Exhibit 10.10

 

 

MEMBER CONTROL AGREEMENT

 

of

 

NORTH METRO HARNESS INITIATIVE, LLC

 

a Minnesota Limited Liability Company

 

 

June 8, 2004

 

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MEMBER CONTROL AGREEMENT

 

OF

 

NORTH METRO HARNESS INITIATIVE, LLC

 

This Member Control Agreement of NORTH METRO HARNESS INITIATIVE, LLC, a
Minnesota limited liability company (the “Company”) is entered into and shall be
effective as of June 8, 2004 (the “Effective Date”), by and between Southwest
Casino and Hotel Corp., a Minnesota corporation (“Southwest”), MTR-Harness,
Inc., a Minnesota corporation (“MTR-Harness”) and MTR Gaming Group, Inc., a
Delaware corporation (“MTR”), the parent of MTR-Harness.

 

RECITALS

 

A.            Southwest caused the Company to be formed in Minnesota as a
single-member limited liability company on June 16, 2003 (the “Formation Date”)
and, since the Formation Date, has operated the Company as an entity that is
disregarded as a separate entity from its owner for federal and state income tax
purposes.

 

B.            Since the Formation Date, Southwest has contributed funds to the
Company, expended funds on behalf of the formation and establishment of the
Business (defined below) of the Company and acquired certain assets, including
the Real Estate Options (defined below).

 

C.            Upon the admission of MTR-Harness as a Member (defined below) of
the Company in exchange for its Initial Capital Contribution (defined below),
the Company will be converted from a disregarded entity into a “partnership” for
federal income tax purposes, as described in Situation 2 of IRS Revenue Ruling
99-5, 1999-1 C.B. 434, whereby (i) Southwest will be treated as making its
Capital Contribution in cash, a cash commitment, and by contributing all of the
assets and liabilities of the Business as such assets and liabilities exist on
the Effective Date, and (ii) MTR-Harness will be considered to contribute its
Capital Contribution in cash and a cash commitment, with each such Capital
Contribution made in exchange for the Membership Interests described in this
Agreement.

 

D.            Southwest and MTR-Harness each have a fifty percent (50%)
Percentage Interest (as defined below) in the Company.

 

E.             Southwest and MTR-Harness, as all of the Members of the Company
desire to enter into this Member Control Agreement (within the meaning of Minn.
Stat. § 322B.37) to govern the business and affairs of the Company to the
fullest extent permitted by law.

 

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements as set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties, intending to be legally bound, hereby agree as follows:

 

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ARTICLE I
DEFINITIONS

 

For the purposes of this Agreement (as defined below) the following terms shall
have the following meanings:

 

1.             ACT – THE MINNESOTA LIMITED LIABILITY COMPANY ACT, MINN. STAT. §
322B.01 ET SEQ., AS AMENDED FROM TIME TO TIME.

 

2.             ADDITIONAL MEMBER - A MEMBER OTHER THAN SOUTHWEST, MTR-HARNESS OR
A SUBSTITUTE MEMBER WHO HAS ACQUIRED A MEMBERSHIP INTEREST FROM THE COMPANY.

 

3.             AFFILIATE – AS APPLIED TO ANY SPECIFIED PERSON OR ORGANIZATION
MEANS ANY OTHER PERSON OR ORGANIZATION (AND ALL NATURAL PERSONS RELATED BY
BLOOD, ADOPTION OR MARRIAGE TO SUCH OTHER PERSON) DIRECTLY OR INDIRECTLY
CONTROLLING, CONTROLLED BY, OR UNDER DIRECT OR INDIRECT COMMON CONTROL WITH,
SUCH SPECIFIED PERSON.  THE TERM “CONTROL” (INCLUDING, WITH CORRELATIVE
MEANINGS, THE TERMS “CONTROLLING,” “CONTROLLED BY” AND “UNDER COMMON CONTROL
WITH”), AS APPLIED TO ANY PERSON, MEANS THE POSSESSION, DIRECTLY OR INDIRECTLY,
OF 20% OR MORE OF THE VOTING POWER (OR IN THE CASE OF A PERSON WHICH IS NOT A
CORPORATION, 20% OR MORE OF THE OWNERSHIP INTERESTS, BENEFICIAL OR OTHERWISE) OF
SUCH PERSON OR ORGANIZATION OR THE POWER OTHERWISE TO DIRECT OR CAUSE THE
DIRECTION OF THE MANAGEMENT AND POLICIES OF THAT PERSON OR ORGANIZATION, WHETHER
THROUGH VOTING, BY CONTRACT OR OTHERWISE.  FOR PURPOSES OF THIS PARAGRAPH,
“VOTING POWER” OF ANY PERSON OR ORGANIZATION MEANS THE TOTAL NUMBER OF VOTES
WHICH MAY BE CAST BY THE HOLDERS OF THE TOTAL NUMBER OF OUTSTANDING EQUITY
INTERESTS OF ANY CLASS OR CLASSES OF SUCH PERSON OR ORGANIZATION IN ANY ELECTION
OF DIRECTORS OF SUCH PERSON OR ORGANIZATION OR INDIVIDUALS SERVING ON A
COMMITTEE OR BOARD SERVING A FUNCTION COMPARABLE TO THAT SERVED BY A BOARD OF
DIRECTORS OF A CORPORATION.  ALL DIRECTORS AND EXECUTIVE OFFICERS OF A
CORPORATION AND ALL DIRECTORS AND MEMBERS OF A BOARD OR BOARD OF DIRECTORS OR
SIMILAR COMMITTEE OF A PERSON OR ORGANIZATION ORGANIZED AS A LIMITED LIABILITY
COMPANY SHALL BE DEEMED TO BE AFFILIATES OF SUCH PERSON.

 

4.             AGREEMENT - THIS MEMBER CONTROL AGREEMENT ESTABLISHED PURSUANT TO
MINN. STAT. § 322B.37.

 

5.             ARTICLES - THE AMENDED AND RESTATED ARTICLES OF ORGANIZATION OF
THE COMPANY FILED WITH THE MINNESOTA SECRETARY OF STATE ON OR BEFORE THE
EFFECTIVE DATE, AS PROPERLY ADOPTED AND SUBSEQUENTLY AMENDED FROM TIME TO TIME
BY THE MEMBERS AND FILED WITH THE MINNESOTA SECRETARY OF STATE.

 

6.             ASSIGNEE - A TRANSFEREE OF A MEMBERSHIP INTEREST WHO HAS NOT BEEN
ADMITTED AS A SUBSTITUTE MEMBER.

 

7.             BANKRUPT MEMBER - THE TERMS “BANKRUPTCY” AND “BANKRUPT,” AND
VARIATIONS THEREOF, SHALL MEAN ANY OF THE FOLLOWING: (I) THE INITIATION BY A
MEMBER OF A PROCEEDING, OR INITIATION OF ANY PROCEEDING AGAINST A MEMBER WHICH
HAS NOT BEEN VACATED, DISCHARGED OR BONDED OFF WITHIN SIXTY (60) DAYS OF
INITIATION, UNDER ANY

 

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FEDERAL, STATE OR LOCAL BANKRUPTCY OR INSOLVENCY LAW, (II) AN ASSIGNMENT BY A
MEMBER FOR THE BENEFIT OF CREDITORS, (III) THE ADMISSION BY A MEMBER IN WRITING
OF HIS INABILITY TO PAY HIS DEBTS AS THEY BECOME DUE, OR (IV) THE CONSENT OF A
MEMBER TO THE APPOINTMENT OF A RECEIVER OR TRUSTEE FOR ALL OR A SUBSTANTIAL PART
OF HIS PROPERTY, OR COURT APPOINTMENT OF SUCH RECEIVER OR TRUSTEE WHICH IS NOT
SUSPENDED OR TERMINATED WITHIN SIXTY (60) DAYS AFTER APPOINTMENT.

 

8.             BOARD OF DIRECTORS (“BOARD”) – HAS THE MEANING ASSIGNED IN
ARTICLE VII, SECTION 4.

 

9.             BUDGETS – HAS THE MEANING ASSIGNED IN ARTICLE VII, SECTION 8.

 

10.           BUSINESS – HAS THE MEANING ASSIGNED IN ARTICLE III, SECTION 2.

 

11.           BUSINESS DAY - ANY DAY OTHER THAN SATURDAY, SUNDAY, OR ANY LEGAL
HOLIDAY OBSERVED IN THE STATE OF MINNESOTA.

 

12.           CAPITAL ACCOUNT - THE ACCOUNT MAINTAINED FOR A MEMBER OR ASSIGNEE
DETERMINED IN ACCORDANCE WITH ARTICLE VIII, SECTION 4.

 

13.           CAPITAL CONTRIBUTION – ANY ACTUAL CONTRIBUTION OF CASH OR PROPERTY
MADE BY OR ON BEHALF OF A MEMBER, BUT EXCLUSIVE OF ANY OBLIGATION TO CONTRIBUTE
CASH OR PROPERTY TO THE COMPANY HAS NOT BEEN FUNDED.

 

14.           CAPITAL CONTRIBUTION COMMITMENT – THE COMMITMENT BY MTR-HARNESS TO
CONTRIBUTE UP TO AN ADDITIONAL SEVEN MILLION FOUR HUNDRED NINETY THOUSAND
DOLLARS ($7,490,000.00) TO THE COMPANY SUBSEQUENT TO THE OCCURRENCE OF A
LICENSING EVENT AND THE COMMITMENT BY SOUTHWEST TO CONTRIBUTE FUND ALL COSTS
(OTHER THAN $10,000 CONTRIBUTED BY MTR-HARNESS) PRIOR TO THE LICENSING EVENT AND
TO CONTRIBUTE UP TO AN ADDITIONAL ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000.00) TO THE COMPANY SUBSEQUENT TO THE OCCURRENCE OF A LICENSING
EVENT, AS REFERENCED IN ARTICLE VIII, SECTION 1.

 

15.           CATCH-UP CONTRIBUTION – MEANS A CAPITAL CONTRIBUTION IN THE AMOUNT
OF TWO MILLION NINE HUNDRED NINETY THOUSAND DOLLARS ($2,990,000.00) TO BE MADE
IN CASH BY MTR-HARNESS UPON THE OCCURRENCE OF A LICENSING EVENT WITHOUT ANY
FURTHER APPROVAL OR ACTION BY THE BOARD OR MEMBERS.  THE CATCH-UP CONTRIBUTION
IS INTENDED TO BE IN SUCH AMOUNT THAT MTR-HARNESS’S CUMULATIVE CAPITAL
CONTRIBUTIONS TO THE COMPANY (INCLUDING ITS INITIAL CAPITAL CONTRIBUTION)
IMMEDIATELY AFTER SUCH CATCH-UP CONTRIBUTION WILL BE AN AMOUNT EQUAL TO THREE
(3) TIMES SOUTHWEST’S MATCHED PRE-LICENSING COSTS.

 

16.           CLOSING DATE – THE DATE, WHICH IS EXPECTED TO BE THE SAME DATE AS
THE EFFECTIVE DATE, ON WHICH MTR-HARNESS ACQUIRED A FIFTY PERCENT (50%)
PERCENTAGE INTEREST IN THE COMPANY PURSUANT TO THE TERMS AND CONDITIONS OF THIS
AGREEMENT AND A PURCHASE AGREEMENT, DATED THE CLOSING DATE BETWEEN THE COMPANY,
SOUTHWEST AND MTR GAMING GROUP, INC., WITH SUCH ADMISSION OF MTR-HARNESS AS A

 

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MEMBER CAUSING THE COMPANY TO CONVERT FROM A DISREGARDED ENTITY TO A PARTNERSHIP
FOR FEDERAL INCOME TAX PURPOSES.

 

17.           CODE - THE INTERNAL REVENUE CODE OF 1986, AS AMENDED FROM TIME TO
TIME.

 

18.           COMPANY – NORTH METRO HARNESS INITIATIVE, LLC, A LIMITED LIABILITY
COMPANY FORMED UNDER THE LAWS OF THE STATE OF MINNESOTA.

 

19.           COMPANY LIABILITY - ANY ENFORCEABLE DEBT OR OBLIGATION FOR WHICH
THE COMPANY IS LIABLE OR WHICH IS SECURED BY ANY COMPANY PROPERTY.

 

20.           COMPANY PROPERTY - ANY PROPERTY OWNED BY THE COMPANY.

 

21.           DIRECTOR – HAS THE MEANING ASSIGNED IN ARTICLE VII, SECTION 4.

 

22.           DISPOSITION (DISPOSE) – WITH RESPECT TO ANY MEMBERSHIP INTEREST,
MEANS ANY SALE, ASSIGNMENT, TRANSFER, EXCHANGE, MORTGAGE, PLEDGE, GRANT,
HYPOTHECATION, OR OTHER TRANSFER, ABSOLUTE OR AS SECURITY OR ENCUMBRANCE
(INCLUDING DISPOSITION BY OPERATION OF LAW).

 

23.           DISSOCIATION (DISSOCIATED) - ANY ACTION WHICH CAUSES A PERSON TO
CEASE TO BE A MEMBER AS DESCRIBED IN ARTICLE XI HEREOF.

 

24.           DISSOLUTION EVENT - AN EVENT, THE OCCURRENCE OF WHICH WILL RESULT
IN THE DISSOLUTION OF THE COMPANY UNDER ARTICLE XV, UNLESS THE MEMBERS ELECT TO
AVOID DISSOLUTION WHERE THE MEMBERS HAVE THE POWER TO SO ELECT.

 

25.           DISTRIBUTION - A TRANSFER OF CASH OR OTHER PROPERTY TO A MEMBER ON
ACCOUNT OF A MEMBERSHIP INTEREST AS DESCRIBED IN ARTICLE IX AND ARTICLE XV.

 

26.           EFFECTIVE DATE – HAS THE MEANING ASSIGNED IN THE PREAMBLE HERETO.

 

27.           FORMATION DATE – HAS THE MEANING ASSIGNED IN THE PREAMBLE HERETO.

 

28.           GAMING AUTHORITY – ANY GOVERNMENTAL GAMING AUTHORITY HAVING
JURISDICTION OVER MTR OR ITS SUBSIDIARIES, SOUTHWEST OR THE COMPANY INCLUDING,
BUT NOT LIMITED TO THE MINNESOTA RACING COMMISSION, MINNESOTA GAMING CONTROL
BOARD, SOUTH DAKOTA DIVISION OF GAMING, COLORADO DIVISION OF GAMING, NATIONAL
INDIAN GAMING COMMISSION, CHEYENNE AND ARAPAHO TRIBES GAMING COMMISSION, THE
PENNSYLVANIA HORSE RACING COMMISSION, THE WEST VIRGINIA LOTTERY COMMISSION, THE
WEST VIRGINIA RACING COMMISSION, THE OHIO RACING COMMISSION, AND THE NEVADA
GAMING CONTROL BOARD.

 

29.           INITIAL CAPITAL CONTRIBUTIONS – THE CAPITAL CONTRIBUTIONS MADE BY
THE MANAGING MEMBERS IN CASH OR PROPERTY ON THE EFFECTIVE DATE, AS DESCRIBED IN
ARTICLE VIII, SECTION 1.

 

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30.           LICENSING EVENT – THE DATE ON WHICH A LICENSE IS ISSUED AND
RECEIVED BY THE COMPANY FROM THE MINNESOTA RACING COMMISSION ALLOWING THE
COMPANY TO CONSTRUCT AND OPERATE A HARNESS RACING TRACK AND CARD ROOM IN
COLUMBUS TOWNSHIP, ANOKA COUNTY, MINNESOTA (THE “LICENSE”).

 

31.           MANAGING MEMBERS – SOUTHWEST AND MTR-HARNESS (EACH A MANAGING
MEMBER AND COLLECTIVELY THE MANAGING MEMBERS AND SOMETIMES REFERRED TO AS THE
CO-MANAGING MEMBERS).

 

32.           MATCHED PRE-LICENSING COSTS – SHALL MEAN ONE MILLION DOLLARS
($1,000,000.00) OF SOUTHWEST’S PRE-LICENSING COSTS.

 

33.           MEMBER – SOUTHWEST, MTR-HARNESS, ANY SUBSTITUTED MEMBER OR ANY
ADDITIONAL MEMBER, AND, UNLESS THE CONTEXT EXPRESSLY INDICATES TO THE CONTRARY,
INCLUDES MANAGING MEMBERS AND ASSIGNEES.

 

34.           MEMBERSHIP INTEREST – THE INDIVIDUAL EQUITY INTEREST OF THE
RESPECTIVE MEMBERS IN AND TO THE COMPANY, WHICH INTEREST IS TO BE MAINTAINED AS
A SINGLE INTEREST AND WHICH IS NOT TO BE DIVIDED INTO ANY SUBINTEREST, SUCH AS
AN INTEREST IN SEPARATE FINANCIAL OR MANAGEMENT RIGHTS OR OTHERWISE.

 

35.           MONTHLY INSTALLMENT – SHALL MEAN THE RETURN TO SOUTHWEST OF THE
UNMATCHED PRE-LICENSING COSTS TO BE PAID, SUBJECT TO THE AVAILABILITY OF
SUFFICIENT DISTRIBUTABLE CASH, IN THE FORM OF TWENTY-FOUR (24) EQUAL MONTHLY
INSTALLMENTS OVER A TWENTY-FOUR (24) MONTH PERIOD.

 

36.           MTR – MTR GAMING GROUP, INC., A DELAWARE CORPORATION.

 

37.           MTR-HARNESS – MTR-HARNESS, INC., A MINNESOTA CORPORATION WHOLLY
OWNED BY MTR.

 

38.           MTR-HARNESS MAXIMUM CAPITAL CONTRIBUTION – THE SEVEN MILLION FIVE
HUNDRED THOUSAND DOLLAR ($7,500,000.00) CAPITAL CONTRIBUTION MADE, OR TO BE
MADE, BY MTR-HARNESS, COMPRISED OF MTR-HARNESS’ INITIAL CAPITAL CONTRIBUTION AND
CAPITAL CONTRIBUTION COMMITMENT, WHICH AMOUNT MAY ONLY BE INCREASED WITH THE
CONSENT OF MTR-HARNESS.

 

39.           NET LOSSES - THE LOSSES AND DEDUCTIONS OF THE COMPANY DETERMINED
IN ACCORDANCE WITH ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED FROM YEAR TO YEAR
EMPLOYED UNDER THE METHOD OF ACCOUNTING ADOPTED BY THE COMPANY AND AS REPORTED
SEPARATELY OR IN THE AGGREGATE, AS APPROPRIATE, ON THE TAX RETURN OF THE COMPANY
FILED FOR FEDERAL INCOME TAX PURPOSES.

 

40.           NET PROFITS - THE INCOME AND GAINS OF THE COMPANY DETERMINED IN
ACCORDANCE WITH ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED FROM YEAR TO YEAR
EMPLOYED UNDER THE METHOD OF ACCOUNTING ADOPTED BY THE COMPANY AS REPORTED
SEPARATELY OR IN THE AGGREGATE, AS APPROPRIATE, ON THE TAX RETURN OF THE COMPANY
FILED FOR FEDERAL INCOME TAX PURPOSES.

 

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41.           NOTICE – ANY NOTICE MADE PURSUANT TO THIS AGREEMENT SHALL BE IN
WRITING.  NOTICE TO THE COMPANY SHALL BE CONSIDERED GIVEN WHEN MAILED BY
CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, ADDRESSED TO BOTH
MANAGING MEMBERS IN CARE OF THE COMPANY AT THE ADDRESS OF THE PRINCIPAL OFFICE
IDENTIFIED IN ARTICLE II, SECTION 6.  NOTICE TO A MEMBER SHALL BE CONSIDERED
GIVEN WHEN MAILED BY CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED,
ADDRESSED TO SUCH MEMBER AT THE ADDRESS REFLECTED IN THE AGREEMENT UNLESS THE
MEMBER HAS GIVEN THE COMPANY A NOTICE OF A DIFFERENT ADDRESS.  NOTICE TO ANY
DIRECTOR SHALL BE AS PROVIDED IN ARTICLE VII, SECTION 4.3.  ANY NOTICE HEREUNDER
SHALL BE CONSIDERED GIVEN THREE (3) DAYS AFTER BEING MAILED BY CERTIFIED MAIL,
POSTAGE PREPAID, RETURN RECEIPT REQUESTED.

 

42.           OFFICERS – SHALL MEAN THE GENERAL MANAGER APPOINTED BY THE
CO-MANAGING MEMBERS AND SUCH OTHER INDIVIDUALS AS MAY BE APPOINTED BY THE BOARD
OF DIRECTORS, AS MORE FULLY DESCRIBED IN ARTICLE VII, SECTION 5.

 

43.           ORGANIZATION - A PERSON OTHER THAN A NATURAL PERSON.  AN
ORGANIZATION INCLUDES, WITHOUT LIMITATION, CORPORATIONS (BOTH NON-PROFIT AND
OTHER CORPORATIONS), PARTNERSHIPS (BOTH LIMITED AND GENERAL), JOINT VENTURES,
LIMITED LIABILITY COMPANIES, AND UNINCORPORATED ASSOCIATIONS, BUT THE TERM DOES
NOT INCLUDE JOINT TENANCIES AND TENANCIES BY THE ENTIRETY.

 

44.           PRE-LICENSING COSTS – DOCUMENTED OUT-OF-POCKET COSTS INCURRED
PRIOR TO THE OCCURRENCE OF A LICENSING EVENT IN CONNECTION WITH THE PREPARATION
OF THE LICENSE APPLICATION AND PURSUIT OF THE LICENSE APPROVAL, THE REAL
PROPERTY OPTIONS, ENGINEERING AND DESIGN WORK, ENVIRONMENTAL ASSESSMENTS AND
OTHER COSTS RELATED TO THE BUSINESS ON OR BEFORE THE OCCURRENCE OF THE LICENSING
EVENT, PROVIDED THAT SUCH COSTS SHALL EXCLUDE CORPORATE OVERHEARD AND PROVIDED
FURTHER THAT SOUTHWEST OR THE COMPANY SHALL HAVE CAPITALIZED (RATHER THAN
DEDUCTED) SUCH COSTS ON ITS TAX RETURNS FOR THE PERIODS PRIOR TO OR INCLUDING
THE OCCURRENCE OF THE LICENSING EVENT.  THE PURPOSE OF THE ABOVE-MENTIONED
REQUIREMENT THAT SOUTHWEST OR THE COMPANY SHALL HAVE CAPITALIZED SUCH COSTS ON
ITS TAX RETURN IS TO AVOID A VARIATION BETWEEN THE BASIS OF THE PROPERTY TO THE
COMPANY AND ITS FAIR MARKET VALUE AT THE TIME OF CONTRIBUTION AND, ACCORDINGLY,
TO AVOID A SPECIAL ALLOCATION OF INCOME, GAIN, LOSS AND DEDUCTION PURSUANT TO
SECTION 704(C) OF THE CODE.  EXCEPT FOR THE EXCLUSION OF CORPORATE OVERHEAD,
THERE IS NO PROHIBITION ON SUCH COSTS BEING REFLECTED AS INTANGIBLE ASSETS ON
THE COMPANY’S FINANCIAL STATEMENTS.  PRE-LICENSING COSTS ARE DIVIDED INTO TWO
CATEGORIES:  MATCH PRE-LICENSING COSTS AND UNMATCHED PRE-LICENSING COSTS.

 

45.           PERCENTAGE INTEREST - A MEMBER’S SHARE OF THE NET PROFITS AND NET
LOSSES OF THE COMPANY (EXCEPT AS OTHERWISE PROVIDED IN ARTICLE IX) AND, SUBJECT
TO THE PAYMENT OF DISPROPORTIONATE DISTRIBUTIONS TO MTR-HARNESS UNTIL
MTR-HARNESS AND SOUTHWEST HAVE EACH RECEIVED A RETURN OF THEIR CAPITAL
CONTRIBUTIONS AS PROVIDED IN ARTICLE IX, A MEMBER’S RIGHT TO RECEIVE
DISTRIBUTIONS OF THE COMPANY’S ASSETS.

 

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46.           PERSON - AN INDIVIDUAL, TRUST, ESTATE, OR ANY INCORPORATED OR
UNINCORPORATED ORGANIZATION PERMITTED TO BE A MEMBER OF A LIMITED LIABILITY
COMPANY UNDER THE LAWS OF THE STATE OF MINNESOTA.

 

47.           PREFERRED RETURN – MEANS THE AMOUNT ACCRUED FOR EACH TAXABLE YEAR
(OR PORTION THEREOF) OF THE COMPANY COMMENCING ON THE EFFECTIVE DATE BY APPLYING
THE PRIME RATE, AS IN EFFECT FROM TIME TO TIME, TO THE SUM OF (I) THE
UNRECOVERED UNMATCHED PRE-LICENSING COSTS AND (II) THE UNRECOVERED PREFERRED
RETURN.

 

48.           PRIME RATE - PRIME RATE SHALL MEAN THE “PRIME RATE” AS PUBLISHED
IN THE “MONEY RATES” SECTION OF THE WALL STREET JOURNAL; HOWEVER, IF SUCH RATE
IS, AT ANY TIME DURING THE TERM OF THIS AGREEMENT, NO LONGER SO PUBLISHED, THE
TERM “PRIME RATE” SHALL MEAN THE AVERAGE OF THE PRIME INTEREST RATES WHICH ARE
ANNOUNCED, FROM TIME TO TIME, BY THE THREE (3) LARGEST BANKS (BY ASSETS)
HEADQUARTERED IN THE UNITED STATES WHICH PUBLISH A PRIME, BASE OR REFERENCE
RATE, IN ANY CASE NOT TO EXCEED THE MAXIMUM RATE PERMITTED BY LAW.

 

49.           PROCEEDING - ANY JUDICIAL OR ADMINISTRATIVE TRIAL, HEARING OR
OTHER ACTIVITY, CIVIL CRIMINAL OR INVESTIGATIVE, THE RESULT OF WHICH MAY BE THAT
A COURT, ARBITRATOR, OR GOVERNMENTAL AGENCY MAY ENTER A JUDGMENT, ORDER, DECREE
OR OTHER DETERMINATION WHICH, IF NOT APPEALED AND REVERSED, WOULD BE BINDING
UPON THE COMPANY, A MEMBER OR OTHER PERSON SUBJECT TO THE JURISDICTION OF SUCH
COURT, ARBITRATOR, OR GOVERNMENTAL AGENCY, INCLUDING AN APPEAL OR REVIEW OF
SAME.

 

50.           PROPERTY - ANY PROPERTY REAL OR PERSONAL, TANGIBLE OR INTANGIBLE,
INCLUDING MONEY AND ANY LEGAL OR EQUITABLE INTEREST IN SUCH PROPERTY, EXCLUDING
SERVICES AND PROMISES TO PERFORM SERVICES IN THE FUTURE.

 

51.           REAL ESTATE OPTIONS – THE OPTIONS TO ACQUIRE THE REAL PROPERTY
WHICH WAS CONTRIBUTED TO THE COMPANY BY SOUTHWEST AS PART OF SOUTHWEST’S INITIAL
CAPITAL CONTRIBUTION.

 

52.           REAL PROPERTY – THE REAL PROPERTY WHICH IS REFERRED TO IN ARTICLE
III AND WHICH IS MORE FULLY DESCRIBED IN EXHIBIT B ATTACHED HERETO AND MADE A
PART HEREOF.

 

53.           REGULATIONS - EXCEPT WHERE THE CONTEXT INDICATES OTHERWISE, THE
PERMANENT, TEMPORARY, PROPOSED, OR PROPOSED AND TEMPORARY REGULATIONS OF THE
U.S. TREASURY DEPARTMENT, PROMULGATED UNDER THE CODE, AS SUCH REGULATIONS MAY BE
LAWFULLY CHANGED FROM TIME TO TIME.

 

54.           RESIGNATION - THE ACT BY WHICH A MANAGING MEMBER CEASES TO BE A
MANAGING MEMBER.

 

55.           SOUTHWEST MAXIMUM CAPITAL CONTRIBUTION – THE SUM OF THE MATCHED
PRE-LICENSING COSTS, THE UNMATCHED PRE-LICENSING COSTS, AND SOUTHWEST’S
COMMITMENT TO CONTRIBUTE UP TO AN ADDITIONAL ONE MILLION FIVE HUNDRED THOUSAND
DOLLAR ($1,500,000.00) SUBSEQUENT TO THE OCCURRENCE OF THE LICENSING EVENT,
WHICH AMOUNT MAY ONLY BE INCREASED WITH THE CONSENT OF SOUTHWEST.

 

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56.           SUBSTITUTE MEMBER - AN ASSIGNEE WHO HAS BEEN ADMITTED TO ALL OF
THE RIGHTS OF MEMBERSHIP PURSUANT TO THE AGREEMENT.

 

57.           SUITABLE PERSON – A PERSON LICENSABLE BY EACH GAMING AUTHORITY
HAVING JURISDICTION OVER THE COMPANY’S BUSINESS OR ANY MEMBER’S OR THEIR
AFFILIATE’S BUSINESS OPERATIONS AT THE TIME OF ANY SUCH DETERMINATION.

 

58.           TAXABLE YEAR - THE TAXABLE YEAR OF THE COMPANY AS DETERMINED
PURSUANT TO SECTION 706 OF THE CODE, WHICH SHALL BE THE CALENDAR YEAR ENDED
DECEMBER 31 UNLESS PROPERLY CHANGED BY THE MANAGING MEMBERS OR BOARD.

 

59.           TAXING JURISDICTION - ANY STATE, LOCAL, OR FOREIGN GOVERNMENT THAT
COLLECTS TAX, INTEREST OR PENALTIES, HOWEVER DESIGNATED, ON ANY MEMBER’S SHARE
OF THE NET PROFITS OF THE COMPANY.

 

60.           UNMATCHED PRE-LICENSING COSTS – SHALL MEAN THE AMOUNT OF
SOUTHWEST’S PRE-LICENSING COSTS IN EXCESS OF ONE MILLION DOLLARS
($1,000,000.00).

 

61.           UNRECOVERED PREFERRED RETURN – SHALL MEAN THE CUMULATIVE AMOUNT OF
ACCRUED BUT UNPAID PREFERRED RETURN.

 

62.           UNRECOVERED UNMATCHED PRE-LICENSING COSTS – SHALL MEAN THE
AGGREGATE UNMATCHED PRE-LICENSING COSTS LESS THE AMOUNT OF SUCH UNMATCHED
PRE-LICENSING COSTS PAID TO SOUTHWEST IN THE FORM OF MONTHLY INSTALLMENTS
PURSUANT TO ARTICLE IX, SECTION 3 OR OTHERWISE RETURNED TO SOUTHWEST PURSUANT TO
ARTICLE IX, SECTION 4.

 

63.           UNSUITABLE PERSON – A PERSON NOT LICENSABLE BY EACH GAMING
AUTHORITY HAVING JURISDICTION OVER THE COMPANY’S BUSINESS OR ANY MEMBER’S OR
THEIR AFFILIATE’S BUSINESS OPERATIONS AT THE TIME OF ANY SUCH DETERMINATION.

 

ARTICLE II
FORMATION

 

1.             ORGANIZATION.  SOUTHWEST ORGANIZED THE COMPANY AS A MINNESOTA
LIMITED LIABILITY COMPANY PURSUANT TO THE PROVISION OF THE ACT AND FILED THE
COMPANY’S ORIGINAL ARTICLES OF ORGANIZATION ON JUNE 16, 2003.  AT ALL TIMES
SINCE ITS FORMATION AND THROUGH THE EFFECTIVE TIME, THE COMPANY HAS BEEN
DISREGARDED AS AN ENTITY SEPARATE FROM SOUTHWEST FOR FEDERAL AND STATE INCOME
TAX PURPOSES.  ON THE EFFECTIVE DATE, MTR-HARNESS ACQUIRED A FIFTY PERCENT (50%)
PERCENTAGE INTEREST FROM THE COMPANY, AND THE REVISED ARTICLES WERE FILED WITH
THE MINNESOTA SECRETARY OF STATE ON OR BEFORE THE EFFECTIVE DATE.  ON THE
EFFECTIVE DATE, THE COMPANY CONVERTED INTO A PARTNERSHIP FOR FEDERAL AND
APPLICABLE STATE INCOME TAX PURPOSES.

 

2.             AGREEMENT.  FOR AND IN CONSIDERATION OF THE MUTUAL COVENANTS
HEREIN CONTAINED AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE MEMBERS EXECUTING THE AGREEMENT
HEREBY

 

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AGREE TO THE TERMS AND CONDITIONS OF THE AGREEMENT, AS IT MAY FROM TIME TO TIME
BE AMENDED ACCORDING TO ITS TERMS.  IT IS THE EXPRESS INTENTION OF THE MEMBERS
THAT THE AGREEMENT SHALL BE THE SOLE SOURCE OF AGREEMENT OF THE PARTIES. 
CONSISTENT WITH SUCH INTENTION, THE MEMBERS ACKNOWLEDGE THAT THE COMPANY’S
OPERATING AGREEMENT, DATED JULY 16, 2003, IS NO LONGER IN FORCE AND EFFECT.

 

3.             NAME.  THE NAME OF THE COMPANY IS NORTH METRO HARNESS INITIATIVE,
LLC, A LIMITED LIABILITY COMPANY, AND ALL BUSINESS OF THE COMPANY SHALL BE
CONDUCTED UNDER THAT NAME OR UNDER ANY OTHER NAME, BUT IN ANY CASE, ONLY TO THE
EXTENT PERMITTED BY APPLICABLE LAW.

 

4.             TERM.  THE DURATION OF THE COMPANY SHALL BE PERPETUAL, UNLESS THE
COMPANY SHALL BE SOONER DISSOLVED AND ITS AFFAIRS ARE WOUND UP IN ACCORDANCE
WITH THE ACT OR THIS AGREEMENT.

 

5.             REGISTERED AGENT AND OFFICE.  THE REGISTERED AGENT FOR THE
SERVICE OF PROCESS SHALL BE THOMAS E. FOX AND THE REGISTERED OFFICE SHALL BE
THAT LOCATION REFLECTED IN THE ARTICLES OF ORGANIZATION AS FILED IN THE
MINNESOTA SECRETARY OF STATE’S OFFICE.  THE MEMBERS, MAY, FROM TIME TO TIME,
CHANGE THE REGISTERED AGENT OR OFFICE THROUGH APPROPRIATE FILINGS WITH THE
MINNESOTA SECRETARY OF STATE’S OFFICE.  IN THE EVENT THE REGISTERED AGENT CEASES
TO ACT AS SUCH FOR ANY REASON OR THE REGISTERED OFFICE SHALL CHANGE, THE
MANAGING MEMBERS OR BOARD SHALL PROMPTLY DESIGNATE A REPLACEMENT REGISTERED
AGENT OR FILE A NOTICE OF CHANGE OF ADDRESS AS THE CASE MAY BE.  IF THE MANAGING
MEMBERS OR BOARD SHALL FAIL TO DESIGNATE A REPLACEMENT-REGISTERED AGENT OR
CHANGE OF ADDRESS OF THE REGISTERED OFFICE, ANY MEMBER MAY DESIGNATE A
REPLACEMENT-REGISTERED AGENT OR FILE A NOTICE OF CHANGE OF ADDRESS.

 

6.             PRINCIPAL OFFICE.  THE PRINCIPAL OFFICE OF THE COMPANY SHALL BE
LOCATED AT:

 

2001 Killebrew Drive

Suite 306

Bloomington, Minnesota 55425

 

The Managing Members shall have the authority upon their unanimous agreement to
change the principal office of the Company.

 

ARTICLE III
NATURE OF BUSINESS

 

1.             GENERAL POWERS.  THE COMPANY MAY ENGAGE IN ANY LAWFUL BUSINESS
PERMITTED BY THE ACT OR THE LAWS OF ANY JURISDICTION IN WHICH THE COMPANY MAY DO
BUSINESS.  THE COMPANY SHALL HAVE THE AUTHORITY TO DO ALL THINGS NECESSARY OR
CONVENIENT TO ACCOMPLISH ITS PURPOSE AND OPERATE ITS BUSINESS AS DESCRIBED IN
THE AGREEMENT AND THIS ARTICLE III.  NOTWITHSTANDING THE FOREGOING, THE COMPANY
EXISTS ONLY FOR THE PURPOSE SPECIFIED IN SECTION 2 OF THIS ARTICLE III, AND MAY
NOT CONDUCT ANY OTHER BUSINESS WITHOUT THE UNANIMOUS CONSENT OF THE MANAGING
MEMBERS.

 

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2.             HARNESS RACE TRACK.  THE COMPANY’S BUSINESS (THE “BUSINESS”) MAY
INCLUDE, BUT SHALL NOT BE LIMITED TO, THE PURCHASE OF THE REAL PROPERTY
DESCRIBED IN EXHIBIT B ATTACHED HERETO AND MADE A PART HEREOF (THE “REAL
PROPERTY”), AND THE OPERATION OF CARD GAMES AND A HARNESS HORSE RACETRACK
THEREON, TOGETHER WITH ALL OF THE NORMAL ANCILLARY FUNCTIONS AND FACILITIES,
SUCH AS STABLES, A CLUBHOUSE, A GRANDSTAND, RESTAURANTS, PARI-MUTUEL WAGERING,
TOGETHER WITH THE OPERATION OF OTHER ANCILLARY BUSINESSES ON THE REAL PROPERTY,
SUCH AS NIGHTCLUBS, A HOTEL AND SUCH OTHER ACTIVITIES (INCLUDING THE ADDITIONAL
AUTHORIZED GAMING DESCRIBED IN ARTICLE VIII, SECTION 3) AS MAY BE PERMITTED BY
LAW FROM TIME TO TIME.

 

ARTICLE IV
ACCOUNTING AND RECORDS

 

1.             RECORDS TO BE MAINTAINED.  THE COMPANY SHALL MAINTAIN THE
FOLLOWING RECORDS AT ITS PRINCIPAL OFFICE:

 

1.1           A CURRENT LIST OF THE FULL NAME AND LAST KNOWN BUSINESS ADDRESS OF
EACH MEMBER;

 

1.2           A COPY OF THE ARTICLES AND ALL AMENDMENTS THERETO, TOGETHER WITH
EXECUTED COPIES OF ANY POWERS OF ATTORNEY PURSUANT TO WHICH ANY ARTICLES HAVE
BEEN EXECUTED;

 

1.3           COPIES OF THE COMPANY’S FEDERAL, FOREIGN, STATE, AND LOCAL INCOME
TAX RETURNS AND REPORTS, IF ANY, FOR THE THREE MOST RECENT YEARS;

 

1.4           COPIES OF THIS AGREEMENT INCLUDING ALL AMENDMENTS THERETO; AND

 

1.5           ANY FINANCIAL STATEMENTS OF THE COMPANY FOR THE SEVEN (7) MOST
RECENT YEARS.

 

2.             REPORTS TO MEMBERS:

 

2.1           THE BOARD SHALL PROVIDE TO THE MEMBERS OTHER THAN ASSIGNEES,
(A) UNAUDITED BALANCE SHEETS, INCOME STATEMENTS AND CHANGES IN FINANCIAL
POSITION (“FINANCIAL STATEMENTS”) FOR EACH CALENDAR QUARTER WITHIN FIFTEEN (15)
DAYS FOLLOWING THE END OF SUCH CALENDAR QUARTER AND (B) AUDITED FINANCIAL
STATEMENTS FOR EACH CALENDAR YEAR ON OR BEFORE THE END OF THE FIFTH (5TH) FRIDAY
FOLLOWING THE END OF SUCH CALENDAR YEAR, OR AT SUCH OTHER TIMES AS MAY BE AGREED
TO BY THE MEMBERS.

 

2.2           THE BOARD SHALL PROVIDE ALL MEMBERS WITH SUCH INFORMATION RETURNS
REQUIRED BY THE CODE AND THE LAWS OF THE APPLICABLE STATE OR STATES IN WHICH THE
COMPANY OPERATES.

 

3.             ACCOUNTS.  THE BOARD SHALL MAINTAIN A RECORD OF EACH MEMBER’S
CAPITAL ACCOUNT IN ACCORDANCE WITH ARTICLE VIII.

 

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4.             ACCOUNTANT.  THE MANAGING MEMBERS JOINTLY, OR THE BOARD, SHALL
DETERMINE THE FIRM OR FIRMS OF ACCOUNTANTS TO ASSIST THE COMPANY WITH FINANCIAL
STATEMENTS AND TAX MATTERS.  NOTWITHSTANDING THE FOREGOING, IF NECESSARY IN
ORDER TO SATISFY THE REQUIREMENTS OF ARTICLE IV, SECTION 2.1, THE COMPANY SHALL
UTILIZE THE ACCOUNTING FIRM SELECTED BY MTR-HARNESS.

 

ARTICLE V
NAMES AND ADDRESSES OF MEMBERS

 

The name and addresses of the Members are as reflected on Exhibit A attached
hereto and by this reference made a part hereof as if set forth fully herein.

 

ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS

 

1.             MANAGEMENT RIGHTS.  ALL MEMBERS (OTHER THAN ASSIGNEES) WHO HAVE
NOT DISSOCIATED SHALL BE ENTITLED TO VOTE ON ANY MATTER SUBMITTED TO A VOTE OF
THE MEMBERS.  WHENEVER ANY MATTER IS REQUIRED OR ALLOWED TO BE APPROVED BY THE
MEMBERS, UNDER THE ACT OR THIS AGREEMENT (WHICH SHALL TAKE PRECEDENCE OVER THE
ACT TO THE FULLEST EXTENT PERMITTED BY LAW), SUCH MATTER SHALL BE CONSIDERED
APPROVED OR CONSENTED TO UPON THE RECEIPT OF THE REQUISITE APPROVAL OR CONSENT,
EITHER IN WRITING OR AT A MEETING OF THE MEMBERS.  ASSIGNEES AND, IN THE CASE OF
APPROVALS TO WITHDRAWAL WHERE CONSENT OF THE REMAINING MEMBERS IS REQUIRED,
MEMBERS WHO HAVE DISSOCIATED, SHALL NOT BE CONSIDERED MEMBERS ENTITLED TO VOTE
FOR THE PURPOSE OF DETERMINING AN APPROVAL ACTION.

 

2.             LIABILITY OF MEMBERS.  NO MEMBER SHALL BE LIABLE AS SUCH, FOR ANY
COMPANY LIABILITY.  THE FAILURE OF THE COMPANY TO OBSERVE ANY FORMALITIES OR
REQUIREMENTS RELATING TO THE EXERCISE OF ITS POWERS OR MANAGEMENT OF ITS
BUSINESS OR AFFAIRS UNDER THIS AGREEMENT OR THE ACT SHALL NOT BE GROUNDS FOR
IMPOSING PERSONAL LIABILITY ON THE MEMBERS, MANAGING MEMBERS OR DIRECTORS OR
OFFICERS FOR LIABILITIES OF THE LIMITED LIABILITY COMPANY.

 

3.             INDEMNIFICATION.  THE COMPANY SHALL INDEMNIFY THE MEMBERS,
MANAGING MEMBERS, DIRECTORS AND OFFICERS AND THEIR AGENTS FOR ALL COSTS, LOSSES,
CLAIM, JUDGMENTS, LIABILITIES, AND DAMAGES PAID OR ACCRUED BY SUCH MEMBER,
MANAGING MEMBER, DIRECTOR, OFFICER OR AGENT IN CONNECTION WITH THE BUSINESS OF
THE COMPANY, TO THE FULLEST EXTENT PROVIDED OR ALLOWED BY THE LAWS OF THE STATE
OF MINNESOTA.

 

4.             REPRESENTATIONS AND WARRANTIES.  EACH MEMBER, AND IN THE CASE OF
AN ORGANIZATION, THE PERSON EXECUTING THE AGREEMENT, HEREBY REPRESENTS AND
WARRANTS TO THE COMPANY AND EACH OTHER MEMBER THAT: (I) IF THAT MEMBER IS AN
ORGANIZATION, IT IS DULY ORGANIZED, VALIDLY EXISTING, AND IN GOOD STANDING UNDER
THE LAW OF ITS STATE OF ORGANIZATION AND THAT IT HAS FULL ORGANIZATIONAL POWER
TO EXECUTE AND AGREE TO THE AGREEMENT AND TO PERFORM ITS OBLIGATIONS HEREUNDER;
(II) THE MEMBER IS ACQUIRING ITS INTEREST IN THE COMPANY FOR THE MEMBER’S OWN
ACCOUNT

 

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AS AN INVESTMENT AND WITHOUT AN INTENT TO DISTRIBUTE THE INTEREST; AND (III) THE
MEMBER ACKNOWLEDGES THAT THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS, AND MAY NOT BE RESOLD OR
TRANSFERRED BY THE MEMBER WITHOUT APPROPRIATE REGISTRATION OR THE AVAILABILITY
OR AN EXEMPTION FROM SUCH REQUIREMENTS.

 

5.             CONFLICTS OF INTEREST:

 

5.1           INDEPENDENT VENTURES; NONSOLICITATION.  EACH OF THE MEMBERS AND
MTR COVENANTS AND AGREES THAT WHILE IT MAY CURRENTLY ENGAGE OR HOLD INTERESTS IN
OTHER BUSINESS VENTURES OF VARIED KINDS AND DESCRIPTIONS FOR ITS OWN ACCOUNT,
INCLUDING OTHER INVESTMENTS WHICH INCLUDE BUT ARE NOT LIMITED TO GAMING AND REAL
ESTATE VENTURES, THAT IT SHALL NOT COMPETE DIRECTLY, OR INDIRECTLY THROUGH ANY
AFFILIATE, WITH THE COMPANY’S BUSINESS (AS THE SAME MAY EVOLVE FROM TIME TO
TIME) IN THE STATE OF MINNESOTA FOR SO LONG AS SUCH PERSON IS A MEMBER AND FOR A
TWO (2) YEAR PERIOD THEREAFTER.  FURTHER, EACH MEMBER AGREES TO PRESENT ANY
OPPORTUNITIES WITHIN THE SCOPE OF THE BUSINESS IN MINNESOTA TO THE BOARD OF
DIRECTORS PROMPTLY AFTER SUCH MEMBER OR ITS AFFILIATES BECOMES AWARE OF SUCH
OPPORTUNITY, HOWEVER, NEITHER THE COMPANY NOR ANY OF THE MEMBERS SHALL HAVE ANY
RIGHTS BY VIRTUE OF THIS AGREEMENT IN ANY: (I) EXISTING BUSINESS VENTURES; OR
(II) FUTURE BUSINESS VENTURES OUTSIDE OF MINNESOTA, OR TO THE INCOME OR PROFITS
DERIVED THEREFROM.  NO MEMBER OR ITS AFFILIATES SHALL SOLICIT ANY EMPLOYEE OF
THE COMPANY TO BECOME EMPLOYED BY SUCH MEMBER OR ITS AFFILIATES FOR SO LONG AS
SUCH MEMBER IS A MEMBER OF THE COMPANY AND FOR A ONE (1) YEAR PERIOD THEREAFTER.

 

5.2           LENDING MONEY.  A MEMBER MAY LEND MONEY TO AND TRANSACT OTHER
BUSINESS WITH THE COMPANY UPON SUCH TERMS AND CONDITIONS AS CONSENTED TO BY ALL
OF THE MANAGING MEMBERS OR THE BOARD, WHICH LOANS SHALL BEAR INTEREST AT THE
PRIME RATE PLUS 200 BASIS POINTS (PRIME RATE + 2%) UNLESS THE MANAGING MEMBERS
OR BOARD SHALL OTHERWISE AGREE.  THE RIGHTS AND OBLIGATIONS OF A MEMBER WHO
LENDS MONEY TO OR TRANSACTS BUSINESS WITH THE COMPANY ARE THE SAME AS THOSE OF A
PERSON OR ORGANIZATION WHO IS NOT A MEMBER, SUBJECT TO OTHER APPLICABLE LAW.  NO
TRANSACTION WITH THE COMPANY SHALL BE VOIDABLE SOLELY BECAUSE A MEMBER HAS A
DIRECT OR INDIRECT INTEREST IN THE TRANSACTION IF ALL OF THE MANAGING MEMBERS OR
THE BOARD, KNOWING THE MATERIAL FACTS OF THE TRANSACTION AND THE MEMBER’S
INTEREST, UNANIMOUSLY AUTHORIZE, APPROVE, OR RATIFY THE TRANSACTION.

 

5.3           AFFILIATED MEMBER CONTRACTS.  A MEMBER MAY CONTRACT WITH THE
COMPANY TO PROVIDE CERTAIN SERVICES TO THE COMPANY EITHER DIRECTLY OR THROUGH AN
AFFILIATE OR SUBSIDIARY OF SUCH ENTITY (A “CONTRACTING MEMBER”) ON SUCH TERMS
AND CONDITIONS AS ARE CONSENTED TO BY ALL OF THE MANAGING MEMBERS OR THE BOARD. 
THE RIGHTS OF SUCH CONTRACTING MEMBER SHALL BE THE SAME AS AN UNAFFILIATED
PERSON AND NO SUCH CONTRACT SHALL BE VOIDABLE SOLELY BECAUSE OF SUCH AFFILIATION
IF ALL OF THE MANAGING MEMBERS OR THE BOARD,

 

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KNOWING THE MATERIAL FACTS OF THE TRANSACTION AND THE CONTRACTING MEMBER’S
INTEREST, AUTHORIZE, APPROVE, OR RATIFY THE TRANSACTION.

 

ARTICLE VII
MANAGING MEMBERS; BOARD OF DIRECTORS

 

1.             CO-MANAGING MEMBERS.  EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
HEREIN OR BY LAW THAT CANNOT BE MODIFIED BY THIS AGREEMENT, OR AS OTHERWISE
DELEGATED TO THE BOARD OF DIRECTORS, THE MANAGEMENT OF THE COMPANY AND ITS
BUSINESS, AND OTHER OPERATING MATTERS, SHALL BE THE RESPONSIBILITY OF BOTH
SOUTHWEST AND MTR-HARNESS, ACTING IN THEIR CAPACITY AS CO-MANAGING MEMBERS OF
THE COMPANY, WHO SHALL EXERCISE SUCH MANAGEMENT POWER THROUGH THE BOARD OF
DIRECTORS.  THE COMPANY SHALL HAVE NO BOARD OF GOVERNORS AS PROVIDED UNDER THE
ACT, BUT SHALL HAVE A BOARD OF DIRECTORS AS DESCRIBED IN SECTION 4 OF THIS
ARTICLE VII.  ALL DECISIONS, BOTH ORDINARY AND EXTRAORDINARY, SHALL BE MADE BY
THE BOARD OF DIRECTORS, INCLUDING, BUT NOT LIMITED TO THOSE MATTERS SET FORTH IN
ARTICLE VII, SECTION 2, BELOW.  THE DIRECTORS SHALL DEVOTE SUCH TIME AND ENERGY
TO THE BUSINESS AND PURPOSES OF THE COMPANY TO THE EXTENT NECESSARY FOR THE
PRUDENT AND EFFICIENT CARRYING ON THEREOF.  THE ACTS OF THE BOARD OF DIRECTORS
SHALL BIND THE COMPANY.  ANY AND ALL DOCUMENTS, AGREEMENTS, INSTRUMENTS OR
CERTIFICATES EXECUTED BY BOTH OF THE MANAGING MEMBERS OR ANY PERSON AUTHORIZED
BY THE BOARD SHALL BE EFFECTIVE AND BINDING UPON THE COMPANY WITHOUT THE NEED
FOR THE CONSENT OR APPROVAL OF ANY OTHER MEMBER OR DIRECTOR.

 

2.             BOARD OF DIRECTORS AUTHORITY.  SUBJECT TO THOSE RESTRICTIONS SET
FORTH IN SECTION 3 OF THIS ARTICLE VII, THE BOARD OF DIRECTORS, ACTING THROUGH
ITS DULY AUTHORIZED AND EMPOWERED COMPANY OFFICERS, IS HEREBY AUTHORIZED FOR,
AND IN THE NAME OF, AT THE EXPENSE OF, AND ON BEHALF OF THE COMPANY:

 

2.1           TO ENTER INTO ANY KIND OF ACTIVITY AND TO PERFORM AND CARRY OUT
CONTRACTS OF ANY KIND NECESSARY TO, OR IN CONNECTION WITH, OR INCIDENTAL TO THE
ACCOMPLISHMENT OF THE PURPOSES OF THE COMPANY, SO LONG AS SAID ACTIVITIES AND
CONTRACTS MAY BE LAWFULLY CARRIED ON OR PERFORMED BY A LIMITED LIABILITY COMPANY
UNDER APPLICABLE LAWS AND REGULATIONS;

 

2.2           TO ACQUIRE BY OPTION, LEASE OR PURCHASE, FINANCE, REFINANCE,
IMPROVE, GRANT OPTIONS, SELL ALL OR ANY PORTION OF THE REAL PROPERTY, CONVEY,
ASSIGN, MORTGAGE, OR OTHERWISE TRANSFER ALL OR ANY PORTION OF THE REAL OR
PERSONAL PROPERTY OF THE COMPANY;

 

2.3           TO DEVELOP, MAINTAIN, LEASE AND EXECUTE SUCH DOCUMENTS ANCILLARY
TO THOSE ACTIVITIES INVOLVING THE DEVELOPMENT OF THE REAL PROPERTY;

 

2.4           TO PREPARE, EXECUTE AND DELIVER ANY AND ALL AGREEMENTS, CONTRACTS,
DOCUMENTS, REGULATORY FILINGS WITH GOVERNMENTAL AUTHORITIES, CERTIFICATIONS AND
INSTRUMENTS NECESSARY OR CONVENIENT IN CONNECTION WITH THE

 

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ACQUISITION, DEVELOPMENT, CONSTRUCTION, LEASING, MANAGING, MAINTENANCE AND
OPERATION OF THE COMPANY’S BUSINESS OR PROPERTY;

 

2.5           THE MANAGING MEMBERS SHALL, UPON ADVICE OF COUNSEL TO THE COMPANY,
AMEND ANY PROVISION OF THIS AGREEMENT IF NECESSARY IN ORDER TO CAUSE SUCH
PROVISION TO COMPLY WITH SECTION 704 OF THE CODE AND THE REGULATIONS THEREUNDER
RELATING TO COMPANY ALLOCATIONS BEING RESPECTED FOR FEDERAL INCOME TAX PURPOSES;
AND

 

2.6           TO INITIATE, DEFEND, ADJUST, SETTLE, COMPROMISE, OR PAY ANY
DISPUTED CLAIM, OBLIGATION, DEBT, DEMAND, SUIT, LITIGATION OR JUDGMENT BY OR
AGAINST THE COMPANY (INCLUDING, WITHOUT LIMITATION, ANY CLAIM TO INSURANCE
PROCEEDS).

 

3.             RESTRICTIONS ON AUTHORITY.

 

3.1           ACTS IN VIOLATION OF ACT, LAW OR AGREEMENT.  WITH RESPECT TO THE
COMPANY AND ITS BUSINESS AND PROPERTY, THE MANAGING MEMBERS SHALL HAVE NO
AUTHORITY ON BEHALF OF THE COMPANY TO PERFORM ANY ACT IN VIOLATION OF THE (I)
ACT, (II) ANY OTHER APPLICABLE LAW (GAMING OR OTHERWISE, (III) ANY REGULATIONS
THEREUNDER, OR (IV) THIS AGREEMENT.

 

3.2           ADDITIONAL RESTRICTED ACTIONS.  UNLESS OTHERWISE DETERMINED BY
BOTH MANAGING MEMBERS OR THE UNANIMOUS CONSENT OF ALL THE DIRECTORS ON THE BOARD
OF DIRECTORS, NEITHER THE MANAGING MEMBERS NOR BOARD OF DIRECTORS SHALL:

 

A.             CAUSE THE COMPANY TO FORM ANY SUBSIDIARY OR ACQUIRE ANY EQUITY
INTEREST OR OTHER INTEREST IN ANY OTHER PERSON OR ORGANIZATION;

 

B.             CAUSE THE COMPANY TO MAKE ANY CAPITAL EXPENDITURE IN EXCESS OF
TWENTY-FIVE THOUSAND DOLLARS ($25,000) OR OTHERWISE OUTSIDE THE ORDINARY COURSE
OF BUSINESS, UNLESS SET FORTH IN THE BUDGETS;

 

C.             CAUSE THE COMPANY TO ENTER INTO ANY CONTRACT INVOLVING ANNUAL
PAYMENTS BY THE COMPANY IN EXCESS OF TWENTY-FIVE THOUSAND DOLLARS ($25,000),
UNLESS SET FORTH IN THE BUDGETS;

 

D.             CAUSE THE COMPANY TO ESTABLISH OR ADOPT ANY NEW EMPLOYEE PLAN,
AMEND ANY EXISTING EMPLOYEE PLAN OR PAY ANY BONUS OR MAKE ANY PROFIT SHARING OR
SIMILAR PAYMENT TO, OR INCREASE THE AMOUNT OF THE WAGES, SALARY, COMMISSIONS,
FRINGE BENEFITS OR OTHER COMPENSATION OR REMUNERATION PAYABLE TO, ANY OF ITS
DIRECTORS, OFFICERS OR EMPLOYEES, EXCEPT FOR MERIT INCREASES OR COST OF LIVING
ADJUSTMENTS GIVEN TO EMPLOYEES IN THE ORDINARY COURSE OF BUSINESS;

 

E.             CAUSE THE COMPANY TO CHANGE ANY OF ITS METHODS OF ACCOUNTING OR
ACCOUNTING PRACTICES IN ANY RESPECT, EXCEPT AS REQUIRED BY GENERALLY ACCEPTED
ACCOUNTING PRINCIPALS OR APPLICABLE LAWS;

 

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F.              CAUSE THE COMPANY TO COMMENCE ANY ACTION, SUIT, LITIGATION,
ARBITRATION, PROCEEDING (INCLUDING ANY CIVIL, CRIMINAL, ADMINISTRATIVE,
INVESTIGATIVE OR APPELLATE PROCEEDING AND ANY INFORMAL PROCEEDING), PROSECUTION,
CONTEST, HEARING, INQUIRY, INQUEST, AUDIT, EXAMINATION OR INVESTIGATION
INVOLVING ANY GOVERNMENT ENTITY OR THIRD PARTY AND INVOLVING AN AMOUNT IN EXCESS
OF ONE HUNDRED THOUSAND DOLLARS ($100,000.00);

 

G.             CAUSE THE COMPANY TO (I) ACQUIRE, DISPOSE OF, TRANSFER, LEASE,
LICENSE, MORTGAGE, PLEDGE OR ENCUMBER ANY FIXED OR OTHER ASSETS, OTHER THAN IN
THE ORDINARY COURSE OF BUSINESS; (II) INCUR, ASSUME OR PREPAY ANY INDEBTEDNESS,
LIABILITY OR OBLIGATION OR ANY OTHER LIABILITIES OR ISSUE ANY DEBT SECURITIES,
OTHER THAN IN THE ORDINARY COURSE OF BUSINESS; (III) ASSUME, GUARANTEE, ENDORSE
OR OTHERWISE BECOME LIABLE OR RESPONSIBLE (WHETHER DIRECTLY, CONTINGENTLY OR
OTHERWISE) FOR THE OBLIGATIONS OF ANY OTHER PERSON, OTHER THAN IN THE ORDINARY
COURSE OF BUSINESS; OR (IV) MAKE ANY LOANS, ADVANCES OR CAPITAL CONTRIBUTIONS
TO, OR INVESTMENTS IN, ANY OTHER PERSON, OTHER THAN IN THE ORDINARY COURSE OF
BUSINESS; OR

 

H.             CAUSE THE COMPANY TO TRANSFER TO ANY PERSON OR ENTITY ANY
INTELLECTUAL PROPERTY OR INTANGIBLE ASSET OTHER THAN IN THE ORDINARY COURSE OF
BUSINESS.

 

I.              OPERATE THE COMPANY IN A MANNER INCONSISTENT WITH THE BUDGETS.

 

4.             BOARD OF DIRECTORS.

 

4.1           EXCEPT AS TO ANY DECISION THAT IS EXPRESSLY DESIGNATED TO BE MADE
ONLY BY THE MANAGING MEMBERS, THE BUSINESS OF THE COMPANY SHALL BE MANAGED BY
AND UNDER THE AUTHORITY OF A BOARD OF DIRECTORS.  THE BOARD OF DIRECTORS SHALL
HAVE THE EXCLUSIVE AUTHORITY AND FULL DISCRETION TO MANAGE THE BUSINESS OF THE
COMPANY, SUBJECT TO THE TERMS OF THIS AGREEMENT WHERE DECISIONS ARE ONLY TO BE
MADE BY THE MANAGING MEMBERS.  THE MEMBERS AGREE THAT THE DIRECTORS ARE NOT
“GOVERNORS” (AS DEFINED IN THE ACT) BUT RATHER ARE REPRESENTATIVES OF THE
MANAGING MEMBERS, AND THE ACTS OF THE BOARD OF DIRECTORS ARE THE ACTS AND
DECISIONS OF THE MANAGING MEMBERS AND ARE BINDING ON ALL THE MEMBERS.  THE BOARD
OF DIRECTORS SHALL HAVE ALL RIGHT, POWER AND AUTHORITY, ON BEHALF OF AND IN THE
NAME OF THE COMPANY, TO ENTER INTO, EXECUTE, ACKNOWLEDGE AND DELIVER ANY AND ALL
CONTRACTS, AGREEMENTS OR OTHER INSTRUMENTS, AND TO TAKE ANY AND ALL OTHER
ACTIONS, WHICH THE BOARD OF DIRECTORS DEEMS NECESSARY, PROPER, OR DESIRABLE TO
CARRY OUT ITS RESPONSIBILITIES UNDER THIS AGREEMENT.

 

4.2           EXCEPT AS PROVIDED IN SECTION 4.10 OF THIS ARTICLE VII, THE BOARD
OF DIRECTORS SHALL BE COMPOSED OF FOUR (4) DIRECTORS.  THE MANAGING MEMBERS
SHALL EACH APPOINT TWO (2) INDIVIDUALS TO SERVE AS DIRECTORS.

 

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EACH OF THE TWO (2) DIRECTORS APPOINTED BY A MANAGING MEMBER SHALL SERVE UNTIL
THE EARLIER OF (I) THE DATE OF THE DIRECTOR’S DEATH, DISABILITY, RESIGNATION, OR
REMOVAL, (II) THE DATE ON WHICH A SUCCESSOR DIRECTOR IS APPOINTED BY THE ACTION
OF THE MANAGING MEMBER WHICH APPOINTED SUCH DIRECTOR, OR (III) THE DATE ON WHICH
THE MANAGING MEMBER THAT APPOINTED SUCH DIRECTOR IS NO LONGER A MEMBER. 
DIRECTORS NEED NOT BE MEMBERS OR RESIDENTS OF THE STATE OF MINNESOTA.  ANY
DIRECTOR MAY RESIGN AT ANY TIME UPON WRITTEN NOTICE TO THE BOARD OF DIRECTORS. 
A RESIGNATION SHALL BE EFFECTIVE WHEN GIVEN UNLESS THE NOTICE SPECIFIES A
DIFFERENT DATE.  THE MANAGING MEMBER APPOINTING A DIRECTOR MAY, AT ANY TIME BY
DELIVERY OF NOTICE TO ALL THE MEMBERS AND DIRECTORS, REMOVE SUCH DIRECTOR FOR
ANY REASON OR FOR NO REASON AND REPLACE ANY DIRECTOR WHO HAS BEEN REMOVED OR WHO
HAS OTHERWISE CEASED TO BE A DIRECTOR.  NO MEMBER SHALL HAVE THE RIGHT TO
APPOINT, VOTE FOR OR OTHERWISE INTERFERE WITH ANY OTHER MEMBER’S RIGHT TO
APPOINT A DIRECTOR HEREUNDER.

 

4.3           REGULAR MEETINGS OF THE BOARD OF DIRECTORS SHALL BE CALLED BY THE
CHAIRMAN OF THE BOARD AND HELD NOT LESS FREQUENTLY THAN QUARTERLY.  SPECIAL
MEETINGS OF THE BOARD OF DIRECTORS MAY BE CALLED FOR ANY PURPOSE OR PURPOSES BY
ANY TWO DIRECTORS, WHO MAY DESIGNATE THE TIME AND PLACE OF THE MEETING.  IF THE
PLACE FOR ANY MEETING OF THE BOARD OF DIRECTORS IS NOT OTHERWISE DESIGNATED, THE
PLACE OF MEETING SHALL BE THE PRINCIPAL OFFICE OF THE COMPANY.  THE CHAIRMAN OF
THE BOARD SHALL PRESIDE AT ALL MEETINGS OF THE BOARD OF DIRECTORS.  WRITTEN
NOTICE STATING THE PLACE, DAY AND HOUR OF THE MEETING AND THE PURPOSE OR
PURPOSES FOR WHICH THE MEETING IS CALLED SHALL BE DELIVERED NOT LESS THAN 5 NOR
MORE THAN 30 DAYS BEFORE THE DATE OF THE MEETING.  NOTICES MUST BE IN WRITING
AND MUST BE GIVEN EITHER PERSONALLY, BY OVERNIGHT COURIER OR BY FACSIMILE AND
WILL BE DEEMED GIVEN WHEN RECEIVED IF GIVEN PERSONALLY, ONE BUSINESS DAY AFTER
HAVING BEEN SENT BY OVERNIGHT COURIER TO THE DIRECTOR’S BUSINESS OFFICE, AND
UPON TELEPHONIC VERIFICATION OF RECEIPT IF SENT BY FACSIMILE TO THE FACSIMILE
NUMBER OF THE DIRECTOR’S BUSINESS OFFICE GIVEN BY THE DIRECTOR TO THE COMPANY
FROM TIME TO TIME.

 

4.4           DIRECTORS MAY PARTICIPATE IN AND HOLD A MEETING BY MEANS OF A
CONFERENCE TELEPHONE CALL OR OTHER SIMILAR COMMUNICATION EQUIPMENT BY MEANS OF
WHICH ALL PERSONS PARTICIPATING IN THE MEETING CAN HEAR EACH OTHER. SUCH
PARTICIPATION SHALL BE MADE AVAILABLE AT THE REQUEST OF ANY DIRECTOR. 
PARTICIPATION IN SUCH A MEETING SHALL CONSTITUTE PRESENCE OF A PERSON AT A
MEETING, EXCEPT WHERE THE PERSON PARTICIPATES SOLELY FOR THE EXPRESS PURPOSE OF
OBJECTING TO THE TRANSACTION OF ANY BUSINESS BECAUSE THE MEETING IS NOT LAWFULLY
CALLED OR CONVENED. AT ANY MEETING OF THE DIRECTORS, THE PRESENCE IN PERSON OR
BY TELEPHONE (OR OTHER ELECTRONIC MEANS) OF ALL OF THE DIRECTORS (IN PERSON OR
BY PROXY PURSUANT TO SECTION 4.6) SHALL CONSTITUTE A QUORUM.

 

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4.5           ALL DETERMINATIONS, ACTS AND DESIGNATIONS TO BE MADE HEREUNDER BY
THE BOARD OF DIRECTORS SHALL BE FINAL AND BINDING FOR ALL PURPOSES OF THIS
AGREEMENT.  EACH DIRECTOR SHALL HAVE ONE (1) VOTE ON ANY MATTER.  AT ANY MEETING
OF THE DIRECTORS AT WHICH A QUORUM IS PRESENT, THE AFFIRMATIVE VOTE OF THREE (3)
DIRECTORS SHALL CONSTITUTE AN ACT OF THE BOARD OF DIRECTORS, EXCEPT TO THE
EXTENT THIS AGREEMENT MAY OTHERWISE REQUIRE THE UNANIMOUS CONSENT OF ALL
DIRECTORS TO TAKE ANY ACTION.  NO PERSON OR ORGANIZATION SHALL BE REQUIRED TO
INQUIRE INTO, AND PERSONS OR ORGANIZATIONS DEALING WITH THE COMPANY ARE ENTITLED
TO RELY CONCLUSIVELY ON, THE RIGHT, POWER AND AUTHORITY OF THE BOARD OF
DIRECTORS TO BIND THE COMPANY.

 

4.6           A DIRECTOR MAY VOTE ON ANY MATTER, OR EXECUTE ANY CONSENT IN LIEU
OF A MEETING, EITHER IN PERSON OR BY PROXY EXECUTED IN WRITING BY THE DIRECTOR.
A TELEGRAM, TELEX, CABLEGRAM, OR SIMILAR TRANSMISSION BY THE DIRECTOR, OR A
PHOTOGRAPHIC, PHOTOSTATIC, FACSIMILE, OR SIMILAR REPRODUCTION OF A WRITING
EXECUTED BY THE DIRECTOR SHALL BE TREATED AS AN EXECUTION IN WRITING FOR THIS
PURPOSE.  ANY DIRECTOR MAY APPOINT ANOTHER DIRECTOR OR ANOTHER INDIVIDUAL
EMPLOYEE OF THE MANAGING MEMBER AS SUCH DIRECTOR’S PROXY AND THE PROXY MAY BE
LIMITED IN SCOPE OR WITH FULL DISCRETION.  PROXIES FOR USE AT ANY MEETING OF THE
DIRECTORS SHALL BE FILED WITH THE BOARD OF DIRECTORS BEFORE OR AT THE TIME OF
THE MEETING OR EXECUTION OF THE WRITTEN CONSENT, AS THE CASE MAY BE.  NO PROXY
SHALL BE VALID AFTER ELEVEN MONTHS FROM THE DATE OF ITS EXECUTION UNLESS
OTHERWISE PROVIDED IN THE PROXY.  A PROXY SHALL BE REVOCABLE.

 

4.7           ANY ACTION PERMITTED TO BE TAKEN AT ANY MEETING OF THE BOARD OF
DIRECTORS MAY BE TAKEN WITHOUT A MEETING IF A WRITTEN CONSENT THERETO IS SIGNED
BY ALL THE DIRECTORS NECESSARY TO TAKE SUCH ACTION AT A DULY CALLED MEETING.

 

4.8           THE BOARD OF DIRECTORS MAY ESTABLISH AND MAINTAIN ONE OR MORE
COMMITTEES AND APPOINT TWO OR MORE DIRECTORS TO SERVE ON SUCH COMMITTEES.  IN
THE DISCRETION OF THE BOARD OF DIRECTORS, ANY COMMITTEE MAY ALSO BE COMPRISED OF
INDIVIDUALS WHO ARE NOT DIRECTORS, EXCEPT THAT ANY PERSON WHO IS NOT A DIRECTOR
SHALL ACT IN AN ADVISORY ROLE ONLY ON SUCH COMMITTEE AND SHALL HAVE NO VOTE ON
COMMITTEE MATTERS.  THE BOARD OF DIRECTORS MAY, TO THE FULLEST EXTENT PERMITTED
BY LAW, MAKE A REVOCABLE DELEGATION TO SUCH COMMITTEES OF ALL OR ANY PORTION OF
ITS POWERS AND AUTHORITY.  ANY DELEGATION TO SUCH A COMMITTEE SHALL BE SET FORTH
IN A WRITING APPROVED BY THE BOARD OF DIRECTORS IN ACCORDANCE WITH THIS
AGREEMENT.  ALL PROCEDURAL PROVISIONS MADE APPLICABLE TO THE BOARD OF DIRECTORS
HEREUNDER SHALL BE EQUALLY APPLICABLE TO ANY COMMITTEE FORMED UNDER THIS SECTION
4.8.

 

4.9           THE COMPANY SHALL REIMBURSE THE DIRECTORS (OR ANY COMMITTEE
MEMBER) FOR ALL OUT-OF-POCKET TRAVEL EXPENSES ASSOCIATED WITH ATTENDING A
MEETING OF THE BOARD OF DIRECTORS (OR ANY COMMITTEE THEREOF).  UNLESS APPROVED
BY THE BOARD OF DIRECTORS, THE COMPANY MAY NOT PAY COMPENSATION TO ANY

 

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DIRECTOR (OR ANY COMMITTEE MEMBER) IN HIS OR HER CAPACITY AS SUCH, UNLESS SUCH
DIRECTOR (OR COMMITTEE MEMBER) IS NEITHER AN AFFILIATE OF ANY MEMBER NOR AN
EMPLOYEE OF THE COMPANY, ANY MEMBER OR AN AFFILIATE OF ANY MEMBER.

 

4.10         IN THE EVENT THAT TWO OR MORE OF JAMES B. DRUCK, THOMAS E. FOX AND
JEFFREY S. HALPERN CEASE TO BE MEMBERS OF THE BOARD OF DIRECTORS OF SOUTHWEST,
MTR-HARNESS SHALL HAVE THE RIGHT TO REQUIRE THAT BOARD OF DIRECTORS OF THE
COMPANY BE COMPRISED OF AN ODD NUMBER OF DIRECTORS, AT LEAST ONE OF WHOM IS AN
INDEPENDENT DIRECTOR WHO IS NOT AFFILIATED WITH EITHER SOUTHWEST OR MTR-HARNESS.

 

5.             OFFICERS.

 

5.1           THE CO-MANAGING MEMBERS SHALL APPOINT A GENERAL MANAGER HAVING THE
FUNCTIONS DESCRIBED IN SECTION 5.2 OF THIS ARTICLE VII AS AN OFFICER OF THE
COMPANY.  IN ADDITION TO THE GENERAL MANAGER APPOINTED BY THE CO-MANAGING
MEMBERS, THE BOARD OF DIRECTORS MAY ALSO ELECT OR DESIGNATE, BY RESOLUTION OR
OTHERWISE, INDIVIDUALS AS OFFICERS OF THE COMPANY AND REVOCABLY DELEGATE TO SUCH
OFFICERS SUCH POWERS, AUTHORITY, AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS
AS ARE (I) SET FORTH IN SECTION 5.2 BELOW OR IN THE DESIGNATION OR DELEGATION
AND (II) NECESSARY TO CARRY OUT AND IMPLEMENT THE MANAGEMENT DECISIONS OF THE
BOARD OF DIRECTORS OR MANAGING MEMBERS.  THE COMPANY SHALL NOT HAVE ANY “CHIEF
MANAGER” AS SUCH TERM IS DEFINED IN THE ACT.  THE BOARD OF DIRECTORS MAY REMOVE
ANY OFFICER, WITH OR WITHOUT CAUSE, AT ANY TIME.  ANY OFFICER MAY RESIGN AT ANY
TIME BY GIVING WRITTEN NOTICE TO THE COMPANY.  ANY RESIGNATION SHALL TAKE EFFECT
AT THE DATE OF THE RECEIPT OF SUCH NOTICE OR AT ANY LATER TIME SPECIFIED IN SUCH
NOTICE (UNLESS SUCH OFFICER IS OTHERWISE REMOVED PRIOR TO SUCH DATE); AND,
UNLESS OTHERWISE SPECIFIED IN SUCH NOTICE, THE ACCEPTANCE OF THE RESIGNATION
SHALL NOT BE NECESSARY TO MAKE IT EFFECTIVE.  ANY REMOVAL OR RESIGNATION IS
WITHOUT PREJUDICE TO THE RIGHTS, IF ANY, OF THE COMPANY OR THE OFFICER UNDER ANY
CONTRACT OF EMPLOYMENT WITH THE COMPANY.

 

5.2           THE FOLLOWING OFFICERS OF THE COMPANY, TO THE EXTENT NAMED, SHALL
HAVE THE FOLLOWING DUTIES:

 

A.             CHAIRMAN OF THE BOARD:  THE CHAIRMAN OF THE BOARD, IF THERE IS
ONE, SHALL BE A DIRECTOR AND SHALL PRESIDE AT MEETINGS OF ALL OF THE MEMBERS, IF
ANY, AND AT ALL MEETINGS OF THE BOARD OF DIRECTORS.  THE CHAIRMAN OF THE BOARD
SHALL BE APPOINTED AND REMOVED IN THE MANNER PROVIDED IN THE DEFINITION OF SUCH
TERM.  THE CHAIRMAN OF THE BOARD MAY EXECUTE CONTRACTS AND AGREEMENTS (I) IN THE
ORDINARY COURSE OF THE COMPANY’S BUSINESS, OR (II) THE EXECUTION OF WHICH HAS
BEEN AUTHORIZED BY THE BOARD OF DIRECTORS, IN THE NAME AND BEHALF OF THE COMPANY
AND SHALL HAVE SUCH OTHER POWERS AND PERFORM SUCH DUTIES AS MAY BE DELEGATED TO
HIM BY THE BOARD OF

 

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DIRECTORS.  UNLESS OTHERWISE DETERMINED BY THE BOARD, WHICH MAY INCREASE,
DECREASE OR TERMINATE THE TERM OF ANY CHAIRMAN OF THE BOARD AT ANY TIME, THE
OFFICE OF CHAIRMAN SHALL ROTATE AMONG THE DIRECTORS APPOINTED BY EACH OF THE
MANAGING MEMBERS. THE INITIAL CHAIRMAN SHALL BE APPOINTED BY MTR-HARNESS. EXCEPT
AS OTHERWISE PROVIDED IN THE PRECEDING SENTENCE, EACH CHAIRMAN OF THE BOARD’S
TERM SHALL BE LIMITED TO TWO CALENDAR YEARS AFTER THE FIRST SUCH TERM WHICH
FIRST TERM SHALL END ON DECEMBER 31, 2005.

 

B.             GENERAL MANAGER.  THE GENERAL MANAGER SHALL CONDUCT THE DAY TO
DAY OPERATIONS OF THE COMPANY, INCLUDING THE MAKING OF EXPENDITURES IN
CONNECTION THEREWITH, IN A MANNER WHICH IMPLEMENTS THE MANAGEMENT DECISIONS OF
THE BOARD OF DIRECTORS OR MANAGING MEMBERS AND IS CONSISTENT WITH THE BUDGETS.

 

C.             PRESIDENT AND CHIEF EXECUTIVE OFFICER:  THE PRESIDENT AND CHIEF
EXECUTIVE OFFICER SHALL BE THE CHIEF EXECUTIVE OFFICER OF THE COMPANY, AND
SUBJECT ONLY TO THE BOARD OF DIRECTORS OF THE COMPANY, SHALL HAVE GENERAL
AUTHORITY OVER, AND GENERAL MANAGEMENT AND CONTROL OF, THE PROPERTY, BUSINESS
AND AFFAIRS OF THE COMPANY.  THE PRESIDENT AND CHIEF EXECUTIVE OFFICER SHALL SEE
THAT ALL ORDERS AND RESOLUTIONS OF THE BOARD OF DIRECTORS ARE IMPLEMENTED.  THE
PRESIDENT AND CHIEF EXECUTIVE OFFICER MAY EXECUTE CONTRACTS AND AGREEMENTS (I)
IN THE ORDINARY COURSE OF THE COMPANY’S BUSINESS, OR (II) THE EXECUTION OF WHICH
HAS BEEN AUTHORIZED BY THE BOARD OF DIRECTORS.

 

D.             VICE PRESIDENT:  THE VICE PRESIDENT, OR IF THERE SHALL BE MORE
THAN ONE, THE VICE-PRESIDENTS IN THE ORDER DETERMINED BY THE BOARD OF DIRECTORS,
SHALL, IN THE ABSENCE OR DISABILITY OF THE PRESIDENT AND CHIEF EXECUTIVE
OFFICER, PERFORM THE DUTIES AND EXERCISE THE POWERS OF THE PRESIDENT AND CHIEF
EXECUTIVE OFFICER, AND SHALL PERFORM SUCH OTHER DUTIES AND HAVE SUCH OTHER
POWERS AS THE BOARD OF DIRECTORS MAY FROM TIME TO TIME PRESCRIBE.

 

E.             SECRETARY AND ASSISTANT SECRETARIES:  THE SECRETARY SHALL ATTEND
ALL MEETINGS OF THE BOARD OF DIRECTORS AND ALL MEETINGS OF THE MEMBERS AND
RECORD ALL THE PROCEEDINGS OF THE MEETINGS OF THE COMPANY AND OF THE BOARD OF
DIRECTORS IN A BOOK TO BE KEPT FOR THAT PURPOSE AND SHALL PERFORM LIKE DUTIES
FOR THE STANDING COMMITTEES WHEN REQUIRED.  THE SECRETARY SHALL GIVE, OR CAUSE
TO BE GIVEN, NOTICE OF ALL MEETINGS OF THE MEMBERS AND SPECIAL MEETINGS OF THE
BOARD OF DIRECTORS, AND SHALL PERFORM SUCH OTHER DUTIES AS MAY BE PRESCRIBED BY
THE BOARD OF DIRECTORS OR PRESIDENT AND CHIEF EXECUTIVE OFFICER, UNDER WHOSE
SUPERVISION THE SECRETARY SHALL BE.  THE ASSISTANT SECRETARY, OR IF THERE BE
MORE THAN ONE, THE ASSISTANT SECRETARIES IN THE ORDER DETERMINED BY THE

 

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BOARD OF DIRECTORS, SHALL, IN THE ABSENCE OR DISABILITY OF THE SECRETARY,
PERFORM THE DUTIES AND EXERCISE THE POWERS OF THE SECRETARY AND SHALL PERFORM
SUCH OTHER DUTIES AND HAVE SUCH OTHER POWERS AS THE BOARD OF DIRECTORS MAY FROM
TIME TO TIME PRESCRIBE.

 

F.              TREASURER AND CHIEF FINANCIAL OFFICER; ASSISTANT TREASURER:  THE
TREASURER AND CHIEF FINANCIAL OFFICER SHALL HAVE THE CUSTODY OF THE FUNDS AND
SECURITIES OF THE COMPANY AND SHALL KEEP FULL AND ACCURATE ACCOUNTS OF RECEIPTS
AND DISBURSEMENTS IN BOOKS BELONGING TO THE COMPANY AND SHALL DEPOSIT ALL MONEYS
AND OTHER VALUABLE EFFECTS IN THE NAME AND TO THE CREDIT OF THE COMPANY IN SUCH
DEPOSITORIES AS MAY BE DESIGNATED BY THE BOARD OF DIRECTORS.  THE TREASURER AND
CHIEF FINANCIAL OFFICER SHALL DISBURSE THE FUNDS OF THE COMPANY AS MAY BE
ORDERED BY THE BOARD OF DIRECTORS, TAKING PROPER VOUCHERS FOR SUCH
DISBURSEMENTS, AND SHALL RENDER TO THE PRESIDENT AND THE BOARD OF DIRECTORS AT
ITS REGULAR MEETINGS OR WHEN THE BOARD OF DIRECTORS SO REQUIRES, AN ACCOUNT OF
ALL HIS TRANSACTIONS AS TREASURER AND CHIEF FINANCIAL OFFICER AND OF THE
FINANCIAL CONDITION OF THE COMPANY.  THE ASSISTANT TREASURER, OR IF THERE SHALL
BE MORE THAN ONE, THE ASSISTANT TREASURERS IN THE ORDER DETERMINED BY THE BOARD
OF DIRECTORS, SHALL, IN THE ABSENCE OR DISABILITY OF THE TREASURER, PERFORM THE
DUTIES AND EXERCISE THE POWERS OF THE TREASURER AND SHALL PERFORM SUCH OTHER
DUTIES AND HAVE SUCH OTHER POWERS AS THE BOARD OF DIRECTORS MAY FROM TIME TO
TIME PRESCRIBE.

 

6.             INDEMNIFICATION.  NO MEMBER OR DIRECTOR (EACH, AN INDEMNIFIED
PARTY), SHALL BE LIABLE TO THE COMPANY OR ANY MEMBER FOR ANY LOSS SUFFERED BY
THE COMPANY OR ANY MEMBER WHICH ARISES OUT OF ANY ACT OR OMISSION OF THE
INDEMNIFIED PARTY INVOLVING THE EXERCISE OF DISCRETION OR BUSINESS JUDGMENT, IF
(I) SUCH ACT OR OMISSION WAS COMMITTED, OR OMITTED, BY THE INDEMNIFIED PARTY IN
GOOD FAITH AND IN THE REASONABLE BELIEF THAT SUCH ACT OR OMISSION WAS IN THE
BEST INTERESTS OF THE COMPANY, (II) SUCH ACT OR OMISSION WAS WITHIN THE SCOPE OF
THE AUTHORITY CONFERRED ON THE INDEMNIFIED PARTY BY THIS AGREEMENT, AS
APPLICABLE, AND DID NOT CONSTITUTE OR INVOLVE A MATERIAL, AND GROSSLY NEGLIGENT
OR WILLFUL, BREACH OF ANY WARRANTY, REPRESENTATION OR LEGAL OR CONTRACTUAL
OBLIGATION OR DUTY BY THE INDEMNIFIED PARTY, (III) SUCH ACT OR OMISSION DID NOT
CONSTITUTE OR INVOLVE ANY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF OR BY THE
INDEMNIFIED PARTY, AND (IV) SUCH ACT OR OMISSION DID NOT CONSTITUTE ALL OR PART
OF AN INTERESTED PARTY TRANSACTION NOT EXPRESSLY APPROVED BY THE MANAGING MEMBER
OR BOARD OF DIRECTORS.  EACH INDEMNIFIED PARTY SHALL BE INDEMNIFIED, DEFENDED
AND HELD HARMLESS BY THE COMPANY AGAINST ANY LOSSES, JUDGMENTS, LIABILITIES,
AMOUNTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND LEGAL COSTS AND
DISBURSEMENTS AS WELL AS REASONABLE AMOUNTS PAID IN SETTLEMENT OF ANY CLAIMS)
ARISING OUT OF OR IN CONNECTION WITH ANY ACT OR OMISSION FOR WHICH SUCH
INDEMNIFIED PARTY IS NOT LIABLE TO THE COMPANY PURSUANT TO THE PROVISIONS OF THE
IMMEDIATELY PRECEDING SENTENCE; PROVIDED, HOWEVER, THAT ANY INDEMNITY UNDER THIS
SECTION 7 SHALL BE PAID

 

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ONLY OUT OF AND TO THE EXTENT OF COMPANY PROPERTY, INCLUDING ANY APPLICABLE
INSURANCE PROCEEDS.

 

7.             RESOLUTION OF DEADLOCKS.  IN THE EVENT SOUTHWEST AND MTR-HARNESS,
EITHER THROUGH THE BOARD OR DIRECTLY, ARE UNABLE TO REACH A DECISION ON ANY
MATERIAL MATTER, INCLUDING, BUT NOT LIMITED TO, BUDGET DISPUTES OR MATTERS
SUBJECT TO SECTION 2 OF THIS ARTICLE VII AFTER A PERIOD OF FIFTEEN (15) DAYS
WHEN DISCUSSION OF THE ACTION BY THE BOARD FIRST COMMENCED, EITHER OF SUCH
MANAGING MEMBERS MAY REQUIRE THAT THE MATTER BE DECIDED PURSUANT TO THE TERMS
AND CONDITIONS OF THIS SECTION 7 OF THIS ARTICLE VII BY SENDING WRITTEN NOTICE
TO THE OTHER MANAGING MEMBER.  IN ORDER TO RESOLVE THE MATTER, SOUTHWEST AND
MTR-HARNESS SHALL (I) EACH PRESENT THE ISSUE TO THE CHIEF EXECUTIVE OFFICERS OF
SOUTHWEST AND MTR WHO SHALL MEET FACE-TO-FACE OR BY TELEPHONE AND WHO SHALL HAVE
ONE DAY TO REACH AGREEMENT, OR (II) UTILIZE THE DISPUTE RESOLUTION PROCEDURES
FOR MEDIATION DESCRIBED IN ARTICLE XVII, SECTION 7, EXCEPT THAT THE FOLLOWING
SENTENCES SHALL BE APPLIED BY THE MEDIATOR OR ARBITER IN RESOLVING ANY SUCH
DEADLOCK.  THE PARTIES ACKNOWLEDGE THAT MTR-HARNESS HAS PARTICULAR EXPERTISE
WITH REGARD TO HORSE RACING AND THAT SOUTHWEST HAS PARTICULAR EXPERTISE WITH
REGARD TO CARD GAMES, AND THAT MTR-HARNESS AND SOUTHWEST HAVE EQUIVALENT
EXPERTISE AS TO SLOTS, VIDEO LOTTERY TERMINALS AND OTHER ELECTRONIC GAMES. 
ACCORDINGLY, THE THIRD PARTY MEDIATOR OR ARBITER, AS THE CASE MAY BE, SHALL BE
INSTRUCTED TO GIVE ADDITIONAL WEIGHT TO MTR’S VIEWS REGARDING HORSE RACING
MATTERS AND TO SOUTHWEST’S VIEWS REGARDING CARD GAME MATTERS, BUT NO SPECIAL
WEIGHT TO EITHER PARTY AS TO SLOTS, VIDEO LOTTERY TERMINALS AND OTHER ELECTRONIC
GAME MATTERS.

 

8.             BUDGETS.  ON OR BEFORE SIXTY (60) DAYS PRIOR TO THE END OF EACH
FISCAL YEAR, THE BOARD SHALL MEET FOR THE PURPOSE OF PREPARING THE COMPANY
BUDGET FOR THE UPCOMING FISCAL YEAR AND THE COMPANY’S CAPITAL EXPENDITURE BUDGET
(COLLECTIVELY, THE “BUDGETS”).  IN CONNECTION WITH ITS PREPARATION OF THE
BUDGETS, THE BOARD SHALL PREPARE A COMPARATIVE ANALYSIS OF THE BUDGETS FOR THE
PRECEDING YEARS.  THE BOARD SHALL FINALIZE AND APPROVE SUCH BUDGETS WITHIN
THIRTY (30) DAYS PRIOR TO THE END OF THE FISCAL YEAR.  IN THE EVENT A BUDGET FOR
THE NEXT SUCCEEDING YEAR IS NOT APPROVED, AS PROVIDED FOR HEREIN, THE COMPANY
SHALL CONTINUE TO OPERATE ITS BUSINESS IN ACCORDANCE WITH THE BUDGETS FOR THE
PRECEDING YEAR, TO THE EXTENT PRACTICABLE, UNTIL THE DEADLOCK CONCERNING THE
BUDGETS IS RESOLVED AND AN ANNUAL OPERATING BUDGET APPROVED.  NO ACTION TAKEN BY
THE PARTIES IN THE DISCHARGE OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER SHALL BE
DEEMED A WAIVER OF ANY CLAIM CAUSING THE DEADLOCK ON THE BUDGETS.

 

9.             SALE OF MEMBERSHIP INTEREST PURSUANT TO BANKRUPTCY COURT ORDER. 
NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO THE CONTRARY, IN THE EVENT
THAT A MANAGING MEMBER BECOMES BANKRUPT AND THE BANKRUPTCY COURT (I) STAYS THE
OPERATION OF ARTICLE XIV, SECTION 1 AND ARTICLE XV, SECTION 2.2 AND (II) ORDERS
THE SALE OF THE MEMBERSHIP INTEREST OF THE BANKRUPT MANAGING MEMBER TO A PERSON
OTHER THAN THE MANAGING MEMBER WHO IS NOT BANKRUPT, THE MANAGING MEMBER WHO IS
NOT BANKRUPT SHALL BECOME THE SOLE MANAGING MEMBER AND SHALL HAVE THE SOLE
AUTHORITY TO APPOINT DIRECTORS.

 

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ARTICLE VIII
CAPITAL ACCOUNTS & CONTRIBUTIONS

 

1.             INITIAL CAPITAL CONTRIBUTIONS AND CAPITAL CONTRIBUTION
COMMITMENTS.  MTR-HARNESS AND SOUTHWEST HAVE EACH MADE THE CAPITAL CONTRIBUTION
COMMITMENT AS DESCRIBED ON EXHIBIT A.  SOUTHWEST HAS FUNDED, AND SHALL CONTINUE
TO FUND, ALL COSTS PRIOR TO THE LICENSING EVENT (OTHER THAN MTR-HARNESS’ INITIAL
$10,000.00 CAPITAL CONTRIBUTION) AND SHALL RECEIVE A CAPITAL ACCOUNT CREDIT
EQUAL TO ITS PRE-LICENSING COSTS.  MTR-HARNESS’ INITIAL CAPITAL CONTRIBUTION IS
IN THE AMOUNT OF $10,000 ON THE EFFECTIVE DATE, WITH MTR-HARNESS MAKING AN
ADDITIONAL CATCH-UP CONTRIBUTION IMMEDIATELY UPON THE OCCURRENCE OF A LICENSING
EVENT.  SUBSEQUENT TO THE OCCURRENCE OF A LICENSING EVENT AND THE CONTRIBUTION
BY MTR-HARNESS OF THE CATCH-UP CONTRIBUTION, ANY PORTION OF A MEMBER’S CAPITAL
CONTRIBUTION COMMITMENT THAT HAS NOT BEEN FUNDED AFTER SUCH CATCH-UP
CONTRIBUTION IS MADE MAY BE CALLED FOR BY THE BOARD AT ANY TIME WITH SUCH
CAPITAL CALLED FOR IN A MANNER THAT RESULTS IN CAPITAL CONTRIBUTIONS (EXCLUDING
UNMATCHED PRE-LICENSING COSTS) HAVING BEEN MADE BY THE MEMBERS ON A CUMULATIVE
BASIS IN THE RATIO OF 75% BY MTR-HARNESS UP TO ITS COMMITMENT TO CONTRIBUTE
ADDITIONAL FUNDS OF UP TO FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
($4,500,000.00) AND 25% BY SOUTHWEST UP TO ITS COMMITMENT TO CONTRIBUTE
ADDITIONAL FUNDS OF UP TO ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000.00), ALL AS DESCRIBED IN EXHIBIT A.  IN ITS DISCRETION, THE BOARD
CAN CHOOSE TO DRAW DOWN LESS THAN THE MEMBER’S RESPECTIVE CAPITAL CONTRIBUTION
COMMITMENTS, PROVIDED THAT CUMULATIVE CAPITAL CONTRIBUTIONS (EXCLUDING UNMATCHED
PRE-LICENSING COSTS) HAVE BEEN MADE ON A 75/25 BASIS BY MTR-HARNESS AND
SOUTHWEST, RESPECTIVELY.  NO INTEREST SHALL ACCRUE ON ANY CAPITAL CONTRIBUTION
(EXCEPT FOR SOUTHWEST’S ENTITLEMENT TO RECEIVE THE PREFERRED RETURN) AND NO
MEMBER SHALL HAVE THE RIGHT TO WITHDRAW OR BE REPAID ANY CAPITAL CONTRIBUTION
EXCEPT AS PROVIDED IN THIS AGREEMENT.  THE FAILURE TO MEET A CAPITAL CALL
PURSUANT TO THIS SECTION 1 SHALL BE SUBJECT TO THE DEFAULT PROVISIONS IN
SECTION 4 BELOW.  MTR HEREBY GUARANTEES THE OBLIGATIONS OF MTR-HARNESS TO MAKE
ALL AGREED CAPITAL CONTRIBUTIONS DESCRIBED IN THIS ARTICLE VIII.

 

2.             ADDITIONAL CAPITAL CONTRIBUTIONS AGREED UPON BY THE MANAGING
MEMBERS.  IN ADDITION TO THE CAPITAL CONTRIBUTION COMMITMENTS MADE BY EACH OF
THE MANAGING MEMBERS, THE MANAGING MEMBERS MAY UNANIMOUSLY DETERMINE FROM TIME
TO TIME THAT ADDITIONAL CAPITAL CONTRIBUTIONS (IN EXCESS OF THE CAPITAL
CONTRIBUTION COMMITMENTS) ARE NEEDED TO ENABLE THE COMPANY TO CONDUCT ITS
BUSINESS.  UPON THE UNANIMOUS DETERMINATION OF THE MANAGING MEMBERS, THE COMPANY
MAY EITHER SEEK ADDITIONAL CAPITAL CONTRIBUTIONS FROM THE MEMBERS OR SEEK
CAPITAL CONTRIBUTIONS FROM THIRD PARTIES EITHER IN THE FULL AMOUNT OF THE
CAPITAL CONTRIBUTIONS NEEDED OR SUCH LESSER AMOUNT EQUAL TO THE AMOUNTS REQUIRED
LESS THE ADDITIONAL CAPITAL CONTRIBUTIONS TO BE MADE BY THE MEMBERS.  THE
MANAGING MEMBERS SHALL BE ENTITLED TO ADJUST THE PERCENTAGE INTERESTS AND OTHER
ALLOCATION AND DISTRIBUTION PROVISIONS IN ARTICLES IX AND XV TO PROPERLY REFLECT
ANY ADDITIONAL CAPITAL CONTRIBUTIONS MADE BY THEM OR ANY THIRD PARTY PURSUANT TO
THIS ARTICLE VIII, SECTION 2, AND MAKE ANY SUCH OTHER MODIFICATIONS TO THIS
AGREEMENT

 

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AS ALL OF THE MANAGING MEMBERS SHALL DETERMINE TO BE APPROPRIATE AS A RESULT OF
SUCH ADDITIONAL CAPITAL CONTRIBUTIONS.

 

3.             ADDITIONAL AUTHORIZED GAMING.  IN THE EVENT THAT MINNESOTA LAW
AUTHORIZES ADDITIONAL FORMS OF GAMING SUCH AS SLOT MACHINES AND VIDEO LOTTERY
TERMINALS, AND THE CO-MANAGING MEMBERS HAVE DETERMINED THAT IT IS IN THE
COMPANY’S INTEREST TO IMPLEMENT SUCH ADDITIONAL FORMS OF GAMING, EACH OF
SOUTHWEST AND MTR-HARNESS HAS AGREED TO FUND ALL COMPANY EXPENDITURES NECESSARY
TO IMPLEMENT SUCH ADDITIONAL FORMS OF GAMING JOINTLY ON A GOING FORWARD BASIS IN
RELIANCE UPON EACH OF THE OTHER’S AGREEMENT TO MAKE SUCH ADDITIONAL
CONTRIBUTIONS TO THE COMPANY IN THE EVENT ADDITIONAL CAPITAL IS NEEDED BY THE
COMPANY TO IMPLEMENT THE ADDITIONAL FORMS OF GAMING.  IT IS CONTEMPLATED THAT
ADDITIONAL CAPITAL CONTRIBUTIONS REQUIRED IN EXCESS OF THE MEMBER’S CAPITAL
CONTRIBUTION COMMITMENTS WILL BE MADE BY THE MEMBERS IN ACCORDANCE WITH THEIR
RESPECTIVE PERCENTAGE INTERESTS UNLESS THE MEMBERS SHALL UNANIMOUSLY DETERMINE
OTHERWISE.  THE MEMBERS ACKNOWLEDGE THAT SUCH AGREEMENT WAS AN INDUCEMENT TO
MAKE THEIR INVESTMENT IN THE COMPANY, AND, ACCORDINGLY, WITHIN THIRTY (30) DAYS
OF THE MANAGING MEMBERS’ DETERMINATION AS TO THE NEED FOR ADDITIONAL CAPITAL
BEYOND THAT CONTEMPLATED BY A COMPANY BUDGET OR WITHIN THIRTY (30) DAYS AFTER
EITHER OF SOUTHWEST OR MTR-HARNESS MAKES DEMAND THEREOF TO THE OTHER, EACH
MEMBER SHALL CONTRIBUTE TO THE CAPITAL OF THE COMPANY ITS REQUIRED PRO RATA
PERCENTAGE SHARE OF THE REQUIRED CAPITAL.

 

4.             DEFAULT.  IN THE EVENT THAT EITHER SOUTHWEST OR MTR-HARNESS FAILS
TO MAKE ANY CAPITAL CONTRIBUTION DESCRIBED IN SECTION 1 OR AN ADDITIONAL
CONTRIBUTION DESCRIBED IN SECTIONS 2 OR 3, WHETHER IN WHOLE OR IN PART, WITHIN
THE TIME SPECIFIED IN THIS ARTICLE VIII, SECTION 4 (THE “DEFAULTING MEMBER”) THE
OTHER MANAGING MEMBER (THE “NON-DEFAULTING MEMBER”) SHALL SEND AN ADDITIONAL
NOTICE TO THE DEFAULTING MEMBER (AND TO MTR IF MTR-SUB IS THE DEFAULTING MEMBER)
SETTING FORTH SUCH FACT AND THE AMOUNT UNPAID, AND THE DEFAULTING MEMBER SHALL
HAVE A FURTHER PERIOD OF TEN (10) BUSINESS DAYS FROM RECEIPT OF SUCH NOTICE TO
MAKE THE FULL AMOUNT OF SUCH CONTRIBUTION.  IF AT THE END OF SUCH TEN (10)
BUSINESS DAY PERIOD, THE DEFAULTING MEMBER SHALL STILL HAVE FAILED TO MAKE SUCH
CONTRIBUTION, IN WHOLE OR IN PART AND THE NON-DEFAULTING MEMBER SHALL HAVE MADE
ITS CONTRIBUTION, THE NON-DEFAULTING MEMBER MAY, AT ANY TIME THEREAFTER, ELECT
TO MAKE THE CONTRIBUTION WHICH THE DEFAULTING MEMBER SHALL HAVE FAILED TO MAKE,
AND IN SUCH EVENT, THE NON-DEFAULTING MEMBER SHALL HAVE THE RIGHT TO HAVE THE
AGGREGATE MEMBERSHIP INTERESTS OF THE MEMBERS IN THE COMPANY, MODIFIED AS OF ANY
DATE FROM AND INCLUDING THE DATE SUCH NON-DEFAULTING MEMBER MADE THE DEFAULTING
MEMBER’S CONTRIBUTION THROUGH AND INCLUDING THE DATE OF SUCH ELECTION TO MODIFY
THE MEMBERSHIP INTERESTS AND, UPON SUCH ELECTION, THE MEMBERSHIP INTERESTS SHALL
BE AUTOMATICALLY MODIFIED AS OF SUCH DATE SO THAT THE NON-DEFAULTING MEMBERS’
AGGREGATE MEMBERSHIP INTERESTS SHALL BE THE SUM OF (I) ITS AGGREGATE MEMBERSHIP
INTERESTS PRIOR TO SUCH DATE PLUS (II) AN ADDITIONAL PERCENTAGE MEMBERSHIP
INTEREST CALCULATED AT A RATE OF 115% OF THE DEFAULT PERCENTAGE (DEFINED
BELOW).  THE DEFAULTING MEMBER’S AGGREGATE MEMBERSHIP INTERESTS AS OF SUCH DATE
SHALL THEN AUTOMATICALLY BECOME (X) ITS AGGREGATE MEMBERSHIP INTERESTS PRIOR TO
SUCH DATE MINUS (Y) A PERCENTAGE MEMBERSHIP INTEREST CALCULATED AT A RATE OF
115% OF THE DEFAULT PERCENTAGE.  FOR

 

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PURPOSES OF THIS ARTICLE VIII, SECTION 4, THE TERM “DEFAULT PERCENTAGE” SHALL
MEAN THE PERCENTAGE THAT THE AMOUNT CONTRIBUTED BY THE NON-DEFAULTING MEMBER IN
RESPECT OF THE CONTRIBUTION WHICH THE DEFAULTING MEMBER FAILED TO FUND
REPRESENTS IN RELATIONSHIP TO THE TOTAL CUMULATIVE CAPITAL CONTRIBUTIONS MADE BY
ALL THE MEMBERS AS OF THE DATE OF SUCH DETERMINATION.  NOTWITHSTANDING THE
ABOVE, THE DEFAULTING MEMBER MAY CURE THE “DEFAULT” BY REIMBURSING THE
NON-DEFAULTING MEMBER FOR THE DEFAULT PERCENTAGE PLUS INTEREST AT THE RATE OF
FIFTEEN PERCENT (15%) PER ANNUM (NOTWITHSTANDING ANYTHING IN ARTICLE VI, SECTION
5.2 TO THE CONTRARY) PAID WITHIN 90 DAYS OF THE DATE OF THE ADDITIONAL
CONTRIBUTION.  FURTHER, A DEFAULTING MEMBER’S PERCENTAGE INTEREST MAY NOT UNDER
ANY CIRCUMSTANCE HEREUNDER, BE REDUCED TO LESS THAN 25% AND EACH MANAGING MEMBER
WILL CONTINUE TO RETAIN THE SAME VOTING RIGHTS IN THE COMPANY, INCLUDING THE
RIGHT TO APPOINT TWO (2) DIRECTORS TO THE BOARD OF DIRECTORS PURSUANT TO ARTICLE
VII, SECTION 4.2.  NOTWITHSTANDING THE PREVIOUS SENTENCE, IF MTR-HARNESS FAILS
TO MAKE ITS FULL CATCH-UP CONTRIBUTION, ITS PERCENTAGE INTEREST SHALL BE REDUCED
TO A PERCENTAGE EQUAL TO ITS ACTUAL CAPITAL CONTRIBUTION DIVIDED BY ITS FULL
CATCH-UP CONTRIBUTION THEN MULTIPLIED BY 50%, WHICH, FOR THE AVOIDANCE OF DOUBT,
WOULD RESULT IN A PERCENTAGE INTEREST CALCULATED AS FOLLOWS IF MTR-HARNESS HAD
MADE A $300,000 CAPITAL CONTRIBUTION OF A REQUIRED $4,500,000 CAPITAL
CONTRIBUTION OBLIGATION - $3,000,000/$4,500,000 X 50% = 33%.  FURTHERMORE, IF
MTR-HARNESS FAILS TO MAKE ITS FULL CATCH-UP CONTRIBUTION, IT SHALL FORFEIT ITS
VOTING RIGHTS AND THE RIGHT TO ELECT ANY PERSONS TO THE BOARD OF DIRECTORS AND
EXHIBIT A WILL BE AMENDED ACCORDINGLY.

 

5.             MAINTENANCE OF CAPITAL ACCOUNTS.  THE COMPANY SHALL ESTABLISH AND
MAINTAIN “CAPITAL ACCOUNTS” FOR EACH MEMBER AND ASSIGNEE.  EACH MEMBER’S CAPITAL
ACCOUNT SHALL BE INCREASED BY (I) THE AMOUNT OF ANY MONEY ACTUALLY CONTRIBUTED
BY THE MEMBER TO THE CAPITAL OF THE COMPANY, (II) THE FAIR MARKET VALUE OF ANY
PROPERTY CONTRIBUTED, AS DETERMINED BY THE COMPANY AND THE CONTRIBUTING MEMBER
AT ARM’S LENGTH (NET OF LIABILITIES ASSUMED BY THE COMPANY OR SUBJECT TO WHICH
THE COMPANY TAKES SUCH PROPERTY, WITHIN THE MEANING OF SECTION 752 IF THE CODE),
AND (III) THE MEMBER’S SHARE OF NET PROFITS AND OF ANY SEPARATELY ALLOCATED
ITEMS OF INCOME OR GAIN EXCEPT ADJUSTMENTS PURSUANT TO THE CODE (INCLUDING ANY
GAIN AND INCOME FROM UNREALIZED INCOME WITH RESPECT TO ACCOUNTS RECEIVABLE
ALLOCATED TO THE MEMBER TO REFLECT THE DIFFERENCE BETWEEN THE BOOK VALUE AND THE
TAX BASIS OF ASSETS CONTRIBUTED BY THE MEMBER).  EACH MEMBER’S CAPITAL ACCOUNT
SHALL BE DECREASED BY (X) THE AMOUNT OF ANY MONEY DISTRIBUTED TO THE MEMBER BY
THE COMPANY, (Y) THE FAIR MARKET VALUE OF ANY PROPERTY DISTRIBUTED TO THE MEMBER
(NET OF LIABILITIES OF THE COMPANY ASSUMED BY THE MEMBER OR SUBJECT TO WHICH THE
MEMBER TAKES SUCH PROPERTY WITHIN THE MEANING OF SECTION 752 OF THE CODE), AND
(Z) THE MEMBER’S SHARE OF NET LOSSES AND ANY SEPARATELY ALLOCATED ITEMS OF
DEDUCTION OR LOSS (INCLUDING ANY LOSS OR DEDUCTION ALLOCATED TO THE MEMBER TO
REFLECT THE DIFFERENCE BETWEEN THE BOOK VALUE AND TAX BASIS OF ASSETS
CONTRIBUTED BY THE MEMBER).

 

6.             DISTRIBUTION OF ASSETS.  IF THE COMPANY AT ANY TIME DISTRIBUTES
ANY OF ITS ASSETS IN-KIND TO ANY MEMBER, THE CAPITAL ACCOUNT OF EACH MEMBER
SHALL BE ADJUSTED TO ACCOUNT FOR THAT MEMBER’S ALLOCABLE SHARE (AS DETERMINED
UNDER ARTICLE IX BELOW)

 

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OF THE NET PROFITS OR NET LOSSES THAT WOULD HAVE BEEN REALIZED BY THE COMPANY
HAD IT SOLD THE ASSETS THAT WERE DISTRIBUTED AT THEIR RESPECTIVE FAIR MARKET
VALUES IMMEDIATELY PRIOR TO THEIR DISTRIBUTION.

 

7.             SALE OR EXCHANGE OF MEMBERSHIP INTEREST.  IN THE EVENT OF A
PERMITTED SALE OR EXCHANGE OR OTHER DISPOSITION OF A MEMBERSHIP INTEREST IN THE
COMPANY, THE CAPITAL ACCOUNT OF THE TRANSFERRING MEMBER SHALL BECOME THE CAPITAL
ACCOUNT OF THE ASSIGNEE, TO THE EXTENT IT RELATES TO THE MEMBERSHIP INTEREST
TRANSFERRED.

 

8.             COMPLIANCE WITH SECTION 704(B) OF THE CODE.  THE PROVISIONS OF
THIS ARTICLE VIII AS THEY RELATE TO THE MAINTENANCE OF CAPITAL ACCOUNTS ARE
INTENDED, AND SHALL BE CONSTRUED, AND, IF NECESSARY, MODIFIED TO CAUSE THE
ALLOCATIONS OF PROFITS, LOSSES, INCOME, GAIN AND CREDIT PURSUANT TO ARTICLE IX
TO HAVE SUBSTANTIAL ECONOMIC EFFECT UNDER THE REGULATIONS PROMULGATED UNDER
SECTION 704(B) OF THE CODE, IN LIGHT OF THE DISTRIBUTIONS MADE PURSUANT TO
ARTICLES IX AND XV AND THE CAPITAL CONTRIBUTIONS MADE PURSUANT THIS ARTICLE
VIII.  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THIS AGREEMENT SHALL NOT
BE CONSTRUCTED AS CREATING A DEFICIT RESTORATION OBLIGATION OR OTHERWISE
PERSONALLY OBLIGATE ANY MEMBER TO MAKE A CAPITAL CONTRIBUTION IN EXCESS OF THE
CAPITAL CONTRIBUTION COMMITMENTS.

 

ARTICLE IX
ALLOCATIONS AND DISTRIBUTIONS

 

1.             ALLOCATIONS OF NET PROFITS AND NET LOSSES.  EXCEPT AS MAY BE
REQUIRED BY SECTION 704 OF THE CODE AND THE REGULATIONS THEREUNDER, NET PROFITS,
NET LOSSES, AND OTHER ITEMS OF INCOME, GAIN, LOSS, DEDUCTION AND CREDIT FOR
PERIODS BEGINNING ON OR AFTER THE EFFECTIVE DATE SHALL BE APPORTIONED AMONG THE
MEMBERS PRO-RATA IN ACCORDANCE WITH THEIR PERCENTAGE INTERESTS; PROVIDED,
HOWEVER, THAT (I) NET LOSSES SHALL FIRST BE ALLOCATED TO THE MEMBERS BASED ON
THEIR RESPECTIVE CUMULATIVE CAPITAL CONTRIBUTION AMOUNTS AT THE END OF ANY
FISCAL YEAR IN WHICH SUCH NET LOSSES ARE INCURRED (PRIOR TO MAKING ANY
ALLOCATIONS HEREUNDER), WITH THE FIRST NET PROFITS ARISING THEREAFTER APPLIED AS
A “CHARGEBACK” TO ANY SUCH NET LOSSES IN THE REVERSE ORDER THEREOF AND (II)
AFTER APPLYING NET PROFITS AS A “CHARGEBACK” PURSUANT TO CLAUSE (I), ABOVE, NET
PROFITS SHALL NEXT BE ALLOCATED TO SOUTHWEST TO THE EXTENT OF THE PREFERRED
RETURN ACCRUED BY SOUTHWEST DURING THE TAXABLE YEAR.

 

2.             TAX DISTRIBUTIONS.  THE FOLLOWING DISTRIBUTIONS (“TAX
DISTRIBUTIONS”) SHALL TAKE PRIORITY OVER ANY OTHER DISTRIBUTIONS PROVIDED IN
SECTIONS 3 OR 4 HEREUNDER:

 

2.1           ON OR BEFORE THE 15TH DAY OF APRIL, JUNE, SEPTEMBER, AND DECEMBER
OF EACH YEAR (OR SUCH OTHER DATES AS THE BOARD OF DIRECTORS SHALL DETERMINE MORE
CLOSELY CORRESPONDS WITH THE MEMBERS’ ESTIMATED TAX PAYMENT REQUIREMENTS UNDER
APPLICABLE LAW), THE BOARD OF DIRECTORS SHALL CAUSE THE COMPANY TO MAKE A
DISTRIBUTION TO THE MEMBERS IN AN AMOUNT EQUAL TO 40% OF THE ESTIMATED TAXABLE
INCOME OF THE COMPANY FOR THE PORTION OF THE FISCAL YEAR ENDING ON THE CLOSE OF
THE MONTH IMMEDIATELY PRECEDING SUCH DATE, MINUS DISTRIBUTIONS PREVIOUSLY MADE
DURING THE FISCAL YEAR FOR

 

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SUCH YEAR UNDER THIS SECTION 2.1.  EACH SUCH DISTRIBUTION SHALL BE ACCOMPANIED
BY INFORMATION CONCERNING THE CALCULATION OF THE AMOUNT OF SUCH DISTRIBUTION.

 

2.2           WITHIN 90 DAYS AFTER THE END OF EACH FISCAL YEAR, THE BOARD OF
DIRECTORS SHALL CAUSE THE COMPANY TO MAKE A DISTRIBUTION TO THE MEMBERS IN AN
AMOUNT EQUAL TO 40% OF THE TAXABLE INCOME OF THE COMPANY FOR SUCH PRIOR FISCAL
YEAR, AS DETERMINED BY THE BOARD OF DIRECTORS, MINUS DISTRIBUTIONS PREVIOUSLY
MADE DURING SUCH FISCAL YEAR FOR SUCH YEAR UNDER SECTION 2.1.

 

2.3           ALL TAX DISTRIBUTIONS REQUIRED UNDER THIS SECTION 2 SHALL BE MADE
TO THE MEMBERS IN ACCORDANCE WITH THE MEMBERS’ RESPECTIVE SHARES OF THE TAXABLE
INCOME OF THE COMPANY ON WHICH THE 40% AMOUNT WAS COMPUTED.

 

3.             OPERATING DISTRIBUTIONS.  UPON A DETERMINATION BY THE BOARD AS TO
THE AMOUNT OF DISTRIBUTABLE CASH AVAILABLE, IN LIGHT OF APPLICABLE STATE LAW,
AND UNLESS OTHERWISE UNANIMOUSLY AGREED TO BY THE MANAGING MEMBERS OR REQUIRED
PURSUANT TO ARTICLE XV, AND AFTER ANY TAX DISTRIBUTION HAS BEEN MADE, OTHER
DISTRIBUTIONS (OTHER THAN PURSUANT TO SECTION 4 OR UPON DISSOLUTION SUBJECT TO
ARTICLE XV) SHALL BE MADE TO THE MEMBERS AS FOLLOWS:  (I) FIRST, TO SOUTHWEST,
TO THE EXTENT OF ITS UNRECOVERED PREFERRED RETURN, (II) SECOND, TO SOUTHWEST TO
THE EXTENT OF THE CURRENT MONTHLY INSTALLMENT AND ANY PAST DUE MONTHLY
INSTALLMENTS, (III) THIRD, UNTIL SUCH TIME AS THE MEMBERS HAVE RECEIVED A RETURN
OF THEIR RESPECTIVE CAPITAL CONTRIBUTIONS, SUCH DISTRIBUTIONS SHALL BE MADE IN
PROPORTION TO EACH MEMBER’S CAPITAL CONTRIBUTIONS (EXCLUDING UNMATCHED
PRE-LICENSING COSTS) UNTIL THEY ARE FULLY REPAID, AND (IV) THEREAFTER, TO THE
MEMBERS IN PROPORTION TO THEIR PERCENTAGE INTERESTS.  IT IS THE INTENTION OF THE
MANAGING MEMBERS THAT (I) THE COMPANY COMMENCE PAYMENT MONTHLY INSTALLMENTS AS
SOON AS PRACTICABLE FOLLOWING THE OPENING OF THE BUSINESS AND (II) THE COMPANY
SHALL NOT MAKE ANY PAYMENTS PURSUANT TO CLAUSE (III), ABOVE, UNTIL SUCH TIME AS
THE MONTHLY INSTALLMENTS HAVE COMMENCED.  NOTWITHSTANDING THE FOREGOING, THERE
IS NO REQUIREMENT THAT SOUTHWEST SHALL HAVE RECEIVED A RETURN OF ALL OF ITS
UNMATCHED PRE-LICENSING COSTS PRIOR TO THE PAYMENT BY THE COMPANY OF
DISTRIBUTIONS TO THE MEMBERS PURSUANT TO CLAUSE (III), ABOVE.  TO THE CONTRARY,
THE COMPANY MAY MAKE DISTRIBUTIONS PURSUANT TO CLAUSE (III), ABOVE, PROVIDING
THAT THERE SHALL BE NO UNRECOVERED PREFERRED RETURN AND NO PAST DUE MONTHLY
INSTALLMENTS.  THE FIRST MONTHLY INSTALLMENT SHALL BE PAID AT THE TIME
DETERMINED BY THE BOARD OF DIRECTORS PURSUANT TO THIS ARTICLE IX, SECTION 3. 
THE DETERMINATION AS TO WHETHER SUBSEQUENTLY MONTHLY INSTALLMENTS ARE PAST DUE
SHALL BE DETERMINED BY REFERENCE TO TIME AT WHICH THE FIRST MONTHLY INSTALLMENT
WAS PAID.

 

4.             NON-OPERATING DISTRIBUTIONS.  UNLESS OTHERWISE UNANIMOUSLY AGREED
TO BY THE MANAGING MEMBERS, OR REQUIRED PURSUANT TO ARTICLE XV, AND AFTER ANY
TAX DISTRIBUTION ASSOCIATED WITH ANY NET INCOME OR GAIN ARISING FROM SUCH EVENT
IS MADE, NET PROCEEDS GENERATED BY THE COMPANY FROM EVENTS ARISING OTHER THAN
PURSUANT TO NORMAL DAY-TO-DAY BUSINESS OPERATIONS SHALL BE DISTRIBUTED TO THE

 

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MEMBERS WITHIN FIVE (5) BUSINESS DAYS AFTER THE EVENT GIVING RISE TO SUCH NET
PROCEEDS, AS FOLLOWS:

 

(1)           First, to the establishment of such additional reserves as the
Managing Members deem appropriate;

 

(2)           Second, to the Members, pro rata in proportion to the amount of
funds (or value of property) which they have loaned to the Company until such
Loans are repaid in full, together with accrued interest thereon;

 

(3)           Third, to Southwest to the extent of its Unrecovered Preferred
Return;

 

(4)           Fourth, to Southwest to the extent of its Unrecovered Unmatched
Pre-Licensing Costs;

 

(5)           Fifth, until such time as the Members have received a return
(including pursuant to any Distributions pursuant to Section 3 of this Article
IX) of their cumulative Capital Contributions (excluding Southwest’s Unmatched
Pre-Licensing Costs), to the Members in proportion to such Capital Contributions
until they are fully repaid;

 

(4)           Sixth, to the Members in accordance with their respective positive
Capital Accounts until each Capital Account is at zero (0) (after providing for
an allocation to such Capital Accounts for Net Profits or Net Loss related to
the event causing such non-operating Distribution as well as for Business
operations for such fiscal year); and

 

(5)           Thereafter, if any cash proceeds remain, to the Members, in
accordance with their Percentage Interests.

 

5.             WITHHOLDING ON DISTRIBUTIONS.  THE AMOUNT OF ANY DISTRIBUTIONS
REQUIRED BY APPLICABLE FOREIGN, FEDERAL, STATE OR LOCAL LAW TO BE WITHHELD AND
REMITTED BY THE COMPANY TO ANY GOVERNMENTAL AUTHORITY SHALL BE TREATED AS IF
SUCH AMOUNT WAS DISTRIBUTED TO THE MEMBER FOR WHOSE BENEFIT SUCH WITHHOLDING WAS
MADE AS IF THE AMOUNT WAS ACTUALLY DISTRIBUTED TO THE MEMBER FOR PURPOSES OF
THIS ARTICLE IX OR ARTICLE XV

 

ARTICLE X
TAXES

 

1.             ELECTIONS.  THE MANAGING MEMBERS OR BOARD OF DIRECTORS MAY MAKE
ANY TAX ELECTIONS FOR THE COMPANY UNDER THE CODE OR THE TAX LAW OF ANY STATE OR
OTHER JURISDICTION HAVING TAXING JURISDICTION OVER THE COMPANY.

 

2.             METHOD OF ACCOUNTING.  THE RECORDS OF THE COMPANY SHALL BE
MAINTAINED ON THE ACCRUAL METHOD OF ACCOUNTING.

 

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3.             PARTNERSHIP.  THE COMPANY SHALL BE TAXABLE AS A “PARTNERSHIP” FOR
FEDERAL INCOME TAX PURPOSES AFTER THE EFFECTIVE DATE UNLESS THE BOARD SHALL
OTHERWISE DETERMINE TO CHANGE SUCH CLASSIFICATION.

 

4.             TAX MATTERS PARTNER.  THE MEMBER WITH THE GREATEST CASH CAPITAL
CONTRIBUTION IN THE COMPANY AT ANY POINT IN TIME DURING 2004 SHALL ACT AS THE
TAX MATTERS MEMBER FOR THE COMPANY, AS DEFINED IN SECTION 6231 OF THE CODE. 
SUBJECT TO ARTICLE X, SECTION 1, THE TAX MATTERS MEMBER SHALL HAVE THE AUTHORITY
TO PERFORM ANY AND ALL ACTIONS PERMITTED BY SECTION 6221 THROUGH 6231 OF THE
CODE IN CONNECTION WITH ANY PROCEEDINGS PERTAINING TO FEDERAL INCOME TAX
ISSUES.  THE TAX MATTERS MEMBER SHALL HAVE THE RIGHT TO ENGAGE COUNSEL TO
REPRESENT THE COMPANY IN CONNECTION WITH ANY AUDIT OR OTHER INVESTIGATION, AND
THE FEES AND EXPENSES OF SUCH COUNSEL AND OF ANY LITIGATION ARISING OUT OF OR IN
CONNECTION WITH SUCH AUDIT OR INVESTIGATION SHALL BE BORNE BY THE COMPANY.  THE
TAX MATTERS MEMBER SHALL BE INDEMNIFIED AND HELD HARMLESS BY THE COMPANY FOR ANY
ACT OR OMISSION PERFORMED OR OMITTED BY IT IN ITS CAPACITY AS THE TAX MATTERS
MEMBER.  ALL EXPENSES INCURRED BY THE TAX MATTERS MEMBER IN CONNECTION WITH ANY
ADMINISTRATIVE PROCEEDING BEFORE THE INTERNAL REVENUE SERVICE (THE IRS) AND/OR
JUDICIAL REVIEW OF SUCH PROCEEDINGS, INCLUDING REASONABLE ATTORNEY’S FEES, SHALL
BE DEEMED A COMPANY EXPENSE.  IN THE EVEN THE TAX MATTERS MEMBER ELECTS TO FILE
A PETITION FOR READJUSTMENT OF ANY COMPANY TAX ITEM (IN ACCORDANCE WITH SECTION
6226(A) OF THE CODE), SUCH PETITION SHALL BE FILED IN ANY COURT HAVING
JURISDICTION OVER ANY TAX OR OTHER MATTER.  IN THE EVENT THAT THE IRS, OR ANY
OTHER GOVERNMENTAL AGENCY WITH JURISDICTION, SHALL CONDUCT, COMMENCE OR GIVE
NOTIFICATION OF INTENT TO CONDUCT OR COMMENCE ANY AUDIT OR OTHER INVESTIGATION
OF THE BOOKS, RECORDS, TAX RETURNS, DOCUMENTS OR AFFAIRS OF THE COMPANY, THE TAX
MATTERS MEMBER SHALL RESPOND TO SUCH AUDIT OR OTHER INVESTIGATION FOR AND ON
BEHALF OF THE COMPANY AND SHALL KEEP ALL OTHER MEMBERS INFORMED WITH RESPECT
THERETO.

 

ARTICLE XI
DISSOCIATION OF A MEMBER

 

1.             DISSOCIATION.  IRRESPECTIVE OF ANY CONTRARY PROVISION UNDER THE
ACT, A PERSON SHALL CEASE TO BE A MEMBER ONLY UPON THE HAPPENING OF ANY OF THE
FOLLOWING EVENTS:

 

1.1           THE WITHDRAWAL OF A MEMBER WITH THE CONSENT OF ALL OF THE MANAGING
MEMBERS;

 

1.2           THAT MEMBER IS FOUND TO BE AN UNSUITABLE PERSON AS MORE FULLY SET
FORTH IN ARTICLE XIII, SECTION 5, BELOW;

 

1.3           THE BANKRUPTCY OF A MEMBER, IF ALL OF THE MANAGING MEMBERS, EXCEPT
ANY BANKRUPT MANAGING MEMBER, SHALL SO ELECT;

 

1.4           IN THE CASE OF A MEMBER THAT IS A SEPARATE ORGANIZATION OTHER THAN
A CORPORATION, THE DISSOLUTION AND COMMENCEMENT OF WINDING UP OF THAT SEPARATE
ORGANIZATION; OR

 

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1.5           IN THE CASE OF A MEMBER THAT IS A CORPORATION, THE FILING OF A
CERTIFICATE OF DISSOLUTION, OR ITS EQUIVALENT, FOR THAT CORPORATION OR THE
REVOCATION OF ITS CHARTER.

 

The parties intend that none of the events described above or any other similar
events should cause a dissolution and winding up of the Company.  Dissolution is
only expected to occur upon the occurrence of the events described in
Article XV, Section 1.

 

2.             RIGHTS OF MEMBER WHO HAS DISSOCIATED.  IN THE EVENT ANY MEMBER
DISSOCIATES IN ACCORDANCE WITH SECTION 1 ABOVE:

 

2.1           AND, NOTWITHSTANDING THE LAST SENTENCE OF SECTION 1 ABOVE OR
ARTICLE XV, SECTION 1, THE DISSOCIATION CAUSES A DISSOLUTION AND WINDING UP OF
THE COMPANY UNDER ARTICLE XV, THEN TO THE EXTENT PERMITTED BY THE GAMING
AUTHORITIES, THE MEMBER SHALL BE ENTITLED TO PARTICIPATE IN THE WINDING UP OF
THE COMPANY TO THE SAME EXTENT AS ANY OTHER MEMBER EXCEPT THAT ANY DISTRIBUTION
TO WHICH THE MEMBER WOULD HAVE BEEN ENTITLED SHALL BE REDUCED BY THE DAMAGES
SUSTAINED BY THE COMPANY OR ANY OTHER MEMBER AS A RESULT OF THE DISSOCIATION
DISSOLUTION AND WINDING UP; OR

 

2.2           IF THE DISSOCIATION DOES NOT CAUSE A DISSOLUTION AND WINDING UP OF
THE COMPANY UNDER ARTICLE XV, THEN TO THE EXTENT PERMITTED BY THE GAMING
AUTHORITIES THE MEMBER OR ITS SUCCESSOR SHALL BE SUBJECT TO THE MEMBER BUY-OUT
PROVISIONS OF ARTICLE XIV, EXCEPT THAT IF THE DISSOCIATION IS CAUSED BY THE
DISSOLUTION OF MTR-HARNESS, MTR SHALL REPLACE MTR-HARNESS AS A MANAGING MEMBER
AND ASSUME ALL OF THE RIGHTS AND OBLIGATIONS OF MTR-HARNESS HEREUNDER.

 

ARTICLE XII
INSPECTION OF RECORDS; BANK ACCOUNTS

 

1.             RIGHTS OF MEMBERS TO INSPECT RECORDS.  PURSUANT TO THE ACT, A
MEMBER MAY INSPECT AND COPY, IN PERSON OR BY AGENT, FROM TIME TO TIME ON A
REASONABLE WRITTEN DEMAND DURING REGULAR BUSINESS HOURS AT THE PRINCIPAL PLACE
OF BUSINESS OF THE COMPANY:

 

A.             TRUE AND FULL INFORMATION REGARDING THE STATE OF THE BUSINESS AND
FINANCIAL CONDITION OF THE COMPANY;

 

B.             A COPY OF THE ARTICLES OF ORGANIZATION AND THIS AGREEMENT AND ALL
AMENDMENTS THERETO;

 

C.             A CURRENT LISTS OF THE NAMES AND LAST KNOWN BUSINESS, RESIDENCE,
OR MAILING ADDRESS OF ALL MEMBERS;

 

D.             A COPY OF THE COMPANY’S FEDERAL, STATE AND LOCAL INCOME TAX
RETURNS; AND

 

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E.             OTHER INFORMATION REGARDING THE AFFAIRS OF THE COMPANY AS IS JUST
AND REASONABLE FOR ANY PURPOSE REASONABLY RELATED TO THE MEMBER’S INTEREST AS A
MEMBER.

 

2.             BANK ACCOUNTS.  THE FUNDS OF THE COMPANY SHALL BE DEPOSITED IN
THE NAME OF THE COMPANY, IN SUCH BANK ACCOUNT OR ACCOUNTS AS ALL OF THE MANAGING
MEMBERS OR BOARD DEEM ADVISABLE AND THE BOARD SHALL ARRANGE FOR THE APPROPRIATE
CONDUCT AND FUNCTION OF SUCH ACCOUNTS.

 

ARTICLE XIII
ADMISSION OF ADDITIONAL MEMBERS; TRANSFERS OF INTERESTS

 

1.             DISPOSITION OF A MEMBER’S MEMBERSHIP INTEREST.

 

1.1           NO DISPOSITION OF A MEMBER’S MEMBERSHIP INTEREST SHALL BE MADE
UNLESS THE ASSIGNEE IS AN SUITABLE PERSON, AND ALL OF THE MANAGING MEMBERS, IN
THEIR SOLE AND ABSOLUTE DISCRETION, UNANIMOUSLY CONSENT IN WRITING TO SUCH
ASSIGNMENT, WHICH CONSENT MAY BE CONDITIONED UPON THE DETERMINATION BY THE
MANAGING MEMBERS (BASED, IF THEY DEEM IT ADVISABLE, UPON AN OPINION OF COUNSEL)
THAT SUCH ASSIGNMENT IS NOT IN VIOLATION OF ANY APPLICABLE FEDERAL OR STATE
SECURITIES LAW, DOES NOT VIOLATE ANY GAMING LAWS OR RULES PROMULGATED BY ANY
GAMING AUTHORITY HAVING JURISDICTION OVER THE BUSINESS OF THE COMPANY, DOES NOT
ADVERSELY AFFECT THE COMPANY’S STATUS AS A LIMITED LIABILITY COMPANY AND WILL
NOT CAUSE THE DISSOLUTION OF THE COMPANY UNDER THE APPLICABLE LAWS OF THE STATE
OF MINNESOTA.  NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO THE CONTRARY,
A CHANGE IN THE CONTROL OF SOUTHWEST OR MTR SHALL NOT BE DEEMED TO BE A
DISPOSITION OF A MEMBERS MEMBERSHIP INTEREST.  A CHANGE IN THE CONTROL OF
MTR-HARNESS, HOWEVER, SHALL BE DEEMED TO BE SUCH A DISPOSITION.

 

1.2           EXCEPT AS PROVIDED IN SECTION 2 OF THIS ARTICLE XIII THE ASSIGNEE
OF THE MEMBERSHIP INTEREST, SHALL NOT BECOME A MEMBER, BUT INSTEAD SHALL BE
ENTITLED ONLY TO RECEIVE SUCH DISTRIBUTIONS AND ALLOCATIONS AS SHALL HAVE BEEN
MADE TO THE ASSIGNOR MEMBER HAD SUCH ASSIGNOR MEMBER CONTINUED TO BE A MEMBER.

 

2.             SUBSTITUTE MEMBERS AND ADDITIONAL MEMBERS.  THE ASSIGNEE OF A
MEMBERSHIP INTEREST SHALL BECOME A SUBSTITUTE MEMBER ONLY IF (I) THE ASSIGNOR
MEMBER SO PROVIDES IN THE INSTRUMENT OF ASSIGNMENT, (II) THE ASSIGNEE AGREES IN
WRITING TO BE BOUND BY THE PROVISIONS OF THIS AGREEMENT AND OF THE ARTICLES AND
ANY AMENDMENTS HERETO AND THERETO, (III) ALL OF THE MANAGING MEMBERS CONSENT TO
THE SUBSTITUTION IN WRITING (WHICH CONSENT MAY BE WITHHELD IN THEIR SOLE AND
ABSOLUTE DISCRETION), (IV) TO THE EXTENT REQUIRED BY ANY GAMING AUTHORITY, THE
LICENSURE OF SUCH PERSON HAS OCCURRED; AND (V) THE SATISFACTION OF COMPLETION BY
THE MANAGING MEMBERS OF DUE DILIGENCE ON SAID PERSON TO DETERMINE IF IT IS A
SUITABLE PERSON.  SIMILARLY, A PERSON SEEKING TO ACQUIRE A MEMBERSHIP INTEREST
FROM THE COMPANY SHALL BECOME AN ADDITIONAL MEMBER ONLY IF (X) SUCH PERSON
AGREES IN WRITING TO

 

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BE BOUND BY THE PROVISIONS OF THIS AGREEMENT AND OF THE ARTICLES AND ANY
AMENDMENTS HERETO AND THERETO, (Y) ALL OF THE MANAGING MEMBERS CONSENT IN
WRITING (WHICH CONSENT MAY BE WITHHELD IN THEIR SOLE AND ABSOLUTE DISCRETION)
AND (Z) THE PROVISIONS OF CLAUSES (IV) AND (V) ABOVE ARE MET.

 

3.             MEMBERS.  UNLESS NAMED IN THIS AGREEMENT, OR UNLESS ADMITTED TO
THE COMPANY AS ABOVE PROVIDED, NO PERSON SHALL BE CONSIDERED A MEMBER, AND THE
COMPANY, EACH MEMBER, AND ANY OTHER PERSONS HAVING BUSINESS WITH THE COMPANY
NEED DEAL ONLY WITH MEMBERS SO NAMED OR SO ADMITTED.  THEY SHALL NOT BE REQUIRED
TO DEAL WITH ANY OTHER PERSON BY REASON OF AN ASSIGNMENT BY A MEMBER OR BY
REASON OF THE DEATH OF A MEMBER, EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT.  IN THE ABSENCE OF SUBSTITUTION OF A MEMBER FOR AN ASSIGNING OR
DECEASED MEMBER, ANY PAYMENT TO A MEMBER OR TO HIS EXECUTORS OR ADMINISTRATORS
SHALL ACQUIT THE COMPANY OF ALL LIABILITY TO ANY OTHER PERSONS WHO MAY BE
INTERESTED IN SUCH PAYMENTS BY REASON OF AN ASSIGNMENT BY THE MEMBER OR BY
REASON OF HIS DEATH.

 

4.             GAMING AUTHORITY APPROVALS.  NOTWITHSTANDING ANY PROVISIONS OF
THIS AGREEMENT TO THE CONTRARY, ALL ASSIGNMENTS OF AND DISPOSITIONS OF
MEMBERSHIP INTERESTS AND ALL ADMISSIONS OF ADDITIONAL MEMBERS SHALL BE SUBJECT
TO THE RECEIPT OF ANY REQUIRED APPROVALS FROM THE GAMING AUTHORITIES HAVING
JURISDICTION OVER THE BUSINESS OF THE COMPANY.

 

5.             DETERMINATION THAT MEMBER IS UNSUITABLE PERSON.  IF ANY GAMING
AUTHORITY DETERMINES THAT A PERSON IS AN UNSUITABLE PERSON AND THAT THE
CONTINUED PARTICIPATION OF SUCH PERSON IN THE COMPANY WOULD JEOPARDIZE ANY
GAMING LICENSE HELD OR BEING SOUGHT BY MTR, SOUTHWEST, THE COMPANY OR THEIR
AFFILIATES, THE COMPANY SHALL PURCHASE, AND THE UNSUITABLE PERSON SHALL SELL,
ALL OF SUCH PERSON’S MEMBERSHIP INTEREST.  THE PURCHASE PRICE SHALL BE
DETERMINED IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN ARTICLE XIV.

 

ARTICLE XIV
MEMBER BUY-OUT PROVISION; RIGHT OF FIRST REFUSAL

 

1.             MEMBERSHIP BUY-OUT PROVISION.  IN THE EVENT OF A MATERIAL BREACH
OF THIS AGREEMENT OR THE ARTICLES, THE BANKRUPTCY OF A MANAGING MEMBER, OR A
DETERMINATION THAT A MANAGING MEMBER HAS BECOME AN UNSUITABLE PERSON, THE
MANAGING MEMBER WHO IS NOT IN BREACH, BANKRUPT OR AN UNSUITABLE PERSON (THE
“OFFERING MEMBER”) MAY ELECT TO PURCHASE ALL OF THE MEMBERSHIP INTERESTS OF THE
OTHER MANAGING MEMBER (THE “RECEIVING MEMBER”).  IF THE OFFERING MEMBER ELECTS,
IN ITS SOLE DISCRETION, NOT TO PURCHASE ALL OF THE MEMBERSHIP INTERESTS OF THE
RECEIVING MEMBER, THE COMPANY SHALL PURCHASE ALL OF THE MEMBERSHIP INTERESTS OF
THE RECEIVING MEMBER.  WHERE THIS PROVISION APPLIES, SUCH OFFERING MEMBER SHALL
FORWARD TO THE RECEIVING MEMBER A BONA FIDE, WRITTEN OFFER (THE “OFFER”) FOR THE
PURCHASE OF ALL OF THE RECEIVING MEMBER’S MEMBERSHIP INTERESTS.  THE OFFER SHALL
STATE A PURCHASE PRICE (THE “OFFERING PRICE”) FOR ALL OF THE COMPANY’S ASSETS
(THE “ASSETS”), FREE AND CLEAR OF ALL LIABILITIES, AS DETERMINED IN GOOD FAITH
BY THE OFFERING MEMBER, TAKING INTO .ACCOUNT THE PRICE THAT AN ARMS-LENGTH BUYER
WOULD LIKELY PAY FOR THE ASSETS.  THE OFFER- SHALL ALSO STATE THE “BUYOUT
PRICE,” WHICH SHALL BE THE AMOUNT THAT WOULD BE DISTRIBUTED TO THE RECEIVING
MEMBER WITH RESPECT TO ITS

 

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MEMBERSHIP INTERESTS AS A FINAL LIQUIDATING DISTRIBUTION IF THE ASSETS WERE SOLD
FOR AN ALL-CASH PRICE EQUAL TO THE OFFERING PRICE ON THE DATE THE OFFERING
MEMBER’S NOTICE IS GIVEN, AND THE PROCEEDS OF THE SALE WERE DISTRIBUTED IN
LIQUIDATION, WITHOUT RESERVES, IN THE MANNER SET FORTH IN SECTION 3.2 OF ARTICLE
XV, REDUCED BY DAMAGES, IF ANY, INCURRED BY THE COMPANY OR ANY MEMBER AS A
RESULT OF THE BREACH, BANKRUPTCY OR UNSUITABLE PERSON STATUS OF THE RECEIVING
MEMBER.  IF THE OFFERING MEMBER DOES NOT TAKE THE ACTION DESCRIBED ABOVE, THE
COMPANY SHALL TAKE SUCH ACTION ACTING THROUGH THE BOARD OF DIRECTORS, BUT
EXCLUDING IN THE DETERMINATION ANY DIRECTORS APPOINTED BY THE RECEIVING MEMBER,
WITH THE TWO DIRECTORS APPOINTED BY THE OFFERING MEMBER DETERMINING THE BUYOUT
PRICE AND PRESENTING IT TO THE RECEIVING MEMBER.  THE MEMBERSHIP INTEREST OF THE
RECEIVING MEMBER SHALL BE PROMPTLY TRANSFERRED TO THE PURCHASER HEREUNDER,
WHETHER THE OFFERING MEMBER OR THE COMPANY, WITHOUT ANY FURTHER ACTION REQUIRED
BY THE RECEIVING MEMBER, UPON THE TRANSFER OF THE BUYOUT PRICE TO THE RECEIVING
MEMBER.  THE BUYOUT PRICE SHALL BE PAID IN THE FORM OF A 5-YEAR NOTE HAVING THE
TERMS DESCRIBED IN ARTICLE XV, SECTION 2.2 BELOW.  THE RECEIVING MEMBER HEREBY
APPOINTS THE DIRECTORS APPOINTED BY THE OFFERING MEMBER AS ITS POWER OF ATTORNEY
TO TRANSFER THE RECEIVING MEMBER’S MEMBERSHIP INTEREST TO THE OFFERING MEMBER OR
THE COMPANY, AS APPLICABLE, UPON PAYMENT OF THE BUYOUT PRICE PURSUANT TO THE
PAYMENT TERMS DESCRIBED IN ARTICLE XV, SECTION 2.2.  IN THE EVENT OF A
BANKRUPTCY OR DETERMINATION OF UNSUITABILITY, IF THE RECEIVING MEMBER DISPUTES
THE AMOUNT OF THE BUYOUT PRICE, THE MEMBERSHIP INTEREST SHALL BE TRANSFERRED
HEREUNDER NOTWITHSTANDING SUCH DISPUTE, AND SUCH DISPUTE OVER THE AMOUNT OF THE
BUYOUT PRICE SHALL BE RESOLVED PURSUANT TO THE BINDING ARBITRATION PROVISIONS OF
ARTICLE XVII, SECTION 7(U).  IN THE EVENT OF A DISPUTE RELATED TO THE EXISTENCE
OF A MATERIAL BREACH OF THIS AGREEMENT, THE DISPUTE SHALL BE LIKEWISE RESOLVED
BY THE BINDING ARBITRATION PROVISIONS OF ARTICLE XVII, SECTION 7(II), BUT THE
MEMBERSHIP INTEREST SHALL BE TRANSFERRED ONLY AFTER A DETERMINATION IN
ARBITRATION THAT SUCH MATERIAL DEFAULT HAS OCCURRED. EXCEPT IN THE CASE OF A
DETERMINATION PURSUANT TO THE BINDING ARBITRATION PROVISIONS OF ARTICLE XV,
SECTION 7(II) THAT THE RECEIVING MEMBER WAS NOT BANKRUPT OR AN UNSUITABLE
PERSON, THE RECEIVING MEMBER SHALL HAVE NO RIGHT OF REDEMPTION WITH RESPECT TO
ITS MEMBERSHIP INTEREST TRANSFERRED PURSUANT TO THIS ARTICLE XIV, SECTION 1.

 

2.             RIGHT OF FIRST REFUSAL.  IF AT ANY TIME ANY MEMBER RECEIVES A
BONA FIDE OFFER (THE “OFFER”) FOR THE PURCHASE OF ALL OR A PORTION ITS
MEMBERSHIP INTEREST (INCLUDING AN OFFER RECEIVED BY MTR TO PURCHASE ALL OR A
PORTION OF ITS SHARES OF MTR-HARNESS), WHICH OFFER THE MEMBER (HEREINAFTER
SOMETIMES CALLED THE “SELLING MEMBER”) IS WILLING TO ACCEPT, THE MEMBER SHALL
NOTIFY ALL OF THE OTHER MEMBERS IN WRITING OF THE OFFER, ENCLOSING A TRUE COPY
OF THE OFFER.  THE COMPANY, AND/OR ALL OF THE SEPARATE MEMBERS, IN THAT ORDER OF
PRIORITY, SHALL HAVE THE FIRST RIGHT TO PURCHASE THE MEMBERSHIP INTEREST WHICH
IS THE SUBJECT OF THE OFFER AT THE PRICE, AND UPON THE TERMS AND CONDITIONS
(EXCEPT FOR TIME AND PLACE OF CLOSING WHICH SHALL BE AS HEREINAFTER PROVIDED)
CONTAINED IN THE OFFER.

 

Notice of intention of the Company to purchase shall be given to the Selling
Member and to all other Members within fifteen (15) days after receipt of notice
from the Selling Member of the Offer.  If the Company does not give timely
notice of an intent to purchase, then any or all of the other Members shall have
the option, which may be exercised by providing written notice to the Selling
Member within fifteen (15) days after the expiration of the time within which
the Company bad the first right to purchase (i.e., within thirty (30) days after
the receipt of the aforesaid notice from the Selling Member) to purchase the
interest of the Selling Member as set forth in the terms and conditions of the
Offer.  Thereupon, each such Purchasing Member shall

 

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be entitled to purchase such portion of the Selling Member’s interest which is
the subject of the Offer in such proportion as the Purchasing Member’s interest
bears to the total interest in the Company of all of the Members who actually
purchase the Selling Member’s interest, which is the subject of the Offer.

 

The closing of the sale to the Company or to the Purchasing Member(s), as the
case may be (hereinafter the “Purchaser”) shall take place within ninety (90)
days after the giving of the notice required of the Selling Member as aforesaid,
on such date and at such time (during normal business hours) and at such
reasonable place as shall be designated by the Purchaser in its notice to the
Selling Member.  If neither the Company nor any Member shall become the
Purchaser, pursuant to the provisions of this Article XIV, Section 2, then the
Selling Member may, subject to Article XIII, sell to the bona fide offeror such
portion or all of its Membership as is set forth in the Offer, at a price not
below nor upon terms more advantageous to the offeror than the price and the
terms contained in the Offer, provided that such sale is closed within ninety
(90) days after the date of the Offer.  If it is not closed within such period
then the rights of the Company and of the separate Members under this Article
XIV, Section 2 shall be fully restored and reinstated as if the Offer had never
been made and the Selling Member may not thereafter dispose of all or any part
of its interest without again giving the Company, and all of the separate
Members, the first option to purchase the Membership Interest of the Selling
Member. Notwithstanding such sale, the offeror shall become a voting Member only
with the unanimous consent of all of the Managing Members.

 

ARTICLE XV
DISSOLUTION AND WINDING UP

 

1.             EVENTS OF DISSOLUTION.  THE COMPANY SHALL CONTINUE UNTIL THE
OCCURRENCE OF ANY ONE OF THE FOLLOWING DISSOLUTION EVENTS, AT WHICH TIME THE
COMPANY SHALL DISSOLVE:

 

1.1           AN ELECTION TO DISSOLVE THE COMPANY MADE IN WRITING UNANIMOUSLY BY
ALL OF THE MANAGING MEMBERS.

 

1.2           THE SALE, EXCHANGE OR OTHER DISPOSITION OF ALL OR SUBSTANTIALLY
ALL OF THE COMPANY’S PROPERTY, UNLESS THE COMPANY RECEIVES A PURCHASE MONEY NOTE
IN CONSIDERATION OF SUCH SALE IN WHICH EVENT DISSOLUTION SHALL OCCUR UPON FINAL
PAYMENT THEREOF.

 

1.3           A JUDICIAL DETERMINATION OF DISSOLUTION UNDER THE ACT.

 

No other events or actions, including any such events or actions described in
the Act or Article XI, Section 1 above, shall cause a dissolution of the
Company.

 

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2.             ELECTION TO CONTINUE DOING BUSINESS.  IF AN EVENT OR ACTION
OCCURS, OTHER THAN THOSE DESCRIBED IN SECTIONS 1.1, 1.2 OR 1.3 ABOVE, AND
DESPITE THE LAST SENTENCE OF SECTION 1 OR THE LAST SENTENCE OF ARTICLE XI,
SECTION 1, PROVIDING THAT SUCH EVENT OR ACTION WILL NOT CAUSE A DISSOLUTION OF
THE COMPANY, IT IS DETERMINED THAT THE COMPANY IS NEVERTHELESS SUBJECT TO
DISSOLUTION:

 

2.1           AS SET FORTH IN THE ACT, NOTWITHSTANDING THE OCCURRENCE OF A
DISSOLUTION EVENT (OTHER THAN WHERE DISSOLUTION OCCURS PURSUANT TO SECTION 1.1,
1.2 OR 1.3 ABOVE), THE COMPANY MAY CONTINUE TO CARRY ON ITS BUSINESS AND AFFAIRS
FOLLOWING SUCH DISSOLUTION EVENT IF, WITHIN NINETY (90) DAYS AFTER SUCH
DISSOLUTION EVENT THERE REMAINS AT LEAST ONE MEMBER (THE “REMAINING MEMBER(S)”),
AND ALL OF THE MANAGING MEMBERS OR ALL REMAINING MEMBER(S) CONSENT TO SO
CONTINUE THE BUSINESS AND AFFAIRS OF THE COMPANY WITHOUT DISSOLUTION.

 

2.2           IN THE EVENT THE SURVIVING MEMBERS SHALL DETERMINE THAT THEY WISH
TO CONTINUE THE COMPANY, AND THE MEMBER BUY-OUT PROVISIONS SET FORTH IN
ARTICLE XIV ARE NOT APPLICABLE TO THE SELLING MEMBERS (DEFINED BELOW), INCLUDING
BY REASON OF ARTICLE XI, SECTION 2.2, ARTICLE XIII, SECTION 2.2, ARTICLE XIII,
SECTION 5, OR ARTICLE XIV, SUCH MEMBERS, HEREINAFTER CALLED THE “PURCHASING
MEMBERS,” SHALL HAVE THE ABSOLUTE OPTION AND RIGHT TO PURCHASE THE MEMBERSHIP
INTERESTS OF THE OTHER MEMBERS, HEREINAFTER CALLED THE “SELLING MEMBERS.”  FOR
THIS PURPOSE THE PURCHASING MEMBERS’ GROUP AND THE SELLING MEMBERS’ GROUP SHALL
EACH PROMPTLY APPOINT AN APPRAISER TO DETERMINE THE VALUE OF THE MEMBERSHIP
INTERESTS.  IN RESPECT TO THOSE ITEMS UPON WHICH THE APPRAISERS DISAGREE, THEY
SHALL TOGETHER APPOINT A THIRD APPRAISER, WHO SHALL DETERMINE ITEMS AND SHALL
RENDER A WRITTEN REPORT OF HIS OPINION WITH RESPECT THERETO.  ALL APPRAISERS
APPOINTED SHALL BE APPRAISERS WHO HAVE QUALIFIED TO GIVE EXPERT VALUATION
TESTIMONY.  THE VALUES CONTAINED IN THE SAID WRITTEN REPORTS SHALL BE USED TO
DETERMINE THE PURCHASE PRICE OF THE MEMBERSHIP INTERESTS OF THE SELLING
MEMBERS.  WITHIN SIXTY (60) DAYS AFTER ALL OF THE SAID WRITTEN REPORTS HAVE BEEN
RENDERED, THE PURCHASING MEMBERS SHALL NOTIFY THE SELLING MEMBERS IN WRITING OF
THEIR DECISION WHETHER TO EXERCISE THE OPTION.  THE OPTION IS GRANTED TO ALL THE
PURCHASING MEMBERS IN PROPORTION TO THEIR RESPECTIVE MEMBERSHIP INTERESTS; BUT
IF ANY SUCH MEMBER DOES NOT DESIRE TO EXERCISE THE OPTION, THEN HIS PORTION MAY
BE TAKEN UP PRO RATA BY THE REMAINING PURCHASING MEMBERS, AS THE CASE MAY BE. 
SETTLEMENT SHALL BE COMPLETED WITHIN THIRTY (30) DAYS AFTER NOTICE OF THE
EXERCISE OF THE OPTION.  THE TERMS OF PAYMENT OF THE PURCHASE PRICE SHALL BE: NO
CASH DOWN PAYMENT, THE BALANCE PAYABLE IN EQUAL MONTHLY INSTALLMENTS OVER A
PERIOD OF FIVE (5) YEARS WITH INTEREST ON THE UNPAID BALANCE AT THE PRIME RATE. 
THE OBLIGATION OF THE PURCHASING MEMBERS TO THE SELLING MEMBERS SHALL BE
EVIDENCED BY A PROMISSORY NOTE OR NOTES, SECURED BY A PLEDGE OF THE PURCHASED
INTERESTS AND THE FILING OF A FINANCING STATEMENT WITH RESPECT THERETO.

 

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3.             PROCEDURES UPON DISSOLUTION.

 

3.1           UPON DISSOLUTION OF THE COMPANY, THE MANAGING MEMBERS OR, IF THERE
IS ONLY ONE MANAGING MEMBER, SUCH PERSON, SHALL PROCEED WITH DISPATCH AND
WITHOUT ANY UNNECESSARY DELAY TO SELL OR OTHERWISE LIQUIDATE THE ASSETS OF THE
COMPANY, AND SHALL DISTRIBUTE THE PROCEEDS THEREOF IN ACCORDANCE WITH ARTICLE
XV, SECTION 3.2, BELOW.

 

3.2           UPON DISSOLUTION AND LIQUIDATION OF THE COMPANY, THE NET PROCEEDS
OF LIQUIDATION SHALL BE APPLIED AND DISTRIBUTED IN THE FOLLOWING ORDER OF
PRIORITY:

 

3.2.1        First, to the payment of the debts and liabilities of the Company
(other than any loans or advances that may have been made by any of the Members)
and the expenses of liquidation;

 

3.2.2        Second, to the creation of any reserves which the Managing Members
may deem reasonably necessary for the payment of any contingent or unforeseen
liabilities or obligations of the Company or of the Members arising out of or in
connection with the Business and operations of the Company;

 

3.2.3        Third, in accordance with the Non-Operating Distribution provisions
of Article IX, Section 4.

 

3.3           A REASONABLE TIME SHALL BE ALLOWED FOR THE ORDERLY LIQUIDATION OF
THE COMPANY’S ASSETS AND THE DISCHARGE OF ITS LIABILITIES, UNLESS THE MANAGING
MEMBERS SHALL HAVE AGREED TO MAKE ANY IN-KIND DISTRIBUTIONS.

 

3.4           THE COMPANY SHALL TERMINATE AND WIND UP WHEN ALL ASSETS OWNED BY
THE COMPANY SHALL HAVE BEEN DISPOSED OF AND THE NET PROCEEDS, AFTER SATISFACTION
OF LIABILITIES TO COMPANY CREDITORS, SHALL HAVE BEEN DISTRIBUTED AMONG THE
MEMBERS.

 

ARTICLE XVI
AMENDMENT

 

1.             AGREEMENT MAY BE MODIFIED.  THE AGREEMENT MAY BE MODIFIED AS
PROVIDED IN THIS ARTICLE XVI (AS THE SAME MAY, TIME TO TIME BE AMENDED).

 

2.             AMENDMENT OR MODIFICATION OF AGREEMENT.  THE AGREEMENT MAY BE
AMENDED OR MODIFIED FROM TIME TO TIME ONLY BY A WRITTEN INSTRUMENT ADOPTED BY
ALL OF THE MANAGING MEMBERS.

 

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ARTICLE XVII
MISCELLANEOUS PROVISIONS

 

1.             PRONOUNS AND PLURALS.  EXCEPT WHERE THE SAME SHALL NOT BE
APPROPRIATE: REFERENCES HEREIN TO THE SINGULAR SHALL INCLUDE THE PLURAL AND TO
THE PLURAL SHALL INCLUDE THE SINGULAR; REFERENCES TO THE MASCULINE GENDER SHALL
INCLUDE THE FEMININE AND NEUTER GENDERS (AND VICE VERSA).

 

2.             WAIVER.  NO CONSENT OR WAIVER, EXPRESS OR IMPLIED, BY ANY MEMBER
TO OR OF ANY BREACH OR DEFAULT BY ANY OTHER MEMBER IN THE PERFORMANCE BY THE
OTHER OF HIS OR HER OBLIGATIONS HEREUNDER SHALL BE DEEMED OR CONSTRUED TO BE A
CONSENT OR WAIVER TO OR OF ANY OTHER BREACH OR DEFAULT BY THE OTHER IN THE
PERFORMANCE BY SUCH OTHER PARTY OF THE SAME OR ANY OTHER OBLIGATIONS OF SUCH
MEMBER HEREUNDER.  FAILURE ON THE PART OF ANY MEMBER TO OBJECT TO OR COMPLAIN OF
ANY ACT OR FAILURE TO ACT OF ANY OF THE OTHER MEMBERS OR TO DECLARE ANY OF THE
OTHER MEMBERS IN DEFAULT, IRRESPECTIVE OF HOW LONG SUCH FAILURE CONTINUES, SHALL
NOT CONSTITUTE A WAIVER BY SUCH MEMBER OF ITS RIGHTS HEREUNDER.

 

3.             SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT OR THE
APPLICATION THEREOF TO ANY PERSON OR CIRCUMSTANCE SHALL BE INVALID OR
UNENFORCEABLE TO ANY EXTENT, THE REMAINDER OF THIS AGREEMENT AND THE APPLICATION
OF SUCH PROVISIONS TO OTHER PERSONS OR CIRCUMSTANCES SHALL NOT BE AFFECTED
THEREBY AND SHALL BE ENFORCED TO THE GREATEST EXTENT PERMITTED BY LAW.

 

4.             TITLES AND CAPTIONS.  ALL SECTION TITLES OR CAPTIONS CONTAINED IN
THIS AGREEMENT ARE FOR CONVENIENCE ONLY AND SHALL NOT BE DEEMED A PART OF THE
CONTEXT OF THIS AGREEMENT.

 

5.             AGREEMENT IN COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN
SEVERAL COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF
WHICH SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.  IN ADDITION, THIS AGREEMENT
MAY CONTAIN MORE THAN ONE COUNTERPART OF THE SIGNATURES PAGE AND THE AGREEMENT
MAY BE EXECUTED BY THE AFFIXING OF THE SIGNATURES OF EACH OF THE MEMBERS TO ONE
OF SUCH COUNTERPART SIGNATURE PAGES; ALL OF SUCH SIGNATURE PAGES SHALL BE READ
AS THOUGH ONE, AND SHALL HAVE THE SAME FORCE AND EFFECT AS THOUGH ALL OF THE
SIGNERS HAD SIGNED A SINGLE SIGNATURE PAGE.  EACH PARTY SHALL BECOME BOUND BY
THIS AGREEMENT IMMEDIATELY UPON AFFIXING HIS, HER OR ITS SIGNATURE HERETO,
INDEPENDENT OF THE SIGNATURE OF ANY OTHER PARTY.

 

6.             BINDING AGREEMENT.  SUBJECT TO THE RESTRICTIONS ON TRANSFERS SET
FORTH HEREIN, THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON
THE UNDERSIGNED MEMBERS AND THEIR RESPECTIVE HEIRS, EXECUTORS, LEGAL OR PERSONAL
REPRESENTATIVES, SUCCESSORS AND ASSIGNS.  IN THIS CONTEXT, WHENEVER IN THIS
INSTRUMENT A REFERENCE TO ANY PARTY OR MEMBER IS MADE, SUCH REFERENCE SHALL BE
DEEMED TO INCLUDE A REFERENCE TO THE HEIRS, EXECUTORS, LEGAL OR PERSONAL
REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF SUCH PARTY OR MEMBER.

 

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7.             GOVERNING LAW; DISPUTES.  IT IS THE INTENT OF THE PARTIES HERETO
THAT ALL QUESTIONS WITH RESPECT TO THE CONSTRUCTION OF THIS AGREEMENT AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE
WITH THE PROVISIONS OF THE LAWS OF THE STATE OF MINNESOTA.  VENUE FOR ANY
DISPUTES SHALL BE IN MINNEAPOLIS, MINNESOTA.  TO RESOLVE DISPUTES THE PARTIES
SHALL (I) FIRST, ENGAGE IN NON-BINDING MEDIATION WITH A SINGLE MEDIATOR, WITH
SUCH MEDIATION SESSION BEFORE THE MEDIATOR NOT TO EXCEED TWO (2) BUSINESS DAYS
AND, (II) SECOND, IF SUCH MEDIATION IS UNSUCCESSFUL, SUBMIT THE DISPUTE TO
BINDING ARBITRATION UNDER AMERICAN ARBITRATION ASSOCIATION RULES USING A SINGLE
ARBITER.  THE PREVAILING PARTY IN ANY MEDIATION OR ARBITRATION WITH RESPECT TO
ANY DISPUTES RELATING TO THE AGREEMENT SHALL BE ENTITLED TO RECOVER ITS
REASONABLE ATTORNEYS FEES FROM THE OTHER PARTY FOR ALL MATTERS, INCLUDING BUT
NOT LIMITED TO APPEALS WITH SUCH FEES TO BE AWARDED BY THE MEDIATOR OR ARBITER.

 

8.             WAIVER OF JURY TRIAL.  EACH MEMBER IRREVOCABLY WAIVES ANY AND ALL
RIGHT THE MEMBER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM
OF ANY NATURE RELATING TO THIS AGREEMENT.  THE MEMBERS ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

 

9.             CONFIDENTIALITY.  EACH MEMBER AGREES THAT THIS AGREEMENT, AND ALL
INFORMATION (OTHER THAN INFORMATION WHICH IS A MATTER OF PUBLIC RECORD OR IS
PROVIDED BY OTHER SOURCES READILY AVAILABLE TO THE PUBLIC) SHARED OR DEVELOPED
ON BEHALF OF THE COMPANY AND ITS ACTIVITIES SHALL BE KEPT STRICTLY CONFIDENTIAL,
EXCEPT IN DISCUSSIONS WITH OR FILINGS WITH GAMING AUTHORITIES, OR A MEMBER’S
FINANCIERS, ATTORNEYS, ACCOUNTANTS, INVESTMENT BANKERS OR PROSPECTIVE
INVESTORS.  NO DISCLOSURES, PRESS RELEASES, OR ANNOUNCEMENTS CONCERNING THE
COMPANY SHALL BE MADE BY ANY MEMBER, EXCEPT THE COMPANY MAY MAKE SUCH PUBLIC
DISCLOSURES THAT ITS COUNSEL DEEMS NECESSARY OR ADVISABLE UNDER FEDERAL
SECURITIES LAWS, AS DETERMINED BY ALL OF THE MANAGING MEMBERS.  EACH MEMBER
HEREBY ACKNOWLEDGES THAT THE SECURITIES OF MTR ARE PUBLICLY TRADED AND COVENANTS
THAT WHILE IN POSSESSION OF MATERIAL NON-PUBLIC INFORMATION CONCERNING MTR, SUCH
MEMBER WILL NEITHER TRADE IN MTR’S SECURITIES NOR ADVISE OTHERS WITH RESPECT TO
SUCH TRADING.

 

10.           FURTHER ASSURANCES.  EACH MEMBER AGREES THAT IT WILL, AT ANY TIME
AND FROM TIME-TO-TIME, UPON THE REQUEST OF THE MANAGING MEMBERS, DO, EXECUTE,
ACKNOWLEDGE OR DELIVER ALL SUCH FURTHER ACTS, DEEDS, ASSIGNMENTS, CONVEYANCES
AND ASSURANCES AS MAY BE REASONABLY REQUIRED TO EFFECTUATE THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.

 

11.           INVESTMENT OBJECTIVES.  EACH MEMBER, BY SUCH MEMBER’S SIGNATURE
HERETO, WARRANTS THAT EACH SUCH MEMBER IS ACQUIRING AN INTEREST IN THE COMPANY
FOR SUCH MEMBER’S OWN ACCOUNT FOR INVESTMENT ONLY AND WITHOUT ANY PRESENT
INTENTION OF SELLING THE SAME.  EACH MEMBER FURTHER COVENANTS AND AGREES THAT IT
SHALL BE RESPONSIBLE, AT ITS SOLE COST AND EXPENSE, FOR MAKING ANY PUBLIC
FILINGS REQUIRED BY VIRTUE OF ITS OWNERSHIP INTEREST IN THE COMPANY.  FURTHER,
AND TO THAT END, THE

 

37

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MEMBERS SHALL LOOK TO THEIR OWN COUNSEL AND NOT THE MANAGING MEMBER FOR GUIDANCE
AS TO THE FILING OF SUCH MATTERS.

 

12.           ENTIRE AGREEMENT.  THIS AGREEMENT, UNLESS SUBSEQUENTLY AMENDED IN
THE MANNER PROVIDED IN ARTICLE XVI, CONTAINS THE FINAL AND ENTIRE AGREEMENT
AMONG THE PARTIES HERETO, AND THEY SHALL NOT BE BOUND BY ANY TERMS, CONDITIONS,
STATEMENTS OR REPRESENTATIONS, ORAL OR WRITTEN, NOT HEREIN CONTAINED.

 

13.           NO CUMULATIVE VOTING.  NO MEMBERS SHALL HAVE ANY CUMULATIVE VOTING
RIGHTS.

 

14.           PREEMPTIVE RIGHTS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, OR AS DETERMINED BY ALL OF THE MANAGING MEMBERS, NO MEMBERS SHALL
HAVE PREEMPTIVE RIGHTS TO CONTRIBUTE ADDITIONAL CAPITAL AS PROVIDED IN THE ACT.

 

IN WITNESS WHEREOF, the parties have executed this Agreement effective on the
date first set forth above.

 

 

MTR-HARNESS, INC.,
a Minnesota corporation

 

 

 

 

 

 

 

/s/ Edson R. Arneault

 

 

By:

Edson R. Arneault

 

 

Its:

President

 

 

 

 

 

 

 

 

SOUTHWEST CASINO & HOTEL CORP.,
a Minnesota corporation

 

 

 

 

 

 

/s/ James B. Druck

 

 

By:

James B. Druck

 

Its:

President

 

 

 

 

 

 

 

MTR GAMING GROUP, INC.
a Delaware corporation

 

 

 

 

 

/s/

 

 

By:

 

 

 

Its:

 

 

 

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EXHIBIT A

 

PERCENTAGE INTERESTS AND CAPITAL CONTRIBUTION COMMITMENT

 

PERCENTAGE INTERESTS AND CAPITAL CONTRIBUTION COMMITMENT

 

Member

 

Percentage Interest

 

Maximum Capital
Contribution
Commitment

 

MTR-Harness
c/o MTR Gaming Group, Inc.
P.O. Box 356
State Route 2 South
Chester, WV 26034

 

50%

 

$7,490,000(1)

 

 

 

 

 

 

 

Southwest Casino & Hotel Corp.
2001 Killebrew Drive, Suite 306
Minneapolis, MN 55425

 

50%

 

$1,500,000 Plus Pre-
Licensing Costs(2)

 

 

 

 

 

 

 

TOTAL

 

100%

 

$8,990,000

 

 

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(1)     MTR-Harness contributed $10,000 in cash on the Effective Date of this
Agreement, will contribute the $2,990,000.00 Catch-Up Contribution on the date
of any Licensing Event and has committed to contribute additional funds in
excess of the Catch-Up Contribution of up to $4,500,000.00 to increase its
cumulative Capital Contributions to the Company to the MTR-Harness Maximum
Capital Contribution of $7,500,000 upon the call for such additional capital by
the Board of Directors.

 

(2)     Southwest shall fund all costs prior to the Licensing Event (other than
MTR-Harness’ initial $10,000.00 Capital Contribution) and shall receive Capital
Account credit with respect to all of its Pre-Licensing Costs.  Southwest has
further committed to contribute additional funds of up to $1,500,000.00
subsequent to the occurrence of the Licensing Event upon the call for such
additional capital by the Board of Directors.

 

A - 1

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EXHIBIT B

 

LEGAL DESCRIPTION OF THE REAL PROPERTY

 

B - 1

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