EXHIBIT 10.1
EXHIBIT B
AMENDED AND RESTATED JOINT VENTURE AGREEMENT
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF QNOV
(FORMERLY KNOWN AS
THE "QUEEN OF NEW ORLEANS AT THE
HILTON JOINT VENTURE")
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT is entered into as of
July 31, 1998, by and among Shreveport Paddlewheels, L.L.C. ("Paddlewheels"),
Sodak Louisiana, L.L.C. ("Sodak"), and HWCC-Louisiana, Inc ("HWCC"). Unless the
context otherwise requires, terms which are capitalized and not otherwise
defined shall have the meanings set forth or cross-referenced in Article I of
this Agreement.
PRELIMINARY STATEMENT
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▇. ▇▇▇▇▇▇ Hotels Corporation ("Hilton") and New Orleans Paddlewheels,
Inc. ("NOP") entered into a Basic Agreement, dated as of January 9, 1992, and
Joint Venture Agreement dated May 20, 1992 (the "Original Joint Venture
Agreement") collectively setting forth the agreement of such parties to operate,
as joint venturers under the name "Queen of New Orleans at the Hilton Joint
Venture" (the "Original JV"), riverboat casinos located in New Orleans,
Louisiana.
▇. ▇▇▇▇▇▇ assigned its equity interest in the Original JV to Hilton New
Orleans Corporation ("HNOC") on January 14, 1994.
C. On the Closing Date, it is contemplated that HNOC will transfer its
total equity interest in the Original JV to Sodak and HWCC, and NOP will
transfer certain of its equity interest in the Original JV to Sodak and HWCC.
D. Paddlewheels, Sodak, HWCC and New Orleans Paddlewheels, Inc. ("NOP")
have entered into an Amended and Restated Master Agreement dated July 31, 1998
(the "Master Agreement"), setting forth the agreement of the parties, as joint
venturers, to participate in, construct and operate a riverboat gaming vessel,
hotel and casino in Shreveport, Louisiana.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Original Joint Venture Agreement is hereby amended and
restated in its entirety as follows:
ARTICLE I
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DEFINITIONS
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1.1 Definitions. The following terms shall have the respective meanings
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indicated:
"Accountants" - shall mean independent certified public accountants of
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recognized national standing.
"Act" - shall mean the Louisiana Gaming Control Act, La. R.S. 27:1 et.
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seq., including the amendments thereto and regulations promulgated
thereunder, as may be in effect from time to time.
"Affiliate(s)" - shall mean with respect to any person or entity, any firm,
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corporation, partnership, limited liability company, association, trust or
other person or entity which, directly or indirectly, controls, is
controlled by, or is under common control with, the subject person or
entity or such person or entity owns directly or indirectly ten percent
(10%) or more of any class of equity securities of, or otherwise has a
substantial beneficial interest in such entity. For purposes hereof, the
term "control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
any such person or entity, whether through the ownership of voting
securities, by contract or otherwise. Such term shall also include with
respect to any person who is a spouse, child, grandchild, sibling or parent
of the owner of any Venturer, or any trust, partnership or other entity
beneficially owned by any of the foregoing, individually or collectively.
"Agreement" - shall mean this Amended and Restated Joint Venture Agreement.
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"Assignment Agreement" - shall mean the Assignment of Joint Venture
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Interest dated as of the date hereof by and among Sodak, HWCC and NOP.
"Budget" - shall mean the annual operating budget for the Venturers adopted
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by the Management Committee pursuant to Article VIII hereof.
"Business Days" - shall mean any day during which federally chartered banks
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are not required to be closed under applicable federal or Louisiana law.
"Casino" - shall mean the premises of the Complex upon which gaming
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activities will be conducted pursuant to the Act.
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"Closing Date" - shall have the same meaning as set forth in the Master
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Agreement.
"Code" - shall mean the Internal Revenue Code of 1986, as amended.
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"Commencement Date" - shall mean the opening date of the Project.
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"Complex" - shall mean, upon completion of the Project, collectively the
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Vessel, the Casino, the Hotel, and the land based facilities related
thereto, together with all related improvements, facilities and amenities
used in connection with the operation thereof.
"Complex Net Revenues" - shall have the same meaning as set forth in the
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Management Agreement.
"Contribution Date" - shall have the same meaning as defined in Section
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3.3(b) below.
"Debt Restriction" - shall have the same meaning as defined Section 6.1
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below.
"Defaulting Venturer" - shall have the meaning as defined in Section 13.1
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below.
"Gaming Authorities" - shall mean any State of Louisiana gaming regulatory
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authority authorized under the Act, including but not limited to, the
Louisiana Gaming Control Board and the Riverboat Gaming Enforcement
Division of the Louisiana State Police, and any other gaming regulatory
authority with jurisdiction over the Venture or any Venturer.
"HCC" - shall mean Hollywood Casino Corporation, a Delaware corporation.
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"HWCC" - shall mean HWCC - Louisiana, Inc., a Louisiana corporation, which
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is a wholly owned subsidiary of HCC.
"Hotel" - shall mean a hotel, which will contain no less than 300 rooms to
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be owned by the Venture located at the Venture Site in Shreveport,
Louisiana.
"JV Interest" - shall mean a unit representing a Venturer's equity
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interest in the Venture.
"JV Value" - shall have the meaning as defined in Section 10.6(a)(i) below.
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"LGCB" - shall mean the State of Louisiana Gaming Control Board.
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"Liquidating Venturer" - shall have the meaning as defined in Article XII.
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"Loan Commitments" - shall mean collectively the financing commitments that
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the Venture intends to procure for construction, development and operation
of the Project upon terms acceptable to the Management Committee.
"Management Agreement" - shall mean the Management Services Agreement
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between the Venture and the Operator dated as of the date hereof, together
with such amendments as the parties thereto may mutually agree.
"Management Agreement Value" - shall have the same meaning as defined in
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Section 10.6(a)(i) below.
"Management Committee" - shall mean the management committee of the
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Venture, as defined in Section 7.1 below.
"Marine Agreement" - shall mean the Marine Services Agreement dated as of
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the date hereof between the Venture and Paddlewheels or an Affiliate
thereof.
"Master Agreement" - shall mean the Amended and Restated Master Agreement
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dated as of July 31, 1998 by and among Sodak, HWCC, NOP and Paddlewheels.
"NOP" - shall mean New Orleans Paddlewheels, Inc., a Louisiana corporation.
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"Operator" - shall mean HWCC - Shreveport, Inc., a Louisiana corporation.
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"Paddlewheels" - shall mean Shreveport Paddlewheels, L.L.C., a Louisiana
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limited liability company, which is a wholly-owned subsidiary of NOP.
"Pari Passu Obligations" - shall mean the Venture's obligation to pay (i)
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1% of the Venture's Complex Net Revenues to Sodak Gaming, Inc., pursuant to
the terms and conditions of the Sodak Agreement, and (ii) any Complex
Incentive Fees (as defined in the Management Agreement) to the Operator
pursuant to the terms and conditions of the Management Agreement.
"Project" - shall mean the planning, construction and operation of (i) the
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Vessel, (ii) landside improvements to
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facilitate the operation of the Complex and (iii) the Hotel (collectively,
the "Project"). The berth site for the Vessel shall be located at the
Venture Site.
"Regulations" - shall mean permanent, temporary, or proposed income tax
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regulations of the United States Department of Treasury promulgated under
the Code.
"Relative Ownership Ratio" - shall have the meaning as defined in Section
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5.2(b) below.
"Residual Ownership Ratio" - shall have the same meaning as defined in
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Section 3.2(d) below.
"Sodak" - shall mean Sodak Louisiana, L.L.C., a Louisiana limited liability
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company, which is a wholly owned subsidiary of Sodak Gaming, Inc.
"Sodak Agreement" - shall mean the Consulting Agreement dated as of the
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date hereof between the Venture and Sodak.
"Transfer" - shall mean the sale, assignment, or other transfer, whether
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voluntary or by operation of law.
"Venture" - shall mean the joint venture governed by this Agreement.
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"Venturer(s)" - shall mean Paddlewheels, Sodak, HWCC, and such other
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entities which may hereafter become Venturers and any person or entity
admitted to the Venture pursuant to the provisions of this Agreement, and
any of the Venturers when the reference is singular, and their respective
successors in interest.
"Venture Site" - shall mean the berth site located at or adjacent to the
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▇▇▇▇▇▇'▇ valet parking site in Shreveport, Louisiana as more expressly
described in "Exhibit A" attached hereto.
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"Vessel" - shall mean a riverboat gaming vessel having approximately 30,000
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square feet of net gaming space or such other amount of net gaming space as
may be permitted under applicable Louisiana law, which riverboat gaming
vessel shall be located at the Venture Site in Shreveport, Louisiana.
1.2 References. Except as otherwise specifically indicated, all
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references to Article, Section and Subsection numbers refer to Articles,
Sections and Subsections of this Agreement, and all references to Exhibits refer
to the Exhibits attached hereto. The words "herein", "hereof", "hereunder",
"hereinafter" and words of similar import refer to this Agreement as a whole and
not to any
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particular Section or Subsection hereof. For purpose of convenience, the
impersonal pronoun is sometimes used herein to refer to the Venturers.
ARTICLE II
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FORMATION OF VENTURE
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2.1 Joint Venturers. The Venturers hereby agree to continue the Original
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JV, in partnership form (the "Venture"), for the limited purposes and pursuant
to the terms and conditions set forth herein.
2.2 Name. From and after the date hereof, the name of the Venture shall
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be "QNOV."
2.3 Principal Office. The principal office of the Venture shall initially
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be located at Two Galleria Tower, Dallas, Texas, and it is the current intention
of the Management Committee to relocate the principal office in or near
Shreveport, Louisiana or such other place as the Management Committee may, from
time to time, determine.
2.4 Partnership Act; Ownership. Except as otherwise expressly stated
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herein, the rights and obligations of the Venturers and the administration and
termination of the Venture shall be governed by this Agreement and the internal
laws (including partnership law) of the State of Louisiana.
2.5 Purpose. The purpose of the Venture shall be to develop, construct,
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own and operate the Project, and the performance of all things necessary or
incidental to or in connection with the foregoing, in accordance with the terms
and conditions of this Agreement. The purposes of the Venture shall not be
modified in any manner, except in the manner set forth in Article VII hereof.
2.6 No Individual Authority. Except as otherwise expressly provided in
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this Agreement, no Venturer, acting alone, shall have any authority to act for,
or undertake or assume any obligations or responsibility, in the name of or on
behalf of, the other Venturers or the Venture.
2.7 No Restrictions. Nothing contained in this Agreement shall be
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construed so as to limit, in any manner, a Venturer, or any Affiliate of such
Venturer, from owning, operating, financing, investing in, providing maritime
services to, or otherwise being affiliated with, any other venture or operation,
including any riverboat or gaming operation not owned or operated by the Venture
wherever located; provided, however, that no Venturer, nor any of its
Affiliates, may be directly or indirectly involved in the ownership, operation,
management, financing or development of any
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casino gaming operation (a "Competing Casino") (i) located within the parishes
described in "Exhibit B" attached hereto or in those areas in the States of
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Texas and Arkansas that are within a 100-mile radius of the dock site of the
Complex, without the prior written consent of all Venturers (other than
Paddlewheels and any Affiliate thereof), and (ii) at any time prior to October
16, 2002, in Tarrant or Dallas County, Texas, or the State of Arkansas without
providing each of the Venturers with written notice of its proposed involvement
in a Competing Casino (the "Competing Casino Notice"), which Competing Casino
Notice shall include an offer to all Venturers (other than Paddlewheels and any
Affiliate thereof) to participate in the Competing Casino pro rata on the same
terms and conditions as the notifying Venturer, with such offer to participate
in such particular Competing Casino expiring and being of no further force or
effect with respect to any such Venturer who has not delivered to the notifying
Venturer written notice of an election to participate within thirty (30) days of
delivery of the Competing Casino Notice. Nothing in this Section 2.7 shall be
deemed to restrict (a) Sodak or an Affiliate thereof, or HWCC or an Affiliate
thereof, in any manner, from engaging in the business of the distribution, sale,
lease, financing or maintenance of casino gaming equipment, gaming and
accounting software and systems, and ancillary equipment and supplies or (b)
Paddlewheels or an Affiliate thereof, in any manner, from performing maritime
services.
2.8 Venturers Not Responsible for Other's Commitments. No Venturer shall
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be responsible or liable for any indebtedness or obligation of another Venturer
incurred either before or after the execution of this Agreement, nor shall the
Venture be responsible or liable for any such indebtedness or obligation of a
Venturer, except for (i) indebtedness or obligations expressly incurred or
assumed by a Venturer pursuant to the terms of this Agreement or (ii) otherwise
as expressly mutually agreed upon by the parties.
2.9 Term. The Venture shall continue until the first to occur of the
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following:
(a) the purchase by a Venturer of the JV Interests owned by all of the
other Venturers;
(b) the sale or other disposition by the Venturers to a third party of
all or substantially all of the outstanding JV Interests, or the sale by
the Venture of all or substantially all of the Venture's assets;
(c) the dissolution of the Venture as expressly provided in this
Agreement;
(d) the mutual agreement of Sodak and HWCC to liquidate and wind up
the Venture; or
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(e) August 24, 2099.
2.10 Effective Date. The effective date of this Agreement shall be the
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Closing Date (as defined in the Master Agreement).
ARTICLE III
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CAPITAL CONTRIBUTIONS
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3.1 Transfers to Affiliates. Subject to the approval of the applicable
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Gaming Authorities, at any time or from time to time during the term hereof, (a)
Sodak may transfer to Sodak Gaming, Inc., or an Affiliate thereof, (b) HWCC may
transfer to HCC or an Affiliate thereof, and (c) Paddlewheels may transfer to an
Affiliate thereof, all or any portion of their respective right, title and
interest in the Venture. The parties hereby consent to any such transfer and
waive any right or claim they may have had or will have to participate in such
transfer.
3.2 Capital Contributions and Ownership Ratios.
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(a) Sodak and HWCC. Payments of $100,000 each made by Sodak and HWCC
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prior to the date hereof together with payments of an additional $2,400,000
each made by Sodak and HWCC on the Closing Date to be deposited into a bank
account established by the Operator, which funds may be withdrawn from the
bank account in accordance with and for the purposes set forth in the
Technical Services Agreement that is attached to the Master Agreement as
Exhibit G. Such contributions shall be deemed to be initial capital
contributions to the Venture made by such parties.
(b) Paddlewheels. (i) Paddlewheels acknowledges and agrees that, as
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consideration for its ownership interest in, and rights to receive payments
from, the Venture from and after the date hereof in accordance with the
terms of this Agreement, Paddlewheels shall make a $1 million cash
contribution concurrent with the date the Venture receives initial funding
under any Loan Commitment. (ii) Furthermore, Paddlewheels acknowledges and
agrees that NOP's agreement in the Master Agreement to fulfill its
obligations pursuant to Section 1(E) of the Loan and Settlement Agreement
dated January 16, 1998, by and between Paddlewheels, HNOC, NOP, Sodak and
HWCC (the "Loan and Settlement Agreement") constitutes additional
consideration for Paddlewheels' ownership interest in and rights to receive
payments from the Venture pursuant hereto.
(c) Allocation of JV Interests. Each of Sodak and HWCC is hereby
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credited with one JV Interest for each dollar contributed by such Venturer
pursuant to Section 3.2(a) and
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shall be credited with one additional JV Interest for each dollar
contributed as a Subsequent Capital Contribution in accordance with Section
3.3 below. Paddlewheels shall be credited with one JV Interest for each
dollar contributed by such party pursuant to Section 3.2(b)(i) above and
shall be credited, as of the date the Venture receives initial funding
under any Loan Commitment, with an additional $1 million of JV Interests in
connection with NOP's obligations as described under Section 3.2(b)(ii)
above.
(d) Residual Ownership Ratios. In consideration for the capital
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contributions described in this Section 3.2 made or to be made by the
Venturers, each Venturer shall be deemed to have the following Residual
Ownership Ratio:
Residual
Ownership
Ratio
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Paddlewheels 10%
Sodak 45%
HWCC 45%
Paddlewheels' Residual Ownership Ratio shall not be subject to adjustment,
increase or diminution. The Residual Ownership Ratio of each Venturer (other
than Paddlewheels and any Affiliate thereof) shall be adjusted from time to time
as Subsequent Capital Contributions are made in accordance with this Article
III, and shall be (x) the quotient equal to the number of outstanding JV
Interests held by such Venturer at such time, divided by the total number of
outstanding JV Interests held by all Venturers other than Paddlewheels at such
time (y) multiplied by 90.
3.3 Subsequent Capital Contributions.
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(a) The Venturers (except Paddlewheels and any Affiliate thereof) from
time to time may, but shall not be obligated to, make additional capital
contributions to the Venture ("Subsequent Capital Contributions") in cash
as needed to meet the needs of the Venture. Paddlewheels and any Affiliate
thereof shall not be permitted or required to make Subsequent Capital
Contributions.
(b) The Management Committee shall authorize and approve Subsequent
Capital Contributions and shall give written notice (the "Notice of
Subsequent Capital Contribution") to each Venturer of the decision of the
Management Committee that Subsequent Capital Contributions are necessary in
connection with the Project. Such notices will state (i) the total amount
of additional capital required by the Venture, (ii) the amount of
additional capital that each of Sodak, HWCC or any
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other eligible Venturer is required to contribute, which shall be based on
their relative Subsequent Contribution Ownership Ratios as provided in
Section 3.3(d) below, (iii) the use of proceeds of the requested Subsequent
Capital Contribution, including a reasonable itemization of such use, and
(iv) the date by which the contribution shall be made (the "Contribution
Date"), which date shall not be less than 20 days after mailing of the
Notice of Subsequent Capital Contribution. In the event a Venturer elects
not to contribute its pro rata share of Subsequent Capital Contributions
that is authorized and approved by the Management Committee pursuant to
this Section 3.3, then the other contributing Venturers may elect to
contribute such unpaid portion of Subsequent Capital Contributions on a pro
rata basis in accordance with their Subsequent Contribution Ownership Ratio
(which shall not include, for purposes of calculating the foregoing, the JV
Interests of the non-contributing Venturer).
(c) Each Venturer that makes a Subsequent Capital Contribution shall
be credited with one additional JV Interest for each additional dollar
contributed by such party to the Venture.
(d) The allocation of any Subsequent Capital Contribution among the
contributing Venturers will be based on the "Subsequent Contribution
Ownership Ratio" for each contributing Venturer which shall be, for each
such contributing Venturer, (i) the quotient equal to the number of JV
Interests held by such contributing Venturer, divided by the total number
of outstanding JV Interests held by all Venturers (other than Paddlewheels
and any Affiliate thereof), (ii) multiplied by (100), immediately prior to
the issuance of the Notice of Subsequent Capital Contribution.
3.4 No Right to Return of Contribution. Except as otherwise expressly
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provided in this Agreement, no Venturer shall have the right to withdraw or
receive any return of its initial or any Subsequent Capital Contribution. Under
circumstances requiring a return of any initial or Subsequent Capital
Contribution, no Venturer shall have the right to receive property other than
cash. No Venturer shall have any right to the withdrawal or to the return of any
initial or Subsequent Capital Contribution made by it to the Venture, except as
otherwise provided in this Agreement.
ARTICLE IV
LOANS
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The Venturers may be entitled, but are not obligated, to make loans to the
Venture from time to time, the terms and conditions of
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which (including, but not limited to, any equity conversion provisions) shall be
approved by the Management Committee, and any such loans (prior to any
applicable conversion thereof) shall not be treated as Subsequent Capital
Contributions to the Venture for any purpose hereunder, nor entitle such
Venturer to any increase in its share of the profits and losses and cash
distributions of the Venture, but the Venture shall be obligated to such
Venturer for the amount of any such loans pursuant to the terms thereof. All
scheduled principal and interest payments with respect to any loans from a
Venturer to the Venture pursuant to this Section shall be repaid prior to any
distributions to any Venturer pursuant to Section 5.1 below. No Venturer shall
be paid interest on any initial or Subsequent Capital Contribution to the
Venture.
ARTICLE V
DISTRIBUTIONS
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From time to time, but in no event less frequently than once each calendar
year, the Management Committee shall determine the amount of equity
distributions that shall be made to the Venturers (other than Paddlewheels and
any Affiliate thereof) pursuant to Section 5.1 and 5.2 below.
5.1 Equity Distributions. No equity distributions shall be made to Sodak
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and HWCC pursuant to Section 5.2 below unless and until the Pari Passu
Obligations have been paid in full.
5.2 (a) Priority of Distributions. All equity distributions (other than
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distributions pursuant to Section 5.2(d) below) shall be made pro rata to
the Venturers (other than Paddlewheels and any Affiliate thereof) based on
their respective Relative Ownership Ratios (as defined in Section 5.2(b)
below), immediately prior to any such distribution.
(b) Definition of Relative Ownership Ratio. For purposes of this
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Agreement, the term "Relative Ownership Ratio" shall mean for each Venturer
(except Paddlewheels and any Affiliate thereof) a percentage equal to (i)
the quotient equal to the number of JV Interests held by such Venturer,
divided by the total number of outstanding JV Interests held by all
Venturers (excluding JV Interests held by Paddlewheels and any Affiliate
thereof), (ii) multiplied by 100.
(c) Withholding. If required by the Code or by state or local law,
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the Venture will withhold any required amount payable to a Venturer
pursuant to Article V for payment to the appropriate taxing authority. Any
amount so withheld from a Venturer will be treated as distributions made
pursuant to Section 5.1 above by the Venture to such Venturer. Each
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Venturer agrees to timely file any agreement or return that is required by
any taxing authority in order to avoid any withholding obligation that
would otherwise be imposed on the Venture.
(d) Tax Distributions. The Venture shall distribute to each Venturer
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(including Paddlewheels and any Affiliate thereof) in the event such
persons are allocated any share of Venture taxable income from operations
(but not with respect to any other allocations of taxable income or gain,
including but not limited to, allocations of income and gains in connection
with a sale of assets by the Venture or a liquidation of the Venture or in
connection with any deemed capital contribution) pursuant to the Code,
Regulations or any formal action by the Internal Revenue Service for each
year, as additional equity distributions, amounts equal to the amount by
which (a) such Venturer's allocable share of Venture taxable income
multiplied by the highest marginal combined federal, state and local income
tax rate applicable to any Venturer that has been allocated a share of
Venture taxable income for such year exceeds (b) cash distributions
otherwise made to such Venturer with respect to such year.
5.3 Profits and Losses.
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(a) Profits and Losses. "Profits and Losses" means, for each Venture
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fiscal year or other fiscal period, an amount equal to the Venture's
taxable income or loss for such year or period, as determined in accordance
with Section 703(a) of the Code (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in Profits or Losses).
(b) Allocation of Losses. All Losses shall be allocated to the
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Venturers (other than Paddlewheels and any Affiliate thereof) in proportion
to such Venturers' Relative Ownership Ratios; provided, however, that any
Losses (or portion thereof) attributable to a loan made or guaranteed by a
Venturer, or Venturer nonrecourse debt within the meaning of Regulation
Section 1.704-2(b)(4) ("Venturer Nonrecourse Debt"), shall be allocated to
such Venturer in accordance with such Regulation.
(c) Allocation of Profits. Subject to the special allocation
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provisions set forth in Section 5.3(d) below, all Profits shall be
allocated to the Venturers (other than Paddlewheels and any Affiliate
thereof) in accordance with such Venturers' respective Relative Ownership
Ratios.
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(d) Special Allocation. In any period during which Paddlewheels
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receives payment of any amount representing its share of Net Realized Value
(as defined in Section 10.7 below), Paddlewheels shall be allocated taxable
income or gain for such period in an aggregate amount equal to such
payment. Except as set forth in the preceding sentence, no income, profits,
gains, losses or tax credits shall be allocated to Paddlewheels.
5.4 Transfer. If, after the date hereof, any JV Interest is transferred
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during any fiscal year of the Venture (whether by liquidation of a JV Interest,
transfer of all or part of a JV Interest or otherwise), the books of the Venture
will be deemed to be or will be closed as of the effective date of such
transfer. The Profits or Losses attributable to the period from the first day of
such fiscal year through the effective date of such transfer will be allocated
to the transferor, and the Profits or Losses attributable to the period
commencing on the effective date of such transfer will be allocated to the
transferee. In lieu of an interim closing of the books of the Venture and with
the agreement of the transferor and the transferee, the Venture may allocate
Profits and Losses for such fiscal year between the transferor and the
transferee based on a daily proration of items for such fiscal year or any other
reasonable method of allocation (including an allocation of extraordinary
Venture items, as determined by the Venture, based on when such items are
recognized for federal income tax purposes). This allocation provision is
subject to the provisions of Section 706(d) of the Code, relating to allocable
cash basis items.
5.5 Tax Credits. Any tax credit, and any tax credit recapture, will
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be allocated to the Venturers (other than Paddlewheels and any Affiliate
thereof) in the same ratio that the federal income tax basis of the asset (to
which such tax credit relates) is allocated to the Venturers under the
Regulations promulgated under Section 46 of the Code, and if no basis is
allocated, in the same manner as Profits are allocated to the Venturers under
Section 5.3 hereof.
5.6 Tax Information Notices. Each Venturer shall furnish the "Tax Matters
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Manager" (as defined in Section 9.8 hereof) with such information (including
information specified in Section 6230(e) of the Code) as the Tax Matters Manager
may reasonably request to permit the Tax Matters Manager to provide the Internal
Revenue Service with sufficient information to allow proper notice to the
Venturers in accordance with Section 6223 of the Code. The Tax Matters Manager
shall keep each Venturer informed of those administrative and judicial
proceedings for the adjustment of the Venture level of Venture items required by
Section 6223(g) of the Code and the Regulations thereunder, and such other
matters as the Tax Matters Manager, in its sole discretion, deems appropriate.
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5.7 Inconsistent Tax Treatment. Each Venturer shall notify the Tax
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Matters Manager in the event its treatment of any Venture item on its federal
income tax return is inconsistent with the treatment of that item on any return
filed by or in any records of the Venture within thirty (30) days of the date
such Venturer's return is filed.
5.8 Tax Proceedings. The Tax Matters Manager, in its sole discretion,
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shall direct and oversee all proceedings, disputes and other similar matters
between the Venture and the Internal Revenue Service. Any Venturer who intends
to file a petition under Section 6226, 6228, or other sections of the Code with
respect to any Venture item, or other tax matters involving the Venture shall
give reasonable notice to each of the Venturers of such intention and the nature
of the contemplated proceedings. In the case where the Tax Matters Manager, on
behalf of the Venture, intends to file such petition, the Tax Matters Manager,
in its sole discretion, shall choose the forum in which such petition will be
filed. If any Venturer desires to seek review of any court decision rendered as
a result of a proceeding instituted under this Section, such Venturer shall so
notify each of the Venturers, and shall request the Tax Matters Manager to so
act. The Tax Matters Manager may, in its sole discretion, choose to pursue or
forego settlement, review, litigation or any other proceedings in connection
with any such proceeding, dispute or other similar matter with the Internal
Revenue Service.
5.9 Tax Settlements. The Tax Matters Manager shall have the authority to
---------------
bind any other Venturer to a settlement agreement regarding any proceeding
dispute or other matter by and between the Venture and the Internal Revenue
Service upon the written concurrence of any such Venturer who would be bound by
such agreement.
5.10 Expenditures, Fees and Indemnification. The Tax Matters Manager may
---------------------------------------
engage such legal counsel, certified public accountants, or others (including,
without limitation, experts) on behalf of the Venture as it may determine to be
necessary and appropriate. Any other Venturer may engage other legal counsel,
certified public accountants, or others on such other Venturer's own behalf and
at such other Venturer's sole cost and expense. Any reasonable item of expense,
including but not limited to fees and expenses for legal counsel, certified
public accountants, and others (including, without limitation, experts) that the
Tax Matters Manager incurs on behalf of the Venture in connection with any
audit, assessment, litigation, or other proceeding regarding any Venture item,
shall constitute expenses of the Venture. In the event that the Venture does
not have adequate cash or other assets to pay such items of expense, the Tax
Matters Manager shall not be obligated to make Capital Contributions or loans to
fund such expenses except as otherwise provided herein, and the Tax Matters
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Manager shall be free to resign as the "tax matters partner" of the Venture
pursuant to Section 5.11 hereof.
5.11 Resignation of Tax Matters Manager. The Tax Matters Manager may
-----------------------------------
resign as "Tax Matters Manager" of the Venture at any time upon the filing of a
signed statement with the Internal Revenue Service in accordance with Temp.
Treas. Reg. (S) 301.623(a)(7)-1T(i) (or any successor provision thereto). The
successor "Tax Matters Manager" shall be determined pursuant to Temp. Treas.
Reg. (S) 301.6231(a)(7)-1T (or any successor provision thereto).
5.12 Survival of Tax Matters Manager Provisions. The provisions of this
------------------------------------------
Article including without limitation the obligation to pay fees and expenses
shall survive the termination of the Venture or the termination of any
Venturer's interest in the Venture and shall remain binding on the Venture for a
period of time necessary to resolve with the Internal Revenue Service, the
Department of the Treasury or any state taxing authority any and all matters
regarding the federal or state income taxation of the Venture for the applicable
tax year(s).
ARTICLE VI
----------
CASH PRIORITIES
---------------
6.1 Priority. (a) The parties hereto agree and acknowledge that, subject
--------
to the payment subordination terms, restrictions and conditions set
forth in any credit facility or other applicable loan agreement or
indenture entered into by the Venture (a "Debt Restriction"), the
Venture shall pay the following fees, expenses and distributions in
the following order of priority:
(i) First, the Venture shall pay the Operator the Basic
Management Fee (as defined in the Management Agreement), pursuant to
the terms and conditions of the Management Agreement.
(ii) Second, the Venture shall pay the Pari Passu Obligations,
which payments shall be made in accordance with Section 6.1(b) below.
(iii) Finally, the Venture shall make equity
distributions pursuant to Section 5.2 above.
(b) In the event the Venture cannot pay, in full, the Pari Passu
Obligations, as a result of any Debt Restriction, payments shall be made to
Sodak and the Operator, pro rata, based on each party's respective portion of
the aggregate amount of all Pari Passu Obligations payable to all parties with
respect to such fiscal year; provided that in the event Pari Passu Obligations
have
-15-
accrued for any prior fiscal year, the order of priority shall be to first pay
accrued amounts relating to each such prior fiscal year starting with the
earliest fiscal year.
ARTICLE VII
-----------
MANAGEMENT AND OPERATION OF THE VENTURE
---------------------------------------
7.1 Management Committee. The Venture shall be managed by a management
--------------------
committee (the "Management Committee") to oversee and supervise the operation of
the Venture's business and to make all decisions on behalf of the Venture. The
Management Committee shall have sole and exclusive control of the business of
the Venture and shall be authorized and empowered to determine all questions
relating to the conduct, operation and management of the business of the
Venture, and the determinations of the Management Committee shall be binding
upon Venturers and all other persons for all purposes.
7.2 Number; Appointment. The number of members on the Management
-------------------
Committee shall be four. Two members shall be appointed by each of Sodak (the
"Sodak Representatives") and HWCC (the "HWCC Representatives"); provided that
the right of either such Venturer to appoint any member or members shall
terminate immediately at such time as such Venturer no longer owns 20% of the
total number of JV Interests outstanding (not including any JV Interests held by
Paddlewheels and any Affiliate thereof). Each of Sodak and HWCC, in its
respective sole discretion, may remove the applicable member or members of the
Management Committee who was appointed by it and appoint a new member or
members, by giving the other Venturers written notice of such change. The
initial members of the Management Committee are set forth in Exhibit C attached
hereto.
7.3 Acts of the Managers; Minutes. Except as otherwise provided herein,
-----------------------------
the Sodak Representatives collectively shall be entitled to one vote (which may
be voted by either of them) and the HWCC Representatives collectively shall be
entitled to one vote (which may be voted by either of them) on all Management
Committee matters. The Management Committee shall take action by a majority
vote. No member, acting individually, shall have any authority to act for or to
assume any obligations or responsibilities on behalf of the Venture, unless
expressly authorized by the members of the Management Committee in accordance
with this Section 7.3. Minutes of all actions of the Management Committee shall
be kept with the other Venture records and shall be available at any reasonable
time for inspection by any Venturer.
7.4 Management Committee Meetings. The Management Committee shall meet
-----------------------------
from time to time to take any action it deems necessary or advisable for the
furtherance of the Venture's business. Meetings of the Management Committee
shall be held at such time and
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place as shall be designated at a previous meeting of the Management Committee.
Any or all members of the Management Committee may participate in any meeting of
the Management Committee by any means of communication through which all of the
members of the Management Committee participating in such meeting can
simultaneously hear and speak to each other during such meeting. For the
purposes of establishing a quorum and taking any action at the meeting, such
members of the Management Committee so participating shall be deemed present in
person at the meeting; and the place of the meeting shall be the place of
origination of the telephone conversation or other comparable communication
technique.
7.5 Calling Special Meetings; Notice. Special meetings of the Management
--------------------------------
Committee may be called by any member by giving at least five (5) business days'
notice of the date, time and place thereof to each member by mail, telephone,
facsimile, telegram or in person. If the day or date, time and place of a
special meeting of the Management Committee has been announced at a previous
meeting of the Management Committee, no notice is required. Notice of an
adjourned meeting of the Management Committee need not be given other than by
announcement at the meeting at which adjournment is taken. The notice of any
special meeting shall contain a statement of the purposes of the meeting.
7.6 Waiver of Notice. Notice of any meeting of the Management Committee
----------------
may be waived by any member thereof either before, at, or after such meeting in
a writing signed by such member. A member, by his or her attendance at any
meeting of the Management Committee, shall be deemed to have waived notice of
such meeting, except where the member objects at the beginning of the meeting to
the transaction of business because the meeting is not properly called or
convened and does not participate thereafter in the meeting.
7.7 Quorum. One Sodak Representative and one HWCC Representative shall
------
constitute a quorum for the transaction of business at any meeting with respect
to which notice was duly given or waived.
7.8 Written Action; Proxies.
-----------------------
(a) Notwithstanding the provisions of Sections 7.4, 7.5 and 7.6, any
action required or permitted to be taken at a meeting of the Management
Committee may be taken without a meeting by written action signed by the
members that would be required to take the same action at a meeting of the
Management Committee at which such members were present. The written
action is effective when signed by the required members, unless a different
effective time is provided in the written action. When written action is
taken by less than all of the members representing all of the outstanding
JV
-17-
Interests, all of the members shall be notified immediately of its text and
effective date.
(b) A member of the Management Committee may cast or authorize the
casting of a vote (including any and all votes at any and all meetings of
the members) by filing a written appointment of a proxy with the Management
Committee of the Venture at or before the meeting or meetings at which the
appointment is to be effective. Any appointment of a proxy shall be signed
by the member making the appointment.
7.9 Powers of the Management Committee. The Management Committee shall
----------------------------------
have all necessary powers to carry out the purposes and conduct the business of
the Venture. In addition to any other rights and powers that the Management
Committee may possess, the Management Committee shall have all specific rights
and powers required or appropriate to the management of the business of the
Venture including, but not limited to, approving the financing or refinancing of
the Project or any portion thereof (including mortgaging, granting a security
interest or otherwise encumbering all or any portion of the real or immovable,
personal or movable, tangible or intangible property of the Venture with any
documents evidencing such mortgage or security interest containing the usual and
customary security clauses, including without limitation a confession of
judgment, waiver of appraisal and pact de non alienando), approving the
construction and development plans and budgets, approving any future Project
expansion, and approving any sale of all of part of the Project, and only the
Management Committee shall have these rights and powers. Notwithstanding the
foregoing, the Management Committee may delegate any or all such rights and
powers to any other person. As a result, the parties hereto acknowledge that
the Management Committee has delegated to Operator certain powers pursuant to
the terms and conditions of and expressly described in the Management Agreement.
Subject to the requirements of Section 7.11 below, all decisions made for or on
behalf of the Venture by the Management Committee consistent with the above
provisions shall be binding upon the Venture.
7.10 Indemnification.
---------------
(a) To the fullest extent permitted by law, the members of the
Management Committee and each Venturer (including Paddlewheels and its
Affiliates) (the "Indemnitee") shall be indemnified, held harmless and
defended by the Venture, (collectively, the "Indemnifying Party"), from and
against any and all losses, claims, damages, liabilities, whether joint or
several, expenses (including legal fees and expenses), judgments, fines and
other amounts paid in settlement, incurred or suffered by such Indemnitee,
as a party or otherwise, in connection with any threatened, pending, or
completed claim, demand, action, suit or proceedings whether
-18-
civil, criminal, administrative or investigative, and whether formal or
informal, arising out of or in connection with the business or the
operation of the Venture and by reason of the Indemnitee's status with
respect to the Venture regardless of whether the Indemnitee continues to be
a member of the Management Committee or a Venturer at the time any such
loss, claim, damage, liability or other expense is paid or incurred
(collectively, the "Losses" individually, a "Loss") if, with respect to a
claim for which an Indemnitee is seeking indemnification, (i) the
Indemnitee acted in good faith and in a manner it reasonable believed to be
in the best interests of the Venture and, with respect to any criminal
proceeding, had no reasonable cause to believe that its conduct was
unlawful, (ii) the Indemnitee's conduct did not constitute gross
negligence, willful misconduct or a material breach of the terms of this
Agreement and (iii) the Indemnitee's conduct did not constitute fraud or
breach of their fiduciary duty, if any, to the Venture. The termination of
any action, suit or proceeding by judgment, order, settlement or upon a
plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the Indemnitee did not act in the best interests of the
Venture.
(b) In the event that the Indemnitee is made a defendant in or party
to any action or proceeding, judicial or administrative, instituted by any
third party for the liability or the costs or expenses of which are Losses
(any such third party action or proceeding being referred to as a "Claim"),
the Indemnitee shall give the Indemnifying Party prompt notice thereof.
The failure to give such notice shall not affect any Indemnitee's ability
to seek reimbursement unless such failure has materially and adversely
affected the Indemnifying Party's ability to defend successfully a Claim.
The Indemnifying Party shall be entitled to contest and defend such Claim;
provided, that the Indemnifying Party (i) has a reasonable basis for
--------
concluding that such defense may be successful and (ii) diligently contests
and defends such Claim. Such contest and defense shall be conducted by
attorneys employed by the Indemnifying Party. The Notifying Party shall be
entitled at any time, at its own cost and expense, to participate in such
contest and defense and to be represented by attorneys of its or their own
choosing. If the Indemnitee elects to participate in such defense, the
Indemnitee shall cooperate with the Indemnifying Party in the conduct of
such defense. Neither the Indemnitee nor the Indemnifying Party may
concede, settle or compromise any Claim without the consent of the other
party, which consents will not be unreasonably withheld.
(c) The Venture, Sodak and HWCC, individually and collectively, waive
any and all claims and rights of
-19-
contribution against Paddlewheels or any Affiliate thereof in connection
with, arising out of or related to any Claims.
7.11 Negative Consent. Neither the Venture nor any Venturer without the
----------------
prior written consent of Paddlewheels shall approve any action that (a) amends,
modifies or otherwise changes (i) the method of calculation of Net Realized
Value pursuant to Section 10.7 below or (ii) Paddlewheels' right to receive 10%
of Net Realized Value pursuant to Section 10.7 below, or (b) transfers, all or a
portion of, Sodak's or HWCC's JV Interests to an Affiliate thereof unless such
applicable Affiliate consents in writing to be bound by the terms of Sections
6.1 and 10.2 hereof.
7.12 Bank Accounts. The Venture shall maintain bank accounts in such banks
-------------
as the Management Committee may designate exclusively for the deposit and
disbursement of all funds of the Venture. All funds of the Venture shall be
promptly deposited in such accounts. The Management Committee from time to time
shall authorize the signatories for such accounts.
7.13 Reimbursement for Costs and Expenses. The Management Committee shall
------------------------------------
determine the amounts, if any, that the Venture will reimburse a Venturer (or
any Affiliate thereof) for costs and expenses incurred by such Venturer or
Affiliate on behalf and for the benefit of the Venture; provided, however, that
no overhead or general administrative expenses of a Venturer or its Affiliates
shall be allocated to the operation of the Venture, and no salaries, fees,
commissions or other compensation shall be paid by the Venture to a Venturer or
its Affiliates or to any officer or employee of a Venturer or its Affiliates for
any services rendered to the Venture, except as may be provided in the
Management Agreement, the Sodak Agreement and the Marine Agreement or as may be
approved in advance by the Management Committee.
7.14 Fidelity Bonds and Insurance. To the extent determined by the
----------------------------
Management Committee, the Venture shall obtain fidelity bonds with reputable
surety or insurance companies covering all persons having access to the
Venture's funds, indemnifying the Venture against loss resulting from fraud,
theft, dishonesty and other wrongful acts of such persons. The Venture shall
carry or cause to be carried on its behalf in insurance companies acceptable to
the Management Committee all property, liability and workmen's compensation
insurance as shall be required under applicable loans, leases, agreements and
other instruments and statutes or as may otherwise be required by the Management
Committee.
7.15 Cooperation. The Venturers agree to use their best efforts and
-----------
cooperate with each other in carrying out the transactions contemplated by this
Agreement, including the following, provided that the cost thereof shall be
borne by the Venture:
-20-
(a) filing all required applications with the Gaming Authorities for
receipt on maintaining of a gaming license under the Act, and maintaining
compliance by the Venture with directives of the Gaming Authorities and the
provisions of the Act;
(b) filing materials with, or participating in, all attendant
investigations instituted by, a gaming regulatory authority of a State
other than Louisiana to which a Venturer is subject;
(c) developing the design of the Complex and supervising the
construction thereof;
(d) filing all required applications for the Vessel license, liquor
licenses and any other licenses or permits required for the operation of
the Complex;
(e) filing all tax returns and other governmental filings on behalf of
the Venture;
(f) securing all required insurance covering the Complex and the
operation thereof; and
(g) executing and delivering any other agreements, instruments,
documents or consents necessary for the construction, development and
operation of the Complex, including but not limited to, the Loan
Commitments, the Hotel and Vessel construction agreements and any dock site
licensing or leasing agreements.
ARTICLE VIII
------------
BUDGETS AND CONTRIBUTIONS
-------------------------
The Management Committee shall furnish to each of the Venturers prior to
the commencement of a fiscal year a budget (the "Budget(s)") covering in
reasonable detail the budget for such ensuing fiscal year. Each Budget shall
show the additional cash requirements of the Venture for the ensuing fiscal
year, which shall be the aggregate of all estimated expenditures to be made by
the Venture during such year, plus appropriate reserves for general maintenance
and cash contingencies, over the sum of the anticipated borrowings from the Loan
Commitments and the estimated cash on hand at the beginning of the year. Within
a reasonable time after the end of each calendar quarter, the Venture will
furnish to each of the Venturers any updates or revisions to operating
forecasts.
-21-
ARTICLE IX
----------
BOOKS AND RECORDS;
AUDIT, TAXES, ETC.
------------------
9.1 Books; Statements. The Venture shall keep, or cause to be kept, books
-----------------
and accounts showing its assets and liabilities, operations, transactions and
financial condition. All financial statements shall present fairly the
financial position and results of the Venture and shall be prepared on an
accrual basis in accordance with generally accepted accounting principles
consistently applied. The Management Committee shall determine the methods to
be used in the preparation of financial statements and federal, state and
municipal income and other tax returns for the Venture in connection with all
items of income and expense, including but not limited to, valuation of assets,
the methods of depreciation, elections, credits and accounting procedures.
9.2 Reports and Statements. On and after the Commencement Date, the
----------------------
Venture shall furnish, or cause to be furnished, to each of the Venturers the
reports and statements required to be furnished by the Operator pursuant to the
terms and conditions of the Management Agreement.
9.3 Where Maintained. The books, accounts and records of the Venture
----------------
shall be at all times maintained at its principal office.
9.4 Audits. Any Venturer may, at its option and at its own expense,
------
conduct internal audits of the books, records and accounts of the Venture.
Audits may be conducted in a reasonable manner, at reasonable times during
normal business hours, that will not interfere or impair the day to day business
operations of QNOV and may be conducted by employees of any Venturer, or of an
Affiliate of any Venturer, or by independent auditors retained by a Venturer at
such Venturer's expense.
9.5 Objections to Statements. Each Venturer shall have the right to
------------------------
object to each statement provided to such Venturer pursuant to Section 9.2
hereof by giving notice in writing to the Management Committee within 45 days
after such statement is received by such Venturer, indicating in reasonable
detail the objections of such Venturer and the basis for such objections. The
statements described in Section 9.2 and the contents thereof, in the absence of
fraud or willful misconduct by the other Venturer or by the Accountants
certifying the statements, shall be deemed conclusive and binding upon any
Venturer who fails to give such notice within such 45-day period. Settlement of
objections to any statement and disputes of any result of audits of the
Venture's books shall be made by the Management Committee.
-22-
9.6 Fiscal Year. The fiscal year of the Venture shall be the calendar
-----------
year.
9.7 Tax Returns. The Management Committee shall cause the Accountants to
-----------
prepare and file all state and federal tax returns on a timely basis. The
Management Committee shall cause the Venture's Accountants to prepare and submit
to the Venture on or before April 1 of each year for its approval all federal
and state income tax returns of the Venture. If the Venture shall disapprove
the Venture's tax returns as submitted by the Accountants, the Venture may
direct the Accountants to revise the tax returns and resubmit them to the
Venture for its approval. A statement of the allocation of profit or loss shown
on the annual income tax returns prepared by the Accountants shall be
transmitted and delivered to each Venturer within ten days of the receipt
thereof by the Venture.
9.8 Tax Information Submitted; Notices Sent. HWCC shall be the "tax
---------------------------------------
matters partner" as defined in Section 6231(a)(7) of the Code (the "Tax Matters
Manager"). The Tax Matters Manager shall perform all duties and functions
within the contemplation of Sections 6223, 6224, 6226, 6228 and 6230 of the Code
in connection with any administrative proceeding by the Internal Revenue Service
(or any taxing authority) or ensuing judicial proceeding by the Internal Revenue
Service (or any taxing authority) or ensuing judicial proceeding regarding a tax
return of the Venture. The Tax Matters Manager shall determine whether the
Venture should make any available tax election and, except for fraud or bad
faith in the making or failure to make such election, shall not be held
responsible or liable for the making of or failure to make such election. The
Tax Matters Manager shall consult with the Venturers concerning, and shall keep
the Venturers apprised of, matters within the scope of responsibility of the Tax
Matters Manager.
ARTICLE X
---------
ASSIGNMENT BY ANY VENTURER OF ITS JV INTERESTS
----------------------------------------------
10.1 Restriction on Transfer.
-----------------------
(a) Except as expressly permitted in Section 10.2 below and, in any
case, subject to the other provisions of this Article X and Article XI, no
Venturer shall sell, assign, transfer, convey, or otherwise dispose of all
or any part of its JV Interests, whether for consideration or not, and no
purchaser or other transferee thereof for value or otherwise shall have any
rights in the Venture or, have any rights as a Venturer with respect to all
or any part of such JV Interests attempted to be sold, assigned,
transferred, conveyed or otherwise disposed of, and any such attempted
sale, assignment, transfer, conveyance, or other disposition (a
-23-
"Transfer") of all or any part of a Venturer's JV Interests shall be
entirely null and void, unless all of the applicable provisions of this
Article X have been satisfied.
(b) The appropriate Venture records shall be noted to prevent the
transfer of a Venturer's JV Interests otherwise than in accordance with
this Article X.
10.2 Certain Permitted Transfers. Subject to the other provisions of this
---------------------------
Article X, Article XI, this Agreement, the Act or as otherwise agreed to by
Sodak and HWCC, the sale, assignment, transfer, conveyance or other disposition,
of all or any part of the JV Interests of a Venturer shall be permitted in each
of the following limited circumstances: (i) where such sale, assignment,
transfer, conveyance or other disposition is performed pursuant to the
requirements of Sections 10.3 and 10.4 hereof; or (ii) where a Venturer
transfers all, but not less than all of its JV Interests to another Venturer or
an Affiliate of the transferring Venturer. In the event of any such transfer by
a Venturer to one of its Affiliates, the transferee of the Venturer's JV
Interests shall assume in writing all of the obligations and liabilities of the
Venturer under this Agreement and succeed to all of the rights, obligations, and
privileges of the Venturer under this Agreement, the Marine Agreement and the
Assignment Agreement (only with respect to the Venture's obligations to make
payments of 1% of "Complex Net Revenues" (as defined in the Assignment
Agreement) to Paddlewheels or any Affiliate thereof).
10.3 Rights of First Refusal Arising from Desired Transfer.
-----------------------------------------------------
(a) Grant of Options. Subject to Section 10.2 and any other express
----------------
agreement by the Venturers, if any Venturer (the "Optionor Venturer")
desires to Transfer any or all of the JV Interests owned by it, such
Venturer shall give notice in writing (the "First Option Notice") to the
Venture and the other Venturers setting forth such desire, the portion of
the JV Interests (the "Offered JV Interests") sought to be transferred, the
price (the "Offer Price") at which the Optionor Venturer proposes to make
such transfer and the name of the proposed transferee. Upon receipt of the
First Option Notice, the Venture shall have the irrevocable right and
option (the "First Option") to purchase all or a portion of the Offered JV
Interests. In the event that the Venture does not exercise the First
Option with respect to all of the Offered JV Interests within the time
period specified in Section 10.3(b), such Optionor Venturer shall give
notice in writing (the "Second Option Notice"), within five days of its
receipt of the earlier of the Election Notice described in Section 10.3(b)
or expiration of the 30-day period following the date of the First Option
Notice (or 20-day period if Paddlewheels or any Affiliate thereof is an
Optionor
-24-
Venturer), to each of the other Venturers setting forth the same
information as in the First Option Notice and the number of Offered JV
Interests to be purchased by the Venture. Upon the giving of the Second
Option Notice, each other Venturer shall have the irrevocable right and
option (the "Second Option") to collectively purchase all of the remaining
Offered JV Interests.
(b) Exercise of First Option. The Venture may exercise the First
------------------------
Option by delivering to the Optionor Venturer written notice (the "Election
Notice") of its election to exercise all or part of the First Option within
30 days after the date that the Venture receives the First Option Notice;
provided that if the Optionor Venturer is Paddlewheels or any Affiliate
thereof the Venture shall exercise such First Option within 20 days of the
date the Venture receives the First Option Notice.
(c) Exercise of Second Option. If the Venture does not exercise its
-------------------------
option to purchase all of the Offered JV Interests, each of the other
Venturers shall, pursuant to the Second Option, have the right to
collectively purchase all of the remaining Offered JV Interests. If the
other Venturers exercising the Second Option elect to purchase more JV
Interests than are subject to the Second Option, each participating
Venturer will be entitled to purchase up to its pro rata share, based on
the respective Relative Ownership Ratio of the participating Venturer, of
the remaining Offered JV Interests. Each participating Venturer may
exercise the Second Option by delivering to the Optionor Venturer written
notice of its election to exercise the Second Option within the 10-day
period immediately following the date of the Second Option Notice. If any
participating Venturer should elect to purchase less than its pro rata
share of the remaining Offered JV Interests, the Optionor Venturer shall
give oral or written notice of the number of remaining Offered JV Interests
available to each other eligible Venturer, each of whom shall have five
business days after receipt of such notice to elect to purchase all of such
remaining JV Interests. If the participating Venturers elect to purchase
more of the remaining Offered JV Interests than are available, each
Venturer participating in such re-offer shall have the right to purchase
its pro rata share (based on the respective Relative Ownership Ratio of
such Venturers participating in the re-offer, which shall be calculated by
excluding the JV Interests of such non-participating Venturer) of such
remaining Offered JV Interests. If, after such re-offer, the participating
Venturers shall fail to purchase all of the Offered JV Interests, the
Second Option shall expire.
-25-
(d) Purchase Price. The purchase price (the "Purchase Price") for the
--------------
Offered JV Interests at which the Optionor Venturer shall be obligated to
sell the Offered JV Interests pursuant to the First Option or the Second
Option shall be equal to the price set forth in the applicable third party
offer. No Venturer shall voluntarily transfer any JV Interests for any
consideration other than for cash. The Venture and Venturers who exercise
the First Option and Second Option shall tender payment in cash for the
Offered JV Interests to be purchased by them on the date of closing of such
purchase, which shall occur no later than the earlier of the tenth day
immediately after the expiration of the 10-day period following the date of
the Second Option Notice or the 75th day immediately following the date of
the First Option Notice.
(e) Sale of Offered JV Interests. If the First Option Notice and the
----------------------------
Second Option Notice shall be duly given, and if the Venture and the
applicable Venturers shall not collectively exercise their options to
purchase all of the Offered JV Interests, then the Optionor Venturer shall
be free to sell all of its Offered JV Interests to any third party
transferee on the same material terms as were described in the First Option
Notice on and after the 30th day immediately following the date the
applicable transferee, if required, obtains a license from the applicable
Gaming Authorities. In such instance, the Venture's and applicable
Venturers' election to purchase any of the Offered JV Interests shall be
null and void and of no further legal effect.
(f) Re-Offers. If the proposed purchase price of a transferee for the
---------
Offered JV Interests is less than the applicable price as set forth in the
First Option Notice, the Optionor Venturer shall not transfer the Offered
JV Interests to such transferee unless the Optionor Venturer shall first
re-offer the Offered JV Interests at such lesser price to the Venture and
each of the other Venturers by giving written notice (the "Re-offer
Notice") thereof, stating the Optionor Venturer's intention to make such
transfer at such lower price (the "Re-offer Price"). The Venture and each
of the other Venturers shall then have the irrevocable and exclusive option
to purchase all of the Offered JV Interests at the Re-offer Price,
exercisable in the same order of priority, proportions and manner as
provided in Sections 10.3(b), (c) and (d) hereof; provided the 30-day and
20-day periods referenced in Section 10.3(b) shall each be reduced to a
10-day period.
(g) Limitation. Notwithstanding the terms and conditions of this
----------
Section 10.3, Paddlewheels and any Affiliate thereof, individually or
collectively, shall not have the right, in any manner, to acquire from any
Venturer
-26-
all or a portion of such other Venturer's JV Interests except as expressly
provided elsewhere in this Agreement. Any such acquisition of JV Interests
by Paddlewheels or any Affiliate thereof shall be null and void, and of no
further legal effect. In the event Sodak, HWCC and any other Venturer
(other than Paddlewheels and any Affiliate thereof) have the right to
purchase all of Paddlewheels' JV Interest, then in addition to such rights,
Sodak, HWCC and such other Venturers and the Venture shall have the right
to purchase all of Paddlewheels' rights to receive payments pursuant to the
Marine Agreement for an additional purchase price equal to the appraised
value of Paddlewheels' right to receive future fees pursuant thereto.
10.4 Transfer by Legal Process.
-------------------------
(a) Involuntary Transfers. Upon any involuntary transfer of all or
---------------------
any portion of the JV Interests pursuant to a levy of execution,
foreclosure of pledge, garnishment, attachment, bankruptcy or other legal
process (or by operation of law resulting from the liquidation, dissolution
or winding-up of a Venture), the applicable transferee or transferees of,
or any successor in title to, the transferred JV Interests (hereinafter the
"Transferred JV Interests"), shall, within 30 days after such transfer,
offer the Transferred JV Interests first to the Venture and second to the
other Venturers under this Section 10.4 by delivering notice of such offer
(the "Transfer Notice") in writing to the Venture and to the other
Venturers. In the event a creditor of the Venture commences foreclosure
against and acquires the assets of the Venture, then Paddlewheels' right to
receive payments pursuant to the Marine Agreement and Section 10.7 below
shall immediately terminate, and the Venture and the other Venturers shall
have no further obligations to make such payments to Paddlewheels.
(b) Option. The Venture shall have the right to purchase any or all
------
of any Transferred JV Interests at a price equal to the stated book value
thereof by giving written notice to the transferee or transferees thereof,
or successor in title thereto (any such transferee, transferees, successor
or Venturer being hereinafter collectively referred to as the "Recipient")
within 90 days after receipt of the Transfer Notice.
(c) Transfer Option. If the Venture does not elect to purchase all of
---------------
the Transferred JV Interests, the Venturers (other than any Venturer whose
JV Interests were subject to the transfer by legal process) shall have the
option (the "Transfer Option") to purchase the remaining Transferred JV
Interests at a price equal to the stated book value thereof by giving
written notice to the recipient within 120 days after
-27-
their receipt of the Transfer Notice. If the other Venturers elect to
purchase more Transferred JV Interests than are available, the available
Transferred JV Interests shall be allocated among the participating
Venturers in the manner described in Section 10.3(c) above.
(d) Transfer Price. The Venture and other Venturers who exercise the
--------------
Transfer Option shall tender payment in cash for the Transferred JV
Interests to be purchased by them on the date of closing of such purchase,
which shall occur no later than the tenth day immediately after the 120th
day following the receipt of the Transfer Notice.
(e) Absence of Transfer Notice. If no Transfer Notice shall be given
--------------------------
and the Venture or any Venturer becomes aware of the transfer of JV
Interests by legal process or otherwise that is subject to this Section
10.4(e), then the Venture or such Venturer shall give written notice to the
Venturers, in the case of the Venture, and to the Venture and Venturers, in
the case of any Venturer, of such of the facts and circumstances of such
transfer as are known by the Venture or such Venturer and such notice shall
be considered the Transfer Notice for the purposes of this Section 10.4(e).
Any Transferred JV Interests shall nevertheless remain subject to this
Section 10.4(e) until a Transfer Notice shall have been properly delivered
by the Recipient and the Venture and the Venturers shall have been given
the opportunity to exercise their respective options during the periods
provided in Sections 10.4(b) and (c) above. If, after a Transfer Notice
shall have been properly delivered, the Venture and the Venturers shall
fail to purchase all of the Transferred JV Interests as provided above, the
Transferred JV Interests not so purchased will no longer be subject to this
Section 10.4(e), provided, however, that the Recipient (if such person is
-------- -------
not already a party to this Agreement) shall, as a condition to the
effectiveness of any transfer to such person be required to become a party
to this Agreement.
(f) Limitation. Notwithstanding the terms and conditions of this
----------
Section 10.4, Paddlewheels and any Affiliate thereof, individually or
collectively, shall not have the right, in any manner, to acquire JV
Interests pursuant to this Section 10.4. Any such acquisition of JV
Interests by Paddlewheels and any Affiliate thereof, shall be null and
void, and of no further legal effect.
10.5 Forfeit of License; Transfer.
----------------------------
(a) If at any time Paddlewheels remains a Venturer and the Management
Committee or the Venturers authorize(s) or approve(s) the surrender or
forfeiture of the Venture's gaming
-28-
license issued by the Gaming Authorities, then Paddlewheels shall have the
option to acquire all of Sodak's, HWCC's and their respective Affiliate's
JV Interests, and upon such election, Sodak, HWCC and such Affiliates agree
to immediately transfer to Paddlewheels all of their JV Interests without
consideration.
(b) In the event the Venture is unable, during the period of time
(including any extensions thereof) established by the applicable Gaming
Authorities to enter into a credit facility or other loan agreement with a
third party lender that, together with capital contributions made or to be
made by Sodak and HWCC, provides sufficient funds to finance the
construction of the Complex, or if Sodak and HWCC notify Paddlewheels that
they are abandoning the Project without causing the dissolution of the
Venture, then Paddlewheels or its permitted assignees shall have the right,
subject to approval by the applicable Gaming Authorities, to purchase all
of the JV Interests held by Sodak and HWCC for an aggregate purchase price,
payable in cash, equal to the aggregate amount of Capital Contributions and
Subsequent Capital Contributions made by Sodak (and an Affiliate thereof)
and HWCC (or an Affiliate thereof), and expenses paid or incurred by such
parties in connection with the Project, less distributions that are a
return of capital paid by the Venture to Sodak and HWCC. The closing of
the transactions contemplated by this Section 10.5(b) shall occur no later
than the 30th day following the date the Gaming Authorities approve such
transfer.
10.6 Tag-a-Long and Call Rights.
--------------------------
(a) In the event of a Change-in-Control (as defined in Section 10.6(b)
below), then Sodak shall have the right to exercise its Tag-a-Long Rights
(as defined below) or its Call Rights (as defined below), subject to the
following conditions:
(i) HWCC will (A) first inform Sodak in writing (the "Change-in-
Control Notice") of (x) the occurrence of such Change-in-Control, (y)
if applicable, the prices, terms and conditions upon which such
Change-in-Control will be effected, including the consideration to be
received by HCC and/or its stockholders (the "Consideration"), and (z)
preliminary determination of the value of (I) a JV Interest (after
giving effect to the fees associated with the Management Agreement)
(the "JV Value") as determined by an investment banking firm(s) of
national standing involved in such business combination, transaction
or sale or, if no investment banking firm is involved, as determined
by HWCC (the
-29-
"HWCC JV Valuation") and (II) the Management Agreement (the
"Management Agreement Value") as determined by the same such
investment banking firm(s) or if no investment banking firm is
involved, as determined by HWCC (the "HWCC Management Agreement
Valuation") and (B) offer Sodak the opportunity to irrevocably elect
to either (x) sell Sodak's interest in the Venture by participating in
the Transaction Event (as defined below) that results in such Change-
in-Control, if practicable (in which case Sodak would sell its
interest in the Venture, excluding Sodak's right to receive 1% of
Complex Net Revenues, upon the same terms and conditions as are
included in the Change-in-Control transaction, it being understood
that if the Consideration is other than cash or unrestricted publicly
traded stock, Sodak may demand that it receives its consideration in
cash) or, if the Change-in-Control is not the result of a Transaction
Event, sell its interest in the Venture directly to HWCC or HWCC's
designee for a cash price equal to the JV Value (as determined
pursuant to Section 10.6(a)(ii) below) multiplied by the total number
of JV Interests proposed to be transferred by Sodak (the "Tag-a-Long
Rights") or (y) require that (I) HWCC sell to Sodak or its designee
all of HWCC's interest in the Venture for a cash price equal to the JV
Value (as determined pursuant to Section 10.6(a)(ii) below) multiplied
by the total number of JV Interests proposed to be transferred by HWCC
and (II) the Operator (or an Affiliate of HCC) sell its interest in
the Management Agreement to Sodak or its designee for a cash price
equal to the Management Agreement Value (as determined pursuant to
Section 10.6(a)(ii) below) (the "Call Rights").
(ii) If Sodak, within 6 business days after receipt of the
Change-in-Control Notice, does not object to the HWCC JV Valuation or
the HWCC Management Agreement Valuation, then such Valuations shall be
deemed to be the JV Value and the Management Agreement Value. If Sodak
objects to either the HWCC JV Valuation or the HWCC Management
Agreement Valuation within the 6-day period referenced in the
preceding sentence, then the JV Value and the Management Agreement
Value shall be determined within a reasonable time by an independent
appraiser selected by mutual agreement of Sodak and HWCC.
(iii) Within 5 business days after the determination of the JV
Value and the Management Agreement Value in accordance with Section
10.6(a)(ii), Sodak may elect to exercise the Tag-a-Long Rights or the
Call Rights. Such Tag-a-Long Rights and Call Rights shall be deemed to
have been waived if such rights have
-30-
not been exercised in writing within 5 business days after the
determination of the JV Value and the Management Agreement Value in
accordance with Section 10.6(a)(ii).
(iv) In the event that Sodak exercises its Tag-a-Long Rights in
a Change-In Control that results from a Transaction Event, HWCC shall
use its best efforts to cause the surviving entity if applicable, to
purchase Sodak's interest in the Venture according to the terms of
Section 10.6(a)(i)(B) above, and at the price established pursuant to
---------------------
Section 10.6(a)(ii) above. In the event that the Change-in-Control
results from a Transaction Event, and the surviving entity will not
agree to purchase Sodak's interest in the Venture, (i) HCC may not
proceed with such Change-in-Control without the prior written consent
of Sodak and (ii) if no Change-in-Control occurs, neither HCC, the
Operator nor HWCC shall have any further obligations with respect to
such particular exercise of the Tag-a-Long Rights.
(v) In the event that Sodak exercises its Call Rights, Sodak
shall purchase HWCC's interest in the Venture and shall purchase the
Operator's interest in the Management Agreement at the prices
established pursuant to Section 10.6(a)(ii) above. The closing for
such sale will occur within 30 days of exercise of the Call Rights or
such other period as mutually agreed upon by Sodak and HWCC.
(b) For purposes of this Section 10.6, the term "Change of Control"
means the occurrence of any of the following events: (i) the sale, lease,
transfer, conveyance or other disposition in one or a series of related
transactions, of all or substantially all of the assets of HCC and its
subsidiaries, taken as a whole, other than a sale to a real estate
investment trust; (ii) the liquidation or dissolution of HCC; (iii) HCC
becoming aware of (by way of a report or any other filing pursuant to
Section 13(d) of the Securities Exchange Act, proxy vote, written notice or
otherwise) the acquisition by any person or related group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange
Act, or any successor provision to either of the foregoing, including any
"group" acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Securities
Exchange Act), other than the ▇▇▇▇▇ Holders (as defined in Section 10.6(c)
below), in a single transaction or in a related series of transactions, by
way of merger, consolidation or other business combination or purchase of
beneficial ownership (within the meaning of Rule 13d-3 under
-31-
the Securities Exchange Act, or any successor provision) of 30% or more of
the total voting power entitled to vote in the election of the board of
directors of HCC or such other entity surviving the transaction and, at
such time, the ▇▇▇▇▇ Holders collectively shall fail to beneficially own,
directly or indirectly, securities representing greater than the combined
voting power of HCC's or such other entity's voting stock as is
beneficially owned by such person or group; or (iv) during any period of
two consecutive years, individuals who at the beginning of such period
constituted HCC's Board of Directors (together with any new directors whose
election or appointment by such board or whose nomination for election by
the stockholders of HCC was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) ceasing for any reason to constitute a majority of HCC's board
of directors then in office. Any Change-in-Control referred to in Sections
10.6(b)(i), (ii) and (iii), other than a Change-in-Control resulting from a
hostile takeover attempt, are referred to herein as a "Transaction Event."
(c) For purposes of this Section 10.6, the term "▇▇▇▇▇ Holders" means
(i) ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, their respective estates
and members of the immediate family (including adopted children) of any
such individuals who acquire voting stock of HCC from any such estates,
(ii) ▇.▇. ▇▇▇▇▇ Co. No. 1, E.T. ▇▇▇▇▇ Co. ▇▇. ▇, ▇.▇. ▇▇▇▇▇ ▇▇. ▇▇. ▇, each
a Texas general partnership, (iii) C.A. ▇▇▇▇▇ Partners, Ltd., a Texas
limited partnership, and (iv) ▇.▇. ▇▇▇▇▇ Family Trust, ▇. ▇▇▇▇▇ Family
Trust and ▇.▇. ▇▇▇▇▇ Family Trust.
10.7 Special Purchase Rights. If, at any time after the opening of the
-----------------------
Project, (i) QNOV sells all or substantially all of its assets to a person that
is not an Affiliate of either Sodak, HWCC , Operator, HCC, Sodak Gaming or any
other Venturer (other than Paddlewheels and any Affiliate thereof), or (ii)
Sodak, HWCC, the Operator, HCC, Sodak Gaming and such other Venturer
collectively sell all of their JV Interests to a person that is not an Affiliate
of either Sodak, HWCC, the Operator, HCC, Sodak Gaming or such Venturer, then
the Venture or Sodak, HWCC, the Operator, HCC, Sodak Gaming and such other
Venturer shall pay Paddlewheels an amount equal to 10% of the Net Realized Value
(as defined below) of such applicable sale received by the Venture, or Sodak,
HWCC, the Operator, HCC, Sodak Gaming and such other Venturer, together with an
additional amount representing the appraised value of Paddlewheels' right to
future fees that would otherwise continue to be payable under the Marine
Agreement. Upon payment of such Net Realized Value to Paddlewheels pursuant to
this Section 10.7, the
-32-
Venture shall not be obligated make any payments to Paddlewheels pursuant to the
Marine Agreement, and all of the JV Interests held by Paddlewheels and all of
its Affiliates shall terminate, expire and be of no legal effect. For purposes
of this section, the term "Net Realized Value" shall mean the gross sales
proceeds from the applicable sale less (x) transaction costs (including, but not
limited to, accountants' and attorneys' fees), and amounts used to repay debt
and to establish reserves for debt payments, replacements and contingencies
(provided that Net Realized Value shall later be increased to the extent that
any portion of such reserves are paid to the Venture subsequent to the initial
determination of Net Realized Value), and (y) paid by the Venture to Sodak,
HWCC, Paddlewheels, the Operator, HCC, Sodak Gaming, any other Venturer, or any
Affiliate thereof representing a return of each Venturer's initial Capital
Contributions and any Subsequent Capital Contributions. The parties hereto agree
and acknowledge that if any sale referred to in this Section 10.7 is made to an
Affiliate of the Venture, Sodak, HWCC, the Operator, HCC, Sodak Gaming or any
other Venturer (other than Paddlewheels or any Affiliate thereof), then
Paddlewheels shall not be entitled to receive any payments pursuant to this
Section 10.7.
ARTICLE XI
----------
MANDATORY TRANSFERS
-------------------
11.1 Unsuitability in Louisiana. If the Louisiana Gaming Control Board
--------------------------
("LGCB") makes a determination any Venturer or any Affiliate of such Venturer
(the "Unsuitable Venturer") is unsuitable to hold a license to perform or
conduct gaming activities (an "Unsuitability Determination"), after the
commencement of gaming operations of the Complex, the Unsuitable Venturer shall
immediately give to the other Venturers (except Paddlewheels and any Affiliate
thereof), upon submitting written notice, a right to purchase all of the
Unsuitable Venturers' JV Interests. In the event such other Venturers elect not
to purchase all of the Unsuitable Venturer's JV Interests within a 30-day period
following the date the Unsuitable Venturers' written notice, the Venture shall
purchase all of the remaining Unsuitable Venturer's JV Interests within a 30-day
period following the termination date of the foregoing 30-day period. The
purchase price for the JV Interests purchased pursuant to this Section 11.1
shall be equal to the lesser of (i) an amount agreed upon by the purchasing and
selling party, and if no such agreement is made, the fair market value as
determined by an appraiser mutually acceptable to the selling and purchasing
party, or (ii) an amount approved by the LGCB. Notwithstanding the foregoing,
if the Unsuitable Venturer receives an offer to purchase such Unsuitable
Venturer's
-33-
JV Interests from a third person, at any time during either the Venturers' 30-
day election period or Venture's 30-day election period pursuant to this Section
11.1, then the provisions set forth in Sections 10.3 and 10.4 shall govern.
Each Venturer shall independently comply with all federal, state and local
gaming regulations and any jurisdiction to which any Venturer is or becomes
subject to during the term of the license issued by the LGCB to the Venture,
including submitting to and cooperating in any investigation required by such
jurisdiction by virtue of the Venturer's JV Interests in the Venture. Each
Venturer shall bear all of its own costs which it incurs in connection with such
compliance.
11.2 Unsuitability in Other Jurisdictions.
------------------------------------
(a) Buy/Sell. If (i) a Gaming Authority of a State other than
--------
Louisiana makes an Unsuitability Determination as to any Venturer or an
Affiliate of such Venturer and (ii) any other Venturer (the "Affected
Venturer") reasonably determines that the affiliation of the Affected
Venturer with such Unsuitable Venturers threatens any gaming permit,
approval or other entitlement that the Affected Venturer or any Affiliate
of the Affected Venturer holds or has applied for because of such
Unsuitability Determination, then the Affected Venturer shall give a notice
of such determination to such Unsuitable Venturers. Within 20 days after
such notice is given, the Venturers receiving such notice shall give a
notice (a "Buy/Sell Notice") to the Affected Venturer and to the Affected
Venturer's Accountants of its election to either sell all (but not less
that all) of the Unsuitable Venturers' JV Interests to the Affected
Venturer or to buy all (but not less that all) of the JV Interests of the
Affected Venturer, in either case at a purchase price mutually agreed upon
by such parties or at the fair market value of such JV Interests as
determined by an appraiser mutually acceptable to such parties.
(b) Suitability Determination. Without limiting reasonableness to
-------------------------
such circumstances, a determination made by the Affected Venturer referred
to in Section 11.2(a) hereof shall be deemed to be reasonable if based
upon: (i) any written communication from a gaming regulatory authority of
the applicable state; or (ii) written evidence that, if true, the Affected
Venturer's participation in the Venture would violate any law, rule or
regulation administered by any gaming regulatory authority, so long as such
evidence is not induced in bad faith by its recipient.
11.3 Closing of Inter-Venturer Transfers. The closing of any Transfer of
-----------------------------------
the JV Interests of a Venturer to another Venturer
-34-
under this Article XI shall take place at the principal office of the Venture or
such other place as may be agreed upon by the Venturers on the first Business
Day that is at least ten days after the date on which the purchase price is
determined pursuant to the applicable provisions set forth in Article XI, or
such other date as may be agreed by the Venturers.
11.4 Limitation of Transfers. Except for Transfers effected pursuant to
-----------------------
any of Sections 11.1 and 11.2, no Transfer shall be made of any JV Interests if
(a) such Transfer, in the opinion of the Venture's legal counsel, would result
in the Venture being treated as an association taxable as a corporation for
federal or state tax purposes, (b) such Transfer, when considered with all other
Transfers of JV Interests within the previous 12 months, would result in the
Venture's being considered to have terminated within the meaning of Code Section
708, (c) such Transfer is effectuated through an "established securities market"
or a "secondary market (or the substantial equivalent thereof)" within the
meaning of Code Section 7704, (d) such Transfer would otherwise result in the
Venture's being classified as a "publicly traded venture" within the meaning of
Code Section 7704(b), (e) in the opinion of the Venture's legal counsel such
Transfer requires the registration of such JV Interests pursuant to any federal
or state securities law, (f) such Transfer would otherwise violate any
applicable federal or state securities laws (including any investor suitability
standards), (g) such Transfer would subject the Venture or any of the Venturers
to regulation under the Investment Company Act of 1940, the Investment Advisers
Act of 1940 or the Employee Retirement Income Security Act of 1974, each as
amended, (h) such Transfer would violate state gaming laws or regulations; (i)
such Transfer is made to any person who lacks the legal right, power or capacity
to own such JV Interests, or (j) the Venture does not receive written
instruments (including, without limitation, true copies of any transfer
instruments and the transferee's consent to be bound by this Agreement) that are
in form and substance satisfactory to the Management Committee of the Venture in
its sole and absolute discretion. Notwithstanding Sections 10.2, 10.3 and 10.4
above, no Transfer of any JV Interests shall be made if such Transfer would (w)
result in a default under the instrument evidencing or securing indebtedness of
the Venture unless such Transfer is otherwise consented to by, or such default
is waived by, the applicable lender, (x) with respect to any agreements or
comments to which any party is bound, require a prepayment of, or result in any
adverse change in the terms of any other instrument evidencing or securing
indebtedness of the Venture, (y) result in, or jeopardize the revocation,
suspension or denial of the gaming license issued by the Gaming Authorities to
the Venture permitting gaming activities pursuant to the Act, or (z) result in,
or jeopardize the revocation, suspension or denial of any gaming license, or
application for a gaming license, of any Venturer or any of its Affiliates in
any jurisdiction in which such Venturer or
-35-
its Affiliates are so licensed or have applied for a gaming license. The
Venturers acknowledge that adequate legal remedies are not likely to exist for
any breach of this Section 11.4 and, accordingly, that the Venture and any
aggrieved Venturer(s) shall have the right to secure injunctive relief in the
event of any actual or threatened breach of a Venturer's obligations under this
Section 11.4.
11.5 Ineligible Transferees. Notwithstanding any provision of this
----------------------
Agreement to the contrary, no Transfer of any JV Interests may be made under any
circumstances to any person who: (a) has not been determined suitable or
otherwise approved or exempted from such determination by the Louisiana Gaming
Control Board; or (b) is subject to an unsuitability determination by any
regulatory authority of any other state; or (c) has been convicted of a felony
offense.
11.6 Limitation. (a) Notwithstanding the terms and conditions contained in
----------
this Article XI, neither Paddlewheels nor any Affiliate thereof, individually or
collectively, shall have the right to acquire any JV Interests unless expressly
provided elsewhere in this Agreement. Any such acquisition of JV Interests by
Paddlewheels or any such Affiliate shall be null and void, and of no further
legal effect. In the event Sodak, HWCC or any other Venturer (other than
Paddlewheels and any Affiliate thereof) has the right to purchase Paddlewheels'
JV Interests pursuant to this Article XI, then Sodak, HWCC and such other
Venturer shall have the right to purchase all of Paddlewheels' rights to receive
payments pursuant to the Marine Agreement for a purchase price equal to the
appraised value of Paddlewheels' right to receive future fees pursuant thereto.
ARTICLE XII
-----------
DISSOLUTION UPON CERTAIN EVENTS
-------------------------------
Upon the occurrence of any event enumerated in Section 2.9 herein, then,
unless such occurrence shall by law cause the Venture not to be dissolved, the
Venturers in accordance with the provisions of Article XIV hereof, shall wind up
the affairs of the Venture unless Sodak and HWCC elect within 60 days after such
dissolution event to continue the Venture. If, upon dissolution of the Venture
for any reason described in Article XII, the business of the Venture is
continued without liquidation and without the winding up of the affairs of the
Venture pursuant to the terms hereof, title to the property of the Venture shall
be vested in the Venture continuing the business subject to Paddlewheels' right
to purchase JV Interests as expressly set forth in Section 13.1 below. Upon such
dissolution, each non-consenting Venturer, or any legal representative of such
Venturer, shall have the right to an accounting of its JV Interests as against
the Venture continuing
-36-
the business, and such Venturer shall have the right to have the value of its
interest as of the date of dissolution ascertained or have any right as a
creditor or otherwise with respect to the value of its JV Interests.
ARTICLE XIII
------------
DEFAULTS AND TERMINATION
------------------------
13.1 Defaults. Upon the occurrence of any of the following events (the
--------
affected Venturer being herein called the "Defaulting Venturer"):
(a) if the Defaulting Venturer shall fail in any other material
respect to perform its obligations and agreements hereunder, and such
default shall continue for 30 days after receipt of a notice of default
with respect thereto (provided that if either the event or condition
causing the default shall be such that it could not reasonably be cured
within 30 days, then no default shall be deemed to have occurred hereunder
if within such 30-day period the Defaulting Venturer shall have commenced
the curing of such default and shall thereafter proceed with all reasonable
diligence to complete the same);
(b) if the Defaulting Venturer shall be dissolved (except as permitted
in Article X);
(c) if the Gaming Authorities provide notice to the effect that the
Defaulting Venturer no longer satisfies the criteria for licensure under
the Act, or that the gaming license of the Venture or the other Venturer
shall be in jeopardy of being revoked, denied or suspended as a result of
the continued participation of the Defaulting Venturer in the Venture, and
the Defaulting Venturer has exhausted all administrative remedies;
(d) if the Defaulting Venturer shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file
any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief for
itself under the present or any future federal bankruptcy, or state
insolvency or other relief for debtors, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, conservator or
liquidator of such Venturer or of all, or any substantial part of its
properties or its interest in the Venture (the term "acquiesce" includes
but is not limited to the failure to file a petition or motion to vacate or
discharge any order, judgment or decree providing for such appointment
within 10 days after the appointment);
-37-
(e) if a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against the Defaulting
Venturer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the present
or any future federal bankruptcy act, or any other present or future
applicable federal, state or other statute or law relating to bankruptcy,
insolvency or other relief for debtors, and such Venturer shall acquiesce
in the entry of such order, judgment or decree (the term "acquiesce"
includes but is not limited to the failure to file a petition or motion to
vacate or discharge such order, judgment or decree within 10 days after the
entry of the order, judgment or decree), or such order, judgment or decree
shall remain unvacated and unstayed for an aggregate of 60 days (whether or
not consecutive) from the date of entry thereof, or any trustee, receiver,
conservator or liquidator of such Venturer or of all or any substantial
part of its property or its interest in the Venture shall be appointed
without the consent or acquiescence of such Venturer and such appointment
shall remain unvacated and unstayed for an aggregate of 60 days (whether or
not consecutive);
(f) if the Defaulting Venturer shall admit in writing its inability to
pay its debts as they mature;
(g) if the Defaulting Venturer shall give written notice to any
governmental body of insolvency or pending insolvency, or suspension or
pending suspension of operations;
(h) if the Defaulting Venturer shall make an assignment for the
benefit of creditors or take any other similar action for the protection or
benefit of creditors; or
(i) if all or a portion of JV Interests of the Defaulting Venturer in
the Venture shall be validly and legally seized or charged in execution of
a judgment;
then in any such event, the other Venturer(s) (if such Venturers are Sodak or
HWCC, or an Affiliate of either) (the "Nondefaulting Venturer(s)") shall have
the right to dissolve the Venture by giving the Defaulting Venturer written
notice thereof, unless Sodak and/or HWCC (or such applicable Affiliates) (if
either such party is a Non-Defaulting Venturer or both such parties are
Defaulting Venturers), elect to continue the Venture. If the Non-Defaulting
Venturers(s) elect to continue the business of the Venture, then the
Nondefaulting Venturer(s) shall have the right to acquire all of the JV
Interests of the Defaulting Venturer at a purchase price equal to the lesser of
book value or liquidation value of the Defaulting Venturer's JV Interests,
provided that Paddlewheels or any Affiliate thereof shall not have the right, in
any manner, to acquire JV Interests pursuant to this Section 13.1.
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Notwithstanding the foregoing, in the event Sodak, HWCC and any other Venturer
(other than Paddlewheels and any Affiliate thereof) each elect to dissolve the
Venture pursuant to this Section 13.1 or as otherwise set forth in this
Agreement, Paddlewheels and any Affiliate thereof shall have the right to
acquire, subject to the approval of the applicable Gaming Authorities, all of
the JV Interests of Sodak, HWCC and such other Venturer (including any Affiliate
thereof), at a purchase price equal to the lesser of book value or liquidation
value.
Failure by the Non-Defaulting Venturers to give any notice of a default as
specified herein, or any failure to insist upon strict performance of any of the
terms of this Agreement shall not constitute a waiver of any such breach or any
of the terms of this Agreement. No breach shall be waived and no duty to be
performed shall be altered or modified except in writing. One or more waivers
or failure to give notice of default shall not be considered as a waiver of a
subsequent or continuing breach of the same covenant.
13.2 Not Exclusive Remedy. The rights granted in Section 13.1 shall not be
--------------------
deemed an exclusive remedy of the Nondefaulting Venturers, but all other rights
and remedies, legal and equitable, shall be available to it.
ARTICLE XIV
-----------
DISSOLUTION
-----------
14.1 General Procedures. Upon any event of termination or dissolution of
------------------
the Venture as set forth in Article XII or Article XIII, hereof, the Venture
shall cease to engage in any further business, except to the extent necessary to
perform existing contracts, and shall wind up its affairs and liquidate its
assets, unless the Non-Defaulting Venturers elect to continue the business of
the Venture pursuant to Article XII, Section 13.1 above or as otherwise set
forth in this Agreement. During the course of liquidation, the Venturers shall
continue to share in the profits and losses as provided in Article V hereof, and
the provisions of this Agreement shall continue to bind the Venturers and apply
to the activities of the Venture, except as specifically provided to the
contrary, but there shall be no cash distributions to any of the Venturers until
the Distribution Date (as defined below).
14.2 Distribution Date. Liquidation will continue until the Venture's
-----------------
affairs are in such condition that there can be a final accounting, showing that
all fixed or liquidated obligations of the Venture are satisfied or can be
adequately provided for hereunder. The assumption or guarantee in good faith by
one or more financially responsible corporations or other persons shall be
deemed to be an adequate means of providing for such obligations.
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When the Venturers shall have determined that there can be a final accounting,
the Venturers shall establish a date for the distribution of the Venture's
assets (the "Distribution Date") and the assets of the Venture shall be
distributed as provided in Section 14.3 hereof on such date.
14.3 Liquidation and Winding Up. If upon dissolution of the Venture, the
---------------------------
business of the Venture is not continued pursuant to the terms of Article XII or
Section 13.1 (if Paddlewheels and any Affiliate thereof elect not to acquire JV
Interests pursuant to such Section), the Venture shall be liquidated and the
Management Committee (or other person or persons designated by a decree of a
court with proper jurisdiction) shall wind up the affairs of the Venture. The
Management Committee or other persons winding up the affairs of the Venture
shall promptly proceed to the liquidation of the Venture and, in settling the
accounts of the Venture, the assets and the property of the Venture shall be
distributed in the following order of priority:
(a) the payment of all debts and liabilities of the Venture in the
order of priority as provided by law (including outstanding loans from a
Venturer);
(b) the establishment of any reserves deemed necessary by the
Management Committee or the person winding up the affairs of the Venture
for any contingent liabilities or obligations of the Venture;
(c) the payment to each Venturer on a pro rata basis an amount equal
to the aggregate amount of initial and Subsequent Capital Contributions
made by each Venturer; and
(d) the balance, if any, distributed to the Venturers (including
Paddlewheels and any Affiliate thereof) pro rata in accordance with such
Venturers' Residual Ownership Ratios.
14.4 Compensation and Reimbursement. The Venture shall retain a person
------------------------------
(who may be any Nondefaulting Venturer) to act as liquidator for the Venture's
assets. The Nondefaulting Venturer or other person so retained shall be
entitled to reimbursement for out-of-pocket expenses incurred and reasonable
compensation for services rendered in connection with the winding up and
liquidation of the Venture, as agreed by the Venturers. Such reimbursement
shall be paid as an expense of the Venture after all debts to third parties have
been repaid or adequately provided for.
14.5 No Capital Contribution Upon Dissolution. Each Venturer shall look
----------------------------------------
solely to the assets of the Venture for all distributions with respect to the
Venture, and shall have no recourse therefor (upon dissolution or otherwise)
against any other Venturer. No Venturer shall be obligated to restore to the
Venture
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any negative balance that may exist or continue in such Venturer's Capital
Account.
ARTICLE XV
----------
NOTICES
-------
15.1 Notices. All notices or other communications hereunder shall be in
-------
writing and shall be deemed delivered, given or made, upon delivery if delivered
personally, by facsimile, or by express mail or other overnight courier service
or 72 hours after deposit thereof in the United States mails, certified or
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Paddlewheels:
Shreveport Paddlewheels, L.L.C.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Chief Executive Officer
With copy to:
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. Esq.
If to Sodak:
Sodak Louisiana, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
With copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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If to HWCC:
HWCC-Louisiana, Inc.
c/o Hollywood Gaming Corporation
Two Galleria Tower, Suite 2200
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
Any party shall have the right to change its address for notice by written
notice to the other Venturers delivered in accordance with this Section 15.1.
ARTICLE XVI
-----------
ADDITIONAL AGREEMENTS
---------------------
16.1 Covenant. Paddlewheels hereby covenants and agrees, and shall cause
--------
any of its permitted assignees or any Affiliate thereof, not to institute any
legal proceedings arising out of any claims, which have arisen or may arise out
of or are in any way connected with this Agreement, the Master Agreement, the
Marine Agreement, the Management Agreement, the Technical Services Agreement,
the Assignment Agreement, the Sodak Agreement, or any agreement, contract,
instrument in connection herewith or therewith or transactions contemplated
hereby or thereby. Notwithstanding the foregoing, Paddlewheels may bring any
claim, demand, cause of action, either in law or in equity, against the Venture,
Sodak or HWCC or any of their successors and assignees for any and all
liabilities and damages arising from the Venture's failure to make payments due
and owing to Paddlewheels under this Agreement, the Marine Agreement and its
right to receive 1% of "Complex Net Revenues" (as defined in the Assignment
Agreement).
16.2 Additional Obligations. The Venture and the Venturers agree that
----------------------
Paddlewheels shall not be required to make Subsequent Capital Contributions to
the Venture or additional contributions to the City of New Orleans or any other
third party (the "Exit Payments") in connection with the Venture's $7 million
exit fee payment obligation to the City of New Orleans, Louisiana pursuant to
the terms and conditions of the (i) Compromise Agreement, (ii) Loan and
Settlement Agreement, (iii) the Side Agreement, (iv) the Escrow Agreement and
(v) the Indemnity Agreement, each dated January 16, 1998 among NOP, HNOC and
certain other respective parties expressly named therein (collectively, the
"Settlement Agreements") or otherwise, and the Venture shall indemnify, defend
and hold Paddlewheels harmless from and against any claims for any Exit Payments
made by Paddlewheels in connection with the Settlement Agreements. The
Venturers agree not to amend, change or modify any of the Settlement Agreements
in any manner that
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adversely affects Paddlewheels' rights thereunder without Paddlewheels' prior
written consent. Sodak and HWCC agree and acknowledge that if Paddlewheels is
required to satisfy all or any portion of the outstanding principal or accrued
interest payable by the Venture to HNOC pursuant to the terms and conditions of
the Loan and Settlement Agreement, then Paddlewheels shall be deemed to be a
creditor of the Venture to the extent of such satisfied amounts, provided that
Paddlewheels shall not, in any manner, seek recourse against Sodak, HWCC or any
of their respective Affiliates for payment of the same.
16.3 Termination of Marine Agreement. In the event Paddlewheels and any
-------------------------------
Affiliate thereof assigns, conveys or otherwise transfers all of their JV
Interests to a party other than Paddlewheels or its Affiliate (a "Third Party"),
then Paddlewheels' right to receive payments from the Venture pursuant to the
Marine Agreement shall immediately terminate, unless at the same time of such
assignment, conveyance or transfer to a Third Party, Paddlewheels and such
Affiliates assign to such Third Party all of Paddlewheels' and such Affiliates'
rights and obligations under the Marine Agreement.
16.4 Appraisal. Unless otherwise expressly set forth in this Agreement,
---------
any appraisal required to be performed between a selling and purchasing party
pursuant to this Agreement shall be conducted by an appraiser selected pursuant
to the provisions set forth in this Section 16.4. The selling party or group
and purchasing party or group shall each appoint an appraiser who, in turn,
shall appoint a "third party" appraiser to perform the applicable appraisal.
The decision of the third party appraiser shall be final and binding and not
reviewable for any type of error. Unless otherwise expressly set forth in this
Agreement, the fees and costs of appraisal shall be borne equally by the selling
party or group and purchasing party or group.
16.5 Conversion to Limited Liability Company or Limited Partnership. The
--------------------------------------------------------------
Venturers hereby agree to pursue the possible change of the Venture from a
general partnership to either a limited liability company or a limited
partnership.
ARTICLE XVII
------------
CASUALTY AND CONDEMNATION
-------------------------
17.1 Insurance. The Venture shall maintain insurance with respect to the
---------
ownership and operation of the Complex, and any additional assets and the risks
of conducting its business, including but not limited to worker's compensation
coverage, all
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risk coverage, difference in conditions coverage, public liability coverage,
property damage coverage, and boiler and machinery coverage, on such terms and
in such amounts as are agreed upon by the Management Committee from time to
time.
17.2 Procedure Following Casualty. Upon the occurrence of a casualty
----------------------------
resulting in any damage to or destruction of all or any portion of the Complex,
any insurance proceeds in respect of such casualty, net of any collection costs
and amounts due to any lender to the Venture, shall, subject to the Management
Agreement, be used to repair or reconstruct such damaged portion of the Complex
on the condition that the Venturers (other than Paddlewheels and an Affiliate
thereof) shall have previously mutually agreed upon or mutually approved each of
the following:
(a) A construction schedule calling for complete repair or
reconstruction of the damage within a specified time period after the date
of occurrence of the casualty;
(b) A construction contract pursuant to which the repair or
reconstruction is to be accomplished;
(c) Plans and specifications for the repair or reconstruction;
(d) An operating budget for the restored property which demonstrates
that the Complex, after repair or reconstruction, can reasonably be
expected to be economically viable; and
(e) A budget and source of funds for the cost of such repair or
reconstruction and express approval of any expenses in excess of any
insurance proceeds that may be available for such repair or reconstruction.
17.3 Procedure Following Partial Condemnation. Upon the occurrence of any
----------------------------------------
partial condemnation of the Complex, any proceeds or payments to the Venture as
a result of such partial condemnation, net of any collections costs and amounts
due to any lender to the Venture, shall, subject to the terms and conditions of
the Management Agreement, be used to repair or reconstruct the remaining portion
of the Complex on the condition that the Venturers (other than Paddlewheels and
any Affiliate thereof) shall have previously mutually agreed upon or mutually
approved each of the following:
(a) A construction schedule calling for complete repair or
reconstruction of the remaining portion of the Complex within a specified
time period after the partial taking;
(b) A construction contract pursuant to which the repair or
reconstruction is to be accomplished;
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(c) Plans and specifications for the repair or reconstruction;
(d) An operating budget for the remaining portion of the Complex which
demonstrates that such remaining portion of the Complex, after the repair
or reconstruction, can reasonably be expected to be economically viable;
and
(e) A budget and source of funds for the cost of such repair and
reconstruction and express approval of any expenses in excess of any
condemnation proceeds that may be available for such repair or
reconstruction.
ARTICLE XVIII
-------------
GENERAL PROVISIONS
------------------
18.1 Other Interests. Each of the Venturers understands that each other
---------------
Venturer or its Affiliates may be interested, directly or indirectly, in various
other businesses and undertakings not included in the Venture. Except as
provided in Section 18.3 hereof or elsewhere in this Agreement or as mutually
agreed upon by the Venturers, the Venturers hereby agree that the creation of
the Venture and the assumption by each of the Venturers of its duties hereunder
shall be without prejudice to their rights (or the rights of its respective
Affiliates) to have such other interests and activities and to receive and enjoy
profits or compensation therefrom, and each Venturer waives any rights it may
otherwise have to, by reason of any duty otherwise owed to the Venture or its
Venturers, share or participate in such other interests or activities of the
other Venturer or its Affiliates. Except as provided in Section 18.3 hereof or
elsewhere in the Agreement, the Venturers and their Affiliates may engage in or
possess any interest in any other business venture of any nature or description
independently or with others, including, but not limited to, the ownership,
financing, leasing, operation, management, syndication, brokerage, or
development of real property and gambling casinos, and neither the Venture nor
any other Venturer shall have the right by virtue of this Agreement or otherwise
to prevent or participate in any such activity or the income or profits derived
therefrom.
18.2 Other Opportunities. Except as provided in this Agreement, no
-------------------
Venturer need disclose to any other Venturer or the Venture any other business
venture in which it or its Affiliates may have an interest or any other business
opportunity presented to it, even if such opportunity is of a character which,
if presented to the Venture, could be taken by the Venture, and each Venturer
and its Affiliates shall have the right to take for its own account or to
recommend to others any such particular investment opportunity or business
venture.
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18.3 Prohibited Payments. Each Venturer agrees that it and its Affiliates
-------------------
will conduct their activities, and will cause any activities conducted on their
behalf to be conducted, in a lawful manner and specifically will not engage in
the following transactions:
(a) Payments or offers of payment, directly or indirectly, to any
domestic or foreign government official or employee in order to obtain
business, retain business or direct business to others, or for the purpose
of inducing such government official or employee to fail to perform or to
perform improperly his official functions;
(b) receive, pay or offer anything of value, directly or indirectly,
from or to any private party in the form of a commercial bribe, influence
payment or kickback for any such purpose; or
(c) use, directly or indirectly, any funds or other assets of the
Venture or of such Venturer for any unlawful purpose including, without
limitation, political contributions in violation of applicable laws,
regulations, rules or orders.
18.4 Subsequent Actions and Good Faith. Each Venturer shall hereafter
---------------------------------
execute, deliver and file such further instruments and do such further acts and
things as may be required or useful to carry out the intent and purpose of this
Agreement and that are not inconsistent with the terms of this Agreement. Each
Venturer shall exercise in good faith and its best efforts in all transactions
affecting the Venture. If a Venturer is required to retain the services of an
attorney to enforce or otherwise litigate or defend any matter arising out of
this Agreement between such Venturer and the Venture or any other of the
Venturers, the prevailing party shall be entitled to be reimbursed for its
reasonable attorney's fees by the non-prevailing party.
18.5 Standing and Discharge of Liens. Each Venturer: (a) shall at all
-------------------------------
times preserve and keep in good standing its corporate status, as the case may
be, in Louisiana and in the State under whose laws it is organized; and (b)
shall pay all federal, state and local taxes, assessments and other governmental
charges imposed upon it or its JV Interests before any such taxes, assessments
or charges become a lien on its JV Interests.
18.6 Captions. The captions and section headings used herein are for
--------
convenience and for ease of reference only and constitute no part of the
agreement or understanding of the parties hereto, and no reference shall be made
thereto for the purpose of construing or interpreting any of the provisions of
this Agreement.
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18.7 Counterparts. This Agreement and any amendments hereto may be
------------
executed in one or more counterparts, all of which, taken together, shall
constitute one agreement binding upon the parties, notwithstanding that all
parties are not signatories to the same counterpart.
18.8 Applicable Law. This Agreement is made pursuant to, and shall be
--------------
governed by the internal laws of the State of Louisiana.
18.9 Entire Agreement. Except for the Master Agreement, Management
----------------
Agreement, the Marine Agreement, the Assignment Agreement and the Sodak
Agreement and all other agreements attached hereto and thereto as exhibits or
expressly referred to herein or therein, this Agreement shall supersede any
written and oral agreement among such parties and constitutes the entire
understanding and agreement of the Venturers with respect to the subject matter,
and may not be altered, modified or rescinded except by written instrument
executed by the Venturers. The parties hereto acknowledge that they do not deem
or intend their interests in the Venture, either alone, together or in
conjunction with the Management Agreement or any other document or
understanding, to represent or to be a "security" for the purposes of any state
or federal law.
18.10 Severability. If any of the terms and provisions of this
------------
Agreement shall be held invalid or unenforceable for any reason, such invalidity
or unenforceability shall in no event affect any of the other terms or
provisions, each of which other terms and provisions of this Agreement shall be
valid and enforceable to the fullest extent permitted by law
18.11 Successors and Assigns. The terms, provisions, covenants,
----------------------
undertakings, agreements, obligations and conditions of this Agreement shall be
binding upon and shall inure to the benefit of the permitted successors in
interest and assigns of the parties hereto with the same effect as if mentioned
in each instance where the party hereto is named or referred to, except that no
Transfer by a Venturer in violation of the provisions of this Agreement shall
vest any rights in the assignee, transferee, purchaser, secured party, mortgagee
or pledgee.
18.12 Time of the Essence. Time is of the essence with respect to all
-------------------
of the terms, covenants, obligations and agreements herein contained.
18.13 No Third Party Beneficiaries. Nothing contained in this
----------------------------
Agreement shall inure to the benefit of any third parties or any creditors of
the Venture or grant such third parties or creditors any rights or causes of
action against any of the parties hereto.
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18.14 Regulatory Information. Each Venturer shall provide, to the
----------------------
Venture or regulatory agency, as the case may be, as required by applicable
laws, regulations, rules or orders, all information pertaining to the Venture
and such Venturer's officers, directors, shareholders, financial sources, and
associations as shall be required by any federal or state securities law or any
regulatory authority with jurisdiction over the Venture, the Complex, or any
Venturer or any Affiliates of such person.
18.15 Lender Suitability. No Venturer shall incur or permit any person
------------------
or entity that holds any JV Interests to incur any indebtedness unless the
documents for such indebtedness provide that:
(a) If any lender to the Venture or to any person that holds any JV
Interest becomes subject to an unsuitability determination by the Gaming
Authorities the result of which is to threaten the revocation, suspension,
termination or rescission of any permit, approval, any entitlement or
license granted by the Gaming Authorities to or for the benefit of the
Venture, a Venturer, or any Affiliate of a Venturer, or result in any other
penalty to the Venture, a Venturer and any Affiliate of a Venturer, and if
such Unsuitability Determination is not cured in accordance with applicable
laws, regulations rules or orders, then to the extent and so long as
provided by applicable laws, regulations, rules or orders: (i) all payments
to such lender shall be suspended and escrowed; (ii) such lender shall
immediately divest itself of all loans made to the Venture or such person;
and (iii) such lender shall be subject to any other remedies as shall be
required by applicable laws, regulations, rules and orders.
(b) If the Management Committee reasonably determines that the
existence of a loan from a lender to the Venture will threaten any gaming
license, permit, approval, or other entitlement that such Venturer or any
Affiliate of such Venturer holds or applies for in any other jurisdiction,
such Venturer may, at no cost to the Venture or the other Venturer: (i)
require the Venture to exercise any redemption rights in any loan documents
with such lender and redeem such loan so long as such Venturer makes a loan
to the Venture (with the same security, interest and maturity provisions as
the redeemed loan) of the funds necessary to effect such redemption or
procures a loan for the Venture (with the same interest, security and
maturity provisions as the redeemed loan) from a Substitute Lender and so
long as such loan is in compliance with the Venture's loan documents and
this Agreement; (ii) require the Venture to exercise the rights in any loan
documents with such lender to procure a Substitute Lender or lenders that
will assume and accept the rights and obligations of the objectionable
lender; or (iii) with the
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consent of such lender, if required in any loan documents with such lender,
procure a Substitute Lender or lenders that assume and accept the rights
and obligations of the objectionable lender.
ARTICLE XIV
-----------
[INTENTIONALLY OMITTED]
ARTICLE XX
----------
INSURANCE
---------
20.1 Coverage.
--------
(a) Required Insurance. The Venture shall secure and maintain the
------------------
following insurance with respect to the Complex at all times during the
term of this Agreement:
(i) Comprehensive general liability insurance at a limit of at
least $1 million per occurrence/$2 million aggregate, including, but
not limited to, liquor liability and innkeepers liability coverage to
protect against theft of or damage to guests' property;
(ii) Automobile liability and physical damage insurance for at
least $1 million combined single limit to include broad form drive
other car coverage;
(iii) Comprehensive crime insurance including, but not limited
to, employee dishonesty and depositor's forgery Coverages;
(iv) Worker's compensation insurance and employer's liability,
including the maritime employers liability endorsement, U.S.L.& H.,
and similar insurances as may be required by law;
(v) Group benefits insurance including major medical and
hospitalization for Complex employees;
(vi) Fiduciary liability insurance, as required by the
Employment Retirement Income Security Act of 1974 covering pension and
benefit plans, in a limit sufficient to cover the assets at risk;
(vii) Marine hull and machinery and property insurance in an
amount equal to at least 100% of the agreed insurable value including
all gaming equipment thereof on a replacement cost basis;
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(viii) Marine business interruption insurance against loss of
profits measured by net income of the Venture;
(ix) Builder's risk insurance, if required, including delayed
opening coverage;
(x) Protection and indemnity coverage, if required, including
▇▇▇▇▇ Act, in an amount of at least $1 million with Excess Protection
and Indemnity coverage in an amount of not less than $25 million;
(xi) Vessel pollution insurance, if required;
(xii) Media/memorabilia professional liability insurance
affording protection for liabilities which may arise from the use and
display of "Hollywood" themed media and memorabilia at the Complex of
at least $2 million;
(xiii) Any insurance which the Venture or Operator may be
required to obtain pursuant to any franchise covering the Complex;
(xiv) Umbrella (excess liability) insurance in an amount of not
less than $100 million;
(xv) Any other insurance required by the terms of the Project
financing; and
(xvi) Insurance against such other insurable risks as may
reasonably be required.
(b) Changes in Coverage. The Venture may raise the minimum amount of
-------------------
insurance to be maintained with respect to the Complex under Section
20.1(a) above to make such insurance comparable to the amount of insurance
carried with respect to other similar operations taking into account the
size, location and character of the Complex. In addition, neither party
shall unreasonably withhold its consent to a request by the other party
that such minimum limits of insurance be lowered on the basis that such
insurance cannot be obtained in such amounts, or can be obtained only at a
prohibitive cost. Similarly, if during the term of this Agreement changes
in the insurance industry shall make any of the descriptions of the
required insurance coverage inaccurate or inappropriate, then the Venture
may change such requirements to accurately describe, the type of insurance
which would be comparable to the coverage described in Section 20.1(a)
above.
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(c) Requirements. All policies of insurance shall be written on an
------------
"occurrence" basis, if possible, and if any policy is written on a "claims
made" basis, then such policy must, if possible, be continued in effect for
a period of two years following the expiration or early termination of this
Agreement. The insurance coverage shall in any event comply with the
requirements of the Loan Commitments, if any.
20.2 Policies and Endorsements.
-------------------------
(a) Policies. All insurance provided for under Section 20.1 above
--------
shall be effected by policies issued by insurance companies of good
reputation and of sound and adequate financial responsibility as determined
by the Management Committee. The Venture shall furnish to each Venturer
certificates of insurance with respect to all of the policies of insurance
so procured, including existing, additional and renewal policies, and in
the case of insurance about to expire, the Venture shall deliver to each
Venturer certificates of insurance with respect to the renewal policies not
less than 30 days after the respective dates of expiration.
(b) Endorsements. All policies of insurance provided for under this
------------
Article XX shall have attached thereto (a) an endorsement that such policy
shall not be canceled or materially changed without at least 30 days prior
written notice to the Venture and each Venturer, (b) an endorsement to the
effect that no act or omission of the Venture or any Venturer shall affect
the obligation of the insurer to pay the full amount of any loss sustained
and (c) an endorsement to the effect that all liability policies of
insurance shall be endorsed to include worldwide coverage for suits brought
against named insureds as described in Section 20.2(c) below.
(c) Named Insureds. All policies of insurance required under clauses
--------------
(a)(i) and (a)(ii) of Section 20.1 shall be carried in the name of the
Venture, and, if required, the lender under the Loan Commitments, and each
of the Venturers shall be named as additional insureds thereunder. Losses
thereunder shall be payable to the parties as their respective interests
may appear. Notwithstanding the foregoing, if the lender under the Loan
Commitments is an institutional lender, and so requires, losses may be made
payable to such lender, or to a bank or trust company, in either instance
as trustee for the custody and disposition of the proceeds therefrom. The
Venturers agree that any Loan Commitment documents shall contain a
provision to the effect that proceeds from property insurance shall be
available for restoration of the Complex. All insurance policies required
in clauses (a)(iii), (a)(iv) and (a)(v) of Section 20.1 shall name the
Venture and its
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Affiliates, and the directors, officers, agents and employees of each such
entity as named insureds, and the Venturers and their Affiliates, and the
directors, officers, agents and employees of such entity as additional
insureds.
20.3 Waiver of Liability. No Venturer shall assert against the other, and
-------------------
each of the Venturers hereby waives with respect to each other, or against any
other entity or person named as additional insureds on any policies carried
under this Article XX, any claims for any losses, damages, liability or expenses
(including attorney's fees) incurred or sustained by either of them on account
of injury to persons or damage to property arising out of the ownership,
development, construction, completion, operation or maintenance of the Complex,
to the extent that the same are covered by the insurance required under this
Article XX. Each policy of insurance shall contain a specific waiver of
subrogation reflecting the provisions of this Section 20.3, or a provision to
the effect that the existence of the preceding waiver shall not affect the
validity of any such policy or the obligation of the insurer to pay the full
amount of any loss sustained.
20.4 Insurance by Venturers. Any insurance provided by the Venture under
----------------------
this Article XX may be effected under policies of blanket insurance which cover
other properties of the Venturers, or any of their respective Affiliates, and
the pro rata portion of such premiums shall be charged and allocated to the
Complex on the same basis as allocated to other participating operations of said
Venturer. Any policies of insurance maintained by the Venture pursuant to the
provisions of this Article XX may contain deductible provisions in such amounts
as are maintained with respect to other operations of said Venturer, taking into
account local standards and practices. Further, in lieu of all or a part of
comprehensive public liability insurance and worker's compensation and
employer's liability insurance under clauses (a)(iii) and (a)(v) of Section
20.1, any or all of the risks covered by such insurance may be self-insured or
self-assumed by the Venture under a self-insurance or assumption of risk program
similar to those in effect at other operations of said Venturer, up to such
amounts as such risks are assumed or self-insured at other operations of said
Venturers.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
By: SODAK LOUISIANA, L.L.C.
By: ▇▇▇▇▇ ▇. Buntrack
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Title: Manager
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By: HWCC - LOUISIANA, INC.
By: ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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By: SHREVEPORT PADDLEWHEELS, L.L.C.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: CEO
-----------------------------------
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