Document:

Exhibit 10.2

 

MENDENHALL
A

 

LOAN AGREEMENT

 

 

By and Among

 

 

MGIM, LLC,

as Borrower

 

 

MILLENNIUM
GAMING, INC.,

 

as
Guarantor

 

 

and

 

 

OCM ACQUISITIONCO,
LLC,

 

as Lender

 

Dated as
of January 5, 2006

 

 

THIS LOAN AGREEMENT (this “Agreement”), dated as of January 5,
2006, is entered into by and among MGIM, LLC, a Nevada limited liability
company (“MGIM” or the “Borrower”), Millennium Gaming, Inc.,
a Nevada corporation (“Millennium” or the “Guarantor”), and OCM AcquisitionCo,
LLC, a Nevada limited liability company (“AcquisitionCo” or the “Lender”).

 

W I T N E S S E T H

 

WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein and herein, AcquisitionCo has agreed to loan to MGIM,
on the 1B Closing Date, the principal amount of Sixty-Four Million Dollars ($64,000,000)
(the “Loan”), evidenced by a promissory note in the form attached hereto
as Exhibit A (the “Mendenhall I Note”),
that will be used by MGIM at the 1B Closing solely to fund the purchase by MGIM
of all of Mendenhall’s membership units in the Company (such purchase, the “Mendenhall
Purchase” and such units, the “Mendenhall Units”).

 

WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Mendenhall I Note, at the
Second Closing, the Loan, including the principal and any and all interest
accrued thereon, shall become immediately due and payable, and as payment in
full for the principal of the Loan, MGIM shall exchange the Mendenhall I Note
for all of the Mendenhall Units by transferring such Mendenhall Units to
AcquisitionCo (the “Mendenhall Exchange”), and all interest accrued on
the Loan shall be waived, and the Mendenhall I Note shall be canceled.

 

WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Security Documents, if the
Second Closing occurs, then on the Second Closing Date the guarantee granted by
the Guarantor under the Guarantee Agreement and the security interests in the
Collateral granted by the Borrower and the Guarantor under the Pledge
Agreements shall be released.

 

NOW,
THEREFORE, in consideration of the representations, warranties, covenants,
agreements and conditions set forth herein, and intending to be legally bound
hereby, the parties hereto agree as follows:

 

SECTION 1.  DEFINITIONS

 

1.1.          Defined
Terms

 

(a)           Capitalized terms used
herein and not otherwise defined have the meanings set forth in the CUP
Agreement, which meanings shall continue to apply herein without regard to whether
the CUP Agreement has been Terminated.

 

(b)           As used in this
Agreement, the following terms shall have the following meanings:

 

1

 

“AcquisitionCo”:  as defined
in the second recital hereto.

 

“Agreement”:  as defined in
the preamble hereto.

 

“Borrower”:  as defined in
the preamble hereto.

 

“Capital Stock”:  shares of capital stock, partnership interests
in a partnership or limited partnership, membership interests in a limited
liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the
holder thereof to purchase or acquire any such equity ownership interest.

 

“CCR”:  Cannery Casino
Resorts, LLC, a Nevada limited liability company.

 

“Collateral”:  from the date
hereof to the Second Closing Date, the rights in and to the collateral of the
Borrower and the Guarantor as evidenced by the Pledge Agreements and as
described in Section 5.

 

“CUP Agreement”:  that
certain First Amendment to and Restatement of Contribution and Unit Purchase
Agreement, dated as of September 23, 2005, by and among Paulos, Wortman, MGIM,
Millennium, CCR, NP Land, WCW, InvestCo, AcquisitionCo and LandCo.

 

“Default”:  any of the
events specified in Section 7, whether or not any requirement for the giving
of notice, the lapse of time or both, or any other condition, has been
satisfied.

 

“Dollars” and “$”:  dollars
in lawful currency of the United States of America.

 

“Event of Default”:  any of
the events specified in Section 7, provided that any requirement
for the giving of notice, the lapse of time or both, or any other condition,
has been satisfied.

 

“Guarantee Agreement”:  as
defined in Section 5.2.

 

“Guarantor”:  as defined in
the preamble hereto.

 

“Indemnified Liabilities”:  as defined in Section 8.6.

 

“Indemnified Person”:  as
defined in Section 8.6.

 

“InvestCo”:  OCM InvestCo,
LLC, a Nevada limited liability company.

 

“Knowledge”:  as defined in
the CUP Agreement; provided, however, that the Knowledge of the
Borrower shall be limited to the Knowledge of Wortman and Paulos.

 

“LandCo”:  OCM LandCo, LLC,
a Delaware limited liability company.

 

2

 

“Lender”:  as defined in the
preamble hereto.

 

“Loan”:  as defined in the first
recital hereto.

 

“Loan Documents”:  this
Agreement, the Note, the Pledge Agreements, the Guarantee Agreement, and any
certificate or other document made or delivered pursuant hereto or thereto.

 

“Material Adverse Effect”:  any
event, circumstance, occurrence, state of facts, condition, change or effect
that, individually or in the aggregate, is or would reasonably be expected to
be materially adverse to (a) the validity or enforceability of this
Agreement or any of the other Loan Documents or (b) the business, results
of operations, condition (financial or otherwise) or prospects of any of the
Borrower, the Guarantor, CCR or any Subsidiary of CCR.  Notwithstanding the immediately preceding
sentence, the following are not and shall not contribute to or result in a
Material Adverse Effect: (i) any condition or event which adversely
affects the gaming industry generally or the gaming industry in Nevada, in
either case which does not adversely affect any of the Borrower, the Guarantor,
CCR or any Subsidiary of CCR disproportionately relative to other entities
operating in such industry; (ii) any changes in general economic
conditions in the United States; (iii) any outbreak of hostilities or
escalation thereof involving the United States or the declaration by the United
States of war; and (iv) the performance or consummation of any of the transactions
contemplated by this Agreement or the other Loan Documents.

 

“Maturity Date”:  as defined
in Section 2.4.

 

“Mendenhall”:  Mendenhall,
LLC, a Nevada limited liability company.

 

“Mendenhall Exchange”:  as
defined in the third recital hereto.

 

“Mendenhall B Loan”:  the
loan made pursuant to that certain loan agreement, dated as of the date hereof,
by and among MGIM as Borrower, Millennium as Guarantor, InvestCo as Lender, and
CCR

 

“Mendenhall I Note”:  as
defined in the first recital hereto.

 

“Mendenhall Purchase”:  as
defined in the first recital hereto.

 

“Mendenhall Units”:  as
defined in the first recital hereto.

 

“MGIM”:  as defined in the preamble
hereto.

 

“MGIM Pledge Agreement”:  as
defined in Section 5.1.

 

“Millennium”:  as defined in
the preamble hereto.

 

“Millennium Pledge Agreement”:  as
defined in Section 5.2.

 

“Nevada Gaming Authorities”:  the
NGC and the NGCB.

 

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“NGC”:  the Nevada Gaming
Commission.

 

“NGCB”:  the Nevada State
Gaming Control Board.

 

“Note”:  as defined in the
first recital hereto.

 

“NP Land”:  NP Land, LLC, a
Nevada limited liability company.

 

“Paulos”:  William J. Paulos,
an individual.

 

“PBGC”:  the Pension Benefit
Guaranty Corporation.

 

“Plan”:  at a particular
time, any employee benefit plan which is covered by ERISA and in respect of
which the Borrower, the Guarantor, CCR, any Subsidiary of CCR or any ERISA
Affiliate of any of them is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.

 

“Pledge Agreements”:  the MGIM
Pledge Agreement and the Millennium Pledge Agreement, individually or
collectively, as the case may be.

 

“Responsible Officer”:  with
respect to the Borrower, the Guarantor, CCR or any Subsidiary of CCR, Paulos or
Wortman (or any manager or member exercising similar authority), or any
employee designated by any of the foregoing.

 

“Syndicated Loan Agreement”:  that
certain Credit Agreement, among CCR, the Cannery Hotel and Casino, LLC, and
Rampart Resort Management, LLC (as Borrowers), Bank of America, N.A. (as
Administrative Agent, Swing Line Lender, and L/C Issuer), and the Other Lenders
party thereto, that is expected to be entered into as of the date hereof.

 

“Taxes”:  as defined in Section 2.8(b).

 

“Terminated,” “Termination” (or
words of similar effect):  valid termination of the CUP Agreement
in accordance with Section 8.1 thereof.

 

“Transferee”:  as defined in
Section 8.9.

 

“Voidable Transfer”:  as
defined in Section 8.10.

 

“Voluntary Termination” as defined in Section 2.3(a).

 

“WCW”:  WCW Landco, LLC, a
Nevada limited liability company.

 

“Wortman”:  William C.
Wortman,  an individual.

 

4

 

1.2.          Other
Definitional Provisions.  

 

(a)           Unless otherwise
specified therein, all terms defined in this Agreement shall have their defined
meanings when used in the other Loan Documents.

 

(b)           As used herein and in any
other Loan Document, accounting terms not defined in Section 1.1, to the
extent not defined, shall have the respective meanings given to them under
GAAP.

 

(c)           The words “hereof,”
“herein” and “hereunder” and words of similar import when used in
this Agreement or any other Loan Document shall refer to this Agreement or such
other Loan Document as a whole and not to any particular provision of this Agreement
or such other Loan Document.

 

(d)           The meanings given to
terms defined in this Agreement or any other Loan Document shall be equally
applicable to both the singular and plural forms of such terms.

 

(e)           Whenever the context
may require, any pronoun used in this Agreement or any other Loan Document shall
include the corresponding masculine, feminine and neuter forms.

 

(f)            All references in this
Agreement or any other Loan Document to Sections, Exhibits and Schedules shall
be deemed to be references to Sections of, and Exhibits and Schedules to, this
Agreement or such other Loan Document unless the context shall otherwise
require.  All Exhibits and Schedules
attached to this Agreement or any other Loan Document shall be deemed
incorporated herein or therein as if set forth in full herein or therein.

 

(g)           The words “include,”
“includes” and “including” when used in this Agreement or any
other Loan Document shall be deemed to be followed by the phrase “without
limitation.”

 

(h)           The word “or” as
used in this Agreement or any other Loan Document is used in the inclusive
sense of “and/or.”

 

(i)            References to a “party”
in this Agreement or any other Loan Document are also to its successors and
permitted assigns.

 

(j)            Unless otherwise
expressly provided in this Agreement or any other Loan Document, any agreement,
instrument or statute defined or referred to herein or therein or in any
agreement, instrument or statute defined or referred to herein or therein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes.

 

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SECTION 2.  AMOUNT AND TERMS OF THE LOAN

 

2.1.          Loan.  The Lender agrees, on the terms and
conditions hereinafter set forth, to make the Loan to the Borrower on the 1B
Closing Date, subject to the satisfaction or wavier, at or prior to the 1B
Closing Date, of the conditions set forth in Sections 5.1(b) and 5.2(b) of
the CUP Agreement.

 

2.2.          Repayment
of Loan; Evidence of Debt.

 

(a)           The
Borrower unconditionally promises to pay to Lender, or any successor or
permitted assignee or third party beneficiary thereof, on the applicable Maturity
Date (or such earlier date on which the Loan becomes due and payable pursuant
to Section 7), the then unpaid principal amount of the Loan due and
payable on such Maturity Date (or such earlier date on which the Loan becomes
due and payable pursuant to Section 7). 
The Borrower further agrees to pay interest on the unpaid principal
amount of the Loan as set forth in Section 2.3.

 

(b)           The
Borrower’s unconditional promise to pay the Loan and any interest thereon shall
be evidenced by the Notes, which shall be executed and delivered by the
Borrower on the 1B Closing Date in connection with the making of the Loan by
the Lender.

 

2.3.          Interest.  Interest shall accrue on the unpaid
principal amount of the Loan, as evidenced by the Notes, as follows:

 

(a)           Interest Rate. 
Interest on the Loan shall accrue at a rate per annum equal to twelve
percent (12%); provided, however, that if the CUP Agreement is Terminated
(i) by the Oaktree Parties pursuant to Section 8.1(g) of the CUP
Agreement solely because the Oaktree Licenses will not or cannot be obtained
(other than as a result of the failure by any Selling Party
to perform in any material respect any of its obligations under the CUP
Agreement that causes, or results in, such Oaktree Licenses not being obtained),
(ii) by the Selling Parties pursuant to Section 8.1(c) or 8.1(f) of
the CUP Agreement solely because of the failure by any Oaktree Party to perform
in any material respect any of its obligations under the CUP Agreement or (iii) by
either the Selling Parties or the Oaktree Parties pursuant to Section 8.1(d) of
the CUP Agreement and the Oaktree Licenses have not been obtained (in each case
of (i) through (iii), a “Voluntary Termination”), then no interest
on the Loan shall accrue from the date of such Voluntary Termination of the CUP
Agreement until the date that is six (6) months after the date of such
Voluntary Termination of the CUP Agreement, at which time interest on the Loan shall
accrue at a rate per annum equal to six percent (6%); and provided,
further, that Termination of the CUP Agreement because of termination or
expiration of the Mendenhall Purchase Agreement or failure of the Mendenhall
Purchase to close shall in no circumstance be considered a Voluntary
Termination.

 

6

 

(b)           Interest Payment Dates.  Interest on the Loan accrued in accordance
with Section 2.3(a) shall be payable as follows:

 

(i)            If
the Second Closing occurs, then all interest accrued on the Loan shall be
waived.

 

(ii)           If
the CUP Agreement is Terminated for any reason (including as a result of a
Voluntary Termination), then all interest accrued on the Loan in accordance
with Section 2.3(a) from the 1B Closing Date to the applicable
Maturity Date of the Loan as set forth in Section 2.4 shall be immediately
due and payable in arrears on such applicable Maturity Date.

 

(c)           Compounding.  Any interest not paid when due pursuant to Section 2.3(b) shall
be compounded with and added to the principal of the Loan and shall thereafter
constitute a part of the Loan hereunder and shall accrue interest at the rate
then applicable to the Loan.

 

(d)           Default Interest.  Upon an Event of Default, the
interest rate applicable to the Loan as set forth in Section 2.3(a) shall
increase by 300 basis points per annum above the rate otherwise applicable to
the Loan on the ninetieth (90th) day following the date of such
Event of Default and on each ninetieth (90th) day thereafter until
the Loan is paid in full; provided, however, that the interest
rate shall not exceed the maximum rate permitted by applicable Law.

 

(e)           Computation.  Interest shall be calculated on the
basis of the actual number of days elapsed over a 365- (or 366-, as the case
may be) day year.

 

2.4.          Maturity
Dates.  The then unpaid principal
amount of the Loan shall be immediately due and payable on the following dates
(each, a “Maturity Date”) which, if not falling on a Business Day, shall
be extended to the immediately following Business Day (with interest accruing thereon
pursuant to Section 2.3):

 

(a)           If
the Second Closing occurs, the then unpaid principal amount of the Loan shall
be immediately due and payable on the Second Closing Date, at which time the
Borrower shall exchange the Note for all of the Mendenhall Units by
transferring such Mendenhall Units to AcquisitionCo pursuant to the terms and
conditions of the CUP Agreement as payment in full for all principal of the
Loan;

 

(b)           If
the CUP Agreement is Terminated pursuant to Section 8.1(c), 8.1(d), 8.1(e),
8.1(f), or 8.1(g) of the CUP Agreement as a result of the failure by any Selling
Party to perform in any material respect any of its
obligations under the CUP Agreement, the then unpaid principal amount of the Loan
shall be immediately due and payable on the date that is six (6) months
following the date of such Termination.

 

(c)           If
the CUP Agreement is Terminated pursuant to Section 8.1(c), 8.1(d), 8.1(e),
8.1(f), or 8.1(g) of the CUP Agreement as a result of a Voluntary
Termination, the then unpaid principal amount of the Loan shall be immediately
due and payable on the date that is eighteen (18) months following the date of
such Voluntary Termination.

 

7

 

(d)           If
the CUP Agreement is Terminated pursuant to Section 8.1(a) or 8.1(h) of
the CUP Agreement or the CUP Agreement is Terminated pursuant to Section 8.1(c),
8.1(d), 8.1(e) or 8.1(f) of the CUP Agreement for any reason other
than a reason set forth in Section 2.4(b) or (c) hereof, the
then unpaid principal amount of the Loan shall be immediately due and payable
on the date that is twelve (12) months following the date of such Termination.

 

2.5.          Prepayments.  The Loan, along with all accrued but unpaid
interest thereon, (a) may not be prepaid prior to the earlier of the
Second Closing or Termination of the CUP Agreement, and (b) may be prepaid
in whole or in part at the option of the Borrower at any time after any of the
events set forth in clause (a) upon at least five (5) Business Days’ prior
written notice to the Lender.  Any such
prepayment (i) shall be in an amount of One Million Dollars ($1,000,000)
or any Five Hundred Thousand Dollar ($500,000) increment thereof and shall be
applied first to accrued but unpaid interest and then to outstanding principal.

 

2.6.          Method
of Payment.  All payments (including
prepayments) to be made by the Borrower hereunder, whether on account of
principal, interest or otherwise, shall be made without offset or counterclaim except
as permitted by Section 9.5 of the CUP Agreement and shall be made prior
to 11:00 A.M., Nevada time, on the due date thereof to the Lender, at the
Lender’s office set forth on the signature page hereto, in Dollars and in
immediately available funds.  Any payment
made after such time shall be deemed to be made as of the opening of business
on the immediately following Business Day.

 

2.7.          Use
of Proceeds. The proceeds of the Loan shall be used by the Borrower
exclusively to effect the Mendenhall Purchase and for no other purpose
whatsoever.

 

2.8.          Expenses
and Withholding Taxes.

 

(a)           The
Borrower agrees to pay the Lender any and all expenses or other amounts
otherwise agreed to be paid by the Borrower in any provision of this Agreement
or in any other Loan Document.

 

(b)           All
payments made by the Borrower under this Agreement or the Notes shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, assessments, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority
with respect to this Agreement or any other Loan Document, and all interest,
penalties or similar liabilities with respect thereto (all such taxes, levies,
imposts, duties, charges, fees, assessments, deductions or withholdings being
referred to collectively as “Taxes”), unless the Borrower is compelled
by Law to make such deduction or withholding. 
If any such Taxes are required to be withheld from any amounts payable
to the Lender hereunder or under the Notes, the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender (after
payment of all such Taxes) principal, interest or any such other amounts
payable hereunder in the amounts or at the rates the Lender would have received
had no such obligation been imposed on the Borrower.  In addition, the Borrower shall pay any Taxes
to the relevant Governmental Authority in accordance with applicable Law, and
as promptly as possible thereafter, the Borrower shall send to the Lender proof
of payment thereof.  If the Borrower
fails to pay any such Taxes when due to the appropriate Governmental

 

8

 

Authority or fails to remit to
the Lender such proof, the Borrower shall indemnify the Lender for any
incremental Taxes that may become payable by the Lender as a result of any
failure to pay any such amounts.

 

SECTION 3.  CONDITIONS PRECEDENT

 

The effectiveness of this Agreement and the
Lender’s obligation to make the Loan are subject to the satisfaction or wavier,
at or prior to the 1B Closing Date, of the conditions set forth in Sections 5.1(b) and
5.2(b) of the CUP Agreement (which itself shall be in full force and
effect, enforceable against the parties thereto in accordance with the terms
and conditions thereof).

 

SECTION 4.  REPRESENTATIONS AND WARRANTIES

 

To induce the Lender to make the Loan hereunder, the Borrower hereby
represents and warrants to the Lender as of the date hereof:

 

4.1.          No
Liabilities.  The Borrower was formed
on April 26, 2005, for the sole purpose of effecting the Mendenhall
Purchase, the Mendenhall Exchange and the Mendenhall II Payment and has no
Liabilities as of the date hereof except for those Liabilities contemplated by
this Agreement, the other Loan Documents or the CUP Agreement.

 

4.2.          Purpose
of Loans.  The proceeds of the Loan
are to be used by the Borrower exclusively to effect the Mendenhall Purchase
and for no other purpose whatsoever.

 

SECTION 5.  SECURITY INTERESTS AND COLLATERAL

 

5.1.          Borrower
Collateral.  As security
for the timely payment of all principal and accrued interest under this
Agreement and the Notes, the Borrower agrees to grant to the Lender, for the
benefit of the Lender, a continuing security interest in all of MGIM’s right,
title and interest in and to the Mendenhall Units and any and all hereafter
acquired membership units of CCR held by MGIM, including in each case any and
all distributions thereon and the right to any and all proceeds from the sale
or transfer thereof, and in connection therewith, shall enter into a pledge and
security agreement in the form attached hereto as Exhibit B
(the “MGIM Pledge Agreement”) simultaneously herewith for the benefit of
the Lender; provided, however, that the MGIM Pledge Agreement
shall provide that if the Second Closing occurs, the security granted pursuant
to the MGIM Pledge Agreement shall be released as of the Second Closing.

 

5.2.          Millennium
Collateral.  Millennium,
the owner of 98% of the total number of issued and outstanding membership units
of the Borrower, agrees to guarantee the timely payment by the Borrower of all principal
and accrued interest under this Agreement and the Notes and, in connection
therewith, shall enter into a guarantee agreement in the form attached hereto
as Exhibit C1 (the “Guarantee
Agreement”) simultaneously herewith for the benefit of the Lender, and as
security for such guarantee, agrees to grant to the Lender, for the benefit of
the Lender, a continuing security interest in all of Millennium’s assets,
tangible or intangible, whether now owned or hereafter acquired, including all
right, title and interest in and to all of the membership units in CCR held by
Millennium (including any and all distributions thereon), and

 

9

 

any and all additions, attachments, accessories and accessions to any
such assets, any and all substitutions, replacements or exchanges therefor and
any and all proceeds from the sale or transfer thereof and any and all other
proceeds (including insurance proceeds) thereon, and, in connection therewith, shall
enter into a pledge and security agreement in the form attached hereto as Exhibit C2 (the “Millennium Pledge Agreement”) simultaneously
herewith for the benefit of the Lender; provided, however, that the
Millennium Pledge Agreement shall provide that if the Second Closing occurs,
the security granted pursuant to the Millennium Pledge Agreement shall be
released as of the Second Closing.

 

SECTION 6.  COVENANTS

 

The Borrower and the Guarantor hereby agree that, so long as the Loan (including
the payment of any and all accrued interest thereon) and all other obligations shall
remain unpaid in whole or in part:

 

6.1.          Financial
Statements; Certificates.  The
Borrower and the Guarantor shall furnish to the Lender, at the Borrower’s or
the Guarantor’s sole expense:

 

(a)           so long as the Credit
Agreement remains in full force and effect, a copy of any document, certificate
or notice provided to the lenders or administrative or other agent pursuant to Article 7
of the Credit Agreement, delivered promptly after delivery of such document,
certificate or notice under the Credit Agreement;

 

(b)           without duplication, so
long as the Note Purchase Agreement remains in full force and effect, a copy of
any document, certificate or notice provided to the lenders or administrative
or other agent pursuant to the Note Purchase Agreement, delivered to the Lender
promptly after delivery of such document, certificate or notice under the Note
Purchase Agreement;

 

(c)           without duplication, so
long as the Syndicated Loan Agreement remains in full force and effect, a copy
of any document, certificate or notice provided to the lenders or
administrative or other agent pursuant to the Syndicated Loan Agreement,
delivered to the Lender promptly after delivery of such document, certificate
or notice under the Syndicated Loan Agreement;

 

(d)           without duplication, as
soon as practicable, but in any event not later than one-hundred and twenty
(120) days (or, after the Second Closing has occurred, fifty (50) days) after
the end of (i) each fiscal year of each of the Borrower and the Guarantor,
a copy of the unaudited consolidated balance sheet of each of the Borrower and
the Guarantor as at the end of such year, certified by a Responsible Officer as
being fairly stated in all material respects, and (ii) each fiscal year of
CCR and its consolidated Subsidiaries, a copy of the audited consolidated
balance sheet of CCR and its consolidated Subsidiaries as at the end of such
year, and the related audited consolidated statements of operations and cash
flows for such year, and the report thereon of Piercy, Bowler, Taylor &
Kern, independent certified public accountants;

 

(e)           without duplication, as
soon as practicable, but in any event not later than thirty (30) (or, after the
Second Closing has occurred, twenty-five (25) days) after the

 

10

 

end of each of
the first three (3) quarterly periods of (i) each fiscal year of each
of the Borrower and the Guarantor, a copy of the unaudited consolidated balance
sheet of each of the Borrower and the Guarantor as at the end of such quarter,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end adjustments), and (ii) each fiscal
year of CCR and its consolidated Subsidiaries, a copy of the unaudited
consolidated balance sheet of CCR and its consolidated Subsidiaries as at the
end of such quarter, and the related unaudited consolidated statements of
operations and of cash flows for such quarter, certified by a Responsible
Officer as being fairly stated in all material respects (subject to normal year-end
audit adjustments);

 

(f)            promptly, such
additional financial and other information regarding the Borrower, the
Guarantor, CCR or any Subsidiary of CCR as the Lender may from time to time
reasonably request in writing; and

 

(g)           concurrently with the
delivery of any quarterly or annual financial statements of the Borrower or the
Guarantor pursuant to this Section 6.1, a certificate of a Responsible
Officer (i) stating that the Borrower or the Guarantor during such period
has observed or performed all of its covenants and other agreements in this
Agreement and the other Loan Documents to be observed or performed by it, and
that such Responsible Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate.

 

All such financial statements delivered pursuant to this Section 6.1
for CCR and its Subsidiaries shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).  All such
financial statements delivered pursuant to this Section 6.1 for each of
the Borrower and the Guarantor shall be complete and correct in all material
respects and shall be prepared on the cash basis of accounting in a manner
consistent with the internal financial reporting of each of the Borrower and
the Guarantor.

 

6.2.          Compliance;
Maintenance of Existence.  The
Borrower and the Guarantor shall, and shall cause CCR and each Subsidiary of
CCR to, (a) comply in all material respects with all Laws, (b) perform
all obligations under all Contracts to which the Borrower or the Guarantor is a
party in all material respects, except with respect to Article 6 of the
Credit Agreement, which is addressed by Section 6.5(a) of this
Agreement, and prior to the Second Closing or Termination of the CUP Agreement,
except with respect to Article 5 of the Credit Agreement, which is
addressed by Section 6.1(a)(i) of the CUP Agreement, and (c)(i) preserve,
renew and keep in full force and effect its organizational existence and (ii) take
all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the ordinary course of its business, except as
permitted by the CUP Agreement or Section 6.5.

 

6.3.          Inspection
of Property; Books and Records; Discussions.  The Borrower and the Guarantor shall, and shall
cause CCR and each Subsidiary of CCR to, (a) keep proper books of records
and account in which full, true and correct entries in conformity with GAAP and
all Laws shall be made of all dealings and transactions in relation to its
business and activities and (b) permit representatives of the Lender (not
more frequently than twice per year if no Default or Event of Default exists)
upon reasonable notice to the Borrower to visit and inspect

 

11

 

its properties and request and obtain copies of its financial records
and to discuss the business, operations, properties and financial and other
condition of the Borrower, the Guarantor, CCR and each Subsidiary of CCR with
officers of the Borrower, the Guarantor, CCR and any Subsidiary of CCR and with
their independent certified public accountants.

 

6.4.          Notices.  The Borrower shall promptly give notice to
the Lender of:

 

(a)           the occurrence of any
Default or Event of Default;

 

(b)           the occurrence of any
event that could be a default under the Credit Agreement, the Note Purchase
Agreement, or the Syndicated Loan Agreement, whether or not such event may give
rise to a right to notice or otherwise, and whether or not any such right is
waived by a party thereto;

 

(c)           any Action or, to the Knowledge
of the Borrower, investigation (i) that may exist at any time between the
Borrower, the Guarantor, CCR or any Subsidiary of CCR, on the one hand, and any
Governmental Authority, on the other hand, that is reasonably expected to have
a Material Adverse Effect or (ii) that relates to any Loan Document; and

 

(d)           any other development
or event that could reasonably be expected to have a Material Adverse Effect.

 

Each notice pursuant to this Section 6.4
shall be accompanied by a statement of a Responsible Officer setting forth
details of the occurrence referred to therein and stating what action the
affected party proposes to take with respect thereto.

 

6.5.          Conduct
of the Business.  Except as contemplated
by the CUP Agreement or, from and after the Second Closing Date or Termination
of the CUP Agreement, as is reasonably necessary to effect a refinancing of the
Borrower, the Guarantor and CCR, the proceeds of which will be used to repay
the obligations of CCR pursuant to the loans made under the CUP Agreement, the Borrower
and the Guarantor shall not, and shall not permit CCR or any Subsidiary of CCR to,
unless otherwise consented to by the Lender:

 

(a)           take any action
prohibited by Article 6 of the Credit Agreement, without regard to the
expiration or termination of the Credit Agreement;

 

(b)           amend its Governing
Documents;

 

(c)           issue, sell, pledge,
encumber, transfer, dispose of or otherwise create any Lien on, or redeem,
purchase or acquire, any shares of its Capital Stock or any other equity or
debt interests, or grant any options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other agreements or rights to
purchase or otherwise acquire, any shares of its Capital Stock or any other
equity or debt interests, or grant any stock appreciation, phantom stock,
profit participation or similar rights;

 

(d)           effect any
recapitalization, reclassification, stock split or like change in its
capitalization;

 

12

 

(e)           declare or pay any
dividends on or make any other distributions (whether in cash, property or
otherwise) in respect of any of its Capital Stock or any other equity interest;

 

(f)            make any change in the
principal nature of its business;

 

(g)           make any change in any
method of accounting for financial reporting, except for any change in
financial reporting after the 1B Closing Date required by reason of a
concurrent change in or interpretation of GAAP;

 

(h)           enter into (i) any
transaction with a Person or entity affiliated with or related to itself,
except upon arms-length terms and conditions, or (ii) any transaction
which is motivated by an intent to evade this Agreement or any other Loan
Document; or

 

(i)            make any commitment
(whether or not in writing) to any of the foregoing.

 

6.6.          Limitation
on Fundamental Changes.  The Borrower
and the Guarantor shall not, and shall cause CCR and each Subsidiary of CCR not
to, enter into any merger, consolidation or amalgamation, or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
property, business or assets, except as contemplated by the CUP Agreement.

 

6.7.          Payment
of Taxes.  The Borrower and the
Guarantor shall, and shall cause CCR and each Subsidiary of CCR to, pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all material taxes, assessments and
governmental charges or levies imposed upon any of them or their income or
profits.

 

6.8.          Ownership.  The direct and indirect ownership structure
of the Capital Stock of the Borrower, the Guarantor, CCR and each Subsidiary of
CCR shall at all times remain as of the 1B Closing Date except for such changes
as are contemplated by the CUP Agreement or, after the Second Closing, as are
permitted under the Company Amended Operating Agreement or the Omnibus
Management Agreement.

 

6.9.          Proceeds.  The Borrower shall use the proceeds from the
Loan solely to effect the Mendenhall Purchase and for no other purpose
whatsoever.

 

6.10.        Clauses
Restricting Distributions from CCR. 
The Borrower and the Guarantor shall not, and shall not permit CCR to,
enter into or suffer to exist or become effective any contractual restriction
on the ability of CCR to pay dividends on, or make other distributions or
payments with respect to, the Capital Stock of CCR, except for those (a) contained
in the CUP Agreement, this Agreement and any other Loan Documents and (b) existing
on this date as set forth in Schedule A
attached hereto.

 

13

 

SECTION 7.  DEFAULTS AND EVENTS OF DEFAULT

 

7.1.          Events
of Default.  If any of the following
events shall occur and be continuing:

 

(a)           the Borrower shall fail
to pay any principal of or interest on the Loan when due and payable in
accordance with the terms hereof;

 

(b)           the Borrower shall fail
to perform or observe (i) any term, covenant, or agreement contained in
Sections 6.2, 6.5, 6.6, 6.8, 6.9 and 6.10; provided, however,
that if Section 6.5(a) would be violated but for the waiver or
consent by the “Administrative Agent” (as such term is defined in the Credit
Agreement) of such action otherwise prohibited by Article 6 of the Credit
Agreement, then such action shall constitute a default under this Section 7.1(c)(i) if
such action was intentional, knowing or otherwise taken with reckless
indifference, or (ii) any other term, covenant or agreement contained in
this Agreement or any other Loan Document (other than as provided in Sections 7.1(a) and
7.1(b)) and, in the case of any default under this clause (ii), such default
shall continue unremedied for thirty (30) days after the Lender shall have given
notice thereof to the Borrower;

 

(c)           prior to the
Termination of the CUP Agreement for any reason or, if the Second Closing
occurs, after the Second Closing, there shall have occurred (i) any “Event
of Default” (as defined in the Credit Agreement) under Sections 9.1(h), 9.1(j)
or 9.1(n) of the Credit Agreement or (ii) any other “Event of Default” as
defined in the Credit Agreement pursuant to which the lenders thereunder shall
have proceeded to enforce their remedies under Section 9.2(c) of the
Credit Agreement;

 

(d)           after the Termination
of the CUP Agreement for any reason, there shall have occurred any “Event of
Default,” as such term is defined under either the Credit Agreement or the Note
Purchase Agreement (which shall not include (i) any “event of default”
that has been waived by any lender or administrative or other agent under the
Note Purchase Agreement or the Credit Agreement to the extent such waiver is
unconditional (or, if conditional, the conditions to such waiver have been
fully satisfied prior to the date of Termination) or not temporally limited
(or, if temporally limited, such wavier shall not expire until at least the
applicable Maturity Date), (ii) any “event of default” that has been cured
or (iii) any “event of default” that has occurred prior to the date of
Termination of the CUP Agreement and is continuing through such date of
Termination);

 

(e)           the Borrower, the
Guarantor, CCR or any Subsidiary of CCR shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be generally unable, to
pay its debts as such debts become due, (iii) make a general assignment
for the benefit of its creditors, (iv) commence a voluntary case under the
federal bankruptcy Laws (as now or hereafter in effect), (v) file a
petition seeking to take advantage of any other Law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or readjustment of
debts, (vi) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against the Borrower, the Guarantor,
CCR or any

 

14

 

Subsidiary of
CCR, as the case may be, in an involuntary case under such federal Laws, or (vii) take
any corporate action for the purpose of affecting any of the foregoing;

 

(f)            an Action shall be
commenced (including commencement of such Action by way of service of process
on the Borrower, the Guarantor, CCR or any Subsidiary of CCR), in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts of the
Borrower, the Guarantor, CCR or any Subsidiary of CCR, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Borrower, the Guarantor, CCR or any Subsidiary of CCR or of all or any
substantial part of the assets of the Borrower, the Guarantor, CCR or any
Subsidiary of CCR or (iii) similar relief in respect of the Borrower, the
Guarantor, CCR or any Subsidiary of CCR under any Law relating to bankruptcy,
insolvency, reorganization, winding up, or composition or readjustment of
debts, or a warrant of attachment, execution or similar process shall be issued
against a substantial part of the property of the Borrower, the Guarantor, CCR or
any Subsidiary of CCR and such Action shall continue undismissed or unstayed
and in effect for a period of forty-five (45) days, or an Order approving or
ordering any of the foregoing shall be entered in an involuntary case under
such federal bankruptcy Laws;

 

(g)           a trustee shall be
appointed to administer any Plan under Section 4042 of ERISA, or the PBGC
shall institute proceedings to terminate, or to have a trustee appointed to
administer any Plan and such proceedings shall continue undismissed or unstayed
and in effect for a period of thirty (30) days, and any such event shall result
in any liability which is material in relation to the consolidated financial
condition of the Borrower, the Guarantor or CCR;

 

(h)           there shall have been
entered by a court of competent jurisdiction within the United States one or
more judgments or decrees for payment of money involving a liability against
the Borrower, the Guarantor, CCR or any Subsidiary of CCR in excess of $1,000,000
that is not otherwise covered by insurance;

 

(i)            the obligation of the
Guarantor under the Guarantee Agreement is limited or terminated by operation
of Law (other than as a result of an action taken by the Nevada Gaming
Authorities solely attributable to any action or inaction of the Lender,
AcquisitionCo or any of their respective Affiliates) or the obligation of the
Guarantor thereunder is limited or terminated by the Guarantor;

 

(j)            the Borrower, the Guarantor,
CCR or any Subsidiary of CCR is enjoined, restrained or in any way prevented by
Order from continuing to conduct all or any material part of its business;

 

(k)           this Agreement or any
other Loan Document that purports to create a security interest in the
Collateral shall, for any reason (other than as a result of an action taken by
the Nevada Gaming Authorities solely attributable to any action or inaction of
the Lender, AcquisitionCo or any of their respective Affiliates), fail or cease
to create a valid and perfected first priority Lien on or security interest in
the Collateral covered hereby or thereby (other than as disclosed on Schedule 1
to any Pledge Agreement);

 

15

 

(l)            any direct or indirect
change in the ownership of Capital Stock of the Borrower, the Guarantor, CCR or
any Subsidiary of CCR shall occur, other than changes of ownership as are
permitted by the CUP Agreement or, after the Second Closing, as are permitted
under the Company Amended Operating Agreement or the Omnibus Management
Agreement;

 

(m)          any provision of any
Loan Document shall at any time for any reason (other than as a result of an
action taken by the Nevada Gaming Authorities solely attributable to any action
or inaction of the Lender, AcquisitionCo or any of their respective Affiliates)
be declared to be null and void, or the validity or enforceability thereof
shall be contested by the Borrower, the Guarantor, CCR or any Subsidiary of CCR,
or an Action shall be commenced by the Borrower, the Guarantor, CCR or any
Subsidiary of CCR, or by any Governmental Authority (other than an Action by
the Nevada Gaming Authorities brought as a result of an action taken by the
Nevada Gaming Authorities solely attributable to any action or inaction of the
Lender, AcquisitionCo or any of their respective Affiliates) having
jurisdiction over the Borrower, the Guarantor, CCR or any Subsidiary of CCR
seeking to establish the invalidity or unenforceability thereof, or the Borrower,
the Guarantor, CCR or any Subsidiary of CCR shall deny that the Borrower, the
Guarantor, CCR or any Subsidiary of CCR has any liability or obligation
purported to be created under any Loan Document; or

 

(n)           an “Event of Default” (as
such term is defined therein) shall be declared under the Mendenhall B Loan;

 

then, and in any such event, (i) if
such event is an Event of Default specified in paragraph (e) or (f) of
this Section 7, automatically the Loan hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the other Loan
Documents shall immediately become due and payable, and (ii) if such event
is any other Event of Default, the Lender may declare the Loan hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement and
the other Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable. 
Except as expressly provided above in this Section 7.1,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.  Subject to Section 7.2,
the rights of the Lender under this Section 7.1 are in addition to other
rights and remedies which the Lender may have, including the right to:

 

(A)          Terminate
this Agreement and any of the other Loan Documents as to any future liability
or obligation of the Lender, but without affecting any of the security
interests in the Collateral.

 

(B)           Without
notice to or demand upon the Borrower, make such payments and do such acts as
the Lender considers necessary or reasonable to protect its security interests
in the Collateral.  Each of the Borrower
and the Guarantor agrees to assemble the Collateral if the Lender so requires,
and to make the Collateral available to the Lender at a place that the Lender
may designate which is reasonably convenient to both parties.  Each of the Borrower and the Guarantor
authorizes the Lender to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest or compromise any Lien that in the Lender’s determination
appears to conflict with the security interest in and to the Collateral and to
pay all expenses incurred in connection therewith and to charge the Borrower
therefor.  With respect to any of the
Borrower’s or the Guarantor’s

 

16

 

owned premises, each of the
Borrower and the Guarantor hereby grants the Lender a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of the Lender’s rights or remedies provided herein, at law, in
equity or otherwise.

 

(C)           To
the extent permitted by applicable Law, foreclose on the Collateral and ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale and sell (in the manner provided for herein) the Collateral.  Each of the Borrower and the Guarantor hereby
grants to the Lender a license or other right to use, without charge, the
labels, patents, copyrights, trade secrets, trade names, trademarks, service
marks and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale
and selling any Collateral and rights of the Borrower or the Guarantor under
all licenses and all franchise agreements shall inure to the Lender’s benefit.

 

(D)          To
the extent permitted by applicable Law, sell the Collateral at either a public
or private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including the Borrower’s
or the Guarantor’s premises) as the Lender determines is commercially
reasonable.  It is not necessary that the
Collateral be present at any such sale. 
Each of the Borrower and the Guarantor covenants and agrees that it
will, upon the Lender’s request, execute and deliver such documents and take
such other action as the Lender deems necessary or advisable in order that any
such sale may be made in compliance with Law. 
Each purchaser at any such sale shall hold the Collateral so sold
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Borrower or the Guarantor, as applicable,
which may be waived, and each of the Borrower and the Guarantor, to the extent
permitted by Law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any Law now existing or hereafter
adopted.

 

(E)           The
Lender shall give notice of the disposition of the Collateral as follows:

 

(1)           The
Lender shall give the Borrower and the Guarantor a notice in writing of the
time and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale, the time on or after which the private
sale or other disposition is to be made; and

 

(2)           The
notice shall be personally delivered or mailed, postage prepaid, to the Borrower
and the Guarantor, at least ten (10) days before the earliest time of
disposition set forth in the notice; no notice needs to be given prior to the
disposition of any portion of the Collateral that is perishable or threatens to
decline speedily in value or that is of a type customarily sold on a recognized
market.

 

The Lender shall not be obligated to make any
such sale pursuant to any such notice. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be
so adjourned.  In case of any sale of all
or any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Lender until the selling price is paid by the

 

17

 

purchaser thereof, but the Lender shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral
may again be sold upon like notice.

 

(F)           The
Lender may credit bid and purchase at any public sale and may purchase at any
private sale, each as conducted in accordance with clause (E) above.

 

(G)           The
Lender may seek the appointment of a receiver or keeper to take possession of
all or any portion of the Collateral or to operate same and, to the maximum
extent permitted by Law, may seek the appointment of such a receiver without
the requirement of prior notice or a hearing.

 

7.2.          Effect
of Gaming Laws.

 

(a)           The
remedies set forth in Section 7.1 shall be subject to applicable limitations
set forth in the Pledge Agreements required for purposes of the Gaming Laws or
with respect to the Nevada Gaming Authorities.

 

(b)           In
connection with exercising its rights under Section 7.1, the Lender may,
if it so elects in its sole discretion, require the Borrower and the Guarantor
to, and to cause CCR and its Subsidiaries to, cooperate with the Lender and
immediately to take all actions required by the Lender to assist with the
preparation and filing by the Lender of all applications for licensure and
approval with all applicable regulatory authorities as are necessary, if any,  for the Lender to acquire ownership and
control of CCR and its Subsidiaries, or of any other Person owning or operating
the Businesses, or of the Businesses and the hotels and casinos operated by
Cannery, Rampart or, after the Second Closing, Nevada LLC.  To enforce the provisions of this Section 7.2(b),
to the extent they are applicable, the Lender is empowered to request the
appointment of a receiver or supervisor from the Nevada Gaming Authorities or,
if applicable, from any court of competent jurisdiction or to engage a licensed
third party operator to operate the Businesses until such time as the Lender is
prepared to sell and transfer the Collateral consisting of membership units or
other interests in CCR or its Subsidiaries, or their properties and assets, to
a third party purchaser licensed by the Nevada Gaming Authorities.  Each of the Borrower and the Guarantor shall,
and shall cause CCR and its Subsidiaries to, use reasonable best efforts to
obtain the approval of the applicable Nevada Gaming Authority, if required, for
any action or transactions contemplated by this Agreement or the Loan
Documents, including preparation, execution and filing with the applicable
Nevada Gaming Authority of any applications relating to the change of control
of the Businesses and the properties and assets of CCR and its Subsidiaries, to
the extent approval is required by applicable Law.

 

SECTION 8.  MISCELLANEOUS

 

8.1.          Cooperation
with Gaming Laws.  To the extent the
Nevada Gaming Authorities have regulatory jurisdiction over the Borrower or the
Guarantor, the Lender shall cooperate with the Nevada Gaming Authorities in
connection with the administration of their regulatory jurisdiction over
Cannery, Rampart and Nevada LLC, including through the provision of such
documents or other information as may be requested by the Nevada Gaming Authorities
relating to the Lender or such companies. 
In connection therewith, to the extent the foregoing

 

18

 

sentence is applicable, the Lender, its successors and its permitted
assignees and designees acknowledge that each of them is subject to being
called forward by the Nevada Gaming Authorities, in the discretion of the
Nevada Gaming Authorities, for licensing or a finding of suitability in order
to remain entitled to the benefits under this Agreement and the other Loan
Documents.  

 

8.2.          Termination.  This Agreement shall terminate on the last
Maturity Date to occur of the Loan.  As
set forth in Section 7.1(A), the Lender shall also have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.  No termination of this Agreement shall
relieve or discharge the Borrower or the Guarantor of its duties, obligations
or covenants hereunder, and except as expressly set forth in the applicable
Pledge Agreements, the Lender’s security interest in the Collateral shall
remain in effect until all Loans and other obligations under this Agreement
(including Sections 2.8 and 8.6) or the Notes have been paid in full.  When all obligations under the Loan have been
paid in full, the Mendenhall I Note shall be canceled.   When
this Agreement has been terminated and all such obligations have been paid in
full, or when the security interests in the Collateral are otherwise released
pursuant to the applicable Pledge Agreements, the Lender shall, at the Borrower’s
or the Guarantor’s sole expense, execute and deliver any UCC termination
statements, lien releases, mortgage releases, discharges of security interests
and other similar discharge or release documents (and, if applicable, in
recordable form) as are reasonably necessary to release, as of record, the
security interests in the Collateral.

 

8.3.          Amendments
and Waivers.  The provisions of this
Agreement and the other Loan Documents may be amended, supplemented, modified
or waived; provided, however, that any such amendment,
supplement, modification or waiver be in writing and executed by each party
hereto; and provided, further, that for the purposes of waiver by
the Borrower and the Guarantor under this Section 8.3, as well as any
other waiver, agreement or consent (including an agreement or consent as to
satisfactoriness, reasonability or termination) granted to or required of the Borrower
or the Guarantor under this Agreement, such waiver by or agreement or consent
of the Borrower or the Guarantor shall be considered effective if given by
Wortman and Paulos, acting on behalf of all of them.

 

8.4.          Notices.  Any and all notices and demands by a
party hereto to the other party hereto required or desired to be given
hereunder shall be in writing and shall be validly given or made only if: (a) delivered
by hand; (b) delivered by FedEx or other similar overnight delivery or
courier service which keeps records of deliveries; or (c) served by
telecopy or similar facsimile transmission, so long as such method is followed
up by one of the methods set forth in (a) or (b).  Delivery of notice by method (a) or (b) shall
be effective upon receipt.  Delivery of
notice by telecopy or similar facsimile transmission shall be effective upon
the printing by sender of a positive confirmation sheet, so long as such sheet
reflects that the telecopy or facsimile was received during regular business
hours.  Telecopy or facsimile
transmissions shown as having been received at any other time shall be deemed
received on the next Business Day. 
Notice on behalf of a party hereto may be signed and sent by any
attorney for such party. 
The address of each party hereto is set forth on the signature page hereof.

 

19

 

(a)           Address of
the Borrower and the Guarantor. 
Any
notice or demand to the Borrower or the Guarantor shall be addressed to the
applicable party at:

 

Cannery Casino Resorts

211 North Rampart Boulevard

Las Vegas, Nevada  89145

Attn:  William Paulos

Attn:  William Wortman

Fax:  (702) 507-5992

 

with a copy to

 

Michael E. Kearney

Santoro, Driggs, Walch, Kearney, Johnson & Thompson

400 South Fourth Street, Suite 300

Las Vegas, Nevada  89101

Fax:  (702) 791-1912

 

(b)           Address of
the Lender.  Any
notice or demand to the Lender shall be addressed to AcquisitionCo at:

 

OCM AcquisitionCo,
LLC

333 South
Grand Avenue, 28th Floor

Los Angeles,
California  90071

Attn:  Chris Brothers

Attn:  Skardon Baker

Fax:  (213) 830-6394

 

with a copy to

 

Munger, Tolles &
Olson LLP

355 South
Grand Avenue, 35th Floor

Los Angeles,
California  90071

Attn:  Robert Knauss

Fax:  (213) 683-5137

 

(c)           Change of
Address.  Each of
the parties hereto may change its address for the purpose of receiving notices
or demands as herein provided by a written notice given in the manner aforesaid
to the others, which notice of change of address shall not become effective,
however, until the actual receipt thereof by the others.

 

8.5.          No
Waiver; Cumulative Remedies.  No
failure to exercise and no delay in exercising, on the part of the Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights,

 

20

 

remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by Law.

 

8.6.          Survival
of Representations and Warranties.  All
representations and warranties made hereunder or incorporated by reference
herein, in the other Loan Documents and in any document, certificate or
statement delivered pursuant hereto or in connection herewith or therewith
shall survive the execution and delivery of this Agreement and the making of
the Loans hereunder until repaid in full.

 

8.7.          Payment
of Expenses and Taxes.  The Borrower
agrees (a) to pay or reimburse the Lender for all its reasonable out-of-pocket
costs and expenses incurred in connection with any amendment, supplement or
modification to, this Agreement and the other Loan Documents, including the
reasonable fees and expenses of counsel in connection therewith, (b) to
pay or reimburse the Lender for all its out-of-pocket costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement or the other Loan Documents, including the fees and
disbursements of counsel to the Lender, (c) to pay, indemnify or reimburse
the Lender for, and hold the Lender harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes (other than any net income or
franchise taxes), if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation or administration
of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this Agreement
and the other Loan Documents, and (d) to pay, indemnify, and hold the
Lender and its respective directors, officers, employees, affiliates and agents
(each, an “Indemnified Person”) harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of this Agreement and the other Loan Documents and the use of proceeds of the
Loan (all the foregoing in this clause (d), collectively, the “Indemnified Liabilities”);
provided, however, that the Borrower shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of such Indemnified
Person; and provided, further, that no matter may be indemnified
pursuant to this Section 8.7 to the extent already fully indemnified
pursuant to Article IX of the CUP Agreement.  This Section 8.7 shall survive
termination of this Agreement.

 

8.8.          Attorneys’
Fees For Disputes.  In the event any
Action is commenced by any party hereto against any other party hereto in
connection herewith, including any bankruptcy proceeding, the prevailing party
shall be entitled to recover, in addition to its costs of enforcement, its
costs and expenses, including reasonable attorneys’ fees.

 

8.9.          Transfer;
Successors and Assigns.  The Borrower
and the Guarantor may not assign or transfer any of its rights or obligations
under this Agreement at any time without the prior written consent of the Lender.  The Lender may freely assign any Note or this
Agreement to any Person, including assigning rights to payment or to declare an
Event of Default and pursue remedies hereunder, and to designate any Person a
third party beneficiary under any Note or this Agreement; provided, however,
that promptly following such assignment or designation, the Lender must provide
notice of such assignment or designation to the

 

21

 

Borrower and the Guarantor. 
Subject to the foregoing, this Agreement shall be binding upon and inure
to the benefit of the Borrower, the Lender and their respective successors and
assigns.

 

8.10.        Disclosure.  The Borrower authorizes the Lender to
disclose to any assignee (a “Transferee”) and any prospective
Transferee, any and all financial information in the Lender’s possession
concerning the Borrower, the Guarantor and their respective Affiliates which
has been delivered to such Lender by or on behalf of the Borrower or the
Guarantor pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower or the Guarantor in connection with such Lender’s
credit evaluation of the Borrower, the Guarantor and their respective Affiliates
prior to becoming a party to this Agreement.

 

8.11.        Revival
and Reinstatement of Obligations.  If
the incurrence or payment of any principal, accrued interest or other
obligations by either the Borrower or the Guarantor or the transfer to Lender
of any Collateral should for any reason subsequently be declared to be void or
voidable under any state or federal Law relating to creditors’ rights,
including provisions of the bankruptcy Laws relating to fraudulent conveyances,
preferences or other voidable or recoverable payments of money or transfers of
property (each, a “Voidable Transfer”), and if the Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender is required or elects to repay
or restore, and as to all reasonable costs, expenses and attorneys’ fees of the
Lender related thereto, the liability of the Borrower or the Guarantor
automatically shall be revived, reinstated and restored and shall exist as
though such Voidable Transfer had never been made (including with respect to
this Agreement, the Pledge Agreements and the Guarantee Agreement).

 

8.12.        Counterparts.  This Agreement may be executed by facsimile
and in any number of counterparts, each of which when executed by and delivered
shall be an original, but all such counterparts shall constitute one and the
same Agreement.  Any signature page of
this Agreement may be detached from any counterpart without impairing the legal
effect of any signatures thereon, and may be attached to another counterpart,
identical in form thereto, but having attached to it one or more additional
signature pages.

 

8.13.        Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

8.14.        Integration.  This Agreement, the other Loan Documents and
the CUP Agreement and the other documents contemplated thereby represent the
agreement of the Borrower and the Lender with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Borrower and the Lender relative to subject matter hereof not expressly set
forth or referred to herein or therein.

 

8.15.        GOVERNING
LAW.   THE INTERNAL LAWS OF
THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND WHOLLY PERFORMED

 

22

 

THEREIN SHALL GOVERN THE VALIDITY,
CONSTRUCTION, PERFORMANCE AND EFFECT OF THIS AGREEMENT.

 

8.16.        WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY
WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY PERMITTED ACTION ARISING OUT
OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, OR ANY DEALINGS BETWEEN ANY OF THE PARTIES HERETO RELATING
TO THE SUBJECT MATTER OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, INCLUDING CONTRACT CLAIMS, TORT CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. 
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, SUPPLEMENTS OR OTHER MODIFICATIONS TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

8.17.        Service
of Process; Consent To Jurisdiction. 
The parties hereto hereby irrevocably submit and consent to the
non-exclusive jurisdiction of any federal or state court located within Reno,
Nevada over any dispute arising out of or relating to this Agreement, the other
Loan Documents or any of the transactions contemplated hereby or thereby.  The parties hereto hereby irrevocably waive,
to the fullest extent permitted by applicable Law, any objection which they may
now or hereafter have to the laying of venue of any such dispute brought in
such court or any defense of inconvenient forum for the maintenance of such
dispute.  Each of the parties hereto
agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable Law.  The parties hereto
irrevocably consent to the service of any process, pleading, notice or other
papers by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party’s address set forth in Section 8.4 or
permitted under Nevada law.

 

8.18.        Interpretation.  The parties hereto agree that no party hereto
shall be deemed to be the drafter of this Agreement and that in the event this
Agreement is ever construed by a court of law or equity, such court shall not
construe this Agreement or any provision hereof against any party hereto as the
drafter of the Agreement.  The parties
hereto acknowledge that each of them has contributed substantially and materially
to the preparation hereof.  The captions
appearing at the commencement of the sections hereof are descriptive only and
for convenience in reference to this Agreement and in no way whatsoever define,
limit or describe the scope or intent of this Agreement, nor in any way affect
this Agreement.

 

[Remainder of page intentionally left blank.]

 

23

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

 

 

	
  Lender:

  	
  Borrower:

  
	
   

  	
   

  
	
  OCM AcquisitionCo, LLC

  	
  MGIM, LLC

  
	
   

  	
   

  
	
  By:

  	
    /s/ Stephen Kaplan

  	
   

  	
  By:

  	
  /s/ William C. Wortman

  	
   

  
	
   

  	
  Name:

  	
  Stephen Kaplan

  	
  Its:

  	
  Manager

  	
   

  
	
   

  	
  Title:

  	
  Manager

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Ronald Beck

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Ronald Beck

  	
   

  
	
   

  	
  Title:

  	
  Manager

  	
   

  
	
   

  	
   

  
	
  Lender’s Office:

  333 South Grand Avenue, 28th Floor

  Los Angeles, California 90071

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Guarantor:

  	
   

  
	
   

  	
   

  
	
  Millennium Gaming, Inc.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William J. Paulos

  	
   

  	
   

  
	
  Its:

  	
  ManagerExhibit 10.3

 

	
   

  
	
  

  AMENDED AND RESTATED

  

  OPERATING AGREEMENT

  

  OF

  

  CANNERY CASINO RESORTS, LLC,

  

  a Nevada Limited Liability Company

  
	
  

  Dated as of
  [                    ]

  

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  THE COMPANY

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Formation

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Name

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.3

  	
  Purpose; Powers

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.4

  	
  Principal Place
  of Business

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.5

  	
  Term

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.6

  	
  Filings; Agent
  for Service of Process

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.7

  	
  Title to
  Property

  	
  3

  
	
   

  	
   

  	
   

  
	
  1.8

  	
  Payments of
  Individual Obligations

  	
  3

  
	
   

  	
   

  	
   

  
	
  1.9

  	
  Independent
  Activities; Transactions with Affiliates

  	
  3

  
	
   

  	
   

  	
   

  
	
  1.10

  	
  Definitions

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.11

  	
  Interpretation

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  CAPITAL
  CONTRIBUTIONS

  	
  4

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Classes of Units

  	
  4

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Capital
  Contributions

  	
  4

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Additional
  Capital Contributions

  	
  4

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Equity
  Participation Plan

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  ALLOCATIONS

  	
  6

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Profits

  	
  6

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Losses

  	
  6

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Special
  Allocations

  	
  6

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Curative
  Allocations

  	
  8

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Loss Limitation

  	
  8

  
	
   

  	
   

  	
   

  
	
  3.6

  	
  Other Allocation
  Rules

  	
  9

  
	
   

  	
   

  	
   

  
	
  3.7

  	
  Tax Allocations:
  Code Section 704(c)

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  DISTRIBUTIONS

  	
  10

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Distributions

  	
  10

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Amounts Withheld

  	
  10

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Tax
  Distributions

  	
  11

  
	
   

  	
   

  	
   

  

 

 

i

 

	
  ARTICLE V

  	
  MANAGEMENT
  COMMITTEE

  	
  11

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Managers;
  Management Committee

  	
  11

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Licensing

  	
  14

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Meetings of the
  Management Committee

  	
  14

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Management
  Committee Powers

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Actions
  Requiring Majority Approval of the Management Committee or the Unanimous
  Approval of the AcquisitionCo Managers

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Actions
  Requiring 80% Approval of the Management Committee

  	
  19

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Duties and
  Obligations of the Management Committee

  	
  20

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Removal of
  Certain Senior Officers

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  MEMBERS

  	
  21

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Rights or Powers
  of Members

  	
  21

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Voting Rights of
  Members

  	
  21

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Meetings of the
  Preferred Members

  	
  21

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Withdrawal

  	
  22

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Member
  Compensation

  	
  22

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Members
  Liability

  	
  22

  
	
   

  	
   

  	
   

  
	
  6.7

  	
  Partition

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.8

  	
  Transactions
  between a Member and the Company

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.9

  	
  Other
  Instruments

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  GAMING
  OPPORTUNITIES

  	
  23

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  General Gaming
  Opportunities

  	
  23

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Mexican Gaming
  Opportunities

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  INDEMNIFICATION
  AND REIMBURSEMENT

  	
  25

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Indemnification

  	
  25

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  General
  Reimbursements

  	
  27

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Gaming
  Development Reimbursements

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  28

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  In General

  	
  28

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Representations
  and Warranties by Members

  	
  28

  
	
   

  	
   

  	
   

  

 

 

ii

 

	
  9.3

  	
  Indemnification

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  ACCOUNTING,
  BOOKS AND RECORDS

  	
  32

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Accounting,
  Books And Records

  	
  32

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Accounting
  Statements; Periodic Reports

  	
  33

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Tax Matters

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  TRANSFERS

  	
  35

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Restrictions On
  Transfers

  	
  35

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  Permitted
  Transfers

  	
  35

  
	
   

  	
   

  	
   

  
	
  11.3

  	
  Second Anniversary
  Trigger

  	
  35

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Fourth
  Anniversary Trigger

  	
  38

  
	
   

  	
   

  	
   

  
	
  11.5

  	
  Conditions to
  Permitted Transfers

  	
  42

  
	
   

  	
   

  	
   

  
	
  11.6

  	
  Prohibited
  Transfers

  	
  42

  
	
   

  	
   

  	
   

  
	
  11.7

  	
  Rights of
  Unadmitted Assignees

  	
  43

  
	
   

  	
   

  	
   

  
	
  11.8

  	
  Admission of
  Substituted Members

  	
  43

  
	
   

  	
   

  	
   

  
	
  11.9

  	
  Distributions and
  Allocations in Respect of Units Transferred

  	
  43

  
	
   

  	
   

  	
   

  
	
  11.10

  	
  Gaming
  Restrictions

  	
  43

  
	
   

  	
   

  	
   

  
	
  11.11

  	
  Compliance with
  Gaming Laws

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  ADVERSE ACT

  	
  44

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Remedies

  	
  44

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Adverse Act
  Purchase

  	
  46

  
	
   

  	
   

  	
   

  
	
  12.3

  	
  Net Equity Value

  	
  47

  
	
   

  	
   

  	
   

  
	
  12.4

  	
  Gross Appraised
  Value

  	
  48

  
	
   

  	
   

  	
   

  
	
  12.5

  	
  Extension of
  Time

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  DISSOLUTION AND
  WINDING UP

  	
  49

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Dissolution
  Events

  	
  49

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Winding Up

  	
  49

  
	
   

  	
   

  	
   

  
	
  13.3

  	
  Deficit Capital
  Accounts

  	
  50

  
	
   

  	
   

  	
   

  
	
  13.4

  	
  Holdback

  	
  50

  
	
   

  	
   

  	
   

  
	
  13.5

  	
  Deemed
  Contribution and Distribution

  	
  51

  
	
   

  	
   

  	
   

  
	
  13.6

  	
  Rights of
  Members

  	
  51

  
	
   

  	
   

  	
   

  

 

 

iii

 

	
  13.7

  	
  Notice of
  Dissolution/Termination

  	
  51

  
	
   

  	
   

  	
   

  
	
  13.8

  	
  Allocations
  During Period of Liquidation

  	
  51

  
	
   

  	
   

  	
   

  
	
  13.9

  	
  Character of
  Liquidating Distributions

  	
  51

  
	
   

  	
   

  	
   

  
	
  13.10

  	
  The Liquidator

  	
  51

  
	
   

  	
   

  	
   

  
	
  13.11

  	
  Form of
  Liquidating Distributions

  	
  52

  
	
   

  	
   

  	
   

  
	
  13.12

  	
  Reserves

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  MISCELLANEOUS

  	
  52

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Further
  Assurances

  	
  52

  
	
   

  	
   

  	
   

  
	
  14.2

  	
  Notices

  	
  52

  
	
   

  	
   

  	
   

  
	
  14.3

  	
  Confidentiality

  	
  53

  
	
   

  	
   

  	
   

  
	
  14.4

  	
  Governing Law

  	
  54

  
	
   

  	
   

  	
   

  
	
  14.5

  	
  Jurisdiction;
  Waiver of Jury Trial

  	
  54

  
	
   

  	
   

  	
   

  
	
  14.6

  	
  Specific
  Performance

  	
  54

  
	
   

  	
   

  	
   

  
	
  14.7

  	
  Entire Agreement

  	
  54

  
	
   

  	
   

  	
   

  
	
  14.8

  	
  Amendment

  	
  54

  
	
   

  	
   

  	
   

  
	
  14.9

  	
  Waiver

  	
  54

  
	
   

  	
   

  	
   

  
	
  14.10

  	
  Invalid
  Provisions

  	
  55

  
	
   

  	
   

  	
   

  
	
  14.11

  	
  No Assignment;
  Binding Effect

  	
  55

  
	
   

  	
   

  	
   

  
	
  14.12

  	
  Third Party
  Beneficiaries

  	
  55

  
	
   

  	
   

  	
   

  
	
  14.13

  	
  Construction

  	
  55

  
	
   

  	
   

  	
   

  
	
  14.14

  	
  Incorporation by
  Reference

  	
  55

  
	
   

  	
   

  	
   

  
	
  14.15

  	
  Headings

  	
  55

  
	
   

  	
   

  	
   

  
	
  14.16

  	
  Counterparts

  	
  55

  
	
   

  	
   

  	
   

  

 

 

iv

 

	
  APPENDICES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Appendix
  A

  	
  Ownership of the
  Company

  	
   

  
	
   

  	
   

  	
   

  
	
  Appendix
  B

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Appendix
  C

  	
  Managers

  	
   

  

 

 

v

 

AMENDED
AND RESTATED

OPERATING
AGREEMENT

OF

CANNERY
CASINO RESORTS, LLC,

a Nevada limited liability company

This AMENDED AND RESTATED OPERATING AGREEMENT of Cannery Casino Resorts,
LLC, is entered into and shall be effective as of [                    ]
(the “Effective Date”), by and among the Persons who are identified as
Members on Appendix A and who have executed a counterpart of this
Agreement as Members pursuant to the provisions of the Act.

This Agreement amends and
restates in its entirety the prior operating agreement of the Company (formerly
known as Mendenhall Millennium, LLC), dated as of June 1, 2001 (the “Prior
Operating Agreement”), and has been approved by the Members in accordance
with the terms of the Prior Operating Agreement and the Act.  This Agreement shall amend, restate, supersede
and replace the Prior Operating Agreement in its entirety.

ARTICLE I

THE COMPANY

1.1           Formation.  The Company was formed as a limited liability
company under and pursuant to the provisions of the NRS through the filing of
the Articles of Organization with the Secretary of State of the State of Nevada
on or about May 18, 2001.  The fact that
the Articles of Organization are on file in the office of the Secretary of
State of the State of Nevada shall constitute notice that the Company is a
limited liability company.  The members
of the Company immediately prior to the Effective Date were Millennium Gaming
and MGIM.  Pursuant to the terms of the
Contribution and Unit Purchase Agreement, AcquisitionCo desires to become a Member
of the Company.  In connection therewith,
Millennium Gaming and MGIM hereby terminate the Prior Operating Agreement, and
such Prior Operating Agreement shall be null and void and of no further force or
effect, and Millennium Gaming and AcquisitionCo hereby enter into this
Agreement to amend, restate, supersede and replace the Prior Operating
Agreement in its entirety.  On the Effective
Date, AcquisitionCo shall be admitted as a Member of the Company in
substitution of MGIM.  The rights and
liabilities of the Members shall be as provided under the Act, the Articles of
Organization and this Agreement.

1.2           Name.  The name of the Company shall be “Cannery
Casino Resorts, LLC” and all Business of the Company shall be conducted in such
name.  The Management Committee may
change the name of the Company upon ten Business Days prior written notice to
the Members.

 

 

 

1.3           Purpose;
Powers.

(a)           The purposes of the Company are (i) to
acquire and hold interests in casino operating companies, (ii) to conduct the
Business, (iii) to make such additional investments and engage in such
additional activities as the Members may approve, and (iv) to engage in any and
all activities related to or incidental to the purposes set forth in clauses
(i), (ii) and (iii) above.

(b)           The Company has the power to do any
and all acts necessary, appropriate, proper, advisable, incidental or
convenient to or in furtherance of the purposes of the Company set forth in
Section 1.3(a) above, and has, without limitation, any and all powers that may
be exercised on behalf of the Company by the Management Committee pursuant to ARTICLE
V below.

1.4           Principal Place of Business.  The principal place of business of the Company
shall be at 221 North Rampart Boulevard, Las Vegas, Nevada 89145.  The Management Committee may change the
principal place of business of the Company to any other place within or without
the State of Nevada, upon ten Business Days prior written notice to the
Members.  The registered office of the Company
in the State of Nevada shall be as currently reflected on the annual list on
file with the Secretary of State of the State of Nevada.

1.5           Term.  The term of the Company commenced on the date
the Articles of Organization were filed in the office of the Secretary of State
of the State of Nevada in accordance with the Act, and shall continue until the
dissolution, winding up and liquidation of the Company and its Business is
completed following a Dissolution Event, as provided in ARTICLE XIII below.

1.6           Filings; Agent for Service of
Process.

(a)           The Company shall take any and all
other actions reasonably necessary to perfect and maintain the status of the
Company as a limited liability company under the laws of the State of Nevada,
including the preparation and filing of such amendments to the Articles of
Organization and such other assumed name certificates, documents, instruments
and publications as may be required by law, including action to reflect:

(i)            a change in the Company name;

(ii)           a correction of false or erroneous
statements in the Articles of Organization, or the desire of the Members to
make a change in any statement therein in order that it shall accurately
represent the agreement among the Members; or

(iii)          a change in the time for dissolution
of the Company, as stated in the Articles of Organization and in this
Agreement.

(b)           The Members and the Management
Committee shall execute, and the Company shall file, original or amended articles
or certificates and shall take any and all 

 

2

 

other actions as may be reasonably necessary to
perfect and maintain the status of the Company as a limited liability company
or similar type of entity under the laws of any other jurisdictions in which
the Company engages in Business.

(c)           The registered agent for service of
process on the Company in the State of Nevada shall be as designated by the
Management Committee from time to time in accordance with the Act.

(d)           Upon the dissolution and completion
of the winding up and liquidation of the Company in accordance with ARTICLE
XIII below, the Management Committee shall promptly execute, and the Company
shall file, articles of dissolution or a certificate of cancellation in
accordance with the Act and the laws of any other jurisdictions in which the Management
Committee deems such filing necessary or advisable.

1.7           Title to Property.  All Property owned by the Company shall be
owned by the Company as an entity, and no Member shall have any ownership
interest in such Property in such Member’s individual name, and each Member’s
interest in the Company shall be personal property for all purposes.  The Company shall hold title to all of its
Property in the name of the Company and not in the name of any Member.

1.8           Payments of Individual Obligations.  The Company’s credit and assets shall be used
solely for the benefit of the Company, and no asset of the Company shall be
Transferred or encumbered for, or in payment of, any individual obligation of
any Member.

1.9           Independent Activities;
Transactions with Affiliates.

(a)           Each Manager shall be required to
devote such time to the affairs of the Company as may be necessary to manage
and operate the Company.  Without the
prior unanimous approval of the Management Committee, no Manager may serve as a
manager, director, officer or employee of a casino holding company or casino
operating company, other than (i) the Company, (ii) one of the Company’s
subsidiaries, (iii) an Upper Tier Equityholder of the Company, (iv) a Person
formed to pursue a gaming opportunity not accepted by the Company pursuant to
Section 7.1 below or the gaming opportunity in Mexico that is subject to the
Mexican Gaming Opportunities Term Sheet, (v) as to Wortman, Renata’s Casino
located at 4451 E. Sunset Road, Henderson, Nevada 89014 (and no other casino or
location), and (vi) as to Wortman and Paulos, Millennium Management Group, LLC,
a Nevada limited liability company, solely with respect to the Greektown Casino
located at 555 East Lafayette Boulevard, Detroit, Michigan 48226 (and no other
casino or location).

(b)           Neither this Agreement nor any
activity undertaken pursuant hereto shall prevent any Member or any of its Affiliates
from engaging in whatever activities such Member or Affiliate chooses, so long
as the same is not contrary to ARTICLE VII below or any other agreement with
the Company to which such Member or Affiliate may be bound.

(c)           To the extent permitted by applicable
law and subject to the provisions of this Agreement, the Management Committee
is hereby authorized to cause the 

 

3

 

Company to purchase Property from, sell Property to,
or otherwise deal with, any Member or Manager, acting on such Member’s or Managers’
own behalf, or any Affiliate of any Member or Manager; provided, that,
any such purchase, sale or other transaction shall be made on terms and
conditions that are no less favorable to the Company than if such purchase,
sale or other transaction had been made with an independent third party.

1.10         Definitions.  As used in this Agreement, capitalized terms
shall have the meanings ascribed to them herein or in Appendix B.

1.11         Interpretation.  Unless the context clearly indicates
otherwise, (a) each definition herein includes the singular and the plural, (b)
each reference herein to any gender includes the masculine, feminine and neuter
where appropriate, (c) the words “include” and “including” and variations
thereof shall not be deemed terms of limitation, but rather shall be deemed to
be followed by the words “without limitation,” (d) the words “hereof,” “herein,”
“hereto,” “hereby,” “hereunder” and derivative or similar words refer to this
Agreement as an entirety and not solely to any particular provision of this
Agreement, (e) each reference in this Agreement to a particular Article, Section,
Appendix or Exhibit means an Article or Section of, or an Appendix or Exhibit
to, this Agreement, unless another agreement is specified, (f) all accounting terms not specifically defined herein
shall be construed in accordance with GAAP, and (g) all references to “$”
or “Dollars” shall mean United States Dollars.

ARTICLE II

CAPITAL CONTRIBUTIONS

2.1           Classes of Units.  The Company is authorized to issue two
classes of Units, designated “Preferred Units” and “Common Units.”  The total number of Preferred Units that the
Company is authorized to issue is 220,000. 
The total number of Common Units that the Company is authorized to issue
is [      ]. 
The number of authorized Preferred Units and Common Units may be
increased as determined from time to time by the Management Committee pursuant
to Section 5.6(h) below.

2.2           Capital Contributions.  Each Member’s Restated Capital Accounts,
Preferred Units, Common Units, Preferred Percentage Interest and Percentage
Interest in the Company, in each case as of the Effective Date, are set forth
opposite such Member’s name under “Restated Capital Accounts,” “Preferred
Units,” “Common Units,” “Preferred Percentage Interest” and “Percentage
Interest,” respectively, on Appendix A.

2.3           Additional
Capital Contributions.

(a)           The Preferred Members may make Additional
Capital Contributions other than as set forth in Section 2.3(b) below only with
the approval of the Management Committee as set forth in Section 5.6(c) below.  Upon such approval, the Preferred Members
shall be obligated to make Additional Capital Contributions in accordance with
such approval.  If such Additional
Capital Contributions are made by the Preferred Members other than pro rata to their respective Preferred Percentage Interests,
the Company shall issue to each 

 

4

 

Preferred Member making an Additional Capital
Contribution additional Preferred Units as provided in Section 2.3(c) below.

(b)           If any Preferred Member determines in
good faith after full and complete consultation with the Managers and senior
management of the Company that the Company requires Additional Capital
Contributions to avoid or cure a Liquidity Crisis with respect to the Company,
such Preferred Member shall have the right (but not the obligation) to request in
writing that the Management Committee make a capital call; provided, that,
the requesting Preferred Member is willing and able to fund the entire capital
call, if necessary, and reasonably demonstrates evidence of committed funds
available for this purpose.  Such written
request shall include a reasonably detailed description of the nature and cause
(if known) of the Liquidity Crisis and the aggregate minimum amount (including
the calculation thereof) required to be raised by such capital call to address
such Liquidity Crisis.  Within five
Business Days following receipt of such written request, the Management
Committee shall cause the Company to make a capital call to each Preferred Member
by written notice that sets forth the aggregate amount of such capital call
(which shall equal the aggregate amount requested by the requesting Preferred Member)
and each Preferred Member’s pro rata (based
on Preferred Percentage Interest) share of such capital call.  Within ten Business Days of such capital
call, each Preferred Member shall, in its sole and absolute discretion, (i) elect
by written notice not to make an Additional Capital Contribution in response to
such capital call (which option shall not be available to the Preferred Member
requesting such capital call) or (ii) make up to its pro rata (based
on Preferred Percentage Interest) share of such capital call by wire transfer
of immediately available U.S. funds.  The
Company shall promptly notify the Preferred Members in writing of any shortfall
in the capital call and provide each Preferred Member that made a pro rata (based on Preferred Percentage Interest) Additional
Capital Contribution with five Business Days to elect in writing, in its sole
and absolute discretion, to make a further Additional Capital Contribution
equal to some or all of such shortfall (if such further Additional Capital
Contributions exceed such shortfall, the Company shall make reductions on a pro rata basis).  The
Company shall promptly notify each Preferred Member in writing of the aggregate
Additional Capital Contributions elected by each Preferred Member and, if any further
shortfall remains, the further Additional Capital Contribution required to be
made by the Preferred Member requesting the capital call equal to such further
shortfall.  The Preferred Members shall
make the Additional Capital Contributions to the Company set forth in such
notice within five Business Days of receipt of such notice by wire transfer of
immediately available U.S. funds.  The
Company shall use all funds raised by such capital call to resolve the Liquidity
Crisis prompting such capital call.  If in
response to such capital call, Additional Capital Contributions are made by the
Preferred Members other than pro rata to
their respective Preferred Percentage Interests, the Company shall issue to
each Preferred Member making an Additional Capital Contribution additional Preferred
Units as provided in Section 2.3(c) below.

(c)           If Additional Capital Contributions
are made by the Preferred Members pursuant to Section 2.3(a) or 2.3(b) above other
than pro rata to their respective Preferred
Percentage Interests, the Company shall issue to each Preferred Member making an
Additional Capital Contribution additional Preferred Units equal to the amount
of such Additional Capital Contribution made by such Preferred Member, divided
by the Net Equity per 

 

5

 

Preferred Unit (calculated prior to the making of such
Additional Capital Contributions by the Preferred Members and with the
Management Committee selecting the First Appraiser and Second Appraiser), and
shall adjust the Preferred Percentage Interest and Percentage Interest of each
Preferred Member accordingly.  The Gross
Asset Value of the Company’s assets immediately prior to the making of such Additional
Capital Contributions shall be adjusted to equal the Gross Appraised Value used
to determine the Net Equity per Preferred Unit.

(d)           If any Preferred Member commits to
make an Additional Capital Contribution pursuant to Section 2.3(a) or 2.3(b)
above and fails to do so, in addition to any other remedies available to the
other Preferred Members under this Agreement, the other Preferred Members shall
be entitled to make further Additional Capital Contributions as determined by
the Management Committee (excluding the Managers designated by the failing
Preferred Member) in an aggregate amount equal to the amount of such Additional
Capital Contribution such failing Preferred Member has failed to make.

2.4           Equity Participation Plan.  The Company shall from time to time make
grants of Common Units to the Equity Participation LLC as approved by the Management
Committee and pursuant to the terms and conditions of the Equity Participation
Plan.

ARTICLE III

ALLOCATIONS

3.1           Profits.  After giving effect to the special
allocations set forth in Sections 3.3 and 3.4 below, Profits for any
Allocation Year shall be allocated to the Members in proportion to their
Percentage Interests.

3.2           Losses.  After giving effect to the special
allocations set forth in Sections 3.3 and 3.4 below and subject to Section
3.5 below, Losses for any Allocation Year shall be allocated to the Members in proportion
to their Percentage Interests.

3.3           Special Allocations.  The following special allocations shall be
made in the following order:

(a)           Minimum Gain Chargeback.  Except as otherwise provided in Regulations Section
1.704-2(f), notwithstanding any other provision of this ARTICLE III, if there
is a net decrease in Company Minimum Gain during any Allocation Year, each
Member shall be specially allocated items of Company income and gain for such
Allocation Year (and, if necessary, subsequent Allocation Years) in an amount
equal to such Member’s share of the net decrease in Company Minimum Gain,
determined in accordance with Regulations Section 1.704-2(g).  Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto.  The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). 
This Section 3.3(a) is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.

 

6

 

(b)           Member Minimum Gain Chargeback.  Except as otherwise provided in Regulations
Section 1.704-2(i)(4), notwithstanding any other provision of this ARTICLE III,
if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable
to a Member Nonrecourse Debt during any Allocation Year, each Member who has a
share of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5),
shall be specially allocated items of Company income and gain for such
Allocation Year (and, if necessary, subsequent Allocation Years) in an amount
equal to such Member’s share of the net decrease in Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4).  Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto.  The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). 
This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.

(c)           Qualified Income Offset.  In the event any Member unexpectedly receives
any adjustments, allocations or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, the Adjusted Capital Account Deficit of
the Member as quickly as possible; provided, that, an allocation
pursuant to this Section 3.3(c) shall be made only if and to the extent that
the Member would have an Adjusted Capital Account Deficit after all other
allocations provided for in this ARTICLE III have been tentatively made as if
this Section 3.3(c) were not in this Agreement.

(d)           Gross Income Allocation.  In the event any Member has a deficit Capital
Account at the end of any Allocation Year which is in excess of the sum of (i)
the amount such Member is obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible; provided, that, an allocation
pursuant to this Section 3.3(d) shall be made only if and to the extent that
such Member would have a deficit Capital Account in excess of such sum after
all other allocations provided for in this ARTICLE III have been made as if
Section 3.3(c) above and this Section 3.3(d) were not in this Agreement.

(e)           Nonrecourse Deductions.  Nonrecourse Deductions for any Allocation
Year shall be specially allocated to the Members in proportion to their
respective Percentage Interests.

(f)            Member Nonrecourse Deductions.  Any Member Nonrecourse Deductions for any
Allocation Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).

 

7

 

(g)           Section 754 Adjustments.  To the extent an adjustment to the adjusted
tax basis of any Company asset, pursuant to Code Section 734(b) or 743(b)
is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken
into account in determining Capital Accounts as the result of a distribution to
a Member in complete liquidation of such Member’s interest in the Company, the
amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was
made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(h)           Priority Return Allocations.  All or a portion of the
remaining items of Company income or gain, if any, shall be specially allocated
to the each holder of the Preferred Units in proportion to and to the extent of
the excess, if any, of (i) the cumulative Priority Return distributions such
holder has received pursuant to Section 4.1(a)(i) below from the Effective Date
to a date 30 days after the end of such Allocation Year, over (ii) the
cumulative items of income and gain allocated to such holder pursuant to this
Section 3.3(h) for all prior Allocation Years.

(i)            Allocations Relating to Taxable
Issuance of Company Units.  Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of Units by the Company to a Member (the “Issuance Items”)
shall be allocated among the Members so that, to the extent possible, the net
amount of such Issuance Items, together with all other allocations under this
Agreement to each Member shall be equal to the net amount that would have been
allocated to each such Member if the Issuance Items had not been realized.

3.4           Curative Allocations.  The allocations set forth in Sections 3.3(a),
3.3(b), 3.3(c), 3.3(d), 3.3(e), 3.3(f) and 3.3(g) above and Section 3.5 below (the
“Regulatory Allocations”) are intended to comply with certain
requirements of the Regulations.  It is
the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss or deduction
pursuant to this Section 3.4. 
Therefore, notwithstanding any other provision of this ARTICLE III (other
than the Regulatory Allocations), the Management Committee shall make such offsetting
special allocations of Company income, gain, loss or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Member’s Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of this Agreement and all Company items were
allocated pursuant to Sections 3.1, 3.2 and 3.3(h) above.

3.5           Loss Limitation.  Losses allocated pursuant to Section 3.2 above
shall not exceed the maximum amount of Losses that can be allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end of
any Allocation Year.  In the event some
but not all of the Members would have Adjusted Capital Account Deficits as a
consequence of an allocation of Losses pursuant to Section 3.2 above, the
limitation set forth in this Section 3.5 

 

8

 

shall be applied on a Member by Member basis and
Losses not allocable to any Member as a result of such limitation shall be
allocated to the other Members in accordance with the positive balances in such
Member’s Capital Accounts so as to allocate the maximum permissible Losses to
each Member under Regulations Section 1.704-1(b)(2)(ii)(d).  Any reallocation of Loses pursuant to this
Section 3.5 shall be subject to chargeback pursuant to the curative allocation
provision of Section 3.4 above.

3.6           Other Allocation Rules.

(a)           For purposes of determining the
Profits, Losses or any other items allocable to any period, Profits, Losses and
any such other items shall be determined on a daily, monthly, or other basis,
as determined by the Management Committee using any permissible method under
Code Section 706 and the Regulations thereunder.

(b)           The Members are aware of the income
tax consequences of the allocations made by this ARTICLE III and hereby agree
to be bound by the provisions of this ARTICLE III in reporting their shares of
Company income and loss for income tax purposes.

(c)           Solely for purposes of determining a
Member’s proportionate share of the “excess nonrecourse liabilities” of the
Company within the meaning of Regulations Section 1.752-3(a)(3), the Members’
interests in Company profits are in proportion to their Percentage Interests.

3.7           Tax Allocations: Code
Section 704(c).  Except as
otherwise provided for in this Agreement, Company items of income, gain, loss,
deduction, or credit for income tax purposes shall be allocated in the same
manner as the corresponding book items are allocated under this Agreement.  If there is no corresponding book item and
this Agreement does not otherwise specify the allocation of an item for income
tax purposes, the Management Committee shall allocate the items in the manner
it deems appropriate taking into account the economic interests of the Members.

In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss and
deduction with respect to any Property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted basis of such Property to
the Company for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with the definition of Gross Asset Value) using such
allocation method pursuant to the Regulations under Code Section 704(c) as is
selected by the Management Committee.

In the event the Gross
Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of
the definition of Gross Asset Value, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Regulations thereunder.

 

9

 

Any elections or other
decisions relating to such allocations shall be made by the Management
Committee in any manner that reasonably reflects the purpose and intention of
this Agreement.  Allocations pursuant to
this Section 3.7 are solely for purposes of federal, state and local taxes,
and shall not affect, or in any way be taken into account in computing, any
Member’s Capital Account or share of Profits, Losses, other items or
distributions pursuant to any provision of this Agreement.

ARTICLE IV

DISTRIBUTIONS

4.1           Distributions.

(a)           Except as otherwise provided in Sections
4.3 and 13.2 below and as otherwise approved by the Management Committee, the
Company shall make no distributions of cash or Property to the Members.  Any distributions approved by the Management
Committee shall (x) only be to the extent of Net Cash Flow, (y) be subject to
compliance with applicable laws (including applicable Gaming Laws) and (z) at
such times as is reasonably determined by the Management Committee, be
distributed by the Company in the following order and priority:

(i)            First, to the Preferred Members with
respect to their Preferred Units pro rata in
proportion to and to the extent of the Priority Return on such Preferred Units to
the date of such distribution.

(ii)           Second, to the Members with respect
to their Units pro rata in proportion to their
Unreturned Capital until the Unreturned Capital of each such Member has been
reduced to zero.

(iii)          Third, to the Members pro rata in proportion to the amount distributable to each
such Member pursuant to this Section 4.1(a)(iii), until there has been
distributed to each such Member an amount equal to such Member’s Capital
Account immediately after the most recent Book-Up Event, after reduction of
such Capital Account by the cumulative amount of any distributions to such
Member under Sections 4.1(a)(i) and 4.1(a)(ii) above and this Section 4.1(a)(iii)
since the date of such Book-Up Event.

(iv)          The balance, if any, to the Members pro rata in proportion to their Percentage Interests.

(b)           A Member may not receive a
distribution from the Company in violation of the terms of the Debt Documents
of the Company or in violation of law.

4.2           Amounts Withheld.  All amounts withheld pursuant to the Code or
any provision of any state, local or foreign tax law with respect to any
payment, distribution or allocation to the Company or the Members shall be
treated as amounts paid or distributed, as the case may be, to the Members with
respect to which such amount was withheld pursuant to this Section 4.2 for all
purposes under this Agreement.  The
Company is authorized to withhold from 

 

10

 

payments and distributions, or with respect to
allocations to the Members, and to pay over to any federal, state, local or
foreign government, any amounts required to be so withheld pursuant to the Code
or any provisions of any other federal, state, local or foreign law, and shall
allocate any such amounts to the Members with respect to which such amount was
withheld.

4.3           Tax
Distributions.

(a)           Subject to compliance with Section 4.1(b)
above, on the first day of the month in which the required estimated tax
payments for federal income taxes are due for individual taxpayers under Code
Section 6654, the Management Committee shall cause the Company to distribute to
the Members with respect to each Fiscal Quarter of the Company an amount of
cash (a “Tax Distribution”) which in the good faith judgment of the
Management Committee equals (i) the amount of taxable income allocable to the
Members in respect of such Fiscal Quarter taking into account any Code Section
704(c) items, multiplied by (ii) the combined maximum federal, state and local
income tax rate to be applied with respect to such taxable income (calculated
by using the highest maximum combined marginal federal, state and local income
tax rates to which any Member may be subject and taking into account the
deductibility of state income tax for federal income tax purposes), with such
Tax Distribution to be made to the Members pro rata in the
proportion to Percentage Interests.  If
the Management Committee determines that such amount is less than the amount
required for a Member to satisfy the safe harbor for such Member’s estimated
tax payments under Code Section 6654 or Code Section 6655 (and analogous state
or local provisions) assuming that the Member’s only income were from the
Company, the Company shall distribute cash to the Members pro rata
in proportion until an amount has been distributed to enable such Member to
satisfy the safe harbor.

(b)           For each such distribution date prior
to the end of such Fiscal Year, the Management Committee shall estimate the Tax
Distribution by annualizing the estimated taxable income (excluding
extraordinary items) allocable to the Members as of the applicable distribution
date and taking extraordinary items into account separately.

(c)           If the method of making estimated tax
payments changes for federal income tax purposes, then the Management Committee
may revise the method of distributing Tax Distributions described above to
reflect the requirements of such change. 
To the extent that there is insufficient Net Cash Flow to fully make a
Tax Distribution, such deficiency shall be carried forward and distributed on
the next day on which amounts are distributed under this Section 4.3, until
such deficiency has been distributed in full. 
Any amounts distributed to a Member pursuant to this Section 4.3 shall
be applied to reduce (without duplication) the next distributions to such
Member that would otherwise be distributed to such Member under Section 4.1(a)
above.

 

11

ARTICLE V

MANAGEMENT COMMITTEE

5.1           Managers;
Management Committee.

(a)           The Company shall have a Management
Committee, the Managers of which shall be designated by the Preferred Members as
provided in this Section 5.1.

(b)           Subject to Section 5.1(c) below, the
number of Managers on the Management Committee shall be four, comprised of two
Managers designated from time to time by Millennium Gaming (the “Millennium
Managers”) in accordance with Section 5.1(d) below (for so long as
Millennium Gaming is a Preferred Member of the Company) and two Managers
designated from time to time by AcquisitionCo (the “AcquisitionCo Managers”)
in accordance with Section 5.1(d) below (for so long as AcquisitionCo is a
Preferred Member of the Company); provided, that, subject to
Section 5.2 below, Millennium Gaming shall designate each of Paulos and Wortman
as a Manager for so long as he holds a direct or indirect beneficial interest
in Millennium Gaming.  The Managers of
the Company as of the Effective Date shall be as set forth on Appendix C;
provided, that, prior to the Effective Date, AcquisitionCo may
change its initial Manager designees in accordance with Section 5.1(d) below,
so long as such initial Manager designees are selected from a pool of
candidates consisting of Stephen Kaplan, Ronald Beck, Christopher Brothers and
Skardon Baker.  The Company shall
maintain key man insurance with respect to Paulos and Wortman in an amount between
$10,000,000 and $20,000,000, payable upon the death of both Paulos and Wortman,
on terms and conditions as approved by the Management Committee.

(c)           If the Management Committee approves
the incurrence of Debt by the Company and such Debt requires that the
Management Committee have one or more independent Managers, the Management
Committee shall expand to include such independent Manager or Managers, who shall
be unanimously designated by the Preferred Members in accordance with Section 5.1(d)
below.

(d)           A Preferred Member or Preferred Members,
as the case may be, shall designate a Manager by delivering to the Company a
written statement of designation that sets forth the Manager’s name, business
address, telephone number, facsimile number, electronic mail address and, if
applicable, the Manager he or she is replacing; provided, that, if
such Manager is an independent Manager, such independent Manager has received
the prior unanimous approval of each Preferred Member, such approval not to be
unreasonably withheld.  Millennium Gaming
hereby designates Paulos and Wortman as its Managers until their replacements
or successors are designated.  AcquisitionCo
hereby designates the Persons identified on Appendix C under “AcquisitionCo
Managers” as its Managers until their replacements or successors are
designated.  A Manager shall remain in
office until the earlier of (i) removal by the Preferred Member or Preferred
Members, as the case may be, designating such Manager (provided, that,
subject to Section 5.2 below, Millennium Gaming shall not remove either Paulos
or Wortman as a Manager for so long as he holds a direct or indirect beneficial
interest in Millennium Gaming), (ii) death or incapacity of such Manager, or
(iii) the 

 

12

 

withdrawal or other cessation of the Preferred Member
or Preferred Members, as the case may be, designating such Manager as a Preferred
Member or Preferred Members, as the case may be, of the Company.

(e)           A Manager designated by a Preferred
Member or Preferred Members, as the case may be, may be removed at any time,
with or without cause, by written notice delivered to the Company by the Preferred
Member or Preferred Members, as the case may be, that designated such Manager, demanding
such removal and designating the Person who shall fill the position of the
removed Manager in accordance with Section 5.1(d) above; provided, that,
subject to Section 5.2 below, Millennium Gaming shall not remove either Paulos
or Wortman as a Manager for so long as he holds a direct or indirect beneficial
interest in Millennium Gaming.

(f)            Each Manager shall have one
vote.  A majority of the total number of Managers
of the Management Committee (or, in the case of AcquisitionCo Manager Matters,
all of the AcquisitionCo Managers) present in person or by proxy shall
constitute a quorum for the transaction of business at any meeting of the Management
Committee.  Other than with respect to those
matters set forth in Section 5.6 below, the Management Committee shall act by
the affirmative vote of a majority of the total number of Managers of the Management
Committee who do not have a Material Conflict of Interest (or, in the case of
AcquisitionCo Manager Matters, the affirmative vote of all AcquisitionCo
Managers) in voting on the particular matter before the Management Committee.  With respect to those matters set forth in
Section 5.6 below, the Management Committee shall act by the affirmative vote
of 80% of the Managers of the Management Committee who do not have a Material
Conflict of Interest in voting on the particular matter before the Management
Committee.  Each Manager who has a Material
Conflict of Interest in voting on any particular matter before the Management
Committee shall recuse himself or herself prior to the vote of the Management
Committee on such matter.

(g)           Each Manager may authorize another Manager
to act for him or her by proxy on all matters in which a Manager is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting.  Every proxy
must be signed by the Manager or his or her attorney-in-fact.  No proxy shall be valid after the expiration
of eleven months from the date thereof unless otherwise provided in the
proxy.  Every proxy, other than an
irrevocable proxy, shall be revocable at the pleasure of the Manager executing
it by a writing delivered to the Company and executed by such Manager stating
that the proxy is revoked, by a subsequent proxy executed by such Manager, or
as to any meeting of the Management Committee by attendance at such meeting and
voting in person by such Manager.

(h)           Each Manager shall perform his or her
duties as a Manager 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.  A Person who so performs his or her duties
shall not have any liability by reason of being or having been a Manager of the
Company.

 

13

 

(i)            The Management Committee shall have
the power to delegate authority to such committees of Managers, officers,
employees, agents and representatives of the Company as it may from time to
time deem appropriate.  Any delegation of
authority to take any action must be approved in the same manner as would be
required for the Management Committee to approve such action directly.  From the Effective Date until the termination
of the Management Agreement, the Management Committee hereby delegates to MMG
II such power and authority with respect to the day-to-day management and operation
of the business and affairs of the Company as is set forth in the Management
Agreement, subject to the terms and conditions of the Management Agreement, Sections
5.5 and 5.6 below and any other provision of this Agreement requiring approval
of the Company, the Management Committee, the AcquisitionCo Managers or the
Members.

(j)            A Manager shall not be liable under
a judgment, decree or order of court, or in any other manner, for any debt,
obligation or liability of the Company.

5.2           Licensing.

(a)           If a Manager is required to be
licensed or found suitable by a Gaming Authority in order to actively engage in
the management of the Company, such Manager shall be so licensed or found
suitable prior to performing his or her duties for the Company and, unless
otherwise agreed by the Management Committee, shall pay all costs associated
with becoming licensed or found suitable.

(b)           A Manager shall be automatically
removed without action of the Management Committee or the Members upon the
occurrence of a Gaming Adverse Event with respect to such Manager, unless the
Management Committee (excluding such Manager) otherwise determines.

(c)           A Manager shall be removed upon the unanimous
affirmative determination of the Management Committee (excluding such Manager)
that such Manager jeopardizes the ability of the Company to obtain or maintain
any necessary or advisable license or qualification awarded by, or approval of,
any Gaming Authority.

5.3           Meetings
of the Management Committee.

(a)           The Management Committee shall hold
regular meetings no less frequently than once every Fiscal Quarter, and shall
establish meeting times, dates and places, and requisite notice requirements (not
shorter than those provided in Section 5.3(b) below), and adopt rules or
procedures consistent with the terms of this Agreement.  At such meetings, the Management Committee
shall transact such business as may properly be brought before the meeting,
whether or not notice of such meeting referenced the action taken at such
meeting.

(b)           Special meetings of the Management
Committee may be called by any Manager. 
Notice of each such special meeting shall be given to each Manager on
the Management Committee by nationally recognized overnight courier, telephone,
facsimile or electronic mail (in each case, notice shall be given not less than
three Business Days nor more 

 

14

 

than ten Business Days prior to the date of such
special meeting, unless a longer notice period is established by the Management
Committee).  Each such notice shall state
(i) the time, date, place (which shall be at the principal office of the
Company, unless otherwise unanimously agreed to by all Managers), or other
means of conducting such special meeting, and (ii) the purpose of the special meeting
to be so held.  No actions other than
those specified in the notice may be considered at any special meeting unless
unanimously approved by all Managers. 
Any Manager may waive notice of any special meeting in writing before,
at or after such meeting.  The attendance
of a Manager at a special meeting shall constitute presence in person at such special
meeting and a waiver of notice of such special meeting, except when a Manager
attends a special meeting for the express purpose of objecting to the
transaction of any business because such special meeting was not properly
called.

(c)           Any action required to be taken at a
meeting of the Management Committee, or any action that may be taken at a
meeting of the Management Committee, may be taken at a meeting held by means of
telephone conference, video conference, or other communications equipment by
means of which all Persons participating in the meeting can hear and respond to
each other.  Participation in such a
meeting shall constitute presence in person at such meeting, except when a Manager
participates in such a meeting for the express purpose of objecting to the
transaction of any business because such meeting was not properly called.

(d)           Notwithstanding this Section 5.3, the
Management Committee may take without a meeting any action that may be taken by
the Management Committee under this Agreement if such action is approved by written
consent by the requisite number of Managers and prompt notice thereof is
delivered to all Managers.  Such written
consent shall have the same force and effect, as of the date stated therein, as
a vote of the Management Committee and may be stated as such in any document or
instrument filed with the Secretary of State of the State of Nevada, or in any
certificate or other document delivered to any Person.  The original, signed written consent shall be
placed in the minute books of the Company.

5.4           Management Committee Powers.  Except as otherwise provided in this
Agreement and except, from the Effective Date until the termination of the
Management Agreement, for those powers expressly delegated to MMG II as is set
forth in the Management Agreement (subject to the terms and conditions of the
Management Agreement, Sections 5.5 and 5.6 below and any other provision of
this Agreement requiring approval of the Company, the Management Committee, the
AcquisitionCo Managers or the Members), all powers to control and manage the
Business and affairs of the Company shall be exclusively vested in the Management
Committee, and the Management Committee may exercise all powers of the Company
and do all such lawful acts as are not by the Act, the Articles of Organization
or this Agreement directed or required to be exercised or done by the Members
and, in so doing, shall have the right and authority to take all actions that
the Management Committee deems necessary, useful or appropriate for the
management and conduct of the Business, including exercising the following
specific rights and powers:

(a)           conduct its Business, carry on its
operations, and have and exercise the powers granted by the Act in any state,
territory, district or possession of the United States, or 

 

15

 

in any foreign country, that may be necessary or
convenient to effect any or all of the purposes for which it is organized;

(b)           acquire by purchase, lease, or
otherwise any real or personal property that may be necessary, convenient, or
incidental to the accomplishment of the purposes of the Company;

(c)           operate, maintain, finance, improve,
construct, own, grant options with respect to, sell, convey, assign, mortgage,
and lease any real estate and any personal property necessary, convenient, or
incidental to the accomplishment of the purposes of the Company;

(d)           execute any and all agreements,
contracts, documents, certifications, and instruments necessary or convenient
in connection with the management, maintenance, and operation of the Business,
or in connection with managing the affairs of the Company, including executing amendments
to this Agreement and the Articles of Organization in accordance with the terms
of this Agreement, both as Managers and, if required, as attorney-in-fact for
the Members, pursuant to any power of attorney granted by the Members to the Managers;

(e)           borrow money and issue evidences of
indebtedness necessary, convenient, or incidental to the accomplishment of the
purposes of the Company, and secure the same by mortgage, pledge, or other lien
on any Company assets;

(f)            execute, in furtherance of any or
all of the purposes of the Company, any deed, lease, mortgage, deed of trust,
mortgage note, promissory note, bill of sale, contract, or other instrument
purporting to convey or encumber any or all of the Company assets;

(g)           prepay in whole or in part,
refinance, recast, increase, modify, or extend any liabilities affecting the
assets of the Company, and in connection therewith execute any extensions or
renewals of encumbrances on any or all of such assets;

(h)           care for and distribute funds to the
Members by way of cash income, return of capital, or otherwise, all in
accordance with the provisions of this Agreement, and perform all matters in
furtherance of the objectives of the Company or this Agreement;

(i)            contract on behalf of the Company for
the employment and services or employees and/or independent contractors, such
as lawyers and accountants, and delegate to such Persons the duty to manage or
supervise any of the assets or operations of the Company;

(j)            engage in any kind of activity and
perform and carry out contracts of any kind (including contracts of insurance
covering risks to Company assets and Manager liability) necessary or incidental
to, or in connection with, the accomplishment of the purposes of the Company,
as may be lawfully carried on or performed by a limited liability company under
the laws of each state in which the Company is then formed or qualified;

 

16

 

(k)           take, or refrain from taking, all
actions, not expressly proscribed or limited by this Agreement, as may be
necessary or appropriate to accomplish the purposes of the Company;

(l)            institute, prosecute, defend,
settle, compromise, and dismiss lawsuits or other judicial or administrative
proceedings brought on or in behalf of, or against, the Company, the Members or
any Manager, in connection with activities arising out of, connected with, or
incidental to this Agreement, and to engage counsel or others in connection
therewith;

(m)          purchase, take, receive, subscribe for
or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend,
pledge, or otherwise dispose of, and otherwise use and deal in and with, shares
or other interests in or obligations of domestic or foreign corporations,
associations, general or limited partnerships, other limited liability
companies, or individuals, or direct or indirect obligations of the United
States or of any government, state, territory, government district or
municipality or of any instrumentality of any of them; and

(n)           indemnify a Member or Manager or
former Member or Manager, and to make any other indemnification that is
authorized by this Agreement in accordance with the Act.

5.5           Actions Requiring Majority Approval
of the Management Committee or the Unanimous Approval of the AcquisitionCo
Managers.  Without limiting the other
terms and conditions of this Agreement, the Company shall not take any of the
following actions (or series of related actions), including the entering into
of any contract, agreement, arrangement or transaction (or series of related
contracts, agreements, arrangements or transactions) with respect thereto, or
any amendment, modification, enforcement, waiver, extension or renewal thereof,
without the affirmative vote of a majority of the total number of Managers of the
Management Committee who do not have a Material Conflict of Interest (or, in
the case of AcquisitionCo Manager Matters, the affirmative vote of all
AcquisitionCo Managers) in voting on the particular matter before the
Management Committee:

(a)           any approval, adoption, amendment, modification
or repeal of the Company’s annual budget (which, upon approval and adoption
with respect to any given Fiscal Year, shall supersede and replace the
then-current long-term budget for the Company with respect to such Fiscal Year);

(b)           any approval, adoption, amendment,
modification or repeal of a long-term budget for the Company covering a
three-year period (which shall be the default budget with respect to any given
Fiscal Year in the absence of a then-current annual budget for such Fiscal Year);

(c)           any approval, adoption, amendment,
modification or repeal of any other budget (including budgets of the Company’s
subsidiaries);

(d)           any approval, adoption, amendment,
modification or repeal of a management agreement for the management of any
Property of the Company; provided, that, the 

 

17

 

Management Agreement shall be deemed approved by the Management
Committee as of the Effective Date;

(e)           except as otherwise provided in the
Management Agreement (subject to the terms and conditions of the Management
Agreement), any incurrence of any expenditures by the Company that has not been
previously approved (whether by budget or otherwise) by the Management
Committee or, in the case of AcquisitionCo Manager Matters, the AcquisitionCo
Managers;

(f)            any incurrence of any gaming
opportunity development expenses by the Company (either directly or through
reimbursement) that has not been previously approved (whether by budget or
otherwise) by the Management Committee or, in the case of AcquisitionCo Manager
Matters, the AcquisitionCo Managers (or otherwise provided for by Section 8.3
below);

(g)           except as otherwise provided in the
Management Agreement (subject to the terms and conditions of the Management
Agreement), any incurrence of any material Debt, Encumbrance or other liability
by the Company, in each case that has not been previously approved (whether by
budget or otherwise) by the Management Committee or, in the case of
AcquisitionCo Manager Matters, the AcquisitionCo Managers;

(h)           any distributions by the Company,
other than tax distributions in accordance with Section 4.3 above;

(i)            except as otherwise provided in this
Agreement or as otherwise affirmatively required by applicable Gaming Law, any
redemption or repurchase by the Company of Units, or securities convertible,
exercisable or exchangeable into Units, in each case pro rata
in proportion to Percentage Interest;

(j)            any appointment of any Senior
Officer of the Company, and any setting or modifying of the compensation of any
Senior Officer of the Company;

(k)           in the event the Management Agreement
has been terminated, any removal of any Senior Officer of the Company;

(l)            any approval, adoption, amendment,
modification, repeal or termination of (A) any “employee benefit plan” (within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended), any severance plan or any equity incentive plan, in each
case for the benefit of any employee of the Company (including any Senior
Officer of the Company), or (B) any employment, bonus, incentive compensation,
or any other benefit agreement or plan, in each case for the benefit of any
Senior Officer of the Company;

(m)          any granting or issuance of any
equity, or securities convertible, exercisable or exchangeable into equity, in
the Company pursuant to an equity incentive plan (including the Equity
Participation Plan);

 

18

 

(n)           except as otherwise provided in the Management
Agreement (subject to the terms and conditions of the Management Agreement), any
institution, maintenance, settlement or compromise of any lawsuit, action,
claim or demand, or any arbitration or consent to arbitration of any dispute or
controversy;

(o)           any appointment or removal of an
independent auditor of the Company; and

(p)           any selection or modification of any
accounting method required under GAAP to be disclosed in the financial
statements of the Company.

5.6           Actions Requiring 80% Approval of
the Management Committee.  Without
limiting the other terms and conditions of this Agreement, the Company shall
not take any of the following actions (or series of related actions), including
the entering into of any contract, agreement, arrangement or transaction (or
series of related contracts, agreements, arrangements or transactions) with
respect thereto, or any amendment, modification, enforcement, waiver, extension
or renewal thereof, without the affirmative vote of 80% of the Managers of the
Management Committee who do not have a Material Conflict of Interest in voting
on the particular matter before the Management Committee:

(a)           any material change in the Business
or purpose of the Company;

(b)           any act or any activity that is
inconsistent with the purpose of the Company as set forth in Section 1.3 above;

(c)           any capital call, other than as set
forth in Section 2.3(b) above;

(d)           any material acquisition or
disposition of Company assets;

(e)           any approval of a gaming opportunity
as the subject of development as an Eligible Operation;

(f)            any material construction, expansion
or improvement projects involving Company assets;

(g)           except as otherwise provided in this
Agreement, any Transfer of Units by any Member or any Member Unit Transfer with
respect to a Member;

(h)           except as otherwise provided in this
Agreement, any increase in the number of Units the Company is authorized to
issue;

(i)            except as otherwise provided in this
Agreement, any sale, grant or other issuance by the Company of Units or
securities convertible, exercisable or exchangeable into Units;

 

19

 

(j)            any merger, consolidation,
recapitalization or other reorganization of the Company;

(k)           the Company’s participation in any
partnership, limited liability company, joint venture, alliance, or similar
agreement or arrangement;

(l)            any formation of any direct or
indirect subsidiary of the Company;

(m)          any conversion of the Company into
another form of entity;

(n)           except as otherwise provided in this Agreement,
admission of any Person as a Member;

(o)           except as otherwise provided in this
Agreement or as otherwise affirmatively required by applicable Gaming Law, any
redemption or repurchase by the Company of Units, or securities convertible,
exercisable or exchangeable into Units, in each case on a basis other than pro rata in proportion to Percentage Interest;

(p)           any public offering of Company
securities;

(q)           any relocation of the Company’s
principal place of business;

(r)            any assignment for the benefit of
creditors, any voluntary bankruptcy of the Company, or any transaction to
dissolve, wind up or liquidate the Company; and

(s)           except as otherwise provided in this
Agreement or the Management Agreement (subject to the terms and conditions of
the Management Agreement), any transaction between the Company and a Member (or
an Affiliate or Upper Tier Holder of a Member).

5.7           Duties
and Obligations of the Management Committee.

(a)           The Management Committee shall cause
the Company to conduct its Business and operations separate and apart from that
of any Member or Manager or any of its or his Affiliates, including (i)
segregating Company assets and not allowing funds or other assets of the
Company to be commingled with the funds or other assets of, held by, or registered
in the name of, any Member or Manager or any of its or his Affiliates, (ii)
maintaining books and financial records of the Company separate from the books
and financial records of any Member or Manager or any of its or his Affiliates,
and observing all Company procedures and formalities, including maintaining
minutes of Company meetings and acting on behalf of the Company only pursuant
to due authorization of the Members, (iii) causing the Company to pay its
liabilities from assets of the Company, and (iv) causing the Company to conduct
its dealings with third parties in its own name and as a separate and
independent entity.

 

20

 

(b)           The Management Committee shall take
all actions that may be necessary or appropriate (i) for the continuation of
the Company’s valid existence as a limited liability company under the laws of
the State of Nevada and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Members or to enable the
Company to conduct the Business in which it is engaged, and (ii) for the
accomplishment of the Company’s purposes, including the acquisition, development,
maintenance, preservation, operation, improvement and expansion of Property in accordance
with the provisions of this Agreement and applicable laws and regulations, and
the use thereof for the exclusive benefit of the Company.

5.8           Removal
of Certain Senior Officers.  The
following Senior Officers of the Company shall not be removed without ten
Business Days prior written notice to each Manager of the Company: chief
financial officer and head of mergers and acquisitions (or any officer
exercising comparable power or authority).

ARTICLE VI

MEMBERS

6.1           Rights
or Powers of Members.  The Members
shall not have any right or power to take part in the management or control of
the Company or its Business and affairs or to act for or bind the Company in
any way.  Notwithstanding the foregoing,
the Members shall have all the rights and powers specifically set forth in this
Agreement and, to the extent not inconsistent with this Agreement, in the Act.

6.2           Voting Rights of Members.  No Member has any voting right except with
respect to those matters specifically reserved for a Member vote that are set
forth in this Agreement and as required in the Act.

6.3           Meetings
of the Preferred Members.

(a)           Meetings of the Preferred Members may
be called by any Preferred Member.  The
call shall state the location of such meeting and the nature of the business to
be transacted.  Notice of any such
meeting shall be given to all Preferred Members by nationally recognized
overnight courier, telephone, facsimile or electronic mail (in each case,
notice shall be given not less than seven Business Days nor more than 30 Business
Days prior to the date of such meeting). 
Each such notice shall state (i) the time, date, place or other means of
conducting such meeting, and (ii) the purpose of such meeting to be so
held.  No actions other than those
specified in the notice may be considered at any such meeting unless
unanimously approved by all Preferred Members. 
Any Preferred Member may waive notice of any meeting in writing before,
at, or after such meeting.  The
attendance of a Preferred Member at a meeting shall constitute presence in
person at such meeting and a waiver of notice of such meeting, except when a Preferred
Member attends a meeting for the express purpose of objecting to the
transaction of any business because such meeting was not properly called.

 

21

 

(b)           Any action required to be taken at a
meeting of the Preferred Members, or any action that may be taken at a meeting
of the Preferred Members, may be taken at a meeting held by means of telephone
conference, video conference, or other communications equipment by means of
which all Persons participating in the meeting can hear and respond to each
other.  Participation in such a meeting
shall constitute presence in person at such meeting, except when a Preferred Member
participates in such a meeting for the express purpose of objecting to the
transaction of any business because such meeting was not properly called.

(c)           Notwithstanding this Section 6.3, the
Preferred Members may take without a meeting any action that may be taken by
the Preferred Members under this Agreement if such action is approved by
written consent by the requisite Preferred Members; provided, that,
written notice of such action be provided to each Preferred Member not
executing such written consent at least five Business Days prior to the
effective date of such action.  Such
written consent shall have the same force and effect, as of the date stated
therein, as a vote of the Preferred Members and may be stated as such in any
document or instrument filed with the Secretary of State of the State of Nevada,
or in any certificate or other document delivered to any Person.  The original, signed written consent shall be
placed in the minute books of the Company.

(d)           Unless otherwise specified in this
Agreement, a unanimous vote of the Preferred Members shall be required to constitute
the act of the Preferred Members.

(e)           For the purpose of determining the Preferred
Members entitled to vote on, or to vote at, any meeting of the Preferred Members
or any adjournment thereof, the Preferred Member requesting such meeting may
fix, in advance, a date as the record date for any such determination.  Such date shall not be less than ten Business
Days nor more than 30 Business Days prior to the date of the meeting.  The record date for determining Preferred Members
entitled to take action without a meeting pursuant to Section 6.3(c) above
shall be the date the first Preferred Member executes a written consent.  A photocopy, facsimile or similar
reproduction of a written consent signed by a Preferred Member shall be
regarded as signed by such Preferred Member for the purposes of this Section 6.3(e).

(f)            Each Preferred Member may authorize
any Person or Persons previously licensed or found suitable to hold or vote
Preferred Units to act for it by proxy on all matters in which a Preferred Member
is entitled to participate, including waiving notice of any meeting, or voting
or participating at a meeting.  Every
proxy must be signed by the Preferred Member or such Preferred Member’s
attorney-in-fact.  No proxy shall be
valid after the expiration of eleven months from the date thereof unless
otherwise provided in the proxy.  Every
proxy, other than an irrevocable proxy, shall be revocable at the pleasure of
the Preferred Member executing it by a writing delivered to the Company and
executed by such Preferred Member stating that the proxy is revoked, by a
subsequent proxy executed by such Preferred Member, or as to any meeting of the
Preferred Members or Members by attendance at such meeting and voting in person
by such Preferred Member.

 

22

 

6.4           Withdrawal.  Except as otherwise provided in ARTICLE IV
above and ARTICLE XIII below, no Member shall demand or receive a return on or
of such Member’s Capital Contributions or withdraw from the Company without the
consent of all Members.  Under
circumstances requiring a return of any Capital Contributions, no Member has
the right to receive Property other than cash, except as may be specifically
provided herein.

6.5           Member Compensation.  No Member shall be entitled to receive any
interest, salary, fee or draw with respect to its Capital Contributions or its
Capital Account or for services rendered to or on behalf of the Company, or
otherwise, in its capacity as a Member, except as otherwise provided in this
Agreement.

6.6           Members Liability.  No Member shall be liable under a judgment,
decree or order of a court, or in any other manner, for the Debt or any other
obligation or liability of the Company. 
A Member shall be liable only to make its Capital Contributions and
shall not be required to restore a deficit balance in its Capital Account or to
lend any funds to the Company or, after required Capital Contributions have
been made, to make any additional contributions, assessments or payments to the
Company.  No Manager shall have any
personal liability for the repayment of any Capital Contributions of any
Member.

6.7           Partition.  While the Company remains in effect or is
continued, each Member agrees and waives such Member’s rights to have any
Property of the Company partitioned, or to file a complaint or to institute any
suit, action or proceeding at law or in equity to have any Property of the
Company partitioned, and each Member, on behalf of such Member and such Member’s
successors and assigns, hereby waives any such right.

6.8           Transactions between a Member and
the Company.  Except as otherwise
provided by applicable law and subject to the other provisions of this
Agreement, any Member may, but shall not be obligated to, lend money to the
Company, act as surety for the Company and transact other business with the
Company and has the same rights and obligations when transacting business with
the Company as a Person or entity who is not a Member.  A Member, any Affiliate thereof or an
equityholder, director, manager, general partner, officer, employee, agent or
representative of a Member or any Affiliate thereof, may also be an employee or
be retained as an agent of the Company. 
The existence of these relationships and acting in such capacities will
not result in the Member being deemed to be participating in the control of the
Business or otherwise affect the limited liability of the Member.

6.9           Other Instruments.  Each Member hereby agrees to execute and
deliver to the Company within five Business Days after receipt of a written
request therefor, such other and further documents and instruments, statements
of interest and holdings, designations, powers of attorney and other
instruments and to take such other action as the Management Committee deems
reasonably necessary, useful or appropriate to comply with any laws, rules or
regulations as may be necessary to enable the Company to fulfill its
responsibilities under this Agreement.

 

23

ARTICLE VII

GAMING OPPORTUNITIES

7.1           General Gaming Opportunities.

(a)           Except as provided in Section 7.2
below, Paulos, Wortman and Millennium Gaming shall, and shall cause their
respective Affiliates to, each offer to the Company first all of their right,
title and interest to any gaming opportunity, whether acquired by them before,
on or after the Effective Date, by written notice to the Company and all
Preferred Members that describes the gaming opportunity in reasonable detail,
including the terms, conditions and current status thereof.  The Company may accept any such offer upon
approval by the Management Committee.  If
Paulos, Wortman and Millennium Gaming, as Managers and Members of the Company,
use all commercially reasonable efforts to cause the Company to accept such
offer (including voting in favor of such acceptance) and the Company
nevertheless does not accept such offer within 30 days of its receipt of such
offer, Paulos, Wortman and Millennium Gaming, and their respective Affiliates,
shall be free to pursue such gaming opportunity outside of the Company; provided,
that, such gaming opportunity is not within a five-mile radius from any
Company gaming property then in operation or Company gaming property or gaming
opportunity in active development. 
Paulos, Wortman and Millennium Gaming hereby agree and acknowledge that
in order to assure that the Members of the Company will realize the full
benefits of the Company, none of them shall, and they shall cause each of their
respective Affiliates not to, during the term of this Agreement, except as
provided in Section 1.9(a)(v) or (vi) above, directly or indirectly, alone or
as a partner, joint venturer, director, manager, officer, employee, consultant,
agent, independent contractor, equityholder or lender, pursue any gaming
opportunity outside of the Company, including any business that directly or
indirectly competes with the Company, without first completing the procedures
set forth in ARTICLE VII.

(b)           Except as provided in Section 7.2
below, AcquisitionCo shall, and shall cause any fund affiliated with Oaktree
Capital Management, LLC that an AcquisitionCo Manager is a portfolio manager of,
including OCM Principal Opportunities Fund III, L.P. and OCM Principal Opportunities
Fund IIIA, L.P. (collectively, the “AcquisitionCo Manager Funds”), to
offer to the Company first all of their right, title and interest to any gaming
opportunity, whether acquired by them before, on or after the Effective Date,
by written notice to the Company and all Preferred Members that describes the
gaming opportunity in reasonable detail, including the terms, conditions and
current status thereof.  The Company may
accept any such offer upon approval by the Management Committee.  If AcquisitionCo’s Managers and
AcquisitionCo, as Member of the Company, use all commercially reasonable
efforts to cause the Company to accept such offer (including voting in favor of
such acceptance) and the Company nevertheless does not accept such offer within
30 days of its receipt of such offer, AcquisitionCo and the AcquisitionCo
Manager Funds shall be free to pursue such gaming opportunity outside of the
Company; provided, that, such gaming opportunity is not within a five-mile
radius from any Company gaming property then in operation or Company gaming
property or gaming opportunity in active development.  AcquisitionCo hereby agrees and acknowledges
that in order to assure that the Members of the Company will realize the full
benefits of the Company, 

 

24

 

AcquisitionCo shall not, and shall cause the AcquisitionCo
Manager Funds not to, during the term of this Agreement, directly or
indirectly, alone or as a partner, joint venturer, director, manager, officer,
employee, consultant, agent, independent contractor, equityholder or lender,
pursue any gaming opportunity outside of the Company, including any business
that directly or indirectly competes with the Company, without first completing
the procedures set forth in ARTICLE VII.

(c)           To the extent that a gaming
opportunity set forth in Section 7.1(a) or 7.1(b) above requires additional
financing beyond that which can be satisfied from the operating cash flow
generated or projected to be generated by the Company, the Preferred Members
shall use their commercially reasonable efforts to seek outside financing prior
to consideration of a capital call.

(d)           No Member shall be entitled to
Capital Account credit, additional Units or an increased Preferred Percentage
Interest or Percentage Interest as a result of providing the Company with a
gaming opportunity pursuant to Section 7.1(a) or 7.1(b) above.

7.2           Mexican Gaming Opportunities.  The gaming opportunity in Mexico that is
subject to the Mexican Gaming Opportunities Term Sheet shall be governed by
such term sheet.

ARTICLE VIII

INDEMNIFICATION AND REIMBURSEMENT

8.1           Indemnification.

(a)           Each Member shall indemnify, hold
harmless and pay all judgments and claims against the Company and each other
Member and such Member’s Affiliates relating to any liability or damage
incurred from any third-party claims as a result of such indemnifying Member’s fraud,
bad faith or knowing violation of law, including reasonable attorneys’ fees
incurred in connection therewith (and shall advance expenses in connection
therewith); provided, however, that if such liability or damage
is subject to the indemnification provisions of the Contribution and Unit
Purchase Agreement, the indemnification provisions of the Contribution and Unit
Purchase Agreement shall control.

(b)           Except to the extent a Member is
liable for indemnity under Section 8.1(a) above, the Company does hereby
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative), except an action by or in
the right of the Company, by reason of the fact that he, she or it is or was a
Member, Manager, officer, employee or agent of the Company, or is or was serving
at the request of the Company as manager, director, officer, employee or agent
of another limited liability company, corporation, partnership, joint venture,
trust or other enterprise, against expenses, subject to the provisions of
Section 8.1(e) below, including attorneys’ fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him, her or it in
connection with the action, suit or 

 

25

 

proceeding if he, she or it acted in good faith and in
a manner that he, she or it reasonably believed to be in or not opposed to the
best interests of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his, her or its conduct was
unlawful.  The termination of any action,
suit or proceeding by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent, does
not, of itself, create a presumption that the Person did not act in good faith
and in a manner that he, she or it reasonably believed to be in or not opposed
to the best interest of the Company, or that, with respect to any criminal
action or proceeding, he, she or it had reasonable cause to believe that his,
her or its conduct was unlawful.

(c)           Except to the extent such Member is
liable for indemnity under Section 8.1(a) above, the Company does hereby
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Company to procure a judgment in its favor by reason of the fact that he,
she or it is or was a Member, Manager, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a Member,
Manager, director, officer, employee or agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise
against expenses, subject to the provisions of Section 8.1(e) below, including
amounts paid in settlement and attorneys’ fees actually and reasonably incurred
by him, her or it in connection with the defense or settlement of the actions
or suit if he, she or it acted in good faith and in a manner that he, she or it
reasonably believed to be in or not opposed to the best interests of the Company.  Indemnification may not be made for any
claim, issue or matter as to which such a Person has been adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the Company or for amounts paid in settlement to the Company, unless
and only to the extent that the court in which the action or suit was brought
or other court of competent jurisdiction determines upon application that in
view of all the circumstances of the case, the Person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.

(d)           To the extent that a Member, Manager,
officer, employee or agent of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 8.1(b)
or 8.1(c) above, or in defense of any claim, issue or matter therein, the
Company does hereby indemnify such Person against expenses, subject to the
provisions of Section 8.1(e) below, including attorneys’ fees, actually and
reasonably incurred by him, her or it in connection with the defense.

(e)           Any indemnification under Section 8.1(b)
or 8.1(c) above, unless ordered by a court or advanced pursuant to Section 8.1(f)
below, must be made by the Company only as authorized in the specific case upon
a determination that indemnification of the Member, Manager, officer, employee
or agent is proper in the circumstances. 
The determination must be made: 
(i) by vote of the Management Committee, excluding any Manager who is a
party to the act, suit or proceeding, or (ii) if the vote of the Management
Committee cannot be obtained, by independent legal counsel in a written
opinion.

 

26

 

(f)            The expenses of a Member or Manager
incurred in defending a civil or criminal action, suit or proceeding shall be
paid by the Company as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking
by or on behalf of such Member or Manager to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he, she or it
is not entitled to be indemnified by the Company.  The provisions of this Section 8.1(f) do not
affect any rights to advancement of expenses to which personnel other than
Members or Managers may be entitled under any contract or otherwise by law.

(g)           The indemnification and advancement
of expenses authorized in or ordered by a court pursuant to this Section 8.1 continues
for a Person who has ceased to be a Member, Manager, officer, employee or agent
and inures to the benefit of the heirs, executors and administrators of such Person,
and does not exclude any other rights to which a Person seeking indemnification
or advancement of expenses may be entitled under the Articles of Organization or
any operating agreement, vote of Members or disinterested Manager, if any, or otherwise,
for an action in his, her or its official capacity or an action in another
capacity while holding office, except that indemnification, unless ordered by a
court pursuant to Section 8.1(c) above, or for the advancement of expenses made
pursuant to Section 8.1(f) above, may not be made to or on behalf of any Member
of Manager if a final adjudication establishes that his, her or its acts or
omissions involved intentional misconduct, fraud or a knowing violation of the
law and was material to the cause of action.

(h)           Notwithstanding any provision of this
Section 8.1, no indemnity under this Section 8.1 shall extend to any claim
related to, or any losses or damages resulting from, an action, suit or
proceeding between or among Members or their respective managers, directors or
officers.

(i)            In each instance in which indemnity
is claimed hereunder, the party claiming indemnity (the “Indemnitee”)
shall give prompt written notice to the party against whom indemnity is sought
(the “Indemnitor”) of any claim, suit, action or proceeding in respect
of which indemnity is claimed, together with photocopies of any and all
letters, pleadings or other documents in the Indemnitee’s possession which are
alleged to form the material basis of any such claim or action; provided,
that, the failure to provide such notice in a timely fashion shall not
affect the Indemnitor’s obligations hereunder except and only to the extent
that any delay in providing such notice results in actual prejudice to the
Indemnitor.  In any case, the Indemnitee
shall cooperate with the Indemnitor in the defense of any such claim or action
to the extent that the Indemnitor and Indemnitee are not adverse parties or
have adverse interests therein.  The
Indemnitor shall have the right to control the defense of any such claim or
action by counsel reasonably acceptable to the Indemnitee, at the Indemnitor’s
sole cost and expense.  The Indemnitee
shall have the right to observe any legal proceedings relating to any such
claim or action and to retain its own counsel, it being understood that the
fees and expenses of the Indemnitee’s counsel shall be paid by the Indemnitee
(unless (i) the defendants in any such claim or action include both the
Indemnitor and the Indemnitee and the Indemnitee shall have been advised by
counsel that there may be one or more legal defenses available to such
Indemnitee that are different from or additional to those available to the
Indemnitor or (ii) the Indemnitor 

 

27

 

fails promptly to assume the defense and retain
counsel reasonably satisfactory to the Indemnitee, in which cases such fees and
expenses shall be paid by the Indemnitor). 
The Indemnitor shall not, without the prior written consent of the
Indemnitee (which consent shall not be unreasonably withheld), effect any
settlement or compromise of any pending or threatened claim, suit, action or
proceeding, and the Indemnitee shall not, without the prior written consent of
the Indemnitor (which consent shall not be unreasonably withheld), effect any
settlement or compromise of any pending or threatened claim, suit, action or
proceeding.

8.2           General Reimbursements.  The Company shall reimburse the Members and Managers
for out-of-pocket expenses incurred and paid by any of them as authorized by
the Company in the conduct of the Business, including telephone expenses,
travel expenses incurred in connection with meetings, and any other
out-of-pocket expenditures as may reasonably be attributable to the
Company.  Such reimbursed expenses shall
not include any expenses incurred in connection with an exercise of rights as a
Member or Manager apart from the authorized conduct of the Business.  In case of a dispute between the Company and
a Member or Manager with respect to reimbursement of out-of-pocket expenses,
the reasonable determination by the Management Committee of which expenses may
be allocated to and reimbursed as a result of the Company’s activities or the Business
and the amount of such reimbursement shall be conclusive.  Such reimbursement shall be treated as
expenses of the Company and shall not be deemed to constitute distributions to
any Member of profit, loss or capital of the Company.  No Manager shall be entitled to receive any
salary or other compensation for services rendered to or on behalf of the
Company, or otherwise, in his capacity as a Manager.

8.3           Gaming
Development Reimbursements.  Subject
to applicable limitations under the Debt Documents of the Company:

(a)           The Company shall reimburse a
Preferred Member and its Affiliates for reasonable out-of-pocket development
expenses incurred by such Preferred Member and its Affiliates in connection
with the development of gaming opportunities for the Company upon such
Preferred Member providing to the Company reasonable evidence of such expenses;
provided, that, the Company shall not make reimbursements under
this Section 8.3(a) not otherwise authorized by the Management Committee
(whether by budget or otherwise) in excess of $250,000 per Fiscal Year (except
the first Fiscal Year, with respect to which such $250,000 amount shall be pro
rated by the number of full months remaining in such first Fiscal Year).

(b)           If the Company pursues a gaming
opportunity provided to it in accordance with Section 7.1(a) or 7.1(b) above,
then the Company shall reimburse the Preferred Member that provided such
opportunity for all reasonable out-of-pocket development expenses incurred by
such Preferred Member and its Affiliates in connection with such gaming
opportunity upon such Preferred Member providing to the Company reasonable
evidence of such expenses; provided, that, such expenses have not
been previously reimbursed (including pursuant to Section 8.3(a) above).

 

28

ARTICLE IX

REPRESENTATIONS AND WARRANTIES

9.1           In General.  Each Person admitted as a Member of the
Company after the Effective Date shall, as of the date of such admission, make
each of the representations and warranties set forth in Section 9.2 below, and
such representations and warranties shall survive such date.  The covenants, obligations and agreements of
the parties set forth in this Agreement shall survive until performed.  The right to indemnification, payment of
damages or other remedy based on any representation, warranty, covenant,
obligation or agreement made herein will not be affected by any investigation
conducted with respect to, or any knowledge acquired or capable of being
acquired at any time with respect to, the accuracy or inaccuracy of or
compliance with any such representation, warranty, covenant, obligation or
agreement.

9.2           Representations and Warranties by
Members.  Each Person admitted as a Member
of the Company after the Effective Date hereby represents and warrants to the
Company and the other Members that, as of the date such Member is admitted as a
member of the Company:

(a)           Due Incorporation or Formation.  Such Member is a corporation duly organized
or a partnership or limited liability company duly formed, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation or
formation, and has requisite corporate, partnership or company power and
authority to own, operate or lease its assets and properties and to carry out its
business as such is presently conducted. 
Such Member is duly licensed or qualified to do business and is in good
standing in each of the jurisdictions in which the failure to be so licensed or
qualified would have a material adverse effect on its financial condition or
its ability to perform its obligations hereunder.

(b)           Authority.  Such Member has the requisite corporate,
partnership or company power and authority to execute and deliver this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby.  The
execution and delivery by such Member of this Agreement, and the performance by
such Member of its obligations hereunder, have been duly and validly authorized
by all necessary corporate, partnership or company action on the part of such
Member, and no other corporate, partnership or company action on the part of
such Member is necessary to approve this Agreement or to consummate the
transactions contemplated hereby.  This
Agreement has been duly and validly executed and delivered by such Member, and
constitutes its legal, valid and binding obligation, enforceable against such
Member in accordance with its terms, subject (as to enforceability) to any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors’ rights generally or to
general principles of equity.

(c)           No Conflict; No Default.  Neither the execution, delivery or performance
of this Agreement, nor the consummation of the transactions contemplated hereby,
shall (i) conflict with, result in a violation or breach of, or constitute a
default under (whether with notice or lapse of time or both), any of the terms,
conditions or provisions of the memorandum of association, articles of
incorporation, bylaws or other applicable governing 

 

29

 

documents of such Member, or of any material agreement
or instrument to which such Member, or by which any of its assets or
properties, is bound; (ii) conflict with, result in a violation or breach of, or
constitute a default under (whether with notice or lapse of time or both), any
of the terms, conditions, or provisions of, or require any filing, consent or
similar action under, any law, regulation, order, writ, injunction, decree,
determination or award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator, applicable to such
Member or any of its assets or properties, (iii) conflict with, result in a
violation or breach of, constitute a default under (whether with notice or
lapse of time or both), accelerate or permit the acceleration of the
performance required by, give to others any material interests or rights
(including rights of termination, cancellation or modification) under, or
require any consent, authorization, approval or action under, any indenture,
mortgage, lease agreement or instrument to which such Member, or by which any
of its assets or properties, is bound, or (iv) result in the creation or
imposition of any Encumbrance upon any of the assets or properties of such
Member.

(d)           Consents.  Any registration, declaration, qualification,
designation, declaration or filing with, or consent, approval, order, waiver,
license, permit or other authorization by, any court, arbitrator, agency or governmental
or regulatory authority, domestic or foreign, or any third party, that is
required in connection with the valid execution, delivery, acceptance and
performance of this Agreement by such Member, or the consummation by such
Member of the transactions contemplated hereby, has been completed, made or
obtained on or before, and are effective as of, the date such Member is
admitted as a member of the Company.

(e)           Litigation.  There are no claims, actions, suits, orders,
proceedings or investigations pending or, to the knowledge of such Member,
threatened against, relating to or affecting such Member or any of its assets, properties
or businesses in any court or before or by any governmental department, board,
agency or instrumentality, domestic or foreign, or any arbitrator, which if
adversely determined would (or, in the case of an investigation, could lead to
any claim, action, suit, order or proceedings which if adversely determined
would) reasonably be expected to result in the issuance of an order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.

(f)            Investment
Representations.

(i)            Preexisting Relationship or
Experience.  By reason of its
business or financial experience, or by reason of the business or financial
experience of its financial advisor who is unaffiliated with and who is not
compensated, directly or indirectly, by the Company or any Affiliate or selling
agent of the Company, such Member is capable of evaluating the risks and merits
of an investment in the Units and of protecting its own interests in connection
with this investment.

(ii)           No Advertising.  Such Member has not seen, received, been
presented with or been solicited by, any leaflet, public promotional meeting,
newspaper or magazine article or advertisement, radio or television
advertisement, or any other form of advertising or general solicitation with
respect to the sale of the Units.

 

30

 

(iii)          Investment Intent.  Such Member is acquiring the Units for
investment purposes for its own account only and not with a view to or for sale
in connection with any distribution of all or any part of such Units.

(iv)          Economic Risk.  Such Member acknowledges that an investment
in the Units is a speculative investment which involves a substantial degree of
risk of loss by it of its entire investment in the Company, and such Member is
financially able to bear the economic risk of such investment, including the
total loss thereof.

(v)           Tax Consequences.  Such Member acknowledges that the tax
consequences to it of investing in the Company will depend on its particular
circumstances, and it will look solely to, and rely upon, its own advisers with
respect to the tax consequences of its investment in the Units.

(vi)          No Registration of Units.  Such Member acknowledges that the Units have
not been registered under the Securities Act or any other applicable blue sky
laws in reliance, in part, on its representations, warranties and agreements
herein.

(vii)         Restrictions on Transferability.  Such Member understands that the Units are “restricted
securities” under the Securities Act in that the Units will be acquired from
the Company in a transaction not involving a public offering, and that the Units
may be resold without registration under the Securities Act only in certain
limited circumstances and that otherwise the Units must be held indefinitely.  Such Member acknowledges that there will be
substantial restrictions on the transferability of its Units pursuant to this
Agreement, that there is no public market for such Units and none is expected
to develop, and that, accordingly, it may not be possible for it to liquidate
its investment in the Company.

(viii)        No Disposition in Violation of Law.  Without limiting the representations set
forth above, such Member will not make any disposition of all or any part of
the Units which will result in the violation by it or by the Company of the
Securities Act, any other applicable securities laws or this Agreement.

(ix)           Legends.  Such Member understands that the certificates,
if any, evidencing the Units shall bear such legends as are required by the
Gaming Authorities and may bear the following legend (and any legend required
by applicable state securities laws):

“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
QUALIFIED AND REGISTERED UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. 
ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE 

 

31

 

IS FURTHER SUBJECT
TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH ARE SET FORTH IN THE AMENDED
AND RESTATED OPERATING AGREEMENT OF CANNERY CASINO RESORTS, LLC, EFFECTIVE AS
OF [                    ],
AS IT MAY BE AMENDED.”

9.3           Indemnification.  Each Member shall indemnify, defend and hold
harmless the Company, each and every Manager, each and every other Member, and
their respective Affiliates, equityholders, members, partners, directors, managers,
general partners, officers, employees, agents and representatives from and
against, and to promptly pay such party or reimburse such party for, any and
all liabilities (whether contingent, fixed or unfixed, liquidated or
unliquidated, or otherwise), obligations, claims, suits, actions or causes of
action, demands, deficiencies, losses, settlements, assessments, awards,
judgments, interest, fines, penalties, damages (including incidental,
consequential, actual and punitive damages), and costs and expenses (including
reasonable attorneys’ fees and other reasonable costs and expenses of investigating
or contesting any of the foregoing) sustained or incurred by such party
relating to, resulting from, arising out of or otherwise by virtue of any inaccuracy
in or breach or nonperformance of any of the representations, warranties,
covenants or agreements made by such Member in this Agreement.  The procedures for indemnity claims under
this Section 9.3 shall be the same as the procedures set forth in Section 8.1(i)
above, mutatis mutandis.

ARTICLE X

ACCOUNTING, BOOKS AND RECORDS

10.1         Accounting,
Books And Records.

(a)           The Company shall keep on site at its
principal place of business each of the following:

(i)            separate books of account for the
Company that shall show a true and accurate record of all costs and expenses
incurred, all charges made, all credits made and received, and all income
derived in connection with the conduct of the Company and the operation of the
Business in accordance with this Agreement;

(ii)           copies of each periodic report
delivered to Members in accordance with Section 10.2(c) below for the three
most recent years;

(iii)          a current list of the full name and
last known business, residence, mailing address, telephone number and
electronic mail address of each Member and Manager, both past and present;

(iv)          a copy of the Articles of Organization
and all amendments thereto, together with executed copies of any powers of
attorney pursuant to which any amendment has been executed;

 

32

 

(v)           copies of the Company’s federal,
state, and local income tax returns and reports, if any, for the three most
recent years;

(vi)          copies of this Agreement and all
amendments thereto; and

(vii)         copies of any written consents of the Managers
or Members taken without a meeting.

(b)           The Company shall use the accrual
method of accounting in preparation of its financial reports and for tax
purposes and shall keep its books and records accordingly.

10.2         Accounting
Statements; Periodic Reports.

(a)           In General.  The Company shall keep adequate and accurate
books and records reflecting, in accordance with GAAP, consistently applied,
all business transactions arising out of or connected with the conduct of the
Company.

(b)           Audits.  Any Member or its designated representative
has the right to have reasonable access to and inspect and copy the contents of
the books and records of the Company, including the books and records specified
in Section 10.2(a) above; provided, that, such access shall be
(i) at the Company’s principal place of business, (ii) during its normal business
hours, (iii) provided in a manner reasonably intended to avoid any interruption
to the Business or operations of the Company, and (iv) subject to any
reasonable rules and guidelines established by the Management Committee.

(c)           Periodic Reports.  The Company shall cause to be delivered to
each Member the following periodic reports, each prepared in accordance with
GAAP:

(i)            within 30 days following the end of
each calendar month, a balance sheet and statement of cash flow for the Company
as of the end of such month (including all supporting schedules and
documentation) and an income statement for the Company for such month and for
the completed portion of the then-current Fiscal Year;

(ii)           within 25 days following the end of
each Fiscal Quarter, a balance sheet and statement of cash flow for the Company
as of the end of such Fiscal Quarter and an income statement for the Company for
such Fiscal Quarter and for the completed portion of the then-current Fiscal
Year;

(iii)          within 50 days following the end of
each Fiscal Year, an audited balance sheet and statement of cash flow for the
Company as of the end of such Fiscal Year and an audited income statement for the
Company for such Fiscal Year; and

(iv)          such other periodic reports and
financial statements for the Company as are required by any Upper Tier Holder
of any Member to comply with periodic reporting requirements under federal or
state securities law.

 

33

 

(d)           Other Reports.  The Company shall cause to be delivered to
each Member such additional periodic reports and financial statements for the
Company as may be reasonably requested from time to time by a Member.

10.3         Tax
Matters.

(a)           Tax
Returns.  Except to the extent expressly set
forth in this Agreement, all elections and decisions required or permitted to
be made by the Company under any applicable tax law shall be made by the
Management Committee.  The Company shall
prepare all necessary tax returns and shall furnish each Preferred Member with
a copy of the proposed federal income tax return for review and comment.  Each Member shall have at least 15 days (but
no more than 30 days) to provide comments to the Company on such proposed tax
return, at the end of which time, such federal tax return, as amended to take
into account any changes reasonably requested by a Preferred Member, shall be timely
filed.  Each Member shall furnish the
Company all pertinent information in its possession relating to Company
operations that the Company requests to prepare and file its income tax
returns.

(b)           Tax
Matters Member.           AcquisitionCo
is hereby designated as the initial tax matters partner for the Company within
the meaning of Code Section 6231(a)(7) (the “Tax Matters Member”); provided,
however, (i) in exercising its authority as Tax Matters Member, the Tax
Matters Member shall be limited by the provisions of this Agreement affecting
tax aspects of the Company; (ii) the Management Committee shall direct the Tax
Matters Member regarding the filing of a Code Section 6227(b) administrative
adjustment request with respect to the Company before filing such request, it
being understood, however, that the provisions hereof will not be construed to
limit the ability of any Member to file an administrative adjustment request on
its own behalf pursuant to Code Section 6227(a) of the Code; (iii) the
Management Committee shall direct the Tax Matters Member regarding the entrance
into any settlement agreement with the Internal Revenue Service that purports
to bind Members other than the Tax Matters Member, the extension of the statute
of limitations with respect to the Company, the filing of a petition for
judicial review of an administrative adjustment request under Code Section
6228, or a petition for judicial review of a final partnership administrative
judgment under Code Section 6226 relating to the Company before filing such
petition; (iv) the Tax Matters Member shall give prompt notice to the
Management Committee of the receipt of any written notice that the Internal
Revenue Service or any state or local taxing authority intends to examine the
Company income tax returns for any year, the receipt of written notice of the
beginning of an administrative proceeding at the Company level relating to the
Company under Code Section 6223, the receipt of written notice of the final
partnership administrative adjustment relating to the Company pursuant to Code
Section 6223, and the receipt of any request from the Internal Revenue Service for
waiver of any applicable statute of limitations with respect to the filing of
any tax return by the Company and (v) the Tax Matters Member shall not take any
action having tax consequences more adverse to any Members than to any other
Member without the prior consent of the more adversely affected Member (such
consent not to be unreasonably withheld or delayed).

 

34

 

(c)           Tax
Partnership.  Each Member
acknowledges that this Agreement creates a partnership for federal and state
income tax purposes (but no other), and hereby agrees not to elect under Code
Section 761 or applicable state law to be excluded from the application of
Subchapter K of Chapter 1 of Subtitle A of the Code or any similar state
statute.  No Member, Manager, agent or
employee of the Company may file IRS Form 8832 (or such alternative or
successor form) to elect to have the Company be classified as a corporation for
federal income tax purposes under Treas. Reg. Section 301.7701-3.  Each Member and Manager agrees to take such
other action as may be reasonably necessary or required (and permitted under
the terms of this Agreement) to maintain the status of the Company as a
partnership for federal income tax purposes.

ARTICLE XI

TRANSFERS

11.1         Restrictions On Transfers.  Except as otherwise approved by the
Management Committee pursuant to Section 5.6(g) above, or permitted by Section 11.2
below or ARTICLE XII below, no Member shall Transfer all or any portion of its Units
(whether Preferred Units or Common Units) and no Member Unit Transfer shall be
permitted with respect to any Member.

11.2         Permitted Transfers.  Subject to the other conditions and
restrictions set forth in this ARTICLE XI, a Preferred Member that is not an
Adverse Member may at any time Transfer its Units as follows:

(a)           any Preferred Member
may Transfer all or any portion of its Units to any other Preferred Member or
any Wholly Owned Affiliate of another Preferred Member;

(b)           any Preferred Member
may Transfer all or any portion of its Units to any Wholly Owned Affiliate of
such Preferred Member;

(c)           any Preferred Member
may pledge or grant a security interest in such Preferred Member’s Units solely
for the purpose of securing financing to participate in a capital call under
Section 2.3(b) above; provided, that, if any event occurs that under
such pledge or grant of security interest may give rise to a foreclosure on
such Units, then prior to such foreclosure being realized, (i) an Adverse Act shall
be deemed to have occurred with respect to such Preferred Member, (ii) any and
all rights or interests of the secured lender with respect to such Units shall
be subordinate to (and be suspended in favor of) the rights and interests of
the other Preferred Members under the Adverse Act procedures set forth in ARTICLE
XII below, and (iii) the secured lender may foreclose on such Units if and only
if the closing of the purchase and sale of such Units pursuant to such Adverse
Act procedures are not consummated, in which case the Transfer of such Units to
the secured lender shall be subject to compliance with all applicable conditions
on Transfer set forth in this Agreement (including Sections 11.5 and 11.10
below) and all applicable law (including all applicable Gaming Laws); or

 

35

 

(d)           any Member may
Transfer its Units in accordance with Section 11.3 or 11.4 below.

11.3         Second Anniversary Trigger.  Subject to the other conditions and
restrictions set forth in this ARTICLE XI, following the second anniversary of
the Effective Date, the following mechanism for the Transfer of Units may be
triggered by a Preferred Member; provided, that, the Preferred
Member triggering this mechanism (the “Triggering Member”) directly or
indirectly holds in the aggregate at least a 25% Preferred Percentage Interest:

(a)           Purchase Offer.  No Transfer may be made under this Section 11.3
unless the Triggering Member has received a bona fide written offer (the “Purchase
Offer”) from an unaffiliated third party (the “Proposed Purchaser”)
to purchase all of the issued and outstanding Units of the Company (or, in lieu
of AcquisitionCo’s Units at AcquisitionCo’s sole and absolute discretion, all
of the equity of AcquisitionCo Parent) for a purchase price (the “Proposed
Price”) denominated and payable in United States dollars at closing, on
terms and conditions that are customary for such a proposed purchase.  The Purchase Offer shall be signed by the
Proposed Purchaser and shall be irrevocable for a period ending no sooner than
the Business Day following the end of the Offer Period.

(b)           Offer Notice.  Prior to making any Transfer that is subject
to the terms of this Section 11.3, the Triggering Member shall give (i) to each
Member and the Company written notice of the triggering of this Section 11.3
and (ii) to each other Preferred Member (collectively, the “Non-Triggering
Members”) written notice (the “Offer Notice”) that shall include a
copy of the Purchase Offer and an offer (the “Firm Offer”) to sell all
of the Triggering Member’s Units (or, in lieu of AcquisitionCo’s Units at AcquisitionCo’s
sole and absolute discretion if AcquisitionCo is the Triggering Member, all of
the equity of AcquisitionCo Parent) (the “Offered Equity”) to the Non-Triggering
Members for a price (the “Offer Price”) equal to the portion of the Proposed
Price attributable to the Offered Equity, on the same terms and conditions as
those contained in the Purchase Offer; provided, that, the Firm
Offer shall be made without regard to any requirement that (A) earnest money or
similar deposit be made by the Non-Triggering Members prior to closing and (B)
any security (other than the Offered Equity) be provided by the Non-Triggering Members
for any deferred portion of the Offer Price. 
In calculating the portion of the Proposed Price attributable to the
Offered Equity, (x) the Proposed Price shall be broken down by price per
Preferred Unit and Common Unit based on the “Net Equity Value” methodology set
forth in Section 12.3(a) below and assuming for purposes of such methodology
that the “Grossed Appraised Value” is the Proposed Price, and (y) the portion
of the Proposed Price attributable to all of the equity of AcquisitionCo
Parent, if applicable, shall be equal to the aggregate value of the Units held
by AcquisitionCo derived from the valuation methodology described in clause (x)
above.

(c)           Offer Period.  The Firm Offer shall be irrevocable for a
period (the “Offer Period) ending at 5:00 p.m., local time, at the
Company’s principal place of business, on the 90th  day following the date the Offer Notice is
received by the Non-Triggering Members.

 

36

 

(d)           Acceptance of the
Firm Offer.  At any time during the
Offer Period, any Non-Triggering Member may accept the Firm Offer as to all or
any portion of the Offered Equity, by giving written notice of such acceptance
to the Triggering Member and each other Non-Triggering Member, which notice
shall indicate the maximum amount of Offered Equity (broken down, if
applicable, by Preferred Units and Common Units) that such Non-Triggering
Member is willing to purchase, not to exceed all of such Offered Equity.  In the event that the Non-Triggering Members giving
such written notice of such acceptance (the “Accepting Members”) in the
aggregate accept the Firm Offer with respect to all of the Offered Equity, the
Firm Offer shall be deemed to be accepted and each Accepting Member shall be
deemed to have accepted the Firm Offer as to that portion of the Offered Equity
(broken down, if applicable, to Preferred Units and Common Units) that corresponds
to the ratio of the number of Preferred Units held by such Accepting Member to
the aggregate number of Preferred Units held by all Accepting Members; provided,  that, if any Accepting
Member’s acceptance of the Firm Offer was for an amount less than its
proportionate share of the Offered Equity as so determined, the portion of the
Offered Equity not so committed to be purchased shall be allocated to the other
Accepting Members; provided, further, that each other Accepting Member
shall not be obligated to purchase in excess of the amount of Offered Equity
such Accepting Member indicated a willingness to purchase in its acceptance of
the Firm Offer.  If the Non-Triggering
Members do not accept the Firm Offer as to all of the Offered Equity during the
Offer Period, the Firm Offer shall be deemed rejected in its entirety.

(e)           Closing of
Purchase Pursuant to Firm Offer.  In
the event that the Firm Offer is accepted pursuant to Section 11.3(d) above,
the closing of the purchase and sale of the Offered Equity shall take place
within 60 days after the Firm Offer is accepted, subject to Section 12.5
below.  The Members shall execute such
documents and instruments as may be reasonably necessary or appropriate to
effect the purchase and sale of the Offered Equity pursuant to the terms of the
Firm Offer and this ARTICLE XI.

(f)            Closing of
Purchase Pursuant to Purchase Offer. 
In the event that the Firm Offer is not accepted pursuant to Section 11.3(d)
above, the Triggering Member may accept the Purchase Offer at any time within 60
days after the last day of the Offer Period by written notice to the Proposed
Purchaser, each Member and the Company. 
Following such acceptance by the Triggering Member, each Member shall be
required to sell their Units (or, in lieu of AcquisitionCo’s Units at
AcquisitionCo’s sole and absolute discretion, all of the equity of
AcquisitionCo Parent) in connection with the Purchase Offer.  The closing of the purchase and sale of
equity relating to the Purchase Offer shall take place within 60 days after the
acceptance of the Purchase Offer, subject to Section 12.5 below.  The Company and each Member shall, and each
Member shall cause each of its Affiliates to, execute such documents and
instruments as may be reasonably necessary or appropriate to effect the
purchase and sale of equity relating to the Purchase Offer pursuant to the
terms of the Purchase Offer and this ARTICLE XI.

(g)           Closing
Conditions.  Notwithstanding any other
provision of this Section 11.3:

 

37

 

(i)            Non-Competition Agreement.  If a closing occurs pursuant to Section 11.3(e)
or 11.3(f) above, and if requested by any purchaser, (A) each Member (except in
respect of the gaming operations described in Sections 1.9(a)(iv), (v) and (vi)
above) and/or  (B) each of Paulos and/or
Wortman (except in respect of the gaming operations described in Sections 1.9(a)(iv),
(v) and (vi) above) and/or (C) each manager of AcquisitionCo and/or each Upper
Tier Holder of AcquisitionCo (except in respect of the gaming operations
described in Sections 1.9(a)(iv), (v) and (vi) above) holding a Nevada gaming
license, shall, at or prior to such closing, execute a non-competition
agreement in favor of, and reasonably acceptable to, such purchaser and its
Affiliates for a term not to exceed four years following such closing and with
a geographic scope not to exceed a five-mile radius from any Company gaming
property then in operation or Company gaming property or gaming opportunity in
active development; and

(ii)           Non-Participation Agreement.  If a closing occurs pursuant to Section 11.3(f)
above and if requested by any Non-Triggering Member, the Triggering Member (and
(A) if the Triggering Member is Millennium Gaming, each of Paulos and Wortman
and (B) if the Triggering Member is AcquisitionCo, each manager of
AcquisitionCo and each Upper Tier Holder of AcquisitionCo holding a Nevada
gaming license), shall, at or prior to such closing, execute a
non-participation agreement in favor of, and reasonably acceptable to, such
Non-Triggering Member and its Affiliates that provides that for four years
following such closing, it or he, as the case may be, shall not, directly or
indirectly, be a partner, joint venturer, director, manager, officer, employee,
consultant, agent, independent contractor, equityholder or lender of, or have
any other interest in, the Company or any of its subsidiaries or the Proposed
Purchaser or any of its Affiliates.

(h)           Blackout.  If a Triggering Party triggers this Section 11.3
and the closing of a Firm Offer or Purchase Offer does not take place by the
deadline for closing set forth in Section 11.3(e) or 11.3(f) above,
respectively, the Triggering Member may not avail itself of the Transfer
mechanism under this Section 11.3 during the one-year period following the date
of the Offer Notice.

11.4         Fourth Anniversary Trigger.  Subject to the other conditions and
restrictions set forth in this ARTICLE XI, following the fourth anniversary of
the Effective Date, the following mechanism for the Transfer of Units may be
triggered by a Preferred Member; provided, that, the Preferred
Member triggering this mechanism (the “Exiting Member”) directly or
indirectly holds in the aggregate at least a 25% Preferred Percentage Interest:

(a)           Negotiation
Period.  An Exiting Member may
trigger this Section 11.4 by providing each other Member and the Company with
written notice that it wishes to sell all of its Units (or, in lieu of
AcquisitionCo’s Units at AcquisitionCo’s sole and absolute discretion if
AcquisitionCo is the Exiting Member, all of the equity of AcquisitionCo Parent)
(the “Exiting Equity”).  For the 90-day
period following the date such notice is given (such period, as shortened or
extended upon the mutual agreement of all Preferred Members, the “Negotiation
Period”), the Preferred Members shall negotiate in good faith with respect
to a transaction for the purchase and sale of all of the Exiting Equity.

 

38

 

(b)           Auction.  If on the last day of the Negotiation Period,
the Preferred Members have not executed definitive transaction agreements for
the purchase and sale of the Exiting Equity, then the Company and each Member
shall, and each Member shall cause each of its Affiliates to, use its or his
commercially reasonable efforts in good faith to conduct an auction (the “Auction”)
to sell all of the issued and outstanding Units of the Company (or, in lieu of
AcquisitionCo’s Units at AcquisitionCo’s sole and absolute discretion, all of
the equity of AcquisitionCo Parent) (the “Auctioned Equity”).  Within 10 days of the end of the Negotiation
Period, each Preferred Member shall, in writing, notify the Company and each
other Preferred Member whether such Preferred Member, or any of such Preferred
Member’s Affiliates, intends to participate, directly or indirectly, as a
bidder in the Auction (if such Preferred Member or any of such Preferred Member’s
Affiliates so intends, such Preferred Member shall be deemed a “Participating
Member” and if such Preferred Member and all of such Preferred Member’s
Affiliates do not so intend, such Preferred Member shall be deemed a “Non-Participating
Member”).  If a Preferred Member
fails to so notify the Company and each other Preferred Member, such Preferred
Member shall be deemed to be a Participating Member.  Each Non-Participating Member and all of such
Non-Participating Member’s Affiliates shall be barred from participating,
directly or indirectly, as a bidder in the Auction.

(c)           Selection of
Investment Bank.  The investment bank
to conduct the Auction shall be selected as follows:

(i)            If Less Than All Preferred
Members Are Participating Members.  If
less than all Preferred Members are Participating Members, then the
Non-Participating Members shall use their commercially reasonable efforts in
good faith to select and hire by mutual agreement, within 30 days of the end of
the Negotiation Period, a nationally recognized investment bank (the “Investment
Bank”) to conduct the Auction, on terms and conditions that are reasonably
acceptable to each Non-Participating Member and subject to the prior written
approval of each Participating Member, if any, such approval not to be
unreasonably withheld.  If the
Non-Participating Members are unable to select and hire the Investment Bank
within 30 days of the end of the Negotiation Period, then the Investment Bank
shall be selected and hired by a majority of the independent Managers of the
Company within 60 days of the end of the Negotiation Period.  If a majority of the independent Managers of
the Company are unable to select and hire the Investment Bank within 60 days of
the end of the Negotiation Period or if there are no independent Managers of
the Company, then the Investment Bank shall be selected and hired by
arbitration in Los Angeles, California, before a sole arbitrator.  The arbitration shall be administered by JAMS
pursuant to its Streamlined Arbitration Rules & Procedures.  The arbitrator’s decision shall be final and
binding upon the parties, and may be entered and enforced in any court of
competent jurisdiction by any Non-Participating Member.  The arbitrator’s expenses shall be borne by
the Company.

(ii)           If All Preferred Members Are
Participating Members.  If all
Preferred Members are Participating Members, then the Preferred Members shall
use their commercially reasonable efforts in good faith to select and hire by
mutual agreement, within 30 days of the end of the Negotiation Period, the
Investment Bank to conduct the Auction, on terms and conditions that are
reasonably acceptable to each Preferred Member. 
If the Preferred 

 

39

 

Members are unable to select and hire the Investment
Bank within 30 days of the end of the Negotiation Period, then the Investment
Bank shall be selected and hired by a majority of the independent Managers of
the Company within 60 days of the end of the Negotiation Period.  If a majority of the independent Managers of
the Company are unable to select and hire the Investment Bank within 60 days of
the end of the Negotiation Period or if there are no independent Managers of
the Company, then the Investment Bank shall be selected and hired by
arbitration in Los Angeles, California, before a sole arbitrator.  The arbitration shall be administered by JAMS
pursuant to its Streamlined Arbitration Rules & Procedures.  The arbitrator’s decision shall be final and
binding upon the parties, and may be entered and enforced in any court of
competent jurisdiction by any Preferred Member. 
The arbitrator’s expenses shall be borne by the Company.

(d)           Auction Process.  The Auction process shall be conducted by the
Investment Bank and the Non-Participating Members (or, if there are no
Non-Participating Members, then the independent Managers of the Company, if
any).  The Company and each Member shall,
and each Member shall cause each of its Affiliates to, use its or his commercially
reasonable efforts in good faith to assist the Investment Bank and the
Non-Participating Members (or, if there are no Non-Participating Members, then
the independent Managers of the Company, if any) in the conduct of the Auction
and the consummation of a sale of all of the Auctioned Equity, including in the
hiring of outside advisors (other than the Investment Bank), the identification
of potential bidders, the preparation of an information memorandum regarding
the Company (including financial statements and financial projections relating
thereto), the preparation of bid procedures and a bid procedures letter to be
distributed to potential bidders, the assembly of a data room, the making of
management presentations, the drafting, negotiation and execution of
transaction documents (including the schedules, exhibits, appendices, annexes and
ancillary documents thereto), the closing of the transaction (including the obtaining
of applicable approvals, consents and waivers), and the equal and fair
treatment of all potential bidders. 
Unless the Preferred Members otherwise mutually agree, the deadline for
the receipt of bids in the Auction (the “Bid Deadline”) shall be a date
that is no later than 180 days following the last day of the Negotiation
Period.  If all Preferred Members are
Participating Members, then any bid involving the direct or indirect
participation of any Preferred Member or any Affiliate of any Preferred Member
shall be submitted by the Bid Deadline in last-and-best offer form and may not
be later modified to “top” other bids.  Such
restriction shall be reflected in the bid procedures letter distributed to
potential bidders.

(e)           Bid Selection.  The winning bid in the Auction shall be
selected as follows:

(i)             
If Less Than All Preferred Members Are Participating Members.  If less than all Preferred Members are
Participating Members, then following the Bid Deadline, the Non-Participating
Members shall use their commercially reasonable efforts in good faith to select
by mutual agreement the bid that obtains the greatest aggregate value for the
Members (taking into account factors such as type and amount of consideration,
timing of the payment of such consideration, the amount of after-tax proceeds,
closing conditions, indemnification terms and consistent treatment of Preferred
Members) and to negotiate for 

 

40

 

execution definitive transaction agreements for the sale
of the Auctioned Equity with the maker of such bid; provided, that,
the Non-Participating Members may not agree to terms that disproportionately
favor the Non-Participating Members over the Participating Members without the
prior written approval of each Participating Member, such approval not to be
unreasonably withheld.  No Participating
Member or any Affiliate of a Participating Member may review any submitted bid (or
any analysis relating thereto) or any draft transaction agreement, or negotiate
with any bidder.

(ii)           If All Preferred Members Are
Participating Members.  If all
Preferred Members are Participating Members, then following the Bid Deadline, a
majority of independent Managers of the Company or, if there are no independent
Managers of the Company, then the Investment Bank shall use their or its commercially
reasonable efforts in good faith to select the bid that obtains the greatest
aggregate value for the Members (taking into account factors such as type and
amount of consideration, timing of the payment of such consideration, the
amount of after-tax proceeds, closing conditions, indemnification terms and
consistent treatment of Preferred Members) and to negotiate for execution
definitive transaction agreements for the sale of the Auctioned Equity with the
maker of such bid.  If the Company has
independent Managers, then no Participating Member or any Affiliate of a
Participating Member may review any submitted bid (or any analysis relating
thereto) or any draft transaction agreement, or negotiate with any bidder.

(f)            Closing.  The closing of the purchase and sale of the
Auctioned Equity shall take place within 60 days following the execution of
definitive transaction documents, subject to Section 12.5 below.  The Company and each Member shall, and each
Member shall cause each of its Affiliates to, execute such documents and
instruments as may be reasonably necessary or appropriate to effect the
purchase and sale of the Auctioned Equity pursuant to the terms of the definitive
transaction documents and this ARTICLE XI.

(g)           Closing
Conditions.  Notwithstanding any
other provision of this Section 11.4:

(i)            Non-Competition Agreement.  If a closing occurs pursuant to Section 11.4(f)
above, then upon the request of the purchaser of the Auctioned Equity, (A) each
Member (except in respect of the gaming operations described in Sections 1.9(a)(iv),
(v) and (vi) above) and/or (B) each of Paulos and/or Wortman (except in respect
of the gaming operations described in Sections 1.9(a)(iv), (v) and (vi) above) and/or
(C) each manager of AcquisitionCo and/or each Upper Tier Holder of
AcquisitionCo (except in respect of the gaming operations described in Sections
1.9(a)(iv), (v) and (vi) above) holding a Nevada gaming license, shall, at or
prior to such closing, execute a non-competition agreement in favor of, and
reasonably acceptable to, such purchaser and its Affiliates for a term not to
exceed four years following such closing and with a geographic scope not to
exceed a five-mile radius from any Company gaming property then in operation or
Company gaming property or gaming opportunity in active development; and

 

41

 

(ii)           Non-Participation Agreement.  If a closing occurs pursuant to Section 11.4(f)
above, then upon the request of any Preferred Member, each Preferred Member, so
long as such Preferred Member or any of its Affiliates is not a participant in
the winning bid (and (A) if such Preferred Member is Millennium Gaming, each of
Paulos and/or Wortman, so long as Paulos or Wortman, as the case may be, or any
of his Affiliates is not a participant in the winning bid, and (B) if such
Preferred Member is AcquisitionCo, each manager of AcquisitionCo and each Upper
Tier Holder of AcquisitionCo holding a Nevada gaming license, so long as such
Person or any of its, his or her Affiliates is not a participant in the winning
bid), shall, at or prior to such closing, execute a non-participation agreement
in favor of, and reasonably acceptable to, such requesting Preferred Member and
its Affiliates that provides that for four years following such closing, it or
he, as the case may be, shall not, directly or indirectly, be a partner, joint
venturer, director, manager, officer, employee, consultant, agent, independent
contractor, equityholder or lender of, or have any other interest in, the
Company or any of its subsidiaries or the purchaser of the Auctioned Equity or
any of its Affiliates.

11.5         Conditions to Permitted Transfers.  A Transfer shall not be treated as a permitted
Transfer under Sections 11.1 or 11.2 above unless and until the following
conditions are satisfied:

(a)           The transferor and
transferee shall execute and deliver to the Company such documents and
instruments of conveyance as may be necessary or appropriate in the opinion of
counsel to the Company to effect such Transfer or as may be required by this
Agreement.  The Company shall be
reimbursed by the transferor and/or transferee for all costs and expenses that
it reasonably incurs in connection with such Transfer.

(b)           The transferor and
transferee shall furnish the Company with the transferee’s taxpayer
identification number, sufficient information to determine the transferee’s
initial tax basis in the Units Transferred, and any other information
reasonably necessary to permit the Company to file all required federal and
state tax returns and other legally required information statements or
returns.  Without limiting the generality
of the foregoing, the Company shall not be required to make any distribution
otherwise provided for in this Agreement with respect to any Units Transferred until
it has received such information.

(c)           Unless otherwise
approved by the Management Committee, no Transfer of Units shall be made except
upon terms and conditions which would not, in the opinion of counsel chosen by
and mutually acceptable to the Management Committee and the transferor Member, result
in the Company being classified as a publicly traded partnership or association
taxable as a corporation for federal income tax purposes.

(d)           No notice initiating
the procedures contemplated by Section 11.3 or 11.4 above may be given by
any Member while any notice, purchase or Transfer is pending under Section 11.3
or 11.4 above or ARTICLE XII below, as the case may be, or after a Dissolution
Event has occurred.

 

42

 

(e)           If there are any
non-transferring Members, the transferee of Units shall execute and deliver to
the Company and to each such non-transferring Member a Joinder Agreement.

(f)            In the case of a
Transfer pursuant to Section 11.2(b) above, the transferor shall not be
relieved of its obligations hereunder.

11.6         Prohibited
Transfers.

(a)           Any purported
Transfer of Units, other than a Transfer permitted under Sections 11.1 and 11.2
above, shall be null and void and of no force or effect whatsoever; provided,
that, if the Company is required by law to recognize a Transfer of Units,
other than a Transfer permitted under Sections 11.1 and 11.2 above, the rights
of the transferee with respect to the Units Transferred shall be strictly
limited to the transferor’s rights to allocations and distributions as provided
by this Agreement with respect to the Units Transferred, which allocations and
distributions may be applied (without limiting any other legal or equitable
rights of the Company) to satisfy any debts, obligations or liabilities for
damages that the transferor or transferee of such Units may have to the
Company.

(b)           In the case of a
Transfer or attempted Transfer of Units, other than a Transfer permitted under Sections
11.1 and 11.2 above, the parties engaging or attempting to engage in such
Transfer shall be liable to indemnify and hold harmless the Company and the
other Members from all cost, liability and damage that the Company or any of
such indemnified Members may incur (including incremental tax liabilities and attorneys’
fees and expenses) as a result of such Transfer or attempted Transfer and
efforts to enforce the indemnity granted hereby.

11.7         Rights of Unadmitted Assignees.  A Person who acquires Units but who is not
admitted as a substituted Member in accordance with Section 11.8 below shall be
entitled only to allocations and distributions with respect to such Units in
accordance with this Agreement, and shall have no right to any information or
accounting of the affairs of the Company, shall not be entitled to inspect the
books or records of the Company, and shall not have any of the rights of a
Member under the Act or this Agreement.

11.8         Admission of Substituted Members.  Subject to the other provisions of this ARTICLE
XI, a transferee of Units in a Transfer from a Member permitted under Sections 11.1
and 11.2 above shall, if not a Member, be admitted to the Company as a
substituted Member.

11.9         Distributions and Allocations in
Respect of Units Transferred.  If any
Units are Transferred by a Member during any Fiscal Year in compliance with the
provisions of this ARTICLE XI, Profits and Losses, each item thereof, and all
other items attributable to the Units Transferred for such Fiscal Year shall be
divided and allocated between the transferor and the transferee by taking into
account their varying Percentage Interests during the Fiscal Year in accordance
with Code Section 706(d), using any conventions permitted by law and selected
by the Management Committee.  All
distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.

 

43

 

11.10       Gaming Restrictions.  To the extent that the Company conducts any
gaming activities that subjects the Company to the licensing and regulatory
control of any Nevada Gaming Authority or other applicable Gaming Authority and
notwithstanding any other provision of this Agreement, the following provisions
shall apply:

(a)           Any Transfer of any
Units shall not be valid unless approved in advance by the applicable Nevada
Gaming Authorities or other applicable Gaming Authorities.

(b)           If at any time any
Nevada Gaming Authority or other applicable Gaming Authority notifies the
Company that a Member or a transferee of Units is unsuitable to be licensed or
to hold such Units (and such unsuitability is not cured), the Company shall,
within 180 days from the date it receives such notice, or such other period as
shall be required by the Nevada Gaming Authorities or other applicable Gaming
Authorities, provide to the unsuitable Member or transferee, in exchange for
all of its Units, the Net Equity Value of such Units (with the Management
Committee selecting the First Appraiser and Second Appraiser), or such other
value as required by the Nevada Gaming Authorities or other applicable Gaming
Authorities, in the form of cash, a promissory note subject to applicable
Gaming Laws (on such terms as determined by the Management Committee), or a
combination of both.

(c)           As of the date that
the Company receives notice that a Member or transferee of Units is unsuitable
to be licensed or to hold that interest, such unsuitable Member or transferee
shall not (i) receive any share of any cash distribution or any other Property
or payments upon the dissolution of the Company, except as provided in Section 11.10(b)
above, (ii) exercise directly or through a trustee or nominee any voting rights
conferred by such Units, (iii) participate in the management of the Business
and affairs of the Company, or (iv) receive any remuneration in any form from
the Company for services rendered or otherwise.

(d)           Any Member or
transferee of Units who is found unsuitable by any Nevada Gaming Authority or
other applicable Gaming Authority shall return all evidence of any ownership in
the Company to the Company immediately upon the receipt of the consideration
set forth in Section 11.10(b) above, and such Member shall cease to be a Member
of the Company.

11.11       Compliance with Gaming Laws.  Each Member shall, and shall cause any Upper
Tier Equityholder of such Member and any holder of a beneficial interest in
such Upper Tier Equityholder, to comply with all Gaming Laws applicable to
casino operating companies directly or indirectly held by the Company,
including delivery of such information as shall be required by the Gaming
Authorities under the Gaming Laws applicable to such casino operating companies.  The Members hereby agree and acknowledge that
a breach of this Section 11.11 by any Member shall be deemed a material breach
of this Agreement.

ARTICLE XII

ADVERSE ACT

12.1         Remedies.

 

44

 

(a)           If an Adverse Act
has occurred or is continuing with respect to any Member, then any Preferred Member
that is not an Adverse Member or an Affiliate of an Adverse Member may elect:

(i)            To trigger the procedures specified
in Section 12.2 below for the purchase and sale of the Adverse Member’s
Units; or

(ii)           To seek to enjoin such Adverse Act or
to obtain specific performance of the Adverse Member’s obligations or Damages
(as defined and subject to the limitations specified below) in respect of such
Adverse Act.

The foregoing remedies
shall not be deemed to be mutually exclusive, and, subject to the requirements
of this Section 12.1(a) regarding the timing of the election of such remedies, selection
or resort to any one remedy shall not preclude selection or resort to the
others.

The election of a remedy
specified in clause (i) or (ii) above may be exercised by notice given to the
Adverse Member within 90 days after the Preferred Member making such election
obtains actual knowledge of the occurrence of such Adverse Act, including, if
applicable, that any cure period has expired; provided, that, if
an election pursuant to clause (ii) above is made to seek an injunction,
specific performance or other equitable relief and a final judgment in such
action is rendered denying such equitable remedy and no election was made
pursuant to clause (i) above, then, by notice given within 30 days after such
final judgment is rendered, the non-Adverse Member may elect to pursue the
remedies specified in clause (i) above unless (x) prior to the giving of such
notice, the Adverse Member has cured in full (or caused to be cured in full)
the Adverse Act in question and no other Adverse Act with respect to such
Adverse Member has occurred and is continuing, or (y) the final judgment
denying equitable relief specifically held that there was no Adverse Act.

Except as provided in
Section 12.1(b) below, the failure to elect a remedy with respect to the
subject Adverse Act within the time periods provided in the preceding paragraph
shall be conclusively presumed to be a waiver of the remedies provided in this ARTICLE
XII with respect to the subject Adverse Act.

Unless resort to such
remedy has been waived as set forth in the immediately preceding paragraph, the
Company shall be entitled to recover from the Adverse Member in an appropriate
proceeding any and all damages, losses and expenses (including reasonable
attorneys’ fees and disbursements) (collectively, “Damages”) suffered or
incurred by the Company as a result of such Adverse Act; provided, that,
the Company shall not have or assert any claim against the Adverse Member for
punitive Damages or for indirect, special or consequential Damages suffered or
incurred by the Company as a result of an Adverse Act; provided, further, that the amount the Company may recover in
any action for Damages shall be reduced by an amount equal to any positive
difference between the Net Equity Value of the Adverse Member’s Units and the
applicable Buy-Sell Price.

 

45

 

The resort to any remedy
pursuant to this Section 12.1(a) shall not for any purpose be deemed to be
a waiver of any remedy not described in this Section 12.1(a) and otherwise
available hereunder or under applicable law.

(b)           If the Company is
dissolved pursuant to Section 13.1 below at any time as a result of a Dissolution
Event that occurs prior to a remedy having been elected pursuant to
Section 12.1(a) above with respect to any Adverse Member, the time periods
for such election shall thereupon expire and the Management Committee shall
deduct from any amounts to be paid to such Adverse Member pursuant to Section 13.2
below that amount which it reasonably estimates to be sufficient to compensate each
Member that is not an Adverse Member for Damages incurred by such Member as a
result of the Adverse Act (subject to the limitations of Section 12.1(a)
above) and shall pay the same to the such Member on behalf of the Adverse
Member.

12.2         Adverse
Act Purchase.

(a)           Determination of
Net Equity Value of Adverse Member’s Units. 
Any Preferred Member that is not an Adverse Member or an Affiliate of an
Adverse Member may make an election pursuant to Section 12.1(a)(i) above
to commence the procedures set forth in this Section 12.2 by written
notice (the “Election Notice”) to the Company and each Member (including
the Adverse Member).  Following the
giving of such Election Notice, the Net Equity Value of the Adverse Member’s
Units shall be determined as of the last day of the Fiscal Quarter immediately
preceding the Fiscal Quarter in which the Election Notice is given, and the
Adverse Member shall be obligated to sell all but not less than all of the
Adverse Member’s Units in accordance with this Section 12.2 and subject to
Section 11.10 above.  The purchase price
for such Units (the “Buy-Sell Price”) shall be equal to (i) in the case
of any Adverse Act specified in clause (ii) or (iv) of the definition of “Adverse
Act,” the Net Equity Value thereof, and (ii) in the case of any Adverse Act
specified in clause (i), (iii), (v), (vi), (vii) or (viii) of the definition of
“Adverse Act,” 80% of the Net Equity Value thereof.  The Election Notice shall designate the First
Appraiser and the Adverse Member shall appoint the Second Appraiser within ten
Business Days of receiving the Election Notice.

(b)           Election to
Purchase Units of Adverse Member.  The
Management Committee (not including any Manager designated by an Adverse Member
or who is an Affiliate of an Adverse Member) shall, until the 30th
day following the day on which notice of the Adverse Member’s Net Equity Value
is given pursuant to Section 12.3 below (the “First Election Period”),
have the right, by written notice to the Members, to cause the Company to purchase,
or designate a third party to purchase, all or any portion of the Units of the
Adverse Member, which written notice shall state the number of Preferred Units and
Common Units that the Company or such designated third party is purchasing.  If the Company or such designated third party
is purchasing less than all of the Units of the Adverse Member (such remaining
units, the “Unpurchased Units”), then each Preferred Member that is not
an Adverse Member or an Affiliate of an Adverse Member shall, until the 30th
day following the earlier of the receipt of the Company’s notice during the
First Election Period or the expiration of the First Election Period (the “Second
Election Period”), have the right, by written notice to the Members, to 

 

46

 

purchase, or
designate a third party to purchase, all or any portion of the Unpurchased
Units, which notice shall state the number of remaining Preferred Units and
Common Units that such Preferred Member that is not an Adverse Member or an
Affiliate of an Adverse Member (in each case, a “Purchasing Member”) is
willing to purchase (each, a “Purchase Commitment”).  If the aggregate Purchase Commitments made by
Purchasing Members are equal to at least 100% of the Unpurchased Units, then the
Purchasing Members shall be obligated to purchase, and the Adverse Member shall
be obligated to sell to such Purchasing Members, 100% of the Unpurchased Units
(with each Purchasing Member’s Purchase Commitment with respect to Preferred
Units and/or Common Units reduced, if necessary, by the Management Committee
(not including any Manager designated by an Adverse Member or who is an
Affiliate of an Adverse Member) pro rata based
on Preferred Percentage Interest).  If following the completion of the
procedure set forth in this Section 12.2(b), all of the Units of the Adverse
Member are not designated for sale to the Company and/or the Purchasing Members,
the Adverse Member shall be under no obligation to sell any Units pursuant to
this ARTICLE XII.

(c)           Terms
of Purchase; Closing.

(i)            The closing of the purchase and sale
of the Adverse Member’s Units shall occur at the principal office of the
Company at 10:00 a.m., local time, on the first Business Day occurring on or
after the 30th day following the last day of the First Election
Period or the Second Election Period, whichever is the last applicable period, subject
to Section 12.5 below.  At the
closing, the purchaser or purchasers of the Adverse Member’s Units shall pay to
the Adverse Member, by cash or other immediately available U.S. funds, the Buy-Sell
Price per Preferred Unit for each Preferred Unit and the Buy-Sell Price per
Common Unit for each Common Unit, and the Adverse Member shall deliver to such
purchaser or purchasers good title, free and clear of any liens or Encumbrances
(other than those created by this Agreement), to such Units thus purchased.

(ii)           At the closing, the Company and the Members
shall execute such documents and instruments of conveyance as may be reasonably
necessary or appropriate to effectuate the transactions contemplated hereby,
including the Transfer of Units to the Purchasing Members and the assumption by
each Purchasing Member of the Adverse Member’s obligations with respect to such
Units.  The Company and each Member shall
bear its own costs of such Transfer and closing, including attorneys’ fees and
filing fees.  The cost of determining Net
Equity Value shall be borne one-half by the Adverse Member and one-half by the Company.

(iii)          If requested by a Member, the Adverse
Member (except in respect of the gaming operations described in Sections 1.9(a)(iv),
(v) and (vi) above) (and (A) if the Adverse Act is with respect to Millennium
Gaming and is an Adverse Act specified in clause (i), (iii), (iv), (v), (vi) or
(vii), then each of Paulos and/or Wortman (except in respect of the gaming
operations described in Sections 1.9(a)(iv), (v) and (vi) above) and (B) if the
Adverse Act is with respect to AcquisitionCo and is an Adverse Act specified in
clause (i), (iii), (iv), (v), (vi) or (vii), then each of manager of
AcquisitionCo and/or each Upper Tier Holder of AcquisitionCo (except in respect
of the gaming operations described in Sections 1.9(a)(iv), (v) 

 

47

 

and (vi) above) holding a Nevada gaming license), shall,
at or prior to the closing, execute a non-competition agreement in favor of,
and reasonably acceptable to, such Member and its Affiliates for a term not to
exceed four years following such closing and with a geographic scope not to
exceed a five-mile radius from any Company gaming property then in operation or
Company gaming property or gaming opportunity in active development.

12.3         Net
Equity Value.

(a)           The “Net Equity
Value” of a Member’s Units, as of any date, shall be the amount that would
be distributed to such Member with respect to the applicable Units in
liquidation of the Company pursuant to Section 13.2 below if (i) the
Company’s Business were sold substantially as an entirety for Gross Appraised
Value, (ii) the Company paid, or established reserves pursuant to Section 13.2
below for the payment of, all Company liabilities, and (iii) the Company
distributed the remaining proceeds to the Members in liquidation, all as of
such date.

(b)           The Net Equity Value
of a Member’s Units shall be determined, without audit or certification, from
the books and records of the Company by the Company’s accountants.  The Net Equity Value of a Member’s Units
shall be determined within 30 days of the day upon which the accountants are
apprised in writing of the Gross Appraised Value of the Property of the Company,
and the amount of such Net Equity Value shall be disclosed to the Company and
each of the Members by written notice. 
The Net Equity Value determination of the accountants shall be final and
binding in the absence of a showing of manifest error.

12.4         Gross
Appraised Value.

(a)           “Gross Appraised
Value,” as of any date, shall be equal to the fair market value of Property
of the Company as of such day.  As used
herein, as of any date, “fair market value” of the Property means the price at
which a willing seller would sell, and a willing buyer would buy, the Property,
free and clear of all liens, security interests or other encumbrances, in an
arm’s length transaction for cash, without time constraints and without being
under any compulsion to buy or sell; provided, that, any such
determination shall incorporate into its analysis the effect, if any, on the
value of such Property of the departure of a Member or any of its equityholders,
if the fair market value determination relates to a purchase and sale that
would result in such departure.

(b)           Each provision of
this Agreement that requires a determination of Gross Appraised Value also
provides the manner and time for the appointment of two appraisers (the “First
Appraiser” and the “Second Appraiser”).  If the Second Appraiser is not timely
designated, the determination of the Gross Appraised Value shall be made by the
First Appraiser.  The First Appraiser, or
each of the First Appraiser and the Second Appraiser if the Second Appraiser is
timely designated, shall submit its determination of the Gross Appraised Value
to the Company, the Members and the accountants of the Company within 30 days
of the date of its selection (or the selection of the Second Appraiser, as applicable).  If there is a First Appraiser and a Second
Appraiser and their respective determinations of the Gross Appraised Value vary
by less than 10% of the higher determination, the Gross Appraised Value shall
be the average of 

 

48

 

the two
determinations.  If such determinations
vary by 10% or more of the higher determination, the two Appraisers shall
promptly designate a third appraiser (the “Third Appraiser”).  Neither the Company nor any Member shall
provide, and the First Appraiser and Second Appraiser shall be instructed not
to provide, any information to the Third Appraiser as to the determinations of
the First Appraiser or the Second Appraiser or otherwise influence such Third
Appraiser’s determination in any way. 
The Third Appraiser shall submit its determination of the Gross
Appraised Value to the Company, the Members and the accountants of the Company within
30 days of the date of its selection. 
The Gross Appraised Value shall be equal to the average of the two closest
of the three determinations; provided, that,
if the difference between the highest and middle determinations is no more than
105% and no less than 95% of the difference between the middle and lowest
determinations, then the Gross Appraised Value shall be equal to the middle
determination.  The determination of the
Gross Appraised Value in accordance with the foregoing procedure shall be final
and binding on the Company and each Member. 
If any appraiser is only able to provide a range in which Gross
Appraised Value would exist, the average of the highest and lowest value in
such range shall be deemed to be such appraiser’s determination of Gross
Appraised Value.  Each appraiser selected
pursuant to the provisions of this Section 12.4 shall be a qualified
Person with prior experience in appraising businesses comparable to the
Business of the Company and that is not an interested person with respect to,
or Affiliate of, any Member.

12.5         Extension of Time.  If any Transfer of a Member’s Units in
accordance with ARTICLE XI above or this ARTICLE XII requires the consent,
approval, waiver or authorization of any governmental authority or any third
party as a condition to the lawful and valid Transfer of such Member’s Units to
the proposed transferee thereof, then each of the time periods provided in ARTICLE
XI above or this ARTICLE XII, as applicable, for the closing of such Transfer
shall be suspended for the period of time during which any such consent,
approval, waiver or authorization is being diligently pursued; provided,
that, in no event shall the suspension of any time period pursuant to
this Section 12.5 extend for more than 180 days without the prior written
consent of all of the Preferred Members. 
The Company and each Member shall use its diligent efforts to obtain, or
to assist in obtaining, any such consent, approval, waiver or authorization,
and shall cooperate and use its diligent efforts to respond as promptly as
practicable to all inquiries received by either the Company or a Member from
any governmental authority for initial or additional information or
documentation in connection therewith.

ARTICLE XIII

DISSOLUTION AND WINDING UP

13.1         Dissolution Events.

(a)           The Company shall dissolve and shall
commence winding up and liquidating upon the first to occur of any of the
following (each a “Dissolution Event”):

 

49

 

(i)            the unanimous vote of the Preferred Members
to dissolve, wind up, and liquidate the Company; and

(ii)           a judicial determination that an
event has occurred that makes it unlawful, impossible or impractical for the
Company to carry on the Business.

(b)           The Members hereby agree that,
notwithstanding any provision of the Act, the Company shall not dissolve prior
to the occurrence of a Dissolution Event.

13.2         Winding Up.  Upon the occurrence of (i) a Dissolution
Event or (ii) the determination by a court of competent jurisdiction that the
Company has dissolved prior to the occurrence of a Dissolution Event, the
Company shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Members, and no Member shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the Business
and affairs of the Company; provided, that, all covenants
contained in this Agreement and obligations provided for in this Agreement
shall continue to be fully binding upon the Members until such time as the
Property of the Company has been distributed pursuant to this Section 13.2 and
the Articles of Organization have been canceled pursuant to the Act.  The Liquidator shall be responsible for
overseeing the winding up and dissolution of the Company, which winding up and
dissolution shall be completed within 90 days of the occurrence of a
Dissolution Event.  The Liquidator shall
take full account of the Company’s liabilities and Property and shall cause such
Property or the proceeds from the sale thereof (as determined pursuant to
Section 13.10 below), to the extent sufficient therefor, to be applied and
distributed, to the maximum extent permitted by law, in the following order:

(a)           First, to creditors (including
Members and Managers who are creditors, to the extent otherwise permitted by
law and this Agreement) in satisfaction of all of the Debt of the Company and
other liabilities (whether by payment or the making of reasonable provision for
payment thereof), other than liabilities for which reasonable provision for
payment has been made and liabilities for interim distributions to the Members
or distributions to resigning Members;

(b)           Second, except as provided in this
Agreement, to the Members and former Members in satisfaction of liabilities for
interim distributions to the Members or distributions to resigning Members; and

(c)           The balance, if any, to the Members
in accordance with the order of priority set forth in Section 4.1 above.

Subject to Section 13.10
below, no Member or Manager shall be entitled to receive additional
compensation for any services performed pursuant to this ARTICLE XIII.

13.3         Deficit Capital Accounts.  If any Member has a deficit balance in his
Capital Account (after giving effect to all contributions, distributions and
allocations for all Allocation Years, including the Allocation Year during which
such liquidation occurs), such 

 

50

 

Member shall have no obligation to make any
contribution to the capital of the Company with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any other
Person for any purpose whatsoever.

13.4         Holdback.  In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise
be made to the Members pursuant to this ARTICLE XIII may be:

(a)           Distributed to a trust established
for the benefit of the Members for the purposes of liquidating Company assets,
collecting amounts owed to the Company, and paying any contingent or unforeseen
liabilities or obligations of the Company. 
The assets of any such trust shall be distributed to the Members from
time to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to Section 13.2 above;
or

(b)           Withheld to provide a reasonable
reserve for Company liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Company, provided
that such withheld amounts shall be distributed to the Members as soon as
practicable.

13.5         Deemed Contribution and Distribution.  In the event the Company is “liquidated”
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has occurred, the Property shall
not be liquidated, the Company’s Debt and other liabilities shall not be paid
or discharged, and the Company’s affairs shall not be wound up.  Instead, solely for  federal income tax purposes, the Company
shall be deemed to have contributed all Property and liabilities to a new
limited liability company and, immediately thereafter, the Company will be
deemed to liquidate by distributing interests in the new limited liability
company to the Members.

13.6         Rights of Members.  Except as otherwise provided in this Agreement,
each Member shall look solely to the Property of the Company for the return of
its Capital Contribution and has no right or power to demand or receive
Property other than cash from the Company. 
If the assets of the Company remaining after payment or discharge of the
debts or liabilities of the Company are insufficient to return such Capital
Contribution, the Members shall have no recourse against the Company or any
other Member or Manager.

13.7         Notice of Dissolution/Termination.

(a)           In the event a Dissolution Event
occurs or an event occurs that would, but for the provisions of Section 13.1
above, result in a dissolution of the Company, the Management Committee shall,
within 30 days thereafter, provide written notice thereof to each of the
Members and to all other parties with whom the Company regularly conducts Business
(as determined in the discretion of the Management Committee).

(b)           Upon completion of the distribution
of the Property of the Company as provided in this ARTICLE XIII, the Company
shall be terminated, and the 

 

51

 

Liquidator shall cause the filing of the Articles of
Dissolution and shall take all such other actions as may be necessary to
terminate the Company.

13.8         Allocations During Period of
Liquidation.  During the Liquidation
Period, the Members shall continue to share Profits, Losses, and other items of
Company income, gain, loss or deduction in the manner provided in ARTICLE III
above.

13.9         Character of Liquidating
Distributions.  All payments made in
liquidation of the interest of a Member in the Company shall be made in
exchange for the interest of such Member in Property pursuant to Code Section
736(b)(1), including the interest of such Member in Company goodwill.

13.10       The
Liquidator.

(a)           Fees.  The Company is authorized to pay a reasonable
fee to the Liquidator for its services performed pursuant to this ARTICLE XIII,
and to reimburse the Liquidator for its reasonable costs and expenses incurred
in performing those services.

(b)           Indemnification.  The Company shall indemnify, hold harmless,
and pay all judgments and claims against such Liquidator or any directors, managers,
general partners, officers, employees or agents of the Liquidator relating to
any liability or damage incurred by reason of any act performed or omitted to
be performed by the Liquidator, or any directors, managers, general partners, officers,
employees or agents of the Liquidator, in connection with the liquidation of
the Company, including reasonable attorneys’ fees incurred by the Liquidator or
any such director, manager, general partner, officer, employee or agent in
connection with the defense of any action based on any such act or omission,
which attorneys’ fees may be paid as incurred, except to the extent such
liability or damage is caused by the fraud, gross negligence, or intentional
misconduct of, or a knowing violation of the laws by, the Liquidator which was
material to the cause of action.

13.11       Form of Liquidating Distributions.  For purposes of making distributions required
by Section 13.2 above, the Liquidator may determine whether to distribute all
or any portion of the Property of the Company in-kind or to sell all or any
portion of the Property of the Company and distribute the proceeds therefrom.

13.12       Reserves.  In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise
be made to the Members pursuant to this ARTICLE XIII may be withheld to provide
a reasonable reserve for Company liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment obligations owed to the
Company; provided, that, such withheld amounts shall be
distributed to the Members as soon as practicable.

 

52

ARTICLE XIV

MISCELLANEOUS

14.1         Further Assurances.  Each Member shall use such Member’s best
efforts in good faith (a) to take, or cause to be taken, all actions, (b) to
do, or cause to be done, all things, and (c) to execute and deliver all
additional certificates, documents, instruments or agreements, in each case
reasonably necessary, proper or advisable to give full force and effect to all
of the terms and provisions of this Agreement.

14.2         Notices.  All notices, requests and other
communications hereunder must be in writing and shall be deemed to have been
duly given only if delivered personally or by facsimile transmission or
internationally recognized courier, to the parties at the following addresses
or facsimile numbers:

(a)           If
to the Company, to:

Cannery Casino Resorts,
LLC

221 North Rampart
Boulevard

Las Vegas, NV 89145

Attn:     William J. Paulos

              William C. Wortman

Fax:       (702) 507-5992

 

with a copy to:

Oaktree Capital
Management, LLC

333 South Grand Avenue,
28th Floor

Los Angeles, CA 90071

Attn:     Stephen A. Kaplan, Principal

Fax:       (213)
830-6293

(b)           If to a Manager, to the address or
facsimile number set forth on Appendix C; and

(c)           If to a Member, to the address or
facsimile number set forth on Appendix A.

All such notices,
requests and other communications shall (i) if delivered by facsimile
transmission, be deemed given upon electronic confirmation of receipt, and
(ii) if delivered personally or by internationally recognized courier, be
deemed given upon actual receipt by the person to receive delivery.  Any party hereto may from time to time change
such party’s address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.

14.3         Confidentiality.  The Preferred Members shall mutually agree on
the form and content of any public announcement, whether by press release or
otherwise, with respect to 

 

53

 

this Agreement or any of the discussions, negotiations
or transactions relating hereto.  Each Member
shall not, and shall cause its Affiliates and any of such Member’s or such
Affiliates’ directors, managers, general partners, officers, employees, agents
and representatives not to, make any public announcement, whether by press
release or otherwise, or otherwise disclose the terms of this Agreement or any
of the discussions, negotiations or transactions relating hereto, except (a)
with the prior written consent of all Preferred Members, (b) such disclosures
as are consistent with press releases or other formal public disclosure made by
the Company, or (c) as such disclosure may be made in the course of normal
reporting practices by a Member to its equityholders, directors, managers, general
partners, officers, outside accountants and outside counsel.  In addition, notwithstanding the previous
sentence, a Member may disclose the terms of this Agreement or any of the
discussions, negotiations or transactions relating hereto if and to the extent
required by order of any governmental authority or otherwise required by law; provided,
that, in each case, such party shall first notify the other Members of
such requirement, permit the other Members to contest such requirement, and
cooperate with the other Members in limiting the scope of the proposed
disclosure and/or obtaining appropriate further means for protecting the
confidentiality of such disclosure.  Each
Member shall not, and shall cause its Affiliates and any of such Member’s or
such Affiliates’ directors, managers, general partners, officers, employees,
agents and representatives not to, use or disclose any confidential or
proprietary information of any Member or the Company, except in each case in
connection with the transactions contemplated hereby or as otherwise required
by law.  Information that is available,
or becomes available, to the public through no fault or action by such Member
or its Affiliates or any of such Member’s or such Affiliates’ directors,
managers, general partners, officers, employees, agents or representatives
shall, in each case, not be deemed “confidential information.”

14.4         Governing Law.  The Members expressly agree that all the
terms and conditions hereof shall be construed under the laws of the State
of Nevada applicable to agreements made and to be performed entirely
therein.

14.5         Jurisdiction; Waiver of Jury Trial.  Each Member hereby consents to the exclusive
jurisdiction of the state and federal courts sitting in Reno, Nevada in any
action on a claim arising out of, under or in connection with this Agreement or
the transactions contemplated by this Agreement.  Each of the Members irrevocably waives to the
extent permitted by law, all rights to trial by jury and all rights to immunity
by sovereignty or otherwise in any action, proceeding or counterclaim arising
out of or relating to this Agreement.

14.6         Specific Performance.  Each Member agrees with the other Members
that the other Members would be irreparably damaged if any of the provisions of
this Agreement are not performed in accordance with their specific terms and
that monetary damages would not provide an adequate remedy in such event.  Accordingly, it is agreed that, in addition
to any other remedy to which the non-breaching Members may be entitled, at law
or in equity, the non-breaching Members shall be entitled to injunctive relief
to prevent breaches of the provisions of this Agreement and specifically to
enforce the terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having subject matter jurisdiction
thereof.

 

54

 

14.7         Entire Agreement.  This Agreement sets forth the entire
agreement of the parties hereto and thereto relating to the subject matter
hereof and thereof and supersedes all prior agreements and understandings of
the parties hereto in connection therewith.

14.8         Amendment.  This Agreement may be amended, supplemented
or modified only by a written instrument duly executed by or on behalf of each Preferred
Member of the Company.

14.9         Waiver.  Any term or condition of this Agreement may
be waived at any time by the Member that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the Member waiving such term or
condition.  No waiver by any Member of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. 
No delay or omission in the exercise of any power, remedy or right
herein provided or otherwise available to any Member will impair or affect the
right of such Member thereafter to exercise the same.  Any extension of time or other indulgence
granted to any Member will not otherwise alter or affect any power, remedy or
right with respect to any other Member, or the obligations of the Member to
whom such extension or indulgence is granted. All remedies, either under this
Agreement or by law or otherwise afforded, shall be cumulative and not
alternative.

14.10       Invalid Provisions.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any Member under this Agreement shall not be
materially and adversely affected thereby, (a) such provision shall be fully
severable, (b) this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (c) the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.

14.11       No Assignment; Binding Effect.  Except pursuant to a Transfer permitted under
Sections 11.1 and 11.2 above, neither this Agreement nor any right, interest or
obligation hereunder may be assigned by any Member without the prior written
consent of the other Members and any attempt to do so shall be void.  Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the Members
and their respective successors permitted transferees and assigns.

14.12       Third Party Beneficiaries.  This Agreement shall be binding upon and
inure solely to the benefit of the Members, their respective successors and
permitted assigns, and nothing herein, express or implied, is intended to or
shall confer upon any other Persons any legal or equitable right, benefit, or
remedy of any nature whatsoever, except as expressly set forth herein.

14.13       Construction.  Every term and provision of this Agreement
shall be construed simply according to its fair meaning and not strictly for or
against any Member.

 

55

 

14.14       Incorporation by Reference.  Every Appendix and Exhibit attached hereto
and referred to herein is incorporated in this Agreement by reference, unless
this Agreement expressly otherwise provides.

14.15       Headings.  The headings used in this Agreement have been
inserted for convenience of reference only, and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof.

14.16       Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

[Remainder of
Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56

 

IN
WITNESS WHEREOF,
the Members have executed and entered into this Operating Agreement of the
Company as of the day first above set forth.

	
   

  	
  MILLENNIUM GAMING, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OCM ACQUISITIONCO, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

AGREED AND ACKNOWLEDGED

AS OF THE DAY FIRST SET FORTH ABOVE

BY:

 

	
  WILLIAM J. PAULOS

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  WILLIAM C. WORTMAN

  
	
   

  
	
   

  

 

 

57

 

APPENDIX A

Attached to and Made a Part of

the Amended and Restated Operating Agreement of

Cannery Casino Resorts, LLC

(a Nevada Limited
Liability Company)

Ownership
of the Company

	
  Member

  	
   

  	
  Restated 

  Capital 

  Account

  	
   

  	
  Preferred 

  Units

  	
   

  	
  Common 

  Units

  	
   

  	
  Preferred 

  Percentage 

  Interest

  	
   

  	
  Percentage 

  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Millennium Gaming, Inc.

  	
   

  	
  $

  	
  128,000,000

  	
   

  	
  128,000

  	
   

  	
  0

  	
   

  	
  66.67

  	
  %

  	
  [66.67]

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  c/o Cannery Casino Resorts, LLC

  221 North Rampart Boulevard

  Las Vegas, NV 89145

  Attn:       William
  J. Paulos
                William C. Wortman

  Fax:         (702)
  507-5992

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OCM AcquisitionCo, LLC

  	
   

  	
  $

  	
  64,000,000

  	
   

  	
  64,000

  	
   

  	
  0

  	
   

  	
  33.33

  	
  %

  	
  [33.33]

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  c/o Oaktree Capital Management, LLC 333 South Grand
  Avenue, 28th Floor Los Angeles, CA 90071

  Attn:       Stephen
  A. Kaplan 
                Principal

  Fax:         (213)
  830-6293

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Equity Participation], LLC

  	
   

  	
  $

  	
  0

  	
   

  	
  0

  	
   

  	
  [0]

  	
   

  	
  0.00

  	
  %

  	
  [0.00]

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [insert address]

  Attn:       [insert
  name]
                [insert title]

  Fax:         [insert
  fax number]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  192,000,000

  	
   

  	
  192,000

  	
   

  	
  [0]

  	
   

  	
  100.00

  	
  %

  	
  100.00

  	
  %

  

 

 

Appendix A-1

 

APPENDIX B

Attached to and Made a Part of

the Amended and Restated Operating Agreement of

Cannery Casino Resorts, LLC

(a Nevada Limited
Liability Company)

Definitions

“Accepting Members” has the meaning ascribed to it in Section 11.3(d)
above.

“AcquisitionCo” means OCM AcquisitionCo, LLC, a Nevada limited
liability company.

“AcquisitionCo Manager Funds” has the meaning ascribed to it in
Section 7.1(b) above.

“AcquisitionCo Manager Matters” means those matters requiring the
approval of the “Oaktree Managers” (as such term is defined in the Management
Agreement) as set forth in the Management Agreement.

“AcquisitionCo Managers” has the meaning ascribed to it in
Section 5.1(b) above.

“AcquisitionCo Parent” means any Person that holds all of the
outstanding equity of AcquisitionCo and no other material assets or liabilities.

“Act” means Chapter 86 of the NRS, as amended from time to time
(or any corresponding provisions of succeeding law).

“Additional Capital Contributions” means, with respect to each
Member, the Capital Contributions made by such Member pursuant to Section 2.3
above.  In the event Units are
Transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Additional Capital Contributions of the transferor to the
extent they relate to the Units Transferred.

“Adjusted Capital
Account Deficit” means, with respect to any Member, the deficit balance, if
any, in such Member’s Capital Account as of the end of the relevant Allocation
Year, after giving effect to the following adjustments:

(i)            Credit
to such Capital Account any amounts that such Member is deemed to be obligated
to restore pursuant to the penultimate sentences in Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and

(ii)           Debit
to such Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5)
and 1.704-1(b)(2)(ii)(d)(6).

 

 

Appendix B-1

 

The foregoing definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

“Adverse Act” means, with respect to a Member,
any of the following:

(i)            a Member Unit Transfer
with respect to such Member, other than as approved by the Management Committee
pursuant to Section 5.6(g) above or permitted by Section 11.2 above;

(ii)           in the case of
Millennium Gaming only, the death or incapacity of both Paulos and Wortman;

(iii)          the uncured
material breach of this Agreement by such Member or any of its Affiliates; provided,
that, such Member has been provided with prior written notice of such
breach by the Company or another Member and (A) if such breach can reasonably
be cured within 30 days of the receipt of such written notice, has failed to
cure such breach within such 30-day period or (B) if such breach cannot
reasonably be cured within such 30-day period (but is otherwise curable), has
failed to commence the curing of such breach within such 30-day period (and
thereafter use commercially reasonable efforts to cure such breach as promptly
as practicable) or, in any event, has failed to cure such breach within a
reasonable period of time of the receipt of such written notice;

(iv)          the uncured material breach of the
Management Agreement (or any successor management agreement) by (A) if such
Member is Millennium Gaming: Paulos, Wortman or any Affiliate of Paulos and/or
Wortman (including MMG II and any permitted assignee of MMG II) and (B) if such
Member is AcquisitionCo: the Company (but only if such uncured material breach
was caused solely by an action or omission of the AcquisitionCo Managers); provided,
that, in either case, such breach results in the termination of the Management
Agreement (or any successor management agreement);

(v)           any event giving rise to an Adverse
Act under 11.2(c) above occurs with respect to such Member;

(vi)          the revocation, suspension or
voluntary relinquishment of a Gaming Approval issued to such Member or any Upper
Tier Holder of such Member by any applicable Gaming Authority under the
applicable Gaming Laws and required in order for such Member to hold an equity
interest in the Company; provided, that, with respect to a
revocation or suspension, such revocation or suspension is not resolved by such
Member within such period, if any, afforded such Member by the applicable
Gaming Authority or under the applicable Gaming Laws;

(vii)         any dissolution or liquidation of such
Member or the taking of any action by its directors, managers, general partners
or equityholders looking to the dissolution or liquidation of such Member
(unless taken in furtherance of a pending dissolution of the

 

Appendix B-2

 

Company), unless substantially all assets of such
Member are transferred or are to be transferred to a Wholly Owned Affiliate of
such Member; or

(viii)        the Bankruptcy of such Member or the
occurrence of any other event that would permit a trustee or receiver to acquire
control of the affairs or assets of such Member.

“Adverse Member” means any Member with respect to whom an
Adverse Act has occurred.

“Affiliate” means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any director, manager, general partner, officer or trustee of
such Person, or (iii) any Person who is an director, manager, general partner, officer
or trustee of any Person described in clauses (i) or (ii) of this
sentence.  For purposes of this
definition, the terms “controlling,” “controlled by” or “under common control
with” mean the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person or entity, whether
through the ownership of voting securities, by contract or otherwise, or the
power to elect at least 50% of the directors, managers, general partners or
persons exercising similar authority with respect to such Person or entity.  Notwithstanding the foregoing, Paulos,
Wortman and Millennium Gaming shall be deemed to be “Affiliates” of one
another, and the Company shall not be deemed to be an “Affiliate” of any Member.

“Agreement” or “Operating Agreement” means this Operating
Agreement of Cannery Casino Resorts, LLC, including all appendices, exhibits,
annexes and schedules attached hereto, as amended from time to time.

“Allocation Year” means (i) the period commencing on the Effective
Date and ending on December 31 of that same calendar year, (ii) any
subsequent 12-month period commencing on January 1 and ending on December
31, or (iii) any portion of the period described in clauses (i) or (ii) for
which the Company is required to allocate Profits, Losses and other items of
Company income, gain, loss or deduction pursuant to ARTICLE III above.

“Articles of Dissolution” means articles filed in accordance
with Sections 86.531 and 86.541 of the Act.

“Articles of Organization” means the Articles of Organization of
the Company filed with the Secretary of State of the State of Nevada pursuant
to the Act to form the Company, as amended, modified, supplemented or restated
from time to time.

“Auction” has the meaning ascribed to it in Section 11.4(b)
above.

“Auctioned Equity” has the meaning ascribed to it in Section 11.4(b)
above.

“Bankruptcy” means, with respect to any Person, the occurrence
of one or more of the following events:

 

Appendix B-3

 

(i)            such Person files a
voluntary petition seeking relief under Chapter 7 of the Bankruptcy Code (or
analogous applicable bankruptcy law in any non-U.S. jurisdiction, excluding
bankruptcy laws relating to reorganizations or restructurings similar to Chapter
11 of the Bankruptcy Code) (collectively, “Chapter 7”) or, after filing a
voluntary petition seeking relief under Chapter 11 of the Bankruptcy Code (or
any similar bankruptcy laws relating to reorganizations or restructurings in
any non-U.S. jurisdiction) (collectively, “Chapter 11”), consents to the
conversion of that case to one under Chapter 7; or

(ii)           an involuntary petition under Chapter
7 is filed against such Person that continues undismissed for 60 days; or

(iii)          such Person files a voluntary petition
seeking relief under Chapter 11, or an involuntary petition under Chapter 11 is
filed against such Person that continues undismissed for 60 days; or

(iv)          a court of competent jurisdiction
enters an order (A) appointing a trustee (including trustee under Chapter 11 of
the Bankruptcy Code), receiver, liquidator, conservator, sequestrator,
custodian or other similar official for such Person or for all or substantially
all of its property or assets, or (B) finding that such Person is insolvent, in
each case only if such order is not vacated or stayed within 60 days; or

(v)           such Person makes a general
assignment for the benefit of its creditors.

Notwithstanding (i) through (v) above, in the event that this Agreement
or any material provision hereof is rejected in any proceeding, a Bankruptcy
shall immediately exist.

“Bid Deadline” has the meaning ascribed to it in Section 11.4(d)
above.

“Book-Up Event” has the meaning ascribed to it in the definition
of Gross Asset Value.

“Business” means activities related to the development and
management of gaming activities conducted by the Company’s subsidiaries, and activities
as may be necessary, appropriate, proper, advisable, incidental or convenient
to or in furtherance of the promotion or conduct of the purposes and business
of the Company, in accordance with the terms of this Agreement.

“Business Day” means any day other than a Saturday, a Sunday or
a day on which banking institutions in Los Angeles, California, or Las Vegas,
Nevada are authorized by law to close.

“Buy-Sell Price”
has the meaning ascribed to it in Section 12.2(a) above.

“Capital Account” means,
with respect to any Member, the Restated Capital Account for such Member maintained
and adjusted in accordance with the following provisions:

 

Appendix B-4

 

(i)            To
each Member’s Capital Account there shall be credited (A) such Member’s Capital
Contributions, (B) such Member’s distributive share of Profits and any items in
the nature of income or gain which are specially allocated pursuant to Section 3.3,
3.4 or 3.5 above, and (C) the amount of any Company liabilities assumed by such
Member or that are secured by any Property distributed to such Member.  The principal amount of a promissory note
which is not readily traded on an established securities market and that is
contributed to the Company by the maker of the note (or a Member related to the
maker of the note within the meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any
Member until the Company makes a taxable disposition of the note or until (and
to the extent) principal payments are made on the note, all in accordance with
Regulations Section 1.704-1(b)(2)(iv)(d)(2);

(ii)           To
each Member’s Capital Account there shall be debited (A) the amount of money
and the Gross Asset Value of any Property distributed to such Member pursuant
to any provision of this Agreement, (B) such Member’s distributive share of
Losses and any items in the nature of expenses or losses which are specially
allocated pursuant to Section 3.3, 3.4 or 3.5 above, and (C) the amount of
any liabilities of such Member assumed by the Company or which are secured by
any Property contributed by such Member to the Company;

(iii)          In
the event Units are Transferred in accordance with the terms of this Agreement,
the transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the Units Transferred; and

(iv)          In
determining the amount of any liability for purposes of subparagraphs (i) and
(ii) above there shall be taken into account Code Section 752(c) and any other
applicable provisions of the Code and Regulations.

The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations. 
In the event the Management Committee shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or that are
assumed by the Company or any Members), the Management Committee may make such
modification; provided, that, it is not likely to have a material
effect on the amounts distributed to any Person pursuant to ARTICLE XIII above upon
the dissolution of the Company.  The Management
Committee also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Members and the amount
of capital reflected on the Company’s balance sheet, as computed for book
purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with Regulations
Section 1.704-1(b).

“Capital Contributions” means, with respect to any Member, the
amount of money and the initial Gross Asset Value of any Property (other than
money) contributed to the 

 

Appendix B-5

 

Company with respect to
the Units in the Company held or purchased by such Member, including Additional
Capital Contributions.

“Code” means the United States Internal Revenue Code of 1986, as
amended from time to time.

“Common Unit” means a common ownership interest in the Company,
including any and all benefits to which the holder of such Common Unit may be
entitled as provided in this Agreement, together with all obligations of such
holder to comply with the terms and provisions of this Agreement.

“Company” means Cannery Casino Resorts, LLC, the limited
liability company formed pursuant to the Articles of Organization, and the
limited liability company continuing the Business of this Company in the event
of dissolution of the Company as herein provided.

“Company Minimum Gain” has the same meaning as the term “partnership
minimum gain” in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

 “Contribution and Unit
Purchase Agreement” means the Contribution and Unit Purchase Agreement,
dated as of May 10, 2005, by and among the Company, Paulos, Wortman, Millennium
Gaming and AcquisitionCo, including all appendices, exhibits, annexes and
schedules attached thereto, as amended from time to time.

“Damages” has the meaning ascribed to it in Section 12.1(a)
above.

“Debt” means (i) any indebtedness for borrowed money or the
deferred purchase price of property as evidenced by a note, bonds or other
instruments, (ii) obligations as lessee under capital leases, (iii) obligations
secured by any mortgage, pledge, security interest, encumbrance, lien or charge
of any kind existing on any asset owned or held by the Company whether or not the
Company has assumed or become liable for the obligations secured thereby, (iv)
any obligation under any interest rate swap agreement, (v) accounts
payable, and (vi) obligations under direct or indirect guarantees of (including
obligations (contingent or otherwise) to assure a creditor against loss in
respect of) indebtedness or obligations of the kinds referred to in clauses
(i), (ii), (iii), (iv) and (v) above; provided, that, Debt shall
not include obligations in respect of any accounts payable that are incurred in
the ordinary course of the Company’s Business and are not delinquent or are
being contested in good faith by appropriate proceedings.

“Debt Documents” shall mean the debt documents relating to
third-party Debt of the Company.

“Depreciation” means, for each Allocation Year, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Allocation Year, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Allocation Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such 

 

Appendix B-6

 

Allocation Year bears to
such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Allocation Year is zero, Depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
Management Committee.

“Dissolution Event” has the meaning ascribed to it in Section 13.1
above.

“Effective Date” has the meaning ascribed to it in the Preamble.

“Election Notice” has the meaning ascribed to it in Section 12.2(a)
above.

“Eligible Operation” has the meaning ascribed to it in the
Management Agreement.

“Encumbrance” means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of others or
restriction, whether on voting, sale, transfer, disposition or otherwise, and whether
imposed by agreement, understanding, law, equity or otherwise.

“Equity Participation LLC” means [Equity Participation], LLC, a
Nevada limited liability company.

“Equity Participation Plan” means the equity participation plan
governing the granting of units in the Equity Participation LLC to key
employees of the Company.

“Exiting Equity” has the meaning ascribed to it in Section 11.4(a)
above.

“Exiting Member” has the meaning ascribed to it in Section 11.4
above.

“Firm Offer” has the meaning ascribed to it in Section 11.3(b)
above.

“First Appraiser” has the meaning ascribed to it in Section 12.4(b)
above.

“First Election Period” has the meaning ascribed to it in
Section 12.2(b) above.

“Fiscal Quarter” means (i) the period commencing on the Effective
Date and ending on the immediately following March 31, June 30, September 30 or
December 31, as the case may be, (ii) any subsequent three-month period
commencing on each of January 1, April 1, July 1 and October 1, and ending on
the last date before the next such date, and (iii) the period commencing on the
immediately preceding January 1, April 1, July 1 or October 1, as the case
may be, and ending on the date on which all Property is distributed to the
Members pursuant to ARTICLE XIII above.

“Fiscal Year” means (i) the period commencing on the Effective
Date and ending on the immediately following December 31, (ii) any subsequent 12-month
period commencing on January 1 and ending on December 31, and (iii) the period
commencing on the immediately 

 

Appendix B-7

 

preceding January 1 and
ending on the date on which all Property is distributed to the Members pursuant
to ARTICLE XIII above.

“GAAP” means United States generally accepted accounting
principles, consistently applied.

“Gaming Adverse Event” means, with respect to a Person:

(i)            the
denial, revocation, suspension or voluntary relinquishment (except in
connection with the disposition of equity or assets of a subsidiary of the
Company) of a required Gaming Approval issued to such Person by any Gaming
Authority; or

(ii)           any
action by such Person that results in (A) a written communication from any Gaming
Authority to the Company advising the Company that, or (B) administrative
action by any Gaming Authority determining that: (x) any required Gaming
Approval by such Gaming Authority with respect to the Company shall be approved
only upon terms and conditions that are unacceptable to the Company (as
determined by the Management Committee, excluding such Person if such Person is
also a Manager), or (y) such Gaming Authority shall revoke or suspend any
existing required Gaming Approval held by the Company or any of its
subsidiaries.

“Gaming Approval”
means, with respect to a Person, a license or finding of suitability required
by a Gaming Authority under the Gaming Laws in order for such Person to hold an
equity interest in the Company or actively engage in the management of the
Company.

“Gaming Authorities”
means those federal, state, local and other governmental, regulatory and
administrative authorities, agencies, boards and officials responsible for or
involved in the regulation of gaming or gaming activities or the sale of liquor
in any jurisdiction and, within the State of Nevada specifically, Nevada Gaming
Authorities.

“Gaming Laws”
means the gaming laws of any jurisdiction or jurisdictions to which the Company
or any of its subsidiaries are, or may at any time become, subject, including
Chapter 463 of the NRS, and the rules and regulations adopted by the Nevada
Gaming Authorities.

“Gross Appraised Value”
has the meaning ascribed to it in Section 12.4(a) above.

“Gross Asset Value”
means with respect to any asset, the asset’s adjusted basis for federal income
tax purposes, except as follows:

(i)            The
initial Gross Asset Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as determined by the Management
Committee;

(ii)           The
Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values (taking Code Section 7701(g) into account),
as 

 

Appendix B-8

 

determined
by the Management Committee, as of the following times: (A) immediately prior
to the acquisition of an additional interest in the Company by any new or
existing Member (a “Book-Up Event”); (B) the distribution by the Company
to a Member of more than a de minimis
amount of Company property as consideration for an interest in the Company; and
(C) the liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, that,
an adjustment described in clauses (A) and (B) of this paragraph shall be made
only if the Management Committee reasonably determines that such adjustment is
necessary to reflect the relative economic interests of the Members in the
Company;

(iii)          The
Gross Asset Value of any item of Company assets distributed to any Member shall
be adjusted to equal the gross fair market value (taking Code Section 7701(g)
into account) of such asset on the date of distribution as determined by the Management
Committee; and

(iv)          The
Gross Asset Values of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Section 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m) and
subparagraph (vi) of the definition of “Profits” and “Losses” or Section 3.3(g)
above; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subparagraph (iv) to the extent that an adjustment
pursuant to subparagraph (ii) is required in connection with a transaction that
would otherwise result in an adjustment pursuant to this subparagraph (iv).

If
the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (i), (ii) or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset, for
purposes of computing Profits and Losses.

“Indemnitee” has the meaning ascribed to it in Section 8.1(i)
above.

“Indemnitor” has the meaning ascribed to it in Section 8.1(i)
above.

“Issuance Items” has the meaning ascribed to it in Section 3.3(h)
above.

“Investment Bank” has the meaning ascribed to it in Section 11.4(b)
above.

“Joinder Agreement” means a written instrument in form and
substance reasonably satisfactory to all Preferred Members pursuant to which
the transferee of Units (i) makes representations and warranties to the Company
and each non-transferring Member equivalent to those set forth in Section 9.2 above,
(ii) accepts, adopts and agrees to be bound by the terms and conditions of this
Agreement, and (iii) assumes all the obligations of, and accept all the
limitations and restrictions imposed on, the transferor Member (and its Managers)
under this Agreement and with respect to the Units Transferred.

 

Appendix B-9

 

“Liquidation Period” means the period commencing on the first
day of the Fiscal Year during which a Dissolution Event occurs and ending on
the date on which all of the assets of the Company have been distributed to the
Members in accordance with Section 13.2 above.

“Liquidator” means AcquisitionCo, or such other Person appointed
and approved by the Management Committee to oversee the liquidation of the
Company.  The Liquidator may be a Manager,
an officer, a Member or any other Person.

“Liquidity Crisis” means a Bankruptcy, an event of default under
a Debt Document of the Company, a failure to maintain positive net working
capital, and an insolvency, in each case that may be avoided or cured by the
making of Additional Capital Contributions.

“Losses” has the meaning ascribed to it in the definition of Profits
and Losses.

“Management Agreement” means the Casino Management Agreement,
dated as of the Effective Date, by and among the Company and its subsidiaries
and MMG II, including all appendices, exhibits, annexes and schedules attached
thereto, as amended from time to time, the form of which is attached as Exhibit
L to the Contribution and Unit Purchase Agreement.

“Management Committee” means the management committee of the
Company, consisting of Managers designated in accordance with Section 5.1 above.

“Manager” means a manager of the Company, designated in
accordance with Section 5.1 above.

“Material Conflict of Interest” means, with respect to a Manager
regarding any matter requiring a vote of the Management Committee, a conflict
of interest arising from (i) such Manager or any of his Affiliates having a
material interest (financial or otherwise) in such matter, other than an
interest solely attributable to an equity interest in the Company, or (ii) any
legal action involving the Company or any of its subsidiaries, on the one hand,
and such Manager or any of his Affiliates, on the other.  For the purpose of clarity, any matter
involving the enforcement of, or the assertion of a breach under, the provisions
of the Management Agreement shall be deemed to give rise to a Material Conflict
of Interest with respect to the Millennium Managers.

“Member” means any Person (i) who is referred to as such on Appendix
A or who has become a substituted Member in accordance with the terms of
this Agreement or who is admitted as a new Member in accordance with the terms
of this Agreement, and (ii) who has not ceased to be a Member.

“Member Nonrecourse Debt” has the same meaning as the term “partner
nonrecourse debt” in Regulations Section 1.704-2(b)(4).

“Member Nonrecourse Debt Minimum Gain” means an amount, with
respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that
would result if such 

 

Appendix B-10

 

Member Nonrecourse Debt
were treated as a Nonrecourse Liability, determined in accordance with
Regulations Section 1.704-2(i)(3).

“Member Nonrecourse Deductions” has the same meaning as the term
“partner nonrecourse deductions” in Regulations Sections 1.704-2(i)(1) and
1.704-2(i)(2).

“Member Unit Transfer” means, with respect to a Member, the
direct Transfer of voting or equity power in such Member or an Upper Tier Equityholder
of such Member; provided, that, (i) the death of one of Paulos or
Wortman (but not both) shall not be deemed to be a “Member Unit Transfer” with
respect to Millennium Gaming, so long as (A) the deceased’s equity units in
Millennium Gaming are Transferred to Wortman or Paulos, as the case may be, and/or
the deceased’s spouse and/or children (subject to compliance with all
applicable conditions on Transfers set forth in this Agreement, including
Sections 11.5 and 11.10 above, and all applicable law, including all applicable
Gaming Laws) and (B) following such death, Wortman or Paulos, as the case may
be, is the holder of a majority of the total equity of, and a majority of the
total voting power in, Millennium Gaming, (ii) the direct Transfer by Wortman
and/or Paulos to Northwestern Mutual Life Insurance Company of equity in
Millennium Gaming (having only proportionate voting rights, with no
supermajority, veto, consent right or separate class protection) with a fair
market value not to exceed $10 million in the aggregate (and, in the
alternative and only with the prior written consent of AcquisitionCo, to be
given or withheld in AcquisitionCo’s sole and absolute discretion, the creation
of an intermediary entity between Millennium Gaming and the Company to effect
such direct Transfer) shall not be deemed to be a “Member Unit Transfer” with
respect to Millennium Gaming, so long as Northwestern Mutual Life Insurance Company
does not receive any voting or other governance rights with respect to the
Company and AcquisitionCo has been permitted no less than ten Business Days to
review the transaction documents relating to such Transfer prior to their
execution, (iii) the indirect Transfer of voting power in AcquisitionCo to an Affiliate
of Oaktree Capital Management, LLC (including a principal thereof) shall not be
deemed to be a “Member Unit Transfer” with respect to AcquisitionCo, (iv) the issuance
of equity interests by OCM InvestCo, LLC, a Nevada limited liability company,
to any Person that is a member of OCM InvestCo, LLC as of the date hereof shall
not be deemed to be a “Member Unit Transfer” with respect to AcquisitionCo, (v)
the repurchase by OCM InvestCo, LLC of non-voting equity interests in OCM
InvestCo, LLC held by any Person that is a non-voting member of OCM InvestCo,
LLC as of the date hereof shall not be deemed to be a “Member Unit Transfer”
with respect to AcquisitionCo, and (vi) the transfer of 0.100 non-voting class
B units of OCM Blocker, LLC, a Delaware limited liability company, to GLCP
Nevada, LLC, a Delaware limited liability company, shall not be deemed to be a “Member
Unit Transfer” with respect to AcquisitionCo.

“Mexican Gaming Opportunities Term Sheet” means the term sheet
attached as Exhibit M to the Contribution and Unit Purchase Agreement.

“MGIM” means MGIM, LLC, a Nevada corporation.

“Millennium Gaming” means Millennium Gaming, Inc., a Nevada
corporation.

 

Appendix B-11

 

“Millennium Managers” has the meaning ascribed to it in Section 5.1(b)
above.

“MMG II” means Millennium Management Group II LLC, a Nevada
limited liability company.

“Negotiation Period” has the meaning ascribed to it in Section 11.4(a)
above.

“Net Cash Flow” means the gross cash proceeds of the Company,
less the portion thereof used to pay or establish reserves for all Company
expenses, debt payments, capital improvements, replacements and contingencies,
all as determined by the Management Committee. 
“Net Cash Flow” shall not be reduced by depreciation, amortization, cost
recovery deductions, or similar allowances, but shall be increased by any
reductions of reserves previously established pursuant to the first sentence of
this definition.

“Net Equity per Preferred Unit” means the Net Equity Value of all
the Preferred Units issued and outstanding, divided by the number of Preferred
Units issued and outstanding.

“Net Equity Value” has the meaning ascribed to it in Section 12.3
above.

“Nevada Gaming Authorities” means the Nevada Gaming Commission,
the Nevada State Gaming Control Board, the Clark County Liquor and Gaming
Licensing Board, the City of Las Vegas, the City of North Las Vegas and the
City of Henderson, and all other state and local regulatory and licensing
bodies with authority over gaming in the State of Nevada and its political
subdivisions.

“Nonrecourse Deductions” has the meaning set forth in
Regulations Sections 1.704-2(b)(1) and 1.704-2(c).

“Nonrecourse Liability” has the meaning set forth in Regulations
Section 1.704-2(b)(3).

“Non-Participating Member” has the meaning ascribed to it in
Section 11.4(b) above.

“Non-Triggering Members” has the meaning ascribed to it in
Section 11.3(b) above.

“NRS” means the Nevada Revised Statutes, as amended from time to
time.

“Offered Equity” has the meaning ascribed to it in Section 11.3(b)
above.

“Offer Notice” has the meaning ascribed to it in Section 11.3(b)
above.

“Offer Period” has the meaning ascribed to it in Section 11.3(c)
above.

“Offer Price” has the meaning ascribed to it in Section 11.3(b)
above.

 

Appendix B-12

 

“Participating Member” has the meaning ascribed to it in Section
11.4(b) above.

“Paulos” means William J. Paulos, an individual.

“Percentage Interest” means, with respect to any Member as of
any date, the ratio (expressed as a percentage) of the number of Units held by
such Member on such date to the aggregate Units held by all Members on such
date.

“Person” means any individual, firm, corporation, partnership,
limited liability company, incorporated or unincorporated association, joint
venture, joint stock company, governmental agency or instrumentality, or other
entity of any kind, or any combination of the foregoing.

“Preferred Member”
means a Member holding Preferred Units.

“Preferred Percentage
Interest” means, with respect to any Preferred Member as of any date, the
ratio (expressed as a percentage) of the number of Preferred Units held by such
Preferred Member on such date to the aggregate Preferred Units held by all Preferred
Members on such date.

“Preferred Unit”
means a preferred ownership interest in the Company, including any and all
benefits to which the holder of such Preferred Unit may be entitled as provided
in this Agreement, together with all obligations of such holder to comply with
the terms and provisions of this Agreement.

“Priority Return”
means, as of any date with respect to any Preferred Member and with respect to
such Preferred Member’s Preferred Units, the excess, if any, of (i) an amount
equal to 12% per annum, determined on the basis of a year of 365 or 366 days,
as the case may be, for the actual number of days elapsed, cumulative and
compounded annually to the extent not distributed, on the average daily balance
of such Preferred Member’s Unreturned Capital from time to time, over (ii) the
aggregate distributions made to such Preferred Member in accordance with
Section 4.1(a)(i) above as of such date.

“Profits” and “Losses”
mean, for each Allocation Year, an amount equal to the Company’s taxable income
or loss for such Allocation Year, determined in accordance with Code
Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments
(without duplication):

(i)            Any
income of the Company that is exempt from federal income tax and not otherwise
taken into account in computing Profits or Losses pursuant to this definition
of “Profits” and “Losses” shall be added to such taxable income or loss;

(ii)           Any
expenditures of the Company described in Code Section 705(a)(2)(B) or treated
as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses 

 

Appendix B-13

 

pursuant
to this definition of “Profits” and “Losses,” shall be subtracted from such
taxable income or loss;

(iii)          In
the event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraphs (ii) or (iii) of the definition of “Gross Asset Value,” the
amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the Gross Asset Value of the asset) or an item of loss (if
the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses;

(iv)          Gain
or loss resulting from any disposition of Property with respect to which gain or
loss is recognized for federal income tax purposes shall be computed by
reference to the Gross Asset Value of the Property disposed of, notwithstanding
that the adjusted tax basis of such Property differs from its Gross Asset
Value;

(v)           In
lieu of the depreciation, amortization, and other cost recovery deductions
taken into account in computing such taxable income or loss, there shall be
taken into account Depreciation for such Allocation Year, computed in
accordance with the definition of Depreciation;

(vi)          To
the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) is required, pursuant to Regulations Section
1.704-(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member’s interest
in the Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) from the disposition of such asset and shall
be taken into account for purposes of computing Profits or Losses; and

(vii)         Notwithstanding
any other provision of this definition, any items which are specially allocated
pursuant to Section 3.3 or 3.4 above shall not be taken into account in
computing Profits or Losses.

The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Section 3.3 or 3.4 above shall
be determined by applying rules analogous to those set forth in subparagraphs
(i) through (vi) above.

“Property” means all real and personal property acquired by the Company,
including cash, and any improvements thereto, and shall include both tangible
and intangible property.

“Proposed Price” has the meaning ascribed to it in Section 11.3(a)
above.

“Proposed Purchaser” has the meaning ascribed to it in Section 11.3(a)
above.

“Purchase Commitment” has the meaning ascribed to it in Section 12.2(b)
above.

 

Appendix B-14

 

“Purchase Offer” has the meaning ascribed to it in Section 11.3(a)
above.

“Purchasing Member” has the meaning ascribed to it in Section 12.2(b)
above.

“Regulations” means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations are
amended from time to time.

“Regulatory Allocations” has the meaning ascribed to it in
Section 3.4 above.

“Restated Capital Account” means, with respect to a Member, the
Capital Account of such Member as of the Effective Date as set forth on Appendix
A.

“Second Appraiser” has the meaning ascribed to it in Section 12.4(b)
above.

“Second Election Period” has the meaning ascribed to it in
Section 12.2(b) above.

“Securities Act” means the Securities Act of 1933, as amended,
including the rules and regulations promulgated thereunder.

“Securities Exchange Act” means the Securities Exchange Act of
1934, as amended, including the rules and regulations promulgated thereunder.

“Senior Officer” shall mean any of the following officers of the
Company (or any officer exercising comparable power or authority): chief
executive officer, president, chief operating officer, chief financial officer,
chief accounting officer, secretary, treasurer, in-house general counsel, head
of mergers and acquisitions, regional vice presidents of operation, and vice
presidents of development or construction.

“Signing Date” means the date of the Contribution and Unit
Purchase Agreement.

“Tax Distribution” has the meaning ascribed to it in Section 4.3(a)
above.

“Tax Matters Member” has the meaning ascribed to it in Section 10.3(b)
above.

“Third Appraiser” has the meaning ascribed to it in Section 12.4(b)
above.

“Transfer” means, as a noun, any voluntary or involuntary
transfer, sale, pledge or hypothecation or other disposition and, as a verb,
voluntarily or involuntarily to transfer, sell, pledge or hypothecate or
otherwise dispose of.

“Triggering Member” has the meaning ascribed to it in Section 11.3
above.

“Unit” means a Preferred Unit or a Common Unit.

“Unpurchased Units” has the meaning ascribed to it in Section 12.2(b)
above.

 

Appendix B-15

 

“Unreturned Capital” means, as of any date with respect to any
Member, the excess, if any, of (i) the sum of (A) the Restated Capital Account
of such Member and (B) any Additional Capital Contributions made by such Member
as of such date, over (ii) the aggregate distributions made to such Member in
accordance with Section 4.1(a)(ii) above as of such date.

“Upper Tier Equityholder” means, with respect to a Person, any
other Person that holds a direct or indirect equity interest in such Person; provided,
that, with respect to AcquisitionCo, an Upper Tier Equityholder shall
not include Oaktree Capital Management, LLC (or any Person holding a direct or
indirect equity interest therein), any principal of Oaktree Capital Management,
LLC, any limited partner of any fund of Oaktree Capital Management, LLC (or any
Person holding a direct or indirect equity interest in any such limited partner),
any Person that is a non-voting member of OCM InvestCo, LLC, a Nevada limited
liability company, as of the date hereof (or any Person holding a direct or
indirect equity interest in any such Person), or GLCP Nevada, LLC, a Delaware
limited liability company (or any Person holding a direct equity interest in
such Person), with respect to, if acquired by GLCP Nevada, LLC, 0.100
non-voting class B units of OCM Blocker, LLC, a Delaware limited liability
company.

“Upper Tier Holder” means, with respect to a Person, any Upper
Tier Equityholder of such Person or any director (or, if the Upper Tier
Equityholder is a limited liability company, manager) or officer of any Upper
Tier Equityholder; provided, that, with respect to AcquisitionCo,
an Upper Tier Holder shall not include Oaktree Capital Management, LLC (or any
Person holding a direct or indirect equity interest therein), any principal of
Oaktree Capital Management, LLC, any limited partner of any fund of Oaktree
Capital Management, LLC (or any Person holding a direct or indirect equity
interest in any such limited partner), any Person that is a non-voting member
of OCM InvestCo, LLC, a Nevada limited liability company, as of the date hereof
(or any Person holding a direct or indirect equity interest in any such
Person), or GLCP Nevada, LLC, a Delaware limited liability company (or any
Person holding a direct equity interest in such Person), with respect to, if
acquired by GLCP Nevada, LLC, 0.100 non-voting class B units of OCM Blocker,
LLC, a Delaware limited liability company.

“Wholly Owned Affiliate” of any Person means (i) an Affiliate of
such Person (A) 100% of the voting stock or beneficial ownership of which is
owned directly by such Person, or by any Person that, directly or indirectly,
owns 100% of the voting stock or beneficial ownership of such Person, or (B) that,
directly or indirectly, owns 100% of the voting stock or beneficial ownership
of such Person, and (ii) any Wholly Owned Affiliate of any Affiliate described
in clause (i)(A) or (B).

“Wortman” means William C. Wortman, an individual.

 

Appendix B-16

 

APPENDIX C

Attached to and Made a Part of

the Amended and Restated Operating Agreement of

Cannery Casino Resorts, LLC

(a Nevada Limited
Liability Company)

Managers

	
  William
  J. Paulos

  	
   

  	
   

  
	
  c/o Cannery Casino
  Resorts, LLC

  	
   

  	
   

  
	
  221 North Rampart
  Boulevard

  	
   

  	
   

  
	
  Las Vegas, NV 89145

  	
   

  	
   

  
	
  Tel:

  	
  (702) 507-5000

  	
   

  	
   

  
	
  Fax:

  	
  (702) 507-5992

  	
   

  	
   

  
	
  E-mail:

  	
  paulos@canneryresorts.com

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  William
  C. Wortman

  	
   

  	
   

  
	
  c/o Cannery Casino
  Resorts, LLC

  	
   

  	
   

  
	
  221 North Rampart
  Boulevard

  	
   

  	
   

  
	
  Las Vegas, NV 89145

  	
   

  	
   

  
	
  Tel:

  	
  (702) 507-5000

  	
   

  	
   

  
	
  Fax:

  	
  (702) 507-5992

  	
   

  	
   

  
	
  E-mail:

  	
  wortman@canneryresorts.com

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AcquisitionCo
  Managers

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [AcquisitionCo
  Manager 1]

  	
   

  	
  [AcquisitionCo
  Manager 2]

  
	
  c/o Oaktree Capital
  Management, LLC

  	
   

  	
  c/o Oaktree Capital
  Management, LLC

  
	
  333 South Grand Avenue,
  28th Floor

  	
   

  	
  333 South Grand Avenue,
  28th Floor

  
	
  Los Angeles, CA 90071

  	
   

  	
  Los Angeles, CA 90071

  
	
  Tel:

  	
  (213) 803-6300

  	
   

  	
  Tel:

  	
  (213) 803-6300

  
	
  Fax:

  	
  (213) 830-6293

  	
   

  	
  Fax:

  	
  (213) 830-6293

  
	
  E-mail:

  	
  [insert e-mail address]

  	
   

  	
  E-mail:

  	
  [insert e-mail address]

  

 

 

Appendix C-1

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