Exhibit 10.3

 

 

FOURTH AMENDMENT TO OPERATING AGREEMENT OF

DETROIT ENTERTAINMENT, L.L.C.

A MICHIGAN LIMITED LIABILITY COMPANY

 

THIS FOURTH AMENDMENT TO OPERATING AGREEMENT (the “Fourth Amendment”) is made
and entered into as of August 2, 2002,  by and between CIRCUS CIRCUS MICHIGAN,
INC., a Michigan corporation (“Circus”) and ATWATER CASINO GROUP, L.L.C., a
Michigan limited liability company (“ACG”), with reference to the following:

 

A.            Circus and ACG are parties to an Operating Agreement of Detroit
Entertainment, L.L.C., dated as of October 7, 1997, as amended (the “Operating
Agreement”) in connection with the formation, governance and operation of
Detroit Entertainment, L.L.C., a Michigan limited liability company (the
“Company”).

 

B             Atwater Entertainment Associates, L.L.C. (“AEA”) and ZRX, L.L.C.
(“ZRX”) are the constituent members of ACG.

 

C.            Circus is a subsidiary of Mandalay Resort Group (formerly known as
Circus Circus Enterprises, Inc.) (“Mandalay”).

 

D.            The parties desire to amend the Operating Agreement of the Company
to reflect the changes agreed to by the parties, among others, in connection
with the transfer restrictions and distribution rights with respect to the
Members.

 

NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

                1.             Amendments to Operating Agreement.  The Operating
Agreement shall be amended as follows:

 

                                a.             A new definition shall be added
to Appendix A and shall read as follows:

 

                                                ““Family Members” means
grandparents, parents, siblings, spouses, child (naturally or adopted),
grandchild (natural or adopted), father-in-law, mother-in-law, including trusts
for the benefit of, or entities wholly-owned by, the foregoing persons.”

 

                                b.             Section 12.01(b) of the Operating
Agreement shall be amended in its entirety to read as follows:

 

                                                “(b)  Notwithstanding anything
to the contrary contained herein, for purposes of this Article XII, a
“Disposition” shall not include (and consent of the non-transferring Members
under Section 12.02 and the right of first refusal, provisions of 12.03 shall
not apply to) (i) a transfer by Circus to its parent or any wholly-owned
Affiliate of its parent or in connection with the sale or transfer of
substantially all of the assets of Circus or its parent (including, without
limitation, any transfer by merger, consolidation, stock sale, or the like);
(ii) a

 

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transfer by ACG to an entity that is beneficially owned by the same Persons who
presently own ACG and in the same percentage as are presently owned by such
Persons; (iii) a transfer of any ownership interest in ZRX or AEA (A) to another
Person owning an interest in such entities as of the date hereof, (B) to Family
Members of the transferor, (C) to the beneficiaries or devisees upon the death
of a transferor, (D) in connection with the entry of a divorce decree for or
against a transferor, (E) to a corporation, partnership, limited liability
company, trust or other entity, the ownership or beneficiaries of which are
comprised wholly of and limited to the transferors and/or their legal/beneficial
owners, (F) as a result of the death or permanent disability or a transferor, or
(G) to the beneficial owners of entities who are members upon the dissolution of
the entity; (iv) or a transfer of the ownership interest in a Member if such
transfer is incident to a transfer by the ultimate parent corporation of such
Member of substantially all of its gaming assets; or (v) a transfer to create a
security interest; provided that such Member shall give notice to the Company
and the other Members upon completion of such transaction and shall provide to
the Company and the other Members, to the extent requested, as a condition to
the transferee being admitted as a Substitute Member, and in compliance with
Section 9.02, an opinion of counsel to the effect that such transfer shall not
result in the Company being characterized for federal income tax purposes as an
association taxable as a corporation.”

 

                                c.             Section 12.03 of the Operating
Agreement shall be amended in its entirety and read as follows:

 

                                                “12.03   Rights of First
Refusal.

 

                                                Each time a Member proposed to
Dispose of all or any part of such Member’s Membership Interest (or is required
by operation of law or other involuntary transfer to do so), such Member shall
first offer such Membership Interest (the “Offered Interest”) to the
non-transferring Members in accordance with the following provisions:

 

                                                                (a)          
Such Member shall deliver a written notice to the non-transferring Members (the
“Disposition Notice”) stating (i) such Member’s intention to Dispose of the
Offered Interest, (ii) the Sharing Ration of the Offered Interest, (iii) the
purchase price for which the Member proposes to Dispose of the Offered Interest,
and (iv) all other pertinent terms and conditions of such proposed bona fide
Disposition.

 

                                                                (b)          
Within sixty (60) days after receipt of the Disposition Notice (the “First
Refusal Period”), the non-transferring Members shall have the first right to
purchase all but not less than all of such Offered Interest upon the stated
purchase price and terms designated in such Disposition Notice and if they so
elect, shall notify the Management Committee in writing (an “Acceptance Notice”)
of such election to purchase all or a portion of the Offered Interest.  The
failure of a non-transferring Member to submit an Acceptance Notice within the
applicable period shall constitute an election on the part of that Member not to
purchase any of the Offered Interest.  If more than one non-transferring Member
elects to purchase (the “Electing Members”), each Electing Member shall purchase
a portion of the Offered Interest equal to a fraction, the numerator of which is
the Electing Member’s Sharing Ratio and the denominator of which is the total of
all Electing Member’s Sharing Ratios; provided, however, that the Electing
Members may elect to purchase the Offered Interest in some

 

 

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other proportion.  If the non-transferring Members elect to purchase the Offered
Interest under this Section 12.03, such purchase shall be consummated within ten
(10) business days after the end of the First Refusal Period.  At the closing of
such purchase, the transferring Member shall transfer the Offered Interest to
the Electing Members, free and clear of all liens, claims and other encumbrances
against payment of the applicable stated purchase price.

 

                                                                (c)           If
the non-transferring Members do not elect to purchase all of the Offered
Interest, then the transferring Member may offer to transfer any portion of the
Offered Interest within 90 days after the expiration of the First Refusal Period
(“Offer Period”), provided such transfer (i) is to a person to whom the transfer
may occur without creating a violation of the Development Agreement and who is
suitable for licensure under the Michigan Gaming Control and Revenue Act and is
financially capable of performing his/her obligations (a “Qualified Purchaser”),
(ii) the transferring Member receives and provides to the non-transferring
Members, within the Offer Period, (1) a binding purchase offer for the Offered
Interest being transferred to the Qualified Purchaser on terms no less favorable
than designated on the Disposition Notice, and (2) evidence of escrowed funds
sufficient to close the purchase of such Offered Interest, (iii) the transfer is
completed after approval by the Gaming Authorities, and (iv) the requirements of
Sections 12.01(d) and (e) and 12.02 are met (other than the requirement to
obtain written consent of the non-transferring Members).  If such Offered
Interest is not so transferred, the transferring Member must give notice in
accordance with this Section 12.03 prior to any other or subsequent proposed
transfer of all or any portion of its Membership Interest.”

 

                                                d.             Section 4.05(d)
shall be amended in its entirety and read as follows:

 

                                                “During the first ten (10) years
following Completion of Construction, Circus shall receive an annual Management
Fee equal to 1.5% of the first $700 million of approved Project Cost.  The
Management Fee shall be payable in monthly estimated installments in arrears, on
or about the tenth day of each calendar month, subject to annual adjustment
within thirty (30) days after the end of each Fiscal Year.  Notwithstanding the
foregoing, the Management Fee shall only be paid in amounts that do not exceed
the cumulative distributions to Members of Distributable Cash under Article VI
(excluding Tax Distributions) beginning on the date the Management Fee is first
payable; provided, however, in the event of dissolution of the Company, any
accrued but unpaid Management Fee would be paid in accordance with Section
13.02(b).”

 

                2.             Entire Amendment.  Except as amended or modified
hereby, the Operating Agreement shall remain unmodified and in full force and
effect.

 

                3.             Counterparts.  This Amendment may be executed in
counterparts, each of which when executed and delivered by all parties named as
signatories below, shall have the force and effect of the original, but all such
counterparts shall constitute one and the same instrument.

 

 

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                IN WITNESS WHEREOF, the undersigned have executed this Fourth
Amendment as the date first set forth above.

 

ATWATER CASINO GROUP, L.L.C.

 

CIRCUS CIRCUS MICHIGAN, INC.,

a Michigan limited liability company

 

a Michigan corporation

 

 

 

By:  Atwater Management Corporation,

 

By:

/s/ GLENN W. SCHAEFFER

a Michigan corporation, its Manager

 

 

 

 

Name: Glenn W. Schaeffer

 

 

 

By:

/s/ THOMAS CELANI

 

Title: President

 

Thomas Celani, President

 

 

 

 

 

By:

/s/ VIVIAN CARPENTER

 

 

 

Vivian Carpenter, Vice President

 

 

 

JOINDER

 

ATWATER ENTERTAINMENT ASSOCIATES, L.L.C., a Michigan limited liability company
and ZRX, L.L.C., a Michigan limited liability company, hereby join in the
execution of the foregoing Fourth Amendment, solely for the purposes of
acknowledging that they have read, understand and agree to be bound by, the
terms, covenants and provisions of the foregoing Fourth Amendment.

 

 

ATWATER ENTERTAINMENT ASSOCIATES,

 

ZRX, L.C.C.,

L.L.C., a Michigan limited liability Company

 

a Michigan limited liability company

 

 

 

 

 

 

 

 

By Z.L.M. Corporation, its Manager

 

 

 

By:

/s/ VIVIAN CARPENTER

 

/s/ THOMAS CELANI

 

By: Vivian Carpenter, Manager

 

Thomas Celani, President

 

 

 

By:

/s/ JACK BARTHWELL

 

/s/ MARIAN ILITCH

 

By: Jack Barthwell, Manager

 

Marian Ilitch, Member

 

 

 

 

 

 

/s/ THOMAS CELANI

 

 

 

Thomas Celani, President

 

 

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