EXHIBIT 10.13
LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXXXXXX.XXX, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT
REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS
FURTHER SUBJECT TO OTHER RESTRICTIONS, THE TERMS AND CONDITIONS OF WHICH ARE SET
FORTH IN THIS AGREEMENT.
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..............................................................................2
1.1 "Act".........................................................................................2
1.2 "Additional Capital"..........................................................................2
1.3 "Adjusted Capital Account"....................................................................2
1.4 "Adjusted Capital Contribution"...............................................................2
1.5 "Affiliate"...................................................................................2
1.6 "Agreed Overrun"..............................................................................2
1.7 "Agreement"...................................................................................2
1.8 "Affected Interest"...........................................................................2
1.9 "Bankruptcy"..................................................................................2
1.10 "Bona Fide Offer".............................................................................3
1.11 "Budget" .....................................................................................3
1.12 "Capital Account".............................................................................3
1.13 "Capital Contribution"........................................................................3
1.14 "Certificate of Formation"....................................................................3
1.15 "Closing".....................................................................................3
1.16 "Code" .....................................................................................3
1.17 "Company".....................................................................................3
1.18 "Company Minimum Gain"........................................................................3
1.19 "Confidential Information"....................................................................4
1.20 "Contribution Cap"............................................................................4
1.21 "Contribution Loan"...........................................................................4
1.22 "Cumulative Default Amount"...................................................................4
1.23 "Distributable Cash"..........................................................................4
1.24 "Distribution"................................................................................4
1.25 "Economic Interest"...........................................................................5
1.26 "Economic Interest Holder"....................................................................5
1.27 "Economic Risk of Loss".......................................................................5
1.28 "Eligible Members"............................................................................5
1.29 "Fair Market Value"...........................................................................5
1.30 "Fiscal Year".................................................................................5
1.31 "Former Member"...............................................................................5
1.32 "Former Member's Interest"....................................................................5
1.33 "Initial Call Notice".........................................................................5
1.34 "Interest Holder".............................................................................5
1.35 "Joint Designee"..............................................................................5
1.36 "Majority in Interest"........................................................................5
1.37 "Managers"....................................................................................5
1.38 "MediaChase"..................................................................................5
1.39 "Member" .....................................................................................5
1.40 "Member Minimum Gain".........................................................................6
1.41 "Member Nonrecourse Debt".....................................................................6
1.42 "Member Nonrecourse Deductions"...............................................................6
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1.43 "Membership Interest".........................................................................6
1.44 "Membership Termination Event"................................................................6
1.45 "Net Profits" and "Net Losses"................................................................6
1.46 "Noncompete Date".............................................................................6
1.47 "Nonrecourse Deductions"......................................................................7
1.48 "Nonrecourse Liability".......................................................................7
1.49 "Notice" .....................................................................................7
1.50 "Offered Interest"............................................................................7
1.51 "Onlinefilmsales".............................................................................7
1.52 "Person" .....................................................................................7
1.53 "Preferred Return"............................................................................7
1.54 "Preferred Return Account"....................................................................7
1.55 "Prime" ......................................................................................7
1.56 "Securities Act"..............................................................................7
1.57 "Subsequent Call Notice"......................................................................7
1.58 "Tax Credits".................................................................................7
1.59 "Tax Matters Partner".........................................................................7
1.60 "Transfer"....................................................................................7
1.61 "Treasury Regulations"........................................................................8
1.62 "United States Bankruptcy Code"...............................................................8
1.63 "Unpaid Preferred Return".....................................................................8
1.64 "Voting Interest".............................................................................8
ARTICLE II ORGANIZATIONAL MATTERS....................................................................9
2.1 Name..........................................................................................9
2.2 Term..........................................................................................9
2.3 Office and Agent..............................................................................9
2.4 Purpose of Company............................................................................9
2.5 Intent .......................................................................................9
2.6 Members ......................................................................................9
2.7 Formation Expenses............................................................................9
ARTICLE III CAPITAL CONTRIBUTIONS....................................................................10
3.1 Initial Capital Contributions................................................................10
3.2 Additional Capital Contributions.............................................................10
(a) Additional Contributions by Onlinefilmsales..............................................10
(b) Additional Capital.......................................................................10
(c) Call Procedures; Payment of Call.........................................................10
(d) Contribution of Default Capital..........................................................10
(e) Effects of Contribution of Default Capital...............................................11
(f) Financing of the Company.................................................................13
3.3 Capital Accounts.............................................................................13
3.4 No Withdrawals of Capital....................................................................13
3.5 Loans; No Compensation.......................................................................14
ARTICLE IV MEMBERS..................................................................................14
4.1 Admission of Additional Members..............................................................14
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4.2 Withdrawals or Resignations..................................................................14
4.3 Members Are Not Agents.......................................................................14
4.4 Meetings of Members; Written Consent.........................................................14
ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY....................................................15
5.1 Management of the Company by the Managers....................................................15
(a) Exclusive Management by the Managers.....................................................15
(b) Powers of the Managers...................................................................15
(c) Agency Authority of the Managers; Delegation by the Managers.............................16
(d) Discretion of the Managers...............................................................16
(e) Performance of Duties; Liability of Managers.............................................17
(f) Devotion of Time.........................................................................17
(g) Decisions of the Managers................................................................17
(h) Meetings of Managers.....................................................................17
5.2 Election of Managers.........................................................................18
(a) Number and Term..........................................................................18
(b) Vacancies................................................................................18
5.3 Limitations on Power of the Managers.........................................................18
5.4 Members Have No Managerial Authority.........................................................19
5.5 Transactions between the Company and the Managers, the Members or their Affiliates...........19
(a) Contracts with Affiliates................................................................19
(b) Contracts with Managers or Affiliates of the Managers....................................19
(c) Treatment of Affiliate Loans and Fees....................................................20
5.6 Officers ....................................................................................20
(a) Appointment of Officers..................................................................20
(b) Signing Authority of Officers............................................................20
(c) Acts of Officers as Conclusive Evidence of Authority.....................................20
5.7 Competing Activities.........................................................................20
(a) Pre-Formation Activities.................................................................20
(b) Post-Formation Activities................................................................21
(c) Specific Enforcement.....................................................................21
(d) Payments to Managers and Others..........................................................22
(e) Expenses.................................................................................22
ARTICLE VI ALLOCATIONS OF NET PROFITS, NET LOSSES AND DISTRIBUTIONS.................................22
6.1 Minimum Gain Chargeback......................................................................22
6.2 Member Minimum Gain Chargeback...............................................................22
6.3 Qualified Income Offset......................................................................22
6.4 Nonrecourse Deductions.......................................................................23
6.5 Member Nonrecourse Deductions................................................................23
6.6 Allocation of Net Profits....................................................................23
6.7 Allocation of Net Losses.....................................................................23
6.8 Distributions by the Company.................................................................23
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6.9 Allocation of Net Profits and Losses and Distributions in Respect of a Transferred Interest..24
6.10 Tax Allocation Matters.......................................................................24
(a) Contributed or Revalued Property.........................................................24
(b) Recapture Items..........................................................................24
6.11 Order of Application.........................................................................24
6.12 Allocation of Liabilities....................................................................25
6.13 Form of Distribution.........................................................................25
ARTICLE VII TRANSFER OF INTERESTS....................................................................25
7.1 Transfer of Interests........................................................................25
7.2 [intentionally omitted]......................................................................25
7.3 Right of First Refusal.......................................................................25
7.4 [intentionally omitted]......................................................................26
7.5 [intentionally omitted]......................................................................26
7.6 [intentionally omitted]......................................................................26
7.7 Repurchase Restrictions Imposed by Law.......................................................26
7.8 Further Restrictions on Transfer of Interests................................................27
7.9 Substitution of Members......................................................................27
7.10 Enforcement..................................................................................27
7.11 Effect of Transfers in Violation of Agreement................................................27
ARTICLE VIII CONSEQUENCES OF MEMBERSHIP TERMINATION EVENTS............................................28
8.1 Dissolution of Company.......................................................................28
8.2 Admission or Conversion......................................................................28
8.3 Terms of Transfer............................................................................28
(a) Transferee Bound by Agreement............................................................28
(b) Notice of Repurchase Event...............................................................28
(c) Option to Purchase.......................................................................29
(d) Purchase Price...........................................................................29
(e) Payment of Purchase Price................................................................30
(f) Consummation of Sale.....................................................................31
ARTICLE IX ACCOUNTING, RECORDS, REPORTING BY MEMBERS...........................................31
9.1 Books and Records............................................................................31
9.2 Reports; Annual Statements...................................................................32
(a) Governmental Reports.....................................................................32
(b) Financial Reports........................................................................32
(c) Tax Reports..............................................................................32
9.3 Bank Accounts; Invested Funds................................................................32
9.4 Tax Matters for the Company Handled by Tax Matters Partner...................................32
9.5 Accounting Matters...........................................................................33
9.6 Confidentiality..............................................................................33
ARTICLE X DISSOLUTION AND WINDING UP...............................................................33
10.1 Dissolution..................................................................................33
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10.2 Date of Dissolution..........................................................................33
10.3 Winding Up...................................................................................34
10.4 Liquidating Distributions to Economic Interest Holders.......................................34
10.5 Distributions in Kind........................................................................34
10.6 Provision for Debts and Liabilities..........................................................34
10.7 No Liability.................................................................................35
10.8 Limitations on Payments Made in Dissolution..................................................35
10.9 Certificate of Cancellation..................................................................35
10.10 Compensation for Services....................................................................35
ARTICLE XI LIMITATION OF LIABILITY; STANDARD OF CARE; INDEMNIFICATION...............................35
11.1 Limitation of Liability......................................................................35
11.2 Standard of Care.............................................................................35
11.3 Indemnification..............................................................................36
11.4 Contract Right; Expenses.....................................................................36
11.5 Indemnification of Employees and Agents......................................................36
11.6 Nonexclusive Right...........................................................................36
11.7 Severability.................................................................................37
11.8 Insurance....................................................................................37
ARTICLE XII REPRESENTATIONS OF THE MEMBERS...........................................................37
12.1 Preexisting Relationship or Experience.......................................................37
12.2 Access to Information........................................................................37
12.3 Economic Risk................................................................................37
12.4 Investment Intent............................................................................37
12.5 Consultation with Attorney...................................................................38
12.6 Purpose of Entity............................................................................38
12.7 Residency....................................................................................38
12.8 No Advertising...............................................................................38
12.9 Membership Interest is Restricted Security...................................................38
12.10 No Registration of Membership Interest.......................................................38
12.11 Organization.................................................................................38
12.12 Authority....................................................................................38
12.13 Enforceability...............................................................................38
12.14 No Violation.................................................................................38
ARTICLE XIII MISCELLANEOUS............................................................................39
13.1 Legal Counsel................................................................................39
13.2 Amendments...................................................................................39
13.3 Offset Privilege.............................................................................39
13.4 Arbitration..................................................................................39
(a) General..................................................................................39
(b) Governing Law............................................................................40
(c) Costs of Arbitration.....................................................................40
13.5 Remedies Cumulative..........................................................................40
13.6 Notices .....................................................................................40
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13.7 Attorneys' Fees..............................................................................40
13.8 Governing Law; Jurisdiction..................................................................40
13.9 Complete Agreement...........................................................................41
13.10 No Third-Party Rights........................................................................41
13.11 Binding Effect...............................................................................41
13.12 Section Headings.............................................................................41
13.13 Interpretation...............................................................................41
13.14 Severability.................................................................................41
13.15 Multiple Counterparts........................................................................41
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LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXXXXXX.XXX, LLC
A DELAWARE LIMITED LIABILITY COMPANY
This Limited Liability Company Agreement is made as of March 28, 2000,
by and between Xxxxxxxxxxxxxxx.xxx, LLC, a Delaware limited liability company
("Onlinefilmsales"), and MediaChase Ltd., a Delaware corporation ("MediaChase"),
with reference to the following facts:
A. XxxxxxxxXX.xxx, LLC (the "Company") was formed on March 8, 2000, as
a limited liability company under the laws of the State of Delaware by the
filing of a Certificate of Formation for the Company with the Delaware Secretary
of State.
B. Concurrently herewith, MediaChase will contribute to the capital of
the Company, all of its right, title and interest in and to any assets of
MediaChase used solely in connection with the operation of the business entitled
"XxxxxxxxXX.xxx" (collectively, the "ReporterTV Assets") in consideration of the
issuance by the Company to MediaChase of a one hundred percent (100%) Membership
Interest in the Company.
C. Immediately thereafter, MediaChase will contribute to
Onlinefilmsales, a fifty percent (50%) Membership Interest in the Company, in
consideration of (i) the issuance by Onlinefilmsales to MediaChase of an
interest in Onlinefilmsales (as more fully described in that certain Limited
Liability Company Agreement of Xxxxxxxxxxxxxxx.xxx, LLC, of even date herewith),
(ii) the agreement by Onlinefilmsales herein to make additional contributions to
the capital of the Company upon the satisfaction of certain conditions stated
herein, and (iii) the contribution to Company by Onlinefilmsales (as
successor-in-interest to XxxxxxxxXxxxxxx.xxx, Inc.) of it rights under that
certain Secured Promissory Note, dated November 12, 1999, by MediaChase payable
to the order of Onlinefilmsales (as successor-in-interest to
XxxxxxxxXxxxxxx.xxx, Inc.), in the original principal amount of $2,025,000
as amended by those certain Allonges to Secured Promissory Note, each by
MediaChase, dated November 18, 1999, December 16, 1999, February 1, 2000 and
March 27, 2000 (the "MediaChase Note") and the prompt release of MediaChase
of any obligations thereunder.
D. The parties now desire to adopt a limited liability company
agreement to govern their respective rights and obligations as Members of the
Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
acknowledged, the parties agree that the following shall be the Limited
Liability Company Agreement of the Company.
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms have the following
meanings:
1.1 "ACT" means the Limited Liability Company Act of the State of
Delaware.
1.2 "ADDITIONAL CAPITAL" has the meaning specified in Section 3.2(b).
1.3 "ADJUSTED CAPITAL ACCOUNT" of an Economic Interest Holder means the
Capital Account of that Economic Interest Holder increased by the Economic
Interest Holder's share of Company Minimum Gain and Member Minimum Gain.
1.4 "ADJUSTED CAPITAL CONTRIBUTION" of an Economic Interest Holder
means the excess of (a) that Economic Interest Holder's Capital Contributions to
the Company, over (b) Distributions to that Economic Interest Holder that are a
return of Capital Contributions under Section 6.8(b) or 3.2(e)(iii).
1.5 "AFFILIATE" of a Member or Manager means (a) a Person directly or
indirectly (through one or more intermediaries) controlling, controlled by or
under common control with that Member or Manager; (b) a Person owning or
controlling ten percent (10%) or more of the outstanding voting securities or
beneficial interests of that Member or Manager; or (c) an officer, director,
partner or member, or a member of the immediate family of an officer, director,
partner or member, of that Member or Manager. For these purposes "control" means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
1.6 "AGREED OVERRUN" shall have the meaning specified in Section
3.2(e)(ii)(B).
1.7 "AGREEMENT" means this Limited Liability Company Agreement of
XxxxxxxxXX.xxx, LLC.
1.8 "AFFECTED INTEREST" has the meaning specified in Section 8.3.
1.9 "BANKRUPTCY" of a Member means the institution of any proceedings
under any federal or state law for the relief of debtors, including the filing
by or against that Member of a voluntary or involuntary case under the United
States Bankruptcy Code, which proceedings, if involuntary, are not dismissed
within sixty (60) days after their filing; an assignment of the property of that
Member for the benefit of creditors; the appointment of a receiver, trustee or
conservator of any substantial portion of the assets of that Member, which
appointment, if obtained ex parte, is not dismissed within sixty (60) days
thereafter; the seizure by a sheriff, receiver, trustee or conservator of any
substantial portion of the assets of that Member; the failure by that Member
generally to pay its debts as they become due within the meaning of Section
303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy
Court; or that Member's admission in writing of its inability to pay its debts
as they become due.
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1.10 "BONA FIDE OFFER" means an offer in writing to an Interest Holder
offering to purchase all or any part of that Interest Holder's Membership
Interest or Economic Interest and setting forth all of the material terms and
conditions of the proposed purchase from an offeror who is ready, willing and
able to consummate the purchase and who is not an Affiliate of that Interest
Holder.
1.11 "BUDGET" means a weekly expenditure of $50,000 to cover the
customary and usual operating expenses of the Company, which amount may be
increased or decreased from time to time by the mutual agreement of the parties
hereto.
1.12 "CAPITAL ACCOUNT" of an Economic Interest Holder means the capital
account of that Economic Interest Holder determined from the inception of the
Company strictly in accordance with the rules set forth in Section
1.704-1(b)(2)(iv) of the Treasury Regulations. If any Membership Interest and/or
Economic Interest is Transferred pursuant to the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
the Capital Account is attributable to the Membership Interest and/or Economic
Interest so Transferred. In the event that assets of the Company other than cash
are distributed to an Economic Interest Holder in kind, Capital Accounts shall
be adjusted for the hypothetical "book" gain or loss that would have been
realized by the Company if the distributed assets had been sold for their fair
market values in a cash sale (in order to reflect unrealized gain or loss). In
the event of the liquidation of the Company, Capital Accounts shall be adjusted
for the hypothetical "book" gain or loss that would have been realized by the
Company if all Company assets had been sold for their fair market values in a
cash sale (in order to reflect unrealized gain or loss), whether as an initial
Capital Contribution, an additional Capital Contribution, or Additional Capital.
1.13 "CAPITAL CONTRIBUTION" of a Member, at any particular time, means
the amount of money or property, or a promissory note or other binding
obligation to contribute money or property, which that Member has theretofore
contributed to the capital of the Company, whether as an initial Capital
Contribution, an additional Capital Contribution or Additional Capital and shall
specifically include all amounts actually paid in legal fees (including
paralegal costs) to tax counsel in connection with the organization and
structuring of the Company, Onlinefilmsales, and StudioBuzz, LLC, a Delaware
limited liability company.
1.14 "CERTIFICATE OF FORMATION" means the Certificate of Formation of
the Company as filed under the Act with the Delaware Secretary of State, as the
same may be amended from time to time.
1.15 "CLOSING" has the meaning specified in Section 8.3.
1.16 "CODE" means the Internal Revenue Code of 1986, as amended.
1.17 "COMPANY" means XxxxxxxxXX.xxx, LLC, a Delaware limited liability
company.
1.18 "COMPANY MINIMUM GAIN" with respect to any taxable year of the
Company means the "partnership minimum gain" of the Company computed strictly in
accordance with the principles of Section 1.704-2(d) of the Treasury
Regulations.
3
1.19 "CONFIDENTIAL INFORMATION" means all information or material not
generally known by non-Company personnel which (i) gives the Company some
competitive business advantage or the opportunity of obtaining such advantage or
the disclosure of which could be detrimental to the interests of the Company,
(ii) which is owned by the Company or in which the Company has an interest and
(iii) which is (A) marked "Confidential Information," "Proprietary Information,"
or other similar marking, (B) known to be considered confidential and
proprietary by the Company, or (C) from all the relevant circumstances should
reasonably be assumed to be confidential and proprietary to the Company.
Confidential Information includes, but is not limited to, the following types of
information and other information of a similar nature (whether or not reduced to
writing): trade secrets, inventions, drawings, graphics, file data,
documentation, diagrams, specifications, know how, processes, formulas, models,
flow charts, software in various stages of development, source codes, object
codes, research and development procedures, research or development and test
results, marketing techniques and materials, marketing and development plans,
price lists, pricing policies, business plans, information relating to customers
and/or suppliers' identities, characteristics and agreements, financial
information and projections, and employee files. Confidential Information also
includes any information described above which the Company obtains from another
party and which the Company treats as proprietary or designates as Confidential
Information, whether or not owned or developed by the Company. NOTWITHSTANDING
THE ABOVE, HOWEVER, NO INFORMATION CONSTITUTES CONFIDENTIAL INFORMATION IF IT IS
GENERIC INFORMATION OR GENERAL KNOWLEDGE WHICH IS OTHERWISE PUBLICLY KNOWN AND
IN THE PUBLIC DOMAIN. Also, Confidential Information shall not include any
information or material owned by MediaChase and used by MediaChase in the
ordinary course of its business, unless used on an exclusive basis in the
business of the Company.
1.20 "CONTRIBUTION CAP" has the meaning specified in Section 3.2(a).
1.21 "CONTRIBUTION LOAN" has the meaning specified in Section
3.2(e)(ii)(C).
1.22 "CUMULATIVE DEFAULT AMOUNT" has the meaning specified in Section
3.2(e)(iv).
1.23 "DISTRIBUTABLE CASH" at any time means that portion of the cash
then on hand or in bank accounts of the Company which the Managers deem
available for Distribution to the Economic Interest Holders, taking into account
(a) the amount of cash required for the payment of all current expenses,
liabilities and obligations of the Company (whether for expense items, capital
expenditures, improvements, retirement of indebtedness or otherwise) and
specifically including repayments of principal or interest on Contribution
Loans, and (b) the amount of cash which the Managers deem necessary to establish
reserves for the payment of future capital expenditures, improvements,
retirements of indebtedness, operations and contingencies, known or unknown,
liquidated or unliquidated, including, but not limited to, liabilities which may
be incurred in litigation and liabilities undertaken pursuant to the
indemnification provisions of this Agreement.
1.24 "DISTRIBUTION" means the transfer of money or property by the
Company to one or more Economic Interest Holders without separate consideration.
4
1.25 "ECONOMIC INTEREST" means a share, expressed as a percentage, of
one or more of the Company's Net Profits, Net Losses, Tax Credits, Distributable
Cash or other Distributions, but does not include any other rights of a Member,
including, without limitation, the right to vote or participate in the
management of the Company or the right to information concerning the business
and affairs of the Company. The Economic Interest of each Economic Interest
Holder shall initially be the percentage set forth opposite the name of that
Economic Interest Holder in Exhibit A and may be adjusted from time to time
thereafter pursuant to the provisions of this Agreement, including, without
limitation, the provisions of Sections 3.2, 4.1, 4.2 and 8.1.
1.26 "ECONOMIC INTEREST HOLDER" means the holder of an Economic
Interest, including either a Member, to the extent of the Economic Interest
constituting a part of its Membership Interest, or a Person who is not a member
but holds merely a bare Economic Interest.
1.27 "ECONOMIC RISK OF LOSS" means the economic risk of loss within the
meaning of Section 1.752-2 of the Treasury Regulations.
1.28 "ELIGIBLE MEMBERS" has the meaning specified in Section 7.3.
1.29 "FAIR MARKET VALUE" means, with respect to an asset, the price at
which that asset would be sold for cash payable at closing between a willing
buyer and a willing seller, each having reasonable knowledge of all relevant
facts concerning the asset and neither acting under any compulsion to buy or
sell.
1.30 "FISCAL YEAR" means the Company's fiscal year, which shall be the
calendar year.
1.31 "FORMER MEMBER" has the meaning specified in Section 8.2.
1.32 "FORMER MEMBER'S INTEREST" has the meaning specified in Section
8.2(a).
1.33 "INITIAL CALL NOTICE" has the meaning specified in Section 3.2(c).
1.34 "INTEREST HOLDER" means either a Member or a Person who holds
merely a bare Economic Interest.
1.35 "JOINT DESIGNEE" has the meaning specified in Section 5.2(a).
1.36 "MAJORITY IN INTEREST" means Voting Interests which, taken
together, exceed fifty percent (50%) of the aggregate of all Voting Interests
held by all Members entitled to vote or grant consent with respect to the matter
in question.
1.37 "MANAGERS" means the one or more managers of the Company selected
by the Members pursuant to Section 5.2(a) and shall be deemed to refer to the
sole Manager at all times when there exists only one Manager.
1.38 "MEDIACHASE" means MediaChase Ltd., a Delaware corporation.
1.39 "MEMBER" means each Person who (a) is an initial signatory to this
Agreement, has been admitted to the Company as a Member in accordance with this
Agreement or is a
5
transferee of a Member who has become a Member in accordance
with Article VII, and (b) has not suffered a Membership Termination Event.
1.40 "MEMBER MINIMUM GAIN" has the meaning given to the term "partner
nonrecourse debt minimum gain" in Section 1.704-2(d) of the Treasury
Regulations.
1.41 "MEMBER NONRECOURSE DEBT" means any "partner nonrecourse
liability" or "partner nonrecourse debt" under Section 1.704-2(b)(4) of the
Treasury Regulations. Subject to the foregoing, it means any Company liability
to the extent the liability is nonrecourse for purposes of Section 1.1001-2 of
the Treasury Regulations and a Member (or related Person within the meaning of
Section 1.752-4(b) of the Treasury Regulations) bears the Economic Risk of Loss
under Section 1.752-2 of the Treasury Regulations because, for example, the
Member or related Person is the creditor or a guarantor.
1.42 "MEMBER NONRECOURSE DEDUCTIONS" means the Company deductions,
losses and Code Section 705(a)(2)(B) expenditures, as the case may be (as
computed for "book" purposes), that are treated as deductions, losses and
expenditures attributable to Member Nonrecourse Debt under Section 1.704-2(i)(2)
of the Treasury Regulations.
1.43 "MEMBERSHIP INTEREST" means a Member's total interest as a Member
of the Company, including that Member's Economic Interest, its options or
similar rights hereunder to acquire Membership Interests or Economic Interests,
its right to inspect the books and records of the Company and its right, to the
extent specifically provided in this Agreement or in the Act and not otherwise
restricted herein, to participate in the business, affairs and management of the
Company and to vote or grant consent with respect to matters coming before the
Company.
1.44 "MEMBERSHIP TERMINATION EVENT" with respect to any Member means
one or more of the following: the withdrawal, resignation, expulsion,
dissolution or occurrence of any other event which terminates the continued
membership of that Member in the Company, other than a Transfer of a Member's
Membership Interest which is made in accordance with the provisions of Article
VII.
1.45 "NET PROFITS" and "NET LOSSES" means, for each fiscal period, the
net income and net loss, respectively, of the Company determined strictly in
accordance with federal income tax principles (including rules governing
depreciation and amortization), except that in computing net income or net loss,
the "book" value of an asset will be substituted for its adjusted tax basis if
the two differ; and the following items shall be excluded from the computation:
(a) any gain, income, deductions or losses specially allocated
under Sections 6.1, 6.2, or 6.3;
(b) any Nonrecourse Deductions; and
(c) any Member Nonrecourse Deductions.
1.46 "NONCOMPETE DATE" has the meaning specified in Section 5.7(b).
6
1.47 "NONRECOURSE DEDUCTIONS" in any fiscal period means the amount of
Company deductions that are characterized as "nonrecourse deductions" under
Section 1.704-2(b) of the Treasury Regulations.
1.48 "NONRECOURSE LIABILITY" means a liability treated as a
"nonrecourse liability" under Sections 1.704-2(b)(3) and 1.752-1(a)(2) of the
Treasury Regulations.
1.49 "NOTICE" has the meaning specified in Section 8.3.
1.50 "OFFERED INTEREST" has the meaning specified in Section 7.3.
1.51 "ONLINEFILMSALES" means Xxxxxxxxxxxxxxx.xxx, LLC, a Delaware
limited liability company.
1.52 "PERSON" means any entity, corporation, company, association,
joint venture, joint stock company, partnership, trust, limited liability
company, limited liability partnership, real estate investment trust,
organization, individual (including personal representatives, executors and
heirs of a deceased individual), nation, state, government (including agencies,
departments, bureaus, boards, divisions and instrumentalities thereof), trustee,
receiver or liquidator.
1.53 "PREFERRED RETURN" shall mean with respect to any Member, a
cumulative preferential rate of return in an amount equal to Prime plus two
percentage points (2%) per annum, on its Adjusted Capital Contributions.
1.54 "PREFERRED RETURN ACCOUNT" shall mean with respect to any Member,
the excess of (i) that Member's Preferred Return, over (ii) all allocations to
that Member pursuant to Section 6.6(c) below.
1.55 "PRIME" shall mean at any time that percentage interest rate per
annum then most recently announced by Xxxxx Fargo, N.A., or its successor, in
Los Angeles, California, as its prime or "reference" rate. The Prime Rate is not
necessarily the lowest rate charged to customers. Any change in rate for
purposes of this Agreement shall become effective on the same date on which such
announced rate becomes effective.
1.56 "SECURITIES ACT" means the Securities Act of 1933.
1.57 "SUBSEQUENT CALL NOTICE" has the meaning specified in Section
3.2(c).
1.58 "TAX CREDITS" means all credits against income or franchise taxes
and credits allowable to Economic Interest Holders under state, federal or other
tax statutes.
1.59 "TAX MATTERS PARTNER" means Onlinefilmsales, or any successor in
interest to Onlinefilmsales' entire Membership Interest, except as otherwise
provided in Section 9.4
1.60 "TRANSFER" means, with respect to a Membership Interest, an
Economic Interest or any interest therein, the sale, assignment, transfer,
disposition, pledge, hypothecation or encumbrance, whether direct or indirect,
voluntary, involuntary or by operation of law, and whether or not for value, of
(a) that Membership Interest, Economic Interest or interest therein or
7
(b) a controlling interest in any Person which directly or indirectly through
one or more intermediaries holds that Membership Interest, Economic Interest
or interest therein. Transfer includes any transfer as a result of or in
connection with any property settlement or judgment incident to a divorce,
dissolution of marriage or separation, and any transfer by decree of
distribution or other court order in proceedings arising from the death of
the spouse of any Member or Economic Interest Holder.
1.61 "TREASURY REGULATIONS" means the regulations of the United States
Treasury Department pertaining to the income tax.
1.62 "UNITED STATES BANKRUPTCY CODE" means the United States Bankruptcy
Code at Xxxxx 00, Xxxxxx Xxxxxx Code.
1.63 "UNPAID PREFERRED RETURN" shall mean the excess of (i) the total
cumulative Preferred Return as of any given date over (ii) the sum of all prior
Distributions in payment of the Preferred Return pursuant to Section 6.8(a).
1.64 "VOTING INTEREST" means a Member's percentage right to vote on
matters coming before the Members for action. The Voting Interest of each Member
shall initially be the percentage set forth opposite the name of that Member in
Exhibit A and may be adjusted from time to time thereafter pursuant to the
provisions of this Agreement, including, without limitation, the provisions of
Sections 3.2, 4.1, 4.2 and 8.1. The combined Voting Interest of all Members
shall at all times equal one hundred percent (100%).
References in this Agreement to "Articles," "Sections," "Exhibits" and
"Schedules" shall be to the Articles, Sections, Exhibits and Schedules of this
Agreement, unless otherwise specifically provided; all Exhibits and Schedules to
this Agreement are incorporated herein by reference; any of the terms defined in
this Agreement may, unless the context otherwise requires, be used in the
singular or the plural and in any gender depending on the reference; the words
"herein", "hereof" and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; and except as otherwise specified in
this Agreement, all references in this Agreement (a) to any Person shall be
deemed to include such Person's permitted heirs, personal representatives,
successors and assigns; and (b) to any agreement, any document or any other
written instrument shall be a reference to such agreement, document or
instrument together with all exhibits, schedules, attachments and appendices
thereto, and in each case as amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof; and (c) to any
law, statute or regulation shall be deemed references to such law, statute or
regulation as the same may be supplemented, amended, consolidated, superseded or
modified from time to time.
8
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 NAME. The name of the Company shall be "XxxxxxxxXX.xxx, LLC." The
business of the Company may be conducted under that name or, upon compliance
with applicable law, under any other name that the Managers deem appropriate or
advisable.
2.2 TERM. The term of the Company's existence commenced upon the filing
of its Certificate of Formation with the Delaware Secretary of State on March 8,
2000, and shall continue until such time as it is terminated pursuant to Article
X.
2.3 OFFICE AND AGENT. The principal office of the Company shall be at
0000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxxxxxxxxx, 00000, or at such other
place as the Managers may determine from time to time. The Company may also have
such other offices within the State of California, or elsewhere, as the Managers
may from time to time determine. The name and business address of the agent for
service of process for the Company in the State of Delaware is Corporation
Service Company, 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx, 00000, or such other
Person as the Managers may appoint from time to time.
2.4 PURPOSE OF COMPANY. The Company may engage in any lawful activity
for which a limited liability company may be organized under the Act; however,
its primary purpose shall be to engage in the following business: the creation
and production of an interactive entertainment news magazine in a television
format broadcast via the Internet.
2.5 INTENT. It is the intent of the Members that the Company shall
always be operated in a manner consistent with its treatment as a "partnership"
for Federal and state income tax purposes. It also is the intent of the Members
that the Company not be operated or treated as a "partnership" for purposes of
Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code. No Member or Manager shall
take any action inconsistent with that express intent.
2.6 MEMBERS. The names, addresses, Capital Contributions, Voting
Interests and Economic Interests of the Members as of the date of this Agreement
are set forth in Exhibit A.
2.7 FORMATION EXPENSES. Each Member shall be responsible for and shall
pay all fees and expenses incurred by it in connection with the formation of the
Company, including, without limitation, all legal and accounting fees and
expenses incurred by it in connection with the negotiation, preparation,
execution and delivery of this Agreement and all related agreements and
instruments. The Company shall pay all filing fees, minimum franchise or other
similar taxes and other governmental charges incident to its formation and
qualification to do business.
9
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 INITIAL CAPITAL CONTRIBUTIONS. Each Member initially has
contributed to the Company the monies and/or properties which are specified in
Exhibit A as that Member's initial Capital Contribution.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) ADDITIONAL CONTRIBUTIONS BY ONLINEFILMSALES. Onlinefilmsales
has contributed additional Capital Contributions to the Company in the amounts
set forth on Exhibit A hereto as additional Capital Contributions, and in no
event shall the sum of Onlinefilmsales initial Capital Contribution and its
additional Capital Contributions be required to exceed $1,650,000 ("Contribution
Cap").
(b) ADDITIONAL CAPITAL. In the event that further funds are
required, as determined by the Managers in their absolute discretion, to pay the
obligations of the Company in excess of the funds available from (i)
Onlinefilmsales' initial Capital Contributions, (ii) the additional Capital
Contributions contributed by Onlinefilmsales pursuant to Section 3.2(a) above,
(iii) any prior contributions of Additional Capital, and (iv) the revenues of
the Company, the Managers may call on the Members to contribute such additional
funds ("Additional Capital") if above the Contribution Cap in accordance with
the procedures set forth in Section 3.2(c) below.
(c) CALL PROCEDURES; PAYMENT OF CALL. A call for Additional
Capital above the Contribution Cap shall be made by notice to MediaChase in
substantially the form of Exhibit B (an "Initial Call Notice"). An Initial Call
Notice shall specify the amount to be contributed as Additional Capital, the
date by which the contribution is due and payable and shall be executed by all
of the Managers. The Managers shall use best efforts to attempt to cause an
Initial Call Notice to be given at least five (5) business days prior to the
date such call is due and payable. If MediaChase has not caused to be
contributed to the Company the full amount of such call for Additional Capital
on the date such call is due and payable, a notice (a "Subsequent Call Notice")
shall be sent to Onlinefilmsales setting forth, in addition to the foregoing
information, the balance of the Additional Capital call due but unpaid by
MediaChase (the "Default Capital"). To satisfy any call for Additional Capital,
a Member shall cause to be contributed to the Company immediately available
funds in the amount of such call on or before the date specified as the due date
in the Initial Call Notice or in the Subsequent Call Notice. Contributions of
Additional Capital shall be credited to the respective Capital Accounts and
Capital Contributions of the Members when made.
(d) CONTRIBUTION OF DEFAULT CAPITAL. In the event that a call
is issued pursuant to Section 3.2(c) above for Additional Capital, and
MediaChase does not contribute funds equal to the full amount of such call by
the date on which the contribution is due and payable, then upon receipt of a
Subsequent Call Notice, Onlinefilmsales may (but shall have no obligation to),
in addition to any other right or remedy available under this Agreement, at law
or in equity, contribute in cash up to the amount of the Default Capital.
10
(e) EFFECTS OF CONTRIBUTION OF DEFAULT CAPITAL.
(i) For any contribution of Default Capital made by
Onlinefilmsales that when aggregated with all of its other Capital Contributions
is in excess of the Contribution Cap but is not for the Budget or not an Agreed
Overrun, Onlinefilmsales will have its Capital Account and Capital Contributions
increased by the amount of its contribution, but the Economic Interest and
Voting Interest percentages of Onlinefilmsales and MediaChase will remain
unchanged.
(ii) (A) As to any contribution of Default Capital made by
Onlinefilmsales that when aggregated with all of its other Capital
Contributions is in excess of the Contribution Cap and that is for the Budget
or is an Agreed Overrun, the Economic Interest and Voting Interest
percentages of MediaChase shall be reduced by subtracting the following from
such percentages, and the Economic Interest and Voting Interest percentages
of Onlinefilmsales shall be increased by adding the following to such
percentages: a fraction (rounded to the nearest hundredth), the numerator of
which is the amount of the Default Capital contributed by Onlinefilmsales,
and the denominator of which is $15,000. By way of example only, if prior to
the contribution of any Default Capital, MediaChase's Economic Interest and
Voting Interest are each 50%, then upon the contribution by Onlinefilmsales
of Default Capital in the amount of $30,000, MediaChase's Economic Interest
and Voting Interest will be reduced to 48%, and Onlinefilmsales' Economic
Interest and Voting Interest will be increased to 52%. In no event shall the
Economic Interest and Voting Interest of MediaChase be reduced below
twenty-five percent (25%). The Members acknowledge and agree that as a result
of the contribution by Onlinefilmsales to the Company of the MediaChase Note
(principal plus accrued interest of $56,124.11) on the date hereof and the
actual payment by Onlinefilmsales to tax counsel in a manner described in
Section 1.13 hereof of $41,982.50, the total Capital Contributions made by
Onlinefilmsales to the Company equals $2,123,106.16, of which $375,000 shall
be deemed Default Capital contributed for the Budget and as a result, the
Economic and Voting Interest percentages of MediaChase have been reduced to
25% and the Economic and Voting Interest percentages of Onlinefilmsales have
been increased to 75%.
(B) For purposes of this Agreement, an "Agreed Overrun"
means any expenditure in excess of the Budget as may be mutually agreed in
advance and in writing by Onlinefilmsales and MediaChase (which agreement shall
not be unreasonably withheld or delayed), but in no event shall any expenditures
incurred and occasioned by the following be an Agreed Overrun: (i) compliance
with any government regulation, request or order, or (ii) circumstances beyond
the control of MediaChase, including, but not limited to, an Act of God, war,
insurrection, fire, flood, earthquake, accident, strike or other labor
disturbance or interruption of or delay in transportation.
(C) In the event that MediaChase's Economic Interest and
Voting Interest have been reduced to twenty-five percent (25%), and Additional
Capital is thereafter required by the Managers, Onlinefilmsales shall have the
exclusive right (but not the obligation) to advance directly to the Company as a
nonrecourse loan the amount of the requested Additional Capital ("Contribution
Loan"). The Contribution Loan shall bear interest from the date it is advanced
until the date it is paid in full at Prime plus two percentage points (2.0%) per
annum. Principal and accrued interest on the Contribution Loan shall be repaid
in full by the Company. The
11
Company will execute a note to reflect any Contribution Loan in form and
substance reasonably satisfactory to Onlinefilmsales.
(iii) Within ten (10) business days following the
conclusion of each calendar month in the year 2000, commencing
in April, 2000, the Managers shall determine the amount of Distributable Cash in
existence as of the close of business on the last business day of such month (in
each case, the "Month-End Distributable Cash"). In the event the Month-End
Distributable Cash exceeds $0, the Managers shall immediately cause the Company
to distribute all of such Month-End Distributable Cash to the Economic Interest
Holders pursuant to Section 6.8, unless distribution of any part of such
Month-End Distributable Cash (in each case, the "Withheld Portion") would not be
in the best interests of the Company in the good faith business judgment of the
Managers because of a reserve necessary for anticipated short-term liabilities
or unless all of the Members otherwise agree in writing, in which case the
Withheld Portion will be not be distributed to the Economic Holders under this
Section 3.2(e)(iii). Within three (3) business days of making the foregoing
determination of Month-End Distributable Cash, the Managers shall provide
written notice to MediaChase of the amount of such Month-End Distributable Cash
together with a description of the planned distribution thereof in accordance
with this Section 3.2(e)(iii) (the "Month-End Distributable Cash Report"). The
provisions of this Section 3.2(e)(iii) shall terminate upon termination of the
dilution provisions of Section 3.2(e)(ii) pursuant to Section 3.2(e)(vi).
(iv) Notwithstanding the dilution provisions of Section
3.2(e)(ii) above, MediaChase shall have the one-time right (the "Buyback Right")
at any time on or before January 31, 2001 to reclaim all or part of its diluted
Economic Interest and Voting Interest (the date of the exercise of such right to
be referred to as the "Buyback Date"); provided, however, that a Buyback Date
must be as of the last business day of a month prior to January 1, 2001 (each a
"Month-End Day"). MediaChase may elect to exercise the Buyback Right with
respect to any Month-End Day by giving written notice to the Company of such
election no later than the last business day of the month immediately following
the month in which the Month-End Day occurs (the "Election Notice"). The
Election Notice shall be accompanied by a contribution of cash equal to all or
less than the following amount (though no less than 25% of the following, with
the full amount of the following referred to as the "Full Buyback Amount"): the
cumulative amount of Default Capital that (A) resulted from the Budget or that
was an Agreed Overrun and (B) that has occurred as of the Buyback Date (the
"Cumulative Default Amount"), less the aggregate amount of all Distributable
Cash that has actually been distributed to Onlinefilmsales as a return of
capital pursuant to Section 6.8(b) from the date of this Agreement through the
close of business on the Buyback Date. Upon receipt by the Company of all or a
portion of the Full Buyback Amount (the actual amount contributed by MediaChase
to be referred to herein as the "MediaChase Contributed Amount"),
Onlinefilmsales will receive an immediate special distribution (notwithstanding
the normal distribution rules of Section 6.8) in cash equal to the amount of the
MediaChase Contributed Amount, which shall be applied first to Onlinefilmsales'
Unpaid Preferred Return accrued as of the date of such contribution and then to
its Adjusted Capital Contributions. Upon the contribution to the Company of the
MediaChase Contributed Amount, the Economic Interest and Voting Interest
percentages of MediaChase shall be increased by adding the following to such
percentages, and the Economic Interest and Voting Interest percentages of
Onlinefilmsales shall be decreased by adding the following to such percentages:
the product (rounded to the nearest hundredth) of 25 and a fraction (rounded to
the
12
nearest hundredth), the numerator of which is the MediaChase Contributed
Amount and the denominator of which is the Full Buyback Amount. By way of
example only, if on the Buyback Date: MediaChase's Economic Interest and Voting
Interest have been reduced to 25%, and Onlinefilmsales's Economic Interest and
Voting Interest have been increased to 75%, the Cumulative Default Amount is
$600,000, the Capital Contributions of Onlinefilmsales are $2,250,000 (before
adjustment for any distributions) and of MediaChase are $0, MediaChase
contributes $150,000 in cash, and there has been $200,000 of other Distributable
Cash distributed to Onlinefilmsales under Section 6.8(b), then MediaChase's
Economic Interest and Voting Interest will be increased to 34.38%,
Onlinefilmsales' Economic Interest and Voting Interest will be decreased to
65.62% (($150,000/$600,000 - $200,000) x 25). In no event shall a reversal of
dilution result in MediaChase having any greater Economic Interest and Voting
Interest than it had as of the date hereof, or 50%.
(v) The Company shall give written notice to MediaChase at
least thirty (30) days prior to the consummation of a merger, consolidation or
other business combination involving the Company, where the Company is not the
surviving party, or an acquisition of more than 50% of the assets of the Company
or the issuance, sale, disposition (including by way of merger, consolidation,
share exchange or similar transaction) of securities representing 50% or more of
the voting control of the Company (the date of consummation of such transaction
to be referred to as the "Closing Date"). Such notice shall set forth the Full
Buyback Amount with respect to the Closing Date. Notwithstanding anything to the
contrary set forth in this Agreement, the Closing Date shall be deemed to be a
Month-End Day for all purposes of Section 3.2(e)(iv); provided, however, that in
order to exercise its Buyback Right with respect to the Closing Date, MediaChase
shall give written notice to the Company of its election to do so no later than
5:00 p.m. (Los Angeles time) on the business day immediately preceding the
Closing Date.
(vi) Notwithstanding anything else in this Agreement, from
and after the date on which Onlinefilmsales has been distributed Distributable
Cash pursuant to Section 6.8 and Section 3.2(e)(iii) an amount that has resulted
in both its Unpaid Preferred Return and its Adjusted Capital Contributions as of
such date being reduced to zero, the dilution provisions of Section 3.2(e)(ii)
above shall cease to be operative to effect further dilution from and after such
date.
(f) FINANCING OF THE COMPANY. The Managers shall not be required to
seek third-party financing prior to issuing calls for Additional Capital.
3.3 CAPITAL ACCOUNTS. The Company shall establish and maintain an
individual Capital Account for each Economic Interest Holder.
3.4 NO WITHDRAWALS OF CAPITAL. No Economic Interest Holder shall have
the right to withdraw or reduce its Capital Contributions in the Company except
as a result of the dissolution of the Company or as otherwise provided in
Section 4.2 or the Act, and no Economic Interest Holder shall have the right to
demand or receive property other than cash in return for its Capital
Contributions.
13
3.5 LOANS; NO COMPENSATION. No Member or Economic Interest Holder shall
be required to lend any funds to the Company, and no Member or Economic Interest
Holder shall have any personal liability for the repayment of any Capital
Contribution of any other Member or Economic Interest Holder. No Member or
Economic Interest Holder shall receive any interest, salary or drawing with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Company or otherwise in its capacity as a Member or
Economic Interest Holder, except as otherwise specifically provided in this
Agreement.
ARTICLE IV
MEMBERS
4.1 ADMISSION OF ADDITIONAL MEMBERS. Subject to compliance with
applicable law, additional Members may be admitted to the Company from time to
time upon the unanimous written approval of all Members.
4.2 WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or resign from
the Company except with the prior written consent of the Managers and all other
Members within the Prohibited Transfer Period (as defined in Section 7.1), which
consent may be given or withheld, conditioned or delayed in the Managers' and
the other Members' sole discretion. After the Prohibited Transfer Period, any
Member may withdraw or resign after thirty (30) day's written notice. If the
withdrawing or resigning Member is the last and only remaining Member, the
withdrawal or resignation shall be effective only after the expiration of the
period for Member consent to continue the business of the Company or dissolve,
as provided in Section 8.1. Any withdrawal or resignation (whether prior to or
after the Prohibited Transfer Period) of a Member shall constitute a Membership
Termination Event (other than a Transfer made in accordance with the provisions
of Article VII), and upon the occurrence thereof, that Member's Membership
Interest may, at the election of the Managers, either be converted to a bare
Economic Interest or purchased as provided in Section 8.2(c). If a Member
withdraws in violation of this Agreement, the Member shall forfeit his, her or
its Voting Interest and Economic Interest without further compensation. In
addition, the Member will be liable to the Company and the other Members and/or
Economic Interest Holders for all damages suffered by the Company and the other
Members and/or Economic Interest Holders as a result of such withdrawal.
4.3 MEMBERS ARE NOT AGENTS. The management of the Company is vested
exclusively in the Managers. No Member may be an agent of the Company, nor may
any Member, in its capacity as a Member, bind or execute any agreement,
instrument or document on behalf of the Company without the prior written
consent of the Managers.
4.4 MEETINGS OF MEMBERS; WRITTEN CONSENT. The Members do not
contemplate holding meetings; however, meetings of the Members may be held if
called by the Managers in their sole and absolute discretion, at such times and
places within or without the State of California as the Managers fix from time
to time. No annual or regular meetings of Members are required, but if such
meetings are held, they shall be noticed, held and conducted pursuant to the
Act. Members may participate in any meeting through the use of conference
telephones or similar communications equipment as long as all Members
participating can hear one another. A
14
Member so participating is deemed to be present in person at the meeting. Any
action which may be taken by the Members at a meeting may also be taken
without a meeting, if a consent in writing setting forth the action so taken
is signed by Members having not less than the minimum votes that would be
necessary to authorize that action at a meeting of the Members duly called
and noticed.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 MANAGEMENT OF THE COMPANY BY THE MANAGERS.
(a) EXCLUSIVE MANAGEMENT BY THE MANAGERS. The business, property
and affairs of the Company shall be managed exclusively by the Managers. Except
for matters as to which the approval of the Members is expressly required by the
Act, Section 5.3, or otherwise in this Agreement, the Managers shall have full,
complete and exclusive authority, power and discretion to manage and control the
business, property and affairs of the Company, to make all decisions regarding
those matters and to perform any and all other actions customary or incident to
the management of the Company's business, property and affairs.
(b) POWERS OF THE MANAGERS. Without limiting the generality of
the foregoing, the Managers, acting in concert but without the need to obtain
any approval from the Members, except only as required in Section 5.3 or
otherwise in this Agreement or the Act, shall have the exclusive power and
authority to cause the Company:
(i) to do any act in the conduct of its business and to
exercise all powers granted to a limited liability company under the Act,
whether in the state of California or in any other state, territory, district or
possession of the United States or any foreign country, that may be necessary,
convenient, desirable or incidental to the accomplishment of the business
purposes of the Company;
(ii) to own, hold, operate, maintain, finance, refinance,
improve, lease, sell, convey, mortgage, transfer, demolish or dispose of any
asset as may be necessary, convenient, desirable or incidental to the
accomplishment of the business purposes of the Company;
(iii) to enter into, perform and carry out any contracts,
leases, instruments, commitments, agreements or other documents of any kind,
including, without limitation, contracts with any Member or Manager, any
Affiliate thereof or any agent of the Company, necessary, convenient, desirable
or incidental to the accomplishment of the business purposes of the Company;
(iv) to xxx and be sued, complain and defend and participate
in administrative or other proceedings, in its own name;
(v) to appoint officers, employees and agents of the
Company, define their duties and fix their compensation, if any, and to select
attorneys, accountants, consultants and other advisors of the Company;
15
(vi) to indemnify any Person in accordance with the Act and
to obtain any and all types of insurance;
(vii) to borrow money from any Person, and issue evidences of
indebtedness and to secure the same by mortgages, deeds of trust, security
agreements, pledges, collateral assignments or other liens on the assets of the
Company;
(viii) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any other action
with respect to any loan agreement, commitment, deed of trust, mortgage,
security agreement or other loan document in respect of any assets of the
Company;
(ix) to pay, collect, compromise, litigate, arbitrate or
otherwise adjust or settle any and all other claims or demands of or against the
Company or to hold such proceeds against the payment of contingent liabilities;
(x) to make, execute, acknowledge, endorse and file any and
all agreements, documents, instruments, checks, drafts or other evidences of
indebtedness necessary, convenient, desirable or incidental to the
accomplishment of the business purposes of the Company;
(xi) to cease the Company's activities and dissolve and wind
up its affairs upon its duly authorized dissolution; and
(xii) to cause any special purpose subsidiary limited
liability company wholly owned by the Company to do any of the foregoing.
(c) AGENCY AUTHORITY OF THE MANAGERS; DELEGATION BY THE MANAGERS.
Any one Manager shall be authorized to endorse all checks, drafts and other
evidences of indebtedness made payable to the order of the Company and, once
approved as required under Section 5.1(g) or as specifically required elsewhere
in this Agreement, to execute all agreements, contracts, commitments, checks,
instruments and other documents on behalf of the Company. The Managers may also
delegate any or all of their authority, rights and/or obligations, whether
arising hereunder, under the Act or otherwise, to any one or more officers,
agents or other duly authorized representatives of the Company.
(d) DISCRETION OF THE MANAGERS. In making any and all decisions
relating to the conduct of the Company's business or otherwise delegated to them
by any provision of this Agreement, the Managers shall be free to exercise their
sole, absolute and unfettered discretion so long as such decision was made by
the Managers in good faith for a purpose reasonably believed by them to be in,
or not opposed to, the best interests of the Company. The Managers shall not, in
respect of any such decision, be liable to the Company, the Members or any of
their respective Affiliates or constituent owners for any resulting actual or
alleged losses, damages, costs or expenses suffered by them so long as such
decision was made by the Managers in good faith for a purpose reasonably
believed by them to be in, or not opposed to, the best interests of the Company.
16
(e) PERFORMANCE OF DUTIES; LIABILITY OF MANAGERS. The Managers
shall perform their managerial duties in good faith and in a manner they believe
to be in, or not opposed to, the best interests of the Company. In performing
their duties, the Managers shall be entitled to rely on information, opinions,
reports or statements, including financial statements and other financial data,
of any attorney, independent accountant or other Person as to matters which the
Managers believe to be within such Person's professional or expert competence
unless the Managers have actual knowledge concerning the matter in question that
would cause such reliance to be unwarranted.
(f) DEVOTION OF TIME. The Managers shall not be obligated to devote
all of their time or business efforts to the affairs of the Company; however,
they shall devote such time, effort and skill as they deem appropriate for the
management and operation of the Company's affairs.
(g) DECISIONS OF THE MANAGERS. Except to the extent that this
Agreement expressly requires the unanimous approval of all of the Managers, any
decision or action taken by a majority in number of the Managers (whether
verbally or in writing, whether in person or by proxy and whether or not at a
formal meeting called pursuant to Section 5.1(h)) shall constitute the act or
decision of the Managers.
(h) MEETINGS OF MANAGERS. Meetings of the Managers may be called by
any Manager or by the Chairperson, President, any Senior Vice-President or
Vice-President or the Secretary of the Company, if any. All meetings shall be
held upon four (4) days' notice by mail or forty-eight (48) hours' notice
delivered personally or by telephone, telegraph or facsimile. A notice need not
specify the purpose of any meeting. Notice of a meeting need not be given to any
Manager who signs a waiver of notice, a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting the lack of notice prior to the
commencement of the meeting. All such waivers, consents and approvals shall be
filed with the Company records or made a part of the minutes of the meeting. A
majority of the authorized number of Managers shall constitute a quorum of the
Managers for the transaction of business, and except to the extent that this
Agreement expressly requires the approval of all of the Managers, every act or
decision done or made by a majority in number of the Managers present at a
meeting duly held at which a quorum is present shall be the act of the Managers.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of Managers if any action taken is
approved by at least a majority of the required quorum for the meeting. Managers
may participate in any meeting of the Managers by means of conference telephones
or similar communications equipment so long as all Managers participating can
hear one another. A Manager so participating is deemed to be present at the
meeting.
The provisions of this Section 5.1(h) govern meetings of the Managers
if the Managers elect, in their discretion, to hold meetings. However, nothing
in this Section 5.1(h) or in this Agreement is intended to require that meetings
of the Managers be held, it being the intent of the Members that meetings of the
Managers are not required.
17
5.2 ELECTION OF MANAGERS.
(a) NUMBER AND TERM. Until such time as Onlinefilmsales' Unpaid
Preferred Return and Adjusted Capital Contributions are reduced to zero, the
Company shall have one (1) Manager, who shall be designated by Onlinefilmsales.
The initial Manager shall be Onlinefilmsales. After Onlinefilmsales' Unpaid
Preferred Return and Adjusted Capital Contributions are reduced to zero, the
Company shall have three (3) Managers, one of whom shall be designated by
Onlinefilmsales, one of whom shall be designated by MediaChase, and one of whom
shall be designated by Onlinefilmsales and MediaChase by mutual agreement (the
"Joint Designee"); provided, however, that in the event Onlinefilmsales and
MediaChase are unable in good faith to agree upon the Joint Designee,
Onlinefilmsales shall designate the Joint Designee. A Member shall have the
right to change the identity of the Manager(s) appointed by it at any time and
for any reason, by written notice to the other Member, and each Manager so
appointed shall serve in that capacity until he or she resigns or is removed by
the Member which appointed him or her, in its absolute discretion; provided,
however, that if the Joint Designee is designated by both Onlinefilmsales and
MediaChase, such Joint Designee may only be removed by the mutual agreement of
Onlinefilmsales and MediaChase. The failure of any Member to appoint one or both
Managers which that Member is entitled to appoint shall not limit the right of
the Managers to carry on the business of the Company.
(b) VACANCIES. Any vacancy occurring for any reason in the number
of Managers may be filled by designation of the Member(s) who previously
designated the Manager whose position has become vacant.
5.3 LIMITATIONS ON POWER OF THE MANAGERS. This Section 5.3 shall have
no force or effect until Onlinefilmsales' Unpaid Preferred Return and Adjusted
Capital Contributions are reduced to zero, and until such date, the Managers
shall have no restrictions on their powers under this Section 5.3. From and
after the date on which Onlinefilmsales' Unpaid Preferred Return and Adjusted
Capital Contributions are reduced to zero, the limitations on the Managers'
power in this Section 5.3 shall apply:
(a) the sale, exchange or other disposition of all, or
substantially all, of the Company's assets occurring as part of a single
transaction or plan, or in a series of transactions, shall require not only the
approval of the Managers, but also the affirmative vote or written consent of
Members holding at least seventy-five percent (75%) of all Voting Interests;
(b) the merger of the Company with another limited liability
company or a corporation, general partnership or limited partnership shall
require not only the approval of the Managers, but also the affirmative vote or
written consent of Members holding at least seventy-five percent (75%) of all
Voting Interests; provided, however, that in no event shall a Member be required
to become a general partner in a merger with a general or limited partnership
without that Member's express written consent or unless the agreement of merger
provides each Member with the dissenter's rights described in the Act;
(c) any decision to admit a Person as a Member of the Company shall
require not only the approval of the Managers, but also the affirmative vote or
written consent of all of the Members;
18
(d) any decision to compromise the obligation of a Member to a make
a Capital Contribution or to return money or property paid or distributed in
violation of the Act shall require not only the approval of the Managers, but
also the affirmative vote or written consent of Members holding at least
seventy-five percent (75%) of the Voting Interests of all non-interested
Members;
(e) any act which would make it impossible to carry on the ordinary
business of the Company shall require not only approval of the Managers, but
also the affirmative vote or written consent of Members holding at least
seventy-five percent (75%) of all Voting Interests;
(f) any decision to place the Company into Bankruptcy shall require
not only the approval of the Managers, but also the affirmative vote or written
consent of Members holding at least seventy-five percent (75%) of all Voting
Interests; and
(g) any amendment to the Certificate of Formation or this Agreement
shall require not only the approval of the Managers, but also the affirmative
vote or written consent of Members holding at least seventy-five percent (75%)
of all Voting Interests, provided, however, that there shall be no change in the
purpose of the Company and provided further that no amendment will be binding on
a Member that diminishes its rights or increases its obligations unless approved
by such Member.
5.4 MEMBERS HAVE NO MANAGERIAL AUTHORITY. The Members shall have no
power to participate in the management of the Company except as expressly
authorized by this Agreement and except as expressly required by any
non-waivable provision of the Act. Without the written authorization of the
Managers to do so, no Member shall have any power or authority to bind or act on
behalf of the Company in any way, to pledge its assets or to render it liable
for any purpose.
5.5 TRANSACTIONS BETWEEN THE COMPANY AND THE MANAGERS, THE MEMBERS OR
THEIR AFFILIATES.
(a) CONTRACTS WITH AFFILIATES. Notwithstanding that it may
constitute a conflict of interest, the Members that are not also Managers may,
and may cause their Affiliates to, engage in any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property, the lending
of money, the rendering of any service or the establishment of any salary, other
compensation or other terms of employment) with the Company so long as that
transaction is not expressly prohibited by this Agreement and so long as the
transaction is approved by the Managers and the transaction is fair to the
Company and is on commercially reasonable terms.
(b) CONTRACTS WITH MANAGERS OR AFFILIATES OF THE MANAGERS. The
Members acknowledge and intend that the Managers may provide, or cause the
Company to engage one or more of its Affiliates to provide, any or all goods
and/or services required by the Company in the conduct of its business and may
engage in any transaction (including, without limitation, the purchase, sale,
lease or exchange of any property, the lending of money, the rendering of any
service or the establishment of any salary, other compensation or other terms of
employment) with the Company, and that, except only as expressly limited below,
the terms and conditions of
19
any such engagement shall be determined exclusively by the Managers in their
sole and absolute discretion; provided, however, that notwithstanding
anything to the contrary set forth in this Agreement, all disinterested
Members must approve the terms and conditions of an agreement with the
Manager or the terms and conditions of any agreement with one or more of the
Managers' Affiliates prior to the Company entering into such agreement, which
approval shall not be unreasonably withheld.
(c) TREATMENT OF AFFILIATE LOANS AND FEES. To the fullest extent
permitted by law, all principal, interest, costs and expenses owing by the
Company to the Members, the Managers and/or Affiliates thereof in repayment of
loans and all fees, commissions and/or reimbursable amounts payable by the
Company to the Members, the Managers and/or Affiliates thereof shall be treated
in the same manner as liabilities payable to unaffiliated creditors of the
Company and shall be paid and taken into account, as such, before any
Distributions of Distributable Cash are made to the Economic Interest Holders.
5.6 OFFICERS.
(a) APPOINTMENT OF OFFICERS. The Managers may, at their discretion,
appoint officers of the Company at any time. The officers of the Company may
include a Chairperson, a President or Chief Executive Officer, one or more
Senior Vice Presidents, one or more Vice Presidents, a Secretary, Assistant
Secretaries, a Chief Financial Officer, a Treasurer and one or more Assistant
Treasurers and a Comptroller. The officers shall serve at the pleasure of the
Managers, subject to all rights, if any, of an officer under any contract of
employment. Any individual may hold any number of offices. Officers of the
Managers may serve as officers of the Company if appointed by the Managers. The
officers shall exercise such powers and perform such duties as are typically
exercised by similarly titled officers in a corporation and as shall be
determined from time to time by the Managers. If any such officer is entitled to
a salary for his or her services, however, all of that salary shall be paid by
the Company.
(b) SIGNING AUTHORITY OF OFFICERS. The officers, if any, shall have
such authority to sign checks, instruments and other documents on behalf of the
Company as may be delegated to them by the Managers in writing.
(c) ACTS OF OFFICERS AS CONCLUSIVE EVIDENCE OF AUTHORITY. Any note,
mortgage, deed of trust, evidence of indebtedness, contract, certificate,
statement, conveyance or other instrument or obligation in writing, and any
assignment or endorsement thereof, executed or entered into between the Company
and any other Person, when signed by the Chairperson, the President or Chief
Executive Officer, any Senior Vice-President and any Secretary, any Assistant
Secretary, any Treasurer, or any Assistant Treasurer of the Company, is not
invalidated as to the Company by any lack of authority of the signing officers
in the absence of actual knowledge on the part of the other Person that the
signing officer(s) had no authority to execute the same.
5.7 COMPETING ACTIVITIES.
(a) PRE-FORMATION ACTIVITIES. Each Member, Economic Interest Holder
and Manager and each of its respective Affiliates may continue to engage or
invest in any activity or project, including, without limitation, those that
might be in direct or indirect competition with
20
the Company, if such Member, Manager, Economic Interest Holder and/or
Affiliate was engaged or had an investment in such activity or project prior
to the date hereof (other than, in the case of MediaChase, any activities or
projects relating to the operation of the business of XxxxxxxxXX.xxx, which
shall be conducted exclusively pursuant to the terms of this Agreement)
("Pre-Formation Activity"). For purposes of this Agreement, "competition" or
"competitive" shall mean an online entertainment news program containing
business news for the film and television industry. Neither the Company nor
any other Member, Economic Interest Holder or Manager shall have any right in
or to such Pre-Formation Activity or to the income or proceeds derived
therefrom.
(b) POST-FORMATION ACTIVITIES. Except as provided in Section
5.7(a), no Member, Economic Interest Holder, Manager or Affiliate thereof shall,
at any time prior to the Noncompete Date (as hereinafter defined), directly or
indirectly engage in, or have any interest in, or manage, operate or advise in
any manner, or provide or arrange any financing for, any activity or project
(whether as director, officer, shareholder, owner, employee, agent,
representative, security holder, member, consultant or otherwise) which activity
or project is an online entertainment news program containing business news for
the film and television industry; provided, however, that this limitation (i)
shall not apply to the acquisition of a stock interest in a corporation that
competes with the Company's business, provided (x) such stock is publicly traded
and the stock so acquired (together with all other stock in the corporation
beneficially owned by such Person and/or his or her spouse and any other member
of his or her family) is not more than one percent (1%) of the outstanding
shares of such corporation or (y) such corporation is not primarily engaged in
the production of an online entertainment news program containing business news
for the film and television industry and (ii) shall not prohibit consulting or
work with companies that own activities or projects that are competitive with
the Company's business so long as the consulting or work is not directly related
to the competing activity or project. For purposes of this Section 5.7(b), the
"Noncompete Date" shall be the earlier of (i) the date which is one (1) year
after a Member's Membership Interest or Economic Interest Holder's Economic
Interest is terminated, or a non-Member Manager ceases to act in such capacity
on behalf of the Company (as the case may be), or (ii) the date on which the
Company or its successors in interest cease to engage in the Company's business.
Except as prohibited in this Section 5.7, the Members, Economic Interest Holders
and Managers and their respective Affiliates, may engage or invest in, and
devote their time to, any other business venture or activity of any nature and
description (independently or with others).
(c) SPECIFIC ENFORCEMENT. The parties hereby acknowledge and agree
that any breach or threatened breach of this Section 5.7 or Section 9.6 will
cause irreparable injury to the Company and the other Members and Economic
Interest Holders and that money damages will not constitute an adequate remedy.
Accordingly, if any Member, Economic Interest Holder, Manager or Affiliate
thereof breaches or threatens to breach this Section 5.7 or Section 9.6, the
Company and the other Members and Economic Interest Holders shall, in addition
to all other rights and remedies available to them at law or in equity, be
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available from any court having equity
jurisdiction, all without the need to post a bond or other security or to prove
any amount of actual damage or that money damages will not provide an adequate
remedy. The provisions of this Section 5.7 and Section 9.6 are intended for the
sole protection and benefit of the parties
21
hereto and their respective successors and assigns, and no other person or
entity shall be the direct or indirect beneficiary of or have any direct or
indirect cause of action or claim in connection of this Section 5.7 or
Section 9.6.
(d) PAYMENTS TO MANAGERS AND OTHERS. The Company is authorized to
pay any Person remuneration or reimbursement for goods and services provided to
the Company. Without limiting the generality of the foregoing, the Company shall
pay the Members, the Economic Interest Holders and their Affiliates for services
rendered or goods provided by them to the Company to the extent that those
Members, Economic Interest Holders or Affiliates are not required to render such
services or goods themselves without charge to the Company, and to the extent
that the fees paid to those Members, Economic Interest Holders or Affiliates do
not exceed the fees that would be payable to independent responsible third
parties that are willing to perform those services or provide those goods.
(e) EXPENSES. The Company shall reimburse the Managers and their
Affiliates for all reasonable out-of-pocket costs and expenses incurred by them
in connection with the business and affairs of the Company, as well as
organizational expenses (including, without limitation, legal and accounting
fees and costs) incurred by them to form the Company and prepare the Certificate
of Formation (other than expenses incurred in connection with the preparation
and negotiation of this Agreement), subject to the Managers receiving advance
approval from all non-Manager Members in the case of expenses (or a series of
related expenses) in excess of $1,000, or such other amount which is agreed to
by all the Members, in any month which do not constitute an Agreed Overrun. The
Managers may allocate to the Company, on any basis selected by them in good
faith which is consistent with good accounting practice, a portion of any and
all expenses, including general, special and administrative expenses, incurred
by them or their Affiliates for the benefit of the Company, subject to the
Managers receiving advance approval from all non-Manager Members in the case of
an allocation to the Company (or a series of related allocations) in excess of
$1,000, or such other amount which is agreed to by all the Members, in any month
which do not constitute an Agreed Overrun.
ARTICLE VI
ALLOCATIONS OF NET PROFITS, NET LOSSES AND DISTRIBUTIONS
6.1 MINIMUM GAIN CHARGEBACK. In the event that there is a net decrease
in the Company Minimum Gain during any taxable year, the minimum gain chargeback
described in Sections 1.704-2(f) and (g) of the Treasury Regulations shall
apply.
6.2 MEMBER MINIMUM GAIN CHARGEBACK. If during any taxable year there is
a net decrease in Member Minimum Gain, the partner minimum gain chargeback
described in Section 1.704-2(i)(5) of the Treasury Regulations shall apply.
6.3 QUALIFIED INCOME OFFSET. Any Economic Interest Holder who
unexpectedly receives an adjustment, allocation or Distribution described in
subparagraphs (4), (5) or (6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations, which adjustment, allocation or distribution creates or increases a
deficit balance in that Economic Interest Holder's Capital Account, shall be
allocated items of "book" income and gain in accordance with the provisions
22
of the "qualified income offset" as described in Section 1.704-1(b)(2)(ii)(d)
of the Treasury Regulations.
6.4 NONRECOURSE DEDUCTIONS. Nonrecourse Deductions shall be allocated
to the Economic Interest Holders in proportion to their Economic Interests.
6.5 MEMBER NONRECOURSE DEDUCTIONS. Member Nonrecourse Deductions shall
be allocated to the Economic Interest Holders as required in Section
1.704-2(i)(1) of the Treasury Regulations in accordance with the manner in which
the Economic Interest Holders bear the burden of an Economic Risk of Loss
corresponding to the Member Nonrecourse Deductions.
6.6 ALLOCATION OF NET PROFITS. The Net Profits for each fiscal period
of the Company shall be allocated to the Economic Interest Holders in accordance
with the following order of priority:
(a) first, to those Economic Interest Holders with negative
Adjusted Capital Accounts, among them in proportion to the ratio of the negative
balances in their Adjusted Capital Accounts, until no Economic Interest Holder
has a negative Adjusted Capital Account;
(b) second, to those Economic Interest Holders whose Adjusted
Capital Contributions are in excess of their Adjusted Capital Accounts, among
them in accordance with the ratio of these excesses, until all of these excesses
have been eliminated;
(c) third, to each Member in proportion to each Member's Preferred
Return Account, until the Preferred Return Account of each is reduced to zero;
and
(d) finally, to the Economic Interest Holders in proportion to
their Economic Interests.
6.7 ALLOCATION OF NET LOSSES. Net Losses for each fiscal period of the
Company shall be allocated to the Economic Interest Holders in accordance with
the following order of priority:
(a) first, to those Economic Interest Holders with positive
Adjusted Capital Accounts, in proportion to the ratio of the positive balances
in their Adjusted Capital Accounts, until no Economic Interest Holder has a
positive Adjusted Capital Account; and
(b) finally, to the Economic Interest Holders in proportion to
their Economic Interests.
6.8 DISTRIBUTIONS BY THE COMPANY. Subject to applicable law and any
limitations contained elsewhere in this Agreement, the Managers may elect from
time to time to cause the Company to distribute Distributable Cash to the
Economic Interest Holders, which Distributions shall be in the following order
of priority:
(a) first, to each Member in proportion to each Member's Unpaid
Preferred Return, until the Unpaid Preferred Return of each has been reduced to
zero;
23
(b) second, to each Member in proportion to each Member's Adjusted
Capital Contributions, until the Adjusted Capital Contributions of each are
reduced to zero; and
(c) finally, to the Economic Interest Holders in proportion to
their Economic Interests.
6.9 ALLOCATION OF NET PROFITS AND LOSSES AND DISTRIBUTIONS IN RESPECT
OF A TRANSFERRED INTEREST. If any Economic Interest is Transferred or is
increased or decreased by reason of the admission of a new Economic Interest
Holder or otherwise during any Fiscal Year, each item of income, gain, loss,
deduction or credit of the Company for that Fiscal Year shall be allocated based
on the "interim closing of the books" method.
6.10 TAX ALLOCATION MATTERS.
(a) CONTRIBUTED OR REVALUED PROPERTY. Each Economic Interest
Holder's allocable share of the taxable income or loss of the Company,
depreciation, depletion, amortization and gain or loss with respect to any
contributed property, or with respect to revalued property where the Company's
property is revalued pursuant to Paragraph (b)(2)(iv)(f) of Section 1.704-1 of
the Treasury Regulations, shall be determined in the manner (and as to
revaluations, in the same manner as) provided in Section 704(c) of the Code. The
allocation shall take into account, to the full extent required or permitted by
the Code, the difference between the adjusted basis of the property to the
Economic Interest Holder contributing it and the fair market value of the
property determined by the Managers at the time of its contribution or
revaluation, as the case may be. The Company shall apply Section 704(c)(1)(A) by
using the "traditional method" as set forth in Section 1.704-3(b) of the
Treasury Regulations.
(b) RECAPTURE ITEMS. In the event that the Company has taxable
income that is characterized as ordinary income under the recapture provisions
of the Code, each Economic Interest Holder's distributive share of taxable gain
or loss from the sale of Company assets (to the extent possible) shall include a
proportionate share of this recapture income equal to that Economic Interest
Holder's share of prior cumulative depreciation deductions with respect to the
assets which gave rise to the recapture income.
6.11 ORDER OF APPLICATION. To the extent that any allocation,
Distribution or adjustment specified in any of the preceding Sections of this
Article VI affects the results of any other allocation, Distribution or
adjustment required herein, the allocations, Distributions and adjustments
specified in the following Sections shall be made in the priority listed:
(a) Section 6.8.
(b) Section 6.1.
(c) Section 6.2.
(d) Section 6.3.
(e) Section 6.4.
24
(f) Section 6.5.
(g) Section 6.7.
(h) Section 6.6.
(i) Section 10.4.
These provisions shall be applied as if all Distributions and
allocations were made at the end of the Company's Fiscal Year. Where any
provision depends on the Capital Account of any Economic Interest Holder, that
Capital Account shall be determined after the operation of all preceding
provisions for the Fiscal Year.
6.12 ALLOCATION OF LIABILITIES. Each Economic Interest Holder's
interest in "partnership" profits for purposes of determining that Member's
share of "excess nonrecourse liabilities" of the Company as used in Section
1.752-3(a)(3) of the Treasury Regulations, shall be equal to that Economic
Interest Holder's Economic Interest.
6.13 FORM OF DISTRIBUTION. No Economic Interest Holder, regardless of
the nature of its Capital Contribution, has the right to demand and receive any
Distribution from the Company in any form other than money. No Economic Interest
Holder may be compelled to accept from the Company a Distribution of any asset
in kind in lieu of a proportionate Distribution of money being made to other
Economic Interest Holder(s), and except upon a dissolution and the winding up of
the Company, no Economic Interest Holder may be compelled to accept a
Distribution of any asset in kind.
ARTICLE VII
TRANSFER OF INTERESTS
7.1 TRANSFER OF INTERESTS. Notwithstanding anything to the contrary set
forth elsewhere herein, no Member may, except as permitted in Section 7.3,
Transfer all or any part of its Membership Interest or its Economic Interest,
for any reason, within the one (1) year period (the "Prohibited Transfer
Period") commencing upon the date hereof. Any attempted Transfer during such
Prohibited Transfer Period shall be null and void ab initio, and the transferee
shall not become either a Member or an Economic Interest Holder. After the
Prohibited Transfer Period, any Member may Transfer all or any part of its
Membership Interest or Economic Interest provided it has complied with Section
7.3. After the consummation of any permitted Transfer of all or any part of a
Membership Interest or an Economic Interest, the Membership Interest or Economic
Interest so Transferred shall continue to be subject to the terms and provisions
of this Agreement, and any further Transfers shall be required to comply with
the terms and provisions of this Agreement.
7.2 [intentionally omitted]
7.3 RIGHT OF FIRST REFUSAL. At any time after the Prohibited Transfer
Period, if any Member decides to Transfer all or any part of its Membership
Interest or Economic Interest (the "Offered Interest") pursuant to a Bona Fide
Offer, that Member shall give written notice to the
25
Company and to all other Members (the "Eligible Members"), setting forth in
full the terms of such Bona Fide Offer and the identity of the offeror(s).
The Company shall then have the right and option, for a period ending thirty
(30) calendar days following its receipt of the written notice, to elect to
purchase all or any part of the Offered Interest at the purchase price and
upon the terms specified in the Bona Fide Offer, and the Eligible Members
(pro rata in accordance with the ratio of their Economic Interests) shall
then have the right and option, for a period of twenty (20) days thereafter,
to elect to purchase all or any part of the Offered Interest not elected to
be purchased by the Company at the purchase price and upon the terms
specified in the Bona Fide Offer. If all Eligible Members do not elect to
purchase the entire balance of the Offered Interest, then the Eligible
Members electing to purchase shall have the right and option, for a period of
ten (10) days thereafter and pro rata in accordance with the ratio of their
Economic Interests, to elect to purchase the balance of the Offered Interest
available for purchase.
Notwithstanding the foregoing, however, if the Company and/or the
Eligible Members do not elect to purchase all of the Offered Interest subject to
the right of first refusal pursuant to this Section 7.3, the Member desiring to
Transfer may Transfer all of the Offered Interest to the original proposed
transferee upon the terms set forth in the written notice provided to the
Company, whereupon the original proposed transferee shall take and hold the
Offered Interest subject to this Agreement and to all of the obligations and
restrictions upon the Member from whom such Offered Interest was acquired and
shall observe and comply with this Agreement and with all such obligations and
restrictions. Any such Transfer of the Offered Interest to the original proposed
transferee must be effected within ninety (90) calendar days after the date of
the termination of the right of first refusal options provided above. If no such
Transfer is effected within such ninety (90) calendar day period, then any
subsequent proposed Transfer of all or any part of the Membership Interest or
Economic Interest of the Member desiring to Transfer shall once again be subject
to the provisions of this Section 7.3.
For these purposes, if any consideration offered for the Offered
Interest in the Bona Fide Offer consists of rights, interests or property other
than money or an obligation to pay money, the Managers shall, in good faith,
determine the Fair Market Value of that consideration in monetary terms as of
the date the Bona Fide Offer was received by the Member desiring to Transfer.
The Fair Market Value of that consideration in monetary terms, as so determined,
shall be included in the purchase price payable by the Company and/or the
purchasing Members hereunder, but, in order to exercise their rights of first
refusal granted above, neither the Company nor the purchasing Members need
transfer to the Member desiring to Transfer the actual rights, interests or
property offered in the Bona Fide Offer nor afford the Member desiring to
Transfer the same tax treatment which would have been available to it under the
Bona Fide Offer.
7.4 [intentionally omitted]
7.5 [intentionally omitted]
7.6 [intentionally omitted]
7.7 REPURCHASE RESTRICTIONS IMPOSED BY LAW. Notwithstanding anything to
the contrary stated herein, the Company's right to exercise any option provided
in this Article VII shall be subject to the restrictions governing prohibited
Company Distributions set forth in the
26
Act and such other pertinent federal and state laws, rules, regulations or
other governmental restrictions as may now or hereafter be in effect.
7.8 FURTHER RESTRICTIONS ON TRANSFER OF INTERESTS. In addition to any
other restrictions found in this Agreement, no Interest Holder may Transfer its
Membership Interest, its Economic Interest or any part thereof (a) without
compliance with the Securities Act, the California Corporate Securities Law of
1968 and any other applicable securities laws, and (b) if the Transfer could
result in the Company not being classified as a partnership for federal or state
income tax purposes, in each case as determined by the Managers. Any attempted
or purported Transfer in violation of this Section 7.8 shall be null and void ab
initio, and the transferee shall not become either a Member or an Economic
Interest Holder.
7.9 SUBSTITUTION OF MEMBERS. Notwithstanding anything in this Agreement
to the contrary, no transferee of the whole or any part of a Membership Interest
shall become a substituted Member in the place of its transferor unless all of
the following conditions are satisfied:
(a) the Transferring Interest Holder and the transferee execute and
acknowledge such other instrument or instruments as the Managers may deem
necessary or desirable to effectuate the admission, including the written
acceptance and adoption by the transferee of all of the terms and conditions of
this Agreement as the same may have been amended; and
(b) The transferee pays to the Company a transfer fee which is
sufficient, in the reasonable discretion of the Managers, to cover all expenses
incurred by the Company in connection with the Transfer and substitution.
7.10 ENFORCEMENT. The Transfer restrictions contained in this Agreement
are of the essence of the ownership of a Membership Interest or an Economic
Interest. Upon application to any court of competent jurisdiction, the Company
shall be entitled to a decree against any Person violating or about to violate
such restrictions, requiring their specific performance, including those
requiring a Member or an Economic Interest Holder to sell all or part of its
Membership Interest or Economic Interest to the Company and/or the other
Members, or prohibiting a Transfer of all or part of a Membership Interest or an
Economic Interest.
7.11 EFFECT OF TRANSFERS IN VIOLATION OF AGREEMENT. If, for any reason,
a court refuses to enforce the provisions of Section 7.1 to the effect that a
Transfer in violation of this Article VII is null and void, then, upon any such
Transfer of a Membership Interest or part thereof in violation of this Article
VII, the transferee shall have no right to vote or participate in the management
of the business, property and affairs of the Company or to exercise any rights
of a Member. The transferee shall only be entitled to become an Economic
Interest Holder to the extent of the Membership Interest attempted or purported
to be Transferred to it in violation of this Agreement and thereafter shall only
receive the share of the Company's Net Profits, Net Losses, Tax Credits,
Distributable Cash, and other Distributions to which the Transferring Interest
Holder would otherwise have been entitled.
27
ARTICLE VIII
CONSEQUENCES OF MEMBERSHIP TERMINATION EVENTS
8.1 DISSOLUTION OF COMPANY. The occurrence of a Membership Termination
Event as to any Member other than the last and only remaining Member shall not
dissolve the Company. Upon the occurrence of a Membership Termination Event as
to the last and only remaining Member, the Company shall dissolve unless the
Managers and the successor-in-interest of the last and only remaining Member
consent in writing within ninety (90) days of such Membership Termination Event
to the continuation of the Company and to the admission of such personal
representative or other successor-in-interest, or its designee or nominee, as a
Member.
8.2 ADMISSION OR CONVERSION. Upon the occurrence of a Membership
Termination Event with respect to a Member under circumstances where the Company
does not dissolve, the Managers shall determine which one of the following shall
occur and give written notice thereof to the remaining Members and to the Member
who suffered the Membership Termination Event (the "Former Member"):
(a) the Former Member's successor-in-interest shall be admitted as
a Member of the Company in the place and stead of the Former Member to the
extent of the Former Member's Membership Interest (the "Former Member's
Interest"); provided, however, that the Managers may not elect this alternative
without the affirmative vote or written consent of Members constituting a
Majority in Interest of all remaining Members holding at least seventy-five
percent (75%) of the Voting Interests of all remaining Members;
(b) the Former Member's Interest shall be converted to a bare
Economic Interest, and the Former Member's successor-in-interest shall become
the owner of that Economic Interest; or
(c) the Company, and/or one or more of the remaining Members and/or
any other Person(s) designated by the Managers shall purchase, and the Former
Member or the Former Member's successor-in-interest shall sell, the Former
Member's Interest upon the terms and conditions specified in Section 8.3.
8.3 TERMS OF TRANSFER.
(a) TRANSFEREE BOUND BY AGREEMENT. If all or any part of Member's
Membership Interest or Economic Interest has been Transferred to a transferee,
that transferee shall take and hold such Interest subject to this Agreement and
to all of the obligations and restrictions upon the Member and shall observe and
comply with this Agreement and with all such obligations and restrictions.
(b) NOTICE OF REPURCHASE EVENT. Upon the occurrence of a Membership
Termination Event, the Member affected (the "Transferring Interest Holder")
shall promptly give notice (the "Notice") to the Company and to all Eligible
Members, stating when the Membership Termination Event occurred, the reason
therefor, if applicable, the percentage of the Membership Interest or Economic
Interest so affected, and the name, address and capacity of the transferee, if
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a Transfer has occurred. If no such Notice is given within ten (10) days of
the occurrence of the Membership Termination Event, any Eligible Member may
institute the purchase proceedings by giving a Notice to the Company, the
other Eligible Members and the Transferring Interest Holder. For purposes of
the remainder of this Section 8.3, the term "Affected Interest" shall mean
the Membership Interest or Economic Interest which the Transferring Interest
Holder is required to sell to the Company and the Eligible Members pursuant
to Section 8.2(c) above.
(c) OPTION TO PURCHASE. Upon receipt of any Notice, the Company
shall have the right and option, for a period ending thirty (30) calendar days
following the determination of the purchase price of the Affected Interest, to
elect to purchase all (but not less than all) of the Affected Interest at the
price and upon the terms provided below in this Section 8.3, and the Eligible
Members, pro rata in accordance with the ratio of their Economic Interests,
shall then have the right and option, for a period of twenty (20) days
thereafter, to elect to purchase all or any part of the Affected Interest not
elected to be purchased by the Company upon the same terms and conditions as
exist in favor of the Company. If all Eligible Members do not elect to purchase
the entire balance of the Affected Interest, then the Eligible Members electing
to purchase shall have the right and option, for a period of ten (10) days
thereafter and pro rata in accordance with the ratio of their Economic
Interests, to purchase the balance of the Affected Interest available for
purchase. If the Company and the Eligible Members do not elect to purchase all
of the Affected Interest, the Transferring Interest Holder shall retain all of
the Affected Interest subject to all of the terms of this Agreement.
(d) PURCHASE PRICE.
(i) BY AGREEMENT. Upon the Company's receipt of the Notice,
the Transferring Interest Holder and the Company (acting through the Managers)
shall promptly attempt to agree upon a purchase price for the Affected Interest.
(ii) BY APPRAISAL IF NO AGREEMENT. If the Company and the
Transferring Interest Holder are unable to agree upon a purchase price within
thirty (30) calendar days following the Company's receipt of the Notice, they
shall appoint an appraiser as mutually agreed by the parties to value the Fair
Market Value of the Affected Interest as of the date the Membership Termination
Event occurred. The determination of the purchase price in the by the appraiser
shall be conclusive for all purposes and upon all parties.
The expenses of appraisal shall be borne equally by the Company and the
Transferring Interest Holder. The portion of the compensation and fees allocated
to the Company shall be apportioned, as among the Company and any Members
electing to purchase the Affected Interest, on a pro rata basis to the amount of
the Affected Interest purchased by the Company and each such Member,
respectively.
(iii) QUALIFICATIONS OF APPRAISER. The appraiser selected by
the parties shall be reasonably experienced in valuing interests in businesses
similar to the business then conducted by the Company.
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(e) PAYMENT OF PURCHASE PRICE.
(i) PAYMENT. Except as provided below, the purchase price
for the Affected Interest shall be payable at the option of the Company and each
purchasing Member, severally, either entirely in cash, or partly in cash and
partly by delivery of a promissory note (in which latter case, at least
twenty-five percent (25%) of the purchase price for the Affected Interest shall
be payable in cash at closing with the remainder payable by delivery of a
promissory note). Each promissory note hereunder ("Note") shall be in the form
of a secured promissory note, payable as provided in clause (ii) below.
(ii) PROMISSORY NOTES. Each Note shall be payable in four (4)
equal quarterly principal installments over one year, with fixed interest at
Prime. Interest shall be paid quarterly in addition to principal. Each Note
shall provide that the maker of the Note shall have the right to prepay all or
any part of the principal balance on the Note without penalty or premium and
that any sums paid in any period in excess of the regular installment for that
period shall be applied against installments thereafter falling due, in the
inverse order of their maturity or against all of the remaining installments
equally, at the option of the holder of the Note. Each Note shall also provide
that in case of default in the payment of any installment when due, the entire
principal balance then remaining unpaid shall become immediately due and payable
at the option of the holder, and shall provide for the payment by the maker of
reasonable attorneys' fees to the holder in the event suit is commenced because
of any default. Each Note executed by a Member shall be secured by a security
interest in that part of the Affected Interest purchased by that Member. Each
Note executed by the Company shall be secured by a security interest in all of
the property of the Company. So long as no default occurs in the making of
payments on any Note, the Company and/or the purchasing Members shall have the
right to receive all distributions of Distributable Cash and other Distributions
and all allocations of Net Profits, Net Losses and Tax Credits attributable
thereto. However, upon default by the Company or a purchasing Member in the
payment of its Note, and if that default continues for a period of thirty (30)
days after notice thereof to the Company and/or the purchasing Member, the
Transferring Interest Holder shall thereupon have, in addition to any other
rights or remedies it may have by reason of the default, the right to receive
the distributions of Distributable Cash and other Distributions attributable
thereto (but not the allocations of Net Profits, Net Losses and Tax Credits
attributable thereto, which shall continue to vest until foreclosure in the
legal owners of the Membership Interests or Economic Interest(s) so serving as
security). Any Distributions so received shall be applied to, and shall reduce,
the amount of principal and interest owing on the Note.
(iii) SUBORDINATION OF NOTES. Each Note issued by the Company
shall be subordinated in right of payment to the payment of all Senior Debt (as
defined below) upon such terms and conditions as the holders of the Senior Debt
may determine, and each such Note shall contain subordination provisions which
are approved as to form and substance by all holders of the Senior Debt. For
these purposes "Senior Debt" means financing provided by one or more
institutional or private lenders to fund the Company's business operations. The
parties acknowledge that the Company's ability to make payments under
outstanding Notes may be limited from time to time by any such subordination
provisions, by provisions of applicable law and by provisions of the Articles.
If, as a result of these limitations, the Company is at any particular time able
to make payments under some but not all of its outstanding Notes, it shall
30
allocate the payments which it is able to make among the Notes on a strict
"first issued, first paid" basis. Each Note issued by the Company shall provide
that no payments of principal or interest may be made thereon at any time that
the Company is in arrears in the payment of principal or interest on any Note
previously issued by the Company.
(f) CONSUMMATION OF SALE. Unless the parties involved mutually
agree otherwise, delivery to the Company and/or the purchasing Members of the
Affected Interest to be sold hereunder and payment of the purchase price
therefor shall take place at a closing (the "Closing") to be held at the
principal office of the Company within thirty (30) calendar days following the
termination of the last applicable option period. At the Closing, the
Transferring Interest Holder shall deliver to the Company and/or the purchasing
Members a xxxx of sale and assignment effecting the transfer of the Affected
Interest to be sold, in form and substance satisfactory to the Company and/or
the purchasing Members, and shall deliver, in addition, any other documents
reasonably requested by the Company and/or the purchasing Members to effectuate
the purposes of this Agreement.
ARTICLE IX
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 BOOKS AND RECORDS. The books and records of the Company shall be
kept, and the financial position and the results of its operations recorded, in
accordance with the method selected by the Managers. The books and records of
the Company shall reflect all the Company transactions and shall be appropriate
and adequate for the Company's business. The Company shall maintain all of the
following at its principal office:
(a) a current list of the full name and last known business or
residence address of each Member and Economic Interest Holder set forth in
alphabetical order, together with the Capital Contributions, Capital Account,
Voting Interest and Economic Interest of each Member and Economic Interest
Holder;
(b) a current list of the full name and business or residence
address of each Manager;
(c) copies of the Certificate of Formation and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which the Certificate of Formation or any amendments thereto have been executed;
(d) copies of the Company's federal, state and local income tax or
information returns and reports, if any, for the six most recent taxable years;
(e) copies of this Agreement and any and all amendments thereto,
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
(f) copies of the financial statements of the Company, if any, for
the six most recent Fiscal Years;
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(g) the Company's books and records pertaining to the internal
affairs of the Company for at least the current and past four Fiscal Years; and
(h) copies of all written consents approving actions taken by the
Members without a meeting pursuant to Section 4.4.
9.2 REPORTS; ANNUAL STATEMENTS.
(a) GOVERNMENTAL REPORTS. The Managers shall cause to be filed all
documents and reports required to be filed with any governmental agency in
accordance with the Act.
(b) FINANCIAL REPORTS. The Managers shall cause to be sent to each
Member of the Company (a) not later than one hundred twenty (120) days after the
close of each Fiscal Year of the Company, the Company's unaudited financial
statements for that Fiscal Year, including a balance sheet as of the end of that
Fiscal Year and an income statement and statement of changes in financial
position for that Fiscal Year, accompanied by the report thereon of the
independent accountants engaged by the Company, and (b) within thirty (30) days
after the end of each of the first three (3) fiscal quarters of each Fiscal Year
of the Company, the Company's unaudited financial statements for such fiscal
quarter, including a balance sheet as of the end of that fiscal quarter and an
income statement and statement of changes in financial position for such fiscal
quarter.
(c) TAX REPORTS. The Managers shall cause to be prepared at least
annually, at Company expense, information necessary for the preparation of the
Members' and Economic Interest Holders' federal and state income tax returns.
The Managers shall send or cause to be sent to each Member and Economic Interest
Holder within ninety (90) days after the end of each taxable year such
information as is necessary to complete federal and state income tax or
information returns.
9.3 BANK ACCOUNTS; INVESTED FUNDS. All funds of the Company shall
be deposited in such account or accounts of the Company as may be determined by
the Managers and shall not be commingled with the funds of any other Person. All
withdrawals therefrom shall be made upon checks signed by such persons and in
such manner as the Managers may determine. Temporary surplus funds of the
Company may be invested in commercial paper, time deposits, short-term
government obligations or other investments determined by the Managers.
9.4 TAX MATTERS FOR THE COMPANY HANDLED BY TAX MATTERS PARTNER. The
Managers shall from time to time cause the Company to make such tax elections as
they deem to be in the best interests of the Company and the Members. The Tax
Matters Partner shall represent the Company (at the Company's expense) in
connection with all administrative and/or judicial proceedings by the Internal
Revenue Service or any government authority involving any return of the Company,
and may expend the Company's funds for professional services and costs
associated therewith. Without limiting the powers which the Tax Matters Partner
may exercise, the Tax Matters Partner shall have the authority to do any of the
following: (a) enter into a settlement agreement with the Internal Revenue
Service which binds the Members, (b) file a petition as contemplated in Section
6226(a) or 6228 of the Code, (c) intervene in any action as
32
contemplated in Section 6226(b)(5) of the Code, (d) file any request
contemplated in Section 6227(b) of the Code, or (e) enter into an agreement
extending the period of limitations as contemplated in Section 6229(b)(1)(B)
of the Code.
9.5 ACCOUNTING MATTERS. All decisions as to accounting matters shall
be made by the Managers.
9.6 CONFIDENTIALITY. All books, records, financial statements, tax
returns, budgets, business plans and projections of the Company, all other
Confidential Information and all of the terms and provisions of this Agreement
shall be held in confidence by the Managers, the Members and the Economic
Interest Holders and their respective Affiliates, subject to any obligation to
comply with (a) any applicable law, (b) any rule or regulation of any legal
authority or securities exchange, or (c) any subpoena or other legal process to
make information available to the Persons entitled thereto. Such confidentiality
shall be maintained to the same degree as each Manager, Member or Economic
Interest Holder maintains its own confidential information and shall be
maintained until such time, if any, as any such confidential information either
is, or becomes, published or a matter of public knowledge. Without limiting the
generality of the foregoing, no Member, Economic Interest Holder or Manager
shall, at any time (both during the period such Person is a Member, Economic
Interest Holder or Manager and thereafter), cause, suffer or permit the
Confidential Information to be used for the gain or benefit of any party outside
of the Company or for such Person's personal gain or benefit outside the scope
of such Person's relationship with the Company.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 DISSOLUTION. The Company shall be dissolved, its assets disposed
of and its affairs wound up upon the first to occur of the following:
(a) the vote of the Managers and Members holding at least
seventy-five percent (75%) of all Voting Interests;
(b) the occurrence of a Membership Termination Event as to the last
and only remaining Member, if the Managers and that Member's
successor-in-interest fail to consent to the continuation of the Company in
accordance with Section 8.1 within ninety (90) days after the occurrence of that
event;
(c) the sale of all or substantially all of the assets of the
Company; or
(d) the occurrence of an event which makes it unlawful for the
business of the Company to be continued.
10.2 DATE OF DISSOLUTION. Dissolution of the Company shall be effective
on the day on which the event occurs giving rise to the dissolution, but the
Company shall not terminate until the assets of the Company have been liquidated
and distributed as provided herein. Notwithstanding the dissolution of the
Company, prior to the termination of the Company the
33
business of the Company and the rights and obligations of the Members and
Economic Interest Holders, as such, shall continue to be governed by this
Agreement.
10.3 WINDING UP. Upon the occurrence of any event specified in Section
10.1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets and satisfying the claims
of its creditors. The Managers shall be responsible for overseeing the winding
up and liquidation of the Company and shall cause the Company to (a) sell or
otherwise liquidate all of the Company's assets as promptly as practicable,
except to the extent the Managers determine to distribute any assets to the
Economic Interest Holders in kind, (b) allocate any Net Profits or Net Losses
resulting from such sales to the Economic Interest Holders' Capital Accounts in
accordance with this Agreement, (c) discharge or make reasonable provision for
all liabilities of the Company, including all liabilities to the Managers, the
Members and the Economic Interest Holders to the extent permitted by law (other
than liabilities for unpaid distributions to Economic Interest Holders and
former Economic Interest Holders under the Act), and all costs relating to the
dissolution, winding up, and liquidation and distribution of assets, (d)
establish such reserves as may be reasonably necessary to provide for contingent
liabilities of the Company (for purposes of determining the Capital Accounts of
the Economic Interest Holders, the amounts of such reserves shall be deemed to
be an expense of the Company), (e) discharge or make reasonable provision for
any remaining liabilities of the Company to the Economic Interest Holders, other
than on account of their interests in Company capital or profits, and to the
Managers, and (f) distribute the remaining assets to the Economic Interest
Holders in the manner specified in Section 10.4.
10.4 LIQUIDATING DISTRIBUTIONS TO ECONOMIC INTEREST HOLDERS. The
remaining assets of the Company shall promptly be distributed to the Economic
Interest Holders in accordance with Section 6.8, after taking into account
income and loss allocations for the Company's taxable year during which the
liquidation occurs.
10.5 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one or
more Economic Interest Holders shall first be valued at its Fair Market Value to
determine the Net Profit or Net Loss that would have resulted if that asset had
been sold for that value, the Net Profit or Net Loss shall then be allocated
pursuant to Article VI, and the Economic Interest Holders' Capital Accounts
shall be adjusted to reflect those allocations. The amount distributed and
charged to the Capital Account of each Economic Interest Holder receiving an
interest in the distributed asset shall be the Fair Market Value of the interest
(net of any liability secured by the asset that the Member assumes or takes
subject to). The Fair Market Value of that asset shall be determined by the
Managers.
10.6 PROVISION FOR DEBTS AND LIABILITIES. The payment of a debt or
liability, whether the whereabouts of the creditor is known or unknown, has been
adequately provided for if the payment has been provided for by either of the
following means:
(a) payment has been assumed or guaranteed in good faith by one or
more financially responsible Persons or by the United States government or any
agency thereof, and the provision, including the financial responsibility of the
Person, was determined in good faith and with reasonable care by the Managers to
be adequate at the time of any distribution of the assets pursuant to this
Section; or
34
(b) the amount of the debt or liability has been deposited as
provided in Title 12, Section 1197 of the Delaware Code.
This Section 10.6 shall not prescribe the exclusive means of
making adequate provision for debts and liabilities.
10.7 NO LIABILITY. Notwithstanding anything to the contrary in this
Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g)
of the Treasury Regulations, if any Economic Interest Holder has a negative
deficit Capital Account balance (after giving effect to all contributions,
distributions, allocations and other Capital Account adjustments for all taxable
years, including the year during which such liquidation occurs), neither that
Economic Interest Holder nor the Managers shall have any obligation to make any
contribution to the capital of the Company, and the negative balance of that
Economic Interest Holder's Capital Account shall not be considered a debt owned
by that Economic Interest Holder or the Managers to the Company or to any other
person for any purpose whatsoever.
10.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise
specifically provided in this Agreement, each Economic Interest Holder shall be
entitled to look only to the assets of the Company for the return of that
Economic Interest Holder's positive Capital Account balance and shall have no
recourse for its Capital Contributions and/or share of Net Profits (upon
dissolution or otherwise) against the Managers or any other Economic Interest
Holder.
10.9 CERTIFICATE OF CANCELLATION. Upon completion of the winding up of
the Company's affairs, the Managers shall file a Certificate of Cancellation
with the Delaware Secretary of State.
10.10 COMPENSATION FOR SERVICES. The Managers shall be entitled to
reasonable compensation from the Company for their services in winding up the
affairs of the Company.
ARTICLE XI
LIMITATION OF LIABILITY; STANDARD OF CARE; INDEMNIFICATION
11.1 LIMITATION OF LIABILITY. The debts, obligations and liabilities of
the Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and no Member, Economic
Interest Holder, Manager or officer of the Company shall be obligated personally
for any such debt, obligation or liability of the Company solely by reason of
being a Member, Economic Interest Holder, Manager and/or officer.
11.2 STANDARD OF CARE. Neither the Managers nor any Member or officer
of the Company shall have any personal liability whatsoever to the Company or to
any Member, Economic Interest Holder or Affiliate of the Company or to any
Affiliate or constituent owner of any Member or Economic Interest Holder on
account of such Person's status as the Manager or as a Member or officer of the
Company or by reason of such Person's acts or omissions in connection with the
conduct of the business of the Company so long as such Person acts in good faith
for a purpose which the Person reasonably believes to be in, or not opposed to,
the best interests of the Company; provided, however, that nothing contained
herein shall protect any
35
such Person against any liability to which such Person would otherwise be
subject by reason of (a) any act or omission of such Person that involves
actual fraud or willful misconduct or (b) any transaction from which such
Person derives any improper personal benefit.
11.3 INDEMNIFICATION. The Company shall indemnify and hold harmless any
Person made, or threatened to be made, a party to an action or proceeding,
whether civil, criminal or investigative (a "proceeding"), including an action
by or in the right of the Company, by reason of the fact that such Person was or
is a Manager, a Member (including in the capacity of the Tax Matters Partner) or
an officer of the Company, an Affiliate of a Manager, a Member or an officer of
the Company, or an officer, director, shareholder, partner, member, employee,
manager or agent of any of the foregoing, against all judgments, fines, amounts
paid in settlement and reasonable expenses (including investigation, accounting
and attorneys' fees) incurred as a result of such proceeding, or any appeal
therein (and including, without limitation, indemnification against active or
passive negligence, gross negligence or breach of duty) if such Person acted in
good faith, for a purpose which he reasonably believed to be in, or not opposed
to, the best interests of the Company and in criminal proceedings, in addition,
had no reasonable cause to believe that his conduct was unlawful. The
termination of any such civil or criminal proceeding by judgment, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not in
itself create a presumption that any such Person did not act in good faith, for
a purpose which he reasonably believed to be in, or not opposed to, the best
interests of the Company or that he had reasonable cause to believe that his
conduct was unlawful; provided only that no such Person shall be indemnified or
held harmless if and to the extent that the liability sought to be indemnified
or held harmless against results from (a) any act or omission of such Person
that involved actual fraud or willful misconduct or (b) any transaction from
which such Person derived improper personal benefit. The Company's
indemnification obligations hereunder shall survive the termination of the
Company. Each indemnified Person shall have a claim against the property and
assets of the Company for payment of any indemnity amounts from time to time due
hereunder, which amounts shall be paid or properly reserved for prior to the
making of distributions by the Company to the Members.
11.4 CONTRACT RIGHT; EXPENSES. The right to indemnification conferred
in this Article XI shall be a contract right and shall include the right to
require the Company to advance the expenses incurred by the indemnified Person
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the Act so requires, the payment of such expenses in advance
of the final disposition of a proceeding shall be made only upon receipt by the
Company of an undertaking, by or on behalf of the indemnified Person, to repay
all amounts so advanced if it shall ultimately be determined that such Person is
not entitled to be indemnified under this Article XI or otherwise.
11.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Company may, to the
extent authorized from time to time by the Managers, grant rights to
indemnification and to advancement of expenses to any employee or agent of the
Company to the fullest extent of the provisions of Sections 11.3 and 11.4 with
respect to the indemnification and advancement of expenses of the Managers, the
Members and/or the officers of the Company.
11.6 NONEXCLUSIVE RIGHT. The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article XI
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shall not be exclusive of any other right which any Person may have or
hereafter acquire under any statute or agreement, or under any insurance
policy obtained for the benefit of the Managers, the Members and/or the
officers of the Company.
11.7 SEVERABILITY. If any provision of this Article XI is determined to
be unenforceable in whole or in part, such provision shall nonetheless be
enforced to the fullest extent permissible, it being the intent of this Article
XI to provide indemnification to all Persons eligible hereunder to the fullest
extent permitted under law.
11.8 INSURANCE. The Managers may cause the Company to purchase and
maintain insurance on behalf of any Person (including, without limitation, the
Managers or any Member or officer of the Company) who is or was an agent of the
Company against any liability asserted against that Person and incurred by that
Person in any such capacity or arising out of that Person's status as an agent,
whether or not the Company would have the power to indemnify that Person against
liability under the provisions of Sections 11.3 and 11.4 or under applicable
law.
ARTICLE XII
REPRESENTATIONS OF THE MEMBERS
Each Member represents and warrants to the other Members and the
Company as follows:
12.1 PREEXISTING RELATIONSHIP OR EXPERIENCE. (a) The Member has a
preexisting personal or business relationship with the Company or one or more of
its Managers, officers or control persons or (b) by reason of the Member's
business or financial experience, or by reason of the business or financial
experience of the Member's 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, the Member is capable of evaluating the risks and
merits of an investment in its Membership Interest and of protecting the
Member's own interests in connection with the investment.
12.2 ACCESS TO INFORMATION. The Member has had an opportunity to review
all documents, records and books pertaining to this investment and has been
given the opportunity to consult with counsel of his or her choice with respect
to all aspects of this investment and the Company's proposed business
activities. Such Member has personally met with the Managers and has been
provided with such information as may have been requested and has at all times
been given the opportunity to obtain additional information necessary to verify
the accuracy of the information received and the opportunity to ask questions of
and receive answers from the Managers concerning the terms and conditions of the
investment and the nature and prospects of the Company's business.
12.3 ECONOMIC RISK. The Member is financially able to bear the economic
risk of an investment in its Membership Interest, including the total loss
thereof.
12.4 INVESTMENT INTENT. The Member is acquiring its Membership Interest
for investment purposes and for the Member's own account only and not with a
view to, or for sale
37
in connection with, any distribution of all or any part of its Membership
Interest. Except for the partners or members of the Member, no other Person
will have any direct or indirect beneficial interest in, or right to, its
Membership Interest.
12.5 CONSULTATION WITH ATTORNEY. The Member has been advised to consult
with its own attorney regarding all legal and tax matters concerning an
investment in its Membership Interest and has done so to the extent it considers
necessary.
12.6 PURPOSE OF ENTITY. If the Member is a corporation, partnership,
limited liability company, trust or other entity, it was not organized for the
specific purpose of acquiring its Membership Interest.
12.7 RESIDENCY. The Member is a resident of the state of California.
12.8 NO ADVERTISING. The Member has not seen, received or been
solicited by any leaflet, public promotional meeting, newspaper or magazine
article or advertisement, radio or television advertisement or any other form of
advertising or general solicitation with respect to the sale of its Membership
Interest.
12.9 MEMBERSHIP INTEREST IS RESTRICTED SECURITY. The Member understands
that its Membership Interest, including the Economic Interest constituting a
part thereof, is a "restricted security" under the Securities Act in that the
Membership Interest will be acquired from the Company in a transaction not
involving a public offering, that its Membership Interest and the Economic
Interest constituting a part thereof may be resold without registration under
the Securities Act only in certain limited circumstances and that otherwise its
Membership Interest and such Economic Interest must be held indefinitely.
12.10 NO REGISTRATION OF MEMBERSHIP INTEREST. The Member acknowledges
that its Membership Interest has not been registered under the Securities Act or
qualified under any state securities law in reliance, in part, upon its
representations, warranties and agreements herein.
12.11 ORGANIZATION. The Member is duly organized and validly existing
under the laws of its jurisdiction of formation, with full corporate or limited
liability company power to carry on its business as now or proposed to be
conducted.
12.12 AUTHORITY. The Member has full power and authority to enter into
this Agreement and has taken all action required to authorize the execution,
delivery and performance of this Agreement.
12.13 ENFORCEABILITY. This Agreement constitutes the legal, valid and
binding obligation of the Member, enforceable against the Member in accordance
with its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally and subject to the availability of equitable
remedies.
12.14 NO VIOLATION. None of the execution, delivery or performance by
the Member of this Agreement will: (a) violate any provision of the Certificate
of Incorporation, Certificate of Formation, bylaws, operating agreement or other
charter documents of the Member; (b) violate,
38
or constitute a default under any contract or agreement to which the Member
or any of its properties is subject or bound; or (c) violate any law or order
to which the Member or any of its properties is subject.
ARTICLE XIII
MISCELLANEOUS
13.1 LEGAL COUNSEL. The Members acknowledge that Loeb & Loeb LLP is
counsel to Onlinefilmsales with respect to this Agreement and the transactions
contemplated herein and that Loeb & Loeb LLP may in the future represent the
Company in connection with its business and affairs. The Members further
acknowledge that Xxxx, Golden & Xxxxxxxx, LLP has been counsel to MediaChase and
the Company and that Xxxx, Golden & Xxxxxxxx, LLP may in the future represent
the Company in connection with its business and affairs. MediaChase hereby
consents to Loeb & Loeb LLP's representation of Onlinefilmsales with respect to
this Agreement and the transactions contemplated herein and also consents to
Loeb & Loeb LLP's representation of the Company in the future. Onlinefilmsales
hereby consents to Xxxx, Golden & Xxxxxxxx, LLP's representation of MediaChase
and the Company with respect to this Agreement and the transactions contemplated
herein and also to its representation of the Company in the future. Without
limiting the generality of the foregoing, MediaChase and Onlinefilmsales agree
that Loeb & Loeb LLP and Xxxx, Golden & Xxxxxxxx, LLP may, notwithstanding any
past existing or future representation of Onlinefilmsales or MediaChase,
respectively, or any information or experience obtained by Loeb & Loeb LLP or
Xxxx, Golden & Xxxxxxxx, LLP in any such representation, represent
Onlinefilmsales or MediaChase and/or their respective Affiliates, respectively,
in connection with any future litigation, reference or other proceeding or
dispute which may arise from or relate to this Agreement or the transactions
contemplated herein, hereby waiving any rights it may have to object to such
representation under any and all circumstances. Such consent is freely given by
MediaChase and Onlinefilmsales after full consideration of its consequences and
after consultation with independent legal counsel of its respective choice.
13.2 AMENDMENTS. No amendment to this Agreement may be made without
compliance with Section 5.3(g). All amendments to this Agreement must be in
writing.
13.3 OFFSET PRIVILEGE. The Company may offset against any monetary
obligation owing from the Company to any Member, Economic Interest Holder or
Manager any monetary obligation then owing from that Member, Economic Interest
Holder or Manager to the Company.
13.4 ARBITRATION.
(a) GENERAL. In the event of any dispute, claim or controversy
among the parties arising out of or relating to this Agreement or the
Certificate of Formation whether in contract, tort, equity or otherwise, and
whether relating to the meaning, interpretation, effect, validity, performance
or enforcement of this Agreement or the Certificate of Formation, such dispute,
claim or controversy shall be resolved by and through an arbitration proceeding
to be conducted under the auspices and the commercial arbitration rules of the
American Arbitration Association (or any like organization successor thereto) at
Los Angeles, California. The arbitrability of the dispute, claim or controversy
shall likewise be determined in the arbitration.
39
The arbitration proceeding shall be conducted in as expedited a manner as is
then permitted by the commercial arbitration rules (formal or informal) of
the American Arbitration Association. Both the foregoing agreement of the
parties to arbitrate any and all such disputes, claims and controversies, and
the results, determinations, findings, judgments and/or awards rendered
through any such arbitration shall be final and binding on the parties and
may be specifically enforced by legal proceedings in any court of competent
jurisdiction.
(b) GOVERNING LAW. The arbitrator(s) shall follow any applicable
federal law and Delaware state law (with respect to all matters of substantive
law) in rendering an award.
(c) COSTS OF ARBITRATION. The cost of the arbitration proceeding
and any proceeding in court to confirm or to vacate any arbitration award, as
applicable (including, without limitation, each party's attorneys' fees and
costs), shall be borne by the unsuccessful party or, at the discretion of the
arbitrator(s), may be prorated between the parties in such proportion as the
arbitrator(s) determine(s) to be equitable and shall be awarded as part of the
arbitrators' award.
13.5 REMEDIES CUMULATIVE. Except as otherwise provided herein, the
remedies under this Agreement are cumulative and shall not exclude any other
remedies to which any Person may be lawfully entitled.
13.6 NOTICES. Any notice to be given to the Company or any Member,
Economic Interest Holder or Manager in connection with this Agreement must be in
writing and will be deemed to have been given and received when delivered to the
address specified by the party to receive the notice by courier or other means
of personal service, when received if sent by facsimile, or three (3) days after
deposit of the notice by first class mail, postage prepaid, or certified mail,
return receipt requested. Any such notice must be given to the Company at its
principal place of business, and to any Member, Economic Interest Holder or
Manager at the address specified in Exhibit A. Any party may, at any time by
giving five (5) days' prior written notice to the other parties, designate any
other address as the new address to which notice must be given.
13.7 ATTORNEYS' FEES. Subject to the provisions of Section 13.4
requiring that disputes be submitted to arbitration, in the event that any
dispute between the Company and/or the Members or Economic Interest Holders
and/or the Managers should result in litigation, the prevailing party in that
dispute shall be entitled to recover from the other party all reasonable fees,
costs and expenses of enforcing any right of the prevailing party, including
without limitation, reasonable attorneys' fees and expenses.
13.8 GOVERNING LAW; JURISDICTION. The Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard to any conflicts of laws principles of the State of Delaware or any other
jurisdiction that would call for the application of the law of any jurisdiction
other than the State of Delaware. Subject to the requirement that all disputes
are to be submitted to arbitration pursuant to Section 13.4, each Member,
Economic Interest Holder and Manager consents to the exclusive jurisdiction of
the federal courts sitting in Los Angeles, California, in any action on a claim
arising out of, under or in connection with this Agreement or the transactions
contemplated by this Agreement. Each Member, Economic
40
Interest Holder and Manager further agrees that personal jurisdiction over it
may be effected by service of process by registered or certified mail
addressed as provided in Section 13.6 and that when so made shall be as if
served upon it personally.
13.9 COMPLETE AGREEMENT. This Agreement, the Certificate of Formation
and all of the other agreements or instruments entered into by any Member in
connection with the consummation of the transactions contemplated hereby
constitute the complete and exclusive statement of agreement among the Members,
Economic Interest Holders and Managers with respect to their respective subject
matters and supersede all prior written and oral agreements or statements by and
among the Members, Economic Interest Holders and Managers. No representation,
statement, condition or warranty not contained in any such agreement shall be
binding on the Members, Economic Interest Holders or Managers or have any force
or effect whatsoever.
13.10 NO THIRD-PARTY RIGHTS. No Person other than a Member, an Economic
Interest Holder, a Manager or a Person entitled to indemnification pursuant to
Article XI shall have any legal or equitable right, remedy or claim, or be a
beneficiary, under or in respect of this Agreement.
13.11 BINDING EFFECT. Subject to the provisions of this Agreement
relating to Transferability, this Agreement shall be binding upon and inure to
the benefit of the Members, Economic Interest Holders and Managers and their
respective successors and assigns.
13.12 SECTION HEADINGS. All Section headings are inserted only for
convenience of reference and are not to be considered in the interpretation or
construction of any provision of this Agreement.
13.13 INTERPRETATION. In the event any claim is made by any Member,
Economic Interest Holder or Manager relating to any conflict, omission or
ambiguity in this Agreement, no presumption or burden of proof or persuasion
shall be implied by virtue of the fact that this Agreement was prepared by or at
the request of a particular Member or Manager or that Member's, Economic
Interest Holder's or Manager's counsel.
13.14 SEVERABILITY. If any provision of this Agreement or the
application of that provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of that provision to
persons or circumstances other than those to which it is held invalid shall not
be affected.
13.15 MULTIPLE COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
41
IN WITNESS WHEREOF, all of the Members and the Managers of the Company
have executed this Agreement, effective as of the date first written above.
MEMBERS:
Xxxxxxxxxxxxxxx.xxx, LLC,
Delaware limited liability company
By: XxxxxxxxXxxxxx.xxx, Inc.,
a Nevada corporation
Its: Manager
By:_____________________________
Name:______________________
Title:_____________________
MediaChase Ltd.,
a Delaware corporation
By:____________________________________
Name:___________________________
Title:__________________________
MANAGER:
Xxxxxxxxxxxxxxx.xxx, LLC,
Delaware limited liability company
By: XxxxxxxxXxxxxx.xxx, Inc.,
a Nevada corporation
Its: Manager
By:_____________________________
Name:______________________
Title:_____________________
42
EXHIBIT A
NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS, VOTING AND
ECONOMIC INTERESTS OF MEMBERS AND NAME AND ADDRESS OF
MANAGERS AS OF
MARCH ___, 2000
Member's
Member's Additional Member's Member's
Initial Capital Capital Voting Economic
Member's Name Member's Address Contribution Contributions Interest Interest
------------- ---------------- ------------ ------------- -------- --------
$473,106.61
0000 0xx Xx., Xxxxx 000
Xxxxxxxxxxxxxxx.xxx, LLC Xxxxx Xxxxxx, XX 00000 $1,500,000 75% 75%
0000 Xxxxx Xxxxxx Xxxx.
XxxxxXxxxx Xxx. Xxxx Xxxxxxxxx, XX 00000 $-0- 25% 25%
MANAGER'S NAME MANAGER'S ADDRESS
0000 0xx Xx., Xxxxx 000
Xxxxxxxxxxxxxxx.xxx, LLC Xxxxx Xxxxxx, XX 00000
EXHIBIT B
FORM OF CALL NOTICE
[DATE]
You are hereby requested to make a contribution of Additional Capital pursuant
to Section 3.2(c) of that certain Limited Liability Company Agreement of
XxxxxxxxXX.xxx, LLC dated _________________, ____ as set forth below by the date
set forth below. All such contributions should be made in cash or readily
available funds of lawful money of the United States of America.
AMOUNT OF ADDITIONAL CAPITAL DATE DUE AND PAYABLE
Manager:
Xxxxxxxxxxxxxxx.xxx, LLC,
Delaware limited liability company
By: XxxxxxxxXxxxxx.xxx, Inc.,
a Nevada corporation
Its: Manager
By:_____________________________
Name:______________________
Title:_____________________
