1
Exhibit 3.2
FIRST AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP OF
THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP
This First Amendment to Agreement of Limited Partnership (this
"Amendment") of The Resort at Xxxxxxxxx, Limited Partnership, a Nevada limited
partnership (the "Partnership"), is made and entered into as of December 30,
1997, by and among The Resort at Xxxxxxxxx, Inc., a Nevada corporation and sole
general partner of the Partnership ("RAS Inc."), with its principal place of
business in Las Vegas, Nevada, and the undersigned Limited Partners (hereinafter
defined). Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement (hereinafter defined).
BACKGROUND INFORMATION
A. Effective August 15, 1996, RAS Inc., as sole general partner of the
Partnership, and Seven Circle Gaming Corporation, a Delaware corporation, as
sole limited partner of the Partnership, entered into an Agreement of Limited
Partnership (the "Agreement") to form the Partnership. The other Limited
Partners who are parties hereto (the "Admitted Partners") were admitted to the
Partnership as of the dates set forth on Schedule 3.1 attached to and made part
hereof pursuant to Acknowledgement of Admission of Limited Partner instruments
executed by each of them and the Partnership.
B. The Partnership plans to construct, own and operate "The Resort at
Xxxxxxxxx," a Mediterranean-style luxury hotel, casino and spa complex in Las
Vegas, Nevada (the "Resort"). The Partnership has obtained commitments for the
initial financing necessary to construct the Resort (the "Financing") subject,
among other things, to the condition that the amendments set forth herein be
adopted by the Partnership.
C. The Financing consists of $100,000,000 principal amount First Mortgage
Notes due 2004 (the "Mortgage Notes") and $100,000,000 principal amount 13%
Senior Subordinated PIK Notes due 2007 (the "Subordinated PIK Notes") to be
issued jointly and severally by the Partnership and RAS Inc. The Subordinated
PIK Notes will be issued together with an aggregate 100,000 warrants issued by
either or both of the Partnership and RAS Warrant Co., a Nevada corporation,
each such warrant issued by the Partnership (a "Warrant") entitling the holder
thereof to purchase one Limited Partner Interest representing 0.00008% of the
Partnership's total Partnership Interests, on a fully diluted basis as of the
date of issuance of such Warrants.
D. RAS and the Limited Partners now desire to modify and amend the
Agreement in order to satisfy such condition.
STATEMENT OF AGREEMENT
The parties to this Amendment hereby acknowledge the accuracy of the above
Background Information and, in consideration of the covenants and agreements set
forth in this Amendment, the parties agree as follows:
1. INCONSISTENCIES. If any inconsistencies exist between the provisions of
this Amendment and the provisions of the Agreement, then the provisions of this
Amendment shall control and supersede the inconsistent provisions of the
Agreement. Unless otherwise specifically indicated, all references to
2
sections are to sections of the Agreement and such sections referred to shall
include the effect of the amendments hereunder.
2. AMENDMENTS. The Agreement is hereby amended as follows:
(a) Section 1.1 is amended by deleting Subsection 1.1 (R) in its
entirety and replacing it with the following new Subsection
1.1(R):
"Limited Partners" shall mean the following individuals or
entities in their respective capacities as limited partners of
the Partnership and their respective heirs, successors and
permitted assigns: (i) Seven Circle Gaming Corporation, a
Nevada corporation, Xxxxx X. Xxxxx, Xxxxxx Xxxxxx and Xxxxxx
Xxxxxx, jointly as husband and wife, and Christiana Limited
Partnership, a Nevada limited partnership; and (ii) any
individual or entity who or which acquires a Limited Partner
Interest from the Partnership upon exercise of a Warrant or
otherwise in accordance with Section 2.10 of this Agreement.
(b) Section 1.1 is further amended by deleting Subsection 1.1 (FF)
in its entirety and replacing it with the following new
Subsection 1.1(FF):
"Partnership Interest" shall mean a single partnership
interest, without regard to the percentage interest in the
Partnership it represents, (i) in the capital, income, gains,
losses, deductions, tax credits and distributions of the
Partnership and (ii) in and to all rights of the Partners to
any and all benefits to which the Partners may be entitled as
provided in this Agreement and under applicable law; provided
that each Partnership Interest shall be evidenced by a
certificate pursuant to Section 3.2; provided, further, that
the total Partnership Interests issued and outstanding as of
the date hereof shall be as stated in Section 3.1.
(c) Section 1.1 is further amended by inserting the following new
Subsections 1.1(LL) and 1.1(MM) after Subsection 1.1(KK):
LL: "Tax Allowance Amount" shall mean, with respect to
any Partner (including a Warrant holder if such Warrant holder
is treated as owning an equity interest in the Partnership for
U.S. federal, state or local income tax purposes), for any
calendar quarter, (i) forty percent (40%) of the excess of (a)
the estimated taxable income allocable to such Partner arising
from its ownership of a Partnership Interest for the fiscal
year through such calendar quarter over (b) any losses of the
Partnership for prior fiscal years and such fiscal year that
are allocable to such Partner that were not previously
utilized in the calculation of Tax Allowance Amounts minus
(ii) prior distributions of Tax Allowance Amounts for such
fiscal year received by such Partner, all as determined by the
General Partner in good faith. The amount so determined by the
General Partner shall be the Tax Allowance Amount for such
period and shall be final and binding on all Partners.
2
3
MM. "Warrants" shall mean warrants issued by the
Partnership which entitle each holder thereof to acquire, upon
the terms and conditions specified in such warrants, a
specified Partnership Interest at the price set forth in such
warrants and shall include, without limitation, the Warrants
referred to in Recital C of the First Amendment to this
Agreement.
(d) Section 2.10 is hereby amended in its entirety by replacing it
with the following new Section 2.10:
2.10 Additional Limited Partners. The General Partner
may, from time to time, admit additional Limited Partners to
the Partnership. Such admission shall include such ministerial
amendments to this Agreement and the Exhibits and Schedules
hereto as the General Partner shall deem appropriate to
properly reflect adjustments caused by such admissions. The
Limited Partners hereby irrevocably consent and agree to the
admission of additional Limited Partners and the issuance of
additional Partnership Interests with respect thereto and any
corresponding adjustments to their relative percentage
interests in the Partnership caused thereby, including,
without limitation, the issuance of Limited Partner Interests
upon the exercise of Warrants. Additionally, the prior
admission of the Admitted Partners as additional Limited
Partners to the Partnership is hereby ratified, confirmed and
approved by the Partners and the General Partner hereby
certifies that the Capital Contributions of the Admitted
Partners set forth on Schedule 3.1 have been received by the
Partnership. Such Admitted Partners shall be treated for all
purposes as Limited Partners retroactively to their original
dates of admission with all terms, rights and obligations as
set forth in this Agreement.
(e) Section 3.1 is hereby amended in its entirety by replacing it
with the following new Section 3.1:
3.1 Partnership Interests. The dates of admission,
Capital Contributions, Partnership Interests and percentage
interests of the Partners as of December 30, 1997 are as set
forth on Schedule 3.1. The General Partner shall cause
Schedule 3.1 to be modified from time to time to reflect new
Partners, Additional Capital Contributions and the like.
(f) Section 3.2 is hereby amended in its entirety by replacing it
with the following new Section 3.2:
3.2 Partnership Certificates.
3.2.1 Form of Certificates. The Partnership
Interests will be issued in registered form as physical
Partnership Interest certificates (the "Partnership
Certificates") in substantially the form set forth in
Exhibit D attached hereto. Such Partnership Certificates
shall represent such of the outstanding Partnership
Interests as shall be specified therein and each shall
provide that it shall represent the aggregate amount of
outstanding
3
4
Partnership Interests from time to time endorsed thereon
and that the aggregate amount of outstanding Partnership
Interests represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of
a Partnership Certificate to reflect the amount of any
increase or decrease in the amount of outstanding
Partnership Interests represented thereby shall be made
by the General Partner or its agent in accordance with
instructions given by the holder thereof.
3.2.2 Execution of Partnership Certificates. Each
Partnership Certificate shall be signed on behalf of the
Partnership by its General Partner. If the General
Partner is a corporation, each Partnership Certificate
shall be signed on behalf of the General Partner by such
General Partner's Chairman of the Board, President, Vice
President, Chief Financial Officer, Treasurer, Secretary
or Assistant Secretary. If the General Partner is a
natural person, each Partnership Certificate shall be
signed on behalf of the General Partner by such natural
person. Each such signature upon the Partnership
Certificates may be in the form of a facsimile signature
of the present or any future person authorized to sign
for the General Partner under the terms of this
Agreement and may be imprinted or otherwise reproduced
on the Partnership Certificates and for that purpose the
General Partner may adopt and use the facsimile
signature of any person who shall have been Chairman of
the Board, President, Chief Executive Officer, Chief
Operating Officer, Vice President, Treasurer, Chief
Financial Officer, Secretary or Assistant Secretary,
notwithstanding the fact that at the time the
Partnership Certificates shall be countersigned and
delivered or disposed of he shall have ceased to hold
such position. In case the General Partner (or any
person authorized to sign for the General Partner under
the terms of this Agreement) who shall have signed any
of the Partnership Certificates shall cease to be such
General Partner (or such person authorized to sign for
the General Partner under the terms of this Agreement,
respectively) before the Partnership Certificates so
signed shall have been disposed of by the Partnership,
such Partnership Certificates nevertheless may be
countersigned and delivered or disposed of as though
such General Partner (or such person authorized to sign
for the General Partner under the terms of this Unit
Agreement) had not ceased to be such General Partner (or
such person authorized to sign for the General Partner
under the terms of this Agreement, respectively); and
any Partnership Certificate may be signed on behalf of
the Partnership by any General Partner (or such person
authorized to sign for the General Partner under the
terms of this Agreement) who, at the actual date of the
execution of such Partnership Certificate, shall be a
proper General Partner (or such person properly
authorized to sign for the General Partner under the
terms of this Agreement, respectively) authorized to
sign such Partnership Certificate, although at the date
of the execution of this Agreement any such General
Partner (or such person authorized to sign for the
General Partner under the terms of this Agreement) was
not such General Partner (or such person authorized to
sign for the General Partner under the terms of this
Agreement, respectively).
4
5
3.2.3 Partnership Interests Register.
(i) The Partnership Interests shall be numbered
and shall be registered on the books of the Partnership
maintained at the principal office of the General
Partner (the "Partnership Interests Register") as they
are issued. The General Partner agrees to make the
Partnership Interests Register available during normal
business hours for inspection by agents and other
representatives of the Nevada State Gaming Control Board
upon request.
(ii) The holders of the Partnership Certificates
registered in the Partnership Interests Register shall
be deemed and treated as the absolute owners thereof
(notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes, and
neither the Partnership nor the General Partner or its
agent shall be affected by any notice to the contrary.
3.2.4 Transfer and Exchange of Partnership Interests.
(i) The General Partner shall from time to time,
subject to the limitations of this Agreement, including
but not limited to Section 3.2.5, register the transfer
of any outstanding Partnership Interest upon the records
to be maintained by it for that purpose, upon surrender
thereof duly endorsed or accompanied (if so required by
it) by a written instrument or instruments of transfer
in form satisfactory to the General Partner, duly
executed by the registered holder or holders thereof or
by the duly appointed legal representative thereof or by
a duly authorized attorney. Subject to the terms of this
Agreement, each Partnership Certificate may be exchanged
for another certificate or certificates entitling the
holder or holders thereof to purchase a like aggregate
amount of Partnership Interests as the certificate or
certificates surrendered then entitle each holder to
purchase. Any holder desiring to exchange a Partnership
Certificate or Certificates shall make such request in
writing delivered to the General Partner, and shall
surrender, duly endorsed or accompanied (if so required
by the General Partner) by a written instrument or
instruments of transfer in form satisfactory to the
General Partner, the Partnership Certificate or
Certificates to be so exchanged.
(ii) Upon registration of transfer, the General
Partner shall countersign and deliver by certified mail
a new Partnership Certificate or Certificates to the
persons entitled thereto. The Partnership Certificates
may be exchanged at the option of the holder thereof,
when surrendered at the office or agency of the
Partnership maintained for such purpose, which initially
will be the office of the General Partner or its agent
for such purpose in Las Vegas, Nevada, for another
Partnership Certificate, or other Partnership
Certificates of different denominations, of like tenor
and representing in the aggregate the right to purchase
a like amount of Partnership Interests.
5
6
(iii) No service charge shall be made for any
exchange or registration of transfer of Partnership
Certificates, but the Partnership may require payment of
a sum sufficient to cover any stamp or other tax or
other governmental charge that is imposed in connection
with any such exchange or registration of transfer.
(iv) Notwithstanding any other provision of this
Agreement, on and after such time as the Partnership
shall have obtained a nonrestricted gaming license (the
"License") issued by the Nevada Gaming Commission (the
"Nevada Commission"), no holder of a Partnership
Interest may sell, assign, transfer, pledge or make any
other disposition of a Partnership Interest without the
prior approval of the Nevada Commission unless the
Partnership is then registered by the Nevada Commission
as a "publicly traded corporation" (a "Registered
Company"), as that term is defined in the Nevada Gaming
Control Act and the regulations promulgated thereunder
(collectively, the "Nevada Act"), and holds certain
exemptions from the Nevada Commission in connection with
such registration (the "Exemptions"). The General
Partner shall promptly notify each holder of a
Partnership Certificate in writing in each instance upon
the Partnership becoming the holder of the License, a
Registered Company and the holder of the Exemptions.
3.2.5 Registration of Transfers and Exchanges.
(i) Transfer and Exchange of Partnership
Certificates. When Partnership Certificates are
presented to the General Partner or its duly appointed
agent with a request:
(A) to register the transfer of any
Partnership Interests;
or
(B) to exchange such Partnership
Certificates for Partnership Certificates of other
authorized denominations evidencing in the aggregate an
equal number of Partnership Interests, the General
Partner shall register the transfer or make the exchange
as requested if the requirements of this Section 3.2 for
such transactions are met; provided, however, that the
Partnership Certificates presented or surrendered for
registration of transfer or exchange:
(I) shall be duly endorsed or
accompanied by a written instrument of transfer in form
satisfactory to the General Partner or its agent, duly
executed by the holder thereof or his attorney duly
authorized in writing; and
(II) in the case of Partnership
Interests the offer and sale of which have not been
registered under the Securities Act of 1933, as amended
(the "Securities Act"), such Partnership Certificates
shall be accompanied, in the sole discretion of the
General Partner, by the following additional information
and documents, as applicable:
6
7
(1) if such Partnership Certificates
are being delivered to the General Partner or its agent
by a holder for registration in the name of such holder,
without transfer, a certification from such holder to
that effect (in substantially the form of Exhibit E
hereto); or
(2) if such Partnership Interests are
being transferred in reliance on an exemption from the
registration requirements of the Securities Act, a
certification to that effect (in substantially the form
of Exhibit E hereto or as otherwise required by the
General Partner) and an opinion of counsel reasonably
satisfactory to the General Partner to the effect that
such transfer is in compliance with the Securities Act.
(ii) Legends.
(A) For so long as transfer of a Partnership
Interest is not permitted without registration under the
Securities Act, each Partnership Certificate evidencing
such Partnership Interest (and all Partnership Interests
issued in exchange therefor or substitution thereof)
shall bear a legend substantially to the following
effect:
THE LIMITED PARTNERSHIP INTERESTS IN THE RESORT AT
XXXXXXXXX, LIMITED PARTNERSHIP (THE "PARTNERSHIP")
REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER ANY
FEDERAL OR STATE SECURITIES LAWS. NO INTEREST IN THE
PARTNERSHIP MAY BE SOLD, ASSIGNED, TRANSFERRED,
MORTGAGED, ENCUMBERED, HYPOTHECATED OR DISPOSED OF IN
ANY WAY WITHOUT THE CONSENT OF THE GENERAL PARTNER. THE
GENERAL PARTNER OF THE PARTNERSHIP MAY REQUIRE AN
OPINION OF COUNSEL THAT ANY SUCH DISPOSITION COMPLIES
WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE OR OTHER TRANSFER OF ANY INTEREST IN THE
PARTNERSHIP IS ALSO SUBJECT TO CERTAIN RESTRICTIONS SET
FORTH IN THE AGREEMENT OF LIMITED PARTNERSHIP OF THE
PARTNERSHIP.
(B) For so long as the Registration Rights
and Limited Partners' Agreement dated as of December 30,
1997 among the General Partner, the Limited Partners and
holders of Warrants is in effect, each Partnership
Certificate shall bear the following legend:
THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A REGISTRATION RIGHTS AND
LIMITED PARTNERS' AGREEMENT DATED AS OF DECEMBER 30,
1997, WHICH CONTAINS PROVISIONS REGARDING THE
RESTRICTIONS ON THE TRANSFER AND PROVISIONS REQUIRING
THE MANDATORY TRANSFER OF SUCH PARTNERSHIP INTERESTS AND
OTHER MATTERS. A
7
8
COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT
THE PRINCIPAL OFFICE OF THE PARTNERSHIP.
(C) On and after the date of issuance of a
License to the Partnership and until the Partnership has
been registered as a Registered Company and granted the
Exemptions by the Nevada Commission, each Partnership
Certificate evidencing Partnership Interests (and all
Partnership Interests issued in exchange therefor or
substitution thereof) shall bear a legend substantially
to the following effect:
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, OR OTHER
DISPOSITION OF ANY INTEREST IN THE LIMITED PARTNERSHIP
IS VOID UNLESS APPROVED IN ADVANCE BY THE NEVADA GAMING
COMMISSION. IF AT ANY TIME THE NEVADA GAMING COMMISSION
FINDS THAT AN INDIVIDUAL OWNER OF ANY SUCH INTEREST IS
UNSUITABLE TO HOLD THAT INTEREST, THE NEVADA GAMING
COMMISSION SHALL IMMEDIATELY NOTIFY THE LIMITED
PARTNERSHIP OF THAT FACT. THE LIMITED PARTNERSHIP SHALL,
WITHIN TEN DAYS FROM THE DATE THAT IT RECEIVES THE
NOTICE FROM THE NEVADA GAMING COMMISSION, RETURN TO THE
UNSUITABLE OWNER THE AMOUNT OF HIS CAPITAL ACCOUNT AS
REFLECTED ON THE BOOKS OF THE LIMITED PARTNERSHIP.
BEGINNING ON THE DATE WHEN THE NEVADA GAMING COMMISSION
SERVES NOTICE OF A DETERMINATION OF UNSUITABILITY,
PURSUANT TO THE PRECEDING SENTENCE, UPON THE LIMITED
PARTNERSHIP, IT IS UNLAWFUL FOR THE UNSUITABLE OWNER:
(A) TO RECEIVE ANY SHARE OF THE PROFITS OR DISTRIBUTIONS
OF ANY CASH OR OTHER PROPERTY OTHER THAN A RETURN OF
CAPITAL AS REQUIRED ABOVE; (B) TO EXERCISE, DIRECTLY OR
THROUGH ANY TRUSTEE OR NOMINEE, ANY VOTING RIGHT
CONFERRED BY SUCH INTEREST; OR (C) TO RECEIVE ANY
REMUNERATION IN ANY FORM FROM THE LIMITED PARTNERSHIP,
FOR SERVICES RENDERED OR OTHERWISE.
ANY LIMITED PARTNER GRANTED DELAYED LICENSING THAT IS
LATER FOUND UNSUITABLE BY THE NEVADA GAMING COMMISSION
SHALL RETURN ALL EVIDENCE OF ANY OWNERSHIP IN THE
LIMITED PARTNERSHIP TO THE LIMITED PARTNERSHIP, AT WHICH
TIME THE LIMITED PARTNERSHIP SHALL REFUND TO THE
UNSUITABLE LIMITED PARTNER NO MORE THAN THE AMOUNT THAT
HE PAID FOR HIS OWNERSHIP INTEREST, AND THE UNSUITABLE
LIMITED PARTNER SHALL NO
8
9
LONGER HAVE ANY DIRECT OR INDIRECT INTEREST IN THE
LIMITED PARTNERSHIP.
3.2.6 Mutilated or Missing Partnership
Certificates. In case any of the Partnership
Certificates shall be mutilated, lost, stolen or
destroyed, the General Partner or its agent may at its
discretion issue in exchange and substitution for and
upon cancellation of the mutilated Partnership
Certificate, or in lieu of and substitution for the
Partnership Certificate lost, stolen or destroyed, a new
Partnership Certificate of like tenor and representing
an equivalent number of Partnership Interests, but only
upon receipt of evidence satisfactory to the General
Partner or its agent of such loss, theft or destruction
of such Partnership Certificate and indemnity also
satisfactory to the General Partner or its agent.
Applicants for such substitute Partnership Certificates
shall also comply with such other reasonable regulations
and pay such other reasonable charges as the General
Partner or its agent may prescribe.
(g) Section 4.3 is hereby amended by deleting Subsections 4.3L and
4.3N thereof in their entireties and replacing them with the
following:
L. The amendment of this Agreement, other than (i)
amendments pursuant to Section 2.10, (ii) amendments solely
for the purpose of clarification which do not change the
substance hereof, (iii) amendments for the purpose of
substituting Limited Partners, (iv) amendments which, in the
opinion of counsel for the Partnership, are necessary or
appropriate to satisfy requirements of the Code with respect
to partnerships or of any federal or state securities laws or
regulations, each of which may be made by the General Partner
acting alone.
N. The admission of additional General Partners or the
expulsion or involuntary withdrawal or liquidation of a
Partner.
(h) Section 5.1 is hereby amended by adding the following
provision at the end thereof:
Notwithstanding the foregoing, no item of income, gain,
loss or deduction will be allocated to any holder of Warrants
prior to such holder's exercise of such Warrant for a Limited
Partner Interest.
(i) Section 5.2 is hereby amended by adding the following
provision at the end thereof:
No item of capital gain realized by the Partnership
shall be allocated to any holder of Warrants prior to such
holder's exercise of such Warrant for a Limited Partner
Interest.
(j) The Agreement is amended by inserting the following New
Sections 5.8 and 5.9 after the current Section 5.7:
5.8 Distribution of Tax Allowance Amounts. As soon as
reasonably practicable after the end of each calendar
quarter, the General Partner shall determine the Tax
Allowance Amount for every Partner (including a Warrant
holder if
9
10
such Warrant holder is treated as owning an equity
interest in the Partnership for U.S. federal, state or
local income tax purposes) in respect of such quarter.
Upon such determination, the Partnership shall
distribute each Partner's Tax Allowance Amount to such
Partner provided that such distribution is not
prohibited by any agreement to which the Partnership is
then a party or is otherwise bound. All such
distributions shall have priority over any distributions
pursuant to Section 5.3. To the extent that the
cumulative distributions of Tax Allowance Amounts to a
Partner pursuant to this Section 5.8 for a fiscal year
exceed an amount equal to the cumulative Tax Allowance
Amount calculated with respect to such Partner at the
end of such fiscal year as if no prior distributions of
Tax Allowance Amounts had been made, the excess shall
not be treated as a Tax Allowance Amount and shall
reduce the amount otherwise distributable to such
Partner under Section 5.3.
5.9 Notwithstanding anything to the contrary contained in
this Agreement, no proceeds of any borrowings by the
Partnership, including but not limited to those under
the Mortgage Notes and the Subordinated PIK Notes, shall
be deemed to be part of distributable Cash Flow and the
use or uses of such borrowings under the Credit
Agreement and Subordinated PIK Notes shall be restricted
to the use or uses permitted by the Credit Agreement and
related documents and instruments with respect to the
Mortgage Notes and by the Indenture and related
documents and instruments with respect to the
Subordinated PIK Notes. In furtherance of the foregoing,
the undersigned Partners hereby acknowledge and accept
that the Partnership shall be subject to the terms and
conditions of the borrowings evidenced by the Mortgage
Notes and Subordinated PIK Notes and the other
agreements, documents and instruments related thereto,
including but not limited to the Warrants.
(k) Section 6.7 is amended by inserting the following at the end
of the current Section 6.7:
In addition, the Partnership will make an election under
Section 754 of the Code to adjust the tax basis of the
property of the Partnership under Section 734 or 743 of the
Code with respect to any transfer of a Partnership Interest by
a holder of a Warrant if requested by such holder with respect
to such transfer, provided, however, that the Partnership
shall not be required to make such election if it reasonably
determines that such election would result in material costs
to the Partnership or the Partners (other than out-of-pocket
expenses incurred in connection with making such election).
(l) Section 7.1 is deleted in its entirety and shall be of no
further force and effect.
(m) Section 7.2 is amended by inserting the following at the end
of Subsection 7.2(D):
Notwithstanding the foregoing, any Transfer or purported
Transfer of any Partnership Interest, whether to another
Partner or to a third party, shall be of no effect, and such
transferee shall not become a Partner, if the Partnership
would or may, in the sole determination of the General
Partner, have in the aggregate more
10
11
than one hundred (100) Partners. For purposes of determining
the number of Partners under this Section 7.2(D), a person
(the "beneficial owner") indirectly owning an interest in the
Partnership through a partnership, grantor trust or S
corporation (as such terms are used in the Code) (the
"flow-through entity") shall be considered a Partner, but only
if (i) substantially all of the value of the beneficial
owner's interest in the flow-through entity is attributable to
the flow-through entity's interest (direct or indirect) in the
Partnership and (ii) in the sole discretion of the General
Partner, a principal purpose of the use of the tiered
arrangement is to permit the Partnership to satisfy such
100-Partner limitation.
(n) Each of Sections 7.3, 7.4 and 7.5 is hereby deleted in its
entirety, and shall be of no further force or effect.
(o) Section 8.1 is hereby deleted in its entirety and shall be of
no further force or effect.
(p) Section 11.3 is hereby deleted in its entirety.
3. SEVERABILITY. Whenever possible, each provision of this Amendment will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Amendment is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Amendment.
4. FULL FORCE AND EFFECT. Except as expressly amended hereby, the
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof and the parties hereto ratify and agree to
continue to be bound by all terms and provisions of the Agreement as amended
hereby. As used in this Amendment, the terms "Agreement," this "Agreement,"
"herein," "hereafter," "hereto," "hereof," and words of similar import shall,
unless the context otherwise requires, mean or refer to the Agreement.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an
original, and such counterparts together will constitute one instrument.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
AND IS FOLLOWED BY A SINGLE SIGNATURE PAGE.]
11
12
This First Amendment to Agreement of Limited Partnership of The Resort at
Xxxxxxxxx, Limited Partnership is executed by the undersigned as of the date
first set forth above.
GENERAL PARTNER:
RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By:____________________________________
Name:
Its:
LIMITED PARTNERS:
_______________________________________
XXXXX X. XXXXX
_______________________________________
XXXXXX XXXXXX
_______________________________________
XXXXXX XXXXXX
CHRISTIANA LIMITED PARTNERSHIP,
a Nevada limited partnership
By: Keepsake, Inc., a Nevada
corporation, general partner
By__________________________
Name:
Its:
SEVEN CIRCLE GAMING
CORPORATION, a Delaware corporation
By__________________________________
Name:
Its:
12
13
SCHEDULE 3.1
PARTNERS LEDGER AS OF DECEMBER 30, 1997
DATE OF CAPITAL PARTNERSHIP PERCENTAGE
GENERAL PARTNER ADMISSION CONTRIBUTION INTERESTS INTERESTS
--------------- --------- ------------ --------- ---------
The Resort at Xxxxxxxxx, Inc. 08/15/96 $ 500,000.00 11,500 1%
LIMITED PARTNERS
----------------
Seven Circle Gaming Corporation 08/15/96 $15,525,628.30 1,046,500 91%
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx,
jointly 05/01/97 $ 500,000.00 11,500 1%
Christiana Limited Partnership 05/07/97 $ 2,500,000.00 57,500 5%
Xxxxx X. Xxxxx 05/07/97 $ 1,000,000.00 23,000 2%
-------------- --------- ---
$20,025,628.30 1,150,000 100%
============== ========= ===
14
EXHIBIT D
[FORM OF PARTNERSHIP CERTIFICATE - FACE]
Certificate Number____ Number of Limited Partnership Interests____
Certificate of Limited Partnership Interest
The Resort at Xxxxxxxxx, Limited Partner
This certifies that _____________________ is the owner of ____ limited
partnership interests of THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP, a limited
partnership formed under the laws of the State of Nevada (the "Partnership"),
and is entitled to all rights and benefits of a limited partner as set forth in
the Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement"), as amended from time to time.
The limited partnership interests evidenced by this Certificate may be
sold, transferred or assigned only in accordance with the terms and conditions
set forth in the Partnership Agreement and only upon surrender of this
Certificate properly endorsed.
IN WITNESS WHEREOF, THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP has
caused this Certificate to be issued this ____ day of _____ , 19__ .
THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP
By: The Resort at Xxxxxxxxx, Inc., general partner
By:_________________________________________
Print Name:_________________________________
Its:________________________________________
15
[FORM OF PARTNERSHIP CERTIFICATE - REVERSE]
THE LIMITED PARTNERSHIP INTERESTS IN THE RESORT AT XXXXXXXXX, LIMITED
PARTNERSHIP (THE "PARTNERSHIP") REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE
SECURITIES LAWS. NO INTEREST IN THE PARTNERSHIP MAY BE SOLD, ASSIGNED,
TRANSFERRED, MORTGAGED, ENCUMBERED, HYPOTHECATED OR DISPOSED OF IN ANY WAY
WITHOUT THE CONSENT OF THE GENERAL PARTNER. THE GENERAL PARTNER OF THE
PARTNERSHIP MAY REQUIRE AN OPINION OF COUNSEL THAT ANY SUCH DISPOSITION COMPLIES
WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE SALE OR OTHER
TRANSFER OF ANY INTEREST IN THE PARTNERSHIP IS ALSO SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN THE AGREEMENT OF LIMITED PARTNERSHIP OF THE
PARTNERSHIP.
[THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A REGISTRATION RIGHTS AND LIMITED PARTNERS' AGREEMENT DATED AS OF
DECEMBER 30, 1997, WHICH CONTAINS PROVISIONS REGARDING THE RESTRICTIONS ON THE
TRANSFER AND PROVISIONS REQUIRING THE MANDATORY TRANSFER OF SUCH PARTNERSHIP
INTERESTS AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE PARTNERSHIP.]
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, OR OTHER DISPOSITION OF ANY
INTEREST IN THE LIMITED PARTNERSHIP IS VOID UNLESS APPROVED IN ADVANCE BY THE
NEVADA GAMING COMMISSION. IF AT ANY TIME THE NEVADA GAMING COMMISSION FINDS THAT
AN INDIVIDUAL OWNER OF ANY SUCH INTEREST IS UNSUITABLE TO HOLD THAT INTEREST,
THE NEVADA GAMING COMMISSION SHALL IMMEDIATELY NOTIFY THE LIMITED PARTNERSHIP OF
THAT FACT. THE LIMITED PARTNERSHIP SHALL, WITHIN TEN DAYS FROM THE DATE THAT IT
RECEIVES THE NOTICE FROM THE NEVADA GAMING COMMISSION, RETURN TO THE UNSUITABLE
OWNER THE AMOUNT OF HIS CAPITAL ACCOUNT AS REFLECTED ON THE BOOKS OF THE LIMITED
PARTNERSHIP. BEGINNING ON THE DATE WHEN THE NEVADA GAMING COMMISSION SERVES
NOTICE OF A DETERMINATION OF UNSUITABILITY, PURSUANT TO THE PRECEDING SENTENCE,
UPON THE LIMITED PARTNERSHIP, IT IS UNLAWFUL FOR THE UNSUITABLE OWNER: (A) TO
RECEIVE ANY SHARE OF THE PROFITS OR DISTRIBUTIONS OF ANY CASH OR OTHER PROPERTY
OTHER THAN A RETURN OF CAPITAL AS REQUIRED ABOVE; (B) TO EXERCISE, DIRECTLY OR
THROUGH ANY TRUSTEE OR NOMINEE, ANY VOTING RIGHT CONFERRED BY SUCH INTEREST; OR
(C) TO RECEIVE ANY REMUNERATION IN ANY FORM FROM THE LIMITED PARTNERSHIP, FOR
SERVICES RENDERED OR OTHERWISE.
ANY LIMITED PARTNER GRANTED DELAYED LICENSING THAT IS LATER FOUND
UNSUITABLE BY THE NEVADA GAMING COMMISSION SHALL RETURN ALL EVIDENCE OF ANY
OWNERSHIP IN THE LIMITED PARTNERSHIP TO THE LIMITED PARTNERSHIP, AT WHICH TIME
THE LIMITED PARTNERSHIP SHALL REFUND TO THE UNSUITABLE LIMITED PARTNER NO MORE
THAN THE AMOUNT THAT HE PAID FOR HIS OWNERSHIP INTEREST, AND THE UNSUITABLE
LIMITED PARTNER SHALL NO LONGER HAVE ANY DIRECT OR INDIRECT INTEREST IN THE
LIMITED PARTNERSHIP.
16
EXHIBIT E
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF PARTNERSHIP INTERESTS
Re: Limited Partnership Interests (the "Securities")
of The Resort at Xxxxxxxxx, Limited Partnership
(the "Partnership")
This Certificate relates to ____________ Securities held in the form
of physical Partnership Certificate by _________________ (the "Transferor").
The Transferor:*
/ / has requested that the General Partner of the Partnership or the
transfer agent for the Partnership by written order to exchange or register the
transfer of Securities evidenced by physical Partnership Certificates.
In connection with such request and in request of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Agreement of Limited Partnership relating to the above captioned
Securities and the restrictions on transfers thereof as provided therein, and
that the transfer of these Securities does not require registration under the
Securities Act of 1933, as amended (the "Act") because*:
/ / Such Security is being acquired for the Transferor's own account,
without transfer.
/ / Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
/ / Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule
501 under the Act.
/ / Such Security is being transferred in reliance on Regulation S under
the Act (and fully executed Certificates in the forms of Exhibits E-1 and E-2
hereto, as applicable, accompany this Certificate).
17
/ / Such Security is being transferred in reliance on Rule 144 under the
Act.
/ / Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 or Regulation S under the Act to a person other than an
institutional "accredited investor."
-------------------------------------
(INSERT NAME OF TRANSFEROR)
By:
--------------------------------
(Authorized Signature)
Date:
-----------------------------
*Check applicable box.
2
18
EXHIBIT E-1
Form of Certificate to Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
[Date]
The Resort at Xxxxxxxxx, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxx Xxxxxx
Re: The Resort at Xxxxxxxxx, Limited Partnership (the "Partnership")
Limited Partnership Interests (the "Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of Securities of the
Partnership, we confirm that:
1. We have received such information as we deem necessary in order to make
our investment decision.
2. We understand that the limited partnership interests of the Partnership
represented by this Certificate are subject to restrictions on the transfer and
the mandatory transfer of interests and other matters as contained in the
Partnership's Agreement of Limited Partnership, as amended, and in a
Registration Rights and Limited Partners' Agreement dated as of December 30,
1997, and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (A) to the
Partnership or any subsidiary thereof, (B) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to the General Partner
or the transfer agent for the Partnership a signed letter substantially in the
form hereof, (D) outside the United States in accordance with Regulation S under
the Securities Act, (E) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
19
4. We understand that, on any proposed resale of Securities, we will be
required to furnish the General Partner and/or the transfer agent for the
Partnership, such certification, legal opinions and other information as may be
reasonably required to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Securities purchased by
us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
You and the Partnership and its transfer agent are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
(Name of Transferor)
By: __________________________
(Authorized Signatory)
2
20
EXHIBIT E-2
Form of Certificate to Be
Delivered in Connection
with Regulation S Transfers
[Date]
The Resort at Xxxxxxxxx, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxx Xxxxxx
Re: The Resort at Xxxxxxxxx, Limited Partnership (the "Partnership")
Limited Partnership Interests (the "Securities")
Dear Sirs:
In connection with our proposed purchase of ___________ of the
Securities, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) neither (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or (b)
the transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been prearranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions applicable
to the Securities.
21
You and the Partnership and its transfer agent are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Defined terms used
herein without definition have the respective meanings provided in Regulation S.
Very truly yours,
(Name of Transferor)
By: __________________________
(Authorized Signatory)
2
22
This First Amendment to Agreement of Limited Partnership of The Resort
at Xxxxxxxxx, Limited Partnership is executed by the undersigned as of the date
first set forth above.
GENERAL PARTNER:
RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By: /s/ Xxxxx XxXxxxxx
---------------------------------
Name: XXXXX XxXXXXXX
Its: PRESIDENT
LIMITED PARTNERS:
/s/ Xxxxx X. Xxxxx
------------------------------------
XXXXX X. XXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------
XXXXXX XXXXXX
CHRISTIANA LIMITED PARTNERSHIP, a
Nevada limited partnership
By: Keepsake, Inc., a Nevada
corporation, general partner
By: /s/ Xxxx Xxxxxxxx
--------------------------
Name: XXXX XXXXXXXX
Its: PRESIDENT
SEVEN CIRCLE GAMING CORPORATION, a
Delaware corporation
By: /s/ Xxxxx XxXxxxxx
---------------------------------
Name: XXXXX XxXXXXXX
Its: PRESIDENT
12
23
This First Amendment to Agreement of Limited Partnership of the Resort
at Xxxxxxxxx, Limited Partnership is executed by the undersigned as of the date
first set forth above.
GENERAL PARTNER:
RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By: /s/ Xxxxx XxXxxxxx
---------------------------------
Name: XXXXX XxXXXXXX
Its: PRESIDENT
LIMITED PARTNERS:
/s/ Xxxxx X. Xxxxx
------------------------------------
XXXXX X. XXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------
XXXXXX XXXXXX
CHRISTIANA LIMITED PARTNERSHIP, a
Nevada limited partnership
By: Keepsake, Inc., a Nevada
corporation, general partner
By: /s/ Xxxx Xxxxxxxx
--------------------------
Name: XXXX XXXXXXXX
Its: PRESIDENT
SEVEN CIRCLE GAMING CORPORATION, a
Delaware corporation
By: /s/ Xxxxx XxXxxxxx
---------------------------------
Name: XXXXX XxXXXXXX
Its: PRESIDENT
24
This First Amendment to Agreement of Limited Partnership of the Resort
at Xxxxxxxxx, Limited Partnership is executed by the undersigned as of the date
first set forth above.
GENERAL PARTNER:
RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By: /s/ Xxxxx XxXxxxxx
---------------------------------
Name: XXXXX XxXXXXXX
Its: PRESIDENT
LIMITED PARTNERS:
/s/ Xxxxx X. Xxxxx
------------------------------------
XXXXX X. XXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------
XXXXXX XXXXXX
CHRISTIANA LIMITED PARTNERSHIP, a
Nevada limited partnership
By: Keepsake, Inc., a Nevada
corporation, general partner
By: /s/ Xxxx Xxxxxxxx
--------------------------
Name: XXXX XXXXXXXX
Its: PRESIDENT
SEVEN CIRCLE GAMING CORPORATION, a
Delaware corporation
By: /s/ Xxxxx XxXxxxxx
---------------------------------
Name: XXXXX XxXXXXXX
Its: PRESIDENT
25
This First Amendment to Agreement of Limited Partnership of The Resort at
Xxxxxxxxx, Limited Partnership is executed by the undersigned as of the date
first set forth above.
GENERAL PARTNER:
RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By: /s/ Xxxxx XxXxxxxx
-------------------------------
Name: Xxxxx XxXxxxxx
Its: President
LIMITED PARTNERS:
/s/ Xxxxx X. Xxxxx
-----------------------------------
XXXXX X. XXXXX
/s/ Xxxxxx Xxxxxx
-----------------------------------
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
-----------------------------------
XXXXXX XXXXXX
CHRISTIANA LIMITED PARTNERSHIP,
a Nevada limited partnership
By: Keepsake, Inc., a Nevada
corporation, general partner
By: /s/ Xxxx Xxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxx
Its: President
SEVEN CIRCLE GAMING
CORPORATION, a Delaware corporation
By: /s/ Xxxxx XxXxxxxx
--------------------------------
Name: Xxxxx XxXxxxxx
Its: President
12
26
This First Amendment to Agreement of Limited Partnership of The Resort at
Xxxxxxxxx, Limited Partnership is executed by the undersigned as of the date
first set forth above.
GENERAL PARTNER:
RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By: /s/ Xxxxx XxXxxxxx
-------------------------------
Name: Xxxxx XxXxxxxx
Its: President
LIMITED PARTNERS:
-----------------------------------
XXXXX X. XXXXX
/s/ Xxxxxx Xxxxxx
-----------------------------------
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
-----------------------------------
XXXXXX XXXXXX
CHRISTIANA LIMITED PARTNERSHIP,
a Nevada limited partnership
By: Keepsake, Inc., a Nevada
corporation, general partner
By: /s/ Xxxx Xxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxx
Its: President
SEVEN CIRCLE GAMING
CORPORATION, a Delaware corporation
By: /s/ Xxxxx XxXxxxxx
--------------------------------
Name: Xxxxx XxXxxxxx
Its: President
27
This First Amendment to Agreement of Limited Partnership of The Resort at
Xxxxxxxxx, Limited Partnership is executed by the undersigned as of the date
that set forth above.
GENERAL PARTNER:
RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By: /s/ Xxxxx XxXxxxxx
-------------------------------
Name: Xxxxx XxXxxxxx
Its: President
LIMITED PARTNERS:
-----------------------------------
XXXXX X. XXXXX
/s/ Xxxxxx Xxxxxx
-----------------------------------
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
-----------------------------------
XXXXXX XXXXXX
CHRISTIANA LIMITED PARTNERSHIP,
a Nevada limited partnership
By: Keepsake, Inc., a Nevada
corporation, general partner
By: /s/ Xxxx Xxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxx
Its: President
SEVEN CIRCLE GAMING
CORPORATION, a Delaware corporation
By: /s/ Xxxxx XxXxxxxx
--------------------------------
Name: Xxxxx XxXxxxxx
Its: President
28
CERTIFICATE OF SECRETARY
OF
THE RESORT AT XXXXXXXXX, INC.
I, Xxxx Xxxxx, Secretary of The Resort at Xxxxxxxxx, Inc., a
Nevada corporation ("RAS, Inc."), do hereby certify on behalf of RAS, Inc. as
follows (capitalized terms not otherwise referred herein shall be the same
meaning as in the Purchase Agreement, dated December 22, 1997, among RAS, Inc.,
The Resort at Xxxxxxxxx, Limited Partnership, RAS Warrant Co., and NatWest
Capital Markets Limited):
1. Attached hereto as Exhibit A is a true and correct copy of
the Certificate of Incorporation of RAS, Inc. as in effect of the date hereof.
2. Attached hereto as Exhibit B is a true and correct copy of
the By-Laws of RAS, Inc. as in effect of the date hereof.
3. The following individuals are elected or appointed officers
of RAS, Inc., each holds the office of RAS, Inc. set forth opposite his name and
the signature written opposite the name and title of each such officer is his
genuine signature.
Name Office Signature
---- ------ ---------
Xxxxx XxXxxxxx President and
Chief Executive Officer /s/ Xxxxx XxXxxxxx
---------------------------
Xxxxxxx Xxxxxxx Senior Vice
President Slot Operations /s/ Xxxxxxx Xxxxxxx
---------------------------
4. Attached hereto as Exhibit C are true and correct copies of
all resolutions of the Board of Directors of RAS, Inc. authorizing (a) the
transactions contemplated by the Purchase Agreement and (b) the Material
Agreements to which RAS, Inc. is a party, the offering of the Securities, the
entering into the Purchase Agreement, the Indenture, the Registration Rights
Agreements, the Unit Agreement, the Disbursement Agreement and the Subordinated
Notes Proceeds Accounts Agreement.
Dated: December 31, 1997 By:
-------------------------
Xxxx Xxxxx, Secretary
1
29
I, Xxxxx XxXxxxxx, President of RAS, Inc., do hereby certify
that Xxxx Xxxxx is the duly elected, qualified and acting Secretary of RAS, Inc.
and that the signature of Xxxx Xxxxx set forth above is his genuine signature.
Dated: December 31, 1997 By:/s/ Xxxxx XxXxxxxx
---------------------------
Xxxxx XxXxxxxx
President
2
30
===============================================================================
THE INTERESTS IN THE PARTNERSHIP REPRESENTED BY THIS AGREEMENT HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE
SECURITIES LAWS. NO INTEREST IN THE PARTNERSHIP MAY BE SOLD, ASSIGNED,
TRANSFERRED, MORTGAGED, ENCUMBERED, HYPOTHECATED OR DISPOSED OF IN ANY WAY
WITHOUT THE CONSENT OF THE GENERAL PARTNER. THE GENERAL PARTNER MAY REQUIRE AN
OPINION OF COUNSEL THAT ANY SUCH DISPOSITION COMPLIES WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS. THE SALE OR OTHER TRANSFER OF AN INTEREST IN
THE PARTNERSHIP IS ALSO SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THIS
AGREEMENT.
===============================================================================
AGREEMENT OF LIMITED PARTNERSHIP OF
THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (the or this "Agreement") creating
THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP, a Nevada limited partnership (the
"Partnership") is entered into by and between THE RESORT AT XXXXXXXXX, INC., a
Nevada corporation with its principal place of business in Las Vegas, Nevada,
and the undersigned Limited Partners.
WITNESSETH:
WHEREAS, the undersigned Partners (as herein defined) wish to form a
Nevada limited partnership for the purpose of acquiring certain land in the
State of Nevada and developing, owning and operating the Resort (as herein
defined);
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. DEFINITIONS
1.1 Terms Defined. When used in this Agreement, the following terms shall
have the meanings set forth in this Paragraph 1.1:
A. "Additional Capital Contributions" shall have the meaning set
forth in Paragraph 3.4 of this Agreement.
B. "Affiliate" shall mean a person, entity or organization which,
directly or indirectly, controls, is controlled by, or is under common control
with the person, entity or organization in question. The term "control" as used
in the immediately preceding sentence means, with respect to an entity that is
a corporation, the right to exercise, directly or indirectly, more than fifty
percent (50%) of the voting rights attributable to the shares of such
corporation and, with respect to a person or organization that is not a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such person or
organization.
C. "Budget" shall mean an annual budget, prepared by the General
Partner for each fiscal year of the Partnership and approved as required by
Paragraph 4.3 of this
1
31
Agreement, which budget shall be comprised of both a capital budget which shall
be an estimate of all capital expenditures to be made during the fiscal year of
the Partnership, and an operating budget which shall be an estimate of all
revenues and expenses of operating the Partnership during the fiscal year.
D. "Capital Account" shall have the meaning set forth in Paragraph 3.3
of this Agreement.
E. "Capital Contribution" shall mean the cash and the fair market value
of services or property other than cash (net of liabilities which the
Partnership assumes or takes the property subject to) contributed to the
capital of the Partnership by the Partners.
F. "Cash Flow" shall mean the net income of the Partnership as
determined in accordance with the method of accounting utilized by the
Partnership pursuant to Paragraph 6.2 of this Agreement, consistently applied
and adjusted as follows:
(1) There shall be added to such net income or loss:
(a) The amount charged for depreciation and any other
deductions not involving a cash expenditure or creating a current account
payable;
(b) The net proceeds received, to the extent not included in
income, by reason of any sale, condemnation or destruction of a part or parts
(but less than all) of the physical structures and facilities or tangible
personal property of the Partnership and not in connection with the dissolution
of the Partnership;
(c) The proceeds of any borrowing by the Partnership;
(d) Cash contributions to the Partnership; and,
(e) The net change in operating assets and liabilities as
included in the Partnership statement of cash flow.
(2) There shall be subtracted from such net income or loss:
(a) The amount of payments made on account of principal upon
mortgages and deeds of trust against any real property or tangible personal
property owned by the Partnership or upon principal of all other loans made to
the Partnership;
(b) Any amounts paid for non-deductible capital expenditures
and any other cash sums expended for items not deducted in determining net
income or loss of the Partnership;
(c) Any change in the cash reserves necessary to retain
sufficient working capital in the Partnership as determined pursuant to
Paragraph 4.3 of this Agreement.
2
32
G. "Commencement Date" shall mean the first date that the Resort is
open to the public as a resort hotel facility. The parties agree to memorialize
the Commencement Date in a writing signed by each of them.
H. "Conversion Date" shall mean the date on which creditors holding
Convertible Notes contribute the same to the capital of the Partnership in
exchange for Limited Partner Interests in accordance with the Note Purchase
Agreements.
I. "Convertible Notes" shall mean those promissory notes representing
loans in the original aggregate principal amount of Two Million Dollars
($2,000,000) made by the Partnership, as borrower, for which all or part of the
same are convertible into Limited Partner Interests on the Conversion Date.
J. "Curing Partner" shall have the meaning as set forth in Paragraph
3.5 of this Agreement.
K. "Enterprise" shall mean the Partnership acting on its own or in any
other form to operate the Resort and conduct activities and Operations
authorized pursuant to the Partnership Agreement and this Agreement.
L. "Failing Partner" shall have the meaning as set forth in Paragraph
3.5 of this Agreement.
M. "Failure Date" shall have the meaning as set forth in Paragraph 3.5
of this Agreement.
N. "General Partner" shall mean The Resort at Xxxxxxxxx, Inc., a Nevada
corporation, its permitted successors and assigns, in its capacity as general
partner of the Partnership.
0. "Gross Revenues" shall mean the total revenues, net of
complimentaries, for any period from the conduct of Operations by the
Enterprise.
P. "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as amended from time to time, and the regulations
thereunder.
Q. "Limited Partner Interests" shall mean Partnership Interests held by
Limited Partners.
R. "Limited Partners" shall mean the following individuals or entities
in their respective capacities as limited partners of the Partnership: those
individuals or entities described in Exhibit "A," attached hereto and made a
part hereof; those individuals or entities admitted as limited partners of the
Partnership on the Conversion Date by reason of their Capital Contributions of
the Convertible Notes; and the respective successors and assigns of each of the
foregoing individuals or entities.
3
33
S. "Liquidating Event" shall mean the sale, condemnation or exchange of
all or substantially all of the facilities of the Partnership used for the
Resort and the support thereof, or other transactions which, individually or
together with any similar transaction or transactions, result in the disposition
of all or substantially all of the facilities of the Partnership used for the
Resort and the support thereof and occurs in the course of liquidation of the
Partnership or upon and with respect to which event the Partnership is dissolved
and wound up and all payments, including payments on any promissory notes, have
been received.
T. "Loan Documents" shall mean all Notes and Security Agreements and
all agreements, documents and instruments executed or delivered pursuant
thereto, each as amended.
U. "Major Capital Event" shall mean any event (excluding Operations and
a Liquidating Event) arising other than in the ordinary course of the
Partnership's business, including, without limitation, the following:
(1) The sale of less than substantially all of the facilities
of the Partnership used for the Resort and the support thereof;
(2) A condemnation of less than substantially all of the
facilities of the Partnership used for the Resort and the support thereof;
(3) The recovery of damage awards or settlements or insurance
proceeds from the loss of or damage to the facilities of the Partnership used
for the Resort and the support thereof; and,
(4) A borrowing or refinancing of indebtedness in excess of
One Million Dollars ($1,000,000).
V. "Majority Interest" shall mean the Partner or Partners who own more
than fifty percent (50%) of the total Partnership Interests. A "Majority
Interest of the Partners", other than an excluded Partner, shall mean more than
fifty percent (50%) of the Partnership Interests held by the remaining Partners.
W. "Negative Cash Flow" shall mean the amount by which the Cash Flow of
the Partnership for any ninety (90) day period is a negative number.
X. "Net Revenues" shall mean the Gross Revenues less total Operating
Expenses.
Y. "Nevada Gaming Authorities" shall mean the appropriate agencies of
the City of Las Vegas, Nevada, Xxxxx County, Nevada and State of Nevada having
jurisdiction and regulatory control over gaming operations of the Partnership or
the Resort.
Z. "Note(s)" shall mean the promissory note or notes executed by the
Partnership in favor of any lender including, without limitation, the General
Partner and
4
34
evidencing the loans extended and other financing arrangements for the benefit
of the Partnership.
AA. "Note Purchase Agreements" shall mean the loan agreements dated on
or after the date of this Agreement, among the Partnership, Xxxxx Xxxxx or a
company which he controls, and Xxxx Xxxxxxxx or a company which he controls, and
all other documents executed or delivered in connection with the Convertible
Notes.
BB. "Operating Expenses" shall mean expenses of the Enterprise incurred
after the Commencement Date, which expenses are necessary for the operation of
the Enterprise and which include, but are not necessarily limited to, the
following:
(1) The payment of salaries, wages and benefit programs for
employees employed in the Enterprise;
(2) Materials and supplies for the Enterprise;
(3) Utilities;
(4) Routine remodeling, repairs and maintenance of the Resort;
(5) Insurance and bonding;
(6) Advertising and marketing;
(7) Compensation to the General Partner for management of the
Partnership, calculated based on Gross Revenues;
(8) Professional fees;
(9) Security costs;
(10) Reasonable and necessary travel expenses for employees of
the partnership, the Enterprise and of General Partner subject to an approved
budget;
(11) Equipment costing less than the minimum capitalization
amount as determined by the Enterprise;
(12) Trash removal;
(13) Costs of goods sold;
(14) Other expenses designated as Operating Expenses in the
annual budget of the Enterprise;
5
35
(15) Expenses specifically designated as Operating Expenses in
this Agreement and ordinarily considered as such in accordance with generally
accepted accounting principles ("GAAP");
(16) Such other expenses which are determined by an annual
audit to be Operating Expenses; and
(17) Any taxes (other than income taxes) or fees accruing to
any governmental entity.
The term "Operating Expenses" as used herein specifically excludes
interest, depreciation, amortization and income taxes.
CC. "Operations" shall mean all activities arising in the ordinary
course of the Partnership's business which do not constitute a Major Capital
Event or Liquidating Event.
DD. "Partners" shall mean the General Partner and the Limited Partners.
EE. "Partnership" shall mean The Resort at Xxxxxxxxx, Limited
Partnership, a Nevada limited partnership, the limited partnership governed by
this Agreement.
FF. "Partnership Interest" shall mean the respective interest of each
Partner in the Partnership, expressed as a percentage in the capital, income,
gains, losses, deductions, tax credits and distributions of the Partnership, and
shall include the right of such Partner to any and all benefits to which such
Partner may be entitled as provided in this Agreement and in applicable law,
together with the obligations of such Partner to comply with all terms and
provisions of this Agreement and applicable law.
GG. "Proceeding" shall mean the following:
(1) Any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative brought by any governmental entity;
(2) Any appeal in such an action, suit or proceeding; and,
(3) Any governmental or regulatory inquiry or investigation
that could lead to such an action, suit or proceeding.
HH. "Resort" shall mean that certain resort hotel together with the
commercial, entertainment and recreational project and support facilities
related thereto to be developed by the Partnership.
II. "Security Agreements" shall mean all security agreements,
mortgages, assignments, financing statements and other documents executed on
behalf of the Partnership in favor of any lender including, without limitation,
the General Partner, in order to grant, evidence, maintain and enforce a lien
and security interest in and to all assets of the Partnership,
6
36
real, personal or mixed tangible or intangible, now owned or hereafter acquired
and wherever located, to secure payment of all sums loaned to the Partnership.
JJ. "Start-up Expenses" shall mean all expenses necessary for the
Partnership to prepare for the commencement of the Enterprise Operations and
which are not classified as construction costs, costs for the purchase of
equipment other than office equipment, working capital or Operating Expenses.
Start-up Expenses shall include, but are not limited to, costs to the
Partnership for legal and other professional fees incurred on behalf of the
Enterprise. Also included are necessary salaries, fees, marketing expenses,
training of employees for employment in the Enterprise, supplies, utilities,
travel costs and similar expenses necessary to prepare for the commencement of
the Enterprise incurred prior to the Commencement Date.
KK. "Transfers" shall mean the sale, transfer, conveyance,
assignment, pledge, hypothecation, mortgage or other encumbrance or disposition
of all or any part of a Partnership Interest.
1.2 Number and Gender. Whenever the context requires, references in this
Agreement to the singular number shall include the plural, and the plural
number shall include the singular, and words denoting gender shall include the
masculine, feminine and neuter.
2. FORMATION, NAME, PRINCIPAL PLACE OF BUSINESS, PURPOSE AND TERM
2.1 Formation and Filings. The Partners hereby create and establish a
limited partnership pursuant to Chapter 88 of the Nevada Revised Statutes, as
amended, known as the Nevada Uniform Limited Partnership Act, (the "Act") for
the purposes described herein. The General Partner shall execute, file, record
and publish all certificates, notices, statements and other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all jurisdictions in which the Partnership conducts business.
2.2 Name. The business of the Partnership shall be conducted under the
name "The Resort at Xxxxxxxxx, Limited Partnership." The General Partner shall
cause the filing and recording of an appropriate assumed name certificate for
the Partnership in accordance with applicable statutory requirements in such
offices and places as may be required by the laws of the State of Nevada or
other applicable law.
2.3 Principal Place of Business. The principal office and place of
business of the Partnership shall be in Las Vegas, Nevada.
2.4 Purposes. The purposes of the Partnership are as follows:
A. To acquire land in the planned unit development known as Xxxxxxxxx
("Xxxxxxxxx") in the City of Las Vegas, State of Nevada, on which to develop
and construct the Resort;
B. To own, lease in whole or in part, manage, maintain and operate
the Resort and support facilities;
7
37
C. To use, lease, rent or license the Resort for such other activities
which are compatible with the Resort;
D. To do any and all other acts and things necessary and incidental to
or convenient to carry on the Partnership business as contemplated under this
Agreement; and
E. To have such other purposes as may be determined by the Partners in
accordance with Article 4 of this Agreement.
2.5 Term. The Partnership shall begin as of the date of this Agreement and
shall continue until July 1, 2050 or until earlier terminated as provided for in
Paragraph 9.1 of this Agreement.
2.6 Ownership. The Partnership Interest of each Partner shall be personal
property for all purposes. All property and interests in property, real or
personal, owned by the Partnership shall be deemed owned by the Partnership as
an entity, and no Partner, individually, shall have any ownership of such
property or interest owned by the Partnership. Each of the Partners irrevocably
waives, during the term of the Partnership and during any period of its
liquidation following any dissolution, any right that it may have to maintain
any action for partition with respect to any of the assets of the Partnership.
2.7 Limits of Partnership. The relationship between and among the parties
hereto or any future Partners shall be limited to the carrying on of the
business of the Partnership in accordance with the terms of this Agreement. Such
relationship shall be construed and deemed to be a limited partnership for the
sole and limited purpose of carrying on such business.
2.8 Powers of Partnership. To accomplish the purposes of the Partnership,
the General Partner, acting on behalf of the Partnership, shall have all powers
and authority and may take such actions as are permitted the General Partner
hereunder.
2.9 No Partner Responsible for Other Partners' Commitments. No Partner nor
the Partnership shall be responsible or liable for any indebtedness or
obligation of any other Partner incurred either before or after the execution of
this Agreement, except those responsibilities, liabilities, debts and
obligations hereafter undertaken or incurred on behalf of the Partnership under
or pursuant to the terms of this Agreement or assumed in writing by the
Partnership, and for which such Partner is liable under the Act and other
applicable law, and each Partner hereby indemnifies and agrees to hold the other
Partners and the Partnership harmless from all such obligations and indebtedness
except as aforesaid. Nothing in this Paragraph 2.9 shall imply any authority of
any Partner to bind the other Partners or the Partnership except as provided in
Paragraphs 2.8 and 2.9 of this Agreement. Notwithstanding anything to the
contrary herein, unless otherwise provided in the Act, no Limited Partner shall
be liable for any of the debts or other obligations of the Partnership.
2.10 Admission of Additional Limited Partners. The Partnership will issue
Convertible Notes in the aggregate amount of Two Million Dollars ($2,000,000) to
persons designated by the General Partner, in return for said persons' making
loans to the Partnership of amounts equal to
8
38
one hundred percent (100%) of the principal amounts of such Convertible Notes.
Under the terms of the Note Purchase Agreements pertaining to said Convertible
Notes, the holders thereof shall be admitted as Limited Partners in the
Partnership on the Conversion Date, whereupon said holders will execute this
Agreement, as in effect on the Conversion Date. The Note Purchase Agreements
shall provide that on the Conversion Date, the holders thereof shall be entitled
to Limited Partner Interests pursuant to a designated schedule, and that any
portion of the principal of the Convertible Notes that is not treated as a
Capital Contribution shall be paid to the holders of the Convertible Notes on
the specified maturity date of the Convertible Notes. The Partners hereby
irrevocably consent and agree to: (a) the issuance of the Convertible Notes to
those holders designated by the General Partner, (b) the issuance of Limited
Partner Interests to said holders on the Conversion Date in accordance with the
schedule(s) contained in the Note Purchase Agreements, (c) the admission of said
holders as Limited Partners effective on the Conversion Date, and (d) the
adjustment of the Partnership Interests to account for said issuance of Limited
Partner Interests. On the Conversion Date, the General Partner shall execute an
acknowledgment of the admission of the holders as Limited Partners, subject to
all of the terms, rights and obligations of this Agreement, and the General
Partner shall immediately forward the acknowledgment to each holder, who shall
then promptly execute the acknowledgment. Notwithstanding the foregoing, any
failure of the General Partner or of any holder to execute the acknowledgment
shall not prevent any such holder from being admitted as a Limited Partner on
the Conversion Date to the extent provided in the Note Purchase Agreements.
Prior to the Conversion Date, the holders shall not be treated as Partners, and
the amounts loaned to the Partnership shall not be treated as Capital
Contributions. On and after the Conversion Date, the holders shall for all
purposes be treated as Limited Partners with all terms,rights and obligations as
set forth in this Agreement.
3. CAPITAL CONTRIBUTIONS AND PARTNERSHIP INTERESTS
3.1 Partnership Interests. The Partnership Interests of each Partner
shall initially be as follows:
General Partner
The Resort at Xxxxxxxxx, Inc. 1%
Limited Partners
Seven Circle Gaming Corporation 99%
----
100%
3.2 Initial Capital Contributions. The Partners shall make initial
Capital Contributions in cash to the Partnership upon the execution of this
Agreement in the following amounts:
General Partner
The Resort at Xxxxxxxxx, Inc. $500,000.00
9
39
Limited Partners
Seven Circle Gaming Corporation $15,525,628.30
Total $16,025,628.30
3.3 Capital Accounts. The Partnership shall establish and maintain a
Capital Account for each Partner in accordance with Section 704(b) of the
Internal Revenue Code and Treasury Regulations Section 1.704-1(b)(2)(iv) and
the principles set forth in Exhibit "C" attached hereto and made a part hereof.
3.4 Additional Capital Contributions. Each Partner shall make Additional
Capital Contributions to the Partnership if recommended by the General Partner
and approved pursuant to Paragraph 4.3 of this Agreement. The Additional
Capital Contributions shall be in an amount equal to such Partner's pro rata
share, based on its respective Partnership Interest. Without limiting the
foregoing, upon and after admission to the Partnership on the Conversation
Date, each Limited Partner admitted by having contributed to the capital of the
Partnership such person's interest in the Convertible Notes (a) shall have the
rights and obligations of a Limited Partner as set forth in this Agreement, (b)
shall not have any obligations except as set forth in this Agreement and the
Note Purchase Agreements, and (c) shall not have any obligation to contribute
money or property in excess of its Capital Contribution to the Partnership as
provided in the Note Purchase Agreement, except as such obligation is set forth
in this Agreement.
3.5 Failure to Make Additional Capital Contributions. If any Partner
(herein called the "Failing Partner") shall fail or refuse to make any
Additional Capital Contribution when required, and such failure or refusal
shall have continued for a period of five (5) days following the due date
therefor, then after the expiration of this five (5) day grace period (herein
called the "Failure Date") the other Partners, in proportion to the Partnership
Interests of such Partners who exercise the following election (collectively
the "Curing Partners") may, at their sole discretion do either or any
combination of the following, in addition to any other remedies available at
law:
A. The Curing Partners may loan to the Failing Partner, through an
advance to the Partnership on behalf of the Failing Partner, the amount of the
Failing Partner's required Additional Capital Contribution, in which event the
Failing Partner and its Capital Account shall be credited with such Additional
Capital Contribution. Said loan advance shall bear interest at the lesser of
(i) the rate of interest announced by the Xxxxx Fargo Bank, N.A., from time to
time, as its prime interest rate, plus three percent (3%) per annum; or (ii)
the highest rate permitted by law. Thereafter, all Partnership distributions or
withdrawals attributable to the Failing Partner's Partnership Interest shall be
paid directly to the Curing Partners pro rata until such time as all such loan
amounts so advanced, together with accrued interest thereon, shall have been
repaid in full. Further, the Curing Partners shall have and are hereby granted
a security interest in and a lien upon the Failing Partner's Partnership
Interest to secure the repayment of said loan advances and the accrued interest
thereon and shall have all rights to which a secured party is entitled under
the Nevada Uniform Commercial Code, as amended,
10
40
including, without limitation, the right to have the Failing Partner sign any
documents necessary to perfect a security interest, and the right to foreclose
and to sell the collateral at public or private sale.
B. The Curing Partners may make the Failing Partner's required
Additional Capital Contribution, in which event the Failing Partner's
Partnership Interest shall be reduced and the Curing Partners' Partnership
Interest shall be correspondingly increased so that their Partnership Interests
will be in the same ratio as their Capital Accounts after the Capital Accounts
of the Curing Partners are credited with the Additional Capital Contribution
made by the Curing Partners pursuant to this Paragraph 3.5.
C. At any time there is a dilution of Failing Partner's Partnership
Interest pursuant to Paragraph 3.5 B of this Agreement, such Failing Partner
shall have the option of restoring its Partnership Interest by payment to the
Curing Partners of the Additional Capital Contribution paid by such Curing
Partners on behalf of such Failing Partner plus an amount equal to the interest
that would be due thereon under the provisions of Paragraph 3.5 A of this
Agreement if the Curing Partners had elected to make a loan to the Failing
Partner, provided such payment is made no later than ninety days (90) following
the subject dilution.
3.6 Other Matters Relating to Capital Contributions.
A. Loans by any Partner to the Partnership shall not be considered
contributions to the capital of the Partnership.
B. No Partner shall be required to make any contributions to the
capital of the Partnership except to the extent expressly provided by this
Article 3.
C. Except as provided in this Agreement, no Partner shall be entitled
to withdraw, or to obtain a return of, any part of its contribution to the
capital of the Partnership, or to receive property or assets other than cash in
return thereof (when and if provided hereby), and no Partner shall be liable to
any other Partner for a return of its contributions to the capital of the
Partnership. Any return of such Capital Contribution or Capital Account shall be
made solely from the assets of the Partnership (including the Capital
Contributions of the Partners) and only in accordance with the terms hereof, and
no Partner shall have the right to receive property other than cash except as
may be specifically provided herein.
D. No Partner shall be entitled to priority over any other Partner,
either with respect to a return of its contributions to the capital of the
Partnership, or to allocations of taxable income, gains, losses or credits or to
distributions, except as provided by this Agreement.
E. The Partnership shall first apply contributions of capital to meet
any cost or expense incurred in connection with the formation of the
Partnership, including but not limited to legal, accounting, management, and
development costs, selling commissions, financial advisory and financing fees,
planning and design costs, taxes, and any sums however advanced
11
41
by or on behalf of the General Partner or the Partnership in connection
therewith, and then apply the remainder to working capital of the Partnership.
F. The principal amount of a promissory note which is not readily
traded on an established securities market and which is contributed to the
Partnership by the maker of the note as a Capital Contribution shall not be
included in the Capital Account of any Partner until the Partnership makes a
taxable disposition of the note or until (and to the extent) principal payments
are made on the note, all in accordance with Section 1.704-(1) (b) (2) (iv) (d)
(2) of the Treasury Regulations.
3.7 Deficit Capital Account Balance.
A. A Capital Account may indicate a negative balance resulting from
distributions and allocations made in accordance with this Agreement. Except as
otherwise expressly provided in this Agreement, no Limited Partner shall have
any obligation to the Partnership arising solely from the existence of a
negative balance in its or his Capital Account.
B. Upon liquidation of the Partnership, each General Partner with a
deficit balance in its Capital Account, as determined after taking into account
all Capital Account adjustments (other than those made pursuant to the
requirements of this Paragraph 3.7) for the Partnership taxable year during
which the liquidation occurs, shall have an obligation to restore such deficit
balance and to make a contribution to the capital of the Partnership within
ninety (90) days after the date of such liquidation in an amount equal to its
deficit Capital Account balance which amount shall be paid to the creditors of
the Partnership or distributed to the other Partners in accordance with their
positive Capital Account balances.
3.8 Minimum Capital Account Balance. The General Partner shall maintain a
minimum Capital Account balance of not less than one percent (1%) of the total
positive Capital Account balances of all Partners, except if no Limited Partner
Capital Account has a positive balance, then the General Partner need not
maintain a positive Capital Account balance for purposes of this Paragraph 3.8.
3.9 Loans By General Partner. The General Partner may advance money on a
secured or unsecured basis to the Partnership in its sole discretion. All funds
other than Capital Contributions advanced by the General Partner to satisfy
Partnership debts or obligations, if expressly designated as advances, shall be
considered loans by the General Partner to the Partnership. All such loans,
including those made pursuant to Paragraph 4.4, shall be payable on demand after
one hundred eighty (180) calendar days and shall bear interest at the prime rate
of interest published in the Wall Street Journal on the business day preceding
the date of the loan in question plus two percent (2%) per annum (provided that
the annual interest rate shall not be less than nine percent (9%), nor greater
than the maximum rate of interest chargeable in the State of Nevada).
3.10 Loans By Limited Partners. A Limited Partner may advance money on a
secured or unsecured basis to the Partnership only upon the written request of
the General Partner; provided, however, the General Partner shall notify all
Limited Partners in writing of any
12
42
proposed Limited Partner loan and the terms thereof at least thirty (30) days
prior to closing the loan. All Limited Partners shall have the right to
participate in funding such loan to the Partnership on a pro rata basis
according to the respective Partnership Interests of those Limited Partners
committed to funding such loan. A Limited Partner shall notify the General
Partner in writing within twenty (20) days of the General Partner's delivery of
notice of the proposed loan of its or his commitment to participate, which
commitment shall be irrevocable and binding; otherwise, failure to timely
respond in writing will be deemed election not to participate. Unless otherwise
agreed, the terms of any such loans shall be as set forth in Paragraph 3.9.
4. MANAGEMENT OF THE PARTNERSHIP
4.1 Organization and Meetings of the Partnership. Meetings of the
Partnership may be called by the General Partner at any time and shall be called
upon the written request of the Partners owning a Majority Interest. In either
event, the General Partner shall send a notice to all Partners. The notice shall
state the nature of the business to be transacted and shall be accompanied by a
proxy and sufficient information to permit the Limited Partners to make an
informed judgment. No other business shall be considered without the unanimous
consent of all Partners. The meeting will be held not less than thirty (30) or
more than sixty (60) days from the date of the notice from the General Partner
and shall be at a reasonable time as determined by the General Partner. The
Partners may vote upon any matter by written consent or consent signed by the
requisite portion of the Partners. Notwithstanding the above, there shall be at
least one meeting of the Partnership held the second (2nd) month of each
calendar quarter at a time and place determined by the General Partner and
generally convenient to all of the Partners.
4.2 Rights and Duties of the General Partner. Subject to Paragraph 4.3 of
this Agreement, the General Partner shall have full and complete authority and
discretion in the management and control of the affairs of the Partnership;
shall make all decisions affecting Partnership affairs; and perform, when
appropriate in its judgment, any and all acts customary or incident to the
management of the Partnership business. Without limiting the foregoing powers,
it is hereby agreed that the General Partner, on behalf of and at the cost and
expense of the Partnership may, without the necessity of consent or joinder by
the Limited Partners:
A. Take all actions necessary to apply for, secure and maintain all the
necessary approvals for the acquisition, development, construction and operation
of the Resort.
B. Decide upon and oversee the financing, operation and management of
the Resort within the financial parameters imposed by the Budget. In addition,
it shall have the rights and powers required or appropriate to the financing,
operations and management of the business of the Partnership, including:
(1) Employing or retaining such accountants, attorneys,
managers, agents and other management or service personnel as may from time to
time be necessary to carry on the business of the Partnership; and
(2) Commencing, defending and settling litigation.
13
43
C. The General Partner shall be required to devote only such time to
the performance of its duties and obligation hereunder as it shall, in its
discretion, determine to be necessary or advisable.
4.3 Major Decisions. In addition to any decisions for which this Agreement
expressly requires the approval of the Partners owning a Majority Interest, the
following decisions of the Partnership shall require the approval of Partners
who own at least seventy-five percent (75%) of the total Partnership Interests
("Major Decisions"):
A. An election by the Partnership under Section 6231 of the Internal
Revenue Code to have the tax treatment of the Partnership items determined at
the Partnership level under Section 6221, et seq.:
B. The Transfer by a Partner of all or part of its Partnership
Interest, except as provided for in Articles 3 and 7 of this Agreement;
C. The merger or consolidation of the Partnership with any other
entity, except if such merger or consolidation is taking place for the purpose
of doing a sale of equity or debt for a public offering in which case the
Partners owning a Majority Interest shall agree;
D. Any additional financing or refinancing for which any Partner or the
assets of the Partnership is liable, except for financing provided by or
arranged by the General Partner for the construction of the Resort or for the
Start-up Expenses;
E. The sale or disposition of the Resort or any other structures or
businesses operated in conjunction therewith, except if such sale or disposition
is taking place for the purpose of issuing equity or debt for a public offering
in which case the Partners owning a Majority Interest shall agree;
F. The dissolution and termination of the Partnership or any
Liquidation Event;
G. The amount of cash reserves in excess of those amounts required by
any regulatory agency necessary to retain sufficient working capital in the
Partnership;
H. The approval of the operating plan to be prepared by the General
Partner;
I. The approval of the Budget for each fiscal year to be prepared by
the General Partner;
J. The call for Additional Capital Contributions;
K. The selection of any change in the Partnership's principal place of
business;
L. The amendment of this Agreement;
14
44
M. The execution on behalf of the Partnership of any Loan
Documents in favor of the General Partner; and
N. The admission of additional partners or expulsion or
involuntary withdrawal or liquidation of a Partner.
4.4 Start-Up Expenses. From time to time prior to the Commencement
Date, General Partner has agreed, to arrange for or provide to the Partnership
for use by the Partnership and Enterprise a sum not to exceed One Million Five
Hundred Thousand Dollars ($1,500,000) for necessary Start-up Expenses. Advances
under this Paragraph 4.4 shall be made only upon adequate documentation that an
obligation has been incurred and such obligation is currently due and owing and
after review by General Partner. Any amounts provided for Start-up Expenses
under this Paragraph 4.4 shall be deemed advanced pursuant to, payable under,
secured by and accruing interest from the date of advance and at the rate set
forth in a Note and such other Loan Documents as General Partner may require and
shall be due upon receipt by the Partnership of permanent financing for the
Resort.
4.5 Payment of Costs and Expenses. The Partnership shall be responsible
for paying all costs and expenses of forming and continuing the Partnership,
owning, operating and holding the Resort and conducting the business of the
Partnership, including, without limitation, costs of utilities, costs of
furniture, fixtures, equipment and supplies, insurance premiums, property taxes,
advertising expenses, accounting costs, legal expenses, office supplies and
travel expenses. If, subsequent to the effective date of this Agreement, any
such budgeted costs and expenses are paid by a Partner, or any of its
Affiliates, on behalf of the Partnership, then the Partner (or its Affiliates)
shall be entitled to be reimbursed for such payment so long as such cost or
expense is reasonably necessary and is reasonable in amount.
4.6 Compensation. Within thirty (30) days after the end of each
calendar month of Operations, the General Partner shall calculate and report to
the Partnership the Gross Revenues, Operating Expenses and Net Revenues of the
Partnership for the previous month's operations and the year's operations to
date. The General Partner shall distribute to itself three percent (3%) of the
monthly Gross Revenues and six percent (6%) of the monthly Net Revenues within
said thirty (30) day period as compensation for management of the Partnership.
The maximum amount of compensation payable to the General Partner in any
calendar month, however, shall not exceed ten percent (10%) of the monthly Gross
Revenues.
4.7 Liability. The General Partner and the other Partners shall perform
their duties under this Agreement with ordinary care and prudence and in a
manner reasonable under the circumstances. Neither the General Partner nor any
other Partner shall be liable to the Partnership or the other Partners for any
loss or liability caused by any act authorized hereunder, or by the failure to
do any act, unless such loss or liability arises from that Partner's willful
misconduct, gross negligence or fraud as to the Partnership or the other
Partners. Except as provided by the foregoing, in no event shall a Partner or
the General Partner be liable if, in good faith, it determined that the action
authorized hereunder or lack of action giving rise to the loss
15
45
was in the best interests of the Partnership or if the action or lack of action
giving rise to the loss was based on the advice of legal counsel.
4.8 Indemnification. The Partnership hereby indemnifies and holds
harmless the person or entity who is or was a Partner (and its Affiliates)
against any and all losses, costs, expenses (including reasonable attorney's
fees), penalties, taxes (except personal or corporate income taxes on
Partnership distributions), fines, settlements, damages and judgments resulting
from the fact that the Partner was or is threatened to be named as a defendant
or respondent in a Proceeding because such party was or is a Partner in the
Partnership. However, this indemnification shall in no event be applicable to a
Proceeding in which the Partner has been found liable for willful misconduct,
gross negligence or fraud in the performance of the Partner's duty to the
Partnership or the Partners. In addition, this indemnification shall be limited
to the assets of the Partnership and shall not obligate the individual Partners
in their respective assets outside of the Partnership.
4.9 Power of Attorney. By the execution of this Agreement, or a
counterpart hereof, each Limited Partner does irrevocably constitute and appoint
the General Partner and any successor thereto, with full power of substitution,
as such Partner's true and lawful attorney-in-fact and agent with full power and
authority to act in his name, place and xxxxx in the execution, acknowledgment,
swearing to, delivering, filing and recording of all certificates and other
documents which the General Partner deems necessary or reasonably appropriate:
A. To qualify or continue the Partnership as a limited
partnership in any jurisdiction in which the Partnership conducts business;
B. To reflect a change in the identity of any Partner, or an
amendment of this Agreement made pursuant to Paragraph 11.3 of this Agreement;
C. To effect the conveyance of any Partnership Interest
pursuant to Article 7 of this Agreement or as otherwise permitted or required
herein and to reflect the substitution of a Partner in connection therewith; or
D. To reflect the dissolution and termination of the
Partnership after same has been dissolved and terminated in accordance herewith.
The power of attorney granted herein shall be deemed to be coupled with
an interest, shall be irrevocable, shall survive the death, incompetency or
legal disability of any Limited Partner, and shall be binding on any assignee or
vendee of a Limited Partners' Partnership Interest hereunder, or any portion
thereof, including, without limitation, the distributive rights relating
thereto.
4.10 Transactions with Affiliates. Any Partner or any Affiliate of any
Partner shall have the right to contract or otherwise deal with the Partnership
for the sale of goods or performance of services if:
16
46
A. Compensation paid or promised for such goods or services is
reasonable and is paid only for goods or services actually furnished to the
Partnership;
B. The goods or services to be furnished shall be reasonable
for, and necessary to, the Partnership; and
C. The terms for the furnishing of such goods or services
shall be at least as favorable to the Partnership as would be obtainable in any
arm's length transaction.
D. The parties to this Agreement hereby agree that the terms
and conditions of the Casino Lease between the Partnership and Seven Circle
Resorts of Nevada, Inc., a Nevada corporation, attached hereto as Exhibit "B"
and made a part hereof are in compliance with this Paragraph 4.10.
5. ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocation of Net Income and Net Loss. Net income and net loss for
each fiscal year shall be determined by the General Partner and shall be audited
by the independent accountants of the Partnership in accordance with the method
of accounting and the books and records of the Partnership. Except as otherwise
provided in this Agreement (including Exhibit "C" hereto), items of income,
gain, loss and deduction shall be allocated among the Partners in accordance
with their Partnership Interests.
5.2 Allocation of Capital Gain. Any capital gain realized by the
Partnership with respect to a Major Capital Event or a Liquidating Event shall
be allocated as follows: (a) first, to those Partners having deficit Capital
Account balances (computed after taking into account allocations of net income
and net loss (excluding such gain) for the fiscal year in which such event
occurred and allocations of distributable Cash Flow (excluding cash attributable
to such event)), ratably in proportion to, and to the extent of, such deficit
balances; (b) second, to and among those Limited Partners whose Capital Account
balances are less than the aggregate balance of such Partners' Capital
Contributions, pro rata according to the differences between respective Capital
Accounts and contributions balances, until such differences are eliminated; and
(c) finally, among the Partners so as to produce, as nearly as possible, Capital
Accounts for the Partners that will result in the distributions being made, when
distributed in accordance with positive Capital Account balances, in the manner,
proportion and order of priority set forth in Paragraph 5.3.
5.3 Distribution of Cash Flow. Unless otherwise agreed by the Partners
who own at least seventy-five percent (75%) of the total Partnership Interests,
the Partnership shall distribute Cash Flow, if available, quarterly to the
Partners within thirty (30) days following the end or each quarter.
Notwithstanding the frequency or amounts of distributions, Cash Flow shall be
distributed as follows:
A. First, to repay loans of a Partner or an Affiliate to the
Partnership, other than any long-term secured construction loan.
17
47
B. Thereafter, to the Partners in accordance with their
Partnership Interests.
5.4 Distributions Upon Liquidation of the Partnership. Upon dissolution
of the Partnership, the assets and properties of the Partnership shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom, to the extent sufficient therefor, shall be applied
and distributed in the following order of priority:
(1) To the payment of debts and liabilities of the
Partnership (including amounts owed to Partners or former Partners), with those
debts and liabilities which have been borrowed from, or which are guaranteed by,
a Partner or an Affiliate being paid first;
(2) To set up any reserves which the General Partner
deems reasonably necessary for contingent or unforeseen liabilities or
obligations of the Partnership arising out of or in connection with the business
of the Partnership, with such reserves to be distributed in the manner provided
in (4) below at the expiration of such period as the Partners who own at least
seventy-five percent (75%) of the total Partnership Interests deem advisable;
(3) To the expenses of the liquidation; and
(4) After all Capital Account adjustments for the
Partnership's taxable year in which the liquidation occurs (including, without
limitation, adjustments required under Treasury Regulations Section
1.704-1(b)(2)(iv)(c), relating to distributions in kind), to the Partners in
accordance with each Partner's positive Capital Account balance properly
adjusted under Article 5 to result, to the extent possible, in distributions
being made to the Partners in accordance with their Partnership Interests.
5.5 Liquidation of Partner's Interest. If a Partner's interest in the
Partnership is to be liquidated, liquidating distributions shall be made in
accordance with the positive Capital Account balance of such Partner, as
determined after taking into account all Capital Account adjustments for the
Partnership's taxable year during which such liquidation occurs, by the end of
the taxable year, or if later, within one hundred and eighty (180) days after
the date of such liquidation. Where a Partner's interest is to be liquidated by
a series of distributions, such Partner's interest shall not be considered
liquidated until the final distribution has been made. For purposes of this
Paragraph 5.5, a liquidation of a Partner's interest in the Partnership means
the termination of the Partner's entire interest in the Partnership by means of
a distribution or series of distributions to the Partner by the Partnership, the
determination of which shall be made by the Partners who own at least
seventy-five percent (75%) of the total Partnership Interests.
5.6 Distributions.
A. Prior to a distribution by the Partnership to a Partner,
the Capital Accounts of the Partners shall be adjusted in the manner described
in Exhibit "C."
B. If any assets of the Partnership are distributed to the
Partners in kind, the Partners shall own and hold the same as tenants in common.
18
48
5.7 Additional Tax Allocation Provisions.
A. Notwithstanding anything to the contrary contained herein
or to the extent required by law, items of income, gain, loss and deduction with
respect to property, other than cash, contributed to the Partnership by a
Partner or with respect to an adjustment to the Partners' Capital Accounts to
reflect a revaluation of the Resort, shall be allocated among the Partners so as
to take into account the variation between the basis of the property to the
Partnership and its fair market value at the time of contribution or, in the
case of a revaluation of the Resort, the variation between the basis of the
Resort to the Partnership at its fair market value of the date of revaluation,
as provided in Section 704(c) of the Internal Revenue Code and Regulations
thereunder and Treasury Regulations Section 1.704-1(b)(2)(iv)(g) and as more
fully described in Exhibit "C" attached hereto.
B. As between a Partner who has transferred all or part of its
interest in the Partnership and its transferee, all items of income, gain, loss
and deduction, for any year shall be apportioned on the basis of the number of
days in each such year that each was the holder of such interest (making any
adjustments necessary to comply with the provisions of Section 706(d)(2) of the
Internal Revenue Code), without regard to the results of the Partnership's
operations during the period before and after the date of such Transfer.
However, if both the transferor and transferee consent thereto, and if the
transferor and transferee compensate the Partnership for any additional
accounting costs necessitated by such interim closing of the Partner's books a
special closing of the books shall be had as of the effective date of such
Transfer and the apportionment of items of income, gain, loss and deduction,
shall be made on the basis of actual operating results. In the case of a
Paragraph 3.5 dilution pursuant to Article 3 of this Agreement, a special
closing of the books shall be had as of the effective date of the dilution, and
the apportionment of items of income, gain, loss and deduction shall be made on
the basis of actual operating results before and after such date.
Notwithstanding the above, gain or loss resulting from a Major Capital Event or
Liquidating Event shall be allocated only to those persons who are Partners as
of the date on which such transaction is consummated.
C. If a Transfer of an interest in the Partnership results in
a termination of the Partnership for Federal income tax purposes under Section
708(b)(1)(B) of the Internal Revenue Code (or any successor provision thereto),
a Partner's portion of any constructive liquidating distribution deemed to occur
under Treasury Regulations Section 1.708-1(b)(1)(iv) (or any similar or
successor provision) shall be determined in accordance with the Capital Accounts
of the Partners after taking into account all Capital Account adjustments for
the Partnership's taxable year ending on the date of such deemed termination.
D. Tax Return Adjustments. In the event of an adjustment to
the tax return of the Partnership (including adjustments that result from an
amended return, request for administrative adjustment, or an audit by the
Internal Revenue Service or other taxing authority), the allocations under
Articles 3 and 5 shall be redetermined to take into account such adjustment as
if it had been made at the time of the original allocations. The Partners agree
to report on their respective tax returns such Partnership items on a basis
consistent with the adjustment at the Partnership level.
19
49
6. FISCAL MATTERS
6.1 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
6.2 Books and Records. The General Partner shall keep, or cause to be
kept, at the expense of the Partnership, full and accurate books and records of
all transactions of the Partnership in accordance with generally accepted
accounting principles, consistently applied. All of such books and records
shall, at all times, be maintained at the principal place of business of the
Partnership and the Partners shall have the right to inspect and copy or audit
any of them, at their own expense, during normal business hours provided that
such inspection, copying or auditing may not unreasonably interfere with the
Operations of the Partnership.
6.3 Reports and Statements.
A. Within ninety (90) days after the end of each fiscal year
of the Partnership, the General Partner shall, at the expense of the
Partnership, cause to be delivered to each Partner such financial statements and
such other information as the General Partner believes to be necessary for the
Partners to be advised of the financial status and results of operations of the
Partnership.
B. The General Partner shall report to the Partners any
significant development materially adversely affecting the Partnership, its
business, property or assets, as soon as practicable following the occurrence of
such development.
C. By the fifteenth (15th) day of the second (2nd) calendar
month in each quarter of the fiscal year, the General Partner shall provide to
each Partner an operating statement for the Resort. The operating statements
shall be prepared by the General Partner and shall set forth all revenues and
expenses of the Partnership for the prior quarter of the fiscal year, a
comparison of such revenues and expenses with those provided for in the Budget,
and an explanation of each item which, year to date, varies fifteen percent
(15%) or more from the Budget.
6.4 Audit. Any of the Partners with at least a twenty-four percent
(24%) Partnership Interest shall be entitled to require an audit of the books
and records of the Partnership to be conducted at any time (but not more
frequently than once each calendar year) with any resulting audited financial
statements to be distributed to all the Partners when available. Any such audit
so required shall be conducted at the expense of the Partnership.
6.5 Tax Returns. The General Partner shall cause to be prepared for
delivery to the Partners on or before April 15 of each year or any extensions
granted therefore, at the expense of the Partnership, all Federal and any
required State and local income tax returns for the Partnership for the
preceding fiscal year. In the event of an audit of the Partnership's income tax
returns, the General Partner shall retain, at the expense of the Partnership,
accountants and other professionals to participate in such audit in order to
contest assertions by the auditing agent or agency that may be materially
adverse to the Partnership or the Partners.
20
50
6.6 Bank Accounts. The General Partner, in the name of the Partnership,
shall open and maintain a Partnership bank account or accounts in a bank or
savings and loan association, the deposits of which are insured by an agency of
the United States Government, in which shall be deposited all funds of the
Partnership. There shall be no commingling of the property and assets of the
Partnership with the property and assets of any other party.
6.7 Tax Elections. Subject to Paragraph 4.3 of this Agreement, the
General Partner shall be entitled to determine all Federal income tax elections
available to the Partnership.
7. TRANSFERS OF PARTNERSHIP INTERESTS
7.1 Restrictions on Transfers. No Partnership Interest shall be
transferred without the written consent of the Partners owning at least
seventy-five percent (75%) of the total Partnership Interests, except as
expressly permitted under the terms and provisions of this Article 7. Any
attempted Transfer in contravention of this Article shall be void and shall not
bind or be recognized by the Partnership. In addition, none of the Partners nor
any equity holder thereof, shall be permitted to Transfer any of its or their
interest in the Partnership or transfer any of its or their interest in such
Partner without the prior written approval of the Partners owning at least
seventy-five percent (75%) of the total Partnership Interests owned by the
non-transferring Partners which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, any Partner shall have the right within ninety
(90) days of the date of the execution of this Agreement to Transfer their
entire Partnership Interest to a newly formed entity, provided that such
Transferring Partner shall, legally and beneficially, own one hundred percent
(100%) of the equity of the new entity. In such event, the new entity will be
the substitute Limited Partner.
7.2 Prohibited Transfers.
A. No Transfers of any Partnership Interest in whole or in
part will be permitted if such Transfer, when considered with all other
transfers of Partnership Interests within the previous twelve (12) months, would
cause the termination of the Partnership for federal income tax purposes or
cause the Partnership to be taxed other than as a partnership. Counsel for the
Partnership may give its opinion to the General Partner as to whether or not
such Transfer would cause the termination of the Partnership for federal income
tax purposes and the opinion shall be conclusive and binding upon all Partners.
B. No Partnership Interest or any portion thereof shall be
transferred to a minor or an incompetent person.
C. No Transfer of any Partnership Interest of any Partner
shall be permitted without the prior written consent of the General Partner if
such Transfer requires the consent of a third party under any agreement to which
the Partnership is a party.
D. No Partnership Interest or portion thereof shall be
transferred in violation of, or without first complying with, to the
satisfaction of the Partnership's counsel, all applicable state and federal
securities laws.
21
51
7.3 Right of First Refusal.
A. Unless such Transfer is prohibited by Paragraphs 7.1 or 7.2
of this Agreement, should any Partner receive from a single third party which is
not an Affiliate ("Offeror") a bona fide offer ("Offer") in writing signed by
the Offeror for the purchase of all or a part of such Partner's Partnership
Interest ("Offered Interest"), then the Partner who received such Offer
("Selling Partner") shall, if it wishes to accept the Offer, promptly forward a
true and correct copy thereof to the other Partners ("Non-Selling Partner(s)")
within ten (10) days of the date of the receipt of the Offer. The Offer shall be
sent by certified or registered mail, return receipt requested. The Non-Selling
Partner(s) shall have the exclusive right and option for thirty (30) days
following the receipt of said Offer to purchase all, but not less than all, of
the Offered Interest on the terms and conditions set forth in the Offer. The
Non-Selling Partner(s) shall exercise this option to purchase the Offered
Interest and thereby accept the Offer of the Selling Partner by actual delivery
of a written notice of election to the Selling Partner, within the aforesaid
thirty (30) day period, by sending such written notice of election by certified
or registered mail, return receipt requested, properly stamped and addressed to
the address of the Selling Partner or by hand delivery or said notice with
proper receipt therefor. Each Non-Selling Partner shall be deemed to have
elected to not purchase the Offered Interest if it fails to timely provide
written acceptance.
B. Each Non-Selling Partner who elects to so purchase the
Offered Interest pursuant to the Offer (an "Electing Partner") shall have the
right to purchase that proportion of the Offered Interest which the Partnership
Interest owned by such Electing Partner bears to the total Partnership Interests
owned by all Electing Partners. An Electing Partner shall be obligated to close
no later than ninety (90) days after the date of the Offer. The closing of said
purchase shall take place at the office of the Partnership.
C. If the Non-Selling Partner(s) do not elect to purchase all
of the Offered Interest, the Selling Partner may sell the Offered Interest;
provided, however, that the sale (i) is not prohibited by Paragraph 7.2 of this
Agreement; (ii) shall not be made at a price lower than the price offered to the
Non-Selling Partner(s); (iii) is not made to any person other than the original
Offeror, (iv) is on the same terms and conditions as those specified in the
Offer; and (v) is consummated within ninety (90) days after the lapse of all
options arising in connection with the Offer.
D. If the Offeror, the terms or conditions of the proposed
sale are changed or such Offered Interest has not been sold prior to the lapse
of the aforesaid ninety (90) day period, the Selling Partner must make a new
Offer, pursuant to the procedures in this Paragraph 7.3, to the Non-Selling
Partner(s) prior to selling such Offered Interest.
7.4 Exception for Transfers to Other Partners or Affiliates. Unless a
Transfer is prohibited by Paragraph 7.2 of this Agreement, then notwithstanding
the provisions of Paragraph 7.3 of this Agreement (dealing with Right of First
Refusal), a Partner may transfer all or any part of its Partnership Interest to
an Affiliate of the same Partner or to another Partner, subject to
22
52
the condition that such transferee shall be bound by all the terms and
conditions of this Agreement.
7.5 Involuntary Transfers.
A. If at any time there is an involuntary Transfer of a
Partnership Interest (which shall be defined as any Transfer other than by a
sale for consideration to a bona fide third party or a Transfer pursuant to
Paragraph 7.4 of this Agreement), then the remaining Partners shall have the
right to acquire the Partnership Interest to be transferred based upon the
procedures set forth in Paragraph 7.3 of this Agreement, except that the
purchase price shall be as determined in Subparagraph B of this Paragraph 7.5.
B. The fair market value of the Partnership's assets shall be
determined as follows:
(1) First, by agreement between the disqualified Partner
and the remaining Partners;
(2) If no agreement as to the value can be reached
within the ten (10) business days ("Valuation Period"), the disqualified Partner
and remaining Partners shall each appoint, by written notice to the other, an
appraiser (which appraiser must be an investment banking firm, a nationally
recognized appraisal firm or a nationally recognized accounting firm). If either
party fails to appoint such appraiser within the ten (10) days following the
Valuation Period, then the appraiser who is appointed shall select a second
appraiser who is also an investment banking, appraisal or accounting firm. The
two (2) selected appraisers shall proceed to determine the fair market value of
the Partnership (including a going business concern value); and
(3) If the two (2) appraisers are unable to agree upon a
fair market value, then they shall jointly appoint a third (3rd) appraiser
meeting the required qualifications and the fair market value shall be that
amount upon which any two (2) of the three (3) appraisers agree or if no such
agreement is reached, that fair market value which represents the average of
the two (2) fair market values determined by the appraisers which are
numerically closest to one another, or, if all fair market values are
numerically equidistant, the average of all three (3) such fair market values.
The disqualified Partner and the remaining Partners shall have the
responsibility for paying the appraiser who was, or who should have been
appointed by such Partner, and each shall pay one-half (1/2) of the costs and
expenses of the third appraiser if one is appointed.
All Partners agree to cooperate fully with the appraisers making the
determination of the fair market value of the Partnership's Assets and further
agree to furnish the appraisers such documentation and information covering the
assets of the Partnership being appraised as may be requested by said
appraisers.
7.6 Assumption by Transferee. Any transferee to whom all or any part of
a Partnership Interest may be transferred pursuant to this Agreement shall take
such Partnership
23
53
Interest subject to all of the terms and conditions of this Agreement and shall
not be considered to have title thereto until said transferee shall have
accepted and assumed the terms and conditions of this Agreement by a written
agreement to that effect delivered to the other Partners, at which time such
transferee shall be admitted as a substitute Partner and shall succeed to all
rights of its transferor except as such rights may be otherwise limited by other
provisions of this Agreement. Anything contained in this Paragraph 7.6 to the
contrary notwithstanding, the assumption by the transferee of the Partnership
Interest being transferred shall not relieve the transferor of such Partnership
Interest of its obligations hereunder unless such transferor is released by
written consent of a Majority in Interest of the non-transferring Partners or
the transfer was made pursuant to Paragraph 7.3 of this Agreement.
7.7 Cost of Transfers. The transferor and, if it fails or refuses to do
so, then the transferee, of any Partnership Interest shall reimburse the
Partnership for all costs incurred by the Partnership resulting from any
Transfer.
7.8 Changes in the General Partner. Except as provided herein, the
General Partner shall not withdraw from the Partnership without the prior
consent of the Limited Partners owning at least fifty percent (50%) of the
Partnership Interests held by the Limited Partners. If, upon withdrawal of the
General Partner, there is no General Partner then remaining, no substitute
General Partner may be admitted to the Partnership without the consent of the
Limited Partners owning at least seventy-five percent (75%) of the Partnership
Interests held by the Limited Partners.
8. OWNERSHIP OF A PARTNER
8.1 Restrictions on Stock Ownership. Each corporate Partner agrees to
adopt by an amendment to their respective Articles of Incorporation, by
amendment to their bylaws and by shareholder agreement, and each non corporate
Partner agrees to adopt by an amendment to their respective organizational
documents, as may be required to create a valid and binding obligation on their
shareholders or partners as the case may be that their shares or interests in
the respective companies shall be subject to the requirements set forth in
Article 7 and Article 8 of this Agreement as if such shares or interests were
direct interests in the Partnership, with the exception that such shareholders
or partners shall be free to transfer their shares or interests to currently
existing at the date of this Agreement shareholders or partners in the
respective companies without complying with Paragraph 7.3 of this Agreement
(dealing with the Right of First Refusal).
8.2 Permitted Transfers to Specified Parties. Unless a Transfer is
prohibited by Paragraphs 7.2 A or C of this Agreement, then notwithstanding the
provisions of Paragraphs 7.3 and 8.1 of this Agreement, a shareholder of a
Partner may transfer all or any part of its shares in the Partner to an
Affiliate of such shareholder or Partner, another shareholder in that same
Partner, his spouse, his parents, his children, his grandchildren, his brothers,
his sisters or to a trust for the benefit of any of the aforementioned parties.
A permitted Transfer may be by will, by intestate succession or by inter vivos
transfer. A Transfer pursuant to this Paragraph 8.2
24
54
shall not relieve the original transferor from any of its obligations to the
Partnership under this Agreement.
9. DISSOLUTION
9.1 Dissolution.
A. It is the intention of the Partners that the business of
the Partnership be continued by the Partners, or those remaining, pursuant to
the provisions of this Agreement, notwithstanding the occurrence of any event
which would result in a statutory dissolution of the Partnership pursuant to the
laws of the State of Nevada, and no Partner shall be released or relieved of any
duty or obligation hereunder by reason thereof; provided, however, that the
business of the Partnership shall be terminated, its affairs wound-up and its
property and assets distributed in liquidation on the earlier to occur of:
(1) The expiration of the term of the Partnership;
(2) A determination by all of the Partners that the
business of the Partnership should be terminated;
(3) The liquidating bankruptcy of the Partnership;
(4) Subject to the provisions of Paragraph B below, the
death, incompetency, bankruptcy, insolvency, withdrawal or removal from the
Partnership of any Partner; or
(5) The date upon which a Liquidating Event occurs and
all payments are received.
For purposes of this Agreement, bankruptcy shall be deemed to have occurred
when the party in question files a petition under any section or chapter of the
Federal Bankruptcy Code, as amended, or an order for relief under Title II of
the United States Code Annotated is entered against it, and insolvency shall be
deemed to have occurred when the party in question admits in writing that its
assets are insufficient to pay its liabilities as they mature.
B. Upon the occurrence of any event set forth in Subparagraph
(4) of Paragraph A above, the business of the Partnership shall be continued
pursuant to the provisions of this Agreement if, within a period of ninety (90)
days from the date of such occurrence, all of the Partners other than the
subject bankrupt Partner shall elect in writing that it be so continued. The
former Partner shall retain and be entitled to its share of profits, losses,
distributions and capital associated with the Partner's Partnership Interest.
9.2 Wind-Up of Affairs. As expeditiously as possible following the
occurrence of an event giving rise to a termination of the business of the
Partnership, the General Partner shall wind-up the affairs of the Partnership,
sell its property and assets for cash at the highest price reasonably obtainable
and distribute the proceeds in accordance with Paragraph 5.3 of this
25
55
Agreement in liquidation of the Partnership. In no event shall there be a
distribution of the property and assets of the Partnership in kind, unless the
Partners owning at least seventy-five percent (75%) of the total Partnership
Interests approve such distribution.
10. APPROVAL OF NEVADA GAMING AUTHORITIES
Notwithstanding anything contained in this Agreement to the contrary,
in no event shall the Partnership or any Partner manage, conduct or derive
revenue from any gaming activity at the Resort unless and until the Partnership
and/or such Partner shall receive all requisite licenses and approvals of the
Nevada Gaming Authorities. Furthermore, notwithstanding anything contained in
this Agreement to the contrary, a Partner shall be expelled from the Partnership
in the event that (i) such expulsion is required by any of the Nevada Gaming
Authorities; (ii) if, after the initial receipt by a Partner of any requisite
license, permit or approval from the Nevada Gaming Authorities, the ownership of
the Partnership Interest by such Partner will, as evidenced by written
communications from any of the Nevada Gaming Authorities, in the reasonable
opinion of General Partner, materially preclude or unduly delay the issuance of,
or result in the imposition of unduly burdensome terms and conditions on, or
revocation of, any liquor, gaming, or other license, permit or approval
necessary or appropriate to the proposed, contemplated or actual Operations;
provided, however, that this clause (ii) shall not be applicable if such Partner
shall, within a reasonable period of time after receipt of written notice from
the General Partner specifying in detail the nature of the issues involved
hereunder, remedy the situation to the satisfaction of the applicable Nevada
Gaming Authorities prior to any further adverse action by the Nevada Gaming
Authorities, such remedy may include, without limitation, the Transfer of the
Partnership Interest of such Partner; (iii) in the event the General Partner
determines in its sole and absolute discretion that the Partnership and each
Partner should file an application for a permit, license or approval from the
Nevada Gaming Authorities, the failure to promptly file and diligently prosecute
any such license, permit or approval on the part of any Partner; or (iv) the
failure to obtain any requisite permit or approval based on suitability from the
Nevada Gaming Authorities within eighteen (18) months of the date of filing the
application for such approval, unless an extension of time is granted by a
majority vote of the Partners owning seventy-five percent (75%) or more of the
total Partnership Interests. In the event that a Partner is expelled pursuant to
this Article 10, then such expulsion shall be treated as an involuntary Transfer
of a Partnership Interest in accordance with Paragraph 7.5 of this Agreement.
11. MISCELLANEOUS
11.1 Investment Representation. Each Partner represents and warrants
that it acquired its Partnership Interest hereunder for its own account with no
view to the resale or any other distribution thereof in violation of applicable
Federal or State laws. No Partner shall have any right to require registration
of a Partnership Interest under the Securities Act of 1933, as amended, or any
Federal or State law governing the sale of securities, and each Partner
acknowledges that, in view of the nature of the Partnership and its business,
such registration is neither contemplated nor likely.
26
56
11.2 Dispute Resolution. Any dispute or controversy concerning one or
more Partners and/or the Partnership and which arises out of or relates to this
Agreement shall be settled and determined by binding arbitration in Las Vegas,
Nevada in accordance with the commercial rules of the American Arbitration
Association then in effect, and judgment upon the award rendered by the
arbitrator(s) may be entered in, and specifically enforced by, any court of
competent jurisdiction. The expenses of the arbitration shall be borne equally
by the parties to the arbitration, provided that each party shall pay for and
bear the cost of its own experts, evidence and legal counsel, unless ruled
otherwise by the arbitrator(s). Whenever any action is required to be taken
under this Agreement within a specified period of time and the taking of such
action is materially affected by a matter submitted to arbitration, such period
shall automatically be extended by the number of days plus ten (10) that are
taken for the determination of that matter by the arbitrator(s).
11.3 Amendments. This Agreement may not be amended, altered or modified
except by instrument in writing which is signed by each Partner and to the
extent applicable the shareholders of the Limited Partners.
11.4 Other Activities. Any Partner may engage or possess an interest in
other business ventures of every nature and description, independently or with
others, including, without limitation, the acquisition, construction, ownership,
leasing, operation and management of other projects similar to the Resort;
provided, however, that in the event that the Partnership receives all
requisite licenses and approvals of the Nevada Gaming Authorities to own and
operate a casino gaming facility at the Resort, no such project located within
(i) Xxxxxxxxx and (ii) a radius of three (3) miles from the Resort may contain
any gaming activity.
11.5 Partition. No Partner shall be entitled to a partition of the
Resort or any other property or assets of the Partnership, notwithstanding any
provision of law to the contrary.
11.6 Notices. Any notice required or permitted to be delivered to any
Partner under the provisions of this Agreement shall be deemed delivered,
whether actually received or not, when deposited in the United States Postal
Service depository, postage prepaid, registered or certified, return receipt
requested, and addressed to the Partner at the address specified on the
signature pages hereof, or such other address as shall be specified by written
notice delivered to the General Partner.
11.7 Provisions Severable. Every provision of this Agreement is
intended to be severable and, if any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remainder of this Agreement.
11.8 Counterparts. This Agreement, and any amendments hereto, may be
executed in counterparts, each of which shall be deemed an original, and such
counterparts shall constitute but one and the same instrument.
11.9 Headings. The headings of the various sections of this Agreement
are intended solely for convenience of reference, and shall not be deemed or
construed to explain, modify or place any construction upon the provisions
hereof.
27
57
11.10 Successors and Assigns. This Agreement and any amendments hereto
shall be binding upon and, to the extent expressly permitted by the provisions
hereof, shall inure to the benefit of the Partners and their respective heirs,
legal representatives, successors and assigns.
11.11 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada and all obligations of one
Partner to another are performable in Nevada.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 15th day of August, 1996. In addition, the individual shareholders of the
Limited Partners have executed this Agreement agreeing to be bound by the terms
and conditions of the specific paragraphs herein by their terms applicable to
such shareholders.
General Partner:
THE RESORT AT XXXXXXXXX, INC., a Nevada
corporation
By: /s/ Xxxx X. Xxxxxx
____________________________ Address:
Name: Xxxx X. Xxxxxx 0000 Xxxxxxx Xx. Xxxxx 000
_______________________ ___________________________
Title: Senior Vice-President Xxxxxx, Xxxx 00000
______________________ ___________________________
Limited Partner:
SEVEN CIRCLE GAMING CORPORATION, a
Delaware corporation
By: /s/ Xxxx X. Xxxxxx
____________________________ Address:
Name: Xxxx X. Xxxxxx 0000 Xxxxxxx Xx. Xxxxx 000
_______________________ ___________________________
Title: Senior Vice-President Xxxxxx, Xxxx 00000
______________________ ___________________________
28
58
EXHIBIT "A"
Limited Partners
SEVEN CIRCLE GAMING CORPORATION, A Delaware corporation
29
59
EXHIBIT "B"
Casino Lease
30
60
CASINO LEASE
THIS CASINO LEASE (this "Lease") is made and entered into as of
199_, by and between Seven Circle Resorts of Nevada, Inc., a Nevada corporation
("Tenant") and The Resort at Xxxxxxxxx, Limited Partnership, a Nevada limited
partnership ("Landlord").
PRELIMINARY STATEMENTS
A. Landlord is the owner of the premises known as The Resort at
Xxxxxxxxx as more particularly described on Exhibit "A" attached hereto and made
a part hereof (the "Resort").
B. Tenant desires to lease from Landlord a portion of the Resort
designated for use as a casino and more particularly described on Exhibit "B"
attached hereto and made a part hereof together with all items of personal
property now or hereinafter installed thereon and owned or leased by Landlord,
including, without limitation (i) all furniture and furnishings; (ii) material
handling, cleaning and engineering equipment; and (iii) associated gaming
equipment, but in all cases excluding any gaming device (as such term is defined
in Nevada Revised Statutes Section 463.0155, as amended) (the "Premises") and
Landlord desires to lease the Premises to Tenant, upon the terms and conditions
contained in this Lease.
1. LEASED PREMISES
Landlord, in consideration of the rent to be paid and the covenants to
be performed by Tenant as set forth herein, does hereby demise and lease the
Premises unto Tenant, and Tenant hereby rents and hires the Premises from
Landlord, subject to the covenants, restrictions and easements of record, the
terms and provisions of certain leases, reciprocal easements and/or operating
agreements now entered into by Landlord with respect to the Resort, the lien of
property taxes and assessments not delinquent, deeds of trust of record and all
other matters of record.
2. TERM
The term of this Lease (the "Term") shall commence on the first day
that the Premises are allowed to open to the public by virtue of receipt of all
of the required permits and licenses by Tenant (the "Commencement Date"). This
Lease shall terminate upon the earlier of (i) the third (3rd) anniversary of the
Commencement Date or (ii) the date upon which Landlord acquires all requisite
licenses and approvals of all state and local governmental authorities (the
"Nevada Gaming Authorities") required to operate the Resort as a gaming casino.
The parties to this Agreement will memorialize the Commencement Date by a
writing executed by each of them.
-1-
61
3. RENT
3.1. Rent. Tenant shall pay to Landlord a rent of Two Million Four
Hundred Thousand Dollars ($2,400,000) per annum (the "Rent") which shall be paid
in advance in equal consecutive monthly installments of Two Hundred Thousand
Dollars ($200,000) commencing on the Commencement Date and continuing thereafter
on the first day of each calendar month of the Term; provided, however, that if
the Commencement Date shall be a day other than the first day of a calendar
month or if this Lease shall expire on a day other than the last day of a
calendar month, the Rent for any such month shall be prorated on the basis of a
thirty (30) day month. Rent shall be payable without notice or demand and
without any deduction, setoff or abatement, in lawful money of the United States
to Landlord at the address stated herein for notices as set forth in Article 15
below or to such other address or such other persons as Landlord may designate
to Tenant in writing.
3.2. Taxes. Tenant shall pay and discharge when due all taxes, rates,
duties, levies and assessments whatsoever, whether municipal, state, local,
sewer district, fire district or otherwise, levied, imposed, assessed or charged
against the Premises or any part thereof or upon Landlord in respect thereof, or
from time to time levied, imposed, assessed or charged in the future in lieu or
in substitution thereof, or for which Landlord is liable with respect to the
Premises, including those levied, imposed, assessed or charged for education and
local improvements. Tenant shall not be responsible for Landlord's income taxes
to the extent that any such income taxes are not levied in lieu of or in
substitution for, any of the foregoing. Landlord shall be entitled to estimate
the amount payable by Tenant under this Section 3.2. The amounts so estimated
shall be payable by Tenant in equal monthly installments in advance over the
period covered by the estimate and each such installment shall be paid by Tenant
together with the monthly installments of Rent. From time to time, Landlord may
reasonably re-estimate the amount payable under this Section 3.2 and the monthly
installments paid by Tenant hereunder shall be adjusted accordingly. If the Term
shall commence on a day other than at the end of a taxation year, then the
amounts payable by the Tenant under this Section 3.2 shall be adjusted on a per
diem basis having regard to such taxation year. Within sixty (60) days after
receipt of any final assessment of taxes due during the Term, the parties shall
determine if the estimated payments made by Tenant with respect to such taxes
resulted in overpayment or underpayment of the amount due. Any amounts underpaid
shall be immediately paid by Tenant to Landlord, and any amounts overpaid shall
be immediately reimbursed by Landlord to Tenant.
3.3. Business Taxes. Tenant shall pay and discharge when due (i) all
charges, taxes, rates, including local improvement rates, duties, assessments
and license fees that may be levied, rated, charged or assessed against the
fixtures, equipment, installations and improvements to the Premises and any
property on the Premises owned or brought thereon by the Tenant (and any of its
subtenants) and (ii) every tax and license fee (including, without limitation,
gaming taxes and fees) in respect of the business carried on by the Tenant on
the Premises, or in respect of the use or occupancy of the Premises by the
Tenant (and any of its subtenants), whether such taxes, rates, duties, charges,
assessments and license fees are charged by a municipal, parliamentary, school
or other body of competent jurisdiction during the Term. Tenant will indemnify
and save harmless the Landlord against and from all payments and loss, costs,
charges and expenses occasioned by or arising from any and all such charges,
taxes, rates, duties, assessments and
-2-
62
license fees and any and all taxes which may in the future by levied in lieu
thereof. Tenant shall not appeal any assessment of its interest in the Premises
or any assessment of business taxes without the express written consent of
Landlord, such consent not to be unreasonably withheld or delayed. If Landlord
shall consent to such an appeal and if Landlord shall so request, Tenant shall
at the same time that it is prosecuting its appeal, appeal as agent of Landlord
the assessment of Landlord's interest in the subject matter of such appeal and
Tenant shall bear the costs of such appeal, and shall indemnify and save
Landlord harmless from all such costs.
3.4. Utilities. Tenant shall give notice to the utility companies to
ensure that all accounts for the Premises are opened in the name of Tenant.
Tenant shall pay and discharge all rates and charges whatsoever for electricity,
water, including water pollution and sewer charges, oil, gas, light, heat, air
conditioning, power, telephone and other public or private utilities and
services supplied to or used on or in connection with the Premises, or in
connection with the business or occupation of Tenant thereon (and anyone
claiming by, through or under Tenant). Tenant shall indemnify Landlord and the
Resort from and against the payment of all losses, costs, charges and expenses
in respect thereof.
3.5. Common Area Charges. Tenant shall pay its pro rata share of all
common area charges for the maintenance and upkeep of the common areas, such as
parking lots, security, landscaping and lighting. Such common area charges shall
include, but shall not be limited to, water and sewer charges, utilities and
utility system installation charges, maintenance and repairs, insurance
premiums, taxes and assessments, licenses, permits, management fees, and
reasonable depreciation of equipment used in the operation of the common areas;
provided, however, costs of equipment properly chargeable to capital account and
depreciation of the original cost of constructing the common areas shall be
excluded. Landlord shall be entitled to estimate the amount payable by Tenant
pursuant to this Section 3.5 so long as said amount is based on the ratio of the
square footage of the Premises to the total leasable square footage of the
Resort (which shall be deemed to be the total square footage of the Resort,
including space occupied by Landlord, that, under commercially reasonable terms,
conditions and circumstances, could be leased to a tenant). The amounts so
estimated shall be payable by Tenant in equal monthly installments in advance
over the period covered by the estimate and each such installment shall be paid
by Tenant together with the monthly installments of Rent. From time to time,
Landlord may reasonably re-estimate the amount payable under this Section 3.5
and the monthly installments paid by Tenant hereunder shall be adjusted
accordingly. Tenant shall be directly responsible for any expenses relating to
the use of the common areas by Tenant, its employees, agents and invitees.
Notwithstanding anything contained in this Lease to the contrary, in no event
shall Tenant be required to pay an amount of common area charges per square foot
which is greater than any other occupant of the Resort. Within sixty (60) days
after the end of each accounting year, the parties shall determine if the
estimated common area charges paid by Tenant resulted in overpayment or
underpayment of the amount due. Any amounts underpaid shall be immediately paid
by Tenant to Landlord, and any amounts overpaid shall be immediately reimbursed
by Landlord to Tenant.
3.6. Net Lease. The payments of Rent hereunder shall be absolutely net
to Landlord and Tenant shall pay, and Landlord shall not be liable for, any
costs, expenses, payments or outgoings whatsoever related to the Premises and
Tenant shall indemnify and hold Landlord
-3-
63
harmless for any such costs, expenses, payments or outgoings, except for
Landlord's financing costs related to the Premises and as otherwise provided in
this Lease. Landlord shall not be responsible to do, perform or arrange anything
for or in connection with the Premises, except as otherwise expressly provided
in this Lease.
4. USE AND STANDARD OF OPERATION
4.1. Use and Standard of Operation.
(a) Except to the extent excused as hereinafter provided,
Tenant shall use the Premises solely for the
operation of a gaming casino (the "Business") in
accordance with all applicable rules and regulations
of the Nevada Gaming Authorities utilizing the name
"The Resort at Xxxxxxxxx" on a non-exclusive basis or
such other name as may be mutually agreed by Landlord
and Tenant and shall operate the Business in a
first-class high quality manner (the "Operating
Standard"). Except as otherwise specifically set
forth in this Lease, Tenant shall have absolute
control and discretion in the operation of the
Business including, without limitation, the right to
determine the terms of admittance and labor policies
(including wage rates, and the hiring and discharging
of employees.
(b) Notwithstanding anything in this Section 4.1 or
elsewhere contained in this Lease, Tenant shall be
excused from its obligation to operate the Business
in conformity with the Operating Standard to the
extent and whenever Tenant shall be prevented from
compliance with the Operating Standard by events
beyond Tenant's reasonable control as set forth in
Section 16.7 below.
4.2. No Assignment or Subletting. Tenant shall not, without Landlord's
prior written consent, assign or in any manner transfer this Lease or any estate
or interest therein, or lease or sublet the Premises or any part or parts
thereof or any right or privilege appurtenant thereto, or allow anyone to
conduct business at, upon or from the Premises (whether as concessionaire,
franchisee, licensee, permittee, subtenant, department operator or otherwise),
either voluntarily or involuntarily or by operation of law or otherwise. Without
limiting the foregoing, the restrictions of this Section 4.2 shall not apply to
any merger, consolidation or other reorganization of Tenant or of any corporate
entity which directly or indirectly controls Tenant, and any such merger,
consolidation or other reorganization shall not be deemed to be an assignment of
this Lease within the meaning of this Section 4.2.
4.3. Negation of Partnership or Joint Venture. Nothing herein contained
shall constitute or be construed to be or to create a partnership or joint
venture between Landlord and Tenant.
5. OPERATING COVENANTS
Tenant shall be obligated to continuously utilize the full Premises and
operate the Business during the Term. From and after the Commencement Date and
at all times hereafter
-4-
64
during the Term, Tenant shall cause to be on hand sufficient inventories of
operating supplies and sufficient funds in Tenant's bank accounts to assure the
timely payment of all current liabilities of Tenant and of other operating
expenses and the uninterrupted operation of the Business in accordance with the
Operating Standard and the performance by Tenant of its other obligations
hereunder. On the date hereof Tenant shall have procured, and during the Term
shall continue to maintain, all licenses required by the Nevada Gaming
Authorities and under applicable law for the operation of the Business.
6. REPAIRS AND ALTERATIONS
6.1. Repairs and Maintenance.
(a) Subject to Section 6.1(b), Tenant shall, at all times
during the Term, maintain the Premises in such good
order and condition and make all non-structural
repairs thereto as shall be necessary in accordance
with the Operating Standard, so as to deliver the
Premises to Landlord at the end of the Term in as
good condition as the present, subject however, to
reasonable wear and tear.
(b) Landlord, at its cost, shall perform all necessary
repairs of the following:
(i) the structural parts of the building and
other improvements in which the Premises are
located, which structural parts include the
foundations, bearing and exterior walls
(excluding glass and doors), subflooring and
roof;
(ii) the unexposed electrical, plumbing and
sewage systems, including, without
limitation, those portions of the systems
lying outside the Premises;
(iii) window frames, gutters, drains and
downspouts on the building and other
improvements that are a part of the
Premises; and
(iv) heating, ventilating and air-conditioning
system servicing the Premises, other than
ordinary maintenance.
6.2. Compliance with Legal Requirements. Except as elsewhere herein
limited or excused, Tenant shall, throughout the Term, comply with all
applicable requirements (the "Legal Requirements") under all laws, ordinances,
rules and regulations and orders of any governmental authorities having
jurisdiction over the Premises including, without limitation, all requirements
of the Nevada Gaming Authorities as well as all applicable gaming related laws
and regulations. Tenant may, but only after written approval by Landlord,
contest, by appropriate legal proceedings conducted in good faith, in the name
of Tenant or Landlord, or both, the validity or application of any of the Legal
Requirements. If Landlord shall approve any such contest, Landlord shall execute
and deliver to Tenant all appropriate documents which may be necessary or proper
to permit Tenant to prosecute such contest. Landlord may, by notice to Tenant,
direct
-5-
65
Tenant to contest, or Landlord may contest directly, any of the Legal
Requirements which Tenant may otherwise desire not to contest.
6.3. Alterations and Additions. Tenant shall not, without
Landlord's prior written consent, make any alterations, improvements or
additions in or about the Premises except for nonstructural work which does not
exceed One Hundred Thousand Dollars ($100,00O) in cost. As a condition to giving
any such consent, Landlord may require Tenant to remove any such alterations,
improvements, or additions at the expiration of the Term, and to restore the
Premises to their prior condition, reasonable wear and tear excepted. If
Landlord so elects, Tenant at its sole cost shall restore the Premises to their
prior condition, reasonable wear and tear excepted, before the last day of the
Term of the Lease.
Before commencing any work relating to the alterations, additions or
improvements affecting the Premises, Tenant shall notify Landlord in writing of
the expected date of the commencement of such work so that Landlord can post and
record the appropriate notices of non-responsibility to protect Landlord from
any mechanic's liens, materialman liens or any other liens. In any event, Tenant
shall pay, when due, all claims for labor and materials furnished to or for
Tenant at or for use in the Premises. Tenant shall not permit any mechanic's
liens or materialmen's liens to be levied against the Premises for any labor or
material furnished to Tenant or claims to have been furnished to Tenant or
Tenant's agents or contractor in connection with work of any character performed
or claimed to have been performed on the Premises by or at the direction of
Tenant; Tenant shall have the right to contest the validity of any such lien if,
immediately on demand by Landlord, Tenant procures and records a lien release
bond meeting the requirements of Landlord and shall provide for the payment of
any sum that the claimant may recover on the claim (together with the costs of
suit, if it is recovered in the action).
Unless Landlord requires their removal as set forth above, all
alterations, improvements or additions which are made on the Premises by Tenant
shall become the property of Landlord and remain upon and be surrendered with
the Premises at the expiration of the Term.
7. INSURANCE
7.1. Hazard Insurance. Tenant shall, at its expense, maintain
during the Term the following hazard insurance:
(a) all risk property insurance, including theft and, if
applicable, broad coverages, boiler or pressure
vessel insurance and machinery insurance, in amounts
reasonably designated by Tenant with approval from
Landlord;
(b) rental income insurance against loss of Tenant's
income from the Premises due to the risks covered by
the insurance referred to in paragraph (a) above, in
an amount not less than all amounts payable by Tenant
under Article 3 of this Lease for a period of six
months from the date of any casualty insured against;
and
(c) insurance against other hazards, excluding earthquake
and flood, in such amounts as Tenant in its
reasonable judgment shall, with the approval of
-6-
66
Landlord, determine is necessary or desirable for the
protection of the Premises, due regard being given to
the height and type of improvements, their method of
construction, use and occupancy.
7.2. Terms of Hazard Policies. All policies of insurance provided
for in Section 7.1 above shall be subject to the following requirements, to the
extent permitted by all deeds of trust and other security instruments
encumbering the Resort:
(a) any loss under such policies shall be adjusted with
the insurer by Landlord and Tenant;
(b) the policies for such insurance shall provide that
the proceeds thereof shall be paid to Landlord to the
extent of Landlord's interest therein;
(c) each policy shall contain, if obtainable, a statement
that the insurance shall not be invalidated should
any insured waive in writing any or all right of
recovery against any party for loss occurring to the
property described in the insurance policy; and
(d) all policies shall name as insureds Landlord, Tenant
and the holders of deeds of trust encumbering the
Premises, as their interests may appear.
7.3. Liability Insurance. Tenant shall, at its expense, maintain
during the Term the following liability insurance:
(a) comprehensive general liability insurance against
all claims for bodily injury, personal injury or
property damage occurring on or about the Premises,
or in or about the adjoining streets, property or
passageways, or in connection with any operations
incidental to the Premises, including claims arising
from the theft of, or damage to, the property of
guests or other tenants of Landlord and/or Tenant.
The policy or policies for such insurance shall name
as additional insureds Landlord and the beneficiaries
of deeds of trust encumbering the Resort (to the
extent that the respective deeds of trust so
provide). Such insurance shall have a combined single
limit of not less than Five Million Dollars
($5,000,000). At any time during the Term, Landlord
may, however, increase the limits of any insurance
provided for in this paragraph (a) by reasonable
amounts to be agreed upon between Landlord and Tenant
on the ground that such limits do not reasonably
protect the interests of Landlord and Tenant; and
(b) statutory worker's compensation insurance and
employer's liability insurance in the amounts
required by law covering all persons working in or
upon the Premises for whom such coverage is required
by Tenant.
7.4. General Terms of Insurance Policies. All insurance carried by
Tenant shall be subject to the following:
-7-
67
(a) all such insurance shall be effected under valid and
enforceable policies issued by insurers of recognized
responsibility which are licensed to do business in
Nevada and have been approved in writing by Landlord.
Upon the execution of this Lease, and thereafter not
less than thirty (30) days prior to the expiration
dates of any expiring policies previously issued,
duplicates of the policies or certificates of the
insurers reasonably satisfactory to Landlord shall be
delivered by Tenant to Landlord, except that on a
temporary basis binders in lieu of policies may be
provided;
(b) all policies for such insurance shall contain a
provision or endorsement that such policies are
primary to any insurance obtained directly by
Landlord;
(c) each policy shall contain, if obtainable, a provision
that no act or omission of Tenant shall affect or
limit the obligation of the insurance company to pay
the amount of any loss sustained;
(d) each policy shall contain an agreement by the insurer
that such policy shall not be canceled or amended
without at least thirty (30) days prior written
notice to Landlord;
(e) any such insurance may be effected by a policy or
policies of blanket insurance, provided, however,
that such policy or policies shall furnish protection
equivalent to that provided by separate policies in
the amounts herein required, and any such policy or
policies shall comply with the other provisions of
this Lease in all other respects, except that no such
policy shall be submitted to Landlord less than
thirty (30) days prior to the expiration of any
existing policy. In any such case, it shall not be
necessary to deliver the original of any such blanket
policy to Landlord, but Landlord shall be furnished
with a certified copy or duplicate of such policy
reasonably acceptable to Landlord; and
(f) in the event of any conflict between the requirements
of this Lease and any of the deeds of trust
encumbering the Property, the deeds of trust shall
prevail.
7.5. Insurable Condition. Tenant shall use reasonable efforts so as
not to violate any of the conditions or provisions of any such policy provided
for in this Article or void or make voidable any such policies.
8. WAIVER AND INDEMNIFICATION BY TENANT
As a material part of the consideration for this Lease, Tenant hereby
waives all claims against Landlord for damages to goods, wares, merchandise,
furniture, fixtures and equipment in, upon or about the Premises or the Resort,
and for injuries to or death of any person in, on or about the Premises, from
any cause arising at any time during the Term. In addition, Tenant shall
indemnify and save Landlord harmless, and, at Tenant's expense, defend Landlord,
from
-8-
68
Restoration within sixty (60) days after the receipt of such
insurance proceeds, or shall fail to complete the same
diligently, Tenant may, but shall not be obligated to,
undertake or complete the Restoration for the account of
Landlord and shall be entitled to be repaid therefor
(including, at Tenant's option, a deduction of such amount
from Rent owed by Tenant to Landlord). In such case, if the
Casualty is an Insured Casualty, the proceeds of insurance
shall be made available to Tenant for this purpose, provided
that Landlord shall have the right to ensure that such
proceeds of insurance shall be applied to the Restoration.
(b) If the cost of Restoring the Damaged Property shall exceed One
Hundred Fifty Thousand Dollars ($150,000), Landlord shall have
an election, exercisable by notice to Tenant ("Notice of
Termination") given within forty-five (45) days after the
occurrence of the Casualty, to terminate this Lease effective
upon the last day of the month (the "Termination Date") in
which month the Notice of Termination shall be given. If
Landlord shall have timely given a Notice of Termination, it
shall have no duty to restore the Damaged Property and, in the
case of an Insured Casualty, all insurance proceeds which
shall be payable to Tenant, shall belong and be paid to
Landlord; in such event this Lease shall terminate on the
Termination Date, with the parties being then relieved from
all obligations hereunder except as to matters theretofore
accrued. In the event that the Landlord shall have failed to
give a Notice of Termination within the aforementioned
forty-five (45) day period then, upon the expiration thereof,
Landlord shall be obligated to restore the Damaged Property
and the provisions of the foregoing paragraph (a) of this
Section 9.2 shall apply to such Restoration.
10. CONDEMNATION
If the Premises or any portion thereof are taken by the power of
eminent domain, or sold by Landlord under the threat of exercise of said power
(all of which is herein referred to as "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever occurs first. If more than twenty percent (20%)
of the floor area of any building on the Land, or more than twenty percent (20%)
of the Land is taken by condemnation, either Landlord or Tenant may terminate
this Lease as of the date the condemning authority takes possession, by notice
in writing of such election within twenty (20) days after Landlord shall have
notified Tenant of such taking or, in the absence of such notice, within twenty
(20) days after the condemning authority shall have taken possession.
If this Lease is not terminated by either Landlord or Tenant as
provided hereinabove, then it shall remain in full force and effect as to the
portion of the Premises remaining, provided that Rent shall be reduced in
proportion to the floor area of the Premises taken as bears to the total floor
area of the Premises.
-10-
69
All awards for the taking of any part of the Premises or any payment
made under the threat of the exercise of the power of eminent domain shall be
the property of the Landlord.
Each party hereby waives the provisions of law allowing either party to
petition a court to terminate this Lease in the event of a partial taking of the
Premises.
Rent shall be abated or reduced during the period from the date of the
damage or taking until the completion of restoration by Landlord, but all other
obligations of Tenant under this Lease shall remain in full force and effect.
The abatement or reduction of the Rent shall be based on the extent to which the
restoration interferes with Tenant's use of the Premises.
11. DEFAULT
11.1. Events of Default. The occurrence of any one or more of the
following shall constitute a default and breach of this Lease by Tenant:
(a) failure to pay Rent within five (5) days after the
date when due;
(b) any abandonment and vacation of the Premises (failure
to occupy and open the Premises for business to the
general public in accordance with the use provisions
set forth in Section 4.1 above for two (2)
consecutive days shall be deemed an abandonment and
vacation except during the periods described in
Articles 9 or 10 of this Lease);
(c) failure to perform any other provision of this Lease
if the failure to perform is not cured within ten
(10) days after written notice thereof has been given
to Tenant by Landlord; provided, however that if the
default cannot reasonably be cured within said ten
(10) day period, Tenant shall not be in default under
this Lease if Tenant commences to cure the default
within the ten (10) day period and diligently
prosecutes the same to completion;
(d) the revocation or suspension of any license or
approval granted by the Nevada Gaming Authorities; or
(e) the making by Tenant of any general assignment, or
general arrangement for the benefit or creditors;
the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating
to bankruptcy unless the same is dismissed within
sixty (60) days of such filing; the appointment of a
trustee or receiver to take possession of
substantially all of Tenant's assets located at the
Premises or of Tenant's interest in the Lease, where
possession is not restored to Tenant within thirty
(30) days of such appointment; or the attachment,
execution or other judicial seizure of substantially
all of Tenant's assets located at the Premises or of
Tenant's interest in the Lease, where such seizure is
not discharged within thirty (30) days.
-11-
70
11.2. Landlord's Remedies. If Tenant defaults under this Lease,
Landlord shall have the following remedies which are not exclusive but are
cumulative and in addition to any remedies now or hereafter allowed by law:
(a) With respect to any failure to timely pay Rent,
Landlord shall, in addition to all other remedies,
receive from Tenant each of (i) a general and
administrative fee of ten percent (10%) of the sum
not timely paid, it being understood and agreed that
such payment does not represent a penalty, but
rather both parties' reasonable agreement of the
amount which Landlord should be compensated for its
general and administrative expense and cost in the
event of any late payments hereunder and (ii)
one-thirtieth of one percent (1/30 of 1%) of the
amount due but not timely paid hereunder for each day
that such payment is late.
(b) Landlord can continue this Lease in full force and
effect, and this Lease will continue in effect so
long as Landlord does not terminate Tenant's right to
possession and the Landlord shall have the right to
collect Rent when due. During the period that Tenant
is in default, Landlord can enter the Premises and
relet them, or any part of them, to third parties for
Tenant's account. Tenant shall be liable immediately
to Landlord for all costs Landlord incurs in
reletting the Premises including, without limitation,
brokers' commissions, expenses of remodeling the
Premises required by the reletting and like costs.
Reletting can be for a period shorter or longer than
the remaining Term of this Lease. Tenant shall pay to
Landlord the Rent due under the Lease on the dates
the Rent is due, less the rent Landlord received from
any reletting. No act by Landlord allowed by this
Section 11.2 shall terminate this Lease unless
Landlord notifies Tenant that Landlord elects to
terminate this Lease. After Tenant's default and for
so long as Landlord has not terminated Tenant's right
to possession of the Premises, if Tenant obtains
Landlord's consent as provided in Section 4.2, Tenant
shall have the right to assign or sublet its interest
in the Lease, but Tenant shall not be released from
liability. Landlord's consent to the proposed
assignment or subletting shall be in Landlord's sole
and absolute discretion.
(c) If Landlord elects to relet the Premises as provided
in this Section 11.2, any rent that Landlord receives
from such reletting shall be applied first to the
payment of any indebtedness from Tenant to Landlord
other than the Rent due from Tenant to Landlord;
secondly, to all costs, including maintenance,
incurred by Landlord in such reletting; and third, to
any Rent due and unpaid under this Lease. After
deducting the payments referred to in this Section
11.2, any sum remaining from the rent Landlord
receives from such reletting shall be held by
Landlord and applied in payment of future rent as
rent becomes due under this Lease. In no event shall
Tenant be entitled to any excess rent received by
Landlord. If, on the date Rent is due under this
Lease, and the rent received from reletting is less
than the
-12-
71
Rent due on that date, Tenant shall pay to Landlord,
in addition to the remaining Rent due, all costs,
including maintenance, that Landlord shall have
incurred in reletting that remain after applying the
rent received from the reletting as provided in this
Section 11.2.
(d) Landlord can, at its option, terminate Tenant's right
to possession of the Premises at any time. No act by
Landlord other than giving written notice to Tenant
shall terminate this Lease. Acts of maintenance,
efforts to relet the Premises or the appointment of a
receiver (subject to all applicable gaming laws) on
Landlord's initiative to protect Landlord's interest
in this Lease shall not constitute a termination of
Tenant's right to possession. In the event of such
termination, Landlord has the right to recover from
Tenant:
(i) the worth at the time of the award, of the
unpaid Rent that had been earned at the time
of the termination of this Lease;
(ii) the worth at the time of the award, of the
amount by which the unpaid Rent that would
have been earned after the date of the
termination of this Lease until the time of
the award exceeds the Rent Mitigation (as
defined below);
(iii) the worth at the time of the award, of the
amount by which the unpaid Rent for the
balance of the term after the time of the
award exceeds the Rent Mitigation; and
(iv) any other amount, including court costs,
necessary to compensate Landlord for all
detriment proximately caused by Tenant's
default.
"The worth at the time of the award" as used in (i)
and (ii) of this Section 11.2 is to be computed by
allowing interest at the maximum rate an individual
is permitted by law to charge. "The worth at the time
of the award" as referred to in (iii) of this
paragraph is to be computed by discounting the amount
at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award, plus one percent
(1%).
"Rent Mitigation" means the amount of the loss of
Rent that Tenant proves could have reasonably been
avoided by reletting of the Premises.
(e) Landlord shall have the additional right (subject to
all applicable gaming laws) to have a receiver
appointed to collect Rent and conduct Tenant's
business. Neither the filing of a petition for the
appointment of a receiver nor the appointment itself
shall constitute an election by Landlord to terminate
this Lease.
(f) Landlord, at any time after Tenant commits a
default, may cure the default at Tenant's cost and
expense. If Landlord at any time by reason of
-13-
72
Tenant's default, pays any sum or does any act that
requires the payment of any sum, the sum paid by
Landlord shall be due immediately from Tenant to
Landlord at the time the sum is paid, and if paid by
a later date shall bear interest at the maximum rate
an individual is permitted by law to charge from the
date the sum is paid by Landlord until Landlord is
reimbursed by Tenant. The sum, together with interest
thereon, shall be considered additional Rent.
12. ENTRY BY LANDLORD
12.1. Entry for Inspection and Repairs, Etc. Landlord and its
authorized representatives shall have the right to enter upon the Premises at
all reasonable times for the purpose of inspecting or examining the same or,
after notice to Tenant, for the purpose of making any repairs to the
improvements and doing any other work necessary by reason of any failure by
Tenant to make repairs or do other work required of it under this Lease. Nothing
contained in this Lease or otherwise shall create or imply any duty upon the
part of Landlord to make any such inspection or repairs or to do any work in
respect of the improvements or any sidewalks or curbs adjoining the Land, or any
liability or other obligation to Tenant or to third persons for not making or
doing the same carefully or properly, or for not completing the same.
12.2. Entry for Showing. Landlord and its authorized representatives
shall have the right to enter upon the Premises (with the exception of the
casino cage and other areas prohibited for access to the general public by the
Nevada Gaming Authorities), at all reasonable times during usual business
hours for the purpose of showing the same to prospective purchasers or lenders,
holders of deeds of trust of the Premises or any part thereof and, at any time
prior to the expiration of the Term.
12.3. Entry Not an Eviction. No entry by Landlord pursuant to the
provisions of this Article 12 shall constitute or be deemed to be an eviction of
Tenant.
13. ESTOPPEL STATEMENT; ATTORNMENT; SUBORDINATION; SUCCESSORS AND ASSIGNS
13.1. Estoppel. Tenant shall, without charge, at any time and from time
to time, within ten (10) days after receipt by Tenant of written request
therefor from Landlord or from any beneficiary under any deed of trust, deliver,
in recordable form, a duly executed and acknowledged certificate or statement on
a form proscribed by Landlord stating that this Lease is unmodified and in full
force and effect, or in full and effect as modified, and reciting the
modification. The certificate shall further state the amount of Rent, the dates
upon which Rent has been paid in advance and the amount of any security deposit.
The certificate shall also acknowledge that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord, or it shall specify
such defaults, if any, which are claimed, and shall state such further matters
(and be from any or all of the guarantors as requested by Landlord) as Landlord
may reasonably request. Failure to deliver such a certificate within the ten
(10) day period shall be conclusive upon Tenant and to the benefit of Landlord
that this Lease is in full force and effect,
-14-
73
that there are no uncured defaults hereunder and that this Lease has not been
modified except as may be represented by Landlord.
13.2. Attornment. In the event any proceedings are brought for the
foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure
of, or in the event of exercise of the power of sale under, any deed of trust
made by Landlord covering the Premises, or in the event Landlord sells, conveys
or otherwise transfers its interest in the property of which the Premises are a
part, or any portion thereof, this Lease shall remain in full force and effect
and Tenant hereby attorns to, and covenants and agrees to execute an instrument
in writing reasonably satisfactory to the new owner where by Tenant attorns to
such successor in interest and recognizes such successor as the landlord under
this Lease. Payment by or performance of the Lease by any person, firm or
corporation claiming an interest in this Lease or the Premises by, through or
under Tenant without Landlord's consent in writing shall not constitute an
attornment or create any interest in this Lease or the Premises.
13.3. Subordination. Tenant agrees that this Lease shall, at the
request of Landlord, be subordinate to any underlying lease or to any deeds of
trust that are now, or may hereafter be, placed upon the Premises and to any and
all advances to be made thereunder, and to the interest thereon, and all
renewals, replacements and extensions thereof, provided that the lessor under
any such underlying lease or the beneficiaries named in said deeds of trust
shall agree to recognize the interest of Tenant under this Lease in the event of
foreclosure, if Tenant is not then in default. Tenant also agrees that any
underlying lessor or beneficiary may elect to have this lease constitute a prior
lien to its underlying deed of trust, and in the event of such election and upon
notification of such underlying lessor or beneficiary to Tenant to that effect,
this Lease shall be deemed prior in lien to such underlying lease or deed of
trust, whether this Lease is dated prior to or subsequent to the date of such
underlying lease or deed of trust. Tenant agrees that upon the request of
Landlord, or any such beneficiary, Tenant shall execute whatever instruments may
be required to carry out the intent of this Section 13.3.
13.4. Assignment by Landlord. Landlord shall have the right to sell,
hypothecate and convey the Premises or any part thereof or to assign, in whole
or in part, its interest in this Lease, or both, without the consent of Tenant;
provided, however, that any such Assignee shall expressly assume in writing the
obligations of Landlord hereunder from and after the date of such assignment.
13.5. Binding on Successors. The terms, provisions, covenants,
undertakings, agreements, obligations and conditions of this Lease shall be
binding upon and shall inure to the benefit of the successors in interest and
the assigns of the parties hereto with the same effect as if mentioned in each
instance where the party hereto is named or referred to.
14. QUIET ENJOYMENT
Landlord covenants and agrees that Tenant, upon paying the Rent and all
other charges provided for in this Lease and upon observing and keeping all of
the covenants, conditions and provisions of this Lease on its part to be
observed and kept, shall, subject to the terms and provisions of this Lease,
lawfully and quietly hold, occupy and enjoy the Premises during the
-15-
74
Term of this Lease, without hindrance or molestation by or from anyone claiming
by, through or under Landlord.
15. NOTICES
All notices, demands and requests required under this Lease shall be in
writing and shall be deemed to have been given if served personally, or if sent
by United States registered or certified mail, postage prepaid, return receipt
requested, or by overnight courier, addressed to the addresses set forth below
or such other addresses as either party may designate by notice to the other and
in each case, with a copy to the appropriate parties as set forth below:
To Tenant: Seven Circle Resorts of Nevada, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: President
with a copy to: Xxxxxx & Silver, Ltd.
0000 Xxxxxx Xxxxxx Xxxx, 00xx Xx.
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxx X. Xxxx
To Landlord: The Resort at Xxxxxxxxx, Limited Partnership
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: General Partner
with a copy to: Xxxxx & Xxxxxxxxx
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx XX
16. MISCELLANEOUS
16.1. Gaming Authorities. If at any time (i) Tenant or any person
associated in any way with Tenant is denied a license, found unsuitable or is
denied or is otherwise unable to obtain any "Approval" (as defined herein) with
respect to the Premises or the Business by the Nevada Gaming Authorities or any
other governmental agencies outside the State of Nevada with requisite authority
for the regulation of gaming (each of the foregoing is referred to herein as a
"Gaming Authority"), is required by any Gaming Authority to apply for an
Approval and does not apply within any required time limit, as the same may be
extended by such Gaming Authority, withdraws any application for Approval other
than upon a determination by the applicable Gaming Authority that such Approval
is not required, and if the result of the foregoing has or would have an adverse
effect on Landlord or any "Landlord's Affiliate" (as defined herein) or does or
would materially delay obtaining any Approval; or (ii) any Gaming Authority
commences or threatens to commence any suit or proceeding against Landlord or
any Landlord's Affiliate or to terminate or deny any Approval of Landlord or any
Landlord's Affiliate as a result of Tenant or any person associated with Tenant
(all of the foregoing events described in (i) and
-16-
75
(ii) above are collectively referred to as a "Denial"), then Landlord may
terminate this Lease by written notice to Tenant; provided, however, that if
Landlord exercises its right to terminate this Lease pursuant to this Section
solely as the result of an association of Tenant or any person associated with
Tenant which is the subject of a Denial, this Lease shall not terminate if
Tenant ends such association within thirty (30) days of such notice of
termination or within such longer period of time, if any, as the Gaming
Authority gives for terminating such association. Tenant and all such persons
associated with Tenant shall promptly, and in all events within any time limit
established by law, regulation or by such Gaming Authority, furnish each Gaming
Authority with any information requested by such Gaming Authority and shall
otherwise fully cooperate with all Gaming Authorities. A person shall be deemed
associated with Tenant if that person directly or indirectly owns any equity
interest in Tenant, any equity interest in such person is directly or indirectly
owned by Tenant, any equity interest in such person is directly or indirectly
owned by a person directly or indirectly having any equity interest in Tenant
(all of the foregoing are hereinafter referred to as "Tenant Affiliates"), such
person is employed by Tenant or a Tenant Affiliate, is an officer, director or
agent of Tenant or a Tenant Affiliate, has any contractual relationship with
Tenant or a Tenant Affiliate, furnishes services or property to Tenant or a
Tenant Affiliate or has the power to exercise a significant influence over
Tenant or Tenant Affiliate, Tenant represents to Landlord that neither Tenant
nor, to the best of Tenant's knowledge, any person associated with Tenant, is
unwilling to file all necessary applications to obtain whatever Approvals may be
required of such persons in connection with this Lease. To the best of Tenant's
knowledge, neither Tenant nor any person associated with Tenant has ever engaged
in any conduct or practices which any of the foregoing persons should reasonably
believe would cause such person or entity to be denied any Approval. The term
"Landlord's Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with Landlord or any
officer, director, trustee or general partner of any of such persons or of
Landlord. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such person, whether through the ownership of voting securities
or by agreement or otherwise. "Approval" means any license, finding of
suitability or any other approval or permit by or from the Gaming Authorities.
16.2. No Recordation. Tenant shall not record this Lease without the
prior written consent of Landlord.
16.3. Construction. In all cases the language in all parts of this
Lease shall be construed simply according to its fair meaning and not strictly
for or against Landlord and Tenant.
16.4. Attorney Fees and Expenses. In the event either party shall file
an action or proceeding against the other to enforce any provision or right
hereunder, the prevailing party in such action or proceeding shall be paid by
the other party thereto all reasonable costs and expenses incurred by such
prevailing party in connection with such action or proceeding, expressly
including, but not limited to, reasonable attorney fees. Such costs and
expenses, including attorney fees, shall be included in any judgment or decree
rendered in such action or proceeding.
-17-
76
16.5. Further Assurances. The parties hereby agree to execute such
other documents and perform such other acts as may be necessary or desirable to
carry out the purposes of this Lease.
16.6. Governing Law. The laws of the State of Nevada shall govern the
validity, construction, performance and effect of this Lease and any action
arising under this Lease may be brought in the courts of the State of Nevada.
16.7. Force Majeure. In the event that either party hereto shall be
delayed or prevented from the performance of its obligations pursuant to this
Lease, by reason of strikes, lock outs, labor troubles, inability to procure
materials, failure of power, or reasons of a similar nature not the fault of the
party delayed in performing such obligations under the terms of this Lease, then
performance of such acts shall be excused for the period of the delay and the
period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. Nothing contained in this Section 16.7
shall excuse Tenant from the prompt payment of Rent and the other obligations of
Tenant pursuant to Article 3 of this Lease and from the continuous operation of
the Business as set forth in Article 5 of this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as
of the day and year first hereinabove set forth.
LANDLORD: Seven Circle Resorts of Nevada, Inc., a
Nevada corporation
By:____________________________________
Its:_______________________________
TENANT: The Resort at Xxxxxxxxx Limited
Partnership, a Nevada limited partnership
By:____________________________________
Its:_______________________________
-18-
77
EXHIBIT C
TO AGREEMENT OF LIMITED PARTNERSHIP OF
THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP
For purposes of interpreting and implementing Articles 3 and 5 of the
Agreement of Limited Partnership of THE RESORT AT XXXXXXXXX, LIMITED PARTNERSHIP
(the "Agreement"), and except as otherwise required under Section 704(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations promulgated thereunder, the following rules shall apply and shall be
treated as part of the terms of the Agreement:
PART A SPECIAL ALLOCATION PROVISIONS.
(1) For purposes of determining the amount of gain or loss to be
allocated pursuant to Articles 3 and 5 of the Agreement, any
basis adjustments permitted pursuant to Section 743 of the Code
shall be disregarded.
(2) Except as otherwise provided in paragraph 5.7B of the Agreement,
Partnership income, gain, loss, deductions, and credits shall be
considered to have been earned and incurred ratably over the
period of the fiscal year of the Partnership and shall be
allocated to the Partners in accordance with the portion of the
year during which the Partners have held their respective
interests.
(3) Notwithstanding any other provision of the Agreement, to the
extent required by law, income, gain, loss, and deduction
attributable to property contributed to the Partnership by a
Partner shall be shared among the Partners so as to take into
account any variation between the basis of the property and the
fair market value of the property at the time of contribution in
accordance with the requirements of Section 704(c) of the Code
and the applicable Treasury Regulations promulgated thereunder
as more fully described in Part B hereof.
(4) Notwithstanding any other provision of the Agreement, in the
event the Partnership is entitled to a deduction for interest
imputed under any provision of the Code on any loan or advance
from a Partner (whether such interest is currently deducted,
capitalized, or amortized), such deduction shall be allocated
solely to such Partner.
(5) Notwithstanding any provision of the Agreement to the contrary,
to the extent any payments in the nature of fees made to a
Partner are finally determined by the Internal Revenue Service
to be distributions to a Partner for Federal income tax
purposes, there will be a gross income allocation to such
Partner in the amount of such distribution.
78
(6)(a) Notwithstanding any provision of the Agreement to the contrary
and subject to the exceptions set forth in Section 1.704-2(f)
(2) - (5) of the Treasury Regulations, if there is a net
decrease in Partnership Minimum Gain during any fiscal year of
the Partnership, each Partner shall be specially allocated items
of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain determined in
accordance with Section 1.704-2(g)(2) of the Treasury
Regulations. Allocations pursuant to the previous sentence shall
be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Section
1.704-2(f) of the Treasury Regulations. This Paragraph A(6)(a)
is intended to comply with the minimum gain chargeback
requirement in such Section of the Treasury Regulations and
shall be interpreted consistently therewith. To the extent
permitted by such Section of the Treasury Regulations and for
purposes of this Paragraph A(6)(a) only, each Partner's Adjusted
Capital Account Balance shall be determined prior to any other
allocations pursuant to Articles 3 and 5 of the Agreement with
respect to such fiscal year and without regard to any net
decrease in Partner Minimum Gain during such fiscal year.
(b) Notwithstanding any provision of the Agreement to the contrary,
except Paragraph A(6)(a) of this Exhibit, and subject to the
exceptions set forth in Section 1.704-2(i)(4) of the Treasury
Regulations, if there is a net decrease in Partner Nonrecourse
Debt Minimum Gain during any Partnership fiscal year, each
Partner who has a share of the Partner Nonrecourse Debt Minimum
Gain, determined in accordance with Section 1.704-2(i)(5) of the
Treasury Regulations, shall be specially allocated items of
Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of
the net decrease in Partner Nonrecourse Debt Minimum Gain,
determined in accordance with Section 1.704-2(i)(5) of the
Treasury Regulations. Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The
items to be so allocated shall be determined in accordance with
Section 1.704-2(i)(4) of the Treasury Regulations. This
Paragraph A(6)(b) is intended to comply with the minimum gain
chargeback requirement in such Section of the Treasury
Regulations and shall be interpreted consistently therewith.
Solely for purposes of this Paragraph A(6)(b), each Partner's
Adjusted Capital Account Balance shall be determined prior to
any other allocations pursuant to Articles 3 and 5 of the
Agreement with respect to such fiscal year, other than
allocations pursuant to A(6)(a) hereof.
Exhibit C: page 2
79
(7) Notwithstanding any provision of the Agreement to the contrary,
if any Partner does not have an unconditional obligation to
restore a deficit in such Partner's Capital Account in
accordance with the requirements of Treasury Regulations Section
1.704- 1(b)(2)(ii)(b)(3), then, in the event such Partner
unexpectedly receives any adjustments, allocations, or
distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1
(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specially allocated to such Partner in an amount and manner
sufficient to eliminate the deficits in such Partner's Adjusted
Capital Account Balance created by such adjustments,
allocations, or distributions as quickly as possible. This
Paragraph A(7) is intended to comply with the Qualified Income
Offset provisions of the aforementioned Treasury Regulations.
(8) No loss shall be allocated to any Partner to the extent that
such allocation would result in a deficit in its Adjusted
Capital Account Balance while any other Partner continues to
have a positive Adjusted Capital Account Balance; in such event
losses shall first be allocated to any Partners with positive
Adjusted Capital Account Balances, and in proportion to such
balances, to the extent necessary to reduce their positive
Adjusted Capital Account Balances to zero. Any excess shall be
allocated to the General Partner.
(9) Any special allocations of items pursuant to this Part A shall
be taken into account in computing subsequent allocations so
that the net amount of any items so allocated and the remaining
profits, losses, and all other items allocated to each Partner
pursuant to Articles 3 and 5 of the Agreement shall, to the
extent possible, be equal to the net amount that would have been
allocated to each such Partner pursuant to the provisions of
Articles 3 and 5 of the Agreement if such special allocations
had not occurred.
(10) Notwithstanding any provision of the Agreement to the contrary,
Nonrecourse Deductions for any fiscal year or other period shall
be specially allocated to the Partners in accordance with their
percentages set forth in Paragraph 3.1 of the Agreement.
(ll) Notwithstanding any provision of the Agreement to the contrary,
any Partner Nonrecourse Deduction for any fiscal year or other
period shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Section 1.704-2(i) of the
Treasury Regulations.
Exhibit C: page 3
80
PART B CAPITAL ACCOUNT ADJUSTMENTS AND 704(C) TAX ALLOCATIONS.
(1) For purposes of computing the amount of any item of income,
gain, deduction, or loss to be reflected in the Partners'
Capital Accounts, the determination, recognition, and
classification of any such item shall be the same as its
determination, recognition, and classification for Federal
income tax purposes; provided, however, that:
(a) Any deductions for depreciation, cost recovery,
or amortization attributable to a Contributed
Property shall be determined as if the adjusted
basis of such property on the date it was
acquired by the Partnership was equal to the
Agreed Value of such property. Upon an
adjustment to the Carrying Value of any
Partnership property, further deductions for
depreciation, cost recovery, or amortization
attributable to such property shall be
determined as if the adjusted basis of such
property was equal to the Carrying Value of such
property immediately following such adjustment.
(b) Any income, gain, or loss attributable to the
taxable disposition of any property shall be
determined by the Partnership as if the adjusted
basis of such property as of such date of
disposition was equal in amount to the
Partnership's Carrying Value with respect to
such property as of such a date.
(c) If the Partnership's adjusted basis in a
depreciable or cost recovery property is reduced
for Federal income tax purposes pursuant to
Section 50(c)(1) of the Code, the amount of such
reduction shall, solely for purposes hereof, be
deemed to be an additional depreciation or cost
recovery deduction in the year such property is
placed in service and shall be allocated among
the Partners pursuant to Articles 3 and 5 of the
Agreement. Any restoration of such basis
pursuant to Section 50(c)(2) of the Code shall
be allocated in the same manner to the Partners
to whom such deemed deduction was allocated.
(d) The computation of all items of income, gain,
loss and deduction shall be made by the
Partnership and, as to those items described in
Section 705(a)(1)(B) or Section 705(a)(2)(B) of
the Code, without regard to the fact that such
items are not includable in gross income or are
neither currently deductible nor capitalizable
for Federal income tax purposes.
(2) A transferee of a Partner's interest will succeed to the Capital
Account relating to the Partner's interest transferred;
provided, however, that if the Transfer causes a termination of
the Partnership under Section 708(b)(1)(B) of the Code, and
subject to such other treatment as may be required by Treasury
Regulations,
Exhibit C: page 4
81
the Partnership properties shall be deemed to have been
distributed in liquidation of the Partnership to the Partners
(including the transferee of a Partnership Interest) and
recontributed by such Partners and transferees in reconstitution
of the Partnership. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the
principles set forth herein. Upon the occurrence of any of the
following events, the Partnership property shall be revalued and
the Partners' Capital Accounts adjusted to reflect the gain (or
loss) that would have been allocated to each Partner if all the
Partnership property had been sold at its fair market value
immediately prior to the occurrence of such event:
(a) The acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution;
(b) The distribution by the Partnership to a Partner
of more than a de minimis amount of property or money in
consideration for an interest in the Partnership; or
(c) The "liquidation" of the Partnership within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations.
The revaluation of the Partnership property referred to in the
immediately preceding sentence shall be made in accordance
with Section 1.704-1(b)(2)(iv)(f) of the Regulations.
(3) Upon an issuance of any additional interests in the Partnership
for cash or Contributed Property, the Capital Accounts of all
Partners (and the Carrying Values of all Partnership properties)
shall, immediately prior to such issuance, be adjusted
(consistent with the provisions hereof) upward or downward to
reflect any unrealized gain or unrealized loss attributable to
each Partnership property (as if such unrealized gain or
unrealized loss had been recognized upon an actual sale of such
property at the fair market value thereof, immediately prior to
such issuance, and had been allocated to the Partners, at such
time, pursuant to Articles 3 and 5 of this Agreement). In
determining such unrealized gain or unrealized loss attributable
to the properties, the fair market value of Partnership
properties shall be determined by the General Partner using such
reasonable methods of valuation as the General Partner may
adopt.
(4) Immediately prior to the distribution of any Partnership
property in liquidation of the Partnership, the Capital Accounts
of all Partners (and the Carrying Values of all Partnership
properties) shall be adjusted (consistent with the provisions
hereof and Section 704 of the Code) upward or downward to
reflect any unrealized gain or unrealized loss attributable to
each Partnership property (as if such unrealized
Exhibit C: page 5
82
gain or unrealized loss had been recognized upon an actual sale
of each such property, immediately prior to such distribution,
and had been allocated to the Partners, at such time, pursuant
to Articles 3 and 5 of the Agreement). In determining such
unrealized gain or unrealized loss attributable to the
properties, the fair market value of Partnership properties
shall be determined by the General Partner using such reasonable
methods of valuation as the General Partner may adopt.
(5) In accordance with Section 704(c) and the Treasury Regulations
promulgated thereunder, income, gain, loss, and deduction with
respect to any Contributed Property shall, solely for tax
purposes, be allocated among the Partners so as to take account
of any variation between the adjusted basis of such property to
the Partnership for Federal income tax purposes and its Agreed
Value.
(6) In the event the Agreed Value of any Partnership asset is
adjusted as described in Paragraphs B(3) or B(4) above,
subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation
between the adjusted basis of such asset for Federal income tax
purposes and its Agreed Value in the same manner as under
Section 704 (c) of the Code and the Treasury Regulations
promulgated thereunder.
(7) Any elections or other decisions relating to any Federal income
tax matters shall be made by the General Partner in any manner
that reasonably reflects the purpose and intention of the
Agreement.
PART C DEFINITIONS.
For the purposes of this Exhibit, the following terms shall have the
meanings indicated unless the context clearly indicates otherwise:
"ADJUSTED CAPITAL ACCOUNT BALANCE" means the balance, if any, in the
Capital Account balance of a Partner as of the end of the relevant
fiscal year of the Partnership, after giving effect to the following:
(a) credit to such Capital Account any amounts the Partner is
obligated to restore, pursuant to the terms of the Agreement or
otherwise or is deemed obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Treasury Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Treasury
Regulations.
Exhibit C: page 6
83
"AGREED VALUE" means the fair market Value of Contributed Properties as
agreed to by the contributing Partner and the Partnership, using such
reasonable method of valuation as they may adopt.
"CARRYING VALUE" means:
(a) with respect to Contributed Property, the Agreed Value of such
property reduced (but not below zero) by all amortization,
depreciation, and cost recovery deductions charged to the
Partners' Capital Accounts with respect to such property, as
well as any other charges for sales, retirements, and other
dispositions of assets included in a Contributed Property, as of
the time of determination; and
(b) with respect to any other property, the adjusted basis of such
property for Federal income tax purposes as of the time of
determination. The Carrying Value of any property shall be
adjusted in accordance with the principles set forth herein.
"CONTRIBUTED PROPERTY" means each Partner's interest in property or
other consideration (excluding services and cash) contributed to the
Partnership by such Partner.
"NONRECOURSE DEDUCTIONS" shall have the meaning at forth in Section
1.704-2(b)(1) of the Treasury Regulations. The amount of Nonrecourse
Deductions for a fiscal year of the Partnership equals the excess, if
any, of the net increase, if any, in the amount of Partnership Minimum
Gain during that fiscal year over the aggregate amount of any
distributions during that fiscal year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Partnership Minimum
Gain, determined according to the provisions of Section 1.704-2(c) of
the Treasury Regulations.
"NONRECOURSE LIABILITY" shall have the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i) of the
Treasury Regulations.
"PARTNER NONRECOURSE DEBT" shall have the meaning set forth in Section
1.704-2(b)(4) of the Treasury Regulations.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect
to each Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i) of the Treasury Regulations.
Exhibit C: page 7
84
"PARTNER NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Section 1.704-2(i)(1) of the Treasury Regulations. For any Partnership
taxable year, the amount of Partner Nonrecourse Deductions with respect
to a Partner Nonrecourse Debt equals the net increase during the year,
if any, in the amount of Partner Nonrecourse Debt Minimum Gain reduced
(but not below zero) by proceeds of the liability distributed during
the year to the Partner bearing the economic risk of loss for the
liability that are both attributable to the liability and allocable to
an increase in the Partner Nonrecourse Debt Minimum Gain determined
according to the provisions of Section 1.704-2(i)(2) of the Treasury
Regulations.
"PARTNERSHIP MINIMUM GAIN" shall have the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.
For purposes of this Exhibit, all other capitalized terms will have the
same definition as in the Agreement.
This Exhibit is intended to comply with Section 704(b) of the Code and
the Treasury Regulations promulgated thereunder and shall be construed and
interpreted consistently therewith. To the extent that any of the provisions of
this Exhibit are inconsistent (whether now or in the future) with Section 704(b)
of the Code and the Treasury Regulations promulgated thereunder, the provisions
of such Section of the Code and such Treasury Regulations shall control, and all
allocations and Capital Account adjustments made under this Exhibit and the
Agreement shall be made in a manner necessary to comply with Section 704(b) of
the Code and the Treasury Regulations promulgated thereunder.
Exhibit C: page 8
