1
Exhibit 10-38
OPERATING AGREEMENT
FOR
UNITED HOTEL & CASINO, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE 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.
2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 "Aba" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Acquisition Opportunity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Assignee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Ata" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Breaching Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Brokerage Contributions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 "Capital Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Capital Contribution" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 "Committee Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "Company Minimum Gain" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Distributable Cash" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 "Economic Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 "Fiscal Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 "Majority Interest of the Members" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 "Majority Interest of the Management Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 "Management Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 "Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 "Member Group" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 "Member Nonrecourse Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 "Member Nonrecourse Deductions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 "Membership Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 "Net Profits" and "Net Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 "Nonrecourse Liability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 "Pashaie" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.31 "Percentage Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 "Proceeds From Sale" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 "Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.35 "Regulations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.36 "Showghy" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.37 "▇▇▇▇▇▇▇" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 "Tax Matters Partner" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.39 "United Leisure" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
i
3
TABLE OF CONTENTS
(continued)
2.3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Office and Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Addresses of the Members and the Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Purpose and Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Initial Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Additional Capital Contributions For Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Additional Capital Contributions To Close Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Additional Capital Contributions For Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Additional Capital Contributions For Capital Improvements . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 No Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Admission of Additional Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 No Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Termination of Membership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 Competing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Transactions With The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Remuneration To Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 Meetings of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Management of the Company by the Management Committee . . . . . . . . . . . . . . . . . . . . . . . . 12
A. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B. Agency Authority of Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
C. Meetings of Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
D. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Election of Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
A. Number, Term, and Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
B. Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Powers of the Management Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
▇. ▇▇▇▇▇▇ of the Management Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
B. Limitations on Power of the Management Committee . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Liability of Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Devotion of Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 Payments to Committee Members or Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. Appointment of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. Removal, Resignation and Filling of Vacancy of Officers . . . . . . . . . . . . . . . . . . . 17
ii
4
TABLE OF CONTENTS
(continued)
C. Duties and Powers of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
D. Duties and Powers of Vice-President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
E. Duties and Powers of Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
F. Duties and Powers of Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Allocations of Net Profit and Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
A. Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
B. Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
A. Minimum Gain Chargeback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
B. Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt . . . . . . . . . . . . . . 20
C. Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
D. Member Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
E. Qualified Income Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Code Section 704(c) Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Allocation of Net Profits and Losses and Distributions in Respect of a Transferred Interest . . . . . 21
6.5 Distributions of Distributable Cash by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 22
A. Distributable Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
B. Proceeds From the Sale of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
C. Holders of Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Form of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Obligations of Members to Report Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII TRANSFER AND ASSIGNMENT OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Transfer and Assignment of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Substitution of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Effective Date of Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 Rights of Legal Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 No Effect to Transfers in Violation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Right of First Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.8 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII ACCOUNTING, RECORDS, REPORTING BY MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Delivery to Members and Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Annual Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Financial and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
iii
5
TABLE OF CONTENTS
(continued)
8.6 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.7 Accounting Decisions and Reliance on Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.8 Tax Matters for the Company Handled by the Management Committee and Tax Matters Partner . . . . . . . 28
ARTICLE IX DISSOLUTION AND WINDING UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Distributions in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Order of Payment Upon Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Limitations on Payments Made in Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X INDEMNIFICATION AND INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 Indemnification of Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Breach of Purchase Agreement or Escrow . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XI INVESTMENT REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.1 Preexisting Relationship or Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.2 No Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.4 Consultation with Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.5 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.6 No Assurance of Tax Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.1 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.3 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.4 Pronouns; Statutory References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.7 References to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.8 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.9 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.11 Additional Documents and Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.14 Reliance on Authority of Person Signing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.15 No Interest in Company Property; Waiver of Action for Partition . . . . . . . . . . . . . . . . . . . 34
12.16 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
iv
6
TABLE OF CONTENTS
(continued)
12.17 Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.18 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.19 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
v
7
OPERATING AGREEMENT
FOR
UNITED HOTEL & CASINO, LLC
A DELAWARE LIMITED LIABILITY COMPANY
This Operating Agreement, is made as of January 22, 1997, by and among
the parties listed on the signature pages hereof, with reference to the
following facts:
A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Showghy")
entered into an Agreement of Purchase and Sale dated July 24, 1996, as amended,
("Purchase Agreement") for the acquisition of that certain real property (the
"Property") commonly known as The Silver City Casino/Las Vegas Plaza Shopping
Center, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, the legal description of which
is set forth on Exhibit B.
B. On July 29, 1996, Pashaie and Showghy entered into an escrow
(the "Escrow") for the acquisition of the Property with Commerce Escrow, Los
Angeles, California, Escrow No. 96-24701.
▇. ▇▇▇▇▇▇▇ and Showghy assigned their rights in the Purchase
Agreement, the Escrow and all funds deposited therein to Aba Enterprises, LLC,
a California limited liability company ("Aba"), and Ata Enterprises, LLC, a
California limited liability company ("Ata"), free and clear of all liens,
claims or encumbrances.
D. Aba, Ata and United Leisure Corporation, a Delaware
corporation ("United Leisure") desire to form a limited liability company in
which all rights of Aba and Ata in the Purchase Agreement, the Escrow and all
funds deposited therein will be contributed together with cash contributions to
be made by all parties as described herein.
E. On January 21, 1997, a Certificate of Formation for United
Hotel & Casino, LLC (the "Company"), a limited liability company organized
under the laws of the State of Delaware, was filed with the Delaware Secretary
of State.
F. The parties desire to adopt and approve a limited liability
company operating agreement for the Company.
NOW, THEREFORE, the parties by this Agreement set forth the operating
agreement for the Company under the laws of the State of Delaware upon the
terms and subject to the conditions of this Agreement.
1
8
ARTICLE 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 Article I shall have the meanings set forth elsewhere in this
Agreement):
1.1 "Aba" shall mean Aba Enterprises, LLC, a California limited
liability company.
1.2 "Acquisition Opportunity" shall mean an opportunity to acquire
real property within one-quarter ( 1/4) mile of the Property which opportunity
is presented or made available to: (a) Aba or its officers, directors,
shareholders, partners, members, managers and Affiliates; (b) Ata or its
officers, directors, shareholders, partners, members, managers and Affiliates;
or (c) United Leisure or its officers, directors or Affiliates other than real
property which will be used in the operation of its business by United
Restaurants, Inc. or any subsidiary thereof.
1.3 "Act" shall mean the Delaware Limited Liability Company Act,
as the same may be amended from time to time.
1.4 "Affiliate" of a Member or Committee Member shall mean any
Person, directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with a Member or Committee
Member, as applicable. The term "control," as used in the immediately
preceding sentence, shall mean with respect to a corporation or limited
liability company the right to exercise, directly or indirectly, more than
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.
1.5 "Agreement" shall mean this Operating Agreement, as originally
executed and as amended from time to time.
1.6 "Assignee" shall mean the owner of an Economic Interest who
has not been admitted as a substitute Member in accordance with Article VII.
1.7 "Ata" mean Ata Enterprises, LLC, a California limited
liability company.
1.8 "Breaching Member" shall have the meaning assigned to it in
Section 10.2.
1.9 "Brokerage Contributions" shall have the meaning assigned to
it in Section 3.9.
1.10 "Capital Account" shall mean with respect to any Member the
capital account which the Company establishes and maintains for such Member
pursuant to Section 3.6.
2
9
1.11 "Capital Contribution" shall mean the total amount of cash and
fair market value of property contributed to the capital of the Company by the
Members.
1.12 "Certificate" shall mean the Certificate of Formation for the
Company originally filed with the Delaware Secretary of State and as amended
from time to time.
1.13 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, the provisions of succeeding law, and to the extent
applicable, the Regulations.
1.14 "Committee Member" shall mean any member of the Management
Committee, each of whom shall be deemed a "manager" for purposes of the Act.
1.15 "Company" shall mean United Hotel & Casino, LLC, a Delaware
limited liability company.
1.16 "Company Minimum Gain" shall have the meaning ascribed to the
term "Partnership Minimum Gain" in the Regulations Section 1.704-2(d).
1.17 "Distributable Cash" shall mean the amount of cash which a
Majority Interest of the Management Committee deems available for distribution
to the Members (other than cash received by the Company with respect to the
sale or other disposition of the Property or any of the Company's other assets
not in the ordinary course of business), taking into account all debts,
liabilities, and obligations of the Company then due, and working capital and
other amounts which are necessary for the Company's business or to place into
reserves for customary and usual claims with respect to such business.
1.18 "Economic Interest" shall mean the right to receive
distributions of the Company's assets and allocations of income, gain, loss,
deduction, credit and similar items from the Company 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 of the
Company.
1.19 "Fiscal Year" shall mean the Company's fiscal year, which
shall be the calendar year.
1.20 "Majority Interest of the Members" shall mean those Members
who, at the time of a consent, vote or approval, hold more than fifty percent
(50%) of the Percentage Interests entitled to vote which all Members hold.
1.21 "Majority Interest of the Management Committee" shall mean
those Committee Members who were appointed by Members who, at the time of a
consent, vote or approval, hold more than fifty percent (50%) of the Percentage
Interests entitled to vote which all Members hold.
1.22 "Management Committee" shall mean a committee of three (3)
individuals who are selected in accordance with Section 5.2.
3
10
1.23 "Member" shall mean each Person who is an initial signatory to
this Agreement, has been admitted to the Company as a Member in accordance with
the Certificate or this Agreement or is an Assignee who has become a Member in
accordance with Article VII.
1.24 "Member Group" shall have the meaning set forth in Section
4.5.
1.25 "Member Nonrecourse Debt" shall have the meaning ascribed to
the term "Partner Nonrecourse Debt" in Regulations Section 1.704- 2(b)(4).
1.26 "Member Nonrecourse Deductions" shall mean items of Company
loss, deduction, or Code Section 705(a)(2)(B) expenditures which are
attributable to Member Nonrecourse Debt.
1.27 "Membership Interest" shall mean a Member's entire interest in
the Company including 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.
1.28 "Net Profits" and "Net Losses" shall mean the income, gain,
loss and deductions of the Company in the aggregate or separately stated, as
appropriate, determined in accordance with the method of accounting at the
close of each Fiscal Year on the Company's information tax return filed for
federal income tax purposes.
1.29 "Nonrecourse Liability" shall have the meaning set forth in
Regulations Section 1.752-1(a)(2).
1.30 "Pashaie" shall mean ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
1.31 "Percentage Interest" shall mean the percentage of a Member
set forth opposite the name of such Member under the column "Member's
Percentage Interest" in Exhibit A hereto, as such percentage may be adjusted
from time to time pursuant to the terms of this Agreement.
1.32 "Person" shall mean an individual, partnership, limited
partnership, limited liability company, corporation, trust, estate, association
or any other entity.
1.33 "Proceeds From Sale" shall all cash proceeds realized by the
Company from the sale or other disposition of the Property or any of the
Company's other assets not in the ordinary course of business.
1.34 "Property" shall mean that certain real property commonly
known as The Silver City Casino/Las Vegas Plaza Shopping Center, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, the legal description of which is set forth on
Exhibit B.
4
11
1.35 "Regulations" shall, unless the context clearly indicates
otherwise, mean the regulations in force as final or temporary that have been
issued by the U.S. Department of Treasury pursuant to its authority under the
Code, and any successor regulations.
1.36 "Showghy" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇.
1.37 "▇▇▇▇▇▇▇" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇.
1.38 "Tax Matters Partner" (as defined in Code Section 6231) shall
be United Leisure or its successor as designated pursuant to Section 8.8.
1.39 "United Leisure" shall mean United Leisure Corporation, a
Delaware corporation.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. The Members have formed a Delaware limited
liability company under the laws of the State of Delaware by filing the
Certificate with the Delaware Secretary of State and entering into this
Agreement, which Agreement shall be deemed effective as of the date the
Certificate were so filed. 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.
2.2 Name. The name of the Company shall be "United Hotel &
Casino, LLC." The business of the Company may be conducted under that name or,
upon compliance with applicable laws, any other name that the Management
Committee deems appropriate or advisable. The Management Committee, any officer
or Committee Member shall file any fictitious name certificates and similar
filings, and any amendments thereto, that the Management Committee considers
appropriate or advisable.
2.3 Term. The term of this Agreement commenced on the filing of
the Certificate and shall continue until December 31, 2036, unless extended or
sooner terminated as hereinafter provided.
2.4 Office and Agent. The Company shall continuously maintain a
registered office and agent in the State of Delaware. The principal office of
the Company shall be determined by the Management Committee. The Company may
also have such offices, anywhere within and without the State of Delaware, as
the Management Committee may determine from time to time, or the business of
the Company may require. The registered office and agent shall be as stated in
the Certificate or as otherwise determined by the Management Committee.
5
12
2.5 Addresses of the Members and the Committee Members. The
respective mailing addresses of the Members and the Committee Members are set
forth on Exhibit A. A Member or Committee Member may change its mailing
address upon notice thereof to the Management Committee.
2.6 Purpose and Business of the 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 consent of a Majority Interest, the Company shall not engage in any
business other than the following:
A. Subject to Section 5.3B, the acquisition of the
Property, the potential acquisition of adjacent properties and the potential
development and construction of such properties as a hotel, casino and related
property; the management, operation and sale of such Property; and
B. Such other activities directly related to and in
furtherance of the foregoing business as may be necessary, advisable, or
appropriate, in the reasonable opinion of the Management Committee.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions. On the date hereof, United
Leisure shall make a Capital Contribution of One Hundred Twenty-Five Thousand
Dollars ($125,000) in cash, which amount shall be paid by the Company to Aba
and Ata as a return of one-half (1/2) of their current deposit in Escrow and
such amount shall not be deemed to be a distribution to them by the Company.
On the date hereof, Aba and Ata shall contribute to the Company, in form
acceptable to United Leisure, all of their right in the Purchase Agreement,
Escrow and all funds deposited therein free and clear of any lien, claim or
encumbrance. The Members agree that such rights have a net fair market value
of, after deduction for the payment to them of the foregoing Capital
Contributions made by United Leisure, Sixty-Two Thousand Five Hundred Dollars
($62,500) for each of Aba and Ata. Aba and Ata shall each receive a credit to
their Capital Account equal to such value.
3.2 Additional Capital Contributions For Litigation. Pursuant to
the Purchase Agreement, Pashaie and Showghy, and by way of assignment, the
Company, agreed to pay one-half of all costs incurred by the seller and buyer
of the Property with respect to an action (the "ART Action") to be filed
against American Realty Trust ("ART") in connection with its refusal to consent
to the assumption of a loan secured by a first deed of trust against the
Property. The Members shall contribute additional capital to the Company in
proportion to their respective Percentage Interests at such times as any
Committee Member determines that additional capital is required to fund the
Company's share of the ART Action. Upon a determination that such additional
capital is necessary, the Committee Member shall give written notice to each
Member of the amount of capital required to be contributed by each Member.
Each Member shall have ten (10) days from the date such
6
13
notice is given to contribute its share of the additional capital to the
Company; provided, however, that no notice may be given requesting Members to
make additional contributions pursuant to this Section 3.2 after July 30, 1997
without the consent of a Majority Interest of the Members. Each Member shall
execute such documents or take such action as may be necessary for the Company
to assume the loan made by ART, or to reapply for consent to assume such loan,
or with the approval of a Majority Interest of the Members, to refinance such
loan; provided, that, no Member shall be obligated to be personally liable for
any such loan to a greater extent than is provided for the borrower in the
existing loan made by ART.
3.3 Additional Capital Contributions To Close Escrow. Provided
that the ART Action has been adjudicated or settled, or new financing has been
obtained, to the satisfaction of a Majority Interest of the Members, at least
five (5) days prior to the scheduled close of the Escrow, the Members shall
contribute additional capital to the Company by depositing the following
amounts in cash in the Escrow: (a) Ata shall deposit Nine Hundred Eighty-Seven
Thousand and Five Hundred Dollars ($987,500) in Escrow, (b) Aba shall deposit
Two Hundred Eighty-Seven Thousand and Five Hundred Dollars ($287,500) in
Escrow, (c) United Leisure shall deposit Three Million Three Hundred
Seventy-Five Thousand Dollars ($3,375,000) in Escrow, and (d) each Member shall
also deposit in Escrow such additional amounts as may be necessary to pay the
Company's share of all closing costs and any additional loan amortization
arising between the date of the Purchase Agreement and the date of the Escrow
closing with such contributions to be made in proportion to each Member's
Percentage Interest. If the purchase price for the Property is reduced for any
reasons, the obligation of the Members to make contributions pursuant to
clauses (a)-(c) of this Section 3.3 shall be reduced by the amount of such
reductions in proportion to each Member's Percentage Interest.
3.4 Additional Capital Contributions For Operations. In the event
that additional capital is required to fund the Company's operations as a
result of losses or negative cash flow incurred by the Company, the Management
Committee shall, or any Committee Member may, give written notice to each
Member of the amount of capital required. Each Member shall have ten (10) days
from the date such notice is given to contribute its share of the additional
capital to the Company in proportion to their respective Percentage Interests;
provided, however, that no Member shall be required to make any contribution
pursuant to this Section 3.4 once a Majority Interest of the Members has
determined that no further contributions are to be made pursuant to this
Section 3.4.
3.5 Additional Capital Contributions For Capital Improvements. If
a Majority Interest of the Members has approved the Company undertaking
acquisitions, developments, expansion or capital improvements (other than those
capital improvements which are made in the ordinary course of the Company's
operations), the Members shall contribute additional capital to the Company in
such amounts and at such times as a Majority Interest of the Members determines
that additional capital is required to fund the cost of such approved
undertakings. Upon the determination that such additional capital is
necessary, the Management Committee shall, or any Committee Member may, give
written notice to each Member and shall include documentation satisfactory to
each Member in its discretion
7
14
supporting the need for, and the amount of, the capital required. Each Member
shall have thirty (30) days from the date such notice is given to contribute
its share of the additional capital to the Company in proportion to their
respective Percentage Interests. No Member shall be required to make any other
additional Capital Contributions under this Section 3.5 unless a Majority
Interest of the Members has approved the matter for which such additional
Capital Contributions is to be spent.
3.6 Capital Accounts. The Company shall establish and maintain an
individual Capital Account for each Member in accordance with Regulations
Section 1.704-1(b)(2)(iv). If a Member transfers all or a part of its
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).
3.7 No Interest. Except as provided in Section 3.8, no Member
shall be entitled to receive any interest on its Capital Contributions.
3.8 Failure to Make Contributions. If a Member does not timely
contribute capital when required, that Member shall be in default under this
Agreement. In such event, the Management Committee shall send the defaulting
Member written notice of such default, giving such Member seven (7) days from
the date such notice is given to contribute the entire amount of its required
Capital Contribution. If a defaulting Member does not contribute its required
capital to the Company within such seven (7)-day period, then, in addition to
the rights and remedies described in Section 10.1 and 10.2, all of the
following shall result:
A. The non-defaulting Members may elect to advance funds
to the Company to cover any or all of those amounts which the defaulting Member
fails to contribute and which the non-defaulting Members do not contribute
pursuant to Section 3.8B. Each non-defaulting Member may make such advances in
the same proportion that the Percentage Interest of such Member bears to the
Percentage Interest of all Members making such advances. If the event any
non-Defaulting Members elects to advance none or less than all of its pro rata
share of such additional advances, then the other Member can elect to advance
more than its pro rata share under this Section 3.8A. Amounts which a non-
defaulting Member so advances shall become a loan due and owing from the
Company to such non-defaulting Member and bear interest at the rate of ten
percent (10%) per annum, payable monthly. No distributions shall be made by
the Company to its Members until such advances and all interest accrued thereon
is paid in full and all Distributable Cash which would otherwise be distributed
to the Members shall instead be paid to the non-defaulting Members making such
advances until such advances and interest thereon are paid in full. In any
event, any such advances shall be evidenced by a promissory note in a form
reasonably acceptable to the non-defaulting Members and be due and payable by
the Company one (1) year from the date that such advance was made. Any amounts
repaid shall first be applied to interest and thereafter to principal.
8
15
B. The non-defaulting Members may elect to make
additional Capital Contributions to cover any or all of those amounts which the
defaulting Member fails to contribute. Each non-defaulting Member may make
such additional contributions in the same proportion that the Percentage
Interest of such Member bears to the Percentage Interest of all Members making
such contributions. If the event any non- Defaulting Members elects to
contribute none or less than all of its pro rata share of such additional
contribution, then the other Member can elect to contribute more than its pro
rata share under this Section 3.8B.
C. The Percentage Interest of the Members shall be
adjusted as follows:
The Percentage Interest of each Member who makes the required Capital
Contribution shall be increased by an amount equal to the additional
capital contributed divided by the sum of the additional capital
contributed by such Member and the aggregate Capital Contributions made
by all Members to the Company (including all additional Capital
Contributions), and the Percentage Interest of the defaulting Members
shall be reduced by the same amount in proportion to their Percentage
Interest. By way of example, if additional capital is required
pursuant to any or all of Sections 3.2, 3.3, 3.4 or 3.5 herein, United
Leisure is the only Member that makes its required additional capital
contribution, such additional capital contribution is $100,000 and the
aggregate capital contributions made to the Company prior to the such
additional capital contribution is $5,300,000, United Leisure's
Percentage Interest would increase by an amount equal to $100,000
divided by the sum of $100,000 and $5,300,000 (or $5,400,000) or 1.85%,
thereby resulting in United Leisure's Percentage Interest being
increased from 50% to 51.85% and the aggregate Percentage Interest of
Aba and Ata being reduced from 30% and 20% to 28.90% and 19.25%,
respectively.
D. The non-defaulting Members who hold a majority of the
Percentage Interests held by all non-defaulting Members may dissolve the
Company, in which event the Company shall be wound-up, liquidated and
terminated pursuant to Article IX.
Each Member acknowledges and agrees that (i) a default by any Member in
making a required capital contribution will result in the Company and the
non-defaulting Members incurring certain costs and other damages in an amount
that would be extremely difficult or impractical to ascertain and (ii) the
remedies described in this Section 3.8 and Sections 10.1 and 10.2 bear a
reasonable relationship to the damages which the Members estimate may be
suffered by the Company and the non-defaulting Members by reason of the failure
of a defaulting Member to make any required Capital Contribution and the
election of any or all of the above described remedies is not unreasonable
under the circumstances existing as of the date hereof.
3.9 Brokerage Commissions. Notwithstanding anything to the
contrary contained herein, the Company is not assuming any obligation of Ata,
Aba, Pashaie or Showghy for the payment of a brokerage fee or commission or a
finder's or similar fee with respect to the acquisition of the Property by the
Company and such obligation shall remain the
9
16
obligation of Ata, Aba, Pashaie or Showghy as the case may be. Ata and Aba
hereby jointly and severally agree to defend, indemnify and hold harmless the
Company and United Leisure from and against any and all claims, actions,
damages or liabilities (including attorneys' fees and expenses) relating to
such obligation. The payment of such commissions by Ata, Aba, Pashaie, Showghy
or any of their Affiliates shall constitute a Capital Contribution of the
actual amount paid to independent third parties who are unaffiliated with Ata,
Aba, Pashaie or Showghy, up to a maximum of $400,000 in the aggregate (the
commissions so paid which constitute a Capital Contribution pursuant to this
Section 3.9 are referred to as the "Brokerage Contributions").
ARTICLE IV
MEMBERS
4.1 Limited Liability. Except as expressly set forth in this
Agreement or required by law, 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.
4.2 Admission of Additional Members. Additional Members may be
admitted to the Company with the approval of a Majority Interest of the
Members. Any additional Members shall obtain Membership Interests and will
participate in the management, Net Profits, Net Losses, and distributions of
the Company on such terms as are determined by a Majority Interest of the
Members. Notwithstanding the foregoing, Assignees may only be admitted as
substitute Members in accordance with Article VII.
4.3 No Withdrawals or Resignations. No Member may withdraw or
resign from the Company. If a Member wrongfully withdraws or resigns as a
Member, that Member shall have no right to receive any distribution or any
payment for the fair value of its Membership Interest other than such
distributions or payments as are made to all Members pursuant to this
Agreement.
4.4 Termination of Membership Interest. Upon the transfer of a
Member's Membership Interest in violation of Article VII, the Membership
Interest of a Member shall be terminated and thereafter that Member shall be an
Assignee only unless such Membership Interest shall be purchased by the Company
and/or remaining Members as provided in Article VIII. Each Member acknowledges
and agrees that such termination or purchase of a Membership Interest upon the
occurrence of any of the foregoing events is not unreasonable under the
circumstances existing as of the date hereof.
4.5 Competing Activities. Except as limited by this Section 4.5,
each Member and its officers, directors, shareholders, partners, members,
managers, agents, employees and Affiliates (collectively, a "Member Group") may
engage or invest in, independently or with others, any business activity of any
type or description, including without limitation those that might be the same
as or similar to the Company's business and that might be in direct or indirect
competition with the Company, and neither the Company nor any Member shall have
any right in or to such other ventures or activities or to the income or
proceeds
10
17
derived therefrom. Except as limited by this Section 4.5, no Person in a
Member Group shall be obligated to present any investment opportunity or
prospective economic advantage to the Company, even if the opportunity is of
the character that, if presented to the Company, could be taken by the Company,
and each Person in a Member Group shall have the right to hold any investment
opportunity or prospective economic advantage for its own account or to
recommend such opportunity to Persons other than the Company. In the case of
an Acquisition Opportunity, the Acquisition Opportunity shall be presented to
the Company by the Person in the Member Group who has such Acquisition
Opportunity prior to such Person accepting such Acquisition Opportunity. If a
Majority Interest of the Management Committee does not elect to accept such
Acquisition Opportunity within ten (10) days of such presentation, neither the
Company nor any Member (other than such Person) shall have any right in or to
such Acquisition Opportunity or to the income or proceeds derived therefrom,
and such Person shall have the right to hold the Acquisition Opportunity for
its own account or to recommend such Acquisition Opportunity to Persons other
than the Company. Each Member acknowledges that the other Members and their
Affiliates own and/or manage other businesses, including businesses that may
compete with the Company and for the Members' time. Except as limited by this
Section 4.5, each Member hereby waives any and all rights and claims which they
may otherwise have against the other Members and their officers, directors,
shareholders, partners, members, managers, agents, employees, and Affiliates as
a result of any of such activities. Notwithstanding the foregoing, this
Section 4.5 does not permit a Member to begin pursuing an opportunity which the
Company had first started pursuing until such time as the Company is no longer
actively pursuing such opportunity.
4.6 Transactions With The Company. Subject to any limitations set
forth in this Agreement and with the prior approval of a Majority Interest of
the Members, a Member may lend money to and transact other business with the
Company and take such actions as it deems appropriate in its sole discretion
with respect to such transactions with the Company. A Member or Committee
Member does not violate a duty or obligation under this Agreement based on the
fact that such Member's or Committee Member's conduct furthers the Member's or
Committee Member's own interest. By way of example but not limitation of the
foregoing provision, any Member or Committee Member may vote or make an
election, or decide whether to approve or disapprove an act or transaction of
the Company based on the effect that such act or transaction would have upon
the interests of such Member or Committee Member outside the Company.
4.7 Remuneration To Members. Except as otherwise specifically
provided in this Agreement, no Member is entitled to remuneration for acting in
the Company business.
4.8 Voting Rights. Except as expressly provided in this Agreement
or the Certificate, Members shall have no voting, approval or consent rights.
Except as set forth in Sections 5.3B (viii) and (ix), in all matters in which a
vote, approval or consent of the Members is required, a vote, consent or
approval of a Majority Interest of the Members (or, in instances in which there
are defaulting, transferring or remaining Members, non-defaulting,
non-transferring or remaining Members who hold a majority of the Percentage
Interests held by all non- defaulting, non-transferring or remaining Members)
shall be
11
18
sufficient to authorize or approve such act. All votes, approvals or consents
of the Members or the Committee Members, as the case may be, may be given or
withheld, conditioned or delayed as the Members or the Committee Members, as
the case may be, may determine in their or its sole and absolute discretion.
4.9 Meetings of Members. Meetings of Members may be held at such
date, time and place as the Member calling the meeting may fix from time to
time. No annual or regular meetings of Members are required. Meetings of the
Members may be called by any Member holding at least fifteen percent (15%) of
the Percentage Interests for the purpose of addressing any matters on which the
Members may vote. Written notice of a meeting of Members shall be sent or
otherwise given to each Member in accordance with not less than seven (7) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and the general nature of the
business to be transacted.
The actions taken at any meeting of Members however called and noticed,
and wherever held, have the same validity as if taken at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the Members entitled
to vote, who was not present in person or by proxy, signs a written waiver of
notice or consents to the holding of the meeting or approves the minutes of the
meeting. All such waivers, consents or approvals shall be filed with the
Company records or made a part of the minutes of the meeting.
Any action that may be taken at a meeting of Members may be taken
without a meeting, provided the consents of all Members entitled to vote have
been solicited in writing and if a consent in writing setting forth the action
so taken, is signed and delivered to the Company within sixty (60) days of the
record date for that action 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 Management Committee or
the secretary, if any, of the Company and shall be maintained in the Company
records. Any Member giving a written consent, or the Member's proxy holders,
may revoke the consent by a writing received by the Management Committee or
secretary, if any, of the Company before written consents of the number of
votes required to authorize the proposed action have been filed.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by the Management Committee.
A. Management. The business, property and affairs of the
Company shall be managed exclusively by the Management Committee. Except for
situations in which the approval of the Members is required by this Agreement,
the Management Committee shall have full, complete and exclusive authority,
power, and discretion to manage and control
12
19
the business, property and affairs of the Company, to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business, property and
affairs.
B. Agency Authority of Committee Members. Any Committee
Member may endorse checks, drafts, and other evidence of indebtedness made
payable to the order of the Company, but only for the purpose of deposit into
the Company's accounts. The Management Committee shall authorize such Persons
as it deems appropriate to sign all checks, drafts, and other instruments
obligating the Company to pay money.
C. Meetings of Committee Members. Meetings of the
Committee Members may be called by any Committee Member or by any officer. All
meetings shall be held upon four (4) days notice by mail or forty-eight (48)
hours notice (or upon such shorter notice period if necessary under the
circumstances) delivered personally or by telephone, telegraph or facsimile. A
notice need not specify the purpose of any meeting. Notice of a meeting need
not be given to any Committee Member who signs a waiver of notice or a consent
to holding the meeting (which waiver or consent need not specify the purpose of
the meeting) or an approval of the minutes thereof, whether before or after the
meeting, or who attends the meeting without protesting, prior to its
commencement, the lack of notice to such Committee Member. All such waivers,
consents and approvals shall be filed with the Company records or made a part
of the minutes of the meeting. Meetings of the Committee Members may be held
at any place designated in the notice of the meeting or at such place as may be
approved by the Committee Members. Committee Members may participate in a
meeting through use of conference telephone or similar communications
equipment, so long as all Committee Members participating in such meeting can
hear one another. Participation in a meeting in such manner constitutes a
presence in person at such meeting. The participation of a Majority Interest
of the Management Committee constitutes a quorum of the Committee Members for
the transaction of business. Every act or decision done or made by a Majority
Interest of the Management Committee present at a meeting duly held at which a
quorum is present is the act of the Committee Members. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of Committee Members, if any action taken is approved by at
least a majority of the required quorum for such meeting.
Any action required or permitted to be taken by the Management
Committee may be taken by the Committee Members without a meeting, if a
Majority Interest of the Management Committee individually or collectively
consent in writing to such action. Such action by written consent shall have
the same force and effect as a vote at a meeting of a Majority Interest of the
Management Committee.
The provisions of this Section 5.1C govern meetings of the
Committee Members if the Committee Members elect, in their discretion, to hold
meetings. However, nothing in this Section 5.1C or in this Agreement is
intended to require that meetings of Committee Members be held, it being the
intent of the Members that meetings of the Management Committee are not
required.
13
20
D. Voting Rights. In all matters in which a vote,
approval or consent of the Management Committee or Committee Members is
required, a vote, consent or approval of a Majority Interest of the Management
Committee shall be required to authorize or approve such act.
5.2 Election of Committee Members.
A. Number, Term, and Qualifications. The Management
Committee shall have three (3) Committee Members, one (1) of whom shall be
appointed by each of United Leisure, Aba and Ata. The Committee Members
initially appointed by United Leisure, Aba and Ata, are Shuster, Pashaie, and
Showghy, respectively. In the event that a Committee Member resigns or is
removed, any successor shall be elected by the Member who appointed such
Committee Member. A Committee Member must be an individual, but need not be a
Member, a resident of the State of Delaware, or a citizen of the United States.
B. Resignation or Removal. A Committee Member may resign
at any time by giving written notice to the Management Committee. The
resignation of a Committee Member shall take effect upon receipt of that notice
or at such later time as shall be specified in the notice. Unless otherwise
specified in the notice, the acceptance of the resignation shall not be
necessary to make it effective. Such resignation shall not affect any
management, voting or approval rights that the Committee Member has as a Member
of the Company under the Act, the Certificate or this Agreement. A Committee
Member may be removed at any time by the Member who appointed such Committee
Member. Any such removal shall be effective upon notice to the Management
Committee.
5.3 Powers of the Management Committee.
▇. ▇▇▇▇▇▇ of the Management Committee. Without limiting
the generality of Section 5.1, but subject to Section 5.3B and to the
limitations set forth elsewhere in this Agreement, the Management Committee
shall have all necessary powers to manage and carry out the purposes, business,
property, and affairs of the Company, including, without limitation, the power
to exercise on behalf and in the name of the Company all of the powers of a
natural person, including, without limitation, the power to:
(i) Execute and deliver all documents or
instruments deemed necessary or advisable by a Majority Interest of the Members
with respect to the Purchase Agreement or the Escrow;
(ii) Acquire, purchase, lease, renovate, improve,
alter, rebuild, demolish, replace, and own the Property and any other real
property and any other personal property or assets that a Majority Interest of
the Members determines is necessary or appropriate or in the interest of the
business of the Company, and to acquire options for the purchase of any such
property;
14
21
(iii) Sell, exchange, lease, or otherwise dispose of
the real property and other property and assets owned by the Company, or any
part thereof, or any interest therein;
(iv) ▇▇▇ on, defend, or compromise any and all
claims or liabilities in favor of or against the Company; submit any or all
such claims or liabilities to arbitration; and confess a judgment against the
Company in connection with any litigation in which the Company is involved
(other than relating to the Members or its Affiliates); and
(v) Retain legal counsel, auditors, and other
professionals in connection with the Company business and to pay therefor such
remuneration as a Majority Interest of the Members may determine.
B. Limitations on Power of the Management Committee. The
Management Committee shall not have authority hereunder to cause the Company to
engage in the following without first obtaining the affirmative vote or written
consent of a Majority Interest (or such greater Percentage Interests set forth
below) of the Members:
(i) A decision not to continue to proceed with the
ART Action prior to July 30, 1997 or a dismissal or settlement of the ART
Action;
(ii) The waiver of any conditions precedent
described in the Purchase Agreement or in the Escrow;
(iii) The selection of a third party who shall act
as the on-site property manager for the Property;
(iv) A capital expenditure for any purpose
described in Section 3.5;
(v) The execution, amendment or renewal (other
than a renewal on existing lease terms) of any lease, option or purchase
agreement for the Property;
(vi) The sale, exchange or other disposition of
all, or substantially all, of the Company's assets occurring as part of a
single transaction or plan, or in multiple transactions over a six (6) month
period, except in the orderly liquidation and winding up of the business of the
Company upon its duly authorized dissolution;
(vii) Except pursuant to Section 3.8, borrow money
from any party, issue evidences of indebtedness in connection therewith,
refinance, increase the amount of, modify, amend, or change the terms of, or
extend the time for the payment of any indebtedness or obligation of the
Company, and secure such indebtedness by mortgage, deed of trust, pledge,
security interest, or other lien on Company assets;
(viii) The merger of the Company with another limited
liability company or limited partnership; provided in no event shall a Member
be required to
15
22
become a general partner in a merger with a limited partnership without its
express written consent;
(ix) The merger of the Company with a corporation
or a general partnership or other Person shall require the affirmative vote or
written consent of all Members;
(x) The establishment of different classes of
Members;
(xi) An alteration of the primary purpose or
business of the Company as set forth in Section 2.6;
(xii) Any act which would make it impossible to
carry on the ordinary business of the Company.
(xiii) The confession of a judgment against the
Company;
(xiv) To file a bankruptcy petition on behalf of the
Company; and
(xv) Any other transaction described in this
Agreement as requiring the vote, consent, or approval of the Members.
5.4 Liability of Committee Members. Committee Members shall not
be liable to the Company or to any Member for any loss or damage sustained by
the Company or any Member, unless the loss or damage shall have been the result
of gross negligence or intentional misconduct.
5.5 Devotion of Time. Committee Members are not obligated to
devote all of their time or business efforts to the affairs of the Company.
Committee Members shall devote whatever time, effort, and skill as they deem
appropriate for the operation of the Company. The Members acknowledge that a
third party property manager will be engaged by the Company with respect to the
day-to-day management of the Property.
5.6 Payments to Committee Members or Members. Except as specified
in this Section 5.6, Committee Members are not entitled to remuneration for
services rendered or goods provided to the Company in any capacity. To the
extent approved by a Majority Interest of the Members, (a) the Company shall
pay the Committee Members or Members for goods provided to the Company, (b) the
Company shall reimburse the Committee Members or Members for the actual cost of
materials used for or by the Company, and (c) the Company shall also pay or
reimburse the Committee Members or Members for expenses relating to the
management or development of the Property (including, without limitation, legal
and accounting fees and costs).
16
23
5.7 Officers.
A. Appointment of Officers. The Management Committee may
appoint officers at any time. The officers of the Company, if deemed necessary
by the Management Committee, may include a president, vice president,
secretary, and chief financial officer. The officers shall serve at the
pleasure of the Management Committee, which may determine a reasonable
compensation to be paid to each officer so appointed; provided, however, that
▇▇▇▇▇▇▇, Showghy and Pashaie shall not receive any compensation in the event
that any of them are appointed or act as an officer. Any individual may hold
any number of offices. The officers shall exercise such powers and perform
such duties as specified in this Agreement and as shall be determined from time
to time by the Management Committee.
B. Removal, Resignation and Filling of Vacancy of
Officers. Subject to the rights, if any, of an officer under a contract of
employment, any officer may be removed, either with or without cause, by the
Management Committee at any time. Any officer may resign at any time by giving
written notice to the Management Committee. Any resignation shall take effect
at the date of the receipt of that notice or at any later time specified in
that notice; and, unless otherwise specified in that notice, the acceptance of
the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the Company under any contract
to which the officer is a party. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in this Agreement for regular appointments to that
office.
C. Duties and Powers of the President. The president
shall be the chief executive officer of the Company, and shall, subject to
Section 5.3B and the control of the Management Committee, have general and
active management of the business of the Company and shall see that all orders
and resolutions of the Members and Management Committee are carried into
effect. He or she shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the Management Committee or
this Agreement. The initial president of the Company shall be ▇▇▇▇▇▇▇.
D. Duties and Powers of Vice-President. The
vice-president, or if there shall be more than one, the vice-presidents in the
order determined by the Management Committee, shall, in the absence or
disability of the president, perform the duties and exercise the powers of the
president and shall perform such other duties and have such other powers as the
Management Committee may from time to time prescribe.
E. Duties and Powers of Secretary. If there is such an
officer, the secretary shall attend all meetings of the Members, and shall
record all the proceedings of the meetings in a book to be kept for that
purpose, and shall perform like duties for the standing committees when
required. The secretary shall give, or cause to be given, notice of all
meetings of the Members and shall perform such other duties as may be
prescribed by the Management Committee. The initial secretary of the Company
shall be Pashaie.
17
24
The secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the Company's transfer agent or
registrar, as determined by the Management Committee, a register, or a
duplicate register, showing the names of all Members and their addresses, and
their Percentage Interests. The secretary shall also keep all documents
described in Section 8.1 and such other documents as may be required under the
Act. The secretary shall perform such other duties and have such other
authority as may be prescribed elsewhere in this Agreement or from time to time
by the Management Committee. The secretary shall have the general duties,
powers and responsibilities of a secretary of a corporation.
If the Management Committee chooses to appoint an assistant
secretary or assistant secretaries, the assistant secretaries, in the order of
their seniority, in the absence, disability or inability to act of the
secretary, shall perform the duties and exercise the powers of the secretary,
and shall perform such other duties as the Management Committee may from time
to time prescribe.
F. Duties and Powers of Chief Financial Officer. If
there is such an officer, the chief financial officer shall keep and maintain,
or cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the Company, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, Membership Interests and Economic Interests. The initial chief
financial officer of the Company shall be Showghy.
The chief financial officer shall have the custody of the
funds and securities of the Company, and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Company, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Company in such depositories as may be designated by the Management
Committee.
The chief financial officer shall disburse the funds of the
Company as may be ordered by the Management Committee, taking proper vouchers
for such disbursements, and shall render to the president and the Management
Committee an account of all his or her transactions as treasurer and of the
financial condition of the Company.
The chief financial officer shall perform such other duties
and shall have such other responsibility and authority as may be prescribed
elsewhere in this Agreement or from time to time by the Management Committee.
The chief financial officer shall have the general duties, powers and
responsibility of a chief financial officer of a corporation, and shall be the
chief financial and accounting officer of the Company.
If the Management Committee chooses to elect an assistant
treasurer or assistant treasurers, the assistant treasurers in the order of
their seniority shall, in the absence, disability or inability to act of the
chief financial officer, perform the duties and exercise the powers of the
chief financial officer, and shall perform such other duties as the Management
Committee shall from time to time prescribe.
18
25
ARTICLE VI
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS
6.1 Allocations of Net Profit and Net Loss.
A. Net Loss. Net Loss (other than Net Loss with respect
to a sale or other disposition of the Property or any of the Company's other
assets not in the ordinary course of business) shall be allocated to the
Members in proportion to their Percentage Interests. Net Loss with respect to
a sale or other disposition of the Property or any of the Company's other
assets not in the ordinary course of business shall be allocated to the Members
as follows:
(i) the first $2,100,000 less the Brokerage
Contributions, if any, of such Net Loss shall be allocated to United Leisure;
and then
(ii) any such remaining Net Loss shall be allocated to the Members in
proportion to their Percentage Interests.
Notwithstanding the previous sentence, loss allocations to a Member
shall be made only to the extent that such loss allocations will not create a
deficit Capital Account balance for that Member in excess of an amount, if any,
equal to such Member's share of Company Minimum Gain. Any loss not allocated
to a Member because of the foregoing provision shall be reallocated to the
other Members (to the extent the other Members are not limited in respect of
the allocation of losses under this Section 6.1A) in proportion to the positive
Capital Account balances of the other Members prior to such reallocation. Any
loss reallocated under this Section 6.1A shall be taken into account in
computing subsequent allocations of income and losses pursuant to this Article
VI, so that the net amount of any item so allocated and the income and losses
allocated to each Member pursuant to this Article VI, to the extent possible,
shall be equal to the net amount that would have been allocated to each such
Member pursuant to this Article VI if no reallocation of losses had occurred
under this Section 6.1A.
B. Net Profit. Net Profit (other than Net Profit with
respect to a sale or other disposition of the Property or any of the Company's
other assets not in the ordinary course of business) shall be allocated to the
Members in proportion to their Percentage Interests. Net Profit with respect
to a sale or other disposition of the Property or any of the Company's other
assets not in the ordinary course of business shall be allocated to the Members
as follows:
(i) the first $2,100,000 less the Brokerage Contributions,
if any, of such Net Profits shall be allocated to the Members in proportion to
the following percentages: (a) United Leisure - 0%; (b) Ata - 60%; and
(c) Aba - 40%; and then
(ii) any such remaining Net Profits shall be allocated to
the Members in proportion to their Percentage Interests.
19
26
Notwithstanding anything to the contrary contained herein, the percentage
interests set forth in clause (i) shall be increased or decreased by the
increases or decreases, if any, in a Member's Percentage Interest made pursuant
to Section 3.8.
6.2 Special Allocations. Notwithstanding Section 6.1:
A. Minimum Gain Chargeback. 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 that is
allocable to the disposition of Company property subject to a Nonrecourse
Liability, which share of such net decrease shall be determined in accordance
with Regulations Section 1.704-2(g)(2). Allocations pursuant to this Section
6.2A shall be made in proportion to the amounts required to be allocated to
each Member under this Section 6.2A. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(f). This Section
6.2A is intended to comply with the minimum gain chargeback requirement
contained in Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
B. Chargeback of Minimum Gain Attributable to Member
Nonrecourse Debt. If there is a net decrease in Company Minimum Gain
attributable to a Member Nonrecourse Debt, during any Fiscal Year, each member
who has a share of the Company 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, in subsequent
Fiscal Years) in an amount equal to that portion of such Member's share of the
net decrease in Company Minimum Gain attributable to such Member Nonrecourse
Debt that is allocable to the disposition of Company property subject to such
Member Nonrecourse Debt (which share of such net decrease shall be determined
in accordance with Regulations Section 1.704-2(i)(5)). Allocations pursuant to
this Section 6.2B shall be made in proportion to the amounts required to be
allocated to each Member under this Section 6.2B. The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(i)(4). This
Section 6.2B 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.
C. Nonrecourse Deductions. Any nonrecourse deductions
(as defined in Regulations Section 1.704-2(b)(1)) for any Fiscal Year or other
period shall be specially allocated to the Members in proportion to their
Percentage Interests.
D. Member Nonrecourse Deductions. Those items of Company
loss, deduction, or Code Section 705(a)(2)(B) expenditures which are
attributable to Member Nonrecourse Debt for any Fiscal Year or other period
shall be specially allocated to the Member who bears the economic risk of loss
with respect to the Member Nonrecourse Debt to which such items are
attributable in accordance with Regulations Section 1.704-2(i).
20
27
E. Qualified Income Offset. If 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 a deficit balance in such Member's Capital Account in excess of such
Member's share of Company Minimum Gain, 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. Any special
allocations of items of income and gain pursuant to this Section 6.2E shall be
taken into account in computing subsequent allocations of income and gain
pursuant to this Article VI so that the net amount of any item so allocated and
the income, gain, and losses allocated to each Member pursuant to this Article
VI to the extent possible, shall be equal to the net amount that would have
been allocated to each such Member pursuant to the provisions of this Article
VI if such unexpected adjustments, allocations, or distributions had not
occurred.
6.3 Code Section 704(c) Allocations. Notwithstanding any other
provision in this Article VI, in accordance with Code Section 704(c) and the
Regulations promulgated thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for
federal income tax purposes and its fair market value on the date of
contribution. Allocations pursuant to this Section 6.3 are solely for purposes
of federal, state and local taxes. As such, they shall not affect or in any
way be taken into account in computing a Member's Capital Account or share of
profits, losses, or other items of distributions pursuant to any provision of
this Agreement.
6.4 Allocation of Net Profits and Losses and Distributions in
Respect of a Transferred Interest. If any Economic Interest is transferred, or
is increased or decreased by reason of the admission of a new Member or
otherwise, during any Fiscal Year of the Company, Net Profit or Net Loss for
such Fiscal Year shall be assigned pro rata to each day in the particular
period of such Fiscal Year to which such item is attributable (i.e., the day on
or during which it is accrued or otherwise incurred) and the amount of each
such item so assigned to any such day shall be allocated to the Member or
Assignee based upon its respective Economic Interest at the close of such day.
However, for the purpose of accounting convenience and simplicity, the
Company shall treat a transfer of, or an increase or decrease in, an Economic
Interest which occurs at any time during a semi-monthly period (commencing with
the semi-monthly period including the date hereof) as having been consummated
on the last day of such semi-monthly period, regardless of when during such
semi-monthly period such transfer, increase, of decrease actually occurs (i.e.,
sales and dispositions made during the first fifteen (15) days of any month
will be deemed to have been made on the 15th day of the month).
Notwithstanding any provision above to the contrary, gain or loss of
the Company realized in connection with a sale or other disposition of any of
the assets of the Company shall be allocated solely to the parties owning
Economic Interests as of the date such sale or other disposition occurs.
21
28
6.5 Distributions of Distributable Cash by the Company.
A. Distributable Cash. Subject to applicable law and any
limitations contained elsewhere in this Agreement, the Management Committee
shall distribute Distributable Cash to the Members in proportion to their
Percentage Interests.
B. Proceeds From the Sale of Property. Subject to
applicable law and any limitations contained elsewhere in this Agreement, the
Management Committee shall distribute the Proceeds From Sale to the Members as
follows:
(i) the first $5,833,334 of Proceeds From Sale shall be
distributed to the Members in proportion to the following percentages: (a)
United Leisure - 60%; (b) Ata - 24%; and (c) Aba - 16%; and then
(ii) the next $1,166,666 of Proceeds From Sale shall be
distributed to the Members in proportion to the following percentages: (a)
United Leisure - 0%; (b) Ata - 60%; and (c) Aba - 40%; and then
(iii) any remaining Proceeds From Sale shall be distributed
to the Members in proportion to their Percentage Interests.
Notwithstanding anything to the contrary contained herein, the percentage
interests set forth in clause (i) and (ii) shall be increased or decreased by
the increases or decreases, if any, in a Member's Percentage Interest made
pursuant to Section 3.8.
C. Holders of Record. Notwithstanding anything to the
contrary in Section 6.5A or 6.5B, all such distributions shall be made only 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 the Committee Members shall incur any liability for making distributions in
accordance with this Section 6.5C.
6.6 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. Except as provided
in Section 9.3, 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 and no Member may be compelled to accept a
distribution of any asset in kind.
6.7 Obligations of Members to Report Allocations. The Members are
aware of the income tax consequences of the allocations made by this Article VI
and hereby agree to be bound by the provisions of this Article VI in reporting
their shares of Company income and loss for income tax purposes.
22
29
ARTICLE VII
TRANSFER AND ASSIGNMENT OF INTERESTS
7.1 Transfer and Assignment of Interests. Except as provided in
this Article VII, a Member shall not be entitled to transfer, assign, convey,
sell, encumber or in any way alienate all or any part of its Membership
Interest (collectively, "transfer") except with the prior written consent of
Members holding a majority of the Percentage Interests held by the
non-transferring Members, which consent may be given or withheld, conditioned
or delayed, as such Members may determine in their sole and absolute
discretion. Transfers in violation of this Article VII shall only be effective
to the extent set forth in Section 7.6. After the consummation of any transfer
of any part of a Membership Interest, the Membership Interest so transferred
shall continue to be subject to the terms and provisions of this Agreement and
any further transfers shall be required to comply with all the terms and
provisions of this Agreement.
With respect to Ata and Aba only, but not with respect to United
Leisure, the transfer of an interest or interests of more than fifty percent
(50%) in the capital or profits of either of such Members (whether accomplished
by the sale or exchange of interests or by the admission of new partners or
members), or the cumulative transfer of such interests in either of such
Members which effectively equal the foregoing (including transfer of interests
followed by the incorporation of a Member and subsequent stock transfers, or
transfers of stock followed by the liquidation of a Member and subsequent
transfers of interests) will be deemed to constitute an assignment of a
Membership Interest subject to this Article VII.
7.2 Substitution of Members. An Assignee shall have the right to
become a substitute Member only if (i) the requirements of Section 7.1 relating
to consent of Members are met, (ii) the Assignee executes an instrument
satisfactory to the Management Committee accepting and adopting the terms and
provisions of this Agreement, and (iii) the Assignee pays any reasonable
expenses in connection with its admission as a new Member. The admission of an
Assignee as 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.
7.3 Permitted Transfers. A Membership Interest may be transferred
to any other Member and without the prior written consent of the other Members.
A Membership Interest also may be transferred, and without the prior written
consent of the Members as required by Section 7.1, by: (a) a Member to any
Affiliate of Pashaie, Showghy, ▇▇▇▇▇▇▇ or United Leisure, or (b) by inter vivos
gift or by testamentary transfer to any spouse, parent, sibling, in-law, child
or grandchild of the Member or to a trust for the benefit of the Member or such
spouse, parent, sibling, in-law, child or grandchild of the Member; it being
agreed that, in executing this Agreement, each Member has consented to such
transfers.
7.4 Effective Date of Permitted Transfers. Any permitted transfer
of all or any portion of a Membership Interest or an Economic Interest shall be
effective as of the date provided in Section 6.4 following the date upon which
the requirements of Sections 7.1 and
23
30
7.2 have been met. Any transferee of a Membership Interest shall take subject
to the restrictions on transfer imposed by this Agreement.
7.5 Rights of Legal Representatives. If a Member is a limited
liability company, corporation, trust, or other entity and is dissolved or
terminated, the powers of that Member may be exercised by its legal
representative or successor.
7.6 No Effect to Transfers in Violation of Agreement. Upon any
transfer of a Membership Interest in violation of this Article VII, the
transferee shall have no right to vote or participate in the management of the
business, property and affairs of the Company or to exercise any rights of a
Member. Such transferee shall only be entitled to become an Assignee and
thereafter shall only receive the share of one or more of the Company's Net
Profits, Net Losses and distributions of the Company's assets to which the
transferor of such Economic Interest would otherwise be entitled.
Notwithstanding the immediately preceding sentences, if, in the determination
of Members holding a majority of the Percentage Interests held by the
non-transferring Members, a transfer in violation of this Article VII would
cause the tax termination of the Company under Code Section 708(b)(1)(B), the
transfer shall be null and void and the purported transferee shall not become
either a Member or an Assignee.
Upon and contemporaneously with any transfer (whether arising out of an
attempted charge upon that Member's Economic Interest by judicial process, a
foreclosure by a creditor of the Member or otherwise) of a Member's Economic
Interest pertaining to a Membership Interest (other than in accordance with
Section 7.3) which does not at the same time transfer the balance of the rights
associated with the Membership Interest transferred by the Member (including,
without limitation, the rights of the Member to vote or participate in the
management of the business, property and affairs of the Company), the Company
shall purchase from the Member, and the Member shall sell to Company for a
purchase price of $100, all remaining rights and interests retained by the
Member that immediately before the transfer were associated with the
transferred Economic Interest. Such purchase and sale shall not, however,
result in the release of the Member from any liability to the Company as a
Member.
Each Member acknowledges and agrees that the right of the Company to
purchase such remaining rights and interests from a Member who transfers a
Membership Interest in violation of this Article VII is not unreasonable under
the circumstances existing as of the date hereof.
7.7 Right of First Negotiation. If any Member desires to transfer
all or any part of its Membership Interest other than pursuant to Section 7.3,
such Member shall notify the Company and the other Members in writing of such
desire and, for a period of thirty (30) days thereafter, the Members and the
Company shall negotiate with respect to the purchase of such Member's
Membership Interest. During such period, the Member desiring to transfer such
Membership Interest may not solicit a transferee for such Membership Interest.
24
31
7.8 Right of First Refusal. If the period described in Section
7.7 expires without an agreement being reached as to the purchase of the
Membership Interest referred to therein, the Member desiring to transfer its
Membership Interest may solicit transferees. In such event, each time a Member
proposes to transfer all or any part of its Membership Interest (or as required
by operation of law or other involuntary transfer to do so) other than pursuant
to Section 7.3, such Member shall first offer such Membership Interest to the
Company and the non-transferring Members in accordance with the following
provisions:
A. Such Member shall deliver a written notice ("Option
Notice") to the Company and the other Members stating (i) such Member's bona
fide intention to transfer such Membership Interest, (ii) the Membership
Interest to be transferred, (iii) the purchase price and terms of payment for
which the Member proposes to transfer such Membership Interest and (iv) the
name and address of the proposed transferee.
B. Within thirty (30) days after receipt of the Option
Notice, the Company shall have the right, but not the obligation, to elect to
purchase all or any part of the Membership Interest upon the price and terms of
payment designated in the Option Notice. If the Option Notice provides for the
payment of non-cash consideration, the Company may elect to pay the
consideration in cash equal to the good faith estimate of the present fair
market value of the non-cash consideration offered as determined by the
Management Committee. If the Company, with the approval of Members holding a
majority of the non-transferring Membership Interests, exercises such right
within such thirty (30) day period, the Management Committee shall give written
notice of that fact to the transferring and non-transferring Members.
C. If the Company fails to elect to purchase the entire
Membership Interest proposed to be transferred within the thirty (30) day
period described in Section 7.8B, the non-transferring Members shall have the
right, but not the obligation, to elect to purchase any remaining share of such
Membership Interest upon the price and terms of payment designated in the
Option Notice. If the Option Notice provides for the payment of non-cash
consideration, such purchasing Members each may elect to pay the consideration
in cash equal to the good faith estimate of the present fair market value of
the non-cash consideration offered as determined by the Management Committee.
Within sixty (60) days after receipt of the Option Notice, each
non-transferring Member shall notify the Management Committee in writing of its
desire to purchase a portion of the Membership Interest proposed to be so
transferred. The failure of any Member to submit a notice within the
applicable period shall constitute an election on the part of that Member not
to purchase any of the Membership Interest which may be so transferred. Each
Member so electing to purchase shall be entitled to purchase a portion of such
Membership Interest in the same proportion that the Percentage Interest of such
Member bears to the aggregate of the Percentage Interests of all of the Members
electing to so purchase the Membership Interest being transferred. In the
event any Member elects to purchase none or less than all of its pro rata share
of such Membership Interest, then the other Members can elect to purchase more
than their pro rata share.
25
32
D. If the Company and the other Members elect to purchase
or obtain any or all of the Membership Interest designated in the Option
Notice, then the closing of such purchase shall occur within ninety (90) days
after receipt of such notice and the transferring Member, the Company and/or
the other Members shall execute such documents and instruments and make such
deliveries as may be reasonably required to consummate such purchase.
E. If the Company and the other Members elect not to
purchase or obtain, or default in their obligation to purchase or obtain, all
of the Membership Interest designated in the Option Notice, then the
transferring Member may transfer the portion of the Membership Interest
described in the Option Notice not so purchased, to the proposed transferee,
providing such transfer (i) is completed within thirty (30) days after the
expiration of the Company's and the other Members' right to purchase such
Membership Interest, (ii) is made on terms no less favorable to the
transferring Member than as designated in the Option Notice, and (iii) complies
with Sections 7.1 and 7.2 relating to consent of Members; it being acknowledged
by the Members that compliance with Sections 7.7 and 7.8A-D does not modify any
of the transfer restrictions in Article VII or otherwise entitle a Member to
transfer its Membership Interest other than in the manner prescribed by Article
VII. If such Membership Interest is not so transferred, the transferring
Member must give notice in accordance with this Section prior to any other or
subsequent transfer of such Membership Interest.
ARTICLE VIII
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
8.1 Books and Records. The books and records of the Company shall
be kept, and the financial position and the results of its operations recorded,
in accordance with the accounting methods followed for federal income tax
purposes. The books and records of the Company shall reflect all the Company
transactions and shall be appropriate and adequate for the Company's business.
The Company shall maintain at its principal office all of the following:
A. A current list of the full name and last known
business or residence address of each Member and Assignee set forth in
alphabetical order, together with the Capital Contributions, Capital Account
and Percentage Interest of each Member and Assignee;
B. A current list of the full name and business or
residence address of each Committee Member;
C. A copy of the Certificate and any and all amendments
thereto together with executed copies of any powers of attorney pursuant to
which the Certificate or any amendments thereto have been executed;
26
33
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; and
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.
8.2 Delivery to Members and Inspection.
A. Upon the request of any Member or Assignee, the
Management Committee shall promptly deliver to the requesting Member or
Assignee, at the expense of the Company, a copy of the information required to
be maintained under Section 8.1.
B. Each Member, Committee Member and Assignee has the
right, upon reasonable request for purposes reasonably related to the interest
of the Person as Member, Committee Member or Assignee, to:
(i) inspect and copy during normal business hours
any of the Company records described in Section 8.1; and
(ii) obtain from the Management Committee, promptly
after their becoming available, a copy of the Company's federal, state, and
local income tax or information returns for each Fiscal Year.
(iii) A monthly income statement of the Company and
a balance sheet of the Company as of the end of that period. Such statement
shall be accompanied by the report thereon, if any, of the independent
accountants engaged by the Company or, if there is no report, the certificate
of the chief financial officer that the statement was prepared without audit
from the books and records of the Company. The statement and balance sheet
shall be delivered or mailed to the Members within twenty (20) days after the
end of each such period.
C. Any request, inspection or copying by a Member or
Assignee under this Section 8.2 may be made by that Person or that Person's
agent or attorney.
8.3 Annual Statements.
A. The Management Committee shall cause an annual report
to be sent to each of the Members not later than one hundred twenty (120) days
after the close of the Fiscal Year. The report shall contain a balance sheet
as of the end of the Fiscal Year and
27
34
an income statement and statement of changes in financial position for the
Fiscal Year. Such financial statements shall be accompanied by the report
thereon, if any, of the independent accountants engaged by the Company or, if
there is no report, the certificate of the chief financial officer that the
financial statements were prepared without audit from the books and records of
the Company.
B. The Management Committee shall cause to be prepared at
least annually, at Company expense, information necessary for the preparation
of the Members' and Assignees' federal and state income tax returns. The
Management Committee shall send or cause to be sent to each Member or Assignee
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.
8.4 Financial and Other Information. The Management Committee
shall provide such financial and other information relating to the Company or
any other Person in which the Company owns, directly or indirectly, an equity
interest, as a Member may request.
8.5 Filings. The Management Committee, at Company expense, shall
cause the income tax returns for the Company to be prepared by a certified
public accountant and timely filed with the appropriate authorities. The
Management Committee, at Company expense, shall also cause to be prepared and
timely filed, with appropriate federal and state regulatory and administrative
bodies, amendments to, or restatements of, the Certificate 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 Management
Committee is required by the Act or other applicable law to execute or file any
document and fails, after demand, to do so within a reasonable period of time
or refuses to do so, any Committee Member or Member may prepare, execute and
file that document.
8.6 Bank Accounts. The Management Committee shall maintain the
funds of the Company in one or more separate bank accounts in the name of the
Company.
8.7 Accounting Decisions and Reliance on Others. All decisions as
to accounting matters, except as otherwise specifically set forth herein, shall
be made by the Management Committee. The Management Committee may rely upon
the advice of its accountants as to whether such decisions are in accordance
with accounting methods followed for federal income tax purposes.
8.8 Tax Matters for the Company Handled by the Management
Committee and Tax Matters Partner. The Members hereby elect that the Company
shall be taxed as an association taxable as a partnership. The Management
Committee shall from time to time cause the Company to make such other tax
elections as they deem to be in the best interests of the Company and the
Members. The Tax Matters Partner 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
28
35
Tax Matters Partner shall oversee the Company tax affairs in the overall best
interests of the Company but shall not have the right to agree to extend any
statute of limitations without the approval of a Majority Interest of the
Members. If for any reason the Tax Matters Partner can no longer serve in that
capacity or ceases to be a Member, a Majority Interest of the Members may
designate another to be Tax Matters Partner.
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 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:
A. The happening of any event of dissolution specified in
the Certificate;
B. The entry of a decree of judicial dissolution;
C. The vote of a Majority Interest of the Members;
D. The vote of non-defaulting Members holding a majority
of the Percentage Interests held by all non-defaulting Members pursuant to
Section 3.8C; or
E. The purchase of the Property by the Company pursuant
to the Purchase Agreement and the Escrow has not been consummated by the
closing date set forth therein;
F. The Escrow is terminated unless a Majority Interest of
the Members elects to continue the business of the Company within ninety (90)
days of such termination; or
G. The sale of all or substantially all of the assets of
Company.
9.2 Winding Up. Upon the occurrence of any event specified in
Section 9.1, 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 Management Committee 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 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 9.4. The Persons winding up the affairs of the Company 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.
9.3 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 VI, and the Members' Capital Accounts shall be
29
36
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 (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 Management Committee or
by the Members or if any Member objects by an independent appraiser (any such
appraiser must be recognized as an expert in valuing the type of asset
involved) selected by the Management Committee or liquidating trustee and
approved by the Members.
9.4 Order of Payment Upon Dissolution. After determining that all
known debts and liabilities of the Company, 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, and in proportion to, 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.
9.5 Limitations on Payments Made in Dissolution. Except as
provided in Section 3.8 or Section 10.2, upon dissolution each Member shall
only 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 its Capital
Contribution and/or share of Net Profits against the Committee Members or any
other Member.
ARTICLE X
INDEMNIFICATION AND INSURANCE
10.1 Indemnification of Agents. The Company shall defend and
indemnify any Member or Committee Member and may indemnify any other Person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that it
is or was a Member, Committee Member, officer, employee or other agent of the
Company or that, being or having been such a Member, Committee Member, officer,
employee or agent, it is or was serving at the request of the Company as a
manager, director, officer, employee or other agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise (all such persons being referred to hereinafter as an "agent"), to
the fullest extent permitted by applicable law in effect on the date hereof and
to such greater extent as applicable law may hereafter from time to time
permit. The Management Committee shall be authorized, on behalf of the
Company, to enter into indemnity agreements from time to time with any Person
entitled to be indemnified by the Company hereunder, upon such terms and
conditions as the Management Committee deems appropriate in its business
judgment.
10.2 Breach of Purchase Agreement or Escrow. If any Member (a
"Breaching Member") fails to perform its obligations hereunder and such failure
results directly or
30
37
indirectly in a termination or breach of the Purchase Agreement or Escrow, such
Breaching Member shall pay for or reimburse the non-Breaching Members for
payments made by them with respect to: (a) all costs and expenses incurred in
investigating the Property; (b) the expenses relating to the ART Action; (c)
the Capital Contributions made by such non-Breaching Members pursuant to
Section 3.1; and (d) any other damages the non-Breaching Members may suffer as
a direct or indirect result of the failure of performance by the Breaching
Member.
10.3 Insurance. The Company shall have the power to purchase and
maintain insurance on behalf of any Person who is or was an agent of 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 Section 10.1 or under applicable
law.
ARTICLE XI
INVESTMENT REPRESENTATIONS
Each Member hereby represents and warrants to, and agrees with, the
Committee Members, the other Members, and the Company as follows:
11.1 Preexisting Relationship or Experience. (i) It has a
preexisting personal or business relationship with the Company or the Committee
Members or control persons or (ii) by reason of its business or financial
experience, or by reason of the business or financial experience of its
financial advisor who is unaffiliated with and who is not compensated, directly
or indirectly, by the Company or any affiliate or selling agent of the Company,
it is capable of evaluating the risks and merits of an investment in the
Membership Interest and of protecting its own interests in connection with this
investment.
11.2 No Advertising. It has not seen, received, been presented
with, or been solicited by any leaflet, public promotional meeting, newspaper
or magazine article or advertisement, radio or television advertisement, or any
other form of advertising or general solicitation with respect to the sale of
the Membership Interest.
11.3 Investment Intent. It is acquiring the Membership Interest
for investment purposes for its own account only and not with a view to or for
sale in connection with any distribution of all or any part of the Membership
Interest. No other person will have any direct or indirect beneficial interest
in or right to the Membership Interest.
11.4 Consultation with Attorney. It has been advised to consult
with its own attorney regarding all legal matters concerning an investment in
the Company and the tax consequences of participating in the Company, and has
done so, to the extent it considers necessary.
31
38
11.5 Tax Consequences. It acknowledges that the tax consequences
to its of investing in the Company will depend on its particular circumstances,
and neither the Company, the Committee Members, the Members, nor the partners,
shareholders, members, managers, agents, officers, directors, employees,
Affiliates, or consultants of any of them will be responsible or liable for the
tax consequences to it of an investment in the Company. It will look solely
to, and rely upon, its own advisers with respect to the tax consequences of
this investment.
11.6 No Assurance of Tax Benefits. It acknowledges that there can
be no assurance that the Code or the Regulations will not be amended or
interpreted in the future in such a manner so as to deprive the Company and the
Members of some or all of the tax benefits they might now receive, nor that
some of the deductions claimed by the Company or the allocations of items of
income, gain, loss, deduction, or credit among the Members may not be
challenged by the Internal Revenue Service.
ARTICLE XII
MISCELLANEOUS
12.1 Complete Agreement. This Agreement and the Certificate
constitute the complete and exclusive statement of agreement among the Members
with respect to the subject matter herein and therein and, other than the
Guarantee provided by ▇▇▇▇▇ ▇▇▇▇▇▇▇, replace and supersede all prior written
and oral agreements or statements by and among the Members or any of them,
including without limitation, that certain Memorandum of Understanding dated as
of December 3, 1996 among United Leisure, Pashaie and Showghy. No
representation, statement, condition or warranty not contained in this
Agreement or the Certificate will be binding on the Members or the Management
Committee or have any force or effect whatsoever. To the extent that any
provision of the Certificate conflict with any provision of this Agreement, the
Certificate shall control.
12.2 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.
12.3 Parties in Interest. Except as expressly provided in the Act,
nothing in this Agreement shall confer any rights or remedies under or by
reason of this Agreement on any Persons other than the Members and Committee
Members and their respective successors and assigns nor shall anything in this
Agreement relieve or discharge the obligation or liability of any third person
to any party to this Agreement, nor shall any provision give any third person
any right of subrogation or action over or against any party to this Agreement.
12.4 Pronouns; Statutory References. All pronouns and all
variations thereof shall be deemed to refer to the masculine, feminine, or
neuter, singular or plural, as the context in which they are used may require.
Any reference to the Code, the Regulations, the Act or other statutes or laws
will include all amendments, modifications, or replacements of the specific
sections and provisions concerned.
32
39
12.5 Headings. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
12.6 Interpretation. In the event any claim is made by any Member
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
Member or its counsel.
12.7 References to this Agreement. Numbered or lettered articles,
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.
12.8 Jurisdiction. Each Member hereby consents to the exclusive
jurisdiction of the state and federal courts sitting in Los Angeles County,
California in any action on a claim arising out of, under or in connection with
this Agreement or the transactions contemplated by this Agreement. Each Member
further agrees that personal jurisdiction over it may be effected by service of
process by registered or certified mail addressed as provided in Section 12.12
of this Agreement, and that when so made shall be as if served upon it
personally within the State of California.
12.9 Exhibits. All Exhibits attached to this Agreement are
incorporated and shall be treated as if set forth herein.
12.10 Severability. If any provision of this Agreement or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision
to persons or circumstances other than those to which it is held invalid shall
not be affected thereby.
12.11 Additional Documents and Acts. Each Member agrees to execute
and deliver such additional documents and instruments and to perform such
additional acts as may be necessary or appropriate to effectuate, carry out and
perform all of the terms, provisions, and conditions of this Agreement and the
transactions contemplated hereby.
12.12 Notices. Any notice to be given or to be served upon the
Company or any party hereto in connection with this Agreement must be in
writing (which may include facsimile) and will be deemed to have been given and
received when delivered to the address specified by the party to receive the
notice. Such notices will be given to a Member or Committee Members at the
address specified in Exhibit A hereto. Any party may, at any time by giving
five (5) days' prior written notice to the other parties, designate any other
address in substitution of the foregoing address to which such notice will be
given.
12.13 Amendments. All amendments to this Agreement will be in
writing and signed by a Majority Interest of the Members.
33
40
12.14 Reliance on Authority of Person Signing Agreement. If a
Member is not a natural person, neither the Company nor any Member will (a) 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 or (b) be responsible for the application or distribution of
proceeds paid or credited to individuals signing this Agreement on behalf of
such entity.
12.15 No Interest in Company Property; Waiver of Action for
Partition. No Member or Assignee has any interest in specific property of the
Company. Without limiting the foregoing, each Member and Assignee irrevocably
waives during the term of the Company any right that it may have to maintain
any action for partition with respect to the property of the Company.
12.16 Multiple Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
12.17 Attorney Fees. In the event that any dispute between the
Company and the Members or among the Members should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys' fees and expenses, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorney fees and
costs incurred in enforcing such judgment and an award of prejudgment interest
from the date of the breach at the maximum rate of interest allowed by law.
For the purposes of this Section: (a) attorney fees shall include, without
limitation, fees incurred in the following: (1) postjudgment motions; (2)
contempt proceedings; (3) garnishment, levy, and debtor and third party
examinations; (4) discovery; and (5) bankruptcy litigation and (b) prevailing
party shall mean the party who is determined in the proceeding to have
prevailed or who prevails by dismissal, default or otherwise.
12.18 Time is of the Essence. All dates and times in this Agreement
are of the essence.
12.19 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
34
41
All of the Members of United Hotel & Casino, LLC, a Delaware limited
liability company, have executed this Agreement, effective as of the date
written above.
UNITED LEISURE CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Its: President
------------------------------------
ATA ENTERPRISES, LLC
By: /s/
-------------------------------------
Its: President
------------------------------------
ABA ENTERPRISES, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Its: Manager
------------------------------------
35
42
EXHIBIT A
INITIAL PERCENTAGE INTERESTS AND ADDRESSES
OF MEMBERS AND COMMITTEE MEMBERS
Member's
Members' Name Member's Address Percentage Interest
------------- ---------------- -------------------
Prior to Upon and
Closing of Following
Acquisition Acquisition
of Property of Property
----------- -----------
United Leisure Corporation ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. 50% 50%
Penthouse
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Ata Enterprises, LLC c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇ 25% 30%
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Aba Enterprises, LLC c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 25% 20%
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
--- ---
100% 100%
=== ===
36
43
Committee Member's Name Committee Member's Address
----------------------- --------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
37
44
EXHIBIT B
LEGAL DESCRIPTION OF THE PROPERTY
THAT PORTION OF THE SOUTHEAST QUARTER (SE 1/4) OF SECTION 9, TOWNSHIP 21 SOUTH,
RANGE 61 EAST, M.D.M., FURTHER DESCRIBED AS FOLLOWS:
LOTS ONE (1), TWO (2), AND THREE (3) OF PARCEL MAP IN FILE 25, PAGE 68,
RECORDED APRIL 24, 1979 AS DOCUMENT NO. 1003812, OFFICIAL RECORDS, ▇▇▇▇▇
COUNTY, NEVADA.
38