Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

 

**FORM 10-K**

 

----

 

**x****     ****ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31, 2010**

** **

**or**

** **

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

 

**Commission file number 0-52042**

 

----

 

**OCM HOLDCO, LLC**

(Exact Name of Registrant as Specified in its Charter)

 

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

 

Registrant’s telephone number, including 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 A Membership Units**

 

----

 

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

 

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

 

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

 

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

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

 

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

 

As of March 31, 2011, none of the registrant’s voting and non-voting common equity was held by non-affiliates.

 

Documents Incorporated by Reference:  **None**

 

 

 

----

Table of Contents

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information included in this annual report on Form 10-K and other filings of OCM HoldCo, LLC, a Delaware limited liability company (the “*Company*”) under the Securities Act of 1933, as amended (the “*Securities Act*”), and the Securities Exchange Act of 1934, as amended (the “*Exchange Act*”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements.” Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are economic conditions generally and in the industries in which the Company may participate; competition within the Company’s chosen industries, including competition from much larger competitors; technological advances; available capital; regulatory approvals; and failure by the Company to successfully develop or acquire products and form new business relationships.

 

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

 

----

Table of Contents

 

**OCM HOLDCO, LLC**

 

**INDEX TO FORM 10-K**

 
| **PART I**      | ** **                                                                                                                    | 1      |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------|--------|
|                 |                                                                                                                          |   |
| Item 1.              | Business                                                                                                                      | 1      |
|                 |                                                                                                                          |   |
| Item 2.              | Properties                                                                                                                    | 15     |
|                 |                                                                                                                          |   |
| Item 3.              | Legal   Proceedings                                                                                                           | 15     |
|                 |                                                                                                                          |   |
| Item 4.              | (Reserved)                                                                                                                    | 15     |
|                 |                                                                                                                          |   |
| **PART II**     |                                                                                                                          | 15     |
|                 |                                                                                                                          |   |
| Item 5.              | Market for   Common Equity, Related Stockholder Matters and Small Business Issuer   Purchases of Equity Securities            | 15     |
|                 |                                                                                                                          |   |
| Item 6.              | Selected   Financial Information                                                                                              | 16     |
|                 |                                                                                                                          |   |
| Item 7.              | Management’s   Discussion and Analysis                                                                                   | 16     |
|                 |                                                                                                                          |   |
| Item 8.              | Financial   Statements                                                                                                        | 19     |
|                 |                                                                                                                          |   |
| Item 9.              | Changes In   and Disagreements With Accountants on Accounting and Financial Disclosure                                        | 19     |
|                 |                                                                                                                          |   |
| Item 9A.             | Controls and   Procedures                                                                                                     | 19     |
|                 |                                                                                                                          |   |
| Item 9B.             | Other   Information                                                                                                           | 20     |
|                 |                                                                                                                          |   |
| **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                                                                                                        | 22     |
|                 |                                                                                                                          |   |
| Item 12.             | Security   Ownership of Certain Beneficial Owners and Management and Related Stockholder   Matters                            | 22     |
|                 |                                                                                                                          |   |
| Item 13.             | Certain   Relationships and Related Transactions                                                                              | 24     |
|                 |                                                                                                                          |   |
| Item 14.             | Principal   Accountant Fees and Services                                                                                      | 26     |
|                 |                                                                                                                          |   |
| **PART IV**     |                                                                                                                          | 27     |
|                 |                                                                                                                          |   |
| Item 15.             | Exhibits,   Financial Statement Schedules                                                                                     | 27     |
|                 |                                                                                                                          |   |
| SIGNATURES           |                                                                                                                          |
|                 |                                                                                                                          |   |
| FINANCIAL STATEMENTS | F-1                                                                                                                           |

 

----

Table of Contents

 

**PART I**

 

**Item 1.  Business**

 

**THE COMPANY**

 

***Overview of the Company***

 

The Company was initially formed on July 22, 2005, at the direction of OCM Principal Opportunities Fund III, L.P. and OCM Principal Opportunities Fund IIIA, L.P. (the “*Oaktree Fund*s”), each of which is a Delaware 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 for the primary purpose of participating in various activities relating to the gaming industry.

 

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

 

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

 

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

 

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

 

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

 

·                  owns (subject to a ground lease) and operates the Eastside Cannery Casino and Hotel (the “*Eastside Cannery*”).

 

***Ownership of the Company***

 

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

 

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

 

1

----

Table of Contents

 

VoteCo, InvestCo, the Company and each of the Company’s wholly-owned subsidiaries are managed by Stephen Kaplan, a Principal of Oaktree, and Ronald Beck, a Managing Director of Oaktree.  Oaktree is a leading global investment management firm focused on non-mainstream and alternative markets.  As of December 31, 2010, Oaktree managed approximately $82 billion in assets across a wide range of investment strategies, including high yield and convertible bonds, distressed debt, specialized private equity (including power infrastructure), senior loans, real estate, emerging market and Japanese equities and mezzanine finance.  Since its founding in 1995, Oaktree has emphasized an opportunistic, value-oriented and risk-controlled approach to investing.  Headquartered in Los Angeles, the firm today has approximately 622 employees and offices in 13 cities worldwide.  Oaktree is registered with the Commission as an investment adviser under the Investment Advisers Act of 1940, as amended.

 

***Business Developments***

 

In connection with the execution and delivery of the Series B Preferred Purchase Agreement and the transactions related thereto (see *2009 Highlights* below), CCR issued an aggregate of 71,614 Series B Preferred Units of CCR (the “*Series B Units”*) to Crown CCR Group Investments One, LLC, a Delaware limited liability company (*“Crown One”*), and Crown CCR Group Investments Two, LLC, a Delaware limited liability company (*“Crown Two”*), which are wholly owned subsidiaries of Crown Limited, an Australian company (*“Crown Parent”* and collectively with Crown One and Crown Two, the *“Crown Parties”*).  In accordance with the terms and provisions of CCR’s Revised Operating Agreement (see *2010 Highlights*below), the Series B Units are convertible on a one-to-one basis (subject to adjustment upon the occurrence of certain events) into Series A2 Preferred Units of CCR (the *“Series A2 Units”*) at the election of the holder upon the attainment of all requisite regulatory approvals under applicable gaming laws.  Both the Series B Units and the Series A2 Units are non-voting securities, except that so long as the aggregate percentage interests of the holders of the Series A2 Units is greater than or equal to 20%, such holders are entitled to appoint a non-voting representative to CCR’s management committee.  On March 8, 2011, Crown One and Crown Two notified CCR of their attainment of all requisite gaming approvals and of their election to convert their Series B Units into Series A2 Units.  Accordingly, the Series B Units held by Crown One and Crown Two were converted to Series A2 Units effective as of such date.  The Company indirectly holds 92,690 Series A1 Preferred Units of CCR (*“Series A1 Units”* and collectively with the Series A2 Units, the *“Series A Units”*), which, after giving effect to the conversion of the Series B Units, represent a 31.71% interest in the aggregate Series A Units of CCR.

 

*2010 Highlights*

 

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

 

Also on March 3, 2010, in accordance with the terms and conditions of that certain Series C Preferred Purchase Agreement (the “*Series C Purchase Agreement*”), by and among the Crown Parties, Millennium Gaming, Inc., a Nevada corporation (“*Millennium*”), AcquisitionCo, and CCR, CCR sold (i) 18,375 Series C Preferred Units to Crown One and Crown Two, collectively; (ii) 10,000 Series C Preferred Units to Millennium; and (iii) 46,625 Series C Preferred Units to AcquisitionCo.  The rights, preferences and privileges of the Series C Preferred Units are set forth in the Revised Operating Agreement.

 

In connection with the First Lien Amendment and the issuance of the Series C Preferred Units described below, the members of CCR entered into CCR’s Third Amended and Restated Operating Agreement (the “*Revised Operating Agreement*”).  Among other matters, the Revised Operating Agreement creates a new series of preferred securities of CCR designated as the “Series C Preferred Units.”  The Series C Preferred Units (i) are non-voting subject to certain limited consent rights, (ii) are required to be redeemed by CCR in certain circumstances, including, without limitation, the repayment of CCR’s credit facilities and/or certain sale transactions, and (iii) may be redeemed at CCR’s option at any time subject to compliance with CCR’s credit facilities.

 

2

----

Table of Contents

 

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

 

*2009 Highlights*

 

On March 12, 2009, the Company entered into the agreements outlined below in connection with the termination of that certain Purchase Agreement by and between the Crown Parties, the Company, Millennium (Millennium and the Company, collectively, the “*Original Equityholders*”), and CCR (collectively, CCR with Millennium and the Company,  the “*Seller Parties*”), dated as of December 11, 2007 (as thereafter amended, the “*Original Purchase Agreement*”), pursuant to which Crown One and Crown Two were to purchase, directly or indirectly, all of the issued and outstanding equity interests of CCR (the “*CCR Units*”) from the Original Equityholders and rights in the Blocker Option Agreement.

 

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

 

Simultaneously with the execution and delivery of the Termination and Settlement Agreement and in accordance with the terms thereof, the Crown Parties, the Original Equityholders and CCR entered into a Preferred Purchase Agreement  (the “*Series B Preferred Purchase Agreement*”).  On April 24, 2009, CCR sold to the Purchasers 71,614 Series B Units for an aggregate purchase price of $320 million in cash (the *“Preferred Purchase Price”*) in accordance with the terms and conditions of the Series B Preferred Purchase Agreement.  Of the Preferred Purchase Price, $20 million represents reimbursement of certain project costs incurred by CCR related to various project costs at The Meadows.   The Series B Units have no coupon and are not subject to mandatory redemption.  The “Option Agreement,” as described below, remains unaffected.  The Series B Units have since been converted into Series A2 Units in accordance with the Revised Operating Agreement (see *Business Developments* above).

 

Simultaneously with the execution and delivery of the Termination and Settlement Agreement and in accordance with the terms thereof, the Crown Parties, the Original Equityholders and CCR entered into an Option Agreement (the *“Option Agreement”*), which granted the Crown Parties an option to complete the purchase of all of the direct and indirect interests of the Original Equityholders in CCR on terms substantially similar to the terms of the Original Purchase Agreement.  The exercise period under the Option Agreement expired in accordance with its terms in March 2011.

 

With construction completed in April 2009, PA Meadows, LLC, a  Delaware limited liability company and wholly-subsidiary of CCR (“*PA Meadows*”), opened an approximately 350,000 square-foot permanent casino that replaced the 82,000 square foot temporary casino.  The permanent facility includes 8 restaurants and boutique style bowling alley and nightclub. In addition, the permanent casino houses approximately 3,500 slot machines and integrates the long-standing tradition of harness racing at The Meadows with state-of-art gaming facilities.

 

In May 2009, CCR distributed $26.21 million of the Preferred Purchase Price to the Company, and concurrent with such distribution, the Company, through AcquisitionCo, made a $5.21 million equity investment in CCR for the purpose of maintaining CCR’s compliance with its debt covenants.  The additional equity contribution by AcquisitionCo was funded by an equity contribution from OCM Blocker, LLC, which, in turn, was funded by a loan from the Company.

 

Each of the foregoing summaries of the Original Purchase Agreement, the Termination and Settlement Agreement, the Preferred Purchase Agreement and the Option Agreement, does not purport to be complete and is qualified in its entirety by reference to the Original Purchase Agreement, the Termination and Settlement Agreement, the Preferred Purchase Agreement or the Option Agreement, as the case may be, filed as Exhibit 10.30, Exhibit 10.31, Exhibit 10.32 and Exhibit 10.33, respectively, to the Company’s Annual Report on Form 10-K filed with the Commission on March 31, 2009.

 

*Other Highlights*

 

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

 

3

----

Table of Contents

 

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

 

***Employees***

 

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

 

***Environmental Issues***

 

The Company has no physical assets.

 

**CANNERY CASINO RESORTS, LLC**

 

CCR was organized on May 22, 2001.  In December 2002, CCR commenced casino operations at the Rampart Casino. In January 2003, CCR completed construction of The Cannery and commenced its operations.  In July 2006, CCR acquired The Meadows, where it currently owns and operates a casino and the on-and-off track racing operations.  In September 2006, CCR acquired the gaming assets of and commenced temporary operations at the Nevada Palace, which ceased operation on February 29, 2008 as planned in connection with the construction of the Eastside Cannery, which replaced the Nevada Palace and opened on August 28, 2008. The Cannery, the Rampart Casino and the Eastside Cannery are currently managed by Millennium Management Group II, LLC, a Nevada limited liability company (“*MMG II*”).  MMG II is 95% owned by William Paulos and William Wortman.  Messrs. Paulos and Wortman, through Millennium, own the remaining 58% of the Series A1 Units of CCR and Mr. Wortman also owns the remaining  66-2/3% of the equity interests in NP Land, the entity that owns the primary site upon which the Eastside Cannery is located.

 

On May 18, 2007, CCR entered into two new syndicated credit facilities totaling $860 million: a $745 million first lien facility and a $115 million second lien term loan facility.  The proceeds were used primarily to retire existing debt, including the then-existing $250 million credit facility.  The remainder of the proceeds from the borrowing were used to partially fund the construction of the permanent casino facility at The Meadows and the Eastside Cannery.  The first lien facility was amended by the First Lien Amendment on March 3, 2010.

 

For more information about the syndicated credit facilities and the First Lien Amendment, see the Company’s current reports on Form 8-K filed with the SEC on May 24, 2007 and March 9, 2010, respectively.

 

***The Cannery***

 

The Cannery, located in North Las Vegas, Nevada, commenced operations in January 2003, and, in 2006, completed a $40 million expansion project.  Currently, The Cannery features approximately 80,000 square feet of casino space, including 1,996 slot/video poker machines, 26 table games, poker room, bingo room and a race and sports book. The attached three-story hotel is designed to be compatible with The Cannery’s World War II industrial theme and includes 201 hotel rooms.  In addition, The Cannery’s facilities include a sports-themed restaurant and bar, a buffet restaurant, a Mexican-themed restaurant, an Italian restaurant and a steakhouse; a 14 screen movie theatre; an indoor/outdoor multi-purpose entertainment venue used to host events such as boxing matches and community festivals; an entertainment lounge; a pool and jacuzzi; and parking for approximately 3,600 vehicles (including a 1,900-space parking garage), with valet options and additional off-site parking for large events, along with shuttle bus service to and from the casino.

 

***The Rampart Casino***

 

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

 

The Rampart Casino is situated within the JW Marriott Las Vegas Resort, Spa & Golf at the Resort at Summerlin, located in the Summerlin area of northwest Las Vegas. The Rampart Casino’s facilities consist of approximately 50,000 square feet of casino space,

 

4

----

Table of Contents

 

approximately 1,200 slot machines, 25 table games, a race and sports book, three restaurants, a bar and three lounges. The JW Marriott Las Vegas Resort is located on over 50 acres of land and consists of a hotel with over 500 guest rooms and suites, a spa, and several restaurants.

 

The Rampart lease will expire in 2012, and CCR’s management is currently evaluating potential transition options at the end of the lease term. However, there can be no assurance that the CCR will not be required to cease its operations related to Rampart.

 

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

 

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

 

The Eastside Cannery, located on the Boulder Strip in east Las Vegas and approximately eight miles from McCarran International Airport, is similar in theme and amenities to The Cannery, with more than 300 guest rooms and suites, a resort spa, jacuzzi and a half-acre pool with cabanas on the property.   The Eastside Cannery’s casino has approximately 65,000 square feet of gaming space, with approximately 1,880 slot machines, 18 table games, a 450-seat bingo hall, a live Keno lounge, a poker room and a race and sports book.  In addition, the Eastside Cannery has five restaurants, five bars, a 250 seat entertainment lounge, the One Six Sky Lounge and an approximately 20,000 square foot ballroom and meeting place.

 

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

 

***The Meadows***

 

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

 

The Pennsylvania Gaming Control Board (the “*Pennsylvania Board*”) approved Washington Trotting Association (“*WTA*”), a wholly-owned subsidiary of PA Meadows, to receive a Category 1 Slot Machine License to operate a casino at The Meadows in December 2006. With construction completed in April 2009, PA Meadows opened an approximately 350,000 square-foot permanent casino that replaced an approximately 82,000 square foot temporary casino.  The permanent facility includes 7 restaurants and boutique style bowling alley and nightclub. In addition, the permanent casino houses approximately 3,500 slot machines and integrates the long-standing tradition of harness racing at The Meadows with state-of-art gaming facilities.

 

In January 2010, the Pennsylvania Act was amended to permit table games at slot facilities in Pennsylvania after issuance of a table games certificate by the Pennsylvania Board.  In February 2010, The Meadows submitted its petition for approval of table games to the Pennsylvania Board.  On April 29, 2010, The Meadows was approved for, and on July 8, 2010 commenced, table games and poker operations. At December 31, 2010 table game operations at The Meadows consisted of 48 table games and 20 poker tables.

 

***Gaming Markets***

 

*Las Vegas Locals Gaming Market*

 

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

 

CCR competes primarily in the Las Vegas locals gaming market, which is defined as the Clark County gaming market excluding the Las Vegas Strip, Downtown Las Vegas and Laughlin.  The Las Vegas Convention and Visitors Authority estimates that two-thirds of the local Las Vegas adult population participates in casino gaming on a regular basis.  In 2010, total win from nonrestricted gaming operations in the Las Vegas locals gaming market was approximately $2.16 billion, representing a year-over-year decline of approximately 4.85% as compared to 2009, according to the Nevada Gaming Control Board.

 

5

----

Table of Contents

 

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

 

*North Las Vegas*

 

The Cannery is located in North Las Vegas, off of I-15 and a few miles from I-95, and targets local residents and visitors to the nearby Nellis Air Force Base and Las Vegas Motor Speedway.  According to the Nevada Gaming Control Board, total win from nonrestricted gaming operations in North Las Vegas decreased from approximately $286 million in 2009 to approximately $268 million in 2010, an approximately 6.29% decrease compared to 2009.  From 2008 to 2009, however, total win from nonrestricted gaming operations increased approximately 1.24%, from $282 million in 2008 to $286 million in 2009.

 

*Summerlin*

 

The Rampart Casino is located in the Summerlin area of northwest Las Vegas, a 22,500-acre, master-planned community with approximately 60,000 households, adjacent to the Summerlin Parkway and within close proximity to six golf courses. CCR management believes that the Rampart Casino’s primary market consists of frequent local gaming patrons who seek a friendly atmosphere and convenience, as well as higher-than-average payout rates for slot machines and video poker games. In addition, due to its central location within the JW Marriott Resort, the Rampart Casino benefits from resort and conference visitor traffic.  Because the Summerlin area is categorized with the balance of Clark County in the Nevada Gaming Control Board’s revenue reports, specific annual gaming revenues for the Summerlin area cannot be determined.

 

*The Boulder Strip Area*

 

The Eastside Cannery is located along the Boulder Highway, known as the “Boulder Strip.”  The Boulder Strip is known as a popular “off the Las Vegas Strip” gaming destination for visitors to Las Vegas who are looking for a less costly gaming experience than that offered on the Las Vegas Strip. Many of the casinos along the Boulder Strip offer entertainment amenities beyond gambling, including movie theaters, bowling alleys and dining establishments.  According to the Nevada Gaming Control Board, the Boulder Strip Area, which includes casinos within the city limits of Henderson, Nevada, has seen win from nonrestricted gaming operations  decrease slightly from approximately $792 million in 2004 to approximately $790 million in 2009.  In 2010, nonrestricted gaming operations were approximately $757 million, representing a decrease of 4.18% from the prior year.  Despite the recent decrease, CCR management believes that the Boulder Strip has become, and is likely to remain, popular with Las Vegas locals.

 

*Pennsylvania Gaming Market*

 

The Meadows is located in North Strabane Township, Washington County, Pennsylvania. North Strabane Township is part of the greater Pittsburgh metropolitan area and is located approximately twenty-five miles from the city of Pittsburgh.  The Meadows competes in a large market that includes 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 greater market, other than Pennsylvania, only West Virginia has established slot machine gaming and recently added table games.  Slot machine gaming is relatively new to Pennsylvania.  Pennsylvania has approved 12 slot machine gaming facilities for licensure throughout the state: 6 racetrack-based casino facilities, 4 stand-alone slot machine gaming facilities and 1 resort-based slot machine facility. The Pennsylvania Board had approved the fifth stand-alone slot machine gaming license for Foxwoods in Philadelphia, but recently revoked the license as the facility has not been built. This decision is currently under appeal.  Of the 12 facilities approved for licensure, 6 racetrack facilities are open and 4 stand-alone slot machine gaming facilities, Mt. Airy Casino Resort, The Rivers Casino, Sands Bethlehem and SugarHouse are open.  The closest licensed in-state racetrack-based casino is Presque Isle Downs & Casino, in Erie, Pennsylvania, which is approximately 146 miles from The Meadows.  The closest stand-alone facility is The Rivers Casino, which opened in August 2009 and is approximately 25 miles from The Meadows.

 

6

----

 

Table of Contents

 

***Competition***

 

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

 

Under the terms of CCR’s amended and restated operating agreement, Millennium and its affiliates, on the one hand, and AcquisitionCo and its affiliates (including the Company), on the other, must offer gaming opportunities first to CCR prior to pursuing any such opportunity outside CCR. Generally, no manager of CCR may serve as a manager, officer, director or employee of any casino operating or holding company, except that a manager may serve in such capacities with respect to CCR or its subsidiaries or entities that hold equity in the Company (other than Oaktree or investors in the Oaktree Funds). Nevertheless, a manager may serve as a manager, officer, director or employee of a casino operating or holding company formed to pursue a gaming opportunity offered to but not accepted by CCR and a casino operating or holding company formed to pursue certain opportunities in Mexico.

 

*Las Vegas Locals Gaming Market*

 

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

 

The closest casino competitors to The Cannery are Aliante Station and Santa Fe Station, which are approximately five and six miles, respectively, from the site of the casino, although outside of The Cannery’s primary market area. Other competitors (each more than six miles from The Cannery) include Texas Station Gambling Hall and Fiesta Rancho.  Each of these four competitors is owned by Station Casinos, Inc.  Together, they account for over 6,500 slot machines, over 100 table games and over 500 hotel rooms and suites.  The closest competitor to the Rampart Casino is Suncoast Casino, which is within close proximity to the Rampart Casino.  In addition, the nearby Red Rock Station casino, also owned by Station Casinos, Inc., is 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 miles away, outside of the Rampart Casino’s primary market area.  The Boulder Strip is home to many competitors.  Prominent casinos along the Boulder Strip include Sam’s Town Hall & Gambling Hall, operated by Boyd Gaming Corporation; and Sunset Station, Boulder Station, Green Valley Ranch and Fiesta Henderson, each owned by Station Casinos, Inc.  These competitors generally have from 1,500 to over 3,100 slot machines, 25 to 70 table games (including poker) and 200 to over 600 hotel rooms and suites.  The Eastside Cannery and a few other smaller casinos along the Boulder Strip may lack the necessary facilities and other amenities to effectively compete in this prominent sub-market.

 

*Las Vegas Strip and Downtown Las Vegas Gaming Market*

 

The Las Vegas Strip is the location of dozens of casinos, including the largest and newest “mega-casinos” in Las Vegas. In addition, the downtown Las Vegas area includes approximately a dozen casinos on or near Fremont Street in old Las Vegas. Casinos located on the Las Vegas Strip or in downtown Las Vegas are typically tourist destinations and generally do not target the locals gaming market.

 

*The Neighborhood Casino Act*

 

In 1997, the Nevada Legislature passed Senate Bill No. 208 (the “*Neighborhood Casino Act*”), enacting laws which possibly create significant barriers to new competition in CCR’s local gaming markets by limiting future casino development in certain areas of Clark County, Nevada.  Those laws were amended in 2001.  With certain specified exemptions, the Neighborhood Casino Act restricts non-restricted gaming to certain designated gaming enterprise districts, and imposes potentially burdensome requirements on applicants proposing to have new locations designated as gaming enterprise districts by the applicable county, city or town body with jurisdiction.

 

7

----

Table of Contents

 

*Pennsylvania Gaming Market*

 

The primary established competition for the casino at The Meadows are The Rivers Casino in Pittsburgh, two racetrack-based casinos located in West Virginia: the Wheeling Island Racetrack and Gaming Center in Wheeling, West Virginia, and the Mountaineer Racetrack and Gaming Resort in Chester, West Virginia.  The Rivers Casino is located approximately 25 miles from The Meadows and opened in August 2009 with approximately 3,000 slot machines.  The Wheeling Island Racetrack and Gaming Center is approximately 34 miles from The Meadows and is an established racetrack and slot machine gaming center with approximately 2,400 slot machines.  The Mountaineer Casino is approximately 50 miles from The Meadows and is an established racetrack and slot machine gaming center with approximately 3,200 slot machines.  Both West Virginia facilities added table games in late 2007. The Meadows and The Rivers Casino commenced table game operations in July 2010.  Pennsylvania has approved for licensure 12 slot machine gaming facilities throughout the state, 6 racetrack-based casino facilities, 4 stand-alone slot machine gaming facilities and 1 resort-based slot machine facility. The Pennsylvania Board had approved the fifth stand-alone slot machine gaming license for Foxwoods in Philadelphia, but recently revoked the license as the facility has not been built. This decision is currently under appeal.  The 6 racetrack facilities are open and 4 stand-alone slot machine gaming facilities, Mt. Airy Casino Resort, The Rivers Casino, Sands Bethlehem and SugarHouse, are open.  The closest in-state licensed facility to The Meadows is The Rivers Casino located in Pittsburgh, Pennsylvania and is approximately 25 miles from The Meadows.  The closest licensed in-state racetrack-based casino is Presque Isle Downs & Casino, located in Erie, Pennsylvania, which is approximately 146 miles from The Meadows.    In addition, the Commission issued a license to Valley View Downs in Lawrence County; however, the Pennsylvania Board has not approved a slot machine license as the Pennsylvania Board determined that Valley View Downs does not have adequate financing. In March 2010, Centaur LLC, the parent company of Valley View Downs, filed for bankruptcy. In January 2011 a bid for the Valley View Downs harness racing license was accepted by the Bankruptcy Court and the bankruptcy plan was approved. To date, the transaction has not been completed.

 

Also, the Pennsylvania Board allowed additional applicants to file for the remaining resort hotel slot machine license which allows for 500 slot machines at the facility or 600 slot machines if the facility also operates table games.  Nemacolin Woodlands Resort in Farmington, Pennsylvania applied for the remaining resort hotel slot machine license and is approximately 35 miles from The Meadows.  The license process is a competitive bidding process and there are three other applicants competing for this license.  This license has not yet been awarded as of this date, but it is anticipated that the Pennsylvania Board will make a decision in April or May 2011.

 

***Business and Marketing Strategy***

 

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

 

*Strong Management Team*.

 

The day-to-day operations of CCR are managed by Messrs. Paulos and Wortman, each of whom has had significant gaming industry experience. Mr. Paulos previously served as 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 Casino Resort, where he also served on the board of directors. Mr. Paulos has served as Chief Operating Officer of Crown Casino Limited, where he was responsible for the construction and opening of its casino in Melbourne, Australia, and as Senior Vice President of Circus Circus Enterprises, Inc., where he had primary responsibility for the development of the Excalibur and Luxor casinos. Mr. Wortman previously served as Chairman and Chief Executive Officer of Palace Casinos, Inc. In addition to Nevada Palace, he previously owned and operated the Fallon Nugget and Bonanza Inn in Fallon, Nevada and Renata’s/Sunset Lanes in Henderson, Nevada. Mr. Wortman held various senior positions at Caesars Palace Las Vegas, including Treasurer, Chief Financial Officer, Vice President of Administration and Vice President of Hotel Operations, and served as President and Chief Operating Officer of Caesars Tahoe.

 

*Targeted Customer Base*.

 

CCR’s operating strategy aims to attract and retain customers primarily from the locals market through innovative, frequent and high-profile promotional programs, focused marketing efforts and convenient locations.  CCR’s primary customers are located within a five-mile radius of its casinos, and CCR focuses its marketing efforts on those patrons.

 

*High-Value Customer Experience*.

 

In order to provide a high-value gaming experience, CCR focuses on slot and video poker machine play with higher-than-average payout. CCR management believes that by offering a wide variety of high quality slot and video poker games, its casinos attract locals and repeat visitors.  CCR management is committed to providing a high-value entertainment experience through restaurant, hotel and other non-gaming amenities at reasonable prices to attract patrons.

 

8

----

Table of Contents

 

*Creative Marketing and Promotional Programs*.

 

CCR management believes that promotions and promotional events are one of the primary factors to success in the locals gaming market.  CCR employs a marketing strategy that utilizes innovative, frequent and high-profile promotional programs in order to attract and retain customers and establish a high level of name recognition for CCR’s casinos.  In addition to aggressive marketing through television, radio, and newspaper advertising, CCR creates and sponsors promotional events and has established and promotes an exclusive players club.

 

*Operating Efficiencies*.

 

By operating its Nevada casinos with a similar marketing focus and target customer, CCR realizes certain operating efficiencies.  For example, The Cannery, the Eastside Cannery and the Rampart Casino participate in the same players’ club, which provides casino patrons with the opportunity to win points at any CCR location and enables management to run larger joint promotions. CCR also benefits from joint purchasing programs for food and other supplies and available quantity discounts.  In addition, CCR realizes equipment cost savings from, among other things, identical player-tracking systems in its casinos.  These player-tracking systems provide CCR with access to a larger database of customers for purposes of cross-marketing and promotions.  Finally, the accounting, personnel and other administrative functions of CCR’s casinos are centralized to reduce costs.

 

***Employees***

 

As of December 31, 2010, CCR and its subsidiaries had approximately 3,869 active employees and approximately 2,885 full-time equivalent employees.  Of these employees, 478 are unionized.  CCR recognizes that its employees are critical to its success and has sought to foster a productive work culture.  Employees are offered competitive salaries and benefit packages.

 

***Environmental Matters***

 

The operations and properties of The Cannery, the Rampart Casino and the Eastside Cannery (and the former operations of the Nevada Palace) are and will continue to be subject to a wide variety of complex and stringent environmental laws. CCR management and NP Land management believe that their respective operations and properties are in compliance in all material respects with all applicable environmental laws.  Based upon their experience to date, CCR management and NP Land management believe that the future cost of compliance with and liability under existing environmental laws will not have a material adverse effect on their respective future financial conditions, cash flows or results of operations.

 

The operations and properties of The Meadows are, and will continue to be, subject to a wide variety of complex and stringent environmental laws.  CCR management believes that these operations and properties are in compliance in all material respects with all environmental laws.  As a result, CCR management believes that the future cost of compliance with and liability under existing environmental laws applicable to The Meadows will not have a material adverse effect on PA Meadows’ future financial conditions, cash flows or results of operations.

 

**REGULATORY MATTERS**

 

CCR and its equity holders, including the Company, are subject to gaming regulation in Nevada and gaming and harness racing regulation in Pennsylvania. The ownership and operation of casino gaming facilities in Nevada are 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 and regulatory control of the Nevada Gaming Control Board (the “*Nevada Board*”), the Nevada Gaming Commission (the “*Nevada Commission*”), the Clark County Liquor and Gaming Licensing Board, the City of Las Vegas and the City of North Las Vegas (collectively, the “*Nevada Gaming Authorities*”). The ownership and operation of slot machine facilities in Pennsylvania are subject to the Pennsylvania Race Horse Development and Gaming Act (such laws and regulations, the “*Pennsylvania Act*”) and the licensing and regulatory control of the Pennsylvania Board. The ownership and operation of harness racing tracks in Pennsylvania are subject to the harness racing laws and regulations of the Commonwealth of Pennsylvania, including the Race Horse Industry Reform Act (such laws and regulations, the “*RHIRA*”), and the licensing and regulatory control of the Pennsylvania State Harness Racing Commission (“*Pennsylvania Commission*”).

 

9

----

Table of Contents

 

***Nevada Gaming Laws and Regulations***

 

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

 

*Licensing Requirements and Approvals*

 

In 2006, certain required approvals were obtained from the Nevada Gaming Authorities in connection with the Company’s acquisition of its equity interests in CCR and NP Land. Such approvals included (i) the Company was registered as a “publicly traded corporation” as that term is defined by the Nevada Act (a “*Registered Company*”); (ii) the Company, VoteCo, and AcquisitionCo were registered as holding or intermediary companies and found suitable; and (iii) the VoteCo Equityholders received various approvals including licensure as members and managers, as applicable, of VoteCo and findings of suitability as controlling members and managers, as applicable, of the Company.

 

While the direct and indirect holders of Class B Membership Units of the Company were not required to be found suitable in connection with the Company’s acquisition of equity interests in CCR and NP Land, they remain subject to the discretionary authority of the Nevada Gaming Authorities and can be required to file an application and have their suitability determined, or to dispose of their investment in the Company.

 

The Nevada Gaming Authorities may require additional licensing or suitability applications. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay or must cause to be paid all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position.

 

*Consequences of Being Found Unsuitable or Violating Gaming Laws*

 

If the Nevada Gaming Authorities were to find an officer, manager or key employee of CCR, the Company, VoteCo or AcquisitionCo unsuitable to continue having a relationship with these entities, the companies involved would have to sever all relationships with such person.  The Nevada Gaming Authorities may deny an application for any cause which they deem reasonable.  Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

 

If it were determined that 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 statutory and regulatory procedures. In addition, any such violator and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act, or of the regulations of the Nevada Commission, at the discretion of the Nevada Commission.  Furthermore, the Nevada Commission could appoint a supervisor to operate The Cannery, the Rampart Casino, the Eastside Cannery and, under specified circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) impact casino revenues and cause the Company to suffer financial loss.

 

*Ongoing Obligations 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 Units or Class B Membership Units or any other security convertible into or exchangeable for Class A Membership Units or Class B Membership Units, without the prior approval of the Nevada Commission, and (2) the Company from declaring cash dividends or distributions on any class of membership unit of the Company beneficially owned in whole or in part by InvestCo, VoteCo, or their respective affiliates, without the prior approval of the Nevada Commission.

 

The Company, VoteCo and AcquisitionCo are subject to detailed ongoing financial and operating reporting requirements to the Nevada Gaming Authorities. Substantially all material loans, leases, sales of securities and similar financing transactions by the Company, VoteCo and AcquisitionCo must be reported to, or approved by, the Nevada Commission.

 

10

----

Table of Contents

 

Regardless of the number of shares held, any beneficial holder of a Registered Company’s voting or non-voting securities may be required to file an application, be investigated and have that person’s suitability as a beneficial holder of voting or non-voting securities determined if the Nevada Commission has reason to believe that the ownership would 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 a corporation, partnership, limited partnership, limited liability company or trust, it must submit detailed business and financial information, including a list of its beneficial owners.  The applicant must pay all costs of the investigation incurred by the Nevada Gaming Authorities in conducting any investigation.

 

The Nevada Act requires any person who individually or in association with others acquires, directly or indirectly, beneficial ownership of more than 5% of a Registered Company’s voting securities to report the acquisition to the Nevada Commission, and such person may be required to be found suitable. The Nevada Act requires that each person who, individually or in association with others, acquires, directly or indirectly, beneficial ownership of more than 10% of a Registered Company’s voting securities to apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. However, an “institutional investor,” as defined in the Nevada Act, which beneficially owns more than 10% but not more than 11% of a Registered Company’s voting securities as a result of a stock repurchase by the Registered Company may not be required to file such an application. Further, an institutional investor which acquires more than 10%, but not more than 25%, of a Registered Company’s voting securities may apply to the Nevada Commission for a waiver of a finding of suitability if the institutional investor holds the voting securities for investment purposes only. An institutional investor that has obtained a waiver may hold more than 25% but not more than 29% of a Registered Company’s voting securities for a limited period of time and maintain the waiver where the additional ownership results from a stock repurchase by the Registered Company. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of a Registered Company, a change in the corporate charter, bylaws, management, policies or operations of a Registered Company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding a Registered Company’s voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include:

 

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

 

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

 

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

 

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

 

·                  pays that person any dividend or interest with respect to voting securities of the Registered Company;

 

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

 

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

 

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

 

The Nevada Commission may, in its discretion, require the holder of any debt or non-voting security of a Registered Company to file applications, be investigated and be found suitable to own the debt or non-voting security of a Registered Company. If the Nevada 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 the Nevada Commission, the Registered Company:

 

11

----

Table of Contents

 

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

 

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

 

·                  pays the unsuitable person remuneration in any form; or

 

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

 

A Registered Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes.

 

The Nevada Act provides that changes in control of a Registered Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby the person obtains control, may not occur without the prior approval of the Nevada Commission. Entities and persons seeking to acquire control of a Registered Company must satisfy the Nevada Commission with respect to a variety of stringent standards prior to assuming control of such Registered Company. The Nevada Commission may also require controlling stockholders, members, partners, officers, directors and other persons having an ownership interest in or a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.

 

Any person who is licensed, required to be licensed, registered, required to be registered, or under common control with such persons, and who proposes to become involved or is involved in a gaming venture outside of Nevada (“*Foreign Gaming*”), is required to deposit certain funds with the Nevada Board in order to pay the expenses of investigation of the Nevada Board of their participation in such Foreign Gaming. Thereafter the licensees are required to comply with certain reporting requirements imposed by the Nevada Act. A licensee is also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the Foreign Gaming operation, fails to conduct the Foreign Gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs, contracts with, or associates with, a person in the Foreign Gaming operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.

 

***Pennsylvania Gaming Laws and Regulations***

 

The ownership and operation of slot machine facilities in Pennsylvania are subject to extensive state regulation by the Pennsylvania Board under the Pennsylvania Act and the regulations 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 regulations promulgated thereunder, concern primarily the good character, honesty, integrity and financial stability of slot machine licensees, their intermediary and holding companies, their employees, their security holders and others financially interested in slot operations.

 

On December 20, 2006, the Pennsylvania Board approved WTA to receive a Category 1 Slot Machine License. The Category 1 Slot Machine License was approved upon completion of a background investigation and initial satisfaction of certain conditions set by the Pennsylvania Board. The holder of a Category 1 Slot Machine License may operate up to 3,000 slot machines and, with the approval of the Pennsylvania Board, up to an additional 2,000 slot machines after six months of operation. Prior to the commencement of slot machine operations, WTA obtained additional approvals from the Pennsylvania Board, such as approval of internal controls and equipment, licensing of employees and the successful completion of gaming test days.

 

As pre-conditions to receiving its license, WTA had to demonstrate, by clear and convincing evidence to the satisfaction of the Pennsylvania Board, that WTA and its affiliates are persons of good character, honesty, integrity and that their prior activities, reputation, habits and associations do not pose a threat to the public interest or the effective regulation and control of slot machine operations or create or enhance the danger of unsuitable, unfair or illegal practices, methods and activities in the conduct of slot machine operations or in the carrying on of the business and financial arrangements incidental thereto. WTA also had to demonstrate by clear and convincing evidence the adequacy of its financial resources, the financial stability, integrity and responsibility of it and its affiliates, and the integrity of all financial backers, investors, mortgagees, bondholders and holders of indentures, notes or other evidences of indebtedness, either in effect or proposed, except that banking or licensed lending institutions and certain institutional investors may be waived from the qualification requirements. WTA had to show by clear and convincing evidence that it has sufficient business ability and experience to create and maintain a successful, efficient operation.

 

12

----

Table of Contents

 

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

 

As a licensee, WTA is obligated to fully cooperate with the Pennsylvania Board in the conduct of any inquiry or investigation and provide any supplementary information as may be requested. Currently, there are no known inquiries or investigations, except license renewal investigations that are in the normal course, being conducted about WTA or its affiliates.

 

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

 

The Pennsylvania Board may deny an application or suspend or revoke a license of a person or applicant who has failed to prove to the satisfaction of the Pennsylvania Board that the person or applicant is qualified in accordance with the Pennsylvania Act, who has violated the Pennsylvania Act, who is disqualified under the criteria set forth in the Pennsylvania Act, who provided false or misleading information to the Pennsylvania Board, who has materially departed from a representation made in the application for a license or who has failed to comply with applicable Federal or state laws or regulations. If the Pennsylvania Board does not approve a slot machine license application based on a finding that an individual who is a principal or has an interest in the entity applying for licensure does not meet the character requirements or any other eligibility requirement or is in violation of the change in ownership and control provisions of the Pennsylvania Act, the Pennsylvania Board may permit the individual or entity the opportunity to 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 divested interest 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 1 Slot Machine licensee, WTA is subject to a daily tax of 34%, a local county share assessment of 2%, a local municipality share assessment of 2% but no less than $10 million, an additional daily assessment of 5% of its daily gross terminal revenue, and a 1.5% tax on gross terminal revenue. A licensee shall also pay a daily assessment to the Pennsylvania Race Horse Development Fund in a maximum amount of 12% of daily gross terminal revenue as determined by the Department of Revenue. WTA is also responsible for the costs of investigation and regulation.

 

A license or permit issued 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 or permittee pledge or otherwise grant a security interest in a license. A licensee must notify the Pennsylvania Board prior to or immediately upon becoming aware of any proposed or contemplated change of ownership by a group or person which involves (i) more than 5% of the licensee’s ownership interests, (ii) more than 5% of the ownership interests of an entity that owns, directly or indirectly, at least 20% of the voting or other ownership interests of the licensee, (iii) a sale, other than in the ordinary course of business, of a licensee’s assets, or (iv) any other transaction or occurrence deemed to be relevant by the Pennsylvania Board. A purchaser of the assets of a licensee other than in the ordinary course of business or of more than 20% of the licensee’s ownership interests must independently qualify for a license and pay a new license issuance fee of $50 million. However, the fee is subject to reduction in the discretion of the Pennsylvania Board. WTA and Crown received approval from the Pennsylvania Board on February 24, 2011 with respect to the conversion of Crown’s Series B Units in CCR into Series A2 Units in CCR described in Note 9 to the consolidated financial statements. The Pennsylvania Board imposed a one-time license fee of $2.5 million on Crown in connection therewith.

 

Slot machine licenses must be renewed every three years, but are required to update the information in their applications annually.  Further, the licensee has the affirmative duty to notify the Pennsylvania Board of any changes relating to the status of the license or to any other information contained in the application materials.  If a completed renewal application is received in a timely manner, the license shall remain in effect unless and until the Pennsylvania Board denies or renews the license.

 

In January 2010, the Act was amended to permit table games.  In order to obtain a certificate to operate table games from the Pennsylvania Board, the licensee must petition the Pennsylvania Board for approval and must prove by clear and convincing evidence that: (i) the slot machine license is in good standing; (ii) the conduct of table games will have a positive economic impact; (iii) that licensee has adequate funds to commence table games operations and pay the license fee; (iv) that the licensee has the necessary financial stability, integrity, and responsibility to conduct table games; (v) that licensee has sufficient business ability and experience to maintain table games operation; (vi) that internal and external security and proposed surveillance are adequate for table games; (vii) that the slot machines in operation as of October 1, 2009 will not be reduced in order to install table games; and (viii) petitioner 

 

13

----

Table of Contents

 

has executed a waiver regarding fee reimbursement.  In February 2010, The Meadows submitted its petition for approval of table games to the Pennsylvania Board.  On April 29, 2010, The Meadows was approved for, and on July 8, 2010 commenced, table games and poker operations. At December 31, 2010 table game operations at The Meadows consisted of 48 table games and 20 poker tables.  In connection with the commencement of these operations, The Meadows was required to pay a one time non-refundable table game authorization fee of $16.5 million.  WTA also will be subject to a tax on daily gross table games revenue of 14% for a period of two years following commencement of table games operations at The Meadows.  The tax on daily gross table games revenue then decreases to 12%.  The tax on automated table games is 34% of daily gross table games revenue.

 

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

 

The ownership and operation of pari-mutuel harness racing facilities in Pennsylvania is subject to extensive state regulation by the Pennsylvania Commission under the RHIRA and the regulations of the Pennsylvania Commission.  Pursuant to the RHIRA, the Pennsylvania Commission is empowered to issue no more than five licenses for the conduct of pari-mutuel harness racing (each, a “Harness Racing License”).  Two subsidiaries of PA Meadows, WTA and Mountain Laurel Racing, Inc. *(“MLR”*), each holds one of the five Harness Racing Licenses.  In June 2007, the Pennsylvania Commission granted the sole remaining Harness Racing License to Valley View Downs, LP. However, the Valley View Downs project has not been completed as a result of the bankruptcy of Centaur LLC, the parent company of Valley View Downs.

 

Once a Harness Racing License has been issued, the RHIRA provides that such license shall remain in effect so long as the licensee complies with all conditions, rules, regulations and provisions of the RHIRA.  Harness Racing Licenses are not transferable.  The RHIRA requires that each holder of a Harness Racing License shall, within ten days after any transfer of stock comprising an interest of 5% or more of such licensee, notify the Pennsylvania Commission of such transfer.  Such licensee must also file with the Pennsylvania Commission affidavits from the proposed transferees setting forth certain required information regarding the proposed transfer and the proposed transferee. On January 20, 2011, the Pennsylvania Commission approved the conversion of Crown’s Series B Units in CCR into Series A2 Units in CCR, as described in Note 9 to the consolidated financial statement.

 

On September 1, 2009, WTA assumed the on-and-off track racing operations previously operated by the MEC Operator.  WTA holds the proper licenses from the Pennsylvania Commission to perform such operations. If the Pennsylvania Commission determines that it is inconsistent with the public interest, convenience or necessity, or with the best interest of racing generally, for any person to continue as the holder of an equity interest in a licensee or any parent or affiliate of a licensee, the Pennsylvania Commission may order such person to dispose of such interest in a licensee within a period of time specified by the Pennsylvania Commission.

 

The Pennsylvania Commission may refuse to grant a Harness Racing License or may suspend or revoke a Harness Racing License without a prior hearing if it determines by a preponderance of the evidence that (i) a licensee, its officers, employees or agents have not complied with the conditions, rules, regulations and provisions of the RHIRA and (ii) it would be in the public interest, convenience or necessity to revoke or suspend the subject license. Such refusal, suspension or revocation may be premised upon, among other things, a determination by the Pennsylvania Commission that (a) any officer, director, member or stockholder of the licensee or any parent or affiliate of the licensee (1) has been convicted of a crime involving moral turpitude, (2) has engaged in bookmaking or other forms of illegal gambling, (3) has been found guilty of any fraud or misrepresentation in connection with racing or breeding, (4) has been found guilty of any violation or attempt to violate any law, rule or regulation of any racing jurisdiction for which suspension from racing might be imposed in such jurisdiction or (5) has violated any rule, regulation or order of the Pennsylvania Commission, or (b) the experience, character or fitness of any officer, director, member or stockholder of the licensee or any parent or affiliate of the licensee is such that the participation of the person in horse racing or related activities would be inconsistent with the public 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 the Pennsylvania Commission. However, the action of the Pennsylvania Commission in refusing to grant or in suspending or revoking a  Harness Racing License shall remain in full force pending such hearing and final determination.

 

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

 

Each entity participating in the management of a licensee and each licensee must provide the Pennsylvania Commission on an annual basis with a complete list of all holders of an ownership interest in such entity or licensee, indicating the interest of each  such owner.

 

***Reports to Security Holders***

 

The Company is required to file annual, quarterly and other current reports and information with the Commission. You may read and copy any materials filed by the Company with the Commission at its Public Reference Room at 100 F Street, NE, Room 1580, 

 

14

----

Table of Contents

 

Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Company’s filings are also available to the public from commercial document retrieval services and at the World Wide Web site maintained by the Commission at http://www.sec.gov.

 

**Item 2.  Properties.**

 

Neither the registrant nor any of its consolidated subsidiaries owns real property.

 

**Item 3.  Legal Proceedings.**

 

As of March 31, 2011, neither the Company nor any of its consolidated subsidiaries is a party to any pending legal proceeding, and to their knowledge, no action, suit or proceeding against it or any of its consolidated subsidiaries has been threatened by any person.

 

As of March 31, 2011, no director, officer, affiliate or security holder of the Company, and no owner of record or beneficially of more than five percent of the Company’s Class A Membership Units, is adverse to the Company or has a material interest adverse to the Company, in any material proceeding to which such person is a party.

 

**Item 4.  (Reserved)**

 

**PART II**

 

**Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**

 

On September 23, 2005, the Company issued all of its Class A Membership Units to VoteCo without registration pursuant to Section 4(2) of the Securities Act in exchange for an aggregate capital contribution of $100. On that same date, the Company issued all of its Class B Membership Units to InvestCo without registration pursuant to Section 4(2) of the Securities Act in exchange for subsequent contributions by InvestCo of (1) all the membership units in LandCo, whose primary asset is its one-third equity interest in NP Land, and (2) $64 million. Except as described immediately above, the Company has not issued any other securities.

 

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

 

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

 

·                  1% of the then outstanding 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 sold on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the four calendar weeks preceding the date on which notice of sale is filed with the Commission.

 

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

 

As of March 31, 2011, VoteCo was the only holder of record of the Company’s Class A Membership Units and InvestCo was the only holder of record of the Company’s Class B Membership Units.

 

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

 

15

----

Table of Contents

 

The Company does not have any equity compensation plans and does not expect to authorize securities for issuance pursuant to any equity compensation plans in the foreseeable future.

 

**Item 6.    Selected Financial Information.**

 

Not applicable.

 

**Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation.**

 

***Overview***

 

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

 

The Company’s current business consists primarily of its indirect ownership of a 42% interest in CCR’s Series A Units (subsequently reduced to 31.71% as described in Note 9 to the consolidated financial statements), 62-1/6% interest in CCR’s Series C Preferred Units and a 33-1/3% equity interest in NP Land. CCR operates three Las Vegas casinos, The Cannery, the Eastside Cannery, the Rampart Casino, and The Meadows, a harness racetrack and casino in Pennsylvania.  NP Land owns the land of the current site of the Eastside Cannery, which it leases to a subsidiary of CCR.

 

On December 11, 2007, the Company entered into the Original Purchase Agreement with CCR, Millennium and the Crown Parties, pursuant to which Crown One and Crown Two were to purchase, directly or indirectly, all of the CCR Units from the Original Equityholders (the “*Original Crown Transaction*”).  The Original Crown Transaction was initially expected to be consummated during the first quarter of 2009.  However, on March 12, 2009, the parties terminated the Original Purchase Agreement pursuant to the Termination and Settlement Agreement as more fully described under Item 1 —  Business Developments —  Termination and Settlement Agreement.  On March 12, 2009, the Company also entered into the Preferred Purchase Agreement and the Option Agreement with the Crown Parties, CCR and Millennium, each as more fully described under Item 1 —  Business Developments—  Preferred Purchase Agreement and Option Agreement.

 

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

 

***Recent Development***

 

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

 

On March 3, 2010, CCR also entered into the First Lien Amendment.  Pursuant to the First Lien Amendment, among other matters, (i) the interest rate margins applicable to term loans and revolving loans under the First Lien Credit Agreement have been fixed at 4.25% for Eurodollar rate loans and 3.25% for base rate loans, in lieu of a range dependent upon the borrowers’ consolidated leverage ratio; (ii) the maximum amount of revolving loans has been permanently reduced from $110 million to $70 million; (iii) the consolidated leverage ratio that the borrowers are required to maintain as of each quarter end date through the remaining term of the First Lien Credit Agreement has been adjusted; and (iv) the borrowers will be permitted to transfer a portion of Pennsylvania real property where The Meadows Racetrack and Casino is located, which is mortgaged under the First Lien Credit Agreement, for construction of a hotel.  In addition to these matters, other covenants and provisions of the First Lien Credit Agreement that are affected by the First Lien Amendment include covenants requiring maintenance of minimum consolidated EBITDA, compliance with cash management procedures and application of the proceeds of certain transactions, including the issuance of securities, to repay the outstanding indebtedness under the First Lien Credit Agreement.

 

***Results of Operations***

 

Material variables and factors affecting the Company’s income before income taxes for the year ended December 31, 2010 compared to the year ended December 31, 2009 follows:

 

16

----

Table of Contents

 

·                  CCR’s net revenue increased approximately $4.3 million for the year ended December 31, 2010, compared to the same period for the prior year, due to the operational highlights for CCR discussed below.  This increase resulted in a $1.8 million increase in equity in earnings of unconsolidated investees.

 

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

 

·                  The decrease in professional fees was the result of the higher legal and accounting fees associated with the termination of the Original Purchase Agreement in 2009.

 

The Company’s provision for income tax benefits for both periods does not bear an expected relationship with its income before income tax benefits because of material nonrecurring transactions, including some that pass-through and are taxable to the Company’s members.  In addition, material tax attributes of the Company’s unconsolidated investees, primarily CCR, flow to the Company through OCM Blocker, LLC, an entity in which the Company owns 99.99% of the equity interest, that are either nonrecurring or vary significantly.  Further, significant income of CCR is taxable to corporate subsidiaries of CCR. Management believes that the undistributed earnings from CCR’s tax-paying subsidiaries will be realized as a gain through an eventual sale of the Company’s investment in CCR.  (See Note 4 to the consolidated financial statements for additional details.)

 

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

 

Operational highlights for CCR for the periods ended December 31, 2010 and 2009, are as follows:

 

·      Revenues (net) for the year ended December 31, 2010 increased approximately $4.3 million as compared to the prior year.  The increase primarily resulted from the on-and-off track racing operations at The Meadows of $19.0 million. The Meadows assumed the on-and-off track racing operations on September 1, 2009, and, thus, the increase is a reflection of twelve months of operations as compared to only four months of operations in the previous year. These operations were previously performed by a wholly-owned subsidiary of Magna Entertainment Corporation. Slot (net) revenues at The Meadows decreased by approximately $29.1 million as compared to the prior year primarily due to increased competition from the opening of The Rivers Casino in August 2009. The decrease in slot revenues was partially offset by the increase in the on-and-off track operations (as previously discussed) and $12.9 million from table games operation, which commenced on July 8, 2010.  Collectively, the revenues (net) at CCR’s Nevada casinos remained relatively unchanged for the year ended December 31, 2010 as compared to the same period for the prior year.

 

·      Income from operations increased approximately $20.5 million, primarily due to the effective gaming tax rate decreasing from approximately 58.4% to 54.9% at The Meadows resulting in a decrease in gaming taxes of approximately $13.7 million for the comparable period in the prior year. The gaming tax rate on table games is 16.0% and approximately 59.5% on slot machine revenues. Other factors that contributed to the increase in income from operations include (i) an abandonment loss at The Meadows and settling a dispute between the Rampart and its landlord of $20.5 million and $1.8 million, respectively, in the prior year and (ii) a reduction in casino marketing and casino leased games expense of approximately $5.2 million and $4.8 million, respectively, as compared to the prior year. The increases were partially offset by (x) the increased operating cost for table games and on and off track racing operations (as previously discussed) of $6.7 million and $17.5 million, respectively and (y) increased other selling, general and administrative expenses of $5.7 million related to opening of the permanent facility at the Meadows on April 15, 2010 and assumption of the on-and-off track operations.

 

·      Net loss for the year ended December 31, 2010 decreased approximately $8.1 million compared to the prior year.  The decrease in net loss was primarily a result of the increase in income from operations (as previously discussed) and decreased interest expense of $1.4 million related to principal reduction in CCR’s outstanding credit facilities. The increases were partially offset by net gains associated with the termination of the Original Purchase Agreement and investment banking arrangements of approximately $11.0 million in the prior year and increased income tax expense of $2.3 million as compared to the prior year.

 

*Inflation*

 

The Company does not believe that inflation has had a material effect on its results of operations in recent years.  However, there is no assurance that inflation will not adversely affect its business in the future.

 

17

----

 

Table of Contents

 

***Liquidity and Capital Resources***

 

The United States recently experienced a recession accompanied by, among other things, weakness in the commercial and investment banking systems resulting in reduced credit and capital financing availability, and highly curtailed gaming, other recreational, construction and real estate market activities and general discretionary consumer spending.  Although capital market activity and liquidity have improved of late, the recovery from this recession period is fragile and there can be no assurance that our business, which has been severely affected by the downturn, will fully recover to pre-recession levels.

 

In March 2009, the Company received $21 million in connection with the termination of the Original Purchase Agreement and subsequently received an additional distribution from CCR totaling $21 million net of the $5.21 million concurrent equity contribution to CCR.  As disclosed above, the Company from time to time has also made equity contributions to CCR in connection with CCR maintaining compliance with its debt covenants including approximately $10.8 million in 2009 and approximately $46.6 million in March 2010 in connection with AcquisitionCo’s purchase of the Series C Units.  The Company has no current investment or other financing plans and the Company’s recurring prospective need for liquidity and capital resources is principally associated with the financing of its income tax obligations when due and, to a lesser extent, the costs associated with being a reporting company.  On July 15, 2010, the Company borrowed $750,000 from certain affiliates of the Company in order to cover existing and future expenses of the Company anticipated to arise during the next two years. Interest will be accrued at the prime rate plus 2% on the outstanding principal amount, and unpaid interest will be compounded monthly.  The notes evidencing this loan are due and payable on demand.  To the extent the Company needs additional liquidity and capital resources to satisfy those needs, the Company’s members are the expected source of funding.

 

***Off Balance Sheet Arrangements***

 

*Credit Agreements*

 

On May 18, 2007, CCR entered into two new syndicated credit facilities totaling $860 million: a $745 million first lien facility and a $115 million second lien term loan facility (collectively, the “*Credit Agreements*”).  Portions of the proceeds were used to retire the then existing debt, including $250 million credit facility, and to partially fund the completion of the Eastside Cannery and the permanent casino facility at The Meadows.

 

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

 

*Additional Conditional Commitments*

 

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

 

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

 

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

 

**Critical Accounting Estimates and Policies.**

 

Although the Company’s consolidated financial statements necessarily make use of certain accounting estimates by management, at this time, we believe no matters are the subject of such estimates that are so highly uncertain or susceptible to change as to present a significant risk of a material impact on its financial condition or results of operations as more fully explained in the following paragraph. Moreover, except as discussed below, the Company does not now employ any critical accounting policies that are selected from among available alternatives or require the exercise of significant management judgment to select or apply except for carrying its investments in unconsolidated investees on the equity method of accounting rather than the available fair value option. Similarly, in the opinion of the Company’s management, except for the selection of depreciable lives and depreciation methods and assumptions used to estimate the fair value of rate swap agreements and investments, consisting of preferred auction rate securities, the accounting policies of the Company’s unconsolidated investees also do not require the exercise of significant management judgment to apply.

 

18

----

Table of Contents

 

The realization of substantially all of the Company’s assets will likely be dependent upon an eventual sale of its investment in the unconsolidated investees following an economic recovery believed to be probable at a price sufficient to realize the carrying value of the Company’s assets.  Further, based in part on prior transactions with the Crown Parties, management believes, despite the current economic conditions, that the present estimated fair value of the Company’s investment in unconsolidated investees exceeds the carrying value of its investment and all other assets by a substantial amount such that any risk of not realizing the carrying values and having a material impact on the Company’s financial condition or results of operation is remote.  Additionally, it is management’s present opinion that the probability of an eventual sale of the Company’s investment in unconsolidated investees at a sufficiently appreciated value makes realization of its deferred tax assets more likely than not.

 

**Recently Issued Accounting Pronouncements.**

 

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

 

**Item 8.** **Financial Statements and Supplementary Data.**

 

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

 

**Item 9.** **Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.**

 

None.

 

**Item 9A. Internal Control over Financial Reporting.**

 

**Evaluation of Disclosure Controls and Procedures**

 

As of the end of the period 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 financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective.

 

**Management’s Annual Report on Internal Control Over Financial Reporting**

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.  This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States (“*GAAP*”). The Company’s internal control over financial reporting includes those policies and procedures that:

 

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

 

·                  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and

 

·                  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

The Company’s management, including its principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures, or its internal controls will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating and evaluating the controls and procedures.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of 

 

19

----

Table of Contents

 

effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2010, 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 a material weakness as a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Based upon that evaluation, our management concluded that the Company’s internal control over financial reporting is effective.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Commission that permit the Company to provide only management’s report in this annual report.

 

**Changes in Internal Control over Financial Reporting**

 

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

 

**Item 9B.** **Other Information.**

 

Not Applicable.

 

**PART III**

 

**Item 10.** **Directors, Executive Officers and Corporate Governance.**

 

As of March 31, 2011, the managers of the Company and of CCR are as follows:

 
| **Name**            | ** ** | **Age** | ** ** | **Position**                            |
|---------------------|------------|---------|------------|-----------------------------------------|
| Stephen   A. Kaplan |       | 52      |       | Manager   of the Company & CCR |
| Ronald   N. Beck    |       | 55      |       | Manager   of the Company & CCR |
| William   Paulos    |       | 63      |       | Manager   of CCR                        |
| William   Wortman   |       | 64      |       | Manager   of CCR                        |

 

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

 

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

 

WILLIAM J. PAULOS has served as manager of CCR and a member of its management committee since May 2001. Mr. Paulos established Millennium Management Group, LLC in September 1996 with Mr. Wortman and has served as its Chief Executive Officer since its inception. Millennium Management Group, LLC is currently a consultant to the Greektown Casino in Detroit. From January 1995 to September 1996, Mr. Paulos was 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 Casino Resort. From March 1994 to January 1995, Mr. Paulos was the Chief Operating Officer of Crown Casino Limited.

 

WILLIAM C. WORTMAN has served as manager of CCR and a member of its management committee since May 2001. Mr. Wortman established Millennium Management Group, LLC in September 1996 with Mr. Paulos and has served as its President since its inception. In 1985, Mr. Wortman became an owner in the Nevada Palace, which he continues to own. Mr. Wortman has also 

 

20

----

Table of Contents

 

served as President of Nevada First Bankcorp since 1999, and has served as Vice-Chairman of the Board of Nevada 1st Bank since 1997. From 1993 to 1994, Mr. Wortman served as Chairman and Chief Executive Officer of Palace Casinos, Inc.

 

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

 

The Company was founded by the VoteCo Equityholders for the primary purpose of participating in various activities relating to the gaming industry. Six of the VoteCo Equityholders are principals of Oaktree and one is a managing director of Oaktree. None would be considered independent under the NASDAQ Stock Market listing standards. The VoteCo Equityholders did not receive any direct consideration or other compensation in connection with their activities in founding the Company.

 

***Corporate Governance***

 

*The Company*

 

Pursuant to the Company’s limited 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 A Membership Units. The two current Managers of the Company are Messrs. Kaplan and Beck. The Company’s Managers cannot take and cannot cause the Company to take the following actions without the approval of VoteCo as the holder of Class A Membership Units:

 

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

 

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

 

·                  any removal or appointment of any Manager of the Company;

 

·                  any voluntary withdrawal of any member from the Company;

 

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

 

·                  any transaction between the Company and any member or Manager of the Company, or any affiliate or direct family member of any member or Manager of the Company, that is not made on an arm’s-length basis.

 

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

 

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

 

*CCR*

 

Under the terms of the amended and restated operating agreement, CCR has a management committee composed of four managers, two designated by AcquisitionCo and two designated by Millennium. AcquisitionCo designated Messrs. Kaplan and Beck as its initial managers, and Millennium designated Messrs. Paulos and Wortman as its initial managers. Other than powers expressly delegated to MMG II in its management of CCR’s casino properties, all powers to control and manage the business and affairs of CCR are vested in the Management Committee. Managers are required to be licensed or found suitable by the relevant Nevada gaming authorities in order to engage in the management of CCR. For further information 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 voluntarily registered its Class A Membership Units pursuant to Section 12(g) of the Securities Exchange Act of 1934 by filing a registration statement on Form 10-SB on June 9, 2006.  The registration became effective automatically 60 days later on August 8, 2006. Stephen Kaplan, Ronald Beck, John Frank, Bruce Karsh, David Kirchheimer, Howard Marks, Richard Masson and Sheldon Stone each filed an Initial Statement of Beneficial Ownership of Securities on Form 3 on August 16, 2006, which filing was 

 

21

----

Table of Contents

 

not timely.  In accordance with VoteCo’s operating agreement, Mr. Masson automatically forfeited his 12.5 VoteCo units upon his retirement from Oaktree on August 31, 2009.  Mr. Masson’s Annual Statement of Changes in Beneficial Ownership of Securities on Form 5 was not timely filed.

 

***Code of Ethics.***

 

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

 

**Item 11. Executive Compensation.**

 

Messrs. Kaplan and Beck, the Company’s named executive officers, are not entitled to compensation from the Company for any services rendered to or on behalf of the Company, or otherwise, in their capacities as Managers of the Company, and since the inception of the Company have received no such compensation.  The Company’s Managers are entitled to reimbursement from the first available funds of the Company for direct out-of-pocket costs and expenses incurred on behalf of the Company that directly relate to the business and affairs of the Company.

 

The VoteCo Equity holders did not receive any direct consideration or other compensation in connection with their activities in founding the Company.

 

**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**

 

The Company has no equity compensation plans.

 

The following table sets forth, as of March 31, 2011, information regarding the beneficial ownership of the Company’s voting securities by all persons known to be the beneficial 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                                   |       | Sheldon   Stone                                                         |       | .100 Units                                                          | (5)        | 100                            | %(5)       |

 

----

(1)                The address for each beneficial owner is:

 

c/o Oaktree Capital Management, L.P.

333 South Grand Ave, 28th Floor

Los Angeles, CA 90071

 

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

 

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

 

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

 

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

 

None of the Class A Membership Units beneficially owned by the persons listed in the table above have been pledged as security.

 

22

----

Table of Contents

 

The following table sets forth, as of March 31, 2011, information regarding the beneficial ownership by all Managers of the Company, named individually and as a group, of any class of equity securities of the Company, the Company’s parent or the Company’s subsidiaries.

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

 

----

(1)                                  The address for each beneficial owner is:

 

c/o Oaktree Capital Management, L.P.

333 South Grand Ave, 28th Floor

Los Angeles, CA 90071

 

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

 

(3)                                  Messrs. Kaplan and 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 other than its interest in AcquisitionCo.

 

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

 

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

 

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

 

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

 

(8)                                  AcquisitionCo is 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 87.5 VoteCo units and, as a result, each of Messrs. Kaplan and Beck may be deemed to be a beneficial owner of all 1,000 LandCo Units directly held by AcquisitionCo.

 

23

----

Table of Contents

 

(9)                                  The Company is the listed owner of all of the equity interests of AcquisitionCo II.  Each of Messrs. Kaplan and Beck may be deemed to be a member of a “group” holding all 87.5 VoteCo units and, as a result, each of Messrs. Kaplan and Beck may be deemed to be a beneficial owner of all of the equity interests of OCM AcquisitionCo II, LLC directly held by the Company.

 

(10)                            Mr. Beck is the listed owner of the securities.

 

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

 

None of the securities listed in the table above as beneficially owned by the Company’s Managers has been pledged as security.

 

**Item 13. Certain Relationships and Related Transactions.**

 

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

 

The Company’s limited liability company agreement provides that no member or Manager of the Company has any liability for the obligations of the Company, except to the extent required by law. To the maximum extent authorized by law, the Company indemnifies any person from any loss, damage, claim or liability incurred by him, her or it as a result of any act or failure to act (other than as a result of fraud, gross negligence or willful misconduct) performed or not performed by such person as a member, Manager, employee, agent or representative of the Company, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred.

 

In addition, a Manager of the Company who performs his or her duties in good faith, in a manner he or she reasonably believes to be in the best interests of the Company and with such care as an ordinarily prudent person in a like position would use under similar circumstances, does not have 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 any debt, obligation or liability of the Company.

 

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

 

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

 

***Other Transactions***

 

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

 

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

 

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

 

In March 2010, Millennium, the Company, through AcquisitionCo, and Crown Limited, through two subsidiaries, made equity contributions to CCR for the purpose of maintaining CCR’s compliance with its debt covenants. The equity contribution by AcquisitionCo was funded by an equity contribution from Blocker, which, in turn, was funded by a loan from the Company.

 

On July 15, 2010, the Company borrowed $750,000 from certain affiliates of the Company in order to cover existing and future expenses of the Company anticipated to arise during the next two years. Interest will be accrued at the prime rate plus 2% on the outstanding principal amount, and unpaid interest will be compounded monthly.  The notes evidencing this loan are due and payable on demand.

 

24

----

Table of Contents

 

***Company’s Parent***

 

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

 

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

 

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

 

The Company entered into certain transactions with Messrs. Paulos and Wortman in order to consummate the transactions contemplated by the First Amendment and Restatement of Contribution and Unit Purchase Agreement, dated as of September 23, 2005 (the “*CUP Agreement*”) related to the Company’s acquisition of the Company’s 33-1/3% of CCR’s Series A1 Units.  On September 30, 2005, the Company’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, and entities controlled by him, to acquire from an unrelated third party all of the interests not otherwise owned by him in the entities which own the land and assets relating to the Nevada Palace.

 

On January 5, 2006, the Company’s affiliates loaned to MGIM, LLC, a Nevada limited liability company controlled by Messrs. Paulos and Wortman, the AcquisitionCo Loan and 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.  All of these loans, while outstanding, accrued interest at 12%, but in the case of the LandCo Loan and the AcquisitionCo Loan, interest was waived and considered additional investment upon the consummation of the Company’s acquisition of its initial 33-1/3% equity interest in CCR and NP Land.  The InvestCo NP Loans were secured by all of the membership interests in NP Land and a related entity controlled by Mr. Wortman, and were also secured by the land and assets of the Nevada Palace.  The LandCo Loan was secured by pledges of the membership interests in an entity controlled by Mr. Wortman.  The AcquisitionCo Loan and the InvestCo/MGIM Loan were secured by pledges of all of the membership interests in CCR held by MGIM, LLC and Millennium, which pledges were subordinated to the pledge of such interests securing CCR’s then-existing credit agreement.  When the transactions contemplated by the CUP Agreement were consummated, all of the related security interests were released.

 

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

 

In September 2006, the Company, through its subsidiaries, acquired MGIM, LLC’s 33-1/3% equity interest in CCR in exchange for the cancellation of the $64 million AcquisitionCo Loan to MGIM, LLC, and a 33-1/3% equity interest in NP Land in exchange for the cancellation of the $4,282,454 LandCo Loan.  The $10,607,245 InvestCo NP Loans and the $5,125,000 InvestCo/MGIM Loan were repaid.  In addition, a wholly-owned subsidiary of CCR, Nevada Palace, LLC, entered into a lease with NP Land of the 22 acres on which the Eastside Cannery sits.  Nevada Palace, LLC also acquired from entities affiliated with Mr. Wortman gaming equipment and other operating assets for approximately $8 million and assumed approximately $1,340,000 of slot machine lease liabilities and $156,000 (accrued as part of the purchase price) of certain other liabilities directly associated with the continuation of operations of the Nevada Palace at the time its gaming assets were sold to CCR.  The NP Land lease is for a 35-year term at a fixed rental rate of $205,761 per month (as of December 31, 2010), subject to periodic inflationary adjustments, and required a $3 million security deposit.

 

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

 

Other than the $6 million distribution to Millennium and the $2.3 million reimbursement to entities controlled by Mr. Wortman, there have been no payments by CCR or its affiliates to Messrs. Paulos or Wortman or their affiliates for fees, expenses or other amounts paid or payable in connection with the transactions relating to the CUP Agreement, except amounts paid for business expenses reimbursed in the ordinary course.

 

25

----

Table of Contents

 

*Other Transactions*

 

Relatives of Messrs. Paulos and Wortman provide CCR with Automated Teller Machines (“*ATM*”) processing services.  CCR received combined commissions of $3,169,267 and $3,142,991 in  2010 and 2009, respectively, pursuant to separate agreements with CCR’s casinos.  Under these agreements, the providers receive the exclusive right to provide cash advance and ATM processing services at predetermined customer rates in return for providing, maintaining and keeping supplied ATMs at each location.  Each agreement has an initial term that expires in 2011, followed by five one-year renewals that are automatic unless either party gives 90 days’ notice.

 

CCR has historically purchased promotional merchandise utilized for casino marketing and as customer incentives from an affiliate of Millennium and a company where a relative of Mr. Paulos had a financial interest.  CCR incurred no such costs in 2010 and 2009.  CCR has contracted with MMG II, an affiliate of Millennium, to operate and manage its Nevada operations.  CCR incurred fees to MMG II of $6,028,703 and $6,296,955 in 2010 and 2009, respectively, in connection with these arrangements.

 

During 2007, Mr. Wortman incurred certain obligations in connection with the development of certain gaming opportunities in New Hampshire.  In connection with pursuing such opportunities, NH Downs has a receivable of approximately $9.1 million from Mr. Wortman.

 

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

 

The management of CCR believes that the transactions relating to the ATM processing services, the provision of promotional merchandise, the executive office lease and the operation and management of its Nevada operations, are on terms that are substantially similar to terms that would be available to unaffiliated third parties and are expected to continue in the future.

 

An affiliate of one of the Company’s members provides the Company with certain administrative support services for an annual fee of $50,000, based on hourly rates of assigned personnel.

 

**Item 14. Principal Accountant Fees and Services.**

 

***Audit Fees:***

 

For 2010 and 2009, we incurred annual audit and quarterly financial statement review fees totaling approximately $152,000 and $168,000, respectively, to Piercy Bowler Taylor & Kern, our independent registered public accounting firm.

 

***Audit-Related Fees:***

 

We did not incur audit-related fees to Piercy Bowler Taylor & Kern, our independent registered public accounting firm in 2010. In 2009, we incurred $9,500 to Piercy Bowler Taylor & Kern, for assurance and related services in connection with the Company’s response to comment letters from the Commission.

 

***Tax Fees:***

 

For 2010 and 2009, we incurred no tax preparation fees to Piercy Bowler Taylor & Kern, Certified Public Accountants.

 

***All Other Fees:***

 

For 2010 and 2009, we incurred no other fees to Piercy Bowler Taylor & Kern, Certified Public Accountants, for products and services other than the services reported above.

 

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

 

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

 

26

----

Table of Contents

 

**PART IV**

 

**Item 15. 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 statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

 

**Exhibits.**

 

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

 

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

 

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

 

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

 

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

 

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

 

Accordingly, these representations and warranties may not describe the actual state of affairs 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-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

 

27

----

 

Table of Contents

 

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

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

 

28

----

Table of Contents

 
| 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 previously with the Company’s Form 10-SB on June 9, 2006

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

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

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

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

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

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

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

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

 

29

----

Table of Contents

 

**SIGNATURES**

 

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

 
| **DATE:**        | **OCM HoldCo, LLC** |
|------------------|---------------------|
| ** **       | ** **          | ** ** |
| ** **       | ** **          | ** ** |
| March   31, 2011 | By:                 | */s/ Stephen A. Kaplan* |
|             |                | Stephen   A. Kaplan |
|             |                | Manager |
|             |                |   |
|             |                |   |
| March   31, 2011 | By:                 | */s/ Ronald N. Beck* |
|             |                | Ronald   N. Beck |
|             |                | Manager |

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 
| **Signatures**          | ** ** | **Title**  | ** ** | **Date**         |
|-------------------------|------------|------------|------------|------------------|
| ** **              | ** ** | ** ** | ** ** | ** **       |
| */s/ Stephen A. Kaplan* | * *   | * *   | * *   | * *         |
| Stephen   A. Kaplan     |       | Manager    |       | March   31, 2011 |
|                    |       |       |       |             |
|                    |       |       |       |             |
| */s/ Ronald N. Beck*    |       | Manager    |       | March   31, 2011 |
| Ronald   N. Beck        |       |       |       |             |

 

----

Table of Contents

 

**OCM HoldCo, LLC and Subsidiaries**

 

**Consolidated Financial Statements**

 

**as of December 31, 2010**

 

**and December 31, 2009**

 

**and for the Years then Ended**

 

**Table of Contents**

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

 

F-1

----

Table of Contents

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Managers of OCM HoldCo, LLC

 

We have audited the accompanying consolidated balance sheets of OCM HoldCo, LLC and its subsidiaries (collectively the Company) as of December 31, 2010 and 2009, 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’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2010 and 2009, and its consolidated results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

**PIERCY BOWLER TAYLOR & KERN**

 
| /s/   Piercy Bowler Taylor & Kern |   |
|--------------------------------------------|--------|
| Certified   Public Accountants             |   |
|                                       |   |
| Las   Vegas, Nevada                        |   |
| March   31, 2011                           |   |

 

F-2

----

Table of Contents

 

**OCM HoldCo, LLC and Subsidiaries**

 

**Consolidated Balance Sheets**

 

**December 31, 2010 and 2009**

 
| ** **                                                                                                 | ** ** | **2010**    | ** **    | **2009**    | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|-------------|---------------|-------------|------------|
| **ASSETS**                                                                                                 | ** ** |        |          |        |       |
| **Current   assets**                                                                                       |       |        |          |        |       |
| Cash                                                                                                       |       | $           |  506,264 |        | $          |  36,700,714 |   |
|                                                                                                       |       | 506,264     |          | 36,700,714  |       |
| **Other   assets**                                                                                         |       |        |          |        |       |
| Investment in Cannery Casino   Resorts, LLC                                                                |       | 139,575,666 |          | 98,464,347  |       |
| Investment in NP Land, LLC                                                                                 |       | 6,928,965   |          | 6,230,875   |       |
| Gaming and related license   costs                                                                         |       | 805,698     |          | 805,698     |       |
| Deferred tax asset                                                                                         |       | 13,129,333  |          | 8,764,049   |       |
|                                                                                                       |       | $           | 160,945,926   |        | $          | 150,965,683 |   |
|                                                                                                       |       |        |          |        |       |
| **LIABILITIES   AND MEMBERS’ EQUITY**                                                                 | ** ** |        |          |        |       |
| **Current   liabilities**                                                                                  |       |        |          |        |       |
| Accounts payable and accrued   expenses, including $46,802 and $28,276 to a related party in 2010 and 2009 |       | $           | 58,667        |        | $          | 38,779 |   |
| Taxes payable                                                                                              |       | —      |          | 141,341     |       |
| Deferred tax liabilities                                                                                   |       | 555,232     |          | 121,000     |       |
| Related party loan                                                                                         |       | 750,000     |          | —      |       |
|                                                                                                       |       | 1,363,899   |          | 301,120     |       |
|                                                                                                       |       |        |          |        |       |
| **Members’   equity**                                                                                 |       | 159,582,027 |          | 150,664,563 |       |
|                                                                                                       |       | $           | 160,945,926   |        | $          | 150,965,683 |   |

 

*See notes to consolidated financial statements.*

 

F-3

----

Table of Contents

 

**OCM HoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Operations**

 

**For the Years Ended December 31, 2010 and 2009**

 
| ** **                                                                             | ** ** | **2010**   | ** ** | **2009**   | ** ** |
|----------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                                                   |       |       |       |       |       |
| **Income**                                                                             |       |       |       |       |       |
| Interest income                                                                        |       | $          | 812        |       | $          | 4,724 |   |
| Equity in loss of   unconsolidated investees                                           |       | (5,644,505 | )          | (9,050,645 | )          |
| Settlement fee                                                                         |       | —     |       | 21,000,000 |       |
|                                                                                   |       | (5,643,693 | )          | 11,954,079 |       |
| **Costs and   expenses**                                                               |       |       |       |       |       |
| Professional fees                                                                      |       | 291,863    |       | 1,551,450  |       |
| Other administrative   expenses, including $50,000 to a related party in 2010 and 2009 |       | 54,763     |       | 54,733     |       |
| Interest expense, related   parties                                                    |       | 18,526     |       | —     |       |
|                                                                                   |       | 365,152    |       | 1,606,183  |       |
|                                                                                   |       |       |       |       |       |
| **(Loss)   income before income tax benefit**                                          |       | (6,008,845 | )          | 10,347,896 |       |
|                                                                                   |       |       |       |       |       |
| **Federal income   tax benefit, deferred**                                             |       | 4,362,515  |       | 3,608,503  |       |
|                                                                                   |       |       |       |       |       |
| **Net (loss)   income**                                                                |       | $          | (1,646,330 | )          | $          | 13,956,399 |   |

 

*See notes to consolidated financial statements.*

 

F-4

----

Table of Contents

 

**OCM HoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Members’ Equity**

 

**For the Years Ended December 31, 2010 and 2009**

 
| ** **                                                                   | ** ** | **Total members’   equity** | ** **  | **Accumulated other   comprehensive   loss** | ** ** | **Invested capital and   accumulated earnings** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------|-------------|---------------------------------------------------|------------|----------------------------------------------------------------|------------|
| **2010**                                                                     | ** ** | ** **                            | ** **  | ** **                                        | ** ** | ** **                                                     | ** ** |
| Balance, beginning of year                                                   |       | $                                     | 150,664,563 |                                              | $          | (674,090                                                       | )          | $ | 151,338,653 |   |
| Net loss                                                                     |       | (1,646,330                            | )           | —                                            |       | (1,646,330                                                     | )          |
| Contributions from members                                                   |       | 10,025,000                            |        | —                                            |       | 10,025,000                                                     |       |
| Equity in other comprehensive   loss of unconsolidated investee, net of tax: |       |                                  |        |                                              |       |                                                           |       |
| Unrealized gain on   investments                                             |       | 83,127                                |        | 83,127                                            |       | —                                                         |       |
| Unrealized gain on interest rate   swap agreements                           |       | 455,667                               |        | 455,667                                           |       | —                                                         |       |
|                                                                         |       |                                  |        |                                              |       |                                                           |       |
| Balance, end of year                                                         |       | $                                     | 159,582,027 |                                              | $          | (135,296                                                       | )          | $ | 159,717,323 |   |
| ** **                                                                   | ** ** | ** **                            | ** **  | ** **                                        | ** ** | ** **                                                     | ** ** |
| **2009**                                                                     | ** ** | ** **                            | ** **  | ** **                                        | ** ** | ** **                                                     | ** ** |
| Balance, beginning of year                                                   |       | $                                     | 134,686,267 |                                              | $          | (2,695,987                                                     | )          | $ | 137,382,254 |   |
| Net income                                                                   |       | 13,956,399                            |        | —                                            |       | 13,956,399                                                     |       |
| Equity in other comprehensive   loss of unconsolidated investee, net of tax: |       |                                  |        |                                              |       |                                                           |       |
| Unrealized gain on   investments                                             |       | 145,409                               |        | 145,409                                           |       | —                                                         |       |
| Unrealized gain on interest rate   swap agreements                           |       | 1,876,488                             |        | 1,876,488                                         |       | —                                                         |       |
|                                                                         |       |                                  |        |                                              |       |                                                           |       |
| Balance, end of year                                                         |       | $                                     | 150,664,563 |                                              | $          | (674,090                                                       | )          | $ | 151,338,653 |   |

 

*See notes to consolidated financial statements.*

 

F-5

----

Table of Contents

 

**OCM HoldCo, LLC and Subsidiaries**

 

**Consolidated Statements of Cash Flows**

 

**For the Years Ended December 31, 2010 and 2009**

 
| ** **                                                                                                                                                       | ** ** | **2010**    | ** ** | **2009**    | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
| **Operating   activities**                                                                                                                                       |       |        |       |        |       |
| Net (loss) income                                                                                                                                                |       | $           | (1,646,330 | )           | $          | 13,956,399 |   |
| Equity in earnings of   unconsolidated investees                                                                                                                 |       | 5,644,505   |       | 9,050,645   |       |
| Adjustments to reconcile net   (loss) income to net cash (used in) provided by operating activities   consisting of increases in operating (assets) liabilities: |       |        |       |        |       |
| Deferred income tax benefit                                                                                                                                      |       | (4,221,174  | )          | (3,749,844  | )          |
| Accounts payable and accrued   expenses                                                                                                                          |       | 19,890      |       | (51,625     | )          |
| Taxes payable                                                                                                                                                    |       | (141,341    | )          | 141,341     |       |
|                                                                                                                                                             |       |        |       |        |       |
| Net cash (used in) provided   by operating activities                                                                                                            |       | (344,450    | )          | 19,346,916  |       |
|                                                                                                                                                             |       |        |       |        |       |
| **Investing   activities**                                                                                                                                       |       |        |       |        |       |
| Investment in Cannery Casino   Resorts, LLC                                                                                                                      |       | (46,625,000 | )          | (10,794,000 | )          |
| Distributions received from   Cannery Casino Resorts, LLC                                                                                                        |       | —      |       | 27,418,214  |       |
|                                                                                                                                                             |       |        |       |        |       |
| Net cash (used in) provided   by investing activities                                                                                                            |       | (46,625,000 | )          | 16,624,214  |       |
|                                                                                                                                                             |       |        |       |        |       |
| **Financing   activities**                                                                                                                                       |       |        |       |        |       |
| Proceeds from notes payable   to related parties                                                                                                                 |       | 750,000     |       | —      |       |
| Contributions from members                                                                                                                                       |       | 10,025,000  |       | —      |       |
|                                                                                                                                                             |       |        |       |        |       |
| Net cash provided by   financing activities                                                                                                                      |       | 10,775,000  |       | —      |       |
|                                                                                                                                                             |       |        |       |        |       |
| **Net   (decrease) increase in cash**                                                                                                                            |       | (36,194,450 | )          | 35,971,130  |       |
|                                                                                                                                                             |       |        |       |        |       |
| **Cash,   beginning of year**                                                                                                                                    |       | 36,700,714  |       | 729,584     |       |
|                                                                                                                                                             |       |        |       |        |       |
| **Cash, end   of year**                                                                                                                                          |       | $           | 506,264    |        | $          | 36,700,714 |   |
|                                                                                                                                                             |       |        |       |        |       |
| **Supplemental   cash flow information**                                                                                                                         |       |        |       |        |       |
| **Noncash   financing and investing activity**                                                                                                                   |       |        |       |        |       |
| Equity in other comprehensive   income of unconsolidated investees                                                                                               |       | $           | 538,794    |        | $          | 2,021,897 |   |

 

*See notes to consolidated financial statements.*

 

F-6

----

Table of Contents

 

**OCM HoldCo, LLC and Subsidiaries**

 

**Notes to Financial Statements**

 

**December 31, 2010**

 

**NOTE 1 - Organization:**

 

***Business Activities***

 

The Company and its consolidated subsidiaries were formed on July 22, 2005, at the direction of OCM Principal Opportunities Fund III, L.P. and OCM Principal Opportunities Fund IIIA, L.P. (the “Oaktree Funds”) Oaktree Funds, each of which is a Delaware limited partnership and an affiliate of Oaktree, for the purpose of participating in various activities relating to the gaming industry.

 

The Company, through a wholly-owned subsidiary, OCM AcquisitionCo, LLC (“AcquisitionCo”), owns a 42% interest in the Series A Units of Cannery Casino Resorts, LLC (“CCR”) (subsequently reduced to 31.71% as described in Note 9 to these financial statements), a 62-1/6% interest in CCR’s Series C Preferred Units (Note 3) and a 331¤3% equity interest in NP Land, LLC (“NP Land”). The Company’s current business consists primarily of its ownership of these equity interests. CCR, through wholly-owned subsidiaries, owns and operates The Cannery Hotel and Casino (“The Cannery”), located in North Las Vegas, Nevada, the Eastside Cannery Casino and Hotel (the “Eastside Cannery”), located in southeast Las Vegas, which opened on August 28, 2008, and operates the Rampart Casino, located in the Summerlin area of northwest Las Vegas.  The primary assets of NP Land are approximately 22 acres of land, the primary site of the Eastside Cannery, which land is leased to a wholly-owned subsidiary of CCR. In addition, CCR, through a wholly-owned subsidiary, PA Meadows, owns The Meadows Racetrack and Casino (“The Meadows”), an operating harness racetrack located in North Strabane Township, Washington County, Pennsylvania.  In April 2009, The Meadows completed an approximately 350,000 square-foot permanent casino.

 

All of the Company’s issued and outstanding Class A Units are held by OCM VoteCo, LLC, a Delaware limited liability company (“VoteCo”), and all of the Company’s issued and outstanding non-voting Class B Units are held by OCM InvestCo, LLC, a Nevada limited liability company (“InvestCo”).  The rights of the Class A Units and Class B Units are substantially identical with the exception that the Class B Units are not entitled to any management or voting rights with respect to the Company, except as provided by applicable law.  Neither class has dividend or liquidation preferences, atypical participation rights, or preferred, convertible, or redeemable features.  In general, any sale, assignment or transfer of such units is subject to the prior approval of the gaming regulators of Nevada and Pennsylvania.  VoteCo is responsible for the operations of the Company, including the appointment and removal of managers.  VoteCo has a *de minimus* economic interest in the Company, less than 0.00015%, and its total equity contributions are limited to $100.

 

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

 

On December 11, 2007, the Company and CCR’s 58%-member (the *“Original Equityholders”*) entered into a definitive agreement with CCR and the Crown Parties, to sell, directly or indirectly, all of the issued and outstanding equity interests of CCR to the Crown Parties, which transaction was initially expected to be consummated during the first quarter of 2009.  However, on March 12, 2009, the parties terminated the purchase agreement when it was determined that the preconditions to completion would not be satisfied in time to allow the purchase to proceed.  Under the termination agreement, a full release has been given to all parties and the Crown Parties paid CCR’s members $50 million ($21 million to the Company).

 

In connection with the termination and settlement agreement and in accordance with the terms thereof, the Crown Parties, the Original Equityholders and CCR entered into a Preferred Purchase Agreement (the “Series B Preferred Purchase Agreement”) in March 2009.  On April 24, 2009, CCR sold to the Crown purchasers 71,614 Series B Preferred Units of CCR (the *“Series B Units”*) for an aggregate purchase price of $320 million in cash (the *“Preferred Purchase Price”*) in accordance with the terms and conditions of the Series B Preferred Purchase Agreement.  Of the Preferred Purchase Price, $20 million represents reimbursement of certain project costs incurred by CCR related to various project costs at The Meadows.  The Series B Units were converted into Series A2 Units effective as of March 8, 2011.  See Note 9 below*.*

 

F-7

----

 

Table of Contents

 

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

 

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

 

Costs incurred by CCR on behalf of the Original Equityholders relating to the initial definitive agreement were $2.9 million ($1.2 million to the Company).  The $1.2 million is included in these financial statements as a distribution received from CCR and related professional fees in like amount.

 

***Concentrations and economic uncertainties***

 

The Company and its consolidated subsidiaries expect to be economically dependent upon relatively few investments in the gaming industry.  The United States recently experienced a recession accompanied by, among other things, weakness in the commercial and investment banking systems resulting in reduced credit and capital financing availability, and highly curtailed gaming, other recreational, construction and real estate market activities and general discretionary consumer spending.  Although capital market activity and liquidity have improved of late, the recovery from this recession period is fragile and there can be no assurance that our business, which has been severely affected by the downturn, will fully recover to pre-recession levels.

 

**NOTE 2 - Significant Accounting Policies:**

 

***Use of estimates***

 

Timely preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates.  Management estimates that the Company will eventually sell its investment in unconsolidated investees following an expected economic recovery at a price sufficient to realize the carrying value of the Company’s assets which estimates is subject to material variation over the next year.

 

***Basis of accounting and presentation***

 

The accompanying consolidated financial statements as of and for the years ended December 31, 2010 and 2009, include the accounts of the Company and its wholly-owned subsidiaries OCM Blocker, LLC (“Blocker”), AcquisitionCo, OCM AcquisitionCo II, LLC, and OCM LandCo, LLC. All significant inter-company accounts and transactions have been eliminated.

 

Investments in CCR and NP Land (Note 3) are accounted for using the equity method of accounting.  Accordingly, the Company measures all of its assets and liabilities on the historical cost basis of accounting except as required by generally accepted accounting principles.

 

***Statement of cash flows and cash concentration***

 

At the request and for the convenience of the Company, certain of the disbursements of the Company and its consolidated subsidiaries for operating expenses are made by InvestCo and/or its beneficial owners directly to vendors and investees, and distributions from the Company’s investees are received directly by InvestCo.  Accordingly, these activities are treated as constructive cash inflows and outflows in the statements of cash flow.

 

***Gaming Licenses***

 

Professional fees and other costs associated with the applications for licensure of the Company and its consolidated subsidiaries and certain of its beneficial owners, including payments to regulatory agencies, have been capitalized. These fees and costs have been treated as indefinite life intangible assets, based on expectations that such licenses would be granted and enable the Company to own interests in gaming enterprises, and benefit from future periods of profitable operations of its investees and resultant expected increases in the value of its investments.  License renewal fees are not significant and are expensed as incurred.

 

F-8

----

Table of Contents

 

Such assets are evaluated at least annually (and more frequently when circumstances warrant) to determine if events or changes in circumstances indicate that the probability that such assets will continue to benefit future periods might have been impaired. Examples of such events or changes in circumstances that might indicate impairment of these assets might include an active or likely regulatory threat to the availability or viability of a license, specifically, as a result of (i) non-compliance with regulations, (ii) an adverse change in the legal, regulatory or business climate relative to gaming nationally or in the jurisdiction, or (iii) a significant long term decline in historical or forecasted earnings or cash flows of the investee or the fair value of its property or business possibly as a result of competitive or other economic or political factors.  As of December 31, 2010, based on our evaluation, there has been no impairment to these assets.

 

***Income taxes***

 

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

 

***Members’ capital***

 

Allocations of net income and distributions to the Members are determined in accordance with the Company’s operating agreement.

 

**NOTE 3 - Unconsolidated Investees:**

 

On March 3, 2010, in connection with the Amendment and the issuance of the Series C Preferred Units of CCR, the members of CCR entered into CCR’s Third Amended and Restated Operating Agreement (the “Revised Operating Agreement”).  Among other matters, the Revised Operating Agreement created a new series of preferred securities of CCR designated as the “Series C Preferred Units.”  The Series C Preferred Units (i) are generally non-voting subject to certain limited consent rights, (ii) are required to be redeemed by CCR in certain circumstances, including, without limitation, the repayment of CCR’s credit facilities and/or certain sale transactions, and (iii) may be redeemed at CCR’s option at any time subject to compliance with CCR’s credit facilities.  OCM AcquisitionCo purchased 46,625 Series C Preferred Units for approximately $46.6 million.  The Series C Units have no coupon and are not subject to mandatory redemption.  The Series C Units carry a 20% per annum cumulative return payable upon redemption or liquidation of CCR, but then only to holders appropriately licensed or otherwise qualified by the Pennsylvania Gaming Control Board to receive such return.  Upon liquidation of CCR, the Series C Units rank senior to all other classes of units.

 

On September 22, 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, 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’s acquisition of the 33-1¤3% equity interest in CCR and a 33-1¤3% equity interest in NP Land was completed pursuant to the terms and conditions of the CUP Agreement. On November 14, 2006, the Company, through a subsidiary, contributed an additional $50 million to CCR, increasing its Series A1 interest in CCR from 33-1¤3% to 42%. For the year ended December 31, 2010, the Company’s equity in earnings (loss) of CCR and NP Land totaled ($6,342,595) and $698,090, respectively.  For the year ended December 31, 2009, the Company’s equity in the earnings (loss) of CCR and NP Land totaled ($9,728,069) and $677,424 respectively.

 

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

 

The following tables present condensed financial information of CCR as of December 31, 2010 and 2009, and for the years ended December 31, 2010 and 2009:

 

F-9

----

Table of Contents

 
| ** **                  | ** ** | **2010**    | ** **  | **2009**    | ** ** |
|-----------------------------|------------|-------------|-------------|-------------|------------|
| **Balance Sheet**      |       |        |        |        |       |
| Current assets              |       | $           | 79,277,000  |        | $          | 84,153,000 |   |
| Investments in securities   |       | 10,926,000  |        | 11,646,000  |       |
| Property and equipment, net |       | 719,025,000 |        | 753,312,000 |       |
| Other                       |       | 120,666,000 |        | 120,568,000 |       |
|                        |       | $           | 929,894,000 |        | $          | 969,679,000 |   |
|                        |       |        |        |        |       |
| Current liabilities         |       | $           | 50,399,000  |        | $          | 52,650,000 |   |
| Long-term liabilities       |       | 492,334,000 |        | 592,837,000 |       |
| Member’s equity        |       | 387,161,000 |        | 324,192,000 |       |
|                        |       | $           | 929,894,000 |        | $          | 969,679,000 |   |
|                        |       |        |        |        |       |
| **Income Statement**   |       |        |        |        |       |
| Revenue                     |       | $           | 513,687,000 |        | $          | 509,435,000 |   |
|                        |       |        |        |        |       |
| Net loss                    |       | $           | (15,101,000 | )           | $          | (23,162,000 | ) |

 

F-10

----

Table of Contents

 

The unaudited total assets of NP Land at December 31, 2010 and 2009, was approximately $5,300,000 and $5,100,000, respectively.  The unaudited net income for the years ended December 31, 2010 and 2009, was approximately $2,100,000 and $2,000,000, respectively.

 

Excess cumulative equity in earnings recognized over distributions received from unconsolidated investees (or the reverse) is approximately as follows:

 
| ** **                                                 | ** ** | **2010**   | ** ** | **2009** | ** ** |
|------------------------------------------------------------|------------|------------|------------|----------|------------|
| **Cumulative   excess equity in earnings (distributions)** | ** ** | ** ** | ** ** |     | ** ** |
| CCR                                                        |       | $          | (6,343,000 | )        | $          | (37,146,000 | ) |
| NP Land                                                    |       | 698,000    |       | 677,000  |       |
|                                                       |       | $          | (5,645,000 | )        | $          | (36,469,000 | ) |

 

**NOTE 4**- **Income Taxes:**

 

Prior to the election by Blocker to be taxable as a corporation, effective January 1, 2006, neither the parent nor its subsidiaries were tax-paying entities for federal or state income tax purposes.  Blocker owns 100% of the other subsidiaries included in this consolidation.  Accordingly, equity in the flow-through earnings of CCR and NP Land is taxed to Blocker.  Blocker also incurs interest expense ($2,852,596 for 2010 and $1,038,831 for 2009) on inter-company indebtedness ($60,487,796 and $13,862,796 at December 31, 2010 and 2009, respectively) that is deductible for tax purposes (a permanent difference) but is eliminated, along with the related debt, in this consolidation. The Company incurs certain other costs, primarily associated with being a public company, including professional and other fees, which, for tax purposes, flow through to its members.

 

The following table presents a reconciliation of the income tax benefit with that determined by applying the statutory U.S. federal income tax rate to income before income taxes for the years ended December 31, 2010 and 2009:

 
| ** **                                | ** ** | **2010**   | ** ** | **2009**       | ** ** |
|-------------------------------------------|------------|------------|------------|----------------|------------|
| ** **                                | ** ** | **Amount** | ** ** | **Percentage** | ** ** | **Amount** | ** ** | **Percentage** | ** ** |
| Statutory federal rate                    |       | $          | (2,103,096 | )              | (35)%      |   | $ | 3,621,764 |   | 35% |   |
| General business tax credits              |       | (328,129   | )          | (5)%           |       | (320,816 | ) | (3)% |   |
| Miscellaneous CCR attributes              |       | 600,201    |       | 10%            |       | (6,896,211 | ) | (67)% |   |
| Intercompany interest expense             |       | (998,409   | )          | (17)%          |       | (363,591 | ) | (4)% |   |
| Attributes passed through to   members    |       | 127,803    |       | 2%             |       | 562,164 |   | 5% |   |
| CCR income not taxable to   Company       |       | (1,111,018 | )          | (19)%          |       | (211,813 | ) | (2)% |   |
| 2009 return to provision   reconciliation |       | (549,869   | )          | (9)%           |       | — |   | — |   |
| Tax at effective rate                     |       | $          | (4,362,517 | )              | (73)%      |   | $ | (3,608,503 | ) | (35)% |   |

 

At December 31, 2010, Blocker had approximately $47,788,065 and $1,418,000 in federal net operating loss and general business tax credit carryforwards, which expire beginning in 2021.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used to determine taxable income for income tax reporting purposes. The following table presents the significant components of the non-current deferred tax assets (liabilities) of the Company and its consolidated subsidiaries related to its investments in CCR and NP Land:

 
| ** **                                      | ** ** | **December 31, 2010** | ** ** | **December 31, 2009** | ** ** |
|-------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Basis adjustment   (Section 754 elections) |       | $                               | (6,970,000 | )                               | $          | (5,683,000 | ) |
| Other CCR attributes                            |       | (5,193,000                      | )          | (4,164,000                      | )          |
| Other comprehensive income                      |       | 73,000                          |       | 363,000                         |       |
| Other NP Land attributes                        |       | 10,000                          |       | 13,000                          |       |
| General business tax credits                    |       | 1,418,000                       |       | 1,090,000                       |       |
| Minimum tax credit carryover                    |       | —                          |       | 141,000                         |       |
| Distributions from   unconsolidated investee    |       | 6,510,000                       |       | 7,779,000                       |       |
| Net operating loss   carryforwards              |       | 16,725,000                      |       | 9,104,000                       |       |
|                                            |       | 12,573,000                      |       | 8,643,000                       |       |
|                                            |       |                            |       |                            |       |
| Deferred tax liability,   current               |       | 555,000                         |       | 121,000                         |       |
|                                            |       |                            |       |                            |       |
| Deferred tax asset,   non-current               |       | $                               | 13,128,000 |                            | $          | 8,764,000 |   |

 

F-11

----

Table of Contents

 

The other CCR attributes shown above consist primarily of depreciation and amortization.

 

Management has made an analysis of its state and federal tax returns that remain subject to examination by major authorities (consisting of tax years 2007 through 2009) and concluded that the Company has no recordable liability as a result of uncertain tax positions taken. The Company is generally subject to audit for tax years 2007 and forward.  Subsequent to December 31, 2010, Blocker was informed that it will be audited for the 2009 tax year by the IRS.  The 2009 audit is not expected to have a material effect on the Company’s financial statements.

 

**NOTE 5—Related party loans**

 

On July 15, 2010, the Company borrowed $750,000 from certain affiliates of the Company in order to cover existing and future expenses of the Company anticipated to arise during the next two years. Interest will be accrued at the prime rate plus 2% on the outstanding principal amount, and unpaid interest will be compounded monthly.  The notes evidencing this loan are due and payable on demand.  The Company has accrued interest of $18,526 as of December 31, 2010.

 

**NOTE 6—Contingencies**

 

The United States recently experienced a recession accompanied by, among other things, weakness in the commercial and investment banking systems resulting in reduced credit and capital financing availability, and highly curtailed gaming, other recreational, construction and real estate market activities and general discretionary consumer spending.  Although capital market activity and liquidity have improved of late, the recovery from this recession period is fragile and there can be no assurance that our business, which has been severely affected by the downturn, will fully recover to pre-recession levels.

 

The Company often carries cash and equivalents on deposit with financial institutions substantially in excess of federally-insured limits, and the risk of losses related to such concentrations has been increasing as a result of recent economic developments and uncertainties discussed in the foregoing paragraph.  The extent of any loss that might be incurred as a result of uninsured deposits in the event of a future failure of a bank or other financial institutions, if any, is not subject to estimation at this time.

 

On March 12, 2009, in connection with the termination and settlement of an earlier agreement, the Original Equityholders and CCR entered into an Option Agreement (the “Option Agreement”) with the Crown Parties. The Option Agreement grants the Crown Parties the option to purchase all of the direct and indirect interests of the Original Equityholders in CCR, on terms substantially similar to the terms of an earlier purchase agreement described elsewhere in this filing.  The exercise period under the Option Agreement expired in accordance with its terms in March 2011.

 

In May 2008, a wholly-owned subsidiary of the Company entered into a loan repayment guarantee agreement which terminated prior to May 15, 2009, as expected. As of April 15, 2009, the Company is no longer conditionally required in certain limited circumstances to make an additional equity investment in CCR’s subsidiary, PA Meadows.

 

**NOTE 7—Other Income, Settlement Agreement**

 

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

 

**NOTE 8—Financial Instruments**

 

Except for cash, the fair value of which equals its carrying value, the only significant financial instruments the Company has is its investment in unconsolidated investees accounted for on the equity method for which fair value disclosure is not required.

 

F-12

----

Table of Contents

 

**NOTE 9—Subsequent Events**

 

On March 8, 2011, Crown One and Crown Two converted 71,614 Series B Units of CCR into Series A2 Units of CCR in accordance with the CCR’s Revised Operating Agreement.  The Company indirectly holds 92,690 Series A1 Preferred Units of CCR (*“Series A1 Units”* and collectively with the Series A2 Units, the *“Series A Units”*), which, after giving effect to the conversion of the Series B Units, represent a 31.71% interest in the aggregate Series A Units of CCR.

 

F-13

----