Exhibit 10(a)
OPERATING AGREEMENT
OF
DETROIT ENTERTAINMENT, L.L.C.
A MICHIGAN LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS. . . . . . . . . . . 1
ARTICLE II ORGANIZATION . . . . . . . . . .1
2.01 Formation. . . . . . . . . . . . .1
2.02 Name.. . . . . . . . . . . . . . .1
2.03 Registered Office; Registered Agent; Other Offices.2
2.04 Business; Purposes.. . . . . . . .2
2.05 Articles; Foreign Qualification. .2
2.06 Term.. . . . . . . . . . . . . . .2
2.07 Initial Members. . . . . . . . . .3
ARTICLE III MANAGEMENT OF THE COMPANY . . .3
3.01 Generally. . . . . . . . . . . . .3
3.02 Management Committee.. . . . . . .3
3.03 Management Committee Meetings. . .3
3.04 Matters Requiring Approval of the Management Committee.4
3.05 Matters Requiring Supermajority Approval of the Management
Committee. . . . . . . . . . . . . . . . . .5
3.06 Matters Requiring Direct Vote of Members.6
3.07 Deadlock-Breaking Authority. . . .6
3.08 No Authority of Individual Members or Committee Members.7
3.09 Other Businesses.. . . . . . . . .7
3.10 Liability of the Members and Committee Members.8
3.11 Indemnity. . . . . . . . . . . . .8
ARTICLE IV DEVELOPMENT AND MANAGEMENT OF THE
PROJECT. . . . . . . . . . . . . . . . . . .9
4.01 Generally. . . . . . . . . . . . .9
4.02 Design, Development and Construction.9
4.03 Governmental Approvals.. . . . . 10
4.04 Project Financing. . . . . . . . 10
(a) Circus Capital Contributions.10
(b) Project Financing. . . . . . 10
(c) Additional Project Costs.. . 11
(d) Refinancing. . . . . . . . . 11
4.05 Compensation; Reimbursement. . . 12
(a) Predevelopment Advances. . . 12
(b) Project Costs and Operating Costs.12
(c) Circus Management Personnel. 12
(d) Management Fee.. . . . . . . 12
(e) Certain Payments to ACG. . . 12
(f) Other Compensation.. . . . . 13
4.06 Intellectual Property. . . . . . 13
4.07 Retail Space.. . . . . . . . . . 13
ARTICLE V CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
MEMBER LOANS . . . . . . . . . . . . . . . 14
5.01 Initial Capital Contributions. . 14
(a) ACG. . . . . . . . . . . . . 14
(b) Circus.. . . . . . . . . . . 14
5.02 Additional Capital Contributions - Circus.14
5.03 Additional Capital Contributions - Circus and ACG.14
5.04 Temporary Casino Loan. . . . . . 14
5.05 Advances by Members. . . . . . . 15
5.06 Capital Accounts.. . . . . . . . 15
5.07 No Withdrawal. . . . . . . . . . 18
5.08 Member Failure to Advance. . . . 18
5.09 Default Loans. . . . . . . . . . 20
5.10 Status as Defaulting Member. . . 20
5.11 No Third Party Beneficiaries.. . 21
ARTICLE VI SHARING RATIO; CASH DISTRIBUTIONS;
ALLOCATIONS OF PROFIT AND LOSS . . . . . . 21
6.01 Sharing Ratios . . . . . . . . . 21
6.02 Periodic Determination of Distributable Cash21
6.03 Distribution of Distributable Cash22
6.04 Determination and Allocation of Profits and Losses23
6.05 Tax Regulatory Provisions. . . . 24
6.06 Taxable Year and Accounting Method.25
6.07 Tax Elections. . . . . . . . . . 25
6.08 Tax Matters Partner. . . . . . . 25
6.09 Tax Returns. . . . . . . . . . . 26
ARTICLE VII INFORMATION AND TRADE SECRETS 26
7.01 Information. . . . . . . . . . . 26
7.02 Trade Secrets. . . . . . . . . . 26
ARTICLE VIII BOOKS, RECORDS, REPORTS, AND BANK
ACCOUNTS . . . . . . . . . . . . . . . . . 27
8.01 Maintenance of Books; Financial Statements; Annual Audits.27
8.02 Reports. . . . . . . . . . . . . 27
8.03 Accounts.. . . . . . . . . . . . 27
8.04 Required Records.. . . . . . . . 27
8.05 Access to Required Records.. . . 28
ARTICLE IX ASSIGNEES; SUBSTITUTE MEMBERS; ADDITIONAL
MEMBERS; WITHDRAWAL. . . . . . . . . . . . 28
9.01 Rights of Assignees. . . . . . . 28
9.02 Admission of Substitute Members. 28
9.03 Admission of Additional Members. 29
9.04 Withdrawal.. . . . . . . . . . . 29
9.05 Rights of Withdrawing Member.. . 29
9.06 Circus Limited Right to Withdraw.29
ARTICLE X LOSS OF LICENSE . . . . . . . . 30
10.01 Loss of License.. . . . . . . . 30
10.02 Buy-Out Provisions Relating to Loss of License.31
ARTICLE XI BANKRUPT MEMBER. . . . . . . . 32
11.01 Membership Interest.. . . . . . 32
ARTICLE XII DISPOSITIONS OF INTERESTS . . 33
12.01 Restrictions on the Disposition of a Membership Interest.33
12.02 Conditions to Disposition.. . . 34
12.03 Rights of First Refusal.. . . . 35
ARTICLE XIII DISSOLUTION, LIQUIDATION, AND
TERMINATION. . . . . . . . . . . . . . . . 36
13.01 Dissolution.. . . . . . . . . . 36
13.02 Liquidation and Termination.. . 36
13.03 Termination.. . . . . . . . . . 37
ARTICLE XIV REPRESENTATIONS AND WARRANTIES38
ARTICLE XV GENERAL PROVISIONS . . . . . . 39
15.01 Offset. . . . . . . . . . . . . 39
15.02 Notices.. . . . . . . . . . . . 40
15.03 Entire Agreement; Supersedure.. 41
15.04 Effect of Waiver or Consent.. . 41
15.05 Amendment or Modification.. . . 42
15.06 Binding Effect. . . . . . . . . 42
15.07 Governing Law; Severability.. . 42
15.08 Further Assurances. . . . . . . 42
15.09 Counterparts. . . . . . . . . . 42
15.10 Third Party Beneficiaries.. . . 42
15.11 Relationship of Agreement to Default Rules.43
15.12 Arbitration.. . . . . . . . . . 43
15.13 Supplemental Provisions.. . . . 43
APPENDIX A DEFINITIONS
OPERATING AGREEMENT
OF
DETROIT ENTERTAINMENT, L.L.C.
A MICHIGAN LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered
into as of October 7, 1997, by and between CIRCUS CIRCUS
MICHIGAN, INC., a Michigan corporation ( Circus ) and
ATWATER CASINO GROUP, L.L.C., a Michigan limited
liability company ( ACG ). CIRCUS CIRCUS ENTERPRISES,
INC., a Nevada corporation ( CCEI ), the parent of Circus, and
ATWATER ENTERTAINMENT ASSOCIATES, L.L.C., a
Michigan limited liability company ( AEA ) and ZRX, L.L.C.,
a Michigan limited liability company ( ZRX ), the Members of
ACG, join in the execution of this Agreement for the limited
purposes set forth at the end of this Agreement.
FOR AND IN CONSIDERATION OF the mutual
covenants, agreements, rights, and obligations set forth in this
Agreement, the benefits to be derived from them, and other good
and valuable consideration, the receipt and the sufficiency of which
each Member acknowledges and confesses, the Members agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, Capitalized Terms shall have
the meanings ascribed to them in Appendix A attached hereto and
incorporated herein by this reference.
ARTICLE II
ORGANIZATION
2.01 Formation.
Effective with the filing of the Articles with the
Department, the Persons executing this Agreement form a limited
liability company (the Company ) for the purposes set forth in
this Agreement.
2.02 Name.
The name of the Company is Detroit Entertainment,
L.L.C. and all Company business must be conducted in that name
or such other names that comply with applicable law as the
Operator may select from time to time.
2.03 Registered Office; Registered Agent; Other
Offices.
The registered office of the Company in the State shall be
at 0000 Xxxxxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxx X. Xxxxxxx XX, or such other place as the
Management Committee may designate from time to time. The
registered agent for service of process on the Company in the State
or any other jurisdiction shall be such Person or Persons as the
Management Committee may designate from time to time. The
initial registered agent in the State shall be Xxxxxx X. Xxxxxxx XX,
c/o Fraser Xxxxxxxxxx Xxxxx & Xxxxxx, P.C., 0000 Xxxxxxxx
Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000. The Company may
have such other offices as the Management Committee may
designate from time to time. The initial principal place of business
of the Company shall be at 0000 Xxxxxxxx Xxxxxx, Xxx Center
Building - 10th Floor, Detroit, MI 48201, Attention: Xxxxxxx
Xxxxx; with a copy to Seyburn, Kahn, Ginn, Bess, Xxxxxx and
Xxxxxx, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxx,
00000, Attention: Xxxxxxxx X. Xxxxxx.
2.04 Business; Purposes.
The business and purposes of the Company are to acquire,
design, develop, construct, finance, own and operate the Project
(and if applicable, the Temporary Casino). The Company shall
have all the powers necessary or convenient to effect any purpose
for which it is formed, including all powers granted by the Act.
Except as otherwise provided in this Agreement, the Company
shall not engage in any other activities or businesses not
reasonably related to the foregoing.
2.05 Articles; Foreign Qualification.
The Articles have been executed and filed with the
Department containing information required by the Act. The
Management Committee shall cause such amendments to the
Articles to be filed with the appropriate offices within the State and
in such other places as may be required from time to time by
applicable law. Prior to the Company s conducting business in
any jurisdiction other than the State, the Management Committee
shall cause the Company to comply, to the extent those matters are
reasonably within the control of the Management Committee, with
all requirements necessary to qualify the Company as a foreign
limited liability company in that jurisdiction. At the request of the
Management Committee, each Member shall execute,
acknowledge, swear to, and deliver all certificates and other
instruments conforming with this Agreement that are necessary or
appropriate to form, qualify, continue, and terminate the Company
as a limited liability company under the law of the State and to
qualify, continue, and terminate the Company as a foreign limited
liability company in all other jurisdictions in which the Company
may conduct business.
2.06 Term.
The Company shall commence on the date the Articles were
first properly filed with the Department and shall perpetually
continue in existence unless and until its business and affairs are
wound up and dissolved in accordance with Article XIII hereof.
2.07 Initial Members.
The initial Members of the Company are ACG and Circus,
each of which is admitted to the Company as a Member, effective
with the commencement of the Company.
ARTICLE III
MANAGEMENT OF THE COMPANY
3.01 Generally.
Except as otherwise provided in Section 3.07 and
Article IV, the business and affairs of the Company shall be
managed by the Members, which authority and responsibility shall
be exercised solely through the Management Committee. Any
Person dealing with the Company, other than a Member or a
Member s Affiliate, may rely on the authority of the Management
Committee or the Operator in taking any action in the name of the
Company without inquiry into the provisions of this Agreement or
compliance with it, regardless of whether that action actually is
taken in accordance with the provisions of this Agreement.
3.02 Management Committee.
The Management Committee shall consist of twelve (12)
Committee Members. Six (6) of the Committee Members will be
appointed by Circus and six (6) Committee Members will be
appointed by ACG (of which three (3) Committee Members will
be appointed by each of ZRX and AEA, unless otherwise provided
in the operating agreement or other governing documents of
ACG). Each Member may appoint one or more alternates for the
Committee Members appointed by it. An alternate shall have all
the powers of the Committee Member in his absence or inability
to serve. Each Committee Member may vote by delivering his
proxy to another Committee Member. Each Member shall have
the power to remove any Committee Member appointed by it by
delivering written notice of such removal to such Committee
Member and to the other Committee Members. Vacancies on the
Management Committee shall be filled by the Member which
appointed the Committee Member previously holding the position
which is then vacant.
3.03 Management Committee Meetings.
(a) The Management Committee shall meet at
least once each quarter at the offices of the Company in Detroit,
Michigan, or such other times or places as the Management
Committee shall determine (unless such meeting shall be waived
by all Committee Members) or on the call of any six (6)
Committee Members upon two (2) business days notice to all
Committee Members by telephone or facsimile for a meeting by
telephone or (ii) five (5) business days notice by telephone or
facsimile for a meeting in person. An agenda for each meeting
shall be prepared in advance by the secretary of the Committee
and circulated to the Committee Members. Eight (8) Members of
the Management Committee shall constitute a quorum; provided,
however, that Approval of the Management Committee shall
require a Majority of the Committee Members, and not just a
majority of the quorum. The Management Committee may act
without a meeting if (i) the action taken is Approved in advance in
writing by the number of Committee Members necessary to take
such action and (ii) written notice of such action is given to the
Committee Members who did not provide such written consent.
Written minutes of all meetings shall be maintained, and the
minutes for each meeting shall be approved at a subsequent
meeting of the Management Committee.
(b) The Management Committee may adopt
whatever rules and procedures relating to its activities as it may
deem appropriate, provided that such rules and procedures shall
not be inconsistent with or violate the provisions of this
Agreement, and provided that such rules and regulations shall
permit meetings by telephone, video conferencing or the like, and
shall permit Committee Members to participate in meetings by
telephone or video conference or the like or by written proxy, and
such participation shall be deemed attendance for purposes of
determining whether a quorum is present.
(c) The Management Committee may by written
resolution delegate its powers, but not its responsibilities, to
employees of either Member or of both Members or to any other
Person. Such delegation of powers may include the authority to
execute and deliver any notes, mortgage, evidence of indebtedness,
contract, certificate, statement, conveyance or other instrument in
writing, and any assignment or endorsement thereof.
(d) Subject to Article IV, the Management
Committee may by resolution appoint officers of the Company
(which may include a president, a treasurer, a secretary and one
or more vice presidents, assistant treasurers and assistant
secretaries), which officers shall be vested with such powers and
duties, shall hold their offices for such terms, and shall be entitled
to such compensation, as shall be determined from time to time by
the Management Committee.
(e) Anything in this Agreement to the contrary
notwithstanding, the Committee Members appointed by any
Member who is a Defaulting Member shall not be entitled to
attend, participate in meetings of, or vote on any matters coming
before the Management Committee for so long as such Member
shall be and remain a Defaulting Member, and, for such period of
time, the Management Committee shall be deemed to have been
reduced in size for all purposes (including, without limitation,
determination of quorum and required votes to act) by the number
of Committee Members which the Defaulting Member would
otherwise be entitled to appoint to the Management Committee.
For so long as any Member shall be a Defaulting Member, any
action taken by the remaining Committee Members shall be fully
binding on all Members (including, without limitation, the
Defaulting Member). Notwithstanding the foregoing, if Circus is
the Defaulting Member, unless and until all of the Membership
Interest of Circus shall have been purchased pursuant to Section
5.08(d), Circus shall, at its option, remain as Operator of the
Project pursuant to Article IV.
3.04 Matters Requiring Approval of the Management
Committee.
Subject to Sections 3.05, 3.06, 3.07, 4.01 and 4.02,
Approval of the Management Committee shall be required for the
following decisions:
(a) The initial design (including exterior design,
overall layout and theme) of the Project (based on Circus
recommendations) and any fundamental changes in such design;
(b) The total amount of the Project Budget
(which is currently estimated to be approximately $700 million)
and any increases in the approved Project Budget resulting from
Additional Project Costs other than increases due to Cost
Overruns;
(c) The selection of the contractor and local
architect for the Project;
(d) The adoption of any affirmative action
programs or commitments to make charitable contributions or to
undertake civic involvement (which programs, commitments,
and/or undertakings shall be based on the recommendations of a
subcommittee a majority of whose members shall be Committee
Members representing AEA);
(e) The annual Operating Budget for the Project
(including Reserves and capital expenditures anticipated to be made
during the period covered by such Operating Budget) (which shall
be based on Circus s recommendations);
(f) The Development Agreement, if any;
(g) The incurrence of any indebtedness on behalf
of the Company other than (i) the Construction Financing and
Permanent Financing for the Project , (ii) gaming equipment
financing (including equipment leasing) in the ordinary course of
business and (iii) trade payables in the ordinary course of business;
and
(h) The determination to proceed with the
development and operation of a Temporary Casino.
3.05 Matters Requiring Supermajority Approval of the
Management Committee.
The following matters shall require the approval of a
Supermajority of the Management Committee:
(a) Any sale, lease, assignment, transfer or other
conveyance (exclusive of financing requirements) of all or
substantially all of the assets of the Company;
(b) Any merger, consolidation, dissolution,
divestiture or winding-up of the Company (except as provided in
Sections 3.06 and 3.07);
(c) Any amendment or restatement of this
Agreement;
(d) Any transaction involving the payment of
compensation by the Company to a Member or an Affiliate of the
Member, (including for purposes of this sentence, any members,
shareholders, employees, agents, officers or directors of any
Member or their respective members or equity participants),
except as provided in Section 4.05;
(e) Any material change in the character of the
business and affairs of the Company;
(f) The commission of any act which would
make it impossible for the Company to carry on its ordinary
business and affairs (except as provided in Sections 3.06 and
3.07);
(g) The commission of any act that would
contravene any provision of this Agreement or the Act; and
(h) The selection of independent certified public
accountants for the Company; or
(i) The admission of new or Substitute Members
to the Company, except as otherwise provided in Section 9.02.
3.06 Matters Requiring Direct Vote of Members.
It is the intention of the Members that except as otherwise
expressly provided in subsections (a) and (b) below and/or except
as otherwise expressly required by the Act or other applicable law,
all matters requiring the consent, approval or other action of the
Members be considered, voted upon and decided by the
Management Committee (through the vote of the Committee
Members) and that to the greatest extent permitted by the Act or
other applicable law, the Members expressly waive the right to
vote directly on such matters. Notwithstanding the foregoing:
(a) Any increase in the Project Budget in excess
of $700 million (other than increases due to Cost Overruns) which
would require the Members to make Additional Capital
Contributions, or any capital expenditure after opening of the
Project, which would require the Members to make Additional
Capital Contributions, shall require the affirmative vote of both
Members.
(b) With respect to the matters described in
Sections 3.05(b), 3.07(a)(iv) and 13.01(a), after the Approval of
the Management Committee or a Deadlock-breaking vote by
Circus, as the case may be, such matters shall be referred for a
direct vote by the Members, unless the Company s legal counsel
determines that such direct vote is not required by the Act or other
applicable law.
3.07 Deadlock-Breaking Authority.
(a) Notwithstanding anything to the contrary contained
in this Agreement (including without limitation, Section 3.04 and
all of the provisions of Section 3.05 other than Section 3.05(d)
hereof), so long as Circus or an Affiliate is providing any Credit
Support to the Project, Circus, after consultation with ACG, will
have Deadlock-breaking authority for decisions relating to the
following:
(i) The Development Agreement;
(ii) Decisions regarding the construction of the
Project (including choice of contractor and local architect);
(iii) Approval or amendment of the annual
Operating Budget; and
(iv) The dissolution, recapitalization or
bankruptcy of the Company.
(b) So long as Circus or an Affiliate is providing Credit
Support to the Project, ACG hereby grants to Circus an
irrevocable proxy to vote ACG s Membership Interest with respect
to a vote relating to the dissolution of the Company or other
matters described in Section 3.07(a) requiring the vote of the
Members pursuant to the Act or other applicable law.
3.08 No Authority of Individual Members or
Committee Members.
Neither Member nor any Committee Member, acting
individually, nor any of their respective Affiliates or constituent
members, has the power or authority to bind the Company or any
Member or to authorize any action to be taken by the Company,
or to act as agent for the Company or any other Member, unless
that power or authority has been specifically delegated by the
Management Committee or is expressly provided for in this
Agreement. Except as otherwise provided in this Agreement, no
Member or Committee Member is authorized to incur any
expenditures on behalf of the Company without the Approval of
the Management Committee.
3.09 Other Businesses.
Each party recognizes that the Members, and their
Affiliates, have or may have other business interests, activities and
investments, some of which may now or hereafter be in conflict or
competition with the business of the Company, and that each
Member and its respective Affiliates are entitled to carry on such
other business activities, interests and investments without any
accountability therefor to the Company or any other Member. No
Member, and no Affiliate of any Member, shall be obligated to
devote all or any particular part of its time and effort to the
Company or its business affairs except such reasonable amount of
time as may be necessary in order to fulfill their respective duties
and obligations hereunder. Each Member, and each Affiliate of
each Member, may engage in or possess an interest in any other
business or venture of any kind, independently or with others,
including, without being limited to, owning, financing, acquiring,
leasing, promoting, developing, improving, constructing, operating
or managing other real or personal properties (including real and
personal properties devoted, in whole or in part, to the business of
gaming or which are activities in support of gaming operations) on
its own behalf or on behalf of other entities with which it is
affiliated or associated, and any Member and each Affiliate of any
Member may engage in any activities, whether or not competitive
to the Company, without any obligation to offer any interest in
such activities to the Company or to any Member or to any
Affiliate of any Member. Neither the Company nor any Member
nor any Affiliate of any Member shall have any right by virtue of
this Agreement or by virtue of the relationship between the
Members as Members in or to such other activities, or to the
income or profits derived therefrom, and the pursuit of such
activities, even if competitive with the business of the Company,
shall not be deemed wrongful or improper or a breach of any
Company or fiduciary duties owed by one party to the other, or
entitle either party to any interest in or sharing in the profits or
losses from any such other activities.
3.10 Liability of the Members and Committee
Members.
So long as each Member (whether in its capacity as a
Member, or if applicable, as Operator or other expressly
authorized agent of the Company) and Committee Member acts in
good faith with respect to the conduct of the business and affairs
of the Company, and in the manner in which it reasonably believes
to be in the best interests of the Company or otherwise in
accordance with the provisions of this Agreement, neither Member
nor any such Committee Member shall be liable or accountable to
the Company or to any of the Members in damages or otherwise
for any error of judgment, for any mistake of fact or of law, or for
any other act or thing which it may do or refrain from doing or
suffer to be done in connection with the business and affairs of the
Company, except in the case of (i) such Person s willful
misconduct or gross negligence, (ii) actions taken by any such
Person in violation of this Agreement, (iii) the receipt by any such
Person of a financial benefit to which it is not entitled pursuant to
this Agreement or (iv) any vote by such Person to approve a
distribution to the Members of funds of the Company in violation
of this Agreement or the Act.
3.11 Indemnity.
The Company shall indemnify, defend and hold each
Member, and each officer, director, stockholder, member,
employee, agent, affiliate, subsidiary or assignee of each Member
(including any such Person in its capacity as an agent or
Committee Member) provided any such Person is properly acting
in its capacity as a Member, Committee Member, officer, director,
stockholder, member, employee or agent, and within the express
authority granted herein (collectively, the Indemnities ) free and
harmless of, from and against any expenses, losses, claims, costs,
damages and liabilities, including without limitation, judgments,
fines, amounts paid in settlement and expenses (including without
limitation, attorneys fees and expenses, court costs, investigation
costs and litigation costs) incurred by any Indemnitee in any civil,
criminal or investigative proceeding in which it is involved or
threatened to be involved by reason of the Member being a
Member in the Company or such Person being a Committee
Member, provided that the Member or such Person acted in good
faith, within what it reasonably believed to be the scope of its
authority and for a purpose which it reasonably believed to be in
the best interests of the Company and the Members or otherwise
in compliance with the provisions of this Agreement; provided,
however (i) that the Company shall not be required to indemnify
any Indemnitee, and any such Indemnitee shall be liable, for any
loss, expense or damage which the Company may suffer as a result
of (A) such Indemnitee s willful misconduct, gross negligence or
bad faith in failing to perform its duties hereunder; (B) actions
taken by such Indemnitee in violation of this Agreement, (C) the
receipt by such Indemnitee of any financial benefits to which it is
not entitled pursuant to this Agreement or (D) the vote by such
Indemnitee for a distribution of funds of the Company in violation
of this Agreement or the Act; (ii) the Company shall not be
required to indemnify any Indemnitee for any breach of the
provisions of this Agreement, or for any loss, expense or damage
which it may suffer as a result of the breach of this Agreement by
the Member to which the Indemnitee is related; and (iii) any
liability hereunder shall be limited solely to the assets and
properties of the Company, and no Member (or any Affiliate of
any Member) shall have any liability or obligation hereunder.
ARTICLE IV
DEVELOPMENT AND MANAGEMENT OF THE
PROJECT
4.01 Generally.
Subject only to any express limitations set forth in Sections
3.04, 3.05 and 3.06, Circus, as Operator, shall have, and is
hereby expressly granted, the responsibility and authority for
conducting the day-to-day operations of the Project, including the
following:
(a) Notwithstanding anything to the contrary contained
herein (including without limitation, Section 3.04(a) above),
Operator will have the exclusive authority for implementing
decisions relating to the operation of the Project, including the
layout of the casino, marketing and credit policies, internal control
and security procedures and employment decisions.
(b) Prepare for submission to the Management
Committee, appropriate Project and Operating Budgets for the
development, construction, opening, repair, improvement and
operation of the Project and if applicable, the Temporary Casino.
(c) Contract on behalf of the Company for the services of
independent contractors, including attorneys, accountants and
financial advisers.
(d) Subject to Section 8.03, establish, maintain and
supervise the deposit of funds and securities of the Company with
federally insured banking institutions; and the Operator is
authorized to sign on behalf of the Company on all accounts with
such banking institutions.
(e) Subject to the approved Project Budget and
Operating Budgets, acquire by purchase, lease or otherwise such
personal property as may be necessary, convenient or incidental to
the accomplishment of the purposes of the Company.
(f) Procure on behalf of the Company, such general
liability, casualty, comprehensive, workers compensation, fidelity,
errors and omissions, business interruption and other insurance as
is adequate to protect the Company.
(g) Subject to Sections 3.04, 3.05, 3.06 and 3.07, execute
and deliver on behalf of the Company any and all agreements,
documents, certificates and instruments necessary or convenient in
connection with the performance of its duties hereunder.
4.02 Design, Development and Construction.
Operator shall have the responsibility and authority for
supervising the design, development and construction of the
Project. Operator shall prepare or cause to be prepared as
promptly as practicable after the date of this Agreement and Initial
Licensing, all necessary preliminary plans and architectural,
engineering, design and construction drawings and other
construction documents for the Project. Subject to Sections 3.04,
3.05(d) and 3.07 above, Operator shall engage on behalf of the
Company, reputable and qualified contractors, architects,
engineers, designers or other professionals for the design,
development and construction of the Project. Operator shall keep
the Management Committee fully advised on a regular basis with
respect to the status of such design, development and construction
activities.
4.03 Governmental Approvals.
Operator shall have the responsibility and authority for
preparing, filing and processing all applications to obtain all
governmental licenses (including Licenses for the Company and
the Project, but not including any Licenses for the individual
Members), approvals, permits and entitlements on behalf of the
Company necessary or appropriate for the design, development,
construction, ownership and operation of the Project, the costs of
which shall be borne by the Company. Each Member shall be
responsible for preparing, submitting and processing its own
License applications and the applications of any party required to
submit an application due to its affiliation with a Member. The
Members shall (and shall cause their respective constituent
members and Affiliates to) act in good faith, cooperate with each
other and furnish all documents and other information necessary
to obtain the Licenses and such other licenses, approvals, permits
and entitlements.
4.04 Project Financing.
(a) Circus Capital Contributions.
Circus shall contribute to the capital of the Company
an amount equal to twenty percent (20%) of the approved Project
Budget, but not to exceed twenty percent (20%) of the first $700
million of Project Cost (for the initial development and
construction of the Project) as provided in Sections 5.01(b) and
5.02 hereof.
(b) Project Financing.
The Company intends to finance approximately 80%
of the approved Project Budget (estimated financing of $560
million) with Construction Financing. Circus shall use its good
faith best efforts to secure such Construction Financing for the
Project to the extent possible on commercially reasonable terms
through bank financing and to the extent bank financing is not
available on commercially reasonable terms for some or all of such
debt, Circus shall use its good faith best efforts to secure the
balance of such debt through subordinated debt in the high yield
market. Circus shall use its good faith best efforts to obtain non-
recourse bank Construction Financing in the bank market at the
lowest available cost (taking into consideration all of the material
terms and conditions of such financing). If Circus deems it
necessary or advisable to finance a portion of the Project Cost
through subordinated debt financing, Circus may elect to provide
such financing to the Company on terms below commercially
available market terms. Notwithstanding anything to the contrary
contained herein, in no event shall Circus be required to provide
any financing from its available bank credit agreement or other
debt sources. Circus shall have the authority to approve, after
consultation with ACG, the terms of any Construction and/or
Permanent Financing for the Project. Notwithstanding anything to
the contrary contained herein, the terms of this Agreement and any
other agreement between the Members shall be subject to the terms
of any such Construction and/or Permanent Financing; provided
however, that any such financing (i) shall not require the Members
to adjust their respective Sharing Ratios in the Company and (ii)
shall not be acceptable unless it permits the Company to make
periodic Tax Distributions to the Members as contemplated in
Section 6.03. Unless otherwise Approved by the Management
Committee, neither Member shall have any personal liability for
repayment of such Construction Financing. Circus shall use its
good faith best efforts to secure Permanent Financing for the
Project.
(c) Additional Project Costs.
The Operator, on behalf of the Company, will use
its good faith best efforts to obtain third party financing to cover
any Additional Project Costs. If in the opinion of the Operator,
such third party financing is unavailable or if additional equity is
required, then Circus shall make an Additional Capital
Contribution in an amount equal to 20% of such Additional Project
Costs (but not to exceed the difference between $140 million and
the amounts contributed or to be contributed by Circus pursuant to
Section 4.04(a) above), and the balance of such Additional Project
Costs will be contributed by Circus and ACG as Additional Capital
Contributions to the Company pursuant to Section 5.03, in
proportion to their respective Sharing Ratios in the Company.
Additional Project Costs (other than Cost Overruns) which would
increase the Project Budget to an amount in excess of $700 million
and which would require the Members to make Additional Capital
Contributions pursuant to Section 5.03, shall require the
affirmative vote of both Members pursuant to Section 3.06. Cost
Overruns shall only require the approval of the Operator. Any
other Additional Project Costs shall require the Approval of the
Management Committee.
(d) Refinancing.
If at any time the Company or the Project is
encumbered with financing for which Credit Support is being
provided by Circus or an Affiliate of Circus, the Company may,
upon the affirmative vote of fifty percent (50%) or more of the
Management Committee, cause such financing to be replaced (and
such Credit Support to be fully released and extinguished) with
new financing Approved by the Management Committee. Circus
agrees that it will direct the Committee Members appointed by
Circus to not unreasonably withhold their approval of such new
financing provided that the terms and provisions of such new
financing do not materially adversely affect the Company or the
Project. In the event of a Deadlock within the Management
Committee as to whether any such proposed new financing will
materially adversely affect the Company or the Project, such
Deadlock shall be resolved by arbitration pursuant to Section
15.12.
4.05 Compensation; Reimbursement.
(a) Predevelopment Advances.
Any Project Costs incurred after May 1, 1997 and
prior to Initial Licensing and Approved by the Management
Committee, shall be borne 45% by Circus and 55% by ACG.
Upon Initial Licensing, all such costs and expenses Approved by
the Management Committee and borne by the Members shall be
included in the Project Budget and shall be promptly reimbursed
to the respective Members.
(b) Project Costs and Operating Costs.
The Company shall pay all costs to develop and
operate the Project, as set forth in the approved Project Budget and
Operating Budgets, as amended from time to time. After Initial
Licensing, any such Project Costs and Operating Costs incurred by
a Member or its Affiliates and included in the approved Project
Budget or an approved Operating Budget, shall be promptly paid
or reimbursed to such Member or its applicable Affiliates.
(c) Circus Management Personnel.
Circus may appoint from time to time, certain
employees of Circus or its Affiliates to devote essentially full time
to the day-to-day management and operation of the Project and
may retain such employees on Circus payroll. In such event, the
Company shall reimburse Circus for the out-of-pocket
compensation (including salary, bonus, direct cost of health and
retirement benefit plans but excluding stock options and other
incentive compensation unless Approved by the Management
Committee) paid to or on behalf of such employee for performing
services to the Company on a full time basis. However, the
Company shall not reimburse Circus for any time or expense
associated with Circus personnel who do not perform full-time
services on behalf of Company.
(d) Management Fee.
During the first ten (10) years following Completion
of Construction, Circus shall receive an annual Management Fee
equal to 1.5 % of the first $700 million of approved Project Cost.
The Management Fee shall be payable in monthly estimated
installments in arrears, on or about the tenth day of each calendar
month, subject to annual adjustment within thirty (30) days after
the end of each Fiscal Year.
(e) Certain Payments to ACG.
(i) Pursuant to the Assignment
Agrteement, Circus shall pay the sum of $5 million to ACG in
respect of the assignment to Circus of an undivided interest of
99.99% in the Preference Rights, upon the earlier of (A) receipt
by Circus of an opinion of legal counsel satisfactory to Circus that
payment of such amount to ACG will not violate any present or
proposed Legal Requirements relating to gaming or other activities
to be conducted by the Company or its Members; or (B) a final
non-appealable determination by the applicable Gaming Authorities
that the Company will not obtain licensing in Michigan for reasons
beyond the control of the Members.
(ii) Pursuant to the Assignment
Agreement, upon Initial Licensing, but subject to compliance with
all Legal Requirements including, if applicable, the issuance (at the
cost of ACG) of a fairness opinion as contemplated in the proposed
regulations of the Michigan Gaming Control Board, Circus shall
pay the sum of $8 million to ACG, in respect of the assignment to
the Circus of the Preference Rights.
(f) Other Compensation.
Other than as set forth above, no Member or its
Affiliates shall receive any management, consulting, development
or license fees, commissions or other payments in connection with
the acquisition, development or operation of the Project without
the Approval of the Management Committee; provided however,
that any increase in the Management Fee payable to Circus
pursuant to Section 4.05(d) or any extension of its duration shall
require Supermajority approval of the Management Committee.
4.06 Intellectual Property.
So long as Circus maintains a Membership Interest in the
Company and the Company maintains an ownership interest in the
Project, Circus will grant a royalty-free license to the Project to
use the Circus Intellectual Property in connection with the
operation of the Project; provided, however, if Circus is not the
Operator of the Project but still maintains a Membership Interest
in the Company and the Company still maintains an ownership
interest in the Project, then Circus will enter into a royalty-free
license agreement (upon and subject to customary terms and
conditions) with the Company for the use of such proprietary
items.
4.07 Retail Space.
It is intended that a portion of the Project be dedicated to
retail use for operation of shops offering for sale at retail items
typically offered for sale in similar first class casino and hotel
complexes. In the event that the Management Committee elects to
have such retail space competitively offered for lease to qualified
operators of retail establishments that meet criteria established by
the Management Committee, then, and in that event, ACG and its
members will be given the opportunity to compete to be among the
operators of such retail space.
ARTICLE V
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
MEMBER LOANS
5.01 Initial Capital Contributions.
(a) ACG.
ACG shall as its Initial Capital Contribution
contribute to the Company ACG s interest in the Preference
Rights, for which ACG shall receive a credit to its Capital Account
of $100. In addition, ACG shall provide certain valuable services
and cooperate with the Company in obtaining the License for the
Project.
(b) Circus.
Circus shall as its Initial Capital Contribution
contribute to the Company Circus interest in the Preference
Rights, for which Circus shall receive a credit to its Capital
Account as follows: (i) $5 million upon full execution and
delivery of this Agreement and satisfaction of the conditions set
forth in Section 4.05(e)(i); and (ii) $8 million payable upon Initial
Licensing and satisfaction of the conditions set forth in Section
4.05(e)(ii).
5.02 Additional Capital Contributions - Circus.
Circus shall make Additional Capital Contributions to or for
the benefit of the Company in cash in an aggregate amount equal
to twenty percent (20%) of the approved Project Budget (up to the
first $700 million of approved Project Costs), less the amounts
contributed or to be contributed pursuant to Section 5.01(b) above,
from time to time after Initial Licensing, as needed to pay the
Project Costs or at such later times as are determined by the
Management Committee, but in no event shall such contributions
be made later than the time advances are required under the terms
of the Construction Financing.
5.03 Additional Capital Contributions - Circus and
ACG.
If additional funds are required by the Company to pay
Additional Project Costs and such funds are not available through
third party financing or Circus Additional Capital Contributions as
contemplated in Section 4.04(c), or if additional equity in the
Company is otherwise necessary and has been approved by the
Members if and to the extent such approval is required pursuant to
Section 3.06(a), then each Member shall make Additional Capital
Contributions in cash, in proportion to the Members respective
Sharing Ratios, at such times and in such amounts as specified in
written notices from the Management Committee to the Members.
5.04 Temporary Casino Loan.
If the Management Committee Approves and elects to
proceed with a Temporary Casino, Circus shall make or cause to
be made to the Company, loans in an aggregate amount equal to
the Temporary Casino Cost (the Temporary Casino Loans ),
which Loans (i) shall be advanced from time to time as needed to
pay the Temporary Casino Costs, (ii) shall bear interest from the
dates of advance until repaid at the Loan Rate, and (iii) shall be
repaid in monthly installments beginning upon the opening of the
Temporary Casino, equal to the sum of principal amortized over
the estimated number of months of operation of the temporary
casino, plus accrued but unpaid interest. Such monthly
installments shall be paid or reserved for payment from first
available cash of the Company (after payment or reservation for
payment of the Tax Distributions pursuant to Sections 6.03(a)(i)
and 6.03 (b)(i), but prior to the calculation and distribution of
Distributable Cash pursuant to Sections 6.03(a)(ii) and 6.03(b)(iii).
5.05 Advances by Members.
If the Company does not have sufficient cash to pay its
obligations, a Member, with the Approval of the Management
Committee, may advance all or part of the needed funds to or on
behalf of the Company, provided that the Management Committee
shall grant to each other Member the right to advance a
proportionate part (based upon the relative Sharing Ratios of each
Member desiring to make an advance) of any funds described in
this Section 5.05. Payment by any Member on account of liability
as a matter of law for Company obligations is deemed to be an
advance under this Section 5.05. An advance described in this
Section 5.05 (i) constitutes a Member Loan from the Member
making the advance to the Company, (ii) bears interest at the Loan
Rate or such other interest rate as may be Approved by the
Management Committee, from the date of the advance until the
date of payment, (iii) is not a Capital Contribution, and (iv) shall
be repaid or reserved for repayment from the first available cash
of the Company in any Fiscal Year, after payment of principal and
interest in respect of all Temporary Casino Loans and after
payment or reservation for payment of Tax Distributions to the
Members pursuant to Sections 6.03(a)(i) and 6.03(b)(i) and
payment of the Management Fee pursuant to Section 6.03(b)(ii),
but prior to any other distribution to the Members of Distributable
Cash with respect to such Fiscal Year.
5.06 Capital Accounts.
(a) The Company shall establish an individual
Capital Account for each Member. The Company shall determine
and maintain each Member s Capital Account in accordance with
Regulations Section 1.704-1(b)(2)(iv). The Capital Account of
each Member shall be equal to the aggregate amount of cash
contributed by such Member to the Company, increased by (i) the
Agreed Value of property contributed by such Member to the
Company (other than a promissory note by such Member who is
the maker of such note), net of liabilities secured by such property
that the Company assumes or takes the property subject to, (ii) the
amount of any Company liabilities assumed by such Member other
than liabilities secured by property distributed to such Member,
(iii) such Member's distributive share of Profits of the Company
and (iv) any items in the nature of income and gain which are
excluded from the definitions of Profits and Losses and allocated
to such Member, and reduced by (i) such Member's distributive
share of Losses, (ii) the amount of any distributions of cash to
such Member, (iii) the amount of liabilities of such Member
assumed by the Company, other than liabilities secured by
property contributed by such Member, (iv) the Agreed Value of
property (net of liabilities assumed by such Member and liabilities
to which such distributed property is subject) distributed to such
Member, and (v) any items in the nature of deductions or losses
which are excluded from the definitions of Profits and Losses and
allocated to such Member.
(b) For purposes of computing the amount of any
item of income, gain, loss or deduction to be reflected in the
Members Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its
determination, recognition and classification for federal income tax
purposes (including, without limitation, any method of
depreciation, cost recovery or amortization used for that purpose),
provided, that:
(i) Except as otherwise provided in
Regulations Section 1.7041(b)(2)(iv)(m), the computation of all
items of income, gain, loss and deduction shall be made without
regard to any election under section 754 of the Code which may
be made by the Company and, as to those items described in
section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard
to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income
tax purposes.
(ii) Any income, gain or loss attributable
to the taxable disposition of any Company property shall be
determined as if the adjusted basis of such property as of such date
of disposition were equal in amount to the Company s Carrying
Value with respect to such property as of such date.
(iii) In accordance with the requirements
of section 704(b) of the Code, any deductions for depreciation,
cost recovery or amortization attributable to any Contributed
Property shall be determined as if the adjusted tax basis of such
property on the date it was acquired by the Company were equal
to the Agreed Value of such property. Upon an adjustment
pursuant to Section 5.06(d) to the Carrying Value of any Company
property subject to depreciation, cost recovery or amortization, any
further deductions for such depreciation, cost recovery or
amortization attributable to such property shall be determined (A)
as if the adjusted tax basis of such property were equal to the
Carrying Value of such property immediately following such
adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal
income tax purposes; provided, however, that if the asset has a
zero adjusted basis for federal income tax purposes, depreciation,
cost recovery or amortization deductions shall be determined using
any reasonable method that the Management Committee may
adopt.
(c) A transferee of a Membership Interest shall
succeed to a pro rata portion of the Capital Account of the
transferor relating to the Membership Interest so transferred;
provided, however, that, if the transfer causes a termination of the
Company under section 708(b)(1)(B) of the Code, the Company s
properties shall be deemed to have been distributed in liquidation
of the Company to the Members (including any transferee of a
Membership Interest that is a party to the transfer causing such
termination) pursuant to Section 13.02 and recontributed by such
Members in reconstitution of the Company. Any such deemed
distribution shall be treated as an actual distribution for purposes
of this Section 5.06. In such event, immediately prior to such
deemed distribution the Carrying Values of the Company
properties shall be adjusted pursuant to Section 5.06(d)(ii) and such
Carrying Values shall then constitute the Agreed Values of such
properties upon such deemed contribution to the reconstituted
Company. The Capital Accounts of such reconstituted Company
shall be maintained in accordance with the principles of this
Section 5.06.
(d) The Carrying Value of Company property
and the Capital Accounts of the Members shall be adjusted in the
following circumstances:
(i) Consistent with the provisions of
Regulations Section 1.701-l(b)(2)(iv)(f), on an issuance of
additional Membership Interests for cash or Contributed Property
(other than contributions by the Members pursuant to Sections
5.01, 5.02 and 5.03) the Capital Accounts of all Members and the
Carrying Value of each Company property immediately prior to
such issuance shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Company
property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Members at
such time pursuant to Section 6.04. In determining such
Unrealized Gain or Unrealized Loss, the aggregate fair market
value of all Company assets (including, without limitation, cash or
cash equivalents) immediately prior to the issuance of additional
Membership Interests shall be determined by the Management
Committee using such reasonable method of valuation as it may
adopt. The Management Committee shall allocate such aggregate
value among the assets of the Company (in such manner as it
determines in its sole discretion to be reasonable) to arrive at a fair
market value for individual properties.
(ii) In accordance with Regulations
Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or
deemed distribution to a Member of any Company property (other
than a distribution solely of cash that is not in redemption or
retirement of a Membership Interest), the Capital Accounts of all
Members and the Carrying Value of such Company property shall
be adjusted upward or downward to reflect any Unrealized Gain
or Unrealized Loss attributable to such Company property, as if
such Unrealized Gain or Unrealized Loss had been recognized in
a sale of such property immediately prior to such distribution for
an amount equal to its fair market value, and had been allocated
to the Members, at such time, pursuant to Section 6.04. In
determining such Unrealized Gain or Unrealized Loss the
aggregate fair market value of all Company assets (including,
without limitation, cash or cash equivalents) immediately prior to
a distribution shall be determined and allocated by the Management
Committee or the liquidator, as appropriate, using such reasonable
method of valuation as it may adopt.
(e) Capital Accounts shall be adjusted, in a
manner consistent with this Section 5.06, to reflect any
adjustments in items of the Company s income, gain, loss or
deduction that result from amended returns filed by the Company
or pursuant to a binding agreement by the Company with the
Internal Revenue Service or a final court decision.
(f) The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations Sections 1.704-
1(b) and 1.704-2 and shall be interpreted and applied in a manner
consistent with such Regulations.
5.07 No Withdrawal.
The Company shall not be obligated to redeem or
repurchase the Membership Interest of any Member. No Member
shall be entitled to withdraw any part of its Additional Capital
Contribution, except as provided in Section 5.08(a), or to receive
any distributions from the Company except as expressly provided
herein or by law. In no event shall any Member have the right to
redeem or receive any assets of the Company other than cash. A
Member shall not be entitled to receive any additional withdrawal
distribution under Section 305 of the Act except as provided in this
Agreement.
5.08 Member Failure to Advance.
In the event a Member fails to advance to the Company the
full amount of a Capital Contribution which such Member is
obligated to advance in accordance with the provisions of Sections
5.01, 5.02 or 5.03 (a Defaulting Member ), then the other
Member, provided it is a Non-Defaulting Member, shall have the
right (but shall not be obligated), exercisable upon at least thirty
(30) days prior written notice to the Defaulting Member at any
time following the date (the Funding Date ) the Members were
required to fund such Capital Contributions, but only so long as
the Defaulting Member shall continue to be a Defaulting Member
hereunder, to elect any of the following remedies, any of which
may be instituted by the Non-Defaulting Member for its own
account, or on behalf of the Company, as appropriate; provided
however, that if Circus is the Defaulting Member and such default
consists of the failure of Circus to duly and timely make its Initial
Capital Contributions and Additional Capital Contributions
pursuant to Sections 5.01(b) and 5.02, then the sole and exclusive
remedies of the Non-Defaulting Member shall be as set forth in
Section 5.08(b), Section 5.08(c) (but only to make Member Loans
and not to make Additional Capital Contributions or to otherwise
take any action which might have the effect of diluting Circus
Sharing Ratio in the Company) and Section 5.08(d):
(a) To cause the Company to return to the Non-
Defaulting Member the full amount of the Additional Capital
Contribution under Section 5.03 previously advanced to the
Company by the Non-Defaulting Member with respect to the
relevant Funding Date, such refund to be made immediately upon
written demand therefor from the Non-Defaulting Member; or
(b) In lieu of the provisions of subsection (a)
above, cause the Company to institute and prosecute appropriate
arbitration proceedings pursuant to Section 15.12 hereof, to compel
the Defaulting Member to make the full Capital Contribution
required hereunder. The Defaulting Member shall indemnify and
hold harmless the other Members and the Company from and
against any and all costs and expenses (including legal fees and
disbursements) incurred in instituting and prosecuting any such
proceeding, and the amount thereof may be recovered by the
Company and the Non-Defaulting Member as part of the judgment
entered in the proceedings brought to enforce the obligation of the
Defaulting Member. The amount which may be recovered by the
Company in connection with any such proceedings shall be the
amount of the Additional Capital Contribution as to which the
Defaulting Member is in default together with interest at the
Default Rate from the due date thereof until recovery, such interest
to inure to the benefit of the Non-Defaulting Member as liquidated
damages and not as a penalty; or
(c) Whether or not arbitration proceedings are
instituted pursuant to subsection (b) above, but in lieu of the
provisions of subsection (a) above, the Non-Defaulting Member
may (but shall not be obligated to) advance to the Company an
additional sum equal to (but not less than) the difference between
the full amount of the Additional Capital Contribution which the
Defaulting Member was required to advance to the Company and
the actual amount thereof, if any, so advanced by the Defaulting
Member (said difference being herein referred to as the Unfunded
Balance ). If the Non-Defaulting Member elects to advance an
additional amount equal to the Unfunded Balance to the Company,
it shall, concurrently therewith, elect, by notice in writing to the
Company and the Defaulting Member, to treat the additional
advance either as a Default Loan (as described in Section 5.09) or
as an Additional Capital Contribution to the Company, or any
combination of Default Loan and Additional Capital Contribution.
If the Non-Defaulting Member elects to treat all or part of the
additional advance as an Additional Capital Contribution to the
Company, then (i) the amount of such advance which is treated as
an Additional Capital Contribution shall be credited to the Capital
Account of the Non-Defaulting Member; and (ii) the Sharing
Ratios of the Members shall be adjusted (provided, however, that
the adjustment shall not affect the Capital Accounts of the
Members), effective as of the date of the additional advance made
by the Non-Defaulting Member, as follows:
(i) The Sharing Ratio of the Non-
Defaulting Member shall be equal to the percentage determined by
dividing the sum of all Additional Capital Contributions made by
the Non-Defaulting Member pursuant to Section 5.03 plus one
hundred fifty percent (150%) of all Additional Capital
Contributions then and theretofore made by the Non-Defaulting
Member pursuant to this Section 5.08(c) (including, but not limited
to, the Additional Capital Contribution made hereunder with
respect to the Funding Date in question) by the sum total of all
Additional Capital Contributions to the Company made by all
Members pursuant to Section 5.03 and pursuant to this Section
5.08(c), provided, however in no event shall the Sharing Ratio of
the Non-Defaulting Member exceed ninety-nine percent (99%);
(ii) The Sharing Ratio of the Defaulting
Member shall be an amount equal to one hundred percent (100%)
less the Sharing Ratio of the Non-Defaulting Member, as adjusted
pursuant to clause (i) above; or
(d) Whether or not arbitration proceedings are
instituted pursuant to subsection (b) above but in lieu of the
provisions of subsections (a) and (c) above, the Non-Defaulting
Member may (but shall not be obligated to) purchase the entire
Membership Interest of the Defaulting Member for a Buy-Out
Price equal to the sum of (i) eighty percent (80%) of the Adjusted
Capital Contribution Account of the Defaulting Member and (ii)
one hundred percent (100%) of the outstanding balance of principal
and accrued interest due to the Defaulting Member in respect of
any Member Loans. If ACG is the Defaulting Member, the Buy-
Out Price shall be payable in cash within ninety days (90) after the
election of Circus to purchase ACG s Membership Interest. If
Circus is the Defaulting Member, the Buy-Out Price shall be
payable pursuant to a promissory note executed by ACG, bearing
interest at the Loan Rate, payable in sixty (60) equal monthly
installments of principal plus accrued but unpaid interest beginning
on the first day of the calendar month next following the date of
closing. In addition, and as a condition precedent to such purchase
if ACG is purchasing Circus Membership Interest, ACG shall
cause Circus and its Affiliates to be released from and relieved of
all personal guaranties, personal liability and other Credit Support
relating to any then-outstanding Construction Financing or
Permanent Financing relating to the Project or the Temporary
Casino. The closing of the purchase transaction shall take place
within ninety (90) days after written notice from the Non-
Defaulting Member to the Defaulting Member.
5.09 Default Loans.
(a) If the Non-Defaulting Member shall elect to
advance a Default Loan as contemplated by Section 5.08 (the
Default Loans ), the amount of such advance shall be made to
the Company but shall, for all purposes, be deemed a loan made
to and on behalf of the Defaulting Member to enable the
Defaulting Member to make its required Additional Capital
Contribution. Default Loans shall bear interest at the Default Rate,
and, if not sooner paid, the outstanding principal amount thereof,
together with accrued and unpaid interest thereon, shall be due and
payable in full on the Liquidation Date in accordance with the
priorities set forth in Article XIII. In order to secure the payment
of the Default Loans, and interest thereon, the Defaulting Member
shall be deemed to have granted to the Non-Defaulting Member a
security interest in the Membership Interest of the Defaulting
Member and shall be deemed to have constituted and appointed the
Non-Defaulting Member, or any officer, agent, employee, or
Affiliate of the Non-Defaulting Member designated by the Non-
Defaulting Member, as the true and lawful agent and
attorney-in-fact for the Defaulting Member with full power of
substitution and with the full right, power and authority to execute
such financing statements, continuation statements and other
similar instruments and documents reasonably necessary in order
to perfect the security interest herein granted.
(b) The making of a Default Loan by the Non-
Defaulting Member shall not relieve the Defaulting Member of its
obligation to make the Additional Capital Contribution, or the
portion thereof as to which it is in default. The Non-Defaulting
Member shall have the right at any time that a Default Loan is
outstanding, to elect the remedies set forth in Section 5.08(b), in
which event the recovery shall first be applied in payment of
outstanding Default Loans and interest thereon. In addition, the
Non-Defaulting Member shall have the right, at its election and
without further action of the Management Committee, to contribute
to the Company, at any time or from time to time, an amount not
to exceed the principal amount of the Default Loans outstanding,
together with any accrued and unpaid interest thereon, the amount
thereof to be treated as though an Additional Capital Contribution
had been made to the Company pursuant to Section 5.08(c) with
an adjustment to the Sharing Ratios of the Members with respect
to the amount so contributed as contemplated by Section 5.08(c),
in which event, however, the Default Loan, and all accrued and
unpaid interest thereon, shall be deemed to have been paid in full.
5.10 Status as Defaulting Member.
A Defaulting Member shall cease to be such on the earlier
to occur of (i) payment of the required Capital Contribution, and
any required interest in full prior to any funding on behalf of the
Defaulting Member by the Non-Defaulting Member; (ii) if a
Default Loan has not been advanced by the Non-Defaulting
Member, an election by the Non-Defaulting Member to treat its
contribution on behalf of the Defaulting Member as an Additional
Capital Contribution to the Company and to adjust the Sharing
Ratios accordingly; and (iii) if a Default Loan has been advanced
by the Non-Defaulting Member, upon payment thereof, and
interest thereon in full, or upon deemed payment thereof by
contribution of the amount thereof to the capital of the Company
by the Non-Defaulting Member. Notwithstanding the foregoing,
and except as otherwise expressly approved in writing by the Non-
Defaulting Member, a Defaulting Member shall not be entitled to
cure its default and to be reinstated as a Member in good standing
in the Company if the Non-Defaulting Member has delivered a
written notice of exercise of the right to purchase the Defaulting
Member s Membership Interest pursuant to Section 5.08(d) and
such default has not been cured within ten (10) days after delivery
of such written notice.
5.11 No Third Party Beneficiaries.
The right or obligation of any Member to make any Capital
Contribution or any Default Loan, or otherwise to do, perform,
satisfy or discharge any liability or obligation of any Member
hereunder, or to pursue any other right or remedy hereunder or as
provided at law or in equity, shall not confer any right or claim
upon or otherwise inure to the benefit of any creditor or other
third party having dealings with the Company or any Member, it
being understood and agreed that the provisions of this Agreement
shall be solely for the benefit of, and may be enforced solely by,
the parties hereto and their respective successors and assigns. The
rights or obligations of the Members herein set forth, including,
without limitation, the obligation or right to make Capital
Contributions or the right to make Default Loans shall not be
deemed an asset of the Company, may not be sold, transferred or
assigned by the Company in connection with any sale or transfer
of a Membership Interest made in accordance with the provisions
of this Agreement, and may not be pledged or encumbered to
secure any debt or other obligation of the Company or of the
Members.
ARTICLE VI
SHARING RATIO; CASH DISTRIBUTIONS;
ALLOCATIONS OF PROFIT AND LOSS
6.01 Sharing Ratios
The Members shall have the following initial Sharing Ratios
in the Company:
ACG 55%
Circus 45%
6.02 Periodic Determination of Distributable Cash
(a) The Management Committee shall review on
a monthly basis the cash flow of the Company and, consistent with
prudent business practices, shall determine the amounts, if any, of
funds available for designation and distribution as Distributable
Cash.
(b) All such distributions shall be made only to
the Persons who, according to the books and records of the
Company, are the holders of record of the Membership Interests
in respect of which such distributions are made on the actual date
of distribution. To the greatest extent permitted by law, neither
the Company nor any Committee Member shall incur any liability
for making distributions in accordance with this Article VI.
(c) In determining Distributable Cash From
Temporary Casino with respect to each Fiscal Year, the
Management Committee shall set aside as a reserve to be used by
the Company to reduce the Construction Financing for the Project,
an amount equal to a specified percentage of funds in excess of the
Tax Distribution with respect to such Fiscal Year, that would
otherwise be available as Distributable Cash From Temporary
Casino. Such specified percentage shall be Approved by the
Management Committee at the time it elects to proceed with
development of a Temporary Casino.
(d) A Member, regardless of the nature of the
Member s Capital Contribution, has no right to demand and
receive any distribution from the Company in any form other than
cash. No Member may be compelled to accept from the Company
a distribution of any asset in kind in lieu of a proportionate
distribution of money being made to other Members. Except upon
a dissolution and the winding up of the Company, no Member may
be compelled to accept a distribution of any asset in kind.
6.03 Distribution of Distributable Cash
(a) Distributable Cash From Temporary Casino
with respect to each Fiscal Year shall be distributed to the
Members in the following order of priority:
(i) First, to each Member an amount
equal to (or in proportion to if less than) such Member s Tax
Distribution with respect to such Fiscal Year; and
(ii) Second to the Members in accordance
with their respective Sharing Ratios.
(b) Distributable Cash From Operations with
respect to each Fiscal Year shall be distributed to the Members in
the following order of priority:
(i) First, to each Member an amount
equal to (or in proportion to if less than) such Member s Tax
Distribution with respect to such Fiscal Year, but without
duplication of any amounts distributed pursuant to Section
6.03(a)(i) with respect to such Fiscal Year;
(ii) Second, to Circus, an amount equal
to its Management Fee with respect to such Fiscal Year and the
accrued but unpaid portion of its Management Fee with respect to
any prior Fiscal Year; and
(iii) Third, to the Members in accordance
with their respective Sharing Ratios.
6.04 Determination and Allocation of Profits and
Losses
(a) Losses of the Company for each Fiscal Year
shall be allocated to the Members in the following order of
priority:
(i) First, to each Member, an amount
equal to (or in proportion to if less than) the excess, if any of the
cumulative amount of Profits previously allocated to such Member
pursuant to Section 6.04(b)(vi) over the cumulative amount of
Losses previously allocated to such Member pursuant to this
Section 6.04(a)(i);
(ii) Second, to each Member, an amount
equal to (or in proportion to if less than) the excess, if any of the
cumulative amount of Profits previously allocated to such Member
pursuant to Section 6.04(b)(v) over the cumulative amount of
Losses previously allocated to such Member pursuant to this
Section 6.04(a)(ii);
(iii) Third, Circus, an amount equal to the
excess, if any of the cumulative amount of Profits previously
allocated to Circus pursuant to Section 6.04(b)(iv) over the
cumulative amount of Losses previously allocated to Circus
pursuant to this Section 6.04(a)(iii);
(iv) Fourth, to each Member, an amount
equal to (or in proportion to if less than), in the case of ACG , its
positive Capital Account balance and, in the case of Circus, the
excess, if any, of its positive Capital Account balance over the
aggregate amount of its Capital Contributions pursuant to Sections
5.01 and 5.02, in each case after adjustment of such Member s
Capital Account for any Losses allocated to such Member pursuant
to Sections 6.04(a)(i), (ii) and (iii);
(v) Fifth, to each Member, an amount
equal to (or in proportion to if less than) such Member s positive
Capital Account balance, after adjustment of such Member s
Capital Account for any Losses allocated to such Member pursuant
to Sections 6.04(a)(i), (ii), (iii) and (iv); and
(vi) Sixth, to the Members, pro rata in
accordance with their respective Sharing Ratios.
(b) Profits of the Company for each Fiscal Year
shall be allocated to the Members in the following order of
priority:
(i) First, to each Member, an amount
equal to (or in proportion to if less than) the excess, if any of the
cumulative amount of Losses previously allocated to such Member
pursuant to Section 6.04(a)(vi) over the cumulative amount of
Profits previously allocated to such Member pursuant to this
Section 6.04(b)(i);
(ii) Second, to each Member, an amount
equal to (or in proportion to if less than) the excess, if any of the
cumulative amount of Losses previously allocated to such Member
pursuant to Section 6.04(a)(v) over the cumulative amount of
Profits previously allocated to such Member pursuant to this
Section 6.04(b)(ii);
(iii) Third, to each Member, an amount
equal to (or in proportion to if less than) the excess, if any of the
cumulative amount of Losses previously allocated to such Member
pursuant to Section 6.04(a)(iv) over the cumulative amount of
Profits previously allocated to such Member pursuant to this
Section 6.04(b)(iii);
(iv) Fourth, to Circus, an amount equal to
(or in proportion to if less than) the excess, if any of the
cumulative amount of the Management Fee Allocation with respect
to such Fiscal Year and all prior Fiscal Years over the cumulative
amount of Profits previously allocated to Circus pursuant to this
Section 6.04(b)(iv);
(v) Fifth, to each Member, an amount
equal to (or in proportion to if less than) the excess, if any of the
cumulative amount of Distributable Cash distributed to such
Member pursuant to Section 6.03 with respect to such Fiscal Year
and all prior Fiscal Years over the cumulative amount of Profits
previously allocated to such Member pursuant to Section
6.04(b)(iv) and this Section 6.04(b)(v); and
(vi) Sixth, to the Members, pro rata in
accordance with their respective Sharing Ratios.
6.05 Tax Regulatory Provisions
(a) Notwithstanding the provisions of Section
6.04(a), in no event shall any allocation of Losses (or any other
loss, deduction or Section 705(a)(2)(B) Expenditure) to any
Member cause such Member to have or increase a deficit balance
in its Adjusted Capital Account.
(b) If a Member receives an adjustment,
allocation or distribution described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) which creates or increases a deficit
balance (taking into account distributions, other than distributions
in liquidation of the Company, reasonably expected to be made) in
such Member s Adjusted Capital Account (as provided in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6)), the
Company shall allocate items of income or gain (as those terms are
used in Regulations Section 1.704-1(b)(2)(ii)(d)) to such Member
in an amount and manner to eliminate the Member s Capital
Account deficit attributable to such adjustment, allocation or
distribution as quickly as possible.
(c) If there is a net decrease in the Company s
Minimum Gain during any Fiscal Year, each Member shall be
allocated items of income and gain for such Fiscal Year equal to
such Member s share of the net decrease in Minimum Gain during
such Fiscal Year in accordance with Regulations Sections 1.704-
2(f) and (g).
(d) Any item of Company loss, deduction or
Section 705(a)(2)(B) Expenditure that is attributable to Member
Nonrecourse Debt shall be allocated to the Member or Members
that bear the economic risk of loss with respect to such Member
Nonrecourse Debt in accordance with Regulations Section 1.704-
2(i). If there is a net decrease during any Fiscal Year in the
minimum gain attributable to a Member Nonrecourse Debt (within
the meaning of Regulations Section 1.704-2(i)(3)), then any
Member with a share of the minimum gain attributable to such
Member Nonrecourse Debt at the beginning of such Fiscal Year
shall be allocated items of Company income and gain for such
Fiscal Year (and, if necessary, for subsequent Fiscal Years) equal
to such Member s share of the net decrease in Member
Nonrecourse Debt Minimum Gain as provided in Regulations
Section 1.704-2(i)(4).
(e) In accordance with Section 704(c) of the
Code and Regulations Section 1.704-1(b)(2)(iv)(d), income, gain,
loss and deduction with respect to any property contributed to the
capital of the Company shall, solely for tax purposes, be allocated
among the Members so as to take account of any variation between
adjusted basis of such property to the Company and its initial
Gross Asset Value. In the event the Gross Asset Value of any
Company property is adjusted (other than for Depreciation)
subsequent allocations of income, gain, loss and deduction with
respect to such property shall take account of any variation
between the adjusted basis of such property and its Gross Asset
Value in the same manner as under Section 704(c) and the
Regulations thereunder. Any elections or other decisions relating
to such allocation shall be made by the Members in a manner that
reasonably reflects the purpose and intention of this Agreement.
(f) Recapture Income shall be apportioned
among the Members, to the extent of Profits allocated to the
Members, pro rata in accordance with the prior allocation of
deductions to which such Recapture Income is attributable.
(g) If there is a Liquidation of the Company, the
Capital Accounts of the Members shall be adjusted to reflect the
actual or anticipated Profits or Losses allocable among the
Members shall be adjusted in accordance with, or as if there had
been, an actual disposition of the Company s property at its fair
market value.
6.06 Taxable Year and Accounting Method.
Except as otherwise required by the Code or the
Regulations, the Company s taxable year shall be the calendar
year. The Company shall use the accrual method of accounting
for federal income tax purposes.
6.07 Tax Elections.
Circus shall have the authority to make any election or
other determination on behalf of the Company provided for under
the Code or any provision of state or local tax law. In making
such elections, Circus shall consider the interests of both Members
as well as that of the Company.
6.08 Tax Matters Partner.
The Tax Matters Partner (within the meaning of Section
6231(a)(7) of the Code) of the Company shall be Circus. In the
event of an administrative or judicial proceeding, the Tax Matters
Partner shall regularly consult with ACG regarding all significant
decisions affecting such proceeding. The Tax Matters Partner
shall have the right to determine whether to challenge a final
partnership administrative adjustment by initiating an action in the
Tax Court or, if advised by counsel to do so and with the consent
of ACG, in the United States District Court or the Claims Court.
6.09 Tax Returns.
Circus shall, at the cost of the Company, cause to be
prepared and filed all necessary federal and state income tax
returns for the Company. Each Member shall furnish to the
Company all pertinent information in its possession relating to
Company operations that is necessary to enable the Company s
income tax returns to be prepared and filed.
ARTICLE VII
INFORMATION AND TRADE SECRETS
7.01 Information.
In addition to the other rights set forth in this Agreement,
each Member is entitled to all information to which that Member
is entitled to have access under applicable law.
7.02 Trade Secrets.
Each Member acknowledges that, from time to time, it may
receive information from or regarding the Company in the nature
of trade secrets or that otherwise is confidential, the release of
which may be damaging to the Company or Persons with which it
does business or to other Members or their respective Affiliates.
Each Member shall hold in strict confidence and not use (except
for matters involving the Company) any confidential information
such Member receives regarding the Company and may not
disclose it to any Person other than another Member, except for
disclosures (a) compelled by law (but the Member must notify the
Management Committee promptly of any request for that
information, before disclosing it if practicable), (b) to advisers or
representatives of the Member or Persons to which that Member s
Membership Interest may be Disposed as permitted by this
Agreement, but only if the recipients have agreed to be bound by
the provisions of this Section 7.02, or (c) of information that
Member also has received from a source independent of the
Company that the Member reasonably believes obtained that
information without breach of any obligation of confidentiality.
The Members acknowledge that breach of the provisions of this
Section 7.02 may cause irreparable injury to the Company for
which monetary damages are inadequate, difficult to compute, or
both. Accordingly, the Members agree that the provisions of this
Section 7.02 may be enforced by specific performance.
ARTICLE VIII
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
8.01 Maintenance of Books; Financial Statements;
Annual Audits.
The books of account for the Company shall be maintained
on an accrual basis in accordance with GAAP and the terms of this
Agreement, except that the Capital Accounts of the Members shall
be maintained in accordance with Section 5.06. The accounting
year of the Company shall be the calendar year. The Company
shall cause its financial statements to be audited annually by a big
six firm of certified public accountants approved by a
Supermajority of the Management Committee.
8.02 Reports.
The Company shall cause to be prepared or delivered such
reports as the Management Committee shall from time to time
deem appropriate. Financial reports shall be sent to the Members
upon request, in accordance with the provisions of the Act. The
Company shall bear the costs of all these reports.
8.03 Accounts.
The Company shall establish and maintain one or more
separate bank and investment accounts and arrangements for
Company funds in the Company name with financial institutions
and firms that the Management Committee determines. The
Company s funds shall not be commingled with the funds of any
Member.
8.04 Required Records.
The Company will maintain at its principal place or
business the following records:
(a) A current list of the full name and last
known address of each Member and each Management Committee
Member;
(b) A copy of the Articles, together with any
amendments to the Articles;
(c) A copy of this Agreement as executed by the
Members, together with all amendments to this Agreement and all
records of the admission of Members, the Disposition of
Membership Interests, and the admission of Substitute Members;
(d) Copies of the Company s federal, state and
local income tax returns and reports, if any, for the three (3) most
recent calendar years;
(e) Copies of any financial statements of the
Company for the three (3) most recent calendar years;
(f) Records (including minutes and written
consents) evidencing authorization of Company action; and
(g) Copies of records that would enable a
member to determine each Member s relative Capital Contribution,
Membership Interest and Sharing Ratios.
8.05 Access to Required Records.
(a) After giving reasonable advance notice to the
Company, any Member may inspect and review the Required
Records and may, at the Member s sole cost and expense, having
the Company make copies of any portion or all of the records.
(b) Unless the Company agrees otherwise, all
Member access to the Required Records must take place during the
Company s regular business hours. The Company may impose
additional reasonable conditions and restrictions on Members
access to the Required Records, including specifying the amount
of advance notice a Member must give and the charges imposed
for copying.
ARTICLE IX
ASSIGNEES; SUBSTITUTE MEMBERS;
ADDITIONAL MEMBERS; WITHDRAWAL
9.01 Rights of Assignees.
The Assignee of a portion of an initial Member s
Membership Interest has no right to appoint Committee Members
to the Management Committee or to otherwise participate in the
management of the business and affairs of the Company or to
become a Member. Such Assignee is not entitled to vote, consent
to or approve any matter for which this Agreement provides such
right to a Member (such right being reserved to the assigning
Member until the Assignee has been admitted as a Substitute
Member) and is entitled to receive only those distributions to
which the assigning Member would have been entitled, and to be
allocated the Profits and Losses attributable to the Membership
Interest assigned to it.
9.02 Admission of Substitute Members.
Subject to Article XII, an Assignee (and any subsequent
Assignee) of all of an initial Member s Membership Interest shall
be admitted as a Substitute Member and substituted to all of the
rights of the assigning Member upon written request to (but
without the necessity for approval of) the Management Committee.
An Assignee (and any subsequent Assignee) of a portion of an
initial Member s Membership Interest may be admitted as a
Substitute Member and substituted to all of the rights of the
assigning Member with respect to the Membership Interest so
assigned, but only with Supermajority approval of the Management
Committee, which approval may be granted or withheld in its sole
and absolute discretion. In either event, if so admitted, the
Substitute Member has all the rights and powers and is subject to
all the restrictions and liabilities of the assigning Member. The
assignment of all or a portion of a Membership Interest or the
admission of a Substitute Member, unless otherwise approved by
a Supermajority of the Management Committee, shall not release
the Member assigning the Membership Interest from any liability
to the Company that may exist prior to the approval.
9.03 Admission of Additional Members.
The Management Committee, may permit the admission of
Additional Members upon such terms and conditions as shall be
approved by a Supermajority of the Management Committee.
9.04 Withdrawal.
No Member shall have the right to withdraw from the
Company or to demand a return of its Capital Contribution at any
time except as provided in Sections 5.08(a) or 9.06, or upon
termination and dissolution of the Company, without the written
consent of the other Member. However, a Person shall cease to
be a Member upon the happening of any of the following events:
(a) the withdrawal of a Member with the consent
of the other Member.
(b) a Member becoming a Bankrupt Member or
a Dissolved Member;
(c) a Member assigning its entire Membership
Interest to a Substitute Member pursuant to Section 9.02.
9.05 Rights of Withdrawing Member.
In the event any Member withdraws prior to the dissolution
and winding up of the Company, the withdrawing Member (or its
liquidator, trustee or receiver, as the case may be) shall thereafter
hold the Membership Interest as an Assignee and shall not be
entitled to receive any additional withdrawing distribution under
Section 305 of the Act.
9.06 Circus Limited Right to Withdraw.
(a) The Members acknowledge that, as of the
date of this Agreement, the Michigan Gaming Control Board has
proposed regulations containing certain provisions which, if
adopted in their present form, would materially adversely affect
the business and affairs of the Company, Circus, CCEI and their
Affiliates. Circus has used, and will continue to use, its good faith
best efforts to urge the Michigan Gaming Control Board to
eliminate or substantially modify such adverse provisions in the
final regulations.
(b) Notwithstanding anything to the contrary
contained in this Agreement, if Circus determines, in its
reasonable judgment, that the initial final rules issued by the
Michigan Gaming Control Board are likely to materially adversely
affect the conduct of the business and affairs of a publicly-traded
company which conducts gaming operations in Nevada and other
jurisdictions in the United States, Circus shall have the absolute
right, upon written notice to ACG within thirty days (30) after the
promulgation of such initial final rules, to withdraw from the
Company. In such event, ACG shall be entitled to retain the $5
million paid by Circus to ACG pursuant to Section 4.05(e)(i), but
neither Circus, CCEI nor any of their respective Affiliates shall
have any other or further liability or obligation of any nature
whatsoever under or with respect to this Agreement or the subject
matter hereof except the payment of its proportionate share of
approved expenses incurred to the date of Circus notification of
intent to withdraw. At the request of ACG, Circus shall execute
and deliver such instruments as may be reasonably necessary to
transfer its Membership Interest in the Company, without recourse
or liability, to ACG or its designees. If at the time of Circus
withdrawal, the Company, Circus or CCEI own any work product
or other property which was generated or acquired in whole or in
part with funds contributed or advanced by Circus or CCEI in
connection with the Project, and if ACG or an Affiliate intends to
proceed with the development of the Project, either alone or in
concert with others, and such work product or other property will
be used or useful by ACG or its successors in connection with the
development and operation of the Project, such property shall
become or remain the property of the Company or ACG or its
designees upon the payment by Company or ACG of ACG s
proportionate share of outside vendor costs in respect of such work
product or other property within sixty days (60) after written
demand. In the event Circus withdraws pursuant to this Section
9.06, neither CCEI nor any of its Affiliates (which for purposes
hereof shall mean an entity in which at least 25% of the voting
interest is owned and controlled by CCEI) shall acquire any
interest in a casino licensed under the Michigan Gaming Control
and Revenue Act or within fifty (50) miles of the Project for a
period of five (5) years after such withdrawal.
ARTICLE X
LOSS OF LICENSE
10.01 Loss of License.
A Loss of License shall mean any denial, failure to be found
suitable or qualified, revocation, suspension (for a period in excess
of three (3) days) or non-renewal of any License, or threat of any
of the foregoing, whether resulting from any judicial or
administrative proceeding, or otherwise, and which results,
directly or indirectly, from any act or omission of any Member,
or any Affiliate of a Member (including, for purposes of this
Section, the members, shareholders, employees, agents, officers
or directors of any of the Members, or their respective members
or equity participants or any person or entity with whom such
party has had business or other dealings), including, the
commission of any crime or other act deemed inconsistent with the
holding of a License, or the association or affiliation with
unsuitable persons or entities, whether or not the allegations with
respect thereto are true in fact, or the failure of any such Member
or Affiliate to cooperate with the Gaming Authorities to the
satisfaction of such Gaming Authorities. No Loss of License shall
be deemed to have occurred so long as proceedings with respect
thereto are being contested with due diligence and in good faith by
the Company, or the person or entity affected thereby, provided
that, during the pendency of such proceedings, the Company is
able to continue gaming operations on an uninterrupted basis and
without additional restrictions with respect thereto. A Loss of
License, however, shall be deemed to have occurred
notwithstanding that additional rights of appeal or contest may be
available if, as a result of any such action, gaming operations by
the Company or by Circus or its Affiliates are prohibited or
materially restrained, limited or restricted. For purposes of the
below provisions of this Article X, the Responsible Member
shall mean the Member (either Circus or ACG, as applicable)
which is, or whose Affiliate is, responsible for the Loss of License
and the Non-Responsible Member shall mean the other Member.
If the Loss of License results from the acts or omissions of one or
more Affiliates of both Members, then each Member shall be a
Responsible Member with respect to the Affiliate whose acts or
omissions were responsible for the Loss of License, and each
Member shall also be deemed a Non-Responsible Member with
respect to the same act or omission, and each shall separately have
the right to invoke the provisions hereinafter set forth.
10.02 Buy-Out Provisions Relating to Loss of License.
(a) If a Loss of License shall occur, then, within
thirty (30) days after written notice from the Company or the Non-
Responsible Member, or such lesser period as required by any
applicable Gaming Authorities, the Responsible Member shall,
subject to approval of any applicable Gaming Authorities, transfer
its Membership Interest to one of its constituent members or to an
Affiliate of such Member or constituent member, who is qualified
to obtain and hold a License. If such transfer does not occur
within said cure period, the Responsible Member shall transfer its
Membership Interest to the Company (or, at the written direction
of the Company, directly to a designee of the Non-Responsible
Member). In the event of such transfer to the Company or such
designee, the Buy-Out Price payable to the Responsible Member
for its Membership Interest shall be the lesser of (i) the amount
approved by the Gaming Authorities or (ii) an amount determined
as follows:
(i) If ACG is the Responsible Member,
the Buy-Out Price shall be an amount equal to the sum of (A)
100% of the Net Book Value of ACG s Membership Interest, and
(B) the outstanding balance of principal and accrued interest due
to ACG in respect of any Member Loans, payable in cash at the
closing.
(ii) If Circus is the Responsible Member,
the Buy-Out Price shall be a principal amount equal to the sum of
(A) Circus Adjusted Capital Contribution Account, determined as
of the last day of the month preceding the date of closing, and (B)
the outstanding balance of principal and accrued interest due to
Circus or its Affiliates in respect of any Member Loans. The Buy-
Out Price shall be payable pursuant to a promissory note executed
by the Company and the Non-Responsible Member, bearing
interest at the Loan Rate, payable in sixty (60) equal monthly
installments of principal plus accrued but unpaid interest beginning
on the first day of the calendar month next following the date of
closing. In addition, and as a condition precedent to such buy-out,
the Company and the Non-Responsible Member shall cause Circus
and its Affiliates to be released from and relieved of all personal
guarantees, personal liability and other Credit Support relating to
any then-outstanding Construction Financing or replacement
financing relating to the Project or the Temporary Casino.
(b) The closing of the buy-out transaction shall take
place within thirty (30) days after notice from the Company. Each
Member shall execute and deliver all documents and take all
actions as either Member may deem reasonably necessary or
advisable (consistent with the provisions of this Agreement), to
effect such buy-out transaction.
ARTICLE XI
BANKRUPT MEMBER
11.01 Membership Interest.
(a) If any Member becomes a Bankrupt Member,
the Company shall have the option, exercisable by notice from the
Company to the Bankrupt Member (or its representative) at any
time prior to the 180th day after receipt of notice of the occurrence
of the event causing it to become a Bankrupt Member, to buy, and
on the exercise of this option the Bankrupt Member or its
representative shall sell, its Membership Interest.
(b) The purchase price shall be the lesser of (i)
the amount approved by the applicable Gaming Authorities or (ii)
an amount equal to the Fair Market Value of the Membership
Interest, taking into account any sums owed to the Bankrupt
Member by the Company or by the Bankrupt Member to the
Company. The Bankrupt Member and the Company each shall
pay one-half of the costs of the appraisal. The Company shall pay
the Fair Market Value as so determined in eight (8) equal quarterly
cash installments, the first due on the first day of the calendar
quarter next following the closing, and the remainder (together
with accumulated interest on the amount unpaid at the Loan Rate)
shall be due on the first day of each calendar quarter thereafter
until paid in full.
(c) The payment to be made to the Bankrupt
Member or its representative under this Section 11.01 is in
complete liquidation and satisfaction of all the rights and interest
of the Bankrupt Member and its representative (and of all Persons
claiming by, through, or under the Bankrupt Member and its
representative) in and in respect of the Company, including,
without limitation, any Membership Interest, any rights in specific
Company property, and any rights against the Company and
(insofar as the affairs of the Company are concerned) against the
Members.
(d) If an event requiring a winding up of the
Company occurs before the purchase price for the Company is
determined under Section 11.01(b), then the purchase and sale
shall not occur. Instead, the Bankrupt Member or its successor
shall be entitled to receive in the liquidation of the Company the
same amount that Person would have received had the Bankrupt
Member continued to be a Member or not become a Bankrupt
Member.
ARTICLE XII
DISPOSITIONS OF INTERESTS
12.01 Restrictions on the Disposition of a Membership
Interest.
(a) Except as otherwise expressly provided
herein, no Member may Dispose of all or any portion of its
Membership Interest, nor may ZRX or AEA Dispose of all or any
portion of its membership interest in ACG, nor may the beneficial
owners of ZRX or AEA Dispose of any of their respective
ownership interests in ZRX or AEA, without complying with the
provisions of Sections 12.02 and 12.03 hereof. For purposes of
this Article XII, but for no other purposes, (i) ZRX and AEA and
their respective constituent members shall be treated as
Members, (ii) the membership interests of ZRX and AEA in
ACG shall be treated as Membership Interests, and (iii) the
membership interests in ZRX and AEA shall be treated as
Membership Interests. In the event ZRX or AEA (or a
constituent member of such entity) is the transferring Member
pursuant to Section 12.03 and Circus elects to purchase all or a
portion of the Offered Interest, Circus shall not acquire a
membership interest in ACG or such other entity, but in such
event, ACG s Sharing Ratio shall be proportionately reduced and
Circus Sharing Ratio shall be appropriately increased, and (ii) the
number of Management Committee Members to be appointed by
ACG shall be decreased, and the number of Management
Committee Members to be appointed by Circus shall be increased,
by one (1) seat for each additional ten percent (10%) of Sharing
Ratio acquired by Circus. (For example: Assume (i) AEA is the
transferring Member , (ii) ZRX declines to acquire any of AEA s
interest, (iii) Circus elects to acquire all of AEA s interest, and
(iv) at the date of transfer AEA s beneficial ownership interest in
ACG is 36.36%, which equates to a 20% Sharing Ratio in the
Company [.3636 x .55 = .20]. In such event, this Agreement
shall be deemed amended so that (i) the Sharing Ratio of Circus
shall be increased from 45% to 65% and the Sharing Ratio of
ACG shall be reduced from 55% to 35% and (ii) the number of
Committee Members appointed to the Management Committee by
Circus and ACG shall be 8 and 4, respectively.)
(b) Notwithstanding anything to the contrary
contained herein, for purposes of this Article XII, a Disposition
shall not include (and the provisions of Sections 12.02 and 12.03
shall not apply to) (i) a transfer by Circus to its parent or any
wholly-owned Affiliate of its parent or in connection with the sale
or transfer of substantially all of the assets of Circus or its parent
(including without limitation, any transfer by merger,
consolidation, stock sale, or the like); (ii) a transfer by ACG to an
entity that is beneficially owned by the same Persons who
presently own ACG and in the same percentage as are presently
owned by such Persons; (iii) a transfer of any ownership interest
in ZRX or AEA (A) to another Person owning an interest in such
entity as of the date hereof, (B) to a trust (or similar vehicle) for
the benefit of the family of the transferor, (C) to the beneficiaries
or devisees upon the death of a transferor, (D) in connection with
the entry of a divorce decree for or against a transferor, (E) to a
corporation, partnership, limited liability company, trust or other
entity, the ownership or beneficiaries of which are comprised
wholly of and limited to the transferors and/or their
legal/beneficial owners, (F) as a result of the death or permanent
disability of a transferor, or (G) to the beneficial owners of
entities
who are members upon the dissolution of the entity; (iv) or a
transfer of the ownership interest in a Member if such transfer is
incident to a transfer by the ultimate parent corporation of such
Member of substantially all of its gaming assets; or (v) a transfer
to create a security interest, or the acquisition by an institutional
investor (as defined in Regulation 16.010 of the Nevada Gaming
Control Act) pursuant to the exercise of rights under a bona fide
security interest; provided that such Member shall give notice to
the Company and the other Members upon completion of such
transaction and shall provide to the Company and the other
Members, to the extent requested, as a condition to the transferee
being admitted as a Substitute Member, and in compliance with
Section 9.02, an opinion of counsel to the effect that such transfer
shall not result in the Company being characterized for federal
income tax purposes as an association taxable as a corporation.
(c) Except as contemplated by Articles X and
XI, the Company shall not recognize for any purpose any
purported Disposition of all or part of a Membership Interest
unless and until the other applicable provisions of this
Section 12.01 and the provisions of Sections 12.02 and 12.03 have
been satisfied.
(d) For the right of a Member to Dispose of all
or any portion of a Membership Interest or of any Person to be
admitted to the Company in connection with such a Disposition to
exist or (subject to the other provisions of this Article XII) be
exercised, (i) either (A) such Membership Interest subject to the
Disposition or admission must be registered under any applicable
federal or state securities laws or (B) the Disposition or admission
must be exempt from registration under those laws and (ii) the
Disposition or admission, when added to the total of all other
sales, assignments, or other Dispositions within the preceding 12
months, must not result in the Company s being considered to have
terminated within the meaning of section 708(b) of the Code. The
Management Committee, however, may waive the requirements of
this Section 12.01(d).
(e) The Member effecting a Disposition and any
Person admitted to the Company in connection with that
Disposition shall pay, or reimburse the Company for, all costs
incurred by the Company in connection with the Disposition or
admission.
(f) The provisions of this Article XII shall
supersede any conflicting provisions in the operating agreements
or other applicable governing documents of ACG, AEA and ZRX.
(g) Unless otherwise approved by ACG, or
permitted pursuant to Section 12.01(b), Circus shall not have the
right to transfer its Membership Interest until six (6) months after
the initial opening of the Project for business to the public.
12.02 Conditions to Disposition.
As a condition precedent to any Disposition of a Member s
Membership Interest, such Member shall obtain the prior written
consent of the non-transferring Members and shall evidence
compliance with the following:
(a) Such Disposition, alone or when combined
with other prior transactions, would not result in a termination of
the Company within the meaning of Section 708 of the Code;
(b) An opinion of counsel satisfactory to counsel
to the Company, to the effect that such Disposition (i) is subject to
an effective registration under, or exempt from the registration
requirements of, the applicable state and federal securities laws;
(ii) shall not result in the Company being characterized for federal
income tax purposes as an association taxable as a corporation; and
(iii) is not to a tax-exempt entity as such term is defined in
Section 168(j) of the Code;
(c) Such Disposition is not in violation of any
provisions of any of the loan documents, or other similar
documents relating to any Construction Financing or other
financing obtained by the Company, or in violation of any other
instrument, document or agreement to which the Company is, at
the time of the proposed Disposition, a party or is otherwise
bound;
(d) The consent, approval or waiver of all
applicable Gaming Authorities has been obtained and such
Disposition is not in violation of any other applicable Legal
Requirements; provided however, that in any event, all
Dispositions shall only be made in accordance with the transfer of
ownership rules of the Michigan Gaming Control Board.
(e) Unless and until the Company receives from
the Assignee the information and agreements that counsel to the
Company may reasonably require, including, but not limited to,
any social security or taxpayer identification number, the
Disposition shall not be recognized by the Company; and
(f) Unless and until the Company receives from
the Assignee, in writing, an agreement wherein such Assignee
expressly assumes and agrees to be bound by all of the terms and
conditions of this Agreement and agrees to be responsible for all
reasonable costs and expenses incurred by the Company in
connection with the Disposition of the Membership Interest to the
Assignee and, if applicable, the admission of such assignee as a
Substitute Member, the Disposition shall not be recognized by the
Company.
12.03 Rights of First Refusal.
Each time a Member proposes to Dispose of all or any part
of such Member s Membership Interest (or is required by
operation of law or other involuntary transfer to do so), such
Member shall first offer such Membership Interest (the Offered
Interest ) to the non-transferring Members in accordance with the
following provisions:
(a) Such Member shall deliver a written notice
to the non-transferring Members (the Disposition Notice ) stating
(i) such Member s bona fide intention to Dispose of the Offered
Interest, (ii) the name and address of the proposed transferee, (iii)
the Sharing Ratio of the Offered Interest, (iv) the purchase price
(which must be entirely in cash) for which the Member proposes
to Dispose of the Offered Interest, and (v) all other pertinent terms
and conditions of such proposed bona fide Disposition.
(b) Within sixty (60) days after receipt of the
Disposition Notice (the First Refusal Period ), the non-
transferring Members shall have the first right to purchase all but
not less than all of such Offered Interest upon the cash purchase
price designated in such Disposition Notice and if they so elect,
shall notify the Management Committee in writing (an
Acceptance Notice ) of such election to purchase all or a portion
of the Offered Interest. The failure of a non-transferring Member
to submit an Acceptance Notice within the applicable period shall
constitute an election on the part of that Member not to purchase
any of the Offered Interest. If more than one non-transferring
Member elects to purchase (the Electing Members ), each
Electing Member shall purchase a portion of the Offered Interest
equal to a fraction, the numerator of which is the Electing
Member s Sharing Ratio and the denominator of which is the total
of all Electing Members Sharing Ratios; provided however, that
the Electing Members may agree to purchase the Offered Interest
in some other proportion. If the non-transferring Members elect
to purchase the Offered Interest under this Section 12.03, such
purchase shall be consummated within 10 business days after the
end of the First Refusal Period. At the closing of such purchase,
the transferring Member shall transfer the Offered Interest to the
Electing Members, free and clear of all liens, claims and other
encumbrances against payment of the applicable cash purchase
price.
(c) If the non-transferring Members do not elect
to purchase all of the Offered Interest, then the transferring
Member may transfer the Offered Interest to the proposed
transferee, provided such transfer (i) is completed within 30 days
after the expiration of the First Refusal Period, (ii) is made on
terms no less favorable to the transferring Member than as
designated in such Notice, and (iii) the requirements of Sections
12.01 and 12.02 relating to consent of Members, securities and tax
requirements hereof are met. If such Offered Interest is not so
transferred, the transferring Member must give notice in
accordance with this Section prior to any other or subsequent
transfer of all or any portion of its Membership Interest.
ARTICLE XIII
DISSOLUTION, LIQUIDATION, AND TERMINATION
13.01 Dissolution.
The Company shall dissolve and its business and affairs
shall be wound up on the first to occur of the following:
(a) the written Approval of a Supermajority of
the Management Committee and ratification thereof by the
Members pursuant to Section 3.06; or
(b) any other event causing dissolution as
described in section 801 of the Act.
13.02 Liquidation and Termination.
On dissolution of the Company, the Management
Committee shall act as liquidator or may appoint one or more
other Persons as liquidator. The liquidator shall proceed diligently
to wind up the affairs of the Company and make final distributions
as provided in this Agreement. The costs of liquidation shall be
borne as a Company expense. Until final distribution, the
liquidator shall continue to operate the Company with all of the
power and authority of the Management Committee. The steps to
be accomplished by the liquidator are as follows:
(a) As promptly as practicable after dissolution
and again after final liquidation, the liquidator shall cause a proper
accounting to be made by a recognized firm of certified public
accountants of the Company s assets, liabilities, and operations
through the last day of the calendar month in which the dissolution
occurs or the final liquidation is completed, as applicable;
(b) The liquidator shall pay from Company funds
all of the debts and liabilities of the Company (including all
expenses incurred in liquidation and any outstanding Member
Loans) or otherwise make adequate provision for them (including,
without limitation, the establishment of a cash escrow fund for
contingent liabilities in such amount and for such term as the
liquidator may reasonably determine);
(c) The liquidator shall sell all Company
property, including to Members; and
(d) All remaining assets of the Company shall be
distributed to the Members in accordance with, and to the extent
of, the positive balances in their respective Capital Accounts, as
determined after taking into account all Capital Account
adjustments, including, but not limited to, adjustments reflecting
any revaluation of Company property pursuant to Section 5.06 and
any other adjustments (other than those reflecting the distributions
made by reason of this Section 13.02(d)) for the taxable year of
the Company during which the liquidation of the Company occurs
(with the date of such occurrence being determined pursuant to
Regulations Section 1.703-1(b)(2)(ii)(g)); and such distribution
shall be made by the end of such taxable year (or, if later, within
90 days after said date of such occurrence).
The distribution of cash to a Member in accordance with
the provisions of this Section 13.02 constitutes a complete return
to the Member of its Capital Contributions and a complete
distribution to the Member of its Membership Interest and all the
Company s property. To the extent that a Member returns funds
to the Company, it has no claim against any other Member for
those funds.
13.03 Termination.
On completion of the distribution of Company assets as
provided in this Agreement, the Company is terminated, and the
Management Committee (or such other Person or Persons as the
Act may require or permit) shall cause the cancellation of the
Articles and any filings made as provided in Section 2.05 and shall
take such other actions as may be necessary to terminate the
Company.
ARTICLE XIV
REPRESENTATIONS AND WARRANTIES
14.01 Each of Circus, AEA and ZRX hereby represents
and warrants to the others and to the Company as follows:
(a) Such Person has all requisite power to
execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereunder; the consummation of the
transactions contemplated hereunder will not result in a breach or
a violation of, or a default under, any agreement or instrument by
which such Person or any of such Person s properties is bound or
any statute, rule, regulation, order or other law to which it is
subject, nor require the obtaining of any consent, approval, permit
or license from or filing with, any Governmental Authority or
other person by such Person in connection with the execution,
delivery and performance by such Person of this Agreement, other
than the Licenses and other governmental approvals which may be
required in connection with the development, ownership and
operation of the Project (and if applicable, the Temporary Casino).
(b) This Agreement constitutes (assuming its due
authorization and execution by the other Persons) such Person s
legal, valid and binding obligation. If such Person is a corporation
or a limited liability company, all corporate and other proceedings
required to be taken by such Person to authorize the execution,
delivery and performance of this Agreement have been taken.
(c) As of the date hereof, such Person has no
actual knowledge of any facts or circumstances that are likely to
adversely affect the ability of such Person (or any Affiliate or
other Person having an interest in such Person) or the Company to
receive all Licenses and other governmental approvals necessary
or advisable for the construction, completion, operation, ownership
and use of the Project as a gaming facility or which would
otherwise adversely affect such Person s ability to be found
suitable by any Gaming Authority. Notwithstanding anything to
the contrary contained herein, AEA shall indemnify and hold
Circus and ZRX harmless from and against any and all loss, cost,
liability, damage or expense incurred or suffered by Circus or
ZRX as a consequence of the existence of any disputes concerning
ownership interests in AEA.
(d) Such Person is acquiring its direct or indirect
Membership Interest for investment solely for such Person s own
account and not for distribution, transfer or sale to others in
connection with any distribution or public offering.
(e) Such Person is financially able to bear the
economic risk of an investment in the Company and has no need
for liquidity in this investment. Furthermore, the financial
capacity of such Person is of such a proportion that the total costs
of such Person s investment in the Company is not material when
compared with such Person s total financial capacity.
(f) Such Person has such knowledge, experience
and skill in financial and business matters in general and with
respect to investments of a nature similar to an investment in the
Company so as to be capable of evaluating the merits and risks of,
and making an informed business decision with regard to, this
investment. Such Person acknowledges and understands that the
purchase of its direct or indirect Membership Interest involves an
investment in a new business that has no previous operating
experience, and, therefore, this is a speculative investment with no
assurance of success.
(g) Such Person (i) has received all information
that such Person deems necessary to make an informed investment
decision with respect to an investment in the Company and (ii) has
had the unrestricted opportunity to make such investigation as such
Person desires pertaining to the Company and an investment
therein and to verify any information furnished to such Person.
(h) Such Person understands that such Person
must bear the economic risk of an investment in the Company for
an indefinite period of time because (i) the Membership Interests
have not been registered under the Securities Act of 1933 and
applicable state securities laws and (ii) the Membership Interests
may not be sold, transferred, pledged or otherwise disposed of
except in accordance with this Agreement and then only if they are
subsequently registered in accordance with the provisions of the
Securities Act and applicable state securities laws or registration
under the Securities Act or any applicable state securities laws is
not required.
(i) Such Person understands that the Company
is not obligated to register the Membership Interests for resale
under any applicable federal or state securities laws and that the
Company is not obligated to supply such Person with information
or assistance in complying with any exemption under any
applicable federal or state securities laws.
(j) Such Person if it is a limited liability
company, is duly organized and validly existing under the laws of
its jurisdiction of formation and has all power and authority
necessary to carry on its business as it is now being conducted.
14.02 Each of Circus, AEA and ZRX shall indemnify and
hold the others harmless from and against any and all loss, cost,
damage, liability or expense of whatsoever nature, incurred or
suffered by the others resulting from a breach of any the foregoing
representations and warranties by such indemnifying Person.
ARTICLE XV
GENERAL PROVISIONS
15.01 Offset.
Whenever the Company is to pay any sum to any Member,
any amounts that Member owes the Company may be deducted
from that sum before payment.
15.02 Notices.
All notices or other communications required or permitted
to be given under this Agreement shall be sufficiently given if in
writing and personally delivered, mailed by prepaid registered or
certified mail, return receipt requested, sent by receipted overnight
courier service or sent by facsimile transmission. Notices and
other communications shall be effective upon receipt by the Person
to be notified and shall be addressed as follows (provided that any
Person may change its address for notice purposes upon at least
thirty (30) days prior written notice given pursuant to this Section
14.02):
If to the Company:
Detroit Entertainment, L.L.C.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxxxx Xxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxx
If to Circus:
c/o Circus Circus Enterprises, Inc.
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: General Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
If to ACG:
Atwater Casino Group, L.L.C.
c/o Xxxxxx Xxxxxx
00000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx XxXxxxxx, Esq.
If to AEA:
Atwater Entertainment Associates, L.L.C.
000 Xxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
with a copy to:
Seyburn, Kahn, Ginn, Xxxx, Xxxxxx & Xxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx
If to ZRX:
ZRX, L.L.C.
c/o Xxxxxx Xxxxxx
00000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx XxXxxxxx, Esq.
15.03 Entire Agreement; Supersedure.
This Agreement, sets forth the entire understanding and
agreement of the Members relating to the Company and supersedes
and replaces any prior understanding, agreement or statement
(written or oral) of intent with respect to the Company.
15.04 Effect of Waiver or Consent.
A waiver or consent, express or implied, to or of any
breach or default by any Person in the performance by that Person
of its obligations hereunder is not a consent or waiver to or of any
other breach or default in the performance by that Person of the
same or any other obligations of that Person hereunder. Failure
on the part of a Person to complain of any act of any Person or to
declare any Person in default hereunder, irrespective of how long
that failure continues, does not constitute a waiver by that Person
of its rights with respect to that default until the applicable statute-
of-limitations period has run.
15.05 Amendment or Modification.
This Agreement may be amended or modified from time to
time only by a written instrument executed by the Members, as
Approved by the Management Committee; provided however, that
with respect to any provision of this Agreement which requires
Supermajority approval of the Management Committee, an
amendment to such provision shall require Supermajority approval
of the Management Committee.
15.06 Binding Effect.
Subject to the restrictions on Dispositions set forth in this
Agreement, this Agreement is binding on and inures to the benefit
of the Members and their respective legal representatives,
successors, and assigns.
15.07 Governing Law; Severability.
THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF
THE STATE OF MICHIGAN WITHOUT GIVING EFFECT TO
ANY CHOICE OR CONFLICT OF LAW PROVISION OR
RULE (WHETHER OF THE STATE OF MICHIGAN OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF MICHIGAN. In the event any
one or more of the provisions contained in this Agreement should
be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired
thereby.
15.08 Further Assurances.
In connection with this Agreement and the transactions
contemplated by it, each Member shall execute and deliver any
additional documents and instruments and perform any additional
acts that may be necessary or appropriate to effectuate and perform
the provisions of this Agreement and those transactions.
15.09 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single instrument.
15.10 Third Party Beneficiaries.
None of the provisions of this Agreement, including
without limitation, the limited joinder of CCEI as provided at the
end of this Agreement, shall be for the benefit of or enforceable
by any third party, including, without limitation, any creditor of
the Company or any Member. No such third party shall obtain
any right under any provision of this Agreement (including without
limitation, such limited joinder), or shall by reason of any such
provision make any claim in respect of any debt, liability, or
obligation (or otherwise) against the Company, any Member or
CCEI.
15.11 Relationship of Agreement to Default Rules.
If any provision of this Agreement conflicts with a Default
Rule, the provisions of this Agreement shall control and the
Default Rule shall be modified or overridden accordingly.
15.12 Arbitration.
Any controversy arising from or relating to this Agreement
shall be resolved by binding arbitration in Cleveland, Ohio,
according to the Commercial Arbitration Rules of the American
Arbitration Association. The Federal Arbitration Act (9 U.S.C.
1 et seq.) shall apply, and discovery shall be permitted as
provided in the Federal Rules of Civil Procedure. There shall be
a single arbitrator, who shall be a retired state or federal appellate
judge. Any award or other determination rendered shall be final
and conclusive upon the parties and a judgment thereon may be
entered in the highest court of the forum, state or federal, having
jurisdiction. The expenses of the arbitration shall be borne equally
by the parties to the arbitration, but each party shall pay for the
cost of its own counsel, witnesses and other related expenses. In
making the award or other determination, the arbitrator shall be
required to adhere to the terms of this Agreement and to applicable
laws of the State, including the provisions of the Act.
15.13 Supplemental Provisions.
This Agreement shall be governed by the Rules of Usage
and the Supplemental Provisions.
IN WITNESS WHEREOF, the undersigned have executed
the Agreement as of the date first set forth above.
ATWATER CASINO GROUP, L.L.C.,
a Michigan limited liability company
By: Atwater Management Corporation,
a Michigan corporation, its Manager
By:Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, President
By: Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx,
Chairman
CIRCUS CIRCUS MICHIGAN, INC.,
a Michigan corporation
By: Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: President
LIMITED JOINDER
CIRCUS CIRCUS ENTERPRISES, INC., hereby joins in
the execution of the foregoing Operating Agreement, solely for the
purpose of assuring to the Company that Circus will (i) make the
Capital Contributions to the Company as specified in Sections
5.01(b) and 5.02 above, (ii) use its good faith best efforts to secure
Construction Financing and Permanent Financing as contemplated
in Section 4.04 above, and (iii) cause a license for the use of
certain Circus Intellectual Property to be granted to the Company
as contemplated in Section 4.06 above.
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By:
Name:
Title:
ATWATER ENTERTAINMENT ASSOCIATES, L.L.C.
a Michigan limited liability company and ZRX, L.L.C., a
Michigan limited liability company hereby join in the execution of
the foregoing Operating Agreement, solely for the purposes of (i)
making the representations and warranties set forth in Article XIV
above and (ii) acknowledging that they have read, understand and
agree to be bound by, the terms, covenants and provisions of the
foregoing Operating Agreement.
ATWATER ENTERTAINMENT
ASSOCIATES, L.L.C., a Michigan limited
liability company
By: Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx, Manager
By: Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Manager
By: Xxxxxxxx X. Xxxx
Xxxxxxxx X. Xxxx, Manager
ZRX, L.L.C., a Michigan limited liability
company
By: Z.L.M. CORPORATION, a
Michigan Corporation, its Manager
By: Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, President
By: Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Member
By: Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, Member
By: Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, Member
APPENDIX A
DEFINITIONS
As used in the Operating Agreement (the Agreement ) to
which this is Appendix A is attached, the following terms have the
meanings set forth below. Unless otherwise expressly stated,
references to Article and Section numbers shall mean the Article
and Section numbers in the Agreement, and references to herein
or hereof or words of like effect shall refer to the Agreement.
Act means the Michigan Limited Liability Company Act,
450.4101 et seq., MSA 21.198 (4101) et seq., and any
successor statute, as amended from time to time.
Acceptance Notice has the meaning set forth in Section
12.03.
Additional Capital Contribution means a Capital
Contribution made pursuant to Sections 5.02 or 5.03.
Additional Member means a new Member admitted to
the Company pursuant to Article IX, other than a Substitute
Member.
Additional Project Cost means the amount, if any, by
which the actual Project Cost exceeds the amount of the Project
Budget initially Approved by the Management Committee.
Adjusted Capital Account of a Member means the
Capital Account maintained for such Member as of the end of each
Fiscal Year of the Company (a) increased by (i) any amount such
Member is obligated to restore to its Capital Account under
Regulations Section 1.704-1(b)(2)(ii)(c), (ii) an amount equal to the
sum of such Member s allocable share of the Company s Minimum
Gain attributable to Company Nonrecourse Liabilities and such
Member s allocable share of the Company s Minimum Gain
attributable to Member Nonrecourse Debt, in each case as
computed on the last day of such Fiscal Year in accordance with
applicable Regulations and (iii) the amount of Company liabilities
allocable to such Member under section 752 of the Code with
respect to which such Member bears the Economic Risk of Loss
to the extent such liabilities do not constitute partner nonrecourse
debt under Regulations Section 1.752-2 and (b) reduced (but not
below zero) by (i) all distributions to such Member pursuant to
Sections 6.03 and 4.05(d) hereof and (ii) all other reasonably
expected adjustments, allocations and distributions described in
Regulations Sections 1.704-l(b)(2)(ii)(d)(4), (5) and (6).
Adjusted Capital Contribution Account means for a
Member, as of the date of calculation, the amount of such
Member s Initial Capital Contributions (a) increased by the amount
of any Additional Capital Contributions contributed by such
Member under Article V and (b) reduced (but not below zero) by
the aggregate amount of all distributions to such Member pursuant
to Sections 6.03(a)(ii) and (iii), 6.03(b)(ii) and (iii) and 13.02(d)
hereof.
Adjusted Property means any property the Carrying
Value of which has been adjusted pursuant to Section 5.05(d). If
an Adjusted Property is deemed distributed by, and recontributed
to the Company for federal income tax purposes upon a
termination thereof pursuant to section 708(b)(1)(B) of the Code,
such property shall thereafter constitute a Contributed Property
until the Carrying Value of such property is subsequently adjusted
pursuant to Section 5.05(d).
ACG means Atwater Casino Group, L.L.C., a Michigan
limited liability company (formerly known as X.R.N., L.L.C.),
whose sole members are ZRX and AEA, and whose manager is
AMC.
AEA means Atwater Entertainment Associates, L.L.C.,
a Michigan limited liability company, which is a member of ACG.
Affiliate means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common
control with such Person. For the purposes of the preceding
sentence, the term control means the possession, directly or
indirectly, through one or more intermediaries, of the following:
(a) in the case of a corporation, more than 50% of the outstanding
voting securities thereof; (b) in the case of a limited liability
company, partnership, limited partnership or venture, the right to
more than 50% of the distributions therefrom (including liquidating
distributions); (c) in the case of a trust or estate, more than 50%
of the beneficial interest therein; or (d) in the case of any other
Person, more than 50% of the economic or beneficial interest
therein.
Agreed Value of any Contributed Property means the
fair market value of such Contributed Property at the time of
contribution as determined by agreement of the Management
Committee and the contributing Member; provided, however, that
the Agreed Value of any property deemed contributed to the
Company for federal income tax purposes upon termination and
reconstitution thereof pursuant to section 708(b)(1)(B) of the Code
shall be determined in accordance with Section 5.06(c). Subject
to Section 5.06(c), the Management Committee shall, in its sole
discretion, use such method as it deems reasonable and appropriate
to allocate the aggregate Agreed Value of Contributed Properties
contributed to the Company in a single or integrated transaction
among each separate property on a basis proportional to the fair
market value of each Contributed Property.
Agreement means this Operating Agreement, as
amended from time to time.
AMC means Atwater Management Corporation, a
Michigan corporation, which is the manager of ACG.
Approval of the Management Committee or words of
like effect, means, unless otherwise expressly stated, the approval
of a Majority of the Management Committee.
Articles means the Articles of Organization of the
Company, as amended or restated, which are filed with the
Department.
Assignee means a transferee of a Membership Interest
who has not been admitted as a Substitute Member.
Assignment Agreement means the Assignment
Agreement between ACG and Circus by which ACG has
transferred a 99.9% interest in the Preference Right to Circus.
Bankrupt Member means any Member with respect to
which a petition shall have been filed by or against such Member
as a debtor and the adjudication of such Member as a bankrupt
under the provisions of the bankruptcy laws of the United States
of America shall have commenced, or that such Member shall
made an assignment for the benefit of its creditors generally or a
receiver shall have been appointed for substantially all of the
property and assets of such Member (and the terms Bankruptcy
and Bankrupt shall have correlative meanings).
Business Day means a day of the year, other than a
Saturday or Sunday, on which commercial banks in the city in
which the principal office of the Company is located, are not
required or authorized to remain closed and on which The New
York Stock Exchange is not closed.
Buy-Out Price means, with respect to Sections 5.08(d),
9.04 or 10.02(a), the consideration payable to the Defaulting
Member, the Responsible Member or the withdrawing Member, as
the case may be, for its Membership Interest.
CCEI means Circus Circus Enterprises, Inc., a Nevada
corporation, which is the parent of Circus.
Capital Account means the capital account maintained
for a Member pursuant to Section 5.06.
Capital Contribution means the sum of the of amount
of cash and the Net Agreed Value of property contributed by a
Member to the capital of the Company.
Carrying Value means (a) with respect to a Contributed
Property, the Agreed Value of such property reduced (but not
below zero) by all depreciation, amortization and cost recovery
deductions charged to the Members Capital Accounts in respect
of such Contributed Property, (b) with respect to an Adjusted
Property, the amount determined pursuant to Section 6.05(d)(i) or
(ii), as appropriate, reduced (but not below zero) by all
depreciation, amortization and cost recovery charged to the
Members Capital Accounts in respect of such Adjusted Property,
and (c) with respect to any other Company property, the adjusted
basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property
shall be adjusted from time to time in accordance with Sections
6.05(d) and to reflect changes, additions or other adjustments to
the Carrying Value for dispositions and acquisitions of Company
properties, as deemed appropriate by the Management Committee.
Circus means Circus Circus Michigan, Inc., a Michigan
corporation.
Circus Intellectual Property means (i) the trade names,
trademarks, logos, trade dress and related trade and service marks
of Circus or any Affiliate under which the Project will operate,
and (ii) any proprietary databases created by or for Circus or any
Affiliate in connection with the operation of the Project.
Code means the Internal Revenue Code of 1986 and any
successor statute, as amended from time to time.
Committee Member means a Person appointed to the
Management Committee by a Member pursuant to Section 3.02.
Company means the limited liability company known as
Detroit Entertainment, L.L.C. created by the filing of the
Articles and governed pursuant to this Agreement and the Act.
Company Nonrecourse Deductions means, with respect
to Company Nonrecourse Liabilities, the amount of deductions,
losses and expenses equal to the net increase during the year in
Minimum Gain attributable to Company Nonrecourse Liabilities,
reduced (but not below zero) by the proceeds, if any, of such
Company Nonrecourse Liabilities distributed during the year, as
determined in accordance with applicable Regulations.
Company Nonrecourse Liabilities means nonrecourse
liabilities (or portions thereof) of the Company for which no
Member bears the Economic Risk of Loss.
Completion of Construction means the substantial
completion of construction of the Project (excluding the Temporary
Casino) and the satisfaction of all Legal Requirements and other
conditions precedent to the opening of the Project (excluding the
Temporary Casino) for business to the public.
Construction Financing mean debt financing, which
may be unsecured or collateralized by a lien on the Project or any
portion thereof (including purchase money financing collateralized
by furniture, furnishings, fixtures, machinery or equipment), to be
obtained by the Company from one or more lenders (including
vendors or the Members or Affiliates) for the purpose of funding
Project Costs and which, except as otherwise provided in Section
4.04(b), is non-recourse to the Members and their Affiliates and
does not require the Members or any Affiliates to provide a
personal guaranty.
Contributed Property means each property or other
asset, in such form as may be permitted by the Act, but excluding
cash, contributed to the Company (or deemed contributed to the
Company on termination and reconstitution thereof pursuant to
section 708 of the Code). Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.06(d), such
property shall no longer constitute a Contributed Property, but
shall be deemed an Adjusted Property.
Cost Overrun means any Additional Project Cost not
resulting from a change in the scope of the Project or from the
gross negligence or willful misconduct of the Operator.
Credit Support by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing or acting as surety for any indebtedness, obligation
or liability of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such indebtedness,
obligation or liability (whether arising by virtue of partnership,
joint venture or similar arrangements, by agreement to keep-well,
to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the
obligee of such indebtedness, obligation or liability of the payment
thereof or to protect such obligee against loss in respect thereof (in
whole or in part).
Deadlock means, with respect to a matter provided under
Section 3.07(a) requiring the approval of a Majority or
Supermajority of the Management Committee, the failure of a
Majority or Supermajority of the Committee Members, as the case
may be, to approve such matter.
Default Interest Rate means the Prime Rate plus five
percent (5%).
Default Rule means a rule stated in the Act which (i)
structures, defines or regulates aspects of a limited liability
company organized under the Act and (ii) applies except to the
extent it is modified or overridden through the provisions of a
limited liability company s articles of organization or operating
agreement.
Defaulting Member has the meaning set forth in Section
5.08.
Department means the Michigan Department of
Consumer and Industry Services, Corporation, Securities and Land
Development Bureau.
Development Agreement means an agreement between
the Company and the City of Detroit or other Governmental
Authorities, relating to the development of the Project.
Dispose, Disposing or Disposition means a sale,
assignment, alienation, gift, transfer, exchange, mortgage, pledge,
grant of a security interest, or other disposition or encumbrance,
whether voluntary or involuntary, or the acts of the foregoing.
For purposes of Article XII, Disposition shall also include, in
the case of ACG, AEA and ZRX, transfers of ownership interest
among members resulting from the exercise of dilution provisions
in their respective operating agreements or other applicable
governing documents.
Disposition Notice has the meaning set forth in Section
12.03.
Dissolution Event means an event, the occurrence of
which will result in the dissolution of the Company under Article
XIII.
Dissolved Member means any Member with respect to
which any of the following events has occurred (and the terms
Dissolution and Dissolved, when used in connection with a
Member, shall have correlative meanings): (a) in the case of a
Member that is a corporation, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation
of its charter and the expiration of 90 days after the date of notice
to the corporation of revocation without a reinstatement of its
charter; and (b) in the case of a Member that is a partnership,
limited partnership, limited liability company or similar entity, the
dissolution and commencement of winding up of such entity.
Distributable Cash means Distributable Cash From
Temporary Casino and Distributable Cash From Operations.
Distributable Cash From Operations mean the gross
revenues from Company operations (including any sales and
dispositions of Company property, but excluding Distributable
Cash From Temporary Casino), which the Management Committee
deems available for distribution to the Members, taking into
account all expenses, debts, liabilities, payments, capital
improvements, replacements, contingencies and other obligations
of the Company (including Member Loans and other obligations
to Members or their Affiliates but excluding the Management Fee)
then due and amounts which the Management Committee deems
necessary to place into Reserves.
Distributable Cash From Temporary Casino means the
gross revenues from the operations and disposition of the
Temporary Casino, which the Management Committee deems
available for distribution to the Members, taking into account all
expenses, debts, liabilities, payments, capital improvements,
replacements, contingencies and other obligations of the Company
(including principal and interest in respect of any Temporary
Casino Loans made by Members and any indebtedness to third
parties but excluding the Management Fee) then due and amounts
which the Management Committee deems necessary to place into
Reserves.
Economic Risk of Loss has the meaning set forth in
Regulations Section 1.752-2(a).
Escrow means an escrow established by the Company
for the purposes of holding and investing the Initial Capital
Contribution made by Circus pursuant to Section 5.01(b)(i), and
disbursing such amount pursuant to Section 4.05(e)(i).
Electing Members has the meaning set forth in Section
12.03.
Fair Market Value means, as to any Membership
Interest or other property, the price at which a willing seller would
sell and a willing buyer would buy such Membership Interest or
other property having full knowledge of the facts, in an arms-
length transaction without time constraints, and without being
under any compulsion to buy or sell. If and to the extent a
determination of the Fair Market Value of any Membership
Interest or other property requires an appraisal of the value of the
Project, such appraisal shall assume that the Project is free and
clear of all liens and encumbrances and shall take into account the
then-current condition, use, zoning and income of the Project,
including the value of any Licenses and similar intangible assets of
the Company, but (unless Circus is the owner of the Membership
Interest in question) excluding any good will attributable to the
Circus Intellectual Property, or Circus business operations. Such
Fair Market Value shall be determined by mutual agreement of the
Members (or their representatives, as the case may be), or if they
are unable to mutually agree within 30 days after request by either
Member, then by appraisal by a reputable disinterested appraiser
who is experienced in the appraisal of casino properties, and who
shall be instructed to complete and deliver the appraisal report
within 30 days after engagement. For purposes of Section 11.01,
the appraiser shall be selected by the non-Bankrupt Member.
First Refusal Period has the meaning set forth in
Section 12.03.
Fiscal Year means the taxable year of the Company.
Funding Date has the meaning set forth in Section 5.08.
GAAP means generally accepted accounting principles,
consistently applied.
Gaming Authorities means the Michigan Gaming
Control Board, the City of Detroit and/or any other Governmental
Authorities possessing and exercising jurisdiction over the Project,
the Company, any Member, any of their respective Affiliates or
constituent members, or any officers or directors of any of the
foregoing, with respect to gaming activities.
Governmental Authorities means any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality of the United States of America
or any state thereof, or any government or governmental,
supranational or state agency or regulatory body of any foreign
country, including any Gaming Authorities.
Indebtedness for Borrowed Money means
(i) obligations for borrowed money (whether secured or
unsecured), (ii) obligations representing the deferred purchase
price of property or services other than accounts payable arising
in the ordinary course of business, (iii) obligations in respect of
operating or capital leases entered into other than in the ordinary
course of business, whether or not such obligations would be
required to be shown as a liability on a balance sheet under
GAAP, and (iv) any guarantee or other obligations having the
economic effect of a guarantee in respect of any obligations
referred to in clauses (i), (ii) or (iii) above.
Initial Capital Contribution means a Capital
Contribution made pursuant to Section 5.01.
Initial Licensing means the issuance of a Certificate of
Suitability (as defined in the rules promulgated under the Michigan
Gaming Control and Revenue Act), or comparable certification or
licensing for the initial development, construction and operation of
the Project as a hotel/casino.
Initial Members means Circus and ACG.
Legal Requirements means any and all applicable (a)
federal, state, local and foreign laws (statutory, judicial or
otherwise), ordinances and regulations, (b) nonappealable
judgments and (c) consent decrees and similar arrangements.
License means any license, permit, authorization,
consent, approval, finding of suitability or qualification issued or
made by any Gaming Authority, and required in order to conduct
a gaming business, either alone or in combination with any one or
more other businesses, including any said license, permit,
authorization, consent, approval, finding of suitability or
qualification issued or made by the State or any local
Governmental Authority in the State, or any other State or local
Governmental Authority in connection with the operation of the
business of the Company, or by any other jurisdiction, domestic
or foreign, necessary in order to conduct the business of any
Member or any of the Affiliates of any Member, in any such other
jurisdiction.
Loan Rate means an interest rate of seven percent (7%)
per annum.
Loss of License has the meaning set forth in Section
10.01.
Losses means the taxable income or loss for federal
income tax purposes of the Company for each Fiscal Year, plus
income and gain exempt from federal income tax for such Fiscal
Year, and minus Section 705(a)(2)(B) Expenditures for such Fiscal
Year, if such amount results in a loss. The items of income, gain,
loss, deduction and Section 705(a)(2)(B) Expenditure included in
the calculation of Losses shall be determined in accordance with
Section 5.06(b) and shall not include any items specially allocated
under Section 6.5(a), (b), (c) or (d) for such Fiscal Year.
Majority means the affirmative vote or consent of a
majority in number of Committee Members of the Management
Committee.
Management Committee means the Management
Committee provided for in Section 3.02.
Management Fee means the management fee payable to
Circus pursuant to Section 4.05(d).
Management Fee Allocation means, for each fiscal
year, an amount based on a schedule to be prepared by the
Company s investment banker, which schedule shall be reasonably
approved by Circus and attached as an addendum to this
Agreement.
Member means any Person executing this Agreement as
of the date of this Agreement as a member or subsequently
admitted to the Company as a member as provided in this
Agreement, but does not include any Person who has ceased to be
a member in the Company.
Member Loans means any loans to or for the benefit of
the Company pursuant to Sections 5.04, 5.05 or 5.09.
Member Nonrecourse Debt means any nonrecourse debt
of the Company for which any Member bears the Economic Risk
of Loss.
Member Nonrecourse Deductions means, with respect
to a Member Nonrecourse Debt, the amount of deductions, losses
and expenses equal to the net increase during the year in Minimum
Gain attributable to Member Nonrecourse Debt, reduced (but not
below zero) by the proceeds, if any, of such Member Nonrecourse
Debt distributed during the year to the Members who bear the
Economic Risk of Loss for such debt, as determined in accordance
with applicable Regulations.
Membership Interest means the interest of a Member in
the Company, including, without limitation, rights to distributions
(liquidating or otherwise), allocations, information, and to consent
or approve.
Minimum Gain means (a) with respect to Company
Nonrecourse Liabilities, the amount of gain that would be realized
by the Company if it disposed of (in a taxable transaction) all
Company properties that are subject to Company Nonrecourse
Liabilities in full satisfaction of such liabilities, computed in
accordance with applicable Regulations or (b) with respect to each
Member Nonrecourse Debt, the amount of gain that would be
realized by the Company if it disposed of (in a taxable transaction)
the Company property that is subject to such Member Nonrecourse
Debt in full satisfaction of such debt, computed in accordance with
applicable Regulations.
Net Agreed Value means (a) in the case of any
Contributed Property, the Agreed Value of such property reduced
by any liabilities either assumed by the Company upon such
contribution or to which such property is subject when contributed,
and (b) in the case of any property distributed to a Member by the
Company, the Company s Carrying Value of such property (as
adjusted pursuant to Section 5.06(d)) at the time such property is
distributed, reduced by any indebtedness either assumed by such
Member upon such distribution or to which such property is
subject at the time of distribution, in either case, as determined
under section 752 of the Code.
Net Book Value means, in the case of a Member s
Membership Interest, the amount, determined as of the last day of
the full calendar quarter immediately preceding the date of
occurrence of the event giving rise to the calculation, which would
be distributed to such Member in liquidation of the Company
pursuant to Article XIII, if (i) all of the Company s assets were
sold for their book value determined by the Company s financial
statements as of the end of the preceding Fiscal Year (but
excluding any value attributable to goodwill or to Circus
Intellectual Property), (b) the Company paid its accrued but unpaid
liabilities (including liabilities to Members or their Affiliates) and
established Reserves for the payment of reasonably anticipated
contingent or unknown liabilities, and (c) the Company distributed
the remaining proceeds to the Members in liquidation. Such Net
Book Value shall be determined from the Company s books and
records, without audit or certification, by the Company s regular
accounting firm. Such determination shall be deemed final and
binding in the absence of a showing of gross negligence or willful
misconduct.
Non-Defaulting Member means, for purposes of Section
5.08, a Member who is not in default in the payment or
performance of its obligations under this Agreement and has
advanced (or is otherwise ready, willing and able to advance) (i)
in the case of Circus, the full amount of its Capital Contributions
required to be made to date pursuant to Sections 5.01, 5.02 and
5.03 and (ii) in the case of ACG, the full amount of its Additional
Capital Contributions required to be made to date pursuant to
Section 5.03.
Non-Responsible Member has the meaning set forth in
Section 10.01.
Offered Interest has the meaning set forth in Section
12.03.
Operating Budget means the annual operating and
capital budget of the Company, as amended form time to time.
Operating Costs means the costs and expenses incurred
in connection with the ownership, operation, management,
maintenance and repair of the Project after Completion of
Construction, including capital improvements and Reserves.
Operator means Circus or an Affiliate of Circus, or any
successor, in its capacity as operator and manager of the Project
(and if applicable, the Temporary Casino) pursuant to Article IV.
Permanent Financing means debt financing, which may
be unsecured or collateralized by a lien on the Project or any
portion thereof (including purchase money financing collateralized
by furniture, furnishings, fixtures, machinery or equipment), to be
obtained by the Company from one or more lenders (including
vendors) for the purpose of retiring the Construction Financing and
which is non-recourse to the Members and their Affiliates and does
not require the Members or any Affiliates to provide a personal
guaranty.
Person means a natural person, trust, estate, partnership,
limited liability company or any incorporated or unincorporated
organization.
Preference Rights means the preferential rights of ACG
and any of its Affiliates under subsection (b) Section 6 of the
Michigan Gaming Control and Revenue Act (MCLA 432.201, et
seq.) as a result of the passage of Proposal B in the City of Detroit
primary election held on August 2, 1994.
Prime Rate means a rate of interest per annum equal to
the varying rate publicly quoted by Chase Manhattan Bank from
time to time as its prime commercial or similar reference interest
rate, with adjustments in that varying rate to be made on the same
date as any change in that rate.
Profits means the taxable income or loss for federal
income tax purposes of the Company for each Fiscal Year, plus
income and gain exempt from federal income tax for such Fiscal
Year, and minus Section 705(a)(2)(B) Expenditures for such Fiscal
Year, if such amount results in a profit. The items of income,
gain, loss, deduction and Section 705(a)(2)(B) Expenditure
included in the calculation of Losses shall be determined in
accordance with Section 5.06(b) and shall not include any items
specially allocated under Section 6.5(a), (b), (c) or (d) for such
Fiscal Year.
Project means the assembling and acquiring of real
property in Detroit, Michigan and the development, construction
and operation thereon of a hotel/casino and related parking, retail
stores, restaurants, entertainment venues and additional compatible
facilities, including all furniture, furnishings, machinery,
equipment and other tangible personal property to be owned or
leased by the Company, located therein and used in connection
therewith. Unless otherwise expressly provided, the term
Project shall not include the Temporary Casino.
Project Budget means the budget of Project Cost, as
amended form time to time.
Project Cost means the total cost of land acquisition,
development (including the cost of the campaign for passage of
Proposal E and expenses incurred in the formation of the Company
and to the extent Approved by the Management Committee, in
obtaining Initial Licensing), design, construction, equipping and
opening of the Project, including all costs related thereto such as
labor, materials, supplies, furniture, furnishings, fixtures,
machinery, equipment, construction management, architectural,
engineering and design fees, legal and accounting fees, on-and-off
site work, utility installation and hook-up fees, construction
permits, certificates and bonds, pre-opening expenses, gaming tax
deposits, license fees, initial gaming bankroll and interest and fees
on the Construction Financing, but excluding (i) the cost of the
Temporary Casino, except and to the extent that the Temporary
Casino or any portion or component thereof is to be integrated into
and become a permanent part of the Project (in which event such
portion or component may be included in Project Cost); and (ii)
the costs and expenses incurred in the formation of the individual
Members and their respective Affiliates.
Recapture Income means any gain recognized by the
Company (computed without regard to any adjustment required by
section 734 or 743 of the Code) upon the Disposition of any
property or asset of the Company, which gain is characterized as
ordinary income under the Code because it represents the recapture
of deductions previously taken with respect to such property or
asset.
Regulations , except where the context indicates
otherwise, means the permanent, temporary, proposed, or
proposed and temporary regulations of the Department of the
Treasury under the Code as such regulations may be lawfully
changed from time to time.
Related Person means a person having a relationship to
a Member as described in Section 1.752-4(b) of the Regulations.
Required Records means those records that the
Company is required to maintain under Section 9.1 of the Act.
Reserves means funds Approved by the Management
Committee to be maintained as reasonable reserves for working
capital, contingencies, operating expenses, capital improvements
and replacements of the Company or its property.
Responsible Member has the meaning set forth in
Section 10.01.
Rules of Usage means, with respect to a document that
states in substance that it is governed thereby, that, except as
expressly provided therein:
(i) A reference in such document to
a Person includes, unless the context otherwise requires,
its predecessors in interest and its permitted assigns.
(ii) The term or shall be
interpreted as and/or.
(iii) A reference in such document to
a law includes any amendment, modification or
replacement to such law.
(iv) Accounting terms used in such
document shall have the meanings assigned to them by
GAAP applied on a consistent basis by the accounting
entity to which they refer.
(v) References to any document,
instrument or agreement (a) shall be deemed to include
all appendices, exhibits, schedules and other attachments
thereto and all documents, instruments or agreements
issued or executed in replacement thereof, and (b) shall
mean such document, instrument or agreement, or
replacement thereto, as amended, modified and
supplemented from time to time in accordance with its
terms and as the same is in effect at any given time.
(vi) Unless otherwise specified, the
words hereof, herein and hereunder and words of
similar import when used in such document shall refer
to such document as a whole and not to any particular
provision of such document.
(vii) The words include and
including and words of similar import when used in
such document are not limiting and shall be construed to
be followed by the words without limitation , whether
or not they are in fact followed by such words.
(viii) The word during when used in
such document with respect to a period of time shall be
construed to mean commencing at the beginning of such
period and continuing until the end of such period.
(ix) All time explicitly or implicitly
referenced in such document shall be deemed to be local
time in Detroit, Michigan.
(x) Any reference in such document
to an Article, Section or subsection or other provision
shall refer to such provision in such document unless
otherwise specified.
Section 705(a)(2)(B) Expenditure means any expenditure of
the Company described in section 705(a)(2)(B) of the Code or treated as
such pursuant to Regulations Section 1.704-1(b)(2)(iv)(i).
Sharing Ratio means the percentage interest of each Member
as set forth in Section 6.01, as the same may be adjusted from time to
time pursuant to Sections 5.08(d) or 12.01(a).
State means the State of Michigan.
Subsidiary means, with respect to any specified Person, any
other Person, as to which such specified Person owns, of record or
beneficially, directly or indirectly (x) more than 50% of the voting power
and (y) (A) if such other Person is a corporation, more than 50% of the
outstanding capital stock or issued share capital and (B) if such other
Person is not a corporation, more than 50% of the equity and profits
interests at the time any determination thereof is made, in each case,
other than director s qualifying shares.
Substitute Member means a transferee of a Membership
Interest who is admitted as a Member in the Company pursuant to
Article IX.
Supermajority means the affirmative vote or consent of at
least (i) four (4) of the six (6) Committee Members representing Circus,
(ii) two (2) of the three (3) Committee Members representing ZRX and
(iii) two (2) of the three (3) Committee Members representing AEA.
Supplemental Provisions means, with respect to a document
that states in substance that it is governed thereby, that, except as
expressly provided therein:
(i) All amounts required to be paid
by any party to such document to any other party
thereunder shall, unless otherwise specified in such
document, be paid in U.S. dollars by wire transfer to an
account as such party may specify by notice to the
paying party, or by other acceptable method of payment
of immediately available funds.
(ii) If any payment under such
document is required to be made on a day other than a
Business Day, the date of payment shall be extended to
the next Business Day.
(iii) Except as otherwise specifically
provided in such document, each party thereto shall, at
its own cost and expense, obey and comply with all
applicable laws, as they may pertain to each party s
performance of its obligations under such document.
(iv) The parties to such document
shall execute and deliver all further documents and
perform all further acts that may be reasonably necessary
to consummate the transactions contemplated by such
document.
Tax Distribution when used with respect to a Member means
with respect to each Fiscal Year an amount equal to 43% of such
Members distributive share of Profits of the Company for such Fiscal
Year, and when used with respect to the Company means with respect
to each Fiscal Year an amount equal to the sum of all of the Members
Tax Distributions with respect to such Fiscal Year.
Temporary Casino means a temporary casino facility operated
by the Company in Detroit, Michigan during the construction, and prior
to the commencement of operations, of the Project.
Temporary Casino Cost means the total cost of acquiring or
leasing, renovating, equipping and operating the Temporary Casino.
Temporary Casino Loans means the loans described in
Section 5.04.
Unfunded Balance has the meaning set forth in Section
5.08(c).
Unrealized Gain attributable to any item of Company property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under
Section 5.06(d)) over (b) the Carrying Value of such property as of such
date (prior to any adjustment to be made pursuant to Section 5.06(d) as
of such date).
Unrealized Loss attributable to any item of Company property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.06(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under
Section 5.06(d)).
ZRX means ZRX L.L.C., a Michigan limited liability
company which is a member of ACG.
