LIMITED LIABILITY COMPANY AGREEMENT
OF
PROVANSIS LLC
An Inforte Company
May 20, 2005
TABLE OF CONTENTS
ARTICLE 1 ORGANIZATION........................................................1
Section 1.1 Formation of the Company.................................1
Section 1.2 Name.....................................................1
Section 1.3 Registered Office; Principal Place of Business...........2
Section 1.4 Purposes and Powers......................................2
Section 1.5 Title to Property........................................2
Section 1.6 Term.....................................................2
ARTICLE 2 MEMBERSHIP INTERESTS................................................2
Section 2.1 Membership Interests.....................................2
Section 2.2 Issuance of Additional Units.............................3
Section 2.3 No Obligation to Make Additional Capital Contributions...3
Section 2.4 Withdrawals; Interest....................................3
ARTICLE 3 AGREEMENTS REGARDING RX-TECHNOLOGY, WORKING CAPITAL, AND
ADMINISTRATIVE SERVICES....................................................3
Section 3.1 Contribution of Exclusive Processing Services of
Rx-Technology in Term-Life Underwriting Application;
First Right to Exclusive License.........................3
Section 3.2 Obligations to Fund Working Capital......................4
Section 3.3 Inforte's Provision of Certain Services to the Company...4
Section 3.4 PKI's Provision of Certain Services to the Company.......5
Section 3.5 New Technology Developed by Inforte......................5
ARTICLE 4 NON-COMPETITION CONDITIONS ON PKI AND XXXXXX........................5
Section 4.1 Rx-Technology............................................5
Section 4.2 No Employee Solicitation.................................5
Section 4.3 Restrictions Reasonable..................................6
Section 4.4 Remedies.................................................6
ARTICLE 5 DISTRIBUTIONS.......................................................6
Section 5.1 Distributions............................................6
ARTICLE 6 CAPITAL ACCOUNTS; ALLOCATIONS.......................................7
Section 6.1 Initial Capital Contribution.............................7
Section 6.2 Capital Accounts.........................................7
Section 6.3 Periodic Allocations.....................................9
Section 6.4 Tax Allocations.........................................10
Section 6.5 Changes in Members' Interests...........................10
ARTICLE 7 RECORDS AND ACCOUNTING; REPORTS....................................11
Section 7.1 Accounting..............................................11
Section 7.2 Access to Information; Reports..........................11
Section 7.3 Unit Register...........................................11
Section 7.4 Tax Returns.............................................12
Section 7.5 Company Funds...........................................12
-i-
Section 7.6 Tax Matters Partner.....................................12
Section 7.7 Accountants.............................................13
ARTICLE 8 MANAGEMENT.........................................................13
Section 8.1 Board of Managers.......................................13
Section 8.2 Required Consent of Inforte.............................14
Section 8.3 Required Consent of PKI.................................15
Section 8.4 Limited Liability.......................................16
Section 8.5 Initial Board Managers; Qualification of Managers.......16
Section 8.6 Selection of Managers; Increase in Board Size;
Removal of Managers.....................................16
Section 8.7 Vacancies...............................................17
Section 8.8 Compensation of Managers................................17
Section 8.9 Other Activities........................................17
Section 8.10 Transactions of Managers with the Company...............17
Section 8.11 Meetings of Managers....................................17
Section 8.12 Chairman................................................18
Section 8.13 Place of Meetings.......................................18
Section 8.14 Quorum; Participation in Meetings by Conference
Telephone Permitted; Vote Required
for Action..............................................18
Section 8.15 Waiver of Notice; Consent to Meeting....................18
Section 8.16 Action by Board Without a Meeting.......................18
ARTICLE 9 OFFICERS...........................................................19
Section 9.1 General.................................................19
Section 9.2 Appointment and Removal.................................19
Section 9.3 Chief Executive Officer - Rights, Duties, and Powers....19
Section 9.4 Resignation of a CEO....................................19
Section 9.5 Authority to Designate Officers.........................19
Section 9.6 Limited Liability.......................................20
Section 9.7 Indemnification.........................................20
Section 9.8 Affiliated Transactions.................................20
ARTICLE 10 MEMBERS...........................................................21
Section 10.1 Limited Liability.......................................21
Section 10.2 Meetings of Members.....................................21
Section 10.3 Place of Meetings.......................................21
Section 10.4 Notice of Meetings......................................21
Section 10.5 Record Date.............................................21
Section 10.6 Quorum..................................................21
Section 10.7 Manner of Acting........................................21
Section 10.8 Proxies.................................................21
Section 10.9 Action by Members Without a Meeting.....................22
Section 10.10 Waiver of Notice........................................22
ARTICLE 11 RESTRICTIONS ON TRANSFER..........................................22
Section 11.1 PKI Restriction on Transfer.............................22
-ii-
Section 11.2 Company Right of First Offer............................22
Section 11.3 Co-Sale Rights..........................................23
Section 11.4 Permitted and Involuntary Transfers.....................24
Section 11.5 Restrictions on Units Held by Xxxxxx Xxxxx..............25
ARTICLE 12 THE INFORTE CALL OPTIONS..........................................25
Section 12.1 Inforte First Call......................................25
Section 12.2 Inforte Second Call.....................................25
Section 12.3 Termination of the Inforte Calls........................26
ARTICLE 13 THE PKI CALL OPTION...............................................26
Section 13.1 PKI Call................................................26
Section 13.2 Deferred Closing of PKI Call............................27
ARTICLE 14 DISSOLUTION AND TERMINATION.......................................27
Section 14.1 Dissolution of Company..................................27
Section 14.2 Liquidation and Distribution............................27
Section 14.3 Termination.............................................28
Section 14.4 Deemed Liquidation......................................28
ARTICLE 15 REPRESENTATIONS AND WARRANTIES....................................29
Section 15.1 PKI's Representations and Warranties....................29
Section 15.2 Inforte's Representations and Warranties................30
Section 15.3 Covenants...............................................31
Section 15.4 Indemnifications........................................31
Section 15.5 Survival of PKI and Xxxxxx Obligations..................32
ARTICLE 16 MISCELLANEOUS.....................................................32
Section 16.1 Amendments..............................................32
Section 16.2 Confidentiality.........................................32
Section 16.3 Start-Up Expenses.......................................33
Section 16.4 Notices and Addresses...................................33
Section 16.5 Governing Law...........................................33
Section 16.6 Successors and Assigns..................................33
Section 16.7 Counterparts............................................33
Section 16.8 Entire Agreement; Severability..........................34
Section 16.9 Captions................................................34
Section 16.10 Statutory References....................................34
Section 16.11 Partition Action........................................34
Section 16.12 Waiver..................................................34
Section 16.13 Securities Law Provisions...............................34
Section 16.14 Consents and Approval...................................34
Section 16.15 Remedies Not Exclusive..................................34
Section 16.16 No Presumption Against Drafter..........................35
Section 16.17 No Partnership Intended.................................35
Section 16.18 Independent Legal Representation........................35
-iii-
ARTICLE 17 DEFINITIONS.......................................................35
Section 17.1 Definitions.............................................35
Section 17.2 Other Definitional Provisions...........................40
EXHIBIT A -- Unit Register
EXHIBIT B --- Rx SOLUTIONS LICENSE TERMS
EXHIBIT C --- TERMS AND CONDITIONS OF WORKING CAPITAL ADVANCES
-iv-
PROVANSIS LLC AN INFORTE COMPANY
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of
PROVANSIS LLC An Inforte Company, a limited liability company (the "Company")
organized pursuant to the Delaware Limited Liability Company Act, is made as of
May 20, 2005, by and among Primary Knowledge, Inc., a California corporation
("PKI"), Inforte Corp., a Delaware corporation ("Inforte"), and Xxxxxx Xxxxx,
residing at 0000 Xxxxx Xxxxxx XX, Xxxxx Xxxxxxx, Xxxx, 00000 ("Xxxxx") (and
together with PKI and Inforte, the "Members"), and, solely with respect to
Articles 4 and 15, Xxxxx Xxxxxx, residing at 00000 Xxx Xxxxxx, Xxxxxxx Xxxxxx,
Xxxxxxxxxx 00000 ("Xxxxxx").
In consideration of the mutual covenants set forth in this Agreement,
the parties hereto agree as follows:
ARTICLE 1.
ORGANIZATION
------------
Section 1.1. Formation of the Company. The Company was formed as a Delaware
limited liability company pursuant to the Act by the filing of the Certificate
of Formation on May 20, 2005. The rights and obligations of the Members shall be
as provided in the Act, except as otherwise expressly provided herein. The
Members shall from time to time execute or cause to be executed all such
certificates, instruments and other documents, and do or cause to be done all
such filings, recordings, publishings and other acts as the Board may deem
necessary or appropriate to comply with the requirements of law for the
operation of the Company in all jurisdictions in which the Company will conduct
business.
Section 1.2. Name.
(a) The business of the Company shall be conducted under the name
"PROVANSIS LLC An Inforte Company" or under such other name as the Board shall
determine.
(b) In the event that Inforte ceases to be a Member of the Company,
the remaining Members, and the Board shall immediately cause the name "Inforte"
to be removed from the name of the Company. The Company shall immediately cease
to use the name "Inforte" in any manner, including, but not limited to (i)
advertising, (ii) branding, (iii) registering for any governmental or agency
permit, approval, or licensing, and (iv) entering into any agreement or
contract. The name of any products or services that were previously offered
under a name that included "Inforte" shall be changed so that the name does not
include "Inforte." The Company shall notify all of its then-existing clients
with respect to the Rx-Technology, Rx-Solutions, or any New Technology that: (i)
Inforte is no longer a Member of the Company and (ii) "Inforte" has been deleted
from the name of the Company.
(c) Each member acknowledges and agrees that the rights of Inforte
under Section 1.2(b) are of a specialized and unique character and that
immediate and irreparable damage will result to Inforte if the Company, the
Board, and the remaining Members fail to or refuse to perform their obligations
under this Section 1.2 and, notwithstanding any election by Inforte to claim
damages from the Company or any remaining Member as a result of any such failure
or refusal, Inforte may, in addition to any other remedies and damages
available, seek an injunction in a court of competent jurisdiction without the
posting of bond or other security to restrain any such failure or refusal. These
remedies are cumulative with all other remedies provided by law or contract, and
will not preclude Inforte from later obtaining a judgment for money damages or
specific acts against the Company or any remaining Member or otherwise affect
any other remedies that Inforte and its Affiliates may have. The exercise of any
right or remedy will be without prejudice to the right to exercise any other
right or remedy provided in this Agreement, by law or in equity.
Section 1.3. Registered Office; Principal Place of Business. The address of
the registered office of the Company in the State of Delaware shall be the
address set forth in the Certificate of Formation, or such other place as may be
designated from time to time by the Board. The name of the registered agent for
service of process on the Company in the State of Delaware at such address shall
be as set forth in the Certificate of Formation or such other Person as may be
designated from time to time by the Board. The Company shall maintain a
principal place of business in such location as the Board shall determine. The
Board may change the registered agent or registered office, change the location
of the Company's principal place of business, or establish additional places of
business at such locations as the Board may from time to time determine in
compliance with the Act.
Section 1.4. Purposes and Powers. The purposes of the Company are to
conduct any or all lawful business that a Delaware limited liability company is
or may be permitted to carry on. Subject to the terms and conditions of this
Agreement, the Company is authorized to enter into, make, and perform all
contracts and other undertakings, and engage in all other activities and
transactions, as the Board may deem necessary, advisable, or convenient for
carrying out the purposes of the Company.
Section 1.5. Title to Property. Title to Company Assets shall be held in
the name of the Company.
Section 1.6. Term. The Company commenced its existence upon the filing of
the Certificate and shall continue until it is dissolved in accordance with
Article 14 hereof.
ARTICLE 2.
MEMBERSHIP INTERESTS
--------------------
Section 2.1. Membership Interests.
(a) The Membership Interests shall be divided into, and the Company is
hereby authorized to issue, 1,000,000 Units.
(b) PKI shall initially hold 76,000 Units.
2
(c) Inforte shall initially hold 19,000 Units.
(d) Xxxxx shall initially hold 5,000 Units.
Section 2.2 Issuance of Additional Units.
Subject to Section 8.2, the Board may issue additional Units to existing
Members or to additional Persons on such terms and for such consideration as
shall be fixed by unanimous approval of the Board. Units may be issued from time
to time in one or more classes (in addition to the classes set forth in this
Agreement) or series, and each such class or series shall have such distinctive
designation or title as shall be fixed by the Board. Each such class or series
of Unit shall have such voting powers, full or limited, or no voting powers, and
such other relative rights, powers and preferences, including, without
limitation, the dividend rate, conversion rights, if any, redemption price and
liquidation preference, and such qualifications, limitations or restrictions,
thereof, as shall be stated in the resolution or resolutions providing for the
issuance of such class or series of Unit as may be adopted from time to time by
the Board. Each Person who subscribes for a Unit and satisfies the conditions
established by the Board shall be admitted to the Company as a Member, effective
upon the execution by such Person of a counterpart of this Agreement. The Board
shall have the power to adopt an amendment to this Agreement necessary to
implement the issuance of additional Units pursuant to this Section.
Section 2.3 No Obligation to Make Additional Capital Contributions. No
Member shall be required by the terms of this Agreement to purchase additional
Units or otherwise make additional Capital Contributions to the Company.
Section 2.4 Withdrawals; Interest. No Member may withdraw from the Company
or receive the return of, or interest on, its capital contributions prior to the
dissolution and winding up of the Company.
ARTICLE 3
AGREEMENTS REGARDING RX-TECHNOLOGY,
WORKING CAPITAL, AND ADMINISTRATIVE SERVICES
--------------------------------------------
Section 3.1 Contribution of Exclusive Processing Services of Rx-Technology
in Term-Life Underwriting Application; First Right to Exclusive License.
(a) The Company shall have the right, during the term of this
Agreement, to be the exclusive worldwide marketer of PKI's processing services
in connection with the underwriting of applications for term life insurance
using PKI's Rx-Technology pursuant to the terms and conditions of Exhibit B of
this Agreement; provided, however, that, if Inforte has not exercised both of
the Inforte Calls within the prescribed time periods set forth in Article 12,
the Company's right to be the exclusive marketer will thereupon automatically
become non-exclusive, but shall otherwise remain in full force and effect in
accordance with the terms and conditions of Exhibit B. PKI shall have the right,
during the term of this Agreement, to be the exclusive provider of processing
services to the Company and its customers in connection with the underwriting of
applications for term life insurance.
3
(b) PKI promptly shall present or cause to be presented, on an
exclusive basis, to the Company, in writing, each New Technology using
prescription data made, conceived, or developed by PKI or one of its Affiliates
and which PKI or such Affiliate is not currently restricted from disclosing and
licensing to others under PRTLA, whereupon, if the Company chooses by written
notice within sixty (60) days of receipt of PKI's written presentation to
license such New Technology, the Company shall have an exclusive, fully paid-up,
royalty-free, worldwide license to such New Technology in accordance with the
terms of Exhibit B. Any such new technology that becomes subject to a license to
the Company is referred to herein as an Rx-Solution or Rx-Solutions. For
purposes of this Section, "New Technology" shall mean all concepts, inventions
(whether or not protected under patent laws), works of authorship, information
fixed in any tangible medium of expression (whether or not protected under
copyright laws), moral rights, mask works, trademarks, trade names, trade dress,
trade secrets, publicity rights, names, likenesses, know-how, ideas (whether or
not protected under trade secret laws), and all other subject matter protected
under patent (or which is not patented, but is subject matter that is protected
under patent law), copyright, mask work, trademark, trade secret, or other laws,
whether existing now or in the future, whether statutory or common law, in any
jurisdiction in the world, for all media now known or later developed, including
without limitation all new or useful art, combinations, discoveries, formulae,
algorithms, specifications, manufacturing techniques, technical developments,
systems, computer architecture, artwork, software, programming, applets,
scripts, designs, processes, and methods of doing business. All New Technology
that does not become an Rx-Solution or Rx-Solutions shall not be used or
disclosed by the Company or Inforte and all rights thereto shall be owned
exclusively by PKI.
Section 3.2 Obligations to Fund Working Capital.
(a) Upon the unanimous affirmative vote of the entire Board, Inforte
shall provide working capital in the form of unsecured loans to the Company (the
"Working Capital Advances"). The Working Capital Advances shall bear interest,
compounding monthly, at a per annum rate equal to the U.S. prime rate as
published in The Wall Street Journal and adjusted from time to time. The terms
and conditions of Inforte's obligation to provide Working Capital Advances are
set forth in Exhibit C to this Agreement.
(b) Repayment by the Company of the outstanding balance of Working
Capital Advances and accrued interest thereon shall be paid monthly in an amount
equal to seventy percent (70%) of the Available Cash of the Company as of the
end of each month, and upon each such repayment, thirty percent (30%) of the
Available Cash shall be distributed to the Members. Notwithstanding any other
provision of this Agreement, so long as there remains outstanding any Working
Capital Advances, the Company shall make no distribution with respect to a
Member's Membership Interest in an amount in excess of thirty percent (30%) of
the Available Cash of the Company and then only after satisfaction of the
Company's obligation set forth in the immediately preceding sentence.
Section 3.3 Inforte's Provision of Certain Services to the Company. At the
reasonable request of the Company, Inforte shall provide the Company accounting,
human resources, information technology and other related administrative
services. The Company shall promptly reimburse Inforte for all direct costs
incurred by Inforte in connection with providing such services plus twenty-five
percent (25%). The term "direct costs" for purposes of this Section 3.3
4
and Section 3.4 does not include indirect general and administrative costs,
depreciation, amortization, or other indirect accounting costs.
Section 3.4 PKI's Provision of Certain Services to the Company. In addition
to the services contemplated by Exhibit B, at the reasonable request of the
Company, PKI shall provide the Company services supporting the marketing right
described in Section 3.1(a) and any license described in Section 3.1(b) and
other related services. The Company shall promptly reimburse PKI for all direct
costs incurred by PKI in connection with providing such services plus
twenty-five percent (25%).
Section 3.5 New Technology Developed by Inforte. Inforte promptly shall
present or cause to be presented, on an exclusive basis, to the Company, in
writing, each New Technology using prescription data, made, conceived, or
developed by Inforte or one of its Affiliates, whereupon, if the Company chooses
by written notice within sixty (60) days of receipt of Inforte's presentation to
license such New Technology, the Company shall have an exclusive, fully paid-up,
royalty-free, worldwide license to such New Technology. All such New Technology
that is not licensed to the Company shall not be used or disclosed by the
Company or PKI and all rights thereto shall be owned exclusively by Inforte. The
foregoing obligation of Inforte to present New Technology to the Company shall
not apply to any New Technology that is made, conceived, or developed (i) by
Inforte, jointly with a client or (ii) by Inforte for a client.
ARTICLE 4
NON-COMPETITION CONDITIONS ON PKI AND XXXXXX
--------------------------------------------
Section 4.1 Rx-Technology. Until the later of (i) the fifth anniversary of
the date on which this Agreement is executed or (ii) one year after PKI ceases
to be a Member for any reason, neither PKI, Xxxxxx nor any of their respective
Affiliates, directly or indirectly, shall either (a) provide or offer or attempt
to provide or offer, whether as an officer, director, employee, partner,
consultant, licensor, shareholder, independent contractor, or otherwise any
Rx-Technology or Rx-Solutions to any Person other than the Company anywhere in
the world, or (b) become an officer, director, partner, owner, or employee of,
or contractor with or consultant to, or invest in, any Person which engages in
activities described in clause (a); provided, however, that, if the Company's
license to use the Rx-Technology becomes non-exclusive pursuant to Section
3.1(a), this covenant not to compete shall be limited to the extent necessary to
allow PKI to use or license the Rx-Technology to the extent of such
non-exclusivity; provided further, however, the parties hereto acknowledge that,
subject to Section 15.3(c), PKI may become a member of Predictive Data LLC
("Predictive Data"), which is in formation, and that Predictive Data, similar to
the Company, also may market processing services using Rx-Technology, in which
event Predictive Data will contract with the Company on terms mutually agreeable
to PKI and Inforte to enable it to provide such services.
Section 4.2 No Employee Solicitation. Until two years after PKI ceases to
be a Member for any reason, neither PKI, Xxxxxx nor any of their respective
Affiliates, directly or indirectly, shall induce or attempt to induce any
officer or employee of or consultant to the Company to terminate his or her
employment or consultancy with the Company.
5
Section 4.3 Restrictions Reasonable. PKI and Xxxxxx each acknowledges and
agrees that the restrictions and other provisions set forth above in this
Article 4 are reasonable, in all respects, including, without limitation,
duration, geographic reach, and scope of activities covered, and will not
prevent Xxxxxx from earning a living in his profession. Further, PKI and Xxxxxx
each acknowledges that in agreeing to said restrictions, it or he has received
and has relied upon the independent advice and counsel of attorneys selected by
it or him. Accordingly, PKI and Xxxxxx each agrees to be bound by and to
faithfully observe the restrictions and covenants set forth above in this
Article 4, and further agrees that it or he will not do or attempt to do
indirectly, through any other Person, or by any other manner, means, or
artifice, anything which this Article 4 prohibits it or him from doing directly.
Section 4.4 Remedies.
PKI and Xxxxxx each acknowledges and agrees that the rights of the Company
under this Agreement are of a specialized and unique character and that
immediate and irreparable damage will result to the Company if either PKI or
Xxxxxx fails to or refuses to perform his obligations under this Article 4 and,
notwithstanding any election by the Company to claim damages from PKI or Xxxxxx
as a result of any such failure or refusal, the Company may, in addition to any
other remedies and damages available, seek an injunction in a court of competent
jurisdiction without the posting of bond or other security to restrain any such
failure or refusal. These remedies are cumulative with all other remedies
provided by law or contract, and will not preclude the Company from later
obtaining a judgment for money damages or specific acts against the Company or
otherwise affect any other remedies that the Company and its Affiliates may
have. The exercise of any right or remedy will be without prejudice to the right
to exercise any other right or remedy provided in this Agreement, by law or in
equity.
ARTICLE 5
DISTRIBUTIONS
-------------
Section 5.1 Distributions.
(a) Subject to the limitation of Section 3.2(b), to the extent
permitted by law, the Board shall from time to time, as described in Section
5.1(b), and in any case, at least once per calendar quarter, cause the Company
to make distributions of Available Cash to the Members in proportion to their
respective Units.
(b) Capital Transaction Proceeds shall be distributed to the Members
as soon as reasonably practicable after the completion of a Capital Transaction.
All such distributions shall be made in the following order of priority:
(i) First, such Capital Transaction Proceeds shall be made
to Members in proportion to their respective Unreturned Capital, until
the Unreturned Capital of each Member has been reduced to zero;
(ii) Second, the remaining Capital Transaction Proceeds
shall be distributed 100% to Xxxxx, until he has received aggregate
distributions under this Section 5.1(b)(ii) equal to the product of
(A) the total amount of the
6
distributions under subparagraph (i) of this Section 5.1(b),
multiplied by (B) a fraction, the numerator of which is the number of
Units held by Xxxxx, and the denominator of which is the number of
Units held by Members receiving distributions under said subparagraph
(i); and
(iii) Third, the remaining Capital Transaction Proceeds
shall be distributed to the Members in proportion to their respective
Units.
(c) Subject to Section 8.2, the Company shall not distribute property
other than money to any Member without the approval of PKI and Inforte.
ARTICLE 6
CAPITAL ACCOUNTS; ALLOCATIONS
-----------------------------
Section 6.1 Initial Capital Contribution.
(a) Within thirty (30) days of the date of formation of the Company
under the Act, or on such later dates as the Members holding, in the aggregate,
at least eighty-five percent (85%) of the then outstanding Units shall agree in
writing, each Member shall make an initial Capital Contribution to the Company
in cash or property as set forth below:
(i) Inforte shall contribute Two-Million Dollars
($2,000,000.00) in cash.
(ii) PKI shall contribute (a) the right to exclusively
market PKI's processing services using Rx-Technology as described in
Section 3.1(a) and (b) the right to license Rx-Solutions as described
in Section 3.1(b), which, for purposes of Section 6.2(a)(i) and (ii)
shall be valued at $7,450,980.
(b) Notwithstanding any other provision of this Agreement, upon the
receipt of Inforte's and PKI's initial respective Capital Contributions, the
Company shall make a special cash distribution in the amount of Two-Million
Dollars ($2,000,000.00) to PKI. Notwithstanding that the transfer of PKI's
rights pursuant to Section 6.1(a)(ii) is treated as a Capital Contribution for
purposes of this Agreement, and the special cash distribution under the
immediately preceding sentence is treated as a distribution for purposes of this
Agreement, the parties acknowledge that the transactions shall be treated as a
purchase of assets from PKI for federal income tax purposes to the extent of the
amount of the special distribution.
(c) Upon the admission of a new Member in accordance with Section 2.2,
or on such later dates as PKI and Inforte, from time to time, shall agree in
writing, each new Member shall make a Capital Contribution to the Company in
such amount and in such form as the Board shall decide.
Section 6.2 Capital Accounts.
7
(a) A Capital Account shall be maintained for each Member in
accordance with the requirements of Section 704(b) of the Code and the
Regulations promulgated thereunder. The Capital Account balance of each Member
shall be adjusted as follows:
(i) increased by any Capital Contributions made by such
Member;
(ii) increased by items of income or gain which are
allocated to such Member under this Article 6;
(iii) decreased by the items of loss and deduction which are
allocated to the Member under this Article 6; and
(iv) decreased by the amount of any cash and the fair market
value of any Company Asset distributed to such Member (net of any
liability assumed by the Member or to which the distributed property
is subject).
(b) If a Company Asset other than cash is distributed to one or more
Members, the value of such property shall be restated on the books of the
Company at its fair market value immediately prior to such distribution and the
separate Capital Accounts of each Member shall be restated to reflect such
adjustment, determined as if the Company had sold such Company Asset for its
fair market value and the resulting gain or loss had been credited or charged to
the Members' Capital Accounts as provided in this Agreement. Following such
adjustment to the Company's books, the separate Capital Accounts of the Members
receiving the distributions shall be adjusted to reflect the amount of the
distribution.
(c) If a Person is admitted to the Company as an additional Member,
money or property is contributed to the Company in other than a de minimis
amount in exchange for a Membership Interest, or money or property is
distributed to a Member in exchange for a Membership Interest, the Company may
cause the book value of Company Assets to be restated on the Company's books to
their respective fair market values, and the unrealized gain or loss inherent in
each Company Asset which has not previously been taken into account under this
subsection (c) shall be reflected in the separate Capital Accounts of the
Members, determined by allocating such unrealized income, gain, loss, or
deduction to the Members as if there had been a taxable disposition of the
Company Asset at its fair market value on such date. The fair market value of
Company Assets shall be determined in good faith by the Board. No restatement of
the Capital Accounts shall be made in connection with the Contributions to the
Company by PKI or Inforte.
(d) Upon a transfer of any Membership Interest in accordance with the
terms of this Agreement, the Assignee shall succeed to the Capital Account of
the transferor which is attributable to such Membership Interest.
(e) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with ss. 1.704-1(b) of the Regulations promulgated under section 704(b) of the
Code. The Board shall apply said provisions in a manner consistent with said
Regulations.
8
Section 6.3 Periodic Allocations. As of the end of each Fiscal Year of the
Company, the Net Loss or Net Profit of the Company for the Fiscal Year shall be
determined and allocated among the Members in accordance with this Article 6.
(a) Except as provided in subsection (c) or Section 6.4, the Net
Profit for a Fiscal Year shall be allocated among the Members in the following
order of priorities:
(i) First, if any Member has an Adjusted Capital Account
deficit balance, Net Profit shall be allocated to such Members to the
extent of, and in proportion to, the amount required to eliminate the
deficit Adjusted Capital Account balances of all such Members;
(ii) Second, the remaining Net Profit shall be allocated to
the Members who have Unreturned Capital, to the extent of and in
proportion to the amount required to increase each Member's Adjusted
Capital Account balance to an amount equal to its Unreturned Capital;
and
(iii) The remaining Net Profit for the Fiscal Year, if any,
shall be allocated among the Holders of Units in proportion to the
number of Units held by them.
(b) Except as provided in subsection (c) or Section 6.4, the Net Loss
for a Fiscal Year shall be allocated among the Members in the following order of
priorities:
(i) First, such Net Loss shall be allocated among the
Holders of Units in proportion to the amount by which the Holders of
Units' respective Adjusted Capital Account balances exceed their
Unreturned Capital until the amount of such excess has been reduced to
zero;
(ii) Second, Net Loss shall be allocated among the Holders
of the Units in proportion to their respective positive Capital
Accounts balances, until each such Capital Account has been reduced to
zero; and
(iii) The remaining Net Loss for the Fiscal Year shall be
allocated among the Holders of Units in proportion to their respective
Units.
(c) Notwithstanding the foregoing, gain or loss from a Capital
Transaction shall be allocated among the Members in such proportions and amounts
as are required to cause the Capital Account of each Member to equal the amount
of Capital Transaction Proceeds from such Capital Transaction which such Member
is entitled to receive pursuant to Section 5.1(b).
9
Section 6.4 Tax Allocations.
(a) The allocations set forth in this Article 6 are intended to
allocate Net Profits and Net Losses to the Members in compliance with the
requirements of section 704(b) of the Code and the Treasury Regulations
promulgated thereunder. If the Board reasonably and in good faith determines
that the allocation of items of Company income, gain, loss, deduction, and
credit pursuant to this Section 6.4(a) does not satisfy the requirements of
section 704(b) of the Code or the Treasury Regulations thereunder (including the
minimum gain chargeback requirement of ss. 1.704-2 of the Treasury Regulations
and the qualified income offset requirement of ss. 1.704-1(b)(2)(iv)(d) of the
Treasury Regulations), then notwithstanding anything to the contrary contained
in this Agreement, such items of income, gain, loss, deduction or credit shall
be allocated in such manner as the Board shall reasonably and in good faith
determine to be required by section 704(b) of the Code and the Treasury
Regulations promulgated thereunder. To the extent that the Board alters the
allocations pursuant to this subsection (a), the Company shall make such
offsetting special allocations of Company income, gain, loss or deduction for
the fiscal year or subsequent fiscal years as it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Board had not made the allocations under this
Section 6.4(a) and all Company items were allocated pursuant to Section 6.3
hereof.
(b) Solely for federal, state, and local income tax purposes and not
for book or Capital Account purposes, except to the extent required by
Regulations, depreciation, amortization, gain, or loss with respect to property
that is properly reflected on the Company's books at a value that differs from
its adjusted basis for federal income tax purposes shall be allocated in
accordance with the principles and requirements of Code Section 704(c) and the
Regulations promulgated thereunder, and in accordance with the requirements of
the relevant provisions of the Regulations issued under Code Section 704(b). For
Capital Account purposes, depreciation, amortization, gain, or loss with respect
to property that is properly reflected on the Company's books at a value that
differs from its adjusted basis for tax purposes shall be determined in
accordance with the rules of Regulation Section 1.704-1(b)(2)(iv)(g).
(c) The Members are aware of the income tax consequences of the
allocations made by this Section 6 and hereby agree to be bound by the
provisions of this Section 6 in reporting their shares of Company income and
loss for income tax purposes. Each Member further agrees that it will not take
any position with respect to any Company item in any tax return, refund claim,
or other document filed with any tax authority, or on an audit of the Company's
tax returns, that is inconsistent with the positions taken by the Company on its
tax returns.
Section 6.5 Changes in Members' Interests. If during any fiscal period of
the Company there is a change in any Member's Membership Interest as a result of
the admission of one or more Members, the withdrawal of a Member, or a transfer
of a Membership Interest that does not result in the termination of the Company
for federal income tax purposes, the Net Profit, Net Loss or any other item
allocable to the Members under this Article 6 for the period shall be allocated
among the Members so as to reflect their varying interests in the Company during
the period. In the event that the change in the interests of the Members results
from the admission or
10
withdrawal of a Member, the allocation of Net Profit, Net Loss, or any other
item allocable among the Members under this Article 6 shall be made on the basis
of an interim closing of the Company's books as of each date on which a Member
is admitted to or withdraws from the Company. In the event that the change in
the Membership Interests of the Members results from a transfer of all or any
portion of a Membership Interest by a Member, the Net Profit, Net Loss, or any
other items allocable among the Members under this Article 6 shall be determined
on a daily, monthly, or other basis, as determined by the Members using any
permissible method under Section 706 of the Code and the Treasury Regulations
promulgated thereunder.
ARTICLE 7
RECORDS AND ACCOUNTING; REPORTS
-------------------------------
Section 7.1 Accounting.
(a) Except as may be required to maintain Capital Accounts hereunder,
the Board shall maintain a system of accounting established and administered in
accordance with GAAP, and all financial statements or information supplied to
the Members shall be prepared in accordance with GAAP (subject, in the case of
unaudited statements, to normal year-end adjustments and the omission of
footnotes). The Fiscal Year of the Company ("Fiscal Year") shall be a 12-month
period ending December 31.
(b) All matters concerning the valuation of assets and accounting
procedures shall be determined by the Board.
Section 7.2 Access to Information; Reports. The Company shall permit any
representative of any Member holding at least five percent (5%) of the
outstanding Units to, during normal business hours, (a) visit and inspect any of
the properties of the Company, (b) examine the company and financial records of
the Company and make copies and extracts therefrom, and (c) discuss the affairs
and finances of the Company with the Company's managers, officers, key employees
and independent accountants, provided that any of such activities set forth in
clauses (a) - (c) do not unreasonably disrupt the operations of the Company. The
Company shall deliver to each Member holding at least five percent (5%) of the
outstanding Units requesting the same: (a) as soon as practicable, but in any
event within ninety (90) days after the end of each Fiscal Year, an income
statement for such Fiscal Year, a balance sheet of the Company and statement of
members' equity as of the end of such year, and a statement of cash flows for
such year, such year-end financial reports to be in reasonable detail, prepared
in accordance with GAAP (but without footnotes), and; (b) as soon as
practicable, but in any event within forty-five (45) days after the end of each
of the first three quarters of each Fiscal Year, an unaudited income statement,
statement of cash flows for such fiscal quarter and an unaudited balance sheet
as of the end of such fiscal quarter.
Section 7.3 Unit Register. The Company shall maintain a register of all of
the Members (the "Unit Register"), setting forth next to the name of each the
number and designation of Units owned by such Member, such Member's address for
notice, and a register of the owners of any rights (including conversion rights)
for Units of Membership Interest. Such registers shall be maintained at the
Company's principal place of business, and each Member or
11
such Member's duly authorized representative shall have the right to inspect and
copy such registers upon reasonable notice, at all reasonable times during
business hours.
Section 7.4 Tax Returns. The Company shall cause federal, state, and local
income tax returns for the Company to be prepared and timely filed (including
applicable extensions) with the appropriate authorities and shall deliver to the
Members or Assignees, as soon as practicable, K-1 statements necessary for such
Members or Assignees to prepare their federal, state, and local tax returns for
such Fiscal Year.
Section 7.5 Company Funds. Pending use in the business of the Company or
distribution to the Members, the funds of the Company may, in the discretion of
the Board, be deposited in a bank account or accounts, or invested in the
following interest-bearing taxable or nontaxable investments: checking and
savings accounts, certificates of deposit and time or demand deposits in
commercial banks, U.S. government securities, securities fully guaranteed by
U.S. government agencies, bankers' acceptances, securities issued by money
market mutual funds, savings and loan association deposits, deposits in members
of the Federal Home Loan Bank System, or commercial paper, rated A-I or better
by Standard & Poor's Corporation or Prime-I or better by Moody's Commercial
Paper Division of Xxxxx'x Investor Services, Inc., or the successor to either of
them. Such funds shall not be commingled with funds of any other person.
Withdrawal of funds shall be made upon such signatures as the Board may
designate.
Section 7.6 Tax Matters Partner.
(a) Inforte is hereby appointed the "Tax Matters Partner" of the
Company for all purposes pursuant to Sections 6221-6231 of the Code; provided,
however, that if Inforte fails to exercise both of the Inforte Calls within the
prescribed time periods set forth in Article 12, PKI may within its sole
discretion choose to be the Tax Matters Partner by giving written notice to
Inforte and the Company, at which time Inforte shall immediately cease to be the
Tax Matters Partner. As Tax Matters Partner, the Tax Matters Partner shall (i)
furnish to each Member or Assignee affected by an audit of the Company income
tax returns a copy of each notice or other communication received from the
Internal Revenue Service or applicable state authority (except such notices or
communications as are sent directly to the Member), (ii) keep such Member and
Assignee informed of any administrative or judicial proceeding, as required by
Section 6223(g) of the Code, (iii) allow each such Member and Assignee an
opportunity to participate in all such administrative and judicial proceedings,
and (iv) advise and consult with each such Member and Assignee as to proposed
adjustments to the federal or state income tax returns of the Company.
(b) The Tax Matters Partner, as such, shall not have the authority to
(i) enter into a settlement agreement with the Internal Revenue Service which
purports to bind any Member other than the Tax Matters Partner, without the
written consent of such Member, or (ii) enter into an agreement extending the
period of limitations as contemplated in Section 6229(b)(1)(B) of the Code
without the unanimous approval of the Members.
(c) The Company shall not be obligated to pay any fees or other
compensation to the Tax Matters Partner in its capacity as such. However, the
Company shall reimburse the Tax Matters Partner for any and all out-of-pocket
costs and expenses (including reasonable attorneys' and other professional fees)
incurred by it in its capacity as Tax Matters Partner. The
12
Company shall indemnify, defend and hold the Tax Matters Partner harmless from
and against any loss, liability, damage, costs or expense (including reasonable
attorneys' fees) sustained or incurred as a result of any act or decision
concerning Company tax matters and within the scope of such Member's
responsibilities as Tax Matters Partner, so long as such act or decision does
not constitute gross negligence or willful misconduct.
Section 7.7 Accountants. The Company shall engage, at its expense, the
Accountant to assist in the annual closing of the Company's books, to prepare
the Company's information and tax returns, and to perform such other similar
tasks as shall be determined from time to time by the Company.
ARTICLE 8
MANAGEMENT
----------
Section 8.1 Board of Managers. Subject to the provisions of the Act and any
limitations in the Certificate of Formation or this Agreement as to action
required to be authorized or approved by the Members or Inforte, the business
and affairs of the Company shall be managed and all its powers shall be
exercised by or under the direction of the Board of Managers. Without prejudice
to such general powers, but subject to the same limitations, it is hereby
expressly declared that the Board shall have the following powers:
(a) To conduct, manage, and control the business and affairs of the
Company and to make such rules and regulations therefor not inconsistent with
law or with the Certificate of Formation or with this Agreement, as the Board
shall deem to be in the best interests of the Company;
(b) To appoint and remove at its pleasure the officers, agents, and
employees of the Company, prescribe their duties and fix their compensation;
(c) To borrow money and incur indebtedness for the purposes of the
Company and to cause to be executed and delivered therefor, in the Company's
name, promissory notes, bond, debentures, deeds of trust, mortgages, pledges,
hypothecations, or other evidences of debt and securities therefor;
(d) To designate an executive and/or other committees, to serve at the
pleasure of the Board, and to prescribe the manner in which the proceedings of
such committees shall be conducted;
(e) To acquire real and personal property, arrange financing and enter
into contracts; and
(f) To make all other arrangements and do all things which are
necessary or convenient to the conduct, promotion, or attainment of the
business, purposes, or activities of the Company.
13
Section 8.2 Required Consent of Inforte. Anything in this Agreement to the
contrary notwithstanding, neither the Board nor the Company shall have the
authority to do any of the following without the prior written approval of
Inforte:
(a) cause the Company to engage in any business other than the
Business;
(b) cause the Company to engage in business under any name other than
"PROVANSIS LLC An Inforte Company;"
(c) authorize, issue or sell any Membership Interests, Units or
rights, warrants, options or convertible securities granting the holder thereof
the right to purchase from the Company any Membership Interests or Units in the
Company after the date hereof;
(d) repurchase or redeem any outstanding Units;
(e) make any special distribution to one or more Members other than in
accordance with the terms of this Agreement or make any distribution of property
other than cash to any Member;
(f) amend this Agreement or the Certificate of Formation of the
Company;
(g) engage in (A) any reorganization, consolidation or merger of the
Company with or into any other entity, or (B) any sale, transfer, issuance or
redemption of the Company's membership interests in any transaction or series of
related transactions by the holders thereof which results in any person or
entity or group of affiliated persons or entities (other than the members of the
Company immediately prior to any such transaction) owning more than Twenty-Five
Percent (25%) of the membership interests in the Company; (C) any sale,
assignment, lease, license or other disposal (whether in one transaction or a
series of related transactions) of all or substantially all of the Company
Assets; or (D) any sale, assignment, lease, license or other disposal of any
material Company Asset outside the ordinary course of the Company's business.
(h) grant a security interest in any of the Company Assets;
(i) commence or settle any litigation;
(j) appoint a new Chief Executive Officer or any other officer of the
Company;
(k) enter into, adopt or materially amend once so entered into or
adopted, any bonus or other incentive plan that awards officers, managers or
employees of the Company rights or payments based on increases in Company value
or increases in equity value, other than annual bonus plan arrangements entered
into in the ordinary course of the Company's business;
(l) make any loans to, or repay the debts of, any Member, Manager,
officer, employee or other affiliate of the Company (or any affiliate of any
such Person);
(m) liquidate, wind up or dissolve the Company;
14
(n) determine the value of Inforte's Units pursuant to Section 14.4;
and
(o) determine the Unit Fair Market Value, in accordance with the terms
of this Agreement.
(p) use the name "Inforte" in any manner, including, but not limited
to, advertising, (ii) branding, (iii) registering for any governmental or agency
permit, approval, or license, and (iv) entering into any agreement or contract.
The requirement of the Board or the Company to obtain the approval of Inforte
with respect to the activities in Sections 8.2(h), (i), and (j) shall
immediately terminate if Inforte does not exercise both of the Inforte Calls
within the prescribed time periods set forth in Article 12.
Section 8.3 Required Consent of PKI. If at any time, PKI's Membership
Interest is less than fifty percent (50%), anything in this Agreement to the
contrary notwithstanding, neither the Board nor the Company shall have the
authority to do any of the following without the prior written approval of PKI:
(a) cause the Company to engage in any business other than the
Business;
(b) cause the Company to engage in business under any name other than
"PROVANSIS LLC An Inforte Company;"
(c) authorize, issue or sell any Membership Interests, Units or
rights, warrants, options or convertible securities granting the holder thereof
the right to purchase from the Company any Membership Interests or Units in the
Company after the date hereof;
(d) repurchase or redeem any outstanding Units;
(e) make any special distribution to one or more Members other than in
accordance with the terms of this Agreement or make any distribution of property
other than cash to any Member;
(f) amend this Agreement or the Certificate of Formation of the
Company;
(g) engage in (A) any reorganization, consolidation or merger of the
Company with or into any other entity, or (B) any sale, transfer, issuance or
redemption of the Company's membership interests in any transaction or series of
related transactions by the holders thereof which results in any person or
entity or group of affiliated persons or entities (other than the members of the
Company immediately prior to any such transaction) owning more than Twenty-Five
Percent (25%) of the membership interests in the Company; (C) any sale,
assignment, lease, license or other disposal (whether in one transaction or a
series of related transactions) of all or substantially all of the Company
Assets; or (D) any sale, assignment, lease, license or other disposal of any
material Company Asset outside the ordinary course of the Company's business.
(h) enter into, adopt or materially amend once so entered into or
adopted, any bonus or other incentive plan that awards officers, managers or
employees of the Company rights
15
or payments based on increases in Company value or increases in equity value,
other than annual bonus plan arrangements entered into in the ordinary course of
the Company's business;
(i) make any loans to, or repay the debts of, any Member, Manager,
officer, employee or other affiliate of the Company (or any affiliate of any
such Person);
(j) liquidate, wind up or dissolve the Company;
(k) determine the value of PKI's Units pursuant to Section 14.4; and
(l) determine the Unit Fair Market Value, in accordance with the terms
of this Agreement.
Section 8.4 Limited Liability. Except as expressly set forth in this
Agreement or required by law, no Manager shall be personally liable for any
debt, obligation, or liability of the Company, whether arising in contract,
tort, or otherwise, solely by reason of being a Manager of the Company.
Section 8.5 Initial Board Managers; Qualification of Managers.
(a) The number of Managers comprising the Board shall initially be
three (3). The initial Managers comprising the Board shall be:
(i) Xxxxx Xxxxxx, 00000 Xxx Xxxxxx, Xxxxxxx Xxxxxx,
Xxxxxxxxxx, 00000, selected by PKI;
(ii) Xxxx Xxxxxxxx, 000X Xxxxxxx Xxxxxxxx, Xxx Xxxxxxxx,
Xxxxxxxxxx, 00000, selected by PKI; and
(iii) Xxxxxx X. Xxxxx, 0000 Xxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxx, 00000, selected by Inforte.
Section 8.6 Selection of Managers; Increase in Board Size; Removal of
Managers.
(a) The Managers shall be initially selected as follows: two Managers
shall be selected by PKI and one Manager shall be selected by Inforte. Except as
otherwise provided by the Act, the Certificate of Formation or this Agreement,
each Manager shall hold office until his or her death, Bankruptcy, mental
disability, resignation, or removal.
(b) In the event that Inforte exercises both of the Inforte Calls
pursuant to Sections 12.1 and 12.2 below, effective immediately upon the closing
of the Inforte Second Call, (i) the Manager who was selected by PKI (other than
Xxxxxx, or Xxxxxx'x replacement) shall no longer be on the Board; (ii) PKI
thereupon shall have the right to select only one Manager of the Board; and
(iii) Inforte thereupon shall have the right to select two Managers of the
Board. The number of Managers comprising the Board shall not be increased or
decreased except upon affirmative vote of PKI and Inforte.
16
(c) Any Manager may be removed, with or without cause at any time, by
the action of the Member or Members empowered pursuant to Sections 8.5(a) or
8.5(b) to select such Manager.
Section 8.7 Vacancies.
(a) A vacancy on the Board shall be deemed to exist in the case of
death, Bankruptcy, mental disability, resignation, or removal of any Manager.
(b) The Member or Members empowered pursuant to Sections 8.5(b) or
8.6(a) to select a Manager with respect to which a vacancy exists on the Board
shall have the exclusive right to name a replacement Manager in connection with
such vacancy.
Section 8.8 Compensation of Managers. Managers of the Company shall receive
no compensation for their services as Managers.
Section 8.9 Other Activities. The Managers are not obligated to devote all
of their time or business efforts to the affairs of the Company. The Managers
shall devote whatever time, effort, and skill as they deem appropriate for the
operation of the Company. A Manager or Member may engage independently or with
others, directly or indirectly, in other business ventures of any nature and
description, and neither the Company nor any Manager or Member shall have any
rights in or to such independent ventures or the income or profits derived
therefrom; provided that any such business venture, other than Predictive Data
described in Section 4.1, shall not be in competition with any ongoing business
engaged in by the Company. A Member or Manager shall not be obligated to present
any investment opportunity or prospective economic advantage to the Company,
even if the opportunity is of the character that, if presented to the Company,
could be taken by the Company, unless it is new technology that PKI is required
to present to the Company pursuant to Section 3.1(b).
Section 8.10 Transactions of Managers with the Company. Subject to any
limitation set forth in this Agreement and with the prior approval of a majority
of disinterested Managers, a Manager may lend money to and transact other
business with the Company. Subject to other applicable law, such Manager has the
same rights and obligations with respect thereto as a Person who is not a Member
or Manager.
Section 8.11 Meetings of Managers. Meetings of the Board may be called for
any purpose or purposes at any time by any Manager. Notice of the time and place
of meetings shall be delivered personally or by telephone to each Manager, or
sent by first-class mail or by facsimile or e-mail transmission, charges
prepaid, addressed to such Manager at his or her address as it appears upon the
records of the Company or, if it is not so shown on the records and is not
readily ascertainable, at the place at which the meetings of the Board are
regularly held. In case such notice is mailed, it shall be deposited in the
United States mail at least ten (10) days prior to the time of the holding of
the meeting. In case such notice is sent by facsimile or e-mail transmission, it
shall be delivered to the Manager or actually transmitted by the person giving
the notice by electronic means to the Manager at least forty-eight (48) hours
prior to the time of the holding of the meeting. In case such notice is
delivered personally or by telephone as above provided, it shall be so delivered
at least twenty-four (24) hours prior to the time of the holding
17
of the meeting. Any notice given personally or by telephone may be communicated
to either the Manager or to a person at the office of the Manager whom the
person giving the notice has reason to believe will promptly communicate it to
the Manager. Such deposit in the mail, delivery to a common carrier,
transmission by electronic means or delivery, personally or by telephone, as
above provided, shall be due, legal and personal notice to such Managers. The
notice need not specify the purpose of the meeting.
Section 8.12 Chairman. The Chairman, if there is one, shall preside at all
meetings of the Members. The Chairman may execute contracts and agreements (i)
in the ordinary course of the Company's business, or (ii) the execution of which
has been authorized by the Board, in the name and behalf of the Company.
Section 8.13 Place of Meetings. Meetings of the Board shall be held at any
place within or without the State of Delaware that has been designated from time
to time by the Board. In the absence of such designation, meetings of the Board
shall be held at the principal executive office of the Company.
Section 8.14 Quorum; Participation in Meetings by Conference Telephone
Permitted; Vote Required for Action. Presence of a majority of the authorized
number of Managers at a meeting of the Board constitutes a quorum for the
transaction of business, except as hereinafter provided. Managers may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all Managers participating in such meeting
can communicate with and hear one another. Except where otherwise provided in
this Agreement, every act or decision done or made by a majority of the Managers
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board, unless there are only two Managers in which case unanimity
shall be required. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of Managers, provided that
any action taken is approved by at least a majority of the required quorum for
such meeting. A majority of the Managers present, whether or not a quorum is
present, may adjourn any meeting to another time and place. If a meeting is
adjourned for more than twenty-four (24) hours, notice of any adjournment to
another time or place (other than adjournments until the time fixed for the next
regular meeting of the Board, as to which no notice is required) shall be given
prior to the time of the adjourned meeting to the Managers who were not present
at the time of the adjournment.
Section 8.15 Waiver of Notice; Consent to Meeting. Notice of a meeting need
not be given to any Manager who signs a waiver of notice or 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, prior thereto or at its
commencement, the lack of notice to such Manager. All such waivers, consents and
approvals shall be filed with the Company's records and made a part of the
minutes of the meeting.
Section 8.16 Action by Board Without a Meeting. Any action required or
permitted to be taken by the Board may be taken without a meeting if all the
Managers shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of the Board.
18
ARTICLE 9
OFFICERS
--------
Section 9.1 General. Subject to the provisions of the Act, the Certificate
of Formation and Section 8.2 of this Agreement, the Board may determine from
time to time to appoint one or more individuals as officers of the Company. An
officer need not be a Member or Manager of the Company, and any number of
offices may be held by the same person. The officers of the Company initially
shall be a Chief Executive Officer and Secretary. The Company may also have, at
the discretion of the Board, such other officers as may be designated from time
to time by the Board.
Section 9.2 Appointment and Removal. The officers shall be appointed by the
Board, subject to Section 8.2. Each officer, including an officer elected to
fill a vacancy, shall hold office at the pleasure of the Board until his or her
successor is elected, except as otherwise provided by the Act. Any officer may
be removed, with or without cause, at any time by the affirmative vote of a
majority of the Managers then in office, unless there are only two Managers in
which case unanimity shall be required.
Section 9.3 Chief Executive Officer - Rights, Duties, and Powers. The Chief
Executive Officer shall be the chief executive officer of the Company and,
subject to the authority of the Board, shall in general supervise and control
all of the business and affairs of the Company. He may sign any contracts or
other instruments which the Board has authorized to be executed and in general
shall perform all duties incident to the office of Chief Executive Officer and
such other duties as may be prescribed by the Board from time to time.
Section 9.4 Resignation of a CEO. At any time upon at least ten (10) days'
prior written notice to the Members, a CEO may resign such position, whereupon,
subject to Section 8.2, the Board shall designate another Person to be a
successor CEO. Neither acceptance by the Members of such resignation, nor
selection of a successor CEO, shall be necessary to make such resignation
effective. If the CEO is also a Member, such resignation shall not affect such
CEO's rights or liabilities as a Member except to the extent expressly otherwise
provided in this Agreement.
Section 9.5 Authority to Designate Officers. Subject to Section 8.2, the
Board may elect or designate, by resolution or otherwise, individuals as
officers of the Company and revocably delegate to such officers such powers,
authority, and responsibilities of the CEO as are (i) set forth in the
designation or delegation and (ii) necessary to carry out and implement the
management decisions of the Board. The Board may remove any officer, including
the CEO, with or without cause, at any time. Any officer may resign at any time
by giving written notice to the Company. Any resignation shall take effect at
the date of the receipt of such notice or at any later time specified in such
notice (unless such officer is otherwise removed prior to such date); and unless
otherwise specified in such notice, the acceptance of the resignation shall not
be necessary to make it effective. Any removal or resignation is without
prejudice to the rights, if any, of the Company or the officer under any
contract of employment with the Company.
19
Section 9.6 Limited Liability. To the fullest extent permitted under
applicable law, no Member, CEO, officer, or shareholder, manager, member,
officer, employee, trustee or agent of a Member, shall be deemed to violate this
Agreement or be liable, responsible or accountable in damages or otherwise to
any Member or the Company for any action or failure to act, unless such
violation or liability is attributable to such Person's gross negligence,
willful misconduct, bad faith or a material breach of this Agreement. Without
limiting the generality of the foregoing, each such Person shall, in the
performance of his, her or its duties, be fully protected in relying in good
faith upon the records of the Company and upon information, opinions, reports or
statements presented to such Person by the Board, the Members or by any other
Person as to matters such Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, the Board or the Members.
Section 9.7 Indemnification. To the fullest extent permitted under
applicable law, the Company shall indemnify and hold harmless any Person (an
"Indemnified Party") who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including any action by or in
the right of the Company) by reason of or arising from any acts or omissions (or
alleged acts or omissions) on behalf of the Company or in furtherance of the
interests of the Company arising out of the Indemnified Party's activities as a
Member, CEO or officer of the Company, or as an officer, director, shareholder,
member, manager, employee, trustee or agent of said Member, against losses,
damages or expenses (including reasonable attorneys' fees, judgments, fines and
amounts paid in any action, suit or proceeding and for which such Indemnified
Party has not otherwise been reimbursed and further including reimbursement of
fees and costs reasonably incurred by any Indemnified Party to enforce the
provisions of this Section 9.7), so long as such Indemnified Party did not act
in bad faith or in a manner constituting gross negligence, willful misconduct or
a material breach this Agreement. The termination of any action, suit or
proceeding by judgment, order, settlement or upon a plea of nolo contendere or
its equivalent shall not of itself (except insofar as such judgment, order,
settlement or plea shall itself specifically provide) create a presumption that
the Indemnified Party acted in bad faith or in a manner constituting gross
negligence, willful misconduct or a material breach of this Agreement.
Section 9.8 Affiliated Transactions. Other than pursuant to the terms and
conditions of Exhibits B and C, the Company shall not enter into or maintain any
transaction or agreement with any of its Affiliates, except in the ordinary
course of business and upon fair and reasonable terms no less favorable to the
Company than would be obtained by the Company in a comparable arm's length
transaction with a Person who is not the Company's Affiliate.
20
ARTICLE 10
MEMBERS
-------
Section 10.1 Limited Liability. Except to the extent required by the Act,
no Member shall be liable for any debts, obligations or liabilities of the
Company. Except as expressly provided in this Agreement, the Members shall have
no obligation to make contributions to the Company.
Section 10.2 Meetings of Members. Meetings of the Members, for any purpose
or purposes, may be called by any Member or group of Members holding fifteen
(15%) or more of the Units outstanding.
Section 10.3 Place of Meetings. Meetings of the Members may be held at any
place, within or outside of the State of Delaware, for any meeting designated in
any notice of such meeting. If no such designation is made, the place of any
such meeting shall be the principal office of the Company.
Section 10.4 Notice of Meetings. Written notice stating (a) the place, day
and hour of the meeting, (b) that it is being issued by or at the direction of
the Member or Members calling the meeting, and (c) the purpose or purposes for
which the meeting is called, shall be delivered not fewer than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 10.5 Record Date. For the purpose of determining the Members
entitled to notice of or to vote at any meeting of Members or any adjournment of
such meeting, or to make a determination of Members for any other purpose, the
date on which notice of the meeting is mailed shall be the record date for
making such a determination. When a determination of Members entitled to vote at
any meeting has been made pursuant to this Section, the determination shall
apply to any adjournment of the meeting.
Section 10.6 Quorum. A quorum for a meeting of Members shall be Members
holding eighty-five percent (85%) of the outstanding Units, represented in
person or by proxy. In the absence of a quorum, Members holding a majority of
the Units so represented may adjourn the meeting from time to time for a period
not to exceed sixty (60) days without further notice.
Section 10.7 Manner of Acting. If a quorum is present, the vote of Members
holding not less than a majority of the outstanding Units shall be the act of
the Members, unless the vote of a greater or lesser proportion or number is
otherwise required by the Act, the Certificate of Formation, or this Agreement.
Section 10.8 Proxies. Any Member may vote in person or by a proxy executed
by such Member or by a duly authorized attorney-in fact of such Member. Every
proxy must be signed by the Member or his or its attorney-in-fact. Every proxy
shall be revocable at the pleasure of the Member executing it. The authority of
the holder of a proxy to act shall not be revoked by the incompetence, death or
bankruptcy of the Member who executed the proxy unless, before authority is
exercised, written notice of an adjudication of such incompetence, death or
bankruptcy is received by the Members.
21
Section 10.9 Action by Members Without a Meeting.
(a) Whenever the Members are required or permitted to take any action
by vote, such action may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken shall be signed by the Members who hold the voting interests having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all of the Members entitled to vote
therein were present and voted, and shall be delivered to the principal office
of the Company by hand or by certified or registered mail, return receipt
requested.
(b) Every written consent shall bear the date of signature of each
Member who signs the consent, and no written consent shall be effective to take
the action referred to therein unless, within sixty (60) days of the earliest
dated consent delivered in the manner required by this Section 10.9 to the
Company, written consents have been signed by a sufficient number of Members to
take the action.
(c) Prompt notice of the taking of the action without meeting by less
than unanimous written consent shall be given to each Member who has not
consented in writing but who would have been entitled to vote thereon had such
matter been taken at a meeting.
Section 10.10 Waiver of Notice. Notice of a meeting need not be given to
any Member who submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any Member at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
that the meeting was not lawfully called or convened, shall constitute a waiver
of notice by him or her.
ARTICLE 11
RESTRICTIONS ON TRANSFER
------------------------
Section 11.1 PKI Restriction on Transfer. PKI shall be prohibited from
Transferring Units held by it until the first anniversary of the date of this
Agreement, after which any Transfer of Units shall remain subject to other
restrictions on Transfer of Units set forth in this Agreement.
Section 11.2 Company Right of First Offer.
(a) Except for Transfers permitted by Section 11.4, if a Holder
desires to Transfer any Units or other securities convertible into or
exercisable for Units (collectively, the "Offered Securities"), such Holder (the
"Selling Holder") will first give written notice (the "Offer Notice") to the
Company and each non-Selling Holder holding at least ten percent (10%) of the
outstanding Units (collectively, the "Qualified Non-Selling Holders") stating
the purchase price, the number and type of Offered Securities, and other
material terms and conditions upon which such Offered Securities are to be
offered for sale and making an offer to sell such Offered Securities (the
"Offer") first to the Company and then to the Qualified Non-Selling Holders
pursuant to the terms and conditions of this Section, at the price and on the
other terms described in the Offer Notice. The date upon which the Offer Notice
is given to the Company and the Qualified Non-Selling Holders is called the
"Offer Notice Date."
22
(b) The Company may elect to purchase Offered Securities by giving
written notice thereof (the "Company's Acceptance Notice") to the Selling Holder
(and if the Company does not elect to purchase all of the Offered Securities,
also to the Qualified Non-Selling Holders) within twenty (20) days following the
Offer Notice Date setting forth the number of Offered Securities the Company is
willing to purchase. In the event the Offer has been accepted in its entirety by
the Company, the Selling Holder shall sell the Offered Securities to the Company
on the terms and conditions set forth in the Offer Notice and the closing shall
take place within ninety (90) days after the Offer Notice Date, unless a later
date is agreed to by the parties.
(c) In the event that the Company does not elect to purchase all of
the Offered Securities, each Qualified Non-Selling Holder may elect to purchase
remaining Offered Securities by giving written notice thereof (the "Holders'
Acceptance Notices") to the Selling Holder within ten (10) days following the
Company's Acceptance Notice setting forth the maximum number of Offered
Securities such Qualified Non-Selling Holder is willing to purchase. In the
event that the Holders' Acceptance Notices in the aggregate contain offers to
purchase more than the number of Offered Securities available, the Qualified
Non-Selling Holders shall be entitled to purchase such Offered Securities pro
rata among themselves on the basis of the number of Units held by each such
Qualified Non-Selling Holder. In the event the Offer has been accepted in its
entirety by the Company and Qualified Non-Selling Holders, the Selling Holder
shall sell the Offered Securities to the Company and the Qualified Non-Selling
Holders on the terms and conditions set forth in the Offer Notice and the
closing shall take place within ninety (90) days after the Offer Notice Date,
unless a later date is agreed to by the parties.
(d) In the event the Offer has not been accepted in its entirety by
the Company and/or the Qualified Non-Selling Holders, the Selling Holder shall
not be obligated to sell any Offered Securities to the Company or the Qualified
Non-Selling Holders, and the Selling Holder may, within 120 days after the Offer
Notice Date, sell the Offered Securities to a purchaser(s) who agrees in writing
to be bound by the terms of this Agreement to the same extent as the Selling
Holder, provided such sale is on terms no more favorable to such purchaser(s)
than those stated in the Offer Notice. If such sale has not been completed
within such 120-day period, such sale may not be carried out without complying
again with the provisions of this Section.
(e) Notwithstanding the foregoing, the provisions of this Section 11.2
shall not apply to (i) sales of all of the outstanding Units in the Company,
(ii) any sale of all the outstanding Units held by both PKI and Inforte; or
(iii) any sale by a Member to the Company pursuant to this Agreement.
Section 11.3 Co-Sale Rights.
(a) In the event that, after complying with the terms of Section 11.2
if applicable, a Selling Holder desires to sell to a third party, in one
transaction or a series of related transactions, Units representing ten percent
(10%) or more of the issued and outstanding Units (such third party, the
"Proposed Purchaser", such transfer, the "Proposed Transfer", and such Units to
be purchased, the "Transferred Securities"), then such Selling Holder's right to
accept any offer shall be conditioned upon Qualified Non-Selling Holders being
offered the right to sell to the Proposed Purchaser their "proportionate number"
of the Transferred Securities. A
23
Qualified Non-Selling Holder's "proportionate number" of the Transferred
Securities shall be determined by multiplying the Units represented by the
Transferred Securities by a fraction, (x) the numerator of which is the number
of Units held by such Qualified Non-Selling Holder and (y) the denominator of
which is the total number of outstanding Units. The Transferred Securities to be
purchased from any Qualified Non-Selling Holder pursuant to this Section 11.3
shall be paid and contracted for at the same price per Unit, with the same form
of consideration and otherwise upon the same terms and conditions as the sale by
the Selling Holder of its Units to the Proposed Purchaser.
(b) A Selling Holder shall, not less than thirty (30) days prior to
each Proposed Transfer it intends to effect, notify Qualified Non-Selling
Holders in writing of such Proposed Transfer (the "Participation Notice"). Such
Participation Notice shall set forth: (i) the number and type of Transferred
Securities; (ii) the name(s) and address(es) of the Proposed Purchaser(s); (iii)
the proposed amount and all forms of consideration and terms and conditions of
payment offered by such Proposed Purchaser, including the proposed date for the
closing of the Proposed Transfer (the "Scheduled Closing"); and (iv) that the
Proposed Purchaser has been informed of the co-sale rights of Qualified
Non-Selling Holders provided for in this Section 11.3 and has agreed to purchase
the Transferred Securities in accordance with the terms hereof.
(c) The co-sale rights described in this Section 11.3 may be exercised
by a Qualified Non-Selling Holder's delivery of a written notice to the Selling
Holder (the "Exercise Notice") at least ten (10) days prior to the Scheduled
Closing or within twenty (20) days after delivery of the Participation Notice,
whichever occurs first. Such notice shall state the number of Units (including
the type of units) the Qualified Non-Selling Holder elects to include in such
sale to the Proposed Purchaser. If the Qualified Non-Selling Holder fails to
timely provide an Exercise Notice, such failure shall be regarded as an election
by the Qualified Non-Selling Holder not to participate in the Proposed Transfer.
In addition, if the Qualified Non-Selling Holder fails to elect to sell its full
"proportionate amount", the amount the Qualified Non-Selling Holder fails to
sell may be sold by the Selling Holder to the Proposed Transferee.
(d) In the event that PKI or Inforte exercises its co-sale rights
pursuant to this Section 11.3 and the Proposed Purchaser is not willing to
purchase Units from the Qualified Non-Selling Holder on the same terms and
conditions as specified in the Participation Notice, then the Selling Holder
shall not be permitted to sell any Units to the Proposed Purchaser pursuant to
the Proposed Transfer.
Section 11.4 Permitted and Involuntary Transfers. Notwithstanding anything
herein to the contrary, the Holders may Transfer Units and other securities
convertible or exercisable for Units free of the restrictions contained in this
Article 11: (a) subject to Section 11.1, if the Holder is a natural person, by
will or intestate succession or for estate and tax planning purposes to a trust
or other entity for the benefit of such Holder's spouse or lineal descendants
(provided such Holder, the spouse and lineal descendants of such Holder agree in
writing to remain the direct and beneficial owners of all such equity interests)
("Permitted Transferees"), (b) if the Holder is not a natural person, to an
Affiliate of such Holder or (c) with respect to Inforte, if such Transfer occurs
in connection with the sale of all or substantially all of Inforte's assets, in
any such instance, so long as such transfer complies with the terms of Section
11.1 and any such proposed transferee consents in writing delivered to the
Company to be bound by the terms of
24
this Agreement (including, without limitation, the terms of this Article 11) to
the same extent as the transferring Holder.
Section 11.5 Restrictions on Units Held by Xxxxxx Xxxxx.
(a) The Units transferred to Xxxxxx Xxxxx upon the formation of the
Company shall vest one percent (1.00%) per year over a period of five (5) years,
vesting to occur on each anniversary of the date of this Agreement. With respect
to any unvested non-forfeited Units held by Xxxxx, subject to Section 11.5(b),
Xxxxx shall be entitled, so long as he is a holder of such Units, to all
allocations and distributions made with respect to such Units notwithstanding
their unvested nature.
(b) In the event that Xxxxx'x employment with the Company is
terminated for any reason:
(i) Unvested Units held by Xxxxx shall be immediately
forfeited and returned to the Company, and
(ii) Vested Units held by Xxxxx, shall, at the option of the
Company, be sold by Xxxxx to the Company. The purchase price for such
Units shall be the Unit Fair Market Value. The purchase price shall be
payable by the Company within one-hundred twenty (120) days following
the final determination of the Unit Fair Market Value in accordance
with the terms of this Agreement.
ARTICLE 12
THE INFORTE CALL OPTIONS
------------------------
Section 12.1 Inforte First Call. Effective as of the date of this
Agreement, Inforte shall have the option (the "Inforte First Call") to purchase
a whole number of Units (the "Inforte First Call Units") from PKI that is
sufficient to increase Inforte's percentage interest of outstanding Units to
thirty-five percent (35%) of all outstanding Units on a fully diluted basis. The
exercise price shall be One Million Dollars ($1,000,000.00) (the "Inforte First
Call Price"). Inforte may exercise the Inforte First Call by giving notice (the
"Inforte First Call Notice") in writing to PKI within the time restrictions set
forth in Section 12.3 below, stating its intention to exercise such call. The
day on which the Inforte First Call Notice is given is the "Inforte First Call
Notice Date." Within thirty (30) business days from the Inforte First Call
Notice Date, unless a later date is agreed to by the parties, PKI shall sell,
and Inforte shall purchase, the Inforte First Call Units, free and clear of all
security interests, liens and encumbrances. Simultaneous with the conveyance of
the Inforte First Call Units, Inforte shall pay to PKI the Inforte First Call
Price. Such payment shall be made by wire transfer, or such other form as
Inforte and PKI mutually agree. Upon the completion of the transfer of the
Inforte First Call Units permitted by this Section 12.1, PKI shall be deemed to
have transferred to Inforte an amount of its Unreturned Capital and Capital
Account equal to the purchase price paid by Inforte.
Section 12.2 Inforte Second Call. Provided that Inforte exercises the
Inforte First Call, effective as of the date of this Agreement, Inforte shall
have the option (the "Inforte Second Call" and, with the Inforte First Call,
collectively, the "Inforte Calls") to purchase a whole
25
number of Units (the "Inforte Second Call Units") from PKI that is sufficient to
increase Inforte's percentage interest of outstanding Units to fifty-one percent
(51%) of all outstanding Units on a fully diluted basis. The exercise price for
the Inforte Second Call shall be One Million Dollars ($1,000,000.00) (the
"Inforte Second Call Price"). Inforte may exercise the Inforte Second Call by
giving notice (the "Inforte Second Call Notice") in writing to PKI within the
time restrictions set forth in Section 12.3 below, stating its intention to
exercise such call. The day on which the Inforte Second Call Notice is given is
the "Inforte Second Call Notice Date." Within thirty (30) business days from the
Inforte Second Call Notice Date, unless a later date is agreed to by the
parties, PKI shall sell, and Inforte shall purchase, the Inforte Second Call
Units, free and clear of all security interests, liens and encumbrances.
Simultaneous with the conveyance of the Inforte Second Call Units, Inforte shall
pay to PKI the Inforte Second Call Price. Such payment shall be made by wire
transfer, or such other form as Inforte and PKI mutually agree. Inforte shall
not exercise the Inforte Second Call prior to exercise of the Inforte First Call
but may exercise both calls simultaneously. Upon the completion of the transfer
of the Inforte Second Call Units permitted by this Section 12.2, PKI shall be
deemed to have transferred to Inforte an amount of its Unreturned Capital and
Capital Account equal to the purchase price paid by Inforte.
Section 12.3 Termination of the Inforte Calls. The Inforte First Call may
be exercised until November 21, 2005 (the "Inforte First Call Termination
Date"). Provided that Inforte exercises the Inforte First Call, the Inforte
Second Call may be exercised until February 20, 2006 (the "Inforte Second Call
Termination Date" and, with the Inforte First Call Termination Date,
collectively, the "Inforte Call Termination Dates").
ARTICLE 13
THE PKI CALL OPTION
-------------------
Section 13.1 PKI Call.
(a) In the event that Inforte fails to exercise either of the Inforte
Calls prior to the Inforte Call Termination Dates, then PKI shall have the right
to purchase all, but not less than all, of the Units held by Inforte (the "PKI
Call"). The PKI Call shall expire on the date (the "PKI Call Termination Date")
that is twenty (20) business days after the Inforte Second Call Termination
Date. The exercise price of the PKI Call (the "PKI Call Price") shall be the sum
of (i) to the extent paid by Inforte, the Inforte First Call Price plus (ii) the
greater of Two Million Dollars ($2,000,000.00) or the amount of Inforte's
Capital Account balance at the time the full PKI Call Price is tendered.
(b) As a condition to closing of the PKI Call, PKI shall repay any
outstanding Working Capital Advances prior to or contemporaneous with the
payment of the PKI Call Price.
(c) PKI may exercise the PKI Call by giving notice (the "PKI Call
Notice") in writing to Inforte, stating its intention to exercise such call.
26
Section 13.2 Deferred Closing of PKI Call.
(a) PKI shall tender the entire PKI Call Price to Inforte not later
than the one-year anniversary of the date on which PKI delivered the PKI Call
Notice. Such payment shall be made by wire transfer, or such other form as
Inforte and PKI mutually agree. As soon as practicable after receipt of the PKI
Call Price, Inforte shall transfer all of its Units to PKI.
(b) Until such time as the full PKI Call Price is delivered to
Inforte, Inforte shall remain the owner of the Units covered by the PKI Call,
and shall remain a Member, with all of the rights entitled to it as a Member. If
PKI has exercised the PKI Call but the closing of the PKI Call does not occur on
or before the first anniversary date of the PKI Call Notice, the PKI Call and
all rights and obligations of PKI under this Article 13 thereupon automatically
shall terminate.
(c) From the date of the PKI Call Notice until and including the date
on which the full PKI Call Price is tendered, any outstanding balance of the PKI
Call Price shall bear interest, compounding, monthly at per annum rate equal to
the U.S. prime rate reported in The Wall Street Journal, as adjusted from time
to time, as of the first business day in each calendar month that a balance is
outstanding.
ARTICLE 14
DISSOLUTION AND TERMINATION
---------------------------
Section 14.1 Dissolution of Company. The Company will dissolve and its
assets and business will be wound up upon the first to occur of the following
events:
(a) Subject to the written consent of PKI and Inforte, the written
approval of Members holding a majority of the Units to dissolve the Company;
(b) The occurrence of an event which makes it unlawful for the Company
business to be continued under the Act or otherwise;
(c) Any other event which, under the Act, requires the dissolution of
the Company and the winding up of its business and affairs.
Dissolution of the Company shall be effective on the date on which the
event occurs giving rise to the dissolution. Notwithstanding the dissolution of
the Company, the business of the Company and the affairs of the Members as such
shall continue to be governed by this Agreement until the completion of the
winding up of the Company and the filing of Articles of Dissolution.
Section 14.2 Liquidation and Distribution. Following the occurrence of an
event described in Section 14.1, a designee of the Board shall act as
liquidating trustee and wind up the affairs of the Company in the following
manner:
27
(a) The liquidating trustee shall use commercially reasonable best
efforts to sell all of the Company's assets in an orderly manner (so as to avoid
the loss normally associated with forced sales).
(b) The liquidating trustee shall apply and distribute the proceeds of
all such sales, together with other assets which the liquidating trustee was
unable to dispose of in accordance with paragraph (a), in the following order of
priority: (A) first, to the payment of any Working Capital Advances, (B) second,
to the payment of all other debts and liabilities of the Company (including
debts and liabilities owed to Members); (C) third, to the establishment of any
reserves reasonably necessary to provide for any contingent Company liabilities
and obligations (such reserves to be paid over to a bank or trust company, as
escrowee, to be held by such escrowee for the purpose of disbursing such
reserves in payment of any such contingent liability or obligation and to pay
over the balance thereafter remaining for distribution in the manner set forth
in clause (D) hereof); and (D) fourth, to the distribution of the Members in
accordance with Section 5.1(b).
Section 14.3 Termination. Each of the Members will be furnished with a
statement prepared by the Accountant, which will set forth the assets and
liabilities of the Company as of the date of the final distribution of Company
Assets under Section 14.2 and the Net Profits or Net Losses and other items
allocable under Article 7 of this Agreement for the fiscal period ending on such
date. Upon compliance with the distribution plan set forth in Section 14.2, the
Members will cease to be such, and the liquidating trustee will cause a
certificate of dissolution to be filed, whereupon the Company will terminate.
Section 14.4 Deemed Liquidation.
(a) Upon a Fundamental Change or Change of Control (each as defined
below), Inforte may, in its sole discretion, by written notice to the Company,
elect to treat such transaction as a deemed liquidation if Inforte has not
otherwise participated in such transaction in accordance with any other
applicable purchase and/or co-sale rights afforded Inforte in Article 12 above.
Within ninety (90) days of receipt of such notice from Inforte, the Company
shall pay to Inforte, in exchange for the redemption of Inforte's Units, an
amount equal to the amount Inforte would have received on account of its Units
in a true liquidation pursuant to Section 14.2 if all assets of the Company had
been sold for cash equal to the fair market value of such assets.
(b) For purposes of this Section 14.4, "Fundamental Change" shall mean
a reorganization, consolidation or merger in which the Company is a party except
any reorganization, consolidation or merger where, after giving effect thereto,
the Members of the Company immediately prior to such transaction (on a fully
diluted basis) will own immediately following such transaction equity interests
in the surviving entity possessing the voting power under ordinary circumstances
to control the business and affairs of the surviving entity, or a sale or other
transfer of all or substantially all of the assets of the Company in any
transaction or series of related transactions (other than sales in the ordinary
course of business); the term "Change of Control" shall mean any sale, transfer,
issuance or redemption or series of sales, transfers, issuances or redemptions
(or any combination thereof) of (i) the Company's Membership Interests (on
28
a fully diluted basis) by the Holders thereof or the Company which results in
any Person or group of affiliated Persons (other than the Members of the Company
(on a fully diluted basis) as of immediately prior to any such transaction or
series of transactions) owning Membership Interests in the Company possessing
the voting power under ordinary circumstances to control the business and
affairs of the Company or (ii) PKI's voting securities (on a fully diluted
basis) by the holders thereof which results in any Person or group of affiliated
Persons (other than the Xxxxxx or persons in his immediate family) owning
securities possessing the voting power under ordinary circumstances to control
the business and affairs of PKI.
ARTICLE 15
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 15.1 PKI's Representations and Warranties. PKI represents and
warrants to Inforte as follows:
(a) Organization and Standing. PKI is a corporation duly organized,
existing and in good standing under the laws of the State of California. PKI has
all necessary power and authority to conduct its business as its business is now
being conducted. PKI has qualified as a foreign corporation and is in good
standing, under the laws of all jurisdictions where the nature of its business
or the nature or location of its assets requires such qualification, except in
those jurisdictions where the failure to so qualify would not result in a
material adverse effect on its business or assets.
(b) Power and Authority. PKI has full corporate power and authority to
enter into and perform (i) this Agreement and (ii) all documents and instruments
executed pursuant to this Agreement. This Agreement has been duly executed and
delivered by duly authorized officers of PKI.
(c) Consents. No consent, authorization, order or approval of, or
filing or registration with, any governmental authority or other person,
organization or association is required for the execution and delivery by PKI of
this Agreement and the consummation by PKI of the transactions contemplated by
this Agreement.
(d) No Conflict. PKI is not in violation or default of any provision
of its articles of incorporation, bylaws, or similar organizational documents,
or any provision of any mortgage, indenture, agreement, instrument, or contract
to which it is a party or by which it is bound or of any federal or state
judgment, order, writ, decree, statute, rule, regulation or restriction
applicable to PKI. The execution, delivery, and performance by PKI of this
Agreement, and the consummation of the transactions contemplated hereby, will
not result in any violation of, or be in conflict with, or constitute, with or
without the passage of time or giving of notice, either a default under any
provision of its articles of incorporation, bylaws, or similar organizational
documents, or any provision of any mortgage, indenture, license, agreement,
instrument, or contract to which it is a party or by which it is bound or of any
federal or state judgment, order, writ, decree, statute, rule, regulation or
restriction applicable to PKI, or an event that results in the creation of any
lien, charge, or encumbrance upon any assets of PKI or the Company, or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any permit,
license, authorization, or approval applicable to PKI or the Company, their
respective businesses, operations, assets or properties. Without limiting the
generality of the foregoing, PKI represents
29
and warrants that the execution, delivery and performance by PKI of this
Agreement is not a violation of, nor will result in the violation of, or be in
conflict with, or constitute, with or without the passage of time or giving of
notice, a default under, the PRTLA or any other agreement affecting PKI's rights
in the Rx-Technology or Rx-Solutions.
(e) PKI's Rights in the Technology. PKI owns the right to use the
Rx-Technology as contemplated in Section 3.1(a). The use of such Rx-Technology
by PKI, does not and shall not, and has not been alleged by any Person to,
infringe on the rights of any Person. PKI further represents that there is no
pending or threatened litigation or other proceedings, and no known basis
therefor, that would have an adverse impact on its performance under this
Agreement or relating to the use of the Rx-Technology as permitted hereunder.
Section 15.2 Inforte's Representations and Warranties. Inforte represents
and warrants to PKI as follows:
(a) Organization and Standing. Inforte is a corporation duly
organized, existing and in good standing under the laws of the state of
Delaware. Inforte has all necessary power and authority to conduct its business
as its business is now being conducted. Inforte has qualified as a foreign
corporation and is in good standing, under the laws of all jurisdictions where
the nature of its business or the nature or location of its assets requires such
qualification, except in those jurisdictions where the failure to so qualify
would not result in a material adverse effect on its business or assets.
(b) Power and Authority. Inforte has full corporate power and
authority to enter into and perform (i) this Agreement and (ii) all documents
and instruments executed pursuant to this Agreement. This Agreement has been
duly executed and delivered by duly authorized officers of Inforte.
(c) Consents. No consent, authorization, order or approval of, or
filing or registration with, any governmental authority or other person,
organization or association is required for the execution and delivery by
Inforte of this Agreement and the consummation by Inforte of the transactions
contemplated by this Agreement.
(d) Inforte is not in violation or default of any provision of its
certificate of incorporation, bylaws, or similar organizational documents, or
any provision of any mortgage, indenture, agreement, instrument, or contract to
which it is a party or by which it is bound or, to the best of its knowledge, of
any federal or state judgment, order, writ, decree, statute, rule, regulation or
restriction applicable to Inforte. The execution, delivery, and performance by
Inforte of this Agreement, and the consummation of the transactions contemplated
hereby, will not result in any violation of, or be in conflict with, or
constitute, with or without the passage of time or giving of notice, either a
default under any provision of its articles of incorporation, bylaws, or similar
organizational documents, or any provision of any mortgage, indenture, license,
agreement, instrument, or contract to which it is a party or by which it is
bound or of any federal or state judgment, order, writ, decree, statute, rule,
regulation or restriction applicable to Inforte, or an event that results in the
creation of any lien, charge, or encumbrance upon any assets of Inforte or the
Company, or the suspension, revocation, impairment, forfeiture, or
30
nonrenewal of any permit, license, authorization, or approval applicable to
Inforte or the Company, their respective businesses, operations, assets or
properties.
Section 15.3 Covenants.
(a) Preservation of Business. PKI shall take such action as may be
necessary to maintain, preserve, renew and keep in favor and effect the
existence and rights of PKI and its assets and will preserve the business
organization of PKI intact.
(b) Maintenance of Rights to Use Rx-Technology. PKI and Xxxxxx shall
not take, or fail to take, any action, including, but not limited to, (i)
entering into or withdrawing from any agreement, contract, instrument, indenture
or understanding; (ii) entering into or exiting from any business or activity;
(iii) violating any judgment, order, writ, decree, statute, rule, regulation, or
restriction; (iv) applying for, or failing to apply for or renew, any permit,
license, authorization, or approval applicable to PKI; and (v) initiating or
joining any claim, suit, arbitration, mediation, or any such proceeding to
determine the legal rights of any Person, if such action or failure to act
constitutes a contradiction, violation, or breach of any provision of the PRTLA
and causes PKI or the Company, with or without, the passage of time, giving of
notice, or action by any other Person, to lose or diminish any rights to the
Rx-Technology granted or maintained under the PRTLA. Without limiting the
generality of the foregoing sentence, PKI shall not (i) attempt to sell,
transfer, assign, sublicense, or otherwise convey the rights or the right to use
Rx-Technology; or (ii) attempt to sell, transfer, assign, sublicense, or
otherwise convey substantially all of its assets; and Xxxxxx shall not sell,
transfer, assign, sublicense, or otherwise convey his equity interest in PKI, if
such action by PKI or Xxxxxx constitutes a contradiction, violation, or breach
of any provision of the PRTLA and causes PKI or the Company, with or without,
the passage of time, giving of notice, or action by any other Person, to lose or
diminish any rights to the Rx-Technology granted or maintained under the PRTLA.
(c) Inforte Approval of Predictive Data Transactions. PKI shall not
enter into a limited liability company agreement or other formation document for
Predictive Data (collectively, "Predictive Data Agreements") without first
presenting the Predictive Data Agreements to Inforte for review and obtaining
the consent of Inforte to execute the Predictive Data Agreements, which consent
shall not be unreasonably withheld. PKI shall not cause Predictive Data to enter
into, or allow such action that would cause Predictive Data to be entered into,
any customer contracts for the provision of marketing processing services using
Rx-Technology ("Predictive Data Customer Contracts"), without first presenting
such Predictive Data Customer Contracts to Inforte for review and obtaining the
consent of Inforte to execute such Predictive Data Customer Contracts, which
consent shall not be unreasonably withheld. In connection with the foregoing,
upon the commencing of material negotiations with a prospective customer, PKI
shall notify Inforte and keep it informed with respect to any prospective
Predictive Data Agreement.
Section 15.4 Indemnifications.
(a) PKI and Xxxxxx, jointly and severally, each hereby agree to
compensate, indemnify, defend, and hold harmless Inforte and its directors,
officers, employees, and controlled and controlling persons (collectively,
"Inforte Affiliates"), from and against all claims
31
asserted against, resulting to, imposed upon, or incurred by Inforte, Inforte
Affiliates, or the Company, directly or indirectly, by reason of, arising out of
or resulting from the inaccuracy or breach of any representation, warranty or
covenant of PKI or Xxxxxx contained in or made pursuant to Article 15 of this
Agreement (regardless of whether such breach is deemed material).
(b) Inforte hereby agrees to compensate, indemnify, defend, and hold
harmless PKI and its directors, officers, employees, and controlled and
controlling persons (collectively, "PKI Affiliates"), from and against all
claims asserted against, resulting to, imposed upon, or incurred by PKI, PKI
Affiliates, or the Company, directly or indirectly, by reason of, arising out of
or resulting from the inaccuracy or breach of any representation or warranty of
Inforte contained in or made pursuant to Article 15 of this Agreement
(regardless of whether such breach is deemed material).
Section 15.5 Survival of PKI and Xxxxxx Obligations. In the event that PKI
ceases to be a Member for any reason, PKI and Xxxxxx agree that they shall
nevertheless be bound, with respect to PKI, by the provisions of Articles 3, 4,
15, and 16 and Exhibit B, and with respect to Xxxxxx, Articles 4 and 15, for the
time periods prescribed in this Agreement.
ARTICLE 16
MISCELLANEOUS
-------------
Section 16.1 Amendments. Subject to Section 8.2, amendments may be made to
this Agreement from time to time with the written consent of Holders holding not
less than a majority of the Units; provided, however, that (i) this Section 16.1
may not be amended without the consent of all Members; (ii) the obligations of
any Member may not be increased nor be diminished, without the consent of such
Member; and (iii) neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated in a manner that materially and adversely
affects a particular Member in a manner that is different from other Members,
except upon the written consent of such Member. Notwithstanding the foregoing,
the execution of a joinder or similar agreement by which a transferee of a
Member or a new Member agrees to be bound by and become a party to this
Agreement, and any change to the Unit Register made in connection therewith,
shall not be deemed an amendment.
Section 16.2 Confidentiality. Each Member agrees that such Member will
utilize Confidential Information (as defined below) solely for the purpose of
the business of the Company and will make no other use of any Confidential
Information. For the purposes of this Agreement, "Confidential Information"
means that information which is confidential and proprietary to the Company and
which derives (or may derive) economic value to the Company by not being
generally known to others, or which the Company is otherwise under an agreement
of confidentiality with an unaffiliated third party. Confidential Information
shall not include any information which was: (i) in the public domain prior to
disclosure, or thereafter comes into the public domain without breach by such
Member of any confidentiality obligation hereunder; (ii) known by such Member
prior to disclosure to such Member, provided that such information is not known
by such Member to be subject to another confidentiality agreement or other
obligation of secrecy to another party; (iii) disclosed to such Member by a
third party not known to such Member to be in violation of any confidentiality
obligation owed to the Company; or (iv)
32
information required to be disclosed by law. Each Member agrees that such Member
will maintain and preserve the confidentiality and secrecy of such Confidential
Information, including, without limitation, taking such steps to preserve the
confidentiality of the Confidential Information as such Member takes to preserve
the confidentiality of such Member's own confidential information. In the event
that any Member becomes legally compelled to disclose any of the Confidential
Information, such Member shall provide the Company with prompt written notice of
such requirement so that the Company may seek a protective order or other
appropriate remedy. Each Member acknowledges and agrees that the Confidential
Information is and shall remain the property of the Company and that upon the
request of the Company, such Member shall promptly redeliver to the Company all
tangible expressions of the Confidential Information and will not retain any
copies, extracts, compilations, work product or other reproductions in whole or
in part of such Confidential Information. Notwithstanding the foregoing, the
Company, PKI, and Xxxxxx acknowledge that as a public company registered with
Securities and Exchange Commission, Inforte is subject to federal and state
securities laws and regulations that may create a legal obligation to disclose
certain information that is Confidential Information under this Agreement.
Disclosure of Confidential Information, including the existence and terms of
this Agreement, pursuant to securities laws will not constitute a breach of this
Agreement.
Section 16.3 Start-Up Expenses. Start-up expenses related to the Company
incurred by PKI and Inforte, including, but not limited to, costs of formation,
trade name search, and reasonable attorneys' fees in connection with the
drafting of agreements related to the organization and operation of the Company,
shall be paid by the Company.
Section 16.4 Notices and Addresses. All notices required to be given under
this Agreement shall be in writing and may be delivered by certified or
registered mail, postage prepaid, by hand, by facsimile, or by any nationally
recognized private courier. Such notices shall be mailed or delivered to the
Members at the addresses set forth on the Unit Register or such other address as
a Member may notify the Company of in writing. Any notices to be sent to the
Company shall be delivered to the principal place of business of the Company.
Notices shall be effective (i) if mailed, on the date five (5) days after the
date of mailing, or (ii) if hand delivered or delivered by private courier, on
the date of delivery.
Section 16.5 Governing Law. The validity and effectiveness of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Delaware, without giving effect to the provisions,
policies or principles of any state law relating to choice or conflict of laws.
Section 16.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Members, Assignees, and their respective legal
representatives and successors.
Section 16.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may bear the signatures of less than all the
parties, but all of which together shall constitute one instrument.
33
Section 16.8 Entire Agreement; Severability. This Agreement, together with
the Exhibits A, B, and C hereto, constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof, and no party hereto
shall be bound by any communications between them on the subject matter of this
Agreement unless in writing and bearing a date contemporaneous with or
subsequent to the date of this Agreement. Any prior written agreements shall,
upon the execution of this Agreement, be null and void. The parties agree that
if any term or provision of this Agreement contravenes or is invalid under any
federal, state or local law, court decision, rule, ordinance or regulation, this
Agreement shall, as to the jurisdiction under which such legal authority is
promulgated or rendered, be construed as if it did not contain the offending
term or provision, and the remaining provisions of this Agreement shall not be
affected thereby; provided, however, that if the removal of such offending term
or provision materially alters the burdens or benefits of any of the parties
under this Agreement, the parties agree to negotiate in good faith such
modifications to this Agreement as are appropriate to insure the burdens and
benefits of each party under such modified Agreement are reasonably comparable
to the burdens and benefits originally contemplated and expected.
Section 16.9 Captions. The captions are inserted for convenience of
reference only and shall not affect the construction of this Agreement.
Section 16.10 Statutory References. Each reference in this Agreement to a
particular statute or regulation, or a provision thereof, shall be deemed to
refer to such statute or regulation, or provision thereof, or to any similar or
superseding statute or regulation, or provision thereof, as is from time to time
in effect.
Section 16.11 Partition Action. Each party hereto irrevocably waives any
right which such party may have to maintain an action for partition with respect
to property of the Company.
Section 16.12 Waiver. The waiver by any party hereto of the breach of any
term, covenant, agreement or condition herein contained shall not be deemed a
waiver of any subsequent breach of the same or any other term, covenant,
agreement or condition herein, nor shall any custom, practice or course of
dealings arising among the parties hereto in the administration hereof be
construed as a waiver or diminution of the right of any party hereto to insist
upon the strict performance by any other party hereto of the terms, covenants,
agreements and conditions herein contained.
Section 16.13 Securities Law Provisions. The Units have not been registered
under the Federal or state securities laws of any state and, therefore, may not
be resold unless appropriate Federal and state securities laws, as well as the
provisions of Articles 11-13 hereof, have been complied with.
Section 16.14 Consents and Approval. Whenever under this Agreement the
consent or approval of any Member is required or permitted, such consent must be
evidenced by a written consent signed by such Member.
Section 16.15 Remedies Not Exclusive. Unless otherwise provided in this
Agreement, any remedy contained in this Agreement for breaches of obligations
hereunder shall not be deemed to be exclusive and shall not impair the right of
any party to exercise any other right or
34
remedy, whether for damages, injunction or otherwise. Notwithstanding any
election by the a party to claim damages as a result of any breach of this
Agreement, such party may, in addition to any other remedies and damages
available, seek an injunction or other equitable relief in a court of competent
jurisdiction without the posting of bond or other security. The exercise of any
right or remedy will be without prejudice to the right to exercise any other
right or remedy provided in this Agreement, by law or in equity
Section 16.16 No Presumption Against Drafter. The parties hereto have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or if a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by all of the parties hereto
and no presumptions or burdens of proof shall arise favoring any party by virtue
of the authorship of any of the provisions of this Agreement.
Section 16.17 No Partnership Intended. The Members intend that the Company
shall be classified and treated as a partnership for federal and state income
tax purposes only and that no provision of this Agreement shall be deemed or
construed to constitute the Company a partnership (including, without
limitation, a limited partnership) or joint venture, or to constitute any Member
a partner or joint venturer of or with any other Member for purposes of section
303 of the federal Bankruptcy Code or any other purpose. No Member shall take
any action inconsistent with the intent of the parties set forth in this
Section.
Section 16.18 Independent Legal Representation. Each of the Members
acknowledges and represents that he, she or it has been advised by the other
Members to seek independent legal counsel with respect to the negotiation,
preparation and execution of this Agreement. None of the Members has been
represented by counsel to the Company.
ARTICLE 17
DEFINITIONS
-----------
Section 17.1 Definitions. In addition to the capitalized terms defined
elsewhere in this Agreement, the following capitalized terms shall have the
following respective meanings when used in this Agreement:
"Accountant" means such independent nationally recognized firm of
certified public accountants as may be selected by the Inforte; provided
however, if Inforte does not exercise both Inforte Calls within the prescribed
time periods set forth in Article 12, the certified public accountants shall be
selected by the mutual consent of PKI and Inforte.
"Act" means the Delaware Limited Liability Company Act, as such act
may be modified or amended from time to time and any successor act.
"Adjusted Capital Account" means, with respect to any Member as of the
end of any fiscal year or other period taken into account under Section 6, such
Member's Capital Account as of the end of the relevant fiscal year, after giving
effect to the following adjustments:
(1) Such Capital Account shall be increased by any amounts
which such Member is obligated to restore (pursuant to the terms of
such Member's promissory
35
note or otherwise) or is deemed to be obligated to restore pursuant to
Treasury Regulations ss. 1.704-1(b)(2)(ii)(c) or would be deemed
obligated to restore if partner loan nonrecourse deductions were
treated as nonrecourse deductions; and
(2) Such Capital Account shall be decreased by the items
described in xx.xx. 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.
"Affiliate" as applied to any specified Person means any other Person
(and all natural Persons related by blood, adoption or marriage to such other
Person), directly or indirectly, controlling, controlled by, or under direct or
indirect common control with, such specified Person. The term "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of 10% or more of the voting power (or in
the case of a Person which is not a corporation, 10% or more of the ownership
interest, beneficial or otherwise) of such Person or the power otherwise to
direct or cause the direction of the management and policies of that Person,
whether through voting, by contract or otherwise. For purposes of this
paragraph, "voting power" of any Person means the total number of votes which
may be cast by the holders of the total number of outstanding equity interests
of any class or classes of such Person in any election of directors of such
Person or individuals serving on a committee or board serving a function
comparable to that served by a board of directors of a corporation. All
directors and executive officers of a Person and all managers and members of a
governing board or committee of a Person organized as a limited liability
company shall be deemed to be Affiliates of such Person. For the avoidance of
doubt, for purposes of this Agreement, Xxxxxx shall be considered an Affiliate
of PKI.
"Assignee" means a person to whom a Membership Interest has been
assigned in accordance with the terms of this Agreement but who has not been
admitted as a Member in accordance with the terms hereof.
"Available Cash" means, as of any date, all cash held by the Company
as of such date (other than Capital Transaction Proceeds), reduced by such
reserves for future expenses, liabilities, contingencies, working capital
(excluding reserves for the repayment of Working Capital Advances), or capital
needs of the Company as are required or prudent in the reasonable judgment of
the Board of Managers.
"Board" means the Board of Managers, as set forth in Section 8.1.
"Business" means the business of marketing PKI's processing services
as described in Section 3.1(a) and exploiting and commercializing Rx-Solutions
as described in Section 3.1(b).
"Capital Account" means those capital accounts of the Members created
and maintained in accordance this Agreement.
"Capital Contribution" means with respect to any Member, the total
amount of cash and the fair market value of other property contributed to the
Company by such Member in
36
exchange for Units (less any indebtedness assumed by the Company in connection
with its acquisition of such contributed property, or to which such contributed
property is subject).
"Capital Transaction" means a sale, exchange, or other disposition of
all or substantially all of the Company's assets in connection with the
dissolution of the Company and the winding up of its business and affairs.
"Capital Transaction Proceeds" means any and all cash proceeds
received by the Company from a Capital Transaction, reduced by (i) expenses
incurred by the Company in connection with such Capital Transaction, (ii)
liabilities of the Company which are repaid out of the proceeds from such
Capital Transaction, and (iii) such reserves as the Board of Managers may
reasonably determine for contingent liabilities.
"CEO" shall have the meaning set forth in Section 9.3 hereof.
"Certificate of Formation" means the Certificate of Formation of
PROVANSIS LLC An Inforte Company, as filed with the Secretary of State of
Delaware.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Company Assets" means any and all property (including intellectual
property) and assets, whether real or personal, tangible or intangible, or
otherwise of the Company.
"Fiscal Year" shall have the meaning set forth in Section 7.1.
"GAAP" means generally accepted accounting principles, in the United
States, consistently applied.
"Holder" means a Person holding one or more Units.
"Inforte Call" shall have the meaning set forth in Section 12.2.
"Members" means those Persons who execute this Agreement or otherwise
agree to be bound hereby and are admitted to the Company as Members pursuant to
the Certificate of Formation and this Agreement, excluding any Person having the
status solely of an Assignee.
"Membership Interest" means the rights of a Member in distributions
(liquidating and otherwise); allocations of the profits, losses, gains,
deductions, and credits of the Company; any voting rights of such Member; and
any other rights granted to such Member pursuant to the Act or this Agreement by
reason of being a member of the Company.
"Net Profit" and "Net Loss" means, for each Fiscal Year, an amount
equal to the Company's taxable income or loss for such Fiscal Year, determined
in accordance with Section 703(a) of the Code, but with the following
adjustments:
37
(a) Items required to be stated separately pursuant to Section
703(a)(1) of the Code shall be included in such taxable income or loss;
(b) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profit or Net Loss
pursuant to this paragraph shall be added to such taxable income or loss;
(c) Any expenditures of the Company described in Section 705(a)(2)(B)
of the Code or treated as Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the Treasury Regulations and not otherwise taken into
account in computing Net Profits or Net Losses shall be subtracted from such
taxable income or loss;
(d) In the event book value of any Company Asset is adjusted pursuant
to this Agreement, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing Net
Profit or Net Loss;
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year;
(f) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the book value of the property disposed of
(adjusted for accumulated Depreciation with respect to such property),
notwithstanding that the adjusted tax basis of such property differs from its
book value; and
(g) To the extent that Section 1.704-1(b)(2)(iv)(m)(2) or (4) of the
Treasury Regulations requires an adjustment to the adjusted tax basis of any
Company Asset pursuant to Section 734(b) or Section 743(b) of the Code to be
taken into account in determining Capital Accounts as a result of a distribution
other than in liquidation of a Membership Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the
assets) from the disposition of the asset for purposes of computing Net Profits
or Net Losses and adjusting the Members' Capital Accounts.
"New Technology" shall have the meaning set forth in Section 3.1(b).
"Person" means any individual, corporation, governmental agency or
authority, limited liability company, partnership, trust, unincorporated
association or other entity.
"PRTLA" means that license agreement to which PKI is a party, among
others, pursuant to which PKI has the right to use Rx-Technology to process
insurance claims or applications for insurance.
"Regulations" shall have the meaning set forth in Section 6.4(h)(ii)
hereof.
"Regulatory Allocations" shall have the meaning set forth in Section
6.4(e) hereof.
38
"Rx Solutions" shall have the meaning set forth in Section 3.1(b).
"Rx Technology" means the confidential technology licensed to PKI in
the PRTLA including all upgrades, enhancements and modifications thereto as such
may be available to PKI from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Transfer" shall mean any sale, gift, bequest, assignment,
distribution, conveyance, pledge, hypothecation, encumbrance or other transfer
or disposition, whether voluntary or involuntary by operation of law or
otherwise, and whether inter vivos or testamentary.
"Treasury Regulations" means the regulations issued under the Code and
as in effect at the relevant time.
"Unit" means a Unit of Membership Interest issued pursuant to Article
2, which entitles the Holder thereof to receive the distributions of cash and
property, allocations of profits and losses, and other rights that are accorded
Holders of Units under this Agreement.
"Unit Fair Market Value" means the fair value of Units determined in
good faith by the Board (or by the Members) (the "Board Calculation"). If a
Member disagrees with the Board Calculation, the Employee Member (or such
Member's representative) may, within thirty (30) days after receipt of the Board
Calculation, deliver a notice (an "Objection Notice") to the Company setting
forth the Member's calculation of Fair Market Value. The Board (or the Members,
as applicable) and the Member shall negotiate in good faith to agree on such
Fair Market Value, but if such agreement is not reached within thirty (30) days
after the Company has received the Objection Notice, Fair Market Value shall be
determined by an appraiser selected by the Board (or the Members, as
applicable), which appraiser shall submit to the Company and the Member a report
within thirty (30) days of its engagement setting forth such determination. The
expenses of such appraiser shall be borne by the Member unless the appraiser's
valuation is more than ten (10%) greater than the Board Calculation, in which
case, the costs of the appraiser shall be borne by the Company. The
determination of such appraiser shall be final and binding upon all parties.
"Unreturned Capital" means, (i) in the case of PKI, the amount of the
Capital Contributions made by PKI, reduced by the amount of the distributions
received by PKI pursuant to Section 6.1(b) or Section 5.1(b)(i), and reduced
further by the amount of the Unreturned Capital that is deemed transferred to
Inforte pursuant to Sections 12.1 and 12.2; and (ii) in the case of Inforte, the
amount of its Capital Contributions, increased by the amount of the Unreturned
Capital that it is deemed to acquire pursuant to Sections 12.1 and 12.2, and
reduced by the amount of the distributions received under Section 5.1(b)(i).
"Working Capital Advances" shall have the meaning as set forth in
Section 3.3.
39
Section 17.2 Other Definitional Provisions.
(a) As used herein, the singular shall include the plural, the
masculine gender shall include the feminine and neuter, and the neuter gender
shall include the masculine and feminine, unless the context otherwise requires.
(b) References in this Agreement to Articles and Sections are intended
to refer to Articles and Sections of this Agreement unless otherwise
specifically stated.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS.]
40
IN WITNESS WHEREOF, the undersigned have executed this Limited Liability
Company Agreement as of the date first above written.
THE COMPANY
PROVANSIS LLC An Inforte Company, a
Delaware limited liability company
By:
--------------------------------------------
----------------------
PRIMARY KNOWLEDGE, INC.
By:
--------------------------------------------
Xxxxx Xxxxxx, Chairman
INFORTE CORP.
By:
--------------------------------------------
Xxxxxx X. Xxxxx, Chairman
XXXXX
------------------------------------------------
Xxxxxx Xxxxx
XXXXXX
------------------------------------------------
Xxxxx Xxxxxx, solely with respect to
Articles 4 and 15
41
EXHIBIT A
UNIT REGISTER
-------------
Member Address for Notice Units Beginning Capital
Account
Issued:
PKI 0000 Xxxxxx Xxx 76,000 $7,450,980.00
Xxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx
Inforte Corp. 000 Xxxxx Xxxxxxxx Xxxxxx 19,000 $2,000,000.00
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxx
Xxxxxx Xxxxx 0000 Xxxxx Xxxxxx XX 5,000 $0.00
Xxxxx Xxxxxxx, XX 00000
EXHIBIT B
TERMS AND CONDITIONS REGARDING SERVICES,
DEVELOPMENT AND LICENSE
EXHIBIT C
TERMS AND CONDITIONS OF WORKING CAPITAL ADVANCES
o The outstanding principal balance of Working Capital Advances shall
bear interest, compounding monthly, at a per annum rate equal to the
U.S. prime rate as published in The Wall Street Journal and adjusted
from time to time.
o Upon the occurrence of an event of default (as set forth below), the
outstanding principal balance shall bear interest, compounding
monthly, at a per annum rate equal to the U.S. prime rate as published
in The Wall Street Journal and adjusted from time to time plus four
percent (4.0%).
o Upon the unanimous affirmative vote of the entire Board and notice to
Inforte and assuming no event of default (as set forth below) has
occurred and is continuing, Inforte shall advance funds to the Company
to satisfy the Company's working capital requirements.
o Use of proceeds shall be solely for the Company's working capital
requirements.
o Repayment by the Company of the outstanding balance of Working Capital
Advances and accrued interest thereon shall be paid monthly from the
Available Cash of the Company, but such repayment shall not exceed
seventy percent (70%) of Available Cash of the Company for each such
month; provided, however, that all outstanding Working Capital
Advances and accrued interest thereon shall be due and owing in their
entirety not later than the first anniversary date of the Limited
Liability Company Agreement of PROVANSIS LLC An Inforte Company, as
amended from time to time (the "Agreement"). Inforte shall have no
obligation to fund Working Capital Advances after the Company
commences generating positive cash flow on a regular basis.
o No indebtedness of the Company senior to Working Capital Advances
shall be permitted.
o Notwithstanding any other provision of the Agreement, so long as there
remains outstanding any Working Capital Advances, the Company shall
make no distribution with respect to a Member's Membership Interest in
an amount in excess of thirty percent (30%) of the Available Cash of
the Company and then only after satisfaction of the Company's
obligation set forth in Section 3.2(b) of the Agreement.
o Any of the following shall constitute an event of default: (i) the
Company fails to pay when due any amount of the Working Capital
Advances or accrued interest thereon; (ii) the Company or PKI fails to
observe or perform any term of the Agreement, including, without
limitation, the terms set forth in this Exhibit C; (iii) the Company
defaults under the terms of any agreement or instrument
relating to any debt for borrowed money such that the creditor
declares the debt due before its maturity; (iv) the Company becomes
insolvent or unable to pay its debts as they become due; (v) the
Company makes an assignment for the benefit of creditors; commences
any proceeding under any bankruptcy, reorganization, liquidation or
similar laws of any jurisdiction; or proceedings are commenced against
the Company under any bankruptcy, reorganization, liquidation or
similar laws of any jurisdiction; or (vi) there is a substantial
change in the existing or prospective financial condition of the
Company which Inforte in good faith determines to be materially
adverse.
o Upon an event of default, Inforte's obligation to provide Working
Capital Advances shall terminate and all outstanding Working Capital
Advances and accrued interest thereon shall become due immediately, at
Inforte's option.
o If the Working Capital Advances and accrued interest thereon are not
paid at maturity, whether by acceleration or otherwise, Inforte shall
have all the rights and remedies of a creditor provided by any law or
agreement.
o No delay on the part of Inforte in exercising any right or remedy
shall waive that right or remedy. No single or partial exercise by
Inforte of any right or remedy shall preclude any other future
exercise of it or the exercise of any other right or remedy. No waiver
by Inforte of any default shall be effective unless it is in writing
signed by Inforte, nor shall a waiver on one occasion bar or waive
that right on any future occasion.
o The Company shall be liable to Inforte for all reasonable costs and
expenses of every kind incurred in the collection of the Working
Capital Advances and accrued interest, including, without limitation,
attorneys' fees.
o The capitalized terms used in this Exhibit C shall have the same
meanings ascribed to them in the Agreement.
C-2
