Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 1 of 19

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1 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 1 of 19 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF RHODE ISLAND ) In re: ) Chapter 11 ) UTGR, INC. d/b/a TWIN RIVER, et al., 1 ) Case No (ANV) ) Debtors. ) Jointly Administered ) NOTICE OF DEBTORS MOTION FOR ENTRY OF AN ORDER APPROVING TRANSITION AGREEMENT PLEASE TAKE NOTICE that a hearing (the Hearing ) on the Debtors Motion for Entry of an Order Approving Transition Agreement will be held before the Honorable Arthur N. Votolato, Bankruptcy Judge of the United States Bankruptcy Court for the District of Rhode Island (the Bankruptcy Court ), at the United States Bankruptcy Court on 380 Westminster St., Providence, Rhode Island, 02903, on October 13, 2009 at 1:00 p.m. (prevailing Eastern Time). PLEASE TAKE FURTHER NOTICE that any objections or other appropriate response to the Motion must comply with the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) and the Local Bankruptcy Rules and Forms for the United States Bankruptcy Court for the District of Rhode Island (the Local Bankruptcy Rules ) and must be set forth in a writing describing the basis therefore. Additionally, all objections to the Motion must be (a) filed with the Bankruptcy Court electronically by registered users of the Bankruptcy Court s case filing system, (b) delivered in hard copy form in an unsealed envelope to the chambers of the Honorable Judge Arthur N. Votolato, United States Bankruptcy Court, 380 Westminster St., Providence, Rhode Island, and marked Chambers Copy, not later than 1 The Debtors in these chapter 11 cases are BLB Management Services, Inc., BLB Worldwide Holdings, Inc., and UTGR, Inc. K&E

2 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 2 of 19 the next business day following the date on which such Motion is electronically filed, and (c) served by first-class mail upon each of the following: (i) the Debtors and their counsel; (ii) the Office of the United States Trustee for the District of Rhode Island (the U.S. Trustee ); (iii) applicable local, state, and federal regulatory entities; (iv) counsel to the Administrative Agents for the First and Second Lien Lenders; (v) counsel to the equity sponsors; (vi) counsel to those certain contractors who have asserted mechanic s liens against the Debtors; (vii) the Internal Revenue Service; (viii) the Securities and Exchange Commission; and (ix) counsel to the Official Committee of Unsecured Creditors, so as to be actually received no later than October 8, 2009 at 4:00 p.m. (prevailing Eastern Time). If no objection or other response is timely filed, the Motion will be deemed to be unopposed and will be granted unless: (a) the requested relief is forbidden by law; (b) the requested relief is against public policy; or (c) in the opinion of the Court, the interest of justice requires otherwise. Only those responses that are timely filed, served, and received will be considered at the Hearing. Failure to file a timely objection may result in entry of a final order granting the Motion as requested by the Debtors. K&E

3 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 3 of 19 Dated: September 30, 2009 Providence, Rhode Island WINOGRAD, SHINE & ZACKS, P.C. Allan M. Shine (Bar No. 0383) 123 Dyer Street Providence, RI Telephone: (401) Facsimile: (401) and - KIRKLAND & ELLIS LLP /s/ Paul M. Basta Paul M. Basta (Admitted pro hac vice) Stephen E. Hessler (Admitted pro hac vice) 601 Lexington Avenue New York, NY Telephone: (212) Facsimile: (212) paul.basta@kirkland.com stephen.hessler@kirkland.com Counsel for the Debtors and Debtors in Possession 3 K&E

4 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 4 of 19 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF RHODE ISLAND ) In re: ) Chapter 11 ) UTGR, INC. d/b/a TWIN RIVER, et al., 1 ) Case No (ANV) ) Debtors. ) Jointly Administered ) DEBTORS MOTION FOR ENTRY OF AN ORDER APPROVING TRANSITION AGREEMENT The above-captioned debtors and debtors in possession (collectively, the Debtors ), file this Motion (the Motion ) for entry of an order, substantially in the form attached hereto as Exhibit A, approving that certain Transition and Release Agreement by and among the Debtors, the Colorado Entities, 2 the Sponsor Entities, 3 the Sponsor Representatives, 4 the First Lien Lenders (as defined herein), and the Second Lien Lenders (as defined herein) (the Transition 1 The Debtors in these chapter 11 cases are BLB Management Services, Inc., BLB Worldwide Holdings, Inc., and UTGR, Inc. 2 Colorado Entities is defined as, collectively, Mile High USA, Inc., a Colorado Corporation ( Mile High USA ), Mile High USA Soccer, Inc., a Colorado corporation, Mile High Kennel Club, Inc., a Colorado corporation, Interstate Racing Association, Inc., a Colorado corporation, Pueblo Kennel Association, Inc., a Colorado corporation, Racing Associates of Colorado, Ltd., a Colorado limited partnership, and Rocky Mountain Post Time, LLC, a Colorado limited liability company. See Transition Agreement (ii). 3 Sponsor Entities is defined as, collectively, BLB Investors, L.L.C., a Delaware limited liability company ( BLB Investors ), Starbell Investors, L.L.C., a Delaware limited liability company, SOF-VI U.S. Holdings, L.L.C., a Delaware limited liability company, Starwood Global Opportunity Fund VI-A, L.P., a Delaware limited partnership, Starwood Global Opportunity Fund VI-B, L.P., a Delaware limited partnership, Starwood Global Opportunity Fund VI-D, L.P., a Delaware limited partnership, SOF-VI Management, L.L.C., a Delaware limited liability company, Starwood Capital Group Global I, L.L.C., a Connecticut limited liability company, Kerzner Investments Acquisitions Limited, a British Virgin Islands company, Kerzner Investments BLB, Inc., a Delaware corporation, Kerzner International Holdings, Ltd., a Bahamian international business company, Waterford Group Investments, L.L.C., a Delaware limited liability company, and Waterford Group, LLC, a Delaware limited liability company. See id. (iii). 4 Madison Grose, Dan Yih, Richard Levine, and Len Wolman, together with all other existing and previous directors of any of the Debtors, the Colorado Entities, and all other existing and previous directors and officers of BLB Investors, collectively comprise the Sponsor representatives (the Sponsor Representatives ). Id. (iv). K&E

5 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 5 of 19 Agreement ), attached hereto as Exhibit B. In support of the Motion, the Debtors respectfully represent as follows: Jurisdiction 1. The United States Bankruptcy Court for the District of Rhode Island has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 2. Venue is proper pursuant to 28 U.S.C and The statutory basis for the relief requested herein is sections 105(a) and 363(b) of title 11 of the United States Code (the Bankruptcy Code ). Background A. Debtors Equity Sponsors 4. As described in the First Day Declaration, 5 BLB Investors, the direct and indirect parent of the Debtors, was formed in March 2004 by the equity sponsors (the Sponsors ) as a joint venture among three of the world s most accomplished leisure and gaming operators, developers, and managers: Starwood Capital Group Global I, L.L.C. ( Starwood ); Kerzner International Holdings Ltd. ( Kerzner ); and Waterford Group, LLC ( Waterford ). First Day Declaration Starwood is a privately-held global investment management firm that specializes in real estate investments, including residential and commercial land development, multifamily, hotel, office, retail, mixed-use, industrial, health clubs, golf clubs, and mezzanine debt. Id. 14. Since its founding in 1991, Starwood has completed more than 300 transactions representing assets in excess of $21 billion. Id. 5 Declaration of George Papanier, President and Chief Operating Officer of UTGR, Inc., in Support of First Day Motions, filed on June 23, 2009 [Docket No. 2] (the First Day Declaration ). K&E

6 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 6 of Kerzner, through its subsidiaries, is a leading international developer and operator of destination resorts, casinos and luxury hotels. Id. 15. Kerzner s flagship brand is Atlantis, which includes ocean-themed destination resorts in Paradise Island, Bahamas, and Dubai, UAE. Id. Kerzner also manages six luxury resort hotels around the world under the One&Only brand. Id. 7. Waterford is a leading developer and operator in the hospitality and gaming industries. Id. 16. Since 1986, Waterford has been involved in developing and operating projects, such as hotel, convention, and gaming properties, totaling more than $2 billion. Id. 8. The following Sponsor personnel serve as directors and officers of the Debtors: Len Wolman, Waterford s Chairman and Chief Executive Officer; Richard Levine, Kerzner s Executive Vice President and General Counsel; Madison Grose, Starwood s Senior Managing Director and Co-General Counsel; and Dan Yih, Starwood s Chief Operating Officer. B. Debtors Corporate History and Structure 9. In July 2005, the Debtors acquired 100% of the equity of the domestic operations of Wembley plc, including Twin River, a Rhode Island gaming and greyhound racing facility (then known as Lincoln Park ), as well as three greyhound tracks, a horse racing track, and a commercial building in Colorado (collectively, the Colorado Facilities ) for $470 million. Id At the time of the acquisition, the Sponsors believed that the appropriate debt capacity for Twin River was approximately $550 million and that the facility would generate approximately $90 million to $100 million in EBITDA annually. Id. The Sponsors then invested another $220 million towards capital improvements and rebranding for the facility. Id. The cash required to purchase and upgrade Twin River and the Colorado Facilities flowed from K&E

7 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 7 of 19 two sources: (a) loans made under the First Lien Credit Agreement 6 and Second Lien Credit Agreement 7 (as amended to provide additional amounts for capital improvements at Twin River); and (b) over $150 million in equity contributions made by the Sponsors. Id. 11. The Sponsors have not recovered any of their $150 million equity contribution. Id. C. Prepetition Restructuring Agreement 12. On the eve of filing these chapter 11 cases (the Chapter 11 Cases ), the Debtors reached agreement with holders holding over 50% of the first lien debt (the First Lien Lenders ) and a substantial amount of the second lien debt (the Second Lien Lenders and, together with the First Lien Lenders, the Lenders ), and the executive branch of the State of Rhode Island (the State ) on the terms of a preliminary restructuring transaction that is expected to eliminate approximately $290 million in debt and is predicated on certain legislative actions designed to ensure the Debtors exit chapter 11 on sound financial footing (the Restructuring Agreement ). Id The amount of the Lenders senior secured claims dwarf that of all other secured and unsecured claims combined. As of the Petition Date, approximately $589 million in principal amount remained outstanding under the First and Second Lien Credit Agreements. Id. 29. By contrast, the Contractors currently hold approximately $3 million in mechanic s liens and the total unsecured claims in these Chapters 11 Cases amount to approximately $3.7 6 That certain First Lien Priority Credit Agreement, dated as of June 30, 2005, as amended and restated as of July 18, 2005, and as further amended and restated as of August 11, 2005 (the First Lien Credit Agreement ). 7 That certain Second Priority Credit Agreement, dated as of July 18, 2005, and amended and restated August 11, 2005 (the Second Lien Credit Agreement ). K&E

8 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 8 of 19 million. 8 In other words, the economic significance of the Lenders, holders of approximately 99% of the claims in these Chapter 11 Cases, is massive. 14. Most importantly for the purposes of this Motion, the Restructuring Agreement requires the Lenders to conduct a marketing process to identify a new operator of Twin River. Id. 6. The Restructuring Agreement further provides that if there is no agreement regarding the continuing role of the Sponsors within an initial 60-day period, the Sponsors will effectively transition operational and financial control by resigning as directors and officers, and be replaced by designees acceptable to the agent for the First Lien Lenders (the First Lien Agent ) and the Governor of the State of Rhode Island (the Governor ), within an additional 60-day period. Id The Restructuring Agreement further provides that, concurrently with and as a condition of the Sponsors resignations, BLB Investors and its affiliates, the Debtors, and the Lenders will execute standard mutual releases. Id. 37. D. The Debtors Chapter 11 Cases 16. On June 23, 2009 (the Petition Date ), each of the Debtors commenced cases under chapter 11 of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code ), by filing a voluntary petition for relief with the United States Bankruptcy Court for the District of Rhode Island (the Court ). The Debtors are operating their businesses and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in these Chapter 11 Cases. The Court has granted procedural consolidation and joint administration of these Chapter 11 Cases [Docket No. 27]. On June 30, 2009, the United States Trustee for the District 8 See id. 31; see also Debtors Schedules and Statements of Financial Affairs, filed on August 22, 2009 [Docket Nos ]. K&E

9 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 9 of 19 of Rhode Island (the U.S. Trustee ) appointed an official committee of unsecured creditors (the Creditors Committee ) [Docket No. 85]. E. The Transition Agreement 17. Within the initial 60-day period following the Petition Date, no agreement was reached regarding BLB Investors continuing role with the Debtors. Accordingly, consistent with the terms of the Restructuring Agreement, the Sponsors, the Debtors, the First Lien Agent, and the State engaged in vigorous negotiations over the terms of a consensual Transition Agreement that effects the transition provided for in the Restructuring Agreement. 18. The complete, executed Transition Agreement is attached hereto as Exhibit B. 9 The key provisions of the Transition Agreement are summarized below. Resignation of Sponsor Representatives 19. Each of the Sponsor Representatives who is currently a member of the board of directors of any of the Debtors or the Colorado Entities (all such boards, collectively, the Boards ) or an officer of any of the Debtors or the Colorado Entities agrees that, upon the earlier of October 23, 2009 or the occurrence of four conditions discussed in greater detail in the Transition Agreement, 10 such Sponsor Representative shall resign immediately and without any further action as a member of all of the Boards and as an officer or from any Board committee or other position held by such Sponsor Representative, in each case, of each of the Debtors or the Colorado Entities 11. With respect to the composition of the replacement Boards, (i) the Governor 9 To the extent that the summaries set forth in this Motion and the terms of the Transition Agreement are inconsistent, the latter shall govern. To the extent any signatures to the Transition Agreement are still being collected, the Debtors will file these in advance of the hearing on this Motion. 10 See Transition Agreement 1(a)(i)-(iv). 11 To clarify: the Colorado Entities are not Debtors in these Chapter 11 Cases. However, BLB Management Services, Inc. (a Debtor) is the sole equity owner of Mile High USA (the parent Colorado Entity and a non- Debtor), and this equity interest is part of the collateral securing the Lenders repayment rights under the First K&E

10 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 10 of 19 of the State of Rhode Island will designate one replacement member of the Boards of the BLB Debtors (the State Replacement BLB Board Member ) 12, who shall be reasonably acceptable to the First Lien Agent, (ii) the First Lien Agent will designate one replacement member of the Boards of the BLB Debtors (the Lender Replacement BLB Board Member and, together with the State Replacement Board Member, the Replacement BLB Board Members ), 13 who shall be reasonably acceptable to the Governor, and one or more replacement members of the Boards of the Colorado Entities, and (iii) the Department of Business Regulation and the Department of Revenue of the State of Rhode Island (together, the State Regulators ) shall review the applications for Replacement BLB Board Members as promptly as reasonably practical upon receipt. Id. 1(a)(i). 20. Concurrently with the resignations of the Sponsor Representatives, all of the Sponsor Representatives will be relieved of all prospective fiduciary and other duties and obligations to each of the Debtors and the Colorado Entities and to all creditors of the Debtors and the Colorado Entities, except as otherwise provided in the Transition Agreement. Id. 1(c). and Second Lien Credit Agreements. There are presently asset sale processes underway for the Colorado Entities. Subject to the satisfaction of a promissory note executed by Mile High USA (and guaranteed by the Sponsors investment affiliates) in favor of City National Bank of Florida (the CNB Note ), with a present balance of approximately $6.2 million, the value of the Colorado Entities ultimately will flow upwards to Mile High USA, and be subject to BLB Management Services, Inc. s equity interests therein. Accordingly, because, as with the Debtors, BLB Investors is not the likely economic beneficiary of the Colorado Entities (subject to exception described in the following sentence), the Sponsors and the Lenders agreed it was advisable (A) for the Sponsors to resign as directors and officers of the Colorado Entities concurrently with the Sponsors resignation as directors and officer of the Debtors, and (B) for the Transition Agreement to effect these simultaneous resignations. Importantly, because the Sponsors investment affiliates have guaranteed the CNB Note, the Transition Agreement clarifies and provides at Section 6 that, in the event the CNB Note is repaid from the applicable guarantees, the guarantors subrogation rights shall entitle them to the initial asset sale proceeds of the Colorado Entities until such subrogation obligations are satisfied in full. 12 The State Replacement BLB Board Member shall not be employed by the State of Rhode Island at the time of his or her appointment as a replacement BLB Board Member or at any time during his or her service as a replacement BLB Board Member. The State Replacement BLB Board Member shall resign his or her position as a director of the BLB Debtors by no later than the Plan Effective Date (as defined herein). 13 The Replacement BLB Board Members, all independent board members, have already been selected by the appropriate designators. K&E

11 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 11 of 19 Transfer of Capital Stock 21. The Debtors and the First Lien Agent agree that, on or prior to October 23, 2009, the First Lien Agent shall designate a person, trust, or entity (the Designated Transferee ) to whom BLB Investors shall irrevocably transfer all of the issued and outstanding capital stock of BLB Worldwide Holdings (whether common or preferred, and whether voting or non-voting, the BLB Capital Stock ); provided that, if, by October 23, 2009, the Lenders shall not have designated the Designated Transferee, then, subject to the rights and restrictions contained in the Transition Agreement, BLB Investors shall retain possession of all of the BLB Capital Stock until, and shall irrevocably transfer such Capital Stock upon, the effective date of the Debtors chapter 11 plan of reorganization (the Plan Effective Date ), which plan of reorganization (the Plan ) shall provide for the discharge or other treatment of the BLB Capital Stock, to the transferee formed by the First Lien Lenders and identified in the Plan or any of the documents related thereto. Id. 2(a). 22. Further, the Debtors acknowledge and agree that they shall provide for the irrevocable transfer of all of the issued and outstanding capital stock of Mile High USA, Inc. pursuant to the Plan to the transferee identified in the Plan or any of the documents related thereto, which transfer shall be effective on the Plan Effective Date. Id. 2(b). 23. Lastly, effective from the date of the Transition Agreement and until the Transfer Date, BLB Investors shall vote all BLB Capital Stock, and shall take all other necessary or desirable actions within its control (whether in BLB Investors capacity as a stockholder, director, member of a board committee or officer of the BLB Debtors or the Colorado Entities or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the K&E

12 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 12 of 19 BLB Debtors and Colorado Entities shall take all necessary and desirable actions within their control, to effect and permit the resignations and stock transfer actions described in the Transition Agreement. Id. 3. Releases 24. Section 5 of the Transition Agreement provides for two forms of releases. First, there are mutual, consensual releases between the Debtors and the Lenders. Id. 5. These are inarguably permissible. Second, the Debtors are releasing derivative shareholder claims of the Sponsors and BLB Investors. Id. As set forth below, these releases are proper if they are in the best interests of the estate according to the Debtors sound business judgment. Here, to the best of the Debtors knowledge, after preliminary investigation, no claims exist that the Debtors are releasing. Additionally, the fact that the Lenders, the party with by far the largest economic interest in these Chapter 11 Cases, have also signed off on the releases acts as an independent check on the Debtors business judgment. Further, these releases are a necessary element to the Transition Agreement. Without the Transition Agreement, the Restructuring becomes increasingly difficult to consummate. Given all of the foregoing, the releases are undoubtedly in the best interests of the Debtors estate. Relief Requested 25. By this Motion, the Debtors seek authority to enter into the Transition Agreement. To be clear, most of the provisions of the Transition Agreement, insofar as they do not involve the proposed use of estate property, do not appear to require Court approval under the Bankruptcy Code. Nonetheless, because the Transition Agreement does involve actions by the Debtors that are not ordinary course in the broadest (albeit non-economic) sense of that term, the Debtors believe it is prudent to file this Motion and seek Court approval via notice and a K&E

13 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 13 of 19 hearing to fully apprise the Court and all parties in interest of the Transition Agreement s terms as well the benefits it provides to the Debtors estates. Basis for Relief I. Entry Into The Transition Agreement, And The Resulting Replacement Of The Debtors Directors, Significantly Advances The Debtors Successful Restructuring. 26. Sections 105 and 363 of the Bankruptcy Code provide authority for this Court to permit the Debtors to enter into the Restructuring Agreement. Section 363(b) of the Bankruptcy Code provides that a trustee [or debtor-in-possession], after notice and a hearing, may use, sell or lease, other than in the ordinary course of business, property of the estate, when a sound business purpose justifies such action. In re Aerovox, Inc., 269 B.R. 74, 80 (Bankr. D. Mass. 2001); In re Cadkey Corp., 317 B.R. 19, 23 (D. Mass. 2004) (in evaluating a debtor s decision under 363(b), The court must be mindful that [a] debtor s business decision should be approved by the court unless it is shown to be so manifestly unreasonable that it could not be based upon sound business judgment. ). 27. Under section 105(a) of the Bankruptcy Code, the bankruptcy court has the equitable power to issue any order, process, or judgment that is necessary or appropriate to carry out provisions of the Code. In re SPM Mfg. Corp., 984 F.2d 1305, 1311 (1st Cir. 1993); see e.g., Monarch Life Ins. Co. v. Ropes & Gray, 65 F.3d 973, 984 (1st Cir. 1995) ( Section 105 of the Bankruptcy Code grants the Court broad equitable power to issue any order, process or judgment that is necessary or appropriate to carry out the provisions of Title 11. ). 28. To the extent the governance and oversight of the Debtors implicate the Debtors use of property of the estate, sections 105 and 363(b) together provide a statutory basis for the Court to approve the relief requested in this Motion. K&E

14 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 14 of The Restructuring Agreement was negotiated consensually among the Debtors, Lenders, and the State and provides the blueprint for the Debtors successful emergence from these Chapter 11 Cases. Although the Restructuring Agreement s terms were finalized on the eve of the Petition Date, the parties thereto had been negotiating actively for over a year on the various forms of a transaction (or series of transactions) that would maximize the value of the Debtors estates for all stakeholders. For this reason, the Restructuring Agreement provides for the obtainment of various legislative enactments that the Debtors, Lenders, and State collectively agree will place the Debtors on much stronger financial footing. 30. Also central to the Restructuring Agreement s provisions is the acknowledgement that the Debtors First Lien Lenders, by virtue of their senior secured status, are the key economic constituency ultimately entitled to receive most of the value of the Debtors estates. To that end, the Transition Agreement benefits all parties in interest by proceeding to transfer operational and economic control of the Debtors from those parties whose present equity interests are effectively valueless (the Sponsors) to those parties whose rights under the Bankruptcy Code position them first in line to assume this mantle (the First Lien Lenders). Put differently, the Transition Agreement merely seeks to effect now the transfer to independent directors of governance and oversight responsibilities but not the actual transfer of economic value that eventually and inevitably will be effected through a reorganization plan. 31. Further as to timing, again, the Debtors disclosure statement and plan of reorganization are presently being drafted and are predicated upon the same Restructuring Agreement that expressly provides for the Transition Agreement. Indeed, the Court has established a deadline of October 21, 2009 for the Debtors to file their disclosure statement and K&E

15 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 15 of 19 plan, 14 and the Debtors and their key constituencies are committed to working as hard as possible to attempt to meet that deadline. Nonetheless, given the myriad (and time-consuming) licensing requirements involved in the State s statutorily-mandated review and approval process before final ownership of the Debtors can be transferred to the First Lien Lenders, it is not surprising that the Debtors, the Lenders, the State (and the Sponsors) support the Transition Agreement s goal of allowing out-of-the-money owners to resign as directors and officers and be replaced with designees chosen by the Debtors most senior creditors and the Debtors regulators--and heavily vetted by both constituencies. 32. In sum, entry into the Transition Agreement, and allowing for the replacement of the Debtors directors now instead of in the indeterminate future upon the plan effective date significantly advances a critical step in the Debtors successful restructuring, thereby benefiting all parties in interest in these Chapter 11 Cases. II. The Transition Agreement s Releases Are Permissible And Justified. 33. A critical component of the Transition Agreement is the provision of mutual releases between the Lenders, the Debtors, the Colorado Entities, the Sponsors and their related entities, and BLB Investors. Put simply, as with the replacement of directors, the proposed releases customarily would be (and here will be) provided for in the chapter 11 reorganization and therefore entry into the Transition Agreement only impacts the timing of the grant of the releases, but not the propriety of the releases themselves. Quite significantly, the proposed releases are not third-party releases, but rather, consensual, mutual releases between Debtor and 14 See Order (I) Establishing a Deadline for the Debtors to File a Disclosure Statement and Plan of Reorganization, (II) Establishing Deadlines to File Proofs of Claim, and (III) Authorizing Donlin Recano to Serve Notice of Proof of Claim Deadlines Upon All Scheduled Creditors, entered on August 31, 2009 [Docket No. 264]. K&E

16 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 16 of 19 Lender, as well as shareholder derivative claims that, to the best of the Debtors knowledge, are non-existent. 34. In determining whether a debtor s release of its claims against another party is appropriate in a transaction under 363(b) of the Bankruptcy Code, courts often use the business judgment rule to determine the propriety of such releases. In re Global Crossing Ltd., 295 B.R. 726, 741 (Bankr. S.D.N.Y. 2003) (court found mutual exchange of releases between debtor and purchaser to be a satisfactory exercise of business judgment, where there are no known claims that the estate could assert); In re Apex Oil Co., 92 B.R. 847, 868 (Bankr. E.D. Mo. 1988) (court found debtor exercised proper business judgment in releasing claims that were unlikely to be consummated). Moreover, releases of a debtor s claims against a third party are often approved using a similar best interests of the estate benchmark for approval of settlements under Bankruptcy Rule See Bally Total Fitness, 2007 WL , at *12 (Bankr. S.D.N.Y. 2007) (release approved as a compromise in the best interests of the estate); In re Spiegel, Inc., No , 2005 WL , at *11 (Bankr. S.D.N.Y. May 25, 2005) (approving releases pursuant to Bankruptcy Rule 9019(a), finding such releases to be a compromise of claims and benefits the Debtors estates). 35. Similarly, courts in this Circuit have approved releases in the context of asset sales and settlement agreements. See e.g., In re Narragansett Pellet Corp., No , 2009 WL , at *1 (Bankr. D.R.I. Jan. 16, 2009) (order authorizing release of debtor's claims against certain released parties pursuant to an asset sale agreement); In re Modern Continental Constr. Co., Inc., Case No (Bankr. D. Mass. Dec. 18, 2008) (approving settlement agreement that included releases for all parties involved); In re Beaver Street P'ship, No. 97- K&E

17 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 17 of , 2007 WL , at * 4 (Bankr. D. Mass June 19, 2007) (approving releases of debtor's claims). 36. The Debtors respectfully assert that their release of derivative shareholder claims under the Transition Agreement is a sound use of business judgment and is in the best interests of the Debtors estates. While the Debtors plan is still being drafted, the Debtors believe the proposed releases are consistent with those typically granted through a chapter 11 plan, and therefore approving the releases through the Transition Agreement does provide releases earlier than will the plan but does so in exchange for significant, and demonstrable benefit to the Debtors estates: the furtherance of the Restructuring Agreement s blueprint for the Debtors quick and successful exit from these Chapter 11 Cases. It is a sound use of the Debtors business judgment to release claims in exchange for significant progress toward an expeditious emergence from chapter Further, the releases in question are solely between the parties to the Transition Agreement and do not involve the release of claims held by third parties. District courts in the First Circuit have found that consenting parties may contractually release their claims against other parties. See Schmid v. National Bank of Greece, S.A., 622 F.Supp 704, (D. Mass. 1985) (upholding a release in which prospective borrower consensually released all claims against the other contracting party - a bank - as well as the bank s vice-president and counsel); see also, In re Boston Harbor Marina Co., 157 B.R. 726, (Bankr. D. Mass 1993) (acknowledging that consenting creditors may contractually release claims against debtors and nondebtors in a plan of reorganization). 38. Finally, and most significantly, the Lenders agree the releases are acceptable. The importance of this fact cannot be overstated. The party with the overwhelming economic interest K&E

18 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 18 of 19 in these Chapter 11 Cases has independently analyzed the effect of the releases and has executed the Transition Agreement. The State has conducted a similar analysis and also takes no issue with the releases contained in the Transition Agreement. Further, the Debtors have already circulated the Transition Agreement to the Creditors Committee and are committed to obtaining the Creditors Committee s support for (or at least non-objection to) the releases. Based on the foregoing, the Debtors respectfully request the Court authorize the Debtors to enter into the Transition Agreement. Motion Practice 39. This Motion includes citations to the applicable rules and statutory authorities upon which the relief requested herein is predicated, and a discussion of their Motion to the Motion. Accordingly, the Debtors submit that the Motion satisfies Rule (a) of the Local Bankruptcy Rules. Notice 40. The Debtors have provided notice of this Motion via first class mail to: (a) the U.S. Trustee; (b) counsel to the Creditors Committee; (c) applicable local, state, and federal regulatory entities; (d) counsel to the Administrative Agents for the First and Second Lien Lenders; (e) counsel to the equity sponsors; (f) counsel to those certain contractors who have asserted mechanic s liens against the Debtors; (g) the Internal Revenue Service; (h) the Securities and Exchange Commission; and (i) any persons who have filed a request for notice in the Chapter 11 Cases pursuant to Bankruptcy Rule No Prior Request 41. No prior motion for the relief requested herein has been made to this or any other court. K&E

19 Case 1:09-bk Doc 330 Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Main Document Page 19 of 19 WHEREFORE, for the reasons set forth herein and in the First Day Declaration, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto as Exhibit A, granting the relief requested herein and such other and further relief as the Court deems appropriate. Dated: September 30, 2009 Providence, Rhode Island WINOGRAD, SHINE & ZACKS, P.C. Allan M. Shine (Bar No. 0383) 123 Dyer Street Providence, RI Telephone: (401) Facsimile: (401) and - KIRKLAND & ELLIS LLP /s/ Paul M.Basta Paul M. Basta (Admitted pro hac vice) Stephen E. Hessler (Admitted pro hac vice) 601 Lexington Avenue New York, NY Telephone: (212) Facsimile: (212) paul.basta@kirkland.com stephen.hessler@kirkland.com Counsel for the Debtors and Debtors in Possession 16 K&E

20 Case 1:09-bk Doc Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Exhibit A - Proposed Order Page 1 of 3 Exhibit A Proposed Order K&E

21 Case 1:09-bk Doc Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Exhibit A - Proposed Order Page 2 of 3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF RHODE ISLAND ) In re: ) Chapter 11 ) UTGR, INC. d/b/a TWIN RIVER, et al., 1 ) Case No (ANV) ) Debtors. ) Jointly Administered ) ORDER APPROVING TRANSITION AGREEMENT Upon the motion, dated September 30, 2009 (the Motion ), 2 of the above-captioned debtors and debtors in possession (collectively, the Debtors ) for entry of an order approving the Transition Agreement; and the Court having found that it has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and the Court having found that this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); and the Court having found that venue of this proceeding and the Motion in this District is proper pursuant to 28 U.S.C and 1409; and the Court having found that the relief requested is in the best interests of the Debtors estates, their creditors, and other parties in interest; and the Court having found that notice of the Motion and of the hearing on the Motion (the Hearing ) was appropriate under the particular circumstances; and the Court having heard the statements in support of the relief requested therein at the Hearing; and the Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before the Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1 The Debtors in these chapter 11 cases are BLB Management Services, Inc., BLB Worldwide Holdings, Inc., and UTGR, Inc. 2 All capitalized terms used but otherwise not defined herein shall have the meaning ascribed to them in the Motion. K&E

22 Case 1:09-bk Doc Filed 09/30/09 Entered 09/30/09 23:59:50 Desc Exhibit A - Proposed Order Page 3 of 3 1. The Motion is granted in all respects. 2. The Debtors are hereby authorized to enter into the Transition Agreement. 3. The form and terms of the Transition Agreement are approved. 4. The Debtors are authorized to take all actions necessary to effectuate the relief granted pursuant to this Order in accordance with the Motion. 5. Notwithstanding the possible applicability of Rules 6004(h), 7062, and 9014 of the Federal Rules of Bankruptcy Procedure or otherwise, the terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 6. The Court retains jurisdiction with respect to all matters arising from or related to the implementation, interpretation and enforcement of this Order. Dated: October, 2009 Providence, Rhode Island Arthur N. Votolato United States Bankruptcy Judge 2

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