Document:

Exhibit 10.1

 

	
 
    

 

FORM OF
 THIRD AMENDED AND RESTATED
 LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

STATION HOLDCO LLC

 

Dated as of [        ], 2016

 

	
 
    

 

THE UNITS REPRESENTED BY THIS THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS.  SUCH UNITS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND APPLICABLE LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.

 

 

THIRD AMENDED AND RESTATED
 LIMITED LIABILITY COMPANY AGREEMENT
 OF
 STATION HOLDCO LLC

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 1.   CONTINUATION OF THE COMPANY
    	
 
    	
2
    
	
Section 1.1
    	
 
    	
Continuation of the   Company
    	
 
    	
2
    
	
Section 1.2
    	
 
    	
Name
    	
 
    	
2
    
	
Section 1.3
    	
 
    	
Business of the Company
    	
 
    	
2
    
	
Section 1.4
    	
 
    	
Location of Principal   Place of Business
    	
 
    	
2
    
	
Section 1.5
    	
 
    	
Registered Agent
    	
 
    	
2
    
	
Section 1.6
    	
 
    	
Term
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 2.   DEFINITIONS
    	
 
    	
3
    
	
Section 2.1
    	
 
    	
Definitions
    	
 
    	
3
    
	
Section 2.2
    	
 
    	
Rules of   Interpretation
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 3.   CAPITALIZATION
    	
 
    	
14
    
	
Section 3.1
    	
 
    	
Units; Initial   Capitalization; Schedule of Members
    	
 
    	
14
    
	
Section 3.2
    	
 
    	
Authorization and   Issuance of Additional Units
    	
 
    	
16
    
	
Section 3.3
    	
 
    	
Repurchase or   Redemption of Class A Common Stock
    	
 
    	
17
    
	
Section 3.4
    	
 
    	
Changes in Class A   Common Stock
    	
 
    	
17
    
	
Section 3.5
    	
 
    	
Capital Contributions
    	
 
    	
18
    
	
Section 3.6
    	
 
    	
No Interest on Capital   Contributions
    	
 
    	
18
    
	
Section 3.7
    	
 
    	
Withdrawal and Return   of Capital Contributions
    	
 
    	
18
    
	
Section 3.8
    	
 
    	
Capital Accounts
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 4.   ALLOCATION OF NET INCOME AND NET LOSS
    	
 
    	
19
    
	
Section 4.1
    	
 
    	
Allocations of Net   Income and Net Losses
    	
 
    	
19
    
	
Section 4.2
    	
 
    	
Special Allocations
    	
 
    	
19
    
	
Section 4.3
    	
 
    	
Allocations for Income   Tax Purposes
    	
 
    	
20
    
	
Section 4.4
    	
 
    	
Tax Withholding
    	
 
    	
20
    
	
Section 4.5
    	
 
    	
Allocations to   Transferred Interests
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 5.   DISTRIBUTIONS
    	
 
    	
21
    
	
Section 5.1
    	
 
    	
Distributions
    	
 
    	
21
    
	
Section 5.2
    	
 
    	
Successors
    	
 
    	
21
    
	
Section 5.3
    	
 
    	
Distributions In-Kind
    	
 
    	
21
    
	
Section 5.4
    	
 
    	
Tax Distributions
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 6.   BOOKS OF ACCOUNT, RECORDS AND REPORTS, FISCAL YEAR, TAX MATTERS
    	
 
    	
22
    
	
Section 6.1
    	
 
    	
Books and Records
    	
 
    	
22
    

 

i

 

	
Section 6.2
    	
 
    	
Annual Reports
    	
 
    	
22
    
	
Section 6.3
    	
 
    	
Tax Elections
    	
 
    	
22
    
	
Section 6.4
    	
 
    	
Fiscal Year
    	
 
    	
23
    
	
Section 6.5
    	
 
    	
Tax Matters Partner
    	
 
    	
23
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 7.   POWERS, RIGHTS AND DUTIES OF THE MEMBERS
    	
 
    	
23
    
	
Section 7.1
    	
 
    	
Limitations
    	
 
    	
23
    
	
Section 7.2
    	
 
    	
Liability
    	
 
    	
24
    
	
Section 7.3
    	
 
    	
Priority
    	
 
    	
24
    
	
Section 7.4
    	
 
    	
Member Standard of Care
    	
 
    	
24
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 8.   MANAGEMENT
    	
 
    	
24
    
	
Section 8.1
    	
 
    	
The Managing Member;   Delegation of Authority and Duties
    	
 
    	
24
    
	
Section 8.2
    	
 
    	
Officers
    	
 
    	
25
    
	
Section 8.3
    	
 
    	
Duties of Officers
    	
 
    	
26
    
	
Section 8.4
    	
 
    	
Existence and Good   Standing
    	
 
    	
26
    
	
Section 8.5
    	
 
    	
Investment Company Act
    	
 
    	
27
    
	
Section 8.6
    	
 
    	
Indemnification of the   Managing Member, Officers and Agents
    	
 
    	
27
    
	
Section 8.7
    	
 
    	
Certain Costs and   Expenses
    	
 
    	
27
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 9.   TRANSFERS OF INTEREST BY MEMBERS
    	
 
    	
28
    
	
Section 9.1
    	
 
    	
Restrictions on   Transfers of Interests by Members
    	
 
    	
28
    
	
Section 9.2
    	
 
    	
Transfer of Interest of   Members
    	
 
    	
28
    
	
Section 9.3
    	
 
    	
Further Requirements
    	
 
    	
29
    
	
Section 9.4
    	
 
    	
Exchange
    	
 
    	
30
    
	
Section 9.5
    	
 
    	
Consequences of   Transfers Generally
    	
 
    	
30
    
	
Section 9.6
    	
 
    	
Capital Account;   Percentage Interest
    	
 
    	
31
    
	
Section 9.7
    	
 
    	
Additional Filings
    	
 
    	
31
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 10.   REGISTRATION RIGHTS
    	
 
    	
31
    
	
Section 10.1
    	
 
    	
Demand Registrations
    	
 
    	
31
    
	
Section 10.2
    	
 
    	
Piggyback Registrations
    	
 
    	
34
    
	
Section 10.3
    	
 
    	
[Reserved]
    	
 
    	
35
    
	
Section 10.4
    	
 
    	
Obligations of Station   Corp
    	
 
    	
35
    
	
Section 10.5
    	
 
    	
Obligations of Holder
    	
 
    	
39
    
	
Section 10.6
    	
 
    	
Expenses of   Registration
    	
 
    	
39
    
	
Section 10.7
    	
 
    	
Indemnification
    	
 
    	
40
    
	
Section 10.8
    	
 
    	
Survival of Obligations
    	
 
    	
42
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 11.   CERTAIN COMPENSATION MATTERS
    	
 
    	
42
    
	
Section 11.1
    	
 
    	
Non-Equity Compensation
    	
 
    	
42
    
	
Section 11.2
    	
 
    	
Equity Compensation
    	
 
    	
43
    
	
Section 11.3
    	
 
    	
Company and Managing   Member Obligation
    	
 
    	
43
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 12. RESIGNATION OF MEMBERS; TERMINATION OF COMPANY;   LIQUIDATION AND DISTRIBUTION OF ASSETS
    	
 
    	
44
    
	
Section 12.1
    	
 
    	
Resignation of Members
    	
 
    	
44
    

 

ii

 

	
Section 12.2
    	
 
    	
Dissolution of Company
    	
 
    	
44
    
	
Section 12.3
    	
 
    	
Distribution in   Liquidation
    	
 
    	
45
    
	
Section 12.4
    	
 
    	
Final Reports
    	
 
    	
46
    
	
Section 12.5
    	
 
    	
Rights of Members
    	
 
    	
46
    
	
Section 12.6
    	
 
    	
Deficit Restoration
    	
 
    	
46
    
	
Section 12.7
    	
 
    	
Termination
    	
 
    	
46
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 13.   NOTICES AND CONSENT OF MEMBERS
    	
 
    	
46
    
	
Section 13.1
    	
 
    	
Notices
    	
 
    	
46
    
	
Section 13.2
    	
 
    	
Consents and Approvals
    	
 
    	
47
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 14.   AMENDMENT OF AGREEMENT
    	
 
    	
47
    
	
Section 14.1
    	
 
    	
Amendments
    	
 
    	
47
    
	
Section 14.2
    	
 
    	
Amendment of   Certificate
    	
 
    	
47
    
	
Section 14.3
    	
 
    	
Power of Attorney
    	
 
    	
47
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 15.   MISCELLANEOUS
    	
 
    	
48
    
	
Section 15.1
    	
 
    	
Entire Agreement
    	
 
    	
48
    
	
Section 15.2
    	
 
    	
Governing Law
    	
 
    	
48
    
	
Section 15.3
    	
 
    	
Severability
    	
 
    	
48
    
	
Section 15.4
    	
 
    	
Effect
    	
 
    	
48
    
	
Section 15.5
    	
 
    	
Captions
    	
 
    	
48
    
	
Section 15.6
    	
 
    	
Counterparts
    	
 
    	
49
    
	
Section 15.7
    	
 
    	
Waiver of Partition
    	
 
    	
49
    
	
Section 15.8
    	
 
    	
Waiver of Judicial   Dissolution
    	
 
    	
49
    
	
Section 15.9
    	
 
    	
Consent to   Jurisdiction; Waiver of Trial by Jury
    	
 
    	
49
    
	
Section 15.10
    	
 
    	
Binding Arbitration
    	
 
    	
49
    
	
Section 15.11
    	
 
    	
Gaming Redemption
    	
 
    	
49
    
	
Section 15.12
    	
 
    	
Non-Occurrence of IPO
    	
 
    	
51
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Schedule I
    	
-
    	
Capital Accounts
    	
 
    	
 
    

 

iii

 

THIRD AMENDED AND RESTATED
 LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

STATION HOLDCO LLC

 

This THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of STATION HOLDCO LLC (the “Company”), dated as of [         ], 2016, is adopted, executed and agreed to, for good and valuable consideration, by and among the members listed on the Schedule of Members (as defined below), and shall be effective as of the Effective Time (as defined below).  Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in Section 2.1.

 

RECITALS

 

WHEREAS, the Certificate of Formation of the Company was filed with the Office of the Secretary of State of Delaware on August 9, 2010 under the name “NP Propco Holdings LLC”;

 

WHEREAS, the Company filed a Certificate of Amendment to the Certificate of Formation with the Office of the Secretary of State of Delaware on November 12, 2010, changing the name of the Company to “Station Holdco LLC”;

 

WHEREAS, the Members previously entered into that certain Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of July 1, 2012 and amended as of July 15, 2012, August 1, 2012, September 4, 2012, October 1, 2012, April 25, 2013, July 31, 2013, August 26, 2014, November 6, 2014 and September 29, 2015 (as amended, the “Prior Agreement”) on the terms and conditions therein set forth providing for the conduct of the Company’s business and affairs;

 

WHEREAS, Members holding the requisite percentage of the outstanding Units (as defined in the Prior Agreement) of the Company have duly consented to the execution and delivery of this Agreement, which shall amend and restate the Prior Agreement in its entirety;

 

WHEREAS, Red Rock Resorts, Inc., a Delaware corporation (“Station Corp.”), and the Company intend to enter into an underwriting agreement (i) to issue and sell to the several Underwriters named therein shares of Class A Common Stock, par value $0.01 per share, of Station Corp. (the “Class A Common Stock”) and (ii) to make a public offering of such shares of Class A Common Stock (collectively, the “IPO”);

 

WHEREAS, in connection with the IPO, the Members desire to amend and restate the Prior Agreement effective immediately prior to the time that the Securities and Exchange Commission declares the registration statement with respect to the IPO effective (the “Effective Time”) to, among other things, reflect the designation of Station Corp. as the sole manager of the Company (the “Managing Member”);

 

 

WHEREAS, immediately after the IPO, Station Corp. will purchase (a) newly-issued Units from the Company and (b) Units held by certain of the Members, in each case using the net proceeds from the IPO; and

 

WHEREAS, in connection with the IPO, each FE Senior Executive is expected to enter into an Executive Employment Agreement with Station Casinos LLC, a Nevada limited liability Company and wholly owned subsidiary of the Company (“Station Casinos”),  and Station Corp., and the Members desire to impose certain limitations upon the compensation of the FE Senior Executives and the other executives and employees of Station Casinos.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the promises and covenants contained herein, the parties hereto agree as follows:

 

ARTICLE 1. CONTINUATION OF THE COMPANY

 

Section 1.1                                    Continuation of the Company.  The Company was previously formed as a limited liability company under the Act by the filing of the Certificate with the Office of the Secretary of State of Delaware on August 9, 2010.  Each Member agrees to be bound by the terms and conditions of this Agreement.  The Members hereby agree to continue the Company as a limited liability company under the Act for the purposes and upon the terms and conditions hereinafter set forth.  To the extent that the rights, powers, duties, obligations and liabilities 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.

 

Section 1.2                                    Name.  The name of the Company is “Station Holdco LLC,” as such name may be modified from time to time by the Managing Member as it may deem advisable.

 

Section 1.3                                    Business of the Company.  Subject to the limitations on the activities of the Company otherwise specified in this Agreement, the purpose and business of the Company shall be the conduct of any business or activity that may be conducted by a limited liability company organized pursuant to the Act, including the ownership of equity interests in Persons which conduct, operate and manage hotels and casinos.

 

Section 1.4                                    Location of Principal Place of Business.  The location of the principal place of business of the Company is 1505 South Pavilion Center Drive, Las Vegas, Nevada, 89135 or such other location as may be determined by the Managing Member.  In addition, the Company may maintain such other offices as the Managing Member may deem advisable at any other place or places within or without the State of Delaware.

 

Section 1.5                                    Registered Agent.  The registered agent for the Company is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801.  The Managing Member may change the registered agent from time to time as it deems appropriate.

 

2

 

Section 1.6                                    Term.  The term of the Company commenced on the date of filing of the Certificate, and shall be perpetual unless the Company is earlier dissolved and terminated in accordance with the provisions of this Agreement.

 

ARTICLE 2. DEFINITIONS

 

Section 2.1                                    Definitions.  The following terms used in this Agreement shall have the following meanings.

 

“AAA” has the meaning set forth in Section 15.10.

 

“Act” means the Delaware Limited Liability Company Act, 6 Del. Code §18-101 et seq., as in effect on the date hereof and as it may be amended hereafter from time to time.

 

“Adjusted Capital Account” means, with respect to any Member, the Member’s Capital Account at such time (x) increased by the sum of (A) the amount of the Member’s share of partnership minimum gain (as defined in Regulation section 1.704-2(g)(1) and (3)), (B) the amount of the Member’s share of partner nonrecourse debt minimum gain (as defined in Regulation section 1.704-2(i)(5)) and (C) any amount of the deficit balance in its Capital Account that the Member is treated as obligated to restore pursuant to Regulation section 1.704-1(b)(2)(ii)(c) and (y) decreased by reasonably expected adjustments, allocations and distributions described in Regulation sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).  This definition shall be interpreted consistently with Regulation section 1.704-1(b)(2)(ii)(d).

 

“Adverse Disclosure” has the meaning set forth in Section 10.1(f).

 

“Affected Interests” means Equity Securities that are owned or controlled directly or indirectly by an Unsuitable Person or an Affiliate of an Unsuitable Person.

 

“Affected Member” means a Member who is an Unsuitable Person or is an Affiliate of an Unsuitable Person.

 

“Affiliate” of any particular Person means any other Person directly or indirectly controlling, controlled by or under common control with such particular Person.  For the purpose of this definition, the term “control” (including with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, either through the ownership of a majority of such Person’s voting stock, by contract or otherwise.

 

“Agreement” means this Third Amended and Restated Limited Liability Company Agreement, as amended, modified or supplemented from time to time.

 

“Assignees” has the meaning set forth in Section 9.2(d).

 

“Assumed Tax Rate” means a rate determined by the Managing Member for the applicable Fiscal Year, which shall not exceed the greater of the highest effective combined marginal U.S. federal, state and local income tax rate (taking into account the tax imposed by

 

3

 

Code section 1411) applicable during such Fiscal Year to a natural person residing in or corporation doing business in New York, New York (after giving effect to any differences in rates applicable to ordinary income and capital gains and any U.S. federal income tax deduction for such state and local income taxes).

 

“Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks are authorized or required to close in New York City, New York.

 

“Capital Account” means, with respect to any Member, the account maintained by the Company with respect to such Member in accordance with Section 3.8.

 

“Capital Contribution” means any contribution (whether in cash, property or a combination thereof) to the capital of the Company.

 

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all ownership interests in a limited liability company, partnership or other Person (other than a corporation), and any and all securities, warrants, options or other rights to purchase or acquire, or that are convertible into, any of the foregoing.

 

“Certificate” means the Certificate of Formation of the Company, as amended, modified or supplemented from time to time.

 

“Change of Control” has the meaning set forth for such term under the Exchange Agreement.

 

“Class A Common Stock” has the meaning set forth in the Recitals.

 

“Class B Common Stock” means the Class B Common Stock, par value $0.01 per share, of Station Corp.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” means the shares of Class A Common Stock, including any shares of capital stock into which Class A Common Stock may be converted (as a result of a recapitalization, share exchange or similar event) or that are issued with respect to Class A Common Stock (including, without limitation, with respect to any stock split or stock dividend, or a successor security).

 

“Company” has the meaning set forth in the preamble hereof.

 

“Company Minimum Gain” has the meaning set forth for the term “partnership minimum gain” in Regulations section 1.704-2(d).

 

“DB Holder” means (a) German American Capital Corporation, Deutsche Bank AG and each Affiliate of Deutsche Bank AG that becomes a Member and (b) any Person that receives or acquires any Units from a DB Holder to the extent that such Transferring DB Holder assigns rights pursuant to Article 10 hereof to such Person; provided, that such designation shall

 

4

 

not become effective until the delivery of notice of such assignment to the Company (it being understood that such Transferee shall be so deemed to be such a DB Holder only with respect to such Units so Transferred).

 

“DB Majority Holder” has the meaning set forth in the definition of “Major Holder”.

 

“Demand Registration” has the meaning set forth in Section 10.1(a).

 

“Depreciation” has the meaning set forth in the definition of “Net Income” or “Net Loss” under paragraph (e) therein.

 

“DEUCC” has the meaning set forth in Section 3.1(f).

 

“Distribution” means each distribution after the Effective Time made by the Company to a Member, whether in cash, property or securities of the Company, pursuant to, or in respect of, Article 5 or Article 10.

 

“Effective Time” has the meaning set forth in the Recitals.

 

“Equity Incentive Plan” means the Red Rock Resorts, Inc. 2016 Equity Incentive Plan.

 

“Equity Securities” means all Common Stock of Station Corp. and Units and any and all securities of the Company, Station Corp. or any of their respective subsidiaries, convertible into, or exchangeable or exercisable for, options, warrants or other rights to acquire, shares of Common Stock or Units.

 

“Exchange Agreement” means the Exchange Agreement, effective on or about the Effective Time, among the Company, Station Corp. and the Company Unitholders (as defined therein) from time to time party thereto, as the same may be amended, modified, supplemented or restated from time to time.

 

“Exercising Holders” has the meaning set forth in Section 10.1(a).

 

“Fair Market Value” means, except as otherwise provided for herein, as of any given date of determination, the cash price, as determined in good faith by the Managing Member using any reasonable method of valuation and taking into account any relevant facts and circumstances then prevailing and in accordance with this Agreement, at which a willing seller would sell, and a willing buyer would buy, each being apprised of all relevant facts and neither acting under compulsion, such assets or properties in an arm’s-length negotiated transaction with an unaffiliated third party without time constraints.

 

“Family Group” means, for any individual, such individual’s current or former spouse, their respective parents, descendants of such parents (whether natural or adopted) and the spouses of such descendants, and any trust, limited partnership, corporation or limited liability company established solely for the benefit of such individual or such individual’s current or

 

5

 

former spouse, their respective parents, descendants of such parents (whether natural or adopted) or the spouses of such descendants.

 

“FE Senior Executive” means each of Frank J. Fertitta III, Lorenzo Fertitta, Stephen L. Cavallaro, Marc J. Falcone and Richard J. Haskins.

 

“Fertitta Entertainment” has the meaning set forth in Section 11.1.

 

“Fertitta Holder” means each of (a) FI Station Investor LLC and each Affiliate of FI Station Investor LLC that becomes a Member, (b) Frank J. Fertitta III, (c) Lorenzo J. Fertitta, (d) each Affiliate or member of the Family Group of Frank J. Fertitta III or Lorenzo J. Fertitta and (e) any Person that receives or acquires any Units from a Fertitta Holder to the extent that such Transferring Fertitta Holder assigns rights pursuant to Article 10 hereof to such Person; provided, that such designation shall not become effective until the delivery of notice of such assignment to the Company (it being understood that such Transferee shall be so deemed to be such a Fertitta Holder only with respect to such Units so Transferred).

 

“Fertitta Majority Holder” has the meaning set forth in the definition of “Major Holder”.

 

“Fiscal Year” has the meaning set forth in Section 6.4.

 

“Gaming Authority” means all governmental authorities or agencies with regulatory control or jurisdiction over all or any portion of the gaming activities of the Company or any of its subsidiaries, or over ownership of an interest in an entity engaged in gaming activities, or any successor to any such authority, including, as applicable, (i) in the State of Nevada, the Nevada Gaming Commission, the Nevada State Gaming Control Board, the Clark County Liquor and Gaming Licensing Board, the Henderson City Council, the City of Las Vegas City Council and all other state and local regulatory and licensing agencies or bodies with authority over gaming, gaming activities and gaming devices, mobile gaming systems and associated equipment in the State of Nevada, the City of Henderson, the City of Las Vegas, the City of Reno, Clark County, Nevada or Washoe County, Nevada, and (ii) the National Indian Gaming Commission and the applicable gaming regulatory authority established by the Federated Indians of Graton Rancheria, the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians of Michigan and the North Fork Rancheria of Mono Indians.

 

“Gaming Laws” means any federal, state, tribal, local or foreign statute, ordinance, rule, regulation, requirement, directive, judgment, order, decree, injunction or other authorization, and any Gaming License, governing or relating to casino and gaming activities and operations of the Company or any of its subsidiaries or the ownership of an interest therein.

 

“Gaming License” shall mean all licenses, consents, permits, approvals, authorizations, registrations, findings of suitability, franchises, entitlements, exemptions, waivers and orders of registration approved or issued by any Gaming Authority under Gaming Laws necessary for or relating to the conduct of activities or the ownership of an interest in an entity engaged in activities under the Gaming Laws, including any condition or limitation placed thereon.

 

6

 

“Governmental Authority” means any governmental, regulatory or administrative authority, whether foreign, federal, state or local, or any agency or commission or any court, tribunal, or judicial or arbitral body (or any subdivision of any of the foregoing) having jurisdiction or authority with respect to the particular matter at issue in its context, including any Gaming Authority.

 

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(a)                                 the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross Fair Market Value of such asset on the date of the contribution;

 

(b)                                 the Gross Asset Values of all Company assets shall be adjusted to equal their respective gross Fair Market Values as of the following times:

 

(i)                                     the acquisition of an additional interest in the Company after the Effective Time by a new or existing Member in exchange for more than a de minimis Capital Contribution, if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company;

 

(ii)                                  the grant of an interest in the Company (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Company or any of its subsidiaries by an existing or a new Member acting in a “partner capacity,” or in anticipation of becoming a “partner” (in each case within the meaning of Regulations section 1.704-1(b)(2)(iv)(d));

 

(iii)                               the Distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company, if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company; and

 

(iv)                              the liquidation of the Company within the meaning of Regulations section 1.704-1(b)(2)(ii)(g);

 

(c)                                  the Gross Asset Value of any Company asset distributed to a Member shall be the gross Fair Market Value of such asset on the date of Distribution;

 

(d)                                 the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code section 734(b) or Code section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to the extent that the Managing Member determines that an adjustment pursuant to subparagraph (b) of this definition of Gross Asset Value is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d); and

 

7

 

(e)                                  with respect to any asset that has a Gross Asset Value that differs from its adjusted tax basis, Gross Asset Value shall be adjusted by the amount of Depreciation rather than any other depreciation, amortization or other cost recovery method.

 

“Holder” means each holder of Registrable Securities.

 

“Indemnified Party” has the meaning set forth in Section 8.6(a).

 

“Interest” when used in reference to an interest in the Company, means the entire ownership interest of a Member in the Company at any particular time, including its interest in the capital, profits, losses and distributions of the Company.

 

“IPO” has the meaning set forth in the Recitals.

 

“Liquidator” has the meaning set forth in Section 12.2(b).

 

“Long-Form Registration” has the meaning set forth in Section 10.1(a).

 

“Major Holder” means any of (a) the holder of a majority of the Units held by the Fertitta Holders (the “Fertitta Majority Holder”) and (b) the holder of a majority of the Units held by the DB Holders (the “DB Majority Holder”).

 

“Managing Member” has the meaning set forth in the Recitals.

 

“Member” means each of the Persons listed on the Schedule of Members and each other Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Act.  The Members shall constitute the “members” (as such term is defined in the Act) of the Company.  Any reference in this Agreement to any Member shall include a Substituted Member to the extent such Substituted Member was admitted to the Company in accordance with the provisions of this Agreement.

 

“Member Minimum Gain” means minimum gain attributable to Member Nonrecourse Debt determined in accordance with Regulations section 1.704-2(i).

 

“Member Nonrecourse Debt” has the meaning set forth for the term “partner nonrecourse debt” in Regulations section 1.704-2(b)(4).

 

“Membership Certificate” has the meaning set forth in Section 3.1(e).

 

“Net Income” or “Net Loss” means, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such Fiscal Year or other period, determined in accordance with Code section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code section 703(a)(1) shall be included in such taxable income or loss), with the following adjustments:

 

(a)                                 any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be added to such taxable income or loss;

 

8

 

(b)                                 any expenditures of the Company described in Code section 705(a)(2)(B) or treated as Code section 705(a)(2)(B) expenditures pursuant to Regulations section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be subtracted from such taxable income or loss;

 

(c)                                  in the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (b) or (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain (if the adjustment increases the Gross Asset Value of the asset) or loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset for purposes of computing Net Income or Net Loss;

 

(d)                                 gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

 

(e)                                  in lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, with respect to a Company asset having a Gross Asset Value that differs from its adjusted basis for tax purposes, “Depreciation” with respect to such asset shall be computed by reference to the asset’s Gross Asset Value in accordance with Regulation section 1.704-1(b)(2)(iv)(g);

 

(f)                                   to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code section 734(b) or 743(b) is required pursuant to Regulations section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts as a result of a Distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and

 

(g)                                  any item of income, gain, credit, loss, deduction or expenditure allocated under Section 4.2 shall be excluded from the computation of Net Income and Net Loss.

 

“Non-Equity Compensation” means, with respect to any person, the aggregate amount of all salaries, bonuses, potential severance payments and perquisites directly or indirectly applicable to such person in its capacity as employee, officer, director or otherwise.

 

“Non-Equity Compensation Thresholds” has the meaning set forth in Section 11.1.

 

“Officer” and “Officers” have the meanings set forth in Section 8.2(a).

 

“Partnership Audit Adjustment” has the meaning set forth in Section 6.6.

 

“Percentage Interest” means, with respect to each Member, as of the applicable date of determination, a fraction (expressed as a percentage), the numerator of which is the

 

9

 

number of Units held by such Member and the denominator of which is the total number of Units held by all Members.

 

“Permitted Transferee” means, with respect to any Member, (a) its Affiliates (including, in the case of any Member that is an entity, any distribution by such Member to its members, partners or shareholders (the “Member’s Owners”) or any redemption of the interests in such Member held by one or more of the Member’s Owners, and any related distributions or redemptions by the Member’s Owners to their respective members, partners or shareholders), (b) in the case of an individual, any member of its Family Group.

 

“Person” means any individual, partnership, limited liability company, association, corporation, trust or other entity.

 

“Prior Agreement” has the meaning set forth in the Recitals.

 

“Public Sale” means any sale of Registrable Securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act.

 

“Quarterly Estimated Tax Periods” means the two, three, and four calendar month periods with respect to which Federal quarterly estimated tax payments are made.  The first such period begins on January 1 and ends on March 31.  The second such period begins on April 1 and ends on May 31.  The third such period begins on June 1 and ends on August 31.  The fourth such period begins on September 1 and ends on December 31.

 

“Redemption Date” shall mean the date specified in a Redemption Notice as the date on which Affected Interests of an Affected Member are to be redeemed by the Company, which Redemption Date shall be determined by the Managing Member and may be extended to the extent required in connection with any actions required to be taken under any Gaming Law; provided, that, unless otherwise directed by a Gaming Authority, in no event shall the Redemption Date be more than one hundred eighty (180) days after the date such Affected Member receives the Redemption Notice.

 

“Redemption Notice” shall mean that notice of redemption given by the  Managing Member to an Affected Member pursuant to Section 15.11.  Each Redemption Notice shall set forth (i) the Redemption Date; (ii) the Affected Interests to be redeemed; (iii) the Redemption Price and the manner of payment therefor; (iv) the place where certificates, if any, shall be surrendered for payment; and (v) any other requirements of surrender of the certificates, including how they are to be endorsed, if at all.

 

“Redemption Price” shall mean the price specified in the Redemption Notice to be paid by the Company for the redemption of Affected Interests to be redeemed pursuant to Section 15.11, which shall be that price (if any and to the extent applicable) required to be paid by the Gaming Authorities making the finding of unsuitability, or if the Gaming Authorities do not require a certain price to be paid, the amount reasonably determined by the Managing Member to be the fair value of the Affected Interests to be redeemed; provided that, unless a Gaming Authority requires otherwise, the Redemption Price per Unit shall be equal to the product of (i) the Exchange Rate (as defined in the Exchange Agreement) and (ii) the

 

10

 

hypothetical Redemption Price (solely for purposes of this clause (ii), as defined in the Amended and Restated Certificate of Incorporation of the Managing Member, as in effect immediately following the IPO (the “Charter”)) in respect of one share of Class A Common Stock redeemed in accordance with the terms of the Charter at the same time as the applicable Unit is redeemed.  The Redemption Price may be paid in cash, by promissory note, or both, as required by the Gaming Authorities and, if not so required, as the Managing Member reasonably determines.  Any promissory note shall contain such terms and conditions as the Managing Member reasonably determines to be necessary or advisable to comply with any law or regulation then applicable to the Company or any Affiliate thereof, or to prevent a default under, or acceleration of, any loan, note, mortgage, indenture, line of credit or other debt or financing agreement.  Subject to the foregoing, (i) the principal amount of the promissory note together with any unpaid interest shall be due and payable no later than the ten-year anniversary of the delivery of the note, (ii) interest on the unpaid principal thereof shall be payable at maturity at a rate per annum equal to the applicable federal rate within the meaning of Code section 1274(d) for debt with a maturity of over nine years, as in effect at the date of such issuance, compounded annually, until the Redemption Price has been paid in full and (iii) the promissory note shall provide that at any time prior to the 15-month anniversary of the date of issuance, if the promissory note is Transferred to a Person that immediately after such Transfer would not be an Unsuitable Person, such promissory note may, at the election of the holder thereof prior to such 15-month anniversary (but with such 15-month period being subject to reasonable extensions up to six months in the aggregate for all such extensions in order to procure any required Gaming Licenses or other regulatory approvals being diligently pursued in good faith), converted into the Interests for which such promissory note was issued as the Redemption Price upon the cash payment by such holder to the Company in an amount equal to the sum of (x) all cash amounts paid to the original holder thereof as part of the Redemption Price and (y) all interest paid on such promissory note prior to such conversion.  If the Redemption Price is being determined with respect to a redemption of at least 10% of the Units then outstanding, the Redemption Price shall be at least equal to the value as determined by a valuation procured by the Company from a nationally recognized investment banking firm.

 

“Registrable Securities” means any shares of Common Stock of Station Corp. issued or issuable upon the conversion or exchange of Units, including pursuant to the Exchange Agreement.  As to any particular securities that are Registrable Securities, such securities shall cease to be Registrable Securities when they have been distributed to the public pursuant to a Public Sale.

 

“Registration Expenses” has the meaning set forth in Section 10.6.

 

“Registration Statement” means, in connection with the public offering and sale of Capital Stock of Station Corp., a registration statement (including pursuant to Rule 415 under the Securities Act) pursuant to the Securities Act.

 

“Regulation” means a Treasury Regulation promulgated under the Code.

 

“Regulatory Allocations” has the meaning set forth in Section 4.2(g).

 

“Schedule of Members” has the meaning set forth in Section 3.1(b).

 

11

 

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Shelf Registration Statement” has the meaning set forth in Section 10.1(e)(i).

 

“Shelf Takedown Prospectus Supplement” has the meaning set forth in Section 10.1(e)(ii).

 

“Short-Form Registration” has the meaning set forth in Section 10.1(a).

 

“Station Casinos” has the meaning set forth in the Recitals.

 

“Station Corp.” has the meaning set forth in the Recitals.

 

“Substituted Member” means any Person admitted to the Company as a substituted Member pursuant to the provisions of Article 9.

 

“Tax Distribution” has the meaning set forth in Section 5.4.

 

“Tax Matters Partner” has the meaning set forth in Section 6.5.

 

“Tax Receivable Agreement” means the Tax Receivable Agreement, effective on or about the Effective Time, among the Company, Station Corp., and the Members (as defined therein) from time to time party thereto, as the same may be amended, modified, supplemented or restated from time to time.

 

“Transfer,” “Transferee” and “Transferor” have the respective meanings set forth in Section 9.1.

 

“True-Up Amount” means, in respect of a particular U.S. federal income tax year of the Company, an amount (but not less than zero) equal to (i) the product of (x) the taxable income of the Company for such tax year (determined by disregarding any adjustment to the taxable income of any Member that arises under Code section 743(b) and is attributable to the acquisition by such Member of an interest in the Company in a transaction described in Code section 743(a)) multiplied by (y) the Assumed Tax Rate minus (ii) the aggregate amount of distributions made in respect of such tax year (treating any Tax Distribution made with respect to income for such tax year, regardless of when made, and any distribution other than a Tax Distribution made during such tax year, as being made in respect of such tax year).

 

“Unit” has the meaning set forth in Section 3.1(a).

 

“Unsuitable Person” means a Person, including any member, shareholder, partner, manager, director, officer or employee of a Person (a) who is denied or disqualified from eligibility for a Gaming License by any applicable Gaming Authority or who is determined by any applicable Gaming Authority to be unsuitable to own or control an Equity Security in Station Corp. or the Company or to be affiliated or connected with or in the gaming business of Station Corp. or the Company, (b) whose ownership of an Equity Security in Station Corp. or the

 

12

 

Company or affiliation or involvement with or in the business of Station Corp. or the Company in any capacity causes Station Corp. or the Company to lose or to be threatened by any applicable Gaming Authority with the loss or denial of a Gaming License, (c) who is deemed likely, as determined in good faith by the Managing Member based on verifiable information received from any applicable Gaming Authority or other Governmental Authority having jurisdiction over Station Corp. or the Company, to preclude or materially delay, impede or impair, or jeopardize or threaten the loss of, or result in the imposition of materially burdensome terms and conditions on, any Gaming License of Station Corp. or the Company or on such Person’s application for, or right to the use of, entitlement to or ability to obtain or retain any Gaming License in any jurisdiction or (d) who is deemed likely, as determined in good faith by the Managing Member without taking into account the votes of directors affiliated or associated with the Unsuitable Person, to result in the disapproval, cancellation, rescission, termination, material adverse modification or non-renewal of any material contract between Station Corp. or the Company, on one hand, and a third party that is not an Affiliate of the Company or any Member, on the other hand.

 

“Violation” has the meaning set forth in Section 10.7(a).

 

“Void Transfer” has the meaning set forth in Section 9.1.

 

“Withdrawing Member” has the meaning set forth in Section 9.2(d).

 

Section 2.2                                    Rules of Interpretation.  Unless the context otherwise clearly requires:  (a) a term has the meaning assigned to it; (b) “or” is not exclusive; (c) wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter shall include the masculine, feminine and neuter; (d) provisions apply to successive events and transactions; (e) all references in this Agreement to “include” or “including” or similar expressions shall be deemed to mean “including without limitation”; (f) all references in this Agreement to designated “Articles,” “Sections,” “paragraphs,” “clauses” and other subdivisions are to the designated Articles, Sections, paragraphs, clauses and other subdivisions of this Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, paragraph, clause or other subdivision; and (g) any definition of or reference to any agreement, instrument, document, statute or regulation herein shall be construed as referring to such agreement, instrument, document, statute or regulation as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein).  This Agreement is among financially sophisticated and knowledgeable parties and is entered into by the parties in reliance upon the economic and legal bargains contained herein and shall be interpreted and construed in a fair and impartial manner without regard to such factors as the party who prepared, or caused the preparation of, this Agreement or the relative bargaining power of the parties.

 

13

 

ARTICLE 3. CAPITALIZATION

 

Section 3.1                                    Units; Initial Capitalization; Schedule of Members.

 

(a)                                 Each Member’s interest in the Company, including such Member’s interest, if any, in the capital, income, gains, losses, deductions and expenses of the Company, shall be represented by Units of limited liability company interest (each, a “Unit”).  As of the Effective Time, the Company shall have one authorized class of Units.  All Units shall have identical rights and privileges in all respects.  The Company shall have the authority to issue an unlimited number of Units.  Immediately following the IPO, the Company will issue Units to Station Corp. in exchange for a contribution of the net proceeds received by Station Corp. from the IPO (less any proceeds used to purchase Units from Members) to the Company, such that following the sale of Units by any Members and the issuance of Units by the Company the total number of Units held by Station Corp. will equal the total number of outstanding shares of Class A Common Stock.  Following such purchase of Units by Station Corp. in connection with the IPO, Units shall only be issued to Station Corp. in accordance with Section 3.2(c) or Section 3.2(d).

 

(b)                                 The aggregate number of outstanding Units and the aggregate amount of cash Capital Contributions that have been made by the Members and the Fair Market Value of Capital Contributions in the form of any property other than cash contributed by the Members with respect to the Units (including, if applicable, a description and the amount of any liability assumed by the Company or to which contributed property is subject) shall be set forth on a schedule maintained by the Company.  The Company shall also maintain a schedule setting forth (i) the name and address of each Member, (ii) the number and class of Units owned by such Member, and (iii) with respect to each Transfer permitted under this Agreement, the date of such Transfer, the number of Units Transferred and the identity of the Transferor and Transferee(s) of such Units (such schedule, the “Schedule of Members”).  The Schedule of Members shall be the definitive record of ownership of each Unit or other Capital Stock of the Company and all relevant information with respect to each Member.  The Company shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units or other Capital Stock of the Company for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units or other Capital Stock of the Company on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Act.

 

(c)                                  At the Effective Time, all of the Common Units and Profit Units (each as defined in the Prior Agreement) held by each Member immediately prior to the Effective Time shall, at the Effective Time, be automatically reverse split into the number of Units of the Company set forth opposite such Member’s name on the Schedule of Members and each Member that holds Profit Units will be issued restricted Shares of Class A Common Stock of Station Corp. in substitution of such Profit Units and Station Corp will be issued a number of Units equal to the number of Shares of Class A Common Stock so issued to holders of Profit Units.  Substantially concurrently therewith, each Member (other than the Managing Member) shall purchase for nominal consideration a number of shares of Class B Common Stock equal to the number of Units held by such Member.

 

(d)                                 In the event of a dividend, split, recapitalization, reorganization, merger, consolidation, combination, exchange of all or any class of Units of the Company, liquidation, spin-off, or other change in organizational structure affecting the Units (including any conversion of the Company to a corporation, whether by merger, filing of a certificate of

 

14

 

conversion or otherwise), the number and class of Units shall be appropriately adjusted for the benefit of Members by the Managing Member.

 

(e)                                  The Company may, in the discretion of the Managing Member, issue one or more certificates to the Members to evidence the Units in the form attached as Annex I (a “Membership Certificate”).  Each certificate representing a Unit shall (i) be signed on behalf of the Company by the Chief Executive Officer, President or Secretary of the Company and (ii) set forth the number of such Units represented thereby.  In case the officer of the Company who has signed or whose facsimile signature has been placed on such Membership Certificate shall have ceased to be an officer of the Company before such Membership Certificate is issued, it may be issued by the Company with the same effect as if such person were an officer of the Company at the time of its issue.  The Membership Certificate shall contain a legend with respect to any restrictions on transfer, as well as all required gaming legends.

 

(f)                                   Each Unit in the Company shall constitute a “security” within the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code as in effect from time to time in the State of Delaware (the “DEUCC”) (including Section 8-102(a)(15)), and (ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995.  Notwithstanding any provision of this Agreement to the contrary, to the extent that any provision of this Agreement is inconsistent with any non-waivable provision of Article 8 of the DEUCC, such provision of Article 8 of the DEUCC shall be controlling.  Each Membership Certificate evidencing Units shall bear the following legend:

 

“This Certificate evidences a limited liability company interest in Station Holdco LLC and shall constitute a “security” within the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code as in effect from time to time in the State of Delaware (including Section 8-102(a)(15)), and (ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995.”

 

No change to this provision shall be effective until all outstanding Membership Certificates have been surrendered for cancellation and any new certificates thereafter issued shall not bear the foregoing legend.

 

(g)                                  The Company shall issue a new Membership Certificate in place of any Membership Certificate previously issued if the holder of the Units in the Company represented by such Membership Certificate, as reflected on the books and records of the Company:

 

15

 

(i)                                     makes proof by affidavit, in form and substance satisfactory to the Company, that such previously issued Membership Certificate has been lost, stolen or destroyed;

 

(ii)                                  requests the issuance of a new Membership Certificate before the Company has notice that such previously issued Membership Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;

 

(iii)                               if requested by the Company, delivers to the Company a bond, in form and substance satisfactory to the Company, with such surety or sureties as the Company may direct, to indemnify the Company against any claim that may be made on account of the alleged loss, destruction or theft of the previously issued Membership Certificate; and

 

(iv)                              satisfies any other reasonable requirements imposed by the Company.

 

Section 3.2                                    Authorization and Issuance of Additional Units.

 

(a)                                 The Managing Member is authorized to (i) issue additional Units, including upon the exercise of warrants to purchase Units outstanding on the date hereof, (ii) create additional classes of Units, (iii) subdivide the Units of any such class into one or more series, (iv) fix the designations, powers, preferences and rights of the Units of each such class or series and any qualifications, limitations or restrictions thereof, and (v) subject to Article 12, amend this Agreement to reflect such actions and the resulting designations, powers, and relative preferences and rights of all the classes and series thereafter authorized under this Agreement.

 

(b)                                 The authority of the Managing Member with respect to each such class and series created in accordance with this Section 3.2 shall include establishing the following:  (i) the number of Units or securities constituting that class or series and the distinctive designation thereof, (ii) whether or not the Units or securities of such class or series shall be redeemable, and if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per Unit or security payable in case of redemption, which amount may vary under different conditions and at different redemption dates, (iii) the rights and preferences of the Units or securities of that class or series in the event of voluntary or involuntary liquidation, dissolution or winding—up of the Company, (iv) the relative rights of priority, if any, of allocations of income or loss or of payment with respect to Units or securities of that class or series and (v) any other relative rights, preferences and limitation of that class or series.

 

(c)                                  If, following the IPO, Station Corp. issues shares of Class A Common Stock (other than an issuance of the type covered by Section 3.2(d) or pursuant to the Exchange Agreement), unless such net proceeds are used to purchase Units from Members, Station Corp. shall promptly contribute to the Company all the net proceeds and property (if any) received by Station Corp. with respect to such Class A Common Stock.  Upon the contribution by Station Corp. to the Company of all (but not less than all) of such net proceeds and property (if any) so received by Station Corp., the Managing Member shall cause the Company to issue a number of

 

16

 

Units equal to the number of shares of Class A Common Stock so issued, registered in the name of Station Corp., such that, at all times, the number of Units held by Station Corp. equals the number of outstanding shares of Class A Common Stock.

 

(d)                                 At any time that Station Corp. issues one or more shares of Class A Common Stock in connection with an equity incentive program, whether such share or shares are issued upon exercise (including cashless exercise) of an option, settlement of a restricted stock unit, as restricted stock or otherwise, the Managing Member shall cause the Company to issue to Station Corp. an equal number of Units, registered in the name of Station Corp.; provided that Station Corp. shall be required to contribute all (but not less than all) the net proceeds and property (if any) received by Station Corp. from or otherwise in connection with such issuance of one or more shares of Class A Common Stock, including the exercise price of any option exercised, to the Company.  If any such shares of Class A Common Stock so issued by Station Corp. in connection with an equity incentive program are subject to vesting or forfeiture provisions, then the Units that are issued by the Company to Station Corp. in connection therewith in accordance with the preceding provisions of this Section 3.2(d) shall be subject to vesting or forfeiture on the same basis; if any of such shares of Class A Common Stock vest or are forfeited, then an equal number of Units issued by the Company in accordance with the preceding provisions of this Section 3.2(d) shall automatically vest or be forfeited.  Any cash or property held by either Station Corp. or the Company or on either’s behalf in respect of dividends paid on restricted Class A Common Stock that fail to vest shall be returned to the Company upon the forfeiture of such restricted Class A Common Stock.

 

(e)                                  For purposes of this Section 3.2, “net proceeds” means gross proceeds to Station Corp. from the issuance of Class A Common Stock or other securities less any underwriting or similar discounts or commissions and all bona fide out-of-pocket expenses of Station Corp., the Company and their respective subsidiaries in connection with such issuance.

 

(f)                                   Notwithstanding anything to the contrary in this Section 3.2, the Company shall not, and the Managing Member shall cause it not to, issue any Capital Stock in the Company other than Units that (i) have rights and privileges identical to those of the Units outstanding at the Effective Time except for any vesting or forfeiture provisions established in accordance with Section 3.2(d) and (ii) are issued in accordance with Section 3.2(c) or (d).

 

Section 3.3                                    Repurchase or Redemption of Class A Common Stock.  If, at any time, any shares of Class A Common Stock are repurchased or redeemed (whether by exercise of a put or call, pursuant to an open market purchase, automatically or by means of another arrangement) by Station Corp. for cash or other consideration and subsequently cancelled, then the Managing Member shall cause the Company, immediately prior to such repurchase or redemption of Class A Common Stock, to redeem an equal number of Units held by Station Corp., at an aggregate redemption price equal to the aggregate purchase or redemption price of the Class A Common Stock being repurchased or redeemed by Station Corp. (plus any expenses related thereto) and upon such other terms as are the same for the Class A Common Stock being repurchased or redeemed by Station Corp.

 

Section 3.4                                    Changes in Class A Common Stock.  Any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse

 

17

 

stock split, reclassification, recapitalization or otherwise) of Class A Common Stock shall be accompanied by an identical subdivision or combination, as applicable, of Units.

 

Section 3.5                                    Capital Contributions.  Except as expressly provided in Section 3.2(c) and Section 3.2(d) with respect to the Managing Member and in the Exchange Agreement, no Member shall be required to make any Capital Contributions without such Member’s consent.

 

Section 3.6                                    No Interest on Capital Contributions.  No Member shall be entitled to interest on or with respect to any Capital Contribution.

 

Section 3.7                                    Withdrawal and Return of Capital Contributions.  Except as provided in this Agreement, no Member shall be entitled to withdraw any part of such Member’s Capital Contribution or to receive distributions from the Company.

 

Section 3.8                                    Capital Accounts.

 

(a)                                 A separate Capital Account shall be maintained for each Member on the books of the Company, and adjustments to such Capital Accounts shall be made as follows:

 

(i)                                     A Member’s Capital Account shall be credited with any amounts of cash contributed by the Member to the Company, the Fair Market Value of any other property contributed to the Company (net of liabilities secured by the property that the Company is considered to assume or take subject to under Code section 752), the amount of any Company liabilities assumed by the Member (other than liabilities that are secured by any Company property distributed to such Member), and the Member’s allocable share of any Net Income and items of income or gain allocated to that Member; and

 

(ii)                                  A Member’s Capital Account shall be debited with the amount of cash distributed to the Member, the Fair Market Value of other Company property distributed to the Member (net of liabilities secured by such property that the Member is considered to assume or take subject to under Code section 752), the amount of any liabilities of the Member assumed by the Company (other than liabilities that are secured by property contributed by such Members), and the Member’s allocable share of Net Losses and items of loss, expense, or deduction allocated to that Member.

 

(b)                                 The foregoing provisions of this Section 3.8 and Sections 4.1 through 4.2 are intended to comply with section 1.704-1(b)(2)(iv) of the Regulations and shall be interpreted and applied in a manner consistent with such Regulations.  If the Managing Member, with the advice of the Company’s tax advisors, shall determine that it is prudent to modify the manner in which the Capital Accounts are computed in order to comply with section 1.704-1(b)(2)(iv) of the Regulations, the Managing Member may make such modification to the minimum extent necessary; provided that the Members are notified in writing of such modification prior to its effective date; provided, further, that the Managing Member shall have no liability to any Member for any exercise of or failure to exercise any such discretion to make any modifications permitted under this Section 3.8.

 

18

 

ARTICLE 4. ALLOCATION OF NET INCOME AND NET LOSS

 

Section 4.1                                    Allocations of Net Income and Net Losses.  Except as otherwise provided in Section 4.2, Net Income and Net Losses (and items thereof) for any Fiscal Year (or other applicable period) shall be allocated among the Members in a manner such that the Capital Account of each Member, immediately after giving effect to such allocation, is, as nearly as possible, equal (proportionately) to the amount of the distributions that would be made to such Member during such Fiscal Year (or other applicable period) pursuant to Section 5.1, based on the assumptions that (i) the Company is dissolved and terminated, (ii) its affairs are wound-up and each asset of the Company is sold for cash equal to its Fair Market Value, (iii) all Company liabilities are satisfied (limited with respect to each nonrecourse liability to the book value of the asset(s) securing such liability), and (iv) the net assets of the Company are distributed in accordance with Section 5.1 to the Members immediately after giving effect to such allocation (taking into account distributions made during such Fiscal Year or other applicable period).

 

Section 4.2                                    Special Allocations.

 

(a)                                 Losses, deduction and expenditures attributable to Member Nonrecourse Debt shall be allocated in the manner required by Regulations section 1.704-2(i).  If there is a net decrease during a taxable year in Member Minimum Gain, income and gain for such taxable year (and, if necessary, for subsequent taxable years) shall be allocated to the Members in the amounts and of such character as is determined according to Regulations section 1.704-2(i)(4).  This Section 4.2(a) is intended to be a “partner nonrecourse debt minimum gain chargeback” provision that complies with the requirements of Regulations section 1.704-2(i)(4), and shall be interpreted in a manner consistent therewith.

 

(b)                                 Except as otherwise provided in Section 4.2(a), if there is a net decrease in Company Minimum Gain during any taxable year, each Member shall be allocated income and gain for such taxable year (and, if necessary, for subsequent taxable years) in the amounts and of such character as is determined according to Regulations section 1.704-2(f).  This Section 4.2(b) is intended to be a “minimum gain chargeback” provision that complies with the requirements of Regulations section 1.704-2(f), and shall be interpreted in a manner consistent therewith.

 

(c)                                  If any Member that unexpectedly receives an adjustment, allocation or distribution described in Regulations section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) has a deficit balance in its Adjusted Capital Account as of the end of any taxable year, computed after the application of Section 4.2(a) and Section 4.2(b) but before the application of any other provision of Section 4.1, Section 4.2 and Section 4.3, then income for such taxable year shall be allocated to such Member in proportion to, and to the extent of, such deficit balance.  This Section 4.2(c) is intended to be a “qualified income offset” provision as described in Regulations section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.

 

(d)                                 “Nonrecourse deductions” (as defined in Regulation sections 1.704-2(b)(1) and (c)) shall be allocated among the Members pro rata in accordance with their respective Percentage Interests.

 

19

 

(e)                                  No Net Loss (or items thereof) shall be allocated to a Member to the extent such allocation would cause or increase a deficit balance in the Adjusted Capital Account of such Member.  Instead, such Net Loss (and items thereof) shall be allocated among the other Members that have positive account balances in the same ratios that such other Members are allocated Net Loss for such year under Section 4.1 until all such positive balances have been reduced to zero.

 

(f)                                   The adjustments described in clause (d) of the definition of Gross Asset Value shall be allocated in a manner consistent with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Regulations section 1.704-1(b)(2)(iv)(m).

 

(g)                                  The allocations set forth in Section 4.2(a) through Section 4.2(f) inclusive (the “Regulatory Allocations”) are intended to comply with certain requirements of section 1.704-1(b) and 1.704-2 of the Regulations.  The Regulatory Allocations may not be consistent with the manner in which the Members intend to allocate Net Income and Net Loss of the Company or to make Distributions.  Accordingly, notwithstanding the other provisions of Section 4.1, Section 4.2 and Section 4.3, but subject to the Regulatory Allocations, items of Net Income and Net Loss of the Company shall be allocated among the Members so as to eliminate the effect of the Regulatory Allocations and thereby cause the respective Capital Account balances of the Members to be in the amounts (or as close thereto as possible) they would have been if Net Income and Net Loss had been allocated without reference to the Regulatory Allocations.  In general, the Members anticipate that this shall be accomplished by specially allocating other Net Income and Net Loss among the Members so that the net amount of Regulatory Allocations and such special allocations to each such Member is zero.

 

Section 4.3                                    Allocations for Income Tax Purposes.  The income, gains, losses, deductions and credits of the Company for any Fiscal Year shall be allocated to the Members in the same manner as Net Income and Net Loss were allocated to the Members for such Fiscal Year pursuant to Sections 4.1 and 4.2; provided, however, that solely for Federal, state and local income and franchise tax purposes and not for book or Capital Account purposes, income, gain, loss and deduction with respect to any Company asset properly carried on the Company’s books at a value other than the tax basis of such Company asset shall be allocated for Federal, state and local income tax purposes in accordance with the “traditional method” described in section 1.704-3(b) of the Regulations.

 

Section 4.4                                    Tax Withholding and Entity-Level Taxes.  To the extent the Company is required by applicable law to withhold or to make tax payments on behalf of or with respect to any Member, the Managing Member is hereby authorized to withhold such amounts and make such tax payments as so required.  All amounts withheld pursuant to applicable law with respect to any Member or payable by the Company pursuant to Code section 6225 (or any similar provision of state, local or foreign law) that (as reasonably determined in good faith by the Managing Member based upon this Agreement) are attributable to or allocable to any Member (and, in each case, not paid to the Company by such Member pursuant to the immediately following sentence) shall be treated as distributed to such Member pursuant to Section 5.1 or Section 5.4, as reasonably determined by the Managing Member, for all purposes of this Agreement and shall reduce amounts such Member would otherwise be entitled to receive under Section 5.1 or Section 5.4, as applicable.  To the extent that at any time any such withheld

 

20

 

or paid amounts exceeds the distributions that such Member would have received but for such withholding or payment, such Member shall, upon demand by the Company, as determined by the Managing Member, promptly pay to the Company the amount of such excess.  Each Member hereby agrees, severally and not jointly, to indemnify and hold harmless the Company and the other Members from and against any liability (including any liability for taxes, penalties, additions to tax or interest) with respect to income attributable to or distributions or other payments to such Member.

 

Section 4.5                                    Allocations to Transferred Interests.  If any Units in the Company are Transferred, increased or decreased during a Fiscal Year, all items of income, gain, loss, deduction and credit recognized by the Company for such Fiscal Year shall be allocated among the Members to take into account their varying interests during the Fiscal Year in any manner approved by the Managing Member, as then permitted by the Code.

 

ARTICLE 5. DISTRIBUTIONS

 

Section 5.1                                    Distributions.  Distributions shall be made to the Members, as and when determined by the Managing Member, pro rata in accordance with their respective Percentage Interests.  Except (i) for pro rata distributions to its Members in accordance with Sections 5.1 through 5.3, (b) for tax distributions in accordance with Section 5.4 or (iii) as authorized by written consent of each Member, the Company shall not make, and shall cause its subsidiaries not to make, any distributions (in cash or in kind), dividend payments or asset transfers to any Member or any direct or indirect equity holder of any Member.

 

Section 5.2                                    Successors.  For purposes of determining the amount of Distributions, each Member shall be treated as having made the Capital Contributions and as having received the Distributions made to or received by its predecessors in respect of any of such Member’s Units.

 

Section 5.3                                    Distributions In-Kind.  To the extent that the Company makes pro rata distributions of property in-kind to the Members, the Company shall be treated as making a Distribution equal to the Fair Market Value of such property for purposes of Section 5.1 and such property shall be treated as if it were sold for an amount equal to its Fair Market Value.  Any resulting gain or loss shall be allocated to the Members’ Capital Accounts in accordance with Article 4.

 

Section 5.4                                    Tax Distributions.

 

(a)                                 Subject to the limitations set forth in any indenture or other credit, or other financing and warehousing or similar agreement governing indebtedness or other liabilities of the Company or any of its subsidiaries, no later than the tenth (10th) day following the end of each Quarterly Estimated Tax Period of each Fiscal Year, the Company shall, to the extent of available cash of the Company, make a distribution in cash (each, a “Tax Distribution”), pro rata in accordance with the Percentage Interests in effect on the date of such Tax Distribution, in an amount equal to the excess of (i) the product of (x) the taxable income of the Company attributable to such period and all prior quarterly periods in such Fiscal Year, based upon (I) the information returns filed by the Company, as amended or adjusted to date, and (II) estimated

 

21

 

amounts, in the case of periods for which the Company has not yet filed information returns (determined by disregarding any adjustment to the taxable income of any Member that arises under Code section 743(b) and is attributable to the acquisition by such Member of an interest in the Company in a transaction described in Code section 743(a)), multiplied by (y) the Assumed Tax Rate, over (ii) the aggregate amount of distributions made by the Company with respect to such Fiscal Year (treating any Tax Distribution made with respect to income for such Fiscal Year, regardless of when made, and any distribution other than a Tax Distribution made during such Fiscal Year, as being made with respect to such Fiscal Year).

 

(b)                                 If, at any time after the end of a U.S. federal income tax year of the Company, the Company has a True-Up Amount, then subject to the limitations set forth in any indenture or other credit, or other financing and warehousing or similar agreement governing indebtedness or other liabilities of the Company or any of its subsidiaries, the Company shall, to the extent of available cash of the Company, make a Tax Distribution in an amount equal to the True-Up Amount pro rata in accordance with the Percentage Interests in effect on the date of such Tax Distribution.

 

ARTICLE 6. BOOKS OF ACCOUNT, RECORDS
 AND REPORTS, FISCAL YEAR, TAX MATTERS

 

Section 6.1                                    Books and Records.  Proper and complete records and books of account shall be kept by the Company in which shall be entered fully and accurately all transactions and other matters relative to the Company’s business as are usually entered into records and books of account maintained by Persons engaged in businesses of a like character, including the Capital Account established for each Member.  The Company’s books and records shall be kept in a manner determined by the Managing Member in its sole discretion to be most beneficial for the Company.  The books and records shall at all times be maintained at the principal office of the Company and shall be open to the inspection and examination of the Members or their duly authorized representatives for a proper purpose as set forth in Section 18-305 of the Act during reasonable business hours and at the sole cost and expense of the inspecting or examining Member.

 

Section 6.2                                    Annual Reports.  The Company shall prepare or cause to be prepared all Federal, state and local tax returns that the Company is required to file.  The Company shall use its best efforts to send to each Person who was a Member at any time during each Fiscal Year a copy of Schedule K-1 to Internal Revenue Service Form 1065 (or any successor form) indicating such Member’s share of the Company’s income, loss, gain, expense and other items relevant for Federal income tax purposes and corresponding analogous state and local tax forms within ninety (90) days after the end of such Fiscal Year.

 

Section 6.3                                    Tax Elections.  The Company shall make on the first U.S. federal income tax return due after the date hereof, and keep in effect, a valid election under Code section 754.  The Managing Member shall have the authority to make any and all other tax elections and other decisions relating to tax matters for Federal, state and local purposes.

 

22

 

Section 6.4                                    Fiscal Year.  The fiscal year of the Company (the “Fiscal Year”) shall be the calendar year; provided, however, that the last Fiscal Year of the Company shall end on the date on which the Company is terminated.

 

Section 6.5                                    Tax Matters Partner.  For purposes of Code section 6231(a)(7) as in effect prior to the enactment of the Bipartisan Budget Act of 2015 and Code section 6223(a) as amended by the Bipartisan Budget Act of 2015, the Company and each Member hereby designate Station Corp. as the “tax matters partner” and the “partnership representative,” respectively (collectively, the “Tax Matters Partner”).  The Managing Member may remove or replace the Tax Matters Partner at any time and from time to time.  The Tax Matters Partner is specifically directed and authorized to take whatever steps may be necessary or desirable to perfect such designation, including filing any forms or documents with the Internal Revenue Service and taking such other action as may from time to time be required under the Regulations.  The Company shall indemnify and reimburse, to the fullest extent permitted by law, the Tax Matters Partner for all expenses (including legal and accounting fees) incurred as Tax Matters Partner while acting in good faith pursuant to this Section 6.5.

 

Section 6.6                                    Amended Returns.  In the event of an adjustment by the Internal Revenue Service of any item of income, gain, loss, deduction or credit of the Company for a taxable year of the Company beginning after December 31, 2017 under Code section 6225(a) (a “Partnership Audit Adjustment”) that results, or would with the passing of time result, in a final assessment under Code section 6232, unless the Managing Member elects not to apply the provisions of this Section 6.6, upon the receipt of an amended Schedule K-1 from the Partnership (other than pursuant to Code section 6226), each Member (and each former Member) agrees to file an amended return as provided under Code section 6225(c)(2) taking into account all Partnership Audit Adjustments allocated to such Member (or former Member) as proposed in the Partnership Audit Adjustment (or, for the avoidance of doubt, as otherwise allocated pursuant to this Agreement if not allocated in the Partnership Audit Adjustment), and to pay the amount of any tax (including any interest and penalties thereon) due with respect to such amended return in such a manner and in such amount that the amount of any “imputed underpayment” of the Company, within the meaning of Code section 6225(a)(1), otherwise resulting from the Member’s (or former Member’s) allocable share of the Partnership Audit Adjustment is determined without regard to the portion of the Partnership Audit Adjustment taken into account by such Member (or former Member) on such amended return.

 

ARTICLE 7. POWERS, RIGHTS AND DUTIES OF THE MEMBERS

 

Section 7.1                                    Limitations.  Other than as set forth in this Agreement, the Members shall not participate in the management or control of the Company’s business nor shall they transact any business for the Company, nor shall they have the power to act for or bind the Company, said powers being vested solely and exclusively in the Managing Member.  The Managing Member shall constitute the “Manager” of the Company within the meaning of the Act.  The Members shall have no interest in the properties or assets of the Managing Member, or any equity therein, or in any proceeds of any sales thereof (which sales shall not be restricted in any respect), by virtue of acquiring or owning an Interest in the Company.

 

23

 

Section 7.2                                    Liability.  Subject to the provisions of the Act, no Member shall be liable for the repayment, satisfaction or discharge of any Company liabilities in excess of the balance of such Member’s Capital Account.  No Member shall be personally liable for the return of any portion of the Capital Contributions (or any return thereon) of any other Member.

 

Section 7.3                                    Priority.  Except as otherwise provided in this Agreement, no Member shall have priority over any other Member as to Company allocations or distributions.

 

Section 7.4                                    Member Standard of Care.  To the fullest extent permitted by law, no Member other than the Managing Member, but solely in its capacity as Managing Member, shall, in its capacity as a Member, have any fiduciary or other duties to the Company or to any other Member, other than any duties expressly set forth in this Agreement.  To the extent that any Member, other than the Managing Member in its capacity as such, has any liabilities or duties at law or in equity in its capacity as a Member, including fiduciary duties or other standards of care, such liabilities and duties are hereby expressly eliminated and disclaimed by the Company and the Members to the fullest extent permitted by law.

 

ARTICLE 8. MANAGEMENT

 

Section 8.1                                    The Managing Member; Delegation of Authority and Duties.

 

(a)                                 Authority of Managing Member.  Subject to the provisions of this Agreement, the business, property and affairs of the Company shall be managed under the sole, absolute and exclusive direction of the Managing Member.  Without limiting the foregoing provisions of this Section 8.1(a) and subject to the provisions of this Agreement, the Managing Member shall have the sole power to manage or cause the management of the Company, including, without limitation, the power and authority to effectuate the sale, lease, transfer, exchange or other disposition of any, all or substantially all of the assets of the Company (including, but not limited to, the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company) or the merger, consolidation, reorganization or other combination of the Company with or into another entity.

 

(b)                                 Other Members.  No Member who is not also a Managing Member, in his or her or its capacity as such, shall participate in or have any control over the business of the Company.  Except as expressly provided herein, the Units, other Capital Stock in the Company, or the fact of a Member’s admission as a member of the Company do not confer any rights upon the Members to participate in the management of the affairs of the Company.  Except as expressly provided herein, no Member other than the Managing Member shall have any right to approve or otherwise consent to any matter involving the Company, including with respect to any merger, consolidation, combination or conversion of the Company, or any other matter that a Member might otherwise have the ability to vote or consent with respect to under the Act, at law, in equity or otherwise.  The conduct, control and management of the Company shall be vested exclusively in the Managing Member.  In all matters relating to or arising out of the conduct of the operation of the Company, the decision of the Managing Member shall be the decision of the Company.  Except as required by law or by separate agreement with the Company, no Member who is not also a Managing Member (and acting in such capacity) shall take any part in the

 

24

 

management or control of the operation or business of the Company in its capacity as a Member, nor shall any Member who is not also a Managing Member (and acting in such capacity) have any right, authority or power to act for or on behalf of or bind the Company in his or her or its capacity as a Member in any respect or assume any obligation or responsibility of the Company or of any other Member.

 

(c)                                  Delegation by Managing Member.  The Managing Member shall have the power and authority to delegate to one or more other Persons the Managing Member’s rights and powers to manage and control the business and affairs of the Company, including to delegate to agents and employees of the Member or the Company, and to delegate by a management agreement or another agreement with, or otherwise to, other Persons.  The Managing Member may authorize any Person (including any Member or Officer of the Company or the Managing Member) to enter into and perform any document on behalf of the Company.

 

(d)                                 Fiduciary Obligations.  The Managing Member shall owe the same fiduciary duties to the Members and the Company and, as applicable, the creditors of the Company, as are owed by directors of a Delaware corporation to such corporation and the stockholders and, as applicable, the creditors of such corporation; provided, however, that the Managing Member shall not be liable to the Company or the Members or such creditors for monetary damages for breach of fiduciary duty as the Managing Member, except for liability (A) for any breach of such member’s duty of loyalty to the Company or the Members or such creditors, (B) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (C) under Section 174 of the General Corporation Law of the State of Delaware, or (D) for any transaction from which such member derived any improper personal benefit.  In furtherance of the foregoing, creditors of the Company shall have the express right to bring claims directly or on behalf of the Company for breach of the fiduciary duties of the Managing Member to the same extent such creditors would have such right if the Company were a Delaware corporation (and if creditors of a Delaware corporation would not have the right to bring any such claim, the creditors of the Company will have no right to bring such claim against the Company).

 

Section 8.2                                    Officers.

 

(a)                                 Designation and Appointment.  Subject to applicable Gaming Laws, the Managing Member may, from time to time, employ and retain Persons as may be necessary or appropriate for the conduct of the Company’s business, including employees, agents and other Persons (any of whom may be a Member) who may be designated as officers of the Company (each, an “Officer” and, collectively, “Officers”), with such titles as and to the extent authorized by the Managing Member.  Any number of offices may be held by the same Person.  In its discretion, the Managing Member may choose not to fill any office for any period as it may deem advisable.  Officers need not be residents of the State of Delaware or Members.  Any Officers so designated shall have such authority and perform such duties as the Managing Member may from time to time delegate to them.  The Managing Member may assign titles to particular Officers.  Each Officer shall hold office until his successor shall be duly designated and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided.  The salaries or other compensation, if any, of the Officers of the

 

25

 

Company shall be fixed from time to time by the Managing Member.  Designation of an Officer shall not of itself create any contractual or employment rights.

 

(b)                                 Resignation and Removal.  Any Officer may resign as such at any time.  Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time is specified, at the time of its receipt by the Managing Member.  The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.  Any Officer may be removed as such, either with or without cause at any time by the Managing Member.

 

(c)                                  Standard of Care.

 

(i)                                     The officers of the Company shall owe the same fiduciary duties to the Members and the Company and, as applicable, the creditors of the Company, as are owed by officers of a Delaware corporation to such corporation and the stockholders and, as applicable, the creditors of such corporation; provided, however, that an officer of the Company shall not be personally liable to the Company or the Members or such creditors for monetary damages for breach of fiduciary duty as an officer of the Company, except for liability (A) subject to paragraph (ii) below, for any breach of such officer’s duty of loyalty to the Company or the Members or such creditors, (B) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (C) for any transaction from which such officer derived any improper personal benefit.  In furtherance of the foregoing, creditors of the Company shall have the express right to bring claims directly or on behalf of the Company for breach of the fiduciary duties of the officers of the Company to the same extent such creditors would have such right if the Company were a Delaware corporation (and if creditors of a Delaware corporation would not have the right to bring any such claim, the creditors of the Company will have no right to bring such claim against the Company).

 

(ii)                                  Notwithstanding anything to the contrary set forth in this Agreement, to the extent that officers of the Company have any fiduciary or similar duties to the Company pursuant to the laws of the State of Nevada or the State of Delaware, whether in law or in equity, that result solely from the fact that such individual is an officer of the Company and that are more expansive than those contemplated by this Section 8.4(c), such duties are hereby modified to the extent permitted under the Act to those contemplated by this Section 8.4(c).

 

Section 8.3                                    Duties of Officers.  The Officers, in the performance of their duties as such, shall owe to the Company duties of loyalty and due care of the type owed by officers of a Delaware corporation pursuant to the laws of the State of Delaware.

 

Section 8.4                                    Existence and Good Standing.  The Managing Member may take all action which may be necessary or appropriate (i) for the continuation of the Company’s valid existence as a limited liability company under the laws of the State of Delaware (and of each other jurisdiction in which such existence is necessary to enable the Company to conduct the business in which it is engaged) and (ii) for the maintenance, preservation and operation of the business of the Company in accordance with the provisions of this Agreement and applicable

 

26

 

laws and regulations.  The Managing Member may file or cause to be filed for recordation in the office of the appropriate authorities of the State of Delaware, and in the proper office or offices in each other jurisdiction in which the Company is formed or qualified, such certificates (including certificates of limited liability companies and fictitious name certificates) and other documents as are required by the applicable statutes, rules or regulations of any such jurisdiction or as are required to reflect the identity of the Members and the amounts of their respective capital contributions.

 

Section 8.5                                    Investment Company Act.  The Managing Member shall use its best efforts to assure that the Company shall not be subject to registration as an investment company pursuant to the Investment Company Act of 1940, as amended.

 

Section 8.6                                    Indemnification of the Managing Member, Officers and Agents.

 

(a)                                 The Company shall indemnify and hold harmless the Managing Member and its Affiliates, and the former and current officers, agents and employees of the Company, the Managing Member and each such Affiliate (each, an “Indemnified Party”), from and against any loss, expense, damage or injury suffered or sustained by them, by reason of any acts, omissions or alleged acts or omissions arising out of their activities on behalf of the Company or in furtherance of the interests of the Company, including any judgment, award, settlement, reasonable attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim if the acts, omissions or alleged acts or omissions upon which such actual or threatened action, proceeding or claims are based were not a result of fraud, gross negligence or willful misconduct by such Indemnified Party.  Any indemnification pursuant to this Section 8.6 shall only be from the assets of the Company.

 

(b)                                 Expenses (including reasonable attorneys’ fees) incurred by an Indemnified Party in a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding; provided that if an Indemnified Party is advanced such expenses and it is later determined that such Indemnified Party was not entitled to indemnification with respect to such action, suit or proceeding, then such Indemnified Party shall reimburse the Company for such advances.

 

(c)                                  No amendment, modification or deletion of this Section 8.6 shall apply to or have any effect on the right of any Indemnified Party to indemnification for or with respect to any acts or omissions of such Indemnified Party occurring prior to such amendment, modification or deletion.

 

Section 8.7                                    Certain Costs and Expenses.  The Company shall (i) pay, or cause to be paid, all costs, fees, operating expenses and other expenses of the Company (including the costs, fees and expenses of attorneys, accountants or other professionals and the compensation of all personnel providing services to the Company) incurred in pursuing and conducting, or otherwise related to, the activities of the Company and (ii) to the extent that such payments may be made in compliance with the terms of the agreements governing the Company’s debt obligations and applicable law, the Company shall pay or reimburse the Managing Member for (A) all costs, fees or expenses incurred by the Managing Member in connection with the IPO, other than the payment obligations of the Managing Member under the Tax Receivable

 

27

 

Agreement and the income, franchise (except as provided in this Section 8.7) or similar tax obligations of the Managing Member, and (B) all costs, fees or expenses incurred by the Managing Member in connection with serving as the Managing Member.  To the extent that the Managing Member determines in good faith that such expenses are related to the business and affairs of the Company or any of its subsidiaries (including expenses that relate to the business and affairs of the Company or any of its subsidiaries and that also relate to other activities of the Managing Member), the Managing Member may cause the Company to pay or bear all expenses of the Managing Member, including costs of securities offerings not borne directly by Members, compensation and meeting costs of the board of directors of the Managing Member, costs relating to periodic reports to stockholders of the Managing Member, litigation costs and damages arising from litigation, accounting and legal costs incurred by the Managing Member and franchise taxes arising from the existing or business activities of the Managing Member, provided that the Company shall not pay or bear any income or similar tax obligations of the Managing Member.

 

ARTICLE 9. TRANSFERS OF INTEREST BY MEMBERS

 

Section 9.1                                    Restrictions on Transfers of Interests by Members.  No Member may sell, assign, pledge or in any manner dispose of or create or suffer the creation of a security interest in or any encumbrance (it being agreed that no provision under the Exchange Agreement shall constitute an encumbrance for purposes hereof) on all or a portion of its Interest in the Company (the commission of any such act being referred to as a “Transfer,” any person who effects a Transfer being referred to as a “Transferor” and any person to whom a Transfer is effected being referred to as a “Transferee”) except in accordance with the terms and conditions set forth in this Article 9.  No Transfer of an Interest in the Company shall be effective until such time as all requirements of this Article 9 in respect thereof have been satisfied and, if consents, approvals or waivers are required under this Agreement by the Managing Member, all of the same shall have been confirmed in writing by the Managing Member.  Any Transfer or purported Transfer of an Interest in the Company not made in accordance with this Agreement (a “Void Transfer”) shall be null and void and of no force or effect whatsoever.  Any amounts otherwise distributable under Article 5 or Article 10 in respect of an Interest in the Company that has been the subject of a Void Transfer may be withheld by the Company until the Void Transfer has been rescinded, whereupon the amount withheld (after reduction by any damages suffered by the Company attributable to such Void Transfer) shall be distributed without interest to the rightful holder of such Interest.

 

Section 9.2                                    Transfer of Interest of Members.

 

(a)                                 A Member may not Transfer all or any portion of its Interest in the Company to any Person without the consent of the Managing Member (which consent shall not be unreasonably withheld, conditioned or delayed); provided that, subject to Section 9.3, a Member may, without the consent of the Managing Member or any other Member, Transfer all or a portion of its Interest in the Company (i) to one or more of its Permitted Transferees or (ii) pursuant to the Exchange Agreement.

 

(b)                                 The Transferee of a Member’s Interest in the Company may be admitted to the Company as a Substituted Member upon the prior written consent of the Managing

 

28

 

Member (which consent shall not be unreasonably withheld, conditioned or delayed).  Unless a Transferee of a Member’s Interest in the Company is admitted as a Substituted Member under this Section 9.2(b), it shall have none of the powers of a Member hereunder and shall have only such rights of an assignee under the Act as are consistent with this Agreement.  No Transferee of a Member’s Interest shall become a Substituted Member unless such Transfer shall be made in compliance with Sections 9.2(a) and 9.3.

 

(c)                                  Upon the Transfer of the entire Interest in the Company of a Member and effective upon the admission of its Transferee as a Member, the Transferor shall be deemed to have withdrawn from the Company as a Member.

 

(d)                                 Upon the death, dissolution, resignation or withdrawal in contravention of Section 12.1, or the bankruptcy of a Member (the “Withdrawing Member”), the Company shall have the right to treat such Member’s successor(s)-in-interest as assignee(s) of such Member’s Interest in the Company, with none of the powers of a Member hereunder and with only such rights of an assignee under the Act as are consistent with this Agreement.  For purposes of this Section 9.2(d), if a Withdrawing Member’s Interest in the Company is held by more than one Person (for purposes of this clause (d), the “Assignees”), the Assignees shall appoint one Person with full authority to accept notices and distributions with respect to such Interest in the Company on behalf of the Assignees and to bind them with respect to all matters in connection with the Company or this Agreement.

 

(e)                                  Upon request of the Company, each Member agrees to provide to the Company information regarding its adjusted tax basis in its Interests along with documentation substantiating such amount, and any other information, documentation and certification necessary for the Company to comply with Code section 743 and the Regulations thereunder.

 

(f)                                   The Company shall reflect each Transfer and admission of a Member authorized under this Article 9 by amending the Schedule of Members maintained pursuant to Section 3.1.

 

(g)                                  To the extent that any Units are Transferred in accordance with this Article 9 by any Member (other than the Managing Member), the Transferor shall Transfer to the Transferee an equal number of shares of Class B Common Stock.  No Member (other than the Managing Member) shall Transfer any such shares except to a Transferee of an equal number of Units pursuant to a Transfer made in accordance with this Article 9.

 

Section 9.3                                    Further Requirements.  In addition to the other requirements of Section 9.2, and unless waived in whole or in part by the Managing Member, no Transfer of all or any portion of an Interest in the Company may be made unless the following conditions are met:

 

(a)                                 The Transferor or Transferee shall have paid all reasonable costs and expenses, including attorneys’ fees and disbursements and the cost of the preparation, filing and publishing of any joinder or amendment to this Agreement or the Certificate, incurred by the Company in connection with the Transfer;

 

29

 

(b)                                 The Transferor shall have delivered to the Company a fully executed copy of all documents relating to the Transfer, executed by both the Transferor and the Transferee, and the agreement of the Transferee in writing and otherwise in form and substance reasonably acceptable to the Managing Member to:

 

(i)                                     be bound by the terms imposed upon such Transfer by the terms of this Agreement; and

 

(ii)                                  assume all obligations of the Transferor under this Agreement relating to the Interest in the Company that is the subject of such Transfer;

 

(c)                                  The Managing Member shall have been reasonably satisfied, including, at its option, having received an opinion of counsel to the Company reasonably acceptable to the Managing Member, that:

 

(i)                                     the Transfer will not cause the Company to be treated as an association taxable as a corporation for Federal income tax purposes;

 

(ii)                                  the Transfer will not cause the Company to be treated as a “publicly traded partnership” within the meaning of Code section 7704;

 

(iii)                               any such Transfer that does not constitute an exchange pursuant to the Exchange Agreement will not cause a termination of the Company under Code Section 708; and

 

(iv)                              the Transfer does not require registration under the Securities Act or any rules or regulations thereunder.

 

Any waivers from the Managing Member under this Section 9.3 shall be given or denied as reasonably determined by the Managing Member.

 

Section 9.4                                    Exchange.

 

(a)                                 Each Member, other than Station Corp., that is not party to the Exchange Agreement shall be entitled to exchange Units and shares of Class B Common Stock on the terms and conditions set forth in the Exchange Agreement as if such Member were party thereto.

 

(b)                                 The Managing Member may require all Members (other than the Managing Member) holding Units to exchange all such Units and shares of Class B Common Stock held by them subject to the terms and conditions of the Exchange Agreement or, if such Member is not a party to the Exchange Agreement, on terms substantially similar to the Exchange Agreement, in connection with a Change of Control.

 

Section 9.5                                    Consequences of Transfers Generally.

 

(a)                                 In the event of any Transfer or Transfers permitted under this Article 9, the Transferor and the Interest in the Company that is the subject of such Transfer shall remain subject to this Agreement, and the Transferee shall hold such Interest in the Company subject to

 

30

 

all unperformed obligations of the Transferor.  Any successor or Transferee hereunder shall be subject to and bound by this Agreement as if originally a party to this Agreement.

 

(b)                                 Unless a Transferee of a Member’s Interest becomes a Substituted Member, such Transferee shall have no right to obtain or require any information or account of Company transactions, or to inspect the Company’s books or to exercise any rights of approval reserved only to admitted Members of the Company with respect to Company matters.  Such a Transfer shall, subject to the last sentence of Section 9.1, merely entitle the Transferee to receive the share of distributions, Net Income, Net Loss and items of income, gain, deduction and loss to which the Transferor otherwise would have been entitled.  Each Member agrees that such Member will, upon request of the Managing Member, execute such certificates or other documents and perform such acts as the Managing Member deems appropriate after a Transfer of such Member’s Interest in the Company (whether or not the Transferee becomes a Substituted Member) to preserve the limited liability of the Members under the laws of the jurisdictions in which the Company is doing business.

 

(c)                                  The Transfer of a Member’s Interest in the Company and the admission of a Substituted Member shall not be cause for dissolution of the Company.

 

Section 9.6                                    Capital Account; Percentage Interest.  Any Transferee of a Member under this Article 9 shall, subject to the last sentence of Section 9.1, succeed to the portion of the Capital Account and Percentage Interest so Transferred to such Transferee.

 

Section 9.7                                    Additional Filings.  Upon the admission of a Substituted Member under Section 9.2, the Company shall cause to be executed, filed and recorded with the appropriate governmental agencies such documents (including amendments to this Agreement) as are required to accomplish such substitution.

 

ARTICLE 10. REGISTRATION RIGHTS

 

Section 10.1                             Demand Registrations.

 

(a)                                 Timing of Demand Registrations.  Subject to the obligations of Station Corp. and the Company under Section 5(h) of the Underwriting Agreement dated on or about the date hereof and applicable Gaming Laws, any Major Holder, acting alone or jointly with other Major Holders (the “Exercising Holders”), may request registration under the Securities Act (a “Demand Registration”) of the offer and sale of all or any portion of such Major Holders’ Registrable Securities on Form S-1 or any similar long-form registration (a “Long-Form Registration”) or, if available, on Form S-3 or any similar short-form registration (a “Short-Form Registration”) or pursuant to a Shelf Takedown Prospectus Supplement.

 

(b)                                 Numbers and Allocation of Demand Registrations.

 

(i)                                     Long-Form Registrations.  Each of the Fertitta Majority Holder and the DB Majority Holder shall be entitled to request three Long-Form Registrations pursuant to this Section 10.1.

 

31

 

(ii)           Short-Form Registrations.  The Major Holders shall be entitled to request an unlimited number of Short-Form Registrations and Shelf Takedown Prospectus Supplements pursuant to this Section 10.1.  Demand Registrations will be Short-Form Registrations whenever Station Corp. is permitted to use any applicable short form and Shelf Takedown Prospectus Supplements whenever Station Corp. has a Shelf Registration Statement filed pursuant to Section 10.1(e) that is effective.

 

(c)           Participation.  Within five (5) days of the receipt of any request for a Demand Registration (including any Shelf Takedown Prospectus Supplement with respect to an underwritten offering), Station Corp. shall give written notice of such request to all Holders.  Subject to the provisions of this Section 10.1 (including Section 10.1(d)), Station Corp. shall include in such Demand Registration all Registrable Securities that the Holders request to be registered in a written request from such Holders received by Station Corp. within (x) five (5) days following the mailing of Station Corp.’s notice pursuant to this Section 10.1(c) with respect to any Shelf Takedown Prospectus Supplement with respect to an underwritten offering and (y) thirty (30) days of the mailing of Station Corp.’s notice pursuant to this Section 10.1(c) with respect to any other registration.  Subject to Section 10.1(d), Station Corp. may include in such Demand Registration securities for sale for its own account or for the account of other security holders.  Notwithstanding the foregoing, Station Corp. shall not be required under this Section 10.1(c) to include any Holder’s Registrable Securities in any underwritten offering made pursuant to this Section 10.1(c) unless such Holder accepts the terms of the underwriting as agreed upon between the Major Holders and the underwriters selected by them and enters into an underwriting agreement in customary form with an underwriter or underwriters selected by the Major Holders.

 

(d)           Priority on Demand Registrations.  Station Corp. shall not include in any Demand Registration any securities which are not Registrable Securities of a Holder without the prior written consent of the Exercising Holder(s).  If a Demand Registration is an underwritten offering and the managing underwriters advise Station Corp. in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold in an orderly manner in such offering within a price range acceptable to the Exercising Holder(s), Station Corp. shall include in such Demand Registration (i) first, the Registrable Securities of the Holders on a pro rata basis based on the number of Registrable Securities requested to be included by such Holders in such Demand Registration; (ii) second, shares of Class A Common Stock or other shares of capital stock proposed to be sold by Station Corp.; and (iii) third, if permitted hereunder, any other securities requested to be included in such Demand Registration which securities, in the opinion of such underwriters, can be sold in an orderly manner within the price range of such offering; provided, that, in the event the Holders are not permitted as a result of such underwriter’s advice to include at least 90% of the Registrable Securities requested to be included in such registration by such Holders, then such request and related registration shall not count towards the number of Demand Registrations which the Major Holders are entitled to request pursuant to Section 10.1(b).

 

(e)           Shelf Registration.   (i) As promptly as practicable following the expiration of the period set forth in Section 5(h) of the Underwriting Agreement, and provided that the Company is then eligible to file a registration statement in accordance with Rule 415

 

32

 

under the Securities Act or any similar rule that may be adopted by the SEC (a “Shelf Registration Statement”),  the Company shall file a Shelf Registration Statement registering the sale of all Registrable Securities of each Holder with respect to which the Company receives a written request for inclusion therein (together with all duly completed and executed questionnaires and other documents reasonably requested by the Company and necessary to enable it to include such Holder as a selling stockholder) within thirty (30) days after the date that the Company delivers notice to each Holder of Registrable Securities of its intention to file such Shelf Registration Statement, which notice the Company shall deliver no less than thirty (30) days prior to the expiration of the period set forth in Section 5(h) of the Underwriting Agreement.  The Company shall use its best efforts to have such Shelf Registration Statement declared effective by the SEC as soon as practicable thereafter and shall, notwithstanding Sections 10.4(a) and 10.4(k), keep such Shelf Registration Statement continuously effective (and supplemented and amended as required by the provisions of Section 10.4) to the extent necessary to ensure that it is available for resales of Registrable Securities included in such registration, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as announced from time to time, from the effective date of such Shelf Registration Statement until the earlier of (i) the date all Registrable Securities covered by such Shelf Registration Statement have been sold in the manner set forth and as contemplated in such Shelf Registration Statement and (ii) the Registrable Securities held by the Major Holders have been sold pursuant to Rule 144 of the Securities Act.

 

(ii)  Subject to the provisions of Section 10.1(f), the Major Holders may, at any time and from time to time, request in writing (which request shall specify the Registrable Securities intended to be disposed of by such Major Holders and the intended method of distribution thereof) to sell pursuant to a prospectus supplement (a “Shelf Takedown Prospectus Supplement”) Registrable Securities of such Major Holders available for sale pursuant to such Shelf Registration Statement.  The Company shall use its commercially reasonable efforts to, not later than the seventh (7th) Business Day after the receipt of the initial request to file a Shelf Takedown Prospectus Supplement from the applicable Major Holder, cause to be filed the Shelf Takedown Prospectus Supplement.

 

(iii)  Notwithstanding the foregoing, the Company may, for valid business reasons, including that the continued use of the Shelf Registration Statement or Shelf Takedown Prospectus Supplement at any time would require Station Corp. to make an Adverse Disclosure, notify Holders that the Shelf Registration Statement or any Prospectus included therein, including a Shelf Takedown Prospectus Supplement, is not effective or useable for offers or resales of Registrable Securities; provided, however, that Station Corp. shall not be permitted to exercise such a suspension in the event of an Adverse Disclosure (i) more than two times during any twelve (12)-month period, or (ii) for a period exceeding forty-five (45) days on any one occasion.  Each Holder agrees that upon receipt of any such notice pursuant to this Section 10.1(e)(iii), it will discontinue use of the Prospectus contained in the Shelf Registration Statement until receipt of copies of the amended Prospectus relating thereto or until advised in writing by the Company that the use of the Prospectus may be resumed.

 

(f)            Restrictions on Demand Registrations.  Station Corp. shall not be obligated to effect any Demand Registration pursuant to this Section 10.1 (including filing a

 

33

 

Registration Statement or any Shelf Takedown Prospectus Supplement) within three months after the effective date of a previous Demand Registration or Shelf Takedown Prospectus Supplement pursuant to this Section 10.1 or a previous registration under which the Holders had piggyback rights pursuant to Section 10.2 hereof (irrespective of whether such rights were exercised).  Station Corp. may postpone for up to two months the filing or the effectiveness of a Registration Statement for a Demand Registration (including any Shelf Takedown Prospectus Supplement) if, based on the good-faith judgment of Station Corp.’s Board of Directors (after consultation with its legal and financial advisors), such Demand Registration would reasonably be expected to have a material adverse effect on any proposal or plan by Station Corp. or any of its subsidiaries to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, reorganization, joint venture or other transaction material to the business of Station Corp., as determined by the Board of Directors of Station Corp. in its good-faith reasonable judgment (an “Adverse Disclosure”); provided, that in such event, the Exercising Holders(s) initially requesting such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn, such Exercising Holder(s) shall retain their rights pursuant to this Section 10.1 as if the request for such Demand Registration was not made and any related registration shall not count as one of the permitted Demand Registrations of the Major Holders under this Section 10.1 and Station Corp. shall pay all Registration Expenses in connection with such registration; provided, further, that, following the postponement of a filing or the effectiveness of a Registration Statement pursuant to this sentence (whether or not the request for the applicable Demand Registration is subsequently withdrawn), Station Corp. may not, in the same calendar year, postpone the filing or effectiveness of any other Registration Statement under this sentence other than in respect of any requests for Demand Registrations made within two months of the initial request that was subject to the postponement.  Station Corp. shall provide written notice to the Holders of (x) any postponement or withdrawal of the filing or effectiveness of a Registration Statement pursuant to this Section 10.1(f), (y) Station Corp.’s decision to file or seek effectiveness of such Registration Statement following such withdrawal or postponement and (z) the effectiveness of such Registration Statement.

 

(g)           Selection of Underwriters.  The Major Holders participating in any underwritten offering pursuant to this Section 10.1 shall collectively select the managing underwriter or underwriters to administer the corresponding offering with the consent of the Company, which shall not be unreasonably withheld.

 

Section 10.2          Piggyback Registrations.

 

(a)           Piggyback Rights.  If (but without any obligation to do so) Station Corp. proposes to register, whether or not for its own account, any Capital Stock in Station Corp. in connection with the public offering for cash of such securities (but excluding any (i) registration made pursuant to Section 10.1, (ii) registration relating solely to the sale of securities to participants in a Company sponsored benefit plan on Form S-1 or Form S-8 under the Securities Act or similar forms that may be promulgated under the Securities Act in the future and (iii) registration relating to a corporate reorganization, acquisition or other transaction under Rule 145 of the Securities Act on Form S-4 under the Securities Act or similar forms that may be promulgated under the Securities Act in the future), Station Corp. shall, at such time, promptly give each Holder written notice of such registration.  Upon the written request of each Holder

 

34

 

given in writing to Station Corp. within fifteen (15) days after receipt of such notice by Station Corp., Station Corp. shall, subject to the provisions of this Section 10.2, include in the Registration Statement all of the Registrable Securities that each such Holder has requested to be registered.

 

(b)           Right to Terminate Registration.  Station Corp. shall have the right to terminate or withdraw any registration initiated by it under this Section 10.2 prior to the effectiveness of such registration and the commencement of the public offer of the securities covered by such registration whether or not any Holder has elected to include securities in such registration.  The expenses of such withdrawn registration shall be borne by Station Corp. in accordance with Section 10.5 hereof.  Any such withdrawal shall be without prejudice to the rights of any Holder to request that a registration be effected under Section 10.1 or to be included in subsequent registrations under Section 10.2(a).

 

(c)           Underwriting Requirements.  In connection with any offering involving an underwriting of shares of common stock for the benefit of Station Corp. or any security holder of Station Corp., Station Corp. shall not be required under this Section 10.2 to include any of the Holders’ Registrable Securities in such underwriting pursuant to this Section 10.2 unless they accept the terms of the underwriting as agreed upon between Station Corp. and the underwriters selected by it and enter into an underwriting agreement in customary form with an underwriter or underwriters selected by Station Corp.  Notwithstanding any other provision of this Section 10.2, if the managing underwriters with respect to the proposed offering advise Station Corp. in writing that in their opinion the number of securities requested to be included in such registration exceeds the number of securities which can be sold in such offering without being likely to have a material adverse effect on the offering of securities as then contemplated (including a material adverse effect on the price at which it is proposed to sell the securities), then Station Corp. shall so advise all holders of securities that would otherwise be included in such registration, and the number of shares that may be included in the registration shall be allocated:  (i) first, to securities being sold for the account of Station Corp., (ii) second, pro rata among the Holders electing to participate in such registration in accordance with this Section 10.2 according to the total amount of Registrable Securities requested to be included in such registration, and (iii) last, pro rata among the other selling security holders of Station Corp. according to the total amount of securities requested to be included in such registration.

 

(d)           Selection of Underwriters.  Station Corp. shall have the right to select the managing underwriter or underwriters to administer any offering pursuant to this Section 10.2.

 

Section 10.3          [Reserved.]

 

Section 10.4          Obligations of Station Corp.  Whenever required under this Article 5 to effect the registration of any Registrable Securities, Station Corp. shall, as expeditiously as reasonably possible:

 

(a)           prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective, and, subject to Section 10.1(e), keep such Registration Statement effective for

 

35

 

a period of up to one hundred eighty (180) days or, if earlier, until the distribution contemplated in the Registration Statement has been completed;

 

(b)           prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such registration as may be necessary to comply with the provisions of the Securities Act with respect to disposition of all securities covered by such Registration Statement for the period set forth in paragraph (a) above or Section 10.1(e), as applicable;

 

(c)           furnish to each selling Holder and their counsel selected in accordance with Section 10.6 copies of all documents proposed to be filed with the SEC in connection with such registration, which documents will be provided to such counsel and each selling Holder prior to the filing thereof;

 

(d)           furnish to the selling Holders, without charge, such number of (i) conformed copies of the Registration Statement and of each amendment or supplement thereto (in each case including all exhibits and documents filed therewith), and (ii) copies of the prospectus included in such Registration Statement, including each preliminary prospectus and any summary prospectus, in conformity with the requirements of the Securities Act, and such other documents, in each case, as they may reasonably request in order to facilitate the disposition of Registrable Securities held by them in accordance with the intended method or methods of such disposition;

 

(e)           in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement or placement agreement, as applicable, in usual and customary form, with the managing underwriters or placement agent, as applicable, of such offering and enter into such other agreements and take such other actions in order to expedite or facilitate the disposition of such Registrable Securities, including preparing for, and participating in, “road shows” and all other customary selling efforts, all as the underwriters reasonably request;

 

(f)            notify each selling Holder covered by such Registration Statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) the issuance or, to its knowledge, threatened issuance of any stop order by the SEC in respect of such Registration Statement (and use every reasonable effort to prevent the entry of such stop order or obtain the lifting of any such stop order at the earliest possible moment), (ii) any period when the Registration Statement ceases to be effective, or (iii) the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and, as promptly as is practicable, prepare and furnish to such selling Holder a reasonable number of copies of any supplement to or amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

 

36

 

(g)           cause all such Registrable Securities registered hereunder to be listed on each securities exchange or any automated quotation system on which similar securities issued by Station Corp. are then listed or, if not so listed, use its commercially reasonable efforts to cause such Registrable Securities registered hereunder to be listed on a securities exchange or any automated quotation system selected by the Board of Directors;

 

(h)           enter into reasonable “lock-up” agreements restricting Station Corp.’s right to issue or sell the Equity Securities or any rights or derivative contracts with respect thereto for a period not to exceed one hundred eighty (180) days from the effective date of the Registration Statement relating to the IPO, plus any applicable extension of such period as may be provided for in a customary “booster shot” provision provided for in such lock-up agreement, which extends such time period under certain circumstances; provided, that for any subsequent underwritten offerings, the lock-up period shall be reduced to be a maximum of ninety (90) days, plus any applicable extension of such period as may be provided for in a customary “booster shot” provision provided for in such lock-up agreement, which extends such time period under certain circumstances;

 

(i)            provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(j)            use its best efforts to register and qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions in the United States as shall be reasonably requested by the selling Holders and such other jurisdictions as shall be reasonably requested by the managing underwriters (or obtain an exemption from registration or qualification under such laws) and do any and all other acts and things which may be necessary or advisable to enable such selling Holders to consummate the disposition of the Registrable Securities in such jurisdictions in accordance with the intended method or methods of distribution thereof; provided, however, that Station Corp. shall not be required in connection therewith or as a condition thereto to qualify to do business, where not otherwise required, or to file a general consent to service of process or become subject to taxation in any such states or jurisdictions;

 

(k)           use its best efforts to cause all Registrable Securities covered by such Registration Statement to be registered with or approved by such other Governmental Authorities, including the Gaming Authorities, as may be necessary by virtue of the business and operations of Station Corp. and its subsidiaries to enable each selling Holder thereof to consummate the disposition of such Registrable Securities in accordance with the intended method or methods of disposition thereof;

 

(l)            otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement of Station Corp. (in form complying with the provisions of Rule 158 under the Securities Act) covering, subject to Section 10.1(e), the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the Registration Statement;

 

37

 

(m)          use its best efforts to take all other reasonable and customary steps typically taken by issuers to effect the registration and disposition of such Registrable Securities as contemplated hereby;

 

(n)           during the period of time referred to in Section 10.4(a) above, use its commercially reasonable efforts to avoid the issuance of, or if issued, to obtain the withdrawal of, any order enjoining or suspending the use or effectiveness of a Registration Statement or suspending the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as promptly as practicable;

 

(o)           enter into customary agreements and take all other action in connection therewith in order to expedite or facilitate the distribution of the Registrable Securities included in such Registration Statement;

 

(p)           in connection with any sale or transfer of the Registrable Securities (whether or not pursuant to a Registration Statement) that will result in the securities being delivered no longer constituting Registrable Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold, which certificates shall not bear any transfer restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as the Holders may request at least three Business Days prior to any sale of the Registrable Securities;

 

(q)           in connection with any underwritten offering, use its best efforts to obtain a “comfort” letter from the independent public accountants for Station Corp. and any acquisition target of Station Corp. whose financial statements are required to be included or incorporated by reference in any Registration Statement, in form and substance customarily given by independent certified public accountants in an underwritten public offering, addressed to the underwriters, if any, and to the Holders of the Registrable Securities being sold pursuant to each Registration Statement;

 

(r)            execute and deliver all instruments and documents (including  an underwriting agreement or placement agent agreement, as applicable in customary form) and take such other actions and obtain such certificates and opinions as sellers of the Registrable Securities being sold reasonably request in order to effect a public offering of such Registrable Securities and in such connection, if the offering is an underwritten offering, (i) make such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, with respect to the business of Station Corp. and its subsidiaries, and the Registration Statement and documents, if any, incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and, if true, confirm the same if and when requested, and (ii) use its reasonable best efforts to furnish to the selling holders and underwriters of such Registrable Securities opinions and negative assurance letters of counsel to Station Corp. and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any ), covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such counsel and any such underwriters; and

 

38

 

(s)            upon reasonable request by a Holder, Station Corp. shall file an amendment to any applicable Registration Statement (or Prospectus supplement, as applicable), to name additional Holders of Registrable Securities or otherwise update the information provided by any such Holder in connection with such Holder’s disposition of Registrable Securities.

 

Section 10.5          Obligations of Holder.

 

(a)           Information from Holder.  It shall be a condition precedent to the obligations of Station Corp. to take any action pursuant to this Article 10 with respect to the Registrable Securities of any selling Holder that such Holder shall, within ten (10) Business Days of a request by Station Corp., furnish to Station Corp. such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be reasonably required by Station Corp. to effect the registration of such Holder’s Registrable Securities.

 

(b)           Participation in Underwritten Registrations.  No Holder may participate in any registration hereunder which is underwritten unless such Holder (a) agrees to sell such Holder’s securities on the basis provided in any customary underwriting arrangements approved by the Person(s) entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

 

(c)           Each Holder shall enter into reasonable “lock-up” agreements restricting such Holder’s right to transfer the Equity Securities or any rights or derivative contracts with respect thereto for a period not to exceed one hundred eighty (180) days from the effective date of the Registration Statement relating to the IPO, plus any applicable extension of such period as may be provided for in a customary “booster shot” provision provided for in such lock-up agreement, which extends such time period under certain circumstances; provided, that for any subsequent offerings, the lock-up period shall be reduced to be a maximum of ninety (90) days, plus any applicable extension of such period as may be provided for in a customary “booster shot” provision provided for in such lock-up agreement, which extends such time period under certain circumstances.

 

Section 10.6          Expenses of Registration.  All expenses (other than underwriting discounts and commissions) incurred in connection with registrations pursuant to Sections 10.1 and 10.2, including all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for Station Corp., all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by Station Corp. and the reasonable fees and disbursements of one counsel for the selling Holders selected by Holders holding a majority of the Registrable Securities being sold in such offering included in such registration (collectively, “Registration Expenses”), shall be borne by Station Corp.; provided that, in the event that both a Fertitta Major Holder and a DB Major Holder participates in an offering, each of them shall be entitled to separate counsel, whose reasonable fees and disbursements shall be borne by Station Corp.; provided, further, that the selection of such counsel shall be subject to the consent of Station Corp., not to be unreasonably withheld, conditioned or delayed.

 

39

 

Section 10.7          Indemnification.  In the event any Registrable Securities are included in a Registration Statement under this Article 10:

 

(a)           To the fullest extent permitted by law, Station Corp. will indemnify and hold harmless each Holder, the partners, members, managers, officers and directors of each Holder, each Observer, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls such Holder or underwriter, within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, expenses or liabilities (joint or several) (or actions, proceedings or settlements in respect thereof), to which they may become subject under the Securities Act, the Exchange Act or other federal, state or foreign securities laws, or common law, insofar as such losses, claims, damages, expenses or liabilities (or actions proceeding or settlements in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”) by Station Corp.:  (i) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus (or similar offering documents) contained therein or any amendments or supplements thereto, or any other document required in connection therewith or any qualification or compliance associated therewith; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation of the Securities Act, the Exchange Act, any state or foreign securities laws or any rule or regulation promulgated under the Securities Act, the Exchange Act or other federal, state or foreign securities laws or common law; and Station Corp. will reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending or settling any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 10.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of Station Corp. (which consent shall not be unreasonably withheld, delayed or conditioned), nor shall Station Corp. be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, underwriter or controlling Person.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Person seeking indemnity and shall survive the transfer of such securities by any such Person.

 

(b)           To the extent permitted by law, each selling Holder, on a several and not joint basis, will indemnify and hold harmless Station Corp., each of its directors, each of its officers who signed the Registration Statement, each Person, if any, who controls Station Corp. within the meaning of the Securities Act, and any underwriter against any losses, claims, damages, expenses or liabilities (joint or several) (or actions, proceedings or settlements in respect thereof) to which any of the foregoing Persons may become subject, under the Securities Act, the Exchange Act or other federal, state or foreign securities laws, or common law, insofar as such losses, claims, damages or liabilities (or actions proceedings or settlements in respect thereto) arise out of or are based upon any Violation (but excluding clause (iii) of the definition thereof), in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any Person intended to

 

40

 

be indemnified pursuant to this Section 10.7(b) for any legal or other expenses reasonably incurred by such Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 10.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld, delayed or conditioned); provided, further that in no event shall any indemnity under this Section 10.7(b) exceed the net proceeds from the offering received by such Holder.

 

(c)           Promptly after receipt by an indemnified party under this Section 10.7 of written notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 10.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict, together with one local counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 10.7 only to the extent of such material prejudice, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 10.7.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party, (iii) does not include any undertaking or obligation to act or to refrain from acting by the indemnified party and (iv) is for monetary damages only.

 

(d)           If the indemnification provided for in this Section 10.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of and, except as to Station Corp. where Station Corp. does not participate in the offering, the relative benefits received by the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided, that no Person guilty of fraud shall be entitled to contribution.  The relative fault of the indemnifying party and of the indemnified party

 

41

 

shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.  The relative benefits received by the indemnifying party and the indemnified party shall be determined by reference to the net proceeds and underwriting discounts and commissions from the offering received by each such party.  In no event shall any contribution of any Holder under this Section 10.7(d) exceed the net proceeds from the offering received by such Holder, less any amounts paid under Section 10.7(b).

 

(e)                                  Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into by Station Corp. and a Holder in connection with an underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control with respect to Station Corp. and such Holder.

 

(f)                                   The obligations of Station Corp. and Holders under this Section 10.7 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Article 10and the termination of this Agreement.

 

(g)                                  The obligations of the parties under this Section 10.7 shall be in addition to any liability which any party may otherwise have to any other party.

 

Section 10.8                             Survival of Obligations.  The obligations of Station Corp. pursuant to this Article 10 shall apply to Registrable Securities held by any Person who was a Member pursuant to the Prior Agreement and to Registrable Securities issued upon an Exchange and shall be enforceable by the Holder thereof even if such Holder is not a Member or party to this Agreement.

 

ARTICLE 11. CERTAIN COMPENSATION MATTERS

 

Section 11.1                             Non-Equity Compensation.  The Company and the Members agree with respect to the employment of the FE Senior Executives, other executives and employees of Station Casinos (a) the aggregate Non-Equity Compensation of Frank J. Fertitta III shall remain unchanged for two (2) years following the consummation of the IPO; (b) the aggregate Non-Equity Compensation of Lorenzo J. Fertitta shall be fixed for two (2) years following the consummation of the IPO at Five Hundred Thousand Dollars ($500,000.00) per year; and (c) for so long as the DB Holder(s) and their Affiliates shall collectively beneficially own at least five percent (5%) of the outstanding Class A Common Stock (determined assuming that all of the outstanding Units, other than those held by Station Corp., were exchanged (together with an equivalent number of shares of Class B Common Stock) for shares of Class A Common Stock in accordance with the terms and conditions of the Exchange Agreement), the aggregate Non-Equity Compensation payable to all other executives and employees (including, but not limited to, the FE Senior Executives other than Frank Fertitta and Lorenzo Fertitta) employed by Fertitta Entertainment LLC, a Delaware limited liability company (“Fertitta Entertainment”), immediately prior to the IPO, (i) shall remain unchanged for the first year following the consummation of the IPO and (ii) for the second year following the consummation of the IPO,

 

42

 

shall not exceed 105% of the aggregate Non-Equity Compensation received by all such individuals, taken in the aggregate, during the first year following the consummation of the IPO (collectively, the “Non-Equity Compensation Thresholds”); provided, however, that the Non-Equity Compensation Thresholds shall not apply to any employees hired for new business or strategic opportunities that are outside of the ordinary course of the existing business of Station Casinos.  Following the expiration of such two (2) year period, the foregoing restrictions shall cease to apply and all matters of Non-Equity Compensation shall be subject to the discretion and oversight of the Compensation Committee of the Board of Directors of Station Corp.

 

Section 11.2                             Equity Compensation.

 

(a)                                 Subject to Section 11.2(b), the Company and the Members agree that, for a period of one (1) year following the consummation of the IPO, no form of equity compensation shall be granted by Station Casinos or any of its Affiliates to any executives or employees employed by Fertitta Entertainment (including, without limitation, the FE Senior Executives) immediately prior to the IPO other than the initial grants that become effective upon the consummation of the IPO; provided, that no initial grants shall be made to either of Frank J. Fertitta III or Lorenzo J. Fertitta. Following the expiration of such one (1) year period, the foregoing restrictions shall cease to apply and, subject to Section 11.2(b), all matters of equity compensation with respect to executives or employees employed by Fertitta Entertainment (including, without limitation, the FE Senior Executives) immediately prior to the IPO shall be subject to the discretion and oversight of the Compensation Committee of the Board of Directors of Station Corp.

 

(b)                                 The Company and the Members agree that, for a period of two (2) years following the consummation of the IPO, no form of equity compensation shall be granted by Station Casinos or any of its Affiliates to either of Frank J. Fertitta III or Lorenzo J. Fertitta.  Following the expiration of such two (2) year period, the foregoing restrictions shall cease to apply and all matters of equity compensation with respect to Frank J. Fertitta III and Lorenzo J. Fertitta shall be subject to the discretion and oversight of the Compensation Committee of the Board of Directors of Station Corp.

 

(c)                                  The Company and the Members agree that, for a period of two (2) years following the consummation of the IPO, the aggregate number of shares of Class A Common Stock issued or issuable in connection with awards made pursuant to the Equity Incentive Plan, any successor plan thereto, or otherwise (including, for the avoidance of doubt, any initial grants referenced in Section 11.2(a)) shall not exceed fifty percent (50%) of the total number of shares of Class A Common Stock reserved for issuance pursuant to the Equity Incentive Plan.  Following the expiration of such two (2) year period, the foregoing restrictions shall cease to apply and all matters of equity compensation shall be subject to the discretion and oversight of the Compensation Committee of the Board of Directors of Station Corp.

 

Section 11.3                             Company and Managing Member Obligation  Notwithstanding anything to the contrary in Article VIII hereof, each of the Company and the Managing Member shall comply with, and cause Station Casinos and any of their other Affiliates to comply with, the terms and provisions of the preceding Sections 11.1 and 11.2.

 

43

 

ARTICLE 12. RESIGNATION OF MEMBERS;
 TERMINATION OF COMPANY; LIQUIDATION
 AND DISTRIBUTION OF ASSETS

 

Section 12.1                             Resignation of Members.  Except as otherwise specifically permitted in this Agreement, a Member may not resign or withdraw from the Company unless unanimously agreed to in writing by all other Members.  The Managing Member shall reflect any such resignation or withdrawal by amending the Schedule of Members maintained pursuant to Section 3.1(b), dated as of the date of such resignation or withdrawal, and the resigning or withdrawing Member (or such Member’s successors-in-interest) shall have none of the powers of a Member hereunder and shall only have such rights of an assignee of a limited liability company interest under the Act as are consistent with the other terms and provisions of this Agreement and with no other rights under this Agreement.  The remaining Members may, in their sole discretion, cause the Company to distribute to the resigning or withdrawing Member the balance in its Capital Account on the date of such resignation or withdrawal.  Upon the distribution to the resigning or withdrawing Member of the balance in his Capital Account, the resigning or withdrawing Member shall have no further rights with respect to the Company.  Any Member resigning or withdrawing in contravention of this Section 12.1 shall indemnify, defend and hold harmless the Company, the Managing Member and all other Members from and against any losses, expenses, judgments, fines, settlements or damages suffered or incurred by the Company or any such other Member arising out of or resulting from such resignation or withdrawal.

 

Section 12.2                             Dissolution of Company.

 

(a)                                 The Company shall be dissolved, wound up and terminated as provided herein upon the first to occur of the following:

 

(i)                                     a decree of dissolution of the Court of Chancery of the State of Delaware pursuant to Section 18-802 of the Act;

 

(ii)                                  the determination of the Managing Member to dissolve the Company; or

 

(iii)                               the occurrence of any other event that would make it unlawful for the business of the Company to be continued.

 

Except as expressly provided herein or as otherwise required by the Act, the Members shall have no power to dissolve the Company.

 

(b)                                 In the event of the dissolution of the Company for any reason, the Managing Member or a liquidating agent or committee appointed by the Managing Member shall act as a liquidating agent (the Managing Member or such liquidating agent or committee, in such capacity, is hereinafter referred to as the “Liquidator”) and shall commence to wind up the affairs of the Company and to liquidate the Company assets.  The Members shall continue to share all income, losses and distributions during the period of liquidation in accordance with Articles 4 and 5.  The Liquidator shall have full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Company assets pursuant to such liquidation,

 

44

 

giving due regard to the activity and condition of the relevant market and general financial and economic conditions.

 

(c)                                  The Liquidator shall have all of the rights and powers with respect to the assets and liabilities of the Company in connection with the liquidation and termination of the Company that the Managing Member would have with respect to the assets and liabilities of the Company during the term of the Company, and the Liquidator is hereby expressly authorized and empowered to execute any and all documents necessary or desirable to effectuate the liquidation and termination of the Company and the transfer of any Company assets.

 

(d)                                 Notwithstanding the foregoing, a Liquidator which is not a Member shall not be deemed a Member and shall not have any of the economic interests in the Company of a Member; and such Liquidator shall be compensated for its services to the Company at normal, customary and competitive rates for its services to the Company, as reasonably determined by the Managing Member.

 

Section 12.3                             Distribution in Liquidation.  The Company’s assets shall be applied in the following order of priority:

 

(a)                                 first, to pay the costs and expenses of the winding—up, liquidation and termination of the Company;

 

(b)                                 second, to creditors of the Company, in the order of priority provided by law, including fees, indemnification payments and reimbursements payable to the Members or their Affiliates, but not including those liabilities (other than liabilities to the Members for any expenses of the Company paid by the Members or their Affiliates, to the extent the Members are entitled to reimbursement hereunder) to the Members in their capacity as Members;

 

(c)                                  third, to establish reserves reasonably adequate to meet any and all contingent or unforeseen liabilities or obligations of the Company; provided, however, that at the expiration of such period of time as the Liquidator may deem advisable, the balance of such reserves remaining after the payment of such contingencies or liabilities shall be distributed as hereinafter provided; and

 

(d)                                 fourth, the remainder to the Members in accordance with Section 5.1.

 

If the Liquidator, in its sole discretion, determines that Company assets other than cash are to be distributed, then the Liquidator shall cause the Fair Market Value of the assets not so liquidated to be determined (with any such determination normally made by the Managing Member in accordance with the definition of “Fair Market Value” being made instead by the Liquidator).  Such assets shall be retained or distributed by the Liquidator as follows:

 

(i)                                     the Liquidator shall retain assets having a value, net of any liability related thereto, equal to the amount by which the cash net proceeds of liquidated assets are insufficient to satisfy the requirements of clauses (a), (b), and (c) of this Section 12.3; and

 

45

 

(ii)                                  the remaining assets shall be distributed to the Members in the manner specified in clause (d) of this Section 12.3.

 

(e)                                  If the Liquidator, in its sole discretion, deems it not feasible or desirable to distribute to each Member its allocable share of each asset, the Liquidator may allocate and distribute specific assets to one or more Members as the Liquidator shall reasonably determine to be fair and equitable, taking into consideration, inter alia, the Fair Market Value of such assets and the tax consequences of the proposed distribution upon each of the Members (including both distributees and others, if any).  Any distributions in-kind shall be subject to such conditions relating to the disposition and management thereof as the Liquidator deems reasonable and equitable.

 

Section 12.4                             Final Reports.  Within a reasonable time following the completion of the liquidation of the Company’s assets, the Liquidator shall deliver to each of the Members a statement which shall set forth the assets and liabilities of the Company as of the date of complete liquidation and each Member’s portion of distributions pursuant to Section 12.3.

 

Section 12.5                             Rights of Members.  Each Member shall look solely to the Company’s assets for all distributions with respect to the Company and such Member’s Capital Contribution (including return thereof), and such Member’s share of profits or losses thereon, and shall have no recourse therefor (upon dissolution or otherwise) against any other Member or the Managing Member.

 

Section 12.6                             Deficit Restoration.  Notwithstanding any other provision of this Agreement to the contrary, upon liquidation of a Member’s Interest in the Company (whether or not in connection with a liquidation of the Company), no Member shall have any liability to restore any deficit in its Capital Account.  In addition, no allocation to any Member of any loss, whether attributable to depreciation or otherwise, shall create any asset of or obligation to the Company, even if such allocation reduces the Capital Account of any Member or creates or increases a deficit in such Capital Account; it is also the intent of the Members that no Member shall be obligated to pay any such amount to or for the account of the Company or any creditor of the Company.  No creditor of the Company is intended as a third-party beneficiary of this Agreement nor shall any such creditor have any rights hereunder.

 

Section 12.7                             Termination.  The Company shall terminate when all property owned by the Company shall have been disposed of and the assets shall have been distributed as provided in Section 12.3.  The Liquidator shall then execute and cause to be filed a Certificate of Cancellation of the Company.

 

ARTICLE 13. NOTICES AND CONSENT OF MEMBERS

 

Section 13.1                             Notices.  All notices, demands or requests required or permitted under this Agreement must be in writing, and shall be made by hand delivery, certified mail, overnight courier service, electronic mail or facsimile to the address, electronic mail address or facsimile number set forth in the Schedule of Members, but any party may designate a different address, electronic mail address or facsimile number by a notice similarly given to the Company.  Any such notice or communication shall be deemed given when delivered by hand, if delivered

 

46

 

on a Business Day, the next Business Day after delivery by hand if delivered by hand on a day that is not a Business Day; four (4) Business Days after being deposited in the United States mail, postage prepaid, return receipt requested, if mailed; on the next Business Day after being deposited for next day delivery with Federal Express or a similar overnight courier; when receipt is acknowledged, whether by facsimile confirmation or return electronic mail, if sent by facsimile or electronic mail on a Business Day; and the next Business Day following the day on which receipt is acknowledged whether by facsimile confirmation or return electronic mail, if sent by facsimile or electronic mail on a day that is not a Business Day.

 

Section 13.2          Consents and Approvals.  Any action requiring the consent or approval of Members under this Agreement, unless otherwise specified herein, may be taken at a meeting of Members or, in lieu thereof, by written consent of Members holding the requisite Percentage Interest or, where expressly required by this Agreement or by applicable law, by all of the Members.

 

ARTICLE 14. AMENDMENT OF AGREEMENT

 

Section 14.1          Amendments.  This Agreement may be amended, supplemented, waived or modified by the written consent of the Managing Member in its sole discretion without the approval of any other Member or other Person; provided, that to the extent that any such amendment, supplement, waiver or modification would adversely affect the rights of the holders of any given class of Units (other than the Managing Member), such amendment shall require the consent of the holders of a majority of the then outstanding Units of each such class held by Members (other than, and, for purposes of determining whether holders of a majority of the then outstanding Units have consented, excluding any Units that are held by the Managing Member); provided, further, that (x) Articles X and XI, and any other provisions governing the rights or obligations of any DB Holder or DB Majority Holder in its capacity as such shall not be amended, supplemented, modified or waived, nor shall any other modifications to this Agreement be made that would have a similar effect, without the prior written consent of the DB Majority Holder and (y) Article X and any other provisions governing the rights or obligations of any Fertitta Holder or Fertitta Majority Holder in its capacity as such shall not be amended, supplemented, modified or waived, nor shall any other modifications to this Agreement be made that would have a similar effect, without the prior written consent of the Fertitta Majority Holder.

 

Section 14.2          Amendment of Certificate.  In the event that this Agreement shall be amended, supplemented or modified pursuant to this Article 14, the Managing Member shall amend, supplement or modify the Certificate to reflect such change if the Managing Member deems such amendment, supplement or modification of the Certificate to be necessary or appropriate.

 

Section 14.3          Power of Attorney.  Each Member hereby irrevocably constitutes and appoints the Managing Member as its true and lawful attorney-in-fact, with full power of substitution, in its name, place and stead to make, execute, sign, acknowledge (including swearing to), verify, deliver, record and file, on its behalf, the following:  (i) any amendment, supplement or modification to this Agreement which complies with the provisions of Section 14.1 of this Agreement; and (ii) the Certificate and any amendment, supplement or modification thereof required because this Agreement is amended, including an amendment, supplement or

 

47

 

modification to effectuate any change in the membership of the Company or in the Capital Contributions of the Members.  This power-of-attorney is a special power-of-attorney and is coupled with an interest in favor of the Managing Member and, as such:  (A) shall be irrevocable and continue in full force and effect notwithstanding the subsequent death or incapacity of any party granting this power-of-attorney, regardless of whether the Company or the Managing Member shall have had notice thereof; (B) may be exercised for a Member by facsimile signature of the Managing Member or, after listing all of the Members, including such Member, by a single signature of the Managing Member acting as attorney-in-fact for all of them; and (C) shall survive the delivery of an assignment by a Member of the whole or any portion of its Interest in the Company, except that where the assignee thereof has been approved by the Managing Member for admission to the Company as a Substituted Member, this power-of-attorney given by the assignor shall survive the delivery of such assignment for the sole purpose of enabling the Managing Member to execute, acknowledge and file any instrument necessary to effect such substitution.

 

ARTICLE 15. MISCELLANEOUS

 

Section 15.1          Entire Agreement.  This Agreement, together with the Exchange Agreement, the Tax Receivable Agreement and the Registration Rights Agreement, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any prior agreement or understandings among them with respect to the subject matter hereof (including the Prior Agreement), and it may not be modified or amended in any manner other than as set forth herein.

 

Section 15.2          Governing Law.  This Agreement and the rights of the parties hereunder shall be governed by, and interpreted in accordance with, the law of the State of Delaware.

 

Section 15.3          Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced as a result of any rule of law or public policy, all other terms and other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated by this Agreement are fulfilled to the greatest extent possible.

 

Section 15.4          Effect.  Except as herein otherwise specifically provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and permitted assigns.

 

Section 15.5          Captions.  Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof.

 

48

 

Section 15.6          Counterparts.  This Agreement may contain more than one counterpart of the signature page and this Agreement may be executed by the affixing of the signatures of each of the Members, which may be delivered via facsimile or .pdf, to one of such counterpart signature pages.  All of such counterpart signatures pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.

 

Section 15.7          Waiver of Partition.  The Members hereby agree that the Company assets are not and will not be suitable for partition.  Accordingly, each of the Members hereby irrevocably waives any and all rights (if any) that such Member may have to maintain any action for partition of any of such assets.

 

Section 15.8          Waiver of Judicial Dissolution.  Each Member agrees that irreparable damage would occur if any Member should bring or have brought on its behalf an action for judicial dissolution of the Company.  Accordingly, each Member accepts the provisions under this Agreement as such Member’s sole entitlement on dissolution of the Company and waives and renounces all rights to seek or have sought for such Member a court decree of dissolution or to seek the appointment by a court of a liquidator for the Company.

 

Section 15.9          Consent to Jurisdiction; Waiver of Trial by Jury.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER.

 

Section 15.10       Binding Arbitration.  Any dispute, claim or controversy arising out of or relating to this Agreement that cannot be resolved amicably by the parties, including the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration pursuant to Section 349 of the Rules of the Court of Chancery of the State of Delaware if it is eligible for such arbitration.  If the dispute claim or controversy is not eligible for such arbitration, it shall be settled by arbitration administered by the American Arbitration Association (“AAA”) in accordance with its commercial rules and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Any AAA arbitration proceeding shall be conducted in the State of Delaware.  The AAA arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including the issuance of an injunction or other equitable relief.  However, any party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction hereof and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved.  Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.

 

Section 15.11       Gaming Redemption.

 

(a)           The Affected Interests owned or controlled directly or indirectly by an Unsuitable Person or an Affiliate of an Unsuitable Person (the “Affected Member”) shall be

 

49

 

subject to redemption by the Company, out of funds legally available therefor, to the extent required by the Gaming Authority making the determination of unsuitability or reasonably deemed necessary or advisable by the Managing Member.  If the Gaming Authority or the Managing Member making the determination of unsuitability requires or deems it reasonably necessary or advisable to redeem the Affected Interests, the Managing Member shall give a Redemption Notice to the Affected Member and shall thereafter proceed to purchase the Affected Interests on the Redemption Date for the Redemption Price, subject to any approvals, conditions or limitations under applicable Gaming Laws.  The Affected Member shall surrender any certificates representing the Affected Interests to be redeemed in accordance with the requirements of the Redemption Notice.

 

(b)           Notwithstanding any other provision in this Agreement, commencing on the date that a Member becomes an Affected Member, and until the Affected Interests of such Affected Member are redeemed or are transferred to a Person who is not an Unsuitable Person in a transfer permitted by the terms of this Agreement, such Affected Member:  (i) shall not be entitled to receive any distributions with regard to such Affected Interests; (ii) shall not be entitled to exercise, directly or indirectly or through any proxy, trustee, or nominee, any voting or other right conferred by such Affected Interests, and Affected Interests shall not for any purposes be included in the Equity Securities of the Company entitled to vote; (iii) shall not be entitled to receive any remuneration in any form from the Company, the Members or any Affiliate of any of them for services rendered or otherwise; and (iv) to the extent not treated as a partner for federal income tax purposes under applicable law, shall not be allocated any Net Income or Net Loss with respect to such Affected Member’s Affected Interests other than, to the extent permitted under applicable law, special allocations of Net Loss (or items of deduction or loss) up to an amount equal to the Net Income (or items of income or gain) allocated to the Affected Member during the period beginning on the date immediately following the close of the period to which the most recent distribution under Section 5.4 relates and ending on the date on which the Member becomes an Affected Member.

 

(c)           All notices given pursuant to this Section, including Redemption Notices, shall be in writing and shall be given in accordance with Section 13.1.

 

(d)           Each Affected Member shall indemnify and hold harmless the Company, the Members and their respective Affiliates for any and all losses, costs and expenses, including attorneys’ fees, incurred by them as a result of, or arising out of, such Affected Member’s refusal or failure to comply with the provisions of this Section, or failure to promptly divest itself of any Affected Interests when required to do so by this Section 15.11.

 

(e)           The right of redemption provided in this Section shall not be exclusive of any other rights the Company or its members or their respective Affiliates may have under this Agreement or hereafter acquire under any other agreement or otherwise.

 

(f)            Nothing contained in this Section shall limit the authority of the Company to take such other action to the extent permitted by law as it deems necessary or advisable to protect the Company or its Affiliates from the denial or threatened denial or loss or threatened loss of any Gaming Licenses or as required by any Gaming Authority.  Without limiting the generality of the foregoing the Managing Member may, to the extent permitted by law, from

 

50

 

time to time establish, modify, amend or rescind regulations, and procedures of the Company not inconsistent with the express provisions of this Section for the purpose of determining whether any Person is an Unsuitable Person and, as applicable, for the orderly application, administration and implementation of the provisions of this Section.

 

(g)           Except as may be required by any applicable Gaming Laws or a Gaming Authority, the Company may waive any of the rights or any restrictions contained in this Section in any instance in which the Managing Member determines that a waiver would be in the best interests of the Company.  Except as may be required by a Gaming Authority, nothing in this Section shall be deemed or construed to require the Company to repurchase any Affected Interest of an Affected Member.

 

Section 15.12       Non-Occurrence of IPO.  Notwithstanding any other provision of this Agreement (including Section 14.1), in the event that the IPO is not consummated prior to the date that is fifteen (15) Business Days after the date of this Agreement, then this Agreement shall automatically, with no action required by any Member, on such date be amended and restated in its entirety back to the Prior Agreement and, upon such automatic amendment and restatement of this Agreement, this Agreement shall be of no force and effect.

 

51

 

[FORM OF SIGNATURE PAGE]

 

	
 
    	
DATED   AS OF:
    	
 
    

 

THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY 

AGREEMENT OF

STATION HOLDCO LLC

 

IN WITNESS WHEREOF, the undersigned Member has caused this counterpart signature page to the Third Amended and Restated Limited Liability Company Agreement of STATION HOLDCO LLC, dated as of        , 2016, to be duly executed as of the date first above written.

 

	
 
    	
[NAME OF MEMBER]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
Address   for Notices:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Attn:
    	
 
    
	
 
    	
Phone:
    	
 
    
	
 
    	
Fax:
    	
 
    
	
 
    	
e-mail:
    	
 
    
				

 

 

 

	
 
    	
DATED   AS OF:
    	
 
    

 

LIMITED LIABILITY COMPANY AGREEMENT OF

STATION HOLDCO LLC

 

IN WITNESS WHEREOF, the undersigned has caused this counter-part signature page to the Third Amended and Restated Limited Liability Company Agreement of STATION HOLDCO LLC, dated as of      , 2016, to be duly executed as of the date first above written.

 

	
 
    	
RED ROCK RESORTS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
Address   for Notices:
    
	
 
    	
 
    
	
 
    	
1505   South Pavilion Center Drive
    
	
 
    	
Las   Vegas, Nevada 89135
    
	
 
    	
Attn:  Richard J. Haskins, President
    
	
 
    	
 
    
	
 
    	
Phone:
    	
(702)   495-4256
    
	
 
    	
Fax:
    	
(702)   795-4245
    
	
 
    	
e-mail:
    	
rhaskins@fertitta.com
    
				

 

 

ANNEX I

 

Form of Certificate

 

THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.

 

THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING AGREEMENTS, TRANSFER RESTRICTIONS AND OTHER TERMS CONTAINED IN AN EQUITYHOLDERS AGREEMENT, DATED AS OF JUNE    , 2011 (AS AMENDED FROM TIME TO TIME), AMONG THE COMPANY, CERTAIN OF ITS AFFILIATES AND CERTAIN HOLDERS OF UNITS OF THE COMPANY.  A COPY OF SUCH AGREEMENT IS ON FILE AT THE COMPANY’S PRINCIPAL EXECUTIVE OFFICES.

 

	
Number of Units:     
    	
 
    	
Certificate Number:
    

 

CERTIFICATE OF LIMITED LIABILITY COMPANY INTEREST

 

Station Holdco LLC, a Delaware limited liability company (the “Company”), hereby certifies that                            (the “Holder”) is the registered owner of [    ] Units representing limited liability company interests in the Company (the “Interests”).  The rights, powers, preferences, restrictions and limitations of the Interests are set forth in, and this Certificate and the Interests represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Third Amended and Restated Limited Liability Company Agreement of the Company dated as of            , 2015, as the same may be amended or modified from time to time (the “LLC Agreement”).  By acceptance of this Certificate, and as a condition to being entitled to any rights and/or benefits with respect to the Interests evidenced hereby, the Holder is deemed to have agreed to comply with and be bound by all the terms and conditions of the LLC Agreement.  The Company will furnish a copy of the LLC Agreement to the Holder without charge upon written request to the Company at its principal place of business.

 

The member’s interests represented by this Certificate are transferable only on the books of the Company by the holder hereof in person or by power of attorney upon surrender of this Certificate properly endorsed.

 

This Certificate shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws

 

 

IN WITNESS WHEREOF, the Company has caused this Certificate to be duly executed and signed this    day of                , 20   .

 

	
Station Holdco LLC
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    

 

THIS CERTIFICATE EVIDENCES A MEMBER’S INTEREST IN STATION HOLDCO LLC AND SHALL CONSTITUTE A “SECURITY” WITHIN THE MEANING OF, AND GOVERNED BY, (I) ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT FROM TIME TO TIME IN THE STATE OF DELAWARE (INCLUDING SECTION 8-102(A)(15)), AND (II) ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE OF ANY OTHER APPLICABLE JURISDICTION THAT NOW OR HEREAFTER SUBSTANTIALLY INCLUDES THE 1994 REVISIONS TO ARTICLE 8 THEREOF AS ADOPTED BY THE AMERICAN LAW INSTITUTE AND THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS AND APPROVED BY THE AMERICAN BAR ASSOCIATION ON FEBRUARY 14, 1995.

 

THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR EXERCISE OF ANY OPTION TO PURCHASE OR OTHER DISPOSITION OF AN INTEREST IN THIS LIMITED LIABILITY COMPANY IS INEFFECTIVE UNLESS APPROVED IN ADVANCE BY THE NEVADA GAMING COMMISSION (THE “COMMISSION”).  IF AT ANY TIME THE COMMISSION FINDS THAT A MEMBER IS UNSUITABLE TO HOLD AN INTEREST IN THIS COMPANY, SUCH OWNER MUST DISPOSE OF SUCH INTEREST AS PROVIDED BY THE GAMING LAWS OF THE STATE OF NEVADA AND THE REGULATIONS PROMULGATED THEREUNDER, OR, IF THE COMMISSION CONSENTS, IN ACCORDANCE WITH THE COMPANY’S ARTICLES OR OPERATING AGREEMENT.  BEGINNING ON THE DATE WHEN THE COMMISSION SERVES NOTICE OR A DETERMINATION OF UNSUITABILITY PURSUANT TO APPLICABLE LAW, IT IS UNLAWFUL FOR THE UNSUITABLE MEMBER (A) TO RECEIVE ANY DIVIDEND OR INTEREST OR ANY PAYMENT OR DISTRIBUTION OF ANY KIND, INCLUDING OF ANY SHARE OF THE DISTRIBUTION OF PROFITS OR CASH OR ANY OTHER PROPERTY, OR PAYMENTS UPON DISSOLUTION, FROM THE COMPANY, OTHER THAN A RETURN OF CAPITAL; (B) TO EXERCISE DIRECTLY OR THROUGH ANY PROXY, TRUSTEE OR NOMINEE ANY VOTING RIGHT CONFERRED BY THE MEMBER’S INTEREST IN THE COMPANY; OR (C) TO RECEIVE ANY REMUNERATION IN ANY FORM FROM THE COMPANY OR FROM ANY COMPANY HOLDING A GAMING LICENSE FOR SERVICES RENDERED OR OTHERWISE.Exhibit 1012

		

			Exhibit 10.12

		

		
			 
		

		
			 
		

		
			SEVEN HILLS WINERY, LLC
		

		
			as Seller
		

		
			-  and  -
		

		
			DOUBLE CANYON VINEYARDS, LLC
		

		
			as Purchaser
		

		
			January 27, 2016
		

		
			 
		

		 

		

			 

		

		

			 

		

		

			 

		

 

		

			TABLE OF CONTENTS

		

		

			 

		

		

			Page

		

		

			 

		

			
					
						 

					
					
						 

					
					
						 

				
	
					
						Article 1

					
					
						INTERPRETATION

					
					
						 

				
	
					
						1.1

					
					
						Definitions

					1 
				
	
					
						1.2

					
					
						Construction

					1 
				
	
					
						1.3

					
					
						Certain Rules of Interpretation

					1 
				
	
					
						1.4

					
					
						Knowledge

					2 
				
	
					
						1.5

					
					
						Computation of Time

					2 
				
	
					
						1.6

					
					
						Performance on Business Days

					2 
				
	
					
						1.7

					
					
						Calculation of Interest

					2 
				
	
					
						1.8

					
					
						Currency and Payment

					2 
				
	
					
						1.9

					
					
						Exhibits and Schedules

					3 
				
	
					
						1.10

					
					
						Provide, Furnish, Deliver, Make Available to Purchaser

					3 
				
	
					
						Article 2

					
					
						PURCHASE AND SALE OF PURCHASED ASSETS

					
					
						 

				
	
					
						2.1

					
					
						Purchased Assets

					3 
				
	
					
						2.2

					
					
						Excluded Assets

					5 
				
	
					
						2.3

					
					
						Assumed Liabilities

					6 
				
	
					
						2.4

					
					
						Retained Liabilities

					6 
				
	
					
						2.5

					
					
						Purchase Price

					7 
				
	
					
						2.6

					
					
						Purchase Price Allocation

					8 
				
	
					
						2.7

					
					
						Closing Payment

					8 
				
	
					
						2.8

					
					
						Post-Closing Adjustment of Purchase Price

					8 
				
	
					
						2.9

					
					
						Disputes

					8 
				
	
					
						2.10

					
					
						Prorations

					10 
				
	
					
						2.11

					
					
						Costs

					10 
				
	
					
						2.12

					
					
						Earn-Out Payments

					11 
				
	
					
						2.13

					
					
						Disclosure of Acquisition

					12 
				
	
					
						Article 3

					
					
						CLOSING

					
					
						 

				
	
					
						3.1

					
					
						Closing

					13 
				
	
					
						3.2

					
					
						Seller’s Closing Deliveries

					13 
				

		 

			

					

						 

					

					

						-1-

					

					

						 

				

		

			 

		

 

		

			TABLE OF CONTENTS

		

		

			(continued)

		

		

			Page

		

		

			 

		

			
					
						3.3

					
					
						Purchaser’s Closing Deliveries

					14 
				
	
					
						3.4

					
					
						 Third Party Consents

					15 
				
	
					
						Article 4

					
					
						CONDITIONS OF CLOSING

					
					
						 

				
	
					
						4.1

					
					
						Conditions to Obligations of All Parties

					16 
				
	
					
						4.2

					
					
						Purchaser’s Conditions

					16 
				
	
					
						4.3

					
					
						Seller’s Conditions

					17 
				
	
					
						Article 5

					
					
						REPRESENTATIONS AND WARRANTIES

					
					
						 

				
	
					
						5.1

					
					
						Nature of Seller’s Representations and Warranties

					18 
				
	
					
						5.2

					
					
						Representations and Warranties as to Seller

					18 
				
	
					
						5.3

					
					
						Representations and Warranties Relating to the Assets

					20 
				
	
					
						5.4

					
					
						Taxes

					23 
				
	
					
						5.5

					
					
						Books, Records and Financial Condition

					24 
				
	
					
						5.6

					
					
						Financial Statements

					24 
				
	
					
						5.7

					
					
						Absence of Certain Changes or Events

					25 
				
	
					
						5.8

					
					
						Legal Proceedings

					26 
				
	
					
						5.9

					
					
						Compliance with Laws and Orders

					26 
				
	
					
						5.10

					
					
						Intellectual Property Rights

					26 
				
	
					
						5.11

					
					
						Affiliate Transactions

					29 
				
	
					
						5.12

					
					
						Employees and Employee Plans

					29 
				
	
					
						5.13

					
					
						Assigned Contracts

					29 
				
	
					
						5.14

					
					
						Permits

					30 
				
	
					
						5.15

					
					
						Products

					30 
				
	
					
						5.16

					
					
						No Guarantees

					31 
				
	
					
						5.17

					
					
						Brokers and Finders

					31 
				
	
					
						5.18

					
					
						No Other Representations or Warranties

					31 
				
	
					
						5.19

					
					
						Nature of Purchaser’s Representations

					31 
				
	
					
						5.20

					
					
						Representations and Warranties of the Purchaser

					31 
				
	
					
						Article 6

					
					
						COVENANTS OF SELLER AND PURCHASER

					
					
						 

				
	
					
						6.1

					
					
						Access

					32 
				

		 

			

					

						 

					

					

						-2-

					

					

						 

				

		

			 

		

 

		

			TABLE OF CONTENTS

		

		

			(continued)

		

		

			Page

		

		

			 

		

			
					
						6.2

					
					
						Confidentiality

					33 
				
	
					
						6.3

					
					
						Further Assurances

					33 
				
	
					
						6.4

					
					
						Assistance in Respect of Applications for Liquor Licenses, Permits, Consents, Approvals, Etc

					33 
				
	
					
						6.5

					
					
						TTB Application; Transition

					33 
				
	
					
						6.6

					
					
						WSLCB Application; Transition

					34 
				
	
					
						6.7

					
					
						Grape Purchase Contracts and Distribution Contracts

					34 
				
	
					
						6.8

					
					
						Operation of the Business of Seller

					34 
				
	
					
						6.9

					
					
						Additional Financial Statements

					34 
				
	
					
						6.10

					
					
						No Solicitation of Other Bids

					34 
				
	
					
						6.11

					
					
						Notice of Certain Events

					35 
				
	
					
						6.12

					
					
						Non-competition; Non-solicitation

					36 
				
	
					
						6.13

					
					
						Bulk Sales Laws

					37 
				
	
					
						6.14

					
					
						Receivables

					37 
				
	
					
						6.15

					
					
						Tax Clearance Certificates

					38 
				
	
					
						6.16

					
					
						Cancellation and Transfer of Name

					38 
				
	
					
						Article 7

					
					
						INDEMNIFICATION

					
					
						 

				
	
					
						7.1

					
					
						Seller’s Indemnity

					38 
				
	
					
						7.2

					
					
						Purchaser’s Indemnity

					39 
				
	
					
						7.3

					
					
						Survival

					39 
				
	
					
						7.4

					
					
						Limitations

					40 
				
	
					
						7.5

					
					
						Claims for Indemnification

					40 
				
	
					
						Article 8

					
					
						EMPLOYMENT MATTERS

					
					
						 

				
	
					
						8.1

					
					
						Seller’s Employees

					43 
				
	
					
						Article 9

					
					
						GENERAL PROVISIONS

					
					
						 

				
	
					
						9.1

					
					
						Public Announcements

					44 
				
	
					
						9.2

					
					
						Disclosure and Consultation

					44 
				
	
					
						9.3

					
					
						Expenses

					44 
				
	
					
						9.4

					
					
						Termination of Agreement

					44 
				
	
					
						9.5

					
					
						No Third Party Beneficiary

					45 
				

		 

			

					

						 

					

					

						-3-

					

					

						 

				

		

			 

		

 

		

			TABLE OF CONTENTS

		

		

			(continued)

		

		

			Page

		

		

			 

		

			
					
						9.6

					
					
						Entire Agreement

					45 
				
	
					
						9.7

					
					
						Non-Merger

					46 
				
	
					
						9.8

					
					
						Time of Essence

					46 
				
	
					
						9.9

					
					
						Amendment

					46 
				
	
					
						9.10

					
					
						Waiver of Rights

					46 
				
	
					
						9.11

					
					
						Venue and Jurisdiction

					46 
				
	
					
						9.12

					
					
						Governing Law

					46 
				
	
					
						9.13

					
					
						Notices

					46 
				
	
					
						9.14

					
					
						Disclosure Schedules

					47 
				
	
					
						9.15

					
					
						Damage or Destruction

					48 
				
	
					
						9.16

					
					
						Assignment

					48 
				
	
					
						9.17

					
					
						Further Assurances

					49 
				
	
					
						9.18

					
					
						Severability

					49 
				
	
					
						9.19

					
					
						Successors

					49 
				
	
					
						9.20

					
					
						No Third-party Beneficiaries

					49 
				
	
					
						9.21

					
					
						Specific Performance

					49 
				
	
					
						9.22

					
					
						Counterparts

					49 
				

		
			 
		

		
			 
		

		
			 
		

		

		

		 

			

					

						 

					

					

						-4-

					

					

						 

				

		

			 

		

 

		

			 

		

		ASSET PURCHASE AGREEMENT
		

		
			THIS ASSET PURCHASE AGREEMENT, is made and entered into as of this 27th day of January, 2016 (the “Effective Date”),
		

		
			BY AND BETWEEN:
		

		
			Seven Hills Winery, LLC a Washington limited liability company (the “Seller”),
		

		
			AND:
		

		
			Double Canyon Vineyards, LLC, a Delaware limited liability company, (the “Purchaser”).
		

		
			RECITALS:
		

		
			A.Seller is the owner of certain personal property and leasehold improvements used to conduct winemaking operations in Walla Walla County, Washington and to market, sell and distribute products under the name “Seven Hills Winery” and other marks and trade names (the “Business”).
		

		
			B.Seller wishes to sell and assign to Purchaser, and Purchaser wishes to purchase and assume from Seller, substantially all of the assets owned by Seller that are used in the Business and certain liabilities of the Business, subject to and in accordance with the terms and conditions contained herein.
		

		
			C.Upon the consummation of this Agreement and the other agreements, instruments or other documents contemplated hereby and thereby, the Purchaser will purchase, or will have rights in, substantially all of the assets used in the Business.
		

		
			NOW THEREFORE in consideration of the mutual premises and of the covenants, agreements, representations and warranties set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties covenant and agree as follows:
		

		
			Article 1

INTERPRETATION
		

		
			1.1Definitions.  Capitalized terms used but not otherwise defined herein shall have the meanings set forth on Exhibit A attached hereto.
		

		
			1.2Construction.  This Agreement has been negotiated by each Party with the benefit of legal representation, and any rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not apply to the construction or interpretation of this Agreement.
		

		
			1.3Certain Rules of Interpretation.  In this Agreement:
		

		
			(a)the division into Articles and Sections and the insertion of headings and the Table of Contents are for convenience of reference only and do not affect the construction or interpretation of this Agreement;
		

		 

		

			-  1  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(b)the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this Agreement and not to any particular portion of this Agreement; and
		

		
			(c)unless specified otherwise or the context otherwise requires:
		

		
			(1)references to any Article, Exhibit, Section or Schedule are references to the Article or Section of, Exhibit of, or Schedule to, this Agreement;
		

		
			(2)“including” or “includes” means “including (or includes) but is not limited to” and shall not be construed to limit any general statement preceding it to the specific or similar items or matters immediately following it;
		

		
			(3)“the aggregate of”, “the total of”, “the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”; and
		

		
			(4)words in the singular include the plural and vice-versa and words in one gender include all genders.
		

		
			1.4Knowledge.  In this Agreement, any reference to the knowledge of any Party means that Party’s actual knowledge.  In the case of Seller, any representation, warranty or statement made with reference to “Seller’s knowledge”, “knowledge of Seller”, “knowingly” or any phrase having similar effect shall be understood to be made to the actual knowledge, after due inquiry, of Casey McClellan, Erik McLaughlin, Robert Richards, or Victoria McClellan, as applicable. Each Party acknowledges that no personal liability will attach to any of the individuals identified in this Section 1.4 as a result of a breach or inaccuracy of a representation or warranty having been qualified by the phrase “to Seller’s knowledge” or any phrase having similar effect.
		

		
			1.5Computation of Time.  In this Agreement, unless specified otherwise or the context otherwise requires:
		

		
			(a)a reference to a period of days is deemed to begin on the first day after the event that started the period and to end at 5:00 p.m. on the last day of the period, but if the last day of the period does not fall on a Business Day, the period ends at 5:00 p.m. on the next succeeding Business Day;
		

		
			(b)all references to specific dates mean 11:59 p.m. on the dates;
		

		
			(c)all references to specific times shall be references to Pacific time; and
		

		
			(d)with respect to the calculation of any period of time, references to “from” mean “from and excluding” and references to “to” or “until” mean “to and  including.”
		

		
			1.6Performance on Business Days.  If any action is required to be taken pursuant to this Agreement on or by a specified date that is not a Business Day, the action is valid if taken on or by the next succeeding Business Day.
		

		
			1.7Calculation of Interest.  In calculating interest payable under this Agreement for any period of time, the first day of the period is included and the last day is excluded.
		

		
			1.8Currency and Payment.  In this Agreement, unless specified otherwise:
		

		 

		

			-  2  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(a)references to dollar amounts or “$” are to United States of America Dollars; and
		

		
			(b)any payment is to be made by wire transfer or any other method (other than cash payment) that provides immediately available funds.
		

		
			1.9Exhibits and Schedules.  The following Exhibits and Schedules are attached to and form part of this Agreement:
		

		
			Exhibits
		

		
			Exhibit ADefinitions
		

		
			Exhibit BAssignment and Assumption Agreement
		

		
			Exhibit CAssignment of Real Property Leases
		

		
			Exhibit DAssignment of Transferred Intellectual Property
		

		
			Exhibit EBill of Sale
		

		
			Exhibit FEmployment Agreement
		

		
			Exhibit GLeaseback and Transition Services Agreement
		

		
			Exhibit HNoncompetition Agreement
		

		
			 
		

		
			Schedules
		

		
			Schedule 2.1(g)Transferred Intellectual Property; Seller’s IP Rights Agreements
		

		
			Schedule 2.2(b)Excluded Assets
		

		
			Schedule 2.2(k)Personal Effects
		

		
			Schedule 2.6Purchase Price Allocation
		

		
			Schedule 2.8Form of Closing Working Capital Statement
		

		
			Schedule 2.12Earn-Out Schedule
		

		
			Schedule 6.7Grape Purchase Contracts and Distribution Contracts
		

		
			 
		

		
			1.10Provide, Furnish, Deliver, Make Available to Purchaser.  For purposes of ARTICLE 5 of this Agreement, the phrase “provided to Purchaser”, “furnished to Purchaser”, “made available to Purchaser” and “delivered to Purchaser” or similar provision or any derivation thereof, shall mean inclusion and posting of any document or information in the Data Room at least three (3) Business Days prior to the Effective Date.
		

		
			Article 2

PURCHASE AND SALE OF PURCHASED ASSETS
		

		
			2.1Purchased Assets.  Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase from Seller, all Seller’s right, title and interest in and to the assets  owned or held by Seller and used in or that relate to the Business wherever located, but excluding the Excluded Assets set forth in Section 2.2 (collectively, the “Purchased Assets”), including:
		

		
			(a)all accounts or notes receivable of the Business; 
		

		
			(b)all rights and interests in and to the Leased Real Property and the Real Property Leases, including prepaid rents, security deposits, options to renew, rights of first refusal under the Real Property Leases and all leasehold improvements and forming part of the Leased Real Property;  
		

		 

		

			-  3  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(c)all Permits, including Environmental Permits, which are held by Seller and required for the conduct of the Business as currently conducted or for the ownership and use of the Purchased Assets, to the extent such Permits may be transferred under applicable Law, including, without limitation, those listed in Section 5.14 of the Disclosure Schedule;
		

		
			(d)all of the Personal Property, and all rights and interests in and to the Personal Property Leases, including prepaid rents, security deposits and options to renew or purchase;
		

		
			(e)the Inventories; provided, however, that subject to and in accordance with the Leaseback Agreement and Applicable Law, Purchaser shall become only the beneficial owner of the Inventories at Closing and legal title shall not transfer to Purchaser until Purchaser receives all Permits that Purchaser determines are necessary for Purchaser to hold legal title to the Inventories;
		

		
			(f)all rights and interests under or pursuant to all warranties, representations and guarantees, express, implied or otherwise, of or made by suppliers or others in connection with the Purchased Assets or the Assumed Liabilities;
		

		
			(g)the Transferred Intellectual Property and Seller’s IP Rights Agreements, including those items listed on Schedule 2.1(g), and all goodwill of the Business connected with the use of, and symbolized by, the Transferred Intellectual Property;
		

		
			(h)all rights and interests in and to all Contracts to which Seller or by which any of the Purchased Assets is bound or affected and that relate to the Business, and all Contracts pertaining to the Assumed Liabilities (collectively, the “Assigned Contracts”);
		

		
			(i)the Books and Records, except to the extent to which Seller is prohibited from disclosing or transferring to Purchaser under Applicable Law and is required by Applicable Law to retain;
		

		
			(j)all prepaid expenses, deferred charges, security deposits, sums, fees and other prepaid items paid by Seller or Affiliate prior to Closing that relate to the Business, the Purchased Assets or the Assumed Liabilities;
		

		
			(k)all rights of Seller under warranties, indemnities and all similar rights against third parties to the extent related to the Business, the Purchased Assets or the Assumed Liabilities;
		

		
			(l)all insurance benefits, including rights and proceeds, arising from or relating to the Business, the Purchased Assets or the Assumed Liabilities;
		

		
			(m)all rights to any Actions of any nature available to or being pursued by Seller to the extent related to the Business, the Purchased Assets or the Assumed Liabilities, whether arising by way of counterclaim or otherwise;
		

		
			(n)all goodwill and going concern value of the Business, including all of the other intangible assets, rights and claims of Seller of every kind and nature relating to the Business, including but not limited to licenses, customer lists, telephone numbers, advertising and marketing programs and plans, referral relationships, business information, and software owned 
		

		 

		

			-  4  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		by Seller, including any enhancements, upgrades and improvements thereto authored by employees of Seller, and used in the operation of the Business;
		

		
			(o)the domain name, website and URL of the Business, and to the extent owned by or available to Seller, or that Seller has any rights therein, all rights of ownership to, claims or rights to, or the ability or right to access, update, reply, or comment on, any third party website or content provider related to or describing the Business (e.g., winemag.com, winespectator.com, erobertparker.com, wine-searcher.com, cellartracker.com, yelp.com, etc.), including all user names, passwords and other logins and/or ability to access any of the foregoing; and
		

		
			(p)all proceeds of any or all of the foregoing received or receivable after the Closing Time.  
		

		
			2.2Excluded Assets.  Seller shall not sell, convey, assign, transfer or deliver, nor cause to be sold, conveyed, assigned, transferred or delivered, to the Purchaser, and the Purchaser shall not purchase, and the Purchased Assets shall not include, the following assets of Seller, wherever located (collectively, the “Excluded Assets”):
		

		
			(a)All Cash of Seller; 
		

		
			(b)the assets set forth in Schedule 2.2(b);  
		

		
			(c)all bank accounts and trust accounts of Seller, securities, and negotiable instruments of Seller in such accounts, on hand, in lock boxes, in financial institutions or elsewhere;
		

		
			(d)any shares of capital stock or other equity interests of Seller or its Affiliates;
		

		
			(e)the company seals, minute books, charter documents, stock or equity record books and such other books and records as pertain to the organization, existence or capitalization of Seller, and any other books or records which Seller is prohibited from disclosing or transferring to Purchaser under Applicable Law and is required by Applicable Law to retain; 
		

		
			(f)all rights of Seller under warranties, indemnities and all similar rights against third parties to the extent related to the Excluded Assets or the Retained Liabilities;
		

		
			(g)all insurance benefits, including rights and proceeds, arising from or relating to the Excluded Assets or the Retained Liabilities;
		

		
			(h)all rights to any Actions of any nature available to or being pursued by Seller to the extent related to the Excluded Assets or the Retained Liabilities, whether arising by way of counterclaim or otherwise;
		

		
			(i)all Tax Returns of Seller and its Affiliates;
		

		
			(j)all refunds, rebates or similar payments of Taxes to the extent such Taxes were paid by or on behalf of Seller or an Affiliate of Seller for the period prior to the Closing Time;
		

		
			(k)all personal effects and belongings of Seller or Seller’s members that are listed on Schedule 2.2(k); and
		

		 

		

			-  5  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(l)rights of Seller and any of its Affiliates under this Agreement and the Transaction Documents.
		

		
			2.3Assumed Liabilities.  At Closing, the Purchaser shall assume, pay, perform and discharge when due only the following Liabilities of Seller to the extent related to the Business or the Purchased Assets, but excluding the Retained Liabilities (the “Assumed Liabilities”): 
		

		
			(a)all trade amounts payable owed by Seller to third parties in connection with the Business that remain unpaid in accordance with their terms and are not past due or delinquent as of the Closing Date and that are either reflected on the Interim Financial Statements or arose in the Ordinary Course of Business since the Interim Financial Statement Date;  
		

		
			(b)those Liabilities of Seller arising under any Assigned Contract but only to the extent that such Liabilities thereunder are required to be performed after the Closing Date, were incurred in the Ordinary Course of Business and do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Seller on or prior to the Closing;
		

		
			(c)those Liabilities of Seller arising under any Real Property Lease or Personal Property Lease constituting a Purchased Asset but only to the extent that such Liabilities thereunder are required to be performed after the Closing Date, were incurred in the Ordinary Course of Business and do not relate to any failure to perform, improper performance, or other breach, default or violation by Seller on or prior to the Closing;
		

		
			(d)Liabilities in respect of the Employees that the Purchaser expressly agrees to assume under Section 8.1(d) hereof;
		

		
			(e)those Liabilities under any Permit constituting a Purchased Asset that relate to periods on or after the Closing Date (and all Liabilities arising prior to the Closing Date in the Ordinary Course of Business to the extent performance is required after the Closing Date), but excluding Liabilities attributable to any breach of the terms of any Permit by Seller prior to the Closing Date; 
		

		
			(f)those Liabilities arising out of or in connection with claims for personal injuries, property damage or losses that occurred on or after the Closing Date or any product sold or otherwise disposed of by the Purchaser or any of its Affiliates in connection with the operation of the Business; and
		

		
			(g)those Liabilities relating to, or occurring or existing in connection with, or arising out of, the ownership and operation of the Business or the Purchased Assets on or after the Closing Date.
		

		
			2.4Retained Liabilities.  Notwithstanding anything to the contrary contained herein, Seller shall retain, and shall be responsible for paying, performing and discharging, and Purchaser shall not assume or have any responsibility for, any Liabilities of Seller or any of Seller’s Affiliates not expressly assumed by Purchaser under Section 2.3 (the “Retained Liabilities”). Seller shall, or shall cause an Affiliate to, timely pay and satisfy all Retained Liabilities for which they are obligated to pay and satisfy.  Without limiting the generality of the foregoing, the Retained Liabilities shall include the following:
		

		
			(a)any Liabilities of Seller arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents 
		

		 

		

			-  6  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		and the transactions contemplated hereby and thereby, including fees and expenses of counsel, accountants, consultants, advisers and others;
		

		
			(b)subject to Sections 2.10(b) and 2.11, any Liabilities for (1) Taxes of Seller (or any member or Affiliate of Seller) or relating to the Business or the Purchased Assets for any Pre-Closing Tax Period that are not otherwise addressed in the Closing Working Capital; (2) Taxes that arise out of the consummation of the transactions contemplated hereby or that are the responsibility of Seller pursuant to this Agreement; and (3) other Taxes of Seller (or any member or Affiliate of Seller) of any kind or description for any Pre-Closing Tax Period (including any Liabilities for Taxes of Seller (or any member or Affiliate of Seller) for Pre-Closing Tax Periods that become a Liability of Purchaser under this Agreement or otherwise under any common law doctrine of de facto merger or transferee or successor liability or otherwise by operation of contract or Applicable Law and are not otherwise addressed in the Closing Working Capital);
		

		
			(c)any Liabilities relating to or arising out of the Excluded Assets, except Liabilities that are Assumed Liabilities;
		

		
			(d)any Liabilities of Seller, including under any Employee Benefit Plan, for any present or former employees, directors, agents or independent contractors of Seller, including any claims for wages or other benefits, workers’ compensation, severance, change in control, retention, termination or other payments;  
		

		
			(e)any Liabilities to indemnify, reimburse or advance amounts to any present or former officer, director, employee or agent of Seller (including with respect to any breach of fiduciary obligations by same), except for indemnification of same pursuant to Section 7.2 as an Indemnified Party;
		

		
			(f)any Liabilities under any Contracts other than Assigned Contracts or Assumed Liabilities;
		

		
			(g)any Liabilities in respect of any pending or threatened Action arising out of, relating to or otherwise in respect of the operation of the Business or the Purchased Assets to the extent such Action related to such operation on or prior to the Closing Date;
		

		
			(h)any Liabilities associated with debt, loans or credit facilities of Seller or an Affiliate owing to financial institutions;
		

		
			(i)any Liabilities arising out of, in respect of or in connection with the failure by Seller or any of its Affiliates to comply with any Applicable Law or Order, including the WARN Act; 
		

		
			(j)any Liabilities for claims of infringement of third party intellectual property rights for any of Seller’s activities, products, or services that took place prior to the Closing Date; and
		

		
			(k)those Liabilities arising out of Seller’s ownership of the Purchased Assets or operation of the Business prior to the Closing Date.
		

		
			2.5Purchase Price.  Subject to the terms and conditions of this Agreement, the aggregate purchase price to be paid by Purchaser to Seller for the Purchased Assets shall be FIVE MILLION 
		
		
 

		

			-  7  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		SEVEN HUNDRED FIFTY THOUSAND AND NO/100 US dollars ($5,750,000.00) and subject to any adjustments pursuant to Section 2.8 and any other prorations or adjustments provided for in this Agreement, and subject to the provisions of Section 2.12 below, which provides that payment of the Earn-Out Payments is contingent upon the occurrence of certain conditions (the “Purchase Price”), plus the assumption of the Assumed Liabilities in accordance with Section 2.3. The Purchase Price shall be paid according to the terms of this Article 2.

		
		
			2.6Purchase Price Allocation. Attached as Schedule 2.6 is a preliminary allocation of the Purchase Price and of the Assumed Liabilities based on the relative agreed values of the Purchased Assets and in accordance the rules under Section 1060 of the Code.  No fewer than three (3) Business Days prior to the Closing Date, Purchaser and Seller shall prepare a mutually acceptable final allocation of the Purchase Price and of the Assumed Liabilities (the “Final Allocation Schedule”), which shall be consistent with the preliminary allocation reflected on Schedule 2.6. Purchaser and Seller shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with the Final Allocation Schedule. Any adjustments to the Purchase Price pursuant to Section 2.8 herein shall be allocated in a manner consistent with the Final Allocation Schedule.
		

		
			2.7Closing Payment.  At the Closing, Purchaser shall pay to Seller, by wire transfer of immediately available funds to an account designated in writing by Seller to Purchaser, an amount equal to FIVE MILLION AND NO/100 US dollars ($5,000,000.00) (the “Closing Payment”).
		

		
			2.8Post-Closing Adjustment of Purchase Price.
		

		
			(a)Within sixty (60) days after the Closing Date, Purchaser shall prepare and deliver to Seller a statement setting forth its calculation of Closing Working Capital and any prorations in accordance with Section 2.10 and any cost reimbursements in accordance with Section 2.11, which statement shall be substantially in the form attached as Schedule 2.8  (the “Closing Working Capital Statement”), using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end, subject to the modifications and limitations set forth on Schedule 2.8. 
		

		
			(b)The “Post-Closing Adjustment” shall be an amount equal to the Closing Working Capital minus the Target Working Capital. Purchaser shall pay to Seller the following: 
		

		
			(1)if the Post-Closing Adjustment is less than or equal to $280,000 (including in the event that the Post-Closing Adjustment is a negative number), an amount equal to $280,000; 
		

		
			(2)if the Post-Closing Adjustment is greater than $280,000 but less than $320,000, an amount equal to the Post-Closing Adjustment; and
		

		
			(3)if the Post-Closing Adjustment is equal to or greater than $320,000, an amount equal to $320,000. 
		

		
			(c)The parties agree that to the maximum extent permitted by the Code any Post-Closing Adjustment will be allocated pursuant to the procedure set forth in Section 2.6 to either goodwill or general intangible.
		

		
			2.9Disputes.
		

		 

		

			-  8  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(a)Examination. After receipt of the Closing Working Capital Statement, Seller shall have thirty (30) days (the “Review Period”) to review the Closing Working Capital Statement. During the Review Period, Seller and Seller’s Accountants shall have full access to the relevant books and records of Purchaser, the personnel of, and work papers prepared by, Purchaser and/or Purchaser’s Accountants to the extent that they relate to the Closing Working Capital Statement and to such historical financial information (to the extent in Purchaser’s possession) relating to the Closing Working Capital Statement as Seller may reasonably request for the purpose of reviewing the Closing Working Capital Statement and to prepare a Statement of Objections, provided, that such access shall be in a manner that does not interfere with the normal business operations of Purchaser.
		

		
			(b)Objection. On or prior to the last Business Day of the Review Period, Seller may object to the Closing Working Capital Statement by delivering to Purchaser a written statement setting forth Seller’s objections in reasonable detail, indicating each disputed item or amount and the basis for Seller’s disagreement therewith (the “Statement of Objections”). If Seller fails to deliver the Statement of Objections before the expiration of the Review Period, the Closing Working Capital Statement and the Post-Closing Adjustment, as the case may be, reflected in the Closing Working Capital Statement shall be deemed to have been accepted by Seller. If Seller delivers the Statement of Objections before the expiration of the Review Period, Purchaser and Seller shall negotiate in good faith to resolve such objections within thirty (30) days after the delivery of the Statement of Objections (the “Resolution Period”), and, if the same are so resolved within the Resolution Period, the Post-Closing Adjustment and the Closing Working Capital Statement with such changes as may have been previously agreed in writing by Purchaser and Seller, shall be final and binding.
		

		
			(c)Resolution of Disputes. If Seller and Purchaser fail to reach an agreement with respect to all of the matters set forth in the Statement of Objections before expiration of the Resolution Period, then any amounts remaining in dispute (“Disputed Amounts” and any amounts not so disputed, the “Undisputed Amounts”) shall be submitted for resolution to an impartial, regionally recognized firm of independent certified public accountants other than Seller’s Accountant or Purchaser’s Accountant, mutually agreed-upon by the Parties (the “Independent Accountants”) who, acting as experts and not arbitrators, shall resolve the Disputed Amounts only and make any adjustments to the Post-Closing Adjustment, as the case may be, and the Closing Working Capital Statement. The Parties agree that all adjustments shall be made without regard to materiality. The Independent Accountants shall only decide the specific items under dispute by the Parties and their decision for each Disputed Amount must be within the range of values assigned to each such item in the Closing Working Capital Statement and the Statement of Objections, respectively.
		

		
			(d)Fees of the Independent Accountants. Seller shall pay a portion of the fees and expenses of the Independent Accountants equal to the total amount of such fees multiplied by a fraction, the numerator of which is the amount of Disputed Amounts submitted to the Independent Accountants that are resolved in favor of Purchaser (that being the difference between the Independent Accountants’ determination and Seller’s determination) and the denominator of which is the total amount of Disputed Amounts submitted to the Independent Accountants (that being the sum total by which Purchaser’s determination and Seller’s determination differ from the determination of the Independent Accountants).  Purchaser shall pay that portion of the fees and expenses of the Independent Accountants that Seller is not required to pay hereunder.
		

		 

		

			-  9  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(e)Determination by Independent Accountants. The Independent Accountants shall make a determination as soon as practicable within thirty (30) days (or such other time as the Parties shall agree in writing) after their engagement, and their resolution of the Disputed Amounts and their adjustments to the Closing Working Capital Statement and/or the Post-Closing Adjustment shall be conclusive and binding upon the Parties.
		

		
			(f)Payments of Post-Closing Adjustment. Except as otherwise provided herein, any payment of the Post-Closing Adjustment shall (1) be due (A) within five (5) Business Days of acceptance of the applicable Closing Working Capital Statement or (B) if there are Disputed Amounts, then within five (5) Business Days of the resolution described in this Section 2.9; and (2) be paid by wire transfer of immediately available funds to such account as is directed by Purchaser or Seller, as the case may be; provided, however, that to the extent the Post-Closing Adjustment is payable to Purchaser, Purchaser shall first offset the amount of such negative amount against any Earn-Out Payments then due and payable (if any) and only after such offset, to the extent a portion remains unpaid, shall Purchaser seek the remainder from Seller.  
		

		
			(g)Adjustments for Tax Purposes. Any payments made pursuant to this Section 2.9 shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Applicable Law.
		

		
			2.10Prorations.
		

		
			(a)General Prorations.  All rent, charges, utility charges, Permit fees and other Liabilities, with respect to the Real Property Leases and any of the other Purchased Assets shall be prorated on a daily basis as of the Closing Date to reflect charges attributable to the pre-Closing period (collectively, the “Seller’s Prorated Charges”).  The Seller’s Prorated Charges shall be payable by Seller notwithstanding the fact that they may become payable after the Closing Date.  The Seller’s Prorated Charges shall be reflected in the adjustments made pursuant to Section 2.8. On the Closing Date, determination of Seller’s Prorated Charges shall be based on actual, current payments by Seller wherever possible, and, to the extent such actual amounts are not available, such prorations shall be estimated as of the Closing Date based on actual amounts for the most recent comparable billing period.  For any amounts of the Seller’s Prorated Charges paid by Purchaser, Purchaser shall offset such amount against the Earn-Out Payments then due and payable (if any) and only after such offset shall Purchaser seek reimbursement of any remainder from Seller.  
		

		
			(b)Property Taxes.  Taxes, if any, on Purchased Assets assessed for the tax year of Closing will be prorated in the same manner as under Section 2.10(a) as of the Closing Date and, at Seller’s election, the charges for such Taxes shall be reflected in the adjustments made as provided in Section 2.8 hereof.  For purposes of this Section, prorations shall be based on the current tax bill if available, and if not, based on the last ascertainable tax bill.  If any Governmental Authority should accelerate the due date of Taxes assessed for the tax year following Closing on account of the Transactions, Purchaser shall pay the same.
		

		
			2.11Costs. Unless otherwise provided in this Agreement or any of the Transaction Documents, with respect to specific costs, any document transfer taxes, escrow fees (if any), recording fees, and value added and excise Taxes arising out of the Transactions shall be borne and paid by the Parties such that any of the foregoing costs, shall be paid fifty percent (50%) by Seller, on the one hand, and fifty percent (50%) by Purchaser, on the other hand; provided, however, that any excise Tax on wine arising out of the Transactions (if any) shall be borne and paid exclusively by Purchaser, and sales or use 
		
		
 

		

			-  10  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		Tax arising out of the Transactions shall be borne and paid exclusively by Purchaser. Any reimbursement or payment required to be made to comply with the apportionment of costs as set forth in this Section 2.11 shall be provided for as an adjustment to the Purchase Price in accordance with Section 2.8. 

		
		
			2.12Earn-Out Payments.  As partial consideration for the Purchased Assets, the following payments may be made to the Seller after the Closing, subject to the terms and conditions of this Section 2.12 and Schedule 2.12:
		

		
			(a)Earn-Out Payment A. If at any time during the Earn-Out Payment A Period, either of the Earn-Out Payment A Conditions has been satisfied, Seller shall become eligible to receive an earn-out payment in the amount of $250,000 (the “Earn-Out Payment A”).   
		

		
			(b)Earn-Out Payment B. If, on or before an applicable Earn-Out Payment B Date the Business has satisfied the Earn-Out Payment B Conditions applicable to such Earn-Out Payment B Date, Seller shall be eligible to receive the corresponding Earn-Out Payment B Amount with respect to such Earn-Out Payment B Date (“Earn-Out Payment B”). The Earn-Out Payment B Amounts collectively and in the aggregate for all Earn-Out Payment B Dates shall not exceed the amount of $500,000.
		

		
			(c)Determination; Payment.  
		

		
			(1)Within fifteen (15) days of the conclusion of the Earn-Out Payment A Period, or within fifteen (15) days of any Earn-Out Payment B Date, as applicable, Purchaser shall prepare and deliver to Seller an earn-out statement together with supporting documentation (in each case, an “Earn-Out Statement”), reflecting Purchaser’s determination as to whether any potential Earn-Out Payment has accrued to, or has been earned by, Seller.
		

		
			(2)After receipt of an Earn-Out Statement, Seller shall have fifteen (15) days to review the Earn-Out Statement, and during such period, Seller and Seller’s Representatives shall have full access to the relevant books and records of Purchaser, the personnel of, and work papers prepared by Purchaser or its Representatives, provided, that such access shall be in a manner that does not interfere with the normal business operations of Purchaser.  On or prior to the conclusion of such review period, Seller may object to the Earn-Out Statement by delivering to Purchaser a written statement setting forth Seller’s objections in reasonable detail.  If Seller fails to deliver a statement of objections before the conclusion of such review period, Purchaser’s determination of the Earn-Out Payment shall be deemed to have been accepted by Seller.  If Seller delivers a statement of objection on or before the conclusion of such review period, Purchaser and Seller shall negotiate in good faith to resolve such objections within thirty (30) days after the delivery of such statement of objections.   
		

		
			(3)If Seller and Purchaser fail to reach an agreement with respect to all of the matters set forth in the statement of objections before expiration of such thirty (30) day period, then any amounts remaining in dispute shall be submitted for resolution to the Independent Accountant pursuant to the process described in Section 2.9(c), (d) and (e) of this Agreement. 
		

		
			(4)Payment of any accrued Earn-Out Payment (after any adjustment pursuant to Section 2.12(d) below) shall be paid to Seller within thirty (30) days of the applicable 
		
		
 

		

			-  11  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		Earn-Out Determination. As used herein, “Earn-out Determination” means, as applicable, (A) Seller’s acceptance or deemed acceptance of Purchaser’s determination of whether any potential Earn-out Payment has accrued to, or has been earned by Seller, or (B) the Independent Accountant’s determination as to whether any Earn-out Payment has accrued, pursuant to the preceding paragraph.

		
		
			(5)To the maximum extent permitted by the Code, all Earn-Out Payments will be allocated pursuant to the procedure set forth in Section 2.6 to either goodwill or general intangible.
		

		
			(d)Offset. Before any amount of the Earn-Out Payments shall be paid to Seller, Purchaser shall offset against such Earn-Out Payment, dollar for dollar, any of the following amounts then owing, for which Purchaser has not as-yet been compensated: (1) any Losses which have been finally determined under Section 7.5 hereof; (2) any Post-Closing Adjustment as finally determined in accordance with Section 2.8 above; (3) any Post-Closing Adjustment as finally determined in accordance with Section 2.8 above; or (4) any reimbursement to which it is entitled pursuant to Section 2.10(a) above.
		

		
			(e)Independence of Earn-Out Payments. Purchaser’s obligation to pay each of the Earn-Out Payments to Seller in accordance with this Section 2.12 is an independent obligation of Purchaser and is not otherwise conditioned or contingent upon the satisfaction of any conditions precedent to any preceding or subsequent Earn-Out Payment and the obligation to pay an Earn-Out Payment to Seller shall not obligate Purchaser to pay any preceding or subsequent Earn-Out Payment.  For the avoidance of doubt and by way of example, with respect to the Earn-Out Payment B, if the Earn-Out Payment B Conditions for the first Earn-Out Payment B Date are not satisfied, but the Earn-Out Payment B Conditions for the second Earn-Out Payment B Date are satisfied, then Purchaser would be obligated to pay such Earn-Out Payment B for the second Earn-Out Payment B Date, and not the Earn-Out Payment B for the first Earn-Out Payment B Date.
		

		
			(f)Post-closing Operation of the Business. Subject to the terms of this Agreement and the other Transaction Documents, subsequent to the Closing, Purchaser shall have sole discretion with regard to all matters relating to the operation of the Business; provided, that Purchaser shall use commercially reasonable, good faith efforts to produce the blends referenced in Schedule 2.12, and shall not, directly or indirectly, take any actions that would have the primary purpose of avoiding or reducing any of the Earn-Out Payments hereunder.
		

		
			2.13Disclosure of Acquisition. Upon completion of the Transactions, Purchaser shall file all necessary forms with all federal and state regulatory agencies to properly disclose the Transactions, which shall include a Form 8-K and any related statements or attachments. Seller shall assist Purchaser with any reasonable requests necessary to file such documentation.  At least two (2) Business Days prior to filing the Form 8-K or any related statements, Purchaser shall provide a copy to Seller for review and opportunity to comment, provided, that Purchaser shall be under no obligation to make any revision, or to take or refrain from taking any course of action, in respect of Seller’s comments.
		

		 

		

			-  12  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			Article 3

CLOSING 
		

		
			3.1Closing.  Subject to the satisfaction or waiver of the conditions set forth in Article 4, the Closing shall take place at the Closing Time by exchange among counsel of PDF signatures, or at such other place as may be agreed to by Seller and Purchaser.
		

		
			3.2Seller’s Closing Deliveries.  At the Closing Seller shall deliver or cause to be delivered to the Purchaser (in the case of item (a) below, at the premises of the Business) the following:
		

		
			(a)Books and Records. The Books and Records to be delivered pursuant to Section 2.1;
		

		
			(b)Closing Certificate. A duly executed certificate of Seller in respect of Seller’s representations and warranties set forth in Articles 4 and  5 and Seller’s covenants and other obligations set forth in this Agreement in the form of reasonably acceptable to Purchaser;
		

		
			(c)Bill of Sale.  A duly executed Bill of Sale executed by Seller transferring the tangible Personal Property to the Purchaser on the terms set forth in this Agreement;
		

		
			(d)Assignment of Contracts. A duly executed counterpart of the Assignment of Contracts;
		

		
			(e)Assignment of Real Property Leases. A duly executed counterpart of the Assignment of Real Property Leases;
		

		
			(f)Assignment of Personal Property Leases.  A duly executed counterpart of the Assignment of Personal Property Leases;
		

		
			(g)Assignment of Transferred Intellectual Property. A duly executed counterpart of the Assignment of Transferred Intellectual Property;
		

		
			(h)Employment Agreement. A duly executed counterpart signature from Casey J. McClellan, to the Employment Agreement.  
		

		
			(i)Contribution Agreement.  A duly executed counterpart from Casey J. McClellan to the Contribution Agreement.
		

		
			(j)Non-Compete Agreements. Non-compete, proprietary information and inventions assignment agreements in the form attached hereto as Exhibit H, duly executed by each of Casey McClellan and Victoria McClellan.
		

		
			(k)FIRPTA Certificates. A duly executed affidavit from Seller with respect to compliance with the Foreign Investment in Real Property Tax Act (Code Sec. 1445, as amended, and the regulations issued thereunder) and any similar state Tax requirements;
		

		
			(l)Authority Documents. True and complete copies, certified by the Manager or appropriate officer of Seller, of duly executed limited liability company resolutions and incumbency certificates of Seller evidencing the capacity and authority of any company 
		

		 

		

			-  13  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		representative signing on behalf of Seller and authorizing the execution, delivery and performance of this Agreement and all Transaction Documents to be delivered by Seller and that such resolutions are in full force and effect and all of the resolutions adopted in connection with the Transactions contemplated hereby and thereby; 
		

		
			(m)Certificates of Valid Existence. A certificate of good standing or valid existence of Seller from the Secretary of State of the State of Washington and from each of the jurisdictions listed in Section 5.2(a) of the Disclosure Schedules;
		

		
			(n)Payoff Letters. Any and all payoff letters relating to the repayment in full of the Indebtedness of Seller secured by any portion of the Purchased Assets and the release, discharge, removal and termination of any and all Encumbrances relating thereto, in form and substance reasonably satisfactory to Purchaser, which shall be effective as of the Closing Date and subject only to the receipt by the applicable lenders or other parties of the amounts specified therein;
		

		
			(o)Leaseback Agreement. A duly executed counterpart to the Leaseback Agreement; and
		

		
			(p)Other Documents. Duly executed counterparts of such other instrument of transfer and assumption reasonably required to effect the transfers of the Purchased Assets and assumption of the Assumed Liabilities as contemplated hereunder, in form and substance reasonably satisfactory to the Purchaser.
		

		
			3.3Purchaser’s Closing Deliveries.  At the Closing, the Purchaser shall deliver or cause to be delivered to Seller the following:
		

		
			(a)Closing Payment. The Closing Payment, paid and delivered by the Purchaser in accordance with Section 2.7;
		

		
			(b)Closing Certificate. A duly executed certificate of Purchaser in respect of Purchaser’s representations and warranties set forth in Articles 4 and  5 and Purchaser’s covenants and other obligations set forth in this Agreement in the form of reasonably acceptable to Seller;
		

		
			(c)Assignment of Contracts. A duly executed counterpart of the Assignment of Contracts;
		

		
			(d)Assignment of Real Property Leases. A duly executed counterpart of the Assignment of Real Property Leases;
		

		
			(e)Assignment of Personal Property Leases. A duly executed counterpart of each Assignment of Personal Property Lease;
		

		
			(f)Assignment of Transferred Intellectual Property. A duly executed counterpart of the Assignment of Transferred Intellectual Property;
		

		
			(g)Employment Agreement. A duly executed counterpart to the Employment Agreement;
		

		 

		

			-  14  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(h)Assumption Agreement. A duly executed counterpart of the Assumption Agreement;
		

		
			(i)Authority Documents. True and complete copies, certified by a Manager of Purchaser, of duly executed limited liability company resolutions and incumbency certificates of Purchaser evidencing the capacity and authority of any company representative or officer signing on behalf of the Purchaser and authorizing the execution, delivery and performance of this Agreement and all Transaction Documents to be delivered by the Purchaser; 
		

		
			(j)Leaseback Agreement. A duly executed counterpart to the Leaseback Agreement; 
		

		
			(k)Certificate of Good Standing. A certificate of good standing of Purchaser from the Secretary of State of the State of Delaware;  
		

		
			(l)Washington Reseller Permit. A copy of its Washington State Reseller Permit to support the exemption of inventory from Washington State sales tax; and
		

		
			(m)Other Documents. Duly executed counterparts of such other instrument of transfer and assumption reasonably required to effect the transfers of the Purchased Assets and assumption of the Assumed Liabilities as contemplated hereunder, in form and substance reasonably satisfactory to the Seller.
		

		
			3.4 Third Party Consents.  To the extent that Seller’s rights under any Assigned Contract or Permit constituting a Purchased Asset, or any other Purchased Asset, may not be assigned to Purchaser without the consent of another Person which consent has not been obtained, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Seller, at its expense, shall use its reasonable best efforts to obtain any such required consent(s) as promptly as possible. If any such consent is not obtained prior to the Closing Date or if any attempted assignment would be ineffective or would impair Purchaser’s rights under the Purchased Asset in question so that Purchaser would not in effect acquire the benefit of all such rights, the Parties will use commercially reasonable efforts after the Closing Date to enter into such arrangements (such as subleasing, sublicensing or subcontracting) to provide to the Parties the economic and operational equivalent of the transfer of such Purchased Asset or Assumed Liability to Purchaser as of the Closing Date.  Notwithstanding any provision in this Section 3.4 to the contrary, Purchaser shall not be deemed to have waived its rights under Section 4.2(a)(3) hereof unless and until Purchaser either provides written waivers thereof or elects to proceed to consummate the Transactions at Closing.  Nothing in this Section 3.4 shall relieve Seller of Seller’s representations, warranties, obligations and covenants under Section 5.2(g).
		

		 

		

			-  15  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			Article 4

CONDITIONS OF CLOSING
		

		
			4.1Conditions to Obligations of All Parties.  
		

		
			(a)The obligations of each Party to consummate the Transactions shall be subject to the fulfillment, at or prior to the Closing Time, of each of the following conditions precedent (each of which conditions precedent is acknowledged to be for the benefit of both Parties):
		

		
			(1)No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Order which is in effect and has the effect of making the Transactions illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof; and 
		

		
			(2)No Actions by any Governmental Authority shall have been commenced against Purchaser or Seller which would prevent the Closing.
		

		
			(b)If any of the conditions in Section 4.1(a) shall not be satisfied or fulfilled in full at or before the Outside Closing Date, then either Party may (1) waive compliance with any such condition by notice in writing to the other Party, except that no such waiver shall operate as a waiver of any other condition, or (2) exercise its rights to terminate this Agreement, as provided herein.
		

		
			4.2Purchaser’s Conditions.
		

		
			(a)The Purchaser’s obligation to complete the Transactions is subject to the satisfaction or waiver at or before the Closing Time of the following conditions precedent (each of which conditions precedent is acknowledged to be for the exclusive benefit of the Purchaser):
		

		
			(1)all of the representations and warranties of Seller made in this Agreement shall, except as qualified by the contents of the Disclosure Schedules, shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect), on the Effective Date and on and as of the Closing Date with the same effect as though made at the Closing Date; 
		

		
			(2)Seller shall have complied with or performed all of the obligations, covenants and agreements under this Agreement to be complied with or performed by Seller at or before the Closing Time, including Seller’s Closing deliveries specified in Section 3.2;
		

		
			(3)Purchaser shall be prepared to file the TTB Application and WSLCB Application in accordance with Sections 6.6 and 6.7 and Purchaser shall have determined in its discretion that there are no events or circumstances that would reasonably impair Purchaser’s ability to timely be issued and obtain a TTB Basic Permit pursuant to the TTB Application or assume Seller’s WSLCB License pursuant to the WSLCB Application; 
		

		 

		

			-  16  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(4)Seller shall have paid all Taxes, including any applicable excise taxes on liquor and wine products due and payable on or prior to the Closing Date; 
		

		
			(5)All Encumbrances relating to the Purchased Assets shall have been released in full, other than Permitted Encumbrances, and Seller shall have delivered to Purchaser written evidence, in form satisfactory to Purchaser in its sole discretion, of the release of such Encumbrances;
		

		
			(6)Casey J. McClellan shall have contributed all of his right, title and interest in and to the option (the “Building Option”) to purchase certain real property, structures, and improvements located at 212 N. 3rd Ave. and 55 W. Cherry St., Walla Walla, Washington 99362 (collectively the “Crawford Building”) pursuant to a Contribution Agreement between Casey J. McClellan and A Fine Old Building, LLC (“Building Company”); and
		

		
			(7)Casey J. McClellan shall have caused Building Company to exercise the Building Option, and title to the Crawford Building shall have been vested in the name of the Building Company.
		

		
			(b)If any of the conditions in Section 4.2(a) shall not be satisfied or fulfilled in full at or before the Outside Closing Date, then Purchaser may (1) waive compliance with any such condition by notice in writing to Seller, except that no such waiver shall operate as a waiver of any other condition, or (2) exercise its rights to terminate this Agreement, as provided herein.
		

		
			4.3Seller’s Conditions.
		

		
			(a)Seller’s obligation to complete the Transactions is subject to the satisfaction or waiver at or before the Closing Time of the following conditions precedent (each of which conditions precedent is acknowledged to be for the exclusive benefit of Seller):
		

		
			(1)all of the representations and warranties of the Purchaser made in this Agreement shall, except as qualified by the contents of the Disclosure Schedules, shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect), on the Effective Date and on and as of the Closing Date with the same effect as though made at the Closing Date; 
		

		
			(2)the Purchaser shall have complied with or performed in all material respects all of the obligations, covenants and agreements under this Agreement to be complied with or performed by the Purchaser at or before the Closing Time, including the Purchaser’s Closing deliveries specified in Section 3.3; and
		

		
			(3)the Purchaser shall have contributed to Building Company certain capital and assets, as more particularly set forth in a Contribution Agreement between Purchaser and Building Company. 
		

		
			(b)If any of the conditions in Section 4.3(a) shall not be satisfied or fulfilled in full at or before the Outside Closing Date, then Seller may (1) waive compliance with any such condition by notice in writing to the Purchaser, except that no such waiver shall operate as a 
		

		 

		

			-  17  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		waiver of any other condition, or (2) exercise its rights to terminate this Agreement, as provided herein.
		

		
			Article 5

REPRESENTATIONS AND WARRANTIES
		

		
			5.1Nature of Seller’s Representations and Warranties.  Each of the representations, warranties, and covenants of Seller contained in this Article 5 constitutes a material part of the consideration to Purchaser, and Seller acknowledges that Purchaser is relying on the correctness and completeness of these representations, warranties and covenants in entering into this Transaction.
		

		
			5.2Representations and Warranties as to Seller. Seller represents and warrants to Purchaser to the statements set forth in Sections 5.2 through 5.18 in this Article 5, as follows:
		

		
			(a)Organization and Status.  Seller is duly organized and validly existing in the State of Washington.  Section 5.2(a) of the Disclosure Schedules sets forth each jurisdiction in which Seller is licensed to conduct the Business, and Seller is in good standing in each such jurisdiction.  Seller has all requisite power and authority to own such Purchased Assets and conduct the Business in the Ordinary Course of Business.
		

		
			(b)Company Power.  Seller has all necessary limited liability company power and capacity to own or lease or dispose of its undertakings, property and assets (including the Purchased Assets), to enter into this Agreement and the Transaction Documents to be delivered by it, and to perform its obligations hereunder and thereunder.
		

		
			(c)Authorization.  All necessary limited liability company action has been taken by Seller or on Seller’s part to authorize Seller’s execution and delivery of this Agreement and the Transaction Documents to be delivered by Seller and the performance of Seller’s obligations hereunder and thereunder.
		

		
			(d)Enforceability.  This Agreement has been duly executed and delivered by Seller and (assuming due execution and delivery by the Purchaser) constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.  Each of the Transaction Documents to be delivered by Seller will at the Closing Time have been duly executed and delivered by Seller and (assuming due execution and delivery by the other parties thereto) will be enforceable against Seller in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.
		

		
			(e)No Other Agreements to Purchase.  No Person other than the Purchaser has any contract or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming a contract for the purchase or acquisition of the Business or any of the Purchased Assets from Seller. 
		

		
			(f)Absence of Conflict.  Except as set forth in Section 5.2(f) of the Disclosure Schedule, the execution, delivery and performance by Seller of this Agreement and the other 
		

		 

		

			-  18  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		Transaction Documents to which Seller is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (1) conflict with or result in a violation or breach of, or default under, any provision of the articles of organization, operating agreement, or other organizational documents of Seller; (2) to the knowledge of Seller, conflict with or result in a violation or breach of any provision of any Applicable Law or Order applicable to Seller, the Business or the Purchased Assets; (3) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any written Contract or, to the knowledge of Seller, any unwritten agreement, or any Permit to which Seller is a party or by which Seller or the Business is bound or to which any of the Purchased Assets are subject (including, but not limited to, any Assigned Contract), except where such conflict, violation, breach, default, imposition or other action would reasonably be expected not to have a Material Adverse Effect; or (4) result in the creation or imposition of any Encumbrance, other than Permitted Encumbrances, on the Purchased Assets.
		

		
			(g)Labor Matters.
		

		
			(1)Seller has provided or made available to Purchaser a list of all persons who are Employees, consultants, or contractors of the Business as of the date hereof, and sets forth for each such individual the following: (A) name; (B) title or position (including whether full or part time); (C) hire date; (D) current annual base compensation rate; (E) commission, bonus or other incentive-based compensation; and (F) a description of the fringe benefits provided to each such individual as of the Effective Date. Except as set forth in Section 5.2(g) of the Disclosure Schedules, as of the Effective Date, all commissions and bonuses payable to Employees, consultants, or contractors of the Business for services performed on or prior to payroll period ending immediately prior to the Effective Date have been paid in full and there are no outstanding agreements, understandings or commitments of Seller with respect to any commissions, bonuses or increases in compensation.
		

		
			(2)Seller is not a party to, or bound by, any collective bargaining or other Contract with a labor organization representing any of Seller’s Employees, and there are no labor organizations representing, purporting to represent or attempting to represent any Employee. To the knowledge of Seller, there has never been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor activity or dispute affecting Seller or any of Seller’s Employees.
		

		
			(3)Seller is in material compliance with all Applicable Laws pertaining to employment and employment practices to the extent they relate to the Employees, including all Applicable Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, health and safety, workers’ compensation, leaves of absence and unemployment insurance. To Seller’s knowledge, all individuals characterized and treated by Seller as consultants or contractors of the Business are properly treated as independent contractors under all Applicable Laws. There are no Actions against Seller pending, or to Seller’s knowledge, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former employee, consultant or independent contractor of the Business, including any 
		

		 

		

			-  19  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay or any other employment related matter arising under Applicable Laws.
		

		
			5.3Representations and Warranties Relating to the Assets.  
		

		
			(a)No Environmental Releases, Violations, Investigations or Assessments.
		

		
			(1)To the knowledge of Seller, the operations of Seller with respect to the Business and the Purchased Assets are currently in material compliance with all Environmental Laws. 
		

		
			(2)During the previous three (3) years, Seller has not received from any Person, with respect to the Business or the Purchased Assets, any: (A) Environmental Notice or Environmental Claim; or (B) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.
		

		
			(3)To the knowledge of Seller, Seller has obtained and is in material compliance with all Environmental Permits necessary for the Business as currently conducted or the ownership, lease, operation or use of the Purchased Assets, and all Environmental Permits are in full force and effect and shall be maintained in full force and effect through the Closing Date in accordance with Environmental Laws.
		

		
			(4)To Seller’s knowledge, the Leased Real Property is not listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar list maintained by any Governmental Authority.
		

		
			(5)To Seller’s knowledge, there has been no Release of Hazardous Materials in an amount requiring cleanup under Environmental Law into, onto, within, impacting, emanating or migrating into or from the Purchased Assets or the Leased Real Property which could reasonably be expected to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, Seller.
		

		
			(6)There are no active underground storage tanks owned or operated by Seller in connection with the Business or the Purchased Assets.
		

		
			(7)Seller has not retained or assumed, by contract or, to Seller’s knowledge, operation of Applicable Law, any liabilities or obligations of, or owed to, third parties under Environmental Laws. 
		

		
			(8)Seller has provided or otherwise made available to Purchaser any and all environmental reports, studies, audits, records, sampling data, site assessments and other similar documents with respect to the Business, the Purchased Assets or the Leased Real Property which are in the possession or control of Seller. 
		

		
			(9)The representations and warranties set forth in this Section 5.3(a) are the Seller’s sole and exclusive representations and warranties regarding environmental matters. 
		

		 

		

			-  20  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(b)Title to Leased Real Property.  
		

		
			(1)Section 5.3(b)(1) of the Disclosure Schedules sets forth each parcel of real property leased by Seller and used in or necessary for the conduct of the Business as currently conducted (together with all rights, title and interest of Seller in and to leasehold improvements relating thereto, including, but not limited to, security deposits, reserves or prepaid rents paid in connection therewith, collectively, the “Leased Real Property”), and a true and complete list of all Real Property Leases. Seller has delivered to Purchaser a true and complete copy of each Real Property Lease.  Except as set forth in Section 5.3(b)(1) of the Disclosure Schedules:
		

		
			(A)such Real Property Lease is valid, binding, enforceable and in full force and effect, and Seller enjoys peaceful and undisturbed possession of the Leased Real Property;
		

		
			(B)Seller is not in material breach or material default under such Real Property Lease, and to Seller’s knowledge, no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a material breach or material default, and Seller has paid all rent currently due and payable under such Real Property Lease;
		

		
			(C)Seller has not received nor given any notice of any material default or event that with notice or lapse of time, or both, would constitute a material default by Seller under any of the Real Property Leases and, to the knowledge of Seller, no other party is in material default thereof, and, to the knowledge of Seller, no party to any Real Property Lease has exercised any termination rights with respect thereto;
		

		
			(D)Seller has not subleased, assigned or otherwise granted to any Person the right to use or occupy such Leased Real Property or any portion thereof; and
		

		
			(E)Seller has not pledged, mortgaged or otherwise granted an Encumbrance on its leasehold interest in any Leased Real Property, except for Permitted Encumbrances.
		

		
			(2)Seller has not received any written notice of (A) violations of building codes and/or zoning ordinances or other governmental or regulatory laws affecting the Real Property, (B) existing, pending or threatened condemnation proceedings affecting the Real Property, or (C) existing, pending or threatened zoning, building code or other moratorium proceedings, or similar matters which would reasonably be expected to adversely affect the ability to operate the Real Property as currently operated. Neither the whole nor any material portion of any Real Property has been damaged or destroyed by fire or other casualty.
		

		
			(3)The Real Property is sufficient for the conduct of the Business and constitutes all of the real property necessary to conduct the Business as currently conducted.
		

		 

		

			-  21  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(c)Title to Purchased Assets. Seller has good title to, or a valid leasehold interest in the Purchased Assets, free and clear of Encumbrances, except as set forth in Section 5.3(c) of the Disclosure Schedules.
		

		
			(d)Water. The Real Property and the Business have access to and use of municipal culinary water supplies and means of wastewater disposal, which are in all material respects sufficient for the operation of the Business as currently conducted and the Purchased Assets.  The foregoing water access and usage comprise all water supply and disposal resources necessary to operate the Business as currently conducted, and all utility billings, charges, and other costs required to be paid by Seller have been fully paid and are current.
		

		
			(e)Insurance Claims.  Section 5.3(e) of the Disclosure Schedules sets forth (1) a true and complete list of all current policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, fiduciary liability and other casualty and property insurance maintained by Seller or Seller’s Affiliates and relating to the Business, the Purchased Assets or the Assumed Liabilities (collectively, the “Insurance Policies”); and (2) with respect to the Business, the Purchased Assets or the Assumed Liabilities, a list of all pending claims and the claims history for Seller since December 31, 2012. Except as set forth on Section 5.3(e) of the Disclosure Schedules, there are no claims related to the Business, the Purchased Assets or the Assumed Liabilities pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. Neither Seller nor any of Seller’s Affiliates has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if not yet due, accrued. All such Insurance Policies are in full force and effect. To the knowledge of Seller, neither Seller nor any of Seller’s Affiliates is in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any such Insurance Policy. True and complete copies of the Insurance Policies have been made available to Purchaser. 
		

		
			(f)Inventory. All Inventory, whether or not reflected in the Financial Statements, consists of a quality and quantity usable and salable in the Ordinary Course of Business, except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves have been established. All Inventory is owned by Seller free and clear of all Encumbrances, and no Inventory is held on a consignment basis. The quantities of each item of Inventory (whether raw materials, work-in-process or finished goods) are not excessive, but are reasonable in the present circumstances of Seller and the Business.  
		

		
			(g)Accounts Receivable. The Accounts Receivable reflected on the Interim Financial Statements and the Accounts Receivable arising after the date thereof, (1) have arisen from bona fide transactions entered into by Seller involving the sale of goods or the rendering of services in the Ordinary Course of Business, (2) constitute only valid, undisputed claims of Seller not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts accrued in the Ordinary Course of Business and (3) subject to a reserve for bad debts not to exceed 1% of the total Accounts Receivable reflected on the Interim Financial Statements, Seller has no knowledge of any reason why the Accounts Receivable would not be collectible in full within ninety (90) days after billing.  
		

		
			(h)Customers and Suppliers.
		

		 

		

			-  22  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(1)Section 5.3(h) of the Disclosure Schedules sets forth with respect to the Business (A) each customer who has paid aggregate consideration to Seller for goods or services rendered in an amount greater than or equal to $30,000 for each of the two (2) most recent fiscal years (collectively, the “Material Customers”); and (B) the amount of consideration paid by each Material Customer during such periods. Except as set forth in Section 5.3(h) of the Disclosure Schedules, Seller has not received any notice, and to Seller’s knowledge, no Material Customer has ceased, or intends to cease, to use the goods or services of the Business or to otherwise terminate or materially reduce its relationship with the Business. 
		

		
			(2)Section 5.3(h) of the Disclosure Schedules sets forth with respect to the Business (A) each supplier to whom consideration for goods or services rendered is in an amount greater than or equal to $30,000 for each of the two (2) most recent fiscal years (collectively, the “Material Suppliers”); and (B) the amount of purchases from each Material Supplier during such periods. Except as set forth in Section 5.3(h) of the Disclosure Schedules, Seller has not received any notice, and to Seller’s knowledge, no Material Supplier has ceased, or intends to cease, to supply goods or services to the Business or to otherwise terminate or materially reduce its relationship with the Business.  
		

		
			(i)Condition and Sufficiency of Assets.  
		

		
			(1)Except as set forth in Section 5.3(i) of the Disclosure Schedules, to the knowledge of Seller, the buildings, plants, structures, Personal Property and other items of tangible personal property included in the Purchased Assets are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, Personal Property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. 
		

		
			(2)The Purchased Assets are sufficient for the conduct of the Business and constitute all of the rights, property and assets necessary to conduct the Business as currently conducted. 
		

		
			5.4Taxes.  Except as set forth in Section 5.4 of the Disclosure Schedules:
		

		
			(a)All Tax Returns with respect to the Business required to be filed by Seller for any Pre-Closing Tax Period have been, or will be, timely filed. Such Tax Returns are, or will be, true, complete and correct in all material respects. All Taxes due and owing by Seller (whether or not shown on any Tax Return) have been, or will be, timely paid.
		

		
			(b)Seller has withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing by Seller to any Employee, independent contractor, creditor, customer, shareholder or other party, and complied with all information reporting and backup withholding provisions of Applicable Law.
		

		
			(c)No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of Seller.
		

		
			(d)No deficiencies have been asserted, or assessments made, against Seller as a result of any examinations by any taxing authority.
		

		 

		

			-  23  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(e)Seller is not a party to any Action by any taxing authority relating to Taxes of Seller. Seller has received no written notice from any taxing authority that such taxing authority intends to initiate an Action with respect to Taxes of Seller.
		

		
			(f)There are no Encumbrances for Taxes upon any of the Purchased Assets.
		

		
			(g)Seller is not a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.
		

		
			(h)Seller is not, and has not been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b).
		

		
			(i)None of the Purchased Assets is property that Seller is required to treat as being owned by any other person pursuant to the so-called “safe harbor lease” provisions of former Section 168(f)(8) of the Tax Code of 1954, as amended.
		

		
			(j)None of the Purchased Assets is tax-exempt use property within the meaning of Section 168(h) of the Code.
		

		
			(k)There have been no claims made by any taxing authority that Seller must file Tax Returns or pay Taxes in any jurisdiction in which Seller does not file Tax Returns or pay Taxes.
		

		
			(l)Seller has delivered to Purchaser copies of all federal Tax Returns and other material returns for all periods ending on or after December 31, 2013.  
		

		
			(m)The representations and warranties set forth in this Section 5.4 are the Seller’s sole and exclusive representations and warranties regarding Tax matters. 
		

		
			5.5Books, Records and Financial Condition.    The Books and Records of Seller are complete and correct in all material respects and reflect a true record of Seller’s financial condition, and reflect the financial condition of the Business through the Effective Date.
		

		
			5.6Financial Statements.  Seller has furnished to Purchaser true and complete copies of the annual financial statements of Seller as of December 31, 2013, December 31, 2014, and December 31, 2015, and the related statements of income for the periods then ended (the “Financial Statement Date”) (collectively, the “Annual Financial Statements”), and the interim financial statements for the period ended December 31, 2015 (the “Interim Financial Statement Date”) (the “Interim Financial Statements”).  Such financial statements have been maintained on the tax-basis of accounting in accordance with reasonable and sound business practices, but do not include footnotes, and are not in accordance with United States generally accepted accounting principles.  Except as set forth therein and in Section 5.6 of the Disclosure Schedule hereto, all of the Annual Financial Statements and Interim Financial Statements (a) were from the Books and Records of Seller and (b) were compiled from Books and Records regularly maintained by management and used to prepare the Annual Financial Statements of Seller.  Seller does not have any obligations or Liabilities, contingent or otherwise, not fully disclosed by the Annual Financial Statements and Interim Financial Statements, except for liabilities or obligations that have arisen since the Financial Statement Date in the Ordinary Course of Business.  The Annual Financial Statements and Interim Financial Statements reflect the overall financial condition of the Business and overall results of operations of the Business on an income-tax basis of accounting as of the respective dates thereof and for the respective periods covered thereby, applied on a consistent basis for the periods 
		

		 

		

			-  24  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		involved, subject, in the case of the Interim Financial Statements, to normal and recurring adjustments (the effects of which will not be materially adverse).
		

		
			5.7Absence of Certain Changes or Events.    Since the Interim Financial Statement Date, except for the execution and delivery of this Agreement and the consummation of the Transactions, and as except disclosed in Section 5.7 of the Disclosure Schedules, there has not been any of the following:
		

		
			(a)Any event or occurrence that has had a Material Adverse Effect on the Business or the Purchased Assets; 
		

		
			(b)any destruction, damage to, or loss of any material asset or property of Seller (whether or not covered by insurance);
		

		
			(c)any acceleration, termination, modification, or cancelation of any Assigned Contract by Seller or any other party;
		

		
			(d)the termination, expiration or lapse of a material Permit; 
		

		
			(e)except for sales of Inventories in the Ordinary Course of Business, any sale or disposition of or agreement to sell or dispose of any of the Purchased Assets;
		

		
			(f)any changes of a material nature, or decisions to make any such changes, which affects or would reasonably be expected to affect the Inventories, including any bottlings, purchasing of packaging materials or the blending of wines, other than in the Ordinary Course of Business, without prior consultation with Purchaser;
		

		
			(g)any material capital expenditures other than in the Ordinary Course of Business;
		

		
			(h)any adverse change in Seller’s relationship with any of its Material Suppliers; 
		

		
			(i)any material change in accounting methods, practices or policies (including any change in cash management practices, procedures with respect to Accounts Receivables, establishment of reserves for uncollectible Account Receivables, inventory control, accrual of Accounts Receivables, prepayment of expenses, payment of trade account payables, accrual of other expenses, deferral of revenue, depreciation or amortization policies or rates) by Seller;
		

		
			(j)any cancellation of debts or any waiver or release of any right or claim of Seller;
		

		
			(k)transfer, abandonment, lapses, encumbrance or impairment of any Intellectual Property asset that is to be included in the Transferred Intellectual Property;
		

		
			(l)incurrence, assumption or guarantee of any indebtedness for borrowed money in connection with the Business except unsecured current obligations and Liabilities incurred in the Ordinary Course of Business; 
		

		
			(m)imposition of any Encumbrance upon any of the Purchased Assets other than Permitted Encumbrances;
		

		
			(n)grant of any bonuses, whether monetary or otherwise, or any general wage or salary increases in respect of any Employees, other than as provided for in any written 
		

		 

		

			-  25  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		agreements or the Ordinary Course of Business, or change in the terms of employment for any Employee;
		

		
			(o)entry into any Assigned Contract except in the Ordinary Course of Business or otherwise approved by Purchaser; 
		

		
			(p)loan to, or entry into any other transaction with, any Employees;
		

		
			(q)adoption, amendment, modification or termination of any Employee Benefit Plan, Contract or commitment for the benefit of any Employees; or
		

		
			(r)agreement by Seller to do any of the foregoing actions or any action which would make any representation or warranty contained in this Agreement untrue or incorrect as of the date when made or as of the Closing Date. 
		

		
			5.8Legal Proceedings.  Except as disclosed in Section 5.8 of the Disclosure Schedules:
		

		
			(a)there are no Actions pending or, to the knowledge of Seller, threatened against, relating to or affecting the Business or any of the Purchased Assets which (1) would reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the Transactions or any of the Transaction Documents or otherwise result in a material diminution of the benefits to Purchaser contemplated by this Agreement or any of the Transaction Documents, or (2) if determined adversely would reasonably be expected to result in (A) any injunction or other equitable relief that would interfere in any material respect with the Business, (B) any material Liabilities by Seller or (C) a Material Adverse Effect;
		

		
			(b)to the knowledge of Seller, there are no facts or circumstances that could reasonably be expected to give rise to any Action that would be required to be disclosed pursuant to Section 5.8(a) above;
		

		
			(c)Seller has not voluntarily or involuntarily commenced or filed, and no third party has commenced or filed or threatened to commence or file, any bankruptcy, insolvency, reorganization, moratorium, sequestration, liquidation, consolidation or similar proceedings with respect to Seller, or appointed a receiver, liquidator, assignee, conservator, trustee, sequestrator or similar official in respect of Seller or its Subsidiaries, or any of their assets; and
		

		
			(d)to the knowledge of Seller, there are no Actions or Orders outstanding with respect to the Business.
		

		
			5.9Compliance with Laws and Orders.  Except as disclosed in Section 5.9 of the Disclosure Schedules, Seller is (a) in material compliance with all Applicable Laws related to the conduct of the Business in the Ordinary Course of Business or the ownership and use of the Purchased Assets, and (b) not in violation of or in default under any Order or Permit applicable to the Business or the Purchased Assets, and has not received any written notice that it is in such violation or default, in each case where such violation or default would reasonably to be expected to result in a Material Adverse Effect.  
		

		
			5.10Intellectual Property Rights.
		

		 

		

			-  26  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(a)Section 5.10(a) of the Disclosure Schedules is a true, accurate and complete list of all the Registered Intellectual Property, all material Transferred Intellectual Property, and all material Seller’s IP Rights Agreements.  Seller is the owner of the right, title and interest in and to and has independently developed or acquired, or has the valid right or license to, all Transferred Intellectual Property, free and clear of all Encumbrances except Permitted Encumbrances.  Seller owns all right, title, and interest in and to the Registered Intellectual Property, free and clear of all Encumbrances except Permitted Encumbrances.  Seller has not assigned any of the Registered Intellectual Property to any third party and has not granted any exclusive licenses to or under any Transferred Intellectual Property to any third party.  To the knowledge of Seller, the operation of the Business as currently conducted, including (1) the design, development, crushing, manufacturing, production, marketing, licensing, sale, offer for sale, importation, distribution, provision, or use of products of the Business and (2) Seller’s use of any product, device, or process used in the Business as currently conducted, does not infringe or misappropriate or otherwise violate the Intellectual Property of any third party, and the Seller has not received any notice alleging the foregoing.
		

		
			(b)To the knowledge of Seller, all products sold, licensed, leased, or delivered to customers of the Business and all services provided by or through the Business to customers on or prior to the Closing Date conform in all material respects to applicable contractual commitments and express and implied warranties, and conform in all material respects to packaging, advertising, and marketing materials and to applicable product or service specifications or documentation.  Seller has secured from all of Seller’s and Seller’s Affiliates’ consultants, employees, and independent contractors who independently or jointly contributed to the conception, reduction to practice, creation, or development of any Transferred Intellectual Property unencumbered and unrestricted exclusive ownership of all such third party’s intellectual property rights in and to such contribution(s). 
		

		
			(c)The Transferred Intellectual Property constitutes all of the Intellectual Property used in or otherwise necessary for the conduct of the Business as currently conducted, and except as set forth in Section 5.10(c)(i) of the Disclosure Schedules Seller is not a party to or bound by any Contract or other obligation whatsoever that limits or impairs its ability to sell, transfer, assign or convey, or that otherwise materially affects, the Intellectual Property.  Except as set forth in Section 5.10(c)(ii) of the Disclosure Schedules, each item of Registered Intellectual Property and each item of Transferred Intellectual Property that has been registered in any jurisdiction (other than applications) is valid and subsisting (or in the case of applications, applied for and pending); all registration, maintenance, and renewal fees currently due in connection therewith have been paid; and all documents, recordations, and certificates in connection therewith currently required to be filed have been filed with the relevant patent, copyright, trademark, or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of prosecuting, maintaining, perfecting and recording Seller’s ownership interests therein; and is not involved in any proceeding, including but not limited to any opposition, invalidation, cancellation or interference and no such action is threatened. To the knowledge of Seller, no third party possesses rights sufficient to cancel or otherwise invalidate any of the Registered Intellectual Property on the ground of prior use, registration, fraud, lack of distinctiveness, or other defects or circumstances that arose prior to the Closing Date. Seller has taken all commercially reasonable actions necessary to maintain, protect, and enforce the Registered Intellectual Property. No Person possesses any Intellectual Property rights that materially restrict the registration by Seller, and the Seller exclusively owns (free and clear of all Encumbrances except Permitted Encumbrances) or has valid rights to use any material Trademark, including associated logos, necessary for the conduct of the Business in all material 
		

		 

		

			-  27  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		respects as conducted prior to Closing. To the knowledge of Seller, no third party possesses any Intellectual Property rights that materially restrict the use by Seller of any material Trademark, including associated logos, necessary for the conduct of the Business in all material respects as conducted prior to Closing.    
		

		
			(d)Except as set forth in Section 5.10(d) of the Disclosure Schedules no third party has been granted any interest in all or any portion of the Transferred Intellectual Property and Seller has not knowingly permitted Seller’s rights in any Transferred Intellectual Property to enter the public domain.  The operation of the Business as currently conducted, including Seller’s use of any product, device, or process used in the Business as currently conducted, does not infringe or misappropriate the intellectual property of any third party.  Seller has not received notice of, and Seller otherwise has no knowledge of, any suit, action, or proceeding, or any threat of any suit, action, or proceeding that involves a claim of infringement or misappropriation or other violation of any intellectual property right of any third party by Seller or which contests the Seller’s validity, ownership, or right to exercise any Intellectual Property right in the Transferred Intellectual Property.  Seller has received no opinion of counsel that any product or service of the Business or the operation of the Business, as previously or currently conducted, infringes, misappropriates or violates any third party intellectual property rights.  To the knowledge of Seller, there is no unauthorized use, unauthorized disclosure, infringement, misappropriation, or violation of any Transferred Intellectual Property by any third party, including any employee or former employee of Seller or its Affiliates.  Seller has not brought any action, suit, or proceeding for infringement or misappropriation of any Transferred Intellectual Property or breach of Seller’s IP Rights Agreements against any third party.  The transactions contemplated by this Agreement shall not impair the right, title, or interest of Seller in or to the Transferred Intellectual Property, and all of the Transferred Intellectual Property shall be owned or available for use by Purchaser immediately after the Closing on terms and conditions identical to those under which Seller owned or used the Transferred Intellectual Property immediately prior to Closing.  The consummation of the transactions contemplated by this Agreement will not (with or without notice, lapse of time, or both), result in the loss or impairment of, nor require payment of additional amounts to or the consent of any third Person in respect of, or result in the creation of any Encumbrance other than a Permitted Encumbrance in or upon any of the Transferred Intellectual Property or Seller’s or, after closing, Seller’s or Purchaser’s rights therein.  The Transferred Intellectual Property is not subject to any outstanding consent, settlement, decree, order, injunction, judgment or ruling restricting or otherwise affecting the use or registration thereof.  
		

		
			(e)Seller has provided Purchaser with true and complete copies of all material Seller’s IP Rights Agreements.  To Seller’s knowledge, all such Seller’s IP Rights Agreements are valid, binding and enforceable between Seller and the other parties thereto, and Seller and, to Seller’s knowledge, such other parties are in material compliance with the terms and conditions of such Seller’s IP Rights Agreements.  
		

		
			(f)Seller has taken commercially reasonable steps to protect and preserve the confidentiality of all material confidential or trade secret information included in the Transferred Intellectual Property. Seller has complied in all material respects with all Applicable Laws and Seller’s internal privacy policies relating to the use, collection, storage, disclosure, and transfer of any personal information collected by Seller or by third parties having authorized access to the records of Seller. Seller has not transferred ownership of any Transferred Intellectual Property to any third party, or knowingly permitted Seller’s rights in any Transferred Intellectual Property to enter the public domain.
		

		 

		

			-  28  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			5.11Affiliate Transactions.  Except as disclosed in Section 5.11 of the Disclosure Schedules, (a) no manager, member, officer, director, partner, employee or Affiliate of Seller provides or causes to be provided any assets, services or facilities used or held for use in connection with the Business, and (b) the Business does not provide any assets, services or facilities to any such manager, member, officer, director, partner, employee or Affiliate.
		

		
			5.12Employees and Employee Plans.  
		

		
			(a)Section 5.12(a) of the Disclosure Schedules contains a true and complete list of each Employee Benefit Plan.
		

		
			(b)With respect to each Employee Benefit Plan, Seller has made available to Purchaser accurate, current and complete copies of each of the following: (1) where the Employee Benefit Plan has been reduced to writing, the plan document together with all amendments; (2) where the Employee Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (3) where applicable, copies of any trust agreements, custodial agreements, insurance policies, administration agreements and similar agreements, and investment management or investment advisory agreements relating to any Employee Benefit Plan; (4) copies of any summary plan descriptions, employee handbooks or similar employee communications relating to any Employee Benefit Plan; (5) in the case of any Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination letter from the IRS; (6) in the case of any Employee Benefit Plan for which Forms 5500 are required to be filed, a copy of the filed Forms 5500 for the last two (2) plan years, with schedules attached; and (7) copies of material notices, letters or other correspondence from the IRS, Department of Labor or Pension Benefit Guaranty Corporation relating to the Employee Benefit Plan.
		

		
			(c)No Employee Benefit Plan (1) provides for defined benefit pension benefits, (2) is a “multiemployer plan” (as defined in Section 3(37) of ERISA) or (3) is a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), and no Employee is entitled to any payment, benefit or right, or any increased or accelerated payment, benefit or right, or any payment of any amount under any Employee Benefit Plan that could individually or in combination with any other such payment constitute an “excess parachute payment” as defined in Section 280G(b)(1) of the Code or fail to be deductible by reason of Section 162 or 404 of the Code, as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby.
		

		
			(d)Other than as required under Section 601 et seq. of ERISA, no Employee Benefit Plan provides benefits or coverage in the nature of health, life or disability insurance following retirement or other termination of employment (other than death benefits when termination occurs upon death).
		

		
			(e)Except as set forth in Section 5.12(e) of the Disclosure Schedules, no Employee Benefit Plan exists that could (1) result in the payment to any Employee of any money or other property or (2) accelerate or provide any other rights or benefits (including funding of compensation or benefits through a trust or otherwise) to any Employee, except as a result of any partial plan termination resulting from this Agreement, in each case, as a result of the execution of this Agreement or otherwise related in any way to the Transactions.
		

		
			(f)The representations and warranties set forth in this Section 5.12 are the Seller’s sole and exclusive representations and warranties regarding employee benefits matters. 
		

		
			5.13Assigned Contracts.  
		

		 

		

			-  29  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(a)Section 5.13 of the Disclosure Schedules includes, a complete list of all Assigned Contracts, except for Contracts which, individually or cumulatively, the inclusion or exclusion of which, would not reasonably be expected to result in a Material Adverse Effect, and (2) Purchaser has been provided true and complete copies of all of the foregoing Assigned Contracts in Seller’s possession or reasonable control. 
		

		
			(b)Each Assigned Contract is valid and binding on Seller in accordance with its terms and is in full force and effect. None of Seller or, to Seller’s knowledge, any other party thereto (1) is in breach of or default under (or is alleged to be in breach of or default under), or (2) has provided or received any notice of any intention to terminate, any Assigned Contract. To Seller’s knowledge, no event or circumstance on the part of Seller has occurred that, with notice or lapse of time or both, would, individually or cumulatively, constitute an event of default under any Assigned Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder.  To Seller’s knowledge, no event or circumstance on the part of any third party thereto has occurred that, with notice or lapse of time or both, would, individually or cumulatively, constitute an event of default under any Assigned Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. There are no material disputes pending or, to Seller’s knowledge, threatened under any Assigned Contract.  
		

		
			(c)The Assigned Contracts are the only Contracts that are material to the Business or the Purchased Assets.
		

		
			5.14Permits.  Section 5.14 of the Disclosure Schedules contains a true, correct and complete list of all the Permits owned by, issued to, held by Seller or the Business.  Section 5.14 of the Disclosure Schedules also describes (a) if applicable, any expiration dates thereof, and (b) the name of the Governmental Authority issuing the Permits or from whom Seller or Purchaser must obtain consent in order to consummate the Transactions. Except as set forth in Section 5.14 of the Disclosure Schedules: (x) all of the Permits listed on Section 5.14 of the Disclosure Schedules are adequate for the operation of the Business as conducted at the Effective Time; (y) the Permits are in full force and effect, and there is no existing default under any such Permits on the part of Seller, nor to Seller’s knowledge any fact or circumstances that, with the passage of time or delivery of notice, would constitute a default thereunder, and there are no proceedings pending or to Seller’s knowledge threatened which may result in the revocation, cancellation, suspension or adverse modification of any of the same; and (z) Purchaser has been provided true and complete copies of the Permits in Seller’s possession or reasonable control.
		

		
			5.15Products.  Each product designed, developed, manufactured, made, produced, provided, distributed, or sold by Seller or the Business (“Products”) in the past three (3) years is in material compliance with (a) to the knowledge of Seller, all requirements of Applicable Law, and (b) the terms and conditions of the Contracts, express and implied warranties, and product and service specifications under which the wine Products have been sold, other than occasional defects, immaterial in amount, that are incidental to the wine production business (e.g., corked bottles) and are not systematic manufacturing defects. None of the Products sold by Seller to customers is subject to any guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale. Seller has no Liabilities (and to Seller’s Knowledge there is no basis for any present or future Action, investigation or demand against Seller or the Business which might give rise to any Liability), whether based on strict liability, negligence, breach of warranty (express or implied), breach of contract or otherwise, in respect of any Product or other item sold by Seller prior to Closing. All packaging, labeling, branding and similar materials relating to the Products are in material compliance with all requirements of Applicable Law. To 
		

		 

		

			-  30  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		the knowledge of Seller, all Products sold by Seller in the past three (3) years have met in all material respects all applicable requirements under the federal Food, Drug and Cosmetic Act of 1938, as amended.
		

		
			5.16No Guarantees.  Except as disclosed in Section 5.16 of the Disclosure Schedule, none of the Liabilities of the Business or of Seller incurred in connection with the conduct of the Business is guaranteed by or subject to a similar contingent obligation of any other Person, nor has Seller guaranteed or become subject to a similar contingent obligation in respect of the Liabilities of any customer, supplier or other Person to whom Seller sells goods or provides services in the conduct of the Business or with whom Seller otherwise has significant business relationships in the conduct of the Business.
		

		
			5.17Brokers and Finders.  Except as set forth in Section 5.17 of the Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions, or any other Transaction Document, based upon any arrangements made by or on behalf of Seller.
		

		
			5.18No Other Representations or Warranties.  Except for the representations and warranties contained in this ARTICLE 5 (including the related portions of the Disclosure Schedule), or in the other Transaction Documents, neither the Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller.
		

		
			5.19Nature of Purchaser’s Representations. Each of the representations and warranties of Purchaser contained in ARTICLE 5 constitutes a material part of the consideration to Seller and Seller is relying on the correctness and completeness of these representations and warranties in entering into this transaction. 
		

		
			5.20Representations and Warranties of the Purchaser.  The Purchaser represents and warrants to Seller as follows and acknowledges that Seller is relying on these representations and warranties in connection with the sale by Seller of the Purchased Assets and the Assumed Liabilities:
		

		
			(a)Organization and Power.  The Purchaser is a limited liability company validly existing and in good standing under the laws of the State of Delaware.  The Purchaser has all necessary limited liability company power and authority to acquire the Purchased Assets, to enter into this Agreement and the Transaction Documents to be delivered by it, and to perform its obligations hereunder and thereunder.
		

		
			(b)Authorization.  All necessary limited liability company action has been taken by or on the part of the Purchaser to authorize its execution and delivery of this Agreement and the Transaction Documents to be delivered by it and the performance of its obligations hereunder and thereunder.
		

		
			(c)Enforceability.  This Agreement has been duly executed and delivered by Purchaser and (assuming due execution and delivery by Seller) constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.  Each of the Transaction Documents to be delivered by Purchaser will at the Closing Time have been duly executed and delivered by Purchaser and (assuming due execution and delivery by the other parties thereto) will be enforceable against Purchaser in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and 
		

		 

		

			-  31  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.
		

		
			(d)Absence of Conflict.  Except as set forth in Section 5.20(d) of the Disclosure Schedules, the execution, delivery and performance by Purchaser of this Agreement and the other Transaction Documents to which Purchaser is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (1) conflict with or result in a violation or breach of, or default under, any provision of the certificate of formation, operating agreement or other organizational documents of Purchaser; or (2) conflict with or result in a violation or breach of any provision of any Applicable Law or Order applicable to Purchaser, the Business or the Purchased Assets.
		

		
			(e)Brokers and Finders.  Except as set forth in Section 5.20(e) of the Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions or any other Transaction Document based upon arrangements made by or on behalf of Purchaser.
		

		
			(f)Sufficiency of Funds. Purchaser has sufficient cash on hand or other sources of immediately available funds to enable it to make payment of the Purchase Price and consummate the Transactions.
		

		
			(g)Legal Proceedings. Except as set forth in Section 5.20(g) of the Disclosure Schedules, there are no Actions pending or, to Purchaser’s knowledge, threatened against or by Purchaser or any Affiliate of Purchaser that challenge or seek to prevent, enjoin or otherwise delay the Transactions. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.
		

		
			Article 6

COVENANTS OF SELLER AND PURCHASER
		

		
			6.1Access.  Seller shall (a) afford Purchaser and its Representatives (collectively, the “Purchaser Group”) full and free access, with reasonable advance notice and during regular business hours, to Seller’s personnel, any Purchased Assets, Assigned Contracts, Books and Records, Employee Benefit Plans and other documents and data to the extent related to the Business, such rights of access to be exercised in a manner that does not unreasonably interfere with the operations of Seller and subject to Seller’s safety and security policies and procedures; (b) provide Purchaser Group with copies of all Contracts, Books and Records and other existing documents and data regarding the Purchased Assets or Business as Purchaser may reasonably request, excluding confidential valuation or transactional information; (c) deliver to Purchaser, or provide Purchaser with an opportunity to review and examine true and complete copies and results of any final written reports, studies, analyses, tests or monitoring in Seller’s possession or control; (d) furnish the Purchaser Group with such additional financial, operating and other relevant data and information regarding the Purchased Assets or Business as Purchaser may reasonably request; and (e) otherwise cooperate and assist, to the extent reasonably requested by Purchaser, with Purchaser’s investigation of the Business; provided, that, all requests for access to such personnel, Contracts, Books and Records and/or other information in accordance with this Section 6.1 shall be made by the Purchaser Group solely through Casey J. McClellan.  All documents and information concerning Seller and the Business furnished to Purchaser in connection with the Transaction shall be subject to the Confidentiality Agreement, which Confidentiality Agreement shall remain in full force and effect from and after the Effective Date.  Without limiting the foregoing, Seller shall permit, 
		

		 

		

			-  32  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		and shall use commercially reasonable efforts to cause the current owner of the Crawford Building to permit, Purchaser’s Representatives to conduct environmental due diligence of the Real Property.  
		

		
			6.2Confidentiality.  
		

		
			(a)The existence of this Agreement, the contents of this Agreement, Purchaser’s interest in purchasing the Purchased Assets and any information provided to Purchaser, or its Representatives pursuant to this Agreement shall be confidential and shall be held in accordance with, and shall be subject to the terms of, the Confidentiality Agreement, which is hereby incorporated in this Agreement as though fully set forth herein, and in accordance with such other terms and conditions as may otherwise be agreed upon by the Parties; provided,  however, that the provisions of this Section 6.2 shall expire following the Closing.
		

		
			(b)For a period of two (2) years after the Closing, Seller shall, and shall cause Seller’s Affiliates to, hold, and shall use Seller’s reasonable best efforts to cause Seller’s respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Business, except to the extent that Seller can show that such information (a) is generally available to and known by the public through no fault of Seller, any of Seller’s Affiliates or their Representatives; or (b) is lawfully acquired by Seller, any of Seller’s Affiliates or their Representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Seller or any of Seller’s Affiliates or their Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Applicable Law, Seller shall promptly notify Purchaser in writing and shall disclose only that portion of such information which Seller is advised by Seller’s counsel in writing is legally required to be disclosed, provided that Seller shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.
		

		
			6.3Further Assurances.  Each of Seller and Purchaser agrees that, from time to time, whether before, at or after the Closing, it shall, and shall cause their respective Affiliates to, execute, deliver and record such further documents, assurances, instruments of conveyances and take such other action as may be reasonably necessary or desirable to carry out the purposes and intents of this Agreement and the other Transaction Documents, and to give effect to the Transactions.
		

		
			6.4Assistance in Respect of Applications for Liquor Licenses, Permits, Consents, Approvals, Etc.  Without limiting any other covenant or obligation of Seller hereunder, Seller agrees that it shall use commercially reasonable efforts to provide the Purchaser with such information and such other assistance as may be reasonably required by the Purchaser on written notice to the Seller, to enable the Purchaser to obtain any and all Consents, Approvals, Permits and licenses as may be necessary or desirable with respect to the transactions herein required from any third-party, government, department, agency or regulator having jurisdiction over the Purchaser, the Business, or the Transactions, including but not limited to any and all assistance required to enable Purchaser to obtain any relevant federal, state, and local liquor licenses or other licenses or Permits required for the Purchaser to make, produce, sell, or distribute alcoholic beverages and to otherwise to operate the Business after the Closing.
		

		
			6.5TTB Application; Transition. Without limiting the covenants and obligations of Seller under Section 6.4, the Parties agree that, promptly following the Closing, and in any event within three (3) Business Days thereafter, Purchaser shall file a TTB Application with all required supplemental information with the TTB. The Parties contemplate that the Business shall continue to operate during the term of the Leaseback Agreement using Seller’s TTB Basic Permit and filing numbers.  
		

		 

		

			-  33  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			6.6WSLCB Application; Transition.  
		

		
			(a)Promptly following the Closing, Purchaser shall file an application for Permits with the WSLCB (collectively the “WSLCB Application”) and in each other state where alcohol Permits and registrations are necessary for Purchaser to conduct the Business after Closing.  Purchaser shall submit such application promptly upon execution of this Agreement and shall keep Seller reasonably apprised of the status of the processing of such applications.
		

		
			(b)During the term of, and subject to the terms and provisions of the Leaseback Agreement, Seller shall continue to operate the Business in the ordinary course for the benefit of Purchaser, but shall, to the maximum extent allowable considering restrictions imposed on the holder of a liquor license, reasonably consult with Purchaser and conduct the Business operations as Purchaser directs. 
		

		
			(c)During the term of the Leaseback Agreement, Purchaser shall have the right to have its employees on the Business premises for training or oversight purposes. 
		

		
			6.7Grape Purchase Contracts and Distribution Contracts.  Between the Effective Date and the Closing, Seller shall cooperate in good faith with Purchaser, and shall exert its commercially reasonable efforts to facilitate the execution and delivery of (a) grape purchase contracts or supply agreements between Purchaser and those grape suppliers and vineyards set forth on Schedule 6.7, in form and substance reasonably acceptable to Purchaser, and (b) distribution agreements or arrangements between Purchaser and those distributors set forth on Schedule 6.7, in form and substance reasonably acceptable to Purchaser.   
		

		
			6.8Operation of the Business of Seller.  Between the Effective Date and the Closing, unless as otherwise provided in this Agreement or consented to in writing by Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned), Seller shall, and shall cause its Affiliates to (a) conduct the Business in the Ordinary Course of Business, (b) use commercially reasonable efforts to maintain and preserve intact its current Business organization and operations and to preserve the goodwill and relationships of its Employees, customers, suppliers, regulators and others having business relationships with the Business, and (c) Seller shall not take any action that would cause any of the events described in Section 5.7 to occur. 
		

		
			6.9Additional Financial Statements.  As soon as reasonably practicable after they become available, Seller will furnish to Purchaser balance sheets and income statements for Seller for each month after the Interim Financial Statement Date, ending prior to the Closing Date.  Such financial statements shall be prepared on a basis consistent with past practice and to the best of Seller’s knowledge shall be complete and fairly present the assets, liabilities, financial condition and results of operations of Seller as of the end of the particular month and for the year-to-date period then ended, subject to normal year-end audit adjustments.
		

		
			6.10No Solicitation of Other Bids.
		

		
			(a)Seller shall not, and shall not authorize or permit any of Seller’s members or Affiliates or any of their Affiliates’ Representatives to, directly or indirectly, (1) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal, (2) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal, or (3) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. Seller shall immediately cease and cause to be 
		
		
 

		

			-  34  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		terminated, and shall cause Seller’s members and Affiliates, and any of their Affiliate’s Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, “Acquisition Proposal” means any inquiry, proposal or offer from any Person (other than Purchaser or any of its Affiliates) relating to the direct or indirect disposition, whether by sale, merger or otherwise, of all or any portion of the Business or the Purchased Assets.

		
		
			(b)In addition to the other obligations under this Section 6.10, Seller shall promptly (and in any event within three (3) Business Days after receipt thereof by Seller or its Representatives) advise Purchaser orally and in writing of any Acquisition Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could reasonably be expected to result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the Person making the same.
		

		
			(c)Seller agrees that the rights and remedies for noncompliance with this Section 6.10 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Purchaser and that money damages would not provide an adequate remedy to Purchaser.
		

		
			6.11Notice of Certain Events.
		

		
			(a)From the date hereof until the Closing, Seller shall promptly notify Purchaser in writing of:
		

		
			(1)any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by Seller hereunder not being true and correct; 
		

		
			(2)any notice or other communication from any Person alleging that the Approval of such Person is or may be required in connection with the Transactions;
		

		
			(3)any notice or other communication from any Governmental Authority in connection with the Transactions; and
		

		
			(4)any Actions commenced or, to Seller’s knowledge, threatened against, relating to or involving or otherwise affecting the Business, the Purchased Assets or the Assumed Liabilities that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 5.8 or that relates to the consummation of the Transactions. 
		

		
			(b)Purchaser’s receipt of information pursuant to this Section 6.10 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement (including Sections 7.1 and 9.4(a)(1)) and shall not be deemed to amend or supplement the Disclosure Schedules unless Seller otherwise complies with Section 9.14.
		

		 

		

			-  35  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			6.12Non-competition; Non-solicitation.
		

		
			(a)For a period of sixty (60) months commencing on the Closing Date (the “Restricted Period”), Seller shall not, and shall not permit any of Seller’s Affiliates to, directly or indirectly, (1) engage in or assist others in engaging in the Business in the Territory, (2) have an interest in any Person that engages directly or indirectly in the Business in the Territory in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant, or (3) cause, induce or encourage any material actual or prospective client, customer, supplier or licensor of the Business (including any existing or former client or customer of the Business and any Person that becomes a client or customer of the Business after the Closing), or any other Person who has a material business relationship with the Business, to terminate or modify any such actual or prospective relationship. 
		

		
			(b)Notwithstanding the foregoing, 
		

		
			(1)Seller and Seller’s Affiliates may (A) exercise any and all rights as permitted under the Transaction Documents, and (B) own directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if Seller is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own five percent (5%) or more of any class of securities of such Person; 
		

		
			(2)McClellan Family LLC or any Affiliate thereof may continue to operate its farming and grape growing businesses in the ordinary course and consistent with its past practice, without any restriction hereunder; 
		

		
			(3)Thomas Sawatzki and any of his Affiliates may continue to operate his litigation support, business valuation and forensic accounting businesses in the ordinary course and consistent with his past practice, without any restriction hereunder; and
		

		
			(4)Nothing herein shall prohibit Seller or any of Seller’s members or their Affiliates from having active involvement in, and lending its, his or her name to, wine industry events, initiatives and activities generally, including without limitation speaking engagements, serving on boards and committees of non-profit and community organizations, writing articles and otherwise providing information with respect to the wine industry generally, provided that in each case such Seller shall not disclose any confidential information of the Company; and provided, that in no event shall Seller or any of Seller’s members or their respective Affiliates make statements about the Company’s wine on behalf of or as a representative of the Company, without the prior written consent of Purchaser, other than with respect to such appropriate statements made by Casey McClellan in accordance with and pursuant to his Employment Agreement with Purchaser. 
		

		
			(c)During the Restricted Period, Seller shall not, and shall not permit any of Seller’s Affiliates to, directly or indirectly, hire or solicit any Person who is offered employment by Purchaser pursuant to Section 8.1(a) or is or was employed in the Business during the Restricted Period, or encourage any such Person to leave such employment or hire any such employee who has left such employment, except pursuant to a general solicitation which is not directed specifically to any such Person; provided, that nothing in this Section 6.12(c) shall prevent Seller or any of Seller’s Affiliates from hiring (1) any Person whose employment has been terminated 
		

		 

		

			-  36  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		by Purchaser or (2) after ninety (90) days from the date of termination of employment, any Person whose employment has been terminated by the Person.
		

		
			(d)If Seller breaches, or threatens to commit a breach of, any of the provisions of this Section 6.12, Purchaser shall have the following rights and remedies, each of which rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to Purchaser under law or in equity:
		

		
			(1)the right and remedy to have such provision specifically enforced by any court having jurisdiction, it being acknowledged and agreed that any such breach or threatened breach may cause irreparable injury to Purchaser and that money damages may not provide an adequate remedy to Purchaser; and
		

		
			(2)the right and remedy to recover from Seller all monetary damages suffered by Purchaser as the result of any acts or omissions constituting a breach of this Section 6.12.
		

		
			(e)Seller acknowledges that the restrictions contained in this Section 6.12 are reasonable and necessary to protect the legitimate interests of Purchaser and constitute a material inducement to Purchaser to enter into this Agreement and consummate the Transactions. In the event that any covenant contained in this Section 6.12 should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by Applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by Applicable Law. The covenants contained in this Section 6.12 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.
		

		
			6.13Bulk Sales Laws. The Parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Purchaser; it being understood that any Liabilities arising out of the failure of Seller to comply with the requirements and provisions of any bulk sales, bulk transfer or similar laws of any jurisdiction which would not otherwise constitute Assumed Liabilities shall be treated as Retained Liabilities.
		

		
			6.14Receivables.  
		

		
			(a)From and after the Closing, if Seller or any of Seller’s Affiliates receives or collects any funds relating to any Accounts Receivable or any other Purchased Asset, Seller or Seller’s Affiliate shall remit such funds to Purchaser within five (5) Business Days after its receipt thereof. 
		

		
			(b)From and after the Closing, if Purchaser or its Affiliate receives or collects any funds relating to any Excluded Asset, Purchaser or its Affiliate shall remit any such funds to Seller within five (5) Business Days after its receipt thereof.
		

		 

		

			-  37  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			6.15Tax Clearance Certificates. Upon the reasonable request of Purchaser, Seller shall notify the taxing authorities in the jurisdictions identified by Purchaser that impose Taxes on Seller or where Seller has a duty to file Tax Returns of the Transactions in the form and manner required by such taxing authorities, if the failure to make such notifications or receive any available tax clearance certificate or other evidence of Seller’s tax status (a “Tax Clearance Certificate”) could subject the Purchaser to any Taxes of Seller. If any taxing authority asserts that Seller is liable for any Tax that is due on or before Closing, Seller shall promptly pay any and all such amounts and shall provide evidence to the Purchaser that such liabilities have been paid in full or otherwise satisfied.
		

		
			6.16Cancellation and Transfer of Name.  
		

		
			(a)Within two (2) Business Days following the Closing Date, Seller provide to Purchaser a consent, in form acceptable to Purchaser, permitting Purchaser to register the name “Seven Hills Winery” or another name mutually acceptable to Seller and Purchaser as a d/b/a of Purchaser with the Secretary of State of Washington.  
		

		
			(b)Further, within two (2) Business Days following the termination of the Leaseback Agreement, or earlier, if mutually agreed between the Parties, Seller shall file with the Secretary of State of the State of Washington an amendment to Seller’s articles of organization changing the name of Seller to a name that is not similar to “Seven Hills Winery” or the name of the Business, which name shall be reasonably acceptable to Purchaser.  Seller shall execute and sign other documents and items necessary for Purchaser to register and transfer the name “Seven Hills Winery” as a d/b/a of Purchaser.
		

		
			Article 7

INDEMNIFICATION
		

		
			7.1Seller’s Indemnity.  
		

		
			(a)Seller will indemnify, defend and hold harmless Purchaser and Purchaser’s Affiliates and their respective Representatives (the “Purchaser Indemnitees”), in respect of any and all claims, losses, damages, liabilities and expenses (including, without limitation, settlement costs and any legal, accounting and other expenses for investigating or defending any actions or threatened actions) (each, a “Loss”) reasonably incurred by Purchaser or any such Affiliate or Representative, in connection with each and all of the following:
		

		
			(1)any breach or inaccuracy of any representation or warranty made by Seller in this Agreement;
		

		
			(2)any breach of or failure to perform or comply with any covenant, agreement or obligation of Seller contained in this Agreement or any other Transaction Document delivered to Purchaser pursuant to this Agreement;
		

		
			(3)any Indebtedness of Seller due and payable prior to the Closing Date arising from any Assumed Liabilities and not accounted for in the Closing Working Capital Statement; and
		

		
			(4)any Retained Liabilities or Excluded Assets.
		

		 

		

			-  38  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			7.2Purchaser’s Indemnity.  
		

		
			(a)Purchaser shall indemnify, defend and hold Seller and Seller’s members and their respective Representatives (the “Seller Indemnitees”) harmless in respect of any and all Loss reasonably incurred by Seller or any such Affiliate or Representative, in connection with each and all of the following:
		

		
			(1)any breach or inaccuracy of any representation or warranty made by Purchaser in this Agreement;
		

		
			(2)any breach of or failure to perform or comply with any covenant, agreement or obligation of Purchaser contained in this Agreement or any other document delivered to Seller pursuant to this Agreement; 
		

		
			(3)any Purchased Asset or Assumed Liability, arising after the Closing Date; and 
		

		
			(4)any obligation or Liability arising out of the use or ownership of the Purchased Assets from and after Closing, for which Purchaser is not indemnified by Seller under this Agreement.
		

		
			7.3Survival.  
		

		
			(a)Except as otherwise specifically provided in this Agreement, the representations and warranties of Seller set forth in this Agreement shall survive Closing and continue in full force and effect for a period of eighteen (18) months from the Closing Date; provided that (1) the representations and warranties of Seller in Sections 5.2(a) (Organization and Status),  5.2(c) (Authorization),  5.3(c) (Title to Purchased Assets), and 5.17 (Brokers and Finders) (collectively, the “Seller Fundamental Representations”) shall survive indefinitely, (2) the representations and warranties of Seller in Section 5.3(a) (Environmental) shall survive for a period of six (6) years from the Closing Date, and (3) the representations and warranties of Seller in Section 5.4 (Taxes) shall survive for the full period of all applicable statutes of limitations plus sixty (60) days.
		

		
			(b)Except as otherwise specifically provided in this Agreement, the representations and warranties of the Purchaser contained in this Agreement shall survive Closing and shall continue in full force and effect for a period of eighteen (18) months from the Closing Date;  provided that the representations and warranties of Purchaser in Sections 5.20(a) (Organization and Power),  5.20(b) (Authorization), and 5.20(f) (Brokers and Finders) (collectively, the “Purchaser Fundamental Representations”) shall survive indefinitely.
		

		
			(c)All covenants and agreements of the Parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. 
		

		
			(d)The parties have agreed to substitute the claims periods described in this Section 7.3 for any statute of limitations period that would otherwise be applicable to such claims. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter 
		

		 

		

			-  39  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.
		

		
			7.4Limitations.
		

		
			(a)Seller shall not be obligated to pay any amounts for indemnification pursuant to Section 7.1(a)(1) until the aggregate Losses for which the Purchaser Indemnitees are entitled to indemnification exceeds an amount equal to One Hundred Thousand Dollars ($100,000) (the “Threshold”); in which event, Seller shall only be obligated to pay for Losses in excess of such Threshold; provided, that the Threshold shall not apply to Losses involving or relating to any (A) Seller Fundamental Representations or (B) fraud or intentional misrepresentation.  
		

		
			(b)Purchaser shall not be obligated to pay any amounts for indemnification pursuant to Section 7.2(a)(1) until the aggregate Losses for which the Seller Indemnitees are entitled to indemnification exceeds an amount equal to the Threshold; in which event, Purchaser shall only be obligated to pay for Losses in excess of such Threshold; provided, that the Threshold shall not apply to Losses involving or relating to any (A) Purchaser Fundamental Representations or (B) fraud or intentional misrepresentation.  
		

		
			(c)In no event shall the indemnification obligations of Seller under Section 7.1(a)(1) or Purchaser under Section 7.2(a)(2) exceed an amount equal to One Million One Hundred Fifty Thousand Dollars ($1,150,000) (the “Indemnification Cap”); provided,  however, that the Indemnification Cap shall not apply to Losses involving or relating to any (A) Seller Fundamental Representations or Purchaser Fundamental Representations, as applicable, or (B) fraud or intentional misrepresentation.  
		

		
			(d)After a claim has been finally determined, either by agreement of the Indemnifying Party or final, non-appealable adjudication pursuant to Section 7.5, any indemnification obligations of Seller hereunder shall be recovered first by Purchaser’s offset against any Earn-Out Payments then due and payable, and only after such offset shall Purchaser seek recovery directly against Seller; provided,  however, that this limitation shall not apply to Losses involving or relating to any (A) Seller Fundamental Representations, or (B) fraud or intentional misrepresentation.  
		

		
			(e)From and after the Closing, absent fraud or intentional misrepresentation, the indemnification provisions contained in this Article 7 shall provide the sole and exclusive remedy following the Closing Date as to all money damages for any action arising out of the subject matter of this Agreement, provided that nothing in this Section 7.4 shall affect the Parties’ rights to specific performance or other equitable remedies to enforce the Parties’ obligations under this Agreement.
		

		
			(f)  For purposes of calculating the amount of Loss pursuant to Section 7.1(a)(1) and Section 7.2(a)(1), any inaccuracy in or breach of any representation or warranty shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty.
		

		
			7.5Claims for Indemnification.  
		

		 

		

			-  40  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(a)Indemnification Procedures. The party making a claim under this Article 7 is referred to as the “Indemnified Party,” and the party against whom such claims are asserted under this Article 7 is referred to as the “Indemnifying Party”. 
		

		
			(1)Third Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “Third Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) calendar days after receipt of such notice of such Third Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided, that if the Indemnifying Party is Seller, such Indemnifying Party shall not have the right to defend or direct the defense of any such Third Party Claim that (A) is asserted directly by or on behalf of a Person that is a supplier or customer of the Business, or (B) seeks an injunction or other equitable relief against the Indemnified Party. In the event that the Indemnifying Party assumes the defense of any Third Party Claim, subject to Section 7.5(a)(2), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party. If the Indemnifying Party elects not to compromise or defend such Third Party Claim or fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, the Indemnified Party may, subject to Section 7.5(a)(2), pay, compromise, defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. Seller and Purchaser shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available (subject to the provisions of Section 6.2) records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim.
		

		
			(2)Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, delayed or conditioned), except as provided in this Section 7.5(a)(2).  If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and 
		
		
 

		

			-  41  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten (10) days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third Party Claim, the Indemnifying Party may settle the Third Party Claim upon the terms set forth in such firm offer to settle such Third Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 7.5(a)(1), it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, delayed or conditioned).

		
		
			(3)Direct Claims. Any Action by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim.  During such thirty (30) day period, the Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the Indemnified Party’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such 30 day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.
		

		
			(4)Cooperation. Upon a reasonable request by the Indemnifying Party, each Indemnified Party seeking indemnification hereunder in respect of any Direct Claim, hereby agrees to consult with the Indemnifying Party and act reasonably to take actions reasonably requested by the Indemnifying Party in order to attempt to reduce the amount of Losses in respect of such Direct Claim. Any costs or expenses associated with taking such actions shall be included as Losses hereunder.
		

		
			(b)Payments. Subject to Section 7.4(d), once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this Article 7, the Indemnifying Party shall satisfy its obligations within fifteen (15) Business Days of such final, non-appealable adjudication by wire transfer of immediately available funds. The Parties agree 
		

		 

		

			-  42  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		that should an Indemnifying Party not make full payment of any such obligations within such fifteen (15) Business Day period (whether by offset or otherwise), any amount payable shall accrue interest from and including the date of agreement of the Indemnifying Party or final, non-appealable adjudication to but excluding the date such payment has been made at a rate per annum equal to twelve-percent (12%). Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed.
		

		
			Article 8

EMPLOYMENT MATTERS
		

		
			8.1Seller’s Employees.
		

		
			(a)Commencing on the Closing Date, or at such other time following the Closing Date as the Parties shall mutually agree (the “Termination Date”), Seller shall terminate all Employees of the Business who are actively at work. At least thirty (30) days prior to the Termination Date, Purchaser shall deliver to Seller a list of the Employees to whom Purchaser shall offer employment to, and hire as of such Termination Date, on an “at will” basis.
		

		
			(b)Seller shall be solely responsible, and Purchaser shall have no obligations whatsoever for, any Employee Benefit Plan compensation or other amounts payable to any current or former Employee, director, officer, manager, or consultant of Seller, including, without limitation, hourly pay, commission, bonus, salary, accrued vacations, fringe, pension or profit sharing benefits, or severance pay payable to any such current or former Employee, director, officer, manager or consultant of Seller for any period relating to the service with Seller or its Affiliates at any time prior to the Termination Date, and Seller shall pay, or cause to be paid, all such amounts to all entitled Employees on or prior to the Termination Date.
		

		
			(c)Seller shall remain solely responsible for the satisfaction of all claims for medical, dental, life insurance, health accident or disability benefits brought by or in respect of current or former Employee, director, officer, manager or consultant of Seller which claims relate to events occurring prior to the Termination Date. Seller also shall remain solely responsible for all worker’s compensation claims of any Employees (or former Employees) or agents of Seller which relate to events occurring prior to the Termination Date. Seller shall pay, or cause to be paid, all such amounts to the appropriate persons as and when due.
		

		
			(d)Effective as soon as practicable after Seller’s SIMPLE IRA accounts become eligible for rollover, Purchaser or an Affiliate of Purchaser shall cause the 401(k) plan covering employees hired by Purchaser to accept rollovers from such employees’ SIMPLE IRA accounts.
		

		
			(e)Each Employee of Seller who becomes employed by Purchaser in connection with the Transactions shall be eligible to receive the salary and benefits maintained for employees of Purchaser on substantially similar terms and conditions in the aggregate as are provided to similarly situated employees of Purchaser.
		

		
			(f)Each Employee of the Business who becomes employed by Purchaser in connection with the transaction shall be given service credit for the purpose of eligibility under the group health plan and eligibility and vesting only under the defined contribution retirement plan for his or her period of service with Seller prior to the Termination Date; provided,  however, that (1) such credit shall be given pursuant to payroll or plan records, at the election of Purchaser, 
		

		 

		

			-  43  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		in its sole and absolute discretion; and (2) such service crediting shall be permitted and consistent with Purchaser’s defined contribution retirement plan.
		

		
			Article 9

GENERAL PROVISIONS
		

		
			9.1Public Announcements.  No Party shall make, or cause to be made, any public statement or issue any press release concerning the Transactions except as agreed by the Parties acting reasonably or as may be necessary, in the opinion of counsel to the Party making that disclosure, to comply with the requirements of all Applicable Law.  If any public statement or release is so required, the Party making the disclosure shall consult with the other Party before making that statement or release, and the Parties shall use all reasonable efforts, acting in good faith, to agree on a text for the statement or release that is satisfactory to the Parties.  Each Party shall cause its Affiliates and their respective directors, officers, employees and Representatives to comply with this Section 9.1.
		

		
			9.2Disclosure and Consultation.
		

		
			(a)Before any public statement or press release concerning the Transactions, no Party shall disclose this Agreement or any aspect of the Transactions except to its Affiliates and their respective directors, officers, employees on a “need to know” basis, its legal, accounting, financial or other professional advisors, or as may be required by any Applicable Law or as agreed by the Parties.
		

		
			(b)Seller and the Purchaser shall consult with each other concerning the manner by which Seller’s employees, customers, suppliers and other Persons having dealings with Seller shall be informed of the Transactions.
		

		
			9.3Expenses.    Each Party shall pay all expenses (including Taxes imposed on those expenses) it incurs in the authorization, negotiation, preparation, execution and performance of this Agreement and the Transactions, including all fees and expenses of its legal counsel, bankers, investment bankers, brokers, accountants or other Representatives or consultants.
		

		
			9.4Termination of Agreement.
		

		
			(a)By notice given prior to Closing, this Agreement may be terminated as follows:
		

		
			(1)subject to Section 9.4(b) below, by the Purchaser if a breach of any provision of this Agreement has been committed by Seller, such breach has not been waived by the Purchaser, the Purchaser has notified Seller of the breach, and the breach has not been cured for a period of fifteen (15) days after the notice of breach;
		

		
			(2)subject to Section 9.4(b) below, by Seller if a breach of any provision of this Agreement has been committed by the Purchaser, such breach has not been waived by Seller, Seller has notified the Purchaser of the breach, and the breach has not been cured for a period of fifteen (15) days after the notice of breach;
		

		
			(3)by mutual written consent of the Purchaser, on the one hand, and Seller, on the other hand; or
		

		 

		

			-  44  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(4)by either the Purchaser or Seller if the Closing has not occurred on or before the Outside Closing Date; provided that the right to terminate this Agreement under this Section 9.4(a)(4) shall not be available to any Party whose failure to fulfill any obligation under this Agreement is the cause of, or results in, the failure of the Closing to occur on or prior to such date or to any Party that is in material breach of this Agreement.
		

		
			(b)If a breach in respect of which the non-defaulting Party has given notice to the defaulting Party under subsection Section 9.4(a)(1) or Section 9.4(a)(2) is not capable of being remedied within the fifteen (15) day period provided for therein, the cure period with respect to that breach will be extended for so long as the defaulting Party continues to diligently use reasonable efforts to remedy that breach, up to a maximum of one hundred twenty (120) additional days.
		

		
			(c)If this Agreement is terminated pursuant to Section 9.4(a), all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach); provided, however, that the obligations in the Confidentiality Agreement will survive such termination and shall continue in full force and effect.
		

		
			9.5No Third Party Beneficiary.  This Agreement is solely for the benefit of the Parties and no third parties shall accrue any benefit, claim or right of any kind pursuant to, under, by or through this Agreement.
		

		
			9.6Entire Agreement.  This Agreement, together with the Confidentiality Agreement, the terms of which are hereby incorporated by reference, the Transaction Documents and the other agreements to be entered into as contemplated by this Agreement (the “Other Agreements”) constitute the entire agreement between the Parties pertaining to the subject matter of this Agreement and the Other Agreements and supersede all prior correspondence, agreements, negotiations, discussions and understandings, written or oral.  Except as specifically set out in this Agreement or the Other Agreements, there are no representations, warranties, conditions or other agreements or acknowledgements, whether direct or collateral, express or implied, written or oral, statutory or otherwise, that form part of or affect this Agreement or the Other Agreements or which induced any Party to enter into this Agreement or the Other Agreements.  No reliance is placed on any representation, warranty, opinion, advice or assertion of fact made either prior to, concurrently with, or after entering into, this Agreement or any Other Agreement, or any amendment or supplement thereto, by any Party or any Other Agreement or its Representatives, to any other Party or its Representatives, except to the extent the representation, warranty, opinion, advice or assertion of fact has been reduced to writing and included as a term in this Agreement or that Other Agreement, and none of the Parties or any other Agreement has been induced to enter into this Agreement or any Other Agreement or any amendment or supplement by reason of any such representation, warranty, opinion, advice or assertion of fact.  There shall be no liability, either in tort or in contract, assessed in relation to the representation, warranty, opinion, advice or assertion of fact, except as contemplated in this Section 9.6.  This Agreement and the Transactions are part of a larger group of transactions contemplated by Purchaser, on the one hand, and Seller and certain of its Affiliates, on the other hand.  The goal of Seller, its Affiliates and Purchaser in the entire series of transactions is that Purchaser acquire substantially all of the assets and assume certain liabilities of the Business, with the right of Purchaser to operate the Business after the Closing Date in substantially the same manner as the Ordinary Course of Business.  In the event of any review of the transactions contemplated herein by any Person for any reason, this Agreement, the Contribution Agreement, and the other Transaction Documents shall be construed together as one integrated transaction giving full effect to the foregoing goal.
		

		 

		

			-  45  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			9.7Non-Merger.  All provisions of this Agreement shall survive the execution, delivery and performance of this Agreement and Closing, provided that the survival of the representations and warranties in Article 5 and the related indemnities in Section 7.1 shall be subject to the special arrangements provided in those Articles or Sections.
		

		
			9.8Time of Essence.  Time is of the essence of this Agreement.
		

		
			9.9Amendment.  This Agreement may be supplemented, amended, restated or replaced only by written agreement signed by each Party.
		

		
			9.10Waiver of Rights.  Any waiver of, or consent to depart from, the requirements of any provision of this Agreement shall be effective only if it is in writing and signed by the Party giving it, and only in the specific instance and for the specific purpose for which it has been given.  No failure on the part of any Party to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of that right.  No single or partial exercise of any such right shall preclude any other or further exercise of that right or the exercise of any other right.
		

		
			9.11Venue and Jurisdiction.  Each Party irrevocably and unconditionally attorns to the exclusive jurisdiction of the courts of the State of Washington. If any legal proceeding or other legal action relating to this Agreement is brought or otherwise initiated, the venue therefore shall be in King County, Washington, which shall be deemed to be a convenient forum.  Purchaser and Seller hereby expressly and irrevocably consent and submit to the exclusive jurisdiction of the courts in King County, Washington.
		

		
			9.12Governing Law.  This Agreement and any dispute arising from this Agreement shall be governed by and construed in accordance with the domestic laws of the State of Washington without giving effect to any choice or conflict of law provision or rule (whether of the State of Washington or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Washington.
		

		
			9.13Notices.
		

		
			(a)Any notice, demand or other communication (in this Section 9.13 a “notice”) required or permitted to be given or made under this Agreement must be in writing and is sufficiently given or made if:
		

		
			(1)delivered in person and left with a receptionist or other responsible employee of the relevant Party at the applicable address set forth below; or
		

		
			(2)sent by overnight courier service of national reputation (a “Transmission”);
		

		
			in the case of a notice to Seller, addressed to Seller at:
		

		
			Seven Hills Winery, LLC
		

		
			Attn:  Casey J. McClellan
		

		
			1212 Pleasant Street
		

		
			Walla Walla, WA 99362
		

		
			 
		

		

		

		 

		

			-  46  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		with a copy to (which shall not constitute notice):
		

		
			Davis Wright Tremaine LLP
		

		
			Attn: Jesse Lyon
		

		
			1300 SW Fifth Avenue, Suite 2400 | Portland, OR 97201
		

		
			 
		

		
			and in the case of a notice to the Purchaser, addressed to it at:
		

		
			Double Canyon Vineyards, LLC
		

		
			c/o Crimson Wine Group Ltd. 
		

		
			Attn:  Pat DeLong, President and Chief Executive Officer
		

		
			2700 Napa Valley Corporate Drive, Suite B
		

		
			Napa, California  94558
		

		
			with a copy to (which shall not constitute notice):
		

		
			Snell & Wilmer L.L.P.
Attn:  Brad W. Merrill
		

		
			15 West South Temple, Suite 1200
Salt Lake City, UT 84101

		

		
			(b)Any notice sent in accordance with this Section 9.13 shall be deemed to have been received:
		

		
			(1)if delivered prior to or during normal business hours on a Business Day in the place where the notice is received, on the date of delivery;
		

		
			(2)if sent by overnight courier, then on the next Business Day in the place where the notice is received; or
		

		
			(3)if sent in any other manner, on the date of actual receipt;
		

		
			except that any notice delivered in person or sent by Transmission not on a Business Day or after normal business hours on a Business Day, in each case in the place where the notice is received, shall be deemed to have been received on the next succeeding Business Day in the place where the notice is received.
		

		
			(c)Any Party may change its address for notice by giving notice to the other Parties.
		

		
			9.14Disclosure Schedules.  
		

		
			(a)The purpose of the Disclosure Schedules is to set out the qualifications, exceptions and other information called for in this Agreement.  The Parties acknowledge and agree that the Disclosure Schedules and the information and disclosures contained in them do not constitute or imply, and will not be construed as:
		

		
			(1)any representation or warranty which is not expressly set forth in the body of this Agreement;
		

		
			(2)an admission of any liability or obligation of Seller;
		

		
			(3)an admission that the information is material or is required to be disclosed;
		

		 

		

			-  47  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			(4)a standard of materiality, a standard for what is or is not in the Ordinary Course of Business, or any other standard contrary to the standards expressly set forth in the body of this Agreement; or
		

		
			(5)an expansion of the scope or effect of any of the representations, warranties or covenants expressly set forth in the body of this Agreement.
		

		
			(b)Nothing in the Disclosure Schedules will be deemed adequate to disclose an exception to a representation or warranty Seller made in this Agreement unless such disclosure is reasonably clear in identifying the applicable exception. The disclosures in any section or subsection of the Disclosure Schedules shall qualify other sections and subsections in Article 5 of the Agreement, provided, that it is reasonably clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.  Providing a copy, or uploading a copy to the Data Room, of a document or other item will not be deemed adequate to disclose an exception to a representation or warranty made in this Agreement (unless such representation or warranty has to do with the existence of the document or other item itself).
		

		
			(c)Notwithstanding anything to the contrary in this Agreement, Seller shall have the right and obligation to amend and supplement any Section to the Disclosures Schedules to this Agreement without the Purchaser’s consent from time to time until the Closing with respect to any matter hereafter arising which, if existing or occurring at the Effective Date, would have been required to be set forth or described in such Sections of the Disclosure Schedules.  Any disclosure in any such supplement or amendment shall be deemed to be incorporated into and to supplement and amend the Disclosure Schedules as of the Closing Date (the “Amending Disclosures”).    With respect to any Amending Disclosure, Purchaser may not refuse to close unless an event or matter disclosed in such Amending Disclosure has had, or could be reasonably expected to have, a Material Adverse Effect on the Business the Purchased Assets, or the ability of the Parties to consummate the Transactions on a timely basis, in which case, Purchaser may terminate this Agreement pursuant to Section 9.4.  If Purchaser has the right to terminate this Agreement due to an Amending Disclosure but does not elect to do so, then Purchaser shall be deemed to have irrevocably waived any right to terminate this Agreement with respect to such Amending Disclosure and its right to indemnification under Article 7 with respect to such Amending Disclosure.
		

		
			9.15Damage or Destruction.  In the event of loss, damage or destruction of the Purchased Assets that has a Material Adverse Effect on the Business, Seller shall promptly notify Purchaser of such loss, damage or destruction.  In the event of such loss, damage or destruction, at Purchaser’s option, in its sole discretion (1) Purchaser may terminate this Agreement upon written notice to Seller, or (2) Purchaser may elect to proceed to Closing and Seller shall assign or pay to Purchaser all insurance proceeds payable in respect of such loss, damage or destruction (including the amount of any deductible or self-insurance).  Seller shall not settle or adjust any such insurance claim without the prior written consent of Purchaser.
		

		
			9.16Assignment.  No Party may assign or transfer, whether absolutely, by way of security or otherwise, all or any part of its rights or obligations under this Agreement to any Person. Notwithstanding the foregoing, prior to Closing Purchaser may assign its rights hereunder to an Affiliate, provided that such assignee assumes all obligations of Purchaser hereunder and such assignment shall not relieve Purchaser of its obligations hereunder. From and after the Closing Date, Seller may assign the right to receive any Earn-Out Payments directly to Seller’s members. 
		

		 

		

			-  48  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		
			9.17Further Assurances.  Each Party shall promptly do, execute, deliver or cause to be done, executed or delivered all further acts, documents and matters in connection with this Agreement and/or the other Transaction Documents that any other Party may reasonably require, for the purposes of giving effect to this Agreement.
		

		
			9.18Severability.  If, in any jurisdiction, any provision of this Agreement or its application to any Party or circumstance is restricted, prohibited or unenforceable, that provision shall, as to that jurisdiction, be ineffective only to the extent of that restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement, without affecting the validity or enforceability of that provision in any other jurisdiction and, if applicable, without affecting its application to the other Parties or circumstances.
		

		
			9.19Successors.  This Agreement shall be binding on, and shall inure to the benefit of, the Parties and their respective successors and permitted assigns.
		

		
			9.20No Third-party Beneficiaries.  Except as provided in Article 7, this Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
		

		
			9.21Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.
		

		
			9.22Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one agreement.  Delivery of an executed counterpart of this Agreement by facsimile or transmitted electronically in legible form, including without limitation in a tagged image format file (TIFF) or portable document format (PDF), shall be equally effective as delivery of a manually executed counterpart of this Agreement.
		

		
			[SIGNATURES PAGES FOLLOWS]
		

		

		

		 

		

			-  49  -

		

		

			 

		

		

			 

		

		

			 

		

 

		

			 

		

		 
		

		
			IN WITNESS WHEREOF, the Parties have duly executed this Agreement on the date first above written.
		

		
			      PURCHASER:
		

			
					
						/ss

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						DOUBLE CANYON VINEYARDS, LLC,

					
						a Delaware limited liability company

				
	
					
						 

					
					
						 

					
					
						By:

					
					
						/s/ Patrick DeLong

				
	
					
						 

					
					
						 

					
					
						Name:

					
					
						Patrick DeLong

				
	
					
						 

					
					
						 

					
					
						Title:

					
					
						President and Chief Executive Officer

				

		
			 
		

		
			                  SELLER:
		

		
			 
		

			
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						SEVEN HILLS WINERY, LLC,

					
						a Washington limited liability company

				
	
					
						 

					
					
						 

					
					
						By:

					
					
						/s/ Casey McClellan

				
	
					
						 

					
					
						 

					
					
						Name:

					
					
						Casey McClellan

				
	
					
						 

					
					
						 

					
					
						Title:

					
					
						Manager

				

		
			 
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			Signature Page to Asset Purchase Agreement

		

		

			 

		

 

		

			 

		

		EXHIBIT A
		

		
			 
		

		
			Definitions
		

		
			 
		

		
			“Accounts Receivable” means accounts receivable, trade accounts receivable, notes receivable, book debts, insurance claims, and other debts due or accruing to Seller in connection with the Business (including any refunds other than Tax refunds and rebates), and the full benefit of any related collateral and security.
		

		
			“Acquisition Proposal” shall have the meaning attributed to that term in Section 6.10(a).
		

		
			“Action” means any action, suit, arbitration, mediation, settlement negotiation, or proceeding by or before any Governmental Authority or arbitrator, mediator, or between the Parties.
		

		
			“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
		

		
			“Agreement” means this Asset Purchase Agreement, including all Schedules and Exhibits to this Asset Purchase Agreement, as amended, supplemented, restated and replaced from time to time in accordance with its provisions.
		

		
			“Amending Disclosures” has the meaning attributed to that term in Section 9.14(c).
		

		
			“Annual Financial Statements” has the meaning attributed to that term in Section 5.6, copies of which financial statements have been made available to Purchaser.
		

		
			“Applicable Law” means:
		

		
			(a)Any past or present federal, state, local or foreign statute, law, common law, rule, regulation, ordinance, code, resolution and/or other Legal Requirement (zoning or otherwise) of any Governmental Authority, as amended or modified; or
		

		
			(b)any judgment, order, writ, injunction, decision, ruling, decree or award or other similar requirement of any court or other adjudicatory Governmental Authority with jurisdiction;
		

		
			whether past or present binding and in effect at the time in question and in each case to the extent the Person or property in question is subject to the jurisdiction of the same.
		

		
			“Approvals” means licenses, qualifications, authorizations, Consents, certificates, registrations, exemptions, waivers, filings, grants, notifications, privileges, rights, orders, judgments, rulings, directives, Permits, and other approvals.
		

		
			“Appurtenances” means, with respect to any real property:
		

		
			(a)all buildings, structures, fixtures, improvements and appurtenances located on or forming part of that real property, including those under construction; and
		

		 

		

			 

		

		

			 

		

 

		

			 

		

		
			(b)all rights of way, licenses, easements or other similar rights appurtenant to and for the benefit of that real property.
		

		
			 
		

		
			“Assigned Contracts” has the meaning attributed to that term in Section 2.1(h).
		

		
			 
		

		
			“Assignment of Contracts” means the Assignment and Assumption of Contracts and Assumed Liabilities to be executed by the Purchaser and Seller, substantially in the form of Exhibit B.
		

		
			“Assignment of Real Property Leases” means the Assignment and Assumption of Leases to be executed by the Purchaser and Seller for each Leased Real Property, substantially in the form of Exhibit C.
		

		
			  “Assignment of Transferred Intellectual Property” means the Assignment and Assumption of Transferred Intellectual Property to be executed by the Purchaser and Seller, substantially in the form of Exhibit D.
		

		
			“Assumed Liabilities” has the meaning attributed to that term in Section 2.3.
		

		
			“Bill of Sale” means the Bill of Sale to be executed by Seller, substantially in the form of Exhibit E.
		

		
			“Books and Records” means all books, records, files (including electronic files) and papers of  Seller wherever located that relate to the operation of the Business, including computer data, financial and Tax working papers, financial and Tax books and records, Tax Returns, business reports, business plans and projections, sales and advertising materials, sales and purchases records and correspondence, trade association files, research and development records, employee and personnel files pertaining to all Employees hired by Purchaser, documents containing technical support (including vendor documents), lists of present and former customers and suppliers, distribution lists, price lists, operating manuals, mailing lists, environmental studies, plans, development plans, catalogs, advertising and display materials, brochures and all copies and recordings of the foregoing.
		

		
			“Building Option” has the meaning attributed to that term in Section 4(a)(7).
		

		
			“Building Company” has the meaning attributed to that term in Section 4(a)(7).
		

		
			“Business” has the meaning attributed to that terms in the Preamble of this Agreement.
		

		
			“Business Day” means any day, except Saturdays and Sundays, on which banks are generally open for business in Washington.
		

		
			“Cash” means cash and cash equivalents calculated in accordance with the tax-basis of accounting, applied on a basis consistent with the preparation of the Annual Financial Statements.
		

		
			“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.
		

		
			“CERCLIS” means the Comprehensive Environmental Response, Compensation, and Liability Information System.
		

		
			“Closing” means the closing of the Transactions.
		

		
			  “Closing Date” means the third (3rd) Business Day after the conditions to closing set forth in Article 4 have been satisfied or waived, or such other date as may be agreed to by the Parties in writing.
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		“Closing Payment” has the meaning attributed to that term in Section 2.7.
		

		
			“Closing Time” means 10:00 a.m. (Washington time) on the Closing Date or such other time on the Closing Date as may be agreed to by the Parties in writing.
		

		
			“Closing Working Capital” means: (a) Current Assets, less (b) Current Liabilities, determined as of the open of business on the Closing Date. 
		

		
			“Closing Working Capital Statement” has the meaning attributed to that term in Section 2.8(a).
		

		
			“COBRA” means the Consolidated Omnibus Budget Reconciliation Act, as amended.
		

		
			“Confidentiality Agreement” means that Mutual Non-disclosure Agreement previously entered into between Purchaser and Seller.
		

		
			“Consent” means any consent, waiver or Approval of a third party required to take any action contemplated by this Agreement with respect to the Purchased Assets.
		

		
			“Contract” means any legally binding agreement, contract, lease, consensual obligation, promise or undertaking (whether written or oral or whether express or implied) in connection with the Business (including, without limitation, maintenance, grape purchase contracts, crush agreements, processing agreements, service and supply contracts, distribution agreements, and all other similar agreements) other than the Real Property Leases, the Personal Property Leases and the Permits, but including all Seller’s IP Rights Agreements.  “Contracts” shall not include any obligation to repay Indebtedness, except for the Assumed Liabilities.
		

		
			“Crawford Building” has the meaning attributed to that term in Section 4(a)(7).
		

		
			“Current Assets” at any time, the sum of the Seller’s cash, accounts receivable, inventory (other than obsolete or otherwise non-saleable inventory), allowance for bad debts, other receivables including any required allowance for doubtful accounts, prepaid bonus, prepaid commissions, and prepaid expenses all determined in accordance with Seller’s past practice.  For avoidance of doubt, “Current Assets” does not include any current or deferred Tax assets, loans to employees, lease deposits, legal deposits, or other non-operating amounts.
		

		
			 
		

		
			“Current Liabilities” means at any time, the sum of the Seller’s accounts payable, accrued liabilities (including accruals commission, bonus, payroll, 401(k), and workers compensation), and sales taxes payable, all determined in accordance with Seller’s past practice. For avoidance of doubt, in the calculation of Closing Working Capital, “Current Liabilities” does not include accounts payable for the purchase of grapes, deferred revenue, or any current or deferred Tax liabilities (except as otherwise set forth in the foregoing sentence).
		

		
			 
		

		
			“Data Room” means that certain virtual data room hosted by Global Wine Partners under the project titled “SHW/CWG Info Hub.”
		

		
			“Direct Claim” has the meaning attributed to that term in Section 7.5(a)(3).
		

		
			“Disclosure Schedules” means the schedules provided along with this Agreement and labeled “Disclosure Schedules.”
		

		
			“Disputed Amounts” has the meaning attributed to that term in Section 2.9(c).
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		“Earn-Out Determination” has the meaning attributed to that term in Section 2.12(c)(4).
		

		
			“Earn-Out Payment A” has the meaning attributed to that term in Section 2.12(a).
		

		
			“Earn-Out Payment A Conditions” has the meaning attributed to that term in Schedule 2.12.
		

		
			“Earn-Out Payment A Period” has the meaning attributed to that term in Schedule 2.12.
		

		
			“Earn-Out Payment B” has the meaning attributed to that term in Section 2.12(b).
		

		
			“Earn-Out Payment B Amount” has the meaning attributed to that term in Schedule 2.12.
		

		
			“Earn-Out Payment B Conditions” has the meaning attributed to that term in Schedule 2.12.
		

		
			“Earn-Out Payment B Date(s)”  has the meaning attributed to that term in Schedule 2.12.
		

		
			“Earn-Out Payments” means, collectively, the Earn-Out Payment A and Earn-Out Payment B.  When used in the singular, “Earn-Out Payment” means any one of the Earn-Out Payments.
		

		
			“Earn-Out Statement” has the meaning attributed to that term in Section 2.12(c)(1).
		

		
			“Effective Date” has the meaning attributed to that term in the Recitals of this Agreement.
		

		
			“Employee” or “Employees” means the individuals who are employed by Seller in connection with the Business immediately prior to the Closing Date.
		

		
			“Employee Benefit Plan” means any “employee benefit plan” (as such term is defined in ERISA § 3(3)) and any other benefit, retirement, employment, compensation, bonus, profit sharing, incentive, stock option, restricted stock, stock appreciation right, phantom equity, change in control, severance, vacation, paid time off, fringe-benefit and other similar agreement, plan, policy, program and other arrangement (and any amendments thereto), whether or not reduced to writing, in effect and covering one or more Employees, former employees and the beneficiaries and dependents of any such Employee or former employee of the Business or any current or former director or consultant of the Business or otherwise in connection with any ERISA Affiliate, and is maintained, sponsored, contributed to, or required to be contributed to by Seller, or under which Seller has or may have any liability for contributions, premiums or benefits.
		

		
			“Employment Agreement” means that Employment Agreement between the Purchaser and Casey J. McClellan, to be entered into effective as of the Closing, in the form attached hereto as Exhibit F.  
		

		
			“Encumbrance” means any encumbrance, lien, pledge, mortgage, security interest of any nature, easement, right of way or occupation right of first option, or right of first refusal, or any matter capable of recordation against title.
		

		
			“Environmental Claim” means any Action, Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, abatement, response, removal or remediation, replacement or restoration of  natural resources evaluations damages, property damages, personal injuries, medical or environmental monitoring, evaluations, assessments, 
		

		 

		

			 

		

		

			 

		

 

		

			 

		

		studies, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.
		

		
			“Environmental Law” means any Applicable Law: (a) relating to pollution (or the cleanup thereof) or the protection, replacement or restoration of, or injury to, natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the Release, presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal, monitoring, leaching, migration, emission or remediation of any Hazardous Materials. 
		

		
			“Environmental Notice” means any written directive, notice of violation or infraction, or written notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.
		

		
			“Environmental Permit” means any Permits other actions required under or issued, granted, given, authorized by or made pursuant to Environmental Law.
		

		
			“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
		

		
			“ERISA Affiliate” means any Person who for purposes of Title IV of ERISA is a member of Seller’s controlled group, or under common control with the Seller, within the meaning of Section 414 of the Code and the regulations promulgated and rulings issued thereunder.
		

		
			“Excluded Assets” has the meaning attributed to it in Section 2.2.
		

		
			  “Final Allocation Schedule” has the meaning attributed to that term in Section 2.6.
		

		
			“Financial Statement Date” has the meaning attributed to that term in Section 5.6.
		

		
			“Financial Statements” mean the Annual Financial Statements and the Interim Financial Statements.
		

		
			“Governmental Authority” means any federal, state or local government or other political subdivision thereof, including, without limitation, any Person exercising executive, legislative, judicial, regulatory or administrative governmental powers or functions, in each case to the extent the same has jurisdiction over the Person or property in question.
		

		
			“Hazardous Materials” means: (a) any material, substance or waste which is defined as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “contaminant,” “pollutant,” “toxic waste” or “toxic substance” under any provision of Environmental Law; (b) any asbestos or asbestos containing materials in any form that is or could become friable, tremolite, anthophylite, actinolite; (c) any solvents, degreasers, heavy metals, refrigerants, nitrates, urea formaldehyde, polychlorinated byphenyls, dioxins, petroleum and petroleum products and derivatives, fuel additives, ethanol, bio-fuels, methyl tertiary butyl ether; and (d) any other product, byproduct, compound, substance, chemical, material, waste; solid, liquid, gaseous or thermal irritant; greenhouse gas; carbon emission;  atomic, molecular and macromolecular nanomaterials; and microbial material whose presence, characteristics, nature, quantity, intensity, existence, use, manufacture, possession, handling, disposal, transportation, spill, Release, threatened Release, or effect, either by itself 
		

		 

		

			 

		

		

			 

		

 

		

			 

		

		or in combination with other materials is:  (x) injurious, dangerous, toxic, hazardous to human health, safety or welfare or any other portion of the environment or natural resources; or (y) is regulated, defined, listed, prohibited, controlled, studied or monitored in any manner by any Governmental Authority or Environmental Law.
		

		
			“Indebtedness” of any Person means all obligations of such Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar instruments, (c) for the deferred purchase price of goods or services (other than trade payables, accruals or other Current Liabilities determined in accordance with the accrual basis of accounting as incurred in the Ordinary Course of Business), (d) under capital leases not assumed by Purchaser, or (e) in the nature of guarantees of the obligations described in clauses (a) through (d) above of any other Person.
		

		
			“Indemnification Cap”  has the meaning attributed to that term in Section 7.4(c).
		

		
			“Indemnified Party” has the meaning attributed to that term in Section 7.5(a).
		

		
			“Indemnifying Party” has the meaning attributed to that term in Section 7.5(a).
		

		
			“Independent Accountants” has the meaning attributed to that term in Section 2.9(c).
		

		
			“Insurance Policy” has the meaning attributed to that term in Section 5.3(d).
		

		
			“Intellectual Property” means all of the following and similar intangible property and related proprietary rights, interests and protections, however arising, pursuant to the Applicable Laws of any jurisdiction throughout the world: (a) trademarks, service marks, trade names, logos, brand names, logos, trade dress and other proprietary indicia of goods and services, whether registered, unregistered or arising by Applicable Law, including, without limitation, the “Seven Hills Winery” brand and mark and all derivatives thereof, and all registrations and applications for registration of such trademarks, including intent-to-use applications, and all issuances, extensions and renewals of such registrations and applications (collectively, “Trademarks”); (b) internet domain names, whether or not trademarks, registered in any generic top level domain by any authorized private registrar or Governmental Authority, and social media rights comprised of registration, ownership or use of an account with a proprietor of an Internet-based application or website that facilitates the creation and exchange of user generated, such as Facebook, Twitter, Pinterest, Google+, or Instagram; (c) original works of authorship in any medium of expression, whether or not published, all copyrights (whether registered, unregistered or arising by Applicable Law), all registrations and applications for registration of such copyrights, and all issuances, extensions and renewals of such registrations and applications; (d) confidential information, formulas, designs, devices, technology, know-how, research and development, inventions, methods, processes, schematics, drawings, concepts, ideas, customer lists, supplier lists, data bases, specifications, compositions and other trade secrets, whether or not patentable; (e) patented and patentable designs and inventions, all design, plant and utility patents, letters patent, utility models, pending patent applications and provisional applications and all issuances, divisions, continuations, continuations-in-part, reissues, extensions, reexaminations and renewals of such patents and applications; (f) all mask works, mask work registrations and applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures, or topology, all computer software, including all source code, object code, firmware, development tools, files, records and data, all schematics, netlists, test methodologies, test 
		

		 

		

			 

		

		

			 

		

 

		

			 

		

		vectors, emulation and simulation tools and reports, hardware development tools; and (g) moral rights, publicity rights and any other proprietary, intellectual or industrial property rights of any kind or nature that do not comprise or are not protected by items contained within subsections (a) – (f) above that: (1) necessary for the conduct of the Business as currently conducted for the benefit of the Business as of the Effective Date;  (2) are owned or are purportedly owned by or exclusively licensed for the benefit of the Business; or (3) were developed by full or part-time employees or consultants or contractors of the Business (where title thereto has not been previously transferred by Seller to a third party).
		

		
			“Interim Financial Statements” means the consolidated unaudited financial statements of the Business as of the Interim Financial Statements Date, copies of which financial statements have been provided to Purchaser.
		

		
			“Interim Financial Statements Date” has the meaning attributed to that term in Section 5.6.
		

		
			“International Trade Law” means Applicable Law applicable to international transactions, including the Export Administration Act, the Export Administration Regulations, the Foreign Corrupt Practices Act, the Arms Export Control Act, the International Traffic in Arms Regulations, the International Emergency Economic Powers Act, the Trading with the Enemy Act, U.S. Customs laws and regulations, the Foreign Asset Control Regulations, and any regulations or orders issued thereunder. 
		

		
			 
		

		
			“Inventory” or “Inventories” means inventories owned by Seller and used in its operation of the Business, including bulk and cased goods, finished products, works-in progress, Seller’s inventory held at a supplier’s location, raw materials, spare parts, replacement parts, fuel, packing materials, shipping containers, samples, prototypes and all other materials and supplies to be sold, used or consumed in connection with the operation of the Business.
		

		
			“IRS” means the Internal Revenue Service.
		

		
			“Leaseback Agreement” means that Leaseback and Transition Services Agreement to be executed by the Purchaser and Seller, substantially in the form of Exhibit G.
		

		
			“Leased Real Property” has the meaning attributed to that term in Section 5.3(b)(1).
		

		
			“Legal Requirement” means any federal, state, local, municipal, foreign, international, or multinational constitution, law, ordinance, principle of common law, code, regulation, statute or treaty.
		

		
			“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.
		

		
			“Loss” or “Losses” has the meaning attributed to that term in Section 7.1(a).
		

		
			“Material Adverse Effect” means a material adverse change or effect upon (a) the results of operations, properties, assets or condition (financial or otherwise) of the business of the specified Person taken as a whole, or (b) the ability of the specified Person to consummate the Transactions; provided,  however, that “Material Adverse Effect” shall not include any change, effect, condition, event or circumstance (collectively, “Events”) arising out of, or attributable to (i) general economic conditions, changes, effects, events or circumstances, except to the extent such Events disproportionately affect (in a manner that is material and adverse) such specified Person, (ii) changes, effects, conditions, events or circumstances that 
		

		 

		

			 

		

		

			 

		

 

		

			 

		

		generally affect the wine industry, except to the extent such Events disproportionately affect (in a manner that is material and adverse) such specified Person, (iii) any acts of terrorism or acts of war, whether occurring within or outside the United States, or any effect of any such acts on general economic or other conditions, except to the extent such acts disproportionately affect (in a manner that is material and adverse) such specified Person, and (iv) any climatic or weather condition, except to the extent such condition disproportionately affects (in a manner that is material and adverse) such specified Person.
		

		
			“Material Customer” has the meaning attributed to that term in Section 5.3(h)(1).
		

		
			“Material Supplier” has the meaning attributed to that term in Section 5.3(h)(2).
		

		
			“Order” means any writ, judgment, decree, injunction, binding agreement, stipulation or similar order of any Governmental Authority (whether preliminary, final, amended or modified).
		

		
			“Ordinary Course of Business” means with respect to an action taken by a Person, such action will be deemed to have been taken in the “Ordinary Course of Business” only if such action is consistent with the past practices of such Person or is taken in the ordinary course of the normal day-to-day operations of such Person.
		

		
			“Other Agreements” has the meaning attributed to that term in Section 9.6.
		

		
			“Outside Closing Date” means February 12, 2016 or such later date as the Parties may agree upon in writing.
		

		
			“Parties” means, collectively, Seller and the Purchaser, and “Party” means any one of them.
		

		
			“Permits” means licenses, permits, letters, clearances, waivers, closures, exemptions, decisions, Environmental Permits, Consents, authorizations, Approvals, registrations, certificates of authority, authorizations, certificates of occupancy, dedications, subdivision maps and entitlements, registrations, franchises and similar consents or certificates now or hereafter issued, approved, granted or otherwise required by any Governmental Authority in connection with the ownership or operation of the Real Property or any portion thereof, or the operation of the Business as presently conducted, including Seller’s WSLCB License, and any other applicable licenses and permits for the production, manufacture, sale, or distribution of alcoholic beverages. 
		

		
			“Permitted Encumbrances” means (a) Encumbrances for taxes, assessments and similar charges that are not yet due and payable or are being contested in good faith provided that adequate reserves have been established therefor; (b) except as arising under ERISA, statutory mechanic’s, materialman’s, carrier’s, repairer’s and other similar Encumbrances arising or incurred in the Ordinary Course of Business and are not yet due and payable or are being contested pursuant to Applicable Law and in good faith and adequate reserves have been established therefore; (c) applicable zoning regulations and ordinances, and building, health and other Applicable Laws, provided the same are not violated by the physical condition or current operation of the Business; (d) all Real Property Leases; and (e) easements, rights of way and other non-monetary Encumbrances, the existence of which do not have a Material Adverse Effect on the use, operation or value of the parcel of property affected thereby.  
		

		
			“Person” is to be broadly interpreted and includes an individual, a corporation, a partnership, a limited liability company, a joint venture, a trust, an association, an unincorporated organization, a Governmental Authority, an executor or administrator or other legal or personal representative, or any other juridical entity.
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		“Personal Property” means all winery and vineyard production, crushing, farming, winemaking and all other equipment, machinery, presses, computers (hardware of software), tools, barrels, racks, supplies, marketing materials and supplies, filters, tanks, fermentors, furniture, motor vehicles, production equipment (including crush, fermentation, cellaring/barrels and storage), bottled and bulk wines (including library wines), and other tangible personal property owned or leased by Seller (including those in possession of third parties) that is used in the operation of the Business.  
		

		
			“Personal Property Leases” means all equipment leases, chattel leases, rental agreements, conditional sales agreements and similar agreements to which Seller is a party, that relate to the operation of the Business.
		

		
			“Post-Closing Adjustment” has the meaning attributed to that term in Section 2.8(b).
		

		
			“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.
		

		
			“Products”  has the meaning attributed to that term in Section 5.15.
		

		
			  “Purchase Price” has the meaning attributed to that term in Section 2.5.
		

		
			“Purchased Assets” has the meaning attributed to that term in Section 2.1.
		

		
			“Purchaser” has the meaning attributed to that term in the introductory paragraph of this Agreement.
		

		
			“Purchaser Fundamental Representations”  has the meaning attributed to that term in Section 7.3(b).
		

		
			“Purchaser Group” has the meaning attributed to that term in Section 6.1.
		

		
			“Purchaser Indemnitees”  has the meaning attributed to that term in Section 7.1(a).
		

		
			“Purchaser’s Accountant” means Moss Adams LLP.
		

		
			“Purchaser’s Counsel” means Snell & Wilmer, L.L.P.
		

		
			“Qualified Benefit Plan” has the meaning attributed to that term in Section 5.12(c).
		

		
			“Real Property” means the real property used in the Business and includes the Real Property Leases. 
		

		
			“Real Property Leases” means all leases and agreements in the nature of a lease (including all renewals, assignments and subleases and agreements to lease) in respect of any real property or Appurtenances to which Seller is a party as lessor or lessee and that relate to the Business.
		

		
			“Registered Intellectual Property” means all (a) patents, (b) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks, (c) registered copyrights and applications for copyright registration, (d) domain names, and (e) social media rights comprised of registration, ownership or use of an account with a proprietor of an Internet-based application or website that facilitates the creation and exchange of user generated, such as Facebook, Twitter, Pinterest, Google+, or Instagram. 
		

		
			“Release” means any actual release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandoning, disposing, discarding, burying, depositing, leaching 
		

		 

		

			 

		

		

			 

		

 

		

			 

		

		escaping or migrating into or through the environment (including ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture or from any storage tank or receptacle).
		

		
			  “Representatives” means, with respect to any Party, its Affiliates and, if applicable, its and their respective directors, officers, employees, agents and other representatives and advisors.
		

		
			“Resolution Period” has the meaning attributed to that term in Section 2.9(b).
		

		
			“Restricted Period” has the meaning attributed to that term in Section 6.12(a).
		

		
			“Retained Liability” has the meaning attributed to that term in Section 2.4.
		

		
			  “Review Period” has the meaning attributed to that term in Section 2.9(a).
		

		
			“Seller” has the meaning set forth in the introductory paragraph of this Agreement.
		

		
			“Seller Indemnitees”  has the meaning attributed to that term in Section 7.2(a).
		

		
			“Seller Fundamental Representations”  has the meaning attributed to that term in Section 7.3(a).
		

		
			“Seller Representative” has the meaning attributed to that term in Section 1.4.
		

		
			“Seller’s Accountants” means Irvine and Company. 
		

		
			“Seller’s Counsel” means the law firm of Davis Wright Tremaine LLP.
		

		
			“Seller’s IP Rights Agreements” means all licenses to and from Seller and all rights granted to and from Seller with respect to any Intellectual Property and all rights to register or otherwise apply for the protection on any of the foregoing.
		

		
			“Seller’s Prorated Charges” has the meaning attributed to that term in Section 2.10(a).
		

		
			“Seller’s TTB Basic Permit” means Sellers Basic Permit issued by the TTB, number WA-W-289, dated April 7, 2000.
		

		
			“Seller’s WSLCB License” means, collectively, Seller’s WSLCB domestic winery licenses numbered 993621883 and 993621181.
		

		
			“Statement of Objections” has the meaning attributed to that term in Section 2.9(b).
		

		
			“Subsidiary” means with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons own a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity’s gains or 
		

		 

		

			 

		

		

			 

		

 

		

			 

		

		losses or shall be or control any managing director or general partner of such business entity (other than a corporation).  The term “Subsidiary” shall include all Subsidiaries of such Subsidiary.
		

		
			“Target Working Capital” means $2,329,875.00.
		

		
			“Tax Clearance Certificate” has the meaning attributed to that term in Section 6.15.
		

		
			“Tax Code” or “Code” means the Internal Revenue Code of 1986, as amended.
		

		
			“Taxes” or “Tax” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code § 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.
		

		
			“Tax Return” means any return, declaration, report, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof required to be filed with any Governmental Authority with respect to any Taxes.
		

		
			“Termination Date” has the meaning attributed to that term in Section 8.1(a).
		

		
			“Territory” means the States of Oregon, Washington, Idaho, and California.
		

		
			“Third Party Claim” has the meaning attributed to that term in Section 7.5(a)(1).
		

		
			“Threshold”  has the meaning attributed to that term in Section 7.4(a).
		

		
			“Transaction Documents” means this Agreement, the Contribution Agreement, the Bill of Sale, the Leaseback Agreement, the Assignment of Contracts, the Assignment of Real Property Leases, each Assignment of Personal Property Lease, the Assignment of Transferred Intellectual Property, the Assumption Agreement, the Employment Agreement, and each other document or instrument to be executed and delivered to any Party by Seller and/ or the Purchaser pursuant to this Agreement.
		

		
			“Transactions” means the transactions contemplated by this Agreement.
		

		
			“Transferred Intellectual Property” means all Registered Intellectual Property, all Intellectual Property owned or controlled by Seller and all Intellectual Property used in or otherwise necessary for the conduct of the Seller’s business as conducted prior to the Closing, including, without limitation, the Intellectual Property set forth on Schedule 2.1(g), which shall be transferred to Purchaser in connection with the purchase by Purchaser of the Business under this Agreement..
		

		
			“Transmission” has the meaning attributed to that term in Section 9.13(a)(2).
		

		
			“TTB” means the Alcohol and Tobacco Tax and Trade Bureau, United States Department of the Treasury.
		

		
			“TTB Application” means collectively, an Application to Establish and Operate Wine Premises (TTB Form 5120.25), an Application for Basic Permit under the FAA Act (TTB Form 5100.24), and any other applications, documents and other instruments to be submitted therewith.
		

		
			“Undisputed Amounts” has the meaning attributed to that term in Section 2.9(c).
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		“WARN Act” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.
		

		
			  “WSLCB” means the Washington State Liquor and Cannabis Board.
		

		
			“WSLCB Application” has the meaning attributed to that term in Section 6.6(a).  
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT B
		

		
			 
		

		
			Assignment and Assumption Agreement
		

		
			 
		

		
			(see attached)
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT C
		

		
			 
		

		
			Assignment of Real Property Leases
		

		
			 
		

		
			(see attached)
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT D
		

		
			 
		

		
			Assignment of Transferred Intellectual Property
		

		
			 
		

		
			(see attached)
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT E
		

		
			 
		

		
			Bill of Sale
		

		
			 
		

		
			(see attached)
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT F
		

		
			 
		

		
			Employment Agreement
		

		
			 
		

		
			(see attached)
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT G
		

		
			 
		

		
			Leaseback and Transition Services Agreement
		

		
			 
		

		
			(see attached)
		

		
			 
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT H
		

		
			 
		

		
			Noncompetition Agreement
		

		
			 
		

		
			(see attached)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00255-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00255-of-00352.parquet"}]]