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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-K**

 

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| **x**                                                | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**     |
|------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
| ** **                                           | ** **                                                                                              |
| **For the fiscal year ended December 31, 2009** |
| ** **                                           |
| **or**                                               |
| ** **                                           | ** **                                                                                              |
| **o**                                                | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Commission file number 0-52042**

 

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**OCMHOLDCO, LLC**

(Exact Name of Registrant as Specified in itsCharter)

 
| **Delaware**                                                     | ** ** | **20-3673772**      |
|------------------------------------------------------------------|------------|---------------------|
| (State or other jurisdiction of                        |       | (I.R.S Employer     |
| incorporation or organization)                         |       | Identification No.) |
|                                                             | ** ** | ** **          |
| **333 South Grand Avenue, 28th Floor, Los Angeles,  California** | ** ** | **90071**           |
| (Address of principal executive offices)                         |       | (Zip Code)          |

 

Registrant’s telephone number, including areacode:** (213) 830-6300**

 

Securities registered pursuant to Section 12(b) ofthe Act:** None**

 

Securities registered pursuant to Section 12(g) ofthe Act:

**Class A Membership Units**

 

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Indicateby check mark whether the registrant is a well-known seasoned issuer, asdefined in Rule 405 of the Securities Act. Yes  o    No  x

 

Indicateby check mark whether the registrant is not required to file reports pursuantto Section 13 or Section 15(d) of the Act. Yes  o    No  x

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes  x  No  o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes  o  No  o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K.  o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 
| Large accelerated filer  o                                   |   | Accelerated filer  o              |
|----------------------------------------------------------------------------------|--------|--------------------------------------------------|
|                                                                             |   |                                             |
| Non-accelerated filer  o                                          |   | Smaller reporting company  x |
| (Do not check if a smaller reporting company) |   |                                             |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).  Yes  o  No  x

 

Asof March 31, 2010, none of the registrant’s voting and non-voting commonequity was held by non-affiliates.

 

Documents Incorporated by Reference:  **None**

 

 

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certaininformation included in this annual report on Form 10-K and other filingsof OCM HoldCo, LLC, a Delaware limited liability company (the “*Company*”) under the Securities Act of1933, as amended (the “*Securities Act*”),and the Securities Exchange Act of 1934, as amended (the “*Exchange Act*”), as well as informationcommunicated orally or in writing between the dates of such filings, containsor may contain “forward-looking statements.” Such statements are subject tocertain risks, trends and uncertainties that could cause actual results todiffer materially from expected results. Among these risks, trends anduncertainties are economic conditions generally and in the industries in whichthe Company may participate; competition within the Company’s chosenindustries, including competition from much larger competitors; technologicaladvances; available capital; regulatory approvals; and failure by the Companyto successfully develop or acquire products and form new businessrelationships.

 

Whenused in this report, the words “expects,” “intends,” “anticipates,” “should,” “believes,”“will,” “plans,” “estimates,” “may,” “seeks,” and similar expressions aregenerally intended to identify forward-looking statements. You should not placeundue reliance on these forward-looking statements, which reflect our opinionsonly as of the date of this annual report on Form 10-K. We undertake noobligation to publicly release any revisions to the forward-looking statementsafter the date of this document. You should carefully review the informationdescribed in this annual report on Form 10-K. You should also carefullyreview the risk factors described in the previously filed Form 10-KSB, andthose described from time to time in our future reports filed with theSecurities and Exchange Commission (the “*Commission*”).

 

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**OCM HOLDCO, LLC**

 

**INDEX TO FORM 10-K**

 
| **PART I**      |                                                                                                                        | 1      |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------|--------|
|                 |                                                                                                                        |   |
| Item 1.              | Description of Business                                                                                                     | 1      |
|                 |                                                                                                                        |   |
| Item 2.              | Description of  Property                                                                                                    | 14     |
|                 |                                                                                                                        |   |
| Item 3.              | Legal Proceedings                                                                                                           | 14     |
|                 |                                                                                                                        |   |
| **PART II**     |                                                                                                                        | 14     |
|                 |                                                                                                                        |   |
| Item 4.              | Market for  Common Equity, Related Stockholder Matters and Small Business Issuer  Purchases of Equity Securities            | 14     |
|                 |                                                                                                                        |   |
| Item 6.              | Management’s  Discussion and Analysis                                                                                  | 15     |
|                 |                                                                                                                        |   |
| Item 7.              | Financial  Statements                                                                                                       | 18     |
|                 |                                                                                                                        |   |
| Item 8.              | Changes In  and Disagreements With Accountants on Accounting and Financial Disclosure                                       | 18     |
|                 |                                                                                                                        |   |
| Item  8A.            | Controls  and Procedures                                                                                                    | 18     |
|                 |                                                                                                                        |   |
| Item 8B.             | Other Information                                                                                                           | 18     |
|                 |                                                                                                                        |   |
| **PART III**    |                                                                                                                        | 19     |
|                 |                                                                                                                        |   |
| Item  9.             | Directors,  Executive Officers, Promoters and Control Persons; Compliance with  Section 16(a) of the Exchange Act | 19     |
|                 |                                                                                                                        |   |
| Item 10.             | Executive  Compensation                                                                                                     | 20     |
|                 |                                                                                                                        |   |
| Item 11.             | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                            | 21     |
|                 |                                                                                                                        |   |
| Item 12.             | Certain  Relationships and Related Transactions                                                                             | 22     |
|                 |                                                                                                                        |   |
| Item 13.             | Principal  Accountant Fees and Services                                                                                     | 24     |
|                 |                                                                                                                        |   |
| **PART IV**     |                                                                                                                        | 26     |
|                 |                                                                                                                        |   |
| Item 14.             | Exhibits, Financial Statement Schedules                                                                                     | 26     |
|                 |                                                                                                                        |   |
| SIGNATURES           | S-1                                                                                                                         |
|                 |                                                                                                                        |   |
| FINANCIAL STATEMENTS | F-1                                                                                                                         |

 

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**PART I**

 

**Item 1.  Business**

 

**THE COMPANY**

 

***Overview of the Company***

 

TheCompany was initially formed on July 22, 2005, at the direction of OCMPrincipal Opportunities Fund III, L.P. and OCM Principal Opportunities FundIIIA, L.P. (the “*Oaktree Fund*s”),each of which is a Delaware limited partnership and an affiliate of OaktreeCapital Management, L.P., a Delaware limited partnership (formerly OaktreeCapital Management, LLC) (“*Oaktree*”). TheCompany was formed for the primary purpose of participating in variousactivities relating to the gaming industry.

 

In2006, the Company, through a wholly-owned subsidiary, OCM AcquisitionCo, LLC, aNevada limited liability company (“*AcquisitionCo*”),acquired a 42% interest in the Series 1A Units of Cannery Casino Resorts,LLC, a Nevada limited liability company (“*CCR*”),and a 33-1/3% equityinterest in NP Land, LLC, a Nevada limited liability company (“*NP Land*”). The Company owns more than 99.99% of the capital interest in OCMBlocker, LLC, a Delaware limited liability company (“*Blocker*”),and Blocker owns all of the issued and outstanding units of AcquisitionCo.   The Company and Blocker are also parties toan Option to Purchase dated January 5, 2006 as corrected on March 17,2006 (the “*Blocker Option Agreement*”), whereby theCompany has the option to purchase all of the issued and outstanding units ofAcquisitionCo from Blocker.  GLCP NevadaLLC, a Delaware limited liability company and a third-party entity unaffiliatedwith the Company (“*GLCP*”), ownsless than 0.01% of the capital interest in Blocker.  In March 2010, the Company, throughAcquisitionCo, acquired a 62-1/6% interest in CCR’s Series C Preferred Units.

 

TheCompany’s current business consists primarily of its ownership of these equityinterests. CCR, through wholly-owned subsidiaries:

 

·                  owns and operates theCannery Hotel and Casino (“*The Cannery*”)located in North Las Vegas, Nevada;

 

·                  owns and operates a casinoat The Meadows, located in North Strabane Township, Washington County,Pennsylvania;

 

·                  operates the Rampart Casino(the “*Rampart Casino*”) located inthe Summerlin area of northwest Las Vegas; and

 

·                  operates the EastsideCannery Casino and Hotel (the “*Eastside Cannery*”).

 

***Ownership of the Company***

 

Allof the Company’s issued and outstanding voting equity, the Class AMembership Units, are held by OCM VoteCo, LLC, a Delaware limited liabilitycompany (“*VoteCo*”), and all ofthe Company’s issued and outstanding non-voting equity, the Class BMembership Units, are held by OCM InvestCo, LLC, a Nevada limited liabilitycompany (“*InvestCo*”). VoteCo isowned equally by seven individuals, six of whom are principals of Oaktree andone of whom is a managing director of Oaktree (collectively, the “*VoteCo Equityholders*”). The rights of the Class A Units and the Class BUnits are substantially identical with the exception that the Class BUnits are not entitled to any management or voting rights with respect to theCompany, except as provided by applicable law. Neither class has dividend or liquidation preferences, atypicalparticipation rights, or preferred convertible or redeemable features. Ingeneral, any sale, assignment or transfer of such units is subject to the priorapproval of the gaming regulators of Nevada and Pennsylvania. VoteCo hasa *de minimus* economic interest in theCompany, less than 0.00015%, and its total equity contributions are limited to$100. InvestCo is owned principally by the Oaktree Funds, which hold all ofInvestCo’s issued and outstanding voting securities. At present, the Companyhas no plans to issue any additional Class A Membership Units or Class BMembership Units.

 

TheVoteCo Equityholders, through VoteCo, control all matters of the Company thatare subject to the vote of members, including the appointment and removal ofthe Company’s managers (the “*Managers*”).The Company has issued Class B Membership Units to InvestCo, which unitsdo not entitle the holders thereof to any voting rights (except as otherwiserequired by applicable law). The Class B Membership Units allow InvestCoand its investors, including the Oaktree Funds, to invest in the Companywithout having any voting power or power to control the operations or affairsof the Company (except as required by law). If InvestCo and its investors,including the Oaktree Funds, had any power to control the operations or affairsof the Company, they and their respective constituent equityholders wouldgenerally be required to be licensed or found suitable pursuant to the gaminglaws and liquor codes of the jurisdictions in which CCR’s properties arelocated.

 

VoteCo,InvestCo, the Company and each of the Company’s wholly-owned subsidiaries aremanaged by Stephen Kaplan, a Principal of Oaktree, and Ronald Beck, a ManagingDirector of Oaktree.  Oaktree is aleading global investment management firm focused on non-mainstream andalternative markets.  As of December 31,2009, Oaktree managed approximately $73 billion in assets across a wide rangeof investment strategies, including high yield and convertible bonds,distressed debt, specialized private equity (including power infrastructure),senior loans, real estate, emerging market and Japanese equities and mezzaninefinance.  Since its founding in 

 

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1995,Oaktree has emphasized an opportunistic, value-oriented and risk-controlledapproach to investing.  Headquartered inLos Angles, the firm today has approximately 600 employees and offices in 14cities worldwide.  Oaktree is registeredwith the Commission as an investment adviser under the Investment Advisers Actof 1940, as amended.

 

***Business Developments***

 

OnMarch 3, 2010, CCR entered into Amendment No. 1 to the First LienCredit Agreement, by and among CCR, Washington Trotting Association, Inc.(a subsidiary of CCR), Bank of America, N.A. (“*Bank ofAmerica*”), as Administrative Agent, Collateral Agent, Swing LineLender and L/C Issuer, and the lenders from time to time party thereto (the “*First Lien Amendment*”), which amends that certain First LienCredit Agreement, dated as of May 18, 2007, by and among CCR, Bank ofAmerica, as Administrative Agent, Collateral Agent, Swing Line Lender and L/CIssuer, the lenders from time to time party thereto, and the other partiesthereto (the “*First Lien Credit Agreement*”).  Pursuant to the First Lien Amendment, amongother matters, (i) the interest rate margins applicable to term loans andrevolving loans under the First Lien Credit Agreement have been fixed at 4.25%for Eurodollar rate loans and 3.25% for base rate loans, in lieu of a rangedependent upon the borrowers’ consolidated leverage ratio; (ii) themaximum amount of revolving loans has been permanently reduced from $110million to $70 million; (iii) the consolidated leverage ratio that theborrowers are required to maintain as of each quarter end date through theremaining term of the First Lien Credit Agreement has been adjusted; and (iv) theborrowers will be permitted to transfer a portion of Pennsylvania real propertywhere The Meadows Racetrack and Casino is located, which is mortgaged under theFirst Lien Credit Agreement, for construction of a hotel.  In addition to these matters, other covenantsand provisions of the First Lien Credit Agreement that are affected by theFirst Lien Amendment include covenants requiring maintenance of minimumconsolidated EBITDA, compliance with cash management procedures and applicationof the proceeds of certain transactions, including the issuance of securities,to repay the outstanding indebtedness under the First Lien Credit Agreement.

 

Alsoon March 3, 2010, in accordance with the terms and conditions of thatcertain Series C Preferred Purchase Agreement (the “*Series CPurchase Agreement*”), by and among Crown Limited, an Australiancompany (“Parent”), Crown CCR Group Investments One, LLC, a Delaware limitedliability company and a subsidiary of Parent (“*Crown One*”),Crown CCR Group Investments Two, LLC, a Delaware limited liability company anda subsidiary of Parent (“*Crown Two*”, andtogether with Parent and Crown Two, the “*Crown Parties*”),Millennium Gaming, Inc., a Nevada corporation (“*Millennium*”),and OCM AcquisitionCo, LLC, a Delaware limited liability company and asubsidiary of the Company (“*AcquisitionCo*”),and CCR, CCR sold (i) 18,375 Series C Preferred Units to Crown Oneand Crown Two, collectively; (ii) 10,000 Series C Preferred Units toMillennium; and (iii) 46,625 Series C Preferred Units toAcquisitionCo.  The rights, preferencesand privileges of the Series C Preferred Units are set forth in theRevised Operating Agreement.

 

Inconnection with the First Lien Amendment and the issuance of the Series CPreferred Units described below, the members of CCR entered into CCR’s ThirdAmended and Restated Operating Agreement (the “*RevisedOperating Agreement*”).  Amongother matters, the Revised Operating Agreement creates a new series ofpreferred securities of CCR designated as the “Series C Preferred Units”.  The Series C Preferred Units (i) arenon-voting subject to certain limited consent rights, (ii) are required tobe redeemed by CCR in certain circumstances, including, without limitation, therepayment of CCR’s credit facilities and/or certain sale transactions, and (iii) maybe redeemed at CCR’s option at any time subject to compliance with CCR’s creditfacilities.

 

Theforegoing summaries of the First Lien Amendment, the Revised OperatingAgreement and the Series C Purchase Agreement do not purport to becomplete and are qualified in their entirety by reference to the First Lien Amendment,the Revised Operating Agreement and the Series C Purchase Agreement,copies of which were filed as Exhibit 10.34, Exhibit 10.35 and Exhibit 10.36,respectively, to the Current Report on Form 8-K filed with the Commissionon March 9, 2010.

 

*2009Highlights*

 

OnMarch 12, 2009, the Company entered into the agreements outlined below inconnection with the termination of that certain Purchase Agreement by andbetween the Crown Parties, the Company, Millennium (Millennium and the Company,collectively, the “*Original Equityholders*”),and CCR (collectively, CCR with Millennium and the Company,  the “*Seller Parties*”),dated as of December 11, 2007 (as thereafter amended, the “*Original Purchase Agreement*”), pursuant to which Crown Oneand Crown Two were to purchase, directly or indirectly, all of the issued andoutstanding equity interests of CCR (the “*CCR Units*”)from the Original Equityholders and rights in an option agreement.

 

OnMarch 12, 2009, the Seller Parties and the Crown Parties entered into aTermination and Settlement Agreement (the “Termination and Settlement Agreement”),whereby the parties agreed to (a) terminate the Original PurchaseAgreement (see *2007 Highlights* below), and (b) settleand release claims among the parties to the Original Purchase Agreementrelating to the Original Purchase Agreement, and in connection therewith, CrownOne and Crown Two (collectively, the “*Purchasers*”),paid the Original Equityholders a cash payment of $50 million, of which theCompany received $21 million.

 

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Simultaneouslywith the execution and delivery of the Termination and Settlement Agreement andin accordance with the terms thereof, the Crown Parties, the OriginalEquityholders and CCR entered into a Preferred Purchase Agreement  (the “*Series B PreferredPurchase Agreement*”).  On April 24,2009, CCR sold to the Purchasers 71,614 Series B Preferred Units of CCR(the “Series B Units”) for an aggregate purchase price of $320 million incash (the “Preferred Purchase Price”) in accordance with the terms andconditions of the Series B Preferred Purchase Agreement.  Of the Preferred Purchase Price, $20 millionrepresents reimbursement of certain project costs incurred by CCR related tovarious project costs at The Meadows.  The Series B Units have no coupon and are not subject to mandatoryredemption.  The “Option Agreement,” asdescribed below, remains unaffected.

 

Simultaneouslywith the execution and delivery of the Termination and Settlement Agreement andin accordance with the terms thereof, the Crown Parties, the OriginalEquityholders and CCR entered into an Option Agreement (the “Option Agreement”),which grants the Crown Parties, subject to the terms and conditions set forthin the Option Agreement, the option to complete the purchase of all of thedirect and indirect interests of the Original Equityholders in CCR on termssubstantially similar to the terms of the Original Purchase Agreement.  If the Crown Parties exercise their optionunder the Option Agreement, then upon the consummation of the transactionscontemplated by the Option Agreement, the Crown Parties will collectively own,directly or indirectly, 100% of the issued and outstanding units of CCR for anaggregate purchase price of approximately $1.7 billion (such purchase priceincludes the Preferred Purchase Price), subject to adjustment upon the termsand conditions of the Option Agreement.

 

Withconstruction completed in April 2009, PA Meadows, LLC, a  Delaware limited liability company andwholly-subsidiary of CCR (“*PA Meadows*”),opened an approximately 350,000 square-foot permanent casino that replaced the82,000 square foot temporary casino.  Thepermanent facility includes 8 restaurants and boutique style bowling alley andnightclub. In addition, the permanent casino houses approximately 3,700 slotmachines and integrates the long-standing tradition of harness racing at TheMeadows with state-of-art gaming facilities.

 

InMay 2009, CCR distributed $26.21 million of the Preferred Purchase Priceto the Company, and concurrent with such distribution, the Company, throughAcquisitionCo, made a $5.21 million equity investment in CCR for the purpose ofmaintaining CCR’s compliance with its debt covenants.  The additional equity contribution byAcquisitionCo was funded by an equity contribution from OCM Blocker, LLC, whichin turn was funded by a loan from the Company.

 

Eachof the foregoing summaries of the Original Purchase Agreement, the Terminationand Settlement Agreement, the Preferred Purchase Agreement and the OptionAgreement, does not purport to be complete and is qualified in its entirety byreference to the Original Purchase Agreement, the Termination and SettlementAgreement, the Preferred Purchase Agreement or the Option Agreement, as thecase may be, filed as Exhibit 10.30, Exhibit 10.31, Exhibit 10.32and Exhibit 10.33, respectively, to the Company’s Annual Report on From10-K filed with the Commission on March 31, 2009.

 

*2008Highlights*

 

OnFebruary 29, 2008, the Nevada Palace, located on the Boulder Strip in eastLas Vegas, ceased operations as planned in connection with the construction ofthe Eastside Cannery.  The EastsideCannery opened on August 28, 2008, on the former site of the NevadaPalace.  Its amenities include a 16-storyhotel, with more than 300 guest rooms and suites, a resort spa, jacuzzi and ahalf-acre pool, and approximately 65,000 square feet of gaming space, withapproximately 1,980 slot machines, 21 table games, a bingo hall, a live Kenolounge, a poker room and a race and sports book.  In addition, the Eastside Cannery has fiverestaurants and four bars, the One Six Sky Lounge and an approximately 20,000square foot ballroom/meeting place.

 

*2007 Highlights*

 

OnDecember 11, 2007, the Company entered into the Original PurchaseAgreement pursuant to which Crown One and Crown Two were to purchase, directlyor indirectly, the CCR Units from the Original Equityholders.

 

Underthe terms of the Original Purchase Agreement, (a) Crown One had agreed topurchase from Millennium, all of Millennium’s CCR Units, (b) Crown Two hadagreed to purchase from the Company, all of the Company’s interest in Blocker,and (c) Crown One had agreed to purchase from the Company, all of theCompany’s right, title and interest in the Blocker Option Agreement, and theaggregate purchase price that would have been payable by the Crown Parties tothe Original Equityholders was approximately $1.75 billion in cash, lessoutstanding debt and other adjustments. The Original Purchase Agreement also provided that the Crown Partieswould have been indemnified for damages resulting from breaches of Sellers’representations, warranties and covenants, certain tax liabilities and othermatters.  The sum of $25 million of thepurchase price was to have been placed in escrow for three years after theclosing date as the exclusive source, subject to certain exceptions, forsatisfaction of such damages as to which claims are made.

 

***Employees***

 

TheCompany has no employees, other than its two managers, Messrs. Kaplan andBeck, who receive no compensation from the Company for their services.

 

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***Environmental Issues***

 

TheCompany has no physical assets.

 

**CANNERY CASINO RESORTS, LLC**

 

CCRwas organized on May 22, 2001.  In December 2002,CCR commenced casino operations at the Rampart Casino. In January 2003,CCR completed construction of The Cannery and commenced its operations.  In July 2006, CCR acquired The Meadows,where it currently owns and operates a casino and the on-and-off track racingoperations.  In September 2006, CCRacquired the gaming assets of and commenced temporary operations at the NevadaPalace, which ceased operation on February 29, 2008 as planned inconnection with the construction of the Eastside Cannery, which replaced theNevada Palace and opened on August 28, 2008. The Cannery, the RampartCasino and the Eastside Cannery are currently managed by Millennium ManagementGroup II, LLC, a Nevada limited liability company (“*MMG II*”).  MMG II is95% owned by William Paulos and William Wortman.  Messrs. Paulos and Wortman, through Millennium,own the remaining 58% of the Series A1 Units of CCR and Mr. Wortmanalso owns the remaining  66-2/3% of the equity interests in NP Land, the entitythat owns the primary site upon which the Eastside Cannery is located.

 

OnMay 18, 2007, CCR entered into two new syndicated credit facilitiestotaling $860 million: a $745 million first lien facility and a $115 millionsecond lien term loan facility.  Theproceeds were used primarily to retire existing debt, including thethen-existing $250 million credit facility. The remainder of the proceeds from the borrowing were used to partiallyfund the construction of the permanent casino facility at The Meadows and theEastside Cannery.  The first lienfacility was amended by the First Lien Amendment on March 3, 2010.

 

Formore information about the syndicated credit facilities and the First LienAmendment, see the Company’s current reports on Form 8-K filed with theSEC on May 24, 2007 and March 9, 2010, respectively.

 

***The Cannery***

 

TheCannery, located in North Las Vegas, Nevada, commenced operations in January 2003,and, in 2006, completed a $40 million expansion project.  Currently, The Cannery features approximately72,000 square feet of casino space, including 1,961 slot/video poker machines,20 table games, an 11 table poker room, bingo room and a race and sports book.The attached three-story hotel is designed to be compatible with The Cannery’sWorld War II industrial theme and includes 201 hotel rooms.  In addition, The Cannery’s facilities includea sports-themed restaurant and bar, a buffet restaurant, a Mexican-themedrestaurant, an Italian restaurant and a steakhouse; a 14 screen movie theatre;an indoor/outdoor multi-purpose entertainment venue used to host events such asboxing matches and community festivals; an entertainment lounge; a pool andjacuzzi; and parking for approximately 3,600 vehicles (including a 1,900-spaceparking garage), with valet options and additional off-site parking for largeevents, along with shuttle bus service to and from the casino.

 

***The Rampart Casino***

 

InDecember 2002, CCR, through a subsidiary, commenced operations at theRampart Casino under a 10-year sublease agreement with Hotspur Casinos Nevada, Inc.,a Nevada corporation (“*Hotspur*”).

 

TheRampart Casino is situated within the JW Marriott Las Vegas Resort, Spa &Golf at the Resort at Summerlin, located in the Summerlin area of northwest LasVegas. The Rampart Casino’s facilities consist of approximately 50,000 squarefeet of casino space, approximately 1,230 slot machines, 22 table games, a raceand sports book, six restaurants, a bar and three lounges. The JW Marriott LasVegas Resort is located on over 50 acres of land and consists of a hotel withover 500 guest rooms and suites, a spa, and several restaurants.

 

***The Eastside Cannery/Nevada Palace***

 

On September 22, 2006, CCR, through a subsidiary, acquired thegaming assets of the Nevada Palace and entered into a 35-year lease of theNevada Palace land with NP Land.  TheEastside Cannery replaced the Nevada Palace and opened on August 28, 2008.

 

TheEastside Cannery, located on the Boulder Strip in east Las Vegas andapproximately eight miles from McCarran International Airport, is similar intheme and amenities to The Cannery, with more than 300 guest rooms and suites,a resort spa, jacuzzi and a half-acre pool complete with cabanas on theproperty.   The Eastside Cannery’s casinooffers guests approximately 65,000 square feet of gaming space, withapproximately 1,980 slot machines, 21 table games, a 450-seat bingo hall, alive Keno lounge, a poker room and a race and sports book.  In addition, the Eastside Cannery has fiverestaurants, four bars, a 250 seat entertainment lounge, the One Six Sky Loungeand an approximately 20,000 square foot ballroom and meeting place.

 

Theprimary assets of NP Land are approximately 22 acres of land, the primary siteof the Eastside Cannery, which land is leased to a wholly-owned subsidiary ofCCR.

 

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***The Meadows***

 

In 2006, CCR, through its indirect subsidiary, PA Meadows, acquiredfrom Magna Entertainment Corp., a Delaware corporation (“*MEC*”),all of the capital stock of entities owning and operating The Meadows harnessracetrack.  Concurrently with theacquisition, PA Meadows and its wholly-owned subsidiaries entered into a RacingServices Agreement, whereby a wholly-owned subsidiary of MEC (the “*MEC Operator*”) would continue to operate the on-and-offtrack racing operations at The Meadows for a minimum term of five years unlessterminated earlier under certain circumstances. On September 1, 2009, theRacing Services Agreement was terminated and The Meadows assumed the on-and-offtrack racing operations that were previously provided by the MEC Operator.

 

ThePennsylvania Gaming Control Board (the “*Pennsylvania Board*”)approved Washington Trotting Association (“*WTA*”), awholly-owned subsidiary of PA Meadows, to receive a Category 1 Slot Machine Licenseto operate a casino at The Meadows in December 2006. With constructioncompleted in April 2009, PA Meadows opened an approximately 350,000square-foot permanent casino that replaced an approximately 82,000 square foottemporary casino.  The permanent facilityincludes 8 restaurants and boutique style bowling alley and nightclub. Inaddition, the permanent casino houses approximately 3,700 slot machines andintegrates the long-standing tradition of harness racing at The Meadows withstate-of-art gaming facilities.  TheMeadows is also the first casino in Pennsylvania to offer patrons with themedslot machines based on Keno, roulette and Monopoly.

 

InJanuary 2010, the Pennsylvania Act was amended to permit table games atslot facilities in Pennsylvania after issuance of a table games certificate bythe Pennsylvania Board.  In February 2010,The Meadows submitted its petition for approval of table games which thePennsylvania Board is to act upon within sixty (60) days.  Assuming the approval of the PennsylvaniaBoard, The Meadows anticipates that table games will be operational in early July 2010.

 

***Gaming Markets***

 

*Las Vegas Locals Gaming Market*

 

LasVegas and North Las Vegas, which are part of Clark County, Nevada, haveexperienced considerable population growth over the past decade.  With an estimated population of 2 million,Clark County is Nevada’s largest county and the 15th largestcounty in the United States.   In 2008,Clark County’s population remained relatively unchanged and increased byapproximately 1% in 2009.   The Cannery,the Rampart Casino and the Eastside Cannery are all located in ClarkCounty.  CCR’s management believes thatthe Clark County’s population growth over the past decade has been driven, inpart, by Clark County’s favorable business climate, tax structure and greatweather.

 

CCRcompetes primarily in the Las Vegas locals gaming market, which is defined asthe Clark County gaming market excluding the Las Vegas Strip, Downtown LasVegas and Laughlin.  The Las VegasConvention and Visitors Authority estimates that two-thirds of the local LasVegas adult population participates in casino gaming on a regular basis.  In 2009, total win from nonrestricted gamingoperations in the Las Vegas locals gaming market was approximately $2.27 billion,representing a year-over-year decline of approximately 9.74% as compared to2008.  Prior to the last two years,gaming revenues for the Las Vegas locals gaming market had experienced steadyincreases in conjunction with the growth of the Clark County population.

 

Thespecific submarkets for The Cannery, the Rampart Casino and the EastsideCannery are North Las Vegas, Summerlin, and the Boulder Strip, respectively.

 

*North Las Vegas*

 

TheCannery is located in North Las Vegas, off of I-15 and a few miles from I-95,and targets local residents and visitors to the nearby Nellis Air Force Baseand Las Vegas Motor Speedway.  Accordingto the Nevada Gaming Control Board, total win from nonrestricted gamingoperations in North Las Vegas increased from approximately $282 million in 2008to approximately $286 million in 2009, an approximately 1.24% increase comparedto 2008.  From 2007 to 2008, however,total win from nonrestricted gaming operations decreased approximately 6.72%,from $303 million in 2007 to $282 million in 2008.

 

*Summerlin*

 

TheRampart Casino is located in the Summerlin area of northwest Las Vegas, a22,500-acre, master-planned community with approximately 60,000 households,adjacent to the Summerlin Parkway and within close proximity to six golfcourses. CCR management believes that the Rampart Casino’s primary marketconsists of frequent local gaming patrons who seek a friendly atmosphere andconvenience, as well as higher-than-average payout rates for slot machines andvideo poker games. In addition, due to its central location within the JWMarriott Resort, the Rampart Casino benefits from resort and conference visitortraffic.  Because the Summerlin area iscategorized with the balance of Clark County in the Nevada Gaming Control Board’srevenue reports, specific annual gaming revenues for the Summerlin area cannotbe determined.

 

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*The Boulder Strip Area*

 

TheEastside Cannery is located, along the Boulder Highway, known as the “BoulderStrip.”  The Boulder Strip is known as apopular “off the Las Vegas Strip” gaming destination for visitors to Las Vegaswho are looking for a less costly gaming experience than that offered on theLas Vegas Strip. Many of the casinos along the Boulder Strip offerentertainment amenities beyond gambling, including movie theaters, bowlingalleys and dining establishments. According to the Nevada Gaming Control Board, the Boulder Strip Area,which includes casinos within the city limits of Henderson, Nevada, has seenwin from nonrestricted gaming operations grow from approximately $792 millionin 2004 to approximately $839 million in 2008. In 2009, nonrestricted gaming operations were approximately $790million, representing a decrease of 5.84% from the prior year.  Despite the recent decrease, CCR managementbelieves that the Boulder Strip has become, and is likely to remain, popularwith Las Vegas locals.

 

*Pennsylvania Gaming Market*

 

TheMeadows is located in North Strabane Township, Washington County, Pennsylvania.North Strabane Township is part of the greater Pittsburgh metropolitan area andis located approximately twenty-five miles from the city of Pittsburgh.  The Meadows competes in a large market thatincludes western Pennsylvania, eastern Ohio and northern West Virginia,although its primary market is the greater Pittsburgh metropolitan area.  Of the states in The Meadows casino’s greatermarket, only West Virginia has established slot machine gaming and recentlyadded table games.  Slot machine gamingis relatively new to Pennsylvania. Pennsylvania has approved for licensure 12 slot machine gamingfacilities throughout the state, 6 racetrack-based casino facilities, 5 standalone slot machine gaming facilities and 1 resort based slot machinefacility.  Of the 12 facilities approvedfor licensure, 6 racetrack facilities are open and 3 stand alone slot machinegaming facilities, Mt. Airy Casino Resort, The Rivers Casino and SandsBethlehem are open.  The closest licensedin-state racetrack-based casino is Presque Isle Downs & Casino, inErie, Pennsylvania, which is approximately 146 miles from The Meadows.  The closest stand alone facility is TheRivers Casino which opened in August 2009 and is approximately 25 milesfrom The Meadows.  Ohio currently doesnot have gaming, but Ohio voters recently passed a constitutional amendment toallow four stand alone casinos and lawmakers are considering legislationallowing video lottery terminals at racetrack facilities in Ohio.

 

***Competition***

 

Thecasino hotel industry is a highly fragmented and competitive industry. Thegaming industry includes land-based casinos, dockside casinos, riverboatcasinos, casinos located on Native American reservations and other forms oflegalized gaming. CCR management believes that the primary competition to CCR’scasinos currently comes from other casinos that cater to the Las Vegas localsgaming market. In addition, to a lesser extent, CCR’s casinos face competitionfrom casinos located on the Las Vegas Strip and in downtown Las Vegas.  Competition with the Company’s casino at TheMeadows currently comes from racetrack-based casinos in West Virginia and fromThe Rivers Casino, located in Pittsburgh, Pennsylvania, which opened in August 2009.The competition among companies in the gaming industry is intense and many ofCCR’s competitors have significantly greater resources than CCR.

 

Underthe terms of CCR’s amended and restated operating agreement, Millennium and itsaffiliates, on the one hand, and AcquisitionCo and its affiliates (includingthe Company), on the other, must offer gaming opportunities first to CCR priorto pursuing any such opportunity outside CCR. Generally, no manager of CCR mayserve as a manager, officer, director or employee of any casino operating orholding company, except that a manager may serve in such capacities withrespect to CCR or its subsidiaries or entities that hold equity in the Company(other than Oaktree or investors in the Oaktree Funds). Nevertheless, a managermay serve as a manager, officer, director or employee of a casino operating orholding company formed to pursue a gaming opportunity offered to but notaccepted by CCR and a casino operating or holding company formed to pursuecertain opportunities in Mexico.

 

*Las Vegas Locals Gaming Market*

 

TheLas Vegas locals gaming market is highly competitive. In addition toestablished casinos, CCR faces competition from smaller casinos, supermarkets,bars and convenience stores that offer gaming.

 

Theclosest casino competitors to The Cannery are Aliante Station and Santa FeStation, which are approximately five and six miles, respectively, from thesite of the casino, although outside of The Cannery’s primary market area.Other competitors (each more than six miles from The Cannery) include TexasStation Gambling Hall and Fiesta Rancho. Each of these four competitors is owned by Station Casinos, Inc.  Together, they account for over 6,500 slots,over 100 tables and over 500 hotel rooms and suites.  The closest competitor to the Rampart Casinois Suncoast Casino, which is within close proximity to the Rampart Casino.  In addition, a nearby Red Rock Station casinois a significant competitor of the Rampart Casino.  The next closest competitors, Texas Station,Fiesta Station, and Arizona Charlie’s — Decatur, are each more than five milesaway, outside of the Rampart Casino’s primary market area.  The Boulder Strip is home to manycompetitors.  Prominent casinos along theBoulder Strip include Sam’s Town Hall & Gambling Hall, operated byBoyd Gaming Corporation; and Sunset Station, Boulder Station, Green ValleyRanch and Fiesta Henderson, each owned by Station Casinos, Inc.  These competitors generally have from 1,500to over 3,100 slots, 25 to 70 tables (including poker) and 200 to over 600hotel rooms and suites.  The EastsideCannery and a few other smaller casinos along the Boulder Strip may lack thenecessary facilities and other amenities to effectively compete in this prominentsub-market.

 

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*Las Vegas Strip and Downtown Las Vegas Gaming Market*

 

TheLas Vegas Strip is the location of dozens of casinos, including the largest andnewest mega-casinos that Las Vegas has to offer. In addition, the downtown LasVegas area includes approximately a dozen casinos on or near Fremont Street inold Las Vegas. Casinos located on the Las Vegas Strip or in downtown Las Vegasare typically tourist destinations and generally do not target the localsgaming market.

 

*The Neighborhood Casino Act*

 

In1997, the Nevada Legislature passed Senate Bill No. 208 (the “*Neighborhood Casino Act*”), enacting lawswhich possibly create significant barriers to new competition in CCR’s localgaming markets by limiting future casino development in certain areas of ClarkCounty, Nevada.  Those laws were amendedin 2001.  With certain specifiedexemptions, the Neighborhood Casino Act restricts non-restricted gaming tocertain designated gaming enterprise districts, and imposes potentiallyburdensome requirements on applicants proposing to have new locationsdesignated as gaming enterprise districts by the applicable county, city ortown body with jurisdiction.

 

*Pennsylvania Gaming Market*

 

Theprimary established competition for the casino at The Meadows are The RiversCasino in Pittsburgh, two racetrack-based casinos located in West Virginia: theWheeling Island Racetrack and Gaming Center in Wheeling, West Virginia, and theMountaineer Racetrack and Gaming Resort in Chester, West Virginia.  The Rivers Casino is located approximately 25miles from The Meadows and opened in August, 2009 with approximately 3,000 slotmachines.  The Wheeling Island Racetrackand Gaming Center is approximately 34 miles from The Meadows and is anestablished racetrack and slot machine gaming center with approximately 2,400slots.  The Mountaineer Casino is approximately50 miles from The Meadows and is an established racetrack and slot machinegaming center with approximately 3,200 slots. Both West Virginia facilities recently added table games and The RiversCasinos recently petitioned the Pennsylvania Board for approval of tablegames.  It is anticipated that TheMeadows and The Rivers Casino will commence table games operations in July 2010.  Pennsylvania has approved for licensure 12slot machine gaming facilities throughout the state, 6 racetrack-based casinofacilities, 5 stand alone slot machine gaming facilities and 1 resort basedslot machine facility.  The 6 racetrackfacilities are open and 3 stand alone slot machine gaming facility, Mt. AiryCasino Resort, The Rivers Casino and Sands Bethlehem, are open.  The closest in-state licensed facility to TheMeadows is The Rivers Casino located in Pittsburgh, Pennsylvania and isapproximately 25 miles from The Meadows. The closest licensed in-state racetrack-based casino is Presque IsleDowns & Casino, located in Erie, Pennsylvania, which is approximately146 miles from The Meadows.    Inaddition, the Commission issued a license to Valley View Downs in LawrenceCounty; however, the Pennsylvania Board has not approved a slot machine licenseas the Pennsylvania Board determined that Valley View Downs does not haveadequate financing.  It is unknown whenthe Pennsylvania Board will reconsider the Valley View Downs license and if thefacility will commence operations.  Also,the Pennsylvania Board allowed additional applicants to file for the remainingresort hotel slot machine license which allows for 500 slot machines at thefacility or 600 slot machines if the facility also operates table games.  Nemacolin Woodlands Resort in Farmington,Pennsylvania applied for the remaining resort hotel slot machine license and isapproximately 35 miles from The Meadows. The license process is a competitive bidding process and there are atleast two other applicants competing for this license.  Applicants have until April 7, 2010 toapply.  It is unknown when the PennsylvaniaBoard will award the remaining license.

 

***Business and Marketing Strategy***

 

CCRaims to target the locals gaming market and capitalize on strong demographictrends. In addition, CCR seeks to position its gaming assets to cater to thepropensity of the local residents to participate in casino-style gaming inproximity to where they live. CCR management believes that CCR’s Las Vegascasinos also benefit from Nevada regulatory restrictions that have the effectof limiting competition in the gaming industry, including the NeighborhoodCasino Act. For more information on the Neighborhood Casino Act, see “Item 1.Cannery Casino Resorts—Competition—The Neighborhood Casino Act” above.

 

*Strong Management Team*.

 

Theday-to-day operations of CCR are managed by Messrs. Paulos and Wortman,each of whom has had significant gaming industry experience. Mr. Paulospreviously served as President of Primadonna Resorts, Inc., which throughsubsidiaries owned and operated various casino-hotel properties, includingBuffalo Bill’s, Whiskey Pete’s, the Primm Valley Inn and Resort, and NewYork-New York Casino Resort, where he also served on the board of directors. Mr. Pauloshas served as Chief Operating Officer of Crown Casino Limited, where he wasresponsible for the construction and opening of its casino in Melbourne,Australia, and as Senior Vice President of Circus Circus Enterprises, Inc.,where he had primary responsibility for the development of the Excalibur andLuxor casinos. Mr. Wortman previously served as Chairman and ChiefExecutive Officer of Palace Casinos, Inc. In addition to Nevada Palace, hepreviously owned and operated the Fallon Nugget and Bonanza Inn in Fallon,Nevada and Renata’s/Sunset Lanes in Henderson, Nevada. Mr. Wortman heldvarious senior positions at Caesars Palace Las Vegas, including Treasurer,Chief Financial Officer, Vice President of Administration and Vice President ofHotel Operations, and served as President and Chief Operating Officer ofCaesars Tahoe.

 

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*Targeted Customer Base*.

 

CCR’soperating strategy aims to attract and retain customers primarily from thelocals market through innovative, frequent and high-profile promotionalprograms, focused marketing efforts and convenient locations.  CCR’s primary customers are located within afive-mile radius of its casinos, and CCR focuses its marketing efforts on thosepatrons.

 

*High-Value Customer Experience*.

 

Inorder to provide a high-value gaming experience, CCR focuses on slot and videopoker machine play with higher-than-average payout. CCR management believesthat by offering a wide variety of high quality slot and video poker games, itscasinos attract locals and repeat visitors. CCR management is committed to providing a high-value entertainmentexperience through restaurant, hotel and other non-gaming amenities atreasonable prices to attract patrons.

 

*Creative Marketing and Promotional Programs*.

 

CCRmanagement believes that promotions and promotional events are one of theprimary factors to success in the locals gaming market.  CCR employs a marketing strategy thatutilizes innovative, frequent and high-profile promotional programs in order toattract and retain customers and establish a high level of name recognition forCCR’s casinos.  In addition to aggressivemarketing through television, radio and newspaper advertising, CCR creates andsponsors promotional events and has established and promotes an exclusiveplayers club.

 

*Operating Efficiencies*.

 

Byoperating its Nevada casinos with a similar marketing focus and targetcustomer, CCR realizes certain operating efficiencies.  For example, The Cannery, the EastsideCannery and the Rampart Casino participate in the same players club, whichprovides casino patrons with the opportunity to win points at either locationand enables management to run larger joint promotions. CCR also benefits fromjoint purchasing programs for food and other supplies and available quantitydiscounts.  In addition, CCR realizesequipment cost savings from, among other things, identical player trackingsystems in its casinos.  These playertracking systems provide CCR with access to a larger database of customers forpurposes of cross-marketing and promotions. Finally, the accounting, personnel and other administrative functions ofCCR’s casinos are centralized to reduce costs.

 

***Employees***

 

Asof December 31, 2009, CCR and its subsidiaries had approximately 3,674active employees and approximately 2,977 full-time equivalent employees.  Of these employees, 525 are unionized.  CCR recognizes that its employees arecritical to its success and has sought to foster a productive workculture.  Employees are offeredcompetitive salaries and benefit packages.

 

***Environmental Matters***

 

Theoperations and properties of The Cannery, the Rampart Casino and the EastsideCannery (and the former operations of the Nevada Palace) are and will continueto be subject to a wide variety of complex and stringent environmental laws.CCR management and NP Land management believe that their respective operationsand properties are in compliance in all material respects with all applicableenvironmental laws.  Based upon their experienceto date, CCR management and NP Land management believe that the future cost ofcompliance with and liability under existing environmental laws will not have amaterial adverse effect on their respective future financial conditions, cashflows or results of operations.

 

Theoperations and properties of The Meadows are, and will continue to be, subjectto a wide variety of complex and stringent environmental laws.  CCR management believes that these operationsand properties are in compliance in all material respects with all environmentallaws.   As a result, CCR managementbelieves that the future cost of compliance with and liability under existingenvironmental laws applicable to The Meadows will not have a material adverseeffect on PA Meadows’s future financial conditions, cash flows or results ofoperations.

 

**REGULATORY MATTERS**

 

TheCompany is subject to gaming regulation in Nevada and gaming and harness racingregulation in Pennsylvania. The ownership and operation of casino gamingfacilities in Nevada are subject to the gaming laws and regulations of theState of Nevada, including the Nevada Gaming Control Act (such laws andregulations, the “*Nevada Act*”),and the licensing and regulatory control of the Nevada Gaming Control Board(the “*Nevada Board*”), the NevadaGaming Commission (the “*Nevada Commission*”),the Clark County Liquor and Gaming Licensing Board, the City of Las Vegas andthe City of North Las Vegas (collectively, the “*Nevada Gaming Authorities*”). The ownership and operation ofslot machine facilities in Pennsylvania are subject to the Pennsylvania RaceHorse Development and Gaming Act (such laws and regulations, the “*Pennsylvania Act*”) and the licensing andregulatory control of the 

 

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PennsylvaniaBoard. The ownership and operation of harness racing tracks in Pennsylvania aresubject to the harness racing laws and regulations of the Commonwealth ofPennsylvania, including the Race Horse Industry Reform Act (such laws andregulations, the “*RHIRA*”), andthe licensing and regulatory control of the Pennsylvania State Harness RacingCommission (“*Pennsylvania Commission*”).

 

***Nevada Gaming Laws and Regulations***

 

TheNevada Act and the regulations and supervisory procedures of the Nevada GamingAuthorities are based upon declarations of public policy that are concernedwith, among other things, the prevention of unsavory or unsuitable persons fromhaving a direct or indirect involvement with gaming at any time or in anycapacity and the strict regulation of all persons, locations, practices,associations and activities related to the operation of licensed gamingestablishments. Changes in such laws, regulations and procedures could have anadverse effect on CCR’s gaming operations and the Company’s indirect investmentin CCR.

 

*Licensing Requirements and Approvals*

 

In2006, certain required approvals were obtained from the Nevada GamingAuthorities in connection with the Company’s acquisition of its equityinterests in CCR and NP Land. Such approvals included (i) the Company wasregistered as a “publicly traded corporation” as that term is defined by theNevada Act (a “*Registered Company*”);(ii) the Company, VoteCo, and AcquisitionCo were registered as holding orintermediary companies and found suitable; and (iii) the VoteCoEquityholders received various approvals including licensure as members andmanagers, as applicable, of VoteCo and findings of suitability as controllingmembers and managers, as applicable, of the Company.

 

Whilethe direct and indirect holders of Class B Membership Units of the Companywere not required to be found suitable in connection with the Company’sacquisition of equity interests in CCR and NP Land, they remain subject to thediscretionary authority of the Nevada Gaming Authorities and can be required tofile an application and have their suitability determined, or to dispose oftheir investment in the Company.

 

TheNevada Gaming Authorities may require additional licensing or suitabilityapplications. A finding of suitability is comparable to licensing, and bothrequire submission of detailed personal and financial information followed by athorough investigation. An applicant for licensing or an applicant for a findingof suitability must pay or must cause to be paid all the costs of theinvestigation. Changes in licensed positions must be reported to the NevadaGaming Authorities and, in addition to their authority to deny an applicationfor a finding of suitability or licensing, the Nevada Gaming Authorities havethe jurisdiction to disapprove a change in a corporate position.

 

*Consequences of Being Found Unsuitable or Violating GamingLaws*

 

Ifthe Nevada Gaming Authorities were to find an officer, manager or key employeeof CCR, the Company, VoteCo or AcquisitionCo unsuitable to continue having arelationship with these entities, the companies involved would have to severall relationships with such person.  TheNevada Gaming Authorities may deny an application for any cause which they deemreasonable.  Determinations ofsuitability or of questions pertaining to licensing are not subject to judicialreview in Nevada.

 

Ifit were determined that the Nevada Act was violated by CCR, the Company, VoteCoor AcquisitionCo, the gaming licenses held by CCR’s subsidiaries and affiliatescould be limited, conditioned, suspended or revoked, subject to compliance withcertain statutory and regulatory procedures. In addition, any such violator andthe persons involved could be subject to substantial fines for each separateviolation of the Nevada Act, or of the regulations of the Nevada Commission, atthe discretion of the Nevada Commission. Furthermore, the Nevada Commission could appoint a supervisor to operateThe Cannery, the Rampart Casino, the Eastside Cannery and, under specifiedcircumstances, earnings generated during the supervisor’s appointment (exceptfor the reasonable rental value of the premises) could be forfeited to theState of Nevada. Limitation, conditioning or suspension of any gaming licenseor the appointment of a supervisor could (and revocation of any gaming licensewould) impact casino revenues and cause the Company to suffer financial loss.

 

*Ongoing Obligations of Gaming Licensees and BeneficialSecurities Holders*

 

OnSeptember 21, 2006, the Nevada Commission issued an order of registrationof the Company, which was immediately effective and which has since beenamended twice (the “*Final Order*”).The Final Order prohibits (1) VoteCo, InvestCo or their respectiveaffiliates from selling, assigning, transferring, pledging or otherwisedisposing of the Company’s Class A Membership Units or Class BMembership Units or any other security convertible into or exchangeable for Class AMembership Units or Class B Membership Units, without the prior approvalof the Nevada Commission, and (2) the Company from declaring cashdividends or distributions on any class of membership unit of the Companybeneficially owned in whole or in part by InvestCo, VoteCo, or their respectiveaffiliates, without the prior approval of the Nevada Commission.

 

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TheCompany, VoteCo and AcquisitionCo are subject to detailed ongoing financial andoperating reporting requirements to the Nevada Gaming Authorities.Substantially all material loans, leases, sales of securities and similarfinancing transactions by the Company, VoteCo and AcquisitionCo must bereported to, or approved by, the Nevada Commission.

 

Regardlessof the number of shares held, any beneficial holder of a Registered Company’svoting or non-voting securities may be required to file an application, beinvestigated and have that person’s suitability as a beneficial holder ofvoting or non-voting securities determined if the Nevada Commission has reasonto believe that the ownership would otherwise be inconsistent with the declaredpolicies of the State of Nevada. If the beneficial holder of such securitieswho must be found suitable is a corporation, partnership, limited partnership,limited liability company or trust, it must submit detailed business andfinancial information, including a list of its beneficial owners.  The applicant must pay all costs of theinvestigation incurred by the Nevada Gaming Authorities in conducting anyinvestigation.

 

TheNevada Act requires any person who individually or in association with othersacquires, directly or indirectly, beneficial ownership of more than 5% of aRegistered Company’s voting securities to report the acquisition to the NevadaCommission, and such person may be required to be found suitable. The NevadaAct requires that each person who, individually or in association with others,acquires, directly or indirectly, beneficial ownership of more than 10% of aRegistered Company’s voting securities to apply to the Nevada Commission for afinding of suitability within 30 days after the Chairman of the Nevada Boardmails the written notice requiring such filing. However, an “institutionalinvestor,” as defined in the Nevada Act, which beneficially owns more than 10%but not more than 11% of a Registered Company’s voting securities as a resultof a stock repurchase by the Registered Company may not be required to filesuch an application. Further, an institutional investor which acquires morethan 10%, but not more than 25%, of a Registered Company’s voting securitiesmay apply to the Nevada Commission for a waiver of a finding of suitability ifthe institutional investor holds the voting securities for investment purposesonly. An institutional investor that has obtained a waiver may hold more than25% but not more than 29% of a Registered Company’s voting securities for alimited period of time and maintain the waiver where the additional ownershipresults from a stock repurchase by the Registered Company. An institutionalinvestor will not be deemed to hold voting securities for investment purposesunless the voting securities were acquired and are held in the ordinary courseof business as an institutional investor and not for the purpose of causing,directly or indirectly, the election of a majority of the members of the boardof directors of a Registered Company, a change in the corporate charter,bylaws, management, policies or operations of a Registered Company, or any ofits gaming affiliates, or any other action which the Nevada Commission finds tobe inconsistent with holding a Registered Company’s voting securities forinvestment purposes only. Activities which are not deemed to be inconsistentwith holding voting securities for investment purposes only include:

 

·                  voting on all matters votedon by stockholders or interest holders;

 

·                  making financial and otherinquiries of management of the type normally made by securities analysts forinformational purposes and not to cause a change in management, policies or operations;and

 

·                  other activities that theNevada Commission may determine to be consistent with such investment intent.

 

Anyperson who fails or refuses to apply for a finding of suitability or a licensewithin 30 days after being ordered to do so by the Nevada Commission or theChairman of the Nevada Board may be found unsuitable. The same restrictionsapply to a record owner of equity securities if the record owner, afterrequest, fails to identify the beneficial owner. Any member found unsuitableand who holds, directly or indirectly, any beneficial ownership of the equitysecurities of a Registered Company beyond such period of time as may beprescribed by the Nevada Commission may be guilty of a criminal offense. ARegistered Company is subject to disciplinary action if, after it receivesnotice that a person is unsuitable to be a member or hold a voting security orother equity security issued by the Registered Company or to have any otherrelationship with the Registered Company, the Registered Company:

 

·                  pays that person anydividend or interest with respect to voting securities of the RegisteredCompany;

 

·                  allows that person toexercise, directly or indirectly, any voting right conferred through securitiesheld by that person;

 

·                  pays remuneration in anyform to that person for services rendered or otherwise; or

 

·                  fails to pursue all lawfulefforts to require such unsuitable person to relinquish his or her votingsecurities, including, if necessary, the immediate purchase of said votingsecurities for cash at fair market value.

 

TheNevada Commission may, in its discretion, require the holder of any debt ornon-voting security of a Registered Company to file applications, beinvestigated and be found suitable to own the debt or non-voting security of a RegisteredCompany. If the Nevada Commission determines that a person is unsuitable to ownsuch security, then pursuant to the Nevada Act, the Registered Company can besanctioned, including by revocation of its approvals, if without the priorapproval of the Nevada Commission, the Registered Company:

 

·                  pays to the unsuitableperson any dividend, interest, or any distribution whatsoever;

 

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·                  recognizes any voting rightby such unsuitable person in connection with such securities;

 

·                  pays the unsuitable personremuneration in any form; or

 

·                  makes any payment to theunsuitable person by way of principal, redemption, conversion, exchange,liquidation or similar transaction.

 

ARegistered Company may not make a public offering of its securities without theprior approval of the Nevada Commission if the securities or the proceedstherefrom are intended to be used to construct, acquire or finance gamingfacilities in Nevada, or to retire or extend obligations incurred for suchpurposes.

 

TheNevada Act provides that changes in control of a Registered Company throughmerger, consolidation, stock or asset acquisitions, management or consultingagreements, or any act or conduct by a person whereby the person obtainscontrol, may not occur without the prior approval of the Nevada Commission.Entities and persons seeking to acquire control of a Registered Company mustsatisfy the Nevada Commission with respect to a variety of stringent standardsprior to assuming control of such Registered Company. The Nevada Commission mayalso require controlling stockholders, members, partners, officers, directorsand other persons having an ownership interest in or a material relationship orinvolvement with the entity proposing to acquire control to be investigated andlicensed as part of the approval process relating to the transaction.

 

Anyperson who is licensed, required to be licensed, registered, required to beregistered, or under common control with such persons, and who proposes tobecome involved or is involved in a gaming venture outside of Nevada (“*Foreign Gaming*”), is required to depositcertain funds with the Nevada Board in order to pay the expenses ofinvestigation of the Nevada Board of their participation in such ForeignGaming. Thereafter the licensees are required to comply with certain reportingrequirements imposed by the Nevada Act. A licensee is also subject to disciplinaryaction by the Nevada Commission if it knowingly violates any laws of theforeign jurisdiction pertaining to the Foreign Gaming operation, fails toconduct the Foreign Gaming operation in accordance with the standards ofhonesty and integrity required of Nevada gaming operations, engages inactivities or enters into associations that are harmful to the State of Nevadaor its ability to collect gaming taxes and fees, or employs, contracts with, orassociates with, a person in the Foreign Gaming operation who has been denied alicense or finding of suitability in Nevada on the ground of personalunsuitability.

 

***Pennsylvania Gaming Laws and Regulations***

 

Theownership and operation of slot machine facilities in Pennsylvania are subjectto extensive state regulation by the Pennsylvania Board under the PennsylvaniaAct and the regulations of the Pennsylvania Board.  The Pennsylvania Board has broad discretionregarding the issuance, renewal, revocation and suspension of slot machinelicenses.  The Pennsylvania Act, and theregulations promulgated thereunder, concern primarily the good character,honesty, integrity and financial stability of slot machine licensees, theirintermediary and holding companies, their employees, their security holders andothers financially interested in slot operations.

 

OnDecember 20, 2006, the Pennsylvania Board approved WTA to receive aCategory 1 Slot Machine License. The Category 1 Slot Machine License wasapproved upon completion of a background investigation and initial satisfactionof certain conditions set by the Pennsylvania Board. The holder of a Category 1Slot Machine License may operate up to 3,000 slot machines and, with theapproval of the Pennsylvania Board, up to an additional 2,000 slot machinesafter six months of operation. Prior to the commencement of slot machineoperations, WTA obtained additional approvals from the Pennsylvania Board, suchas approval of internal controls and equipment, licensing of employees and thesuccessful completion of gaming test days.

 

Aspre-conditions to receiving its license, WTA had to demonstrate, by clear andconvincing evidence to the satisfaction of the Pennsylvania Board, that WTA andits affiliates are persons of good character, honesty, integrity and that theirprior activities, reputation, habits and associations do not pose a threat tothe public interest or the effective regulation and control of slot machineoperations or create or enhance the danger of unsuitable, unfair or illegalpractices, methods and activities in the conduct of slot machine operations orin the carrying on of the business and financial arrangements incidentalthereto. WTA also had to demonstrate by clear and convincing evidence theadequacy of its financial resources, the financial stability, integrity andresponsibility of it and its affiliates, and the integrity of all financialbackers, investors, mortgagees, bondholders and holders of indentures, notes orother evidences of indebtedness, either in effect or proposed, except thatbanking or licensed lending institutions and certain institutional investorsmay be waived from the qualification requirements. WTA had to show by clear andconvincing evidence that it has sufficient business ability and experience tocreate and maintain a successful, efficient operation.

 

Asa licensee, WTA is obligated to develop and implement a diversity plan toassure that all persons are accorded equality of opportunity in employment andcontracting, which it has done. WTA is also required to maintain certainrecords, which it has done, which shall be made available to the PennsylvaniaBoard upon request. In addition, WTA is required to hold a license issued bythe Pennsylvania Commission to conduct harness racing meetings. WTA holds alicense from the Pennsylvania Commission to conduct harness racing meetings.

 

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Asa licensee, WTA is obligated to fully cooperate with the Pennsylvania Board inthe conduct of any inquiry or investigation and provide any supplementaryinformation as may be requested. Currently, there are no known inquiries orinvestigations, except license renewal investigations that are in the normalcourse, being conducted about WTA or its affiliates.

 

Noexecutive-level Pennsylvania state employee, public official or party officer,or any of their immediate family members, may knowingly or intentionally have afinancial interest in a licensed gaming entity, be employed by any gamingentity or affiliate thereof or solicit or accept any service or discount notoffered to the general public from a gaming entity or affiliate. No applicant,affiliate, intermediary, subsidiary or holding company may possess a greaterthan one-third ownership or financial interest in another slot machine licenseeor person eligible to apply for a Category 1 Slot Machine License. A licensedentity or officer, director, principal employee or key employee of a licenseemay not make any contribution to a candidate for nomination or election to anypublic office in Pennsylvania.

 

ThePennsylvania Board may deny an application or suspend or revoke a license of aperson or applicant who has failed to prove to the satisfaction of thePennsylvania Board that the person or applicant is qualified in accordance withthe Pennsylvania Act, who has violated the Pennsylvania Act, who isdisqualified under the criteria set forth in the Pennsylvania Act, who providedfalse or misleading information to the Pennsylvania Board, who has materiallydeparted from a representation made in the application for a license or who hasfailed to comply with applicable Federal or state laws or regulations. If thePennsylvania Board does not approve a slot machine license application based ona finding that an individual who is a principal or has an interest in theentity applying for licensure does not meet the character requirements or anyother eligibility requirement or is in violation of the change in ownership andcontrol provisions of the Pennsylvania Act, the Pennsylvania Board may permitthe individual or entity the opportunity to divest completely his or herinterest in the entity and related entities. The Pennsylvania Board mustapprove the terms and conditions of divestiture, but the Pennsylvania Actrequires that the compensation for the divested interest not exceed the cost ofthe interest.

 

OnFebruary 27, 2007, WTA paid a one-time license fee in the amount of $50million. As a Category 1 Slot Machine licensee, WTA is subject to a daily taxof 34%, a local county share assessment of 2%, a local municipality shareassessment of 2% but no less than $10 million, an additional daily assessmentof 5% of its daily gross terminal revenue, and a 1.5% tax on gross terminal revenue.A licensee shall also pay a daily assessment to the Pennsylvania Race HorseDevelopment Fund in a maximum amount of 12% of daily gross terminal revenue asdetermined by the Department of Revenue. WTA is also responsible for the costsof investigation and regulation.

 

Alicense or permit issued by the Pennsylvania Board is a privilege and, exceptas set forth below, may not be sold, transferred or assigned to any person, norshall a licensee or permittee pledge or otherwise grant a security interest ina license. A licensee must notify the Pennsylvania Board prior to orimmediately upon becoming aware of any proposed or contemplated change ofownership by a group or person which involves (i) more than 5% of thelicensee’s ownership interests, (ii) more than 5% of the ownershipinterests of an entity that owns, directly or indirectly, at least 20% of thevoting or other ownership interests of the licensee, (iii) a sale, otherthan in the ordinary course of business, of a licensee’s assets, or (iv) anyother transaction or occurrence deemed to be relevant by the PennsylvaniaBoard. A purchaser of the assets of a licensee other than in the ordinarycourse of business or of more than 20% of the licensee’s ownership interestsmust independently qualify for a license and pay a new license issuance fee of$50 million. However, the fee is subject to reduction in the discretion of thePennsylvania Board. WTA notified the Pennsylvania Board of the proposedtransfer to Crown in December 2007.

 

Slotmachine licenses must be renewed  everythree years, but are required to update the information in their applicationsannually.  Further, the licensee has theaffirmative duty to notify the Pennsylvania Board of any changes relating tothe status of the license or to any other information contained in theapplication materials.  If a completedrenewal application is received in a timely manner, the license shall remain ineffect unless and until the Pennsylvania Board denies or renews the license.

 

InJanuary 2010, the Act was amended to permit table games.  In order to obtain a certificate to operatetable games from the Pennsylvania Board, the licensee must petition thePennsylvania Board for approval and must prove by clear and convincing evidencethat: (i) the slot machine license is in good standing; (ii) theconduct of table games will have a positive economic impact; (iii) thatlicensee has adequate funds to commence table games operations and pay thelicense fee; (iv) that the licensee has the necessary financial stability,integrity, and responsibility to conduct table games; (v) that licenseehas sufficient business ability and experience to maintain table gamesoperation; (vi) that internal and external security and proposedsurveillance are adequate for table games; (vii) that the slot machines inoperation as of October 1, 2009 will not be reduced in order to installtable games; and (viii) petitioner has executed a waiver regarding feereimbursement.  The Meadows filed apetition in February 2010 requesting approval of a table games certificateand anticipates the hearing before the Pennsylvania Board on same will occur inlate April 2010.  If approved, WTAanticipates that table games operations will commence in early July 2010.

 

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Onor before June 1, 2010, The Meadows must pay a one time non-refundabletable game authorization fee of $16.5 million. If the table games authorization fee is paid after June 1, 2010,the fee is increased to $24.75 million. WTA also will be subject to a tax on daily gross table games revenue of14% for a period of two years following commencement of table games operationsat its facility.  The tax on daily grosstable games revenue then decreases to 12%. The tax on automated table games is 34% of daily gross table gamesrevenue.

 

***Pennsylvania Harness Racing Laws and Regulations***

 

Theownership and operation of pari-mutuel harness racing facilities inPennsylvania is subject to extensive state regulation by the PennsylvaniaCommission under the RHIRA and the regulations of the PennsylvaniaCommission.  Pursuant to the RHIRA, thePennsylvania Commission is empowered to issue no more than five licenses forthe conduct of pari-mutuel harness racing (each, a “Harness Racing License”).  Two subsidiaries of PA Meadows, WTA andMountain Laurel Racing, Inc., each holds one of the five Harness RacingLicenses.  In June 2007, thePennsylvania Commission granted the sole remaining Harness Racing License toValley View Downs, LP.

 

Oncea Harness Racing License has been issued, the RHIRA provides that such licenseshall remain in effect so long as the licensee complies with all conditions,rules, regulations and provisions of the RHIRA. Harness Racing Licenses are not transferable.  The RHIRA requires that each holder of aHarness Racing License shall, within ten days after any transfer of stockcomprising an interest of 5% or more of such licensee, notify the PennsylvaniaCommission of such transfer.  Suchlicensee must also file with the Pennsylvania Commission affidavits from theproposed transferees setting forth certain required information regarding theproposed transfer and the proposed transferee. WTA and MLR have sent appropriate notice to the Pennsylvania Commissionregarding the proposed transactions with the Crown Parties.

 

OnSeptember 1, 2009, WTA assumed the on-and-off track racing operationspreviously operated by the MEC Operator. WTA holds the proper licenses from the Pennsylvania Commission toperform such operations. If the Pennsylvania Commission determines that it isinconsistent with the public interest, convenience or necessity, or with thebest interest of racing generally, for any person to continue as the holder ofan equity interest in a licensee or any parent or affiliate of a licensee, thePennsylvania Commission may order such person to dispose of such interest in alicensee within a period of time specified by the Pennsylvania Commission.

 

ThePennsylvania Commission may refuse to grant a Harness Racing License or maysuspend or revoke a Harness Racing License without a prior hearing if itdetermines by a preponderance of the evidence that (i) a licensee, itsofficers, employees or agents have not complied with the conditions, rules,regulations and provisions of the RHIRA and (ii) it would be in the publicinterest, convenience or necessity to revoke or suspend the subject license.Such refusal, suspension or revocation may be premised upon, among otherthings, a determination by the Pennsylvania Commission that (a) anyofficer, director, member or stockholder of the licensee or any parent oraffiliate of the licensee (1) has been convicted of a crime involvingmoral turpitude, (2) has engaged in bookmaking or other forms of illegalgambling, (3) has been found guilty of any fraud or misrepresentation inconnection with racing or breeding, (4) has been found guilty of anyviolation or attempt to violate any law, rule or regulation of any racingjurisdiction for which suspension from racing might be imposed in suchjurisdiction or (5) has violated any rule, regulation or order of thePennsylvania Commission, or (b) the experience, character or fitness ofany officer, director, member or stockholder of the licensee or any parent oraffiliate of the licensee is such that the participation of the person in horseracing or related activities would be inconsistent with the public interest,convenience or necessity or with the best interest of racing. Upon receivingnotice of any such determination by the Pennsylvania Commission, a licenseemay, within ten days after such notice, demand a hearing before thePennsylvania Commission. However, the action of the Pennsylvania Commission inrefusing to grant or in suspending or revoking a  Harness Racing License shall remain in fullforce pending such hearing and final determination.

 

Inaddition to its power to suspend or revoke Harness Racing Licenses, thePennsylvania Commission is authorized and empowered to impose fines uponpersons and entities that participate in any way in any horse race meet atwhich pari-mutuel wagering is conducted and violate the RHIRA or the rules andregulations promulgated by the Pennsylvania Commission, in an amount not to exceed$5,000 for each violation.

 

Eachentity participating in the management of a licensee and each licensee mustprovide the Pennsylvania Commission on an annual basis with a complete list ofall holders of an ownership interest in such entity or licensee, indicating theinterest of each  such owner.

 

***Reports to Security Holders***

 

TheCompany is required to file annual, quarterly and other current reports andinformation with the Commission. You may read and copy any materials filed bythe Company with the Commission at its Public Reference Room at 100 FStreet, NE, Room 1580, Washington, D.C. 20549. You may obtain informationon the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.The Company’s filings are also available to the public from commercial documentretrieval services and at the World Wide Web site maintained by the Commissionat http://www.sec.gov.

 

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**Item 2.    Description of Property.**

 

Neitherthe registrant nor any of its consolidated subsidiaries owns real property.

 

**Item 3.    Legal Proceedings.**

 

Asof March 31, 2010, neither the Company nor any of its consolidated subsidiariesis a party to any pending legal proceeding, and to their knowledge, no action,suit or proceeding against it or any of its consolidated subsidiaries has beenthreatened by any person.

 

Asof March 31, 2010, no director, officer, affiliate or security holder ofthe Company, and no owner of record or beneficially of more than five percentof the Company’s Class A Membership Units, is adverse to the Company orhas a material interest adverse to the Company, in any material proceeding towhich such person is a party.

 

**PART II**

 

**Item 4.    Market for Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities.**

 

OnSeptember 23, 2005, the Company issued all of its Class A MembershipUnits to VoteCo without registration pursuant to Section 4(2) of theSecurities Act in exchange for an aggregate capital contribution of $100. Onthat same date, the Company issued all of its Class B Membership Units toInvestCo without registration pursuant to Section 4(2) of the SecuritiesAct in exchange for subsequent contributions by InvestCo of (1) all themembership units in LandCo, whose primary asset is its one-third equityinterest in NP Land, and (2) $64 million. Except as described immediatelyabove, the Company has not issued any other securities.

 

Noestablished public trading market exists for the Company’s membership units.There are no plans, proposals, arrangements or understandings with any personwith regard to the development of a trading market in any of the Company’s membershipunits.  In addition, the Final Orderprohibits VoteCo, InvestCo and their respective affiliates from selling,assigning, transferring, pledging or otherwise disposing of the Company’s Class AMembership Units or Class B Membership Units or any other securityconvertible into or exchangeable for Class A Membership Units or Class BMembership Units, without the prior approval of the Nevada Commission.

 

Thereare no outstanding options or warrants to purchase, or securities convertibleinto, the Company’s membership units. The Company’s currently outstanding Class A Membership Units are “restricted,”which means that they were originally sold in offerings that were not subjectto a registration statement filed with the Commission.  Accordingly, the Company’s membership unitsare subject to sale in the public market pursuant to Rule 144 under theSecurities Act, including the limitations set forth therein. Effective February 15,2008, Rule 144 generally permits a person or persons whose membership unitsare aggregated and who has beneficially owned restricted membership units forat least six months to sell in the public market within any three-month perioda number of membership units that does not exceed the greater of:

 

·                  1% of the then outstanding membershipunits of the class of membership units to be sold; or

 

·                  if applicable, the averageweekly trading volume of the class of membership units to be sold on allnational securities exchanges and/or reported through the automated quotationsystem of a registered securities association during the four calendar weekspreceding the date on which notice of sale is filed with the Commission.

 

Salespursuant to Rule 144 under the Securities Act are subject to restrictionsrelating to the manner of sale, notice and availability of current publicinformation about the Company.  TheCompany has not agreed with any security holder to register any of itsmembership units for sale by any security holder.  The Company does not currently propose topublicly offer any membership interests of its common equity.

 

Asof March 31, 2010, VoteCo was the only holder of record of the Company’s Class AMembership Units and InvestCo was the only holder of record of the Company’s Class BMembership Units.

 

TheCompany does not pay, and does not expect to pay in the foreseeable future, anydividends or other distributions with respect to its membership units.

 

TheCompany does not have any equity compensation plans and does not expect toauthorize securities for issuance pursuant to any equity compensation plans inthe foreseeable future.

 

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**Item5.    Selected Financial Information.**

 

Not applicable.

 

**Item 6.    Management’s Discussion andAnalysis of Financial Condition and Results of Operation.**

 

***Overview***

 

Thefollowing management’s discussion and analysis of the Company’s financialcondition and results of operations should be read in conjunction with theaudited financial statements and the notes thereto included in Part II,Item 8 of this Annual Report on Form 10-K.

 

TheCompany’s current business consists primarily of its ownership of a 42%interest in CCR’s Series A1 Units, 62-1/6% interest in CCR’s Series C Preferred Units and a 33-1/3% equity interest in NPLand. CCR operates three Las Vegas casinos, The Cannery, the Eastside Cannery,the Rampart Casino, and The Meadows, a harness racetrack in Pennsylvania whereconstruction of its permanent casino was completed in April 2009.  In addition, CCR operated the Nevada Palacewhich ceased operations on February 29, 2008 in connection with theconstruction of the Eastside Cannery, which opened on August 28, 2008 andreplaced the Nevada Palace.  NP Land ownsthe land of the current site of the Eastside Cannery, which it leases to asubsidiary of CCR.

 

OnDecember 11, 2007, the Company entered into the Original PurchaseAgreement with CCR, Millennium and the Crown Parties, pursuant to which CrownOne and Crown Two were to purchase, directly or indirectly, all of the CCRUnits from the Original Equityholders (the “*Original Crown Transaction*”).  The Original Crown Transaction was initiallyexpected to be consummated during the first quarter of 2009.  However, on March 12, 2009, the partiesterminated the Original Purchase Agreement pursuant to the Termination andSettlement Agreement as more fully described under Item 1 —  Business Developments —  Terminationand Settlement Agreement.  On March 12,2009, the Company also entered into the Preferred Purchase Agreement and theOption Agreement with the Crown Parties, CCR and Millennium, each as more fullydescribed under Item 1 —  Business Developments—  PreferredPurchase Agreement and Option Agreement.

 

In March 2009, theCompany, its wholly-owned subsidiary, AcquisitionCo, made an equitycontribution of $5.6 million to CCR for the purpose of maintaining CCR’scompliance with its debt covenants.  In May 2009, CCR distributed$26.21 million of the Preferred Purchase Price to the Company, and concurrentwith such distribution, the Company, through AcquisitionCo, made a $5.21million equity contribution to CCR for the purpose of maintaining CCR’scompliance with its debt covenants.  The additional equity contributionsby AcquisitionCo were funded by an equity contribution from OCM Blocker, LLC,which in turn were funded by loans from the Company.

 

***RecentDevelopment***

 

On March 3, 2010,CCR sold: (i) 18,375 Series C Preferred Units to Crown One andCrown Two, collectively; (ii) 10,000 Series C Preferred Units toMillennium; and (iii) 46,625 Series C Preferred Units toAcquisitionCo.  The rights, preferences and privileges of theSeries C Preferred Units are set forth in the Revised Operating Agreement.

 

On March 3, 2010,CCR also entered into the First Lien Amendment.  Pursuant to the FirstLien Amendment, among other matters, (i) the interest rate marginsapplicable to term loans and revolving loans under the First Lien CreditAgreement have been fixed at 4.25% for Eurodollar rate loans and 3.25% for baserate loans, in lieu of a range dependent upon the borrowers’ consolidatedleverage ratio; (ii) the maximum amount of revolving loans has beenpermanently reduced from $110 million to $70 million; (iii) the consolidatedleverage ratio that the borrowers are required to maintain as of each quarterend date through the remaining term of the First Lien Credit Agreement has beenadjusted; and (iv) the borrowers will be permitted to transfer a portionof Pennsylvania real property where The Meadows Racetrack and Casino islocated, which is mortgaged under the First Lien Credit Agreement, forconstruction of a hotel.  In addition tothese matters, other covenants and provisions of the First Lien CreditAgreement that are affected by the First Lien Amendment include covenantsrequiring maintenance of minimum consolidated EBITDA, compliance with cashmanagement procedures and application of the proceeds of certain transactions,including the issuance of securities, to repay the outstanding indebtednessunder the First Lien Credit Agreement.

 

***Results of Operation***

 

Materialvariables and factors affecting the Company’s income before income taxes forthe year ended December 31, 2009 compared to the year ended December 31,2008 follows:

 

·                  In March 2009, the Company received a payment of$21 million from the Crown Parties as its share of the settlement payment inconnection with the termination of the Original Purchase Agreement as discussedabove.

 

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·                  CCR’s net income decreased approximately $30.3 millionfor the year ended December 31, 2009, compared to the same period for theprior year, primarily as a result of the effect of the economic downturn, asdiscussed in the operational highlights for CCR below.  This decreaseresulted in a $12.7 million decrease in equity in earnings of unconsolidatedinvestees,

 

·                  The increase in professional fees was the result ofincreased legal and accounting fees associated with the termination of theOriginal Purchase Agreement.

 

The Company’s provisionfor income tax benefits for both periods does not bear an expected relationshipwith its income before income tax benefits because of material nonrecurringtransactions, including some that pass-through and are taxable to the Company’smembers.  In addition, material tax attributes of the Company’sunconsolidated investees, primarily CCR, flow to the Company through OCMBlocker, LLC, an entity in which the Company owns 99.99% of the equityinterest, that are either nonrecurring or vary significantly.  Further,significant income of CCR is taxable to corporate subsidiaries of CCR . Management believes that the undistributed earnings from CCR’s tax-payingsubsidiaries will be realized at a gain through an eventual sale of the Company’sinvestment in CCR.  (See Note 4 to the consolidated financial statementsfor additional details.)

 

The Company’s operationsare primarily related to its investments in CCR and, to a much lesser extent,NP Land.  The United States isexperiencing a recession accompanied by, among other things, reduced casinogaming and other recreational activity nationwide, instability in thecommercial and investment banking systems and reduced credit availability, andis also engaged in war, all of which are likely to have far-reaching effects oneconomic activity in the country for an indeterminate period. The effects andprobable duration of these conditions and related uncertainties on the Company’sunconsolidated investees’ future operations and cash flows cannot be estimatedat this time but may be significant. Significant events related to CCR are described below.

 

Operational highlightsfor CCR for the periods ended December 31, 2009 and 2008, are as follows:

 

·              Revenues for the year ended December 31, 2009,increased approximately 13.7% compared to the prior year.  This increase primarily resulted from theopening of the Eastside Cannery in August 2008 and the permanent casinofacility at The Meadows in April 2009. On September 1, 2009, The Meadows assumed the on-and-off trackracing operations that were previously performed by a wholly-owned subsidiaryof MEC.  The on-and-off track racingoperations contributed $8.5 million in revenues for the year ended December 31,2009. The Rampart Casino’s revenues for the year ended December 31, 2009decreased approximately 12.8% compared to the prior year, primarily due to theweakness in the Las Vegas economy resulting in less customer spend per visit.Due to this reason, as well as construction on I-15 and the opening of a newcompetitor in November 2008, The Cannery’s revenues for the year ended December 31,2009 decreased approximately 14.9% compared to the prior year.

 

·              Net income for the year ended December 31, 2009decreased approximately $30 million compared to the prior year.  The decrease was primarily due to a partialabandonment of the temporary casino facility at The Meadows ($20.5 million), aswell as (a) increased selling, general and administrative expenses withthe addition of the Eastside Cannery in August 2008 and increasedmarketing expenses, resulting in declines in operating margins; (b) increaseddepreciation and amortization expenses ($19.6 million) associated with theEastside Cannery and the opening of the permanent facility at The Meadows in April 2009,offset by reductions of pre-opening expenses ($8.1 million), income tax expense($13.3 million), and net gains associated with the termination of the OriginalPurchase Agreement and investment banking arrangements ($11.0 million).

 

*Inflation*

 

TheCompany does not believe that inflation has had a material effect on itsresults of operations in recent years. However, there is no assurance that inflation will not adversely affectits business in the future.

 

***Liquidity and Capital Resources***

 

The United States iscurrently experiencing a recession accompanied by, among other things, weaknessin the commercial and investment banking systems resulting in reduced creditand capital financing availability, and highly curtailed gaming, otherrecreational, construction and real estate market activities and generaldiscretionary consumer spending.  It is also engaged in war.  All ofthese factors are likely to continue to have far-reaching effects on economicconditions in the country for an indeterminate period.  The effects andduration of these developments and related risks and uncertainties on thefuture operations and cash flows of the Company’s investees and, hence, theCompany, cannot be estimated at this time but may likely be significant.

 

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In March 2009, theCompany received $21 million in connection with the termination of the OriginalPurchase Agreement and subsequently received an additional distribution fromCCR totaling $21 million net of the $5.21 million concurrent equitycontribution to CCR.  As disclosed above, the Company from time to timehas also made equity contributions to CCR in connection with CCR maintainingcompliance with its debt covenants including approximately $10.8 million in2009 and approximately $36.6 million in March 2010 in connection withAcquisitionCo’s purchase of the Series C Units.  The Company has no current investment orother financing plans and the Company’s recurring prospective need forliquidity and capital resources is principally associated with the financing ofits income tax obligations when due and, to a lesser extent, the costsassociated with being a reporting company. To the extent the Company needs additional liquidity and capitalresources to satisfy those needs, the Company’s members are the expected sourceof funding.

 

***Off Balance Sheet Arrangements***

 

*Credit Agreements*

 

OnMay 18 2007, CCR entered into two new syndicated credit facilitiestotaling $860 million: a $745 million first lien facility and a $115 millionsecond lien term loan facility (collectively, the “*CreditAgreements*”).  Portions of theproceeds were used to retire the then existing debt, including $250 millioncredit facility, and to partially fund the completion of the Eastside Canneryand the permanent casino facility at The Meadows.

 

On March 3, 2010,CCR entered into the First Lien Amendment which changed certain covenants andprovisions of the Credit Agreement as previously described.

 

*Additional Conditional Commitments*

 

In March 2009 and May 2009,Millennium and the Company, through AcquisitionCo, made equity contributions toCCR for the purpose of maintaining CCR’s compliance with its debtcovenants.  The equity contributions byAcquisitionCo were funded by equity contributions from Blocker, which in turnwere funded by loans from the Company.

 

In May 2008, awholly-owned subsidiary of the Company entered into a loan repayment guaranteeagreement which terminated prior to May 15, 2009, as expected.

 

As of April 15,2009, the Company was no longer conditionally required in certain limitedcircumstances previously disclosed to make an additional equity investment inCCR’s subsidiary PA Meadows.

 

**CriticalAccounting Estimates and Policies.**

 

Although the Company’sconsolidated financial statements necessarily make use of certain accountingestimates by management, at this time, we believe no matters are the subject ofsuch estimates that are so highly uncertain or susceptible to change as topresent a significant risk of a material impact on its financial condition orresults of operations as more fully explained in the following paragraph.Moreover, except as discussed below, the Company does not now employ anycritical accounting policies that are selected from among availablealternatives or require the exercise of significant management judgment toselect or apply except for carrying its investments in unconsolidated investeeson the equity method of accounting rather than the available fair value option.Similarly, in the opinion of the Company’s management, except for the selectionof depreciable lives and depreciation methods and assumptions used to estimatethe fair value of rate swap agreements and investments, consisting of preferredauction rate securities, the accounting policies of the Company’sunconsolidated investees also do not require the exercise of significantmanagement judgment to apply.

 

The realization ofsubstantially all of the Company’s assets will likely be dependent upon aneventual sale of its investment in the unconsolidated investees following aneconomic recovery believed to be probable at a price sufficient to realize thecarrying value of the Company’s assets.  Further, based in part on priortransactions with the Crown Parties, management believes, despite the currenteconomic conditions, that the present estimated fair value of the Company’sinvestment in unconsolidated investees exceeds the carrying value of itsinvestment and all other assets by a substantial amount such that any risk ofnot realizing the carrying values and having a material impact on the Company’sfinancial condition or results of operation is remote.  Additionally, itis management’s present opinion that the probability of an eventual sale of theCompany’s investment in unconsolidated investees at a sufficiently appreciatedvalue makes realization of its deferred tax assets more likely than not.

 

**RecentlyIssued Accounting Pronouncements.**

 

No recently issuedaccounting pronouncements not yet adopted are expected to have a materialimpact on our future financial position, results of operations, or cash flows.

 

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**Item 7.** **Financial Statements and Supplementary Data.**

 

Thefinancial statements and supplementary data of the Company called for by thisitem are submitted under a separate section of this annual report.  Reference is made to the Index of FinancialStatements contained on page F-1 hereof.

 

**Item 8.** **Changes In and Disagreements With Accountants onAccounting and Financial Disclosure.**

 

None.

 

**Item 8A(T). Internal Control over Financial Reporting.**

 

**Evaluation of Disclosure Controls and Procedures**

 

Asof the end of the period covered by this annual report, the Company carried outan evaluation, under the supervision and with the participation of the Company’smanagement, including the Company’s principal executive officer and principalfinancial officer, of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures pursuant to Rule 13a-15(b) ofthe Exchange Act. Based upon that evaluation, the principal executive officerand principal financial officer concluded that the Company’s disclosurecontrols and procedures are effective.

 

**Management’s Annual Report on Internal Control Over FinancialReporting**

 

Managementis responsible for establishing and maintaining adequate internal control overfinancial reporting as defined in Rule 13a-15(f) under the ExchangeAct.  This rule defines internalcontrol over financial reporting as a process designed by, or under thesupervision of, the Company’s principal executive officer and principalfinancial officer, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with accounting principles generally accepted in theUnited States (“*GAAP*”). The Company’s internalcontrol over financial reporting includes those policies and procedures that:

 

·                  Pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the Company;

 

·                  Provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financialstatements in accordance with GAAP, and that receipts and expenditures of theCompany are being made only in accordance with authorizations of management ofthe Company; and

 

·                  Provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use ordisposition of the Company’s assets that could have a material effect on thefinancial statements.

 

TheCompany’s management, including its principal executive officer and principalfinancial officer, does not expect that its disclosure controls and procedures,or its internal controls will prevent all error and all fraud.  A control system, no matter how wellconceived and operated, can provide only reasonable, not absolute, assurancethat the objectives of the control system are met.  The effectiveness of any system of internalcontrol over financial reporting is subject to inherent limitations, includingthe exercise of judgment in designing, implementing, operating and evaluatingthe controls and procedures.  Because ofits inherent limitations, internal control over financial reporting may notprevent or detect misstatements. In addition, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

Managementhas evaluated the effectiveness of its internal control over financialreporting as of December 31, 2009, based on the control criteriaestablished in a report entitled *InternalControl—Integrated Framework*, issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).  That framework defines a material weakness asa control deficiency, or combination of control deficiencies, that results inmore than a remote likelihood that a material misstatement of the annual orinterim financial statements will not be prevented or detected. Based upon thatevaluation, our management concluded that the Company’s internal control overfinancial reporting is effective.

 

Thisannual report does not include an attestation report of the Company’sregistered public accounting firm regarding internal control over financialreporting.  Management’s report was notsubject to attestation by the Company’s registered public accounting firmpursuant to temporary rules of the Commission that permit the Company toprovide only management’s report in this annual report.

 

**Changes in Internal Control over Financial Reporting**

 

Wehave made no significant change in our internal control over financialreporting during the most recent fiscal quarter covered by this annual reporton Form 10-K that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.

 

**Item 8B.** **Other Information.**

 

Not Applicable.

 

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**PART III**

 

**Item 10.** **Directors, Executive Officers, Promoters and ControlPersons.**

 

Asof March 31, 2010, the managers of the Company and of CCR are as follows:

 
| **Name**           | ** ** | **Age** | ** ** | **Position**                           |
|--------------------|------------|---------|------------|----------------------------------------|
| Stephen  A. Kaplan |       | 51      |       | Manager  of the Company & CCR |
| Ronald  N. Beck    |       | 54      |       | Manager  of the Company & CCR |
| William  Paulos    |       | 62      |       | Manager  of CCR                        |
| William  Wortman   |       | 63      |       | Manager  of CCR                        |

 

STEPHENKAPLAN has served as a Manager of the Company since its inception and asmanager of CCR and a member of its management committee since September 2006,and is expected to continue in these roles. Mr. Kaplan is a Principal atOaktree and is the worldwide head of Oaktree’s Principal Group. In 1995, Mr. Kaplanfounded Oaktree along with six other principals. Mr. Kaplan graduated witha B.S. degree in Political Science summa cum laude from the State University ofNew York at Stony Brook and a J.D. from the New York University School of Law.

 

RONALDBECK has served as a Manager of the Company since its inception and as managerof CCR and a member of its management committee since September 2006, andis expected to continue in these roles.  Mr. Beckis a Managing Director of Oaktree and joined Oaktree in 2000.  Mr. Beck is a co-portfolio manager ofOaktree’s Principal Group.  Mr. Beckgraduated with a B.A. degree in Economics from Stanford University, a J.D. fromStanford Law School and an M.B.A. from Stanford’s Graduate School of Business.

 

WILLIAMJ. PAULOS has served as manager of CCR and a member of its management committeesince May 2001. Mr. Paulos established Millennium Management Group,LLC in September 1996 with Mr. Wortman and has served as its ChiefExecutive Officer since its inception. Millennium Management Group, LLC iscurrently a consultant to the Greektown Casino in Detroit. From January 1995to September 1996, Mr. Paulos was President of Primadonna Resorts, Inc.which, through subsidiaries, owned and operated various casino hotel propertiesincluding Buffalo Bill’s, Whiskey Pete’s, the Primm Valley Inn and Resort andNew York-New York Casino Resort. From March 1994 to January 1995, Mr. Pauloswas the Chief Operating Officer of Crown Casino Limited.

 

WILLIAMC. WORTMAN has served as manager of CCR and a member of its managementcommittee since May 2001. Mr. Wortman established MillenniumManagement Group, LLC in September 1996 with Mr. Paulos and hasserved as its President since its inception. In 1985, Mr. Wortman becamean owner in the Nevada Palace, which he continues to own. Mr. Wortman hasalso served as President of Nevada First Bankcorp since 1999, and has served asVice-Chairman of the Board of Nevada 1st Bank since 1997. From 1993 to 1994, Mr. Wortmanserved as Chairman and Chief Executive Officer of Palace Casinos, Inc.

 

TheCompany’s named executive officers are Messrs. Kaplan and Beck,neither of whom receives compensation for their services as Managers. TheCompany has no directors.

 

TheCompany was founded by the VoteCo Equityholders for the primary purpose ofparticipating in various activities relating to the gaming industry. Six of theVoteCo Equityholders are principals of Oaktree and one is a managing directorof Oaktree. None would be considered independent under the NASDAQ Stock Marketlisting standards. The VoteCo Equityholders did not receive any directconsideration or other compensation in connection with their activities infounding the Company.

 

***Corporate Governance***

 

*The Company*

 

Pursuantto the Company’s limited liability company agreement, the Company is managed bytwo Managers, each of whom is appointed, and may be removed, by VoteCo as theholder of Class A Membership Units. The two current Managers of theCompany are Messrs. Kaplan and Beck. The Company’s Managers cannot takeand cannot cause the Company to take the following actions without the approvalof VoteCo as the holder of Class A Membership Units:

 

·                  any material change in thebusiness purpose of the Company or the nature of the business;

 

·                  any action that would renderit impossible to carry on the ordinary business of the Company;

 

·                  any removal or appointmentof any Manager of the Company;

 

·                  any voluntary withdrawal ofany member from the Company;

 

·                  any assignment for thebenefit of creditors, any voluntary bankruptcy of the Company, or anytransaction to dissolve, wind up or liquidate the Company; or

 

·                  any transaction between theCompany and any member or Manager of the Company, or any affiliate or directfamily member of any member or Manager of the Company, that is not made on anarm’s-length basis.

 

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Generally,in all other respects, VoteCo has no power or authority to participate in themanagement of the Company or to bind or act on behalf of the Company in any wayor to render it liable for any purpose. Except as otherwise expressly required by applicable law, InvestCo asthe sole holder of the Company’s Class B Membership Units has neither anyright to vote on any matters to be voted on by the members of the Company, norany power or authority to participate in the management of the Company or bindor act on behalf of the Company in any way or render it liable for any purpose.

 

Becausethe Company has conducted no operations other than in connection with theownership of equity interests in CCR and NP Land, the Company does not have,and is not required to have, a separately designated audit, nominating orcompensation committee or committee performing similar functions, and theCompany does not have an audit committee financial expert.  Preparation of the Company’s financialstatements is performed by an outside consultant, on a contractual basis, andsupervised by the Company’s Managers.

 

*CCR*

 

Underthe terms of the amended and restated operating agreement, CCR has a managementcommittee composed of four managers, two designated by AcquisitionCo and twodesignated by Millennium. AcquisitionCo designated Messrs. Kaplan and Beckas its initial managers, and Millennium designated Messrs. Paulos andWortman as its initial managers. Other than powers expressly delegated to MMGII in its management of CCR’s casino properties, all powers to control andmanage the business and affairs of CCR are vested in the Management Committee.Managers are required to be licensed or found suitable by the relevant Nevadagaming authorities in order to engage in the management of CCR. For furtherinformation about licensing and suitability requirements, see “Item 1.Regulatory Matters—Nevada Gaming Laws and Regulations”.

 

***Compliance with Section 16(a) ofthe Exchange Act***

 

TheCompany voluntarily registered its Class A Membership Units pursuant to Section 12(g) ofthe Securities Exchange Act of 1934 by filing a registration statement on Form 10-SBon June 9, 2006.  The registrationbecame effective automatically 60 days later on August 8, 2006. StephenKaplan, Ronald Beck, John Frank, Bruce Karsh, David Kirchheimer, Howard Marks,Richard Masson and Sheldon Stone each filed an Initial Statement of BeneficialOwnership of Securities on Form 3 on August 16, 2006, which filingwas not timely.  In accordance withVoteCo’s operating agreement, Mr. Masson automatically forfeited his 12.5VoteCo units upon his retirement from Oaktree on August 31, 2009.  Mr. Masson’s Annual Statement of Changesin Beneficial Ownership of Securities on Form 5 was not timely filed.

 

***Code of Ethics.***

 

Wehave adopted a code of ethics as described in Item 406 of Regulation S-K.  We will provide to any person without charge,upon request, a copy of our code of ethics. Requests may be sent to OCM HoldCo,LLC, c/o Oaktree Capital Management, L.P., 333 South Grand Avenue, 28th Floor,Los Angeles, California 90071.

 

**Item 10. Executive Compensation.**

 

Messrs. Kaplanand Beck, the Company’s named executive officers, are not entitled tocompensation from the Company for any services rendered to or on behalf of theCompany, or otherwise, in their capacities as Managers of the Company, andsince the inception of the Company have received no such compensation.  The Company’s Managers are entitled toreimbursement from the first available funds of the Company for directout-of-pocket costs and expenses incurred on behalf of the Company thatdirectly relate to the business and affairs of the Company.

 

TheVoteCo Equity holders did not receive any direct consideration or other compensationin connection with their activities in founding the Company.

 

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**Item 11. Security Ownership of Certain BeneficialOwners and Management and Related Stockholder Matters**

 

TheCompany has no equity compensation plans.

 

Thefollowing table sets forth, as of March 31, 2010, information regardingthe beneficial ownership of the Company’s voting securities by all personsknown to be the beneficial owners of more than 5% of any voting class ofCompany securities.

 
| **Title of Class of Securities** | ** ** | **Name and Address of Beneficial  Owner (1)** | ** ** | **Amount and Nature of  Beneficial Ownership** | ** ** | **Percent of Class** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------|------------|
| Class A  Units                                  |       | OCM  VoteCo, LLC                                                       |       | .100 Units                                                         | (3)        | 100                            | %(3)       |
| Class A  Units                                  |       | Stephen  Kaplan(4)                                                     |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A  Units                                  |       | Ronald  Beck(4)                                                        |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A  Units                                  |       | John  Frank                                                            |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A  Units                                  |       | Bruce  Karsh                                                           |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A  Units                                  |       | David  Kirchheimer                                                     |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A  Units                                  |       | Howard  Marks                                                          |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A  Units                                  |       | Sheldon  Stone                                                         |       | .100 Units                                                         | (5)        | 100                            | %(5)       |

 

----

(1)                The address for eachbeneficial owner is:

 

c/o Oaktree Capital Management, L.P.

333 South Grand Ave, 28th Floor

Los Angeles, CA 90071

 

(2)                Beneficial ownership is determined inaccordance with the Exchange Act, as amended, and the rules andregulations promulgated thereunder.

 

(3)                VoteCo directly owns 100% of the Company’s Class AMembership Units.

 

(4)                Messrs. Kaplan and Beck are the managersof VoteCo and the Company.

 

(5)                Stephen Kaplan, Ronald Beck, John Frank,Bruce Karsh, David Kirchheimer, Howard Marks and Sheldon Stone are each avoting member of VoteCo holding 12.5 VoteCo units. These individuals may bedeemed to form a “group” holding all 87.5 VoteCo units and, as a result, eachsuch individual may be deemed to be a beneficial owner of the .100 Class AMembership Units of the Company directly held by VoteCo.

 

Noneof the Class A Membership Units beneficially owned by the persons listedin the table above have been pledged as security.

 

Thefollowing table sets forth, as of March 31, 2010, information regardingthe beneficial ownership by all Managers of the Company, named individually andas a group, of any class of equity securities of the Company, the Company’sparent or the Company’s subsidiaries.

 
| **Title of Class of Securities** | ** ** | **Name of Beneficial Owner (1)** | ** ** | **Amount and Nature of  Beneficial Ownership(2)** | ** ** | **Percent of Class** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|--------------------------------|------------|
| VoteCo Units                                         |       | Stephen  Kaplan(3)                                   |       | 12.5 Units                                                            | (4)        | 14.286                         | %(4)       |
| Company Class A Units                           |       |                                                 |       | .100 Units                                                            | (5)        | 100                            | %(5)       |
| Blocker Class A Units                           |       |                                                 |       | 126,896.317 Units                                                     | (6)        | 100                            | %(6)       |
| AcquisitionCo Class A Units                     |       |                                                 |       | 1,000 Class A Units                                              | (7)        | 100                            | %(7)       |
| LandCo Units                                         |       |                                                 |       | 1,000 Units                                                           | (8)        | 100                            | %(8)       |
| AcquisitionCo II                                     |       |                                                 |       | 100% equity interest                                                  | (9)        | 100                            | %(9)       |
| VoteCo Units                                         |       | Ronald  Beck(3)                                      |       | 12.5 Units                                                            | (10)       | 14.286                         | %(10)      |
| Company Class A Units                           |       |                                                 |       | .100 Units                                                            | (5)        | 100                            | %(5)       |
| Blocker Units                                        |       |                                                 |       | 126,896.317 Units                                                     | (6)        | 100                            | %(6)       |
| AcquisitionCo Class A Units                     |       |                                                 |       | 1,000 Class A Units                                              | (7)        | 100                            | %(7)       |
| LandCo Units                                         |       |                                                 |       | 1,000 Units                                                           | (8)        | 100                            | %(8)       |
| AcquisitionCo II                                     |       |                                                 |       | 100% equity interest                                                  | (9)        | 100                            | %(9)       |
| VoteCo Units                                         |       | Executive  Officers of the Company as a Group        |       | 25 Units                                                              | (11)       | 28.572                         | %(11)      |
| Company Class A Units                           |       |                                                 |       | .100 Units                                                            | (5)        | 100                            | %(5)       |
| Blocker Units                                        |       |                                                 |       | 126,896.317 Units                                                     | (6)        | 100                            | %(6)       |
| AcquisitionCo Class A Units                     |       |                                                 |       | 1,000 Class A Units                                              | (7)        | 100                            | %(7)       |
| LandCo Units                                         |       |                                                 |       | 1,000 Units                                                           | (8)        | 100                            | %(8)       |
| AcquisitionCo II                                     |       |                                                 |       | 100% equity interest                                                  | (9)        | 100                            | %(9)       |

 

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(1)                                  The address for eachbeneficial owner is:

 

c/o Oaktree Capital Management, L.P.

333 South Grand Ave, 28th Floor

Los Angeles, CA 90071

 

(2)                                  Beneficial ownership isdetermined in accordance with the Exchange Act, as amended, and the rules andregulations promulgated thereunder.

 

(3)                                  Messrs. Kaplan and Beckare the managers of VoteCo, the Company, Blocker, AcquisitionCo, LandCo and OCMAcquisitionCo II, LLC.  Blocker is adirect subsidiary of the Company and owns nothing other than its interest inAcquisitionCo.

 

(4)                                  Mr. Kaplan is thelisted owner of the securities.

 

(5)                                  VoteCo is the listed ownerof all .100 Company Class A Membership Units.  Messrs. Kaplan and Beck each may bedeemed to be a member of a “group” holding all 87.5 VoteCo Units and, as aresult, each of Messrs. Kaplan and Beck may be deemed to be a beneficialowner of all .100 Company Class A Membership Units directly held byVoteCo.

 

(6)                                  The Company is the listedowner of all 126,896.317 Blocker Class A Units. Each of Messrs. Kaplanand Beck may be deemed to be a member of a “group” holding all 87.5 VoteCoUnits and, as a result, each of Messrs. Kaplan and Beck may be deemed tobe a beneficial owner of all 126,896.317 Blocker Class A Units directlyheld by the Company.

 

(7)                                  Blocker is the listed ownerof all 1,000 AcquisitionCo Class A Membership Units. Messrs. Kaplanand Beck each may be deemed to be a member of a “group” holding all 87.5VoteCo Units and, as a result, each of Messrs. Kaplan and Beck may bedeemed to be a beneficial owner of all 1,000 AcquisitionCo Class AMembership Units directly held by Blocker.

 

(8)                                  AcquisitionCo is the listedowner of all 1,000 LandCo Units.  Each ofMessrs. Kaplan and Beck may be deemed to be a member of a “group” holdingall 87.5 VoteCo units and, as a result, each of Messrs. Kaplan and Beckmay be deemed to be a beneficial owner of all 1,000 LandCo Units directly heldby AcquisitionCo.

 

(9)                                  The Company is the listedowner of all of the equity interests of AcquisitionCo II.  Each of Messrs. Kaplan and Beck may bedeemed to be a member of a “group” holding all 87.5 VoteCo units and, as aresult, each of Messrs. Kaplan and Beck may be deemed to be a beneficialowner of all of the equity interests of OCM AcquisitionCo II, LLC directly heldby the Company.

 

(10)                            Mr. Beck is the listedowner of the securities.

 

(11)                            Messrs. Kaplan and Beckare each a listed owner of 50% of these securities.

 

Noneof the securities listed in the table above as beneficially owned by theCompany’s Managers has been pledged as security.

 

**Item 12. Certain Relationships and RelatedTransactions.**

 

***Limited Liability and Indemnification underthe Company’s Limited Liability Company Agreement and CCR’s Operating Agreement***

 

TheCompany’s limited liability company agreement provides that no member orManager of the Company has any liability for the obligations of the Company,except to the extent required by law. To the maximum extent authorized by law,the Company indemnifies any person from any loss, damage, claim or liabilityincurred by him, her or it as a result of any act or failure to act (other thanas a result of fraud, gross negligence or willful misconduct) performed or notperformed by such person as a member, Manager, employee, agent orrepresentative of the Company, including attorneys’ fees, judgments, fines andamounts paid in settlement actually and reasonably incurred.

 

Inaddition, a Manager of the Company who performs his or her duties in goodfaith, in a manner he or she reasonably believes to be in the best interests ofthe Company and with such care as an ordinarily prudent person in a likeposition would use under similar circumstances, does not have any liability byreason of being or having been a Manager of the Company. Furthermore, a Managerof the Company is not liable, as Manager of the Company, under any judgment,decree or order of court, or in any other manner, for any debt, obligation orliability of the Company.

 

CCR’soperating agreement provides that under certain circumstances CCR willindemnify any person who is an affiliate of AcquisitionCo who was or is a partyor is threatened to be made a party to any threatened, pending or completed action,suit or proceeding, by reason of the fact that he, she or it was serving at therequest of CCR as a manager, officer, employee or agent of CCR. 

 

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CCR’soperating agreement also provides that CCR will reimburse AcquisitionCo and itsaffiliates in connection with the development of gaming opportunities for CCR,at a cap of $250,000 per fiscal year of CCR, and will reimburse the expenses ofmanagers of CCR serving on CCR’s management committee, including those managerswho are affiliates of AcquisitionCo, for certain out-of-pocket expensesreasonably attributable to CCR.

 

***Other Transactions***

 

InFebruary 2007, the Oaktree Funds, beneficial owners of the Company’snon-voting equity interests, agreed to support, through member contributions toCCR, letters of credit issued in favor of the Pennsylvania Department ofTransportation for an aggregate stated amount of approximately $18.3million.  Such support was transferred toPA Meadows during the second quarter of 2007. The Oaktree Funds received $382,000 from CCR as consideration for supportingthe letters of credit.

 

CCRhas a receivable of approximately $16.2 million from NH Downs Holdings, LLC, asubsidiary of InvestCo (“*NH Downs*”), inconnection with the development of certain gaming opportunities in NewHampshire.

 

InMarch 2009 and May 2009, Millennium and the Company, throughAcquisitionCo, made equity contributions to CCR for the purpose of maintainingCCR’s compliance with its debt covenants. The equity contributions by AcquisitionCo were funded by equitycontributions from Blocker, which in turn were funded by loans from theCompany.

 

InMarch 2010, Millennium, the Company, through AcquisitionCo, and CrownLimited, through two subsidiaries, made equity contributions to CCR for thepurpose of maintaining CCR’s compliance with its debt covenants. The equitycontribution by AcquisitionCo was funded by an equity contribution fromBlocker, which in turn was funded by a loan from the Company.

 

***Company’s Parent***

 

TheCompany’s only parent is VoteCo, which holds 100% of the voting securities ofthe Company.

 

***Transactions between CCR and its Promoters***

 

*Transactions relating to the Company’s Acquisition of itsEquity Interests in CCR and NP Land*

 

TheCompany entered into certain transactions with Messrs. Paulos and Wortmanin order to consummate the transactions contemplated by the First Amendment andRestatement of Contribution and Unit Purchase Agreement, dated as of September 23,2005 (the “*CUP Agreement*”)related to the Company’s acquisition of the Company’s 33-1/3% of CCR’s Series A1 Units.  On September 30, 2005, the Company’saffiliates loaned an aggregate of $10,607,245 (the “*InvestCo NP Loans*”) and $4,282,454 (the “*LandCo Loan*”) to entities controlled by Mr. Wortmanto enable Mr. Wortman, and entities controlled by him, to acquire from anunrelated third party all of the interests not otherwise owned by him in theentities which own the land and assets relating to the Nevada Palace.

 

OnJanuary 5, 2006, the Company’s affiliates loaned to MGIM, LLC, a Nevadalimited liability company controlled by Messrs. Paulos and Wortman, theAcquisitionCo Loan and the InvestCo/MGIM Loan to enable MGIM, LLC to acquirefrom an unrelated third party a 33-1/3% interest inCCR for a total purchase price of $70 million. All of these loans, while outstanding, accrued interest at 12%, but inthe case of the LandCo Loan and the AcquisitionCo Loan, interest was waived andconsidered additional investment upon the consummation of the Company’sacquisition of its initial 33-1/3% equityinterest in CCR and NP Land.  TheInvestCo NP Loans were secured by all of the membership interests in NP Landand a related entity controlled by Mr. Wortman, and were also secured bythe land and assets of the Nevada Palace. The LandCo Loan was secured by pledges of the membership interests in anentity controlled by Mr. Wortman. The AcquisitionCo Loan and the InvestCo/MGIM Loan were secured bypledges of all of the membership interests in CCR held by MGIM, LLC andMillennium, which pledges were subordinated to the pledge of such interestssecuring CCR’s then-existing credit agreement. When the transactions contemplated by the CUP Agreement wereconsummated, all of the related security interests were released.

 

InJanuary 2006, the second series of transactions contemplated by the CUPAgreement were consummated. The Company’s affiliates loaned to MGIM, LLC, aNevada limited liability company controlled by Messrs. Paulos and Wortman,$64 million (the “*AcquisitionCo Loan*“) and $5,125,000 (the “*InvestCo/MGIM Loan*”)to enable MGIM, LLC to acquire from an unrelated third party a 33-1/3% interest in CCR’s Series A1 Units for a totalpurchase price of $70 million.

 

InSeptember 2006, the Company, through its subsidiaries, acquired MGIM, LLC’s33-1/3% equity interest in CCR inexchange for the cancellation of the $64 million AcquisitionCo Loan to MGIM,LLC, and a 33-1/3% equity interest in NP Landin exchange for the cancellation of the $4,282,454 LandCo Loan.  The $10,607,245 InvestCo NP Loans and the$5,125,000 InvestCo/MGIM Loan were repaid. In addition, a wholly-owned subsidiary of CCR, Nevada Palace, LLC,entered into a lease with NP Land of the 22 acres on which the Eastside Cannerysits.  Nevada Palace, LLC also acquiredfrom entities affiliated with Mr. Wortman gaming equipment and otheroperating assets for approximately $8 million and assumed approximately $1,340,000of slot machine lease liabilities and 

 

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$156,000(accrued as part of the purchase price) of certain other liabilities directlyassociated with the continuation of operations of the Nevada Palace at the timeits gaming assets were sold to CCR.  TheNP Land lease is for a 35-year term at a fixed rental rate of $205,761 permonth (as of December 31, 2009), subject to periodic inflationaryadjustments, and required a $3 million security deposit.

 

Inaddition to the loans and the NP Land lease, certain payments were made to Messrs. Paulosand Wortman in connection with the transactions contemplated by the CUP Agreement.  The Company and Millennium are generallyresponsible for their respective expenses in connection with the CUPAgreement.  Each agreed to takein-substance equalizing distributions from CCR of $3 million and $6 million,respectively, which were applied by the Company to the Company’s obligations,including consulting fees ($1,996,155) and amounts due to beneficial owners($1,003,845), and by Millennium to pre-existing indebtedness.  In addition, in 2006 entities controlled by Mr. Wortmanwere reimbursed for approximately $2.3 million, respectively, of costs andexpenses incurred by them primarily in connection with the development of theEastside Cannery.  In 2006, these costsand expenses included $1.9 million of expenses incurred in connection withmoving certain power lines relating to the development of the Eastside Cannery,$265,000 in legal and professional fees relating to the CUP Agreement, $155,000in title fees and approximately $80,000 in architectural and similar fees inconnection with construction of the Eastside Cannery.

 

Otherthan the $6 million distribution to Millennium and the $2.3 millionreimbursement to entities controlled by Mr. Wortman, there have been nopayments by CCR or its affiliates to Messrs. Paulos or Wortman or theiraffiliates for fees, expenses or other amounts paid or payable in connectionwith the transactions relating to the CUP Agreement, except amounts paid forbusiness expenses reimbursed in the ordinary course.

 

*Other Transactions*

 

Relativesof Messrs. Paulos and Wortman provide CCR with Automated Teller Machines (“*ATM*”) processing services.  CCR received combined commissions of $3,142,991, $2,795,042 and $2,042,528 in 2009, 2008 and 2007, respectively,pursuant to separate agreements with CCR’s casinos.  Under these agreements, the providers receivethe exclusive right to provide cash advance and ATM processing services atpredetermined customer rates in return for providing, maintaining and keepingsupplied ATMs at each location.  Eachagreement has an initial term that expires in 2011, followed by five one-yearrenewals that are automatic unless either party gives 90 days’ notice.

 

CCRhas historically purchased promotional merchandise utilized for casinomarketing and as customer incentives from an affiliate of Millennium and acompany where a relative of Mr. Paulos has a financial interest.  CCR incurred no costs in 2009 and aggregatecosts of $2,113,164 and 2,634,801 in 2008 and 2007, respectively, in connectionwith such historic purchases.

 

CCR has contracted withMMG II, an affiliate of Millennium, to operate and manage its Nevadaoperations.  CCR incurred fees to MMG IIof $6,296,955, $6,458,564 and $5,042,549 in 2009, 2008 and 2007, respectively,in connection with these arrangements.

 

Duringthe Company’s last fiscal quarter of 2007, Mr. Wortman incurred certainobligations in connection with the development of certain gaming opportunitiesin New Hampshire.  In connection withpursuing such opportunities, NH Downs has a receivable of approximately $9.1million from Mr. Wortman.

 

OnJuly 15, 2006, CCR executed with Millennium a 10-year lease of anexecutive office building and adjacent parking spaces. The lease is for a fixedrental rate of $34,681 per month, subject to periodic inflationary adjustments,and grants Millennium two 5-year renewals.

 

Themanagement of CCR believes that the transactions relating to the ATM processingservices, the provision of promotional merchandise, the executive office leaseand the operation and management of the Rampart Casino and The Cannery, are onterms that are substantially similar to terms that would be available tounaffiliated third parties and are expected to continue in the future.

 

Anaffiliate of one of the Company’s members provides the Company with certain administrativesupport services for an annual fee of $50,000, based on hourly rates ofassigned personnel.

 

**Item 13. Principal Accountant Fees and Services.**

 

***Audit Fees:***

 

For2009 and 2008, we incurred annual audit and quarterly financial statementreview fees totaling approximately $168,000 and $130,000, respectively, toPiercy Bowler Taylor & Kern, our independent registered publicaccounting firm.

 

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***Audit-Related Fees:***

 

For 2009, we incurred audit-related fees totaling $9,500 to PiercyBowler Taylor & Kern, our independent registered public accountingfirm, for assurance and related services in connection with the Company’sresponse to comment letters from the Commission. In 2008, we incurred no feesto Piercy Bowler Taylor & Kern, for such assurances or other services.

 

***Tax Fees:***

 

For2009 and 2008, we incurred no tax preparation fees to Piercy Bowler Taylor &Kern, Certified Public Accountants.

 

***All Other Fees:***

 

For2009 and 2008, we incurred no other fees to Piercy Bowler Taylor &Kern, Certified Public Accountants, for products and services other than theservices reported above.

 

***Audit Committee Policies and Procedures:***

 

Wedo not currently have an audit committee. The foregoing services werepre-approved by our Managers.

 

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**PART IV**

 

**Item 14. Exhibits, Financial Statement Schedules**

 

**FinancialStatements**

 
| Report of Independent Registered Public Accounting  Firm |   | F-2    |
|----------------------------------------------------------|--------|--------|
|                                                     |   |   |
| Consolidated Balance Sheets                              |   | F-3    |
|                                                     |   |   |
| Consolidated Statements of Operations                    |   | F-4    |
|                                                     |   |   |
| Consolidated Statements of Members’ Equity          |   | F-5    |
|                                                     |   |   |
| Consolidated Statements of Cash Flows                    |   | F-6    |
|                                                     |   |   |
| Notes to Consolidated Financial Statements               |   | F-7    |

 

**FinancialStatement Schedules**

 

Allfinancial statement schedules are omitted because they are not applicable orthe required information is shown in the financial statements or notes thereto.

 

**Exhibits.**

 

In reviewing the agreements included as exhibits tothis Form 10-K, please remember they are included to provide you withinformation regarding their terms and are not intended to provide any otherfactual or disclosure information about the Company or the other parties to theagreements.

 

The agreements contain representations andwarranties by each of the parties to the applicable agreement. Theserepresentations and warranties have been made solely for the benefit of theother parties to the applicable agreement and:

 

·                  should not in all instances be treated as categorical statements of fact,but rather as a way of allocating the risk to one of the parties if thosestatements prove to be inaccurate;

 

·                  have been qualified by disclosures that were made to the other party inconnection with the negotiation of the applicable agreement, which disclosuresare not necessarily reflected in the agreement;

 

·                  may apply standards of materiality in a way that is different from whatmay be viewed as material to you or other investors; and

 

·                  were made only as of the date of the applicable agreement or such otherdate or dates as may be specified in the agreement and are subject to morerecent developments.

 

Accordingly, these representations and warrantiesmay not describe the actual state of affairs as of the date they were made orat any other time.  Additionalinformation about the Company may be found elsewhere in this Form 10-K andthe Company’s other public filings, which are available without charge throughthe SEC’s website at http://www.sec.gov.

 

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Thefollowing exhibits are filed as part of, or incorporated by reference into,this Annual Report on Form 10-K.

 
| **EXHIBIT  NUMBER** | ** ** | **INDEX OF EXHIBITS**                                                                                                                                                                                                                                                                                                        |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                 |       | First  Amendment and Restatement of Contribution and Unit Purchase Agreement, dated  as of December 23, 2005 (1)                                                                                                                                                                                                                  |
| 3.1                 |       | Amended  and Restated Certificate of Formation, dated as of December 1, 2005 (1)                                                                                                                                                                                                                                                  |
| 3.2                 |       | Limited  Liability Company Agreement, dated as of September 23, 2005 (1)                                                                                                                                                                                                                                                          |
| 10.1                |       | Rampart  Casino Sublease Agreement, dated April 1, 2002 (2)                                                                                                                                                                                                                                                                       |
| 10.2                |       | Rampart  Management Agreement, dated April 1, 2002 (3)                                                                                                                                                                                                                                                                            |
| 10.3                |       | Cannery  Management Agreement, dated May 2002 (3)                                                                                                                                                                                                                                                                                 |
| 10.4                |       | LandCo  Loan Agreement, dated as of September 30, 2005 (1)                                                                                                                                                                                                                                                                        |
| 10.5                |       | InvestCo/Esquire  Loan Agreement, dated as of September 30, 2005 (2)                                                                                                                                                                                                                                                              |
| 10.6                |       | InvestCo/Nevada  Palace Loan Agreement, dated as of September 30, 2005 (2)                                                                                                                                                                                                                                                        |
| 10.7                |       | Stock  Purchase Agreement, dated as of November 8, 2005, between Magna  Entertainment Corp. and PA Meadows, LLC (1)                                                                                                                                                                                                          |
| 10.8                |       | AcquisitionCo  Loan Agreement, dated as of January 5, 2006 (1)                                                                                                                                                                                                                                                                    |
| 10.9                |       | InvestCo/MGIM  Loan Agreement, dated January 5, 2006 (2)                                                                                                                                                                                                                                                                          |
| 10.10               |       | Limited  Continuing Guarantee, dated January 5, 2006 (2)                                                                                                                                                                                                                                                                          |
| 10.11               |       | Credit  Agreement, dated as of January 5, 2006 (2)                                                                                                                                                                                                                                                                                |
| 10.12               |       | Lease  Agreement, dated July 15, 2006, between Millennium Gaming, Inc. and  Cannery Casino Resorts, LLC (4)                                                                                                                                                                                                                  |
| 10.13               |       | Rampart  Financial Services Agreement, dated June 18, 2006 (3)                                                                                                                                                                                                                                                                    |
| 10.14               |       | Cannery  Financial Services Agreement, dated June 18, 2006 (3)                                                                                                                                                                                                                                                                    |
| 10.15               |       | First  Amendment to Stock Purchase Agreement, dated July 26, 2006 (2)                                                                                                                                                                                                                                                             |
| 10.16               |       | Racing  Services Agreement, dated July 26, 2006 (2)                                                                                                                                                                                                                                                                               |
| 10.17               |       | Post-Closing  and Note Issuance Agreement, dated July 26, 2006 (2)                                                                                                                                                                                                                                                                |
| 10.18               |       | Equity  Commitment Letter Agreement, dated July 26, 2006 (2)                                                                                                                                                                                                                                                                      |
| 10.19               |       | Form of  Amended and Restated Operating Agreement for Cannery Casino Resorts, LLC (1)                                                                                                                                                                                                                                             |
| 10.20               |       | Form of  Ground Lease between Nevada Palace, LLC and NP Land, LLC (2)                                                                                                                                                                                                                                                             |
| 10.21               |       | Form of  Omnibus Management Agreement between Cannery Casino Resorts, LLC, and  Millennium Management Group II, LLC (2)                                                                                                                                                                                                      |
| 10.22               |       | Amendment  to Continuing Guaranty, dated as of September 22, 2006 (4)                                                                                                                                                                                                                                                             |
| 10.23               |       | First  Lien Credit Agreement, dated as of November 14, 2006 (5)                                                                                                                                                                                                                                                                   |
| 10.24               |       | Second  Lien Credit Agreement, dated as of November 14, 2006 (5)                                                                                                                                                                                                                                                                  |
| 10.25               |       | First  Amendment to Post-Closing and Note Issuance Agreement, dated as of  November 14, 2006 (5)                                                                                                                                                                                                                                  |
| 10.26               |       | Pledge  Agreement, dated June 5, 2006 (6)                                                                                                                                                                                                                                                                                         |
| 10.27               |       | Amendment  to Pledge Agreement, dated April 2, 2007 (6)                                                                                                                                                                                                                                                                           |
| 10.28               |       | First  Lien Credit Agreement, dated as of May 18, 2007 (7)                                                                                                                                                                                                                                                                        |
| 10.29               |       | Second  Lien Credit Agreement, dated as of May 18, 2007 (7)                                                                                                                                                                                                                                                                       |
| 10.30               |       | Purchase  Agreement, by and among Crown Limited, Crown CCR Group Investment One, LLC,  Crown CCR Group Investment Two, LLC, Millennium Gaming, Inc., OCM  HoldCo, LLC and Cannery Casino Resorts, LLC dated as of December 11,  2007 (8)                                                                                     |
| 10.31               |       | Termination  and Settlement Agreement, by and among Crown Limited, Crown CCR Group  Investment One, LLC, Crown CCR Group Investment Two, LLC, Millennium  Gaming, Inc., OCM HoldCo, LLC and Cannery Casino Resorts, LLC dated as  of March 12, 2009 (9)                                                                      |
| 10.32               |       | Preferred  Purchase Agreement, by and among Crown Limited, Crown CCR Group Investment  One, LLC, Crown CCR Group Investment Two, LLC, Millennium Gaming, Inc.,  OCM HoldCo, LLC and Cannery Casino Resorts, LLC dated as of March 12,  2009 (9)                                                                              |
| 10.33               |       | Option  Agreement, by and among Crown Limited, Crown CCR Group Investment One, LLC,  Crown CCR Group Investment Two, LLC, Millennium Gaming, Inc., OCM  HoldCo, LLC and Cannery Casino Resorts, LLC dated as of March 12, 2009  (9)                                                                                          |
| 10.34               |       | Amendment  No. 1 to the First Lien Credit Agreement, dated March 3, 2010, by  and among Cannery Casino Resorts, LLC, Washington Trotting  Association, Inc., Bank of America, N.A., as Administrative Agent,  Collateral Agent, Swing Line Lender and L/C Issuer, and the lenders from time  to time party thereto (10) |
| 10.35               |       | Third  Amended and Restated Operating Agreement of Cannery Casino Resorts, LLC,  dated March 3, 2010 (10)                                                                                                                                                                                                                         |
| 10.36               |       | Series C  Preferred Purchase Agreement by and among Crown Limited, Crown CCR Group  Investments One, LLC, Crown CCR Group Investments Two, LLC, Millennium  Gaming, Inc., OCM AcquisitionCo, LLC and Cannery Casino Resorts, LLC,  dated March 3, 2010 (10)                                                             |
| 21.1                |       | Subsidiaries  of OCM HoldCo, LLC (1)                                                                                                                                                                                                                                                                                                   |
| 31.1                |       | Section 302  Certification of Principal Executive Officer                                                                                                                                                                                                                                                                         |
| 31.2                |       | Section 302  Certification of Principal Financial Officer                                                                                                                                                                                                                                                                         |
| 32.1                |       | Certification  pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                 |
| 32.2                |       | Certification  pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                 |

 

----

(1) Filedpreviously with the Company’s Form 10-SB on June 9, 2006

(2) Filedpreviously with the Company’s Amendment No. 1 to Form 10-SB on July 26,2006

(3) Filedpreviously with the Company’s Post-Effective Amendment No. 1 to Form 10-SBon September 8, 2006

(4) Filedpreviously with the Company’s Current Report on Form 8-K on September 27,2006

(5) Filedpreviously with the Company’s Current Report on Form 8-K on November 20,2006

(6) Filedpreviously with the Company’s Current Report on Form 8-K on April 8,2007

(7) Filedpreviously with the Company’s Current Report on Form 8-K on May 24,2007(8) Filed previously with the Company’s Annual Report on Form 10-KSBon March 31, 2008

(9) Filedpreviously with the Company’s Annual Report on Form 10-K on March 31,2009

(10) Filedpreviously with the Company’s Current Report on Form 8-K on March 9,2010

 

27

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Table of Contents

 

**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Exchange Act of1934, the registrant has caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
| **DATE:**            | **OCM HoldCo, LLC** |
|----------------------|---------------------|
| ** **           | ** **          | ** ** |
| ** **           | ** **          | ** ** |
| April 15,  2010 | By:                 | /s/*Stephen A. Kaplan* |
|                 |                | Stephen  A. Kaplan |
|                 |                | Manager |
|                 |                |   |
|                 |                |   |
| April 15,  2010 | By:                 | /s/*Ronald N. Beck* |
|                 |                | Ronald  N. Beck |
|                 |                | Manager |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

 
| **Signatures**         | ** ** | **Title**  | ** ** | **Date**             |
|------------------------|------------|------------|------------|----------------------|
| ** **             | ** ** | ** ** | ** ** | ** **           |
| /s/*Stephen A. Kaplan* | * *   | * *   | * *   | * *             |
| Stephen  A. Kaplan     |       | Manager    |       | April 15,  2010 |
|                   |       |       |       |                 |
|                   |       |       |       |                 |
| /s/*Ronald N. Beck*    |       | Manager    |       | April 15,  2010 |
| Ronald  N. Beck        |       |       |       |                 |

 

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Table of Contents

 

**OCM HoldCo, LLC and Subsidiaries**

 

**Consolidated Financial Statements**

 

**as of December 31, 2009**

 

**and December 31, 2008**

 

**and for the Years then Ended**

 

**Table of Contents**

 
| Report  of Independent Registered Public Accounting Firm |   | F-2    |
|----------------------------------------------------------|--------|--------|
|                                                     |   |   |
| Consolidated Balance Sheets                              |   | F-3    |
|                                                     |   |   |
| Consolidated Statements of Operations                    |   | F-4    |
|                                                     |   |   |
| Consolidated Statements of Members’ Equity          |   | F-5    |
|                                                     |   |   |
| Consolidated Statements of Cash Flows                    |   | F-6    |
|                                                     |   |   |
| Notes to Consolidated Financial Statements               |   | F-7    |

 

F-1

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Table of Contents

 

**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 

Managers ofOCM HoldCo, LLC

 

We have audited theaccompanying consolidated balance sheets of OCM HoldCo, LLC and itssubsidiaries (collectively the Company) as of December 31, 2009 and 2008,and the related consolidated statements of operations, members’ equity and cashflows for the years then ended.  These financial statements are theresponsibility of the Company’s management.  Our responsibility is toexpress an opinion on these financial statements based on our audit.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States).  Those standards require that we plan and performthe audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement. The Company is not required tohave, nor were we engaged to perform, audits of its internal control overfinancial reporting.  Our audits included consideration of internal controlover financial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the consolidated financial position of the Company as of December 31,2009 and 2008, and its consolidated results of operations and cash flows forthe years then ended, in conformity with accounting principles generallyaccepted in the United States.

 

**PIERCYBOWLER TAYLOR & KERN**

 
| /s/ Piercy Bowler  Taylor & Kern |   |
|-------------------------------------------|--------|
| Certified Public  Accountants             |   |
|                                      |   |
| Las Vegas, Nevada                         |   |
| April 15, 2010                       |   |

 

F-2

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Table of Contents

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Balance Sheets**

 

**December 31,2009 and 2008**

 
| ** **                                                                                                 | ** ** | **2009**    | ** **  | **2008**    | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| **ASSETS**                                                                                                 |       |        |        |        |       |
| **Current assets**                                                                                         |       |        |        |        |       |
| Cash                                                                                                       |       | $           | 36,700,714  |        | $          | 729,584 |   |
|                                                                                                       |       | 36,700,714  |        | 729,584     |       |
| **Other assets**                                                                                           |       |        |        |        |       |
| Investment  in Cannery Casino Resorts, LLC                                                                 |       | 98,464,347  |        | 121,706,019 |       |
| Investment  in NP Land, LLC                                                                                |       | 6,230,875   |        | 5,553,450   |       |
| Gaming  and related license costs                                                                          |       | 805,698     |        | 805,698     |       |
| Deferred  tax asset                                                                                        |       | 8,764,049   |        | 6,292,921   |       |
|                                                                                                       |       | $           | 150,965,683 |        | $          | 135,087,672 |   |
|                                                                                                       |       |        |        |        |       |
| **LIABILITIES AND MEMBERS’ EQUITY**                                                                   |       |        |        |        |       |
| **Current liabilities**                                                                                    |       |        |        |        |       |
| Accounts  payable and accrued expenses, including $28,276 and $53,276 to a related  party in 2009 and 2008 |       | $           | 38,779      |        | $          | 90,405 |   |
| Taxes  payable                                                                                             |       | 141,341     |        | —      |       |
| Deferred  tax liabilities                                                                                  |       | 121,000     |        | 311,000     |       |
|                                                                                                       |       | 301,120     |        | 401,405     |       |
|                                                                                                       |       |        |        |        |       |
| **Members’ equity**                                                                                   |       | 150,664,563 |        | 134,686,267 |       |
|                                                                                                       |       | $           | 150,965,683 |        | $          | 135,087,672 |   |

 

*See notesto consolidated financial statements.*

 

F-3

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Table of Contents

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Operations**

 

**For theYears Ended December 31, 2009 and 2008**

 
| ** **                                                                             | ** ** | **2009**   | ** ** | **2008**  | ** ** |
|----------------------------------------------------------------------------------------|------------|------------|------------|-----------|------------|
|                                                                                   |       |       |       |      |       |
| **Income**                                                                             |       |       |       |      |       |
| Interest  income                                                                       |       | $          | 4,724      |      | $          | 17,504 |   |
| Equity  in earnings (loss) of unconsolidated investees                                 |       | (9,050,645 | )          | 3,540,207 |       |
| Settlement  fee                                                                        |       | 21,000,000 |       | —    |       |
|                                                                                   |       | 11,954,079 |       | 3,557,711 |       |
| **Costs and expenses**                                                                 |       |       |       |      |       |
| Professional  fees                                                                     |       | 1,551,450  |       | 292,733   |       |
| Other  administrative expenses, including $50,000 to a related party in 2009 and  2008 |       | 54,733     |       | 58,278    |       |
|                                                                                   |       | 1,606,183  |       | 351,011   |       |
|                                                                                   |       |       |       |      |       |
| **Income before income tax benefit**                                                   |       | 10,347,896 |       | 3,206,700 |       |
|                                                                                   |       |       |       |      |       |
| **Federal income tax benefit**                                                         |       | 3,608,503  |       | 2,647,236 |       |
|                                                                                   |       |       |       |      |       |
| **Net income**                                                                         |       | $          | 13,956,399 |      | $          | 5,853,936 |   |

 

*Seenotes to consolidated financial statements.*

 

F-4

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Table of Contents

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Members’ Equity**

 

**For theYears Ended December 31, 2009 and 2008**

 
| ** **                                                                  | ** ** | **Total members’  equity** | ** **  | **Accumulated other  comprehensive  loss** | ** ** | **Invested capital and  accumulated earnings** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------|-------------|-------------------------------------------------|------------|---------------------------------------------------------------|------------|
| **2009**                                                                    | ** ** | ** **                           | ** **  | ** **                                      | ** ** | ** **                                                    | ** ** |
| Balance,  beginning of year                                                 |       | $                                    | 134,686,267 |                                            | $          | (2,695,987                                                    | )          | $ | 137,382,254 |   |
| Net  income                                                                 |       | 13,956,399                           |        | —                                          |       | 13,956,399                                                    |       |
| Equity  in other comprehensive loss of unconsolidated investee, net of tax: |       |                                 |        |                                            |       |                                                          |       |
| Unrealized  loss on investments                                             |       | 145,409                              |        | 145,409                                         |       | —                                                        |       |
| Unrealized  loss on rate swap agreements                                    |       | 1,876,488                            |        | 1,876,488                                       |       | —                                                        |       |
|                                                                        |       |                                 |        |                                            |       |                                                          |       |
| Balance,  end of year                                                       |       | $                                    | 150,664,563 |                                            | $          | (674,090                                                      | )          | $ | 151,338,653 |   |
| ** **                                                                  | ** ** | ** **                           | ** **  | ** **                                      | ** ** | ** **                                                    | ** ** |
| **2008**                                                                    | ** ** | ** **                           | ** **  | ** **                                      | ** ** | ** **                                                    | ** ** |
| Balance,  beginning of year                                                 |       | $                                    | 129,410,071 |                                            | $          | (2,118,247                                                    | )          | $ | 131,528,318 |   |
| Net  income                                                                 |       | 5,853,936                            |        | —                                          |       | 5,853,936                                                     |       |
| Equity  in other comprehensive loss of unconsolidated investee, net of tax: |       |                                 |        |                                            |       |                                                          |       |
| Unrealized  loss on investments                                             |       | (561,294                             | )           | (561,294                                        | )          | —                                                        |       |
| Unrealized  loss on rate swap agreements                                    |       | (16,446                              | )           | (16,446                                         | )          | —                                                        |       |
|                                                                        |       |                                 |        |                                            |       |                                                          |       |
| Balance,  end of year                                                       |       | $                                    | 134,686,267 |                                            | $          | (2,695,987                                                    | )          | $ | 137,382,254 |   |

 

*See notesto consolidated financial statements.*

 

F-5

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Table of Contents

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Cash Flows**

 

**For theYears Ended December 31, 2009 and 2008**

 
| ** **                                                                                                                                              | ** ** | **2009**    | ** ** | **2008**   | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------|------------|
| **Operating activities**                                                                                                                                |       |        |       |       |       |
| Net  income                                                                                                                                             |       | $           | 13,956,399 |       | $          | 5,853,936 |   |
| Equity  in earnings of unconsolidated investees                                                                                                         |       | 9,050,645   |       | (3,540,207 | )          |
| Adjustments  to reconcile net income to net cash provided by (used in) operating  activities consisting of increases in operating (assets) liabilities: |       |        |       |       |       |
| Deferred  income tax benefit                                                                                                                            |       | (3,749,844  | )          | (2,647,236 | )          |
| Other  assets                                                                                                                                           |       | —      |       | 475        |       |
| Accounts  payable and accrued expenses                                                                                                                  |       | (51,625     | )          | 49,710     |       |
| Taxes  payable                                                                                                                                          |       | 141,341     |       | —     |       |
|                                                                                                                                                    |       |        |       |       |       |
| Net  cash provided by (used in) operating activities                                                                                                    |       | 19,346,916  |       | (283,322   | )          |
|                                                                                                                                                    |       |        |       |       |       |
| **Investing activities**                                                                                                                                |       |        |       |       |       |
| Investment  in Cannery Casino Resorts, LLC                                                                                                              |       | (10,794,000 | )          | —     |       |
| Distributions  received from Cannery Casino Resorts, LLC                                                                                                |       | 27,418,214  |       | —     |       |
|                                                                                                                                                    |       |        |       |       |       |
| Net  cash provided by (used in) investing activities                                                                                                    |       | 16,624,214  |       | —     |       |
|                                                                                                                                                    |       |        |       |       |       |
| **Net increase (decrease) in cash**                                                                                                                     |       | 35,971,130  |       | (283,322   | )          |
|                                                                                                                                                    |       |        |       |       |       |
| **Cash, beginning of year**                                                                                                                             |       | 729,584     |       | 1,012,906  |       |
|                                                                                                                                                    |       |        |       |       |       |
| **Cash, end of year**                                                                                                                                   |       | $           | 36,700,714 |       | $          | 729,584 |   |
|                                                                                                                                                    |       |        |       |       |       |
| **Supplemental cash flow information:**                                                                                                                 |       |        |       |       |       |
| **Noncash financing and investing activity:**                                                                                                           |       |        |       |       |       |
| Equity  in other comprehensive income (loss) of unconsolidated investees                                                                                |       | $           | 2,021,897  |       | $          | (577,740 | ) |

 

*Seenotes to consolidated financial statements.*

 

F-6

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Table ofContents

 

**OCMHoldCo, LLC and Subsidiaries**

 

**Notes to Financial Statements**

 

**December 31,2009**

 

**NOTE 1 - Organization:**

 

***BusinessActivities***

 

TheCompany and its consolidated subsidiaries were formed on July 22, 2005, atthe direction of OCMPrincipal Opportunities Fund III, L.P. and OCM Principal Opportunities FundIIIA, L.P. (the “Oaktree Funds”) OaktreeFunds, each of which is a Delaware limited partnership and an affiliate ofOaktree, for the purpose of participating in various activities relating to thegaming industry.

 

The Company, through awholly-owned subsidiary, OCM AcquisitionCo, LLC (“AcquisitionCo”), owns a 42%interest in the Series 1A Units of Cannery Casino Resorts, LLC (“CCR”), 62-1/6% interest inCCR’s Series C Preferred Units (Note 9) and a 331¤3% equity interest in NP Land, LLC (“NPLand”). The Company’s current business consists primarily of its ownership ofthese equity interests. CCR, through wholly-owned subsidiaries, owns andoperates The Cannery Hotel and Casino (“The Cannery”), located in North LasVegas, Nevada, the Eastside Cannery Casino and Hotel (the “Eastside Cannery”),located in southeast Las Vegas, which opened on August 28, 2008, andoperates the Rampart Casino, located in the Summerlin area of northwest LasVegas.  The primary assets of NP Land areapproximately 22 acres of land, the primary site of the Eastside Cannery, whichland is leased to a wholly-owned subsidiary of CCR. In addition, CCR, through awholly-owned subsidiary, PA Meadows, owns The Meadows Racetrack and Casino (“TheMeadows”), an operating harness racetrack located in North Strabane Township,Washington County, Pennsylvania.  In April 2009,The Meadows completed an approximately 350,000 square-foot permanent casino.

 

All of the Company’sissued and outstanding Class A Units are held by OCM VoteCo, LLC, aDelaware limited liability company (“VoteCo”), and all of the Company’s issuedand outstanding non-voting Class B Units are held by OCM InvestCo, LLC, aNevada limited liability company (“InvestCo”).  The rights of the Class AUnits and Class B Units are substantially identical with the exceptionthat the Class B Units are not entitled to any management or voting rightswith respect to the Company, except as provided by applicable law. Neither class has dividend or liquidation preferences, atypical participationrights, or preferred, convertible, or redeemable features.  In general,any sale, assignment or transfer of such units is subject to the prior approvalof the gaming regulators of Nevada and Pennsylvania.  VoteCo isresponsible for the operations of the Company, including the appointment andremoval of managers.  VoteCo has a *deminimus* economic interest in the Company, less than 0.00015%, andits total equity contributions are limited to $100.

 

On March 3, 2010(Note 9), in accordance with the terms and conditions of that certain Series CPreferred Purchase Agreement (the “Series C Purchase Agreement”), by andamong Crown Limited, an Australian company and its affiliates (the “CrownParties”), Millennium Gaming, Inc., a Nevada corporation and holder of 58%of CCR’s the Series A1 Units (“Millennium”), and OCM AcquisitionCo, LLCand CCR, CCR sold: (i) 18,375 Series C Preferred Unitsto Crown One and Crown Two, collectively; (ii) 10,000 Series CPreferred Units to Millennium; and (iii) 46,625 Series C PreferredUnits to AcquisitionCoin accordance with the terms and conditions of the Series C PreferredPurchase Agreement.

 

On December 11,2007, the Company and CCR’s 58%-member (the “Original Equityholders) enteredinto a definitive agreement with CCR and the Crown Parties, to sell, directlyor indirectly, all of the issued and outstanding equity interests of CCR to theCrown Parties, which transaction was initially expected to be consummatedduring the first quarter of 2009. However, on March 12, 2009, the parties terminated the purchaseagreement when it was determined that the preconditions to completion would notbe satisfied in time to allow the purchase to proceed.  Under the termination agreement, a fullrelease has been given to all parties and the Crown Parties paid CCR’s members$50 million ($21 million to the Company).

 

In connection with thetermination and settlement agreement and in accordance with the terms thereof,the Crown Parties, the Original Equityholders and CCR entered into a PreferredPurchase Agreement (the “Series B Preferred Purchase Agreement”) in March 2009.  On April 24, 2009, CCR sold to the Crownpurchasers 71,614 Series B Preferred Units of CCR (the “Series BUnits”) for an aggregate purchase price of $320 million in cash (the “PreferredPurchase Price”) in accordance with the terms and conditions of the Series BPreferred Purchase Agreement.  Of thePreferred Purchase Price, $20 million represents reimbursement of certainproject costs incurred by CCR related to various project costs at The Meadows.  The Series B Units have no coupon andare not subject to mandatory redemption. The “Option Agreement” (Note 5) remains unaffected.

 

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Table ofContents

 

In May 2009, CCRdistributed $26.21 million of the $320 million to the Company, and concurrentwith such distribution, the Company, through AcquisitionCo, made a $5.21million equity investment in CCR for the purpose of maintaining CCR’scompliance with its debt covenants.  In March 2009,the Company, through its wholly-owned subsidiary, AcquisitionCo, made an equitycontribution of $5.6 million to CCR for the purpose of maintaining CCR’scompliance with its debt covenants

 

The additional equitycontribution by AcquisitionCo was funded by an equity contribution from OCMBlocker, LLC, which in turn was funded by a loan from the Company.

 

Costs incurred by CCR onbehalf of the Original Equityholders relating to the initial definitiveagreement were $2.9 million ($1.2 million to the Company).  The $1.2 million is included in thesefinancial statements as a distribution received from CCR and relatedprofessional fees in like amount.

 

***Concentrationsand economic uncertainties***

 

The Company and itsconsolidated subsidiaries expect to be economically dependent upon relativelyfew investments in the gaming industry. The United States is experiencing a recession accompanied by, amongother things, reduced casino gaming and other recreational activity nationwide,instability in the commercial and investment banking systems and reduced creditavailability, and is also engaged in war, all of which are likely to havefar-reaching effects on economic activity in the country for an indeterminateperiod. The effects and probable duration of these conditions and relateduncertainties on the Company’s unconsolidated investees’ future operations andcash flows cannot be estimated at this time but may be significant.

 

**NOTE 2 - Significant AccountingPolicies:**

 

***Useof estimates***

 

Timely preparation offinancial statements in accordance with generally accepted accountingprinciples requires management to make estimates that affect the reportedamounts of assets and liabilities at the date of the financial statements, aswell as the reported amounts of income and expenses during the reportingperiods. Actual results could differ from those estimates.  Management estimates that the Company will eventuallysell its investment in unconsolidated investees following an expected economicrecovery at a price sufficient to realize the carrying value of the Company’sassets which estimates is subject to material variation over the next year.

 

***Basisof accounting and presentation***

 

The accompanyingconsolidated financial statements as of and for the years ended December 31,2009 and 2008, include the accounts of the Company and its wholly-ownedsubsidiaries OCM Blocker, LLC (“Blocker”), AcquisitionCo, OCM AcquisitionCo II,LLC, and OCM LandCo, LLC. All significant inter-company accounts andtransactions have been eliminated.

 

Investments in CCR and NPLand (Note 3) are accounted for using the equity method of accounting.  Accordingly, the Company measures all of itsassets and liabilities on the historical cost basis of accounting except asrequired by generally accepted accounting principles.

 

***Statementof cash flows and cash concentration***

 

At the request and forthe convenience of the Company, certain of the disbursements of the Company andits consolidated subsidiaries for operating expenses are made by InvestCoand/or its beneficial owners directly to vendors and investees, anddistributions from the Company’s investees are received directly byInvestCo.  Accordingly, these activitiesare treated as constructive cash inflows and outflows in the statements of cashflow.

 

***GamingLicenses***

 

Professional fees andother costs associated with the applications for licensure of the Company andits consolidated subsidiaries and certain of its beneficial owners, includingpayments to regulatory agencies, have been capitalized. These fees and costshave been treated as indefinite life intangible assets, based on expectationsthat such licenses would be granted and enable the Company to own interests ingaming enterprises, and benefit from future periods of profitable operations ofits investees and resultant expected increases in the value of itsinvestments.  License renewal fees arenot significant and are expensed as incurred.

 

Such assets are evaluatedat least annually (and more frequently when circumstances warrant) to determineif events or changes in circumstances indicate that the probability that suchassets will continue to benefit future periods might have been impaired.Examples 

 

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of such events or changesin circumstances that might indicate impairment of these assets might includean active or likely regulatory threat to the availability or viability of alicense, specifically, as a result of (i) non-compliance with regulations,(ii) an adverse change in the legal, regulatory or business climaterelative to gaming nationally or in the jurisdiction, or (iii) asignificant long term decline in historical or forecasted earnings or cashflows of the investee or the fair value of its property or business possibly asa result of competitive or other economic or political factors.  As of December 31, 2009, based on ourevaluation, there has been no impairment to these assets.

 

***Incometaxes***

 

The Company recordsestimated penalties and interest, if any, related to income tax matters,including uncertain tax positions, if any, as a component of income taxexpense.

 

***Members’capital***

 

Allocations of net incomeand distributions to the Members are determined in accordance with the Company’soperating agreement.

 

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**NOTE 3 - UnconsolidatedInvestees:**

 

OnSeptember 22, 2006, the Company, through a subsidiary, acquired a 33-1¤3% equityinterest in CCR and a 33-1¤3% equityinterest in NP Land, both Nevada limited liability companies, in exchange forcancellation of loans of $64 million and $4,282,454, and accrued interest of $5,470,685 and $502,631, respectively. The Company’s acquisition ofthe 33-1¤3% equity interest in CCR anda 33-1¤3% equity interest in NP Landwas completed pursuant to the terms and conditions of the CUP Agreement. On November 14,2006, the Company, through a subsidiary, contributed an additional $50 millionto CCR, increasing its Series 1A interest in CCR from 33-1¤3% to 42%. Forthe year ended December 31, 2009, the Company’s equity in earnings (loss)of CCR and NP Land totaled ($9,728,069) and $677,424, respectively.  For the year ended December 31, 2008,the Company’s equity in the earnings of CCR and NP Land totaled $3,012,049 and$528,158 respectively.

 

In March 2009, theCompany, through its wholly-owned subsidiary, AcquisitionCo, made an equitycontribution of $5.6 million to CCR for the purpose of maintaining CCR’scompliance with its debt covenants.  In May 2009, CCR distributed$26.21 million of the Preferred Purchase Price to the Company, and concurrentwith such distribution, the Company, through AcquisitionCo, made a $5.21million equity contribution to CCR for the purpose of maintaining CCR’scompliance with its debt covenants.  The additional equity contributionsby AcquisitionCo were funded by equity contributions from OCM Blocker, LLC,which in turn were funded by loans from the Company.

 

The following tablespresent condensed financial information of CCR as of December 31, 2009 and2008, and for the years ended December 31, 2009 and 2008:

 
| ** **                   | ** ** | **2009**    | ** **  | **2008**    | ** ** |
|------------------------------|------------|-------------|-------------|-------------|------------|
| **Balance Sheet**       |       |        |        |        |       |
| Current  assets              |       | $           | 84,153,000  |        | $          | 65,473,000 |   |
| Investments  in securities   |       | 11,646,000  |        | 17,113,000  |       |
| Property  and equipment, net |       | 753,312,000 |        | 749,029,000 |       |
| Other                        |       | 120,568,000 |        | 143,135,000 |       |
|                         |       | $           | 969,679,000 |        | $          | 974,750,000 |   |
|                         |       |        |        |        |       |
| Current  liabilities         |       | $           | 52,650,000  |        | $          | 97,733,000 |   |
| Long-term  liabilities       |       | 592,837,000 |        | 797,047,000 |       |
| Member’s  equity        |       | 324,192,000 |        | 79,970,000  |       |
|                         |       | $           | 969,679,000 |        | $          | 974,750,000 |   |
| ** **                   |       |        |        |        |       |
| **Income Statement**    |       |        |        |        |       |
| Revenue                      |       | $           | 509,435,000 |        | $          | 448,160,000 |   |
|                         |       |        |        |        |       |
| Net  (loss) income           |       | $           | (23,162,000 | )           | $          | 7,172,000 |   |

 

**Theunaudited total assets of NP Land at December 31, 2009 and 2008, wasapproximately $5,100,000 and $4,600,000, respectively.  The unaudited net income for the years ended December 31,2009 and 2008, was approximately $2,000,000 and $1,600,000, respectively.**

** **

**Excesscumulative equity in earnings recognized over distributions received fromunconsolidated investees (or the reverse) is approximately as follows:**

 
| ** **                                                | ** ** | **2009**   | ** **  | **2008** | ** ** |
|-----------------------------------------------------------|------------|------------|-------------|----------|------------|
| **Cumulative excess equity in  earnings (distributions)** | ** ** | ** ** | ** **  |     | ** ** |
| CCR                                                       |       | $          | (37,146,000 | )        | $          | 3,012,000 |   |
| NP  Land                                                  |       | 677,000    |        | 528,000  |       |
|                                                      |       | $          | (36,469,000 | )        | $          | 3,540,000 |   |

 

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**NOTE 4**- Income Taxes:

 

Prior to the election byBlocker to be taxable as a corporation, effective January 1, 2006, neitherthe parent nor its subsidiaries were tax paying entities for federal or stateincome tax purposes.  Blocker owns 100%of the other subsidiaries included in this consolidation.  Accordingly, equity in the flow-throughearnings of CCR and NP Land is taxed to Blocker.  Blocker also incurs interest expense($1,038,831 for 2009 and $1,961,784 for 2008) on inter-company indebtedness($13,862,796 and $23,218,683 at December 31, 2009 and 2008, respectively)that is deductible for tax purposes (a permanent difference) but which iseliminated, along with the related debt, in this consolidation. The Companyincurs certain other costs, primarily associated with being a public company,including professional and other fees, which, for tax purposes, flow through toits members.

 

The following table presentsa reconciliation of the income tax benefit with that determined by applying thestatutory U.S. federal income tax rate to income before income taxes for theyears ended December 31, 2009 and 2008:

 
| ** **                            | ** ** | **2009**   | ** ** | **2008**       | ** ** |
|---------------------------------------|------------|------------|------------|----------------|------------|
| ** **                            | ** ** | **Amount** | ** ** | **Percentage** | ** ** | **Amount** | ** ** | **Percentage** | ** ** |
| Statutory  federal rate               |       | $          | 3,621,764  |           | 35         | % | $ | 1,122,000 |   | 35 | % |
| General  business tax credits         |       | (320,816   | )          | (3             | )%         | (769,236 | ) | (24 | )% |
| Miscellaneous  CCR attributes         |       | (6,896,211 | )          | (67            | )%         | 605,000 |   | 19 | % |
| Intercompany  interest expense        |       | (363,591   | )          | (4             | )%         | (687,000 | ) | (21 | )% |
| Attributes  passed through to members |       | 562,164    |       | 5              | %          | 123,000 |   | 4 | % |
| CCR  income not taxable to Company    |       | (211,813   | )          | (2             | )%         | (3,041,000 | ) | (95 | )% |
|                                  |       |       |       |           |       |   |   |   |   |
| Tax  at effective rate                |       | $          | (3,608,503 | )              | (35        | )% | $ | (2,647,236 | ) | (83 | )% |

 

At December 31,2009, Blocker had approximately $48,236,000 and $320,000 in federal net operating loss andgeneral business tax credit carryforwards, which expire beginning in 2021.

 

Deferred income taxesreflect the net tax effects of temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and theamounts used to determine taxable income for income tax reporting purposes. Thefollowing table presents the significant components of the non-current deferredtax assets (liabilities) of the Company and its consolidated subsidiariesrelated to its investments in CCR and NP Land (there are no current deferredtax assets and liabilities):

 
| ** **                                     | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Basis  adjustment (Section 754 elections) |       | $                               | (5,683,000 | )                               | $          | (4,356,000 | ) |
| Other  CCR attributes                          |       | (4,164,000                      | )          | (3,476,000                      | )          |
| Other  comprehensive income                    |       | 363,000                         |       | 1,451,685                       |       |
| Other  NP Land attributes                      |       | 13,000                          |       | 17,000                          |       |
| General  business tax credits                  |       | 1,090,000                       |       | 769,236                         |       |
| Minimum  tax credit carryover                  |       | 141,000                         |       | —                          |       |
| Distributions  from unconsolidated investee    |       | 7,779,000                       |       | —                          |       |
| Net  operating loss carryforwards              |       | 9,104,000                       |       | 11,576,000                      |       |
|                                           |       | 8,643,000                       |       | 5,981,921                       |       |
|                                           |       |                            |       |                            |       |
| Deferred  tax liability, current               |       | 121,000                         |       | 311,000                         |       |
|                                           |       |                            |       |                            |       |
| Deferred  tax asset, non-current               |       | $                               | 8,764,000  |                            | $          | 6,292,921 |   |

 

The other CCR attributesshown above consist primarily of depreciation and amortization.

 

Management has made ananalysis of its state and federal tax returns that remain subject toexamination by major authorities (consisting of tax years 2006 through 2009)and concluded that the Company has no recordable liability as a result ofuncertain tax positions taken.

 

**NOTE5—Contingencies**

 

The United States iscurrently experiencing a widespread recession accompanied by, among otherthings, weakness in the commercial and investment banking systems resulting inreduced credit and capital financing availability, and highly curtailed gaming,other recreational, construction and real estate market activities and generaldiscretionary consumer spending.  It is also engaged in war.  All 

 

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of these factors arelikely to continue to have far-reaching effects on economic conditions in thecountry for an indeterminate period.  The effects and duration of thesedevelopments and related risks and uncertainties on the future operations andcash flows of the Company’s investees and, hence, the Company, cannot beestimated at this time but may likely be significant.

 

The Company often carriescash and equivalents on deposit with financial institutions substantially inexcess of federally-insured limits, and the risk of losses related to suchconcentrations has been increasing as a result of recent economic developmentsand uncertainties discussed in the foregoing paragraph.  The extent of anyloss that might be incurred as a result of uninsured deposits in the event of afuture failure of a bank or other financial institutions, if any, is notsubject to estimation at this time.

 

On March 12, 2009,in connection with the termination and settlement of an earlier agreement, theOriginal Equityholders and CCR entered into an Option Agreement (the “OptionAgreement”) with the Crown Parties. The Option Agreement grants the CrownParties the option to purchase all of the direct and indirect interests of theOriginal Equityholders in CCR, on terms substantially similar to the terms ofan earlier purchase agreement described elsewhere in this filing.  If the Crown Parties exercise their optionunder the Option Agreement, then upon the consummation of the transactionscontemplated thereby, the Crown Parties will collectively own, directly orindirectly, 100% of the issued and outstanding units of CCR for an aggregatepurchase price of approximately $1.7 billion (such purchase price includes thePreferred Purchase Price as defined below), subject to adjustment pursuant tothe terms and conditions of the Option Agreement.

 

In May 2008, awholly-owned subsidiary of the Company entered into a loan repayment guaranteeagreement which terminated prior to May 15, 2009, as expected, as of April 15,2009, the Company is no longer conditionally required in certain limitedcircumstances to make an additional equity investment in CCR’s subsidiary, PAMeadows.

 

**NOTE6—Other Income, Settlement Agreement**

 

On March 12, 2009,the Seller Parties and the Crown Parties entered into a termination andsettlement agreement, whereby the parties agreed to (a) terminate an earlierpurchase agreement pursuant to which the Crown Parties were to purchase all ofthe membership units of CCR from the Seller Parties, and (b) settle andrelease all possible claims among the parties related to the earlier purchaseagreement.  In connection with the termination of the purchase agreementand the settlement of claims, the Crown Parties paid to the Seller Parties $50million, of which the Company and CCR’s 58%-member received $21 million and $29million, respectively.  Additionally, CCR incurred legal expenses onbehalf of its members of approximately $2.9 million ($1.2 million to theCompany) in connection with the termination of the earlier purchaseagreement.  The $1.2 million is included in these financial statements asa distribution received from CCR and related professional fees in like amount.

 

**NOTE7—Financial Instruments**

 

Except for cash andequivalents, the fair value of which equals its carrying value, the onlysignificant financial instruments the Company has is its investment in unconsolidatedinvestees accounted for on the equity method for which fair value disclosure isnot required.  Cash equivalents consist of money market accounts.

 

**NOTE8—Fourth Quarter Adjustment**

 

TheCompany determined during its annual audit that CCR elected to abandon aportion of its temporary casino facilities at The Meadows during the secondquarter of 2009 incurring a non-recurring, non-cash loss, which had the effectof decreasing the Company’s equity in the earnings of CCR by $5,040,000.  As a result, the Company amended itsquarterly reports on Form 10-Q for the second and third quarters of 2009.

 

**NOTE9—Subsequent Events**

 

On March 3, 2010,CCR entered into Amendment No. 1 to the First Lien Credit Agreement, byand among CCR, Washington Trotting Association, Inc. (a subsidiary ofCCR), Bank of America, N.A. (“Bank of America”), as Administrative Agent,Collateral Agent, Swing Line Lender and L/C Issuer, and the lenders from timeto time party thereto (the “Amendment”), which amends that certain First LienCredit Agreement, dated as of May 18, 2007.

 

Also on March 3,2010, in connection with the Amendment and the issuance of the Series CPreferred Units, the members of CCR entered into CCR’s Third Amended andRestated Operating Agreement (the “Revised Operating Agreement”).  Among other matters, the Revised OperatingAgreement creates a new series of preferred securities of CCR designated as the“Series C Preferred Units”.  The Series CPreferred Units (i) are generally non-voting subject to certain limitedconsent rights, (ii) are required to be redeemed by CCR in certaincircumstances, including, without limitation, the repayment of CCR’s creditfacilities and/or certain sale transactions, and (iii) may be redeemed atCCR’s option at any time subject to compliance with CCR’s creditfacilities.  AcquisitionCo purchased 46,625 Series CPreferred Units forapproximately $46.6 million.  The Series CUnits have no coupon and are not subject to mandatory redemption.  The Series C Units carry a 20% per annumcumulative return payable upon redemption or liquidation of CCR, but then onlyto holders appropriately licensed or otherwise qualified by the PennsylvaniaGaming Control Board to receive such return. Upon liquidation of CCR, the Series C Units rank senior to allother class of units.

 

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