EXHIBIT 10.6
OPERATING AGREEMENT
FOR
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT
REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS
FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH ARE SET FORTH
HEREIN.
TABLE OF CONTENTS
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ARTICLE 1 ORGANIZATIONAL MATTERS 2
1.1 FORMATION 2
1.2 NAME 2
1.3 TERM 3
1.4 COMPANY PROPERTY 3
1.5 OFFICE AND AGENT 3
1.6 ADDRESSES OF THE MEMBERS 3
1.7 PURPOSE OF COMPANY 3
ARTICLE 2 CAPITAL CONTRIBUTIONS 4
2.1 INITIAL CAPITAL CONTRIBUTIONS 4
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS 5
2.3 CAPITAL ACCOUNTS 5
2.4 NO INTEREST ON OR WITHDRAWAL OF
CAPITAL 6
2.5 THIRD PARTY LOANS. 6
2.6 SHORT-TERM ADVANCES 6
2.7 DILUTION 6
ARTICLE 3 ALLOCATIONS OF NET PROFITS AND NET
LOSSES 7
3.1 ALLOCATIONS OF INCOME AND NET
PROFITS 7
3.2 ALLOCATIONS OF NET LOSSES 7
3.2.1 POSITIVE CAPITAL ACCOUNTS 7
3.2.2 PROFIT PERCENTAGE INTERESTS 7
3.3 SPECIAL ALLOCATIONS 7
3.3.1 MEMBER NONRECOURSE DEDUCTIONS 7
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3.3.2 NONRECOURSE DEDUCTIONS REFERABLE
TO LIABILITIES OWED TO NON-MEMBERS 8
3.3.3 MEMBER MINIMUM GAIN CHARGEBACK 8
3.3.4 MINIMUM GAIN CHARGEBACK 8
3.3.5 QUALIFIED INCOME OFFSET 9
3.4 CURATIVE ALLOCATIONS 9
3.5 APPLICATION OF SECTION 704(C)
PRINCIPLES 9
3.6 ALLOCATION OF EXCESS NON-RECOURSE
LIABILITIES 9
3.7 INTENTION TO BE TAXED AS A
PARTNERSHIP 9
3.8 ALLOCATION OF NET PROFITS AND
LOSSES IN RESPECT OF A TRANSFERRED
INTEREST 9
3.9 OBLIGATIONS OF MEMBERS TO REPORT
ALLOCATIONS 10
ARTICLE 4 DISTRIBUTIONS 10
4.1 DISTRIBUTION OF ASSETS BY THE
COMPANY 10
4.2 NET CASH FLOW 10
4.3 PERSONS TO RECEIVE DISTRIBUTION 10
4.4 FORM OF DISTRIBUTION 10
4.5 WITHHOLDING ON DISTRIBUTIONS 10
4.6 RETURN OF DISTRIBUTIONS 11
ARTICLE 5 MEMBERS 11
5.1 LIMITED LIABILITY 11
5.2 ADMISSION OF ADDITIONAL MEMBERS 11
5.3 TRANSACTIONS WITH THE COMPANY 11
5.4 MEMBERS ARE NOT AGENTS 12
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5.5 VOTING RIGHTS 12
5.5.1 GENERAL RULE 12
5.5.2 MEETINGS OF MEMBERS 12
5.5.3 PROXIES 12
5.6 WITHDRAWAL, RESIGNATION AND
RETIREMENT 13
ARTICLE 6 MANAGEMENT AND CONTROL OF THE COMPANY 13
6.1 MANAGEMENT OF THE COMPANY BY THE
MANAGER 13
6.1.1 EXCLUSIVE MANAGEMENT BY THE
MANAGER 13
6.1.2 AGENCY AUTHORITY OF THE
MANAGER 13
6.2 MANAGER 14
6.2.1 INITIAL MANAGER 14
6.2.2 TERM OF OFFICE; SUCCESSOR
MANAGER 14
6.2.3 RESIGNATION 14
6.3 LIMITATIONS ON MANAGER'S AUTHORITY 14
6.4 CARD CLUB OPERATOR; HOTEL OPERATOR;
OTHER OFFICERS 15
6.4.1 CARD CLUB OPERATOR; HOTEL
OPERATOR 15
6.4.2 OTHER OFFICERS 15
6.5 REMUNERATION AND REIMBURSEMENT OF
MEMBERS 15
6.6 BUDGETS 16
6.7 BANK ACCOUNTS 16
6.8 INSURANCE 16
ARTICLE 7 TRANSFER AND ASSIGNMENT OF INTERESTS 16
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7.1 RESTRICTIONS ON TRANSFER;
TRANSFERS OF ECONOMIC
INTERESTS 16
7.2 RIGHTS OF FIRST REFUSAL 17
7.3 TRANSFERS SUBJECT TO LICENSES AND
APPROVALS 18
7.4 EFFECT OF NON-COMPLIANCE 18
7.5 EFFECT OF TRANSFER 18
7.6 RIGHTS OF LEGAL REPRESENTATIVES 18
7.7 OBLIGATION TO COMPLY WITH APPLICABLE
LAW 19
7.8 CHANGES OF CONTROL -- XXXXXXXXX AND
CHU 19
7.9 PUT/CALL 20
7.9.1 CHU/HPC 20
7.9.2 XXXXXXXXX/HPC 20
7.9.3 DETERMINATION OF FAIR VALUE 21
7.9.4 HPC OPTION 22
7.9.5 CLOSING 23
7.10 TAG-ALONG RIGHTS 23
7.10.1 RIGHT TO PARTICIPATE IN SALE 23
7.10.2 SALE NOTICE 24
7.10.3 TAG-ALONG NOTICE 24
7.10.4 VOID TRANSFERS 24
7.10.5 EXEMPT TRANSFERS 25
ARTICLE 8 ACCOUNTING, RECORDS, REPORTING BY
MEMBERS 25
8.1 FISCAL YEAR 25
8.2 BOOKS AND RECORDS 25
8.3 STATEMENTS 26
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8.3.1 ANNUAL REPORT 26
8.3.2 TAX INFORMATION 26
8.3.3 ANNUAL STATE REPORT 26
8.3.4 MONTHLY REPORTS 26
8.4 FILINGS 27
8.5 BANK ACCOUNTS 27
8.6 TAX MATTERS FOR THE COMPANY HANDLED
BY THE MANAGER AND TAX MATTERS
PARTNER 27
ARTICLE 9 DISSOLUTION AND WINDING UP 27
9.1 EVENTS OF DISSOLUTION 27
9.2 EFFECT OF A DISSOLUTION EVENT (OTHER
THAN DISSOLUTION) 28
9.3 CERTIFICATE OF DISSOLUTION 28
9.4 WINDING UP 28
9.5 DISTRIBUTIONS IN KIND 29
9.6 ORDER OF PAYMENT UPON DISSOLUTION 29
9.7 COMPLIANCE WITH REGULATIONS 29
9.8 LIMITATIONS ON PAYMENTS MADE IN
DISSOLUTION 29
9.9 CERTIFICATE OF CANCELLATION 30
9.10 NO ACTION FOR DISSOLUTION 30
ARTICLE 10 INDEMNIFICATION AND INSURANCE 30
10.1 INDEMNIFICATION OF COMPANY PERSONS 30
10.2 SUCCESSFUL DEFENSE 31
10.3 INDEMNIFICATION OF OTHER AGENTS 31
10.4 RIGHT TO INDEMNIFICATION UPON
APPLICATION 32
10.4.1 TIMING 32
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10.4.2 ENFORCEMENT 32
10.5 PAYMENT OF EXPENSES IN ADVANCE 32
10.6 LIMITATIONS ON INDEMNIFICATION 32
10.7 OTHER TERMS OF INDEMNIFICATION 33
10.7.1 PARTIAL INDEMNIFICATION 33
10.7.2 INDEMNITY NOT EXCLUSIVE 33
10.7.3 INSURANCE 33
10.7.4 HEIRS, EXECUTORS AND
ADMINISTRATORS 34
ARTICLE 11 REGISTRATION RIGHTS 34
11.1 INCIDENTAL REGISTRATION 34
11.1.1 NOTICE 35
11.1.2 INCLUSION OF SHARES 35
11.1A DEMAND REGISTRATION 35
11.1A.1 NOTICE OF DEMAND 35
11.1A.2 HOLDER AND XXXXXXXXXXXX 00
11.1A.3 HOLDBACK 36
11.2 REGISTRATION PROCEDURES 36
11.2.1 SELLING HOLDER INFORMATION 36
11.2.2 CONSULTATION 36
11.2.3 PROVISION OF PROSPECTUSES 36
11.2.4 BLUE SKY COMPLIANCE 36
11.2.5 AMENDMENTS 37
11.2.6 PROSPECTUS DELIVERY 37
11.2.7 STOP-ORDERS 37
11.2.8 UNDERWRITING AGREEMENT 37
11.2.9 COMPLIANCE WITH LAWS 37
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11.3 REGISTRATION NOT REQUIRED 38
11.4 DELAY OF REGISTRATION 38
11.5 INDEMNITY 38
11.5.1 HPI'S INDEMNITY 38
11.5.2 THE HOLDER'S INDEMNITY 38
11.6 EXPENSES OF REGISTRATION 39
11.7 TERMINATION 39
ARTICLE 12 MISCELLANEOUS 39
12.1 OTHER VENTURES; COMPETITION 39
12.2 COUNSEL TO THE COMPANY 40
12.3 GENERAL PROVISIONS 40
12.3.1 COMPLETE AGREEMENT 40
12.3.2 DISPUTES 40
12.3.2.1 GOVERNING LAW; JURISDICTION 40
12.3.2.2 ARBITRATION AS EXCLUSIVE REMEDY 40
12.3.3 ADDITIONAL DOCUMENTS 41
12.3.4 NOTICES 41
12.3.5 PARTIES 42
12.3.5.1 NO THIRD-PARTY BENEFITS 42
12.3.5.2 SUCCESSORS AND ASSIGNS 42
12.3.6 GOVERNING LAW; JURISDICTION 42
12.3.7 WAIVER OF JURY 42
12.3.8 WAIVERS STRICTLY CONSTRUED 42
12.3.9 RULES OF CONSTRUCTION 42
12.3.9.1 HEADINGS 42
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12.3.9.2 TENSE AND CASE 43
12.3.9.3 SEVERABILITY 43
12.3.9.4 AGREEMENT NEGOTIATED 43
12.3.10 COUNTERPARTS 43
12.4 AMENDMENTS 43
12.5 RELIANCE ON AUTHORITY OF PERSON
SIGNING AGREEMENT 43
12.6 INVESTMENT REPRESENTATION 43
12.7 LLC AS CARD CLUB OPERATOR 44
OPERATING AGREEMENT
FOR
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
This Operating Agreement is made as of July 18, 1996, by and among HP/COMPTON,
INC., a California corporation ("HPC"), REDWOOD GAMING LLC, a California limited
liability company ("XxXxxxxxx") and FIRST PARK INVESTMENTS, LLC, a California
limited liability company ("Chu"), with reference to the following facts:
X. Xxxxxxx Entertainment, Inc., a California corporation ("CEI") and each of its
officers, directors and shareholders has been licensed (the "City License") by
the City of Xxxxxxx (the "City") to own and operate a card club (the "Card
Club") located in the area known as Alameda Auto Plaza in the City (the "Card
Club Site").
B. Pursuant to an Amended and Restated Agreement Respecting Pyramid Casino by
and between Hollywood Park, Inc., a Delaware corporation and the parent
corporation of HPC ("HPI"), on the one hand, and CEI and the principal
shareholder of CEI, Xxxxxx Xxxxxxxxx, on the other hand (the "Purchase
Agreement"), HPC (by assignment of HPI's rights thereunder) acquired CEI's
rights to the Card Club Site, including its rights under that certain Amended
and Restated Disposition and Development Agreement, Agreement of Purchase and
Sale, and Lease with Option to Purchase (the "DDA") with The Community
Redevelopment Agency of the City (the "Real Property Rights"), the plans and
specifications for the construction of the Card Club (the "Plans"), an option
(the "License Rights Option") to acquire the City License and all other assets
held by CEI pertaining to the Card Club.
C. Pursuant to the DDA, HPC has leased certain improvements on the Card Club
Site adjacent to the Card Club which HPC is obligated to remodel, furnish and
operate as a hotel (the "Hotel").
D. HPC and CEI have entered into a Lease of the Card Club, dated as of August 3,
1995, with HPC as Landlord and CEI as Tenant (the "Lease"). Pursuant to the
Lease, HPC is to construct, develop and furnish the Card Club on the Card Club
Site pursuant to the Plans. Costs of construction, development and furnishing of
the Card Club and the Hotel and related start-up matters (collectively, "Project
Costs") are expected to be approximately $25,000,000, including an aggregate
$5,000,000 paid or to be paid by HPC to CEI for the Real Property Rights, the
Plans, the License Rights Option and the exercise price
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under the License Rights Option. HPC has expended approximately $9,200,000 to
date on Project Costs and related matters.
E. Section 5.4.1 of the Purchase Agreement provides that at such time as HPI is
licensed as an operator of the Card Club under applicable California law and
City ordinances, the Lease shall terminate and CEI and HPI shall enter into a
partnership agreement (or limited liability company operating agreement) for the
ownership and operation of the Card Club.
F. HPC, XxXxxxxxx and Chu wish to form a limited liability company to acquire
all of HPC's rights to construct and own the Card Club, to acquire HPC's rights
under the Lease, the DDA and the Purchase Agreement and to enter into this
Agreement for the management and operation of the Company (as hereinafter
defined).
G. The Members have executed, and have filed or will cause to be filed with the
California Secretary of State, Articles of Organization ("Articles") of Crystal
Park Hotel and Casino Development Company, LLC, a California limited liability
company (the "Company"), pursuant to the provisions of California Corporations
Code, Title 2.5, also known as the Xxxxxxx-Xxxxxx Limited Liability Company Act
(the "Act").
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the Members (capitalized terms are generally defined in
Schedule I) by this Agreement set forth the operating agreement for the Company
under the laws of the State of California.
ARTICLE 1
ORGANIZATIONAL MATTERS
1.1 FORMATION. Pursuant to the Act, the Members have formed a California limited
liability company under the laws of the State of California by filing the
Articles with the California Secretary of State and entering into this
Agreement. The rights and liabilities of the Members shall be determined
pursuant to the Act and this Agreement. To the extent that the rights or
obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent permitted by the Act, control.
1.2 NAME. The name of the Company shall be "CRYSTAL PARK HOTEL AND CASINO
DEVELOPMENT COMPANY, LLC." The business of the Company may be conducted under
that name or, upon compliance with applicable laws, any other name that the
Manager deems appropriate or advisable. The Manager shall file any fictitious
name certificates and similar filings, and any
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amendments thereto, that the Manager considers appropriate or advisable.
1.3 TERM. The term of this Agreement shall be co-terminus with the period of
duration of the Company provided in the Articles, unless extended or sooner
terminated as hereinafter provided.
1.4 COMPANY PROPERTY. Pursuant to Section 2.1 hereof, the property of the
Company (the "Company Property") shall consist of all of HPC's interest in the
Card Club Site, including the Real Property Rights, the Card Club, the License
Rights Option, HPC's rights under the Purchase Agreement, the Lease, and the
DDA, and all other assets and properties, tangible and intangible, that are
hereafter acquired or received by the Company. No Member, individually, shall
have any ownership of the Company Property.
1.5 OFFICE AND AGENT. The Company shall continuously maintain an office and
registered agent in the State of California as required by the Act. The
principal office of the Company shall be as determined by the Manager. The
Company also may have such offices, anywhere within and without the State of
California, as the Manager from time to time may determine. The registered agent
shall be as stated in the Articles or as otherwise determined by the Manager.
1.6 ADDRESSES OF THE MEMBERS. The respective names and addresses of the Members
are set forth on Exhibit A. The Manager shall revise Exhibit A from time to time
as changes in the information on that Exhibit occur.
1.7 PURPOSE OF COMPANY. The purpose of the Company is to engage in any lawful
activity for which a limited liability company may be organized under the Act.
Notwithstanding the foregoing, without the written consent of all of the
Members, the Company shall not engage in any business other than the following:
(a) The business of developing and owning the Card Club and, after such time as
applicable law is amended to permit public companies to operate card clubs or
HPI or HPC is otherwise legally permitted to operate the Card Club, to obtain
all necessary licenses and approvals for, and to transfer the Company Assets to,
Newco in accordance with the Purchase Agreement, with Newco thereafter to own
and operate the Card Club and to own, lease or operate or to provide for the
operation by others of the other Company Assets;
(b) The business of remodeling, furnishing and operating or contracting for the
operation of the Hotel;
(c) The business of acquiring the Card Club Site or other property pursuant to
the DDA and developing, constructing,
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operating, contracting for the operation of and/or leasing other improvements at
the Card Club Site or such other property as may be acquired and/or leased
pursuant to the DDA; and
(d) Such other activities directly related to the foregoing businesses as may be
necessary, advisable or appropriate to further the foregoing business.
In furtherance of this purpose, after such time as applicable law is amended to
permit public companies to operate card clubs or HPI or HPC is otherwise legally
permitted to operate the Card Club, each Member shall, and shall cause each
person or entity that has a direct or indirect interest in such Member and who
is required to apply for a license in order for the Company or Newco to acquire
a license to operate the Card Club to, apply to the appropriate governmental
authorities to obtain such licenses and approvals as are necessary for the
Company or Newco to obtain a license to operate the Card Club.
ARTICLE 2
CAPITAL CONTRIBUTIONS
2.1 INITIAL CAPITAL CONTRIBUTIONS. The Members shall make the following
contributions to the Company ("Initial Capital Contributions"):
Chu $ 1,000,000
HPC $22,000,000
XxXxxxxxx $ 2,000,000
Chu and XxXxxxxxx shall contribute their Initial Capital Contributions in cash
on the effective date of this Agreement. HPC shall satisfy a portion of its
Initial Capital Contribution by assigning to the Company all of its right, title
and interest in and to the Card Club Site, including without limitation the Real
Property Rights and HPC's rights under the Purchase Agreement, the Lease and the
License Rights Option (together, the "Initial Card Club Assets"), upon approval
of such assignment by the City and CEI. The Company shall assume all of HPC's
obligations under or with respect to the Initial Card Club Assets, including
without limitation obligations under the agreements set forth in Schedule 2.1,
and shall indemnify HPC and HPI and hold each of them harmless from and against
all losses, liabilities, costs and expenses with respect thereto (the "Card Club
Liabilities"). The parties agree that the net fair market value of the non-cash
assets contributed by HPC (i.e., the value of the Initial Card Club Assets minus
the value of the Card Club Liabilities) is equal to the amount of HPC's Initial
Expenses which, as of July 8, 1996, were approximately Nine Million Two Hundred
Thousand Dollars ($9,200,000), as shown on Schedule 6.5. HPC shall contribute,
as and when required by
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the Company, cash of up to the difference between the Initial Expenses on the
date that the Initial Card Club Assets are assigned to the Company and Twenty-
Two Million Dollars ($22,000,000).
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as may be explicitly agreed in
writing by the Member and the Company, no Member shall be required to make any
additional Capital Contributions. If the Manager notifies the Members, from time
to time upon at least twenty (20) days' prior written notice, that additional
Capital Contributions are necessary for (i) the acquisition, development and
construction of the Card Club and the remodeling and furnishing of the Hotel and
related activities in accordance with the Budget in effect from time to time or
(ii) the acquisition and/or leasing of the Card Club Site or other property
pursuant to the DDA or (iii) such improvements to the Card Club Site or other
property acquired and/or leased pursuant to the DDA as are agreed upon by a
Super Majority Interest or (iv) the payment of Card Club Liabilities or (v) such
additional expenses as may be incurred after such time as applicable law is
amended to permit public companies to operate card clubs or HPI or HPC is
otherwise legally permitted to operate the Card Club, in connection with the
formation of Newco and in connection with the operation by Newco of the Card
Club or (vi) any other business purpose of the Company (collectively,
"Additional Capital Contributions") each of the Members shall have the right,
but not the obligation, to contribute as Additional Capital an amount equal to
its respective Profit Percentage Interest of such Additional Capital
Contribution. If any Member elects not to make such Additional Capital
Contribution (the "Non-participating Member Contribution"), and HPC contributes
its Profit Percentage Interest of such Additional Capital Contribution, then HPC
shall be entitled to contribute as an Additional Capital Contribution an amount
equal to the Non-participating Member Contribution. To the extent that the
Members do not contribute their respective Profit Percentage Interests of
Additional Capital Contributions, their Profit Percentage Interests shall be
adjusted in accordance with Section 2.7.
2.3 CAPITAL ACCOUNTS. The Company shall establish an individual Capital Account
for each Member. The Company shall determine and maintain each Capital Account
in accordance with Regulations Section 1.704-1(b)(2)(iv). Upon the contributions
by the Members under Section 2.1 and 2.2, each such Member will receive a credit
to its Capital Account in the amount of cash or the fair market value of
property so contributed. If a Member Transfers all or a part of such Member's
Membership Interest in accordance with this Agreement, such Member's Capital
Account attributable to the Transferred Membership Interest shall carry over to
the new owner of such Membership Interest pursuant to Regulations Section
1.704-1(b)(2)(iv)(1). Each Capital Account shall consist of a Member's paid-in
Capital Contribution(s) (whether in cash, property, services or otherwise,
including a
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Member's payment of claims against or liabilities of the Company to the extent
that the payor has no right of indemnification or contribution) (a) increased by
such Member's allocated share of Net Profits in accordance with Article 3
hereof, (b) decreased by such Member's allocated share of Net Losses and
distributions in accordance with Article 3 hereof, and (c) adjusted as otherwise
required in accordance with the Code, Regulations and generally accepted
accounting principles (to the extent consistent with the Code and Regulations).
If the book value of property is adjusted pursuant to Regulations
1.704-1(b)(2)(ix)(f), Capital Accounts shall be adjusted as provided in
Regulations Section 1.704-1(b)(2)(iv)(g).
2.4 NO INTEREST ON OR WITHDRAWAL OF CAPITAL. No Member shall be entitled to
receive any interest on such Member's Capital Contributions. Except as otherwise
provided by law, no Member shall be entitled to withdraw or reduce its Capital
Contribution or to demand or receive property other than cash in return for its
Capital Contribution. No Member shall have any obligation, upon winding up of
the Company, to restore any deficit balance in its Capital Account for the
benefit of the other Members.
2.5 THIRD PARTY LOANS. The Company may seek debt financing from banks, savings
and loan associations or other financial institutions from time to time if the
Manager determines that the Initial Capital Contributions are insufficient for
the conduct of its business or if the Manager otherwise determines in good faith
that such financing is necessary or desirable ("Third Party Loans"), provided
that no Member shall be required to guarantee any Third Party Loan unless such
Member agrees to do so. Third Party Loans may be secured by liens on the Company
Property and shall have such other terms and conditions as may be determined by
a Super Majority Interest.
2.6 SHORT-TERM ADVANCES. Any Member may, but shall be under no obligation to,
advance funds in excess of its obligation to make Initial Capital Contributions
and Additional Capital Contributions ("Advances") in order to pay operational
expenditures on a short-term basis in contemplation of income from operations or
a disbursement of funds from Third Party Loans, if, in the judgment of the
Manager, payment of expenditures cannot or should not be delayed until such
funds are obtained by the Company. Amounts funded by a Member pursuant to this
Section 2.6 shall bear interest at the Rate plus 200 basis points (but in no
event greater than the maximum rate permitted under applicable law), and shall
be repaid immediately upon receipt of funds contemplated to be received as
provided above or from other Company assets as agreed by all of the Members.
2.7 DILUTION. In the event that HPC contributes its Profit Percentage Interest
of an Additional Capital Contribution
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and Chu and/or XxXxxxxxx, as applicable, does not contribute its Profit
Percentage Interest of such Additional Capital Contribution, the Profit
Percentage Interests shall be recalculated such that (a) Chu's or XxXxxxxxx'x
(as applicable) Profit Percentage Interest shall equal one-hundred (100)
multiplied by a fraction, the numerator of which shall equal Chu's or
XxXxxxxxx'x (as applicable) Capital Contributions and the denominator of which
shall equal the total of all Capital Contributions by all Members; and (b) the
Profit Percentage Interest of HPC shall be increased by the reduction in the
Profit Percentage Interest of Chu or XxXxxxxxx (as applicable) determined
pursuant to clause (a) of this Section 2.7 from the Profit Percentage Interest
of Chu or XxXxxxxxx (as applicable) immediately prior to such determination.
ARTICLE 3
ALLOCATIONS OF NET PROFITS AND NET LOSSES
3.1 ALLOCATIONS OF INCOME AND NET PROFITS. After giving effect to the special
allocations set forth in Sections 3.3 and 3.4 hereof, Net Profits shall be
allocated in accordance with the Members' Profit Percentage Interests, which
shall initially be as follows:
HPC 88%
XxXxxxxxx 8%
Chu 4%
The foregoing Profit Percentage Interests shall be subject to adjustment from
time to time upon the admission of new Members or in accordance with Section
2.7.
3.2 ALLOCATIONS OF NET LOSSES. After giving effect to the special allocations
set forth in Sections 3.3 and 3.4 hereof, Net Losses shall be allocated to the
Members as follows:
3.2.1 POSITIVE CAPITAL ACCOUNTS. Net Losses shall first be allocated to the
Members in proportion to and to the extent of their positive Capital Account
balances.
3.2.2 PROFIT PERCENTAGE INTERESTS. Except as provided in Section 3.2.1, Net
Losses shall be allocated to the Members in proportion to their Profit
Percentage Interests.
3.3 SPECIAL ALLOCATIONS.
3.3.1 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions for any
Fiscal Year and any other deductions or losses for any Fiscal Year referable to
a liability owed by the Company to (or guaranteed or indemnified by) a Member
for which no other Member bears the economic risk
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of loss shall be specially allocated to the Member who bears the economic risk
of loss with respect to the Member Nonrecourse Debt or other liability to which
such Member Nonrecourse Deductions or other deductions are attributable in
accordance with Regulations Section 1.704-2(i) and Regulations Section
1.704-1(b).
3.3.2 NONRECOURSE DEDUCTIONS REFERABLE TO LIABILITIES OWED TO NON-MEMBERS. Any
Nonrecourse Deductions for any Fiscal Year and any other deductions or losses
for any Fiscal Year referable to a liability owed by the Company to a Person
other than a Member for which no Member bears the economic risk of loss shall be
specially allocated to the Members in proportion to their Profit Percentage
Interests.
3.3.3 MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Regulation
Section 1.704-2(i)(4), notwithstanding any other provision of this Article 3, if
there is a net decrease in Member Nonrecourse Debt Minimum Gain (as defined in
Regulations Section 1.704-2(i)(2)) attributable to a Member Nonrecourse Debt
during any Fiscal Year, each Member who has a share of the Member Nonrecourse
Minimum Gain attributable to such Member Nonrecourse Debt (which share shall be
determined in accordance with Regulations Section 1.704-2(i)(5)) shall be
specially allocated items of Company income and gain for such Fiscal Year (and,
if necessary, subsequent Fiscal Years) in an amount equal to that portion of
such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4) and 1.704-2(j)(2). This
Section 3.3.3 is intended to comply with the minimum gain chargeback requirement
contained in Regulations Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
3.3.4 MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Regulations
Section 1.704-2(f), notwithstanding any other provision of this Article 3, if
there is a net decrease in Company Minimum Gain during any Fiscal Year, each
Member shall be specially allocated items of Company income and gain for such
Fiscal Year (and, if necessary, in subsequent Fiscal Years) in an amount equal
to the portion of such Member's share of the net decrease in Company Minimum
Gain which share of such net decrease shall be determined in accordance with
Regulations Section 1.704-2(g)(2). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(f)(6) and
1.704-2(j)(2). This Section 3.3.4 is intended to comply with the minimum gain
chargeback requirement contained in
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Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
3.3.5 QUALIFIED INCOME OFFSET. In the event a Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) or any other event creates an Adjusted
Capital Account Deficit, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate such
excess deficit balance as quickly as possible.
3.4 CURATIVE ALLOCATIONS. The allocations set forth in Section 3.3 hereof (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Regulations. It is the intent of the Members that, to the extent possible,
all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain,
loss, or deduction pursuant to this Section 3.4. Therefore, notwithstanding any
other provision of this Article 3 (other than the Regulatory Allocations), the
Members shall make such offsetting special allocations of Company income, gain,
loss, or deduction in whatever manner they determine appropriate so that, after
such offsetting allocations are made, a Member's Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would have
had if the Regulatory Allocations were not part of this Agreement and all
Company items were allocated pursuant to Sections 3.1 and 3.2.
3.5 APPLICATION OF SECTION 704(C) PRINCIPLES. Notwithstanding the preceding
sections of this Article 3:
(a) Section 704(c) of the Code shall apply to the allocation of items of income,
gain, deduction and loss related to contributed property having a tax basis at
the time of contribution that differs from its fair market value; and
(b) Regulations Section 1.704-1(b)(2)(iv)(f) shall apply to the items of income,
gain, deduction and loss related to property the book value of which is adjusted
pursuant to that Regulations Section.
3.6 ALLOCATION OF EXCESS NON-RECOURSE LIABILITIES. For purposes of Section 752
of the Code and Section 1.752-2(a)(3) of the Regulations, "excess non-recourse
liabilities" shall be allocated among the Members in accordance with their
Profit Percentage Interests.
3.7 INTENTION TO BE TAXED AS A PARTNERSHIP. The Company shall be treated as a
partnership for tax purposes.
3.8 ALLOCATION OF NET PROFITS AND LOSSES IN RESPECT OF A TRANSFERRED INTEREST.
--------------------------------------------------------------------
If any Membership Interest is
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Transferred, or is increased or decreased by reason of the admission of a new
Member, Additional Capital Contributions or otherwise, during any Fiscal Year of
the Company, each item of income, gain, loss, deduction or credit of the Company
for such Fiscal Year shall be allocated among the Members by the Manager in
accordance with any method permitted by Section 706(d) of the Code and the
applicable Regulations in order to take into account the Members' varying
Percentage Interests during the Year.
3.9 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are aware of the
income tax consequences of the allocations made by this Article 3 and hereby
agree to be bound by the provisions of this Article 3 in reporting their shares
of Company income and loss for income tax purposes.
ARTICLE 4
DISTRIBUTIONS
4.1 DISTRIBUTION OF ASSETS BY THE COMPANY. Subject to applicable law and any
limitations contained elsewhere in this Agreement, no distribution shall be made
if, after giving effect to the distribution, (a) the Company would not be able
to pay its debts as they become due in the usual course of business, or (b) the
Company's total assets would be less than the sum of its total liabilities.
4.2 NET CASH FLOW. Subject to Section 4.1, Net Cash Flow, if any, shall be
distributed within thirty (30) days after the end of each calendar quarter to
the Members in accordance with the Members' respective Profit Percentage
Interests on the date of the distribution.
4.3 PERSONS TO RECEIVE DISTRIBUTION. All distributions shall be made to the
Persons who, according to the books and records of the Company, are the holders
of record of the Economic Interests in respect of which such distributions are
made on the actual date of distribution. Neither the Company nor any Company
Person shall incur any liability for making distributions in accordance with
this Section 4.3.
4.4 FORM OF DISTRIBUTION. A Member, regardless of the nature of the Member's
Capital Contribution, has no right to demand and receive any distribution from
the Company in any form other than money. No Member may be compelled to accept
from the Company a distribution of any asset in kind in lieu of a proportionate
distribution of money being made to other Members.
4.5 WITHHOLDING ON DISTRIBUTIONS. Each Member consents and agrees that the
Company may deduct and withhold amounts for tax or other obligations of such
Member on any amount
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distributed or allocated by the Company to such Member, and to any assignee of a
Member's Membership Interest (or the related Economic Interest), if the Company
believes in good faith that it is required by law to do so. All amounts so
withheld with respect to such Member, substitute Member, or Economic Interest
Owner shall be treated as amounts distributed to such Person pursuant to Section
9.5 or 9.6 for all purposes under this Agreement. In addition, the affected
Member, substitute Member or Economic Interest Owner shall reimburse the Company
for any such amounts so withheld to the extent not deducted from a distribution.
4.6 RETURN OF DISTRIBUTIONS. Except for distributions made in violation of the
Act or this Agreement, no Member or Economic Interest Owner shall be obligated
to return any distribution to the Company or pay the amount of any distribution
for the account of the Company or to any creditor of the Company. The amount of
any distribution returned to the Company by a Member or Economic Interest Owner
or paid by a Member or Economic Interest Owner for the account of the Company or
to a creditor of the Company shall be added to the account or accounts from
which it was subtracted when it was distributed to the Member or Economic
Interest Owner.
ARTICLE 5
MEMBERS
5.1 LIMITED LIABILITY. Except as required under the Act or as expressly set
forth in this Agreement, no Member shall be personally liable for any debt,
obligation or liability of the Company, whether that liability or obligation
arises in contract, tort or otherwise.
5.2 ADMISSION OF ADDITIONAL MEMBERS. No additional Members shall be admitted
unless approved by a Super Majority Interest. No additional Member shall become
a Member until such additional Member has made any required Capital Contribution
and has become a party to this Agreement by executing a signature page agreeing
to the terms and provisions hereof, and substitute Members may only be admitted
in accordance with Article 7.
5.3 TRANSACTIONS WITH THE COMPANY. A Company Person or any Affiliate may lend
money to and transact other business with the Company only in accordance with
this Agreement or with the prior approval of holders of a majority of the Profit
Percentage Interests held by the disinterested Members after full disclosure of
the Member's involvement. Subject to other applicable law, such Member has the
same rights and obligations with respect thereto as a person who is not a
Member.
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5.4 MEMBERS ARE NOT AGENTS. Pursuant to Article 6, the management of the Company
is vested in the Manager. Unless expressly and duly authorized in writing to do
so by the Manager, no Member, acting solely in the capacity of a Member, is an
agent of the Company nor can any Member in such capacity bind or execute any
instrument on behalf of the Company or render the Company liable for any
purpose.
5.5 VOTING RIGHTS.
5.5.1 GENERAL RULE. Except as expressly provided in this Agreement, the Articles
or the Act, Members shall have no voting, approval or consent rights. Except as
otherwise expressly provided in this Agreement, in all instances in which a
vote, approval, consent or agreement of the Members is required, a vote,
approval or consent of a Super Majority Interest (or, in instances in which
there are defaulting Members or an assignment of a Membership Interest, non-
defaulting Members or Members who are not assignors of a Membership Interest,
respectively, who hold eighty (80%) of the Profit Percentage Interests held by
all such non-defaulting or non-assigning Members) shall be required.
5.5.2 MEETINGS OF MEMBERS. No annual or regular meetings of Members are
required. A meeting of the Members may be called by any Manager or by Members
with collective Profit Percentage Interests of at least ten percent (10%).
Meetings of Members may be held at such date, time and place within or without
the State of California as the Manager may fix from time to time. Notice of any
meeting shall be given in accordance with Section 17104 of the Corporations
Code. At any Members' meeting, the Manager shall preside at the meeting and
shall designate an officer or representative of a Member to act as secretary of
the meeting. The secretary of the meeting shall prepare minutes of the meeting,
which shall be placed in the minute books of the Company. Any action that may be
taken at a meeting of Members may be taken without a meeting, if a consent in
writing setting forth the action so taken, is signed and delivered to the
Company by Members having not less than the minimum number of votes that would
be necessary to authorize or take that action at a meeting at which all Members
entitled to vote on that action at a meeting were present and voted. All such
consents shall be filed with the Company and shall be maintained in the Company
records. Members may participate in any Members' meeting through the use of any
means of conference telephones or similar communications equipment as long as
all Members participating can hear one another. A Member so participating is
deemed to be present in person at the meeting.
5.5.3 PROXIES. Every Member entitled to vote at a meeting may authorize another
person or persons to act by proxy with respect to his, her or its Membership
Interest. No proxy shall be valid after the expiration of 11 months from the
date thereof unless otherwise provided in the proxy. Every
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proxy continues in full force and effect until revoked by the Member executing
it prior to the vote pursuant thereto, except as otherwise herein provided. Such
revocation may be effected by a writing delivered to the Company stating that
the proxy is revoked or by a subsequent proxy executed by the Member executing
the prior proxy and presented to the meeting, or as to any meeting by attendance
at such meeting and voting in person by the person executing the proxy. The
dates contained on the forms of proxy presumptively determine the order of
execution, regardless of the postmark dates on the envelopes in which they are
mailed. A proxy is not revoked by the death or incapacity of the Member unless,
before the vote is counted, written notice of such death or incapacity is
received by the Company. The revocability of a proxy that states on its face
that it is irrevocable shall be governed by the provisions of Sections 703(e)
and 705(f) of the California General Corporation Law.
5.6 WITHDRAWAL, RESIGNATION AND RETIREMENT. Except as required by law, no Member
may withdraw, resign or retire from the Company without the express consent of a
Super Majority Interest.
ARTICLE 6
MANAGEMENT AND CONTROL OF THE COMPANY
6.1 MANAGEMENT OF THE COMPANY BY THE MANAGER.
6.1.1 EXCLUSIVE MANAGEMENT BY THE MANAGER. Subject to the provisions of the
Articles and this Agreement, the business, property and affairs of the Company
shall be managed, and all powers of the Company shall be exercised, by or under
the direction of the Manager. The Manager shall have, without limitation the
authority to exercise all rights and fulfill all obligations with respect to the
Initial Card Club Assets, including without limitation rights and obligations
under the agreements set forth in Schedule 2.1.
6.1.2 AGENCY AUTHORITY OF THE MANAGER. Subject to the rights of the Members as
set forth in Section 6.3, the Manager shall have signing authority with respect
to all matters on behalf of the Company, including without limitation the
authority to endorse checks, drafts and other evidences of indebtedness made
payable to the order of the Company or to sign checks, drafts and other
instruments obligating the Company to pay money, or sign agreements or other
documents. Subject to the provisions of the Articles and this Agreement, the
Manager may delegate any of its powers hereunder.
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6.2 MANAGER.
6.2.1 INITIAL MANAGER. HPC shall be the initial Manager.
---------------
6.2.2 TERM OF OFFICE; SUCCESSOR MANAGER. The Manager shall hold
---------------------------------
office for a term commencing on the date of appointment (or in the case of the
initial Manager, commencing on the date hereof) and expiring upon the earlier of
(i) the date on which such Manager resigns, (ii) the date on which the Manager
becomes an Excluded Member pursuant to Section 9.2 hereof or (iii) the date on
which the Manager ceases to be a Member owning at least a 20% interest in the
capital and profits of the Company. Upon the expiration of the term of office of
a Manager, a successor Manager shall be elected by a Super Majority Interest,
including HPC in its capacity as a Member (unless HPC's term as the Manager
expired by reason of clause (ii) above), provided that such successor Manager
must be a Member owning at least a 20% interest in the capital and profits of
the Company unless agreed upon in writing by all of the Members.
6.2.3 RESIGNATION. The Manager may resign at any time by giving written notice
to the Members without prejudice to the rights, if any, of the Company under any
contract to which the Manager is a party. The resignation of any Manager shall
take effect upon receipt of that notice or at such later time as shall be
specified in the notice; and, unless otherwise specified in the notice,
acceptance of the resignation shall not be necessary to make it effective. A
Manager who has an incapacity shall be deemed to have resigned. For purposes of
this Section 6.2.3, "incapacity" shall mean, as to any Manager, as applicable,
(i) the death or adjudication or incompetence or insanity in the case of a
natural person, (ii) the inability of a Manager to fulfill his obligations under
this Agreement because of injury or physical or mental illness and such
incapacity shall exist for ninety (90) working days in the aggregate during any
consecutive twelve (12) month period, (iii) the termination of a trust in the
case of a trustee of a trust, the dissolution and commencement of winding up of
a partnership in the case of a partnership, the filing of a certificate of
dissolution or its equivalent in the case of a corporation or a limited
liability company and the distribution by a fiduciary of an estate's entire
interest in the Company, or (iv) the Bankruptcy of such Manager. The resignation
of a Manager shall not affect the Manager's rights as a Member and shall not by
itself constitute a withdrawal of a Member.
6.3 LIMITATIONS ON MANAGER'S AUTHORITY. Notwithstanding the foregoing, the
Manager shall not, without the written consent of all of the Members, which
consent shall not be unreasonably delayed or withheld:
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(a) do any act in contravention of this Agreement in its present form or as
amended;
(b) confess a judgment against the Company;
(c) cause the Company to enter into any arrangement with itself or any of its
affiliates or other related entities as principal on terms less favorable to the
Company as would be obtained from an unaffiliated third party;
(d) dissolve the Company except in accordance with Article 9 hereof;
(e) change the nature of the business of the Company (provided, however, that to
the extent agreed to by a Super Majority Interest the Company may determine to
undertake additional businesses at the Card Club Site or other property leased
or acquired by the Company pursuant to the DDA in addition to the Card Club and
the Hotel).
6.4 CARD CLUB OPERATOR; HOTEL OPERATOR; OTHER OFFICERS.
6.4.1 CARD CLUB OPERATOR; HOTEL OPERATOR. Pursuant to the Lease, CEI will act as
the operator of the Card Club (the "Card Club Operator") until such time as the
Company may be licensed to act as the Card Club Operator, at which time the
Company and CEI shall form Newco to operate the Card Club, the Hotel and related
businesses, in accordance with the Purchase Agreement. When the Company and CEI
form Newco, subject to the terms of the Purchase Agreement, the Manager shall
select the chief operating officer and manager of the Card Club (and may enter
into employment agreements with such persons as it deems appropriate). Such
chief operating officer and manager, under the supervision of the Manager, shall
be responsible for the day-to-day management of the operations of the Card Club
and shall make all the decisions required to be made regarding the day-to-day
administration, supervision, management and control of the operations of the
Card Club. The chief operating officer (and all other employees of the Company)
shall report directly to and shall be supervised by the Manager. The Hotel
operator shall be selected by the Manager.
6.4.2 OTHER OFFICERS. The Manager may appoint such other officers as may be
deemed necessary or advisable from time to time by the Manager. All officers,
including the chief operating officer, shall serve at the pleasure of the
Manager, subject to all rights, if any, of an officer under any contract of
employment. Any individual may hold any number of offices with such duties and
powers as designated by the Manager.
6.5 REMUNERATION AND REIMBURSEMENT OF MEMBERS. Except as otherwise authorized
in, or pursuant to, this Agreement, no Member is entitled to remuneration for
acting on behalf of the Company or in connection with the Company's business.
HPC shall
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receive a credit against its Initial Capital Contribution for all Initial
Expenses paid for by HPC or HPI. A schedule setting forth the Initial Expenses
paid for by HPC or HPI as of July 8, 1996, is attached hereto as Schedule 6.5.
The Manager shall be entitled to full reimbursement of its actual costs incurred
in connection with the Company's ownership and/or operation of the Card Club,
including salaries and other compensation of all employees hired for or assigned
to Card Club operations but excluding any allocation for general and
administrative overhead costs. The Members shall be entitled to reimbursement of
reasonable out-of-pocket expenses incurred or services provided for the purposes
of the Company at the request of the Manager.
6.6 BUDGETS. The Manager shall prepare an initial capital budget and annual
capital and operating budgets and operating plans for the Company for each
fiscal year, which annual budgets and plans shall be delivered to the Members
for informational purposes.
6.7 BANK ACCOUNTS. All funds of every kind and nature received by the Company,
including capital contributions, loan proceeds, and operating receipts shall be
deposited in such bank accounts in the name of the Company as shall be
determined from time to time by the Manager. Company funds shall not be
commingled with funds of any Member or others.
6.8 INSURANCE. The Company shall procure and maintain in full force and effect
insurance on the Card Club and other Company Property, including liability,
fire, extended property and business interruption insurance, naming the Company
and the Manager as insureds thereunder (the terms and coverage amounts of which
shall be that customary in the industry). The Company shall procure and maintain
any additional insurance coverage required by applicable City ordinances or
written order.
ARTICLE 7
TRANSFER AND ASSIGNMENT OF INTERESTS
7.1 RESTRICTIONS ON TRANSFER; TRANSFERS OF ECONOMIC INTERESTS. No Member may
Transfer its Membership Interest or Economic Interest in the Company, in whole
or in part, without the prior written consent of the Manager (or, in the case of
HPC if HPC is then the Manager, holders of a majority of the Profit Percentage
Interests excluding those held by HPC), which consent may be given or withheld,
conditioned or delayed by the Manager or such holders, as applicable, in its or
their sole discretion; provided that any Member may Transfer its Economic
Interest to another Member or to an Affiliate without consent. The Transfer of
an Economic Interest to an Affiliate or another Member shall not effect a
Transfer of the Membership Interest of the transferring Member and the
transferee shall in no event be
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deemed substituted as a Member of the Company, except to the extent of the
Economic Interest so Transferred unless otherwise agreed by all of the Members.
No Transfer of an Economic Interest permitted by this Agreement shall effect a
novation or release any of the transferor Member's obligations hereunder, and
the Transferring Member shall continue to be obligated under each and every
provision of this Agreement. No Economic Interest Owner of the Company shall
have any right to participate in the management of the business and affairs of
the Company or to become a Member thereof.
7.2 RIGHTS OF FIRST REFUSAL. If a Member has received the prior written consent
of the Manager (or, in the case of HPC if HPC is then the Manager, holders of a
majority of the Profit Percentage Interests excluding those held by HPC), to a
proposed Transfer in accordance with Section 7.1, prior to seeking to sell all
or any portion of its Membership Interest (the "Transferable Interest"), (i)
each Member other than HPC shall first offer HPC and, as long as HPC is the
Manager, the other Members and (ii), HPC subject to the requirements of the
Purchase Agreement regarding the rights of CEI in connection with Transfers by
HPC, shall offer to the other Members (in each case, collectively with HPC, the
"Offerees") the right to purchase the Transferable Interest (or in the case of
HPC, if CEI had the right pursuant to the Purchase Agreement to exercise a right
of first refusal and did so, the remainder, if any, of the Transferable Interest
following such exercise) on the same terms and conditions as the selling Member
intends to sell such interest, or on the same terms and conditions as the offer
received from a prospective purchaser, as the case may be (herein, the "First
Opportunity Offer"). The First Opportunity Offer, once made, shall constitute an
irrevocable binding offer by the selling Member to sell the Transferable
Interest to the Offerees, who shall have thirty (30) days after receipt of the
First Opportunity Offer within which to accept same in writing. If any of the
Offerees timely accepts the First Opportunity Offer, the selling Member shall
sell the Transferable Interest to such accepting Offerees on a pro rata basis in
accordance with their Profit Percentage Interests (or if only one Offeree
accepts in a timely manner, such Offeree may purchase the entire Transferable
Interest), on the same terms and conditions as the First Opportunity Offer;
provided, however, that such sale shall be consummated within ninety (90) days
of the Offerees' acceptance of the First Opportunity Offer. If the Offerees fail
to timely accept the First Opportunity Offer or do not agree to purchase all of
the Transferable Interest, the selling Member (other then HPC, if it has
previously made such offer to CEI) shall offer the still available portion of
the Transferable Interest to CEI in accordance with the terms and conditions of
the Purchase Agreement. If CEI agrees to purchase (x) all of the still available
portion of the Transferable Interest of DeBartelo or Chu, as applicable, or (y)
all or any portion of the Transferable Interest of HPC, the sale of the
Transferable Interest to CEI and the accepting Offerees, if any, shall be
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consummated in accordance with the Purchase Agreement. If the accepting
Offerees, if any, and CEI together do not agree to purchase the entire
Transferable Interest, then the selling Member shall be free to sell the
Transferable Interest to any third party, subject to the terms of this Agreement
and of the Purchase Agreement. Each of the Members acknowledges receipt of a
copy of the Purchase Agreement and hereby agrees to be bound by all the
provisions thereof, including without limitation (i) the grant to CEI by each of
them of a right of first refusal with respect to Transfers of their respective
Membership Interests herein, and (ii) the provisions regarding the price below
which Membership Interests may not be sold, all as set forth in Section 10.2 of
the Purchase Agreement.
7.3 TRANSFERS SUBJECT TO LICENSES AND APPROVALS. Notwithstanding any other
provision of this Agreement, at such time as a public company is permitted under
applicable law to own and operate a card club, or HPI or HPC is otherwise
legally permitted to operate the Card Club, no Transfer of a Membership Interest
or an Economic Interest in the Company may be made unless and until the
transferee has obtained all licenses and approvals necessary for the ownership
and operation of the Card Club from the City and any other necessary or
applicable licensing authorities and has executed an agreement to be bound by
all provisions of this Agreement.
7.4 EFFECT OF NON-COMPLIANCE. Any purported Transfer not permitted by this
Agreement shall be void ab initio and of no effect against the Company, any
other Member or any creditor of or claimant against the Company.
7.5 EFFECT OF TRANSFER. A transferee of a Membership Interest shall have the
right to become a substitute Member only if (a) the requirements of Sections 7.1
and 7.2, and as applicable, Sections 7.3 and 7.8, are met, (b) such person
executes an instrument satisfactory to all of the Members accepting and adopting
the terms and provisions of this Agreement, and (c) such person pays any
reasonable expenses in connection with its admission as a new Member. The
admission of a substitute Member shall not result in the release of the Member
who assigned the Membership Interest from any liability that such Member may
have to the Company or to any Member.
7.6 RIGHTS OF LEGAL REPRESENTATIVES. Subject to the provisions of Section 9.2,
if a Member who is an individual dies or is adjudged by a court of competent
jurisdiction to be incompetent to manage the Member's person or property, the
Member's executor, administrator, guardian, conservator, or other legal
representative shall have all the rights of a holder of an Economic Interest,
but shall have no right to become a substitute Member without the consent
otherwise required pursuant to this Agreement. If a Member is a corporation,
trust, or other entity and is dissolved or terminated, the
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powers described in the preceding sentence may be exercised by such Member's
legal representative or successor.
7.7 OBLIGATION TO COMPLY WITH APPLICABLE LAW. At such time as a public company
is permitted under applicable law to own and operate a card club, or HPI or HPC
is otherwise legally permitted to operate the Card Club, the Company shall
promptly apply to obtain licensing and the necessary approvals to permit Newco
to acquire the Company Assets and to operate the Card Club, the Hotel and
related businesses and all Members hereby agree to obtain (and to cause each of
their directors, officers, equity owners and other Affiliates, as applicable, to
obtain) all required licenses and approvals as promptly as possible. If any
Member or any director, officer, equity owner or other Affiliate of any Member
(collectively a "Noncomplying Person") is unable, at any time, to obtain or
maintain such licensing or otherwise comply with applicable law, such Member
shall take such action, including without limitation, a corporate restructuring
or the severing of its relationship with the Noncomplying Person, in order to
comply with applicable law within thirty (30) days of the date on which the
Noncomplying Person was unable or ceased to comply with such law. If a Member is
unable to satisfy the requirements of the preceding sentence, then the Company
(or, if the Company is unable to do so, the other Members) shall purchase such
Member's Membership Interest (on a pro rata basis in accordance with their
respective Profit Percentage Interests, if the purchasers are the other
Members). The purchase price of the sale required by the previous sentence shall
equal the Fair Value of such Member's Membership Interest determined in
accordance with the procedures for determining the Fair Value of Chu's and
XxXxxxxxx'x Membership Interests as set forth in Section 7.9.3 and shall be
payable in equal quarterly installments over five (5) years with interest at the
Rate. A Member that is removed from the Company pursuant to this Section shall
have no further right to participate, in any way, in the business of the Company
(specifically including the right to receive distributions from, or to share in
the Net Profits, Net Losses or similar items of, the Company or to approve
Company actions).
7.8 CHANGES OF CONTROL -- XXXXXXXXX AND CHU. During the term of this Agreement,
each of Chu and XxXxxxxxx shall prohibit each of its equity owners from
effecting any Transfer of their ownership interests that would result in a
Change of Control, respectively, of Chu or XxXxxxxxx. Xxx represents and
warrants to HPC and XxXxxxxxx that attached hereto as Schedule 7.8A is a true
and complete list setting forth each of the equity owners of Chu, showing the
percentage interest owned. XxXxxxxxx represents and warrants to HPC and Chu that
attached hereto as Schedule 7.8B is a true and complete list setting forth each
of the equity owners of XxXxxxxxx, showing the percentage interest owned. Each
of Chu and XxXxxxxxx hereby agrees to provide the Manager (or HPC, if HPC is no
longer the Manager) with prompt notice of any proposed sale by an equity owner
of his, her or
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its ownership interest. Concurrently with the execution of this Agreement, each
of Chu and XxXxxxxxx shall cause any certificates representing such ownership
interests to bear a legend substantially as follows:
"THE OWNERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS CONTAINED IN THE OPERATING AGREEMENT OF CRYSTAL PARK HOTEL
AND CASINO DEVELOPMENT COMPANY, LLC, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE ISSUER. ANY TRANSFER OF SHARES IN VIOLATION OF SUCH
PROVISIONS SHALL BE NULL AND VOID AB
INITIO."
--------
The Members hereby agree that any Change of Control, merger, sale of assets,
recapitalization or other corporate restructuring of HPI shall not constitute a
Transfer or Change of Control of HPC for purposes of this Agreement.
7.9 PUT/CALL.
7.9.1 CHU/HPC. Within one-hundred twenty (120) days following each of the
following events, subject to CEI's rights pursuant to the Purchase Agreement,
Chu shall have the right to notify HPC of its election to cause HPC to purchase
its Membership Interest, and HPC shall have the right to notify Chu of its
election to purchase Chu's Membership Interest, for a price equal to the Fair
Value of Chu's Membership Interest, which price shall be payable in accordance
with Section 7.9.4. This right and obligation shall be personal to Chu and may
not be assigned or transferred, even if there is a permitted Transfer of Chu's
Membership Interest. The events giving rise to rights of each of HPC and Chu
under this Section 7.9.1 are as follows:
(a) An HPI Change;
(b) The death of Xxx Xxx;
(c) The death of Xxx Xxx; or
(d) The date that is five (5) years after the date hereof.
7.9.2 XXXXXXXXX/HPC. Within one-hundred twenty (120) days following each of the
following events, subject to CEI's rights pursuant to the Purchase Agreement,
XxXxxxxxx shall have the right to notify HPC of its election to cause HPC to
purchase its Membership Interest in the Company, and HPC shall have the right to
notify XxXxxxxxx of its election to purchase XxXxxxxxx'x Membership Interest,
for a price equal to the Fair Value of XxXxxxxxx'x Membership Interest, which
price shall be payable in accordance with Section 7.9.4. This right and
obligation shall be personal to XxXxxxxxx and may not be
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assigned or transferred, even if there is a permitted Transfer of XxXxxxxxx'x
Membership Interest. The events giving rise to the rights of each of XxXxxxxxx
and HPC under this Section 7.9.2 are as follows:
(a) An HPI Change; or
(b) The date that is five (5) years after the date hereof.
7.9.3 DETERMINATION OF FAIR VALUE. The Fair Value of the Membership Interest of
Chu or XxXxxxxxx for purposes hereof shall be determined as follows.
(a) During the first eighteen (18) months after the date hereof, the Fair Value
shall be determined by multiplying the Profit Percentage Interest of Chu or
XxXxxxxxx as applicable by the total Capital Contributions to the Company of all
of the Members from its inception to the date of the purchase of such interest.
(b) From and after the date that is eighteen (18) months after the date hereof,
the Fair Value shall mean the price that an unaffiliated third party would be
willing to pay for the Membership Interest of Chu or XxXxxxxxx, as applicable
(the "Acquired Interest"), considering the value of the Company's business and
assets at the time and its liabilities (with no minority discount applied). HPC
and XxXxxxxxx or Chu, as applicable, shall attempt to agree on the Fair Value
during the sixty (60) day period after the notification by HPC, on the one hand,
or Chu or XxXxxxxxx, on the other, of its election to purchase or sell the
Acquired Interest pursuant to Section 7.9.1 or 7.9.2. If HPC and XxXxxxxxx or
Chu, as applicable, cannot agree on the Fair Value during such sixty (60) day
period, then the Fair Value of the Acquired Interest shall be determined by an
appraisal. Either HPC, on the one hand, or XxXxxxxxx or Xxx, on the other hand,
may initiate an appraisal by notifying the other in writing of its designation
of a nationally recognized investment banking firm to determine the Fair Value
of the Acquired Interest. Within ten (10) days following receipt of such
designation, the other shall either notify HPC or XxXxxxxxx or Chu, as the case
may be, of its designated appraiser, which shall also be a nationally recognized
investment banking firm, or, in the absence of notice, shall be deemed to have
accepted the investment banking firm designated by the other. The investment
banking firm (or firms) so appointed shall make a determination of the Fair
Value within thirty (30) days after the deemed acceptance of the first
designated investment banking firm or, if applicable, the appointment of the
second investment banking firm, and shall concurrently exchange and/or deliver
such determinations to HPC or XxXxxxxxx or Xxx. If only one investment banking
firm has been appointed, the determination by such firm of the Fair Value shall
be final and binding. If two
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firms have been appointed, and the determinations of the two firms are within
ten percent (10%) of each other, the average of the two determinations shall be
the Fair Value. If the two determinations are not within ten percent (10%) of
each other, then the two investment banking firms shall select a third
investment banking firm within fifteen (15) days after the determinations have
been exchanged; and if the two investment banking firms are unable to agree
within that period on a third firm, such appointment will be made by the
American Arbitration Association. If a third investment banking firm is
appointed, the third investment banking firm shall make the determination of the
Fair Value, which shall be within the range of the determinations made by the
first two firms, within fifteen (15) days after the appointment of the third
firm. Each of HPC on the one hand and Chu or XxXxxxxxx on the other shall pay
one-half ( 1/2) of the cost of the investment banking firm, if only one is
appointed; if two firms are appointed, HPC on the one hand, and Chu or
XxXxxxxxx, on the other hand, shall each pay the fees and costs of the
investment banking firm appointed by such Person; and the fees and costs of a
third investment banking firm shall be divided equally between them.
7.9.4 HPC OPTION. HPC shall have the option to pay for the Acquired Interest
either by the issuance of HPI Common Stock (or common stock of any successor to
HPI) in an amount equal to the Fair Value or by payment of the Fair Value in
cash by wire transfer; provided, that HPC may elect to pay for the Acquired
Interest by issuing common stock only if HPI or its successor is a public
company at the time. HPC shall make such election by notice to Chu or XxXxxxxxx
as applicable within thirty (30) days after the determination of the Fair Value
of the Acquired Interest. If HPC elects to pay for the Acquired Interest by the
issuance of HPI Common Stock, Chu or XxXxxxxxx, as applicable, shall be entitled
to exercise piggyback registration rights and demand registration rights on one
occasion each with respect to such common stock, on the terms and conditions
contained in Article 11 hereof. For purposes hereof, the value of HPI's stock
shall be determined by reference to the closing price on the principal stock
exchange on which such shares are then listed or, if such shares are not then
listed on a stock exchange, by reference to the closing price (if approved for
quotation on the Nasdaq National Market) or the mean between the bid and asked
price (if other over-the-counter issue) of a share as supplied by the National
Association of Securities Dealers, Inc. through Nasdaq (or its successor in
function), in each case as reported by The Wall Street Journal, for the business
day immediately following the date of the election made by HPC, XxXxxxxxx or Chu
pursuant to Section 7.9.1 or 7.9.2 (or, if for any reason no such price is
available, in such other manner as the Board of Directors of HPI may deem
appropriate to reflect the then fair market value thereof). If HPC is no longer
the Manager at the time HPC, Chu or XxXxxxxxx exercises its right hereunder, the
parties acknowledge that Chu or XxXxxxxxx must first offer its
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Membership Interest to CEI in accordance with the terms of the Purchase
Agreement.
7.9.5 CLOSING. The closing (the "Closing") of any sale pursuant hereto shall be
held at a mutually acceptable place, on a date (the "Closing Date") not more
than the later of (i) one-hundred twenty (120) days after the election made by
HPC, XxXxxxxxx or Chu pursuant to Section 7.9.1 or 7.9.2, or (ii) thirty (30)
days after determination of the Fair Value of the Membership Interest of Chu or
XxXxxxxxx as applicable, which date shall be established by HPC upon not less
than ten (10) business days' prior written notice to Chu or XxXxxxxxx, as
applicable. Conveyance shall be made by an appropriate assignment, duly and
validly executed by Chu or XxXxxxxxx, as applicable, conveying the Acquired
Interest, free and clear of all liens, claims, encumbrances and rights of others
and containing customary representations and warranties to HPC, including
without limitation, representations and warranties that (i) there are no
outstanding options, warrants or other rights to purchase such Membership
Interest; and (ii) Chu or XxXxxxxxx, as applicable, has full power and authority
to sell its Membership Interest and such sale is not prohibited by and will not
conflict with the terms of any other understanding, agreement or arrangement to
which Chu or XxXxxxxxx, as applicable, is a party or by which it is bound.
7.10 TAG-ALONG RIGHTS.
7.10.1 RIGHT TO PARTICIPATE IN SALE. Following compliance with all applicable
requirements of this Agreement governing the Transfer of Membership Interests,
including the requirements of the Purchase Agreement regarding offering the
Membership Interest to CEI, if any Member ("Selling Member") enters into an
agreement to transfer, sell or otherwise dispose of any portion of its
Membership Interest (other than a Transfer of an Economic Interest to an
Affiliate or another Member as permitted by Section 7.1) (such transfer, sale or
other disposition being referred to as a "Tag-Along Sale"), then each other
Member ("Tag-Along Member") shall have the right, but not the obligation, to
participate in such Tag-Along Sale. The portion of its Membership Interest that
each Tag-Along Member will be entitled to include in such Tag-Along Sale (the
"Member's Allotment") shall be determined by multiplying (i) the Profit
Percentage Interest represented by the Membership Interest proposed to be sold,
transferred or otherwise disposed of pursuant to the Tag-Along Sale, by (ii)
such Tag-Along Member's Profit Percentage Interest on the day immediately
preceding the Tag-Along Notice Date (as defined below). Any sales of any portion
of its Membership Interest by a Tag-Along Member as a result of the foregoing
"Tag-Along Rights" shall be on the same terms and conditions as the proposed
Tag-Along Sale by the Selling Member. The "Tag-Along Notice Date" shall be the
date that the Tag-Along Sale Notice (as defined below) is delivered to Members.
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7.10.2 SALE NOTICE. The Selling Member shall provide the other Members with
written notice (the "Tag-Along Sale Notice") not more than sixty (60) nor less
than thirty (30) days prior to the proposed date of the Tag-Along Sale (the
"Tag-Along Sale Date"). Each Tag-Along Sale Notice shall set forth:
(i) the name and address of each proposed transferee or purchaser of a
Membership Interest in the Tag-Along Sale; (ii) the Profit Percentage Interest
represented by the Membership Interest proposed to be transferred or sold by the
Selling Member; (iii) the proposed amount and form of consideration to be paid
for such Membership Interest and the terms and conditions of payment offered by
each proposed transferee or purchaser; (iv) confirmation that the proposed
purchaser or transferee has been informed of the "Tag-Along Rights" provided for
herein and has agreed to purchase the Membership Interest in accordance with the
terms hereof; and (v) the Tag-Along Sale Date.
7.10.3 TAG-ALONG NOTICE. If a Member wishes to participate in the Tag-Along
Sale, such Member shall provide written notice (the "Tag-Along Notice") to the
Selling Member no less than ten (10) business days prior to the Tag-Along Sale
Date. If a Tag-Along Notice is not received by the Selling Member from a Member
prior to the ten (10) day period specified above, the Selling Member shall have
the right to sell or otherwise transfer the Membership Interest specified in the
Tag-Along Sale Notice to the proposed purchaser or transferee without any
participation by such Member. The Tag-Along Notice shall set forth the Profit
Percentage Interest represented by the Membership Interest that such Member
elects to include in the Tag-Along Sale, which shall not exceed the Member's
Allotment. The Tag-Along Notice shall also specify the aggregate Profit
Percentage Interest represented by such Member's Membership Interest as of the
close of business on the day immediately preceding the Tag-Along Notice Date,
which such Member desires also to include in the sale ("Additional Membership
Interests") in the event there is any under-subscription for the entire amount
of all Members' Allotments. In the event there is an under- subscription in the
aggregate of such Members' Allotments, the Selling Member shall apportion the
unsubscribed Members' Allotments to such holders whose Tag- Along Notices
specified an amount of Additional Membership Interests, which apportionment
shall be on a pro rata basis among such Members in accordance with the number of
Additional Membership Interests specified by all such Members in their Tag-Along
Notices. The Tag-Along Notice given by the Member shall constitute such Member's
binding agreement to sell such Membership Interest on the terms and conditions
applicable to the Tag-Along Sale, subject to the provisions of this Section
7.10.
7.10.4 VOID TRANSFERS. If the Selling Member fails to sell or otherwise Transfer
its Membership Interest or any portion thereof on terms and conditions which are
no more
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favorable in any material respect to the Selling Member than as stated in the
Tag-Along Sale Notice on or prior to the Tag-Along Sale Date, such sale or
Transfer shall be null and void, and any subsequent sale or Transfer of such
Membership Interest must comply with all of the requirements of this Agreement.
7.10.5 EXEMPT TRANSFERS. The provisions of this Section 7.10 shall not apply to
any Transfer, sale or other disposition by any Member to one of its Affiliates
(provided that prior to any such disposition the Member complies with the
requirements of this Agreement regarding Transfers).
ARTICLE 8
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
8.1 FISCAL YEAR. The fiscal year of the Company shall be the calendar year. The
decision to engage outside accountants for the Company and the selection of such
outside accountants, if any, shall be made by the Manager.
8.2 BOOKS AND RECORDS. Each Member and each Economic Interest Owner, and their
duly authorized representatives shall at all times, during regular business
hours, have reasonable access to and may inspect and copy at its own expense any
of the books and records of the Company set forth in this Section, for purposes
reasonably related to such person's interest in the Company. Each Member shall
be entitled at any time to have the Company's books and records examined or
audited at such Member's expense, and HPC shall cooperate fully with the party
or parties making such examination or audit on behalf of such Member. The books
of account of the Company shall be maintained and prepared in accordance with
generally accepted accounting principles, consistently applied. The Company
shall maintain at its principal office in California all of the following:
(a) A current list of the full name and last known business or residence address
of each Member and Economic Interest Owner set forth in alphabetical order,
together with the Capital Contributions, Capital Account and Profit Percentage
Interest of each Member and Economic Interest Owner;
(b) A current list of the full name and business or residence address of the
Manager and each officer;
(c) A copy of the Articles and any and all amendments thereto together with
executed copies of any powers of attorney pursuant to which the Articles or any
amendments thereto have been executed;
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(d) Copies of the Company's federal, state and local income tax or information
returns and reports, if any, for the six (6) most recent taxable years;
(e) A copy of this Agreement and any and all amendments thereto together with
executed copies of any powers of attorney pursuant to which this Agreement or
any amendments thereto have been executed;
(f) Copies of the financial statements of the Company, if any, for the six (6)
most recent Fiscal Years;
(g) The Company's books and records as they relate to the internal affairs of
the Company for at least the current and past four (4) Fiscal Years;
(h) Originals or copies of all minutes, actions by written consent, consents to
action and waivers of notice to Members and Member votes, actions and consent,
if any; and
(i) Any other information required to be maintained by the Company pursuant to
the Act.
8.3 STATEMENTS.
8.3.1 ANNUAL REPORT. Within one-hundred twenty (120) days after the end of each
calendar year, the Manager shall deliver to each of the other Members audited
financial statements of the Company, certified by Xxxxxx Xxxxxxxx & Co., Inc. or
such other "Big Six" accounting firm selected by the Manager.
8.3.2 TAX INFORMATION. The Manager shall cause to be prepared at least annually,
at Company expense, information necessary for the preparation of the Members'
and Economic Interest Owners' federal and state income tax returns. The Manager
shall send or cause to be sent to each Member or Economic Interest Owner within
ninety (90) days after the end of each taxable year such information as is
necessary to complete federal and state income tax or information returns and a
copy of the Company's federal, state, and local income tax or information
returns for that year.
8.3.3 ANNUAL STATE REPORT. The Manager shall cause to be filed at least annually
with the California Secretary of State the statement required under California
Corporations Code (S)17060.
8.3.4 MONTHLY REPORTS. As soon as practicable following the end of each month,
the Manager shall deliver to each of the other Members a copy of such monthly
financial reports of income and expense of the Company as are prepared by the
Manager with respect to the Company.
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8.4 FILINGS. The Manager, at Company expense, shall cause the income tax returns
for the Company to be prepared and timely filed with the appropriate
authorities. The Manager, at Company expense, shall cause to be prepared and
timely filed, with appropriate federal and state regulatory and administrative
bodies, amendments to, or restatements of, the Articles and all reports required
to be filed by the Company with those entities under the Act or other then
current applicable laws, rules, and regulations. If the Manager or any officer
required by the Act to execute or file any document fails, after demand, to do
so within a reasonable period of time or refuses to do so, any other officer or
Member may prepare, execute and file that document with the California Secretary
of State.
8.5 BANK ACCOUNTS. The Manager shall maintain the funds of the Company in one or
more separate bank accounts in the name of the Company, and shall not permit the
funds of the Company to be commingled in any fashion with the funds of any other
Person.
8.6 TAX MATTERS FOR THE COMPANY HANDLED BY THE MANAGER AND TAX MATTERS
----------------------------------------------------------------------
PARTNER. The Manager shall from time to time cause the Company to make such tax
elections as the Manager deems to be in the best interests of the Company and
the Members. The Tax Matters Partner, as defined in Code Section 6231, shall
represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including resulting
judicial and administrative proceedings, and shall expend the Company funds for
professional services and costs associated therewith. The Tax Matters Partner
shall oversee the Company tax affairs in the overall best interests of the
Company. If for any reason the Tax Matters Partner resigns or can no longer
serve in that capacity, a Super Majority Interest may designate another Member
to be Tax Matters Partner.
ARTICLE 9
DISSOLUTION AND WINDING UP
9.1 EVENTS OF DISSOLUTION. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
9.1.1 The happening of any event of dissolution specified in the
Articles;
9.1.2 The entry of a decree of judicial dissolution pursuant to
Section 17351 of the Corporations Code;
9.1.3 The vote of a Super Majority Interest;
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9.1.4 The occurrence of a Dissolution Event unless there are at
least two Remaining Members in addition to the Excluded Member (it being agreed
that, if there are not at that time at least two Remaining Members in addition
to the Excluded Member, the sole Remaining Member shall in its sole and absolute
discretion have the right to admit another Member to the Company) and a Majority
Interest consent within ninety (90) days of the Dissolution Event to the
continuation of the business of the Company; or
9.1.5 The expiration of the period fixed for the duration of the Company as
stated in the Articles.
9.2 EFFECT OF A DISSOLUTION EVENT (OTHER THAN DISSOLUTION). If following a
Dissolution Event, the Remaining Members vote to continue the business of the
Company, such Remaining Member(s) shall purchase the Excluded Member's interest
in the Company, on a pro rata basis in accordance with their respective Profit
Percentage Interests, for an aggregate purchase price equal to the amount that
the Excluded Member would be entitled to receive for the Fair Value of the
Excluded Member's Membership Interest as determined in accordance with the
procedures for determining the Fair Value of Chu's and XxXxxxxxx'x Membership
Interests set forth in Section 7.9.3, payable in equal quarterly installments
over five (5) years with interest at the Rate. Following such purchase, the
Remaining Members shall continue the operation of the Company independently of
the Excluded Member. Upon such vote by the Remaining Members to continue the
business of the Company, the Excluded Member shall have no further right to
participate, in any way, in the business of the Company (specifically including
the right to receive distributions from, or to share in the Net Profits, Net
Losses or similar items of, the Company or to approve Company actions). Election
of the Remaining Member(s) to continue the business of the Company under this
Section 9.2 shall not preclude such Remaining Member(s) from pursuing any and
all other remedies available to it or them under this Agreement, at law or in
equity.
9.3 CERTIFICATE OF DISSOLUTION. As soon as possible after the occurrence of any
of the events specified in Section 9.1 above, any Member shall execute a
Certificate of Dissolution in such form as shall be prescribed by the California
Secretary of State and file the Certificate as required by the Act.
9.4 WINDING UP. Upon the occurrence of any event specified in Section 9.1 above,
the Company shall continue solely for the purpose of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors. The Manager shall be responsible for overseeing the winding up and
liquidation of Company, shall take full account of the liabilities of Company
and assets, shall either cause its assets to be sold or distributed, and if sold
as promptly as is
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consistent with obtaining the fair market value thereof, shall cause the
proceeds therefrom, to the extent sufficient therefor, to be applied and
distributed as provided in Section 9.6. The Manager shall give written notice of
the commencement of winding up by mail to all known creditors and claimants
whose addresses appear on the records of the Company. The Manager shall be
entitled to reasonable compensation for its services in winding up the Company's
affairs.
9.5 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one or more Members
shall first be valued at its fair market value to determine the Net Profit or
Net Loss that would have resulted if such asset were sold for such value, such
Net Profit or Net Loss shall then be allocated pursuant to Article 3, and the
Members' Capital Accounts shall be adjusted to reflect such allocations. The
amount distributed and charged to the Capital Account of each Member receiving
an interest in such distributed asset shall be the fair market value of such
interest (which shall mean the price that an independent third party would pay
for such asset, net of any liability secured by such asset that such Member
assumes or takes subject to). The fair market value of such asset shall be
determined by the Manager or if there is an objection by any Member, the fair
market value shall be determined by an independent appraiser (which must be
recognized as an expert in valuing the type of asset involved) selected by the
Manager or liquidating trustee and approved by a Super Majority Interest.
9.6 ORDER OF PAYMENT UPON DISSOLUTION. After determining that all known debts
and liabilities of the Company in the process of winding-up, including, without
limitation, debts and liabilities to Members who are creditors of the Company,
have been paid or adequately provided for, the remaining assets shall be
distributed to the Members in accordance with their positive Capital Account
balances, after taking into account income and loss allocations for the
Company's taxable year during which liquidation occurs. Such liquidating
distributions shall be made by the end of the Company's taxable year in which
the Company is liquidated, or, if later, within ninety (90) days after the date
of such liquidation.
9.7 COMPLIANCE WITH REGULATIONS. All payments to the Members upon the winding up
and dissolution of the Company shall be strictly in accordance with the positive
capital account balance limitation and other requirements of Regulations Section
1.704-1(b)(2)(ii)(d).
9.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise
specifically provided in this Agreement, each Member shall be entitled to look
solely at the assets of the Company for the return of its positive Capital
Account balance and shall have no recourse for such Member's Capital
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Contribution and/or share of Net Profits (upon dissolution or otherwise) against
the Manager, officers, or any other Member.
9.9 CERTIFICATE OF CANCELLATION. The Persons who filed the Certificate of
Dissolution shall cause to be filed in the office of, and on a form prescribed
by, the California Secretary of State, a certificate of cancellation of the
Articles upon the completion of the winding up of the affairs of the Company.
9.10 NO ACTION FOR DISSOLUTION. No Member or Economic Interest Owner has any
interest in specific property of the Company. Without limiting the foregoing,
each Member and Economic Interest Owner irrevocably waives during the term of
the Company any right that he or it may have to maintain any action for
partition with respect to the property of the Company. Except as expressly
permitted in this Agreement, a Member or Economic Interest Owner shall not take
any voluntary action that directly causes a Dissolution Event. The Members
acknowledge that irreparable damage would be done to the goodwill and reputation
of the Company if any Member should bring an action in court to dissolve the
Company under circumstances where dissolution is not required by Section 9.1.
This Agreement has been drawn carefully to provide fair treatment of all parties
and equitable payment in liquidation of the Economic Interests. Accordingly,
except where the Members have failed to liquidate the Company as required by
this Article 9, each Member hereby waives and renounces such Member's right to
initiate legal action to seek the appointment of a receiver or trustee to
liquidate the Company or to seek a decree of judicial dissolution of the Company
on the ground that (a) it is not reasonably practicable to carry on the business
of the Company in conformity with the Articles or this Agreement, or (b)
dissolution is reasonably necessary for the protection of the rights or
interests of the complaining Member. Damages for breach of this Section 9.10
shall be monetary damages only (and not specific performance), and the damages
may be offset against distributions by the Company to which such Member would
otherwise be entitled.
ARTICLE 10
INDEMNIFICATION AND INSURANCE
10.1 INDEMNIFICATION OF COMPANY PERSONS. The Company shall indemnify any Company
Person who was or is a party or is threatened to be made a party to, or
otherwise becomes involved in, any Proceeding (including a Proceeding by or in
the right of the Company) by reason of the fact that such Company Person is or
was an agent of the Company against all Expenses, amounts paid in settlement,
judgments, fines, penalties and ERISA excise taxes actually and reasonably
incurred by or levied against such Company Person in connection with such
Proceeding
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if such Company Person acted in good faith and in a manner such Company Person
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal Proceeding, had no reasonable cause to believe
such Company Person's conduct was unlawful. The termination of any Proceeding,
whether by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that a
Company Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company or, with
respect to any criminal Proceeding, that a Company Person had reasonable cause
to believe that such Company Person's conduct was unlawful. To the fullest
extent permitted by applicable law, a Company Person shall be conclusively
presumed to have met the relevant standards of conduct, as defined by the laws
of the State of California or other applicable jurisdictions, for
indemnification pursuant to this Section 101, unless and until a court of
competent jurisdiction, after all appeals, finally determines to the contrary,
and the Company shall bear the burden of proof of establishing by clear and
convincing evidence that such Company Person failed to meet such standards of
conduct. In any event, the Company Person shall be entitled to indemnification
from the Company to the fullest extent permitted by applicable law, including,
without limitation, any amendments thereto subsequent to the date of this
Agreement that increase the protection of Company Persons allowable under such
laws.
10.2 SUCCESSFUL DEFENSE. Notwithstanding any other provision of this Agreement,
to the extent that a Company Person has been successful on the merits or
otherwise in defense of any Proceeding referred to in Section 10.1, or in
defense of any claim, issue or matter therein, such Company Person shall be
indemnified against Expenses actually and reasonably incurred in connection
therewith to the fullest extent permitted by the laws of California or other
applicable jurisdictions, including, without limitation, any amendments thereto
subsequent to the date of this Agreement that increase the protection of Company
Persons allowable under such laws.
10.3 INDEMNIFICATION OF OTHER AGENTS. The Company may, but shall not be
obligated to, indemnify any Person (other than a Company Person) who was or is a
party or is threatened to be made a party to, or otherwise becomes involved in,
any Proceeding (including any Proceeding by or in the right of the Company) by
reason of the fact that such Person is or was an agent of the Company, against
all Expenses, amounts paid in settlement, judgments, fines, penalties and ERISA
excise taxes actually and reasonably incurred by such Person in connection with
such Proceeding under the same circumstances and to the same extent as is
provided for or permitted in this Article 10 with respect to a Company Person,
or with respect to such circumstances and on such terms as the Manager may
determine.
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10.4 RIGHT TO INDEMNIFICATION UPON APPLICATION.
10.4.1 TIMING. Any indemnification or advance under Section 10.1 or 10.3 shall
be made promptly, and in no event later than sixty (60) days, after the
Company's receipt of the written request of a Company Person therefor, unless,
in the case of an indemnification, a determination shall have been made as
provided in Section 10.1 that such Company Person has not met the relevant
standard for indemnification set forth in that Section.
10.4.2 ENFORCEMENT. The right of a Person to indemnification or an advance of
Expenses as provided by this Article 10 shall be enforceable in any court of
competent jurisdiction. The burden of proving by clear and convincing evidence
that indemnification or advances are not appropriate shall be on the Company.
Neither the failure by the Manager or Members of the Company or its independent
legal counsel to have made a determination that indemnification or an advance is
proper in the circumstances, nor any actual determination by the Manager or
Members of the Company or its independent legal counsel that indemnification or
an advance is not proper, shall be a defense to the action or create a
presumption that the relevant standard of conduct has not been met. In any such
action, the Person seeking indemnification or advancement of Expenses shall be
entitled to recover from the Company any and all expenses of the types described
in the definition of Expenses actually and reasonably incurred by such Person in
such action, but only if such Person prevails therein. A Person's Expenses
incurred in connection with any Proceeding concerning such Person's right to
indemnification or advances in whole or in part pursuant to this Agreement shall
also be indemnified by the Company regardless of the outcome of such a
Proceeding, unless a court of competent jurisdiction finally determines that
each of the material assertions made by such Person in the Proceeding was not
made in good faith or was frivolous.
10.5 PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred by a Company Person in
connection with a Proceeding shall be paid by the Company in advance of the
final disposition of such Proceeding upon receipt of a written undertaking by or
on behalf of such Company Person to repay such amount if it shall ultimately be
determined that such Company Person is not entitled to be indemnified by the
Company as authorized in this Article 10.
10.6 LIMITATIONS ON INDEMNIFICATION. No payments pursuant to this Agreement
shall be made by the Company:
(a) To indemnify or advance funds to any Person with respect to a Proceeding
initiated or brought voluntarily by such Person and not by way of defense,
except as provided in Section 10.42 with respect to a Proceeding brought to
establish or enforce a right to indemnification under this Agreement,
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otherwise than as required under California law, but indemnification or
advancement of Expenses may be provided by the Company in specific cases if a
determination is made that such indemnification or advancement is appropriate.
The determination as to whether any such indemnification or advancement of
Expenses is appropriate shall be made (i) by the Manager or, if there is more
than one Manager (provided the Manager is not a party to such Proceeding)
Managers by a majority vote of a quorum consisting of Managers who were not
parties to such Proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of such disinterested Managers so directs, by independent
legal counsel in a written opinion, or (iii) by the Members by a vote of Members
holding a Super Majority Interest, whether or not constituting a quorum, who
were not parties to such Proceeding;
(b) To indemnify or advance funds to any Person for any Expenses, judgments,
amounts paid in settlement, fines, penalties or ERISA excise taxes resulting
from the such Person's conduct which is finally adjudged to have been willful
misconduct, knowingly fraudulent or deliberately dishonest; or
(c) If a court of competent jurisdiction finally determines that any
indemnification or advance of Expenses hereunder is unlawful.
10.7 OTHER TERMS OF INDEMNIFICATION.
10.7.1 PARTIAL INDEMNIFICATION. If a Person is entitled under any provision of
this Article 10 to indemnification by the Company for a portion of Expenses,
amounts paid in settlement, judgments, fines, penalties or ERISA excise taxes
incurred by such Person in any Proceeding but not, however, for the total amount
thereof, the Company shall nevertheless indemnify such Person for the portion of
such Expenses, amounts paid in settlement, judgments, fines, penalties or ERISA
excise taxes to which such Person is entitled, except that no indemnification
shall be given for Expenses in connection with a Proceeding brought by the
Company if the Person is found liable on any portion of the claims in such
Proceeding.
10.7.2 INDEMNITY NOT EXCLUSIVE. The indemnification and advancement of Expenses
provided by, or granted pursuant to, the provisions of this Article 10, shall
not be deemed exclusive of any rights to which any Person seeking
indemnification or advancement of Expenses may be entitled under any agreement,
vote of Members, determination of the Board, or otherwise, both as to action in
such Person's capacity as an agent of the Company and as to action in another
capacity while serving as an agent.
10.7.3 INSURANCE. The Company shall have the power to purchase and maintain
insurance or other financial arrangement on behalf of any Person who is or was
an agent of
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the Company against any liability asserted against such Person and incurred by
such Person in any such capacity, or arising out of such Person's status as an
agent, whether or not the Company would have the power to indemnify such Person
against such liability under the provisions of this Article 10 or of Section
17155 of the Act. In the event a Person shall receive payment from any insurance
carrier or from the Plaintiff in any action against such Person with respect to
indemnified amounts after payment on account of all or part of such indemnified
amounts having been made by the Company pursuant to this Article 10, such Person
shall reimburse the Company for the amount, if any, by which the sum of such
payment by such insurance carrier or such plaintiff and payments by the Company
to such Person exceeds such indemnified amounts; provided, however, that such
portions, if any, of such insurance proceeds that are required to be reimbursed
to the insurance carrier under the terms of its insurance policy shall not be
deemed to be payments to such Person hereunder. In addition, upon payment of
indemnified amounts under the terms and conditions of this Agreement, the
Company shall be subrogated to such Person's rights against any insurance
carrier with respect to such indemnified amounts (to the extent permitted under
such insurance policies). Such right of subrogation shall be terminated upon
receipt by the Company of the amount to be reimbursed by such Person pursuant to
the second sentence of this Section 10.7.3.
10.7.4 HEIRS, EXECUTORS AND ADMINISTRATORS. The indemnification and advancement
of Expenses provided by, or granted pursuant to, this Article 10 shall, unless
otherwise provided when authorized or ratified, continue as to a Person who has
ceased to be an agent of the Company and shall inure to the benefit of such
Person's heirs, executors and administrators.
ARTICLE 11
REGISTRATION RIGHTS
In the event that, following the exercise of a right to cause a Membership
Interest to be purchased or sold pursuant to Section 7.9, HPC exercises its
right pursuant to Section 7.9.4 to pay for the Acquired Interest with HPI Common
Stock, then the provisions of this Article 11 shall apply. The rights set forth
in this Article 11 shall be personal to Chu and XxXxxxxxx and may not be
assigned or transferred.
11.1 INCIDENTAL REGISTRATION. Each time HPI proposes to file a Registration
Statement, if Chu or XxXxxxxxx, as applicable, has not theretofore exercised its
rights pursuant to Section 11.1A hereof, HPI shall take the following steps:
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TAX INFORMATION
ANNUAL STATE REPORT
MONTHLY REPORTS
FILINGS
11.1.1 NOTICE. Mail a written notice of the offering and the name of the
managing underwriter (if any) to each Holder at the address shown on the books
and records of HPI at least thirty (BANK ACCOUNTS 30) days prior to the filing
of any such Registration Statement; and
11.1.2 INCLUSION OF SHARES. Include in such Registration Statement any and all
Registrable Securities specified in a notice by the Holder which is received by
the Company not less than fifteen (15) days following the mailing of the notice
specified in Section 11.1.1 above. In connection with any registration, the
Selling Holder must: (i) sell such Registrable Securities in the manner and on
the terms adopted by or through the underwriter(s) acting on behalf of HPI in
connection with such registration, if such underwriter(s) so requests; and (ii)
accept a reduction (including a total elimination) in the number of shares to be
included in such registration on a pro rata basis (based on the number of shares
held by each) with any other selling shareholders holding contractual
registration rights (except that HPI and any shareholder who has exercised
demand registration rights with respect to such Registration Statement shall not
be affected by such reduction) if the underwriter(s) reasonably deem that
without such reduction (or elimination) HPI might be substantially hindered in
the terms or number of securities which it could sell in such registration.
Nothing in this Section 11.1.2 shall limit the ability of HPI to withdraw a
Registration Statement it has filed either before or after effectiveness
thereof. In the case of an underwritten offering, a Selling Holder may withdraw
his, her or its included shares after the filing of the Registration Statement
only (i) with the consent of the underwriter; (ii) if the final price is less
than the range of prices given in the preliminary prospectus; (iii) if HPI
breaches its obligations; or (iv) as provided in Section 11.2.2.
11.1A DEMAND REGISTRATION.
-------------------
11.1A.1 NOTICE OF DEMAND. At any time after Chu or XxXxxxxxx
----------------
receives Registrable Securities, each of Chu or XxXxxxxxx shall have the right
to request by written notice to HPI that HPI register the Registrable Securities
under the 1933 Act. Each of Chu and XxXxxxxxx shall have the right to make one
such demand (except that if such demand is withdrawn pursuant to Section
11.1A.3, such demand shall not be deemed to have been made for purposes of this
limitation); and each such demand must include all Registrable Securities held
by Chu or XxXxxxxxx, as applicable. Each notice shall set forth (i) the number
of shares to be included; (ii) the names of the Selling Holder; and (iii) the
proposed manner of sale. Within ten (10) days after receipt of such notice, the
Company shall notify the other Holder (if any) and offer to such Holder the
opportunity to include its shares in such registration.
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11.1A.2 HOLDER AND REGISTRATION. Promptly after receipt of any notice pursuant
to Section 11.1A.1, HPI shall prepare and file with the SEC, a Registration
Statement on any applicable form, with respect to all the Registrable Securities
held by such Selling Holder.
11.1A.3 HOLDBACK. In the event that registration is demanded pursuant to Section
11.1A.1, and HPI determines that the shares for which registration is requested
cannot be sold without serious injury to HPI or its existing shareholders, HPI
shall have the option to require the Selling Holders to withdraw such
registration demand and not make any other demand for a period of up to one-
hundred eighty (180) days (which may be extended if such facts continue to be in
effect).
11.2 REGISTRATION PROCEDURES. Whenever HPI shall register any securities
pursuant to this Article 11, the parties agree as follows:
11.2.1 SELLING HOLDER INFORMATION. Each Selling Holder shall provide HPI with
such information about such Holder and his, her or its intended manner of
distributing the Registrable Securities, and shall otherwise cooperate with HPI
and the underwriter(s) as may be needed or helpful in the reasonable opinion of
HPI to complete any obligation of HPI hereunder. Failure to comply with this
requirement shall excuse HPI from any further obligation to a Selling Holder to
include his, her or its shares in that Registration Statement;
11.2.2 CONSULTATION. HPI shall supply copies of any Registration Statement, any
amendment thereto and any communications of the SEC related thereto to each
Selling Holder and Seller's Underwriter and shall provide each Selling Holder
and Seller's Underwriter with a reasonable opportunity, prior to filing such
document with the SEC, to provide comments with respect to any matters in such
documents that describe such Selling Holder, the Seller's Underwriter or the
distribution of securities held by such Selling Holder ("Selling Holder
Matters"). HPI will immediately amend such Registration Statement to include
such reasonable changes relating to Selling Holder Matters as the Selling
Holders and the Seller's Underwriter reasonably agree should be included
therein. Any Selling Holder requesting a change refused by HPI may withdraw his,
her or its shares from the Registration Statement;
11.2.3 PROVISION OF PROSPECTUSES. HPI shall furnish each Selling Holder such
number of copies of preliminary and final prospectuses, each in conformity with
the requirements of the 1933 Act, and such other documents as such Selling
Holder may reasonably request in order to facilitate the public sale or other
disposition of such securities;
11.2.4 BLUE SKY COMPLIANCE. HPI shall use its reasonable efforts to register or
qualify the securities covered
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by such Registration Statement under the securities or "blue sky" laws of such
jurisdictions as each Selling Holder shall reasonably request (provided,
however, that HPI shall not be required (i) to consent to, or take any action
which would subject it to, general service of process for all purposes or (ii)
to qualify to do business in any jurisdiction where it is not then subject or
qualified);
11.2.5 AMENDMENTS. HPI shall use its reasonable efforts to prepare and file
promptly with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith, as may be necessary
to keep such Registration Statement continuously effective and in compliance
with the 1933 Act for up to four (4) months, or until all Registrable Securities
registered in that Registration Statement are sold, whichever is earlier;
11.2.6 PROSPECTUS DELIVERY. At any time when a sale or other public disposition
pursuant to a Registration Statement is subject to a prospectus delivery
requirement, HPI shall immediately notify each Selling Holder and Sellers'
Underwriter of the occurrence of any event as a result of which the prospectus
included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing. Upon receipt of such a notice, each
Selling Holder shall immediately discontinue sales or other dispositions of
Registrable Securities pursuant to the Registration Statement. The Selling
Holders may resume sales only upon receipt of amended prospectuses or after such
Selling Holders have been advised by HPI that the use of the previous prospectus
may be legally resumed;
11.2.7 STOP-ORDERS. HPI agrees to immediately notify each Selling Holder (i) of
the issuance by the SEC of any stop order or order suspending the effectiveness
of any Registration Statement or the initiation of any proceedings for that
purpose, or (ii) of the receipt by HPI of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction, or the initiation of any proceedings for such purpose. HPI, with
the reasonable cooperation of the Selling Holders, shall make every reasonable
effort to contest any such proceedings and to obtain the withdrawal of any such
order at the earliest possible moment;
11.2.8 UNDERWRITING AGREEMENT. At the request of HPI or any underwriter of the
offering, each Selling Holder shall enter into an underwriting agreement in a
form reasonably agreed upon by HPI and such underwriter(s); and
11.2.9 COMPLIANCE WITH LAWS. In all actions taken under this Agreement, each
Selling Holder agrees to use
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his, her or its best efforts to comply with all provisions of the 1933 Act as
well as any other applicable law.
11.3 REGISTRATION NOT REQUIRED. HPI shall have no obligation to any Holder under
this Article 11 with respect to whom HPI has obtained an opinion of counsel, in
form reasonably satisfactory to such Holder, to the effect that the Registrable
Securities involved may be immediately sold to the public without registration
thereof, whether pursuant to Rule 144 or otherwise.
11.4 DELAY OF REGISTRATION. No Holder shall have any right to take any action to
restrain, enjoin or otherwise delay the filing or effectiveness of any
Registration Statement on the basis of any controversy which might arise with
respect to the interpretation or implementation of this Article 11.
11.5 INDEMNITY.
11.5.1 HPI'S INDEMNITY. HPI will indemnify each Selling Holder and any Sellers'
Underwriter (and any of their officers and directors and persons who control
such Holder or Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 0000 Xxx) against all claims, losses, damages, liabilities and
expenses resulting from any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or from any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same is based on (i) information furnished in writing to the Company by such
Holder, an underwriter, or any Selling Holder expressly for use therein, or (ii)
the circumstances set forth in Section 11.5.2(y) hereof.
11.5.2 THE HOLDER'S INDEMNITY. Each Selling Holder will indemnify (i) HPI, any
underwriter, and any other person selling under a Registration Statement (and
any of their officers and directors and persons who control HPI, such
underwriter or such other persons within the meaning of Section 15 of the 1933
Act or Section 20 of the 0000 Xxx) against all claims, losses, damages,
liabilities and expenses resulting from (x) any untrue statement or alleged
untrue statement of a material fact contained in that Registration Statement or
from any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements therein not misleading, but only to
the extent based upon information furnished in writing to the Company by such
Holder expressly for inclusion in that Registration Statement or other document
or (y) any untrue statement or alleged untrue statement of a material fact
contained in, or any omission or alleged omission of a material fact from, a
prospectus if (i) a later prospectus corrected the untrue statement or alleged
untrue statement, or omission or alleged omission, (ii) at such time the Company
had advised the Holder of the availability of
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the revised prospectus, and (iii) there would have been no such liability had
such later prospectus actually been delivered to the purchaser at or prior to
confirmation of sale.
11.6 EXPENSES OF REGISTRATION. The Selling Holder shall bear all expenses
incurred in any Registration undertaken pursuant to Section 11.1A, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.),
legal fees, brokerage or underwriting fees, expenses or commissions, fees and
expenses of complying with securities and blue sky laws and regulations,
printing expenses and fees and disbursements of the independent certified public
accountants and of HPI's counsel. With respect to any Registration undertaken
pursuant to Section 11.1, HPI shall bear all expenses other than Selling Holder
Expenses (defined below). Each Selling Holder shall bear his, her or its
equitable share of any Selling Holder Expenses. "Selling Holder Expenses" shall
consist of (i) Selling Holder's legal costs, (ii) any proportionate share of
brokerage or underwriting fees, expenses or commissions, (iii) any fees and
expenses of complying with blue sky laws to the extent registration in the
applicable state is requested by a Selling Holder pursuant to Section 11.24
hereof, and (iv) any other costs required to be paid by Selling Holders in order
to comply with state securities laws and regulations.
11.7 TERMINATION. Each Holder shall have no further rights under this Article at
any time (i) after such time as no further Registrable Securities of such Holder
remain outstanding or (ii) such Holder has exercised his, her or its
registration rights under Section 11.1A on one occasion, whichever comes first.
Further, each Holder shall have the right to participate in any Registration
undertaken pursuant to Section 11.1 only once.
ARTICLE 12
MISCELLANEOUS
12.1 OTHER VENTURES; COMPETITION.
(a) Nothing contained in this Agreement or in law shall be construed to limit or
restrict in any way the freedom of any Member, or any shareholders or affiliates
of a Member, to conduct any other business venture or activity whatsoever,
including the ownership, development, leasing, sale, financing, operation and
management of other card clubs or casinos nor to require any accountability to
the Company or to any other Member, whether or not such other business ventures
are in direct or indirect competition with the business of the Company.
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(b) No Member need afford the Company or any other Member or any affiliate of a
Member the opportunity to acquire or invest in any other property, project or
enterprise, regardless of whether such property, project or enterprise would,
but for this sentence, be deemed an opportunity of the Company.
12.2 COUNSEL TO THE COMPANY. Counsel to the Company may also be counsel to any
Member or any Affiliate of a Member. The officers of the Company may execute on
behalf of the Company and the Members any consent to the representation of the
Company that counsel may request pursuant to the California Rules of
Professional Conduct or similar rules in any other jurisdiction.
12.3 GENERAL PROVISIONS.
12.3.1 COMPLETE AGREEMENT. This Agreement and any documents referred to herein
or executed contemporaneously herewith constitute the parties' entire agreement
with respect to the subject matter hereof and supersede all prior or
contemporaneous agreements, representations, warranties, statements, promises
and understandings, whether oral or written, with respect to the subject matter
hereof.
12.3.2 DISPUTES.
12.3.2.1 GOVERNING LAW; JURISDICTION. This Agreement has been negotiated and
entered into in the State of California, concerns a California business and all
questions with respect to the Agreement and the rights and liabilities of the
parties will be governed by the laws of that state, regardless of the choice of
law provisions of California or any other jurisdiction. Any and all disputes
between the parties which may arise pursuant to this Agreement not covered by
arbitration will be heard and determined before an appropriate federal or state
court located in Los Angeles, California. The parties hereto acknowledge that
such court has the jurisdiction to interpret and enforce the provisions of this
Agreement and the parties waive any and all objections that they may have as to
personal jurisdiction or venue in any of the above courts.
12.3.2.2 ARBITRATION AS EXCLUSIVE REMEDY. Except for actions seeking injunctive
relief and for actions pursuant to Sections 10.1 and 10.4.2, which may be
brought before any court having jurisdiction, any claim arising out of or
relating to (i) this Agreement, including without limitation its validity,
interpretation, enforceability or breach, or (ii) the relationship between the
parties (including without limitation its commencement and termination) whether
based on breach of covenant, breach of an implied covenant or intentional
infliction of emotional distress or other tort or contract theories, which are
not settled by agreement between the parties, shall be settled by arbitration in
Los Angeles County, California, before a sole arbitrator who shall be a retired
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judge of the Los Angeles Superior Court or retired justice of the California
Court of Appeal or Supreme Court. The sole arbitrator shall be selected by
mutual agreement of the parties within fifteen (15) days after service of a
notice of intent to arbitrate by any party. If the parties are unable to select
a mutually agreeable arbitrator, then a retired judge or justice of the
California state courts shall be selected by order of the court pursuant to the
provisions of Code of Civil Procedure (S)1281.6. The parties hereby (i) consent
to the in personam jurisdiction of the Superior Court of the State of California
for purposes of the enforcement of this arbitration provision and confirming any
such award and entering judgment thereof; (ii) agree to use their best efforts
to keep all matters relating to any arbitration hereunder confidential; and
(iii) agree that the arbitrators may not assess any remedy other than the
awarding of actual out-of-pocket damages suffered and/or punitive damages when
appropriate. In any arbitration proceedings hereunder (a) all testimony of
witnesses shall be taken under oath; (b) discovery will be allowed under the
provisions of Section 1283.05 of the Code of Civil Procedure, as presently in
force, which are incorporated herein; (c) production of documents will be
allowed as provided for by Section 2031 of the Code of Civil Procedure; and (d)
upon conclusion of any arbitration, the arbitrator shall render findings of fact
and conclusions of law in a written opinion setting forth the basis and reasons
for any decision reached and deliver such documents to each party to this
Agreement along with a signed copy of the award in accordance with Section
1283.6 of the California Code of Civil Procedure. Each party agrees that, except
as expressly provided above, the arbitration provisions of this Agreement are
its exclusive remedy and expressly waives any right to seek redress in another
forum. Each party shall share equally the fees of the arbitrator during the
arbitration, but the fees of the arbitrator shall be borne by the losing party.
Any arbitration shall be commenced within forty-five (45) days, and completed
within ninety (90) days, of the appointment of the arbitrator.
12.3.3 ADDITIONAL DOCUMENTS. Each party hereto agrees to execute any and all
further documents and writings and to perform such other actions which may be or
become necessary or expedient to effectuate and carry out this Agreement.
12.3.4 NOTICES. Unless otherwise specifically permitted by this Agreement, all
notices under this Agreement shall be in writing and shall be delivered by
personal service, telecopy, federal express or comparable overnight service or
certified mail (if such service is not available, then by first class mail),
postage prepaid, to such address as may be designated from time to time by the
relevant party, and which shall initially be as set forth on Exhibit A. All
other notices shall be deemed given when received. No objection may be made to
the manner of delivery of any notice actually received in writing by an
authorized agent of a party.
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12.3.5 PARTIES.
12.3.5.1 NO THIRD-PARTY BENEFITS. None of the provisions of this Agreement shall
be for the benefit of, or enforceable by, any third party.
12.3.5.2 SUCCESSORS AND ASSIGNS. Except as provided herein to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties, their
respective successors and permitted assigns.
12.3.6 GOVERNING LAW; JURISDICTION. This Agreement has been negotiated and
entered into in the State of California, concerns a California business and all
questions with respect to the Agreement and the rights and liabilities of the
parties will be governed by the laws of that state, regardless of the choice of
law provisions of California or any other jurisdiction.
12.3.7 WAIVER OF JURY. WITH RESPECT TO ANY DISPUTE ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, AS TO WHICH NO MEMBER
INVOKES THE RIGHT TO ARBITRATION HEREINABOVE PROVIDED, OR AS TO WHICH LEGAL
ACTION NEVERTHELESS OCCURS, EACH MEMBER HEREBY IRREVOCABLY WAIVES ALL RIGHTS IT
MAY HAVE TO DEMAND A JURY TRIAL, INCLUDING ITS CONSTITUTIONAL RIGHTS. THIS
WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY THE MEMBERS AND EACH
MEMBER ACKNOWLEDGES THAT NONE OF THE OTHER MEMBERS NOR ANY PERSON ACTING ON
BEHALF OF THE OTHER PARTIES HAS MADE ANY REPRESENTATION OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE
MEMBERS EACH FURTHER ACKNOWLEDGE THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
THE MEMBERS EACH FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTAND THE
MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
12.3.8 WAIVERS STRICTLY CONSTRUED. With regard to any power, remedy or right
provided herein or otherwise available to any party hereunder (i) no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party; and (ii) no alteration, modification or impairment
shall be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or by any other indulgence.
12.3.9 RULES OF CONSTRUCTION.
12.3.9.1 HEADINGS. The Article and Section headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit, or
interpret the scope of this Agreement or of any particular Article or Section.
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12.3.9.2 TENSE AND CASE. Throughout this Agreement, as the context may require,
references to any word used in one tense or case shall include all other
appropriate tenses or cases.
12.3.9.3 SEVERABILITY. The validity, legality or enforceability of the remainder
of this Agreement will not be affected even if one or more of the provisions of
this Agreement will be held to be invalid, illegal or unenforceable in any
respect.
12.3.9.4 AGREEMENT NEGOTIATED. The parties hereto are sophisticated and have
been represented by lawyers throughout this transaction who have carefully
negotiated the provisions hereof. As a consequence, the parties do not believe
that the presumptions of Civil Code Section 1654 and similar laws or rules
relating to the interpretation of contracts against the drafter of any
particular clause should be applied in this case and therefore waive their
effects. Only the final executed version of this Agreement may be admitted into
evidence or used for any purpose, and drafts of this Agreement shall be
disregarded for all purposes.
12.3.10 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.4 AMENDMENTS. Except as set forth in the next sentence, all amendments to
this Agreement shall be in writing and approved by all of the Members. The
Manager may amend Exhibit A hereto at any time and from time to time to reflect
the admission or withdrawal of any Member, or the change in any Member's Capital
Contributions, Profit Percentage Interests, or any changes in the Member's
addresses, all as contemplated by this Agreement.
12.5 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT. If a Member is not a
natural person, neither the Company nor any Member will be required to determine
the authority of the individual signing this Agreement to make any commitment or
undertaking on behalf of such entity or to determine any fact or circumstance
bearing upon the existence of the authority of such individual.
12.6 INVESTMENT REPRESENTATION. Each Member hereby represents and warrants to,
and agrees with, the other Members and the Company that he or it is acquiring
the Membership Interest for investment purposes for his or its own account only
and not with a view to or for sale in connection with any distribution of all or
any part of the Membership Interest. No other person will have any direct or
indirect beneficial interest in or right to the Membership Interest.
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12.7 LLC AS CARD CLUB OPERATOR. At such time as HPI or HPC may be licensed as an
owner and operator of a card club under applicable California law and the City
ordinance, if applicable law then prohibits a card club operator from being
organized as a limited liability company or the Company as a limited liability
company from being the manager or the managing general partner of Newco, the
Company shall be reorganized as a California limited partnership, with HPC as
the managing general partner, and the Members shall enter into a Limited
Partnership Agreement containing substantially the same terms and provisions
hereof, modified as necessary to reflect the fact that the entity is a
California limited partnership.
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IN WITNESS WHEREOF, this Agreement is executed as of the day and year set forth
above.
HP/XXXXXXX, INC.
By: /s/ G. Xxxxxxx Xxxxxxxx
---------------------------
G. Xxxxxxx Xxxxxxxx
Its: Vice President
REDWOOD GAMING LLC
DEMUR, INC.
By: /s/ Xxxx Xxxxxx
---------------------------
Xxxx Xxxxxx
Its: Vice President
FIRST PARK INVESTMENTS, LLC
By: /s/ Xxx Xxx
---------------------------
Xxx Xxx
Its:
--------------------------
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SCHEDULE I
----------
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings set
forth below (all terms used in this Agreement that are not defined in this
Schedule I shall have the meanings set forth elsewhere in this Agreement):
"1933 ACT" shall mean the Securities Act of 1933, as amended, or any future
comparable law.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended, or any
future comparable law.
"ACQUIRED INTEREST" is defined in Section 7.9.3.
"ACT" means the Xxxxxxx-Xxxxxx Limited Liability Company Act, codified in
the California Corporations Code, Section 17000 et seq., as the same may be
amended from time to time.
"ADDITIONAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section 2.2.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts that such Member is obligated to
restore pursuant to any provision of this Agreement or is deemed to be obligated
to restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5);
(b) Credit to such Capital Account the amount of the deductions and losses
referable to any outstanding recourse liabilities owed by the Company to such
Member for which no other Member bears any economic risk of loss and the amount
of the deductions and losses referable to such Member's share (determined in
accordance with the Member's Profit Percentage Interest) of outstanding recourse
liabilities owed by the Company to non-Members for which no Member bears any
economic risk of loss; and
(c) Debit to such Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
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"ADVANCES" has the meaning set forth in Section 2.6.
"AFFILIATE" means any individual, partnership, corporation, trust or other
entity or association, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with, a
Member. The term "control," as used in the immediately preceding sentence,
means, with respect to a corporation or limited liability company, the right to
exercise, directly or indirectly, fifty percent (50%) of the voting rights
attributable to the controlled corporation or limited liability company and,
with respect to any individual, partnership, trust, other entity or association,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled entity.
"AGREEMENT" means this Operating Agreement, as originally executed and as
amended and/or restated from time to time.
"ARTICLES" means the Articles of Organization for the Company originally filed
with the California Secretary of State, as amended and/or restated from time to
time.
"BANKRUPTCY" means: (i) being adjudicated bankrupt or insolvent in proceedings
filed against a Person or its ultimate "parent" entity under any section or
chapter of the United States Bankruptcy Code, as amended from time to time, or
any similar law or statute of any state thereof (collectively "Bankruptcy
Laws"); (ii) any petition for reorganization or arrangement under any Bankruptcy
Laws; (iii) proceedings under any Bankruptcy Laws to have a Person adjudicated a
bankrupt or insolvent, which proceedings are not dismissed within ninety (90)
days of commencement; (iv) the general assignment by any Person for the benefit
of creditors; (v) the appointment of a receiver for all or substantially all of
the assets of any Person and the failure to have such receiver discharged within
ninety (90) days after appointment; (vi) the suffering by any Member of any
assignment by operation of law, or any attachment, sequestration, garnishment or
lien against, or the occurrence of a levy on, such Person's interest in the
Company, or any portion thereof, with the same not being discharged of record by
bonding or otherwise within ninety (90) days after notice to such Member of such
event.
"CAPITAL ACCOUNT" means with respect to any Member the capital account that the
Company establishes and maintains for such Member pursuant to Section 2.3.
"CAPITAL CONTRIBUTION" means the total value of cash and the fair market value
(as determined by the Managers or as agreed upon by the Members under this
Agreement) of property (including promissory notes or other obligations to
contribute cash or property) or services contributed by Members.
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"CAPITAL INTERESTS" means the ratio of each Member's Capital Account to the
total of all Member's Capital Accounts at any time.
"CARD CLUB" has the meaning set forth in Recital A of this Agreement.
"CARD CLUB OPERATOR" has the meaning set forth in Section 6.4.1.
"CARD CLUB SITE" has the meaning set forth in Recital A of this AGREEMENT.
"CHANGE OF CONTROL" means that, with respect to a Person, more than 50% of the
beneficial ownership (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, whether or not such provision is applicable to
such Person) of its securities, as of the date of this Agreement, is Transferred
to another Person or group of Persons that is not an Affiliate of the current
owners. In the case of Chu, a Change of Control shall occur if Xxx and Xxx Xxx
together do not own more than 50% of the beneficial ownership of Chu; and in the
case of XxXxxxxxx, a Change of Control shall occur if Xxxxxx X. XxXxxxxxx or
Xxxxxxx X. XxXxxxxxx do not own more than 50% of the beneficial ownership of
XxXxxxxxx.
"CHU" means FIRST PARK INVESTMENTS, LLC, a California limited liability
---
company.
"CITY" has the meaning set forth in Recital A of this Agreement.
----
"CODE" means the Internal Revenue Code of 1986, as amended from time to
----
time, the provisions of succeeding law and to the extent applicable, the
Regulations.
"COMPANY" MEANS CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC, A
California limited liability company.
"COMPANY MINIMUM GAIN" has the meaning ascribed to the term "Partnership Minimum
Gain" in the Regulations Section 1.704-2(d).
"COMPANY PERSON" means a Member, Manager or officer of the Company.
"COMPANY PROPERTY" has the meaning set forth in Section 14.
"CORPORATIONS CODE" means the California Corporations Code, as amended from time
to time, and the provisions of succeeding law.
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"DDA" has the meaning set forth in Recital B of this Agreement.
"XXXXXXXXX" means REDWOOD GAMING LLC, a California limited liability company.
"DEFAULTING MEMBER" means any Member that has committed a material breach of
this Agreement, including without limitation a breach pursuant to Section 2.7
hereof.
"DISSOLUTION EVENT" means (i) the death, insanity, expulsion, Bankruptcy or
dissolution of any Member or the commission by a Member of a material default
under this Agreement which is incapable of cure or (ii) the withdrawal,
resignation or retirement of a Member without the prior consent of all of the
other Members.
"ECONOMIC INTEREST" means a Member's or Economic Interest Owner's share of one
or more of the Company's Net Profits, Net Losses and distributions of the
Company's assets pursuant to this Agreement and the Act, but shall not include
any other rights of a Member including, without limitation, the right to vote or
participate in the management or, except as provided in Section 17106 of the
Corporations Code, any right to information concerning the business and affairs
of Company.
"ECONOMIC INTEREST OWNER" means the owner of an Economic Interest who is not a
Member.
"EXCLUDED MEMBER" means a Member that caused a Dissolution Event.
"EXPENSES" shall include, without limitation, attorneys' fees, disbursements and
retainers, court costs, transcript costs, fees of accountants, experts and
witnesses, travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees, and all other expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness or
other participant in a Proceeding.
"FAIR VALUE" shall be determined in accordance with Section 7.9.3.
"FIRST OPPORTUNITY OFFER" has the meaning set forth in Section 7.2.
"FISCAL YEAR" means (i) the period commencing upon the formation of the Company
and ending on December 31, 1996, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31, or (iii) any portion of the
period described in Clause (ii) of this sentence for which the Company is
required to allocate Profits, Losses, and other items
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of Company income, gain, loss, or deduction pursuant to Article 3 hereof.
"HOLDER" means either Chu or XxXxxxxxx, who at that time, is the holder of any
Registrable Securities based on the records of HPI.
"HOTEL" is defined in Recital C.
"HPC" means HP/Compton, Inc., a California corporation.
---
"HPI" means Hollywood Park, Inc., a Delaware corporation.
---
"HPI CHANGE" means that either X. X. Xxxxxxx or G. Xxxxxxx Xxxxxxxx ("Xxxxxxxx")
no longer serves in either (i) his current capacity or (ii) a capacity that is
senior to his current capacity with HPI or a successor (as long as, in the case
of Xxxxxxxx, the individual at HPI or its successor who is primarily responsible
for the Company reports directly or indirectly to Xxxxxxxx).
"INITIAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section 2.1.
"INITIAL CARD CLUB ASSETS" has the meaning set forth in Section 2.1.
"INITIAL EXPENSES" means all monies expended or committed by HPC or HPI with
respect to the Card Club, the Hotel and related businesses prior to the
assignment of the Initial Card Club Assets to the Company, including without
limitation the costs of acquiring the Card Club Site.
"LEASE" has the meaning set forth in Recital D of this Agreement.
"LICENSE RIGHTS OPTION" has the meaning set forth in Recital B of this
AGREEMENT.
"MAJORITY INTEREST" means Members holding in the aggregate over fifty percent
(50%) of the aggregate of all Profit Percentage Interests; provided, however,
that for purposes of Section 9.1, "Majority Interest" means more than fifty
percent (50%) of both the capital and profit interests in the Company (within
the meaning of such terms in Revenue Procedure 94-46, 1994-28 IRB 1) held by the
Remaining Members.
"MANAGER" shall mean the manager who is designated from time to time as provided
in Section 6.2.
"MEMBER" means each Person who (a) is an Original Member, has been admitted to
the Company as a Member in accordance with the Articles and this Agreement or is
an assignee who has become a Member in accordance with Article 7 and (b) has not
resigned,
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withdrawn, been expelled or, if other than an individual, dissolved.
"MEMBER-MANAGER" means a Manager who is a Member.
"MEMBER NONRECOURSE DEBT" has the meaning ascribed to the term "Partner
Nonrecourse Debt" in Regulations Section 1.704-2(b)(4).
"MEMBER NONRECOURSE DEDUCTIONS" means items of Company loss, deduction or Code
Section 705(a)(2)(B) expenditures that are attributable to Member Nonrecourse
Debt or to other loans by a Member to the Company for which no other Member
bears the economic risk of loss.
"MEMBERSHIP INTEREST" means a Member's entire interest in the Company or any
portion thereof, including without limitation the Member's Economic Interest,
the right to vote on or participate in the management and the right to receive
information concerning the business and affairs of the Company.
"NET CASH FLOW" means the sum of Net Cash From Operations and Net Cash From
Sales or Refinancings, where:
(a) "NET CASH FROM OPERATIONS" means the gross cash proceeds from Company
operations (including sales and dispositions of property in the ordinary course
of business) less the portion thereof used to pay or establish reserves for all
Company expenses, debt payments, capital improvements, replacements, and
contingencies, all as determined by the Manager, subject to the reasonable
approval of all of the Members. Net Cash From Operations shall not be reduced by
depreciation, amortization, cost recovery deductions, or similar allowances, but
shall be increased by any reductions of reserves previously established pursuant
to the first sentence of this clause (a) and pursuant to the definition below of
Net Cash From Sales or Refinancings.
(b) "NET CASH FROM SALES OR REFINANCINGS" means the net cash proceeds from all
sales and other dispositions (other than in the ordinary course of business) and
all refinancings of property, less any portion thereof used to establish
reserves, all as determined by the Manager, subject to the reasonable approval
of all of the Members. Net Cash From Sales or Refinancings shall include all
principal and interest payments with respect to any note or other obligation
received by the Company in connection with sales and other dispositions (other
than in the ordinary course of business) of property.
"NET PROFITS" and "NET LOSSES" means the income, gain, loss, deductions and
credits of the Company in the aggregate or separately stated, as appropriate,
determined in accordance with the method of accounting used on the Company's
information tax return filed for federal income tax purposes. Notwithstanding
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the foregoing, any items of income, gain, loss or deduction that are specially
allocated pursuant to Section 3.3 or 3.4 shall not be taken into account in
computing Net Profits or Net Losses.
"NEWCO" means the limited liability company, general partnership or other entity
formed by the Company and CEI to which the Company Assets will be transferred in
accordance with the Purchase Agreement after such time as applicable law is
amended to permit public companies to operate card clubs or HPI or HPC is
otherwise legally permitted to operate the Card Club.
"NONCOMPLYING PERSON" has the meaning set forth in Section 7.7.
"NONRECOURSE LIABILITY" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"OFFEREES" has the meaning set forth in Section 7.2.
"ORIGINAL MEMBERS" means HPC, XxXxxxxxx and Xxx.
"PERSON" means an individual, general partnership, limited partnership, limited
liability company, corporation, trust, estate, real estate investment trust
association or any other entity.
"PROCEEDING" means any action, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or other proceeding, whether
civil, criminal, administrative or investigative in nature.
"PROFIT PERCENTAGE INTEREST" means the percentage interest of a Member in Net
Profits, as set forth in Section 31 and as adjusted from time to time in
accordance with Section 2.7.
"PURCHASE AGREEMENT" has the meaning set forth in Recital B of this Agreement.
"RATE" means interest at an annual rate equal to the Bank of America's prime
interest rate in effect from time to time (but in no event greater than the
maximum rate permitted under applicable law).
"REAL PROPERTY RIGHTS" has the meaning set forth in Recital B of this Agreement.
"REGISTRABLE SECURITIES" means those shares of HPI Common Stock received or
receivable by either Chu or XxXxxxxxx under Section 7.9 of this Agreement
(including shares received from HPI with respect to or in replacement of such
shares by reason of splits, dividends and recapitalizations) but excluding any
shares which may be then sold to the public without registration
-52-
pursuant to Rule 144 or other comparable provision under the 1933 Act ("Rule
144").
"REGISTRATION STATEMENT" means any registration statement or comparable document
under the 1933 Act through which a public sale or disposition of HPI's Common
Stock may be registered or exempted from registration (except a form exclusively
for the sale or distribution of securities by HPI or to employees of HPI or its
subsidiaries or for use exclusively in connection with a business combination).
"REGULATIONS" means, unless the context clearly indicates otherwise, the
regulations currently in force from time to time as final or temporary that have
been issued by the U.S. Department of Treasury pursuant to its authority under
the Code.
"REMAINING MEMBERS" means the Members other than the Excluded Member.
"SEC" means the Securities and Exchange Commission.
"SELLING HOLDER" means with respect to any Registration Statement, any Holder
whose securities are included therein.
"SELLERS' UNDERWRITER" means with respect to any Registration Statement and only
to the extent that HPI has not retained an underwriter for such offering, the
underwriter designated in writing by the Selling Holders, subject to the prior
approval of HPI, which may be withheld for any reason.
"SUPER MAJORITY INTEREST" means Members holding in the aggregate at least eighty
percent (80%) of all Profit Percentage Interests.
"TAX MATTERS PARTNER" shall be HPC or its successor as designated pursuant to
Section 8.6.
"THIRD PARTY LOANS" has the meaning set forth in Section 25.
"TRANSFER" means any sale, transfer, assignment, hypothecation or other
voluntary disposition, whether by gift, bequest or otherwise. In the case of a
hypothecation, the Transfer shall be deemed to occur both at the time of the
initial pledge and at any pledgee's sale or a sale by any secured creditor.
"TRANSFERABLE INTEREST" has the meaning set forth in Section 7.2.
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SCHEDULE 2.1
------------
INITIAL CARD CLUB ASSETS
------------------------
A. AGREEMENTS WITH COMPTON ENTERTAINMENT, INC. ("CEI")
1. Agreement In Principle, dated April 29, 1994, by and among Hollywood Park,
Inc., a Delaware corporation ("HPI") and CEI.
2. Amended and Restated Agreement Respecting Pyramid Casino, dated July 14,
1995, by and among HPI as Buyer, CEI as Seller and Shareholder, together with
(i) Exhibit A: Form of Lease, by and among HP/Compton as Landlord and CEI as
Tenant; (ii) Exhibit B-1: Form of Partnership Agreement Of Pyramid Casino
Partners, a California general partnership, by and among HPI and CEI; and
Exhibit B-2: Form of Limited Liability Company Operating Agreement Of Pyramid
Casino Company, LLC, by and among HPI and CEI.
3. Lease, dated August 3, 1995, by and among HPC as Landlord and CEI as Tenant,
as amended by that certain First Amendment to Lease.
4. Assignment, Acceptance and Assumption and Consent, dated August 2, 1995, to
transfer and assign to HPC, all of its right, title and interest in that certain
Amended and Restated Agreement Respecting Pyramid Casino, dated as of July 14,
1995, by and between HPI and CEI and Shareholder.
5. License Rights Option Agreement, dated August 3, 1995, by and among CEI as
Optionor and HPC as Optionee.
B. AGREEMENTS WITH THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF XXXXXXX
("the Agency")
1. Amended and Restated Disposition and Development Agreement, Agreement of
Purchase and Sale, and Lease with Option to Purchase, dated April 4, 1995 (the
"DDA"), by and among the Agency and CEI.
2. Assignment, Assumption & Consent Agreement, dated July 31, 1995, by and among
CEI as Assignor, HPC as Assignee, HPI as Guarantor and the Agency.
3. Guaranty, dated July 31, 1995, by HPI as Guarantor, in favor of the Agency.
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4. Memorandum of Lease and Option to Purchase, dated July 31, 1995, by and among
the Agency as Landlord and HPC as Tenant, recorded August 3, 1995, as Instrument
No. 00-0000000, in the Official Records, Los Angeles County, California.
5. Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing,
dated July 31, 1995, by HPC as Trustor, Chicago Title Company, a California
corporation, as Trustee and the Agency as Beneficiary, recorded August 3, 1995,
as Instrument No. 00-0000000, in the Official Records, Los Angeles County,
California.
6. UCC-1 Financing Statement dated July 31, 1995, executed by HPC as Debtor, in
favor of the Agency as Secured Creditor, recorded August 3, 1995, as Instrument
No. 00-0000000, in the Official Records of Los Angeles County, California.
7. UCC-1 Financing Statement, dated July 31, 1995, executed by HPC as Debtor, in
favor of the Agency as Secured Creditor, filed with the Secretary of State-
California.
8. Offset Agreement, dated as of July 31, 1995, by and among the Agency, the
City of Xxxxxxx, HPC and CEI.
9. Representations and Warranties Agreement, dated August 2, 1995, by and among
CEI, HPC and the Agency.
10. Slope Maintenance Agreement, dated August 2, 1995, by HPC in favor of the
City of Xxxxxxx, recorded August 3, 1995, as Instrument No. 00-0000000, in the
Official Records of Los Angeles County, California.
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SCHEDULE 6.5
------------
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SCHEDULE 7.8A
--------------
INTERESTS IN FIRST PARK INVESTMENTS, LLC
Member Profit Percentage Interest
------ --------------------------
Xxx Xxx 50%
Xxx Xxx 50%
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SCHEDULE 7.8B
-------------
INTERESTS IN REDWOOD GAMING LLC
Member Profit Percentage Interest
------ --------------------------
Xxxxxxx X. XxXxxxxxx 90%
Xxxxxxxxx Xxxxxxxxx Xxxxxxxx 10%
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EXHIBIT A
---------
------------------ -------------------------- ------------ --------------
Initial
Profit Initial
Percentage Capital
Member's Name Member's Address Interests Contributions
------------------ -------------------------- ------------ --------------
HPC 0000 Xxxxx Xxxxxxx Xxxxxx 88% $22,000,000
Xxxxxxxxx, XX 00000
XxXxxxxxx Attn: G. Xxxxxxx Xxxxxxxx 8% $ 2,000,000
000 Xxxxx Xxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Chu Attn: Xxxx Xxxxxx 4% $ 1,000,000
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxx Xxx
