OPERATING AGREEMENT OF JEANCO, LLC February 9, 2007
TABLE OF CONTENTS
Page | ||||
ARTICLE 1 FORMATION |
1 | |||
1.1 Formation |
1 | |||
1.2 Intent |
1 | |||
1.3 Definitions |
1 | |||
ARTICLE 2 GENERAL PROVISIONS |
9 | |||
2.1 Name |
9 | |||
2.2 Principal Office and Place of Business |
9 | |||
2.3 Company Purpose |
9 | |||
2.4 Purpose Limited |
10 | |||
2.5 Statutory Compliance |
10 | |||
2.6 Term |
10 | |||
2.7 Agent for Service of Process |
10 | |||
2.8 No Payment of Individual Obligations |
10 | |||
2.9 Licensing |
10 | |||
2.10 Conduct of Business Through Single Purpose Entities |
11 | |||
ARTICLE 3 CAPITALIZATION |
11 | |||
3.1 Issuance of Units |
11 | |||
3.2 Initial Capital Contributions by the Members |
11 | |||
3.3 Additional Capital Contributions, Guarantees and Letters of Credit |
15 | |||
3.4 Failure to Make a Capital Contribution |
15 | |||
3.5 Additional Remedies for Failure to Make a Capital Contribution |
17 | |||
3.6 Member Loans |
17 | |||
3.7 No Further Capital Contributions |
17 | |||
ARTICLE 4 DISTRIBUTIONS |
18 | |||
4.1 Amount and Time of Distributions |
18 | |||
4.2 Distribution Upon Withdrawal |
18 | |||
4.3 Return of Capital |
18 | |||
4.4 The MGM Xxxx Distribution |
18 | |||
4.5 Acknowledgment of Liability for Taxes |
18 | |||
4.6 Tax Distributions |
18 | |||
ARTICLE 5 PROFITS AND LOSSES |
19 | |||
5.1 Profit Allocations |
19 | |||
5.2 Loss Allocations |
19 | |||
5.3 Allocation Rules |
19 | |||
5.4 Special Tax Allocations: Code Section 704(c) |
20 | |||
ARTICLE 6 MANAGEMENT |
20 | |||
6.1 Manager-Managed |
20 |
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TABLE OF CONTENTS
(Continued)
(Continued)
Page | ||||
6.2 Responsibilities, Rights and Powers of the Manager |
23 | |||
6.3 Member Acts |
25 | |||
6.4 Actions Requiring a Vote |
25 | |||
6.5 Filing of Documents |
27 | |||
6.6 Indemnification and Liability |
27 | |||
6.7 Compensation |
28 | |||
6.8 Amendment of Agreement. Any non-Defaulting Member may propose amendments to this Agreement |
28 | |||
6.9 Standard of Care |
29 | |||
6.10 Transactions with Affiliates |
29 | |||
6.11 Independent Activities |
29 | |||
6.12 Decision of the Managers |
30 | |||
6.13 Delegation by MGM Xxxx |
30 | |||
ARTICLE 7 THE MEMBERS |
30 | |||
7.1 Meetings of the Members |
30 | |||
7.2 Voting of the Members |
31 | |||
7.3 Other Business Interests of the Members |
31 | |||
7.4 Rights and Obligations of Members |
31 | |||
7.5 Defaulting Member |
32 | |||
ARTICLE 8 BOOKS, RECORDS, REPORTS AND ACCOUNTING |
33 | |||
8.1 Records |
33 | |||
8.2 Fiscal Year and Accounting |
34 | |||
8.3 Preparation of Tax Returns |
34 | |||
8.4 Tax Controversies |
35 | |||
8.5 Reports |
35 | |||
ARTICLE 9 TRANSFERS, WITHDRAWALS |
35 | |||
9.1 Restrictions on Transfers |
35 | |||
9.2 Permitted Transfers |
35 | |||
9.3 Conditions to Permitted Transfers |
36 | |||
9.4 Prohibited Transfers |
37 | |||
9.5 Rights of Unadmitted Assignees |
37 | |||
9.6 Distributions and Allocations in Respect of Transferred Units |
37 | |||
9.7 Withdrawal of a Member |
37 | |||
9.8 Right of First Offer and Drag Along Right |
38 | |||
ARTICLE 10 LIQUIDATION AND WINDING UP; MERGER |
39 | |||
10.1 Dissolution |
39 | |||
10.2 Continuation of the Company |
40 | |||
10.3 Liquidation |
40 |
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TABLE OF CONTENTS
(Continued)
(Continued)
Page | ||||
10.4 Liquidating Trust |
41 | |||
10.5 Deficit Capital Account |
41 | |||
10.6 Filings |
41 | |||
10.7 Merger |
41 | |||
10.8 Representations and Warranties of the Members |
42 | |||
ARTICLE 11 GAMING LAWS |
43 | |||
11.1 Gaming Licensing Matters |
43 | |||
11.2 Qualifications |
44 | |||
11.3 Additional Requirements |
44 | |||
ARTICLE 12 DISPUTE RESOLUTION |
44 | |||
12.1 Commencement of Mediation and Arbitration |
45 | |||
12.2 Mediation |
45 | |||
12.3 Rules of Arbitration |
45 | |||
12.4 Selection of Arbitrator |
45 | |||
12.5 Choice and Adoption of Law |
46 | |||
12.6 Place of Hearing |
46 | |||
12.7 Confidentiality |
46 | |||
12.8 Service of Process |
46 | |||
12.9 Form of Arbitrator’s Award |
46 | |||
12.10 Performance During Disputes |
46 | |||
12.11 Review of Arbitrator’s Award |
46 | |||
12.12 Discovery |
46 | |||
12.13 Costs of Arbitration and Attorneys’ Fees |
47 | |||
12.14 Joinder of Third Parties |
47 | |||
12.15 Issues involving Business Judgment |
47 | |||
ARTICLE 13 MISCELLANEOUS |
47 | |||
13.1 Governing Law |
47 | |||
13.2 Method of Providing Notices |
47 | |||
13.3 Severability |
48 | |||
13.4 Binding Effect |
48 | |||
13.5 Titles and Captions |
49 | |||
13.6 Pronouns and Plurals |
49 | |||
13.7 No Third Party Rights |
49 | |||
13.8 Time is of Essence |
49 | |||
13.9 Further Assurances |
49 | |||
13.10 Estoppel Certificates |
49 | |||
13.11 Schedules Included in Exhibits; Incorporation by Reference |
49 | |||
13.12 Amendments |
49 | |||
13.13 Counterparts |
49 | |||
13.14 Creditors |
49 |
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TABLE OF CONTENTS
(Continued)
(Continued)
Page | ||||
13.15 Entire Agreement |
49 | |||
13.16 Independent Legal Counsel |
50 | |||
13.17 Proceeding Expenses |
50 | |||
13.18 Specific Performance |
50 | |||
13.19 Non-Involvement of Certain Parties |
50 | |||
13.20 Waiver of Partition Right |
51 | |||
13.21 Interpretation |
51 |
iv
OF
JEANCO, LLC
THIS OPERATING AGREEMENT (the “Agreement”) of JEANCO, LLC (the “Company”) is
made and entered into effective as of February 9, 2007, by and between MGM JEAN, LLC, a Nevada
Limited Liability Company (“MGM Jean”) and JEANCO REALTY DEVELOPMENT, LLC (“JRD”), a Nevada
limited liability company, as members (the “Members”) and managers (individually, a
“Manager” or collectively, the “Managers”) of the Company.
ARTICLE 1
FORMATION
FORMATION
1.1 Formation. The Company has been formed or will be formed pursuant to the Nevada Limited
Liability Company Act (the “Act”) by filing of the Articles of Organization with the Nevada
Secretary of State. The parties agree to promptly execute all amendments of the Articles of
Organization and all other documents that are needed to enable the Members to accomplish all
filing, recording, publishing and other acts necessary or appropriate to comply with all
requirements for the formation and continuation of the Company under the Act.
1.2 Intent. The Members intend that the Company be operated as a “partnership” for
federal and state income tax purposes. No Member may take any action inconsistent with the express
intent of the parties hereto as set forth herein.
1.3 Definitions. The following terms used in this Agreement have the meanings described
below:
“Act” means the Nevada Limited Liability Company Act.
“Affiliate” means, with respect to the subject Person (a) any Person directly or
indirectly controlling, controlled by or under common control with the subject Person and (b) any
officer, director, partner, manager, member or trustee of either such Person. For purposes of this
definition, the terms “controlling,” controlled by,” or “under common control
with” shall mean the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person or entity, whether through the ownership of
voting securities, by contract or otherwise, or the power to elect the majority of the directors,
managers, general partners, or Persons exercising similar authority with respect to such Person or
entities. Notwithstanding anything to the contrary, “Affiliate” does not include Tracinda
Corporation and its affiliated (other than the Company and its Subsidiaries) and Persons not
controlled or managed by the Company that are associated with the Company in a business venture.
“Agreement” means this Operating Agreement, as it may be amended from time to time,
complete with all exhibits and schedules hereto.
“Appraisal Notice” is defined in Section 7.5(c).
“Appraised Value” is defined in Section 7.5(c).
“Arbitrator” is defined in Section 12.4.
“Assignee” is defined in Section 9.5.
“Available Cash Flow” means the Company’s gross cash proceeds from any source, except
amounts borrowed from Members, their Affiliates or third parties, less the portion thereof used to
pay or establish reserves for the Company’s ordinary and necessary expenses and fees in amounts and
for purposes set forth in the then Overall Approved Budget/Plan, principal and interest payments on
all Company debt (including Member Loans), capital improvements, replacements and contingencies,
all as reasonably determined by the Managers (taking into account, to the extent applicable,
amounts available to the Company from Company loan proceeds to pay off Company expenses).
Available Cash Flow shall not be reduced by depreciation, amortization or other similar non-cash
allowances, and shall be increased by any reductions in reserves which, when previously
established, reduced Available Cash Flow.
“Bankruptcy” means, with respect to a Person, the happening of any of the following:
(a) the making by such Person of a general assignment for the benefit of creditors;
(b) the filing by such Person of a voluntary petition in bankruptcy or the filing by such
Person of a pleading in any court of record admitting in writing an inability to pay debts as they
become due;
(c) the entry of an order, judgment or decree by any court of competent jurisdiction
adjudicating such Person to be bankrupt or insolvent;
(d) the filing by such Person of a petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any statute, law or
regulation;
(e) the filing by such Person of an answer or other pleading admitting the material
allegations of, or consenting to, or defaulting in answering, a bankruptcy petition filed against
such Person in any bankruptcy proceeding;
(f) the filing by such Person of an application or other pleading or any action otherwise
seeking, consenting to or acquiescing in the appointment of a liquidating trustee, receiver or
other liquidator of all or any substantial part of such Person’s properties;
(g) the commencement against such Person of any proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation which has not been quashed or dismissed within one hundred eighty (180)
days; or
(h) the appointment, without the consent or acquiescence of such Person of a liquidating
trustee, receiver or other liquidator of all or any substantial part of such Person’s
2
properties without such appointment being vacated or stayed within ninety (90) days and, if
stayed, without such appointment being vacated within 90 days after the expiration of any such
stay.
“Business Day” means any day other than Saturday, Sunday or any other day on which
commercial banks in Las Vegas, Nevada are authorized or required to close under the laws of the
State of Nevada or applicable federal law.
“Business Plan” is defined in Section 6.1(b)(i).
“Capital Contribution” means, with respect to any Unit Holder, the amount of money
contributed by that Unit Holder to the Company and, if property other than money is contributed,
the initial Gross Asset Value of such property, net of liabilities assumed or taken subject to by
the Company.
“Cloobeck Family” means Xxxxxxx X. Cloobeck and/or Xxxxxxx Cloobeck or their lineal
descendants.
“Code” means the Internal Revenue Code of 1986 (or successor thereto), as amended from
time to time.
“Company” means the limited liability company formed pursuant to this Agreement, as
such limited liability company may from time to time be constituted.
“Confidential Information” is defined in Section 7.4.
“Contribution Date” means the date on which any Member makes an Initial Capital
Contribution to the Company in accordance with the provisions of Section 3.2.
“Contribution Value” is defined in Section 3.2(a)(i).
“Default Interest Rate” means Prime Rate plus five percent (5%).
“Defaulting Member” means a Member that has committed an event of default as described
in Section 7.5.
“Delinquent Member” is defined in Section 3.4.
“Development Budget” is defined in Section 6.1(b)(iii).
“Development Business” is defined in Section 2.3(b).
“Development Business Manager” is defined in Section 6.1(a).
“Development Business Approved Budget/Plan” is defined in Section 6.1(b)(v).
“Development Business Operating Budget” is defined in Section 6.1(b)(iv).
3
“Disposing Member” is defined in Section 9.8.
“Disposition Notice” is defined in Section 9.8.
“Dispute” means any claim, dispute or other matter in controversy between the Members
or one or more Members and the Manager arising directly or indirectly out of or relating to this
Agreement or the subject matter hereof, including, without limitation, one involving an alleged
violation of law, an alleged default by the Manager or an officer (if any) of the Company, an
alleged breach of this Agreement (including, without limitation, for non-payment of any Capital
Contribution and the re-determination of the Percentage Interest of the Members pursuant to
Section 3.4(b)) or alleged misconduct by a Member, whether or not during the term or after
the termination of this Agreement. Any such claim, dispute or matter in controversy against or
involving the Manager or an officer (if any) of the Company shall be brought by or against the
Member that is affiliated with the Manager or such officer. Except as set forth below in this
definition, a “Dispute” shall exclude any claim, dispute or other matter in controversy not
involving (i) an alleged violation of law; (ii) an alleged default by the Manager or an officer
(if any) of the Company; (iii) an alleged breach of this Agreement; or (iv) the alleged misconduct
of a Member, unless the failure to resolve the matter would, or could reasonably be
expected to, adversely affect the ability of the Company to continue to operate in the ordinary
course or to maximize its enterprise potential. Any Major Decision proposed to be executed, taken
or performed by the Managers which has not received Unanimous Consent shall be a “Dispute” and
shall be subject to mediation and arbitration under Article 12. Notwithstanding the
foregoing, the question of whether a particular claim, dispute or other matter in controversy
constitutes a “Dispute” hereunder shall be a Dispute and subject to the terms of Article
12.
“Dispute Notice” is defined in Section 12.1.
“Encumbrance” means any mortgage, pledge, lien, charge, hypothecation, security
interest, encumbrance, adverse right, interest or claim, license, covenant, title defect, option,
right of first refusal or other restriction or limitation of any nature whatsoever.
“Excluded Assets” means that certain real property located in Sloan, Nevada, more
particularly described in Exhibit “C” hereof, which, as of the Formation Date, is owned by
Jean Development Company, a Nevada general partnership.
“Fiscal Year” means the year on which the accounting and federal income tax records of
the Company are kept, as identified in Section 8.2 hereof. The first Fiscal Year shall
start on the organization date of the Company and the last Fiscal Year shall end on the termination
of the Company.
“Formation Date” means the date first appearing on this Agreement.
“Gaming” means to deal, operate, carry on, conduct, maintain or expose for play any
game as defined in Nevada Revised Statute § 463,0152, or to operate an inter-casino linked system.
“Gaming Business” is defined in Section 2.3(a).
4
“Gaming Business Manager” is defined in Section 6.1(a).
“Gaming Business Operating Budget” is defined in Section 6.1(b)(ii).
“Gaming Laws” means any Law governing or relating to Gaming.
“Greenspun Family” means Xxxx and/or Xxxxxxx Xxxxxxxxx or their lineal descendants.
“Guarantor” means each of American Nevada Holdings, LLC, a Nevada limited liability
company, and Diamond Resorts, LLC, a Nevada limited liability company.
“Improvements” means any and all improvements included in or built or to be built on
the Property by the Company pursuant to the Master Plan.
“Indemnitee” is defined in Section 6.6(a).
“Independent Activities” is defined in Section 6.11(a).
“Initial Capital Contribution” is defined in Section 3.2.
“Initial Capital Contribution Date” is defined in Section 3.2(a)(i).
“JRD Successor” means any Person who is a Permitted Transferee of JRD’s Units and to
whom such Units have been Transferred in compliance with the terms of Article 9.
“Law” is defined in Section 10.8(b).
“Lending Member” is defined in Section 3.4(b).
“Licensing Date” means the date on which the Company has obtained all governmental or
quasi-governmental authorizations, registrations, licenses, permits and approvals, including all
restricted and nonrestricted gaming licenses, necessary to permit the transfer of the MGM Xxxx
Assets to the Company and the operation of the Gaming Business by the Company.
“Line of Business” means each of the Gaming Business and the Development Business.
“Liquidating Trustee” is defined in Section 10.3.
“Major Decisions” is defined in Section 6.4.
“Master Plan” means a plan for the development of the Property that may, as determined
unanimously by the Managers, include, without limitation, gaming casinos (including all related
activities such as rental of rooms, retail and gas sales), residential (including apartments,
condominiums, single units and affordable housing), commercial, retail and recreational real
estate, recreational and entertainment facilities to serve both the resort property and the
residential community, and the integration of gaming/resort, retail, office, and residential
components into a single mixed-use development. The Master Plan shall include an allocation of
development responsibility between the Gaming Business Manager and the Development Business
Manager.
5
“Material Deviation” means, in reference to the Development Business Approved
Budget/Plan, a departure from the Development Business Approved Budget/Plan to the extent that
actual revenues of the Development Business Company are less than ninety percent (90%) of the
revenues projected in the Development Business Approved Budget/Plan or actual expenses of the
Development Business are more than (A) one hundred ten percent (110%) of the overall expenses
projected in the Development Business Approved Budget/Plan, or (B) one hundred twenty percent
(120%) of any single line item of the expenses projected in the Development Business Approved
Budget/Plan.
“Mediation Period” is defined in Section 12.2.
“Member” means any Person that executes this Agreement as a member, and any other
Person admitted to the Company as an additional or substituted member, that has not made a
disposition of all of such Person’s Units.
“Member Loan” means a loan to the Company from a Member in accordance with Section
3.6.
“MGM Xxxx Assets” means all assets and liabilities owned by the MGM Xxxx Members on
the Formation Date, which are comprised of the Property and all improvements thereon, including,
without limitation, the Resorts and the Truck Stations, but excluding the Excluded Assets.
“MGM Jean Members” means each of (1) Jean Development Company, dba Gold Strike Hotel
and Gambling Hall, a Nevada general partnership; (2) Jean Development West, dba Nevada Landing
Hotel and Casino, a Nevada general partnership; (3) Jean Development North, a Nevada general
partnership; (4) Gold Strike Fuel Company, dba Gold Strike Auto & Truck Plaza, a Nevada general
partnership; and (5) Jean Fuel Company West, dba Nevada Landing Auto Plaza, a Nevada general
partnership.
“MGM Jean Members Ownership Interests” means the ownership interest in all of the MGM
Jean Members.
“MGM MIRAGE” means MGM MIRAGE, a Delaware Corporation.
“Non-Delinquent Member” is defined in Section 3.4(c).
“Non-Disposing Member” is defined in Section 9.8.
“Notices” is defined in Section 13.2(a).
“Overall Approved Budget/Plan” is defined in Section 6.1(b)(v).
“Percentage Interest” means at any particular time the percentage interest of each
Member or Unit Holder of the Company and determined with respect to a particular Member or Unit
Holder at any particular time by dividing the number of Units owned by such Member or Unit Holder
by the aggregate number of outstanding Units.
6
“Permitted Encumbrance” means (i) any statutory lien for current taxes, assessments or
other governmental charges not yet delinquent or the amount or validity of which is being contested
in good faith by appropriate proceedings, (ii) any mechanic’s, carrier’s, worker’s, repairer’s or
similar lien arising or incurred in the ordinary course of business that is not material to the
business or to the operations or financial condition of the business, or (iii) any zoning,
entitlement or other land use or environmental regulation by any governmental authority.
“Permitted Transfer” is defined in Section 9.2.
“Permitted Transferee” means, in the case of MGM Xxxx, any Person, at least fifty-one
percent (51%) of the voting stock or beneficial ownership of which is owned directly or indirectly,
including through subsidiaries, by MGM Mirage, and in the case of JRD, any Person approved by MGM
Jean, which approval will not be unreasonably withheld or delayed so long as both the Greenspun
Family and the Cloobeck Family have a level of ownership, directly or indirectly, including through
subsidiaries, in the transferee that is reasonably satisfactory to MGM Xxxx.
“Person” means an individual, firm, corporation, partnership, limited liability
company, association, estate, trust, pension or profit-sharing plan, or any other entity.
“Prime Rate” means the “prime rate” published in the “Money Rates” or
equivalent section of the Western Edition of The Wall Street Journal, provided that if a “prime
rate” range is published by The Wall Street Journal, then the highest rate of that range will
be used, or if The Wall Street Journal ceases publishing a prime rate or a prime rate range, then
the Members will by Unanimous Consent select a prime rate, a prime rate range or another substitute
interest rate index that is based upon comparable information.
“Principal Office” means the registered Nevada office of the Company at which the
records of the Company are kept as required under the Act.
“Property” means the real estate more particularly described in Exhibit “B”
hereof.
“Proposal” is defined in Section 6.1(b)(vi).
“Regulations” means pronouncements, as amended from time to time, or their successor
pronouncements, which clarify, interpret and apply the provisions of the Code, and which are
designated as “Treasury Regulations” by the United States Department of the Treasury.
“Resorts” means each of (1) the Gold Strike Hotel and Gambling Hall, located at 0 Xxxx
Xxxxxx, Xxxx, Xxxxxx 00000; and (2) the Nevada Landing Hotel and Casino, located at 0 Xxxxxxxxxxx
Xxxx, Xxxx, Xxxxxx 00000, which Resorts are owned by the MGM Jean Members as of the Formation Date.
“Rules” is defined in Section 12.3.
“Securities Act” means the Securities Act of 1933, as amended.
“Site Plan” is defined in Section 6.1(c).
7
“Subsequent Contribution Date” is defined in Section 3.2(b)(i).
“Subsidiary” or “Subsidiaries” is defined in Section 2.10.
“Tax Matters Partner” means the “tax matters partner” as defined in Code
Section 6231(a)(7).
“Transfer” means to sell, assign, transfer, give, donate, pledge, hypothecate,
deposit, alienate, bequeath, devise or otherwise dispose of or encumber to any Person other than
the Company.
“Transferee” means a Person to whom a Transfer is made.
“Truck Stations” means each of (1) the Gold Strike Auto & Truck Plaza, located at 0
Xxxx Xxxxxx, Xxxx, Xxxxxx 00000, and (2) Jean Fuel Company West, located at 0 Xxxxxxxxxxx Xxxx,
Xxxx, Xxxxxx 00000, which Truck Stations are owned by the MGM Members as of the Formation Date.
“Unanimous Consent” means the written consent of all Members (excluding a Defaulting
Member).
“Unit Holders” means all Persons who hold Units, regardless of whether they are
Members. “Unit Holder” means any one of the Unit Holders.
“Units” is defined in Section 3.1.
“Withdrawal Event” means the occurrence of any of the following events:
(a) The Member voluntarily withdraws from the Company;
(b) The Member does any of the following:
(i) Makes an assignment for the benefit of creditors;
(ii) Files a voluntary petition in bankruptcy;
(iii) Is adjudicated as bankrupt or insolvent;
(iv) Files a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law or rule;
(v) Files an answer or other pleading admitting or failing to contest the material allegations
of a petition filed against him in a bankruptcy, insolvency, reorganization or similar proceeding;
(vi) Seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator
of the Member or of all or any substantial part of his property;
8
(c) If a Member is a natural person:
(i) Such Member’s death;
(ii) The entry of an order or judgment by a court of competent jurisdiction adjudicating him
incompetent to manage his person or his estate;
(d) If a Member is acting as a Member by virtue of being a trustee of a trust, the termination
of the trust but not merely the substitution of a new trustee;
(e) If a Member is a general or limited partnership, the dissolution and commencement of
winding up of the partnership;
(f) If a Member is a corporation, the filing of a certificate of dissolution or its equivalent
for the corporation or revocation of its charter;
(g) If a Member is an estate, the distribution by the fiduciary of the estate’s entire
interest in the limited liability company; and
(h) If a Member is another foreign or domestic limited liability company, the filing of
articles of dissolution or termination or their equivalent for the foreign or domestic limited
liability company.
ARTICLE 2
GENERAL PROVISIONS
GENERAL PROVISIONS
2.1 Name. The name of the Company is “JEANCO, LLC” or such other name as the Members
select from time to time.
2.2 Principal Office and Place of Business. The Principal Office and place of business of the
Company in Nevada is at 0000 Xxx Xxxxx Xxxx. Xxxxx, Xxx Xxxxx, Xxxxxx 00000, or such other place as
the Members designate from time to time.
2.3 Company Purpose. The nature of the business and of the purposes to be conducted and
promoted by the Company is to:
(a) Conduct, manage and operate gaming in the gaming casinos (including all related
activities, including, but not limited to, rental of rooms, retail, and gas sales) on or within the
Resorts and the Truck Stations and improve and redevelop the Resorts and the Truck Stations
pursuant to the Master Plan and the Business Plan (the “Gaming Business”);
(b) Conduct a business of developing residential (including apartments, condominiums, single
units and affordable housing), commercial, retail and recreational real estate pursuant to the
Master Plan and the Business Plan (the “Development Business”) and, in connection
therewith:
(i) Acquire by contribution from MGM Xxxx certain real properties more particularly described
in Exhibit B attached hereto (the “Property”);
9
(ii) Design, develop, finance and construct the Improvements on the Property pursuant to the
Development Business Approved Budget/Plan; and
(iii) Market and sell the Improvements pursuant to the Development Business Approved
Budget/Plan.
The Company may exercise all powers enumerated in the Act necessary or convenient to the
conduct, promotion or attainment of such purpose, including, but not limited to, entering into or
acquiring interests in any partnerships, joint ventures, corporations, limited liability companies,
or similar entities or arrangements to engage in any of the foregoing in accordance with the terms
of this Agreement. The Company may engage in other businesses only with Unanimous Consent.
2.4 Purpose Limited. The Company shall be a limited liability company having the sole
purposes specified in Section 2.3. Except as otherwise provided in this Agreement, the
Company shall not engage in any other activity or business and neither Member shall have any
authority to hold itself out as an agent of the other Member in any other business or activity.
2.5 Statutory Compliance. The Company shall exist under and be governed by the laws of the
State of Nevada, but excluding its conflict of law principles. The Members shall make all filings
and disclosures required by, and shall otherwise comply with, all such laws. The Members shall
execute, file and record in the appropriate records any assumed or fictitious name certificate
required by law to be filed or recorded in connection with the formation of the Company and shall
execute, file and record such other documents and instruments as may be necessary or appropriate
with respect to the formation of, and conduct of business by, the Company.
2.6 Term. The term of the Company commences on the filing of the Articles of Organization and
continues until dissolved, wound-up and terminated in accordance with Article 10 of this
Agreement.
2.7 Agent for Service of Process. The Agent for Service of Process for the Company is Xxxxx
X. Xxxxxx, or such other Person as the Managers appoint from time to time.
2.8 No Payment of Individual Obligations. The Members shall use the Company’s credit and
assets solely for the benefit of the Company. No asset of the Company shall be transferred or
encumbered for or in payment of any individual obligation of a Member.
2.9 Licensing. Upon formation of the Company, the Gaming Business Manager shall use
commercially reasonable efforts to prepare, file and process applications to obtain all necessary
gaming registrations, licenses and approvals from the Nevada gaming authorities that are required
for the Company and its Subsidiaries to operate the Resorts and the Truck Stations. Further, each
Member shall use commercially reasonable efforts to prepare, file and process applications to
obtain all necessary gaming registrations, licenses and approvals from the Nevada gaming
authorities that are required in connection with the ownership of an interest in the Company and to
obtain as soon as practicable all consents necessary to permit the Company to consummate its
purposes as set forth in Section 2.3 hereof without breaching or violating any applicable
law. Each Member shall cooperate reasonably and shall (i) furnish upon request to
10
each other such further information, (ii) execute and deliver to each other such other
documents, and (iii) do such other acts and things, as may be reasonably requested by the other
Member or the Gaming Business Manager in obtaining the licenses and consents referred to in this
Section 2.9.
2.10 Conduct of Business Through Single Purpose Entities. It is the intention of the Members
that the Company serve as a holding company and operate its business through single purpose wholly
owned limited liability companies (each, a “Subsidiary” or, together, the
“Subsidiaries”). Where applicable in this Agreement, any reference to the Company or the
business of the Company also includes a reference to the Subsidiaries and the business of the
Subsidiaries.
ARTICLE 3
CAPITALIZATION
CAPITALIZATION
3.1 Issuance of Units. Upon formation of the Company, the Company will issue two membership
units (each a “Unit” and collectively, the “Units”) to the Members (1 to each
Member). In addition, the Company will issue one hundred thousand (100,000) Units to the Members
(50,000 to each Member) on the Initial Capital Contribution Date. Additional Capital Contributions
may be made and, if necessary, additional Units may be issued, in accordance with terms and
conditions approved by the Members and in accordance with the Overall Approved Budget/Plan.
Issuance of additional Units pursuant to this Agreement does not constitute an amendment of this
Agreement. Exhibit A will be revised from time to time to reflect the Units issued from
time to time to the Members and Unit Holders.
3.2 Initial Capital Contributions by the Members. Within thirty (30) days from the Licensing
Date, each Member shall make its initial Capital Contribution to the Company (“Initial Capital
Contribution”) subject to the terms and conditions of this Agreement and in the following
manner:
(a) MGM Jean’s Initial Capital Contribution:
(i) MGM Xxxx will contribute the MGM Xxxx Members Ownership Interests (the date on which MGM
makes its Initial Capital Contribution shall be referred to as the “Initial Capital
Contribution Date”). At the time of such contribution, the MGM Xxxx Members shall own all of
the MGM Xxxx Assets. Notwithstanding anything to the contrary contained in this Agreement, the
Members stipulate that the initial Gross Asset Value of the MGM Xxxx Members Ownership Interests
for purposes of determining MGM Jean’s initial Capital Contribution to the Company is equal to One
Hundred and Fifty Million Dollars ($150,000,000) (the “Contribution Value”) as immediately
thereafter reduced by the Seventy-Five Million Dollars ($75,000,000) distributed to it pursuant to
Section 4.4 hereof.
(ii) MGM Jean’s contribution of the MGM Xxxx Members Ownership Interests, including all of the
MGM Xxxx Assets held by the MGM Xxxx Members, will be made subject to the following warranties and
representations in addition to any other warranties and representations set forth within this
Agreement, all of which representations and warranties shall be made as of the date of the
execution of this Agreement, provided that, to the extent that
11
Xxxxxxx Xxxxxxxxxx or his successor becomes aware of any such change, MGM Xxxx shall keep JRD
reasonably informed of any changes with respect to the matters represented and warranted hereto
between the date of the execution of this Agreement and the Initial Contribution Date:
(A) The MGM Xxxx Members are each lawfully and duly formed, and in good standing under the
laws of the State of Nevada. As of the Formation Date MGM Xxxx has, and at the time of
contribution shall have, the power and authority to contribute the MGM Xxxx Members Ownership
Interests to the Company. The MGM Xxxx Members Ownership Interests are being given free and clear,
without any material encumbrances, and have, or at the time of such contribution shall have taken
all partnership or equivalent entity actions required for such contribution as contemplated by the
terms of this Agreement. The compliance with or fulfillment of the terms and conditions of this
Agreement will not conflict with, or result in a breach of, the terms, conditions or provisions of,
or constitute a default under, any contract or form of agreement to which MGM Xxxx or any of the
MGM Xxxx Members is / are a party or by which they are otherwise bound.
(B) The only membership interests to be contributed to the Company pursuant to this Agreement
are the MGM Xxxx Members Ownership Interests and the MGM Xxxx Members own all right, title and
interest in and to the MGM Xxxx Assets.
(C) There are no adverse or other parties who have an interest in the MGM Xxxx Members
Ownership Interests and /or the MGM Xxxx Assets.
(D) Except as otherwise disclosed in writing on or before the date of execution of this
Agreement to JRD and except for gaming approvals, MGM Xxxx does not require the consent, third
party approvals, or joinder of any persons or entities in order to effect the contribution of the
MGM Xxxx Members Ownership Interests, fully and completely, to the Company pursuant to the terms of
this Agreement, or to fulfill MGM Jean’s obligations hereunder.
(E) Except as otherwise disclosed in writing on or before the date of execution of this
Agreement to JRD, to Xxxxxxx Xxxxxxxxxx’x knowledge there are no actions, proceedings, litigation
or governmental investigations or condemnation actions either pending or threatened against any of
the MGM Xxxx Members or the MGM Xxxx Assets which if adversely determined would restrain the
consummation of the transactions contemplated by this Agreement or would declare illegal, invalid
or non-binding the obligation of contribution of the MGM Xxxx Members Ownership Interests as set
forth herein.
(F) Except as otherwise disclosed in writing on or before the date of execution of this
Agreement to JRD, to Xxxxxxx Xxxxxxxxxx’x knowledge there are no mechanic’s liens as of the date of
contribution on any of the MGM Xxxx Assets.
(G) Except as otherwise disclosed in writing on or before the date of execution of this
Agreement to JRD, to Xxxxxxx Xxxxxxxxxx’x knowledge none of the MGM Xxxx Members nor any Affiliates
thereof have received any written notifications from the United States of America, the State of
Nevada, Xxxxx County, or any other governmental authority, including but not limited to, the Nevada
Gaming Control Board, of: (i) any uncured
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violation of any ordinance or statute regarding either the MGM Xxxx Members Ownership
Interests or the MGM Xxxx Assets of the operation thereof which has remained uncured, or (ii) any
material violation of any ordinance or statute regarding either the MGM Xxxx Members Ownership
Interests or the MGM Xxxx Assets during the past three (3) years, whether or not such violation has
been cured.
(H) Except as otherwise disclosed in writing on or before the date of execution of this
Agreement to JRD, to Xxxxxxx Xxxxxxxxxx’x knowledge none of the MGM Xxxx Members have received any
notification of any special assessment against any of the MGM Xxxx Assets.
(I) Except as otherwise disclosed in writing on or before the date of execution of this
Agreement to JRD, to Xxxxxxx Xxxxxxxxxx’x knowledge, there are no encumbrances on the Property
(excluding for the purpose of this representation any encumbrances on any Improvements on the
Property) other than those listed in Schedule B to the title report dated December 21, 2006 and
issued by Fidelity National Title.
(iii) Except to the extent of representations and warranties provided herein, MGM Jean’s
contribution of the MGM Xxxx Members Ownership Interests, including all of the MGM Xxxx Assets held
by the MGM Xxxx Members, will be made on as “AS IS” basis.
(iv) From the Formation Date until the Contribution Date, except as contemplated by this
Agreement or as otherwise waived or consented to in writing by JRD, MGM Xxxx shall, or cause the
MGM Xxxx Members to:
(A) carry on the business of the Resorts and the Truck Stations in the ordinary course of
business consistent with past practice, and in any event in material compliance with all applicable
laws and governmental authorizations held by the MGM Xxxx Members or any of their Affiliates, and
not cause or permit the MGM Xxxx Members to enter into any agreement, transaction or activity
(other than as contemplated herein) or make any commitment with respect to the MGM Xxxx Assets,
except those in the ordinary course of business consistent with past practice;
(B) continue to maintain, service and protect the MGM Xxxx Assets consistent with past
practice, and in any event in a commercially reasonable and prudent manner;
(C) use commercially reasonable efforts to preserve intact the goodwill of the Resorts and the
Truck Stations and the relationships of the MGM Xxxx Members with their customers, vendors,
suppliers, creditors, agents, landlords, equipment lessors, service providers, employees and others
having business relations with the MGM Xxxx Members, and refrain from doing anything or making any
statement that could be reasonably expected to materially disrupt, prejudice or disparage the
current and/or long-term business, finances or relationships of the MGM Xxxx Members with respect
to the Resorts and the Truck Stations;
(D) satisfy and perform in all material respects all of the MGM Xxxx Members’ obligations
under the contracts to which the MGM Xxxx Members are a party or by which they are bound, and not
amend, modify or supplement, or agree to the amendment,
13
modification or supplementing of, any such contract except in the ordinary course of business
consistent with past practice;
(E) continue to make all necessary and material filings and payments with governmental
authorities in connection with the conduct of the business of the Resorts and the Truck Stations in
a timely manner;
(F) except as consistent with past practice and in the ordinary course of business not: (i)
sell, assign, convey, transfer or lease (as lessor) any of the MGM Xxxx Assets, (ii) move, relocate
or dispose of any of the MGM Xxxx Assets, (iii) grant, create, incur or suffer to exist any
Encumbrance (other than a Permitted Encumbrance) on any of the MGM Xxxx Assets which did not exist
before the date hereof, (iv) forgive, waive or otherwise cancel, in whole or in part, any
obligation owed to the MGM Xxxx Members, or (v) make any distributions of property to any partner
or any other Person, provided that, through the day before the Contribution Date, all cash relating
to the day-to-day operations of the Resorts and the Truck Stations shall be distributed to the
respective owners of the MGM Xxxx Members on a daily or other periodic basis;
(G) notify JRD of any proceeding commenced or overtly threatened by or against the Resorts and
the Truck Stations that materially affects (or could reasonably be expected to relate to or affect)
the MGM Xxxx Asset; and
(H) notify JRD of the existence or occurrence of any fact or circumstance of which the MGM
Xxxx Member becomes aware which materially adversely affects the ability of MGM Xxxx to complete
the Contemplated Transactions.
(v) Notwithstanding anything to the contrary in Section 3.2(a)(iii) hereof, the
parties acknowledge that Xxxx Development West may, in its reasonable discretion, cease business
operations of the Nevada Landing Hotel and Casino prior to the Contribution Date.
(vi) JRD acknowledges and agrees that before the contribution of the MGM Xxxx Members
Ownership Interests, the MGM Xxxx Members shall distribute, sell, or otherwise transfer the
Excluded Assets to the respective owners of the MGM Xxxx Members and that the Company shall have no
right to acquire such Excluded Assets or any amounts received by the MGM Xxxx Members in connection
with the sale or transfer of such Excluded Assets.
(vii) MGM Xxxx shall prepare an allocation of the Contribution Value among the MGM Xxxx
Members Ownership Interests, including the MGM Xxxx Assets, in accordance with Code §1060 and
Regulations thereunder (and any similar provision of state, local or foreign law, as appropriate),
which allocation shall be binding upon Members. MGM Xxxx shall deliver such allocation to JRD
within 30 days after the Contribution Date. To the extent applicable, the Members and their
Affiliates shall report, act, and file Tax Returns (including, but not limited to Internal Revenue
Service Form 8594, if applicable) in all respects and for all purposes consistent with such
allocation prepared by MGM Xxxx. JRD shall timely and properly prepare, execute, file, and deliver
all such documents, forms, and other information as MGM Xxxx may reasonably request in preparing
such allocation. Neither Member, nor any
14
Affiliate of a Member, shall take any position (whether in audits, tax returns, or otherwise)
that is inconsistent with such allocation unless required to do so by applicable law.
(b) JRD’s Initial Capital Contribution:
(i) On the Initial Capital Contribution Date, JRD shall contribute Fifty-Five Million Dollars
($55,000,000) to the Company. In addition, upon the earlier of: (a) eighteen (18) months from the
execution of this Agreement, or (b) approval of the Master Plan by the Members (the “Subsequent
Contribution Date”), JRD shall contribute an additional Twenty Million Dollars ($20,000,000) to
the Company.
3.3 Additional Capital Contributions, Guarantees and Letters of Credit. Except as otherwise
provided in Section 3.2, additional Capital Contributions, loan guarantees and standby
letters of credit shall be required of the Members only upon Unanimous Consent of the Members, and
then in such event the amounts to be contributed shall be payable in proportion to the Members’
respective Percentage Interests, and guarantees and standby letters of credit shall be for amounts
that are in proportion to the Members’ respective Percentage Interests.
3.4 Failure to Make a Capital Contribution. If a Member fails to make any required Capital
Contribution, the Company may exercise, on notice to that Member (the “Delinquent Member”),
one of the following remedies:
(a) permit the Members, in proportion to their Percentage Interests or in such other
percentages as they may agree (the “Lending Member”, whether one or more), to advance the
portion of the Delinquent Member’s Capital Contribution that is in default, with the following
results:
(i) The sum advanced constitutes a loan from the Lending Member to the Delinquent Member and a
Capital Contribution of that sum to the Company by the Delinquent Member and shall be treated as
such by all parties for federal, state and local income tax purposes;
(ii) The unpaid principal balance of the loan and all accrued unpaid interest is due and
payable on the tenth day after written demand by the Lending Member to the Delinquent Member;
(iii) The unpaid balance of the loan bears interest at the Default Interest Rate, compounded
monthly, from the day that the advance is deemed made until the date that the loan, together with
all accrued interest, is repaid to the Lending Member;
(iv) All amounts distributable by the Company to the Delinquent Member shall (A) be paid to
the Lending Member until the loan and all accrued interest have been paid in full; (B) constitute a
distribution to the Delinquent Member followed by a repayment of the loan and accrued interest from
the Delinquent Member to the Lending Member; and (C) be treated as such by all parties for
federal, state and local income tax purposes;
(v) The payment of the loan and accrued interest is secured by a security interest in the
Delinquent Member’s assets;
15
(vi) In addition to the other rights and remedies granted to it under this Agreement, the
Lending Member has the right to take any action available at law or in equity, at the cost and
expense of the Delinquent Member, to obtain payment from the Delinquent Member of the unpaid
balance of the loan and all accrued and unpaid interest; and
(vii) The Delinquent Member grants to the Company, and to each Lending Member with respect to
any loans made to that Delinquent Member, as security, equally and ratably for the payment of all
Capital Contributions that the Delinquent Member has agreed to make and the payment of all loans
and interest accrued made by Lending Members to that Delinquent Member, a security interest in its
assets under the Uniform Commercial Code of the State of Nevada. On any default in the payment of
a required Capital Contribution or in the payment of a loan to a Lending Member or interest
accrued, the Company or the Lending Member, as applicable, is entitled to all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of Nevada with respect
to the security interest granted. Each Delinquent Member hereby authorizes the Company and the
each Lending Member, as applicable, to prepare and file financing statements and other instruments
that the Manager or the Lending Member, as applicable, may deem necessary to effectuate and carry
out the preceding provisions of this Section.
(b) permit the Members, in proportion to their Percentage Interests or in such other
percentages as they may agree (the “Non-Delinquent Member”, whether one or more), to
contribute the portion of the Delinquent Member’s Capital Contribution that is in default, with the
following results:
(i) Immediately following the contribution by the Non-Delinquent Member of a portion or all of
the Delinquent Member’s Capital Contribution, the Percentage Interest of the Non-Delinquent Member
in the Company shall be increased and the Percentage Interest of the Delinquent Member in the
Company shall be decreased. The resulting Percentage Interest of the Non-Delinquent Member shall
be the number of percentage points (rounded to the nearest one-hundredth of a percentage point)
determined in accordance with the following formula: (A) determine the percentage equivalent of a
fraction, the numerator of which shall be the aggregate Capital Contributions made to the Company
by the Non-Delinquent Member pursuant to this Agreement, and the denominator of which shall be the
aggregate Capital Contributions made to the Company by all Members pursuant to this Agreement, (B)
subtract 50 percentage points, (C) multiply the result of (A) and (B) by 1.5 and
(D) add 50 percentage points to the result of (A), (B) and (C). The resulting Percentage Interest
of the Delinquent Member shall be the number of percentage points equal to 100 minus the
resulting Interest of the Delinquent Member as determined above.
(ii) By way of illustration, assume that (i) the Percentage Interest of each Member is fifty
percent (50%); (ii) the parties have made their Initial Capital Contributions; (iii) the Members
approve a Capital Contribution pursuant to Section 3.3 in the amount of $100,000,000 (iv)
JRD contributes only $30,000,000 (versus $50,000,000). If MGM Xxxx contributes the $20,000,000
shortfall by JRD in addition to its own $50,000,000 pro rata share of the Capital Contribution, the
resulting Percentage Interest of MGM Xxxx following such contribution would be 62%, determined as
follows:
16
[$125,000,000 plus $20,000,000] divided by [$250,000,000] = 58%
58%, minus 50% = 8%
8%, multiplied by 1.5 = 12%
12%, plus 50% = 62%
Accordingly, the resulting Percentage Interest of MGM Xxxx would be sixty-two (62%) and the
resulting Percentage Interest of JRD would be thirty-eight percent (38%).
3.5 Additional Remedies for Failure to Make a Capital Contribution. In addition to the
remedies provided under Section 3.4, the Company may, on notice to a Delinquent Member,
take such action, at the cost and expense of the Delinquent Member, to obtain payment by the
Delinquent Member of the portion of the Delinquent Member’s Capital Contribution that is in
default, together with interest on that amount at the Default Interest Rate from the date that the
Capital Contribution was due until the date that it is made, provided, however, that in the event
that either party fails to make its Initial Capital Contribution within thirty (30) days from the
Licensing Date, then such Delinquent Member shall also be required to pay the other Member an
“inconvenience fee” equal to ten percent (10%) of any Capital Contribution shortfall. The
Delinquent Member’s obligation to make Capital Contributions or repay any loan to a Lending Member
shall be recourse to such Delinquent Member (except to the extent and after such time that the
Non-Delinquent Member elects to make a contribution of any portion of the Delinquent Member’s
Capital Contribution). The Delinquent Member shall have personal liability for the Delinquent
Member’s obligation to make Capital Contributions or repay any loan to a Lending Member. Further,
in the case of JRD’s Initial Capital Contribution, JRD’s obligation to make its Initial Capital
Contributions shall be recourse to each of the Guarantors (except to the extent and after such time
that MGM Xxxx elects to make a contribution of any portion of JRD’s Initial Capital Contribution).
Simultaneously with the signing of this Agreement, JRD shall cause each of the Guarantors to
provide a guarantee in connection with JRD’s obligation to make its Initial Capital Contributions
under Section 3.1(b) in the form attached hereto as Exhibit D.
3.6 Member Loans. If the Capital Contributions of the Members, third-party loans to the
Company, and the revenues of the Company are insufficient to satisfy the capital requirements of
the Company as set forth in the Overall Approved Budget/Plan, or if bridge funds are needed by the
Company on an interim basis, the Members may make loans (“Member Loans”) to the Company in
such amounts as are reasonably determined by Unanimous Consent. No Member is required to make a
Member Loan. Each Member may elect to participate as a lender in a Member Loan, pro rata, based
upon the Percentage Interest held by the Members electing to make such Member Loan or, upon the
agreement of all participating Members, in a differing proportion. The terms of the Member Loans
shall be determined by the Unanimous Consent of the Members.
3.7 No Further Capital Contributions. The Members shall not be required to contribute
additional capital or lend any funds to the Company, except as expressly provided in this
Article 3.
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ARTICLE 4
DISTRIBUTIONS
DISTRIBUTIONS
4.1 Amount and Time of Distributions. Except as otherwise provided in Section 4.4 and
Section 4.6, distributions of Available Cash Flow will be made from time to time, as
determined by Unanimous Consent of the Members, in proportion to the Percentage Interest of the
Members.
4.2 Distribution Upon Withdrawal. No withdrawing Member is entitled to receive any
distribution or the value of such Member’s Units as a result of withdrawal from the Company prior
to the liquidation of the Company, except as otherwise specifically provided herein.
4.3 Return of Capital. No Unit Holder is entitled to the return of, or interest on, that Unit
Holder’s Capital Contributions, except as provided herein.
4.4 The MGM Xxxx Distribution. Simultaneous with MGM Jean’s contribution of the MGM Xxxx
Assets to the Company, the Company shall distribute Fifty-Five Million Dollars ($55,000,000) to MGM
Xxxx. In addition, on the Subsequent Contribution Date, the Company shall distribute Twenty
Million Dollars ($20,000,000) to MGM Xxxx.
4.5 Acknowledgment of Liability for Taxes. To the extent that the laws of any taxing
jurisdiction require, each Member requested to do so by the Manager shall submit an agreement
indicating that the Member shall make timely income tax payments to the taxing jurisdiction and
that the Member accepts personal jurisdiction of the taxing jurisdiction with regard to the
collection of income taxes, interest, and penalties attributable to the Member’s income. If a
Member fails to provide such agreement, the Company may withhold or pay over to such taxing
jurisdiction the amount of tax, penalty, and interest determined under the laws of the taxing
jurisdiction with respect to such income. Any such payments shall be treated as distributions for
purposes of Article 4.
4.6 Tax Distributions. Within seventy-five (75) days of the end of each Fiscal Year, the
Company shall distribute to each Member, to the extent cash is available to the Company, an amount
which, when combined with the amount previously distributed to that Member pursuant to Section
4.1 and this Section 4.6 in that Fiscal Year and all prior Fiscal Years, equals the
cumulative net taxable income allocated to that Member pursuant to Article 5 for that
Fiscal Year and all prior Fiscal Years (taking into account net tax losses allocated to that Member
in prior Fiscal Years) multiplied by the highest applicable federal and state marginal corporate
tax rates, if any, in effect for that Fiscal Year (taking into account the deductibility of state
income taxes for purposes of determining the effective state income tax rate). Distributions, if
any, made pursuant to this Section 4.6 shall be taken into account in determining
subsequent distributions pursuant to Section 4.1 so that, in the aggregate, all
distributions are divided among the Members in the manner they would be divided without regard to
this Paragraph.
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ARTICLE 5
PROFITS AND LOSSES
PROFITS AND LOSSES
5.1 Profit Allocations. After making any special allocations required under Appendix
1, Profits for each Fiscal Year (and each item of income and gain entering into the computation
thereof) shall be allocated among the Members (and credited to their respective Capital Accounts)
in the following order and priority:
(a) First, to the Members until the cumulative Profits allocated pursuant to this Section
5.1(a) are equal to the cumulative Losses, if any, previously allocated to the Members pursuant
to Section 5.2(b) and Section 5.2(c), such Profits being allocated under this
Section 5.1(a) on a last-in first-out basis with respect to the Losses allocated under
Section 5.2(b) and Section 5.2(c), for all prior periods in proportion to the
Members’ respective shares of the Losses being offset;
(b) Thereafter, to the Members in accordance with their Percentage Interests.
5.2 Loss Allocations. After making any special allocations required under Appendix 1,
Losses for each Fiscal Year (and each item of loss and deduction entering into the computation
thereof) shall be allocated among the Members (and charged to their respective Capital Accounts) in
the following order and priority:
(a) First, to the extent that Profits have previously been allocated to the Members for prior
periods pursuant to Section 5.1(b) hereof, Losses shall be allocated to the Members to
offset such Profits in proportion to the Members’ respective shares of the Profits being offset.
(b) The balance, if any, to the Members in accordance with their respective Percentage
Interests.
(c) Losses allocated to any Member’s Capital Account in accordance with this Section
5.2 shall not exceed the maximum amount of Losses that can be so allocated without creating an
Adjusted Capital Account Balance deficit with respect to such Capital Account. This limitation
shall be applied individually with respect to each Member in order to permit the allocation
pursuant to this Section 5.2(c) of the maximum amount of Losses permissible under
Regulations Section 1.704-1(b)(2)(ii)(d). All Losses in excess of the limitations set forth in
this Section 5.2(c) shall be allocated solely to those Members that bear the economic risk
for such additional Losses within the meaning of Code Section 704(b) and the Regulations
thereunder. If it is necessary to allocate Losses under the preceding sentence, the Managers
shall, in accordance with the Regulations promulgated under Code Section 704(b), determine those
Members that bear the economic risk for such additional Losses.
5.3 Allocation Rules.
(a) For purposes of determining the Profits, Losses or any other items allocable to any
period, Profits, Losses, and any such other items will be determined on a daily, monthly or other
basis, as determined by Unanimous Consent using the accrual method of accounting, or any
permissible method under Code Section 706 and the Regulations thereunder.
19
(b) The Unit Holders are aware of the income tax consequences of the allocations made under
this Article 5 and hereby agree to be bound by the provisions of this Article 5 in
reporting their respective shares of Company income and loss for income tax purposes.
5.4 Special Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c) and
the Regulations thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company will, solely for tax purposes, be allocated among the
Unit Holders so as to take account of any variation between the Adjusted Basis of such property to
the Company for federal income tax purposes and its initial Gross Asset Value (computed in
accordance with the definition of Gross Asset Value) using the traditional method pursuant to the
Regulations under Code Section 704(c). If the Gross Asset Value of any Company asset is adjusted
pursuant to paragraph (b) of the definition of Gross Asset Value, subsequent allocations of income,
gain, loss, and deduction with respect to such asset will take account of any variation between the
Adjusted Basis of such asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder. The Members by Unanimous
Consent will make any elections or other decisions relating to such allocations in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this
Section 5.4 are solely for purposes of federal, state, and local taxes and will not affect,
or in any way be taken into account in computing, any Unit Holder’s Capital Account or share of
Profits, Losses, other items or distributions pursuant to any provision of this Agreement.
ARTICLE 6
MANAGEMENT
MANAGEMENT
6.1 Manager-Managed.
(a) General Management Terms. The Members agree that the management of the Company is vested
in its Managers. The Members hereby appoint MGM Xxxx and JRD as the Managers of the Company for so
long as each Person is a Member of the Company and is not a Defaulting Member. MGM Xxxx is hereby
designated as the “Gaming Business Manager” and JRD is hereby appointed as the
“Development Business Manager”. MGM Xxxx shall have the authority to manage the Gaming
Business and JRD shall have the authority to manage the Development Business. However, the Members
intend that the Gaming Business Manager and the Development Business Manager explore synergistic
opportunities between the two Lines of Businesses. Consequently, each Manager shall make
commercially reasonable efforts to consult with the other Manager in conducting its Line of
Business and to work to promote realization of synergistic opportunities between the two Lines of
Businesses. In addition to the business plans and operating and development budget set forth in
Section 6.1(b), the Managers shall work together to prepare a Master Plan within eighteen
(18) months from the execution of this Agreement.
(i) The Development Manager shall make good faith efforts to conduct the Development Business
in conformity with the Development Business Approved Budget/Plan and may take any action that is
consistent with the Development Business Approved Budget/Plan. The Development Manager’s actions
shall be deemed to be in
20
conformity with the Development Business Approved Budget/Plan if the Development Manager’s
action does not result in a Material Deviation, or is otherwise specifically permitted by this
Agreement.
(ii) The Gaming Business Manager shall make good faith efforts to conduct the Gaming Business
in conformity with the Business Plan and the Master Plan. Except as specifically set forth in this
Agreement, the Gaming Business Manager may take any action that is consistent with the Business
Plan and the Master Plan.
(b) Approved Budget/Plan. The Gaming Business Manager and the Development Manager shall
prepare and submit for approval of the Members, business plans and operating and development budget
as set forth in this Section 6.1(b):
(i) Within ninety (90) days from approval of the Master Plan or as soon as reasonably
practicable thereafter, the Managers shall work together to develop a business plan (“Business
Plan”) for both Lines of Business. With respect to each Line of Business, the Business Plan
shall set forth the timeline for any development or redevelopment activity and the manner in which
the Manager proposes to finance the activity, and such other matters as the Manager consider
material to the Manager’s Line of Business. Further, each Manager shall update and revise the
Business Plan in connection with its Line of Business for review by the Members once annually (or
more often the Managers deem appropriate).
(ii) By January 31 of the year following the Contribution Date, the Gaming Business Manager
shall propose an annual operating budget for the Gaming Business which budget will describe the
proposed revenues, expenses and reserves for the Gaming Business and such other matters as the
Gaming Business Manager considers material (the “Gaming Business Operating Budget”).
Further, the Gaming Business Manager shall update and revise the Gaming Business Operating Budget
for review by the Members once annually (or more often as it deems appropriate in its sole and
absolute discretion), which shall be submitted by the Gaming Manager to the Members no later than
forty five (45) days prior to the commencement of each Fiscal Year of the Company.
(iii) Before taking on any capital improvements, development, or redevelopment activity
included in the Master Plan or the Business Plan in connection with a Manager’s Line of Business,
and on or before sixty (60) days prior to the proposed date of the initiation of such activity,
such Manager shall propose a development budget for such capital improvements, development, or
redevelopment activity in connection with such Manager’s Line of Business, (each a “Development
Budget”), which Development Budget shall, among others, include the proposed terms of any
acquisition or construction financing. Further, each Manager shall update and revise any existing
Development Budget for review by the Members once annually (or more often as it deems appropriate),
which shall be submitted by the Manager to the Members no later than forty five (45) days prior to
the commencement of each Fiscal Year of the Company.
(iv) At such time as a certificate of substantial completion or similar instrument is issued
with respect to any Improvements, the Development Manager shall propose an annual operating budget
for the Development Business (the “Development Business
21
Operating Budget”). Further, the Development Manager shall update and revise the
Development Business Operating Budget for review by the Members once annually (or more often as it
deems appropriate) which shall be submitted by the Manager to the Members no later than forty five
(45) days prior to the commencement of each Fiscal Year of the Company.
(v) Together, the Master Plan and the Business Plan as it relates to the Development Business,
the Development Manager’s Development Budget, and the Development Business Operating Budget, when
approved by the Members in accordance with the provisions of this Section 6.1(b), shall be
referred to as the “Development Business Approved Budget/Plan”. Further, together, the
Development Business Approved Budget/Plan and the Master Plan and the Business Plan as it relates
to the Gaming Business, when approved by the Members in accordance with the provisions of this
Section 6.1(b), shall be referred to as the “Overall Approved Budget/Plan”.
(vi) At the time that a Manager proposes the adoption of the Gaming Business Operating Budget,
a Development Budget, and the Development Business Operating Budget, as applicable, or at any time
that the Manager proposes any revisions, including any annual adjustments, to such plan or budget
(each a “Proposal”), such Manager shall first obtain the Unanimous Consent of the Members,
which approval shall not be unreasonably withheld. Within thirty (30) days after receiving such
Proposal from a Manager, the Member will by written notice to the Managers either approve the
Proposal or state with specificity and detail its good faith reasons for disapproving the Proposal.
A Member may, among other reasons, disapprove the Proposal if the Member reasonably determines
that the Proposal does not include sufficient details upon which a Member may make a determination
whether to approve the Proposal. A failure on the part of a Member to notify the Managers in
writing with specificity of its reasonable disapproval of the Proposal within thirty (30) days
after receipt of the Proposal shall be deemed conclusively to constitute such Member’s approval of
the Proposal. Any Proposal by a Manager must (i) be in the same general format as the existing, if
any, Gaming Business Operating Budget, Development Budget, or Development Business Operating
Budget, as applicable, and (ii) address, at a minimum, all material matters that are addressed in
such existing budget.
(vii) If a Proposal fails to be approved by the Members under Section 6.1(b)(vi)
above, the Managers and Members shall cause their duly authorized representatives to meet and
discuss the merits of the Proposal within fifteen (15) days after notice of disapproval was
received by the Manager. If the Members cannot agree within the fifteen (15) day time period, or
within a longer time period agreed to by all Members in writing, each Manager shall operate its
Line of Business in accordance with the existing Overall Approved Budget/Plan, if any, provided
that each Manager may honor previously approved obligations of the Company in connection with its
Line of Business, but shall not make any improvements or incur additional obligations, except to
the extent consistent with the Overall Approved Budget/Plan, until such time as a new Proposal has
been approved.
(c) Site Plan. Before taking on any capital improvements, development, or
redevelopment activity included in the Business Plan in connection with a Manager’s Line of
Business, and within sixty (60) days from the proposed date of the initiation of such activity,
such Manager shall Propose a site plan (each a “Site Plan”) for the property in connection
with
22
such development activity. The Site Plan, and any revisions to the Site Plan, is subject to
the approval procedures set forth in Section 6.1(b)(vi) and (vii) of this Agreement. Each
Manager is authorized to proceed with capital improvements, development or redevelopment in
connection with its Line of Business in substantial conformance with the approved Site Plan and the
Overall Approved Budget/Plan subject to the provisions of this Agreement. If the Members cannot
agree on a Site Plan, each Member and the Company may only take such actions as are consistent with
the previous Site Plan, if any, or otherwise specifically permitted by this Agreement.
6.2 Responsibilities, Rights and Powers of the Manager. Each Manager agrees to devote to the
Company such time as may be necessary for the proper performance of the duties assigned to the
Manager under this Agreement, but is not required to devote full time to the performance of such
duties. Except as expressly provided in Section 6.4 or otherwise in this Agreement, each
Manager shall have full, exclusive and complete power to manage and control the day-to-day
operations and administrative affairs of the Manager’s Line of Business in accordance with this
Agreement and in a manner that is consistent with the then Overall Approved Budget/Plan and Site
Plan. In addition to the powers and responsibilities of the Manager listed in other Sections of
this Agreement, the rights, responsibilities and powers of each Manager in connection with such
Manager’s Line of Business include, but are not limited to, the following, all of which may be done
at the Company’s expense:
(a) Performing all normal business functions and otherwise operating and managing the business
and affairs of the Company in accordance with the then Overall Approved Budget/Plan as limited by
this Agreement;
(b) Protecting the interests of the Company and the Subsidiaries and their properties,
improvements and other assets;
(c) Obtaining and paying for all insurance coverage that is appropriate, as determined by the
Manager in its reasonable discretion and that is in accordance with the then Overall Approved
Budget/Plan, for the protection of the Line of Business managed by such Manager;
(d) Making, executing, acknowledging and delivering any and all documents of transfer or
conveyance and any and all instruments, including agreements with regulatory agencies, that may be
necessary or appropriate to carry out the powers herein granted for purposes of the Company in
connection with the Manager’s Line of Business;
(e) Making capital expenditures in accordance with the then Overall Approved Budget/Plan in
connection with the Manager’s Line of Business;
(f) Preparing and delivering to each Member all reports required by the terms of this
Agreement in connection with such Manager’s Line of Business;
(g) Causing all books of account and other records in connection with such Manager’s Line of
Business to be kept in accordance with the terms of this Agreement;
23
(h) Maintaining proper reserves for, and to the extent that funds of the Company are
available, paying all taxes, assessments, rents and other impositions applicable to the assets held
in the Manager’s Line of Business as set forth in the Overall Approved Budget/Plan;
(i) Maintaining proper reserves for, and to the extent that funds of the Company are
available, paying all debts and other obligations of the Company and the Subsidiaries in connection
with the Manager’s Line of Business as they come due as set forth in the Overall Approved
Budget/Plan;
(j) Subject to Section 6.10, causing the Line of Business to retain or employ,
coordinate and determine the services of all architects, engineers, contractors, consultants,
employees, accountants, attorneys and other persons necessary or appropriate to carry out the
Manager’s Line of Business, to manage the Line of Business’s assets;
(k) Establishing one or more bank accounts on behalf of the Company and its Subsidiaries in
connection with the Manager’s Line of Business, maintaining all funds of the Company in Company
accounts or account of Subsidiaries in a bank or banks, and being the signatory to such accounts.
In the event of a change in the Manager, the prior Manager must transfer signature authority on all
such accounts to the new Manager;
(l) Making distributions periodically to the Unit Holders in accordance with the provisions of
this Agreement;
(m) After obtaining Unanimous Consent for such financing, using commercially reasonable
efforts to obtain construction financing in connection with any capital improvement, development or
redevelopment in connection with such Manager’s Line of Business in a prompt and reasonable manner
and upon terms most favorable to the Company and the applicable Subsidiaries and, in connection
therewith, negotiating, structuring and documenting the construction financing, all consistent with
the Overall Approved Budget/Plan;
(n) Where applicable, obtaining, in an expeditious manner, all governmental and
quasi-governmental licenses, approvals, permits and entitlements, including, without limitation,
all zoning and master plan approvals necessary or appropriate for the design, development,
construction, ownership and operation of any improvements in connections with all development or
redevelopment activity related to such Manager’s Line of Business;
(o) Where applicable, preparing, submitting and prosecuting diligently to completion,
applications for all necessary pre-construction permits for each phase of development activity in
connection with such Manager’s Line of Business;
(p) Where applicable, preparing or causing to be prepared all necessary preliminary plans and
architectural, engineering, design and construction drawings and other construction documents for
each phase of development activity in connection with such Manager’s Line of Business;
(q) Where applicable, arranging for the Company to obtain a construction contract from a
reputable and qualified general contractor or a construction management
24
agreement from a reputable and qualified construction management firm, and engaging on behalf
of the Company other reputable and qualified contractors or subcontractors, architects, engineers,
designers and other professionals for the design, development and construction for each phase of
development activity in connection with such Manager’s Line of Business;
(r) Where applicable, keeping the Members fully advised on a regular basis with respect to all
aspects of the design, permitting, development and construction of each phase of development
activity in connection with such Manager’s Line of Business;
(s) With respect to the Development Business Manager, entering into leases of the Improvements
that provide for an effective rental rate of at least ninety percent (90%) of that set forth in the
then Development Business Approved Budget/Plan;
(t) With respect to the Development Business Manager, negotiating and entering into contracts
for the marketing and sales of the Improvements in accordance with the Development Business
Approved Budget/Plan;
(u) Unless doing so is otherwise limited under the terms of this Agreement, undertaking such
actions as are necessary or desirable so that the Company, within reason, promptly complies with
all material present and future laws, ordinances, orders, rules, regulations and requirements of
all governmental authorities having jurisdiction which may be applicable to the Company, its
property, and the operations and management of the Company and its Lines of Business; and
(v) Performing all other duties required by this Agreement to be performed by a Manager in
connection with such Manager’s Line of Business, including, without limitation, performing such
actions as are necessary in connection with the day-to-day business of the Company to the extent
consistent with the Overall Approved Budget/Plan.
6.3 Member Acts. Except upon the specific authorization of the Members, no Member, in such
Member’s capacity as a Member, is authorized or empowered to execute, deliver or perform any
agreements, acts, transactions or other matters contemplated in this Agreement on behalf of the
Company as agent for the Company, notwithstanding any applicable law, rule, or regulation to the
contrary.
6.4 Actions Requiring a Vote. No Manager may undertake any of the following acts (“Major
Decisions”) without Unanimous Consent in writing:
(a) Amending this Agreement;
(b) Acquiring any real property in addition to the Property, except for immaterial
acquisitions of property rights ancillary to the development of the Property;
(c) Causing the Company to file for Bankruptcy;
(d) Using the Company’s or the Subsidiaries’ funds or capital in any way other than for the
business and purpose of the Company as set forth in Section 2.3; or in accordance with the
then Overall Approved Budget/Plan;
25
(e) Amending an Overall Approved Budget/Plan or the Site Plan to the extent requiring approval
of the other Member under
Sections 6.1(b) or 6.1(c), whichever is applicable;
Sections 6.1(b) or 6.1(c), whichever is applicable;
(f) With respect to the Development Manager, taking any action that would result in a Material
Deviation from the Development Business Approved Budget/Plan; provided, however, notwithstanding
the foregoing to the contrary, in cases where there exists a present and material risk of damage to
property, injury to person, or breach of a Company obligation (unless resulting from the action or
failure to act of the Manager), the Development Manager may reasonably and in good faith take such
steps as the Development Manager deems immediately necessary or advisable to eliminate or reduce
the risk or breach without regard to whether such action would result in a Material Deviation from
the Development Business Approved Budget/Plan. In the event of any such emergency action, the
Manager shall limit its actions to those necessary to reduce the risk or breach and shall give the
other Members notice of such actions as soon thereafter as possible;
(g) Admitting any Person as a Member of the Company or any Subsidiary;
(h) Except as specifically permitted in this Agreement, making any expenditure or taking any
action that is inconsistent with the Overall Approved Budget/Plan or the Approved Site Plan;
(i) Selling, exchanging, conveying, transferring or otherwise disposing of all or any part of
any Company property other than in the ordinary course of the Company’s or a Subsidiary’s business
or except as permitted under Section 6.2(u) above;
(j) Leasing all or any part of the Property other than as permitted under Section
6.2(t) above;
(k) Except as otherwise provided in this Agreement, dissolving or liquidating the Company, or
merging, consolidating or recapitalizing the Company;
(l) Compromising any claim owned by the Company in excess of $250,000 or submitting to
arbitration any dispute or controversy involving the Company or a Subsidiary,
(m) When required under this Agreement, selecting accountants which perform an annual audit
and issue an opinion letter with respect to the financial statements of the Company or the
Subsidiaries;
(n) Requiring additional Capital Contributions;
(o) Requiring or permitting Member Loans and in connection therewith determining the terms of
any Member Loans;
(p) Loaning Company or Subsidiary funds or assets, but the foregoing does not preclude a
Manager’s ability to encumber the assets of its Line of Business as security for loans to the
Company in a manner consistent with the Overall Approved Budget/Plan;
26
(q) Borrowing or raising monies for the purposes of the Line of Business from any source and
causing the Company or a Subsidiary to issue a promissory note (or any other evidence of
indebtedness) and securing repayment thereof by pledging or granting a security interest in all or
any part of the Line of Business’ assets;
(r) Making any charitable or political donations; or
(s) Taking any other action that expressly requires the approval of the Members pursuant to
this Agreement.
6.5 Filing of Documents. The Managers agree to file or cause to be filed all certificates or
documents as may be reasonably determined by the Managers to be necessary or appropriate for the
formation, continuation, qualification and operation of a limited liability company in the State of
Nevada and any other state in which the Company or a Subsidiary may elect to do business.
6.6 Indemnification and Liability.
(a) Company Indemnification. The Company agrees to indemnify, defend and hold harmless the
Members, the Manager and their Affiliates (each, an “Indemnitee”) for, from and against any
and all losses, claims, damages, liabilities, expenses (including reasonable attorneys’ fees and
costs), judgments, fines, settlements, demands, actions, or suits relating to or arising out of the
business of the Company, the development of the Property or the exercise by such Indemnitee of any
authority conferred on it hereunder or the performance by such Indemnitee of any of its duties and
obligations hereunder, even if such Indemnitee was negligent. Notwithstanding anything contained
in this Agreement to the contrary, no Indemnitee is entitled to indemnification hereunder, but
shall instead indemnify and hold harmless the Company and each Member (other than the Indemnitee),
with respect to any claim, issue or matter in respect of which such Indemnitee (or the Company as
the result of an act or omission of such Indemnitee) has been adjudged liable for fraud, gross
negligence or willful misconduct. In addition, no Member or its Affiliate is entitled to
indemnification as a result of a material breach by such Member of any term or provision of this
Agreement, the Members acknowledging that the remedies of the Members for a breach of this
Agreement are as set forth in Section 7.5 below.
(b) Liability. An Indemnitee will not be liable, responsible, accountable in damages or
otherwise to the Company or the Members for any act or failure to act in connection with the
Company and its business unless the act or omission is attributed to gross negligence, willful
misconduct or fraud, in which event the Indemnitee must indemnify and hold harmless the Company and
each Member (other than the Indemnitee) to the same extent and on the same terms as provided in
Section 6.6(a) above and Section 6.6(c) below.
(c) Terms of Indemnification. Each indemnity provided for under this Agreement is subject to
the following provisions:
(i) The indemnity will cover the costs and expenses of the Indemnitee, including reasonable
attorneys’ fees and costs, related to any actions, suits or judgments incident to any of the
matters covered by such indemnity.
27
(ii) The Indemnitee must notify the Company of any claim against the Indemnitee covered by the
indemnity within forty-five (45) days after the Indemnitee has notice of such claim, but failure to
notify the Company in no case prejudices the rights of the Indemnitee under this Agreement unless
the Company is prejudiced by such failure and then only to the extent the Company is prejudiced by
such failure. If the Company fails to discharge or undertake to defend the Indemnitee against such
liability upon learning of such liability, then the Indemnitee may settle such liability, and the
liability of the Company hereunder will be conclusively established by such settlement, which
liability will include both the settlement consideration and the reasonable costs and expenses,
including reasonable attorneys’ fees and costs, incurred by the Indemnitee in effecting such
settlement.
(iii) No indemnity hereunder may be construed to limit or diminish the coverage of any Member
under any insurance obtained by the Company. Payment under any such policy is not a condition
precedent to any indemnification provided in this Agreement.
6.7 Compensation.
(a) Fees. Unless expressly provided for in this Agreement or approved by Unanimous Consent,
no Member or Manager, nor any Affiliate of any of them, shall be paid any compensation for its
management services to the Company.
(b) Reimbursable Expenses. The Company shall reimburse each Manager and its Affiliates for
all actual out-of-pocket, arm’s length, third-party expenses (other than expenses incurred in
connection with any Manager’s actions with respect to which the Manager has been adjudged liable
for fraud, gross negligence or willful misconduct) incurred in connection with the carrying out of
the Manager’s duties set forth in this Amended Agreement, and the management of the Company and the
Manager’s Line of Business including: (i) taxes, insurance and assessment(s) with respect to the
assets and operation of the Company; (ii) legal and accounting fees; and (iii) expenses for the
acquisition, financing, operation, construction and disposition of Company assets.
(c) Additional Reimbursable Expenses. In addition to being reimbursed for its actual
out-of-pocket costs as set forth in Section 6.7(b) above, MGM Xxxx, or the MGM Xxxx
affiliate providing such services, shall be entitled to reimbursement for its allocable share of
its direct costs in connection with providing internal audit, legal, payroll, information
technology, human resource and other administrative services to the Resorts and the Truck Stations
as set forth in the Overall Approved Budget/Plan. Similarly, in addition to being reimbursed for
its actual out-of-pocket costs as set forth in Section 6.7(b) above, JRD, or JRD affiliate
providing such services, shall be entitled to reimbursement for its allocable share of its direct
costs in connection with providing internal audit, legal, payroll, information technology, human
resource and other administrative services in connection with the Development Business as set forth
in the Overall Approved Budget/Plan.
6.8 Amendment of Agreement. Any non-Defaulting Member may propose amendments to this
Agreement. The Managers will submit to the Members a verbatim statement of any proposed amendment
with a recommendation as to the proposed amendment. The Managers will seek Unanimous Consent on
the proposed amendment and call a meeting to vote
28
thereon and to transact any other business that the Managers deem appropriate. A proposed
amendment will be adopted and be effective as an amendment hereto if it receives Unanimous Consent.
Notwithstanding any provision of this Agreement to the contrary, the Managers may make amendments
to this Agreement without the vote of the Members so long as such amendments are of a ministerial
nature.
6.9 Standard of Care. The Managers shall (i) conduct the business of the Manager’s Line of
Business and on a day-to-day basis in accordance with the standard of care required of prudent and
experienced third-party asset managers performing similar functions in accordance with customary
industry standards, and will use commercially reasonable efforts to conduct the business of the
Line of Business in a manner consistent with the Overall Approved Budget/Plan, provided that the
Gaming Business Manager shall operate the Resorts and the Truck Stations consistent with past
practice and custom (except to the extent there are changes in the law); (ii) perform the duties
assigned to it under this Agreement and (iii) carry out all decisions and resolutions of the
Members as required under this Agreement. Unless otherwise specifically provided in this
Agreement, whenever hereunder a Manager or Member is required or permitted to make a decision, take
or approve an action or omit to do any of the foregoing: (i) in its sole discretion, such Member or
the Manager shall be entitled to consider only such factors and interest, including its own, as it
desires, and shall have no duty or obligation to consider any other interest (including the
interest of any other Member) or factors whatsoever, (ii) with an express standard of behavior
(including, without limitation, standards such as “reasonable” or “good faith”), then such Member
or the Manager shall comply with such express standard, or (iii) without any express standard, then
such Member or Manager shall be obligated to act consistently with standards set for in this
Section 6.9. Without limiting the foregoing, each Member agrees that the standards set
forth in this Section 6.9 are intended to supersede any fiduciary obligations that would
otherwise apply to the Members under any applicable law (excluding any fiduciary duty for the
benefit of the Company required of Members’ Affiliates pursuant to any written contract between
such Affiliates and the Company).
6.10 Transactions with Affiliates. Each Manager shall be entitled to employ or retain, or
enter into any transaction or contract with, any Member or any officer, employee or Affiliate of
any Member, provided that (i) the compensation and other terms and conditions of any such
arrangement are no less favorable to the Company than those that could reasonably be obtained at
the time from an unrelated party providing comparable goods or services; and (ii) the Manager
discloses the transaction to the Members prior to entering into such transaction.
6.11 Independent Activities.
(a) General Scope of Independent Activities. The Members hereby expressly agree and
acknowledge that each of the Members, either directly or through the Member’s Affiliates (which,
for the purposes of this Section 6.11 includes Tracinda Corporation and its affiliates), is
involved in transactions, investments and business ventures and undertakings of every nature,
which include, without limitation, the managing and operating of gaming businesses and other
related activities such as retail and room rental and the ownership, construction, development,
marketing, sale and operation of real property and improvements of every type and nature thereon,
as well as activities which are not associated in any manner with
29
the gaming business or real estate (all such investments and activities being referred to
hereinafter as the “Independent Activities”).
(b) Waiver of Rights with Respect to Independent Activities. Nothing in this
Agreement shall be construed to: (i) prohibit any Member or the Member’s Affiliates from
continuing, acquiring, owning or otherwise participating in any Independent Activity that is not
owned or operated by the Company, even if such Independent Activity is or may be in competition
with the Company; or (ii) require any Member or the Member’s Affiliates to allow the Company or any
other Member to participate in the ownership or profits of any such Independent Activity. To the
extent any Member would have any rights or claims against any other Member as a result of the
Independent Activities of such Member or such Member’s Affiliates, whether arising by statute,
common law or in equity, the same are hereby waived.
(c) Limitation on Company Opportunities. Each Member hereby represents and warrants
to the other Member that it has not been offered, as an inducement to enter into this Agreement,
the opportunity to participate in the ownership or profits of any present or future Independent
Activity of any kind whatsoever of such other member or such other Member’s Affiliates.
(d) Acknowledgment of Reasonableness. The Members hereby expressly acknowledge,
represent and warrant that they are sophisticated investors, they understand the terms, conditions
and waivers set forth in this Section 6.11 and that the provisions of this Section
6.11 are reasonable, taking into account the relative sophistication and bargaining position of
the Members.
6.12 Decision of the Managers. Unless a decision specifically relates to a Manager’s Line of
Business or if this Agreement expressly states otherwise, all actions, approvals, elections and
consents in this Agreement to be made by “the Managers” will be effective when approved by
both Managers.
6.13 Delegation by MGM Xxxx. MGM Xxxx may delegate part or all of its duties to manager the
Gaming Business to one or more Affiliates, provided that such Affiliate shall not be entitled to
compensation from the Company in connection with its services.
ARTICLE 7
THE MEMBERS
THE MEMBERS
7.1 Meetings of the Members. Meetings of the Members will be held on the call of the Managers
or one or more non-Defaulting Member, provided that at least five (5) Business Days’ notice must be
given to all Members with respect to any meeting, and further provided that any Member may require
that such meeting be held by telephone. A waiver of any required notice is equivalent to the
giving of such notice if such waiver is in writing and signed by the Member entitled to such
notice, whether before, at or after the time stated therein. The Members may make use of
telephones and other electronic devices to hold meetings, provided that each Member may
simultaneously participate with the other Members with respect to all discussions and votes of the
Members. The Members may act without a meeting if the action taken is reduced to writing (either
prior to or thereafter) and approved and signed by the required vote of
30
Members in accordance with the voting provisions of this Agreement. Written minutes will be
taken at each meeting of the Members; however, any action taken or matter agreed upon by the
Members will be deemed final, whether or not written minutes are prepared or finalized.
7.2 Voting of the Members. Unless this Agreement expressly states otherwise, all votes,
actions, approvals, elections and consents required in this Agreement to be made by “the
Members” will be effective when approved by Unanimous Consent.
7.3 Other Business Interests of the Members. Except as set forth in Section 6.2
above, this Agreement may not be construed to grant any right, privilege or option to a Member to
participate in any manner in any other business, corporation, partnership or investment in which
the other Members or their Affiliates may participate including those which may be the same as or
similar to the Company’s business or in direct competition therewith including the ownership and
development of parcels adjacent to the Property. Except as set forth in Section 6.11(b)
above, each Member expressly waives the doctrine of corporate opportunity (or any analogous
doctrine) with respect to any other such business, corporation, partnership or investment of any
other Member or Affiliate; provided, however, that this waiver and all other terms and conditions
of this Agreement will not restrict or otherwise affect any party’s rights, obligations and duties
under any employment or consulting agreement with the Company.
7.4 Rights and Obligations of Members.
(a) Limitation of Liability. Each Member’s liability for the debts, obligations and
liabilities of the Company is limited as set forth in the Act and other applicable law.
(b) Confidentiality. Except as contemplated hereby or required by the Gaming Laws, the Nevada
gaming authorities or a court of competent authority, each Member must keep confidential and not
disclose or use, and must use its commercially reasonable efforts to prevent such Member’s
Affiliates and any of such Member’s, or such Member’s Affiliates’, present or former employees,
agents and representatives, from disclosing or using, without the prior written authorization of
the Company, any information pertaining to this Agreement, any of the transactions contemplated
hereby or the business of the Company, provided that each Member shall be permitted to share
pertinent documents relating to the Company with third-party advisors so long as such third-party
advisors are bound by the same confidentiality requirements of this Section 7.4(b). The
term “confidential information” is used in this Section 7.4 to describe information
that is confidential, non-public or proprietary in nature, is provided to such Member or such
Member’s representative by the Company, any other Member, or any such Person’s agents,
representatives or employees, and relates either directly or indirectly to the Company.
Notwithstanding anything herein to the contrary, JRD acknowledges that MGM MIRAGE is a
publicly-traded company and nothing in this Agreement shall be construed to limit or otherwise
circumscribe the taking, by MGM Xxxx or any Affiliate thereof, of all actions reasonably determined
by MGM Xxxx to be necessary or appropriate to comply with any disclosure obligations relating
thereto. This provision shall survive the termination or expiration of this Agreement in
perpetuity for as long as information shall remain confidential information. The obligations not
to use or disclose confidential information shall not apply to confidential information which, with
respect to a Member (a) has been made previously available
31
to the public by the Member or becomes generally available to the public, other than as a
result of a breach of this Agreement or any other confidentiality agreement between the Members or
their respective Affiliates, (b) prior to disclosure to any Member or its respective Affiliates,
was already rightfully in any such Member’s possession, or the possession of any Affiliate of such
Member, or (c) is obtained by such Member from a third party who is lawfully in possession of such
confidential information, and not in violation of any contractual, legal or fiduciary obligation to
the other Member with respect to such confidential information, and who does not require such
Member to refrain from disclosing such confidential information to others.
7.5 Defaulting Member.
(a) Events of Default. The occurrence of any of the following events constitutes an event of
default and the Member so defaulting (herein referred to as the “Defaulting Member”) will
(except as otherwise provided in Section 7.5(a)(iv) below) thereafter be deemed to be in
default without any further action whatsoever on the part of the Company or the other Members: (i)
attempted dissolution of the Company by such Member other than pursuant to the express provisions
of this Agreement; (ii) a Bankruptcy as to such Member; (iii) a Withdrawal Event as to such Member;
(iv) a material breach of this Agreement by such Member, provided that if the material breach is
non-monetary, then the Member shall not be deemed to be a Defaulting Member until after a period of
thirty (30) days has elapsed from the delivery of written notice thereof from the non-Defaulting
Member to the Defaulting Member, such material default has not been rectified or cured; provided
further that if the non-monetary material default complained of in such notice is of such a nature
that the same can be rectified or cured, but cannot with reasonable diligence be done within thirty
(30) days then such material default shall be deemed to be rectified or cured if the Defaulting
Member shall, within a reasonable time period to be determined by the non-Defaulting Member, which
in no event shall exceed sixty (60) days, from the date of giving of such notice cure and rectify
the same; (v) a Transfer of Units that is not a Permitted Transfer; (vi) the failure by the Member
to make its Capital Contribution in accordance with Section 3.2; (vii) an indirect transfer
of the ownership interest in the Company (for example, through a change in the ownership of any
Member or the upper-tier owners of the Member) that does not meet the requirements of Section
9.3(c), Section 9.3(e) and Section 9.3(f), as applicable; (viii) in the case of
MGM Xxxx, any transfer of a direct or indirect ownership interest in MGM Xxxx, if the ownership
interest in MGM Xxxx constitutes substantially all of the assets (by value) in such transfer; or
(ix) in the case of JRD, any transfer of a direct or indirect ownership interest in JRD or a JRD
Successor (for example, through a change in the ownership of JRD or the upper-tier owners of JRD)
unless MGM Xxxx approves the transfer, which approval will not be unreasonably withheld or delayed
so long as both the Greenspun Family and the Cloobeck Family have a level of ownership, directly or
indirectly, including through subsidiaries, in JRD or the JRD Successor that is reasonably
satisfactory to MGM Xxxx.
(b) Effect of Default. Notwithstanding anything in this Agreement to the contrary, a
Defaulting Member does not have any voting, approval or consent rights with respect to any matters
set forth in this Agreement, including but not limited to all approval and consent rights set forth
in Article 6 and Article 7, provided, however, that except as specifically set
forth in this Agreement, the non-Defaulting Member may not use its unanimous voting power to amend
this Agreement except to the extent reasonably necessary if the amendments (i) are of a
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ministerial nature, (ii) do not adversely affect the Unit Holders in any material respect, or
(iii) are required by law or regulations. The Defaulting Member’s right to vote will be reinstated
if and when the Defaulting Member’s default is cured in accordance with the provisions of this
Agreement. The Defaulting Member, at the sole election of the non-Defaulting Member, shall be
removed as the Manager and the non-Defaulting Member shall determine the replacement Manager, as
applicable.
(c) Remedies on Default. Upon the occurrence of a default by a Member, the non-Defaulting
Member and the Company have all rights and remedies available at law and in equity and may
institute legal proceedings against the Defaulting Member with respect to any damages or losses
incurred by the Company or any non-Defaulting Member, and/or the non-Defaulting Member may cause
the Company to dissolve and liquidate in accordance with the provisions of Article 10. The
Company is entitled to reasonable attorneys’ fees and costs incurred in connection with any such
action. Further, if the default results from the failure of the Member to make all or any portion
of a required additional Capital Contribution under Section 3.2 above, then the remedies
set forth in Section 3.4 shall apply. In addition, at any time during the continuance of
an Event of Default under this Agreement, the non-defaulting Member, without limiting any other
rights or remedies it may have under this Agreement, at law or in equity, may, upon written notice
(the “Appraisal Notice”) delivered to the Defaulting Member, elect to purchase all (but not
less than all) of the Interest of the Defaulting Member for cash in an amount equal to eighty
percent (80%) of the Appraised Value of the Defaulting Member’s Interest. The “Appraised
Value” shall be an amount equal to the Defaulting Member’s Interest multiplied by the fair
market value of the Company, which shall represent the amount that a single purchaser unrelated to
any Member would reasonably be expected to pay for the Company business and assets as a going
concern, subject to all existing indebtedness, liens and encumbrances, in a single cash purchase,
taking into account the current condition, use and net income of the Facility. If the Members are
unable to mutually agree upon the Appraised Value within thirty (30) days after delivery of the
Appraisal Notice, each Member shall select a reputable Member of the Appraisal Institute
(“MAI”) appraiser to determine the Appraised Value. The two appraisers shall furnish the
Members with their written appraisals within forty-five (45) days of their selection, setting forth
their determinations of the Appraised Value as of the date of the Appraisal Notice. If the higher
of such appraisals does not exceed the lower of such appraisals by more than ten percent (10%), the
Appraised Value shall be the average of the two appraisals. If the higher of such appraisals
exceeds the lower of such appraisals by more than ten percent (10%), the two appraisers shall,
within twenty (20) days, mutually select a third reputable MAI appraiser. The third appraiser
shall furnish the Members with its written appraisal within forty-five (45) days of its selection,
and the Appraised Value shall be the average of the three appraisals. The cost of the appraisals
shall be borne equally by the Defaulting Member and the non-Defaulting Member. The determination
of the Appraised Value in accordance with this Section 7.5(c) shall constitute a final and
non-appealable arbitration. The closing of the purchase and sale of the Interest of the Defaulting
Member pursuant to this Section 7.5(c) shall occur not later than ninety (90) days after
determination of the Appraised Value, or such other time as may be directed by the Nevada gaming
authorities. At the closing, the Defaulting Member shall deliver to the non-Defaulting Member good
title to its Interest, free and clear of any liens, claims or other encumbrances.
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ARTICLE 8
BOOKS, RECORDS, REPORTS AND ACCOUNTING
BOOKS, RECORDS, REPORTS AND ACCOUNTING
8.1 Records. The Managers agree to keep or cause to be kept at the Principal Office of the
Company (or at the principal business office of the Managers) the following: (a) a current list of
the full name and last known business, residence or mailing address of each Member; (b) a copy of
the Company’s initial Articles of Organization and all amendments thereto; (c) copies of all
written operating agreements and all amendments thereto, including any prior written operating
agreements no longer in effect; (d) copies of any written and signed promises by the Members to
make Capital Contributions to the Company; (e) copies of the Company’s federal, state and local
income tax returns and reports, if any, for the three most recent years; (f) copies of any prepared
financial statements of the Company for the three most recent years; and (g) minutes (if reduced to
writing) of every meeting of the Members as well as any written consents of the Members to actions
taken by the Members without a meeting. Any such records maintained by the Company may be kept on
or be in the form of any information storage device, provided that the records so kept are
convertible into legible written form within a reasonable period of time. Each Member has the
right to inspect the records of the Company described in this Section 8.1 in person at the
Principal Office of the Company (or the principal office of the Manager, as the case may be) upon
twenty-four (24) hours’ notice. Upon request of a Member, the Manager will photocopy and send any
requested Company records to that Member, provided that the requesting Member pays to the Manager
any actual out-of-pocket costs incurred by the Manager in complying with such request.
8.2 Fiscal Year and Accounting. The Fiscal Year of the Company is the calendar year unless
otherwise required by applicable law. All amounts computed for the purposes of this Agreement and
all applicable questions concerning the rights of Members will be determined using the method of
accounting employed by the Company for federal income tax purposes. The Managers, except as
specifically provided to the contrary herein, will make all decisions as to other accounting
matters.
8.3 Preparation of Tax Returns. The Tax Matters Partner will arrange, at the expense of the
Company, for the preparation and timely filing of all returns of Company income, gains, deductions,
losses and other items necessary for income tax purposes and cause to be furnished to the Members
the tax information reasonably required for income tax reporting purposes. As promptly as
practicable, but in any event within sixty (60) days after the end of each Fiscal Year, the Tax
Matters Partner shall cause to be prepared and distributed to each Member all information necessary
for the preparation of such Member’s federal and state income tax returns, including a statement
showing such Member’s share of income, gains, losses, deductions and credits for such year for
federal and state income tax purposes and the amount of any distributions made to or for the
account of such Member pursuant to this Agreement. The classification, realization and recognition
of income, gain, losses and deductions and other items, for federal income tax purposes, will be on
that method of accounting as the Tax Matters Partner determines or such other method as is required
by the Code.
Tax Elections.
34
(a) At the request of any Member, the Tax Matters Partner, on behalf of the Company, shall
elect to adjust the basis of the assets of the Company for federal income tax purposes in
accordance with Section 754 of the Code in the event of a distribution of any Company property as
described in Section 734 of the Code or a transfer by any Member of its Units in the Company as
described in Section 743 of the Code.
(b) The Tax Matters Partner, on behalf of the Company, shall from time to time make such other
tax elections as it deems necessary or desirable to carry out the business of the Company or the
purposes of this Agreement, provided that the Tax Matters Partner shall use its commercially
reasonable efforts to consult with the other Member prior to such election, if such consultation is
requested by the other Member.
8.4 Tax Controversies. MGM Xxxx is the Tax Matters Partner of the Company. The Tax
Matters Partner is authorized and required to represent the Company (at the Company’s expense) in
connection with all examinations of the Company’s affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Company funds for professional services and
costs associated therewith. The Members agree to cooperate with the Tax Matters Partner and to do
or refrain from doing any or all things reasonably required by the Tax Matters Partner to conduct
those proceedings. The Tax Matters Partner agrees to promptly notify the Members upon the receipt
of any correspondence from any federal, state or local tax authorities relating to any examination
of the Company’s affairs, to consult with the Members regarding the progress of any audit, and not
to settle any tax matters without Unanimous Consent.
8.5 Reports. Within twenty (20) days after the end of each Fiscal Year and within fifteen
(15) days after the end of each of the first three fiscal quarters thereof, and within fifteen (15)
days after the end of each calendar month, the Managers shall cause each Member to be furnished
with a copy of the balance sheet of the Company as of the last day of the applicable period, a
statement of income or loss for the Company for such period, and a statement of the Company’s cash
flow for such period. Annual statements shall also include a statement of the Members’ Capital
Accounts and changes therein for such Fiscal Year. Annual statements shall be audited by the
Company’s accountants, and shall be in such form as shall enable the Members to comply with all
reporting requirements applicable to either of them or their Affiliates under the Securities
Exchange Act of 1934, as amended. The audited financial statements of the Company shall be
furnished to the Members within fifty (50) days after the end of each Fiscal Year. Each Manager
shall be responsible for providing the reports discussed in this Section 8.6 in connection
with its Line of Business.
ARTICLE 9
TRANSFERS, WITHDRAWALS
TRANSFERS, WITHDRAWALS
9.1 Restrictions on Transfers. Except as otherwise permitted by this Agreement, no Unit
Holder may Transfer all or any portion of such Unit Holder’s Units.
9.2 Permitted Transfers. Subject to the conditions and restrictions set forth in Section
9.3 below, a Member may at any time Transfer all or any portion of its Units to (a) any other
Member, (b) any Permitted Transferee, or (c) any Person, provided the Transfer is made to
35
such Person following compliance with the terms of the right of first offer set forth in
Section 9.8. Except in connection with a Transfer occurring following compliance with the
terms of the right of first offer set forth in Section 9.8, no Member is released from its
obligations under this Agreement solely as a result of the Permitted Transfer of all of its Units.
9.3 Conditions to Permitted Transfers. A Transfer will not be treated as a Permitted Transfer
under Section 9.2 above unless and until all of the following conditions are satisfied:
(a) Except in the case of a Transfer by operation of law, the transferor and transferee will
execute and deliver to the Company such documents and instruments of conveyance as may be necessary
or appropriate in the opinion of counsel to the Company to effect such Transfer. In the case of a
Transfer of Units involuntarily by operation of law, the Transfer must be confirmed by presentation
to the Company of legal evidence of such Transfer, in form and substance satisfactory to counsel to
the Company. In all cases, the transferor and/or transferee must reimburse the Company for all
costs and expenses that the Company incurs in connection with such Transfer.
(b) The transferor and transferee must furnish the Company with the transferee’s taxpayer
identification number, sufficient information to determine the transferee’s initial tax basis in
the Units transferred, and any other information reasonably necessary to permit the Company to file
all required federal and state tax returns and other legally-required information statements or
returns. Without limiting the generality of the foregoing, the Company is not required to make any
distribution otherwise provided for in this Agreement with respect to any transferred Units until
the Company has received such information.
(c) No Transfer may be made except upon terms which do not, in the opinion of counsel chosen
by the Company, result in the termination of the Company within the meaning of Section 708 of the
Code, except upon the issuance of a final and non-appealable order or directive of a governmental
agency of any jurisdiction, including the Nevada gaming authorities, disqualifying such Member from
holding any registration, license, approval or permit required for the business of the Company, or
directing that the other Company or any of its Affiliates terminate its relationship with such
Member.
(d) Except in the case of a Transfer of Units involuntarily by operation of law, either (i)
such Units must be registered under the Securities Act and any applicable state securities laws, or
(ii) unless waived by the non-transferring Members, the transferor must provide an opinion of
counsel, which opinion and counsel must be reasonably satisfactory to the non-transferring Members,
to the effect that such Transfer is exempt from all applicable registration requirements and that
such Transfer will not violate any applicable laws regulating the Transfer of securities.
(e) Notwithstanding anything to the contrary in this Agreement, no Member shall be permitted
to Transfer its Units or any portion thereof to the extent such Transfer would be in violation of
applicable law (including without limitation securities laws and regulations and all Gaming Laws)
or would cause a default under any agreement or instrument to which the Company is a party or by
which it is bound. Without limiting the foregoing, at such time as the
36
Company is a Nevada gaming registrant and/or licensee, no Transfer of Units or any portion
thereof shall be valid or effective unless such transfer is first approved by the Nevada gaming
authorities.
(f) Without the consent of MGM Mirage, no Transfer may be made to any Person that is a
competitor of MGM Mirage.
9.4 Prohibited Transfers. Any purported Transfer of Units that is not a Permitted Transfer is
null and void and of no force or effect whatsoever; provided that, if the Company is required to
recognize a Transfer that is not a Permitted Transfer, the Units transferred will be strictly
limited to the transferor’s rights to allocations and distributions as provided by this Agreement
with respect to the transferred Units, which allocations and distributions may be applied (without
limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations or
liabilities for damages that the transferor or transferee of such Units may have to the Company.
In the case of a Transfer or attempted Transfer of Units that is not a Permitted Transfer, the
parties engaging or attempting to engage in such Transfer are obligated to indemnify, defend and
hold harmless the Company and the other Members for, from and against all cost, liability and
damage that the Company or any of such indemnified Members may incur (including, without
limitation, incremental tax liabilities, attorneys’ fees and expenses) as a result of such Transfer
or attempted Transfer and efforts to enforce the indemnity granted hereby.
9.5 Rights of Unadmitted Assignees. A Person who acquires Units in any manner other than as a
Permitted Transfer will be referred to as an “Assignee” and entitled only to allocations
and distributions with respect to such Units in accordance with this Agreement, will have no right
to any information or accounting of the affairs of the Company, will have no right to inspect the
books or records of the Company and will have no rights of a Member under the Act or this
Agreement.
9.6 Distributions and Allocations in Respect of Transferred Units. If any Units are
Transferred during any Fiscal Year in compliance with the provisions of this Article 9,
Profits, Losses, each item thereof and all other items attributable to the Transferred Units for
such Fiscal Year will be divided and allocated between the transferor and the transferee by taking
into account their varying interests during the Fiscal Year in accordance with Code Section 706(d),
using any convention permitted by law and selected by Unanimous Consent. All distributions on or
before the date of such Transfer will be made to the transferor and all distributions thereafter
will be made to the transferee. Solely for purposes of making such allocations and distributions,
the Company will recognize such Transfer not later than the end of the calendar month during which
the Company is given notice of the Transfer, provided that, if the Company is given notice of a
Transfer at least ten (10) Business Days prior to the Transfer, the Company will recognize the
Transfer as of the date of the Transfer, and provided further that if the Company does not receive
a notice stating the date such Units were transferred and such other information as the Managers
may reasonably require within thirty (30) days after the end of the Fiscal Year during which the
Transfer occurs, then all such items will be allocated, and all distributions will be made, to the
Person who, according to the books and records of the Company, was the owner of the Units on the
last day of such Fiscal Year. Neither the Company nor the Managers will incur any liability for
making allocations and distributions in accordance
37
with the provisions of this Section 9.6, whether or not the Managers or the Company
have knowledge of any Transfer of ownership of any Units.
9.7 Withdrawal of a Member. Within thirty (30) days following the Withdrawal Event of a
Member, that Member (or its successor) is required to give notice to the Company of such
withdrawal. Failure to give notice constitutes a default under this Agreement. Upon the
Withdrawal Event of a Member, the withdrawn Member is not entitled to receive the value of such
Member’s Units; rather, the withdrawn Member will be treated as an Assignee of such Member’s Units
in accordance with Section 9.5 above.
9.8 Right of First Offer and Drag Along Right.
(a) General. Except as otherwise provided in Section 9.2, if any Member that
is not a Defaulting Member desires to Transfer all or a portion of the Member’s Units to any Person
who is not a Member, such Transfer shall not constitute a Permitted Transfer unless such Member
shall afford the Company and the other Members a right of first offer pursuant to this Section
9.8.
(b) Notice. A Member that is not a Defaulting Member desiring to Transfer Units (a
“Disposing Member”) shall first provide to the other Members and the Company at least
ninety (90) days’ prior written notice of the Member’s intention to make a Transfer of Units (the
“Disposition Notice”). The Disposition Notice must be accompanied by a complete
description of the price and the terms and conditions upon which the Disposing Member wishes to
market and sell the Units. The price for the Units set forth in the Disposition Notice must be
commercially reasonable and determined in good faith.
(c) Option to the Non-Disposing Member. Upon receipt of the Disposition Notice, the
other Member (the “Non-Disposing Member”) has the right, exercisable within ninety (90)
days after receipt of the Disposition Notice, to notify the Disposing Member that the Non-Disposing
Member or its designee will purchase the Units of the Disposing Member upon the terms set forth in
the Disposition Notice (provided, however, that to the extent that the terms provide for non-cash
consideration, such non-cash consideration may be replaced with property of equivalent value) as if
the Units were marketed under such terms and the Non-Disposing Member was an independent
third-party purchaser); provided, however, that the consummation and closing of such sale must
occur within one hundred eighty (180) days after the date that the Non-Disposing Member notifies
the Disposing Member that the Non-Disposing Member wishes to exercise its rights to purchase the
Units under this Section 9.8(c), provided, further that such 180-day period may be extended
to allow for obtaining any necessary gaming and regulatory approvals as long as the Disposing
Member and the Non-Disposing Member are using commercially reasonable efforts to obtain such
approvals. If the Non-Disposing Member or its designee declines in writing to purchase the Units,
or if the Non-Disposing Member does not affirmatively elect to purchase the Units within such
90-day period, then the Disposing Member has the unilateral authority, notwithstanding anything
else in this Agreement to the contrary, to market and sell its Units on terms no less favorable to
the Company and the Non-Disposing Member than those set forth in the Disposition Notice (e.g., the
price must be no lower and the contingency and closing periods must be no greater than the price
and time periods provided in the Disposition Notice); provided, however, that the consummation and
closing of such sale must
38
occur within one hundred eighty (180) days after the date that the Non-Disposing Member
notifies the Disposing Member in writing that the Non-Disposing Member declines to exercise its
rights to purchase the Units under this Section 9.8(c) (or in the absence of such written
notification, the expiration of the 90-day period within which the Non-Disposing Member was
required to affirmatively elect to exercise such rights), provided, further that such 180-day
period may be extended to allow for obtaining any necessary gaming and regulatory approvals as long
as the Disposing Member and the proposed transferee of the Disposing Member’s Units are using
commercially reasonable efforts to obtain such approvals. If such sale of the Units is not closed
within such 180-day period, or if the Disposing Member wishes to enter into a contract to sell the
Units on terms less favorable to the Company than those set forth in the Disposition Notice, then
any subsequent sale of the Units by the Disposing Member may be effected only after again complying
with the conditions of this Section 9.8. The options set forth in this Section 9.8
shall be subject to the condition that in no event shall less than one hundred percent (100%) of
the Units proposed to be disposed of by the Disposing Member be purchased by the Non-Disposing
Member.
(d) Drag Along Rights.
(i) If the requirements of Sections 9.8(a) through 9.8(c) have been satisfied
and if MGM Xxxx is the Disposing Member and is disposing all of its Units in the Company, then the
MGM Xxxx shall have the right (the “Drag-Along Right”) to require JRD to sell all, but not less
than all, of its Units to such proposed purchaser or transferee on the same terms and conditions as
are applicable to the Transfer by MGM Xxxx of all of its Units to such proposed purchaser or
transferee in accordance with this Section 9.8(d).
(ii) Drag Along Notice. MGM Xxxx shall notify JRD (the “Drag-Along Members”), in
writing (the “Drag-Along Notice”) of the terms and conditions of the proposed Transfer at
least ninety (90) days before the date on which the Transfer is to occur.
(iii) Seller’s Obligations. At or before the time of completion of the Transfer of the Units
set forth in this Section 9.8(d), JRD shall (i) cause to be discharged any and all
encumbrances of, and security interests in, if any, its Units and provide written evidence of such
discharges to the third party purchaser, and (ii) execute and deliver to the third-party purchaser,
against payment for such Units, all certificates or other documents representing such Units, duly
endorsed for transfer or with duly executed assignment forms attached. For purposes of this
Section, no premium or discount shall be attributed to any Unit.
ARTICLE 10
LIQUIDATION AND WINDING UP; MERGER
LIQUIDATION AND WINDING UP; MERGER
10.1 Dissolution. The Company will dissolve only upon:
(a) Unanimous Consent;
(b) upon any Withdrawal Event of the last remaining Member, unless the business of the Company
is continued by the unanimous written consent of the Assignees given within ninety (90) days after
such Withdrawal Event;
39
(c) the occurrence of any event that makes it unlawful for the business of the Company to be
carried on or for the Members to carry on the business of the Company;
(d) the sale or other disposition of all or substantially all of the Company’s assets and
properties and the collection of all notes received in connection with such sale or other
disposition;
(e) the final and non-appealable denial of the Company’s application for any Nevada gaming
registration and/or license for the Resorts and the Truck Stations or, after issuance, the final
and non-appealable revocation of any such registration and/or license;
(f) the issuance of a final and non-appealable order or directive of a governmental agency of
any jurisdiction, including the Nevada gaming authorities, disqualifying a Member from holding any
registration, license, approval or permit required for the business of the Company, or directing
that the other Company or any of its Affiliates terminate its relationship with such Member; or
(g) the failure or inability of a Member, its officers, directors, key employees or direct or
indirect owners or the officers, directors or key employees of its direct or indirect owners to
obtain any registration, license, approval or permit required for the business of the Company or
any other event involving a Member which results in the Company or such Member becoming unable to
conduct the Gaming Business.
10.2 Continuation of the Company. A Withdrawal Event with respect to any Member does not
dissolve the Company, unless such Member is the last remaining Member and the Assignees do not
elect to continue the Company pursuant to Section 10.1(b) above.
10.3 Liquidation. Upon dissolution of the Company, the business and affairs of the Company
will be wound up and liquidated as rapidly as business circumstances permit, the Managers or a
Person (who may be an officer or Affiliate of a Member) designated by the Managers, will act as the
liquidating trustee (the “Liquidating Trustee”), and the assets of the Company will be
liquidated and the proceeds thereof paid (to the extent permitted by applicable law) in the
following order:
(a) First, to creditors, including Members that are creditors, in the order of priority as
required by applicable law;
(b) Second, to a reserve for contingent liabilities to be distributed at the time and in the
manner as the Liquidating Trustee determines in its discretion; and
(c) Third, to the Members in accordance with the positive balance of each Member’s Capital
Account as determined after taking into account all Capital Account adjustments for the Company’s
taxable year during which the liquidation occurs, including any Capital Account adjustments
associated with the allocation of Profits and Losses with respect to any sale, transfer or other
taxable disposition of any Company property. Any such distributions to the Members in respect of
their Capital Accounts shall be made within the time requirements of Section
1.704-1(b)(3)(ii)(b)(2) of the Regulations. If for any reason the amount
distributable pursuant to this Section 10.3(c) shall be more than or less than the sum of
all the positive
40
balances of the Members’ Capital Accounts, the proceeds distributable pursuant to this
Section 10.3(c) shall be distributed among the Members in accordance with the ratio by
which the positive Capital Account balance of each Member bears to the sum of all positive Capital
Account balances.
10.4 Liquidating Trust. In the discretion of the Liquidating Trustee, a pro rata portion of
the distributions that would otherwise be made to the Unit Holders pursuant to this Article
10 may be:
(a) Distributed to a trust established for the benefit of the Unit Holders solely for the
purposes of liquidating Company property, collecting amounts owed to the Company, and paying any
contingent or unforeseen liabilities or obligations of the Company. The assets of any such trust
may be distributed to the Unit Holders from time to time, in the reasonable discretion of the
Liquidating Trustee, in the same proportions as the amount distributed to such trust by the Company
would otherwise have been distributed to the Unit Holders pursuant to Section 10.3 above;
or
(b) Withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise)
and to allow for the collection of the unrealized portion of any installment obligations owed to
the Company, provided that such withheld amounts are distributed to the Unit Holders as soon as
practicable.
The portion of the distributions that would otherwise have been made to each of the Unit Holders
that is instead distributed to a trust pursuant to clause (a) or withheld to provide a reserve
pursuant to clause (b) will be determined in the same manner as the expense or deduction would have
been allocated if the Company had realized an expense equal to such amounts immediately prior to
distributions being made pursuant to Section 10.3 above.
10.5 Deficit Capital Account. Upon liquidation, if any Unit Holder has a deficit balance in
such Unit Holder’s Capital Account (after giving effect to all contributions, distributions and
allocations for all Fiscal Years, including the Fiscal Year in which such liquidation occurs), such
Unit Holder has no obligation to make any contribution to the capital of the Company with respect
to such deficit, and such deficit will not be considered a debt owed to the Company or to any other
Person for any purpose whatsoever. Each Unit Holder agrees to look solely to the assets of the
Company for the return of that Unit Holder’s Capital Contribution.
10.6 Filings. Upon the dissolution of the Company, the Company will cease to carry on its
business, except insofar as may be necessary for the winding up of its business, but its separate
existence will continue until the Articles of Termination have been filed with the Nevada Secretary
of State as required by the Act or until a decree dissolving the Company has been entered by a
court of competent jurisdiction. When all debts, liabilities and obligations have been paid and
discharged or adequate provisions have been made therefor and all of the remaining assets have been
distributed to Unit Holders, Articles of Termination will be executed and filed with the Nevada
Secretary of State as required by the Act.
41
10.7 Merger. The Members may by Unanimous Consent approve a plan of merger or
consolidation under which the Company will merge or consolidate with or into one or more Persons.
10.8 Representations and Warranties of the Members. In addition to representations and
warranties made by the Members in other sections of this Agreement, each Member hereby represents
and warrants that:
(a) Due Incorporation or Formation; Authorization of Agreement. Such Member is a corporation
or a limited liability company (as the case may be), duly organized, validly existing, and in good
standing under the Law of the jurisdiction of its incorporation or formation and has all power and
authority to own its property and carry on its business as owned and carried on at the date hereof
and as contemplated hereby. Such Member is duly licensed or qualified to do business and is in
good standing in each of the jurisdictions in which the failure to be so licensed or qualified
would have a material adverse effect on its financial condition or its ability to perform its
obligations hereunder. Each Member has all power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and the execution, delivery, and performance of
this Agreement has been duly authorized by all necessary corporate action. This Agreement has been
duly executed and delivered by such Member and constitutes the legal, valid, and binding obligation
of such Member enforceable in accordance with its terms.
(b) No Conflict with Restrictions; No Default. Neither the execution, delivery, and
performance of this Agreement nor the consummation by any Member of the transactions contemplated
hereby will (i) conflict with, violate, or result in a breach of, any of the terms, conditions, or
provisions of any statute, law, rule, regulation, ordinance, judgment, order, writ, injunction or
decree of any arbitrator or governmental authority (whether state, local, federal, and whether
written or established by custom or tradition) (collectively, “Law”) applicable to such
Member or any of its Affiliates, (ii) conflict with, violate, result in a breach of, or constitute
a default under, any of the terms, conditions, or provisions of the articles of incorporation,
bylaws, or other governing documents of such Member or any of Affiliate thereof, or any material
agreement or instrument to which such Member or any Affiliate thereof is a party or by which such
Member or any Affiliate thereof is or may be bound or to which any of its material properties or
assets is subject, (iii) conflict with, violate, result in a breach of, constitute a default under
(whether with notice or lapse of time or both), accelerate or permit the acceleration of the
performance required by, give to others any material interests or rights in, or require any
consent, authorization or approval under, any indenture, mortgage, lease agreement, or instrument
to which such Member or any Affiliate thereof is a party or by which such Member or any Affiliate
thereof is or may be bound, or (iv) result in the creation or imposition of any lien upon any of
the material properties or assets of such Member or Affiliate thereof.
(c) Governmental Authorizations. Any registration, declaration or filing with, or consent,
approval, license, permit or other authorization, or order by, any governmental or regulatory
authority (domestic or foreign), that is required in connection with the valid execution, delivery
and acceptance by such Member of this Agreement has been completed, made or obtained on or before
the Formation Date. Each Member, at its own cost and expense, shall apply for and obtain any and
all registrations, approvals, licenses and permits necessary in connection with the Gaming Business
conducted by the Company.
42
(d) Litigation. There are no actions, suits, proceedings or investigations pending or, to the
knowledge of such Member, threatened against or affecting such Member or any Affiliate thereof or
any of their respective properties, assets, or businesses in any court or before or by any
governmental department, board, agency, or instrumentality (domestic or foreign), or any arbitrator
which could, if adversely determined (or, in the case of an investigation could lead to any action,
suit, or proceeding, which if adversely determined could) reasonably be expected to materially
impair such Member’s ability to perform its obligations under this Agreement or to have a material
adverse effect on the consolidated financial condition of such Member; and such Member or any
Affiliate thereof has not received any currently effective notice of any default, and such Member
or any Affiliate thereof is not in default, under any applicable Law which could reasonably be
expected to materially impair such Member’s ability to perform its obligations under this Agreement
or to have a material adverse effect on the consolidated financial condition of such Member.
(e) Investment Company Act. Neither such Member nor any Affiliate thereof is, nor will the
Company as a result of such Member holding Units be, an “investment company” as defined in, or
subject to regulation under, the Investment Company Act of 1940.
(f) Investigation. Such Member is acquiring its Units based upon its own investigation, and
the exercise by such Member of its rights and the performance of its obligations under this
Agreement will be based upon its own investigation, analysis and expertise. Such Member’s
acquisition of its Units is being made for its own account for investment, and not with a view to
the sale or distribution thereof.
All warranties and representations made pursuant to this Section 10.8 shall survive
the execution of this Agreement
ARTICLE 11
GAMING LAWS
GAMING LAWS
11.1 Gaming Licensing Matters. Each Member (i) shall, and shall cause its Affiliates to,
reasonably cooperate with any investigation by any gaming authority having jurisdiction over any
Member or any Affiliate of any Member, and use its best efforts to promptly comply with any
directives of any such gaming authority, and (ii) use its best efforts to cause any transferee of
any portion of its Units likewise to so cooperate and comply. Each Member agrees that it shall not
take any action or omit to take any action that would have the effect of adversely affecting any
Gaming registration, license, approval or permit held by any Member or Affiliate thereof. The
Members and their Affiliates shall cooperate in connection with any review of this Agreement by any
gaming authority, and the Members shall, and shall cause, their respective Affiliates to execute
and deliver any further documents or instruments, including amendments to this Agreement, as any
gaming authority may require. Each Member acknowledges that monetary damages alone would not be
adequate compensation for a breach of this Section 11.1 and the Members agree that a
non-breaching Member shall be entitled to seek a decree or order from a court of competent
jurisdiction for specific performance to restrain a breach or threatened breach of this Section
11.1 or to require compliance by a Member with this Section 11.1.
43
11.2 Qualifications.
(a) Subject to Gaming Laws. If the Company becomes, and for as long as it remains, subject to
regulation under any Gaming Laws, ownership of the Company shall be held subject to the applicable
provisions of any applicable Gaming Laws.
(b) Managers and Officers. The election of an individual to serve as a manager or officer of,
or in any other capacity with, the Company is subject to any qualifications or approvals required
under any Gaming Laws. For purposes of this Agreement, an individual shall be qualified to serve
as a manager, officer or in any other capacity, for so long as that individual is determined to be,
and continues to be, qualified and deemed suitable by all Gaming Authorities and under all
applicable Gaming Laws. In the event any such individual does not continue to be so qualified and
suitable, that individual shall be disqualified and shall cease to be a manager, officer or serve
in such other capacity with the Company.
11.3 Additional Requirements.
(a) Notwithstanding anything to the contrary expressed or implied in this Agreement, the sale,
assignment, transfer, pledge or other disposition of any interest in the Company is ineffective
unless approved in advance by the Nevada Gaming Commission. If at any time the Nevada Gaming
Commission finds that a Member which owns any such interest is unsuitable to hold that interest,
the Nevada Gaming Commission shall, pursuant to N.R.S. Section 463.5733(2), immediately notify the
Company of that fact. The Company shall, within ten (10) days from the date that it receives the
notice from the Nevada Gaming Commission, return to the unsuitable Member the amount of its capital
account as reflected on the books of the Company. Beginning on the date when the Nevada Gaming
Commission serves notice of a determination of unsuitability, pursuant to the preceding sentence,
upon the Company, it is unlawful for the unsuitable Member: (i) to receive any share of the
distribution of profits or cash or any other property of, or payments upon dissolution of, the
Company, other than a return of capital as required above; (ii) to exercise directly or through a
trustee or nominee, any voting right conferred by such interest; (iii) to participate in the
management of the business and affairs of the Company; or (iv) to receive any remuneration in any
form from the Company, for services rendered or otherwise.
(b) Any Member that is found unsuitable by the Nevada Gaming Commission shall return all
evidence of any ownership in the Company to the Company, at which time the Company shall within ten
(10) days after the Company receives notice from the Nevada Gaming Commission, return to the Member
in cash, the amount of its capital account as reflected on the books of the Company, and the
unsuitable Member shall no longer have any direct or indirect interest in the Company.
ARTICLE 12
DISPUTE RESOLUTION
DISPUTE RESOLUTION
Dispute Resolution. The Members commit to each other to resolve any Dispute or other
issues in a commercially reasonable manner as promptly as possible and to cause their respective
44
representatives to be readily available to address business issues that arise. Any Dispute
shall be resolved exclusively under the mediation and arbitration procedures of this Article
12.
12.1 Commencement of Mediation and Arbitration. Any Member may invoke the mediation and
arbitration procedures under the provisions of this Section 12.1 by giving written notice
thereof (a “Dispute Notice”) to the other Member and to the Company, specifying the Dispute
to be arbitrated, the nature and amount (if any) of the Dispute and a demand to resolve the
Dispute.
12.2 Mediation. The parties shall attempt in good faith to resolve the Dispute by mediation
under the Commercial Mediation Rules of JAMS in effect on the date of the Dispute Notice. If the
parties cannot agree on the selection of a mediator within five Business Days after delivery of the
Dispute Notice, the mediator will be selected by JAMS. If the Dispute has not been resolved by
mediation within twenty (20) days after delivery of the Dispute Notice (the “Mediation
Period”) then the Dispute shall be determined by arbitration in accordance with the provisions
of Section 12.2 through Section 12.13.
12.3 Rules of Arbitration. Any arbitration shall be settled in accordance with the
Comprehensive Arbitration Rules and Procedures (the “Rules”) of JAMS in effect on the date
of the Dispute Notice, and the federal Arbitration Act, except as specifically modified in this
Section 12.3. The statute of limitations, estoppel, waiver, laches and similar doctrines,
which would otherwise be applicable in an action brought by a Member, shall be applicable in any
arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the
commencement of any action for these purposes.
12.4 Selection of Arbitrator. Within ten (10) calendar days of the expiration of the
Mediation Period, if any issues in the Dispute Notice have not been resolved, the Members shall
select a single arbitrator or a three-member panel exclusively drawn from the JAMS panel of retired
judges (individually or collectively, as the case may be, the “Arbitrator”) to hear the
Dispute, depending upon the following circumstances: (i) if the Members are able to agree upon one
individual, such individual shall be the Arbitrator, (ii) if the Members are not able to agree upon
a single Arbitrator, the Member initiating the request for arbitration shall select one Arbitrator
from the JAMS panel of retired judges and the adverse Member shall select one Arbitrator from the
JAMS panel of retired judges, and the two Arbitrators shall select as promptly as possible but not
later than twenty (20) days after the Members have selected their Arbitrators, a third individual
from the JAMS panel of retired judges, and (iii) if the two Arbitrators are unable to agree upon a
third Arbitrator, the JAMS case manager shall select the third Arbitrator. Notwithstanding the
foregoing, if the only relief sought in the matter is for a monetary award of $250,000.00 or less,
then one Arbitrator selected from the JAMS panel of retired judges by the JAMS case manager shall
resolve the Dispute. The Arbitrator shall proceed to hear and decide the matters at issue in such
manner as the Arbitrator determines. The Arbitrator shall be neutral and independent and no
Arbitrator shall have or shall previously have had any relationship with any of the Members or
their Affiliates or the Company. The Arbitrator must be knowledgeable and experienced in the
subject matter of the Dispute. The Members agree that it is in the best interests of the Company
to have any matter submitted to arbitration under the provisions of this Section 14.16
decided as expeditiously as possible, which in no
45
event may be more than one hundred twenty (120) days after the date of the Dispute Notice,
unless the matter in dispute requires a shorter period or the Members agree otherwise.
12.5 Choice and Adoption of Law. The Members agree that the interpretation and enforcement of
this Agreement shall be governed by and construed in accordance with the laws of the State of
Nevada (without giving effect to conflict of laws principles) and applicable federal law, including
the federal Arbitration Act, 9 U.S.C. ‘1, et seq. The Members further agree that all tribal laws
are expressly excluded as applicable law.
12.6 Place of Hearing. All arbitration hearings shall be held at a place designated by the
Arbitrator in Las Vegas, Nevada or at such other place that has received approval of the Members.
To the extent possible, the hearings shall be held on consecutive days, excluding weekends and
holidays, until completion.
12.7 Confidentiality. The Members and the Arbitrator shall maintain strict confidentiality
with respect to the arbitration proceedings.
12.8 Service of Process. Service of process may be made by any means authorized by applicable
law and the JAMS rules.
12.9 Form of Arbitrator’s Award. The Arbitrator shall issue its decision in writing, with
written findings of fact, conclusions of law, and a calculation of how damages, if any, were
determined. Any award not so supported shall be null and void, and the matter shall be referred to
a new Arbitrator, to be selected as set forth herein. If a three-member arbitration panel is
involved, the decision shall be by a majority vote. Except as may be limited elsewhere herein, the
Arbitrator shall have the power to award any remedy or relief that a court of competent
jurisdiction could order or grant, including damages, equitable remedies, specific performance of
any obligation created under this Agreement, the issuance of any injunction, and the imposition of
sanctions for abuse or frustration of the arbitration process. The award rendered by the
Arbitrator shall be final, and judgment may be entered upon it in accordance with the Act in any
court having jurisdiction. As an additional limitation, a monetary award may only be made for
compensatory damages, and if any other damages (whether exemplary, punitive, consequential or
other) are included, the award shall be vacated and remanded, modified or corrected as appropriate
to promote this damage limitation.
12.10 Performance During Disputes. It is mutually agreed that during any Dispute, including a
Dispute as to the validity of this Agreement, the Members shall continue to possess the rights,
duties, and obligations set forth in this Agreement.
12.11 Review of Arbitrator’s Award. Any party may seek to have the Arbitrator’s award
modified, corrected, confirmed or vacated in accordance with Nevada Revised Statutes Chapter 38.
12.12 Discovery. For any arbitration initiated hereunder, the Members may conduct discovery
in advance of the arbitration hearing in accordance with the Nevada Rules of Civil Procedure. Upon
the request of a Member or the Members, the Arbitrator shall establish a discovery cutoff date and
any other necessary pre-hearing deadlines.
46
12.13 Costs of Arbitration and Attorneys’ Fees. The prevailing party or parties in any
arbitration or judicial proceeding (including a proceeding to compel arbitration or defending
against an attempt to stay an arbitration award or defending or enforcing an award) shall be
awarded reasonable legal fees and costs, including any expert witness expenses, and all fees and
expenses of the Arbitrator and JAMS. The prevailing party or parties shall submit a detailed
statement of its fees and costs to the Arbitrator within 20 calendar days after receipt of the
arbitration award. The parties agree that the Arbitrator shall retain jurisdiction after issuance
of the arbitration award solely to make a determination on the issue of awarding fees and costs to
the prevailing party.
12.14 Joinder of Third Parties. No Member shall have the right to object to the joinder of
third parties in such proceedings in order to resolve any other disputes, the facts of which are
related to the Dispute submitted for arbitration hereunder.
12.15 Issues involving Business Judgment. In arbitrating a Dispute between the Members
involving an issue of business judgment (as opposed to an alleged violation of law or breach of a
contractual obligation), the Arbitrator shall resolve the Dispute by choosing one Member’s proposal
for resolving the Dispute. Each Member shall submit to the Arbitrator a reasonably detailed
proposal for resolving the Dispute including reasonably detailed supporting evidence and reasoning
for the proposal. To the extent the subject matter of the Dispute involves an issue of business
judgment, the Arbitrator shall be guided by (i) the elements of the most recent Overall Approved
Budget/Plan (including the assumptions and qualifications contained therein), including any element
thereof that addresses the risk tolerance of the Company, the profitability of the Company and
other economic factors, or (ii) if an Overall Approved Budget/Plan has not been approved, the
attainment of the highest reasonably feasible internal rate of return on Capital Contributions when
compared to other projects of comparable size, complexity, duration and risk.
ARTICLE 13
MISCELLANEOUS
MISCELLANEOUS
13.1 Governing Law. This Agreement is governed by and construed in accordance with the laws
of the State of Nevada, without regard to conflicts of laws principles.
13.2 Method of Providing Notices. All communications, notices, demands, requests or advice
(“Notices”) required or permitted hereunder shall be in writing and shall be served on the
parties at the address set forth below, which address may be modified by the applicable Member by
means of a Notice to the other Members. When any written Notice is requested or may be given
hereunder, it shall be deemed sufficient if the party giving such Notice delivers the same to the
other party by overnight delivery service, by facsimile with a copy by overnight delivery service
for the next day, or by hand delivery. All Notices delivered by mail or by hand shall be deemed to
have been given when received or first refused by any party hereto at the addresses listed on the
signature page hereto.
47
(a) if to MGM, to:
MGM
MIRAGE 0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxx, President, CFO and Treasurer
Fax: (000) 000-0000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxx, President, CFO and Treasurer
Fax: (000) 000-0000
With a copy to:
Xxxx X. Xxxxxx, Executive Vice President, General Counsel and Secretary
MGM MIRAGE
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Fax: (000) 000-0000
Xxxx X. Xxxxxx, Executive Vice President, General Counsel and Secretary
MGM MIRAGE
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Fax: (000) 000-0000
(b) If to JRD, to:
Diamond Resorts
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxx Cloobeck
Fax: (000) 000-0000
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxx Cloobeck
Fax: (000) 000-0000
With a copy to:
Xxxxxxx Cloobeck
Diamond Resorts
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Fax: (000) 000-0000
Xxxxxxx Cloobeck
Diamond Resorts
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Fax: (000) 000-0000
and
American Nevada Holdings, LLC
000 Xxxxx Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxxx
Fax: (000) 000-0000
000 Xxxxx Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxxx
Fax: (000) 000-0000
With a copy to:
Xxx Xxxxxxx, General Counsel
American Nevada Holdings, LLC
000 Xxxxx Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
Xxx Xxxxxxx, General Counsel
American Nevada Holdings, LLC
000 Xxxxx Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
48
13.3 Severability. If any provision of this Agreement is conclusively determined by a court
of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement is not affected thereby.
13.4 Binding Effect. Except as otherwise provided herein, this Agreement inures to the
benefit of and is binding upon the Members and their respective successors and assigns.
13.5 Titles and Captions. All article, section and paragraph titles and captions contained in
this Agreement are for convenience only and are not a part of the context hereof.
13.6 Pronouns and Plurals. All pronouns and any variations thereof are deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the appropriate Person(s) may
require.
13.7 No Third Party Rights. This Agreement is intended to create enforceable rights between
the parties hereto only, and creates no rights in, or obligations to, any other Persons whatsoever.
Without limiting the generality of the foregoing, as to any third party, a deficit capital account
of a Member shall not be deemed to be a liability of such Member nor an asset or property of the
Company.
13.8 Time is of Essence. Time is of the essence in the performance of each and every
obligation herein imposed.
13.9 Further Assurances. The parties agree to execute all further instruments and perform all
acts that are or may become necessary to effectuate and to carry on the business contemplated by
this Agreement.
13.10 Estoppel Certificates. Each Member agrees, at the request of another Member, to execute
and deliver an estoppel certificate stating that this Agreement is in full force and effect and
that to the best knowledge and belief of the certifying Member there are no defaults by any Member
under this Agreement (or specifying in reasonable detail such defaults, if any are claimed).
13.11 Schedules Included in Exhibits; Incorporation by Reference. Any reference to an Exhibit
to this Agreement contained herein is deemed to include any Schedules to such Exhibit. Each of the
Exhibits referred to in this Agreement, and each Schedule to such Exhibits, is hereby incorporated
by reference in this Agreement as if such Schedules and Exhibits were set out in full in the text
of this Agreement.
13.12 Amendments. Amendments to this Agreement may be made in accordance with the provisions
of Section 6.9.
13.13 Counterparts. This Agreement may be executed in counterparts.
13.14 Creditors. No provision of this Agreement is for the benefit of or enforceable by any
creditors of the Company, and no creditor will be entitled to require either Member to solicit or
demand Capital Contributions from the other Member. The Company may not assign a
49
Member’s obligation to make Capital Contributions to any third party without the prior written
consent of such Member.
13.15 Entire Agreement. This Agreement and the Exhibits hereto contain all of the agreements
between the parties hereto and supersede any and all prior agreements, arrangements or
understandings between the parties relating to the subject matter hereof. No oral understandings,
oral statements, oral promises or oral inducements exist. No representations, warranties,
covenants or conditions, expressed or implied, whether by statute or otherwise, other than as set
forth herein, have been made by the parties hereto.
13.16 Independent Legal Counsel. Each party has had the opportunity to consult with
independent legal counsel in connection with the negotiation of this Operating Agreement and the
formation of the Company.
13.17 Proceeding Expenses. In any controversy, claim or dispute arising out of, or relating
to, this Agreement or the method or manner of the performance hereof, the prevailing party, as
determined by the arbitrator or court, as applicable, is entitled, in addition to any other relief,
to recover proceeding expenses. If no party wholly prevails, the party that substantially
prevails, as determined by the arbitrator or court, is entitled to recovery of proceeding expenses.
In determining the award of proceeding expenses, attorneys’ fees, proceeding costs, cost of
investigation and other reasonable expenses must be included. For the purposes of this provision,
the term “proceeding” includes arbitration, administrative, bankruptcy and judicial
proceedings, including appeals therefrom.
13.18 Specific Performance. Each Member agrees that the Company and the other Member(s) would
be irreparably damaged if any of the provisions of this Agreement are not performed in accordance
with their specific terms and that monetary damages may not provide an adequate remedy in such
event. Accordingly, it is agreed that, in addition to any other remedy to which the Company and
the nonbreaching Member(s) may be entitled, at law or in equity, the Company and the nonbreaching
Member(s) are entitled to injunctive relief to prevent breaches of the provisions of this Agreement
and to specifically enforce the terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having subject matter jurisdiction thereof.
13.19 Non-Involvement of Certain Parties. JRD hereby acknowledges and agrees in perpetuity
that, in the event that there is any breach or alleged default by MGM Xxxx or any Affiliate thereof
of this Agreement, or the Company has or may have any claim arising from or relating to the
services to any actions to be taken by MGM Xxxx or any Affiliate thereof under this Agreement, JRD
shall not, and shall cause its Affiliates not to, commence any lawsuit or otherwise seek to impose
any liability whatsoever against Xxxx Xxxxxxxxx or Tracinda Corporation. JRD hereby further
acknowledges and agrees in perpetuity that neither Xxxx Xxxxxxxxx nor Tracinda Corporation shall
have any liability whatsoever to any Person with respect to this Agreement or with respect to any
services provided or other actions taken hereunder or pursuant hereto by any Member, any Affiliate
thereof or the Company. JRD hereby further acknowledges and agrees in perpetuity that it shall not
permit, by act or omission, any Person claiming through it, to assert a claim or impose any
liability against either Xxxx Xxxxxxxxx or Tracinda Corporation, either collectively or
individually, as to any matter or thing arising out
50
of, or relating to, or any alleged breach or default by MGM Xxxx, any Affiliate thereof, or
the Company under or pursuant to this Agreement. In addition, JRD acknowledges and agrees in
perpetuity that neither Xxxx Xxxxxxxxx nor Tracinda Corporation, individually or collectively, is a
party to, or bound by any term or provision of, this Agreement or liable for any alleged breach or
default thereof.
13.20 Waiver of Partition Right. Each Member hereby waives any right to partition or the
right to take any other action that might otherwise be available to such Member for the purpose of
severing such Member’s relationship with the Company or such Member’s interest in the assets and
properties held by the Company from the interest of the other Members until the dissolution of the
Company.
13.21 Interpretation. When a reference is made in this Agreement to an Article, Section,
Schedule or Exhibit, such reference shall be to an Article or Section of or a Schedule to or an
Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by the words “without
limitation.” To the extent any restriction on the activities of the Company under the terms of this
Agreement requires prior approval under any Gaming Laws, such restriction shall be of no force or
effect unless and until such approval is obtained. If any provision of this Agreement is illegal
or unenforceable under any Gaming Laws, such provision shall be void and of no force or effect.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES TO FOLLOW]
51
JEANCO, LLC
MEMBER SIGNATURE PAGE
The undersigned, by executing this Member Signature Page, hereby adopts all of the terms,
provisions and conditions of the Operating Agreement (the “Agreement”) of Jeanco, LLC and
agrees to become a Member under the terms of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first set forth
above.
MGM XXXX, LLC | ||||
By:
|
/s/ Xxxxx X. Xxxxxx | |||
Its:
|
JEANCO REALTY DEVELOPMENT, LLC
A Nevada limited liability company,
A Nevada limited liability company,
By: | AMERICAN NEVADA COMPANY, LLC | |||||
a Nevada limited liability company, | ||||||
Its MANAGER; | ||||||
By : | /s/ Xxxxx Xxxxxx | |||||
52
JEANCO, LLC
MANAGER SIGNATURE PAGE
The undersigned, by executing this Manager Signature Page, hereby adopts all of the terms,
provisions and conditions of the Operating Agreement (the “Agreement”) of Jeanco, LLC and
agrees to become a Manager under the terms of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first set forth
above.
MGM XXXX, LLC | ||||
By:
|
/s/ Xxxxx X. Xxxxxx | |||
Its:
|
JEANCO REALTY DEVELOPMENT, LLC
A Nevada limited liability company,
A Nevada limited liability company,
By: | AMERICAN NEVADA COMPANY, LLC | |||||
a Nevada limited liability company, | ||||||
Its MANAGER; | ||||||
By : | /s/ Xxxxx Xxxxxx | |||||
53