OPERATING AGREEMENT
THIS
OPERATING AGREEMENT (hereinafter referred to as the “Agreement”) is made and
entered into as of November 5, 2008 by, between and among , LLC (“Emissary”),
Xxxx Xxxxxx, Xxxx Xxxxxx and Xxxxxx Xxx as Members of Emissary, a Delaware
limited liability company the “Company”).
WHEREAS,
the initial Members have formed Emissary Capital Group, LLC as a limited
liability company under the Laws of the State of Delaware by causing a
Certificate of Formation, conforming to the requirements of the Act (as defined
below) to be filed in the Office of the Secretary of State for the State of
Delaware.
NOW, THEREFORE, in consideration of the
mutual covenants herein contained and for other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledge, and intending to be
legally bound hereby, the parties hereby covenant, agree and certify as
follows:
ARTICLE
I
DEFINITIONS
1.1 “Act” shall mean the
Delaware Limited Liability Company Act, Chapter 18, Title 6 of the Delaware
Code.
1.2 “Agreement” shall mean
this Operating Agreement as originally executed and as amended from time to
time.
1.3 “Articles of
Organization”
shall refer to the Certificate of Formation of the Company filed on the
5th day of November, 2008, in the Office of Secretary of State of
Delaware.
1.4 “Capital
Contribution” shall mean any
contribution to the capital of the Company by a Member, whenever made, of cash,
property, services rendered, promissory note(s), or other obligation to
contribute cash or property or to perform services.
1.5 “Cash Available for
Distribution” shall mean gross cash receipts less all expenses paid on a
cash basis (including debt service) less reasonable reserves for the portion of
such cash receipts which will be committed to the business of the Company, less
reasonable reserves for amounts necessary for the satisfaction of current debts
and obligations of the Company, and less reasonable reserves for the
contingencies or other needs of the business, all as determined in the sole and
absolute discretion of the Managers.
1.6 “Cash Available for Tax
Distribution” means all cash and cash equivalents of the Company on hand
less all outstanding obligations of the Company due or to become due within
thirty (30) days.
1.7 “Code” shall refer to
the Internal Revenue Code of 1986 as it presently exists and hereafter may be
amended.
1.8 “Company” shall refer
to Emissary Capital Group, LLC, a limited liability company formed under the
laws of the State of Delaware.
1.9 “Disposition” shall refer to the sale
of all or substantially all of the assets of the Company, refinancing of the
Company property, condemnation (whether pursuant to governmental authority or
pursuant to a private right of condemnation), a casual or an involuntary
conversion.
1.10 “Initial Capital
Contributions” shall mean the initial contributions of the Initial
Members to the capital of the Company as set forth opposite the name of each
Initial Member listed on Exhibit A.
1.11 “Initial Members”
shall be the initial parties to this Agreement, whose names are set forth in the
opening paragraph hereof.
1.12 “Initial
Managers” shall be the person or
persons whose names and addresses are set forth in the Articles of Organization,
who shall serve as Managers until the first annual meeting of Members pursuant
to Article 8 hereof or until their successors are elected and
qualified.
1.13 “Managers” shall be
the Initial Managers and the person or persons from time-to-time elected
pursuant to Article 8 hereof by the Members to manage the Company.
1.14 “Members” shall be the
Initial Members and any additional or substituted Members admitted pursuant to
Article 11 hereof.
1.15 “Membership Interests”
refer to the Members' respective shares of Company Profits and Losses and the
right to receive distributions of the Company's assets. Membership
Interests may be divided into one or more classes or series, each with such
rights and preferences as may be determined by the Managers.
1.16 “Member Nonrecourse
Debt” shall
have the meaning set forth in Treasury Regulations Section
1.704-2(b)(4).
1.17 “Member Nonrecourse Debt
Minimum Gain” shall be the amount with
respect to each Member Nonrecourse Debt equal to the company minimum gain (as
defined in Section 10.1(a)(ii)) that would result if such Member Nonrecourse
Debt was treated as a nonrecourse liability determined in accordance with
Treasury Regulations Section 1.704-2(i)(3).
1.18 “Member Nonrecourse
Deductions” shall have the meaning, the amount thereof shall be, as set
forth in Treasury and the amount thereof shall be, as set forth Regulations
Section 1.704-2(i).
1.19 “Nonrecourse
Debt” shall
have the meaning set forth in Treasury Regulations Section
1.704-2(b)(3).
1.20 “Nonrecourse
Deductions” shall have the meaning,
and the amount thereof shall be, as set forth in Treasury Regulations Section
1.704-2(b)(1).
1.21 “Profits and
Losses” shall mean the net
profits or net losses of the Company as shown on its books of account after
deduction of expenses, depreciation and such other charges or additions as are
appropriate under the record keeping system and accounting principles
customarily employed by the Company and consistently applied (being initially,
the cash method of accounting for federal income tax reporting
purposes).
1.22 “Units” shall refer to the parts
into which aggregate Membership Interests shall be divided and represented in
the aggregate.
ARTICLE
II
OFFICES
The principal office of the Company
shall be at such place within or without the State of Delaware as the Managers
may determine. The Company may have such other offices, either within
or without the States of Delaware as the Managers may designate or as the
business of the Company may from time-to-time require.
ARTICLE
III
REGISTERED
OFFICE AND AGENT
The registered office of the Company in
the State of Delaware shall be located at 000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx
Xxxxxxxx 00000, and the registered agent at such address shall be National
Registered Agents, Inc.
ARTICLE
IV
TERM
The term of the Company commenced on
the date the Company’s Articles of Organization were accepted by the Delaware
Secretary of State, which also is the effective date of this
Agreement. The Company shall continue for a term of thirty (30) years
and, thereafter, shall continue in existence for such successive periods of one
(1) year each as all of the Members may agree upon by and under any appropriate
instrument, unless it shall have been otherwise dissolved as hereinafter
provided.
ARTICLE
V
INITIAL
MEMBERS
The names of the initial Members are as
set forth in the opening paragraph of this Operating Agreement.
ARTICLE
VI
RIGHTS
AND OBLIGATIONS OF MEMBERS
6.1 Liability. Each
Member's liability shall be limited as set forth in the Act and other applicable
law. No Member shall be liable for any debts or losses of the Company
beyond his or her Capital Contributions, except as provided in Article 8 hereof
and in the Act.
6.2 Business of the
Company. Except as provided in Article 7 hereof and under the
Act, a Member shall take no part in the conduct or control of the business of
the Company and shall have no right or authority to act for or to bind the
Company in any manner whatsoever.
6.3 Status of Membership
Interests. Except as is otherwise provided in this Agreement
or the Act, the Membership Interest owned by a Member shall be fully paid and
nonassessable. No Member shall have the right to withdraw or reduce
his or her Capital Contribution to the Company except as a result of the
dissolution and termination of the Company or as otherwise explicitly provided
in this Agreement. No Member shall have the right to bring an action
for partition against the Company and each Member expressly waives any such
right.
6.4 Resignation. A
Member may resign at any time by giving written notice of his or her resignation
to the Managers and remaining Members, provided that a resigning Member shall
not be entitled to the return of such Member’s capital account or any other
payment, except as may be explicitly provided in this Agreement.
ARTICLE
VII
MEETINGS
OF MEMBERS
7.1 Annual
Meetings. The annual meeting of the Members for the election
of Managers and for the transaction of such other business as may properly come
before such meeting shall be held at such time and date during the month of
April of each year (commencing with the year 2009) as the Managers shall each
year determine.
7.2 Special
Meetings. A special meeting of the Members may be called at
any time by any Manager or Managers and shall be called by the Managers upon the
written request of the holders of not less than one-tenth (1/10) of all
Membership Interests entitled to vote at the meeting, such written request to
state the purpose or purposes of the meeting and to be delivered to the
Managers.
7.3 Place of
Meetings. All meetings of the Members shall be held at the
principal office of the Company or at such other place as shall be determined
from time to time by the Managers.
7.4 Notice of
Meetings. Written notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purposes for which the
meeting is called, shall be given by or under the direction of any Manager or
the person(s) calling the meeting at least ten (10) days but not more than fifty
(50) days before the date fixed for such meeting. Notice shall be
given to each Member of record entitled to vote at such
meeting. Notice shall be delivered to each Member in person or sent
by United States mail, postage prepaid, addressed as set forth on the books of
the Company. Notice that has been mailed pursuant to this Section 7.4
shall be deemed to have been given when deposited. A waiver of such
notice, in writing, signed by the person or persons entitled to said notice,
whether before, at or after the time stated therein, shall be deemed equivalent
to such notice. Except as otherwise required by the Act, notice of
any adjourned meeting of the Members shall not be required.
7.5 Record
Date. For the purpose of determining Members entitled to
notice of and to vote at any meeting of Members or any adjournment thereof, or
entitled to receive any Cash Available for Distribution, or in order to make a
determination of Members for any other proper purpose, the Managers shall fix in
advance a date as the record date for any such determination, such date in any
case not to be more than 50 days and, in the case of a meeting of Members, not
less than 10 days prior to the date on which the particular action requiring
such determination is to be taken. If no record date is fixed in
accordance with this Section 7.5, the date on which a notice of meeting is
mailed, or on which a resolution declaring such a distribution is adopted, as
the case may be, shall be the record date for such determination of
Members. When a determination of Members entitled to vote at any
meeting has been made as provided herein, the determination shall apply to any
adjournment thereof.
7.6 Quorum. Except
as otherwise may be required by this Agreement or the Act, the presence at any
meeting, in person or by proxy, of Members holding a majority of Membership
Interests entitled to vote at the meeting shall be necessary and sufficient to
constitute a quorum for the transaction of business. In the absence
of a quorum, a majority in interest of the Members entitled to vote, present in
person or by proxy, may adjourn the meeting from time to time for a period not
to exceed sixty (60) days in any one case. If an adjournment is for
more than thirty (30) days, or if a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be delivered to each Member of
record entitled to vote at the meeting. At any such adjourned meeting
at which a quorum may be present, any business may be transacted which might
have been transacted at the meeting as originally called.
7.7 Voting. Except
as otherwise may be provided by the Act, this Agreement, or any voting agreement
among the Members, each Member, at every meeting of the Members, shall be
entitled to vote, in person or by proxy, in accordance with his or her
percentage of ownership of Membership Interests.
At all meetings of the Members at which
a quorum is present, except as otherwise may be required by statute, the
Articles of Organization, this Agreement, or any voting agreement among Members,
the affirmative vote of the holders of a majority of Membership Interests shall
be the act of the Members.
7.8 Actions by Members Without a
Meeting. Whenever the vote of Members at a meeting thereof is
required or permitted to be taken in connection with any action by any provision
of the Act, this Agreement, or the Articles of Organization, the meeting and
vote of Members may be dispensed with if all of the Members who would have been
entitled to cast the number of votes required to adopt the action if such
meeting were held shall consent in writing to such action being
taken. Actions taken pursuant to this Section 7.8 shall be effective
when the required Members entitled to vote have signed the subject consent,
unless the consent specifies a different effective date. The record
date for determining Members entitled to take action without a meeting shall be
the date the first Member signs consent.
7.9 Telephonic Meetings;
Proxies. Any meeting which may be
held under this Article 7 may be held by telephone. At all meetings
of Members, a Member may vote in person or by proxy executed in writing by the
Member or by a duly authorized attorney-in-fact. Any such proxy shall
be filed with the Managers before or at the time of the meeting.
7.10 Voting Trusts and Agreements
Among Members. Any number of Members may create a voting trust
for the purpose of voting their Membership Interests by entering into a written
agreement specifying the terms and conditions of the voting
trust. Each beneficiary of such a trust and his or her agents and
attorneys shall have the same rights to inspect the Company's books and records,
to share in the Company's Profits and Losses, and to receive distributions of
the Company's assets as has every other Member.
ARTICLE
VIII
MANAGERS
8.1 General
Powers. The business and affairs of the Company shall be
managed by the Managers, except as otherwise provided by the Act, the Articles
of Organization, or this Agreement. The Managers shall devote such
time to the business and affairs of the Company as they shall reasonably deem
necessary to properly conduct such business and affairs in accordance with this
Agreement and applicable law. It is expressly understood and agreed
that the Managers shall not be required to devote their entire business time or
business resources to the business of the Company, unless so required by the
terms of any employment or other agreement between an individual Manager and the
Company relating to the services of a Manager. Except as provided in
the Act, the Articles of Organization and any amendments thereto, or this
Agreement, each Manager shall be responsible for the management of the Company's
business and shall have all powers generally conferred by law as well as those
which are necessary, advisable or consistent in connection therewith, provided,
however, that all decisions shall be upon the affirmative vote of a majority of
the Managers, or upon the affirmative vote of both of the Managers if there
shall be only two (2) in office. Any note, contract, deed, xxxx of
sale, mortgage, lease, or other commitment purporting to bind the Company to any
action which is authorized in accordance with this Agreement shall be signed on
behalf of the Company by any Manager or by any person to whom the Managers
designate authority under an agreement, arrangement or resolution.
8.2 Limitations on Authority of
the Managers.
A. The
Managers shall not have the authority to:
(i) do
any act in contravention of this Agreement;
(ii) do
any act which would make it impossible to carry on the ordinary business of the
Company. For purposes of this Section 8.2, the sale of all or a
substantial portion of the Company's assets not in the ordinary course of
business, without the prior written approval of the holders of two-thirds of the
Membership Interests, shall be deemed to be an act making it impossible for the
Company to carry on its ordinary business;
(iii) confess
a judgment against the Company;
(iv) possess
Company property or assign the rights of the Company in specific Company
property for other than Company purposes;
(v) admit
a person as a Member except as provided in this Agreement;
(vi) continue
the business of the Company in contravention of Article 13 hereof;
(vii) combine
the Company with another entity without the prior written consent of the holders
of two-thirds of the Membership Interests; and
(viii) amend
the Articles of Organization or this Agreement without the prior written consent
of the holders of two-thirds of the Membership Interests.
B. The
Managers shall not do any of the following without the consent of the holders of
the Initial Members; if an Initial Member has assigned all or a majority of its
Membership Interest as permitted in this Agreement, for purposes of this Section
8.2.B, the consent of such member shall be deemed received upon consent of the
holders of at least eighty percent (80%) of the Membership Interests originally
held by such Initial Member:
(i) The
sale or disposition of assets of the Company having an aggregate value in excess
of twenty five percent (25%) of the net book value of all assets of the Company,
unless in the context of a determination by the Board of Managers to cease the
conduct of all business of the Company.
(ii) The
adoption of any official Business Plan or any deviation from the Business Plan
in effect from time-to-time.
(iii) Engaging
in any business outside the scope of the business purpose of the Company as
described in Section 1.8 herein.
(iv) Increasing
the authorized and/or issued share capital or issuing any new membership units
of the Company, or granting any option, warrant or other interest over, or
effecting any other reorganization of, the capital of the Company.
(v) Incurring
any indebtedness in the nature of borrowings or making any loan other than as
expressly provided for or contemplated by the Business Plan then in
effect.
8.3 Liability of
Managers. Each Manager shall discharge his, her or its duties
to the Company in good faith and with reasonable care. Unless fraud,
deceit, gross negligence, willful misconduct or a wrongful taking or other
self-dealing shall be proved in a court of competent jurisdiction, a Manager
shall not be liable or obligated to the Members for any mistake of fact or
judgment or for the doing of any act or the failure to do any act by the Manager
in conducting the business, operations and affairs of the Company which may
cause or result in any loss or damage to the Company or its Members, or for
losses by the Company or the Members. A Manager shall incur no
liability to the Company or to any of the Members as a result of engaging in any
other business or venture, except as may be specified in this Agreement, or any
employment or other agreement relating to the Manager’s provision of services to
the Company.
The Company shall indemnify any Person
(such term includes any natural person and any legal entity), 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 by reason of the fact that he is or was a
Manager, Member, officer, employee or agent of the Company or is or
was serving at the request of the Company as a manager, director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (“Indemnified Person”), against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement (subject to the
provisions below) actually and reasonably incurred by him in connection with
such action, suit or proceeding if the act or failure to act giving rise to the
claim for indemnification is not determined by a court to have constituted
fraud, bad faith, gross negligence, recklessness, willful misconduct, or breach
of this Agreement.
The Company shall not be required to
indemnify an Indemnified Person for amounts paid in settlement unless the
Company has approved the terms of such settlement.
8.4 Number and
Qualifications. The Company shall have at least two and not
more than five (5) Managers. The Board of Managers shall initially
consist of Xxxx Xxxxxx and Xxxx Xxxxxx. No change in the number of
Managers shall have the effect of shortening the term of any incumbent
Manager. Managers shall be natural persons of the age of 18 years or
older.
8.5 Election and Term of
Office. The Initial Managers shall hold office until their
respective successors are duly elected and qualified. If any Managers
are added in addition to the initial managers set forth in Section 8.4 above,
such Managers shall be elected by the affirmative vote of a majority of
Membership Interests to hold office until, the next succeeding annual
meeting. Each Manager shall hold office until his or her successor is
duly elected and qualified, unless sooner displaced. Election of
Managers need not be by ballot. Managers also may be elected or
removed at a special meeting of the Members by vote of the holders of a majority
of Membership Interests.
8.6 Compensation. Salary
or other compensation of the Managers may be fixed from time to time by the
affirmative vote of Members holding a majority of Membership Interests, and no
Manager shall be prevented from receiving such salary by reason of the fact that
he is also a Member of the Company.
8.7 Removals and
Resignations. Except as may otherwise be provided by the Act,
the Members may, at any meeting called expressly for the purpose, by a vote of
the Members owning a majority of Membership Interests entitled to vote at an
election of Managers, remove any or all Managers from office, with or without
cause. A Manager may resign at any time by giving written notice to
the Board of Managers. The resignation shall take effect immediately
upon the receipt of the notice, or at any later time specified
therein. The acceptance of such resignation shall not be necessary to
make it effective, unless the resignation by its terms requires
acceptance.
8.8 Vacancies. Any
vacancy occurring in the office of a Manager, whether by reason of an increase
in the number of Managers or otherwise, shall be filled by the affirmative vote
of the Members holding a majority of Membership Interests. A Manager
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office, unless sooner displaced.
8.9 Manager
Committees. The Managers may designate one or more committees
each consisting of one or more Managers which may, to the extent provided by the
Managers and except as otherwise may be provided by statute, exercise the powers
of the Managers in the management of the business and affairs of the
Company. The designation of any such committee and the delegation
thereto of authority shall not operate to relieve the Managers of any
responsibility imposed upon them by law. If there be more than two
members on such a committee, a majority of the members of the committee may
determine its action and may fix the time and place of its
meetings. If there be only two members, unanimity of action shall be
required. Committee action may be by way of a written consent signed
by all committee members. The Managers shall have the power at any
time to fill vacancies on committees, to discharge or abolish any such
committee, and to change the size of any such committee. Except as
otherwise prescribed by the Managers, each committee may adopt such rules and
regulations governing its proceedings, quorum, and manner of acting as it shall
deem proper and desirable.
8.10 Tax
Matters. The Managers may designate a Manager or committee of
Managers as the “Tax Matters Manager” or “Tax Matters Committee for the purpose
of determining the tax treatment of any item (“Company Items”) required to be
taken into account for the Company's taxable year under any provision of the
Code. Such Tax Matters Manager or, Committee shall be authorized to
enter into settlement agreements with the Internal Revenue Service on behalf of
all Members with respect to Company Items, and each Member (except any Member
who has filed a statement described in Code Section 6224 (c)(3)(B)) agrees to be
bound by the terms of any settlement agreement entered into by the Tax Matters
Manager or Committee on behalf of all Members. Pursuant to this
authorization, each Member who has not so filed agrees to execute such further
documents as may be necessary or desirable to cause the settlement agreement to
be binding on such Member and not to exercise any right or undertake any other
action which is inconsistent with any settlement agreement entered into by the
Tax Matters Manager or Committee on behalf of such Member. The Tax
Matters Manager or Committee shall (i) keep the Members reasonably informed as
to the status of all administrative and judicial Tax proceedings, (ii) file with
the Internal Revenue Service a request for administrative adjustment if the Tax
Matters Manager or Committee deems such to be appropriate, and (iii) file a
petition in a court of competent jurisdiction regarding any dispute with respect
to Company Items which the Tax Matters Manager or Committee deems
appropriate.
8.11 Representations and
Obligations of the Managers. The Managers shall have the sole
and exclusive control of and the management and conduct of the affairs of the
Company. The right, power and authority of the Managers to control
the affairs of the Company and to do any and all acts on behalf of the Company
shall include, subject to any specific limitations set forth in this Agreement,
without limitation, the following:
(a) subject
to Section 8.1 hereof, they will be responsible for the overall supervision and
operation of the Company's business;
(b) they
will represent the Company in all transactions and dealings with other parties
consistent with their fiduciary obligations to the Company;
(c) they
will establish and maintain checking, savings and other banking accounts on
behalf of the Company as they may deem appropriate, in accordance with Section
14.4 hereof;
(d) they
shall cause to be prepared and filed all Company federal and state tax
information returns;
(e) they
shall furnish to the Members all reasonable information and accounting of the
business of the Company on a timely basis when and if requested by any
Member;
(f) they
shall devote such time to the Company business as may be necessary to carry on
and conduct such business consistent with their fiduciary obligations to the
Company; and
(g) they
will maintain and review all books of account for all costs and expenses
incurred in connection with the business of the Company.
ARTICLE
IX
CAPITAL
CONTRIBUTIONS AND MEMBERSHIP INTERESTS
9.1 Capital Contributions of the
Members. Each
Member shall contribute to the Company's capital such cash, property or services
rendered in the percentages specified in Exhibit “A,” attached hereto and
incorporated herein by reference.
9.2 Membership Interests in the
Company. Upon the contribution by the Members of the cash,
property, or services, all as set forth on Exhibit “A,” the Members shall own,
in the aggregate, all of the Membership interests, to be allocated among them in
proportion to their respective Initial Capital Contributions.
9.3 Return of Capital
Contributions.
Except as
provided in Exhibit “A” hereto or any document provided for
therein:
(a) No
Member shall have the right to withdraw his or her Capital Contributions or
Capital Account or demand or receive the return of his or her Capital
Contributions or Capital Account or any part thereof except as otherwise
provided in this Agreement.
(b) The
Managers shall not be personally liable for the return of the Capital
Contributions or payment of the Capital Accounts of the Members if and to the
extent that any return or payment is required. Any such return or
payment shall be made solely from the assets of the Company.
(c) If
any Member shall receive the return, in whole or part, of his or her Capital
Contributions or Capital Account without violating this Agreement or the Act, he
shall nevertheless be liable to the Company, only to the extent required by the
Act, for the sum returned, together with interest thereon, to the extent
necessary to discharge the Company's liabilities to creditors who extended
credit or whose claims arose prior to such return or as otherwise provided under
applicable law.
(d) If
a Member has received the return of any part of his or her Capital Contributions
or Capital Account in violation of this Agreement or the Act, he shall be liable
to the Company as provided in the Act for the full amount of the contribution
wrongfully returned together with interest thereon.
(e) The
Company shall not pay any interest on the Capital Contribution or Capital
Account of any Member.
ARTICLE
X
ALLOCATIONS,
DISTRIBUTIONS AND CAPITAL ACCOUNTS
10.1 Allocations of Company
Items. Company income
and loss resulting from Company operations, from a Disposition, and items of
income or loss upon the dissolution of the Company will be allocated to and
among the Members as specifically provided in this Section 10.1. If
any Company property is properly reflected in the books of the Company at a
value that differs from the adjusted tax basis of such property and, as a
result, the items of income, deduction, credit, gain or loss allocable with
respect to such property based upon the value of the property on the Company's
books (the “Book Allocations”) are more or less than the items of income,
deduction, credit, gain or loss allocable with respect to such property for tax
purposes (the “Tax Allocations”), the allocations pursuant to Sections 10.1(a)
below with respect to such property shall be deemed to refer solely to the Book
Allocations, and the Tax Allocations to the Members shall be made pursuant to
Section 10.1(c)(iii) below in accordance with Code Section
704(c).
(a) All
Company items or income, gain, loss, deduction, and credit, (“Company Items”)
shall be allocated among the Members pro rata in accordance with their relative
Membership Interests subject to the following exceptions:
(i) Notwithstanding
any other provision of this Agreement, in the event any Member unexpectedly
receives an adjustment, allocation or distribution as described in subparagraphs
(4), (5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d), the terms
and provisions of which are incorporated herein by this reference, which
adjustment, allocation or distribution causes a deficit capital account balance,
such Member(s) shall, to the extent required by Treasury Regulations Sections
1.704-1 and 1.704-2, be allocated gross income or gain (or items thereof
consisting of a pro rata portion of each item of Company income, including gross
income, and gain for such year) in an amount and manner sufficient to eliminate
such deficit balance as quickly as possible. The effect of any
allocation pursuant to this Section 10.1(a)(i) shall be taken into account in
computing subsequent allocations of income, gains, losses, and deductions
pursuant to this Section 10.1, such that the net amount of any items so
allocated and the income and gain and losses and deductions (or item thereof)
allocated to each Member pursuant to this Section. 10.1, to the
extent possible, shall be equal to the net amount that would have been allocated
to each such Member pursuant to the Provisions of this Section 10.1 if such
unexpected adjustments, allocations or distributions had not
occurred.
(ii) Except
as otherwise provided in Treasury Regulations Section 1.704-2(f), to the extent
that there is a net decrease in “partnership minimum gain” (as defined in
Treasury Regulations Section l.704-2(b)(2)) and 1.704-2(d) during a taxable year
of the Company, all Members with deficit capital account balances at the end of
such year will be allocated income or gain (or items thereof) before any other
allocation is made of such items in the amount and in the proportions needed to
eliminate such deficits as quickly as possible (“Minimum Gain Chargeback”)
Minimum Gain Chargeback allocated in any taxable year shall be computed pursuant
to, allocated in accordance with, and interpreted and implemented in a manner
consistent with Treasury Regulations Section 1.704-2(f), the terms and
provisions of which are incorporated herein by this
reference. Minimum Gain Chargeback shall be computed and allocated
prior to the application of the provisions of Section 10.1(a)(i).
(iii) Notwithstanding
the provisions of this Section 10.1(a), if at the end of any taxable year (and
upon the dissolution and termination of the Company) the Members' capital
accounts are not in proportion to the respective amounts that the Members share
in cash distributions under Section 10.2, then all income and gain shall
thereafter shall be allocated in such a manner as shall cause the capital
accounts of each Member to be adjusted in proportion to the capital accounts of
all Members based on the respective amounts that the Members share in cash
distributions under Section 10.2. If such income and gain are
insufficient to bring the Members' capital accounts in proportion to the amounts
set forth in Section 10.2, then such allocations of income and gain shall be
made to those Members whose capital accounts are required to be increased to
proportionalize their capital accounts to the amounts set forth in Section 10.2,
and such allocations of income and gain shall be made pro rata among such
Members in proportion to the amount so available. After the capital
accounts of the Members have been so proportionalized to the amounts set forth
in Section 10.2, all income and gain shall be allocated pro rata among the
Members in accordance with their Membership Interests.
(iv) Except
as otherwise provided in Treasury Section 1.704-2(i)(4), notwithstanding any
other this Section, if there is a net decrease in Member Nonrecourse Debt
Minimum Gain attributable to a Member Nonrecourse Debt during any fiscal year,
each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(5) shall be specially allocated items of
income and gain for such fiscal year (and, if necessary, subsequent
fiscal years, ) in an amount equal to such Member's share of the net decrease in
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Sections 1.704 2(i)(4) and
1.704-2(j)(2).
(v) Nonrecourse
Deductions for any fiscal year shall be specially allocated among the Members in
proportion to their respective Membership Interests.
(vi) Any
Member Nonrecourse Deductions for any fiscal year shall be specially allocated
to the Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Treasury Regulations Section 1.704-1-2(i)(1).
(vii) Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of a Membership Interest by the Membership to a Member (the “Issuance
Items”) shall be allocated among the Members so that, to the extent possible,
the net amount of such Issuance Items, together with all other allocations under
this Agreement to each Member shall be equal to the net amount that would have
been allocated to each such Member if the Issuance Items had not been
realized.
(b) Upon
the permitted sale or transfer of a Membership interest the Company, the
permitted liquidation of a Membership Interest or a constructive termination of
the Company, the Company's books shall be immediately closed and the Company
Items for the period from the date the Company’s books were last closed for the
prior fiscal year preceding such event to the date of such sale, transfer, or
constructive termination (“Interim Period”) shall be computed by the
Company. All Company Items for the Interim Period shall be allocated
to such transferring Member (or to all of the Members immediately prior to any
constructive termination) and the Revaluation Adjustment (as defined in Section
10.1(c) below), if made, as of the last day of the Interim Period will be made
to such Member or Members in accordance with Section 10.1(c). As
such, the fiscal year in which the Company's books are closed shall be divided
into separate periods.
(c) Upon
a contribution of money or property (other than a de minimis amount as
determined under applicable Treasury Regulations) to the Company by a new or
existing Member as consideration for an interest in the Company, a distribution
of money or property (other than a de minimis amount as
determined under applicable Treasury Regulations) by the Company to a resigning
or continuing Member for an interest in the Company, or a constructive
termination of the Company under Code Section 708, the Company shall make a
revaluation of each item of Company property on the Company's books (the
“Revaluation Adjustment”) if required by the Treasury Regulations promulgated
under Code Section 704(b) or (ii) in the sole and absolute discretion of the
“Tax Matters Manager (or Tax Matters Committee, as the case may be) (provided
the decision to revalue each item of Company property is not in violation of the
Treasury Regulations promulgated under Code Section 704(b)), based upon the fair
market value of the property (taking into account any nonrecourse indebtedness
to which the property is subject in accordance with Code Section 7701(g)) on the
date of the Revaluation Adjustment. The Revaluation Adjustment, if
made, and all allocations of Company Items following the Revaluation Adjustment,
if made, shall be made in the following manner:
(i) The
unrealized income, gain, loss, or deduction inherent in each item of Company
property (that has not previously been allocated to the Members), including any
unrealized deduction with respect to accounts receivable, accounts payable, and
other accrued, unpaid items, shall be allocated among the Members pursuant to
Section 10.1(a) of this Agreement as if there were a taxable disposition (a
“Deemed Sale”) of such Company property for its fair market value on the date of
the Revaluation Adjustment;
(ii) Following
the Revaluation Adjustment, Book Allocations of all Company Items, including
gains, losses, or credits relating to the Company property, shall be allocated
in accordance with Section 10.1(a) of this Agreement; and
(iii) Following
a Revaluation Adjustment, Tax Allocations to a Member with respect to items of
Company property shall be made and determined so as to take into account the
variation between the adjusted tax basis and book value of the property in the
same manner as required under Code Section 704(c).
(d) For
purposes of Book Allocations, any depreciation, amortization or other cost
recovery deduction allowable for any year or other period with respect to any
item of Company property that is properly reflected on the Company's books at a
value that differs from the adjusted tax basis of such property shall be in an
amount that bears the same ratio to the fair market value of the property at the
beginning of such year or period as the depreciation, amortization, or other
cost recovery deduction for such year or period bears to the adjusted tax basis
of the property at the beginning of such year or period.
(e) If
an event occurs as described in Section 10.1(c) hereof and the capital accounts
of the Members are not adjusted as provided in such subsection, the Company
shall nonetheless allocate Company Items attributable to Company property
immediately prior to the occurrence of such event in a manner consistent with
the principles of Code Section 704(c) as described in Section 10.1(f) hereof and
in a manner reasonable calculated to avoid the potential adverse tax
consequences contemplated by the last paragraph of Treasury Regulations Section
1.704-2(d)(4), such allocations to be generally made to the Members pro rata in
accordance with their relative Membership Interests.
(f) In
accordance with Code Section 704(c) and the Treasury Regulations shall,
promulgated thereunder, income, gain, loss, with respect to any property
contributed to the Company shall, the solely, for tax purposes, be allocated
among the Members so as to take into account any variation between the adjusted
basis of such property contributed to the Company for tax purposes and its fair
market value at the time of contribution.
In the event the fair market value of
any property is adjusted pursuant to Section 10.1(c) hereof, subsequent
allocations of income, gain, loss and deduction with respect to such property
shall take into account any variation between the adjusted basis of such
property for federal income tax purposes and its fair market value in the same
manner as under Code Section 704(c) and the Treasury Regulations promulgated
thereunder.
Any elections or other decisions
relating to such allocations shall be made by the Tax Matters Manager (or Tax
Matters Committee, as the case may be) in any manner that reasonably reflects
the purpose and intention of this Agreement. Allocations pursuant to
this Section 10.1(f) are solely for purposes of federal, state, and local taxes
and shall not affect, or in any way be taken into account in computing, any
Members’ capital account or share of Profits and Losses, other items, or
distributions pursuant to any Provision of this Agreement unless required to
maintain compliance with Code Sections 704(b) or 704(c) or the Treasury
Regulations promulgated thereunder.
(g) Except
as otherwise provided herein, a Membership Interest assigned by a Member in
accordance herewith will be deemed to be held by the Member transferring his or
her Membership Interest until the date the assignment is consummated in
compliance with all the Requirements set forth in Article 11 of this
Agreement. Therefore, all Company Items (other than gain or loss from
a sale or Deemed Sale or other disposition of Company property) for a taxable
year of the Company allocable to any Membership interest which has been
transferred during such year shall be allocated between the assignor and
assignee based on the number of days during such year that each was the record
owner of such Membership Interest without regard to actual operating
results. Gain or loss from a sale or Deemed Sale or other disposition
of Company property other than in the ordinary course of the Company's business
will be allocated to the owner of the Membership Interest as of the date of such
event. Notwithstanding the provisions of this Section 10.1(g) the Tax
Matters Manager (or Tax Matters Committee., as the case may be) may elect in his
or her discretion to allocate such Company Items according to actual operating
results or, if permitted under the regulations adopted by the Secretary of the
United States Treasury under Code Section 706, in accordance with the monthly
convention, which in effect permits the allocation to the assignor of all
Company items attributable to the period preceding the 15th day of the month in
which such assignment is consummated and the allocation to the assignee of all
Company Items attributable to the period thereafter.
10.2 Distributions
(a) All
Cash Available for Distribution shall be allocated to the Members and
distributed among them pro rata in accordance with their relative Membership
Interests (subject, however, to Section 9.3, above and 10.3, below), in such
amounts as the Managers in their sole discretion may from time-to-time, and at
such times, determine to be appropriate for distribution to members and
consistent with the then applicable business plan and financial requirements of
the Company. Tax Distributions (as defined in Section 10.3) shall be
made at least one (1) day before the date that federal quarterly estimated
payments are due, and shall be made to the extent there is Cash Available for
Tax Distribution.
(b) Upon
the resignation of a Member, except as otherwise provided in this Agreement, a
resigning Member shall not be entitled to the return of such Member’s capital
contribution or capital account, or to any other payment. Unless the
resigning Member and a majority in interest of the other Members agree on the
terms of redemption of the resigning Member’s Membership Interest, the resigning
Member shall receive the amount such former Member would have
received if still a Member at the time of dissolution. No Member,
regardless of the nature of his or her contribution, has a right to demand or
receive any distribution from the Company in any form other than
cash.
(c) Notwithstanding
anything to the contrary herein contained, the net proceeds realized and
available from any Disposition (which in the case of insurance funds from a
casualty shall take into account the costs or expenditures for repair or
replacement and the requirements of any mortgage holder on the Company property)
shall be distributed in the following order of priority:
(i) to
pay any debts and liabilities of the Company;
(ii) to
establish any reserve which the Managers deem reasonably necessary to provide
for any contingent or unforeseen liabilities or obligations of the Company;
provided that, at the expiration of such period of time as the Managers deem
advisable, the remaining balance of such reserve shall be distributed, other
than “Tax Distributions” (as defined below), in the manner set forth in this
Section 10.2(b);
(iii) to
pay the Members pro rata according to their respective Membership Interests set
forth on Exhibit “A.”
10.3 Limitations on
Distributions. Company distributions, other than “Tax
Distributions” (as defined below), shall not be made to the extent that, after
giving effect to the distribution, all liabilities of the Company, other than
liabilities to Members on account of their Membership Interests, would exceed
the fair value of the Company's assets. No distributions, other than
Tax Distributions shall be made to any Member at any time there is principal,
interest or other amount outstanding. “Tax Distributions” means
quarterly distributions to each Member in an amount equal to the product of
(A) the highest marginal federal income tax rate for individuals, plus the
highest individual income tax rate of any state in which the Company’s
activities result in income taxable to a Member or a Member’s equity owners, and
(B) the Member’s allocable portion of the Company’s taxable net
income.
10.4 Capital Accounts of
Members.
(a) There
shall be established for each Member a single capital account, regardless of the
payout status of the Membership interest owned by such Member or when or how
such Member's interest in the Company is obtained, which capital account shall
be maintained and adjusted as follows: The capital account of a Member shall
first be credited with the amount of his or her Initial Capital Contribution to
the Company determined pursuant to this Agreement. Each such account
shall then be increased by such Member's additional Capital Contributions to the
Company (including the fair market value of any property contributed by such
Member to the Company (net of any liabilities securing such contributed property
that the Company is considered to assume or take subject to under Code Section
752)) and by such Member's allocable share of Company income and gain (or items
thereof), including tax exempt income and gain, unrealized income and gain
allocated upon a Revaluation Adjustment pursuant to Section 10.1(c)(i) of this
Agreement, and Book Allocations (as defined in Section 10.1 of this Agreement),
but excluding such Member's share of Tax Allocations. Each such
account shall then be decreased by: (i) such Member's allocable share of
expenditures of the Company which are not deductible (or with respect to which
the Company has not made a proper election to amortize) in computing the
Company's taxable income; (ii) such Member's allocable share of Company loss or
deduction (or items thereof) including unrealized loss or deduction allocated
upon a Revaluation Adjustment pursuant to Section 10.1(c)(i) of this Agreement
and Book Allocations, but excluding losses of the Company not
deductible in computing the Company's taxable income and Tax Allocations; and
(iii) amounts distributed to such Member pursuant to this Agreement (including
the fair market value of any property distributed to such Member by the Company)
net of any liabilities securing such distributed property that such Member is
considered to assume or take subject to pursuant to Code Section
752.
(b) The
fair market value of any property contributed to the Company, distributed by the
Company, or otherwise revalued by the Company as provided by Section 10.1(c) of
this Agreement shall be the value established by consent of the Managers, or, to
the extent counsel advises may be appropriate or necessary for income tax
reporting, the most current and independent appraisal with respect to such
property, and such determination shall be made on a property-by-property basis
at the time of such contribution, distribution, or revaluation. With
respect to a promissory note of any Member which may, at any time, be
contributed by such Member to the Company, or with respect to a promissory note
of the Company distributed by it to a Member (other than a note which is readily
tradable on an established securities market) as provided in Section 13.2(d)
hereof, such promissory note shall be deemed to have no fair market value upon
contribution, distribution, or revaluation and shall increase or decrease (as
the case may be) a Member's capital account only if and to the extent there is a
taxable disposition thereof or when and to the extent principal payments are
made thereon. In the case of a distribution to a Member of any
Company promissory note which is negotiable, the amount of the capital account
reduction of such Member shall be equal to the fair market value thereof (which
in no event shall be less than the outstanding principal balance of such note so
long as the interest rate on such note is not less than the applicable Federal
rate as determined under Code Section 1274(d) at the time of valuation) as
determined at the time of distribution of such note to such
Member. In the case of a distribution to a Member in liquidation of
his or her Membership Interest of any Company promissory note which is
negotiable, the amount of the capital account reduction of such Member shall be
equal to the fair market value thereof (which in no event shall be less than the
outstanding principal balance of such note so long as the interest rate on such
note is not less than the applicable federal rate as determined under Code
Section 1274(d) at the time of valuation) as determined at the time of
distribution of such note to such Member.
(c) If
all or a portion of a Member's interest in the Company is transferred, the
capital account of the transferring Member shall carry over to his or her
transferee except to the extent that such transfer causes a termination of the
Company under Code Section 708(b)(1)(B), in which case the Company's books shall
be closed in accordance with Section 10.1(b) hereof and the transferee's capital
account shall he adjusted in accordance with the provisions
hereof. If the Company has an election in effect under Code Section
754 to adjust the basis of the Company's property to the extent provided under
Code Section 743, or if the Company does not have such an election in effect hut
the transferee elects to adjust the bases of the Company's property under Code
Section 732, such adjustment shall not be reflected in the transferee's capital
account on the Company's books, and subsequent allocations of depreciation,
amortization, gain, or loss with respect to such Company property will disregard
the effect of such bases except to the extent otherwise permitted under the
regulations adopted by the Internal Revenue Service under such Code Sections and
Code Section 704(b). Notwithstanding the foregoing, a Member who
receives a distribution of an interest in any Company property that gives rise
to adjustment of the adjusted tax bases of any properties under Code Section 743
shall have a corresponding adjustment made to his or her capital account where a
Code Section 754 election is in effect for the taxable year in which such
distribution occurs.
10.5 Compliance with Treasury
Regulations. Notwithstanding anything to the contrary herein
contained, the foregoing provisions and other provisions of this Agreement
relating to the maintenance of capital accounts are intended to comply with
Treasury Regulations Section 1.704-1(b) and 1.704-2, and shall be interpreted
and applied in a manner consistent with such Regulations. In the
event the Tax Matters Manager (or Tax Matters Committee, as the case may be)
shall determine that it is prudent to modify the manner in which the capital
accounts, or any debits or credits thereto, are computed in order to comply with
such Regulations, the Tax Matters Manager (or Tax Matters Committee) may make
such modifications, provided that it is not likely to have a material effect on
the amounts distributable to any Member pursuant to Article 13 hereof upon the
dissolution and liquidation of the Company. The Tax Matters Manager
(or Tax Matters Committee) shall have the authority in his or her sole and
absolute discretion to make any appropriate modifications if events might
otherwise cause this Agreement not to comply with Treasury Regulations Section
1.704-1(b) and 1.704-2.
ARTICLE
XI
TRANSFER
OF A MEMBERSHIP INTEREST; ADDITIONAL MEMBERS
11.1 Assignment. No
Member shall have the right to assign, transfer, encumber or pledge (herein, for
purposes of this Article 11, “assign”) , the whole or any portion of his or her
Units of Membership Interest in the Company without the written approval of the
other Members except to permitted transferees which shall be limited to
affiliates of the Initial Members .
(a) The
effective date of an assignment of a Unit of Membership
Interest shall be the date set forth on the written instrument of
assignment.
(b) Notwithstanding
anything herein to the contrary, the Company, the Managers and the Members shall
be entitled to treat the assignor of such interest as the absolute owner thereof
in all respects and shall incur no liability for distributions of cash or other
property made in good faith to him until such time as the written assignment has
been received by and recorded on the books of the Company and all other terms
relating to such assignment under this Agreement have been complied with, and
such Assignment is otherwise effective in accordance
herewith.
(c) Except
as provided in Section 11.1(b) above, an assignee of a Member's interest in the
Company shall be entitled to receive distributions of cash or other property
from the Company attributable to the interest acquired by reason of such
assignment from and after the effective date of the assignment of such interest
to him (subject, however, to Section 9.3, above).
(d) The
division and allocation of profits, losses and Cash Available for Distribution
attributable to the Membership Interest between assignor and assignee during any
fiscal year of the Company be in accordance with the provisions of Section
10.1(d).
11.2 Right of First
Refusal. Subject to the foregoing approval requirement, in the
event that a Member, or any of their respective permitted successors and
assigns, desires to sell, transfer, assign or otherwise dispose of all or any
portion of the membership units of the Company owned by said party (the “Selling
Party”) to any third party other than an affiliated or associated company of a
Member, the Selling Party shall first obtain a bona fide written offer (the
“Outside Offer”) from a non-affiliated third party (the “Third Party”) to
purchase such membership units and, before the Selling Party may accept the
Outside Offer, the Selling Party shall offer to sell such units to the other
parties hereto in proportion to their respective ownership of membership units
at the price and upon the terms contained in the Outside Offer. The
Selling Party’s offer to the other parties shall be in writing and shall be
accompanied by a copy of the Outside Offer and the full name and address of the
Third Party. The non-selling parties shall have sixty (60) days after
receipt of the Selling Party’s written offer in which to accept the same by
delivering a written notice to that effect to the Selling Party and if a
non-selling party elects not to purchase the subject interest, the other
non-selling party shall have the right to acquire all of the Selling Party’s
interest. If the Selling Party’s offer is accepted by the non-selling
party(ies), completion of such transaction shall be at the principal offices of
the Company within ten (10) days after the Selling Party’s receipt of the
non-selling party’s notice of acceptance; at completion of such sale, the
Selling Party shall deliver to the non-selling party certificates representing
the offered units of the Company to be purchased, duly endorsed for transfer,
and free and clear of all claims, liens, encumbrances and security interest,
with full warranties of title. Upon presentment of such certificates,
the non-selling party (ies) shall pay the purchase price in accordance with the
terms and conditions of the Outside Offer or upon such other terms and
conditions as may have been agreed upon by the Selling Party and the non-selling
party.
If the Selling Party’s offer is not
accepted by any non-selling party, then the Selling Party shall be free to sell,
transfer or assign the offered membership units of the Company to the Third
Party at the price and upon the terms and conditions contained in the Outside
Offer; provided, however, that before any such transfer may be consummated, the
Selling Party shall cause the Third Party to acknowledge and agree in writing
prior to the consummation of the sale of membership units of the Company to be
bound by the terms, conditions and restrictions contained in this paragraph 9 of
this Agreement. Notwithstanding the foregoing, in the event the
Selling Party holds and proposes to sell a majority or controlling interest in
the Company, then:
(i) if
the party not selling his or its interest declines to exercise his or its right
of first refusal hereunder, said party may nonetheless be required at the
election of the Selling Party proposing to sell a majority or controlling
interest in the Company to join in such sale as to his or its entire ownership
of membership units provided that the Selling Party has negotiated an
arms-length sale of his or its entire membership interest and the party
previously electing not to sell receives the same price and other consideration
per membership unit obtained by the Selling Party; and
(ii) if
the party not previously determining to sell his or its interest declines to
exercise his or its right of first refusal to acquire the Selling Party’s
interest, such party may, at its election, require as a condition of the Selling
Party’s sale of its majority or controlling interest that the minority share
ownership interest(s) of the non-selling party(ies) be included in the subject
transaction on the same terms and conditions and at the same price and other
consideration per membership unit to be obtained by the Selling Party as a
result of the transaction.
If the membership units of the Company
so offered to the non-selling party, but not accepted by it, have not been sold,
transferred or assigned to the Third Party in accordance with the terms and
conditions of the Outside Offer within sixty (60) days after the expiration of
the offer to the non-selling party, then the restrictions provided for herein
shall again become effective with respect to such membership units of the
Company, and no sale, transfer, assignment or other disposition of such
membership units of the Company may be made thereafter without again offering
such membership units of the Company to the other party hereto in accordance
with the provisions hereof.
11.3 Substitution. No
assignee of the whole or any portion of a Member's interest in the Company shall
have the right to become a substituted Member in place of his or her assignor
unless all of the following conditions are satisfied:
(a) the
assignor and assignee execute and acknowledge a written instrument of assignment
together with such other instruments as the Managers may deem necessary or
desirable to effect the admission of the assignee as a substituted
Member;
(b) such
instrument of assignment has been delivered to, received and approved by the
Managers;
(c) the
written consent of all of the Members to such substitution has been obtained,
the granting or denial of which shall be within the sole discretion of each of
the Members; and
(d) a
transfer fee has been paid to the Company which is sufficient to cover all
reasonable expenses connected with such assignment and substitution including
attorneys' fees and recording costs.
11.4 Transferees Not Substituted
as Members. Unless an assignee has been approved as
a substitute Member by the unanimous written consent of all of the Members, the
transferee and the transferee's Membership Interest shall have no right to vote
or participate in the management of the business and affairs of the Company,
under Article 7 or otherwise, or to become a substituted Member. Such
transferee shall be entitled only to receive the share of profits or other
compensation by way of income and the return of contributions to which the
transferring Member was entitled.
11.5 Additional Conditions to
Assignment and Substitution. In addition to the conditions to
assignment and substitution set forth above, the Managers and the Company shall
not recognize any assignment or substitution of any Member for any purpose if
(a) such transfer, together with prior transfers, would result in sale or
exchange of fifty percent (50%) or more of the total interest in the Company
capital and profits within a twelve (12) month period, or (b) the Company shall
not have received, if required by the Managers, an opinion of counsel selected
by the Managers to the effect that such sale will not (i) result in termination
of the Company under applicable law, (ii) result in termination of the Company
for federal income tax purposes, (iii) change the status of the Company as a
partnership for federal income tax purposes, (iv) require the Company to have an
interim closing of the Company's books pursuant to Section 10.1(e) hereof, or (v) require
the Company to revalue its property pursuant to Section 10.1(f)
hereof.
11.6 Involuntary Assignment by
Member. In the event that a Member's Interest is taken or
disturbed by levy, foreclosure, charging order, execution or other similar
proceeding, the Company shall not dissolve but the assignee of said Membership
Interest shall be entitled to no more than to receive distributions subject to
Section 10.2 hereof, and profits and losses attributable to the Member's
Interest in the Company, in accordance with the percentages allowed under this
Agreement and in no event shall said assignee have the right to interfere with
the management or administration of the Company business or affairs or to become
a substituted Member or a Manager except as may otherwise be
provided.
11.7 Continuing Liability of
Transferor. Upon the substitution of a Member as provided in
this Article 11, the transferring Member shall be released from all liability to
the Company except as provided in the Act.
11.8 Death, Incapacity or
Dissolution of a Member.
(a) Upon
the death or adjudication of bankruptcy, insanity or incompetency of a Member
who is an individual, his or her legally authorized personal representatives
shall have all the rights of the Member for the purpose of settling or managing
his or her estate
and shall have such power as the Member possessed to make an assignment of his
or her interest in the Company in accordance with the terms hereof and to Join
with any assignee in making application to substitute such assignee as a
Member.
(b) Upon
the adjudication of bankruptcy, dissolution or other cessation to exist as a
legal entity of any Member which is not an individual, the authorized
representative of such entity, possessed of the rights of such Member for the
purpose of winding up in an orderly fashion and disposing of the business of
such entity, shall have such power as such entity possessed to make an
assignment of its interest in the Company in accordance with the terms hereof
and to join with such assignee in making application to substitute such assignee
as a Member.
11.9 Admission of New
Members. From the date of the formation of the Company, with
the unanimous and voluntary consent of the Members, any person or entity
acceptable to the Members may, subject to the terms and conditions of this
Agreement: (i) become an additional Member by the sale of new Membership
Interests for such consideration as the Members, by their unanimous vote, shall
determine, or (ii), become a substituted Member as a transferee of a Membership
Interest or any portion thereof.
11.10 Compliance with Securities
Laws. The Members hereby agree that Membership Interests shall
be nontransferable and nonassignable, except in compliance with the registration
provisions of the Act or an exemption or exemptions therefrom, in compliance
with (or exempt from) applicable state securities laws and rules and regulations
promulgated thereunder and the terms of this Agreement. Any attempted
or purported transfer or assignment in violation of the foregoing shall be void
and no effect.
ARTICLE
XII
CONFIDENTIALITY
AND INTELLECTUAL PROPERTY
12.1 Confidentiality/Intellectual
Property Rights.
(a) The
Members agree to hold in strictest confidence and not to disclose to others or
use other than for purposes of this Agreement any data, reports, writings and
communications and any other information provided to, learned by or made
available to them by the other parties in the course of this Agreement
(collectively referred to as “Information”) except as the other parties
expressly authorize in writing. The Members acknowledge that all
Information provided or learned by them in connection with this Agreement
constitutes trade secret data and/or proprietary information of great value and
agree not to use such Information for any purpose other than the objectives of
this Agreement. In the event that any party receives notice of an
attempt by anyone to obtain a court order compelling any disclosure of any
Information, such party shall immediately notify the other party.
(b) Nothing
in this section in any way restricts or impairs any party’s right to use,
disclose or otherwise deal with any Information or data which:
(i) at
the time of disclosure is generally available to the public or thereafter become
available to the public by publication or otherwise through no act of that
party;
(ii) that
party can demonstrate was within its possession prior to the time of disclosure
and was not acquired directly or indirectly from the other party or any person,
firm or corporation acting on its behalf, or
(iii) is
independently made available as a matter of right to any party by a third party
who is under no confidentiality obligation to the other
party.
(c) Member’s
obligations under this Section 12 shall terminate three (3) years after
termination of the Member’s Membership in the Company, except that with respect
to any information, etc., maintained as a trade secret, the Member’s obligations
shall continue so long as such information remains a trade secret.
ARTICLE
XIII
DISSOLUTION
AND TERMINATION OF THE COMPANY
13.1 Dissolution and
Termination. The Company shall be dissolved and/or
terminated under the Act upon the occurrence of any of the following
events:
(a) Upon
the expiration of the term of this Agreement;
(b) Upon
the written consent of the holders of two-thirds of the Membership Interests;
or
(c) Upon
the death, retirement, resignation, expulsion, bankruptcy, or dissolution of a
Member or the occurrence of any other event which terminates the continued
membership of a Member in the Company, unless there are at least two remaining
Members and the business of the Company is continued by and with the voluntary
consent of all of the remaining Members.
13.2 Distribution upon
Termination. Upon the dissolution and termination of the
Company, the Managers shall take full account of the Company's assets and
liabilities, the assets shall be liquidated (subject to Section 10.4 hereof) as
promptly as is consistent with
obtaining fair value therefor, and the proceeds therefrom, to the extent
sufficient therefor, shall be applied and distributed in the following
order:
(a) to
the payment of all creditors, other than Members, in the order of priority as
provided by the Act, except any claims of secured creditors whose obligations
will be assumed or otherwise transferred on the liquidation of the Company's
assets;
(b) to
the payment of any obligations of the Company to any Member;
(c) to
the establishment of any reserves which the Managers deem reasonably necessary
for any contingencies or unforeseen liabilities or obligations of the
Company. Such reserves shall be paid over by the Managers to an
escrow agent or shall be held for the purpose of disbursing such reserves in
payment of any of the said contingencies and, at the expiration of such period
as the Managers shall deem advisable, the balance thereof shall be distributed
in the manner and order provided in this Section 13.2; and
(d) to
the payment of all Members of their respective positive capital accounts (after
taking into account all capital account adjustments under Section 10.3 of this
Agreement during the taxable year such liquidation occurs other than any
adjustments for the liquidating distributions hereunder), including Members who
resigned and received less than the fair value of their Membership Interests at
the time of their resignation.
13.3 Allocations During
Dissolution. Throughout the dissolution and winding up of the
Company, all of the Members shall be allocated their share of Company Items,
including items of gain or loss, in accordance with Article 10 of this
Agreement. Any gain or loss from a sale or Deemed Sale or other
disposition of any Company property shall also be allocated in accordance with
Article 10 of this Agreement. The difference between the value of any
item of Company property distributed in kind and its adjusted tax basis shall be
treated as a gain or loss on the sale of such and shall be allocated to the
Members in accordance with Article 10 of This Agreement.
13.4 Distributions in
Kind. In the event a distribution of Company property in kind
is made, such property shall be either: (i) transferred and conveyed to the
Members or their assigns so as to vest in each of them, as tenants-in-common, a
percentage interest in the whole of said property equal to the percentage
interest he would have received had the aforesaid property not been distributed
in kind; or (ii) transferred and conveyed to the Members on an asset-by-asset
determination, as determined by the Managers in their sole and absolute
discretion. Notwithstanding anything to the contrary herein
contained, distributions in kind are expressly authorized to such extent as the
Managers may determine in their sole and absolute discretion and the allocation
of gain or loss in connection therewith, if any, shall be allocated in
accordance with the Provisions of Section 10.1 hereof.
13.5 Time. A
reasonable time, as determined by the Managers, not to exceed six months from
the date of an event of dissolution, shall be allowed for the orderly
liquidation of the assets of the Company and the discharge of Company
liabilities.
13.6 Statement of
Termination. The Managers shall furnish each of the Members,
at the Company's expense, with a statement which shall set forth the assets and
liabilities of the Company as of the date of complete liquidation and
distribution as herein provided. Such statement shall also schedule
the receipts and disbursements made with respect to the termination hereunder
and shall be final and binding upon all persons, except such persons who may
file a specific and detailed written protest thereof within 90 days of his or
her receipt of the statement.
13.7
Certificate of
Cancellation. Upon the completion of termination in accordance
with the terms hereof, the Company shall terminate and the Members shall
execute, acknowledge, and cause to be filed a certificate of cancellation of the
Company, whereupon the Company will cease to exist in all respects.
13.8 Liquidating
Trustee. In the event of a dissolution of the Company, the
liquidation of its assets and the discharge of its liabilities may be carried
out by a liquidating trustee or receiver who shall be a bank or trust company or
other person or firm having experience in managing, liquidating, or otherwise
handling property of the type then owned by the Company. Any such
liquidating trustee or receiver shall be designated by the
Managers. A liquidating trustee shall not be personally liable for
the debts of the Company but otherwise shall have such obligations and
authorities as are given the Managers pursuant to this Agreement or as may be
agreed upon between the Members and said liquidating
trustee.
ARTICLE
XIV
ACCOUNTING
AND REPORTS
14.1 Books and
Records. At the expense of the Company, the Managers shall
maintain records and accounts of all operations and expenditures of the
Company. In accordance with the Act, the Company shall keep at its
principal place of business the following records:
(a) A
current list of the full name and last known business, residence, or mailing
address of each Member and Manager, both past and present;
(b) A
copy of the Articles of Organization and all amendments thereto, together with
executed copies of all powers of attorney pursuant to which any amendment has
been executed;
(c) Copies
of the Company's federal, state, and local income tax returns and reports, if
any, for the three most recent years;
(d) Copies
of this Agreement, copies of any writings permitted or required with respect to
a Member's obligation to contribute cash, property or services, and copies of
any financial statements of the Company for the three most recent
years;
(e) Minutes of every annual, special,
and court-ordered meeting of the Members and/or Managers; and
(f) Any written consents obtained from
Members or Managers for actions taken without a meeting.
Such books and records shall be open
for the inspection and examination by any Member, in person or by his or her
duly authorized representative, at reasonable times at the principal office of
the Company upon at least five business days prior written notice and a showing
that the request is made in good faith and for a proper purpose.
The Company's books and records shall
be kept on the cash method of accounting for federal income tax reporting
purposes and any change in method shall be made by the Tax Matters Manager (or
Tax Matters Committee as the case may be) in its sole discretion.
14.2
Fiscal
Year. The annual accounting period of the Company shall be the
calendar year.
14.3
Returns and
Reports. The Company shall prepare or have prepared and
distribute, at the Company's expense, a completed copy of the Company's federal
information return and any similar state income tax return required by
applicable law. The Managers will use reasonable efforts to mail each
Member's Schedule K-1 (Form 1065) within one hundred (100) days of the end of
each calendar year of the Company. The Company shall also furnish to
each Member such other reports on the operation of the Company as may be
reasonably requested. Each Member shall file such state income tax
returns and make timely payment of all state taxes imposed with respect to such
Member's share of Company income.
14.4 Bank
Accounts. All funds of the Company shall be deposited in its
name in such checking and savings accounts or time certificates (or the like) as
shall be designated by the Managers. Withdrawals therefrom shall be
made upon such one or more signatures as the Managers may designate; provided,
however, that only Managers who maintain an office in the principal office of
the company may be a signatory on any bank account established by the
Company.
14.5 Federal Income Tax
Elections. All elections required or permitted to be made by
the Company under the Code shall be made by, the Tax Matters Manager (or Tax
Matters Committee, as the case may be) in his or her sole
discretion.
ARTICLE
XV
MISCELLANEOUS
15.1 Amendments. Any
amendment to this Agreement may be proposed by any Member or
Manager. A vote on a proposed amendment shall be taken within 30 days
of the date notice of the proposal is given to the Members. An
amendment shall become effective at such time as it has been approved in writing
by all of the Members entitled to vote.
15.2
15.3
Notices. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified; (b)
when sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day; (c) three (3) business days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All such communications shall be sent to the Company at
principal office, and to the Members at the address set forth on the
signature page hereto or at such other address as the Company or Member may
designate by ten (10) days advance written notice to the other parties
hereto.
15.4 Captions. Titles
or captions contained in this Agreement are inserted only as a matter of
convenience and reference, and in no way define, limit, extend, or describe the
scope of this Agreement or the intent of any provision hereof.
15.5 Usage. As
used herein, the masculine, feminine or neuter gender, and the singular or
plural numbers, shall each be deemed to include the others unless the context
clearly indicates to the contrary. “Person” or “party” shall include
a corporation, firm, partnership, proprietorship, or other form of
association.
15.6 Counterparts. This
Agreement may be executed in any number of counterparts and all of such
counterparts shall be deemed an original and for all purposes constitute one
Agreement binding on the parties hereto, notwithstanding that all parties are
not signatory to the same counterpart.
15.7 Binding
Agreement. Except as otherwise provided herein to the
contrary, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their personal representatives, successors, assigns, and legal
representatives.
15.8 Severability. If
any provision of this Agreement shall be declared invalid or unenforceable, the
remainder of this Agreement will continue in full force and effect so far as the
intent of the parties can be carried out.
15.9 Entire Agreement; Governing
Law. This Agreement, including the Exhibits hereto, contains
the entire agreement of the parties hereto. In the event any of the
terms or conditions hereof shall conflict with any of the terms or condition of
the Articles of Organization, the terms and conditions of this Agreement shall
control. All amendments, modifications, supplements or riders hereto,
if any, shall be set forth in writing executed by the parties hereto, and shall
be attached to this Agreement at the time of such execution. This
Agreement shall be governed by the laws of the State of Delaware.
15.10 Further
Action. All parties agree to execute and deliver such papers,
documents, and instruments, and perform such acts, as are necessary or
appropriate to implement or carry out the terms or intent or
hereof.
Rest
of page intentionally left blank.
IN WITNESS WHEREOF, the
undersigned have executed this Agreement effective as of the November 5,
2008.
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EMISSARY
CAPITAL GROUP, LLC
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By:
|
|
|
|
Xxxx
Xxxxxx, Managing Member
|
||
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XXXX
XXXXXX
|
|
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XXXX
XXXXXX
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XXXXXX
XXX
|
EXHIBIT
A
MEMBERS’
CAPITAL CONTRIBUTIONS
AND
PERCENTAGE INTERESTS
|
Name/Address
|
Capital
Contributions
|
Percentage
Interest
|
||||
|
Xxxx
Xxxxxx
|
Services
|
45
|
%
|
|||
|
Xxxx
Xxxxxx
|
Services
|
45
|
%
|
|||
|
Xxxx
Xxxxxx
|
Cash
|
10
|
%
|
|||
|
100
|
%
|
|||||
