Here is Section 7.5.2 from the SEC filing:
7.5.2 The non-defaulting Member may elect to have the defaulting Member’s Ownership Interest diluted or eliminated as follows:
(a) The Reduced Member’s Ownership Interest shall be recalculated by dividing: (i) the sum of (A) the value of the Reduced Member’s Initial Contribution, as applicable; (B) the total of all of the Reduced Member’s contributions to the Company pursuant to the Contribution Agreements or otherwise pursuant to this Agreement; and (C) the amount, if any, the Reduced Member contributed to the adopted current Program and Budget with respect to which the default occurred; by (ii) the sum of (A), (B) and (C) above for both Members; and then multiplying the result by eighty percent (80%). The Ownership Interest of the other Member shall be increased by the amount of the reduction in the Ownership Interest of the Reduced Member, including the further reduction under this Section 7.5.2.
(b) For a default relating to a Program and Budget covering in whole or in part Expansion or Modification to which the defaulting Member has agreed to contribute, at the non-defaulting Member’s election, the defaulting Member shall be deemed to have withdrawn and to have automatically relinquished its interest in the Assets to the non-defaulting Member; provided, however, the defaulting Member shall have the right to receive only from ten percent (10%) of Net Profits, if any, and not from any other source, an amount equal to eighty percent (80%) of the defaulting Member’s Equity Account balance at the time of such default. Upon receipt of such amount the defaulting Member shall thereafter have no further right, title or interest in the Assets.
(c) Dilution under this Section 7.5.2 shall be effective as of the date of the original default, and Section 6.7 shall not apply. The amount of any Cover Payment under Section 7.4 and interest, or any interest accrued in accordance with Section 7.3, shall be deemed to be amounts contributed by the non-defaulting Member, and not as amounts contributed by the defaulting Member.
(d) Whenever the Ownership Interests are recalculated pursuant to this Section 7.5.2, (i) the Equity Accounts of both Members shall be adjusted to bear the same ratio to each other as their recalculated Ownership Interests; and (ii) the portion of Capital Account attributable to the reduced Ownership Interest of the Reduced Member shall be transferred to the other Member. |
