Exhibit 10.9
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
A DELAWARE CORPORATION
ETPI 2000 TRUST AGREEMENT
This Trust Agreement ("Agreement") is made as of December __, 2000, by and
between Entertainment Technologies & Programs, Inc., a Delaware corporation
("ETPI"), whose address is 00000 Xxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxxx, XX
00000, and Xxxxx X. Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxxx, and Xxxxxx Xxxxxx
(the "Trustees"), as trustees of the trust created hereby (the "Trust"), whose
address is 000 Xxxx Xxxxxxxxx Xxxxxx, Xx Xxxxx, Xxxxxxxxxx 00000.
WHEREAS, ETPI has issued a number of corporate notes (the "Notes") to
certain parties (the "Note Holders"); the Notes and the Note Holders are as
described in Exhibit A and Exhibit B, respectively, which are attached hereto
and incorporated herein by this reference; and,
WHEREAS, the Notes have become due and ETPI does not presently have
sufficient liquid assets to pay them and ETPI wishes to satisfy the Notes by
means of transfer of common stock of ETPI (the "Common Stock") and certain other
assets of ETPI to this Trust for liquidation by the Trustees;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
of the parties hereinafter contained, and in order fully to set forth certain
obligations of the parties hereto, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the meanings
set out below, unless the context otherwise requires:
1.1. "BENEFICIAL INTEREST" shall mean the respective rights and interests
of each of the Beneficial Interest Holders in and to the Trust and the
Trust Estate. The Beneficial Interests shall be measured in units (the
"Units") with a par value of One Dollar ($1) each.
1.2. "BENEFICIAL INTEREST HOLDER" shall mean the holder of a Beneficial
Interest.
1.3. "NOTES" shall mean those corporate notes of ETPI more specifically
described in Exhibit A, which is attached hereto and incorporated herein by
this reference.
1.4. "REGISTER" shall have the meaning set out in Section 3.2 hereof.
1.5. "TRUST" shall mean the trust created by this Agreement.
1.6. "TRUST CERTIFICATES" shall mean the certificates issued by the Trust
to the Beneficial Interest Holders to reflect all of the Beneficial
Interests in the Trust.
1.7. "TRUST ESTATE" shall mean all of the property held from time to time
by the Trustees pursuant to this Agreement.
2. DECLARATION OF TRUST.
2.1. CREATION OF THE TRUST. ETPI hereby creates the Trust for the purposes
stated herein. The name of the Trust shall be the "ETPI 2000 Trust." The
Trustees may, but shall not be required to, transact the business and
affairs of the Trust in that name.
2.2. PURPOSE OF TRUST. This Trust is organized for the purpose of
consolidating ownership of the Notes, receiving assets of ETPI in
satisfaction of the Notes, liquidating such assets to maximize the returns
thereon, and distributing the proceeds to the Beneficial Interest Holders
and, if the proceeds should exceed the amounts payable to the Beneficial
Interest Holders and the Trust expenses, paying the excess to ETPI.
Pursuant to this express purpose, the Trustees are hereby authorized and
directed to take all reasonable and necessary actions to conserve and
protect the Trust Estate and to sell, lease, or otherwise dispose of the
Trust Estate, and to distribute the net proceeds of such disposition, as
hereinafter set out, in as prompt, efficient and orderly a fashion as
possible in accordance with the provisions hereof.
2.3. PROPERTY OF THE TRUST. Immediately upon execution of the this
Agreement, ETPI shall convey to the Trust the sum of $100 in cash for the
purpose of establishing an initial Trust Estate. Legal title to the Trust
Estate shall be held either in the name of the Trust, or in the names of
the Trustees on behalf of the Trust, as the Trustees may from time to time
determine. The Trustees shall hold such property in Trust to be
administered and disposed of by them pursuant to the terms of this
Agreement. In the event that the Offering is not successful, this Trust
shall terminate immediately, and any Trust assets remaining after payment
of expenses shall be returned to ETPI. In the event that the Offering is
successful, ETPI shall further fund the Trust as provided below. ETPI's
delivery of the consideration described in section 2.3.1 and its commitment
pursuant to this Agreement to provide the additional funding described in
sections 2.3.2 and 2.3.3 shall be deemed payment in full of the Notes, and
upon the Trustees' receipt of the consideration described in section 2.3.1,
the Trustees shall xxxx the Notes "paid in full," deliver the Notes to
ETPI, and execute and deliver such additional documents to ETPI as may be
necessary or appropriate to evidence full payment of the Notes and release
of all security interests securing the Notes.
2.3.1. UPON CLOSING OF THE OFFERING. Immediately upon the closing of
the Offering, ETPI shall convey the following property to the Trust in
the manner and upon the terms described below.
2.3.1.1. Common Stock of ETPI. ETPI has pledged One Million Two
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Hundred Thousand (1,200,000) shares of its common stock as
security for payment of the Note issued to ETPI Lenders Trust I
pursuant to an "Escrow and Assignment Agreement" dated June 2,
1997. Upon successful completion of the Offering, ETPI shall
convey such stock to the Trustees as payment on the Note which
was issued to ETPI Lenders Trust I, and ETPI shall instruct its
transfer agent to remove the restrictive legend from the
certificate(s) issued to the Trust representing such stock.
Additionally, ETPI will contribute an additional One Million
(1,000,000) restricted shares of its common stock. Finally, ETPI
shall contribute to the Trust additional restricted shares of its
common stock equal to the number of shares which the Trust is
committed to deliver to Note Holders as part of the Offering
pursuant to section 3.1.7 hereof.
2.3.1.2. Midlands Property. ETPI owns certain real property
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located at 00000 Xxxxxxxx Xxxx 00, Xxxxxxx Xxxxxx Texas, as more
particularly described in Exhibit C, which is attached hereto and
incorporated herein by this reference (the "Midlands Property").
The Midlands Property includes a facility commonly known as
"Hero's Water World," a facility commonly known as "Midessa
Speedway," and additional vacant land. ETPI has secured the Notes
by granting several deeds of trust on the Midlands Property in
favor of the holders of the Notes. ETPI is in default under all
of the Notes. Upon successful completion of the Offering, ETPI
shall convey the Midlands Property to the Trustees as payment on
the Notes. The Property shall be conveyed to the Trust free and
clear of all liens and encumbrances (those trust deeds created as
security for the Notes being simultaneously released), and ETPI
shall procure, at its own expense, title insurance to such effect
and naming the Trust as the insured.
2.3.2. SUBSEQUENT FUNDING. If the sale of the assets conveyed to the
Trust pursuant to section 2.3.1 is not sufficient to make the
distributions to Beneficial Interest Holders pursuant to section 6.1
and pay the expenses of the Trust, then ETPI will attempt to either
sell or refinance its property known as the "Hero's Entertainment"
facility located in Pasadena, Texas. The period for making such sale
or obtaining such loan will expire 60 days after the earlier of (i)
completion of sale by the Trust of the assets conveyed pursuant to
section 2.3.1., or (ii) 18 months after completion of the Offering;
provided, however, that if at the time such 18 month period expires,
there exists a binding agreement for sale of Trust assets which, if
completed, would provide the Trust with sufficient net proceeds to
complete the remaining distributions to Beneficial Interest Holders
pursuant to section 6.1 and to pay the expenses of the Trust, then
such 18 month period shall be extended until such sale is completed or
the sale agreement is terminated or materially breached. The sale
price may not be less than 80% of appraised value, and the loan amount
may not be less than 70% of appraised value, unless such lesser amount
will permit ETPI to pay to the Trust sufficient funds to make the
remaining distributions to Beneficial Interest Holders pursuant to
section 6.1 and to pay the expenses of the Trust. ETPI shall pay to
the Trust all of the proceeds of such sale or refinancing, net of sale
or loan expenses and payment of the promissory note secured by this
property, up to the amount necessary to complete the distributions to
Beneficial Interest Holders pursuant to section 6.1 and pay the
expenses of the Trust. The note secured by a first trust deed on this
property is dated December 6, 1996, in favor of Bayshore National
Bank, 0000 Xxxxxxx 000 Xxxxx, Xxxxxxx, Xxxxx 00000, was in the
original principal amount of $511,862, and had a balance of
$515,157.38 as of November 30, 2000. Immediately following the closing
of the Offering, ETPI shall grant to the Trust a second lien on this
facility as security for its funding obligations pursuant to this
Agreement. In the event that ETPI fails to sell the property or
obtained refinancing in compliance with this section, then ETPI shall
be in default and the Trustees may proceed with foreclosure on the
property.
2.3.3. FINAL FUNDING. In the event that the sale of the assets
conveyed by ETPI to the Trust pursuant to section 2.3.1 and the
payments or proceeds received by the Trust pursuant to section 2.3.2
(including proceeds of sale subsequent to foreclosure) are not
sufficient to make the required distributions to Beneficial Interest
Holders pursuant to section 6.2 and pay all expenses of the Trust,
then upon the receipt of the proceeds of sale or refinancing of the
Hero's Entertainment facility, the Trustees shall notify ETPI of the
amount of any shortfall plus any actual and/or estimated unpaid
expenses of the Trust, and within 60 days thereafter ETPI shall issue
to the Trust additional shares of common stock of ETPI, the value of
which shall be equal to the amount specified in the notice by the
Trustees. The value per share of common stock for this purpose shall
be equal to the volume-adjusted average closing price of the stock on
the 30 trading days immediately following the notice given by the
Trustees. ETPI shall use its best efforts to file a registration
statement for such issuance under the Securities Act of 1933 (the
"Securities Act"), and the cost of such registration shall be borne by
the Trust and the cost added into the final costs of the Trust to be
paid by such issuance.
3. BENEFICIAL INTERESTS.
3.1. OFFERING AND SALE OF BENEFICIAL INTERESTS. Immediately upon execution
of this Agreement by ETPI and all of the initial Trustees, the Trust shall
undertake an offering (the "Offering") of units (the "Units") of Beneficial
Interests in the Trust and 8,000,000 restricted shares of common stock of
ETPI (the "Stock") on the following terms:
3.1.1. The Offering shall be made to all of the Note Holders, and only
to such persons.
3.1.2. The Trust shall offer to purchase the Note Holders' interests
in the Notes (the "Note Interests") in consideration of Units, valued
at $1 per Unit, and/or Stock, valued at $0.10 per share. Each Note
Holder may elect to receive any combination of Units and/or Stock
equal to the value of his/her/its Note Interest, subject to the
limitations and provisions of sections 3.1.4 through 3.1.7, below.
Each Note Interest shall be valued as the sum of (i) the principal
amount due on such Note Interest (the "Principal"), and (ii) the
amount of all interest, penalties, extension fees or other amounts
other than principal (the "Interest") which will be due on such Note
Interest through December 31, 2000.
3.1.3. The maximum number of Units to be issued is 2,920,487, valued
at One Dollar ($1) per Unit, a total value of $2,920,487, which is
equal to the total amount due on the Notes, Principal and Interest, as
of December 31, 2000.
3.1.4. The maximum number of shares of Stock to be issued is 8,000,000
shares, valued at Ten Cents ($0.10) per share, a total value of
$800,000.
3.1.5. In the event that Note Holders subscribe for Stock in excess of
the 8,000,000 share maximum, such subscriptions shall be adjusted such
that Stock shall be issued pro rata among such Note Holders in
proportion to their respective subscriptions for Stock and their
subscriptions for Units shall be increased accordingly.
3.1.6. Stock issued to Note Holders shall be deemed to be issued first
in payment of Interest up to the full amount of Interest due on that
Note Holder's Note Interest, and any Stock in excess of that amount
shall be deemed payment for the Note Interest.
3.1.7. The Stock is to be offered by the Trust, and at the closing of
the Offering, ETPI shall fund the Trust with the requisite number of
shares of Stock necessary to fulfill the Stock subscriptions of the
Offering. In the interest of convenience, the Trustees shall notify
ETPI of the Stock subscriptions and ETPI shall issue the certificates
for the Stock directly to those offerees who have subscribed for the
Stock, but the Stock shall be deemed to be delivered by ETPI to the
Trustees and thence by the Trustees to the subscribers.
3.1.8. The Offering shall be conducted by means of an offering
memorandum (the "Offering Memorandum") prepared by the Trust with the
assistance of ETPI. Each subscribing Note Holder shall complete,
execute and deliver to the Trustees the following documents (as
appropriate):
3.1.8.1. an offeree questionnaire (the "Offeree Questionnaire");
3.1.8.2. a purchaser representative questionnaire (the "Purchaser
Representative Questionnaire") if the offeree has elected to use
such a representative; and,
3.1.8.3. a subscription agreement (the "Subscription Agreement").
3.1.9. In the event that the Offering results in subscriptions
representing less than 100% of the ownership of the Notes, the
Offering shall be canceled. In the event that the Offering is
canceled, the subscribers shall be so notified in writing. In the
event that the Offering is successfully completed and closed, the
Trustees shall issue to the subscribers certificates representing
their Beneficial Interests (the "Trust Certificates").
3.1.10. The Offering shall continue until it is fully subscribed or
until January 27, 2000, which period may be shortened or lengthened in
the discretion of the Trustees but in no event shall the offering be
extended to later than February 28, 2001 without the express written
consent of ETPI. Additionally, ETPI shall have the right elect to
terminate the Offering at any time up until the closing.
3.1.11. The Offering shall be conducted in such fashion as to qualify
the Offering under Section 4(2) of the Securities Act and/or Rule 506
of Regulation D of the Securities and Exchange Commission (the "SEC")
and under applicable state securities laws.
3.1.12. The certificates representing the Beneficial Interests shall
bear the following legend:
"THE BENEFICIAL INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE INTERESTS HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE INTERESTS UNDER THE ACT, OR
THE AVAILABILITY OF AN EXEMPTION UNDER THE ACT AS DETERMINED BY LEGAL
COUNSEL SATISFACTORY TO THE TRUSTEES IN THEIR SOLE DISCRETION."
3.1.13. The costs of the Offering shall be borne by ETPI.
3.1.14. No commissions shall be payable in connection with the
Offering.
3.2. TRANSFER AND EXCHANGE. The Trustees shall cause to be kept at such
place or places as shall be designated by them from time to time, a
register (the "Register") to register the ownership and the transfer of
ownership of Trust Certificates, subject to the provisions of Section 3.3
hereof. The Trustees may require such documentation of the transfer of
Trust Certificates as they deem advisable in their discretion.
3.3. ABSOLUTE OWNERS. The Trustees may deem and treat each Beneficial
Interest Holder reflected as the owner of a Beneficial Interest on the
Register as the absolute owner thereof for the purpose of receiving the
distributions and payments on account thereof and for all other purposes
whatsoever, and until any transfer of ownership is recorded in the
Register, the Trustees shall not be charged with having received notice of
any claim or demand of any other person to such Beneficial Interest or the
rights, titles, and interests therein. All notices of a change of ownership
of Trust Certificates shall be forwarded to the Trustees by registered or
certified mail as set out in Section 10.3.
3.4. PLACE OF PAYMENT. The amounts payable to the Beneficial Interest
Holders pursuant to Section 6.2 hereof as of the record date determined by
the Trustees will be payable either by mailing a check payable to such
Beneficial Interest Holder at the address reflected in such person's
Subscription Agreement or such other address as the Beneficial Interest
Holder shall have specified by written notice to the Trustees.
4. DELIVERY AND ACCEPTANCE OF TRUST ESTATE.
4.1. CONVEYANCE BY ETPI. ETPI shall execute and deliver to the Trustees
conveyance instruments for the property required to be conveyed to the
Trust pursuant to section 2.3, above. At any time and from time to time
thereafter, at the Trustees' request and without further consideration,
ETPI shall execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and will cooperate and take such
other actions as the Trustees may reasonably deem necessary or desirable to
more effectively transfer, convey, and assign the property described in
section 2.3 to the Trust. ETPI shall have no further interest in the Trust
Assets subsequent to their conveyance to the Trust, except as provided
herein.
4.2. ACCEPTANCE OF CONVEYANCE. The Trustees are hereby directed to, and the
Trustees agree that they will:
4.2.1. accept delivery from ETPI, on behalf of the Trust and for the
benefit of the Beneficial Interest Holders, of the property described
in section 2.3;
4.2.2. accept from ETPI, on behalf of the Trust and for the benefit of
the Beneficial Interest Holders, all conveyance instruments required
to be delivered by ETPI to the Trustees with respect to the property
described in section 2.3 pursuant to or in connection with this
Agreement; and,
4.2.3. take such other action as may be required of the Trustees or
the Trust hereunder, including the receipt and acceptance as part of
the property transferred into the Trust of any property or rights,
which the Trustees may receive in connection with or in consideration
of the property transferred into the Trust.
5. ADMINISTRATION OF TRUST ESTATE.
5.1. TRUST EXPENSES. Upon execution hereof, and continuing for so long as
the Trust remains in existence, the Trustees may reserve such amounts as
the Trustees deem advisable for the payment of all expenses, debts,
charges, liabilities, and obligations with respect to the Trust Estate,
including all taxes of the Trust as determined by the Trustees in the
Trustees' sole and absolute discretion.
5.2. POWERS OF TRUSTEES. Subject to the provisions and conditions of this
Agreement, the Trustees shall have the following powers to be exercised in
their discretion in the administration of the Trust: (i) to receive the
Trust Estate; (ii) to conserve, manage, sell, operate, lease, or otherwise
dispose of the Trust Estate for such price and upon such terms and
conditions as the Trustees may deem appropriate and to execute such deeds,
bills of sale, assignments and other instruments in connection therewith;
(iii) to determine and collect payments to and other income of the Trust;
(iv) to collect the proceeds of the sale of property out of the Trust
Estate; (v) to collect, receive, compromise and settle notes and other
claims and receivables of the Trust; (vi) to assert, prosecute, litigate,
compromise and settle claims and causes of action included within the Trust
Estate; (vii) to discharge, compromise and settle any unascertained,
unliquidated or contingent debts, liabilities or obligations of the Trust;
(viii) to distribute the net income and proceeds of the Trust Estate in
accordance with this Agreement; (ix) to bring suit on behalf of or defend
any suit against the Trust or the Trustees on behalf of the Trust; (x) to
retain such legal counsel, public accountants and other experts as the
Trustees may deem advisable in connection with the administration of the
Trust or the exercise of their other powers set out herein; (xi) to open
bank accounts on behalf of and in the name of the Trust; (xii) to pay all
taxes, to make all tax withholdings, and to file tax returns and tax
information returns and make tax elections by and on behalf of the Trust;
(xiii) to pay all lawful expenses, debts, charges and liabilities of the
Trust, including, without limitation, the reasonable expenses of the
Trustees; and (xiv) to exercise such other powers and duties as necessary
or appropriate, in the discretion of the Trustees, to accomplish the
purposes of the Trust as set out herein.
5.3. ADDITIONAL POWERS OF TRUSTEES. Subject to the express limitations
contained herein, the Trustees shall have, and may exercise with respect to
the Trust Estate, or any part thereof, and in the administration and
distribution of the Trust Estate, all powers now or hereafter conferred on
trustees by California trust law. The powers conferred by this Section in
no way limit any power conferred on the Trustees by any other section
hereof but shall be in addition thereto; provided, always, that the powers
conferred by this Section are conferred and may be exercised only and
solely within the limitations and for the limited purposes imposed and
expressed in Section 2 hereof.
5.4. TRANSFEREE LIABILITIES. The Trust shall have no liability for, and the
Trust Estate shall not be subject to, any claim arising by, through, or
under ETPI. In no event shall the Trustees have any personal liability for
such claims. If any liability shall be asserted against the Trust or the
Trustees as the transferees of the Trust Estate on account of any claimed
liability of, through, or under ETPI, the Trustees may use such part of the
Trust Estate as may be necessary to contest any such claimed liability and
to pay, compromise, settle or discharge same on terms reasonably
satisfactory to the Trustees. In no event shall the Trustees be required to
use their personal funds or assets or the funds or assets of their firm or
partnership for such purposes.
5.5. ADMINISTRATION OF TRUST. Subject to the express limitations contained
herein, in administering the Trust, the Trustees are authorized and
directed to do and perform all such acts and to execute and deliver such
deeds, bills of sale, assignments, instruments of conveyance, and other
documents as they may deem necessary or advisable to carry out the purposes
of the Trust. The Trustees shall effect such registrations and take all
such actions as are required to comply with state and federal securities
laws.
5.6. PAYMENT OF EXPENSES AND OTHER LIABILITIES. The Trustees shall pay from
the Trust Estate all expenses, charges, liabilities, and obligations of the
Trust, including, without limiting the generality of the foregoing,
interest, taxes, assessments, and public charges of every kind and nature.
The Trustees, in their discretion and judgment, may from time to time make
provision by reserve or otherwise out of the Trust Estate or the proceeds
thereof in such reasonable amount or amounts as the Trustees in their
discretion and judgment may determine to be necessary or advisable to meet
unascertained, unliquidated or contingent liabilities of the Trust.
5.7. FISCAL YEAR. The Liquidating Trust's fiscal year shall end on December
31 of each year unless the Trustees deem it advisable to establish some
other date on which the fiscal year of the Trust shall end.
5.8. REPORTS TO BENEFICIAL INTEREST HOLDERS. The Trustees shall prepare and
deliver:
5.8.1. as soon as practicable after the end of each calendar quarter,
a quarterly unaudited report for such quarter, commencing with the
first complete calendar quarter following the date of this Agreement
reflecting (i) the specific assets of the Trust Estate disposed of or
liquidated during such calendar quarter; (ii) the gross receipts and
any selling expenses associated therewith; (iii) any other income
received or expense, disbursement, or reserve made or established
during such calendar quarter; (iv) the borrowings of the Trust during
such calendar quarter and the amount remaining owing on such
borrowings; and (v) all litigation commenced by the Trustees on behalf
of the Trust;
5.8.2. income tax information returns, tax returns, or other reports
to Beneficial Interest Holders and applicable taxing authorities as
may be required by law or as may be requested in writing by a
Beneficial Interest Holder at such Beneficial Interest Holder's
expense; and
5.8.3. within 120 days after the termination or expiration of the
Trust, a final financial report reflecting the final disposition of
Trust Estate.
6. DISTRIBUTIONS.
6.1. PAYMENTS FROM TRUST ESTATE. All payments to be made by the Trustees to
any Beneficial Interest Holder shall be made only from the assets, income
and proceeds of the Trust Estate and only to the extent that the Trustees
shall have received sufficient assets, income, or proceeds of the Trust
Estate to make such payments in accordance with the terms of this Section
6. Each Beneficial Interest Holder shall look solely to the assets, income,
and proceeds of the Trust Estate for distribution to such Beneficial
Interest Holder as herein provided.
6.2. AMOUNTS AND TIMING OF PAYMENTS TO BENEFICIAL INTEREST HOLDERS. The
total base amount planned to be distributed by the Trust to the Beneficial
Interest Holders (the "Base Distribution") shall be equal to the aggregate
balance of the Notes determined through December 31, 2000 less the value
(at $0.10 per share) of the Stock distributed to the Note Holders in the
Offering. The Planned Distribution shall be made by the Trustees in such
amounts and at such times as they shall determine in their discretion as
funds are available, making appropriate allowances for reserves. All
distributions shall be prorated among the Beneficial Interest Holders based
upon the number of Units held by each. Additionally, as consideration for
extensions of the time of payment of the Planned Distribution, the Trust
shall make distributions to the Beneficial Interest Holders of amounts
equal to 10% per annum on the average undistributed Base Distribution
balance (the "Extension Fees"). The Extension Fees shall be computed and
paid on a calendar quarterly basis, and the distributions shall by made no
later than the fifteenth day of the month following the end of each
calendar quarter. The first such calendar quarter shall be January 1, 2001
through March 31, 2001, and the first payment shall be due on or before
April 15, 2001.
6.3. DISTRIBUTION OF REMAINDER TO ETPI. Any portion of the Trust Estate
remaining after completion of the distributions described in section 6.2
and payment of all Trust expenses shall be distributed to ETPI.
6.4. TAX PROVISIONS.
6.4.1. INCOME TAX STATUS. FOR ALL PURPOSES OF THE TAX CODE, ETPI SHALL
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BE DEEMED TO HAVE TRANSFERRED THE TRUST ASSETS TO THE BENEFICIAL
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INTEREST HOLDERS IN SATISFACTION OF THE NOTES AND THE BENEFICIAL
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INTEREST HOLDERS SHALL BE DEEMED TO HAVE TRANSFERRED THEIR RESPECTIVE
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SHARES OF THE TRUST ASSETS TO THE TRUST. For all federal income tax
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purposes, consistent valuations shall be used by the Trust and the
Beneficial Interest Holders for the transferred Trust Assets. The
Trust is intended to be treated as a liquidating trust pursuant to
Treasury Regulations Sec. 301.7701-4(d), and as a grantor trust
subject to the provisions of Subchapter J, Subpart E of the Tax Code,
owned by the Beneficial Interest Holders as grantors. Any items of
income, deduction, credit, or loss of the Trust shall be allocated for
federal, state and local income tax purposes among the Beneficial
Interest Holders pro rata on the basis of their Beneficial Interests;
provided, however, that to the extent that any item of income cannot
be allocated in the taxable year in which it arises, the Trust shall
pay the federal, state and local taxes attributable to such income
(net of related deductions) and the amount of such taxes shall be
treated as having been received by, and paid on behalf of, the
Beneficial Interest Holders receiving such allocations when such
allocations are ultimately made. The Trust is authorized to take any
action that may be necessary or appropriate to minimize any potential
tax liability of the Beneficial Interest Holders arising out of the
operations of the Trust.
6.4.2. TAX RETURNS AND REPORTS. In accordance with Treasury Regulation
Sec. 1.671-4(a), the Trust shall cause to be prepared and filed, at
the cost and expense of the Trust, an annual information tax return
(Form 1041) with the Internal Revenue Service, with a schedule
attached showing the item of income, deduction, and credit
attributable to the Trust and detailing the allocation of such items
of income, deduction, and credit among the Beneficial Interest Holders
as required pursuant to the Form 1041 instructions for grantor trusts.
Copies of such Form 1041 and attached schedules will be delivered
promptly to each Beneficial Interest Holder. In addition, the Trust
shall cause to be prepared and filed in a timely manner, such other
state or local tax returns as are required by applicable law by virtue
of the existence and operation of the Trust and shall pay any taxes
shown as due thereon. Within thirty (30) days after the end of each
calendar year, the Trust shall cause to be prepared and mailed to a
Beneficial Interest Holder such other information as may be requested
by such Beneficial Interest Holder in writing to enable such
Beneficial Interest Holder to complete and file his, her, or its
federal, state and local income and other tax returns.
6.4.3. WITHHOLDING. The Trust may withhold from the amount
distributable from the Trust at any time such sum or sums as may be
sufficient to pay any tax or taxes or other charge or charges which
have been or may be imposed on the distributee or upon the Trust with
respect to the amount distributable or to be distributed under the
income tax laws of the United States or of any state or political
subdivision or entity by reason of any distribution provided for any
law, regulation, rule, ruling, directive, or other governmental
requirement.
6.4.4. TAX IDENTIFICATION NUMBERS. The Trust may require any
Beneficial Interest Holder or other distributee to furnish to the
Trust its Employer or Taxpayer Identification Number as assigned by
the Internal Revenue Service and the Trust may condition any
distribution to any Beneficial Interest Holder or other distributee
upon receipt of such identification number.
6.4.5. TAX YEAR. The taxable year of the Trust shall, unless otherwise
required by the Internal Revenue Code, be the calendar year.
7. OTHER DUTIES OF THE TRUSTEES.
7.1. MANAGEMENT OF TRUST ESTATE. With respect to assets of the Trust Estate
from time to time, the Trustees shall, and are hereby directed:
7.1.1. If sufficient funds are available to purchase and maintain in
existence, such insurance as the Trustees deems reasonable, necessary,
or appropriate from time to time to protect the Trust's and the
Beneficial Interest Holders' interests in the Trust Estate.
7.1.2. To take such actions as shall be necessary or advisable to
preserve, maintain, and protect the Trust Estate for the Beneficial
Interest Holders' benefit consistent with the purposes of the Trust.
7.2. NO IMPLIED DUTIES. The Trustees shall not manage, control, use, sell,
dispose, collect or otherwise deal with the Trust Estate or otherwise take
any action hereunder, except as expressly provided herein, and no implied
duties or obligations shall be read into this Agreement in favor of or
against the Trustees; provided, however, that this provision shall not
limit the powers conferred on trustees by California law, without regard to
conflicts of laws principles, except to the extent any such power may
conflict with any of the provisions and purposes of this Agreement.
8. CONCERNING THE TRUSTEES.
8.1. ACCEPTANCE BY TRUSTEES. The Trustees accept the Trust hereby created
for the benefit of the Beneficial Interest Holders and agree to administer
the Trust upon the terms and conditions of this Agreement. Notwithstanding
any term or provision hereof to the contrary, the Trustees shall have and
exercise the rights and powers herein granted and shall be charged with the
performance of the duties herein declared on the part of the Trustees to be
had and exercised or to be performed. The Trustees also agree to receive
and disburse all monies actually received by them constituting part of the
Trust Estate pursuant to the terms of this Agreement. The Trustees shall
not be personally liable for any action taken or omitted to be taken by
them except for their own gross negligence or willful misconduct.
8.2. INITIAL AND SUBSEQUENT TRUSTEES. From the time of execution of this
Agreement until the close of the Offering, this Trust shall have a single
Trustee, Xxxxx X. Xxxxxxx. Upon the close of the Offering, Xx. Xxxxxxx
shall automatically cease to be the Trustee, the number of Trustees shall
increase to three, and Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxxx, and Xxxxxx Xxxxxx
shall automatically become the Trustees of the Trust. Xx. Xxxxxxx shall be
responsible for all administration and actions of the Trust during his term
as sole Trustee, and Xx. Xxxxxx, Xx. Xxxxxxxx, and Xx. Xxxxxx shall have no
authority or responsibility for administration and actions of the Trust
during this period. Similarly, subsequent to the close of the Offering and
as long as they remain Trustees thereafter, Xx. Xxxxxx, Xx. Xxxxxxxx, and
Xx. Xxxxxx shall be responsible for all administration and actions of the
Trust, and Xx. Xxxxxxx shall have no authority or responsibility for
administration and actions of the Trust during this period.
8.3. ACTIONS BY THE TRUSTEES. Prior to the close of the Offering, Xx.
Xxxxxxx shall act alone in administering the Trust. Subsequent to the close
of the Offering, the Trustees may act upon approval by two Trustees, except
that any decision to sell the Midlands Property, or any part thereof, at
less than 60% of appraised value shall require the unanimous approval of
all three Trustees. The Trustees may approve actions at meetings, by
conference telephone, by written communications, or by any other means
approved by a majority of the Trustees.
8.4. LIABILITY OF THE TRUSTEES.
8.4.1. LIMITATION ON LIABILITY. No provision of this Agreement shall
be construed to impart any liability upon the Trustees unless it shall
be proved in a court of competent jurisdiction that the Trustees'
actions or omissions constituted gross negligence or willful
misconduct in the exercise of or failure to exercise any right, power
or duty vested in them under this Agreement. The Trustees shall have
no personal liability for any of the rights, obligations, duties, or
liabilities of ETPI or the Trust.
8.4.2. RELIANCE ON ORDERS, STATEMENTS, CERTIFICATES OR OPINIONS. In
the absence of gross negligence or willful misconduct on the part of
the Trustees, the Trustees may conclusively rely, as to the truth of
the statements and correctness of the opinions expressed therein, upon
any orders, statements, certificates or opinions furnished to the
Trustees and conforming to the requirements of this Agreement.
8.4.3. DISCRETION OF TRUSTEES. Within the limitations and restrictions
expressed and imposed herein, the Trustees may act freely with respect
to the exercise of any or all of the rights, powers, and authority
conferred hereby in all matters concerning the Trust Estate after
forming their best judgment based upon the circumstances without the
necessity of obtaining the consent or permission or authorization of
the Beneficial Interest Holders. The rights, powers, and authority
conferred on the Trustees by this Agreement are conferred in
contemplation of such freedom of prudent judgment and action by the
Trustees, within the limitations and restrictions so expressed and
imposed. Further, the Trustees shall not be liable for any act or
omission in connection with the administration of this Trust, or the
exercise of any right, power, or authority conferred upon them
hereunder, unless it shall be proved that such Trustees were grossly
negligent or acted in a manner which constituted willful misconduct.
8.4.4. DELEGATION OF DUTIES. The Trustees shall have power over and be
solely responsible for the management and administration of the Trust.
Notwithstanding the foregoing, the Trustees may engage the services of
and delegate such of their powers and duties (but not any of their
responsibilities), upon such terms and conditions as are satisfactory
to the Trustees, to such employees, agents, attorneys, accountants,
appraisers, consultants and other persons, including, without
limitation, where appropriate, any of the Beneficial Interest Holders
and their respective agents and employees, as they may deem necessary
or advisable to carry out the purposes of the Trust.
8.4.5. RETENTION AND PAYMENT OF PROFESSIONALS. The Trustees may
consult with legal counsel and with such public accountants and other
professionals as may be retained by the Trustees. The Trustees may pay
from the Trust Estate the fees and expenses of such professionals
monthly at such rates as may be agreed upon by the Trustees and such
professionals. The Trustees shall not be liable for any action taken
or suffered by them or omitted to be taken by them without gross
negligence or willful misconduct in reliance on any opinion or
certification of such accountants or in accordance with the advice of
such counsel or experts.
8.5. RELIANCE ON TRUSTEES. No person dealing with the Trustees shall be
obligated to see to the application of any monies, securities, or other
property paid or delivered to them, or to inquire into the expediency or
propriety of any transaction or the right, power, or authority of the
Trustees to enter into or consummate the same upon such terms as the
Trustees may deem advisable. Persons dealing with the Trustees shall look
only to the Trust Estate to satisfy any liability incurred by the Trustees
to such persons, and, except as otherwise expressly provided herein, the
Trustees shall have no personal obligation to satisfy any such liability.
8.6. PARTIES ACTING ON BEHALF OF TRUST.
8.6.1. INDEMNIFICATION. The Trust shall indemnify any person who
becomes a party, or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative by reason of the
fact that he/she/it is or was a Trustee, employee, or agent of the
Trust, or is or was serving on behalf of the Trust at the request of
the Trustees as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, tax
obligations, liabilities or penalties, fines and amounts paid in
settlement actually and reasonably incurred by him/her it in
connection with such action, suit or proceeding, including appeals
thereof, if he acted without gross negligence or willful misconduct,
in the exercise and performance of any power or duty of a Trustee,
employee or agent of the Trust, as the case may be, under this
Agreement.
8.6.2. PAYMENT OF EXPENSES. Expenses (including attorneys' fees)
incurred by any Trustee or any employee or agent of the Trustees in
defending any action, suit or proceeding may be paid by the Trust in
advance of the final disposition of such action, suit or proceeding,
upon an undertaking by such Trustee, or such employee or agent, to
repay such amount to the Trust, unless it shall ultimately be
determined that he or she is or was entitled to be indemnified with
respect thereto.
8.7. COMPENSATION OF TRUSTEES. The Trustees shall not be entitled to
receive from the Trust Estate compensation for their services as Trustees.
However, the Trust Estate shall reimburse the Trustees upon request for all
reasonable out-of-pocket expenses incurred by the Trustees in the
performance of their duties hereunder, including the reasonable
out-of-pocket expenses of the Trustees and the Trustees' employees,
attorneys, agents, accountants, appraisers, consultants, and other persons
retained by the Trustees pursuant to the terms of this Agreement.
8.8. CHANGES IN TRUSTEES.
8.8.1. DESIGNATION OF TRUSTEES. Subsequent to the close of the
Offering, the three Trustees shall be designated as Trustee A, Trustee
B and Trustee C. Trustee A, initially Xxxxxxx Xxxxxx, shall be deemed
appointed by Capital Growth Planning, Inc. and Capital Protection,
Inc. and shall be subject to removal and replacement in the discretion
of such parties. Trustee B, initially Xxxxxx Xxxxxxxx, shall be deemed
appointed by the Beneficial Interest Holders other than Capital Growth
Planning, Inc. and Capital Protection, Inc. and shall be subject to
removal and replacement in the discretion of such parties. Trustee C,
initially Xxxxxx Xxxxxx, shall be deemed appointed by ETPI and shall
be subject to removal and replacement in the discretion of ETPI.
8.8.2. RESIGNATION. Any Trustee may resign and be discharged from any
future obligations hereunder by giving written notice thereof to the
other Trustees, to ETPI, and to the Beneficial Interest Holders at
least thirty (30) days prior to the effective date of such
resignation. Such resignation shall become effective on the later of
(i) thirty (30) days after the giving of such notice, or (ii) after
appointment of a permanent or interim successor trustee.
8.8.3. REMOVAL. Any person serving as a Trustee may be removed at any
time, with or without cause as follows: Trustee A by Capital Growth
Planning, Inc. and Capital Protection, Inc. acting together; Trustee B
by the vote of a majority in interest of the Beneficial Interest
Holders; and Trustee C by ETPI.
8.8.4. APPOINTMENT OF SUCCESSOR TRUSTEES. If a Trustee gives notice of
his intent to resign pursuant to Section 8.6.2 hereof, or is removed
pursuant to Section 8.6.3 hereof, or dies or becomes incapable of
acting, then a successor shall be appointed as follows: Trustee A by
Capital Growth Planning, Inc. and Capital Protection, Inc.; Trustee B
by the vote of a majority in interest of the Beneficial Interest
Holders; and Trustee C by ETPI.
8.8.5. RESERVE FUND, TAX REPORTS, WINDING UP. Notwithstanding
his/her/its resignation or removal, each Trustee shall be entitled to
complete and file any and all tax returns and reports and pay any and
all taxes for periods during which the Trustee served on behalf of the
Trust. The Trust shall pay the taxes and the Trustee's expenses
incurred with respect to the foregoing.
8.9. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEES. Any successor Trustee
appointed hereunder shall execute an instrument accepting such appointment
and shall deliver it to the other Trustees. Thereupon, such successor
Trustee shall, without any further act, become vested with all the rights,
titles, interests, estates, properties, rights, powers, trusts, and duties
of his predecessor in the Trust hereunder with like effect as if originally
named herein.
8.10. POSTING OF BONDS. No Trustee shall be required to post a bond.
9. TERM AND TERMINATION OF TRUST.
9.1. TERM. The Trust shall continue and remain in effect until the first to
occur of the following: (a) three years after the Effective Date ("Initial
Term"), provided, the term of the Trust shall automatically be renewed for
two periods of one year each ("Renewal Period") in the event any portion of
the Trust Estate has not been fully liquidated and the proceeds thereof
distributed in accordance with this Agreement by the end of the Initial
Term or at the end of any Renewal Period; or (b) the Trust Estate has been
fully liquidated and the proceeds thereof distributed in accordance with
this Agreement.
9.2. WINDING UP. For the purpose of winding up the affairs of the Trust at
its termination, the Trustees shall continue to act as Trustees until their
duties have been fully discharged. After so doing, the Trustees shall have
no further duties or obligations hereunder.
10. MISCELLANEOUS.
10.1. TITLE TO TRUST ESTATE. No Beneficial Interest Holder shall have title
to any part of the Trust Estate. No transfer, by operation of law or
otherwise, of the right and interest of any Beneficial Interest Holder in
and to the Trust Estate or hereunder shall operate to terminate this
Agreement or the trust hereunder or entitle any successor or transferee of
such Beneficial Interest Holder to an accounting with respect to the Trust
Estate or to the transfer to him/her/it of title to any part of the Trust
Estate.
10.2. SALES OF TRUST ESTATE. Any sale or other conveyance of the Trust
Estate, or part thereof, by the Trustees made pursuant to the terms of this
Trust Agreement shall bind the Beneficial Interest Holders and shall be
effective to transfer or convey all rights, titles and interests of the
Trustees and the Beneficial Interest Holders in and to such Trust Estate or
part thereof.
10.3. NOTICES. Unless otherwise expressly specified or permitted by the
terms hereof, all notices shall be in writing and shall be given by posting
same in the United States mails, certified or registered mail, return
receipt requested, postage prepaid, addressed to the party to whom
directed, as follows:
Xxxxx X. Xxxxxxx, President
Entertainment Technologies & Programs, Inc.
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
Mr. Xxxxxxx Xxxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
Xx. Xxxxxx Xxxxxxxx Xx. Xxxxxx Xxxxxx
X.X. Xxx 0000 Xxxxxx & Xx.
Xxxxxx Xxxxx Xx, XX 00000 000 0xx Xxxxxx, Xxxxx 000
Xxx Xxx, XX 00000
and if to any Beneficial Interest Holder, addressed to his/her/its address
appearing on the Register or at such other address as such Beneficial Interest
Holder shall have given by written notice to the other parties. All such notices
shall be deemed delivered three days after the posting thereof in such mails.
10.4. SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability without affecting the validity or enforceability of any other
provisions hereof.
10.5. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, but all of which together shall
constitute one and the same instrument.
10.6. BINDING AGREEMENT. All covenants and agreements contained herein shall be
binding upon, and inure to the benefit of, the Trustees and their respective
successors and assigns, any successor trustee provided for in Section Eight,
their respective successors and assigns, and the Beneficial Interest Holders,
and their respective successors and assigns. Any request, notice, direction,
consent, waiver, or other instrument or action by any Beneficial Interest Holder
shall bind its successors and assigns.
10.7. NO PERSONAL LIABILITY OF BENEFICIAL INTEREST HOLDERS. The Beneficial
Interest Holders shall not incur any personal liability through their ownership
or possession of the Beneficial Interests, except for taxes imposed on the
Beneficial Interest Holders pursuant to applicable provisions of federal, state,
or local law with respect to their Beneficial Interests in or distributions from
the Trust. Liabilities of the Trust are to be satisfied in all events (including
the exhaustion of the Trust Estate) exclusively from the Trust Estate. If the
Trustees determine that it is appropriate or necessary to obtain a return of
sums distributed to the Beneficial Interest Holders out of the Trust Estate to
pay the expenses, debts or liabilities of the Trust (including, but not limited
to, tax liabilities), the Trustees shall have the right to demand that the
Beneficial Interest Holders return to the Trustees sums distributed to such
Beneficial Interest Holders out of the Trust Estate. If the Trustees makes such
a demand on the Beneficial Interest Holders, the Beneficial Interest Holders
shall return to the Trustees such sums distributed to them out of the Trust
Estate as the Trustees demand.
10.8. HEADINGS. The heading of the various Sections herein are for convenience
of reference only and shall not define or limit any of the terms or provisions
hereof.
10.9. CONSTRUCTION. Except where the context otherwise requires, words
importing the masculine gender shall include the feminine and the neuter, if
appropriate; words importing the singular number shall include the plural number
and vice versa; and words importing persons shall include partnerships,
associations, and corporations. The words herein, hereof, hereby, hereunder, and
words of similar import, refer to this instrument as a whole and not to any
particular Section or Subsection hereof.
10.10. GOVERNING LAW. This agreement shall in all respects be governed by, and
construed and interpreted in accordance with, the laws of the state of
California, exclusive of its laws relating to conflict of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ETPI: TRUSTEES:
By: /s/ Xxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxxx
----------------------------------------- ------------------------
Xxxxx X. Xxxxxxx, its Chairman, President Xxxxx X. Xxxxxxx
and Chief Executive Officer
/s/ Xxxxxxx Xxxxxx
------------------------
Xxxxxxx Xxxxxx
By: Xxxxx X. Xxxxxxx
---------------------------------------- /s/ Xxxxxx Xxxxxxxx
------------------------
Xxxxxx Xxxxxxxx
Its: Chairman/CEO
----------------------------------------
/s/ Xxxxxx Xxxxxx
------------------------
Xxxxxx Xxxxxx
14
SCHEDULE OF NOTES
EXHIBIT A
NOTE I: Dated June 2, 1997, in the principal sum of $600,000, issued to
Capital Growth Planning, Inc., a California corporation, as
Trustee of ETPI Lenders Trust, with accrued interest, extension
fees, and late charges accrued through 12/31/00 of $104,689.56, a
total of $704,689.56.
NOTE II: Dated October 23, 1998, in the principal sum of $600,000, issued
to Capital Protection, Inc., a California corporation, as Trustee
of ETPI Lenders Trust II, with accrued interest, extension fees,
and late charges accrued through 12/31/00 of $49,188.00, a total
of $649, 188.00.
NOTE III: Dated February 19, 1999, in the principal sum of $600,000, with
accrued interest, extension fees, and late charges accrued
through 12/31/00 of $72,579.56, a total of $672,579.56, issued to
those persons and in such proportions as specified in Exhibit B.
NOTE IV: Dated April 15, 1999, in the principal sum of $600,000, with
accrued interest, extension fees, and late charges accrued
through 12/31/00 of $84,929.56, a total of $684,929.56, issued to
those persons and in such proportions as specified in Exhibit B.
NOTE V: Dated July, 1999, in the principal sum of $200,000, with accrued
interest, extension fees, and late charges accrued through
12/31/00 of $9,100, a total of $209,100, issued to those persons
and in such proportions as specified in Exhibit B.
15
SCHEDULE OF NOTES HOLDERS
EXHIBIT B
NAME ADDRESS NOTE INTEREST
----------------------------------- -------------------------- -------------
Capital Growth Planning, Inc., 000 Xxxx Xxxxxxxxx Xxxxxx Note I
a California corporation, Xx Xxxxx, Xxxxxxxxxx 00000
as Trustee of ETPI Lenders Trust
Capital Protection, Inc., 000 Xxxx Xxxxxxxxx Xxxxxx Note II
a California corporation, Xx Xxxxx, Xxxxxxxxxx 00000
as Trustee of ETPI Lenders Trust II
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