EXHIBIT 10.4
WARRANT TO PURCHASE
MEMBERSHIP INTERESTS
OF
MEZZCO, L.L.C.
THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1)
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS
EFFECTIVE UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES,
(2) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS AND (3) IN
ACCORDANCE WITH APPLICABLE STATE GAMING LAWS AND REQUIREMENTS AND RESTRICTIONS
IMPOSED BY THE NEVADA GAMING COMMISSION.
THE MEMBERSHIP INTERESTS ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO
THE PROVISIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT, DATED AS OF AUGUST 9,
2004, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COMPLETE
AND CORRECT COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
WHEN THE LIMITED LIABILITY COMPANY ISSUING THE OWNERSHIP INTEREST REPRESENTED BY
THIS CERTIFICATE HAS BEEN LICENSED BY OR REGISTERED WITH THE NEVADA GAMING
COMMISSION, THE PURPORTED SALE, ASSIGNMENT, TRANSFER, PLEDGE, GRANTING OF ANY
OPTION TO PURCHASE OR OTHER DISPOSITION OF SUCH INTEREST SHALL BE INEFFECTIVE
UNLESS APPROVED IN ADVANCE BY THE COMMISSION. IF AT ANY TIME THE COMMISSION
FINDS THAT A MEMBER IS UNSUITABLE TO HOLD SUCH INTEREST, THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL BE SUBJECT TO REDEMPTION
AND/OR REPURCHASE, PURSUANT TO THE TERMS SET FORTH HEREIN. BEGINNING ON THE DATE
WHEN THE COMMISSION SERVES NOTICE OR A DETERMINATION OF UNSUITABILITY PURSUANT
TO APPLICABLE LAW UPON THE COMPANY, IT SHALL BE UNLAWFUL FOR THE UNSUITABLE
MEMBER (A) TO RECEIVE ANY DIVIDEND OR INTEREST OR ANY PAYMENT OR DISTRIBUTION OF
ANY KIND, INCLUDING OF ANY SHARE OF THE DISTRIBUTION OF PROFITS OR CASH OR ANY
OTHER PROPERTY, OR PAYMENTS UPON DISSOLUTION, FROM THE COMPANY, OTHER THAN A
RETURN OF CAPITAL AS REQUIRED ABOVE; (B) TO EXERCISE DIRECTLY OR THROUGH ANY
PROXY, TRUSTEE OR NOMINEE ANY VOTING RIGHT CONFERRED BY THE MEMBER'S INTEREST IN
THE COMPANY; (C)
TO PARTICIPATE IN THE MANAGEMENT OF THE COMPANY; OR (D) TO RECEIVE ANY
REMUNERATION (OTHER THAN THE REDEMPTION PRICE) IN ANY FORM FROM THE COMPANY OR
FROM ANY COMPANY HOLDING A GAMING LICENSE FOR SERVICES RENDERED OR OTHERWISE.
Warrant No. [__] August 9, 2004
MEZZCO, L.L.C., a Nevada limited liability company (the "Company"), hereby
certifies that, for value received and pursuant to the Securities Purchase
Agreement, dated as of August 9, 2004, between the Company and the Purchasers
named therein (the "Purchase Agreement"), [________________] (together with its
successors and permitted assigns and any permitted transferees of this Warrant,
and their successors and permitted assigns, the "Holder"), is entitled, subject
to the terms and conditions set forth in this warrant (this "Warrant") and
subject to all applicable Gaming Laws and the requirements imposed by the
Commission, to purchase from the Company, at any time or times on or after the
date hereof, but not after 5:00 P.M., New York City time on August 9, 2011 (the
"Expiration Date"), an aggregate of [______________] ([______]) duly authorized
and validly issued units representing Interests of the Company, which shall
consist of (i) Class B Units of the Company (the "Class B Units"), or (ii) if
the Holder so elects, in its sole and absolute discretion, either Class A Units
of the Company (the "Class A Units") or a combination of Class A Units and Class
B Units (such Class A Units and/or Class B Units together with the securities
issuable upon exercise of the Warrants in accordance with the terms hereof,
including, without limitation, Section 2.2(b) and Section 2.2(e), which
securities are issuable by an entity other than the Company or issuable in a
different class of securities, collectively, the "Warrant Interests"). At any
time prior to the Expiration Date but after a Qualified Public Offering and
subject to all applicable Gaming Laws and the requirements imposed by the
Commission, this Warrant shall be exercisable by Holder only for voting common
equity securities of the same class as those that are issued by the Company (or
any successor thereto) in such Qualified Public Offering. The number of Warrant
Interests issuable pursuant to this Warrant shall be adjusted or readjusted from
time to time as provided in this Warrant. The purchase price per unit at which
each Warrant Interest shall be purchased upon exercise of the Warrant shall be
equal to $0.01 at all times (the "Exercise Price").
This Warrant is one of the "Warrants" issued pursuant to the Purchase
Agreement (collectively, the "Warrants," such term to include any warrants
issued in substitution therefor), and the Holders of the Warrants shall be
collectively referred to herein as the "Holders". The Warrants evidence rights
to purchase an aggregate of 17,500 units representing membership interest of the
Company, consisting of (ii) Class B Units, or (ii) at the election of the
Holders of Warrants, either Class A or a combination of Class A Units and Class
B Units (the "Membership Interests"), subject to adjustment as provided herein
and therein. At Closing, the Warrant Interests issuable upon exercise of the
Warrants will represent 17.5% of the fully-diluted Equity Interests of the
Company (after taking into account dilution from the Mecca Options but excluding
dilution from the Management Pool).
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All capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement. Certain terms defined
herein are so defined in Section 6.18 or in the section referenced with respect
thereto in Section 6.19.
SECTION 1. REGISTRATION; TRANSFERABILITY; EXERCISE; EXCHANGE OF WARRANT
1.1. REGISTRATION. The Company shall number and register the Warrants in
a register (the "Warrant Register") maintained at the principal office of the
Company (its "Office"). The Company shall be entitled to treat the Holder of the
Warrants as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrants on the
part of any other Person. Each transferee registered, or required to be
registered in the Warrant Register pursuant to Section 1.2 below, shall be
registered (or deemed to have been registered) for all purposes hereunder as of
the date of the surrender of this Warrant as provided in Section 1.2 and
compliance with the other provisions of Section 1.2.
1.2. TRANSFER OF WARRANTS. Subject to the restrictions on transfer set
forth in the Investor Rights Agreement (as defined below) and in Section 5.2
hereof, the Gaming Laws and any requirements or restrictions imposed by the
Commission, any Warrant may be transferred or endorsed to another party in whole
or in part by (i) surrendering to the Company the Warrant to be transferred,
endorsed or accompanied by a written instrument of transfer, in form reasonably
satisfactory to the Company, duly executed by the Holder thereof, (ii) supplying
the Company with an appropriate opinion of counsel in form reasonably
satisfactory to the Company, and investment letter, if deemed reasonably
necessary by counsel to the Company to assure compliance with the Securities
Act, and (iii) the transferee of such Warrant agreeing in writing to be bound by
the provisions of this Warrant, the Purchase Agreement, the Investor Rights
Agreement and the Intercreditor Agreement (Senior Debt), the Gaming Laws, and
any requirements or restrictions imposed by the Commission. Upon receipt
thereof, the Company shall issue and deliver, in the name of the transferee, a
new Warrant for the same type and number of Warrant Interests, containing the
same terms as the surrendered Warrant. The Company shall register in the Warrant
Register, each transferee of a Warrant transferred in compliance with the terms
of this Section 1.2 as the Holder of such transferred Warrant. In the case of
the transfer of fewer than all of the rights evidenced by the surrendered
Warrant, the Company shall issue a new Warrant to the Holder thereof for the
same type and remaining number of such Warrants.
1.3. MANNER OF EXERCISE; EXCHANGE.
(a) Exercise. Subject to Section 1.6 hereof, the Gaming Laws, and
the requirements or restrictions imposed by the Commission, the Holder may
exercise this Warrant, in whole or in part (except as to a fractional interest),
at any time and from time to time during normal business hours on any Business
Day on or prior to the Expiration Date, by (i) delivering to the Company a
written notice, in the form attached hereto as Exhibit A (the "Exercise
Notice"), duly executed by the Holder, specifying the number and type of Warrant
Interests to be issued to the Holder as a result of such exercise, (ii)
surrendering this Warrant to the Company, properly endorsed by the Holder (or if
this Warrant has been destroyed, stolen or has otherwise
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been misplaced, by delivering to the Company an affidavit of loss duly executed
by the Holder), and (iii) by tendering payment for the Warrant Interests
designated by the Exercise Notice in lawful money of the United States in the
form of cash, bank or certified check made payable to the order of the Company,
or by wire transfer of immediately available funds, or by the cancellation of
indebtedness of the Company owed to the Holder (including the surrender by the
Holder to the Company, at its Office of any of the Notes held by such Holder and
the crediting of the principal amount evidenced thereby (including PIK Interest)
plus all interest accrued and unpaid thereon through the date of such
surrender), or in any combination thereof, of an amount equal to the product of
(A) the Exercise Price and (B) the number of Warrant Interests as to which this
Warrant is being exercised and (iv) executing and delivering to the Company any
and all documents and certificates required for admission of Members.
(b) Net Exchange. Subject to the Gaming Laws and the requirements
or restrictions imposed by the Commission, the Holder may, in lieu of exercising
or converting this Warrant pursuant to the terms of Section 1.3(a), elect to
exchange this Warrant, in whole or in part (except as to a fractional interest),
at any time and from time to time during normal business hours on any Business
Day on or prior to the Expiration Date by (i) delivering to the Company a
written notice, in the form attached hereto as Exhibit B (the "Exchange
Notice"), duly executed by the Holder, specifying the number and type of Warrant
Interests to be issued to the Holder as a result of such exchange, and (ii)
surrendering this Warrant to the Company, properly endorsed by the Holder (or if
this Warrant has been destroyed, stolen or has otherwise been misplaced, by
delivering to the Company an affidavit of loss duly executed by the Holder), and
the Holder shall thereupon be entitled to receive that number of Warrant
Interests of the same type being exchanged, equal to the product of (A) the
number of Warrant Interests issuable upon exercise of this Warrant (or, if only
a portion of this Warrant is being exercised, issuable upon the exercise of such
portion) for cash, determined as provided in Section 2, and (B) a fraction, the
numerator of which is the Fair Market Value (as defined below) per unit of
Membership Interest at the time of such exercise minus the Exercise Price in
effect at the time of such exercise, and the denominator of which is the Fair
Market Value per unit of Membership Interest at the time of such exercise, such
number of interests so issuable upon such exchange to be rounded up or down to
the nearest whole number of units of Membership Interest.
(c) Tax Status. The "exchange" of this Warrant pursuant to Section
1.3(b) is intended to qualify a recapitalization within the meaning of Section
368(a)(1)(E) of the Code. It is intended that the Warrants are and shall be mere
unexercised options for federal income tax purposes.
(d) For all purposes of this Warrant (other than this Section
1.3), any reference herein to the "exercise" of this Warrant shall be deemed to
include a reference to the exchange of this Warrant into Warrant Interests in
accordance with the terms of Section 1.3(b), and any reference to an "Exercise
Notice" shall be deemed to include a reference to an Exchange Notice in
accordance with the terms of Section 1.3(b).
1.4. WHEN EXERCISE EFFECTIVE. Subject to the Gaming Laws and the
requirements or restrictions imposed by the Commission, each exercise of this
Warrant shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which the
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Holder shall have fulfilled all of the requirements of Section 1.3, and at such
time the Person or Persons in whose name or names any certificate or
certificates for units of Membership Interest shall be issuable upon such
exercise as provided in Section 1.5 shall be deemed to have become the holder or
holders of record thereof.
1.5. DELIVERY OF CERTIFICATES UPON EXERCISE. As soon as practicable after
exercise of this Warrant in accordance with this Section 1, but in no event
later than five Business Days after such exercise, the Company shall at its
expense cause to be issued in the name of and delivered to the Holder or,
subject to Section 5 of this Warrant, as the Holder may direct: (a) a
certificate or certificates for the number and type of Warrant Interests,
determined as provided in Section 2 of this Warrant, to which the Holder shall
be entitled upon such exercise and, (b) unless this Warrant has expired or has
been exercised in full, a new Warrant (or Warrants) substantially in the form
of, and on the terms in, this Warrant, for the number and type of Warrant
Interests remaining following such exercise (without giving effect to any
adjustment thereto), and shall be subject to adjustment as provided for in this
Warrant as of the date hereof.
1.6. EXERCISE SUBJECT TO GAMING APPROVAL. Notwithstanding any other
provision of this Warrant, the Holder of this Warrant may only exercise this
Warrant upon receipt of any and all applicable gaming licenses, findings of
suitability, approvals, appropriate waivers from the licensing requirements
pursuant to NGC Regulation 15B.070 or upon the Commission's granting of an order
of registration to the Company that allows the Holder of this Warrant to
exercise this Warrant without receipt of all applicable gaming licenses,
findings of suitability or waivers from the licensing requirements or other
approvals ("Gaming Approvals"). The Company will reasonably cooperate with the
Holder in obtaining any Gaming Approvals and meeting any other requirements that
the Gaming Authorities may impose in connection with such exercise (including by
filing a Form 10 with the Securities and Exchange Commission and the filing of
an application for registration as a publicly traded corporation by the
Commission after the Closing Date within one month of the written request by the
Required Interest). The costs of obtaining Gaming Approval and meeting any other
requirements that the Gaming Authorities may impose in connection with such
exercise shall be borne equally by Libra Securities, LLC, on the one hand, and
the Required Interest, on the other hand).
1.7. CANCELLATION OF WARRANT. Upon surrender of this Warrant for
exchange, substitution, transfer or exercise, the Company shall cancel and
retire it.
SECTION 2. ADJUSTMENTS TO EXERCISE PRICE AND WARRANT INTERESTS
2.1. GENERAL. The number of Warrant Interests that the Holder shall be
entitled to receive upon exercise of this Warrant shall be determined by
multiplying the number of Warrant Interests which would otherwise (but for the
provisions of this Section 2) be issuable upon such exercise, as designated by
the Holder in the Exercise Notice, by a fraction, (i) the numerator of which
shall be the Exercise Price, and (ii) the denominator of which shall be the
Antidilution Price (as defined below) in effect on the date of such exercise.
The price per unit of Membership Interest for the purposes of calculating the
number of Warrant Interests issuable hereunder (the "Antidilution Price")
initially shall be $0.01.
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2.2. ADJUSTMENTS.
(a) Subdivision or Combination of Membership Interests. If the
Company shall at any time after the date hereof subdivide its outstanding units
of Membership Interest into a greater number of units (by any split, dividend or
otherwise), then the Antidilution Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, if the Company
shall at any time after the date hereof combine its outstanding units of
Membership Interest into a smaller number of units of Membership Interest (by
any reverse split or otherwise), then the Antidilution Price in effect
immediately prior to such combination shall be proportionately increased.
(b) Reorganization or Reclassification. If any capital
reorganization or reclassification of the membership interests of the Company
shall be effected in such a way that holders of Membership Interests shall be
entitled to receive membership interests, securities or assets with respect to
or in exchange for Membership Interests, then, as a condition of such
reorganization or reclassification, lawful and adequate provisions shall be made
whereby subject to the Gaming Laws and any requirements or restrictions imposed
by the Commission, the Holder shall thereupon have the right to receive, upon
the basis and upon the terms and conditions specified herein and in lieu of the
Warrant Interests immediately theretofore receivable upon the exercise of this
Warrant in full, as the case may be, such membership interests, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding units of Membership Interest equal to the number of units of
Membership Interest immediately theretofore receivable upon such exercise of
this Warrant in full had such reorganization or reclassification not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Antidilution
Price) shall thereafter be applicable, as nearly as may be, in relation to any
membership interests, securities or assets thereafter deliverable upon the
exercise of such conversion rights.
(c) Dividends and Distributions
(i) Dividends. If the Company at any time or from time to
time after the date hereof declares a dividend or makes any other distribution
upon any membership interests of the Company other than Membership Interests,
which dividend or distribution is payable in units of Membership Interest,
Options (as defined below) or Convertible Securities (as defined below), any
Membership Interests, Options or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be deemed to have
been issued or sold without consideration, and the Antidilution Price shall be
adjusted pursuant to Section 2.2(d); provided, however, that no adjustment shall
be made to the Antidilution Price as a result of such dividend or distribution
if the Holder is entitled to, and actually receives such dividend or
distribution in accordance with Section 2.2(c)(ii)(B); provided, further, that
if any adjustment is made to the Antidilution Price as a result of the
declaration of a dividend and such dividend is not effected, the Antidilution
Price shall be appropriately readjusted to the Antidilution Price that would
have been in effect had such dividend not been declared.
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(ii) Other Dividends and Distributions. If the Company at any
time or from time to time after the date hereof makes or issues, or fixes a
record date for the determination of holders of Membership Interests entitled to
receive, a dividend or other distribution (in each case other than to pay
Operating Expenses) payable in:
(a) cash or securities or other property of the
Company other than Membership Interests, Options or Convertible
Securities then the Holder shall receive such dividend or
distribution as if the Holders had exercised all of the Warrants in
full on the date such record is taken; and
(b) Membership Interests, Options or Convertible
Securities, the Holder shall receive such dividend or distribution
as if the Holder had exercised the Warrants in full on the date such
record is taken; provided, however, that no Holder shall be required
to accept any such dividend or distribution if it deems such refusal
to be required or advisable under applicable law, in which case such
Holder's rights to receive such dividend or distribution shall be
exercisable upon the exercise of the Warrant on the same terms as if
exercised as otherwise contemplated under this provision (and,
without duplication, the Antidilution Price applicable to such
Holder's Warrants shall be adjusted pursuant to Section 2.2 with
respect to such dividend or distribution).
(iii) Restrictions on Divisions and Distributions. The
declaration of a dividend or the making of a distribution by the Company shall
at all times be subject to the Gaming Laws and any requirements or restrictions
imposed by the Commission.
(d) Issuances. Except as provided in Section 2.2(d)(vi) and except
in the case of an event described in Section 2.2(a), if at any time after the
date hereof the Company shall issue or sell Membership Interests (including
deemed issuance or sales thereof) for a consideration per unit of Membership
Interest less than the Current Market Price (as defined below) per unit of
Membership Interest in effect immediately prior to the date of such issuance or
sale (such date, the "Relevant Date"), then, upon such issuance or sale, the
Antidilution Price then in effect shall be adjusted to the price determined by
multiplying the Antidilution Price then in effect by a fraction: (i) the
numerator of which shall be the sum of (A) the Membership Interests Deemed
Outstanding (as defined below) immediately prior to such offering including, for
this purpose, all units of Membership Interest that are then issuable upon
exercise or conversion of Options and Convertible Securities and (B) the number
of units of Membership Interest that the aggregate consideration received by the
Company for the total number of such additional units of Membership Interest so
issued or sold (or deemed issued or sold) would purchase at the Current Market
Price on the Relevant Date; and (ii) the denominator of which shall be the sum
of (A) the Membership Interests Deemed Outstanding immediately prior to the
consummation of such issuance or sale, including, for this purpose, all
Membership Interests that are then issuable upon exercise or conversion of
Options and Convertible Securities outstanding immediately prior to such
issuance or sale, and (B) the number of units of Membership Interest issued or
sold and/or units of Membership Interest that are issuable upon exercise or
conversion of any Options or Convertible Securities issued or sold for which an
adjustment (or readjustment) to the Antidilution Price is being made.
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For purposes of this Section 2.2(d), the following shall also be
applicable:
(i) Issuance of Rights or Options. If the Company, at any
time after the date hereof grants (whether directly or by assumption in a merger
or otherwise) any warrants or other rights to subscribe for or to purchase, or
any options to purchase, units of Membership Interest or any membership
interests or security convertible into or exchangeable for units of Membership
Interest (such warrants, rights or options being called "Options" and such
convertible or exercisable membership interests or securities being called
"Convertible Securities"), in each case for consideration per unit of Membership
Interest (determined as provided in this paragraph and in Section 2.2(d)(iv))
less than the Current Market Price per unit of Membership Interest then in
effect, whether or not such Options or Convertible Securities are immediately
exercisable, convertible, or exchangeable, then the total maximum number of
units of Membership Interest issuable upon the exercise of such Options, or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon exercise of such Options, shall be deemed to have been
issued as of the date of granting of such Options, at a price per unit of
Membership Interest equal to the amount determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration for the
issuance of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options,
plus, in the case of such Options that relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issuance or sale of such Convertible Securities and upon the conversion or
exchange of Convertible Securities, by (B) the total maximum number of units of
Membership Interests deemed to have been so issued. Except as otherwise provided
in Section 2.2(d)(iii), no adjustment of the Antidilution Price shall be made
upon the actual issuance of such Membership Interests or of such Convertible
Securities upon exercise of such Options or upon the actual issuance of such
Membership Interests upon conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company, at
any time after the date hereof issues or sells any Convertible Securities for
consideration per unit of Membership Interest (determined as provided in this
paragraph and in Section 2.2(d)(iv)) less than the Current Market Price then in
effect, whether or not the right to exchange or convert any such Convertible
Securities is immediately exercisable, then the total maximum number of units of
Membership Interest issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date of the issuance or
sale of such Convertible Securities, at a price per unit of Membership Interest
equal to the amount determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of units of Membership Interest deemed
to have been so issued; provided, however, that (1) except as otherwise provided
in Section 2.2(d)(iii), no adjustment of the Antidilution Price shall be made
upon the actual issuance of such Membership Interests upon conversion or
exchange of such Convertible Securities and (2) if any such issuance or sale of
such Convertible Securities is made upon exercise of any Options to purchase
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any such Convertible Securities, no further adjustment of the Antidilution Price
shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate; Termination
of Options or Convertible Securities. If a change occurs in (A) the maximum
number of units of Membership Interest issuable in connection with any Option
referred to in Section 2.2(d)(i) or any Convertible Securities referred to in
Section 2.2(d)(i) or (ii), (B) the purchase price provided for in any Option
referred to in Section 2.2(d)(i), (C) the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in Section 2.2(d)(i) or (ii), or (D) the rate at which Convertible Securities
referred to in Section 2.2(d)(i) or (ii) are convertible into or exchangeable
for units of Membership Interest, (in each case, other than in connection with
an event described in Section 2.2(a)),then the Antidilution Price in effect at
the time of such event shall be readjusted to the Antidilution Price that would
have been in effect at such time had such Options or Convertible Securities that
remain outstanding provided for such changed maximum number of membership
interests, purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. Upon the termination
of any such Option or any such right to convert or exchange such Convertible
Securities, the Antidilution Price then in effect hereunder shall be increased
to the Antidilution Price that would have been in effect at the time of such
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such termination (i.e., to the extent that fewer than the
number of units of Membership Interests deemed to have been issued in connection
with such Option or Convertible Securities were actually issued), never been
issued or been issued at such higher price, as the case may be.
(iv) Consideration for Membership Interests. In case any
units of Membership Interest are issued or sold, or deemed issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received or to be received by the Company therefor (determined with respect to
deemed issuances and sales in connection with Options and Convertible Securities
in accordance with clause (A) of Section 2.2(d)(i) or Section 2.2(d)(ii), as
appropriate) determined in the manner set forth below in this Section
2.2(d)(iv). If any units of Membership Interest are issued or sold, or deemed
issued or sold, for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration received or to be received by the Company
(determined with respect to deemed issuances and sales in connection with
Options and Convertible Securities in accordance with clause (A) of Section
2.2(d)(i) or Section 2.2(d)(ii), as appropriate) as determined in good faith by
EquityCo, L.L.C., a Nevada limited liability company, as the sole member of the
Company (the "Sole Member") and Holders holding Warrants representing in excess
of 50% of the Warrant Interests issuable upon exercise of all outstanding
Warrants (a "Required Interest"). If any Options are issued in connection with
the issuance and sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
for such consideration as determined in good faith by the Sole Member and a
Required Interest; provided, that if the Sole Member and a Required Interest are
unable to reach agreement as to the value of such consideration, then the value
thereof will be determined by an Appraiser as provided in Section 6.1.
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(v) Indeterminable Amounts. In calculating any adjustment to
the Antidilution Price pursuant to this Section 2.2(d), any Options or
Convertible Securities that provide, as of the effective date of such
adjustment, for the issuance upon exercise or conversion thereof of an
indeterminable number of units of Membership Interest shall (together with the
units of Membership Interest issuable upon exercise or conversion thereof) be
disregarded for purposes of the calculation of Membership Interests Deemed
Outstanding; provided, that at such time as a number of units of Membership
Interest issuable upon exercise or conversion of such Options or Convertible
Securities becomes determinable, then the Antidilution Price shall be adjusted
as provided in Section 2.2(d)(iii).
(vi) Certain Issues of Membership Interests Excepted.
Notwithstanding anything herein to the contrary, no adjustment to the number of
Warrant Interests or the Antidilution Price shall be made in the case of an
issuance from and after the date hereof of (i) issuances, grants or sales of
Membership Interests (or Options or Convertible Securities for Membership
Interests) to employees of the Company and its Subsidiaries (other than
employees that are affiliated with BH/RE) in an aggregate amount not to exceed
6,000 Class B Units (subject to adjustments pursuant to Section 2.2(a), 2.2 (b)
and 2.2(c), etc.) (the "Management Pool"), (ii) units of Membership Interest
upon exercise of the Warrants, and (iii) units of Membership Interest (or
Options or Convertible Securities for Membership Interests) acquired by the
Holder hereof through the exercise of the Holder's pre-emptive rights pursuant
to Section 4.1 of the Investor Rights Agreement.
(vii) Membership Interests Deemed Outstanding. For purposes of
this Section 2.2(d), the term "Membership Interests Deemed Outstanding" shall
mean, at any time, the sum of (A) the number of units of Membership Interest
outstanding immediately prior to the Relevant Date (including for this purpose
all Membership Interest issuable upon exercise or conversion of any Options or
Convertible Securities outstanding immediately prior to the Relevant Date), plus
(B) the number of units of Membership Interest issued or sold (or deemed issued
or sold) after the Relevant Date, the issuance or sale of which resulted in an
adjustment to the Antidilution Price pursuant to Section 2.2(d)(iii), plus (C)
the number of units of Membership Interest deemed issued or sold pursuant to
Section 2.2(d)(v)(A) above; provided, that Membership Interests Deemed
Outstanding shall not include the Warrant Interests or any units of Membership
Interest issuable upon exercise of the Warrant Interests.
(e) Adjustment for Merger, Consolidation, Liquidation etc.
(i) Upon any merger or consolidation of the Company with or
into another limited liability company (or other legal entity), or any
sale of all or substantially all of the assets of the Company to another
limited liability company (or other legal entity), subject to the Gaming
Laws and any requirements or restrictions imposed by the Commission, this
Warrant shall automatically convert into the right to receive the kind and
amount of membership interests or other securities or property to which a
Holder of the number of units of Membership Interest of the Company
deliverable upon the exercise of this Warrant in full would have been
entitled upon such merger, consolidation, or asset sale (and any
distribution of assets to members of the Company following such asset
sale). The Company shall use reasonable best efforts to
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structure and consummate any merger, consolidation or such sale, to permit
the Holder to participate in such transaction on an as exercised basis.
Notwithstanding anything to the contrary contained herein but subject to
the Gaming Laws and any requirements or restrictions imposed by the
Commission, each Holder shall have the right to exercise the Warrant
immediately prior to or simultaneously with the consummation of such
merger, consolidation, or asset sale in accordance with the provisions of
Section 1.
(ii) The Company shall not effect any such consolidation,
merger or sale, unless prior to or simultaneously with the consummation
thereof the successor (if other than the Company) resulting from such
consolidation or merger or the person purchasing such assets shall assume
by written instrument executed and delivered to the Holder, the obligation
to deliver to the Holder such membership interests, securities or assets
as, in accordance with the foregoing provisions, the Holder may be
entitled to receive upon the automatic conversion, or exercise, of this
Warrant, as applicable.
(iii) Subject to the Gaming Laws and any requirements or
restrictions imposed by the Commission, upon any liquidation, dissolution
or winding up of the Company, the Holder shall receive such cash or
property (less the Exercise Price) which the Holder would have been
entitled to receive upon the happening of such liquidation, dissolution or
winding up had the Warrants been exercised and the Warrant Interests
issued immediately prior to the occurrence of such liquidation,
dissolution or winding up, and, upon the Holder's receipt of such cash or
property, the Warrants shall terminate.
(f) Additional Warrants Upon Certain Events; Other Adjustments.
The number of Warrant Interests issuable upon exercise or conversion hereof
shall be increased as set forth below upon the occurrence of the following
events:
(i) On the fifteenth day following receipt by the Company of
a written notice from the holders of a Required Interest that an Event of
Default has occurred resulting from a breach of the covenant contained in
Section 6.10 of the Purchase Agreement (Use of Additional Capital For
Renovation Capital Expenditures) (a "Triggering Default"), and provided
that on or before such date an Event of Default described in Sections
8.1(e), (f), (g) or (h) under the Purchase Agreement has not occurred, the
number of Warrant Interests issuable upon exercise or conversion hereof
shall be increased by the number of units of Membership Interests as is
necessary to provide the Holder with an additional [___]% interest in the
fully-diluted equity of the Company as of the date of such adjustment;
provided, however, that only one such adjustment shall be made pursuant to
this Section 2.2(f)(i) and such adjustment will occur in connection with
the first such Triggering Default for which such notice is provided;
(ii) On the fifteenth day following receipt by the Company of
a written notice from the holders of a Required Interest that an Event of
Default under the Purchase Agreement has occurred (other than (x) an Event
of Default under Section 8.1(m) of the Purchase Agreement, or (y)
resulting from a breach of the covenant contained in Section 6.10 (Use of
Additional Capital For Renovation Capital
-11-
Expenditures) or Section 6.23 (Development Agreement for Time Share
Premises) of the Purchase Agreement), and provided that on or before such
date an Event of Default described in Sections 8.1(e), (f), (g) or (h)
under the Purchase Agreement has not occurred, the number of Warrant
Interests issuable upon exercise or conversion hereof, shall be increased
by the number of Membership Interests as is necessary to provide the
Holder with an additional [___]% interest in the fully-diluted equity of
the Company as of the date of such adjustment;
(iii) If the applicable conditions set forth in Section
6.23(b) (Development Agreement for Time Share Premises) of the Purchase
Agreement for adjusting the number of Warrants Interests are satisfied,
then the number of Warrant Interests issuable upon exercise or conversion
hereof shall be increased by the number of Membership Interests as is
necessary to provide the Holder with an additional [__]% interest in the
fully-diluted equity of the Company as of the date of such adjustment;
(iv) Upon the incurrence by the Company of Senior Debt in
excess of $530 million (subject to reduction by payments of principal
thereon, other than with respect to payments as a result of refinancings
permitted under the Intercreditor Agreement (Senior Debt)) (the "Senior
Debt Threshold"), the number of Warrant Interests issuable upon exercise
or conversion hereof shall be increased by the number of units of
Membership Interests as is necessary to provide the Holder with an
additional [__________]% interest in the fully-diluted equity of the
Company as of the Closing Date for each $5,000,000 of Senior Debt in
excess of the Senior Debt Threshold (applied proportionally from the first
dollar of Senior Debt in excess of the Senior Debt Threshold), subject to
dilution from the Management Pool. Adjustments under this Section
2.2(f)(iv) shall be made from time to time as the Company incurs Senior
Debt in excess of the Senior Debt Threshold; provided, that adjustment
under this Section 2.2(f)(iv) shall be made only once for each dollar of
Senior Debt in excess of the Senior Debt Threshold;
(v) Upon contribution of the Additional Capital Amount (as
defined in the Investor Rights Agreement) to the equity of the Company or
any of its Subsidiaries, the number of Warrant Interests issuable upon
exercise or conversion hereof shall be increased by the number of units of
Membership Interests as is necessary to maintain at least the same
percentage interest in the Company and, indirectly, in its Subsidiaries,
that this Warrant represented immediately prior to such issuance
(including, for purposes of this clause (v), any interest acquired by the
Holder of this Warrant in connection with the contribution of the
Additional Capital Amount through the exercise of the Holder's pre-emptive
rights pursuant to Section 4.1 of the Investor Rights Agreement); and
(vi) Upon contribution of cash to the equity of the Company
or any of its Subsidiaries pursuant to Section 8.13 of the Senior Credit
Agreement, the number of Warrant Interests issuable upon exercise or
conversion hereof shall be increased by the number of units of Membership
Interests as is necessary to maintain at least the same percentage
interest in the Company and, indirectly, in its Subsidiaries, that this
Warrant represented immediately prior to such contribution (including, for
purposes of this
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clause (vi), any interest acquired by the Holder of this Warrant in
connection with such contribution through the exercise of the Holder's
pre-emptive rights pursuant to Section 4.1 of the Investor Rights
Agreement).
The adjustments in each of clauses (i), (ii) and (iii) of this Section
2.2(f) shall only be made once. Any adjustment made pursuant to clauses (iv),
(v) or (vi) of this Section 2.2(f) shall be the exclusive adjustment made to the
number of Warrant Interests in connection with the contribution giving rise to
such adjustment. Upon any adjustment pursuant to this Section 2.2(f), a
corresponding reduction shall be made to the Antidilution Price.
(g) Record Date. If the Company takes a record of the Holders of
its Membership Interests for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Membership Interests, Options or
Convertible Securities, or (B) to subscribe for or purchase Membership
Interests, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issuance or sale of the Membership Interests deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(h) Other Dilutive Events. In case any event shall occur as to
which, but for this Section 2.2(h), the provisions of this Section 2 are not
directly applicable, and the failure to make any adjustment would not in the
opinion of the Holder fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of such sections,
then, in each case, at the request of the Required Interest, the Company shall
appoint an Appraiser, which shall give its opinion upon the adjustment, if any,
on the basis consistent with the essential intent and principles established in
this Section 2, necessary to preserve, without dilution, the purchase rights by
this Warrant. Upon receipt of such Appraiser's opinion, which shall be
applicable to all Holders, the Company shall promptly mail a copy thereof to the
Holders and shall make the adjustments described therein, if any.
SECTION 3. REDEMPTION AND CANCELLATION OF WARRANTS
3.1. PUT RIGHT.
(a) In the event that the Company has not consummated a Liquidity
Event within seven years from the Closing Date (the "Put Period"), the Holder
may demand that the Company purchase (or cause to be purchased) this Warrant and
any Warrant Interests held by the Holder (the "Put Securities") for the
Redemption Price by delivery of a written notice to the Company (the date such
notice is delivered to the Company shall hereinafter be referred to as the "Put
Demand Date"). Within ten Business Days of the Put Demand Date, the Company
shall deliver a notice to the Holder identifying the Redemption Price and
providing the calculations thereof. The Company shall pay the Redemption Price
to such Holder as soon as reasonably practicable (the "Put Payment Date"), but
in no event later than 180 days after the Put Demand Date (the "Put Demand
Period"), upon surrender of this Warrant, together with any certificates
evidencing any other Put Securities, to the Company, at its Office, or, if
requested by such
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Holder without surrender of this Warrant or such other certificates, by wire
transfer of immediately available funds to an account or accounts designated in
writing by the Holder; provided, however, that the foregoing obligations of the
Company, and the time periods in which they must be performed, shall be subject
to the Gaming Laws and any requirements or restrictions imposed by the
Commission. The right of the Holder to demand that the Company purchase the Put
Securities is referred to as the Holder's "Put Right".
(b) Upon surrender of this Warrant in accordance with Section
3.1(a) for payment of the Redemption Price, the right to purchase Warrant
Interests represented by this Warrant shall terminate, and this Warrant shall
represent the right of the Holder to receive only the applicable Redemption
Price from the Company in accordance with Section 3.1.
(c) Default; Automatic Conversion into Debt. In the event that the
Company fails to purchase this Warrant prior to the expiration of the Put Demand
Period after using its best efforts to do so, then (i) an Event of Default under
Section 8.1(a) of the Purchase Agreement shall exist (regardless of whether the
Purchase Agreement has been terminated) and (ii) all obligations of the Company
to pay the Redemption Price pursuant to Section 3.1(a) shall, subject to the
Gaming Laws and any requirements or restrictions imposed by the Commission,
convert automatically without any further action or acknowledgment on the part
of the Company or the Holder, into secured indebtedness of the Company in the
aggregate principal amount of the Redemption Price, secured by the Liens granted
to the Collateral Agent under the Security Documents (the "Put Note"). The Put
Note shall rank junior in right of payment only to the Senior Debt. The Put Note
shall evidence an obligation of the Company to pay to such Holder, on a date no
later than the first anniversary of the Put Demand Date, an amount equal to the
Redemption Price, together with accrued and unpaid interest (based on a 360-day
year of 30-day months) at a rate per annum on the unpaid principal amount
thereof equal to the Default Rate, or such lower rate as then may be the maximum
rate permitted by applicable law, and interest thereon shall be payable in cash
semi-annually in six-month intervals starting on the six-month anniversary of
the date the obligations of the Company to pay the Redemption Price are
converted into the Put Note, or if the Company so elects at any time and from
time to time in its sole discretion more frequently than semi-annually upon
written notice to the Holder, to be capitalized and added to the unpaid
principal amount of the Put Note semi-annually on each such interest payment
date, until such Put Note is paid in full, and otherwise on terms and conditions
applicable to the Notes issued pursuant to the Purchase Agreement; provided that
it is expressly understood and agreed that in the event that all of the
Noteholder Obligations (other than the Put Note) have been repaid in full or the
Purchase Agreement is, for any other reason, not in effect when any obligation
under this Section 3.1(c) is outstanding (and notwithstanding such lack of force
and effect), the rate of interest applicable to the Put Note shall be the
Default Rate set forth in the Purchase Agreement as in effect on the Put Demand
Date, or if the Purchase Agreement is not then in effect, as the Purchase
Agreement is in effect on the last Business Day on which it is in effect, which
Default Rate is and shall be deemed to be incorporated by reference into this
Warrant with the same force and effect as if set forth in full herein. The rate
of interest payable on the Put Note shall increase by one percent (1.00%) as of
the last day of each fiscal quarter commencing with the fiscal quarter following
the fiscal quarter in which the Put Demand Date occurs until the Put Note is
paid in full. Nothing in this Section 3.1(c) shall require the Company
-14-
to pay interest at a rate in excess of the maximum rate permitted by applicable
law. The Put Note may be prepaid by the Company at any time in whole or in part
without premium or penalty. The entire principal amount of the Put Note and any
interest accrued thereon shall become immediately due and payable (A) upon the
consummation of a Liquidity Event, (B) upon the occurrence and continuance of an
additional Event of Default under the Purchase Agreement (regardless of whether
the Purchase Agreement has been terminated or is otherwise no longer in full
force and effect, provided, that for purposes of determining whether an Event of
Default under the Purchase Agreement has occurred after the Purchase Agreement
has been terminated, the provisions of Article VI and VII thereof (other than
Sections 6.3 (Books and Records), 6.4 (Financial and Other Information), 6.5
(Notices), 6.7 (Existence, Good Standing and Legal Requirements), 7.6
(Transactions with Affiliates) and 7.7 (Business Conducted)) shall be
disregarded) or (C) in the event (i) the Company agrees, submits or consents to
any voluntary or involuntary dissolution, liquidation or winding-up of the
Company or any Subsidiary; (ii) a decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating the Company or any
Subsidiary bankrupt or insolvent, or approving a petition in any such case or
other proceeding; or (iii) a decree or order for relief is entered in respect of
the Company or any Subsidiary in an involuntary case under federal bankruptcy
laws as now or hereafter constituted (each, an "Insolvency Event"). All payments
of principal and cash interest on the Put Note shall be made by wire transfer of
immediately available funds to an account or accounts designated in writing by
the Holder. The Holder further acknowledges and agrees that, without prejudice
to any of Holder's rights to receive the Redemption Price, and/or any payments
of principal or interest under the Put Note when due, its rights to receive such
Redemption Price, and/or payments of principal or interest under the Put Note,
shall be subject to applicable Gaming Laws and any applicable requirements or
restrictions imposed by the Commission and the Intercreditor Agreement (Senior
Debt).
3.2. REDEMPTION UPON REPLACEMENT OF SECURITYHOLDER. If a Holder is
required to dispose of its Warrant, Warrant Interests and/or Put Notes pursuant
to Section 2.6.8 of the Purchase Agreement, the Warrant, Warrant Interests
and/or Put Notes held by such Holder shall be purchased or redeemed (as
applicable) at a price equal to the Redemption Price, in accordance with Section
2.6.8 of the Purchase Agreement.
SECTION 4. COVENANTS OF THE COMPANY
4.1. THE COMPANY COVENANTS AND AGREES THAT:
(a) all Warrant Interests that may be issued upon the exercise of
the rights represented by this Warrant shall, upon issuance and payment of the
Exercise Price, be duly authorized and validly issued and free from preemptive
rights and all transfer taxes, liens, charges and security interests with
respect to the issuance thereof;
(b) during the period within which this Warrant may be exercised,
it will at all times have authorized and reserved, without limitation, out of
the aggregate of its authorized but unissued units of Membership Interests, a
sufficient number of Warrant Interests to provide for the exercise of rights
represented by this Warrant;
-15-
(c) if any Warrant Interests reserved or to be reserved to provide
for the exercise of this Warrant require registration with or approval of any
governmental or self-regulatory authority under any federal or state law or
stock exchange or NASDAQ rule before such membership interests may be validly
issued, then it shall in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be;
(d) before taking any action that would cause an adjustment
pursuant to Section 2, the Company will take any and all corporate action that
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue Warrant Interests at the Exercise Price.
(e) if it shall have filed a registration statement pursuant to
the requirements of Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or a registration statement pursuant to the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Company shall comply with the reporting requirements of Sections 13 and
15(d) of the Exchange Act and will comply with all other applicable public
information reporting requirements of the Securities and Exchange Commission
from time to time in effect and relating to the availability of an exemption
from the Securities Act for the sale of any restricted securities, including
Rule 144 and Rule 144A promulgated by such commission under the Securities Act;
and
(f) it shall not, by amendment to its articles of organization
(whether by way of merger, operation of law, or otherwise) or through
reorganization, transfer of assets, consolidation, merger, dissolution, issuance
or sale of securities, agreement or any other voluntary action (including any of
the foregoing that constitutes a Liquidity Event), avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company and shall at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such
action as may be reasonably necessary in order to protect the rights of the
Holders against impairment. Nothing in this clause will restrict the Company
from taking any action required by any Gaming Authority.
SECTION 5. RESTRICTIONS ON TRANSFER
5.1. RESTRICTIVE LEGEND.
(a) The Warrant Interests issuable upon exercise hereof, are
subject to certain restrictions on transfer as set forth in the Investor Rights
Agreement dated as of August 9, 2004, by and among the Company and the parties
thereto (as the same may be amended from time to time, the "Investor Rights
Agreement") and may be subject to redemption as provided in the Company's
Articles or Organization and Operating Agreement. Each certificate representing
Warrant Interests issued upon exercise of this Warrant and each certificate
issued to any subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the form as follows:
-16-
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE
SECURITIES ACT OR TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE
ACT RELATING TO THE DISPOSITION OF SECURITIES, (2) IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES AND BLUE SKY LAWS, AND (3) IN ACCORDANCE WITH
APPLICABLE STATE GAMING LAWS AND REQUIREMENTS AND RESTRICTIONS IMPOSED BY
THE NEVADA GAMING COMMISSION.
THE MEMBERSHIP INTERESTS ISSUABLE UPON EXERCISE OF THIS WARRANT ARE
SUBJECT TO THE PROVISIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT, DATED AS
OF AUGUST 9, 2004, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH
THEREIN. A COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED
UPON WRITTEN REQUEST AND WITHOUT CHARGE.
WHEN THE LIMITED LIABILITY COMPANY ISSUING THE OWNERSHIP INTEREST
REPRESENTED BY THIS CERTIFICATE HAS BEEN LICENSED BY OR REGISTERED WITH
THE NEVADA GAMING COMMISSION, THE PURPORTED SALE, ASSIGNMENT, TRANSFER,
PLEDGE, GRANTING OF ANY OPTION TO PURCHASE OR OTHER DISPOSITION OF SUCH
INTEREST SHALL BE INEFFECTIVE UNLESS APPROVED IN ADVANCE BY THE
COMMISSION. IF AT ANY TIME THE COMMISSION FINDS THAT A MEMBER IS
UNSUITABLE TO HOLD SUCH INTEREST, THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS WARRANT SHALL BE SUBJECT TO REDEMPTION AND/OR
REPURCHASE, PURSUANT TO THE TERMS SET FORTH HEREIN. BEGINNING ON THE DATE
WHEN THE COMMISSION SERVES NOTICE OR A DETERMINATION OF UNSUITABILITY
PURSUANT TO APPLICABLE LAW UPON THE COMPANY, IT SHALL BE UNLAWFUL FOR THE
UNSUITABLE MEMBER (A) TO RECEIVE ANY DIVIDEND OR INTEREST OR ANY PAYMENT
OR DISTRIBUTION OF ANY KIND, INCLUDING OF ANY SHARE OF THE DISTRIBUTION OF
PROFITS OR CASH OR ANY OTHER PROPERTY, OR PAYMENTS UPON DISSOLUTION, FROM
THE COMPANY, OTHER THAN A RETURN OF CAPITAL AS REQUIRED ABOVE; (B) TO
EXERCISE DIRECTLY OR THROUGH ANY PROXY, TRUSTEE OR NOMINEE ANY VOTING
RIGHT CONFERRED BY THE MEMBER'S INTEREST IN THE COMPANY; (C) TO
PARTICIPATE IN THE MANAGEMENT OF THE COMPANY; OR (D) TO RECEIVE ANY
REMUNERATION (OTHER THAN THE REDEMPTION PRICE) IN ANY
-17-
FORM FROM THE COMPANY OR FROM ANY COMPANY HOLDING A GAMING LICENSE FOR
SERVICES RENDERED OR OTHERWISE.
(b) In furtherance of the foregoing, if at any time any securities
other than Membership Interests shall be issuable upon the exercise of this
Warrant, such securities shall bear a legend similar to the ones set forth
above. Whenever the legend requirement imposed by the Investor Rights Agreement
shall terminate, upon exercise of the Warrant, the Holder shall be entitled to
receive within five Business Days from the Company, at the Company's expense, a
new certificate or certificates representing Warrant Interests issued upon
exercise of this Warrant, in each case, without such legends.
5.2. RESTRICTION ON TRANSFER.
(a) General Restrictions. The Holder shall not directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) this Warrant unless
such Holder's transferee has agreed in writing to be bound by the terms of this
Warrant (including Section 1.6 hereof) and in accordance with Section 6.15
hereof.
(b) Transfers to Competitors. Absent an Event of Default, no
Holder shall directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) this Warrant (or any securities into which such Warrant is convertible or
exchangeable) to any Person that is a Competitor of the Company.
(c) Qualified Public Offering Restrictions. The Holder shall not
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) this
Warrant (or any securities into which such Warrant is convertible or
exchangeable) or any other securities of the issuer of the securities in the
Qualified Public Offering during any "blackout period" required by any
underwriter in connection with a Qualified Public Offering, which "blackout
period" shall in no event exceed the earlier of (i) 180 days from the date
securities are first sold in the Qualified Public Offering, and (ii) the date
any holder of 1% or more of the voting common equity securities of the Company,
that is subject to such "blackout period", is released from such restriction. In
order to enforce the foregoing covenant, the issuer in such Qualified Public
Offering may impose stop-transfer instructions with respect to the securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such "blackout period."
(d) Gaming Restriction. No Holder shall be permitted to transfer
this Warrant (or any securities into which such Warrant is convertible or
exchangeable) except in accordance with all applicable Gaming Laws and any
requirements or restrictions imposed by the Commission.
-18-
SECTION 6. MISCELLANEOUS
6.1. NOTICE OF ADJUSTMENTS; APPRAISAL.
(a) In each case of any adjustment or readjustment in the number
of Warrant Interests issuable upon exercise of this Warrant, the Company shall
promptly thereafter compute such adjustment or readjustment in accordance with
the terms of this Warrant and provide a written report thereof certified by the
Sole Member, the Chief Financial Officer of the Company or the Chief Executive
Officer to the Holder stating the number of Warrant Interests and the
Antidilution Price, after giving effect to such adjustment or readjustment, and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based (each, an "Adjustment Notice").
(b) Within 25 days of receipt of an Adjustment Notice, the Holder
or Holders representing a Required Interest shall have the right to cause the
Company to appoint an Appraiser to verify such computations reported pursuant to
Section 2, Section 3 or Section 6.1(a), including, without limitation, any
determination made by the Company's Sole Member. Such Holder or Holders shall
exercise its or their right pursuant to this Section 6.1(b) by delivering a
written request (each, an "Appraisal Notice") to the Company. Each such dispute
shall be resolved as set forth below.
(c) The Company shall within 30 days after an Appraisal Notice has
been given, engage an Appraiser to make an independent determination of the
Current Market Price and the other disputed calculations or amounts (such
determination, the "Appraiser's Determination"). The Appraiser's Determination
shall be final and binding on the Company and each holder of the Warrants. The
costs of conducting any appraisal shall be borne entirely by the Company;
provided, that in the event that the Company's computation of the adjustment or
readjustment contained in the applicable Adjustment Notice and the Appraiser's
Determination differ by not more than 10% , the cost and expense of the
Appraiser shall be borne by the Holder.
(d) The Company shall also keep copies of all such reports
generated pursuant to this Section 6.1 at its Office and will cause the same to
be available for inspection at such Office during normal business hours by the
Holder any prospective purchaser of this Warrant designated by the Holder.
6.2. NOTICE OF CERTAIN EVENTS. In case at any time:
(a) the Company shall pay any dividend upon, or make any
distribution in respect of, its membership interests of the Company;
(b) the Company shall propose to register any of its equity
securities under the Securities Act in connection with a public offering;
(c) there shall be any proposed Liquidity Event, Insolvency Event,
capital reorganization, or reclassification of the membership interests of the
Company, or consolidation
-19-
or merger of the Company with, or sale of all or substantially all of its assets
to, another person; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give notice to the
Holder of the date on which (i) the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights, or (ii)
such Liquidity Event, Insolvency Event, public offering, reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be, all of which shall be, in each
case, in compliance with the provision of Section 2.2(g). Such notice shall be
given not less than 10 days prior to the record date or the date on which the
transfer books of the Company are to be closed in respect thereto in the case of
an action specified in clause (i) of the preceding sentence and, to the extent
such disclosure (x) is not prohibited by Applicable Laws or (y) would not
require the Company or any Affiliate to make a public announcement of such
event, at least 20 days prior to the action in question, in the case of an
action specified in clause (ii) of the preceding sentence.
6.3. NOTICE. Any notice that is required or provided to be given under
this Warrant shall be deemed to have been sufficiently given and received for
all purposes when delivered in writing by hand, telecopy, telex or other method
of facsimile, or five days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, or two days after being
sent by overnight delivery providing receipt of delivery, to the following
addresses: if to the Company: MezzCo, L.L.C, c/o OpBiz, L.L.C., 3667 Las Vegas
Boulevard South, Las Vegas, Nevada 89109 Attn: Joshua Revitz, c/o Debbie Faint
Facsimile No.: (702) 785-5080 or at any other address designated by the Company
to Holder, with a copy to Jones Day, 2727 North Harwood Street, Dallas, Texas
75201 Attn: Michael Weinberg, Esq., Facsimile No.: (214) 969-5100; if to Holder,
[_________________], [_____________], Attn: [___________], [Title], Facsimile
No.: [____________], or at any other address designated by Holder to the Company
in writing.
6.4. NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective of any
adjustment in the Antidilution Price or the number of Warrant Interests, this
Warrant, whether theretofore or thereafter issued or reissued, may continue to
express the same price and number of Membership Interests as are stated herein
and the Antidilution Price and such number of Membership Interests specified
herein shall be deemed to have been so adjusted.
6.5. ISSUANCE AND TRANSFER TAXES. The Company covenants and agrees that
it will pay when due and payable all documentary, stamp and other similar taxes,
if any, that may be payable in respect of the issuance or delivery of the
Warrants or of the Warrant Interests purchasable and issuable upon the exercise
of the Warrants; provided, however, that the Company shall not be required to
pay any such tax or other charge imposed in respect of the transfer of Warrants,
or the issuance or delivery of certificates for Warrant Interests or other
securities in respect of the Warrant Interests upon the exercise of Warrants, to
a person or entity other than a then-existing registered holder of Warrants or
other securities issued by the Company.
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6.6. EXCHANGE OF WARRANT. This Warrant is exchangeable at no cost to the
Holder upon the surrender hereof by Holder at the Company's office, for a new
warrant of like tenor representing in the aggregate the right to subscribe for
and purchase the type and number of Warrant Interests that may be subscribed for
and purchased hereunder from time to time after giving effect to all the
provisions hereof, each of such new warrants to represent the right to subscribe
for and purchase such number of Warrant Interests as shall be designated by said
Holder hereof at the time of such surrender.
6.7. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company shall at no cost to the
Holder, on such terms as to indemnity or otherwise as it may in its discretion
impose (which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
6.8. GOVERNING LAW. This Warrant shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of New
York, without giving effect to conflict of laws principles thereof.
Notwithstanding the foregoing, matters of law in this Warrant that are related
to gaming in Nevada shall be governed by the Gaming Laws in their current form
and as they may hereafter be amended from time to time.
6.9. SECTION HEADINGS; CONSTRUCTION. The descriptive headings in this
Warrant have been inserted for convenience only and shall not be deemed to limit
or otherwise affect the construction of any provision thereof or hereof. The
parties have participated jointly in the negotiation and drafting of this
Warrant and the other agreements, documents and instruments executed and
delivered in connection herewith with counsel sophisticated in investment
transactions. In the event an ambiguity or question of intent or interpretation
arises, this Warrant shall be construed as if drafted jointly by the parties and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any provisions of this Warrant and the
agreements, documents and instruments executed and delivered in connection
herewith.
6.10. DISPUTE RESOLUTION.
(a) Except as provided in Section 6.1, all disputes, claims, or
controversies arising out of or relating to this Warrant or the negotiation,
breach, termination, validity or performance hereof that are not resolved by
mutual agreement shall be resolved solely and exclusively by binding arbitration
to be conducted before J.A.M.S./Endispute, Inc. or its successor. The
arbitration shall be held in Las Vegas, Nevada before a single arbitrator and
shall be conducted in accordance with the rules and regulations promulgated by
J.A.M.S./Endispute, Inc. unless specifically modified herein
(b) The parties covenant and agree that the arbitration hearing
shall commence within twenty (20) days of the date on which a written demand for
arbitration is filed by any party hereto. In connection with the arbitration
proceeding, the arbitrator shall have the
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power to order the production of documents by each party and any third-party
witnesses. In addition, each party may take up to three (3) depositions as of
right, and the arbitrator may in his or her discretion allow additional
depositions upon good cause shown by the moving party. However, the arbitrator
shall not have the power to order the answering of interrogatories or the
response to requests for admission. In connection with any arbitration, each
party shall provide to the other, no later than ten (10) business days before
the date of the arbitration, the identity of all Persons that may testify at the
arbitration and a copy of all documents that may be introduced at the
arbitration or considered or used by a party's witness or expert, and a summary
of the expert's opinions and the basis for said opinions. The arbitrator's
decision and award shall be made and delivered within ten (10) days of the
conclusion of the arbitration. The arbitrator's decision shall set forth a
reasoned basis for any award of damages or finding of liability. The arbitrator
shall not award punitive damages or any other damages that are specifically
excluded under this Warrant, and each party hereby irrevocably waives any claim
to such damages
(c) The parties covenant and agree that they will participate in
the arbitration in good faith and, except as set forth below, shall (i) bear
their own attorneys' fees costs and expenses in connection with the arbitration,
and (ii) share equally in the fees and expenses charged by J.A.M.S./Endispute,
Inc. The arbitrator may in his or her discretion assess costs and expenses
(including the reasonable legal fees and expenses of the prevailing party)
against any party to a proceeding. Any party unsuccessfully refusing to comply
with an order of the arbitrators shall be liable for costs and expenses,
including attorneys' fees, incurred by the other party in enforcing the award.
This agreement applies equally to requests for temporary, preliminary or
permanent injunctive relief, except that in the case of temporary or preliminary
injunctive relief any party may proceed in court without prior arbitration for
the limited purpose of avoiding immediate and irreparable harm. The dispute
resolution provisions of this Section 6.10 shall be enforceable in any court of
competent jurisdiction
6.11. CONSENT TO JURISDICTION. Each of the parties hereto irrevocably and
unconditionally consents to the exclusive jurisdiction of J.A.M.S./Endispute,
Inc. to resolve all disputes, claims or controversies arising out of or relating
to this Warrant or the negotiation, breach, termination, validity or performance
hereof and or and further consents to the jurisdiction of the courts of the
State of California for the purposes of enforcing the arbitration provisions of
this Agreement. Each party further irrevocably waives any objection to
proceeding before J.A.M.S./Endispute, Inc. based upon lack of personal
jurisdiction or to improper venue and further irrevocably and unconditionally
waives and agrees not to make a claim in any court that arbitration before
J.A.M.S./Endispute, Inc. has been brought in an inconvenient forum. Each of the
parties hereto hereby consents to service of process by registered mail at the
address to which notices are to be given. Each of the parties hereto agrees that
its or his submission to jurisdiction and its or his consent to service of
process by mail are made for the express benefit of the other parties hereto.
6.12. REMEDIES; SEVERABILITY. Notwithstanding Sections 6.10 and 6.11, it
is specifically understood and agreed that any breach of the provisions of this
Warrant by any person subject hereto will result in irreparable injury to the
other parties hereto, that the remedy at law alone will be an inadequate remedy
for such breach, and that, in addition to any other remedies which
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they may have, such other parties may enforce their respective rights by actions
for specific performance (to the extent permitted by law). Whenever possible,
each provision of this Warrant shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Warrant
shall be deemed prohibited or invalid under such applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Warrant.
6.13. INTEGRATION. This Warrant, the Purchase Agreement, the Intercreditor
Agreement (Senior Debt) and the Investor Rights Agreement, including the
exhibits referred to herein and therein, constitute the entire agreement and
supersede all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
6.14. NO RIGHTS OR LIABILITIES AS MEMBER. Nothing contained in this
Warrant shall be construed as conferring upon the Holder any rights as a member
of the Company or as imposing any obligation on the Holder to purchase any
securities or as imposing any liabilities on the Holder as a member of the
Company, whether such obligation or liabilities are asserted by the Company or
creditors of the Company.
6.15. AGREEMENT TO BE BOUND; COVENANTS OF THE PURCHASE AGREEMENT.
(a) Agreement to be Bound. By Holder's receipt and acceptance of
this Warrant, the Holder acknowledges and hereby agrees to be bound by such
terms and conditions of this Warrant, the Investor Rights Agreement and the
Intercreditor Agreement (Senior Debt) that are applicable to the Holder. Any and
all Warrant Interests issued upon exercise hereof shall, immediately upon such
issuance, and without further action by or on behalf of the Holder or the
Company, become subject to such terms and conditions of the Investor Rights
Agreement, the Articles of Organization of the Company and the Company's Amended
and Restated Operating Agreement, as are by their terms applicable to such
Warrant Interests, as well as Gaming Laws and any requirements or restrictions
imposed by the Commission.
(b) Covenants of the Purchase Agreement. By Holder's receipt and
acceptance of this Warrant, the Holder acknowledges and hereby agrees that the
Warrants and the Warrant Interests shall be entitled to the benefits of certain
covenants in the Purchase Agreement, as set forth in Sections 6.3 (Books and
Records), 6.4 (Financial and Other Information), 6.5 (Notices), 6.7 (Existence,
Good Standing and Legal Requirements), 7.6 (Transactions with Affiliates), 7.7
(Business Conducted) and 7.16 (Tax Classification) of the Purchase Agreement,
whether or not the Notes have been paid in full.
(c) Non-Disclosure. By Holder's receipt and acceptance of this
Warrant, the Holder acknowledges and hereby agrees that the Warrants, the
Warrant Interests and the Put Notes shall be subject, in all respects, to the
confidentiality obligations, as set forth in Section 9.23 (Non-Disclosure) of
the Purchase Agreement.
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6.16. WARRANT OBLIGATIONS INDEPENDENT OF DEBT OBLIGATIONS. Pursuant to the
Purchase Agreement, the Company has issued the Notes. The obligations of the
Company with respect to the Warrants are independent of the obligations of the
Company under and with respect to such Notes, and such obligations with respect
to the Warrants shall remain valid and binding notwithstanding the failure of
performance of, or any breach by the Company with respect to its obligations
under the Notes.
6.17. WAIVERS AND CONSENTS; AMENDMENTS.
(a) For the purposes of this Warrant and all documents executed
pursuant hereto, no course of dealing between or among any of the parties hereto
and no delay on the part of any party hereto in exercising any rights hereunder
or thereunder shall operate as a waiver of the rights hereof or thereof. No
covenant or provision hereof may be waived otherwise than by a written
instrument signed by the party or parties so waiving such covenant or other
provision contemplated herein.
(b) No amendment to this Warrant may be made without the written
consent of the Company and the Holders representing the Required Interest.
(c) Unless otherwise specified herein, any actions required to be
taken with respect to consents, approvals or waivers required or contemplated to
be given by the Holder, shall require the vote of the Holder or Holders
representing the Required Interest and any such action shall bind all of the
Holders; provided, however that the consent of the Holder will be required to
(i) reduce the number of Warrant Interest into which the Warrant is exercisable
(except pursuant to the express antidilution provisions of Section 2), (ii)
increase the Exercise Price, (iii) modify the Holder's right to transfer the
Warrant, (iv) amend, modify or waive the application of Section 2 (Adjustments
to Exercise Price and Warrant Interests), (v) amend, modify or waive application
of Section 3.1 (Put Right), (vi) approve any modification to or waiver from the
terms of this Warrant that would treat the Holder in a discriminatory manner, or
(vii) amend, modify or waive application of this Section 6.17(c).
6.18. CERTAIN DEFINITIONS. The following terms as used in this Warrant
shall have the following meanings:
(a) An "AFFILIATE" means, with respect to any Person, (a) any
other Person directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with such Person, (b) any
other Person owning or controlling 10% or more of the outstanding voting
interests of such Person, (c) any officer, director, general partner, managing
member or trustee of such Person, or (d) any other Person which is an officer,
director, general partner, managing member, trustee or holder of 10% or more of
the voting interests of any other Person described in clauses (a) through (c) of
this definition. As used in this definition, the term "control", "controlling",
"controlled by" or "under common control with" means the possession, directly or
indirectly, through one or more intermediaries, of the power to direct or cause
the direction of the management and policies of a Person, whether through voting
securities, by contract or otherwise.
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(b) "APPRAISER" means an independent nationally recognized
investment bank or other qualified financial institution acceptable to the
Company and a Required Interest.
(c) "BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which shall be in Nevada, Texas or the City of New York a legal holiday
or a day on which banking institutions are authorized by law or other
governmental action to close. Any reference to "days" (unless Business Days are
specified) shall mean calendar days.
(d) "COMMISSION" means the Nevada Gaming Commission.
(e) "COMPETITOR" means (i) any Person that operates, or owns 50%
or more of the Equity Interests in, one or more casinos or casino/hotels, (ii)
any Person that engages in the management of one or more casinos or
casino/hotels as a material portion of its business, or (iii) any Person that
directly or indirectly is in control of, is controlled by or under common
control with any of the foregoing.
(f) "CURRENT MARKET PRICE" means, on any date specified herein,
(i) the average daily Market Price during the period of the most recent 20 days
ending on the Relevant Date, on which the national securities exchanges were
open for trading, (ii) if no class of Membership Interests are then listed or
admitted to trading on any national securities exchange or granted in the
over-the-counter market, then the "Current Market Price" shall be the Market
Price on such date or (iii) if there shall have been no trading on such date or
if such security is not so designated or if such security is not then listed or
admitted to trading on any national exchange or quoted in the over-the-counter
market, or if the asset to be valued is other property, the Fair Market Value
thereof determined in good faith by the Sole Member and Holders holding a
Required Interest.
(g) "EBITDA" shall mean without duplication, (a) the sum of (i)
Net Income (as defined in the Purchase Agreement), (ii) Interest Expense (as
defined in the Purchase Agreement), (iii) federal, state and local income taxes
deducted in determining Net Income, and (iv) depreciation and amortization and
other non-cash items properly deducted in determining Net Income, in each case
on a consolidated basis for the Company and its Subsidiaries for such period,
calculated on a consolidated basis in accordance with generally accepted
accounting principles, minus (b) non-cash items properly added in determining
Net Income for such period (calculated on a consolidated basis in accordance
with generally accepted accounting principles). Any and all payments made to
Northwind Aladdin, LLC, a Nevada limited liability company, in cash pursuant to
the Energy Services Agreement (as defined in the Purchase Agreement) shall be
deemed to be operating expenses of the Company for the purpose of determining
EBITDA.
(h) "EQUITY VALUE" means an amount equal to eight times (8.0x)
EBITDA for the twelve calendar months ending on the last day of the month in
which the seventh anniversary of the Closing Date occurs, less Net Debt of the
Company and its Consolidated Subsidiaries as of the end of the month in which
the Put Demand Notice is received.
(i) "FAIR MARKET VALUE" means, with respect to any security or
other property, either (i) the Market Price, if any, of such security or (ii) if
no Market Price exists, the
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value (which shall not take into effect any discounts for minority interest,
illiquidity or restrictions on transferability) of such security or other
property as determined in good faith by agreement of the Sole Member and Holders
holding a Required Interest; provided, however, that if the parties cannot agree
upon such Fair Market Value, the Fair Market Value of such security or other
property shall be determined by the procedures for obtaining an Appraiser's
Determination set forth in Section 6.1(b).
(j) "GAMING AUTHORITY" means any of the Nevada Gaming Commission,
the Nevada State Gaming Control Board, the Clark County Liquor and Gaming
Licensing Board and any other gaming regulatory body or any agency which has, or
may at any time after the Closing Date have, jurisdiction over the gaming
activities of the Premises or any successor to such authority.
(k) "GAMING LAWS" means the provisions of the Nevada Gaming
Control Act, as amended from time to time, all regulations of the Nevada Gaming
Commission promulgated thereunder, as amended from time to time, the provisions
of the Clark County Code, as amended from time to time, and all other laws,
statutes, rules, rulings, orders, ordinances, regulations and other legal
requirements of any Gaming Authority.
(l) "LIQUIDITY EVENT" shall mean the occurrence of any one of the
following events: (i) a Qualified Public Offering of the Company or OpBiz or
(ii) a sale of all or substantially all of the assets of either OpBiz (or any
successor) or the Premises (either before or after the renovation thereof into
the Planet Hollywood Resort & Casino) to any Person that is not an Affiliate of
the Company or of BH/RE, L.L.C.
(m) "MARKET PRICE" of any security, as of any date, means the
value determined in accordance with the following provisions:
(i) if such security is listed on a national securities
exchange registered under the Exchange Act, a price equal to the closing
sales price for such security on such exchange on such date; or
(ii) if not so listed, and such security is quoted on NASDAQ,
a price equal to the closing bid and asked prices for such security quoted
on such system on such date.
(n) "NET DEBT" shall mean (a) Debt of the Company and its
Consolidated Subsidiaries less (b) unrestricted cash balances of the Company and
its Consolidated Subsidiaries.
(o) "OPBIZ" shall mean OpBiz, L.L.C.
(p) "QUALIFIED PUBLIC OFFERING" shall mean an underwritten public
offering on a firm commitment basis lead managed by a nationally recognized
investment banking organization or organizations pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), covering the offer and sale of Membership
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Interests or voting common equity securities of the Company or OpBiz or any
successor thereto (A) with respect to which the issuer of such securities
receives aggregate net proceeds attributable to sales for the account of the
Company (after deduction of underwriting discounts and commissions) of not less
than $25 million, (B) with respect to which the gross equity value of the issuer
of such securities, valued at the initial public offering price, is at least
$100 million and (C) with respect to which such Membership Interests are listed
for trading on the New York Stock Exchange or quoted on the NASDAQ National
Market.
(q) "REDEMPTION PRICE" means, on any date, the aggregate purchase
price for the Warrant and Put Securities held by the Holder, which shall equal
the Holder's fully-diluted interest in the Company's Equity Value on such date.
In calculating the Holder's fully-diluted interest, unvested and
out-of-the-money Membership Interests, Options and Convertible Securities shall
be disregarded.
6.19. OTHER DEFINITIONAL PROVISIONS.
(a) The following terms used herein shall have the meaning
assigned to such terms in the section set forth opposite such term:
Adjustment Notice 6.1(a)
Affiliate.................................................. 6.18(a)
Antidilution Price......................................... 2.1
Appraisal Notice........................................... 6.1(b)
Appraiser.................................................. 6.18(b)
Appraiser's Determination.................................. 6.1(c)
Arbitrator................................................. 6.10(a)
Business Day............................................... 6.18(c)
Class A Units.............................................. First paragraph
Class B Units.............................................. First paragraph
Commission................................................. 6.18(d)
Company.................................................... First paragraph
Competitor................................................. 6.18(e)
Convertible Securities..................................... 2.2(d)(i)
Current Market Price....................................... 6.18(f)
EBITDA..................................................... 6.18(g)
Equity Value............................................... 6.18(h)
Exchange Act............................................... 4.1(e)
Exchange Notice............................................ 1.3(b)
Exercise Notice............................................ 1.3(a)
Exercise Price............................................. First paragraph
Expiration Date............................................ First paragraph
Fair Market Value.......................................... 6.18(i)
Filing Date................................................ 6.10(b)
Gaming Authority........................................... 6.18(j)
Gaming Laws................................................ 6.18(k)
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Holder..................................................... First paragraph
Insolvency Event........................................... 3.1(c)
Investor Rights Agreement.................................. 5.1(a)
Liquidity Event............................................ 6.18(l)
Management Pool............................................ 2.2(d)(vi)
Market Price............................................... 6.18(m)
Membership Interests....................................... First paragraph
Net Debt................................................... 6.18(n)
Office..................................................... 1.1
OpBiz...................................................... 6.18(o)
Options.................................................... 2.2(d)(i)
Purchase Agreement......................................... First paragraph
Put Demand Date............................................ 3.1(a)
Put Demand Period.......................................... 3.1(a)
Put Payment Date........................................... 3.1(a)
Put Period................................................. 3.1(a)
Put Right.................................................. 3.1(b)
Put Securities............................................. 3.1(a)
Qualified Public Offering.................................. 6.18(p)
Redemption Price........................................... 6.18(q)
Relevant Date.............................................. 2.2(d)
Required Interest.......................................... 2.2(d)(iv)
Securities Act............................................. 4.1(e)
Sole Member................................................ 2.2(d)(iv)
Warrant.................................................... First paragraph
Warrant Register........................................... 1.1
Warrant Interests.......................................... First paragraph
(b) Except as otherwise specified herein, all references herein:
(i) to any person other than the Company, shall be deemed to
include such person's successors and assigns;
(ii) to the Company shall be deemed to include the Company's
successors; and
(iii) to any applicable law defined or referred to herein,
shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time.
(c) When used in this Warrant, the words "herein", "hereof' and
"hereunder", and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words "Section" and "Exhibit"
shall refer to Sections of, and Exhibits to, this Warrant unless otherwise
specified.
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(d) Whenever the context so requires the neuter gender includes
the masculine or feminine, and the singular number includes the plural, and vice
versa.
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IN WITNESS WHEREOF, the Company has caused this certificate to be
executed by its duly authorized officer as of the date first written above.
MEZZCO., L.L.C.,
a Nevada limited liability company
By: EQUITYCO., L.L.C.,
a Nevada limited liability company, its
sole member
By: ______________________________________
Name:
Title: Manager