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**UNITED STATES**

**SECURITIES AND 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, 2008**

 

**or**

 
| **o**      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES** |
|------------|------------------------------------------------------------------------------------|
| ** ** | **EXCHANGE ACT OF 1934**                                                           |

 

**Commissionfile number 0-52042**

 

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**OCM HOLDCO, LLC**

(Exact Name of Registrant as Specified in itsCharter)

 

| **Delaware**                                                                        | ** ** | **20-3673772**                       |
|-------------------------------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of

incorporation or organization) | ** ** | (I.R.S Employer

Identification No.) |
| ** **                                                                          | ** ** | ** **                           |
| **333  South Grand Avenue, 28th Floor, Los Angeles, California**                    | ** ** | **90071**                            |
| (Address of principal executive offices)                                            | ** ** | (Zip Code)                           |

 

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

 

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

 

Securities registered pursuant to Section 12(g) of the Act:

**Class AMembership Units**

 

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Indicate by check markwhether the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.Yes  o    No  x

 

Indicate by check markwhether the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act.Yes  o    No  x

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.    Yes  x    No  o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405of this chapter) is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

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

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theAct).    Yes  o    No  x

 

As of March 31,2009, none of the registrant’s voting and non-voting common equity was held bynon-affiliates.

 

Documents Incorporated by Reference:

 

**None**

 

 

 

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SPECIAL NOTEREGARDING FORWARD-LOOKING STATEMENTS

 

Certain informationincluded in this annual report on Form 10-K and other filings of OCMHoldCo, 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.

 

When used in this report,the words “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,”“estimates,” “may,” “seeks,” and similar expressions are generally intended toidentify forward-looking statements. You should not place undue reliance onthese forward-looking statements, which reflect our opinions only as of thedate of this annual report on Form 10-K. We undertake no obligation topublicly release any revisions to the forward-looking statements after the dateof this document. You should carefully review the information described in thisannual report on Form 10-K. You should also carefully review the riskfactors described in the previously filed Form 10-KSB, and those describedfrom time to time in our future reports filed with the Securities and ExchangeCommission (the “*Commission*”).

 

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**OCMHOLDCO, LLC**

 

**INDEXTO FORM 10-K**

 
| **PART I**      |                                                                                                                        | 1      |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------|--------|
|                 |                                                                                                                        |   |
| Item 1.              | Description of  Business                                                                                                    | 1      |
|                 |                                                                                                                        |   |
| Item 2.              | Description of  Property                                                                                                    | 14     |
|                 |                                                                                                                        |   |
| Item 3.              | Legal Proceedings                                                                                                           | 14     |
|                 |                                                                                                                        |   |
| Item 4.              | Submission of  Matters to a Vote of Security Holders                                                                        | 14     |
|                 |                                                                                                                        |   |
| **PART II**     |                                                                                                                        | 14     |
|                 |                                                                                                                        |   |
| Item 5.              | Market for  Common Equity, Related Stockholder Matters and Small Business Issuer  Purchases of Equity Securities            | 14     |
|                 |                                                                                                                        |   |
| Item 7.              | Management’s  Discussion and Analysis                                                                                  | 16     |
|                 |                                                                                                                        |   |
| Item 8.              | Financial Statements                                                                                                        | 18     |
|                 |                                                                                                                        |   |
| Item 9.              | Changes In and  Disagreements With Accountants on Accounting and Financial Disclosure                                       | 18     |
|                 |                                                                                                                        |   |
| Item 9A.             | Controls and  Procedures                                                                                                    | 18     |
|                 |                                                                                                                        |   |
| Item 9B.             | Other Information                                                                                                           | 19     |
|                 |                                                                                                                        |   |
| **PART III**    |                                                                                                                        | 20     |
|                 |                                                                                                                        |   |
| Item 10.             | Directors,  Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of  the Exchange Act | 20     |
|                 |                                                                                                                        |   |
| Item 11.             | Executive  Compensation                                                                                                     | 21     |
|                 |                                                                                                                        |   |
| Item 12.             | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                            | 21     |
|                 |                                                                                                                        |   |
| Item 13.             | Certain  Relationships and Related Transactions                                                                             | 23     |
|                 |                                                                                                                        |   |
| Item 14.             | Principal  Accountant Fees and Services                                                                                     | 26     |
|                 |                                                                                                                        |   |
| **PART IV**     |                                                                                                                        | 27     |
|                 |                                                                                                                        |   |
| Item 15.             | Exhibits,  Financial Statement Schedules                                                                                    | 27     |
|                 |                                                                                                                        |   |
| SIGNATURES           | S-1                                                                                                                         |
|                 |                                                                                                                        |   |
| FINANCIAL STATEMENTS | F-1                                                                                                                         |

 

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**PART I**

 

**Item1.  Description of Business**

 

**THECOMPANY**

 

***Overview of the Company***

 

The Company was initiallyformed on July 22, 2005, at the direction of OCM Principal OpportunitiesFund III, L.P. and OCM Principal Opportunities Fund IIIA, L.P. (the “*Oaktree Fund*s”), each of which is aDelaware limited partnership and an affiliate of Oaktree Capital Management,L.P., a Delaware limited partnership (formerly Oaktree Capital Management, LLC)(“*Oaktree*”). The Company was formed forthe primary purpose of participating in various activities relating to thegaming industry.

 

In 2006, the Company,through a wholly-owned subsidiary, OCM AcquisitionCo, LLC, a Nevada limited liabilitycompany (“*AcquisitionCo*”),acquired a 42% equity interest in Cannery Casino Resorts, LLC, a Nevada limitedliability company (“*CCR*”), and a33-1/3% equity interest in NP Land,LLC, a Nevada limited liability company (“*NPLand*”).  The Company owns morethan 99.99% of the capital interest in OCM Blocker, LLC, a Delaware limitedliability company (“*Blocker*”), andBlocker 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.

 

The Company’s currentbusiness consists primarily of its ownership of these equity interests. CCR,through wholly-owned subsidiaries:

 

·                  ownsand operates the Cannery Hotel and Casino (“*TheCannery*”) located in North Las Vegas, Nevada;

 

·                  ownsand operates a temporary casino at The Meadows, located in North StrabaneTownship, Washington County, Pennsylvania, and is currently constructing alarger, permanent casino facility;

 

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

 

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

 

·                  Operatedthe Nevada Palace Hotel and Casino (the “*Nevada Palace*”)until February 29, 2008 when it was as closed as planned in connectionwith the construction of the Eastside Cannery.

 

***Ownership of the Company***

 

All of the Company’sissued and outstanding voting equity, the Class A Membership Units, areheld by OCM VoteCo, LLC, a Delaware limited liability company (“*VoteCo*”), and all of the Company’s issuedand outstanding non-voting equity, the Class B Membership Units, are heldby OCM InvestCo, LLC, a Nevada limited liability company (“*InvestCo*”). VoteCo is owned equally byeight individuals, seven of whom are principals of Oaktree and one of whom is amanaging director of Oaktree (collectively, the “*VoteCo Equityholders*”). InvestCo is owned principally by theOaktree Funds, which hold all of InvestCo’s issued and outstanding votingsecurities. At present, the Company has no plans to issue any additional Class AMembership Units or Class B Membership Units.

 

The VoteCo Equityholders,through VoteCo, control all matters of the Company that are subject to the voteof members, including the appointment and removal of the Company’s managers(the “*Managers*”). The Company hasissued Class B Membership Units to InvestCo, which units do not entitlethe holders thereof to any voting rights (except as otherwise required byapplicable law). The Class B Membership Units allow InvestCo and itsinvestors, including the Oaktree Funds, to invest in the Company without havingany voting power or power to control the operations or affairs of the Company (exceptas required by law). If InvestCo and its investors, including the OaktreeFunds, had any power to control the operations or affairs of the Company, theyand their respective constituent equityholders would generally be required tobe licensed or found suitable pursuant to the gaming laws and liquor codes ofthe jurisdictions in which CCR’s properties are located.

 

VoteCo, InvestCo,the Company and each of the Company’s wholly-owned subsidiaries are managed byStephen Kaplan, a Principal of Oaktree, and Ronald Beck, a Managing Director ofOaktree.  Oaktree is a Los Angeles-basedinvestment management firm with over $49 billion in assets committed tomanagement in specialized investment strategies. These strategies includedistressed debt, high 

 

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yield bonds,convertible securities, emerging market equities, power infrastructureinvestments, principal investments for corporate control, real estateinvestments, mezzanine financing and Japanese equity securities. Oaktree hasapproximately 530 employees, with offices in Los Angeles, New York, Stamford(Connecticut), London, Frankfurt, Paris, Beijing, Hong Kong, Seoul, Shanghai,Singapore, Tokyo and, through affiliates of Oaktree-managed funds, Amsterdamand Luxembourg.  Oaktree is led by HowardMarks, Chairman, and Bruce Karsh, President, and is registered with theSecurities and Exchange Commission as an investment adviser under theInvestment Advisers Act of 1940, as amended. The Oaktree Funds are the fourthclosed-end “principal” funds that the professionals who invest and manage theOaktree Funds have organized since 1994 for the purpose of makingcontrol-oriented equity investments.

 

***Business Developments***

 

*Recent Events*

 

On March 12, 2009,the Company entered into the agreements outlined below in connection with thetermination of that certain Purchase Agreement by and between Crown Limited, anAustralian company (“*Parent*”), CrownCCR Group Investments One, LLC, a Delaware limited liability company and anindirect wholly owned subsidiary of Parent (“*Crown One*”),Crown CCR Group Investments Two, LLC, a Delaware limited liability company andan indirect wholly owned subsidiary of Parent (“*Crown Two*,”and collectively with Parent and Crown One, the “*CrownParties*”), the Company, Millennium Gaming, Inc., a Nevadacorporation (“*Millennium*,” and together withthe Company, the “*Current 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 Current Equityholders and rights in an option agreement.

 

*Termination and SettlementAgreement*

 

On March 12, 2009,the Seller Parties and the Crown Parties entered into a Termination and SettlementAgreement (the “*Termination and Settlement Agreement*”),whereby the parties agreed to (a) terminate the Original PurchaseAgreement, and (b) settle and release claims among the parties to theOriginal Purchase Agreement relating to the Original Purchase Agreement, and inconnection therewith, Crown One and Crown Two (collectively, the “*Purchasers*”), paid the Current Equityholders a cash paymentof $50 million, of which the Company received $21 million.  In addition, certain of the parties to theOriginal Purchase Agreement and other related parties entered into separateagreements releasing claims relating to the Original Purchase Agreement.

 

*Preferred Purchase Agreement*

 

Simultaneously with theexecution and delivery of the Termination and Settlement Agreement and inaccordance with the terms thereof, the Crown Parties, the Current Equityholdersand CCR entered into a Preferred Purchase Agreement (the “*PreferredPurchase Agreement*”).  Underthe terms of the Preferred Purchase Agreement, the Purchasers agreed topurchase from CCR, and CCR agreed to sell to the Purchasers, 71,614 Series BPreferred Units of CCR (the “*Series B Purchase*”)for an aggregate purchase price of $320 million in cash (the “*Preferred Purchase Price*”), upon obtaining all necessaryregulatory approvals and subject to the terms and conditions set forth therein.

 

Simultaneously with theexecution and delivery of the Preferred Purchase Agreement and in accordancewith the terms thereof, the Current Equityholders, CCR, the Purchasers andJPMorgan Chase Bank, N.A., as escrow agent, entered into an Escrow Agreement,pursuant to which the Purchasers deposited the Preferred Purchase Price into anescrow account, and the Crown Parties and the Seller Parties agreed that thePreferred Purchase Price will be released from the escrow account, subject to,and in accordance with, the terms and conditions of the Escrow Agreement andthe Preferred Purchase Agreement, as follows, (a) the entire PreferredPurchase Price will be released to CCR upon the closing of the Series BPurchase, which is subject to obtaining all necessary regulatory approvals, or (b) ifthe Series B Purchase does not close prior to May 11, 2009 (or suchother date as extended in accordance with the terms of the Preferred Purchase Agreement),then (i) $80 million of the Preferred Purchase Price will be returned tothe Purchasers, and CCR will issue to the Purchasers, and the Purchasers willpurchase, subject to obtaining all necessary regulatory approvals, 9,435 Series A2Preferred Units of CCR representing 4.1% of the issued and outstanding equityof CCR (the “*Series A2 Purchase*”) and (ii) $240million of the Preferred Purchase Price will be released to CCR ($40 million ofwhich would be applied to the Series A2 Purchase, if applicable).

 

*Option Agreement*

 

Simultaneously with theexecution and delivery of the Termination and Settlement Agreement and inaccordance with the terms thereof, the Crown Parties, the Current Equityholdersand CCR entered into an Option Agreement (the “*OptionAgreement*”), which grants the Crown Parties, subject to the termsand conditions set forth in the Option Agreement, the option to complete thepurchase of all of the direct and indirect interests of the CurrentEquityholders in CCR on terms substantially similar to the terms of theOriginal 

 

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Purchase Agreement asmore fully described below in Item 1 — Business Developments**—* *2007 Highlights.   If theCrown Parties exercise their option under the Option Agreement, then upon theconsummation of the transactions contemplated by the Option Agreement and bythe Preferred Purchase 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.

 

*2008 Highlights*

 

On February 29,2008, the Nevada Palace, located on the Boulder Strip in east Las Vegas, ceasedoperations as planned in connection with the construction of the EastsideCannery.  The Eastside Cannery opened on August 28,2008, on the former site of the Nevada Palace. Its amenities include a 16-story hotel, with more than 300 guest roomsand suites, a resort spa, Jacuzzi and a half-acre pool, approximately 65,000square feet of gaming space, with over 2,100 slot machines, 26 table games, a450-seat bingo hall, a live Keno lounge, a poker room and a race and sportsbook.  In addition, the Eastside Canneryhas six restaurants, two night clubs and a 20,000 square foot ballroom andmeeting place.

 

*2007Highlights*

 

On December 11,2007, the Company entered into the Original Purchase Agreement pursuant towhich Crown One and Crown Two were to purchase, directly or indirectly, the CCRUnits from the Current Equityholders.

 

Under the terms of theOriginal Purchase Agreement, (a) Crown One had agreed to purchase fromMillennium, all of Millennium’s CCR Units, (b) Crown Two had agreed topurchase from the Company, all of the Company’s interest in Blocker, and (c) CrownOne had agreed to purchase from the Company, all of the Company’s right, titleand interest in the Blocker Option Agreement, and the aggregate purchase pricethat would have been payable by the Crown Parties to the Current Equityholderswas approximately $1.75 billion in cash, less outstanding debt and otheradjustments.  The Original PurchaseAgreement also provided that the Crown Parties would have been indemnified fordamages resulting from breaches of Sellers’ representations, warranties andcovenants, certain tax liabilities and other matters.  The sum of $25 million of the purchase pricewas to have been placed in escrow for three years after the closing date as theexclusive source, subject to certain exceptions, for satisfaction of suchdamages as to which claims are made.

 

*PriorHighlights*

 

In September 2006,the Company, through a subsidiary, acquired a 33-1/3%equity interest in CCR and a 33-1/3% equity interest in NP Land,both Nevada limited liability companies. The Company’s acquisition of the 33-1/3% equity interest in CCR and a 33-1/3% equity interest in NP Land wascompleted pursuant to the terms and conditions of a Contribution and UnitPurchase Agreement, dated as of May 10, 2005, as amended and restated inits entirety by the First Amendment and Restatement of Contribution and UnitPurchase Agreement, dated as of September 23, 2005 (the “*CUP Agreement*”). The parties to the CUPAgreement were Messrs Paulos and Wortman, Millennium, CCR, AcquisitionCo, andother entities named therein.  In November 2006,the Company, through a subsidiary, contributed an additional $50 million toCCR, increasing its equity interest in CCR from 33-1/3%to 42%.

 

Key features of thetransactions completed during 2005 and 2006 pursuant to the CUP Agreementinclude the following:

 

·                  InSeptember 2005, the first series of transactions contemplated by the CUPAgreement were consummated. The Company’s affiliates loaned an aggregate of$10,607,245 (the “*InvestCo NP Loans*”)and $4,282,454 (the “*LandCo Loan*”)to entities controlled by Mr. Wortman to enable Mr. Wortman, andentities controlled by him, to acquire from an unrelated third party all of theinterests not otherwise owned by him in the entities which own the land andassets relating to the Nevada Palace.

 

·                  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 for a total purchase price of $70 million.

 

·                  InSeptember 2006, the last of the series of transactions contemplated by theCUP Agreement was completed, and the Company acquired a 33-1/3%interest in each of CCR and NP Land in exchange for cancellation of loans of$64 million and $4,282,454, plus accrued interest of $5,470,685 and $502,631,respectively.

 

·                  TheInvestCo NP Loans, the LandCo Loan, the AcquisitionCo Loan and theInvestCo/MGIM Loan each accrued interest at 12%, but in the case of the LandCoLoan and the AcquisitionCo Loan, interest was waived and considered additionalinvestment upon the final closing of the equity purchase pursuant to the CUPAgreement. The loans were financed by capital 

 

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contributions from InvestCo.

 

In July 2006, CCR,through a wholly-owned subsidiary, PA Meadows, LLC, a Delaware limitedliability company (“*PA Meadows*”),acquired all of the capital stock in entities owning and operating The Meadowsharness racetrack and issued to the seller a note for $175 million to secure acash purchase price obligation, and a note for $25 million to secure a holdbackobligation. The acquisition was pursuant to two agreements: (i) a Stock PurchaseAgreement between PA Meadows and Magna Entertainment Corp., a Delawarecorporation (“*MEC*”), dated November 8,2005, as amended by a first amendment dated July 26, 2006, and (ii) aPost-Closing and Note Issuance Agreement dated July 26, 2006 by and betweenPA Meadows, MEC and the parties named therein. On November 14, 2006, PAMeadows paid $175 million in cash and delivered a $25 million holdbackagreement to MEC, in full satisfaction of the notes issued to MEC on July 26,2006. The acquisition was financed by a $50 million equity contribution fromthe Company to CCR and proceeds from two syndicated credit facilities.  In exchange for the $50 million equitycontribution to CCR, CCR issued additional equity interests to AcquisitionCo,causing the Company’s percentage ownership in CCR to increase from 33-1/3% to 42%.

 

Messrs. Paulos andWortman, through Millennium, own the remaining 58% of the equity interests inCCR and continue to play a substantial role in the management of the business. Mr. Wortmanalso owns the remaining 66-2/3% of the equity interests in NP Land.

 

***Employees***

 

The Company has noemployees, other than its two managers, Messrs. Kaplan and Beck, whoreceive no compensation from the Company for their services.

 

***Environmental Issues***

 

The Company has nophysical assets.

 

**CANNERYCASINO RESORTS, LLC**

 

CCR was organized on May 22,2001.  In December 2002, CCRcommenced casino operations at the Rampart Casino. In January 2003, CCRcompleted construction of The Cannery and commenced its operations.  In July 2006, CCR acquired The Meadows,where it currently owns and operates a temporary gaming facility and where itis constructing a permanent casino expected to open in April 2009.  In September 2006, CCR acquired thegaming assets of and commenced temporary operations at the Nevada Palace, whichceased operation on February 29, 2008 as planned in connection with theconstruction of the Eastside Cannery, which replaced the Nevada Palace andopened on August 28, 2008. The Cannery, the Rampart Casino and theEastside Cannery are currently managed by Millennium Management Group II, LLC,a Nevada limited liability company (“*MMG II*”),and MMG II provides certain management services related to The Meadows.  MMG II is 95% owned by Messrs. Paulosand Wortman.

 

On May 18, 2007, CCRentered into two new syndicated credit facilities totaling $860 million: a $745million first lien facility and a $115 million second lien term loanfacility.  The proceeds were usedprimarily to retire existing debt, including the then-existing $250 millioncredit facility.  The remainder of theproceeds from the borrowing will be used to partially fund the construction ofthe permanent casino facility at The Meadows and the completion of the EastsideCannery.  For more information about thesyndicated credit facilities, see the Company’s periodic filing on Form 8-Kfiled with the SEC on May 24, 2007.

 

***The Cannery***

 

The Cannery, located inNorth Las Vegas, Nevada, commenced operations in January 2003, and, in2006, completed a $40 million expansion project.  Currently, The Cannery features approximately72,000 square feet of casino space, including 1,961 slot/video poker machines,37 table games (including 12 poker tables), a poker room, and a race and sportsbook. The attached three-story hotel is designed to be compatible with TheCannery’s World 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, a steakhouse and a franchised donut shop; a14 screen movie theatre; an indoor/outdoor multi-purpose entertainment venueused to host events such as boxing matches and community festivals; anentertainment lounge; a pool and jacuzzi; and parking for approximately 3,600vehicles (including a 1,900-space parking garage), with valet options andadditional off-site parking for large events, along with shuttle bus service toand from the casino.

 

***The Rampart Casino***

 

In December 2002,CCR, through a subsidiary, commenced operations at the Rampart Casino under a10-year sublease agreement with Hotspur Casinos Nevada, Inc., a Nevadacorporation (“*Hotspur*”).

 

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The Rampart Casino issituated within the JW Marriott Las Vegas Resort, Spa & Golf at theResort at Summerlin, located in the Summerlin area of northwest Las Vegas. TheRampart Casino’s facilities consist of approximately 50,000 square feet ofcasino space, over 1,200 slot machines, 26 table games, a race and sports book,three restaurants, multiple bars, and an entertainment lounge. The JW Marriott Las Vegas Resort is located onover 50 acres of land and consists of a hotel with over 500 guest rooms andsuites, a spa, and several restaurants.

 

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

 

On September 22,2006, CCR, through a subsidiary, acquired the gaming assets of the NevadaPalace and entered into a 35-year lease of the Nevada Palace land with NPLand.   In May 2007, CCR commencedconstruction of the Eastside Cannery to replace the Nevada Palace, which wasoperated through February 29, 2008 when it closed as planned in connectionwith the construction of the Eastside Cannery. The Eastside Cannery opened on August 28, 2008.

 

The Eastside Cannery,located on the Boulder Strip in east Las Vegas and eight miles from McCarranInternational Airport, is similar in nature to The Cannery, with more than 300guest rooms and suites, a resort spa, Jacuzzi and a half-acre pool completewith cabanas on the property.   TheEastside Cannery’s casino offers guests approximately 65,000 square feet ofgaming space, with over 2,100 slot machines, 26 table games, a 450-seat bingohall, a live Keno lounge, a poker room and a race and sports book.  In addition, the Eastside Cannery has sixrestaurants, two night clubs and a 20,000 square foot ballroom and meetingplace.

 

The primary assets of NPLand are approximately 22 acres of land, the primary site of the EastsideCannery, which land is leased to a wholly-owned subsidiary of CCR.

 

***The Meadows***

 

In 2006, CCR, through itsindirect subsidiary, PA Meadows, acquired from MEC all of the capital stock ofentities owning and operating The Meadows harness racetrack.  Concurrently with the acquisition, PA Meadowsand its wholly-owned subsidiaries entered into a Racing Services Agreement,whereby a wholly-owned subsidiary of MEC (the “*MECOperator*”) would continue to operate The Meadows for a minimum termof five years unless terminated earlier under certain circumstances. Under theRacing Services Agreement, the MEC Operator receives all revenues from and isliable for all of the costs associated with the racing operations, after payingPA Meadows a fixed fee of $50,000 per year, and generally indemnifies CCR andits affiliates against losses arising from all obligations and liabilities ofthe racing operations, subject to certain exceptions. In addition, MEC agreedto guarantee the financial obligations of the MEC Operator. As a result, duringthe term of the Racing Services Agreement, CCR’s principal economic interest inthe racing operations will consist of the $50,000 in annual fixed fees paid bythe MEC Operator.

 

The Pennsylvania GamingControl Board (the “*Pennsylvania Board*”)approved Washington Trotting Association (“*WTA*”),a wholly-owned subsidiary of PA Meadows, to receive a Category 1 Slot MachineLicense to operate a casino at The Meadows in December 2006.  In June 2007, PA Meadows opened an82,000 square-foot temporary casino at The Meadows, which houses over 1,800slot machines, a 360-seat all-you-can-eat restaurant, a snack bar, and sportsbar with 23 bar-top video poker games. The Meadows is also the first casino in Pennsylvania to offer patronsKeno, roulette and Monopoly-themed slot machines.    PA Meadows began construction of a 350,000square-foot permanent casino in late 2007 and expects the permanent casino toopen in spring 2009.  The permanentcasino will house approximately 3,750 slot machines and will integrate thelong-standing tradition of harness racing at The Meadows with state-of-artgaming facilities.

 

***Gaming Markets***

 

*LasVegas Locals Gaming Market*

 

Las Vegas and North LasVegas, which are part of Clark County, Nevada, are located within a growingmetropolitan area.  With an estimatedpopulation of 2 million, Clark County is Nevada’s largest county and the 15th largest county in the United States.   In 2007, Clark County’s population increasedby approximately 4%, and remained relatively unchanged in 2008.   The Cannery, the Rampart Casino and theNevada Palace are all located in Clark County. CCR’s management believes that the Clark County’s population growth overthe past decade has been driven, in part, by Clark County’s favorable businessclimate, tax structure and great weather.

 

CCR competes primarily inthe Las Vegas locals gaming market, which is defined as the Clark County gamingmarket excluding the Las Vegas Strip, Downtown Las Vegas and Laughlin.  The Las Vegas Convention and VisitorsAuthority estimates that two-thirds of the local Las Vegas adult populationparticipates in casino gaming on a regular basis.  In 2008, total win from nonrestricted gamingoperations in the Las Vegas locals gaming market declined by 9.36% from itshigh of $2.51 billion in 2007.  Prior tolast year, gaming revenues for the Las Vegas locals gaming market haveexperienced steady increases in conjunction with the growth of the Clark Countypopulation.  According to the NevadaGaming Control Board, total win from nonrestricted gaming operations in the LasVegas locals gaming market grew from approximately $2.12 billion in 2004 toapproximately $2.69 billion in 2006, and $2.77 billion 

 

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in 2007, representing anaverage annual compound growth rate of 12.7% between 2004 and 2006, and  3.1% between 2006 and 2007.

 

The specific submarketsfor The Cannery, the Rampart Casino and the Eastside Cannery (once open) areNorth Las Vegas, Summerlin, and the Boulder Strip, respectively.

 

*NorthLas Vegas*

 

The Cannery is located inNorth Las Vegas, off of I-15 and a few miles from I-95, and targets localresidents and visitors to the nearby Nellis Air Force Base and Las Vegas MotorSpeedway.  According to the Nevada GamingControl Board, total win from nonrestricted gaming operations in North LasVegas decreased from approximately $303 million in 2007 to approximately $282million in 2008, an approximately 6.72% decrease from 2007.  From 2006 to 2007, total win fromnonrestricted gaming operations decreased approximately 3.63%, from $314million in 2006 to $303 million in 2007.

 

*Summerlin*

 

The Rampart Casino is locatedin the Summerlin area of northwest Las Vegas, a 22,500-acre, master-plannedcommunity with approximately 60,000 households, adjacent to the SummerlinParkway and within close proximity to six golf courses. CCR management believesthat the Rampart Casino’s primary market consists of frequent local gamingpatrons who seek a friendly atmosphere and convenience, as well ashigher-than-average payout rates for slot machines and video poker games. Inaddition, due to its central location within the JW Marriott Resort, theRampart Casino benefits from resort and conference visitor traffic.  Because the Summerlin area is categorizedwith the balance of Clark County in the Nevada Gaming Control Board’s revenuereports, specific annual gaming revenues for the Summerlin area cannot bedetermined.

 

*TheBoulder Strip*

 

The Eastside Cannery islocated, along the Boulder Highway, known as the “Boulder Strip.”  The Boulder Strip is known as a popular “offthe Las Vegas Strip” gaming destination for visitors to Las Vegas who arelooking for a less costly gaming experience than that offered on the Las VegasStrip. Many of the casinos along the Boulder Strip offer entertainmentamenities beyond gambling, including movie theaters, bowling alleys and diningestablishments.  According to the NevadaGaming Control Board, the Boulder Strip, which includes casinos within the citylimits of Henderson, Nevada, has seen win from nonrestricted gaming operationsgrow from approximately $792 million in 2004 to approximately $928 million in2007.  This growth represents an averageannual compound growth rate of 5.47% between 2004 and 2007.  In 2008, nonrestricted gaming operations wereapproximately $839 million, representing a decrease of 9.52% from the prioryear.  Despite the recent decrease, CCRmanagement believes that the Boulder Strip has become, and is likely to remain,popular with Las Vegas locals.

 

*PennsylvaniaGaming Market*

 

The Meadows is located inNorth Strabane Township, Washington County, Pennsylvania. North Strabane Townshipis part of the greater Pittsburgh metropolitan area and is locatedapproximately 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 11 slot machine gamingfacilities throughout the state, 6 racetrack-based casino facilities and 5stand alone slot machine gaming facilities. Of the 11 facilities approved for licensure, 6 racetrack facilities areopen and 1 stand alone slot machine gaming facility, Mt. Airy Casino Resort, isopen.  The closest licensed in-stateracetrack-based casino is Presque Isle Downs & Casino, in Erie,Pennsylvania, which is approximately 146 miles from The Meadows.  Ohio does not permit slot machine gaming.

 

***Competition***

 

The casino hotel industryis a highly fragmented and competitive industry. The gaming industry includesland-based casinos, dockside casinos, riverboat casinos, casinos located onNative American reservations and other forms of legalized gaming. CCRmanagement believes that the primary competition to CCR’s casinos currentlycomes from other casinos that cater to the Las Vegas locals gaming market. Inaddition, to a lesser extent, CCR’s casinos face competition from casinoslocated 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 willalso likely come from The Rivers Casino, located in Pittsburgh, Pennsylvania,and anticipated to open in August 2009. The competition among companies in thegaming industry is intense and many of CCR’s competitors have significantlygreater resources than CCR.

 

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Under the terms of CCR’samended and restated operating agreement, Millennium and its affiliates, on theone hand, and AcquisitionCo and its affiliates (including the Company), on theother, must offer gaming opportunities first to CCR prior to pursuing any suchopportunity outside CCR. Generally, no manager of CCR may serve as a manager,officer, director or employee of any casino operating or holding company, exceptthat a manager may serve in such capacities with respect to CCR or itssubsidiaries or entities that hold equity in the Company (other than Oaktree orinvestors in the Oaktree Funds). Nevertheless, a manager may serve as amanager, officer, director or employee of a casino operating or holding companyformed to pursue a gaming opportunity offered to but not accepted by CCR and acasino operating or holding company formed to pursue certain opportunities inMexico.

 

*LasVegas Locals Gaming Market*

 

The growth in gamingrevenue in the Las Vegas locals gaming market has led to a highly competitivemarket to attract business of Las Vegas locals. In addition to establishedcasinos, CCR faces competition from smaller casinos, supermarkets, bars andconvenience stores that offer gaming.

 

The closest casinocompetitors to The Cannery are Aliante Station and Santa Fe Station, which areapproximately five and six miles, respectively, from the site of the casino,although outside of The Cannery’s primary market area. Other competitors (eachmore than six miles from The Cannery) include Texas Station Gambling Hall andFiesta Rancho.  Each of these fourcompetitors 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.

 

*LasVegas Strip and Downtown Las Vegas Gaming Market*

 

The Las Vegas Strip isthe location of dozens of casinos, including the largest and newestmega-casinos that Las Vegas has to offer. In addition, the downtown Las Vegasarea includes approximately a dozen casinos on or near Fremont Street in oldLas Vegas. Casinos located on the Las Vegas Strip or in downtown Las Vegas aretypically tourist destinations and generally do not target the locals gamingmarket.

 

*TheNeighborhood Casino Act*

 

In 1997, the NevadaLegislature passed Senate Bill No. 208 (the “*Neighborhood Casino Act*”), enacting laws which possiblycreate significant barriers to new competition in CCR’s local gaming markets bylimiting future casino development in certain areas of Clark County,Nevada.  Those laws were amended in2001.  With certain specified exemptions,the Neighborhood Casino Act restricts non-restricted gaming to certaindesignated gaming enterprise districts, and imposes potentially burdensomerequirements on applicants proposing to have new locations designated as gamingenterprise districts by the applicable county, city or town body withjurisdiction.

 

*PennsylvaniaGaming Market*

 

The primary establishedcompetition for the casino at The Meadows are two racetrack-based casinoslocated in West Virginia: the Wheeling Island Racetrack and Gaming Center inWheeling, West Virginia, and the Mountaineer Racetrack and Gaming Resort inChester, West Virginia.  The WheelingIsland Racetrack and Gaming Center is approximately 34 miles from The Meadowsand is an established racetrack and slot machine gaming center withapproximately 2,400 slots.  TheMountaineer Casino is approximately 50 miles from The Meadows and is anestablished racetrack and slot machine gaming center with approximately 3,200slots.  Both facilities recently addedtable games.  Pennsylvania has approvedfor licensure 11 slot machine gaming facilities throughout the state, 6 racetrack-basedcasino facilities and 5 stand alone slot machine gaming facilities.  The 6 racetrack facilities are open and 1stand alone slot machine gaming facility, Mt. Airy Casino Resort, is open.  The closest licensed in-state racetrack-basedcasino is Presque Isle Downs & Casino, located in Erie, Pennsylvania,which is approximately 146 miles from The Meadows.  In addition to the 6  racetrack casinos currently in operation, theValley View Downs in Lawrence County is expected to begin operations in 2009pending licensing approval by the Pennsylvania Board.  Valley View Downs is approximately 75 milesfrom The Meadows.  The Pennsylvania Boardhas also approved for licensure a stand alone slot machine facility inPittsburgh, Pennsylvania, The Rivers Casino. The Rivers Casino will be approximately 25 miles from The Meadows and isexpected to open in August 

 

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2009.

 

***Business and Marketing Strategy***

 

CCR aims to target thelocals gaming market and capitalize on strong demographic trends. In addition,CCR seeks to position its gaming assets to cater to the propensity of the localresidents to participate in casino-style gaming in proximity to where theylive. CCR management believes that CCR’s Las Vegas casinos also benefit fromNevada regulatory restrictions that have the effect of limiting competition inthe gaming industry, including the Neighborhood Casino Act. For moreinformation on the Neighborhood Casino Act, see “Item 1. Cannery Casino Resorts—Competition—TheNeighborhood Casino Act” above.

 

*StrongManagement Team*.

 

The day-to-day operationsof CCR are managed by Messrs. Paulos and Wortman, each of whom have hadsignificant gaming industry experience. Mr. Paulos previously served asPresident of Primadonna Resorts, Inc., which through subsidiaries ownedand operated various casino-hotel properties, including Buffalo Bill’s, WhiskeyPete’s, the Primm Valley Inn and Resort, and New York-New York Casino Resort,where he also served on the board of directors. Mr. Paulos has served asChief Operating Officer of Crown Casino Limited, where he was responsible forthe construction and opening of its casino in Melbourne, Australia, and asSenior Vice President of Circus Circus Enterprises, Inc., where he hadprimary responsibility for the development of the Excalibur and Luxor casinos. Mr. Wortmanpreviously served as Chairman and Chief Executive Officer of Palace Casinos, Inc.In addition to Nevada Palace, he previously owned and operated the FallonNugget and Bonanza Inn in Fallon, Nevada and Renata’s/Sunset Lanes inHenderson, Nevada. Mr. Wortman held various senior positions at CaesarsPalace Las Vegas, including Treasurer, Chief Financial Officer, Vice Presidentof Administration and Vice President of Hotel Operations, and served asPresident and Chief Operating Officer of Caesars Tahoe.

 

*TargetedCustomer Base*.

 

CCR’s operating strategyaims to attract and retain customers primarily from the locals market throughinnovative, frequent and high-profile promotional programs, focused marketingefforts and convenient locations.  CCR’sprimary customers are located within a five-mile radius of its casinos, and CCRfocuses its marketing efforts on those patrons.

 

*High-ValueCustomer Experience*.

 

In order to provide ahigh-value gaming experience, CCR focuses on slot and video poker machine play.CCR management believes that by offering a wide variety of high quality slotand video poker games, its casinos attract locals and repeat visitors.  CCR management is committed to providing ahigh-value entertainment experience through restaurant, hotel and otherentertainment amenities to attract local gaming patrons.

 

*CreativeMarketing and Promotional Programs*.

 

CCR management believesthat promotions and promotional events are one of the primary factors tosuccess in the locals gaming market.  CCRemploys a marketing strategy that utilizes innovative, frequent and high-profilepromotional programs in order to attract and retain customers and establish ahigh level of name recognition for CCR’s casinos.  In addition to aggressive marketing throughtelevision, radio and newspaper advertising, CCR creates and sponsorspromotional events and has established and promotes an exclusive players club.

 

*OperatingEfficiencies*.

 

By operating its Nevadacasinos with a similar marketing focus and target customer, CCR realizescertain operating efficiencies.  Forexample, The Cannery and the Rampart Casino participate in the same playersclub, which provides casino patrons with the opportunity to win points ateither location and enables management to run larger joint promotions. CCR alsobenefits from joint purchasing programs for food and other supplies andavailable quantity discounts.  Inaddition, CCR realizes equipment cost savings from, among other things,identical player tracking systems in its casinos.  These player tracking systems provide CCRwith access to a larger database of customers for purposes of cross-marketingand promotions.  Finally, the accounting,personnel and other administrative functions of CCR’s casinos are centralizedto reduce costs.

 

***Employees***

 

As of December 31,2008, CCR and its subsidiaries had approximately 3,139 active employees andapproximately 2,787 full-time equivalent employees.  Of these employees, 86 are unionized.  CCR recognizes that its employees arecritical to its success and has

 

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sought to foster aproductive work culture.  Employees areoffered competitive salaries and benefit packages.

 

***Environmental Matters***

 

The operations andproperties of The Cannery, the Rampart Casino and the Eastside Cannery (and theformer operations of the Nevada Palace) are and will continue to be subject toa wide variety of complex and stringent environmental laws. CCR management andNP Land management believe that their respective operations and properties arein compliance in all material respects with all applicable environmentallaws.  Based upon their experience todate, 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 financial condition or results ofoperations.

 

The operations andproperties of The Meadows also are and will continue to be subject to a widevariety of complex and stringent environmental laws.  CCR management believes that these operationsand properties are in compliance in all material respects with allenvironmental laws.   As a result, CCRmanagement believes that the future cost of compliance with and liability underexisting environmental laws applicable to The Meadows will not have a materialadverse effect on PA Meadows’s financial condition or results of operations.

 

**REGULATORYMATTERS**

 

The Company is subject togaming regulation in Nevada and gaming and harness racing regulation inPennsylvania. The ownership and operation of casino gaming facilities in Nevadaare subject to the gaming laws and regulations of the State of Nevada,including the Nevada Gaming Control Act (such laws and regulations, the “*Nevada Act*”), and the licensing andregulatory control of the Nevada Gaming Control Board (the “*Nevada Board*”), the Nevada GamingCommission (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 Pennsylvania Board. The ownership and operation ofharness racing tracks in Pennsylvania are subject to the harness racing lawsand regulations of the Commonwealth of Pennsylvania, including the Race HorseIndustry Reform Act (such laws and regulations, the “*RHIRA*”), and the licensing and regulatory control of thePennsylvania State Harness Racing Commission (“*PennsylvaniaCommission*”).

 

***Nevada Gaming Laws and Regulations***

 

The Nevada Act and theregulations and supervisory procedures of the Nevada Gaming Authorities arebased upon declarations of public policy that are concerned with, among otherthings, the prevention of unsavory or unsuitable persons from having a director indirect involvement with gaming at any time or in any capacity and thestrict regulation of all persons, locations, practices, associations andactivities related to the operation of licensed gaming establishments. Changesin such laws, regulations and procedures could have an adverse effect on CCR’sgaming operations and the Company’s indirect investment in CCR.

 

*LicensingRequirements and Approvals*

 

In 2006, certain requiredapprovals were obtained from the Nevada Gaming Authorities in connection withthe Company’s acquisition of its equity interests in CCR and NP Land. Suchapprovals included (i) the Company was registered as a “publicly tradedcorporation” as that term is defined by the Nevada Act (a “*Registered Company*”); (ii) theCompany, VoteCo, and AcquisitionCo were registered as holding or intermediarycompanies and found suitable; and (iii) the VoteCo Equityholders receivedvarious approvals including licensure as members and managers, as applicable,of VoteCo and findings of suitability as controlling members and managers, asapplicable, of the Company.

 

While the direct andindirect holders of Class B Membership Units of the Company were notrequired to be found suitable in connection with the Company’s acquisition ofequity interests in CCR and NP Land, they remain subject to the discretionaryauthority of the Nevada Gaming Authorities and can be required to file anapplication and have their suitability determined, or to dispose of theirinvestment in the Company.

 

The Nevada GamingAuthorities may require additional licensing or suitability applications. Afinding of suitability is comparable to licensing, and both require submissionof detailed personal and financial information followed by a thoroughinvestigation. An applicant for licensing or an applicant for a finding ofsuitability 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.

 

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*Consequencesof Being Found Unsuitable or Violating Gaming Laws*

 

If the Nevada GamingAuthorities were to find an officer, manager or key employee of CCR, theCompany, VoteCo or AcquisitionCo unsuitable to continue having a relationshipwith these entities, the companies involved would have to sever allrelationships 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.

 

If it were determinedthat the Nevada Act was violated by CCR, the Company, VoteCo or AcquisitionCo,the gaming licenses held by CCR’s subsidiaries and affiliates could be limited,conditioned, suspended or revoked, subject to compliance with certain statutoryand regulatory procedures. In addition, any such violator and the personsinvolved could be subject to substantial fines for each separate violation ofthe Nevada Act, or of the regulations of the Nevada Commission, at thediscretion of the Nevada Commission. Furthermore, the Nevada Commission could appoint a supervisor to operateThe Cannery, the Rampart Casino, the Nevada Palace or, when constructed, theEastside Cannery and, under specified circumstances, earnings generated duringthe supervisor’s appointment (except for the reasonable rental value of thepremises) could be forfeited to the State of Nevada. Limitation, conditioningor suspension of any gaming license or the appointment of a supervisor could(and revocation of any gaming license would) impact casino revenues and causethe Company to suffer financial loss.

 

*OngoingObligations of Gaming Licensees and Beneficial Securities Holders*

 

On September 21,2006, the Nevada Commission issued an order of registration of the Company,which was immediately effective and which has since been amended twice (the “*Final Order*”). The Final Order prohibits (1) VoteCo,InvestCo or their respective affiliates from selling, assigning, transferring,pledging or otherwise disposing of the Company’s Class A Membership Unitsor Class B Membership Units or any other security convertible into orexchangeable for Class A Membership Units or Class B MembershipUnits, without the prior approval of the Nevada Commission, and (2) theCompany from declaring cash dividends or distributions on any class ofmembership unit of the Company beneficially owned in whole or in part byInvestCo, VoteCo, or their respective affiliates, without the prior approval ofthe Nevada Commission.

 

The Company, VoteCo andAcquisitionCo are subject to detailed ongoing financial and operating reportingrequirements to the Nevada Gaming Authorities. Substantially all materialloans, leases, sales of securities and similar financing transactions by theCompany, VoteCo and AcquisitionCo must be reported to, or approved by, theNevada Commission.

 

Regardless of the numberof shares held, any beneficial holder of a Registered Company’s voting ornon-voting securities may be required to file an application, be investigatedand have that person’s suitability as a beneficial holder of voting securitiesdetermined if the Nevada Commission has reason to believe that the ownershipwould otherwise be inconsistent with the declared policies of the State of Nevada.If the beneficial holder of such securities who must be found suitable is acorporation, partnership, limited partnership, limited liability company ortrust, it must submit detailed business and financial information, including alist of its beneficial owners.  Theapplicant must pay all costs of the investigation incurred by the Nevada GamingAuthorities in conducting any investigation.

 

The Nevada Act requiresany person who individually or in association with others acquires, directly orindirectly, beneficial ownership of more than 5% of a Registered Company’svoting securities to report the acquisition to the Nevada Commission, and suchperson may be required to be found suitable. The Nevada Act requires that eachperson who, individually or in association with others, acquires, directly orindirectly, beneficial ownership of more than 10% of a Registered Company’svoting securities to apply to the Nevada Commission for a finding ofsuitability within 30 days after the Chairman of the Nevada Board mails thewritten notice requiring such filing. Under certain circumstances, an “institutionalinvestor,” as defined in the Nevada Act, which acquires more than 10%, but notmore than 15%, of a Registered Company’s voting securities may apply to theNevada Commission for a waiver of a finding of suitability if the institutionalinvestor holds the voting securities for investment purposes only. Also undercertain circumstances, an institutional investor that has obtained a waiver mayhold up to 19% of a Registered Company’s voting securities for a limited periodof time and maintain the waiver. An institutional investor will not be deemedto hold voting securities for investment purposes unless the voting securitieswere acquired and are held in the ordinary course of business as aninstitutional investor and not for the purpose of causing, directly orindirectly, the election of a majority of the members of the board of directorsof a Registered Company, a change in the corporate charter, bylaws, management,policies or operations of a Registered Company, or any of its gamingaffiliates, or any other action which the Nevada Commission finds to beinconsistent 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 allmatters voted on by stockholders or interest holders;

 

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·                  making financialand other inquiries of management of the type normally made by securitiesanalysts for informational purposes and not to cause a change in management,policies or operations; and

 

·                  other activitiesthat the Nevada Commission may determine to be consistent with such investmentintent.

 

Any person who fails orrefuses to apply for a finding of suitability or a license within 30 days afterbeing ordered to do so by the Nevada Commission or the Chairman of the NevadaBoard may be found unsuitable. The same restrictions apply to a record owner ofequity securities if the record owner, after request, fails to identify thebeneficial owner. Any member found unsuitable and who holds, directly orindirectly, any beneficial ownership of the equity securities of a RegisteredCompany beyond such period of time as may be prescribed by the NevadaCommission may be guilty of a criminal offense. A Registered Company is subjectto disciplinary action if, after it receives notice that a person is unsuitableto be a member or hold a voting security or other equity security issued by theRegistered Company or to have any other relationship with the RegisteredCompany, the Registered Company:

 

·                  pays that personany dividend or interest with respect to voting securities of the RegisteredCompany;

 

·                  allows thatperson to exercise, directly or indirectly, any voting right conferred throughsecurities held by that person;

 

·                  paysremuneration in any form to that person for services rendered or otherwise; or

 

·                  fails to pursueall lawful efforts to require such unsuitable person to relinquish his or hervoting securities, including, if necessary, the immediate purchase of saidvoting securities for cash at fair market value.

 

The Nevada Commissionmay, in its discretion, require the holder of any debt or non-voting securityof a Registered Company to file applications, be investigated and be foundsuitable to own the debt or non-voting security of a Registered Company. If theNevada Commission determines that a person is unsuitable to own such security,then pursuant to the Nevada Act, the Registered Company can be sanctioned,including by revocation of its approvals, if without the prior approval of theNevada Commission, the Registered Company:

 

·                  pays to theunsuitable person any dividend, interest, or any distribution whatsoever;

 

·                  recognizes anyvoting right by such unsuitable person in connection with such securities;

 

·                  pays theunsuitable person remuneration in any form; or

 

·                  makes anypayment to the unsuitable person by way of principal, redemption, conversion,exchange, liquidation or similar transaction.

 

A Registered Company maynot make a public offering of its securities without the prior approval of theNevada Commission if the securities or the proceeds therefrom are intended tobe used to construct, acquire or finance gaming facilities in Nevada, or toretire or extend obligations incurred for such purposes.

 

The Nevada Act providesthat changes in control of a Registered Company through merger, consolidation,stock or asset acquisitions, management or consulting agreements, or any act orconduct by a person whereby the person obtains control, may not occur withoutthe prior approval of the Nevada Commission. Entities and persons seeking toacquire control of a Registered Company must satisfy the Nevada Commission withrespect to a variety of stringent standards prior to assuming control of suchRegistered Company. The Nevada Commission may also require controllingstockholders, members, partners, officers, directors and other persons havingan ownership interest in or a material relationship or involvement with theentity proposing to acquire control to be investigated and licensed as part ofthe approval process relating to the transaction.

 

Any person who islicensed, required to be licensed, registered, required to be registered, orunder common control with such persons, and who proposes to become involved oris involved in a gaming venture outside of Nevada (“*Foreign Gaming*”), is required to deposit certain funds withthe Nevada Board in order to pay the expenses of investigation of the NevadaBoard of their participation in such Foreign Gaming. Thereafter the licenseesare required to comply with certain reporting requirements imposed by theNevada Act. A licensee is also subject to disciplinary action by the NevadaCommission if it knowingly violates any laws of the foreign jurisdictionpertaining to the Foreign Gaming operation, fails to conduct the Foreign Gamingoperation in accordance with the standards of honesty and integrity required ofNevada gaming operations, engages in activities or enters into associationsthat are harmful to the State of Nevada or its ability to collect gaming taxesand fees, or employs, contracts with, or associates with, a person in theForeign 

 

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Gaming operation who hasbeen denied a license or finding of suitability in Nevada on the ground ofpersonal unsuitability.

 

***Pennsylvania Gaming Laws and Regulations***

 

The ownership andoperation of slot machine facilities in Pennsylvania are subject to extensivestate regulation by the Pennsylvania Board under the Pennsylvania Act and theregulations of the Pennsylvania Board. The Pennsylvania Board has broad discretion regarding the issuance,renewal, revocation and suspension of slot machine licenses.  The Pennsylvania Act, and the regulationspromulgated thereunder, concern primarily the good character, honesty,integrity and financial stability of slot machine licensees, their intermediaryand holding companies, their employees, their security holders and othersfinancially interested in slot operations.

 

On December 20,2006, the Pennsylvania Board approved WTA to receive a Category 1 Slot MachineLicense. The Category 1 Slot Machine License was approved upon completion of abackground investigation and initial satisfaction of certain conditions set bythe Pennsylvania Board. The holder of a Category 1 Slot Machine License mayoperate up to 3,000 slot machines and, with the approval of the PennsylvaniaBoard, up to an additional 2,000 slot machines after six months of operation.Prior to the commencement of slot machine operations, WTA obtained additionalapprovals from the Pennsylvania Board, such as approval of internal controlsand equipment, licensing of employees and the successful completion of gamingtest days.

 

As pre-conditions toreceiving its license, WTA had to demonstrate, by clear and convincing evidenceto the satisfaction of the Pennsylvania Board, that WTA and its affiliates arepersons of good character, honesty, integrity and that their prior activities, reputation,habits and associations do not pose a threat to the public interest or theeffective regulation and control of slot machine operations or create orenhance the danger of unsuitable, unfair or illegal practices, methods andactivities in the conduct of slot machine operations or in the carrying on ofthe business and financial arrangements incidental thereto. WTA also had todemonstrate by clear and convincing evidence the adequacy of its financialresources, the financial stability, integrity and responsibility of it and itsaffiliates, and the integrity of all financial backers, investors, mortgagees,bondholders and holders of indentures, notes or other evidences ofindebtedness, either in effect or proposed, except that banking or licensed lendinginstitutions and certain institutional investors may be waived from thequalification requirements. WTA had to show by clear and convincing evidencethat it has sufficient business ability and experience to create and maintain asuccessful, efficient operation.

 

As a licensee, WTA isobligated to develop and implement a diversity plan to assure that all personsare accorded equality of opportunity in employment and contracting, which ithas done. WTA is also required to maintain certain records, which it has done,which shall be made available to the Pennsylvania Board upon request. Inaddition, WTA is required to hold a license issued by the PennsylvaniaCommission to conduct harness racing meetings. WTA holds a license from thePennsylvania Commission to conduct harness racing meetings.

 

As a licensee, WTA isobligated to fully cooperate with the Pennsylvania Board in the conduct of anyinquiry or investigation and provide any supplementary information as may berequested. Currently, there are no known inquiries or investigations, exceptlicense renewal investigations that are in the normal course, being conductedabout WTA or its affiliates.

 

No executive-levelPennsylvania state employee, public official or party officer, or any of theirimmediate family members, may knowingly or intentionally have a financialinterest in a licensed gaming entity, be employed by any gaming entity oraffiliate thereof or solicit or accept any service or discount not offered tothe general public from a gaming entity or affiliate. No applicant, affiliate,intermediary, subsidiary or holding company may possess a greater thanone-third ownership or financial interest in another slot machine licensee orperson 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.

 

The Pennsylvania Boardmay deny an application or suspend or revoke a license of a person or applicantwho has failed to prove to the satisfaction of the Pennsylvania Board that theperson or applicant is qualified in accordance with the Pennsylvania Act, whohas violated the Pennsylvania Act, who is disqualified under the criteria setforth in the Pennsylvania Act, who provided false or misleading information tothe Pennsylvania Board, who has materially departed from a representation madein the application for a license or who has failed to comply with applicable Federalor state laws or regulations. If the Pennsylvania Board does not approve a slotmachine license application based on a finding that an individual who is aprincipal or has an interest in the entity applying for licensure does not meetthe character requirements or any other eligibility requirement or is inviolation of the change in ownership and control provisions of the PennsylvaniaAct, the Pennsylvania Board may permit the individual or entity the opportunityto divest completely his or her interest in the entity and related entities.The Pennsylvania Board must approve the terms and conditions of divestiture,but the Pennsylvania Act requires that the compensation for the divestedinterest not exceed the cost of the interest.

 

On February 27, 2007,WTA paid a one-time license fee in the amount of $50 million. As a Category 1Slot Machine licensee, WTA is subject to a daily tax of 34%, a local countyshare assessment of 2%, a local municipality share assessment of 2% but no lessthan 

 

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$10 million, anadditional daily assessment of 5% of its daily gross terminal revenue, and a1.5% tax on gross terminal revenue. A licensee shall also pay a dailyassessment to the Pennsylvania Race Horse Development Fund in a maximum amountof 12% of daily gross terminal revenue as determined by the Department ofRevenue. WTA is also responsible for the costs of investigation and regulation.

 

A license or permitissued by the Pennsylvania Board is a privilege and, except as set forth below,may not be sold, transferred or assigned to any person, nor shall a licensee orpermittee pledge or otherwise grant a security interest in a license. Alicensee must notify the Pennsylvania Board prior to or immediately uponbecoming aware of any proposed or contemplated change of ownership by a groupor person which involves (i) more than 5% of the licensee’s ownershipinterests, (ii) more than 5% of the ownership interests of an entity thatowns, directly or indirectly, at least 20% of the voting or other ownershipinterests of the licensee, (iii) a sale, other than in the ordinary courseof business, of a licensee’s assets, or (iv) any other transaction oroccurrence deemed to be relevant by the Pennsylvania Board. A purchaser of theassets of a licensee other than in the ordinary course of business or of morethan 20% of the licensee’s ownership interests must independently qualify for alicense and pay a new license issuance fee of $50 million. However, the fee issubject to reduction in the discretion of the Pennsylvania Board. WTA notifiedthe Pennsylvania Board of the proposed transfer to Crown in December 2007.

 

Slot machine licenses mustbe renewed annually. If a completed renewal application is received in a timelymanner, the license shall remain in effect unless and until the PennsylvaniaBoard denies or renews the license.

 

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

 

The ownership andoperation of pari-mutuel harness racing facilities in Pennsylvania is subjectto extensive state regulation by the Pennsylvania Commission under the RHIRAand the regulations of the Pennsylvania Commission.  Pursuant to the RHIRA, the PennsylvaniaCommission is empowered to issue no more than five licenses for the conduct ofpari-mutuel harness racing (each, a “*HarnessRacing License*”).  Twosubsidiaries of PA Meadows, WTA and Mountain Laurel Racing, Inc., eachholds one of the five Harness Racing Licenses. In June 2007, the Pennsylvania Commission granted the soleremaining Harness Racing License to Valley View Downs, LP.

 

Once a Harness RacingLicense has been issued, the RHIRA provides that such license shall remain ineffect so long as the licensee complies with all conditions, rules, regulationsand provisions of the RHIRA.  HarnessRacing Licenses are not transferable. The RHIRA requires that each holder of a Harness Racing License shall,within ten days after any transfer of stock comprising an interest of 5% ormore of such licensee, notify the Pennsylvania Commission of suchtransfer.  Such licensee must also filewith the Pennsylvania Commission affidavits from the proposed transfereessetting forth certain required information regarding the proposed transfer andthe proposed transferee.  WTA and MLRhave sent appropriate notice to the Pennsylvania Commission regarding theproposed transactions with the Crown Parties.

 

Since PA Meadowspurchased the stock of the entities that own and operate The Meadows, the MECOperator has continued to conduct harness racing at the site of The Meadows andoperate the racing operations. As such, and in connection with such activities,the MEC Operator has made appropriate application to the Pennsylvania Commissionand maintains an appropriate license.

 

If the PennsylvaniaCommission determines that it is inconsistent with the public interest,convenience or necessity, or with the best interest of racing generally, forany person to continue as the holder of an equity interest in a licensee or anyparent or affiliate of a licensee, the Pennsylvania Commission may order suchperson to dispose of such interest in a licensee within a period of timespecified by the Pennsylvania Commission.

 

The Pennsylvania Commissionmay refuse to grant a Harness Racing License or may suspend or revoke a HarnessRacing License without a prior hearing if it determines by a preponderance ofthe evidence that (i) a licensee, its officers, employees or agents havenot complied with the conditions, rules, regulations and provisions of theRHIRA and (ii) it would be in the public interest, convenience ornecessity to revoke or suspend the subject license. Such refusal, suspension orrevocation may be premised upon, among other things, a determination by thePennsylvania Commission that (a) any officer, director, member orstockholder of the licensee or any parent or affiliate of the licensee (1) hasbeen convicted of a crime involving moral turpitude, (2) has engaged inbookmaking or other forms of illegal gambling, (3) has been found guiltyof any fraud or misrepresentation in connection with racing or breeding, (4) hasbeen found guilty of any violation or attempt to violate any law, rule orregulation of any racing jurisdiction for which suspension from racing might beimposed in such jurisdiction or (5) has violated any rule, regulation ororder of the Pennsylvania Commission, or (b) the experience, character orfitness of any officer, director, member or stockholder of the licensee or anyparent or affiliate of the licensee is such that the participation of theperson in horse racing or related activities would be inconsistent with thepublic interest, convenience or necessity or with the best interest of racing.Upon receiving notice of any such determination by the Pennsylvania Commission,a licensee may, 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 

 

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Harness Racing Licenseshall remain in full force pending such hearing and final determination.

 

In addition to its powerto suspend or revoke Harness Racing Licenses, the Pennsylvania Commission isauthorized and empowered to impose fines upon persons and entities thatparticipate in any way in any horse race meet at which pari-mutuel wagering isconducted and violate the RHIRA or the rules and regulations promulgatedby the Pennsylvania Commission, in an amount not to exceed $5,000 for eachviolation.

 

Each entity participatingin the management of a licensee and each licensee must provide the PennsylvaniaCommission on an annual basis with a complete list of all holders of anownership interest in such entity or licensee, indicating the interest ofeach  such owner.

 

***Reports to Security Holders***

 

The Company is requiredto file annual, quarterly and other current reports and information with theCommission. You may read and copy any materials filed by the Company with theCommission at its Public Reference Room at 100 F Street, NE, Room 1580,Washington, D.C. 20549. You may obtain information on the operation of thePublic Reference Room by calling the Commission at 1-800-SEC-0330. TheCompany’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.

 

**Item2.    Description of Property.**

 

Neither the registrantnor any of its consolidated subsidiaries owns real property.

 

**Item3.    Legal Proceedings.**

 

As of March 31,2009, neither the Company nor any of its consolidated subsidiaries is a partyto any pending legal proceeding, and to their knowledge, no action, suit orproceeding against it or any of its consolidated subsidiaries has beenthreatened by any person.

 

As of March 31,2009, no director, officer, affiliate or security holder of the Company, and noowner of record or beneficially of more than five percent of the Company’s Class AMembership Units, is adverse to the Company or has a material interest adverseto the Company, in any material proceeding to which such person is a party.

 

**Item4.**  **Submission ofMatters to a Vote of Security Holders.**

 

No matters were submittedto a vote of security holders during the quarter ended December 31, 2008.

 

**PART II**

 

**Item5.    Market for Common Equity, Related Stockholder Matters andSmall Business Issuer Purchases of Equity Securities.**

 

On September 23,2005, the Company issued all of its Class A Membership Units to VoteCowithout registration pursuant to Section 4(2) of the Securities Actin exchange for an aggregate capital contribution of $100. On that same date,the Company issued all of its Class B Membership Units to InvestCo withoutregistration pursuant to Section 4(2) of the Securities Act inexchange 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.

 

No established publictrading market exists for the Company’s membership units. There are no plans,proposals, arrangements or understandings with any person with regard to thedevelopment of a trading market in any of the Company’s membership units.  In addition, the Final Order prohibitsVoteCo, 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.

 

There are no outstandingoptions or warrants to purchase, or securities convertible into, the Company’smembership units.  The Company’scurrently outstanding Class A Membership Units are “restricted,” whichmeans that they were originally sold in offerings that were not subject to aregistration 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 membershipunits are aggregated and who has beneficially owned restricted membership unitsfor at least six months to sell in the public market within any three-monthperiod a number of membership units that does not exceed the greater of:

 

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·                  1% of the thenoutstanding membership units of the class of membership units to be sold; or

 

·                  if applicable,the average weekly trading volume of the class of membership units to be soldon all national securities exchanges and/or reported through the automatedquotation system of a registered securities association during the fourcalendar weeks preceding the date on which notice of sale is filed with theCommission.

 

Sales pursuant to Rule 144under the Securities Act are subject to restrictions relating to the manner ofsale, notice and availability of current public information about theCompany.  The Company has not agreed withany security holder to register any of its membership units for sale by anysecurity holder.  The Company does notcurrently propose to publicly offer any membership interests of its commonequity.

 

As of March 31,2009, 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.

 

The Company does not pay,and does not expect to pay in the foreseeable future, any dividends or otherdistributions with respect to its membership units.

 

The Company does not haveany equity compensation plans and does not expect to authorize securities forissuance pursuant to any equity compensation plans in the foreseeable future.

 

**Item6.    Selected Financial Information.**

 

Notapplicable.

 

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**Item7.    Management’s Discussion and Analysis.**

 

***Overview***

 

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

 

TheCompany’s current business consists primarily of its ownership of a 42% equityinterest in CCR and a 33-1/3% equity interest in NP Land. CCR operatesthree Las Vegas casinos, The Cannery, Eastside Cannery, and the Rampart Casino,and The Meadows, a harness racetrack in Pennsylvania where it is constructing amore permanent casino.  In addition, CCRoperated the Nevada Palace which ceased operations on February 29, 2008 inconnection with the construction of the Eastside Cannery, which opened on August 28,2008 and replaced the Nevada Palace.  NPLand owns the land of the current site of Eastside Cannery.

 

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 Current 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**—* *Subsequent Events —  Termination and Settlement Agreement.  On March 12, 2009, the Company alsoentered into the Preferred Purchase Agreement and the Option Agreement with theCrown Parties, CCR and Millennium, each as more fully described under Item 1 — Business Developments**—* *Subsequent Events —  Preferred Purchase Agreement and OptionAgreement.

 

***Resultsof Operation***

 

Results of operations for the year ended December 31, 2008, compared to the year ended December 31, 2007.

* *
| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Change**  | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|-------------|------------|
| ** **                                      | ** ** | **2008**   | ** ** | **2007**   | ** ** | **Dollars** | ** ** | **Percent** | ** ** |
| Interest income                                 |       | $          | 17,504     |       | $          | 20,180      |       | $ | (2,676 | ) | (13 | )% |
| Equity in  earnings of unconsolidated investees |       | 3,540,207  |       | 1,087,034  |       | 2,453,173   |       | 226 | % |
| Total income                                    |       | 3,557,711  |       | 1,107,214  |       | 2,450,497   |       | 221 | % |
| Operating,  general and administrative costs    |       | 351,011    |       | 330,486    |       | 20,525      |       | 6 | % |
| Income (loss)  before income tax benefit        |       | $          | 3,206,700  |       | $          | 776,728     |       | $ | 2,429,972 |   | 313 | % |

 

No cash distributionswere received from CCR or NP Land during the year ended December 31,2008.  This has resulted in lower cashbalances as of December 31, 2008, as compared to December 31,2007.  The Company expects interestincome to increase during 2009 due to receipt of the $21 million payment fromthe Crown Parties in connection with the termination of the Original PurchaseAgreement as discussed above.

 

CCR’s net incomeincreased by approximately $5.8 million for the year ended December 31,2008, as discussed in the operational highlights for CCR below accounting forthe increase in equity in earnings of unconsolidated investees.  The Company expects earnings inunconsolidated investees to stay relatively the same.

 

The increase inoperating, general and administrative costs was due to an increase inprofessional fees during the year ended December 31, 2008, offset by a lowerrelated party management fee of $50,000 as compared to $75,000 for the prioryear.   The Company expects operating,general and administrative costs to stay relatively the same

 

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, 2008 and 2007, are as follows:

 

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·      Revenues for the year ended December 31,2008, increased approximately 37.7% compared to the prior year.  These increases primarily resulted from theopening of the temporary casino facility at The Meadows in June 2007 andEastside Cannery in August 2008.  TheRampart Casino’s revenues for the year ended December 31, 2008, decreasedapproximately 4.4% compared to the prior year. The Cannery’s revenues for the year ended December 31, 2008,decreased approximately 6.8% compared to the prior year.

 

·                  Income fromoperations for the twelve months ended December 31, 2008 increasedapproximately 27.9% compared to the prior year primarily due to the operationsof The Meadows. 

 

·                  Net income forthe year ended December 31, 2008, increased approximately $5.8 millioncompared to the prior year.  In additionto the factors previously mentioned, other reasons for the net increaseinclude, (1) the prior year included a loss on debt extinguishment ofapproximately $15 million; (2)  interest expense was 24.7% higher in thecurrent year due to increased borrowings; (3) a $2.6 million gain on the disposition of an investment in theprior year; and (4) increased income taxes associated with The Meadowsoperations. 

 

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.

 

*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***

 

As previously discussed,the Company received $21 million in March 2009 in connection with thetermination of the Original Purchase Agreement. As a result, the Company has sufficient liquidity to meet its capitalresource needs for the foreseeable future.

 

***Off Balance Sheet Arrangements***

 

*Credit Agreements*

 

OnMay 18 2007, CCR entered into two new syndicated credit facilities totaling$860 million: a $745 million first lien facility and a $115 million second lienterm loan facility (collectively, the “*Credit Agreements*”).  Portions of the proceeds were used to retireexisting debt, including the then-existing $250 million credit facility, and topartially fund the completion of the Eastside Cannery.  The remaining proceeds are being used topartially fund the construction of the permanent casino facility at TheMeadows.  For more information about thesyndicated credit facilities, see the Company’s periodic filing on Form 8-Kfiled with the SEC on May 24, 2007.

 

CCR’sobligations under the Credit Agreements are guaranteed by its subsidiaries andare secured by substantially all of the real and personal property of CCR andits subsidiaries, except that certain gaming-related accounts and assets arenot pledged under the Credit Agreements.

 

*Additional Conditional Commitments*

 

In March 2009, Millenniumand the Company, through AcquisitionCo, made equity contributions to CCR forthe purpose of maintaining CCR’s compliance with its debt covenants.  The equity contribution by AcquisitionCo wasfunded by an equity contribution from Blocker, which in turn was funded by aloan from the Company.

 

InMay 2008, a wholly-owned subsidiary of the Company entered into a loanrepayment guarantee agreement which is expected to terminate no later than May 15,2009.  The likelihood of the guaranteeever being called is remote.  Althoughthe maximum exposure under the guarantee is $20 million, the fair value of theguarantee is not material as of December 31, 2008.

 

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Asof December 31, 2008, the Company was conditionally committed to make upto an additional $25 million of equity investment in CCR to support theoperational needs of CCR’s subsidiary, PA Meadows, but only in certain limitedcircumstances and only to the extent not previously funded.

 

**Item8.** **FinancialStatements.**

 

The financial statementsand supplementary data of the Company called for by this item are submittedunder a separate section of this annual report. Reference is made to the Index of Financial Statements contained on page F-1hereof.

 

**Item9.** **Changes In andDisagreements With Accountants on Accounting and Financial Disclosure.**

 

None.

 

**Item9(A)T. Internal Control over Financial Reporting.**

 

**Evaluationof Disclosure Controls and Procedures**

 

As of the end of theperiod covered by this annual report, the Company carried out an evaluation,under the supervision and with the participation of the Company’s management,including the Company’s principal executive officer and principal financialofficer, of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures pursuant to Rule 13a-15(b) of theExchange Act. Based upon that evaluation, the principal executive officer andprincipal financial officer concluded that the Company’s disclosure controlsand procedures are effective.

 

**Management’sAnnual Report on Internal Control Over Financial Reporting**

 

Management is responsiblefor establishing and maintaining adequate internal control over financialreporting as defined in Rule 13a-15(f) under the Exchange Act.  This rule defines internal control overfinancial reporting as a process designed by, or under the supervision of, theCompany’s principal executive officer and principal financial officer, toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith U.S. GAAP. The Company’s internal control over financial reportingincludes those policies and procedures that:

 

·                  Pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the Company;

 

·                  Providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with U.S. GAAP, and thatreceipts and expenditures of the Company are being made only in accordance withauthorizations of management of the Company; and

 

·                  Providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company’s assets that could have amaterial effect on the financial statements.

 

The Company’s management,including the Company’s principal executive officer and principal financialofficer, does not expect that its disclosure controls and procedures, or itsinternal 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.

 

Management has evaluatedthe effectiveness of its internal control over financial reporting as of December 31,2008, based on the control criteria established in a report entitled *Internal Control—Integrated Framework*,issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO).  That framework defines amaterial weakness as a control deficiency, or combination of controldeficiencies, that results in more than a remote likelihood that a materialmisstatement of the annual or interim financial statements will not beprevented or detected. Based upon that evaluation, our management concludedthat the Company’s internal control over financial reporting is effective.

 

This annual report doesnot include an attestation report of the Company’s registered public accountingfirm regarding internal control over financial reporting.  Management’s report was not subject toattestation by the Company’s registered public accounting firm 

 

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pursuant to temporary rules ofthe Commission that permit the Company to provide only management’s report inthis annual report.

 

**Changesin Internal Control over Financial Reporting**

 

We have made nosignificant change in our internal control over financial reporting during themost recent fiscal quarter covered by this annual report on Form 10-K thathas materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

**Item9B.** **Other Information.**

 

Not Applicable.

 

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**PART III**

 

**Item10.** **Directors,Executive Officers, Promoters and Control Persons.**

 

As of March 31,2009, the managers of the Company and of CCR are as follows:

 
| **Name**           | ** ** | **Age** | ** ** | **Position**                          | ** ** | ** ** |
|--------------------|------------|---------|------------|---------------------------------------|------------|------------|
| Stephen A.  Kaplan |       | 50      |       | Manager of the Company & CCR |       |       |
| Ronald N. Beck     |       | 53      |       | Manager of the Company & CCR |       |       |
| William Paulos     |       | 61      |       | Manager of CCR                        |       |       |
| William Wortman    |       | 62      |       | Manager of CCR                        |       |       |

 

STEPHEN KAPLAN has servedas a Manager of the Company since its inception and as manager of CCR and amember of its management committee since September 2006, and is expectedto continue in these roles. Mr. Kaplan is a Principal at Oaktree and isthe 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.

 

RONALD BECK has served asa Manager of the Company since its inception and as manager of CCR and a memberof its management committee since September 2006, and is expected tocontinue 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.

 

WILLIAM J. PAULOS has servedas manager of CCR and a member of its management committee since May 2001.Mr. Paulos established Millennium Management Group, LLC in September 1996with Mr. Wortman and has served as its Chief Executive Officer since itsinception. Millennium Management Group, LLC is currently a consultant to theGreektown Casino in Detroit. From January 1995 to September 1996, Mr. Pauloswas President of Primadonna Resorts, Inc. which, through subsidiaries,owned and operated various casino hotel properties including Buffalo Bill’s,Whiskey Pete’s, the Primm Valley Inn and Resort and New York-New York CasinoResort. From March 1994 to January 1995, Mr. Paulos was theChief Operating Officer of Crown Casino Limited.

 

WILLIAM C. WORTMAN hasserved as manager of CCR and a member of its management committee since May 2001.Mr. Wortman established Millennium Management Group, LLC in September 1996with Mr. Paulos and has served as its President since its inception. In1985, Mr. Wortman became an owner in the Nevada Palace, which he continuesto own. Mr. Wortman has also served as President of Nevada First Bankcorpsince 1999, and has served as Vice-Chairman of the Board of Nevada 1st Banksince 1997. From 1993 to 1994, Mr. Wortman served as Chairman and ChiefExecutive Officer of Palace Casinos, Inc.

 

The Company’s namedexecutive officers are Mr. Kaplan and Mr. Beck, who receive nocompensation for their services as Managers. The Company has no directors.

 

The Company was foundedby the VoteCo Equityholders for the primary purpose of participating in variousactivities relating to the gaming industry. Seven of the VoteCo Equityholdersare principals of Oaktree and one is a managing director of Oaktree. None wouldbe considered independent under the NASDAQ Stock Market listing standards. TheVoteCo Equityholders did not receive any direct consideration or othercompensation in connection with their activities in founding the Company.

 

***Corporate Governance***

 

*TheCompany*

 

Pursuant to the Company’slimited liability company agreement, the Company is managed by two Managers,each of whom is appointed, and may be removed, by VoteCo as the holder of Class AMembership Units. The two current Managers of the Company are Messrs. Kaplanand Beck. The Company’s Managers cannot take and cannot cause the Company totake the following actions without the approval of VoteCo as the holder of Class AMembership Units:

 

·                  any materialchange in the business purpose of the Company or the nature of the business;

 

·                  any action thatwould render it impossible to carry on the ordinary business of the Company;

 

·                  any removal orappointment of any Manager of the Company;

 

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·                  any voluntarywithdrawal of any member from the Company;

 

·                  any assignmentfor the benefit of creditors, any voluntary bankruptcy of the Company, or anytransaction to dissolve, wind up or liquidate the Company; or

 

·                  any transactionbetween the Company and any member or Manager of the Company, or any affiliateor direct family member of any member or Manager of the Company, that is notmade on an arm’s-length basis.

 

Generally, in all otherrespects, VoteCo has no power or authority to participate in the management ofthe Company or to bind or act on behalf of the Company in any way or to renderit liable for any purpose.  Except asotherwise expressly required by applicable law, InvestCo as the sole holder ofthe Company’s Class B Membership Units has neither any right to vote onany matters to be voted on by the members of the Company, nor any power orauthority to participate in the management of the Company or bind or act onbehalf of the Company in any way or render it liable for any purpose.

 

Because the Company hasconducted no operations other than in connection with the ownership of equityinterests in CCR and NP Land, the Company does not have, and is not required tohave, a separately designated audit, nominating or compensation committee orcommittee performing similar functions, and the Company does not have an auditcommittee financial expert.  Preparationof the Company’s financial statements is performed by an outside consultant, ona contractual basis, and supervised by the Company’s Managers.

 

*CCR*

 

In connection with theCompany’s acquisition of its equity interest in CCR, AcquisitionCo andMillennium executed an amended and restated form of operating agreement. 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) of the Exchange Act***

 

The Company voluntarilyregistered 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.

 

***Code of Ethics.***

 

We have adopted a code ofethics as described in Item 406 of Regulation S-B.  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.

 

**Item11. Executive Compensation.**

 

Messrs. Kaplan andBeck, the Company’s named executive officers, are not entitled to compensationfrom the Company for any services rendered to or on behalf of the Company, orotherwise, in their capacities as Managers of the Company, and since theinception of the Company have received no such compensation.  The Company’s Managers are entitled to reimbursementfrom the first available funds of the Company for direct out-of-pocket costsand expenses incurred on behalf of the Company that directly relate to thebusiness and affairs of the Company.

 

The VoteCo Equity holdersdid not receive any direct consideration or other compensation in connectionwith their activities in founding the Company.

 

**Item12. Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters**

 

The Company has no equitycompensation plans.

 

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The following table setsforth, as of March 31, 2009, information regarding the beneficialownership of the Company’s voting securities by all persons known to be thebeneficial owners of more than 5% of any voting class of Company 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                                  |       | Richard Masson                                                         |       | .100 Units                                                         | (5)        | 100                            | %(5)       |
| Class A  Units                                  |       | Sheldon Stone                                                          |       | .100 Units                                                         | (5)        | 100                            | %(5)       |

 

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(1)                Theaddress for each beneficial owner is:

 

c/o OaktreeCapital Management, L.P.

333 South GrandAve, 28th  Floor

Los Angeles, CA90071

 

(2)                Beneficialownership is determined in accordance with the Exchange Act, as amended, andthe rules and regulations promulgated thereunder.

 

(3)                VoteCo directlyowns 100% of the Company’s Class A Membership Units.

 

(4)                Messrs. Kaplanand Beck are the managers of VoteCo and the Company.

 

(5)                Stephen Kaplan,Ronald Beck, John Frank, Bruce Karsh, David Kirchheimer, Howard Marks, RichardMasson and Sheldon Stone are each a voting member of VoteCo holding 12.5 VoteCounits. These individuals may be deemed to form a “group” holding all 100 VoteCounits and, as a result, each such individual may be deemed to be a beneficialowner of the .100 Class A Membership Units of the Company directly held byVoteCo.

 

None of the Class AMembership Units beneficially owned by the persons listed in the table abovehave been pledged as security.

 

The following table setsforth, as of March 31, 2009, information regarding the beneficialownership by all Managers of the Company, named individually and as a group, ofany class of equity securities of the Company, the Company’s parent or theCompany’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)        | 12.5                           | %(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)       | 12.5                           | %(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)       | 25                             | %(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)                Theaddress for each beneficial owner is:

 

c/o OaktreeCapital Management, L.P.

333 South GrandAve, 28th  Floor

Los Angeles, CA90071

 

(2)                                  Beneficialownership is determined in accordance with the Exchange Act, as amended, andthe rules and regulations promulgated thereunder.

 

(3)                                  Messrs. Kaplanand Beck are the managers of VoteCo, the Company, Blocker, AcquisitionCo,LandCo and OCM AcquisitionCo II, LLC. Blocker is a direct subsidiary of the Company and owns nothing otherthan its interest in AcquisitionCo.

 

(4)                                  Mr. Kaplanis the listed owner of the securities.

 

(5)                                  VoteCois the listed owner of all .100 Company Class A Membership Units.  Messrs. Kaplan and Beck each may bedeemed to be a member of a “group” holding all 100 VoteCo Units and, as aresult, each of Mr. Kaplan and Mr. Beck may be deemed to be abeneficial owner of all .100 Company Class A Membership Units directlyheld by VoteCo.

 

(6)                                  TheCompany is the listed owner of all 126,896.317 Blocker Class A Units. Eachof Messrs. Kaplan and Beck may be deemed to be a member of a “group”holding all 100 VoteCo Units and, as a result, each of Messrs. Kaplan andBeck may be deemed to be a beneficial owner of all 126,896.317 Blocker Class AUnits directly held by the Company.

 

(7)                                  Blockeris the listed owner of all 1,000 AcquisitionCo Class A Membership Units. Messrs. Kaplanand Beck each may be deemed to be a member of a “group” holding all 100VoteCo 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)                                  AcquisitionCois the listed owner of all 1,000 LandCo Units. Each of Messrs. Kaplan and Beck may be deemed to be a member of a “group”holding all 100 VoteCo units and, as a result, each of Messrs. Kaplan andBeck may be deemed to be a beneficial owner of all 1,000 LandCo Units directlyheld by AcquisitionCo.

 

(9)                                  TheCompany is the listed owner of all of the equity interests of AcquisitionCoII.  Each of Messrs. Kaplan and Beckmay be deemed to be a member of a “group” holding all 100 VoteCo units and, asa result, 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. Beckis the listed owner of the securities.

 

(11)                            Messrs. Kaplanand Beck are each a listed owner of 50% of these securities.

 

None of the securitieslisted in the table above as beneficially owned by the Company’s Managers hasbeen pledged as security.

 

**Item13. Certain Relationships and Related Transactions.**

 

***Limited Liability and Indemnification under the Company’sLimited Liability Company Agreement and CCR’s Operating Agreement***

 

The Company’s limitedliability company agreement provides that no member or Manager of the Companyhas any liability for the obligations of the Company, except to the extentrequired by law. To the maximum extent authorized by law, the Companyindemnifies any person from any loss, damage, claim or liability incurred byhim, her or it as a result of any act or failure to act (other than as a resultof fraud, gross negligence or willful misconduct) performed or not performed bysuch person as a member, Manager, employee, agent or representative of theCompany, including attorneys’ fees, judgments, fines and amounts paid insettlement actually and reasonably incurred.

 

In addition, a Manager ofthe Company who performs his or her duties in good faith, in a manner he or shereasonably believes to be in the best interests of the Company and with suchcare as an ordinarily prudent person in a like position would use under similar

 

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circumstances, does nothave any liability by reason of being or having been a Manager of the Company.Furthermore, a Manager of the Company is not liable, as Manager of the Company,under any judgment, decree or order of court, or in any other manner, for anydebt, obligation or liability of the Company.

 

CCR’s operating agreementprovides that under certain circumstances CCR will indemnify any person who isan affiliate of AcquisitionCo who was or is a party or is threatened to be madea party to any threatened, pending or completed action, suit or proceeding, byreason of the fact that he, she or it was serving at the request of CCR as amanager, officer, employee or agent of CCR. CCR’s operating agreement alsoprovides that CCR will reimburse AcquisitionCo and its affiliates in connectionwith the development of gaming opportunities for CCR, at a cap of $250,000 perfiscal year of CCR, and will reimburse the expenses of managers of CCR servingon CCR’s management committee, including those managers who are affiliates ofAcquisitionCo, for certain out-of-pocket expenses reasonably attributable toCCR.

 

***Other Transactions***

 

In February 2007,the Oaktree Funds, beneficial owners of the Company’s non-voting equityinterests, agreed to support, through member contributions to CCR, letters ofcredit issued in favor of the Pennsylvania Department of Transportation for anaggregate stated amount of approximately $18.3 million.  Such support was transferred to PA Meadowsduring the second quarter of 2007.  TheOaktree Funds received $382,000 from CCR as consideration for supporting theletters of credit.

 

As of December 31,2008, the Company was conditionally committed to make up to an additional $25million of equity investment in CCR to support the operational needs of CCR’ssubsidiary, PA Meadows, but only in certain limited circumstances and only tothe extent not previously funded.

 

CCR has a receivable ofapproximately $16.2 million from NH Downs Holdings, LLC, a subsidiary ofInvestCo (“*NH Downs*”), in connection with thedevelopment of certain gaming opportunities in New Hampshire.

 

In March 2009, Millenniumand the Company, through AcquisitionCo, made equity contributions to CCR forthe purpose of maintaining CCR’s compliance with its debt covenants.  The equity contribution by AcquisitionCo wasfunded by an equity contribution from Blocker, which in turn was funded by aloan from the Company.

 

***Company’s Parent***

 

The Company’s only parentis VoteCo, which holds 100% of the voting securities of the Company.

 

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

 

*Transactionsrelating to the Company’s Acquisition of its Equity Interests in CCR and NPLand*

 

The Company entered intocertain transactions with Messrs. Paulos and Wortman in order toconsummate the transactions contemplated by the CUP Agreement.  On September 30, 2005, the Company’saffiliates loaned the InvestCo NP Loans and the LandCo Loan to entitiescontrolled by Mr. Wortman to enable Mr. Wortman, and entitiescontrolled by him, to acquire from an unrelated third party all of theinterests not otherwise owned by him in the entities which own the land andassets 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 331/3%interest in CCR for a total purchase price of $70 million.  All of these loans, while outstanding,accrued interest at 12%, but in the case of the LandCo Loan and theAcquisitionCo Loan, interest was waived and considered additional investmentupon the consummation of the Company’s acquisition of its initial 331/3% equity interest in CCR and NPLand.  The InvestCo NP Loans were securedby all of the membership interests in NP Land and a related entity controlledby Mr. Wortman, and were also secured by the land and assets of the NevadaPalace.  The LandCo Loan was secured bypledges of the membership interests in an entity controlled by Mr. Wortman.  The AcquisitionCo Loan and the InvestCo/MGIMLoan were secured by pledges of all of the membership interests in CCR held byMGIM, LLC and Millennium, which pledges were subordinated to the pledge of suchinterests securing CCR’s then-existing credit agreement.  When the transactions contemplated by the CUPAgreement were consummated, all of the related security interests werereleased.

 

In September 2006,the Company, through its subsidiaries, acquired MGIM, LLC’s 331/3% equity interest in CCR in exchange forthe cancellation of the $64 million AcquisitionCo Loan to MGIM, LLC, and a 331/3% equity interest in NP Land in exchangefor 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 whichthe Eastside Cannery sits.  NevadaPalace, LLC also acquired from entities affiliated with Mr. Wortman gamingequipment and

 

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other operating assetsfor approximately $8 million and assumed approximately $1,340,000 of slotmachine lease liabilities and $156,000 (accrued as part of the purchase price)of certain other liabilities directly associated with the continuation ofoperations of the Nevada Palace at the time its gaming assets were sold toCCR.  The NP Land lease is for a 35-yearterm at a fixed rental rate of $192,467 per month (as of December 31,2008), subject to periodic inflationary adjustments, and required a $3 millionsecurity deposit.

 

In addition to the loansand the NP Land lease, certain payments were made to Messrs. Paulos andWortman in connection with the transactions contemplated by the CUPAgreement.  The Company and Millenniumare generally responsible for their respective expenses in connection with theCUP Agreement.  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, includingconsulting 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. Wortman werereimbursed for approximately $2.3 million, respectively, of costs and expensesincurred by them primarily in connection with the development of the EastsideCannery.   In 2006, these costs andexpenses included $1.9 million of expenses incurred in connection with movingcertain 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.

 

Other than the $6 milliondistribution to Millennium and the $2.3 million reimbursement to entitiescontrolled by Mr. Wortman, there have been no payments by CCR or itsaffiliates to Messrs. Paulos or Wortman or their affiliates for fees,expenses or other amounts paid or payable in connection with the transactionsrelating to the CUP Agreement, except amounts paid for business expensesreimbursed in the ordinary course.

 

For additional informationconcerning the transactions relating to the CUP Agreement, see “Item 1.Description of Business — The Company — Acquisition of Equity Interests in CCRand NP Land; Acquisition of The Meadows.”

 

*OtherTransactions*

 

Relatives of Messrs. Paulosand Wortman provide CCR with Automated Teller Machines (“*ATM*”) processing services.  CCR received combined commissions of$2,795,042 and $2,042,528 in 2008 and 2007, respectively, pursuant to separateagreements with CCR’s casinos.  Underthese agreements, the providers receive the exclusive right to provide cashadvance and ATM processing services at predetermined customer rates in returnfor providing, maintaining and keeping supplied ATMs at each location.  Each agreement has an initial term thatexpires in 2011, followed by five one-year renewals that are automatic unlesseither party gives 90 days’ notice.

 

CCR has purchasedpromotional merchandise utilized for casino marketing and as customerincentives from an affiliate of Millennium and a company where a relative of Mr. Pauloshas a financial interest.  CCR incurredaggregate costs of $2,113,164 and $2,635,801 in 2008 and 2007, respectively, inconnection with such purchases.

 

CCR has contracted withMMG II, an affiliate of Millennium, to operate and manage the Rampart Casino,The Cannery and the Eastside Cannery, and MMG II provides certain managementservices related to The Meadows.  CCRincurred fees to MMG II of $6,458,564 and $5,042,549 in 2008 and 2007,respectively, in connection with these arrangements.

 

During the Company’s lastfiscal quarter of 2007, Mr. Wortman incurred certain obligations inconnection with the development of certain gaming opportunities in NewHampshire.  In connection with pursuingsuch opportunities, NH Downs has a receivable of approximately $9.1 millionfrom Mr. Wortman.

 

On July 15, 2006,CCR executed with Millennium a 10-year lease of an executive office buildingand adjacent parking spaces. The lease is for a fixed rental rate of $32,000per month, subject to periodic inflationary adjustments, and grants Millenniumtwo 5-year renewals.

 

The management of CCRbelieves that the transactions relating to the ATM processing services, theprovision of promotional merchandise, the executive office lease and theoperation and management of the Rampart Casino and The Cannery, are on termsthat are substantially similar to terms that would be available to unaffiliatedthird parties and are expected to continue in the future.

 

An affiliate of one ofthe Company’s members provides the Company with certain administrative supportservices for an annual fee of $50,000, based on hourly rates of assignedpersonnel.

 

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**Item14. Principal Accountant Fees and Services.**

 

***Audit Fees:***

 

For 2008 and 2007, weincurred audit and financial statement review fees totaling approximately$130,000 and $136,000, respectively, to Piercy Bowler Taylor & Kern,our independent registered public accounting firm.

 

***Audit-Related Fees:***

 

For 2008 and 2007, weincurred no fees to Piercy Bowler Taylor & Kern, Certified PublicAccountants, for assurance and related services reasonably related to theperformance of audit and financial statement review.

 

***Tax Fees:***

 

For 2008 and 2007, weincurred no tax preparation fees to Piercy Bowler Taylor & Kern,Certified Public Accountants.

 

***All Other Fees:***

 

For 2008 and 2007, weincurred no other fees to Piercy Bowler Taylor & Kern, CertifiedPublic Accountants, for products and services other than the services reportedabove.

 

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

 

We do not currently havean audit committee. The foregoing services were pre-approved by our Managers.

 

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**PART IV**

 

**Item15. Exhibits, Financial Statement Schedules**

 

**Financial Statements**

 
| 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    |
|                                                          |        |        |        |  |  |

 

**Financial Statement Schedules**

 

All financial statementschedules are omitted because they are not applicable or the requiredinformation is shown in the financial statements or notes thereto.

 

**Exhibits.**

 

Inreviewing the agreements included as exhibits to this Form 10-K, pleaseremember they are included to provide you with information regarding theirterms and are not intended to provide any other factual or disclosureinformation about the Company or the other parties to the agreements.

 

Theagreements contain representations and warranties by each of the parties to theapplicable agreement. These representations and warranties have been madesolely for the benefit of the other parties to the applicable agreement and:

 

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

 

·                  have been qualified by disclosures that weremade to the other party in connection with the negotiation of the applicableagreement, which disclosures are not necessarily reflected in the agreement;

 

·                  may apply standards of materiality in a waythat is different from what may be viewed as material to you or otherinvestors; and

 

·                  were made only as of the date of theapplicable agreement or such other date or dates as may be specified in theagreement and are subject to more recent developments.

 

Accordingly,these representations and warranties may not describe the actual state ofaffairs as of the date they were made or at any other time.  Additional information about  the Company may be found elsewhere in this Form 10-Kand the Company’s other public filings, which are available without chargethrough the SEC’s website at http://www.sec.gov.

 

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The following exhibitsare 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. |
| 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.          |
| 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.                      |
| 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) Filed previouslywith the Company’s Form 10-SB on June 9, 2006.

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

 

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(3) Filed previouslywith the Company’s Post-Effective Amendment No. 1 to Form 10-SB on September 8,2006.

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

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

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

(7) Filed previouslywith 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

 

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**SIGNATURES**

 

Pursuant to therequirements of  Section 13 or 15(d) ofthe Exchange Act of 1934, the registrant has caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.

 
| **DATE:**           | **OCM  HoldCo, LLC** |
|---------------------|----------------------|
| ** **          | ** **           |
| ** **          | ** **           |
| March 31, 2009 | By:                  |  /s/*Stephen A. Kaplan* |
|                |                 | Stephen A. Kaplan |
|                | ** **           | Manager |
|                |                 |
|                |                 |
| March 31, 2009 | By:                  |  /s/*Ronald N. Beck* |
|                |                 | Ronald N. Beck |
|                | ** **           | Manager |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.

 

| **Signatures**               | ** ** | **Title**  | ** ** | **Date**            |
|------------------------------|------------|------------|------------|---------------------|
| ** **                   | ** ** | ** ** | ** ** | ** **          |
|  /s/*Stephen A. Kaplan* | * *   | * *   | * *   | * *            |
| Stephen A. Kaplan            |       | Manager    |       | March 31, 2009 |
|                         |       |       |       |                |
|                         |       |       |       |                |
|  /s/*Ronald N. Beck*    |       | Manager    |       | March 31, 2009 |
| Ronald N. Beck               |       |       |       |                |

 

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**OCMHoldCo, LLC and Subsidiaries**

 

**Consolidated Financial Statements**

 

**December 31,2008**

 

**December 31,2007**

 

**Table ofContents**

 
| 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    |
|                                                          |        |        |        |  |  |

 

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

** **

Managers ofOCM HoldCo, LLC

 

We have audited the accompanying consolidated balance sheet of OCMHoldCo, LLC and its subsidiaries (collectively the Company) as of December 31,2008 and 2007, and the related consolidated statements of operations, members’equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the 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, an audit of its internal control overfinancial reporting.  Our audit includedconsideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no suchopinion. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the consolidated financial position of theCompany as of December 31, 2008 and 2007, and its consolidated results ofoperations and cash flows for the years then ended, in conformity withaccounting principles generally accepted in the United States.

 

**PIERCY BOWLER TAYLOR & KERN**

 

/s/ Piercy Bowler Taylor & Kern

Certified Public Accountants

 

Las Vegas, Nevada

March 31, 2009

 

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**OCM HoldCo, LLC and Subsidiaries**

 

**ConsolidatedBalance Sheets**

 

**December 31, 2008 and 2007**

 
| ** **                                                                           | ** ** | **2008**    | ** **  | **2007**    | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| **ASSETS**                                                                           |       |        |        |        |       |
| **Current  assets:**                                                                 |       |        |        |        |       |
| Cash                                                                                 |       | $           | 729,584     |        | $          | 1,012,906 |   |
| Other assets                                                                         |       | —      |        | 475         |       |
|                                                                                 |       | 729,584     |        | 1,013,381   |       |
| **Other  assets:**                                                                   |       |        |        |        |       |
| Investment in  Cannery Casino Resorts, LLC                                           |       | 121,706,019 |        | 120,723,395 |       |
| Investment in NP  Land, LLC                                                          |       | 5,553,450   |        | 5,025,292   |       |
| Gaming and  related licenses                                                         |       | 805,698     |        | 805,698     |       |
| Deferred tax  asset                                                                  |       | 6,292,921   |        | 2,126,000   |       |
|                                                                                 |       | $           | 135,087,672 |        | $          | 129,693,766 |   |
|                                                                                 |       |        |        |        |       |
| **LIABILITIES  AND MEMBERS’ EQUITY**                                            |       |        |        |        |       |
| **Current  liabilities:**                                                            |       |        |        |        |       |
| Accounts payable  and accrued expenses, including $53,276 to a related party in 2008 |       | $           | 90,405      |        | $          | 40,695 |   |
| Deferred tax  liabilities                                                            |       | 311,000     |        | 243,000     |       |
|                                                                                 |       | 401,405     |        | 283,695     |       |
|                                                                                 |       |        |        |        |       |
| **Members’  equity**                                                            |       | 134,686,267 |        | 129,410,071 |       |
|                                                                                 |       | $           | 135,087,672 |        | $          | 129,693,766 |   |

 

*See notes to consolidatedfinancial statements.*

 

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**OCM HoldCo, LLC and Subsidiaries**

 

**ConsolidatedStatements of Operations**

 

**For the Years Ended December 31,2008 and 2007**

 
| ** **                                                                                         | ** ** | **2008**  | ** ** | **2007**  | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                                               |       |      |       |      |       |
| **Income:**                                                                                        |       |      |       |      |       |
| Interest income                                                                                    |       | $         | 17,504     |      | $          | 20,180 |   |
| Equity in  earnings of unconsolidated investees                                                    |       | 3,540,207 |       | 1,087,034 |       |
|                                                                                               |       | 3,557,711 |       | 1,107,214 |       |
| **Costs  and expenses:**                                                                           |       |      |       |      |       |
| Professional  fees                                                                                 |       | 292,733   |       | 222,719   |       |
| Other  administrative expenses, including $50,000 and $75,000 to a related party in  2008 and 2007 |       | 58,278    |       | 107,767   |       |
|                                                                                               |       | 351,011   |       | 330,486   |       |
|                                                                                               |       |      |       |      |       |
| **Income  before income tax benefit**                                                              |       | 3,206,700 |       | 776,728   |       |
|                                                                                               |       |      |       |      |       |
| **Income  tax benefit**                                                                            |       | 2,647,236 |       | 3,100,437 |       |
|                                                                                               |       |      |       |      |       |
| **Net income**                                                                                     |       | $         | 5,853,936  |      | $          | 3,877,165 |   |

 

*Seenotes to consolidated financial statements.*

 

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**OCM HoldCo, LLC and Subsidiaries**

 

**ConsolidatedStatements of Members’ Equity**

 

**For the Years Ended December 31,2008 and 2007**

 
| ** **                                                                  | ** ** | **Total members’  equity** | ** **  | **Accumulated other  comprehensive  loss** | ** ** | **Invested capital and  accumulated earnings** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------|-------------|-------------------------------------------------|------------|---------------------------------------------------------------|------------|
| **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 |   |
| ** **                                                                  | ** ** | ** **                           | ** **  | ** **                                      | ** ** | ** **                                                    | ** ** |
| **2007**                                                                    | ** ** | ** **                           | ** **  | ** **                                      | ** ** | ** **                                                    | ** ** |
| Balance,  beginning of year                                                 |       | $                                    | 127,643,512 |                                            | $          | —                                                        |       | $ | 127,643,512 |   |
| Net income                                                                  |       | 3,877,165                            |        | —                                          |       | 3,877,165                                                     |       |
| Capital  contribution                                                       |       | 7,641                                |        | —                                          |       | 7,641                                                         |       |
| Equity in other  comprehensive loss of unconsolidated investee:             |       |                                 |        |                                            |       |                                                          |       |
| (Unrealized loss  on rate swap agreements, net of tax)                      |       | (2,118,247                           | )           | (2,118,247                                      | )          | —                                                        |       |
|                                                                        |       |                                 |        |                                            |       |                                                          |       |
| Balance, end of  year                                                       |       | $                                    | 129,410,071 |                                            | $          | (2,118,247                                                    | )          | $ | 131,528,318 |   |

** **

*See notes to consolidatedfinancial statements.*

 

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**OCM HoldCo, LLC and Subsidiaries**

 

**ConsolidatedStatements of Cash Flows**

 

**For the Years Ended December 31,2008 and 2007**

 
| ** **                                                                                                                                | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Operating  activities:**                                                                                                                |       |       |       |       |       |
| Net income                                                                                                                                |       | $          | 5,853,936  |       | $          | 3,877,165 |   |
| Equity in  earnings of unconsolidated investees                                                                                           |       | (3,540,207 | )          | (1,087,034 | )          |
| Adjustments to  reconcile net income to net cash used by operating activities consisting of  increases in operating (assets) liabilities: |       |       |       |       |       |
| Deferred income  tax benefit                                                                                                              |       | (2,647,236 | )          | (3,100,437 | )          |
| Other assets                                                                                                                              |       | 475        |       | (475       | )          |
| Accounts payable  and accrued expenses                                                                                                    |       | 49,710     |       | (70,110    | )          |
|                                                                                                                                      |       |       |       |       |       |
| Net cash used in  operating activities                                                                                                    |       | (283,322   | )          | (380,891   | )          |
|                                                                                                                                      |       |       |       |       |       |
| **Investing  activities:**                                                                                                                |       |       |       |       |       |
| Distribution  from Cannery Casino Resorts, LLC                                                                                            |       |       |       | 1,030,000  |       |
| Distribution  from NP Land, LLC                                                                                                           |       |       |       | 405,000    |       |
| Investment in Cannery  Casino Resort, LLC                                                                                                 |       |       |       | (60,396    | )          |
| Gaming and  related licenses                                                                                                              |       |       |       | 11,246     |       |
|                                                                                                                                      |       |       |       |       |       |
| Net cash  provided by (used in) investing activities                                                                                      |       |       |       | 1,385,850  |       |
|                                                                                                                                      |       |       |       |       |       |
| **Financing  activities:**                                                                                                                |       |       |       |       |       |
| Capital  contributions                                                                                                                    |       |       |       | 7,641      |       |
|                                                                                                                                      |       |       |       |       |       |
| **Net  increase (decrease) in cash**                                                                                                      |       | (283,322   | )          | 1,012,600  |       |
|                                                                                                                                      |       |       |       |       |       |
| **Cash,  beginning of year**                                                                                                              |       | 1,012,906  |       | 306        |       |
|                                                                                                                                      |       |       |       |       |       |
| **Cash,  end of year**                                                                                                                    |       | $          | 729,584    |       | $          | 1,012,906 |   |
|                                                                                                                                      |       |       |       |       |       |
| **Supplemental  cash flow information:**                                                                                                  |       |       |       |       |       |
| Equity in other  comprehensive income of unconsolidated investees                                                                         |       | $          | 1,319,126  |       | $          | 2,118,247 |   |

 

*Seenotes to consolidated financial statements*

 

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**OCMHoldCo, LLC and Subsidiaries**

 

**Notes to Financial Statements**

 

**December 31,2008**

 

**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 42%equity interest in Cannery Casino Resorts, LLC (“CCR”) 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 current 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, where it is currently operating a temporarycasino and is constructing a larger permanent casino that is scheduled to openmid-April 2009.

 

Allof the Company’s issued and outstanding Class A Units are held by VoteCo,and all of the Company’s issued and outstanding non-voting Class B Unitsare held by InvestCo. VoteCo and InvestCo are affiliates of Oaktree. VoteCo isresponsible for the operations of the Company, including the appointment andremoval of managers. VoteCo has a *de**minimus* economic interest in the Company, and its totalequity contributions are limited to $100.

 

On December 11,2007, the Company and CCR’s 58%-member entered into a definitive agreement withCCR, Crown Limited, an Australian Company (“Parent’), Crown CCR InvestmentsOne, LLC, a Delaware limited liability company and an indirect wholly ownedsubsidiary of Parent (“Crown One”), and Crown CCR Investments Two, LLC, aDelaware limited liability company and an indirect wholly owned subsidiary ofParent (“Crown Two” and together with Crown One and Parent, the “Crown Parties”),to sell, directly or indirectly, all of the issued and outstanding equityinterests of CCR to Crown One and Crown Two, which transaction was initiallyexpected to be consummated during the first quarter of 2009.  However, on March 12, 2009, the partiesterminated the purchase agreement when it was determined that the preconditionsto completion would not be satisfied in time to allow the purchase toproceed.  Under the terminationagreement, a full release has been given to all parties and Crown One and CrownTwo paid CCR’s members $50 million ($21 million to the Company).

 

The Company and the CrownParties have entered into new agreements requiring Crown One and Crown Two topay $320 million to CCR to, in part, subscribe for a 24.5% convertiblepreferred equity interest, with an option to acquire the balance of the equityinterests of CCR for approximately $1.4 billion at any time over the next 2years, each subject to regulatory approval. If the regulatory approval for issuance of the convertible preferredequity interest is not received within 60 days (90 days at the option of CCR),Crown One and Crown Two will pay an additional $200 million and purchase anapproximate 4.1% preferred interest in CCR for $40 million.  The two preferred interests discussed hereinare no coupon and non-participating.

 

Costs incurred by CCRrelating to the initial definitive agreement ($2,122,546 at December 31,2008) were deferred until the arrangement was terminated in 2009 and thentreated as a distribution to CCR’s members.

 

***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.

 

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**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.

 

***Basisof accounting and presentation***

 

The accompanyingconsolidated financial statements as of December 31, 2008 and 2007 includethe accounts of the Company and its wholly-owned subsidiaries OCM Blocker, LLC(“Blocker”), AcquisitionCo, OCM AcquisitionCo II, LLC, and OCM LandCo, LLC. Allsignificant inter-company accounts and transactions have been eliminated.

 

Investments in CCR and NPLand (Note 3) are accounted for using the equity method of accounting.  The Company has not elected to adopt theoption available under Financial Accounting Standards Board (“FASB”) No. 159,*The Fair Value Option for Financial Assets andFinancial Liabilities*, to measure any of its eligible financialinstruments or other items. Accordingly, the Company continues to measure allof its assets and liabilities on the historical cost basis of accounting exceptas required 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 by InvestCo.  Accordingly, these activities are treated asconstructive cash inflows and outflows in the statements of cash flow.

 

The Company and itsunconsolidated investees carry and expect to carry cash and equivalents andinvestment securities on deposit with financial institutions substantially inexcess of federally-insured limits, and risk of losses related to suchconcentrations that might result from any failures of depository institutionsmay be increasing in the current economic environment.  The extent of loss, if any, to be sustainedas a result of a future financial institution failure, however, is not subjectto estimation at this time.

 

***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 pursuant to guidelinescontained in para. 2.06 of the American Institute of Certified PublicAccountants’ Audit and Accounting Guide, *Audits of Casinos*.These fees and costs have been treated as indefinite life intangible assetspursuant to Statement of Financial Accounting Standard No. 142, *Goodwill and Other Intangible Assets*, based on expectationsat the time the costs were incurred and capitalized that such licenses would begranted, as they subsequently were, that they would enable the Company and/orits consolidated subsidiaries to hold direct and indirect ownership interestsin gaming enterprises, and, therefore, that it was and is probable that theywill benefit future periods through continued profitable operations of itsinvestee entities and resultant expected increases in the value of itsinvestments therein and cash distributions therefrom.  License renewal fees are not significant andare 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 of such events or changes in circumstances that might indicateimpairment of these assets might include an active or likely regulatory threatto the availability or viability of a license, specifically, as a result of (i) non-compliancewith regulations, (ii) an adverse change 

 

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in the legal, regulatoryor business climate relative 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, 2008, based on ourevaluation, there has been no impairment to these assets.

 

***Incometaxes***

 

The Company accounts foruncertain in income taxes recognized in financial statements under the provisionsof FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.  The Company’s adoption of FIN 48 on January1, 2007, had no effect on retained earnings or results of operation.  The Company records estimated penalties andinterest, if any, related to income tax matters, including uncertain taxpositions, if any, as a component of income tax expense.

 

***Members’capital***

 

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

 

**NOTE 3 -Significant Equity Investee:**

 

On September 22, 2006, the Company, through a subsidiary, acquired a33-1/3% equity interest in CCR and a 33-1/3% equity interest in NP Land, bothNevada limited liability companies, in exchange for cancellation of loans of$64 million and $4,282,454, and accrued interest of $5,470,685 and$502,631, respectively. The Company’sacquisition of the 33-1/3% equity interest in CCR and a 33-1/3% equity interest in NPLand was completed pursuant to the terms and conditions of the CUP Agreement.On November 14, 2006, the Company, through a subsidiary, contributed anadditional $50 million to CCR, increasing its equity interest in CCR from 331/3% to 42%. For the year ended December 31, 2007, the Company’s equityin the earnings of CCR and NP Land totaled $578,420 and $508,663,respectively.  For the year ended December 31,2008, the Company’s equity in earnings of CCR and NP Land totaled $3,012,049and $528158, respectively.  Nodistributions were received from either CCR or NP Land in the year ended December 31,2008.

 

The following tablespresent condensed financial information of CCR as of December 31, 2008 and2007, and for the years ended December 31, 2008 and 2007:

 
| ** **                   | ** ** | **2008**    | ** **  | **2007**    | ** ** |
|------------------------------|------------|-------------|-------------|-------------|------------|
| **Balance Sheet**       |       |        |        |        |       |
| Current assets               |       | $           | 65,473,000  |        | $          | 92,089,000 |   |
| Investments in  securities   |       | 17,113,000  |        | —      |       |
| Property and  equipment, net |       | 749,029,000 |        | 484,879,000 |       |
| Other                        |       | 143,135,000 |        | 145,477,000 |       |
|                         |       | $           | 974,750,000 |        | $          | 722,445,000 |   |
|                         |       |        |        |        |       |
| Current  liabilities         |       | $           | 97,733,000  |        | $          | 90,593,000 |   |
| Long-term  liabilities       |       | 797,047,000 |        | 554,221,000 |       |
| Member’s equity         |       | 79,970,000  |        | 77,631,000  |       |
|                         |       | $           | 974,750,000 |        | $          | 722,445,000 |   |

 
| **Income Statement** |   |   |        |   |   |        |   |
|---------------------------|--------|--------|-------------|--------|--------|-------------|--------|
| Revenue                   |   | $      | 448,160,000 |   | $      | 325,394,000 |   |
|                      |   |   |        |   |   |        |   |
| Net income                |   | $      | 7,172,000   |   | $      | 1,377,000   |   |

 

**The unaudited total assets of NP Land at December 31,2008 and 2007, was approximately $4,600,000 and $5,400,000, respectively.  The unaudited net income for the years ended December 31,2008 and 2007, was approximately $1,600,000 and $1,500,000, respectively.**

** **

**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 othersubsidiaries included in this consolidation. Accordingly, equity in the flow-through earnings of CCR and NP Land istaxed to Blocker.  Blocker also incurs 

 

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interest expense($1,961,784 for 2008 and $2,612,702 for 2007) on inter-company indebtedness($23,218,683 at December 31, 2008 and 2007) that is deductible for taxpurposes (a permanent difference) but which is eliminated, along with therelated debt, in this consolidation. The Company incurs certain other costs,primarily associated with being a public company, including professional andother fees, which, for tax purposes, flow through to its members.

 

The following tablepresents a reconciliation of the income tax benefit with that determined byapplying the statutory U.S. federal income tax rate to income before incometaxes for the years ended December 31, 2008 and 2007:

 
| ** **                            | ** ** | **2008**   | ** ** | **2007**       | ** ** |
|---------------------------------------|------------|------------|------------|----------------|------------|
| ** **                            | ** ** | **Amount** | ** ** | **Percentage** | ** ** | **Amount** | ** ** | **Percentage** | ** ** |
| Statutory  federal rate               |       | $          | 1,122,000  |           | 35         | % | $ | 271,856 |   | 35 | % |
| General business  tax credits         |       | (769,236   | )          | (24            | )%         | — |   | — | % |
| Miscellaneous  CCR attributes         |       | 605,000    |       | 19             | %          | (1,863,817 | ) | (240 | )% |
| Intercompany  interest expense        |       | (687,000   | )          | (21            | )%         | (914,446 | ) | (118 | )% |
| Non-taxable  interest income          |       | —     |       | —         | %          | — |   | — | % |
| Attributes  passed through to members |       | 123,000    |       | 4              | %          | 330,487 |   | 43 | % |
| CCR income not  taxable to Company    |       | (3,041,000 | )          | (95            | )%         | (924,517 | ) | (119 | )% |
|                                  |       |       |       |           |       |   |   |   |   |
| Tax at effective  rate                |       | $          | (2,647,236 | )              | (83        | )% | $ | (3,100,437 | ) | (399 | )% |

 

At December 31, 2008,Blocker had approximately $33,075,000 and $769,000 in federal net operatingloss and general business tax credit carryforwards, which expire beginning in2021.

 

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, 2008** | ** ** | **December 31, 2007** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Basis adjustment  (Section 754 elections) |       | $                               | (4,356,000 | )                               | $          | (2,954,685 | ) |
| Other CCR  attributes                          |       | (3,476,000                      | )          | (1,309,421                      | )          |
| Other  comprehensive income                    |       | 1,451,685                       |       | —                          |       |
| Other NP Land  attributes                      |       | 17,000                          |       | 18,263                          |       |
| General business  tax credits                  |       | 769,236                         |       | —                          |       |
| Net operating  loss carryforwards              |       | 11,576,000                      |       | 6,128,843                       |       |
|                                           |       | 5,981,921                       |       | 1,883,000                       |       |
|                                           |       |                            |       |                            |       |
| Deferred tax  liability, current               |       | 311,000                         |       | 243,000                         |       |
|                                           |       |                            |       |                            |       |
| Deferred tax  asset, non-current               |       | $                               | 6,292,921  |                            | $          | 2,126,000 |   |

 

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

 

**NOTE 5 - Related partytransactions:**

 

InMay 2008, a wholly-owned subsidiary of the Company entered into a loanrepayment guarantee agreement which is expected to terminate no later than May 15,2009.  The likelihood of the guaranteeever being called is remote.  Althoughthe maximum exposure under the guarantee is $20 million, the fair value of theguarantee is not material as of December 31, 2008.

 

Asof December 31, 2008, the Company was conditionally committed to make upto an additional $25 million of equity investment in CCR to support theoperational needs of CCR’s subsidiary, PA Meadows, but only in certain limitedcircumstances and only to the extent not previously funded.

 

An affiliate of one ofthe Company’s members provides the Company with certain administrative supportservices for an annual fee of $50,000 based on hourly rates of assignedpersonnel ($75,000 in 2007).

 

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In February 2007,the Oaktree Funds, beneficial owners of the Company’s non-voting equityinterests, agreed to support, through member contributions to CCR, letters of creditissued in favor of the Pennsylvania Department of Transportation for anaggregate stated amount of approximately $18.3 million.  Such support was transferred to PA Meadowsduring the second quarter of 2007.  TheOaktree Funds received $382,000 from CCR as consideration for supporting theletters of credit.

 

In March 2009, Millenniumand the Company, through AcquisitionCo, made equity contributions to CCR forthe purpose of maintaining CCR’s compliance with its debt covenants.  The equity contribution by AcquisitionCo wasfunded by an equity contribution from Blocker, which in turn was funded by aloan from the Company.

 

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