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Sample Business ContractsHome: Sample Business Contracts:
OPERATING AGREEMENT
OF
AMERICAN ENTERTAINMENT, L.L.C., A LOUISIANA LIMITED-LIABILITY
COMPANY
This Operating Agreement (the "Agreement") is entered
into as of this 14th day of January, 1994, by and between
CIRCUS CIRCUS LOUISIANA, INC., a Louisiana corporation ("CCLI")
and AMERICAN ENTERTAINMENT CORPORATION, a Louisiana
corporation ("AEC"), collectively referred to as the
"Members."
ARTICLE 1. NAME; DEFINED TERMS
Section 1.1 Name. The name of the Company shall be:
"American Entertainment, L.L.C."
Section 1.2 Identification of Company. The
abbreviation "L.L.C." must appear in the name of the Company
on all correspondence, stationery, checks, invoices, and all
documents executed by the Company.
Section 1.3 Certain Definitions. As used in this
Agreement, the following terms shall have the following
meanings:
"AEC Loan" means the loan made by the Company to AEC
pursuant to Section 6.6.
"Affiliate" means any person or entity controlling,
controlled by or under common control with any other
person or entity, including without limitation, any
officer, director, employee, agent, partner or member of
any such person or entity.
"Appointing Member" means the Member entitled to
initially appoint a Manager or to fill a vacancy of a
Manager on the Management Committee pursuant to Section
5.3(c).
"B of A Prime Rate" means the "prime rate" of
interest charged from time to time by Bank of America,
N.T. & S.A. to its best commercial customers for short
term unsecured loans.
"CCEI" means Circus Circus Enterprises, Inc., a
Nevada corporation, an Affiliate of CCLI.
"CCLI Additional Capital Balance" means an amount
equal to the aggregate amount of CCLI Additional Capital
Contributions, as reduced (but not below zero) by the
aggregate amount of all prior distributions of Net
Available Cash to CCLI pursuant to Section 7.3(a)(iv) and
as provided in Section 7.3(c).
"CCLI Additional Capital Contributions" means the
amounts contributed to or for the benefit of the Company
by CCLI pursuant to Section 6.2(a)(ii).
"CCLI Cost of Funds" means (i) with respect to CCLI
Additional Capital Contributions or CCLI Loans funded
from its own cash (or with the proceeds of inter-company
advances from Affiliates of CCLI), the imputed cost of
funds to CCLI and/or its Affiliates, taking into account
the cost of both equity and debt funds, as such imputed
costs may vary from time to time, or (ii) with respect to
CCLI Additional Capital Contributions or CCLI Loans made
with funds borrowed by CCLI or its Affiliates under its
or their credit facilities, the rate of interest charged
to CCLI or such Affiliate in connection with such
financing.
"CCLI Guaranty" means any guaranty of indebtedness
or similar obligations undertaken by CCLI or an Affiliate
for the benefit of the Company.
"CCLI Loans" means loans made by CCLI or an
Affiliate to or for the benefit of the Company pursuant
to Section 6.2(a)(iii), which Loans (i) shall bear
interest from the date of each advance until repaid, at a
rate equal to one percent (1%) per annum in excess of the
CCLI Cost of Funds, (except as otherwise provided in
Sections 6.2(e) or 6.2(f)), (ii) may be secured by deeds
of trust and/or other security interests in the Property,
the Project and/or other assets of the Company, as
required from time to time by CCLI or such Affiliate, and
(iii) shall be made upon and subject to such commercially
reasonable terms and conditions as required from time to
time by CCCI or such Affiliate.
"Capital Account" shall have the meaning ascribed to
it in Section 6.5.
"Capital Contributions" means the amounts
contributed to or for the benefit of the Company by a
Member pursuant to Section 6.1.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Conditional Approval" means the certificate of
approval for a gaming license granted to the Company by
the Louisiana gaming authorities after completion of all
suitability investigations and all required public
hearings, which license is conditioned (if at all) only
upon the completion of construction of the Project and
the satisfaction of other non-discretionary conditions
(which conditions shall have been approved by the
Management Committee).
"Construction Budget" means the written budgets and
schedules and any amendments thereto, approved by CCLI
pursuant to Section 5.4, setting forth in reasonable
detail, all costs and expenses (including without
limitation, both "hard" and "soft" costs for both off-
site and on-site work) incurred or to be incurred in
connection with the acquisition and development of the
Property and the design, development, construction,
fixturizing, equipping, preopening expenses and initial
bankroll for operation of the Project.
"Consulting Agreement" means that certain Riverboat
Casino Consulting Agreement to be entered into
concurrently herewith between the Company as owner and
AEC as consultant, in form and substance as set forth on
attached Exhibit E.
"Current Year Amortization" means for each fiscal
year with respect to each CCLI Loan and each CCLI
Additional Capital Contribution the aggregate amount that
would be payable by the Company with respect to such
fiscal year to amortize each such CCLI Loan and each such
CCLI Additional Capital Contribution ratably over a five-
year period commencing with the date of such CCLI Loan or
CCLI Additional Capital Contribution, as the case may be;
provided, however, that for any fiscal year in which the
Liquidation of the Company shall occur, "Current Year
Amortization" with respect to each CCLI Loan shall mean
the outstanding principal balance of such CCLI Loan and
with respect to the CCLI Additional Capital Contributions
shall mean an amount equal to the CCLI Additional Capital
Balance.
"Depreciation" means, for each fiscal year or other
period, an amount equal to the depreciation, amortization
or other cost recovery deduction allowable with respect
to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the
beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery
deduction for such year or other period bears to such
beginning adjusted tax basis.
"Estimated Project Cost" means a lump sum amount, to
be approved by the Management Committee, representing the
initial estimated total amount of the costs and expenses
to be more particularly described in the Construction
Budget.
"Event of Default" shall have the meaning ascribed
to it in Section 9.1.
"Final Approval" means the satisfaction or waiver of
all conditions imposed pursuant to the Conditional
Approval, so that all gaming licenses have become
effective and the Company is entitled to conduct all
contemplated gaming activities and substantially all
other contemplated activities at the Project.
"Georgusis" means Joseph Georgusis, an Affiliate of
AEC.
"Gross Asset Value" means, with respect to any
asset, the asset's adjusted basis for federal income tax
purposes, except as follows: (i) the initial Gross Asset
Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as
determined by the Members; and (ii) the Gross Asset Value
of all assets whose Gross Asset Value has been adjusted
pursuant to Section 7.5(f) shall be adjusted pursuant to
the last sentence of Section 7.5(f).
"Initial Capital Contributions" means the amounts
contributed to or for the benefit of the Company by the
Members pursuant to Section 6.1.
"Intangibles" means (i) the Preliminary Approval (as
modified pursuant to the petition attached hereto as
Exhibit C-2), (ii) the Conditional Approval, (iii) the
Final Approval and (iv) all other leases, contracts,
building or other permits, licenses and other assets
(excluding cash) necessary to develop, construct, market
and operate the Project.
"Liquidation" means (i) when used with reference to
the Company, the earlier of (a) the date upon which the
Company is terminated under Section 708(b)(1) of the
Code, or any similar provision enacted in lieu thereof,
or (b) the date upon which the Company ceases to be a
going concern, and (ii) when used with reference to any
Member, the earlier of (a) the date upon which there is a
Liquidation of the Company or (b) the date upon which
such Member's entire interest in the Company is
terminated by means of a distribution or series of
distributions by the Company to the Member.
"Major Decision" shall have the meaning ascribed to
it in Section 8.2(a).
"Management Agreement" means that certain Riverboat
Casino Management Agreement to be entered into
concurrently herewith between the Company as owner and
CCLI or an Affiliate of CCLI as manager, relating to the
management and operation of the Project, in form and
substance as set forth on attached Exhibit D.
"Management Committee" shall have the meaning
ascribed to it in Section 5.3(a).
"Manager" shall have the meaning ascribed to it in
Section 5.3.
"Member Nonrecourse Debt" means any Company
liability to the extent the liability is nonrecourse for
purposes of Regulations Section 1.1001-2, and a Member
(or a related person within the meaning of Regulations
Section 1.752-4(b)) bears the economic risk of loss
(within the meaning of Regulations Section 1.752-2).
"Member Nonrecourse Debt Minimum Gain" means Minimum
Gain attributable to Member Nonrecourse Debt.
"Minimum Gain" means the sum of the separately
computed amount of gain, if any, that would be realized
by the Company if, with respect to each nonrecourse
liability of the Company, the Company disposed of the
property subject to such nonrecourse liability for no
other consideration than full satisfaction of such
liability in accordance with Regulations Section 1.704-
2(d). For this purpose, the term "nonrecourse liability"
shall have the meaning set forth in Regulations Section
1.752-1(a)(2).
"Net Available Cash" of the Company means, for each
fiscal year or other period, an amount equal to the total
cash revenues and receipts of the Company from any source
(including financings and refinancings) for such period,
less the sum of (i) cash payments made by the Company
during such period in connection with the conduct of the
Company's business (including the repayment of any Third
Party Loans, current principal and interest payments on
other Company debt, and payment of the Project Management
and Consulting Fees, but excluding any payments or
distributions pursuant to Section 7.3) and (ii) the
amount of any increase during such period in, or amounts
established during such period for, reasonable reserves
for anticipated costs, expenses, liabilities and
obligations of the Company, working capital needs of the
Company or other appropriate Company purposes, as
determined by the Management Committee pursuant to
Section 5.3.
"Offering Price" means, for purposes of Section
8.2(c), a hypothetical amount of cash, calculated
separately for each Member, which such Member would
receive if the Total Value was paid to the Company and
the proceeds thereof used to repay all outstanding CCLI
Additional Capital Contributions and CCLI Loans[, to
repay any outstanding balance of the AEC Loan] and to
make distributions of Net Available Cash pursuant to
Section 7.3 (excluding Section 7.3(a)).
"Operating Budgets" means the annual written budgets
and schedules and any amendments thereto, approved by the
Management Committee pursuant to Section 5.3, setting
forth in reasonable detail, all costs and expenses
incurred or to be incurred in connection with the
maintenance, management, marketing and operation of the
Project.
"Percentage Interest" or "Interest" means the
percentage ownership interest of a Member in the Company,
as set forth in Section 7.1.
"Permitted Title Exceptions" means those matters
affecting title to the Property which have been approved
by CCLI, as set forth on attached Exhibit B.
"Preferred Return" means an amount equal to a
cumulative annual return at 1% per annum in excess of the
CCLI Cost of Funds (except as otherwise provided in
Section 6.2(e)), with respect to the daily balance of the
CCLI Additional Capital Balance, compounded annually, as
reduced (but not below zero) by the aggregate amount of
Net Available Cash distributed to CCLI pursuant to
Section 7.3(a)(ii).
"Preliminary Approval" means the certificate of
preliminary approval for a gaming license granted to AEC,
evidence of which approval is attached hereto as
Exhibit C-1, and the petition for modification of
certificate of preliminary approval, in the form attached
hereto as Exhibit C-2.
"Profits" and "Losses" means the taxable income or
loss for federal income tax purposes of the Company for
each fiscal year, plus income and gain of the Company
exempt from federal income tax for such fiscal year, and
minus Section 705(a)(2)(B) Expenditures for such fiscal
year. Any item of income, gain, loss, deduction or
Section 705(a)(2)(B) Expenditure that is allocated in any
fiscal year pursuant to Section 7.5(a), (b), (c) or (d)
shall be excluded from the computation of Profits or
Losses to be allocated for such fiscal year pursuant to
Section 7.4. Profits or Losses resulting from any
disposition of Company property shall be computed by
reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis
of such property differs from its Gross Asset Value. In
lieu of the depreciation, amortization or other cost
recovery deductions taken into account in computing
income for federal income tax purposes, there shall be
taken into account Depreciation for such fiscal year.
"Project" means a riverboat gaming operation and
related facilities to be developed on or adjacent to the
Property. The Members contemplate that the Project will
be completed in two phases, of which "Phase I" shall
consist of a riverboat gaming vessel, a dockside
facility and related parking and "Phase II" shall consist
of additional facilities designed to enhance the
riverboat gaming operation, the general scope and purpose
of which will be determined by the Management Committee
pursuant to Section 5.3(b)(ii), and the specific design
and construction of which will be determined by CCLI
pursuant to Section 5.4(a).
"Project Management and Consulting Fees" means the
management fees payable to CCLI or its Affiliate pursuant
to the Management Agreement and the consulting fees
payable to AEC pursuant to the Consulting Agreement.
"Property" means that certain parcel of land
containing approximately 28 contiguous acres, located on
Paris Road in St. Bernard Parish, State of Louisiana, as
more particularly described on attached Exhibit A.
"Regulations" means the Income Tax Regulations
promulgated under the Code, as such regulations may be
amended from time to time.
"Section 705(a)(2)(B) Expenditure" means any
expenditure of the Company described in Section
705(a)(2)(B) of the Code or treated as such pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i).
"Third Party Loans" means secured or unsecured
financings arranged by CCLI or its Affiliates and
obtained from unaffiliated third parties; each such
financing to bear interest at the rate offered by the
third party lender and to be repayable over such period
and upon such terms and conditions as shall have been
agreed upon between the third party lender and CCLI
(after consultation with AEC).
"Total Value" means, for purposes of Section 8.2(c),
a hypothetical amount representing the total cash value
of the Company, after liquidation of all assets and
payment or reservation for payment of all liabilities to
third parties, but prior to distribution of any Net
Available Cash pursuant to Sections 7.3 or 11.2.
ARTICLE 2. PRINCIPAL OFFICE; REGISTERED OFFICE AND AGENT
Section 2.1 Principal Office. The initial principal
office of the Company in the State of Louisiana shall be
located at 700 Camp Street, New Orleans, Louisiana 70130.
The Company may have all such other offices, either within or
without the State of Louisiana, as the Management Committee
may designate from time to time.
Section 2.2 Registered Office and Agent. The address
of the initial registered office of the Company is 700 Camp
Street, New Orleans, Louisiana 70130, and the initial
registered agent at such address is James E. Smith, Jr. The
registered office and agent may be changed from time to time
by action of the Management Committee and by filing the
prescribed form with the Louisiana Secretary of State. The
Company shall keep at its registered office, originals or
copies of the records and information required pursuant to
R.S. 12:1319.
ARTICLE 3. PURPOSE
Section 3.1 Purpose. The purposes for which the
Company is organized include, without limiting those
enumerated in the Articles of Organization, the acquisition of
the Property and the development, improvement, construction
and operation thereon of the Project, and for any other lawful
purposes incidental thereto for which a limited-liability
company may be organized under the laws of the State of
Louisiana, except banking or insurance.
Section 3.2 Powers. The Company shall have all the
powers granted to a limited-liability company under the laws
of the State of Louisiana.
ARTICLE 4. TERM
Section 4.1 Duration. The Company shall commence its
existence on the date its Articles of Organization and Initial
Report are filed with the Louisiana Secretary of State and
shall terminate fifty (50) years from that date, unless
earlier dissolved as provided by law, in this Agreement or in
the Articles of Organization.
ARTICLE 5. MEMBERS; MANAGEMENT OF COMPANY
Section 5.1 Members' Voting Rights.
(a) Each Member shall be entitled to cast a single
vote on all matters properly brought before the Members, and
except as otherwise expressly provided in this Agreement or in
the Articles of Organization, all decisions of the Members
shall be made by a majority vote of the Members.
(b) Notwithstanding R.S. 12:1318 B, only the
following matters shall require approval by the Members:
(i) The election to dissolve and wind up the
Company pursuant to Section 10.01(b).
(ii) The sale, exchange or other transfer of
all or substantially all of the assets of the Company
(expressly excluding any lease, mortgage, pledge or similar
financing transactions).
(iii) The lease, mortgage, pledge or other
hypothecation of all or substantially all of the assets of the
Company, unless such transaction(s) is contemplated in an
approved Construction Budget or Operating Budget, in which
event such transaction(s) shall not require the independent
approval of the Members.
(iv) The merger or consolidation of the
Company.
(v) The incurrence of indebtedness by the
Company other than in the ordinary course of its business; it
being expressly agreed and understood that any incurrence of
indebtedness as contemplated in an approved Construction
Budget or Operating Budget shall be deemed in the ordinary
course of the Company's business.
(vi) The alienation, lease or encumbrance of
any immovables of the Company other than in the ordinary
course of its business, it being expressly agreed and
understood that any such alienation, lease or encumbrance
contemplated in an approved Construction Budget or Operating
Budget shall be deemed in the ordinary course of the Company's
business.
(vii) An amendment to the Articles of
Organization or this Agreement.
(viii) Subject to Section 5.3, the selection
and removal of the Managers, the determination of their
compensation and the prescription of such powers and duties
for them as may be consistent with law, the Articles of
Organization and this Agreement.
(ix) Such other matters as are expressly
reserved to the Members pursuant to any provisions of this
Agreement.
Section 5.2 New Members. A new Member may only be
admitted as a Member in the Company with the unanimous consent
of the existing Members; provided however, upon the occurrence
of any of the acts or events set forth in Section 10.1(c), the
remaining Member, acting alone, may admit one or more new
Members. In any such event, the new Member shall execute a
written consent to be bound by the terms and provisions of
this Agreement. The new Member and all existing Members shall
also execute Amended Articles of Organization to be filed with
the Secretary of State before the new Member becomes a Member
of the Company.
Section 5.3 Managers; Management Committee.
(a) Except as otherwise provided in Section 5.4,
the management of the Company's business shall be vested in a
Management Committee composed of six (6) Managers, of which
three of such Managers shall be appointed by AEC and three of
such Managers shall be appointed by CCLI. The vote of a
majority in number of the Managers comprising the Management
Committee shall be required to act on any matter requiring
Management Committee approval; provided however, that until
such time as the AEC Loan has been paid in full and for so
long as any CCLI Guaranty remains outstanding, and/or during
any time that the amount of CCLI's Capital Contributions
exceeds the amount of AEC's Capital Contributions, CCLI shall
have the right to break any tie vote of the Management
Committee; provided further, however, that CCLI will consult
with AEC prior to making any such tie-breaking decision; and
provided further, however, that after the AEC Loan has been
paid in full, if Clyde T. Turner ceases to be associated with
CCLI, then CCLI will not have the right to break a tie vote of
the Management Committee concerning (i) approval of the Annual
Plan and Annual Operating Budget (as defined in and as
provided for pursuant to the Management Agreement), and (ii)
decisions regarding the development and construction of
additional capital facilities on the Property. The powers
granted to the Management Committee shall include, without
limitation, the express powers:
(i) To conduct, manage and control the affairs
and business of the Company, and to make such rules and
regulations therefor consistent with law, the Articles of
Organization and this Agreement.
(ii) To change the principal office of the
Company from one location to another within Louisiana; to fix
and locate from time to time one or more subsidiary offices of
the Company within or without the State of Louisiana; and to
designate any place within or without the State of Louisiana
for the holding of any Members' or Management Committee
meeting or meetings.
(iii) To borrow money and incur
indebtedness for the purposes of the Company, in accordance
with the approved Construction Budgets and Operating Budgets
and as directed by CCLI pursuant to Sections 6.2(a)(i) or
(iii), and to cause to be executed and delivered therefor, in
the Company's name, promissory notes, bonds, debentures, deeds
of trust, mortgages, pledges, hypothecations or other evidence
of debt and securities.
(b) Matters requiring Management Committee approval
shall include, without limitation, the following:
(i) the approval of the Estimated Project Cost
based upon estimates presented to the Management Committee by
CCLI.
(ii) Decisions relating to the overall site
development of the Property, based upon submittals presented
to the Management Committee by CCLI.
(iii) Decisions relating to the annual
Operating Budgets for the Project and any amendments thereto.
(c) The Managers appointed to the Management
Committee by one Appointing Member may be removed at any time
either with or without cause, but only by such Appointing
Member. Any Manager may resign at any time by giving written
notice to the Members. Any such resignation shall take effect
at the date of receipt of such notice or at any later time
specified therein; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make
it effective. The applicable Appointing Member shall replace
any vacancy in the office of any Manager appointed by such
Appointing Member. The Management Committee shall endeavor to
defer voting on any material matters while a vacancy exists.
However, if a majority of the remaining Managers on the
Management Committee determine that it is necessary or
advisable to vote on a material matter prior to appointment of
a replacement Manager by the Appointing Member, then the
Management Committee may vote on such matter, but the
remaining Manager(s) appointed by the Appointing Member shall
have the right to cast an additional vote, so that each
Appointing Member shall be represented by an equal number of
votes on the Management Committee. Each Manager on the
Management Committee shall be chosen annually by the
applicable Appointing Member and each shall hold office until
such Manager shall resign or shall be removed or otherwise
disqualified to serve, or the Manager's successor shall be
elected and qualified.
(d) The Management Committee may from time to time
authorize one or more Managers, acting alone or in concert, to
take such actions as may be necessary or advisable to
implement the policies and decisions of the Management
Committee including, without limitation, the execution and
delivery of documents and instruments as contemplated in
Section 5.3(a)(iii).
Section 5.4 CCLI Decisions. Notwithstanding anything
to the contrary contained in Sections 5.1 or 5.3 above, the
following matters shall be determined exclusively by CCLI, in
its capacity as a Member of the Company or by CCLI or an
Affiliate in its capacity as manager of the Project pursuant
to the Management Agreement; provided however, that CCLI shall
consult with AEC prior to making any of the following
decisions:
(a) All decisions relating to the development of
the Project including, without limitation, the concept,
design, Construction Budget, construction schedule and
selection of contractors and equipment suppliers, and any
amendments, modifications and supplements to any of the
foregoing. In this connection, CCLI shall endeavor to cause
the Project to be designed and developed for a total cost in
the approximate range of the Estimated Project Cost; provided
however, (i) CCLI shall have the absolute right to deviate
from the Estimated Project Cost as CCLI, in the exercise of
its reasonable business judgment,shall from time to time
determine and (ii) in no event shall CCLI be deemed a
guarantor of any Project costs.
(b) All decisions relating to the operation of the
riverboat gaming facility comprising the Project including,
without limitation, the layout of the casino, marketing and
credit policies, internal control and security procedures, and
all decisions concerning employment and operation of the
Project. It is acknowledged that employment decisions shall
be made with due consideration to guidelines recommended by
the State of Louisiana Riverboat Gaming Commission and/or
Riverboat Gaming Enforcement Division on local employment and
procurement, and the use of minority and women owned business
enterprises. The initial casino manager shall be R. Zupella.
Mr. Zupella shall be an "at will" employee and may be replaced
by CCLI should he fail to meet the performance standards as
established by CCLI from time to time, in its sole and
absolute discretion.
Section 5.5 Books of Account. Each of the Members
shall have the right at all reasonable times to review all
books of account and physical books and records of the
Company. Each Member shall be entitled to review, for at
least thirty (30) days prior to filing, the annual Form 1065,
income tax returns, tax elections and other tax filings
proposed to be filed for the Company with the Internal Revenue
Service. At the completion of each fiscal year, the books of
account and physical records of the Company shall be audited
by a certified public accounting firm selected by the
Management Committee.
Section 5.6 Banking. The Company shall establish one
or more general business bank accounts with such bank or banks
as may be determined by the Management Committee from time to
time. All Company receipts shall be deposited to said account
or accounts of the Company, and all expenses of the Company
shall be paid from said account or accounts.
Section 5.7 Authorization of Disbursement of Company
Funds. Disbursement of Company funds, in payment of business
expenses or otherwise, shall be by appropriate check, draft or
other instrument and shall be drawn upon those signatures as
determined from time to time by the Management Committee.
Section 5.8 General Restrictions. No Member or
Manager shall have the right, power or authority to do any of
the following acts without the prior written consent of the
Members:
(a) expend or use any Company money or property
except upon the account of and for the benefit of the Company
or except as otherwise expressly provided in Section 6.6;
(b) mortgage, lease, pledge or otherwise dispose of
all, or substantially all, of the assets of the Company, other
than in the ordinary course of business; it being expressly
acknowledged that any transactions contemplated in an approved
Construction Budget or Operating Budget shall be deemed "in
the ordinary course of business;"
(c) pledge any of the Company's credit or property
for other than Company purposes;
(d) compromise, settle or release any debt due the
Company except upon full payment thereof or except in the
ordinary course of business;
(e) assign the Company's property in trust for
creditors or on the assignee's promise to pay the debts of the
Company;
(f) confess a judgment against the Company, the
Company's property or any of the Members;
(g) dispose of any of the goodwill of the Company
business; or
(h) do any other act which would make it impossible
to carry on the ordinary business of the Company.
Section 5.9 Progress Reports; Meetings. The
Management Committee shall report not less frequently than
monthly to the Members concerning the progress of the
development, construction and operation of the Project. Any
Member may call a special meeting of the Members and/or the
Management Committee for any purpose on giving three (3) days
prior written notice of the meeting (shorter notice may be
agreed upon by the parties in writing). The notice shall
provide information as to time, place and agenda of the
meeting.
Section 5.10 Salaries and Compensation to Members.
Except as specifically provided in the Management Agreement or
the Consulting Agreement or as otherwise approved from time to
time by the Management Committee, the Company shall have no
duty or obligation to reimburse or compensate the Members,
their employees, assigns or Affiliates, for services rendered
on behalf of the Company, nor shall a Member be entitled to
salary or other compensation; provided however, the Company
shall be responsible for all Project costs as set forth in
approved Construction and Operating Budgets, and to the extent
that such costs are paid or loaned to the Company by a Member
or Affiliates, such Member shall be entitled to reimbursement
by the Company in the manner and at such times as is
specifically herein set forth. Each Member shall pay its own
licensing costs and fees.
Section 5.11 Company Property. All property originally
brought into or transferred to the Company as capital
contributions of the Members or subsequently acquired by
purchase or otherwise by or on behalf of the Company, shall be
owned by and held in the name of the Company or in such
fictitious business names as are approved by the Management
Committee.
Section 5.12 Other Business Activities.
(a) Each reference in this Section 5.12 to a
"Member" shall also mean and include each and every Affiliate
of such Member; it being expressly agreed and understood that
this Section 5.12 shall be deemed to apply to (and each Member
shall cause the provisions of this Section 5.12 to become
binding upon) each and every Affiliate of such Member.
(b) Each Member may be interested, directly or
indirectly, in various other businesses and undertakings not
included in the Company, including non-gaming-related
entertainment ventures wherever situated and gaming-related
ventures located outside of the radii specified in Section
5.12(c) below. The Members hereby agree that the creation of
the Company and the assumption by each of the Members of their
duties hereunder shall, subject to the provisions of Section
5.12(c) below, be without prejudice to their rights to have
such other interests and activities and to receive and enjoy
profits and compensation therefrom. Subject to the provisions
of Section 5.12(c) below, each Member waives any rights it
might otherwise have to share or participate in such other
interests or activities of the other Members. Subject to the
provisions of Section 5.12(c) below, any Member may engage in
or possess any interest in any other business venture of any
nature or description independently or with others, and
neither the Company nor any other Member shall have any right
by virtue of this Agreement in and to such venture or the
income or profits derived therefrom.
(c) Notwithstanding the provisions of Section
5.12(b) above, in the event that (i) prior to the
commencement of operations at the Project and for a period of
three (3) years thereafter, any Member shall desire to
directly or indirectly participate (as an owner, operator,
manager, developer, lender, investor or in any other similar
capacity) in any gaming-related venture (a "Gaming Project")
within that area of Louisiana falling within a 150 mile radius
(to include Lafayette) of the Property or (ii) during the
balance of the term of this Agreement, any Member shall desire
to so participate in any such Gaming Project within that area
of Louisiana falling within a 75 mile radius (to include Baton
Rouge) of the Property, such Member (the "Offering Member")
shall offer to the other Member (the "Receiving Member") the
right to participate with the Offering Member in such proposed
Gaming Project, upon such terms and conditions as the Offering
Member shall reasonably propose, consistent with then-current
market conditions. The Offering Member shall give written
notice thereof to the Receiving Member, which notice shall
include (i) a general description of the proposed Gaming
Project, including such detail as a prudent investor would
customarily require in order to make an informed investment
decision, (ii) to the extent reasonably available, pro forma
budgets of development and construction costs and projections
of income and expense and (iii) the proposed economic terms
and conditions upon which the Offering Member and the
Receiving Member would jointly participate in such proposed
Gaming Project. The Receiving Member shall have ten (10) days
after receipt of such notice and supporting documentation in
which to negotiate a mutually acceptable agreement whereby the
Offering Member and the Receiving Member will jointly
participate in the development of the Proposed Development
Project. If the Receiving Member declines the Offering
Member's offer, or if the parties, after proceeding in good
faith and with due diligence, are unable to reach agreement
within said 10-day periiod, then, unless otherwise approved by
both Members in their sole and absolute discretion, the offer
shall be deemed to have expired and neither Member shall
participate in any manner in such proposed Gaming Project
without the involvement of the other Member.
Section 5.13 Project Management. Concurrently with the
execution and delivery of this Agreement, the Company shall
enter into the Management Agreement with CCLI (or an Affiliate
designated by CCLI) and the Consulting Agreement with AEC.
The termination of the Management Agreement for any reason
whatsoever shall, without the necessity of further action by
any party, result in the automatic termination of the
Consulting Agreement, effective as of the termination date of
the Management Agreement. So long as the Company owns the
Project and AEC is a Member of the Company, a termination of
the Consulting Agreement (other than a voluntary termination
thereof) shall, without the necessity of further action by any
party, result in the automatic termination of the Management
Agreement, effective as of the date of termination of the
Consulting Agreement.
ARTICLE 6. CAPITAL CONTRIBUTIONS; LOANS; INITIAL PUBLIC
OFFERING
Section 6.1 Initial Capital
Contributions.
(a) (i) AEC shall initially contribute to the
capital of the Company, (i) fee simple title to the Property,
subject only to any Permitted Title Exceptions and (ii) the
Intangibles, free and clear of all liens and third party
claims, except as shall have been expressly approved in
advance in writing by CCLI. Such contribution of the Property
shall be deemed to have an agreed value of $7,000,000.00.
Such contribution of the Intangibles shall be deemed to have
an initial agreed value of $1.00, which agreed value shall be
deemed increased to $13,000,000.00 if, as and when, the Final
Approval is issued.
(ii) AEC shall execute and deliver to the
Company, such deeds, bills of sale, assignments and other
instruments of conveyance as may, in the opinion of CCLI and
its counsel, be necessary or advisable to vest title to the
Property and the Intangibles in the Company. Concurrently
with the conveyance of the Property to the Company, AEC shall
cause to be issued in favor of and delivered to the Company,
an ALTA extended coverage owner's policy of title insurance
(or equivalent) in a liability amount of not less than
$7,000,000.00, showing fee simple title to the Property to be
vested in the Company, subject only to the Permitted Title
Exceptions and/or such other matters affecting title to the
Property as shall have been approved in advance in writing by
the Members in their sole and absolute discretion.
(iii) In the event that either Member
determines that any additional properties, purchase
agreements, options, leases or governmental approvals,
permits, licenses and/or waivers are necessary or advisable
for the full development and operation of the Project, AEC
shall proceed with due diligence and use its best efforts to
cause such property rights and entitlements to be transferred,
assigned and conveyed to the Company at a price to the Company
equal to AEC's actual out-of-pocket costs (as approved by
CCLI), and without any profit, mark-up, commission, finder's
fee or similar payment of whatsoever nature to AEC or its
Affiliates.
(b) CCLI shall initially contribute to the capital
of the Company, cash (or equivalent) in the aggregate amount
of $20,000,000.00.
(c) Except as otherwise expressly provided in
Section 6.1(a) above, AEC shall not be obligated to make any
additional Capital Contributions.
Section 6.2 Additional Capital Requirements.
(a) If and to the extent the Management Committee
determines that additional funds are or will be required for
the payment of Project costs, expenses and obligations (as set
forth in approved Construction Budgets or Operating Budgets),
CCLI shall use its commercially reasonable efforts to arrange
for the funding of such requirements using, at its election,
one or more of the following sources:
(i) Third Party Loans;
(ii) CCLI Additional Capital Contributions; or
(iii) CCLI Loans;
provided however, that in no event shall CCLI (or any
Affiliate) be deemed obligated to make or provide any such
contributions or loans from its own funds.
(b) Any financing arranged by CCLI pursuant to
Section 6.2(a) shall not impose any personal liability upon
the Members or their respective officers, directors or
shareholders, and shall not decrease either Member's interest
in the Company, unless expressly approved in advance in
writing by the Members.
(c) Except as provided in Section 6.2(a), any other
loans or advances to or for the benefit of the Company shall
be subject to the prior written approval of the Management
Committee.
(d) The provisions of this Article 6 are solely and
exclusively for the benefit of the Members (and their
permitted successors and assigns), and may only be enforced
by, the Members (or such permitted successors and assigns),
and shall not inure to the benefit of, or be enforceable by,
any third parties, including without limitation, any creditors
of the Company.
(e) Notwithstanding anything to the contrary
contained herein, in the event CCLI makes a CCLI Additional
Capital Contribution or CCLI Loan to the Company and the
source of at least 90% of the funds used therefor is a non-
recourse mortgage loan obtained by CCLI or an Affiliate of
CCLI from a third-party lender, secured solely by security
interests in the Project, then in such event, the Preferred
Return on any such CCLI Additional Capital Contribution or the
interest rate on any such CCLI Loan, as the case may be, shall
be the CCLI Cost of Funds and not one percent (1%) in excess
of the CCLI Cost of Funds.
(f) (i) Notwithstanding anything to the contrary
contained herein, in the event that in any fiscal year there
is insufficient Net Available Cash to make the full amount of
distributions set forth in Section 7.3(a)(v), solely by reason
of the fact that distributions have been made pursuant to
Sections 7.3(a)(i), (ii), (iii) or (iv), then in such event,
CCLI shall make a CCLI Loan to the Company in an amount equal
to the lesser of (A) such shortfall or (B) the aggregate
distributions received by CCLI pursuant to Sections 7.3(a)(i),
(ii), (iii) and (iv) for such fiscal year, and the proceeds of
such CCLI Loan shall be deemed Net Available Cash and shall be
distributed to the Members in accordance with Section
7.3(a)(v).
(ii) Notwithstanding anything to the contrary
contained herein, in the event that in any fiscal year there
is insufficient Net Available Cash to make the full amount of
distributions set forth in Section 7.3(a)(v), solely by reason
of the fact that Company funds which would otherwise have been
available as Net Available Cash were used for capital
expenditures in excess of the greater of (A) the amounts
permitted to be expended for capital expenditures pursuant to
Sections 6.4 (capital and riverboat replacements), 6.12
(compliance with governmental requirements) and 6.13
(emergency expenditures) of the Management Agreement or (B)
amounts approved by AEC in an Annual Budget (as defined in the
Management Agreement), then in such event, CCLI shall make a
CCLI Loan to the Company in an amount equal to the lesser of
(x) such shortfall or (y) the amount of Net Available Cash
that would have been distributed to the Members for such
fiscal year pursuant to Section 7.3(a)(v) if such excess
capital expenditures had not been made, and the proceeds of
such CCLI Loan shall be deemed Net Available Cash and shall be
distributed to the Members in accordance with Section
7.3(a)(v).
(iii) Any CCLI Loan made pursuant to this
Section 6.2(f) shall bear interest from the date(s) of advance
until repaid at the BofA Prime Rate.
Section 6.3 Interest. No Member shall be entitled to
interest on its Initial Capital Contributions; however, the
provision of this Section shall not impair the obligation of
the Company and the right of CCLI to receive interest and
Preferred Return upon its Loans and Additional Capital
Contributions to the Company as hereinabove provided.
Section 6.4 Withdrawal of Capital. No Member shall
withdraw any portion of the capital of the Company without the
express consent of the Management Committee.
Section 6.5 Capital Account. An individual Capital
Account shall be established and maintained for each Member.
The Capital Account of each Member shall be equal to the
aggregate amount of cash contributed by such Member to the
Company, increased by (i) the fair market value of property
contributed by such Member to the Company (other than a
promissory note by such Member who is the maker of such note),
net of liabilities secured by such property that the Company
assumes or takes the property subject to, (ii) the amount of
any Company liabilities assumed by such Member other than
liabilities secured by property distributed to such Member,
(iii) such Member's distributive share of Profits of the
Company and (iv) any items in the nature of income and gain
which are excluded from the definitions of Profits and Losses
and allocated to such Member, and reduced by (i) such Member's
distributive share of Losses, (ii) the amount of any
distributions of cash to such Member, (iii) the amount of
liabilities of such Member assumed by the Company, other than
liabilities secured by property contributed by such Member,
(iv) the fair market value of property (net of liabilities
assumed by such Member and liabilities to which such
distributed property is subject) distributed to such Member,
and (v) any items in the nature of deductions or losses which
are excluded from the definitions of Profits and Losses and
allocated to such Member. Upon a distribution of property,
other than one described in Section 7.5(f), the Capital
Account of each Member shall be adjusted as provided in
Regulations Section 1.704-1(b)(2)(iv)(e). In the event the
Gross Asset Values of Company assets are adjusted pursuant to
Section 7.5(f), the Capital Account of each Member shall be
adjusted simultaneously to reflect the aggregate net
adjustment as if the Company recognized gain or loss equal to
the amount of such aggregate net adjustment. The foregoing
provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2 and shall be
interpreted and applied in a manner consistent with such
Regulations. For purposes of this section, the term Member
shall include any predecessor in interest of such Member.
Section 6.6 AEC Loan. Concurrently with (i) the
contribution by AEC to the Company of the Property and the
Intangibles pursuant to Section 6.1(a); (ii) the approval by
the Management Committee of the Estimated Project Cost
pursuant to Section 5.3(b)(i) and the overall plan for site
development of the Property pursuant to Section 5.3(b)(ii);
and (iii) the issuance of the Conditional Approval, the
Company shall loan to AEC, an amount not to exceed
$10,000,000, which AEC Loan shall be evidenced by a recourse
promissory note in the form attached hereto as Exhibit F,
secured by a security and pledge agreement encumbering AEC's
interest in the Company, in the form attached hereto as
Exhibit G, and guaranteed by Georgusis pursuant to a guaranty
in the form attached hereto as Exhibit H (collectively, the
"AEC Loan Documents"). The AEC Loan shall bear interest at a
rate equal to one percent (1%) per annum in excess of the B of
A Prime Rate. The proceeds of the AEC Loan may be drawn in
multiple advances, at any time within one (1) year of the
initial loan advance (the "first draw"), provided AEC is not
in default under the AEC Loan Documents or this Agreement.
The AEC Loan shall be repaid in installments equal to the
greater of (i) annual payments of interest-only commencing one
year after the first draw or (ii) the amount of Net Available
Cash deemed distributed to AEC pursuant to Section 7.3(b);
with the outstanding balance of principal and accrued but
unpaid interest all due and payable not later than six (6)
years after the first draw. At the election of CCLI, the
outstanding balance of the AEC Loan may be accelerated upon
(i) the failure of AEC to make any payment when due under the
AEC Loan which failure remains uncured for a period of ten
(10) days after notice or the occurrence of any non-monetary
default under the AEC Loan Documents which default remains
uncured for a period of thirty (30) days after notice; (ii)
the occurrence of any Event of Default by AEC under this
Agreement, (iii) the occurrence of any event requiring
dissolution of the Company pursuant to Section 10.1, or
(iv) the occurrence of any event which triggers the "buy-sell"
provisions pursuant to Section 8.2. The AEC Loan may be
prepaid in whole or in part at any time without premium or
penalty therefor. Pursuant to Section 8.11(b), CCLI hereby
consents to AEC's pledge of its Membership interest in the
Company pursuant to the above-referenced security and pledge
agreement.
Section 6.7 Initial Public Offering. After the
Project is in operation, the Management Committee will cause
the Company to engage a national investment
banking/underwriting firm to advise the Company on the
advisability/feasibility of retiring debt and invested capital
and commencing an initial public offering or institutional
private placement of equity or debt interests in the Company's
business. Upon approval by the Members, the Company will take
the actions reasonably necessary or advisable to proceed with
such initial public offering or private placement.
ARTICLE 7. PERCENTAGE INTERESTS;
CASH DISTRIBUTIONS; ALLOCATIONS OF PROFIT AND LOSS
Section 7.1 Percentage Interests. The Members shall
have the following Percentage Interests in the Company:
AEC 50%
CCLI 50%
Section 7.2 Periodic Determination of Net Available
Cash. Not more frequently than monthly and not less than
annually, the Management Committee shall review the cash flow
of the Company and, consistent with prudent business
practices, shall determine the amounts, if any, of funds
available for designation and distribution as Net Available
Cash.
Section 7.3 Distribution of Net Available Cash.
(a) Net Available Cash with respect to each fiscal
year shall be distributed in the following order of priority:
(i) First, to CCLI, an amount equal to all
accrued but unpaid interest with respect to any
outstanding CCLI Loans;
(ii) Second, to CCLI, an amount equal to its
Preferred Return;
(iii) Third, to CCLI, an amount equal to the
Current Year Amortization for such fiscal year with
respect to all outstanding CCLI Loans;
(iv) Fourth, to CCLI, an amount equal to the
Current Year Amortization for such fiscal year with
respect to all CCLI Additional Capital
Contributions;
(v) Fifth, to each Member, an amount equal to
(or in proportion to if less than) 35% (or such
other percentage as the Members shall mutually
agree) of the net income for federal income tax
purposes allocated to such Member by the Company
with respect to such fiscal year;
(vi) Sixth, to CCLI, an amount equal to the
outstanding principal balance and all accrued but
unpaid interest on the AEC Loan;
(vii) Seventh, to the Members, until CCLI has
received distributions of Net Available Cash
pursuant to Section 7.3(a)(vii)(A) equal to the sum
of the outstanding principal balance on any CCLI
Loans and the CCLI Additional Capital Balance:
(A) 70% to CCLI, and
(B) 30% to the Members, pro rata in accordance
with their respective Percentage
Interests; and
(viii) Eighth, the balance of any Net Available
Cash, to the Members, pro rata in accordance with
their respective Percentage Interests.
(b) An amount equal to the Net Available Cash
distributed to CCLI pursuant to Section 7.3(a)(vi) shall be
deemed received by AEC as a distribution of Net Available Cash
followed by a payment by AEC to the Company with respect to
the AEC Loan. Such deemed payment by AEC shall be applied
first to accrued but unpaid interest and then to the
outstanding principal balance of the AEC Loan.
(c) The outstanding principal balance of each CCLI Loan
and the CCLI Additional Capital Balance shall each be
proportionately reduced (but not below zero) by 50% of the
amount of any distributions of Net Available Cash to CCLI
pursuant to Section 7.3(a)(iii) and by 100% of the amount of
any distributions of Net Available Cash to CCLI pursuant to
Section 7.3(a)(vii)(A).
Section 7.4 Determination and Allocation of
Profits and Losses.
(a) Losses of the Company for each fiscal year shall be
allocated to the Members, pro rata in accordance with their
respective Percentage Interests; provided, however, that any
Losses of the Company attributable to the Intangibles shall be
allocated to AEC.
(b) Profits of the Company for each fiscal year shall be
allocated as follows:
(i) First, to CCLI, an amount equal to
the excess, if any, of 1% per annum in excess of the
CCLI Cost of Funds, cumulative, compounded annually,
with respect to the daily balance of the CCLI
Additional Capital Balance over the cumulative
amount of Profits allocated to CCLI pursuant to this
Section 7.4(b)(i); and
(ii) Second, to the Members, pro rata in
accordance with their respective Percentage Interests.
Section 7.5 Tax Regulatory Provisions.
(a) Notwithstanding the provisions of Section 7.4,
in no event shall any allocation of Losses (or any other loss,
deduction or Section 705(a)(2)(B) Expenditure) to any Member
cause such Member to have or increase a deficit balance in its
Capital Account.
(b) If a Member receives an adjustment, allocation
or distribution described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) which creates or increases a
deficit balance (taking into account distributions, other than
distributions in liquidation of the Company, reasonably
expected to be made) in the Member's Capital Account (as
provided in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5)
or (6)), the Company shall allocate items of income or gain
(as those terms are used in Regulations Section 1.704-
1(b)(2)(ii)(d)) to such Member in an amount and manner to
eliminate the Member's Capital Account deficit attributable to
such adjustment, allocation or distribution as quickly as
possible.
(c) If there is a net decrease in the Company's
Minimum Gain during any fiscal year, each Member shall be
allocated items of income and gain for such fiscal year equal
to such Member's share of the net decrease in Minimum Gain
during such fiscal year in accordance with Regulations
Sections 1.704-2(f) and (g).
(d) Any item of Company loss, deduction or Section
705(a)(2)(B) Expenditure that is attributable to Member
Nonrecourse Debt shall be allocated to the Member or Members
that bear the economic risk of loss with respect to such
Member Nonrecourse Debt in accordance with Regulations Section
1.704-2(i). If there is a net decrease during any fiscal year
in the minimum gain attributable to a Member Nonrecourse Debt
(within the meaning of Regulations Section 1.704-2(i)(3)),
then any Member with a share of the minimum gain attributable
to such Member Nonrecourse Debt at the beginning of such
fiscal year shall be allocated items of Company income and
gain for such fiscal year (and, if necessary, for subsequent
fiscal years) equal to such Member's share of the net decrease
in Member Nonrecourse Debt Minimum Gain as provided in
Regulations Section 1.704-2(i)(4).
(e) In accordance with Section 704(c) of the Code
and Regulations Section 1.704-1(b)(2)(iv)(d), income, gain,
loss and deduction with respect to any property contributed to
the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any
variation between adjusted basis of such property to the
Company and its initial Gross Asset Value. In the event the
Gross Asset Value of any Company property is adjusted (other
than for Depreciation) subsequent allocations of income, gain,
loss and deduction with respect to such property shall take
account of any variation between the adjusted basis of such
property and its Gross Asset Value in the same manner as under
Section 704(c) and the Regulations thereunder. Any elections
or other decisions relating to such allocation shall be made
by the Members in a manner that reasonably reflects the
purpose and intention of this Agreement.
(f) The Gross Asset Values of all Company assets
may be adjusted by the Members in accordance with Regulations
Section 1.704-1(b)(2)(iv) to equal their respective gross fair
market values as reasonably determined by the Members as of
the following times: (i) the acquisition of an additional
interest in the Company by any new or existing Member in
exchange for more than a de minimis capital contribution; (ii)
the distribution by the Company to a retiring or continuing
Member as consideration for an interest in the Company of more
than a de minimis amount of money or other Company property;
and (iii) the Liquidation of the Company. In such event, if
the Gross Asset Value of an asset does not equal its adjusted
basis for federal income tax purposes, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing
Profits and Losses.
(g) For purposes of Sections 7.5(a), (b), (c) and
(d), there shall be excluded from any deficit in a Member's
Capital Account any amount such Member is obligated to restore
to its Capital Account under Regulations Section 1.704-
1(b)(2)(ii)(c), as well as any addition thereto pursuant to
the penultimate sentences of Regulations Sections 1.704-
2(g)(l) and 1.704-2(i)(5) after taking into account thereunder
any changes during such fiscal year in Minimum Gain and Member
Nonrecourse Debt Minimum Gain.
(h) For purposes of Sections 7.5(a), (c) and (d),
each Member's Capital Account shall be reduced by the items
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5)
and (6).
(i) To the extent that Profits includes any income
or gain which for federal income tax purposes is treated as
ordinary income from recapture of depreciation, such Profits
treated as ordinary income shall be apportioned among the
Members, to the extent of Profits allocated to the Members,
pro rata in accordance with the prior allocation of
depreciation to which such recapture is attributable.
(j) If there is any conflict in the application of
the following Sections, they shall be applied in the following
order of priority: (i) Section 7.5(c), (ii) Section 7.5(d),
(iii) Section 7.5(b), (iv) Section 7.5(a) and (v) Section 7.4.
(k) If there is a Liquidation of the Company, the
Capital Accounts of the Members shall be adjusted to reflect
the actual or anticipated Profits or Losses allocable among
the Members shall be adjusted in accordance with, or as if
there had been, an actual disposition of the Company's
property at its fair market value.
(l) Upon the transfer of an Interest in the
Company, the Transferor's Capital Account that is attributable
to the transferred Interest shall carry over to the transferee
Member. If the transfer of any Interest in the Company causes
a termination of the Company under Section 708(b)(1)(B) of the
Code, the Capital Account that carries over to the transferee
Member shall be adjusted in accordance with Regulations
Section 1.708-1(b)(2)(iv)(e) in connection with Regulations
Section 1.708-1(b)(12)(iv). The constructive reformation of
the Company shall be treated as the formation of a new limited
liability company, and the capital accounts of the Members of
such new limited liability company shall be determined and
maintained accordingly.
Section 7.6 Taxable Year and Accounting Method.
Except as otherwise required by the Code or the Regulations,
the Company's taxable year shall be the calendar year. The
Company shall use the accrual method of accounting for federal
income tax purposes.
Section 7.7 Tax Elections. CCLI shall have the
authority to make any election or other determination on
behalf of the Company provided for under the Code or any
provision of state or local tax law. In making such
elections, CCLI shall consider the interests of both Members
as well as that of the Company.
Section 7.8 Tax Matters Partner. The Tax Matters
Partner (within the meaning of Section 6231(a)(7) of the Code)
of the Company shall be CCLI. In the event of an
administrative or judicial proceeding, the Tax Matters Partner
shall regularly consult with AEC regarding all significant
decisions affecting such proceeding. The Tax Matters Partner
shall have the right to determine whether to challenge a final
partnership administrative adjustment by initiating an action
in the Tax Court or, if advised by counsel to do so and with
the consent of AEC, in the United States District Court or the
Claims Court.
ARTICLE 8. TRANSFER OF MEMBERS' INTERESTS
Section 8.1 Transfer of Members' Interests.
(a) The Interest of each Member of the Company is
personal property. Except as otherwise provided in this
Agreement, the "transfer" of a Member's Interest or portion
thereof or interest therein shall include a gift, sale,
transfer, assignment, hypothecation, pledge, encumbrance or
any other disposition, whether voluntary or involuntary, by
operation of law or otherwise, including without limitation,
any transfer occurring upon or by virtue of the dissolution,
bankruptcy or insolvency of a Member; the appointment of a
receiver, trustee or conservator or guardian for a Member or
its property; or pursuant to the will of a Member or the laws
of descent and distribution in the event of a Member's death;
pursuant to court order in the event of divorce, marital
dissolution, legal separation or similar proceedings; or
pursuant to any loan or security agreement under which any of
the Member's interests are pledged or otherwise serve as
collateral, as well as the transfer of any such interest in
the event recourse is made to such collateral.
(b) Except as otherwise provided in Section 8.2(c),
neither Member shall transfer all or any portion of its
Interest in the Company without the prior written consent of
the other Member, which consent may be granted or withheld in
its sole discretion.
Section 8.2 Major Decisions: Deadlock: Buy-Sell
Agreement.
(a) For purposes of this Section, the term "Major
Decision" shall mean any action (or election not to act) by or
on behalf of the Company which, pursuant to the provisions of
this Agreement, requires the approval of all or a majority of
the Members or the Management Committee, and which may have,
or which may be anticipated to have, a material effect on the
business and operation of the Company.
(b) In the event the voting rights of the Members
or the Management Committee are evenly divided with respect to
a Major Decision and the Members or the Management Committee
are unable to reach agreement with respect to a proposed
course of action within fifteen (15) days after a request for
action by any Member, then in such an event (except as
otherwise provided in Section 5.3(a) above), a deadlock (the
"Deadlock") shall be deemed to exist.
(c) At any time after the occurrence of a Deadlock
and prior to a resolution thereof among the Members or the
Management Committee, as applicable, or at any time after 36
months from the commencement of operations at the Project
(whether or not a Deadlock exists), either Member (the
"Offering Member") may, upon written notice to the other
Member (the "Offering Notice"), propose a Total Value which
would be the basis for calculating the applicable Offering
Price at which the Offering Member is willing to either (i)
sell to the other Member all of the Offering Member's Interest
or (ii) purchase from the other Member all of the other
Member's Interest; provided however, that such Total Value
shall not be less than an amount sufficient to repay the
outstanding balance of principal and accrued but unpaid
interest due under the AEC Loan pursuant to Section 7.3. The
other Member shall have a period of thirty (30) days after
delivery of the Offering Notice in which to elect, by written
notice to the Offering Member (the "Response Notice") to
either (i) purchase all of the Interest of the Offering Member
at the applicable Offering Price or (ii) sell all of its
Interest to the Offering Member at the applicable Offering
Price. The failure of the other Member to duly and timely
give a Response Notice shall constitute its election to sell
all of its Interest to the Offering Member at the applicable
Offering Price. Unless otherwise approved by the Members,
such purchase and sale shall be consummated within nine (9)
months after the expiration of the 15-day notice period and at
least thirty percent (30%) of the purchase price for the
Interest being sold or purchased shall be payable at the
closing in cash (or by wire transfer in immediately available
funds). The balance of the purchase price shall be paid in
five (5) equal annual installments of principal, together with
interest on the unpaid principal balance at one percent (1%)
per annum in excess of the B of A Prime Rate, and shall be
secured by (i) a deed of trust (or equivalent) encumbering the
Project (subject and subordinate only to any secured debt
existing as of the date of closing of such purchase) and (ii)
an assignment of all rights to receive any proceeds from the
Project. Notwithstanding any other provisions hereof to the
contrary, any Member shall not be required to close on the
purchase of any Interest in accordance with this Section
unless the representations and warranties of the selling
Member as set forth in Section 8.4 shall be true and correct
in all material respects as of the date of such closing, and
the selling Member shall deliver a certificate to such effect
to the purchasing party dated as of the closing date.
(d) At any time after the occurrence of an Event of
Default under this Agreement, the non-defaulting Member,
without limiting any other rights or remedies it may have
under this Agreement, any other agreement or instrument
relating to or arising out of this Agreement, at law or in
equity, may, upon written notice to the Defaulter (the
"Appraisal Notice"), elect to either sell its Interest to the
Defaulter or purchase the Interest of the Defaulter; provided
however, that for purposes of determining the purchase price
hereunder, the "Total Value" shall be an amount equal to the
fair market value of the Project, as determined by mutual
agreement of the Members or by appraisal, but in no event less
than an amount sufficient to repay the outstanding balance of
principal and accrued but unpaid interest due under the AEC
Loan pursuant to Section 7.3. If the Members are unable to
mutually agree upon the fair market value of the Project
within thirty (30) days after delivery of the Appraisal
Notice, the non-defaulting Member shall select a reputable,
disinterested appraiser who shall furnish the Members with a
written Appraisal within thirty (30) days of the selection,
setting forth the determination of the fair market value of
the Project as of the date of the Appraisal Notice. Such
Appraisal shall assume that the Project shall be the highest
and best use of the Property, shall assume that the assets are
subject to any agreements, including without limitation,
leases, management and service agreements then in effect,
except this Agreement, and shall include the value of any
gaming licenses and similar intangible assets, but shall
exclude any other intangible assets such as good will. The
cost of the Appraisal shall be at the expense of the
Defaulter.
Section 8.3 Representations and Warranties of the
Members. As of the date of exercise of any option and closing
of any sale pursuant to this Article 8, each of the Members
represents and warrants to the Company and the other Members
with respect to itself as follows:
(a) Such Member is the lawful owner of and has the
full right, power and authority to sell, transfer and deliver
the Interest of the Company which it purports to own, and the
sale, transfer and delivery of such Interests of the Company
in accordance therewith will transfer good and marketable
title thereto free and clear of all liens, encumbrances,
claims or right of the third parties of every kind and nature
whatsoever, subject only to the provisions of this Agreement.
(b) The Interests of the Company owned by such
Member have been duly authorized and are fully paid and non-
assessable (except as otherwise stated). There are no
existing options, warrants, calls or commitments on the part
of any Member relating to such Interests. No voting
agreements or restrictions of any kind other than those set
forth in this Agreement affect the rights of any such
Interests of the Company or such Member.
(c) Such Member has the right and power to enter
into this Agreement, and this Agreement has been fully
executed and delivered and constitutes the valid and binding
obligation of such Member. No consent of any person not a
party to this Agreement and no consent of any governmental
authority is required to be obtained on the part of such
Member in connection with or resulting from the execution or
performance of this Agreement.
ARTICLE 9. EVENTS OF DEFAULT
Section 9.1 Events of Default. The occurrence of any
of the following events shall constitute an event of default
("Event of Default") hereunder on the part of the Member to
whom such event occurs (the "Defaulter") if within thirty (30)
days following the Defaulter's receipt of notice of such
default from the other Member, or within ten (10) days where
the default is due solely to the non-payment of monies,
whichever is applicable, the Defaulter fails to pay such
monies or in the case of non-monetary defaults, fails to
commence substantial efforts to cure such default or
thereafter fails within a reasonable time to prosecute to
completion with diligence and continuity the curing of such
default; provided, however, that the occurrence of any of the
events described in Section 9.1(b) below shall constitute an
Event of Default immediately upon such occurrence without any
requirement of notice or the passage of time except as
specifically set forth in any such subparagraph.
(a) the violation by a Member of any of the
restrictions set forth in Article 8 of this Agreement upon the
right of a Member to transfer its Interest;
(b) (i) institution by a Member of proceedings
under any laws of the United States or any state, whether now
existing or subsequently enacted or amended, for the relief of
debtors wherein such Member is seeking relief as debtor; (ii)
a general assignment by a Member for the benefit of creditors;
(iii) the institution by a Member of a proceeding under any
section or chapter of the Federal Bankruptcy Code as now
existing or hereafter amended or becoming effective; (iv) the
institution against a Member of a proceeding under any section
or chapter of the Federal Bankruptcy Code as now existing or
as hereafter amended or becoming effective, which proceeding
is not dismissed, stayed or discharged within a period of
sixty (60) days after the filing thereof or, if stayed, which
stay is thereafter lifted without a contemporaneous discharge
or dismissal of such proceeding; (v) a proposed plan of
arrangement or other action by a Member's creditors taken as a
result of a general meeting of the creditor of such Member;
(vi) admission by a member in writing of its inability to pay
its debts as they mature; (vii) the attachment, execution or
other judicial seizure of all or any substantial part of a
Member's assets or of a Member's Percentage Interest, or any
part thereof, such attachment, execution or seizure being with
respect to an amount not less than Five Thousand Dollars
($5,000.00) and remaining undismissed or undischarged for a
period of fifteen (15) days after the levy thereof, if the
occurrence of such attachment, execution or other judicial
seizure would reasonably tend to have a materially adverse
effect upon the performance by such Member of its obligations
under this Agreement; provided, however, that any such
attachment, execution or seizure shall not constitute an
Event of Default hereunder if such Member posts a bond
sufficient to fully satisfy the amount of such claim or
judgment within fifteen (15) days after the levy thereof and
the Member's assets are thereby released from the lien of such
attachment (any of the foregoing hereinafter referred to as an
"Act of Insolvency");
(c) any breach by a Member of its representations
and warranties pursuant to Article 13 or any material default
in performance of, or failure to comply with any other
agreements, obligations or undertakings of a Member herein
contained;
(d) causing or permitting an event of default under
any Third Party Loan or other permitted mortgage loan
encumbering the Project;
(e) any default in the payment or performance of
the AEC Loan and the Georgusis Guaranty; and
(f) the rejection of a Member for licensing by the
Louisiana gaming authorities or any other event involving a
Member which results in the Company or a Member becoming
unable to conduct a gaming business.
Section 9.2 Remedies Upon Default. Upon the
occurrence of any Event of Default, the non-defaulting Member
shall have the right, without limitation, to exercise any and
all rights and remedies set forth in Agreement and/or as may
otherwise be available at law and in equity against Defaulter.
ARTICLE 10. EVENTS REQUIRING DISSOLUTION OF THE COMPANY/CONSENT
TO CONTINUE
Section 10.1 Events Requiring Dissolution. The Company
shall be dissolved upon the occurrence of any of the following
events:
(a) The expiration of the fifty (50) year term of
the Company;
(b) The unanimous written consent of all Members;
(c) The death, interdiction, withdrawal, expulsion,
bankruptcy or dissolution of a Member, or the occurrence of
any other event which terminates a Member's continued
membership in the Company, unless within ninety (90) days
after such event the remaining Members unanimously consent in
writing to continue the business of the Company, or if there
is only one remaining Member, the admission of one or more new
Members pursuant to Sections 5.2 and 10.2;
(d) At the election of the non-defaulting Member,
the occurrence of an Event of Default by a Defaulter;
(e) The final and non-appealable rejection of the
Company's application for a gaming license for the Project or,
after issuance, the final and non-appealable revocation of
such license;
(f) The inability or unwillingness of CCLI to
obtain or provide funding pursuant to Section 6.2(a) which is
required for the initial development and construction of the
Project; or
(g) The sale or other disposition of all or
substantially all of the assets of the Company and the
collection of the proceeds thereof.
Section 10.2 Members' Consent to Continue the Company's
Business. Upon the occurrence of any event described in
Section 10.1 which may cause the dissolution of the Company,
or subsequent discovery of the occurrence of such an event (a
"triggering event"), the Company shall immediately notify in
writing each of the Members of the occurrence of the
triggering event, each of the remaining Members shall notify
the Company, in writing, whether or not such Member consents
to continue the business of the Company. If all of the
remaining Members consent to continue the Company's business,
and there are at least two (2) remaining Members, the Company
shall not be dissolved and the remaining Members shall
continue the Company's business. If there is only one (1)
remaining Member and it consents to continue the Company's
business, such Member shall have the absolute right,
notwithstanding any contrary provisions of this Agreement, to
transfer a portion of its Interest to a transferee (who may be
an Affiliate of such Member) and to unilaterally admit such
transferee as a new Member in the Company, so that such two
(2) Members may continue the Company's business. In the event
the business of the Company is not continued, the provisions
of Article 11 shall apply.
ARTICLE 11. DISSOLUTION
Section 11.1 Liquidation. Upon the occurrence of any
event requiring dissolution as set forth in Section 10.1, if
the business of the Company is not continued by the remaining
Members pursuant to Section 10.2, the Company shall
immediately execute and deliver to the Secretary of State a
statement of its intent to dissolve. Upon filing the
statement of intent to dissolve, the Company shall cease to
carry on its business and shall wind up its affairs and
liquidate.
In the course of the dissolution and winding up the
affairs of the Company, every effort shall be made to sell the
assets of the Company for cash so that the distribution may be
made to the Members in cash. If the Company's assets include
notes secured by deeds of trust on properties which the
Company or an Affiliate has sold, said notes and deeds of
trust may be distributed in kind to the Members if the Members
may legally accept same, and shall be valued at one hundred
percent (100%) of the unpaid principal balance of said notes,
plus accrued interest at the time of such distribution. Any
assets including notes secured by deeds of trust which are
owned by the Company and cannot conveniently or economically
be converted into cash, may be distributed in kind to the
Members. Unless the Members otherwise agree in writing, each
Member shall receive a proportionate share of each of those
assets which are to be distributed in kind.
Section 11.2 Distribution of Assets. During the
Liquidation of the Company, the Members shall continue to
share profits and losses in the same proportions as before
dissolution. In settling accounts after dissolution, (i) the
outstanding balance of the AEC Loan and all accrued but unpaid
interest thereon shall be repaid by AEC to the extent not
deemed paid pursuant to this Section 11.2 and Sections
7.3(a)(iii) and 7.3(b), (ii) the aggregate amount of all prior
distributions of Net Available Cash to a Member pursuant to
Section 7.3(a)(v) in excess of the additional amount of Net
Available Cash that such Member would receive if the aggregate
amount of all prior distributions of Net Available Cash to the
Members pursuant to Section 7.3(a)(v) were repaid to the
Company and distributed to the Members as Net Available Cash
in Liquidation of the Company pursuant to this Section 11.2
and Section 7.3(a) shall be paid by such Member to the other
Member, and (iii) the proceeds from the Liquidation of the
Company's assets shall be applied as follows:
(a) To creditors of the Company, in the order of
priority as provided by law, other than debts owed to Members
for their contributions; and
(b) To the Members in accordance with Section 7.3;
provided, however, that (i) no distributions of Net Available
Cash in Liquidation of the Company shall be made pursuant to
Section 7.3(a)(v), and (ii) if immediately prior to such
Liquidation $20,000,000 exceeds the sum of (A) 50% of the
aggregate distributions to CCLI pursuant to Section 7.3(a)(vi)
and (B) 100% of the aggregate distributions to CCLI pursuant
to Sections 7.3(a)(vii)(B) and 7.3(a)(viii), distributions of
Net Available Cash in Liquidation of the Company pursuant to
Section 7.3 shall be modified as follows until the sum of (A)
50% of Net Available Cash distributed to CCLI in Liquidation
of the Company pursuant to this Section 11.2 and Section
7.3(a)(vi) and (B) 100% of Net Available Cash distributed to
CCLI in Liquidation of the Company pursuant to this Section
11.2 and Section 7.3(a)(viii) is equal to such excess: (1)
For purposes of Section 7.3(b), an amount equal to 35%
(instead of 100%) of the Net Available Cash distributed to
CCLI in Liquidation of the Company pursuant to Section
7.3(a)(vi) shall be deemed received by AEC as a distribution
of Net Available Cash and applied to repayment of the AEC
Loan, and (2) for purposes of Section 7.3(a)(viii), Percentage
Interests shall be 74.074% for CCLI and 25.926% for AEC;
provided further, however, that if the Conditional Approval
has been obtained (and has not been revoked by reason of any
act or omission of AEC or its Affiliates) but the Company is
dissolved pursuant to Section 10.1(f), then in such event, all
of the Company's right, title and interest in the Property and
the Intangibles shall be distributed to AEC in full
satisfaction of AEC's right to receive any other liquidating
distributions pursuant to this Section 11.2 and Section 7.3.
ARTICLE 12. INDEMNIFICATION
Section 12.1 Indemnification of Manager, Member,
Employee or Agent: Proceeding Other than by Company. The
Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the
right of the Company, by reason of the fact that he is or was
a Manager, Member, employee or agent of this Company, or is or
was serving at the request of this Company as Manager, Member,
director, officer, employee or agent of another limited-
liability company partnership, joint venture, trust or other
entity, against expenses, including attorney fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or
proceeding if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best
interests of this Company, and, with respect to a criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in
good faith and in a manner which he reasonably believed to be
in or not opposed to the best interest of this Company, and
that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.
Section 12.2 Indemnification of Manager, Member,
Employee or Agent: Proceeding by Company. The Company shall
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action
or suit by or in the right of this Company to procure a
judgment in its favor by reason of the fact that he is or was
a Manager, Member, employee or agent of the Company, or is or
was serving at the request of the Company as a Manager,
Member, director, officer, employee or agent of another
limited-liability company, corporation, partnership, joint
venture, trust or other enterprise against expenses, including
amounts paid in settlement and attorney fees actually and
reasonably incurred by him in connection with the defense or
settlement of the actions or suit if he acted in good faith
and in a manner which he reasonably believed to be in or not
opposed to the best interests of this Company.
Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to this Company or for amounts paid in
settlement to this Company, unless and only to the extent that
the court in which the action was brought or other court of
competent jurisdiction determines upon application that in
view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses
as the court deems proper.
Section 12.3 Indemnity if Successful. To the extent
that a Manager, Member, employee or agent of the Company has
been successful on the merits or otherwise in defense of any
action, suit or proceeding described in Section 12.1 or 12.2,
or in defense of any claim, issue or matter therein, the
Company shall indemnify the Manager, Member, employee or agent
against expenses, including attorney fees, actually and
reasonably incurred in connection with the defense.
Section 12.4 Expenses. Any indemnification under
Sections 12.1 and 12.2, unless ordered by a court or advanced
pursuant to Section 12.5 below, must be made by this Company
only as authorized in the specific case upon a determination
that indemnification of the Manager, Member, employee or agent
is proper in the circumstances. The determination must be
made:
(a) By the Members;
(b) By the owners of more than 50% of the interests
owned by Members who were not parties to the act, suit or
proceeding; or
(c) If Members who own more than 50% of the
interests owned by Members who are not parties to the act,
suit or proceeding so order, by independent legal counsel in a
written opinion; or
(d) If Managers who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 12.5 Advancement of Expenses. The expenses of
Members and Managers incurred in defending a civil or criminal
action, suit or proceeding must be paid by the Company as they
are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the Manager or Member to repay the amount if
it is ultimately determined by a court of competent
jurisdiction that the Member or Manager is not entitled to be
indemnified by the Company.
ARTICLE 13. REPRESENTATIONS AND WARRANTIES
Section 13.1 CCLI Representations and Warranties. As a
material inducement to AEC to enter into this Agreement, CCLI
represents and warrants to AEC that, as of the date hereof,
CCLI knows of no facts or circumstances that are likely to
affect the ability of CCLI, AEC or the Company to receive all
gaming licenses and approvals necessary to operate the
Project.
Section 13.2 AEC Representations and Warranties. As a
material inducement to CCLI to enter into this Agreement, AEC
represents and warrants to CCLI that, as of the date hereof,
AEC knows of no facts or circumstances that are likely to
affect the ability of CCLI, AEC or the Company to receive (i)
all gaming licenses and approvals necessary to operate the
Project or that would constitute a violation of Louisiana
Gaming Laws or the Louisiana Code of Ethics for Public
Employees and (ii) all other licenses, permits and approvals
necessary or advisable for the construction, completion,
operation, ownership and use of the Property and the Project
as a riverboat gaming facility. AEC shall proceed with due
diligence and take all actions necessary or advisable to apply
for all necessary licenses, permits and approvals, and will
use its best efforts to cause all such licenses, permits and
approvals to be issued to the Company in due course, at a cost
to the Company not to exceed the actual out-of-pocket costs
reasonably incurred in furtherance of the terms of the
application processes.
Section 13.3 Breach. In the event any representation
or warranty made by a Member is discovered to be untrue or is
breached, the non-defaulting Member may, without limiting the
other rights or remedies it may have, declare an Event of
Default and elect to dissolve the Company pursuant to Article
10. In such event, the defaulting Member shall, within thirty
(30) days after demand, reimburse the non-defaulting Member
for all Capital Contributions and loans or other advances
made, and all expenses incurred, by the non-defaulting Member
in connection with the Project, the Preliminary Approval and
the Company.
ARTICLE 14. MISCELLANEOUS PROVISIONS
Section 14.1 Agreement to Perform Necessary Acts. Each
Member agrees to perform any further acts and execute and
deliver any documents that may be reasonably necessary to
carry out the provisions of this Agreement.
Section 14.2 Amendments. The provisions of this
Agreement may not be waived, altered, amended or repealed, in
whole or in part, except with the unanimous written consent of
the Members.
Section 14.3 Successors and Assigns. This Agreement
shall be binding on, and shall inure to the benefit of, the
Members and their respective heirs, legal representatives,
successors and assigns.
Section 14.4 Validity of Agreement. It is intended
that each Section of this Agreement shall be viewed as
separate and divisible, and in the event that any Section
shall be held to be invalid, the remaining Sections shall
continue to be in full force and effect.
Section 14.5 Notices. All notices, requests, demands
and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom
notice is given, or on the next business day if sent by
confirmed electronic facsimile transmission ("fax") or on the
date of actual delivery (as set forth in the courier's or
carrier's receipt) if sent by overnight commercial courier or
by first class mail, registered or certified, postage prepaid
and properly addressed to the party at his address set forth
below, or any other address that any party may from time to
time designate by written notice to the others:
If to CCLI:
Circus Circus Louisiana, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
If to AEC:
American Entertainment Corporation
8301 Judge Perez Drive, Suite 305
Chalmette, Louisiana 70043
Attention: Mr. Bill Bueck
Section 14.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Louisiana.
Section 14.7 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall be
constitute one and the same instrument.
Section 14.8 Gender and Number. As used in this
Agreement, and masculine, feminine, and neuter gender, and the
singular or plural number shall be considered to include the
others whenever the context so indicates.
Section 14.9 Attorney Fees. In the event any party
shall bring an action or proceeding for damages against the
other party for an alleged breach of any provision of this
Agreement, or to enforce, protect, or establish any right or
remedy of either party, the prevailing party shall be entitled
to recover as a part of such action or proceeding reasonable
attorney fees and court costs.
Section 14.10 Exhibits. The Exhibits referred to herein
and attached hereto are hereby incorporated by reference as
though set forth in full. Unless the context otherwise
expressly requires, any reference to "this Agreement" shall
mean and include all such Exhibits.
Section 14.11 Complete Agreement. This Agreement and
the Articles of Organization constitute the complete and
exclusive statement among the Members with respect to the
subject matter contained therein. This Agreement and the
Articles of Organization supersede all prior agreements by and
among the Members.
IN WITNESS WHEREOF, this Agreement was adopted by a
unanimous vote of all the Members of this Company at the
organizational meeting thereof held on the 14th day of
January, 1994.
CIRCUS CIRCUS
LOUISIANA, INC., a
Louisiana corporation
By:
/ S /
Name: Clyde T. Turner
Title: President
AMERICAN ENTERTAINMENT
CORPORATION, a Louisiana
corporation
By:
/ S /
Name: Joseph H. Georgusis
Title: President
EXHIBIT A
LEGAL DESCRIPTION
LEGAL DESCRIPTION
1. Lots 6-B-1, 6-B-3 and 6-B-4 (15.82 acres).
2. Submerged portions Lots 6-B-1, 6-B-3, 6-B-4 and Halter
Marine Lot (approximately 5 acres)
3. Halter Marine Lot (10 acres)
EXHIBIT B
PERMITTED TITLE EXCEPTIONS
TO BE PROVIDED
EXHIBIT C-1
PRELIMINARY APPROVAL
CERTIFICATE OF
PRELIMINARY APPROVAL
FOR RIVERBOAT GAMING OPERATIONS
After consideration of the submitted Application for a
Certificate of Preliminary Approval, the Louisiana Riverboat
Gaming Commission (the "Commission"), in accordance with the
provisions of the Louisiana Riverboat Economic Development and
Gaming Control Act, La. R.S. 4"501 et. seq., (the "Act") hereby
awards
AMERICAN ENTERTAINMENT, L.L.C.
(hereinafter referred to as "Holder"), this Certificate of
Preliminary Approval to begin construction of a riverboat and
commence such other operations as are authorized by the
administrative rules of the Commission. Upon compliance with
said
rules and the voluntary conditions of this Certificate, and
further, upon receipt of a Certificate of Final Approval, the
Holder is hereby authorized to commence riverboat gaming
operations and other operations incident thereto, as described in
detail in their application; said riverboat to utilize the routes
described in the application and (voluntary conditions hereto),
with the riverboat to be berthed at 5601 Paris Road in Chalmette,
Louisiana, on Bayou Bienvenue to the Mississippi Gulf Outlet in
St. Bernard Parish.
By accepting this Certificate of Preliminary Approval, the
Holder expressly accepts and agrees to all of the conditions to
this Certificate, as previously or subsequently amended, as set
forth in the attached statement of Mandatory and Voluntary
Conditions, which are incorporated herein by reference and made a
part of this Certificate.
By accepting this Certificate of Preliminary Approval,
Holder agrees to: (1) conduct all riverboat gaming and related
operations in accordance with the law, the rules of the Commission, and the
conditions attached hereto and incorporated herein; and (2)
expressly agrees that this Certificate is an absolute privilege,
the awarding, denial, conditions or modification of which shall
be controlled solely by the Commission and the provisions of the
Louisiana Riverboat Economic Development and Gaming Control Act.
This Certificate, and the conditions attached hereto are
approved this 10th day of February, 1994, in New Orleans,
Louisiana.
__________|s|_________________
__________|s|_________________
Kenneth Pickering William F. Biossat
Chairman Executive Director
STATEMENT OF CONDITIONS TO
CERTIFICATE OF PRELIMINARY APPROVAL
OF AMERICAN ENTERTAINMENT, L.L.C.
AMERICAN ENTERTAINMENT, L.L.C,
hereafter referred to as
"Holder", hereby expressly accepts, agrees and stipulates to the
following mandatory and voluntary conditions to its Certificate
of Preliminary Approval, issued by the Louisiana Riverboat Gaming
Commission pursuant to the provisions of La. R.S. 4"501 et. seq.
and administrative rules promulgated pursuant thereto. More
particularly, holder agrees as follows:
GENERAL CONDITIONS
1. Holder agrees and stipulates to the following: (1) To
not mention, assert, utilize or argue that he or another
person should be licensed by the State Police Riverboat
Gaming Enforcement Division (hereafter "Division") because he
or another person holds or has applied for a Certificate; (2)
To make application to the Division for a gaming operator's
license and commence construction of the riverboat within the
time limits required by Rule 307 of Rules of the Louisiana
Riverboat Gaming Commission; and (3) To apply to the
Commission for a Certificate of Final Approval, prior to
commencement of the operations authorized by this
Certificate.
2. To indemnify and hold harmless the Riverboat Gaming
Commission, the State of Louisiana, and their agents and
employees against any and all claims for personal injury or
property damage arising out of or in connection with errors
and omissions in the following: (1) The approval of riverboat
or support facility plans, designs and specifications; (2)
The granting of a Certificate; (3) The issuance of emergency
orders; and (4) The denial, suspension or revocation of a
Certificate of Approval. Pursuant to this condition, Holder
further agrees to, at the time of signing its acceptance of
this Certificate, sign a separate indemnification agreement
implementing this condition.
3. To maintain copies of this Certificate and Conditions at
the helm or pilot house of the riverboat named herein, the
offices of the gaming operator, and any Louisiana State
Police Riverboat Gaming Division offices on board the
riverboat; they shall be produced for examination and
inspection upon demand of any agent or representative of the
Commission or the Division.
4. To at all times comply with all provisions of the Act.
5. To at all times comply with all administrative rules
promulgated by the Commission.
6. To at all times and in all operations comply with
all administrative rules of the Louisiana State Police
Riverboat Enforcement Division.
7. To operate the riverboat on the approved and authorized
routes as described in the application for certificate of
preliminary approval (or separate route authorization
document) unless authorized otherwise by the Act or rules of
the Commission.
8. To conduct the kind, amount, and scope of gaming
activities as described in the Application or Certificate.
9. To offer the kind, amount and scope of non-gaming
activities upon the riverboat and shore or support facilities
as described in the Holder's Application.
10. To allow inspection by the authorized agents and
representatives of the commission or the Division at any time
and of any premises under control of the Holder or affiliated
companies and particularly any portion of the riverboat
terminal support facilities, administrative offices,
surveillance rooms and account rooms.
11. To report to the Commission in writing as soon as is
practical any failure to comply with these voluntary
conditions or any provision of the Act or rules of the
Commission along with an explanation of the reasons
therefore.
12. To construct and operate shore, support, and terminal
facilities as detailed in the Holder's Application.
13. To quarterly submit to the Commission sworn
certifications that the Holder has complied with all
conditions of this Certificate or any Certificate of Final
Approval, or in the event of non-compliance, to certify that
such conditions (or specific portions thereof) have not been
met, and the reasons therefore.
14. To quarterly submit to the commission a sworn
certificate or list of all persons having an interest in the
Holder, the Holder's gaming operator or the Holder's
riverboat (excluding publicly traded companies), and a list
of all consultants, contractors or persons deriving $25,000 a
year or more from the Holder or any affiliated company in
connection with or as a result of the Holder's riverboat
operations.
15. That no ownership, income or security interest, in the
Holder, the Holder's gaming operator or the Holder's
riverboat is transferable or may be transferred without the
permission of the Commission. (This does not apply to the
transfer of the stock of publicly traded companies not
forming a part of a transaction relating to the Holder.)
16. To quarterly submit to the Commission a sworn report of
the numbers of minorities employed, their general job
classification and total salaries of all minority employees.
17. Upon receipt of the Certificate of Final Approval, the
Commission may require a Holder to discontinue use of a
particular advertisement or promotion which the Commission
determines offensive or contrary to the integrity of gaming
regulations.
18. In the event the Holder fails to comply with an
employment or procurement goal as set forth in the specific
conditions of this Certificate, the Holder agrees to submit
quarterly an affidavit setting forth in detail the variance
from the employment or procurement goal, the specific reasons
therefore, the efforts undertaken by the Holder to remedy or
overcome the variance and the results thereof.
19. This Certificate of Preliminary Approval shall have a
term of 120 days but may be subject to renewal upon the
approval of the Commission.
20. To comply with such other general or specific conditions
to this preliminary or the Holder's Final Certificate of
Approval, as may be required by the Commission.
SPECIFIC ECONOMIC AND PROCUREMENT
CONDITIONS
In addition to the general conditions above, the Holder also
agrees to specific economic and procurement conditions or goals as
follows:
1. To construct at the Bender Shipyard the riverboat
described in the application, said construction to begin on
or before January 14, 1994, said construction to be completed
by November 1, 1994.
2. To start construction of the shore, support, terminal
and related facilities on or before January 13, 1994, and to
complete construction of said facilities by November 1, 1994.
3. To take immediate steps and continue to take whatever
measures necessary to obtain sufficient cash, loan proceeds
or unconditional letters of credit to finance all aspects of
the construction of the riverboat, and all related shore,
support, terminal and related facilities, said cash, loan
proceeds or unconditional letters of credit to be completed
and in the possession of Holder by January 14, 1994.
4. (A) To commence riverboat gaming operations on or about
November 1, 1994. There will be 4 cruises per day Monday
through Friday at 10:00 a.m., 2:00 p.m., 6:00 p.m. and 10:00
p.m. There will be 5 cruises per day on Saturday, Sunday and
holidays at 9:00 a.m., 1:00 p.m., 5:00 p.m., 9:00 p.m., and
1:00 a.m. The designated route shall be upon Bayou Bienvenue
as authorized by the chairman of the Commission, originating
at and within a reasonable distance of 5601 Paris Road in
Chalmette, the riverboat's licensed berth.
(B) For purposes of this Certificate, an excursion
shall consist of a total of three hours with not more than
the initial and last forty-five minute periods of the
excursion to be used for the embarking and disembarking of
passengers at the riverboat's approved berth. The riverboat
shall be underway away from its approved berth for not less
than ninety minutes during an excursion unless the conditions
of La. R.S. 4:525 (B) (1) or other provisions of the Act are
met. In the event that the riverboat remains dockside at its
licensed berth pursuant to La. R.S. 4:525 (b) (1) or other
provisions of the Act, passengers may embark or disembark
during the initial and last forty-five minute periods;
however, during the remaining (middle) ninety minute period
passengers may disembark only.
5. To maintain a policy or policies of general liability
insurance, insuring all non-employee passengers, guests,
patrons, etc. against personal injury and damage to property
which they may sustain in connection with or arising out of
their presence upon the riverboat and the various related and
support facilities operated by Holder, pursuant to this
Certificate. The said policy of liability insurance to be in
an amount of not less than $50 Million Dollars.
6. Holder agrees to achieve and adhere to the general
following economic and procurement goals in conducting
riverboat operations.
a) To hire at least 80% Louisiana residents.
b) To procure 75% of the total cost of goods and
services purchased from or through Louisiana owned
companies.
7. To hire minorities and women to fill employment
positions in the same percentage as minorities and women
represent the total population of this state, or in the
percentage represented in the parish in which the riverboat
is docked, whichever is greater. Minority and women
populations shall be determined in accordance with the 1990
U.S. Census data.
8. To procure 20% and 20% of the total cost of goods and
services from minorities and women (respectively) majority
owned suppliers and firms.
9. To employ at least 500 persons in riverboat and support
operations.
10. To pay a minimum wage of at least $4.25 per hour to
salaried, non-tipped employees and at least $2.13 per hour to
tipped employees.
11. To provide within 20 days, if not already provided,
complete and any remaining documentation, information, and
affidavits as requested by the Commission in its letters of
July 28, 1993 requesting "source documentation" and September
17, 1993 requesting additional and supplemental information
in affidavit form.
Issued or revised on January 29, 1994.
Footnotes to specific voluntary conditions.
1. The amount expended by a Holder for a construction of a
riverboat vessel shall not be included in the
calculation of the percentage of procurements from
Louisiana firms.
2. Amounts expended by a Holder for the purchase of gaming
supplies and devices shall not be included in the
calculation of the percentage of procurements from
Louisiana firms.
3. The term minorities shall mean minorities as defined by
41 CFR ch. 60-4.3. The numbers of minorities and women
employed shall be calculated separately in the manner
provided for the Equal Employment Opportunity
Commission's EEO-1 so that, for example, if a minority
woman is employed she is credited toward both the
minority and woman hiring goals.
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
ACKNOWLEDGEMENT OF CERTIFICATE CONDITIONS
BEFORE ME, the undersigned notary public, duly commissioned
and qualified within and for the State and Parish aforesaid, and
in the presence of the subscribing witnesses, personally came and
appeared:
AMERICAN ENTERTAINMENT, L.L.C.
appearing herein, through and represented by James E. Smith, Jr.,
its dully authorized officer and agent bearing the title of
General Counsel, who after being sworn and deposed and stated
that he does hereby, for and on behalf of AMERICAN ENTERTAINMENT,
L.L.C., accept and agree to this Certificate of Preliminary
Approval and expressly agrees to and is bound by the conditions
provided thereto.
__________|s|____________________
James E. Smith, Jr.
Witnesses:
___________|s|__________________
____________|s|_______________
Sworn to and Subscribed before me, Notary, and the
subscribing witnesses, this 10th day of February, 1994, at New
Orleans, Louisiana.
_____________|s|_________________
Notary Public
EXHIBIT C-2
PETITION FOR MODIFICATION OF
CERTIFICATE OF PRELIMINARY APPROVAL
LOUISIANA RIVERBOAT GAMING COMMISSION
STATE OF LOUISIANA
PETITION FOR MODIFICATION AND AMENDMENT
OF APPLICATION OF AMERICAN ENTERTAINMENT CORPORATION
FOR CERTIFICATE OF PRELIMINARY APPROVAL
NOW COMES American Entertainment Corporation ("American")
and respectfully submits this Petition for Modification and Amendment
of its Application for Certificate of Preliminary Approval.
On March 22, 1993, American filed an Application for
Certificate of Preliminary Approval (the "Application") with the
Louisiana Riverboat Gaming Commission (the "Commission"). On
June 18, 1993, the Commission approved the Application subject to an
ongoing duty on the part of American to apprise the Commission of
any modifications or amendments to the Application.
Subsequent to approval of the Application, American has
entered into a letter agreement (the "Agreement") with Circus
Circus Enterprises, Inc. ("Circus") whereby the parties to the
Agreement will form a joint venture to acquire or obtain all
property, rights, assets, leases, approvals, contracts, licenses
and permits necessary to develop, construct, market, manage and
operate a riverboat gaming operation and related facilities. As
a result of this Agreement, the terms of which are more fully set
forth in the attached Memorandum in Support, American desires to
amend its application in order to permit the inclusion of Circus
as a 50% owner of the venture formed to develop, manage and
operate the vessel.
WHEREFORE, American Entertainment Corporation respectfully
petitions this Commission to permit the modification and amendment
of its Application For Certificate of Preliminary Approval dated
March 22, 1993, as set forth herein and in the attached
Memorandum in Support.
Respectfully submitted,
AMERICAN ENTERTAINMENT CORPORATION
BY:_____________|s|___________________
James E. Smith, Jr., its
attorney
SMITH, MARTIN & SCHNEIDER
700 Camp Street
New Orleans, Louisiana 70130
Telephone: (504) 525-0134
LOUISIANA RIVERBOAT GAMING COMMISSION
STATE OF LOUISIANA
MEMORANDUM IN SUPPORT OF PETITION FOR MODIFICATION AND
AMENDMENT OF APPLICATION OF AMERICAN ENTERTAINMENT
CORPORATION FOR CERTIFICATE OF PRELIMINARY APPROVAL
On March 22, 1993, American Entertainment Corporation
("American") filed an Application for Certificate of Preliminary
Approval (the "Application") with the Louisiana Riverboat Gaming
Commission (the "Commission"). On June 18, 1993, the Commission
approved the Application subject to an ongoing duty on the part
of American to apprise the Commission of any modifications or
amendments to the Application.
Having subsequently entered into a letter agreement to form
a joint venture with Circus Circus Enterprises, Inc. ("Circus") to
jointly own, develop, construct, market and operate the riverboat
gaming operation described in the Application, American
respectfully submits this Petition for Modification and Amendment
of its Application for approval by the Commission.
A. THE LETTER AGREEMENT WITH CIRCUS
American and Circus have expressed their intent, via a
letter agreement (the "Agreement"), to form a Louisiana joint venture
for the purpose of acquiring or obtaining the property, Preliminary
Approval, and all other leases, contracts, building and other
permits, licenses and other assets necessary to develop,
construct, market, manage and operate a riverboat gaming
operation and related facilities. A copy of the confidential Agreement has
been provided to the Commission under separate cover, marked
"Confidential".
The general terms of the Agreement require that American
contribute the property on which the terminal operation and
related facilities will be constructed and that Circus will be
responsible for arranging all additional financing for the
venture. The joint venture will enter into a Management
Agreement with Circus to operate the project and a Consulting Agreement
with American to provide its expertise in connection with the
development and operation of the project.
The riverboat gaming operation and related facilities
referred to in the Agreement are those described in American's
original Application. The overall plans for the project will be
unaffected by the Agreement, although it is expected that the
benefit of Circus's operational experience will be reflected in
the final plans and may result in modification of the plans
described in the original Application. As discussed below, these
plans were developed and approved with the knowledge that an
experienced gaming operator would eventually become involved with
the project.
The Agreement between American and Circus contemplates an
actual transfer of ownership in the project. American is
currently the sole owner of the project. The current and
approved stockholders of American and their respective ownership
percentages are Joseph H. Georgusis (93%), Lewis S. Frank (5%)
and Dr. Charles C. Mary, Jr. (2%). Pursuant to the Agreement,
ownership of the project will be transferred resulting in both
American and Circus having a 50% interest therein. Of course,
the respective interests of the American stockholders will be reduced
proportionately.
B. BENEFITS OF THE AGREEMENT WITH CIRCUS
From the early stages of planning its riverboat gaming
project, through preliminary Approval by the Commission, and
until this time, American has fully informed the Commission of its
intent to join forces with an established and experienced gaming
concern for the purpose of operating the project. In fact, in
its original Application, American disclosed to the commission that
it was negotiating with nationally known gaming operators to manage
the day-to-day gaming activities. (See letter from American
submitting original Application to Commission, dated March 22,
1993, a copy of which is attached hereto as Exhibit "A".) The
Agreement with Circus is the result of those negotiations. In
Circus, American has selected a partner whose combination of
experience, reputation, and resources are unsurpassed in the
gaming industry. A summary of the most significant benefits of
this alliance are set forth below.
1. Greater Financial Resources
Circus's financial strength provides the project with access
to financial resources. Circus is a Fortune 500 corporation with
over $950 million in assets. For the fiscal year ended January
31, 1993, Circus recorded net income of over $117 million on
gross revenues of $843 million. Over the past five years, Circus has
generated operating cash flow exceeding $1 billion, resulting in
the highest operating cash flow per total investment among all
major publicly traded gaming companies. A copy of Circus's most
recent annual report is attached hereto as Exhibit "B".
As a result of its sustained successful operating results,
Circus is financially well-positioned. Its size and strength
provide it with access to the private and public markets to raise
additional capital. Certainly, Circus's financial stability and
experience in these markets will benefit the venture in its own
future public or private financing.
2. Greater Management Resources
Circus is a nationally recognized and renowned gaming
operator with a reputation for innovation. Circus successfully
operates eight gaming facilities throughout Nevada. Circus
pioneered the themed resort approach to gaming and was among the
first in the industry to introduce a value-oriented entertainment
concept to gaming activities and resorts. The results of this
visionary management approach have been impressive.
In addition to its gaming management resources, Circus
brings with it extensive support resources, including staff experienced
in the design, construction, financial and legal aspects of the
gaming business.
3. Promotes Louisiana's Interests
To a great extent, the benefits outlined above will inure to
Louisiana and its citizens in the form of a more successful and
stable gaming operation. In addition, Circus's gaming experience
will provide the project a greater potential for growth and
investment, thereby increasing related income, property, gaming,
and franchise tax bases. Moreover, the presence of a recognized
gaming operator with Circus's reputation in the fledgling
Louisiana gaming arena adds credibility and an increased
potential for building a successful and profitable industry.
Introducing a public company into this project further
promotes the interests of the state and its citizens by providing
extensive public disclosure of corporate events and operations.
Under federal and state laws, a public corporation must publicly
report its financial position and results of operations on a
quarterly and annual basis. It must disclose all significant
events, contracts, relationships, and contingencies. It is
overseen by the Securities and Exchange Commission and various
other agencies. Public corporations are accountable to
stockholders, as well as regulatory agencies. Finally, public
corporations are required to undergo an annual audit by an
independent accounting firm. Consequently, the involvement of
Circus in this project will result in Louisiana and its citizens
having access to an abundance of otherwise unavailable information
on the position, operations, management and ownership of the
proposed venture.
C. CONCLUSION
For the reasons set forth above, American believes that the
joint venture with Circus is in the best interests of the subject
project, the local gaming industry and the state of Louisiana and
its citizens. Accordingly, American Entertainment Corporation
respectfully requests that the Commission approve its Petition
for Modification and Amendment of its Application for Certificate of
Preliminary Approval to permit the inclusion of Circus as a 50%
owner in the venture to be formed to develop and operate the
vessel.
Respectfully submitted,
AMERICAN ENTERTAINMENT CORPORATION
By:___________|s|_____________________
James E. Smith, Jr., its
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