Exhibit 10.1
OPERATING AGREEMENT
OF
AMERICAN RACING AND ENTERTAINMENT, LLC
This Operating Agreement (the "Agreement") of American Racing and
Entertainment, LLC (the "Company"), dated effective as of the 24th day of
August, 2005, is hereby executed and agreed to, for good and valuable
consideration, by Nevada Gold NY, Inc., a New York corporation, ("Nevada Gold"),
TrackPower, Inc., a Wyoming corporation ("TrackPower"), and Southern Tier
Acquisition II LLC, a New York limited liability company ("Southern Tier").
The parties agree as follows:
ARTICLE I. ORGANIZATION AND DEFINITIONS
1.1 Company Name. The business of the Company will be conducted under the name
"American Racing and Entertainment, LLC" or any other name selected by the
Company in accordance with governing law.
1.2 New York Office . The Company's principal place of business is 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Company may maintain offices at such other
place or places within or outside the State of New York as the Board deems
advisable.
1.3 Term. The Company shall begin on the date its Articles of Organization are
filed with the New York Secretary of State and shall continue until a
Dissolution may occur.
1.4 Foreign Qualification. After formation of the Company under the Act, the
Company will apply for any required certificate of authority to do business in
any other state or jurisdiction where it conducts business, as appropriate.
1.5 Definitions. Terms used with initial capital letters will have the meanings
specified in Exhibit "A," applicable to both singular and plural forms, for all
purposes of this Agreement.
ARTICLE 2: PURPOSES AND POWERS
2.1 Principal Purposes. The purposes for which the Company is organized are:
(a) to own, hold, develop, operate, lease, transfer, sell, exchange,
improve or otherwise dispose of all or any part of the Tioga Downs Complex;
(b) to acquire, own, hold, develop, operate, lease, transfer, sell,
exchange, improve or otherwise dispose of all or any part of the Xxxxxx Xxxxx
Complex;
(c) to enter into and perform contracts of any kind necessary to, in
connection with or incidental to the accomplishment of the foregoing purposes;
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(d) to incur Debt from any source, including without limitation any Member
or Affiliate of a Member, to accomplish the foregoing purposes or to meet the
obligations of the Company; to issue evidences of the Company's Debt to repay
such borrowings; and to grant security interests in the Company's assets to
secure repayment of such Debt; and
(e) to do all other things necessary, desirable or conducive to the
accomplishment of the aforesaid purposes or otherwise contemplated by this
Agreement.
The Company is a single-purpose venture and is intended to engage in no
business or project other than those described above regarding the Tioga Downs
Complex and the Xxxxxx Xxxxx Complex. Title to all Company property shall be
held in the name of the Company or a subsidiary of the Company.
2.2 Powers. The Company has all of the powers granted to a limited liability
company under the Act, as well as all powers necessary or convenient to achieve
its purposes and to further its Business.
ARTICLE 3: MEMBERSHIP
3.1 Members. The Members of the Company are Nevada Gold, TrackPower and Southern
Tier. The initial Percentage of each Member in the Company shall be as follows:
Nevada Gold 50.00%
TrackPower 25.00%
Southern Tier 25.00%
The Percentage of each Member as stated in this Section 3.1 shall be
adjusted from time to time pursuant to the provisions of this Agreement.
3.2 Rights of and Restrictions on Members. No Member will:
(a) Be personally liable for any of the debts, obligations or losses
(including deficits in its Capital Account except as specifically provided
herein) of the Company or the other Members, except as otherwise provided in the
Act or an agreement signed by the Member to be subjected to any individual
liability;
(b) Be assessed or required to make any Capital Contributions except as
provided in Sections 7.1 and 7.2 hereof.
(c) Except as specifically set forth herein or as otherwise approved by
the Members, have the authority or power to act for or on behalf of the Company,
to do any act that would be binding on the Company, or to incur any expenditures
on behalf of the Company;
(d) Except as specifically set forth herein or as otherwise approved by
the Members, be entitled to be paid any salary or to have a Company drawing
account;
(e) Be entitled to receive any interest on any Capital Contribution or
Capital Account;
(f) Be entitled to a partition of any property of the Company;
(g) Except as expressly provided to the contrary herein, be entitled to
priority over any Member, either as to a return of its Capital Contribution or
as to allocations of revenues, gains, costs, expenses, losses or distributions;
or
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(h) Be entitled to a return of, or to a withdrawal of, all or any part of
its contributions to the Company, except to the extent that the Members may be
entitled to distributions pursuant to the express provisions of this Agreement,
and (unless otherwise provided) no Member shall have any right to demand or
receive property other than cash in return for its contributions, and its right
to receive cash shall be, and is hereby expressly limited and controlled by the
terms of this Agreement.
3.3 Information.
(a) In addition to the other rights specifically set forth in this
Agreement, each Member is entitled to all information to which that Member is
entitled to have access pursuant to the Act under the circumstances and subject
to the conditions therein stated.
(b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is confidential, the release of which may be damaging to the Company
or Persons with which it does business. Each Member will hold in strict
confidence any information it receives regarding the Company that is identified
as being confidential (and if that information is provided in writing, that is
so marked) and may not disclose it to any Person other than another Member or a
Director except for disclosures (i) compelled by law (but the Member must notify
the Board promptly of any request for that information, before disclosing it if
practicable), (ii) required under the securities laws, (iii) to advisers or
representatives of the Member or Persons to whom any of that Member's Membership
Interests may be transferred as permitted by this Agreement, but only if the
recipients have agreed to be bound by the provisions of this Section 3.3(b),
(iv) of information that such Member also has received from a source independent
of the Company that the Member reasonably believes obtained that information
without breach of any obligation of confidentiality or (v) as otherwise
permitted under this Agreement. The Members acknowledge that breach of the
provisions of this Section 3.3(b) may cause irreparable injury to the Company
for which monetary damages are inadequate, difficult to compute, or both.
Accordingly, the Members agree that the provisions of this Section 3.3(b) may be
enforced by specific performance.
3.4 Meetings. Special meetings of the Members shall be held at the Company's
principal place of business in New York, or such other place approved by the
Members. There shall be no regularly scheduled meetings of the Members of the
Company. A special meeting of the Members may be called by any Member.
3.5 Votes of Members. Any decision or approval required of the Members as a
group pursuant to this Agreement shall require approval of the Members holding
at least 75% of the Membership Interests.
3.6 Notice of Meetings. Written notice of a meeting shall be given to each
Member not less than three (3) days nor more than thirty (30) days before the
date of the meeting, unless waived by all of the Members; provided, however, if
the immediate attention of the Members to a matter is required, then twenty four
hours (24) notice, or such shorter notice if reasonable under the circumstances,
shall be given. The notice shall state the place, date and hour of the meeting
and the general nature of the business to be transacted.
3.7 Actions Without a Meeting. Any action that may be taken at any meeting of
Members may be taken without a meeting and without prior notice if a consent in
writing, setting forth the action so taken, shall be signed and delivered to the
Board by all Members. Any Member giving a written consent may revoke such
consent by a writing received by the Board prior to the time that the Board has
received written consents of all Members.
3.8 No Resignation or Retirement. Each Member agrees not to voluntarily resign
or retire as a Member in the Company. However, if such voluntary resignation or
retirement occurs in contravention of this Agreement, the withdrawing Member
will, without further act, become a Transferee of its Membership Interest (with
the limited rights of a Transferee as set forth in Section 14.6). Any Member who
resigns or retires from the Company in contravention of this Agreement will be
liable to the Company and the other Members for proven monetary damages (but any
such action or proposed action to resign or retire will not be subject to any
equitable action for injunctive relief or specific performance except as
permitted under Section 17.8).
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ARTICLE 4: MANAGEMENT
4.1 Management. The overall business and affairs of the Company shall be managed
by a Board of Directors (the "Board"), which, except as otherwise provided in
this Agreement, shall have full and complete charge of all facets of the overall
business affairs of the Company, and the overall management and control of the
Company's business shall rest exclusively with the Board. Any decision by the
Board shall require the affirmative vote of a majority of the directors (except
as provided in Section 4.1(b)), and shall bind the Company and the Members. The
Board, acting as a body pursuant to this Agreement, shall constitute a "manager"
for purposes of the Act. No Director, in such capacity, acting singly or with
any other Director, shall have any authority or right to act on behalf of or
bind the Company, other than by exercising the Director's voting power as a
member of the Board, unless specifically authorized by the Board in each
instance. No Director shall represent himself or herself as a manager of the
Company. The Board shall make all Unanimous Decisions, Major Decisions and
Non-Arbitrable Decisions.
(a) Decisions other than Unanimous Decisions, Major Decisions and
Non-Arbitrable Decisions may be made and related acts taken: (x) as provided in
this Agreement; or (y) if not specifically provided in this Agreement, by the
President, subject to the monetary limitations of the Budgets, or the Board (by
majority vote unless unanimous vote is specifically required by this Agreement)
in the event there is no President; or (z) as delegated by any contract entered
into by the Company (including, without limitation, the Management Agreement
defined in Section 4.5 hereof).
(b) "Unanimous Decisions" shall mean decisions to:
(i) invest in or operate any business other than the Tioga Downs
Complex and the Xxxxxx Xxxxx Complex;
(ii) make any single voluntary expenditure in excess of $250,000
unless such expenditure is provided for in the Cost Budget or Annual
Plan and Operating Budget (a voluntary expenditure shall not include
an expenditure which (A) is necessary to comply with applicable
laws, rules, regulations and orders; (B) is in defense of the
Company's interests in any proceedings in any court, before any
governmental agency, or in arbitration; or (C) is necessary to
comply with any contractual or other Company obligations);
(iii) during the nine (9) period commencing on the opening of the
Tioga Downs Complex, approve any capital expenditure in excess of
those set forth in the Cost Budget for the Tioga Downs Complex, it
being agreed that any approved capital expenditures will not
actually be made until twelve (12) months following the opening of
the Tioga Downs Complex;
(iv) during the nine (9) month period commencing on the opening of
the Xxxxxx Xxxxx Complex, approve any capital expenditure in excess
of those set forth in the Cost Budget for the Xxxxxx Xxxxx Complex
it being agreed that any approved capital expenditures will not
actually be made until twelve (12) months following the opening of
the Xxxxxx Xxxxx Complex;
(c) "Major Decisions" shall mean decisions to:
(i) select the president of the Company, the General Manager and the
Racing Manager;
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(ii) approve the Conceptual Plans and Specifications and the Final
Plans and Specifications or a Material Modification (but a
nonmaterial amendment or modification shall not be a Major
Decision);
(iii) after the expiration of the nine (9) month period commencing
on the opening of the Tioga Downs Complex, approve any capital
expenditure in excess of those set forth in the Cost Budget for the
Tioga Downs Complex it being agreed that any approved capital
expenditures will not actually be made until twelve (12) months
following the opening of the Tioga Downs Complex;
(iv) after the expiration of the nine (9) month period commencing on
the opening of the Xxxxxx Xxxxx Complex, approve any capital
expenditure in excess of those set forth in the Cost Budget for the
Xxxxxx Xxxxx Complex it being agreed that any approved capital
expenditures will not actually be made until twelve (12) months
following the opening of the Xxxxxx Xxxxx Complex;
(v) approve the Cost Budgets, Annual Plan and Operating Budget;
(vi) allocate a condemnation award or casualty insurance or title
insurance proceeds among the various items of property taken (if not
allocated by the condemnee, insurer or judicial or other authority
making such award);
(vii) enter into a general construction contract and/or the
architectural contract for any material portion of either Complex;
(viii) enter into any contracts with or pay any compensation to a
Member or Director or any Affiliate of a Member, other than pursuant
to the Management Agreement;
(ix) commence, discontinue, settle, compromise, submit to
arbitration, or participate in any single or related series of
actions in the nature of legal proceedings in any court, before any
governmental agency, or in arbitration, or other than actions
arising out of the ordinary course of business, involving any
potential liabilities to, or claims by or against, the Company not
covered by insurance or within the deductible amount of any
insurance policy, the cost of which, if lost or settled, would not
exceed One Hundred Thousand Dollars ($100,000.00), adjusted annually
on each anniversary of the Effective Date, to provide for increases,
but not decreases, in the Consumer Price Index;
(x) select (or change) attorneys, accountants or other professionals
to render legal, accounting or other professional services to the
Company, it being agreed that the Board has selected Xxxxxxxx,
Xxxxxx & Green as the accountants for the Company;
(xi) approve a proposed transaction between the Company and an
Affiliate of a Member.
(d) "Non-Arbitrable Decisions" shall mean decisions to:
(i) elect to dissolve the Company under Section 12.1;
(ii) sell, assign, transfer, hypothecate, pledge, lease, encumber or
otherwise dispose of, in a single transaction or related series of
transactions, all or any portion of the either Complex (or both
Complexes) or enter into any agreement to do so, except the
Management Agreement and any easements, rights-of-way or title
encumbrances incidental to the development of either Gaming Complex;
(iii) incur Debt other than (A) Debt provided for in a Cost Budget;
(B) Debt provided for in an Operating Budget; (C) Debt provided in
an approved budget for future development; (D) trade debt incurred
in the ordinary course of business; (E) Debt imposed by law; or (F)
Debt incurred under any contract, loan document, lease or other
agreement authorized pursuant to this Agreement.
(iv) elect to have the Members make additional capital contributions
to the Company pursuant to Section 7.2;
(v) construct any improvements on the Project Site, other than the
work shown on the Plans and Specifications, any Material
Modifications and any work approved as part of an Annual Plan or
required by law;
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(vi) (A) enter into any management agreement other than the
Management Agreement; or (B) enter into any amendment or
modification of the Management Agreement;
(vii) commence, discontinue, settle, compromise, submit to
arbitration, or participate in any single or related series of
actions in the nature of legal proceedings in any court, before any
governmental agency, or in arbitration, or other than actions
arising out of the ordinary course of business, involving any
potential liabilities to, or claims by or against, the Company not
covered by insurance or within the deductible amount of any
insurance policy, the cost of which, if lost or settled, would
exceed One Hundred Thousand Dollars ($100,000.00), adjusted annually
on each anniversary of the Effective Date, to provide for increases,
but not decreases, in the Consumer Price Index;
(e) If the Board is unable to reach a majority decision with respect to a
Major Decision, any Member may submit the matter to the procedures for resolving
deadlocks, including binding arbitration, in accordance with Section 4.7.
(f) If the Board is unable to reach a majority decision with respect to a
Non-Arbitrable Decision, the Company shall not undertake the related action,
except that: (i) any Member may cause the Company to take such action to the
extent it, in good faith, determines that such action: (A) is necessary to
comply with applicable laws, rules, regulations and orders; (B) is in defense of
the Company's interests in any proceedings in any court, before any governmental
agency, or in arbitration; or (C) is necessary to comply with any contractual or
other Company obligations.
(g) The Conceptual Plans and Specifications, the Final Plans and
Specifications (prepared by Climans, Green, Liang Architects, Inc.) and the Cost
Budget for the Tioga Downs Complex have been approved by the Board. The
Conceptual Plans and Specifications, and the Cost Budget for the Xxxxxx Xxxxx
Complex have been approved by the Board. It is anticipated that the Board will
(i) cause to be performed a cost benefit analysis of making capital improvements
to the 47,700 square foot grandstand at the Xxxxxx Xxxxx Complex and, (ii) upon
reviewing the results of such analysis make a decision (under either Section
4.1(b)(iv) or Section 4.1(c)(iv)) as to whether to approve the capital
expenditures for such improvements.
(h) The Management Company shall annually prepare, for the Board's review,
an Annual Plan for each Gaming Complex (the "Annual Plan"). Southern Tier shall
have certain rights to approve matters in the Annual Plan affecting the Racing
Operations as provided in Section 4.5 hereof. The Annual Plan for the first
whole or partial Fiscal Year following the date the Company opens a Gaming
Complex for business will be prepared by the Management Company and presented to
the Board not less than sixty (60) days before the anticipated opening date of
the Gaming Complex except as otherwise provided in the Management Agreement. The
Annual Plan for each subsequent Fiscal Year shall be prepared and submitted to
the Board not later than sixty (60) days before the beginning of such Fiscal
Year.
The Annual Plan for each Gaming Complex will be comprised of the
following:
(i) a statement of the estimated income and expenses of the Gaming
Complex for the coming Fiscal Year, such statement to reflect the estimated
income and expenses during each month of the subject Fiscal Year;
(ii) either as part of the statement of the estimated income and
expenses referred to in the preceding clause (i), or separately, budgets for:
(A) repairs and maintenance;
(B) capital replacements and improvements; and
(C) equipment purchases or leases;
(iii) a business and marketing plan for the subject Fiscal Year
including, without limitation:
(A) room rates (if applicable), food and beverage pricing and
other charges to persons using the Gaming Complex;
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(B) an advertising and marketing plan for the Gaming Complex
as a whole.
(iv) the Minimum Balance (as defined in the Management) which must
remain in the Bank Account (as defined in the Management Agreement) as of the
end of each Fiscal Month during the Fiscal Year to assure sufficient monies for
working capital purposes and other expenditures authorized under the Annual
Plan.
The "Operating Budget" shall mean the budgeted expenses approved under
clauses (i), (ii), and (iii) above. References to budgeted items contained in
the Annual Plan shall refer to the expenses for such items set forth in the
Operating Budget.
In connection with the submission of the Annual Plan, the Board will meet
within twenty (20) days after the proposed Annual Plan is delivered to have an
in-depth review, including, after the first full Fiscal Year, a comparison with
the previous Fiscal Year's performance of the Gaming Complex and a discussion of
proposed expenditures contained in the Operating Budget.
It is the intention of the Board to complete the review and approval of
the proposed Annual Plan no later than thirty (30) days prior to: (x) the
opening date of the Gaming Complex; and (y) the commencement of each Fiscal Year
thereafter. The majority of the Board shall be required to approve each proposed
Annual Plan. If a majority of the Board does not approve the proposed Annual
Plan, the undisputed portions of the proposed Annual Plan shall be operative. In
the case of any Annual Plan after the Annual Plan for the first full Fiscal
Year, the item corresponding to the disputed item and contained in the Annual
Plan for the preceding Fiscal Year shall be substituted in lieu of the disputed
portions of the proposed Annual Plan. In each instance where portions of the
Annual Plan from the preceding Fiscal Year are deemed to be the Annual Plan in
effect until a new Annual Plan is approved, the Operating Budget expense
contained in the Annual Plan for the preceding Fiscal year shall be
automatically increased by a percentage equal to the percent of increase in the
Consumer Price Index during the preceding Fiscal Year. If, notwithstanding such
Consumer Price Index increase, the Board do not reach agreement as to a mutually
acceptable Annual Plan within thirty (30) days prior to: (x) the opening date of
the Gaming Complex; or (y) the commencement of each Fiscal Year thereafter, as
the case may be, the item(s) of the Annual Plan that are in dispute shall be
submitted to and resolved by arbitration in accordance with Section 4.7.
4.2 Election of Board of Directors.
(a) Number, Term and Qualifications. The Board of Directors shall be
comprised of four members (each, a "Director"), two designated by Nevada Gold,
one designated by TrackPower and one designated by Southern Tier. Each of the
Members agrees to vote or express consent with respect to all of their
respective Membership Interests in favor of the election of a slate of Directors
consisting of individuals meeting the requirements of this Section 4.2. The
number of Directors of the Company, and the manner of designation and election
of such Directors, may only be changed by unanimous vote of all Members, except
as specifically provided in Section 7.2 of this Agreement or elsewhere in this
Agreement. The initial members of the Board are as follows:
H. Xxxxxx Xxxx Nevada Gold
Xxx Xxxxxxx Nevada Gold
Xx Xxxxx TrackPower
Xxxxxxx Xxxxx Southern Tier
(b) Resignation. Any Director may resign at any time by giving written
notice to the Company. The resignation of any Director shall take effect three
(3) business days following receipt of that notice or at such later time as
shall be specified in the notice. Unless otherwise specified in the notice, the
acceptance of the resignation shall not be necessary to make it effective.
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(c) Removal. Any Director may be removed at any time, with or without
Cause, by the vote of the Member entitled to designate such Director. A finding
of Cause or unsuitability of a Director to engage in gaming by any Gaming
Authority shall result in the immediate termination of such Director without
further action by the Members.
(d) Vacancies. If a vacancy occurs for any reason in the Board, the Member
who designated the Director shall have the right to designate another person to
fill that vacancy.
(e) Committees. The Board may from time to time establish one or more
committees of the Board, which shall have such authority as shall be determined
from time to time by the Board.
(f) Meetings of the Board. Regular meetings of the Board shall be held on
a quarterly basis. Special meetings of the Board may be called by any Director.
All meetings shall be held upon at least two (2) days' notice by mail, notice
delivered personally or by telephone, telegraph, facsimile or electronic mail,
to the Directors setting forth the time and location of such meeting; provided,
however, if the immediate attention of the Board to a matter is required, then
twenty four (24) hours notice, or such shorter notice if reasonable under the
circumstances, shall be given. Notice of a special meeting shall also state the
purpose or purposes for which such meeting is called. Notice of a meeting need
not be given to any Director who signs a waiver of notice or a consent to
holding the meeting (which waiver or consent need not specify the purpose of the
meeting) or an approval of the minutes thereof, whether before or after the
meeting, or who attends the meeting without protesting, prior to its
commencement, the lack of notice to such Director. All such waivers, consents
and approvals shall be filed with the Company records or made a part of the
minutes of the meeting. A majority of the Directors present may adjourn any
meeting to another time. If the meeting is adjourned for more than twenty-four
(24) hours, notice of any adjournment shall be given prior to the time of the
adjourned meeting to the Directors who are not present at the time of the
adjournment. Meetings of the Board may be held at the Company's principal place
of business in New York or such other place as may be approved by the Board.
Directors may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all Directors participating in such
meeting can hear one another. Participation in a meeting in such manner
constitutes presence in person at such meeting. Any Major Decision, any
Non-Arbitrable Decision and any other decision to be made by the Board under
this Agreement requires the affirmative vote of a majority of the entire Board
of Directors cast in favor of that decision (each Director having one vote).
Notwithstanding the foregoing, any Unanimous Decision requires the affirmative
vote of the entire Board of Directors cast in favor of that Unanimous Decision.
(g) Quorum. A quorum shall exist when a majority of the Directors are
present.
(h) Written Consent. Any action required or permitted to be taken by the
Board may be taken by the Board without a meeting if all of the Directors
consent in writing to such action. Such action by written consent shall have the
same force and effect as a vote at a duly constituted meeting of the Board.
4.3 Officers.
(a) Appointment of Officers. The Company may at any time appoint such
officers as it deems necessary or advisable for the operation of the business of
the Company. Subject to approval of all compensation in accordance with Section
4.6, Directors may serve as officers. The officers shall serve at the pleasure
of the Company, subject to all rights, if any, of an officer under any contract
of employment. Any individual may hold any number of offices. The officers shall
exercise such powers and perform such duties as shall be determined from time to
time by the Company.
(b) Removal and Resignation. Subject to the rights, if any, of an officer
under a contract of employment, any officer may be removed, either with or
without cause, by the Company at any time. Any officer may resign at any time by
giving notice to the Board. Any resignation shall take effect upon receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective.
4.4 Devotion to Company Business; Conflicts of Interest; Non-Compete.
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(a) The Members and the Directors shall devote such time to the Company
business as they deem reasonably necessary in furtherance of, and shall exercise
their best judgment in all matters relating to, the Company's Business. However,
except as provided in this Section 4.4(a) (i.e., except for gross negligence,
fraud, bad faith, breach of this Agreement or criminal conduct), no Member or
Director shall have liability to the Company or to the Members for any failure
or misfeasance on the part of such Member or Director whatsoever including,
without limit, a failure or misfeasance with respect to any Member's or
Director's obligations under this Agreement. Without limiting the generality of
the foregoing, the Company recognizes that innumerable decisions will have to be
made by the Members and the Directors during the term of the Company which will
require the Members and the Directors to exercise broad discretion. Accordingly,
each of the Members hereby waives its right to institute any legal proceeding of
any kind whatsoever against another Member or a Director for any action taken
by, or any omission of, a Member or Director in its capacity as a Member or
Director in the Company, except for gross negligence, bad faith, fraud, breach
of this Agreement or criminal conduct.
(b) Each of the Members understands that the other Members or their
Affiliates (including their designees to the Board) may be interested, directly
or indirectly, in various other businesses and undertakings including those in
competition with the Company. The Members hereby agree that the creation of the
Company and the assumption by each of the Members of its duties hereunder shall
be without prejudice to its rights (or the rights of its Affiliates) to have
such other interests and activities and to receive and enjoy profits or
compensation therefrom, and each Member waives any rights it might otherwise
have to, by reason of any duty otherwise owed to the Company or its Members,
prevent or share or participate in such other interests or activities of the
other Member or the other Member's Affiliates. The Members and their Affiliates
may engage in or possess any interest in any other business venture of any
nature or description independently or with others, including, but not limited
to, the ownership, financing, leasing, operation, management, syndication,
brokerage, or development of real property and gaming facilities, and neither
the Company nor any other Member shall have the right by virtue of this
Agreement or otherwise to prevent or participate in any such venture or the
income or profits derived therefrom.
(c) No Member need disclose to any other Member or the Company any other
business venture in which it or its Affiliates may have an interest or any other
business opportunity presented to it, even if such opportunity is of a character
which, if presented to the Company, could be taken by the Company, and each
Member and its Affiliates shall have the right to take for its own account or to
recommend to others any such particular investment opportunity or business
venture.
(d) Notwithstanding the foregoing provisions of this Section 4.4, during
the first forty eight (48) months of this Agreement but not thereafter, any and
all opportunities to acquire, own, develop, operate and/or manage projects in
the Harness Racing and VLT industry in New York State ("New York Harness
Racing/VLT Opportunities") shall be business opportunities of the Company and
the Members shall owe the Company a fiduciary duty with respect to New York
Harness Racing/VLT Opportunities. The Members each agree for themselves and
their respective Affiliates, not to engage or invest in, independently or with
others, any New York Harness Racing/VLT Opportunities, unless and until the
Company, by unanimous vote of the Members has elected not to pursue such New
York Harness Racing/VLT Opportunity and has approved the pursuit of such New
York Harness Racing/VLT Opportunity by any of the Members (or their Affiliates)
for their own account; provided, that a vote of the Members shall be held within
fifteen (15) days after receipt by the Members of all information related to
such New York Harness Racing/VLT Opportunity from the Member presenting the New
York Harness Racing/VLT Opportunity to the Company. It is understood and
acknowledged that any election by the Members to pursue such opportunity must
include the obligation by the Members to contribute, on a prorata basis, all
equity required for the pursuit of the opportunity.
4.5 Transactions between the Company and the Directors, Members and Affiliates.
Notwithstanding that it may constitute a conflict of interest, the Directors,
Members and their Affiliates may provide the Company with services (e.g.
management, accounting, legal, computer support, engineering, etc.) provided
that such services are reasonably necessary, are at a price that is competitive
with those available from non-affiliates in an arms-length transaction and the
terms and conditions of such transaction are approved by the Board. Directors,
Members and their Affiliates shall fully disclose to the Company any ownership
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or financial interest they may have in the services provided or recommended to
the Company. The Members and the Directors may also engage in any other
transaction with the Company so long as such transaction is not expressly
prohibited by this Agreement and so long as the terms and conditions of such
transaction are approved by the Board. The Company (or a subsidiary of the
Company) has entered into a management agreement (the "Management Agreement")
with Nevada Gold to manage all operations, including casino operations, racing
operations (subject to the input and approval rights of Southern Tier as
hereinafter provided), food and beverage operations, entertainment and hotel
operations, of (a) the Tioga Downs Complex, and (b) if the acquisition of the
Xxxxxx Xxxxx Complex is consummated, the Xxxxxx Xxxxx Complex. The terms of such
management are set forth in the management agreement entered into on the date of
execution of this Agreement between the Company (or a subsidiary of the Company)
and Nevada Gold. As long as Xxxxxxx Xxxxx (or in the event of retirement, death
or disability of Xxxxxxx Xxxxx, an Approved Substitute Manager) is the managing
member of Southern Tier and designated director of Southern Tier pursuant to
Section 4.2(a), Southern Tier shall have the right to:
(a) designate the manager (the "Racing Manager") for the harness racing
and simulcast facility operations (the "Racing Operations") of (i) the Tioga
Downs Complex, and (ii) if the acquisition of the Xxxxxx Xxxxx Complex is
consummated, the Xxxxxx Xxxxx Complex,
(b) approve the compensation and all employment decisions related to the
Racing Manager, and
(c) approve the operating expenses and capital expenditure allocations for
the Racing Operations in the pre-opening budgets, start-up budgets and Annual
Plans that are prepared by Nevada Gold, as manager, for submission to the Board.
The selection of the general manager for the Project (the "General Manager")
designated by Nevada Gold and the Racing Manager designated by Southern Tier
shall be subject to the approval of the Board. The compensation of the General
Manager and the Racing Manager shall be an expense of the Company (or its
subsidiary) and shall be part of the Operating Budget. No Member or Director
shall represent to any party that it or he is a manager of the Tioga Downs
Complex or the Xxxxxx Xxxxx Complex unless it or he is a manager under a
Management Agreement or is the General Manager or Racing Manager. The Board will
hold regular quarterly meetings with the General Manager and the Racing Manager
to receive an update on the operations of the Company.
4.6 Payments to Directors. Each Director shall be reimbursed for reasonable
out-of-pocket expenses for attending Board meetings and attending to other
Company Business. Except as specified in this Agreement, no Director is entitled
to remuneration for services rendered or goods provided to the Company in his or
her capacity as a Director.
4.7 Resolution of Voting Deadlock. In the event of a failure of the Board to
approve any Major Decision, any Member may, by Notice to the other Members,
require that the matter be decided pursuant to the terms set forth in this
Section 4.7.
(a) The highest ranking executive officer of each of the Members shall
meet in person within ten (10) days following the Notice and attempt in good
faith to resolve the disagreement in one day.
(b) If the disagreement is not resolved pursuant to Section 4.7(a), then
any Member may, by Notice to the other Members, elect to proceed with an
arbitration which shall be conducted in accordance with the following
procedures:
(i) The Members shall endeavor to appoint a single qualified and
disinterested Arbitrator. For purposes of this Section 4.7, an Arbitrator (the
"Arbitrator") shall be an individual who: (A) is independent of, and who has not
performed work for, any Member; and who: (x) is a partner with any of the six
largest public accounting firms in the United States; and (y) has at least five
(5) years of auditing or accounting experience in the gaming industry; or, (B)
if the Members so agree prior to the time for appointment herein provided, but
not otherwise, is an expert in a field other than accounting (including casino
management) having qualifications agreed to by the Members. Such Arbitrator, if
agreed to by the Members, shall meet with the Board within thirty (30) days of
such appointment to discuss the disputed decision and a vote of the Board and
the Arbitrator shall be held, with a majority of such group authorized to make
the decision.
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(ii) If the Members cannot agree on a single Arbitrator within
twenty (20) days after an election to submit a Major Decision to arbitration,
then Nevada Gold, on the one hand, and TrackPower and Southern Tier, on the
other hand, shall each appoint one Arbitrator within ten (10) days following
such twenty (20) day period. The two appointed Arbitrators shall within ten (10)
days of such referral appoint a third Arbitrator, and if such Arbitrators are
not able to agree on such third Arbitrator within such time, then, on five (5)
days' Notice in writing to the other Arbitrator, either Arbitrator shall apply
to the branch of the American Arbitration Association in New York, New York to
designate and appoint such third Arbitrator. The three Arbitrators shall meet
with the Board within twenty (20) days after the appointment of the third
Arbitrator to discuss the disputed decision and a vote of the Board and the
Arbitrators shall be held, with a majority of such group authorized to make the
decision.
(iii) If either Nevada Gold, on the one hand, or TrackPower and
Southern Tier, on the other hand, fails timely to appoint an Arbitrator pursuant
to Section 4.7(b) (ii), then the single Arbitrator designated by the other shall
act as the sole Arbitrator and shall be deemed to be the unanimously approved
Arbitrator to resolve such dispute.
(iv) The fees and expenses of the Arbitrators shall be paid by the
Company.
(v) The Arbitrators shall make their decision based solely on the
best interests of the Company. Unless otherwise agreed, all arbitration
proceedings shall be conducted in New York, New York, at a law office in New
York, New York, designated by the Member invoking arbitration.
ARTICLE 5: PROJECT FINANCING FOR THE GAMING COMPLEXES
5.1 Senior Note Financing. The Members acknowledge that the Company will arrange
certain senior note financing for the development of the Xxxxxx Xxxxx Complex
and the Tioga Downs Complex, from a lender (the "Lender") in the aggregate
amount of approximately $70.0 million (the "Senior Note Financing"). In
connection with the Senior Note Financing, Nevada Gold agrees to provide an
approximately $5.0 million guarantee to the Lender and, if collateral is
required by the Lender with respect to such guarantee, then Nevada Gold agrees
to provide cash or a letter of credit to the Lender to the extent required to
collateralize such guarantee on the terms set forth below. The Company will
endeavor to obtain Senior Note Financing on a non-recourse basis, with payments
of interest only at an interest rate of approximately nine percent (9%) per
annum and a term of approximately five to seven years, or such other terms as
the Board shall approve. If Nevada Gold provides collateral in the form of cash
or if cash is drawn from a guaranty or a letter of credit provided as
collateral, such amounts shall be treated as loans by Nevada Gold to the Company
and evidenced by subordinated notes (the "Subordinated Notes") bearing interest
at the rate of one percent (1%) per annum above the interest rate of the Senior
Note Financing and maturing thirty (30) days following the maturity date of the
Senior Note Financing. The Subordinated Notes will be unsecured obligations of
the Company. The Company shall pay all reasonable bank fees incurred by Nevada
Gold for any required letter of credit.
The Company shall proceed with the development of the Tioga Downs Complex
whether or not the Company acquires the Xxxxxx Xxxxx Complex. If the Company
does not acquire the Xxxxxx Xxxxx Complex, then the Initial DIP Financing in the
net amount of $1,414,000 contributed by TrackPower and Southern Tier shall be
returned to them as and when repaid in accordance with, and subject to the
limitations of, Section 7.1(f). Additionally, the Senior Note Financing will
decrease from approximately $70 million to approximately $25 million and Nevada
Gold's guarantee will decrease from $5.0 million to $2.5 million.
ARTICLE 6: FAIR MARKET VALUE; INDEPENDENT APPRAISALS
6.1 Fair Market Value.
(a) The fair market value ("Fair Market Value") of any property shall mean
the price at which a willing seller would sell and a willing buyer would buy
such property having full knowledge of the relevant facts, in an arm's-length
transaction without time constraints, and without being under any compulsion to
buy or sell, or, in a transaction between Members, the value otherwise agreed by
the selling Member(s) (the "Selling Member") and the purchasing Member(s) (the
"Purchasing Member") to be the Fair Market Value.
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(b) The Fair Market Value of any property other than a Membership Interest
or the Company shall be determined by an independent appraisal from an
independent appraiser selected by the Board.
(c) The Fair Market Value of the Company or a Membership Interest in the
Company shall be determined in accordance with this Section 6.1(c). Membership
Interests in the Company shall be valued without regard to classification of
ownership, rights to Excess Cash Flow, incidents of ownership such as voting
rights, or level of Ownership Percentage in the Company. The Fair Market Value
of the Company shall be determined utilizing then current methods for the
valuation of gaming companies (and to the extent other businesses represent a
material portion of the Company's business, then current methods for the
valuation of such businesses shall be used for that portion of the business of
the Company) including without limitation EBIDTA multiples, asset valuations or
cash flow analyses, when appropriate. The Fair Market Value of all of the
Membership Interests shall be equal to the Fair Market Value of the Company,
less all liabilities of the Company, including Debt, and Unreturned Capital
Contributions. The Fair Market Value of each Member's Membership Interests shall
be (i) the Percentage represented by such Member's Membership Interests,
multiplied by the Fair Market Value of all of the Membership Interests, plus
(ii) any Unreturned Capital Contributions of such Member. If the Selling Member
and the Purchasing Member cannot agree on a Fair Market Value of a Membership
Interest, then the Members shall proceed under the terms of Section 6.2 to
provide for an independent appraisal process to determine the Fair Market Value.
(d) Notwithstanding the foregoing, the Members have agreed on the Fair
Market Value of the contributions of property contributed to the Company by the
Members as set forth in Section 7.1 hereof. In addition, the Members may
mutually agree on the Fair Market Value of any property, including a Membership
Interest in the Company, by written agreement.
6.2 Independent Appraisals. The Selling Member shall provide a Notice to the
Purchasing Members, which notice shall include the name, mailing address and
telephone number of an appraiser appointed by it, to determine such fair market
value ("First Appraiser"). The Purchasing Members (or the Company if the Company
is the purchaser) shall then appoint one appraiser and furnish the name, mailing
address and telephone number of the appraiser so appointed to the Selling Member
("Second Appraiser"). If any Member fails to appoint an Appraiser to which it or
he is otherwise entitled, the other appointed appraiser shall proceed to
determine the Fair Market Value of the Membership Interests or interest therein
to be conveyed and such determination shall be binding on the Selling Member and
Purchasing Members (or the Company if the Company is the purchaser). If,
however, another appraiser is appointed, then the two appraisers shall meet and
attempt to reach a determination of the Fair Market Value. If such appraisers
select Fair Market Values within five percent (5%) of each other, then the
mathematical average of the two (2) appraisals shall constitute the Fair Market
Value of the Membership Interests or interest therein. If the Fair Market Value
is not determined pursuant to the foregoing provisions of this Section 6.2, the
two appraisers shall then select a third appraiser ("Third Appraiser") and the
three appraisers shall then make such determination. A decision by any two of
the appraisers (or, in instances where no two appraisers can agree, the
mathematical average of the two closest appraisals, and the average of the
appraisals if no two appraisals are closest) shall be final and conclusive on
the Selling Member and Purchasing Members (or the Company if the Company is the
purchaser) as to such Fair Market Value. In the event no Third Appraiser can be
agreed upon by the two appraisers, or by the Selling Member and Purchasing
Members (or the Company if the Company is the purchaser), the third appraiser
shall be appointed by the then Senior Federal District Judge for the Southern
District of New York, and application to such Court may be made by either
Selling Member or Purchasing Members (or the Company if the Company is the
purchaser). Each appraiser or appraisal firm appointed pursuant to this Section
must be a member of the American Society of Appraisers with an ASA accreditation
or must be certified as a Certified Valuation Analyst. The appraisers must
establish the Fair Market Value consistent with the intent of the parties as
established in Section 6.1 hereof and shall generally appraise based on American
Society of Appraisers' standards, utilizing EBIDTA multiples, asset valuations
or cash flow analyses, when appropriate, for determination of Fair Market Value.
Each Member (and the Company if the Company is the purchaser) shall pay the fees
and expenses of its own appraiser and one-half (1/2) of the fees and expenses of
any Third Appraiser. Each appraiser appointed shall have been engaged for at
least five (5) years prior to the date of his appointment in the business of
appraising gaming and entertainment businesses or the applicable business that
is being appraised, and shall not otherwise be disqualified from exercising an
independent judgment as to the fair market value determination to be made.
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ARTICLE 7: CAPITAL CONTRIBUTIONS; LOANS
7.1 Initial Capital Contributions.
(a) In accordance with the terms of the Contribution Agreement, certain
Affiliates of TrackPower and Southern Tier have contributed to the Company all
of their right, title and interest in and to the Tioga Downs Contributed Assets.
The Members agree that the Fair Market Value of the Tioga Downs Contributed
Assets is $10,221,408, including $5,221,408 in cash, and $5,000,000 in increased
value. As a result of such contribution, TrackPower and Southern Tier have each
been credited with a capital account equal to $5,110,704. For purposes of
determining the pro-rata capital contributions required of each Member from and
after the date hereof, the $5,000,000 in increased value will not be taken into
account in determining TrackPower's and Southern Tier's capital contributions.
Certain Affiliates of TrackPower and Southern Tier have also contributed to the
Company all of their right, title and interest in and to the Xxxxxx Xxxxx
Contributed Assets. The Members agree that the Fair Market Value of the Xxxxxx
Xxxxx Contributed Assets is $1,745,360. As a result of such contribution,
$872,680 shall be credited to each of TrackPower's and Southern Tier's Capital
Account, resulting in a total Capital Account of $5,983,384 for each of
TrackPower and Southern Tier.
(b) In accordance with the terms of the Contribution Agreement, an
Affiliate of Nevada Gold has contributed to the Company all of its right, title
and interest in and to the TDR Loan ($1,001,550 in principal outstanding). In
addition, an Affiliate of Nevada Gold made the Xxxxx/Vestin Settlement Payment
($526,550) on behalf of the Company. As a result of the contribution of the TDR
Loan and the Xxxxx/Vestin Settlement Payment, Nevada Gold has been credited with
a Capital Account equal to $1,528,100 and the TDR Loan shall be converted from
debt to equity.
(c) The equity financing necessary to complete the development of the
Tioga Downs Complex will be approximately $10,000,000. The equity financing
necessary to complete the development of the Xxxxxx Xxxxx Complex will be
approximately $10,000,000. These amounts ($20,000,000) are inclusive of the
capital contributions made pursuant to Section 7.1(a) (with the exception of the
$5,000,000 in increased value) and Section 7.1(b), which total $8,494,868. If
the Company is not successful in acquiring the Xxxxxx Xxxxx Complex, then the
Members shall not be required to contribute any remaining amount of the
$10,000,000 equity financing for the Xxxxxx Xxxxx Complex.
(d) Nevada Gold agrees to make the next $5,438,668 in capital
contributions to the Company, as and when required for items set forth in the
Cost Budget for the Tioga Downs Complex and the Cost Budget for the Xxxxxx Xxxxx
Complex, in order to equalize the capital contributions of the Members in
accordance with their Percentages as follows:
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(i) Nevada Gold: $6,966,768
(ii) TrackPower: $3,483,384
(iii) Southern Tier: $3,483,384
(e) Once Nevada Gold has made the contributions described in Section
7.1(d), each Member agrees to contribute to the capital of the Company, as
follows:
(i) Nevada Gold will contribute $3,033,232, as and when required for
items set forth in the Cost Budgets for the Tioga Downs Complex and the Xxxxxx
Xxxxx Complex, on a pari passu basis with TrackPower and Southern Tier.
(ii) TrackPower will contribute $1,516,616, as and when required by
the Company for items set forth in the Cost Budgets for the Tioga Downs Complex
and the Xxxxxx Xxxxx Complex, on a pari passu basis with Southern Tier and
Nevada Gold.
(iii) Southern Tier will contribute $1,516,616, as and when required
by the Company for items set forth in the Cost Budgets for the Tioga Downs
Complex and the Xxxxxx Xxxxx Complex, on a pari passu basis with TrackPower and
Nevada Gold.
(f) If the Company is not successful in acquiring the Xxxxxx Xxxxx
Complex, then the Company shall return to TrackPower and Southern Tier the
interest in the Initial DIP Financing (in the net amount of $1,414,000) that
each of them contributed, and their Capital Contributions and Capital Accounts
shall be adjusted accordingly; provided, that no distribution (or portion
thereof) will be made to the extent such distribution (or portion thereof) would
cause the Capital Contributions (as adjusted for such distribution and not
including the increased value for the Tioga Downs Complex described in Section
7.1(a)) of either TrackPower and Southern Tier to be less than 25% of the
aggregate Capital Contributions (as adjusted for such distribution and not
including the increased value for the Tioga Downs Complex described in Section
7.1(a)) made by all Members at the time of such distribution.
(g) Aggregate Capital Contributions made by the Members pursuant to this
Section 7.1 shall not exceed (i) $10 million in the aggregate for the Tioga
Downs Complex or (ii) $10 million in the aggregate for the Xxxxxx Xxxxx Complex,
except as provided in Section 7.2.
(h) The Company shall have three wholly owned subsidiaries, Tioga Downs
Racetrack, LLC, Xxxxxx Xxxxx Acquisition, LLC and Tioga Management Co., Inc. The
capital contributions described in Section 7.1(a) represent existing equity in
Tioga Downs Racetrack, LLC and Xxxxxx Xxxxx Acquisition, LLC. Unless otherwise
agreed by the Board, the capital contributions described in Section 7.1 (b)
through (f) shall be loaned or contributed as equity to either Tioga Downs
Racetrack, LLC or Xxxxxx Xxxxx Acquisition, LLC, as appropriate.
7.2 Additional Capital Contributions; Advances from Nevada Gold.
(a) In the event the Company requires financing to fund Cost Budget
overruns for the Tioga Downs Complex and/or the Xxxxxx Xxxxx Complex or
operating deficits of the Company after all initial Capital Contributions of the
Members as set forth in Section 7.1 above have been made, then, the Board may
elect to require (i) additional Capital Contributions by the Members or (ii) in
the case of Cost Budget overruns, advances from Nevada Gold, but only on the
terms and conditions set forth in Section 7.2(b).
(b) If the Lender has not required a guaranty of $5,000,000 ($2,500,000 in
the event the Xxxxxx Xxxxx Complex is not acquired), or if the Lender has
required such guaranty but permits all or a portion of it to be used to fund
Cost Budget overruns for the Tioga Downs Complex and/or the Xxxxxx Xxxxx
Complex, then Nevada Gold shall provide financing to the Company, up to the
amount of $5,000,000 (or $2,500,000 in the event the Xxxxxx Xxxxx Complex is not
acquired) to fund Cost Budget overruns for the Tioga Downs Complex and/or the
Xxxxxx Xxxxx Complex. Any and all such advances shall be treated as unsecured
loans by Nevada Gold to the Company and evidenced by subordinated notes bearing
interest at the rate of one percent (1%) per annum above the interest rate of
the Senior Note Financing and maturing thirty (30) days following the maturity
date of the Senior Note Financing.
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(c) If financing from Nevada Gold is not required under Section 7.2(b),
and the Board elects to require additional Capital Contributions by the Members,
the Board shall give written notice of such Cost Budget overruns or operating
deficits to all of the Members, which notice shall summarize, with reasonable
particularity, the specific Cost Budget overruns or operating deficits, as the
case may be, the Company's actual and projected cash obligations, cash on hand,
and the projected sources and amounts of future cash flow and which notice shall
also specify a contribution date ("Contribution Date") ( which shall not be less
than thirty (30) days following the effective date of such notice) upon which
each Member shall have the obligation to contribute to the capital of the
Company, in cash, such Member's Percentage (as of the Contribution Date) of such
operating deficits ("Cash Deficit Contribution"). If any Member (the
"Non-Contributing Member") fails to contribute all or any portion of the Cash
Deficit Contribution or any other amount required to be made by such Member
pursuant to Section 7.1 ("Delinquent Contribution"), and provided that one or
more of the other Members (collectively, the "Contributing Members") have
contributed (in the proportion of their ownership Percentages unless otherwise
agreed) to the capital of the Company all of the Cash Deficit Contribution or
any other amount required to be made by the Non-Contributing Member pursuant to
Section 7.1 within thirty (30) days following the Contribution Date, then in
such event there shall be a dilution penalty of 150% of every dollar not
contributed by the Non-Contributing Member. The Members agree that if either
(but not both) Southern Tier or TrackPower is the Non-Contributing Member, then
the other shall have the first right but not the obligation to contribute 100%
of the Cash Deficit Contribution or other amount required by Section 7.1 of such
Non-Contributing Member, such election to be exercised within five (5) days
following the Contribution Date. The dilution penalty shall be determined as
follows: the Percentage of the Contributing Members will be increased by an
amount which is arrived at by multiplying 150% times a fraction, the numerator
of which is the amount contributed by the Contributing Members on behalf of the
Non-Contributing Member, and the denominator of which is the aggregate Capital
Contributions of all of the Members after the making of the additional Capital
Contribution by the Contributing Members. The Percentage of the Non-Contributing
Member will be decreased by the same amount. For example, if (i) $1,000,000 in
Cash Deficit Contributions are required, (ii) Nevada Gold contributes 100% of
such amount, and (iii) the aggregate Capital Contributions of all of the Members
after the making of the $1,000,000 Cash Deficit Contribution is $19,000,000,
then Nevada Gold's Percentage shall be increased by 3.95%, calculated as
follows:
150% X $500,000/$19,000,000 = 3.95%
Trackpower's Percentage shall be decreased by 1.975% and Southern Tier's
Percentage shall be decreased by 1.975%.
For purposes of this Section, the aggregate amount of Capital Contributions made
by the Members shall not include the amount of $5,000,000 associated with the
Tioga Downs Contributed Amount (representing the incremental increase in value),
which was credited one-half to TrackPower and one-half to Southern Tier.
(d) If, as a result of the dilution penalty, a Member's (the "Diluted
Member") ownership Percentage falls to or below 50% of its initial Percentage
set forth in Section 3.1, then the other Members (in the proportion of their
respective Percentages unless otherwise agreed) shall have the right by notice
("Purchase Notice") to purchase all of the remaining Membership Interests of the
Diluted Member at a purchase price equal to 85% of the Fair Market Value of the
remaining Membership Interests of the Diluted Member. The Purchase Notice may
designate any date, beginning ninety (90) days before the date of such Notice,
and ending on the date of such Notice, as to the effective date on which Fair
Market Value of the Membership Interests being purchased shall be determined.
Upon giving of the Purchase Notice, the Fair Market Value of the Membership
Interests shall be determined pursuant to Article 6. The purchase price shall be
payable 50% in cash due sixty (60) days from the date upon which Fair Market
Value is determined pursuant to Article 6 (the "Valuation Date"), with the
balance payable in 4 equal annual payments, plus interest, with the first
installment due one year following the Valuation Date. The outstanding balance
shall accrue interest at the interbank borrowing rate that banks charge each
other for overnight loans (the "fed funds rate").
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(e) If, as a result of this Section 7.2 or any other provisions of this
Agreement, a Member's Percentage increases to 60% or greater, then the Board of
Directors shall be increased to five members and such Member shall have the
right to elect three directors to the Board, and each of the other two Members
shall have the right to elect one director (or if there is only one other
Member, the Member holding a 60% or greater Percentage shall have the right to
elect three directors to the Board and the other Member shall have the right to
elect two directors).
7.3 No Withdrawal. Except as specifically provided in this Agreement, no Member
will be entitled to withdraw all or any part of such Member's capital from the
Company or, when such withdrawal of capital is permitted, to demand a
distribution of property other than cash.
7.4 No Interest on Capital. No Member will be entitled to receive interest on
such Member's Capital Contribution or Capital Account.
7.5 Loans by Members. Any advances by a Member to the Company shall constitute a
loan from the Member to the Company ("Member Loan"), and shall bear interest at
an interest rate agreed to by the Board, and shall not be deemed to be a Capital
Contribution. A loan account shall be established and maintained for the Member
making a loan separate from such Member's Capital Account. Loans made by a
Member to the Company will be credited to the Member's loan account. A credit
balance in any Member's loan account shall constitute a liability of the Company
to such Member, and all such advances and accrued interest shall be repaid prior
to any distributions to the Members unless otherwise provided by the terms of
the loan.
7.6 Capital Accounts. A Capital Account will be maintained for each Member.
(a) Each Member's Capital Account will be credited with (i) the Member's
Capital Contributions (net of liabilities secured by any property contributed
that the Company takes subject to or assumes), (ii) the Member's allocable share
of Profits and (iii) all other items properly credited to the Member's Capital
Account.
(b) Each Member's Capital Account will be charged with (i) the amount of
cash distributed to the Member by the Company, (ii) the Fair Market Value of
property distributed to the Member by the Company (net of liabilities secured by
such property that the Member takes subject to or assumes), (iii) the Member's
allocable share of Losses and (iv) all other items properly charged to the
Member's Capital Account.
(c) Upon the distribution of property in kind, all of the property of the
Company, including the property to be distributed, will be revalued and any
unrealized appreciation or depreciation with respect to any asset shall be
allocated among the Members in accordance with the provisions of Article 8 as
though such assets had been sold for their Fair Market Value on the date of
Distribution. The Members' Capital Accounts will be adjusted to reflect both the
deemed realization of such appreciation or depreciation and the Distribution of
such property in accordance with Regulations ss. 1.704-1(b)(2)(iv)(e), (f).
(d) The Capital Account of each Member shall be determined and maintained
in accordance with Code Section 704(b) and the regulations promulgated
thereunder.
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7.7 Transfer. If all or any part of any Membership Interest is transferred in
accordance with this Agreement, the Capital Account and Membership Interest of
the Transferor (including a pro-rata share of Capital Contributions) that is
attributable to the transferred Membership Interest will carry over to the
Transferee, unless otherwise provided by the express terms of this Agreement.
7.8 Liability to Company. Each Member is liable to the Company for any Capital
Contribution or Distribution that has been wrongfully or erroneously returned or
paid to such Member in violation of the Act, the Articles or this Agreement.
ARTICLE 8: ALLOCATION OF PROFITS AND LOSSES
8.1 Profits and Losses.
(a) Allocation of Losses other than from Capital Transactions.
All Losses, other than Losses arising from Capital Transactions, shall be
allocated to the Members in proportion to their respective Percentages.
(b) Allocation of Profits other than from Capital Transactions.
All Profits, other than Profits from Capital Transactions, shall be
allocated in accordance with the following order and priority:
(i) first, to those Members who were allocated Losses (or portions
thereof) under Section 8.1(a) in proportion to such Losses until the cumulative
Profits allocated pursuant to this Section 8.1(b) to such Members are equal to
the total of such Losses allocated to such Members for all prior periods; and
(ii) second, to the Members in proportion to their respective
Percentages.
(c) Allocation of Losses from Capital Transactions.
All Losses arising from Capital Transactions shall be allocated among the
Members in accordance with their respective Percentages.
(d) Allocation of Profits from Capital Transactions
All Profits shall be allocated in accordance with the following order and
priority:
(i) first, to those Members who were allocated Losses (or portions
thereof) under Section 8.1(c) in proportion to such Losses until the cumulative
Profits allocated pursuant to this Section 8.1(d) to such Members are equal to
the total of such Losses allocated to such Members for all prior periods; and
(ii) second, to the Members in accordance with their respective
Percentages.
(e) Special Allocation of Profits and Losses from Initial DIP Financing.
If Section 7.1(f) applies such that the interest and fees in the Initial
DIP Financing is returned to TrackPower and Southern Tier, then all Profits and
Losses with respect to the Initial DIP Financing shall be allocated to
TrackPower and Southern Tier pro rata.
8.2 Regulatory Allocations.
(a) Notwithstanding any of the foregoing provisions of Section 8.1 to the
contrary:
(i) If during any fiscal year of the Company there is a net increase
in Minimum Gain attributable to a Member Nonrecourse Debt that gives rise to
Member Nonrecourse Deductions, each Member bearing the economic risk of loss for
such Member Nonrecourse Debt shall be allocated items of Company deductions and
losses for such year equal to such Member's share of Member Nonrecourse
Deductions, as determined in accordance with applicable Treasury regulations.
(ii) If for any fiscal year of the Company there is a net decrease
in Minimum Gain attributable to Company Nonrecourse Liabilities, each Member
shall be allocated items of Company income and gain for such year equal to such
Member's share of such net decrease, as determined in accordance with applicable
Regulations.
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(iii) If for any fiscal year of the Company there is a net decrease
in Minimum Gain attributable to a Member Nonrecourse Debt, each Member bearing
the economic risk of loss for such Member Nonrecourse Debt shall be allocated
items of Company income and gain for such year equal to such Member's share of
such net decrease, as determined in accordance with applicable Regulations.
(b) The Losses allocated pursuant to this Article 8 shall not exceed the
maximum amount of Losses that can be allocated to a Member without causing or
increasing a deficit balance in the Member's Adjusted Capital Account. All
Losses in excess of the limitations set forth in this Section 8.2(b) shall be
allocated to Members with positive Adjusted Capital Account balances remaining
at such time in proportion to such balances.
(c) In the event that a Member unexpectedly receives any adjustment,
allocation or distribution described in Treasury regulations section
1.704-1(b)(2)(ii)(d)(4)-(6) that causes or increases a deficit balance in such
Member's Adjusted Capital Account, items of Company income and gain shall be
allocated to that Member in an amount and manner sufficient to eliminate the
deficit balance as quickly as possible.
(d) The allocations set forth in subsections (b), (c), and (d)
(collectively, the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury regulations. It is the intent of the Members that,
to the extent possible, all Regulatory Allocations that are made be offset
either with other Regulatory Allocations or with special allocations pursuant to
this Section 8.1(d). Therefore, notwithstanding any other provisions of this
Article 8 (other than the Regulatory Allocations), the Board shall make such
offsetting special allocations in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Member's Adjusted Capital
Account balance is, to the extent possible, equal to the Adjusted Capital
Account balance such Member would have had if the Regulatory Allocations were
not part of this Agreement and all Company items were allocated pursuant to the
remaining sections of this Article 8.
(e) In accordance with Section 704(c) of the Internal Revenue Code and the
Treasury regulations thereunder, income and deductions with respect to any
property contributed to or revalued by the Company shall, solely for federal
income tax purposes, be allocated among the Members in a manner to take into
account any variation between the adjusted tax basis of such property to the
Company and its fair market value at the time of contribution or revaluation. In
making such allocations, the Board shall use the remedial allocation method
unless the Members agree to the contrary.
(f) Except as otherwise provided in Section 8.2, if a Membership Interest
is transferred during any Fiscal Year (whether by Transfer or liquidation of a
Membership Interest, or otherwise), the books of the Company will be closed as
of the effective date of Transfer. The Profits or Losses attributed to the
period from the first day of such Fiscal Year through the effective date of
Transfer will be allocated to the Transferor, and the Profits or Losses
attributed to the period commencing on the effective date of Transfer will be
allocated to the Transferee. In lieu of an interim closing of the books of the
Company and with the agreement of the Transferor and Transferee, the Company may
agree to allocate Profits and Losses for such Fiscal Year between the Transferor
and Transferee based on a daily proration of items for such Fiscal Year or any
other reasonable method of allocation (including an allocation of extraordinary
Company items, as determined by the Company, based on when such items are
recognized for federal income tax purposes).
8.3 Tax Credits. Any tax credit, and any tax credit recapture, will be allocated
to the Members in the same ratio that the federal income tax basis of the asset
(to which such tax credit relates) is allocated to the Members under the Section
46 Regulations, and if no basis is allocated, in the same manner as Profits are
allocated to the Members under Section 8.1.
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ARTICLE 9: DISTRIBUTIONS
9.1 Distributions. Unless the Members unanimously agree otherwise, the Company
will make distributions to its Members of 100% of Excess Cash Flow (as defined
below) no later than forty five (45) days after the end of each fiscal quarter
in the following order of priority:
(a) First, the Company will make distributions to TrackPower and Southern
Tier, on a 50/50 basis, until each has received the cumulative amount of
$2,500,000 (the cumulative amount of which represents the $5,000,000 in
increased value of the Tioga Downs Contributed Assets).
(b) Second, the Company will make distributions to the Members in
proportion to their Capital Contributions until the Unreturned Capital
Contributions of all of the Members equal zero.
(c) Third, the Company will distribute the remaining Excess Cash Flow,
other than distributions of Net Sales Cash, to the Members in proportion to
their respective Percentages.
(d) Fourth, the Company will make distributions of Net Sales Cash to the
Members in accordance with their respective Percentages.
(e) Distributions made pursuant to the Dissolution and Liquidation of the
Company will be made pursuant to Article 13.
Notwithstanding the foregoing, the distributions to Members (other than tax
distributions under Section 9.5) shall not be made until all Member Loans
(including the Subordinated Notes and any loans under Section 7.2(b)) have been
fully repaid, and distributions, including tax distributions under Section 9.5,
shall not be in excess of that entitled to be made pursuant to any indenture or
credit facility entered into by the Company. As used herein, "Excess Cash Flow"
means EBIDTA less:
(i) management fees (to the extent not taken into account in the
calculation of EBIDTA),
(ii) capital expenditures approved by the Board and actually paid,
(iii) interest,
(iv) tax distributions made pursuant to Section 9.5 actually paid to
Members within forty five (45) days after the end of each fiscal quarter,
(v) scheduled principal payments on debt of the Company, and
(vi) Reserves.
9.2 Other Distributions. Unless the Members otherwise unanimously agree, the
Members intend that all Distributions, except for Distributions under Section
9.5, will be made to the Members in accordance with Section 9.1. In the event
any Distribution is made otherwise than in accordance with Sections 9.1 or 9.5,
without the unanimous consent of the Members, any excess Distribution to a
Member will be treated as an advance or loan made by the Company to such Member,
payable to the Company with interest payable at the Interest Rate and on demand.
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9.3 Payment. Any Distribution will be made to a Member only if such Person owns
a Membership Interest on the date of Distribution, as reflected on the books of
the Company.
9.4 Withholding. If required by the Code or by state or local law, the Company
will withhold any required amount from Distributions to a Member for payment to
the appropriate taxing authority. Any amount so withheld from a Member will be
treated as a Distribution by the Company to such Person. Each Member agrees to
timely file any agreement that is required by any taxing authority in order to
avoid any withholding obligation that would otherwise be imposed on the Company.
9.5 Tax Distributions. Unless the Members unanimously agree otherwise, the
Company will make distributions to its Members no later than forty five (45)
days after the end of each fiscal quarter of an amount equal to 40% of the
Profits of the Company allocated to each Member. Any payments made under this
Section 9.5 to a Member shall be deemed to be a draw against such Member's share
of future distributions under Section 9.1, so that such Member's share of such
future distributions shall be reduced by the amounts previously drawn under this
Section 9.5 until the aggregate reductions in such distributions equal the
aggregate draws made under this Section 9.5.
ARTICLE 10: REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 Representations and Warranties of Members. As used in this Article 10, the
term "Agreement" includes this Agreement and the Management Agreement. Each of
the Members represents and warrants (which representations and warranties shall
survive the execution hereof) to the Company and each of the other Members that,
as of the signing of this Agreement:
(a) (i) Such Member is duly organized, validly existing and in good
standing under the laws of the jurisdiction where it purports to be organized,
and is a United States Person;
(ii) Such Member has full power and authority to enter into and perform
this Agreement;
(iii) All actions necessary to authorize the signing and delivery of this
Agreement and the performance of the respective obligations of the Member to
this Agreement, have been duly taken;
(iv) This Agreement has been duly signed and delivered by a duly
authorized officer or other representative of each of the Members that are
signatories thereto, and each such agreement constitutes the legal, valid and
binding obligation of each such Member enforceable in accordance with its
respective terms (except as such enforceability may be affected by applicable
bankruptcy, insolvency or other similar laws effecting creditors' rights
generally, and except that the availability of equitable remedies is subject to
judicial discretion);
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(v) No consent or approval of any other Person is required in connection
with the signing, delivery and performance of this Agreement by the Members;
(vi) The signing, delivery and performance of this Agreement do not
violate the organizational documents of such Member, or any material agreement
to which such Member is a party or by which such Member is bound;
(vii) It is not in violation or default under any agreement with any
Person, or under any law, judgment, order, decree, license, permit, approval,
rule, or regulation of any court, arbitrator, administrative agency, or other
governmental authority to which it may be subject which could reasonably be
anticipated to have a material adverse impact on the Company, and hereafter
shall take no action which shall be in violation or cause a default under any
agreement with any Person, or under any law, judgment, order, decree, license,
permit, approval, rule, or regulation of any court, arbitrator, administrative
agency, or other governmental authority to which it may be subject which could
reasonably be anticipated to have a material adverse impact on the Company;
(b) with respect to its investment in the Company and the Membership
Interests:
(i) it acknowledges that the Membership Interests are being offered and
sold without registration under The Securities Act of 1933, as amended, or under
similar provisions of state law;
(ii) it has knowledge and experience in financial and business matters in
general, and in investment of this type;
(iii) it is capable of evaluating the merits and risks of such investment;
(iv) it has either secured independent tax advice with respect to such
investment, upon which it is solely relying, or it is sufficiently familiar with
the income taxation of partnerships that it has deemed such independent advice
unnecessary;
(v) it has received or has access to all material information and
documents with respect to such investment and has had an opportunity to ask
questions and receive answers thereto and to verify and clarify and information
available;
(vi) notwithstanding any financial projections which may have been
prepared by any other Person, it has relied solely upon its independent
investigation, and not on any financial projections, statements, actions or
representations of the other Members or any Affiliate of the other Members, in
making the decision to acquire such investment;
(vii) it understands that no Federal or State agency has reviewed or
passed upon the adequacy or accuracy of the information set forth in the
documents submitted to it or made any finding or determination as to the
fairness for investment, or any recommendation or endorsement of such
investment;
(viii) it understands that there are restrictions on the transferability
of its Membership Interests;
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(ix) it understands that there will be no public market for its Membership
Interests, and, accordingly, it may not be possible to liquidate such
investment;
(x) it understands that any anticipated Federal or state income tax
benefits applicable to its Membership Interests may be lost through changes in,
or adverse interpretations of, existing laws and regulations;
(xi) it has entered into this Agreement freely and voluntarily, without
coercion, duress, distress, or undue influence by any other Persons or their
respective shareholders, members, directors, officers, partners, agents or
employees; and
(xii) it understands that this Agreement may affect legal rights and it
has received legal advice from counsel of its choice in connection with the
negotiation and execution of this Agreement and is satisfied with its legal
counsel and the advice received from it.
(c) each of the following is true and correct:
(i) none of it or any of its Affiliates is a party to any other agreement
or other arrangement which would interfere with the development or operation of
the Gaming Complexes;
(ii) performance of this Agreement will not violate any other material
agreement or other arrangement to which it or its Affiliates is a party;
(iii) it and its Affiliates have not received notice of any claim which
would interfere with its or their performance of this Agreement;
(iv) none of it or its Affiliates has incurred any material liabilities or
obligations on behalf of the Company or has knowledge of any liabilities or
obligations of the Company, the Tioga Downs Complex or the Xxxxxx Xxxxx Complex
other than those described on Exhibit "B" to the Contribution Agreement and
agrees hereafter that it or they, as the case may be, will not, nor cause any of
its Affiliates, to incur any liability or obligation on behalf of the Company,
except as otherwise expressly provided herein;
(v) it knows of no actions or lawsuits, pending, planned or threatened, by
or against it, the Company, or its Affiliates, which could create an obligation
or liability for the Company or any of the other Members other than those
described in Exhibit "B" to the Contribution Agreement; and
(vi) none of such Member, its Affiliates or any officers or directors of
any of them has been determined by any gambling commission or authority to be
unsuitable, has been convicted of a crime (other than traffic offenses), and had
any application for any gambling license or permit rejected, or has had any
gambling licenses or permit, once having been issued, rescinded, suspended,
revoked or not renewed or reinstated, and no Member has knowledge that its
affiliation with any other Member will threaten any gambling license, permit,
entitlement or approval in any jurisdiction of any other Member or Affiliate of
a Member.
(d) the execution, delivery and performance of this Agreement will not:
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(i) violate any law, judgment, order, decree, license, permit, approval,
rule or regulation of any court, arbitrator, administrative agency, or other
governmental authority to which it may be subject;
(ii) result in a breach or default under any contract or other binding
commitment or any provision of the charter or by-laws or partnership agreement
or other organizational documents, as the case may be, of any such entity; or
(iii) require any consent, or approval or vote of any court or
governmental authority or of any Person that, as of the date hereof, has not
been given or taken ,and does not remain effective.
(e) (i) TrackPower shall and does hereby indemnify, defend and hold
harmless the Company and the Indemnified Persons of Nevada Gold and Southern
Tier, and each of them separately, from and against all loss, cost, or damage
whatsoever (including reasonable attorneys fees) resulting from any act, claim
or omission of or by TrackPower or any Affiliates of TrackPower's prior to the
date hereof.
(ii) Southern Tier shall and does hereby indemnify, defend and hold
harmless the Company and the Indemnified Persons of Nevada Gold and TrackPower,
and each of them separately, from and against all loss, cost, or damage
whatsoever (including reasonable attorneys fees) resulting from any act, claim
or omission of or by Southern Tier or any Affiliates of Southern Tier prior to
the date hereof.
(iii) Nevada Gold shall and does hereby indemnify, defend and hold
harmless the Company and the Indemnified Persons of TrackPower and Southern
Tier, and each of them separately, from and against all loss, cost, or damage
whatsoever (including reasonable attorneys fees) resulting from any act, claim
or omission of or by Nevada Gold or any Affiliates of Nevada Gold's prior to the
date hereof.
(iv) Each Member shall and does hereby indemnify, defend and hold harmless
the Company and each other Member from and against any loss, cost, or damage
whatsoever (including reasonable attorneys fees) resulting from any breach by
any of them of the representations and warranties under Section 10.1 hereof, or
any losses or expenses as a result of or in connection with any breach of this
Agreement.
10.2 Indemnification.
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(a) To the fullest extent permitted by applicable laws, regulations, rules
or orders, each Member and its Indemnified Persons shall not be liable,
responsible or accountable in damages or otherwise to the Company, or to any of
the Members, for any act or omission performed or omitted by them in good faith
on behalf of the Company and in a manner reasonably believed by them to be
within the scope of their authority and in the best interests of the Company;
provided, however, that this exculpation shall not apply to acts or omissions
which are determined, by final decision of a court of competent jurisdiction, to
constitute either fraud, bad faith, breach of this Agreement, gross negligence,
or criminal conduct.
(b) To the fullest extent permitted by law, the Company shall indemnify,
defend and hold harmless each Member and its Indemnified Persons from and
against any and all loss, cost, damage, expense or liability (other than a loss
of any equity contributions, loan or other investment in the Company), which
relate to or arise out of the Company, the Gaming Complexes, the Company's
business and affairs, regardless of whether the Members continue to be Members,
an Affiliate of a Member, or an agent, officer, member, director, stockholder or
employee of such Member or such Affiliate at the time any such liability or
expense is paid or incurred, if such Member's or its Indemnified Persons'
conduct did not constitute fraud, bad faith, breach of this Agreement, gross
negligence or criminal conduct. With respect to the expenses actually and
reasonably incurred by a Member or Indemnified Person who is a party to a
Proceeding, the Company shall provide funds to such Member or Indemnified Person
for its documented costs of defense in advance of the final disposition of the
Proceeding if the Member or Indemnified Person furnishes the Company with such
Person's written affirmation of a good-faith belief that such Person has met the
standard of conduct described herein, and such Person agrees in writing to repay
the advance if it is subsequently determined that such Person has not met such
standard of conduct.
(c) To the extent that, at law or in equity, a Member or its Indemnified
Persons have duties (including fiduciary duties) and liabilities relating
thereto to the Company or to the Members, each Member and its Indemnified
Persons acting under this Agreement or otherwise shall not be liable to the
Company or to any Member for its good faith reliance on the provisions of this
Agreement. The provisions of this Section 10.2, to the extent that they expand
or restrict the duties and liabilities of a Member or its Indemnified Persons
otherwise existing at law or in equity, are agreed by the Members to replace
such other duties and liabilities of such Member and its Indemnified Person.
(d) (i) (A) Promptly after the assertion of any claim by a third party
which may give rise to a claim for indemnification from an Indemnifying Member
under this Agreement, an Indemnified Person shall notify the Indemnifying Member
in writing of such claim and advise the Indemnifying Member whether the
Indemnified Person intends to contest such claim.
(B) The Indemnified Person shall permit the Indemnifying
Member to contest and defend against such claim, at the Indemnifying Member's
expense, if the Indemnifying Member has confirmed to the Indemnified Person in
writing that it agrees that the Indemnified Person is entitled to
indemnification hereunder in respect of such claim, unless the Indemnified
Person can establish, by reasonable evidence, that the conduct of its defense by
the Indemnifying Member could be reasonably likely to prejudice such Indemnified
Person due to the nature of the claims presented or by virtue of a conflict
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between the interests of such Indemnified Persona and such Indemnifying Member
and another Indemnified Person whose defense has been assumed by the
Indemnifying Member. Notwithstanding a determination by the Indemnifying Member
to contest such claim, the Indemnified Persons shall have the right to be
represented by its own counsel and accountants at its own expense. In any case,
the Indemnified Person shall make available to the Indemnifying Member and its
attorneys and accountants, at all reasonable times during normal business hours,
all books, records, and other documents in its possession relating to such
claim. The party contesting any such claim shall be furnished all reasonable
assistance in connection therewith by the other party (with reimbursement of
reasonable expenses by the Indemnifying Member). If the Indemnifying Member
fails to undertake the defense of or to settle or pay any such third-party claim
within fifteen (15) days after the Indemnified Person has given Notice to the
Indemnifying Member advising the Indemnifying Member of such claim, or if the
Indemnifying Member, after having given Notice to the Indemnified Person that it
intends to undertake the defense, fails forthwith to defend, settle or pay such
claim, then the Indemnified Person may take any and all necessary action to
dispose of such claim including, without limitation, the settlement or full
payment thereof upon such terms as it shall deem appropriate, in its sole
discretion.
(C) The Indemnifying Member shall not consent to the terms of
any compromise or settlement of any third-party claim defended by the
Indemnifying Member in accordance herewith (other than terms related solely to
the payment of money damages and only after the Indemnifying Member has
furnished the Indemnified Person with such evidence as the Indemnified Person
may reasonably request of the Indemnifying Member's capacity and capability
(financial and otherwise) to pay promptly the amount of such money damages at
such times as provided in the compromise or settlement) without the prior
written consent of the Indemnified Person if as a result of such compromise or
settlement such Indemnified Person could be adversely affected.
(D) Any claim for indemnification under this Agreement which
does not result from the assertion of a claim by a third party shall be asserted
by written notice given by the Indemnified Person to the Indemnifying Member.
Such Indemnifying Member shall have a period of thirty (30) days within which to
respond thereto. If such Indemnifying Member does not respond within such thirty
(30) day period, such Indemnifying Member shall be deemed to have accepted
responsibility to make payment, and shall have no further right to contest the
validity of such claim. If the Indemnifying Member does respond within such
thirty (30) day period and rejects such claim in whole or in part, such
Indemnified Person shall be free to pursue such remedies as may be available to
such party under applicable laws, regulations, rules or orders.
(ii) Mitigation
Each Indemnifying Member and Indemnified Person shall use reasonable
efforts and shall consult and cooperate with each other with a view towards
mitigating claims, losses, liabilities, damages, deficiencies, costs and
expenses that may give rise to claims for indemnification.
(iii) Payment
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Each Indemnifying Member agrees to pay any amounts due hereunder (A)
within ten (10) days of written notice in respect of its indemnity obligations
which it has accepted or which it has been deemed to accept; (B) within five (5)
days of any final adjudication by a court of competent jurisdiction of any
indemnity obligations as to which it has not so accepted; and (C) as reasonable
attorneys' fees and other costs of defense are incurred and invoiced.
10.3 Insurance. The indemnification provisions of this Article do not limit a
Member's or Indemnified Person's right to recover under any insurance policy or
other financial arrangement by the Company (including any self-insurance, trust
fund, letter of credit, guaranty or surety). If, with respect to any liability,
any Member or Indemnified Person receives an insurance or other indemnification
payment which, together with any indemnification payment made by the Company,
exceeds the amount of such liability, then such Member or Indemnified Person
will immediately repay such excess to the Company.
ARTICLE 11: ACCOUNTING AND REPORTING
11.1 Fiscal Year. For income tax and accounting purposes, the Fiscal Year of the
Company shall end on the last Sunday in April or as otherwise determined by the
Board.
11.2 Accounting Method. For accounting purposes, the Company will use United
States generally accepted accounting principles as in effect from time to time,
applied on a consistent basis using the accrual method of accounting ("GAAP")
and all financial statements will be prepared in accordance with GAAP.
11.3 Tax Elections. The Company will have the authority to make such tax
elections, and to revoke any such election, as the tax matters partner may from
time to time determine. No Director or Member shall have the right to file an
election to treat the Company as an association taxable as a corporation for
federal income tax purposes.
11.4 Returns. The Company will cause the preparation and timely filing of all
tax returns required to be filed by the Company pursuant to the Code, as well as
all other tax returns required in each jurisdiction in which the Company does
business.
11.5 Reports. The Company will furnish a Profit or Loss statement and a balance
sheet to each Member within a reasonable time after the end of each fiscal
quarter. The Company books will be closed at the end of each Fiscal Year and
audited financial statements prepared showing the financial condition of the
Company and its Profits or Losses from operations. Copies of these statements
will be given to each Member. In addition, as soon as is practicable after the
close of each Fiscal Year (and in any event within 90 days following the end of
each Fiscal Year), the Company will provide each Member with all necessary tax
reporting information.
11.6 Books and Records. Full and accurate books of the Company shall be
maintained by the Company, at the Company's principal place of business, showing
all receipts and expenditures, assets and liabilities, Profits and Losses and
all other records necessary for recording the Company's business and affairs.
The books and records of the Company will be available for inspection and
examination at reasonable times by all Members or their duly authorized
representatives who have executed confidentiality agreements.
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11.7 Banking. The Company may establish one or more bank or financial accounts
and safe deposit boxes. The Company may authorize one or more individuals to
sign checks on and withdraw funds from such bank or financial accounts and to
have access to such safe deposit boxes, and may place such limitations and
restrictions on such authority as the Company deems advisable.
11.8 Tax Matters Partner. Until further action by the Company, Nevada Gold is
designated as the tax matters partner under Section 6231(a)(7) of the Code. The
tax matters partner will be responsible for notifying all Members of ongoing
proceedings, both administrative and judicial, and will represent the Company
throughout any such proceeding. The Members will furnish the tax matters partner
with such information as it may reasonably request to provide the Internal
Revenue Service with sufficient information to allow proper notice to the
Members. If an administrative proceeding with respect to a partnership item
under the Code has begun, and the tax matters partner so requests, each Member
will notify the tax matters partner of its treatment of any partnership item on
its federal income tax return, if any, which is inconsistent with the treatment
of that item on the partnership return for the Company. Any settlement agreement
with the Internal Revenue Service will be binding upon the Members only as
provided in the Code. The tax matters partner will not bind any other Member to
any extension of the statute of limitations or to a settlement agreement without
such Member's written consent. Any Member who enters into a settlement agreement
with respect to any partnership item will notify the other Members of such
settlement agreement and its terms within 30 days from the date of settlement If
the tax matters partner does not file a petition for readjustment of the
partnership items in the Tax Court, Federal District Court or Claims Court
within the 90-day period following a notice of a final partnership
administrative adjustment, any notice partner or 5-percent group (as such terms
are defined in the Code) may institute such action within the following 60 days.
The tax matters partner will timely notify the other Members in writing of its
decision. Any notice partner or 5-percent group will notify any other Member of
its filing of any petition for readjustment.
11.9 No Partnership. The classification of the Company as a partnership will
apply only for federal (and, as appropriate, state and local) income tax
purposes. This characterization, solely, for tax purposes, does not create or
imply a general partnership between the Members for state law or any other
purpose. Instead, the Members acknowledge the status of the Company as a limited
liability company formed under the Act.
ARTICLE 12: DISSOLUTION OF THE COMPANY
12.1 Dissolution. Dissolution of the Company will occur only upon the happening
of any of the following events:
(a) The occurrence of any act or omission by a Member which results in the
dissolution of the Company by operation of law under the provisions of the Act;
(b) The sale or other disposition of all or substantially all of the
assets of the Company and the collection of all sales proceeds, including any
involuntary "sale" as a result of condemnation or casualty that is not restored;
or
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(c) By unanimous written agreement of the Members.
(d) The election of the remaining Members to dissolve as permitted by
Section 15.4(g) of this Agreement.
(e) The entry of a decree of judicial dissolution pursuant to Section 702
of the Act.
The withdrawal, retirement, resignation, bankruptcy or dissolution of any Member
or the occurrence of any event that terminates the continued membership of any
Member in the Company shall not, in and of itself, cause the Company's
dissolution.
12.2 Events of Withdrawal. An event of Withdrawal of a Member occurs when any of
the following occurs:
(a) With respect to any Member, upon the Transfer of all of such Member's
Membership Interests not approved by the Members;
(b) With respect to any Member, upon the voluntary withdrawal of the
Member (including any resignation or retirement in contravention of Section 3.8)
by notice to all other Members;
(c) With respect to any Member that is a corporation, upon filing of
articles of dissolution of the corporation;
(d) With respect to any Member that is a partnership or a limited
liability company, upon dissolution of such entity;
(e) With respect to any Member who is an individual, upon either the death
or retirement of the individual, or upon such Person's insanity or the entry by
a court of competent jurisdiction of an order adjudicating the individual to be
incompetent to manage such individual's person or estate;
(f) With respect to any Member that is a trust, upon termination of the
trust;
(g) With respect to any Member that is an estate, upon final distribution
of the estate's Membership Interests;
(h) Any other event which terminates the continued membership of a Member
in the Company;
(i) With respect to any Member, the bankruptcy of the Member, so long as
there is one or more remaining Members.
Within 30 days following the happening of any event of Withdrawal with respect
to a Member, such Member must give notice of the date and the nature of such
event to the Company. Any Member failing to give such notice will be liable in
damages for the consequences of such failure as otherwise provided in this
Agreement. Upon the occurrence of an event of Withdrawal with respect to a
Member, such Member (and its designated Directors) will cease to have voting
rights hereunder, and such Member will, without further act, become a Transferee
of its Membership Interest (with only the limited rights of a Transferee as set
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forth in Section 14.6). Any Member who withdraws from the Company in
contravention of this Agreement will be liable to the Company and the other
Members for proven monetary damages (but any such action or proposed action to
resign or retire will not be subject to any equitable action for injunctive
relief or specific performance except as permitted under Section 17.8).
12.3 Bankruptcy. The bankruptcy of a Member will not dissolve the Company. The
bankruptcy of a Member will be deemed to occur when such Person:
(a) files a voluntary petition in bankruptcy,
(b) is adjudged a bankrupt or insolvent, or has entered against such
Person an order for relief in any bankruptcy or insolvency proceeding,
(c) files a petition or answer seeking for such Person any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation,
(d) files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against such Person in any insolvency
proceeding of this nature, or
(e) seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of all or any substantial part of such Person's
properties. In addition, the bankruptcy of a Member will be deemed to occur if
any proceeding filed against a Member seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation is not dismissed within 120 days or if the
appointment without the Member's consent (or acquiescence of a trustee, receiver
or liquidator of the Member or of all or any substantial part of such Person's
properties) is not vacated or stayed within 90 days (or if after the expiration
of any stay, if the appointment is not vacated within 90 days).
ARTICLE 13: LIQUIDATION
13.1 Liquidation. Upon Dissolution of the Company, the Company will immediately
proceed to wind up its affairs and liquidate. The Board will appoint a
liquidating trustee which may be one or more of the Directors or a Member. The
winding up and Liquidation of the Company will be accomplished in a businesslike
manner as determined by the liquidating trustee and this Article 13. A
reasonable time will be allowed for the orderly Liquidation of the Company and
the discharge of liabilities to creditors so as to enable the Company to provide
for any losses reasonably anticipated to be attendant upon Liquidation. Any gain
or loss on disposition of any Company assets in Liquidation will be allocated to
Members and credited or charged to Capital Accounts in accordance with the
provisions of Articles 7 and 8. With respect to all Company property that has
not been sold, the Fair Market Value of that property shall be determined and
the Capital Accounts of the Members shall be adjusted to reflect the manner in
which the unrealized income, gain, loss, and deduction inherent in property that
has not been reflected in the Capital Accounts previously would be allocated
among the Members if there were a taxable disposition on that property for the
Fair Market Value of that property on the date of distribution in accordance
with the provisions of Articles 7 and 8. Any liquidating trustee is entitled to
reasonable compensation for services actually performed, and may contract for
such assistance in the liquidation process as such Person deems necessary. Until
the filing of articles of dissolution as provided in Section 13.6, the
liquidating trustee may settle and close the Company's business, prosecute and
defend suits, dispose of its property, discharge or make provision for its
liabilities, and make distributions in accordance with the priorities set forth
in Section 13.2.
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13.2 Priority of Payment. The assets of the Company will be distributed in
Liquidation of the Company in the following order:
(a) First, to non-Member creditors of the Company in order of priority as
provided by law in payment of unpaid liabilities of the Company to the extent
required by law or under agreements with such creditors;
(b) Second, to the setting up of any reserves which the Board reasonably
deem necessary for any anticipated, contingent or unforeseen liabilities or
obligations of the Company arising out of or in connection with the conduct of
the Company's Business. At the expiration of such period as the Board reasonably
deem advisable, the balance thereof shall be distributed in accordance with this
Section 13.2;
(c) Third, to any Member for any other loans or debts owing to such Member
by the Company;
(d) Fourth, to the Members in accordance with Section 9.1.
13.3 Distribution to Members. Distributions in Liquidation due to the Members
may be made by either or a combination of the following methods: selling the
Company assets and distributing the net proceeds, or by distributing the Company
assets to the Members at their net Fair Market Value in kind. Any liquidating
Distribution in kind to the Members may be made either by a pro-rata
Distribution of undivided interests or, upon the affirmative vote of all
Members, by non pro-rata Distribution of specific assets at Fair Market Value on
the effective date of Distribution. Any Distribution in kind may be made subject
to, or require assumption of, liabilities to which such property may be subject,
but in the case of any non pro-rata Distribution only upon the express written
agreement of the Member receiving the Distribution. Each Member hereby agrees to
save and hold harmless the other Members from such Member's share of any and all
such liabilities which are taken subject to or assumed. Appropriate and
customary prorations and adjustments shall be made incident to any Distribution
in kind. The Members will look solely to the assets of the Company for the
return of their Capital Contributions, and if the assets of the Company
remaining after the payment or discharge of the debts and liabilities of the
Company are insufficient to return such contributions, they will have no
recourse against any other Member.
13.4 No Restoration Obligation. Except as otherwise specifically provided in
Section 7.8, nothing contained in this Agreement imposes on any Member an
obligation to make a Capital Contribution in order to restore a deficit Capital
Account upon Liquidation of the Company. Furthermore, each Member will look
solely to the assets of the Company for the return of such Member's Capital
Contribution and Capital Account.
13.5 Liquidating Reports. A report will be submitted with each liquidating
distribution to Members, showing the collections, disbursements and
distributions during the period which is subsequent to any previous report. A
final report, showing cumulative collections, disbursements and distributions,
will be submitted upon completion of the liquidation process.
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13.6 Articles of Dissolution. Upon Dissolution of the Company and the completion
of the winding up of its business, the Company will file articles of dissolution
(to cancel its Articles of Organization) with the New York Secretary of State
pursuant to the Act. At such time, the Company will also file an application for
withdrawal of its certificate of authority in any jurisdiction where it is then
qualified to do business.
ARTICLE 14: TRANSFER RESTRICTIONS
14.1 General Restriction. No Member may Transfer all or any part of its
Membership Interests in any manner whatsoever (and no constituent owner of a
Member shall be permitted to transfer its interests in such Member) except (a)
to a Permitted Transferee as set forth in Section 14.3 or (b) after full
compliance with the right of first refusal set forth in Section 14.4, and in
either case only if the requirements of Section 14.5 have also been satisfied.
Any other Transfer of all or any part of its Membership Interests is null and
void, and of no effect. Any Member who makes a Transfer of all of such Member's
Membership Interests will be treated as resigning from the Company on the
effective date of such Transfer. Any Member who makes a Transfer of part (but
not all) of such Member's Membership Interests will continue as a Member (with
respect to the interest retained), and such partial Transfer will not constitute
an event of Withdrawal of such Member. The rights and obligations of any
resigning Member or of any Transferee of a Membership Interest will be governed
by the other provisions of this Agreement.
14.2 No Member Rights. No Member has the right or power to confer upon any
Transferee (other than a Permitted Transferee) the attributes of a Member in the
Company. The Transferee of all or any part of a Membership Interest by operation
of law (except as contemplated by Section 14.3) does not, by virtue of such
Transfer, succeed to any rights as a Member in the Company.
14.3 Permitted Transferee. Subject to the requirements set forth in Section
14.5, a Person may Transfer all or any part of such Person's Membership Interest
without the consent of any other Member:
(a) To a wholly-owned subsidiary of such Person;
(b) To the Company;
(c) To a Person approved by all the Members;
(d) In the case of Nevada Gold, to another Person as part of a change in
control, merger, reorganization, consolidation or sale of all or substantially
all of the assets of its parent company;
(e) In the case of TrackPower, to another Person as part of a change in
control, merger, reorganization, consolidation or sale of all or substantially
all of its assets;
(f) In the case of Southern Tier only, ownership interests within Southern
Tier may be transferred provided that (i) Xxxxxxx Xxxxx remains the managing
member, (ii) Xxxxxxx Xxxxx, together with his immediate family members or family
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trusts for the benefit of his immediate family members, retains ownership of at
least 35% of the ownership interests of Southern Tier and (iii) Xxxxxxx Xxxxx
has the ability, by ownership of voting securities or membership interests,
contract or otherwise, to direct the management and affairs of Southern Tier;
provided, that upon the retirement, death or disability of Xxxxxxx Xxxxx, the
provisions of Section 14.7 shall be applicable.
(g) A pledge or encumbrance of a Membership Interest in favor of one or
more lenders to secure a loan provided by such lender(s) to such Member or its
Affiliates, provided that a foreclosure upon such pledge or encumbrance shall
not be a Permitted Transfer.
Each of the foregoing transferees shall be a "Permitted Transferee" and
shall become a Member of the Company in accordance with Section 602 of the Act.
14.4 Right of First Refusal. Prior to any proposed Transfer of all or any part
of Membership Interests of a Member, other than to a Permitted Transferee
pursuant to Section 14.3, the Transferor must obtain a Third Party Offer. For
purposes of this Section 14.4, a Transfer of the Membership Interests of a
Member shall be deemed to occur upon any change in control of such Member other
than to a Permitted Transferee pursuant to Section 14.3(d). The Third Party
Offer must not be subject to unstated conditions or contingencies or be part of
a larger transaction such that the price for the Membership Interests stated in
such Third Party Offer does not accurately reflect Fair Market Value (reduced by
the amount of associated liabilities of such Membership Interests). The Third
Party Offer must contain a description of all of the consideration, material
terms and conditions of the proposed Transfer. The Transferor will give notice
of the Third Party Offer to the Company and the other Member (such Members
called the "Other Members"), together with a written offer to sell the
Membership Interests (which is the subject of the Third Party Offer) to the
Other Member on the same price and terms as the Third Party Offer as provided
herein. The Other Members shall have the right, to purchase, in whole but not in
part, the Membership Interests of the Transferor in accordance with the terms of
the Third Party Offer by giving notice to the Transferor within 30 days after
notice of such offer. The Other Members shall each have the right to purchase a
proportionate part of the Transferor's Membership Interest, equal to a
percentage determined by dividing its Percentage by the total Percentages of the
Other Members; provided that if only Member elects to purchase then that Member
shall have the right to purchase 100% of the Transferor's Membership Interest.
Unless otherwise agreed, the closing of such sale will be held at the Company's
principal place of business in New York on a date to be specified by the Other
Members which is not later than 60 days after the date of the notice of
acceptance by the Other Members. At the closing, the Other Members will deliver
the consideration in accordance with the terms of the Third Party Offer, and the
Transferor will by appropriate documents assign to the Other Members the
Membership Interests to be sold, free and clear of all liens, claims and
encumbrances. If all of the Other Members reject the right of first refusal or
if the acceptance of the right of first refusal is not closed in accordance with
this Section 14.4, the Transferor will be free for a period of 60 days after the
last day for such acceptance to sell all, but not less than all, of such
Membership Interests so offered, but only to the Third Party for a price and on
terms no more favorable to the Third Party than the Third Party Offer and
subject to Section 14.5. If such Membership Interests are not so sold within
such 60-day period (or within any extensions of such period agreed to in writing
by the Company), all rights to sell such Membership Interests pursuant to such
Third Party Offer (without making another offer to the Other Members pursuant to
this Section 14.4) will terminate and the provisions of this Article will
continue to apply to any proposed future Transfer.
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14.5 General Conditions on Transfers. No Transfer of a Membership Interest after
the date of this Agreement will be effective unless all of the conditions set
forth below are satisfied:
(a) Unless waived by the Company, the Transferor signs and delivers to the
Company an undertaking in form and substance satisfactory to the Company to pay
all reasonable expenses incurred by the Company in connection with the Transfer
(including, but not limited to, reasonable fees of counsel and accountants and
the costs to be incurred with any additional accounting required in connection
with the Transfer, and the cost and fees attributable to preparing, filing and
recording such amendments to the organizational documents or filings as may be
required by law);
(b) Such transfer does not require the registration of such transferred
Membership Interests pursuant to any applicable federal or state securities
laws, and the Transferor delivers to the Company an opinion of counsel for the
Transferor satisfactory in form and substance to the Company to the effect that
the Transfer of the Membership Interests is in compliance with the applicable
federal and state securities laws, and a statement of the Transferee in form and
substance satisfactory to the Company making appropriate representations and
warranties in respect to compliance with the applicable federal and state
securities laws and as to any other matter reasonably required by the Company;
(c) The Company receives an opinion from its counsel that (i) the Transfer
does not cause the Company to lose its classification as a partnership for
federal or state income tax purposes, and (ii) unless waived by the Company, the
Transfer, together with all other Transfers within the preceding twelve months,
does not cause a termination of the Company for federal or state income tax
purposes;
(d) The Transferor signs and delivers to the Company a copy of the
assignment of the Membership Interests to the Transferee, together with the
Certificates representing such Membership Interests, duly executed for
assignment;
(e) The Transferee signs and delivers to the Company its agreement to be
bound by this Agreement;
(f) Such Transfer does not cause the Company to become a "Publicly Traded
Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of the
Code;
(g) Such Transfer does not subject the Company to regulation under the
Investment Company Act of 1940, the Investment Advisers Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended;
(h) Such Transfer is in compliance with any and all gaming acts and
regulations now or hereafter existing in the State of New York, including a
finding of suitability of such Transferee or any owners or beneficial owners of
a Transferee;
(i) Such Transfer is not made to any Person who lacks the legal right,
power or capacity to own such Membership Interest; and
(j) The Transfer is in compliance with the other provisions of this
Article.
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Except as the Company and the Transferee may otherwise agree, the Transfer
of a Membership Interest will be effective as of 12:01 a.m. (Eastern Time) on
the first day of the month following the Transfer.
Notwithstanding anything to the contrary expressed or implied in this
Agreement, the sale, assignment, transfer, pledge or other disposition of any
direct or indirect interest in the Company is subject to the laws of the State
of New York and the requirements, limitations and decisions of any gaming
commission or other gaming regulatory body for the State of New York.
14.6 Rights of Transferees. A Permitted Transferee shall become a Member of the
Company in accordance with Section 602 of the Act. Any Transferee of a
Membership Interest will, on the effective date of the Transfer, have only those
rights of an assignee as specified in the Act and this Agreement unless and
until such Transferee is admitted as a substitute Member. This provision
limiting the rights of a Transferee will not apply if such Transferee is already
a Member; provided that, any Member who withdraws from the Company pursuant to
an event of Withdrawal described in Section 12.2 will have only the rights of an
assignee as specified in the Act and this Agreement. Any Transferee of all or
any part of a Membership Interest who is not admitted as a substitute Member in
accordance with this Agreement has no right (a) to participate or interfere in
the management or administration of the Company's Business or affairs, (b) to
vote or agree on any matter affecting the Company or any Member (and if a Member
has transferred its entire Membership Interest to a Transferee who is not a
substitute Member, then (x) if the transferring Member is Nevada Gold, the Board
shall be decreased by the number of directors such transferring Member had the
right to appoint or (y) if the transferring Member is either Southern Tier or
TrackPower, then the Board shall be increased to 5 members, Nevada Gold shall
have the right to appoint 3 directors and the other Member shall have the right
to appoint 2 directors), (c) to require any information on account of Company
transactions, or (d) to inspect the Company's books and records. The only right
of a Transferee of all or any part of an Membership Interest who is not admitted
as a substitute Member in accordance with this Agreement is to receive the
allocations and Distributions to which the Transferor was entitled (to the
extent of the Membership Interest transferred) and to receive required tax
reporting information. However, each Transferee of all or any part of a
Membership Interest (including both immediate and remote Transferees) will be
subject to all of the obligations, restrictions and other terms contained in the
Agreement as if such Transferee were a Member. To the extent of any Membership
Interest transferred, the Transferee or Member does not possess any right or
power as a Member and may not exercise any such right or power directly or
indirectly on behalf of the Transferee. The Members acknowledge that these
provisions may differ from the rights of an assignee as set forth in the Act,
and the Members agree that they intend, to that extent, to vary those provisions
by this Agreement.
14.7 Ownership Interests in Members. Each Member represents and warrants that on
the date of this Agreement its directors, officers and owners (and in the case
of Nevada Gold and TrackPower, shareholders owning five percent (5%) or more of
stock in their parent companies) in such Member is listed on Exhibit "B" to this
Agreement. Southern Tier further represents that no transfers or assignments of
ownership interests in Southern Tier will be made except in compliance with
Article 14, it being agreed that a transfer of a Membership Interest by Southern
Tier (or its Permitted Transferee) shall include a transfer of ownership
interests within Southern Tier (or its Permitted Transferee) by its members and
shall require compliance with the provisions of this Article 14. In the event
the retirement, death or disability of Xxxxxxx Xxxxx causes a Transfer of the
Membership Interest of Southern Tier, then Southern Tier shall thereafter have
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only the rights of an assignee pursuant to Section 14.6; provided, however, such
Transfer shall be considered a Permitted Transfer if and for so long as Southern
Tier's managing member and designated director pursuant to Section 4.2 is either
an Approved Substitute Manager or approved by a majority in interest of the
remaining Members. An event described in Section 14.3(d), (e) or (f) shall not
be deemed to be a transfer of a Membership Interest by Nevada Gold, TrackPower
or Southern Tier, respectively. The Members shall have a continuing obligation
to update the list on Exhibit "B".
ARTICLE 15: PRIVILEGED LICENSE PROTECTION
(a) 15.1. No Unsuitability Knowledge. Each Member represents to the other that
it is not aware of any facts or circumstances which would make it an Unsuitable
Person.
(b) 15.2. Regulatory Compliance in the State of New York. Each Member
acknowledges that it and its Affiliated Persons will be subject to licensing and
other regulatory review and approval procedures by New York Regulatory
Authorities. Each Member agrees to cooperate fully and to cause its Affiliated
Persons to cooperate fully with the representatives of all New York Regulatory
Authorities. If any New York Regulatory Authority determines at any time that a
necessary Gaming License will not be issued or renewed for the Company, or must
be revoked, as a result of a Member's, or a Member's Affiliated Person's
relationship to the Company or a Member, then such Member shall, if possible,
remedy or cause its Affiliated Person to remedy the condition that gave rise to
such determination to the satisfaction of the New York Regulatory Authority. If
the Member (the "Non-Compliant Member") does not remedy the condition that gave
rise to such determination prior to the expiration of the period prescribed by
the New York Regulatory Authority, then the Licensed Members may provide written
notice to the Non-Compliant Member that it is an Unsuitable Person, and of its
intention to exercise the provisions set forth in Section 15.4.
(c) 15.3. Gaming Regulations in Jurisdictions Outside of New York.
(d) (a) Each Member acknowledges that each other Member and its Affiliated
Persons may or will be a Licensed Member because of Gaming Licenses related to
Gaming Authorities other than New York Regulatory Authorities. Each Member
acknowledges that the issuance and maintenance of Gaming Licenses are highly
regulated by these other Gaming Authorities and that the laws of applicable
jurisdictions may require a Licensed Member to disclose private or otherwise
confidential information about the other Members and their respective Affiliated
Persons. If requested to do so by a Licensed Member, any other Member shall
obtain any Gaming License, qualification, clearance or the like which shall be
requested or required of such other Member by any Gaming Authority having
jurisdiction over the Licensed Member.
(i) (b) All Members acknowledge and agree that if a Gaming Authority shall
determine that any Member or any of its Affiliated Persons (a) is or might be
engaged in, or is about to be engaged in, any activity or activities, or (b) was
or is involved in a relationship with any Person, and if as a result of such
determination any Gaming Authority (i) fails to issue a Gaming License, (ii)
fails to grant or renew any required or requested Gaming License or related
application upon terms and conditions which are in the Licensed Member's
reasonable discretion acceptable to the Licensed Member, (iii) unreasonably
delays any Gaming License sought by the Licensed Member, (iv) conditions any
Gaming License sought by the Licensed Member upon terms and conditions which are
in the Licensed Member's reasonable discretion not acceptable to the Licensed
Member, (v) revokes any Gaming License, or (vi) disciplines, in any manner, the
Licensed Member, then such other Member (the "Non-Compliant Member") shall
immediately (A) terminate any relationship with the Person which is the source
of the problem, or (B) cease the activity creating the problem. In the event
that the Non-Compliant Member does not comply with item (A) or (B) above, then
the Licensed Member may provide written notice to the Non-Compliant Member that
it is an Unsuitable Person, and of its intention to exercise the provisions set
forth in Section 15.4.
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(ii) 15.4. Buy-Out Provisions.
(iii) (a) In the event of an unremedied finding that a Member is an Unsuitable
Person and the sending of notice by a Licensed Member of its intention to
exercise the rights set forth in this Section 15.4, the provisions of this
Section 15.4 shall apply, notwithstanding any other provision herein to the
contrary.
(iv) (b) During the period commencing with the Trigger Date and ending with the
transfer or sale of the Affected Member's Membership Interest pursuant to a
subsection of this Section 15.4, (i) the Company shall not be required or
permitted to pay any distribution or interest with regard to the Membership
Interests and the amount of such distributions or interest shall be held in
escrow by the Company, (ii) the holder of such Membership Interests shall not be
entitled to vote on any matter, and (iii) the Company shall not pay any
remuneration in any form to the holder of the Membership Interests except in
exchange for such Membership Interests as provided in this Section 15.4. Upon
any sale or transfer of the Affected Member's Membership Interest in accordance
herewith, all voting rights shall be reinstated with respect to the Membership
Interest and all amounts held in escrow shall be applied to pay to the Affected
Member the purchase price of the Membership Interest.
(v) (c) For a period of 120 days following the Trigger Date (or such shorter
period of time as the New York Regulatory Authority or the Gaming Authority, as
applicable, otherwise allows), the Affected Member shall have the right to sell
its Membership Interest to a third party for cash, subject to the provisions of
Section 14.5 and the right of first refusal in favor of the other Members
pursuant to and in accordance with the terms of Section 14.4.
(vi) (d) If the Affected Member has not given notice to the other Members on or
before 120 days following the Trigger Date (or such shorter period of time as
the New York Regulatory Authority or the Gaming Authority, as applicable,
otherwise allows), that a third party (who is permitted to receive an assignment
of the Membership Interest pursuant to Section 14.5), has entered into a binding
agreement to purchase the Membership Interest for cash, or if the cash purchase
is not consummated within the period provided in Section 14.4), any one or more
of the remaining Members may purchase the Membership Interest by giving written
notice of such Member's or Members' purchase intent to the Company and the
Affected Member. The price of this purchase shall be an amount equal to the sum
of (a) the outstanding principal balance of and accrued and unpaid interest on
the Affected Member's loans to the Company, plus (b) the Fair Market Value of
the Affected Member's Membership Interest as of the Trigger Date. Such purchase
price shall be payable, without interest on the Fair Market Value of the
Affected Member's Membership Interest, by the Company applying the distributions
from the Company that would have otherwise gone to the Affected Member to pay
the Affected Member until the purchase price has been paid in full, provided
that any remaining balance shall be repaid at the end of five (5) years
following the Trigger Date.
(vii) (e) In the event that the Affected Member does not give proper notice that
it has entered into a binding agreement to sell its Membership Interest pursuant
to Section 15.4(c), or if, in the case of a sale, the cash purchase is not
consummated within the period provided in Section 14.4, and if no Member chooses
to purchase the Membership Interest as provided for in Section 15.4(e), the
majority in interest of the remaining Members may choose to continue the
business of the Company. In such event, the Company shall repay any loans owed
to the Unsuitable Person and shall repurchase the Unsuitable Person's Membership
Interest for its Fair Market Value plus any escrowed amounts under Section
15.4(b). The Company shall repay the Unsuitable Person's loans when the Company
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receives revenues that the Company would have been required to use to repay
loans made by the Unsuitable Person, had the Unsuitable Person remained a
Member. The Fair Market Value of the Unsuitable Person's Membership Interest
(without interest) shall be payable when the Company receives cash payments that
the Company would have been required to distribute to all Members under Article
9 had the Unsuitable Person remained a Member; provided that any remaining
balance shall be repaid at the end of five (5) years following the Trigger Date.
(viii) (f) In the event that the remaining Members decide not to continue the
business of the Company, the Company shall be dissolved.
(ix) Article 16: GOVERNING LAW; DISPUTE RESOLUTION
16.1 Governing Law. THIS AGREEMENT IS GOVERNED BY AND WILL BE CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, EXCLUDING ANY CONFLICT-OF-LAWS
RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS
AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the event of a direct conflict
between the provisions of this Agreement and any mandatory provision of the Act,
the applicable provision of the Act, will control.
16.2 Disputes. Except as to any disputes for which injunctive relief may be
available, in the event a dispute of any kind arises in connection with this
Agreement (including any dispute concerning its construction, performance or
breach), the parties to the dispute (who may be any combination of the Company
and any one or more of the Members) will attempt to resolve the dispute as set
forth in Section 16.3 before proceeding to arbitration as provided in Section
16.4. All documents, discovery and other information related to any such
dispute, and the attempts to resolve or arbitrate such dispute will be kept
confidential to the fullest extent possible. This Article 16 shall not apply to
disputes arising under the Management Agreement.
16.3 Negotiation. If a dispute arises, any party to the dispute will give notice
to each other party. If the Company is not a party to the dispute, notice will
be given to the Company. After notice has been given, the parties in good faith
will attempt to negotiate a resolution of the dispute.
16.4 Arbitration. If, within 30 days after the notice provided in Section 16.3,
a dispute is not resolved through negotiation or mediation, the dispute will be
arbitrated. The parties to the dispute agree to be bound by the selection of an
arbitrator, and to settle the dispute exclusively by binding arbitration in
accordance with the following provisions:
(a) All parties to the dispute will collectively select one arbitrator. If
they fail to do so within 45 days after the notice provided in Section 16.3, one
or more parties will request the American Arbitration Association to submit a
panel of five arbitrators who are qualified to resolve the matters in dispute
from which the choice will be made. The party requesting the arbitration will
strike first, followed by alternative striking until one name remains. A similar
procedure will be followed if there are more than two parties. The parties may
by agreement reject one entire list, and request a second list. If selection by
the above method is not completed within 90 days after the notice provided in
Section 16.3, or if there are more than four parties, then an arbitrator will be
selected by the American Arbitration Association. The arbitrator so selected
will then arbitrate the dispute in New York, New York, and issue an award.
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(b) To the extent consistent with the provisions of this Article, the
arbitration will be conducted under the Commercial Arbitration Rules of the
American Arbitration Association and in accordance with New York law. The
arbitrator's decision will be made pursuant to the relevant substantive law of
the State of New York. The award of the arbitrator will be final, binding and
non-appealable. Judgment on the award may be entered in any court, state or
federal court having jurisdiction.
(c) The fees and expenses of the arbitrator, and the other direct costs of
the arbitration, will be shared by the parties to the dispute in equal
proportions. Each party to the dispute will bear all other costs and expenses as
provided in Section 17.11. If one or more Members are included in the
arbitration because of their membership or former membership in the Company,
such group will collectively be treated as one party to the dispute (through the
Company as a party).
(d) The arbitrator(s) shall have the authority to award equitable relief
and compensatory damages. The arbitrator(s) shall not have any authority to
award punitive damages or other non-compensatory damages against the Company,
Nevada Gold, TrackPower, Southern Tier, or any Transferee or Permitted
Transferee notwithstanding any action based on gross negligence, bad faith,
fraud, breach of this Agreement, or any other conduct that might give rise to a
claim for punitive damages.
(e) The decision of the arbitrator(s) shall be rendered within ninety (90)
calendar days after the date of the selection of the arbitrator(s) or within
such period as the parties may otherwise agree.
ARTICLE 17: GENERAL PROVISIONS
17.1 Covenants.
(a) Securities Law Requirements. The Members acknowledge that Nevada
Gold's Parent and TrackPower are publicly held corporations, and that trading in
the securities of such corporations based upon non-public information or
unauthorized disclosure or other use of material developments could expose such
publicly held corporations to liability. The Members shall take appropriate
precautions to inform its employees and agents of such fact and to prevent such
persons from making such disclosure.
(b) Regulatory Information. Each Member shall provide to the Company or
regulatory agency, as the case may be, as required by applicable laws,
regulations, rules or orders, all information pertaining to the Company, the
Gaming Complexes, and each Member's officers, directors, shareholders, financial
sources, and associations as shall be required by any Federal or state
securities law or any regulatory authority with jurisdiction over the Company,
the Complexes, or any Member or any Affiliates of such Person including the
regulatory authorities in the states of New York, Colorado, California,
Oklahoma, New Mexico or any other jurisdiction. Specifically and without
limitation, each Member shall provide the other Members with all information
necessary to determine such Member's and its Affiliates' suitability for
licensing applications and renewals, including regarding their ownership
structure, corporate structure, officers and directors, stockholders, members,
and partners' identity, financing, transfers of interest, etc., as shall be
required by any regulatory authority with jurisdiction over the other Members or
any of their Affiliates, whether foreign or domestic, including, without
limitation, Colorado, California, New Mexico, Oklahoma, Texas and New York, or
with respect to any federal, state or other security law requirement - this
shall be a continuing obligation during the term of the Agreement.
(c) Prohibited Payments.
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Each Member agrees that it and its Affiliated Persons will conduct
all activities that affect the Company, and will cause any activities affecting
the Company conducted on their behalf, to be conducted in a lawful manner and
specifically will not engage in the following transactions:
(i) payments or offers of payment, directly or indirectly, to any
domestic or foreign government official or employee in order to obtain business,
retain business or direct business to others, or for the purpose of inducing
such government official or employee to fail to perform or to perform improperly
his official functions;
(ii) receive, pay or offer anything of value, directly or
indirectly, from or to any private party in the form of a commercial bribe,
influence payment or kickback for any such purpose; or
(iii) use, directly or indirectly, any funds or other assets of the
Company for any unlawful purpose including, without limitation, political
contributions in violation of applicable laws, regulations, rules or orders.
17.2 Amendments. This Agreement may be amended by the unanimous written
agreement of the Members. Any amendment will become effective upon such
approval, unless otherwise provided. Notice of any proposed amendment must be
given at least 5 days in advance of the meeting at which the amendment will be
considered (unless the approval is evidenced by duly signed minutes of action).
Any duly adopted amendment to this Agreement is binding upon, and inures to the
benefit of, each Person who holds a Membership Interest at the time of such
amendment. Notwithstanding any other provision of this Agreement, with respect
to any Transferee not admitted as a substitute Member, any amendment to Article
8 (relating to allocation of Profits or Losses), Article 9 (relating to
Distributions), Section 13.2 (relating to Distributions in Liquidation) and
Section 17.2 (relating to amendment of this Agreement) will not be effective if
it adversely affects a Member's rights under such Articles or Sections, nor will
such Person be required to make any Capital Contribution, without such Person's
written consent. Non-material amendments relating to this Agreement or that are
necessary for compliance with applicable law may be made by the Board.
17.3 Intentionally Deleted.
17.4 Confidentiality. In addition to and as provided in Section 3.3 and Article
17, the Members shall consult with each other as to the form, substance and
timing of all public announcements regarding the Company or this Agreement, and
no public announcements regarding the Company or this Agreement shall be made by
one Member without the consent of the Board. Notwithstanding the foregoing, a
Member may make such announcements, file such documents (including this
Agreement) with the Securities and Exchange Commission and other regulatory
authorities, and take other actions to comply with the requirements of federal
and state securities laws as it deems necessary.
17.5 Intentionally Deleted.
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17.6 Waiver of Partition Right. Each Member waives and renounces any right that
such Person may have prior to Dissolution and Liquidation to institute or
maintain any action for partition with respect to any real property owned by the
Company.
17.7 Waivers Generally. No course of dealing will be deemed to amend or
discharge any provision of this Agreement. No delay in the exercise of any right
will operate as a waiver of such right. No single or partial exercise of any
right will preclude its further exercise. A waiver of any right on any one
occasion will not be construed as a bar to, or waiver of, any such right on any
other occasion.
17.8 Equitable Relief. If any Person proposes to Transfer all or any part of
such Person's Membership Interest in violation of the terms of this Agreement,
the Company or any Member may apply to any court of competent jurisdiction for
an injunctive order prohibiting such proposed Transfer except upon compliance
with the terms of this Agreement, and the Company or any Member may institute
and maintain any action or proceeding against the Person proposing to make such
Transfer to compel the specific performance of this Agreement. Any attempted
Transfer in violation of this Agreement is null and void, and of no force and
effect. The Person against whom such action or proceeding is brought waives the
claim or defense that an adequate remedy at law exists, and such Person will not
urge in any such action or proceeding the claim or defense that such remedy at
law exists.
17.9 Remedies for Breach. The rights and remedies of the Members set forth in
this Agreement are neither mutually exclusive nor exclusive of any right or
remedy provided by law, in equity or otherwise. The Members agree that all legal
remedies (such as monetary damages) as well as all equitable remedies (such as
specific performance) will be available for any breach or threatened breach of
any provision of this Agreement.
17.10 Notices. All notices, consents, waivers and other communications required
or permitted by this Agreement shall be in writing and shall be deemed given to
a party when (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile or
e-mail with confirmation of transmission by the transmitting equipment; or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested, in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or
person as a party may designate by notice to the other parties):
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If to Nevada Gold:
Nevada Gold NY, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Fax no.: (000) 000-0000
E-mail address: xxxxx@xxxxxxxxxx.xxx
With a copy to:
Nevada Gold & Casinos, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
Fax no.: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxx.xxx
If to Southern Tier:
Southern Tier Acquisition II LLC
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxxx
Fax no.: 000-000-0000
E-mail address: XXxxxx@xxxxxxxxx.xxx
With a copy to:
Xxxxxxxx Weprin & Ustin LLP
0000 Xxxxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq
Fax no.: 000 000 0000
E-mail address: xxxxxxxxx@xxxxxx.xxx
If to TrackPower:
TrackPower, Inc.
000 00xx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxx Xxxxxx X0X0X0
Attention: Xxxx Xxxxxxxx
Fax: 000-000-0000
E-mail address: xxx@xxxxxxxxxx.xxx
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With a copy to:
Towne Law Firm
000 Xxx Xxxxxx Xx
X.X. Xxx 00000
Xxxxxx, XX 00000-0000
Attention Xxx Xxxxx, Esq.
Fax: 000-000-0000
E-mail address: xxxxxxxxxx@XxxxxXxx.xxx
17.11 Costs. If the Company or any Member retains counsel for the purpose of
enforcing or preventing the breach or any threatened breach of any provision of
this Agreement or for any other remedy relating to it, then the prevailing party
will be entitled to be reimbursed by the non-prevailing party for all costs and
expenses so incurred (including reasonable attorneys' fees, costs of bonds, and
fees and expenses for expert witnesses) unless the arbitrator or other trier of
fact determines otherwise in the interest of fairness.
17.12 Partial Invalidity. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. However, if for any reason any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
action will not affect any other provision of this Agreement. In such event,
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.
17.13 Survivability of the August 24, 2005 Agreement. This Agreement hereby
amends, restates and supersedes any and all of the provisions of the letter
agreement dated August 24, 2005, by and among Tioga Downs Racetrack, LLC, Xxxxxx
Xxxxx Acquisition, LLC, Nevada Gold & Casinos, Inc., TrackPower, Inc. and
Southern Tier Acquisition, LLC.
17.14 Entire Agreement. This Agreement the Exhibits attached hereto, the
Contribution Agreement and the Management Agreement contain the entire agreement
and understanding of the Members with respect to its subject matter, and it
supersedes all prior or other contemporaneous understandings, correspondence,
negotiations, or agreements between them respecting the within subject matter.
No amendment, modification or interpretations hereof shall be binding unless in
writing and signed by all the Members unless it is made in accordance with
Section 17.2.
17.15 Binding Effect. This Agreement is binding upon, and inures to the benefit
of, the Members and their permitted successors and assigns; provided that, any
Transferee will have only the rights specified in Section 14.6 unless admitted
as a substitute Member in accordance with this Agreement.
17.16 Further Assurances. Each Member agrees, without further consideration, to
sign and deliver such other documents of further assurance as may reasonably be
necessary to effectuate the provisions of this Agreement.
17.17 Headings. Article and section titles have been inserted for convenience of
reference only. They are not intended to affect the meaning or interpretation of
this Agreement.
-42-
17.18 Terms. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural include the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than a
limiting sense.
17.19 Effectiveness. This Agreement shall automatically, without further action
by any of the parties, become effective and enforceable according to its terms
immediately upon execution hereof.
17.20 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original for all purposes, but all of
which taken together shall constitute only one agreement. The production of any
executed counterpart of this Agreement shall be sufficient for all purposes
without producing or accounting for the other counterparts hereof.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the Members have executed this Operating Agreement of
American Racing and Entertainment, LLC as of the 8th day of November, 2005 but
to be effective as of the date first set forth above.
NEVADA GOLD:
NEVADA GOLD NY, INC.
By:
------------------------------
H. Xxxxxx Xxxx, President
SOUTHERN TIER:
SOUTHERN TIER ACQUISITION II LLC
By:
------------------------------
Xxxxxxx Xxxxx, Manager
TRACKPOWER:
TRACKPOWER, INC.
By:
------------------------------
Xxxx Xxxxxxxx, Chairman
By:
------------------------------
Xx Xxxxx
President and Chief Executive Officer
LIST OF EXHIBITS
Exhibit "A" Definitions
Exhibit "B" Constituent Interests in Members
-44-
EXHIBIT "A"
Definitions
In addition to other terms which are defined elsewhere in this Agreement, the
following terms, for purposes of this Agreement, shall have the meanings set
forth in this Exhibit "A":
Act: The New York Limited Liability Company Law and any successor
statute, as amended from time to time.
Adjusted Capital
Account: The Capital Account maintained for each Member as provided in
Section 7.6 of the Regulations, (a) increased by (i) the
amount of any unpaid Capital Contributions agreed to be
contributed by such Member, if any, (ii) an amount equal to
such Member's allocable share of Minimum Gain as computed on
the last day of such Fiscal Year in accordance with the
applicable Regulations, and (iii) the amount of Company
liabilities allocable to such Member under Section 752 of the
Internal Revenue Code with respect to which such Member bears
the economic risk of loss to the extent such liabilities do
not constitute Member Nonrecourse Debt, and (b) reduced by the
adjustments provided for in Regulations ss.
1.704-1(b)(2)(ii)(d)(4)-(6).
Affected Member: A Member that is notified that it is an Unsuitable Person
under Section 15.2 or Section 15.3(b).
Affiliate: An "Affiliate" of a Person means a Person directly or
indirectly controlling, controlled by or under common control
with such Person. For this purpose and for purposes of the use
of the term "control" in this Agreement, control means the
possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise.
Affiliated
Person: A Person whose relationship to a Member is such that a Gaming
Authority considers such Person's suitability as a factor in
determining the Member's or the Company's suitability for
receiving a Gaming License.
Agreement: This Agreement, as amended from time to time.
Annual Plan: The Annual Plan set forth in Section 4.1(h) of the Agreement.
-45-
Approved
Substitute
Manager: Xxxxx X. Xxxxx, Vice Chairman and Chief Executive Officer of
Newmark & Company Real Estate, Inc., or Xxxxx X. Xxxx,
President of Newmark & Company Real Estate, Inc.
Articles: The Articles of Organization of the Company as filed under the
Act, as amended from time to time.
Board: The Board of Directors established pursuant to Section 4.2 of
this Agreement.
Budgets: The Cost Budgets that are approved or otherwise operative
under this Agreement or the Operating Budgets that are
approved or otherwise operative under this Agreement.
Business: The business of the Company set forth in Section 2.1 of the
Agreement.
Capital Account: The capital account maintained for each Member under Section
7.6 of this Agreement.
Capital
Contribution: The aggregate of the dollar amounts of any cash contributed to
the capital of the Company and the Fair Market Value of any
property contributed to the capital of the Company, or, if the
context in which such term is used so indicates, the dollar
amounts of cash and the Fair Market Value of any property
agreed to be contributed, by such Member to the capital of the
Company.
Capital
Transaction: Any sale, exchange, condemnation (including any eminent domain
or similar transaction), casualty, financing, refinancing or
other disposition with respect to any real or personal
property owned by the Company which is not in the ordinary
course of business.
Cause: Cause as to the termination of any Director under Section 4.2
(c) shall be defined as any breach of the terms of this
Agreement, breach of any term of employment including
violation of policies and procedures of the Company, fraud, or
willful misconduct, by the Director who is being terminated.
Code: The Internal Revenue Code of 1986, as amended from time to
time (including corresponding provisions of subsequent revenue
laws).
Company: American Racing and Entertainment, LLC, as formed under the
Articles and as operating under this Agreement.
Company
Nonrecourse
Liabilities: Nonrecourse liabilities (or portions thereof) of the Company
for which no Member (or a related person within the meaning of
Treasury Regulation section 1.752-4) bears the economic risk
of loss.
-46-
Conceptual
Plans and
Specifications: The Conceptual Plans and Specifications for a Gaming Complex
(or any portion thereof), approved by the Board.
Consumer Price
Index: The Consumer Price Index for All Urban Consumers most recently
published by the Bureau of Labor Statistics of the United
States Department of Labor, U.S. City Average, all items,
(1997-98=100), or any successor or replacement index thereto.
If the Consumer Price Index shall, after the date hereof, be
converted to a different standard reference base or shall
otherwise be revised, any determination hereunder which uses
the Consumer Price Index shall be made with the use of such
conversion factor, formula or table for converting the
Consumer Price Index as may be published by the Bureau of
Labor Statistics, or, if said Bureau shall not publish the
same, then with the xxx of such conversion factor, formula or
table as may be published by Prentice Hall, Inc., or, failing
such publication, by any other nationally recognized publisher
of similar statistical information. If the Consumer Price
Index shall cease to be published, then for the purpose of
this Agreement there shall be substituted for the Consumer
Price Index such other similar index as the Company
accountants shall determine which measures changes in the
relative purchasing power of United States currency over the
term of this Agreement.
Contribution
Agreement: The Contribution Agreement dated the same date as the
execution date of this Agreement, between the Company, Nevada
Gold, TrackPower, Inc. and Southern Tier Acquisition, LLC,
relating to the contribution of certain assets to the Company.
Cost Budget: The Cost Budget for all development and construction costs for
each Gaming Complex (or any part thereof), approved by the
Board.
Debt: (a) all liabilities and obligations, contingent or otherwise:
(i) in respect to borrowed money (whether or not the recourse
of the lender is to the whole or the assets of the Company or
only to a portion thereof); (ii) evidenced by bonds, notes,
debentures or similar instruments; (iii) representing the
balance deferred and unpaid of the purchase price of any
property or services, if and to the extent any of the
foregoing described in clauses (i), (ii) and (iii) would
appear as a liability on the balance sheet of the Company;
(iv) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks; (v) for the payment of money
relating to a capitalized lease obligation; or (vi) evidenced
by a letter of credit or reimbursement obligation of such
person with respect to any letter of credit; (b) all
liabilities of others of the kind described in the preceding
clause (a) that the Company has guaranteed or that is
-47-
otherwise its legal liability; and (c) all obligations secured
by a lien to which the property or assets (including, without
limitation, leasehold interests and any other tangible or
intangible property rights) of the Company are subject,
whether or not the obligations secured thereby shall have been
assumed by or shall otherwise be the Company's legal
liability, provided, that the amount of such obligations shall
be limited to the lesser of the fair market value of the
assets or property to which such lien attaches and the amount
of the obligation so secured.
Director: Any Person named in the Articles and any Person elected as a
Director of the Company as provided in this Agreement, but
does not include any Person who has ceased to be a Director of
the Company.
Dissolution: The dissolution of the Company as provided in Section 12.1.
Distribution: A distribution of money or other property made by the Company
with respect to a Membership Interest.
EBIDTA: Earnings of the Company before interest, depreciation, taxes
and amortization.
Fair Market
Value: Fair Market Value as defined in Section 6.1.
Final Plans and
Specifications: The final plans and specifications for a Gaming Complex (or
any portion thereof), approved by the Board.
Fiscal Year: The fiscal and taxable year of the Company as determined under
this Agreement, including both 12-month and short taxable
years.
Gaming Authority Any national, state, tribal, local and other governmental,
regulatory and administrative authority, agency, board,
commission or official responsible for or involved in the
regulation of gaming activities of the Company or its Members
in any jurisdiction.
Gaming Complex: For each of the Xxxxxx Xxxxx Complex and the Tioga Downs
Complex, the Project Site, and any building structures and
improvements construed on or affixed to the Project Site; and
all roads, utilities, dredging, grading, landscaping, and
other off-site improvements constructed or developed by the
Company on or in support of the Project Site.
Gaming
Facilities: Any and all buildings within a Gaming Complex including but
not limited to hotel, parking, gaming, restaurant and
entertainment facilities and all surface parking lots serving
such buildings.
-48-
Gaming Laws: The laws pursuant to which any Gaming Authority possesses
regulatory, licensing or permit authority over gaming within
any jurisdiction.
Gaming License: Any license, permit, authorization, consent or favorable
determination from or issued by a Gaming Authority pursuant to
any Gaming Laws.
General Manager: The General Manager for the Gaming Complexes.
Indemnified
Person: As to any Member indemnified under Article 10, such Member and
any Affiliate of such Member (other than the Indemnifying
Member), and any agents, attorneys, officers, members,
directors, stockholders or employees of such Member or such
Affiliate.
Indemnifying
Member: The Member that woes any amount or duty to any Indemnified
Person pursuant to Article 10.
Initial DIP
Financing: The debtor-in-possession financing in the net amount of
$1,414,000 provided to Mid-State Raceway, Inc. by VDA. Such
amount is net of (a) loans advanced by Nevada Gold for the
purpose of funding any portion of such debtor-in-possession
financing, which loans have been converted to equity pursuant
to Section 7.1, and (b) any loans advanced by the Company to
Mid-State Raceway, Inc. from and after the execution date of
this Agreement.
Interest Rate: The prime interest rate of X.X. Xxxxxx Xxxxx & Co. (or any
successor bank), plus 2%.
Licensed Member: Any Member to which a Gaming License has been granted, or to
whose Affiliate a Gaming License has been granted.
Liquidation: The process of terminating the Company and winding up its
business under Article 13 after its Dissolution.
Losses: The net losses, deductions and credits of the Company
determined in accordance with generally accepted accounting
principles and as reported separately or in the aggregate, as
appropriate, on the tax returns of the Company filed for
federal income tax purposes.
Major Decisions As defined in Section 4.1(c).
Management
Company Nevada Gold NY, Inc.
Material
Modification: A modification of addition to or deletion from the Conceptual
Plans and Specifications or the Final Plans and Specifications
for a Gaming Complex, including without limitation, the sign
layouts as well as the use of proprietary marks.
-49-
Member(s): Each of the Persons executing this Agreement as a Member, or
who is subsequently admitted as a substitute or an additional
Member as provided in this Agreement, but not including any
Person who has ceased to be a Member in the Company.
Member Nonrecourse
Debt: Any nonrecourse debt of the Company (or portions thereof) for
which any Member (or a related person within the meaning of
Treasury Regulation section 1.752-4) bears the economic risk
of loss.
Member Nonrecourse
Deductions: The amount of deductions, losses and expenses equal to the net
increase during the year in Minimum Gain attributable to a
Member Nonrecourse Debt, reduced (but not below zero) by
proceeds of such Member Nonrecourse Debt distributed during
the year to the Members who bear the economic risk of loss for
such debt, as determined in accordance with applicable
Regulations.
Membership
Interest: The Membership Interests established under Section 3.1 of this
Agreement; with respect to each Person owning a Membership
Interest in the Company, all of the Membership Interests of
such Person in the Company expressed as a Percentage.
Minimum Gain: With respect to Company Nonrecourse Liabilities, the amount of
gain that would be realized by the Company if it disposed of
(in a taxable transaction) all properties that are subject to
Company Nonrecourse Liabilities in full satisfaction of such
liabilities, computed in accordance with applicable
Regulations. With respect to each Member Nonrecourse Debt, the
amount of gain that would be realized by the Company if it
disposed of (in a taxable transaction) the property that is
subject to such Member Nonrecourse Debt in full satisfaction
of such debt, computed in accordance with applicable
Regulations.
Net Sales Cash: Cash receipts of the Company from a Capital Transaction, less
payment of fees or expenses related to the Capital
Transaction.
Nevada Gold: Nevada Gold NY, Inc., a New York corporation, owned 100% by
Nevada Gold & Casinos, Inc.
New York
Regulatory
Authority A Gaming Authority whose approval is necessary in order for
the Company to obtain or maintain Gaming Licenses with respect
to the Gaming Complexes.
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Non-Arbitrable
Decisions: As defined in Section 4.1(d).
Non-Compliant
Member As defined in Sections 15.2 or 15.3(b) hereof, as applicable.
Notice: Written notice (including any communication or delivery),
actually given pursuant to Section 17.10.
Operating Budget: The Operating Budget defined in Section 4.1.
Percentages: The percentage ownership of a Member in the Company, as
initially set forth in Section 3.1; subject, however, to
appropriate adjustment in the event of any dilution pursuant
to Section 7.2, in the event of any transfer pursuant to
Articles 14 or 15, or as may be otherwise provided in this
Agreement.
Permitted
Transferee: A person described in Section 14.3 to whom a Membership
Interest may be transferred without compliance with a right of
first refusal.
Person: An individual, corporation, trust, partnership, limited
liability company, limited liability association,
unincorporated organization, association or other entity.
Profits: The net income and gains of the Company determined in
accordance with generally accepted accounting principles and
as reported separately or in the aggregate, as appropriate, on
the tax returns of the Company filed for federal income tax
purposes.
Project Site(s): The sites on which the Tioga Downs Complex and the Xxxxxx
Xxxxx Complex are located.
Racing Manager: The manager for the Racing Operations.
Racing
Operations: As defined in Section 4.5 hereof.
Regulations: The Regulations (including temporary regulations) promulgated
under the Code, as amended from time to time (including
corresponding provisions of succeeding regulations).
Reserves: With respect to any Fiscal Period, cash set aside by the
Company for working capital and to pay taxes, insurance, debt
service, repairs, capital replacements, capital improvements,
contingent liabilities or other costs and expenses incident to
the ownership or operation of the Company's properties, as
estimated in good faith by the Board.
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Xxxxx/Vestin
Settlement
Payment: The amount of $526,550 paid by Nevada Gold to Vestin Mortgage,
Inc., Xxxxx Xxxxx, Xxxxxxxx Xxxxx, All Capital, LLC, and All
Xxxxxx Acquisition, LLC on September 12, 2005.
Southern Tier: Southern Tier Acquisition II LLC, a New York limited liability
company owned 36.364% by Xxxx Xxxxx.
TDR Loan: The loan in the original principal amount of $1,125,000 made
by Nevada Gold to Tioga Downs Racetrack, LLC, of which there
is an outstanding principal balance of $1,001,550 on the
execution date of this Agreement.
Third Party: With respect to any Member, a Person other than an Affiliate.
Third Party
Offer: A bona fide, non-collusive, binding, arm's-length written
offer from a Third Party stated in terms of U.S. dollars.
Tioga Downs
Complex: Tioga Downs Racetrack, a harness track located in Nichols, New
York, located on approximately 145 acres of real estate, and
all improvements located thereon.
Tioga Downs
Contributed
Assets: 100% of the ownership interests in Tioga Downs Racetrack, LLC
and Tioga Downs Management Co., Inc.
TrackPower: TrackPower, Inc., a Wyoming corporation.
Transfer: A sale, exchange, assignment or other disposition of a
Membership Interest, whether voluntary or by operation of law.
Transferee: A Person to whom a Membership Interest is transferred in
compliance with this Agreement.
Transferor: A Person who transfers a Membership Interest in compliance
with this Agreement.
Trigger Date: The later of the date of receipt by the Company and receipt by
all other Members of a notice from a Licensed Member under
Sections 15.2 or 15.3 that it intends to exercise the rights
set forth in Section 15.4.
Unanimous
Decisions As defined in Section 4.1(b).
Unreturned
Capital
Contributions: The total amount of Capital Contributions made to the Company
by a Member less the total distributions received by that
Member. In no event will the total Unreturned Capital
Contribution of a Member be less than zero.
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Unsuitable Person (i) any Person who, if the Person is an Affiliate of the
Company or any Member, will cause the Company, any Member or
any Affiliate of any Member (A) not to obtain any Gaming
License, or (B) to have a Gaming License revoked or note
renewed, or (ii) a Member who is properly determined by a
second Member to be an Unsuitable Person in accordance with
Sections 15.2 or 15.3(b) for reasons that remain unremedied.
VDA: Xxxxxx Xxxxx Acquisition, LLC, a Delaware limited liability
company owned 50% by Southern Tier and 50% by TrackPower, Inc.
Xxxxxx Xxxxx
Complex: Xxxxxx Xxxxx Raceway, a harness track located in Xxxxxx, New
York, located on approximately 600 acres of real estate, and
all improvements located thereon, including a 47,700 square
foot grandstand, clubhouse, 34,000 square foot VLT facility, a
175-room hotel, surface parking and other amenities.
Xxxxxx Xxxxx
Contributed
Assets: 100% of the ownership interests in VDA.
Withdrawal: The occurrence of an event with respect to a Member which
terminates membership in the Company, as provided in Section
12.2.
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EXHIBIT "B"
Constituent Interests in Members
Directors, Officers and Owners of Southern Tier:
Manager: Xxxxxxx Xxxxx
Owners: Xxxxxxx X. Xxxxx 36.364%
Xxxxx Xxxxx 18.182%
Xxxxx Xxxxx 9.091%
Xxxxx Xxxxxxxxx 9.091%
Xxx Xxxxxxx 7.273%
Buzzy Geguld 5.455%
Xxxxx Xxxxxxxxx 5.455%
Xxxxx Xxxx 4.545%
Xxxxxx Xxxx 2.727%
Marc Holiday 1.817%
TOTAL 100%
Directors, Officers and Owners (5% or more) of TrackPower, Inc.
Directors: Xxxx X. Xxxxxxxx, Chairman
Xxxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxx
Xxxxx Xxxxxx
Officers: Xxxxxx X. Xxxxx, CEO and President
Xxxx Xxxxxxxx, CFO and Treasurer
Xxxxxx Xxxxxx, Secretary
Shareholders (5% or more): Xxxx Xxxxxxxxx
Asolare II, LLC
Directors, Officers and Owners (5% or more) of Nevada Gold & Casinos, Inc.
Directors: H. Xxxxxx Xxxx
Xxxx Xxxxxxx
Xxxxx Xxxxx
Xxxxxxx Xxxxx
Xxxxxxx Xxxxxx
Xxx Xxxxxxx
Officers: H. Xxxxxx Xxxx, CEO
Xxx Xxxxxxx, President & COO
Xxxxxxx X. Xxxxxx, General Counsel and Secretary
Xxx Xxxxxxx, Vice President - Development
Shareholders (5% or more): Clay County Holdings, Inc.
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