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Exhibit H
OPERATING AGREEMENT
OF
BLACK HAWK/XXXXXX ENTERTAINMENT, LLC
A COLORADO LIMITED LIABILITY COMPANY
EFFECTIVE AS OF NOVEMBER 12, 1996
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THIS OPERATING AGREEMENT made as of the 12th day of November, 1996 for
BLACK HAWK/XXXXXX ENTERTAINMENT, LLC (the "Company") by and among BLACK HAWK
GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation ("Black Hawk"), and
BH ENTERTAINMENT LTD., an Ohio limited liability company ("Entertainment"), and
DIVERSIFIED OPPORTUNITIES GROUP LTD., an Ohio limited liability company
("Diversified").
RECITALS
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WHEREAS, concurrently herewith, Black Hawk and Diversified are entering
into an Amended and Restated Purchase Agreement (the "Purchase Agreement");
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Purchase Agreement that the parties hereto form the Company
on the terms and subject to the conditions hereinafter set forth;
WHEREAS, the parties desire to form the Company as a limited liability
company under the laws of the State of Colorado to develop and manage a casino
project (the "Project") in the City of Black Hawk, County of Xxxxxx, State of
Colorado; and
WHEREAS, the parties desire to enter into this Operating Agreement to
reflect certain agreements among them and to replace and supersede that certain
Joint Venture Agreement dated December 15, 1994, by and between Black Hawk and
Xxxxxx Investments, Inc.; Entertainment and Diversified being the assignees of
Xxxxxx Investments, Inc.
NOW, THEREFORE, in consideration of the foregoing, of mutual promises
of the parties hereto, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby mutually
agree as follows:
ARTICLE I
DEFINITIONS
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The following terms used in this operating Agreement shall have the
following meanings (unless otherwise expressly provided herein):
"ACT" shall mean the Colorado Limited Liability Company Act.
"AFFILIATE" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by, or under common control with such
Person, (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any officer, director, or
general partner of such Person, or (iv) any Person who is an officer, director,
general partner, trustee, or holder of ten percent (10%) or more of the voting
interests of any Person described in clauses (i) through (iii) of this sentence.
For purposes of this definition, the term "controls," "is controlled by," or "is
under common control with" shall mean the possession, direct or indirect, of the
power to direct or cause
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the direction of the management and policies of a Person or Entity, whether
through the ownership of voting securities, by contract or otherwise.
"ANNUAL OPERATING PLAN" shall have the meaning ascribed in Section 5.11
of this Operating Agreement.
"APPRAISAL" shall mean the following process for determining the fair
market value of an interest in the Company: The fair market value of an interest
in the Company shall be the value agreed upon by the Members, or if an agreement
cannot be reached within thirty (30) days after such value is requested by any
Member (the "Determination Date"), then within twenty (20) business days
thereafter each Member shall select a reputable qualified appraiser, each such
appraiser having no less than ten (10) years experience in the gaming industry
and each being familiar with the prices then being paid for comparable
businesses. If either Member shall fail to designate its appraiser within said
twenty (20) business day period and thereafter shall fail to do so within three
(3) days after written notice by the other party requesting such designation,
then such appraiser shall be appointed by the office of the American Arbitration
Association. The two appraisers shall separately complete their appraisals
within thirty (30) days after the date that the later of them is designated. The
two appraisers shall then meet together with the Members or their
representatives, and at such meeting each appraiser shall present to the other a
sealed letter setting forth the appraiser's judgment as to the fair market value
of the interest in the Company and attempt to persuade all Members to reach
agreement as to the value. If all of the Members (or their representatives) do
not reach agreement, and if the higher amount set forth in either such letter
shall not exceed one hundred ten percent (110%) of the lower amount, then the
value shall be the average of the amounts set forth in the two letters. If,
however, the higher amount set forth in either of the two letters shall exceed
one hundred ten percent (110%) of the lower amount, then within ten (10)
business days after the initial delivery of the sealed letters the two
appraisers shall designate a third appraiser having the same minimum
qualifications as the first two. If the first two appraisers shall fail to agree
upon the designation of a third appraiser, then the third appraiser shall be
appointed by the American Arbitration Association. The third appraiser shall
conduct such investigations and hearing as he shall deem appropriate and within
thirty (30) days after his date of designation shall choose a value in the range
of the values determined by the appraisers selected by the Members as the fair
market value as of the Determination Date. The decision of the third appraiser
shall be in writing and shall be binding upon each Member. The costs of the
Appraisal shall be shared by all Members in accordance with their Membership
Interests.
"ARTICLES OF ORGANIZATION" shall mean the Articles of Organization of
the Company as filed with the Office of the Secretary of State of the State of
Colorado in the form attached as Exhibit A hereto, as the same may be amended
from time to time.
"BANKRUPTCY" means, with respect to any Person, (i) the making of an
assignment for the benefit of creditors, (ii) the filing of a voluntary petition
in bankruptcy, (iii) the adjudication of such Person as bankrupt or insolvent;
(iv) the filing by such Person of a
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petition or answer seeking for himself or itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under a statute, law or regulation; (v) the filing by such Person of an
answer or other pleading admitting or failing to contest the material allegation
of a petition filed against him or it in any proceeding of this nature; (vi)
seeking, consenting to, or acquiescence by such Person in the appointment of a
trustee, receiver, or liquidator of him or it or of all or any substantial part
of his or its property; (vii) the commencement of any proceeding against such
Person seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,
if such proceeding has not been dismissed within 120 days after such
commencement; or (viii) the appointment without the consent of such Person or
acquiescence of a trustee, receiver, or liquidator of such Person or of all or
any substantial part of his or its properties, if the appointment is not vacated
or stayed within 90 days, or if within 90 days after the expiration of any such
stay, the appointment is not vacated.
"BOOK BASIS" means the adjusted basis of an item of property as
reflected in the books of the Company, determined and maintained in accordance
with this Operating Agreement and with the capital accounting rules contained in
Treasury Regulation Section 1.704- 1(b)(2)(iv).
"BUDGET" means the Budget proposed and adopted with respect to a Fiscal
Year of the Company pursuant to Section 5.11 of this Operating Agreement.
"CAPITAL ACCOUNT" means the account maintained by the Company for each
Member in accordance with the provisions of Treasury Regulation
Section 1.704-1(b) and Section 7.4 of this Operating Agreement.
"CAPITAL INTEREST" shall mean the proportion that a Member's Capital
Account bears to the aggregate Capital Accounts of all Members whose Capital
Accounts have positive balances as adjusted from time to time.
"CAPITAL PROCEEDS" means the net cash proceeds realized by the Company
resulting from (1) a Capital Transaction, (2) any refinancing of indebtedness of
the Company, or (3) the elimination of the necessity for any funded reserve in
connection with any mortgage or other indebtedness of the Company.
"CAPITAL TRANSACTION" means the sale, exchange, liquidation or other
disposition of, or any condemnation award or casualty loss recovery with respect
to, all or substantially all of the property of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall refer to Black Hawk/Xxxxxx Entertainment, LLC.
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"CONSENT" means the written consent of a Person to do the act or thing
for which the Consent may be required.
"DEFICIT CAPITAL ACCOUNT" shall mean with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
taxable year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amount which such
Member is obligated to restore under Section 1.704-1(b)(2)(ii)(c) of
the Treasury Regulations, as well as any additions thereto pursuant to
the next to last sentence of Sections 1.704-2(g)(1) and (i)(5) of the
Treasury Regulations, after taking into account thereunder any changes
during such year in partnership minimum gain (as determined in
accordance with Section 1.704-2(d) of the Treasury Regulations) and in
the minimum gain attributable to any partner nonrecourse debt (as
determined under Section 1.704-2(i)(3) of the Treasury Regulations);
and
(ii) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury
Regulations.
This definition of Deficit Capital Account is intended to comply with the
provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2, and
will be interpreted consistently with those provisions.
"DEPRECIATION" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Manager.
"ENTITY" shall mean any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association or any foreign trust or foreign business
organization.
"FISCAL YEAR" shall mean the Company's fiscal year, which shall be the
calendar year.
"GIFTING MEMBER" shall mean any Member who gifts, bequeaths or
otherwise transfers for no consideration (by operation of law or otherwise) all
or any part of its Membership Interest in accordance with the provisions of
Article IX of this Operating Agreement.
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"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such
asset, as determined by the mutual agreement of the Members, provided
that the initial Gross Asset Values of the assets contributed to the
Company pursuant to Section 7.1 hereof shall be the agreed values of
such assets as set forth in Section 7.1;
(ii) The Gross Asset Values of all Company assets may be
adjusted to equal their respective gross fair market values, as
determined by the mutual agreement of the Members as of the following
times: (a) the acquisition of an additional interest by any new or
existing Member in exchange for more than a de minimis contribution of
property (including money); (b) the distribution by the Company to a
Member of more than a de minimis amount of property as consideration
for a Membership Interest; and (c) the liquidation of the Company
within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (a) and (b)
above shall be made only if the Manager reasonably determines that such
adjustments are necessary or appropriate to reflect the relative
economic interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset distributed
to any Member shall be adjusted to equal the gross fair market value of
such asset on the date of distribution as determined by the mutual
agreement of the Members; and
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m) and Section 7.4 and subparagraph (iv)
under the definition of Net Profits and Net Losses; provided, however,
that Gross Asset Values shall not be adjusted pursuant to subparagraph
(iv) to the extent the Manager determines that an adjustment pursuant
to subparagraph (ii) of this definition is necessary or appropriate in
connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (i), (ii) or (iv) of this definition, then such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Net Profits and Net Losses.
"LIQUIDATOR" means the Manager or, if there is no Manager at the time
in question, such other Person as may be appointed in accordance with applicable
law who shall be
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responsible to take all actions related to the winding up and distribution of
assets of the Company.
"MANAGER" shall mean Entertainment or any other Person that accompanies
or succeeds it in that capacity in accordance with this Operating Agreement.
"MEMBER" shall initially mean each of Black Hawk, Entertainment and
Diversified, in their capacities as Members, and thereafter shall mean each of
the foregoing so long as it remains a Member of the Company in accordance with
the terms of this Operating Agreement, and each person who may hereafter become
a Member in accordance with the terms of this Operating Agreement.
"MEMBER CAPITAL" means an amount equal to the sum of all the Members'
Capital Account balances determined immediately prior to an allocation to the
Members pursuant to Section 8.1(b) of any Disposition Gain or Disposition Loss,
increased by the aggregate amount of Disposition Gain to be allocated to the
Members pursuant to Section 8.1(b)(i) or decreased by the aggregate amount of
Disposition Loss to be allocated to the Members pursuant to Section 8.1(b)(ii).
"MEMBERSHIP INTEREST" shall mean the entire interest of a Member in the
Company, including without limitation, the right to receive distributions
(liquidation or otherwise) and allocations of profits and losses. Initial
Membership Interests of the Members are as follows, although actual voting,
governance and other rights deriving from membership, and the allocation of
them, are subject to the specific provisions of this Operating Agreement:
Black Hawk - 75%
Entertainment - 24%
Diversified - 1%
"NET CASH FLOW" means the Net Profits or Net Losses of the Company as
shown on the books of the Company adjusted for any accrual items and further
adjusted by the addition of all items set forth in subsection (i) below and by
the deduction of all items set forth in subsection (ii) below:
(i) (A) the amount of Depreciation taken in computing such
taxable income; (B) all other receipts of the Company not included in
taxable income (exclusive of Capital Contributions), the proceeds of
loans and similar capital receipts provided for elsewhere; (C) the net
proceeds of sale, exchange, condemnation, destruction or other event
resulting from the disposition of any part (but not all or
substantially all) of the property owned by the Company, to the extent
not included in such taxable income; (D) amounts released from
Reserves; and (E) any other funds deemed available for distribution and
designated as Net Cash Flow by the Manager.
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(ii) (A) all principal payments for the current Fiscal Year on
all loans and on similar obligations of the Company, if any; (B)
expenditures of the acquisition of property of the Company and similar
capital outlay items not deducted for federal income tax purposes; and
(C) amounts added to Reserves.
Net Cash Flow shall be determined separately for each Fiscal Year and shall not
be cumulative.
"NET PROFITS" and "NET LOSSES" shall mean for each taxable year of the
Company an amount equal to the Company's net taxable income or loss for such
year as determined for federal income tax purposes (including separately stated
items) in accordance with Section 703 of the Code with the following
adjustments:
(i) Any items of income, gain, loss and deduction allocated to
Members pursuant to Section 8.2 shall not be taken into account in
computing Net Profits or Net Losses for purposes of this Operating
Agreement;
(ii) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net
Profits and Net Losses (pursuant to this definition) shall be added to
such taxable income or loss;
(iii) Any expenditure of the Company described in Section
705(a)(2)(B) of the Code and not otherwise taken into account in
computing Net Profits and Net Losses (pursuant to this definition)
shall be subtracted from such taxable income or loss;
(iv) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to clause (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be taken into account
as gain or loss from the disposition of such asset for purposes of
computing Net Profits and Net Losses;
(v) Gain or loss resulting from any disposition of any Company
asset with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax
basis of such asset differs from its Gross Asset Value; and
(vi) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year.
"NOTICE" means a writing containing the information required by this
Agreement to be communicated to a Person and sent by registered or certified
United States mail, postage prepaid and registered or certified with returns
receipt requested, or sent by some form of
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overnight express delivery to such Person at the last known address of such
Person or sent by facsimile (receipt confirmed). All Notices shall be effective
upon being deposited in the United States mail or with such overnight express
delivery service. However, the time period in which a response to any such
Notice must be given shall commence to run from the date of delivery or
attempted delivery as noted on the return receipt of the Notice by the addressee
thereof or the records of the Entity effecting the overnight express delivery.
Notwithstanding the foregoing, any written communication containing such
information sent to such Person actually received by such Person shall
constitute Notice for all purposes of this Agreement.
"OPERATING AGREEMENT" shall mean this Operating Agreement as originally
executed and as amended from time to time.
"PERSON" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such "Person"
where the context so permits.
"POLICY BOARD" shall mean the board established by the Members as
contemplated by Section 5.3, which Policy Board shall have full responsibility
and authority for the operation and management of the Company's business
affairs. Initially, the Policy Board shall have five members (three appointed by
Entertainment and two appointed by Black Hawk).
"PROJECT" shall have the meaning ascribed to it in the recital
paragraphs.
"RESERVES" shall mean, with respect to any fiscal period, funds set
aside or amounts allocated to such period to reserves which shall be maintained
in amounts deemed sufficient by the Members for working capital or other
reasonable business needs.
"REQUIRED INTEREST" shall mean Members owning 100% of the Membership
Interests of the Company.
"SELLING MEMBER" shall mean any Member which sells, assigns, or
otherwise transfers for consideration all or any portion of its Membership
Interest in accordance with the provisions of Article IX of this Operating
Agreement.
"SERVICE" means the Internal Revenue Service.
"STATE" means the State of Colorado.
"TAX MATTERS PARTNER" means Entertainment.
"TRANSFERRING MEMBER" shall, depending on the context, refer to a
Selling Member, a Gifting Member or both.
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"TREASURY REGULATIONS" shall include temporary and final regulations
promulgated under the Code in effect as of the date of filing the Articles of
organization and the corresponding sections of any regulations subsequently
issued that amend or supersede such regulations.
"WITHDRAWAL EVENT" shall have the meaning ascribed in Section
12.1(a)(iii) of this Operating Agreement.
ARTICLE II
FORMATION OF COMPANY
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SECTION 2.1 MEMBERS. The names and business addresses of the initial
Members are as follows:
Black Hawk Gaming & Development
Company, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
BH Entertainment Ltd.
c/x Xxxxxx Entertainment Ltd.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Diversified Opportunities Group Ltd.
c/x Xxxxxx Entertainment Ltd.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
2.2 FORMATION AND NAME. The Company was formed as a Colorado limited
liability company as of November _____, 1996, upon the filing of Articles of
Organization with the Colorado Secretary of State. This Operating Agreement
constitutes the sole agreement, and supersedes any prior oral or written
agreements, of the Members relating to the Company.
2.3 NAME. The name of the Company is Black Hawk/Xxxxxx Entertainment,
LLC.
2.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be 0000 Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000. The Company
may locate its places of business and registered office at any other place or
places as the Manager may from time to time determine.
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2.5 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial
registered office shall be at the office of its registered agent at 0000
Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, and the name of its initial
registered agent at such address shall be Black Hawk Gaming & Development
Company, Inc. The registered office and registered agent may be changed from
time to time by filing the address of the new registered office and/or the name
of the new registered agent with the Secretary of State pursuant to the Act.
2.6 TERM. The term of the Company shall commence upon the filing of the
Articles of Organization with the Colorado Secretary of State and shall expire
on December 31, 2036, or such later date as may be fixed by amendment of this
Operating Agreement, unless the Company is earlier dissolved in accordance with
either the provisions of this Operating Agreement or the Act.
ARTICLE III
BUSINESS OF COMPANY
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3.1 PERMITTED BUSINESSES. The business of the Company shall be the
development, ownership and management of the Project and in connection
therewith:
(a) to accomplish any lawful business whatsoever, or which shall
at any time appear conducive to or expedient for the protection or
benefit of the Company and its assets;
(b) to exercise all other powers necessary to or reasonably
connected with the Company's business which may be legally exercised
by limited liability companies under the Act; and
(c) to engage in all activities necessary, customary, convenient,
or incident to any of the foregoing.
ARTICLE IV
GENERAL ECONOMIC TERMS AND SECURITY
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4.1 PURCHASE AGREEMENT TERMS. Subject to the terms of the Purchase
Agreement, Diversified is acquiring 190,476 Shares (as defined in the Purchase
Agreement) and is loaning to Black Hawk an amount that ultimately will equal
$6,000,000. The loan is evidenced by a Convertible Note of even date herewith
(the "Note"). The Note provides, among other things, that prior to payment in
full of the principal balance of the Note, all or any portion of the unpaid
principal balance shall be convertible into Shares of Black Hawk at any time
upon the election of Diversified and, if not yet fully converted, shall, unless
the provisions of Article XI of this Operating Agreement apply, be automatically
converted into Shares at such time as (i) Diversified has acquired or received
all necessary
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and appropriate regulatory, licensing and other approvals from the Colorado
Division of Gaming (the "Division"), the Colorado Limited Gaming Control
Commission (the "Commission") and the State and local liquor licensing
authorities and (ii) the Commission approves the issuance to the Company of a
retail gaming license (such date of conversion being hereafter referred to as
the "Conversion Date"). The proceeds of the loan received by Black Hawk pursuant
to the Note shall be contributed to the capital of the Company by Black Hawk.
4.2 NASD APPROVAL. Notwithstanding anything to the contrary contained
in Section 4.1, in the event Black Hawk does not obtain NASD Approval (as
defined in the Purchase Agreement), Diversified shall have no further obligation
to make any investment in or loan to Black Hawk beyond the acquisition of the
190,476 Shares and the initial $1,500,000 loan for the First Note (as defined in
the Purchase Agreement). At such time, the First Note shall be deemed to have
been cancelled, the 190,476 Shares acquired by Diversified shall be deemed to
have been redeemed by Black Hawk, and Diversified shall be deemed to have made a
$2,500,000 capital contribution to the Company and the parties' Membership
Interests and other interests in the Company shall be adjusted so that Black
Hawk shall have a 50% Membership Interest and Diversified and Entertainment
shall have an aggregate 50% Membership Interest and, thereafter, the parties
shall make such capital contributions as are necessary to equalize their Capital
Accounts in accordance with the foregoing.
4.3 SECURITY. As security for Black Hawk's obligations to Diversified
under the Note, pursuant to the terms of an Assignment, Pledge and Security
Agreement (the "Security Agreement") of even date herewith, Black Hawk is
granting Diversified a first priority lien in 100% of Black Hawk's Membership
Interest and the products and proceeds thereof, including but not limited to its
Capital Interest, interest in Net Profits and Net Losses and Net Cash Flow of
the Company, and all other rights and privileges associated with Black Hawk's
membership in the Company; provided, however, that Diversified's remedies upon
an event of default under the Note shall be limited (i) to obtaining accrued but
unpaid interest thereon and (ii) in the same manner as if it exercised its
Purchase Right described in Sections 11.2(a) and (b), below, (provided that all
of the events described in Section 11.2(b) occur).
ARTICLE V
MANAGEMENT
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5.1 MANAGER.
(a) Subject to the other provisions of this Operating
Agreement, the business and affairs of the Company shall be managed by the
Manager. The Manager shall direct, manage and control the business of the
Company to the best of its ability. Except for decisions, actions or situations
in which the approval of the Policy Board or the
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Members is expressly required by this Operating Agreement or by non-waivable
provisions of applicable law, the Manager shall have full and complete
authority, power and discretion to manage and control the business, affairs and
properties of the Company, to make all decisions regarding those matters and to
perform any and all other acts or activities customary or incident to the
management of the Company's business.
(b) No Person may serve as Manager unless it is a Member and
holds at least a twenty percent (20%) Membership Interest in the Company.
(c) The Members hereby designate Entertainment as the initial
Manager; provided, however, that from and after the Conversion Date, Black Hawk
also shall be designated as a Manager and, thereafter, Entertainment and Black
Hawk shall have equal rights as Manager. Notwithstanding the foregoing,
following the Conversion Date, Entertainment shall continue to serve as the Tax
Matters Partner.
5.2 POWERS AND DUTIES OF MANAGER.
(a) Without limiting the generality of Section 5.1, but
subject to the limitations set forth in Section 5.4, the Manager shall have the
power and authority, on behalf of the Company to:
(i) Cause the Company to pay all required taxes, rents,
assessments and other obligations of the Company;
(ii) On behalf of the Company, execute and supervise
contracts to be entered into by the Company and execute all other
instruments and documents, including, without limitation, checks,
drafts, notes and other negotiable instruments, mortgages or deeds of
trust, security agreements, financing statements, documents providing
for the acquisition, mortgage or disposition of the Company's
property, assignments, bills of sale, leases and any other instruments
or documents necessary, in the opinion of the Manager, to the business
of the Company;
(iii) Borrow money for the Company from banks, other lending
institutions, Members, or Affiliates of Members in accordance with
this Agreement or on such terms as may be approved by the Members, and
in connection therewith, to hypothecate, encumber and grant security
interests in the assets of the Company to secure repayment of the
borrowed sums. No debt shall be contracted or liability incurred by or
on behalf of the Company except to the extent expressly provided in
this Operating Agreement or as approved by the Policy Board;
(iv) Purchase liability and other insurance to protect the
Company's property and business;
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(v) Invest any Company funds temporarily (by way of example
but not limitation) in time deposits, short-term governmental
obligations, commercial paper or other investments; and
(vi) Take any action and do and perform all other acts which
(A) are necessary or appropriate to the conduct of the Company's
business, including all actions necessary to fulfill the Company's
obligations to maintain the development of the Project, but (B) do not
require approval of the Policy Board under this Operating Agreement,
unless such action or acts are specifically authorized by the Budget
or the Annual Operating Plan.
(b) The Manager shall be responsible for and hereby covenants
that:
(i) as Tax Matters Partner, it will provide: (A) notice of
each Member's name, address and profits interest to be furnished to
the Service in accordance with Section 6223(c) of the Code, provided
the Tax Matters Partner has knowledge of such Member's name, address
and profits interest, (B) notice of all administrative and judicial
proceedings for the adjustment at the partnership (Company) level of
partnership (Company) items shall be sent to each known Member, and
(C) if the Service notifies the Company of any administrative
proceeding, notice will be sent to the Service in accordance with
Section 6230(e) of the Code;
(ii) it will exercise good faith in all activities relating
to the conduct of the business of the Company and will take no action
with respect to the business and property of the Company which is not
reasonably related to the achievement of the purpose of the Company;
(iii) extended risk insurance in favor of the Company
acceptable to the Policy Board and workmen's compensation and public
liability insurance in favor of the Company in amounts satisfactory to
the Policy Board will be kept in force during the term of the Company
as to property of the Company;
(iv) all funds of the Company will be deposited in a
separate bank account or accounts as shall be determined by the
Manager;
(v) at the Company's cost and expense, it will provide or
cause to be provided each Member (A) within thirty (30) days after the
end of each fiscal quarter, a report of operations for such quarter,
including a balance sheet, a statement of income and expenses and a
cash flow statement for the quarter then ended, (B) within ninety (90)
days after the end of each Fiscal Year of the Company, reviewed and
compiled and, if necessary, audited financial statements prepared by
Deloitte & Touche (or such other independent accountants as may be
selected by the Members) in accordance with generally accepted
accounting principles and such
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financial information with respect to such Fiscal Year of the Company
as shall be reportable for federal and state income tax purposes, (C)
tax returns for the Company as set forth in Section 8.10; and (D)
regular and periodic (but not less than quarterly) reports and updates
regarding the Project;
(vi) comply with all contracts, agreements and obligations
and all governmental rules, regulations, laws, ordinances and
requirements, applicable to the Project and management of the Company;
and
(vii) in hiring professionals on behalf of the Company, it
will consider, on a reasonable basis, any business issues or concerns
raised by any Member with respect to any one or more candidates for
such engagement.
5.3 POLICY BOARD.
(a) Subject to the authority granted to the Manager, the
Policy Board shall have full authority for operating and managing the Company
and the Project. Actions and decisions of the Policy Board shall require the
vote or Consent of a majority of the members of the Policy Board. The Policy
Board shall make all decisions on behalf of the Company not specifically
reserved herein to the Manger.
(b) There shall be five Members of the Policy Board. The
Policy Board members and the Member of the Company appointing such individuals
are as follows:
Entertainment Black Hawk
------------- ----------
1) Xxxxxxx X. Xxxxxx 1) Xxxxxx X. Xxxxxxxx
2) Xxxxx X. Xxxxxxxxxx 2) Xxxxxxx X. Xxxxx
3) Xxxxxx X. Xxxxxx
All members of the Policy Board shall serve in such capacity without
compensation from the Company. Each Member of the Company may at any time and
from time to time upon Notice to the other Members replace any of its designees
to the Policy Board should such designee die, become disabled, resign or for any
reason cease to serve on the Policy Board.
(c) From and after the date on which Diversified controls
Black Hawk's Board of Directors, one of the Members of the Policy Board
designated by Entertainment shall resign and Black Hawk shall have the right to
nominate the fifth member of the Policy Board. If, however, Xxxxxxx X. Xxxxxx
("Xxxxxx") ceases to be Chief Executive Officer or Chairman of the Board of
Black Hawk, the Policy Board shall consist of six members, with three members
being designated by each of Entertainment and Black Hawk and thereafter
decisions of the Policy Board shall require the vote or consent of four of the
members of the Policy Board.
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5.4 RESTRICTIONS ON AUTHORITY OF THE MANAGER.
The Manager shall not have the authority to, and covenants and
agrees that it shall not, do any of the following acts without the majority
Consent of the members of the Policy Board:
(a) Cause or permit the Company to engage in any activity that
is not consistent with the purposes of the Company as set forth in Section 3.1
hereof;
(b) Do any act in contravention of this Operating Agreement;
(c) Do any act which would make it impossible to carry on the
ordinary business of the Company, except as otherwise provided in this Operating
Agreement;
(d) Confess a judgment against the Company or execute an
assignment for the benefit of creditors;
(e) Utilize Company property, or assign rights in specific
property of the Company, for other than a Company purpose;
(f) Perform any act that would cause the Company to conduct
business in a state which has neither enacted legislation which permits limited
liability' companies to organize in such state nor permits the Company to
register to do business in such state as a foreign limited liability company;
(g) Cause the Company to voluntarily take any action that
would cause Bankruptcy of the Company;
(h) Cause the Company to acquire any equity or debt securities
of any Member or any of its Affiliates, or otherwise make loans to any Member or
any of its Affiliates;
(i) Direct the business and affairs of the Company and
exercise the rights and powers granted by Section 5.2 in a manner that would
cause or effect a significant change in the nature of the Company's business;
(j) Cause the Company to admit any additional Members;
(k) Sell, lease, encumber or otherwise dispose of all or any
part of the Project or Company assets, except for a liquidating sale in
connection with the dissolution of the Company or the casual sale or other
disposition of Company assets with a fair market value of less than $10,000 in a
single transaction or $100,000 in the aggregate;
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(l) Except as otherwise contemplated by this Agreement, cause
the Company to enter into any contract or obligation in excess of $50,000;
(m) Borrow money on behalf of the Company;
(n) Except as otherwise contemplated by this Agreement, cause
the Company to enter into any contract or agreement with any Affiliate of any
Member, unless the compensation provided thereunder is in accordance with
Section 6.7 and the services to be provided are approved by the Manager and are
reasonably necessary for the Company's business;
(o) Cause dissolution of the Company;
(p) Establish, add to and release funds from Reserves;
(q) Cause the Company to enter into any joint venture,
partnership or other Entity; or
(r) Agree or consent to any material amendment of, or the
execution of, any Agreement, contract or other document relating to the Project.
5.5 DUTIES OF MANAGER AND POLICY BOARD. Each of the Manager and Policy
Board shall perform their respective duties in good faith, in a manner each
reasonably believes to be in the best interests of the Company, and with such
care as an ordinarily prudent person in a like position would use under similar
circumstances.
5.6 MANAGERS AND MEMBERS OF THE POLICY BOARD HAVE NO EXCLUSIVE DUTY TO
COMPANY. Neither the Manager nor the members of the Policy Board shall be
required to manage the Company as its sole and exclusive function and each
(and/or any Member) (i) may have other business interests and may engage in
other activities in addition to those relating to the Company, including,
without limitation, subject to this Agreement, and the Master Joint Venture
Agreement (as defined in the Purchase Agreement), participation in ventures
which compete, or may compete, with the business of the Company and (ii) shall
incur no liability to the Company or to any of the Members as a result of
engaging in any such other business or venture.
5.7 BANK ACCOUNTS. The Manager may from time to time open bank accounts
in the name of the Company, and the Policy Board shall designate the sole
signatories on such accounts.
5.8 RESIGNATION. The Manager of the Company may resign at any time by
giving Notice to the Members. Any such resignation of a Manager shall take
effect upon receipt of Notice thereof or at such later time as shall be
specified in such Notice; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to
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make it effective. The failure of a Manager to satisfy or to continue to satisfy
the requirements of Section 5.1(b) shall be deemed to constitute the resignation
of such Manager, effective immediately and without Notice or any further action
upon such failure. Upon resignation of a Manager, until a new Manager is
appointed pursuant to Section 5.8, the management of the Company shall revert to
and be vested in the Policy Board. The resignation of a Manager shall not affect
the former Manager's rights as a Member and shall not constitute a withdrawal of
a Member.
5.9 VACANCIES. Any vacancy occurring for any reason in the position of
Manager of the Company shall be filled by Entertainment until the Conversion
Date and, thereafter, by the Members holding the Required Interest.
5.10 RIGHT TO RELY ON THE MANAGER. Any Person dealing with the Company
may rely (without duty of further inquiry) upon a certificate signed by the
Manager as to:
(a) The identity of the Manager or any Member;
(b) The existence of nonexistence of any fact or facts which
contribute a condition precedent to acts by the Manager or which are in any
other manner germane to the affairs of the Company;
(c) The Persons who are authorized to execute and deliver any
instrument or document of the Company; or
(d) Any act or failure to act by the Company or any other
matter whatsoever involving the Company or any Member with respect to the
business of the Company.
5.11 ANNUAL OPERATING PLAN AND BUDGET.
(a) The Manager shall prepare for the approval of the Policy
Board, which approval shall not be unreasonably withheld, each Fiscal Year (no
later than thirty (30) days prior to the end of the then current Fiscal Year) a
business plan ("Annual Operating Plan") for the next Fiscal Year. Each Annual
Operating Plan shall consist of a strategic plan setting forth the Company's
goals and objectives regarding the Project during the next Fiscal Year. Any such
Annual Operating Plan shall also include such other information or other matters
necessary in order to inform the Policy Board of the Company's business and
prospects and to enable the Policy Board to make an informed decision with
respect to their approval of such Annual Operating Plan.
(b) The Manager shall prepare for the approval of the Policy
Board, which approval shall not be unreasonably withheld, each Fiscal Year (no
later than thirty (30) days prior to the end of the then current Fiscal Year) a
budget ("Budget") for the next Fiscal Year. If the proposed Budget for any given
year is not approved by the Policy Board by the
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first day of such year, then, until such time as the Members approve a Budget
for that year, the Manager shall be authorized to expend only such funds as are
required to preserve and protect the value of the Project and satisfy the
Company's obligations under existing contracts with Persons.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
---------------------------------
6.1 LIMITATION OF LIABILITY. Each Member's liability shall be limited
as set forth in this Operating Agreement, the Act and other applicable law. A
Member will not be personally liable for any debts, obligations, liabilities or
losses of the Company beyond its respective Capital Contributions and any
obligation of a Member under Section 7.1, 7.2 or 7.4 to make Capital
Contributions, as specifically agreed in accordance with Section 7.5 or as
otherwise required by law.
6.2 LIST OF MEMBERS. Upon written request of any Member, the Manager
shall provide a list showing the names, addresses and Membership Interests of
all Members.
6.3 COMPANY BOOKS. In accordance with the Act, at the expense of the
Company, the Manager shall maintain and preserve, during the term of the
Company, and for five (5) years thereafter, all books, records and accounts of
all operations and expenditures of the Company and other relevant Company
documents. Upon reasonable request, each Member (or its representative) shall
have the right, during ordinary business hours, to inspect and copy such Company
documents at the requesting Member's expense. In addition to complete accounting
records, at a minimum, the Company shall keep at its principal place of business
the following records:
(a) A current list of the full name and last known business,
residence, or mailing address of each Member, assignee, member of the Policy
Board and Manager, both past and present;
(b) A copy of the Articles of Organization of the Company and
all amendments thereto, together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;
(c) Copies of the Company's federal, state, and local income
tax returns and reports, if any, for the four most recent years;
(d) Copies of the Company's currently effective written
Operating Agreement, copies of any writings permitted or required with respect
to a Member's obligation to contribute cash, property or services, and copies of
any financial statements of the Company for the three most recent years;
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(e) Minutes of every annual, special meeting and court-ordered
meeting of the Manager or the Members; and
(f) Any written consents obtained from Members for actions
taken by Members without a meeting and from members of the Manager for actions
taken by the Manager without a meeting.
6.4 LIABILITY OF A MEMBER TO THE COMPANY. A Member who receives a
distribution in violation of this Agreement or the Act is liable to the Company
to the extent now or hereafter provided by the Act.
6.5 NO COMMITMENTS ON BEHALF OF THE COMPANY. Except as provided in this
Operating Agreement, each Member agrees that it will not take any action which
will commit or bind, or purport to commit or bind, the Company or any other
Member to any act, agreement, contract or undertaking of any kind or nature
whatsoever, or incur debt in the name of or on behalf of the Company or create
any lien upon any of the properties or the other assets of the Company or hold
itself out as authorized to act on behalf of the Company or any Member, unless
permitted by this Operating Agreement or expressly authorized in advance to do
so by approval of the other Member. Each Member agrees that it will indemnify
the Company and the other Member(s) against any and all claims, damages, losses
and liabilities to which the Company or any other Member may be or become
subject arising or resulting from the breach by such Member of this Section 6.5.
6.6 PAYMENT OF COSTS AND EXPENSES. All reasonable costs and expenses of
the Company and (to the extent fairly allocable to the Company) of the Manager
and/or the Policy Board will be borne by and charged to the Company, including,
without limitation: (i) out-of pocket expenses incurred by the Company, the
Manager or the Policy Board in connection with the organization of the Company;
(ii) fees and expenses of consultants, appraisers, custodians, counsel,
independent public accountants, actuaries and other agents; (iii) finders,
placement, brokerage and other similar fees; (iv) out-of-pocket costs of
meetings with (including travel), and reports to, the Members or the Policy
Board; (v) costs and expenses incurred for the preparation and distribution of
financial reports, tax reports, and other information for the benefit of the
Members or as specifically requested by a Member; (vi) any taxes, fees or other
governmental charges levied against the Manager or its income or assets or in
connection with its business or operations; and (vii) costs of any agency or
administrative actions or hearings, any governmental action or third-party
litigation or other matters that are the subject of indemnification pursuant to
Article X hereof; (viii) costs of winding-up and liquidating the Company, and
(ix) all other reasonable costs and expenses of the Company, the Manager or the
Policy Board in connection with this Agreement.
6.7 MEMBER OR AFFILIATES DEALING WITH COMPANY.
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(a) A Member or any Affiliate of a Member shall have the right
to contract or otherwise deal with the Company for the sale of goods or services
only if (i) the terms and conditions of such contract are fully disclosed in
writing to all Members not less than thirty (30) business days prior to the
effective date of such contract, (ii) compensation paid or promised for such
goods or services is reasonable and competitive (i.e., at fair market value) and
is paid only for goods or services actually furnished to the Company, (iii) the
goods or services to be furnished are reasonable for and necessary to the
Company, and (iv) the terms for the furnishing of such goods and services are at
least as favorable to the Company as would be obtainable in an arm's length
transaction. Any contract covering such transactions shall be in writing. Any
payment made to a Member or any Affiliate of a Member for such goods or services
shall be fully disclosed to all Members, and no Affiliate shall, by the making
of lump-sum payments to any other Person for disbursement by such other Person,
circumvent the provisions of this Section 6.7.
(b) Notwithstanding the provisions of Section 6.7(a), no
Member or Affiliate of a Member shall:
(i) participate in any arrangement which would circumvent
the provisions of Section 6.7(a), including but not limited to receipt
of a rebate or give-up; or
(ii) receive any insurance brokerage fee or write any
insurance policy covering the Company.
6.8 MEMBER LOANS. Nothing in this Operating Agreement shall prevent any
Member from making secured or unsecured loans to the Company by agreement with
the Company and approval of all of the Members; provided, however, each Member
shall be entitled to proportionately participate in making such loan(s) on the
same terms as made by any Member.
ARTICLE VII
CAPITAL CONTRIBUTIONS, MEMBER LOANS,
------------------------------------
FINANCIAL OBLIGATIONS AND CAPITAL ACCOUNTS
------------------------------------------
7.1 MEMBERS' CAPITAL CONTRIBUTIONS.
(a) As its Capital Contribution to the Company, Entertainment
and Diversified have or will assign, or cause to be assigned, and contribute
those items set forth on Exhibit B. For Capital Account purposes, the Members
acknowledge that the Agreed Value of such Capital Contribution is $5,000,000.
(b) As its Capital Contribution to the Company, Black Hawk has
or will assign, or cause to be assigned, and contribute those items set forth on
Exhibit B. For
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Capital Account purposes, the Members acknowledge that the Agreed Value of such
Capital Contribution is $15,000,000.
7.2 ADDITIONAL CAPITAL. Except as may be required or desired by the
Policy Board, no Member shall be required to contribute capital to the Company
beyond its initial Capital Contribution. Additional Capital Contributions shall
be made by each of the Members in proportion to their Membership Interests.
7.3 PROVISIONS NOT FOR BENEFIT OF CREDITORS. None of the terms,
covenants, obligations or rights contained in this Article VII is or shall be
deemed to be for the benefit of any person or Entity other than the Members and
the Company, and no such third person shall under any circumstances have any
right to compel any actions or payments by the Manager and/or the Members.
7.4 CAPITAL ACCOUNTS.
(a) A separate Capital Account will be maintained for each
Member. Each Member's Capital Account will be increased by (1) the amount of
money contributed by such Member to the Company; (2) the fair market value of
property contributed by such Member to the Company (net of liabilities secured
by such contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code); (3) allocations to such Member of Net
Profits; (4) any items in the nature of income and gain which are specially
allocated to the Member pursuant to paragraphs (a), (b), (c), (d), (e), (i)
and/or (j) of Section 8.2; and (5) allocations to such Member of income
described in Section 705(a)(1)(B) of the Code. Each Member's Capital Account
will be decreased by (1) the amount of money distributed to such Member by the
Company; (2) the fair market value of property distributed to such Member by the
Company (net of liabilities secured by such distributed property that such
Member is considered to assume or take subject to under Section 752 of the
Code); (3) allocations to such Member of expenditures described in Section
705(a)(2)(B) of the Code; (4) any items in the nature of deduction and loss that
are specially allocated to the Member pursuant to paragraphs (a), (b), (c), (d),
(e), (f), (i) and/or (j) of Section 8.2; and (5) allocations to the account of
such Member of Net Losses.
(b) In the event of a permitted sale or exchange of a
Membership Interest in the Company, the Capital Account of the transferor shall
become the Capital Account of the transferee to the extent it relates to the
transferred Membership Interest in accordance with Section 1.704-1(b)(2)(iv) of
the Treasury Regulations.
(c) The manner in which Capital Accounts are to be maintained
pursuant to this Section 7.4 is intended to comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations promulgated thereunder.
If, in the opinion of the Company's accountants, the manner in which Capital
Accounts are to be maintained pursuant to the preceding provisions of this
Section 7.4 should be modified in order to comply with Section 704(b) of the
Code and the Treasury Regulations thereunder, then
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notwithstanding anything to the contrary contained in the preceding provisions
of this Section 7.4, the method in which Capital Accounts are maintained shall
be so modified; provided, however, that any change in the manner of maintaining
Capital Accounts shall not materially alter the economic agreement between or
among the Members.
(d) Upon liquidation of the Company (or any Member's
Membership Interest or an assignee's Membership Interest, except as otherwise
provided in this Operating Agreement), liquidating distributions will be made in
accordance with the positive Capital Account balances of the Members and
assignees, as determined after taking into account all Capital Account
adjustments for the Company's taxable year during which the liquidation occurs.
Liquidation proceeds will be paid in accordance with Section 12.3(b). The
Company may offset damages for breach of this Operating Agreement by a Member or
assignee whose interest is liquidated (either upon the withdrawal of the Member
or the liquidation of the Company) against the amount otherwise distributable to
such Member.
(e) Except as otherwise required in the Act (and subject to
Sections 6.1 and 6.4), no Member or assignee shall have any liability to restore
all or any portion of a deficit balance in such Member's or assignee's Capital
Account.
7.5 WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS
(a) A Member shall not receive out of the Company's property
any part of its Capital Contribution until all liabilities of the Company,
except liabilities to Members on account of their Capital Contributions, have
been paid or there remains property of the Company sufficient to pay them.
(b) A Member, irrespective of the nature of its Capital
Contribution, has only the right to demand and receive cash in return for its
Capital Contribution.
ARTICLE VIII
ALLOCATIONS, DISTRIBUTIONS, ELECTIONS AND REPORTS
-------------------------------------------------
8.1 (a) ALLOCATIONS OF PROFITS AND LOSSES FROM OPERATIONS.
Subject to Section 8.1(b) and 8.2 the Net Profits and Net Losses of the Company
for each Fiscal Year shall be allocated to the Members in proportion to their
respective Membership Interests.
(b) ALLOCATIONS OF GAIN OR LOSS UPON SALE OR OTHER DISPOSITION
OF THE PROPERTY UPON LIQUIDATION OF THE COMPANY. The Net Profits or Net Losses
from the sale or other disposition of the property or any portion thereof (such
Net Profits or Net Losses determined by reference to the Book Basis of such
property to the Company, and without including any income from interest on any
deferred portion of the sale price) ("Disposition Gain" and Disposition Loss,"
respectively) for each fiscal year of the Company shall be allocated to the
Members as follows:
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(i) DISPOSITION GAIN. Subject to the allocations set forth in
Sections 8.2, Disposition Gain shall be allocated to the
Members as follows:
(A) First, to any Members with deficit balances in
their respective Capital Accounts, until such
balances are restored to zero;
(B) Second, among the Members in such proportions and
in such amounts as would result in the Capital
Account balance of each Member equaling, as nearly
as possible, the amount of the distribution that
such Member would receive if an amount equal to
the Member Capital were distributed to the Members
pursuant to Section 8.4; and
(C) Any remaining Disposition Gain shall be allocated
to the Members in accordance with their respective
Percentage Interests.
(ii) DISPOSITION LOSS. Subject to the allocations set forth in
Sections 8.2, Disposition Loss shall be allocated to the
Members as follows:
(A) First, to those Members with positive balances in
their respective Capital Accounts in amounts equal
to their respective Capital Account balances;
provided, however, that if the amount of
Disposition Loss to be allocated is less than the
sum of the Capital Account balances of all Members
having positive Capital Account balances, then the
Disposition Loss shall be allocated to such
Members in such proportions and in such amounts as
would result in the Capital Account balance of
each such Member equaling, as nearly as possible,
the amount of the distribution that such Member
would receive if an amount equal to the Member
Capital were distributed to such Members pursuant
to Section 8.4; and
(B) Any remaining Disposition Loss shall be allocated
to the Members in accordance with their respective
Membership Interests.
(iii) INTEREST INCOME ON SALE. Income from interest on any deferred
portion of the Net Capital Proceeds with respect to a sale or other
disposition of Property shall not be deemed to be gain on such sale,
and such income shall be considered an item of gross income and
allocated to the Member receiving the interest to which such income is
attributable.
8.2 SPECIAL ALLOCATIONS TO CAPITAL ACCOUNTS AND CERTAIN OTHER INCOME
TAX ALLOCATIONS. Notwithstanding Section 8.1 hereof:
(a) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4),
(5) or (6) of the
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Treasury Regulations, which create or increase a Deficit Capital Account of such
Member, then items of Company income and gain (consisting of a pro rata portion
of each item of Company income, including gross income, and gain for such year
and, if necessary, for subsequent years) shall be specially allocated to such
Member in an amount and manner sufficient to eliminate, to the extent required
by the Treasury Regulations, the Deficit Capital Account so created as quickly
as possible. It is the intent that this Section 8.2(a) be interpreted to comply
with the alternate test for economic effect set forth in Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
(b) In the event any Member would have a Deficit Capital
Account at the end of any Company taxable year which is in excess of the sum of
any amount that such Member is obligated to restore to the Company under Section
1.704-1(b)(2)(ii)(c) of the Treasury Regulations and such Member's share of
minimum gain as defined in Section 1.704-2(g)(1) of the Treasury Regulations
(which is also treated as an obligation to restore in accordance with Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations), the Capital Account of such
Member shall be specially credited with items of Membership income (including
gross income) and gain in the amount of such excess as quickly as possible.
(c) Notwithstanding any other provision of this Section 8.2,
if there is a net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company, then, the
Capital Account of each Member shall be allocated items of income (including
gross income) and gain for such year (and if necessary for subsequent years)
equal to that Member's share of the net decrease in Company minimum gain. This
Section 8.2(c) is intended to comply with the minimum gain chargeback
requirement of Section 1.704-2 of the Treasury Regulations and shall be
interpreted consistently therewith. If (i) in any taxable year that the Company
has a net decrease in the Company's minimum gain, (ii) the minimum gain
chargeback requirement would cause a distortion in the economic arrangement
among the Members, and (iii) it is not expected that the Company will have
sufficient other income to correct that distortion, then the Manager may in its
discretion (and shall, if requested to do so by a Member) seek to have the
Internal Revenue Service waive the minimum gain chargeback requirement in
accordance with Treasury Regulation Section 1.704-2(f)(4).
(d) Items of Company loss, deduction and expenditures
described in Section 705(a)(2)(B) which are attributable to any nonrecourse debt
of the Company and are characterized as partner (Member) nonrecourse deductions
under Section 1.704-2(i) of the Treasury Regulations shall be allocated to the
Members' Capital Accounts in accordance with said Section 1.704-2(i) of the
Treasury Regulations.
(e) Beginning in the first taxable year in which there are
allocations of "nonrecourse deductions" (as described in Section 1.704-2(b) of
the Treasury Regulations) such deductions shall be allocated to the Members in
the same manner as Net Profit or Net Loss is allocated for such period.
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(f) In accordance with Section 704(c)(1)(A) of the Code and
Section 1.704-1(b)(2)(i)(iv) of the Treasury Regulations, if a Member
contributes property with a fair market value that differs from its adjusted
basis at the time of contribution, income, gain, loss and deductions with
respect to the property shall, SOLELY FOR FEDERAL INCOME TAX PURPOSES (and not
for Capital Account purposes), be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the
Company and its fair market value at the time of contribution.
(g) Pursuant to Section 704(c)(1)(B) of the Code, if any
contributed property is distributed by the Company other than to the
contributing Member within five years of being contributed, then, except as
provided in Section 704(c) (2) of the Code, the contributing Member shall,
SOLELY FOR FEDERAL INCOME TAX PURPOSES (and not for Capital Account purposes),
be treated as recognizing gain or loss from the sale of such property in an
amount equal to the gain or loss that would have been allocated to such Member
under Section 704(c) (1)(A) of the Code if the property had been sold at its
fair market value at the time of the distribution.
(h) In the case of any distribution by the Company to a Member
or assignee, such Member or assignee shall, SOLELY FOR FEDERAL INCOME TAX
PURPOSES (and not for Capital Account purposes), be treated as recognizing gain
in an amount equal to the lesser of:
(i) the excess (if any) of (A) the fair market value
of the property (other than money) received in the distribution over
(B) the adjusted basis of such Member's Membership Interest or
assignee's Membership Interest in the Company immediately before the
distribution reduced (but not below zero) by the amount of money
received in the distribution, or
(ii) the Net Precontribution Gain (as defined in
Section 737(b) of the Code) of the Member or assignee. The Net
Precontribution Gain means the net gain (if any) which would have been
recognized by the distributes Member or assignee under Section
704(c)(1)(B) of the Code of all property which (1) had been contributed
to the Company within five years of the distribution, and (2) is held
by the Company immediately before the distribution, had been
distributed by the Company to another Member or assignee. If any
portion of the property distributed consists of property which had been
contributed by the distributes Member or assignee to the Company, then
such property shall not be taken into account under this Section 8.2(h)
and shall not be taken into account in determining the amount of the
Net Precontribution Gain. If the property distributed consists of an
interest in an Entity, the preceding sentence shall not apply to the
extent that the value of such interest is attributable to the property
contributed to such Entity after such interest had been contributed to
the Company.
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(i) All recapture of income tax deductions resulting from sale
or disposition of company property shall be allocated to the Member or Members
to whom the deduction that gave rise to such recapture was allocated hereunder
to the extent that such Member is allocated any gain from the sale or other
disposition of such property.
(j) Any credit or charge to the Capital Accounts of the
Members pursuant to Sections 8.2(a), (b), (c), (d), and/or (e) hereof shall be
taken into account in computing subsequent allocations of profits and losses
pursuant to Section 8.1, so that the net amount of any items charged or credited
to Capital Accounts pursuant to Sections 8.1 and 8.2(a), (b), (c), (d), and/or
(e) shall, to the extent possible, be equal to the net amount that would have
been allocated to the Capital Account of each Member pursuant to the provisions
of this Article VIII if the special allocations required by Sections 8.2(a),
(b), (c), (d), and/or (e) hereof had not occurred.
8.3 INTENTIONALLY OMITTED.
8.4 DISTRIBUTIONS. Except as provided in Section 12.3, all Company Net
Cash Flow, Capital Proceeds, or other cash or property shall be distributed at
least quarterly, after payment of debts of the Company to the extent required
(including the payment of debts to Members) and the setting aside of any
Reserves which the Members deem reasonably necessary for contingent, unforeseen
or unmatured Company obligations, to the Members in the same manner as Net
Profits and Net Losses are allocated as set forth in Section 8.1.
8.5 LIMITATION UPON DISTRIBUTIONS. No distribution shall be declared
and paid unless, after the distribution is made, the then fair market value of
the assets of the Company are in excess of all liabilities of the Company,
except liabilities to Members on account of their contributions.
8.6 PRIORITY AND RETURN OF CAPITAL. Except as may be expressly provided
in this Article VIII, no Member or assignee shall have priority over any other
Member or assignee, either as to the return of Capital Contributions or as to
Net Profits, Net Losses or distributions; provided that this Section shall not
apply to loans (as distinguished from Capital Contributions) which a Member has
made to the Company.
8.7 ACCOUNTING PRINCIPLES. The profits and losses of the Company shall
be determined in accordance with generally accepted accounting principles
applied on a consistent basis.
8.8 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall be
entitled to interest on its Capital Contribution or to return of its Capital
Contribution, except as otherwise specifically provided for herein.
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8.9 ACCOUNTING PERIOD. The Company's accounting period shall be the
calendar year.
8.10 RETURNS AND ELECTIONS. The Manager shall cause the preparation and
timely filing of all tax returns required to be filed by the Company pursuant to
the Code and all other tax returns deemed necessary and required in each
jurisdiction in which the Company does business. Copies of such returns, or
pertinent information therefrom, shall be furnished to the Members within a
reasonable time after the end of the Company's Fiscal Year.
All elections permitted to be made by the Company under federal or
state tax laws shall be made by the Manager with the prior approval and
direction of the Members.
8.11 DISTRIBUTIONS IN KIND. No Member shall be entitled to demand and
receive property other than cash in return for his Capital Contributions to the
Company. No Company assets shall be distributed in kind except as and in such
manner as may be specifically agreed and approved by the Members. The amount by
which the fair market value of any property to be distributed in kind to the
Members exceeds or is less than the tax basis of such property shall, to the
extent not otherwise recognized by the Company, be taken into account in
computing Net Profits and Net Losses of the Company for purposes of allocations
and distributions to the Members under this Article VIII.
ARTICLE IX
ASSIGNMENTS AND TRANSFERS
-------------------------
9.1 GENERAL. Except for the pledge and assignment by Black Hawk to
Diversified of its Membership Interest and as otherwise specifically provided
herein, neither a Member nor an assignee shall have the right to:
(a) sell, assign, transfer, exchange, pledge or otherwise
transfer for consideration, (collectively, "sell" or "sale"), or
(b) gift, bequeath or otherwise transfer for no consideration
whether or not by operation of law, including without limitation, in the case of
Bankruptcy (collectively "gift")
all or any part of its Membership Interest. Each Member hereby acknowledges the
reasonableness of the restrictions on sale and gift of Membership Interests
imposed by this Operating Agreement in view of the unique terms, the Company
purposes and the relationship of the Members. Accordingly, the restrictions on
sale and gift contained herein shall be specifically enforceable. Any attempt to
effect a sale or gift of a Membership Interest in contravention of this Section
9.1 shall be deemed null and void.
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9.2 NO ASSIGNMENT OR TRANSFER IN ABSENCE OF UNANIMOUS CONSENT.
(a) Notwithstanding anything contained herein to the contrary,
except Sections 12.1(c) and (d) below, no sale or gift of a Membership Interest
to a proposed assignee which is not a Member immediately prior to the sale or
gift shall be permitted or shall be effective without the prior Consent of all
of the remaining Members, which Consent may be given or withheld in the sole and
absolute discretion of such Members; provided, however, (x) each of
Entertainment or Diversified may assign its rights hereunder, in whole or in
part, to one or more corporations, limited liability companies, partnerships,
trusts or other entities which are under common control with or control through
equity ownership and/or voting control by, Entertainment, Diversified or Xxxxxx;
it being acknowledged that (i) any entity managed by Xxxxxx Entertainment Ltd.
("JEL") or Xxxxxx, (ii) any entity in which either of JEL or Xxxxxx is one of
the trustees and/or one of the beneficiaries or (iii) any entity in which either
JEL or Xxxxxx beneficially owns 15% or more of the outstanding equity securities
constitutes common control and (y) Black Hawk may assign its rights hereunder,
in whole or in part, to one or more corporations, limited liability companies,
partnerships, trusts or other entities which are wholly-owned by Black Hawk.
(b) Further notwithstanding anything contained herein to the
contrary, notwithstanding the Consent of the remaining Members to the sale or
gift of a Membership Interest to an assignee in accordance with Section 9.2(a)
above, no assignee (other than a permitted assignee of Entertainment or
Diversified as described in 9.2(a)) which is not a Member immediately prior to
the sale or gift shall have any right to exercise any rights as a Member, to
participate in the management of the business and affairs of the Company or to
become a Member without the further Consent of all of the remaining Members.
Such assignee shall have only the rights of an assignee under Section 7-80-702
of the Act.
(c) No assignment or transfer of a Member's interest in the
Company shall be effective unless and until Notice (including the name and
address of the proposed assignee and the date of such transfer) has been
provided to the Company and the non-transferring Member(s).
(d) Upon and contemporaneously with any sale or gift of a
Transferring Member's Membership Interest in the Company which does not at the
same time transfer the balance of the rights associated with the Membership
Interest transferred by the Transferring Member (including, without limitation,
the rights of the Transferring Member to participate in the management of the
business and affairs of the Company), all remaining rights and interests
otherwise retained by the Transferring Member which immediately prior to such
sale or gift were associated with the transferred Membership Interest shall
lapse.
(e) The remaining Members may require the Selling Member or
Gifting Member and the proposed assignee to execute, acknowledge and deliver to
the remaining Members such instruments of transfer, assignment and assumption
and such other
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certificates, representations and documents, and to perform all such other acts
which the remaining Members may deem necessary or desirable to:
(i) constitute the assignee as a Member, donee or
successor-in-interest as such;
(ii) confirm that the Person desiring to acquire an interest
or interests in the Company, or to be admitted as a Member, has
accepted, assumed and agreed to be subject and bound by all of the
terms, obligations and conditions of this Operating Agreement, as the
same may have been further amended (whether such Person is to be
admitted as a new Member or will merely be an assignee);
(iii) preserve the Company after the completion of such
sale, transfer, assignment, or substitution under the laws of each
jurisdiction in which the Company is qualified, organized or does
business;
(iv) maintain the status of the Company as a partnership for
federal tax purposes; and
(v) assure compliance with any applicable state and federal
laws including securities laws and regulations.
9.3 EFFECTIVE DATE. Any sale or gift of a Membership Interest or
admission of a Member in compliance with this Article IX shall be deemed
effective as of the later of the last day of the calendar month in which the
remaining Members' Consent thereto was given (if such Consent is required) or
such date that the assignee complies with Section 9.2. The Transferring Member
agrees, upon request of the remaining Members, to execute such certificates or
other documents and perform such other acts as may be reasonably requested by
the remaining Members from time to time in connection with such sale, transfer,
assignment, or substitution.
9.4 INDEMNITY. The Transferring Member hereby indemnifies the Company
and the remaining Members against any and all loss, damage or expense
(including, without limitation, reasonable attorney's fees and tax liabilities
or loss of tax benefits) arising directly or indirectly as a result of any
transfer or purported transfer in violation of this Article IX.
ARTICLE X
INDEMNIFICATION AND DAMAGES
---------------------------
10.1 INDEMNITY OF THE MANAGER, MEMBERS OF THE POLICY BOARD, EMPLOYEES
AND OTHER AGENTS. To the maximum extent permitted under the Act, the Company
shall indemnify the Manager, members of the Policy Board and the Members and
make advances
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for expenses to the maximum extent permitted under the Act. The Company shall
indemnify its employees and other agents who are not managers to the fullest
extent permitted by law, provided that such indemnification in any given
situation is approved by the Members. The Manager, the members of the Policy
Board and the Members (and their respective officers, directors, employees and
agents) shall be indemnified by the Company from any liability resulting from
any act omitted or performed by them in good faith on behalf of the Company and
in a manner reasonably believed by them to be within the scope of the authority
conferred upon them by this operating Agreement and in the best interest of the
Company; provided, however, that any indemnity under this Article X shall be
provided out of and be limited to the extent of the Company assets only and
shall not include any liabilities arising under the Securities Act of 1933, and
no Member shall have any personal liability therefor.
10.2 LIABILITY FOR ACTS AND OMISSIONS. No Manager or Member (and no
officer, director, employee or agent of a Manager or a Member) shall be liable,
responsible or accountable, in damages or otherwise, to the Company or the
Members for or as a result of any act, omission or error in judgment which was
taken, omitted or made by them in good faith on behalf of the Company and in a
manner reasonably believed by them to be within the scope of the authority
granted to them by this Operating Agreement and in the best interest of the
Company, except for fraud, deceit, willful misconduct, gross negligence or a
knowing violation of the law. The Manager or Member may consult with such legal
or other professional counsel as it may select. Any action taken or omitted by
it in good faith reliance on, and in accordance with, the opinion or advice of
such counsel shall be full protection and justification to it with respect to
the action taken or omitted.
10.3 REIMBURSEMENT. If (i) a Member ("Paying Member") shall pay any
amount on behalf of or for the account of the Company with respect to any
liability, obligation, undertaking, damage or claim for which the Company shall
or may (pursuant to contract or applicable law) be liable or responsible, or
with respect to making good any loss or damage sustained by, or paying any duty,
costs, claim or damage incurred by, the Company, and (ii) such payment was made
by the Paying Member because the Members authorized such payment by the Paying
Member, then (except as otherwise expressly provided in this Operating
Agreement) the Paying Member shall have a right of contribution from the Members
and the other Members shall reimburse the Paying Member for such amount as shall
have been so paid thereby in accordance with such other Members' proportionate
Membership Interests in the Company.
10.4 DAMAGES. In the event that a Member violates or breaches any of
its representations, warranties or agreements under this Operating Agreement,
becomes a Resigning Member, or is terminated as a result of its Bankruptcy,
resignation, expulsion or dissolution, then, in any such event, such Member
shall be liable to the Company and to the other Members for damages incurred by
the Company and such other Members and arising from such violation, breach,
resignation, Bankruptcy, expulsion or dissolution. Except as otherwise provided
in this Operating Agreement, the foregoing remedy is in addition to and
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not in limitation of the right of the Company and the other Members to recover
damages resulting from any default or breach by a Member hereunder and any other
right or remedy of the Company and the other Members at law or in equity. Each
Member acknowledges that the damages suffered by the Company may include
expenses relating to the Company's efforts to exercise its rights and remedies
upon such breach or default. To the extent required to recover the damages
suffered by the Company, the Company and the other Members shall have the right
to set-off any cash or property otherwise payable on account of the defaulting
Member's Membership Interest and to retain such cash or property. Except as
otherwise provided in this Operating Agreement, the selection of which remedy or
remedies to pursue will be made is the sole and absolute discretion of the other
Members, and the pursuit of any remedy shall not operate as a waiver of the
rights of such Members or the Company to pursue any other remedy against the
defaulting Member.
ARTICLE XI
REGULATORY CONCERNS AND MANDATORY REDEMPTION EVENTS
---------------------------------------------------
11.1 GOVERNMENT REGULATIONS.
(a) The parties hereto acknowledge that the proposed business
of the Project is subject to stringent government regulation including
supervision by the Division and the Commission.
(b) The parties also acknowledge that Entertainment and
certain of its Affiliates are presently seeking appropriate gaming licenses from
the Division (Xxxxxx has already obtained a key employee license), and that no
assurance can be given that such licenses will be issued or when such licenses
may be issued.
(c) If any license, registration, application or other form of
required governmental filing for the Project or otherwise, is denied, reserved,
revoked or suspended for any reason, including but not limited to the
participation of a person unacceptable or unsuitable to the Division and the
Commission or other Governmental Authority (as defined in the Purchase
Agreement), the affected party hereto (each of Black Hawk, Entertainment,
Diversified or the affected Affiliate) shall take all measures necessary to
remedy or correct the deficiency. In the case where the Division, the Commission
or other Governmental Authority denies or reserves approval for gaming
operations or other business operations of a party hereto because of the
participation of an unacceptable or unsuitable person, that party shall
forthwith expel such person(s) and substitute a person(s) acceptable to the
Division, the Commission or other Governmental Authority, or otherwise take
measures to remedy or correct the deficiency.
11.2 CASINO INVESTIGATION.
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(a) In the event that, on or before January 1, 1998, the
Commission has not approved a retail gaming license for the Project casino
("Licensing Approval") and, on or before such date, Entertainment, in its sole
but reasonable discretion, has reason to believe that the Project casino will
not receive such Licensing Approval and such failure to obtain Licensing
Approval is attributable to the Division's and the Jefferson County, Colorado
District Attorney's office's investigation into check cashing and bad check
collection practices of the Xxxxxx Hotel Casino of which Black Hawk is the
general manager and a joint venture participant and/or certain of the Xxxxxx
Hotel Casino's personnel and agents (the "Casino Investigation"), Entertainment
shall have the right and option to acquire (the "Purchase Right") all of Black
Hawk's interest in the Company, except that portion that is actually transferred
to the Holder (as defined below) in full satisfaction of the Note as described
in Section 11.2(b).
(b) Entertainment may elect such Purchase Right by delivering
Notice of such election to Black Hawk on or before March 31, 1998. The purchase
price for the Purchase Right shall be an amount equal to 90% of the fair market
value of such interest determined as of the date Entertainment delivered its
Notice. The fair market value of such interest shall be determined by an
Appraisal. The purchase price for the Purchase Right shall be payable by
Entertainment to Black Hawk pursuant to a promissory note which shall be payable
over a ten year period and which shall bear interest at a rate equal to 2% in
excess of the prime rate of interest as announced from time to time by the Wall
Street Journal or shall be discounted (using the same rate) to present value if
an earlier payoff is required under the Colorado Gaming Laws. The closing of the
Purchase Right shall occur on a date mutually agreed to by Entertainment and
Black Hawk, which date shall be within 15 days following the completion of the
Appraisal. At such time as Entertainment provides Notice of the election of its
Purchase Right, Black Hawk shall be deemed to be in default of the Note. For
four months thereafter or such longer period as the parties shall agree, so long
as the Appraisal and purchase process is ongoing and not stayed, Diversified or
any other related entity that is a Member and is holding the Note by permitted
assignment from Diversified (collectively, the "Holder") shall take no
enforcement action on the Note (other than the collection of accrued but unpaid
interest thereon and sending any notices or filing any claims it deems
appropriate.) Concurrently with the closing of the Purchase Right, Black Hawk
shall transfer to the Holder in exchange for the cancellation of the Note, and
the Holder shall accept in full satisfaction of its rights under the Note, the
following property (collectively, the "Note Satisfaction Property"): 40% of each
of Black Hawk's (a) Capital Interest, (b) Membership Interest, and (c) interest
in Net Profits, Net Losses, and Net Cash Flow of the Company; together with all
membership rights associated with any of the foregoing, and all proceeds and
products of any of the foregoing. On the Closing Date, Black Hawk shall cease to
be a Member, shall cease to have any management function in the Company, and the
members of the Policy Board appointed by it shall be terminated and replaced by
designees of the Holder and Entertainment.
(c) In the event Entertainment has exercised the Purchase
Right, within two years of the opening of the Project casino, Black Hawk shall
have the right to reacquire
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its 75% Membership Interest in the Company on the terms and subject to the
conditions hereinafter set forth. Provided Black Hawk can prove to
Entertainment, in Entertainment's sole but reasonable discretion, that the
involvement of Black Hawk in the Project will not detrimentally affect the
Project casino and provided Black Hawk obtains Licensing Approval, Black Hawk
shall have the right and option to reacquire its 75% Membership Interest in the
Company (the "Repurchase Right"). Black Hawk may elect such Repurchase Right by
delivering Notice to Entertainment of the exercise of such Repurchase Right. The
purchase price for the Repurchase Right representing 60% of its Membership
Interest shall be an amount equal to the purchase price for the Purchase Right,
plus an amount equal to Black Hawk's proportionate share of any additional
capital contributions made to the Company from and after the closing of the
Purchase Right. In addition, the purchase price for the Repurchase Right
representing 40% of its Membership Interest shall be 1,142,857 Shares (as
adjusted in accordance with Section 2(e) of the Purchase Agreement) to be issued
by Black Hawk to the Holder. The closing of the Repurchase Right shall occur on
a date mutually agreed to by Black Hawk and Entertainment, which date shall be
within 30 days after the date which Black Hawk gave Notice to Entertainment and
Holder of the Repurchase Right and at such time, the economic and control
position of Black Hawk, Entertainment and Holder, as to both the Company and
Black Hawk, shall be made to be equivalent to what would have been the positions
of such parties immediately following the Conversion Date.
(d) The parties acknowledge that the redemption provisions
contained in this Article XI and the terms hereof (including price and payment
terms) are subject to the Colorado Gaming Laws (as defined below) and the
discretion of the Commission and the Division.
11.3 AUTOMATIC DIVESTITURE.
(a) If, prior to the issuance by the Commission of appropriate
gaming licenses to the Company for the Project casino, any of the following
occur to a Member, all interests of that Member (the "Affected Member") will
automatically and immediately terminate, and the Affected Member will cease to
be a Member, all subject only to any contrary requirements of the Colorado
Gaming Laws (as defined below.) The divestiture events are as follows:
(i) The Affected Member is charged with or convicted
of any criminal offense, if a conviction of the offense in question would,
pursuant to the Colorado gaming laws (C.R.S. Section 12-47.1-101 et seq., as
the same may be amended or supplemented from time to time, together with the
regulations promulgated thereunder -- collectively, the "Colorado Gaming Laws")
disqualify the Affected Member from obtaining a gaming license. However, where
a Member is only charged with a criminal offense and not convicted, and where
the Commission and the Division upon request have agreed to defer pursuing any
action based upon such charges against the Company's application for a gaming
license, or where any such actions of the Division or Commission are subject to
a
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stay order, then the Affected Member's Membership Interest shall not be subject
to divestiture under this subdivision (i).
(ii) The Affected Member, or any Entity that it owns
or controls, incurs a revocation of any Colorado gaming or alcohol beverage
license, and it is determined through arbitration pursuant to Section 15.2
below, that such revocation has a material adverse affect upon the issuance to
the Company of a gaming or alcohol beverage license.
(iii) The Division issues a formal recommendation
against the issuance to the Company of an operator or retail gaming license,
which recommendation cites the participation of the Affected Member as a
material factor in the decision.
(iv) The Commission denies the issuance to the
Company of an operator or retail gaming license, citing the participation of the
Affected Member as a factor in the decision, or the Commission conditions the
issuance of a retail gaming license on the Company removing the Affected Member
in the Company or its casino operations.
(v) The Company's alcoholic beverage license
applications are denied by either the state or local licensing authority, citing
the participation of the Affected Member as a material factor in the decision.
(vi) The Affected Member is found to be an
"unsuitable person" within the meaning of the Colorado Gaming Laws.
(vii) The Commission or the Division advise the
Company in writing, or it is otherwise determined through arbitration pursuant
to Section 15.2 below, that a decision on the Company's gaming license
application is being delayed beyond the later of (x) one year following the
filing of the Company's application for a retail gaming license or (y) January
1, 1998, and the Company is advised before or after said date that the sole
reason for further delay is the participation of or concerns about the Affected
Member.
(b) The Company shall continue in existence notwithstanding
the automatic termination of any Member pursuant to Section 11.3(a) above,
notwithstanding any provision of this Operating Agreement to the contrary. The
occurrence of any of the events enumerated in Section 11.3(a) above, if the
Affected Member is Black Hawk, shall constitute an Event of Default under the
Note, and the Note shall automatically be accelerated, all without notice or
other action of any kind by the Holder. The automatic termination of the
Membership Interest shall cause the percentage Membership Interest of the Holder
to increase by an amount equal to 40% of the percentage Membership Interest of
Black Hawk as it existed immediately prior to its automatic termination. For
example, if Diversified is the Holder, Diversified's percentage Membership
Interest would increase to 31% (1% + the product of (75% x 40%)). The percentage
Membership Interest of Entertainment shall increase by an amount equal to 60% of
the percentage Membership
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Interest of Black Hawk as it existed immediately prior to its automatic
termination. For example, Entertainment's Membership Interest would increase to
69% (24% + the product of (75% x 60%)). The Company shall be liable to Black
Hawk for the value of its terminated Membership Interest as follows. The Company
shall pay in full for 40% of the terminated Membership interest by canceling the
Note, which the Holder shall immediately contribute to the Company to enable the
Company to make payment. The Company shall pay in full for the remaining 60% of
the terminated Membership Interest as follows: the Company and Black Hawk shall
determine the fair market value of that portion of the Membership Interest by an
Appraisal. Upon determination, the Company shall deliver a note (the "Payoff
Note") to Black Hawk for 90% of the value found by the Appraisal. The Payoff
Note shall be payable over a ten year period and shall bear interest at a rate
equal to 2% in excess of the prime rate of interest as announced from time to
time by the Wall Street Journal or shall be discounted (using the same rate) to
present value if an earlier payoff is required under the Colorado Gaming Laws.
Entertainment agrees to contribute to the Company, in time for payments to be
made under the Payoff Note, additional capital in an amount equal to the
payments to be made, which additional capital shall be used solely for that
purpose. On request of Black Hawk, Entertainment will also execute a guaranty of
the Payoff Note, and any payments made pursuant to the guaranty will be deducted
from the additional capital requirements that it would otherwise have. In the
event the Affected Member is either Entertainment or Diversified, both will be
treated as being the Affected Member. The percentage Membership Interest of
Black Hawk shall increase by an amount equal to the percentage Membership
Interest of both Entertainment and Diversified as such Membership Interests
existed immediately prior to their automatic termination. The Company shall be
liable to the Affected Member (both Entertainment and Diversified) for the value
of their terminated Membership Interest by the Appraisal method and issuance of
the Payoff Note in the same manner as described above. Black Hawk agrees to
contribute to the Company, in time for payments to be made under the Payoff
Note, additional capital in an amount equal to the payments to be made, which
additional capital shall be used solely for that purpose. On request of the
Affected Member, Black Hawk will also execute a guaranty of the Payoff Note, and
any payments made pursuant to the guaranty will be deducted from the additional
capital requirements that it would otherwise have. On the date of automatic
termination pursuant to this Section 11.3(b), the Affected Member shall cease to
be a Member, shall cease to have any management function in the Company and the
members of the Policy Board appointed by it shall be terminated and replaced by
designees of the other Member(s) of the Company.
(c) Subject only to the contrary requirements of the Colorado
Gaming Laws, the Affected Member pursuant to this Section 11.3 shall have, for a
period of two years from and after the event causing the involuntary
termination, the right to reacquire its Membership Interest on the same terms
described above in Section 11.2(c); provided, however, that if Entertainment or
Diversified is the Affected Member, no Shares shall be issued as part of the
purchase price for the repurchase right described in this Section 11.3(c) (the
"11.3(c) Repurchase Right") and Diversified and Entertainment shall have the
right to reacquire 100% of their respective Membership Interests that was
divested by paying to
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Black Hawk an amount equal to what Black Hawk paid for such Membership
Interests, plus an amount equal to their proportionate share of any additional
capital contributions made to the Company from and after the date of the event
causing the involuntary termination. The closing of the 11.3(c) Repurchase Right
shall occur on a date mutually agreed to by Black Hawk, Diversified and
Entertainment, which date shall be within 30 days after the date which
Diversified and Entertainment gave Notice to Black Hawk of the 11.3(c)
Repurchase Right and at such time, the economic and control position of Black
Hawk, Entertainment and Diversified, as to both the Company and Black Hawk,
shall be made to be equivalent to what would have been the positions of such
parties immediately following the Conversion Date.
11.4 RIGHT OF FIRST PARTICIPATION. In the event that the right of first
participation asserted by Black Hawk's partners at the Xxxxxx Hotel Casino is
determined in a final adjudication (whether by arbitration or declaratory
judgment action or otherwise), and the outcome of such determination provides
Black Hawk's partners at the Xxxxxx Hotel Casino with a 50% Membership Interest
in the Company, thereafter, Entertainment shall have the right to acquire 50% of
Black Hawk's then Membership Interest. If such determination provides Black
Hawk's partners with a 25% interest in the Company, thereafter Entertainment
shall have the right to acquire 25% of Black Hawk's then Membership Interest.
The price and payment terms for such Membership Interest shall be as agreed to
by the parties.
11.5 ADDITION OF MEMBER. Notwithstanding anything to the contrary
contained in this Article XI, if, upon the occurrence of any event described in
this Article XI, there is only one remaining Member, then such Member shall be
entitled to cause one or more additional persons to become members in order to
enable the existence of the Company to continue.
ARTICLE XII
DISSOLUTION AND TERMINATION
---------------------------
12.1 DISSOLUTION.
(a) The Company shall be dissolved upon the occurrence of any
of the following events:
(i) expiration of the period fixed for the duration of the
Company pursuant to Section 2.6 hereof;
(ii) the unanimous written agreement of all Members; or
(iii) upon the death, retirement, resignation, removal,
expulsion, Bankruptcy or dissolution of a Member or occurrence of any
other event which
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terminates the continued Membership of a Member in the Company (a
"Withdrawal Event"), unless the business of the Company is continued
by the consent of all the remaining Members within 90 days after the
Withdrawal Event.
(b) As soon as possible following the occurrence of any of the
events specified in this Section 12.1 effecting the dissolution of the Company,
the Liquidator shall execute a certificate of dissolution in such form as shall
be prescribed by the Act and the Colorado Secretary of State and file the same
with the Colorado Secretary of State's office.
(c) If a Member who is an individual dies or a court of
competent jurisdiction adjudges him to be incompetent to manage his person or
his property, the Member's executor, administrator, guardian, conservator, or
other legal representative ("Successor") may exercise all of the Member's rights
for the purpose of settling his estate or administering his property, provided,
however, that for purposes of Section 9.2 and Section 12.1(a) (iii), the
Successor shall not be considered a Member and shall have no right to vote,
approve or consent to any matter pursuant to such provisions.
(d) Except as expressly permitted in this Operating Agreement,
a Member shall not voluntarily withdraw or resign or take any other voluntary
action which directly causes a Withdrawal Event. Unless otherwise approved by
all of the other Members, a Member who attempts to withdraw or resign (a
"Resigning Member") or whose Membership Interest is otherwise terminated by
virtue of a Withdrawal Event, regardless of whether such Withdrawal Event was
the result of a voluntary act by such Resigning Member, shall become an assignee
and be entitled to receive only those distributions to which such Resigning
Member would have been entitled had such Resigning Member remained a Member (and
only at such times as such distribution would have been made had such Resigning
Member remained a Member). Damages for breach of this Section 12.1(d) may be
offset against distributions by the Company to which the Resigning Member would
otherwise be entitled.
(e) Notwithstanding anything to the contrary contained in this
Article 12, if, upon the occurrence of any event described in this Section 12.1,
there is only one remaining Member, then such Member shall be entitled to cause
one or more additional persons to become Members in order to enable the
existence of the Company to continue.
12.2 EFFECT OF FILING OF CERTIFICATE OF DISSOLUTION. Upon the filing
with the Colorado Secretary of State of a certificate of dissolution, the
Company shall cease to carry on its business, except insofar as may be necessary
for the winding up of its business or as may be otherwise permitted under the
Act, but its separate existence shall continue until the winding up of its
affairs is completed.
12.3 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.
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(a) Upon dissolution, an accounting shall be made by the
Company's independent accountants of the accounts of the Company and of the
Company's assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Liquidator shall immediately
proceed to wind up the affairs of the Company.
(b) If the Company is dissolved and its affairs are to be
wound up, the Liquidator shall:
(i) Sell or otherwise liquidate all of the Company's assets
as promptly as practicable (except to the extent the Members may
determine to distribute any assets to the Members in kind);
(ii) Allocate any Net Profit or Net Loss resulting from such
sales to the Members' and assignees' in accordance with Section 8.1
hereof;
(iii) Discharge all liabilities of the Company, including
liabilities to Members and assignees who are also creditors, to the
extent otherwise permitted by law, other than liabilities to Members
and assignees for distributions and the return of capital, and
establish such Reserves as may be reasonably necessary to provide for
contingent liabilities of the Company (for purposes of determining the
Capital Accounts of the Members and assignees, the amounts of such
Reserves shall be deemed to be an expense of the Company); and
(iv) Distribute the remaining assets in the following order:
(1) If any assets of the Company are to be
distributed in kind, the net fair market value of such assets
as of the date of dissolution shall be determined by Appraisal
or by agreement of the Members. Such assets shall be deemed to
have been sold as of the date of dissolution for their fair
market value, and the Capital Accounts of the Members and
assignees shall be adjusted pursuant to the provisions of
Article VIII and Section 7.4 of this Operating Agreement to
reflect such deemed sale.
(2) The positive balance (if any) of each
Member's and assignees Capital Account (as determined after
taking into account all Capital Account adjustments for the
Company's taxable year during which the liquidation occurs)
shall be distributed to the Members, either in cash or in
kind, with any assets distributed in kind being valued for
this purpose at their fair market value. Any such
distributions to the Members in respect of their Capital
Accounts shall be made in accordance with the time
requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of
the Treasury Regulations.
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(c) Notwithstanding anything to the contrary in this operating
Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g)
of the Treasury Regulations, if any Member has a Deficit Capital Account (after
giving effect to all contributions, distributions, allocations and other Capital
Account adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member's Capital Account shall
not be considered a debt owed by such Member to the Company or to any other
Person for any purpose whatsoever.
(d) Upon completion of the winding up, liquidation and
distribution of the assets, the Company shall be deemed terminated.
(e) The Liquidator shall comply with any applicable
requirements of applicable law pertaining to the winding up of the affairs of
the Company and the final distribution of its assets.
12.4 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as
provided by law or as expressly provided in this operating Agreement, upon
dissolution, each Member shall look solely to the assets of the Company for the
return of its Capital Contribution. If the Company property remaining after the
payment or discharge of the debts and liabilities of the Company is insufficient
to return the cash contribution of one or more Members, such Member or Members
shall have no recourse against any other Member.
ARTICLE XIII
MEETINGS OF MEMBERS
-------------------
13.1 MEETINGS OF MEMBERS.
(a) ANNUAL MEETINGS. An annual meeting of Members may be held
if so desired, and if held shall be at such time and on such date in the first
three months of each year (commencing in 1997) as may be fixed by the Manager
and stated in the notice of the meeting.
(b) SPECIAL MEETINGS. Special meetings of the Members shall be
called upon the written request of the Manager, acting either with or without a
meeting, or by any Member. Calls for such meetings shall specify the purposes
thereof. No business other than that specified in the call shall be considered
at any special meeting.
(c) NOTICES OF MEETINGS. Unless waived, written notice of each
annual or special meeting stating the time, place, and the purposes thereof
shall be given by personal delivery or by mail to each Member of record entitled
to vote at or entitled to notice of the meeting, not more than sixty (60) days
nor less than seven (7) days before any such meeting. If mailed, such notice
shall be directed to the Member at its address as the same appears
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upon the records of the Company. Any Member, either before or after any meeting,
may waive any notice required to be given by law or under this Agreement. The
giving of notice shall be deemed to have been waived by any Member who shall
participate in any annual or special meeting.
(d) PLACE OF MEETINGS. Meetings of Members shall be held at
the principal office of the Company unless the Manager determines that a meeting
shall be held at some other place within or without the State of Colorado and
causes the notice thereof to so state.
(e) QUORUM. Members holding a Required Interest present in
person or by proxy, shall constitute a quorum for the transaction of business to
be considered at such meeting; provided, however, that no action required by law
or by the Articles or this Operating Agreement to be authorized or taken by the
holders of a designated proportion of the Membership Interests may be authorized
or taken by the holders of a designated proportion of the Membership Interests
may be authorized or taken by a lesser proportion. The holders of a majority of
the voting Membership Interests represented at a meeting, whether or not a
quorum is present, may adjourn such meeting from time to time, until a quorum
shall be present.
(f) RECORD DATE. The Manager may fix a record date for any
lawful purpose, including without limiting the generality of the foregoing, the
determination of Members entitled to (i) receive notice of or to vote at any
meeting, (ii) receive payment of any distribution, (iii) receive or exercise
rights of purchase of or subscription for, or exchange or conversion of,
certificates or other securities, subject to any contract right with respect
thereto, or (iv) participate in the execution of written consents, waivers or
releases. Said record date shall not be more than sixty (60) days preceding the
date of such meeting, the date fixed for the payment of any distribution or the
date fixed for the receipt or the exercise of rights, as the case may be. If a
record date shall not be fixed, the record date for the determination of Members
who are entitled to notice of, or who are entitled to vote at, a meeting of
Members, shall be the close of business on the date next preceding the day on
which notice is given, or the close of business on the date next preceding the
day on which the meeting is held, as the case may be.
(g) PROXIES. A person who is entitled to attend a Members'
meeting, to vote thereat, or to execute consents, waivers or releases, may be
represented at such meeting or vote thereat, and execute consents, waivers and
releases, and exercise any of its other rights, by proxy or proxies appointed by
a writing signed by such person.
(h) WRITTEN ACTION. Any action may be decided or approved,
without notice, by written action signed by all of the Members.
ARTICLE XIV
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DEBT FINANCING
--------------
14.1 It is contemplated by the parties that certain Affiliates of
Entertainment will be providing guarantees for the Company's debt financing with
Xxxxx Fargo Bank, N.A. or such other lenders as may be selected by the Company.
In the event that Entertainment's Affiliates provide such guarantees, the
Company shall pay Entertainment an annual fee in an amount equal to 2% of the
amount so guaranteed. The fee required to be paid pursuant to this Section 14.1
shall be paid on an annual basis in arrears on or before March 31.
Notwithstanding the foregoing, one-half of the fee payable for 1997 pursuant to
this Article XIV shall be deferred and paid in two (2) equal installments on or
before March 31, 1999 and March 31, 2000, respectively.
ARTICLE XV
MISCELLANEOUS PROVISIONS
------------------------
15.1 NOTICES. All Notices and communications required or permitted
under this Operating Agreement to be sent to the Members shall be expressed in
writing and delivered in person and sent and confirmed by certified or
registered mail, return receipt requested, or sent by overnight courier service
such as Federal Express, or sent by facsimile (receipt confirmed) to the Members
at the following addresses, or at such other addresses as the parties shall
designate by Notice to the other:
If to Black Hawk: Black Hawk Gaming &
Development Company, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, President
Fax No. (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Fax No. (000) 000-0000
If to Entertainment or
Diversified: c/x Xxxxxx Entertainment Ltd.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Fax No. (000) 000-0000
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with a copy to:
Xxxx Xxxxxx & Parks
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No. (000) 000-0000
15.2 ARBITRATION. If any dispute shall arise between the parties
pursuant to this Operating Agreement, such dispute shall be settled by
arbitration pursuant to this Section 15.2. In such event, either party hereto
may serve upon the other party a written notice demanding that the dispute be
resolved pursuant to this Section 15.2. To the extent that any provision herein
is inconsistent with any rule of the American Arbitration Association (the
"AAA"), this Agreement shall prevail. The dispute or claim shall be heard in
Chicago, Illinois by one (1) neutral arbitrator, if the parties can agree on the
selection of said arbitrator, or if unable to agree, each party shall select (1)
arbitrator and the two arbitrators chosen shall select the third arbitrator. If
the dispute shall be heard by three (3) arbitrators, one (1) arbitrator will be
selected by the party initiating the arbitration at the time of the submission
to arbitration. Within seven (7) days after submission, the other party will
select an arbitrator. Within seven (7) days after the first two (2) arbitrators
are chosen, the third arbitrator will be selected. The third arbitrator selected
shall not have any relationship to either of the parties. The arbitrators shall
apply the internal law of the State of Colorado. Said arbitrator(s) shall be
sworn faithfully and fairly to determine the question at issue. The
arbitrator(s) shall afford to the parties a hearing and the right to submit
evidence, with the privilege of cross examination and the right to compel
testimony by applying for subpoena powers to appropriate judicial authority, on
the question at issue, and shall, with all possible speed, make his/their
determination in writing and shall give notice to the parties hereto of such
determination. The concurring determination of the arbitrator, if heard by one,
or of any two of said three arbitrator(s) shall be binding upon the parties
hereto, or, in case no two of the arbitrators shall render a concurring
determination, then the determination of the third arbitrator appointed shall be
binding upon the parties hereto. The decision of the arbitrators shall be final
and binding upon the parties hereto and shall be enforceable in any court having
jurisdiction. Any arbitration shall be conducted in accordance with the then
prevailing Commercial Rules of the AAA, or the successor party thereto from time
to time in existence. The fees and expenses of the arbitrator(s) shall be
divided equally between the parties so involved. The parties shall each bear
their own expenses (including, but not limited to, attorneys' and witnesses'
fees and expenses) in any arbitration proceedings.
15.3 DEVELOPMENT FEE. The Company shall pay Entertainment or its
nominee the remaining portion of the development fee, which is estimated at
$370,000.
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15.4 XXXXXXXXXX AND RICH. Any amounts paid or to be paid to Xxxxxx X.
Xxxx or Xxx Xxxxxxxxxx pursuant to certain Settlement Agreements shall be
treated as expenses of the Company.
15.5 BOOKS OF ACCOUNT AND RECORDS. Proper and complete records and
books of account shall be kept or shall be caused to be kept by the Manager in
which shall be entered fully and accurately all transactions and other matters
relating to the Company's business in such detail and completeness as is
customary and usual for businesses of the type engaged in by the Company. Such
books and records shall be maintained as provided in Section 5.3. The books and
records shall at all times be maintained at the principal executive office of
the Company and shall be open to the reasonable inspection and examination of
the Members, assignees or their duly authorized representatives during
reasonable business hours.
15.6 APPLICATION OF COLORADO LAW. This Operating Agreement, and the
application and interpretation hereof, shall be governed exclusively by its
terms and by the laws of the State, and specifically the Act.
15.7 WAIVER OF ACTION FOR PARTITION. Each Member and assignee
irrevocably waives during the term of the Company any right that it may have to
maintain any action for partition with respect to the property of the Company.
15.8 AMENDMENTS. This Operating Agreement may not be amended except by
the written agreement of all of the Members. Further, without the Consent of the
Member or former Member, no amendment shall be adopted which prejudices the
rights of a Member or former Member from exercising any repurchase or similar
right described in this Operating Agreement.
15.9 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments and documents, and to
provide such information, necessary to comply with any laws, rules or
regulations, and to effectuate the provisions of this Operating Agreement.
15.10 CONSTRUCTION. Whenever the singular number is used in this
Operating Agreement and when required by the context, the same shall include the
plural and vice versa, and the masculine gender shall include the feminine and
neuter genders and vice versa.
15.11 HEADINGS AND PRONOUNS. The headings in this operating Agreement
are inserted for convenience only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Operating
Agreement or any provision hereof. All pronouns and only variations thereof
shall be deemed to refer to masculine, feminine, or neuter, singular or plural
as the identity of the Person or Persons may require.
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15.12 WAIVERS. The failure of any party to seek redress for violation
of or to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not constitute a waiver or prevent a subsequent act,
which would have originally constituted a violation, from having the effect of
an original violation.
15.13 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Operating Agreement are cumulative and the use of any one right or
remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
15.14 SEVERABILITY. If any provision of this Operating Agreement or the
application thereof to any Person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
15.15 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, and
permitted successors and assigns.
15.16 CREDITORS. None of the provisions of this Operating Agreement
shall be for the benefit of or enforceable by any creditor of the Company.
15.17 COUNTERPARTS. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
15.18 INVESTMENT REPRESENTATIONS. The undersigned Members and
assignees, if any, understand (i) that the Membership Interests evidenced by
this Operating Agreement have not been registered under the Securities Act of
1933, the Colorado or the Ohio Securities Act or any other state securities laws
(the "Securities Acts") because the Company is issuing these Membership
Interests in reliance upon the exemptions from the registrations requirements of
the Securities Acts providing for issuance of securities not involving a public
offering, (ii) that the Company has relied upon the fact that the Membership
Interests are to be held by each Member for investment, and (iii) that exemption
from registrations under the Securities Acts would not be available if the
Membership Interests were acquired by a Member with a view to distribution.
Accordingly, each Member and assignee hereby confirms to the Company
that such Member or assignee is acquiring the Membership Interests for such own
Member's or assignee's account, for investment and not with a view to the resale
or distribution thereof. Each Member and assignee agrees not to transfer, sell
or offer for sale any portion of the Membership Interests unless (i) there is an
effective registration or other qualification
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relating thereto under the Securities Acts, or (ii) the holder of Membership
Interests delivers to the Company an opinion of counsel, satisfactory to the
Company, that such registration or other qualification under such Act and
applicable state securities laws is not required in connection with such
transfer, offer or sale. Each Member and assignee understands that the Company
is under no obligation to register the Membership Interests or to assist such
Member or assignee in complying with any exemption from registration under the
Securities Acts if such Member or assignee should at a later date, wish to
dispose of the Membership Interest. Furthermore, each Member realizes that the
Membership Interests are unlikely to qualify for disposition under Rule 144 of
the Securities and Exchange commission unless such Member is not an "affiliate"
of the Company and the Membership Interest has been beneficially owned and fully
paid for by such Member for at least three years.
Prior to acquiring the Membership Interests, each Member and assignee
has made an investigation of the Company and its business and has had made
available to each other Member and assignee all information with respect thereto
which such other Member or assignee needed to make an informed decision to
acquire the Membership Interest. Each Member and assignee considers himself or
itself to possess experience and sophistication as an investor which are
adequate for the evaluation of the merits and risks of such Member's or
assignee's investment in the Membership Interest.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
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CERTIFICATE
-----------
The undersigned hereby agree, acknowledge and certify that the
foregoing Operating Agreement, consisting of 45 pages, excluding the Table of
Contents and attached Exhibits, constitutes the Operating Agreement of Black
Hawk/Xxxxxx Entertainment, LLC adopted by the Members of the Company as of
November 12, 1996.
MEMBERS: BLACK HAWK GAMING & DEVELOPMENT
COMPANY, INC.
By:/S/ XXXXXX X. XXXXXXXX
------------------------------------------------
Xxxxxx X. Xxxxxxxx, Chairman
BH ENTERTAINMENT LTD.
By: Xxxxxx Entertainment Ltd., its manager
By:/S/ XXXXX X. XXXXXXXXXX
------------------------------------------------
Title: VICE PRESIDENT
---------------------------------------------
DIVERSIFIED OPPORTUNITIES GROUP LTD.
By: Xxxxxx Entertainment Ltd., its manager
By:/S/ XXXXX X. XXXXXXXXXX
------------------------------------------------
Title: VICE PRESIDENT
---------------------------------------------
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