Exhibit 3.2
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
PENINSULA GAMING COMPANY, LLC
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ARTICLE I
GENERAL PROVISIONS
1.1 Formation and Filing ............................................ 1
1.2 Name and Principal Place of Business ............................ 2
1.3 Registered Agent and Registered Office .......................... 2
1.4 Term ............................................................ 2
1.5 Purpose ......................................................... 2
1.6 Definitions ..................................................... 3
ARTICLE II
MEMBERSHIP MATTERS
2.1 Common Member ................................................... 12
2.2 Preferred Member ................................................ 12
2.3 Limitation on Liability ......................................... 12
2.4 Title to Company Property ....................................... 12
2.5 Business Transactions Involving Member .......................... 12
2.6 Iowa Gaming Licenses ............................................ 12
2.7 Voting By Members ............................................... 13
ARTICLE III
GAMING CONTROL
3.1 Applicability ................................................... 14
3.2 Licensing ....................................................... 14
3.3 Sale, Assignment, Transfer, Pledge or Other Disposition ......... 14
3.4 Revocability of License ......................................... 14
3.5 Restrictive Legend .............................................. 14
3.6 Acceptance of Gaming Law Restrictions ........................... 15
3.7 Gaming Taxes, Assessments, Privilege Fees, Etc. ................. 15
3.8 Limitation on Payments and Distributions ........................ 15
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ARTICLE IV
MANAGEMENT OF THE COMPANY
4.1 Management Rights ............................................... 16
4.2 No Management by Other Members .................................. 16
4.3 Limited Liability ............................................... 16
4.4 Indemnification ................................................. 17
4.5 General Obligations ............................................. 17
4.6 Scope of Duties ................................................. 17
ARTICLE V
COMPANY OFFICERS
5.1 Officers, Employees and Agents .................................. 18
5.2 Removal and Resignation ......................................... 18
5.3 Vacancies ....................................................... 18
5.4 Limitation of Liability and Indemnification of Company Officers . 18
ARTICLE VI
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
6.1 Common Membership Interest ...................................... 19
6.2 Preferred Membership Interest ................................... 19
6.3 GDREC Capital Contribution ...................................... 19
6.4 Additional Capital Contributions ................................ 20
6.5 Issuance of Interests ........................................... 20
ARTICLE VII
ALLOCATIONS
7.1 Allocation of Profits and Losses ................................ 20
7.2 Changes in Percentage Interests ................................. 21
7.3 Tax Allocations ................................................. 21
7.4 Qualified Income Offset, Minimum Gain Chargeback ................ 22
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7.5 Tax Credits ..................................................... 22
7.6 Allocations in Event of Recharacterization ...................... 22
7.7 Allocations upon Liquidation or Cessation of Business Activities 22
ARTICLE VIII
DISTRIBUTIONS
8.1 Distribution Policy ............................................. 24
8.2 Distributions on Dissolution .................................... 25
8.3 Treatment of Taxes Withheld; Distributions With Respect to
Certain State and Local Taxes ................................... 25
8.4 Mandatory Distributions ......................................... 25
8.5 Refinancings or Redemptions of Indebtedness ..................... 27
ARTICLE IX
REDEMPTION OF PREFERRED MEMBERSHIP INTERESTS
9.1 Mandatory Partial Redemption .................................... 28
9.2 Mandatory Final Redemption ...................................... 28
9.3 Optional Redemption ............................................. 28
9.4 Required Regulatory Redemptions or Repurchases .................. 28
ARTICLE X
TAX MATTERS AND ELECTIONS
10.1 Designation of Tax Matters Partner .............................. 30
10.2 Powers and Duties of Tax Matters Partner ........................ 30
10.3 Expenses Regarding Tax Matters .................................. 30
10.4 Basis Election .................................................. 30
10.5 Established Securities Markets .................................. 31
10.6 Election to be Taxed as a Corporation ........................... 31
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ARTICLE XI
DISSOLUTION AND TERMINATION
11.1 Events Causing Dissolution ...................................... 31
11.2 Liquidating Trustee ............................................. 31
11.3 Liquidation ..................................................... 32
11.4 Liabilities ..................................................... 32
11.5 Distribution of Proceeds upon Liquidation ....................... 32
11.6 Deficit Capital Accounts ........................................ 33
11.7 Certificate of Cancellation ..................................... 33
ARTICLE XII
TRANSFERS OF INTERESTS
12.1 Restrictions on Transfer ........................................ 33
12.2 Admission of Transferee as a Member ............................. 33
12.3 Entity Member Transfers ......................................... 34
12.4 Restrictive Legend .............................................. 34
12.5 Limitation on Foreign Ownership ................................. 35
12.6 Limitation on Activities ........................................ 35
12.7 Restrictions to Avoid Publicly Traded Partnership Status ........ 35
12.8 Disqualified Interest ........................................... 36
ARTICLE XIII
LIABILITY
13.1 Liability of the Members ........................................ 37
13.2 Waiver of Partition and Nature of Interest in the Company ....... 37
ARTICLE XIV
BOOKS, RECORDS, ACCOUNTING AND REPORTS
14.1 Books and Records ............................................... 37
14.2 Accounting and Fiscal Year ...................................... 38
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14.3 The Company Accountant .......................................... 38
14.4 Reserves ........................................................ 38
ARTICLE XV
EXPENSES
15.1 Reimbursement ................................................... 38
15.2 Out-of-pocket Expenses .......................................... 38
ARTICLE XVI
SECURITIES LAWS MATTERS
16.1 Securities Law Representations and Warranties ................... 39
ARTICLE XVII
POWER OF ATTORNEY
17.1 Power of Attorney ............................................... 42
ARTICLE XVIII
MISCELLANEOUS
18.1 Further Assurances ............................................. 43
18.2 Severability ................................................... 43
18.3 Amendments ..................................................... 43
18.4 Amendments to Comply with Gaming or Similar Laws ............... 43
18.5 Entire Agreement; Purchase Agreement ........................... 43
18.6 Governing Law .................................................. 44
18.7 Dispute Resolution ............................................. 44
18.7.1 Agreement to Negotiate ............................. 44
18.7.2 Procedure for Arbitration .......................... 45
18.8 Attorney Fees .................................................. 45
18.9 Captions ....................................................... 45
18.10 Creditors Not Benefited ....................................... 45
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18.11 Indemnification of Organizer .................................. 45
18.12 Counterparts .................................................. 46
18.13 Binding Effect ................................................ 46
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of Peninsula
Gaming Company, LLC, a Delaware limited liability company (the "Company"), is
made and entered into to be effective for all purposes as of July 15, 1999 by
Peninsula Gaming Partners, LLC, a Delaware limited liability company ("PGP"),
Greater Dubuque Riverboat Entertainment Company, L.C., an Iowa limited liability
company ("GDREC"), and such other Persons as may from time to time be admitted
as members of the Company in accordance with the terms of this Agreement and the
Delaware Act. As used in this Agreement, the term "Member" shall mean any one of
PGP, GDREC or any other Person or entity who is admitted as and continues to be
a Common Member or Preferred Member of the Company in accordance with this
Agreement and the Delaware Act, and the term "Members" (whether one or more)
shall mean PGP, GDREC and all other Persons who are admitted as and continue to
be Common Members or Preferred Members of the Company in accordance with this
Agreement and the Delaware Act.
RECITALS
WHEREAS, PGP is party to a limited liability company agreement, adopted as
of January 29, 1999 and amended and restated as of April 5, 1999, with respect
to the conduct of the affairs of the Company and the rights and obligations of
Members with regard to their interests in the Company (the "Existing Operating
Agreement").
WHEREAS, PGP and GDREC desire to amend and restate the Existing Operating
Agreement as set forth herein in order to, among other things, provide for the
admission of GDREC as a Preferred Member of the Company;
NOW, THEREFORE, the undersigned hereby amend and restate the Existing
Operating Agreement and adopt the following as their "limited liability company
agreement" (as that term is used in the Delaware Act):
ARTICLE I
GENERAL PROVISIONS
1.1 Formation and Filing. The Managing Member caused the Company to be
formed as a limited liability company under the Delaware Limited Liability
Company Act, 6 Del.C xx.xx. 18-101, et. seq. (as amended from time to time, the
"Delaware Act") as of January 26, 1999 (the "Formation Date"). The Managing
Member's actions in causing the formation of the Company are hereby ratified,
adopted and approved, and the Managing Member is hereby authorized to file and
record any amendments to the Certificate of Formation and such other documents
as may be required or appropriate under the Delaware Act or the laws of any
other jurisdiction in which the Company may conduct business or own property.
1.2 Name and Principal Place of Business:
(i) The name of the Company is "Peninsula Gaming Company, LLC." The
Managing Member may change the name of the Company or adopt such trade or
fictitious names for use by the Company as the Managing Member may from time to
time determine. All business of the Company shall be conducted under such name,
and title to all assets or property owned by the Company shall be held in such
name.
(ii) After the Purchase Agreement Closing Date, the principal place of
business of the Company shall be at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxx 00000,
or at such other place or places as the Managing Member may from time to time
designate.
1.3 Registered Agent and Registered Office: The name of the Company's
registered agent for service of process shall be The Corporation Trust Company
(the "Registered Agent"), and the address of the Company's Registered Agent and
the address of the Company's registered office in the State of Delaware shall be
0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (the "Registered Office"). The
Registered Agent and the Registered Office of the Company may be changed from
time to time by the Managing Member.
1.4 Term: The term of the Company is deemed to have commenced on the
Formation Date and shall continue until 11:59 p.m. E.S.T. on December 31, 2048,
unless sooner terminated or further extended pursuant to the provisions of this
Agreement by the Members.
1.5 Purpose: The Company has been formed for the purpose of:
(i) acquiring an excursion gambling boat from GDREC, and either directly
acquiring certain real property owned by Harbor Community Investment, L.C., an
Iowa limited liability company, or through an affiliate acquiring such real
property, and to conduct gaming operations thereon to the extent allowed by, and
in conformance with, applicable law;
(ii) acquiring and/or developing any facilities that are related to,
necessary for the operation of, compatible with or enhance the gaming operation
to be conducted by the Company, including parking areas, entertainment and
lodging facilities, food and beverage service, docking facilities, shopping
centers, movie theaters, bowling alleys, storage and maintenance facilities; and
(iii) engaging in any other lawful business activities determined by the
Managing Member to be necessary, convenient or advisable in connection with or
incidental to the foregoing.
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1.6 Definitions. As used in this Agreement, the following terms shall,
unless the context otherwise requires, have the meanings given to them below:
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account, after giving effect
to the following adjustments: (a) such Capital Account shall be credited with
any amounts that such Member is obligated to restore pursuant to this Agreement
or otherwise and any amounts that such Member is deemed to be obligated to
restore pursuant to the penultimate sentence of Treas. Reg. Section
1.704-2(g)(1) or the penultimate sentence of Treas. Reg. Section 1.704-2(i)(5);
and (b) such Capital Account shall be debited with such Member's share of the
items described in Treas. Reg. Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treas. Reg. Section 1.704-1 (b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Aggregate Capital Contribution" means the total amount of Capital
Contributions made to the Company by all the Members or any one Member (or, in
the event a Member has acquired an Interest other than directly from the
Company, such Member's Capital Contribution and the ratable portion of the
Capital Contribution of the predecessor holder of the Interest acquired by such
Member), as the case may be.
"Agreement" means this operating agreement (including the Exhibits and
schedules hereto), as originally executed and as amended from time to time, and
the terms "hereof", "hereto" and "hereunder", when used in reference to this
Agreement, refer to this Agreement as a whole, unless the context otherwise
requires.
"Bankruptcy" or "Bankrupt" means with respect to any Member, such Member
making an assignment for the benefit of creditors, becoming a party to any
liquidation or dissolution action or proceeding with respect to such Member or
any bankruptcy, reorganization, insolvency or other proceeding for the relief of
financially distressed debtors with respect to such Member, or a receiver,
liquidator, custodian, or trustee being appointed for such Member or a
substantial part of such Member's assets and, if any of the same occur
involuntarily, the same not being dismissed, stayed or discharged within one
hundred (120) days of its filing; or the entry of an order for relief against
such Member under Title 11 of the United States Code. A Member shall be deemed
Bankrupt if the Bankruptcy of such Member shall have occurred and be continuing.
"Beneficial Interest" of any Person means all direct or indirect forms of
ownership or control, voting power or investment power of such Person, whether
held through a contract, lien, lease, partnership, stockholding, syndication,
joint venture, understanding, relationship, present or reversionary right, title
or interest, or otherwise.
"Capital Account" means, with respect to any Member, the Aggregate Capital
Contribution made by such Member to the Company, (i) reduced by (A) any Losses
(or items thereof) allocated to such Member and (B) any distributions made to
such Member, and
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(ii) increased by any Profits (or items thereof) allocated to such Member. The
Capital Account of any Member shall reflect all prior adjustments to the Capital
Account of any predecessor holder of such Member's Interest in the Company or
portion thereof. Any other item which is required to be reflected in a Member's
Capital Account under Section 7.3 or otherwise under this Agreement shall be so
reflected.
"Capital Contribution" means, with respect to any Member, the amount of
money and the Fair Market Value of any property other than money (reduced by the
amount of liabilities assumed by the Company with respect to such property)
contributed to the Company with respect to the Interest held by such Member
pursuant to Article VI of this Agreement.
"Certificate of Formation" means the Certificate of Formation of the
Company, filed on January 26, 1999 with the office of the Secretary of State of
Delaware, as the same may be amended or otherwise modified from time to time in
accordance with the Delaware Act.
"Claimant" has the meaning given to it in Section 18.7.1.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
"Common Member" means PGP and any other Person admitted as a Common Member
in accordance with the terms of this Agreement.
"Common Membership Interest" means, as to any Common Member, such Common
Member's Interest.
"Common Member Percentage Interest" means, as to any Common Member, the
percentage that such Common Member's Interest bears to the aggregate Interests
of all Common Members, as reflected on Schedule A.
"Company Accountant" has the meaning given to it in Section 14.3.
"Company Asset" means the interest of the Company in any entity or
security (whether in corporate securities, equity, debt or hybrid securities,
partnership or joint venture interests, other contractual rights or otherwise),
or group of related entities or securities, and any business and other assets,
or group of related businesses and other assets, owned, directly or indirectly,
by the Company.
"Debt" means (i) any indebtedness for borrowed money or for the deferred
purchase price of property or evidenced by a note, bonds, or other instruments,
(ii) obligations as lessee under capital leases, (iii) obligations secured by
any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
existing on any asset owned or held by the Company whether or not the Company
has assumed or become liable for the obligations secured thereby, and (iv)
obligations under direct or indirect guarantees of (including
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obligations (contingent or otherwise) to assure a creditor against loss in
respect of indebtedness or obligations of the kinds referred to in clauses (i),
(ii) and (iii) above, provided that Debt shall not include obligations in
respect of any accounts payable that are incurred in the ordinary course of the
Company's business and are not delinquent or are being contested in good faith
by appropriate proceedings.
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for Federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Managing Member.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del.C.
ss. 18-101, et. seq., as amended from time to time.
"Disqualified Interest" has the meaning given such term in Section 12.9.
"Distribution Date" has the meaning given such term in Section 11.4.
"Escrow Agreement" means the Escrow Agreement dated as of January 15, 1999
entered into between PGP and GDREC in connection with the acquisition by the
Company of substantially all of the assets of GDREC.
"Fair Market Value" means the price that would be paid for a given asset
in an arm's length transaction between a willing buyer and a willing seller as
determined by the Managing Member in its reasonable good faith judgement and
approved by a majority of the Independent Committee.
"Final Redemption Date" has the meaning given to such term in Section 9.2.
"Fiscal Year" means (i) the period commencing on the effective date of
this Agreement and ending on December 31, 1999, (ii) any subsequent twelve (12)
month period commencing on January 1st and ending on December 31st, or (iii) any
portion of the period described in clause (ii) for which the Company is required
to allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Article VII.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or
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foreign government, any state, province or any city or other political
subdivision or otherwise, whether now or hereafter in existence, or any officer
or official thereof, including, without limitation, the IRGC, and any other
agency with authority to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by the Company, PGP or any of their
respective subsidiaries.
"Gaming Laws" means the gaming laws of any jurisdiction or jurisdictions
to which the Company or any of its subsidiaries is, or may at any time become,
subject, including, without limitation, Chapter 99F of the Iowa Code, as
amended, and the rules and regulations adopted by the IRGC.
"Gaming License" means every material license, material franchise,
material registration, material qualification, findings of suitability or other
material approval or authorization required to own, lease, operate or otherwise
conduct or manage riverboat, dockside or land-based gaming activities in any
state or jurisdiction in which the Company or any of its subsidiaries conducts
business (including, without limitation, all such licenses granted by the IRGC
under Chapter 99F of the Iowa Code and the rules and regulations promulgated
thereunder), and all applicable liquor licenses.
"GDREC" means Greater Dubuque Riverboat Entertainment Company, L.C., an
Iowa limited liability company.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross Fair Market Value of such asset;
(b) The Gross Asset Value of all property of the Company shall be
adjusted to equal the respective gross Fair Market Values of such
property, as of the following times: (i) the acquisition of an additional
Interest in the Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of property of the
Company as consideration for an Interest; and (iii) the Liquidation of the
Company; provided, however, that adjustments pursuant to clauses (i) and
(ii) above shall be made only if the Managing Member reasonably
determines, and a majority of the Independent Committee agrees, that such
adjustments are necessary or appropriate to reflect the relative economic
Interests of the Members;
(c) The Gross Asset Value of any property of the Company distributed
to any Member shall be adjusted to equal the gross Fair Market Value of
such property on the date of distribution;
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(d) The Gross Asset Values of assets of the Company shall be
increased (or decreased) to reflect any adjustments to the adjusted basis
of such assets pursuant to section 734(b) or section 743(b) of the Code,
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Treas. Reg. ss.
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not
be adjusted pursuant to this subsection (d) to the extent the Managing
Member determines that an adjustment pursuant to subsection (b) hereof is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subsection (d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraph (a), (b), or (d) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"HCI" means Harbor Community Investment, L.C., an Iowa limited liability
company.
"Indemnified Party" has the meaning given to such term in Section 4.4.
"Indenture" means the indenture governing the Notes.
"Independent Committee" means a committee composed of the disinterested,
independent Managers (as such term is defined in the Amended and Restated
Operating Agreement of PGP dated as of July 15 1999 (the "PGP Operating
Agreement")) that are appointed to serve as independent managers of PGP pursuant
to Section 3.1(c) of the PGP Operating Agreement.
"Initial Distribution Period" has the meaning given such term in Section
8.1.2.
"Interest" means, with respect to any Person, the Beneficial Interest or
other interest of such Person in the Company at any particular time under this
Agreement, including the right of such Person to any and all benefits to which
such Person may be entitled as provided in this Agreement, together with the
obligations of such Person to comply with all the terms and provisions of this
Agreement.
"Investment Company" has the meaning given such term in Section 4.5(c).
"Iowa Gaming License" has the meaning given such term in Section 2.6.
"IRGC" means the Iowa Racing and Gaming Commission.
"Liquidation" means (i) when used with reference to the Company, the
earlier of (a) the date upon which the Company is terminated under Section
708(b)(1) of the Code or
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(b) the date upon which the Company ceases to be a going concern, and (ii) when
used with reference to any Member, the earlier of (a) the date upon which there
is a Liquidation of the Company or (b) the date upon which such Member's entire
Interest in the Company is terminated other than by transfer, assignment or
other disposition to a Person other than the Company.
"Managing Member" means PGP, or such other Person appointed as the
managing member of the Company pursuant to the terms hereof.
"Mandatory Redemption Purchase Price" has the meaning given to such term
in Section 9.1.
"Member" shall have the meaning given to such term in the introductory
paragraph of this Agreement.
"Minimum Partial Redemption" has the meaning given to such term in Section
10.1.
"Minimum Preferred Liquidation Preference" means, with respect to any
Preferred Member, the excess of:
(i) the sum of such Preferred Member's initial Capital Account
attributable to his Preferred Membership Interest and any cumulative
unpaid Preferred Distributions attributable to such Preferred
Membership Interest, less any applicable reductions or offsets, over
(ii) any portion of the Mandatory Redemption Purchase Price or
Optional Redemption Purchase Price paid pursuant to section 9.1 or
9.3, respectively, to such Preferred Member and to any previous
holders of such Preferred Membership Interests.
"Net Cash From Operations" means the gross cash proceeds from Company
operations less the portion thereof used to pay or establish Reserves, all as
determined by the Managing Member. Net Cash From Operations shall not be reduced
by depreciation, amortization, cost recovery deductions, or similar allowances,
but shall be increased by any reductions of Reserves previously established.
"Notes" means the 12 1/4% Senior Secured Notes due 2006 offered on July 8,
1999 by the Company and Peninsula Gaming Corp, a Delaware corporation and wholly
owned subsidiary of the Company.
"Optional Redemption Purchase Price" has the meaning given to such term in
Section 9.3.
"Organizer" has the meaning given to such term in Section 18.12.
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"Person" means any individual, partnership, corporation, limited liability
company, trust, estate, association, unincorporated organization or other entity
or association.
"PGP" means Peninsula Gaming Partners, LLC, a Delaware limited liability
company.
"Preferred Distribution" has the meaning given to such term in Section
8.1.2.
"Preferred Distribution Date" has the meaning given to such term in
Section 8.1.2.
"Preferred Member" shall mean GDREC (upon its admission as a Preferred
Member), and any other Person admitted as a Preferred Member of the Company in
accordance with the terms of this Agreement.
"Preferred Membership Interest" means, as to any Preferred Member, such
Preferred Member's Interest.
"Preferred Member Percentage Interest" means, as to any Preferred Member,
the percentage that such Preferred Member's Interest bears to the aggregate
Interests of all Preferred Members, as reflected on Schedule A.
"Profits" or "Losses" means, for each period taken into account under
Article III, an amount equal to the Company's taxable income or taxable loss for
such period, determined in accordance with Federal income tax principles, with
the following adjustments:
(a) There shall be added to such taxable income or taxable loss an
amount equal to any income received by the Company during such period
which is wholly exempt from Federal income tax (e.g., interest income
which is exempt from Federal income tax under section 103 of the Code);
(b) Any expenditures of the Company described in section
705(a)(2)(B) of the Code or treated as section 705(a)(2)(B) expenditures
pursuant to Treas. Reg. ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses, shall be subtracted from such
taxable income or loss;
(c) In the event the Gross Asset Value of any Company Asset is
adjusted pursuant to this Agreement, the amount of such adjustment shall
be taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits or Losses, and shall be allocated in
accordance with the provisions of Article VII;
(d) Gain or loss resulting from any disposition of property or
assets of the Company with respect to which gain or loss is recognized for
Federal income tax purposes shall be computed by reference to the Gross
Asset Value of such property
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or assets disposed of, notwithstanding that the adjusted tax basis of such
property or assets differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year
or other period; and
(f) To the extent an adjustment to the adjusted tax basis of any
Company Asset pursuant to section 734(b) or section 743(b) of the Code is
required pursuant to Treas. Reg. ss. 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution
other than in Liquidation of a Member's Interest in the Company, the
amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and
shall be taken into account for purposes of computing Profits or Losses;
provided, however, that an adjustment pursuant to this clause (f) shall
not be made to the extent that such adjustment has been taken into account
pursuant to clause (c) of this defined term.
"Purchase Agreement" means the Asset Purchase and Sale Agreement dated as
of January 15, 1999, as amended, entered into between POP (f/k/a AB Capital,
LLC) and GDREC in connection with the acquisition by PGP or its designee of
substantially all of the assets of GDREC.
"Purchase Agreement Closing Date" means the date on which the transactions
contemplated by the Purchase Agreement are consummated.
"Real Property Purchase Agreement" means the Real Property Purchase and
Sale Agreement dated as of January 15, 1999 entered into between PGP (f/k/a AB
Capital, LLC) and Harbor Community Investment, L.C. in connection with the
acquisition by PGP or its designee of certain real property described therein.
"Recipient" has the meaning given to such term in Section 18.7.1.
"Redemption Date" has the meaning given to such term in Section 9.1.
"Regulations" means the income tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
Application of the requirements and the definitions set forth in said
Regulations to the provisions of this Agreement shall be made by substituting
"Member" for "Partner" and "Company" for "Partnership."
"Reserves" means the amount of cash that the Managing Member from time to
time determines to be reasonably necessary or advisable as reserves for: (a)
payment of Company
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Debts, including any amounts required under any loan agreement or bond indenture
to be retained by the Company; (b) payment of Preferred Distributions and any
redemption obligations of the Company with respect to the Preferred Membership
Interests; (c) working capital requirements in connection with the management
and operation of the Company, including, but not limited to, payments to
consultants, advisors and other professionals retained by the Company from time
to time; (d) acquisition of new properties or expansion of the Company's
business; and (e) other contingencies related to the business of the Company.
"Rights" means any securities convertible into or exchangeable for Common
Membership Interests.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Semi-Annual Distribution Period" has the meaning given to such term in
Section 8.1.2.
"Xxxxxxx" means M. Xxxxx Xxxxxxx.
"Tax Distributions" has the meaning given to such term in Section 8.4.
"Tax Matters Partner" has the meaning given to such term in Section 10.2.
"Transfer" means, when used as a noun, any sale, hypothecation,
participation, pledge, assignment, attachment, disposal, loan, gift, levy or
other transfer, when used as a verb, to sell, hypothecate, pledge, assign,
dispose, loan, gift, levy or otherwise transfer, and when used as a gerund,
selling, hypothecating, pledging, assigning, disposing of, lending, giving,
levying or otherwise transferring.
"Transferee" means a Person to whom a Transferring Member Transfers all or
any portion of such Transferring Member's Interest and who has not been admitted
as a Member in accordance with the terms and conditions of this Agreement.
"Unit" means any Common Membership Interest or any Preferred Membership
Interest.
"Unsuitable Member" has the meaning given to such term in Section 9.4.
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ARTICLE II
MEMBERSHIP MATTERS
2.1 Common Member. PGP is the single and sole Common Member of the Company
and shall be shown as such on the books and records of the Company. Except as
expressly permitted by this Agreement, no other Person shall be admitted as a
Common Member of the Company without the approval of the Managing Member.
2.2 Preferred Member. As of the date hereof, the Company has no Preferred
Members. Upon consummation of the transfer of assets contemplated by the
Purchase Agreement on the Purchase Agreement Closing Date, GDREC shall be
admitted as a Preferred Member of the Company and shall be shown as such on the
books and records of the Company. Except as expressly permitted by this
Agreement, no other Person shall be admitted as a Preferred Member of the
Company without the approval of the Managing Member; provided, however, that if
an additional Person is admitted as a Preferred Member, so long as GDREC is a
Preferred Member, no Preferred Member shall hold interests of the Company
ranking senior to or pari passu with GDREC's interests in respect of
distributions or liquidation without the consent or approval of GDREC.
2.3 Limitation on Liability. Members shall not be liable under a judgment,
decree or order of any court, or in any other manner, for a debt, obligation or
liability of the Company, except as provided by law or as specifically provided
otherwise herein. No Member shall be required to make any contribution to the
Company by reason of any negative balance in the Member's Capital Account nor
shall any negative balance in a Member's Capital Account create any liability on
the part of the Member to any third party.
2.4 Title to Company Property. All real, personal, tangible and intangible
property owned by the Company shall be deemed owned by the Company as an entity
and no Member, individually, shall have any ownership of such property. Each
Member's Interest in the Company shall be personal property for all purposes.
2.5 Business Transactions Involving Member. Any Member may lend money to,
provide services to and transact other business with the Company and shall have
the same rights and obligations with respect to such matters as a Person who is
not a Member.
2.6 Iowa Gaming Licenses. (a) The Company is required to notify the IRGC
as to the identity of (and may be required to submit background information
regarding) each director, corporate officer and owner, partner, joint venturer,
trustee or any other Person, including any Member, who has a Beneficial Interest
of five percent (5%) or more, direct or indirect, in the Company or PGP. The
IRGC may also request a list of Persons, including Members, holding a Beneficial
Interest of less than five percent (5%) in the Company or PGP.
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(b) Holders of Units of the Company that are required to be licensed or
found suitable by a Gaming Authority (including the IRGC) in order to own a
Beneficial Interest in the Company or actively engage in the management of the
Company shall timely submit all information and perform in a timely fashion any
and all acts required to be submitted or performed in connection with obtaining
a Gaming License issued by such Gaming Authority (including the IRGC). All
holders of Units shall also timely submit all information and perform in a
timely fashion any and all acts required to be submitted and performed in
connection with the license required of the Company or any of its subsidiaries
to operate an excursion gambling boat and of the Members to hold Beneficial
Interests in an Iowa gaming licensee (an "Iowa Gaming License"). The holders of
Units acknowledge that this Agreement is subject to review by the IRGC and any
other applicable Gaming Authority, and that the Company and/or any holder of
Units may be required to make available, upon written request by the IRGC or
such Gaming Authority or any of their duly authorized representatives,
information in respect of such holders, including background information of such
holders and their respective directors, officers, owners, partners, joint
venturers or trustees. To the extent that any holder of Units receives such a
request, such holder agrees to provide copies of such documents to the Company
in order to respond to such request. If any Gaming Authority, including the
IRGC, requires a record or beneficial owner of Units to be licensed, qualified
or found suitable, such owner must apply for a Gaming License, qualification or
finding of suitability within the time period specified by such Gaming
Authority. Such owner shall pay all costs of obtaining such Gaming License,
qualification or finding of suitability. In the event that any holder of Units,
or any of such holder's subcontractors, agents, or advisors should fail to
comply with the terms and provisions of this Agreement relating to the retention
and production of documents or any requirement to be licensed, qualified or
found suitable, such holder of Units (i) agrees to indemnify and make whole the
Company from any loss as the result of the refusal or non-compliance in
maintaining or producing documents in accordance with the provisions herein and
(2) acknowledges that the Units of such holder will be subject to mandatory
redemption by the Company as set forth in Section 9.4.
2.7 Voting By Members. In respect of any action that must be approved by a
vote of the Common Members under this Agreement, each Common Member, upon and
after becoming a Common Member of the Company, shall have voting power equaling
its Common Member Percentage Interest. Except with respect to certain consent
rights described in Sections 2.2, 18.3 and 18.5, Preferred Members shall have no
voting rights hereunder. In respect of any action that must be consented to by
the Preferred Members pursuant to Sections 2.2. 18.3 or 18.5, each Preferred
Member, upon and after becoming a Preferred Member of the Company, shall have
voting power equaling its Preferred Member Percentage Interest. In the event new
Preferred Members are admitted, any actions pursuant to Sections 2.2, 18.3
and/or 18.5 must be consented to by GDREC voting as a separate class of
Preferred Members.
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ARTICLE III
GAMING CONTROL
3.1 Applicability. This Agreement is governed by and subject to all
applicable Gaming Laws.
3.2 Licensing. Any manager or holder of Interests (including their
respective officers, directors, partners, managers, employees and equity
interest holders) required by the IRGC or any other Gaming Authority to hold an
Iowa Gaming License or any other Gaming License required by applicable Gaming
Laws shall first procure and thereafter maintain in full force and effect an
Iowa Gaming License or such other Gaming License before such manager and/or
holder of Interests shall exercise influence over the conduct of the gaming
operations of the Company or PGCL. All licensing fees and related costs and
expenses reasonably incurred prior to the Purchase Agreement Closing Date by any
manager or Member in connection with an investment in the Company and approved
by the Board of Managers shall be reimbursed by the Company promptly following
the Purchase Agreement Closing Date; provided, however, that if, following the
Purchase Agreement Closing Date, any Gaming Authority requires a manager or
Member to be licensed, qualified or found suitable, such manager or Member must
pay all costs of obtaining such license, qualification or finding of
suitability.
3.3 Sale, Assignment, Transfer, Pledge or Other Disposition.
Notwithstanding any provision to the contrary in this Agreement, the Transfer or
issuance of Units or the grant or issuance of options or other Rights shall be
ineffective unless the Transferee or the holder of such Right obtains an Iowa
Gaming License (and any other applicable Gaming License) or it is determined by
the IRGC (and any other applicable Gaming Authority), that no such Iowa Gaming
License (or other applicable Gaming License) need be obtained in connection with
such Transfer, grant or issuance.
3.4 Revocability of License. The Members agree that any license,
determination of suitability or other approval issued to any Member or other
Person in connection with the operation of the business of the Company or this
Agreement shall be deemed to be a revocable privilege and no holder thereof
shall be deemed to have acquired any vested rights therein or thereunder.
3.5 Restrictive Legend. If the Company issues any certificate evidencing
ownership of an Interest in the Company, such certificate shall, in addition to
any other restrictive legend that may be imposed, bear the following legend:
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF ANY
OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN REGULATORY RESTRICTIONS IMPOSED BY
14
GAMING AUTHORITIES HAVING JURISDICTION OVER THE BUSINESS OPERATIONS
OF THE COMPANY, INCLUDING, WITHOUT LIMITATION. THE IOWA RACING AND
GAMING COMMISSION. AS SET FORTH IN THE COMPANY'S OPERATING
AGREEMENT, ANY VIOLATION OF THESE RESTRICTIONS MAY RESULT IN, AMONG
OTHER THINGS, A REDEMPTION OR REPURCHASE OF SUCH SECURITIES. IF AT
ANY TIME SUCH GAMING AUTHORITIES FIND THAT AN OWNER OF SUCH
SECURITIES IS UNSUITABLE TO CONTINUE TO HAVE AN INVOLVEMENT IN
GAMING IN THE STATE OF IOWA OR ANY OTHER JURISDICTION IN WHICH THE
COMPANY OPERATES ITS BUSINESS, SUCH OWNER MUST DISPOSE OF SUCH
SECURITIES AS PROVIDED BY THE LAWS OF THE STATE OF IOWA AND THE
REGULATIONS OF THE IOWA RACING AND GAMING COMMISSION THEREUNDER AND
ALL OTHER APPLICABLE LAWS.
3.6 Acceptance of Gaming Law Restrictions. The Members agree that any
license, determination of suitability or other approval issued to any Member or
other Person in connection with the operation of the business of the Company or
this Agreement shall be deemed to be a revocable privilege and no holder thereof
shall be deemed to have acquired any vested rights therein or thereunder.
3.7 Gaming Taxes, Assessments, Privilege Fees, Etc. The Company shall pay
all gaming taxes, assessments, privilege fees and similar charges required to be
paid to the State of Iowa and any county, city, town or municipality thereof
arising out of the gaming operations of the Company.
3.8 Limitation on Payments and Distributions. Neither the Company nor any
holder of Interests shall make any payments or distributions of any kind at any
time to (or enter into any agreement requiring a payment or distribution of any
kind to) Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx or any of their respective
affiliates, related parties, immediate family members, agents, representatives,
successors or assigns. The Company and each Member hereby acknowledges that no
obligation of any kind is owed by the Company to, and the Company has not
entered into nor has any Member caused the Company to enter into any agreement
with, any of the Persons referred to in the immediately preceding sentence.
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ARTICLE IV
MANAGEMENT OF THE COMPANY
4.1 Management Rights. The Members hereby delegate all their power and
authority to the Managing Member, except for such power and authority expressly
retained by the Members pursuant to the terms of this Agreement. It shall be the
duty and responsibility of the Managing Member solely and exclusively to manage
and control the business and affairs of the Company. Subject to the terms of
this Agreement, the Managing Member shall have all the rights and powers of a
manager as provided in the Delaware Act and as otherwise provided by law. The
Managing Member may delegate its authorities and responsibilities for management
of the business affairs of the Company to third parties, but such delegation
shall not relieve the Managing Member of any of its obligations hereunder and
shall not be in violation of applicable Gaming Laws. In furtherance of this
right of delegation, the Managing Member may appoint, subject to applicable
Gaming Laws, individuals with such titles as it may elect, including but not
limited to, the titles of Chief Executive Officer, Chief Operating Officer,
President, Vice President, Treasurer and Secretary, to act on behalf of the
Company with such power and authority as the Managing Member may delegate in
writing to such Person. The Managing Member is hereby granted (i) the right,
power and authority to do on behalf of the Company all things which, in its
judgment, are necessary, proper or desirable to carry out the aforementioned
duties and responsibilities, including but not limited to the right, power and
authority from time to time to incur Company expenses; to employ and dismiss
from employment any and all employees, agents, independent contractors,
attorneys and accountants; to establish employee benefits plans providing for
the payment of deferred compensation; to enter into leases for real or personal
property; to purchase equipment; and to manage all other aspects of running the
business of the Company; and (ii) such other rights, powers and authorities of a
manager as provided in the Delaware Act and as otherwise provided by law.
4.2 No Management by Other Members. Except as otherwise provided herein,
no Member other than the Managing Member shall take part in the management,
operation or control of the business and affairs of the Company. Except as
expressly delegated by the Managing Member, no Member shall be an agent of the
Company or have any right, power or authority to transact any business in the
name of the Company or to act for or on behalf of the Company.
4.3 Limited Liability. To the fullest extent permitted under applicable
law, no Member or Managing Member shall be deemed to violate this Agreement or
be liable, responsible or accountable in damages or otherwise to any other
Member or Managing Member or the Company for any action or failure to act,
unless such violation or liability is attributable to such Member's or Managing
Member's gross negligence, willful misconduct, bad faith or a continuing
material breach of this Agreement. Without limiting the generality of the
foregoing, each such Member or Managing Member shall, in the performance of its
duties, be fully protected in relying in good faith upon the records of the
Company and upon
16
information, opinions, reports or statements presented to such Member or
Managing Member by any other Person as to matters such Member or Managing Member
reasonably believes are within such other Person's professional or expert
competence and that has been selected with reasonable care by or on behalf of
the Company.
4.4 Indemnification. To the fullest extent permitted under applicable law,
the Company shall severally indemnify and hold harmless any Person (an
"Indemnified Party") who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including any action by or in
the right of the Company) by reason of or arising from any acts or omissions (or
alleged acts or omissions) on behalf of the Company or in furtherance of the
interests of the Company arising out of the Indemnified Party's activities as a
Member, Managing Member, officer, employee, trustee or agent of the Company
against losses, damages or expenses (including attorneys' fees, judgments, fines
and amounts paid in settlement) actually and reasonably incurred by such
Indemnified Party in connection with such action, suit or proceeding and for
which such Indemnified Party has not otherwise been reimbursed, so long as such
Indemnified Party did not act in bad faith or in a manner constituting gross
negligence or willful misconduct. The termination of any action, suit or
proceeding by judgment, order, settlement or upon a plea of nolo contendere or
its equivalent shall not of itself (except insofar as such judgment, order,
settlement or plea shall itself specifically provide) create a presumption that
the Indemnified Party acted in bad faith or in a manner constituting gross
negligence or willful misconduct.
4.5 General Obligations. The Managing Member shall:
(a) Take or cause to be taken all actions that may be necessary or
appropriate for the development, maintenance, preservation and
operation of the properties of the Company as a gaming casino
and in accordance with the terms and provisions of this
Agreement and applicable laws and regulations;
(b) At all times conduct the affairs of the Company, or cause the
affairs of the Company to be conducted, in such a manner that
the Company shall be able to service all Debts and financial
obligations of the Company; and
(c) Use reasonable best efforts to assure that the Company shall
not (x) be deemed an "Investment Company" as such term is
defined in the Investment Company Act of 1940, as amended, or
(y) become a "publicly traded partnership" within the meaning
of section 7704 of the Code.
4.6 Scope of Duties. The Managing Member shall not be required to devote
its full time to the business or affairs of the Company but shall devote the
time reasonably necessary
17
to perform the duties of the Managing Member under this Agreement and to manage
and operate prudently the Company's business and properties.
ARTICLE V
COMPANY OFFICERS
5.1 Officers, Employees and Agents. The Managing Member shall have the
right at any time and from time to time to appoint such officers, employees and
agents of the Company as the business of the Company may require, as determined
in the discretion of the Managing Member, provided, however, that any officer
required to be licensed by the IRGC shall apply for and obtain the requisite
license prior to performing his duties for the Company. Officers, employees and
agents of the Company, if any, shall have the duties and powers as may be
prescribed by the Managing Member.
5.2 Removal and Resignation. Any officer may be removed, either with or
without cause, by the Managing Member at any time (subject, in each case, to the
rights, if any, of an officer under any contract of employment). Any officer may
resign at any time by giving written notice to the Managing Member, without
prejudice, however, to the rights, if any, of the Company under any contract to
which such officer is a party. Any such resignation shall take effect on the
date of the Managing Member's receipt of such notice or at any later time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
5.3 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled by the Managing
Member.
5.4 Limitation of Liability and Indemnification of Company Officers.
(a) No officer of the Company shall be liable to the Company or to
the Members for acts or omissions of such officer of the Company in connection
with the business or affairs of the Company, including, without limitation, any
breach of fiduciary duty of such officer as an officer of the Company, any
mistake of judgment of such officer as an officer of the Company and any
business decision of such officer as an officer of the Company, except for acts
or omissions of such officer of the Company that a final adjudication
establishes involved breach of such officer's duty of loyalty to the Company or
its Members, intentional misconduct, fraud or a knowing violation of the law
that was material to the cause of action subject to such final adjudication.
(b) Notwithstanding any other term or provision of this Agreement,
the Company and/or its successor, trustee or receiver may indemnify, defend and
hold harmless every officer of the Company and every individual who at any time
was but ceased to be an officer of the Company, and the heirs and personal
representative of
18
every officer of the Company and of every such individual, against all claims,
demands, actions, losses, liabilities, damages, costs and expenses, which after
the date of this Agreement arise out of the Company or its business or affairs,
including reasonable attorneys' fees incurred in defending all such matters.
(c) The satisfaction of the indemnification obligations of the
Company under this Section 5.4 shall be from and limited to the assets of the
Company, and no Member shall have any personal liability for the satisfaction of
any such indemnification obligation.
(d) No amendment or repeal of any term or provision of this Section
5.4 that otherwise would restrict or limit any right or protection of an officer
of the Company or other individuals under this Section 5.4 shall apply to or
have any effect on any such right or protection of any officer of the Company
existing at the time of such amendment or repeal or of any individual who at any
time before such amendment or repeal was but ceased to be an officer of the
Company, or of the heirs and personal representative of any such officer of the
Company or other individual.
ARTICLE VI
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
6.1 Common Membership Interest. The Company is wholly-owned by the Common
Members. Each Common Member and its Common Member Percentage Interest is listed
on Schedule A hereto. If, following the date hereof, any Person is admitted as a
Common Member or the Common Member Percentage Interest of any Common Member
changes, the Managing Member shall amend Schedule A to reflect such new
information. On the Purchase Agreement Closing Date, PGP shall make the Capital
Contribution set forth next to its name on Schedule B hereto and shall receive a
Common Membership Interest in the Company.
6.2 Preferred Membership Interest. GDREC shall be admitted as a Preferred
Member upon the consummation of the transfer of assets contemplated by the
Purchase Agreement on the Purchase Agreement Closing Date. Upon its admission as
a Preferred Member, GDREC shall have the Preferred Member Percentage Interest
listed on Schedule A hereto. If, following the Purchase Agreement Closing Date,
any Person is admitted as a Preferred Member or the Preferred Member Percentage
Interest of any Preferred Member changes, the Managing Member shall amend
Schedule A to reflect such new information.
6.3 GDREC Capital Contribution. On the Purchase Agreement Closing Date,
GDREC shall contribute or cause to be contributed to the Company the assets
listed next
19
to its name on Schedule B hereto and shall receive a Preferred Membership
Interest in the Company.
6.4 Additional Capital Contributions: In the event that the Managing
Member determines that funds are required by the Company for any Company
purpose, the Managing Member may (i) make a Capital Contribution with respect to
such funds, (ii) request, but not require, any other Common Member to advance,
as an additional Capital Contribution, any or all of the funds so required or
(iii) obtain such funds from any third party upon such terms and conditions as
the Managing Member deems appropriate.
6.5 Issuance of Interests. Interests in the Company (including any right
to or attribute of such Interest, or any right to or in the capital, profits or
distributions of the Company) may only be issued in a transaction or
transactions that are not required to be registered under the Securities Act
and, to the extent such offerings or sales are not required to be registered
under the Securities Act by reason of Regulation S of the Securities Act, that
would not be required to be registered under the Securities Act if the interests
so offered or sold were offered and sold within the United States. Any issuance
or purported issuance of Interests in the Company (including any right to or
attribute of such Interest, or any right to or in the capital, profits or
distributions of the Company) in contravention of this Section 6.5 shall be null
and void ab initio and of no effect.
ARTICLE VII
ALLOCATIONS
7.1 Allocation of Profits and Losses.
7.1.1 Except as otherwise provided in this Article VII, Profits and
Losses for any Fiscal Year shall be allocated to the Members as follows:
(a) First, to the Preferred Members in proportion to their
respective Preferred Member Percentage Interests, until the aggregate Profits
allocated with respect to the Preferred Members (taking into account allocations
of Profits to all previous holders of such Preferred Membership Interests)
pursuant to this Section 7.1.1 (a) for the period commencing with the effective
date of this Agreement and ending on the last day of such Fiscal Year equal the
cumulative Preferred Distribution paid to such Preferred Members (taking into
account Preferred Distributions paid to all previous holders of such Preferred
Membership Interests) for the period commencing with the effective date of this
Agreement and ending on the last day of such Fiscal Year and
(b) Thereafter, to the Common Members, in proportion to their
respective Common Member Percentage Interests as of the end of the Fiscal Year.
20
7.1.2 Except as otherwise provided in this Article VII, Losses for
any Fiscal Year shall be allocated to the Common Members in proportion to their
respective Common Member Percentage Interests as of the end of such Fiscal Year.
7.1.3 The Losses allocated pursuant to Section 7.1.2 shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Member to have an Adjusted Capital Account Deficit at the end of any fiscal
period. In the event that some but not all of the Members would have Adjusted
Capital Account Deficits as a consequence of an allocation of Losses pursuant to
this Section 7.1, the limitation set forth in this Section 7.1.3 shall be
applied on a Member by Member basis so as to allocate the maximum permissible
Losses to each Member under Treas. Reg. Section 1.704-1(b)(2)(ii)(d). All
Losses in excess of the limitation set forth in this Section 7.1.3 shall be
allocated proportionately among the Common Members. Notwithstanding the
provisions of Section 7.1.1, 100% of the Profits shall be allocated, prior to
any other allocations of Profits, to the Members up to the aggregate of, and in
proportion to, any Losses previously allocated to each Member in accordance with
this Section 7.1.3 in the reverse order in which such Losses were allocated.
7.2 Changes in Percentage Interests. If during any Fiscal Year there is a
change in the Common Member Percentage Interests, then items of income, gain,
loss and deduction for such Taxable Year shall be allocated according to the
varying interests of the Common Members pursuant to the
interim-closing-of-the-books method under Code Section 706 and the Regulations
promulgated thereunder.
7.3 Tax Allocations. Items of taxable income, gain, loss and deduction
shall be determined in accordance with Code Section 703, and except as otherwise
provided in this Article VII, the Members' distributive shares of such items for
purposes of Code Section 702 shall be determined according to their respective
shares of Profits or Losses to which such items relate. In accordance with
Section 704(c) of the Code and the regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted basis of such property to the
Company for Federal income tax purposes and its Gross Asset Value as of the date
of contribution. In the event the Gross Asset Value of any Company Asset is
adjusted pursuant to this Agreement, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for Federal income tax
purposes and its Gross Asset Value in the same manner as under Section 704(c) of
the Code and the Regulations thereunder. The Company shall make curative
allocations under the traditional method with curative allocations set forth in
Treas. Reg. ss. 1.704-3(c) to the extent necessary to fully offset the effect of
the ceiling rule on the allocations pursuant to this Section 7.3. Such curative
allocations shall be made at the time of the disposition of property, the
allocations with respect to which were affected by the ceiling rule. Such
curative allocations shall first be allocations of the gain or loss recognized
by the Company on such disposition. To the
21
extent such gain or loss is insufficient to fully offset the effect of the
ceiling rule with respect to such property, allocations in the amount of such
shortfall shall be made of other items of Company income, gain or loss of
similar character recognized upon the disposition of all or substantially all of
the assets of the Company. Any elections or other decisions relating to such
allocations shall be made by the Managing Member in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this Section 7.3 are solely for purposes of Federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provision of this Agreement.
7.4 Qualified Income Offset, Minimum Gain Chargeback. Notwithstanding
anything to the contrary in this Agreement, Profits and Losses shall be
allocated as though this Agreement contained (and there is hereby incorporated
herein by reference) a qualified income offset provision which complies with
Treas. Reg. ss. 1.704-l(b)(2)(ii)(d) and minimum gain chargeback and partner
minimum gain chargeback provisions which comply with the requirements of
Treasury Regulation Section 1.704-2.
7.5 Tax Credits. All tax credits of the Company for a Fiscal Year shall be
allocated among the Members in the same ratio as Profits were allocated for such
Fiscal Year, or if there were no Profits for such Fiscal Year, such tax credits
shall be allocated to the Members in accordance with their respective Percentage
Interests.
7.6 Allocations in Event of Recharacterization. If transactions between
the Company and a Member are recharacterized, imputed or otherwise treated in a
manner the effect of which is to increase or decrease the taxable income,
deduction or loss of the Company, and correspondingly decrease or increase the
taxable income, deduction or loss of one or more Common Members, the allocations
set forth in this Article VII shall be adjusted to eliminate, to the greatest
extent possible, the consequences of such recharacterization or imputation.
7.7 Allocations upon Liquidation or Cessation of Business Activities.
Notwithstanding anything to the contrary in Section 7.1 if the Company is to be
liquidated pursuant to Article XI hereof or the Company has not conducted any
substantial business activities during the 90 days immediately preceding the
last day of a Fiscal Year (a "Termination Year"), and there is a reasonable
likelihood that the Company will not resume the conduct of any substantial
business activities during the Fiscal Year immediately succeeding such
Termination Year, and if as of the date of liquidation or the last day of such
Termination Year, as applicable, the Capital Account balance of a Preferred
Member is (after making all other adjustments as required under this Agreement
to the Capital Account balance of such Preferred Member, but before taking into
account any adjustments pursuant to this Section 7.7) less than the Minimum
Preferred Liquidation Preference of such Preferred Member, then the Company
shall make to such Preferred Member a special allocation of gross income (a
"Special Gross
22
Income Allocation") earned by the Company in the Fiscal Year of liquidation or
such Termination Year, or any preceding Fiscal Year (beginning with the
immediately preceding Fiscal Year), in an amount equal to the amount necessary
(after taking into account any further adjustments resulting from such gross
income allocation) to make the Capital Account balance of such Preferred Member
equal to the Minimum Preferred Liquidation Preference as of such date of
liquidation or final day of such Termination Year, as applicable, provided,
however, that if at any time before the filing of its federal income tax return
for such preceding Fiscal Year, and any other applicable state and local income
tax returns for such year, a liquidation of the Company is anticipated to occur
during the Fiscal Year in which such income tax returns are due to be filed, the
Company shall not file such returns until the 15th day of the seventh month of
the Company's Fiscal Year in which such income tax returns are due to be filed,
provided, further, that if the liquidation of the Company has not occurred by
the 15th day of the 6th month, the Company shall make a reasonable estimate of
the special allocation of gross income required to be made pursuant to this
Section 7.7 for purposes of preparing and filing its federal, state, and local
income tax returns described in the immediately preceding proviso. In the event
the aggregate amount of Special Gross Income Allocations required to be made to
all Preferred Members is greater than the aggregate amount of gross income
earned by the Company in the Fiscal Year of liquidation or in such Termination
Year and, if applicable in the case of a liquidation of the Company, the
immediately preceding Fiscal Year ("Company Aggregate Gross Income"), the
Company Aggregate Gross Income shall be allocated to all Preferred Members
ratably in proportion to their respective Preferred Member Percentage Interests
(but, in the case of any particular Preferred Member, not in any amount that
would result in such holder's Capital Account balance exceeding such holder's
Minimum Preferred Liquidation Preference). In addition, if after allocation of
all Company Aggregate Gross Income pursuant to the immediately preceding
sentence, the Capital Account balance of any Preferred Member has not been
increased to the amount of such Preferred Member's Minimum Preferred Liquidation
Preference as of such date of liquidation or final day of such Termination Year,
as applicable, then the Company shall amend its federal income tax return and
any other applicable state and local tax returns for Fiscal Years preceding such
Fiscal Year (beginning with the federal income tax return for the most recent
Fiscal Year, and to the extent required, continuing to all previous Fiscal Years
for which the applicable statute of limitations for amendments has not expired)
to the extent necessary to make the Special Gross Income Allocations required to
be made by this Section 7.7. Notwithstanding anything to the contrary in this
Section 7.7, the Special Gross Income Allocations required to be made pursuant
to this Section 7.7 shall not exceed the amount by which a ratable portion of
the net proceeds of liquidation available for distribution to such Preferred
Member pursuant to Section 11.5(c) exceeds the Capital Account of such Preferred
Member before the adjustments otherwise required by this Section 7.7.
23
ARTICLE VIII
DISTRIBUTIONS
8.1 Distribution Policy.
8.1.1 Except as otherwise provided in Sections 8.1. 8.2 and 8 4
distributions of Net Cash From Operations, securities or other property shall be
made by the Company to the Common Members in proportion to their respective
Common Member Percentage Interests, at such time and from time to time as
determined by the Managing Member in its sole and absolute discretion.
8.1.2 Except as otherwise provided in Section 8.2, with respect to
each semi-annual distribution period (hereinafter referred to as a "Semi-Annual
Distribution Period") ending on or prior to the Final Redemption Date, GDREC
shall be entitled to receive, to the extent of available Net Cash From
Operations, cumulative distributions in an amount equal to nine percent (9%) per
annum, without compounding, of the Aggregate Capital Contribution of GDREC
(which as of the Purchase Agreement Closing Date shall equal $7,000,000) (a
"Preferred Distribution") provided, that Preferred Membership Interests shall
not accrue Preferred Distributions to the extent redeemed in accordance with the
terms and provisions of this Agreement. The Semi-Annual Distribution Periods
shall commence on January 15 and July 15 of each year and shall end on the day
next preceding the first day of the next Semi-Annual Distribution Period;
provided, however, that the initial distribution period shall consist of the
period from and including the Purchase Agreement Closing Date to and including
January 15, 2000 (the "Initial Distribution Period"). All Preferred
Distributions described in this Section 8.1.2 shall be payable on each January
15 and July 15 of each year (each of such dates being a "Preferred Distribution
Date"), commencing January 15, 2000, with respect to the Semi-Annual
Distribution Period then ended. Such Preferred Distributions shall be payable to
the holders of record, as they appear on the books and records of the Company at
the close of business on each January 1 and July 1 prior to the applicable
Preferred Distribution Date. Each of such Preferred Distributions shall be fully
cumulative and shall accrue (whether or not declared), without interest, from
the first day of the Semi-Annual Distribution Period, except that, with respect
to the Initial Distribution Period, Preferred Distributions shall accrue from
the Purchase Agreement Closing Date, and shall be computed on the basis of a
360-day year consisting of twelve thirty day months. Notwithstanding any
provision to the contrary in this Agreement, no Preferred Distributions shall be
paid to GDREC or on the Preferred Membership Interests (whether or not declared)
if such payment would violate the terms and covenants of the Company's debt
financing arrangements related to the transaction contemplated by the Purchase
Agreement. In the event of a refinancing or redemption of Debt as set forth in
Section 8.5, any new Debt incurred to refinance or redeem the Notes shall be on
terms (including but not limited to the aggregate principal amount of such Debt)
no less favorable, with respect to payment of the Preferred Distributions and
the redemption of
24
the Preferred Membership Interests held by GDREC, than those contained in the
Notes and the Indenture; provided that in connection with such refinancing or
redemption, accrued Preferred Distributions shall be paid.
8.1.3. Except as otherwise provided herein, the Preferred Members
shall not be entitled to participate in any distribution by the Company to the
Common Members and, except as otherwise provided herein, the Managing Member
shall determine the order and priority of distributions in its absolute
discretion.
In addition, subject to the limitations in Section 8.1.1 and the
terms of the Indenture, the Company may make, from time to time, distributions
to holders of its Common Membership Interests; provided, however, that, other
than (i) distributions permitted by the second sentence of the covenant entitled
"Limitation on Restricted Payments" set forth in the Indenture, and (ii)
distributions permitted by Sections 3.5 and 3.6 of the PGP Operating Agreement
as limited by Section 8.4(b) hereof, the Company will not be permitted to make
distributions to Common Members unless the Company, at the time of its
determination to make any such distributions and the payment thereof, has
satisfied its payment obligations relating to the Preferred Distributions and
the redemption of the Preferred Membership Interests.
8.2 Distributions on Dissolution. If the Company is dissolved,
distributions shall be made in accordance with Section 11.5.
8.3 Treatment of Taxes Withheld: Distributions With Respect to Certain
State and Local Taxes. All allocations and distributions made under this
Agreement by the Company to any Common Member or Preferred Member shall be
subject to withholding or deduction for any taxes as may be required by
applicable law, and the Company shall make such withholding or deduction
accordingly. All such withholdings or deductions shall be treated as amounts
distributed to such Member pursuant to this Article VIII and shall be debited to
its Capital Account accordingly. Notwithstanding anything to the contrary
herein, in the event that any state, local or other income tax imposed on the
Company as an entity for any Fiscal Year is reduced by reason of the holding of
a Common Membership Interest by any Member, an amount equal to the reduction
attributable to such Member shall be distributed to such Member within 60 days
after the end of the Fiscal Year and the expense attributable to such tax shall
be allocated among the other Members.
8.4 Mandatory Distributions.
(a) To the extent of available Net Cash From Operations and subject
to the terms of the Indenture, the Common Members shall be entitled to receive
cash distributions from Net Cash From Operations for each Fiscal Year in amounts
sufficient to enable the Common Members to discharge any Federal, state and
local tax liability for such taxable year (excluding penalties) arising as a
result of their Interest in the
25
Company, determined by assuming the applicability to each Member of the highest
combined effective marginal federal, state and local income tax rates applicable
to any individual actually obligated to report on any tax returns income derived
from the Company. To the extent distributions otherwise payable to a Member
pursuant to this Article VIII (excluding for these purposes any amounts
distributed to Common Members under this Section 8.4) are insufficient to cover
such tax liabilities and subject to the terms of the Indenture, the Company
shall make cash distributions (the "Tax Distributions") in amounts, that when
added to the cash distributions otherwise payable, shall equal such tax
liability. The amount of such tax liability shall be calculated (x) taking into
account the deductibility (to the extent allowed) of state and local income
taxes for Federal income tax purposes, and (y) taking into account the amount of
net cumulative tax loss previously allocated to such Member in prior Fiscal
Years and not used in prior Fiscal Years to reduce taxable income for the
purpose of making distributions under this Section 8.4 (based on the assumption
that taxable income or tax loss from the Company is each Member's only taxable
income or tax loss). Tax Distributions shall be debited against such Member's
Capital Account. To the extent this Section 8.4 results in distributions other
than in the ratios required by Section 8.1.1 the first distributions that are
not made pursuant to Section 8.1.1 shall be made so as to cause the aggregate
distributions pursuant to Section 8.1.1, including those made pursuant to this
Section 8.4, to be, as nearly as possible, in the ratio required by Section
8.1.1.
In addition, in the event that aggregate income and, without duplication,
Profits of the Company for any Fiscal Year are required, under the provisions of
Section 704(c) of the Code or by Section 7.7 of this Agreement, to be allocated
to the Preferred Members in amounts such that the aggregate income and Profits
allocated with respect to the Preferred Members (taking into account allocations
of income and Profits to all previous holders of Preferred Membership Interests)
for the period commencing with the effective date of this Agreement and ending
on the last day of such Fiscal Year exceed the cumulative Preferred Distribution
paid to such Preferred Members (taking into account Preferred Distributions paid
to all previous holders of Preferred Membership Interests) for the period
commencing with the effective date of this Agreement and ending on the last day
of such Fiscal Year, then to the extent of available Net Cash From Operations
and subject to the terms of the Indenture, the Preferred Members shall be
entitled to receive cash distributions from Net Cash From Operations in amounts
sufficient to enable the Preferred Members to discharge any Federal, state, and
local tax liability for such Fiscal Year (excluding penalties) arising as a
result of the allocation of such income and Profits to Preferred Members under
the provisions of Section 704(c) of the Code or by Section 7.7 of this
Agreement, determined by assuming the applicability to each Preferred Member of
the highest combined effective marginal federal, state and local income tax
rates applicable to an individual that is resident in the State of Iowa (the
"Effective Tax Rate") and assuming that the amount of income of the Company
allocated to each Preferred Member for such Fiscal Year does not exceed the
lesser of (i) the actual amount of income of the Company allocated to such
Preferred Member and (ii) a ratable portion (determined on the basis of the
Preferred Membership Interest of each Preferred
26
Member) of the entire Company Profits for such Fiscal Year; provided, however,
that the amount distributed to a Preferred Member pursuant to this Section
8.4(a) for any Fiscal Year shall not exceed the excess of (A) the product of (i)
the aggregate income of the Company allocated with respect to such Preferred
Member and all previous holders of the same Preferred Membership Interest for
the period commencing with the effective date of this Agreement and ending on
the last day of such Fiscal Year and (ii) the Effective Tax Rate over (B) the
cumulative Preferred Distribution paid to such Preferred Member and all previous
holders of the same Preferred Membership Interest for the period commencing with
the effective date of this Agreement and ending on the last day of such Fiscal
Year. The amount of such tax liability shall be calculated taking into account
the deductibility (to the extent allowed) of state and local income taxes for
Federal income tax purposes. Any such cash distributions made to Preferred
Members pursuant to this Section 8.4(a) shall be debited against such Member's
Capital Account, and credited against and shall reduce, dollar for dollar, any
cumulative unpaid Preferred Distributions or Preferred Distributions required to
be made in any succeeding Semi-Annual Distribution Period.
(b) To the extent of available Net Cash From Operations and subject
to the terms of the Indenture, PGP shall be entitled to receive cash
distributions from Net Cash From Operations for each Fiscal Year in amounts
sufficient to enable PGP to satisfy its obligations under the PGP Operating
Agreement, including, without limitation, Sections 3.5 and 3.6 thereof;
provided, however, that in no event shall such annual cash distributions in
respect of Sections 3.5 and 3.6 of the PGP Operating Agreement exceed five
percent (5%) of the Company's earnings before interest, income taxes,
depreciation and amortization ("EBITDA") determined on a basis consistent with
the Company's presentation of its financial statements.
8.5 Refinancings or Redemptions of Indebtedness. If the Company repays,
redeems or refinances ninety percent (90%) or more of the Notes on or prior to
July 1, 2003, the Company shall pay certain members of senior management of the
Company and/or PGP a refinancing fee in consideration for their services in
connection with such refinancing or redemption in an aggregate amount not to
exceed $1,500,000, such refinancing fee to be allocated at Xxxxxxx' discretion.
In the event of a refinancing or redemption of the Notes as set forth in this
Section 8.5, any new Debt incurred to refinance or redeem the Notes shall be on
terms (including but not limited to the aggregate principal amount of such Debt)
no less favorable with respect to payment of the Preferred Distributions and the
redemption of the Preferred Membership Interests held by GDREC, than those
contained in the Notes and the Indenture; provided that in connection with such
refinancing or redemption, accrued Preferred Distributions shall be paid.
27
ARTICLE IX
REDEMPTION OF PREFERRED MEMBERSHIP INTERESTS
9.1 Mandatory Partial Redemption. Subject to the provisions of the Escrow
Agreement and the Purchase Agreement, including, without limitation the right of
the Company to reduce or offset the Preferred Membership Interests to satisfy
indemnification obligations of GDREC and HCI under the Purchase Agreement and
the Real Property Purchase Agreement, at any time on or prior to the eighteenth
month anniversary of the Purchase Agreement Closing Date (the "Redemption
Date"), the Company shall purchase and redeem a portion of the Preferred
Membership Interests in an original face amount of $3,000,000, less any
applicable reductions or offsets (the "Minimum Partial Redemption") at a
purchase price (the "Mandatory Redemption Purchase Price") equal to the face
amount of the Preferred Membership Interests to be redeemed, less any applicable
reductions or offsets, plus all accrued and unpaid Preferred Distributions in
respect of such redeemed Preferred Membership Interests through, but not
including, the Redemption Date. All Preferred Membership Interests redeemed
pursuant to this Section 9.1 shall be permanently retired.
9.2 Mandatory Final Redemption. The original face amount of Preferred
Membership Interests outstanding (the "Remaining Preferred Interests")
immediately following the purchase and redemption (or, if applicable, reduction
or setoff) of the Minimum Partial Redemption in accordance with the provisions
of Section 9.1 hereof shall be purchased and redeemed by the Company on the date
occurring seven (7) years and ninety (90) days after the Purchase Agreement
Closing Date (the "Final Redemption Date") at a purchase price equal to the
original face amount of outstanding Remaining Preferred Interests, plus all
accrued and unpaid Preferred Distributions in respect of such Remaining
Preferred Interests through, but not including, the Final Redemption Date. All
Preferred Membership Interests redeemed pursuant to this Section 9.2 shall be
permanently retired.
9.3 Optional Redemption. The Preferred Membership Interests shall be
redeemable, at the option of the Managing Member, in whole or in part, at any
time or from time to time after the issuance thereof at a purchase price equal
to the original face amount of Preferred Membership Interests to be redeemed,
plus all accrued and unpaid Preferred Distributions in respect of such redeemed
Preferred Membership Interests through, but not including, the date of
redemption thereof, less any applicable reductions or offsets (the "Optional
Redemption Purchase Price"). All Preferred Membership Interests redeemed
pursuant to this Section 9.3 shall be permanently retired.
9.4 Required Regulatory Redemptions or Repurchases. The Preferred
Membership Interests and the Common Membership Interests will be subject to
redemption or repurchase as set forth below if:
28
(1) the holder of such Interest is required by any Gaming Authority
to divest itself of such Interest,
(2) the holder of such Interest is licensed to hold Interests and
such Gaming License is subsequently revoked or such holder fails to have
any Gaming License required for it to be a holder of Interests and such
failure continues for 30 consecutive days,
(3) the holder of such Interest (i) takes any action or omits or
fails to take any action, in each case in contravention of any gaming laws
or governmental authorities or (ii) is found not to be suitable (or found
to be unsuitable) or to otherwise qualify under any applicable gaming laws
and, with respect to each of clauses (i) or clause (ii) above, as
applicable, the Company determines, in its reasonable good faith
judgement, that such actions, omissions, failures, unsuitability or
inability to be qualified could reasonably be expected to prevent or
materially impairs the acquisition or retention by the Company of any
Gaming License, or
(4) the holder of such Interests fails to comply with its
obligations under Section 2.6 of this Agreement.
Upon the occurrence of any of the events described in clauses (1) through
(4) above with respect to a holder of an Interest, including a Preferred
Membership Interest (hereinafter, an "Unsuitable Member"), the Company shall
have the right to purchase (which right shall be assignable by the Company),
upon 5 days' notice to such applicable Unsuitable Member and for 10 days
thereafter, such Interest for an amount equal to the lesser of (a) such holder's
capital contribution in respect of such Interest or (b) the current fair market
value of such Interest as determined by the Managing Member in its reasonable
good faith judgement.
The purchase price to be paid by the Company to an Unsuitable Member may
be paid, at the option of the Company, in cash or a promissory note with the
principal and interest payable annually and amortized over not more than seven
years and bearing interest at a rate per annum equal to the sum of the prime
lending rate published by the Wall Street Journal at the date of redemption plus
2%. No Unsuitable Member shall be entitled to any compensation from PGP, any
direct or indirect subsidiary of PGP, or any member of PGP or the Company, by
reason of the redemption or repurchase of such Preferred Membership Interest.
29
ARTICLE X
TAX MATTERS AND ELECTIONS
10.1 Designation of Tax Matters Partner. The Members hereby unanimously
designate PGP as the "Tax Matters Partner" of the Company as defined in Section
6231 of the Code. Any future alternative Tax Matters Partner shall be elected by
the Members in accordance with the terms of this Agreement.
10.2 Powers and Duties of Tax Matters Partner. The Tax Matters Partner
shall have such powers and perform such duties as provided in Sections 6221
through 6233 of the Code with respect to a Tax Matters Partner. However, the Tax
Matters Partner will not make an election pursuant to (i) Regulation
ss.301.7701-3 to treat the Company as an association taxable as a corporation or
(ii) Code Section 761 for the Company not to be treated as a partnership, in
either case, without the consent of all Members and the approval of a majority
of the members of the Independent Committee. During any Company income tax audit
or other income tax controversy with any governmental agency, the Tax Matters
Partner shall keep the Members informed of all material facts and developments
on a timely basis, and shall consult with the Members at their request. The Tax
Matters Partner shall not be authorized to enter into a settlement which binds
the Members or the Company without the advance written consent of the Members,
except for settlements for de minimis amounts (e.g., not exceeding $10,000 in
the aggregate). The Tax Matters Partner shall take all actions necessary to
cause each qualifying Member to be a "notice partner" within the meaning of
Section 6231(a)(8) of the Code.
10.3 Expenses Regarding Tax Matters. All reasonable expenses incurred by
the Tax Matters Partner with respect to any tax matter which does or may affect
the Company, or any Member by reason thereof, including but not limited to
expenses incurred by the Tax Matters Partner acting in its capacity as Tax
Matters Partner in connection with Company-level administrative or judicial tax
proceedings, shall be paid for out of Company assets. If the Members are
permitted by the Company or permitted under the Code to participate in
Company-level administrative or judicial tax proceedings, the Company shall be
responsible for all expenses incurred by them in connection with such
participation. The cost of any adjustments to the members and the cost of any
resulting audits or adjustments of the Members' tax returns will be borne solely
by the Members and the cost of any adjustments to the Company and the cost of
any resulting audits or adjustments of the Company's tax returns will be borne
solely by the Company.
10.4 Basis Election. In the event that a distribution of any of the
Company's property is made in the manner provided in Section 734 of the Code, or
where a transfer of an Interest in the Company permitted by this Agreement is
made in the manner provided in Section 743 of the Code, then, upon the written
request of any Member, the Company shall file an election under Section 754 of
the Code and the Regulations
30
thereunder and a corresponding election under the applicable section of state
and local law. Each Member shall provide the Company with all information
necessary to give effect to any election under Section 754 of the Code.
10.5 Established Securities Markets. Each Member hereby represents and
warrants to the Company and to all of the other Members that such Member has not
acquired nor will such Member Transfer any Interest in the Company (including
any right to or attribute of such Interest, or right to or in the capital,
profits or distributions of the Company), or cause any Interest in the Company
(including any right to or attribute of such Interest, or right to or in the
capital, profits or distributions of the Company), to be marketed on or through
an "established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of section 7704(b) of the Code or the
Regulations thereunder, including, without limitation, an over-the-counter
market or an interdealer quotation system that regularly disseminates firm buy
or sell quotations.
10.6 Election to be Taxed as a Corporation. No officer or manager of the
Company, and not less than all Members (subject to the approval of a majority of
the members of the Independent Committee) shall have the power to make an
election to treat the Company as an association taxable as a corporation for
federal, state and local income tax purposes (including an election under
Regulation ss.301.7701-3(c)).
ARTICLE XI
DISSOLUTION AND TERMINATION
11.1 Events Causing Dissolution. The Company shall be dissolved and its
business wound up upon the earlier to occur of any of the following events:
(a) The expiration of the term of the Company;
(b) The sale or disposition of substantially all of the property and
assets owned by the Company, if the Managing Member approves such
dissolution;
(c) The entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act.
The death, disability, Bankruptcy or dissolution of a Member shall not cause the
dissolution of the Company. No Member has any right to resign, retire or
withdraw from the Company and any attempt to do so shall be NULL and VOID
11.2 Liquidating Trustee. Upon the occurrence of an event of dissolution,
as described in Section 11.1, the Managing Member is approved to carry out the
winding up
31
of the Company and shall promptly notify the Members of such dissolution and
shall constitute the "liquidating trustee" as defined in Section 18-101 of the
Delaware Act.
11.3 Liquidation.
(a) Upon the occurrence of an event of dissolution as described in
Section 11.1 a liquidator unanimously selected by the Managing Member shall sell
the Company's assets, and thereafter cease to engage in any further business,
except to the extent necessary to perform existing obligations, and shall wind
up the Company's affairs and liquidate its assets
(b) During the course of liquidation, the Common Members shall
continue to share Profits and Losses as provided in Article VII. but there shall
be no cash distributions to the Members until the Distribution Date (as defined
in Section 11.4).
11.4 Liabilities. Liquidation shall continue until the Company's affairs
are in such condition that there can be a final accounting, showing that all
fixed or liquidated obligations and liabilities of the Company are satisfied or
can be adequately provided for under this Agreement. The assumption or guarantee
in good faith by one or more financially responsible Persons shall be deemed to
be an adequate means of providing for such obligations and liabilities. When the
Managing Member has determined that there can be a final accounting, the
Managing Member shall establish a date (not to be later than the end of the
taxable year of the liquidation, i.e., the time at which the Company ceases to
be a going concern as provided in Section 1.704-1 (b)(2)(ii)(g) of the
Regulations, or, if later, ninety (90) days after the date of such liquidation)
for the distribution of the proceeds of liquidation of the Company (the
"Distribution Date"). The net proceeds of liquidation of the Company shall be
distributed to the Members as provided in Section 11.5 not later than the
Distribution Date.
11.5 Distribution of Proceeds upon Liquidation. Subject to Section 18-803
of the Delaware Act, upon final liquidation of the Company, but not later than
the Distribution Date, the net proceeds of liquidation shall be distributed in
the following order of priority:
(a) to creditors with respect to any unpaid expenses, or any
outstanding loan or advance, including under the Notes;
(b) to the Members in respect of costs and expenses incurred by such
Members in connection with the winding up the affairs of the Company,
discharging the liabilities of the Company, distributing the assets of the
Company or dissolving the Company in accordance with this Article XI
(c) to the Preferred Members, ratably in accordance with, and to the
extent of; their positive Capital Account balances, as determined after taking
into account
32
all Capital Account adjustments for the Fiscal Year of the Company during which
the liquidation of the Company occurs (other than such Capital Account
adjustments made by reason of this clause (c)); and
(d) to the Common Members in accordance with their positive Capital
Account balances, as determined after taking into account all Capital Account
adjustments for the Fiscal Year of the Company during which the liquidation of
the Company occurs (other than such Capital Account adjustments made by reason
of this clause (d)).
11.6 Deficit Capital Accounts. If any Member's Capital Account has a
deficit balance (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs), such Member shall have no obligation to contribute to the
capital of the Company with respect to such deficit, and such deficit shall not
be considered a debt owed to the Company or to any other Person for any purposes
whatsoever.
11.7 Certificate of Cancellation. Upon dissolution and liquidation of the
Company, the Managing Member shall cause a Certificate of Cancellation to be
executed and filed with the office of the Secretary of State of Delaware in
accordance with Section 18-203 of the Delaware Act.
ARTICLE XII
TRANSFERS OF INTERESTS
12.1 Restrictions on Transfer. No Member shall have the right to Transfer
all or any part of its Interest in the Company without the approval of the
Managing Member, and any purported Transfer of all or any part of an interest in
the Company in contravention hereof shall be null and void and of no force and
effect.
12.2 Admission of Transferee as a Member. No Transferee of all or any
portion of any Member's Interest in the Company shall be admitted as a
substitute or additional member of the Company unless (i) the Transfer to such
Transferee is in full compliance with the provisions of this Agreement, (ii)
such Transfer has been approved in writing by the Managing Member (which
approval may be withheld in its sole and absolute discretion) and (iii) such
Transferee shall have executed and delivered to the Company such instruments as
the Managing Member reasonably deems necessary or desirable to effectuate the
admission of such Transferee as a Member of the Company and to confirm the
agreement of such Transferee to be bound by all the terms, conditions and
provisions of this Agreement.
33
12.3 Entity Member Transfers. If any Member is a closely-held corporation,
limited liability company or unincorporated association or partnership, then, in
any single transaction or series of related transactions, the original issuance
or Transfer of any stock or interest in such corporation, limited liability
company, association or partnership constituting in the aggregate in excess of
fifty percent (50%) of all such stock or interests then outstanding shall be
deemed a Transfer of such Member's Interest within the meaning of this
Agreement, except as provided below in this Section 12.3. If any Member is a
publicly-traded corporation, limited liability company, association or
partnership, meaning for the purposes of this Agreement that such corporation,
limited liability company, association or partnership has effected a bona fide
initial public offering of any class of its equity securities that were
registered for such purpose with the Securities and Exchange Commission under
the Securities Act on Form S-1 (or any successor of such form), then, in any
single transaction or series of related transactions, the original issuance or
Transfer of any stock or interest in such corporation, limited liability
company, association or partnership constituting in the aggregate in excess of
eighty percent (80%) of all such stock or interests then outstanding shall be
deemed a Transfer of such Member's Interest within the meaning of this
Agreement, except as provided below in this Section 12.3. Notwithstanding the
foregoing, in no event shall any public offering of securities of any class of
any Member that is registered with the Securities and Exchange Commission under
the Securities Act constitute or be deemed a Transfer of an Interest within the
meaning of this Agreement.
Notwithstanding any other term or provision of this Section 12.3, in no
event shall the Transfer by any Person to any of the Persons listed in
subparagraphs (a) and (b) below of this Section 12.3 of any stock or interest in
any corporation, limited liability company, association or partnership that is a
Member, whether or not closely-held or publicly-traded, be deemed a Transfer of
such Member's Interest within the meaning of this Agreement:
(a) To any one or more entities that directly, or indirectly
through one or more intermediaries, control, or are controlled
by, or are under common control with, the current or any
future record or beneficial holder of such stock or interest;
or
(b) To a revocable living trust for the benefit of the current or
any future record or beneficial holder of such stock or
interest.
12.4 Restrictive Legend. In addition to any other restrictive legend that
may be imposed on any certificate evidencing ownership of any Interest, such
certificate shall bear the following legend:
THE TRANSFER OF ANY SECURITIES EVIDENCED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS CONTAINED IN THE COMPANY'S OPERATING
34
AGREEMENT, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY UPON
REQUEST.
12.5 Limitation on Foreign Ownership. Notwithstanding any provision to the
contrary in this Agreement, no Person, including existing Members, shall be
permitted to purchase Interests and no Member shall be permitted at any time and
under any circumstances to Transfer its Interest, or any portion thereof if;
following such purchase or Transfer, more than 25% of the Interests in the
Company are owned, directly or indirectly, by Persons who are not citizens of
the United States. Any such purchase or Transfer or purported purchase or
Transfer shall be null and void and the Company shall not recognize the
transferee, purchaser, purported transferee or purported beneficial owner of
such Interest as a direct or indirect holder or owner of an Interest in the
Company for any purpose. To the extent required by maritime laws, the Managing
Member and the officers of the Company shall be citizens of the United States.
12.6 Limitation on Activities. Notwithstanding any provision to the
contrary in this Agreement, without the written consent of the Managing Member,
no Member shall at any time engage in (or acquire or hold, directly or
indirectly, a controlling interest in any Person engaged in) any gaming business
or related activity that competes with the business of the Company, whether as
presently or hereafter conducted.
12.7 Restrictions to Avoid Publicly Traded Partnership Status. A Member
shall not Transfer (which term shall include, for purposes of this Section 12.7,
a redemption of Interests by the Company or the entering into of a financial
instrument or contract the value of which is determined in whole or in part by
reference to the Company) all or any part of its Interest in the Company
(including any right to or attribute of such Interest, or any right to or in the
capital, profits or distributions of the Company), and any such Transfer or
purported Transfer shall be null and void ab initio and of no effect, and the
Company shall not recognize the transferee, purported transferee or purported
beneficial owner of such Interest as a direct or indirect holder or owner of an
Interest in the Company for any purpose, unless prior to the effectiveness of
such Transfer, the Member delivers to the Managing Member an opinion of counsel
reasonably satisfactory to the Managing Member and a majority of the members of
the Independent Committee to the effect that such Transfer will not result in
the Company being treated as a "publicly traded partnership" under Section 7704
of the Code, the regulations thereunder and any administrative rulings or
policies with respect thereto. For purposes of the preceding sentence, a
Transfer will not include transfers which, in the determination of the Managing
Member, and subject to a concurring determination by a majority of the members
of the Independent Committee, constitute (i) transfers in which the basis of the
interest in the hands of the transferee is determined, in whole or in part, by
reference to its basis in the hands of the transferor or is determined under
Section 732 of the Code, (ii) transfers at death, (iii) transfers to a spouse,
brother, sister, ancestor or lineal descendant of the transferring Member, (iv)
transfers involving the issuance by the Company of interests in the capital or
profits of the Company in exchange for consideration, (v)
35
transfers involving distributions from a retirement plan or individual
retirement account, (vi) block transfers where a Member and related persons
(within the meaning of Sections 267(b) and 707(b)(1) of the Code), in one or
more transactions during any 30 calendar day period, transfer in the aggregate
more than 2% of the total interests in Company capital or profits, (vii)
transfers pursuant to a right under a redemption or repurchase agreement
described in Regulation ss. 1.7704-1(e)(vii) that is exercisable only upon the
death, disability or mental incompetence of the Member or upon the retirement or
termination of services of an individual who actively participated in the
management of the Company or performed services on a full-time basis for the
Company, (viii) transfers through a "qualified matching service," as defined by
Regulation ss.1.7704-1(g) or (ix) transfers by one or more Members of interests
representing more than 50% of the total interests in Company capital and profits
in one transaction or a series of related transactions. Transfers which would be
null and void under the provisions of this Section 12.8 will be permitted in the
order requested as soon as the opinion referred to in this Section 12.8 is
delivered to the Managing Member. References in this Section 12.8 to a specific
percentage of Company capital or profits shall be deemed to be a reference to
such percentage of Company capital or profits determined in accordance with
Regulation ss. 1.7704-1(k).
Neither the Members nor the Company shall participate in the establishment
of an "established securities market" or a "secondary market" (or the
substantial equivalent thereof) within the meaning of Section 7704 of the Code
for the Transfer of any Interest in the Company (including any right to or
attribute of such Interest, or any right to or in the capital, profits or
distributions of the Company) or recognize any Transfers made thereon, and any
Transfer or purported Transfer thereon shall be null and void ab initio and of
no effect.
Notwithstanding any other provision of this Agreement, upon the receipt by
the Managing Member of an opinion of counsel to the Company reasonably
satisfactory to the Managing Member and a majority of the members of the
Independent Committee to the effect that the removal of one or more of the
foregoing restrictions contained in this Section 12.8 will not result in the
Company being treated as a "publicly traded partnership" under Section 7704 of
the Code, the regulations thereunder and any administrative rulings or policies
with respect thereto, then the restriction or restrictions so specified in such
opinion shall no longer constitute provisions of this Agreement, and shall no
longer prevent the Transfer of any Interest.
12.8 Disqualified Interest. No Person is permitted at any time to hold,
directly or indirectly, a Beneficial Interest that is equal to or in excess of
five percent (5%) of the issued and outstanding Interests of the Company without
having been found suitable or qualified to hold a Gaming License by applicable
Gaming Authorities, including the IRGC. To the extent any holder of Interests
that has not been licensed and has not otherwise satisfied all applicable
suitability and other requirements imposed by applicable Gaming Laws acquires,
directly or indirectly, in one or more transactions a
36
Beneficial Interest equal to or in excess of five percent (5%) of the issued and
outstanding Interests of the Company (such excess amount, a "Disqualified
Interest"), such transactions, solely to the extent relating to the acquisition
by such holder of such Disqualified Interest, shall be void ab initio and of no
effect.
ARTICLE XIII
LIABILITY
13.1 Liability of the Members. Except as otherwise expressly provided in
the Delaware Act, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member. Except as otherwise expressly provided in the Delaware Act, the
liability of each Member shall be limited to the amount of capital
contributions, if any, required to be made by such Member in accordance with the
provisions of this Agreement, but only when and to the extent the same shall
become due pursuant to the provisions of this Agreement.
13.2 Waiver of Partition and Nature of Interest in the Company. Except as
otherwise expressly provided in this Agreement, each of the Members hereby
irrevocably waives any right or power that such Member might have to cause the
Company or any of its assets to be partitioned, to cause the appointment of a
receiver for all or any portion of the assets of the Company, to compel any sale
of all or any portion of the assets of the Company pursuant to any applicable
law, or to file a complaint or to institute any proceeding at law or in equity
to cause the termination, dissolution and liquidation of the Company. Each of
the Members has been induced to enter into this Agreement in reliance upon the
waivers set forth in this Section 13.2, and without such waivers, no Member
would have entered into this Agreement. No Member shall have any interest in any
specific assets of the Company. The interest of all Members in this Company are
personal property.
ARTICLE XIV
BOOKS, RECORDS, ACCOUNTING AND REPORTS
14.1 Books and Records. The Company shall maintain, or cause to be
maintained, in a manner customary and consistent with generally accepted
accounting principles, practices and procedures, a comprehensive system of
office records, books and accounts (which records, books and accounts shall be
and remain the property of the Company) in which shall be entered fully and
accurately each and every financial transaction with respect to the ownership
and operation of the property of the Company. Such books and records of account
shall be prepared and maintained at the principal
37
place of business of the Company or such other place or places as may from time
to time be determined by the Managing Member. Each Member or its duly authorized
representative shall have the right to inspect, examine and copy such books and
records of account at the Company's office during reasonable business hours. A
reasonable charge for copying books and records may be charged by the Company.
14.2 Accounting and Fiscal Year. The books of the Company shall be kept on
the accrual basis and the Company shall report its operations for tax purposes
on the accrual method. The fiscal year of the Company shall end on December 31
of each year, unless a different fiscal year shall be required by the Code.
14.3 The Company Accountant. The Company shall retain as the regular
accountant and auditor for the Company (the "Company Accountant") a nationally
recognized accounting firm designated by the Managing Member and approved by a
majority of the Independent Committee. The fees and expenses of the Company
Accountant shall be a Company expense.
14.4 Reserves. The Members may, subject to such conditions as they shall
determine, establish reserves for the purpose and requirements as they may deem
appropriate.
ARTICLE XV
EXPENSES
15.1 Reimbursement. Each Member and its Affiliates shall bear their own
costs and expenses, other than costs and expenses actually and reasonably
incurred by the Common Members and their Affiliates in connection with the
formation and organization of the Company and the ongoing business and affairs
of the Company, which costs and expenses shall be borne by the Common Members in
proportion to their respective Common Member Percentage Interests.
15.2 Out-of-pocket Expenses. The Members have agreed to pay their own
respective out-of-pocket and other incidental expenses such as travel, lodging,
entertainment, telephone, overnight courier and postage. No Member will make a
claim against the other Members as a result of these expenses.
38
ARTICLE XVI
SECURITIES LAWS MATTERS
16.1 Securities Law Representations and Warranties. Each Member hereby
represents and warrants to the Company and to all of the other Members all of
the following:
(a) Such member is acquiring such Member's Interest for investment
and not with a view to the sale or distribution of any part
thereof.
(b) Such member has no present intention to sell or otherwise
distribute any part of such Member's Interest.
(c) The Company has advised such Member (i) that such Member's
Interest has not been registered under the Securities Act, as
the offering and sale of such Member's Interest is to be
effected in accordance with an exemption from the registration
requirements of the Securities Act and similar exemptions
under applicable state securities law, and (ii) that, in this
connection, the Company is relying in part on the
representations and warranties of such Member set forth
herein.
(d) Such Member shall make no disposition of all or any portion of
such Member's Interest unless and until (i) such Member has
notified the Company of the proposed disposition, (ii) such
Member has furnished the Company with an opinion of legal
counsel to the effect that such disposition will not require
registration of such Member's Interest under the Securities
Act, (iii) such opinion of legal counsel has been concurred
with by the Company's legal counsel, and (iv) the Company has
advised such Member of such concurrence.
(e) Such Member has received all such information as such Member
deems necessary and appropriate to enable such Member to
evaluate the financial risk inherent in acquiring such
Member's Interest, and such Member acknowledges receipt of
satisfactory and complete information covering the business
and financial condition of the Company in response to all
inquiries in respect thereof.
(f) Such Member has had the opportunity to consult with such
Member's investment counselors, attorneys, accountants and
other
39
advisors regarding the terms and conditions of this Agreement
and its tax and legal consequences.
(g) Such Member has either or both of the following:
(i) a pre-existing business or personal relationship with
the Company and/or one (1) or more of its Managers; or
(ii) sufficient sophistication to make an informed investment
decision based on such Member's personal knowledge of
the business and affairs of the Company, based on such
additional information as such Member may have requested
and received from the Company and based on the
independent inquiries and investigation undertaken by
such Member.
(h) Such Member understands that such Member's investment in such
Member's Interest is speculative and risky.
(i) Such Member understands that such Member has no assurance that
the Company will be a financial success or that such Member's
investment in such Member's Interest will be recovered.
(j) Such Member has the financial ability to bear the economic
risk of such Member's investment in such Member's Interest,
has adequate means for providing for such Member's current
needs and personal contingencies and has no need for liquidity
with respect to such Member's Interest.
(k) Neither the Company, nor any of the other Members nor any
employee, agent or affiliate of the Company or of any of the
other Members has made any representation or warranty to such
Member.
(I) The Company used no general solicitation or general
advertising in connection with the Company's offer to sell (if
any) or the Company's sale of such Member's Interest to such
Member.
(m) Such Member recognizes that such Member's Interest is
unregistered under the Securities Act and must be held
indefinitely unless it is subsequently registered under the
Securities Act or an exemption from such registration is
available.
40
(n) Such Member understands that the Company is under no
obligation to register such Member's Interest under the
Securities Act or to comply with any exemption from such
registration.
(o) Such Member understands and agrees that, in addition to any
other restrictive legend that may be imposed on any
certificate evidencing ownership of such Member's Interest,
such certificate shall bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NO SUCH SECURITY NOR ANY INTEREST OR PARTICIPATION
THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
(p) Such Member understands that Rule 144 under the Securities Act
presently does not apply and may never apply to the Company's
securities because the Company does not now, and may never,
file reports required by the Exchange Act, and has not made,
and may never make, publicly available the information
required by Rule 15c2-11 of the Exchange Act. Furthermore,
such Member understands that if Rule 144 were available, sales
of Company securities made in reliance thereon could be made
only in certain limited amounts, after certain holding
periods, and only when specified current information about the
Company had been made available to the public, all in
accordance with the terms and in satisfaction of the
conditions of Rule 144. Such Member understands that, in the
case of Company securities to which Rule 144 is not
applicable, compliance with some other exemption under the
Securities Act will be required in order for any re-sale or
other Transfer of such Company securities to be effected
legally.
41
ARTICLE XVII
POWER OF ATTORNEY
17.1 Power of Attorney. Except as otherwise provided in this Agreement,
each Member hereby irrevocably constitutes and appoints Xxxxxxx (the
"Attorney-in-Fact") his or its true and lawful attorney, for it and in its or
his name, place and xxxxx and for its, his or its use and benefit to sign and
acknowledge, file and record:
(a) The Certificate of Formation, as well as any and all
amendments thereto;
(b) Any certificates, instruments, and documents, including
fictitious business name statements, as may be appropriate
under the laws of any state or other jurisdiction in which the
Company currently conducts or intends to conduct business in
connection with the use of the name of the Company by the
Company;
(c) Any other instrument which may be required to be filed by or
on behalf of the Company under the laws of any state or by any
governmental agency;
(d) Any and all amendments of the instruments described in, or
required to effectuate or perfect, any of the preceding
subparagraphs; and
(e) Except as otherwise provided in this Agreement, any documents
which may be required to effect the continuation of the
Company, the admission of an additional or substituted Member,
or the dissolution and termination of the Company.
The foregoing grant of authority: (i) is a special power of attorney
coupled with an interest, is irrevocable, and shall survive the death of any
Member; (ii) may be exercised by the Attorney-in-Fact for each of the
undersigned by a facsimile signature by the Attorney-in-Fact or by listing the
names of all of the undersigned executing any instrument with a single signature
of Xxxxxxx acting as Attorney-in-Fact for all of them; and (iii) shall survive
the delivery of an assignment by a Member of all or any of its, his or its
Interest, and any Transferee does hereby constitute and appoint M. Xxxxx Xxxxxxx
his or its attorney in the same manner and force and for the same purposes as
the assignor.
The undersigned authorizes such Attorney-in-Fact to take such further
action which such Attorney-in-Fact shall consider necessary or advisable in
connection with any of the foregoing, hereby gives such Attorney-in-Fact full
power and authority to do and
42
perform each and every act or thing whatsoever required or advisable to be done
in and about the foregoing as fully as the undersigned might or could do if
personally present, and hereby ratifies and confirms all that such
Attorney-in-Fact shall lawfully do or cause to be done by virtue hereof. In the
event of any conflict between the provisions of this Agreement and any document
executed or filed by Xxxxxxx pursuant to the Power of Attorney granted in this
Section 17.1, this Agreement shall govern.
ARTICLE XVIII
MISCELLANEOUS
18.1 Further Assurances: Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further instruments and documents, and do
all such other acts and things as may be required by law, or as may be required
to carry out the intent and purposes of this Agreement.
18.2 Severability: In case any one or more of the provisions contained in
this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and other application thereof shall not in
any way be affected or impaired thereby.
18.3 Amendments. Except as otherwise provided herein, this Agreement may
be amended, modified or revised, in whole or in part' upon the approval of the
Managing Member and the approval of all of the members of the Independent
Committee; provided, however, that no amendment, modification or revision of
this Agreement shall be effective without the consent or approval of the
Preferred Members if and to the extent that such amendment, modification or
revision would adversely affect the Preferred Members' rights, privileges or
preferences hereunder. In the event new Preferred Members are admitted, any
amendment, modification or revision of this Agreement that would adversely
affect GDREC's rights, privileges or preferences hereunder shall require GDREC's
consent and approval.
18.4 Amendments to Comply with Gaming or Similar Laws. Notwithstanding the
provisions of Section 18.3 of this Agreement, (i) the Members hereby agree that
this Agreement may be amended by the Managing Member as necessary to comply with
the requirements of applicable Gaming Laws that regulate or otherwise pertain to
the business of the Company, and (ii) Sections 3.8. 1 8.5(a) and this Section
18.4 shall not be amended without the prior consent of the IROC.
18.5 Entire Agreement: Purchase Agreement.
(a) The Company and each Member hereby ratifies and confirms the
rights, duties and obligations of the Company (as PGP's designee) set forth in
the
43
Purchase Agreement and, notwithstanding any other provision in this Agreement to
the contrary, the Company (as PGP's designee) and each Member hereby
acknowledges and agrees to comply with all provisions thereunder, and in the
event that there are any inconsistencies between the terms of the Purchase
Agreement and this Agreement, the terms and provisions of the Purchase Agreement
shall govern. This Section 18.5(a) shall not be amended without the prior
consent of the IRGC and GDREC.
(b) This Agreement, including all Exhibits hereto, constitutes the
entire agreement of the parties hereto with respect to the matters hereof and,
with the exception of applicable provisions of the Purchase Agreement,
supersedes any prior oral and written understandings or agreements.
18.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to conflict of
law principles thereof.
18.7 Dispute Resolution. The parties hereto hereby agree that any
controversy, dispute or claim arising out of or relating to this Agreement or
any breach of this Agreement shall be resolved in accordance with the terms and
provisions of this Section 18.7.
18.7.1 Agreement to Negotiate. Before submitting any controversy,
dispute or claim arising out of or relating to this Agreement or any breach of
this Agreement to arbitration, the following procedures shall be followed:
(a) The party desiring to submit any such controversy,
dispute or claim to arbitration ("Claimant") first shall
give written notice thereof to the other party
("Recipient") setting forth in detail the pertinent
facts and circumstances relating to such controversy,
dispute or claim;
(b) Recipient shall have a period of fifteen (15) days in
which to consider the controversy, dispute or claim that
is the subject of the notice and to furnish in writing
to Claimant a written statement of Recipient's position
with respect thereto;
(c) Within seven (7) days of Claimant's receipt of
Recipient's written statement, Claimant and Recipient
shall meet with a mediator, whose identity shall be
mutually agreed upon by Claimant and Recipient, in an
effort to resolve amicably any difference that may exist
between the respective positions of Claimant and
Recipient, and, if such resolution
44
is not achieved, either or both of Claimant and
Recipient shall have the right to submit the matter to
arbitration.
18.7.2 Procedure for Arbitration. Any controversy, dispute or claim
arising out of or relating to this Agreement or any breach of this Agreement,
including any dispute concerning the termination of this Agreement, that has not
been resolved in accordance with Section 18.7.1 shall be settled by arbitration
in Xxxxx County, Nevada in accordance with the commercial arbitration rules of
the American Arbitration Association then existing. In arbitration, this
Agreement (including this provision providing for arbitration in the event of
any controversy, dispute or claim arising out of or relating to this Agreement
or any breach of this Agreement that has not been resolved in accordance with
Section 18.7.1) shall be specifically enforceable. Judgement upon any award
rendered by an arbitrator may be entered in any court having jurisdiction. The
prevailing party to an arbitration proceeding commenced hereunder shall be
entitled as a part of the arbitration award to the costs and expenses (including
reasonable attorneys' fees) of investigating, preparing and pursuing an
arbitration claim as such costs and expenses are awarded by the arbitrator.
18.8 Attorney Fees. If the Company or any Member obtains a judgment
against any Member by reason of the breach of this Agreement or the failure to
comply with the terms hereof; reasonable attorneys' fees and costs as fixed by
the court shall be included in such judgment.
18.9 Captions. All titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend, or describe the scope of this Agreement or the intent of any
provision in this Agreement.
18.10 Creditors Not Benefited. Nothing contained in this Agreement is
intended or shall be deemed to benefit any creditor of the Company or any
member, and no creditor of the Company shall be entitled to require the Company
or the Members to solicit or accept any capital contribution for the Company or
to enforce any right which the Company or any Member may have against any Member
under this Agreement.
18.11 Indemnification of Organizer. The Common Members hereby agree to
indemnify and hold harmless the person or persons who sign the Company's
Certificate of Formation, as filed with the Secretary of State of Delaware (the
"Organizer") for all other acts taken by the Organizer as organizer. The Common
Members agree to pay all costs and expense incurred by the Organizer in
organizing the Company including any claims brought against the Organizer
including any damages, court costs, attorneys fees and other costs related to
the Organizer's defense of any claim brought or judgment rendered against the
Organizer for the Organizer's actions as organizer.
45
18.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
18.13 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective personal
representatives, heirs, successors and permitted assigns; provided, however,
that (i) nothing contained in this Section 18.13 shall be construed to permit
any attempted assignment or other transfer which would be prohibited or void
pursuant to any other provision of this Agreement, and (ii) notwithstanding any
provision to the contrary in this Agreement, neither the Company nor any Member
shall be required to take any action or omit to take any action inconsistent
with the requirements of applicable law or as required in connection with legal
process.
* * * * *
46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth below next to its signature.
PENINSULA GAMING PARTNERS, LLC
a Delaware limited liability company
Date: 7/15/99 By: /s/ Xxxxx Xxxxxxx
-------------------------------------------
Name: M. Xxxxx Xxxxxxx
Title: Manager
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT
COMPANY, L.C., an Iowa limited liability
company
Date: 7/15/99 By: /s/ Xxx Xxxxxxx
-------------------------------------------
Name: Xxx Xxxxxxx
Title: Chairman
SCHEDULE A
MEMBERSHIP INTERESTS
COMMON MEMBERS COMMON MEMBER PERCENTAGE INTEREST
-------------- ---------------------------------
Peninsula Gaming Partners, LLC 100%
PREFERRED MEMBERS PREFERRED MEMBER PERCENTAGE INTEREST
----------------- ------------------------------------
Greater Dubuque Riverboat 100%
Entertainment Company, L.C.
SCHEDULE B
CAPITAL CONTRIBUTIONS
Peninsula Gaming Partners, LLC
$9,000,000 in cash.
Greater Dubuque Riverboat Entertainment Company, L.C.
A portion of Seller's Assets (as such term is defined in the Purchase Agreement)
having a Fair Market Value equal to $7,000,000.
