___________________________________
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
xxxxxxxxxxxxxx.xxx llc
Effective as of October 31, 1998
____________________________________
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
xxxxxxxxxxxxxx.xxx llc
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") of xxxxxxxxxxxxxx.xxx llc, a Delaware limited liability company
(the "Company"), is made and entered into, effective as of 11:59 p.m. on the
31st day of October, 1998, by and among Xxxxxx & Xxxxx, Inc., a corporation
organized and existing under the laws of Delaware, with its principal place
of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("BN"), B&X.xxx
Holding Corp., a corporation organized and existing under the laws of
Delaware, with its principal place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 ("BN Holding"), Bertelsmann AG, an Aktiengesellschaft
organized and existing under the laws of Germany, with its principal place of
business at Xxxx-Xxxxxxxxxxx-Xxxxxxx 000, 00000 Xxxxxxxxx, Xxxxxxx ("BAG")
and XXX.XX Online, Inc., a corporation organized and existing under the laws
of Delaware, with its principal place of business at 0000 Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 ("USO").
WHEREAS, the Company was formed as a limited liability company pursuant
to the Delaware Limited Liability Company Law (6 Del. C. Section 18-101, et
seq., as it may be amended from time to time, or any successor statute (the
"LLCL")) by the filing of a Certificate of Formation with the Office of the
Secretary of State of the State of Delaware on October 27, 1998;
WHEREAS, xxxxxxxxxxxxxx.xxx inc., a wholly-owned subsidiary of BN, has,
as of October 31, 1998: (i) contributed to the Company all of its assets
(except its interests in NuvoMedia, Inc. and B&X.xxx Member Corp., a wholly-
owned subsidiary of xxxxxxxxxxxxxx.xxx inc. ("B&X.xxx Member")) and
liabilities in exchange for a one hundred percent (100%) Membership Interest
(as hereinafter defined), and (ii) transferred a one percent (1%) Membership
Interest to B&X.xxx Member ;
WHEREAS, USO has, as of the Closing Date (as defined in the Formation
Agreement), pursuant to the Formation Agreement (as hereinafter defined),
paid xxxxxxxxxxxxxx.xxx inc. (or its designee) Seventy-Five Million Dollars
($75 million) for a 21.42857% Membership Interest;
WHEREAS, USO has, as of the Closing Date, pursuant to the Formation
Agreement, made a capital contribution to the Company in exchange for an
additional 28.57143% Membership Interest, which, together with the 21.42857%
Membership Interest referred to above, has given USO an aggregate fifty
percent (50%) Membership Interest;
WHEREAS, immediately subsequent to the payments described above, but
immediately prior to the execution of this Agreement, each of
xxxxxxxxxxxxxx.xxx inc. and B&X.xxx Member has assigned all of its Membership
Interests (which together will aggregate a fifty percent (50%) Membership
Interest) to BN Holding; and
WHEREAS, the parties hereto desire to amend and restate the Limited
Liability Company Agreement (the "Original Agreement") of the Company, dated
as of October 27, 1998, to provide for the admission of USO as a Member and
to establish herein the respective rights and obligations of BN Holding and
USO with respect to the Company.
NOW, THEREFORE, in consideration of the conditions and provisions con-
tained herein, BN Holding and USO hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 DEFINITIONS. The following terms shall, for the purposes of this
Agreement and the Schedules and Exhibits hereto, have the following meanings
(terms defined in the singular or the plural include the plural or the
singular, as the case may be):
"Affiliate" of any Person shall mean any other Person that, directly or
indirectly, controls, is under common control with or is controlled by that
Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities or by contract or otherwise. In the case of BOL, the term
"Affiliates" shall include all Persons in which BOL directly or indirectly
owns an equity interest to the extent such Person operates under the name BOL
(or a derivative thereof) provided that no Restricted Transferee owns any
equity interest therein.
"Bankruptcy" of a Member shall mean (a) the filing by a Member of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States
Code (or corresponding provisions of future laws) or any other federal,
foreign or state insolvency law, or a Member's filing of an answer consenting
to or acquiescing in any such petition; (b) the making by a Member of any
assignment for the benefit of its creditors or the admission by a Member in
writing of its inability to pay its debts as they mature; or (c) the
expiration of 60 days after the filing of an involuntary petition under Title
11 of the United States Code (or corresponding provisions of future laws),
seeking an application for the appointment of a receiver for the assets of a
Member, or an involuntary petition seeking liquidation, reorganization,
arrangement or readjustment of its debts under any other federal, foreign or
state insolvency law, provided that the same shall not have been vacated, set
aside or stayed within such 60-day period.
"BN College" shall mean Xxxxxx & Xxxxx College Bookstores, Inc., a New
York corporation, and any successor thereto.
"BN Managers" shall mean, collectively, the Managers designated by BN
Holding pursuant to Section 3.2 (a).
"Board" or "Board of Managers" shall mean the Board of Managers defined
in Section 3.1.
"BOL" shall mean XXX.Xxxxxx, Inc., a corporation organized under the
laws of Delaware.
"Book Clubs" shall mean the business commonly known as "book clubs,"
"negative option mail-order" and "positive option mail-order" and similar
operations, which offer access to a customary and limited number of titles,
to which access is made available to the consumers by any means including
through Websites. For the avoidance of doubt, reference to such clubs or
mail order or similar operations shall include the business of acquiring
customers by direct-to-consumer methods and of selling and distributing such
products by direct marketing to customers who selected such products which
were offered at regular intervals or as special offers irrespective of the
manner by which customers are solicited or acquired.
"Business" shall mean sale, through one or more Websites, of books to
consumers (regardless of the form in which such books are delivered and
regardless of whether the form of delivery is now known or hereafter
devised), as well as videos, magazines, software or music. For the sake of
clarity, all other activities which do not directly involve consumers, as
well as the following, are excluded from the definition of "Business":
1. the retail sale of books through traditional retail stores;
2. sale of college textbooks through Websites;
3. Book Clubs regardless of the medium or means (whether now
known or hereafter devised, including through Websites) through which access
to such Book Clubs is made available to consumers;
4. mail-order operations; and
5. wholesale distribution of books.
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which federally chartered banks in the United States are open for business.
"Business Plan" shall mean a five-year business plan for the Company
setting forth a statement of projected expenses, revenue and capital
requirements of the Company over such period.
"Certificate of Formation" means the Certificate of Formation of the
Company filed on October 27, 1998 with the Secretary of State of the State of
Delaware pursuant to the LLCL, as such Certificate of Formation may be
amended or restated from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning given to that term in the first
paragraph of this Agreement.
"Distributable Cash" shall mean the excess of the Company's positive
cash flow on a consolidated basis over the Company's consolidated working
capital needs as determined in U.S. dollars in accordance with GAAP. The
Company's positive cash flow on a consolidated basis shall mean the excess of
consolidated cash receipts (excluding the proceeds of any borrowing by the
Company or any subsidiary thereof) over consolidated cash disbursements for
any given period. The Company's working capital needs shall be determined in
good faith by the Board and shall include, but not be limited to, reasonable
reserves for current and future operating expenses, debt service, business
expansion and acquisitions, contingencies and emergencies.
"Encumbrance" shall mean any mortgage, pledge, security interest, lien,
restriction on use or transfer, other than those imposed by law, voting
agreement, adverse claim or encumbrance or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or
any agreement to give, any financing statement under the Uniform Commercial
Code or similar law of any jurisdiction.
"English Language Books" shall mean books published in the English
language.
"Fiscal Year" of the Company shall mean the twelve (12) month period
ending on December 31st.
"Foreign Language Books" shall mean books published in a language other
than English.
"Formation Agreement" shall mean the Formation Agreement by and among
BN, BN Holding, USO and BAG, dated as of the date hereof.
"Fulfillment Agreements" shall mean each of the Fulfillment Agreements
between the Company and BOL (or its Affiliates), regarding the fulfillment by
the Company and BOL (or its Affiliates) of certain customer product orders to
be negotiated in good faith after the Closing Date.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time, consistently applied, with respect to the jurisdiction to
which it refers.
"Governmental Body" shall mean any domestic or foreign national, state
or municipal or other local government or multi-national body (including, but
not limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder and any corporation, partnership or other
entity directly or indirectly owned by or subject to the control of any of
the foregoing.
"Majority in Interest of the Members" means, at any time, Members owning
a majority of all of the outstanding Membership Interests in the Company.
"Member" shall mean, at any time, each of BN Holding and USO if, at such
time, they have a Membership Interest in the Company and any Person who at
such time has a Membership Interest in the Company.
"Member-Funded Debt" shall mean any non-recourse debt of the Company
which is loaned or guaranteed by any Member and/or is treated as "partner
non-recourse debt" under Section 1.704-2(b)(4) of the Treasury Regulations.
"Membership Interest" shall mean a Member's entire interest in the
Company, including (i) the Percentage Interest now or hereafter owned by it;
(ii) its share in any Net Income, Net Loss and any distributions of the
Company; and (iii) its right to participate in the management of the Company
or any other decision of the Members pursuant to this Agreement.
"Minimum Gain" shall mean an amount equal to the excess of the principal
amount of debt, for which no Member is liable ("non-recourse debt"), secured
by any property of the Company over the adjusted basis of such Property which
represents the minimum taxable gain which would be recognized by the Company
if the non-recourse debt were foreclosed upon and the property were
transferred to the creditor in satisfaction thereof, and which is referred to
as "minimum gain" in Section 1.704-1(b)(4)(iv) of the Treasury Regulations.
A Member's share of Minimum Gain shall be determined pursuant to the above-
cited Treasury Regulations.
"Name License Agreements" shall mean each of the agreements between the
Company and BOL and between the Company and BN College relating to the right
to use the trade names, trademarks and domain names associated with BOL and
"Xxxxxx and Noble," respectively.
"Net Profits" and "Net Losses" shall mean the income and loss of the
Company as determined in accordance with the accounting methods followed by
the Company for Federal income tax purposes including income exempt from tax
and described in Code Section 705(a)(1)(B), treating as deductions items of
expenditure described in, or under Treasury Regulations deemed described in,
Code Section 705(a)(2)(B) and treating as an item of gain (or loss) the
excess (deficit), if any, of the fair market value of distributed property
over (under) its book value. Depreciation, depletion, amortization, income
and gain (or loss) with respect to Company assets shall be computed with
reference to their book value rather than to their adjusted basis in the
Company.
"Percentage Interest" shall mean a Member's aggregate economic
percentage interest in the Company as set forth on Schedule I hereto as each
such percentage may be adjusted from time to time by the Members by mutual
consent or upon any Transfer by a Member in accordance with the terms of this
Agreement.
"Permitted Encumbrances" shall mean as of a particular date (i)
Encumbrances reflected in the financial statements of the Company (including
purchase money liens which are not overdue as of a particular date or which
are being contested in good faith), (ii) Encumbrances arising out of
contracts entered into in the ordinary course of the Business, (iii)
mechanics', materialmen's or similar inchoate liens relating to liabilities
not yet due and payable and (iv) liens for current taxes not yet delinquent,
to the extent the validity thereof is being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
foreclosure or enforcement of such liens and where adequate reserves are
established and maintained in accordance with GAAP.
"Person" shall mean an individual, sole proprietorship, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, mutual company, joint stock company, estate, union, employee
organization, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, or a Governmental Body.
"Prime Rate" for any period shall mean the interest rate for such period
as announced by Citibank N.A. (or its successors) at its principal office in
New York City as its base rate for loans.
"Restricted Transferee" shall mean xxxxxx.xxx, inc., Borders Group,
Inc., America Online, Inc. ("AOL"), Microsoft, Inc. or Yahoo, Inc. or any of
their respective Affiliates.
"Software Licenses" shall mean the Software License between the Company
and BOL relating to the exploitation of software owned by the Company and the
Software License between the Company and BOL relating to the exploitation of
software owned by BOL.
"Transfer" shall mean, whether directly or indirectly by merger,
operation of law or otherwise, any sale, assignment, conveyance, transfer,
donation or any other means to dispose of, or pledge, hypothecate or
otherwise encumber in any manner whatsoever, or permit or suffer any
Encumbrance of any interest in the Company (whether profits, management or
Percentage Interest).
"Transition Services Agreement" shall mean the Transition Services
Agreement, dated as of the date hereof, by and between the Company and BN.
"Treasury Regulations" means the regulations promulgated by the U.S.
Department of the Treasury under the Code.
"USO Managers" shall mean, collectively, the Managers designated by USO
pursuant to Section 3.2(a).
"Website" shall mean any interactive site or area, including any
interactive site or area located on the World Wide Web portion of the
Internet or on any commercial service or network (including services such as
AOL), which is accessed via the use of any protocols, standards or platforms
(including Internet or Internet derivative protocols, standards and
platforms) for remote access by narrowband or broadband telecommunications,
including POTS, ISDN, cable, fiber optics and hybrid CD-ROM, regardless of
whether access to such site or area is secured through cable, telephone,
satellite or otherwise and regardless of whether the same is received or
operated in conjunction with a personal computer or television, together with
any successor into which any of the foregoing may evolve.
S USAGE GENERALLY; INTERPRETATION. Whenever the context may require,
any pronoun includes the corresponding masculine, feminine and neuter forms.
All references herein to Articles and Sections shall be deemed to be
references to Articles and Sections of this Agreement unless the context
otherwise requires. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". The words
"hereof", "herein" and "hereunder" and words of similar import when used in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise expressly provided herein, any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
Except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to sections of the Code or Treasury
Regulations or is expressly prohibited or ineffective under the LLCL, this
Agreement shall govern, even when inconsistent with, or different from, the
provisions of the LLCL or any other law or rule. To the extent any provision
of this Agreement is prohibited or ineffective under the LLCL, this Agreement
shall be deemed to be amended to the least extent necessary in order to make
this Agreement effective under the LLCL. In the event the LLCL is
subsequently amended or interpreted in such a way to make any provision of
this Agreement that was formerly invalid valid, such provision shall be
considered to be valid from the effective date of such interpretation or
amendment.
II. ORGANIZATIONAL AND OTHER MATTERS; MEMBERSHIP
2.1 FORMATION; ADMISSION. The Company was formed as a limited
liability company under the provisions of the LLCL by the filing on October
27, 1998 of the Certificate of Formation with the Secretary of State of the
State of Delaware. Each of the Persons listed on Schedule I hereto, by
virtue of the execution of this Agreement, are being admitted to the Company
as a Member. The rights and liabilities of the Members shall be as provided
in the LLCL, except as is otherwise expressly provided herein. This
Agreement hereby amends and restates the Original Agreement in its entirety.
2.2 NAME. The name of the Company shall be, and the business of the
Company shall be conducted under the name of, xxxxxxxxxxxxxx.xxx llc.
2.3 BUSINESS PURPOSE/OPERATION.
(a) The purpose of the Company is to engage in the Business
and/or such other businesses as determined by the Board.
(b) The Company shall operate one or more Websites for the purpose
of selling English Language Books.
(c) As soon as reasonably practical, the Websites operated by BOL
and its Affiliates shall allow access to customers of the Company who wish to
order Foreign Language Books, and the Websites operated by the Company shall
promote (in a manner approved by the Board) the availability of Foreign
Language Books which shall be accessed through "hot links", pointers and key
word indexes which transport the customers to one or more Websites operated
by BOL or its Affiliates. BOL and its Affiliates shall be the exclusive
Website to which customers of the Company shall be allowed access with
respect to the Business through any form of links, pointers or key words for
purposes of ordering Foreign Language Books (to the extent that BOL is
capable of servicing such orders), except as may be limited by reason of
applicable laws or agreements relating to sale and distribution of books in
the country to which shipment will be made. If BOL or any of its Affiliates
is unable to provide a certain Foreign Language Book, the Company may provide
access to third-party Websites ("Alternative Site") which offers books in
such language provided that the Company shall discontinue access to such
Alternative Site, and resume BOL's exclusive Website promotion and access for
such Foreign Language Book, at such time as BOL offers books in such foreign
language. In the event that BOL expands to offer music, videos, magazines or
software in languages other than English in the future, the Company may offer
access to such Websites operated by BOL or its Affiliates in the same manner
as available with respect to books. Nothing herein shall obligate BMG Music,
a New York partnership, of which Bertelsmann Music Group, Inc. and Xxxxxx
Eurodisc, Inc. are the partners or any other Person owned directly or
indirectly by BAG which is engaged in the music business (collectively,
"BMG") to conduct business with BOL, the Company or in any manner whatsoever
affect the conduct of business by BMG through a Website.
(d) As soon as reasonably practical, the Websites operated by the
Company shall allow access to customers of BOL and its Affiliates who wish to
order English Language Books, and the Websites operated by BOL and its
Affiliates shall promote (in a manner approved by the applicable Boards) the
availability of English Language Books which shall be accessed through "hot
links", pointers and key word indexes which transport the customers to one or
more Websites operated by the Company. The Company shall be the exclusive
Website to which customers of BOL and its Affiliates shall be allowed access
with respect to the Business through any form of links, pointers or key words
for purposes of ordering English Language Books, except as may be limited by
reason of applicable laws or agreements relating to sale and distribution of
books in the country to which shipment will be made. In the event that the
Company expands to offer music, videos, magazines or software in the English
language in the future, BOL may offer access to such Websites operated by the
Company in the same manner as available with respect to books. Nothing
herein shall obligate BMG to conduct business with BOL, the Company or in any
manner whatsoever affect the conduct of business by BMG through a Website.
(e) Notwithstanding the foregoing, the parties hereto will work
together, in good faith, so that as promptly as practicable following the
Closing, each BOL Website (other than XXX.XX) shall offer its customers
access to English Language Books through two equal sized buttons, one of
which shall access XXX.XX and one of which shall access the Company. In the
case of XXX.XX, there will be a button for xxxxxxxxxxxxxx.xxx of equal size
as other BOL entities.
(f) Orders for English Language Books placed by customers of BOL
or its Affiliates who enter Websites operated by BOL or its Affiliates will
be filled by the Company through the applicable Fulfillment Agreements to be
negotiated in good faith after the Closing Date.
(g) Orders for Foreign Language Books placed by customers of the
Company who enter Websites operated by the Company will be filled by BOL or
its Affiliates through the applicable Fulfillment Agreements to be negotiated
in good faith after the Closing Date.
(h) BN or its Affiliates will provide services for the benefit of
the Company pursuant to that certain Amended and Restated Services Agreement
for BN, Amended and Restated Services Agreement for Marboro and Supply
Agreement entered into in connection herewith.
(i) In order to minimize confusion and maximize name recognition,
the Company shall agree with BOL on cobranding of trademarks and trade names
which will be used by the Company, BOL and its Affiliates, including
identifying an affiliation or a relationship between the Company and BOL on
the first screen and/or home page and for purposes of "bridging screens",
assuring seamless order processing and avoiding confusion to the public.
(j) Either party may engage in any activity relating to
development and exploitation of content, regardless of the medium which is
used (i.e. traditional media or Websites), except that actual sale of books
on Websites will be permitted only as set forth in this Section 2.3 and
Sections 7.7, 7.8 and 7.9.
(k) Nothing herein shall affect the right of either BN, BAG or
their respective Affiliates to engage in any other business, including sale
in any manner whatsoever (including through Websites) of music, videos,
software, magazines or any other product other than books through Websites,
except as provided in Section 2.3(a) relating to Book Clubs.
(l) Notwithstanding anything to the contrary contained herein or
in any of the agreements contemplated to be executed in connection with this
Agreement, BN shall not commingle any of its (or any of its Affiliates')
funds with the funds which it (or any of its Affiliates) collects on behalf
of the Company.
(m) With respect to all existing agreements to which BN (or any of
its Affiliates) is the contracting party for the sole benefit of the Company,
and which are renewed or extended during the term of this Agreement, the
Company shall use its good faith efforts to substitute itself in place of BN
(or its applicable Affiliate) as a party to, and the sole obligor under, such
agreements.
(n) BN Holding and USO are fully aware of, have been advised and
agree that each of them and their respective Affiliates are engaged in, and
may, in the future, conduct activities, which are directly or indirectly
competitive with the Company without any benefit to the Company or its
Members, except to the extent explicitly set forth in this Agreement. Each
party hereby consents to such activity and agrees that such conduct or
competition will not, in and of itself, constitute any breach of corporate or
partnership opportunity, breach of fiduciary responsibility, conflict of
interest, or otherwise, or impose any obligation on BN Holding or USO or
their Affiliates.
2.4 OFFICES. The Company's principal office shall be located at
00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Company may have
other offices at such other places within or without the State of New York as
the Board (as hereinafter defined) from time to time may select.
2.5 TERM. The Company commenced on the date of the filing of the
Certificate of Formation, and the term of the Company shall continue until
the close of business on January 31, 2049, subject to extension under Section
9.1(a), or until the earlier dissolution of the Company in accordance with
the provisions of ARTICLE IX hereof or as otherwise provided by law.
2.6 MEMBERS. The Members of the Company as of the date of this
Agreement are BN Holding and USO. Subject to the prior written consent of
all Members, a new Person may be admitted from time to time as a Member; pro-
vided, however, that each such new Member shall execute an appropriate
supplement to this Agreement pursuant to which the new Member agrees to be
bound by the terms and conditions of this Agreement, as it may be amended
from time to time. Admission of a new Member shall not be cause for the
dissolution of the Company.
2.7 PLACE OF MEMBERS' MEETINGS. Meetings of the Members (each, a
"Members' Meeting") shall be held at the principal office of the Company, or
at such other place as the Members shall mutually agree.
2.8 MEETINGS. A Members' Meeting may be called by any Member for
any matter which is appropriate for consideration thereat. Members' Meetings
shall be held from time to time, but no fewer than once in each calendar
year. Meetings shall be chaired by the Chairman of the Board, and the
Secretary of the Meeting shall be appointed by the Chairman.
2.9 TELEPHONIC MEETINGS. Members' Meetings may be held through
the use of conference telephone or similar communications equipment so long
as all Persons participating in such Members' Meetings can hear one another
at the time of such Members' Meeting. Participation in a Members' Meeting
via conference telephone or similar communications equipment in accordance
with the preceding sentence constitutes presence in person at the Members'
Meeting.
2.10 NOTICE OF MEETINGS. Written notice of each Members' Meeting
shall state the place, date and hour of such Members' Meeting, and the
general nature of the business to be transacted. Notice shall be given in
the manner prescribed in Section 11.2 hereof not fewer than ten (10) days nor
more than sixty (60) days before the date thereof.
2.11 WAIVERS. Notice of a Members' Meeting need not be given to
any Member who signs a waiver of notice, in person or by proxy, whether
before or after the Members' Meeting. The attendance of any Member at a
Members' Meeting, in person or by proxy, without protesting prior to the
conclusion of such Members' Meeting the lack of notice of such Members'
Meeting, shall constitute a waiver of notice by such Member, provided that
such Member has been given an adequate opportunity at the meeting to protest
such lack of notice.
2.12 QUORUM. A Majority in Interest of the Members shall
constitute a quorum at a Members' Meeting for the transaction of any
business; provided, however, that in order to constitute a quorum, each of
such Members must be represented in person or by proxy. A Majority in
Interest of the Members present may adjourn the Members' Meeting, whether or
not a quorum is present. An adjournment may include notice of the date, hour
and place that the Members shall reconvene. Notice of the adjournment (with
the new date, time and place) shall be given to all Members who were absent
at the time of the adjournment and, unless such date, hour and place are
announced at the Members' Meeting, to the other Members.
2.13 PROXIES. Every Member entitled to vote at a Members' Meeting
may authorize another Person or Persons to act for it by proxy. Every proxy
must be signed by the Member or his attorney-in-fact. No proxy shall be
valid after the expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable in writing
at the pleasure of the Member executing it.
2.14 VOTING POWER. Each Member shall be entitled to vote in
proportion to such Member's Percentage Interest.
2.15 WRITTEN CONSENT. Any action required or permitted to be
taken at any Members' Meeting may be taken without a meeting if all Members
consent thereto in writing. Any such written consents shall be filed with
the minutes of the proceedings.
ARTICLE III. BOARD OF MANAGERS; POWERS; VOTING; MEETINGS
3.1 BOARD OF MANAGERS/CHAIRMAN.
(a) The business, property and affairs of the Company shall be
managed under the direction of the Board of Managers (the "Board") consisting
of six (6) Managers (the "Managers").
(b) Without limiting the foregoing provisions of this Section 3.1,
the Managers shall have the general power to manage or cause the management
of the Company within the scope of the business purpose set forth in Section
2.3, including the following powers which may, subject to any limitations set
forth in this Agreement (including those set forth in Section 3.11(b) and
4.6), be delegated to the officers of the Company:
(i) To have developed and prepared a Business Plan each year
which will set forth the operating goals and plans for the Company;
(ii) To execute and deliver or to authorize the execution and
delivery of contracts, deeds, leases, licenses, instruments of transfer and
other documents in the ordinary course of business on behalf of the Company;
(iii) To employ, retain, consult with and dismiss such
personnel as may be required for accomplishment of the business purpose set
forth in Section 2.3, subject to the provisions of Section 3.11(b);
(iv) To establish and enforce limits of authority and internal
controls with respect to all personnel and functions;
(v) To engage attorneys, consultants and accountants for the
Company;
(vi) To develop or cause to be developed accounting procedures
for the maintenance of the Company's books of account;
(vii) To appoint auditors; and
(viii) To do all such other acts as shall be specifically
authorized in this Agreement or by the Members in writing from time to time.
(c) The Board will elect Mr. Xxxxxxx Xxxxxx as its first
Chairman. Each subsequent Chairman will be nominated by the BN Managers and
shall be elected as the Chairman of the Company by the Managers unless the
USO Managers reject such nominee for good reason. In the event that Mr.
Xxxxxxx Xxxxxx ceases to serve as the Chairman, USO agrees that it will not
reject the election of Xx. Xxxxxxx Xxxxxx as Chairman.
3.2 ELECTION AND TERM OF MANAGERS; COMMITTEE MEMBERS.
(a) (i) Each of USO and BN Holding shall be entitled to
designate three (3) Managers. Each of USO and BN Holding hereby agrees to
vote its respective Membership Interests and take whatever action may be
necessary in respect of its Membership Interest to cause the election or
removal of all such designees as contemplated by this Article III.
(ii) If either Member Transfers a percentage of its
Membership Interest which is equal to more than ten percent (10%) of the
aggregate Membership Interests in the Company to any Person (other than an
Affiliate as permitted by Section 7.2(a)), then the transferring Member will
lose the right to elect one of its three (3) Managers and the number of
Managers on the Board of Managers will be reduced to five (5) by automatic
resignation of one of the Managers designated by the transferring Member
(such resigning Manager to be selected by the transferring Member within ten
(10) days prior to the transfer). In the absence of such notice, the
nontransferring Member shall designate the resigning Manager. Upon such
reduction, the nomination rights, restrictions on nomination and election of
the Chairman and CEO (whichever is applicable with respect to the
transferring Member) and, thereafter, all other governance provisions,
including the provisions of Section 3.11(b), shall be eliminated, and all
such decisions shall be made by majority vote of the Board of Managers.
(b) Each Member who is entitled to designate a Manager or
Committee Member pursuant to Section 3.15 hereof, shall have the authority to
designate a successor to that Manager or Committee Member should such Manager
or Committee Member resign, be removed or otherwise no longer be a Manager or
Committee Member of the Company. In addition, at the request of a Member who
desires to remove a Manager or Committee Member designated by such Member and
designate a successor Manager or Committee Member, the Members agree to take
all necessary action to remove such Manager or Committee Member and appoint
the successor Manager or Committee Member.
(c) The initial Board shall be constituted as set forth on
Schedule 3.2.
3.3 VACANCIES. Vacancies occurring on the Board or any Committee
thereof, for any reason, shall be filled by the Member which appointed the
Manager whose resignation, death or removal caused such vacancy.
3.4 REMOVAL OF MANAGERS AND COMMITTEE MEMBERS. A Manager or Committee
Member may be removed at any time for any or no reason by the Member which
appointed such Manager or Committee Member.
3.5 RESIGNATION. A Manager or Committee Member may resign at any time
by giving written notice to the Members and the Company. Unless otherwise
specified in such notice or consent, the resignation shall take effect upon
receipt of such notice by all of the Members.
3.6 PLACE OF MEETINGS. Unless otherwise agreed by each of the Members
or each Committee Member in the case of a Committee Meeting (as hereinafter
defined), Meetings of the Board (each, a "Board Meeting") and any committees
thereof (each a "Committee Meeting") shall be held at the principal office of
the Company.
3.7 MEETINGS. A Board Meeting may be called by any Manager or by the
Chief Executive Officer. Board Meetings shall be held from time to time,
but no fewer than once in any calendar quarter. Committee Meetings may be
called by a member thereof, or by the Board or by the Chief Executive
Officer. Meetings shall be chaired by the Chairman of the Board, and the
Secretary of the Meeting shall be appointed by the Chairman.
3.8 TELEPHONIC MEETINGS. Board Meetings and Committee Meetings may be
held through the use of conference telephone or similar communications
equipment so long as all Persons participating in such Board Meetings and
Committee Meetings can hear one another at the time of such Board Meeting or
Committee Meeting. Participation in such Board Meeting or Committee Meeting
via conference telephone or similar communications equipment in accordance
with the preceding sentence constitutes presence in person at the Board
Meeting or Committee Meeting.
3.9 NOTICE OF MEETINGS. Written notice of each Board Meeting and
Committee Meeting shall state the place, date and hour of such Board Meeting
or Committee Meeting, and the general nature of the business to be
transacted. Notice shall be given in the manner prescribed in Section 11.2
hereof to each of the Managers and the Members at the addresses set forth
therein and, in the case of the Managers, to their addresses appearing on the
records of the Company and not fewer than ten (10) days (provided that in
case of an economic emergency, the notice period may be reduced to twenty-
four (24) hours at the request of a Member) nor more than sixty (60) days
before the date thereof.
3.10 WAIVERS. Notice of a Board Meeting need not be given to any
Manager or Committee Member who signs a waiver of notice, in person or by
proxy, whether before or after the Board Meeting or Committee Meeting. The
attendance of any Manager or Committee Member at a Board Meeting or Committee
Meeting, in person or by proxy, without protesting prior to the conclusion of
such Board Meeting or Committee Meeting the lack of notice of such Board
Meeting or Committee Meeting, shall constitute a waiver of notice by such
Manager or Committee Member, provided that such Manager or Committee Member
has been given an adequate opportunity at the meeting to protest such lack of
notice.
3.11 QUORUM; BOARD ACTION.
(a) A majority of the Managers shall constitute a quorum at a
Board Meeting for the transaction of any business. A majority of the
Managers present may adjourn the Board Meeting, whether or not a quorum is
present. An adjournment may include notice of the date, hour and place that
the Managers shall reconvene. Notice of the adjournment (with the new date,
time and place) shall be given to all Managers who were absent at the time of
the adjournment and, unless such date, hour and place are announced at the
Board Meeting, to the other Managers. Except as otherwise expressly provided
in this Agreement, the vote of a majority of the Managers present at a
meeting at which a quorum is present shall be the act of the Board, provided
that such majority must contain at least one BN Manager and one USO Manager.
The Board shall keep a written record of its proceedings.
(b) Without the prior affirmative majority vote of each of the BN
Managers and the USO Managers then in office, the Company shall not, and
shall not permit any subsidiary to, and no officer, employee or agent of the
Company or any subsidiary thereof shall, take any of the actions specified in
Schedule 3.11(b).
(c) If the Board is unable to resolve any material matter subject
to approval under Section 3.11(b), the matter shall be referred to the
Chairman and Chief Executive Officer of BN Holding and USO, respectively, for
resolution, which resolution shall be final and binding on the Members.
3.12 PROXIES. Every Manager entitled to vote at a Board Meeting or a
Committee Meeting may authorize another Manager or Managers to act for him by
proxy. Every proxy must be signed by the Manager or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven (11) months from the
date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable in writing at the pleasure of the Manager executing it.
3.13 VOTING POWER. Each Manager of record shall be entitled to one
vote.
3.14 WRITTEN CONSENT. Any action required or permitted to be taken at
any Board Meeting or Committee Meeting may be taken without a meeting if all
Managers or Committee Members consent thereto in writing. Any such written
consents shall be filed with the minutes of the proceedings of the Board or
Committee.
3.15 COMMITTEES. The Board may, by resolution passed by a majority of
the whole Board, designate two or more of their Managers to constitute
committees of the Board to hold office at the pleasure of the Board;
provided, however, that each such Committee shall have at least one member (a
"Committee Member") designated by USO and one member designated by BN
Holding. Any Person ceasing to be a Manager shall ipso facto cease to be a
member of each Committee of which they were a member. A majority of the
members of a Committee shall constitute a quorum; provided at least one
Committee Member designated by USO and one Committee Member designated by BN
Holding are present. The act of a majority of the members of a Committee
present at any meeting at which a quorum is present shall be the act of such
Committee. The members of a Committee shall act only as a Committee, and the
individual members thereof shall not have any powers as such. A Committee
may act on such matters as authorized by the Board; provided, however, a
Committee may not act on any matter requiring Board approval under Section
3.11(b).
3.16 COMPENSATION. No Manager rendering services to the Company shall
be entitled to compensation for services rendered in his capacity as a
Manager or Committee Member. Each Member shall be responsible for the
compensation and expenses of its representatives on the Board or any
Committee thereof.
ARTICLE IV. OFFICERS AND EMPLOYEES
4.1 CHIEF EXECUTIVE OFFICER; ELECTION. USO will have the right to
nominate the Chief Executive Officer of the Company for approval by the Board
of Managers. The individual nominated by USO will be elected as the Chief
Executive Officer of the Company unless the BN Managers reject a nominee for
good reason. The terms of employment of the Chief Executive Officer will be
negotiated by the Chairman and shall be subject to Board approval.
4.2 OTHER OFFICERS AND EMPLOYEES. In addition to the Chief Executive
Officer, the Board may appoint such other officers as they may from time to
time determine to be appropriate.
4.3 REMOVAL OF OFFICERS AND EMPLOYEES; RESIGNATION.
(a) Any person serving as Chief Executive Officer shall be removed
by the Board of Managers upon the request of (i) the Chairman of the Board,
due to the failure of the Chief Executive Officer to perform his duties in a
manner satisfactory to the Chairman; or (ii) the majority of the Board of
Managers, due to the failure of the Chief Executive Officer to perform his
duties in a manner satisfactory to a majority of the Board of Managers.
(b) Any person serving as any other officer or employee appointed,
hired or otherwise approved by the Board shall cease to serve in such
position upon the written notification at any time by the Board. Any officer
or employee hired by the Company without requirement of approval by the Board
may be dismissed at any time by the Chief Executive Officer.
(c) The Chief Executive Officer may resign by giving written
notice to the Board. Unless otherwise specified in such notice, the
resignation shall take effect upon the receipt of such notice by the Board,
and the acceptance of the resignation shall not be necessary to make it
effective.
4.4 DUTIES; POWERS OF CHIEF EXECUTIVE OFFICER AND CHAIRMAN.
(a) The Chief Executive Officer shall implement all orders and
resolutions of the Board. As long as the name of the Company (or the
business operated thereunder) includes the name "Xxxxxx and Xxxxx" or any
substantially similar name or derivation thereof, subject to the terms and
conditions of this Agreement, including Sections 3.11(b) and 4.6, the Chief
Executive Officer shall report to the Chairman of the Board, who will be the
representative of the Board in reviewing the day-to-day affairs of the
business of the Company. As long as the name of the Company (or the business
operated thereunder) uses the name "Xxxxxx and Noble, or any substantially
similar name or derivation thereof, the Chairman may direct the Chief
Executive Officer in accordance with the guidelines and Business Plan
established by the Board, subject to Sections 3.11(b) and 4.6.
(b) Any matters involving a contractual relationship between the
Company and any of the Members or any of their Affiliates shall either be on
the terms set forth herein, an agreement entered into pursuant to this
Agreement or on an arm's length basis and, if in excess of $50,000, such
matter shall be subject to the approval of the Board of Managers.
4.5 MANAGEMENT POLICIES
(a) The Chief Executive Officer and other officers and employees
of the Company shall develop and implement management policies consistent
with the general policies and programs established by the Board.
(b) To the extent specifically requested by the Board or the
Chairman, the Chief Executive Officer shall attend all meetings of the Board.
The Board or the Chairman may also request any other Person (including
officers and employees of the Company) to attend any meeting of the Board.
4.6 RESTRICTED ACTIVITIES. Any variance from the license agreement
relating to the name "Xxxxxx & Xxxxx", or any substantially similar name or
derivation thereof, shall require the approval of the BN Managers.
4.7 SPECIAL MANAGEMENT PROVISIONS. Notwithstanding anything to the
contrary contained in Article IV, the following actions shall at all times
be taken by the party indicated below, by or on behalf of the Company,
without the approval, consent or authorization by the other party (including
in such party's capacity as a Member) or its designees on the Board or any
Committee:
(a) Subject to Section 4.4(b), all action with respect to the
execution, delivery, or termination in accordance with the terms of any
agreement between BN Holding (or any of its Affiliates) and the Company shall
be taken solely pursuant to the direction of USO, and BN Holding shall cause
its Members to take such action by or on behalf of the Company as is directed
by USO.
(b) Subject to Section 4.4(b), all action with respect to the
execution, delivery, or termination in accordance with the terms of any
agreement between USO (or any of its Affiliates) and the Company shall be
taken solely pursuant to the direction of BN Holding, and USO shall cause its
Members to take such action by or on behalf of the Company as is directed by
BN Holding.
(c) The appointment and dismissal of the Chief Executive Officer
shall be governed by the provisions of Sections 4.1 and 4.3(a). The
appointment of the Chairman shall be governed by the provisions of Section
3.1(c).
(d) Subject to Section 4.4(b), all action with respect to matters
relating to the enforcement or waiver of any rights granted the Company under
an agreement with USO (or any of its Affiliates) shall be taken solely
pursuant to the direction of BN Holding, and USO shall cause its Members to
take such action as is directed by BN Holding.
(e) Subject to Section 4.4(b), all action with respect to matters
relating to the enforcement or waiver of any rights granted the Company under
an agreement with BN Holding (or any of its Affiliates) shall be taken solely
pursuant to the direction of USO, and BN Holding shall cause its Members to
take such action as is directed by USO.
ARTICLE V. FINANCE AND CAPITAL
5.1 CAPITAL CONTRIBUTIONS.
(a) The Members have made, on or prior to the date
hereof, capital contributions or acquired Membership Interests as specified
opposite their respective names on Schedule I hereto, including cash and
certain other assets all as set forth on Schedule I hereto.
(b) One Hundred Fifty Million shall be paid on the
Closing Date by USO to the Company as a capital contribution. Fifty Million
Dollars ($50 million) of USO's initial capital contribution shall be placed
in a segregated account of the Company (the "Reserve Account"). Withdrawals
from the Reserve Account may only be made in accordance with Section
5.3(a)(ii) and (iii). The funds in the Reserve Account shall be invested as
directed by the BN Managers in their sole discretion.
5.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as set forth in
Section 5.3, no Member shall be required or permitted to make additional
capital contributions to the Company without the consent of all of the
Members.
5.3 DRAWDOWN AND PAYMENT OF AGREED CAPITAL
CONTRIBUTIONS.
(a) (i) USO has agreed to make additional cash capital
contributions to the Company in amounts not to exceed, in the aggregate, the
sum of Fifty Million Dollars ($50 million). USO agrees that it will cause
such contribution to be made within two (2) Business Days after receipt of a
request signed by each of the Chairman and Chief Executive Officer of the
Company specifying the amount to be contributed by USO and the account to
which such amount shall be remitted. In no event shall the individual
obligation of USO under this Section 5.3 exceed, in the aggregate, the sum of
Fifty Million Dollars ($50 million).
(ii) Concurrently with any USO additional contribution
referred to in Section 5.3(a)(i), an equal amount shall be released to the
Company from the principal portion of the Reserve Account, together with
interest earned thereon as is reasonably allocable to such principal portion,
for use, in accordance with the Business Plan, as determined by the Chairman
and CEO of the Company. In the event that the principal portion of the
amount on deposit in the Reserve Account is less than the amount of such
additional USO contribution, then, in addition to releasing to the Company
the full amount of the Reserve Account, BN Holding agrees to contribute to
the Company as an additional capital contribution the amount of any such
deficiency, concurrently with such USO additional contribution.
(iii) Subject to Section 5.3(a)(ii), the remaining amount of
the principal on deposit in the Reserve Account (or any portion thereof) may
be paid to BN Holding at any time and from time to time after the six (6)
month anniversary of the date hereof if the BN Managers shall determine, in
their sole discretion, that such funds to be paid to BN Holding are no longer
needed by the Company. Any interest earned in the Reserve Account on the
principal paid to BN Holding shall be released to the Company at the time of
such payment. Unless otherwise agreed by the Managers, the amount (if any)
on deposit in the Reserve Account on January 1, 2001 shall be paid by the
Company to BN Holding on such day.
(b) In the event that a party defaults (a "Defaulting Party") for
a period of more than fifteen (15) days after notice from the Company or the
other party (the "Non-Defaulting Party") in satisfying a funding obligation
imposed on the Defaulting Party under the terms of this Agreement (regardless
of when and how such a default or failure occurs), the Non-Defaulting Party
shall be entitled, in connection with such funding obligation, to take all
necessary and available remedies to enforce the obligation of the Defaulting
Party for and on behalf of itself or the Company. Such failure to fund shall
constitute a material breach of this Agreement.
(c) The Non-Defaulting Party may, but shall not be required to,
satisfy the funding obligation of the Defaulting Party, in which case neither
party's percentage ownership interest in the Company shall change and the
Defaulting Party shall be obligated to reimburse the Non-Defaulting Party for
all amounts so funded together with interest thereon (at the rate provided
for herein) to the date of repayment.
(d) During the fifteen (15) day period described in Section 5.3(b)
and such longer period until the Defaulting Party cures said default or the
Non-Defaulting Party effectuates the remedies described in Section 5.3(b), as
applicable, the funding which is not made shall bear interest at five
percent (5%) over the Prime Rate and such interest shall be paid by the
Defaulting Party to the Company or the Non-Defaulting Party upon demand. In
the event that such interest rate is in excess of the legally permissible
rate of interest in New York, the rate of interest applicable under this
Section 5.3(d) shall be the highest rate allowed by New York State law.
(e) A Defaulting Party shall remain fully liable to the Company,
in proportion to its interest in the Company, for further funding obligations
to be made by the parties following such failure to fund pursuant to this
Agreement.
(f) This Section 5.3 provides a specific remedy only with respect
to funding obligations imposed pursuant to the terms and conditions of this
Agreement.
(g) Subject to Section 4.7, in the event that a party is a
Defaulting Party under Section 5.3, then, for a period which is equal to two
(2) times the period from the date on which such funding should originally
have been made to the date of cure, the right of the Defaulting Party to
grant or withhold consent to the matters requiring joint action set forth in
Sections 3.11(b) shall be suspended. Notwithstanding the foregoing, the
provisions of Sections 4.6 and 4.7 shall continue to apply in accordance with
their terms.
5.4 MEMBERS' CAPITAL ACCOUNTS. No Member shall have any right to
withdraw any portion of its Capital Account, except as otherwise provided
herein. For purposes hereof, "Capital Account" shall mean the separate
capital account maintained for each Member in accordance with Treasury
Regulations (as hereinafter defined) Section 1.704-1(b), as of any particular
date. Each Member's initial Capital Account (as determined immediately after
all of the events described in Section 5.1 hereof) is set forth on Schedule
I, which initial Capital Accounts apply the principles of Treasury Regulation
Section 1.704-1(b)(2)(iv)(d) (except as otherwise set forth therein) and
thereafter such Capital Accounts shall be adjusted as follows:
(a) The Capital Account of each Member shall be increased by:
(i) The amount of any Net Profits, allocated on or after
the date hereof to such Member;
(ii) The amount, if any, of any Company liabilities
assumed by such Member or taken subject to or in connection with the
distribution of property to such Member by the Company on or after the date
hereof;
(iii) The amount of any cash contributed by the Member to
the Company; and
(iv) The fair market value of property contributed to the
Company by such Member on or after the date hereof.
(b) The Capital Account of each Member shall be decreased by:
(i) The amount of cash distributed to such Member by the
Company on or after the date hereof;
(ii) The amount of any Net Losses allocated to such
Member on or after the date hereof;
(iii) The fair market value of any property distributed to
such Member by the Company on or after the date hereof; and
(iv) The amount of any liabilities of such Member assumed
by the Company or taken subject to or in connection with the contribution of
property by such Member to the Company on or after the date hereof.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations under Section 704(b) of the Code and, to the extent not
inconsistent with the provisions of this Agreement, shall be interpreted and
applied in a manner consistent with such Treasury Regulations.
5.5 PROFITS/LOSSES.
(a) Allocation of Income and Loss.
(i) Net Profits shall be allocated among the Members in
proportion to their Percentage Interests.
(ii) Net Losses shall be allocated among the Members in
proportion to their Percentage Interests.
(b) Tax credits, if any, shall be allocated among the Members
in proportion to their Percentage Interests.
(c) When the book value of a Company asset differs from its
basis for Federal or other income tax purposes, solely for purposes of the
relevant tax and not for purposes of computing Capital Account balances,
income, gain, loss, deduction and credit shall be allocated among the Members
under the traditional method with remedial allocations under Treasury
Regulation Section 1.704-3(d). The Members agree that, as of the date hereof,
all such differences relate to goodwill, and the corresponding remedial
allocations shall be made ratably over a fifteen (15) year period.
(d) Determinations by the Members. All matters concerning the
allocation of Net Income and Net Loss among the Members, tax elections
(except as may otherwise be required by the income tax laws) and accounting
procedures not expressly and specifically provided by the terms of this
Agreement, shall be determined in good faith by the Members, and on a basis
which is in conformity with the requirements imposed under Code Section 704
and the Treasury Regulations thereunder as equitably applied among the
Members.
(e) Interest. Except for interest payable pursuant to Member
loans permitted to be made hereunder, no interest shall be paid by the
Company on capital contributions, balances in Member's Capital Accounts or
any other funds contributed to the Company or distributed or distributable by
the Company under this Agreement.
(f) Minimum Gain Chargeback. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), if there is a net
decrease in Minimum Gain during a taxable year of the Company (including any
Minimum Gain attributable to Member-Funded Debt), each Member at the end of
such year shall be allocated, before any other allocations of Net Profits or
Net Losses for such year, items of income and gain for such year (and, if
necessary, subsequent years) in the amount and in the proportions described
in Section 1.704-2(f) of the Treasury Regulations.
(g) Qualified Income Offset. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), no allocation of an
item of loss or deduction shall be made to a Member to the extent such
allocation would cause or increase a deficit Capital Account balance in such
Member's Capital Account as of the end of the taxable year to which such
allocation relates, after taking into account any adjustment, allocation or
distribution described in Section l.704-1(b)(2)(ii)(d)(4), (5) or (6) of the
Treasury Regulations, and if any such adjustment, allocation or distribution
unexpectedly occurs, the Members shall be allocated items of income and gain
in an amount and manner to eliminate any Capital Account deficit attributable
to such adjustment, allocation or distribution as quickly as possible. For
purposes of this Section 5.5(g), there shall be excluded from a Member's
deficit Capital Account balance at the end of a taxable year of the Company
(x) such Member's share, determined in accordance with Section 704(b) of the
Code and Section 1.704-2(g) of the Treasury Regulations, of Minimum Gain
(provided that in the case of Minimum Gain attributable to Member-Funded
Debt, such Minimum Gain shall be allocated only to the Member or Members to
which such debt is attributable pursuant to Section 1.704-2(i) of the
Treasury Regulations); (y) the amount of any loans (other than Member-Funded
Debt) for which such Member is personally liable (whether as a result of a
guarantee or otherwise); and (z) the amount such Member is obligated to
restore to the Company under Section 1.704-l(b)(2)(ii) of the Treasury
Regulations.
(h) Member-Funded Debt. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), if there is a net
increase in Minimum Gain during a taxable year of the Company that is
attributable to Member-Funded Debt then, first depreciation, to the extent
the increase in such Minimum Gain is allocable to depreciable property, and
then a proportionate part of other deductions and expenditures described in
Section 705(a)(2)(B) of the Code, shall be allocated to the lending or
guaranteeing Member, provided that, the total amount of deductions so
allocated for any year shall not exceed the increase in Minimum Gain
attributable to such Member-Funded Debt in such year.
(i) Regulatory Allocations. The allocations set forth in
Sections 5.4(f), (g) and (h) (the "Regulatory Allocations") are intended to
comply with certain requirements of Section 1.704-1(b) of the Treasury
Regulations. The Regulatory Allocations shall be taken into account in
allocating other Net Profits and Net Losses so that, to the extent possible,
the net amount of such other allocations and the Regulatory Allocations to
each Member shall be equal to the net amount that would have been allocated
to such Member if the Regulatory Allocations had not been made.
(j) Special Allocations. If the remedial allocation
provisions of Section 5.5(c) or the provisions of Section 6.8(b) shall not
apply in the manner contemplated by the parties, then notwithstanding
Section 5.5(a), Net Profits and Net Losses or items of income, gain,
deduction or loss shall be allocated among the Members so that the tax
consequences are as nearly as possible identical to those tax consequences
contemplated by the parties.
5.6 BANKING; INVESTMENTS. All funds of the Company shall be deposited
in such bank account or accounts, or invested, and withdrawals from any such
bank account shall be made upon such signature or signatures, as shall be
established and designated by the Board, subject to Sections 5.1(c) and
5.3(a)(ii) and (iii).
5.7 DISTRIBUTIONS.
(a) Except as otherwise required by law or as provided in this
Agreement (including Section 5.3(a)(iii)), no Member shall have any right to
withdraw any portion of its Capital Account without the consent of all the
other Members.
(b) The Company shall, within ninety (90) days after the end
of each Fiscal Year (the "Distribution Period"), distribute Distributable
Cash as of the date of the proposed distribution, to each Member in
proportion to such Member's Percentage Interest.
5.8 RETURN OF CONTRIBUTION. Except as required by the LLCL, no Member
shall be personally liable for the return of any capital contribution, or any
portion thereof, or the return of any additions to the Capital Accounts of
the other Members, or any portion thereof, it being agreed that any return of
capital as may be made at any time, or from time to time, shall be made
solely from the assets of the Company, and only in accordance with the terms
hereof.
5.9 BUSINESS PLAN.
(a) Business Plan. The Business Plan is annexed to the
Disclosure Letter as Schedule 5.9(a) and is hereby adopted and approved by
the Members. No later than October 1st of each Fiscal Year beginning with
October 1, 2000, the Chief Executive Officer shall furnish to the Board a
Business Plan for the following Fiscal Year which shall be prepared in a
manner substantially similar to and contain the same level of detail as that
set forth in the Business Plan annexed to the Disclosure Letter. Such
Business Plan shall be subject to the review and approval of the Board. If
the Board approves any Business Plan item, the Company may make the capital
and other expenditures set forth in the Business Plan with respect to such
item, provided it has the necessary funds or can borrow such funds if
authorized by the Board in accordance with this Agreement, from third-party
lenders. A Member shall not be under any obligation to cause a vote in favor
of modifying a Business Plan once it has been adopted by the Board, it being
agreed that such decision is within the sole discretion of each Member.
(b) Other Reports. The Chief Executive Officer shall also
furnish to the Board such other reports and budgets as the Board may request
from time to time.
ARTICLE VI. ACCOUNTING; TAX MATTERS
6.1 BOOKS; FISCAL YEAR. The Company shall maintain complete and
accurate books of account of the Company's affairs at the Company's principal
place of business. Such books shall be kept in accordance with U.S. GAAP.
The Company's accounting period for tax purposes shall be the Fiscal Year.
The Company's accounting year for all other purposes shall be the Fiscal
Year, however, the Company shall also report its results for the twelve (12)
month period ended as of June 30 of each year in German GAAP.
6.2 REPORTS. The Company shall close the books of account after the
close of each month in each Fiscal Year. The Company shall prepare and
distribute to each Member a monthly statement of such Member's distributive
share of income and expense for income tax reporting purposes, as well as a
report on sales, income, expenses and other reports as are normally prepared
for USO and BN Holding and in sufficient detail to permit each of USO and BN
Holding to report its respective share of income, expense and such other GAAP
items as each of USO and BN Holding may reasonably request. Such information
shall be made available to each Member no later than fourteen (14) days after
the end of each month (provided that the Company shall have twenty-one (21)
days until June 30, 1999 and eighteen (18) days until December 31, 1999,
respectively, after each month end) and no later than August 15 of each
Fiscal Year in respect of such Fiscal Year. After the end of each Fiscal
Year, the Company shall send to each Member a report indicating such
information with respect to the Member as is necessary for purposes of
reporting such amounts for federal, state and local income tax purposes.
6.3 COMPANY INFORMATION. Upon reasonable request, the Company shall
supply to any Member information regarding the Company, its sales, receipts,
payments, all accounting information and records as well as all activities of
the Company. Each Member and its representatives shall have free access
during normal business hours to discuss the operations and business of the
Company with employees or agents of the Company, and to inspect, audit or
make copies of all books, records and other information relative to the
operations and business of the Company at their own expense; provided,
however, that each Member shall preserve the confidentiality of such
information. The Chairman of the Board of Managers or the Chief Executive
Officer shall provide all information requested by a Member.
6.4 RECORDS. The Company shall keep or cause to be kept appropriate
books and records in accordance with the LLCL with respect to the Company's
business, which books and records shall at all times be kept at the principal
office of the Company. Without limiting the foregoing, the Company shall
keep at its principal office the following:
(a) a current list of the full name and the last known street
address of each Manager and Member;
(b) a copy of the Certificate of Formation and this Agreement
and all amendments thereto;
(c) copies of the Company's federal, state and local income
tax returns and reports, if any, for the three most recent Fiscal Years;
(d) copies of any financial statements, if any, of the Company
for the six most recent Fiscal Years; and
(e) such other documents with respect to the Company's
business as may reasonably be required from time to time by Board resolution.
6.5 TAX CHARACTERIZATION. It is intended that the Company be
characterized and treated as a partnership for, and solely for, U.S. federal,
state and local income tax purposes. For such purpose, (i) the Company shall
be subject to all the provisions of Subchapter K of Chapter 1 of Subtitle A
of the Code, and (ii) all references to a "Partner," to "Partners" and to the
"Partnership" in the provisions of the Code and Treasury Regulations cited in
this Agreement shall be deemed to refer to a Member, Members and the Company,
respectively.
6.6 TAX RETURNS. The Members shall provide each other with copies of
all correspondence or summaries of other communication with any taxing
authority regarding any aspect of items of Company income, gain, loss or
deduction and no Member shall enter into settlement negotiations with respect
to the tax treatment of any Company item of income, gain, loss or deduction
without first giving reasonable advance notice of such intended action to the
other Members.
6.7 TAX MATTERS PARTNER. Pursuant to Code Section 6231(a)(7)(A), the
Board of Managers shall designate the "Tax Matters Partner" of the Company
for all purposes of the Code and any corresponding state or local statute.
Each Member consents to such designation and agrees to take such further
action as may be required, by regulation or otherwise, or as may be requested
by either Member, to effectuate such designation. The Tax Matters Partner
shall cooperate with the other Member and shall promptly provide the other
Member with copies of notices or other materials from, and inform the other
Member of discussions engaged in with, any taxing authority and shall provide
the other Member with notice of all scheduled administrative proceedings,
including meetings with agents, technical advice conferences and appellate
hearings, as soon as possible after receiving notice of the scheduling of
such proceedings. The Tax Matters Partner will schedule such proceedings
only after consulting the other Member with a view to accommodating the
reasonable convenience of both the Tax Matters Partner and the other Member.
The Tax Matters Partner shall not agree to extend the period of limitations
for assessments; file a petition or complaint in any court; file a request
for an administrative adjustment of partnership items after any return has
been filed; or enter into any settlement agreement with respect to Company
items of income, gain, loss or deduction except at the direction of the
Board. The Tax Matters Partner may request extensions to file any tax return
or statement without the written consent of, but shall so inform, the Board.
The provisions of this Agreement regarding the Company's tax returns shall
survive the termination of the Company and the transfer of either Member's
interest in the Company and shall remain in effect for the period of time
necessary to resolve any and all matters regarding the taxation of the
Company and items of Company income, gain, loss and deduction.
6.8 TAX ELECTIONS.
(a) The Board shall determine in accordance with Section
3.11(b) whether to make any available tax election.
(b) The Company shall, at the written request of BN Holding or
USO, file a written statement (the "Section 754 Election"), signed by a
Manager, setting forth (i) the name and address of the Company, (ii) a
declaration that the Company elects under Section 754 to apply the provisions
of Section 734(b) and Section 743(b) and (iii) such other information as may
be required under Treas. Reg. Section 1.754-1. The Company shall file the
Section 754 Election with its tax return for the taxable year during which
the election is to be effective. The Section 754 Election, once made, may
not be revoked without the consent of the Internal Revenue Service, and
applies to all subsequent distributions of Company property and permitted
ownership Transfers. The Company shall allocate such special basis
adjustments under Section 734(b) and Section 743(b) pursuant to Section 755.
The Members agree that a Section 754 Election shall be made with respect to
the Company's Fiscal Year which includes USO's purchase from
xxxxxxxxxxxxxx.xxx inc. of a 21.42857% Membership Interest.
(c) The Company shall pay all costs incurred by the Company in
connection with such special basis adjustments arising from such permitted
ownership Transfers or distributions, including reasonable attorneys' and
accountants' fees. In addition, both the transferor and the transferees of a
permitted ownership interest Transfer (or the transferee of any Company
distribution) shall (within sixty (60) days of such permitted Transfer or
distribution), provide the Company with complete and accurate information
regarding such Transfer (or distribution) to enable the Company to make
special basis adjustments and other computations in connection therewith.
ARTICLE VII. TRANSFERS/EXCLUSIVITY/NONCOMPETITION
7.1 PROHIBITED TRANSFERS. Except as expressly permitted in this
Agreement, no Member or any of their respective Affiliates, including any
direct or indirect beneficial owner or ultimate parent of any Member
(including BN and BAG), shall, directly or indirectly, Transfer any of the
right, title or interest in (i) any Membership Interest or (ii) any of their
Affiliates which beneficially own, either directly or indirectly, a
Membership Interest.
7.2 PERMITTED TRANSFERS. Notwithstanding anything in this Agreement to
the contrary, each Member may Transfer all (but not less than all) of the
Membership Interests owned by it and its rights under this Agreement under
any of the following circumstances:
(a) Each of USO and BN Holding may Transfer all (but not less
than all) of the Membership Interests owned by it together with its rights
under this Agreement to any transferee which is an Affiliate of the
transferring Member provided that no Restricted Transferee owns an interest
in such transferee;
(b) Each of USO and BN Holding (or any permitted transferee
under clause (a) above) may Transfer all (but not less than all) of the
Membership Interests owned by it together with its rights under this
Agreement if such Transfer is part of the Transfer (i) by BAG and its
Affiliates of all (or substantially all) of the publishing business in the
United States, operated by BAG and its Affiliates; or (ii) by BN and its
Affiliates, of all (or substantially all) of its retail book store business.
(c) In the event of any such Transfer, a transferee (or
subsequent transferee) shall be entitled to the rights and privileges set
forth in this Agreement and shall be bound and obligated by the provisions of
this Agreement. As a condition to such Transfer permitted pursuant to this
Section 7.2, each transferee shall, prior to such transfer, agree in writing
to be bound by all of the provisions of this Agreement and no such transferee
shall be permitted to make any Transfer which the original transferor was not
permitted to make. In connection with any Transfer pursuant to this Section
7.2, the transferee shall execute and deliver to the non-transferring Member
and the Company such documents as may reasonably be requested by the non-
transferring Member or the Company to evidence the same.
7.3 RIGHTS OF FIRST REFUSAL.
(a) Except with respect to Transfers permitted pursuant to
Sections 7.2, if, on or after the first anniversary after the date hereof, a
Member desires to Transfer any part of its Membership Interest to any other
Person (other than a Restricted Transferee) in a bona fide transaction solely
for cash consideration, such Member (the "Offeror") shall be entitled to do
so provided that such Offeror first offers to sell such Membership Interest
to the other Member at the same price and the same terms and conditions as
the Offeror would receive from such other Person. If the Offeror shall
Transfer a percentage of its Membership Interest which is equal to more than
ten percent (10%) of the aggregate Membership Interests in the Company, the
terms of Section 3.2(a)(ii) shall apply. The Offeror shall submit to the
Company and the other Member a written notice (the "Offer Notice") stating in
reasonable detail such price and such terms and conditions and identifying
the Person and all Persons who beneficially own more than five percent (5%)
of such Person, proposing to purchase the Membership Interest. The other
Member shall have a period of thirty (30) days after the receipt of the Offer
Notice in which to accept or reject such offer. If the other Member elects
to accept such offer, which acceptance must be for all and not part of the
Membership Interest offered for sale, it shall so indicate within such thirty
(30) day period by notice to the Offeror. The notice required to be given by
the other Member (the "Purchaser") shall specify a date for the closing of
the purchase which, subject to the expiration or early termination of any
waiting period required by any Governmental Body and the receipt of any
required approvals of any Governmental Body, shall not be more than thirty
(30) days after the date of the giving of such notice.
(b) If the other Member does not exercise its right to
purchase all of the Membership Interest offered for sale pursuant to the
provisions of this Section 7.3, the Offeror of such Membership Interest shall
have the right to sell to the Person identified in the Offer Notice, subject
to the provisions of all of such Membership Interest on the same terms and
conditions including the Membership Interest price as specified in the Offer
Notice, free from the restrictions of Section 7.1 of this Agreement (for
purposes of such specific transaction, but not for purposes of any subsequent
transaction) in a bona fide transaction, for a period of ninety (90) days
from the date that the Offer expires hereunder, provided that any such
purchaser shall, prior to such transfer, agree in writing to be bound by all
of the provisions of this Agreement. At the end of such ninety (90) day
period, the Offeror shall notify the Company and the other Member in writing
whether its Membership Interest has been sold in a bona fide transaction
during such period. To the extent not sold during such ninety (90) day
period, all of such Membership Interest shall again become subject to all of
the restrictions and provisions hereof.
(c) The purchase price per unit for the Membership Interest
shall be the price per unit offered to be paid by the prospective transferee
described in the Offer Notice, which price shall be paid in cash.
(d) The closing of the purchase shall take place at the office
of the Company or such other location as shall be mutually agreeable and the
purchase price shall be paid at the closing by wire transfer of immediately
available funds. At the closing, the Offeror shall deliver to the Purchaser
the certificates evidencing the Membership Interest to be conveyed, duly
endorsed and in negotiable form as well as the items listed in Section 7.4.
7.4 CLOSING DELIVERIES. The Offeror at a closing under this Article
VII shall deliver to the Purchaser the following:
(a) A duly executed "Deed of Transfer of Membership Interest"
in the Company conveying to the Purchaser the Membership Interest being
purchased by the Purchaser, free and clear of any Encumbrances, except those
in this Agreement which are expressly assumed.
(b) A statement from the Offeror that: (i) except as set forth
therein, the Offeror has no claim as against the Company for unpaid
dividends, compensation, bonuses, profit-sharing or rights or other claims of
whatsoever kind, nature or description and that all amounts due and payable
by the Company to the Offeror have been paid; and (ii) it shall guarantee the
performance of the Purchaser's obligations under this Agreement.
7.5 CONTINUITY OF AGREEMENTS.
(a) In the event of a permitted Transfer under Section 7.2 or
7.3 (other than a permitted transfer to an Affiliate), the parties' rights
under the fulfillment agreements with BN shall terminate on the date which is
six (6) months after the date of Transfer unless otherwise provided therein.
(b) Notwithstanding the foregoing Section 7.5(a), in the event
that (x) USO is the transferring party in a transfer subject to Section 7.3,
and has complied with Section 7.3, and (y) the Transfer is to any entity
which is a competitor of the Company and derives more than fifty percent
(50%) of its revenues from the sale of books, BN College shall have the
right, by notice given no later than ninety (90) days after the consummation
of the Transfer by USO under Section 7.3(a), to terminate the Name License
Agreement insofar as relates to the right granted to the Company to use the
name "Xxxxxx and Xxxxx" or any substantially similar name or derivation.
7.6 BN'S PURCHASE RIGHT. If BOL (or the entity operating BOL's
business, but excluding any entity operating solely within one country)
engages in an initial public offering within five (5) years after the date
hereof, then BN shall have the right, exercisable within forty-five (45) days
after notice thereof, to purchase twenty percent (20%) of BOL outside of the
offering at a purchase price equal to eighty percent (80%) of the public
offering price.
7.7 EXCLUSIVITY. Each of BN and BAG agrees that the following
provisions shall be applicable during such time as BN and BAG (directly or
indirectly through its respective Affiliates) own an interest in the Company:
(a) The Company shall be the exclusive vehicle for each of BN
and BAG (and their respective Affiliates) to engage in the Business with
respect to English Language Books, except that BAG (and its Affiliates) may
engage in the sale of English Language Books through XXX.XX in accordance
with the provisions set forth in Section 2.3(e).
(b) BN (and its Affiliates) shall not engage in the: (i) sale
of Foreign Language Books through Websites except through links to Websites
operated by BAG and its Affiliates; or (ii) establishment or operation of
Book Clubs through Websites.
(c) Notwithstanding any provision of this Agreement to the
contrary:
(i) Either BN or BAG (or its respective Affiliates) may
engage in any activity described in clauses (1), (2), (4) (provided that
Websites may only be used for e-mail purposes in connection with operations
described in clause (4)) or (5) of the definition of Business;
(ii) BAG (or its Affiliates) may engage in any activity
described in clause (3) of the definition of Business;
(iii) BAG (or its Affiliates) may engage in the sale to
consumers through Websites of English Language Books, which are published by
BAG, or its Affiliates, at such times as unrelated third party publishers
(which are regarded as major publishers by industry sources) are engaged in
such sales activity;
(iv) BN (or its Affiliates) may engage in the sale to
consumers through Websites of English Language Books which are published by
BN (or its Affiliates), at such times as unrelated third party publishers
(which are regarded as major publishers by industry sources) are engaged in
such sales activity.
(v) Either BAG or BN (or its respective Affiliates) may
engage in the distribution of videos, music, software or magazines
independent of the Company;
(vi) BAG (or its Affiliates) or BN (or its Affiliates)
may engage in the following activities relating to sale, distribution or
delivery of electronic or digitized material:
1) the actual act of transforming copyrighted material
into electronic or digitized form;
2) the services involved in providing clearinghouse
functions; and
3) the offering of such electronic or digitized materials
to wholesalers, retailers, distributors or consumers, whether through
Websites or otherwise, including (but with respect to BAG and its Affiliates
only) through Book Clubs, but only to the extent that the offering party is
the publisher of such material.
7.8 EXCEPTIONS TO EXCLUSIVITY.
Notwithstanding anything in this Agreement to the contrary, the
following shall be exempt from the restrictions set forth in Section 7.7:
(a) Any Person in which either BAG, BN, or any of their
respective Affiliates owns:
(i) ten percent (10%) or less, in case the primary
activity of such Person is the Business. For purposes of the preceding
sentence, the primary activity of a Person shall be deemed to be the Business
only if it derives twenty-five percent (25%) or more of its net revenues from
the conduct of Business for the fiscal year of such Person preceding the
acquisition;
(ii) twenty percent (20%) or less, in the case of any
Person the primary activity of which involves or is focused on sectors
outside of the Business and where the contribution from the Business, in net
revenues, is less than twenty-five percent (25%) (on a consolidated basis)
but more than ten percent (10%) (on a consolidated basis) for the fiscal year
of such Person preceding the acquisition;
(iii) any percentage of another Person, without
limitation, if the net revenues of such Person from the conduct of Business
(on a consolidated basis) is less than ten percent (10%) of its total net
revenues for the fiscal year of such Person preceding the acquisition; or
(iv) any acquisition of another Person where such Person
is directly engaged in the Business (directly or through one or more units)
to an extent greater than that permitted by the above provisions of this
Agreement provided that, within a period of twelve (12) months after the date
of the acquisition, the acquiring party either: (a) makes an orderly
divestiture of such portions of the acquired business which are conducted by
the acquired Person or its Affiliates to a third party; or (b) the acquiring
party offers and sells such identifiable unit which is engaged in the
Business to the Company. In case an offer is made to the Company under the
preceding sentence, the purchase price shall be determined by the offering
party subject to acceptance, on behalf of the Company, by Managers who are
not appointed by the offering party.
(v) For purposes of this Section, the ownership
interest of each of BN and BAG, respectively, shall be aggregated with the
ownership interest of any Person in which it directly or indirectly through a
chain of other Persons owns an interest of fifty percent (50%) or more.
7.9 NONCOMPETITION AFTER SALE OF MEMBERSHIP INTEREST.
The restrictions set forth in Section 7.7 , and the provisions of
Sections 2.3(c), (d), and (e), shall apply to a Member at all times during
which:
(a) such Member owns a Membership Interest; and
(b) for two (2) years after the date on which such Member
ceases to own at least ten percent (10%) of the total Membership Interests.
ARTICLE VIII. LIMITED LIABILITY; INDEMNIFICATION
8.1 LIMITED LIABILITY. Except as otherwise provided under the LLCL,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company and neither any Member nor Manager shall be
obligated or liable for any such debt, obligation or liability of the
Company. Except as otherwise provided by the laws of the State of Delaware,
the debts, obligations and liabilities of any Member, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liability of such Member and neither any Member, Manager nor the Company
shall be obligated or liable for any such debt, obligation or liability of
such Member.
8.2 INDEMNIFICATION.
(a) The Company shall indemnify, defend and hold harmless any
Member, Manager or other Person, 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 (other
than an action by or in the right of the Company) by reason of the fact that
he, she or it is or was a Member, Manager, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, from and against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such Person in connection with such claim, action,
suit or proceeding if such Person acted in good faith and in a manner such
Person reasonably believed to be in, or not opposed to, the best interests of
the Company, and, with respect to any criminal sanction or proceeding, had no
reasonable cause to believe that his, her or its conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the Person did not act in good faith and
in a manner which he, she or it reasonably believed to be in, or not opposed
to, the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his, her or its
conduct was unlawful.
(b) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the Member, Manager, employee or agent to repay such
amount if it shall be ultimately determined by a court of competent
jurisdiction from which no further appeal may be taken or the time for appeal
has lapsed that such Person is not entitled to be indemnified by the Company
pursuant to the terms and conditions of this Section 8.2.
(c) The Company may maintain insurance on behalf of any Person
who is or was a Member, Manager, employee or agent, or is or was serving at
the request of the Company as a Manager, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against and incurred by such Person in any such
capacity, or arising out of such Person's status as such, whether or not the
Company would have the power to indemnify such Person against such liability
under this Section 8.2.
(d) The indemnification and advancement of expenses provided
by, or granted pursuant to this Section 8.2 shall continue as to a Person who
has ceased to be a Member, Manager, employee or agent and shall inure to the
benefit of the heirs, executors, administrators and other legal successors of
such Person.
(e) The indemnification provided by this Section 8.2 shall not
be deemed exclusive of any other rights to indemnification to which those
seeking indemnification may be entitled under any agreement, determination of
Members or otherwise.
(f) Any indemnification hereunder shall be satisfied only out
of the assets of the Company (including insurance and any agreements pursuant
to which the Company and indemnified Persons are entitled to
indemnification), and the Members shall not, in such capacity, be subject to
personal liability by reason of these indemnification provisions, except with
respect to the provisions set forth in Section 8.2(h).
(g) No Person shall be denied indemnification in whole or in
part under this Section 8.2 because such Person had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) The parties agree that the remedial allocations described
in Section 5.5(c) of this Agreement are intended to comply with the
provisions of Section 704 of the Code and, along with the 754 Election to be
made pursuant to Section 6.8(b), are intended to eliminate the disparity
between USO's (outside) basis in its interest in the Company and USO's share
of the Company's (inside) basis in the Company's assets as of the date
hereof. In the event that such disparity is not eliminated in full, and USO
does not secure the benefit of the deductions which it would have been
entitled to if an amount equal to USO's outside basis had been used to
calculate the deductions or credits allowable to USO, BN shall indemnify,
defend and hold harmless USO (and its Affiliates) and the Company from and
against all loss, expenses (including attorneys' fees and expenses),
judgments, interest, fines and amounts paid or incurred in connection with
any claim, action, suit or proceeding involving any adverse tax consequences
to any of such parties, including adverse tax consequences resulting by
reason of the remedial allocation provisions of Section 5.5(c), the 754
Election described in Section 6.8(b), or Section 5.5(j) not applying in the
manner contemplated by such parties. For purposes hereof, the disallowance
of any such benefits shall be deemed to give rise to economic loss to USO at
the time USO (or its Affiliates) could have used the benefit in any
jurisdiction to offset any other income or gain (after giving effect to all
other available offsets) upon presentation of a certificate to that effect to
BN. The obligation of BN hereunder shall survive until the year in which
such deduction could have been used.
ARTICLE IX. DISSOLUTION; LIQUIDATION
9.1 DISSOLUTION. The Company shall be dissolved and its affairs wound
up, upon the first to occur of any of the following events (each of which
shall constitute a "Dissolution Event"):
(a) The expiration of the term set forth in Section 2.5 hereof
unless the Company is continued with the consent of all Members;
(b) The written consent of all Members;
(c) The entry of a decree of judicial dissolution with respect
to the Company;
(d) Any event which makes it unlawful for the business of the
Company to be carried on by the Members;
(e) Any other event not inconsistent with any provision hereof
causing a dissolution of a limited liability company under the LLCL; or
(f) The Bankruptcy of any Member; provided, however, that upon
any such event, the Company shall be deemed dissolved, but such dissolution
shall not cause the termination of the Company, it being understood and
agreed that, upon any such dissolution, the remaining Member may elect to
continue to carry on the Company business pursuant to, and subject to, all of
the terms and provisions of this Agreement.
9.2 WITHDRAWAL OF MEMBERS. No Member shall have the right to
voluntarily withdraw as a Member of the Company other than following the sale
of such Member's entire Membership Interest under Article VII. Prior to the
tenth anniversary of the date hereof, no Member shall seek a decree of
judicial dissolution with respect to the Company.
9.3 DISTRIBUTION UPON DISSOLUTION.
(a) Upon dissolution, the Company shall not be terminated and
shall continue until the winding up of the affairs of the Company is
completed and a certificate of cancellation has been issued by the Secretary
of State of Delaware. Upon the winding up of the Company, the Board, or any
other Person designated by the Board (the "Liquidation Agent"), shall take
full account of the assets and liabilities of the Company and shall, unless
the Members agree otherwise, liquidate the assets of the Company as promptly
as is consistent with obtaining the fair value thereof. The proceeds of any
liquidation shall be applied and distributed in the following order:
(i) First, to the payment of debts and liabilities of
the Company (including payment of all indebtedness to Members and/or their
Affiliates) and the expenses of liquidation;
(ii) Second, to the establishment of any reserve which
the Liquidation Agent shall deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company ("Contingencies"). Such
reserve may be paid over by the Liquidation Agent to any attorney-at-law, or
acceptable party, as escrow agent, to be held for disbursement in payment of
any Contingencies and, at the expiration of such period as shall be deemed
advisable by the Liquidation Agent for distribution of the balance in the
manner hereinafter provided in this Section 9.3; and
(iii) Any balance, in accordance with the Percentage
Interest of each Member.
(b) It is the intent of the Members that the allocations
provided in Section 5.5 hereof result in the distributions required pursuant
to Section 9.3 being in accordance with positive capital accounts as provided
for in the Treasury Regulations under Section 704(b) of the Code. However,
if after giving hypothetical effect to the allocations required by Section
5.5, the capital accounts of the Members are in such ratios or balances that
distributions pursuant to Section 9.3 would not be in accordance with the
positive capital accounts of the Members as required by Treasury Regulations
under Section 704(b) of the Code, such failure shall not affect or alter the
distributions required by Section 9.3. Rather, the Members will have the
authority to make other allocations of Net Profits or Net Losses, or items of
income, gain, loss or deduction among the Members which, to the extent
possible, will result in the capital accounts of each Member having a balance
prior to the distribution equal to the amount of the distributions to be
received by each Member pursuant to Section 9.3.
9.4 TIME FOR LIQUIDATION. A reasonable amount of time shall be allowed
for the orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to enable the Liquidation Agent to minimize
the losses attendant upon such liquidation.
9.5 WINDING UP AND FILING ARTICLES OF CANCELLATION. Upon the
commencement of the winding up of the Company, articles of cancellation shall
be delivered by the Company to the Secretary of State of Delaware for filing.
The articles of cancellation shall set forth the information required by the
LLCL. The winding up of the Company shall be completed when all debts,
liabilities, and obligations of the Company have been paid and discharged or
reasonably adequate provision therefor has been made and all the remaining
assets of the Company have been distributed to the Members.
ARTCIEL X. MEMBERSHIP INTERESTS; CERTIFICATES
10.1 CERTIFICATES. A Membership Interest of the Company shall be
represented by a certificate or certificates, setting forth upon the face
thereof that the Company is a limited liability company formed under the laws
of the State of Delaware, the name of the Member to which it is issued and
the initial Percentage Interest which such certificate represents. Such
certificates shall be entered in the books of the Company as they are issued,
and shall be signed by the Chief Executive Officer and may be sealed with the
Company's seal or a facsimile thereof. Upon any Transfer permitted under
this Agreement, BN Holding and USO shall surrender to the Company and the
Company shall issue to BN Holding and USO certificates representing the
Membership Interests taking into account such Transfer. All certificates
representing Membership Interests (unless registered under the Securities Act
of 1933, as amended (the "Securities Act")), shall bear the following legend:
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY SECURITIES REGULATORY
AUTHORITY OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED,
PLEDGED, ENCUMBERED, TRANSFERRED, GRANTED AN OPTION WITH
RESPECT TO OR OTHERWISE DISPOSED OF, (I) UNLESS AND UNTIL THEY
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR SUCH SALE,
ASSIGNMENT, PLEDGE, ENCUMBRANCE, TRANSFER, OPTION GRANT OR
OTHER DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND (II) EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT OF THE COMPANY, A COPY OF WHICH IS AVAILABLE
FOR INSPECTION AT THE OFFICES OF THE COMPANY.
10.2 LOST OR DESTROYED CERTIFICATES. The Company may issue a new
certificate for Membership Interests in place of any certificate or
certificates theretofore issued by it, alleged to have been lost or
destroyed, upon the making of an affidavit of that fact, and providing an
indemnity in form and substance reasonably satisfactory to the Company, by
the Person claiming the certificate to be lost or destroyed.
10.3 TRANSFER OF MEMBERSHIP INTERESTS. Except for Transfers duly made
in accordance with Article VII, no Transfer of Membership Interests shall be
valid as against the Company except upon surrender to and cancellation of the
certificate therefor, accompanied by an assignment or transfer by the Member,
subject to any restrictions on Transfer contained in this Agreement.
10.4 REGULATIONS. The Board may make such additional rules and
regulations, not inconsistent with this Agreement, as it may deem expedient
with respect to the issue, transfer and recordation of certificates for the
Membership Interests.
10.5 REGISTERED MEMBERS. The Company shall be entitled to recognize the
exclusive right of a Person registered on its records as the owner of the
Membership Interests to receive distributions and to vote as owner of
Membership Interests and shall not be bound to recognize any equitable or
other claim to or interest in such Membership Interest(s) on the part of any
other Person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the LLCL.
ARTICLE XI. MISCELLANEOUS
11.1 SEVERABILITY. The terms, conditions, and provisions of this Agree-
ment are fully severable, and the decision or judgment of any court of
competent jurisdiction rendering void or unenforceable any one or more of
such terms, conditions or provisions shall not render void or unenforceable
any of the other terms, conditions or provisions hereof and such void or
unenforceable term shall be replaced with a valid and enforceable term which
would to the greatest degree possible reflect the original intentions of the
parties hereunder.
11.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be given and delivered by messenger, transmitted by
telecopy or telegram (in either case followed by reputable overnight courier
sent the same day), by reputable overnight courier or mailed by certified
mail, postage prepaid, return receipt requested, to the parties at the
following addresses (or such other address as shall be specified by such
party by like notice), and shall be deemed given on the date on which so
delivered by messenger or reputable overnight courier, on the next business
day following the date on which so transmitted by telecopy, telegram or on
the third business day following the date on which mailed by certified mail:
If to the Company, to:
xxxxxxxxxxxxxx.xxx llc
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
If to BN, BN Holding or BN Holding representatives on the Board, to:
Xxxxxx & Xxxxx, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. Xxxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
If to USO, to:
XXX.XX Online, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Fax: (000) 000-0000/1103
If to BAG, to:
Bertelsmann AG
Xxxx-Xxxxxxxxxxx-Xxxxxxx 000
00000 Xxxxxxxxx, Xxxxxxx
Attention: Xx. Xxxxx Xxxxxxxx
Fax: (000) 00 0000 000 000
with a copy for each of USO and BAG to:
Xxxxxx, Xxxxxxx, Xxxxxxxxx & Green, P.C.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
11.3 CAPTIONS. The captions at the heading of each article or section
of this Agreement are for convenience of reference only, and are not to be
deemed a part of the Agreement itself.
11.4 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the other agreements and documents referenced herein or
contemplated hereby, constitutes the entire agreement and understanding of
the parties hereto with respect to the matters herein set forth, and all
prior negotiations and understandings relating to the subject matter of this
Agreement are merged herein and are superseded and canceled by this
Agreement.
11.5 COUNTERPARTS. This Agreement may be executed and delivered in one
or more counterparts, each of which shall be deemed an original, and all of
which shall be deemed to constitute one and the same agreement.
11.6 AMENDMENTS; WAIVER. Amendments to this Agreement may be made from
time to time, provided, however, that no amendment, modification or waiver of
this Agreement or any provision hereof shall be valid or effective unless in
writing and signed by each and every Member. No consent to, or waiver, dis-
charge or release (each, a "Waiver") of, any provision of or breach under
this Agreement shall be valid or effective unless in writing and signed by
the party giving such Waiver, and no specific Waiver shall constitute a
Waiver with respect to any other provision or breach, whether or not of
similar nature. Failure on the part of any party hereto to insist in any
instance upon strict, complete and timely performance by another party hereto
of any provision of or obligation under this Agreement shall not constitute a
Waiver by such party of any of its rights under this Agreement or otherwise.
11.7 FURTHER ASSURANCES. Each party shall perform all other acts and
execute and deliver all other documents as may be necessary or appropriate to
carry out the purposes and intent of this Agreement.
11.18 INVESTMENT SERVICES. BN Holding shall be entitled to an
investment advisory fee with respect to investments and earnings on the
Reserve Account. Such fee shall be payable to BN Holding on January 1 of
each year in an amount equal to the aggregate earnings, if any, on the
amounts in the Reserve Account for the preceding calendar year.
11.9 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to its rules on conflicts of laws.
11.10 THIRD PARTY BENEFICIARY. Nothing set forth in the Agreement
shall be construed to confer any benefit to any third party who is not a
party to this Agreement.
11.11 ASSIGNMENT. This Agreement is personal to the parties hereto
and neither party may (except as set forth in Article VII) assign or Transfer
the rights accruing hereunder nor may performance of any duties by either
party hereunder be delegated or assumed by any other Person or legal entity
without the prior written consent of the other parties hereto.
11.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted assigns
of each party hereto; provided, that no party hereto may Transfer (or cause
or permit to be created or existing any lien on) or assign his Membership
Interest (or any portion thereof or any beneficial interest therein) or this
Agreement or his rights, interests or obligations hereunder, except in
accordance with the terms of this Agreement.
11.13 RELATIONSHIP. This Agreement does not constitute any Member,
Manager, or any employee or agent of the Company as the agent or legal
manager of any Member for any purpose whatsoever and no Member, Manager, or
any employee or agent of the Company is granted hereby any right or authority
to assume or to create any obligation or responsibility, express or implied,
on behalf of or in the name of any Member or to bind any Member in any manner
or thing whatsoever.
11.14 CONSENT TO JURISDICTION. The exclusive jurisdiction and venue
for any disputes arising out of or in connection with this Agreement will be
any state or federal court located in New York County, New York, and each
party hereby consents to personal jurisdiction in such court and consents to
service of process by means of certified or registered mail, return receipt
requested.
11.15 EQUITABLE REMEDIES. Each party acknowledges that no adequate
remedy of law would be available for a breach of Sections 3.11 and 4.6 and
Articles VII and VIII of this Agreement, and that a breach of any of such
Sections of this Agreement by one party would irreparably injure the other
and accordingly agrees that in the event of a breach of any of such Sections
of this Agreement, the respective rights and obligations of the parties
hereunder shall be enforceable by specific performance, injunction or other
equitable remedy (without bond or security being required), and each party
waives the defense in any action and/or proceeding brought to enforce this
Agreement that there exists an adequate remedy or that the other party is not
irreparably injured. Nothing in this Section 11.15 is intended to exclude
the possibility of equitable remedies with respect to breaches of other
sections of this Agreement.
11.16 FEES AND EXPENSES. Except as specifically set forth herein,
each party shall be responsible for any legal and other fees and expenses
incurred by such party in connection with the negotiation and preparation of
this Agreement and the transactions contemplated hereby.
11.17 OBLIGATIONS OF BN AND BAG. By their signatures below, BN
agrees to be liable for any failure by BN Holding to perform any of its
obligations under this Agreement, the Formation Agreement and any other
agreements executed in connection herewith to which it is a party, and BAG
agrees to be liable for any failure by USO to perform any of its obligations
under this Agreement, the Formation Agreement and any other agreements
executed in connection herewith to which it is a party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
Bertelsmann AG
By:/s/Xxxxxx Xxxxxxxxxx
_______________________
Name:
Title:
XXX.XX Online, Inc.
By:/s/Xxxxxx Xxxxxxxxxx
_______________________
Name:
Title:
Xxxxxx & Xxxxx, Inc.
By:/s/Xxxxxxx Xxxxxx
________________________
Name:
Title:
B&X.xxx Holding Corp.
By:/s/Xxxxxxx Xxxxxx
_______________________
Name:
Title:
B&X.xxx Member Corp.
By:/s/Xxxxxxx Xxxxxx
_______________________
Name:
Title:
SCHEDULE 3.11(b)
ACTIONS REQUIRING BOARD APPROVAL BY A MAJORITY OF EACH
OF THE BN MANAGERS AND THE USO MANAGERS
1. Any amendment, change or other modification, or restatement of this
Amended and Restated Limited Liability Company Agreement or the Certificate
of Formation of the Company.
2. The issuance, authorization, cancellation, alteration, modification,
redemption or any change in, of, or to, any Membership Interest, debt or
equity security of the Company or any option, put, call or warrant with
respect to the foregoing, or any initial public offering with respect to the
Membership Interest in the Company or any Person established for the purpose
of engaging in an initial public offering of the Company's business.
3. The Transfer or other disposition (other than inventory or obsolete
assets of the Company) of, or placing any Encumbrance (other than
Encumbrances arising by operation of law) on, any asset of the Company,
except Permitted Encumbrances.
4. The acquisition of any interest in another entity by the Company for an
amount in excess of $500,000; provided that the foregoing shall not apply
with respect to cash management objectives of the Company on a short term
basis with a recognized money market institution.
5. The merger, consolidation, dissolution or liquidation of the Company, or
any transaction having the same effect.
6. Other than pursuant to an agreement entered into with the consent of
the Board of Managers or involving an amount below $50,000, any transaction
between the Company on the one hand and either BAG, BN or their respective
Affiliates on the other hand; or any amendment or modification of, or waiver
with respect to, any such agreement or transaction.
7. Adoption and approval of the Business Plan.
8. Any capital expenditure (or a series of related expenditures) in excess
of $5 million.
9. Any debt, loan or borrowing (other than borrowings under a revolving
credit facility approved by the Board under Section 3.11(b)) exceeding $20
million outstanding in the aggregate at any time or any revolving credit
facility permitting aggregate borrowings at any one time outstanding to
exceed $20 million.
10. Adoption of any stock option or other employee benefit plan or any
material amendment to any existing plan (except as set forth in Section 5.8
of the Formation Agreement).
11. Hiring any personnel with an annual salary in excess of $250,000 or
increasing the compensation of any personnel above $250,000.
12. Appointment or dismissal of auditors.
SCHEDULE I
1. Members' Percentage Interest
B&X.xxx Holding Corp. 50%
XXX.XX Online, Inc. 50%
2. Initial Capital Contributions and Acquisitions of Membership Interests
BN Holding USO
All of the business, assets and liabilities (i) Purchase of 21.42857 %
of xxxxxxxxxxxxxx.xxx, other than its Membership Interest
investment in NuvoMedia, Inc. and B&X.xxx from BN and/or its
Member Corp., all such assets being Affiliates: $75 million
contributed by BN Holding having an
aggregate net agreed value of $275 million (ii) Capital contribution
(determined after taking into account the for 28.57143%
transfer of $75 million of capital to USO Membership
in connection with its acquisition of the Interest: $150 million
21.42857% Membership Interest). ------------
$225 million
3. Initial Capital Accounts
BN Holding USO
$275 million $225 million
