**Exhibit 10.15**

 

Exhibit A toConsolidation Agreement

 

RAINBOW CASINO-VICKSBURG PARTNERSHIP, L.P.

(A Mississippi Limited Partnership)

 

THISSECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of March29, 1995 (the “Agreement”), is entered into by and between United GamingRainbow, a Nevada corporation (“UGR”), as general partner, and The RainbowCasino Corporation, a Mississippi corporation, as limited partner (“RCC” or the“Limited Partner”).

 

RECITALS:

 

A.            RCC, as general partner, and UGR, aslimited partner, are partners in a limited partnership pursuant to the MississippiLimited Partnership Act, §§ 74-14-101 et seq. of the Mississippi Code of1972, as amended (the “Mississippi Act”), pursuant to an Amended and RestatedLimited Partnership Agreement dated as of July 16, 1994 (the “OriginalAgreement”), which carried forward the Partnership. UGR and RCC desire to amendand restate the Original Agreement, pursuant to the Mississippi Act and uponthe terms and conditions set forth in this Agreement, to effect the changes setforth herein, including without limitation, by UGR being and becoming thegeneral partner in the Partnership and RCC being and becoming the LimitedPartner.

 

B.            Pursuant to the Original Agreement,the Partnership issued to UGR Special Limited Partnership Interests (as definedtherein) in the aggregate amount of $3.25 million, as more particularlyprovided therein. Pursuant to the Consolidation Agreement (as defined below)and as provided in Section 4.04 below, such Special Limited Partnership Interestsshall be cancelled and in exchange therefor the Partnership is issuing to UGRon the date hereof a Class A Note (as defined below) in the principal amount of$3.25 million. In addition, pursuant to the Consolidation Agreement, amounts inrespect of accrued and unpaid royalties payable to UGR, accrued and unpaidamounts in respect of Distributions (as defined below) in respect of, andRedemptions (as defined below) of, such Special Limited Partnership Interestsand certain other accrued and unpaid amounts, through and including the date hereof,in the aggregate amount of $935,052 (as set forth in Exhibit A hereto),shall hereafter constitute an obligation of the Partnership which shallconstitute a portion of the indebtedness evidenced by the Class B Note (asdefined below) in the maximum principal amount of $3.5 million issued on thedate hereof by the Partnership to UGR.

 

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C.            The Partnership is also issuing toNational Gaming Mississippi, Inc., a Delaware corporation (“NGM”), a Class BNote in the maximum principal amount of $2 million pursuant to the Consolidation Agreement.

 

AGREEMENT:

 

Theparties agree that the Original Agreement shall be amended and restated asfollows:

 

Article I:  Organizational Matters

 

1.01 Formation; Etc.  UGR and RCC hereby agree to continue aspartners (sometimes referred to herein as the “Partners”) in continuation ofthe Partnership under the Mississippi Act as described in Recital A above. Onor prior to the date hereof (or within five business days hereafter), UGR andRCC have caused (or shall cause) to be filed an amended certificate of limited partnership(a “Certificate”) in the office of the Secretary of State of the State ofMississippi reflecting the fact that UGR is the general partner and RCC is thelimited partner in the Partnership. Failure to effect such filing in a timelymanner shall not affect the Partners’ respective rights or obligations hereunder.

 

1.02 Partners.  UGR shall, from and after the date hereof, bethe sole general partner in the Partnership (the “General Partner”). RCC shall,from and after the date hereof, be the sole Limited Partner. Each additionalLimited Partner, if any, upon execution and delivery of a counterpart of thisAgreement, as provided for herein, shall become a limited partner in thePartnership and shall be reflected as such on the books and records of thePartnership. UGR shall not admit any other Person as a Partner if the effectthereof is to reduce amounts otherwise payable to RCC hereunder, as providedherein.

 

1.03  Documents.  The Partners acknowledge and ratify the filingof each Certificate by UGR and RCC and, after the execution and delivery ofthis Agreement, the General Partner shall cause to be filed such othercertificates or filings as may be required for the operation of a limited**partnership in the State of Mississippi.The General Partner shall thereafter file any necessary amendments to theCertificate, and shall otherwise do all things necessary or appropriate for themaintenance of the Partnership as a limited partnership under the laws of theState of Mississippi.

 

1.04  Name.  The Partnership’s name is “RainbowCasino-Vicksburg Partnership, L.P.”  ThePartnership’s business shall be conducted under the name “RainbowCasino-Vicksburg Limited Partnership” or under any other name or namesreasonably deemed advisable by the General Partner from time to time, includingwithout limitation, the name of the General Partner or any Affiliate thereof orany trade style or trade names. The words “Limited Partnership” or letters “L.P.”shall be included in the name of the Partnership where necessary to comply withthe laws of any jurisdiction that so requires.

 

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1.05 Registered Office: Principal Office. Unless and until changed by the GeneralPartner, the registered office of the Partnership in the State of Mississippishall be located at 1440 Warrenton Road, Vicksburg, Mississippi 39180. Theprincipal office of the Partnership shall be c/o Alliance Gaming Corporation,4380 Boulder Highway, Las Vegas, Nevada 89121, or such other place in theUnited States as may from time to time be reasonably designated by the GeneralPartner (provided, that the General Partner shall not charge any overhead inrespect of such office if not maintained at the Project site, except asreflected in the management fee under the Management Agreement (as in effect onthe date hereof)). The General Partner shall give prompt written notice of anysuch change to the Limited Partner. The Partnership may maintain offices atsuch other place or places within or outside the State of Mississippi as theGeneral Partner deems desirable or advisable.

 

1.06 Duration.  The Partnership has commenced operations priorto the date hereof and shall continue until December 31, 2010, unless earlierterminated pursuant to Article VII or extended pursuant to Article V hereof.

 

1.07  Purposes and Powers.  The Partnership is organized for the objectand purpose of conducting, operating and disposing of the Rainbow Business, andto engage in all such, activities and transactions as are reasonably related toor incidental to the foregoing. In the event that the General Partner proposesto enter into any transaction or series or related transactions on behalf ofthe Partnership that are material to the Rainbow Business with Alliance GamingCorporation or any of its Affiliates (other than the Partnership), the GeneralPartner shall notify the Limited Partner of such proposed transaction (togetherwith a reasonably detailed written description thereof), and the LimitedPartner shall have the right to consent (in its reasonable discretion) to thefact that the economic terms of such transaction are no less favorable to thePartnership than the terms on which such a transaction would have been effectedwith an unaffiliated third party; it being understood that failure to respondto such General Partner’s notice within 10 days thereof shall constitute theLimited Partner’s consent, The Rainbow Business shall not be conducted by theGeneral Partner other than through the Partnership. The Partnership may conductand operate the Rainbow Business through divisions or other formats, utilizingtrade styles or trade names.  ThePartnership shall have all powers necessary or incidental, suitable, desirableor convenient for the accomplishment of the aforesaid purposes as limitedabove, alone or with others, as principal or as agent.

 

1.08 Power of Attorney.  Subject to Section 1.07 above, the LimitedPartner hereby constitutes and appoints the General Partner and each of itsauthorized officers and attorneys-in-fact, with full power of substitution, asits true and lawful agent and attorney-in-fact, with full power and authorityin its name, place and stead, in a manner not prohibited by this Agreement, toexecute, swear to, acknowledge, deliver, file and record in the appropriatepublic offices all certificates, documents and other instruments that theGeneral Partner deems necessary or appropriate to form, qualify or continue theexistence or qualification of the Partnership as a limited partnership in theState of Mississippi. The foregoing power of attorney is irrevocable and apower coupled with an interest, and it shall survive and not be affected by thesubsequent death, incompetency, dissolution, bankruptcy

 

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or termination of theLimited Partner or the transfer of all or any portion of the Limited Partner’sInterest and shall extend to the Limited Partner’s successors and assigns.

 

1.09 Ownership of Property.  Legal title to all assets, rights and property(including without limitation, all cash and cash deposits in whatever formheld, including in gaming machines), whether real, personal or mixed andwhether tangible or intangible, acquired by the Partnership shall be acquired,held, owned and subsequently conveyed in the name of the Partnership and noPartner, individually or collectively, shall have any ownership interest insuch partnership properties or any portion thereof. Subject to Section 1.07above, (a) the Partnership shall have the power to acquire, own, lease,sublease, manage, operate, hold, deal in, control or dispose of any interest inreal property constituting part of the Project and (b) the Partnership shallalso have the power to acquire, own, hold, manage, sell, transfer, convey,assign, exchange, pledge or otherwise dispose of the stock of or other interestin any Person, foreign or domestic.

 

Article II:  Definitions

 

Forthe purposes of this Agreement, the following terms shall havethe following meanings:

 

“Affiliate”of any Person means any other person Controlled by, Controlling or under commonControl with such first Person, including without limitation, directors,officers, employees, stockholders and agents of such first Person or any otherPerson Controlled by, Controlling or under common Control with such firstPerson.  “Control,” “Controlling” or “Controlled”as to any Person shall mean the possession, directly or indirectly, of thepower to direct or cause the direction of the management and/or policies ofsuch Person, whether through ownership of voting securities or partnershipinterests, by agreement or understanding or otherwise.

 

“AllianceAgreements” shall mean the Basic Agreement dated as of October 28, 1993 amongAlliance Gaming Corporation (formerly known as United Gaming, Inc.), TheRainbow Casino Corporation, John A. Barrett. Jr. and Leigh Seippel, as amendedto date by agreements among such Persons and certain other Persons, includingby the Consolidation Agreement.

 

“AllowedDeductions” shall mean deductions from Net Cash Flow consisting of:

 

(i)  NGM and/or HFS royalties andinterest and principal in respect of the HFS Financing Agreements, each asprovided for in the HFS Financing Agreements as presently in effect;

 

(ii)  interest and principal inrespect of the existing obligations of the Partnership to International GameTechnology, Inc. or any of its affiliates, as presently in effect;

 

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(iii)  interest and principal inrespect of existing obligations to the Partnership to Kossens, Inc. or any ofits affiliates, as presently in effect;

 

(iv)  interest and principal inrespect of the Class A Note issued by the Partnership on the date hereof to UGRin the maximum principal amount of $3.25 million; it being understood that fromand after the date hereof no further royalty shall accrue in respect of anySpecial Limited Partnership Interests or under the Alliance Agreements in anycircumstance, the maximum principal amount of Class A Notes to be given effectfor purposes of computation of the Net Cash Flow from which the RCC Interest ispayable being $3.25 million; and

 

(v) interest and principal in respect of the Class B Notes issued bythe Partnership on the date hereof to UGR and NGM in the amounts of $3.5million and $2 million, respectively; such Class B Notes being for purposes offunding Permitted Capital Expenditures in the aggregate of up to but not inexcess of $5.5 million, such that the maximum principal amount of the Class BNotes for purposes of computation of Net Cash Flow from which the RCC Interestis payable being $5.5 million or such lesser amount as shall have been fundedin respect of such Class B Notes, in conformity with the terms of thisAgreement and the Consolidation Agreement.

 

Incalculating Allowed Deductions it is agreed that the General Partner isauthorized to amend the terms of the indebtedness and other items in clauses(i) through (v) above or to obtain substitute, replacement or additionalfinancing in respect of the Project, each, in the General Partner’s solediscretion; provided, that, notwithstanding any such action or any otherrecapitalization of the Partnership, or any other action of the Partnership orthe General Partner, the RCC Interest shall continue to be calculated solelybased upon Net Cash Flow calculated based on the provisions set out above inthis definition, throughout the term of the RCC Interest and based on a maximumaggregate principal amount of Notes of $8.75 million to be repaid in accordancewith their terms, as provided herein.

 

“ClassA Note” shall mean the Class A Note issued by the Partnership to UGR on thedate hereof in accordance with Section 4.04 hereof in the maximum principalamount of $3.25 million.

 

“ClassB Note” shall mean each of the Class B Notes issued by the Partnership to UGRand NGM on the date hereof in accordance with Section 4.04 hereof in themaximum principal amounts of $3.5 million and $2 million, respectively. TheClass B Notes shall accrue interest on and the principal amounts thereundershall be repayable solely based upon the amounts funded or deemed funded by UGRand NGM hereunder and under the Consolidation Agreement. As of the date hereof,the Partnership has incurred indebtedness to (and such amounts shall be deemedfunded by) (a) UGR in the amounts of $935,052 in respect of accrued and unpaidamounts described on Exhibit A hereto and $651,999.92 as provided inSection 2(b) of the Consolidation Agreement and (b) NGM in the amount of$651,999.92 as provided in the Consolidation Agreement. The Class B Notes shallbe subject to the final sentence of Section 3.04 hereof.

 

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“Code”shall mean the Internal Revenue Code of 1986, as amended, or any successorstatute or statutes thereto.

 

“ConsolidationAgreement” shall mean the Consolidation Agreement dated as of the date hereof among RCC, NGM, HFS GamingCorp., a Delaware corporation. Alliance Gaming Corporation, UGR and, as tocertain matters, John A. Barrett, Jr., Leigh Seippel, Rainbow DevelopmentCorporation, a Mississippi corporation, and National Gaining Corp., a Delawarecorporation, and Doyle  & * *Bachman,a law partnership.

 

“EBITDAR”shall mean earnings from the Project, before giving effect to depreciation,amortization, interest and principal payments (including payments of intereston and principal of the HFS Financing Agreements to HFS or NGM or any of theirrespective Affiliates and payments of interest on and principal of the Notes),royalties payable to HFS, capital expenditures, and federal, state and localtaxes (provided that such taxes are not paid by the Partnership)(but aftergiving effect to specifically gaming-related taxes, which shall constitute adeduction from earnings of the Partnership), all as determined in accordancewith generally accepted accounting principles, consistently applied.

 

“Eventof Withdrawal” shall mean, with respect to the General Partner, any bankruptcyor insolvency of the General Partner and the events specified under §79-14-402(a) of the Mississippi Act.

 

“GrossGaming Revenues” shall mean gaming revenues derived from the casino forming a partof the Project, in accordance with generally accepted accounting principles,consistently applied, i.e., for any applicable period, the amounts retained bysuch casino in respect of players’ wagers, less payments to winning players andall applicable gaining taxes.

 

“HFS”shall mean Hospitality Franchise Systems, Inc. or any of its Affiliates (andshall include NGM or any of its Affiliates); “HPS Financing Agreements” shallmean the various financing agreements, marketing and servicing agreements andother documents and instruments in effect on the date hereof among thePartnership, either of the Partners (or any of their respective Affiliates) andHFS or NGM, as amended or supplemented and in effect from time to time.

 

“Interest”shall mean, as to each Partner, all applicable rights of such Partner underthis Agreement.

 

“ManagementAgreement” shall mean the Management Agreement dated as of October 28, 1993among Mississippi Ventures, Inc., the Partnership, RCC, John A, Barrett, Jr.and Leigh Seippel, as amended to date.

 

“NetCash Flow” shall mean EBITDAR of the Project, on a freestanding basis,exclusive of any overhead, service or other charges of the General Partner.Alliance Gaming Corporation or any Affiliate thereof (other than thePartnership, as permitted by this Agreement) other than the Management Fee (as presentlyin effect and as provided for in the

 

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Management Agreement, including any incentive or performance basedmanagement fees), prepared on a consistently applied generally acceptedaccounting principles basis for the Project, less deductions for, but only forAllowed Deductions.

 

“NetIncome” or “Net Loss” for any taxable year shall mean the taxable income or thetaxable loss of the Partnership for such taxable year as determined for U.S.federal income tax purposes.

 

“Notes”means, collectively, the Class A Note and me Class B Notes.

 

“PermittedCapital Expenditures” shall mean expenditures made by UGR or NGM or any oftheir respective Affiliates to or as directed by the Partnership or otherwisedesignated by the General Partner (in its sole discretion) in connection withthe Project or the Rainbow Business, whether from the cash available in orgenerated by the Project or from UGR’s or NGM’s or such Affiliates’ own orborrowed funds, and in each case, whether or not such expenditures are, inaccordance with generally accepted accounting principles, properly classifiedas capital expenditures; provided, that the aggregate amount of suchexpenditures (including the amount provided to be expended under the ConsolidationAgreement) shall not have exceeded the difference between $5.5 million and theamount funded on the date hereof in respect of the Class B Notes (i.e.,$2,239,051.84), from and after the date hereof. Nothing herein shall limit UGR’sability to fund additional amounts to the Project so long as such additionalamounts are not evidenced by a Class B Note.

 

“Person”shall mean any individual, company, corporation, association; governmental orquasi-governmental authority or other entity.

 

“Project”shall mean a dockside casino, restaurants, concessions and related activitiesin Vicksburg, Mississippi (including the contiguous family entertainment parkand hotel).

 

“RainbowBusiness” shall mean the business and operations heretofore and hereafter conductedby the Partnership, consisting of the development, ownership and operation ofthe Project.

 

“RCCInterest” shall mean the Interest of RCC as Limited Partner in the Partnershipcalculated as 10% of Net Cash Flow of the Partnership for each fiscal year ofthe Partnership from January 1, 1995 through the term of this Partnership asset forth in Section 1.06 hereof, subject to earlier termination as provided inArticle VII hereof and to extension of such date as provided in thisdefinition; provided, that RCC shall be entitled to a 20% share of Net CashFlow to the extent (but solely to the extent) allocable on a straight lineproportionate basis to Gross Gaming Revenues in any fiscal year in excess of$35,000,000 (e.g., if gross gaming revenues are $38,000,000 and Net Cash Flowis $5,000,000, the RCC Interest shall be (a) $5,000,000 x 35/38 x 10% plus (b) $55,000,000x 3/38 x 20%). The term of the RCC Interest shall be for 15 years, commencingJanuary 1, 1995; provided, that if the RCC Interest does not produce at least$50,000 per calendar year in actual payments to RCC, or a compensating paymentup to the difference between $550,000 and the amount of

 

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the RCC Interest otherwisepayable by the Partnership is not made for such calendar year to RCC, then theterm of the RCC Interest shall be extended for an additional consecutive12-month period in each such case.

 

“Transfer”shall mean the direct or indirect sale, donation, assignment (as collateral orotherwise), pledge, hypothecation, encumbrance, transfer or disposition of anyInterest; “Transferor” and “Transferee” shall have correlative meanings to theforegoing.

 

Article III: Management and Operation of the Business

 

3.01 Management of the Partnership.  (a) The management and operation of thePartnership shall be exclusively vested in the General Partner, which mayexercise all powers necessary or convenient for the accomplishment of thepurposes of the Partnership on behalf of and in the name of the Partnership.The Partnership has previously entered into a Management Agreement, whichManagement Agreement is ratified and remains in full force and effect. Inaddition to the powers now or hereafter granted to a general partner of alimited partnership under applicable laws or which are granted to the GeneralPartner under any other provision of this Agreement, the General Partner shall,subject to the other provisions of this Agreement, have full power andauthority to do all things and on such terms as it may deem necessary ordesirable to conduct the business of the Partnership and to effectuate thepurposes set forth herein and in the Consolidation Agreement; provided, that inany transaction between the Partnership, on the one hand, and Alliance GamingCorporation and its Affiliates (other than the Partnership), on the other hand,such transaction shall be conducted in accordance with the standards of Section1.07 hereof or the financial consequences of such transaction to thePartnership if materially adverse to the Partnership’s EBITDAR as calculatedfor purposes of the Net Cash Flow shall be disregarded to the extent (butsolely to the extent) less favorable to the Partnership than articulated insuch standards.

 

Notwithstandingthe foregoing, the General Partner shall not (i) liquidate the Partnershipprior to December 31, 2010 (or such later date as may be provided for inArticle V hereof), other than as the result of an Event of Termination, or (ii)modify or amend this Agreement or the Management Agreement in a manner which ismaterially adverse to the Limited Partner, in each case, without the consent ofthe Limited Partner. Nothing contained in this Agreement shall affect theduration of the royalty payable to HFS in connection with the HFS FinancingAgreements, which royalty shall survive the termination of the Partnership tothe extent provided therein.

 

(b)           The respective liabilities of thePartners in respect of the completion of the Project shall be solely as setforth in the Consolidation Agreement and no Partner shall have any liability inrespect thereof other than as set forth therein.

 

(c)           The Partnership may have employeesand agents who may be designated as officers with titles designated by theGeneral Partner, and who in such capacities may act for and on behalf of thePartnership. Nothing in this Section 3.01(c) shall affect the parties’respective rights or obligations under or pursuant to the Management Agreementfor purposes of calculating Net Cash Flow or otherwise under this Agreement.

 

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3.02         Relationship Between the GeneralPartner and the Limited Partners. (a) Each of the Partners hereby approves, ratifies and confirms theexecution, delivery and performance by the Partnership of the ConsolidationAgreement and accompanying documents and all other documents or instrumentsheretofore executed by or on behalf of the Partnership or in connectiontherewith and the HFS Agreement.

 

(b)           The acts of the General Partner incarrying on the business of the Partnership at authorized herein shall bind thePartnership. The Limited Partner shall not have any right to, and shall not,(i) take part in the management or control (within the meaning of the MississippiAct) of the Partnership’s business, (ii) act for or bind the Partnership, (iii)transact any business in the name of or on behalf of the Partnership, or (iv)withdraw from the Partnership as a limited partner until the Limited Partnerhas assigned its Interest pursuant to and in accordance with the provisionshereof. The Limited Partner, in its capacity as limited partner, shall onlyhave the rights and powers specifically granted to the Limited Partner in thisAgreement or pursuant totheMississippi Act.

 

(c)           Neither the General Partner nor theLimited Partner shall be obligated to make any further contributions to thecapital of the Partnership except as provided in the Consolidation Agreement.

 

(d)           The liability of the Limited Partnerto third parties shall be limited as provided in the Mississippi Act.  The Limited Partner acknowledges and agreesthat it shall be liable to the Partnership for any money or other propertydistributed, paid or conveyed to it by the Partnership, only to the extentrequired by the Mississippi Act.

 

(e)           Notwithstanding any other term ofthis Agreement, none of the Partners, their respective Affiliates or theirrespective stockholders, directors, officers, employees, servants, direct orindirect partners, attorneys or agents, or the officers of the Partnership shallbe liable to the Partnership or any other Person or any such Affiliate orofficer, director, direct or indirect partner, stockholder, employee, attorneyor agent for any act or omission taken or omitted in good faith by or for suchPersons; provided, that such act or omission did not constitute fraud, willfulviolation of law, willful violation of this Agreement, reckless disregard ofthe duties of such person or gross negligence in the performance of its duties,in each such case, in relationship to the Partnership.

 

3.03  Partnership Funds.  The funds of the Partnership shall bedeposited in such account or accounts as are designated by the General Partner.

 

3.04 Permitted Capital Expenditures.  Each amount that is designated by the GeneralPartner as a Permitted Capital Expenditure (which the General Partner may sodesignate in its sole discretion but which shall include all amounts fundedunder Section 2 of the Consolidation Agreement) shall be deemed to be andconstitute a part of the indebtedness evidenced by the Class B Notes; provided,that in no event shall the aggregate principal amount of all Permitted CapitalExpenditures exceed $5.5 million for purposes of computation of the RCCInterest. Such amount shall not be renewed by borrowing, repayment andreborrowing or otherwise, but such limit shall apply only for the purpose ofcomputation of

 

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the RCC Interest and shallnot otherwise limit in any manner the business, financing or operations of thePartnership.

 

Article IV:   Allocations of NetIncome and Net Losses; Etc.

 

4.01  [Intentionally Omitted].

 

4.02  Allocation of Items of Net Income and NetLoss.   Except as required by Section4.03 hereof or otherwise required by the Code, Net Income for any fiscal yearof the Partnership shall be allocated to the General Partner and the LimitedPartner on a pro rata basis in accordance with the actual distribution of cashto the Partners as provided in Article V hereof. Net Loss shall be allocated inproportion to and to the extent of the difference, if positive, betweencumulative Net Income and cumulative cash distributed to the Partners, and thereafterto the General Partner.  The forms K-lissued to the Partners shall be as specified in Section 8.04(c) hereof.

 

4.03  Section 704(c) of the Code and TreasuryRegulation § 1.704-1(b)(4)(i). Partnership income, gains, losses anddeductions shall, solely for income tax purposes, be allocated among thePartners in accordance with Section 704(c) of the Code and the Treasury regulationspromulgated thereunder with respect to contributed property, and in accordance withTreasury Regulation § 1.704-l(b)(4)(i) with respect to revalued property, so asto take account of any difference between the adjusted basis to the Partnershipof any property for federal income tax purposes and its fair market value atthe time such property was contributed to the Partnership, or at the time suchproperty was revalued in accordance with Treasury Regulation §1.7041(b)(2)(iv)(f). The depreciation allocation will be limited to the federalincome tax depreciation on the contributed or revalued assets. All Partnersshall report the amounts attributable to them under this Agreement inaccordance with the Form K-l provided to them by the Tax Matter Partner.

 

4.04 Issuance of Notes.  (a) On the date hereof, the Partnership isissuing to (i) UGR the Class A Note in the principal amount of $3.25 million(all of which shall be deemed funded and outstanding as of the date hereof) and(ii) each of UGR and NGM a Class B Note in the original principal amount of$3.5 million and $2 million, respectively. Of such amounts, (x) $935,052 inrespect of accrued and unpaid amounts as set forth on Exhibit A heretoand $651,999.92, as contemplated by the Consolidation Agreement, shall bedeemed funded by UGR and outstanding as of the date hereof and (y) $651,999.92,as contemplated by the Consolidation Agreement, shall be deemed funded by NGMand outstanding as of the date hereof. Additional amounts of Permitted CapitalExpenditures that hereafter are funded by UGR or NGM shall be deemed to beoutstanding under the Class B Notes upon funding thereof.

 

(b) The Class A Note shall bear interest ata rate of 7.5% per year on the outstanding principal amount thereof and shallbe repayable on the basis of 77 level monthly payments of interest andprincipal, commencing on April 1, 1995. The Class B Notes shall bear interest at a rate of 10% per year asapplied to the amount funded thereunder and shall be repayable on the basis of84 monthly level payments of interest and principal (as adjusted

 

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for additional amounts ofindebtedness incurred and outstanding thereunder after the date hereof),commencing April 1, 1995. Amounts under the Notes (of interest or principal)that are unpaid after any applicable payment date shall bear interest at therate otherwise in effect plus 2% per year.

 

Article V:  Distributions: Etc.

 

5.01  RCC Interest.  The Limited Partner shall be entitled toreceive the RCC Interest, as provided herein, for so long as the term of suchInterest shall be in effect as provided herein, and the General Partner shallreceive all other revenues, profits, income, cash and other property or assetsof the Partnership. Such payments of the RCC Interest shall be calculated fromthe Partnership’s fiscal year financial statements as reported on by itsindependent accounting firm on the basis provided for herein, shall be payablein quarterly estimated installments based upon the prior fiscal year’s Net CashFlow of the Partnership in the subject quarter and shall be subject to finaladjustment on a whole fiscal year basis (by supplemental payment to RCC or byoffset of the succeeding year’s accruals or payment by RCC to UGR in the finalyear of the Partnership, as the case may be) within 120 days of the end of eachfiscal year of the Partnership. A pro forma illustration of the basis ofcomputation of the RCC Interest is attached hereto as Schedule B.

 

5.02  Sale of Partnership or PartnershipBusiness.   In the event of a sale orits substantial equivalent of all or substantially all of the General Partner’sInterest or of all or substantially all of the assets or business of thePartnership (irrespective of the form of such transaction), then either (a) theRCC Interests shall be conveyed additionally at the option of the GeneralPartner in its sole discretion; provided, that RCC shall be allocated a shareof the total transaction proceeds in respect of the RCC Interest on a basisreflecting its then present value with reference to the valuations of thesubject transaction (as mutually agreed between the General Partner and RCC, orfailing agreement within 15**daysof consummation of such transaction, then, as determined by Arbitration (asdefined below in this paragraph)) or, alternatively, (b) if mutually agreedbetween the acquiror, the General Partner and RCC, the RCC Interest shall bepreserved by the terms of the subject transaction.  It is understood and agreed that the consentof RCC shall not be required for any such transaction, except in anytransaction involving an Affiliate of the General Partner.  “Arbitration” shall mean an arbitrationconducted under the rules of the American Arbitration Association by either amutually satisfactory independent arbitrator (or failing agreement on such aperson within 15 days after either party requests Arbitration in writing, then,by a panel of three independent arbitrators of which one will be selected byeach of the parties and the third will be selected by such nominees, andfailing that agreement, then, by the American Arbitration Association). TheGeneral Partner shall keep the Limited Partner reasonably informed of thestatus of negotiations and progress of any such transaction and shall provideto the Limited Partner copies of relevant final (and with respect to materialdocuments, draft) transaction documents. In the event of a transaction described in clause (a) above, the GeneralPartner shall, upon consummation thereof if the Partners shall not have thenagreed upon the amount allocable to the RCC Interest, cause to be delivered toa third party escrow agent designated by the General Partner an amountreasonably estimated by the General Partner to be allocable to the LimitedPartner in respect of the RCC Interest, which amount shall be held

 

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in an interest-bearingescrow account with a bank or financial institution. Such amount shall be heldpursuant to a then-customary escrow agreement and all or a portion thereof,together with accrued and unpaid interest, disbursed upon the finaldetermination of the amount allocable to the Limited Partner, as describedabove, or as otherwise jointly directed in writing by the Partners; at suchtime, if the amount allocable to the Limited Partner is greater than theprincipal amount so held in escrow, the General Partner shall cause to be paidsuch discrepancy, together with interest thereon at the rate earned in such escrowaccount.

 

5.03   Certain Rights. The foregoingprovisions in this Article V (and the correlative definitions) are included inthis Agreement solely for the purpose of calculating the amounts payable to theLimited Partner and are not intended to limit or restrict in any way theGeneral Partner’s right to operate the business of the Partnership in its solediscretion, including without limitation, to incur any financing or capitalexpenditure that is not a Permitted Capital Expenditure.

 

5.04Term. The term of the Partnership may be extended as provided in thedefinition of RCC Interest.

 

Article VI:  [Intentionally Omitted]

 

Article VII:  Termination andDissolution

 

7.01  Events of Termination. The Partnershipshall not be dissolved unless in good faith. The Partnership shall be dissolvedand its affairs wound up pursuant to Section 7.02 hereof, and this Agreementshall terminate upon the first to occur of any of the following events (each,an “Event of Termination”); (a) the execution by each Partner of a unanimouswritten consent to dissolution and payment in full in cash of the Notes and thethen net present value of estimated future payments of the RCC Interest overits remaining scheduled term, as provided for in Article V above; (b) the saleor other disposition of all or substantially all of the assets of thePartnership and provision for the sale or continuance of the RCC Interest asprovided in Article V; (c) the dissolution, winding-up, cessation of businessor withdrawal of all of the Partners; (d) an Event of Withdrawal unless at thetime of the occurrence of such Event of Withdrawal there is at least oneGeneral Partner who is authorized and agrees to continue the business of thePartnership without dissolution (and, if there are no remaining generalpartners, a majority in interest of the limited partners shall make selectionof a new General Partner and, if RCC is the sole limited partner, RCC shall bepermitted to elect to continue the Partnership in its sole discretion); or (e)December 31, 2010 or such later date as may be provided pursuant to thisAgreement for the full term of the RCC Interest in Article V above.

 

7.02Winding-Up. Upon the occurrence of an Event of Termination, thePartnership’s affairs shall be wound up, its debts paid and its business andproperty, rights and assets disposed of in an orderly manner as shall bedetermined by the General Partner and the General Partner shall receive allproperty, rights or assets of the Partnership after provision for payment ofthe amounts to RCC as provided in Section 5.02 above.  The

 

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Limited Partner shall nothave any right to share or participate in any such property, rights or assetsremaining after such payments, all of which shall be and belong solely to theGeneral Partner.

 

Article VIII: Reports to Partners

 

8.01  Books of Account. Appropriate recordsand books of account shall be kept by the General Partner and by the managerunder the Management Agreement, at the principal place of business of thePartnership. The Limited Partner shall be provided reasonable access to suchbooks and records, at reasonable times on reasonable prior notice for thepurpose of verifying the amounts payable to it under Article V above and shallbe provided a quarterly estimated computation thereof by the General Partnerand an annual final computation reported on by the independent accounting firmof the Partnership (including without limitation, a computation of the RCCInterest in each period) and unaudited monthly summaries of the operations ofthe Partnership.

 

8.02  Audit and Report. The books andrecords of the Partnership shall be kept in accordance with generally acceptedaccounting principles, which is consistent with the requirements of Section 704of the Code and the Treasury Regulations thereunder, and shall be audited byindependent certified public accountants of the General Partner’s selection. TheGeneral Partner shall provide to the Limited Partner and the holders of Noteson a timely basis annual and quarterly balance sheets, statements of income(loss) for each applicable period and of such Partner’s capital accounts,statements of Net Cash Flow; and the amount of such Partner’s share in eachitem of Partnership’s taxable income or loss for each year which must beseparately accounted for by a Partner pursuant to section 702(a) of the Codeand any other information needed to prepare the Partner’s federal, state andlocal income tax returns and reports.

 

8.03  Fiscal Year. The fiscal year andtaxable year of the Partnership shall end on June 30.

 

8.04  Tax Matters.  (a) The General Partner is hereby designatedas the “Tax Matters Partner” under Section 6231(a)(7) of the Code, to manageadministrative tax proceedings conducted at the Partnership level by theInternal Revenue Service with respect to Partnership matters. The GeneralPartner is specifically directed and authorized to take whatever steps theGeneral Partner deems necessary or desirable to perfect such designation, includingwithout limitation, filing any forms or documents with the Internal RevenueService and taking such other action as may from time to lime be required underany Treasury Regulation. The Tax Matters Partner shall not be liable to thePartnership or any other Partner for any act or omission taken or suffered byit in such capacity in good faith and in the reasonable belief that such act oromission is in or is not opposed to the best Interests of the Partnership;provided, that such act or omission is not in violation of the Agreement and doesnot constitute gross negligence, fraud or a willful violation of law.

 

(b)Within five business days of receipt, a Partner shall give to the remainingPartners written notice of such Partner’s receipt from any taxing authority ofany notification

 

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of any audit orinvestigation of the Partnership or any other tax proceeding or proposed taxadjustment affecting the Partnership.

 

(c)           The Tax Matters Partner shall causeincome and other required federal, state and local tax returns for thePartnership to be prepared on a basis consistent with the terms of thisAgreement and timely filed with the appropriate authorities. The forms K-l issuedto the Limited Partner in respect of each fiscal year of the Partnership shallreport income in an amount equal to the cash distributed to such Partner. TheTax Matters Partner shall make or maintain in effect tax elections as it shalldeem to be appropriate.

 

(d)           Each Partner and the Partnershipshall cooperate with and assist, at its own expense, the Tax Matters Partner inconnection with any federal, state, local or foreign tax matter affecting thePartnership or any entity in which the Partnership has an interest, includingwithout limitation, providing any records or supporting data with respect toassets or liabilities transferred to the Partnership, preparing any tax returnor assisting as requested on any audit.

 

Article IX: Miscellaneous

 

9.01   Transfers of Interests: Admission of Additional Partners.  (a)   Subject to applicable requirements of the MississippiAct and applicable gaming laws and regulations, the General Partner and theLimited Partner shall have the right to Transfer their respective Interests toany Person, subject to the provisions of this Agreement; provided, that, exceptto its stockholders on the date hereof, the Limited Partner shall not bepermitted to Transfer its Interests without the prior written consent of theGeneral Partner, which shall not be unreasonably withheld.

 

(b) Upon compliance with Section 9.01(a)hereof with respect to the Transfer of all or any portion of its Interest, theTransferee shall become a Limited Partner or General Partner, as the case maybe, and shall succeed proportionately to the Interest Transferred by theTransferor and shall become subject to all of the obligations of the Transferorwith respect to such Interests, only upon compliance with the followingadditional conditions: (i) the proposed Transferee shall have executed an amendmentto this Agreement, and shall have executed such other instruments as theGeneral Partner may deem necessary or desirable, to admit such Transferee as aPartner (including the execution of a counterpart of this Agreement and anappropriate supplement to this Agreement pursuant to which such Partner shallagree to be bound by and comply with the terms and provisions hereof) and (ii)the Transferor shall have paid to the Partnership all of the Partnership’sexpenses connected with such Transfer and substitution (including withoutlimitation, the legal and accounting fees and disbursements of thePartnership).

 

(c) If the Transferor is the GeneralPartner, upon compliance with the terms of Sections 9.01 (a) and (b) hereof,the admission of the Transferee as a successor General Partner shall occur, andfor all purposes shall be deemed to have occurred, immediately prior to thewithdrawal of the Transferor General Partner from the Partnership as a generalpartner of the Partnership.  Upon suchwithdrawal, the General Partner shall cease to be a general

 

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partner of the Partnershipand the successor General Partner shall, and is hereby authorized to, continuethe business of the Partnership without dissolution. In accordance with the Mississippi Act, the successor General Partnershall execute and file an appropriate amendment to the Certificate to reflectits admission to the Partnership.

 

(d)           Notwithstanding any provision of thisAgreement to the contrary, no Transfer of any Interest shall be effective toconvey any Interest in the Partnership until the Transferee executes allnecessary certificates or other documents and performs all acts required inaccordance with the laws of the State of Mississippi and any other applicablelaw, and any and all documents as shall be required from time to time by therules and regulations of any regulatory body or commission having ajurisdiction over the Partnership, to the full extent necessary to constitutesuch Transferee a Partner and preserve the status of the Partnership as apartnership after the completion of such Transfer in accordance with such laws.  Each such Transferee by accepting theTransfer of an Interest agrees upon the request of a Partner to execute such certificatesor other documents and to perform such acts and gives the power of attorney setforth in Section 1.09 as fully as though such Transferee was an originalsignatory hereto.

 

(e)           If any Partnership Interest is sold,assigned, or transferred during any taxable year of the Partnership incompliance with the provisions of this Section 9.01, Net Income, Net Loss, eachitem thereof, and all other items attributable to such Interest for such periodshall be divided and allocated between the Transferor and the Transferee bytaking into account their varying interests during the period in accordancewith Code Section 706(d), using any conventions permitted by law and reasonablyselected by the General Partner.  Alldistributions on or before the date of such Transfer shall be made to the Transferor,and all distributions thereafter shall be made to the**Transferee. Solely for the purposes of making suchallocations and distributions, the Partnership shall recognize such Transfernot later than the end of the calendar month during which it is given notice ofsuch Transfer.

 

9.02         Applicable Law.  Notwithstanding the place where thisAgreement may be executed by any of the parties hereto, the parties expresslyagree that all the terms and provisions hereof shall be construed under theinternal laws, and not the laws pertaining to conflicts or choice of law, ofthe State of Mississippi.

 

9.03         Binding Agreement. Except asexpressly provided in this Agreement, this Agreement shall not be construed soas to confer any right or benefit upon any Person other than the parties tothis Agreement and their respective successors and assigns. This Agreementshall be binding upon the successors and assigns of the Partners.

 

9.04         Notices. All notices hereundershall be in writing and shall be deemed to have been duly given if personallydelivered, mailed by registered or certified mail, return receipt requested, orby telex or telecopy and confirmed by mail as aforesaid to the Partnership ortothe General Partner,at 4380 Boulder Highway, Las Vegas, Nevada 89121; Attention: General Counsel,with a copy to Kramer, Levin, Naftalis, Nessen, Kamin *&*Frankel, 919 Third Avenue, New York,New York 10022; Attention: David Robbins, Esq.

 

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or such other address oraddresses as to which the Partners shall have been given notice, and to theLimited Partner, to The Rainbow Casino Corporation, c/o Barrett RefiningCorporation, 23 East Ninth, Suite 329, Shawnee, Oklahoma 74801 and LeighSeippel, c/o Doyle & Bachman, 919 Eighteenth Street, N.W., Washington, D.C.20006; Attention: James D. Bachman, Esq.,**witha copy to Doyle & D. Bachman 919 Eighteenth Street, N.W., Washington, D.C.20006; Attention: James D. Bachman, Esq., and such notice shall be deemed tohave been given as of the date delivered, telexed or telecopied or if mailed,the second day after being so mailed.

 

9.05 Counterparts.  This Agreement may be executed in counterpartsand by facsimile transmission, all of which together shall constitute oneagreement binding on all the parties notwithstanding that all the parties arenot signatories to the original or the same counterpart.

 

9.06  Amendments. Any waiver, modificationor amendment to this Agreement shall be effective when signed by each Partner.

 

9.07  Severability. If any provision of thisAgreement, or the application of such provision to any person or circumstance,shall be held invalid, the remainder of this Agreement or the application ofsuch provision to other persons or circumstances shall not be affected thereby.

 

9.08  Confidentiality.  The Limited Partner shall not, during theterm of this Agreement, disclose any confidential or proprietary informationwith respect to the Partnership to any person, except (a) with the priorwritten consent of the General Partner, (b) or as may be required by applicablelaw or administrative or judicial process.

 

9.09  Creditors. None of the provisions ofthis Agreement shall be for the benefit of or enforceable by any creditors ofthe Partnership or other person doing business with the Partnership (other thanas provided herein).

 

9.10 Waiver. No failure by any partyto insist upon the strict performance of any covenant, duty, agreement, orcondition of this Agreement or to exercise any right or remedy consequent upona breach thereof shall constitute a waiver of any such breach or any othercovenant, duty, agreement or condition.

 

9.11  Certain Provision Relating to Holders ofNotes.  The holders of the Notes (insuch capacity) shall not be, and shall have none of the rights and none of theobligations of, Partners of the Partnership. Without limiting the foregoing, theholders of the Notes (in such capacity) shall have no liability for Partnershipdebts or to make advances to the Partnership, except as provided in theConsolidation Agreement, and no right to take part in the management or controlof the Partnership’s business, act or bind the Partnership, transact anybusiness in the name of or on behalf of the Partnership. Except for payment of theNotes, the holders of the Notes (in such capacity) shall not have any right toparticipate in the property, rights or assets of the Partnership.  The Partnership shall provide the holders ofthe Notes on a timely basis annual and quarterly balance sheets, and statementsof income

 

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(loss) for each applicableperiod.  Holders of the Notes shall notdisclose any confidential or proprietary information with respect to thePartnership except (a) with the prior written consent of the General Partner,or (b) as may be required by applicable law or administrative or judicialprocess.  Holders of the Notes maytransfer their Notes to any Person.

 

9.12  Loan and Other Financing Proceeds.  The proceeds of any loan, financing,refinancing or other capital or similar transaction shall not constituterevenues for purposes of calculating EBITDAR, and all of such proceeds shall beretained by and be the exclusive property of, the Partnership and allocatedsolely to the General Partner and have no effect on the RCC Interest.

 

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INWITNESS WHEREOF, the parties hereto have hereunto set their hands as of this29th day of March, 1995.

 
|                                                                     | United Gaming Rainbow,          |
|--------------------------------------------------------------------------|---------------------------------|
|                                                                     | General Partner                 |
|                                                                     |                            |
|                                                                     | By:                             |   |   |
|                                                                     |                            |  Name: |   |
|                                                                     |                            |  Title: |   |
|                                                                     |                            |
|                                                                     | The Rainbow Casino Corporation, |
|                                                                     | Limited Partner                 |
|                                                                     |                            |
|                                                                     | By:                             | /s/ Leigh Seippel |   |
|                                                                     |                            |  Name: Leigh Seippel |   |
|                                                                     |                            |  Title:  President |   |
|                                                                     |                            |
|                                                                     | By:                             | /s/ John A. Barett Jr. |   |
|                                                                     |                            |  Name:  John  A. Barett Jr. |   |
|                                                                     |                            |  Title: Chairman |   |
|                                                                     |                            |
| The undersigned joins as  manager of the Project (and not as a Partner): |
|                                                                     |                            |
|                                                                     | Mississippi Ventures, Inc.      |
|                                                                     |                            |
|                                                                     | By:                             |   |   |
|                                                                     |                            | Name: |   |
|                                                                     |                            | Title: |   |

 

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Schedule A

 

Calculation of Accrued and Unpaid Royalties,Distributions, Redemptions and Other AmountsConstituting a Part of a Class B Promissory Note Issued to UGR

 
| **Amount**                                          | ** ** | **Original Balance** | ** ** | **Less:  Payments  Received** | ** ** | **Balance As  of March 28,  1995** | ** ** |
|-----------------------------------------------------|------------|----------------------|------------|-------------------------------|------------|------------------------------------|------------|
| Special Limited                                     |       |                 |       |                          |       |                               |       |
| Partnership Interests                               |       | $                    | 3,250,000  |                          | $          | 0                                  |       | $ | 3,250,000 |   |
| Redemptions                                         |       | 163,368              |       | 0                             |       | 163,368                            |       |
| Accrued Management Fee                              |       | 70,027               |       | 0                             |       | 70,027                             |       |
| Royalties through February 28, 1995                 |       | 689,999              |       | (233,728                      | )          | 456,271                            |       |
| March 1 through March 28, 1995                      |       | 97,838               |       |                          |       | 97,838                             |       |
| Other (Pre-opening, payroll, travel, miscellaneous) |       | 639,009              |       | (491,461                      | )          | 147,548                            |       |
|                                                |       |                 |       |                          |       |                               |       |
|                                                |       | $                    | 4,910,241  |                          | $          | (725,189                           | )          | $ | 4,185,052 |   |
|                                                |       |                 |       |                          |       |                               |       |
| Less                                                |       |                 |       |                          |       | 3,250,000                          |       |
|                                                |       |                 |       |                          |       |                               |       |
| Balance                                             |       |                 |       |                          |       | $                                  | 935,052    |   |

 

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**SCHEDULE B**

 

**PRO FORMA ILLUSTRATIONCOMPUTATIONRCC INTEREST***

 
| **Project  Revenue**                                                                                                                       | ** ** | ** **    | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|------------|
|                                                                                                                                       |       |          |       |
| Gross Gaming  Revenues                                                                                                                     |       | 30,000,000    |       |
|                                                                                                                                       |       |          |       |
| Food, Beverage,  Rent, Other Project Revenue                                                                                               |       | 2,000,000     |       |
|                                                                                                                                       |       |          |       |
| Total Revenue                                                                                                                              |       | 32,000,000    |       |
|                                                                                                                                       |       |          |       |
| **Less Operating Costs**                                                                                                                   | ** ** | ** **    | ** ** |
|                                                                                                                                       |       |          |       |
| Gaming Taxes                                                                                                                               |       | 5,500,000     |       |
|                                                                                                                                       |       |          |       |
| Food/Beverage  and other Project Costs                                                                                                     |       | 1,000,000     |       |
|                                                                                                                                       |       |          |       |
| Casino Payroll  & Related Expenses                                                                                                     |       | 9,400,000     |       |
|                                                                                                                                       |       |          |       |
| Operating  Expenses Including Marketing & Comps                                                                                        |       | 5,000,000     |       |
|                                                                                                                                       |       |          |       |
| Base Management  Fee (including any future additional incentive management fees which,  however, are not included in such $100,000 amount) |       | 100,000       |       |
|                                                                                                                                       |       |          |       |
| Total Operating  Costs                                                                                                                     |       | 21,000,000    |       |
|                                                                                                                                       |       |          |       |
| EBITDAR                                                                                                                                    |       | 11,000,000    |       |
|                                                                                                                                       |       |          |       |
| **Less Allowed Deductions**                                                                                                                | ** ** | ** **    | ** ** |
|                                                                                                                                       |       |          |       |
| HFS Royalty                                                                                                                                |       | 3,600,000     |       |
|                                                                                                                                       |       |          |       |
| Existing NGC  Principal & Interest Payment                                                                                             |       | 1,250,000     |       |
|                                                                                                                                       |       |          |       |
| Existing IGT Payment                                                                                                                       |       | 1,250,000     |       |
|                                                                                                                                       |       |          |       |
| Existing Kossen  Payment                                                                                                                   |       | 100,000       |       |
|                                                                                                                                       |       |          |       |
| Class A Note  Payment                                                                                                                      |       | 600,000       |       |
|                                                                                                                                       |       |          |       |
| Class B Notes                                                                                                                              |       | 700,000       |       |
|                                                                                                                                       |       |          |       |
| Total                                                                                                                                      |       | 7,500,000     |       |
|                                                                                                                                       |       |          |       |
| **NET CASH FLOW**                                                                                                                          | ** ** | **3,500,000** | ** ** |
| ** **                                                                                                                                 | ** ** | ** **    | ** ** |
| **RCC INTEREST**                                                                                                                           | ** ** | **350,000**   | ** ** |

 

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*              These amounts are for illustrative purposes only and norepresentation is made that the amounts set out above are achievable or thatOperating Costs or Allowed Deductions are the actual or estimated amounts thatwould be payable at corresponding revenue levels.

 

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