EXHIBIT 10.59
JOINT VENTURE AGREEMENT
OF
CAPRI CRUISES
BETWEEN
COMMODORE CRUISES LIMITED
AND
ISLE OF CAPRI CASINO CORPORATION
DATED APRIL __, 1998
TABLE OF CONTENTS
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Page
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ARTICLE 1 DEFINITIONS............................................................ -1-
ARTICLE 2 OFFICES AND STATUTORY AGENT............................................ -5-
2.1 Principal Executive Office............................................. -5-
2.2 Other Offices.......................................................... -5-
ARTICLE 3 ESTABLISHMENT OF THE JOINT VENTURE..................................... -5-
3.1 Establishment of the Joint Venture..................................... -5-
3.2 Organization as a General Partnership.................................. -5-
3.3 Name................................................................... -6-
3.4 Charter of Vessel...................................................... -6-
3.5 Operations............................................................. -6-
3.6 Reservations........................................................... -6-
3.7 Corporate Overhead..................................................... -6-
3.8 Intellectual Property Assets........................................... -7-
3.9 Representations and Warranties of the Partners......................... -7-
3.10 Covenants of Partners.................................................. -8-
3.11 Concession Aboard Enchanted Isle....................................... -8-
ARTICLE 4 PARTNERS; MANAGEMENT; VOTING RIGHTS; MEETINGS OF DIRECTORS............. -8-
4.1 Partners............................................................... -8-
4.2 Management Committee................................................... -8-
4.3 Management Committee Meetings.......................................... -9-
4.4 Voting................................................................. -10-
4.5 Procedures in the Event of a Deadlock.................................. -12-
4.6 Chief Executive Officer................................................ -13-
4.7 Executive Officers..................................................... -14-
4.8 Business Plan.......................................................... -14-
4.9 Budget Approval........................................................ -15-
4.10 Employees and Employee Benefits........................................ -16-
4.11 Arrangements with Partners or Affiliates............................... -16-
4.12 Access to Books of Account............................................. -17-
4.13 Duty of Partners to Cooperate.......................................... -17-
4.14 Insurance and Risk Management.......................................... -17-
4.15 Limitations on Partner's Authority..................................... -17-
ARTICLE 5 CAPITAL CONTRIBUTIONS.................................................. -18-
5.1 Initial Capital Contributions.......................................... -18-
5.2 Adjustments to Capital Accounts........................................ -18-
5.3 Additional Capital Contributions....................................... -19-
(i)
5.4 Procedure for Making Capital Calls by the Management Committee......... -19-
5.5 Failure of Partner to Contribute Capital............................... -19-
5.6 No Third Party Beneficiaries........................................... -21-
5.7 No Withdrawal of, or Payment of Interest on, Capitals Accounts......... -21-
5.8 Obligation to Restore.................................................. -21-
ARTICLE 6 ALLOCATIONS, DISTRIBUTIONS, ACCOUNTING AND TAX MATTERS................. -21-
6.1 Allocations............................................................ -21-
6.2 Distributions and Reserves............................................. -21-
6.3 Accounting Matters..................................................... -23-
6.4 Tax Status and Returns................................................. -23-
6.5 Tax Matters Partner.................................................... -23-
6.6 754 Election........................................................... -24-
6.7 Partnership Classification............................................. -24-
ARTICLE 7 TRANSFER OF INTERESTS; ADMISSION AND RESIGNATION OF PARTNERS........... -24-
7.1 Transfer of Interests.................................................. -24-
7.2 Right of First Refusal................................................. -25-
7.3 Exempt Transfers....................................................... -26-
7.4 Legend................................................................. -27-
7.5 Admission of New Partners.............................................. -27-
7.6 Resignation of Partners................................................ -28-
7.7 Sale Due to Objection of Governmental Body............................. -28-
ARTICLE 8 DISSOLUTION/MANDATORY SALE............................................. -29-
8.1 No Default Dissolution................................................. -29-
8.2 Default Dissolution.................................................... -29-
8.3 Mandatory Sale......................................................... -31-
8.4 Notice................................................................. -31-
8.5 Dissolution Procedures................................................. -31-
8.6 Settling of Accounts................................................... -32-
8.7 Distribution of Proceeds............................................... -32-
8.8 Certified Liquidation Statement........................................ -33-
8.9 Mandatory Sale Procedures.............................................. -33-
ARTICLE 9 OUTSIDE ACTIVITIES; CONFIDENTIALITY.................................... -35-
9.1 Outside Activities..................................................... -35-
9.2 Duties of Partners..................................................... -36-
9.3 Confidential Information............................................... -36-
9.4 Duty of Partners to Cooperate.......................................... -38-
ARTICLE 10 INDEMNIFICATION........................................................ -38-
10.1 Limitation of Liability................................................ -38-
(ii)
10.2 Indemnification: Proceeding other than by Joint Venture............... -38-
10.3 Indemnification: Proceeding by Joint Venture.......................... -39-
10.4 Mandatory Indemnification.............................................. -39-
10.5 Authorization of Indemnification....................................... -39-
10.6 Mandatory Advancement of Expenses...................................... -39-
10.7 Effect and Continuation................................................ -39-
10.8 Insurance and Other Financial Arrangements............................. -40-
10.9 Notice of Indemnification and Advancement.............................. -40-
10.10 Repeal or Modification................................................. -40-
ARTICLE 11 INSPECTION OF JOINT VENTURE RECORDS; ANNUAL AND OTHER REPORTS.......... -40-
11.1 Records to be Kept..................................................... -40-
11.2 Inspection of Joint Venture Records.................................... -41-
11.3 Financial Reports...................................................... -41-
11.4 Joint Venture Auditors................................................. -41-
ARTICLE 12 DEFAULTS AND REMEDIES.................................................. -41-
12.1 Defaults............................................................... -41-
12.2 Remedies............................................................... -42-
12.3 No Waiver.............................................................. -42-
ARTICLE 13 DISPUTE RESOLUTION..................................................... -42-
13.1 Disputes............................................................... -42-
13.2 Arbitration............................................................ -42-
ARTICLE 14 MISCELLANEOUS.......................................................... -46-
14.1 Term................................................................... -46-
14.2 Amendments............................................................. -46-
14.3 Nature of Partnership Interest; Agreement Is Binding Upon Successors... -46-
14.4 Title to Property...................................................... -46-
14.5 Attorney Fees.......................................................... -46-
14.6 Seal................................................................... -47-
14.7 Entire Agreement....................................................... -47-
14.8 Third Parties.......................................................... -47-
14.9 Governing Law.......................................................... -47-
14.10 Counterparts........................................................... -47-
14.11 Titles and Subtitles; Form of Pronouns; Construction and Definitions... -47-
14.12 Severability........................................................... -47-
14.13 Costs.................................................................. -48-
(iii)
SCHEDULE 1 Names, Addresses and Initial Capital
Contributions of Partners................... 1-1
SCHEDULE 2 Initial Percentage Interests................ 2-1
SCHEDULE 3 Initial Directors........................... 3-1
SCHEDULE 4 Capital Accounts and Profits and Losses..... 4-1
SCHEDULE 5 Booking Rights and Commissions.............. 5-1
EXHIBIT A Guaranty.................................... A-1
EXHIBIT B Form of Joint Venture Charter and Assignment B-1
EXHIBIT C Form of License Agreement................... C-1
EXHIBIT D Initial Business Plan....................... D-1
EXHIBIT E Initial Budget.............................. E-1
EXHIBIT F Form of Casino Management Agreement......... F-1
(iv)
JOINT VENTURE AGREEMENT
OF
CAPRI CRUISES
THIS JOINT VENTURE AGREEMENT (this "Agreement") is made and entered into as
of the ___ day of April, 1998 by and between COMMODORE CRUISES LIMITED, a
Bermuda corporation ("Commodore"), and ISLE OF CAPRI CORPORATION, a Mississippi
corporation ("Casino"),
W I T N E S S E T H
WHEREAS, the parties hereto wish to form and become Partners of a general
partnership, to be called Capri Cruises (the "Joint Venture"), under and
pursuant to Chapter 620 of the Florida Statutes (the Florida Revised Uniform
Partnership Act), for the purpose of operating a cruise ship from New Orleans,
Louisiana, and such other business activities as shall be approved by the
Partners from time to time; and
WHEREAS, the parties agree that their respective rights, powers, duties and
obligations as Partners of the Joint Venture, and the management, operations and
activities of the Joint Venture, shall be governed by this Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants, and
conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement without other definition shall,
unless expressly stated otherwise, have the meanings specified in this
Article 1.
"Act" means Chapter 620 of the Florida Statutes (the Florida Revised
Uniform Partnership Act), as from time to time in effect in the State of
Florida, or any corresponding provision or provisions of any succeeding or
successor law of such State; provided, however, that in the event that any
amendment to the Act, or any succeeding or successor law, is applicable to the
Joint Venture only if the Joint Venture has elected to be governed by the Act as
so amended or by such succeeding or successor law, as the case may be, the term
"Act" shall refer to the Act as so amended or to such succeeding or successor
law only after the appropriate election by the Joint Venture has been made and
has become effective.
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"Affiliate" means any other Person directly or indirectly controlling,
controlled by, or under common control with, such Person; provided, however,
except that no party to this Agreement shall be considered an affiliate of any
other party solely by reason of its investment in the Joint Venture.
"Agreement" means this Joint Venture Agreement, as originally executed and
as amended, modified or supplemented from time to time. Words such as "herein,"
"hereafter," "hereof," "hereto," "hereby" and "hereunder", when used with
reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
"Business" means the operation of a cruise ship in "blue waters" from New
Orleans, Louisiana, and such other business activities as shall be approved by
the Partners from time to time.
"Business Plan" means the business plan of the Joint Venture described in
Section 4.8.
"Capital Account" means a Partner's account, calculated in accordance with,
and intended to comply with, Treasury Regulations section 1.704-1(b), pursuant
to Article 5 hereof.
"Capital Contributions" means the contributions made by the Partners to the
Joint Venture pursuant to Article 5 hereof and, in the case of all the Partners,
the aggregate of all such Capital Contributions.
"Code" means the United States Internal Revenue Code of 1986, as amended,
or any corresponding provision or provisions of any succeeding law.
"Confidential Information" means all confidential documents and information
(including, without limitation, confidential commercial information and
information with respect to customers and proprietary processes and the design
and development of new services) concerning the Joint Venture or the Joint
Venture Business, any Partner, or any Affiliate of a Partner furnished to a
Partner, an Affiliate of a Partner or the Joint Venture in connection with the
transactions leading up to and contemplated by this Agreement and the operation
of the Joint Venture or its business, except to the extent that such information
can be shown to have been (a) generally available to the public other than as a
result of a breach of the provisions of Section 9.3 of this Agreement; (b)
already in the possession of the receiving Person (as defined below in this
Section) or its Representatives (as such term defined in Section 9.3 hereof)
without restriction (including restrictions contained in any confidentiality
agreement or other nondisclosure obligation entered into by the Partner) and
prior to any disclosure in connection with the Joint Venture or pursuant to any
of the terms of this Agreement; (c) lawfully disclosed to the receiving Person
or its Representatives by a third party who is free lawfully to disclose the
same; or (d) independently developed by the receiving Person without use of any
Confidentiality Information obtained in connection with the transactions leading
up to and contemplated by this Agreement and the operation of the Joint Venture
or its business.
"Default Loan" means loans described in Section 5.5(d).
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"Default Rate" means the rate announced from time to time by NationsBank
N.A. as its prime rate plus 5%.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the balance sheet and the
other financial statements preceding the ones with respect to which such term is
used were prepared.
"Governmental Body" means any: (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign, or other government; (c) governmental or quasi-
governmental authority of any nature (including any governmental agency, branch,
department, official, or entity and any court or other tribunal); (d) multi-
national organization or body; or (e) body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"Guarantee" means the Guaranty executed by each of Commodore Holdings
Limited and Casino America, Inc., in the form of Exhibit "A" hereto.
"Intellectual Property Assets" means:
(a) all patents, patent applications and inventions and discoveries that
may be patentable;
(b) all copyrights in both published and unpublished works;
(c) all know-how, trade secrets, confidential information, customer lists,
software, programs, prototypes, designs, technical information, data, process
technology, engineering and manufacturing information, procedures,
specifications, plans, drawings and blue prints; and
(d) all trademarks (whether registered or unregistered) and trademark
applications owned, used, or licensed by the Person with respect to whom the
term is used either as licensee or licensor.
"Interest" means the entire ownership interest of a Partner in the Joint
Venture at any particular time, including, without limitation, the right of such
Partner to participate in the Joint Venture's income or losses and its Net Cash
Flow, and any and all other benefits to which a Partner may be entitled as
provided in this Agreement and the Act, subject to the obligations of such
Partner to comply with all the terms and provisions of this Agreement.
"IRC" means the United States Internal Revenue Code of 1986, as amended, or
any corresponding provision or provisions of any succeeding law.
"Net Cash Flow" means, with respect to any fiscal period, the excess of
operating revenues and receipts over operating expenses and other expenditures
for such fiscal period, (a) decreased by
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any amounts added to Reserves during such fiscal period, and (b) increased by
the amount (if any) of all allowances for cost recovery, amortization or
depreciation with respect to property of the Joint Venture for such fiscal
period, and (c) increased by any amounts withdrawn from Reserves during such
fiscal period. The foregoing computation shall be performed in accordance with
GAAP, consistently applied.
"Operations" means all transactions in the ordinary course of the Joint
Venture's business, but does not include the making of Capital Contributions to
the Joint Venture.
"Parent Entity" means, as to any Person, an Affiliate of which such Person
is a wholly or majority owned subsidiary.
"Partner Loans" means the loans described in Section 6.2(a)(i).
"Partner" shall mean each of the parties to this Agreement and any Person
(as defined below) who is admitted as a Partner of the Joint Venture pursuant to
the Act and the terms of this Agreement provided that such party or Person has
not disposed of its entire interest in the Joint Venture pursuant to Article 7
hereof.
"Percentage Interest" means the allocable interest of each Partner in the
income, gain, losses, deductions or credits of the Joint Venture. The
Percentage Interests of the Partners are as set forth in Schedule 2 hereto.
"Person" means any partnership, joint venture, association, corporation,
limited liability company, trust or other entity, or, where the contexts so
permits or requires, natural Person.
"Present Operations" means the Operations of the Joint Venture as described
in the Business Plan for its present fiscal year.
"Reference Rate" means the rate announced from time to time by NationsBank
N.A. as its prime rate.
"Reserves" means the reserves established and maintained from time to time
by the Management Committee for the purposes set forth in Section 6.2(b).
"Seaworthiness" means that the Vessel complies with all requirements of its
classification society, country of registry, United States Public Health
Service, United States Coast Guard, the International Convention of Safety of
Life at Sea, and that all equipment aboard the Vessel, including air
conditioning systems, water pumps and desalinization systems, are operational.
"Treasury Regulations" means the regulations issued by the Treasury
Department under the Code, as such regulations may be amended form time to time,
including any successor regulations.
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"Vessel" means the M/V Island Holiday (to be renamed the "M/V Enchanted
Capri") and/or such other ships as may be operated by the Joint Venture in the
future.
"Vessel Rules" means the Vessel's operating manual and such rules and
regulations concerning safety, discipline, shipboard conduct and compliance with
applicable laws as may be promulgated by Commodore and the Vessel's Captain from
time to time.
"Wholly Owned Subsidiary" means, as to any Person, a corporation or other
entity of which all of the capital stock or other equity interest is owned,
directly or indirectly, through one or more intermediaries, or both, by such
Person.
ARTICLE 2
OFFICES AND STATUTORY AGENT
2.1 Principal Executive Office. The principal executive office for the
transaction of the business of the Joint Venture shall initially be at 0000
Xxxxxxxxx Xxxxxxxxx, Xxxxx 000-X, Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxxx 00000, and may
be changed from time to time by the Partners within or without the State of
Florida.
2.2 Other Offices. The Partners may at any time and from time to time
establish other business offices within or without the State of Florida.
ARTICLE 3
ESTABLISHMENT OF THE JOINT VENTURE
3.1 Establishment of the Joint Venture. Upon execution of this Agreement
and contribution of the first installment of the Initial Capital Contributions
due by each Partner as set forth on Schedule 1 hereto, the Joint Venture shall
commence its existence. The purpose of the Joint Venture shall be for each of
the Partners to provide its unique expertise and experience to the joint project
of operating a cruise ship from New Orleans, Louisiana, and such other business
activities as shall be approved by the Partners from time to time.
3.2 Organization as a General Partnership. Notwithstanding the referral to
the Joint Venture as a "Joint Venture," the Joint Venture shall operate as a
Florida general partnership. The Joint Venture will be managed by a Management
Committee and none of the Partners shall have the authority to bind the Joint
Venture by virtue of their status as Partners of the Joint Venture. The purpose
of the Joint Venture shall be as described in Section 3.1.
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3.3 Name. The name of the Joint Venture shall be Capri Cruises and the
Joint Venture shall make such filings and take such other actions as shall be
necessary to conduct the business of the Joint Venture under such name.
3.4 Charter of Vessel. Upon execution of this Agreement, Commodore shall
assign to the Joint Venture its interest as charterer under the charter dated
March 9, 1998, as amended, between Commodore and Cruise Charter Ltd. (the "Joint
Venture Charter"), which assignment and charter are attached hereto as Exhibit
"B". Pursuant to the assignment of the Joint Venture Charter, each of Commodore
Holdings Limited and Casino America, Inc. shall execute a guaranty in the form
of Exhibit "A" attached hereto whereby each of them shall guarantee half of the
charter hire and other obligations (severally and not jointly) due under the
Joint Venture Charter.
3.5 Operations. The Partners shall operate the Joint Venture so as to take
advantage of their particular areas of expertise and experience. In this
connection, Commodore will operate the Vessel and Casino will operate the casino
aboard the Vessel as an "Isle of Capri" casino, including setting up the
internal controls for the casino. In addition, the marketing for the Joint
Venture will be shared between the Partners, with Commodore marketing the base
cruise product and Casino marketing the gaming product. The Management Committee
of the Joint Venture will agree upon the marketing and pricing schedule and upon
the predetermined percentage of the published cruise fare to be discounted for
database casino customers as a marketing tool, which plans will be included in
the proposed Business Plan and Budget submitted to the Management Committee of
the Joint Venture on an annual basis by the CEO of the Joint Venture pursuant to
Section 4.9. Such marketing will be conducted so as not to disrupt the fare
structure Commodore has in place with its travel agents.
3.6 Reservations. Reservations for the Joint Venture's Vessel will be made
through Commodore's reservations office with a special Joint Venture telephone
manned by employees of an Affiliate of Commodore who will be trained regarding
the Joint Venture.
3.7 Corporate Overhead. In order to best take advantage of the experience,
expertise and economies of scale which each of the Partners can provide to the
Joint Venture, the Partners may, where necessary and appropriate, utilize the
services of employees of each of the Partners to provide services to the Joint
Venture instead of hiring new employees specifically for the Joint Venture. As
such, a portion of each of Commodore's and Casino's overhead related to the
services it provides to the Joint Venture will be charged to the Joint Venture,
at cost, with the amounts proposed to be charged set forth in the proposed
Budget submitted to the Management Committee by the CEO each year and as may be
approved by such Management Committee. In addition, each Partner will be
reimbursed by the Joint Venture for all out-of-pocket monies expended on behalf
of the Joint Venture, to be budgeted and approved by the Joint Venture's
Management Committee in advance. The Partners anticipate that these costs will
relate primarily to marketing costs and management staff, and reimbursement for
advances made in connection with formation and operation of the Joint Venture.
Without limitation of the foregoing, Casino shall be reimbursed by
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the Joint Venture for a portion of the salary and benefits of a senior Person
who will be assigned to oversee and coordinate the operations and marketing of
the Joint Venture's casino.
3.8 Intellectual Property Assets. Each of the Partners shall license
certain of its Intellectual Property Assets to the Joint Venture for a fee equal
to $1 per year for as long as such Partner owns an Interest in the Joint Venture
and the Vessel is operating. Specifically, Casino shall license its
Intellectual Property Assets related to its "Isle of Capri" casino products and
services and Commodore shall license its Intellectual Property Assets related to
its "Commodore Cruise Lines" products and services to the Joint Venture. The
Joint Venture shall enter into license agreements with each of Casino and
Commodore on terms substantially similar to the those contained in Exhibit "C"
hereto.
3.9 Representations and Warranties of the Partners. Each Partner
represents and warrants to each other Partner and the Joint Venture as follows
(except as to the matters in clause (d) below, which Commodore represents and
warrants to Casino and the Joint Venture):
(a) Each Partner is a corporation duly incorporated, validly existing, and
in good standing under the laws of its state or country of incorporation, with
full corporate power and authority to own, lease, and operate its properties and
to carry on its business as it is now being conducted. Each such corporation is
in good standing as a foreign corporation in each jurisdiction in which the
ownership of its property or the conduct of its business makes such
qualification necessary. Each such corporation has taken all action necessary to
authorize the execution, delivery, and performance of this Agreement.
(b) Neither the execution or the delivery of this Agreement or any
document or instrument contemplated hereby to be executed and delivered by any
Partner or its Affiliate, nor the fulfillment of or compliance with the terms
and provisions of this Agreement and such other documents and instruments, will
conflict with or will result in a breach of, the terms, conditions, or
provisions of, or constitute a default under, or result in any violation of, any
judgment, decree, or any order of any court or any arbitration authority, or any
statute, law, rule, or regulation by which any such Partner, or its Affiliate,
or its respective assets are affected or bound.
(c) There are no oral or written contracts, agreements, or undertakings
binding upon or affecting any Partner or its Affiliate, or its respective assets
that would alter or impair the ability of such Partner or Affiliate to enter
into and perform its obligations under this Agreement or any document or
instrument contemplated hereby to be executed and delivered by any Partner or
its Affiliate.
(d) As of the date of this Agreement, (i) the Joint Venture Charter is in
full force and effect, (ii) to Commodore's knowledge, there is no actual or
alleged breach, default or event of default of or under such Joint Venture
Charter or matter or occurrence which, with or without the passage of time,
would constitute, cause or result in any such breach, default or event of
default, (iii) attached to this Agreement as Exhibit B is a true, accurate and
complete copy of the Joint
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Venture Charter and all amendments or modifications to it, and except as
contained in Exhibit B, there are no modifications, amendments or changes to the
Joint Venture Charter.
3.10 Covenants of Partners. Each Partner covenants to each other Partner
as follows:
(a) Commodore will use its reasonable best efforts to operate the
Vessel in accordance with industry practices and to cause the Joint Venture to
remain in compliance with the terms of the Joint Venture Charter (and to notify
the Management Committee promptly if it appears that the Joint Venture may fail
to comply with the terms of the Joint Venture Charter in any material respect).
(b) Casino will use its reasonable best efforts to operate the casino
aboard the Vessel in accordance with industry standards and to implement and
maintain internal controls with respect to the casino as customarily implemented
in the industry.
3.11 Concession Aboard Enchanted Isle. If during any three-month period
commencing on or after Xxx 0, 0000, Xxxxxx or its Affiliates book passengers
aboard the Vessel who occupy an average of one-third or more of the occupied
cabins on the Vessel, then, at the election of Casino, Commodore shall cause its
Affiliate to enter into the Casino Management Agreement, in the form attached
hereto as Exhibit "F" with Casino America, Inc. with respect to Commodore's
vessel, the M/V Enchanted Isle or, if Commodore or its Affiliates cease to
operate the M/V Enchanted Isle, any replacement vessel on similar itineraries
(the "Enchanted Isle"). Such option shall expire six months after Casino or its
Affiliates first meets such target. Notwithstanding the foregoing, commencing
on the date hereof, Commodore or its Affiliates shall grant Casino and its
Affiliates certain rights with respect to the sale of cabins aboard the
Enchanted Isle described on Schedule 5.
ARTICLE 4
PARTNERS; MANAGEMENT; VOTING RIGHTS; MEETINGS OF DIRECTORS
4.1 Partners. Each of the parties to this Agreement, and each Person
admitted as a Partner of the Joint Venture pursuant to the Act and Article 7 of
this Agreement, shall be a Partner of the Joint Venture until ceasing to be a
Partner as a result of the provisions of the Act or this Agreement. The names
of the initial Partners are set forth on Schedule 1 hereto.
4.2 Management Committee.
(a) Except as otherwise provided in this Agreement, complete and
exclusive power to direct and control the business affairs of the Joint Venture
is delegated to a Management Committee (the "Management Committee"), which will
consist of four members. Each Partner shall appoint two members of the
Management Committee (the "Directors").
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(b) Effective upon the giving of written notice to the other Partner,
a Partner may, at any time in its sole discretion, remove, replace or fill a
vacancy relating to any or all of its appointed Directors with other individuals
and may designate one or more alternates for any or all of its Directors. Each
Director must be an officer or employee of a Partner or an Affiliate thereof.
Each Director shall serve on the Management Committee until his successor is
appointed or until his earlier death, resignation or removal.
(c) Except as otherwise provided in this Agreement, the Management
Committee shall have the exclusive authority and power to act on behalf of the
Joint Venture on all matters, including without limitation on the matters set
forth in Section 4.4 or elsewhere herein and including without limitation the
following matters:
(i) The approval of the Business Plan and Budget (as defined in
Section 4.9) or any material change to it and the determination to require
any Additional Capital Contributions; and
(ii) any other matters coming before the Management Committee.
Each Partner, by execution of this Agreement, agrees to, consents to and
acknowledges the delegation of powers and authority to such Management
Committee.
(d) Any member of the Management Committee may receive all reports and
information from the CEO and the Executive Officers as he shall request, in his
sole discretion.
(e) The Management Committee may delegate any portion of its authority
(other than with respect to the matters set forth in Section 4.4(b)) to the CEO
or to any other Executive Officer.
4.3 Management Committee Meetings .
(a) The Management Committee shall hold regular meetings (at least
quarterly) as such time and place as shall be determined by the Management
Committee (or by the Chairman). Special meetings of the Management Committee may
be called at any time by any Director by delivering the notice as provided in
Sub-section (g) below.
(b) The Chairman of the Management Committee shall be a Director who
is appointed by the Management Committee from time to time. The Chairman shall
establish the agendas for, and regulate the proceedings, of the Management
Committee, but must include on such agendas matters requested by any Director in
writing received at least two business days prior to the meeting.
(c) Directors may participate in a meeting of the Management Committee
by conference telephone or similar communications equipment by means of which
all Persons
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participating in the meetings can hear each other, and such participation shall
constitute presence in person or at such a meeting.
(d) Any action required or permitted to be taken at any meeting of the
Management Committee may be taken without a meeting upon the written consent of
the number of Directors required to approve the actions contained in such
consent (in accordance with Section 4.4). Such written consent or consents shall
be filed with the minutes of the proceedings of the Management Committee and
shall have the same force and effect as a vote of the Directors required to
approve the actions contained in such consent (in accordance with Section 4.4).
(e) The Management Committee shall appoint a Secretary from time to
time. The Secretary shall keep written minutes of all Management Committee
meetings and written consents, a copy of which meetings shall be provided to
each Director.
(f) The Directors shall have the right to designate an alternate to
attend meetings of the Management Committee, instead and in place of such
Director, and to exercise all of the functions of such Director. Any such
alternate shall be an officer or employee of a Partner or of an Affiliate
thereof. Any such alternate shall be deemed to be a Director for all purposes
hereunder until such designation is revoked.
(g) Notice of each regular meeting and each special meeting of the
Management Committee shall be given to each Director at least three business
days before such meeting. Notices of special meetings shall contain a
description, in reasonable detail, of the items of business to be conducted at
such meeting and no business other than those items (unless expressly agreed to
by the Director representing the Partner who did not call that special meeting)
may be conducted at such special meeting. Notice of a meeting need not be given
to any Director who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting, or
who attends the meeting without protesting prior thereto or at its commencement.
All such waivers, consents and approvals shall be filed with the Joint Venture's
records and made a part of the minutes of the meeting.
4.4 Voting.
(a) On any matter on which a vote is taken, each of the Directors
shall have one vote. That number of Directors which is one less than the number
of Directors on the Management Committee shall constitute a quorum for the
transaction of business; provided that all of the Directors of the Management
Committee are required in order to have a quorum for transaction of business
that requires an affirmative vote of all of the Directors. All actions by the
Management Committee shall require the affirmative vote of a majority of the
Directors on the Management Committee, except for the actions set forth in Sub-
section (b) below, which shall require the affirmative vote of all the Directors
of the Management Committee, and the actions set forth in Subsection (c) below,
which shall require the affirmative vote of two of the Directors of the
Management Committee.
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(b) Except as otherwise expressly provided in this Agreement, the
Joint Venture shall not take any of the following actions unless such action has
been approved by the affirmative vote of all the Directors of the Management
Committee:
(i) Any amendment of this Agreement;
(ii) Any determination to change the nature of the Joint
Venture's Business;
(iii) The admission of any additional Partners to the Joint
Venture or the issuance of any additional Interests in the Partnership
(other than pursuant to Section 5.5 hereof);
(iv) The voluntary dissolution or liquidation of the Joint
Venture;
(v) The agreement to continue the Business of the Joint Venture
after an event of dissolution specified in Section 8.1;
(vi) Any merger or consolidation of the Joint Venture with or
into another Person or sale, assignment, lease or other transfer of
substantially all of the Joint Venture's assets;
(vii) A determination to require an Additional Capital
Contribution in accordance with Section 5.3, other than an Additional
Capital Contribution required to maintain the Seaworthiness of the Vessel
or for items of necessity to continue the Present Operations of the Joint
Venture;
(viii) The authorization or the incurrence by the Joint Venture of
indebtedness for borrowed money in excess of $100,000 in the aggregate at
anytime outstanding;
(ix) The determination to make any capital expenditures or
commitments therefor that aggregate in excess of $250,000 in budget in any
one transaction or series of related transactions;
(x) The making of any loans or advances to, or guarantees for
the benefit of, any Partner or Affiliate;
(xi) The execution of any leases or other arrangements involving
the rental, use or occupancy of any property by or on behalf of the Joint
Venture (other than dock space for the Vessel), which involve an aggregate
annual expenditure in excess of $100,000;
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(xii) The authorization of any transaction between the Joint
Venture and any Partner or Affiliate of a Partner;
(xiii) The taking of any action which may cause the Joint Venture
to become an entity other than a general partnership; and
(xiv) Any other matter which the Management Committee determines,
pursuant to its unanimous vote, shall require the unanimous approval of the
Directors of the Management Committee.
(c) The Joint Venture may act to require an Additional Capital
Contribution from the Partners to be used solely for the purposes of maintaining
the Seaworthiness of the Vessel or for items of necessity to continue the
Present Operations of the Joint Venture if at least two of the Directors of the
Management Committee determine that such Additional Capital Contribution is
required for such purpose. In the event that at least two but less than all of
the Directors of the Management Committee vote to require such Additional
Capital Contribution, the Director or Directors who vote against such action
(the "Opposed Directors") may require that such decision be submitted to
arbitration pursuant to Article 13 if the Opposed Directors dispute whether the
Additional Capital Contribution is required (or the amount that is required) to
maintain the Seaworthiness of the Vessel or for items of necessity to continue
the Present Operations of the Joint Venture. If the arbitrators find that the
Additional Capital Contribution is required for either Seaworthiness or for
items of necessity to continue Present Operations, the Partner represented by
the Opposed Directors shall have a period of 120 days to remit such Additional
Capital Contribution to the Joint Venture together with interest at the Default
Rate or to be treated as a Defaulting Partner. In the event such party fails to
make such Additional Capital Contribution within the 120-day period, the non-
defaulting Partner may elect any of the options under Section 5.5 with respect
to the Defaulting Partner's Additional Capital Contribution, may purchase the
Defaulting Partner's Interest pursuant to Section 8.3 or dissolve the Joint
Venture pursuant to Section 8.2. During the period between the date such
Additional Capital Contribution is demanded and the expiration of the 120-day
period, the Partner who does not dispute the Additional Capital Contribution
may, but shall not be required to, make a Partner Loan to the Joint Venture in
the amount of the other Partner's Additional Capital Contribution, which Partner
Loan shall bear interest at the Reference Rate until the decision of the
arbitrators is released, and if such decision supports such Additional Capital
Contribution, the interest rate shall increase on such day the decision is
released to the Default Rate.
4.5 Procedures in the Event of a Deadlock. In cases where a majority of
the Directors fail to agree on any matter submitted to a vote of the Management
Committee (a "Dispute"), the Dispute shall be resolved in the following manner:
(a) First, any Director may refer the Dispute to the executive at the
parent (if applicable) of each Partner to whom the respective Director reports
(each, a "Senior Executive"), in an attempt to reach a resolution;
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(b) If the Senior Executives of the Partners are unable to resolve a
Dispute within five business days after the referral to them of a Dispute (or
such longer period of time as to which the Senior Executives mutually agree in
writing), except as set forth in Section 4.5(d), the Partners shall submit the
Dispute to arbitration pursuant to the procedures set forth in Article 13.
(c) Except as set forth in Section 4.5(d), during the pendency of any
Dispute, the operations of the Joint Venture in dispute shall be operated as
follows: If the Dispute relates to the operations or marketing of the Vessel
(excluding the casino), Commodore's decision shall control, and if the Dispute
relates to the operation or marketing of the casino, Casino's decision shall
control. If the Dispute relates to a matter other than the operation of the
Vessel or the casino, no action shall be taken respecting the matter pending the
determination of the arbitrators and the matter shall be status quo.
(d) Notwithstanding the provisions of this Section 4.5, a deadlock
with respect to any matter set forth in Section 4.4(b) shall not be subject to
arbitration pursuant to Article 13. Instead, the Joint Venture shall continue to
operate without taking any action with respect to such matter unless and until
the Management Committee unanimously agrees to take such action.
4.6 Chief Executive Officer.
(a) Except as limited by Sections 4.7 and 4.10(c), the Chief Executive
Officer (the "CEO") shall have such authority and power as shall be delegated to
him by the Management Committee, including management of the Joint Venture's
day-to-day operations, in a manner consistent with the Business Plan and then
current Budget.
(b) The CEO shall be appointed by Commodore with Casino's reasonable
approval, and serve at the pleasure of the Management Committee. The CEO also
may serve as an executive officer or employee of one of the Partners or an
Affiliate thereof.
(c) Subject to Sections 4.2, 4.4, 4.7 and 4.10(c), the CEO will be
responsible for and have the authority, discretion, and primary responsibility
in managing the staff and the day-to-day operations of the Joint Venture,
including :
(i) Implementing the Business Plan and Budget of the Joint
Venture as approved by the Management Committee;
(ii) Making any immaterial changes to or taking actions which
would constitute an immaterial deviation from, an approved Business Plan or
approved Budget;
(iii) Operating and managing the business of the Joint Venture
(other than the casino);
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(iv) Preparing, on an annual basis, proposed revisions to the
Business Plan and Budget for submission to the Management Committee for
approval;
(v) Authorizing the Joint Venture to enter into transactions up
to $100,000 for any transaction or series of related transactions;
(vi) The delegation of powers and authorities to the Executive
Officers consistent with the other provisions of this Agreement; and
(vii) Ensuring that the Joint Venture complies with all
applicable legal requirements.
4.7 Executive Officers.
(a) The executive officers of the Joint Venture shall consist of the
CEO, a Chief Financial Officer/Financial Manager (the "CFO"), a Vice President -
Casino Operations (the "Casino VP"), Vice President - Cruise Operations (the
"Cruise VP") and such other officers as the Management Committee may appoint
(collectively, the "Executive Officers"). An Executive Officer may also be an
officer or employee of one of the Partners or an Affiliate.
(b) Commodore shall have the right to appoint, remove (and replace)
one of its employees or employees of an Affiliate to the positions of CFO and
Cruise VP (with Casino's reasonable approval), and Casino shall have the right
to appoint, remove (and replace) one of its employees or an employee of an
Affiliate to the position of Casino VP (with Commodore's reasonable approval).
(c) The Casino VP shall report to the Directors of the Management
Committee appointed by Casino, and shall report, on an advisory basis, to the
CEO. The CFO and Cruise VP shall report to the CEO and shall report, on an
advisory basis, to the Directors of the Management Committee.
(d) Notwithstanding Section 4.7(c), while on board the Vessel, all
Executive Officers shall report to the captain of the Vessel (the "Captain") as
to matters relating to Vessel Rules.
4.8 Business Plan. Attached hereto as Exhibit "D" is the Joint Venture's
Initial Business Plan for the 16 months ending September 30, 1999, which has
been approved by the Partners. The CEO shall submit to the Management Committee
proposed revisions to the Business Plan for the Joint Venture not less
frequently than annually, at least 60 days prior to the start of the first
fiscal year covered by such Business Plan. Each such Business Plan shall be
considered at the first meeting of the Management Committee following its
submissions and shall be subject to the approval of a majority of the Directors
on the Management Committee.
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4.9 Budget Approval.
(a) Attached hereto as Exhibit "E" is the Joint Venture's Initial
Budget (including the items of corporate overhead to be charged to the Joint
Venture) for the 16 months ending September 30, 1999, which has been approved by
the Partners.
(b) The CEO shall include a proposed budget (the "Budget") for the
Joint Venture for the next fiscal year in his submission of the revised Business
Plan, with the assistance of the Cruise VP, Casino VP, and the CFO. The Budget
shall include an income statement, balance sheet, and capital budget prepared
consistently with the Joint Venture's method of accounting, for the forthcoming
fiscal year and a cash flow statement which shall show in reasonable detail the
anticipated receipts and disbursements (including anticipated distributions)
projected for the Joint Venture for the forthcoming fiscal year and the amount
of any corresponding cash deficiency or surplus, and the amount and due dates of
any proposed Additional Capital Contributions. The Budget shall be prepared on a
basis consistent with the Joint Venture's financial statements and shall be
prepared in accordance with the provisions of this Agreement.
(c) Each Budget shall be considered at the first meeting of the
Management Committee following its submission and shall be subject to the
approval of a majority of the Directors on the Management Committee.
(d) Each Budget shall also include a detailed explanation of the
proposed related party charges for corporate overhead or services proposed to be
charged by any Partner in connection with services to be provided by such
Partner and/or its Affiliates to the Joint Venture.
(e) Without the unanimous approval of the Directors, a Budget shall
not include a requirement for Additional Capital Contributions.
(f) If for any fiscal year no new Budget is agreed upon and approved,
then the Joint Venture will be managed in a manner consistent with the
Operations for the prior fiscal year, as adjusted by the CEO to reflect the
Joint Venture's contractual obligations for the year and other items of
necessity for the Joint Venture to conduct its Present Operations.
Notwithstanding anything to the contrary in this Agreement, a failure by the
Management Committee to approve any Budget shall not be subject to arbitration
under Article 13 hereof.
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4.10 Employees and Employee Benefits.
(a) Generally. The CEO shall determine, or shall delegate authority to
others to determine, how many people will be required for the operation of the
Joint Venture (other than casino operations) and which personnel shall be hired
by the Joint Venture, in accordance with the Business Plan and Budget and
subject to arrangements under Section 4.11. Except for personnel who are
employees of a Partner and who are appointed by such Partner to work for the
Joint Venture and for Executive Officers who also are employees of a Partner or
an Affiliate thereof, unless other agreed all Joint Venture personnel will be
employees of the Joint Venture and not of either Partner. In the event that the
Joint Venture hires an employee of a Partner, each Partner shall indemnify the
Joint Venture against any claims that the transfer of that employee amounted to
a termination of employment.
(b) Employee Benefits. Joint Venture personnel who are employees of a
Partner may continue to participate in the employee benefit programs of the
Partner by which they are employed to the extent allowed by law or permitted by
the employee benefit plans of the respective Partners.
(c) Casino Employees. The Casino VP shall determine, as approved by
the Directors of the Management Committee appointed by Casino, the number of
casino employees (as long as such number meets Budget requirements) and the
identity of such employees. The Casino VP shall also have sole authority to
appoint the casino manager (who shall work aboard the Vessel) and to determine
together with such casino manager when and if to hire or fire casino employees.
It is understood that certain of the casino employees may also be employees of
Casino or its Affiliates. The Casino VP and casino manager shall set all
policies for the casino (subject to the approval of the Directors of the
Management Committee appointed by Casino), including the salaries of casino
employees (as long as such salaries are within the Budget), and shall manage all
aspects of the casino aboard the Vessel.
(d) Casino Manager. The casino manager selected by the Casino VP shall
be treated as a senior officer aboard the Vessel for purposes of determining his
or her cabin assignment and other perquisites provided to shipboard personnel.
The casino manager shall be treated as shipboard personnel and shall be invited
to events for ship's officers and otherwise treated as a part of the captain's
staff.
(e) Notwithstanding anything contained in this Section 4.10, while on
board the Vessel all personnel (including casino employees) shall report to the
Captain of the Vessel as to matters relating to Vessel Rules.
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4.11 Arrangements with Partners or Affiliates.
(a) If the Management Committee decides that any services should be
provided by contract rather than by the Joint Venture, the Management Committee
shall request from one or more Partners a bona fide written offer for such a
contract. Unless otherwise provided in the Agreement, if any Partner or any
Affiliate of a Partner elects to bid for any such contract, the Management
Committee may award a contract to the bidding Partner of Affiliate of a Partner
if that bid is in the Joint Venture's best economic interest. In making the
determination of services to be provided by contract and/or by the Partners, the
Management Committee shall be guided by Article 3 hereof and shall not award a
contract for any type of services already being provided to the Joint Venture by
a Partner pursuant to a corporate overhead allocation.
(b) Subject to Section 4.11(a), the Joint Venture may enter into
contracts with a Partner or any of its Affiliates provided that any such
transaction shall be on terms no more favorable than those afforded to unrelated
third parties. The validity of any transaction, agreement of payment involving
the Joint Venture and a Partner or any Affiliate of Partner shall not be
affected by reason of the relationship between the Joint Venture and a Partner
or such Affiliate of Partner.
4.12 Access to Books of Account. Notwithstanding any other provision of
this Agreement, each Partner shall have the right at all reasonable times during
usual business hours to audit, examine, and make copies or extracts of or from
the complete books of account of the Joint Venture, including the books and
records maintained in accordance with Article 11 and all other books and records
of the Joint Venture. Such right may be exercised through any agent or employee
of such Partner designated by it or by independent certified public accountants
or counsel designated by such Partner. Each Partner shall bear all expenses
incurred in all examination made for such Partner's account.
4.13 Duty of Partners to Cooperate. Each member will, to the extend
permitted by applicable law, furnish such information, execute such applications
and similar documents as are required by governmental authorities, and take such
other actions as may be reasonably requested by the Management Committee and as
may be necessary or reasonably desirable in connection with the Business of the
Joint Venture.
4.14 Insurance and Risk Management. As long as the premiums and other
terms remain advantageous to the Joint Venture, the property and casualty
insurance program for the Joint Venture (including the insurance for the Vessel)
shall be integrated into the insurance program of Commodore. Each Partner
hereby consents and agrees that the Joint Venture shall compensate Commodore for
a mutually agreed upon budgeted amount for insurance premiums and related
expenses. Said insurance shall comply with the requirements of the Joint
Venture Charter, including, Clauses 12 and 53 thereof. The Joint Venture and
each Partner shall be named as additional assureds under that program.
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4.15 Limitations on Partner's Authority. No Partner shall have the right
to bind the Joint Venture or act on behalf of the Joint Venture by virtue of
such Partner's ownership of an Interest, it being the intention of the Partners
that the Joint Venture be managed by the Management Committee and the Executive
Officers, including the CEO, appointed by such Management Committee.
ARTICLE 5
CAPITAL CONTRIBUTIONS
5.1 Initial Capital Contributions. Each Partner shall make Capital
Contributions to the Joint Venture in cash, in installments pursuant to the
funding schedule, as set forth on Schedule 1 hereto. Upon receipt of each such
Capital Contribution, the Joint Venture shall credit each Partner's Capital
Account with the amount of such Partner's Capital Contribution. In addition,
each Partner shall set aside an additional $500,000 as a potential supplemental
capital contribution to the Joint Venture (the "Supplemental Capital"). In the
event either Partner determines that the Joint Venture requires the Supplemental
Capital for any purpose, such Partner shall notify the other Partner of such
determination and both Partners shall contribute the Supplemental Capital to the
Joint Venture within ten days after receipt of such notice. Upon receipt of the
Supplemental Capital, each Partner's Capital Account shall be credited
accordingly. Such Supplemental Capital shall not be treated as an Additional
Capital Contribution for purposes of this Agreement except that any Partner who
fails to pay Supplemental Capital when due shall be considered a Defaulting
Partner, and the Non-Defaulting Partner shall have all rights related thereto
including the rights set forth in Section 5.5. Any dispute regarding
Supplemental Capital shall not be subject to Article 13.
5.2 Adjustments to Capital Accounts.
(a) Generally. Subject to Section 5.1, each Partner's Capital Account
shall be increased by:
(i) the amount of money contributed by it or on its behalf to
the Joint Venture;
(ii) the fair market value of any property contributed by it to
the Joint Venture (net of any liabilities secured by such contributed
property that the Joint Venture is considered to assume or take subject to
under IRC[_]752); and
(iii) allocations to it of profit and other items of book income
and gain, including income and gain exempt from tax and income and gain
described in Treas. Reg. 1.704-1(b)(2)(iv)(g), but excluding income and
gain described in of Treas. Reg. 1.704-1 (b)(4)(i);
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and shall be decreased by:
(iv) the amount of money distributed to it by the Joint Venture;
(v) the fair market value of property distributed to it by the
Joint Venture (net of liabilities secured by such distributed property that
such Partner is considered to assume or take subject to under IRC[_]752);
and
(vi) allocations of loss and other items of book loss, including
items of loss and deduction described in IRC[_]705(a)(2)(B) and Treas. Reg.
[_]1.7041(b)(2)(iv)(g), but excluding items described in of Treas. Reg.
[_]1.704-1 (b)(4)(i) or (b)(4)(iii), and shall otherwise be adjusted in
accordance with the additional rules set forth in Treas. Reg. [_]1.704-
1(b)(2)(iv).
(b) Certain Adjustments to Capital Accounts. If the book values of
Joint Venture assets are adjusted pursuant to Treas. Reg. [_]1.704-1(b), the
Capital Accounts of all the Partners shall be adjusted simultaneously to reflect
the allocations of gain or loss that would be Partners if there were a taxable
disposition of the Joint Venture's property for its fair market value. If any
assets of the Joint Venture are to be distributed in kind, such assets shall be
distributed on the basis of their fair market values after the Partners' Capital
Accounts have been adjusted to reflect the manner in which any unrealized gain
and loss with respect to such assets (that has not been reflected in the Capital
Accounts previously) would be allocated between the Partners if there were a
taxable disposition of the property for its fair market value.
(c) Definition of Adjusted Capital Account. As used in this Agreement,
"Adjusted Capital Account" means, with respect to each Partner, such Partner's
Capital Account as determined under the preceding provisions of this Section
5.2, increased by such Partner's share of Joint Venture minimum gain and minimum
gain attributable to partnership nonrecourse debt as determined under Treas.
Reg. [_]1.704-2.
5.3 Additional Capital Contributions. Subject to Section 4.4(c), if all
of the Directors on the Management Committee determine from time to time that
additional cash is needed by the Joint Venture for the payment of the debts and
obligations of the Joint Venture relating to the Vessel or otherwise for the
carrying on of the Business of the Joint Venture, then upon such call of the
Management Committee, each Partner shall contribute as additional capital to the
Joint Venture ("Additional Capital Contributions"), in accordance with its
Percentage Interest, the amount of cash determined by the Management Committee
to be needed by the Joint Venture for such purposes.
5.4 Procedure for Making Capital Calls by the Management Committee.
Subject to Section 4.4(c), all calls for Additional Capital Contributions
pursuant to Section 5.3: (a) shall have been unanimously approved by the
Management Committee, (b) shall be in writing delivered to each Partner, (c)
shall state the aggregate amount of funds needed by the Joint Venture, the
expected use or uses of such funds, and the amount of each Partner's
proportionate share of such capital
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contribution, and (d) shall specify the date on which the capital contribution
is to be made, which shall in no event be sooner than 60 days following the
Partner's receipt of the written call.
5.5 Failure of Partner to Contribute Capital. If a Partner (the
"Defaulting Partner") fails to make an Additional Capital Contribution to the
Joint Venture within 30 days after such contribution is due under the procedures
set forth in Section 5.4, the other Partner (the "Non-Defaulting Partner") may
exercise one or more of the following remedies:
(a) Set-Offs. Cause the Joint Venture to set-off against any
distributions otherwise due from the Joint Venture to the Defaulting Partner the
amount of capital due to the Joint Venture from the Defaulting Partner, and
apply such amount to such capital contribution required to be made by the
Defaulting Partner.
(b) Make the Defaulting Partner's Contribution. Make the capital
contribution required to be made to the Joint Venture by the Defaulting Partner,
in which case the Non-Defaulting Partner's Percentage Interest will be
increased, and the Defaulting Partner's Percentage Interest correspondingly
decreased, by adding to or subtracting from such percentage, as the case may be,
an amount, expressed as a percentage, equal to the amount of such capital
contribution in default, divided by (x) the total of all capital contributions
theretofore made to the Joint Venture by both Partners, plus (y) the amount of
the Additional Capital Contribution of both Partners.
(c) Loan by Third Party. In lieu of an Additional Capital Contribution
by either Partner, cause the Joint Venture to borrow from a third party the
amount otherwise due from both Partners without the requirement for the consent
of the Defaulting Partner or its representative Directors.
(d) Loan by Non-Defaulting Partner. In lieu of an Additional Capital
Contribution by either Partner, cause the Joint Venture to borrow from the Non-
Defaulting Partner the amount otherwise due from both Partners (a "Default
Loan"), in which case the Defaulting Partner, with respect to that portion of
the Default Loan reflecting the amount of capital due to the Joint Venture from
the Defaulting Partner (the "Defaulting Partner Portion"), shall be liable to
the Non-Defaulting Partner for the Defaulting Partner's Portion plus interest at
the Default Rate (plus interest) in the event the Joint Venture fails to repay
such Default Loan to the Non-Defaulting Partner (the "Default Lender"). Loans
made to the Joint Venture by the Non-Defaulting Partner pursuant to this Section
5.5(d) shall bear interest at the Default Rate. No Partner shall make loans to
the Joint Venture unless such loans are approved by the Joint Venture pursuant
to Section 4.4 or are made with respect to a default pursuant to this Section
5.5(d).
(e) Refuse to Make Capital Contribution. Refuse to make any Additional
Capital Contributions without being in default of any provision of this
Agreement.
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(f) Cause a Mandatory Sale or Terminate the Joint Venture. Cause a
mandatory sale or terminate the Joint Venture by reason of a breach by the
Defaulting Partner of its obligations hereunder as provided in Sections 8.2 and
8.3.
(g) Effect of Set-off. In the event the Joint Venture exercises any
right to set-off any amount against any distribution otherwise payable to any
Partner, the amount set-off shall be deemed to have been distributed to the
Partner and contributed by the Partner to the Capital of the Joint Venture.
5.6 No Third Party Beneficiaries. The rights of the Joint Venture, or
either Partner, to require Additional Capital Contributions under the terms of
this Agreement are not intended to, and do not, confer any rights or benefits to
or upon any Person who is not a party to this Agreement other than the Joint
Venture itself.
5.7 No Withdrawal of, or Payment of Interest on, Capitals Accounts. No
Partner shall have any right to withdraw or make a demand for withdrawal of all
or any portion of such Partner's capital (or the amount, if any, reflected in
such Partner's Capital Account). No interest or additional share of profits
shall be paid or credited to the Partners on their Capital Accounts, or on any
undistributed profits or funds left on deposit with the Joint Venture; provided,
however, that nothing contained in this Agreement shall be construed to prevent
or prohibit the payment of interest on account of loans by Partners. Any loans
by Partners shall not increase a Partner's Capital Account or interest in the
profits, losses, or distributions, but shall be a debt due from the Joint
Venture.
5.8 Obligation to Restore. Upon liquidation of the Joint Venture (or any
Partner's interest in the Joint Venture), a Partner which has a deficit balance
in its book Capital Account following the liquidation of its interest in the
Joint Venture after taking into account all capital account adjustments for the
Joint Venture taxable year during which such liquidation occurs need not, except
as otherwise provided by law, restore the amount of such deficit balance to the
Joint Venture or to any other Partner.
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ARTICLE 6
ALLOCATIONS, DISTRIBUTIONS, ACCOUNTING AND TAX MATTERS
6.1 Allocations. The allocations of profits and losses shall be as set
forth in Schedule 4 hereto.
6.2 Distributions and Reserves.
(a) Cash Distributions. Unless otherwise determined by the Management
Committee and except as reserved against in accordance with Subsection (b)
below, the Net Cash Flow realized in any fiscal quarter shall be distributed
promptly after the end of such quarter, as follows:
(i) Repay Partner Loans. to repay any principal and interest on
loans to the Joint Venture by Partners ("Partner Loans"), including Default
Loans; and
(ii) The Balance. to the Partners in accordance with their
respective Percentage Interests.
(b) Reserves. The Joint Venture shall establish reserves for:
(i) federal income taxes (the "Tax Reserve") to be held by the
Joint Venture and distributed in accordance with Section 6.2(d). The Tax
Reserve for any fiscal period shall be determined by multiplying the
reasonably estimated federal taxable income of the Joint Venture as an
entity by 40%. In determining such federal taxable income, the fact that
any Partner may not be taxable on that Partner's share of such income
(e.g., because that Partner may be exempt from tax on such income under
Section 883(a) of the Code, or because that Partner has losses from other
sources to offset such income), shall not be taken into account. The Tax
Reserve shall be paid to the Partners in accordance with their respective
Percentage Interests (even if different from their respective percentage of
Joint Venture taxable income); and
(ii) Contingent or unforeseen obligations, debts or liabilities
of the Joint Venture which may be deemed reasonably necessary in the
opinion of the Management Committee;
(iii) Amounts required by any contracts or agreements of the
Joint Venture; and
(iv) Such other purposes as the Management Committee may decide.
(c) Intentionally omitted.
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(d) Priority and Distribution of Property. Except as expressly
provided in this Agreement, no Partner shall have priority over any other
Partner as to the return of capital, allocation of income or losses, or
distributions of cash or any other distributions. No Partner shall have the
right to demand or receive property other than cash for its Capital
Contributions to the Joint Venture or in payment of its share of cash or other
distributions.
(e) Distribution of Tax Reserve. Within 60 days after the end of each
Joint Venture fiscal year during which a Tax Reserve has been created, the Joint
Venture shall distribute such Tax Reserve (less any amounts withheld pursuant to
Sections 1441, 1442, 1445 or 1446 of the Code, unless otherwise provided in
Section 6.2(g)) to the Partners, such distribution to be allocated among the
Partners based on each Partner's Percentage Interest.
(f) Additional Distribution Provisions. Upon liquidation of any
Partner's interest in the Joint Venture, liquidating distributions are required
in all cases to be made in accordance with Section 8.7.
(g) Foreign Partners. If the Joint Venture withholds any income tax
with respect to any foreign Partner pursuant to Sections 1441, 1442, 1445 or
1446 of the Code, the Joint Venture will, at its option, either (x) require the
foreign Partner to repay such amount to the Joint Venture within 45 days
thereafter; or (y) offset any distributions otherwise payable to the foreign
Partner by the amount of such payments.
6.3 Accounting Matters. The Partners shall cause to be maintained complete
books and records accurately reflecting the accounts, business and transactions
of the Joint Venture, on a September 30th fiscal-year basis and in accordance
with GAAP; provided, however, that books and records with respect to the Joint
Venture's Capital Accounts and allocations of income, gain, loss, deduction or
credit (or item thereof) shall also be kept under U.S. federal income tax
accounting principles as applied to partnerships on the same fiscal year as
Casino's. Commodore shall perform such services for the Joint Venture and charge
the Joint Venture for such services pursuant to the overhead allocation in the
Budget.
6.4 Tax Status and Returns.
(a) Any provision hereof to the contrary notwithstanding, solely for
United States federal income tax purposes, each of the Partners hereby
recognizes that the Joint Venture will be subject to all provisions of
Subchapter K of Chapter 1 of Subtitle A of the Code; provided, however, the
filing of U.S. Partnership Returns of Income shall not be construed to extend
the purposes of the Joint Venture or expand the obligations or liabilities of
the Partners.
(b) The Partners shall prepare or shall direct such other Person to
prepare or cause to be prepared all tax returns and statements, if any, that
must be filed on behalf of the Joint Venture with any taxing authority and shall
make timely filing thereof. Further, the Partners shall prepare or shall direct
such other Person to prepare or cause to be prepared all tax statements, if any,
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that must, by law, be provided to any Partner, employee or other Person and
shall timely deliver such statements to such Persons. Within 90 days after the
end of each fiscal year, the Partners or such other Person as the Partners may
direct shall prepare or cause to be prepared and delivered to each Partner a
report setting forth in reasonable detail the information with respect to the
Joint Venture during such calendar year reasonably required to enable each
Partner to prepare its federal, state and local income tax returns in accordance
with applicable law then prevailing.
6.5 Tax Matters Partner.
(a) The Tax Matters Partner of the Joint Venture within the meaning of
section 6231(a)(7) of the Code shall be Casino. Unless otherwise expressly
provided herein or in the Code and the regulations issued thereunder (or the
laws of other relevant taxing jurisdictions), the Tax Matters Partner is
authorized to take any action for or on behalf of the Joint Venture that it
determines to be necessary or appropriate with respect to all tax matters.
Notwithstanding the foregoing, the Tax Matters Partner shall take no action for
or on behalf of the Joint Venture, except as emergency situations may dictate,
without the prior agreement of all the Partners.
(b) The Tax Matters Partner shall promptly advise the other Partners
of all audits or other actions by the Internal Revenue Service and shall furnish
to the Joint Venture and to each Partner a copy of each notice or other
communication received by the Tax Matters Partner from the Internal Revenue
Service except such notice or communication sent directly to the Partners by the
Internal Revenue Service. All reasonable expenses incurred by the Tax Matters
Partner in its capacity as such shall be expenses of the Joint Venture and shall
be paid by the Joint Venture. Such fees must be approved in advance by Casino,
which consent shall not be unreasonably withheld.
(c) To the fullest extent permitted by law, the Joint Venture shall
indemnify the Partners on an after-tax basis against any liabilities incurred
while acting as the Tax Matters Partner of the Joint Venture but only to the
extent such Partner acts within the scope of its authority as Tax Matters
Partner under this Agreement. The Tax Matters Partner shall not be indemnified
against any liability regarding Joint Venture tax matters arising by reason of
the willful misconduct, bad faith, gross negligence or reckless disregard of the
duties of the Tax Matters Partner.
(d) No Partner shall file a notice with the Internal Revenue Service
under section 6222(b) of the Code in connection with such Partner's intention to
treat an item on such Partner's Federal income tax return in a manner that is
inconsistent with the treatment of such item on the Joint Venture's Federal
income tax return unless such Partner has, not less than 30 days prior to the
filing of such notice, provided the other Partner with a copy of the notice and
thereafter in a timely manner provides such other information related thereto as
the other Partner shall reasonably request.
6.6 754 Election. In the event of a distribution of property to a Partner
or a transfer of any interest in the Joint Venture permitted under the Act or
this Agreement, the Joint Venture, upon the written request of the transferor or
transferee, shall file a timely election under section 754 of the Code and the
Income Tax Regulations thereunder to adjust the basis of the Joint Venture's
assets
-24-
under section 734(b) or 743(b) of the Code and a corresponding election
under the applicable provisions of state and local law, and the Person making
such request shall pay all costs incurred by the Joint Venture in connection
therewith, including reasonable attorneys' and accountants' fees.
6.7 Partnership Classification. The Joint Venture shall be treated as a
partnership for federal tax purposes and shall not elect, under section
301.7701-3 of the Income Tax Regulations, to be taxed as an association.
ARTICLE 7
TRANSFER OF INTERESTS; ADMISSION AND RESIGNATION OF PARTNERS
7.1 Transfer of Interests. Except as set forth in this Article 7, no
Partner may transfer, nor suffer or sustain any involuntary transfer or transfer
by operation of law of, all or any portion of its Interest in the Joint Venture
to any Person or another Partner, unless all Partners approve the transfer in
writing. For all purposes of this Article 7, a transfer of a Partner's Interest
in the Joint Venture shall be deemed to occur upon any change in control of such
Partner. Any transfer of all or any portion of a Partner's Interest in the
Joint Venture, in violation of this Section (other than a transfer by operation
of Law), shall be null, void and of no effect. In the event that all or any
portion of a Partner's Interest is transferred by operation of law, the
transferee of such Interest shall not be a Partner unless and until admitted to
Partnership in accordance with the provisions of Section 7.5 and shall, until
such time, be considered merely an assignee of Economic Interests (as hereafter
defined). Notwithstanding the foregoing, any pledge, hypothecation or grant of
a security interest in any Interest shall not require the consent of any
Partners and shall not violate this Article 7. The pledge or granting of a
security interest, lien or other encumbrance in or against all or any part of a
Partner's Interest shall not cause the Partner to cease to be a Partner. Upon
foreclosure or sale in lieu of foreclosure of any such security interest, the
secured party will be entitled to receive allocations and distributions from the
Joint Venture as to which a security interest has been granted by such Partner
("Economic Interests"). In no event will any secured party be entitled to
exercise any rights under this Agreement, and such secured party may look only
to such Partner for the enforcement of any of its rights as a creditor. In no
event will the Joint Venture have any liability or obligation to any Person by
reason of the Joint Venture's payment of a distribution to any secured party as
long as the Joint Venture makes such payment in reliance upon written
instructions from the Partner to whom such distributions would be payable. Any
secured party will be entitled, with respect to the security interest granted,
only to the distributions to which the assigning Partner would be entitled under
this Agreement, and only if, as and when such distributions are made by the
Joint Venture. Neither the Company nor any Partner will owe any fiduciary duty
of any nature to a secured party. Reference to any secured party includes any
assignee or successor-in-interest of such Person.
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7.2 Right of First Refusal.
(a) If any Partner proposes to sell or transfer to any Person all or
any portion of its Interest in one or more related transactions (the "Proposed
Sale"), then, at least 45 days prior to the proposed closing (the "Sale
Closing") of such sale or transfer, such Partner (the "Seller") shall promptly
give written notice (the "Notice") to the Joint Venture and to each of the other
Partners (the "Other Holders") of such proposed sale or transfer. The Notice
shall describe in reasonable detail the Proposed Sale, including, without
limitation, the Percentage Interest to be sold, transferred or issued (the
"Percentage Interest To Be Sold"), the nature of such sale, transfer or
issuance, the consideration to be paid, and the name and address of each
prospective purchaser or transferee.
(b) Each of the Other Holders shall have the right, exercisable upon
written notice to the Seller within thirty (30) days after receipt of the
Notice, to purchase, in proportion to its interest in the Joint Venture
(excluding for this purpose the Seller's Interest), the Percentage Interest To
Be Sold on the same terms and conditions of the Proposed Sale.
(c) If any of the Other Holders declines to exercise its right of
first refusal pursuant to Section 7.2(b), the Seller shall give notice of such
decision and of the number of Percentage Interest To Be Sold yet unpurchased
(the "Unpurchased Portion") to the Partners who did not so decline (the
"Purchasers"). Such notice may be made by telephone if confirmed in writing
within two days.
(d) The Purchasers shall each have the right, exercisable upon written
notice to the Seller within three business days after receipt of notice of such
decision, to purchase their Pro Rata Share of the Unpurchased Portion. For
purposes of this Section 7.2, the Pro Rata Share of the Unpurchased Portion
shall be the ratio of the Unpurchased Portion to the number of Purchasers.
(e) The Seller shall then give notice, in the manner specified in
Section 7.2(c), to all the Purchasers of any Purchaser that declines to exercise
its right to purchase its Pro Rata Share. All the Purchasers excluding
Purchasers who decline to exercise their rights to purchase their Pro Rata
Shares (the "Remaining Purchasers"), shall have the right to purchase any
Percentage Interest remaining of the Unpurchased Portion in the manner specified
in Section 7.2(d).
(f) The Seller shall comply with Sections 7.2(d) and 7.2(e) until
there are no remaining Percentage Interests in the Unpurchased Portion or there
are no Remaining Purchasers who elect to purchase remaining Percentage Interests
in the Unpurchased Portion. Thereafter, if Percentage Interests remain in the
Unpurchased Portion, the Seller may consummate the Proposed Sale upon the terms
set forth in the Notice or cancel the Proposed Sale. If the other Holders have
elected to purchase all of the Percentage Interests to be sold, the Proposed
Seller shall consummate the sale of the Percentage Interest to be sold with the
other Holders on the Sale Closing date.
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(g) Notwithstanding anything to the contrary herein, the Seller may
not consummate a Proposed Sale to a Person if any of the Other Holders object to
such Person and the objection is based on a reasonable concern.
7.3 Exempt Transfers. Notwithstanding the foregoing, the first refusal
rights of the Partners shall not apply to (i) any pledge of Percentage Interests
made pursuant to a bona fide loan transaction that creates a mere security
interest (as described in Section 7.1); (ii) transfers of a Partner's entire
Interest to an Affiliate, provided such transferring Partner has provided prior
written notice to the other parties hereto of such transfer, and such transferee
has agreed to be bound by the terms hereof; (iii) the Joint Venture; (iv) to a
Person approved by all of the Partners; or (v) to another Person as part of a
merger, reorganization, consolidation or sale of all or substantially all of the
assets of Casino America, Inc. or Commodore Holdings Limited, provided that such
Person is not objectionable as provided in Section 7.2(g) above. Such
transferred Percentage Interests shall remain "Percentage Interests" hereunder,
and such pledgee shall be treated as a "Seller" for purposes of this Agreement.
7.4 Legend.
(a) Each certificate representing Percentage Interests now or
hereafter owned by the Partners or issued to any Person in connection with a
transfer pursuant to Section 7.3 hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN AGREEMENT AMONG THE INITIAL HOLDER OF THE
SECURITIES, THE JOINT VENTURE AND CERTAIN PartnerS OF THE JOINT
VENTURE. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE JOINT VENTURE.
(b) Under no circumstances shall any transfer of any Interests subject
hereto be valid until the proposed transferee thereof shall have executed and
become a party to this Agreement and thereby shall have become subject to all of
the provisions hereof; and notwithstanding any other provisions of this
Agreement, no such transfer of any kind shall in any event result in the non-
applicability of the provisions hereof at any time to any of the Percentage
Interests subject hereto.
(c) Each Partner agrees that the Joint Venture may instruct its
transfer agent to impose transfer restrictions on the Percentage Interests
represented by certificates bearing the legend referred to in Section 7.4(a)
above to enforce the provisions of this Agreement and the Joint Venture agrees
to promptly do so. The legend shall be removed upon termination of this
Agreement.
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7.5 Admission of New Partners.
(a) Subject to this Section and to the Act, no Person shall be
admitted as a Partner of the Joint Venture unless all the Partners shall have
approved the admission of such Person as a new Partner and shall have agreed in
writing upon the amendments, if any, to be made to this Agreement as a result of
such admission.
(b) Upon the admission of a new Partner in accordance with the Act and
this Agreement, there shall be a special closing of the books solely for the
purpose of determining the value of the Joint Venture's investments on such date
by whatever method the existing Partners, in their sole and absolute discretion,
consider reasonable, and the Capital Accounts of the existing Partners shall be
adjusted accordingly. After such adjustment, the Joint Venture shall establish a
Capital Account which shall be credited with the Capital Contribution of the new
Partner, and Schedules 1 and 2 shall be adjusted accordingly.
7.6 Resignation of Partners. No Partner may resign or withdraw from the
Joint Venture without the prior express written consent of all the other
Partners.
7.7 Sale Due to Objection of Governmental Body.
(a) Commodore acknowledges that as a result of the transactions
contemplated by this Agreement, Commodore and its Affiliates may be subject to
regulatory review by any Governmental Body which is authorized or empowered to
regulate the gaming operations of Casino and its Affiliates in the jurisdictions
in which Casino and its Affiliates conduct or propose to conduct gaming
activities including, without limitation, Colorado, Mississippi, Louisiana and
Florida. Commodore agrees to use its reasonable best efforts to cooperate fully
and to cause its Affiliates to cooperate fully with the representatives of all
such Governmental Bodies in making applications, supplying information,
providing reports and otherwise cooperating with and complying with the
requirements of all such Governmental Bodies so as not to interfere with the
ability of Casino or its Affiliates to develop new business (other than the
Business in contravention of Section 9.1(b) hereof) or to continue to conduct
its existing business. Casino and Commodore and their respective Affiliates will
use their reasonable best efforts to overcome any objection raised by any
Governmental Body relating to the transactions contemplated by this Agreement;
provided that in the event the Board of Directors of Casino reasonably
determines based on communications with a Governmental Body that despite such
efforts (i) Commodore or any of its Affiliates is likely to be determined
unsuitable by such Governmental Body and as a result Casino or its Affiliates
may not be permitted to engage or to continue to engage in a gaming activity, or
(ii) Casino's participation in the Joint Venture could jeopardize its ability to
engage or continue to engage in a gaming activity (a "Casino Determination"),
then, upon written notice from Casino of its Board's determination, Commodore
shall purchase Casino's Interest in the Joint Venture pursuant to Section 8.9.
Because the Partners believe that the market value of an Interest will be very
difficult, if not impossible, to assess, they have adopted the valuation method
described in Section 8.9(a) as the method to determine the Purchase Price for
Casino's Interest.
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(b) Casino acknowledges that as a result of the transactions
contemplated by this Agreement, certain actions by Casino or its Affiliates or
regulatory determinations adverse to Casino or its Affiliates, which actions or
regulatory determinations result in Casino or its Affiliates being prohibited
from conducting gaming activities in a specific state (a "Materially Adverse
Event") could impair Commodore's ability to operate or sell securities in a
jurisdiction where such Materially Adverse Event occurred. Casino and Commodore
and their respective Affiliates will use their reasonable best efforts to
overcome any objection raised by any Governmental Body related to the
transactions contemplated by this Agreement (including making any disclosure
required to cure such objection), provided that in the event any Governmental
Body that regulates Commodore's cruise business, any state, federal or foreign
securities regulator or Nasdaq advises Commodore in writing that Casino's
participation in the Joint Venture will jeopardize Commodore's ability to engage
or continue to engage in its cruise business or materially affect its ability to
raise capital because of such Materially Adverse Event (a "Governmental Body
Determination") then, upon written notice from Commodore of such Governmental
Body Determination, Commodore shall purchase Casino's Interest in the Joint
Venture pursuant to Section 8.9. Because the Partners believe that the market
value of an Interest will be very difficult, if not possible to assess, they
have adopted the valuation method described in Section 8.9(a) as the method to
determine the Purchase Price for Casino's Interest.
ARTICLE 8
DISSOLUTION/MANDATORY SALE
8.1 No Default Dissolution. The Joint Venture shall be dissolved and its
affairs wound up in accordance with Section 8.5 hereof upon the first to occur
of the following:
(a) Upon the expiration of the term specified in Section 14.1 of this
Agreement;
(b) Issuance of an order by a court of competent jurisdiction,
requiring the dissolution of the Joint Venture; or
(c) The written consent of all the Partners.
8.2 Default Dissolution. A Non-Defaulting Partner may give notice to a
Defaulting Partner dissolving the Joint Venture upon the occurrence of any one
of the following events with respect to the Defaulting Partner or its Parent
Entity, as the case may be, (unless there is a Dispute with respect to whether a
Default has occurred and such Dispute has not yet been resolved pursuant to the
terms of this Agreement):
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(a) any action or proceeding is commenced by the Defaulting Partner or
its Parent Entity to wind up, dissolve, cancel its incorporation or otherwise
terminate its corporate existence; or
(b) any action or proceeding is commenced against the Defaulting
Partner or its Parent Entity which seeks or requires the winding up,
dissolution, revocation or cancellation of its incorporation or other
termination of its corporate existence unless the action or proceeding is
defended or contested in good faith by the Defaulting Partner or its Parent
Entity within 30 days of the commencement of the action or proceeding in a
manner that stays the winding up, dissolution, revocation or cancellation of its
incorporation or other termination of its corporate existence and is pursued
diligently thereafter; or
(c) the agreement of the Defaulting Partner or its Parent Entity to
sell, assign, transfer or otherwise dispose of the whole or any part of its
Interest in the Joint Venture in contravention of the terms of this Agreement;
or
(d) any Event of Default by the Defaulting Partner or its Parent
Entity pursuant to Section 12.1, which has not been cured within the applicable
cure period; or
(e) the Defaulting Partner or its Parent Entity becomes bankrupt or
seeks relief by any proceedings of any nature under any laws of the United
States or any state for the relief of debtors; or
(f) the appointment of a receiver, receiver-manager, trustee,
custodian or like officer for all or a substantial part of the business or
assets of the Defaulting Partner or its Parent Entity unless the appointment is
defended or contested in good faith by the Defaulting Partner or its Parent
Entity within 30 days of the commencement of the appointment in a manner that
stays the appointment and is pursued diligently thereafter; or
(g) the institution against the Defaulting Partner or its Parent
Entity of a proceeding under the Bankruptcy Reform Act of 1978, or any law of
the United States now in existence or hereafter enacted having the same general
purpose unless the proceeding is defended or contested in good faith by the
Defaulting Partner or its Parent Entity within 30 days of the commencement of
the proceeding in a manner that stays the proceedings and is pursued diligently
thereafter; or
(h) the Defaulting Partner or its Parent Entity makes an assignment
for the benefit of its creditors; or
(i) if any execution, attachment, distress or other process of any
court is made or attached to the Interest of the Defaulting Partner or its
Parent Entity in the Joint Venture unless the execution, attachment, distress or
other process of any court is stayed within 30 days of the
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commencement of the proceedings in a manner that stays attachment, distress or
other proceedings and is pursued diligently thereafter;
(j) a breach by Casino America, Inc. or Commodore Holdings Limited of
the Guaranty, which breach is not cured within 10 days of receipt of written
notice from the non-breaching party describing in reasonable detail the facts
giving rise to the breach (in which event the Defaulting Partner shall be the
Affiliate of the breaching Parent Entity);
(k) any failure by the Defaulting Member to make any Additional
Capital Contribution pursuant to Section 4.4(c) within 120 days after the final
decision of the arbitrators pursuant to Article 13 that such Additional Capital
Contribution is required for Seaworthiness or for items of necessity to continue
the Present Operations or pursuant to Section 5.5 within the period specified
therein; or
(l) the failure of Commodore to purchase Casino's Interest pursuant to
Section 7.7 where Commodore and Casino have followed the procedures in Section
7.7 and either Casino's Board or a Governmental Body has made a Casino
Determination or a Governmental Body Determination, respectively.
8.3 Mandatory Sale. Upon the occurrence of any of the events set out in
Section 8.2(a) through (l) with respect to a Partner, as an alternative to
giving notice dissolving the Joint Venture, the Partner entitled to dissolve the
Joint Venture (in this Article 8 referred to as the "purchasing Partner") may
give notice to the other Partner (in this Article 8 referred to as the "selling
Partner") requiring the selling Partner to sell its Interest in the Joint
Venture to the purchasing Partner for the Purchase Price (as defined in Section
8.9) and on the terms and conditions hereinafter provided.
8.4 Notice.
(a) Notice of Election to Dissolve. A Partner electing to dissolve the
Joint Venture, pursuant to Section 8.2, must give notice of dissolution to the
other Partner within 60 days of first acquiring actual knowledge of the event or
circumstances giving rise to the right of dissolution. Following any such notice
pursuant to Section 8.2 (unless there is a Dispute as to the right to dissolve),
the Partner who has received notice of dissolution shall not be entitled to vote
(or to have its Directors vote) with respect to any matter relating to the
affairs of the Joint Venture and shall be deemed to have given its proxy to the
Partner giving the notice for all matters requiring the vote of the Partners
with respect to the Joint Venture.
(b) Notice of Intention to Buy. The purchasing Partner under Section
8.3 must give notice of its intention to buy the interest of the selling Partner
in the Joint Venture (the "Purchase Notice") within 60 days of the date upon
which the purchasing Partner first acquires actual knowledge of the occurrence
of the event or circumstances giving rise to the right to purchase. Following
such notice (unless there is a Dispute as to the existence of a right to
purchase), the selling Partner shall not be entitled to vote (or to have its
Directors vote) with respect
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to any matter relating to the affairs of the Joint Venture and the selling
Partner shall be deemed to have given its proxy to the purchasing Partner for
all matters requiring the vote of the Partners with respect to the Joint
Venture.
8.5 Dissolution Procedures.
(a) Generally. Unless there is a Dispute as to whether an event
causing a dissolution has occurred, promptly following the giving of notice of
dissolution of the Joint Venture:
(i) No Default Dissolution. Pursuant to Section 8.1, the
Partners shall proceed to wind up the affairs of the Joint Venture in the
manner hereinafter provided; or
(ii) Default Dissolution. Pursuant to Section 8.2, the Partner
giving notice of dissolution shall wind up the affairs of the Joint Venture
in the manner hereinafter provided on behalf of the Partners.
(b) Use of Business or Ship Broker. If the Business of the Joint
Venture is in operation, the parties shall consider retaining a business or ship
broker, and the Business of the Joint Venture shall be listed for sale as a
going concern. If an offer acceptable to the Partners or the Non-Defaulting
Partner, as the case may be, acting reasonably, has not been received within 120
days of listing the business for sale, then the assets of the Joint Venture
shall be sold and the Vessel subchartered in a piecemeal manner. The liquidation
of assets and the discharge of liabilities of the Joint Venture shall occur over
a reasonable time to attempt to minimize the losses which may otherwise be
attendant upon an immediate liquidation.
(c) Payments Owed by Partners. Each Partner shall immediately pay to
the Joint Venture all amounts owing to the Joint Venture, less any amounts owed
by the Joint Venture to the Partner.
(d) Distributions. During the course of liquidation, the Partners
shall continue to share profits and losses as provided in Article 6 of this
Agreement, but there shall be no cash distributions to the Partners until the
distribution pursuant to Section 8.7(d).
8.6 Settling of Accounts. Subject to section 18-804 of the Act, upon the
dissolution and liquidation of the Joint Venture, the proceeds of liquidation
shall be applied as follows: (a) first, to pay all expenses of liquidation and
winding up; (b) second, to pay all debts, obligations and liabilities of the
Joint Venture, in the order of priority as provided by law, other than debts
owing to the Partners or on account of Partners' contributions; (c) third, to
pay all debts of the Joint Venture owing to a Partner; and (d) to establish
reasonable reserves for any remaining contingent or unforeseen liabilities of
the Joint Venture not otherwise provided for, which reserves shall be maintained
by the liquidator on behalf of the Joint Venture in a regular interest-bearing
trust account for a reasonable period of time as determined by the liquidator.
If any excess funds remain in such
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reserves at the end of such reasonable time, then such remaining funds shall be
distributed by the Joint Venture to the Partners pursuant to Section 8.7 hereof.
8.7 Distribution of Proceeds. Subject to Section 18-804 of the Act, upon
final liquidation of the Joint Venture, the net proceeds of liquidation shall be
distributed to the Partners in the following order of priority:
(a) to creditors, including Partners who are owed Partner Loans or
Default Loans, to the extent of any unpaid expenses or any outstanding loan or
advance;
(b) to the Partners in respect of the costs of winding up the affairs
of the Joint Venture, discharging the liabilities of the Joint Venture,
distributing the assets of the Joint Venture and dissolving the Joint Venture in
accordance with this Article 8;
(c) to the Partners in the proportion of their respective positive
Capital Accounts as those accounts are determined after all adjustments to such
accounts for the taxable year of the Joint Venture during which the liquidation
occurs as are required by this Agreement and Treasury Regulations [_]1.704-1(b),
such adjustments to be made within the time specified in such Treasury
Regulations; and
(d) after each Partner has received the amount in its Capital Account,
to the Partners in proportion to their respective Percentage Interests.
8.8 Certified Liquidation Statement. The Partners, in the event of a
liquidation of the Joint Venture following dissolution pursuant to Section 8.1,
or the Non-Defaulting Partner, in the event of a liquidation of the Joint
Venture following dissolution pursuant to Section 8.2, shall cause the
independent auditors of the Joint Venture to prepare a certified liquidation
statement of the Joint Venture which shall contain:
(i) a summarized statement of receipts and disbursements;
(ii) a statement of the debts and liabilities of the Joint
Venture owing to each Partner;
(iii) a determination of the Capital Account of each Partner;
(iv) an allocation between the Partners of all gains or losses
realized on the liquidation of the property and assets of the Joint
Venture; and
(v) an allocation of any tax benefits between the Partners.
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Each Partner agrees to prepare its financial statements and to prepare and file
all tax returns required to be filed by it in accordance with the liquidation
statement prepared by the independent auditors of the Joint Venture.
8.9 Mandatory Sale Procedures.
(a) Amount. Except with respect to a Mandatory Sale under Section 7.7,
the Purchase Price payable by the purchasing Partner for the interest of the
selling Partner in the Joint Venture (the "Purchase Price") shall be an amount
equal to 100% of the net book value of the selling Partner's Interest in the
Joint Venture as determined pursuant to GAAP as of the date of the Purchase
Notice ("Book Value") and paid in equal quarterly installments over a period of
five years commencing on the Closing Date, plus interest on such amount from the
Closing date at the Reference Rate. With respect to a Mandatory Sale based on
Section 7.7, if the Purchase Notice is received within one year of the date of
this Agreement, the Purchase Price shall be the amount of Casino's Initial
Capital Contribution as set forth on Schedule 1 plus interest from the Closing
Date at the Reference Rate plus 2%, paid in equal semi-annual installments over
a period of two years commencing six months after the Closing Date (as evidenced
by a promissory note and secured by a pledge of Casino's Interest). If the
Purchase Notice for a Mandatory Sale under Section 7.7 is received thereafter,
the Purchase Price shall be the greater of Book Value or five times the earnings
(determined under GAAP but excluding pre-opening expenses) of the Joint Venture
allocable to Casino's Interest for the Applicable Fiscal Year (as hereafter
defined) preceding delivery of the Purchase Notice, paid in equal quarterly
installments over a period of five years commencing on the Closing Date, plus
interest on such amount from the Closing Date at the Reference Rate (as
evidenced by a promissory note and secured by a pledge of Casino's Interest).
The Applicable Fiscal Year shall be the Joint Venture's fiscal year immediately
preceding the Closing or, in the event the Joint Venture is more than six months
into its next fiscal year, the period beginning six months before the end of the
Joint Venture's last fiscal year and ending six months into its current fiscal
year.
(b) Closing -- Generally. The purchase and sale of the selling
Partner's interest in the Joint Venture shall be consummated (the "Closing") at
the office of the purchasing Partner's counsel, on the date which is 30 days
following the receipt by the selling Partner of the Purchaser Notice.
(c) Closing -- Selling Partner Deliveries. At the Closing, the selling
Partner shall deliver to the purchasing Partner the following duly executed
documentation, in form acceptable to the purchasing Partner acting reasonably:
(i) an assignment of its Interest in the Joint Venture;
(ii) the resignation of each of its designees as Directors of
the Management Committee and as Executive Officers of the Joint Venture;
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(iii) a representation and warranty by the selling Partner that
its Interest in the Joint Venture is free and clear of all liens,
mortgages, pledges, charges, security interests, restrictions or
encumbrances whatsoever, which representation and warranty shall survive
Closing and shall continue forever;
(iv) a general release of all claims against the Joint Venture
or the purchasing Partner by the selling Partner in respect of the Joint
Venture except for claims arising from the unauthorized actions of the
purchasing Partner in respect of the Joint Venture which have not been
disclosed to the selling Partner; and
(v) such other documentation as the attorneys for the
purchasing Partner may require, acting reasonably, in order to vest in the
purchasing Partner full right, title and interest in and to the Interest of
the selling Partner in the Joint Venture and to reflect the assignment and
transfer of the interest of the selling Partner in all of the underlying
assets of the Joint Venture, including, without limitation, the interest in
the Vessel.
(d) Closing -- Purchasing Partner Deliveries. At the Closing, the
purchasing Partner shall pay the selling Partner the Purchase Price for the
Interest of the selling Partner in the Joint Venture by means of immediately
available funds for the cash portion of the Purchase Price and by means of a
promissory note with respect to the deferred portion of the Purchase Price and
the purchasing Partner shall deliver to the selling Partner the following duly
executed documentation in a form acceptable to the selling Partner, acting
reasonably:
(i) an indemnity of the Joint Venture and the purchasing
Partner indemnifying the selling Partner against any claims arising from
the conduct of the business of the Joint Venture from and after the time of
Closing;
(ii) a general release of all claims against the selling Partner
by the Joint Venture or the purchasing Partner in respect of the Joint
Venture except for claims arising from the unauthorized actions of the
selling Partner in respect of the Joint Venture which have not been
disclosed to the purchasing Partner; and
(iii) in the case of a Mandatory Sale under Section 7.7, a
promissory note payable to the order of the selling Partner and a pledge or
security agreement, in form and content reasonably satisfactory to the
selling Partner.
(e) At the Closing, the selling Partner shall repay to the Joint
Venture or the purchasing Partner, as the case may be, any amounts owing to such
parties, and the Joint Venture or the purchasing Partner, as the case may be,
shall repay to the selling Partner any amounts owing to it, which repayments may
occur as a set off of the respective amounts. If the amounts owed to the
purchasing Partner by the selling Partner and the Joint Venture exceed the
amount owed by the purchasing Partner to such parties, the purchasing Partner
may reduce the amount of the Purchase Price by such excess amount.
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ARTICLE 9
OUTSIDE ACTIVITIES; CONFIDENTIALITY
9.1 Outside Activities.
(a) Except as otherwise expressly provided in this Article 9, any
Partner or Affiliate thereof may engage in or possess any interest in any
business, and may do so through itself or through any other business venture of
any nature independently or with others, and neither the Joint Venture nor any
other Partner shall have any right by virtue of this Agreement in or to such
Partner's business or its other ventures or in or to any income or profits
derived therefrom.
(b) For as long as the Joint Venture exists, and except as described
herein, no Partner or Affiliate thereof may, directly or indirectly (except
through the Joint Venture), engage (or possess any interest in any business or
venture that engages), in the Business. Notwithstanding the foregoing, Commodore
may continue to operate a cruise vessel(s) in the New Orleans, Louisiana market
that conducts cruises equal to or greater than seven days in duration during the
term of the Joint Venture, as long as it appoints Casino as the casino gaming
concessionaire aboard such vessels on terms substantially the same as those in
the Casino Management Agreement attached hereto as Exhibit "F". With respect to
cruise vessel(s) operated by Commodore in the New Orleans, Louisiana market that
conduct cruises of less than seven days duration, Casino shall have a right of
first refusal during the term of this Joint Venture, at Casino's election, to
operate such vessel(s) as a 50/50 joint venture with Commodore or to manage the
casino aboard such vessel(s) pursuant to the terms of the Casino Management
Agreement, attached hereto as Exhibit "F". Casino shall not operate or manage a
casino, directly or indirectly, aboard any vessel that operates in "blue water"
in the New Orleans, Louisiana market during the term of the Joint Venture.
Vessels operating in "blue water" shall specifically exclude barges, riverboats
and other vessels which offer gaming in the New Orleans, Louisiana market
subject to state regulations.
(c) This Agreement shall not be deemed to create any duties other than
as expressly provided for herein or imposed by applicable law, nor shall its
existence be deemed to alter the legal duties and obligations that any Partner
or any Affiliate has to the other Partners or their Affiliates as to matters
outside the scope of this Agreement.
9.2 Duties of Partners. The fiduciary duties of Partners shall not
restrict any Partner or Affiliate from:
(a) engaging in conduct not expressly prohibited by Article 9; or
(b) acting to prevent the Joint Venture from engaging in an activity
that is outside the scope of the Business;
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whether or not such Partner or Affiliate is motivated in whole or in part by a
desire to further the interests of a Person other than the Joint Venture.
9.3 Confidential Information.
(a) Each Partner shall, and shall cause each of its Affiliates, and
its and their respective partners, shareholders, directors, officers, employees
and agents (collectively, "Representatives") to keep secret and retain in
strictest confidence, except as provided in subsection (c) hereof, any and all
Confidential Information and shall not distribute, disseminate or disclose such
Confidential Information, and shall cause its Representatives not to distribute,
disseminate or disclose such Confidential Information, except to (i) the Joint
Venture and its respective agents on a need-to-know basis or (ii) any Partner or
any of their respective Affiliates or other Representatives on a "need-to-know"
basis in connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Joint Venture, or (iii) any other Person on a
"need to know" basis in connection with this Agreement or the operation of the
Joint Venture that agrees in writing to keep in confidence such Confidential
Information in accordance with the terms of this Section 9.3; and such Partner
disclosing Confidential Information pursuant to this Section 9.3 shall use, and
shall cause its Affiliates and other Representatives or Persons to use, such
Confidential Information only for the benefit of the Joint Venture in conducting
the Business or for any other specific purposes for which it was disclosed to
such party; provided that the disclosure of financial statements of, or other
information relating to, the Joint Venture shall not be deemed to be the
disclosure of Confidential Information (A) to the extent that any Partner is
required by law, GAAP or a Governmental Body that regulates the operations of
Casino or its Affiliates to disclose such financial statements or other
information or (B) to the extent that in order to sustain a position taken for
tax purposes, any Partner deems it necessary and appropriate to disclose such
financial statements or other information. All Confidential Information
disclosed in connection with the Joint Venture or pursuant to this Agreement
shall remain the property of the Person whose property it was prior to such
disclosure.
(b) No Confidential Information regarding the plans or operations of
any Partner or any Affiliate thereof received or acquired by or disclosed to any
other Partner or Affiliate thereof in the course of the conduct of Business, or
otherwise as a result of the existence of the Joint Venture, may be used by such
other Partner or Affiliate thereof for any purpose other than for the benefit of
the Joint Venture in conducting the Business.
(c) In the event that a Partner or anyone to whom a Partner transmits
any Confidential information becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, investigative
demand, similar process or request) to disclose any of the Confidential
information, such Partner will use its best efforts to provide the other Partner
and the Joint Venture with prompt written notice prior to disclosure (not less
than 24 hours) so that the other Partner and the Joint Venture may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement in the event that such protective
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order or other remedy is not obtained, or that the Joint Venture and the other
Partner waive compliance with the provisions of this Section 9.3, the Partner or
Person who is compelled to disclose such Confidential Information will furnish
only that portion of the Confidential Information which (based on the advice of
counsel) it is legally required to disclose and will exercise its best efforts
to obtain reliable assurance that protective treatment will be accorded the
Confidential Information
(d) Each Partner who ceases to be such will, and will cause its
Affiliates and Representatives to, maintain the confidentiality required by this
Section 9.3 and to destroy or return upon request, all documents and other
materials, and all copies thereof, obtained by such Partner or on its behalf
from either the Joint Venture or the other Partners or any of their Affiliates
in connection with the transactions leading up to and contemplated by this Joint
Venture. The obligations under this Section 9.3 shall survive the termination of
the Joint Venture for a period of ten years or, if shorter, the maximum period
permitted by applicable law.
(e) To the fullest extent permitted by law, if a Partner or any of its
Affiliates or Representatives breaches, or threatens to commit a breach of, this
Section 9.3, the other Partner and the Joint Venture shall have the right and
remedy to have this Section 9.3 specifically enforced, it being acknowledged and
agreed that money damages will not provide an adequate remedy to such other
Partner or the Joint Venture. Nothing in this Section 9.3 shall be construed to
limit the right of any Partner or the Joint Venture to collect money damages in
the event of breach of this Section 9.3.
9.4 Duty of Partners to Cooperate. Each Partner will, to the extent
permitted by applicable law and consistent with this Agreement, furnish such
information, execute such applications and similar documents as are required by
governmental authorities, and take such other action reasonably requested by the
Joint Venture or the other Partners and as may be necessary or reasonably
desirable in connection with the Business.
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ARTICLE 10
INDEMNIFICATION
10.1 Limitation of Liability. A Director, CEO or Executive Officer of the
Joint Venture shall perform his duties as such in good faith, in a manner he
reasonably believes to be in the best interest of the Joint Venture and the
Partners, and with such care as an ordinarily prudent person in a like position
would use under similar circumstances. A Director, CEO or Executive Officer who
so performs his duties shall not have any liability by reason of being or having
been a Director, CEO or Executive Officer of the Joint Venture. The Directors,
CEO and Executive Officers shall not be liable, responsible or accountable in
damages or otherwise to the Joint Venture or any Partner for any action taken or
failure to act on behalf of the Joint Venture within the scope of authority
conferred on the Directors, CEO and Executive Officers under this Agreement or
the Act, except where the claim at issue is based on the fraud, gross negligence
or bad faith of the Directors, CEO or Executive Officers.
10.2 Indemnification: Proceeding other than by Joint Venture. The Joint
Venture shall indemnify any Partner, Affiliate of a Partner, member of the
Management Committee or Executive Officer and may indemnify any other Person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the Joint Venture, by
reason of the fact that he is or was a Partner, officer, employee or agent of
the Joint Venture, or is or was serving at the request of the Joint Venture as a
manager, member, director, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Joint Venture, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plead of nolo contendere or its equivalent, does not, of itself, create a
presumption that the Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Joint
Venture, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
10.3 Indemnification: Proceeding by Joint Venture. The Joint Venture may
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Joint Venture to procure a judgment in its favor by reason of the fact that he
is or was a Partner, officer, employee or agent of the Joint Venture, or is or
was serving at the request of the Joint Venture as a manager, Partner, director,
officer, employee or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and
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reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Joint Venture.
Indemnification may not be made for any claim, issue or matters as to which such
a Person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the Joint Venture or for
amounts paid in settlement to the Joint Venture, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the Person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
10.4 Mandatory Indemnification. To the extent that a Partner, officer,
employee or agent of the Joint Venture requests indemnification pursuant to
Section 10.2 or has been successful on the merits or otherwise in defense of any
action, suit or proceeding described in Sections 10.2 and 10.3, or in defense of
any claim, issue or matter therein, he must be indemnified by the Joint Venture
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
10.5 Authorization of Indemnification. Any indemnification under Section
10.3, unless ordered by a court or advanced pursuant to Section 10.4, may be
made by the Joint Venture only as authorized in the specific case upon a
determination that indemnification of the Partner, officer, employee or agent is
proper in the circumstances.
10.6 Mandatory Advancement of Expenses. The expenses of Partners and
officers incurred in defending a civil or criminal action, suit or proceeding
must be paid by the Joint Venture as they are incurred and in advance of the
final disposition of the action, suit or proceeding, if such indemnification is
being provided pursuant to Section 10.2 or upon receipt of an undertaking by or
on behalf of the Partner or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the Joint Venture. The provisions of this Section 10.6 do not
affect any rights to advancement of expenses to which personnel of the Joint
Venture other than Partners or officers may be entitled under any contract or
otherwise.
10.7 Effect and Continuation. The indemnification and advancement of
expenses authorized in or ordered by a court pursuant to this Article 10:
(a) Does not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled under any limited
liability company agreement, vote of Partners, or otherwise, for either an
action in his official capacity or an action in another capacity while holding
his office, except that indemnification, unless ordered by a court pursuant to
Section 10.4 for the advancement of expenses made pursuant to Section 10.6, may
not be made to or on behalf of any Partner or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and was material to the cause of action.
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(b) Continues for a Person who has ceased to be a Partner, officer,
employee or agent and inures to the benefit of his heirs, executors and
administrators.
10.8 Insurance and Other Financial Arrangements. The Joint Venture may
purchase and maintain insurance or make other financial arrangements on behalf
of any Person who is or was a member, officer, employee or agent of the Joint
Venture, or is or was serving at the request of the Joint Venture as a manager,
Partner, director, officer, employee or Agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise for
any lability asserted against him and liability and expenses incurred by him in
his capacity as a Partner, director, officer, employee or agent, or arising out
of his status as such, whether or not the Joint Venture has the authority to
indemnify him against such liability and expenses.
10.9 Notice of Indemnification and Advancement. Any indemnification of, or
advancement of expenses to, a Partner or officer in accordance with this Article
10, if arising out of a proceeding by or on behalf of the Joint Venture, shall
be reported in writing to the Partners with or before the notice of the next
Partners' meeting.
10.10 Repeal or Modification. An repeal or modification of this Article 10
by the Partners of the Joint Venture shall not adversely affect any right of a
Partner or officer of the Joint Venture existing hereunder at the time of such
repeal or modification.
ARTICLE 11
INSPECTION OF JOINT VENTURE RECORDS; ANNUAL AND OTHER REPORTS
11.1 Records to be Kept. The Joint Venture shall keep at its registered
office:
(a) A current list of the full name and last known business, resident
or mailing address of each Partner and its designated Directors separately
identifying the Partners in alphabetical order and the Directors in alphabetical
order;
(b) Copies of this Agreement, and all amendments hereto;
(c) Copies of the Joint Venture's federal income tax returns and
reports, if any, for the three (3) most recent years; and
(d) Copies of any financial statements of the Joint Venture for the
three (3) most recent years.
11.2 Inspection of Joint Venture Records. The accounting books and
records, the records of the Management Committee, and any other records
maintained by the Joint Venture shall be open to inspection upon the request of
any Partner at any reasonable time during usual business
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hours. Such inspection by a Partner may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and make
extracts.
11.3 Financial Reports. The Joint Venture shall within 30 days after the
close of each fiscal quarter and within 60 days after the close of each fiscal
year, deliver or mail to the Partners the quarterly financial statements and
annual financial statements, respectively, of the Joint Venture. The CFO shall
also prepare abbreviated monthly financial reports with respect to the Joint
Venture and provide such reports to the Partners within 15 days after the end of
each month. A copy of any such statements shall be kept on file in the
principal executive office of the Joint Venture and shall be exhibited at all
reasonable times to any Partner demanding an examination of them or a copy shall
be mailed to such Partner. The quarterly income statements and balance sheets
referred to in this Section shall be accompanied by the report thereon, if any,
of any independent accountants engaged by the Joint Venture and the certificate
of the CFO of the Joint Venture that such financial statements were prepared in
accordance with GAAP without audit from the books and records of the Joint
Venture except that such financial statements may lack footnotes and other
presentation items required by GAAP and shall be subject to normal year-end
adjustments. The annual financial statements of the Joint Venture shall be
audited and shall be accompanied by a report from the independent auditors.
11.4 Joint Venture Auditors. The auditors for the Joint Venture shall be
Xxxxx Xxxxxxxx, LLP, or such other independent public accounting firm of
national standing selected by Commodore, with Casino's reasonable approval.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Defaults. An Event of Default shall occur if a Partner (or its
Affiliate) commits an act described in Section 8.2 as being an act of a
Defaulting Partner or materially defaults in the performance of its obligations,
covenants or representations and warranties under this Agreement, and such
default is not cured within 30 days after notice of such default is given by a
Partner to the Defaulting Partner, or action has not been taken to begin curing
such Default within such 30-day period and such cure is being diligently
pursued, if the Default is not reasonably capable of being cured within 30 days.
12.2 Remedies. Upon the occurrence of an Event of Default, the non-
defaulting Partner shall have the right, in addition to all other rights and
remedies provided herein (including rights under Section 8.3), to pursue any and
all available legal and equitable remedies on behalf of itself or the Joint
Venture or elect to dissolve the Joint Venture pursuant to Section 8.2, or both.
12.3 No Waiver. No consent or waiver, express or implied, by a Partner to
or of any breach or default by another Partner in the performance by such other
Partner of its obligations
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under this Agreement shall constitute a consent to or waiver of any similar
breach or default by such Partner. Failure by a Partner to complain of any act
or omission to act by another Partner, or to declare such other Partner in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such Partner of its rights under this Agreement.
ARTICLE 13
DISPUTE RESOLUTION
13.1 Disputes. Except for actions described in Section 4.4(b) or as
expressly otherwise provided in this Agreement, any and all claims, disputes,
controversies, and other matters in question (whether contractual or non-
contractual) arising out of or relating to this Agreement, or the formation,
validity, binding effect, applicability, scope, interpretation, construction,
modification, performance, breach, termination, or enforcement thereof
(including all such issues pertaining to this subsection) (singly, the "Dispute"
and collectively, the "Disputes") shall be resolved by alternative dispute
resolution in accordance with this Article 13.
13.2 Arbitration.
(a) Compulsory Arbitration. All Disputes not resolved by the parties
under other dispute resolutions provisions of this Agreement shall be settled
exclusively by final and binding arbitration in accordance with this Section
13.2 (Arbitration). Judgment upon the award may be entered in any court
specified by the parties in this Agreement or in one of the Related Agreements,
or in the absence of any such designation, in any court having jurisdiction, or
application may be made to the appropriate court for judicial recognition of the
award or for an order of enforcement thereof.
(b) Arbitration Tribunal, Rules, and Administration. The sole
arbitrator or the panel of arbitrators constituted for the resolution of the
Dispute will be called the Arbitration Tribunal. Except as otherwise provided in
this Section, the arbitration proceeding (the "Arbitration Case") will be
administered by the American Arbitration Association (the "Case Administrator")
and conducted by the Arbitration Tribunal in substantial accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect (the "Procedural Rules"). In the event of any conflict between the
Procedural Rules and this Section 13.2 (Arbitration), the provisions of this
Section 13.2 (Arbitration) will control.
(c) Conditions Precedent to Arbitration. A party may initiate
arbitration at any time after the utilization and completion of the dispute
resolution procedures set forth in Section 4.5.
(d) Initiation of Arbitration Case. The Arbitration Case must be
initiated by the initiating party (the "Petitioner") in accordance with the
Procedural Rules by giving to the other party
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(the "Respondent") in a demand for arbitration ("Petitioner's Demand") written
notice of the Dispute and Petitioner's claim.
(e) Appointment of Arbitration Tribunal by Parties or Appointing
Authority. In Petitioner's Demand, the Petitioner shall select one (1) neutral
arbitrator from the panel or roster of arbitrators established and maintained by
the Appointing Authority. Within ten (10) of receipt of Petitioner's Demand, the
Respondent shall mail or deliver to the Petitioner and the Appointing Authority
an answering statement to Petitioner's Demand in which the Respondent answers
Petitioner's Demand and selects one (1) neutral arbitrator from the panel or
roster of arbitrators established and maintained by the Appointing Authority. If
no answering statement is mailed or delivered within the stated time, the claim
set forth in Petitioner's Demand is deemed denied by the Respondent and the
Appointing Authority shall select the second neutral arbitrator. Within ten days
of receipt of notice of their selection as arbitrators, the two (2) arbitrators
shall select a third neutral arbitrator. If the two (2) arbitrators do not agree
upon the third arbitrator within the stated time, the Appointing Authority shall
select the third neutral arbitrator. The three (3) neutral arbitrators so
selected will constitute the Arbitration Tribunal. Unless the parties otherwise
mutually agree, if Petitioner's Demand names two (2) or more parties as
Petitioner or two (2) or more parties as Respondent, the Appointing Authority
shall appoint all three (3) members of the Arbitration Tribunal. The Appointing
Authority has the exclusive right and power to resolve any Dispute arising out
of or related to the appointment of the Arbitration Tribunal. In this regard, in
addition to any other action it deems just and equitable in order to resolve any
such Dispute, the Appointing Authority may appoint an arbitrator or arbitrators
to serve in place of any arbitrator or arbitrators selected by the Petitioner or
the Respondent. The American Arbitration Association is designated as the
Appointing Authority.
(f) Qualifications of Arbitrators. Each member of the Arbitration
Tribunal must be an independent, impartial, neutral and have experience in the
subject matter of the Dispute. At least one member of the Arbitration Tribunal
must be actively engaged in the practice of law, or a retired member of the
state or federal judiciary, and must have at least ten years' experience in
resolving disputes in the area of law directly related to the subject matter of
the Dispute. The Arbitration Tribunal will be the judge of its own
qualifications and jurisdiction.
(g) Interim Measures. The Arbitration Tribunal may grant and order
such interim, provisional, ancillary, and special remedies and relief as it
deems just and equitable and necessary or desirable under the circumstances
including, without limitation, protective orders, sanctions for abuse or
frustration of the arbitration process, temporary restraining orders,
preliminary injunctions, attachment, sequestration, specific performance, and
the appointment of a receiver. Such interim measures may be taken in the form of
an interim award. The Arbitration Tribunal may require security for the payment
of costs and damages. A request for interim measures by a party to a court shall
not be deemed incompatible with this Article 13 or a waiver of that party's
right to arbitrate. Without limiting the generality of the foregoing provisions,
a party may seek interim relief from the Arbitration Tribunal or from the
appropriate court having jurisdiction for a breach or threatened breach of
Section 9.3 (Confidential Information).
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(h) Pre-Hearing Conference. A pre-hearing conference will be held and
conducted by the Arbitration Tribunal within 30 days of its appointment for the
purpose of expediting the Arbitration Case, directing and controlling the
exchange of information, and setting the date for the opening of the hearing.
(i) Exchange of Information. Consistent with the expedited nature of
arbitration, the Arbitration Tribunal will direct and control the scope and
timing of the exchange of information between the parties and will take such
steps as it deems necessary or desirable to avoid delay and achieve a just,
speedy, and cost-effective resolution of the Dispute. The Arbitration Tribunal
may order (i) the production of documents and other information and the entry
upon designated land or other property, and (ii) the identification of witnesses
to be called. When the demands of justice require such extraordinary measures
and upon good cause shown, the Arbitration Tribunal may order the taking of the
testimony of any Person, including a party, by deposition upon oral examination
or upon written questions, or the propounding of interrogatories, but no party
is entitled to conduct discovery of this nature as a matter of right. At least
ten days prior to the hearing, the parties shall exchange copies of all exhibits
they intend to submit at the hearing and final witness lists. The Arbitration
Tribunal has the exclusive right and power to resolve all Disputes related to
the exchange of information.
(j) Language and Locale. The Arbitration Case will be conducted in
the English language at a location selected by the Arbitration Tribunal that is
within fifty (50) miles of Broward County, Florida.
(k) Opening and Closing of Hearing; Time of Award. The hearing will
be opened within 60 days of the initial pre-hearing conference and will be
closed within 60 days of the opening of the hearing. To secure a just, speedy,
and cost-effective resolution of the Dispute and for good cause, the Arbitration
Tribunal may shorten or lengthen the time for opening or closing the hearing.
Unless the parties otherwise agree, the Arbitration Tribunal shall render the
award within 30 days from the date of closing of the hearing. The failure of the
Arbitration Tribunal to render the award within that time will not deprive the
Arbitration Tribunal of its jurisdiction or authority to render the award.
(l) Form of Award. The award will be written in the English language
and signed by a majority of the members of the Arbitration Tribunal. The
Arbitration Tribunal will provide a concise, written breakdown of the award. If
requested in writing by the parties prior to the opening of the hearing, or if
the Arbitration Tribunal believes it is appropriate to do so, the Arbitration
Tribunal will also provide a concise, written explanation of the award not
exceeding five (5) pages in length. Detailed findings of fact and conclusions of
law and a reasoned opinion in the form of a judicial opinion are not required
and will not be provided.
(m) Governing Law. The Arbitration Case shall be governed by the
United States Arbitration Act, 9 U.S.C. [_] I - 16 and the substantive governing
law designated by the
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parties in this Agreement without regard to conflicts of laws principles. In the
absence of any such designation, the Arbitration Tribunal may apply such law or
laws as it considers appropriate.
(n) Scope of Award; Punitive Damages. The Arbitration Tribunal may
grant any remedy or relief that it deems just and equitable and not outside of
the scope of this Agreement or the Related Agreements, including, but not
limited to, specific performance and other equitable relief. The Arbitration
Tribunal is not empowered to and may not award punitive damages.
(o) Assessment of Fees, Compensation, and Expenses. Unless the
parties have otherwise agreed to bear such costs equally or in some other
manner, the Arbitration Tribunal, in the award, will allocate and assess against
the parties in such manner as it deems just and equitable the fees,
compensation, and expenses of the Arbitration Tribunal, the Case Administrator,
and the Appointing Authority. Except as otherwise provided in this subsection or
the following subsection, all other costs and expenses incurred in connection
with resolution of the Dispute or Disputes shall be borne by the party that
incurs such costs and expenses.
(p) Attorneys' Fees. The Arbitration Tribunal may provide in the
award for the recovery of all or part of a prevailing party's reasonable
attorneys' fees incurred in connection with resolution of the Dispute from the
date of inception thereof through enforcement and collection of the award. In
addition, the Arbitration Tribunal may award reasonable attorneys' fees to a
party (whether or not the party prevails on the merits of the Dispute) if the
Arbitration Tribunal finds and concludes that the party participated in good
faith in the manner contemplated by this Agreement in the Arbitration Case and
other alternative dispute resolution procedures described in this Article 13 and
that the other party materially breached its obligations under this Article 13.
(q) Interest. The Arbitration Tribunal may provide in the award for
the recovery of pre-award interest and post-award interest on such principal
amounts and at such rates and from such date or dates as the Arbitration
Tribunal may deem just and equitable. Interest on any judgment entered upon the
award will accrue from the date of entry of judgment at the judgment rate
prescribed by applicable law.
(r) Finality of Award. The award shall be final and binding on the
parties. The award may be vacated, modified, or corrected and an appeal may be
taken only as provided in the Procedural Rules and the United States Arbitration
Act, 9 U.S.C. [_] I - 16.
(s) Confidentiality. The parties, the Arbitration Tribunal, the
Appointing Authority, and the Case Administrator shall treat the proceedings of
the Arbitration Case including, without limitation, the award and decisions of
the tribunal, the testimony of witnesses, the documentary evidence exchanged,
offered, or introduced, and other papers and data related thereto, as
confidential. Upon request of any party, each party agrees to execute prior to
the exchange of any information a confidentiality agreement in form and
substance satisfactory to the Arbitration Tribunal that restricts disclosure of
confidential information during and after the conclusion of the Arbitration
Case, subject to disclosure required by the federal securities laws.
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ARTICLE 14
MISCELLANEOUS
14.1 Term. The existence of the Joint Venture shall be for a period of 50
years from the date of the filing of its certificate of formation with the
Delaware Secretary of State.
14.2 Amendments. This Agreement may be amended only by the affirmative
vote of all the Partners. Any such amendment shall be in writing, duly executed
by all the Partners.
14.3 Nature of Partnership Interest; Agreement Is Binding Upon Successors.
A membership interest is personal property. A Partner shall have no interest in
any specific property of the Joint Venture except to the extent such interest is
evidenced by a separate agreement between such Partner and the Joint Venture.
The successor of any Partner shall be bound by the provisions of this Agreement,
including without limitation, Article 7.
14.4 Title to Property. Title to all Joint Venture property shall be held
in the name of the Joint Venture. Except as otherwise permitted by this
Agreement, no Partner shall have the right, and each Partner does hereby agree
that it shall not seek, to cause a partition of the Joint Venture's property
whether by court action or otherwise.
14.5 Attorney Fees. In the event that any dispute between the Joint
Venture and the Partners or among the Partners should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys' fees and expenses, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action is
prosecuted to judgment as long as the recipient is a prevailing party as defined
herein. Any judgment or order entered in such action shall contain a specific
provision providing for the recover of attorney fees and costs incurred in
enforcing such judgment and an award of prejudgment interest from the date of
the breach at the maximum rate of interest allowed by law. For the purposes of
this Section: (a) attorney fees shall include, without limitation, fees
incurred in the following: (i) post-judgment motions; (ii) contempt
proceedings; (iii) garnishment, levy, and debtor and third party examinations;
(iv) discovery; and (v) bankruptcy litigation and (b) prevailing party shall
mean the party who is determined in the proceeding to have prevailed or who
prevailed by dismissal, default or otherwise.
14.6 Seal. The Partners may adopt a seal of the Joint Venture in such form
as the Partners shall decide.
14.7 Entire Agreement. This Agreement, including the exhibits and
schedules hereto, constitutes the entire agreement between the Partners with
respect to the subject matter hereof, and
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supersedes all prior and contemporaneous agreements, representations, and
understandings of the parties. No party hereto shall be liable or bound to the
other in any manner by any warranties, representations or covenants with respect
to the subject matter hereof except as specifically set forth herein.
14.8 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein or in the Exhibits hereto.
14.9 Governing Law. This Agreement shall be governed by and construed
under the substantive laws of the State of Florida, without regard to Florida
choice of law provisions.
14.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and shall become
effective when there exist copies hereof which, when taken together, bear the
authorized signatures of each of the parties hereto. Only one such counterpart
signed by the party against whom enforceability is sought needs to be produced
to evidence the existence of this Agreement.
14.11 Titles and Subtitles; Form of Pronouns; Construction and Definitions
. The titles of the sections and paragraphs of this Agreement are for
convenience only and are not to be considered in construing this Agreement. All
pronouns used in this Agreement shall be deemed to include masculine, feminine
and neuter forms, the singular number includes the plural and the plural number
includes the singular. Unless otherwise specified, references to Sections or
Articles are to the Sections or Articles in this Agreement. Unless the context
otherwise requires, the term "including" shall mean "including, without
limitation."
14.12 Severability. If one or more provisions of this Agreement are held
by a proper court to be unenforceable under applicable law, portions of such
provisions, or such provisions in their entirety, to the extent necessary and
permitted by law, shall be severed herefrom, and the balance of this Agreement
shall be enforceable in accordance with its terms.
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14.13 Costs. Each Partner, and its respective Affiliates, shall bear its
own costs (including legal and accounting fees) in connection with the
transactions leading up to, and the negotiating and entering into, this
Agreement.
IN WITNESS WHEREOF, the Partners of CAPRI CRUISES hereby execute this Joint
Venture Agreement as of the __ day of April, 1998.
COMMODORE CRUISES LIMITED, a
Bermuda corporation
By:______________________________
Title:___________________________
ISLE OF CAPRI CORPORATION, a
Mississippi corporation
By:______________________________
Title:___________________________
The undersigned agree to be bound by the provisions contained in Article 9
of this Joint Venture Agreement.
COMMODORE HOLDINGS LIMITED
By:______________________________
Title:___________________________
CASINO AMERICA, INC.
By:______________________________
Title:___________________________
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Schedule 1
Names Addresses and Initial Capital Contributions of Partners
Initial Capital
Name of Partner Address Contribution Schedule
--------------- ------- ---------------------
Commodore Cruises Limited 0000 Xxxxxxxxx Xxxx. $1,000,000 paid to
Suite 385-S owner of Vessel
Xxxxx Xxxxx
Xxxxxxxxx, XX 00000 $212,000 paid to
Federal Maritime
Commission
$288,000 upon execution
$1,000,000 at a date to
be agreed upon between
the parties
Isle of Capri Corporation 000 Xxxxxxxxxx Xxxx $1,500,000 upon execution
Xxxxxx, XX 00000
$1,000,000 at a date to
be agreed upon between
the parties
1-1
Schedule 2
Initial Percentage Interests
Percentage
Name of Partner Interest
--------------- -----------
Commodore Cruises Limited 50%
Isle of Capri Corporation 50%
100%
----
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Schedule 3
Initial Directors
For Commodore Cruises Limited
-----------------------------
Xxxxxxx Xxxxxx
Xxxxxxxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
For Isle of Capri Corporation
-----------------------------
Xxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
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Schedule 4
Capital Accounts and Profits and Losses
ARTICLE 1
Capital Accounts
1.1 A separate Capital Account shall be maintained for each Partner in
accordance with the capital accounting rules of section 704(b) of the Code and
the regulations thereunder (including without limitation section 1.704-
1(b)(2)(iv) of the Income Tax Regulations). Each Partner's Capital Account
shall be:
(a) increased by (A) the amount of money contributed by such Partner
to the Joint Venture (including the amount of any Joint Venture liabilities
that are assumed by such Partner other than in connection with distribution
of Joint Venture property), (B) the fair market value of property
contributed by such Partner to the Joint Venture, determined as of the date
of each such contributions, net of liabilities secured by such property
that the Joint Venture is considered to assume or to which the Joint
Venture's ownership of the property is subject pursuant to section 752 of
the Code, and (C) items of Joint Venture income and gain, including income
and gain exempt form tax, that are allocated to such Partner pursuant to
Article 2 of this Schedule 4;
(b) decreased by (A) the amount of money distributed to or for the
benefit of such Partner by the Joint Venture (including the amount of such
Partner's individual liabilities that are assumed by the Joint Venture
other than in connection with contribution of property to the Joint
Venture), (B) the fair market value of property distributed to such Partner
by the Joint Venture, determined as of the date of each such distribution,
net of liabilities secured by such property that such Partner is considered
to assume or to which such Partner's ownership of the property is subject
pursuant to section 752 of the Code (c) items of Joint Venture expenditures
not deductible in computing its taxable income and not properly chargeable
to the Capital Account that are allocated to such Partner pursuant to
Article 2 of this Schedule 4; and
(c) increased or decreased by any adjustments to such Partner's tax
basis in its interest in the Joint Venture pursuant to section 48(q)(6) of
the Code.
1.2 When Joint Venture property is distributed in kind (whether in
connection with liquidation and dissolution or otherwise), the Capital Accounts
of the Partners shall first be adjusted to reflect the manner in which the
unrealized income, gain, loss and deduction inherent in such property (that has
not been reflected in the Capital Account previously) would be allocated among
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the Partners if there were a taxable disposition of such property for the fair
market value of such property (taking into account section 7701(g) of the Cod)
on the date of distribution.
1.3 The Joint Venture shall make or cause to be made all necessary
adjustments in each Partner's Capital Account as required by the capital
accounting rules of section 704(b) of the Code and the regulations thereunder.
1.4 Loans by Partners to the Joint Venture. Any loan by a Partner to the
Joint Venture made in accordance with the provisions of this Agreement shall be
separately entered on the books of the Joint Venture as a loan to the Joint
Venture and not as a Capital Contribution, shall be evidenced by a promissory
note substantially in the form attached hereto as Exhibit B and shall be duly
executed by the Joint Venture and delivered to the lending member.
ARTICLE 2
ALLOCATION OF PROFITS AND
LOSSES; TAX AND ACCOUNTING MATTERS
(a) General Allocations. Each Partner's distributive share of the
Joint Venture's income, gain, loss, deduction or credit (or items thereof)
as shown on the annual federal income tax return prepared in accordance
with Section 6.4(b) of this Agreement or as finally determined by the
United States Internal Revenue Service or the courts, and as modified by
the capital accounting rules of section 704(b) of the Code and the Income
Tax Regulations thereunder, shall be determined as follows:
(b) Allocations. Except as otherwise provided in this Section 1.1,
items of income, gain, loss, deduction and credit shall be allocated among
the Partners proportionately in accordance with their Percentage Interests,
except that items of loss or deduction allocated to any Partner pursuant to
this Section 1.1 with respect to any taxable year shall not exceed the
maximum amount of such items that can be so allocated without causing such
Partner to have a deficit balance in his Capital Account at the end of such
year, computed in accordance with the rules of paragraph (b)(2)(ii)(d) of
section 1.704-1 of the Income Tax Regulations. Any such items of loss or
deduction in excess of the limitation set forth in the preceding sentence
shall be allocated as follows and in the following order of priority:
(i) first, to those Partners who would not be subject to such
limitation, proportionately in accordance with their Capital Accounts;
and
(ii) second, any remaining amount to the Partners in the manner
required by the Code and Income Tax Regulations.
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Subject to the provisions of subsections 1.1(b) through (j)
hereof, the items specified in this Section 2.1 shall be allocated to the
Partners as necessary to eliminate any deficit Capital Account balances and
thereafter to bring the relationship among the Partners' positive Capital
Account balances in accord with their Percentage Interest.
(c) Allocations With Respect to Property. In accordance with section
704(c) of the Code and sections 1.704-1(b)(2)(iv)(g) and 1.704-3(b) of the
Income Tax Regulations, items of income, gain, loss, and deduction with respect
to any property contributed to the capital of the Joint Venture shall, solely
for tax purposes, be allocated among the Partners in a manner consistent with
section 1.704-3(b) of the Income Tax Regulations so as to take into account to
the full extent required or permitted by the Code, the difference between the
adjusted basis of the property to the Partner contributing it and the fair
market value of the property determined by the Partners at the time of its
contribution or revaluation, as the case may be.
(d) Minimum Gain Chargeback. Notwithstanding anything to the contrary
in this Section 1.1, if there is a net decrease in Joint Venture Minimum Gain or
Joint Venture Nonrecourse Debt Minimum Gain (as such terms are defined in
sections 1.704-2(b) and 1.704-2(i)(2) of the Income Tax Regulations, but
substituting the term "Joint Venture" for the term "Partnership" as the context
requires) during a Joint Venture taxable year, then each Partner shall be
allocated items of Joint Venture income and gain for such year (and, if
necessary, for subsequent years) in the manner provided in section 1.704-2(i)(4)
of the Income Tax Regulations.
This provision is intended to be a "minimum gain chargeback"
within the meaning of sections 1.704-2(f) and 1.704-2(i)(4) of the Income Tax
Regulations and shall be interpreted and implemented as therein provided.
(e) Qualified Income Offset. Subject to the provisions of subsection
1.1(c), but otherwise notwithstanding anything to the contrary in this Section
1.1, if any Partner's Capital Account has a deficit balance in excess of such
Partner's obligation to restore its Capital Account balance, computed in
accordance with the rules of paragraph (b)(2)(ii)(d) of section 1.704-1 of the
Income Tax Regulations, then sufficient amounts of income and gain (consisting
of a pro rata portion of each item of Joint Venture Income, including gross
income, and gain for such year) shall be allocated to such Partner in an amount
and manner sufficient to eliminate such deficit as quickly as possible.
This provision is intended to be a "qualified income offset"
within the meaning of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations
and shall be interpreted and implemented as therein provided.
(f) Depreciation Recapture. Subject to the provisions of section
704(c) of the Code and subsections 1.1(b) through (d) hereof, gain recognized
(or deemed recognized under the provisions hereof) upon the sale or other
disposition of Joint Venture property, which is subject to
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depreciation recapture, shall be allocated to the Partner who was entitled to
deduct such depreciation.
(g) Tax Credits. Tax credits shall generally be allocated according to
section 1.704-1(b)(4)(ii) of the Income Tax Regulations or as otherwise provided
by law. Investment tax credits with respect to any property shall be allocated
to the Partners pro rata in accordance with the manner in which Joint Venture
profits are allocated to the Partners under subsection 1.1(a) hereof, as of the
time such property is placed in service. Recapture of any investment tax credit
required by section 47 of the Code shall be allocated to the Partners in the
same proportion in which such investment tax credit was allocated.
(h) Change of Pro Rata Interests. Except as provided in subsections
1.1(f) and (j) hereof or as otherwise required by law, if the Percentage
Interests of the Partners of the Joint Venture are changed during any taxable
year, all items to be allocated to the Partners for such entire taxable year
shall be prorated on the basis of the portion of such taxable year which
precedes each such change and the portion of such taxable year on and after each
such change according to the number of days in each such portion, and the items
so allocated for each such portion shall be allocated to the Partners in the
manner in which such items are allocated as provided in Section 2.1(a) during
each such portion of the taxable year in question.
(i) Effect of Special Allocations on Subsequent Allocations. Any
special allocation of income or gain pursuant to subsection 1.1(c) or (d) hereof
shall be taken into account in computing subsequent allocations of income and
gain pursuant to this section 1.1 so that the net amount of all such allocations
to each Partner shall, to the extent possible, be equal to the net amount that
would have been allocated to each such Partner pursuant to the provisions of
this Section 1.1 if such special allocations of income or gain under subsection
1.1(c) or (d) hereof had not occurred.
(j) Nonrecourse and Recourse Debt. Items of deduction and loss
attributable to Partner nonrecourse debt within the meaning of section 1.704-
2(b)(4) of the Income Tax Regulations shall be allocated to the Partners bearing
the economic risk of loss with respect to such debt in accordance with section
1.704-2(i)(1) of the Income Tax Regulations. Items of deduction and loss
attributable to recourse liabilities of the Joint Venture, within the meaning of
section 1.752-2 of the Income Tax Regulations, shall be allocated among the
Partners in accordance with the ratio in which the Partners share the economic
risk of loss for such liabilities.
(k) State and Local Items. Items of income, gain, loss, deduction,
credit and tax preference for state and local income tax purposes shall be
allocated to and among the Partners in a manner consistent with the allocation
of such items for federal income tax purposes in accordance with the foregoing
provisions of this Section 1.1.
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Schedule 5
Booking Rights and Commissions
Except during the Initial Period (as defined in the Casino Management
Agreement), Commodore or its Affiliate shall reserve ten (10%) percent of the
cabins on the Enchanted Isle for Casino or its Affiliate to sell to Casino
customers. For each passenger who is booked on the Enchanted Isle through
Casino or its Affiliate (and for whom no travel agent commission is paid),
Commodore or its Affiliate shall pay Casino or its Affiliate a preferred
wholesaler's commission of fifteen (15%) percent of the collected fare.
Commodore or its Affiliate shall pay such amount to Casino or its Affiliate on a
monthly basis, within 20 days after the end of each calendar month. Commodore
or its Affiliate shall provide Casino or its Affiliate with an accounting for
each such payment. Not more than 60 days prior to each cruise, Commodore or its
Affiliate shall review Casino's bookings and may release some or all of the
reserved but unbooked cabins. Casino's (or its Affiliate's) right to receive
such commission shall continue for as long as Casino owns an Interest and
Commodore operates the Enchanted Isle (or another vessel on similar itineraries)
regardless of whether Casino or its Affiliate elects to enter into the Casino
Management Agreement with respect to the Enchanted Isle.
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EXHIBIT A
GUARANTY
A-1
EXHIBIT B
FORM OF JOINT VENTURE CHARTER AND ASSIGNMENT
B-1
EXHIBIT C
LICENSE AGREEMENT
X-0
XXXXXXX X
XXXXXXX XXXXXXXX XXXX
X-0
EXHIBIT E
INITIAL BUDGET
E-1
EXHIBIT F
CASINO MANAGEMENT AGREEMENT
F-1
