Second Amended and Restated Limited Liability Company Agreement of ALLEGIANCY, LLC a Delaware Limited Liability Company
Exhibit
1.1
Second Amended and Restated
of
a Delaware Limited Liability Company
This
Second Amended and Restated Limited Liability Company Agreement, is
made and entered into effective as of the 28th day of June, 2017
(the “Effective
Date”), by and among ALLEGIANCY, LLC, a Delaware
limited liability company (the “Company”), and the
Members.
SECTION I
1.1 A&R
Agreement has the meaning set forth in the preambles
above.
1.2 Act
means the Delaware Limited Liability Company Act (Title 6, Subtitle
II, Chapter 18), as amended from time to time.
1
1.3 Accountant
means the certified public accounting firm selected by the Board
to provide accounting
services to the Company and its Affiliates generally.
1.4 Additional
Units means any Units issued after the date of this
Agreement.
1.5 Affiliate
means any Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, a Person. The term “control” (including
the terms “controlling,” “controlled by,”
and “under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of the voting securities of such Person, by contract or
otherwise.
1.6 Agreement
means this Second Amended and Restated Limited Liability Company
Agreement, as it may be amended from time to time, which the
parties intend to constitute an operating agreement within the
meaning of the Act, and is further intended to be the sole document
to serve as such operating agreement.
1.7 Associate
shall have the meaning set forth in Section 5.13(a) of this
Agreement.
1.8 Board
shall mean the Company’s Board of Managers.
1.9 Capital
Contribution means the amount of money or other property
that each Member contributes to the Company from time to
time.
1.10 Cash
Flow shall have the meaning set forth in Section 8.1 of this
Agreement.
1.11 Certificate
of Formation means the Company’s Certificate of
Formation, as filed with the State, as the same may be amended from
time to time.
1.12 Class
A Member means any Record Holder of Class A Units who is
admitted to the Company as a Class A Member.
1.13 Class
A Unit means a Unit entitling the owner of such Unit, if
admitted as a Class A Member, to the respective rights, benefits
and preferences of a Class A Member of the Company; provided,
however, that until such time as such owner has been admitted as a
Class A Member to the Company, such owner shall only have the right
to receive its share of distributions of Cash Flow as provided in
this Agreement, and shall have no right to vote on, consent to or
otherwise participate in any decision of the Members. The
aggregate number of authorized Class A Units is
1,000,000.
1.14 Class
B Member means any Record Holder of Class B Units who is
admitted to the Company as a Class B Member.
1.15 Class
B Unit means a Unit entitling the owner of such Unit, if
admitted as a Class B Member, to the respective rights, benefits
and preferences of a Class B Member of the Company; provided,
however, that until such time as such owner has been admitted as a
Class B Member to the Company, such owner shall only have the right
to receive its share of distributions of Cash Flow as provided in
this Agreement, and shall have no right to vote on, consent to or
otherwise participate in any decision of the Members. The
aggregate number of authorized Class B Units is
20,000,000.
2
1.16 Code
means the Internal Revenue Code of 1986, as amended.
1.17 Commission
means the United States Securities and Exchange
Commission.
1.18 Company
has the meaning set forth in the introductory paragraph
above.
1.19 Company
Register means a register
maintained on behalf of the Company by the Board, or, if the Board
so determines, by the Transfer Agent as part of the Transfer
Agent's books and transfer records, with respect to each class of
Units in which all Record Holders and transfers of such class of
Units are registered or otherwise recorded.
1.20 Conversion
Date means the date on which Class A Units are converted to
Class B Units pursuant to Section 10.4.
1.21 Date
of Formation shall have the meaning set forth in
Section 2.1 of this
Agreement.
1.22 EBITDA
shall mean an amount equal to net income for the fiscal year after
adding back expenses for interest, taxes, depreciation and
amortization for such period.
1.23 Effective
Date has the meaning set forth in the introductory paragraph
above.
1.24 Exchange
Act means the Securities Exchange Act of 1934, as
amended.
1.25 Fiscal
Year shall have the meaning set forth in Section 11.1 of this
Agreement.
1.26 Good
Cause shall have the meaning set forth in Section 5.2(c)(i) of this
Agreement.
1.27 Guarantor
shall have the meaning set forth in Section 7.6 of this
Agreement.
1.28 Guaranty
shall have the meaning set forth in Section 7.6 of this
Agreement.
1.29 Holder
means any Person holding Units.
1.30 Independent
Manager shall have the meaning set forth in Section 5.13 of this
Agreement.
1.31 Initial
Offering means the Offering of a minimum of $4,997,970 of
the Company’s Class A Units (499,997 total Class A Units,
respectively), which Offering concluded in 2014, pursuant to the
exemption from registration under the Securities Act found in
Section 3(b)(1) of the Securities Act and Regulation A promulgated
by the Commission.
3
1.32 Issuable
Units shall have the meaning set forth in Section 7.2(b) of this
Agreement.
1.33 Liquidating
Representative shall have the meaning set forth in
Section 2.6 of this
Agreement.
1.34 Majority
means, with respect to the Members as a whole or a specific class
of Members, Members owning more than 50% of the Units then held by
all Members of the Company or of such class, entitled to vote or
consent on such matter.
1.35 Manager
means an individual who is a duly elected or appointed member of
the Board, including the Independent Manager; provided,
however,
that for purposes of Section 5.10, the term
“Manager” shall include any former member of the
Board.
1.36 Members
are the Class A Members, the Class B Members and any other Persons
admitted to the Company as members.
1.37 Merger
Partner shall have the meaning set forth in Section 4.8(h) of this
Agreement.
1.38 Notice
shall have the meaning set forth in Section 11.5 of this
Agreement.
1.39 Notice
of Exercise shall mean a Notice delivered to the Company
from a Class A Member notifying the Company of the Class A
Member’s intention to exercise the Class A Member’s
Purchase Right.
1.40 Offering
means any public offering of the Units or other securities pursuant
to the registration of such securities under the Securities Act or
pursuant to any exemption from registration under the Securities
Act permitting the public solicitation of offerees, including
without limitation any exemption from registration pursuant to
Section 3(b) of the Securities Act and Commission regulations
promulgated thereunder.
1.41 Offering
Statement shall have the meaning set forth in Section 7.2(c) of this
Agreement.
1.42 Officer
or Officers shall have the meaning set forth in Section 5.15(a) of this
Agreement.
1.43 Original
Agreement has the meaning set forth in the preambles
above.
1.44 Partial
Redemption shall have the meaning set forth in Section 10.3(a) of this
Agreement.
1.45 Percentage
Interest means, as applicable, the interest of a Member in
the Company, or in any class or classes of the Company’s
Units, at any particular time, expressed as a percentage and
calculated by dividing the total number of Units owned by the
Member in the Company, or in the class of Units in question, by the
total number of Units of the Company, or such applicable class, as
are issued and outstanding as of the date of calculation and then
multiplying the quotient by 100. The Board shall maintain, or shall
cause the Transfer Agent to maintain, the Percentage Interest of
each Member in the Company on the Company Register.
4
1.46 Person
means and includes an individual, proprietorship, trust, estate,
partnership, joint venture, association, company, corporation,
limited liability company or other entity, regardless of the form
of organization and whether organized for profit or
otherwise.
1.47 Purchase
Period shall have the meaning set forth in Section 7.2(a) of this
Agreement.
1.48 Proceeding
means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
1.49 Purchase
Rights shall have the meaning set forth in Section 7.2(a) of this
Agreement.
1.50 Record
Date means the date
established by the Board or otherwise in accordance with this
Agreement for determining (a) the identity of the Record
Holders entitled to receive notice of, or entitled to exercise
rights in respect of, any lawful action of Members (including
voting) or (b) the identity of Record Holders entitled to
receive any report or distribution or to participate in any
offer.
1.51 Record
Holder means (a) with
respect to any class of Units for which a Transfer Agent has been
appointed, the Person in whose name a Unit of such class is
registered on the books of the Transfer Agent as of the Company's
close of business on a particular business day or (b) with
respect to other classes of Units, the Person in whose name any
such other Units are registered on the books that the Board has
caused to be kept as of the Company's close of business on a
particular business day.
1.52 Redemption
Price shall have the meaning set forth in Section 10.3(c) of
this Agreement.
1.53 Redemption
Years shall mean, beginning in 2018, the first, second,
third and fourth years in which the Company achieves an EBITDA of
at least $1,500,000 for the twelve months preceding June
30th of
such year.
1.54 Regulations
means the Treasury Regulations issued under the Code, (whether
temporary, proposed, or final) as amended from time to time.
Reference to any particular provision of the Regulations shall mean
that provision of the Regulations on the date of this Agreement and
any succeeding provision of the Regulations.
1.55 Secondary
Redemptions shall have the meaning set forth in Section
10.3(b) of this Agreement.
1.56 Securities
Act means the Securities Act of 1933, as
amended.
5
1.57 Service
means the Internal Revenue Service.
1.58 Split
shall have the meaning set forth in Section 4.10 of this
Agreement.
1.59 State
means the State of Delaware.
1.60 Supermajority
means with respect to the Members as a whole or a specific class of
Members, the vote or consent of Members owning more than 80% of the
Units then held by all Members of the Company or of such class,
entitled to vote or consent on such matter.
1.61 Terminating
Capital Transaction means the sale, exchange or other
disposition of all or substantially all of the assets of the
Company with the intent to liquidate the Company.
1.62 Transfer
shall have the meaning set forth in Section 10.1(a) of this
Agreement.
1.63 Transfer
Agent means such bank, trust
company or other Person as may be appointed from time to time by
the Board to act as registrar and transfer agent for any class of
Units; provided that, if no such Person is appointed as registrar
and transfer agent for any class of units, the Board shall act as
registrar and transfer agent for such class of
Units.
1.64 Transferee
means a Person to whom or which Units are transferred in accordance
with this Agreement.
1.65 Unit
Purchase Price shall have the meaning set forth in
Section 7.2(a) of
this Agreement.
1.66 Units
shall mean, collectively and individually, Class A Units and Class
B Units or any other equity securities which are issued by the
Company from time to time.
SECTION II
2.1 Formation.
The Members acknowledge the formation of the Company as a Delaware
limited liability company pursuant to the filing of the Certificate
of Formation with the Secretary of State of the State on January
22, 2013 (“Date of
Formation”).
2.2 Name,
Office and Registered Agent. The name of the Company shall
be “ALLEGIANCY, LLC.” The principal office and place of
business of the Company shall be 0000 Xxxxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxx 00000. The
name of the registered agent and the registered office of the
Company, for purposes of the Act is National Registered Agents,
Inc., 000 Xxxxxxxxx Xxxxx, Xxxxx, Xxxxxxxx 00000. The Board may at
any time change the location of the principal office or the
registered agent, provided the Board gives Notice to all Members of
any such change.
2.3 Governing
Law. This Agreement and all questions with respect to the
rights and obligations of the Members, its construction,
enforcement, and interpretation, and the formation, administration,
and termination of the Company shall be governed by the provisions
of the Act and other applicable laws of the State without regard to
conflicts of law rules.
6
2.4 Term.
The term of the Company commenced on the Date of Formation and
shall continue perpetually, unless sooner terminated as provided in
Section 2.5.
2.5 Events
of Dissolution. The Company shall be dissolved upon the
occurrence of the following events:
(a)
The determination
in writing of the Board, the Independent Manager and a
Supermajority of the Members to dissolve the Company;
or
(b)
as otherwise
required by the Act.
2.6 Conclusion
of Affairs. Upon the dissolution of the Company for any
reason, if the Company is not continued as permitted by this
Agreement, the Board shall proceed promptly to wind up the affairs
of the Company. Except as otherwise provided in this Agreement, the
Members and their successors in interest shall continue to share
distributions during the period of winding up in the same manner as
before the dissolution. The Board, or alternatively, a
representative appointed by the Board (the “Liquidating
Representative”), which the Company shall compensate
and indemnify as the Board determines, shall determine the time,
manner, and terms of any sale or sales of Company assets pursuant
to such winding up.
2.7 Termination.
Within a reasonable time following the completion of the winding up
of the Company, the Board or the Liquidating Representative, as the
case may be, shall supply to each Member a statement, which shall
set forth the assets and the liabilities of the Company as of the
date of completion of the winding up and each Member’s
portion of the distributions pursuant to this Agreement. Upon
completion of the winding up of the Company and the distribution of
all Company assets in accordance with Section 8.6, the Company shall
terminate, and the Members shall execute and record a Certificate
of Cancellation of the Company, as well as any and all other
documents required to effectuate the dissolution and termination of
the Company.
SECTION III
The
Company is formed to transact any lawful business not required to
be stated specifically in this Agreement and for which limited
liability companies may be formed under the Act.
SECTION IV
4.1 Members.
The Members of the Company are those Persons set forth in the
Company Register.
7
4.2 Other
Activities. Except as otherwise expressly provided in this
Agreement or in any exhibit hereto, any Member may engage in, or
possess any interest in, another business or venture of any nature
and description, independently or with others, provided that it
does not compete with the business of the Company or otherwise
breach the Member’s agreements with the Company, and neither
the Company nor any Member shall have any rights in, or to, any
such independent ventures or the income or profits derived
therefrom.
4.3 No
Right to Withdraw. Except as otherwise set forth in this
Agreement, no Member shall have any right to withdraw voluntarily
from the Company.
4.4 Places
of Meetings. All meetings of the Members shall be held at
such place, either within or without the State, as from time to
time may be fixed by the Board. A Member may attend in person or by
conference call or other means where each participant can hear and
be heard. For purposes of this Agreement, such telephonic
attendance shall be deemed in person attendance at any such
meeting.
4.5 Annual
Meetings. The annual meeting of the Members, for the
transaction of such business as may come before the meeting, shall
be held in each year within one hundred twenty (120) days after the
close of the immediately preceding Fiscal Year of the Company for
the purpose of conducting such business as properly may come before
the meeting.
4.6 Special
Meetings. A special meeting of the Members for any purpose
or purposes may be called at any time by the Board. Member(s) in
the aggregate owning not less than 20% of the Units may request in
writing that the Board call a special meeting. Any such request
shall include the purpose of the special meeting and a proposed
time and date for the special meeting. The Board, in its sole
discretion, may call any special meeting so requested; provided, that, the Board may alter the
time and date proposed for such special meeting. At a special
meeting, no business shall be transacted and no action shall be
taken other than that stated in the Notice of the
meeting.
4.7 Notice
of Meetings.
(a) When calling a
meeting, the Board shall provide all Members with Notice at least
ten (10) calendar days and at most sixty (60) calendar days before
the date of the meeting to each Member entitled to vote at the
meeting, which Notice may be waived in writing by any
Member.
(b) Any Notice of a
meeting of the Members shall be given in accordance with the
provisions of Section
11.5 of this Agreement.
4.8 Voting
and Form of Proxy. Except as otherwise provided in this
Agreement or the Act, or as otherwise required by law:
(a) At
any meeting, whether annual or special, each Member shall be entitled to cast one
vote for each Unit such Member owns, in person or by proxy,
equal to such Member’s Percentage Interest, recorded as
stated in its name on Company Register on a date not more than 60
days and not less than 30 days before such meeting, fixed by the
Board as the Record Date for the purpose of determining Members
entitled to vote. The
failure of a Member to vote in person at a meeting or to timely
deliver such Member’s proxy on or before the commencement of
such meeting, shall be deemed to constitute the consent and
approval by such Member to all business transacted at the
applicable meeting. The Members neither shall take part in
the management of the Company, nor transact any business for the
Company in their capacity as Members; neither shall they have power
to sign for, or to bind, the Company; provided, however, that the Members
shall have the right as provided in this Agreement to approve or
consent to certain matters previously approved by the Board and
recommended to the Members.
8
(b) Every
proxy shall be in writing, in a form specified by the Board, dated
and signed by the Member entitled to vote or his, her or its duly
authorized attorney-in-fact. Notwithstanding the foregoing, the
Board may at any time, in its sole and absolute discretion, elect
to utilize an electronic proxy system. If a Member is an entity or
if a Member’s proxy is granted to an entity, the
Member’s vote shall be cast by an individual designated in
writing by such entity as its representative for such
purposes.
(c) A Majority
of Members at the time of any meeting shall constitute a quorum for
the transaction of business.
(d) The
affirmative vote of a Majority of the Members represented at a
meeting and entitled to vote shall be the act of the Members,
unless a greater or lesser vote is required by the Act or this
Agreement.
(e) Except as otherwise
provided in this Agreement, upon approval by the Board and
recommendation to the Members, a Majority of the Members, either
present and voting at a meeting duly called and held or acting by
written consent pursuant to Section 4.9 shall be required
to approve the following actions with respect to the
Company:
(i) Amendment of the
Certificate of Formation or, subject to Sections 4.8(f), 5.2(d), 8.4 and
11.15, this Agreement;
(ii) The
conversion of the Company to another type of entity organized
within or without the State, including without limitation, a
limited partnership;
(iii) Merger,
equity interest exchange, business combination or consolidation
with any other Person, except a wholly-owned subsidiary, in which
the Company is not the surviving entity;
(iv) A
Terminating Capital Transaction;
(v) A decision to file
a voluntary petition or otherwise initiate proceedings to have the
Company adjudicated insolvent, or seeking an order for relief of
the Company as debtor under the United States Bankruptcy Code (11
U.S.C. §§ 101 et
seq.); to file any petition seeking any composition,
reorganization, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy laws or
any other present or future applicable federal, state or other
statute or law relative to bankruptcy, insolvency, or other relief
for debtors with respect to the Company; or to seek the appointment
of any trustee, receiver, conservator, assignee, sequestrator,
custodian, liquidator (or other similar official) of the Company or
of all or any substantial part of the assets of the Company, or to
make any general assignment for the benefit of creditors of the
Company, or to admit in writing the inability of the Company to pay
its debts generally as they become due, or to declare or effect a
moratorium on the Company’s debt or to take any action in
furtherance of any of the above proscribed actions.
9
(vi) Any
decision to dissolve or liquidate the Company, except as
specifically set forth in this Agreement.
(f) Upon
approval by the Board and recommendation to the Members, approval
of a Supermajority of the Members shall be required for any
amendment to this Agreement which alters any provision of this
Agreement providing for approval, consent or vote of a
Supermajority of the Members, including without limitation this
Section
4.8(f).
(g) For the
absence of doubt, the Board may create, authorize, and issue
Additional Units and/or classes of Units upon such terms as the
Board determines, in its sole discretion.
(h) Notwithstanding
Section 4.8(e)(iii)
above, or any other provision of this Agreement, subject to any
applicable statutory or regulatory approvals, upon the unanimous
approval of the Board, in its sole and absolute discretion and
without the consent of the Members, the Company may merge with any
corporation subject to taxation under Subtitle A, Chapter 1,
Subchapter M, Part II of the Code (a “Merger Partner”) or any
domestic or foreign partnership, limited partnership, limited
liability company controlled by the Merger Partner; provided, however, prior to the
Board’s approval to merge, the following conditions shall
have been met: (i) the Merger Partner shall have provided
commercially reasonable evidence to the Board that it owns real
estate assets having a fair market value of $100 million or more;
(ii) the securities that will constitute the consideration to the
Members in such a proposed merger shall be of the Merger Partner,
registered under the Act and listed on a national exchange and
(iii) the terms of such merger shall not materially diminish the
voting, economic or other rights of the Members.
4.9 Action
Without a Meeting. Any action required to be taken at a
meeting of the Members, or any action which may be taken at a
meeting of the Members, may be taken without a meeting with a
written consent. Such consent shall set forth the action so taken
with the signature of the requisite Members required to act,
whether before or after such action. Such consent shall have the
same force and effect as a requisite vote of the Members, and the
Board may so describe it as such in any article or document filed
with the Secretary of State of the State or otherwise. The Board
shall be promptly provided with a copy of any written consent of
the Members and shall keep such written consent in the books and
records of the Company.
10
4.10 Class
A Unit Split. Within 30 days of the Effective Date and after
the Partial Redemption, the Company shall cause the Class A Units
to be split such that each Class A Member shall receive 1.6 Class A
Units for each Class A Unit held on the Effective Date and which
such Class A Member still holds (the “Split”).
SECTION V
5.1 Power and Authority of the Board. Except
for those matters specifically requiring approval of the Members as
set forth in Section 4.8(e), the Board
shall have complete and exclusive control of the management of the
Company’s business and affairs (including tax and accounting
elections), and the Members shall have no right to participate in
the management or the conduct of the Company’s business and
affairs nor any power or authority to act for, or on behalf of, the
Company in any respect whatsoever. Except as otherwise specifically
provided in the Certificate of Formation, this Agreement or the
Act, the Board shall have the right, power, and authority on
behalf of the Company and in its name to exercise all of the
rights, powers, and authority of the Company under the Act. The
Board shall direct, manage, and control the business of the Company
to the best of its ability and shall have full and complete
authority, power, and discretion to make any and all decisions and
to do any and all things that the Board shall deem to be reasonably
required to accomplish the business and objectives of the Company.
The Board shall act in good faith and in a manner that the Board
reasonably believes to be in the best interests of the Company.
Subject to any provision to the contrary contained in this
Agreement, the Board may delegate to any one or more Managers or
Officers, acting alone, the authority to make decisions or to take
action specified by the Board. In addition to, and not as a
limitation upon, Section 5.10, but subject
to Section 18-1011 of the Act, any loss or damage incurred by any
Manager or Officer by reason of any act or omission performed or
omitted by him in good faith on behalf of the Company and in a
manner reasonably believed to be within the scope of the authority
granted to him by this Agreement and in the best interests of the
Company (but not, in any event, any loss or damage incurred by any
Manager or Officer by reason of gross negligence, willful
misconduct, fraud or any breach of his fiduciary duty as a Manager
or Officer with respect to such acts or omissions) shall be paid
from Company assets to the extent available (but no Member shall
have any personal liability to any Manager or Officer under any
circumstances on account of any such loss or damage incurred by
such Manager or Officer or on account of the payment thereof). To
the extent that the Act allows this Agreement to define the
fiduciary standard of the Managers and Officers, that standard
shall be met unless the error or omission of any Manager or Officer
constituted gross negligence, willful misconduct, or
fraud.
(a) Number of Managers. Subject to the
provisions of Section
5.13, the authorized number of Managers shall be three (3).
The Managers of the Company are Xxxxxxx X. Xxxxxx, Xxxxxxxxxxx X.
Xxxxxx and the Independent Manager. The Independent Manager shall
be appointed by the Board in accordance with Section 5.13.
(b) Qualification. A Manager need not be a
Member of the Company.
11
(i)
Removal. A Manager may be
removed for “Good Cause” by the vote of a Supermajority
of the Members, which are entitled to vote pursuant to the
provisions of this Agreement. For purposes of this Section 5.2(c)(i), “Good
Cause” means willful misconduct, bad faith, gross negligence
or breach of fiduciary duty by a Manager in the performance of his
duties to the Company, any criminal conviction under federal or
state securities law or any conviction of a felony under federal or
state law. No removal of a Manager shall be effective until such
time as a replacement Manager has been elected pursuant to
Section
5.2(c)(iii).
(ii)
Resignation. A Manager may
resign upon the earlier of 180 days written Notice to the Company
or upon the election of a replacement Manager.
(iii)
Death. A Manager shall cease
to be a Manager upon his death.
(iv)
Election. Upon the death,
removal or resignation of a Manager, a replacement Manager shall be
elected by a Majority of the Members at the annual meeting or a
special meeting called for such purpose.
(d) Amendment of this Provision.
Notwithstanding anything to the contrary contained in this
Agreement, the provisions of this Section 5.2 may be amended
solely with the approval of a Supermajority of the
Members.
5.3
Quorum. A
majority in number of Managers elected and serving at the time of
any meeting shall constitute a quorum for the transaction of
business. Subject to the terms of this Agreement, the act of a
majority of Managers present at a meeting at which a quorum is
present shall be the act of the Board. Less than a quorum may
adjourn any meeting.
12
5.8
Voting.
(a) At
any meeting of the Board, each Manager entitled to vote on any
matter coming before the meeting shall, as to such matter, have one
vote, in person. If a Manager is an entity, the Manager’s
vote shall be cast by an individual designated in writing by such
entity as its representative for such purposes.
(b) The
affirmative vote of a majority of the Managers represented at a
meeting where a quorum is present and entitled to vote on the
subject matter shall be the act of the Board, unless a greater or
lesser vote is required by the Act, the Certificate of Formation,
or this Agreement.
(c) Notwithstanding
any provision to the contrary contained herein, or the delegation
of any authority to an Officer, the approval of the Board shall be
required for the following actions with respect to the Company
(which approval must be unanimous for (i), (ii), (iii), (iv), (vi),
(vii) and (x):
(i) Amendment of the
Certificate of Formation or this Agreement;
(ii) The
conversion of the Company to another type of entity organized
within or without the State, including without limitation, a
limited partnership;
(iii) Merger,
equity interest exchange, business combination or consolidation
with any other Person, excepting a wholly-owned
subsidiary;
(iv) Creating
or authorizing any new class or series of Units or equity, or
selling, issuing or granting Additional Units;
(v) A decision to file
a voluntary petition or otherwise initiate proceedings to have the
Company adjudicated insolvent, or seeking an order for relief of
the Company as debtor under the United States Bankruptcy Code (11
U.S.C. §§ 101 et
seq.); to file any petition seeking any composition,
reorganization, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy laws or
any other present or future applicable federal, state or other
statute or law relative to bankruptcy, insolvency, or other relief
for debtors with respect to the Company; or to seek the appointment
of any trustee, receiver, conservator, assignee, sequestrator,
custodian, liquidator (or other similar official) of the Company or
of all or any substantial part of the assets of the Company, or to
make any general assignment for the benefit of creditors of the
Company, or to admit in writing the inability of the Company to pay
its debts generally as they become due, or to declare or effect a
moratorium on the Company’s debt or to take any action in
furtherance of any of the above proscribed actions;
13
(vi) Any
decision to dissolve or liquidate the Company, except as
specifically set forth in this Agreement;
(vii) Approving
any budget or strategic or business plan for the Company or any of
its Affiliates;
(viii) Except
with respect to an Affiliate of the Company, making any investment
in any Person;
(ix) Encumbering
all of the assets of the Company or any Affiliate of the Company;
and
(x) Making any
distributions of Company cash or other property except as
specifically provided in this Agreement.
5.10
Indemnification.
14
15
5.11
Transactions with Managers,
Officers and Affiliates. Subject to the prior approval of
the Independent Manager, the Board may appoint, employ, contract,
or otherwise deal with any Person, excluding the Independent
Manager, but including without limitation any Manager, Officer or
their respective Affiliates, and with Persons, who or which have a
financial interest in any Manager or Officer or in which any
Manager of Officer has a financial interest, for transacting the
Company’s or any of its subsidiaries’ or other
Affiliates’ businesses; provided, however, that the fees or
other payments to any such Persons shall not be in excess of
prevailing competitive rates for the transaction in question and
the terms of which shall be at least as favorable to the Company as
the terms available to the Company from an independent third-party
in an arms-length transaction.
5.12
No
Exclusive Duty to Company. The Managers shall not
be required to manage the Company as the Managers’ sole and
exclusive function and the Managers may have other business
interests and may engage in other activities in addition to those
relating to the Company, provided that it does not compete with the
business of the Company or otherwise breach the Manager’s
agreements with the Company. Neither the Company nor any Member or
Manager shall have any right, by virtue of this Agreement, to share
or participate in such other investments or activities of the
Manager or to the income or proceeds derived therefrom. A Manager
shall incur no liability to the Company or to any of the Members or
the other Managers as a result of engaging in any other business or
ventures.
5.13
Independent
Manager.
Notwithstanding the provisions of Section
5.2(a) above, the
Board shall cause the Company at all times beginning ___ days from
the Effective Date to have at least one (1) Independent Manager.
The initial Independent Manager shall be appointed by the Board.
Any replacement Independent Manager shall be elected in accordance
with the provisions of Section
5.2(c)(iv). “Independent
Manager” means a duly appointed or elected Person who: (a)
does not receive, other than in his capacity as a member of a board
of managers or directors or a board committee, any consulting,
advisory or other compensatory fee from our company, any subsidiary
of our company, or any Affiliate or Associate (as defined below)
thereof and has not received any such fee within the last two
years; and (b) does not have a “material business
relationship” with our company or any of our Affiliates or
associates. For purposes of the above definition of
“independent manager”:
16
(a) the term
“Associate” means any person who is: (a) a corporation
or other legal entity, other than our company or a majority-owned
subsidiary of our company, of which the person in question is an
officer, director, partner, or a direct or indirect, legal or
beneficial owner of five percent (5%) or more of any class of
equity securities; and (b) a trust or other estate in which the
person in question has a substantial beneficial interest or for
which the person in question serves as a trustee or in a similar
capacity; and
(b) the term
“Material Business Relationship” means a business or
professional relationship from which the Independent Manager
derives gross revenue from our company, or any Affiliate or
Associate of our company, that exceeds 5% of (a) the Independent
Manager’s annual gross revenue from all sources during either
of the last two years; or (b) the Independent Manager’s net
worth on a fair market value basis.
5.14
Appointment of
Non-Voting Observer. Notwithstanding any provision to the
contrary contained in this Section V, the dealer-manager
for the Initial Offering will have the right, from time to time, to
designate one (1) individual to serve as a non-voting observer on
the Board, the appointment of which individual shall be subject to
the prior written approval of the Board, which approval may not be
unreasonably withheld.
5.15
Officers.
(a)
Designation and Election of Officers;
Terms. The Board, at its discretion, may elect and appoint
officers (each, an “Officer” and collectively, the
“Officers”), whose titles may be specified by the
Board. All Officers shall hold office until removed by the Board.
Any two or more offices may be held by the same
person.
(b)
Removal of Officers; Vacancies. Any
Officer may be removed summarily with or without cause, at any
time, by the Board. Vacancies, including a vacancy caused by the
death, disability, resignation, or removal of any Officer, may be
filled by the Board.
17
5.16
Compensation. The Company may pay such
compensation and other benefits to the Managers and Officers of the
Company as determined by the Board from time to time in its
reasonable discretion for services rendered or to be rendered to
the Company in their capacities as Managers or Officers of the
Company pursuant to the terms and provisions of this
Agreement.
SECTION VI
The
Board may cause the Company to provide Managers, Officers employees
or consultants of the Company or its Affiliates with Units or
Purchase Rights for Units as equity incentive compensation, which
Units shall have all the terms, benefits, rights and preferences as
the Board may designate to be applicable to such Units or Purchase
Rights. The Board may adopt a plan of equity incentive compensation
or may issue such equity incentive compensation outside of any
plan. Upon their receipt of Units, whether immediately or pursuant
to the exercise of a Purchase Right, such recipient shall be deemed
bound by all of the provisions of this Agreement.
SECTION VII
Purchase Right for Class B Units. Each
Holder of Class A Units on December 31, 2017 shall have the right
to purchase one Class B Unit of the Company for each 1.6 Class A
Units held on such date upon such terms, including purchase or
exercise price, as set forth in this Section 7.2 (the
“Purchase
Right”). The Board shall reserve, from the
Company’s authorized securities, the number of Class B Units
necessary to satisfy any outstanding Purchase Rights.
(a) Exercise Price; Term. The exercise
price per Class B Unit (the “Unit Purchase Price”)
entitled to be purchased pursuant to the Purchase Right shall be
$7.50. Subject to the conditions set forth in Section 7.2(c) below,
the Purchase Right must be exercised within the ten (10) day period
immediately following December 31, 2021 (the “Purchase Period”) or
otherwise expire and be of no further force or effect.
18
(b) Conditions to Exercise. Notwithstanding anything contained
herein, the Purchase Right associated with any Class A Member shall
not be exercisable until such time as the Company:
(1) has
caused the Class B Units issuable pursuant to the exercise of the
Purchase Right (the “Issuable Units”) to be
exempt from registration under the Securities Act pursuant to
Section 3(b) of the Securities Act and the regulations promulgated
thereunder by the Commission, including without limitation
Regulation A, or has determined, upon the opinion of counsel, that
there exists another exemption or exception from registration under
the Securities Act applicable to the Issuable Units;
and
(2)
has caused the Issuable Units to be registered or qualified under
the state securities or “blue sky” laws of the state of
the Holder’s residence, or has determined, upon the opinion
of counsel, that there exists an exemption or exception from
registration of the Issuable Units in the applicable
state.
(1) The
Company agrees to prepare and file with the Commission an Offering
Statement on Form 1-A, or, in the discretion of the Company, such
offering document as may then be required to be filed with the SEC
to seek an exemption pursuant to Section 3(b)(2) of the Act (any of
the foregoing, an “Offering Statement”) with
respect to the Issuable Units associated with the Purchase Period
and will use commercially reasonable efforts to cause such Offering
Statement to be declared qualified by the Commission as soon as
practicable thereafter. Such Offering Statement shall be filed with
the Commission sufficiently in advance, in the Company’s
commercially reasonable judgment, to provide for such Offering
Statement to be declared effective on or prior to the Purchase
Period.
(2) The
Company shall use commercially reasonable efforts to keep the
Offering Statement continuously qualified for at least that period
beginning on the date on which the Offering Statement is declared
qualified and ending on a date sufficient to allow for the
expiration of the Purchase Period. During the period that the
Offering Statement is qualified, the Company shall supplement or
make amendments to the Offering Statement, as required by the
Securities Act or other law, and shall use its commercially
reasonable efforts to have such supplements and amendments declared
qualified, if required, as soon as practicable after
filing.
(3) The
Company shall use its commercially reasonable efforts to register
or qualify Issuable Units under applicable state securities or
“blue sky” laws as of the date of qualification of the
Offering Statement or as soon as practicable thereafter, but only
to the extent legally required to do so, and shall use its
commercially reasonable efforts to keep such registration or
qualification in effect for so long as the Offering Statement
remains qualified with the Commission.
(4) Notwithstanding
the provisions of subsections (a) – (c) of this Section
12:
19
(A)
the Company shall have no obligation to file or seek qualification
of an Offering Statement with the Commission if the Company has
determined, upon the opinion of counsel, that another exemption or
exception from registration under the Securities Act is applicable
to the issuance of the Issuable Units; and
(B)
the Company shall have no obligation to register or qualify the
Issuable Units under any state’s securities or “blue
sky” laws if the Company has determined, upon the opinion of
counsel, that another exemption or exception from registration or
qualification under the applicable state securities or “blue
sky” laws is applicable.
7.4
Return of Capital
Contributions. Except as otherwise provided in this
Agreement, no Member shall be entitled to a return of any part of
his, her or its Capital Contribution or to receive any distribution
from the Company, and there shall be no obligation to return to any
Member any part of such Member’s Capital Contribution for so
long as the Company continues in existence.
7.5
No
Liability. No
Member, as such, shall be liable for any of the debts of the
Company or be required to contribute any additional capital to the
Company, each Member’s liability being limited to its Capital
Contribution. Notwithstanding the foregoing or any provision
to the contrary contained herein, all agreements and instruments
executed by Members assuming or guaranteeing obligations of the
Company shall be valid and enforceable in accordance with their
terms.
20
7.6
Guarantor
Payments. If a Guarantor (as defined below) makes a payment
to a lender of the Company pursuant to the terms of a Guaranty (as
defined below) and such Guarantor is a Member, then all amounts
paid to the lender pursuant to the Guaranty will be deemed an
additional Capital Contribution by such Member to the Company. If
such Guarantor is not a Member, the Manager shall cause the
admission of such Person as a Member and such Member will be deemed
to have made an additional Capital Contribution to the Company
equal to the amount paid to the lender pursuant to the Guaranty. A
“Guarantor” is a Manager,
Member or an Affiliate of a Manager or Member (other than the
Company) that is a guarantor of the debt of the Company, or has
pledged collateral to secure such debt or has provided other credit
support on behalf of the Company. A “Guaranty” is a guaranty
of the debt of the Company or the pledge of collateral to secure
such debt or the provision of other credit support on behalf of the
Company.
SECTION VIII
8.1
Determination of
Cash Flow. For purposes of this Agreement, the term
“Cash Flow” for a Fiscal Year of the Company shall mean
the profits and losses of the Company, but subject to the following
adjustments:
(a) In
determining Cash Flow for any year, there shall be added
depreciation, amortization, and other non-cash charges and, as the
Board determines, reductions in cash reserves.
(b) In
determining Cash Flow for any year, there shall be subtracted the
following amounts:
(i) Principal
payments on Company indebtedness, including indebtedness to a
Member;
(ii) Increases
in working capital, capital, maintenance, and contingency reserves
as the Board determines;
(iii) Payments
for capital expenditures; and
(iv) Fees,
interest payments on the Company’s indebtedness, and other
expenses to the extent paid or accrued by the Company in such year,
but not reflected in the computation of profits and
losses.
8.2
Distribution of
Cash Flow. The Board shall cause the Company to distribute
Cash Flow of the Company in such amounts and at such times as the
Board shall determine, in its sole and absolute discretion, to the
Members as of a Record Date fixed by the Board, in its discretion,
to the Members, pro rata, in accordance with their Percentage
Interests.
21
8.3
Amounts
Withheld. All amounts withheld, if any, pursuant to the Code
or any provisions of any state or local tax law and with respect to
any payment or distribution to the Members or Transferees shall be
treated as amounts distributed to the Members or Transferees, as
the case may be, pursuant to Section 8.2 for all purposes of
this Agreement.
8.4
Revisions to
Reflect Issuance of Units. If, in accordance with this
Agreement, the Company creates, authorizes and/or issues any new
Units, the Board may make such revisions to this Section VIII, the Company
Register and the books and records of the Company as it deems
necessary to reflect the terms, including without limitation the
rights and preferences of such Additional Units relative to all
other Units, as well as the issuance of such Additional Units, all
without the consent or approval of any Member.
8.5
Distributions
Solely to Record Holders. Each distribution in
respect of Units shall be paid by the Company, directly or through
the Transfer Agent or through any other Person or agent, only to
the Record Holder of such Units as of the Record Date set for such
distribution. Such payment shall constitute full payment and
satisfaction of the Company's liability in respect of such payment,
regardless of any claim of any Person who may have an interest in
such payment by reason of an assignment or
otherwise.
8.6
Liquidation Preference. In
the event of a sale, bankruptcy or dissolution of the Company, the
proceeds and all other assets of the Company shall be applied and
distributed as follows and in the following order of
priority:
(a) first, to the
satisfaction of the debts and liabilities of the Company
(contingent or otherwise) and the expenses of liquidation or
distribution (whether by payment or reasonable provision for
payment);
(b) second, to the
Class A Members’ in proportion to their investment in the
Original Offering less an amount equal to $10.00 per Class A Unit
redeemed in connection with the Partial Redemption or transferred
after the Effective Date and prior to the Split and less $6.25 per
Class A Unit either (i) redeemed or able to be redeemed in any
Secondary Redemption or (ii) transferred after the Split;
and
(c) last, the balance,
if any, to the Members in accordance with their Percentage
Interests.
SECTION IX
The
Board has caused the Company to elect to be taxed as a subchapter C
corporation under the Code by filing Form 8832 with the Service.
Subject to the consent of a Supermajority of the Members, the Board
may change the tax election status of the Company from time to
time. During any period for which the Company has elected to be
taxed as a subchapter C corporation, the Company will not make any
allocations of income, losses or expense deductions to the Members.
Tax information
reasonably required by Members for federal and state income
tax reporting purposes with respect to a taxable year shall be
furnished to them on or before January 31st of the year immediately
following such taxable year.
22
SECTION X
(a) Units
may be, in whole or in part, and directly or indirectly, sold,
pledged, encumbered, mortgaged, donated, bequeathed, assigned or
otherwise transferred (whether voluntarily or by operation of law)
(each, a “Transfer”) in accordance
with the terms of this Agreement, including without limitation,
this Section 10.1. A Member
seeking to Transfer Units shall provide the Board (at the
Company’s principal place of business) with Notice of its
intent to Transfer his, her or its Units, including without
limitation a description of the proposed Transferee. The Board
shall have seven (7) days to object to the Transfer. If the Board
has not responded to a request to Transfer within such 7-day
period, then the Board shall be deemed to have consented to such
Transfer. The Board
shall not withhold its consent to a Transfer unless the Board
believes in good faith that the Transfer: (i) will cause the
assets of the Company to become “plan assets” under
ERISA, (ii) will cause the Company to violate any law, rule or
regulation applicable to the Company, including without limitation
federal securities laws or the securities laws of any state, or
(iii) will cause the Company to become subject to the reporting
requirements of the Exchange Act. A Transfer shall not
include the acquisition of Units by exercise, exchange or
conversion of options or warrants to purchase, or other securities
convertible into, or exchangeable for, Units. Any Transfer or
attempted Transfer of Units in violation of, or without full
compliance with, as applicable, this Agreement shall be absolutely
void ab initio and without
legal effect other than to give rise to a cause of action
on the part of the
Company against the purported transferor. The Members
acknowledge the reasonableness of the restrictions on Transfer
imposed by this Agreement.
(b) Each
Transferee (including any nominee,
agent or representative acquiring Units for the account of another
Person, who shall be subject to Section 10.1(c) below)
(i) shall be admitted to the Company as a Member with respect to
the Units so transferred to such Person when any such Transfer is
reflected in the books and records of the Company and such Member
becomes the Record Holder of the Units so transferred, (ii) shall
become bound, and shall be deemed to have agreed to be bound, by
the terms of this Agreement, (iii) shall be deemed to represent
that he, she or it has the capacity, power and authority to enter
into this Agreement and (iv) makes the consents, acknowledgements
and waivers contained in this Agreement, all with or without
execution of this Agreement by such Person. A Person may become a
Member without the consent or approval of any of the other Members.
A Person may not become a Member without acquiring Units and until
such Person is reflected in the books and records of the Company as
the Record Holder of such Units.
(c) With
respect to any Member that holds Units for another Person's account
(such as a broker, dealer, bank, trust company or clearing
corporation, or an agent of any of the foregoing), in whose name
such Units are registered, such Member shall, in exercising the
rights of a Member in respect of such Units on any matter, and
unless the arrangement between such Persons provides otherwise,
take all action as a Member by virtue of being the Record Holder of
such Units at the direction of the Person who is the beneficial
owner, and the Company shall be entitled to assume such Member is
so acting without further inquiry.
23
(d) Any
Member who has transferred his, her or its Units shall cease to be
a Member upon the Transfer of all of the Member’s Units and
thereafter shall have no further powers, rights, and privileges as
a Member hereunder but shall, unless otherwise relieved of such
obligations by written agreement of the Board or by operation of
law, remain liable for all obligations and duties incurred as a
Member.
(e) Notwithstanding
the provisions above, a Transferee who becomes a substitute Member
is liable for any obligations of his, her or its transferor to make
Capital Contributions as provided in this Agreement or in the
Act.
10.2
Additional Members.
(a)
Additional Units Generally.
Additional Units may be offered and issued pursuant to a
determination by the Board to do so. A new Member’s admission
to the Company will cause a pro rata reduction in each
Member’s Percentage Interest unless the Board determines
otherwise.
(b)
Each Person issued Additional Units shall be deemed to have taken
the actions and made the representations set forth in Section
10.1(b).
(c)
Subscription Agreements. In
addition to, and not as a limitation upon, any other provision of
this Agreement, as a further condition to becoming a Member, the
Board may require each Person subscribing for Additional Units to
have executed and delivered a subscription agreement in form and
substance acceptable to the Board.
(d)
The Board shall, or shall cause the Transfer Agent to, reflect the
admission of such additional Members in the Company
Register.
(a) Partial Redemption Right. Within 30
days of the Effective Date, the Company shall be required to redeem
$500,000 of Class A Units from Class A Members, pro rata, at the original investment
price of $10.00 per Class A Unit (the “Partial
Redemption”).
(b) Secondary Redemption Rights. After the
Partial Redemption and the Split, the Class A Units held by a Class
A Member may be redeemed at the option of the Class A Member in
four installments equal (i) to one-quarter of such Class A
Member’s Class A Units then held or (ii) all of such Class A
Member’s Class A Units, whichever is less, for the Redemption
Price (each a “Secondary Redemption” and
collectively, the “Secondary
Redemptions”).
24
(c) Notice and Timing of Secondary
Redemptions. The Secondary Redemptions will occur in the
Redemption Years. If a Class A Member wishes to participate in the
Secondary Redemption for a given year, such Class A Member shall
provide their Notice of Redemption (a form of which is attached
hereto as Exhibit
B) on or before June 1st of that year.
Beginning in 2018 and continuing until the fourth Redemption Year,
the Company’s obligation to redeem in a given year is subject
to its achievement of EBITDA of at least $1,500,000 for the twelve
months preceding June 30th of such year. The
Company shall notify Class A Members on or before November
15th of
the applicable year as to whether they have achieved EBITDA of at
least $1,500,000 and provide the supporting financial statements in
such notice. Such notice may be accomplished by making a public
filing with the Commission via its Electronic Data Gathering,
Analysis and Retrieval system. If the Company achieves an EBITDA of
at least $1,500,000, the Company shall redeem the Class A Units
tendered by the Class A Members on or before December
31st of
such year. If a Class A Member does not tender its Class A Units in
a Redemption Year, such Class A Member’s Secondary Redemption
right with respect to those Class A Units that would have been
redeemable in such Redemption Year shall expire and be
void.
(f)
Effect of Redemption.
Immediately upon payment in full of the Redemption Price to a Class
A Member, the number of Class A Units of such Class A Member being
redeemed shall be immediately deemed canceled. If the entirety of
such Class A Member’s Class A Units have been redeemed, then
such Class A Member will automatically cease to be a Class A Member
and will no longer have any right, title or interest in the Company
as a Class A Member. The exercise of the rights set forth in this
Section 10.3 shall
in no way affect the right, title or interest of a Class A Member
as a Class B Member or other owner of Units in the Company,
including the ownership of, or the right to exercise, any Purchase
Right. The Board, or the Transfer Agent, as the case may be, shall
reflect the foregoing transactions in the Company
Register.
(a)
If Class A Units remain outstanding
following the fourth Redemption Year, then the Company shall have
the right to convert the remaining outstanding Class A Units into
Class B Units at the Company’s discretion, subject to the
provisions of this Section
10.4.
(b) At any time
following the fourth Redemption Year, the Company may elect to
convert all, but not less than all, of the then outstanding Class A
Units into Class B Units.
25
(c) As of the
Conversion Date, each Class A Member’s Class A Units will be
canceled, and such Class A Member shall be issued Class B Units
equal to such Class A Member’s number of Class A Units owned
immediately prior to conversion. The Class A Members shall then
cease to be Class A Members of the Company and shall be admitted as
Class B Members of the Company with no further action required. The
Company’s exercise of its conversion rights under this
Section 10.4 shall
in no way affect the right, title, or interest of a Class A Member
as a Class B Member or other owner of Units in the Company,
including the ownership of, or the right to exercise, any Purchase
Right. The Board, or the Transfer Agent, as the case may be, shall
reflect the foregoing transactions in the Company
Register.
(a)
The Board shall maintain, or cause to be maintained, by the
Transfer Agent in whole or in part, the Company
Register.
(b)
The names and addresses
of Record Holders as they appear in the Company Register, as
applicable, shall be the official list of Record Holders of the
Units for all purposes. The Company and the Board shall be entitled
to recognize the Record Holder as the Member with respect to any
Units and, accordingly, shall not be bound to recognize any
equitable or other claim to, or interest in, such Units on the part
of any other Person, regardless of whether the Company or the Board
shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule or regulation to which the
Company is subject. Without limiting the foregoing, when a Person
(such as a broker, dealer, bank, trust company or clearing
corporation or an agent of any of the foregoing) is acting as
nominee, agent or in some other representative capacity for another
Person in acquiring and/or holding Units, as between the Company on
the one hand, and such other Person on the other, such
representative Person shall be the Member with respect to such
Units upon becoming the Record Holder and have the rights and
obligations of a Member hereunder as, and to the extent, provided
herein, including Section 10.1(c).
(c)
Upon the
receipt of proper Transfer instructions from the Record Holder of
uncertificated Units and provided that the Board has not objected
to such Transfer in accordance with Section 10.1, such Transfer
shall be recorded in the Company Register. No Transfers of Units
represented by Unit Certificates shall be recognized or recorded in
the Company Register until the Unit Certificates representing the
Units to be transferred are surrendered for registration of
transfer and are accompanied by a transfer application, duly
executed by the transferee, indicating the identity of the
transferee and such other information as may be required by the
Board (the “Transfer
Application”). Upon
surrender for registration of transfer of any Units represented by
Unit Certificates and receipt of a duly executed Transfer
Application, the appropriate Officers of the Company, and the
Transfer Agent, if applicable, will countersign and deliver, in the
name of the transferee or transferees, one or more new Unit
Certificates evidencing the transferred Units.
10.6 Reserved.
26
10.7
Unit Certificates.
(a) The
Company may, in the discretion of the Board, upon the issuance of
Units to a Record Holder of the Units, issue such Record Holder a
certificate evidencing the Units being issued, in form to be
determined by the Board (a “Unit
Certificate”). Unit
Certificates shall be executed by such Officers of the Company as
may be determined by the Board. No Unit Certificate shall be valid
for any purpose until it has been countersigned by the Transfer
Agent, unless no Transfer Agent be appointed as of the date of
issuance, in which case Unit Certificates shall be valid upon their
execution and delivery by the appropriate Officers. Any or all
signatures on a Unit Certificate may be a facsimile. All Unit
Certificates shall bear a legend indicating the Units represented
thereby are subject to the restrictions on transfer contained in
this Agreement.
(b) In
the event that a Unit Certificate is lost, stolen or destroyed, the
appropriate Officers of the Company shall execute, and the Transfer
Agent (if any) shall countersign and deliver, a replacement Unit
Certificate to the applicable Record Holder if such Record
Holder:
(i) Makes
proof by affidavit, in form and substance satisfactory to the
Company, that a previously issued Unit Certificate has been lost,
destroyed or stolen;
(ii) Requests
the issuance of a new Unit Certificate before the Record Holder has
notice the Unit Certificate has been acquired by a purchaser for
value in good faith and without notice of an adverse claim;
and
(iii) Satisfies
any other reasonable requirements imposed by the
Company.
SECTION XI
11.1
Fiscal Year. The fiscal year
of the Company shall be from July 1st through June 30th of each year
(“Fiscal
Year”), with the first Fiscal Year of the Company
ending on June 30, 2013.
11.2
Reports. As soon as practicable, but in
no event later than one hundred twenty (120) days after the close
of each Fiscal Year of the Company, the Board shall cause to be
made available, by any reasonable means, to each Member as of a
date selected by the Board, an annual report containing financial
statements of the Company for such Fiscal Year of the Company,
presented in accordance with GAAP, including a balance sheet and
statements of operations, Company equity and cash flows, with such
statements having been audited by the Accountant selected by the
Board. The Board shall be deemed to have made a report available to
each Member as required by this Section 11.2 if it has either
(i) filed such report with the Commission via its Electronic Data
Gathering, Analysis and Retrieval system and such report is
publicly available on such system or (ii) made such report
available on any website maintained by the Company and available
for viewing by the Members.
27
(a)
The Board will select an account or accounts of a type, form, and
name and in a bank(s) or other financial institution(s), in which
to deposit funds of the Company. The Board shall arrange for the
appropriate maintenance of such accounts. Funds may be withdrawn
from such accounts only for Company purposes and may from time to
time be invested in such short-term securities, money market funds,
certificates of deposit, or other liquid assets as the Board deems
appropriate in the exercise of its discretion.
(b) The
Members acknowledge that the Board may maintain Company funds in
accounts, money market funds, certificates of deposit, and other
liquid assets in excess of the insurance provided by such federal
insurance programs, if any, and that the Board shall not be
accountable or liable for any loss of such funds resulting from the
failure or insolvency of a depository institution.
(c) Checks,
notes, drafts and other orders for the payment of money shall be
signed by such Officers or other Persons as the Board from time to
time may authorize. When the Board so authorizes, however, the
signature of any such Officer or other Person may be a
facsimile.
11.4 Books
and Records. At all times during the term of the Company,
the Board shall keep, or cause to be kept, full and accurate books
of account, records and supporting documents, which shall reflect,
completely, accurately and in reasonable detail, each transaction
of the Company. The books of account shall be maintained, and tax
returns shall be prepared and filed, utilizing the accrual method
of accounting. The books of account, records, and all documents and
other writings of the Company shall be kept and maintained at the
principal office of the Company. Each Member or his, her or its
designated representative shall have access to, and the right to
review the information set forth in romanettes (i)-(v) below,
provided that, any such
Member has provided the Board a written request for such access and
review, setting forth in reasonable detail the reasons therefor,
and provided further that
the Board may deny such request, if in good faith it finds that the
reasons for such access and review are not in the best interest of
the Company.
(i)
a copy of the Certificate of Formation and amendments
thereto;
(ii)
copies of the Company’s federal, state, and local income tax
returns and reports, if any, for the three (3) most recent years;
and
(iii)
copies of this Agreement, as amended from time to time,
and
(iv)
financial statements of the Company for the three (3) most recent
years, or the period of the Company’s existence if less than
three (3) years.
28
Pursuant to §
18-305(g) of the Act, the Members shall only have such rights to
obtain information relating to the Company, or access to the books,
records and documents of the Company, as expressly provided in this
Agreement. Each Member acknowledges that this provision regarding
access and review of financial books, records and documents are
reasonable and in accordance with the provisions of
§ 18-305 of the Act. Each Member acknowledges that any
information it receives from the Company pursuant to this
Section 11.4 is
confidential and proprietary information of the Company, unless
such information is available publicly prior to the date of the
requesting Member’s receipt thereof. No Member shall share or
divulge such confidential information with any third party, other
than as expressly consented to in writing by the Board, or as
otherwise required by law or court order.
11.5 Notices.
Unless otherwise set forth in this Agreement, any notice required
under this Agreement (“Notice”) shall be given
in writing, either personally or by mail or other means of written
communication, including facsimile, charges prepaid, addressed to
the Member at the address of the Member appearing on the books of
the Company or given by the Member to the Company for the purpose
of notice or to the Company at its principal place of business. Any
Member may designate a different address for notice by a Notice to
the Company in accordance with the provisions of this Section 11.5. The Company
(in care of its Board), if it is not the party to which Notice is
being given, shall be sent a copy of all Notices related to this
Agreement by any method permitted by this Section 11.5 for the giving of
Notice. Any Notice shall be deemed given at the time when delivered
personally, or deposited in the mail or sent by other means of
written communication, including facsimile.
11.6 Binding
Effect. Subject in all respects to the limitations
concerning the Transfer of Units in the Company contained in this
Agreement, and except as otherwise herein expressly provided, the
provisions of this Agreement shall be binding upon and inure to the
benefit of the Company, the Members, and their respective heirs,
legatees, devisees, executors, trustees, administrators, personal
representatives and successors and assigns. This Agreement shall
not be construed to provide any rights to third parties, including
without limitation the creditors of the Company or of the Members,
it being the intent of the parties to this Agreement that there
shall be no third-party beneficiaries of this
Agreement.
11.7 Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall for all purposes constitute one agreement, which is
binding on the Company and all of the Members.
11.8 Section
Headings. Section titles or captions contained in this
Agreement are inserted as a matter of convenience and for reference
only and shall not be construed in any way to define, limit, or
extend or describe the scope of this Agreement or the intention of
its provisions.
11.9 Exhibits.
The terms of the Exhibits to this Agreement are made a part of this
Agreement by reference as though such Exhibits were fully set forth
in this Agreement.
29
11.10 Variation
in Pronouns. All pronouns shall be deemed to refer to
masculine, feminine, neuter, singular or plural, as the identity of
the Person or Persons to which they refer may require.
11.11 Severability.
Each provision of this Agreement is intended to be severable, and
the invalidity or illegality of any portion of this Agreement shall
not affect the validity or legality of the remainder.
11.12 Qualification
in Other States. If the business of the Company is carried
on or conducted in states in addition to Delaware, then the Members
severally agree to execute such other and further documents as may
be required or requested by the Board to qualify the Company in
such states.
11.13 Entire
Agreement. This Agreement constitutes the entire agreement
of the parties concerning the matters set forth in this Agreement
and supersedes any understanding or agreement, oral or written,
made before this Agreement.
11.14 Forum.
Any action by one or more Members against the Company or its Board,
Officers or any of their respective Affiliates or by the Company or
its Board , Officers or any of their respective Affiliates against
one or more Members or their respective Affiliates, which arises
under, or in any way relates to this Agreement, the sale of the
Units or actions taken or failed to be taken or determinations made
or failed to be made by the Company, the Board, Officers, the
Members or their respective Affiliates or otherwise relating to the
Company or the products or services that it or its Affiliates
provide or joint activities or other transactions in which it
engages with third parties, including without limitation
transactions permitted hereunder, or otherwise related in any way
to the Company, the Board, Officers, the Members or the Affiliates
of any of them, shall be brought only in the United States District
Court sitting in Richmond, Virginia or in the courts of record of
the State sitting in Richmond, Virginia, and each party hereto
hereby irrevocably waives any right that it may have to challenge
such jurisdiction or the laying of venue in any such courts or the
right to assert any inconvenience of the forum in connection with
any such proceeding. The
losing party shall bear any fees and expenses of the other parties
to such action, including reasonable attorney’s fees, any
costs of producing witnesses and any other reasonable costs or
expenses incurred by the prevailing party. If the losing party is a
Member and such Member does not reimburse the prevailing party or
parties in such action within 30 days after the disposition of the
action at issue, the Company may apply any distributions payable to
such Member to the Member’s reimbursement obligation to the
prevailing party or parties. The foregoing shall not limit the
remedies which a prevailing party may have hereunder or at
law. EACH PARTY HERETO ALSO
IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN CONNECTION WITH
ANY SUCH ACTION.
11.15 Amendments.
Except as otherwise set forth in Sections 4.8(f), 5.2(d), 8.4 and this
Section 11.15 of this Agreement, this Agreement may not be
amended, except with the consent of a Majority of the Members;
provided, however, that no
Member shall be required without his, her or its prior written
consent to make any Capital Contribution in excess of the amount
set forth in this Agreement or in the Company Register;
provided further,
however, that the Board may
amend this Agreement without the consent of the Members to reflect
changes validly made in the membership of the Company and in
Capital Contributions. Notwithstanding anything to the contrary
contained in this Agreement, no amendment may be made to this
Agreement which would reduce or otherwise adversely affect the
economic, voting or other rights of a class of Members without the
consent of a Majority of the Members in such class. All amendments
of this Agreement shall be in writing, copies of which shall be
kept at the principal place of business of the Company. The Board,
without the necessity of obtaining the consent of any of the
Members, shall amend this Agreement from time to time in each and
every manner to comply with the then existing requirements of the
Code, Regulations, and rulings of the Service. Any revision or
amendment to the Company Register by the Board or Transfer Agent
pursuant to a valid issuance of Units pursuant to an Offering or
any Transfer consented to by the Board shall not constitute an
amendment to this Agreement.
11.16 Deemed
Execution. A Person purchasing Units in an Offering or
receiving Units as equity incentive compensation, shall be deemed
bound by this Agreement as of the closing of such Person’s
purchase or receipt of such Units.
[Signature
Pages Follows]
30
THE
COMPANY:
a
Delaware limited liability company
By:
/s/ Xxxxxxx X.
Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Its:
Authorized Signatory
CLASS
B MEMBERS:
Continuum Capital,
LLC
By:
/s/ Xxxxxxx X.
Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Its:
Manager
Chesapeake Realty
Advisors, LLC
By:
/s/ Xxxxxxxxxxx X.
Xxxxxx
Name:
Xxxxxxxxxxx X. Xxxxxx
Its:
Manager
31