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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _________)*
Hawaiian Holdings, Inc.
--------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.01 per share
--------------------------------------------------------------------------------
(Title of Class of Securities)
419879101
--------------------------------------------------------------------------------
(CUSIP Number)
Erin C. Ross
Watershed Asset Management, L.L.C.
One Maritime Plaza, Suite 1525
San Francisco, California 94111
(415) 391-8900
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 2, 2005
--------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 13d-1(f) or 240.13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
Page 1 of 72 Pages
Exhibit Index Found on Page 24
13D
===================
CUSIP No. 419879101
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Watershed Capital Partners, L.P.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 3,105,175 Shares, which is 6.9% of the
class of securities. The reporting person on this
cover page, however, is a beneficial owner only of
the securities reported by it on this cover page.
[See Preliminary Note]
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
WC
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 414,828 [See Preliminary Note]
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
414,828 [See Preliminary Note]
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
414,828 [See Preliminary Note]
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
0.9% [See Preliminary Note]
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
PN
------------====================================================================
Page 2 of 72 Pages
13D
===================
CUSIP No. 419879101
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Watershed Capital Institutional Partners, L.P.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 3,105,175 Shares, which is 6.9% of the
class of securities. The reporting person on this
cover page, however, is a beneficial owner only of
the securities reported by it on this cover page.
[See Preliminary Note]
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
WC
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 2,128,963 [See Preliminary Note]
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
2,128,963 [See Preliminary Note]
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,128,963 [See Preliminary Note]
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
4.7% [See Preliminary Note]
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
PN
------------====================================================================
Page 3 of 72 Pages
13D
===================
CUSIP No. 419879101
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Watershed Asset Management L.L.C.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 3,105,175 Shares, which is 6.9% of the
class of securities. The reporting person on this
cover page, however, may be deemed a beneficial owner
only of the securities reported by it on this cover
page. [See Preliminary Note]
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
AF
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 3,105,175 [See Preliminary Note]
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
3,105,175 [See Preliminary Note]
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
3,105,175 [See Preliminary Note]
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.9% [See Preliminary Note]
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
OO
------------====================================================================
Page 4 of 72 Pages
13D
===================
CUSIP No. 419879101
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
WS Partners, L.L.C.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 3,105,175 Shares, which is 6.9% of the
class of securities. The reporting person on this
cover page, however, may be deemed a beneficial owner
only of the securities reported by it on this cover
page. [See Preliminary Note]
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
AF
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 2,543,791 [See Preliminary Note]
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
2,543,791 [See Preliminary Note]
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,543,791 [See Preliminary Note]
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.6% [See Preliminary Note]
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
OO
------------====================================================================
Page 5 of 72 Pages
13D
===================
CUSIP No. 419879101
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Meridee A. Moore
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 3,105,175 Shares, which is 6.9% of the
class of securities. The reporting person on this
cover page, however, may be deemed a beneficial owner
only of the securities reported by her on this cover
page. [See Preliminary Note]
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
AF
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 3,105,175 [See Preliminary Note]
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
3,105,175 [See Preliminary Note]
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
3,105,175 [See Preliminary Note]
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.9% [See Preliminary Note]
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
IN
------------====================================================================
Page 6 of 72 Pages
Preliminary Note: The Reporting Persons (as defined below) are filing
this Schedule 13D with respect to shares of common stock, par value $0.01 per
share (the "Shares"), of Hawaiian Holdings, Inc. (the "Company"). Certain of the
Reporting Persons are the direct holders of 2,046,352 of the Shares reported
herein (or 4.5% of the Shares issued and outstanding as of October 21, 2005). As
members of RC Aviation LLC, a principal investor in the Company, such Reporting
Persons also have the right to receive as an in-kind distribution from RC
Aviation LLC 1,058,823 Shares (or 2.3% of the Shares issued and outstanding as
of October 21, 2005) upon the earlier of (i) the date such Shares are registered
under a registration statement filed with the SEC and (ii) January 31, 2006.
Pursuant to Rule 13d-3 promulgated under the Securities Act of 1934, as amended
("Rule 13d-3"), the Reporting Persons may be deemed to be the beneficial owners
of such 1,058,823 Shares as of December 2, 2005.
Item 1. Security And Issuer
------- -------------------
This statement relates to shares of common stock, par value $0.01 per
share, of Hawaiian Holdings, Inc. The Company's principal offices are located at
3375 Koapaka Street, Suite G-350, Honolulu, Hawaii 96819.
Item 2. Identity And Background
------- -----------------------
(a) This statement is filed by the entities and persons listed
below, all of whom together are referred to herein as the "Reporting Persons."
The Partnerships
----------------
(i) Watershed Capital Partners, L.P., a Delaware limited
partnership ("WCP"), with respect to the Shares
beneficially owned by it; and
(ii) Watershed Capital Institutional Partners, L.P., a
Delaware limited partnership ("WCIP"), with respect
to the Shares beneficially owned by it.
WCP and WCIP are together referred to herein as the "Partnerships."
The Management Company
----------------------
(iii) Watershed Asset Management, L.L.C., a Delaware
limited liability company (the "Management Company"),
with respect to the Shares beneficially owned by
Watershed Capital Partners (Offshore), Ltd.
("Watershed Offshore"), an entity managed by the
Management Company, and with respect to the Shares
beneficially owned by the Partnerships, for which the
Management Company serves as an investment adviser.
Page 7 of 72 Pages
The General Partner
-------------------
(iv) WS Partners, L.L.C., a Delaware limited liability
company, which is the general partner of each of the
Partnerships (the "General Partner"), with respect to
the Shares beneficially owned by the Partnerships.
The Managing Member
-------------------
(v) Meridee A. Moore, a United States citizen who is the
Senior Managing Member of both the General Partner
and the Management Company, with respect to the
Shares beneficially owned by the Partnerships and
Watershed Offshore.
Meridee A. Moore is referred to herein as the "Individual Reporting
Person."
(b) The address of the principal business and principal office of
the Partnerships, the General Partner, the Management Company and the Individual
Reporting Person is c/o Watershed Asset Management, L.L.C., One Maritime Plaza,
Suite 1525, San Francisco, California 94111.
(c) The principal business of each of the Partnerships is that of
a private investment fund engaging in the purchase and sale of investments for
its own account. The principal business of the General Partner is to act as the
general partner of the Partnerships. The principal business of the Management
Company is that of an investment adviser. The principal business of the
Individual Reporting Person is serving as the Senior Managing Member of both the
Management Company and the General Partner.
(d) None of the Partnerships, the Management Company, the General
Partner or the Individual Reporting Person has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) None of the Partnerships, the Management Company, the General
Partner or the Individual Reporting Person has, during the last five years, been
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or
Page 8 of 72 Pages
is subject to a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
(f) The citizenship of each of the Partnerships, the General
Partner, the Management Company and the Individual Reporting Person is set forth
above.
Item 3. Source And Amount Of Funds And Other Consideration
-------- --------------------------------------------------
An aggregate of 3,105,175 Shares are reported herein. The Partnerships
and Watershed Offshore (i) acquired 668,300 of such Shares through open-market
purchases (the "Open Market Shares"), (ii) acquired 1,378,052 of such Shares as
distributions made pursuant to the Third Amended Joint Plan of Reorganization of
Joshua Gotbaum, as Chapter 11 Trustee for Hawaiian Airlines, Inc. and others,
dated as of March 11, 2005 (the "Plan of Reorganization"), approved in the
reorganization proceedings (the "Proceedings") of Hawaiian Airlines, Inc., a
subsidiary of the Company, in the United States Bankruptcy Court for the
District of Hawaii (the "Reorganization Shares"), and (iii) will acquire
1,058,823 of such Shares as in-kind distributions from RC Aviation LLC to such
Reporting Persons, as members of RC Aviation LLC (the "LLC Shares").
The net investment cost (including commissions) for the Open Market
Shares is set forth below:
Entity Shares Held Approximate Net
------ ----------- ---------------
Investment Cost
---------------
WCP 122,500 $318,917
WCIP 355,600 $925,740
Watershed Offshore 190,200 $495,147
The Partnerships and Watershed Offshore, as members of RC Aviation LLC,
received distributions in-kind with respect to certain claims against the
Company held by RC Aviation LLC
Page 9 of 72 Pages
in the Proceedings. Pursuant to the Company's Plan of Reorganization and as
payment in full for such portion of the claims, the Partnerships and Watershed
Offshore received in aggregate the 1,378,052 Reorganization Shares reported
herein.
The Partnerships and Watershed Offshore, as members of RC Aviation LLC,
have the right to receive the 1,058,823 LLC Shares reported herein as a
distribution in-kind from RC Aviation LLC upon the earlier of (i) the date such
Shares are registered under a registration statement filed with the SEC and (ii)
January 31, 2006. RC Aviation LLC acquired these Shares pursuant to a
privately-negotiated transaction with a third-party.
Each of WCP, WCIP and Watershed Offshore obtained the consideration for
its acquisition of the Open Market Shares and its investment in RC Aviation LLC
from its working capital.
Item 4. Purpose Of The Transaction
------ --------------------------
The purpose of the acquisitions of the Shares is for investment, and
the acquisitions of the Shares by each of the Partnerships and Watershed
Offshore were made in the ordinary course of business and were not made for the
purpose of acquiring control of the Company. In addition to the Shares and as
further described below, certain of the Reporting Persons own in aggregate
$4,114,435 principal amount of the Company's Series A Subordinated Convertible
Notes due June 1, 2010 (the "Series A Notes"), $2,238,507 principal amount of
the Company's Series B Subordinated Convertible Notes due June 1, 2010 (the
"Series B Notes", and together with the Series A Notes, the "Notes") and may
receive as a distribution from RC Aviation LLC, warrants to purchase 726,300
Shares at an exercise price of $7.20 per share (the "Warrants"), subject to
adjustment from time to time for certain dilutive events, pursuant to the terms
of the such Warrants.
Although no Reporting Person has any specific plan or proposal to
acquire or dispose of Shares, Notes and/or Warrants, consistent with its
investment purpose, each Reporting Person at
Page 10 of 72 Pages
any time and from time to time may acquire additional Shares, Notes and/or
Warrants or dispose of any or all of its Shares, Notes and/or Warrants depending
upon an ongoing evaluation of the investment in such securities, prevailing
market conditions, other investment opportunities, liquidity requirements of the
Reporting Person and/or other investment considerations.
No Reporting Person has made a determination regarding a maximum or minimum
number of Shares, Notes and/or Warrants which it may hold at any point in time.
As stated above, the Reporting Persons may acquire beneficial ownership of
additional Shares through the conversion feature of the Notes (including through
Notes acquired as paid-in-kind interest) and/or if RC Aviation LLC makes an
in-kind distribution of Warrants to the Partnerships and Watershed Offshore (as
discussed below).
Also, consistent with their investment intent and in an effort to
maximize shareholder value, the Reporting Persons may engage in communications
with one or more shareholders of the Company, one or more officers of the
Company, one or more members of the board of directors of the Company, potential
investors in the Company and/or other persons regarding the Company, including
but not limited to its operations.
Except to the extent the information stated in this Item 4 may be
deemed a plan or proposal, none of the Reporting Persons has any plans or
proposals which relate to, or could result in, any of the matters referred to in
paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule
13D. The Reporting Persons may, at any time and from time to time, review or
reconsider their position and/or change their purpose and/or formulate plans or
proposals with respect thereto.
As stated in Item 3, the Shares reported herein were acquired by the
Partnerships and Watershed Offshore through open-market purchases or as
distributions made pursuant to the Plan
Page 11 of 72 Pages
of Reorganization, or will be acquired by the Partnerships and Watershed
Offshore as in-kind distributions from RC Aviation LLC to such Reporting
Persons, as members of RC Aviation LLC. In addition to these Shares, the
Partnerships and Watershed Offshore own in aggregate $4,114,435 principal amount
of the Company's Series A Notes and $2,238,507 principal amount of the Company's
Series B Notes issued pursuant to that certain Note Purchase Agreement, dated
June 1, 2005, between the Company and RC Aviation LLC (the "Note Purchase
Agreement"). The Reporting Persons' Series A Notes and Series B Notes are
convertible into 945,847 Shares and 514,599 Shares, respectively, at any time
after the first anniversary of their issuance at a conversion price of $4.35 per
Share, subject to adjustment pursuant to the terms of the Note Purchase
Agreement. Pursuant to the terms of the Series A Notes and the Series B Notes,
the Company has the right to make payments of interest on the Notes in either
cash or additional issuances of Series A Notes or Series B Notes, as
appropriate. The Reporting Persons are not currently the beneficial owners of
the Shares into which the Notes will be convertible as they do not have the
right to convert them into Shares in the next 60 days.
RC Aviation LLC currently holds a warrant (the "Common Stock Warrant")
to purchase 6,283,705 Shares at an exercise price of $7.20 per share, subject to
adjustment from time to time for certain dilutive events, pursuant to the terms
of the Common Stock Warrant. The Common Stock Warrant is immediately
exercisable, subject to a cap (which may be waived by the holder upon 65 days'
notice) that would prevent the holder of the Common Stock Warrant from acquiring
the underlying Shares to the extent that such acquisition would cause such
holder, or any other persons who are deemed to beneficially own any Shares
beneficially owned by such holder, to beneficially own in aggregate more than
9.999% of the total number of issued and outstanding Shares (including Shares
that would be issuable upon the exercise of the Common Stock Warrant). RC
Page 12 of 72 Pages
Aviation LLC acquired the Common Stock Warrant in connection with the
Proceedings and the Note Purchase Agreement. Pursuant to RC Aviation LLC's
Second Amended and Restated Limited Liability Company Agreement dated as of June
1, 2005 (the "RC LLC Agreement"), RC Aviation LLC is obligated to distribute to
certain of its members 90% of either (i) their pro-rata share of the Common
Stock Warrant or (ii) a cash amount equivalent to the value of such pro rata
share. If RC Aviation LLC makes or agrees to make an in-kind distribution of the
Common Stock Warrant, the Partnerships and Watershed Offshore will receive or
will be entitled to receive, in aggregate, Common Stock Warrants to purchase
726,300 Shares (the Warrants as described previously). Upon the date of the
receipt of such Common Stock Warrants or, if known, the date 60 days prior to
the date on which the Partnerships and Watershed Offshore have the right to
receive such Common Stock Warrants, the Reporting Persons will be deemed to
beneficially own an additional 726,300 Shares. The Reporting Persons currently
are not deemed to beneficially own any of the Common Stock Warrant or any Shares
underlying the Common Stock Warrant.
RC Aviation LLC entered into a Registration Rights Agreement (the
"Registration Rights Agreement") dated June 1, 2005 with the Company pursuant to
which RC Aviation LLC received certain demand and piggy-back registration rights
with respect to the Shares into which the Common Stock Warrant is exercisable
and with respect to the Shares into which the Notes (including any Notes
acquired as paid-in-kind interest) are convertible. If the Partnerships and
Watershed Offshore receive an in-kind distribution of Common Stock Warrants,
they will be entitled to the benefit of the Registration Rights Agreement with
respect to the Shares for which their Common Stock Warrants are exercisable.
The descriptions above of the Note Purchase Agreement, the Notes, the
Common Stock Warrant and the Registration Rights Agreement are qualified in
their entirety by the full terms and
Page 13 of 72 Pages
conditions of the Note Purchase Agreement, the Notes and the Common Stock
Warrant, which agreements are incorporated herein by reference. For the full
terms and conditions of the Note Purchase Agreement, the Series A Notes, the
Series B Notes and the Registration Rights Agreement, see Exhibits 10.9, 10.10,
10.11 and 10.12, respectively, to the Form 8-K filed by the Company with the SEC
on June 7, 2005. For the full terms and conditions of the Common Stock Warrant,
see Exhibit 10.44 to the Registration Statement on Form S-1 filed by the Company
with the SEC on November 7, 2005.
Item 5. Interest In Securities Of The Issuer
------ ------------------------------------
(a) The Partnerships
----------------
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for each Partnership is
incorporated herein by reference for each such
Partnership. The percentage amount set forth in Row
13 for all cover pages filed herewith is calculated
based upon the 45,125,100 Shares outstanding as of
October 21, 2005, as reported by the Company in its
Quarterly Report on Form 10-Q for the period ended
September 30, 2005 and filed with the Securities and
Exchange Commission on November 9, 2005.
(c) The trade dates, number of Shares purchased or sold
and the price per Share (including commissions) for
all purchases and sales of the Shares by the
Partnerships in the past 60 days are set forth on
Schedules A-B hereto and are incorporated herein by
reference. All of such transactions were open-market
transactions.
(d) The General Partner has the power to direct the
receipt of dividends relating to, or the disposition
of the proceeds of the sale of, all of the Shares
held by the Partnerships as reported herein. The
Management Company, as an investment adviser, has the
power to direct the receipt of dividends relating to,
or the disposition of the proceeds of the sale of,
all of the Shares held by the Partnerships as
reported herein. The Individual Reporting Person is
the Senior Managing Member of the General Partner and
the Management Company.
(e) Not applicable.
(b) The Management Company
----------------------
Page 14 of 72 Pages
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for the Management Company is
incorporated herein by reference.
(c) The trade dates, number of Shares purchased or sold
and the price per Share (including commissions) for
all purchases and sales of the Shares by the
Management Company on behalf of Watershed Offshore in
the past 60 days are set forth on Schedule C hereto
and are incorporated herein by reference. All of such
transactions were open-market transactions.
For information regarding transactions by the
Management Company on behalf of the Partnerships, see
Item 5(a) above.
(d) The Management Company, as an investment adviser, has
the power to direct the receipt of dividends relating
to, or the disposition of the proceeds of the sale
of, all of the Shares held by Watershed Offshore and
the Partnerships as reported herein. The General
Partner has the power to direct the receipt of
dividends relating to, or the disposition of the
proceeds of the sale of, all of the Shares held by
the Partnerships as reported herein. The Individual
Reporting Person is the Senior Managing Member of the
Management Company.
(e) Not applicable.
(c) The General Partner
-------------------
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for the General Partner is
incorporated herein by reference.
(c) None.
(d) The General Partner has the power to direct the
receipt of dividends relating to, or the disposition
of the proceeds of the sale of, all of the Shares
held by the Partnerships as reported herein. The
Management Company, as an investment adviser, has the
power to direct the receipt of dividends relating to,
or the disposition of the proceeds of the sale of,
all of the Shares held by the Partnerships as
reported herein. The Individual Reporting Person is
the Senior Managing Member of the General Partner and
the Management Company.
(e) Not applicable.
(d) The Individual Reporting Person
--------------------------------
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for
Page 15 of 72 Pages
the Individual Reporting Person is incorporated
herein by reference for the Individual Reporting
Person.
(c) None.
(d) The General Partner has the power to direct the
receipt of dividends relating to, or the disposition
of the proceeds of the sale of, all of the Shares
held by the Partnerships as reported herein. The
Management Company, as an investment adviser, has the
power to direct the receipt of dividends relating to,
or the disposition of the proceeds of the sale of,
all the Shares held by Watershed Offshore and the
Partnerships as reported herein. The Individual
Reporting Person is the Senior Managing Member of the
General Partner and the Management Company.
(e) Not applicable.
The Shares reported hereby for the Partnerships are beneficially owned
by the Partnerships and those reported by the Management Company on behalf of
Watershed Offshore are beneficially owned by Watershed Offshore. The General
Partner, as general partner to the Partnerships, may be deemed to be the
beneficial owner of all such Shares beneficially owned by the Partnerships. The
Management Company, as investment adviser to Watershed Offshore and the
Partnerships, may be deemed to be the beneficial owner of all such Shares
beneficially owned by Watershed Offshore and the Partnerships, respectively. The
Individual Reporting Person, as the Senior Managing Member of both the General
Partner and the Management Company, may be deemed to be the beneficial owner of
all such Shares beneficially owned by the Partnerships and Watershed Offshore.
Each of the Management Company, the General Partner and the Individual Reporting
Person hereby disclaims any beneficial ownership of any such Shares.
Item 6. Contracts, Arrangements, Understandings Or
------ -------------------------------------------
Relationships With Respect To Securities Of The Issuer
------------------------------------------------------
The Partnerships and Watershed Offshore are parties to the RC LLC
Agreement (as defined in Item 4). Pursuant to such agreement and as reported in
the Schedule 13D, as amended, filed by
Page 16 of 72 Pages
RC Aviation LLC with respect to the Shares, RC Aviation Management LLC ("RC
Management") is vested with the exclusive right and authority to manage and
control the business of RC Aviation LLC, subject to member approval of certain
major transactions (including the sale or exchange to a third party of any of
the Company's securities held by RC Aviation LLC). RC Management may only be
removed as the managing member of RC Aviation LLC for fraud, willful neglect, or
gross or reckless misconduct which, in each case, causes material harm to RC
Aviation LLC.
The RC LLC Agreement obligates RC Aviation LLC to distribute 90% of
each of the Common Stock Warrant and the Shares held by RC Aviation LLC, or,
solely with respect to the Common Stock Warrant, 90% of the cash amount
equivalent to the value of the Common Stock Warrant, to certain of its members
on a pro rata basis. As discussed previously, the 1,058,823 LLC Shares reported
herein must be distributed by RC Aviation LLC to the Partnerships and Watershed
Offshore upon the earlier of (i) the date such Shares are registered under a
registration statement filed with the SEC and (ii) January 31, 2006. Pursuant to
the terms of the RC LLC Agreement, the Partnerships and Watershed Offshore may
also receive certain additional distributions in the form of Shares, Common
Stock Warrants, Notes, cash and/or other property held by RC Aviation LLC if, in
the reasonable determination of RC Management and pursuant to the terms of the
RC LLC Agreement, such amounts are available for distribution. As of the date of
this filing, RC Management has not informed the Reporting Persons that it will
make any additional distributions.
The original limited liability company agreement of RC Aviation LLC
dated June 4, 2004 provided for a grant by the members to RC Management of an
irrevocable proxy to vote all Shares distributed from RC Aviation LLC to such
members for so long as such members continued to hold such Shares. RC Aviation
LLC and its members previously entered into a stockholders agreement which
provided for certain drag-along and tag-along rights with respect to future
sales of Shares by
Page 17 of 72 Pages
RC Aviation LLC. Pursuant to amendments agreed upon in the current RC LLC
Agreement, both the stockholders agreement and the provisions for the future
grant of the voting proxy were terminated.
The description above of the RC LLC Agreement is qualified in its
entirety by the full terms and conditions of the RC LLC Agreement and that
certain letter of clarification dated November 2, 2005 between RC Aviation LLC
and certain of the Reporting Persons (the "LLC Agreement Letter"), which
agreements are incorporated herein by reference. For the full terms and
conditions of the RC LLC Agreement and the LLC Agreement Letter, see Exhibits 2
and 3 to this Schedule 13D.
Other than the Notes, the Common Stock Warrant, the Note Purchase
Agreement, the RC LLC Agreement, the Registration Rights Agreement and as
otherwise described in this Schedule 13D, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the Reporting Persons
or between such persons and any other person with respect to any securities of
the Company, including but not limited to the transfer or voting of any
securities of the Company, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, divisions of profits or
loss, or the giving or withholding of proxies.
Item 7. Materials To Be Filed As Exhibits
------- ---------------------------------
There is filed herewith as Exhibit 1 a written agreement relating to
the filing of joint acquisition statements as required by Section 240.13d-1(k)
under the Securities Exchange Act of 1934, as amended. The RC LLC Agreement and
LLC Agreement Letter are filed as Exhibits 2 and 3, respectively, to this
Schedule 13D. The Note Purchase Agreement, a form of Series A Note, a form of
Series B Note and the Registration Rights Agreement described above were filed
with the SEC as Exhibits 10.9, 10.10, 10.11 and 10.12, respectively, to the Form
8-K filed by the Company
Page 18 of 72 Pages
on June 7, 2005, and each is incorporated herein by reference. The Common Stock
Warrant described above was filed with the SEC as Exhibit 10.44 to the
Registration statement on Forms S-1 filed by the SEC on November 7, 2005 and is
incorporated herein by reference.
Page 19 of 72 Pages
SIGNATURES
----------
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: December 12, 2005
/s/ Meridee A. Moore
----------------------------------------
WS PARTNERS, L.L.C.,
On its own behalf and
As the General Partner of
WATERSHED CAPITAL PARTNERS, L.P.
and WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
WATERSHED ASSET MANAGEMENT, L.L.C.
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
Meridee A. Moore
Page 20 of 72 Pages
SCHEDULE A
----------
WATERSHED CAPITAL PARTNERS, L.P.
--------------------------------
NO. OF SHARES PRICE
TRADE DATE PURCHASED PER SHARE ($)
------------ ----------- --------------
11/1/05 1,900 $2.73
11/2/05 65,600 $2.59
11/7/05 27,500 $2.64
11/8/05 27,500 $2.59
Page 21 of 72 Pages
SCHEDULE B
----------
WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.
----------------------------------------------
NO. OF SHARES PRICE
TRADE DATE PURCHASED PER SHARE ($)
------------ ----------- --------------
11/1/05 5,300 $2.73
11/2/05 190,700 $2.59
11/7/05 79,800 $2.64
11/8/05 79,800 $2.59
Page 22 of 72 Pages
SCHEDULE C
----------
WATERSHED ASSET MANAGEMENT, L.L.C.
----------------------------------
The transactions listed below were effected solely on behalf of
Watershed Offshore. For transactions on behalf of Watershed Capital Partners,
L.P. and Watershed Capital Institutional Partners, L.P., see Schedules A and B,
respectively.
NO. OF SHARES PRICE
TRADE DATE PURCHASED PER SHARE ($)
------------ ----------- --------------
11/1/05 2,800 $2.73
11/2/05 102,000 $2.59
11/7/05 42,700 $2.64
11/8/05 42,700 $2.59
Page 23 of 72 Pages
EXHIBIT INDEX
EXHIBIT 1 Joint Acquisition Statement Pursuant to Section
240.13d-1(k)
EXHIBIT 2 RC LLC Agreement
EXHIBIT 3 LLC Agreement Letter
Page 24 of 72 Pages
EXHIBIT 1
to
SCHEDULE 13D
JOINT ACQUISITION STATEMENT
PURSUANT TO SECTION 240.13d-1(k)
--------------------------------
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning him, her or it contained therein, but
shall not be responsible for the completeness and accuracy of the information
concerning the other entities or persons, except to the extent that he, she or
it knows or has reason to believe that such information is inaccurate.
Dated: December 12, 2005
/s/ Meridee A. Moore
----------------------------------------
WS PARTNERS, L.L.C.,
On its own behalf and
As the General Partner of
WATERSHED CAPITAL PARTNERS, L.P.
and WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
WATERSHED ASSET MANAGEMENT, L.L.C.
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
Meridee A. Moore
Page 25 of 72 Pages
EXHIBIT 2
to
SCHEDULE 13D
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
RC AVIATION LLC
a Delaware limited liability company
THE MEMBERSHIP INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 506 PROMULGATED THEREUNDER AND HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE STATE SECURITIES LAWS OF ANY RELEVANT JURISDICTION IN WHICH
THE MEMBERSHIP INTERESTS HAVE BEEN OFFERED AND SOLD PURSUANT TO APPLICABLE
EXEMPTION THEREFROM. THE MEMBERSHIP INTERESTS MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS, UNLESS EXEMPTIONS FROM SUCH REGISTRATION AND
QUALIFICATION ARE AVAILABLE. IN ADDITION, THE SALE, TRANSFER OR OTHER
DISPOSITION OF THE MEMBERSHIP INTERESTS EVIDENCED HEREBY OR ANY INTEREST THEREIN
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THIS AGREEMENT.
Page 26 of 72 Pages
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
RC AVIATION LLC
a Delaware limited liability company
This Second Amended and Restated Limited Liability Company Agreement (this
"Agreement") of RC Aviation LLC, a Delaware limited liability company (the
"Company"), is made and entered into as of June 1, 2005 (the "Effective Date")
by and among those Persons whose names are listed on Exhibits A-1, A-2, A-3 and
A-4, attached hereto, and such other Persons who shall subsequently execute this
Agreement or otherwise agree or have agreed in writing to be bound hereby as
members of the Company (collectively, the "Members" and each individually as a
"Member"), with reference to the following facts:
WHEREAS, effective as of June 4, 2004, the Company was duly formed
under the Delaware Limited Liability Company Act (the "Delaware Act") by the
filing of Articles of Organization (the "Articles") with the Delaware Secretary
of State;
WHEREAS, the affairs of the Company, and the rights, duties,
privileges, preferences, and obligations of each of the Company's members have
heretofore been set forth in that certain Limited Liability Company Agreement of
RC Aviation LLC dated as of September 1, 2004 (the "Original LLC Agreement");
WHEREAS, subsequent to the effective date of the Original LLC
Agreement, the Company has determined to make certain distributions of assets
and other amounts to certain of its Members, and has also undertaken certain
related transactions;
WHEREAS, pursuant to that certain Note Purchase Agreement dated on or
about the Effective Date by and between HHI and the Company (the "Note Purchase
Agreement"), the Company has agreed to purchase from HHI the Convertible Notes
(as defined below) for an aggregate cash purchase price and otherwise upon the
terms and conditions that are set forth in such Note Purchase Agreement;
WHEREAS, certain of the existing Members of the Company and/or certain
additional Persons have agreed to participate in the Company's acquisition of
the Convertible Notes, as more particularly set forth hereunder;
WHEREAS, in order to evidence and reflect the foregoing, and in order
to make certain conforming and other amendments, the parties hereto now desire
to amend and restate the Original LLC Agreement in its entirety as set forth
hereunder, all as permitted under the Delaware Act;
WHEREAS, the parties hereto have previously executed and delivered a
Second Amended and Restated Limited Liability Company Agreement of RC Aviation
LLC, date as of the Effective Date (the "Prior Amendment"), and now wish to make
certain clarifications and modifications to such Prior Amendment in order to
more accurately reflect the agreements amongst the parties hereto.
Page 27 of 72 Pages
NOW THEREFORE, in consideration of the mutual covenants expressed
herein, and for other good and valuable consideration, each of the parties
hereto do hereby agree that the Original LLC Agreement and the Prior Amendment
each shall be, and each hereby is, amended and restated in its entirety, as
follows:
ARTICLE 1
ORGANIZATIONAL MATTERS
1.1. Defined Terms. For purposes of this Agreement, capitalized terms
utilized herein and not otherwise defined herein shall, unless the context
clearly indicates otherwise, have the following definitions:
1.1.1 "Affiliate" shall, with respect to any particular Person, mean
any other Person that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such Person. For this purpose, the term "control" shall be deemed satisfied to
the extent that there exists direct or indirect ownership representing a minimum
ten percent (10%) ownership interest. Notwithstanding the foregoing, a Member of
the Company shall not be deemed to be an affiliate of the Company merely by
reason of ownership of Units.
1.1.2 "Agreement" shall have the meaning ascribed to such term in the
introductory paragraph to this Agreement.
1.1.3 "Ansett Claims" shall have the meaning ascribed to such term in
Section 1.7.5(a)(ii) of this Agreement.
1.1.4 "Applicable Law" shall mean, with respect to any Person, all
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions affecting such Person, such Person's assets or the securities of
such Person, whether now or hereafter enacted and in force, including, without
limitation, the Delaware Act, the Securities Act and the Exchange Act and ERISA,
as well as any rules or regulations promulgated under any of the foregoing, by
any securities exchange, the Securities and Exchange Commission, Federal
Aviation Administration, Department of Transportation, and/or any other
governmental entity.
1.1.5 "Articles" shall have the meaning ascribed to such term in the
first WHEREAS clause to this Agreement, as the same may be amended from time to
time.
1.1.6 "Bankruptcy" shall have the meaning ascribed to such term in
Section 1.7.3 of this Agreement.
1.1.7 "Boeing Claims" shall have the meaning ascribed to such term in
Section 1.7.5(a)(iii).
1.1.8 "Book Value" shall mean, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Book Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset, as determined
by the Managing Member and the contributing Member.
Page 28 of 72 Pages
(b) The Book Values of all Company assets immediately prior to
the occurrence of any event described in subsection (i), subsection (ii),
subsection (iv) or subsection (v) hereof shall be adjusted to equal their
respective gross fair market values, as determined by the Managing Member using
such reasonable method of valuation as it may adopt, as of the following times:
(i) the acquisition of an additional interest in the Company
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 Interest of the
Members in the Company;
(ii) the distribution by the Company to a Member of more
than a de minimis amount of Company assets 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;
(iii) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g);
(iv) the issuance of any interests in the Company for
services; and
(v) at such other times as the Managing Member shall
reasonably determine necessary or advisable in order to comply with the
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Book Value of any Company asset distributed to a Member
shall be the gross fair market value of such asset on the date of distribution
as determined by the Managing Member.
(d) The Book 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
Book Values shall not be adjusted pursuant to this Section 1.1.8(d) to the
extent that the Managing Member reasonably determines that an adjustment
pursuant to Section 1.1.8(b) above is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to this
Section 1.1.8(d).
(e) If the Book Value of a Company asset has been determined or
adjusted pursuant to Section 1.1.8(a), (b), or (d) hereof, such Book Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such Company asset for purposes of computing Net Profits and Net Losses.
1.1.9 "Capital Accounts" shall have the meaning ascribed to such term
in Section 4.1 of this Agreement.
1.1.10 "Capital Contributions" shall mean, with respect to any Member,
the total amount of money and the initial Book Value of property (other than
money) contributed to the capital of the Company by such Member, whether as an
initial Capital Contribution or as an additional Capital Contribution.
Page 29 of 72 Pages
1.1.11 "Cause" shall mean fraud, willful neglect, or gross or reckless
misconduct which, in each case, causes material harm to the Company.
1.1.12 "Claim Purchase Agreement" shall have the meaning ascribed to
such term in Section 1.7.5(a)(iii) of this Agreement.
1.1.13 "Class A Member" and "Class A Units" shall each have the
meanings ascribed to such terms in Section 2.1 of this Agreement.
1.1.14 "Class B Member" and "Class B Units" shall each have the
meanings ascribed to such terms in Section 2.1 of this Agreement.
1.1.15 "Class C Member" and "Class C Units" shall each have the
meanings ascribed to such terms in Section 2.1 of this Agreement.
1.1.16 "Class D Member" and "Class D Units" shall each have the
meanings ascribed to such terms in Section 2.1 of this Agreement.
1.1.17 "Class M Member" and "Class M Units" shall each have the
meanings ascribed to such terms in Section 2.1 of this Agreement.
1.1.18 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.1.19 "Company" shall have the meaning ascribed to such term in the
introductory paragraph to this Agreement. References hereunder to the "Company"
shall also be deemed to be a collective reference to the Company's Series.
1.1.20 "Company Cash" shall have the meaning ascribed to such term in
Section 1.7.7(c) of this Agreement.
1.1.21 "Company Counsel" shall have the meaning ascribed to such term
in Section 10.3 of this Agreement.
1.1.22 "Company Minimum Gain" shall have the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d)(1) for the phrase "partnership
minimum gain."
1.1.23 "Convertible Notes" shall mean those certain convertible
promissory notes being purchased by the Company pursuant to the Note Purchase
Agreement.
1.1.24 "Delaware Act" shall have the meaning ascribed to such term in
the first WHEREAS clause of this Agreement.
1.1.25 "Distributable Amounts" shall mean the amounts which the
Managing Member reasonably determines are available for distribution with
respect to each Series to the Members associated with such Series, taking into
account all debts, liabilities and obligations of the Company, and any reserves
for (a) expenditures contemplated by the Company, (b) to provide for working
capital and/or reserves in amounts deemed appropriate by the Managing Member,
(c) to provide for other capital requirements as determined by the Managing
Member (including capital expenditures), and (d) to provide for contingencies
(as determined by the Managing Member).
Page 30 of 72 Pages
1.1.26 "Economic Interest" shall mean a Person's right to share in the
Net Profits, Net Losses, or similar items of, and to receive distributions from,
the Company, but does not include any other rights of a Member including,
without limitation, the right to vote or to participate in the management of the
Company, or, except as specifically provided in this Agreement or required under
the Delaware Act, any right to information concerning the business and affairs
of the Company.
1.1.27 "Effective Date" shall have the meaning ascribed to such term in
the introductory paragraph to this Agreement.
1.1.28 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all regulations promulgated thereunder.
1.1.29 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.1.30 "HAL" shall have the meaning ascribed to such term in Section
1.7.3 of this Agreement.
1.1.31 "Fair Market Value" shall have the meaning ascribed to such term
in Section 4.6.6 of this Agreement.
1.1.32 "HHI" shall mean Hawaiian Holdings, Inc., a Delaware
corporation, and any successor in interest.
1.1.33 "HHI Loans" shall have the meaning ascribed to such term in
Section 2.6.3 of this Agreement.
1.1.34 "Indemnitee" shall have the meaning ascribed to such term in
Section 3.4.2(a) of this Agreement.
1.1.35 "Joint Plan of Reorganization" shall mean that certain third
Amended Joint Plan of Reorganization, styled "In Re Hawaiian Airlines, Inc., a
Hawaiian corporation," filed by Joshua Gotbaum, as Chapter 11 Trustee for
Hawaiian Airlines, Inc., the Official Committee of Unsecured Creditors, Hawaiian
Holdings, Inc., HHIC, Inc., and RC Aviation LLC, dated as of March 11, 2005, and
related filings in connection therewith.
1.1.36 "Letter of Intent" shall mean that certain Letter of Intent
dated on or about May 25, 2004, executed by Ranch Capital, LLC (an affiliate of
RC Management) and addressed to Mr. John W. Adams, as managing member of AIP,
LLC, as the same may be amended, modified, superceded, or restated (including
through the execution of Definitive Documents, as such term is defined therein).
1.1.37 "Loan Capital" shall have the meaning ascribed to such term in
Section 2.2.3 of this Agreement.
1.1.38 "Majority in Interest of the Members" shall, as of any given
point in time, mean such Member or Members who collectively hold more than fifty
percent (50%) of all Units outstanding as of such time, all voting together as a
single class.
Page 31 of 72 Pages
1.1.39 "Managing Member" shall have the meaning ascribed to such term
in Section 3.1 of this Agreement.
1.1.40 "Material Decision" shall have the meaning ascribed to such term
in Section 3.3 of this Agreement.
1.1.41 "Member" or "Members" shall have the meaning ascribed to such
term in the introductory paragraph of this Agreement.
1.1.42 "Member Minimum Gain" shall mean an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Regulations Section 1.704-2(i) with respect to "partner
minimum gain."
1.1.43 "Member Nonrecourse Debt" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4) for the phrase "partner nonrecourse debt."
1.1.44 "Member Nonrecourse Deductions" shall have the meaning set forth
in Regulations Section 1.704-2(i) for the phrase "partner nonrecourse
deductions."
1.1.45 "Membership Interest" or "Interest" shall mean the entire
ownership interest of a Member in the Company at any particular time, including
without limitation, the Member's Economic Interest, any and all rights to vote
and otherwise participate in the Company's affairs, and the rights to any and
all benefits to which a Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all of the terms and
provisions of this Agreement.
1.1.46 "Merger" shall have the meaning ascribed to such term in Section
1.7.5(b) of this Agreement.
1.1.47 "Net Profits" and "Net Losses" shall mean for any given period,
the taxable income or taxable loss of the Company for such period determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be separately stated pursuant to
Section 703(a)(1) of the Code shall be included in 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 Profits and Net Losses
shall increase such income or decrease such loss, as the case may be;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures by
Regulations Section 1.704-1(b)(2)(iv)(I), and not otherwise taken into account
in computing Net Profits and Net Losses, shall decrease such Net Profits or
increase such Net Losses, as the case may be;
(c) Any income, gain, loss, or deduction required to be specially
allocated to Members under Section 4.3 or Section 4.5.2, below, shall not be
taken into account in computing Net Profits or Net Losses;
Page 32 of 72 Pages
(d) In lieu of any depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or loss, the
Company shall compute such deductions based on the Book Value of the property so
being depreciated or amortized for such period;
(e) Gain or loss resulting from a disposition of Company property
where such gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Book Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Book Value;
(f) If the Book Value of Company assets is adjusted as provided
in Section 1.1.8 above, then the Net Profits or Net Losses of the Company shall
including the amount of any increase or decrease in such Book Values
attributable to such adjustments.
1.1.48 "Nonrecourse Deductions" shall have the meaning set forth in
Regulations Sections 1.704-2(b)(1) and 1.704-2(c).
1.1.49 "Nonrecourse Liability" shall have the meaning set forth in
Regulations Sections 1.704-2(b)(3) and 1.752-1(a)(2).
1.1.50 "Note Purchase Agreement" shall have the meaning ascribed to
such term in the fourth WHEREAS clause of this Agreement.
1.1.51 "Offering Notice" and "Offering Period" shall each have the
respective meanings ascribed to each such term in Section 2.6.2 of this
Agreement.
1.1.52 "Original LLC Agreement" shall have the meaning ascribed to such
term in the second WHEREAS clause of this Agreement.
1.1.53 "Permitted Investments" shall have the meaning ascribed to such
term in Section 3.3.8, below.
1.1.54 "Permitted Transfer" shall have the meaning ascribed to such
term in Section 5.3.1 of this Agreement.
1.1.55 "Person" shall mean and include any individual, corporation,
partnership, limited liability company, trust, unincorporated organization,
government or any department or agency thereof, or any entity similar to any of
the foregoing.
1.1.56 "Potential Actions" shall have the meaning ascribed to such term
in Section 3.9 of this Agreement.
1.1.57 "Presumed Tax Liability" shall have the meaning ascribed to such
term in Section 4.6.1(b) of this Agreement.
1.1.58 "Principal" shall, with respect to RC Management, mean Lawrence
Hershfield or Randall Jenson.
1.1.59 "Prior Amendment" shall have the meaning ascribed to such term
in the seventh WHEREAS clause of this Agreement.
Page 33 of 72 Pages
1.1.60 "Public Securities" shall have the meaning ascribed to such term
in Section 4.6.6 of this Agreement.
1.1.61 "RC Management" shall mean RC Aviation Management, LLC, a
Delaware limited liability company.
1.1.62 "Regulations" shall mean proposed, temporary, and final Treasury
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of successor Treasury
Regulations).
1.1.63 "Regulatory Allocations" shall have the meaning ascribed to such
term in Section 4.3.6 of this Agreement.
1.1.64 "Securities" shall have the meaning ascribed to such term in
Section 1.7.1(a)(i) of this Agreement.
1.1.65 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.1.66 "Series" shall have the meaning ascribed to such term in Section
2.1 of this Agreement.
1.1.67 "Series A," "Series B" "Series C" and "Series D" shall each have
the respective meanings assigned to each such term in Section 2.1 of this
Agreement.
1.1.68 "Stockholder's Agreement" shall have the meaning ascribed to
such term in Section 1.7.4 of this Agreement.
1.1.69 "Tax Matters Partner" shall have the meaning ascribed to such
term in Section 6.5 of this Agreement.
1.1.70 "Transfer" shall mean, with respect to any interest in the
Company, a sale, conveyance, exchange, assignment, pledge, encumbrance, gift,
bequest, hypothecation or other transfer or disposition by any other means,
whether for value or no value, direct or indirect, and whether voluntary or
involuntary (including, without limitation, by operation of law), or an
agreement to do any of the foregoing.
1.1.71 "Units" shall have the meaning ascribed to such term in Section
2.1 of this Agreement.
1.1.72 "Warrants" shall have the meaning ascribed to such term in
Section 1.7.6(a) of this Agreement.
1.2. Formation. The Company has been organized as a limited liability
company by the filing of the Articles with the Delaware Secretary of State, in
accordance with an pursuant to the Delaware Act. The rights and liabilities of
the Members shall be determined pursuant to the Delaware Act and this Agreement.
To the extent that there is any conflict or inconsistency between any provision
of this Agreement and any non-mandatory provision of the Delaware Act, the
provisions of this Agreement shall control and take precedence.
Page 34 of 72 Pages
1.3. Name. The name of the Company shall be "RC Aviation LLC," or such
other name selected from time to time by the Managing Member. The Company may
conduct business under that name or any other name selected by the Managing
Member, from time to time, in accordance with Applicable Law.
1.4. Principal Place of Business. The principal place of business of the
Company shall be at such place or places as shall be designated by the Managing
Member from time to time. The Company may maintain offices and places of
business at such other place or places within or outside the State of Delaware
as the Managing Member deems advisable.
1.5. Registered Office and Resident Agent. The Company shall continuously
maintain a registered office and a designated and duly qualified agent for
service of process on the Company in the State of Delaware.
1.6. Term. The Company shall continue from the Effective Date until such
time as the Company is dissolved pursuant to the terms of this Agreement or the
Delaware Act.
1.7. Business Purpose/Related Transactions.
1.7.1 General.
(a) The Company has been formed for the following purposes:
(i) acquiring, investing in, managing, owning, holding,
selling, transferring, exchanging, and/or otherwise disposing of (directly or
indirectly) shares of stock, notes, debentures and other similar instruments,
and/or other securities, or instruments which are exercisable, convertible or
exchangeable into or for such shares of stock, notes, debentures and other
similar instruments, which, in each case, are issued by HHI (collectively, the
"Securities"), and/or any claims, choses of action or other similar items with
respect to HHI, HAL or any of their respective Affiliates;
(ii) subject to Section 3.3, below, investing and
reinvesting any income or proceeds derived therefrom or in connection therewith,
entering into one or more financial transactions relating to the Securities as
shall be determined by the Managing Member to be consistent with the investment
objectives of the Company;
(iii) entering into any lawful transaction and engaging in
any lawful activities in furtherance of the foregoing purposes and as may be
necessary, incidental or convenient to carry out the business of the Company as
contemplated by this Agreement.
(b) To such ends, the Company may engage in any activities or
transactions that may, in the Managing Member's discretion, be necessary,
suitable or proper to accomplish or further such purposes, including, but not
limited to, the designation of agents of the Company from time to time to
participate in or consult regarding the management of HHI, and to do all other
acts incidental to, arising from or connected with such purposes. The Managing
Member hereby undertakes to exert reasonable best efforts in order to register
the Securities pursuant to the Securities Act as soon as is practicable.
1.7.2 Specific Actions. In furtherance of the purposes of the Company
set forth in this Section 1.7, and except as otherwise provided hereunder, the
Company shall have all of the
Page 35 of 72 Pages
rights and powers of a limited liability company under the Delaware Act,
including the authorization to:
(a) Purchase, hold, sell (including short sales, forward sales
and/or other similar transactions), exchange, transfer and otherwise dispose of
the Securities;
(b) Exercise all rights, powers, privileges, and other incidents
of ownership or possession with respect to the Securities (including but not
limited to any voting, information and other rights with respect thereto) and
other assets of the Company;
(c) Invest or deposit Company funds, pending investment or
distribution to Members, in the manner described in this Agreement;
(d) Engage independent attorneys, accountants, advisors,
consultants, or such other Persons as the Managing Member may determine to be
necessary or appropriate;
(e) Enter into, make and perform all contracts and other
undertakings, and engage in all other activities and transactions, in each case,
as may be determined by the Managing Member to be necessary, convenient or
advisable for carrying out the purposes of the Company.
1.7.3 [This Section 1.7.3 intentionally left blank].
1.7.4 Stockholder's Agreement. Each of the parties to the Original LLC
Agreement has executed and delivered, and agreed to be bound by the terms and
conditions of that certain Stockholder's Agreement dated on or about the date of
the Original LLC Agreement, a copy of which is attached hereto as Exhibit C (the
"Stockholder's Agreement"). Each of the Members hereto hereby agrees that the
Stockholder's Agreement shall be, and hereby is, terminated and shall be, and
hereby is, no longer of any force or effect. Each of the parties hereto agrees
to take such further actions as shall be reasonably necessary or appropriate in
order to evidence or reflect the termination of the Stockholder's Agreement.
1.7.5 Purchase of Claims; Related Transactions.
(a) Each of the parties hereto acknowledges and agrees as
follows:
(i) The Company has acquired certain shares of the common
stock of HHI pursuant to the terms and conditions of the Letter of Intent, the
purchase price of such shares, and the other costs and expenses relating thereto
having been funded through Capital Contributions which were made by the Class A
Members as described in Section 2.2,
(ii) The Company has acquired one or more claims or similar
rights (collectively, the "Ansett Claims") held by Ansett Worldwide Aviation
Services, Inc. and/ or its affiliates, against HHI, HAL and/or one or more of
its affiliates for an aggregate purchase price of approximately Eighty One
Million Seven Hundred Thousand Dollars ($81,700,000), such purchase price, and
certain related costs and expenses, having been funded through Capital
Contribution made by the Class B Members, as described in Section 2.3, below;
(iii) Pursuant to that certain Claim Purchase Agreement
dated as of September 15, 2004 (the "Claim Purchase Agreement"), the Company has
purchased from BCC
Page 36 of 72 Pages
Equipment Leasing Corporation and Wells Fargo Bank Northwest (in its capacity as
trustee) certain lease related claims (the "Boeing Claims") for an aggregate
purchase price (along with certain costs and fees relating thereto) of
approximately Fifty Three Million Eight Hundred and Sixty Five Thousand Dollars
($53,865,000), such purchase having been consummated subject to the terms and
conditions set forth in the Claim Purchase Agreement, with the purchase price
thereof, along with certain other related costs and expenses, having been funded
through Capital Contributions made to the Company by the Class C Members
pursuant to Section 2.4, below.
(iv) The Company has previously agreed to "backstop" a
rights offering by HHI to the shareholders of HHI, in an amount up to Sixty
Million Dollars ($60,000,000), or in lieu thereof, a purchase of up to Sixty
Million Dollars ($60,000,000) of Series E Preferred Stock of HHI, such amounts,
and certain costs and expenses related thereto, to be funded through obligations
of the Class B Members to make additional Capital Contributions to the Company;
(v) In lieu of the transactions described in the immediately
preceding paragraph, the Company has agreed to purchase from HHI the Convertible
Notes for an aggregate purchase price of Sixty Million Dollars ($60,000,000), as
per the terms and conditions of the Note Purchase Agreement, such purchase
price, along with certain costs, expenses and other similar items relating
thereto, to be funded through the conversion of a portion of the Ansett Claims
and Boeing Claims, as described below.
(b) It is acknowledged and agreed that the various claims and/or
other items purchased by the Company and described in the immediately preceding
paragraph were contemplated to be collected and/or otherwise satisfied in
connection with the Bankruptcy and/or HAL's emergence therefrom, in the form of
cash and/or some combination of cash, promissory notes, obligations and/or
certain stock or other equity-linked securities issued by HHI and/or HAL, or any
combination thereof. In this regard, the Managing Member has elected to cause
both the Ansett Claims and the Boeing Claims to be converted and/or paid in full
by HHI and HAL in connection with the Bankruptcy as follows: (i) In connection
with the merger of HAL with and into HHIC, Inc., a Delaware corporation (and
wholly-owned subsidiary of HHI) (the "Merger"), fifty percent (50%) of the
allowed face amount of each of the Ansett Claims and Boeing Claims will be paid
in full through the issuance of a certain number of new common shares of HHI,
such number to be determined by dividing 50% of such allowed face amount of such
claims by an assumed value per share of Six Dollars and Sixteen Cents ($6.16),
(ii) also in connection with the Merger, a portion of the remaining allowed face
amount of the Ansett Claims and Boeing Claims equal to Sixty Million Dollars
($60,000,000) will be converted into the Convertible Notes pursuant to the Note
Purchase Agreement, for this purpose, by first converting the remaining such
portion of the Ansett Claims (i.e., approximately $53,753,057) in full into an
equal original principal amount of Convertible Notes, and then converting
approximately $6,246,943 of the remaining such portion of the Boeing Claims into
such Convertible Notes (i.e., for an aggregate total of $60,000,000 of
Convertible Notes), and (iii) separately from the foregoing, the remaining
balance of the Boeing Claims will be redeemed with cash from HAL.
1.7.6 Issuance of Warrants.
(a) It is acknowledged and agreed that in connection with the
Company's commitment to provide certain additional financing to HHI, HHI,
through its independent directors, has agreed to issue to the Company certain
warrants (the "Warrants") to purchase HHI common
Page 37 of 72 Pages
stock. The Warrants have an exercise price of Seven Dollars and Twenty Cents
($7.20) per share, and entitle the holder thereof to purchase shares of common
stock of HHI representing up to ten percent (10%) of the Company's common stock
on a fully-diluted basis. It is acknowledged and agreed, however, that such
Warrants, in whole or in part, may not be exercisable for or into shares of the
Common Stock of HHI unless or until such time as HHI has authorized an
additional number of shares of its Common Stock in order to cover such exercise
(such shares not being currently fully authorized).
(b) All of the Warrants and all rights thereto were initially
assigned to Series B of the Company, to be distributed amongst the Members as
described in Section 4.6.3, below. However, in light of the fact that the
Company is purchasing the Convertible Notes from HHI in lieu of the
aforementioned rights offering, and in further light of the fact that the
purchase price thereof is being funded through conversion of certain portions of
the Ansett Claims and Boeing Claims by the Series D Members pursuant to Section
2.5, below, rather than from Capital Contributions from the Series B Members (as
was originally contemplated), the Warrants, and all associated rights thereto,
shall be, and hereby are, assigned to Series D of the Company, to be distributed
amongst the Series D Members as described in Section 4.6.5, below, and shall not
be assigned to Series B of the Company.
1.7.7 Distributions.
(a) General. The parties hereto acknowledge and agree that
subject and pursuant to Sections 4.6.2(a), 4.6.3(a) and 4.6.4(a) of this
Agreement, the Company has agreed to make certain distributions of certain of
its assets to the Class A Members, Class B Members and Class C Members as set
forth therein, such distributions to be made as soon as is practicable following
the date upon which the Bankruptcy shall have been approved, and/or at such
sooner time as shall be determined by the Managing Member. The Managing Member
has determined to make those certain distributions described in those certain
Resolutions of the Managing Member which are substantially in the form attached
hereto as Exhibit B, such distributions to be effective as of the times set
forth therein. Each of the Members hereby agrees that distribution of any
portion of the Ansett Claims and/or Boeing Claims to each such Member shall, on
a pro rata basis, be subject to the repayment, conversion and satisfaction in
full as described in Section 1.7.5(b), above, and each such Member hereby agrees
to cooperate in connection with the redemption, retirement, conversion and
satisfaction of the same, in each case, in accordance with the terms and
conditions thereof.
(b) Basis Assigned to Series D. The distributions described on
Exhibit B, attached hereto, include (except to the extent described thereunder)
distributions by the Company of 90% of the portion of the Ansett Claims and the
Boeing Claims which are to be converted into Convertible Notes pursuant to the
Note Purchase Agreement (i.e., $54 million in the aggregate), such distributions
being pursuant to Sections 4.6.3(a) and 4.6.4(a) of this Agreement. The parties
acknowledge and agree that the portion of the remaining 10% of the Ansett Claims
and Boeing Claims which are retained by the Company and which are converted into
Convertible Notes by the Company pursuant to the Note Purchase Agreement (i.e.,
$6 million) shall be and hereby is assigned to Series D as an asset of such
Series hereunder. The foregoing assignment to Series D shall be treated as a
distribution to the Series B and Series C Members listed on Exhibit A-4 (pro
rata based on Class D Units held by each) in satisfaction of a portion of the
amounts otherwise distributable to such Members pursuant to Sections 4.6.3(b)(i)
and 4.6.4(b)(i), below (i.e., as a return of "basis" in such Series), followed
by a re-contribution of such amounts by such Members to Series D (pro rata to
each such Member based on numbers of Class D Units), such re-contributions
Page 38 of 72 Pages
to be returned to such Members as per Section 4.6.5(b)(i), below, in amounts set
forth opposite each such Member's name on Exhibit A-4, attached hereto.
(c) Excess Cash.
(i) The distributions described on Exhibit B, attached
hereto, also include (except to the extent described thereunder) distributions
by the Company of 90% of the portion of the Ansett Claims and the Boeing Claims
which are to be redeemed for cash (i.e., approximately $24.3 million in the
aggregate) as part of the Joint Plan of Reorganization, such distributions being
pursuant to Sections 4.6.3(a) and 4.6.4(a) of this Agreement. The parties
acknowledged and agree that the portion of the remaining 10% of the Ansett
Claims and Boeing Claims which are retained by the Company and which are to be
redeemed for cash (the "Company Cash") pursuant to the Joint Plan of
Reorganization (i.e., approximately $2.7 million) shall be and hereby is
retained by the Company. The Managing Member shall be authorized to utilize
portions of the Company Cash to satisfy any Presumed Tax Liabilities of the
Managing Member (provided that any such use of funds shall be deemed to be an
advance against the first amounts otherwise distributable to the Managing Member
hereunder), and to establish reasonable reserves for costs, expenses or
liabilities or other similar amounts. To the extent the Managing Member
reasonably determines that amounts of the Company Cash would otherwise be
distributed or available for distribution to Members hereunder, the Managing
Member shall, as soon as practicable, distribute such amounts to the Members
associated with the appropriate Series, such distributions to be in accordance
with Section 4.6 of this Agreement.
(ii) Notwithstanding the foregoing, in the event that any
Company Cash is utilized pursuant to the preceding paragraph to satisfy any
Presumed Tax Liabilities of the Managing Member, the Managing Member agrees to
make an additional cash Capital Contribution to the Company if, following the
distributions required pursuant to Sections 4.6.2(e), 4.6.3(c), 4.6.4(c) and
4.6.5(d), the Class A Members have not received distributions pursuant to
Section 4.6.2(b)(i) at least equal to the amount described in such Section
4.6.2(b)(i), the Class B Members have not received distributions pursuant to
Section 4.6.3(b)(i) at least equal to the amount described in such Section
4.6.3(b)(i), the Class C Members have not received distributions pursuant to
Section 4.6.4(b)(i) at least equal to the amount described in such Section
4.6.4(b)(i), or the Class D Members have not received distributions pursuant to
Section 4.6.5(b)(i) at least equal to the amounts described in such Section
4.6.5(b)(i). The amount of the Managing Member's additional cash Capital
Contribution pursuant to this Section 1.7.7(c)(ii) shall be an amount equal to
the lesser of (A) the amount of any Company Cash used to satisfy any Presumed
Tax Liabilities of the Managing Member and (B) the aggregate amount required
such that the conditions requiring such additional Capital Contributions
pursuant to the preceding sentence are no longer present.
1.7.8 Authorization. The actions described or contemplated in Sections
1.7.5, 1.7.6 and 1.7.7 shall each be, and hereby are, authorized, ratified,
consented to and confirmed, and the Managing Member shall be, and hereby is
authorized to take such further actions, and/or to negotiate and execute such
additional documents, agreements or instruments, with such terms and conditions,
as shall be deemed to be necessary or appropriate in connection therewith. The
Managing Member shall be authorized to adopt such amendments to this Agreement
(including, but not limited to amendments to Sections 4.6.2(a), 4.6.3(a) and/or
4.6.4(a) to reflect the extent to which such distributions have been satisfied
and related matters), as shall be necessary or appropriate to evidence, reflect
or to give effect to the transactions described in Sections 1.7.5, 1.7.6 or
1.7.7.
Page 39 of 72 Pages
ARTICLE 2
COMPANY CAPITAL; CAPITAL CONTRIBUTIONS
2.1. Capital Units. It is intended by the parties hereto that the Company
shall have multiple series (the "Series") pursuant to and in connection with the
provisions of Section 18-215 of the Delaware Act (and/or any successor provision
of the Delaware Act). The Company's Membership Interests shall be represented by
separate classes of units with respect to each such Series, and each such class
of Membership Interests shall be represented by a separate class of units
(collectively, the "Units"). The Company shall have four (4) Series, to be
designated as Series A, Series B, Series C and Series D. Each such Series shall
have the following classes of Units associated therewith, such classes of Units
to be hereby authorized in the following numbers:
Series Class of Units Number
Series A Class A Units 42,500,000
Series B Class B Units 141,700,000
Series C Class C Units 53,865,000
Series D Class D Units 60,000,000
Series A, B, C & D Class M Units 1
The Company shall be initially authorized to issue up to that number of
each class of Units as are set forth above. Additional classes of Units within
each existing Series, as well as additional Series of the Company, with
additional corresponding classes of Units with respect to each such additional
Series, shall be issuable by the Company pursuant to the provisions of Section
2.6, below. Any holder of more than one class of Units shall have separate
rights under this Agreement with respect to each class of Units held by such
Member. A Member holding Class A Units shall also sometimes be referred to
hereunder in its capacity as such as a "Class A Member," a Member holding Class
B Units shall also sometimes be referred to hereunder in its capacity as such as
a "Class B Member," a Member holding Class C Units shall also sometimes be
referred to hereunder in its capacity as such as a "Class C Member," a Member
holding Class D Units shall also sometimes be referred to hereunder in its
capacity as such as a "Class D Member," and a Member holding Class M Units shall
also sometimes be referred to hereunder in its capacity as such as a "Class M
Member."
2.2. Series A Contributions.
2.2.1 Managing Member. RC Management has previously contributed to the
Company all of RC Management's right, title and interest in and to the Letter of
Intent and/or the matters contained therein, and has also previously contributed
to the Company that amount of cash as is set forth opposite RC Management's name
on Exhibit A-1, attached hereto. In consideration for the foregoing
contributions, and for other valuable consideration, RC Management was admitted
to the Company as a Member, and was previously issued one (1) Class B Unit, and
also was issued that number of Class A Units as are set forth opposite RC
Management's name on Exhibit A-1, attached hereto. It is acknowledged and agreed
that, as of the effective date of the Original LLC Agreement, the one (1) Class
B Unit that was so issued to RC Management was redesignated as one (1) Class M
Unit. Accordingly, as of the Effective Date hereof, RC Management shall continue
to own and hold that number of Class A Units as are set forth opposite its name
on Exhibit A-1, attached hereto, and shall also continue to own and hold one (1)
Class M Unit, as is also indicated opposite its name on such Exhibit A-1. Each
of the parties hereto agrees and acknowledges that the
Page 40 of 72 Pages
Company has incurred and will incur certain necessary and incidental costs and
expenses in connection with its activities as described in Section 1.7 and that
such costs and expenses shall be paid and/or reimbursed (or, if advanced by the
Managing Member or any other Member, reimbursed to such Person) out of proceeds
of the Company available therefor.
2.2.2 Non-Managing Members. Each of the Class A Members listed on
Exhibit A-1, attached hereto has each previously contributed to the Company that
amount of cash as is set forth opposite each of their respective names on
Exhibit A-1, attached hereto. In consideration for such Capital Contributions,
such Persons each have previously been issued that number of Class A Units as is
set forth opposite each of their respective names on Exhibit A-1, attached
hereto. Each such Class A Member shall continue to own and hold that number of
Class A Units as is set forth opposite each of their respective names on such
Exhibit A-1.
2.2.3 Loan Capital. It is acknowledged and agreed that a portion of the
Capital Contributions made by the Class A Members to the Company pursuant to
Sections 2.2.1 and 2.2.2, above, such portions being set forth opposite each
such Member's respective name on Exhibit A-1 attached hereto (the "Loan
Capital"), have been utilized by the Company to fund one or more HHI Loans from
the Company to HHI upon such terms and conditions as have been deemed reasonable
and in the best interests of the Company and its Members by the Managing Member.
Such loans to HHI are hereby authorized, ratified and approved, and the Managing
Member shall be, and hereby is, authorized to execute and deliver such
documents, instruments and agreements as the Managing Member determines is
reasonable or necessary in order to evidence or reflect the same.
2.2.4 Series A Assets. Proceeds received by the Company in connection
with Capital Contributions made pursuant to this Section 2.2 have been utilized
in the manner described in the Original LLC Agreement and the Letter of Intent
to purchase certain Securities as more particularly described thereunder, and to
pay certain related costs and expenses. Any such assets, and/or any other assets
acquired with such Capital Contributions, as well as any income or proceeds
therefrom, in addition to any assets acquired from investment and/or
reinvestment of the same, hereby are assigned to Series A of the Company.
2.3. Series B Contributions.
2.3.1 Contributions. Each of the Class B Members listed on Exhibit A-2,
attached hereto, has previously made a Capital Contribution to the Company in
the amount of cash as is set forth opposite each such Member's name on such
Exhibit A-2. In consideration for such Capital Contributions, each such Member
previously has been issued that number of Class B Units as is set forth opposite
each such Member's respective name on Exhibit A-2, attached hereto.
2.3.2 Series B Assets. Proceeds received by the Company in connection
with Capital Contributions made pursuant to this Section 2.3 have been utilized
by the Company to acquire the Ansett Claims as described in Section
1.7.5(a)(ii), above, and to pay certain related costs and expenses. The Ansett
Claims, together with any income or proceeds therefrom, in addition to any
assets acquired from investment and/or reinvestment of the same, as well as any
related obligations, costs or other similar amounts, hereby are assigned to
Series B of the Company.
2.4. Series C Contributions.
2.4.1 Contributions. Each of the Class C Members listed on Exhibit A-3,
attached hereto, has previously made cash Capital Contributions to the Company
in the amounts set forth
Page 41 of 72 Pages
opposite each of their respective names on Exhibit A-3, attached hereto. In
consideration for such Capital Contributions, each such Member previously has
been issued that number of Class C Units as is set forth opposite each such
Member's respective name on Exhibit A-3, attached hereto.
2.4.2 Series C Assets. Proceeds received by the Company in connection
with Capital Contributions made pursuant to this Section 2.4 have been utilized
by the Company to acquire the Boeing Claims. The Boeing Claims, as well as any
income or proceeds therefrom, in addition to any assets acquired from investment
and/or reinvestment of the same, hereby are assigned to Series C of the Company.
2.5. Series D Contributions.
2.5.1 Contributions. On and as of the Effective Date, the Members
listed on Exhibit A-4, attached hereto, shall be deemed to have contributed to
the Company, as additional Capital Contributions, that amounts set forth
opposite each of their respective names on such Exhibit A-4. It is acknowledged
and agreed that, except as otherwise noted on Exhibit A-4, attached hereto, each
such Member is funding its Capital Contributions described in this Section 2.4
through a conversion of portions of their respective shares of distributed
Ansett Claims and Boeing Claims into Convertible Notes pursuant to the Note
Purchase Agreement and also through deemed contributions to the Company
described in Section 1.7.7(b) of this Agreement. In consideration for such
Capital Contributions, each such Member shall be, and hereby is, issued that
number of Class D Units as is set forth opposite their respective names on such
Exhibit A-4.
2.5.2 Series D Assets. The portions of the Ansett Claims and/or Boeing
Claims received by the Company in connection with Capital Contributions made, or
deemed made pursuant to this Section 2.5 shall be utilized by the Company to
purchase the Convertible Notes and the Warrants pursuant to the terms and
conditions of the Note Purchase Agreement, such purchase to be accomplished
through conversion of such portions of the Ansett Claims and/or Boeing Claims
into the Convertible Notes and Warrants pursuant to the terms thereof. The
Convertible Notes and the Warrants, as well as any income or proceeds therefrom,
in addition to any assets acquired from investment and/or reinvestment of the
same, hereby are assigned to Series D of the Company.
2.6. Additional Capital Contributions.
2.6.1 General. Except as otherwise provided hereunder, no Member shall
be required to make additional Capital Contributions to the Company. Except as
provided in Section 2.6.2, below, in the event that the Managing Member
determines to seek additional funds in connection with the Company's activities,
investments or businesses, the Company shall be authorized upon consent of a
Majority in Interest of the Members to issue any additional Units, including any
Class A, Class B Class C or Class D Units and/or such additional classes or
series of Units, and/or other securities convertible, exercisable or
exchangeable into such Units, to one or more existing or new Members or other
Persons, upon such terms and conditions, and in consideration for such Capital
Contributions or other investments of proceeds or amounts, as shall be
determined by the Managing Member (and approved by a Majority in Interest of the
Members) to be in the best interests of the Company and its Members. The
Managing Member shall be, and hereby is, authorized to adopt such amendments to
this Agreement as shall be necessary or appropriate in order to evidence or
reflect any such additional issuances of Units. Any such additional issuances of
Units shall not dilute the interests of the Class M Member in the distributions
and Net Profits or Net Losses of the Company or any Series.
Page 42 of 72 Pages
2.6.2 Pro Rata Offering.
(a) The Class A Units, Class B Units, Class C Units and the Class
D Units have been issued to each of the Members in those proportions as are set
forth on Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit A-4, attached hereto.
Any subsequent issuances of Units (in one or more classes), and/or securities or
instruments exercisable, convertible or exchangeable into such Units, with
respect to either Series A, Series B, Series C or Series D shall, in each case,
be first offered on a pro rata basis to the existing Members holding Units with
respect to such Series (as the case may be), based on their relative numbers of
Units held with respect to such Series. Any subsequent issuances of Units in one
or more additional classes with respect to any additional Series of the Company
(i.e., other than Series A, Series B, Series C or Series D) pursuant to Section
2.6.1, above, shall be first offered to existing holders of Class A Units on a
pro rata basis, based upon such holders' relative holdings of total Units
(regardless of class) vis-a-vis each other.
(b) In any case in which additional Units in the Company are
required to be offered to one or more existing Members of the Company pursuant
to Section 2.6.2(a), above, such offering to such Members shall be accomplished
through provision of written notice by the Managing Member to such Members with
a description of the terms and conditions pertaining to such offering (an
"Offering Notice"). Any Units not subscribed for by such Member within ten (10)
days (the "Offering Period") of having received an Offering Notice, shall be
reallocated among the other Members who are entitled to such preemptive right on
a pro rata basis (based again upon their relative holdings of the relevant Units
vis-a-vis each other), and any such Units not subscribed to by such Members
within ten (10) days of the expiration of the Offering Period shall, in the
Managing Member's determination, be issuable to additional Members in accordance
with Section 2.6.1, above.
2.6.3 Additional Capital to Fund HHI Loans and/or Expenses. Each of the
Members acknowledges and agrees that the Company has loaned (and/or may lend)
certain funds to HHI and/or one or more of its Affiliates in order to fund
certain expenses in connection with the Bankruptcy (the "HHI Loans"), which
loans shall be evidenced by promissory notes and/or other evidences of
indebtedness to be issued to the Company. It is also acknowledged and agreed
that the Company will incur, and has incurred, with respect to each Series,
various out-of-pocket costs and expenses which are necessary or incidental to
its activities as described in Section 1.7, above (including legal, accounting,
etc.), such amounts to be allocated among such Series as reasonably determined
by the Managing Member. In the event the Managing Member determines to fund an
HHI Loan and/or has incurred or will incur such costs and expenses, the Managing
Member shall submit a written notice to each of the Members setting forth (in
the case of an HHI Loan) the main terms and conditions thereof, including the
aggregate principal amount of such HHI Loan, the amount and type of such costs
and expenses, and each Member's pro rata share thereof (which pro rata shares
shall be based on each Member's holdings of Units with respect to each relevant
Series to which such items relate as of such time). Within five (5) days of
receipt of such notice, each of the Members agrees to make a Capital
Contribution to the Company in an amount equal to such Member's pro rata share
of the amount set forth in such notice. Any such Capital Contributions made by
the Members pursuant to this Section 2.6.3 shall be deemed to be additional to
the Member's original Loan Capital which shall be returned to such Member
pursuant to the provisions of Section 4.6, below. Notwithstanding the foregoing,
the aggregate amount of additional Capital Contributions from Members described
in this Section 2.6.3 and in Section 2.2.3, above, shall not exceed Four Million
Dollars ($4,000,000) in the aggregate without the approval of all of the
Members.
Page 43 of 72 Pages
2.7. Default in Capital Contribution Obligation. In the event that any
Member does not fund the entire amount of its pro rata share of any additional
Capital Contributions required to be made pursuant to this Agreement, the
Managing Member, in its discretion, may elect to provide the other Members with
the opportunity during the ten (10) day period thereafter, and with the consent
of the Managing Member, to fund that Member's portion of such Capital
Contribution. Any portion so funded by such other Member(s) pursuant to this
Section 2.7 shall be deemed to be a loan from such other Member(s) to the
defaulting Member, such deemed loan to bear interest at the rate of fifteen
percent (15%) per annum, compounded annually (or, if lower, the highest rate
permitted by Applicable Law), and such deemed loan (both principal and accrued
interest thereon) to be repayable upon demand by such other Member(s), it also
being hereby agreed that any such amounts (both principal and accrued interest
thereon) may be repaid in whole or part, upon request of such other Member(s) by
direct payment to such other Member(s) from the Company of the first dollars
which otherwise would be distributable to such defaulting Member pursuant to
this Agreement. Notwithstanding the foregoing, nothing herein shall limit the
Company's and/or other Member's remedies in law or equity or otherwise vis-a-vis
such defaulting Member with respect to any defaults pursuant to this Agreement.
The provisions of this Section 2.7 shall not apply with respect to any Capital
Contributions described in Sections 2.6.3 or 2.2.3, above, to the extent that
such Capital Contributions would cause the amount of all such Capital
Contributions pursuant to Section 2.6.3, above, to exceed Four Million Dollars
($4,000,000).
2.8. No Withdrawal; No Interest. Except as otherwise provided hereunder, no
Member shall demand or be entitled to receive a return of or interest on any
portion of its Capital Contributions or Capital Account and no Member shall
withdraw any portion of its Capital Contributions or Capital Account or receive
any distributions from the Company as a return of capital on account of such
Capital Contributions or Capital Account.
2.9. Member Loans. No Member shall be required to make any loans or
otherwise lend any funds to the Company.
2.10. Liability of Members. Except as otherwise required by any
non-waivable provision of the Delaware Act or other Applicable Law and except as
provided hereunder or in other agreements between the Company and one or more
Members or their affiliates: (1) no Member shall be personally liable in any
manner whatsoever for any debt, liability or other obligation of the Company,
whether such debt, liability or other obligation arises in contract, tort, or
otherwise; and (2) no Member shall in any event have any liability whatsoever in
excess of (a) the amount of its Capital Contributions or (b) its share of assets
and undistributed profits of the Company, if any.
2.11. No Right of Partition. No Member shall have the right to seek or
obtain partition by court decree or operation of law of any Company property, or
the right to own or use particular or individual assets of the Company.
2.12. Title to Assets. The assets of the Company shall be deemed to be
owned by the Company as an entity, and no Member or Managing Member,
individually, or collectively, shall have any ownership interest in such assets
or any portion thereof and legal title to such assets shall be held in the name
of the Company.
2.13. Uncertificated Interests. Unless otherwise determined by the Managing
Member, the Membership Interests in the Company shall not be represented by any
form of certificate. Without limitation to any other provision hereunder, the
Members hereby authorize the Managing Member
Page 44 of 72 Pages
to, from time to time, update Exhibits A-1, A-2 and/or A-3 to reflect changes in
the Members' and/or the outstanding membership interests in the Company and/or
Capital Accounts of such Members, in each case only to the extent such updates
accurately reflect changes and events done in accordance with the terms and
conditions of this Agreement.
ARTICLE 3
MANAGEMENT OF THE COMPANY; RELATED MATTERS
3.1. Authority of the Managing Member/Ratification of Acts.
3.1.1 General. Except as otherwise provided in this Agreement, the
manager of the Company (the "Managing Member") shall have the exclusive right
and authority to manage and control the business of the Company and each Series.
The Managing Member shall have the authority and power on behalf and in the name
of the Company and each Series to perform all acts and enter into and perform
all contracts and other undertakings which it may deem necessary, advisable, or
incidental to the purposes of the Company, including, but not limited to, the
authority and power to participate in the management of HHI and/or its
Affiliates in such manner as the Managing Member may determine.
3.1.2 Certification. Any Person dealing with the Company or the
Managing Member may rely upon a certificate signed by the Managing Member,
thereunto duly authorized, as to (a) the identity of the Managing Member or any
Member hereof; (b) the existence or non-existence of any fact or facts which
constitute a condition precedent to acts by the Managing Member or in any other
manner germane to the affairs of the Company; (c) the identity of Persons who
are authorized to execute and deliver any instrument or document of or on behalf
of the Company; or (d) any act or failure to act by the Company or any other
matter whatsoever involving the Company or any Member. Except as expressly set
forth to the contrary in this Agreement, the Members, in their capacities as
such, shall have no part in the management of or authority to act on behalf of
the Company, and their Membership Interests shall, in all respects, be nonvoting
and shall not confer any consent or approval rights.
3.2. Appointment, Resignation, etc. of the Managing Member.
3.2.1 Initial Appointment. The initial Managing Member of the Company
and each Series shall be RC Management. The Managing Member shall serve as such
until resignation or removal pursuant to the terms of this Agreement.
3.2.2 Vacancies; Consequences of Removal or Resignation. Upon any
removal of the Managing Member by vote of a Majority in Interest of the Members
for Cause (as provided below), or upon any voluntary resignation of the Managing
Member (other than such a voluntary resignation which is attributable to the
death or permanent disability of Lawrence Hershfield), the Managing Member
agrees to forfeit its Class M Units. Upon any other resignation or removal of
the Managing Member (including any removal or resignation attributable to the
death or permanent disability of Lawrence Hershfield), such resignation or
removal shall not affect the Managing Member's rights with respect to any Units
held as of such time by the Managing Member. Any such resignation will take
effect upon receipt of such notice by the Company or at such later time, if any,
as may be specified in such notice. Unless otherwise specified in the notice,
the acceptance of the notice shall not be necessary in order to make it
effective.
Page 45 of 72 Pages
3.2.3 Removal of Managing Member. Any Managing Member may only be
removed upon vote of a Majority in Interest of the Members for Cause. Upon the
resignation or removal hereunder of the Managing Member, a successor Managing
Member shall be nominated by a Majority in Interest of the Members and such
nominee shall become a successor Managing Member upon acceptance of such
nomination by such nominee. Except as otherwise provided in this Section 3.2,
any removal or resignation of a Managing Member from its status as such pursuant
to the provisions of this Section 3.2 shall not affect such Managing Member's
rights to distributions and/or other rights, duties, privileges, preferences as
a Member hereunder.
3.3. Material Decisions. Notwithstanding any other provision contained
herein, prior to the time the Company consummates the distribution described in
Section 4.6.2(a), neither the Managing Member, nor any officer or employee of
the Company, shall have the authority to adopt any Material Decision for or on
behalf of the Company without the prior written consent of a Majority in
Interest of the Members. For this purpose, the term "Material Decision" shall
consist of any of the following:
3.3.1 Any sale of all or substantially all of the Company's assets,
and/or any sale or exchange of any of the Securities to a third party purchaser;
3.3.2 Any dissolution, consolidation or other reorganization involving
the Company;
3.3.3 The merger, combination or consolidation of the Company with any
other legal entity, the formation of any subsidiary by the Company, or the
acquisition of any interest in any other corporation, limited liability company,
partnership or other legal entity;
3.3.4 Any issuance of additional Units or Membership Interests in
either Series A, B, C or D (and/or any instruments convertible, exchangeable or
exercisable for or into such Units or Membership Interests) to the extent such
Units or Membership Interests rank senior in terms of liquidation preference to
any Units existing with respect to such Series as of the Effective Date,
provided, however, that the requisite approval for purposes of this provision
shall be Majority in Interest of the Members holding such Units in the Series
which otherwise would be impacted by such issuances.
3.3.5 Any issuance of any additional Units or Membership Interests
(provided, however, that, for the avoidance of doubt, the issuance of Class B,
Class C and Class D Units, as described in Sections 2.3, 2.4 and 2.5, above,
shall be, and hereby are acknowledged and approved, subject to the terms and
conditions set forth thereunder).
3.3.6 Any incurrence of a debt obligation or liability (other than
loans described in Section 2.6.3, above) in a principal amount of in excess of
Two Hundred and Fifty Thousand Dollars ($250,000), and/or the issuance of any
guaranty or indemnity in an amount in excess of Two Hundred and Fifty Thousand
Dollars ($250,000).
3.3.7 Establishment of any reserves (when calculating Distributable
Amounts) of more than One Million Dollars ($1,000,000) in the aggregate
(provided, however, that this Section 3.3.7 shall not apply with respect to any
amounts described in Section 3.9, below).
3.3.8 The investment or reinvestment of any income or proceeds derived
from the Securities in any investments other than Permitted Investments. For
this purpose, the term
Page 46 of 72 Pages
"Permitted Investments" shall mean investments in (a) direct obligations of the
United States of America or obligations of any agency or instrumentality thereof
which mature not later than one year from the date of acquisition thereof or (b)
money market deposit accounts, checking accounts, savings accounts, or
certificates of deposit, or other time deposit accounts which mature not later
than one year from the date of acquisition thereof which are issued by a
commercial bank or savings institution organized under the laws of the United
States of America or any state thereof.
3.3.9 Any change to the classification of the Company as a
"partnership" for US and applicable state tax purposes.
3.3.10 Any transactions between the Company and any Member and/or an
Affiliate of any Member.
3.4. Standards of Care; Liability and Indemnification.
3.4.1 Standards of Care. The duty of care of any Managing Member or
Member in the discharge of his, her or its duties, in his, her or its capacity
as such, to the Company and its Members is limited to acting in good faith and
in a manner reasonably believed to be in the best interests of the Company. No
Managing Member or Member will be liable to the Company or to any Member for any
act or failure to act pursuant to this Agreement or otherwise if he, she or it
acted in good faith and reasonably believed that such act or failure to act was
in the best interests of the Company.
3.4.2 Indemnification.
(a) Each Series of the Company shall indemnify, defend and hold
harmless, each Managing Member and Member associated with such Series, their
respective affiliates and subsidiaries, and any and all members, officers,
directors, employees, and agents of any of the foregoing (each individually, an
"Indemnitee") to the fullest extent permitted by law from and against any and
all losses, claims, demands, costs, damages, liabilities, joint or several,
expense of any nature (including attorneys' fees and disbursements), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative
with respect to such Series and in which the Indemnitee may be involved, or
threatened to be involved as a party or otherwise, relating to the performance
or nonperformance of any act concerning the activities of the Company, if (i)
the Indemnitee acted in good faith and in a manner it believed to be in, or not
contrary to, the best interests of the Company and the Members associated with
such Series, and (ii) the Indemnitee's conduct did not constitute fraud, gross
negligence or willful misconduct. The termination of an action, suit or
proceeding by judgment, order, settlement, or upon a plea of nolo contendere or
its equivalent, shall not, in and of itself, create a presumption or otherwise
constitute evidence that the Indemnitee acted in a manner contrary to that
specified in clauses (i) or (ii) above. Any indemnification provided hereunder
shall be satisfied solely out of the assets of the relevant Series of the
Company, as an expense of such Series. Except as set forth in Section 3.4.2(b),
below, no Member shall be subject to personal liability by reason of these
indemnification provisions. The provisions of this Section 3.4.2 are for the
benefit of the Indemnitees and shall not be deemed to create any rights for the
benefit of any other Person.
(b) Notwithstanding the foregoing, but subject to Section
3.4.2(c), below, in the event that any of the assets of any Series shall be
insufficient to satisfy any indemnification
Page 47 of 72 Pages
obligation to any Indemnitee pertaining to such Series pursuant to the preceding
paragraph, each of the Members associated with such Series (as the case may be)
agrees, to the extent of the amount of any cash and/or the value of any assets
distributed to each such Member pursuant to Section 4.6.3, Section 4.6.4 or
Section 4.6.5, below, as the case may be (the value of such assets being
measured as of the time that the plan of reorganization in connection with the
Bankruptcy shall have become final and effective), to defend and hold harmless,
each Indemnitee from and against any and all losses, claims, demands, costs,
damages, liabilities, joint or several, expense of any nature (including
attorneys' fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved as a party or otherwise, relating to
acquisition, disposition or settlement of any of the claims against HAL and/or
the other claims and assets contemplated in Section 1.7 of this Agreement,
provided, however, that (i) the Indemnitee acted in good faith and in a manner
it believed to be in, or not contrary to, the best interests of such Series, and
(ii) the Indemnitee's conduct did not constitute fraud, gross negligence or
willful misconduct. The termination of an action, suit or proceeding by
judgment, order, settlement, or upon a plea of nolo contendere or its
equivalent, shall not, in and of itself, create a presumption or otherwise
constitute evidence that the Indemnitee acted in a manner contrary to that
specified in clauses (i) or (ii) above.
(c) The amount of any distribution required to be returned to the
Company pursuant to Section 3.4.2(b), above, by the Class A Members attributable
to Series A shall not, in the aggregate, exceed an amount equal to Thirty
Million Dollars ($30,000,000). The amount of any distribution required to be
returned to the Company pursuant to Section 3.4.2(b), above, by the Class B
Members attributable to Series B shall not, in the aggregate, exceed an amount
equal to Thirty Million Dollars ($30,000,000). The amount of any distribution
required to be returned to the Company pursuant to Section 3.4.2(b), above, by
the Class C Members attributable to Series C shall not, in the aggregate, exceed
an amount equal to Thirteen Million Dollars ($13,000,000).
3.4.3 Reliance. The Managing Member and each Member will be fully
protected in relying in good faith upon the records of the Company and upon such
information, opinions, reports or statements presented to the Company by its
officers, employees, or by any other person, as to matters such person
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company including information, opinions, reports regarding the value and amount
of the assets, liabilities, profits or losses of the Company or any other facts
pertinent to the existence and amount of assets from which distributions to
Members may be paid.
3.5. Contractual Authority. Only the Managing Member (acting through its
authorized individuals) and/or any other individuals associated with the Company
who have been given authority by the Managing Member to do so may execute on
behalf of the Company any note, mortgage, evidence of indebtedness, contract,
certificate, statement, conveyance, or other instrument in writing, or any
assignment or endorsement thereof. Any person dealing with the Company or the
Managing Member may rely upon a certificate signed by any of the members of the
Managing Member as to (a) the identity of the Managing Member or any other
Member of the Company, (b) the persons who are authorized to execute and deliver
any instrument or document for or on behalf of the Company or (c) any act or
failure to act by the Company or as to any other matter whatsoever involving the
Company or any Member.
3.6. Outside Activities; Non-Competition.
Page 48 of 72 Pages
3.6.1 Outside Activities. The Managing Member and its Principals shall
devote to the Company such time as may be necessary for the performance of its
duties hereunder, but neither the Managing Member nor its Principals shall be
expected to devote its full time to the performance of such duties.
Notwithstanding the foregoing, however, the Managing Member agrees that for so
long as it is the Managing Member, it shall cause the Principals to collectively
expend a significant portion of their business time towards the activities and
business of the Company. Except as otherwise provided in Section 3.6.2, below,
neither the Managing Member, nor any of its partners, members, managers,
officers or employees (nor any affiliates of such persons) shall be restricted
from creating, or acting (in each case, either directly or indirectly) as a
general partner, manager, or advisor for, any other partnership or entity,
including a partnership or entity which operates or invests in securities and/or
otherwise operates or invests in areas which may be competitive with the
activities of the Company, and neither the Company nor any of its Members shall
have any rights or interests with respect to such other partnerships or
entities. Neither the Managing Member nor any of its members, managers,
officers, or employees shall be obligated to present any particular investment
or other opportunity to the Company or any of its Members.
3.6.2 Non-Competition.
(a) General. Except as may be approved in advance by each of the
Members, and except as provided in Section 3.6.2(b), below, and otherwise
without limitation upon the terms and conditions of any other agreement entered
into by and between any Member and the Company, during the time each of the
Members holds any Units hereunder, such Member agrees that neither he, she or
it, nor his, her or its controlled or commonly controlled affiliates or agents,
shall, directly or indirectly, own, manage, operate, control, be employed by, or
participate in (nor will they solicit, entertain or negotiate any transactions
involving) the ownership or management or control of, or be connected or
associated in any way with (whether as an investor, partner, lender, director,
officer, manager, employee, consultant, representative, agent or otherwise), any
transaction, person or entity (other than through Membership Interest in the
Company) which is engaged in a business or activity involving investment in or
in connection with Securities issued by, or any transactions involving HHI
and/or its Affiliates.
(b) Certain Exceptions and Related Transactions. Without
limitation to any of the foregoing, each of the Members hereby acknowledges and
agrees that, the Managing Member, and/or its Principals and/or the principals of
any Member, may from time to time, serve in the capacity as a director, officer
or other similar capacity with respect to HHI and/or its Affiliates, and that
such service is hereby approved and ratified. It is further acknowledged and
agreed that any fees or equivalent compensation received by any such person for
serving in such capacity with respect to HHI and/or its Affiliates shall be
solely for the account of the individual(s) serving in such capacity, provided,
however, that such fees are reasonable in amount and scope. It is further
acknowledged and agreed that, notwithstanding the foregoing provisions, nothing
in this Section 3.6 shall be deemed to prohibit a Member from continuing to own,
or from disposing of, for his, her or its own account, nor shall the
Stockholder's Agreement apply to, any securities issued by HHI and/or its
Affiliates to the extent such securities were acquired on or prior to June 1,
2004, nor shall it prohibit any Members from buying and selling shares of common
stock of HHI in public market transactions (e.g., in transactions not involving
restricted securities). In addition, none of the Members shall be prohibited
from purchasing, in one or more transactions, any claims, choses in action, or
other similar items with respect to HHI and/or its Affiliates, provided that (i)
no such claims or choses in action relate to any aircraft leases and/or the
negotiation, renegotiation or rejection of the same, and (ii) that all such
claims or choses in actions purchased by any such
Page 49 of 72 Pages
Member and/or its affiliate, in the aggregate, do not have a face amount of more
than Five Million Dollars ($5,000,000).
3.7. Public Reporting Obligations.
3.7.1 Each of the parties to this Agreement acknowledges and agrees
that the Company, the Managing Member and/or each of the Members may be subject
to various reporting, filing or other informational requirements which may be
imposed from time to time pursuant to Applicable Law, including but not limited
to one or more periodic or other reports which may be required to be filed with
one or more governmental securities agencies (or other Persons) with respect to
the Company's acquisition and ownership of Securities issued by HHI and/or their
respective intentions with respect thereto (including, for example, any filing
required under the Exchange Act and/or the rules promulgated thereunder).
3.7.2 Notwithstanding the provisions of Section 10.2 below, the
Managing Member shall be authorized to take such actions, and execute and
deliver such documents, instruments, forms or other materials as may be
necessary or appropriate in connection with such requirements, and each of the
Members agrees to reasonably cooperate with the Managing Member upon request in
connection therewith, including but not limited to, providing the Managing
Member with such information as shall be necessary or appropriate in connection
with any such requirements. Each of the Members also agrees to timely comply
with any requirements described in this Section 3.7 which may be applicable from
time to time to such Member.
3.8. Short Position Agreement. Notwithstanding any other provision
hereunder, beginning as of the Effective Date hereof and ending upon the date
which is thirty five (35) days following the date on which the plan of
reorganization with respect to the Bankruptcy shall have become effective and
final, each of the Members agrees not to (and agrees to cause its Affiliates to
not) sell short, enter into an offsetting notional principal contract, sell on a
forward basis, collar or enter into similar transactions with respect to HHI
common stock. Notwithstanding the preceding sentence, however, with respect to
Deutsche Bank AG and its Affiliates, the limitation of this Section 3.8 shall
only apply to any account, interest or position of Deutsche Bank AG or its
Affiliates which is managed or controlled (directly or indirectly) by QVT
Financial LP or its Affiliates (a "QVT Controlled-Account"), provided, however,
that QVT Financial LP, Deutsche Bank AG (in its capacity as a Member hereunder),
and their respective Affiliates, maintain an "ethical wall" between such QVT
Controlled-Accounts and such other accounts, interests or positions such that
such other accounts, positions, investments or interests do not utilize,
consider or receive any information relating to any position, interest or
investment with respect to any QVT Controlled-Account (including the existence
of such position), directly or indirectly, in connection with its entering into
any transactions described in this Section 3.8. Nothing in this provision shall,
however, prevent a Member or their Affiliates from selling, Securities which
such Member or Affiliate (as the case may be) owns, in compliance with
Applicable Law.
3.9. Litigation Reserve Fund; Related Actions. Without limitation on any
other provision of this Agreement (including but not limited to Section 3.4.2,
above), the Managing Member shall be, and hereby is, authorized to fund and/or
reserve for, in whole or in part, the costs, and reasonably anticipated
potential costs, of defending against, preparing to defend against, and/or
taking such other actions as may be necessary or advisable in connection with or
in light of any claims, proceedings, suits, allegations or similar actions
asserted, threatened or potentially assertable by any shareholders of HHI and/or
any other third parties (collectively, the "Potential
Page 50 of 72 Pages
Actions") in connection with the Company's purchase of one or more claims as
described in Section 1.7, above, and/or any other activities relating thereto,
either through Capital Contributions from the Class B Members, Class C Members
and/or Class D Members described in Section 2.6.3, above, and/or through one or
more reserves (established either in calculation of any Distributable Amounts
hereunder or otherwise) deemed reasonably appropriate by the Managing Member
from time to time. Without limitation on any of the other provisions hereof, the
Managing Member shall be, and hereby is authorized, to prepare, prosecute,
settle, and/or to take such additional actions (including retention of legal
counsel) as may be advisable in connection with any such Potential Actions, and
shall keep each of the Members apprised of any developments in connection
therewith. Each of the Members and their respective Affiliates agrees not to
participate in any suit, claim or other proceeding (including but not limited to
derivative or other similar actions, and whether in their respective capacities
as Members, shareholders or otherwise) against or with respect to which the
Company, the Managing Member, the Principals, or their respective affiliates are
adverse, involving any Potential Actions or similar claims.
ARTICLE 4
CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS
4.1. Capital Accounts. A capital account for each Member (the "Capital
Accounts") will be established on the Company's books and records. The Capital
Accounts will be maintained in accordance with the following provisions:
4.1.1 To each Member's Capital Account there shall be added (a) such
Member's Capital Contributions (net of any liabilities encumbering such asset
that is transferred to the Company within the meaning of Code Section 752), and
(b) such Member's allocable share of Net Profits and any items in the nature of
income or gain that are specially allocated to such Member pursuant to Sections
4.2 or 4.3 hereof, or other provisions of this Agreement.
4.1.2 From each Member's Capital Account there shall be subtracted (a)
the amount of (i) cash and (ii) the Book Value of any Company assets (other than
cash) distributed to such Member (net of any liabilities encumbering such asset
that is transferred to the Member within the meaning of Code Section 752)
pursuant to any provision of this Agreement, and (b) such Member's allocable
share of Net Losses and any other items in the nature of expenses or losses that
are specially allocated to such Member pursuant to Sections 4.2 or 4.3 hereof,
or other provisions of this Agreement.
4.1.3 In the event any Interest in the Company is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest.
4.1.4 The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and
applied in a manner consistent with such Regulations.
4.2. Allocations. After giving effect to the special allocations set forth
in Section 4.3, below, and except as may otherwise be provided in this
Agreement, Net Profits or Net Losses (or any items thereof) for any period, and
which are allocable to each Series, shall be allocated at the end of the
Company's fiscal year and at such times as the Book Values of any Company asset
held
Page 51 of 72 Pages
within each such Series is adjusted pursuant to Section 1.1.8, above, among the
Members associated with such Series, as follows:
4.2.1 All such Net Profits and all Net Losses (or items thereof) which
are allocable to each particular Series shall be allocated among the Members
associated with such Series so as to, as nearly as possible, increase or
decrease, as the case may be, each Member's Capital Account balance to the
extent necessary such that each such Member's Capital Account is equal to the
amount that such Member would receive if each such Series were dissolved, their
assets sold for their respective Book Values, their liabilities satisfied in
accordance with their terms and all remaining amounts in each such Series were
distributed to the Members in accordance with Section 4.6, below (as pertains to
each such Series), immediately after making such allocations. The intent of the
foregoing allocation is to comply with Regulations Section 1.704-1(b) and to
ensure that the Members receive allocations of Net Profits and Net Losses (and
items thereof) pursuant to this Section 4.2.1 in accordance with their relative
economic interests in the Company.
4.2.2 If the Capital Accounts of the Members are in such ratios or
balances that distributions in the manner set forth in Section 4.2.1, above,
would not be in accordance with the positive Capital Account balances of the
Members with respect to such Series, such failure shall not affect or alter the
distributions set forth hereunder; instead, the Managing Member will have the
authority to reasonably make other allocations and/or re-allocations of Net
Profits or Net Losses (or items thereof, including unrealized appreciation
and/or other similar items) among the Members in a manner which will result in
such Capital Accounts of each Member having a balance prior to such
distributions equal to the distributions to be received by the Member in
accordance with the provisions of this Section 4.2.
4.2.3 The Managing Member shall have the authority, exercisable in its
reasonable discretion, to allocate overhead and other general expenses or costs
incurred by the Company, and/or other similar income items, to each particular
Series in a manner reasonably approved by the Managing Member and consistently
applied.
4.3. Regulatory Allocations. Notwithstanding the foregoing provisions of
this Article 4, the following special allocations shall be made in the following
order or priority:
4.3.1 If there is a net decrease in Company Minimum Gain with respect
to any Series during a Company taxable year, then each Member associated with
such Series shall be allocated items of Company income and gain with respect to
such Series for such taxable year (and, if necessary, for subsequent years) in
an amount equal to such Member's share of the net decrease in Company Minimum
Gain with respect to such Series, determined in accordance with Regulations
Section 1.704-2(g)(2) as if such Series were a separate "partnership." This
Section 4.3.1 is intended to comply with the minimum gain chargeback requirement
of Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
4.3.2 If there is a net decrease in Member Minimum Gain with respect to
any Series attributable to a Member Nonrecourse Debt with respect to such Series
during any Company taxable year, each Member associated with such Series who has
a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5) as if each
Series were a separate "partnership," shall be specially allocated items of
Company income and gain with respect to such Series for such taxable year (and,
if necessary, subsequent years) in an amount equal to such Member's share of the
net decrease in
Page 52 of 72 Pages
Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in
a manner consistent with the provisions of Regulations Section 1.704(g)(2) as if
such Series were a separate "partnership." This Section 4.3.2 is intended to
comply with the partner nonrecourse debt minimum gain chargeback requirement of
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
4.3.3 If any Member associated with any Series unexpectedly receives an
adjustment, allocation, or distribution of the type contemplated by Regulations
Section 1.704-1(b)(2)(ii)(d)(4), or (5) or (6), items of income and gain shall
be allocated to all such Members associated with such Series (in proportion to
the amounts of their respective adjusted capital account deficits with respect
to such Series) in an amount and manner sufficient to eliminate the adjusted
capital account deficit of such Member with respect to such Series as quickly as
possible. It is intended that this Section 4.3.3 qualify and be construed as a
"qualified income offset" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(d).
4.3.4 If the allocation of Net Loss to a Member as provided in Section
4.2 hereof would create or increase an adjusted capital account deficit with
respect to any Series, then to the extent possible there shall be allocated to
such Member only that amount of Net Loss as will not create or increase an
adjusted capital account deficit with respect to any such Series. The Net Loss
that would, absent the application of the preceding sentence, otherwise be
allocated to such Member shall be allocated to the other Members associated with
such Series in accordance with their relative holdings of membership interests,
subject to the limitations of this Section 4.3.4.
4.3.5 The Nonrecourse Deductions for each taxable year of the Company
with respect to each Series shall be allocated to the Members associated with
such Series in a manner permitted by the Code and Regulations, as reasonably
determined by the Managing Member.
4.3.6 The allocations set forth in this Sections 4.3 (the "Regulatory
Allocations") are intended to comply with certain requirements of Regulations
Sections 1.704-1(b) and 1.704-2(i) as if each Series were a separate
"partnership." Notwithstanding the provisions of Section 4.2, the Regulatory
Allocations made with respect to any particular Series shall be taken into
account in allocating other items of income, gain, loss and deduction with
respect to such Series among the Members associated with such Series so that, to
the extent possible, the net amount of such allocations of other items and the
Regulatory Allocations to each Member with respect to such Series shall be equal
to the net amount that would have been allocated to each such Member if the
Regulatory Allocations had not occurred.
4.4. Tax Allocations.
4.4.1 Except as provided in Section 4.4.2 hereof, for income tax
purposes under the Code and the Regulations each Company item of income, gain,
loss and deduction with respect to each Series shall be allocated between the
Members associated with such Series as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to this Article 4.
4.4.2 Tax items with respect to Company assets that are contributed to
the Company and/or any Series with a Book Value that varies from its basis in
the hands of the contributing Member immediately preceding the date of
contribution shall be allocated between the Members for income tax purposes
pursuant to Regulations promulgated under Code Section 704(c) so as to take into
account such variation. Each Series holding such property shall account for such
Page 53 of 72 Pages
variation under the "traditional method," and/or such other permitted methods
elected by the Managing Member. If the Book Value of any Company asset with
respect to any Series is adjusted pursuant to Section 1.1.8, subsequent
allocations of income, gain, loss and deduction with respect to such Company
asset shall take account of any variation between the adjusted basis of such
Company asset for federal income tax purposes and its Book Value in the same
manner as under Code Section 704(c) and the Regulations promulgated thereunder.
Allocations pursuant to this Section 4.4.2 are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Net Profits, Net Losses
and any other items or distributions pursuant to any provision of this
Agreement.
4.5. Other Provisions.
4.5.1 For any fiscal year during which any part of a Membership
Interest or Economic Interest is transferred between the Members or to another
Person, the portion of the Net Profits, Net Losses and other items of income,
gain, loss, deduction and credit that are allocable with respect to such part of
a Membership Interest or Economic Interest shall be apportioned between the
transferor and the transferee under any method allowed pursuant to Section 706
of the Code and the applicable Regulations as determined by the Managing Member.
4.5.2 In the event that the Code or any Regulations require allocations
of items of income, gain, loss, deduction or credit different from those set
forth in this Article 4, the Managing Member is hereby authorized to make new
allocations in reliance on the Code and such Regulations, and no such new
allocation shall give rise to any claim or cause of action by any Member. The
Managing Member will utilize its reasonable best efforts to, to the extent
practicable, avoid causing the Company to recognize "unrelated business taxable
income" within the meaning of Sections 511 through 514 of the Code.
4.6. Distributions.
4.6.1 Tax Distributions.
(a) The Company, to the extent of any Distributable Amounts with
respect to any Series, may, in the discretion of the Managing Member, make
distributions to the Members associated with such Series, pro rata to the
taxable income expected to be allocated to them in that year, as soon as is
practicable following the close of each calendar year in amounts up to the
Presumed Tax Liability with respect to each such Member relating to such
calendar year (as estimated by the Managing Member based on the results of such
calendar year). Any amounts distributed to a Member pursuant to this Section
4.6.1 shall be treated as a dollar-for-dollar advance against the first amounts
otherwise distributable to such Member pursuant to the other provisions of this
Section 4.6.
(b) The term "Presumed Tax Liability" means, with respect to any
Member, with respect to any particular period, an amount equal to the product of
the excess, if any, of the cumulative amount of income and gain items of the
Company which are reported or reportable on the Schedule K-1 (IRS Form 1065)
with respect to such Member for such period, over the sum of the deduction and
loss items of the Company reported or reportable on such Schedule K-1 for such
period, and 0.35.
4.6.2 Series A Distributions. The Company shall make distributions with
respect to Series A as follows:
Page 54 of 72 Pages
(a) As soon as is practicable following the date upon which the
plan of reorganization for HAL in connection with the Bankruptcy shall have
become effective and final, the Company shall, subject to compliance with
Applicable Law (which, in the case of US and applicable state securities laws,
shall mean receipt of appropriate representations and warranties from any Member
receiving such distributions of Securities), distribute ninety percent (90%) of
the Securities then held by the Company with respect to Series A to the Members
holding Class A Units (such Securities to be distributed among such Members in
accordance with their respective holdings of Class A Units). In the event any
such Securities are sold prior to the distribution of such Securities described
in this paragraph 4.6.2(a), ninety percent (90%) of the net proceeds of sale
shall, subject to Applicable Law, be distributed pro-rata to the Class A Members
following consummation of each such sale, based upon their relative holdings of
Class A Units. Following the consummation of the distributions in this Section
4.6.2(a), any further interest of the Class A Member's in and to such Securities
and/or any proceeds from the disposition thereof shall be as described in
Section 4.6.2(b), below.
(b) All other Distributable Amounts with respect to Series A
which consist of either the remaining ten percent (10%) of such Securities
and/or the proceeds from the disposition of such Securities shall, except as
otherwise described hereunder, be distributed among the Members in the following
order and priority:
(i) First, to the Class A Members in an amount equal to the
excess of (1) ten percent (10%) of the aggregate Capital Contributions made to
the Company by the Class A Members pursuant to Sections 2.2.1 and 2.2.2, over
(2) the amounts previously distributed to the Class A Members pursuant to this
subsection 4.6.2(b)(i) (such amounts so distributed to be allocated among each
Class A Member based on the number of Class A Units held by each such Member);
(ii) Then, all remaining amounts with respect to such Series
shall thereafter be distributed solely to the Class M Member.
(c) Except as described in paragraph 4.6.2(d), below, all other
Distributable Amounts with respect to Series A which consist of amounts other
than the Securities and/or the proceeds of any disposition of any Securities
(including, but not limited to, any such amounts which are attributable to fees,
or other consulting or similar income earned by the Company from time to time)
shall be distributed first to the Class A Members in proportion to and to the
extent of each such Class A Member's unreturned Loan Capital which is
attributable to Series A expenses and costs described in Section 2.6.3, above,
and then any such remaining amounts shall be distributed ninety percent (90%) to
the Class A Members (such distributions to be pro rata amongst all such Class A
Members based upon the relative number of Class A Units held by each) and ten
percent (10%) to the Class M Member.
(d) Any Distributable Amounts with respect to Series A which
consist of proceeds from the repayment to the Company of any HHI Loans shall be
distributed to the Class A Members in proportion to and to the extent of the
excess of each such Member's Loan Capital, over the amount previously
distributed to such Member pursuant to this Section 4.6.2(d). Notwithstanding
the foregoing, the Managing Member shall have the discretion to apply any
proceeds towards the return of any Loan Capital pursuant to this Section
4.6.2(d) to such Members upon the sale of any Securities.
Page 55 of 72 Pages
(e) In the event that, on or before the date which is the fifth
(5th) annual anniversary of the Effective Date, the Company has not made
distributions to the Class A Members in the full amount described in Section
4.6.2(b)(i), above, the Company shall, as soon as is practicable following such
fifth annual anniversary (and subject to Applicable Law), make such
distributions with respect to Series A, through sales of Securities or
otherwise.
4.6.3 Series B Distributions. The Company shall make distributions with
respect to Series B as follows:
(a) As soon as is practicable following the date upon which the
plan of reorganization for HAL in connection with the Bankruptcy shall have been
approved (or, at such sooner time as shall be determined in the Managing
Member's discretion), the Company shall, subject to compliance with Applicable
Law (which, in the case of US and applicable state securities laws, shall mean
receipt of appropriate representations and warranties from any Member receiving
such distributions of Securities), distribute, in cash and/or in-kind, to the
Members holding Class B Units an amount equal to ninety percent (90%) of the net
value of Securities and other assets (including claims and related assets) then
held by the Company with respect to Series B (such distributions to be allocated
among all Class B Members on a pro rata basis in accordance with their
respective holdings of Class B Units). In the event that any such Securities or
other assets are sold (or, in the case of claims or similar assets, satisfied)
prior to the distribution date for such Securities or other assets described in
this Section 4.6.3(a), ninety percent (90%) of the net proceeds thereof shall,
subject to Applicable Law, be distributed pro-rata to the Class B Members
following consummation of each such sale, based upon their relative holdings of
Class B Units. Following the consummation of the distributions in this Section
4.6.3(a), any further interest of the Class B Member's in and to such Securities
and/or other assets (and/or any proceeds from the disposition thereof) shall be
as described in Section 4.6.3(b), below.
(b) All other Distributable Amounts with respect to Series B
which consist of either the remaining ten percent (10%) of such Securities or
other assets held by the Company with respect to Series B, and/or the proceeds
from the disposition of such Securities or other assets, shall, except as
otherwise described hereunder, be distributed among the Members in the following
order and priority:
(i) First, to the Class B Members in an amount equal to the
excess of (1) ten percent (10%) of the aggregate Capital Contributions made to
the Company by the Class B Members pursuant to Sections 2.3, above, over (2) the
amounts previously distributed to the Class B Members pursuant to this
subsection 4.6.3(b)(i) (such amounts so distributed to be allocated among each
Class B Member based on the number of Class B Units held by each such Member);
(ii) Then, all remaining amounts with respect to such Series
shall thereafter be distributed solely to the Class M Member.
(c) In the event that, on or before the date which is the fifth
(5th) annual anniversary of the Effective Date, the Company has not made
distributions to the Class B Members in the full amount described in Section
4.6.3(b)(i), above, the Company shall, as soon as is practicable following such
fifth (5th) annual anniversary (and subject to Applicable Law), make such
distributions with respect to Series B, through sales of Securities or
otherwise.
Page 56 of 72 Pages
4.6.4 Series C Distributions. The Company shall make distributions with
respect to Series C as follows:
(a) As soon as is practicable following the date upon which the
plan of reorganization for HAL in connection with the Bankruptcy shall have been
approved (or, at such sooner time as shall be determined in the Managing
Member's discretion), the Company shall, subject to compliance with Applicable
Law (which, in the case of US and applicable state securities laws, shall mean
receipt of appropriate representations and warranties from any Member receiving
such distributions of Securities), distribute in cash and/or in-kind, to the
Members holding Class C Units an amount equal to ninety percent (90%) of the net
value of Securities and other assets (including claims and related assets) then
held by the Company with respect to Series C (such distributions to be allocated
among all Class C Members on a pro rata basis in accordance with their
respective holdings of Class C Units). In the event that any such Securities or
other assets are sold (or, in the case of claims or similar assets, satisfied)
prior to the distribution date for such Securities or other assets described in
this paragraph 4.6.4(a), ninety percent (90%) of the net proceeds thereof shall,
subject to Applicable Law, be distributed pro-rata to the Class C Members
following consummation of each such sale, based upon their relative holdings of
Class C Units. Following the consummation of the distributions in this Section
4.6.4(a), any further interest of the Class C Member's in and to such Securities
and/or other assets (and/or any proceeds from the disposition thereof) shall be
as described in Section 4.6.4(b), below.
(b) All other Distributable Amounts with respect to Series C
which consist of either the remaining ten percent (10%) of such Securities or
other assets held by the Company with respect to Series C, and/or the proceeds
from the disposition of such Securities or other assets, shall, except as
otherwise described hereunder, be distributed among the Members in the following
order and priority:
(i) First, to the Class C Members in an amount equal to the
excess of (1) ten percent (10%) of the aggregate Capital Contributions made to
the Company by the Class C Members pursuant to Sections 2.4, above, over (2) the
amounts previously distributed to the Class C Members pursuant to this
subsection 4.6.4(b)(i) (such amounts so distributed to be allocated among each
Class C Member based on the number of Class C Units held by each such Member);
(ii) Then, all remaining amounts with respect to such Series
shall thereafter be distributed solely to the Class M Member.
(c) In the event that, on or before the date which is the fifth
(5th) annual anniversary of the Effective Date, the Company has not made
distributions to the Class C Members in the full amount described in Section
4.6.4(b)(i), above, the Company shall, as soon as is practicable following such
fifth annual anniversary (and subject to Applicable Law), make such
distributions with respect to Series C, through sales of Securities or
otherwise.
4.6.5 Series D Distributions. The Company shall make distributions with
respect to Series D as follows:
(a) As soon as is practicable following the date upon the
execution of the Note Purchase Agreement by all parties thereto, the Company
shall, subject to compliance with the terms of the Note Purchase Agreement, and
subject to compliance with Applicable Law (which, in the case of US and
applicable state securities laws, shall mean receipt of appropriate
representations
Page 57 of 72 Pages
and warranties from any Member receiving such distributions of Securities),
distribute in cash and/or in-kind, to the Members holding Class D Units an
amount equal to ninety percent (90%) of the net value of Securities and other
assets then held by the Company with respect to Series D (such distributions to
be allocated among all Class D Members on a pro rata basis in accordance with
their respective holdings of Class D Units). In the event that any such
Securities or other assets are sold (or, in the case of claims or similar
assets, satisfied) prior to the distribution date for such Securities or other
assets described in this paragraph 4.6.5(a), ninety percent (90%) of the net
proceeds thereof shall, subject to Applicable Law, be distributed pro-rata to
the Class D Members following consummation of each such sale, based upon their
relative holdings of Class D Units. Following the consummation of the
distributions in this Section 4.6.5(a), any further interest of the Class D
Members in and to such Securities and/or other assets (and/or any proceeds from
the disposition thereof) shall be as described in Section 4.6.5(b), below.
(b) All other Distributable Amounts with respect to Series D
which consist of either the remaining ten percent (10%) of such Securities or
other assets held by the Company with respect to Series D, and/or the proceeds
from the disposition of such Securities or other assets, shall, except as
otherwise described hereunder, be distributed among the Members in the following
order and priority:
(i) First, to each of the Class D Members in an amount equal
and in proportion to the excess of (1) the amounts set forth opposite each such
Class D Member's respective names on Exhibit A-4, attached hereto, over (2) the
amounts previously distributed to each such Class D Members pursuant to this
subsection 4.6.5(b)(i);
(ii) Then, all remaining amounts with respect to such Series
shall thereafter be distributed solely to the Class M Member.
(c) Notwithstanding the foregoing, however, any interest accrued
on the Convertible Notes and paid by HHI (other than pursuant to a conversion of
the Convertible Notes into stock and/or a repayment in cash on an "as-converted"
basis) shall be distributed solely to the Class D Members (pro rata to each
based on the number of Class D Units held by each). For this purpose, the term
"interest" shall not include any premium or other similar amounts paid by HHI
upon retirement or repayment, in whole or part, of the Convertible Notes.
(d) In the event that, on or before the date which is the fifth
(5th) annual anniversary of the Effective Date, the Company has not made
distributions to the Class D Members in the full amount described in Section
4.6.5(b)(i), above, the Company shall, as soon as is practicable following such
fifth annual anniversary (and subject to Applicable Law), make such
distributions with respect to Series D, through sales of Securities or
otherwise.
(e) It is acknowledged and agreed that, pursuant to the Note
Purchase Agreement, those portions of the Ansett Claim and Boeing Claim which
are distributed to the Members as described in Exhibit B, attached hereto, and
which are to be converted into Convertible Notes, are contemplated to be
converted in manner such that the relative portions of such Convertible Notes
shall be issued directly to each such Member. Following consummation of the
conversion of such portions of the Ansett Claims and the Boeing Claims in such
manner (i.e., such that 90% of the Convertible Notes are issued or otherwise
transferred directly to such Members), the distributions described in Section
4.6.5(a), above, shall be deemed satisfied in full and any further distributions
with respect to Series D shall be pursuant to Sections 4.6.5(b), above.
Page 58 of 72 Pages
4.6.6 Valuation. In the event of any distribution of Securities or
other assets other than cash pursuant to this Agreement, such Securities or
other assets shall be valued according to their Fair Market Value as of time of
such distribution. For this purpose, the term "Fair Market Value" shall mean (i)
in the case of any securities which are traded on a national securities
exchange, or quoted on a national market system ("Public Securities"), the
average of the closing sales prices (or if there shall have been no sale on any
day, the last bid price on such day) of such securities on such exchange or as
quoted on such market system, as the case may be, for the five (5) trading days
preceding such distribution, and (ii) in the case of any such Securities or
other assets which are not Public Securities, the fair market value thereof as
reasonably determined by the Managing Member, such determination to be provided
to the Members in writing at the time of such distribution, provided, however,
that if a Majority in Interest of the Members disagrees with such determination
in writing within ten (10) days of the receipt of such notice, such fair market
value shall be conclusively determined by an independent, internationally
recognized investment banking firm.
4.6.7 Prior Distributions. It is acknowledged and agreed that the
distributions described in Sections 4.6.2(a), 4.6.3(a) and 4.6.4(a), above, have
been made to the extent described in the attached Exhibit B (which is hereby
incorporated by this reference), and the Managing Member shall be, and hereby
is, authorized to adopt such conforming amendments to such Sections as shall be
determined by the Managing Member to be necessary or appropriate in order to
evidence or reflect the same.
ARTICLE 5
TRANSFER AND ASSIGNMENT OF INTERESTS
5.1. Transfers. Except for Permitted Transfers (as defined below), no
Member may Transfer (directly or indirectly) all or any portion of such Member's
Membership Interest in the Company (or any beneficial interests therein) to any
other Person except with the prior written consent of the Managing Member, or in
the case of a Transfer by the Managing Member, the consent of a Majority in
Interest of the Members, in each case, which consent shall not be unreasonably
withheld, conditioned or delayed. Any purported Transfer which is not in
accordance with this Agreement shall be null and void and of no effect. After
the consummation of any Transfer or any part of a Member's Membership Interests
in the Company, the Membership Interests (or portion thereof) so Transferred
shall continue to be subject to the terms and conditions of this Agreement and
any further Transfers shall be required to comply with all of the terms and
provisions of this Agreement.
5.2. Substitution of Members. A transferee of any Membership Interests in
the Company properly transferred hereunder shall have the right to become a
substitute Member associated with any applicable Series only if consent of the
Managing Member is given, such transferee executes an instrument satisfactory to
the Managing Member accepting and adopting the terms and provisions of this
Agreement, and such transferee pays any reasonable expenses in connection with
his, her or its admission as a substitute Member (as requested by the Managing
Member); provided, however, that this Section 5.2 shall not apply to Permitted
Transfers. The admission of a substitute Member shall not result in the release
of the Member who assigned the membership interest in the Company from any
liability that such Member may have to the Company.
5.3. Permitted Transfers.
Page 59 of 72 Pages
5.3.1 For purposes of this Agreement, the term "Permitted Transfer"
shall (subject to Section 5.3.2, below) mean (a) a transfer by a Member of all
or any portion of such Member's Membership Interests in the Company to (i) a
trust for the benefit of the transferor and/or his or her family members,
provided that such trust is, during the transferor's lifetime, controlled by the
transferor, or (ii) as an estate planning transfer to an entity over which the
transferor retains voting control, (b) any transfer by a Member to an Affiliate
of such Member (including any other account managed by any investment advisor of
such Member), or (c) any transfer by a permitted transferee described in (i) or
(ii), above, back to the original transferor Member thereof.
5.3.2 Notwithstanding the foregoing, in no event shall a purported
Transfer constitute a "Permitted Transfer" unless and to the extent that (a) the
Managing Member is notified of the material terms concerning such transfer prior
thereto (including, but not limited to, the would-be transferee and the
consideration to be received therefore) and (b) the would-be transferee agrees
in advance in writing to be bound by the provisions of all agreements applicable
to the Membership Interests to be transferred (including, without limitation, a
joinder to this Agreement).
5.4. Additional Transfer Restrictions. Notwithstanding anything herein to
the contrary, no Member may, without the prior written consent of the Managing
Member, Transfer all or any portion of its membership interest in the Company to
the extent such Transfer (a) would violate any applicable securities laws, or
(b) would cause a termination of the Company for federal income tax purposes.
5.5. Enforcement of Transfer Restrictions. The restrictions on Transfer
contained in this Agreement are an essential element in the ownership of
membership interests in the Company. Upon application to any court of competent
jurisdiction, the Company and/or a Member, as the case may be, shall be entitled
to a decree against any Person violating or about to violate such restrictions,
requiring their specific performance, including those prohibiting a Transfer of
all or a portion of such membership interests.
ARTICLE 6
BOOKS AND RECORDS; ACCOUNTING
6.1. Company Books and Records. The books and records of the Company will
be maintained at the principal office of the Company and will be available for
examination by any Member or such Member's duly authorized representatives at
any reasonable time upon written notice by such Member to the Company. The
Company will maintain the following books and records:
6.1.1 A current list of the full name and last known business address
of each Member, their respective numbers and classes of Units, together with the
Capital Contributions and Capital Account balances of each Member;
6.1.2 A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed;
6.1.3 A copy of this Agreement and any and all amendments thereto or
restatements thereof, together with executed copies of any powers of attorney
pursuant to which this Agreement or any such amendments or restatements thereto
have been executed;
Page 60 of 72 Pages
6.1.4 Copies of the Company's federal, state, and local income tax or
information returns and reports, if any, for the six (6) most recent taxable
years; and
6.1.5 Copies of the annual financial statements of the Company, if any,
for the six (6) most recent fiscal years.
6.2. Inspection of Records. Each Member shall have the right, upon
reasonable written request and subject to such reasonable standards as the
Managing Member may from time to time establish, to obtain from the Managing
Member for purposes reasonably related to the Member's interest as a Member of
the Company, the information set forth above in Section 6.1, as well as
information regarding the status of the business and financial condition of the
Company (generally consisting of financial statements of the Company) and such
other information regarding the affairs of the Company as is just and reasonable
in light of the purpose related to the Member's interest as a Member for which
such information is sought. The Managing Member may, however, keep confidential
from any Member any information that the Company is required by law or agreement
to keep confidential.
6.3. Company Tax Returns and Tax Elections. The Company's accountants will
be instructed by the Managing Member to prepare and file all required tax
returns for the Company and/or each Series. The Managing Member will cause the
Company and/or each Series to make any tax election necessary for completion of
any such tax returns. In the event of a distribution of property made in the
manner provided in Section 734 of the Code, or in the event of a transfer of an
interest in the Company by a Member made in the manner provided in Section 743
of the Code, the Managing Member may, in its discretion, cause the Company
and/or any Series to file an election under Section 754 of the Code. The Members
agree to cooperate with the Managing Member in connection with the making of any
such elections.
6.4. Reports. Within ninety (90) days following the close of each of the
Company's fiscal years, the Company shall provide copies of unaudited financial
statements with respect to such year to the Members. Each Member will have the
right to request in writing and pay for (out of their separate funds, and which
payments shall not be reimbursed by or otherwise recoverable through or from the
Company or any other Member) an annual audit of the Company, and, provided such
request and payments by the requesting Member are timely made, the Company shall
make available all necessary documents, agreements, and any other pertinent
information required to have such audit completed within ninety (90) days of
each calendar year end. The Company shall cause to be filed, in accordance with
the Delaware Act, all reports and documents required to be filed with any
governmental agency. The Company shall cause to be prepared at least annually,
information concerning the Company's operations necessary for the completion of
the Member's federal and state income tax returns. The Company shall send or
cause to be sent to each Member within ninety (90) days after the end of each
taxable year such information as is necessary to complete the Member's federal
and state income tax returns and a copy of the Company's federal, state and
local income tax returns for such year.
6.5. Tax Matters for the Company. The Managing Member shall designate a
"Tax Matters Partner" for the Company and each Series within the meaning of
Section 6231 of the Code. The Tax Matters Partner shall have no authority to
settle or compromise any matter in respect of taxes of the Company and/or each
Series, to waive any period of limitations, or to otherwise bind the Company in
any proceeding or claim in respect of taxes of the Company and/or each Series,
unless such authority is expressly conferred on the Tax Matters Partner by the
Managing Member.
Page 61 of 72 Pages
In addition, unless the Managing Member expressly provides
otherwise, the Managing Member shall control any proceeding in respect of taxes
of the Company and/or each Series. The Managing Member may, in its discretion,
and subject to the requirements of the Code, remove and replace the Tax Matters
Partner at any time and from time to time.
ARTICLE 7
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
7.1. Events of Dissolution. The Company and each Series shall be dissolved
and wound up on the first to occur of any of the following events:
7.1.1 A sale of all or substantially all of the Company's assets;
7.1.2 The vote of Members holding at least two-thirds of all Units
(regardless of class); and
7.1.3 Any other event that Applicable Law specifies must operate as an
event causing the dissolution of a limited liability company, notwithstanding
any provision to the contrary in this Agreement.
7.2. Effect of Dissolution. The dissolution of the Company and each Series
shall be effective on the day on which the event occurs giving rise to the
dissolution, but the Company and/or each Series shall not terminate until it is
wound up and its assets have been distributed as provided in Section 7.4 of this
Agreement. Notwithstanding the dissolution of the Company and each Series, prior
to the termination of the Company and each Series, the business of the Company,
and each Series and the affairs of the Members, as such, shall continue to be
governed by this Agreement.
7.3. No Capital Contribution Upon Dissolution. Each Member shall look
solely to the assets of the Series to which such Member is associated for all
distributions with respect to the such Series, its Capital Contribution thereto,
its Capital Account and its share of Net Profits or Net Losses with respect
thereto, and shall have no recourse therefore (upon dissolution or otherwise)
against any other Member. Accordingly, if any Member has a deficit balance in
its Capital Account with respect to each Series (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which the liquidation occurs), then such Member shall have no
obligation to make any Capital Contribution with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any other
person for any purpose whatsoever.
7.4. Priority of Liquidating Distributions. Upon the occurrence of a
dissolution event described in Section 7.1 above, the Company and each Series
shall terminate. In the event of the dissolution and termination of the Company
and each Series, the Managing Member shall proceed with an orderly liquidation
of the Company and each Series and the proceeds of such liquidation shall be
applied and distributed in the following order of priority:
7.4.1 To creditors of the Company and each Series for payment of the
debts and liabilities of the Company and each such Series (as the case may be)
and the expenses of liquidation;
Page 62 of 72 Pages
7.4.2 To the setting up of any reserves that the Managing Member may
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Company and each such Series. Such reserves shall be paid
over by the Managing Member to a bank or other institutional escrow agent to be
held for the purpose of disbursing such reserves in payment of the
aforementioned contingencies, and at the expiration of such period as the
Managing Member may deem advisable, to distribute the balance in the manner
provided in this Section 7.4; and
7.4.3 To the Members in accordance with Section 4.6, above.
ARTICLE 8
AMENDMENTS
8.1. General. Except as set forth in Section 8.2 below, any and all
amendments to this Agreement may be made by the Managing Member only with the
written consent of a Majority in Interest of the Members. In making any
amendments, there shall be prepared and filed by, or for, the Managing Member
such documents and certificates as may be required under the Delaware Act and
under the laws of any other jurisdiction applicable to the Company; provided,
however, that any amendment which alters in a negative way the economic rights
of any Member (including the Managing Member) shall require the written consent
of that Member.
8.2. Special Rules. Notwithstanding Section 8.1, above, this Agreement may
be amended by the Managing Member, without the consent of any Member (a) to cure
any ambiguity, to correct or supplement any provision hereof which may be
inconsistent with any provision hereof, or to make any other provision with
respect to matters, or questions arising under this Agreement not inconsistent
with the intent of this Agreement; provided, however, that no such amendment
shall, except as otherwise expressly provided hereunder, have a disproportionate
adverse impact on any Member or class of Members, and (b) as expressly provided
elsewhere in this Agreement.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Each Member hereby represents and warrants to, and agrees with, the other
Members and the Company as follows:
9.1. Preexisting Relationship or Experience. By reason of its business or
financial experience, or by reason of the business or financial experience of
its financial advisor who is unaffiliated with and who is not compensated,
directly or indirectly, by the Company or any affiliate or selling agent of the
Company, it is capable of evaluating the risks and merits of an investment in
the Membership Interests of the Company and of protecting its own interests in
connection with this investment.
9.2. Investment Intent. It is acquiring the Membership Interests in the
Company for investment purposes for its own account only and not with a view to
or for sale in connection with any distribution of all or any part of such
membership interest. No other person will have any direct or indirect beneficial
interest in or right to such membership interest.
9.3. No Registration of Interests. It acknowledges that the Membership
Interests of the Company have not been registered under the Securities Act, or
under any applicable blue sky laws in reliance, in part, upon its
representations, warranties, and agreements herein.
Page 63 of 72 Pages
9.4. Restricted Securities. It understands that the Membership Interests in
the Company are "restricted securities" under the Securities Act in that such
Membership Interests will be acquired from the Company in a transaction not
involving a public offering, and that the Membership Interests may be resold
without a registration under the Securities Act only in certain limited
circumstances and that otherwise the Membership Interests must be held
indefinitely.
9.5. No Obligations to Register. It represents, warrants, and agrees that
the Company and the Board of Managers are under no obligation to register or
qualify the Membership Interests of the Company under the Securities Act or
under any state securities law, or to assist it in complying with any exemption
from registration and qualification.
9.6. No Disposition in Violation of Law. Without limiting the
representations set forth above, and without limiting anything contained
elsewhere in this Agreement, it will not make any disposition of all or any part
of its Membership Interest in the Company which will result in violation by it
or by the Company of the Securities Act, or any other applicable securities
laws. Without limiting the foregoing, it agrees not to make any disposition of
all or any part of its Membership Interest in the Company unless and until it
has notified the Company of the proposed disposition and has furnished the
Company with a detailed statement of the circumstances surrounding the proposed
disposition, and, if reasonably requested by the Managing Member, it has
furnished the Company with a written opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of any
securities under the Securities Act or the consent of or a permit from
appropriate authorities under any applicable state securities laws.
9.7. Investment Risk. It acknowledges that the Membership Interests in the
Company are speculative investments which involve a substantial degree of risk
of loss of its entire investment in the Company, that it understands and takes
full cognizance of the risks related to the purchase of such Membership
Interests.
9.8. Investment Experience. It is an experienced investor in unregistered
securities of limited liability companies.
9.9. Restrictions on Transferability. It acknowledges that there are
substantial restrictions on the transferability of the Membership Interests in
the Company pursuant to this Agreement, that there is no public market for such
Membership Interests and that none is expected to develop, and that,
accordingly, it may not be possible for it to liquidate its investment in the
Company.
9.10. Information Reviewed. It has received and reviewed this Agreement and
the other information provided by the Company it considers necessary or
appropriate for deciding whether to invest in the Company.
9.11. No Advertising. It has not seen, received, been presented with, or
been solicited by any leaflet, public promotional meeting, article or any other
form of advertising or general solicitation with respect to the sale of
Membership Interests in the Company.
9.12. Accredited Investors It is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D under the Securities Act. Each Member
which has been formed specifically for the purpose of investing in the Company
shall provide to the Company a certification in form and substance reasonably
acceptable to the Company to the effect that ownership of beneficial interests
in such Member are "accredited investors" within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
Page 64 of 72 Pages
9.13. ERISA Matters. Each Member represents and warrants that it is not (a)
an "employee benefit plan" within the meaning of Section 3(3) of ERISA, whether
or not it is subject to the provisions of Title I of ERISA, (b) a plan described
in Section 4975(e)(1) of the Code, or (c) an entity whose underlying assets
include "plan assets" (as defined in Federal regulations codified at 29 CFR ss.
2510.3-101, et.seq., as the same may be amended from time to time, which
describe the circumstances under which an entity in which an ERISA-covered plan
invests will be deemed to be "plan assets" for certain purposes of ERISA and/or
the Code). In addition, each Member covenants that it will, to the fullest
extent practicable, manage and conduct its affairs so as to avoid violating the
representation set forth in the immediately preceding sentence, and further
covenants to notify the Managing Member in the event that at any time such
representation is no longer accurate.
9.14. Representations Relating to Convertible Notes. It is acquiring its
portion of the Convertible Notes pursuant to the Note Purchase Agreement for
investment purposes for its own account only and not with a current view to or
for sale in connection with any distribution of all or any part of such
Convertible Notes, except pursuant to an effective registration statement under
the Securities Act, or applicable state law, or pursuant to an exemption for
registration under said Securities Act.
ARTICLE 10
MISCELLANEOUS
10.1. Notices.
10.1.1 Any notice, election, demand, request, consent, approval,
concurrence or other communication given or made under any provision of this
Agreement shall be deemed to have been sufficiently given or made for all
purposes only if it is in writing and it is: (a) delivered personally to the
party to whom it is directed, or (b) sent by overnight express mail, postage and
charges prepaid, addressed to the party to whom it is directed, at its address
set forth on the Managing Member's books and records and as indicated opposite
each Member's name on Exhibit A-1, attached hereto. Any Member may change its
address or facsimile number for purposes of this Agreement by giving the Company
and the Managing Member notice of such change in the manner provided above for
the giving of notices.
10.1.2 Except as otherwise expressly provided in this Agreement, any
such notice, election, demand, request, consent, approval, concurrence or other
communication (a) given or made in the manner indicated in clause (a) of Section
10.1.1 above shall be deemed to be given or made on the day on which it was
delivered; and (b) given or made in the manner indicated in clause (b) of
Section 10.1.1 above shall be deemed to be given or made on the business day
immediately following the day on which it was deposited in a regularly
maintained receptacle for the deposit of overnight express mail.
10.2. Confidentiality.
10.2.1 Each Member hereby acknowledges that the Company may be in
possession of confidential information the improper use or disclosure of which
could have a material adverse effect upon the Company, HHI, or any of their
respective Affiliates, and agrees that all information provided to them by or on
behalf of the Company or the Managing Member concerning the business or assets
of the Company, HHI, or any of their respective Affiliates shall be deemed
strictly confidential and shall not, without the prior consent of the Managing
Member, be (a) disclosed to
Page 65 of 72 Pages
any Person or (b) used by a Member other than for a Company purpose or for a
purpose reasonably related to protecting such Member's interest in the Company.
The Managing Member hereby consents to the disclosure by each Member of such
information to such Member's accountants, attorneys and similar advisors bound
by a duty of confidentiality; moreover, the foregoing requirements of this
Section 10.2 shall not apply to a Member with regard to any information that is
currently or becomes publicly known or available in the absence of any improper
or unlawful action on the part of such Member or otherwise becomes known or
available to such Member (via legitimate means) other than through or on behalf
of the Company or the Managing Member.
10.2.2 Except as otherwise provided in this Section 10.2 or in Section
3.7, above, or as otherwise required by Applicable Law, the Managing Member and
the Company agree not to disclose the terms of this Agreement, and/or to
disclose the identity of any Members without the prior consent of a Majority in
Interest of the Members.
10.2.3 The Managing Member may, in its sole and absolute discretion,
keep confidential from any Member information to the extent the Managing Member
reasonably determines that disclosure of such information to such Member likely
would have a material adverse effect upon the Company, HHI and/or any of their
respective Affiliates, provided that the Managing Member must disclose to a
Member any information that such Member requires to comply with Applicable Law.
10.2.4 Each Member (a) acknowledges that the Managing Member and/or one
or more representatives of the Company may acquire confidential third party
information (e.g., through HHI directorships or the like) that, pursuant to
related fiduciary, contractual, legal or similar obligations, cannot be
disclosed to the Company or the Members; and (b) agrees that holding or failing
to disclose such information to the Company or the Members shall not be in
breach of any duty under this Agreement or the Delaware Act so long as such
obligations were undertaken in good faith.
10.2.5 The Managing Member agrees to use its reasonable efforts to
cause any confidential information regarding HHI or any of its Affiliates which
has been disclosed to the Members by the Managing Member and which the Managing
Member deems to be material to be publicly disclosed prior to the conclusion of
the Bankruptcy. Following the conclusion of the Bankruptcy, the Managing Member
shall use its reasonable efforts so as to not disclose any material, non-public
information regarding HHI or any of its Affiliates to any Member without the
prior consent of such Member. Notwithstanding the foregoing, however, nothing in
this Section 10.2.5 shall be deemed to impose upon the Managing Member any
indemnity or other liability towards any Member relating to any violation of
Applicable Law with respect to trades, sales or other transfers of Securities by
such Member.
10.3. Company Counsel. Legal counsel to the Company may also be legal
counsel to any Member or any Affiliate of a Member. The Company has initially
selected Foley & Lardner LLP ("Company Counsel") as legal counsel to the
Company. Each Member acknowledges that Company Counsel does not represent any
Member in the absence of a clear and explicit agreement to such effect between
the Member and Company Counsel, and that in the absence of any such written
agreement Company Counsel shall owe no duties directly to that Member.
Notwithstanding any adversity that may develop, in the event any dispute or
controversy arises between any Members and the Company, then each Member agrees
that Company Counsel may represent either the Company or such Member in any such
dispute or controversy to the extent permitted by the
Page 66 of 72 Pages
California Rules of Professional Conduct or similar rules in any other
applicable jurisdiction, and each Member hereby consents to such representation.
10.4. Further Assurances. Each of the parties hereto does hereby covenant
and agree on behalf of himself, his successors, and his assigns, without further
consideration, to prepare, execute, acknowledge, file, record, publish, and
deliver such other instruments, documents and statements, and to take such other
action as may be required by law or reasonably necessary or advisable to
effectively carry out the purposes of this Agreement.
10.5. Counterparts/Facsimile. This Agreement may be executed in any number
of counterparts and all so executed shall constitute one Agreement, binding on
all of the parties hereto, notwithstanding that all of the parties are not
signatory to the original or the same counterpart. This Agreement may be
executed by facsimile.
10.6. Governing Law. This Agreement is deemed to have been entered into and
executed in the State of Delaware, and all questions with respect to the
construction of this Agreement and the rights and liabilities of the parties
shall be determined in accordance with the provisions of the internal laws of
the State of Delaware, without regard to conflicts of laws principles.
10.7. Binding Effect. Except as otherwise provided herein to the contrary,
this Agreement shall be binding upon and inure to the benefit of the parties
signatory hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
10.8. Provisions Severable. The provisions of this Agreement are severable.
If any article, section, paragraph, provision or clause of this Agreement shall
be enforceable or invalid, it shall not affect the enforceability or validity of
any one or more of the other articles, sections, paragraphs or provisions of
this Agreement.
10.9. Construction of Agreement. This Agreement shall be construed as if
all parties prepared this Agreement. Words in the singular shall be held to
include the plural and vice versa and the words of one gender shall be held to
include the other genders as the context requires; the terms "hereof", "herein",
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement and not to any particular provision of this
Agreement, and Article, Section, paragraph and Exhibit references are to the
Articles, Sections, paragraphs and Exhibits to this Agreement, unless otherwise
specified; the word "or" shall not be exclusive; and provisions shall apply,
when appropriate, to successive events and transactions.
10.10. Entire Agreement. This Agreement and each of its Exhibits
constitutes the entire agreement between the parties relating to the subject
matter of this Agreement and such Exhibits and supersedes all prior oral and
written negotiations, commitments, and understandings of the parties with
respect to the subject matter hereof.
10.11. Parties in Interest. Except for the Persons expressly contemplated
as beneficiaries of the indemnity provisions set forth in this Agreement,
nothing in this Agreement shall confer any rights or remedies under or by reason
of this Agreement upon any Persons other than the Members and Managing Member
and their respective successors and assigns nor shall anything in this Agreement
relieve or discharge the obligation or liability of any third Person to any
party to this Agreement, nor shall any provision give any third Person any right
of subrogation or other action, claim or right over or against any Member or the
Company.
Page 67 of 72 Pages
10.12. Use of Pronouns/References to a Member. References to a Member in
the singular or plural, as him, her, it or other like references, shall also,
where the context so requires, be deemed to include the singular or the plural,
or masculine, feminine or neuter reference, as the case may be.
[Remainder of Page Intentionally Left Blank]
Page 68 of 72 Pages
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
RC AVIATION MANAGEMENT, LLC GUGGENHEIM PORTFOLIO CO. XXXI, LLC
By: /s/ Randall Jenson By: /s/ [illegible]
------------------------------ ---------------------------------
Its: Manager Its: Whitebox Advisors, LLC
----------------------------- Andrew Redleaf, CEO
Investment Advisor to the Fund
---------------------------------
QVT HAWAIIAN LLC by its president RIVER RUN RC AVIATION HOLDINGS, LLC
QVT ASSOCIATES GP LLC
By: /s/ Nicholas Brumm By: /s/ Ian Wallace
----------------------------- ---------------------------------
Its: Managing Member Its: Managing Member
----------------------------- ---------------------------------
By: /s/ Tracy Fu
-----------------------------
Its: Managing Member
-----------------------------
DB HAWAIIAN LLC by its president LITESPEED MASTER FUND, LTD
QVT FINANICAL LP by its general
partner
QVT FINANCIAL GP LLC
By: /s/ Nicholas Brumm By: /s/ [illegible]
----------------------------- ---------------------------------
Its: Managing Member Its: Managing Member
----------------------------- ---------------------------------
By: /s/ Tracy Fu
-----------------------------
Its: Managing Member
-----------------------------
WHITEBOX-RC AVIATION (CONVERTIBLE WATERSHED CAPITAL PARTNERS, L.P. by its
ARBITRAGE), LLC general partner WS PARTNERS, L.L.C.
By: /s/ Andrew Redleaf By: /s/ Meridee A. Moore
----------------------------- ---------------------------------
Its: Managing Member Its: Senior Managing Member
----------------------------- ---------------------------------
WHITEBOX-RC AVIATION (HEDGED HIGH WATERSHED CAPITAL INSTITUTIONAL PARTNERS,
YIELD), LLC LP, by its general partner WS PARTNERS L.L.C.
By: /s/ Andrew Redleaf By: /s/ Meridee A. Moore
----------------------------- ---------------------------------
Its: Managing Member Its: Senior Managing Member
----------------------------- ---------------------------------
WHITEBOX-RC AVIATION (PANDORA WATERSHED CAPITAL PARTNERS (OFFSHORE),
SELECT), LLC LLC
By: /s/ Andrew Redleaf By: /s/ Meridee A. Moore
----------------------------- ---------------------------------
Its: Managing Member Its: Senior Managing Member
----------------------------- ---------------------------------
WHITEBOX-RC AVIATION (INTERMARKET),
LLC
By: /s/ Andrew Redleaf
-----------------------------
Its: Managing Member
-----------------------------
Page 69 of 72 Pages
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
GPI HOLDINGS, L.L.C. KERMIT I, LLC and KERMIT II, LLC
By: /s/ Bryan Verona By: SAGAMORE HILL HUB FUND, LTD.
------------------------------ their Manager
Its: By: Sagamore Hill Capital Management, L.P.
----------------------------- its Investment Manager
By: /s/ Thomas FitzGerald
---------------------------------
Name: Tom FitzGerald
Title: Managing Director
SHADOW AVIATION, LLC GRYPHON HAWAIIAN HOLDINGS, LLC
By: /s/ [illegible] By: /s/ Warren W. Garden
------------------------------ ---------------------------------
Its: Managing Member Its: Authorized Agent
----------------------------- ---------------------------------
TRIAGE CAPITAL MANAGEMENT LP TRIAGE CAPITAL MANAGEMENT B, L.P.
By: By:
------------------------------ ---------------------------------
Its: Its:
----------------------------- ---------------------------------
TOF HOLDINGS, LLC RCG CARPATHIA MASTER FUND, LTD.
By: By:
------------------------------ ---------------------------------
Its: Its:
----------------------------- ---------------------------------
HARBERT DISTRESSED INVESTMENT PORTSIDE GROWTH AND OPPORTUNITY FUND
FUND, L.P.
By:
By: HMC Distressed Investment ---------------------------------
Fund GP, LLC
By: HMC - New York, Inc. Its:
--------------------------------
By:
------------------------------
Its:
-----------------------------
CANYON CAPITAL ADVISORS, LLC HOTEL ALPHA HOLDING COMPANY, LLC
By: By:
------------------------------ ---------------------------------
Its: Its:
----------------------------- ---------------------------------
[Counterpart Signature Page No. 2 of 2 to Second Amended and Restated Limited
Liability Company Agreement of RC Aviation LLC, a Delaware limited liability
company]
Page 70 of 72 Pages
EXHIBIT 3
to
SCHEDULE 13D
WATERSHED CAPITAL PARTNERS, L.P.
WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.
WATERSHED CAPITAL PARTNERS (OFFSHORE), LTD.
c/o WATERSHED ASSET MANAGEMENT, L.L.C.
ONE MARITIME PLAZA, SUITE 1525
SAN FRANCISCO, CA 94111
November 2, 2005
RC Aviation LLC
12730 High Bluff Drive, Suite 180
San Diego, CA 92130
Attention: Randall Jensen
Re: Series A Distributions
----------------------
Ladies and Gentlemen:
Reference is made to that certain Second Amended and Restated Limited Liability
Company Agreement of RC Aviation LLC ("RCA"), dated as of June 1, 2005 (the "LLC
Agreement"), by and among those Persons whose names are listed on Exhibits A-1,
A-2, A-3 and A-4 attached thereto. Capitalized terms used but not defined herein
shall have the meanings set forth in the LLC Agreement.
On or about the date of the LLC Agreement Watershed Capital Partners, L.P.,
Watershed Capital Institutional Partners, L.P. and Watershed Capital Partners
(Offshore), Ltd. (together, the "Watershed Funds") agreed with RCA to defer
their right to receive Securities under Section 4.6.2 of the LLC Agreement until
the date such Securities are registered under a registration statement filed
with the Securities and Exchange Commission. The parties now wish to clarify
that arrangement as follows: Notwithstanding Section 4.6.2 of the LLC Agreement,
the Watershed Funds agree with RCA to defer their right to receive Securities
under Section 4.6.2 of the LLC Agreement until the earlier of (a) the date such
Securities have been registered under a registration statement filed with the
Securities and Exchange Commission and (b) January 31, 2006. By signing below,
each of the undersigned acknowledges and confirms the foregoing.
Page 71 of 72 Pages
This letter may be executed simultaneously in one or more counterparts, and by
different parties hereto in separate counterparts, each of which when executed
will be deemed an original, but all of which taken together will constitute one
and the same instrument. This letter, to the extent signed and delivered by
means of a facsimile machine, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person.
Very truly yours,
RC AVIATION LLC
By: /s/ Randall Jenson
-------------------------
Name: Randall Jenson
Title: Manager and Vice-President
Acknowledged and Confirmed:
WATERSHED CAPITAL PARTNERS, L.P.
WATERSHED CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: WS Partners, L.L.C.
Its General Partner
By: /s/ Meridee A. Moore
------------------------------
Name: Meridee A. Moore
Title: Senior Managing Member
Date: November 4, 2005
WATERSHED CAPITAL PARTNERS (OFFSHORE), LTD.
By: Watershed Asset Management, L.L.C.
Its Investment Manager
By: /s/ Meridee A. Moore
------------------------------
Name: Meridee A. Moore
Title: Senior Managing member
Date: November 4, 2005
Page 72 of 72 Pages