Document:

(i)

EXHIBIT 10.39

 

PATENT LICENSE AGREEMENT

 

between

 

LUCENT TECHNOLOGIES GRL CORPORATION

 

and

 

CONDUCTUS, INC.

 

 

Effective as of April 1, 1999

 

 

Relating to Superconducting Materials

 

 

 

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS

DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION

 

PATENT LICENSE AGREEMENT

 

TABLE OF CONTENTS

 

	

  ARTICLE

  I - GRANTS OF LICENSES

  
	

   

  	

   

  
	

  1.01

  	

  Grant

  
	

  1.02

  	

  Duration

  
	

  1.03

  	

  Scope

  
	

   

  	

   

  
	

  ARTICLE

  II - FEES AND PAYMENTS

  
	

   

  	

   

  
	

  2.01

  	

  Fee

  
	

  2.02

  	

  Royalties

  
	

  2.03

  	

  Accrual

  
	

  2.04

  	

  Records and Adjustments

  
	

  2.05

  	

  Reports and Payments

  
	

   

  	

   

  
	

  ARTICLE

  III - TERMINATION

  
	

   

  	

   

  
	

  3.01

  	

  Breach

  
	

  3.02

  	

  Voluntary Termination

  
	

  3.03

  	

  Survival

  
	

   

  	

   

  
	

  ARTICLE

  IV - MISCELLANEOUS PROVISIONS

  
	

   

  	

   

  
	

  4.01

  	

  Disclaimer

  
	

  4.02

  	

  Nonassignability

  
	

  4.03

  	

  Addresses

  
	

  4.04

  	

  Taxes

  
	

  4.05

  	

  Choice

  of Law

  
	

  4.06

  	

  Publicity

  
	

  4.07

  	

  Integration

  
	

  4.08

  	

  Dispute Resolution

  
	

   

  	

   

  
	

  DEFINITIONS APPENDIX

  

 

 

**** Confidential material

redacted and filed separately with the Commission.

 

i

 

PATENT LICENSE AGREEMENT

 

This Patent License Agreement

(“Agreement”) is between the following Parties: LUCENT TECHNOLOGIES GRL

CORPORATION, a Delaware corporation (“GRL”), having an office at Suite 105,

14645 N.W. 77th Avenue, Miami Lakes, Florida 33014, and CONDUCTUS, INC., a

Delaware corporation (“CONDUCTUS”), having an office at 969 West Maude Avenue,

Sunnyvale, California 94086.  This

Agreement is effective on April 1, 1999 (“Effective Date”).  The Parties agree as follows:*

 

ARTICLE

I

GRANTS OF LICENSES

 

1.01        Grant

 

GRL grants to the CONDUCTUS

under GRL’s PATENTS personal, nonexclusive and nontransferable licenses for:

 

COMMUNICATIONS PRODUCTS

HEALTHCARE PRODUCTS

NMR COIL SETS

SQUID SENSORS

 

and no other products.

 

1.02        Duration

 

All licenses granted herein

under any patent shall continue for the entire unexpired term of such patent

provided CONDUCTUS is in compliance with its obligations under this Agreement.

 

1.03        Scope

 

(a)           The licenses granted are licenses to make, have made and

import in the United States and to use, lease, sell and offer for sale

world-wide LICENSED PRODUCTS.

 

(b)           Licenses granted herein are not to be construed either (i)

as consent by GRL to any act which may be performed by CONDUCTUS, except to the

extent

 

* Any term in capital letters

which is defined in the Definitions Appendix shall have the meaning specified therein.

 

 

impacted by GRL’s PATENTS, or

(ii) to include licenses to contributorily infringe or induce infringement

under U.S. law or a foreign equivalent thereof.

 

(c)           The grant of each license hereunder includes the right of

CONDUCTUS to grant sublicenses within the scope of such license to CONDUCTUS’s

SUBSIDIARIES for so long as they remain its SUBSIDIARIES.  Any such sublicense may be made effective

retroactively, but not prior to the effective date hereof, nor prior to the

sublicensee’s becoming a SUBSIDIARY of CONDUCTUS.

 

ARTICLE

II

FEES AND PAYMENTS

 

2.01        Fee

 

(a)           In payment for the grant of rights hereunder by GRL to

CONDUCTUS, CONDUCTUS agrees to pay to GRL an initial nonrefundable fee of

[****]

 

(b)           For the convenience of the Parties, CONDUCTUS shall pay

the fee specified in Section 2.01(a) in four installments as specified in the

table below.

 

	

  Installment

  	

   

  	

  Amount

  	

   

  	

  Due Date

  
	

  1

  	

   

  	

  $

  	

  [****]

  	

   

  	

  July 15, 1999

  
	

  2

  	

   

  	

  $

  	

  [****]

  	

   

  	

  September 15, 1999

  
	

  3

  	

   

  	

  $

  	

  [****]

  	

   

  	

  January 15, 2000

  
	

  4

  	

   

  	

  $

  	

  [****]

  	

   

  	

  April 15, 2000

  

 

(c)           In no event shall any fee paid or any portion thereof

under this Section 2.01 be refundable or creditable toward royalties or other

payments due under this Agreement.

 

2.02        Royalties

 

(a)           In addition to the fee specified in Section 2.01 and

subject to Section 2.02(c), royalty shall be payable to GRL at the rate of

[****] on each TYPE 1 LICENSED PRODUCT which is sold, leased, or put into use

by CONDUCTUS or any of its SUBSIDIARIES licensed pursuant to Section

1.03(c).  Royalty shall be payable to

GRL at the rate of [****] on each TYPE 2 LICENSED PRODUCT which is sold,

leased, or put into use by CONDUCTUS or any of its SUBSIDIARIES licensed

pursuant to Section 1.03(c).  Such

royalty rates shall be applied, except as otherwise provided in this Article

II, to the FAIR MARKET VALUE of such LICENSED PRODUCTS.  No royalty shall be due on LICENSED PRODUCTS

sold to LUCENT or its SUBSIDIARIES.

 

2

 

(b)           If CONDUCTUS purchases a product which product is solely a

material claimed in one or more of GRL’s PATENTS from a third party, which

product is purchased from a third party licensed under one or more of GRL’s

PATENTS to make, have made and/or import said product and such third party

provides written notice to such effect at the time of purchase, then the

royalty rate specified in Section 2.02(a) for any LICENSED PRODUCT

incorporating or manufactured using said product shall be reduced by [****]

 

(c)           No royalty under this Section 2.02 shall be due on the

sale, lease or use of any LICENSED PRODUCT prior to April 26, 2003.

 

2.03        Accrual

 

(a)           Royalty shall accrue upon the first sale, lease or putting

into use of such LICENSED PRODUCT. (Rebuilding or enlarging any product shall

be deemed to be a first putting into use of such product).  Obligations to pay accrued royalties shall

survive termination of licenses and rights pursuant to Article III and the

expiration of any patent.

 

(b)           When a company ceases to be a SUBSIDIARY of CONDUCTUS,

royalties which have accrued with respect to any products or revenues of such

company, but which have not been paid, shall become payable with CONDUCTUS’s

next scheduled royalty payment.

 

2.04        Records and Adjustments

 

(a)           CONDUCTUS shall keep full, clear and accurate records with

respect to all sales and with respect to LICENSED PRODUCTS and shall furnish

any information which GRL may reasonably prescribe from time to time to enable

GRL to ascertain the proper royalty due hereunder on account of products sold,

leased and put into use by CONDUCTUS or any of its SUBSIDIARIES.  CONDUCTUS shall retain such records with

respect to sales and with respect to each LICENSED PRODUCT for at least seven

(7) years.  GRL shall have the right

through its accredited auditors to make an examination, during normal business

hours, of all records and accounts bearing upon the amount of royalty payable

to it hereunder.  Prompt adjustment

shall be made to compensate for any errors or omissions disclosed by such

examination.

 

(b)           Independent of any such examination, GRL will credit to

CONDUCTUS the amount of any overpayment of royalties made in error which is

identified and fully explained in a written notice to GRL delivered within

twelve (12) months after the due date of the payment which included such

alleged overpayment, provided that GRL is able to verify, to its own

satisfaction, the existence and extent of the overpayment.

 

3

 

(c)           No refund, credit or other adjustment of royalty payments

shall be made by GRL except as provided in this Section 2.04.  Rights conferred by this Section 2.04 shall

not be affected by any statement appearing on any check or other document,

except to the extent that any such right is expressly waived or surrendered by

a party having such right and signing such statement.

 

2.05        Reports and Payments

 

Within sixty (60) days after

the end of each semiannual period ending on March 31st or September 30th,

commencing with the semiannual period during which April 26, 2003 occurs,

CONDUCTUS shall furnish to GRL at the address specified in Section 4.05 a

statement certified by a responsible official of CONDUCTUS showing in a  manner acceptable to GRL:

 

(i)                                     all

TYPE 1 LICENSED PRODUCTS and TYPE 2 LICENSED PRODUCTS which were sold, leased

or put into use during such semiannual period;

 

(ii)                                  the

FAIR MARKET VALUES of such TYPE 1 LICENSED PRODUCTS and TYPE 2 LICENSED

PRODUCTS; and

 

(iii)                               the

amount of royalty payable thereon without regard to any exclusions or

reductions of royalty pursuant to Sections 2.02(a) and (b); and

 

(iv)                              the

net amount payable after application of such reductions of royalty.

 

If no TYPE 1 LICENSED PRODUCT

or TYPE 2 LICENSED PRODUCT has been so sold, leased or put into use, the

statement shall show that fact.

 

(c)           Within such sixty (60) day period specified in Section

2.05, CONDUCTUS shall pay in United States dollars to GRL at the address

specified in Section 4.03 the royalties payable in accordance with such

statement.  Any conversion to United States

dollars shall be at the prevailing rate for bank cable transfers as quoted for

the last day of such semiannual period by leading United States banks in New

York City dealing in the foreign exchange market.

 

(d)           Overdue payments hereunder shall be subject to a late

payment charge calculated at an annual rate of three percentage points (3%)

over the prime rate or successive prime rates (as posted in New York City

during delinquency.  If the amount of

such charge exceeds the maximum permitted by law, such charge shall be reduced

to such maximum.

 

4

 

ARTICLE III

TERMINATION

 

3.01        Breach

 

In

the event of a breach of this Agreement by CONDUCTUS, GRL may, in addition to

any other remedies that it may have, at any time terminate all licenses and

rights granted by it hereunder by not less than two (2) months’ written notice

specifying such breach, unless within the period of such notice all breaches

specified therein shall have been remedied.

 

3.02        Voluntary

Termination

 

(a)           By written notice GRL, CONDUCTUS may

voluntarily terminate all or a specified portion of the licenses and rights

granted to it hereunder.  Such notice

shall specify the effective date (not more than six (6) months prior to the

giving of said notice) of such termination.

 

(b)           Failure to pay any installment of the

fee due pursuant to Section 2.01 within ten (10) days of the due date for such

installment shall be considered to be a voluntary termination by CONDUCTUS,

effective upon such due date, of all rights and licenses under this Agreement.  Upon such voluntary termination, such

installment and any remaining installments of the fee due pursuant to Section

2.01 shall be payable immediately.

 

3.03        Survival

 

Any

termination of licenses and rights of CONDUCTUS under the provisions of this

Article III shall not affect CONDUCTUS’s licenses, rights and obligations with

respect to any MAGNETIC PRODUCT made prior to such termination.

 

ARTICLE IV

MISCELLANEOUS

PROVISIONS

 

4.01        Disclaimer

 

Neither GRL nor any of its RELATED COMPANIES

makes any representations, extends any warranties of any kind, assumes any

responsibility or obligations whatever, or confers any right by implication,

estoppel or otherwise, other than the licenses and rights herein expressly

granted.

 

5

 

4.02        Nonassignability

 

(a)           GRL has entered into this Agreement

in contemplation of personal performance by CONDUCTUS and it is GRL’s intention

that a transfer of CONDUCTUS’s licenses or rights not occur without GRL’s

express written consent.

 

(b)           Neither this Agreement nor any

licenses or rights hereunder, in whole or in part, shall be assignable or

transferable by CONDUCTUS (by operation of law or otherwise) without GRL’s

express written consent.

 

(c)           Any purported assignment or transfer

of this Agreement or licenses or rights hereunder by CONDUCTUS without GRL’s

necessary consent shall be void (without affecting any other licenses or rights

hereunder).

 

(d)           Notwithstanding the provisions of

Section 4.02(a-c), if CONDUCTUS is acquired by a third party prior to April 25,

2003, which third party (i) is not a COMPETITOR of GRL or any of its RELATED

COMPANIES and (ii) is not engaged, as of the date on which CONDUCTUS is

acquired, in litigation on any matter with GRL or any of its RELATED COMPANIES,

then this Agreement may be assigned to such third party provided that such

third party agrees:

 

(i)                         to pay GRL a lump sum of [****] United States dollars (U.S. $[****]) on the date this Agreement is assigned;

or

 

(ii)                      to pay GRL a lump sum of [****] United States dollars (U.S. $[****]) on the date this Agreement is assigned

and to amend the royalty provisions of Section 2.02(a) so that the royalty for

TYPE 1 LICENSED PRODUCTS is ****]

and for TYPE 2 LICENSED PRODUCTS is [****]

 

CONDUCTUS

shall provide to GRL written notice of both the acquisition and which of (i) or

(ii) above has been selected by the third party.

 

(e)           Notwithstanding the provisions of

Section 4.02(a-c), if CONDUCTUS is acquired by a third party on or after April

25, 2003, which third party (i) is not a COMPETITOR of GRL or any of its

RELATED COMPANIES and (ii) is not engaged, as of the date on which CONDUCTUS is

acquired, in litigation on any matter with GRL or any of its RELATED COMPANIES,

then this Agreement may be assigned to such third party provided that such

third party agrees:

 

6

 

(i)                         to pay GRL a lump sum of United States

dollars (U.S. $ [****]) on the

date this Agreement is assigned; or

 

(ii)                      to pay GRL a lump sum of [****] United States dollars (U.S. $ [****]) on the date this Agreement is assigned

and to amend the royalty provisions of Section 2.02(a) so that the royalty for

TYPE 1 LICENSED PRODUCTS is [****]

and for TYPE 2 LICENSED PRODUCTS is [****]

 

CONDUCTUS

shall provide to GRL written notice of both the acquisition and which of (i) or

(ii) above has been selected by the third party.

 

4.03        Addresses

 

(a)           Any notice or other communication

hereunder shall be sufficiently given to CONDUCTUS when sent by certified mail

addressed to CONDUCTUS’s office specified above, or to GRL when sent by

certified mail addressed to Contract Administrator, Intellectual Property

Organization, Lucent Technologies GRL Corporation, Suite 105, 14645 N.W. 77th

Avenue, Miami Lakes, Florida 33014, United States of America. Changes in such

addresses may be specified by written notice.

 

(b)           Payments by CONDUCTUS shall be made

to GRL at Lucent Technologies GRL Corporation, General Post Office, P.O. Box

6219, New York, New York 10087-6219, United States of America or by wire

transfer at Chase Manhattan Bank, Account Number: 323857752, Swift Code:

CHASUS33, ABA Code: 021000021.  Changes

in such address or account may be specified by written notice.

 

4.04        Taxes

 

CONDUCTUS

shall pay any tax, duty, levy, customs fee, or similar charge (“taxes”),

including interest and penalties thereon, however designated, imposed as a

result of the operation or existence of this Agreement, including taxes which

CONDUCTUS is required to withhold or deduct from payments to GRL, except (i)

net income taxes imposed upon GRL by any governmental entity within the United

States (the fifty (50) states and the District of Columbia), and (ii) net

income taxes imposed upon GRL by jurisdictions outside the United States which

are allowable as a credit against the United States Federal income tax of GRL

or any of its SUBSIDIARIES.  In order

for the exception in (ii) to be effective, CONDUCTUS must furnish to GRL

evidence sufficient to satisfy the United States taxing 

 

7

 

authorities

that such taxes have been paid.  Such

evidence must be furnished to GRL within thirty (30) days of issuance by the

local taxing authority.

 

4.05        Choice of Law

 

The

Parties agree that the law of New York, exclusive of its conflict of law

provisions, shall apply in any dispute arising with respect to this Agreement.

 

4.06        Publicity

 

(a)           Nothing in this Agreement shall be

construed as conferring upon CONDUCTUS or its SUBSIDIARIES any right to include

in advertising, packaging or other commercial activities related to a

COMMUNICATIONS PRODUCT, HEALTHCARE PRODUCT, NMR COIL SET, and/or SQUID SENSOR,

any reference to GRL or any of its RELATED COMPANIES, their trade names,

trademarks or service marks in a manner which would be likely to cause

confusion or to indicate that such COMMUNICATIONS PRODUCT, HEALTHCARE PRODUCT,

NMR COIL SET and/or SQUID SENSOR is in any way certified by GRL or any of its

RELATED COMPANIES.

 

(b)           Each Party agrees to maintain the

contents of this Agreement in confidence. 

However, GRL and its RELATED COMPANIES may disclose the royalty

reduction provision of Section 2.02(b) to potential licensees of intellectual

property relating to high temperature superconducting materials.

 

(c)           Each Party may make announcements

relating to the existence of this Agreement. 

Each Party agrees, however, to submit each announcement for approval to

the other Party, whose approval shall not be unreasonably withheld.  If a Party does not respond within thirty

(30) days from receipt of an announcement submitted to it for approval, such

announcement shall be deemed approved by such Party.

 

4.07        Integration

 

This

Agreement sets forth the entire agreement and understanding between the Parties

as to the subject matter hereof and merges all prior discussions between

them.  Neither of the Parties shall be

bound by any warranties, understandings, modifications or representations with

respect to such subject matter other than as expressly provided herein or in a

writing signed with or subsequent to execution hereof by an authorized

representative of the Party to be bound thereby.

 

4.08        Dispute

Resolution

 

(a)           If a dispute arises out of or relates

to this Agreement, or the breach, termination or validity thereof, the Parties

agree to submit the dispute to a sole 

 

8

 

mediator

selected by the Parties or, at any time at the option of a Party, to mediation

by the American Arbitration Association ("AAA").  If not thus resolved, it shall be referred

to a sole arbitrator selected by the Parties within thirty (30) days of the

mediation, or in the absence of such selection, to AAA arbitration which shall

be governed by the United States Arbitration Act.

 

(b)           Any award made (i) shall be a bare

award limited to a holding for or against a Party and affording such remedy as

is deemed equitable, just and within the scope of the agreement; (ii) shall be

without findings as to issues (including but not limited to patent validity

and/or infringement) or a statement of the reasoning on which the award rests;

(iii) may in appropriate circumstances (other than patent disputes) include

injunctive relief; (iv) shall be made within four (4) months of the appointment

of the arbitrator; and (v) may be entered in any court.

 

(c)           The requirement for mediation and

arbitration shall not be deemed a waiver of any right of termination under this

Agreement and the arbitrator is not empowered to act or make any award other

than based solely on the rights and obligations of the Parties prior to any

such termination.

 

(d)           The arbitrator shall be knowledgeable

in the legal and technical aspects of this Agreement and shall determine issues

of arbitrability but may not limit, expand or otherwise modify the terms of

this Agreement.

 

(e)           The place of mediation and

arbitration shall be New York City.

 

(f)            Each Party shall bear its own

expenses but those related to the compensation and expenses of the mediator and

arbitrator shall be borne equally.

 

(g)           A request by a Party to a court for

interim measures shall not be deemed a waiver of the obligation to mediate and

arbitrate.

 

(h)           The arbitrator shall authority to

award only compensatory damages.  The

arbitrator shall no authority to award punitive or other damages, and each

Party irrevocably waives any claim thereto.

 

(i)            The Parties, their representatives,

other participants and the mediator and arbitrator shall hold the existence,

content and result of mediation and arbitration in confidence.

 

9

 

IN WITNESS WHEREOF, each of the Parties has caused this

Agreement to be executed in duplicate originals by its duly authorized

representatives on the respective dates entered below.

 

	

   

  	

  LUCENT TECHNOLOGIES GRL CORPORATION

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ M. R. Greene

  	

   

  
	

   

  	

   

  	

  M. R. Greene

  	

   

  
	

   

  	

   

  	

  Chairman

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Date:

  	

  6-11-99

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  CONDUCTUS, INC.

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Charles E. Shalvoy

  	

   

  
	

   

  	

   

  	

  Charles E. Shalvoy

  	

   

  
	

   

  	

   

  	

  President and CEO

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Date:

  	

  6/3/99

  	

   

  
							

 

 

THIS AGREEMENT DOES

NOT BIND OR OBLIGATE EITHER PARTY

IN ANY MANNER UNLESS

DULY EXECUTED BY AUTHORIZED

REPRESENTATIVES OF

BOTH PARTIES

 

10

 

DEFINITIONS APPENDIX

 

COMPETITOR means a legal entity providing service

and/or products in microelectronics (including but not limited to integrated

circuits and optoelectronics), business communications systems (including but

not limited to messaging, voice/date and call center systems), optical

networking systems, switching and access systems, wireless network products,

systems and infrastructure, network products (including but not limited to

fiber products and power systems for communication products) and all natural

improvements and extension therefrom. 

The term does not include a legal entity whose sales of the above

products constitute less than one percent (1%) of such legal entity’s

revenue.  The term also does not include

Superconducting Technologies Inc., Illinois Superconductor Corp., Northrop

Grumman and General Dynamics.

 

COMMUNICATIONS PRODUCT means components for the transmission and

reception of radio frequency signals including, but not limited to, front-end

receivers and antennas.

 

FAIR MARKET VALUE means, with respect to any item sold,

leased or put into use, the greater of (i) the selling price which a seller

would realize from an unaffiliated buyer in an arm’s length sale of an

identical product in the same quantity and at the same time and place as such

sale, lease or putting into use; or (ii) the selling price actually obtained

for such product in the form in which it is sold, whether or not assembled (and

without excluding therefrom any components or subassemblies thereof which are

included in such selling price).

 

In

determining “selling price” the following shall be excluded:

 

(a)                      usual trade discounts actually allowed to

unaffiliated persons or entities;

(b)                     packing costs;

(c)                      costs of insurance and transportation; and

(d)                     import, export, excise, sales and value

added taxes, and customs duties.

 

GRL’s PATENTS means any patent issuing from U.S. patent

application serial number 021,229 filed March 3, 1987, having inventors

Batlogg, Cava and van Doser (presently involved in interference 101,981) and

any reissues, divisionals, continuations, continuations-in-part and foreign

equivalents thereof.

 

HEALTHCARE PRODUCT means a detector for magnetic resonance

imaging.

 

LICENSED PRODUCTS means any product specified in Section

1.01.

 

11

 

NMR COIL SET means patterned and tested radio frequency

devices for use in Nuclear Magnetic Resonance (NMR) systems.

 

RELATED COMPANIES means, with respect to GRL: (i) any

SUBSIDIARY of GRL, (ii) the parent company of GRL, Lucent Technologies, Inc.

and/or (iii) any SUBSIDIARY of such parent company.

 

SQUID SENSOR means superconducting quantum interference

devices (SQUIDs) for measuring magnetic properties of materials for use in the

field of healthcare and for research.

 

SUBSIDIARY of a company means a corporation or other

legal entity (i) the majority of whose shares or other securities entitled to

vote for election of directors (or other managing authority) is now or

hereafter controlled by such company either directly or indirectly; or (ii)

which does not have outstanding shares or securities but the majority of whose

ownership interest representing the right to manage such corporation or other

legal entity is now or hereafter owned and controlled by such company either

directly or indirectly; but any such corporation or other legal entity shall be

deemed to be a SUBSIDIARY of such company only as long as such control or

ownership and control exists.

 

TYPE 1 LICENSED PRODUCT means a COMMUNICATIONS PRODUCT.

 

TYPE

2 LICENSED PRODUCT means a HEALTHCARE PRODUCT, NMR

COIL SET and/or a SQUID SENSOR.

 

12INVESTOR AGREEMENT

EXHIBIT 10.56

 

INVESTOR AGREEMENT

 

This AGREEMENT is dated as of February 15, 2002, by

and between FULL HOUSE RESORTS, INC. (“Full House”), a Delaware corporation

with an address at 2300 West Sahara Avenue, Suite 450, Las Vegas, Nevada 89102,

(“Full House”) and RAM ENTERTAINMENT, LLC, a Nevada limited liability company

with an address at c/o Mark Knobel, 165 W. Liberty Street, #210, Reno, Nevada

89501 (“Investor”)(Full House and Investor are collectively referred to herein

as the “Parties” and sometimes individually as the “Party”).

 

W I T N E S S E T H:

 

WHEREAS, Full House is the sole owner (through its

wholly-owned affiliates GAMING ENTERTAINMENT (Michigan) LLC and GAMING

ENTERTAINMENT (California) LLC) of certain Management Agreements executed by

and between it and the Nottawaseppi Huron Potawatomi Tribe and the Torres

Martinez Tribe (the “Tribes”), granting it the opportunity to develop, finance,

and manage an Indian Gaming Facility for each Tribe (“Development

Opportunities”), as well as owner of other various agreements and work

undertaken  in connection therewith;

 

WHEREAS, Full House is seeking an investor to help

provide the infrastructure, financing and expertise to analyze, develop and

manage certain aspects of these Development Opportunities;

 

WHEREAS, RAM ENTERTAINMENT, LLC is desirous of

contracting with Full House to be that Investor;

 

NOW, THEREFORE, in consideration of the mutual

covenants and agreements set forth herein, and for other good and valuable

consideration the receipt and adequacy of which are hereby acknowledged, the

Parties hereby agree as follows:

 

ARTICLE I

CERTAIN DEFINED TERMS

 

“Affiliate” means with respect to a specified Party,

any entity that directly or indirectly controls, is controlled by, or is under

common control with, the specified Party. 

As used in this definition, the term “control” means the possession,

directly or indirectly, of the power to direct or cause the direction of the

management and policies of an entity, whether through ownership of voting

securities, by contract or otherwise.

 

 

 

“Ancillary Opportunities” means real estate

development opportunities such as opportunities to develop hotels and

non-gaming recreational facilities, which are ancillary to the Development

Opportunities.

 

“Business Day” means any day other than a Saturday,

Sunday or day on which commercial banking institutions are authorized by law to

be closed in Las Vegas, Nevada.

 

“Closing Date” refers to such date or dates as the

Parties mutually agree upon.

 

“Confidential Information” means all information which

is disclosed to or otherwise acquired by a Party hereto, under or in connection

with the performance by a Party of its obligations under this Agreement, which

relates to the other Party hereto and/or its business, products and services.

Confidential Information does not include information which is:  (i) in the public domain; (ii) already known

to the party to whom it is disclosed (hereinafter “Recipient”) at the time of

such disclosure as documented by records in its possession prior to such

disclosure; (iii) subsequently received by Recipient in good faith from a third

party having prior right to make such subsequent disclosure; (iv) independently

developed by Recipient without use of the information disclosed pursuant to

this Agreement; (v) approved in writing for unrestricted release of

unrestricted disclosure by the party owning or disclosing the information

(hereinafter “Discloser”); or (vi) produced or disclosed pursuant to applicable

laws, regulations or court order, provided the Recipient has given the

Discloser written notice of such request such that the Discloser has an

opportunity to defend, limit or protect such production or disclosure.

 

“Full House Financing Obligation” shall mean Full

House’s fifty percent (50%) of the amounts that the Parties are required to

provide to GEC and GEM, pursuant to Section 4.1 below, to fund the requirements

of the Development Opportunities and of the Project Development Budget.

 

“GEC” means GAMING ENTERTAINMENT (California) LLC, a

limited liability company organized under the laws of the State of Delaware and

a wholly-owned subsidiary of Full House and party to certain gaming Management

Agreements executed by and between it and the Torres Martinez Tribe.

 

“GEC LLC Agreement” means the agreement governing the

formation and operation of GEC, a copy of which is attached as Exhibit A

hereto.

 

“GEM” means GAMING ENTERTAINMENT (Michigan) LLC, a

limited liability company organized under the laws of the State of Delaware and

a

 

2

 

wholly-owned subsidiary of Full House and party to

certain gaming Management Agreements executed by and between it and the

Nottawaseppi Huron Potawatomi Tribe.

 

“GEM LLC Agreement” means the amended and restated LLC

agreement governing the formation and operation of GEM, a copy of which is

attached as Exhibit B hereto.

 

“Indian Gaming Facility” means a facility located in

Indian Lands (as defined in the LLC Agreement) in which it is lawful to conduct

Class II or Class III gaming, as such terms are defined in the Indian Gaming

Regulatory Act, as amended (25 U.S.C. § 2701 et seq.).

 

“Investor Loans” includes the Temporary Loan and any

other funds advanced or loaned by Investor to GEM or GEC, as well as amounts

loaned by Investor to GEC and GEM to fund the Full House Financing Obligation,

as described at Section 5.2 below, which are repaid as set forth at Article V

below.

 

“In-House Project Personnel” means employees of a

Party or its Affiliates (other than an LLC) who perform services in connection

with a project.

 

“Management Agreement” includes the Second Amended and

Restated Management Agreement between the Tribe and GEM and the Temporary

Gaming Facility Management Agreement between the Tribe and GEM.

 

“Management Committee” refers to the individuals

responsible, pursuant to the GEC LLC and GEM LLC Agreements, for the management

of GEC and GEM, and who are appointed by the Members as set forth herein.

 

“Material Breach” means any action with respect to the

business of GEM, LLC, which constitutes (i) fraud, embezzlement,

misappropriation, dishonesty or breach of trust; (ii) a felony or any action

involving moral turpitude; (iii) a material breach or violation of any or all

of the covenants, agreements and obligations set forth in this Agreement

(including without limitation a willful or knowing failure or refusal to

perform any or all material duties and responsibilities — including in

particular all financing responsibilities — in this Agreement or in the GEM LLC

Agreement) which remains uncured for a period of fifteen (15) days after

written notice to cure the action or inaction specified therein.

 

“Outside Project Personnel” means non-employee

professionals, contractors or agents who are retained by a Party or its

Affiliates (other than

 

3

 

an LLC) to perform services in connection with the

Development Opportunities.

 

“Prime” shall mean the prime

rate charged by Bank of America, New York.

 

“Project Development Budget”

shall have the meaning set forth in Article III hereof.

 

“Site” means the prospective

location for the Tribe’s proposed Indian Gaming Facility, which is further

described in the fee-to-trust application filed by the Tribe with, and

currently pending before, the Bureau of Indian Affairs.

 

“Temporary Loan” means the

funds required to develop the Temporary Facility on the Site as defined in the

Management Agreements.

 

4

 

ARTICLE II

ADMISSION OF INVESTOR TO LLC’s

 

Section 2.1  Admission

of Investor.  Upon execution of this

Agreement, Investor shall be admitted to GEC and GEM as a Member with 50% of

the ownership interest therein, and having the rights and responsibilities set

forth here and in the GEC and GEM LLC Agreements, which shall be or have been

amended to the extent necessary to reflect the terms of this Agreement.  Of even date  herewith, the Parties have entered into an Amended and Restated Limited

Liability Company Agreement of GEM, pursuant to this Investor Agreement; in the

event of any conflict between the terms of this Investor Agreement and the

provisions contained therein, the terms of this Investor Agreement shall be

controlling.

 

Section 2.2  Initial

Loan by Investor to Full House. 

Immediately upon execution of this agreement, Investor shall loan to

Full House the sum of Two Million Three Hundred Eighty One Thousand Two Hundred

Sixty Dollars ($2,381,260) (the “Initial Loan”) pursuant to a promissory note

attached as Exhibit C (“Note”), which Note shall be secured by a Security

Agreement attached hereto as Exhibit D (“Security Agreement”).  The Initial Loan shall be paid pursuant to

the terms of the Note and be due and payable one year from receipt by Full

House of the full amount of the Initial Loan proceeds.  Notwithstanding the foregoing, in the event

that both of the two events described at subparagraphs (a) and (b) of this

Section 2.2 (collectively, the “Investor Contingencies”) occurs prior to that

date, then the Initial Loan shall be deemed to be paid in full, and Investor

shall be credited with a capital contribution to GEM in the amount of Two

Million Dollars ($2,000,000) and with the sum of Three Hundred Eighty One

Thousand Two Hundred Sixty ($381,260) as part of its Temporary Loan to GEM.

 

Notwithstanding anything contained herein to the

contrary, the Parties acknowledge that the capital contribution of Full House

shall, as of the date that Investor is credited with the $2,000,000 capital

contribution described in the foregoing sentence, also be deemed to be

$2,000,000.

 

(a)                                  Federal approval of the currently-pending fee-to-trust application filed

by the Nottawaseppi Huron Band of Potawatomi in Michigan, in connection with

their proposed Site for construction of their Indian Gaming Facility; and

 

(b)           Federal approval of a Class III Management Agreement that

has been executed by the Tribe.

 

5

 

Investor may waive any one or more of the Investor

Contingencies.  In the event that both

Investor Contingencies fail to occur prior to the due date of the Initial Loan

(which due date, according to its terms, shall be the first anniversary of the

execution date of the Note given in connection therewith) or are not waived by

Investor, then the Initial Loan shall be payable in full and Investor shall

forfeit its interest in GEM.

 

Notwithstanding anything to the contrary contained

herein, the Parties shall, based upon an equitable tax treatment of the

transaction, treat the transaction whereby the Initial Loan is deemed to be paid

in full upon the happening (or waiver) of the Investor Contingencies, as

 

(i)                                    an acquisition by Investor of one half of Full House’s interest in GEM,

or

 

(ii)                                a capital contribution by Investor to GEM, followed by a distribution of

$2 million to Full House,

 

as well as an Investor Loan to GEM in the amount $381,260.

 

Section 2.3  Special

Distribution of Profits to Investor. 

After the Investor Contingencies have been met, GEM profits shall be

divided equally between the Members except as set forth in Section 5.4

below.  However, a priority distribution

of the first $2 million of any distributions from GEM shall be paid out to

Investor, and the second $2 million of distributions from GEM shall be paid out

to Full House, as a repayment of their respective capital contributions to

GEM.  Notwithstanding the foregoing, GEM

shall not make any distribution or payment to Full House or an affiliate prior

to making  the $2,000,000 priority

distribution to Investor.

 

Section 2.4  Management

Committee.  The Management Committee

will consist of three members. One member appointed by Full House, one member

appointed by Investor, and the third member will be appointed by the Investor

so long as the Initial Loan or any Investor Loans remain unpaid; thereafter,

the third member will be appointed jointly by the Members.

 

Section 2.5  Failure

of Investor Contingencies. 

Notwithstanding provisions herein to the contrary, in the event that

both Investor Contingencies fail to occur within one year from Full House’s

receipt of the proceeds of the Initial Loan, and Investor has not waived any

unfulfilled Investor Contingency, so that the Investor is credited with the

capital

 

6

 

contribution as stated above at Section 2.2, then Investor

shall cease to be a member of GEM and of GEC.

 

ARTICLE III

PURPOSE AND BUSINESS DEVELOPMENT PROCESS

 

Section 3.1  Purpose.  The Parties agree that they shall, through

their participation in GEC and GEM, jointly pursue the Development

Opportunities with a view to develop, finance, and manage Indian Gaming

Facilities for the Tribes.

 

Section 3.2  Huron

Potawatomi Development Opportunity. The Parties agree that they will

develop and operate the Huron Potawatomi Development Opportunity in accordance

with the terms of the GEM LLC Agreement, as amended pursuant to this Agreement.

Each Party agrees to devote to GEM such resources as are reasonably necessary

to develop and manage this Development Opportunity. The Parties shall agree

upon a timeline documenting target dates respecting:  (i) the creation of a Project Development Budget (as defined in

Article III hereof); (ii) the securing of necessary permits and approvals; and

(iii) the securing of third party financing. 

All expenses related to this Development Opportunity shall be incurred

in accordance with the Project Development Budget and borne equally by the

Parties, but funded as set forth herein below. 

Except as otherwise agreed between the Parties, no Party shall enter

into any material third party agreement without the consent of the Other

Party.  The Parties shall work together

on this Development Opportunity in accordance with its Project Development

Budget and all related expenses shall be incurred in accordance with the

Project Development Budget and paid by GEM.

 

Section 3.3  Licenses.  The Parties acknowledge that the business

activities of GEC and GEM will require GEC, GEM and the Parties (and/or their

Affiliates) to obtain various gaming licenses and approvals (the “Licenses”).  Each Party hereby agrees to use its best

efforts to obtain such Licenses (and to cause any of its Affiliates required to

obtain License to use its best efforts) in as short a time period as reasonably

practicable (but no later than 30 days after receipt of a written request for

submission), including submission of all required applications and response to

all requests for information from a licensing agency.  In the event that a Party is advised that a required license will

not be issued to it or its Affiliate(s) or that such license will only be

issued upon terms which the Party reasonably deems unacceptable, such Party

(the “Notifying Party”) shall provide immediate notice to the other Party

whereupon the Notifying Party shall transfer its

 

7

 

interest in GEC and GEM to the other party, and shall receive

as sole consideration there for, re-payment of its capital account from funds

generated by the operation of the LLC from which it has withdrawn.  Notwithstanding anything to the contrary

expressed or implied in this Investor Agreement or in the Amended Operating

Agreement of GEC or GEM, the sale, assignment, transfer, pledge or other

disposition of any interest in GEC or GEM after it is licensed by the NIGC is

ineffective unless approved in advance by the NIGC.  If at any time the NIGC finds that a Party which owns any such

interest is unsuitable to hold that interest, the NIGC shall immediately notify

the Company of that fact.  The Company

shall, within 10 days from the date that it receives the notice from the NIGC,

return to the unsuitable Party the amount of his capital account as reflected

on the books of the Company.  Beginning

on the date when the NIGC serves notice of determination of unsuitability,

pursuant to the preceding sentence, upon the Company, it is unlawful for the

unsuitable Party:  (a) to receive any

share of the distribution of profits or cash or any other property of, or

payment upon dissolution of the Company, other than a return of capital as

required above; (b) to exercise directly or through a trustee or nominee, any

voting right conferred by such interest; (c) to participate in the management

of the business and affairs of the limited-liability Company; or (d) to receive

any remuneration in any form from the Company, for services rendered or

otherwise.

 

Section 3.4  Torres

Martinez Development Opportunity. 

The Parties acknowledge that the Torres Martinez Tribe has sent

notification of its intent to abrogate the Management Agreement with GEC.  The Parties will jointly pursue a recovery

of the costs incurred for this project. 

In the event that either of the Parties, or their affiliates, determines

to pursue possible re-engagement or a new agreement with this Tribe, then it

shall do so through GEC and the financing for GEC shall be made upon terms

reasonably similar to those set forth herein regarding the financing for

GEM.  If Investor, in its sole

discretion, declines to provide financing for GEC upon terms reasonably similar

to those herein upon which it provides financing to GEM, then  Investor shall cease to be a Member of GEC

and shall transfer its interest in GEC to Full House.

 

ARTICLE IV

BUDGETS & EXPENDITURES

 

Section 4.1  Project

Development Budget.  The Parties

shall develop a budget for Huron Potawatomi Development Opportunity (the

“Project Development Budget”) for the period commencing immediately and ending

 

8

 

upon the date that the facility is budgeted to be generating

cash flow sufficient to cover its expenses. The Project Development Budget must

be approved by both Parties. The Parties and/or their Affiliates shall be

entitled to reimbursement for all costs incurred which are in accordance with

the Project Development Budget. Any reimbursements made pursuant to this

Article III shall be made within 30 days after each Party (or each Member) has

reviewed and approved supporting documentation submitted by the Party or Member

seeking reimbursement.  Notwithstanding

anything contained herein to the contrary, reimbursement to a Party for the

out-of-pocket expenses and costs of In-House and outside Project Personnel must

be approved by both Parties.

 

Section 4.2  Personnel.  Unless expressly permitted in the Project

Development Budget, each Party and their respective Affiliates shall bear the

costs of their respective executive and/or key personnel, including their

travel and related expenses, incurred in connection with the Development

Opportunities. It is hereby agreed by the Parties that each will cause GEM to

use its best efforts to so structure the contractual arrangements with the

Tribe, in a manner that will permit the Parties’ out-of-pocket expenses as well

as costs of their In-House Project Personnel and Outside Project Personnel,

which may be incurred or utilized in accordance with the Project Development

Budget, to be reimbursed.

 

Section 4.3  Variations

from Budget.  Any variations (either

individually or in the aggregate for related expenses) from an approved Budget

will require further approval from each of the Parties should they be in excess

of the lesser of (i) 10% of the originally approved amount, or (ii) $50,000 in

excess of the originally approved amount.

 

Section 4.4  GEM

Project Manager.  The salary of the

GEM Project Manager shall be bourne by Full House until the Investor

Contingencies are met; thereafter, the salary of the GEM Project Manager shall

be bourne by GEM.

 

9

 

ARTICLE V

FINANCING RESPONSIBILITIES

 

Section 5.1  Funding

of GEM.  The Parties agree that it

is their intent to cause GEM to develop the Huron Potawatomi Development

Opportunity with non-recourse financing, and they agree that each will use

commercially-reasonable efforts to obtain, for GEM, the maximum amount of non-recourse

financing for the project.  In the event

that the Management Committee of GEM determines that such financing is either

not fully-available or is not fully-available on acceptable terms (such a

determination being hereinafter referred to as “Unavailable Financing”), Full

House and Investor shall each be responsible to provide, as loans to GEM, fifty

percent of the additional funds needed to pursue the Development Opportunity in

accordance with the approved Project Development Budget.  Although each of Full House and Investor is

responsible to provide to GEM fifty percent of such additional funds, those

funds shall be loaned solely by Investor, upon the terms set forth in the GEM

Management Agreements and shall be secured by the assets of GEM.

 

Section 5.2  Investor

Loans to GEM.  The Parties intend

that, to the extent possible, all expenditures which GEM is required to make in

connection with the Development Opportunity will be made from the proceeds of

non-recourse, third party loans to GEM. 

To the extent that Unavailable Financing occurs, Investor shall,

commencing upon execution of this Agreement, loan to GEM, upon the terms set

forth in the GEM Management Agreements, all costs and expenses appropriate

solely for the purposes of developing the Development Opportunity (the

“Investor Loans”).

 

Section 5.3  Repayment

of Investor Loans.  The Parties

intend that, to the extent possible, all expenditures which GEM is required to

make for this project will be loans from GEM to the Tribe and will be repaid by

the Tribe to GEM in accordance with the terms of the Tribal loan documents and

Management Agreements.

 

To the extent that any of the Investor Loans to GEM is

included in the Tribal loan documents as a loan from GEM to the Tribe, then GEM

shall repay the Investor Loans upon all of the same terms as the Tribe repays

its loan to GEM as provided in the Management Agreements executed between GEM

and the Tribe; and

 

To the extent that any of the Investor Loans to GEM is

not included (“Non-included Amount”), then such Non-included Amount shall be

repaid to

 

10

 

the Investor by GEM commencing upon GEM’s receipt of revenues

from gaming operations at the Tribe’s Indian Gaming Facility, at an interest

rate of Prime plus 1%.

 

Section 5.4  Special

Allocation of Profits to Investor. 

In the event that, within the earlier of 24 months from the date of the

first advance of an Investor Loan, or 12 months from the date that the Tribe’s

Indian Gaming Facility commences receipt of gaming revenue from its patrons,

GEM has failed to repay the Investor Loans then the following shall apply:

 

Investor shall be entitled to receive 22.5% of the

profits of GEM which would otherwise be allocable to Full House; provided however, that Investor shall

cease to be entitled to said special allocation at such time as all Investor

Loans have been repaid by GEM or at its sole discretion, by Full House.

 

Section 5.5  Additional

Limitations on Distributions. 

Notwithstanding any provision to the contrary contained in this

Agreement, the Company shall not make any distribution if such distribution

would violate federal or state law.

 

Section 5.6  Additional Provisions Regarding Investor Loans.  A default of the Investor Loan shall occur

upon the failure of GEM to timely make any payment to Investor, as set forth

herein.

 

The maturity date of the Temporary Loan shall be the

earlier of the fourth (4th) anniversary of the date that the

Investor Contingencies are satisfied or the second anniversary of the date that

Class III gaming commences at the Indian Gaming Facility.  In the event that the Temporary  Loan is not fully paid to Investor by the

maturity date of the Temporary Loan, then Full House shall unconditionally pay

to Investor, within ninety (90) days of written demand by Investor, half of the

outstanding principal balance plus all unpaid interest accrued on half of the

outstanding principal.  In the event

that (i) a default of any Investor Loan occurs or (ii) less than all of the

Investor Loan is timely paid by GEM, then Full House shall pay to Investor up

to fifty percent (50%) of any outstanding principal balance plus all unpaid

interest thereon within ninety (90) days of written demand of Investor.

 

The Temporary Loan shall be secured by the assets of

GEM pursuant to the terms of a Security Agreement in form acceptable to

Investor’s counsel.

 

11

 

As an inducement to Investor to loan the funds on

behalf of Full House, to develop the Development Project and for other valuable

consideration, Full House personally guarantees the repayment of half of the

Investor Loans. The maximum amount which Investor will have to advance under

the Temporary Loan shall be $12,500,000. Investor shall only lend funds as provided

in the Budget.

 

If the Temporary Loan has not been fully-repaid to

Investor by its maturity date, or any management fees due from Tribe to GEM are

in arrears, then Investor shall not be obligated to lend any further funds

pursuant to the Investor or LLC Agreements.

 

12

 

ARTICLE VI

CONFIDENTIALITY AND PRESS RELEASES

 

Section 6.1  Confidentiality.  The Parties acknowledge that in connection

with the performance of their obligations under this Agreement, it may be

necessary and convenient for Investor to disclose and make available to Full

House information relating to Investor and/or its business, products and

services; and that it may be necessary and convenient for Full House to

disclose and make available to Investor, information relating to Full House

and/or its business, products and services.

 

Except as necessary to perform pursuant to this

Agreement, each recipient (the “Recipient”) shall never use or duplicate any

Confidential Information, and shall keep confidential and never disclose any

Confidential Information unless the discloser (the “Discloser”) has, in its

sole discretion, previously and expressly consented to such use, duplication or

disclosure in writing.  Each Recipient

may disclose such Confidential Information to those principals, agents and

employees of Recipient whose knowledge is necessary for the performance by a

Party of its obligations under this Agreement provided that all such

principals, agents and employees shall be advised of their obligations to

protect Discloser’s interests, which obligations shall be identical to

Recipient’s under this Agreement.  The

Parties acknowledge and agree that:

 

(A)          All

Confidential Information disclosed by or belonging to Investor is and shall

remain the exclusive and valuable property of Investor and all Confidential

Information disclosed by or belonging to Full House is and shall remain the

exclusive and valuable property of Full House;

 

(B)          The

Recipient does not hereby obtain any license or other interest in or to

Confidential Information of the Discloser or the subjects thereof; and

 

(C)          Upon

the completion of any dealing between the Parties, each Recipient shall

promptly deliver to Discloser all products, components and equipment provided

by Discloser as well as all records or other things in any media containing or

embodying Discloser’s Confidential Information within its possession or control

which were delivered or made available to each Recipient during or in

connection with any dealing between the Parties, including any copies thereof.

 

13

 

The Parties further acknowledge and agree that the

restrictions on the use, duplication and disclosure of the other Party’s

Confidential Information set forth herein are reasonable to protect the

latter’s business interests.

 

Section 6.2  Press

Releases.  The Parties agree not to

issue any press or other releases with respect to an LLC without the prior

approval of the other Party.  In the

event that upon the advice of securities counsel a Party believes that it must

issue a press or other release, such Party shall submit a draft of the proposal

release to the other Party.  The Parties

will attempt within two business days to agree on the context of the release

before it is issued.

 

ARTICLE VII

CONDITIONS TO THE OBLIGATIONS OF THE PARTIES

 

Section 7.1  Conditions

to the obligations of the Parties. 

The obligations of the Parties under this Agreement are subject to the

satisfaction, on or before the Closing Date, of the following conditions:

 

(A)          Investor

Representations and Warranties. 

Representations and warranties by Investor set forth below are true,

complete and correct as of the Closing Date.

 

(B)          Full

House Representations and Warranties. 

Representations and warranties by Full House set forth below are true,

correct and complete as of the Closing Date.

 

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES

 

Each of the representations and warranties contained

in this Article VIII shall survive the admission of Investor to GEM and GEC.

 

Section 8.1 Full House represents and warrants that:

 

(A)          All

tribal approvals required to conduct gaming on the Site have already been

obtained;

 

(B)          The

financial statements of GEM fairly present the condition of GEM and there is no

indebtedness or liability of GEM other than as disclosed on the same attached

hereto as Exhibit E; and

 

14

 

(C)          The

GEM and GEC membership interests being acquired by Investor from Full House

pursuant to this Agreement are and shall be, at the time of its admission, free

of any claims, liens, security interests and encumbrances, except as provided

herein.

 

Section 8.2 

Investor represents and warrants that, upon satisfaction of the Investor

Contingencies, it will have immediate access to $12.5 million, as well as

access to all other funds necessary for it to comply with its obligations under

this Agreement.

 

15

 

Section 8.3 

Full House and Investor each represent and warrant:

 

(A)          It

is an entity duly organized, validly existing and in good standing under the

laws of the State in which it was formed and has all requisite power and

authority to enter into this Agreement.

 

(B)          All

corporate or company actions necessary for it to execute, deliver and perform

this Agreement will be duly and properly taken by its respective Managers

and/or board/officers, as appropriate, and all company actions necessary for it

to execute, deliver and perform under the GEC LLC and GEM LLC Agreements will

be duly and properly taken by its respective Managers and/or officers, as

appropriate.

 

(C)          This

Agreement constitutes a valid and binding obligation of the Party making this

representation, enforceable in accordance with the respective terms of such

agreement.

 

(D)          Neither

its execution, delivery nor performance of this Agreement will violate or

breach any term or provision of, or constitute a default under, its Membership

Agreement, Certificate of Incorporation or By- Laws, as amended, or any

material agreement to which it is a Party or to which it or any of its property

is subject, and, neither the execution, delivery nor performance of the GEC LLC

or GEM LLC Agreement will violate or breach any term or provision of, or

constitute a default under, their respective Membership Agreements,

Certificates of Incorporation or By-Laws, as amended, or any material agreement

to which they are a Party or to which they or any of their property is subject.

 

(E)           To

the extent that it would prevent performance of this Agreement or the GEC  LLC or GEM LLC Agreements:

 

(i)            there

are no actions, suits, claims, proceedings or investigations (whether or not on

its behalf) pending or, to its knowledge, threatened against or affecting it

with respect to their businesses, at law or in equity or before or by any

governmental court, department, commission, board, bureau, agency or

instrumentality, except as made known in the public domain, set forth in its

securities filings or disclosed to the Parties of this Agreement;

 

16

 

(ii)           it

is not in default with respect to any order, writ, injunction, or decree of any

court or governmental department, commission, board, bureau, agency or

instrumentality with respect to their businesses; and

 

(iii)         to

the best of its knowledge, has complied in all material respects with all laws,

regulations and orders applicable to engaging in its businesses.

 

(F)           no

representation or warranty made by it in this Agreement , in the GEC LLC or GEM

LLC Agreement, or in any document, certificate or schedule required to be

furnished pursuant thereto, contains any untrue statement of material fact, or

omits to state a material fact necessary to make any statement contained herein

or therein not misleading.

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1  Notices.  All notices provided for in this Agreement

shall be in writing, duly signed by the Party giving such notice, and shall be

delivered, telecopied or mailed by registered or certified mail or by recognized

overnight delivery service, as follows:

 

(i)            If

given to Full House, in

care of the Secretary at 2300 West Sahara Avenue, Suite 450-Box 23, Las Vegas,

Nevada 89102, Telecopy:  (702) 221-8101

with a copy to the Full House General Counsel at the same address;

 

(ii)           If

given to Investor, in care of the Chief Executive at the address set forth in

the first paragraph of this Agreement, with a copy to the General Counsel at

the address set forth above.

 

All such notices shall be deemed to have been given

when received

 

Section 9.2  Amendments.  Any amendment to this Agreement shall be

adopted and be effective as an amendment hereto if it receives the affirmative

vote of each of the Parties, provided that such amendment be in writing and

executed by each of the Parties.

 

Section 9.3  Failure

to Pursue Remedies.  The failure of

any Party to seek redress for violation of, or to insist upon the strict

performance of, any

 

17

 

provision of this Agreement shall not prevent a subsequent

act, which would have originally constituted a violation, from having the

effect of an original violation.

 

Section 9.4  Cumulative

Remedies.  The rights and remedies

provided by this Agreement are cumulative and the use of any one right or

remedy by any Party shall not preclude or waive its right to use any or all

other remedies.  Said rights and

remedies are given in addition to any other rights the Parties may have by law,

statute, ordinance or otherwise.

 

Section 9.5  Binding

Effect.  This Agreement shall be

binding upon and inure to the benefit of all of the Parties and, to the extent

permitted by this Agreement, their successors, legal representatives and

assigns.

 

Section 9.6  Interpretation.  Throughout this Agreement, nouns, pronouns

and verbs shall be construed as masculine, feminine, neuter, singular or

plural, whichever shall be applicable.

 

Section 9.7  Severability.  The invalidity or unenforceability of any

particular provision of this Agreement shall not affect the other provisions

hereof, and this Agreement shall be construed in all respects as if such

invalid or unenforceable provision were omitted.

 

Section 9.8  Counterparts.  This Agreement may be executed in any number

of counterparts with the same effect as if all Parties hereto had signed the

same document.  All counterparts shall

be construed together and shall constitute one instrument.

 

Section 9.9  Integration

and Future Assurances.  This

Agreement constitutes the entire agreement among the Parties hereto pertaining

to the subject matter hereof and supersedes all prior agreements and

understandings pertaining thereto, and all exhibits attached hereto shall be

incorporated herein.. The Parties agree to execute any further documents

reasonably necessary to effectuate the transactions contemplated by this

Agreement.

 

Section 9.10  Governing

Law.  This Agreement and the rights

of the Parties hereunder shall be interpreted in accordance with the laws of

the State of Delaware, and all rights and remedies shall be governed by such

laws without regard to principles of conflict of laws.

 

18

 

Section 9.11  Alternative

Dispute Resolution.  Except as

otherwise provided in this Agreement (and specifically excluding any matter to

be determined by the Members or waived in writing by all Parties, any dispute,

controversy or claim between the Parties arising out of or related to this

Amended Agreement, either during the existence of the Company or afterwards,

between the Parties hereto, their assignees, their Affiliates, their attorneys

or agents, shall be resolved in Reno, Nevada, as set forth in this Section 9,

which shall apply, without limitation, to any action against any Member and all

actions where the Chancery Court of the State of Delaware would have subject

matter jurisdiction but for this Section 9, except for those actions where the

court has exclusive subject matter jurisdiction expressly under Section

18-305(f) of the Act.  In those actions

where that court has that exclusive subject matter jurisdiction, despite the

provisions of this Agreement intended to control over the Act, the Parties

hereby submit to the personal jurisdiction and venue of that court, and they

agree that the Company or Members may enforce their rights in that court.

 

(a)           Good Faith Negotiations; Mediation.  The Parties shall first seek to negotiate,

in good faith and in a timely fashion, a resolution of their dispute.  If such negotiations fail to resolve the

dispute, then the Parties shall determine if they desire to submit the dispute

to mediation, and if they elect to seek a resolution by mediation, they shall

then submit the dispute to mediation by an Alternative Dispute Resolution

entity (“ADR Entity”) mutually-agreed to be the parties under the ADR Entity’s

mediation rules and, if the Parties cannot agree on that entity, then by the

AAA under the AAA’s Commercial Mediation Rules then in effect.

 

(b)           Arbitration.  If the Parties have not sought mediation, or if any mediation has

failed to resolve the dispute, then the dispute shall be resolved by

arbitration by an ADR Entity mutually-agreed to be the parties under that

entity’s arbitration rules and, if the Parties cannot agree on that ADR Entity,

then by the AAA in accordance with the AAA’s Rules for Commercial Arbitration

then in force, except as provided in this Section 9.  The arbitration shall be conducted in Reno, Nevada, before a

panel of three (3) arbitrators, all of whom shall possess the necessary expertise

about the subject matter of the dispute to be able to resolve the dispute.  The decision of the arbitration panel shall

be final and binding, and the arbitration award may be confirmed by a court of

competent jurisdiction.  The arbitration

panel shall not have any power to alter, amend, modify, or change any of the

terms of this Agreement or to grant any remedy

 

19

 

either

prohibited by the terms of this Amended Agreement or not available in a court

of law.  The arbitration panel may award

reasonable attorneys’ fees and costs to the prevailing or most-prevailing

party.  The provisions of applicable

Delaware arbitration law shall govern the arbitration, including the

confirmation of any arbitration award.

 

(c)           Payment. 

Each party to the arbitration will pay its pro rata share of the

expenses and fees of the arbitrators, together with other expenses of the

arbitration incurred or approved by the arbitrators, together with other

expenses of the arbitration incurred or approved by the arbitrators.  Arbitration may proceed in the absence of

any party, if notice under the ADR Entity’s or AAA’s rules and regulations, as

applicable, of the proceedings has been given to such party.

 

(d)           Binding Effect and Enforcement.  The Parties agree to abide by all decisions

and awards rendered in such proceedings. 

Such decisions and awards rendered by the arbitrators shall be final and

conclusive, and they may be entered in any court having jurisdiction thereof.

 

20

 

IN WITNESS WHEREOF, the Parties hereto have duly

executed this Agreement as of the day and year first written above.

 

	

  FULL HOUSE RESORTS, INC.

  
	

   

  
	

   

  
	

  By:

  	

   

  	

   

  
	

   

  	

  Michael P. Shaunnessy

  
	

   

  	

  Executive Vice President

  
	

   

  
	

  RAM ENTERTAINMENT, LLC

  
	

   

  
	

   

  
	

  By:

  	

   

  	

   

  
	

   

  	

  Robert Mathewson

  
	

   

  	

  Its:

  	

   

  	

   

  
					

 

FOR VALUE RECEIVED AND IN CONSIDERATION OF BENEFITS CONFERRED

ON GEM BY THIS AGREEMENT, GEM HEREBY AGREES TO PERFORM SUCH TERMS CONTAINED

HEREIN AS THOSE TERMS APPLY TO IT.

 

GAMING ENTERTAINMENT (MICHIGAN) L.L.C.

 

 

	

  By:

  	

   

  	

   

  
	

   

  	

  Michael P. Shaunnessy

  
	

   

  	

  Member

  

 

21

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