OPERATING AGREEMENT OF ROCK OHIO VENTURES LLC By and Between ROCK OHIO VENTURES I LLC, ROCK OHIO VENTURES II LLC and LAKES OHIO DEVELOPMENT LLC Dated as of October 29, 2009
Exhibit 10.2
THE INTERESTS REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. THEREFORE, SUCH
INTERESTS CANNOT BE RESOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF AT ANY
TIME UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE, AND THE HOLDER COMPLIES WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET
FORTH IN THIS AGREEMENT.
OF
ROCK OHIO VENTURES LLC
By and Between
Dated as of
October 29, 2009
This OPERATING AGREEMENT (this “Agreement”) is entered into and shall be effective as of the
29th of October, 2009, by and among ROCK OHIO VENTURES I LLC, a Delaware limited liability company,
ROCK OHIO VENTURES II LLC, a Delaware limited liability company, and LAKES OHIO DEVELOPMENT, LLC, a
Minnesota limited liability company, each as Members of ROCK OHIO VENTURES LLC
(the “Company”).
ARTICLE 1
ORGANIZATION OF THE COMPANY
ORGANIZATION OF THE COMPANY
1.1 Formation. The parties have formed and intend hereby to operate the Company
pursuant to the provisions of Chapter 18 of Title 6 of the Delaware Revised Statutes, as amended
from time to time, or any corresponding provisions of succeeding law, (the “Act”) and in accordance
with the terms and conditions of this Agreement and the Company’s Certificate of Formation, as
amended. The Members shall promptly make, execute and deliver all filings, disclosures, and other
documentation that are required by Applicable Law to enable the Company to comply with all
requirements for its continued operation.
1.2 Name. The name of the Company shall be “ROCK OHIO VENTURES LLC” and all business
of the Company shall be conducted in such name or such other name or assumed names as the Manager
shall from time to time approve. The Members consent to amending the Company’s Certificate of
Formation to change the Company’s name to Rock Ohio Ventures LLC. The Company shall be authorized
to conduct business in any state in which the Manager shall determine appropriate.
1.3 Purpose. The purpose or purposes for which the Company is formed are to engage in
any activity within the purposes for which a limited liability company may be formed under the Act
as determined from time to time by the Manager, including, without limitation, directly or
indirectly through subsidiaries, third parties or otherwise, to acquire, own, develop, mortgage,
encumber, hypothecate, lease, sell, maintain, improve, alter, remodel, expand, manage, and
otherwise operate and deal with part or all of the Project, including obtaining financing and
refinancing for the above purposes, selling, exchanging, transferring, joint venturing or otherwise
disposing of all or any part of the Project, and investing and reinvesting any undistributed
Company funds. No Member or Manager shall have any authority to hold itself out as an agent of
another Member, and no Member, other than the Manager, shall have any authority to hold itself out
as an agent of the Company. The Company shall have any and all powers necessary or desirable to
carry out the purposes and business of the Company, to the extent that the same may be lawfully
exercised by limited liability companies under the Act.
1.4 Intent. It is the intent of the Members that the Company be operated in a manner
consistent with its treatment as a “partnership” for federal income tax purposes. Without
limitation to the foregoing sentence, it is also the intent of the Members that the Company not be
operated, deemed or treated as a “partnership” for purposes of Section 303
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of the Federal Bankruptcy Code. No
Member shall take action inconsistent with this express intent.
1.5 Term. The Company shall continue in perpetuity, unless the Company shall sooner be
dissolved and its affairs wound up in accordance with the Act and this Agreement.
(a) Member Cooperation. Except to the extent expressly provided to the contrary in
this Agreement, each Member shall use reasonable efforts to cooperate with the requests of the
Manager for actions or efforts which the Manager deems necessary or desirable for the Project or
the other business of the Company, including obtaining required licenses under applicable Gaming
Law, and a Member shall be required to devote only such time to the affairs of the Company as may
be necessary for the performance of the foregoing.
(b) Independent Activities. Nothing, including anything in the Company’s Certificate
of Formation or this Agreement, shall: (1) limit the rights of a Manager, Member or any of their
Affiliates, or any of their respective officers, directors, managers, employees, investors,
stockholders, partners and members (“Related Persons”) to serve other Persons in any capacity, to
own interests in other businesses and undertakings, to pursue and engage in other investments,
opportunities and activities, and to derive and enjoy profits, compensation and other consideration
in respect thereof, whether or not such services, interests, businesses, undertakings, investments,
opportunities and activities (collectively, “Other Interests”) are similar to or competitive with
the business or assets of the Company, (2) afford any Member any right to share in the profits,
compensation and other consideration derived from the Other Interests of any Manager, other Member
or the Manager’s or other Member’s Related Persons; (3) except as may be required to be disclosed
under any Applicable Law, require any Member to disclose to any other Member or to the Company the
existence, nature of, or any information relating to, any such Other Interest, or impose any
fiduciary or other obligation on any Member not to favor or advance such Other Interests over the
interests of the Company or the Project; or (4) obligate any Member to first offer any such Other
Interest to any other Member or to the Company, or allow the other Member or the Company to
participate therein. The Members, Manager and Company agree that the Company’s Members and Manager
shall owe no fiduciary duties to the Company or other Members and shall not be required to devote
any minimum time to the affairs of the Company.
(a) To the extent permitted by Applicable Law and except as otherwise provided in this
Agreement, the Company is hereby authorized to purchase property and services from, sell property
and services to, or otherwise deal with, the Manager and any Member, acting on its own behalf, or
any Affiliate of the Manager or any Member, provided that any such purchase, sale, or other
transaction shall be made on terms and conditions which are no less favorable to the Company
(including as to price, quality and payment terms) than if the Company had entered into the sale,
purchase, or other transaction with an independent third party.
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(b) Subject to Section 1.7(a), the Company may advertise or otherwise promote the Project in
conjunction or association with other resorts, projects or properties owned by, managed by or
otherwise affiliated with the Manager, a Member or their Affiliates or joint ventures (“Shared
Promotion”). The negotiation of shared revenues resulting from or relating to, any such Shared
Promotion shall be within the discretion of the Manager.
1.8 Expenses of Members. Subject to Section 1.7, the Manager may authorize
compensation to Members, the Manager and their Affiliates for services rendered to the Company by
such Manager, Member or Affiliate and may authorize reimbursement from the Company for actual “out
of pocket” expenses reasonably incurred by such Manager, Member or Affiliate in the furtherance of
the Company’s business to the extent such expenses are approved by the Manager, in each case, upon
the presentation of reasonable supporting documentation of the amount and purpose of such expenses.
The legal, accounting, due diligence and investigative fees and expenses relating to gaming
licensure fees and costs associated with each Member’s individual licensure investigation under
applicable Gaming Law shall be borne by the Company to the extent approved by the Manager.
1.9 Registered Office and Agent for Service of Process. The address of the registered
office, and the name and address of the Company’s initial agent for service of process, are as set
forth in the Certificate of Formation. Such office address and agent may be changed from time to
time by the Manager. Notwithstanding the foregoing, the Manager shall cause an appropriate
certificate of amendment to the Certificate of Formation to be duly filed upon any change of office
address or agent that is or may become required by Applicable Law.
1.10 Definitions. Each capitalized term used in this Agreement is defined in the
Glossary of Defined Terms attached hereto. All definitions shall also apply to the singular and
plural form of the defined term, regardless of whether such term is defined in its singular or
plural form.
ARTICLE 2
CAPITAL CONTRIBUTIONS
CAPITAL CONTRIBUTIONS
(a) Capital Contribution Commitment. Each Member shall be
unconditionally obligated to contribute cash, the property described in Section 2.1(b) or such
other assets as the Manager approves to the capital of the Company an aggregate amount equal to the
Capital Contribution Commitment of such Member as set forth on Schedule 2.1(a) and, in exchange
therefore, shall initially be allocated the Percentage Interest set forth opposite the Member’s
name. All Capital Contributions shall be made not later than the Capital Contribution Dates set by
the Manager with respect thereto in accordance with Section 2.5. No Member shall be required to
make Capital Contributions in excess of such Member’s Capital Contribution Commitment.
(b) Amounts Contributed. Members of the Company’s Members formed OH Ventures Cleveland
LLC, a Delaware limited liability company (the “Cleveland LLC”),
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OH Ventures Cleveland Peninsula LLC, a Delaware limited liability company (the “Cleveland Peninsula
LLC”), and OH Ventures Cincinnati LLC, a Delaware limited liability company (the “Cincinnati LLC”,
and together with the Cleveland LLC and the Cleveland Peninsula LLC,
the “Casino Site LLCs”).
Members of the Company’s Members caused the Casino Site LLCs to acquire leases and/or options to
purchase real estate in Cleveland and Cincinnati, Ohio. Members of the Company’s Members also spent
money (1) to cause the Casino Site LLCs to acquire such leases and options on real estate in
Cleveland and Cincinnati, Ohio, and (2) in the furtherance of electoral approval of legislation
directly related to the success of the Project, thereby enhancing the value of the leases and
options on real estate in Cleveland and Cincinnati, Ohio. Members of the Company’s Members
contributed in kind their interests in the Casino Site LLCs to those Members listed on
Schedule 2.l(b), which in turn have contributed them in kind to the Company as part of such Member’s Capital
Contribution to the Company. Each Member agrees that the Gross Asset Value with respect to the
contribution of interests in the Casino Site LLCs to the Company by a Member shall be equal to the
amount set forth on Schedule 2.l(b) with respect to the interest in the Casino Site LLCs
contributed to the Company.
2.2 Member Loans, Third Party Financing. The Manager may, on the Company’s behalf,
obtain any financing it deems necessary, at any time, to enable the Company to conduct its business
and affairs or to develop, construct, acquire, complete and operate the Company’s Property and the
Project in addition to the Members’ Capital Contribution Commitments. The financing obtained as
described in the immediately preceding sentence may include third-party debt financing obtained by
the Company and the collateral for any such financing may include the Property and the Project,
among other collateral. Subject to Section 1.7, the Manager may request that one or more Members to
provide all or any part of such financing (“Member Loan(s)”) and may cause the Company to enter
into Member Loans. If any Member shall make any loan or loans to the Company, the amount of any
such loan or advance shall not be treated as a contribution to the capital of the Company but shall
be a debt due from the Company.
2.3 Member Guaranties. No Member or Affiliate or Related Person of a Member shall be
required to guaranty, or to make or otherwise provide any other financial commitment or enhancement
with respect to any Debt of the Company. Subject to Section 1.7, the Manager may request that one
or more Members provide or cause to be provided a guaranty or enhancement with respect to any Debt
of the Company (collectively, the “Member Guaranties”) if, in the Manager’s reasonable judgment,
such Member Guaranties are necessary or desirable, and may cause the Company to obtain and enter
into Member Guaranties. A Member Guaranty of any Company Debt may be provided by a Member or an
Affiliate thereof in any form, including the form of a guaranty, letter of credit, pledge of
collateral or other credit enhancement facility. The Manager may, in its discretion, agree to pay
to Members providing Member Guaranties a guaranty fee. Such obligation of the Company shall be
separate from and in addition to the guaranteeing Member’s right-to receive any other payment or
distributable amount hereunder.
2.4
Return of Capital. No interest shall accrue on any Capital Contributions and no
Member shall have any right to withdraw or to be repaid any Capital Contributions except as
provided in this Agreement.
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2.5 Funding Unpaid Capital Contribution Commitment. With respect to any unpaid Capital
Contribution Commitments pursuant to Section 2.1(a), (i) the Manager may set a date on which all
or a portion of such unpaid Capital Contributions are to be made (the “Capital Contribution Date”),
(ii) the Company shall notify the Members not less than three (3) days prior to such Capital
Contribution Date of the Capital Contributions required to be made and the amounts of their
respective required Capital Contributions, and (iii) such required
Capital Contributions of the
Members shall be proportionate to such Members’ unpaid Capital Contribution Commitment then
outstanding.
2.6 Additional Capital Contributions. No Member shall be obligated to make any capital
contributions beyond such Member’s Capital Contribution
Commitment. The Manager may cause the
Company to offer and sell additional Interests in the Company on such terms and providing for such
rights and obligations (including amendments to this Agreement to reflect such rights and
obligations) as are approved by the Manager and by Members holding a majority of the Percentage
Interest; provided that no approval by Members shall be required with respect to any offer or sale
of additional Interests in the Company or the terms, rights and obligations of such Interests and
their offer and sale if (a) they do not require amendments to ARTICLE 3, ARTICLE 4, or Section
11.2(b), but amendments to Schedules 2.1(a) and 2.l(b) do not require approval, and (b) if ROCK
OHIO VENTURES I LLC purchases an additional Interest on or before November 3, 2009, ROCK OHIO
VENTURES II LLC invests an amount in the Company equal to at least 46.48% of the total of the two
investments.
2.7
Preemptive Rights. If the Company authorizes the issuance or sale of any Interests
(except for issuances on the date of this Agreement and except for issuances on or before November
3, 2009 if LAKES OHIO DEVELOPMENT LLC is offered at least 10% of the total Interests issued), the
Company shall first offer in writing (the “Preemptive Rights Notice”) to sell to LAKES OHIO
DEVELOPMENT LLC or the successor to its Interests 10% of such Interests. LAKES OHIO DEVELOPMENT LLC
or the successor to its Interests shall be entitled to purchase up to 10% of such Interests being
issued or sold by notifying the Company in writing within three business days after the delivery of
the Preemptive Rights Notice. The closing of such purchase shall take place on the first closing
date of the same Interests offered to others. LAKES OHIO DEVELOPMENT LLC or the successor to its
Interests shall be entitled to purchase such Interests at the most favorable price and on the most
favorable terms that such Interests are to be offered in such
transaction; provided that
notwithstanding the foregoing, in the event that the Company is issuing more than one type or class
of Interests in connection with such issuance, LAKES OHIO DEVELOPMENT LLC or the successor to its
Interests shall be required to acquire all such types and classes of Interests in the same form as
they are being offered to others. Such Interests specified in the Preemptive Rights Notice that are
not purchased by LAKES OHIO DEVELOPMENT LLC or the successor to its Interests pursuant to the terms
of this Section 2.7 may be issued and sold by the Company (on terms no less favorable than the
terms offered in such Preemptive Rights Notice) within 90 days of the date of the Preemptive Rights
Notice. Any Units not issued within such 90-day period will be subject to the provisions of this
Section 2.7 upon subsequent issuance.
2.8 Admission of Additional Members. Additional Members may be admitted to the Company
if, and only if, (1) any requirements of Section 2.6 are met, (2) such
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admission, and the terms and conditions of such admission, including, without limitation, any
required Capital Contribution, are approved by the Manager, subject to Section 1.7, and (3) such
person accepts, adopts and agrees to be bound by all of the terms and provisions of this Agreement,
as it may then be amended; provided that the admission of new Members in connection with a transfer
of an Interest shall be governed by Section 9.1(b), rather than this Section 2.8.
ARTICLE 3
ALLOCATIONS
ALLOCATIONS
3.1 Profits and Losses. After giving effect to the special allocations set forth in
Section 3.2 below, and subject to Section 3.3(d) below, Profit or Loss of the Company for any
Fiscal Year shall be allocated among the Members in such proportions as will cause the Augmented
Capital Account (as hereinafter defined) of each Member to equal, as nearly as possible, the amount
such Member would receive if an amount equal to all Members’ Augmented Capital Accounts, increased
by the amount of such Profit or reduced by the amount of such Loss, were distributed to the Members
in accordance with Section 4.1 below. For this purpose, the “Augmented Capital Account” of any
Member shall mean such Member’s Capital Account, determined after giving effect to all
distributions during such Fiscal Year and all allocations other than allocations of Profit or Loss
for such Fiscal Year, and increased by such Member’s “share of partnership minimum gain” (within
the meaning of Section 1.704-2(g) of the Regulations) and “share of partner nonrecourse debt
minimum gain” (within the meaning of Section 1.704-2(i)(5) of the Regulations) as of the end of
such Fiscal Year.
3.2 Special Allocations. The following special allocations shall be made for
income tax purposes in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this ARTICLE 3, if there is a net decrease in
Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of
Company gross income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in
an amount equal to such member’s share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance with Sections
1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 3.2(a) is intended to comply with
the minimum gain chargeback requirements in the Regulations and shall be interpreted consistently
therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any other provision of this
Agreement except Section 3.2(a), if there is a net decrease in Member Minimum Gain attributable to
Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Minimum
Gain attributable to such Member Nonrecourse Debt shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an amount equal to the
portion of such Member’s share of the net decrease of Member Minimum Gain attributable to such
Member Nonrecourse Debt that is allocable to the disposition of any Company assets subject to such
Member
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Nonrecourse Debt. The items to be so allocated shall be determined in accordance with Regulation
Section 1.704-2(j)(2)(ii). Any Member’s share of the net decrease in Member Minimum Gain shall be
determined in accordance with Regulation Section 1.704-2(i)(5). This Section is intended to comply
with the minimum gain chargeback requirements in the Regulations and shall be interpreted
consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse deductions for any Fiscal Year shall be
allocated to the Members in accordance with their Percentage Interests. For purposes of this
Section, “nonrecourse deductions” shall have the meaning set forth in Section 1.704-2(b)(l) of the
Regulations. The amount of nonrecourse deductions for a Fiscal Year shall equal the excess, if any,
of the net increase, if any, in the amount of Company Minimum Gain during that Fiscal Year over the
aggregate amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Company Minimum Gain, determined according to the
provisions of Regulation Section 1.704-2(d).
(d) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Member who bears economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance
with Regulation Section 1.704-2(i). The amount of Member Nonrecourse Deductions with respect to a
Member Nonrecourse Debt for a Fiscal Year equals the excess, if any, of the net increase, if any,
in the amount of Member Minimum Gain attributable to such Member Nonrecourse Debt during that
Fiscal Year over the aggregate amount of any distributions during that Fiscal Year to the Member
that bears the economic risk of loss for such Member Nonrecourse Debt to the extent such
distributions are from the proceeds of such Member Nonrecourse Debt and are allocable to an
increase in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(l).
(e) Qualified Income Offset. In the event any Member unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulation paragraphs (4), (5) or (6)
of Section 1.704-l(b)(2)(ii)(d), items of Company gross income and gain shall be specially
allocated to the Members in an amount and manner sufficient to eliminate, to the extent required by
the Treasury Regulations, the Adjusted Capital Account Deficit of that Member as quickly as
possible.
(a) The Members are aware of the income tax and economic consequences of the allocations made
by this ARTICLE 3 and hereby agree to be bound by the provisions of this ARTICLE 3 in reporting
their shares of Company income and loss for income tax purposes.
(b) For purposes of determining the Profits, Losses or any other items allocable to any
period, Profits, Losses and any such other items shall be determined on a daily, monthly, or other
basis, as determined in good faith by the Manager using any permissible method under Code Section
706 and the Regulations thereunder.
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(c) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Company shall
elect not to treat distributions as having been made from the proceeds of a Nonrecourse Liability
or a Member Nonrecourse Debt.
(d) Notwithstanding any other provisions in this Agreement, Losses (or items of deduction)
shall not be allocated to a Member to the extent that the Member has or would have, as a result of
such allocations, an Adjusted Capital Account Deficit.
3.4 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial Gross Asset Value.
In the event the Gross Asset Value of any Company asset is adjusted pursuant to the definition
of Gross Asset Value, subsequent allocations of income, gain, loss, and deduction with respect to
such asset shall take account of any variation between the adjusted basis of such asset for federal
income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and
the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made by the Manager in
any manner that reasonably reflects the purpose and intention of this Agreement.
ARTICLE 4
DISTRIBUTIONS
DISTRIBUTIONS
4.1 Distributions and Priority. To the extent the Manager determines the Company has
sufficient cash and to the extent permitted by the Act and any lending agreements to which the
Company or any of its subsidiaries is a party, the Company may make distributions to its Members
in respect of their Interests at any time and from time to time as determined by the Manager in
its sole discretion. Subject to Sections 4.2 and 4.3, distributions shall be made in the following
order and priority:
(a) First, to the Members (in the proportion that each Member’s
Unreturned Capital Contributions bears to the aggregate of all Members’ Unreturned Capital
Contributions) until the amount of all Members’ Unreturned Capital Contributions is zero.
(b) Second, to ROCK OHIO VENTURES I LLC and LAKES OHIO
DEVELOPMENT LLC (in the proportion that each such Member’s Unpaid Additional Preferred Return bears
to the aggregate Unpaid Additional Preferred Return) until the Additional Preferred Return has been
paid in full.
(c) Third, to the Members (in the proportion that each such Member’s Unpaid Preferred Return
bears to the aggregate of all such Members’ Unpaid Preferred Return) until the Preferred Return of
all such Members has been paid in full.
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(d) Thereafter, (1) thirty-eight percent (38%) to ROCK OHIO VENTURES I LLC, (2) two percent
(2%) to LAKES OHIO DEVELOPMENT, LLC, and
(3) sixty percent (60%) pro-rata to all Members in proportion to their respective Percentage
Interests.
4.2 Tax Distributions. Notwithstanding the priority of distributions in Section 4.1,
the Company shall, consistent with any restrictions which may be imposed by any creditor or under
any contract of the Company or any of its subsidiaries or by applicable law, make distributions
(whether pursuant to this Section 4.2 or otherwise) to each Member (1) by April 15 after the end of
each taxable year of the Company, in an amount equal to the Year End Tax Distribution, if any, and
(2) at such times and in such amounts so that each Member will be able to make timely estimated and
final tax payments, if any, of all federal and state income taxes attributable to the portion of
the Company’s taxable income, if any, allocated to such Member pursuant to this Agreement and the
Code, which distributions shall be credited against the Year End Tax Distribution to be received by
the Members; provided that each periodic distribution will not exceed the sum of the State Tax
Amount plus the Federal Tax Amount, calculated as though the Taxable Income were equal to the
Company’s estimated taxable income from the beginning of the Company’s taxable year through the
date of such periodic distribution, less prior periodic distributions for taxes with respect to
such taxable year of the Company.
Distributions under this Section 4.2 for any Fiscal Year shall be treated as distributions
made pursuant to Section 4.1; provided that any distribution to a Member pursuant to this Section
4.2 that exceeds the amount that would have been distributed to a Member had the amount been
distributed pursuant to Section 4.1 shall be treated as an advance distribution under Section 4.1
and shall be offset against subsequent distributions such Member would otherwise be entitled to
receive pursuant to Section 4.1. Nothing in this Section 4.2 shall be construed to restrict any
right of the Manager or the Company to declare or make any distribution in addition to those
contemplated hereby.
The “Year End Tax Distribution” means the sum of the “State Tax Amount” and the “Federal Tax
Amount.” The “State Tax Amount” means the product of (1) the Company’s taxable income, if any, for
the applicable year (determined under the Code) and allocated to the Members pursuant to ARTICLE 3
(“Taxable Income”), multiplied by (2) the Ohio state income tax rate for individuals then in
effect. The “Federal Tax Amount” means the product of (1) the amount by which the Taxable Income
exceeds the State Tax Amount, multiplied by (2) the highest marginal federal tax rate for
individuals then in effect under the Code.
4.3 Distributions Only From Company Assets. The Members shall look solely to the
assets of the Company for any distributions, whether liquidating distributions or otherwise. If the
assets of the Company remaining after the payment or discharge, or the provision for payment or
discharge, of the debts, obligations, and other liabilities of the Company are insufficient to make
any distributions, no Member shall have any recourse against the separate assets of any other
Member.
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ARTICLE 5
MANAGEMENT
MANAGEMENT
5.1
Designation and Authority of Manager. ROCK OHIO VENTURES I LLC shall be the
initial Manager, and ROCK OHIO VENTURES I LLC may only be removed as the Manager (and any vacancy
in the office of Manager may only be filled) by Members holding a majority of the Percentage
Interest. The Manager may resign at any time, and the Manager shall resign as Manager if it is
finally determined not to be qualified under applicable Gaming Law to serve as Manager and the
Manager is unable to cure such lack of qualification within a reasonable period of time. Neither
the resignation or removal of a Manager shall affect its Interest, and following any such event, it
shall continue to be a Member with all rights and responsibilities as such.
Except for situations in which the approval of the Members is required by the terms of this
Agreement or the Act, (i) the Manager shall conduct, direct and exercise full control over all
activities of the Company, (ii) all management powers over the business and affairs of the Company
shall be vested in the Manager, and (iii) the Manager shall have the power to bind or take any
action on behalf of the Company, or to exercise in its sole discretion any rights and powers
(including the rights and powers to take certain actions, give or withhold certain consents or
approvals, or make certain determinations, opinions, judgments, or other decisions) granted to the
Company under this Agreement, or any other agreement, instrument, or other document to which the
Company is a party or by virtue of its holding the equity interests of any direct or indirect
subsidiary of the Company. Unless delegated such power in accordance with Section 5.3, no Member,
except a Member who is a Manager and acting in such capacity, shall (1) participate in the
management of the Company, (2) hold himself out to any third party as an agent of the Company, (3)
have any authority to bind the Company or act for the Company in any matter, or (4) shall take any
action on behalf of the Company without the approval or authorization of the Manager. In addition
to any power of the Manager granted under this Agreement, the Manager shall have all of the powers
and authority equivalent to those afforded to a board of directors of a corporation organized and
existing under the laws of the State of Delaware.
5.2 Limitation of Liability. The Manager shall not be liable to the Company or any
Member for any act or omission of the Manager in its capacity as the manager of the Company taken
in good faith, to the maximum extent permitted by applicable law, except for the Manager’s willful
misconduct or knowing violation of law. The Manager may exercise any of the powers granted to it by
this Agreement and perform any of the duties imposed upon it under this Agreement either directly
or by or through its agents, and neither the Manager nor any of its Affiliates shall be responsible
for any misconduct or negligence on the part of any such agent appointed by the Manager (so long as
such agent was selected in good faith). The Manager shall be entitled to rely upon the advice of
legal counsel, independent public accountants and other experts, including financial advisors, and
any act of or failure to act by the Manager in good faith reliance on such advice shall in no event
subject the Manager to liability to the Company or any Member.
5.3
Delegation of Authority. The Manager may, from time to time, delegate to one or
more Persons (including any officer of the Company) such authority and duties as the
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Manager may deem advisable. Such delegation may include the appointment of officers, which such
titles, powers and duties as are determined by the Manager, including day to day management of the
Company’s operations. Any delegation pursuant to this Section 5.3 may be revoked at any time by the
Manager in its sole discretion and any officer appointed by the Manager shall serve at the pleasure
of the Manager and may be removed by the Manager at any time with or without cause. An officer
shall perform his or her duties as an officer in good faith and, except as otherwise expressly
provided in this Agreement, in a manner he or she reasonably believes to be in the best interest of
the Company.
5.4 Management Fee. The Company may enter into one or more technical, licensing
and management agreements of (collectively, as each may be executed, amended, supplemented or
otherwise modified from time to time, the “Management Agreements”) setting forth certain management
and technical services to be supplied by to the Company or its subsidiaries by third parties (or,
subject to Section 1.7, one or more Members or the Manager), which agreements may include the
licensing of certain trademarks and other intellectual property to the Company.
ARTICLE 6
INDEMNIFICATION
INDEMNIFICATION
6.1 Indemnification. The Company shall indemnify any Member, Manager or officer, and
may indemnify any other Person, to the fullest extent permitted under the Act, as the same now
exists or may later be amended, substituted or replaced (but, in case of any such amendment,
substitution or replacement only to the extent that such amendment, substitution or replacement
permits the Company to provide broader indemnification rights than the Company is providing
immediately before such amendment), against all expenses, liabilities and losses (including,
without limitation, attorneys’ fees, judgments, fines, excise taxes, amounts paid in settlement and
penalties) incurred or suffered by such Person (or one or more of such Person’s Affiliates) by
reason of the fact that such Person is or was a Member, Manager or officer of the Company (and in
the sole discretion of the Manager, any Person that is or was serving as an employee or agent of
the Company or is or was serving at the request of the Company as a representative, officer,
director, member, manager, principal, employee or agent of another partnership, corporation, joint
venture, limited liability company, trust or other enterprise); provided that, (unless the Manager
otherwise consents) no Person shall be indemnified for any expenses, liabilities and loses suffered
that are attributable to such Person’s or its Affiliates’ bad faith, willful misconduct or knowing
violation of law. Expenses, including attorneys’ fees, incurred by a Person entitled to
indemnification under this Section 6.1 in defending a proceeding shall be paid by the Company in
advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt
of an undertaking satisfactory to the Manager by or on behalf of such Person to repay such amount
if it shall ultimately be determined that such Person is not entitled to be indemnified by the
Company.
6.2 Company Obligation Only. Any indemnity by the Company under this ARTICLE 6 shall
be provided out of and to the extent of Company assets only and no Member shall have personal
liability on account of such indemnification obligations of the Company or shall be required to
make Capital Contributions to help satisfy such indemnification obligations of the Company.
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6.3 Non-Exclusive Rights. The right to indemnification and the advancement of
expenses conferred in this ARTICLE 6 shall not be exclusive of any other right which any Person may
have or later acquire under any statute, agreement, determination of the Manager or otherwise. The
Company (acting with the approval of its Manager) may purchase and maintain insurance or make other
financial arrangements on behalf of any Person who is or was a Manager, Member, officer, employee
or agent of the Company, or at the request of the Company is or was serving as a manager, director,
officer, employee or agent of another limited-liability company, corporation, partnership, joint
venture, trust or other enterprise, for any liability asserted against such Person and liability
and expenses incurred by such Person in such Person’s capacity as a Manager, Member, officer,
employee or agent, or arising out of such Person’s status as such, whether or not the Company has
the authority to indemnify such Person against such liability and expenses. The decision of the
Company as to the propriety of the terms and conditions of any insurance or other financial
arrangement made pursuant to the immediately-preceding sentence hereof and the Company’s choice of
Person to provide such insurance or other financial arrangement is and shall be conclusive, and
such insurance or other financial arrangement is not and shall not be void or voidable and does not
and shall not subject any Manager or Member of the Company approving such insurance or other
financial arrangement to personal liability for such Person’s action, even if such Person approving
such insurance or other financial arrangement is a beneficiary of such approved insurance or other
financial arrangement.
7.1 In General. As of the date hereof, each of the Members hereby makes each of the
representations and warranties applicable to such Member as set forth in Section 7.2, and such
warranties and representations shall survive the execution of this Agreement.
7.2
Investigation. Each Member hereby represents and warrants that each Member is
acquiring its Interest based upon its own investigation, and the exercise by such Member of its
rights and the performance of its obligations under this Agreement will be based upon its own
investigation, analysis and expertise. Each Member’s acquisition of its Interest is being made for
its own account for investment, and not with a view to the sale or distribution thereof. The
Interest acquired by a Member pursuant to this Agreement has not been, and when acquired by the
Members will not be, registered under the Securities Act of 1933 (as amended, supplemented or
otherwise modified from time to time, and together with the regulations promulgated thereunder, the
“Securities Act”) or qualified under any “blue sky” or other securities law of any State of the
United States, by reason of exemptions from such registration provisions, which exemptions depend
upon, among other things, the good faith nature of the investment intent and accuracy of the
Members’ representations as expressed herein. Each Member understands that its Interest must be
held indefinitely unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Each Member further understands that at the time it
wishes to Transfer any portion of its Interest, there may be no public or other market upon which
to make a Transfer, and that, even if such a public or other market then exists, a Member may be
precluded from Transferring any portion of its Interest under Securities Act “Rule 144” or under
this Agreement for various reasons. Each Member acknowledges possessing such
12
general knowledge and experience in financial and business matters that it is capable of evaluating
the merits and risks of the acquisition of its Interest and, by reason of such financial and
business experience, the Member has the capacity to protect the Member’s own interests in
connection with such acquisition of its Interest. The Member also acknowledged being financially
able to bear the economic risk of its investment, including the total loss thereof.
ARTICLE 8
ACCOUNTING, BOOKS AND RECORDS
ACCOUNTING, BOOKS AND RECORDS
8.1 Accounting, Books and Records. The Company shall keep, or cause to be kept,
appropriate books and records with respect to the Company’s business, including all books and
records necessary to provide the information required pursuant to Sections 8.2 and 8.3 or pursuant
to applicable laws. All matters concerning (i) the determination of the relative amount of
allocations and distributions among the Members, and (ii) accounting procedures and determinations,
and other determinations not specifically and expressly provided for by the terms of this
Agreement, shall be determined by the Manager in its sole discretion, whose determination shall be
final and conclusive as to all of the Members absent manifest error.
8.2 Reports. Insofar as practicable, the Company shall, within ninety (90) days after
the end of each Fiscal Year and within forty-five (45) days after the end of each of the first
three (3) fiscal quarters, furnish each Member with a copy of the balance sheet of the Company as
of the last day of the applicable period, a statement of income or loss for the Company for such
period, and a statement of the Company’s cash flows for such period. Annual statements shall also
include a statement of the Members’ Capital Accounts and changes therein for such Fiscal Year.
Annual statements shall be audited by the Company’s accountants, if (and only if) the Manager so
elects.
8.3 Tax Returns; Information. The Company shall (i) arrange for the preparation and
timely filing of all income and other tax returns of the Company, (ii) provide the Members with
estimates of amounts necessary to prepare tax returns for the Members for each Fiscal Year in so
far as such returns pertain to the Company’s income for such Fiscal Year, by April 1 of the next
succeeding year (insofar as practicable); provided, that a filing shall be deemed timely if
made within the time permitted by extensions therefor obtained from the appropriate tax authority,
and (iii) provide to the each Member a K-1 form for each Fiscal Year.
8.4 Special Basis Adjustment. In connection with any Transfer of a Company interest,
the Company shall, if the transferor or the transferee so requests and the Manager agrees, elect,
at the time and in the manner provided in Regulations
Section 1.754-1(b), to adjust the basis of
the Company’s property in the manner provided in Section 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including, without limitation,
reasonable attorneys’ and accountants’ fees.
8.5 Tax Matters Member. ROCK OHIO VENTURES I LLC is specially authorized and appointed
to act as the Tax Matters Partners under the Code and in any similar
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capacity under state or local law. The Company shall, in accordance with ARTICLE 6, hold the Tax
Matters Partner harmless from any action taken as such.
ARTICLE 9
TRANSFERS OF INTERESTS
TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall directly or indirectly Transfer all or
any portion of its Interest unless (i) the Manager is satisfied that the Transfer is either
registered under, or exempt from, the registration requirements of applicable federal and state
securities laws, and (ii) either (a) the Manager consents to such Transfer in advance in writing,
which consent may be withheld by the Manager in its sole and absolute discretion, (b) the Transfer
is pursuant to Section 9.2, (c) the Transfer is pursuant to Section 9.3, or (d) the Transfer is
pursuant to Section 9.4 (such Transfer, a “Permitted Transfer”); provided that none of the
foregoing shall prohibit, or restrict in any way, any sale of Lakes Entertainment, Inc. (whether by
sale of stock, merger, consolidation, share exchange or sale of all or substantially all of its
assets) or any transfer of any equity interests in Lakes Entertainment, Inc.. Any Transfer or
attempted Transfer by any Member in violation of the preceding sentence shall be null and void and
of no force or effect whatever. Each Member hereby acknowledges the reasonableness of the
restrictions on Transfer imposed by this Agreement in view of the Company’s 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, the Manager and
each other Member wholly and completely harmless from any cost, liability, or damage (including
liabilities for income and other taxes and costs of enforcing this indemnity) incurred by any of
such indemnified Persons as a result of a Transfer or an attempted Transfer in violation of this
Agreement.
(a) Conditions to Permitted Transfers. A Permitted Transfer otherwise permitted under
this Agreement shall not be a Permitted Transfer, and any attempted Transfer of a Member’s Interest
shall be null and void and of no force or effect whatever, unless and until the following
conditions are satisfied:
(i) The transferor and transferee shall execute such documents and instruments of conveyance
and assumption as may be necessary or appropriate in the opinion of the Manager to effect such
Transfer and to confirm the transferee’s agreement to be bound by the provisions of this Agreement
and assumption of all obligations of the transferor Member with respect to the Interest being
transferred.
(ii) The transferor and transferee shall furnish the Company with the transferee’s
taxpayer identification number, sufficient information to determine the transferee’s initial tax
basis in the Interest transferred, and any other information reasonably necessary to permit the
Company to file all required federal and state tax returns and other legally required information
statements or returns. Without limiting the generality of the foregoing, the Company shall not be
required to make any distribution otherwise provided for in this Agreement with respect to any
transferred Interest until it has received such information.
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(iii) The Transfer and Permitted Transferee have been approved by the Ohio Gaming
Commission, if required by applicable Gaming Law, and any other governmental or regulatory agency
or body having jurisdiction over the Company and whose approval is required under Applicable Law.
(iv) A Member making a Permitted Transfer and the transferee shall pay all reasonable
costs and expenses incurred by the Company in connection with such Transfer.
(b) Admission of Permitted Transferee as a Member. A Permitted
Transferee of an Interest shall be admitted as a Member in the Company only upon the written
approval of the Manager. The rights of a Permitted Transferee who is not admitted as a Member shall
be limited to the right to receive allocations and distributions from the Company with respect to
the Interest transferred, as provided by this Agreement. The transferee of such Interest shall not
be a Member, or have any rights of a Member, with respect to such Interest, unless and until such
transferee is admitted as a Member in accordance with this Agreement.
(c) Effect of Permitted Transfer on Company. The Members intend that the Permitted
Transfer of an interest in the Company shall not cause the dissolution of the Company.
9.2 Approved Sale. If the Manager approves a sale of over 50% of the assets of the
Company or of all of the subsidiaries of the Company or of equity with over 50% of the voting power
of the Company or 50% of the voting power of all subsidiaries of the Company (whether by merger,
consolidation, equity exchange or sale or transfer of equity securities) (as so approved, an
“Approved Sale”), (i) each Member shall vote for, consent to and raise no objections against, and
waive any dissenters or appraisal rights with respect to, such Approved Sale, and the Company and
each Member shall consummate such Approved Sale on the terms and conditions so approved and (ii)
the Company, the Manager, each subsidiary and their respective members, boards of directors or
managers and each Member shall take all necessary or desirable actions in connection with the
consummation of the Approved Sale as requested by the Manager, including, without limitation,
transferring a pro rata portion of such Member’s Interests required to consummate such transaction.
Notwithstanding the foregoing, no Member shall be obligated in connection with such Approved Sale
to indemnify the prospective transferee or its Affiliates with respect to an amount in excess of
the aggregate proceeds paid to such Member in connection with such Approved Sale (other than as a
result of a breach of its representations and warranties with respect to authorization and
ownership of Interests (and any representations and warranties, if required to be made, will be
made by all Members and will be uniform in all material respects), as to which no limitation shall
apply). The Manager shall use commercially reasonable efforts to minimize the representations and
warranties made by the Members (in their capacity as Members) in connection with any Approved Sale.
9.3 Tag Along Rights. If ROCK OHIO VENTURES I LLC or the affiliated
successor to its Interests proposes to sell, in one transaction or a series of related
transactions, all or substantially all of its Interests to an unaffiliated person or entity, ROCK
OHIO VENTURES I LLC or the affiliated successor to its Interests shall use its best efforts to
cause the buyer of such
15
Interests to offer to purchase all of the Interests owned by LAKES OHIO DEVELOPMENT LLC or the
successor to its Interests for the consideration per proportional share of the Interests, and
otherwise on the same terms and conditions, received by ROCK OHIO VENTURES I LLC or the affiliated
successor to its Interests for its Interests. If LAKES OHIO DEVELOPMENT LLC desires to sell all of
its Interests in such transaction and the transferee does not agree to purchase all of the
Interests owned by LAKES OHIO DEVELOPMENT LLC in such transaction, ROCK OHIO VENTURES I LLC may
not, and shall not, sell any of its Interests in such transaction. The transferee must accept,
approve, adopt, and agree in writing to comply with, and be bound by, all of the terms and
conditions of this Agreement as if such transferee were the Member whose interests it purchased,
and such transferee shall be treated for all purposes of this Agreement as such Member.
9.4 Redemption of Interests Upon Specified Events. If at any time during the term (as
defined in Section 1.5), (a) a Member fails to comply with any provision of this Agreement (the
redemption pursuant to the event described in clause (a) is referred to as a “Breach Redemption”)
or (b) (i) the ownership of any Interest by any transferee of a Member, or owner or Affiliate of a
transferee of a Member, poses a material risk of a potential adverse gaming regulatory consequences
to the Company, an Affiliate, a Member or any direct or indirect owner of any Member (the
redemption pursuant to the event described in clause (b)(i), a “Transferee Regulatory Redemption”),
or (ii) LAKES OHIO DEVELOPMENT LLC or any other Person admitted as a member of LAKES OHIO
DEVELOPMENT LLC or their owners, including as a transferee, poses a material risk of a potential
adverse gaming regulatory consequences to the Company, an Affiliate, a Member or any direct or
indirect owner of any Member (the redemptions pursuant to the events described in clause (b),
including the Transferee Regulatory Redemption, are referred to as a “Regulatory Redemption”, and
collectively the events described in clauses (a) and (b) are referred to as the “Buy-Sell Events,”
and the Interests of the Member or transferee causing the Buy-Sell Event are referred to as the
“Buy-Sell Interest”) then, at any time following the expiration of the Cure Period (as defined
below) with respect to such occurrence, the Company shall have the right (and in connection with a
Transferee Regulatory Redemption, an obligation) to purchase all, but not less than all, of the
Buy-Sell Interest on the terms and conditions, and subject to the provisions, set forth in this
Section 9.4.
(a) Cure. There shall be no right to purchase an Interest if the occurrence of a
Buy-Sell Event shall have been entirely cured (including the elimination of any potential adverse
gaming regulatory consequences to the Company, any Affiliate, a Member or any direct or indirect
owner of any Member) prior to the expiration of the Cure Period corresponding thereto. “Cure
Period” means, with respect to any Buy-Sell Event, the period beginning on (but not including) the
date of notice of the occurrence of a Buy-Sell Event by the Company
to the Member
(a “Demand Notice”) and ending either sixty days thereafter or on such earlier date as the Company shall notify the Member is necessary to avoid a material adverse gaming regulatory consequence affecting the Company or any Affiliate, including a material adverse action by any governmental gaming regulatory authority in any jurisdiction.
(a “Demand Notice”) and ending either sixty days thereafter or on such earlier date as the Company shall notify the Member is necessary to avoid a material adverse gaming regulatory consequence affecting the Company or any Affiliate, including a material adverse action by any governmental gaming regulatory authority in any jurisdiction.
(b) Purchase Price. The purchase price for a sale under this Section 9.4 shall be as
follows (the “Purchase Price”):
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(i) Breach Redemption. For a sale in connection with a Breach
Redemption, the positive balance, if any, of the Member’s Capital Account at the time of the
closing of the sale in accordance with the terms hereof.
(ii) Regulatory Redemption. For a sale in connection with a Regulatory Redemption, the
applicable Member’s or transferor’s Unreturned Capital Contributions plus the applicable Member’s
or transferor’s Unpaid Preferred Return, plus two times the Capital Contribution made by the
applicable Member or transferor minus any distributions received by the applicable Member or
transferor (and any predecessors) under Section 4.1(d), if any, at the time of the closing of the
sale in accordance with the terms hereof.
Once given, a Demand Notice may be revoked or withdrawn at any time prior to the closing of such
sale in the sole and absolute discretion of the Manager.
(c) Obligation to Sell. Upon the occurrence of a Buy-Sell Event and receipt of a
Demand Notice, the Member shall then be obligated to sell its Interest for the Purchase Price to
the Company or any other Person designated by the Company in accordance with this Section 9.4 in
the absence of a cure within the Cure Period.
(d) Closing.
(i)
Terms of Closing. The selling Member shall meet with the Company and exchange
documents and pay any amounts due, and otherwise do all things necessary to conclude the
transaction set forth herein at the closing of such purchase (the “Closing”). The Closing shall
occur at the Company’s offices at 9:00 a.m., on the first Wednesday after the tenth (10th) day
after the end of the Cure Period unless that day is a national or state holiday and, in that event,
on the next Business Day. At the Closing, the Member shall deliver to the Company a duly executed
assignment of its Interest in blank, and shall also, upon the request of the Company, concurrently
therewith (or at any time and from time to time thereafter) execute and deliver such other
documents and records as the Company determines are reasonably necessary or desirable to conclude
the Closing and to otherwise allow the Company to complete the Project or otherwise develop, use,
sell, rent or dispose of any Property. Regardless of whether the Member delivers a duly executed
assignment, such Member’s interest shall be deemed to have been transferred as of the Closing
pursuant to this Section 9.4, and the Member shall no longer be deemed the owner of the transferred
Interests and shall have no further rights as a Member of the Company or under this Agreement as of
the Closing, other than any rights to receive any unpaid Purchase Price for such Interests.
(ii) Delivery. Except as otherwise provided in the next sentence, the Company shall
deliver to the Member cash for the full amount of the Purchase Price at the Closing, or if later,
ten business days after the Purchase Price is determined under this Section 9.4. The Company may
instead elect (in the Manager’s discretion) to pay up the Purchase Price in five equal annual
installments (beginning one year after the Closing) without interest.
17
(iii) Liens. If the Member’s Interest is subject to any Lien,
the Company may elect (a) to cause the Purchase Price (or a portion thereof) to be applied to discharge
such Lien, (b) to take the Interest subject to such Lien and to reduce the Purchase Price otherwise
payable by the Company to the Member by the amount of such Lien, or (c) to terminate the buy-sell
proceedings under this Section 9.4 because of the existence of such Lien and in such event pursue
any and all remedies available at law and in equity.
(e) Appointment of Transferee. Notwithstanding anything in this Agreement to the
contrary, the Company shall be entitled to designate any Affiliate or third party to be the
transferee and purchaser of such Interest or obtain financing from any third party with respect to
a purchase under this Section 9.4, provided that the foregoing shall not delay the closing of any
such transaction. The reasonable costs of the Closing shall be divided equally, provided that each
such Member shall bear its own attorneys’ fees and costs.
(f) Specific Enforcement. The Members acknowledge and agree that each Member’s
Interest is extraordinary and unique, and the provisions of this Section 9.4 shall be specifically
enforceable.
(g) Tax Returns. The Member shall continue, after the Closing, to have access during
normal business hours, to the books and records of the Company to the extent reasonably necessary
in connection with the preparation, review or audit of the Investors’ state and federal returns
relating to the Company.
9.5 Distribution Among Members. Upon the occurrence of any Transfer of an
Interest during any Fiscal Year, Profits, Losses, each item thereof, and all other items
attributable to such interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests during the Fiscal Year
in accordance with Code Section 706(d), using any conventions permitted by law and selected by the
Manager.
ARTICLE 10
WITHDRAWALS; ACTION FOR PARTITION
WITHDRAWALS; ACTION FOR PARTITION
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take any
action to require partition of any Company property, and notwithstanding any provisions of
applicable law to the contrary, each Member hereby irrevocably waives any and all rights it may
have to maintain any action for partition or to compel any sale with respect to its Interest, or
with respect to any assets or properties of the Company, except as expressly provided in this
Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Each Member hereby covenants and agrees
that the Members have entered into this Agreement based on their mutual expectation that all
Members will continue as Members and carry out the duties and obligations undertaken by them
hereunder and that, except as otherwise expressly required or permitted hereby, each Member hereby
covenants and agrees not to
(a) take any action to file a certificate of dissolution or its equivalent with respect
to itself,
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(b) withdraw or attempt to withdraw from the Company,
(c) exercise any power under the Act to dissolve the Company,
(d) Transfer all or any portion of its interest in the Company (other than in a Permitted
Transfer),
(e) petition for judicial dissolution of the Company, or
(f) demand a return of such Member’s contributions or profits (or a bond or other security for
the return of such contributions or profits) without the consent of holders of a majority of the
Percentage Interests held by the Members, or except as otherwise specifically allowed under this
Agreement.
ARTICLE 11
DISSOLUTION AND WINDING UP
DISSOLUTION AND WINDING UP
11.1 Liquidating Events. The Company shall dissolve and commence winding up and
liquidating upon the first to occur of the following (“Liquidating Events”):
(a) The sale of all or substantially all of the Property;
(b) The agreement of holders of a majority of the Percentage Interests to dissolve, wind up,
and liquidate the Company;
(c) Ballot Initiative 3 on the November 3, 2009 Ohio statewide ballot is not approved and any
litigation or other challenge to such vote is completed and fails to cause Ballot Initiative 3 to
be approved;
(d) The happening of any other event that makes it unlawful or impossible to carry on the
business of the Company; or
(e) An administrative dissolution or the entry of a decree of judicial dissolution
of the Company under the Act.
The Members hereby agree that the Company shall not dissolve prior to the occurrence of a
Liquidating Event. If it is determined, by a court of competent jurisdiction, that the Company has
dissolved prior to the occurrence of a Liquidating Event, the Members hereby agree to continue the
business of the Company without a winding up or liquidation.
11.2 Winding Up. Unless the business of the Company is continued pursuant to Section
11.1, the provisions of this Section 11.2 shall apply upon the occurrence of a Liquidating Event.
(a) Process. The Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors
and Members, and no Member shall take any action that is inconsistent with, or not necessary to or
appropriate for, winding up the Company’s business and affairs. To the extent
19
consistent with this ARTICLE 11, all covenants and obligations in this Agreement (including those
relating to the control, management and operation of the Company) shall continue in full force and
effect until such time as the Property has been distributed pursuant to this Section 11.2 and the
Company has terminated. The Manager or its designee shall be responsible for overseeing the winding
up and liquidation of the Company.
(b) Distributions. The Manager or its designee shall apply and distribute as soon as
practicable all Company cash on hand in the following order of priority, unless otherwise required
by Applicable Law:
(i) First, to the payment and discharge or the establishment of reserves for the payment
of all of the Company’s debts and liabilities to creditors (including guaranty fees, management
fees, Member Loans and other amounts of Debt owing to any Member which is then outstanding), in the
order of priority as provided by law; and
(ii) Second, to the Members in the manner and order of priority specified in Section
4.1.
(c) Compensation; No Creditors as to Capital. The Manager shall not receive any
additional compensation for any services performed pursuant to this ARTICLE 11.
11.3 Deemed Continuation. Notwithstanding any other provisions of this ARTICLE 11, in
the event the Company is liquidated within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g)
but no Liquidating Event has occurred, the Property shall not be liquidated, the Company’s
liabilities shall not be paid or discharged, and the Company’s affairs shall not be wound up.
Instead, the Company shall be deemed to have continued as prescribed by Regulations Sections
1.704-1 and 1.708-l(b)(l)(iv).
11.4 Rights of Members. Except as otherwise provided in this Agreement, (a) each
Member shall look solely to the assets of the Company for the return of its Capital Contributions,
and (b) no Member shall have priority over any other Member as to the return of its Capital
Contributions, distributions, or allocations.
11.5 Reasonable Time for Winding Up. A reasonable time shall be allowed for the
orderly winding up of the business and affairs of the Company and the liquidation.
ARTICLE 12
MISCELLANEOUS
MISCELLANEOUS
12.1 Notices. Notices may be delivered either by private messenger or delivery
service, by certified mail, or facsimile transmission. Any notice or document required or permitted
hereunder to a Member shall be in writing and shall be deemed to be given on the date received by
the Member; provided, however, that all notices and documents mailed to a Member in the United
States mail, postage prepaid, certified mail return receipt requested, addressed to the Member at
its respective address as shown in the records of the Company, shall be deemed to have been
received on the date of receipt or acceptance or failure to accept, and provided further, that the
sender of any such notice or document by facsimile transmission
20
shall bear the burden of proof as to proper transmission and date of transmission of such
facsimile. The address and the telecopier number of each of the Members shall for all purposes
be as set forth on the signature page hereof unless otherwise changed by the applicable Member
by notice to the other Members and the Company as provided herein.
12.2 Binding Effect. Except as otherwise provided in this Agreement, every
covenant, term and provision of this Agreement shall be binding upon and inure to the benefit
of the Members and their respective permitted successors, transferees and assigns.
12.3 Amendment. Any provision of this Agreement may be amended, modified or waived
with the written approval of Members holding a majority of the Percentage Interest; provided that
(1) no provision of ARTICLE 3, ARTICLE 4 or Section 11.2(b) that would adversely affect the
allocations or distributions among the Members as of the date of this Agreement with respect to
their Interests as of the date of this Agreement may be amended or modified in any way that would
adversely affect an existing Member as of the date of this Agreement differently than the other
Members without the unanimous approval of such adversely affected Members, and (2) Sections 1.7
(related-party transactions), 2.7 (preemptive rights), 9.3 (tag along rights) and 12.3 (amendment)
may not be amended without unanimous approval of the Members. For clarity, Members holding a
majority of the Percentage Interest may (without the consent of other Members) amend any provisions
of this Agreement to provide for different allocations and distribution priorities with respect to
contributions of additional capital (including by existing Members), as long as no provision of
ARTICLE 3, ARTICLE 4 or Section 11.2(b) that would adversely affect the allocations or
distributions among the Members as of the date of this Agreement with respect to their Interests as
of the date of this Agreement is amended or modified in any way that would adversely affect an
existing Member as of the date of this Agreement differently than the other Members as of the date
of this Agreement with respect to such Interests. In addition, as provided in Section 2.6,
additional Interests may be issued and Schedules 2.1 (a) and 2.1(b) may be appropriately updated in
specified circumstances without any approval of the Members, subject to the preemptive rights in
Section 2.7.
12.4 Construction. Every covenant, term and provision of this Agreement shall be
construed simply according to its fair meaning and not strictly for or against any Member.
12.5 Time. Time is of the essence in the performance of each and every obligation
herein imposed.
12.6 Titles and Captions. Section and paragraph titles and captions contained in this
Agreement are for reference purposes only and are not intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
12.7
Severability. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or legality of the remainder of this
Agreement.
12.8 Incorporation by Reference. The Glossary of Defined Terms and every exhibit,
schedule and other appendix attached to this Agreement and referred to herein is incorporated in
this Agreement by reference.
21
12.9 Further Assurance. Each Member agrees to perform all further acts and
execute, acknowledge and deliver any documents which are or may become necessary,
appropriate, or desirable to effectuate and to carry on the business contemplated by this
Agreement.
12.10 Pronouns and_Plurals. All pronouns and any variations thereof shall be deemed to
refer to masculine, feminine or neuter, singular or plural, as the identity of the Person(s) may
require.
12.11
Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware and the Gaming Law. The Company shall exist under and be
governed by, and this Agreement shall be construed in accordance with, the laws of the State of
Delaware, except as the same may be superseded by the gaming and other applicable la s of the State
of Ohio, including those laws, rules and regulations which may hereafter be promulgated after
passage of Ballot Initiative 3 on the November 3, 2009 Ohio statewide ballot (the “Gaming Law”).
12.12 Arbitration. All claims, actions or disputes arising out of or relating to this
Agreement or the transactions contemplated hereby (collectively, “Disputes”) including any Disputes
concerning the construction, validity, performance, and interpretation of this Section 12.12 or any
other provision of this Agreement, shall be exclusively resolved by arbitration pursuant to the
Federal Arbitration Act, as provided below. The Company or any party hereto may elect to compel
arbitration of any Dispute by notifying each party hereto and the Company of such election. Each
Dispute shall be promptly adjudicated by a panel of three arbitrators. Each party to such Dispute
shall select an arbitrator for such panel within ten (10) Business Days of the date of the notice
of election to compel arbitration described above. The two arbitrators so selected shall meet and
attempt to appoint a third arbitrator, who shall be of good reputation and character and, if
possible, shall be highly knowledgeable of the gaming industry and casino operation and finance. If
the two arbitrators shall not have appointed such third arbitrator within thirty (30) days of the
date of the notice of election to compel arbitration described above, the Company or any party
hereto may elect to cause such third arbitrator to be appointed by the American Arbitration
Association, as soon as practicable. Arbitration shall be conducted by such panel in the City in
which the Company’s main office is then located, pursuant to the rules of the American Arbitration
Association. The arbitration panel shall meet to consider the Dispute within ten Business Days of
the appointment of its three members, and shall endeavor to resolve and adjudicate such Dispute in
not more than ninety (90) days after its first meeting. Costs, fees and expenses of the arbitrators
and the American Arbitration Association shall be paid by the non-prevailing parties, to such
Dispute. Without limitation of any other right or power of the arbitration panel, such panel shall
have the right and power to grant remedies in the form of any order for specific performance or
other equitable relief. The parties hereby subject exclusively to the jurisdiction of the Federal
Courts of the United States in any action to compel arbitration hereunder or to enforce any order,
decision or judgment of the arbitrators.
12.13 Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all of the Members had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
22
12.14 No Third Party Rights. Except as provided in ARTICLE 6, this Agreement is
intended to create enforceable rights between the parties hereto only, and creates no rights in, or
obligations to, any other Persons whatsoever. Without limiting the generality of the foregoing, as
to any third party, a deficit capital account of a Member shall not be deemed to be a liability of
such Member nor an asset or property of the Company.
12.15 Estoppel Certificates. Upon the written request of the Manager, the Members
shall, within fifteen (15) days of its receipt of such request, execute and deliver a written
statement certifying: (a) that this Agreement is unmodified and in full force and effect (or, if
modified, that this Agreement is in full force and effect as modified and, stating any and all
modifications), (b) that such Member is not in default hereunder, except as specified in such
statement, and (c) that to its actual knowledge, no event has occurred which with the passage of
time or the giving of notice, or both, would ripen into a default by such Member hereunder, except
as specified in such statement.
12.16 Usury. If any return, interest payment, or other charge payable under this
Agreement shall at any time exceed the maximum amount chargeable by Applicable Law, then the
applicable rate of return or interest shall be the maximum rate permitted by Applicable Law.
12.17 Business Days. Any reference in this Agreement to “business days” shall mean all
calendar days except Saturday, Sundays, and Ohio or federal legal holidays.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
23
SIGNATURE PAGE TO OPERATING AGREEMENT OF
ROCK OHIO VENTURES LLC
ROCK OHIO VENTURES LLC
ROCK OHIO VENTURES I LLC | ROCK OHIO VENTURES II LLC, | |||||||||||
A Delaware limited liability company | A Delaware limited liability company | |||||||||||
By: | /s/ Xxxxxx Xxxxxxx | By: | ROCK OHIO VENTURES I | |||||||||
Xxxxxx Xxxxxxx | LLC, a Delaware limited | |||||||||||
Its: Manager | liability company, its | |||||||||||
Manager | ||||||||||||
By: | /s/ Xxxxxx Xxxxxxx
|
|||||||||||
Address: 00000 Xxxxxx Xxxxxxx | Address: 00000 Xxxxxx Xxxxxxx | |||||||||||
Xxxxxxx, Xxxxxxxx 00000 | Xxxxxxx, Xxxxxxxx 00000 | |||||||||||
Fax: (000) 000-0000 | Fax: (000) 000-0000 | |||||||||||
LAKES OHIO DEVELOPMENT LLC | ||||||||||||
A Minnesota Limited Liability Company | ||||||||||||
By: |
/s/ Xxxxxxx X Xxxx | |||||||||||
Its: |
President/CFO | |||||||||||
Address:
|
000 Xxxxxxxx Xxxx, Xxxxx 000 | |||||||||||
Xxxxxxxxxx, XX 00000 | ||||||||||||
Fax: |
(000) 000-0000 | |||||||||||
GLOSSARY OF DEFINED TERMS
(a) “Act” has the meaning specified in Section 1.1.
(b) “Additional Preferred Return” shall mean (1) with respect to ROCK OHIO
VENTURES I LLC an
amount equal to ten (10) times the Capital Contribution made with respect to its Interest in the
Company, provided, however, that in no event shall the Capital Contribution upon which the
Additional Preferred Return is based exceed the amounts set forth on Schedule 2.1(a) with respect
to ROCK OHIO VENTURES I LLC, and (2) with respect to LAKES OHIO DEVELOPMENT LLC an amount equal to
$5,000,000.
(c) “Adjusted Capital Account Deficit” means, the deficit balance, if any, in a Member’s
Capital Account as of the end of the taxable year, after giving effect to the following
adjustments:
(i) credit to such Capital Account any amount which such Member is obligated to restore
under Treasury Regulation Section 1.704-l(b)(2)(ii)(c) or is deemed obligated to restore pursuant
to the penultimate sentences of Treasury Regulation Sections 1.704-2(g)(l) or l.704-2(i)(5); and
(ii) debit to such Capital Account the items described in Sections
1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), and 1.704-l(b)(2)(ii)(d)(6) of the Treasury
Regulations.
(d) “Affiliate” mean s, with respect to any Person, any Person directly or indirectly
controlling, controlled by or under common control with such Person. 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
and policies of a person or entity, whether through the ownership of voting securities, by contract
or otherwise.
(e) “Agreement” has the meaning specified in the first sentence of this operating agreement,
and shall further mean this operating agreement of the Company as amended, supplemented or
otherwise modified from time to time. Words such as “herein’, “hereinafter”, “hereof”, “hereto”,
and “hereunder’ refer to this Agreement as a whole, unless the context otherwise requires.
(f) “Applicable Law” means all applicable laws, ordinances, rules, regulations, statutes, case
law and orders, including the Gaming Law and all applicable Environmental Laws.
(g) “Approved Sale” is defined in Section 9.2.
(h) “Augmented Capital Account” is defined in Section 3.1.
(i) “Breach Redemption” is defined in Section 9.4.
(j) “Business Day” is defined in Section 12.17.
1
(k) “Buy-Sell Events” is defined in Section 9.4.
(l) “Capital Account” means the accounting record of each Member’s capital interest in
the Company. There shall be credited to each Member’s Capital Account (a) the amount of any
contribution of cash by that Member, (b) the Gross Asset Value of property contributed by that
Member, (c) that Member’s allocable share of Profits and any items in the nature of income or gain
that are specially allocated to that Member pursuant to Section 3.2 of this Agreement, and (d) the
amount of any Company liabilities that the Member assumes or takes subject to under Code Section
752. There shall be debited against each Member’s Capital Account (i) the amount of all
distributions of cash to that Member unless a distribution to the Member is a loan or is deemed a
guaranteed payment under Code Section 707(c), (ii) the Gross Asset Value of property distributed to
that Member by the Company, (iii) that Member’s allocable share of Losses and any items in the
nature of expenses or losses which are specially allocated to that Member pursuant to Section 3.2
of this Agreement, and (iv) the amount of any liabilities of that Member that the Company assumes
or takes subject to under Code Section 752. The transferee of all or a portion of a membership
interest shall succeed to that portion of the transferor Member’s Capital Account that is allocable
to the portion of the membership interest transferred. This definition of Capital Account and the
other provisions herein relating to the maintenance of Capital Accounts are intended to comply with
Regulation Sections 1.704-l(b) and 1.704-2 and shall be interpreted and applied in a manner
consistent with those Regulation Sections. In the event the Manager shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Company or the Members), are
computed in order to comply with such Regulations, the Manager may make such modification, provided
that such modification is reasonable in relation to the requirements
of the Regulations. The
Manager also shall (i) to the extent permitted by the Code and other Applicable Law, make any
reasonable adjustments that are necessary or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet,
as computed for book purposes in accordance with Regulations Section l.704-l(b)(2)(iv)(g), and (ii)
make any reasonable appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-l(b).
(m) “Capital Contribution Commitment” means the amount set forth on Schedule 2.1(a) as the
total initial Capital Contribution on a per-Member basis.
(n) “Capital Contribution Date” is defined in Section 2.5.
(o) “Capital Contributions” means, with respect to any Member, the amount of money and
the initial Gross Asset Value of any property (other than money) contributed to the Company net of
liabilities assumed or taken subject to by the Company with respect to an Interest held by such
Member pursuant to the terms of this Agreement.
(p) “Casino Site LLCs” is defined in Section 2.1(b).
2
(q) “Certificate of Formation” means the certificate of formation filed with the
Delaware Secretary of State for the purpose of forming the Company pursuant to the Act, as amended
from time to time in accordance with this Agreement and the Act.
(r) “Cincinnati LLC” is
defined in Section 2.1(b).
(s) “Cleveland LLC” is defined in Section 2.l(b).
(t) “Cleveland Peninsula LLC” is defined in Section 2.l(b).
(u) “Closing” is defined in Section 9.4(d)(i).
(v) “Code” means the United States Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
(w) “Company” has the meaning specified in the introductory paragraph of this Agreement,
and shall further mean and include the limited liability company formed by this Agreement and the
company continuing the business of this Company in the event of dissolution (until completion of
liquidation and distribution of the proceeds) as herein provided.
(x) “Company Minimum Gain” has the meaning of “partnership minimum gain” set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
(y) “Cure Period” is defined in Section 9.4(a).
(z) “Debt” of any Person means (a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d)
all indebtedness created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to repossession or sale of such
property), (e) all obligations of such Person as lessee under leases that have been or should be,
in accordance with GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise,
of such Person under acceptance, letter of credit or similar facilities, (g) obligations of such
Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of
such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock,
at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all obligations of such Person in respect of interest rate swap agreements, currency
swap agreements and other similar agreements designed to hedge against fluctuations in interest
rates or foreign exchange rates, (i) all obligations for production payments from property operated
by or on behalf of such Person and other similar arrangements with respect to natural resources,
(j) all Debt referred to in clauses (a) through (i) above guaranteed directly or indirectly by such
Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to
pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt,
(ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss, (iii) to supply funds to
3
or in any other manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are rendered) or (iv)
otherwise to assure a creditor against loss, and (k) all Debt referred to in clauses (a) through
(j) above secured by (or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed or become liable for
the payment of such Debt.
(aa) “Demand Notice” is defined in Section 9.4(a).
(bb) “Depreciation” means, means, for each Fiscal Year or other period, an amount equal to
the depreciation, amortization or other cost recovery deduction allowable for federal income tax
purposes with respect to an asset for that year or other period, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning
of the Fiscal Year or other period, Depreciation shall be an amount which bears the same ratio to
such Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery
deduction for that Fiscal Year or other period bears to the adjusted tax basis of such asset;
provided, however, that if the federal income tax depreciation, amortization or other cost recovery
deduction for the applicable year or period is zero, Depreciation shall be determined with
reference to the Gross Asset Value of such asset using any reasonable method selected by the
Company.
(cc) “Disputes” is defined in Section 12.12.
(dd) “Environmental Law” means any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award relating to the environment, health or safety or to the
release of any materials into the environment, including, without limitation, the Clean Air Act, as
amended, the Clean Water Act of 1977, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Hazardous Materials Transportation Act, as
amended, and the Resource Conservation and Recovery Act of 1976, as amended.
(ee) “Federal
Tax Amount” is defined in Section 4.2.
(ff) “Fiscal Year” means (i) the period commencing on the effective date of this
Agreement and ending on December 31 of this year (or such other ending date as may be required by
Section 706 of the Code), (ii) any subsequent twelve (12) month period commencing on January 1st
and ending on December 31st (or such other ending date as may be required by Section 706 of the
Code), or (iii) any portion of the period described in clause (ii) for which the Company is
required to allocate Profits, Losses and other items of Company income, gain, loss or deduction
pursuant to ARTICLE 3.
(gg) “GAAP” means, as of any date of determination, accounting principles as codified by
the Financial Accounting Standards Board or that are then approved by such other entity as may be
approved by a significant segment of the accounting profession in the United States. The term
“consistently applied,” as used in connection therewith, means that the
4
accounting principles applied are consistent in all material respects with those applied at prior
dates or for prior periods.
(hh) “Gaming Law” is defined in Section 12.11.
(ii) “Gross Asset Value” means with respect to any Company 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 that asset, for the initial contributions as determined by the
Manager or pursuant to this Agreement for the initial contributions;
(ii) the Gross Asset Value of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the Manager, as of the date upon
which any of the following occurs: (A) the acquisition of an additional interest in the Company
after the date of this Agreement by any new or existing Member, in exchange for more than a de
minimis Capital Contribution or the distribution by the Company to a Member of more than a de
minimis amount of Company property as consideration for an interest in the Company, if the Manager
determines that such adjustment is necessary or appropriate to reflect the relative economic
interest of the Members of the Company; and (B) the liquidation of the Company within the meaning
of Regulation Section 1.704-l(b)(2)(ii)(g);
(iii) the Gross Asset Value of any Company asset distributed to any Member shall be the
gross fair market value of that asset on the date of distribution, as determined by the Manager;
and
(iv) if an election under Code Section 754 has been made, the Gross Asset Value of
Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis
of the assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that
the Manager determines that an adjustment pursuant to subsection (ii) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an adjustment pursuant
to this subsection (iv).
(v) If the Gross Asset Value of an asset has been determined or adjusted hereby, that
Gross Asset Value shall thereafter be determined by taking into account all adjustments for
Depreciation, if any, taken with respect to that asset for purposes of computing Profits and
Losses. For the purposes of the definition of Gross Asset Value, values which are determined by the
Manager, shall mean the good faith determination of the Manager.
(jj) “Interest” shall mean the entire interest of a Member in the Company, including all
of such Member’s rights, powers and privileges under this Agreement and the Act.
(kk) “Lien” means any lien, security interest or other charge, option, claim or
encumbrance of any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property.
(ll) “Liquidating Event” is defined in Section 11.1.
5
(mm) “Management Agreement” is defined in Section 5.4.
(nn) “Manager” is defined in Section 5.1.
(oo) “Member Guaranties” is defined in Section 2.3.
(pp) “Member Loan(s)” is defined in Section 2.2.
(qq) “Member Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt,
equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Section 1.704-2(i) of the Regulations.
(rr) “Member Nonrecourse Debt” has the meaning of “partner nonrecourse debt” set forth in
Section 1.704-2(b)(4) of the Regulations.
(ss) “Member Nonrecourse Deductions” has the meaning of “partner nonrecourse deductions”
set forth in Sections 1.704-2(i)(l) and 1.704-2(i)(2) of the Regulations.
(tt) “Members” means those Persons executing this Agreement as Members.
(uu) “Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the
Regulations.
(vv) “Other Interests” is defined in Section 1.6.
(ww) “Percentage Interest” means the fraction, expressed as a percentage, whose numerator is
the aggregate amount of such Member’s Capital Contributions made on or prior to such date and whose
denominator is the aggregate of the amounts of the Capital Contributions of all Members made on or
prior to such date, in each case as such Capital Contributions referenced above shall be reflected
on the books and records of the Company. In the event any Company interest is transferred in
accordance with the provisions of this
Agreement, the transferee of such interest shall succeed to the Percentage Interest of his
transferor to the extent it relates to the transferred interest.
(xx) “Permitted Transfer” is defined in Section 9.1.
(yy) “Person” means any individual, company (general or limited), limited liability
company, corporation, trust, or other entity.
(zz) “Preemptive Rights Notice” is defined in Section 2.7.
(aaa) “Preferred Return” shall mean ten (10) times the Capital Contribution made by a
Member, provided, however, that in no event shall the Capital Contribution upon which the Preferred
Return is based exceed the amounts, or apply to Members other than those, set forth on
Schedule 2.1(a) with respect to any Member.
6
(bbb) “Profits” and “Losses” means, for each Fiscal Year or other period, an amount equal to
the Company’s taxable income or loss for that year or period, 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)(l) shall be included in taxable income or loss),
with the following adjustments:
(i) any tax-exempt income of the Company described in Code
Section 705(a)(l)(B) and not otherwise taken into account in computing Profits or Losses
shall be added to that 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 Regulation Section 1.704-l(b)(2)(iv)(i), shall
be subtracted from that taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset is adjusted as required by
subsections (ii) or (iii) of the definition of Gross Asset Value, the amount of that adjustment
shall be taken into account as gain or loss from the disposition of that asset (as though the asset
were disposed of just prior to the adjustment) for purposes of computing Profits or Losses in the
Fiscal Year of adjustment;
(iv) gain or loss resulting from any disposition of Company 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 basis of that
property for federal income tax purposes may differ from its Gross Asset Value;
(v) in lieu of the depreciation, amortization and other cost recovery deductions taken
into account in computing the taxable income or loss, there shall be taken into account the
Depreciation for the Fiscal Year or other period; and
(vi) any items of income, gain, loss or deduction that are specially allocated pursuant
to Section 3.2, or allocated solely for tax purposes pursuant to Section 3.4, shall not be taken
into account in computing Profits or Losses, any preceding provision of this definition to the
contrary notwithstanding.
(ccc) “Project” means all the real property, development and business activities of or
relating to any casino located in the cities of Cincinnati, Ohio and Cleveland,
Ohio which is operated by the Company or its designee from time to
time.
(ddd) “Property” means all real and personal property owned by the Company from time to
time, and shall include both tangible and intangible property.
(eee) “Purchase Price” is defined in Section 9.4(b).
(fff) “Regulations” means the Income Tax Regulations, including Temporary Regulations,
promulgated under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
7
(ggg) “Regulatory Redemption”
is defined in Section 9.4.
(hhh) “Related Persons” is defined in Section 1.6.
(iii) “Securities Act” is defined in Section 7.2.
(jjj) “Shared Promotion” is defined in Section 1.7(b).
(kkk) “State Tax Amount” is defined in Section 4.2.
(lll) “Tax Matters Member” is defined in Section 8.5.
(mmm)
“Taxable Income” is defined in Section 4.2.
(nnn) “Transfer” means, as a noun, any direct or indirect, voluntary or involuntary
transfer, sale, other disposition or hypothecation, and, as a verb, directly or indirectly,
voluntarily or involuntarily to transfer, sell, otherwise dispose of or hypothecate. The term
Transfer shall also include any voluntary or involuntary transfer, sale, other disposition or
hypothecation of any kind, or any other transaction regardless of its form or structure, whereby a
Member’s Interest in the Company is reduced except reductions resulting solely from adjustment to
the Capital Accounts. An indirect Transfer includes (1) the transfer of equity interests in any
Member that is an entity or in any of its owners that is an entity up the entire chain of
ownership, and (2) with respect to any trust in the chain of ownership, any change in trustees or
beneficiaries of such trust, but not including distributions to beneficiaries from such trust.
(ooo) “Unreturned Capital Contributions” means the Capital Contributions of each Member
reduced by distributions on account of such Capital Contributions under Section 4.1(a).
(ppp) “Unpaid Additional Preferred Return” means the Additional Preferred Return of ROCK
OHIO VENTURES I LLC and LAKES OHIO DEVELOPMENT LLC
reduced by distributions on account of such Additional Preferred Return under
Section 4. l(b).
(qqq) “Unpaid Preferred Return” means the Preferred Return of each Member reduced by
distributions on account of such Preferred Return under
Section 4.l(c).
8
Schedule 2.1(a)
Member’s Capital Contributions
Member’s Capital Contributions
Capital | Percentage | |||||||
Commitment | Member | Interest | ||||||
$ | 9,500,000 | ROCK OHIO VENTURES I LLC |
40.137076 | % | ||||
$ | 11,802,000 | ROCK OHIO VENTURES II LLC |
49.862924 | % | ||||
$ | 2,366,889 | LAKES OHIO DEVELOPMENT LLC |
10.000000 | % |
Schedule 2.1(b)
Capital Contributions Currently Being Made
Capital Contributions Currently Being Made
Capital | ||||
Contribution | Member | |||
$ | 9,500,000 | ROCK OHIO VENTURES I LLC |
||
$ | 11,802,000 | ROCK OHIO VENTURES II LLC |
||
$ | 750,000 | LAKES OHIO DEVELOPMENT LLC |