SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 23, 1996
American Gaming & Entertainment, Ltd.
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or Other Jurisdiction of
Incorporation or Organization)
0-19049 74-2504501
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(Commission (IRS Employer
File Number) Identification No.)
Bayport One, Yacht Club Drive, Suite 300, West Atlantic City, NJ 08232
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (609) 272-9099
Not Applicable
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(Former Name, Address and Former Fiscal Year, if Changed Since Last Report)
1 of 79
Exhibit Index - 4
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American Gaming & Entertainment, Ltd.
SEC Form 8-K
Item 5. Other Events
1) Effective August 23, 1996, the Registrant transferred to NBD Bank, N.A., as
trustee, ("NBD") the Registrant's 24.5% equity interest (the "Interest") in RSR,
LLC ("RSR"), representing the equivalent of a 4.9% equity interest in a
riverboat gaming entertainment complex in the City of Rising Sun, Indiana on the
Ohio River (the "Rising Sun Project"). Additionally, the Registrant has granted
a irrevocable proxy to the other members of RSR (collectively, the "Remaining
Members") to vote the Interest in the same manner and proportion as the
Remaining Members vote on any matter, provided, however, that such proxy may not
be exercised to vote in favor of any action that could reasonably be viewed as
decreasing or otherwise adversely affecting the value of the Interest or the
ability to sell or otherwise transfer the Interest. Prior to August 23, 1998,
the Registrant may instruct NBD to sell any portion of the Interest, for the
benefit of the Registrant, to a third party approved by the Indiana Gaming
Commission ("IGC"), subject to rights of first refusal held by RSR, the
Remaining Members and Indiana RBG, L.P. ("RBG"), the partner of RSR in the
Rising Sun Project. Any portion of the Interest which is not transferred prior
to August 23, 1998 shall be purchased from NBD, for the benefit of the
Registrant, by either the Remaining Members or RSR at an average appraised fair
market value. As a result of the Registrant, RSR, the Remaining Members and RBG
advising the staff of the IGC of their intention to enter into the foregoing
arrangements, no determination on the Registrant's suitability for licensure was
made at the meetings of the IGC held on August 19 and 20, 1996 and the
Registrant does not believe that the IGC has any present intention of making a
determination on the Registrant's suitability for licensure.
Effective September 12, 1996, J. Douglas Wellington, the Registrant's President
and Chief Operating Officer, was elected as Chief Executive Officer. Also, Paul
L. Patrizio of Rick, Steiner & Tannenbaum, P.C. and a member of the Board of
Directors of the Registrant, was appointed Chairman of the Board of the
Registrant.
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Item 7. Financial Statements and Exhibits
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
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<S> <C>
10.71 Employment Agreement dated September 12, 1996 between the Registrant and J.
Douglas Wellington
10.72 Irrevocable Proxy and Consent Agreement dated as of August 23, 1996 by and
between Paul L. Partridge, Patrick F. Daly, James A. Everatt, Charles E.
Reisert, Jr., Eric C. Jackson, the Registrant and RSR, LLC
Exhibit A Amended and Restated Operating Agreement of Rising Sun
Riverboat Casino & Resort, LLC, dated January 5, 1996
Exhibit B Amended and Restated Operating Agreement of RSR, LLC,
dated February 26, 1996
Exhibit C Trust Agreement, dated as of August 23, 1996 (see
Exhibit 10.73)
10.73 Trust Agreement dated as of August 23, 1996 by and between the Registrant
and NBD Bank, N.A.
Exhibit A Irrevocable Proxy and Consent Agreement (See Exhibit
10.72)
Exhibit B Schedule
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
American Gaming & Entertainment, Ltd.
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(Registrant)
DATE: September 26, 1996
By: /s/ J. Douglas Wellington
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J. DOUGLAS WELLINGTON
President and Chief Executive Officer and Principal
Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.71 Employment Agreement dated September 12, 1996 between the
Registrant and J. Douglas Wellington (filed herewith)
10.72 Irrevocable Proxy and Consent Agreement dated as of
August 23, 1996 by and between Paul L. Partridge, Patrick
F. Daly, James A. Everatt, Charles E. Reisert, Jr., Eric
C. Jackson, the Registrant and RSR, LLC (filed herewith)
10.73 Trust Agreement dated as of August 23, 1996 by and
between the Registrant and NBD Bank, N.A. (filed herewith)
</TABLE>
5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of September 12, 1996 between American Gaming
& Entertainment, Ltd., a Delaware corporation (the "Company"), and J. Douglas
Wellington, a resident of New Jersey ("Executive").
A. Executive desires to be employed as President and Chief Executive
Officer of the Company.
B. The Company desires to retain the benefit of Executive's experience and
loyalty, and to employ Executive as President and Chief Executive Officer of the
Company.
C. The Company intends to negotiate with Shamrock Holdings Group, Inc.,
formerly known as Bennett Holdings, Inc., ("Bennett"), the Company's largest
creditor and stockholder, to restructure all obligations due from the Company to
Bennett. The Company understands that Shamrock is owned by Richard C. Breedan,
the Trustee (the "Trustee") under Chapter 11 of the U.S. Bankruptcy Code for
certain entities related to Bennett. Executive has advised that the Company that
he would execute this Employment Agreement and agree to participate in the
negotiation and restructuring efforts and be responsible for the day-to-day
operations of the Company only if the Company pays to Executive the signing
bonus set forth in Section 4(b) and causes to have issued to Executive the
letter of credit set forth in Section 4(g).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. Definitions.
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The terms used in this Agreement shall be defined as follows:
(a) "Agreement" shall mean this Employment Agreement as amended from
time to time.
(b) "Base Salary" shall mean the annual base salary payable to
Executive pursuant to Section 4(a) hereof.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean termination of the Executive's employment with
the Company by the Board because of (i) Executive's willful misconduct or gross
negligence in the performance of, or the willful failure or refusal by Executive
to perform substantially, Executive's duties and obligations under this
Agreement, as an officer of the Company or the lawful duties which are otherwise
assigned to Executive by the Board, (ii) the inexcusable repeated or prolonged
absence from work by Executive (other than pursuant to a Permanent Disability
(as defined below) of Executive), (iii) any breach by Executive of Executive's
material obligations under this Agreement, (iv) the habitual abuse of illegal or
intoxicating substances by Executive, (v) conviction or entry of a plea of
guilty to any felony by Executive, (vi) Executive's engagement in fraud,
misappropriation, embezzlement, or other act or acts of dishonesty resulting in,
or intended to result in, substantial personal enrichment of Executive at the
expense of the Company or (vii) the entry of any final civil judgment in
connection with any allegation of fraud, misrepresentation, misappropriation or
any other intentional tort or intentional statute violation related to
Executive's employment with the Company. A Cause pursuant to clauses (i) - (iv)
of this Section 1(d) shall be deemed to exist only if such Cause has not been
cured by Executive within two weeks after written notice thereof from the
Company to Executive.
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(e) A "Change in Control" shall be deemed to have occurred if, at any
time during the two-year period after the date of this Agreement (1) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
(other than an "Affiliate" (as defined in the Exchange Act) of Bennett) becomes
the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing greater than
50% of the combined voting power (with respect to the election of directors, or
a merger, consolidation or liquidation of the Company or a sale of all or
substantially all of the business or assets of the Company) of the Company's
then outstanding securities who was not as of the date of this Agreement the
Beneficial Owner of securities of the Company representing greater than 50% of
such combined voting power of the Company's securities outstanding as of the
date of this Agreement; (2) the consummation of a merger or consolidation of the
Company with or into any other corporation, other than (A) a merger or
consolidation which would result in all or substantially all of the Beneficial
Owners of voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) greater than 50% of the combined
voting power (with respect to the election of directors, or a merger,
consolidation or liquidation of the Company or a sale of all or substantially
all of the business or assets of the Company) of the securities of the Company
or of such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger, consolidation or distribution effected to
implement a recapitalization or reorganization of the Company (or similar
transaction) which results in no person (other than Bennett or any of its
Affiliates) after such transaction, directly or indirectly, owning more than 40%
of the combined voting power (with respect to the election of directors, or a
merger, consolidation or liquidation of the Company or a sale of all or
substantially all of the business or assets of the Company) of the Company's
then outstanding securities; (3) the consummation of a plan of complete
liquidation of the Company or of an agreement for the sale or disposition by the
Company of all or substantially all of the Company's business or assets to any
person or (4) Bennett or the Trustee exercises control over the Company,
including without limitation (A) causing the election of any person not
currently a director of the Company to the Board or (B) causing the appointment
of any person as an officer of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" shall mean the Compensation Committee of the Board, if
one exists and, if not, shall mean the Board.
(h) "Confidential Information" shall have the meaning ascribed to it in
Section 7 below.
(i) "Effective Date" shall mean the date of this Agreement.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(k) "Executive Benefit Plans" shall mean any plans within the meaning
of Sections 4(c) and (d) of this Agreement.
(l) "Period" shall mean the two-year period commencing on the date of
this Agreement. If the parties hereto agree to any extension of the Period, the
term "Period" shall include all such extensions thereof; provided, that the
Company shall not be obligated to grant any such extension.
(m) "Permanently Disabled" shall mean prevented from performing his
obligations hereunder for a period of 120 consecutive days as a result of his
physical or mental health, as evaluated by sufficient documentation including
doctors' statements.
(n) "Stock Options" shall mean any options held by Executive granting
him the right to acquire shares of common stock of the Company.
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(o) "Substantial Breach" shall mean (1) a substantial reduction in the
nature or status of Executive's responsibilities hereunder; provided, that it
shall not be deemed to be a Substantial Breach if Executive's duties are revised
so that he remains an officer but is removed or not reelected as President or as
Chief Operating Officer or as a director of the Company; (2) a reduction by the
Company in the Base Salary of Executive; (3) the failure by the Company to allow
Executive to participate to the full extent in all plans, programs or benefits
in accordance with Sections 4(b) to (d), inclusive, hereof; (4) the failure by
the Company to pay, distribute or grant any amounts of cash, stock or other
compensation to Executive to which he is contractually entitled; or (5) the
failure of the Company to maintain its principal offices during the Period in
Atlantic, Bergen, Passaic, Morris or Essex counties in New Jersey or Rockland
county in New York, provided, however, that the Company move and maintain its
principal offices through the end of the Period in Bergen, Passaic, Morris or
Essex counties in New Jersey or Rockland county in New York upon the merger or
consolidation with or into another entity. A Substantial Breach shall be deemed
to occur only if such Substantial Breach has not been corrected by the Company
within two weeks of receipt of notice from Executive of the occurrence of such
Substantial Breach, which notice shall specifically set forth the nature of the
Substantial Breach.
2. Employment and Duties.
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(a) General. From the date of this Agreement through the end of the
Period, the Company hereby employs Executive, and Executive agrees upon the
terms and conditions herein set forth, to serve as an officer of the Company and
Executive, in such capacity, shall perform duties substantially the same as
normally performed by persons in like positions in similar companies and
substantially the same as those performed by Executive immediately prior to the
date of this Agreement. So long as the principal offices of the Company are not
located in Bergen, Passaic, Morris or Essex counties in New Jersey or Rockland
county in New York, Executive may work one day per week from his home and the
Company shall pay for a fax machine and fax line for Executive to work at such
location.
(b) No Other Employment. Throughout the time that Executive is employed
by the Company during the Period, Executive shall, except as may from time to
time be otherwise agreed in writing by the Company and unless prevented for less
than 120 consecutive days by ill health, devote his full-time working hours to
his duties hereunder and Executive shall not, directly or indirectly, render
services to any other person or organization for which he receives compensation
(excluding outside board activities for a public charity, which involve modest
time commitments) without the consent of the Board or otherwise engage in
activities which would interfere with the performance of his duties hereunder;
provided, however, that the Executive may render volunteer services for which he
is not compensated so long as such services do not interfere with the
performance of his duties hereunder.
3. Term of Employment. Subject to earlier termination of employment
hereunder pursuant to Sections 5 or 6 of this Agreement, the Company shall
retain Executive during the Period and Executive shall serve in the employ of
the Company for the Period.
4. Compensation and Other Benefits. Subject to the provisions of this
Agreement, the Company shall pay and provide the following compensation and
other benefits to Executive during the Period as compensation for services
rendered hereunder:
(a) Base Salary. The Company shall pay to Executive an annual base
salary in the amount of one hundred and twenty-five thousand dollars ($125,000)
(the "Base Salary") payable in accordance with the Company's standard payroll
policies. The Company shall be entitled to deduct or withhold all taxes and
charges which the Company may be required to deduct or withhold therefrom. The
Base Salary will be reviewed not less than annually by the Committee and may be
increased at any time but may not be decreased without the consent of Executive.
(b) Signing Bonus. Upon the execution by the Company and Executive of
this Agreement, the Company shall promptly pay to Executive a signing bonus in
the amount of sixty-two thousand five hundred dollars ($62,500).
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8
(c) Incentive Compensation. At all times during the Period, Executive
shall be entitled to participate in all incentive compensation plans and
programs of the Company in which other Company executives participate, existing
from time to time. Subject to this Section 4, the Company shall at all times
maintain incentive compensation plans and programs that provide Executive with
substantially the same opportunities for incentive compensation as those in
effect immediately prior to the date of this Agreement.
(d) Stock Options. Executive shall be entitled to participate in all
stock option plans and programs of the Company existing from time to time other
than plans that exclude executive employees generally; provided, that the
Company shall have no obligation to grant any options under such plans or
programs; and provided, further, that upon exercise of the Company's rights set
forth in Section 17 of the Company's Stock Option Plan the Company may terminate
such plan. Notwithstanding the terms of the plans or agreements pursuant to
which Executive's Stock Options were granted, in the event that Executive's
employment hereunder is terminated by the Company pursuant to clause (v), (vi)
or (vii) of Section 1(d), all of Executive's Stock Options shall immediately
terminate and Executive shall have no right to exercise such Stock Options or
receive any payment for them. Upon the execution by the Company and Executive of
this Agreement, the Company shall promptly grant to Executive options to
purchase at the market price in effect on the date of this Agreement 350,000
shares of common stock of the Company pursuant to a stock option agreement
having terms substantially similar to the existing stock option agreement
covering Executive's existing options.
(e) Other Executive Benefit Plans. Executive shall be eligible to
participate in all pension and welfare plans and programs of the Company for
executive employees, existing from time to time, including, without limitation,
the following:
(i) All qualified benefit plans and programs (e.g., defined
contribution, supplemental retirement and Section 401(k) plans, long-term
disability and life insurance plans and programs);
(ii) All hospitalization and medical plans and programs; and
(iii) All retirement plans and programs.
Such other executive benefit plans shall be substantially similar to those plans
in effect at the Company immediately prior to the Effective Date.
(f) Severance Compensation. The Company shall pay to Executive a
severance payment equal to two (2) years' Base Salary (i) in the event that
Executive is terminated without Cause, (ii) upon the occurrence of a Substantial
Breach or (iii) Executive resigns from his employment hereunder after a Change
in Control.
(g) Letter of Credit. Upon execution of this Agreement by the Company
and Executive, the Company shall cause to have issued an irrevocable letter of
credit (the "L/C") in the amount of sixty-two thousand five hundred dollars
($62,500) to be paid to Executive in the event that (i) Executive's employment
is terminated by the Company without Cause, (ii) the Company files for
bankruptcy protection or an involuntary case is commenced against the Company,
(iii) Executive remains employed by the Company for a period of one (1) year
after the date of this Agreement, (iv) a Substantial Breach has occurred or (v)
Executive resigns from his employment hereunder after a Change of Control.
(h) Car Allowance. The Company shall pay to Executive a car allowance
of $500 per month, payable on the first of each month, with the payment for
September 1996 being made upon execution of this Agreement.
(i) Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company, nor shall anything
herein limit or reduce such rights as Executive may have under any other
agreements with the Company (except as provided in Section 6(c)).
Notwithstanding any provision hereof, amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan or program of the
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement. Executive's entitlement to any other
compensation or benefits shall be determined in accordance with the Company's
employee benefit plans and other applicable programs, policies and practices
then in effect.
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5. Termination of Employment for Cause.
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(a) Compensation and Benefits. If, prior to the expiration of the
Period, (i) Executive's employment hereunder is terminated by the Company for
Cause, or (ii) Executive resigns from his employment hereunder other than under
circumstances covered by Section 6 below, Executive shall not be eligible to
receive any compensation or benefits or to participate in any plans or programs
under Section 4 hereof with respect to the Period after the date of such
termination except for the right to receive benefits under any plan or program,
to the extent vested, in accordance with the terms of such plan or program and
except for benefits provided in accordance with customary practices of the
Company at Executive's expense (e.g., hospitalization and medical insurance);
provided, however, that Executive's Stock Options shall be governed by the
provisions of Section 4(d) above.
(b) Date of Termination. The date of termination of Executive's
employment hereunder by the Company under this Section 5 shall be (i)
immediately upon receipt by Executive of written notice of termination for
Cause; provided, that the Cause specified in such notice shall not have been
corrected by Executive within two (2) weeks after Executive received notice of
such Cause if Executive had the right pursuant to Section 1(d) to cure such
Cause or (ii) immediately upon receipt by the Company of written notice of
Executive's resignation, except if such resignation is due to a Substantial
Breach.
6. Termination of Employment Other Than For Cause.
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(a) Compensation and Benefits. If, prior to the expiration of the
Period, Executive's employment hereunder is terminated by the Company without
Cause or for any reason within one year after a Change in Control, or if, prior
to the expiration of the Period, Executive resigns from his employment hereunder
following a Substantial Breach or for any reason within one year after a Change
in Control, or if, prior to the expiration of the Period, Executive dies or
becomes Permanently Disabled while employed hereunder, notwithstanding such
termination or resignation, through the end of the Period:
(i) Executive shall be entitled to continue to receive payments
through the expiration of the Period under Section 4(a) above at the rate of his
Base Salary as in effect on the date of termination or resignation;
(ii) Executive shall be entitled to receive bonuses under any
incentive compensation plans described in Section 4(b) as in effect on the date
of termination or resignation determined as though Executive had remained
employed pursuant to this Agreement;
(iii) All of Executive's Stock Options shall immediately vest and
remain exercisable through the option term of each respective Stock Option as
set forth in the respective Stock Option grant letter;
(iv) Executive shall remain eligible to participate in all
Executive Benefit plans and for purposes of determining Executive's
participation and benefits thereunder, Executive's employment with the Company
shall be deemed to continue and his compensation shall include the payments
under Section 6(a)(i) and (ii) above; and
(v) Executive shall be entitled to receive the severance
compensation described in Section 4(f).
(b) Date of Termination. The date of termination's of Executive's
employment by the Company under this Section 6 shall be the date specified in
the written notice of termination to Executive, or if no such date is specified
therein, the date on which such notice is given to Executive. The date of
resignation by Executive under this Section 6 as a result of a Substantial
Breach shall be immediately upon receipt by the Company of written notice of
resignation; provided, that the Substantial Breach shall not have been corrected
by the Company during the two (2) week period after such notice of such
Substantial Breach was provided to the Company pursuant to Section 1(p)
hereunder. The date of termination of Executive's employment in the event of his
death shall be the date of Executive's death or in the event Executive becomes
Permanently Disabled, 120 days after the date such disability commenced.
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(c) Reduction in Payments. The amount of any payments of compensation
and benefits to Executive under this Section 6 shall be reduced by the amount,
if any, necessary to prevent any part of such payments from being treated as an
"excess parachute payment" (as that term is defined for purposes of Section
280G(b)(1) of the Code and the related federal tax regulations); provided,
however, that such reduction shall apply only if the reduction will result in
payments to Executive under this Section 6 which have, after consideration of
all applicable taxes, a greater after-tax benefit to Executive than the amount
of such payments to Executive under this Section 6 computed without such
reduction. The determination of relative benefits shall be made by the Company
on the basis of information supplied by Executive.
7. Nondisclosure of Confidential Information.
-----------------------------------------
(a) Definition. For purposes of this Agreement "Confidential
Information" means any information or compilation of information, not generally
known, which is proprietary to the Company and relates to the Company's existing
or reasonably foreseeable business. All information which the Company identifies
as being "confidential" or "trade secret" shall be presumed to be Confidential
Information. Confidential Information shall also include any confidential
information of a parent, subsidiary or sister corporation of the Company and any
information disclosed by a third party under contract with the Company which
contract requires such disclosed information be kept confidential. Confidential
Information shall not include information that is in or enters the public domain
other than through a breach of confidentiality owed to the Company.
(b) Nondisclosure. During the Period and at all times thereafter,
Executive shall hold in strictest of confidence and will never disclose,
furnish, transfer, communicate, make assessable to any person or use in any way
Confidential Information for Executive's own or another's benefit or permit the
same to be used in competition with the Company, nor will Executive accept any
employment which would, by the nature of the position, inherently involve the
use or disclosure by Executive of Confidential Information.
8. Specific Performance and Injunctive Relief. In addition to any other
relief afforded by law, the Company shall have the right to enforce the
covenants contained in Section 7 hereof by specific performance and by
preliminary, temporary and permanent injunctive relief against Executive and any
other person concerned thereby, it being understood that damages, specific
performance or injunctive relief shall be proper modes of relief and are not to
be considered as alternative remedies. If the Company is successful in any
action for specific performance or injunctive relief, the costs incurred by the
Company related thereto, including reasonable attorneys' fees and expenses,
shall be paid by Executive.
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any and all oral or written
understanding between the parties hereto.
10. Headings of No Effect. The Section headings contained in this Agreement
are included solely for convenience of reference and shall not in any way affect
the meaning or interpretation of any of the provisions of this Agreement.
11. Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto, any successor to or assigns of the Company,
and Executive's heirs and the personal representative of Executive's estate.
12. Severability. If the final determination of a court of competent
jurisdiction declares, after the expiration of the time within which judicial
review (if permitted) of such determination may be perfected, that any term or
provision hereof is invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable term
or provision shall be deemed replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
13. Amendment; Waiver. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by both parties
hereto. The waiver by either party hereto of compliance with any provision of
this Agreement by the other party hereto shall not operate or be construed as a
waiver of any other provision of this Agreement, or of any subsequent breach by
such party of a provision of this Agreement.
14. Renewal. The Company shall be under no obligation to renew this
Agreement.
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15. Governing Law. All matters affecting this Agreement, including the
validity hereof, are to be governed by, interpreted and construed in accordance
with the laws of the State of New Jersey.
16. Notices. Any notice hereunder by either party hereto to the other shall
be given in writing by personal delivery or certified mail, return receipt
requested. If addressed to Executive, the notice shall be delivered or mailed to
Executive at the address specified under Executive's signature hereto or such
other address which Executive has advised the Company to send notice to, or if
addressed to the Company, the notice shall be delivered or mailed to the Company
at its executive offices and to the attention of each member of the Board of
Directors of the Company at their respective business addresses. A notice shall
be deemed given, if by personal delivery, on the date of such delivery or, if by
certified mail, on the date shown on the applicable return receipt.
17. Consideration. The parties acknowledge that the restrictions contained
in Section 7 hereof are a reasonable and necessary protection of the immediate
interests of the Company and any violation of these restrictions would cause
substantial injury to the Company and that the Company would not have entered
into this Employment Agreement without receiving the additional consideration
offered by Executive in binding himself to these restrictions.
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IN WITNESS WHEREOF, the Company has caused the Agreement to be signed by
its officer pursuant to the authority of its Board, and Executive has executed
this Agreement, as of the day and year first written above.
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: /s/ Paul L. Patrizio
---------------------------------
Name: Paul L. Patrizio
Title: Chairman
/s/ J. Douglas Wellington
---------------------------------
J. Douglas Wellington
Address: 51 Beech Road
Glen Rock, NJ 07452
13
IRREVOCABLE PROXY AND CONSENT AGREEMENT
THIS IRREVOCABLE PROXY AND CONSENT AGREEMENT (the "Agreement"), by and
between Paul R. Partridge, Patrick F. Daly, James A. Everatt, Charles E.
Reisert, Jr. and Eric C. Jackson (each a "Remaining Member" and collectively,
the "Remaining Members"), American Gaming & Entertainment, Ltd. ("American"),
and RSR, LLC ("RSR"), is dated as of this 23rd day of August, 1996.
WHEREAS, American owns a 24.5% Membership Interest (the "American
Interest"), and the Remaining Members, collectively, own a 75.5% Membership
Interest in RSR;
WHEREAS, RSR and Indiana RBG, L.P. ("RBG"), respectively, own 20% and
80% interests in Grand Victoria Casino & Resort, LLC ("Grand") which is
organized under and operates pursuant to the Amended and Restated Operating
Agreement of Rising Sun Riverboat Casino & Resort, LLC, dated January 5,
1996, a true and complete copy of which, as in effect this day, is attached
hereto as Exhibit A (the "Grand Operating Agreement");
WHEREAS, Grand has been awarded by the Indiana Gaming Commission (the
"Commission") a Certificate of Suitability to develop, own and operate a
riverboat gaming facility in the City of Rising Sun, Indiana.
WHEREAS, any capitalized term not otherwise defined herein shall have
the meaning ascribed thereto in the Amended and Restated Operating
Agreement of RSR, LLC dated February 26, 1996, a true and complete copy of
which, as in effect this day, is attached hereto as Exhibit B (the "RSR
Operating Agreement"); and
WHEREAS, American desires to transfer the American Interest to a
trustee (the "Trustee") under a certain Trust Agreement dated as of August
23, 1996 and attached hereto as Exhibit C (the "Trust Agreement") and the
Remaining Members, RSR, RBG and Grand each desire to permit American to so
transfer the American Interest, subject to the terms and conditions hereof.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Irrevocable Proxy. American hereby grants to the Remaining
Members, for so long as the American Interest remains held by the Trustee,
an irrevocable proxy to vote, on each matter submitted to a vote of the
Members, the American Interest in the same manner and proportion as the
Remaining Members have voted on such matter; provided, however, that such
proxy may not be exercised to vote in favor of any action that could
reasonably be viewed as decreasing or otherwise adversely affecting the
value of the American Interest or the ability to sell or otherwise transfer
the American Interest, including specifically, but not exclusively, any
amendment to Article III (Capital Contributions, Member Loans, Capital
Accounts), Article IV (Allocation of Profits or Losses), Article V
(Distributions), or Article IX (Assignability of Member s Interest -
Buy-Sell Provisions) of the RSR Operating Agreement or the definitions used
in such Articles; and provided that such proxy may only be voted at a
meeting of Members duly called and held.
<PAGE>
14
2. Consent to Transfer to Trustee. The Remaining Members (and, to the extent
required by the Grand Operating Agreement, RBG and Grand) each hereby
consent to the transfer of the American Interest to, and the substitution
as a Member of RSR of, the Trustee for the limited purposes and period set
forth in Trust Agreement, and agree, along with RSR, to cause a certificate
representing the American Interest to be issued by RSR in the name of the
Trustee.
3. Consent to Transfer to Third Party Transferee. Whenever American shall have
received an offer (a "Third Party Offer") from a person or entity (a "Third
Party Offeree") to purchase any portion of the American Interest, American
shall not sell such portion of the American Interest unless and until
American shall have offered such portion of the American Interest to RSR,
the Remaining Members and RBG as follows:
a. American shall first deliver to the secretary of RSR (with a copy to
RBG) written notice setting forth the portion of the American Interest
to be sold, the price and the other terms of the Third Party Offer.
RSR shall have thirty (30) days from the date of delivery of such
notice within which to exercise its option to purchase all or any
portion of the portion of the American Interest so offered for the
price and otherwise on the terms of the Third Party Offer.
b. In the event that RSR shall fail to elect to purchase all of such
portion of the American Interest within such thirty (30) day period,
the Secretary of RSR shall, within five (5) days thereafter, give
written notice to each of the Remaining Members (with a copy to
American and RBG) stating the portion of the American Interest offered
for sale but not purchased by RSR, and the price, and other terms upon
which the sale is being made. Within thirty (30) days after the
delivery of such notices, any Remaining Member desiring to purchase
part or all of such portion of the American Interest for the price and
otherwise on the terms of the Third Party Offer shall deliver to the
secretary of RSR a written offer for the portion of the American
Interest desired by him, accompanied by the purchase price therefor
with authorization to pay such purchase price against delivery of such
portion of the American Interest. On the thirty-first (31st) day after
the secretary of RSR shall have delivered the written notice of sale
to the Remaining Members, the secretary of RSR shall deliver to
American (with a copy to RBG) a notice (the "Remaining Member Purchase
Notice") setting forth the portion, if any, of the American Interest
to be purchased by the Remaining Members.
i. If the Remaining Members offer to purchase more than the total
portion of the American Interest available for purchase by them,
then the Remaining Members offering to purchase shall be entitled
to purchase such portion of such American Interest as the portion
of the Interest of RSR held by such Remaining Member bears to the
total portion of Interest of RSR held by all Remaining Members
offering to purchase. In the event that the portion of the
American Interest to which any Remaining Member should be
entitled to purchase is more than the portion of the American
Interest such Remaining Member desires to purchase, each
Remaining Member desiring to purchase an additional portion of
the American Interest shall be entitled to purchase such
proportion of the overplus as the portion of Interest of RSR
which such Remaining Member holds bears to the total portion of
Interest of RSR held by all Remaining Members desiring to
participate.
c. In the event that the Remaining Member Purchase Notice indicates that
a portion of the American Interest being offered for sale will not be
purchased by RSR or the Remaining Members, RBG may purchase all or
part of such remaining interest for the proportionate price and
otherwise on the terms of the Third Party Offer by delivering to
American a written offer to purchase all or part of the remaining
portion of the American Interest being offered for sale. Such notice
must be delivered to American within five (5) days after the date of
delivery of the Remaining Member Purchase Notice.
<PAGE>
15
d. In the event that any of RSR, the Remaining Members or RBG shall have
elected to purchase any portion of the American Interest being offered
for sale, the closing on such sale (or sales) shall occur at the
offices of Bose McKinney & Evans within ten (10) days after the
earlier of (i) the date upon which one or more parties shall have
elected to purchase the entire portion of the American Interest being
offered for sale and (ii) the date upon which all option periods set
forth in this Section 3 shall have expired. Such closing shall be
conducted in accordance with the terms of the Third Party Offer.
e. In the event that the option periods set forth in this Section 3 shall
have expired and a portion of the American Interest being offered for
sale shall not have been purchased, or in the event that the closing
under Section 3(d) shall not have occurred timely (other than due to
American's failure to sell), then American may cause the Trustee to
sell the remaining portion of the American Interest being offered for
sale in accordance with the Third Party Offer and, provided that such
Third Party Transferee shall have been approved by the Commission and
such sale shall have occurred within sixty (60) days thereafter, the
Remaining Members (and, to the extent required by the Grand Operating
Agreement, RBG and Grand) each hereby consent to the transfer of the
American Interest to, and the substitution as a Member of RSR of, the
Third Party Transferee.
4. Transfer to the Remaining Members or redemption by RSR. If any portion of
the American Interest has not been transferred to a Third Party Transferee
on or before the second anniversary of the date of this Agreement (the
"Remaining American Interest"), then each of the Remaining Members and RSR
shall have the right to purchase or redeem the Remaining American Interest
as follows:
a. Each of the Remaining Members shall have the right to purchase the
Remaining American Interest by delivering written notice (the "Buy-Out
Notice") of such election (each Remaining Member who delivers a
Buy-Out Notice, a "Purchasing Member") to American, the Trustee and
the Commission. Each delivered Buy-Out Notice shall constitute an
agreement on the part of the Purchasing Member to buy, and the Trustee
to sell, the entire Remaining American Interest for a price, payable
in cash at the closing, equal to Fair Market Value.
i. If there shall be more than one Purchasing Member, each shall
purchase a portion of the Remaining American Interest pro rata in
accordance with the respective Interest of RSR of the Purchasing
Members.
ii. The closing shall take place not later than ten (10) days after
the two initial appraisals of the Remaining American Interest are
completed. At the closing, the Trustee and American shall execute
and deliver such instruments, documents and certificates as the
Purchasing Members shall reasonably request (keeping in mind that
the Trustee will not make any representations other than with
respect to its own actions) in order to transfer and assign to
the Purchasing Members (or any Affiliate thereof designated in
writing) the entire Remaining American Interest, including,
without limitation, the entire interest of Trustee in all loans,
and all interest accrued and unpaid thereon, and the Purchasing
Members shall deliver the purchase price in cash (or by certified
or cashier's check payable to the order of the Trustee). The
Purchasing Members shall, prior to and/or after the closing,
substitute Financial Accommodations for any Financial
Accommodations in existence for American and/or the Trustee and
shall use their reasonable efforts to cause any Financial
Accommodation of American and/or the Trustee to be released. In
the event of any dispute regarding the amount of the purchase
price, there shall be paid to Trustee at the closing the amount
not in dispute (i.e., the amount of the lower of the two ----
appraisals) and the remainder shall be paid promptly upon the
determination thereof by the parties, or, in the event they shall
fail to agree on the amount within thirty (30) days after
closing, by arbitration conducted in Chicago, Illinois, in
accordance with the rules and regulations of the American
Arbitration Association. In order to further secure the
performance of the obligations of the parties hereto, American
hereby appoints the Purchasing Members, and each of their
Affiliates, and the officers, directors, shareholders, employees
and agents of American and its Affiliates, as the agent and
attorney-in-fact for and on behalf of each Purchasing Member to
execute, acknowledge and deliver such instruments, documents or
certificates as are hereinafter contemplated in connection with
the buy-out contemplated hereby.
<PAGE>
16
b. If a Buy-Out Notice is not given by at least one of the Remaining
Members within thirty days after the second anniversary of the date of
this Agreement, RSR shall redeem the entire Remaining American
Interest for a price, payable in cash at the closing, equal to Fair
Market Value (the "Redemption").
i. RSR shall make a good faith effort to obtain third party
financing to complete the Redemption. If RSR fails to obtain such
third party financing, RBG shall lend to RSR at the closing on
the Redemption (and at such other times as RSR shall be required
to make payments under Section 4(b)(ii) hereunder) sufficient
funds to complete such Redemption in an amount not to exceed the
Fair Market Value (as determined Section 4(c) hereunder) of the
American Interest. RBG s loan shall be fully secured by RSR s
membership interest in Grand and all distributions from Grand to
which RSR is entitled shall be paid by Grand to RBG in repayment
of such loan, together with interest thereon at a commercially
reasonable rate, not less than Prime but in no event greater than
16% per annum, until the loan and interest thereon is repaid. At
the closing on the Redemption, RSR shall execute and deliver to
RBG such agreements, documents and instruments as RBG shall
reasonably request to evidence and secure the loan.
ii. The closing shall take place not later than ten (10) days after
the two initial appraisals of the Remaining American Interest are
completed. At the closing, the Trustee and American shall execute
and deliver such instruments, documents and certificates as RSR
shall reasonably request (keeping in mind that the Trustee will
not make any representations other than with respect to its own
actions) in order to effect the Redemption of the entire
Remaining American Interest, including, without limitation, the
entire interest of Trustee in all loans, and all interest accrued
and unpaid thereon, and RSR shall deliver the purchase price in
cash (or by certified or cashier's check payable to the order of
the Trustee). RSR shall, prior to and/or after the closing,
substitute Financial Accommodations for any Financial
Accommodations in existence for American and/or the Trustee and
shall use its reasonable efforts to cause any Financial
Accommodation of American and/or the Trustee to be released. In
the event of any dispute regarding the amount of the purchase
price, there shall be paid to Trustee at the closing the amount
not in dispute (i.e., ---- the amount of the lower of the two
appraisals) and the remainder shall be paid promptly upon the
determination thereof by the parties, or, in the event they shall
fail to agree on the amount within thirty (30) days after the
closing, by final and binding arbitration conducted in Chicago,
Illinois, in accordance with the rules and regulations of the
American Arbitration Association.
iii. Notwithstanding the foregoing, RSR shall not be obligated to
close on the Redemption unless (i) American shall provide RSR
with reasonable assurances that the Redemption will not be voided
or otherwise set aside in a bankruptcy proceeding or (ii)
American shall have consented to the placement of the proceeds of
the Redemption, together with the American Interest, in an
interest bearing escrow account for a period of one year and one
day from the date of such closing, which escrow would provide
that the proceeds from the Redemption would revert to RSR if
American were to become Bankrupt Member (treating American as a
Member solely for the purposes of such definition) while such
proceeds were held in escrow and American was not then able to
provide RSR with reasonable assurances that the Redemption would
not be voided or otherwise set aside. Upon the termination of the
escrow, the Redemption proceeds shall be distributed to American
(or the Trustee, as applicable) and the American Interest and any
distributions paid thereon during the escrow shall be distributed
to RSR. If the parties cannot agree on what constitutes
"reasonable assurances" hereunder within thirty (30) days after
the date for the closing required hereunder or, if an escrow
account is used, the date American becomes a Bankrupt Member,
then the parties shall promptly submit the issue of what
constitutes reasonable assurances hereunder to final and binding
arbitration conducted in Chicago, Illinois in accordance with the
rules and regulations of the American Arbitration Association.
<PAGE>
17
c. For purposes of this Section 4, Fair Market Value of the Remaining
American Interest shall be determined by two independent appraisers,
one selected by RSR and one selected by American. Each such appraiser
shall perform an appraisal at the cost of the respective party. If the
two appraisals are within 10% of each other, the Fair Market Value
shall be the average of the two appraisals. If the two appraisals are
not within 10% of each other, a third appraiser shall be selected by
the two appraisers who shall perform a third appraisal. In such event,
the Fair Market Value of the Remaining American Interest shall be the
average of the three appraisals. The cost of the third appraisal will
be split evenly between the parties. All selected appraisers must
possess substantial current expertise in riverboat casino valuations.
5. Access to Information. For so long as the American Interest remains held by
the Trustee, American shall have access to and receive such information
with respect to RSR as American deems reasonably necessary to effect the
sale of the American Interest.
6. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of any successors or assigns of the parties hereto. This Agreement
shall be governed and interpreted in accordance with the laws of the State
of Indiana. All notices required or permitted hereunder, if in writing and
addressed to the applicable party at the address set forth below, shall be
deemed given on the business day after being deposited with Federal Express
or other similar overnight delivery for priority overnight delivery:
If to American: With copy to:
Bayport One, Suite 300 Bose McKinney & Evans
Yacht Club Drive 135 N. Pennsylvania Street, Suite 2700
West Atlantic City, NJ 08232 Indianapolis, IN 46204
Attn: J. Douglas Wellington Attn: C. Joseph Russell
If to RSR: With copy to:
The Daly Group Krieg DeVault Alexander and Capehart
615 North Wabash Avenue Suite 2800, One Indiana Square
Chicago, IL 60611 Indianapolis, IN 46204
Attn: Patrick F. Daly Attn: Paul F. Lindemann
If to Grand or RBG: With copy to:
Richard L. Schulze Philip M. Kayman
Suite 3800 Neal Gerber & Eisenberg
200 West Madison Two North LaSalle Street
Chicago, IL 60606 Chicago, IL 60602
If to the Remaining Members, notice shall be delivered to the last address
set forth in RSR's records.
Any of the addresses set forth herein may be changed by giving notice as
provided herein. In addition to any other rights or remedies of any of the
parties hereto, any aggrieved party shall be entitled to appropriate
injunctive relief or specific performance against any party in breach of
this Agreement and shall be entitled to recover from the party in breach
all reasonable costs, fees and expenses (including but not limited to
reasonable attorneys' fees and expenses) incurred in enforcing its rights
hereunder. This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. In the event of a
conflict between the provisions hereof and the provisions of any other
document or instrument heretofore executed and delivered, the terms and
conditions of this Agreement shall govern. This Agreement may be signed in
one or more counterparts, each of which shall be deemed an original, but
all of which, taken together, shall constitute but one agreement.
<PAGE>
18
IN WITNESS WHEREOF, This Agreement is executed as of the date first written
above.
AMERICAN GAMING & ENTERTAINMENT, LTD. /s/ Paul R. Partridge
--------------------------------
Paul R. Partridge
By: /s/ J. Douglas Wellington
---------------------------------
J. Douglas Wellington, President /s/ Patrick F. Daly
--------------------------------
Patrick F. Daly
RSR, LLC /s/ James A. Everatt
--------------------------------
James A. Everatt
By: /s/ Patrick F. Daly
---------------------------------
Patrick F. Daly, Managing Member /s/ Charles E. Reisert, Jr.
--------------------------------
Charles E. Reisert, Jr.
/s/ Eric C. Jackson
--------------------------------
Eric C. Jackson
In order to clarify the implementation of certain provisions of the Grand
Operating Agreement and the RSR Operating Agreement solely in connection with
this contemplated disposition of the American Interest, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the undersigned hereby agree to be bound by the provisions of
Sections 2, 3, 4(b)(i) and 6 of the above Irrevocable Proxy and Consent
Agreement.
GRAND VICTORIA RIVERBOAT CASINO
INDIANA RBG, L.P. & RESORT, LLC
By: HCC Corp., its general partner By: /s/ Richard L. Schulze
---------------------------------- -----------------------------
Richard L. Schulze, President
By: /s/ Richard L. Schulze
-----------------------------------
Richard L. Schulze, Vice President
<PAGE>
19
Exhibit A
---------
AMENDED AND RESTATED
--------------------
OPERATING AGREEMENT
--------------------
THIS AMENDED AND RESTATED OPERATING AGREEMENT is made and entered into as
of the 5th day of January, 1996, by and between RSR, LLC, an Indiana limited
liability company ("RSR"), and INDIANA RBG, L.P. ("RBG").
W I T N E S S E T H:
WHEREAS, the members of RSR heretofore formed an Indiana limited liability
company pursuant to an operating agreement dated April 13, 1995 (the "Original
Operating Agreement");
WHEREAS, the parties hereto desire to amend and restate the Original
Operating Agreement in its entirety to reflect the contribution by the members
of RSR of their interests in the LLC to RSR and to admit RBG to the LLC.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
---------
Definitions
-----------
1.1 Definitions. Except as otherwise herein expressly provided, the
following terms and phrases shall have the meanings set forth below:
"Act" shall mean the Indiana Business Flexibility Act of the State of
Indiana, as the same may be amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(1) decrease such deficit by any amounts which such Member is
obligated or deemed obligated to restore pursuant to this Agreement or the
penultimate sentence of each of Treasury Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
(2) increase such deficit by the items described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Affiliate" shall mean, as to any Member (or as to any other person the
affiliates of whom are relevant for purposes of any of the provisions of this
Agreement) any corporation, partnership, joint venture, limited liability
company, trust or individual controlled by, under common control with, or which
controls, directly or indirectly, such Member or other person. The term
"control" for these purposes means the ability, whether by direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to elect a majority of the
managers of a limited liability company, to select the managing partner of a
partnership, or otherwise to select, or have the power to remove and then
select, a majority of those persons exercising governing authority over an
entity, and, in the case of a limited partnership, shall mean the sole general
partner thereof, all of the general partners thereof which have or share
management control or authority, or the managing general partner or managing
general partners thereof, as appropriate (and in any event shall mean the
ownership and control [that is, the right to vote] of fifty percent [50%] or
more of the residual equity interests in an entity). The term "Affiliate" shall
<PAGE>
20
also mean and include (i) a trust of which the Member, or other applicable
person, or a direct or indirect shareholder of such Member or other person, is a
trustee, or which has as its principal income or residual beneficiaries, such
Member or other person, or any direct or indirect shareholder of such Member or
other person, or members of the immediate family of such Member, direct or
indirect shareholder or other person, and (ii) any members of such Member's or
other person's immediate family, or a member of the immediate family of any
direct or indirect shareholder of such Member or other person. For purposes
hereof, shares or other ownership interests held by a trust shall be deemed to
be owned pro rata by the income and residuary beneficiaries of such trust.
Further, the members of the immediate family of any Member or other person shall
include all collateral relatives of such Member or other person having a common
linear ancestor with such Member or other person, and the spouse or any former
spouse of such Member or other person or any of such collateral relatives.
"Agreement" shall mean this Operating Agreement, as may be amended from
time to time.
"Bankruptcy" or "Bankrupt" as to any Member or the LLC means (i) any
proceeding brought by or against such person under the United States Bankruptcy
Code, or any successor thereto, as amended, or any state laws providing for the
relief of debtors, except that, in the case of an involuntary proceeding brought
against any such person, only if such proceeding shall not have been withdrawn,
stayed or discharged within sixty (60) days after the institution thereof,
unless, within such sixty (60) day period, such person shall have consented to
the institution thereof; (ii) admission in writing of the inability of such
person to pay its debts as they come due; (iii) the making of an assignment for
the benefit of the creditors of such person; (iv) if such person shall become
insolvent (except that, for purposes hereof, no Member shall be deemed insolvent
merely by reason of the fact that it has a negative balance in its Capital
Account or by reason of the fact that the amount of its liabilities exceed the
amount of its assets by an amount equal to or less than the negative balance of
such Member's Capital Account); or (v) the entry of an order, judgment or decree
against such person in an amount in excess of $100,000 which continues unpaid,
unstayed or undischarged for more than sixty (60) days after the entry thereof.
A Bankruptcy of a general partner of a Member shall, for purposes of this
Agreement, also constitute the Bankruptcy of such Member.
"Capital Account" shall mean, with respect to any Member, the separate
"book" account which the LLC shall establish and maintain for such Member in
accordance with Section 704(b) of the Code and Section 1.704-1(b)(2)(iv) of the
Regulation and such other provisions of Section 1.704-1(b) of the Regulation
that must be complied with in order for the Capital Accounts to be determined in
accordance with the provisions of the Regulation. In furtherance of the
foregoing, the Capital Accounts shall be maintained in compliance with Section
1.704-1(b)(2)(iv) of the Regulation, and the provisions hereof shall be
interpreted and applied in a manner consistent therewith.
"Capital Call" shall mean a notice from the LLC to the Members requesting
additional capital contributions pursuant to this Agreement setting forth (i)
the amount of funds and/or the amount and terms of any Financial Accommodations
required by the LLC, (ii) the Funding Date not sooner than 30 days from date of
delivery of the Capital Call; provided, however, that the first Funding Date may
not occur until 60 days after the RSR Commitment Date and (iii) each Member's
share of the required amount of funds and/or Financial Accommodations.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations promulgated from time to time thereunder.
"Commission" shall mean the Indiana Gaming Commission.
"Committee" shall have the meaning set forth in Section 7.1.
"Community Participants" shall mean residents of Ohio County who are
"Accredited Investors" under Regulation D of the Securities Act of 1933 who are
offered the opportunity to invest, either directly or indirectly, in the LLC.
<PAGE>
21
"Cumulative Preferred Return" shall mean, at any time, an amount equal to
the aggregate of the Preferred Returns for the fiscal year with respect to which
the "Cumulative Preferred Return" is calculated and all previous fiscal years.
"Depreciation" means, for each Fiscal Year or other period, an amount equal
to the depreciation, amortization or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such year or other
period in accordance with the depreciation method elected by the LLC with
respect to such asset, 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 allowable for such year or other
period bears to such beginning adjusted tax basis.
"Factory Outlet Mall" shall mean the factory outlet retail mall and related
amenities and facilities including parking, to be located on the Site.
"Fair Market Value" means, with respect to an LLC Interest or an interest
in RSR, the fair market value thereof, based on the price at which a willing
buyer would purchase and a willing seller would sell the subject interest,
taking into account all relevant factors affecting the value of such interest
determined as provided in Section 8.3 hereof.
"Fiscal Year" shall mean the taxable year of the LLC, which shall be the
calendar year (or such other year as may be required under the Code).
"Financial Accommodation" means any guarantee, assumption, stop-loss,
letter of credit or other similar agreement to any governmental agency, creditor
providing financing to the LLC or other party pursuant to which liability is
several and not joint between the Members.
"Financing Deadline" means the date 60 days after submission, whether prior
to or after the date hereof, by the LLC or the Members of requests for
commitment for non-recourse construction and/or Project financing for the
Project to four financial institutions, investment banking firms or financing
sources approved in writing by RBG and Paul Partridge, as a representative of
RSR.
"Funding Date" shall mean the date on which a Capital Call is due.
"Gain" or "Loss" shall mean the gain or loss recognized by the LLC during
any fiscal year on account of the sale, exchange, condemnation or other
disposition of any LLC assets, as determined in accordance with Section 1001 of
the Code (or, where applicable, Section 453 of the Code), appropriately
adjusted, however, with respect to final determination of the foregoing for
federal income tax purposes, and also adjusted as follows:
(1) In the event the Gross Asset Value of any LLC asset is adjusted
pursuant to subparagraphs (2) or (3) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account as though
the same constituted gain or loss from the disposition of such asset for
purposes of computing Gain or Loss under the provisions of this Agreement.
(2) Gain or Loss, if any, resulting from any disposition of LLC
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value
of the property disposed of, notwithstanding that the adjusted tax basis of
such property differs from its Gross Asset Value.
"Golf Complex" shall mean an 18-hole golf course and related other
facilities.
"Gross Asset Value" means, with respect to any LLC asset, the adjusted
basis of such asset for federal income tax purposes, except as follows:
(1) The Gross Asset Value of any asset contributed by a Member to the
LLC shall, as of the date of such contribution and subject to further
adjustment as herein provided, be the gross fair market value of such
asset, as determined by the contributing Member and the Committee.
<PAGE>
22
(2) The Gross Asset Values of all LLC assets (including assets
contributed to the LLC) shall be adjusted to equal their respective gross
fair market values, as reasonably determined by the Committee, as of each
of the following times: (a) the acquisition of an additional interest in
the LLC by any new or existing Member in exchange for more than a de
minimis capital contribution; (b) the distribution by the LLC to a Member
of more than a de minimis amount of LLC property in consideration of the
redemption, or partial redemption, of the LLC Interest in the LLC of the
Member or Members to whom such distribution shall be made if, in connection
therewith, the Committee reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic interests of the
Members in the LLC; and (c) the liquidation of the LLC within the meaning
of Section 1.704-1(b)(2)(ii)(g) of the Regulation.
(3) The Gross Asset Value of any LLC asset distributed to any Member
shall be the gross fair market value of such asset on the date of
distribution.
(4) The Gross Asset Value of any LLC assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulation;
provided, however, that Gross Asset Values shall not be adjusted to the
extent the Committee determines that an adjustment pursuant to subparagraph
(2) above is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this subparagraph (4).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
any of the foregoing, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Net Profits and Net Losses.
"Hotel" shall mean a 200 room hotel to be developed, constructed and owned
by the LLC on the Site, subject to and in accordance with the provisions of this
Agreement.
"Hotel Complex" shall mean the hotel/conference center and related
amenities and facilities including parking and furniture, fixtures and
equipment, to be located on the Site.
"License" shall mean any license, permit, authorization, consent or
approval issued by any governmental agency, authority, board, bureau,
commission, department or instrumentality, and required in order to conduct a
gaming business, either alone or in combination with any one or more other
businesses, including any such license, permit, authorization, consent or
approval issued by the State of Indiana or any local governmental authority in
connection with the operation of the business of the LLC, or by any other
jurisdiction, domestic or foreign, necessary in order to conduct the business of
any Member or any of the Affiliates of any Member, in any such other
jurisdiction. Without limiting the generality of the foregoing, for purposes of
this definition "gaming business" shall include thoroughbred horse racing with
pari-mutuel betting.
"LLC" shall mean the limited liability company constituted hereunder.
"LLC Interest" shall mean the ownership interest of a Member in the LLC
from time to time including the right of such Member to any and all benefits to
which such Member may be entitled in this Agreement or under the Act, together
with the obligations of such Member to comply with all of the terms and
provisions of this LLC Agreement and of applicable law, and shall include,
without limitation, each Member's LLC Percentage and Capital Account. Wherever
in this Agreement reference is made to a Member's LLC Interest it shall be
deemed to refer to such Member's LLC Percentage and shall include all of such
Member's other interests in the LLC.
"LLC Minimum Gain" has the meaning ascribed to partnership minimum gain in
Regulation Sections 1.704-2(b)(2) and 1.704-2(d).
"LLC Percentages" shall mean the percentage interests of each of the
Members as set forth in Section 4.6, as the same may be adjusted, from time to
time, in accordance with the provisions of this Agreement.
<PAGE>
23
"Loss of License" shall have the meaning set forth in Section 8.1.
"Management Agreement" shall mean the management agreement to be entered
into between the LLC and the Manager pursuant to which the Manager is engaged to
manage and operate the Complex, substantially in the form of attached Exhibit A,
as may be amended from time to time.
"Manager" shall mean Hyatt Gaming Management, Inc.
"Member" shall mean RSR and RBG, or their respective successors in interest
in the LLC, without distinction among them.
"Member's Commitment Percentage" shall mean the RBG Commitment Percentage
or the RSR Commitment Percentage, as the case may be.
"Member Nonrecourse Debt" has the meaning ascribed to partner nonrecourse
debt in Regulation Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the LLC Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Regulation Section 1.704-2(i)(2) and (3).
"Member Nonrecourse Deductions" has the meaning ascribed to partner
nonrecourse deductions in Regulation Sections 1.704-2(i)(1) and 1.704-2(i)(2).
"Minimum Gain" shall mean the LLC minimum gain determined by computing,
with respect to each non-recourse liability of the LLC, the amount of gain (of
whatever character), if any, that would be realized by the LLC if it disposed of
(in a taxable transaction) the LLC property subject to such liability in full
satisfaction thereof (and for no other consideration), and by then aggregating
the amounts so computed. Minimum Gain shall be computed in all respects in
conformity with the Regulation. Without limiting the generality of the
foregoing, all definitions relevant for Minimum Gain purposes shall have the
meaning ascribed thereto in, or for purposes of, the Regulation.
"Net Cash Flow" shall mean, with respect to any fiscal period of the LLC,
the excess, if any, of "Receipts" over "Expenditures". For purposes hereof, the
term "Receipts" means the sum of all cash receipts of the LLC from all sources
for such period excluding capital contributions, Sale proceeds and financing
proceeds, plus any unspent cash reserves established in prior periods (excluding
cash reserves established pursuant to Section 6.2). The term "Expenditures"
means the sum of (a) all cash operating expenses of the LLC for such period
including, without limitation, fees payable under the Riverboat Management
Agreement, (b) the amount of all payments of principal and interest on account
of any indebtedness of the LLC, (c) expenditures for and reasonable cash
reserves as of the last day of such period as determined by the Committee for,
capital replacement or maintenance, including refurbishment or replacement of
furniture, fixtures and equipment or (d) reasonable cash reserves (including
cash reserves established pursuant to Section 6.2) as of the last day of such
period as determined by the Committee for operating expenditures and excluding
expenses incurred in connection with any Sale, refinancing, development or
construction of the Project.
"Net Profits" or "Net Losses" shall mean the income or loss of the LLC for
federal income tax purposes determined as of the close of the LLC's Fiscal Year
or as of such other time as may be required by this Agreement or the Code, as
well as, where the context requires, related federal tax items such as tax
preferences and credits (but excluding any items of Gain or Loss), appropriately
adjusted with respect to final determination of any of the foregoing for federal
income tax purposes, and also adjusted as follows:
(1) Any income of the LLC that is exempt from federal income tax and
not otherwise taken into account in computing Net Profits or Net Losses
shall be added to such taxable income or loss.
(2) Any expenditures of the LLC described in Section 705(a)(2)(B) of
the Code, or treated as Section 705(a)(2)(B) expenditures pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Regulation, and not otherwise taken
into account in computing Net Profits or Net Losses shall be subtracted
from such taxable income or loss.
(3) In lieu of depreciation, amortization or other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or
other period.
<PAGE>
24
(4) Notwithstanding any other provision hereof, any items which are
specially allocated under Section 5.3 shall not be taken into account in
computing Net Profits or Net Losses.
"Nonrecourse Deductions" has the meaning set forth in Regulation Section
1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in Regulation Section
1.704-2(b)(3).
"Performance Pavilion" shall mean a festival performance pavilion and
related amenities and facilities including parking and furniture, fixtures and
equipment.
"Preferred Capital" shall mean, with respect to the Members, the aggregate
of the amounts contributed by the Members in accordance with Sections 4.2 and
4.4(d) and any unreturned Drawn Amount under Section 4.4(d) hereof.
"Preferred Rate" shall mean the per annum rate equal to 16%.
"Preferred Return" shall mean, for any fiscal year or portion thereof, a
return equal to the Preferred Rate on the sum of (a) the Undistributed Preferred
Capital from time to time during such year and (b) the Unpaid Cumulative
Preferred Return from time to time during such year (but excluding the Preferred
Return for such fiscal year or portion thereof).
"Project" shall mean (i) the Riverboat Complex, (ii) the Hotel Complex,
(iii) the Factory Outlet Mall, (iv) the Performance Pavilion, (v) the Golf
Complex, (vi) any temporary gaming facility operated by the LLC pending
completion of the Riverboat Complex and (vii) any other land-based facilities
located at the Site to provide for activities which are ancillary or
complementary to the foregoing.
"RBG Commitment Percentage" shall mean 62.5% adjusted pursuant to Sections
4.3 and 4.5 hereof.
"RBG Loans" shall mean those loans made by RBG or its Affiliates to the LLC
pursuant to that certain Commitment Letter between RBG and the LLC dated June
29, 1995.
"Regulation" shall mean the Treasury Regulations, as in effect on the date
hereof, adopted pursuant to Section 704(b) of the Code, together with any
revisions or amendments thereto.
"Riverboat Complex" shall mean (a) the permanent floating gaming pavilion
or vessels to be acquired, constructed, developed, furnished, equipped and
operated by the LLC for gaming, including a dock, barges and/or mooring facility
for such gaming pavilion or vessels in connection with the proposed operation of
such pavilion or vessel from a facility or dock located at the Site and (b)
shall include activities that are ancillary or complementary to the gaming
business (including but not limited to restaurants, gift shops and other
permitted and related activities thereon or associated therewith).
"RSR Commitment Date" shall mean the date 90 days after the Financing
Deadline.
"RSR Commitment Percentage" shall mean 37.5% adjusted pursuant to Sections
4.3 and 4.5 hereof.
"Sale" shall mean the sale, exchange, condemnation, foreclosure or other
disposition of all or any substantial part of the assets and properties of the
LLC in a non-recurring transaction outside the regular course of business of the
LLC, and shall include, without limitation, any condemnation, easement sale,
casualty or other form of disposition of property, and any other transaction
(other than a capital contribution or loan transaction) wherein the proceeds to
the LLC are, under generally accepted accounting principles, considered capital
in nature. The occasional sale, trade-in or depreciation of furniture,
furnishings, fixtures and equipment which become worn out, obsolete or surplus
is, for purposes hereof, a transaction occurring in the regular course of
business and therefore not a Sale.
"Site" shall mean the real property to be acquired by the LLC in and around
Rising Sun, Indiana.
<PAGE>
25
"Tax Matters Member" shall have the same meaning as the term "tax matters
partner" as set forth in Section 6231(a)(7) of the Code.
"Undistributed Preferred Capital" shall mean, at any time, the excess, if
any, of (a) the Preferred Capital over (b) the aggregate of all distributions to
the Members pursuant to Sections 6.1(b)(ii), 6.1(c)(i)(y), 6.3(b) and 6.4(b)
hereof prior to such time.
"Unpaid Cumulative Preferred Return" shall mean, at any time, an amount
equal to excess, if any, of (a) the Cumulative Preferred Return over (b) the
aggregate of all distributions to the Members pursuant to Sections 6.1(b)(i),
6.1(c)(i)(x), 6.3(a) and 6.4(a) hereof prior to and including such time.
1.2 References. All references in this Agreement to particular sections or
articles shall, unless expressly otherwise provided or unless the context
otherwise requires, be deemed to refer to the specific sections or articles in
this Agreement. In addition, the words "hereof", "herein", "hereunder", and
words of similar import, refer to this Agreement as a whole and not to any
particular section or article.
1.3 Gender and Number. All pronouns and variations used herein shall,
regardless of the pronouns actually used, be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person or persons
may, in the context in which such pronoun is used, require.
ARTICLE II
----------
Organization/Continuation
-------------------------
2.1 Continuation of the LLC. The LLC was previously formed as a limited
liability company under the Act and pursuant to the pertinent laws of the State
of Indiana. The parties hereto desire to continue the existence of the LLC for
the limited purposes and upon the terms and conditions hereinafter set forth.
The Members agree that the rights and liabilities of the Members shall be as
provided under the Act as the same may be amended from time to time, except as
otherwise herein expressly provided.
2.2 Name. The business of the LLC shall be conducted under the name of
Rising Sun Riverboat Casino and Resort, LLC or such other name as the Committee
may select, and all transactions of the LLC, to the extent permitted by
applicable law, shall be carried on and completed in such name.
2.3 Character of the Business. The purpose of the LLC shall be to acquire
direct or indirect interests in, hold, develop, own, maintain and operate the
Project, including the Riverboat and related land facilities on the Site and to
operate the Riverboat for casino gaming and related purposes, and to engage in
such other ancillary activities as shall be necessary or desirable, and as shall
be determined by the Committee, to effectuate the foregoing purposes. The LLC
shall have all powers necessary or desirable to accomplish the purposes
enumerated.
2.4 Location of the Principal Place of Business. The location of the
principal place of business of the LLC shall initially be at 206 Main Street,
Rising Sun, Indiana. The principal place of business of the LLC may be changed
from time to time by direction of the Committee.
2.5 Statutory Agent and Registered Office. The Statutory Agent for service
of process and the Registered Office of the LLC shall be CT Corporation System,
1 North Capitol Avenue, Indianapolis, Indiana, 46204, or such other Statutory
Agent and Registered Office as the Committee may determine from time to time
provide written notice thereof is provided to all Members.
<PAGE>
26
ARTICLE III
-----------
Term
----
The LLC shall commence as of the date hereof and continue until dissolved
upon the occurrence of the earliest of the following events:
(a) The Sale or other disposition of all or substantially all of the
assets of the LLC;
(b) The determination of the Committee;
(c) Dissolution of the LLC by operation of law;
(d) December 31, 2068; or
(e) Death, dissolution, liquidation, bankruptcy or termination
(through withdrawal, removal or otherwise) of any Member, unless the remaining
Members agree to continue the LLC within 60 days of such event.
ARTICLE IV
----------
Contributions to Capital
------------------------
4.1 Initial Capital Contributions. RBG shall contribute to the LLC all of
its interest in the Site and the Project, including all permits, licenses,
plans, drawings, contracts and rights with respect thereto. No credit shall be
made to Capital Accounts of either Member by reason of such contribution or any
prior contributions by the Members or their predecessors.
4.2 Additional Capital Contributions.
(a) RBG: RBG shall contribute all RBG Loans to the LLC and shall fund
all LLC expenses incurred in connection with the Project (including up to
$219,764 previously advanced by the members of RSR to the LLC) and provide all
Financial Accommodations until the first Funding Date, to the extent not funded
by third party financing.
(b) RSR: Subject to Section 4.3, RSR shall, on or prior to the first
Funding Date, contribute an amount equal to the RSR Commitment Percentage of the
sum of the then outstanding Undistributed Preferred Capital (inclusive of
amounts contributed by RBG pursuant to Section 4.2(a) above) and the Unpaid
Cumulative Return thereon and provide its pro rata share, based on the RSR
Commitment Percentage, of any Financial Accommodations in substitution for the
applicable portion of any Financial Accommodation previously provided by RBG.
(c) Additional Funds: After the first Funding Date, in the event the
Committee shall determine that additional funds and/or Financial Accommodations
are necessary in order to finance the acquisition, development, construction or
operation of the assets and business of the LLC in excess of funds otherwise
available to the LLC, including funds available from third party loans, the
Committee shall deliver a Capital Call to the Members. Each Member shall,
subject to Section 4.3 hereof, be obligated to advance to the LLC its pro rata
share of the required additional funding based on its then Member Commitment
Percentage, the amount of which funding shall, except as provided by Section 4.4
hereof, be due, in cash, on the Funding Date. Any amounts funded pursuant hereto
in cash shall be credited to the Capital Account of the contributing Member in
accordance with the provisions of Section 4.4 hereof. Except as provided in
Section 4.2(a), in no event shall a Member be required to make capital
contributions under this Section 4.2 and Financial Accommodations under Section
4.4 which aggregate more than such Member's Commitment Percentage.
4.3 Adjustments to Commitments. On or prior to the RSR Commitment Date, RSR
may elect to reduce the RSR Commitment Percentage by delivery to RBG of a
written notice stating the amount of the reduced RSR Commitment Percentage, in
which event the RBG Commitment Percentage shall be increased by the amount the
RSR Commitment Percentage is decreased; provided, however, that if RSR has
failed to provide the LLC with notice prior to the RSR Commitment Date, of its
ability to fund the RSR Commitment Percentage on the first Funding Date, RSR
shall be deemed to have elected to reduce the RSR Commitment Percentage to zero.
<PAGE>
27
4.4 Financial Accommodations.
(a) If in the Committee's discretion Financial Accommodations are
required to be delivered by Members to any governmental agency, lender or other
party (an "Accommodation Recipient") in connection with the LLC's business, the
Committee shall provide written notice thereof (the "Financial Accommodation
Notice") to the Members, including the form or terms of the Financial
Accommodations, the aggregate amount thereof (the "Required Aggregate Financial
Accommodation Amount") and the date upon which the Financial Accommodations are
required to be delivered to the Accommodation Recipient (the "Financial
Accommodation Requested Date"), in which event each of RBG and RSR shall provide
such Financial Accommodation in proportion to their respective Member Commitment
Percentages; provided, however, that in no event will RSR be required to provide
a Financial Accommodation prior to the first Funding Date.
(b) Except as provided in Section 4.2(b), (i) no later than 30 days
after the Financial Accommodation Notice is given, if such Notice is given prior
to the completion of the Riverboat Complex or (ii) no later than 60 days after
the Financial Accommodation Notice is given, if such notice is given following
the completion of the Riverboat Complex, each Member shall provide to the
Accommodation Recipient a Financial Accommodation issued by or for the account
of such Member or an Affiliate of such Member in the amount equal to the product
of the Required Aggregate Financial Accommodation Amount and the Commitment
Percentage of such Member (the "Required Financial Accommodation Amount") and
otherwise complying with the terms set forth in the Financial Accommodation
Notice.
(c) If RSR fails to deliver or cause to be delivered its Financial
Accommodation in accordance with the terms of this Section 4.4 or Section 4.2 or
the Accommodation Recipient refuses to accept RSR's Financial Accommodation, or
accept the substitution by RSR's Financial Accommodation and the corresponding
release of the applicable portion of RBG's Financial Accommodation pursuant to
Section 4.2, RBG shall have the right to advance to the LLC funds as Preferred
Capital or provide (or continue providing) Financial Accommodations equal to
RSR's Required Financial Accommodation Amount, in which event RSR shall be
deemed to have failed to make a capital contribution in accordance with Section
4.5 hereof in the amount of its Required Financial Accommodation Amount.
(d) If there is a draw on, or any amount otherwise is paid pursuant
to, the Financial Accommodation (the "Drawn Amount") of any Member (the "Drawn
Member"), the other Members shall contribute to the capital of the LLC in cash,
no later than ten days after written notice is given by the Drawn Member of such
draw or other payment, an amount equal to the product of the Drawn Amount and
such other Member's Commitment Percentage, and the amount of such contribution
promptly shall be paid by the LLC to the Drawn Member as reimbursement for such
draw or other payment. Any failure by RSR to make such contribution shall be a
funding default pursuant to Section 4.5 hereof.
4.5 RSR Failure to Advance. Subject to Section 4.3, if RSR shall fail to
make its proportionate share of a required contribution under Sections 4.2(b) or
4.2(c) (an "RSR Default"), the same shall be deemed an irrevocable election by
RSR not to make any further contributions of Preferred Capital to or provide
Financial Accommodations for the benefit of, the LLC.
4.6 LLC Percentages.
(a) Subject to adjustment as herein provided, the initial LLC
Percentages of each of the Members shall be:
<TABLE>
<CAPTION>
Member Percentage
------ ----------
<S> <C>
RBG 50%
RSR 50%
</TABLE>
<PAGE>
28
(b) In the event of an adjustment to the RSR Commitment Percentage
pursuant to Section 4.3 hereof, RSR's LLC Percentage shall be reduced to equal
(i) 20%, plus (ii) 80% of the RSR Commitment Percentage, and RBG's LLC
Percentage shall be increased by the amount of any such decrease in RSR's LLC
Percentage unless and until a RSR Default occurs and thereafter the LLC
Percentages shall be adjusted as provided in Section 4.6(c).
(c) In the event of an RSR Default, RSR's LLC Percentage shall be
reduced from time to time to equal (i) 20%, plus (ii) 40% of the quotient of the
(x) the amount of RSR's Preferred Capital, divided by (y) the total Preferred
Capital, as increased from time to time by additional contributions of Preferred
Capital by RBG, and RBG's LLC Percentage shall be increased by the amount of any
such decrease in RSR's LLC Percentage. The adjustment required by this Section
4.6(c) shall be made upon the occurrence of each RSR Default, on the last day of
the first full month the Project is completed and open to the public (or if
earlier, December 31, 1997) and as of the last day of each year thereafter.
4.7 RSR Minimum and Maximum Percentage. Except for dilution attributable to
the admission of Community Participants, RSR's LLC Percentage shall not be less
than 20% nor more than 50%.
4.8 No Withdrawal. Neither the LLC nor any Member shall be obligated to
redeem or repurchase the LLC Interest of any Member. No Member shall be entitled
to withdraw any part of its capital contribution or to receive any distributions
from the LLC except as expressly provided herein or by law. In no event shall
any Member have the right to redeem or receive any assets of the LLC other than
cash.
4.9 Capital Accounts. The Members' Capital Accounts as of the date hereof
are as set forth on Exhibit A hereto.
4.10 No Third Party Beneficiaries. The right or obligation of any Member to
make a capital contribution or a Default Loan or other loan, or otherwise to do,
perform, satisfy or discharge any liability or obligation of any Member
hereunder, or to pursue any other right or remedy hereunder or at law or in
equity provided, shall not confer any right or claim upon or otherwise inure to
the benefit of any creditor or other third party having dealings with the LLC,
it being understood and agreed that the provisions of this LLC Agreement shall
be solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns. The rights or obligations of the
Members herein set forth, including, without limitation, the obligation to make
capital contributions or the right to make additional capital contributions or
Default Loans or other loan shall not be deemed an asset of the LLC, may not be
sold, transferred or assigned by the LLC in connection with any sale or transfer
of a LLC Interest made in accordance with the provisions of this LLC Agreement,
and may not be pledged or encumbered to secure any debt or other obligation of
the LLC or of the Members.
4.11 Transactions. Concurrently herewith, the LLC shall enter into the
Management Agreement.
4.12 Community Participants. The Members acknowledge that it may be
desirable to offer Community Participants the opportunity to acquire interests
in the LLC through a newly created entity, subject to the approval by the
Members. LLC shall be responsible, at the LLC's expense, for the solicitation
and admission of Community Participants into the LLC through a newly-created
entity which will be admitted as a member of the LLC and RSR and RBG shall
suffer dilution proportionate to their LLC Percentages. Any offering of such
interests to the Community Participants shall be priced, at a minimum, at the
total cost of the Project, shall be on such other terms as agreed to by the
Members and the proceeds of any such subscription shall be paid to the LLC,
whether directly or indirectly. The LLC shall be responsible for compliance with
security and other laws and shall indemnify RBG and RSR for any loss, claim,
damage or expense arising from such solicitation.
<PAGE>
29
ARTICLE V
---------
Allocations, Distributions and
Other Tax and Accounting Matters
--------------------------------
5.1 Allocation of Net Profits. The Net Profits of the LLC for any fiscal
year of the LLC shall, subject to the provisions of Section 5.5, be allocated
among the Members as follows:
(a) In any fiscal year in which there shall be a distribution to the
Members of Net Cash Flow pursuant to Sections 6.1(a), 6.1(b)(i), 6.2(c)(i)(x),
6.2(c)(ii) or 6.2(d), Net Profits, up to and including (but not in excess of)
the amount of such Net Cash Flow so distributed for such fiscal year, shall be
allocated among the Members in the same proportion in which such Net Cash Flow
has been so distributed.
(b) In the event that, as a result of any of the provisions of Section
5.5, Net Losses for any preceding fiscal year shall have been allocated among
the Members other than in accordance with the LLC Percentages of the Members for
the fiscal year or years in which such allocations shall have been made, then
any Net Profits remaining for the fiscal year in question after allocation
pursuant to subsection (a) above shall be allocated to those Members which, in
preceding fiscal years, shall have been allocated Net Losses in excess of the
amount thereof which would have been allocated to such Members on the basis of
their LLC Percentages then in effect (or, for any fiscal year in which an
adjustment shall have been made in LLC Percentages, their weighted average LLC
Percentage for such fiscal year), until there shall have been allocated to such
Members pursuant to this subsection (b), pro rata in accordance with the
respective amounts of such excess Net Losses previously allocated each such
Member, an amount of Net Profits equal to such excess Net Losses.
(c) If in any fiscal year there shall be Net Profits not otherwise
allocated pursuant to subsections (a) or (b) above, and if the aggregate amount
of Net Profits allocated to the Members for all previous LLC fiscal years shall,
as of the end of any fiscal year, be less than the aggregate amount of Net Cash
Flow distributed to the Members (other than Net Cash Flow excluded pursuant to
subsection (a) above), any remaining Net Profits not allocated or above provided
shall be allocated to the Members in such amounts and in such proportions as
shall result, as nearly as possible, in the total amount of all Net Profits
allocated to the Members on a cumulative basis during the term of the LLC being
equal to the total amount of such Net Cash Flow actually distributed to the
Members, without regard to amounts distributed pursuant to Sections 6.2(b)(ii)
and 6.2(c)(i)(y).
(d) If in any fiscal year there shall be Net Profits not otherwise
allocated pursuant to subsections (a), (b) or (c) above, the balance shall be
allocated among the Members in accordance with their respective LLC Percentages
as of the end of the fiscal year in question.
5.2 Net Losses. The Net Losses of the LLC for any fiscal year of the LLC
shall, subject to the provisions of Section 5.5, be allocated to the Members in
accordance with their respective LLC Percentages.
5.3 Gain or Loss.
(a) Timing of Allocations. All allocations of Gain or Loss realized
during any fiscal year shall be made after the Capital Accounts of the Members
shall have been credited or charged with all Net Profits and Net Losses of the
LLC, after distribution of any Net Cash Flow (other than Net Cash Flow resulting
from a transaction giving rise to Gain or Loss), and after any special
allocations required by Section 5.5, in each case for any Fiscal Year in which
such Gain or Loss occurs, but prior to the charge to the Capital Accounts
resulting from the distribution of Net Cash Flow resulting from the transaction
giving rise to such Gain or Loss.
(b) Allocation of Gain. After compliance with Section 5.3(a), any Gain
shall be allocated among the Members as follows and in the following order of
priority:
(i) If, at the time of allocation of such Gain, any Member shall
have a negative balance in its Capital Account, there shall first be
allocated to the Members having negative balances in their Capital
Accounts, an amount of such Gain sufficient to cause the balances in their
respective Capital Accounts to equal zero (0), such Gain to be allocated
among the Members pro rata in accordance with their respective negative
Capital Account balances; and
<PAGE>
30
(ii) Next, any remaining Gain shall be allocated among the Members
in such amounts and in such proportions as shall, as nearly as possible,
cause their respective Capital Account balances to equal the amount they
would be entitled to receive pursuant to Sections 6.3 (a) and (b) hereof.
(iii) Next, any remaining Gain shall be allocated among the
Members in such amounts and in such proportion as shall, as nearly as
possible, after disregarding the allocation in the immediately preceding
subclause (ii), cause their respective Capital Accounts to be in proportion
to their LLC Percentages.
(c) Losses. Any Losses recognized during any fiscal year of the LLC
shall be allocated as ------ follows:
(i) Losses shall first be allocated among those Members, if any,
having positive balances in their Capital Accounts in such manner and in
such amount so as to cause their respective Capital Account balances
(whether positive or negative) to equal the amount they would be entitled
to receive pursuant to Sections 6.3 (a) and (b) hereof;
(ii) Next, any remaining Loss shall be allocated among the Members
in such amounts and in such proportion as shall, as nearly as possible,
cause their respective Capital Accounts to be in proportion to their LLC
Percentages.
(iii) Any remaining Losses shall be allocated among the Members in
accordance with their then LLC Percentages; and
(d) Installment Sales. In connection with any transaction which, under
the Code, the LLC elects to treat as an installment sale, Gain or Loss shall be
allocated under the above provisions of this Section as though the full amount
of the deferred obligation had been received at the time of Sale, and, in any
fiscal year in which a portion of the Gain or Loss is required to be recognized
for federal income tax purposes, the portion to be recognized by the LLC for
such fiscal year shall be allocated among the Members, as nearly as possible, in
the proportions in which Net Cash Flow resulting from such Sale has been
distributed or is distributable to the Members for such fiscal year, until such
time as the full amount of the Gain or Loss required to be allocated to a Member
has been so allocated. Anything herein to the contrary notwithstanding, the
amount of interest income included in the income of the LLC for federal income
tax purposes by reason of the collection of interest on any deferred obligation
resulting from a Sale shall be specially allocated to the Members to whom and in
such amount as such interest is distributable pursuant to Section 6.3.
5.4 Allocations in Case of Transfer or Other Events. The Net Profits or Net
Losses allocable to a Member whose LLC Interest has been transferred or
otherwise adjusted, in whole or in part, during any fiscal year, shall be
allocated among the persons who were holders of such LLC Interest (or the
portion thereof so transferred or adjusted) during such year in proportion to
their respective holding periods, without any requirement for the attempted
separate determination of the results of LLC operations during such separate
periods; provided, however, Gains or Losses shall be allocated to those Members
who were Members in accordance with the provisions above set forth with respect
to allocations of Gains or Losses based upon Capital Account balances and LLC
Percentages in effect at the time of the occurrence of the event giving rise to
such Gain or Loss.
5.5 Special Allocations. The following special allocations shall be made in
the following order:
(a) (i) Minimum Gain Chargeback. Notwithstanding any other provision
of this Article V, if there is a net decrease in LLC Minimum Gain during any
Fiscal Year, then, except as otherwise provided in Regulations Section
1.704-2(f), each Member shall be specially allocated items of income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to such Member's share of the net decrease in LLC Minimum Gain, as
determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Section 1.704-2(j)(2) of
the Regulations. This Section 5.5(a)(i) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall
be interpreted consistently therewith.
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(ii) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V, if there is a net decrease in Member Nonrecourse
Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal
Year, then, except as otherwise provided in Regulations Section 1.704-2(i)(4),
each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5) shall be specially allocated items of LLC
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Member's share of the net decrease in Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Section
1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.5(a)(ii) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-(2)(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(b) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Regulations
Sections 1.704-1(b)(2)(ii) (d)(4), (5) or (6), items of income and gain shall be
specially allocated to the Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of the Member as quickly as possible, provided that an
allocation pursuant to this Section 5.5(b) shall be made only if and to the
extent that the Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article V have been tentatively made as
if this Section 5.5(b) were not in the Agreement.
(c) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
or other period shall be allocated among the Members in accordance with their
LLC Percentages as of the end of the Fiscal Year.
(d) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any Fiscal Year or other period shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Member Nonrecourse Debt
to which such Member Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
(e) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any LLC asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts
as a result of a distribution to a Member in complete liquidation of its
interest, the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Members in accordance with their interests in the LLC
in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the
Member to whom such distribution was made in the event Regulations Section
1.704(b)(2)(iv)(m)(4) applies.
5.6 Other Allocation Rules.
(a) For purposes of determining the Net Profits, or Net Losses, or any
other items allocable to any period, such items shall be determined on a daily,
monthly, or other basis, as determined by the Committee using any permissible
method under Code Section 706 and the Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all items of
income, gain, loss, deduction, and any other allocations not otherwise provided
for shall be divided among the Members in the same proportions as they share Net
Profits and Net Losses, as the case may be, for the Fiscal Year.
(c) The Members are aware of the income tax consequences of the
allocations made by this Article V and hereby agree to be bound by the
provisions thereof in reporting their shares of income and loss for income tax
purposes.
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(d) Solely for purposes of determining a Member's proportionate share
of the "excess nonrecourse liabilities" of the LLC within the meaning of
Regulations Section 1.752-3(a)(3), the interest of the Members in LLC Profits
equals one hundred percent (100%), in proportion to their LLC Percentages.
5.7 Tax Allocations: Code Section 704(c). In accordance with Code Section
704(c) and the Regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the LLC shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the LLC for federal
income tax purposes and its initial Gross Asset Value in accordance with the
"traditional method" set forth in Regulations Section 1.704-3(b)(1).
In the event the Gross Asset Value of any LLC asset is adjusted pursuant to
any provision of this Agreement in accordance with the definition of Gross Asset
Value, subsequent allocations of income, gain, loss and deduction with respect
to such LLC asset shall take into account any variation between the adjusted
basis of such LLC asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the Regulations
thereunder.
5.8 Books and Records. The Committee shall cause to be maintained full and
accurate books and records for the LLC in accordance with generally accepted
accounting principles consistently applied. The LLC books and records shall be
kept at the principal office of the LLC and each Member shall, at reasonable
times, have free access thereto for the purpose of inspecting or copying the
same. The accrual method of accounting shall be selected for all purposes of the
LLC's books of account and for federal income tax purposes unless otherwise
determined by the Committee.
5.9 Tax Elections and Returns. All elections required or permitted to be
made by the LLC under any applicable tax laws shall be made by the Committee;
provided, however, the LLC shall, if requested by the transferee of a LLC
Interest, file an election on behalf of the LLC pursuant to Section 754 of the
Code to adjust the basis of the LLC property in the case of a transfer of a LLC
Interest made in accordance with the provisions of this Agreement. The Committee
shall be responsible for preparing all federal and state tax returns for the LLC
and furnishing required schedules showing allocations of tax items to all other
Members within the period of time prescribed by law (including any extensions
permitted by applicable law), and the Managing Member or such other Member
selected by the Committee shall be the Tax Matters Member for the LLC.
5.10 Restoration of Deficit Capital Accounts. Anything herein to the
contrary notwithstanding, no Member shall have any obligation to restore the
amount of any negative balance in its Capital Account whether upon dissolution
or liquidation of the LLC or otherwise. The negative balance in any Capital
Account shall in no event be deemed an asset of the LLC.
ARTICLE VI
----------
Distributions and Reimbursements
--------------------------------
6.1 Net Cash Flow. Subject to the provisions of Sections 6.2, 6.3, 6.4 and
6.5, the LLC shall distribute to the Members the Net Cash Flow of the LLC as
follows, within 30 days after the end of each fiscal year (the "subject fiscal
year"):
(a) To the extent not previously distributed under Section 6.6(b)
hereof, the first $10,000,000 (or such less available amount) of Net Cash Flow
for the subject fiscal year to the Members in proportion to their respective LLC
Percentages;
(b) The next $35,000,000 (or such lesser available amount) of Net Cash
Flow for the subject fiscal year:
(i) first, to the Members an amount up to the Unpaid Cumulative
Preferred Return, ratably on the basis of the Members' respective amounts
thereof; and
(ii) the balance, to the Members, an amount up to the
Undistributed Preferred Capital, ratably on the basis of the Members'
respective amounts thereof;
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(c) During any period where there exists Unpaid Cumulative Preferred
Return or Undistributed Preferred Capital, the balance, if any, of Net Cash Flow
for the subject fiscal year shall be distributed (i) two-thirds (x) first to
Unpaid Cumulative Preferred Return, ratably on the basis of the Members'
respective amounts thereof and (y) second, to the Undistributed Preferred
Capital, ratably on the basis of the Members' respective amounts thereof; and
(ii) one-third to the Members in proportion to their respective LLC Percentages;
and
(d) During any period where there is no Undistributed Preferred
Capital or Unpaid Cumulative Preferred Return, to the Members in proportion to
their respective LLC Percentages.
(e) For the fiscal year in which the Initial Opening Date referred to
in Section 6.2 shall occur, the $10,000,000 distribution referred to in Section
6.1(a) shall be pro rated on a per diem basis for that portion of the year after
the Initial Opening Date occurs.
6.2 Limitations on Distribution. Except as provided in Sections 6.4, 6.5
and 6.6 hereof, no distributions shall be made of Net Cash Flow attributable to
periods ending prior to the later of (i) January 1, 1997 and (ii) the date a
gaming vessel and the shell and core gaming related facilities at the land
pavilion portion of the Riverboat Complex are completed and open to the general
public (the "Initial Opening Date"). Any such Net Cash Flow not so distributed
shall be held in reserve and used to fund Project development and construction
costs and the required distribution pursuant to Section 6.6(a).
6.3 Net Cash Flow Resulting From a Sale or Refinancing. Notwithstanding the
provisions of Section 6.1, but subject to the provisions set forth herein,
distributions of the net proceeds resulting from a Sale or refinancing shall be
made from time to time as determined by the Committee, and when made shall be
distributed in the following amounts and the following order of priority:
(a) First, to the Members an amount equal to the Unpaid Cumulative
Preferred Return ratably on the basis of the Members' respective amounts
thereof;
(b) Second, to the Members an amount equal to the Undistributed
Preferred Capital, ratably on the basis of the Members' respective amounts
thereof; and
(c) Third, to the Members an amount equal to the then remaining
outstanding positive balances in their Capital Accounts, pro rata in accordance
with their then positive balances until the positive balances in their
respective Capital Accounts shall have been reduced to zero (0) provided,
however, in the case of any distribution of Net Cash Flow resulting from a Sale
which results in or is made in connection with the liquidation of the LLC (as
defined in Section 1.704-1(b)(2)(ii)(g) of the Regulation) no such distribution
shall be made to any Member except to the extent of and in proportion to the
then positive balance in the Member's Capital Account after allocation to such
Member of any gain or loss in accordance with the provisions of Article V.
6.4 Special Distribution to RBG. Notwithstanding Sections 6.1 and 6.2, the
proceeds of RSR's capital contribution pursuant to Section 4.2(b) shall be
distributed to RBG upon receipt of such contribution by the LLC and such amount
shall be charged to RBG's Capital Account and shall be (a) first in payment of
Unpaid Cumulative Preferred Return and (b) second in payment of Undistributed
Preferred Capital.
6.5 Special Distribution to RSR. Concurrently with the execution hereof,
the LLC shall distribute the sum of $219,764 to RSR in repayment of prior
advances by the members of RSR to the LLC.
6.6 Tax Distributions. Notwithstanding Sections 6.1 and 6.2:
(a) If, on the first Funding Date, RSR's Commitment Percentage is
zero, then the LLC shall distribute to the Members, in proportion to their
LLC Percentages, an amount equal to the greater of (i) 40% and (ii) the
highest marginal rate applicable to individuals for the tax year in
question, times the LLC's taxable income for each taxable year or portion
thereof up to but not after the Initial Opening Date. Distributions
pursuant to this Section 6.6(a) shall be made no later than March 15 of the
year following the year in which said taxable income was recognized; and
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(b) In the event on the first Funding Date RSR's Commitment Percentage
is zero, after the Initial Opening Date the LLC shall distribute quarterly,
to the extent of Net Cash Flow, $2.5 million among the Members in
accordance with their LLC Percentages, such distribution to be an advance
against distributions pursuant to Section 6.1(a) hereof; provided, however,
the total amount distributable pursuant to this Section 6.6(b) for the
fiscal year in which the Initial Opening Date shall occur shall not exceed
the maximum distribution for such fiscal year pursuant to Section 6.1(a) as
adjusted by Section 6.1(e).
6.7 Installment Sales. In connection with any Sale transaction whereby Net
Cash Flow is received in installments, principal payments received with respect
to the installment obligation shall be allocated among the Members in the
priority indicated in (and subject to the provisions of) Section 6.1 as of the
date of such Sale, and interest payments received by the LLC with respect to
such deferred obligation shall be distributed among the Members in the same
proportion in which each is entitled to share in the principal portion of the
deferred obligation.
ARTICLE VII
-----------
Management of the LLC
---------------------
7.1 Executive Committee.
(a) The management and control of the LLC shall be vested in the
Members, who shall exercise their authority through an executive committee (the
"Committee"), which shall be responsible for the establishment of policy and
operating procedures respecting the business affairs of the LLC and exercising
its right under the Management Agreement. The Committee shall at all times
consist of four (4) Members, three (3) of whom shall be appointed by RBG and one
(1) of whom shall be appointed by RSR, each of whom shall represent the Members
which appointed them. Each Member may appoint either a permanent or temporary
alternative for each Member appointed by it to the Committee, who shall have all
the powers of the Committee member in his absence or inability to serve. Each
member of the Committee may vote by delivering his proxy to another member of
the Committee or to any other person. Each Member shall have the power to remove
any member or alternative member of the Committee appointed by it by delivering
written notice of such removal to the LLC and to the other Members. Vacancies on
the Committee shall be filled by the Member which appointed the Committee member
previously holding the position which is then vacant.
(b) The Committee shall meet at least once each quarter at the offices
of the LLC or such other times or places as the Committee shall determine
(unless such meeting shall be waived by all members thereof) or on the call of
any two members upon five (5) days' notice to all Members by telecopy, telephone
or delivery of written notice. Any officer of the Members shall be allowed to
attend any meeting of the Committee. An agenda for each meeting shall be
prepared in advance by the Members in consultation with each of the others. A
majority of the members of the Committee shall constitute a quorum.
(c) A concurring vote of at least a majority of the members of the
Committee present at any meeting shall be required for any action of the
Committee and shall be deemed to be a vote by the Members; provided however,
that a unanimous vote of the Committee shall be required for (i) the sale of all
or substantially all of the Project or the dissolution of the LLC as long as
RSR's LLC Percentage is in the ratio of 45:55 or greater to RBG's LLC
Percentage, (ii) the exercise of the LLC's right under Section 7.8 of the
Management Agreement as long as RSR's LLC Percentage is in the ratio of 45:55 or
greater to RBG's LLC Percentage and (iii) materially expanding the scope of the
Project beyond the Components as described herein which cause the total amount
of Preferred Capital and financing to exceed $152 million (excluding that
portion of Preferred Capital and financing which are used to fund loans for
infrastructure improvements to governmental entities).
(d) The Committee may act without a meeting if the action taken is
approved in writing in advance by at least three members then entitled to vote
and the Members are given at least five days prior notice to the taking of such
action. In addition, the Committee may hold meetings by conference telephone
connection so long as all participating Committee members have the ability to
hear discussions from all other members participating in the meeting. The
Committee shall cause written minutes to be prepared of all action taken by the
Committee and shall deliver a copy thereof to each member of the Committee
within thirty (30) days thereafter.
(e) The Committee may by resolution delegate its powers, but not its
responsibilities, to employees of any Member or to any other person or persons.
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(f) Anything herein contained to the contrary, the Committee shall
have no right, power or authority to borrow money if the terms of such borrowing
require the personal liability of any of the Members, without the written
consent of such Member or Members, except as provided in Section 4.4 hereof.
7.2 Managing Member. RBG shall be the Managing Member (such Member so
appointed being herein referred to as the "Managing Member") who shall be
responsible, on a day-to-day basis, for the operation of the business of the LLC
including obtaining necessary insurance for the Project to the extent the LLC is
required to do so pursuant to Section 8 of the Management Agreement. The
Managing Member shall have only such authority as shall be delegated to it by
the Committee, or as herein expressly provided, which authority shall be subject
to revision, revocation, or alteration from time to time by action of the
Committee, and the Managing Member shall report to the Committee.
7.3 Bank Accounts. The LLC shall maintain bank accounts in such banks as
the Committee may designate exclusively for the deposit and disbursement of all
funds of the LLC. All funds of the LLC shall be promptly deposited in such
accounts. The Committee from time to time shall authorize signatories for such
accounts.
7.4 Reimbursements for Costs and Expenses. The Committee shall fix the
amounts, if any, by which the LLC will reimburse each Member for the costs and
expenses incurred by such Member on behalf and for the benefit of the LLC.
7.5 No Authority of Individual Member. Subject to the provisions of Section
7.2 relating to the Managing Member, no Member, acting individually, nor any of
their respective Affiliates, has the power or authority to bind the LLC or any
Member or to authorize any action to be taken by the LLC, or to act as agent for
the LLC or any other Member, unless that power or authority has been
specifically delegated or authorized by action of the Committee.
7.6 Other Businesses. Each party recognizes that the Members, and their
Affiliates, have or may have other business interests, activities and
investments, some of which may now or hereafter be in conflict or competition
with the business of the LLC, and that, subject to the provisions hereinafter in
this Section 7.6 set forth, each Member and their respective Affiliates are
entitled to carry on such other business activities, interests and investments
without any accountability therefor to the LLC or any other Member. No Member,
and no Affiliate of any Member, shall be obligated to devote all or any
particular part of its time and effort to the LLC or its business affairs except
such reasonable amount of time as may be necessary in order to fulfill their
respective duties and obligations hereunder. Except as hereinafter in this
Section 7.6 set forth, each Member, and each Affiliate of each Member, may
engage in or possess an interest in any other business or venture of any kind,
independently or with others, including, without being limited to, owning,
financing, acquiring, leasing, promoting, developing, improving, constructing,
operating or managing other real or personal properties (including real and
personal properties devoted, in whole or in part, to the business of gaming or
which are activities in support of gaming operations) on its own behalf or on
behalf of other entities with which it is affiliated or associated, and any
Member and each Affiliate of any Member may engage in any activities, whether or
not competitive to the LLC, without any obligation to offer any interest in such
activities to the LLC or to any Member or to any Affiliate of any Member. Except
as may be set forth in any separate agreement which may be entered into by the
Members or any of their Affiliates, neither the LLC nor any Member nor any
Affiliate of any Member shall have any right by virtue of this LLC Agreement or
by virtue of the relationship between the Members as partners, in or to such
other activities, or to the income or profits derived therefrom, and the pursuit
of such activities, even if competitive with the business of the LLC, shall not
be deemed wrongful or improper or a breach of any joint venture or fiduciary
duties owed by one party to the other, or entitle any party to any interest in
or sharing in the profits or losses from any such other activities.
7.7 Liability of the Members. So long as each Member acts in good faith
with respect to the conduct of the business and affairs of the LLC, and in the
manner in which it reasonably believes to be in the best interests of the LLC or
otherwise in accordance with the provisions of this LLC Agreement, no Member
shall be liable or accountable to the LLC or to any of the Members in damages or
otherwise for any error of judgment, for any mistake of fact or of law, or for
any other act or thing which it may do or refrain from doing or suffer to be
done in connection with the business and affairs of the LLC, except in the case
of its willful misconduct or gross negligence. RSR acknowledges that an
Affiliate of RBG is the Operator of the Project pursuant to the Management
Agreement and notwithstanding such relationship RBG shall be entitled to vote
its LLC Interest and take all other actions as a Member of the LLC to enforce,
fulfill and/or waive the LLC's rights and obligations under the Management
Agreement as it may deem appropriate (subject to Section 7.1(c) hereof).
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7.8 Indemnity. The LLC shall indemnify, defend and hold each Member, and
each officer, director, stockholder, partner, employee, agent, affiliate,
subsidiary, successor or assign of each Member (the "Indemnitees") free and
harmless of, from and against any expenses, losses, claims, costs, damages and
liabilities, including without limitation, judgments, fines, amounts paid in
settlement and expenses (including without limitation, attorneys' fees and
expenses, court costs, investigation costs and litigation costs) incurred by any
Indemnitee in any civil, criminal or investigative proceeding in which it is
involved or threatened to be involved by reason of the Member's being a member
in the LLC provided that the Member acted in good faith, within what it
reasonably believed to be the scope of its authority and for a purpose which it
reasonably believed to be in the best interests of the LLC or the Members or
otherwise in compliance with the provisions of this Agreement; provided, however
(i) that the LLC shall not be required to indemnify any Indemnitee for any loss,
expense or damage which it may suffer as a result of the willful misconduct,
gross negligence or bad faith by or of the Member to which the Indemnitee is
related in failing to perform its duties hereunder; (ii) the LLC shall not be
required to indemnify any Indemnitee for any breach of the provisions of this
LLC Agreement, or for any loss, expense or damage which it may suffer as a
result of the breach of this LLC Agreement by the Member to which the Indemnitee
is related; and (iii) any liability hereunder shall be limited solely to the
assets and properties of the LLC, and no Member (or any Affiliate of any Member)
shall have any liability or obligation hereunder.
7.9 Third Party Financing. The Members shall use their reasonable efforts
to obtain non-recourse third party financing on terms more favorable to the LLC
than the Preferred Capital when and if such financing becomes available and
shall request on or prior to October 1, 1995, proposed financing terms for and
financing from four financial institutions selected by RBG and a representative
of RSR.
ARTICLE VIII
------------
Loss of License
---------------
8.1 Loss of License. A "Loss of License" shall mean any denial, revocation,
suspension (for a period in excess of three (3) days) or non-renewal of any
License, whether resulting from any judicial or administrative proceeding, or
otherwise, and which results, directly or indirectly, from any act or omission
of, or ineligibility to hold a License by any Member, or any Affiliate of a
Member (including, for this purpose, the partners, shareholders, employees,
agents, officers, members or directors of any of the Members, or their
respective partners or equity participants or any person or entity with whom
such party has had business or other dealings), including, without limitation,
the commission of any crime or other act deemed inconsistent with the holding of
a License, or the association or affiliation with unsuitable persons or
entities, whether or not the allegations with respect thereto are true in fact.
No Loss of License shall be deemed to have occurred so long as proceedings with
respect thereto are being contested with due diligence and in good faith by the
LLC, or the person or entity affected thereby, provided that, during the
pendency of such proceedings, the LLC is able to continue gaming operations on
an uninterrupted basis and without additional restrictions with respect thereto.
A Loss of License, however, shall be deemed to have occurred notwithstanding
that additional rights of appeal or contest may be available if, as a result of
any such action, gaming operations by the LLC are prohibited or materially
restrained, limited or restricted. For purposes of the below provisions of this
Article VIII, the "Responsible Member" shall mean the Member which is, or whose
Affiliate is, responsible for the Loss of License and the Non-Responsible
Members shall mean all other Members. If the Loss of License results from the
acts or omissions of one or more Affiliates of more than one Member, then each
such Member shall be a Responsible Member with respect to the Affiliate whose
acts or omissions were responsible for the Loss of License, and each other
Member shall also be deemed a Non-Responsible Member with respect to the same
act or omission, and each shall separately have the right to invoke the
provisions hereinafter set forth.
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8.2 Provisions Relating to Loss of License.
(a) If a Loss of License shall occur or is imminent, the Responsible
Member may transfer its interest in the LLC, or such Member's Affiliate, if
applicable, may transfer its interest in the Member, to a trust established for
the purpose of disposing of such interest; provided, however that the terms of
such trust and the identity of the trustee thereof are acceptable to the
Commission and reasonably acceptable to the other Members, the ownership of such
interest by the trust does not impair the ability of the LLC to continue gaming
operations on an uninterrupted basis and without additional restrictions and
such interest transferred to the trust continues to be subject to the provisions
hereof, including, without limitation, Article IX hereof;
(b) Subject to Section 8.2(a), if the Loss of License occurs as a
result of the acts or omissions of an Affiliate of a Member, the Responsible
Member shall redeem such Affiliate's interest within thirty (30) days after such
Loss of License or such lesser period of time as may be required by law;
(c) If RSR is the Responsible Member and the Loss of License is
attributable to an Affiliate of RSR, RBG shall lend RSR sufficient funds to
complete the purchase required by Section 8.2(b) at a price not greater than the
Fair Market Value of such Affiliate's interest, upon the request of RSR;
provided, that RBG shall not be obligated to make such loan if (i) the purchase
of such interest by RSR for RSR's unsecured promissory note would cure or
prevent the Loss of License and (ii) RSR has not demonstrated a good faith
effort to obtain third party financing and would be able to obtain such
financing. RBG's loan shall be fully secured by RSR's LLC Interest and all
distributions from the LLC to which RSR is entitled shall be paid by the LLC to
RBG in repayment of such loan, together with interest thereon at commercially
reasonable rate, not less than Prime but in no event greater than 16% per annum,
until the loan and interest thereon is repaid in full;
(d) If any of the foregoing transfers are not effected or do not
prevent or cure the Loss of License or if thereafter the trust is not effective
in preventing a Loss of License or the trust terminates prior to a disposition
of the interest or for any reason the Responsible Member fails to redeem the
ownership interest of its Affiliate then and only then the following provisions
shall apply:
(i) The Non-Responsible Members shall have the right, at any time
and for so long as the Loss of License condition shall continue, to elect
the "Buy-Out Right" set forth in Section 8.3 below, such election to be
contained in a written notice (the "Buy-Out Notice") from any
Non-Responsible Member to the Responsible Member. For purposes hereof, any
Non-Responsible Member submitting a Buy-Out Notice shall hereafter be
referred to as a "Purchasing Member".
(ii) Promptly upon delivery of the Buy-Out Notice, and in no event
later than three (3) days thereafter, the Responsible Member shall have the
right, exercisable by written notice to the Purchasing Members (the
"Response Notice") that the Responsible Member has elected to, and has,
caused the withdrawal of the Affiliate of the Responsible Member
responsible for the Loss of License. Upon the delivery of the Response
Notice, the Members shall advise the appropriate licensing authorities that
the Affiliate responsible for the Loss of License has withdrawn from its
interest in the LLC and shall request reinstatement of the License. If,
after such request, the License is reinstated, then, with respect to the
event or circumstance giving rise to the Loss of License, the Buy-Out
Notice shall be deemed to have been terminated and will be of no further
force or effect. If, however, the licensing authorities fail or refuse to
reinstate the License within five (5) days after request therefor as
hereinabove provided, then the Buy-Out Notice shall remain in effect and
the provisions of Section 8.3 shall be applicable;
(e) During the period Fair Market Value is being determined pursuant
to a purchase under Section 8.3, the Responsible Member shall not be entitled to
any distributions from the LLC and shall not be permitted to vote its LLC
Interest.
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8.3 Buy-Out Provisions.
(a) Whenever a Buy-Out Notice shall be delivered in accordance with the
provisions of Section 8.2, the same shall constitute an agreement on the part of
the Purchasing Members to buy, and the Responsible Member to sell, the entire
LLC Interest of the Responsible Member in the LLC for a price, payable in cash
at the closing, equal to:
(i) If the Loss of License relates solely to the Project, at
seventy-five percent (75%) of Fair Market Value.
(ii) If the Loss of License relates to a License for a
jurisdiction outside of Rising Sun, at Fair Market Value.
(b) If there shall be more than one Purchasing Member, each shall
purchase a portion of the LLC Interest of the Responsible Member pro rata in
accordance with the respective LLC Percentages of the Purchasing Members. The
closing shall take place not later than ten (10) days after the determination of
the purchase price of the LLC Interest of the responsible member. At the
closing, the Responsible Member shall execute and deliver such instruments,
documents and certificates as the Purchasing Members shall reasonably request in
order to transfer and assign to the Purchasing Members (or to any other party
designated by the Purchasing Members to the Responsible Member in writing at or
prior to the closing) the entire LLC Interest of the Responsible Member in the
LLC, including, without limitation, the entire interest of the Responsible
Member in all loans, and all interest accrued and unpaid thereon, and the
Non-Responsible Member shall deliver the purchase price in cash (or by certified
or cashier's check made payable to the order of the Responsible Member) or in
the form of a promissory note with recourse to the assets of RBG, bearing
interest the lower of (i) the prime or base rate announced from time to time by
the First National Bank of Chicago, N.A. and (ii) 10% fully amortizing over five
years. The Purchasing Members shall, prior to and/or after the closing,
substitute Financial Accommodations for any Financial Accommodations in
existence for the Responsible Member and shall use their reasonable efforts to
cause any Financial Accommodation of the Responsible Member to be released. In
the event of any dispute between the Responsible Member and the Purchasing
Members regarding the amount of the purchase price, there shall be paid to the
Responsible Member the amount not in dispute, and the remainder shall be paid
promptly upon the determination thereof by the parties, or, in the event they
shall fail to agree on the amount, by arbitration conducted in Chicago,
Illinois, in accordance with the rules and regulations of the American
Arbitration Association. In order to further secure the performance of the
obligations of the parties hereto, each Member (if it shall be a Responsible
Member at any time hereafter) hereby appoints the Purchasing Members, and each
of their Affiliates, and the officers, directors, shareholders, employees and
agents of the Responsible Member and its Affiliates, as the agent and
attorney-in-fact for and on behalf of each Purchasing Member to execute,
acknowledge and deliver such instruments, documents or certificates as are
herein contemplated in connection with any buy-out.
(c) For purposes of this Article VIII, Fair Market Value of an LLC
Interest or of an interest in RSR, as the case may be, shall be determined by
two independent appraisers, one selected and paid for by the LLC and one
selected and paid for by the Responsible Member. Each such appraiser shall
perform an appraisal at the cost of the respective party. If the appraisers are
within 10% of each other, the Fair Market Value shall be the average of the two.
If the two are not within 10% of each other, a third appraiser will be selected
by the two appraisers who will perform a third appraisal. In such event, the
Fair Market Value of the LLC Interest shall be the average of the two closest
appraisals. The cost of the third appraisal will be split equally between the
parties. All selected appraisers must possess substantial current expertise in
riverboat casino valuations.
ARTICLE IX
----------
Transfer of LLC Interests
-------------------------
9.1 Right to Transfer. Except as otherwise herein in this Article IX
provided, there shall be no restriction on the right, power or authority of any
Member to sell, transfer or assign its LLC Interest. To the extent, however, the
following provisions of this Article IX set forth any such restrictions, it is
the intention of the Members that there shall be no indirect transfer of the
beneficial interest of a Member in this LLC or any part thereof as a result of a
transfer of an interest in such Member under any circumstances in which a direct
<PAGE>
39
transfer of a LLC Interest is prohibited or restricted, other than through the
sale of securities registered pursuant to Sections 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended. Accordingly, except as otherwise
specifically provided herein, the provisions of this Article IX applicable to
any transfer of a LLC Interest shall be equally applicable to the sale,
assignment, transfer, conveyance, encumbrance, exchange or other disposition,
directly or indirectly, of a controlling interest in a Member, including without
limitation, any partnership or other equity interest of a Member which is a
partnership, limited liability company or other form of business organization,
and all references in this Article IX to transfers of a LLC Interest shall apply
equally to the transfer of controlling shares of the capital stock of, or other
ownership interests in, such partners. Each Member agrees that its respective
partnership agreements, corporate charter, by-laws and shareholder agreements
comply with the restrictions set forth herein and each Member shall be deemed a
third party beneficiary with respect to such restrictions contained in each
Member's partnership and shareholder constituent documents. Any LLC Interest
validly transferred in accordance with the provisions of this Article IX shall
remain subject to all limitations and restrictions contained in this Agreement.
9.2 Transfer of LLC Interests - Right of First Refusal. If any Member shall
at any time desire to sell all or a portion of its LLC Interest other than to an
"Exempt Purchaser" (as hereinafter defined) in a transaction other than a
transaction exempted from the provisions of Article IX pursuant to Section 9.1
(the "Selling Member"), and shall have received a bona fide written offer for
the purchase thereof, the Selling Member shall, within five (5) days thereafter,
transmit a copy thereof to the other Member (the "Other Member") together with a
copy of the contract for the sale of such interest (the "Offer"). The LLC
Interest shall thereupon be subject to the option on the part of the Other
Member to purchase said LLC Interest on the same price and terms as contained in
the Offer. The Other Member must exercise its option hereunder, if at all, by
giving notice of exercise to the Selling Member within thirty (30) days of the
transmittal of a copy of the Offer by the Selling Member, and such sale shall be
consummated on the date on which the sale would otherwise have been consummated
pursuant to the offer but in no event sooner than ninety (90) days after the
date on which notice of the offer is delivered by LLC. In the event the Other
Member fails to elect to purchase the LLC Interest of the Selling Member as
hereinabove provided within the aforesaid period of thirty (30) days, said right
shall terminate and be of no further force or effect with respect to the
transaction described in the Offer. If the Other Member fails to exercise its
option hereunder in accordance with the above provisions within the aforesaid
period of thirty (30) days, then the Selling Member may sell its LLC Interest
(or so much thereof as it proposed to sell pursuant to the Offer) on the terms
specified in the Offer, provided such sale is consummated no later than the
later to occur of (i) the date set forth for closing in the Offer; or (ii) one
hundred twenty (120) days after the expiration of the aforesaid thirty (30) day
option period. If the sale is not consummated within the period of time
specified in the preceding sentence, then no sale may be consummated with
respect to any portion of the Selling Member's LLC Interest except upon
compliance again with the provisions of this Section 9.2 to the extent this
Section 9.2 would otherwise be applicable. The Selling Member shall not be
permitted to sell its LLC Interest without the consent of the other Member for
any consideration other than cash.
For purposes hereof, the term "Exempt Purchaser" shall mean (w) any person,
firm, corporation or other entity which is then a Member in the LLC, or any
Affiliate of any Partner (including, without limitation, any Affiliate of the
Selling Member); (x) with respect to a sale or transfer of an interest in any
entity which is a Member, or with respect to a sale or transfer of any ownership
interest in any partner of a Member, any other partner of such Member or any
Affiliate of such other partner; (y) a person which purchases all or
substantially all of the gaming assets of H Group Holding Inc., and its
subsidiaries.
9.3 Securities Laws. In connection with any sale or other transfer of a LLC
Interest, the selling or transferring Member shall effect such transfer only in
compliance with all applicable federal and state securities laws (to the extent
said laws may be applicable to such transaction), and the transferring Member
shall indemnify, protect and defend the LLC, and each of the other Members, from
any liabilities, obligations, costs or expenses to which the LLC or any Member
may become liable by reason of the application of any such securities laws in
connection with such transfer.
<PAGE>
40
9.4 Further Restrictions on Transfer. In addition to any other restrictions
on transfer herein contained, in no event may any transfer or assignment be made
(i) to any "tax exempt entity" as such term is defined in Section 168(j) of the
Code; (ii) to any person or entity who lacks the legal right, power or capacity
to own a LLC Interest; (iii) in violation of any provision of any of the loan
documents, or any similar documents relating to any financing obtained by the
LLC, or in violation of any other instrument, document or agreement to which the
LLC is, at the time of the proposed transfer, a party or is otherwise bound;
(iv) if the effect of any such transfer is to cause a termination of the LLC for
federal income tax purposes pursuant to Section 708 of the Code; (v) in
violation of Indiana law; (vi) of any component portion of a LLC Interest such
as any rights with respect to Net Cash Flow separate and apart from all other
components of a LLC Interest; (vii) except to a person or entity who shall have
theretofore been approved for licensing, and whose participation in the LLC
shall have been approved, by the Commission, or any other state or local
authority in the State of Indiana whose approval shall be required; (viii) to
any person or entity whose interest in the LLC might reasonably be expected to
result in a Loss of License in any jurisdiction other than Indiana; or (ix) with
respect to the transfer of a LLC Interest by a Member (as opposed to the
transfer of a direct or indirect interest in a Member by an Affiliate of such
Member), of less than the entire LLC Interest of such Member.
9.5 Restriction on Encumbrance. In addition to any other restrictions on
the transfer or assignment of LLC Interests herein contained, it is understood
and agreed that no Member shall have any right to encumber its LLC Interest, in
whole or in part or any right to receive distributions or payments from the LLC,
without the written consent of all other Members unless: (i) the proceeds of any
loan secured by such an encumbrance are used solely to make capital
contributions to the LLC, or with respect to RSR, if RSR's Commitment Percentage
is reduced to zero on or prior to the first Funding Date, (ii) the other Members
reasonably determine that the terms of any such encumbrance do not provide the
lender thereunder with any right, whether directly or indirectly, exercisable
currently or in the future, to control or to participate in the management or
decision making process of the LLC (except as a result of the exercise of the
rights of a Member upon the Lender's realization upon its collateral) and (iii)
the other Members receive a copy of the relevant loan and encumbrance
documentation and have a right of first refusal to provide the financing
described therein within the same time periods and the same terms and conditions
and as otherwise described in Section 9.2 hereof. In the event the other Members
elect to provide the financing described in the immediately preceding sentence,
the Members providing such financing shall pay the reasonable out-of-pocket
expenses such as commitment fees and legal expenses payable to the third-party
lender. For purposes hereof, an encumbrance shall include, without limitation,
any mortgage, chattel mortgage, security interest, assignment or transfer
intended as security, charging order, profits or cash flow participation, or
other similar device, whether or not the effect thereof is to permit the
transferee, assignee or secured party to exercise any rights, powers or
privileges of a Member hereunder. Any attempted encumbrance of a LLC Interest by
a Member made in violation of the provisions of this Section 9.5 shall be
absolutely void and of no force or effect.
9.6 New Members. Any person or entity not then a member to which a LLC
Interest shall be transferred in accordance with the above provisions shall be
admitted to the LLC as a substitute Member provided the transferee shall, in
writing, expressly assume and agree to be bound by all of the terms and
conditions of this LLC Agreement. Each such person or entity shall also cause to
be delivered to the LLC, at its sole cost and expense, (x) a favorable written
opinion of legal counsel reasonably acceptable to the Committee to the effect
that (i) the transfer of a LLC Interest to such person or entity does not
violate any applicable federal or state securities law and (ii) such person or
entity has the right, power and capacity to own the LLC Interest being
transferred to it, and (y) evidence reasonably satisfactory to the Committee of
compliance with the provisions of Section 9.4. All reasonable costs and expenses
incurred by the LLC in connection with any transfer, and, if applicable, the
admission of any person or entity as a partner hereunder, shall be paid by the
transferor.
If a LLC Interest is transferred in accordance with the provisions of this
Article, and the transferee refuses to execute an agreement to be bound by all
of the terms and conditions of this Agreement, or if other conditions to the
admission of such person or entity as a partner herein shall not have been
satisfied, then the transfer shall be void and of no effect whatsoever.
Upon compliance with the provisions of this Section, and upon admission of
the transferee as a new Member, the transferor shall be deemed to have withdrawn
from the LLC.
<PAGE>
41
9.7 Bankrupt Member.
(a) If any Member, at any time shall become Bankrupt (such Member
being herein referred to as the "Bankrupt Member") the remaining Members
shall have the right and option, exercisable by written notice (the
"Purchase Notice") delivered to the Bankrupt Member and all other Members
at any time during the continuance of the Bankruptcy proceedings, or so
long as the Bankruptcy event shall be continuing, or by notice to the
successors or legal representatives of the Bankrupt Member, to purchase
all, but not less than all, of the LLC Interest of the Bankrupt Member at a
price equal to the amount which the Bankrupt Member would have been
entitled to receive if the LLC had sold substantially all of its assets for
their fair market value, subject to existing liens and encumbrances, as of
the date of delivery of the aforesaid notice, such fair market value to be
determined in accordance with the provisions of this Section 9.7. The
amount which the Bankrupt Member would have been entitled to receive upon
such Sale shall be the amount of Net Cash Flow which would have been
distributed to the Bankrupt Member from the LLC following a Sale and after
payment of all liabilities and obligations of the LLC.
Upon delivery of the Purchase Notice, the same shall constitute an
irrevocable and unconditional contract of purchase and sale between the
Members delivering such notice and the Bankrupt Member. The closing of the
purchase and sale of the LLC Interest of the Bankrupt Member shall take
place on the closing date specified in the Purchase Notice, which date
shall not be more than ninety (90) days, nor less than thirty (30) days,
after the delivery of the Purchase Notice. If more than one Member shall
deliver a Purchase Notice (or, if any Member shall deliver a Purchase
Notice within ten (10) days after receipt of a Purchase Notice from another
Member) then each such electing Member shall be entitled to purchase a pro
rata portion of the Bankrupt Member's LLC Interest, and all such electing
Members shall be jointly and severally obligated to purchase the entire LLC
Interest of the Bankrupt Member.
(b) At the separate election of each Member electing to purchase the
LLC Interest of the Bankrupt Member, the purchase price required to be paid
by such Member may be paid either all in cash at the closing or such lesser
amount of cash (but in no event less than twenty percent (20%) in cash) on
the closing date with the balance to be represented by a promissory note
executed by the purchasing Member in favor of the Bankrupt Member, bearing
interest at a rate equal to the greater of (i) eight percent (8%) per
annum, or (ii) the applicable Federal Rate as set forth in Section 1274 of
the Code, and providing for payment in equal monthly installments of
principal and interest in such amount as will fully amortize the principal
amount of such note over a period of five (5) years.
(c) The fair market value of the assets of the LLC, subject to liens
and encumbrances, if not otherwise agreed upon by the Members, shall be
determined, using the income approach, by three (3) independent appraisers,
all of whom shall be members of a recognized appraisal institute with
experience in appraisal of properties similar to those owned by the LLC,
one appointed jointly by the electing Members, one by the Bankrupt Member,
and a third appointed by the two appraisers so appointed by the Members.
The appraisers to be appointed by the electing Members and the Bankrupt
Member shall be appointed not later than fifteen (15) days following
delivery of the Purchase Notice to the Bankrupt Member, and, if any Member
shall fail to appoint its appraiser within the aforesaid period of fifteen
(15) days the fair market value shall be determined solely by the appraiser
selected by the Member who has selected its appraiser within the required
fifteen (15) day period. If the two appraisers so appointed shall be unable
to agree on the selection of the third appraiser, then either appraiser, on
behalf of both, may request such appointment by the Chief Judge of the
United States District Court for the Northern District of Illinois. The
fair market value of the assets of the LLC, subject to liens and
encumbrances, shall be the average of the valuations of such property as
determined by each such appraiser; provided, however, if such average
deviates more than seven percent (7%) from the median of such valuations,
the fair market value shall be the average of the two closest valuations.
Any such appraisal shall be at the sole expense of the LLC and shall be
submitted to the Members within thirty (30) days after the panel of the
three appraisers is constituted.
9.8 Additional Members. Additional Members (other than as a result of
transfers by Members otherwise permitted by Article IX hereof) may be admitted
to the LLC only upon the unanimous written consent of all members of the
Committee and shall have such representation on the Committee, if any, as may be
determined by all members of the Committee in connection with such admission.
<PAGE>
42
ARTICLE X
---------
Dissolution and Liquidation
---------------------------
In all cases of dissolution of the LLC, the business of the LLC shall be
wound up by the Committee and the LLC terminated as promptly as practicable
thereafter and each of the following shall be accomplished:
(a) The Committee shall cause to be prepared a statement
setting forth the assets and liabilities of the LLC as of the date of
dissolution, a copy of which statement shall be furnished to all
Members.
(b) The property and assets of the LLC shall be liquidated by
the Committee as promptly as possible, but in an orderly and
businesslike and commercially reasonable manner so as not to cause
undue financial sacrifice. The Committee may, in the exercise of its
business judgment, determine not to sell all or any portion of the
property and assets of the LLC, in which such event such property and
assets shall be distributed in kind. In connection with any such
liquidation of the assets of the LLC, the Committee, in the exercise of
its discretion, may sell for cash or on credit or in exchange for other
property as determined by the Committee, at public, private or
negotiated sale or sales, and if upon credit, taking such collateral
security, if any, as the Committee deems appropriate.
(c) Following sale or liquidation of the property of the LLC,
the proceeds of such sale shall, after payment of all costs and
expenses of dissolution and winding up of the LLC, and after payment or
adequate provision for payment of all debts and liabilities of the LLC,
be distributed to the Members in proportion to their Capital Accounts
after giving effect to the allocations set forth in Article V no later
than the end of the fiscal year in which the LLC ceases to be a going
concern, the LLC terminates pursuant to Section 708(b)(1)(A) of the
Code, or, if later, ninety (90) days after such termination or
cessation. If deemed prudent and advisable by the Committee, the
Committee may establish such reasonable reserves for contingent or
unforeseen liabilities as they deem appropriate, in such form and for
such period of time as may be reasonably necessary, and the Members
shall then, when all contingent or unforeseen liabilities have been
paid or otherwise satisfied, distribute any balance of such reserves to
the Members as herein provided.
ARTICLE XI
----------
Miscellaneous
-------------
11.1 Further Assurances. Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further certificates, amendments to
certificates, instruments and documents, and do such other acts and things as
may be required by law, or as may be required to carry out the intent and
purposes of this Agreement.
11.2 Notices. All notices, demands, consents, approvals, requests or other
communications which any of the parties to this Agreement may desire or shall be
required to be given hereunder shall be in writing and shall be given by
registered or certified mail, return receipt requested, or by personal delivery,
or delivery by a courier service, the cost and expense of such delivery to be
borne by the sending party. All notices shall be addressed to the parties at
their respective addresses as set forth on the signature page hereof. Any Member
may designate another address (or change its address) for notices hereunder by
delivery of a written notice to all other Members in accordance with the
provisions of this Section. Any notice sent in compliance with the above
provisions shall be deemed delivered on the fifth business day next succeeding
the day on which it was sent, or, if sooner, on the actual date of receipt by
the other party.
<PAGE>
43
11.3 Governing Law. This Agreement is made pursuant to and shall be
governed by and construed in accordance with the laws of the State of Indiana.
11.4 Captions. All article and section headings or captions contained in
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
11.5 Successors and Assigns. Subject to the provisions of Article IX, this
LLC Agreement shall be binding upon the parties hereto and their respective
executors, administrators, legal representatives, heirs, successors and assigns,
and shall inure to the benefit of the parties hereto, and, except as otherwise
herein expressly provided, their respective executors, administrators, legal
representatives, successors and assigns.
11.6 Extension Not a Waiver. No delay or omission in the exercise of any
power, remedy or right herein provided or otherwise available to a party or to
the LLC shall impair or affect the right of such Member or the LLC thereafter to
exercise the same. Any extension of time or other indulgences granted to a
Member hereunder shall not otherwise alter or affect any power, remedy or right
of any other Member or of the LLC, or of the obligations of the Member to whom
such extension or indulgence is granted.
11.7 Severability. If any provision of this LLC Agreement or application to
any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such person or circumstances,
other than as to which it is so determined invalid or unenforceable shall not be
affected thereby, and each provision shall be valid and shall be enforced to the
fullest extent permitted by law.
11.8 Consent. Any consent or approval to any act or matter required under
this Agreement must be in writing and shall apply only with respect to the
particular act or matter to which such consent or approval is given, and shall
not relieve any Member from the obligation to obtain consent or approval, as
applicable, whenever required under this Agreement or any other act or matter.
11.9 Entire Agreement and Amendments. This Agreement contains the entire
understanding and agreement of the parties hereto relating to the subject matter
hereof and all prior agreements relative hereto which are not contained herein
are terminated. Amendments, variations, modifications or changes herein may be
made effective and binding upon the Members by, and only by, setting forth the
same in a document duly executed by each Member, and any alleged amendment,
variation, modification or change herein which is not so documented shall not be
effective as to any Member.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall be deemed one Agreement, but no counterpart shall be
binding unless an identical counterpart shall have been executed and delivered
by each of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RSR, LLC INDIANA RBG, L.P.
By: HCCC Corp., its general partner
By: /s/ Patrick F. Daly /s/ Richard L. Schulze
------------------------- ---------------------------------
Address: Address:
<PAGE>
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Exhibit B
---------
AMENDED AND RESTATED
OPERATING AGREEMENT
FOR
RSR, LLC
This Operating Agreement is made as of February 26, 1996 by and among Paul
R. Partridge, American Gaming & Entertainment, Ltd., Patrick F. Daly, and James
A. Everatt as Members (hereinafter referred to collectively as the "Members" and
individually as a "Member") and Charles E. Reisert, Jr. and Eric C. Jackson
(hereinafter referred to collectively as the "Limited Members" and individually
as a "Limited Member").
WHEREAS, the parties have formed a limited liability company and have filed
Articles of Organization with the Indiana Secretary of State for that purpose in
accordance with the Indiana Business Flexibility Act;
WHEREAS, the Members have previously adopted an Operating Agreement which
they now desire to amend and restate in its entirety by this Agreement:
NOW THEREFORE, the parties hereto, in consideration of the mutual covenants
and benefits herein contained do hereby agree to the following operating
agreement for RSR ("Company") pursuant to the provisions of the laws of the
State of Indiana upon the terms hereinafter set forth:
ARTICLE I
Definitions
-----------
As used in this Agreement, the following terms shall have the following
meanings:
1.01. "Act" shall mean the Indiana Business Flexibility Act of the State of
Indiana, as amended from time to time.
1.02. "Affiliate" shall mean, as to any Member (or as to any other Person
the affiliates of whom are relevant for purposes of any of the provisions of
this Agreement) any corporation, partnership, joint venture, limited liability
company, trust or individual controlled by, under common control with, or which
controls, directly or indirectly, such Member or other Person. The term
"control" for these purposes means the ability, whether by direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to elect a majority of the
managers of a limited liability company, to select the managing partner of a
partnership, or otherwise to select, or have the power to remove and then
select, a majority of those persons exercising governing authority over an
entity, and, in the case of a limited partnership, shall mean the sole general
partner thereof, all of the general partners thereof which have or share
management control or authority, or the managing general partner or managing
general partners thereof, as appropriate (and in any event shall mean the
ownership and control [that is, the right to vote] of fifty percent (50%) or
more of the residual equity interests in an entity). The term "Affiliate" shall
also mean and include (i) a trust of which the Member, or other applicable
Person, or a direct or indirect shareholder of such Member or other Person, is a
trustee, or which has as its principal income or residual beneficiaries, such
Member or other Person, or any direct or indirect shareholder of such Member or
other Person, or members of the immediate family of such Member, direct or
indirect shareholder or other Person, and (ii) any members of such Member's or
other Person's immediate family, or a member of the immediate family of any
direct or indirect shareholder of such Member or other Person. For purposes
hereof, shares or other ownership interests held by a trust shall be deemed to
be owned pro rata by the income and residuary beneficiaries of such trust.
Further, the members of the immediate family of any Member or other Person shall
include all collateral relatives of such Member or other person having a common
linear ancestor with such Member or other Person, and the spouse or any former
spouse of such Member or other Person or any of such collateral relatives.
1.03. "Agreement" shall mean this Operating Agreement as originally
executed and as amended, modified, supplemented or restated from time to time,
as the context requires.
<PAGE>
45
1.04. "Bankrupt Member" shall mean any Member (a) that (i) makes a general
assignment for the benefit of creditors; (ii) files a voluntary bankruptcy
petition; (iii) becomes the subject of an order for relief or is declared
insolvent in any federal or state bankruptcy or insolvency proceedings; (iv)
files a petition or answer seeking for the Member a reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
law, (v) files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against the Member in a proceeding of
the type described in subclauses (i) through (iv) of this clause (a); or (vi)
seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of the Member's or of all or any substantial part of the Member's
properties; or (b) against which a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any law has been commenced and 120 days have expired without
dismissal thereof or with respect to which, without the Member's consent or
acquiescence, a trustee, receiver, or liquidator of the Member or of all or any
substantial part of the Member's properties has been appointed and 90 days have
expired without the appointment's having been vacated or stayed, or 90 days have
expired after the date of expiration of a stay, if the appointment has not
previously been vacated.
1.05. "Capital Contribution" shall mean any contribution of cash or other
property which is required to be made to the Company pursuant to the provisions
of Sections 3.01 and 3.02 hereof.
1.06. "Capital Call" shall mean a Rising Sun LLC Capital Call or an
Operating Expense Capital Call.
1.07. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time unless otherwise indicated.
1.08. "Commission" shall mean the Indiana Gaming Commission.
1.09. "Committee" shall mean the Executive Committee of the Company
established under Article VI of this Agreement.
1.10. "Company" shall mean the limited liability company formed pursuant to
the terms of this Agreement and the provisions of the Act, as such company may
from time to time be constituted.
1.11. "Company Interest" shall mean the percentage Interest of the Company
of each Member from time to time as set forth on Schedule A attached hereto
(which Schedule A shall be amended from time to time to reflect any adjustments
in the Company Interest of each Member).
1.12. "Fair Market Value" means, with respect to an Company Interest, the
fair market value thereof, taking into account associated liabilities and
minority and liquidity discounts (if any) as appropriate determined as provided
in Section 9.05(b) hereof.
1.13. "Financial Accommodation" means any guarantee, assumption, stop-loss,
letter of credit or other similar agreement to any governmental agency, creditor
providing financing to the Company or other party pursuant to which liability is
several and not joint between the Members.
1.14. "Fiscal Year" shall mean the calendar year or such other fiscal year
of the Company as may be determined by the Members for federal income tax
reporting purposes. Such term shall also refer to any short taxable year of the
Company.
1.15. "Funding Date" shall mean the date on which a Capital Call is due.
1.16. "Gain From a Disposition" shall mean any net gain determined in
accordance with the Code included in the Company's Net Profit or Net Loss for
any fiscal year resulting from (a) the sale, foreclosure, exchange or other
disposition of all or a substantial portion of any asset of the Company and (b)
the condemnation or taking of or casualty to all or a substantial portion of any
asset of the Company.
1.17. "Interest" shall mean the entire ownership interest of a Member in
the Company at any particular time, including the right of such Member to any
and all benefits to which he may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all the terms and
provisions of this Agreement.
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46
1.18. "License" shall mean any license, permit, authorization, consent or
approval issued by any governmental agency, authority, board, bureau,
commission, department or instrumentality, and required in order to conduct a
gaming business, either alone or in combination with any one or more other
businesses, including any such license, permit, authorization, consent or
approval issued by the State of Indiana or any local governmental authority in
connection with the operation of the business of the Company or Rising Sun LLC,
or by any other jurisdiction, domestic or foreign, necessary in order to conduct
the business of any Member or any of the Affiliates of any Member, in any such
other jurisdiction. Without limiting the generality of the foregoing, for
purposes of this definition "gaming business" shall include thoroughbred horse
racing with pari-mutuel betting.
1.19. "Limited Member" shall mean Charles E. Reisert, Jr. and Eric C.
Jackson, who shall be included as Members solely for the purposes of allocations
of Net Profit and Net Loss, distributions to Members and Article IX of this
Agreement, but who shall not be subject to Capital Calls and shall have no
voting rights on any matter upon which Members are entitled to vote.
1.20. "Loss of License" shall mean any denial, revocation, suspension (for
a period in excess of three (3) days), or non-renewal of any License, whether
resulting from any judicial or administrative proceeding, or otherwise, and
which results, directly or indirectly, from any act or omission of, or
ineligibility to hold a License by any Member, or any Affiliate of a Member
(including, for this purpose, the partners, shareholders, employees, agents,
officers, members or directors of any of the Members, or their respective
partners or equity participants or any person or entity with whom such party has
had business or other dealings), including, without limitation, the commission
of any crime or other act deemed inconsistent with the holding of a License, or
the association or affiliation with unsuitable persons or entities, whether or
not the allegations with respect thereto are true in fact. No Loss of License
shall be deemed to have occurred so long as proceedings with respect thereto are
being contested with due diligence and in good faith by the Company or Rising
Sun LLC, or the person or entity affected thereby, provided that, during the
pendency of such proceedings, the Company or Rising Sun LLC is able to continue
gaming operations on an uninterrupted basis and without additional restrictions
with respect thereto. A Loss of License, however, shall be deemed to have
occurred notwithstanding that additional rights of appeal or contest may be
available if, as a result of any such action, gaming operations by the Company
or Rising Sun LLC are prohibited or materially restrained, limited or
restricted.
1.21. "Loss From a Disposition" shall mean any net loss determined in
accordance with the Code included in the Company's Net Profit or Net Loss for
any Fiscal Year resulting from (a) the sale, foreclosure, exchange or other
disposition of all or a substantial portion of any asset of the Company and (b)
the condemnation or taking of or casualty to all or a substantial portion of any
asset of the Company.
1.22. "Majority in Interest" shall mean the affirmative vote, approval or
consent of the Members with aggregate Company Interests of more than fifty
percent (50%).
1.23. "Members" shall include those persons listed as Members in the first
paragraph of this Agreement, except that such term shall also include Limited
Members on matters pertaining to allocations of Net Profit and Net Loss,
distributions to Members and Article IX of this Agreement.
1.24. "Member's Commitment Percentage" shall mean the Company Interest of
each Member or Limited Member, as the case may be.
1.25. "Net Cash Flow" shall mean, with respect to any fiscal period, the
sum of all cash receipts of the Company from fees for services, and any and all
other sources (excluding, however, capital contributions and transactions the
proceeds from which are included for purposes of determining Net Proceeds of any
Sale or Net Proceeds of Financings) less the sum of the following expenditures
paid out of such cash receipts:
(i) payments of salaries, advertising and promotion, rental, insurance,
management expenses, utilities, repairs and maintenance, accounting
services, equipment, supplies, and any and all other items which are
customarily considered to be "operating expenses";
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47
(ii) payments of interest, principal and other charges with respect to any
and all loans or other indebtedness of the Company, including loans or
other indebtedness of the Company to any Member incurred in accordance
with the provisions of this Agreement;
(iii) payments made in connection with the organization of the Company;
(iv) payments of any and all amounts of compensation to Members and
Affiliates;
(v) any and all other cash expenditures of the Company, except
distributions to Members pursuant to Articles V, IX or X hereof; and
(vi) amounts set aside as additions to reasonable reserves established by
the Members for working capital, contingent liabilities or as
otherwise deemed by the Members as reasonably necessary to meet the
current and anticipated future liabilities, obligations and operating
and capital expenditures of the Company.
1.26. "Net Loss" shall mean, with respect to any Fiscal Year, the net
"book" loss of the Company, if any, for such year as determined for federal
income tax accounting purposes consistent with the requirements of Section
704(b) of the Code and applicable regulations thereunder.
1.27. "Net Proceeds of Any Sale" shall mean the gross proceeds arising from
a sale, exchange, or other disposition of all or a substantial portion of any
property of the Company, or from any other transaction giving rise to Gain from
a Disposition or Loss from a Disposition less the sum of:
(i) the amount of funds disbursed or to be disbursed (including amounts
deducted for adjustments) in connection with or as an expense of such
Sale, including without limitation all broker's fees and attorneys'
fees;
(ii) the amount necessary for the payment of all debts and obligations of
the Company arising from or otherwise related to such Sale or to which
the property is subject and which are then to be paid; and
(iii) any amounts set aside by the Members for the reserves described in
paragraph (vi) of Section 1.25 hereof arising from or otherwise
relating to such Sale.
1.28. "Net Proceeds of Financing" shall mean the gross proceeds of any
borrowings by the Company, less the sum of:
(i) any amounts used to repay then existing indebtedness of the Company or
to pay or provide for any and all liabilities and obligations of the
Company then due:
(ii) all expenses of such borrowings including, without limitation, all
commitment fees, broker's commissions and attorneys' fees;
(iii) any amounts paid to acquire or in connection with the acquisition of
any real or personal property of the Company;
(iv) any amounts used for any purpose in order to satisfy conditions to or
established in connection with such borrowings; and
(v) any amounts set aside by the Members for the reserves described in
paragraph (vi) of Section 1.25 hereof arising from or otherwise
relating to such borrowings.
1.29. "Net Profit" shall mean, with respect to any Fiscal Year, the net
"book" income of the Company, if any, for such year as determined for federal
income tax accounting purposes consistent with the requirements of Section
704(b) of the Code and applicable regulations thereunder.
1.30. "Operating Expense Capital Call" shall mean a notice from the Company
to the Members requesting additional Capital Contributions pursuant to this
Agreement to pay the operating expenses of the Company setting forth (i) the
amount of funds required by the Company, (ii) the Funding Date not sooner than
twenty-five (25) days from date of delivery of the Capital Call.
1.31. "Partner Minimum Gain Chargeback Allocations" means the allocation
required by Sections 1.704-2(i)(4) and 1.704-2(k) of the Treasury Regulations.
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1.32. "Partner Nonrecourse Deduction Allocations" means the allocations
required by Section 1.704-2(i)(1) of the Treasury Regulations.
1.33. "Partnership Minimum Gain Chargeback Allocations" means the
allocations required by Sections 1.704-2(f) and 1.704(k) of the Treasury
Allocations.
1.34. "Person" shall mean and include an individual, partnership, limited
partnership, limited liability company, foreign limited liability company,
trust, estate, corporation, custodian, trustee, executor, administrator, nominee
or entity in a representative capacity (as defined in article 1.02(A)(4) of the
Act).
1.35. "Project" shall mean the riverboat casino and related operations as
defined under the Operating Agreement for Rising Sun LLC.
1.36. "RSR Commitment Date" shall mean the date for electing the percentage
interest of the Company in Rising Sun LLC as that date is defined in the
Operating Agreement for Rising Sun LLC.
1.37. "Rising Sun LLC" shall mean Rising Sun Riverboat Casino and Resort,
LLC, an Indiana limited liability company.
1.38. "Rising Sun LLC Capital Call" shall mean a notice from the Company to
the Members requesting additional Capital Contributions pursuant to this
Agreement setting forth (i) the amount of funds and/or the amount and terms of
any Financial Accommodations required by the Company, (ii) the Funding Date not
sooner than twenty-five (25) days from date of delivery of the Capital Call;
provided, however that the first Funding Date may not occur until 55 days after
the RSR Commitment Date, and (iii) each Member's share of the required amount of
funds and/or Financial Accommodations.
1.39. "Sale" shall mean the sale, exchange, condemnation, foreclosure or
other disposition of all or any substantial part of the assets and properties of
the Company in a non-recurring transaction outside the regular course of
business of the Company, and shall include, without limitation, any
condemnation, easement sale, casualty or other form of disposition of property,
and any other transaction (other than a capital contribution or loan
transaction) wherein the proceeds to the Company are, under generally accepted
accounting principles, considered capital in nature. The occasional sale,
trade-in or depreciation of furniture, furnishings, fixtures and equipment which
become worn out, obsolete or surplus is, for purposes hereof, a transaction
occurring in the regular course of business and therefore not a Sale.
1.40. "Treasury Regulations" means the income tax regulations promulgated
under the Code as in effect on the date of this Agreement, or as hereinafter
amended or supplemented (including corresponding provisions of such succeeding
regulations.
ARTICLE II
General Provisions
------------------
2.01. Name of the Company. The name of the Company shall be RSR, LLC or
such other name as the Members may from time to time determine. The Members
shall cause to be filed on behalf of the Company such assumed or fictitious name
certificate or certificates as may from time to time be required by law.
2.02. Purposes of the Company.
(a) Business. The business of the Company shall to the extent permitted by
law be (1) to acquire, and to finance the acquisition, of interests in other
entities, including Rising Sun LLC, which have interests in gaming and resort
operations; (2) to own, rehabilitate, renovate, improve, finance, refinance,
lease, operate, manage and sell or otherwise deal with the real and personal
property in the operation of a riverboat gaming and resort business under the
terms and conditions hereinafter set forth; (3) to have and exercise all the
powers necessary or convenient in connection with its business and purposes; and
(4) to engage in any lawful business, whether or not related or incidental to
any of the foregoing activities or any activities related thereto. The Company
may directly carry on any such activities or may do so as a joint venturer or
partner with any other Person or Persons.
(b) Authorized Activities. In carrying out the purposes of the Company, but
subject to all other provisions of this Agreement, and without limitation, the
Company is authorized to:
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49
(i) Acquire, hold, rent, lease and otherwise manage, operate, construct,
reconstruct, improve, renovate, rehabilitate, maintain, finance, sell,
transfer, convey, exchange, assign, mortgage or otherwise deal with or
dispose of any real or personal property or interests therein that may
be necessary, convenient, or incidental to the accomplishment of the
purposes of the Company;
(ii) Borrow money and issue evidences of indebtedness in furtherance of any
or all of the purposes of the Company, and to extend, repay, and
renegotiate the terms of any such indebtedness, and to secure the same
by mortgage, assignment, pledge, or grant of other security interest
on assets of the Company;
(iii) Enter into, perform, and carry out contracts and agreements of any
kind, including contracts with the Members or any of them or any of
their Affiliates, necessary or convenient or incidental to the
accomplishment of the purposes of the Company;
(iv) Bring and defend actions at law or in equity;
(v) Make prudent interim investments, including, without limitation,
obligations of federal, state and local governments or their agencies,
mutual funds, commercial paper, money-market funds, and bank
certificates of deposit; and
(vi) Engage in any kind of lawful activity, and perform and carry out
contracts of any kind and execute, acknowledge, and deliver
instruments of any kind that are necessary or convenient and permitted
by the Act in connection with the accomplishment of the purposes of
the Company.
2.03. Agent for Service of Process. Timothy M. Harden shall be the
Company's agent for service of process within the State of Indiana and for such
purpose the address of Mr. Harden shall be One Indiana Square, Suite 2800,
Indianapolis, Indiana 46204.
2.04. Place of Business of the Company. The principal place of business of
the Company shall be located at 206 Main Street, Rising Sun, Indiana 47040. The
Committee may, at any time and from time to time, change the location of the
Company's principal place of business, and may establish such additional place
or places of business of the Company as it may from time to time determine.
2.05. Duration of the Company. The duration of the Company shall be until
December 31, 2068, unless sooner terminated in accordance with Article X hereof,
or as otherwise provided by law.
2.06 Members' Names and Addresses. The names and addresses of the Members
are set forth on Schedule A attached hereto.
2.07 Title to Company Property. All property owned by the Company, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Company as an entity, and no Member, individually, shall have any ownership of
such property. The Company may hold any of its assets in its own name or in the
name of a nominee, which nominee may be one or more individuals, companies,
corporations, trusts and other entities.
2.08 Relationship of Members. Except as otherwise expressly provided in or
as authorized pursuant to this Agreement, (a) nothing contained herein shall
render any Member liable for any debts or obligations incurred by the other
Members, (b) no Member shall be constituted an agent of the other Members, (c)
nothing contained herein shall create any interest on the part of any Member in
the business or other assets of the other Members, (d) nothing contained herein
shall be deemed to restrict or limit in any way the carrying on of separate
businesses or activities by any Member now or in the future and (e) no Member
shall have any authority to act for, or to assume any obligation on behalf of,
the other Members.
ARTICLE III
Capital Contributions, Member Loans, Capital Accounts
-----------------------------------------------------
3.01 Initial Capital Contributions. The Members have made or shall make
contributions to the capital of the Company in the amounts, at the agreed values
and at the times set forth opposite their respective names on Schedule 3.01
attached hereto and incorporated herein by reference. No interest shall accrue
<PAGE>
50
on any contributions to the capital of the Company, and no Member shall have the
right to withdraw or to be repaid any capital contributed by it, except as
specifically provided in this Agreement. No Member shall be required to make any
additional contributions to the capital of the Company except as set forth in
this Section 3.01 or in Section 3.02 hereof.
3.02 Additional Capital Contributions.
(a) Financing or Equity Commitment.
(1) Election. Prior to the RSR Commitment Date, the Committee shall explore
commitments for equity or for financing the Company's share of the Project as a
member of Rising Sun LLC. In the event that satisfactory financing or equity
commitments are found, the Committee shall present the terms and conditions of
such proposal to the Members for a vote in accordance with the Members' Company
Interests. At least five days prior to the RSR Commitment Date, the Committee
shall cause a meeting of Members to be held for the purpose of discussing the
status of the financing or equity and the level of participation of the Company
as a member of Rising Sun LLC. In the event that suitable financing or equity
commitments are not found and approved by the Members prior to the RSR
Commitment Date, the Company shall deliver its election to Rising Sun LLC that
its interest in Rising Sun LLC shall be reduced to twenty percent (20%), subject
to further reduction if Community Participants are admitted to Rising Sun LLC.
In the event that one or more of the Members are able to supply the funds
necessary for the Company to maintain more than a twenty percent (20%) interest
in Rising Sun LLC, such proposal shall be approved and the Company Interests
shall be adjusted pursuant to Section 3.02(a)(2) below.
(2) Adjustment of Company Interests. Each of the Members shall have the
right to provide the funds necessary for the Company to maintain a seven and
one-half percent interest in Rising Sun LLC and shall receive an additional
Company Interest of two times the amount of Rising Sun LLC interest maintained,
with a prorata adjustment of Company Interests for the remaining Members. In the
event that fewer than all of the Members provides all of the funds necessary for
the Company to maintain more than a twenty percent (20%) interest in Rising Sun
LLC, then the Company Interests shall be adjusted in accordance with Schedule B.
In addition to the funds necessary for the Company to maintain more than a
twenty percent (20%) interest in Rising Sun LLC, the contributing Member or
Members shall also make a Capital Contribution to the Company in the amount of
the estimated taxes which would otherwise be payable by the other Members of the
Company based on the projection of income allocated to such Members as shown on
Schedule C for the first year of operations of Rising Sun LLC, such Capital
Contribution to be distributed to such non-contributing Members and using for
this purpose an assumed tax rate of the greater of (i) 40% and (ii) the highest
combined U.S. federal or Canadian and Indiana marginal income tax rate
applicable to individuals for the tax year in question (reduced for any tax
credit received by Canadian Members). Such contributing Member or Members shall
also indemnify and hold harmless any other Member from any out-of-pocket
expenses incurred by such Member as a result of the contributing Member's
contribution to Rising Sun LLC. In the event that fewer than all of the Members
commits to provide all of the funds necessary for the Company to maintain more
than a twenty percent (20%) interest in Rising Sun LLC and the interest of the
Company in Rising Sun LLC is sold prior to the time that the funds are actually
contributed, the Gain from the Disposition resulting from such Sale shall be
allocated under the Company Interests as adjusted in the manner provided on
Schedule B assuming that the contributing Member or Members have already
received a full recovery of its capital, plus a sixteen percent (16%) preferred
return; provided, however, that such contributing Member or Members shall first
receive a full reimbursement of its out-of-pocket expenses incurred in obtaining
the commitments for such funds.
(b) Additional Funds.
(1) Rising Sun LLC Capital Call. After the RSR Commitment Date, in the
event that Rising Sun LLC shall determine that additional funds and/or Financial
Accommodations are necessary in order to finance the acquisition, development,
construction or operation of the assets and business of Rising Sun LLC in excess
of funds otherwise available to Rising Sun LLC, including funds available from
third party loans, the Committee shall deliver a Rising Sun LLC Capital Call to
the Members of the Company's share of the amount required by Rising Sun LLC.
Each contributing Member shall be obligated to advance to the Company its pro
rata share of the required additional funding based on its then Member
Commitment Percentage, the amount of which funding shall, except as provided by
Section 3.02(c) hereof, be due, in cash, on the Funding Date. Any amounts funded
pursuant hereto in cash shall be credited to the capital account of the
contributing Member in accordance with the provisions of Section 3.02(c) hereof.
In no event shall a Member be required to make Capital Contributions under this
Section 3.02(b) and Financial Accommodations under Section 3.02(c) which
aggregate more than such Member's Commitment Percentage.
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51
(2) Operating Expense Capital Call. In the event the Committee determines
that the Company requires additional funds to pay its operating expenses, the
Committee shall deliver an Operating Expense Capital Call to the Members of the
Company. Each Member shall be obligated to advance to the Company its pro rata
share of the required additional funding based on its then Member Commitment
Percentage, the amount of which funding shall, except as provided by Section
3.02(c) hereof, be due, in cash, on the Funding Date. Any amounts funded
pursuant hereto in cash shall be credited to the capital account of the
contributing Member in accordance with the provisions of Section 3.02(c) hereof.
In no event shall a Member be required to make Capital Contributions under this
Section 3.02(b) and Financial Accommodations under Section 3.02(c) which
aggregate more than such Member's Commitment Percentage.
(c) Financial Accommodations. If in the Committee's discretion Financial
Accommodations are required to be delivered by Members to any governmental
agency, lender or other party (an "Accommodation Recipient") in connection with
the Company or Rising Sun LLC's business, the Committee shall provide written
notice thereof (the "Financial Accommodation Notice") to the Members pursuant to
Section 3.02(b)), including the form or terms of the Financial Accommodations,
the aggregate amount thereof (the "Required Aggregate Financial Accommodation
Amount") and the date upon which the Financial Accommodations are required to be
delivered to the Accommodation Recipient (the "Financial Accommodation Requested
Date"), in which event the Members shall provide such Financial Accommodation in
proportion to their respective Member Commitment Percentages. No Financial
Accommodation by a Member shall be required to provide joint and several
liability with another Member or any other party.
(i) (1) No later than 25 days after the Financial Accommodations Notice is
given prior to the completion of the Riverboat Complex (as defined in
the Rising Sun LLC Operating Agreement) or (2) no later than 55 days
after the Financial Accommodation Notice is given following the
completion of the Riverboat Complex, each Member shall provide to the
Accommodation Recipient a Financial Accommodation issued by or for the
account of such Member or an Affiliate of such Member in the amount
equal to the product of the Required Aggregate Financial Accommodation
Amount and the Commitment Percentage of such Member (the "Required
Financial Accommodation Amount") and otherwise complying with the
terms set forth in the Financial Accommodation Notice.
(ii) If any Member fails to deliver or cause to be delivered its Financial
Accommodation in accordance with the terms of this Section 3.02(c) or
the Accommodation Recipient refuses to accept such Member's Financial
Accommodation, any other Member shall have the right to advance to the
Company funds or provide additional Financial Accommodations equal to
the Company's Required Financial Accommodation Amount; in which event
the non-complying Member shall be deemed to have failed to make a
Capital Contribution in accordance with Section 3.05 hereof in the
amount of its Required Financial Accommodation Amount.
(iii) If there is a draw on, or any amount otherwise is paid pursuant to,
the Financial Accommodation (the "Drawn Amount") of any Member (the
"Drawn Member"), the other Members shall contribute to the capital of
the Company in cash, no later than ten days after written notice is
given by the Drawn Member of such draw or other payment, in amount
equal to the product of the Drawn Amount and such other Member's
Commitment Percentage, and the Drawn Account promptly shall be paid by
the Company to the Drawn Member as reimbursement for such draw or
other payment.
(d) Contributions for Nondefaulting Members. If any Member is unable or
unwilling to make any or all of his proportionate contribution pursuant to a
Capital Call, then the remaining Members who are able and willing to do so may
make a contribution in excess of their Company Interest, in such amounts as they
may agree among themselves. If they are unable to agree, each Member who is able
and willing to make a contribution shall have the primary right to contribute
that portion of such excess which the proportion of such Member's Company
Interest bears to the aggregate Company Interests of all such Members, and a
secondary right to contribute any remaining portion of such excess which is not
desired to be contributed by any other Member in the exercise of his primary
right. If there is more than one Member desiring to exercise secondary rights,
they shall be entitled to contribute the remaining portion of such excess in the
same proportion as stated above with regard to their primary rights.
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52
(e) Contributions by Nondefaulting Members. Any Member who makes a
contribution to the Company pursuant to paragraph 3.02(d) above as a result of a
Capital Call shall treat the contribution as a loan to the defaulting Member
bearing interest at the rate of eighteen percent (l8%) per annum. Thereafter,
all distributions of cash from the Company payable to the defaulting Member
shall be paid to the Member (or pro rata to the Members) who have elected to
treat the contributions as loans, until such time as the principal and interest
of the loan(s) are paid in full.
3.03. Members' Capital Accounts. The Company shall maintain a separate
capital account for each Member. Each Member's initial capital account balance
shall equal his initial contribution to the capital of the Company as provided
in Section 3.01 of this Agreement. Each Member's capital account shall
thereafter be increased (i) by any cash, or the fair market value of any
property thereafter contributed by such Member (net of liabilities assumed by
the Company and liabilities to which such contributed property is subject), (ii)
by the amount of any Company liabilities that are assumed by such Member,
(excluding liabilities described in clause (iv) of the sentence next following),
and (iii) by such Member's distributive share of the Company's income and gain
(or items thereof). Each Member's capital account shall be decreased (i) by such
Member's distributive share of the Company's loss and deductions (or item
thereof) (except items described in clause (iii) hereinbelow), (ii) by the
amount of such Member's individual liabilities that are assumed by the Company
(excluding liabilities described in clause (i) of the next preceding sentence,
except to the extent, if at all, that such liabilities exceed the fair market
value of the property contributed), (iii) by such Member's share of expenditures
of the Company described in Section 705(a)(2)(B) of the Code, and (iv) by the
amount of cash, or the fair market value of any property distributed by the
Company to such Member (net of liabilities assumed by such Member and
liabilities to which such distributed property is subject). Other appropriate
adjustments to each Member's capital account shall also be made from time to
time, in accordance with the rules set forth in Regulation Section
1.704-1(b)(2)(iv) under Section 704 of the Code or the requirements of any other
applicable final or temporary regulations thereunder. It is the intent of the
Members that the capital accounts shall be determined and maintained in
accordance with Section 704 of the Code and regulations thereunder, and this
Section 3.03 shall be construed in a manner consistent therewith. A Member who
has more than one Interest in the Company shall have a single capital account
that reflects all such Interests. No Member shall be entitled to interest on his
capital account.
3.04. Member Loans. In the event that funds are needed by the Company for
its operations, any Member may loan such funds to the Company under such terms
and conditions as may be agreed to between the Member and the Company.
3.05. Pledge Agreement.
(a) Each Member hereby grants to the Company a first priority security
interest in and to such Member's Company Interest, including, without
limitation, any right to distributions, in liquidation or otherwise, with
respect to such Company Interest, for the purpose of securing the payment to the
Company of the Member's Capital Contribution. Each Member represents and
warrants to the Company that such Member has good and marketable title to its
Interest in the Company and that such Interest is free and clear of all liens,
claims and encumbrances whatsoever having priority over the security interest
granted herein to the Company. The Company shall have all of the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in the
State of Indiana (the "UCC"). Each Member further agrees to execute and deliver
to the Company such UCC Financing Statements and other documents and instruments
and to take such further actions as may be reasonably necessary or appropriate
in the opinion of counsel to the Company in order to perfect and maintain the
first priority security interest granted hereby. In furtherance thereof, each
Member agrees that the provisions of this paragraph shall constitute a security
agreement and hereby authorizes the Company to execute and file any such UCC
Financing Statements on behalf of such Member, and any and all continuation
statements or amendments thereto as the Committee shall determine to be in the
best interests of the Company. In the event a Member shall fail to make any
payment of its Capital Contribution to the Company by the date required therefor
pursuant to this Agreement, such Member shall be considered to be in default in
respect of such payment obligations and, pursuant to Section 3.05(b) hereof, the
Company may mail a written notice to such defaulting Member of the existence of
such default and demand that such default be cured within the ten (10) day
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53
period specified in such Section 4.16(b), and failing payment in full of such
amount within the ten (10) day cure period, the Company may then exercise any
and all remedies available to it hereunder or at law or in equity. The Company
and any Member shall be entitled to bid for and purchase all or any part of the
Company interest being sold at any sale conducted pursuant to, or as permitted
under, the UCC. In order to realize upon the security interest granted herein,
the Company may sell or otherwise dispose of the Company Interest of a Member
defaulting in the payment of its Capital Contributions hereunder at public sale,
with or without having the Company Interest at the place of sale and upon such
terms and in such manner as the Company may determine. The Company shall give
any such defaulting Member at least ten (10) days prior written notice of the
time and place of any public sale of the Company interest or other intended
disposition thereof. Such notice may be mailed to the defaulting Member at the
address set forth herein, as the same may be amended from time to time.
(b) Prior to instituting any efforts to realize upon the security interest
granted herein, the Company shall mail a notice to the defaulting Member that a
required Capital Contribution has not been made, and such defaulting Member
shall have a period of ten (10) days after the Company mails such notice (as
evidenced by the postmark date of the notice) within which to cure any such
default. If the default has not been cured within such ten (10) day period, the
Company may exercise any and all remedies available to it hereunder or at law or
in equity.
ARTICLE IV
Allocation of Profits or Losses
-------------------------------
4.01. Allocation of General Profits and Losses. Except as otherwise
provided in Sections 4.02 or 4.03 hereof, and subject to the provisions of
Section 9.03 hereof, the Net Profit or Net Loss, as the case may be, as of the
end of any Fiscal Year shall be allocated among the Members in accordance with
the Members' Company Interests.
4.02. Allocation of Gains from Dispositions. Subject to the provisions of
Section 9.03 hereof, any Gain from a Disposition shall be allocated to the
Members in accordance with the Members' Company Interests in effect as of the
date of the consummation of the transaction giving rise to such Gain.
4.03. Allocation of Losses from Dispositions. Subject to the provisions of
Section 10.03 hereof, any Loss from a Disposition shall be allocated in
accordance with the Members' Company Interests in effect as of the date of the
consummation of the transaction giving rise to such Loss.
4.04. Deduction for Receipt of Company Interest. To the extent that the
Company shall be entitled to any deduction for federal income tax purposes as a
result of any Interest acquired by a Member in the Company as a result of an
original acquisition or as a result of an exercise of an option to purchase an
additional Interest in the Company, such deduction shall be allocated to the
Member acquiring such Interest.
4.05. Special Allocations.
(a) The Company shall make the qualified income offset allocation required
by the alternate test for economic effect under Section 1.704-1(b)(2)(ii)(d) of
the Treasury Regulations.
(b) In the event any Member has a deficit Capital Account at the end of any
Company fiscal year that is in excess of the amount such Member is obligated to
restore the Company (including amounts the Member is obligated or deemed to be
obligated to restore to the Company pursuant to the alternate test for economic
effect under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations), each
Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 4.05(b) shall be made if and only to the extent that
such Member would have a deficit Capital Account in excess of such amount after
all other allocations provided in this Article IV have been tentatively made as
if the qualified income offset allocation required by the alternate test for
economic effect and this Section 4.05(b) were not required by this Agreement.
(c) Except as otherwise provided in Section 4.05(d) hereof, the Company
shall make all (i) Partner Nonrecourse Deduction Allocations; (ii) Partner
Minimum Gain Chargeback Allocations; and (iii) Partnership Minimum Gain
Chargeback Allocations as required by Section 1.704-2 of the Treasury
Regulations.
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54
(d) The Company shall make all Nonrecourse Deduction Allocations to the
Members in a manner that is reasonably consistent with allocations, which have
substantial economic effect, of some other significant Company item attributable
to the property securing nonrecourse liabilities of the Company (as determined
by the Members).
(e) To the extent an adjustment to the adjusted tax basis of any Company
asset pursuant to Code Section 734(b) or Code Section 743(b) is required,
pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations, to be
taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the base of the asset) or loss (if the adjustment decreases
such basis) and such gain or loss shall be specially allocated to the Members in
a manner consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Treasury Regulations.
4.06. Curative Allocations.
(a) Notwithstanding any other provision of this Agreement, other than
Section 4.05 hereof, the allocations made pursuant to Sections 4.05(a), 4.05(b)
and 4.05(e) hereof shall be taken into account in allocating other Net Profits,
Net Losses, and items of income, gain, loss and deduction among the Members so
that, to the extent possible, the net amount of such allocations of other Net
Profits, Net Losses, and other items and the allocation made pursuant to
Sections 4.05(a), 4.05(b) and 4.05(e) hereof to each Member shall be equal to
the net amount that would have been allocated to each such Member if the
allocations made pursuant to Sections 4.05(a), 4.05(b) and 4.05(e) hereof had
not occurred. For purposes of applying the foregoing sentence, allocations
pursuant to this Section 4.06(a) shall only be made with respect to allocations
pursuant to Section 4.05(e) hereof to the extent the Tax Matters Partner
reasonably determines that such allocations will otherwise be inconsistent with
the economic agreement among the parties to this Agreement.
(b) Notwithstanding any other provision of this Agreement, other than
Section 4.05 hereof, the Nonrecourse Deduction Allocations and Partnership
Minimum Gain Chargeback Allocations shall be taken into account in allocating
items of income, gain, loss and deduction among the Members so that, to the
extent possible, the net amount of such allocations of other items and such
Nonrecourse Deduction Allocations and Partnership Minimum Gain Chargeback
Allocations made to each Member shall be equal to the net amount that would have
been allocated to each such Member if the Nonrecourse Deduction Allocations and
Partnership Minimum Gain Chargeback Allocations had not occurred. For purposes
of applying the foregoing sentence (i) allocations pursuant to this Section
4.06(b) shall be made only to the extent necessary to avoid any potential
economic distortions caused by a net decrease in Partnership minimum gain
pursuant to Section 1.704-2(d) and 1.704-2(k) of the Treasury Regulations, and
(ii) allocations pursuant to this Section 4.06(b) shall be deferred with respect
to Nonrecourse Deduction Allocations to the extent the Tax Matters Partner
reasonably determines that such allocations are likely to be offset by
subsequent Partnership Minimum Gain Chargeback Allocations.
(c) Notwithstanding any other provision of this Agreement, other than
Section 4.05 hereof, the Partner Nonrecourse Deduction Allocations and Partner
Minimum Gain Chargeback Allocations shall be taken into account in allocating
items of income, gain, loss and deduction among the Members so that, to the
extent possible, the net amount of such allocations of other items and the
Partner Nonrecourse Deduction Allocations and Partner Minimum Gain Chargeback
Allocations made to each Member shall be equal to the net amount that would have
been allocated to each Member if the Partner Nonrecourse Deduction Allocations
and Partner Minimum Gain Chargeback Allocations had not occurred. For purposes
of applying the foregoing sentence (i) allocations pursuant to this Section
4.06(c) shall be made only the extent necessary to avoid any economic
distortions caused by a net decrease in Member minimum gain pursuant to Sections
1.704-2(i)(3) and 1.704-2(k) of the Treasury Regulations, and (ii) allocations
pursuant to this Section 4.06(c) shall be deferred with respect to Partner
Nonrecourse Deduction Allocations to the extent the Tax Matters Partner
reasonably determines that such allocations are likely to be offset by
subsequent Partner Minimum Gain Chargeback Allocations.
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55
ARTICLE V
Distributions
-------------
5.01. Distribution of Net Cash Flow. The Managing Member shall cause
distributions to be made at such times and in such amounts as he may determine
of Net Cash Flow, after consideration of the annual budget for the Company
adopted by the Committee. Distribution of Net Cash Flow shall be allocated to
and divided among the Members in the same proportions as Net Profits are
allocated under Article IV.
5.02. Distribution of Net Proceeds of Sales and Financings. Except as
otherwise provided herein, the Net Proceeds of any Sale or the Net Proceeds of
Financing shall be distributed to and allocated in accordance with the Members'
Company Interests in effect as of the date of the consummation of the sale,
exchange, other disposition, or financing, as applicable.
ARTICLE VI
Management of the Company
-------------------------
6.01. Executive Committee.
(a) The management and control of the Company shall be vested in the
Members, who shall exercise their authority through an executive committee (the
"Committee"), which shall be responsible for the establishment of policy and
operating procedures respecting the business affairs of the Company. Subject to
the following paragraph, the Committee shall at all times consist of four (4)
members, one to be appointed by each of the Members entitled to vote. Each
member of the Committee may vote by delivering his proxy to another member of
the Committee or to any other person. Subject to the following paragraph, each
Member shall have the power to remove any member or alternative member of the
Committee appointed by it by delivering written notice of such removal to the
Company and to the other Members. Subject to the following paragraph, vacancies
on the Committee shall be filled by the Member which appointed the Committee
member previously holding the position which is then vacant.
Notwithstanding the foregoing paragraph, during any period when less than
all of the Members have contributed funds to enable the Company to maintain its
fifty percent (50%) interest in Rising Sun LLC and such funds have not been
returned through distributions from the Company to the contributing Members, the
members of the Committee shall be elected by the Members voting in accordance
with their Company Interests at a meeting held pursuant to Article VI(A). During
such period, vacancies on the Committee shall be filled by the remaining members
of the Committee until the next meeting of Members.
(b) Except for situations in which the approval of the Members is required
by this Agreement or by nonwaivable provisions of applicable law, and subject to
the provisions of Section 6.02, (i) the powers of the Company shall be exercised
by or under the authority of, and the business and affairs of the Company shall
be managed under the direction of, the Committee; and (ii) the Committee may
make all decisions and take all actions for the Company not otherwise provided
for in this Agreement, including, without limitation, the following:
(1) entering into, making, and performing contracts, agreements, and
other undertakings binding the Company that may be necessary, appropriate,
or advisable in furtherance of the purposes of the Company and making all
decisions and waivers thereunder;
(2) opening and maintaining bank and investment accounts and
arrangements, drawing checks and other orders for the payment of money, and
designating individuals with authority to sign or give instructions with
respect to those accounts and arrangements;
(3) maintaining the assets of the Company in good order;
(4) collecting sums due the Company;
(5) to the extent that funds of the Company are available therefor,
paying debts and obligations of the Company;
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56
(6) acquiring, utilizing for Company purposes, and disposing of any
asset of the Company;
(7) borrowing money or otherwise committing the credit of the Company
for Company activities and voluntary prepayments or extensions of debt;
(8) selecting, removing, and changing the authority and responsibility
of lawyers, accountants, and other advisors and consultants;
(9) obtaining insurance for the Company; and
(10) adoption of an annual financial budget for the Company.
(c) Notwithstanding the provisions of Section 6.01(b), the Committee may
not cause the Company to do any of the following without complying with the
applicable requirements set forth below:
(1) sell, lease, exchange or otherwise dispose of (other than by way
of a pledge, mortgage, deed of trust or trust indenture) all or
substantially all of the Company's property and assets (with or without
good will), other than in the usual and regular course of the Company's
business, without complying with the applicable procedures set forth in the
Act;
(2) be a party to (i) a merger, or (ii) an exchange or acquisition
without complying with the applicable procedures set forth in the Act;
(3) amend or restate the Articles, without complying with the
applicable procedures set forth in the Act; and
(4) anything herein contained to the contrary, borrow money if the
terms of such borrowing require the personal liability of any of the
Members, without the written consent of such Member or Members, except as
provided in Section 3.02(c) hereof.
6.02. Actions by Committee; Committees; Delegation of Authority and Duties.
(a) In managing the business and affairs of the Company and exercising its
powers, the Committee shall act (i) collectively through meetings and written
consents consistent as may be provided or limited in other provisions of this
Agreement; (ii) through committees pursuant to Section 6.02(b); and (iii)
through officers to whom authority and duties have been delegated pursuant to
Section 6.02(c).
(b) The Committee may, from time to time, designate one or more committees,
each of which shall be comprised of one or more of its members. Any such
committee, to the extent provided in such resolution or in the Articles or this
Agreement, shall have and may exercise all of the authority of the Committee,
subject to the limitations set forth in the Act. At every meeting of any such
committee, the presence of a majority of all the members thereof shall
constitute a quorum, and the affirmative vote of a majority of the members
present shall be necessary for the adoption of any resolution. The Committee may
dissolve any committee at any time, unless otherwise provided in the Articles or
this Agreement.
(c) The Committee may, from time to time, designate one or more Persons to
be officers of the Company who are not members of the Committee. No officer need
be a resident of the State of Indiana or a Member. Any officers so designated
shall have such authority and perform such duties as the Committee may, from
time to time, delegate to them. The Committee may assign titles to particular
officers; provided, however, that the office of President and the position as
Managing Member shall not be held by different Persons. Unless the Committee
decide otherwise, if the title is one commonly used for officers of a business
corporation, the assignment of such title shall constitute the delegation to
such officer of the authority and duties that are normally associated with that
office, subject to (i) any specific delegation of authority and duties made to
such officer by the Committee, or (ii) any delegation of authority and duties
made to one or more members pursuant to Section 6.02(a). Each officer shall hold
office until his successor shall be duly designated and shall qualify or until
his death or until he shall resign or shall have been removed in the manner
hereinafter provided. Any number of offices may be held by the same Person. The
salaries or other compensation, if any, of the officers and agents of the
Company shall be fixed from time to time by the Committee.
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57
Any officer may resign as such at any time. Such resignation shall be made
in writing and shall take effect at the time specified therein, or if no time be
specified, at the time of its receipt by the Committee. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any officer may be removed as such, either with or
without cause, by the Committee whenever in their judgment the best interests of
the Company will be served thereby; provided, however, that such removal shall
be without prejudice to the contract rights, if any, of the Person so removed.
Designation of an officer shall not of itself create contract rights. Any
vacancy occurring in any office of the Company may be filled by the Committee.
(d) Any Person dealing with the Company, other than a Member, may rely on
the authority of the Managing Member or officer in taking any action in the name
of the Company without inquiry into the provisions of this Agreement or
compliance herewith, regardless of whether that action actually is taken in
accordance with the provisions of this Agreement.
(e) Subject to the provisions of Section 6.03 relating to the Managing
Member, no Member, acting individually, nor any of their respective Affiliates,
has the power or authority to bind the Company or any Member or to authorize any
action to be taken by the Company, or to act as agent for the Company or any
other Member, unless that power or authority has been specifically delegated or
authorized by action of the Committee.
6.03. Managing Member. Patrick F. Daly shall be the initial Managing Member
(such Member so appointed being herein referred to as the "Managing Member") who
shall be responsible, on a day-to-day basis, for the operation of the business
of the Company. The Managing Member shall have only such authority as shall be
delegated to it by the Committee, or as herein expressly provided, which
authority shall be subject to revision, revocation, or alteration from time to
time by action of the Committee, and the Managing Member shall report to the
Committee. Notwithstanding the foregoing, the Managing Member shall have the
authority to break all ties if the vote of the members of the Committee results
in a tie and shall further be the appointee of the Company to the Executive
Committee of Rising Sun LLC. The Managing Member shall be elected by the Members
at their annual meeting in accordance with Article VI(A). In the event of the
resignation, death or disability of the Managing Member, the Committee shall
appoint a successor to serve until the next meeting of Members.
6.04. Number and Term of Office. The number of members of the Committee
shall be four unless changed by resolution of the Committee; provided, however,
that no decrease in the number of Committee members that would have the effect
of shortening the term of an incumbent member of the Committee may be made by
the Committee. Each member of the Committee shall hold office for the term for
which he is elected and thereafter until his successor shall have been elected
and qualified, or until his earlier death, resignation or removal. Unless
otherwise provided in the Articles, members of the Committee need not be Members
or residents of the State of Indiana.
6.05. (reserved)
6.06. Removal. Any and all members of the Committee may be removed, either
for or without cause, at any special meeting of Members by the affirmative vote
of a Majority in Interest entitled to vote at elections of Members of the
Committee. The notice calling such meeting shall give notice of the intention to
act upon such matter.
6.07. Resignations. Any member of the Committee may resign at any time.
Such resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified then at the time of its receipt
by the Managing Member. The acceptance of a resignation shall not be necessary
to make it effective, unless expressly so provided in the resignation.
6.08. Vacancies. Except when the members of the Committee were elected by
the Members under the circumstances described in the second paragraph of Section
6.01(a), any vacancy occurring in the members of the Committee shall be filled
by the Member who designated such member originally. A member of the Committee
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office.
6.09. Place and Manner of Meetings. Meetings of the Committee, regular or
special, may be held either within or without the State of Indiana. Members of
the Committee may participate in such meetings by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other and participation in a meeting as provided
herein shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
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6.10. (reserved)
6.11. Regular Meeting of Committee. A regular meeting of the Committee may
be held at such time as shall be determined from time to time by resolution of
the Committee.
6.12. Special Meeting of Committee. The Managing Member shall call a
special meeting of the Committee whenever requested to do so by any two members
of the Committee. Such special meeting shall be held at the time specified in
the notice of meeting. Except as otherwise expressly provided by statute, or by
the Articles, or by this Agreement, neither the business to be transacted at,
nor the purpose of, any special meeting need be specified in a notice or waiver
of notice.
6.13. Notice of Committee Meeting. All meetings of the Committee (annual,
regular or special) shall be held upon five (5) days' written notice stating the
date, place and hour of meeting delivered to each member either personally or by
mail or at the direction of the Managing Member or the officer or person calling
the meeting.
In any case where all of the members of the Committee execute a waiver of
notice of the time and place of meeting, no notice thereof shall be required,
and any such meeting (whether annual, regular or special) shall be held at the
time and at the place (either within or without the State of Indiana) specified
in the waiver of notice. Attendance of members of the Committee at any meeting
shall constitute a waiver of notice of such meeting, except where the members of
the Committee attend a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Neither the business to be transacted at, nor the purpose of, any annual,
regular or special meeting of the Committee need be specified in the notice or
waiver of notice of such meeting.
6.14. Action Without Meeting. Any action required by statute to be taken at
a meeting of the Committee, or any action which may be taken at a meeting of the
Committee, may be taken without a meeting if a consent in writing setting forth
the action so taken, shall be signed by all the members of the Committee. Such
consent shall have the same force and effect as a unanimous vote at a meeting.
6.15. Quorum; Majority Vote. At all meetings of the Committee a majority of
the number of members of the Committee fixed by this Agreement shall constitute
a quorum for the transaction of business unless a greater number is required by
law or by the Articles. The act of a majority of the members of the Committee
present at any meeting at which a quorum is present shall be the act of the
Committee unless the act of a greater number is required by statute, by the
Articles or by this Agreement. If a quorum shall not be present at any meeting
of the Committee, the members of the Committee present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
6.16. Approval or Ratification of Acts or Contracts by Members. The
Committee in its discretion may submit any act or contract for approval or
ratification at any annual meeting of the Members, or at any special meeting of
the Members called for the purpose of considering any such act or contract and
any act or contract that shall be approved or be ratified by a Majority in
Interest shall be as valid and as binding upon the Company and upon all the
Members as if it shall have been approved or ratified by every Member of the
Company.
6.17. Interested Members of the Committee, Officers and Members.
(a) Interested Members of the Committee. No contract or transaction between
this Company and one or more of its members of the Committee or officers, or
between this Company and any other limited liability company, corporation,
partnership, association, or other organization in which one or more of its
members of the Committee or officers are managers or officers or have a
financial interest, shall be void or voidable solely for this reason, solely
because the member of the Committee or officer is present at or participates in
the meeting of the Committee or of a committee thereof which authorizes the
contract or transaction, or solely because such Committee member's vote are
counted for such purpose if:
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(1) The material facts as to the relationship or interest and as to
the contract or transaction are disclosed or are known to the Committee or
the committee, and the Committee or committee in good faith authorizes the
contract or transaction by the affirmative vote of a majority of the
disinterested members of the Committee, even though the disinterested
members of the Committee be less than a quorum; or
(2) The material facts as to the relationship or interest and as to
the contract or transaction are disclosed or are known to the Members
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the Members; or
(3) The contract or transaction is fair as to this Company as of the
time it is authorized, approved, or ratified by the Committee, a committee
thereof, or the Members.
(b) Quorum. Common or interested members of the Committee may be counted in
determining the presence of a quorum at a meeting of the Committee or of a
committee which authorizes the contract or transaction.
(c) Non-Exclusive. This provision shall not be construed to invalidate any
contract or transaction which would be valid in the absence of this provision.
6.18. Compensation. The members of the Committee shall serve without
compensation from the Company.
6.19. Procedure. The Committee shall keep regular minutes of its
proceedings. The minutes shall be placed in the minute book of the Company.
ARTICLE VI(A)
Meetings of Members
-------------------
6A.01. Place of Meeting; Conference Telephone Meetings. Meetings of Members
of the Company shall be held at such place, within or outside the State of
Indiana, as may from time to time be designated by the Committee, or as may be
specified in the notices or waivers of notice of such meetings. A Member may
participate in a Members' meeting by means of a conference telephone or similar
communications equipment by which all Persons participating in the meeting can
communicate with each other, and participating by these means constitutes
presence in person at the meeting.
6A.02. Annual Meeting. The annual meeting of Members for the report on the
finances of the Company, and for the transaction of such other business as may
properly come before the meeting, shall be held on such day and at such time
within six (6) months following the close of the Company's fiscal year as the
Committee may set by resolution. Failure to hold an annual meeting shall not
work any forfeiture or a dissolution of the Company, and shall not affect
otherwise valid acts.
6A.03. Special Meetings. Special meetings of the Members, for any purpose
or purposes, unless otherwise prescribed by statute or this Agreement, may be
called by the Committee or the Managing Member and shall be called by the
Managing Member at the request in writing of a majority of the Committee, or at
the request of Members owning not less than twenty percent (20%) of the Company
Interests and entitled to vote under the Articles, this Agreement and the Act as
now in effect or as hereafter amended. Such request by Members shall be in
writing, signed by all such Members (or their duly authorized proxies) dated and
delivered to the Managing Member.
6A.04. Notice of Meetings. A written or printed notice, stating the place,
day and hour of the meeting, and in case of a special meeting, or when required
by any other provision of the Act, or the Articles, or this agreement as now in
effect or hereafter amended, the purpose or purposes for which the meeting is
called, shall be delivered or mailed by the Secretary, or by the Managing Member
or persons calling the meeting, to each Member entitled by the Articles, this
Agreement and the Act as now in effect or hereafter amended, at such address as
appears upon the records of the Company, at least ten (10) days and no more than
sixty (60) days before the date of the meeting. Notice of any such meeting may
be waived in writing by any Member, if the waiver sets forth in reasonable
detail the purpose or purposes for which the meeting is called, and the time and
place thereof. Attendance at any such meeting in person, or by proxy, shall
constitute a waiver of notice of such meeting. Each Member, who has in the
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manner above provided waived notice of the Members' meeting, or who personally
attends a Members' meeting, or is represented thereat by a proxy authorized to
appear by an instrument of proxy, shall be conclusively presumed to have been
given due notice of such meeting. Notice of any adjourned meeting of Members
shall not be required to be given if the time and place thereof are announced at
the meeting at which the adjournment is taken, except as may be expressly
required by law.
6A.05. Addresses of Members. The address of any Member appearing on the
records of the Company shall be deemed to be the latest address of such Member.
6A.06. Voting at Meetings. (a) Quorum. The Members of record of a Majority
in Interest of the Members entitled to vote at such meeting, present in person
or by proxy, shall constitute a quorum at all meetings of Members for the
transaction of business, except where otherwise provided by law, the Articles,
or this Agreement. In the absence of a quorum, the Managing Member shall have
the power to adjourn the meeting from time to time until a quorum shall be
constituted. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the original
meeting, but only those Members entitled to vote at the original meeting shall
be entitled to vote at any adjournment or adjournments thereof unless a new
record date is fixed by the Committee for the adjourned meeting.
(b) Voting Rights. Except as otherwise provided by law, the Articles, or
this Agreement, every Member shall have the right at every Members' meeting to
vote their percentage of the Company Interests, registered in his name on the
books of the Company on the date for the determination of Members entitled to
vote on all matters coming before the meeting, At any meeting of the Members,
every Member shall be entitled to vote in person, or by proxy executed in
writing by the Member or a duly authorized attorney-in-fact and bearing a date
not more than eleven (11) months prior to its execution, unless a longer time is
expressly provided therein.
(c) Required Vote. When a quorum is present at any meeting, action on a
matter is approved by the affirmative vote of a Majority in Interest of the
Members unless the Act, the Articles or this Agreement require a greater number
of affirmative votes.
(d) Validity of a Vote, Consent, Waiver, or Proxy Appointment. If the name
on a vote, consent, waiver, or proxy appointment corresponds to the name of a
Member, the Company if acting in good faith may accept the vote, consent,
waiver, or proxy appointment and give it effect as the act of the Member. The
Company may reject a vote, consent, waiver, or proxy appointment if the Managing
Member, acting in good faith, has a reasonable basis for doubt about the
validity of the signature, or the signatory's authority. If so accepted or
rejected, the Company and the Managing Member are not liable in damages to the
Member for any consequences of the rejection. Any of the Company's actions based
on an acceptance or rejection of a vote, consent, waiver or proxy appointment
under this Section is valid unless a court of competent jurisdiction determines
otherwise.
6A.07. Voting List. The Managing Member of the Company shall make before
each meeting of Members, a complete list of the Members entitled by the Articles
or this Agreement, as now or hereafter amended, to vote at such meeting,
arranged in alphabetical order, with the address, number of Units, and Company
Interest so entitled to vote held by each Member. Such list shall be produced
and kept open at the time and place of the meeting of Members and subject to the
inspection of any Member during the holding of such meeting.
6A.08. (reserved)
6A.09. Consent Action by Members. Any action required or permitted to be
taken at a Members' meeting may be taken without a meeting, if one (1) or more
written consents describing the action taken are signed by a Majority in
Interest of the Members entitled to vote on the action, and delivered to the
Company for inclusion in the minutes or filing with the Company's records.
Action taken under this Article VI(A) is effective when the last Member entitled
to vote on the action signs the consent, unless the consent specifies a
different, prior or subsequent effective date.
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ARTICLE VII
Books, Records and Bank Accounts
--------------------------------
7.01. Books and Records. The Managing Member shall keep at the Company's
principal place of business just and true books of account with respect to the
operation of the Company. All Members, and their duly authorized
representatives, shall at all reasonable times have access to such books. The
books of the Company shall be kept on the cash basis of accounting, or on such
other basis of accounting as the Managing Member may determine, and otherwise in
accordance with accounting methods employed for federal income tax reporting
purposes, and shall be closed and balanced at the end of each Fiscal Year of the
Company and at such other times as the Managing Member may determine is
appropriate.
7.02. Bank Accounts. The Managing Member shall be responsible for causing
one or more accounts to be maintained in a bank (or banks), which accounts shall
be used for the payment of the expenditures incurred in connection with the
business of the Company, and in which shall be deposited any and all cash
receipts. All such amounts shall be and remain the property of the Company, and
shall be received, held and disbursed by the Managing Member for the purposes
specified in this Agreement. There shall not be deposited in any of said
accounts any funds other than funds belonging to the Company, and no other funds
shall in any way be commingled with such funds.
ARTICLE VIII
Tax Returns, Elections, Allocations
-----------------------------------
8.01. Company Tax Returns. The Managing Member shall arrange for the
preparation and filing of all necessary tax returns of the Company.
8.02. Tax Elections; Accounting.
(a) The Company may elect, pursuant to Section 754 of the Code (or
corresponding provisions of succeeding law), to adjust the basis of the
Company's property, in the event of a distribution of Company property as
described in Section 734 of the Code or a transfer by any Member of his Interest
in the Company as described in Section 743 of the Code. Appropriate adjustments
shall be made in the allocations to Members under Section 8.03 hereof in order
to reflect adjustments in the basis of Company property permitted pursuant to
any election under Section 754 of the Code.
(b) The Managing Member shall, from time to time, make such other tax
elections as they deem necessary or desirable in their sole discretion to carry
out the business of the Company or the purposes of this Agreement.
(c) The Company shall be classified and taxed as partnership for income tax
purpose and the Company's United States Partnership Return of Income shall be
prepared on the cash basis of accounting, or on such other permissible basis of
accounting as the Managing Member may determine. The Managing Member shall
select the methods of calculating cost recovery and any other permissible
methods of accounting for purposes of preparing such return. The Company's
taxable year shall be the calendar year.
8.03. Tax Allocations.
(a) For Federal income tax purposes, each Member's distributive share of
income, gain, loss, deduction, credit or tax preference (or item thereof) for
any taxable year of the Company shall be allocated in the same proportion that
the Company's Net Profit or Net Loss (or item thereof) for such year to which it
corresponds, under applicable Federal income tax accounting rules (including in
the case of depreciation, depletion, amortization and gain or loss with respect
to property properly reflected in the Members' capital accounts at a book value
that differs from the adjusted tax basis of such property, the rules set forth
in Regulation Section 1.704-1(b)(4)(i) under Section 704 of the Code and in
Section 704(c) of the Code and regulations thereunder), is allocated pursuant to
Article IV hereof. To the extent not inconsistent with such rules:
(i) Income, gain, loss and deduction with respect to property
contributed to the Company by a Member shall be shared among
Members so as to take account of the variation between the basis
of the property to the Company and its fair market value at the
time of contribution, as required by Section 704(c) of the Code
and regulations promulgated thereunder.
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(ii) If any gain realized with respect to any Company asset shall be
treated as ordinary income under the depreciation recapture
provisions of the Code, then the full amount of such ordinary
income shall be allocated among the Members in the proportions
that the Company deductions from the depreciation giving rise to
such recapture actually were allocated.
(iii) The Members shall bear any recapture of tax credits in the
proportions in which such credits were claimed.
8.04. Tax Matters Partner. The Members hereby agree that Paul R. Partridge
shall serve as the "Tax Matters Partner" as set forth under subchapter C of
Chapter 63 of the Code. Nothing herein shall be construed to restrict the
Company from engaging accountants or other professionals to assist the Tax
Matters Partner in discharging its duties hereunder.
ARTICLE IX
Assignability of Member's Interest - Buy-Sell Provisions
--------------------------------------------------------
9.01. Substituted Member. No transfer of a Member's Interest or any part
thereof and no substitution of a new Member in place of an existing Member shall
be allowed except with the consent of all the Members. If a Member transfers his
Interest with the consent of all the Members, and the transferee executes and
delivers such instruments as are reasonably necessary to effect such
substitution and to confirm the agreement of the transferee to be bound by all
of the terms and provisions of this Agreement, including, without limitation, an
amendment to this Agreement, the transferee shall thereafter be a substituted
Member vested with the powers and duties of a Member to the same extent as
though originally named, and the Company shall continue. To the extent that the
Interest is transferred (including as the result of the death of a Member) to
more than one Person, the percentages applicable to the Interest shall be pro
rated accordingly.
9.02. Allocations Subsequent to Transfer. In the event of the admission or
withdrawal of a Member, or in the event all or any part of an Interest is
validly transferred under the terms of this Article IX, the Net Profits or Net
Losses allocated under Article IV hereof (and each item thereof or corresponding
thereto), and the cash distributions allocated under Article V hereof, shall be
further allocated based upon the ownership or deemed ownership of the respective
Interests prior to and following the effective date of such admission,
withdrawal or transfer in a manner determined by the Members to be consistent
with the requirements of Section 706 of the Code and any final, proposed or
temporary regulations thereunder.
9.03. Transfer Restrictions. Notwithstanding anything herein to the
contrary, except for transfers to an Affiliate or to a member of the Member's
immediate family or to a trust for the benefit of the Member or his immediate
family, no Member (including the heirs, assigns, executors, or administrators of
a deceased Member) shall voluntarily or involuntarily sell or assign an Interest
of the Company to any person or persons, firms or other limited liability
company not a Member, without first offering such Interest for sale to the
Company and the other Members in the following manner:
(a) Such Member shall give written notice by registered or certified
mail to the secretary of the Company of his intention to sell such
Interest. Said notice shall specify the portion of Interest to be sold, the
price, and the terms upon which the sale is to be made. The Company shall
have thirty (30) days from the receipt of such notice within which to
exercise its option to purchase all or any portion of the Interest so
offered. Such purchase may be authorized by the Committee.
(b) In the event that the Company shall fail to purchase all of such
Interest within the said thirty (30) day period, the secretary of the
Company shall, within ten (10) days thereafter, give written notice to each
of the Members of record, stating the portion of Interest offered for sale
but not purchased by the Company, and the price, and the terms upon which
the sale is being made. Such notice shall be sent by mail addressed to each
Member at his last address as it appears on the books of the Company.
Within thirty (30) days after the mailing of said notices any Member
desiring to purchase part or all of such Interest shall deliver by mail or
otherwise to the secretary of the Company a written offer for the portion
of Interest desired by him, accompanied by the purchase price therefor with
authorization to pay such purchase price against delivery of such Interest.
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63
(c) If the Members offer to purchase more than the total portion of
Interest available for purchase by them, then the Members offering to
purchase shall be entitled to purchase such proportion of said Interest as
the portion of Interest of the Company which he holds bears to the total
portion of Interest held by all Members offering to purchase. In the event
that the proportion of said Interest to which any Member should be entitled
to purchase is more than the portion of Interest he desires to purchase,
each remaining Member desiring to purchase additional Interest shall be
entitled to purchase such proportion of the overplus as the portion of
Interest which he holds bears to the total portion of Interest held by all
Members desiring to participate.
(d) If none or only a part of the Interest offered for sale if
purchased by the Company or Members, or both, then the Member who offered
the same for sale shall have thereafter the right if all Members consent to
the sale, at any time during the period of sixty (60) days after the
expiration of the thirty (30) day period referred to in paragraph (b)
above, to sell said Interest not so purchased to such person or persons as
he desires; PROVIDED, HOWEVER, that he shall not sell such Interest at a
lower price or on terms more favorable to the purchaser than those
specified in the written notice he gave to the Company nor shall he sell
such Interest after the expiration of the sixty (60) day period without
again giving written notice as hereinabove required and obtaining the
consent of all Members to the sale.
(e) No Interest shall be sold or transferred on the books of the
Company until these provisions have been complied with, but the Committee
may, in any particular instance, waive the requirements except the
requirement to obtain the consent of the sale by the remaining Members.
9.04. Buy-Sell Provisions.
(a) Bankruptcy of a Member. Subject to Section 10.01(vi), if any Member
becomes a Bankrupt Member, the Company shall have the option, exercisable by
notice from the Committee to the Bankrupt Member (or its representative) at any
time prior to the 180th day after receipt of notice of the occurrence of the
event causing it to become a Bankrupt Member, to buy, and on the exercise of
this option the Bankrupt Member or its representative shall sell, its Interest.
The purchase price shall be an amount equal to the fair market value thereof
determined by agreement by the Bankrupt Member (or its representative) and the
Committee; however, if those Persons do not agree on the fair market value on or
before the 30th day following the exercise of the option, either such Person, by
notice to the other, may require the determination of fair market value to be
made by an independent appraiser specified in that notice. If the Person
receiving that notice objects on or before the tenth day following receipt to
the independent appraiser designated in that notice, and those Persons otherwise
fail to agree on an independent appraiser, either such Person may petition the
United States District Judge for the Southern District of Indiana then senior in
service to designate an independent appraiser. The determination of the
independent appraiser, however designated, is final and binding on all parties.
The Bankrupt Member and the Company each shall pay one-half of the costs of the
appraisal. The purchaser shall pay the fair market value as so determined in
four equal cash installments, the first due on closing and the remainder
(together with accumulated interest on the amount unpaid at the prime rate of
interest as announced in the Wall Street Journal from time to time) due on each
of the first three anniversaries thereof. The payment to be made to the Bankrupt
Member or its representative pursuant to this section is in complete liquidation
and satisfaction of all the rights and interest of the Bankrupt Member and its
representative (and of all Persons claiming by, through or under the Bankrupt
Member and its representative) in and in respect of the Company, including
without limitation, any Interest, any rights in specific Company property, and
any rights against the Company and (insofar as the affairs of the Company are
concerned) against the Members, and constitutes a compromise to which all
Members have agreed.
(b) Death, Disability, Dissolution, Retirement or Expulsion of a Member.
Subject to Section 10.01(vi), if any Member dies, becomes disabled, is
dissolved, retires from the Company or is expelled from the Company (a
"Terminated Member"), the Company shall have the option, exercisable by notice
from the Committee to the Terminated Member (or its representative) at any time
prior to the 90th day after receipt of notice of the occurrence of the event
causing it to become a Terminated Member, to buy, and on the exercise of this
option the Terminated Member or its representative shall sell, its Interest. The
purchase price shall be an amount equal to the fair market value thereof
determined by agreement by the Terminated Member (or its representative) and the
Committee; however, if those Persons do not agree on the fair market value on or
before the 30th day following the exercise of the option, either such Person, by
notice to the other, may require the determination of fair market value to be
made by an independent appraiser specified in that notice. If the Person
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64
receiving that notice objects on or before the tenth day following receipt to
the independent appraiser designated in that notice, and those Persons otherwise
fail to agree on an independent appraiser, either such Person may petition the
United States District Judge for the Southern District of Indiana then senior in
service to designate an independent appraiser. The determination of the
independent appraiser, however designated, is final and binding on all parties.
The Terminated Member and the Company each shall pay one-half of the costs of
the appraisal. The purchaser shall pay the fair market value as so determined in
four equal cash installments, the first due on closing and the remainder
(together with accumulated interest on the amount unpaid at the prime rate of
interest as announced in the Wall Street Journal from time to time) due on each
of the first three anniversaries thereof. The payment to be made to the
Terminated Member or its representative pursuant to this section is in complete
liquidation and satisfaction of all the rights and interest of the Terminated
Member and its representative (and of all Persons claiming by, through or under
the Terminated Member and its representative) in and in respect of the Company,
including without limitation, any Interest, any rights in specific Company
property, and any rights against the Company and (insofar as the affairs of the
Company are concerned) against the Members, and constitutes a compromise to
which all Members have agreed.
9.05 Loss of License. For purposes of the below provisions of this Section
9.05, the "Responsible Member" shall mean the Member which is, or whose
Affiliate is, responsible for the Loss of License and the Non-Responsible
Members shall mean all other Members. If the Loss of License results from the
acts or omissions of one or more Affiliates of more than one Member, then each
such Member shall be a Responsible Member with respect to the Affiliate whose
acts or omissions were responsible for the Loss of License, and each other
Member shall also be deemed a Non-Responsible Member with respect to the same
act or omission, and each shall separately have the right to invoke the
provisions hereinafter set forth.
(a) If a Loss of License shall occur or is imminent, the Responsible Member
may transfer its interest in the Company, or such Member's Affiliate, if
applicable, may transfer its interest in the Member, to a trust established for
the purpose of disposing of such interest; provided, however that the terms of
such trust and the identity of the trustee thereof are acceptable to the
Commission and reasonably acceptable to the other Members, the ownership of such
interest by the trust does not impair the ability of the Company or Rising Sun
LLC to continue gaming operations on an uninterrupted basis and without
additional restrictions and such interest transferred to the trust continues to
be subject to the provisions hereof, including, without limitation, Article IX
hereof. If the foregoing transfer is not affected or if thereafter the trust is
not effective in preventing a Loss of License or the trust terminates prior to a
disposition of the interest, then the following provisions shall apply:
(i) The Non-Responsible Members shall have the right, at any time and for
so long as the Loss of License condition shall continue, to elect the
"Buy-Out Right" set forth in Section 9.05(b) below, such election to
be contained in a written notice (the "Buy-Out Notice") from any
Non-Responsible Member to the Responsible Member. For purposes hereof,
any Non-Responsible Member submitting a Buy-Out Notice shall hereafter
be referred to as a "Purchasing Member."
(ii) Promptly upon delivery of the Buy-Out Notice, and in no event later
than three (3) days thereafter, the Responsible Member shall have the
right, exercisable by written notice to the Purchasing Members (the
"Response Notice") that the Responsible Member has elected to, and
has, caused the withdrawal of the Affiliate of the Responsible Member
responsible for the Loss of License. Upon the delivery of the Response
Notice, the Members shall advise the appropriate licensing authorities
that the Affiliate responsible for the Loss of License has withdrawn
from its interest in the Company and shall request reinstatement of
the License. If, after such request, the License is reinstated, then,
with respect to the event or circumstance giving rise to the Loss of
License, the Buy-Out Notice shall be deemed to have been terminated
and will be of no further force or effect. If, however, the licensing
authorities fail or refuse to reinstate the License within five (5)
days after request therefor as hereinabove provided, then the Buy-Out
Notice shall remain in effect and the provisions of Section 9.05(b)
shall be applicable.
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(b) Whenever a Buy-Out Notice shall be delivered in accordance with the
provisions of Section 9.05(a), the same shall constitute an agreement on the
part of the Purchasing Members to buy, and the Responsible Member to sell, the
entire Company Interest of the Responsible Member in the Company for a price,
payable in cash at the closing, equal to Fair Market Value.
If there shall be more than one Purchasing Member, each shall purchase a
portion of the Company Interest of the Responsible Member pro rata in accordance
with the respective Company Percentages of the Purchasing Members. The closing
shall take place not later than ten (10) days after the determination of the
purchase price of the Company Interest of the Responsible Member. At the
closing, the Responsible Member shall execute and deliver such instruments,
documents and certificates as the Purchasing Members shall reasonably request in
order to transfer and assign to the Purchasing Members (or to any other party
designated by the Purchasing Members to the Responsible Member in writing at or
prior to the closing) the entire Company Interest of the Responsible Member in
the Company, including, without limitation, the entire interest of the
Responsible Member in all loans, and all interest accrued and unpaid thereon,
and the Non-Responsible Member shall deliver the purchase price in cash (or by
certified or cashier's check made payable to the order of the Responsible
Member). The Purchasing Members shall, prior to and/or after the closing,
substitute Financial Accommodations for any Financial Accommodations in
existence for the Responsible Member and shall use their reasonable efforts to
cause any Financial Accommodation of the Responsible Member to be released. In
the event of any dispute between the Responsible Member and the Purchasing
Members regarding he amount of the purchase price, there shall be paid to the
Responsible Member the amount not in dispute, and the remainder shall be paid
promptly upon the determination thereof by the parties, or, in the event they
shall fail to agree on the amount, by arbitration conducted in Chicago,
Illinois, in accordance with the rules and regulations of the American
Arbitration Association. In order to further secure the performance of the
obligations of the parties hereto, each Member (if it shall be a Responsible
Member at any time hereafter) hereby appoints the Purchasing Members, and each
of their Affiliates, and the officers, directors, shareholders, employees and
agents of the Responsible Member and its Affiliates, as the agent and
attorney-in-fact for and on behalf of each Purchasing Member to execute,
acknowledge and deliver such instruments, documents or certificates as are
herein contemplated in connection with any buy-out.
For purposes of this Section 9.05(b), Fair Market Value of an Company
Interest shall be determined by two independent appraisers, one selected by the
Company and one selected by the Responsible Member. Each such appraiser shall
perform an appraisal at the cost of the respective party. If the appraisers are
within 10% of each other, the Fair Market Value shall be the average of the two.
If the two are not within 10% of each other, a third appraiser will be selected
by the two appraisers who will perform a third appraisal. In such event, the
Fair Market Value of the Company Interest shall be the average of the three
appraisals. The cost of the third appraisal will be split equally between the
parties. All selected appraisers must possess substantial current expertise in
riverboat casino valuations.
9.06. Liquidation of a Member's Interest.
(a) In the event there is a liquidation of any Member's Interest for
purposes of paragraphs (b)(2)(ii)(b) and (b)(2)(ii)(g) of Regulation Section
1.704-1 under Code Section 704 (prior to dissolution or liquidation of the
Company as provided in Article X hereof), liquidating distributions, if any,
shall be made to such Member in the ratio that the positive balance, if any, in
such Member's capital account, after taking into account all capital account
adjustments provided for in Section 3.03 hereof (other than those made as a
result of any such liquidating distributions), bears to the aggregate positive
capital account balances (as so adjusted) of all Members. Such liquidating
distributions shall be made no later than the end of the taxable year during
which such liquidation takes place or, if later, within 90 days after the date
of such liquidation.
(b) Notwithstanding the foregoing, this Section 9.06 shall not apply if all
or part of the Interest of one or more Members is purchased (other than in
connection with the liquidation of the Company) by the Company or by one or more
Members (or one or more persons related, within the meaning of Code Section
267(b) (without modification by Code Section 267(e)(1) or Code Section
707(b)(1)), to a Member) pursuant to an agreement negotiated at arm's length by
persons who at the time such agreement is entered into have materially adverse
interests and if a principal purpose of such purchase and sale is not to avoid
the principles of the second sentence of paragraph (b)(2)(ii)(a) of Regulation
Section 1.704-1 under Code Section 704.
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66
9.07. Securities Laws. In connection with any sale or other transfer of a
Company Interest, the selling or transferring Member shall effect such transfer
only in compliance with all applicable federal and state securities laws (to the
extent said laws may be applicable to such transaction), and the transferring
Member shall indemnify, protect and defend the Company, and each of the other
Members, from any liabilities, obligations, costs or expenses to which the
Company or any Member may become liable by reason of the application of any such
securities laws in connection with such transfer.
ARTICLE X
Dissolution
-----------
10.01. Dissolution. The Company shall be dissolved upon the earliest to
occur of the following:
(i) The expiration of its term, unless such term is extended by the
unanimous written consent of all the Members;
(ii) The consent of all the Members of the Company;
(iii) The ceasing of the Company to be a going concern;
(iv) The cessation of the carrying on by the Company of any and all
business, financial operations, and ventures of the Company;
(v) The entry of a decree or order by a court of competent jurisdiction
adjudging the Company a bankrupt or insolvent; or the institution by
the Company of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or similar proceeding
under the law of any jurisdiction; or the institution of any such
proceedings against the Company which shall remain undismissed for a
period of 60 days; or the application for or consent to the
appointment of any receiver, trustee, custodian or similar officer for
the Company, or for all or any substantial part of its property; or
the appointment of any such receiver, trustee, custodian or any
similar officer without the application or consent of the Company, as
the case may be, and such appointment shall continue undischarged for
a period of 60 days;
(vi) The death, retirement, resignation, expulsion, bankruptcy, or
dissolution of one of the Members unless the remaining Members
unanimously consent within 60 days to continue the business of the
Company; or
(vii) The happening of any other event resulting in dissolution under the
Act or any other applicable law of the State of Indiana.
10.02. Distribution Upon Dissolution.
(a) Upon the dissolution of the Company, its affairs shall be wound up and
it shall be liquidated and the proceeds of such liquidation and the Company's
other assets shall be distributed as follows:
(i) All of the Company's ascertained debts and liabilities to creditors
shall be promptly paid and discharged in the order provided by
applicable law.
(ii) A reserve shall be set aside in an amount reasonably required to
provide for contingent or other liabilities.
(iii) The Company's Net Profit or Net Loss (including without limitation
any Gain from a Disposition or Loss from a Disposition resulting from
any sales or other dispositions of Company property in connection with
the liquidation of the Company) shall be computed and shall be
allocated to the Members in accordance with Article IV hereof, and the
Members' capital accounts shall be adjusted in accordance with Section
3.03 hereof.
(iv) Distribution shall be made to the Members in accordance with Section
5.01 hereof of any and all Net Cash Flow, and distribution shall be
made to the Members in accordance with Section 5.02 hereof of any and
all Net Proceeds of Sales and Financings, and the Member's capital
accounts shall be adjusted in accordance with Section 3.03 hereof.
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(v) The remainder of the Company's assets shall be distributed, in
liquidation of the Interests of all the Members, to those Members with
positive capital account balances, after taking into account all
capital account adjustments provided for in Section 3.03 hereof (other
than those made as a result of any such liquidating distributions) in
the ratios of such positive capital account balances, as so adjusted.
Each Member shall receive his share of such remaining assets in cash
and/or in kind, and the portion of such share that is received in cash
may vary from Member to Member, all as the Members may determine.
Notwithstanding the foregoing, if any assets of the Company are to be
distributed in kind, such assets shall be distributed on the basis of
the fair market value thereof and any Member entitled to any interest
in such assets shall receive such interest therein as a
tenant-in-common with all other Members so entitled. If any asset is
to be distributed in kind, the Members' capital accounts shall be
adjusted as provided for in Section 3.03 hereof (consistent with the
requirements of Regulation Section 1.704-1(b)(2)(iv) under Section 704
of the Code) before any such distribution is made to reflect the
increases or decreases to said capital accounts which would have
occurred if such asset to be distributed in kind had been sold for its
fair market value by the Company immediately prior to such
distribution. All such liquidating distributions shall be made by the
end of the taxable year of the Company in which there is a liquidation
of the Company for purposes of paragraphs (b)(2)(ii)(b) and
(b)(2)(ii)(g) of Regulation Section 1.704-1 under Code Section 704 or,
if later, within 60 days after the date of such liquidation.
Notwithstanding the foregoing, the Members may, in their discretion,
withhold from such distribution any or all installment obligations
owed to the Company, so long as such withheld amounts are so
distributed as soon as practicable and in the ratios of such positive
capital account balances, as so adjusted.
(vi) As soon as practicable, the remaining balance, if any, of the reserve
established in accordance with Subparagraph (ii) hereof shall be
distributed in the manner set forth in Subparagraph (v) hereof.
(b) Distribution of cash or property to the Members in accordance with the
provisions of paragraph (a) hereof shall constitute a complete return to the
Members of their respective Interests in the Company assets.
(c) The winding up of the Company's affairs and the liquidation and
distribution of its assets shall, subject to the provisions of the Act, be
conducted by the Members, which are authorized to do any and all acts authorized
by law for these purposes, or by a duly authorized liquidator.
10.03. Liquidation for Tax Purposes. Notwithstanding any other provision of
this Agreement, in the event there is a liquidation of the Company for purposes
of paragraphs (b)(2)(ii)(b) and (b)(2)(ii)(g) of Regulation Section 1.704-1
under Code Section 704 (regardless of whether or not there is a dissolution of
the Company as hereinabove provided), liquidating distributions, within the
meaning of said paragraph (b)(2)(ii)(b), shall in all cases be made in
accordance with the positive capital account balances of the Members, taking
into account all capital account adjustments for the taxable year of the Company
during which such liquidation occurs (other than adjustments made pursuant to
this Section 10.03), by the end of such taxable year or, if later, within 90
days after the date of such liquidation. Such distributions shall otherwise be
made in the manner and in accordance with the provisions of Section 10.02(a)(v)
hereof. Neither the occurrence of such a liquidation nor the making of such
liquidating distributions shall, however, be treated as the occurrence of any
event described in Subparagraph (iii) or (iv) of Section 10.01 hereof, or shall
otherwise result in dissolution of the Company for purposes of Article X hereof.
If such liquidation occurs at a time when there is not also such a dissolution
by reason of the independent occurrence of an event described in said Section
10.01, then (i) the Company shall not be dissolved, (ii) the Members shall,
immediately upon receiving such liquidating distributions, contribute all cash
and properties so received to the Company, (iii) the capital accounts of the
Members shall be adjusted as provided in Section 3.03 hereof and (iv) the
business and affairs of the Company shall be continued without interruption.
Prior to distribution of any property pursuant to this Section 10.03, the
Members' capital accounts shall be adjusted as provided for in Section 3.03
hereof (consistent with the requirements of Regulation Section 1.704-1(b)(2)(iv)
under Code Section 704) to reflect the increases or decreases to said capital
accounts which would have occurred if such property had been sold for its fair
market value by the Company immediately prior to such distribution.
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10.03. Restoration of Deficit Capital Accounts. Anything herein to the
contrary notwithstanding, no Member shall have any obligation to restore the
amount of any negative balance in its Capital Account whether upon dissolution
or liquidation of the Company or otherwise. The negative balance in any Capital
Account shall in no event be deemed an asset of the Company.
ARTICLE XI
Miscellaneous
-------------
11.01. Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
Member giving such notice, election or demand and shall be delivered personally
or sent by registered or certified mail, return receipt requested, to the other
Member or Members, at its or their address set forth in the Company's records,
or at such other address as may be supplied by written notice given in
conformity with the terms of this Section 11.01. The date of personal delivery
or the date of mailing, as the case may be, shall be the date of such notice.
11.02. Successors and Assigns. Subject to the restrictions on transfer set
forth herein, this Agreement, and each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Members, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest by way of gift, purchase, foreclosure, or by any other
method, shall hold such interest subject to all of the terms and provisions of
this Agreement.
11.03. Amendment of Operating Agreement. No amendment of this Agreement
shall become effective unless it has been approved in writing and executed by
all the Members.
11.04. Partition. The Members hereby agree that no Member nor any
successor-in-interest to any Member, shall have the right, while this Agreement
remains in effect, to have the property of the Company partitioned, or to file a
complaint or institute any proceeding at law or in equity to have the property
of the Company partitioned, and each Member, on behalf of himself, his
successors, representatives, heirs and assigns, hereby waives any such right.
11.05. Indemnification. The Members, or any of them, shall be indemnified
by the Company for any loss or liability paid or incurred by such Member(s), and
all fees, costs and expenses associated therewith including, without limitation,
reasonable attorneys' fees, costs and expenses arising out of or related to any
act performed by them within the scope of the authority conferred upon it by
this Agreement; provided, however, such indemnity shall be payable only if the
Member (i) acted in good faith and in a manner it reasonably believed to be in,
or not opposed to, the best interests of the Company and the Members, and (ii)
had no reasonable grounds to believe that its conduct was negligent or unlawful.
No indemnification may be made with respect to any act or omission of a Member
for which it shall have been adjudged to be liable for gross negligence or
willful misconduct in the performance of its duty to the Company unless, and
only to the extent that the court in which such action or suit was brought
determines that in view of all the circumstances of the case, despite the
adjudication of liability for negligence or willful misconduct, the Member is
fairly and reasonably entitled to indemnity for those expenses which the court
deems proper. To the extent not covered by insurance maintained by the Company,
any indemnity under this subsection shall be paid from, and only to the extent
of, Company assets, and no other Member shall have any personal liability to
indemnify the Member or the Company on account thereof.
11.06. No Waiver. The failure of any Member to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Member's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder, shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder.
11.07. Other Businesses. Each party recognizes that the Members, and their
Affiliates, have or may have other business interests, activities and
investments, some of which may now or hereafter be in conflict or competition
with the business of the Company, and that, subject to the provisions
<PAGE>
69
hereinafter in this Section 11.07 set forth, each Member and their respective
Affiliates are entitled to carry on such other business activities, interests
and investments without any accountability therefor to the Company or any other
Member. No Member, and no Affiliate of any Member, shall be obligated to devote
all or any particular part of its time and effort to the Company or its business
affairs except such reasonable amount of time as may be necessary in order to
fulfill their respective duties and obligations hereunder. Except as hereinafter
in this Section 11.07 set forth, each Member, and each Affiliate of each Member,
may engage in or possess an interest in any other business or venture of any
kind, independently or with others, including, without being limited to, owning,
financing, acquiring, leasing, promoting, developing, improving, constructing,
operating or managing other real or personal properties (including real and
personal properties devoted, in whole or in part, to the business of gaming or
which are activities in support of gaming operations) on its own behalf or on
behalf of other entities with which it is affiliated or associated, and any
Member and each Affiliate of any Member may engage in any activities, whether or
not competitive to the Company, without any obligation to offer any interest in
such activities to the Company or to any Member or to any Affiliate of any
Member. Except as may be set forth in any separate agreement which may be
entered into by the Members or any of their Affiliates, neither the Company nor
any Member nor any Affiliate of any Member shall have any right by virtue of
this Agreement or by virtue of the relationship between the Members as partners,
in or to such other activities, or to the income or profits derived therefrom,
and the pursuit of such activities, even if competitive with the business of the
Company, shall not be deemed wrongful or improper or a breach of any joint
venture or fiduciary duties owed by one party to the other, or entitle any party
to any interest in or sharing in the profits or losses from any such other
activities.
11.08. Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
11.09. Captions. Titles or captions of Articles or Sections contained in
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
11.10. Gender. The use of the masculine personal pronoun shall be deemed to
mean the appropriate pronoun applicable to the number or gender of the person to
whom or which it refers, as the context may require.
11.11. Counterparts. This Agreement may be executed in a number of
counterparts, all of which together shall for all purposes constitute one
agreement.
11.12. Applicable Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and interpreted, construed and enforced
in accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, the Members have executed this Agreement as of the day
and year first above written.
AMERICAN GAMING &
ENTERTAINMENT, LTD., Member
/s/ Paul R. Partridge By: /s/ William I. Fasy
- -------------------------------------- ---------------------------------
Paul R. Partridge, Member William I. Fasy, CEO
/s/ Patrick F. Daly /s/ James A. Everatt
- --------------------------------------- ---------------------------------
Patrick F. Daly, Member James A. Everatt, Member
/s/ Charles E. Reisert, Jr. /s/ Eric C. Jackson
- --------------------------------------- ---------------------------------
Charles E. Reisert, Jr., Limited Partner Eric C. Jackson, Limited Partner
<PAGE>
70
<TABLE>
<CAPTION>
SCHEDULE A
----------
Capital Contributions and Company Interests
-------------------------------------------
Company
Name and Address Social Security Interest
of Member Number or EIN Percentage
- ---------------- ------------- ----------
<S> <C> <C>
Paul R. Partridge 340-767-488 24.5%
52 Chesham Court
London, Ontario N6G 3T4
Canada
American Gaming & Entertainment, Ltd 74-2504501 24.5%
Suite 300
Bayport 1, Yacht Club Drive
West Atlantic City, NJ 08232
Patrick F. Daly ###-##-#### 24.5%
615 North Wabash Avenue
Chicago, Illinois 60611
James A. Everatt N/A 24.5%
R.R. #4
St. Thomas, Ontario N5P 3S8
Canada
Charles E. Reisert, Jr. 1%
1302 E. 10th Street
Jeffersonville, Indiana 47130
Eric C. Jackson 1%
407 Ridge Ave.
Lawrenceburg, Indiana 47025
Approved and Accepted by:
Date 02/26/96 /s/ Paul R. Partridge
------------------ ------------------------------
Paul R. Partridge, Member
</TABLE>
<PAGE>
71
AMERICAN GAMING &
ENTERTAINMENT, LTD., Member
Date ----------------- By: /s/ William I. Fasy
----------------------------------------
William I. Fasy, CEO
Date 2/30/96[sic] /s/ James A. Everatt
---------------- ----------------------------------------
James A. Everatt, Member
Date 2/26/96 /s/ Patrick F. Daly
---------------- ----------------------------------------
Patrick F. Daly, Member
Date 5/12/96 /s/ Charles E. Reisert, Jr.
---------------- ----------------------------------------
Charles E. Reisert, Jr., Limited Partner
Date /s/ Eric C. Jackson
---------------- ----------------------------------------
Eric C. Jackson, Limited Partner
<PAGE>
72
SCHEDULE B
----------
Capital Contributions and Company Interests
-------------------------------------------
The following schedules are examples of the change in Company Interests in
the event that the Company elects to maintain an interest in Rising Sun LLC
above 20%. Each Member shall have the right to contribute the funds necessary to
maintain an additional 7.5% interest in Rising Sun LLC and shall receive an
additional 15% Company Interest in exchange for those funds. If each of the
Members elects to participate fully in such additional interest, such Member
would have a percentage Company Interest of 24.8% and an interest in the overall
project of 12.4%.
If any of the Members contributes more than his share of 7.5%, such Member
shall be entitled to the same percentage as stated in the preceding paragraph
until he has recovered his entire capital contribution plus a sixteen percent
(16%) preferred return and after that has occurred, the non-contributing Members
shall be entitled to an increased percentage of Company Interest at the rate of
.266% for each one percent above the respective Member's incremental 7.5%. The
following is a schedule of the Company Interest in the event that only one
Member contributes funds to maintain a 50% interest in Rising Sun LLC:
<TABLE>
<CAPTION>
Prior to the Return of Capital After the Return of Capital
to the Contributing Member to the Contributing Partner
--------------------------------------- -------------------------------------
RSR RSR Percent of
Member Percent Percent of Project Percent Project
- -------------------------- ---------------- ----------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Reisert .4% .2% .56% .28%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Jackson .4% .2% .56% .28%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Daly 9.8% 4.9% 13.72% 6.86%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Partridge 9.8% 4.9% 13.72% 6.86%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Everatt 9.8% 4.9% 13.72% 6.86%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
American
Gaming 9.8% 4.9% 13.72% 6.86%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Contributing
Member 60.0% 30.0% 44% 22.00%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Totals 100% 50.00% 100% 50.00%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
</TABLE>
The above schedule assumes that the Company maintains its full 50% interest in
the Project. If less than a 50% interest is maintained, the Schedule above would
be adjusted pro-rata. For example, if the Company elected a 30% interest in
Rising Sun LLC with only one Member contributing the additional funds, then the
excess percent for that Member would be 2.5% (10% minus 7.5%) and then the
Schedule would be as shown on Schedule B-1 as follows:
<PAGE>
73
<TABLE>
<CAPTION>
SCHEDULE B-1
------------
Capital Contributions and Company Interests
-------------------------------------------
Prior to the Return of Capital After the Return of Capital
to the Contributing Member to the Contributing Partner
--------------------------------------- -------------------------------------
RSR RSR Percent of
Member Percent Percent of Project Percent Project
- -------------------------- ---------------- ----------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Reisert .67% .2% .70% .21%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Jackson .67% .2% .70% .21%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Daly 16.33% 4.9% 17.03% 5.11%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Partridge 16.33% 4.9% 17.03% 5.11%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Everatt 16.33% 4.9% 17.03% 5.11%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
American 16.33% 4.9% 17.03% 5.11%
Gaming
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Contributing 33.34% 10.0% 30.48% 9.14%
Member
- -------------------------- ---------------- ----------------------- ---------------- --------------------
Totals 100% 30.00% 100% 30.00%
- -------------------------- ---------------- ----------------------- ---------------- --------------------
</TABLE>
<PAGE>
74
<TABLE>
<CAPTION>
SCHEDULE 3.01
-------------
Capital Contributions of Members
--------------------------------
Value of
Contribution
<S> <C>
Paul R. Partridge $ 25,000
Patrick F. Daly $ 25,000
American Gaming & Entertainment, Ltd. $ 25,000
James A. Everatt $ 25,000
------
Total $100,000
</TABLE>
All capital contributions are of the Member's entire interest in Rising Sun
Riverboat Casino and Resort, LLC
No capital contributions shall be required by Limited Members.
<PAGE>
75
Exhibit C
---------
The Trust Agreement is filed as Exhibit 10.73 to this Form 8-K.
76
TRUST AGREEMENT
AMERICAN GAMING & ENTERTAINMENT, LTD. (hereinafter referred to as
"American"), and NBD Bank, N.A., (hereinafter referred to as "Trustee"), agree
as follows:
1. American has transferred to the Trustee, to be held in trust pursuant to
the terms and conditions enumerated herein, a certain 24.5% membership interest
(the "Membership Interest") in RSR, LLC, an Indiana limited liability company
("RSR") which is represented by certificate No. 1.
2. The Trustee acknowledges receipt of the certificate representing the
Membership Interest and agrees to hold it in trust in accordance with the terms
and conditions of this Trust Agreement.
3. The Trustee shall not be responsible for the sufficiency or accuracy of
the form, execution, validity or genuineness of the certificate representing the
Membership Interest, or of any endorsement (or any lack of endorsement) thereon,
or for any description therein.
4. Because of the execution and delivery by American of the Irrevocable
Proxy and Consent Agreement attached hereto as Exhibit A (the "Proxy"), Trustee
shall have no obligation or authority whatsoever to vote the Membership Interest
whatsoever. In addition, Trustee shall not make any capital or other
contribution to RSR in respect of the Membership Interest. Trustee shall
promptly forward to American any and all notices it receives in respect of the
Membership Interest.
5. a. Subject to the provisions of Article 8 below, Trustee shall hold the
Membership Interest in trust, and shall not sell, transfer, convey, assign or
otherwise dispose of the same except in accordance with written instructions
from American, which instructions shall be accompanied by written approval from
the Indiana Gaming Commission (the "Commission") permitting such a transfer.
b. Subject to the provisions of Article 8 below, Trustee shall not
distribute any of the distributions or other monies received by the Trustee in
respect of the Membership Interest, but shall hold the same, together with any
interest or other earnings on such distributions and other monies, in trust.
c. Subject to the provisions of Article 8 below, if the Trustee sells
or otherwise disposes of the Membership Interest in accordance with the written
instructions of American pursuant to Article 5a, Trustee shall distribute to
American or its designee (i) the proceeds received by Trustee from such sale or
other disposition and (ii) any and all distributions or other monies received by
Trustee in respect of the Membership Interest (including any and all interest or
other earnings thereon) then held or thereafter received by Trustee. Such
proceeds and monies shall be distributed to American as soon as possible, but in
no event later than 30 days after receipt thereof, and this Trust Agreement
shall terminate upon such distribution. If the sale or disposition of the
Membership Interest occurs pursuant to Section 4 of the Proxy, the Trustee shall
make the distribution contemplated by this Article 5 after the closing under the
Proxy and, if any portion of the purchase price is in contention under Section 4
of the Proxy, shall make any additional distributions within thirty (30) days
after the Trustee's receipt of any additional funds in respect of the Membership
Interest.
6. American shall be responsible to the Trustee for the payment of the
Trustee's reasonable fees and expenses (including reasonable attorneys' fees)
and agrees to pay the Trustee periodically in advance, and no less often than
annually, a reasonable fee, as may be agreed upon in advance in writing from
time to time, for its services under this Trust Agreement. Initially, Trustee's
fee shall be in accordance with the schedule set forth on Exhibit B attached
hereto.
7. Trustee, at its discretion, may render to American periodic statements
for its services or may periodically deduct said fee from the monies held
pursuant to this Trust Agreement. In addition to the compensation provided
herein, the Trustee shall be entitled to its reasonable fees, costs and expenses
in the event of litigations or arbitrations or other proceedings arising out of
this Trust Agreement or the Proxy, or in any way involving the Membership
Interest. In any case, Trustee shall furnish at least quarterly to American and
to the Commission an account of its receipts and disbursements.
<PAGE>
77
8. In addition to any other remedies which may be provided by law, if the
Trustee's fees, costs, expenses, or reasonable attorney's fees provided for
herein, are not paid within 60 days after written notice to American and there
are no other monies held pursuant to the Trust Agreement against which Trustee
may offset such fees, costs and expenses, the Trustee shall have the right to
sell the Membership Interest and reimburse itself therefore from the proceeds of
such sale after receiving Commission approval of the Purchaser or from any other
cash held pursuant to this Trust Agreement. In addition, the Trustee shall have
the right to withhold distribution of any property held pursuant to this Trust
Agreement until such time as its fees, costs, expenses or reasonable attorney's
fees have been paid.
9. The Trustee may at the expense of American consult with counsel to be
selected and employed by the Trustee on any matter arising out of or in
conjunction with this Trust Agreement and shall be fully protected with respect
to any action under this Trust Agreement taken or suffered in good faith by the
Trustee in accordance with the opinion of such counsel. The Trustee shall not be
responsible for any act or omission on its part so long as it acts in good
faith. The Trustee may rely upon any notice, certificate, affidavit, release
letter or other paper or document which it reasonably believes to be genuine and
it shall not be liable if it relies on such genuineness in good faith. American
shall hold harmless and indemnify Trustee for any action or inaction on the part
of Trustee, its directors, officers, employees or agents unless such action or
inaction shall constitute gross negligence or willful misconduct.
10. Any monies held pursuant to this Trust Agreement shall be invested in
any daily money market funds maintained by the Trustee or its affiliates for its
fiduciary accounts.
11. American agrees to use its best efforts to solicit a suitable buyer for
the Membership Interest and to provide quarterly to Trustee written evidence of
such efforts. Trustee is authorized and directed to mail to the Commission a
copy of such written evidence upon Trustee's receipt thereof, which copy shall
be clearly marked confidential and shall be accompanied by a direction to the
Commission to treat the information contained therein as confidential. American
shall provide to Trustee a copy of any notice or other document delivered to or
by American pursuant to the Proxy. Except as otherwise expressly allowed in this
Agreement, American agrees not to exercise, directly or indirectly, any control
or influence over the Trustee with respect to any matter concerning the
Membership Interest.
12. Trustee may resign upon thirty (30) days prior written notice to
American and the Commission. In the event of the resignation or inability of the
Trustee to act, American, with the consent of the Commission, shall appoint a
successor Trustee. Such successor Trustee shall take possession of all property
held in the Trust in accordance with the terms and conditions of this Agreement,
but shall not be responsible for the acts or omissions of the predecessor
Trustee.
13. The delivery of the Membership Interest or any other property held
pursuant to the terms of this Trust Agreement, in accordance herewith, shall
wholly discharge the Trustee from all responsibility hereunder and shall
terminate the Trust Agreement as it applies to the property so delivered.
14. Any notice in writing required or permitted to be given by the Trustee
to American will be deemed to have been sufficiently given if personally
delivered to American or if mailed in an envelope addressed to American at the
following address or such other address as American hereafter may specify in
written notice to the Trustee:
American Gaming & Entertainment, Ltd.
Bayport One, Suite 300
Yacht Club Drive
West Atlantic City, NJ 08232
Any notice in writing required or permitted to be given by American to the
Trustee will be sufficiently given if delivered to the Trustee at its principal
office, or if mailed in an envelope addressed as follows or to such other
address as the Trustee may hereinafter specify by written notice to American:
NBD Bank, N.A.
One Indiana Square
Indianapolis, Indiana 46204
Attention: Trust Department
15. This Trust Agreement is irrevocable and may not be amended or
modified except by Trustee with prior written consent of American and the
Commission.
<PAGE>
78
16. This Trust Agreement shall be governed, construed and enforced
according to the laws of the State of Indiana and shall be binding upon, and
inure to the benefit of, each party's successors, assigns, heirs, executors, and
administrators.
17. This Trust Agreement shall become effective upon the later to occur
of execution and delivery of the Proxy and the approval of the Trustee by the
Commission.
IN WITNESS WHEREOF, the parties have set their hands and seals to this
Trust Agreement as of this 23rd day of August, 1996.
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: /s/ J. Douglas Wellington
-------------------------------------------
Printed: J. Douglas Wellington
---------------------------------------
Its: President and Chief Operating Officer
-------------------------------------------
"American"
NBD Bank, N.A.
By: /s/ Marya Jones Lee
-------------------------------------------
Printed: Marya Jones Lee
---------------------------------------
Its: Associate Trust Counsel And Vice President
-------------------------------------------
"Trustee"
<PAGE>
79
EXHIBIT A
---------
The Irrevocable Proxy and Consent Agreement is filed as Exhibit 10.72
to this Form 8-K.
