EXHIBIT 10.1
ZOOM GROUP LLC
OPERATING AGREEMENT
This Operating Agreement of ZOOM GROUP LLC (the "Company"), a limited
liability company organized pursuant to the Act, is entered into and shall be
effective as of March ____, 2002 by and among the Persons executing this
Agreement as Members and the Persons executing this Agreement as Managers.
PRELIMINARY STATEMENT
WHEREAS the Company was formed as a Massachusetts limited liability company
pursuant to a Certificate filed with the Secretary of State of the State on
March __ 2002; and
WHEREAS the Members and Managers desire to enter into this Agreement to,
among other things, provide for the operation of the Company, and, in general,
to set out fully the rights and obligations of the Members and Managers of the
Company.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members and Managers hereby agree as follows:
ARTICLE I
DEFINITIONS
The defined terms used in this Agreement shall have the meanings specified
below, unless otherwise defined in this Agreement:
"AAA" has the meaning set forth in Section 11.03.
"Accountants" means such firm of independent certified public accountants
as may be engaged by the Company.
"Act" means the Massachusetts Limited Liability Company Act.
"Additional Capital Contributions" has the meaning set forth in Section
4.09.
"Adjusted Capital Account" means the Capital Account maintained for each
Member as of the end of each fiscal year as adjusted under Section 4.02 hereof,
and further (i) increased by any amounts which such Member is obligated to
restore pursuant to any provision of this Agreement or is treated as being
obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the
items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition
of Adjusted Capital Account is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"Affiliate" means, with respect to a specified Person, (i) any Person that
directly or indirectly controls or is controlled by or is under common control
with the specified Person, and (ii) any Person that is an officer of, general
partner in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, general partner
or trustee, or with respect to which the specified Person serves in a similar
capacity.
"Agreement" means this Operating Agreement, including all Exhibits and
Schedules attached hereto, as it may be amended from time to time.
"Allocation Period" means (i) the period commencing on the date hereof and
ending on December 31, 2002, (ii) any subsequent period commencing on January 1
and ending on the following December 31, or (iii) any portion of the period
described in clause (ii) for which the Company is required to allocate profits,
losses and other items of income, gain, loss or deduction pursuant to Article
IV.
"Assign" or "Assignment" has the meaning set forth in Section 9.01.
"Call" has the meaning set forth in Section 9.06.
"Call Option Price" has the meaning set forth in Section 9.06.
"Call Period" means the period beginning on the Option Effective Date and
ending on December 31, 2005.
"Capital Account" has the meaning set forth in Section 4.02(a).
"Capital Contribution" means the amount of cash or the fair market value of
property contributed to the Company by each Member as the consideration for such
Member's interest in the Company pursuant to Article IV (including any
Additional Capital Contributions). Any reference in this Agreement to the
Capital Contribution of a then Member shall include a Capital Contribution
previously made by any prior Member with respect to the interest of such then
Member in the Company.
"Capital Event" means a sale of all or a substantial portion of the
Company's assets or a revaluation of the Company's assets in connection with
maintaining Capital Accounts or any transaction in contemplation of liquidation.
"Certificate" means the Certificate of Organization as filed with the
Secretary of State of the State, as the same may be amended from time to time.
"Change In Control" means with respect to any ultimate parent company of
the Company or a Member, as the case may be (or the Company or such Member if
there is no ultimate parent company) (the "Subject Entity").
(i) the acquisition by any Person, including any "person" within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial
ownership, within the meaning of Rule 13d-3 promulgated under the Exchange
Act, of more than 50% of either (i) the then outstanding shares of common
stock of the Subject Entity (the "Outstanding Common Stock") or (ii) the
combined voting power of the then outstanding securities of the Subject
Entity entitled to vote generally in the election of directors (the
"Outstanding Voting Securities");
(ii) the consummation of a reorganization, merger or consolidation of
the Subject Entity or sale or other disposition of all or substantially all
of the assets of the Subject Entity (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which all or substantially all
of the Persons who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 50%, respectively, of the Outstanding shares of
Common Stock and the combined voting power of the outstanding securities
entitled to vote generally in the election of directors, as the case may
be, of the Person resulting from such Corporate Transaction (including,
without limitation, a Person which as a result of such transaction owns the
Subject Entity or all or substantially all of the Subject Entity's assets
either directly or indirectly) in substantially the same proportions
relative to each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Common Stock and the Outstanding
Voting Securities, as the case may be;
(iii) the consummation of a plan of complete liquidation or
dissolution of the Subject Entity; or
(iv) an Event of Bankruptcy with respect to the Subject Entity.
"Closing Credit" has the meaning set forth in the Second Amendment.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contribution Loan" has the meaning set forth in Section 4.09(b)(i).
"Contributing Member" has the meaning set forth in Section 4.09(b).
"Convertible Securities" means any rights or securities convertible
into or exchangeable for Units.
"Depreciation" means, for each Allocation Period, an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable
for federal income tax purposes with respect to an asset for such
Allocation Period, except that if the Gross Asset Value of an asset differs
from its adjusted basis for federal income tax purposes at the beginning of
such Allocation Period, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such
Allocation Period bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an
asset at the beginning of such Allocation Period is zero, Depreciation
shall be determined with reference to such beginning Gross Asset Value
using any reasonable method selected by the Managers.
"Dispute" has the meaning set forth in Section 11.01.
"Xxxxxxx Money" has the meaning set forth in the Purchase Agreement.
"Event of Bankruptcy" means, with respect to any Person:
(i) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of such Person in an involuntary
case under the Federal bankruptcy laws, as now or hereafter constituted, or
any other applicable Federal or state bankruptcy, insolvency or other
similar law, appointing a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of such Person or for any
substantial part of its property, or ordering the winding-up or liquidation
of its affairs and the continuance of any such decree or order unstayed and
in effect for a period of one hundred eighty (180) consecutive days; or
(ii) the commencement by such Person of any proceeding seeking a
decree, order, appointment or other relief referred to in clause (i) above,
the consent to or failure to oppose the granting of such relief, or the
failure of such Person generally to pay its debts as such debts become due,
or the taking of any action by such Person in furtherance of any of the
foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows: (i) The
initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross fair market value of such asset, as determined
by the Managers;
(ii) The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the
Managers, as of the following times: (A) the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (B) the distribution by the Company
to a Member of more than a de minimis amount of property as consideration
for an interest in the Company; and (C) the liquidation of the Company
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g): provided,
however, that adjustments pursuant to clauses (A) and (B) above shall be
made only if the Managers reasonably determine that such adjustments are
necessary or appropriate to reflect the relative economic interests of the
Members in the Company;
(iii) The Gross Asset Value of any Company asset distributed to a
Member shall be adjusted to equal the gross fair market value of such asset
on the date of distribution as determined by the Managers; and
(iv) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and
subparagraph (vi) of the definition of Profits and Losses herein; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subparagraph (iv) to the extent the Managers determine that an adjustment
pursuant to subparagraph (ii) is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to
this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraphs (i), (ii), or (iv), such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing profits and losses. For purposes of this
definition of Gross Asset Value, a Capital Contribution or distribution shall be
considered de minimis if its value is less than $25,000.
"Intangible Personal Property" has the meaning set forth in the Purchase
Agreement.
"Investment Capital Contributions" means that portion of aggregate
Additional Capital Contributions that is used solely to cover expenses that are
amortizable or depreciable under the terms of the Internal Revenue Code of 1986
and the Treasury regulations issued thereunder, each as amended from time to
time.
"Leases" has the meaning set forth in the Purchase Agreement.
"Level 1 Review" has the meaning set forth in Section 11.02.
"Level 2 Review" has the meaning set forth in Section 11.02.
"License Agreements" has the meaning set forth in the Purchase Agreement.
"Liquidator" has the meaning set forth in Section 10.01(b).
"Majority Consent of the Members" means the vote at a meeting or the
Written Consent of Members holding at least a majority of the aggregate
Percentage Interests in the Company.
"Managers", "Board" or "Board of Managers" means those Persons named as
managers of the Company in this Agreement and any Person who becomes an
additional, substitute or replacement Manager in accordance with Article V, in
such Person's capacity as a Manager, and "Manager" means any of the Managers.
"Members" means the parties executing this Agreement as Members and any
Person subsequently admitted to the Company as a Substitute Member or an
additional Member in accordance with the terms of this Agreement, in such
Persons capacity as a Member, and "Member" means any of the Members.
"Net Purchase Equity" has the meaning set forth in Section 9.07.
"Neutral" has the meaning set forth in Section 11.03.
"Non-Contributing Member" has the meaning set forth in Section 4.09(b).
"Non-Zoom Members" means the Members of the Company other than Zoom.
"Non-Zoom Members' Net Profit" has the meaning set forth in Section 9.06.
"Option Effective Date" means the date of complete execution and delivery
of the Second Amendment.
"Option Notification" has the meaning set forth in Section 9.07.
"Percentage Interest" means, for each Member, at any particular time, the
percentage obtained by dividing the number of Units owned by such Member by the
total number of Units outstanding. The Percentage Interest of each Member is as
indicated on Schedule A, as amended from time to time in accordance with the
terms of this Agreement.
"Permitted Transferees" has the meaning set forth in Section 9.03.
"Person" means any individual, general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association, and the heirs, executors, administrators, legal
representatives, successors and assigns of the "Person" when the context so
permits.
"Prime Rate" means the prime rate as defined in the "Money Rates" section
of The Wall Street Journal on the date in question.
"Profits" and "Losses" means for each Allocation Period, an amount equal to
the Company's taxable income or loss for such year or period, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits and Losses shall
be added to such taxable income or loss;
(ii) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Section 1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise taken
into account in computing Profits or Losses, shall be subtracted from such
taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset is
adjusted pursuant to paragraph (ii) or (iii) of the definition of Gross
Asset Value herein the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Profits or Losses;
(iv) gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Period
or other period, computed in accordance with the definition of Depreciation
herein;
(vi) to the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Sections 734(b) or 743(b) is required,
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into
account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain or loss from the
disposition of such asset for purposes of computing Profits or Losses; and
(vii) notwithstanding any other provisions hereof, any items which are
specially allocated pursuant to Section 4.04(a) hereof shall not be taken
into account in computing Profit or Losses.
The amounts of items of Company income, gain, loss or deduction available
to be specially allocated pursuant to Section 4.04(b) hereof shall be determined
by applying rules analogous to those set forth in paragraphs (i) through (vi)
above.
"Project" has the meaning set forth in Section 2.03.
"Property" has the meaning set forth in the Purchase Agreement.
"Purchase Agreement" means the Agreement of Purchase and Sale having an
effective date of January 11, 2001 with respect to the land with improvements
thereon known and numbered as Building 114, Section A, 00-00 Xxxxxxx Xxxxxx,
Xxxxx Xxxxxx, Xxxxxxxxxxxxx, entered into between Zoom and SKW Real Estate
Limited Partnership, as amended from time to time.
"Purchase Price" has the meaning set forth in the Purchase Agreement.
"Real Property" has the meaning set forth in the Purchase Agreement.
"Regulations" or "Treasury Regulations" means regulations promulgated under
the Code, as in effect from time to time.
"Retirement" means in the case of any Member, the death or incapacity of
such Member or an Event of Bankruptcy with respect to such Member. Incapacity
shall mean an adjudication of insanity or incompetency. Upon Retirement, a
Member shall be referred to as a "Retired Member."
"Second Amendment" means the Reinstatement Agreement, Assignment Agreement
and Second Amendment to the Purchase Agreement entered into by and among SKW
Real Estate Limited Partnership, Zoom and the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"State" means the Commonwealth of Massachusetts.
"Substitute Member" means an assignee of a Unit who is admitted as a Member
of the Company pursuant to this Agreement.
"Supermajority Consent of the Members" means the vote at a meeting or the
Written Consent of Members holding at least two-thirds (2/3) of the aggregate
Percentage Interests in the Company.
"Tangible Personal Property" has the meaning set forth in the Purchase
Agreement.
"Unit" means an interest in the Company held by a Member. The number of
Units held by each Member is as indicated on Schedule A, as amended from time to
time in accordance with the terms of this Agreement.
"Written Consent" means the written consent or approval of the affected
Member or Manager, as the case may be. The Company shall deliver, or cause to be
delivered, to each affected Member or Manager reasonable prior written notice of
any proposed action the taking of which would require the Written Consent of
such Member or Manager pursuant to this Agreement. Each affected Member or
Manager shall deliver to the Company written notice of its approval or
disapproval of any such proposed action on or before the fifth (5th) business
day after delivery of the notice from the Company referred to in the preceding
sentence. If any affected Member or Manager fails to deliver such notice within
such five (5) business day period, such proposed action shall be deemed to have
been approved by such Member or Manager. All deliveries of writings shall be
governed by Section 13.01.
"Zoom" means Zoom Telephonics, Inc., a Delaware corporation.
"Zoom Option" has the meaning set forth in Section 9.07.
"Zoom Option Period" means the period beginning on the Option Effective
Date and ending on January 5, 2003.
"Zoom Option Price" has the meaning set forth in Section 9.07.
"Zoom's Legal Share" has the meaning set forth in Section 9.07.
"Zoom's Net Profits" has the meaning set forth in Section 9.07.
Words used herein, regardless of the number and gender used, shall be
deemed and construed to include any other numbers, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires, and, as
used herein, unless the context clearly requires otherwise, the words "hereof,"
"herein," and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provisions hereof.
ARTICLE II
GENERAL PROVISIONS
2.01 Formation of the Company. The parties hereby confirm the formation of
the Company as a limited liability company pursuant to the provisions of the
Act. Except as expressly provided herein, the rights and obligations of the
Members and Managers and the administration and termination of the Company shall
be governed by the Act. The Managers shall take all actions necessary to assure
the prompt filing of any documents or instruments necessary or appropriate to
effectuate the provisions of this Agreement and the conduct of the operations of
the Company as contemplated hereby.
2.02 Name of the Company. The name of the Company shall be "Zoom Group LLC"
or such other name as the Managers may from time to time determine. The Managers
shall cause to be filed on behalf of the Company such corporate, assumed or
fictitious name certificate or certificates as may from time to time be required
by law.
2.03 Business of the Company. The Company shall be organized as a "special
purpose entity", whose business shall consist solely of the acquisition,
ownership, operation, development, renovation, management, leasing, financing
and refinancing of Building 114, Section A, 00-00 Xxxxxxx Xxxxxx, Xxxxx Xxxxxx,
Xxxxxxxxxxxxx (the "Project") and such activities as are necessary, incidental
or appropriate in connection therewith; further, the Company will not: (a)
engage in any business or activity other than the acquisition, ownership,
operation, development, renovation, management, leasing, financing and
refinancing of the Project and activities incidental thereto; (b) acquire or own
any material assets other than (i) the Project, and (ii) such incidental
personal property as may be necessary for the operation of the Project; (c)
consent to the dissolution or winding up, in whole or in part, of the Company,
nor shall the Managers of the Company consent to the dissolution or liquidation,
in whole or in part, of the Company; (d) fail to preserve its existence as an
entity duly formed, validly existing and in good standing (if applicable) under
the laws of the State; (e) commingle its assets with the assets of its Members
or of any other person or entity, or (f) make any loans or advances to any third
party (including any Affiliate of the Company or any member or principal of an
Affiliate of any Member or principal of the Company); further, the Company shall
(i) maintain its assets, books and records in a way which segregates and
identifies such assets separate and apart from the assets of any other person or
entity, (ii) hold itself out to the public as a separate legal entity distinct
from any other person or entity, (iii) conduct business solely in its name, (iv)
not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation); (v) be solvent and pay its liabilities from its
assets as the same shall become due; (vi) file its own tax returns; and (vii)
maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations.
2.04 Place of Business of the Company; Registered Office and Registered
Agent. The principal place of business of the Company shall be located at c/o
Northstar Management, 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000. The
Managers may, at any time and from time to time, change the location of the
Company's principal place of business upon written notice of such change to the
Members. The Managers shall have the authority to cause the Company to do
business in jurisdictions other than the State. The registered agent for service
of process for the Company in the State shall be the initial registered agent
named in the Certificate or such other Person or Persons as the Managers may
designate in the manner provided in the Act. The registered office of the
Company required by the Act to be maintained in the State shall be the initial
registered office named in the Certificate or such other office (which need not
be a place of business of the Company) as the Managers may designate from time
to time in the manner provided by the Act.
2.05 Duration of the Company. The Company shall continue in existence until
terminated in accordance with Article X hereof.
2.06 Title to Company Property. All property owned by the Company, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Company as an entity, and no Member, individually, shall have any ownership of
such property. The Company may hold any of its assets in its own name or in the
name of its nominee, which nominee may be one or more individuals, partnerships,
trusts or other entities.
2.07 Members Names and Addresses. The names and addresses of the Members
are as set forth on Schedule A, as amended from time to time in accordance with
the terms of this Agreement.
2.08 No Partnership Relationship. Notwithstanding, but not in limitation
of, any other provision of this Agreement, the parties understand and agree that
the creation, management and operation of the Company shall not create or imply
a general partnership or joint venture between or among the Members and shall
not make any Member the agent or partner of any other Member for any purpose
other than Federal and state tax purposes.
ARTICLE III
DISTRIBUTIONS
3.01 General. The Board of Managers shall determine the amount and timing
of all distributions to the Members of the Company; provided, however, that the
Members, by Supermajority Consent of the Members, may from time to time override
such determination by Board of Managers and change the amount and/or timing of
distributions to the Members. All distributions shall be distributed to and
among the Members in accordance with their respective Percentage Interests,
except liquidating distributions shall be made as set forth in Article X.
ARTICLE IV
CAPITAL CONTRIBUTIONS, LOANS AND ALLOCATION OF PROFITS AND LOSSES
4.01 Capital Contributions; No Withdrawal Rights; Loans By Members.
(a) Each Member has made one or more Capital Contributions to the Company
in the aggregate amount set forth opposite such Member's name under the heading
"Capital Contribution" on Schedule A hereto, as amended from time to time in
accordance with the terms of this Agreement. Except as specifically provided in
this Agreement, no Member shall be required to make any additional Capital
Contributions or any loans to the Company.
(b) No interest shall accrue on any contributions to the capital of the
Company, and no Member shall have the right to withdraw or to be repaid any
capital contributed by him or it or to receive any other payment in respect of
his or its interest in the Company (including, without limitation, upon
withdrawal from the Company), except as specifically provided in this Agreement.
4.02 Capital Accounts.
(a) In determining allocations of income and loss for federal income tax
purposes, a capital account (the "Capital Account") shall be maintained for each
Member in accordance with the capital account maintenance rules set forth in
Treasury Regulations Section 1.704-1(b)(2)(iv). Without limiting the generality
of the foregoing, each Member's Capital Account shall be increased by (i) the
amount of money contributed by such Member to the Company, (ii) the Gross Asset
Value of property contributed by such Member to the Company (net of liabilities
that the Company is considered to assume or take subject to in accordance with
Section 752 of the Code), and (iii) allocations to such Member of Profits; and
shall be decreased by (w) the amount of money distributed to such Member, (x)
the Gross Asset Value of any property distributed to such Member (net of any
liabilities that such Member is considered to assume or take subject to in
accordance with Section 752 of the Code), and (y) allocations to such Member of
Losses.
(b) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in
a manner consistent with such Treasury Regulations. In the event the Board of
Managers shall determine, in its reasonable discretion, that it is necessary or
advisable to modify the manner in which the Capital Accounts, or any debits or
credits thereto, are computed in order to comply with such Treasury Regulations,
the Board of Managers may make such modification; provided, however, that such
modification shall not have a material adverse effect on any Member.
4.03 Determination and Allocations of Profits and Losses. The income,
gains, losses, deductions and credits of the Company shall be determined for
each fiscal year in accordance with generally accepted accounting principles,
consistently applied.
(a) Profits for a fiscal year, other than Profits attributable to a Capital
Event, shall be allocated among the Members:
(i) first, to eliminate a negative Adjusted Capital Account of any
Member; and
(ii) thereafter, in proportion to each Member's Percentage Interest.
(b) Losses for a fiscal year, other than Losses attributable to a Capital
Event, shall be allocated among the Members in the following order:
(i) first, to reduce the Adjusted Capital Account of each Member to
zero; and
(ii) thereafter, in proportion to each Member's Percentage Interest.
(c) Items of income, gain, loss and deduction attributable to a Capital
Event shall be allocated among the Members so as to cause the Members Capital
Accounts to be in proportion to their respective Percentage Interests.
4.04 Regulatory Allocations.
(a) Tax Allocations: Code Section 704(c).
(i) Except as otherwise provided herein, all items of income, gain,
loss, deduction and credit realized by the Company shall, for each fiscal
year, be allocated for Federal, state and local income tax purposes among
the Members in the same manner as the items of income, gain, loss,
deduction and credit were allocated pursuant to Section 4.03.
(ii) In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes,
be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal
income tax purposes and its initial Gross Asset Value (computed in
accordance with subparagraph (i) of the definition of Gross Asset Value).
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii) of the definition of Gross Asset
Value, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its Gross
Asset Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.
(iv) Any elections or other decisions relating to such allocations
shall be made by the Managers in any manner that reasonably reflects the
purpose and intention of this Agreement. Allocations pursuant to this
Section 4.04(a) are solely for purposes of federal, state, and local taxes
and shall not affect, or in any way be taken into account in computing, any
Capital Account or share of profits, losses, other items, or distributions
pursuant to any provision of this Agreement.
(v) Except as otherwise provided in this Agreement, all items of
Company income, gain, loss, deduction, and any other allocations not
otherwise provided for shall be divided among the Members in the same
proportions as they share profits or losses, as the case may be, for the
Allocation Period.
(b) Notwithstanding Section 4.03, the following allocations shall apply:
(i) the "minimum gain chargeback requirement" of Regulations Section
1.704-2(f);
(ii) the "chargeback of partner nonrecourse debt minimum gain"
requirement of Regulations Section 1.704-2(i)(4); and
(iii) the "qualified income offset" provision of Regulations Section
1.704-1(b)(2)(ii)(d).
(c) The economic arrangement intended by the Members with respect to
distributions on liquidation is based on Capital Accounts adjusted for profits
and losses as set forth in Section 4.03 without consideration of the allocations
specified in Section 4.04(b), above. Therefore, in the event the allocations
specified in Section 4.04(b) or any other allocations required by the Code or
other applicable tax law would cause the Capital Accounts balances of the
Members to differ from the Capital Account balances which would have pertained
in the absence of such allocations, the Managers will specially allocate items
of income, gain, loss and deduction in a manner which complies with Code section
704(b) and causes the Capital Account of each Member to equal as closely as
practicable the Capital Account such Member would have had in the absence of any
such allocations required by Section 4.04(b) or other allocations required by
the Code or other applicable tax law.
4.05 Allocations Upon Transfer or Admittance. In the event that a Member
acquires an interest in the Company either by transfer from another Member or by
acquisition from the Company, unless a different method is selected by the
Managers, (i) an equal portion of the profits or losses from ordinary operations
of the Company for the year in which such acquisition occurs shall be allocated
to each day of such year, and the profits and losses so allocated to the portion
of the year prior to the date of the acquisition of the interest in the Company
by the Member shall be allocated among the Members without giving effect to such
acquisition, and the profits and losses so allocated to the portion of the year
from and after the date of the acquisition of such interest shall be allocated
among the Members by giving effect to such acquisition, and (ii) profits and
losses realized from the sale or other disposition of the assets of the Company
outside of ordinary operations shall be allocated among the Members based upon
the actual ownership of interests in the Company on the date of the event giving
rise to such profits or losses.
4.06 Allocations with Respect to Non-cash Distributions. In the case of a
non-cash distribution, the Company shall be deemed to have recognized income or
loss as if the distributed property were sold for fair market value as
determined in good faith by the Board of Managers and the Capital Accounts of
the Members will be adjusted accordingly.
4.07 Amounts Withheld. All amounts withheld pursuant to the Code or any
provisions of any state, local or foreign tax law with respect to any payment,
distribution or allocation to the Members shall be treated as amounts paid or
distributed, as the case may be, to the Members with respect to which such
amount was withheld pursuant to this Section 4.07 for all purposes under this
Agreement. The Company is authorized to withhold from payments and
distributions, or with respect to allocation to the Members, and pay over to any
Federal, state and local government or any foreign government, any amounts
required to be so withheld pursuant to the Code or any provisions of any other
Federal, state or local law or any foreign law, and shall allocate any such
amounts to the Members with respect to which such amount was withheld.
4.08 Loans by Members.
(a) In the event the Company requires additional funds to carry out its
purposes, conduct its business, meet its obligations or make any expenditure
authorized by this Agreement, and additional funds are not available from third
parties on terms acceptable to the Board of Managers in its sole discretion, any
Member may, but shall not be obligated to, loan such funds to the Company. Any
loan made pursuant to this Section shall be nonrecourse to the Member, shall be
evidenced by a promissory note, shall be unsecured, shall not violate the
Company's other loan or contractual arrangements, shall bear interest,
compounded monthly, at a rate of interest equal to the Prime Rate plus four (4)
percentage points, shall be repaid out of the first funds available therefor and
in any event prior to any distribution to any Member, and shall be due and
payable in full on the first (1st) anniversary of the date on which any such
loan is made.
(b) Loans by a Member to the Company shall not be considered Capital
Contributions. If any Member shall advance funds to the Company in excess of the
amounts required hereunder to be contributed by such Member to the capital of
the Company, the making of such advances shall not result in any increase in the
amount of the Capital Account of such Member. The amounts of any such advances
shall be a debt of the Company to such Member and shall be payable or
collectible only out of the Company assets in accordance with the terms and
conditions upon which such advances are made, subject to the provisions of
Section 4.08(a). The repayment of loans from a Member to the Company upon
liquidation shall be subject to the order of priority set forth in Article X.
4.09 Additional Capital Contributions.
(a) Obligation to Make Additional Capital Contributions. Except as
otherwise provided in Section 9.07(c) below, each Member shall be obligated to
(and does hereby covenant and agree to) contribute, at such times and in the
manner as may be determined by Supermajority Consent of the Members, its pro
rata share (based on Percentage Interests) of additional capital required to
fund the operations of the Company from time to time (the "Additional Capital
Contributions"). All such Additional Capital Contributions shall be paid within
thirty (30) days of receipt of a capital call notice from the Board of Managers
requiring that such Additional Capital Contributions be made; provided, however,
that the total of all required Capital Contributions, including, but not limited
to, Additional Capital Contributions, prior to the closing under the Purchase
Agreement shall not exceed $540,000 per Member.
(b) Non-Contributing Members. If any Member (hereinafter referred to as a
"Non-Contributing Member") fails to make an Additional Capital Contribution at
the time specified above, any Member who made its required Additional Capital
Contribution (hereinafter referred to as the "Contributing Member") shall
thereafter have the right, but not the obligation, to do one or more of the
following, in addition to all other rights and remedies under this Agreement or
otherwise available at law or in equity by notice to the Non-Contributing Member
of the amount which has been advanced and/or contributed (as the case may be) by
the Contributing Member pursuant to this Section 4.09:
(i) To make a loan (a "Contribution Loan") to the Non-Contributing
Member by advancing funds directly to the Company in an amount equal to all
or a portion of the Additional Capital Contribution which the
Non-Contributing Member failed to make, which Contribution Loan shall
(except to the extent Section 4.09(d)(iii)(A)) treatment is elected) be a
recourse obligation of the Non-Contributing Member, and shall bear interest
and be repayable in accordance with the provisions hereof; or
(ii) To make a Capital Contribution to the Company in an amount equal
to all or a portion of the Additional Capital Contribution which the
Non-Contributing Member failed to make, and to cause dilution of the
Non-Contributing Member's Percentage Interest in accordance with the
provisions of Section 4.09(e) below.
If more than one (1) Member wishes to be a Contributing Member, they shall
do so in such proportion as they shall agree, or, failing such agreement, in
proportion to the Contributing Members' respective Percentage Interests.
(c) Intentionally Omitted.
(d) Contribution Loan Terms.
(i) If a Contributing Member elects to make a Contribution Loan on
behalf of a Non-Contributing Member, such Contribution Loan shall bear
interest at a rate equal to the Prime Rate plus six (6) percentage points,
and shall be repayable in accordance with Section 4.09(d)(ii). A
Contributing Member shall be entitled to make a Contribution Loan in any
amount equal to or less than the entire amount of the Additional Capital
Contribution which the Non-Contributing Member failed to make, in which
event the Company and/or the Contributing Member shall be entitled to
exercise any other remedies hereunder or at law or in equity with respect
to the balance of such unpaid Additional Capital Contribution.
(ii) A Contribution Loan shall be repayable out of any subsequent
distributions to which the Non-Contributing Member (for whose account the
Contribution Loan was made) would otherwise be entitled in accordance with
this Agreement, which amounts shall be applied first to interest and then
to principal, until the Contribution Loan is paid in full. If not paid out
of distributions as provided above, a Contribution Loan, together with
accrued but unpaid interest thereon, shall be payable sixty (60) days after
the date on which such Contribution Loan is made. Repayment of a
Contribution Loan shall be secured by the Non-Contributing Member's Units,
and each Member hereby grants a security interest in such Units which may
be invoked by a Contributing Member who has advanced a Contribution Loan to
the Company on behalf of such Member (who would then be a Non-Contributing
Member). If requested by the Contributing Member, the Non-Contributing
Member shall be obligated, and each Member hereby agrees, to execute such
documents, including UCC-1s, as reasonably may be requested by the
Contributing Member to perfect such security interest.
(iii) If any Contribution Loan has not been repaid in full in
accordance with and within the applicable time period set forth in Section
4.09(d)(ii) above, then at any time thereafter the Contributing Member may
elect to proceed under subsections 4.09(d)(iii)(A) or (B) below.
(A) Upon thirty (30) days written notice to the Non-Contributing
Member (during which thirty (30) day period the Non-Contributing
Member shall have the right to cure nonpayment of its Contribution
Loan), the Contributing Member may elect to treat all or a portion of
the outstanding principal balance of a Contribution Loan as a Capital
Contribution by the Contributing Member and to dilute the Percentage
Interest of the Non-Contributing Member in accordance with the
provisions of Section 4.09(e). Accrued interest on any Contribution
Loan so converted to capital as provided above shall not be converted
to capital and shall thereafter be payable upon demand from the
Contributing Member; provided, however, that if such accrued interest
is not paid in full upon demand, the Member making such demand may at
any time thereafter exercise his rights under subsection (B) below
with respect to the then-outstanding amount of such accrued interest.
(B) The Contributing Member may elect to make written demand upon
the Non-Contributing Member for payment in full of such Contributing
Member's Contribution Loan, including all interest accrued thereon,
and upon failure of the Non-Contributing Member to pay the
Contribution Loan and all interest thereon in full within one hundred
twenty (120) days after such demand, the Contributing Member may cause
all available remedies against the Non-Contributing Member to be
enforced, including but not limited to a suit for damages in the full
amount of the Contribution Loan.
(C) Until a Contributing Member has elected to proceed under
subsections 4.09(d)(iii)(A) or (B), above, such Contributing Member's
Contribution Loan shall remain in place and shall bear interest and be
repaid as provided above. The rights of a Contributing Member under
this Section shall be non-exclusive, and a Contributing Member may
elect to proceed under either or both provisions of this Section as to
all or any portion of any particular Contribution Loan, or, in the
event of an election under subsections 4.09(d)(iii)(B) followed by
nonpayment, in whole or in part, of the Contribution Loan within the
time period provided for therein the Contributing Member may then
elect to proceed under Section 4.09(d)(iii)(A) with respect to the
unpaid principal amount of such Contribution Loan.
(e) Penal Dilution. If a Contributing Member makes a Capital Contribution
to the Company pursuant to the preceding provisions, or elects to convert the
principal amount of a Contribution Loan to capital pursuant to the provisions of
subsections 4.09(d)(iii)(A) above, the Percentage Interests of the Members shall
be adjusted, effective as of the date of such contribution or conversion, as the
case may be (hereinafter referred to as the "Computation Date"), as follows:
(i) The Percentage Interest of the Member making such Capital
Contribution or electing to convert the principal amount of such
Contribution Loan to capital shall be adjusted to an amount calculated in
accordance with the following formula: NCP*(C/(NCP*AC)) + P = NP
P = The Percentage Interest of the Contributing Member then in effect,
expressed as a decimal
AC = The aggregate amount of Capital Contributions required to be made by
all Members pursuant to this Agreement and not previously returned at
the Computation Date
C = The amount of the Additional Capital Contribution made by the
Contributing Member on behalf of the Non-Contributing Member
multiplied by 2
NP = The Percentage Interest of the Contributing Member immediately after
such Additional Capital Contribution, expressed as a decimal
NCP = The Percentage Interest of the Non-Contributing Member immediately
before such Additional Capital Contribution, expressed as a decimal
(ii) The Non-Contributing Member's Percentage Interest shall be equal
to one hundred percent (100%) less the aggregate of (i) the Percentage
Interest of the Contributing Members adjusted pursuant to the provisions of
this Section and (ii) the Percentage Interest of the Members who are not
Contributing Members but who make Additional Capital Contributions as
required pursuant to this Section.
To effectuate the foregoing, the Contributing Members shall be issued
additional Units in the Company.
(f) Adjusting Allocations. If the Percentage Interests of the Members are
adjusted during an Allocation Period pursuant to this Section, the Company's
books shall, unless otherwise approved by Majority Consent of the Members, be
closed as of the date immediately preceding the Computation Date. For the period
ended on such date, profits, losses and distributions shall be allocated and
distributed pursuant to the provisions of Sections 3 and 4, according to the
Percentage Interests in effect prior to the Computation Date. Thereafter,
distributions, profits and losses for the balance of such Allocation Period
shall be distributed and allocated pursuant to the provisions of Articles III
and IV according to the Percentage Interests of such Members, as so adjusted;
provided that nothing in this Section shall be construed to require
distributions at a date earlier than specified in Articles III and IV.
ARTICLE V
MANAGEMENT
5.01 Board of Managers. The overall management and control of the business
and affairs of the Company will be vested solely in the Board of Managers. The
Board of Managers shall direct, manage, and control the business of the Company
to the best of its ability. Subject to the provisions of this Agreement, the
Board of Managers shall have the full and complete authority, power, and
discretion to manage and control the business, affairs, and properties of the
Company, to make all decisions regarding those matters and to perform any and
all other acts or activities customary or incident to the management of the
Company's business.
5.02 Number and Election of Managers. The number of Managers of the Company
shall be fixed and the Members of the Board of Managers shall be elected from
time to time by the Members in accordance with Section 6.08. Upon election, each
Manager shall execute a counterpart to this Agreement or another instrument
accepting and adopting the terms of this Agreement. The Board of Managers shall
consist initially of two (2) Managers, who shall be Xxxxx Xxxxxx and Xxxx
Xxxxxxx. Managers need not be residents of the State.
5.03 Resignation of Managers. Any Manager of the Company may resign at any
time by giving written notice to the Company. The resignation of any Manager
shall take effect upon receipt of that notice or at such later time as shall be
specified in the notice and the acceptance of the resignation shall not be
necessary to make it effective. The resignation of a Manager who is also a
Member shall not affect the Manager's rights as a Member and shall not
constitute a withdrawal of such Manager as a Member.
5.04 Removal of Managers. All or any lesser number of Managers may be
removed at any time, with or without cause, by Majority Consent of the Members,
except the Manager to be removed. The removal of a Manager who is also a Member
shall not affect the Manager's rights as a Member and shall not constitute a
withdrawal of such Manager as a Member.
5.05 Vacancies on Board of Managers. Any vacancy occurring for any reason
in the Board of Managers of the Company may be filled by the Members in
accordance with Section 6.08. A Manager elected to fill a vacancy shall hold
office until the Manager's successor shall be elected and shall qualify or until
the Manager's earlier death, resignation, or removal.
5.06 Certain Powers of Managers. Without limiting the generality of Section
5.01 above or Section 2.03, and subject to the limitations set forth in Section
5.07 below, the Board of Managers shall have power and authority, on behalf of
the Company:
(a) to acquire from any Person by purchase, lease or otherwise, any real or
personal property which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company;
(b) to borrow money for the Company from banks, other lending institutions,
the Managers, Members, or Affiliates of the Managers or Members on such terms as
the Members, by Majority Consent of the Members, deems appropriate, and in
connection therewith, to hypothecate, encumber, and grant security interests in
the assets of the Company to secure repayment of the borrowed sums;
(c) to enter into, perform and carry out contracts of any kind necessary
to, in connection with or incidental to, the accomplishment of the purposes of
the Company, which contracts may extend beyond the term of the Company;
(d) to prepay in whole or in part, refinance, recast, increase, modify or
extend any deed of trust, mortgage or other indebtedness of the Company, and, in
connection therewith, to execute any extensions, renewals or modifications of
such deeds of trust or mortgages;
(e) to employ or engage persons, firms or companies (including any Manager
or Member or an Affiliate of any Manager or Member) for the operation,
maintenance, marketing and financing of the Company and to pay reasonable
compensation for such services;
(f) to cause to be paid any and all taxes, charges and assessments that may
be levied, assessed or imposed upon any assets of the Company;
(g) to purchase liability and other insurance to protect the Company's
property and business;
(h) to hold and own any Company real and/or personal properties in the name
of the Company;
(i) to invest any Company funds temporarily (by way of example but not
limitation) in time deposits, short-term governmental obligations, commercial
paper, or other investments;
(j) to employ accountants, legal counsel, managing agents, or other experts
to perform services for the Company and to compensate them from Company funds;
(k) to sell or otherwise dispose of all or substantially all of the assets
of the Company as part of a single transaction or plan or to merge or
consolidate the Company with or into another Person;
(l) to execute on behalf of the Company all instruments and documents,
including, without limitation: checks; drafts; notes and other negotiable
instruments; mortgages, or deeds of trust; security agreements; financing
statements; documents providing for the acquisition, mortgage or disposition of
the Company's property; assignments; bills of sale; leases; partnership
agreements; operating agreements of other limited liability companies; and any
other instruments or documents necessary, in the opinion of the Board of
Managers, to the business of the Company; and
(m) to engage in such other activities and incur such other expenses as may
be reasonably necessary, advisable or appropriate for the furtherance of the
Company's purposes so long as such activities may be lawfully carried on or
performed by a limited liability company under the Act, and to execute,
acknowledge and deliver any and all instruments necessary to implement the
foregoing.
5.07 Certain Actions Requiring Supermajority Consent of the Members.
Notwithstanding anything to the contrary contained in this Agreement, and in
addition to any other actions required by the terms of this Agreement or by
applicable law to be approved by Members, each of the following actions shall
require both the approval of the Managers and the Supermajority Consent of the
Members:
(a) any amendments to or changes in the purposes of the Company, as set
forth in Section 2.03 of this Agreement;
(b) any transaction or series of transactions pursuant to which (i) the
Company would sell, assign, lease or otherwise dispose of or voluntarily part
with the control of all or substantially all of its assets to any Person, or
(ii) a Change In Control of the Company would be effected;
(c) decisions regarding the raising of capital for the Company, including
the incurring of any indebtedness for borrowed money or the issuance of Units or
options or warrants therefor (other than the issuance of any Units in connection
with the exercise of warrants or options issued pursuant to arrangements
approved by Supermajority Consent of the Members or any repurchase or redemption
by the Company of any Units;
(d) the granting of any lien, security interest or other charge or
encumbrance upon, in or with respect to any assets or rights of the Company and
the prepayment, refinancing, modification or extension of any such lien,
security interest or other charge or encumbrance;
(e) any agreement, arrangement, transaction or series thereof between the
Company and any Member or Manager of the Company or any direct or indirect
Affiliate thereof;
(f) any other agreement, contract, transaction, series of transactions or
plan of action involving aggregate payments, liabilities, obligations or the
forgiveness of any of the same in excess of $50,000 in value that is not set
forth in an annual budget previously approved by Supermajority Consent of the
Members;
(g) the acquisition of any assets other than in the ordinary course of
business;
(h) to sell or otherwise dispose of all or substantially all of the assets
of the Company as part of a single transaction or plan or to merge or
consolidate the Company with or into another Person; and
(i) any decision involving (1) the filing by the Company of a voluntary
bankruptcy case, (2) the making by the Company of a general assignment for the
benefit of its creditors, (3) the admission in writing by the Company of its
inability to pay its debts as they mature, (4) the filing by the Company of an
application for, or consent to, the appointment of any receiver or a permanent
or interim trustee of the Company or of all or any portion of its property,
including, without limitation, the appointment or authorization of a trustee,
receiver, or agent under applicable law or under a contract to take charge of
its property for the purposes of enforcing a lien against such property or for
the purpose of general administration of such property for the benefit of its
creditors, or (5) the filing by the Company of a petition seeking a
reorganization of its financial affairs or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against the Company in any proceeding under any such law or statute.
5.08 Certain Transactions.
(a) No contract or transaction between the Company and one or more of its
Managers, or between the Company and any other Person in which one or more of
its Managers are directors, managers or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because such
Manager(s) is present at or participates in the meeting of the Board which
authorizes the contract or transaction or solely because the votes of such
Manager(s) are counted for such purpose, if:
(i) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Managers and the Board in good faith authorizes the contract or transaction
by the affirmative vote of a majority of the disinterested Managers, even
though the disinterested Managers be less than a quorum; or
(ii) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Members
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by Supermajority Consent of the Members; or
(iii) The contract or transaction is fair to the Company as of the
time it is authorized, approved or ratified by the Board of Managers or the
Members.
(b) Interested Managers may be counted in determining the presence of a
quorum at a meeting of the Board of Managers which authorizes any such contract
or transaction. 5.09 Meetings of Managers.
(a) Place of Meetings. Meetings of the Managers need not be held in
the State.
(b) Regular Meetings. Regular meetings of the Board of Managers may be held
without call or notice at such places and at such times as the Managers may from
time to time determine, provided that any Manager who is absent when such
determination is made shall be given written notice of the determination. A
regular meeting of the Board of Managers may be held without a call or notice at
the same place as the annual meeting of Members, or a special meeting held in
lieu thereof, following such meeting of Members.
(c) Special Meetings. Special meetings of the Board of Managers may be
called by any Manager. Notice of the time and place of all special meetings
shall be given by the Manager(s) calling the meeting. Notice must be given
orally, by telephone, by facsimile, or in writing, and such notice shall be
sufficient if given in time to enable the Manager to attend, provided, that such
notice must, in any event, be received at least twenty-four (24) hours before
the meeting. No notice of any meeting of the Board of Managers need be given to
any Manager if such Manager, by a writing filed with the records of the meeting
(and whether executed before or after such meeting), waives such notice, or if
such Manager attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him.
(d) Quorum of Managers; Required Vote. At any meeting of the Board of
Managers a majority of the number of Managers then constituting the full Board
shall constitute a quorum, but a lesser number may adjourn any meeting from time
to time without further notice. Unless otherwise provided by law or by this
Agreement, business may be transacted by vote of a majority of the Managers then
present at any meeting at which there is a quorum.
(e) Action Without a Meeting. Unless otherwise provided by law, any action
required or permitted to be taken at any meeting of the Managers may be taken
without a meeting if all Managers consent to the action by Written Consent and
the written consents are filed with the records of the meetings of Managers.
Such consents shall be treated for all purposes as a vote at a meeting.
(f) Telephone Conference Meetings. Any Manager may participate in any
meeting of the Board by means of a conference telephone or similar
communications equipment by means of which all Persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
5.10 Authority to Act. Subject to the provisions of this Agreement, the
signature of any Manager, or any Person authorized by the Managers, on any
agreement, contract, instrument or other document shall be sufficient to bind
the Company in respect thereof and conclusively evidence the authority of such
Person and the Company with respect thereto, and no third party need look to any
other evidence or require the joinder or consent of any other party. Unless
authorized to do so by this Agreement or by the Board of Managers, no
attorney-in-fact, employee, or other agent of the Company shall have any power
or authority to bind the Company in any way, to pledge its credit or to render
it liable pecuniarily for any purpose. No Member shall have any power or
authority to bind the Company unless the Member has been authorized by the Board
of Managers to act as an agent of the Company in accordance with the previous
sentence.
5.11 Standard of Care; Limitation of Liability. Each Manager of the Company
shall perform his duties in good faith, in a manner he reasonably believes to be
in the best interests of the Company, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances. A
Manager of the Company who so performs the duties of Manager shall not have any
liability by reason of being or having been a Manager of the Company. The Board
of Managers of the Company do not, in any way, guarantee the return of the
Members' Capital Contributions or a profit for the Members from the operations
of the Company. No Manager shall be liable to the Company or to any Member for
any loss or damage sustained by the Company or any Member, unless the loss or
damage shall have been the result of fraud, deceit, gross negligence, willful
misconduct, or a wrongful taking by the Manager.
5.15 Managers Have No Exclusive Duty to Company. Except as otherwise
Provided in this Agreement or any other agreement between the Company and a
Manager,
(a) no Manager shall be required to manage the Company as his sole and
exclusive function;
(b) any Manager may have other business interests and may engage in other
activities in addition to those relating to the Company;
(c) neither the Company nor any Member shall have any right, by virtue of
this Agreement, to share or participate in such other investments or activities
of any Manager or to the income or proceeds derived therefrom and;
(d) no Manager shall incur any liability to the Company or to any of the
Members as a result of engaging in any other business or venture.
5.16 Indemnity of Managers, Employees and Other Agents.
(a) Indemnification and Advancement of Expenses. Subject to the provisions
of this Section, the Company shall, to the fullest extent it would be permitted
under Section 145 of the Delaware General Corporation Law, as the same may be
amended and supplemented from time to time or any successor provision ("Section
145"), if the Company were a Delaware corporation (provided such indemnification
is at the time also permitted by Section 8 of the Act, as the same may be
amended and supplemented from time to time or any successor provision ("Section
8")), indemnify and advance expenses to (i) its Managers (as if directors), and
(ii) any person who at the request of the Company is or was serving as a
director, manager, officer, employee or agent of another Person, from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by Section 145 or Section 8. The Company, by action of its Board
of Managers, may indemnify and advance expenses to its employees, and other
agents and other persons who are not Managers up to the fullest extent permitted
by Section 145 and Section 8 provided that such indemnification and advancement
of expenses in any given situation is approved or ratified by the Board of
Managers.
(b) Actions other than by or in the Right of the Company. Subject to the
provisions of Subsection (a) above, the Company shall indemnify any 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 is or was a Manager, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
manager, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his 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 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 conduct was unlawful.
(c) Actions by or in the Right of the Company. Subject to the provisions of
Subsection (a) above, the Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a Manager, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, manager, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
(d) Success on the Merits. To the extent that any person described in
Subsections (b) or (c) of this Section has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in said
Subsections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(e) Specific Authorization. Any indemnification under Subsection (b) or (c)
of this Section (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of any
Person described in said Subsections is proper in the circumstances because he
has met the applicable standard of conduct required by said Subsections. Such
determination shall be made by Supermajority Consent of the Members.
(f) Advance Payment. Expenses incurred in defending any civil, criminal,
administrative or investigative action, suit or proceeding may 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 any person described in this
Section to repay such amount if it shall ultimately be determined that he is not
entitled to indemnification by the Company as authorized in this Section.
(g) Non-Exclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section shall not be deemed exclusive
of any other rights to which those provided indemnification or advancement of
expenses may be entitled under any agreement, vote of Members or disinterested
Managers or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office.
(h) Insurance. The Members may, by Supermajority Consent of the Members,
authorize the Company to purchase and maintain insurance on behalf of any Person
who is or was a Manager, employee or agent of the Company, or is or was serving
at the request of the Company as a director, manager, officer, employee or agent
of another Person against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under the
provisions of this Section.
(i) Continuation of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Section shall continue as to a person who has ceased to be a director,
manager, officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person. (j) Severability. If any word,
clause or provision of this Section or any award made hereunder shall for any
reason be determined to be invalid, the provisions hereof shall not otherwise be
affected thereby but shall remain in full force and effect.
(k) Intent of Section. The intent of this Section is to provide for
indemnification and advancement of expenses to the fullest extent that would be
permitted by Section 145 if the Company were a Delaware corporation, provided
such indemnification also is permitted by Section 8. To the extent that Section
145 or Section 8 or any successor section thereto may be amended or supplemented
from time to time, this Article shall be amended automatically and construed so
as to permit indemnification and advancement of expenses to the fullest extent
from time to time permitted by law.
5.17 Compensation; Expenses of Managers; Loans; Guaranties.
(a) Compensation and Reimbursement. Except as otherwise provided in this
Agreement, no Member or Manager shall receive any salary, fee, or draw for any
services rendered to or on behalf of the Company, nor shall any Member or
Manager be reimbursed for any expenses incurred by such Member or Manager on
behalf of the Company. For the performance of their services as Managers
hereunder, the Board of Managers, in the aggregate, shall be entitled to
compensation equal to two percent (2%) of the Project's net income, up to a
total of $25,000 per fiscal year (the "Management Fee"). The Board of Managers
may determine the timing and apportionment of such Management Fee in its sole
discretion, with any deadlock among the Managers with respect to the Management
Fee to be resolved in accordance with the procedures described in Article XI
below.
(b) Engagement of Asset Manager. The Company may engage and retain an asset
manager (the "Asset Manager") in accordance with such terms and conditions as
are mutually agreeable to the Company and the Asset Manager, and the Asset
Manager or its Affiliate may be a Manager and/or Member hereunder. It is the
intention of the parties that the Asset Manager shall be responsible for
property management, including leasing coordination and negotiation, investor
correspondence and oversight of preparation of information for tax return
preparation. For its services, the Company shall pay to the Asset Manager an
asset management fee to be mutually determined by the Company and the Asset
Manager. The Asset Manager shall also be reimbursed at cost for any maintenance
personnel, including an on-site maintenance person (if approved by the
Managers), but not for a non-maintenance property manager.
(c) Expenses. The Managers may charge the Company for any direct expenses
reasonably incurred in connection with the Company business.
(d) Loans. The Managers may, but are not obligated to, lend or advance
money to the Company to further the purposes of the Company. If a Manager shall
make any loan or loans to the Company or advance money on its behalf, the amount
of any such loan or advance shall not be treated as a contribution to the
capital of the Company but shall be a debt due from the Company. The amount of
any such loan or advance by a Manager shall be repayable out of the Company's
cash and shall bear interest at a rate not in excess of the lesser of (i) the
Prime Rate plus four (4) percentage points, or (ii) the maximum rate permitted
by law, which interest shall accrue and be payable at the same time as the
principal amount of such loan shall be repaid as hereinafter provided. Each such
loan made by a Manager shall be due and payable on demand and may be evidenced
by a promissory note substantially in accordance with the terms and conditions
outlined in this Section 5.17(d). Said loan or loans shall be secured in such
manner as reasonably requested by a Manager and the Company agrees to execute
such security agreements, financing statements and other instruments as
necessary to evidence the same.
(e) Guaranties. The Managers may charge the Company a fee for any personal
guaranty required to be executed in connection with any loan, or any other
hazardous substances or similar indemnification required to be executed or
delivered in connection with any loan to the Company. Such fee shall not exceed
five percent (5%) of the amount of the guaranty, or if no amount is specified,
then the fee shall not exceed one percent (1%) of the amount of the loan to
which the guaranty relates.
ARTICLE VI
MEETINGS OF MEMBERS
6.01 No Annual Meeting. No annual meeting of the Members shall be required.
6.02 Special Meetings. Special meetings of the Members, for any purpose or
purposes, unless otherwise prescribed by the Act, may be called by the Board of
Managers or by Written Consent of any Member or Members having aggregate
Percentage Interests of at least ten (10) percent.
6.03 Place of Meetings. The Board of Managers may designate any place,
either within or outside the State, as the place of meeting for any meeting of
the Members. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the Company.
6.04 Notice of Meetings. Except as provided in section 6.05 below, written
notice stating the place, day, and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered no fewer than five
(5) nor more than thirty (30) days before the date of the meeting, either
personally or by mail, by or at the direction of the Board of Managers or Person
calling the meeting, to each Member entitled to vote at the meeting.
6.05 Meeting of All Members. If all of the Members shall meet at any time
and place, either within or outside of the State, and consent to the holding of
a meeting at that time and place, the meeting shall be valid without call or
notice, and at the meeting lawful action may be taken.
6.06 Record Date. For the purpose of determining Members entitled to notice
of or to vote at any meeting of Members or any adjournment of the meeting, or
Members entitled to receive payment of any distribution, or to make a
determination of Members for any other purpose, the date on which notice of the
meeting is mailed or the date on which the resolution declaring the distribution
is adopted, as the case may be, shall be the record date for the determination
of Members. When a determination of Members entitled to vote at any meeting of
Members has been made as provided in this section, the determination shall apply
to any adjournment of the meeting.
6.07 Quorum. Members having at least two-thirds (2/3) of the aggregate
Percentage Interests, represented in person or by proxy, shall constitute a
quorum at any meeting of Members. In the absence of a quorum at any meeting of
Members, a majority of the aggregate Percentage Interests so represented may
adjourn the meeting from time to time for a period not to exceed 60 days without
further notice. However, if the adjournment is for more than 60 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each Member of record entitled
to vote at the meeting. At an adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The Members present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during the meeting of Members having aggregate
Percentage Interests whose absence would cause less than a quorum.
6.08 Manner of Acting. All elections of Managers shall be determined by a
vote of a plurality of the Percentage Interests represented at a meeting called
for such purpose, provided, however, that in no case shall the Managers have the
ability to control such plurality. All other matters shall be determined by
Majority Consent of the Members, unless Supermajority Consent of the Members or
the vote of another proportion or number is otherwise required by the Act or by
this Agreement.
6.09 Proxies. At all meetings of Members, a Member may vote in person or by
proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. The proxy shall be filed with the Managers of the Company
before or at the time of the meeting. No proxy shall be valid after eleven (11)
months from the date of its execution, unless otherwise provided in the proxy.
6.10 Action by Members Without a Meeting. Action required or permitted to
be taken at a meeting of Members may be taken without a meeting if the action is
evidenced by one or more Written Consents describing the action taken, signed by
Members entitled to vote having the aggregate Percentage Interests required to
take such action at a duly called meeting and delivered to the Secretary of the
Company for inclusion in the minutes or for filing with the Company records.
6.11 Waiver of Notice. When any notice is required to be given to any
Member, a waiver of the notice in writing signed by the person entitled to the
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of the notice.
ARTICLE VII
RIGHTS, OBLIGATIONS AND REPRESENTATIONS OF MEMBERS
7.01 Limitation of Liability. Each Member's liability shall be limited as
set forth in this Agreement, the Act, and other applicable law. Except as
otherwise expressly provided, no Member shall be personally liable for any
debts, obligations, liabilities or losses of the Company nor shall any Member be
required to restore a negative Capital Account balance.
7.02 Company Books and Records. Subject to such reasonable standards
(including standards governing what information and documents are to be
furnished at what time and location and at whose expense) imposed by the Board
of Managers, upon written request stating the purpose, a Member may examine and
copy in person, at any reasonable time, for any proper purpose reasonably
related to such Member's interest as a Member of the Company, all records
required to be maintained under the Act and such other information regarding the
business affairs and financial condition of the Company as is just and
reasonable for the Member to examine and copy.
7.03 Expenses. Any Member may charge the Company for any direct expenses
reasonably incurred in connection with the Company business.
7.04 Guaranties. Any Member may charge the Company a fee for any personal
guaranty required to be executed in connection with any loan, or any other
hazardous substances or similar indemnification required to be executed or
delivered in connection with any loan to the Company. Such fee shall not exceed
five percent (5%) of the amount of the guaranty, or if no amount is specified,
then the fee shall not exceed one percent (1%) of the amount of the loan to
which the guaranty relates.
7.05 Priority and Return of Capital. Except as may be expressly provided in
Articles III and IV, no Member shall have priority over any other Member, either
for the return of Capital Contributions or for profits, losses, or
distributions.
7.06 Representations. Each Member hereby represents and warrants as
follows:
(a) Such Member is acquiring its Units for investment, solely for such
Member's own account and not for distribution, transfer or sale to others in
connection with any distribution or public offering.
(b) Such Member is financially able to bear the economic risk of an
investment in the Company and has no need for liquidity in this investment.
Furthermore, the financial capacity of such Member is of such a proportion that
the total costs of such Member's investment in the Company is not material when
compared with such Member's total financial capacity.
(c) Such Member has such knowledge, experience and skill in financial and
business matters in general and with respect to investments of a nature similar
to an investment in the Company so as to be capable of evaluating the merits and
risks of, and making an informed business decision with regard to, this
investment. Such Member acknowledges and understands that the purchase of its
Units involves an investment in a new business that has no previous operating
experience, and, therefore, this is a speculative investment with no assurance
of success.
(d) Such Member (i) has received all information that such Member deems
necessary to make an informed investment decision with respect to an investment
in the Company; (ii) has had the unrestricted opportunity to make such
investigation as such Member desires pertaining to the Company and an investment
therein and to verify any information furnished to such Member; and (iii) has
had the opportunity to ask questions of representatives of the Company
concerning the Company and such Member's investment.
(e) Such Member understands that such Member must bear the economic risk of
an investment in the Company for an indefinite period of time because (i) the
Units have not been registered under the Securities Act and applicable state
securities laws and (ii) the Units may not be sold, transferred, pledged or
otherwise disposed of except in accordance with this Agreement, the Securities
Act and any applicable state securities laws.
(f) Such Member understands that the Company is not obligated to register
the Units for resale under the Securities Act or any applicable state securities
laws and that the Company is not obligated to supply such Member with
information or assistance in complying with any exemption under the Securities
Act or any applicable state securities laws.
(g) Such Member has full power and authority to execute, deliver, and
perform this Agreement in accordance with its terms, and this Agreement
constitutes the valid and binding obligation of such Member, enforceable against
such Member in accordance with its terms.
7.07 Confidentiality.
(a) Each Member agrees not to divulge, communicate, use to the detriment of
the Company or for the benefit of any other Person, or misuse in any way, any
confidential information of the Company or any subsidiary or any other
information received by the Company under an obligation of confidentiality that
is disclosed to the Members, except as may be required by law; provided,
however, that this prohibition shall not apply to any information which, (i) is
or becomes generally available to the public or within the industry to which
such information relates other than as a result of a breach of this Agreement,
or (ii) at the time of disclosure to a Member by any other party was already
known by such Member as evidenced by such Member's written records, or (iii)
becomes available on a non-confidential basis from a source that is entitled to
disclose it on a non-confidential basis, or (iv) was or is independently
developed by or for a Member without reference to the confidential information,
as evidenced by such Member's written records.
ARTICLE VIII
BOOKS, RECORDS AND BANK ACCOUNTS
8.01 Books and Records. During the term of the Company's existence and for
a period of five (5) years thereafter, there shall be maintained all records
required to be kept pursuant to the Act, including, without limitation, a
current list of the names, addresses and Units held by each of the Members
(including the dates on which each of the Members became a Member), all tax
records, copies of this Agreement and the Certificate, including all amendments
or restatements, and correct and complete books and records of account of the
Company. Notwithstanding the foregoing, it is understood that all books and
records of the Company shall be retained for any period required by applicable
law or any pending audit or similar proceeding. The Company shall keep just and
true books of account with respect to the operations of the Company. All such
books shall be maintained at the principal place of business of the Company, or,
for the period following dissolution, at such other place as the Liquidator
shall determine.
8.02 Accounting Basis and Fiscal Year. The books of account of the Company
shall be kept on the tax basis of accounting, or on such other method of
accounting as the Board of Managers may from time to time determine. The fiscal
year of the Company shall be the calendar year.
8.03 Reports.
(a) Within ninety (90) days after the end of each fiscal year, the Company
shall furnish to each Member such information as may be needed to enable such
Member to file its Federal income tax return, any required state income tax
return and any other reporting or filing requirements imposed by any
governmental agency or authority.
(b) Within thirty (30) days after the end of each fiscal year, the Company
shall prepare and deliver to the Members a financial report of the Company,
including a balance sheet, a profit and loss statement and, if such profit and
loss statement is not prepared on a cash basis, a cash flow or source and
application of funds statement, which shall be accompanied by a certificate of
the Treasurer, stating that such financial report presents fairly the financial
condition of the Company as of the date of such financial report and the results
of the Company's operations for such year.
(c) Within twenty (20) days after the end of the months of March, June and
September of each year, the Company shall prepare and deliver to each of the
Members an estimate of the Company's Profit or Loss for the fiscal quarter just
ending and such Member's share thereof.
(d) The Managers shall cause to be maintained an annual budget and monthly
financial statements. At a minimum, these reports shall contain (i) the balance
sheet of the Company as of the end of the month, the fiscal quarter or year,
(ii) an income statement of the Company for such month, quarter or year, and
(iii) a statement showing the revenues distributed by the Company to Members in
respect of such month, quarter or year. Such financial statements shall be
available to any Member that from time to time requests such reports.
(e) The Managers shall timely provide the Members with adequate information
to meet its periodic securities filing obligations, including, but not limited
to, financial statements prepared in accordance with generally accepted
accounting principles
8.04 Bank Accounts. The Managers shall be responsible for causing one or
more accounts to be maintained in a bank (or banks) which is a member of the
F.D.I.C., which accounts shall be used for the payment of the expenditures
incurred by the Board of Managers in connection with the business of the
Company, and in which shall be deposited any and all cash receipts. All such
amounts shall be and remain the property of the Company, and shall be received,
held and disbursed by the Managers for the purposes specified in this Agreement.
There shall not be deposited in any of said accounts any funds other than funds
belonging to the Company, and no other funds shall in any way be commingled with
such funds. All checks, drafts or other orders for the payment of money, notes
or other evidences of indebtedness issued in the name of the Company, shall be
signed by such Manager, agent or agents of the Company and in such manner as
shall from time to time be determined by resolution of the Board of Managers.
8.05 Tax Matters. The Members intend for the Company to be treated as a
partnership for tax purposes. The Managers shall designate one Member to be the
"tax matters partner" (the "Tax Matters Member") of the Company pursuant to
Section 6231(a)(7) of the Code. Such Member shall take such action as may be
necessary to cause each other Member to become a "notice partner" within the
meaning of Section 6223 of the Code. Such Member shall inform each other Member
of all significant matters that may come to its attention in its capacity as Tax
Matters Member by giving notice thereof on or before the fifth Business Day
after becoming aware thereof and, within that time, shall forward to each other
Member copies of all significant written communications it may receive in that
capacity. Such Member may not take any action contemplated by Sections 6222
through 6232 of the Code without the Written Consent of all Members but this
sentence does not authorize such Member to take any action left to the
determination of an individual Member under Sections 6222 through 6232 of the
Code. The initial Tax Matters Member shall be Xxxx Xxxxxxx.
ARTICLE IX
TRANSFERABILITY OF UNITS
9.01 General. No Member may voluntarily retire or withdraw from the Company
or sell, transfer, assign, pledge, encumber or otherwise dispose of all or any
part of its interest in the Company (whether voluntarily, involuntarily or by
operation of law) ("Assign" or "Assignment") except in compliance with this
Article IX. Any purported Assignment of any Units in violation of the provisions
of this Agreement shall be wholly void and shall not effectuate the Assignment
contemplated thereby. Notwithstanding anything to the contrary contained herein,
the provisions of Sections 9.03, 9.04 and 9.05 shall not apply to any transfer
made pursuant to the exercise of the Call or the Zoom Option under Sections 9.06
and 9.07, respectively.
9.02 Retirement of a Member. The Retirement of a Member shall not dissolve
or terminate the Company. In the event of a Member's death, the legal
representative of the Retired Member shall be the assignee of the Retired
Member's Units and may become a Substitute Member upon compliance with the
provisions of Section 9.04 hereof. The estate of the Retired Member shall be
liable for all of the Retired Member's liabilities and obligations to the
Company as a Member.
9.03 Assignment. This Section governs only the Assignment of a Member's
economic rights in the Company. With respect to admission of an assignee as a
Member, the provisions of Section 9.04 shall govern. No Member may Assign all or
any part of its Units without first complying with the following provisions:
(a) the assignor shall, at the request of the Board of Managers, deliver an
opinion of counsel, in form and substance satisfactory to counsel designated by
the Board of Managers, that such Assignment and any offerings made in connection
therewith are in compliance with applicable Federal and state laws, including,
without limitation, the Act and applicable securities laws;
(b) the assignee shall execute a statement that it is acquiring the Units
for its own account for investment and not with a view to the distribution or
resale thereof; and
(c) in the opinion of counsel designated by the Board of Managers, such
assignment would not result in substantial adverse tax consequences to the
Members under the Code.
If the foregoing conditions are complied with, the Board of Managers shall
consent to any Assignment made by a Member (a)(i) to such Member's spouse,
children, grandchildren, or siblings, or a trust for the benefit of any or all
of such individuals ("Permitted Transferees") or (b) to another Member or to a
third party pursuant to Section 9.05 below.
9.04 Substitution. An assignee of Units assigned in accordance with the
provisions of Section 9.03 may become a Substitute Member of the same class of
its assignor only if: (a) such Person executes an instrument satisfactory to the
Managers accepting and adopting the terms and provisions of this Agreement;
(b) in the case of Assignments other than by operation of law, the assignor
states its intention in writing to have its assignee become a Substitute Member;
and
(c) such Person agrees, at the option of the Company, to pay any filing
fees, reasonable counsel fees, and other reasonable expenses in connection with
its becoming a Substitute Member hereunder.
An assignee of Units who does not become a Substitute Member in accordance
with this Section 9.04 and who desires to make a further assignment of its Units
shall nonetheless be subject to all the provisions of this Article IX to the
same extent and in the same manner as any Member desiring to make an assignment
of its Units. The Units held by an assignee who is not admitted as a Substitute
Member shall in no way affect the right of such assignee to receive the share of
capital, profits and losses and distributions to which its predecessor in
interest was entitled. The Units held by an assignee who is not admitted as a
Substitute Member shall not be counted for the purpose of determining whether
the requisite consent or vote of the Members has been given to any proposed
action for which the vote or consent of the Members is required.
9.05 Right of First Refusal.
(a) If at any time any Member (the "Selling Member") intends to Assign any
of its Units to any Person (including another Member), other than to a Permitted
Transferee or pursuant to the provisions of Sections 9.06 or 9.07 below, then
the Selling Member shall, prior to any such Assignment, give written notice (the
"Sale Notice") of such intention to the Company and the other Members (the
"Buying Members"). The Sale Notice shall include the name of the proposed
assignee, the proposed purchase price per Unit, the terms of payment of such
purchase price and all other matters relating to such Assignment and shall be
accompanied by a copy of a binding written agreement of the proposed assignee to
purchase such Units from the Selling Member. The Sale Notice shall constitute a
binding offer by the Selling Member to Assign to the Company such number of
Units (the "Offered Units") then owned by the Selling Member as are proposed to
be Assigned in the Sale Notice at the monetary price per Unit designated in the
Sale Notice, payable as hereinafter provided.
(b) Not later than thirty (30) days after receipt of the Sale Notice, the
Company shall deliver to the Selling Member and the Buying Members a written
notice (the "Buying Notice") stating whether the Company has accepted the offer
stated in the Sale Notice. If the Company accepts the offer of the Selling
Member in full, the Buying Notice shall fix a time, location and date for the
closing of such purchase, which date shall be not less than ten (10) nor more
than sixty (60) days after delivery of the Buying Notice. The Company shall have
no right to purchase any Offered Units unless the Company accepts the offer of
the Selling Member in whole. In the event the Company elects to purchase less
than all the Offered Units, the Buying Members shall have fifteen (15) days from
the date of the Buying Notice to elect to purchase the Offered Units which the
Company did not elect to purchase, by giving written notice to the Company and
the Selling Member specifying the number of Offered Units each elects to
purchase and a time, location and date for the closing for such purchase, which
date shall be not less that ten (10) nor more than sixty (60) days from the end
of such fifteen (15) day period. If the Company is purchasing some of the
Offered Units, the closing of the Company's purchase shall be on such date.
Unless otherwise agreed between or among the Buying Members, the purchase by the
Buying Members shall be pro rata to their then Percentage Interests; provided,
however, that if one or more of the Buying Members elects not to purchase any
Offered Units subject to the Sale Notice, the remaining Buying Members may
purchase all of the Offered Units, without the consent of any non-purchasing
Members, pro rata between or among them or in such other manner as they may
agree. Notwithstanding the foregoing, neither the Company nor any Buying Member
shall have a right to purchase any Offered Units unless the Company and/or the
Buying Members accept the offer of the Selling Member in whole. The place for
the closing of any purchase and sale described in this Section 9.05 shall be the
principal office of the Company or at such other place as the parties shall
agree. At the closing, the Selling Member shall accept payment on the terms
offered by the proposed assignee named in the Sale Notice; provided, however,
that neither the Company nor the Buying Members, as the case may be, shall be
required to meet any non-monetary terms of the proposed Assignment, including,
without limitation, delivery of other securities in exchange for the Units
proposed to be Assigned, but rather, shall be entitled to substitute therefore
monetary terms having the same fair market value as the non-monetary terms, as
conclusively determined by the Managers in good faith. At the closing, the
Selling Member shall execute and deliver to the Company and/or the Buying
Members such documents, certificates and instruments of Assignment as the
Company and/or the Buying Members shall require to evidence and effectuate the
Assignment.
(c) If the Company and the Buying Members shall fail to accept the offer
stated in the Sale Notice within such thirty (30) day period, then the Selling
Member shall be free to Assign all, but not less than all, of the Offered Units
to the designated assignee at a price and on terms no less favorable to the
Selling Member than described in the Sale Notice; provided, however, that such
Assignment is consummated within one hundred fifty (150) days after the delivery
of the Sale Notice to the Company and otherwise satisfies the terms and
conditions of this Agreement; and provided, further, that the designated
assignee may become a Substitute Member only upon compliance with the provisions
of Section 9.04 hereof.
9.06 Call Option.
(a) At all times during the Call Period, Zoom shall have the right,
provided that Zoom has not (i) sold, assigned or transferred any of its
interests under the Purchase Agreement, or (ii) failed to make and Additional
Capital Contribution under Section 4.09 above beyond any applicable cure period,
to purchase from the Non-Zoom Members, and the Non-Zoom Members shall be
obligated to sell to Zoom, all, but not less than all, of the Non-Zoom Members'
collective Units (free and clear of all liens, encumbrances, and the like),
including, but not limited to, all of the Non-Zoom Members' right, title and
interest in and to the Real Property, Leases, Tangible Personal Property,
Intangible Personal Property, License Agreements and Xxxxxxx Money, under the
Purchase Agreement and the Second Amendment (the "Call"). If Zoom desires to
exercise the Call, Zoom shall provide written notice to the Non-Zoom Members at
least thirty (30) business days prior to the Call purchase date. In the event
that the Call transaction has not closed by December 31, 2005 (other than as a
result of a default of the Non-Zoom Members), all of Zoom's Call rights shall
expire.
(b) The purchase price for the Non-Zoom Members' interest (the "Call Option
Price") shall be as follows:
(i) If the closing of the Call transaction occurs within one (1) year
after the Option Effective Date, an amount equal to the sum of (A) the
Purchase Price (less, if applicable, the Closing Credit), plus any
Investment Capital Contributions made from time to time by the Non-Zoom
Members to the Company, plus the Non-Zoom Members' collective pro rata
share of any undistributed net Profits of the Company (the "Non-Zoom
Members' Net Profits") and (B) twenty percent (20%) of the Purchase Price
(less, if applicable, the Closing Credit). For example, if the Purchase
Price is $6,250,000.00 (including all closing costs, adjustments and
credits), the total Investment Capital Contributions made by the Non-Zoom
Members to the Company are $500,000.00, and the Non-Zoom Members' Net
Profits are $100,000.00, then the Call Option Price would be $8,100,000.00
($6,250,000.00 + 1,250,000.00 + 100,000.00 + 500,000.00).
(ii) If the closing of the Call transaction occurs more than one (1)
year after the Option Effective Date, an amount equal to the sum of (A) the
Purchase Price (less, if applicable, the Closing Credit), plus any
Investment Capital Contributions made from time to time by the Non-Zoom
Members to the Company, plus the Non-Zoom Members' Net Profits and (B) (x)
twenty percent (20%) of the the Purchase Price (less, if applicable, the
Closing Credit), multiplied by (y) a fraction, the numerator of which shall
be the number of months from the Option Effective Date to the close of the
Call transaction, and the denominator of which shall be twelve (12).
9.07 Zoom Option.
(a) At all times during the Zoom Option Period, Zoom shall have the right
to sell to the Non-Zoom Members, and the Zoom Members shall be obligated to buy
from Zoom, all, but not less than all, of Zoom's Units (free and clear of all
liens, encumbrances, and the like), including, but not limited to, all of Zoom's
right, title and interest in and to the Real Property, Leases, Tangible Personal
Property, Intangible Personal Property, License Agreements and Xxxxxxx Money
under the Purchase Agreement and the Second Amendment (the "Zoom Option"). If
Zoom desires to exercise the Zoom Option, Zoom shall provide written notice (the
"Option Notification") to the Non-Zoom Members prior to the expiration of the
Zoom Option Period.
(b) The purchase price for Zoom's Units (the "Zoom Option Price") shall be
an amount equal to the sum of (w) Zoom's allocable share, i.e. twenty percent
(20%), of the Net Purchase Equity (as hereinafter defined), plus (x) any
Investment Capital Contribution made from time to time by Zoom to the Company,
plus (y) Zoom's pro rata share of any undistributed net Profits of the Company
("Zoom's Net Profits"), plus (z) Zoom's pro rata share of any of the Company's
legal fees in connection with the acquisition and financing of the Property
("Zoom's Legal Share"). The term "Net Purchase Equity" as used herein shall mean
the amount of the Purchase Price for the Property, increased by any closing
costs and adjustments, and decreased by the Closing Credit (if applicable) and
by the net proceeds of the mortgage used to fund the Purchase Price. For
example, if the Purchase Price is $6,250,000.00 (including all closing costs,
adjustments and credits) and the net mortgage proceeds are $4,000,000.00, the
total Investment Capital Contributions made by Zoom to the Company are
$50,000.00, Zoom's Net Profits are $25,000.00, and Zoom's Legal Share is
$25,000.00, then the Zoom Option Price would be $550,000.00 (20% of
$2,250,000.00, plus $50,000.00, plus $25,000.00, plus $25,000.00).
(c) In the event that Zoom exercises the Zoom Option, each of the Non-Zoom
Members hereby agrees (i) to jointly and severally consummate such transaction
within ninety (90) days after Zoom's delivery of the Option Notification, and
(ii) to contribute its pro rata share of the Zoom Option Price. Any member who
fails to timely contribute its pro rata share of the Zoom Option Price shall
suffer punitive dilution vis-a-vis the other Members, using the formula set
forth in Section 4.09(e) above. Immediately upon Zoom's exercise of the Zoom
Option, Zoom shall have no further obligation to make any Additional Capital
Contribution under Section 4.09 above, including any Additional Capital
Contribution required by a pending capital call notice.
(d) The Members hereby agree to execute and deliver any and all documents
and instruments reasonably necessary to effect the exercise of the Zoom Option,
including, but not limited to, all documents required under Section 9.03 above.
9.08 Rights and Liabilities of an Assigning Member. Any Member who shall
have assigned its Units shall cease to be a Member of the Company, except for
the purpose of determining the profits and losses and assets allocable to its
assignee and shall no longer have any of the rights or privileges of a Member.
ARTICLE X
DISSOLUTION AND TERMINATION
10.01 Events of Dissolution.
(a) The Company shall be dissolved at 12:00 midnight on a date designated
by the Board of Managers with the Supermajority Consent of the Members.
(b) The Company shall not terminate until (a) a Certificate of Cancellation
shall have been filed with the Secretary of State of the state and (b) the
assets of the Company shall have been distributed as provided herein.
Notwithstanding the dissolution of the Company, prior to the termination of the
Company, as aforesaid, the business of the Company and the affairs of the Board
of Managers and the Members, as such, shall continue to be governed by this
Agreement. Upon dissolution, the Managers or, if there are none, a liquidator
appointed by the Majority Consent of the Members (hereinafter, the
"Liquidator"), shall liquidate the assets of the Company and apply and
distribute the proceeds thereof as contemplated by this Agreement and cause the
filing of a Certificate of Cancellation.
(c) Without limiting the generality of the foregoing, in winding up the
affairs of the Company, the Liquidator shall have full right and unlimited
discretion, in the name of and for and on behalf of the Company to:
(i) Prosecute, defend and settle civil, criminal or administrative
suits;
(ii) Collect Company assets, including obligations owed to the
Company;
(iii) Settle and close the Company's business;
(iv) Dispose of and convey all Company property for cash or any other
form of consideration which would facilitate liquidation or distribution
thereof, and in connection therewith to determine the time, manner and
terms of any sale or sales of Company property, having due regard for the
activity and condition of the relevant market and general financial and
economic conditions;
(v) Pay all reasonable selling costs and other expenses incurred in
connection with the winding up out of the proceeds of the disposition of
Company property;
(vi) Discharge the Company's known liabilities and, if necessary, to
set up, for a period not to exceed five (5) years after the date of
dissolution, such cash reserves as the Liquidator may deem reasonably
necessary for any contingent or unforeseen liabilities or obligations of
the Company;
(vii) Distribute, in accordance with Section 10.02, any remaining
proceeds from the sale of Company property to the Members;
(viii) Prepare, execute, acknowledge and file a Certificate of
Cancellation under the Act and any other certificates, tax returns or
instruments necessary or advisable under any applicable law to effect the
winding up and termination of the Company; and
(ix) Exercise, without further authorization or consent of any of the
parties hereto or their legal representatives or successors in interest,
all of the powers conferred upon the Managers under the terms of this
Agreement to the extent necessary or desirable in the good faith judgment
of the Liquidator to perform its duties and functions. The Liquidator (if
not a Manager) shall not be liable as a Manager to the Members and shall,
while acting in such capacity on behalf of the Company, be entitled to the
indemnification rights set forth in Section 5.16.
10.02 Distributions Upon Liquidation.
(a) After payment of liabilities owing to creditors (including any Member
or Manager that has made a loan to the Company in accordance with this
Agreement), the Liquidator shall set up such reserves as the President or such
Liquidator deems reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company. Said reserves may be paid over by the
Liquidator to a bank, to be held in escrow for the purpose of paying any such
contingent or unforeseen liabilities or obligations and, at the expiration of
such period as the Liquidator may deem advisable, such reserves shall be
distributed to the Members or their assigns in the manner set forth in Section
10.02(b) below.
(b) After paying such liabilities and providing for such reserves, the
Liquidator shall cause the remaining net assets of the Company to be distributed
to and among the Members in accordance with their respective positive Capital
Account balances, as determined after taking into account all profits and losses
of the Company.
10.03 Final Audit. Within a reasonable time following the completion of the
liquidation, the Liquidator shall supply to each Member a statement setting
forth the assets and liabilities of the Company as of the date of complete
liquidation and each Member's pro rata portion of distributions pursuant to
Section 10.02.
ARTICLE XI
DISPUTE RESOLUTION
11.01 Procedures for Dispute Resolution. Any dispute, controversy or claim
(a "Dispute") between any parties hereto arising out of or relating to this
Agreement shall be resolved in accordance with the procedures described in this
Article XI. The parties hereto agree to establish an internal hierarchy to
facilitate resolution of these issues as set forth below.
11.02 Informal Resolution.
(a) The Managers of the Company and any Member involved in a Dispute shall
discuss the Dispute and negotiate in good faith in an effort to resolve the
Dispute without the necessity of any formal proceeding relating thereto ("Level
1 Review").
(b) If the Dispute cannot be resolved within ten (10) days of the
commencement of the Level 1 Review, then the Dispute shall be brought before all
of the Members ("Level 2 Review"). The Board of Managers or a duly authorized
committee thereof (excluding for this purpose any Manager affiliated with the
Members involved in the Dispute) shall meet in person or by telephone as often
as the parties reasonably deem necessary in order to gather and furnish to the
participants in the Dispute all information with respect to the Dispute which
the parties believe to be appropriate and germane in connection with its
resolution. The Board of Managers or such committee shall discuss the Dispute
and negotiate in good faith with senior management of any Member involved in a
Dispute in an effort to resolve the Dispute without the necessity of any formal
proceeding relating thereto. During the course of negotiations, all reasonable
requests made by the Board of Managers or such committee or any Member for
nonprivileged information, reasonably related to the Dispute, shall be honored
in order that all parties may be fully advised of each Member's position.
11.03 Non-Binding Mediation.
(a) If resolution of the Dispute is not resolved within thirty (30) days of
the first Level 2 Review meeting, then any party to a Dispute may refer the
Dispute to non-binding mediation.
(b) The parties to a Dispute shall endeavor to agree upon a mutually
acceptable professional mediator not affiliated with any party to the Dispute (a
"Neutral"). If no Neutral is selected within twenty (20) days after the referral
to non-binding mediation, any party to the Dispute may request, within five (5)
days of the end of such period, the American Arbitration Association ("AAA"), or
other similar nationally recognized independent dispute resolution organization
agreed to by the parties, to supply within ten (10) days of such request a list
of at least three (3) potential Neutrals who are knowledgeable in the business
in which the Company is engaged. If a mutually acceptable Neutral is not
selected by the parties within five (5) days after receipt of the list of
potential Neutrals, the Dispute shall be resolved in accordance with Section
11.04.
(c) Within ten (10) days after the appointment of the Neutral, the parties
to the Dispute agree to meet with the Neutral for a prehearing conference. At
such conference the parties shall arrange for the exchange of information in the
possession of any other party, including certain limited depositions where
appropriate, and stipulation of uncontested facts. The parties shall establish
the extent of and schedule for the production of relevant documents,
depositions, and the identification of witnesses. Should a dispute arise over
the extent of document production, appropriate witnesses or the scheduling of
any activity, including the hearing date, the Neutral shall make a final
determination after hearing each party's position. At such prehearing
conference, or at a later scheduled conference as agreed by all parties to the
Dispute, the date of the hearing shall be set which shall not, unless all
parties agree, be more than forty-five (45) days from the date of the initial
pre-hearing conference.
(d) One week prior to the scheduled hearing, each party to the Dispute
shall deliver to the Neutral and to any other party a written summary of its
views on the matter in dispute. The summary shall be no longer than twenty (20)
double-spaced pages unless the parties agree otherwise.
(e) At the hearing each party shall be represented by counsel if so desired
by any party. Each party shall have an agreed-upon time, not to exceed four
hours, in which to present its case, including live or recorded testimony. The
Neutral will be permitted to ask questions after the presentation by each side.
No party shall interrupt any other party or lodge objections unless such
procedures are agreed to in advance by all parties and the Neutral.
(f) If the parties agree to a settlement, the parties, with the assistance
of the Neutral, shall endeavor to draft and execute a settlement agreement at
that time. The settlement agreement shall be a final and binding settlement
among the parties of all claims, cross-claims and counterclaims among the
parties relating to the Dispute. The facts reflected in the Dispute shall
thereafter not serve as the basis of any other claim, cross-claim,
counter-claim, action or other form of recovery by one party against any other
party or parties to the settlement.
(g) If a settlement agreement is not executed by the parties, the Neutral
will meet separately with each party and orally summarize the dispute and the
strengths and weaknesses of that party's position. If all parties agree, this
oral summary can be conducted as a joint conference. There shall be no
stenographic, visual or audio recording made of the hearing or subsequent
discussions.
(h) To the extent any issues arise as to the conduct of the mediation that
are not specifically addressed by the rules specified above, the Commercial
Mediation Rules of the AAA shall apply to the extent that they do not conflict
with the procedures and rules specified above.
(i) The mediation proceedings and all testimony, filings, documents and
information relating to or presented during the mediation proceedings shall be
disclosed exclusively for the purpose of facilitating the mediation process and
for no other purpose and shall be deemed to be information subject to the
confidentiality provisions of this Agreement.
11.04 Binding Arbitration. If resolution of the Dispute still cannot be
achieved pursuant to Section 11.03, the Dispute shall be settled by binding
arbitration conducted in Boston, Massachusetts, in accordance with the then
current Commercial Arbitration Rules of the AAA as modified by the following
provisions:
(a) Selection of one neutral arbitrator by the parties shall be from the
AAA panel list in accordance with the appointment rules of the AAA.
(b) The arbitration process shall be conducted on an expedited basis by the
Boston Office of the AAA. Proceedings in arbitration shall begin no later than
forty-five (45) days after the filing of the Dispute and shall be scheduled to
conclude no later than two-hundred seventy (270) days after the filing of the
Dispute. All hearings, unless otherwise agreed to by the parties, shall be held
in Boston, Massachusetts.
(c) The arbitrator may in his discretion order a pre-hearing exchange of
information including production of documents, exchange of summaries of
testimony or exchange of statements of position or depositions.
(d) The arbitration proceedings and all testimony, filings, documents and
information relating to or presented during the arbitration proceedings shall be
disclosed exclusively for the purpose of facilitating the arbitration process
and for no other purpose and shall be deemed to be information subject to the
confidentiality provisions of this Agreement.
(e) The award of the arbitrator shall be made in a written opinion
containing a concise analysis of the basis upon which the award was made.
(f) A judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
(g) The parties agree to equally split the cost of any arbitration
including the administrative fee, the compensation of the arbitrator and the
expenses of any witnesses or proof produced at the direct request of the
arbitrator.
(h) The parties shall each bear all their own costs and expenses, including
the fees and expenses of legal counsel and expert witnesses.
(i) Notwithstanding the agreement to arbitrate contained in this Article
XI, any party may apply to any court having jurisdiction to enforce this
Agreement to seek provisional injunctive relief so as to maintain the status quo
until the arbitration award is rendered or the dispute is otherwise resolved.
(j) The arbitrator shall have the right only to interpret and apply the
terms and conditions of this Agreement in accordance with the law of the State
and to order any remedy allowed by this Agreement, but may not change any term
or condition of this Agreement, deprive any party of any remedy expressly
provided hereunder or provide any right or remedy that has not been expressly
provided hereunder.
(k) The arbitrator shall not have the power to award consequential damages
or punitive damages.
(l) The Federal Arbitration Act, 9 U.S.C. Sections 1 through 14, except as
modified hereby, shall govern the interpretation and enforcement of this Article
XI.
11.05 Performance of Obligations. Notwithstanding anything to the contrary
in this Article XI, the Members agree to continue performing their respective
obligations under this Agreement while the Dispute is being resolved unless and
until such obligations are terminated or expire in accordance with the
provisions hereof.
ARTICLE XII
POWER OF ATTORNEY
12.1 Managers as Attorney-In-Fact. Each Member hereby makes, constitutes,
and appoints the Managers and each successor Manager with full power of
substitution and resubstitution, such Member's true and lawful attorney-in-fact
for, and in the name, place, and stead and for the use and benefit of such
Member, to sign, execute, certify, acknowledge, swear to, file, and record (a)
all certificates and other instruments (including counterparts of this
Agreement) that the Managers may deem necessary or appropriate to be filed by
the Company under the laws of the Commonwealth of Massachusetts or any other
state or jurisdiction in which the Company is doing, or intends to do, business;
(b) any and all amendments or changes to this Agreement and the instruments
described in (a), as now or hereafter amended, that the Managers may deem
necessary or appropriate to effect a change or modification of the Company in
accordance with the terms of this Agreement, including, without limitation,
amendments or changes to reflect (i) the exercise by the Managers of any power
granted to them under this Agreement, (ii) any amendments adopted by the Members
in accordance with the terms of this Agreement, (iii) the admission of any
substituted Member, and (iv) the disposition by any Member of such Member's
Units in the Company; (c) all certificates of cancellation and other instruments
that the Managers may deem necessary or appropriate to effect the dissolution
and termination of the Company pursuant to the terms of this Agreement; and (d)
any other instrument that is now or may hereafter be required by law to be filed
on behalf of the Company or is deemed necessary or appropriate by the Managers
to carry out fully the provisions of this Agreement in accordance with its
terms. Each Member authorizes such attorney-in-fact to take any further action
that such attorney-in-fact shall consider necessary or advisable in connection
with any of the foregoing, hereby giving such attorney-in-fact full power and
authority to do and perform each and every act or thing whatsoever requisite or
advisable to be done in connection with the foregoing as fully as such Member
might or could do personally, and hereby ratifying and confirming all that such
attorney-in-fact shall lawfully do or cause to be done by virtue thereof or
hereof.
12.2 Nature of Special Power. The power of attorney granted pursuant to
this Article XII:
(a) Is a special power of attorney coupled with an interest and is
irrevocable;
(b) May be exercised by such attorney-in-fact by listing the Members
executing any agreement, certificate, instrument, or other document with the
single signature of such attorney-in-fact acting as attorney-in-fact for such
Members; and
(c) Shall survive the death, disability, legal incapacity bankruptcy,
insolvency, dissolution, or cessation of existence of a Member and shall survive
the delivery of an assignment by a Member of the whole or a portion of such
Member's Units; provided, however, that where the assignment is of all of such
Member's Units and the assignee is admitted as a substituted Member, the power
of attorney shall survive the delivery of such assignment for the sole purpose
of enabling such attorney-in-fact to effect such substitution.
ARTICLE XIII
MISCELLANEOUS
13.01 Notices. Any and all notices, elections, consents or demands
permitted or required to be made or given under this Agreement shall be in
writing and shall be delivered personally, made by telex, telecopy, or facsimile
transmission, sent by overnight courier or sent by registered or certified mail,
return receipt requested, to the addressee as follows: if to a Member, to its
address set forth on Schedule A, and, if to the Board of Managers of the
Company, to the Company's principal office. Any and all notices, elections,
consents or demands permitted or required to be made or given under this
Agreement shall be deemed to have been given if by hand, at the time of the
delivery thereof to the receiving party, if made by telex, telecopy or facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, if sent by overnight courier, on the next
business day following the day such notice is delivered to the courier service,
or if sent by registered or certified mail, on the third (3rd) business day (ten
(10) if overseas) following the day such mailing is made.
13.02 Successors and Assigns. Subject to the restrictions on transfer set
forth herein, this Agreement, and each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Members, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Member, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
13.03 Amendments. This Agreement may be amended from time to time by the
Board of Managers; provided, however, that: (a) all Members must vote in favor
of, or give their Written Consent to, any amendment which would amend this
Section 13.03; (b) each Member to be affected must give its Written Consent to
any amendment which would (i) increase the amount of the Capital Contribution
payable by such Member; (ii) increase the liability of such Member; or (iii)
cause such Member's share of the Company's assets, profits or losses to be
modified, unless such modification is in connection with the admission of a new
Member or Members and all interests of persons or entities who are Members of
the same class immediately prior to such admission are similarly modified; (c)
no provision of this Agreement requiring that an action be taken only upon
approval of Members holding a specified Percentage Interest may be modified,
amended or repealed unless Members holding at least such Percentage Interest
vote in favor of, or give their Written Consent to, such modification, amendment
or repeal, and (d) the Board of Managers is authorized, without the vote in
favor or Written Consent of any Member, to make amendments to this Agreement:
(i) to add to the duties or obligations of the Board of Managers or surrender
any right or power granted to the Board of Managers herein for the benefit of
the Members; (ii) to preserve the status of the Company as a "partnership" for
federal income tax purposes; (iii) to amend the provisions of this Agreement
relating to allocations of profits and losses for tax purposes so that such
provisions comply with applicable regulations adopted under the Code; and (iv)
to reflect the admission or withdrawal of Members and the terms as authorized by
this Agreement.
13.04 Partition. The Members hereby agree that no Member nor any
successor-in-interest to any Member, shall have the right while this Agreement
remains in effect to have any property of the Company partitioned, or to file a
complaint or institute any proceeding at law or in equity to have any property
of the Company partitioned, and each Member, on behalf of itself, its
successors, representatives, heirs, and assigns, hereby waives any such right.
13.05 No Waiver. The failure of any Member to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Member's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder, shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder.
13.06 Exhibits and Schedules. All exhibits and schedules attached hereto
are an integral part of this Agreement and are incorporated herein by this
reference.
13.07 Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
13.08 Captions. Titles or captions of articles or sections contained in
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
13.09 Applicable Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and interpreted, construed and enforced
in accordance with the laws of the State.
13.10 Equitable Remedies. Each Member shall, in addition to rights provided
herein or as may be provided under applicable law, be entitled to all equitable
remedies, including those of specific performance and injunction, to enforce its
rights hereunder.
13.11 Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor of any Member or of the Company.
13.12 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment.
13.13 Separability of Provisions. Each provision of this Agreement shall be
considered separable. To the extent that any provision of this Agreement is
prohibited or ineffective under the Act, this Agreement shall be considered
amended to the smallest degree possible in order to make the Agreement effective
under the Act (and, if the Act is subsequently amended or interpreted in such
manner as to make effective any provision of this Agreement that was formerly
rendered invalid, such provision shall automatically be considered to be valid
from the effective date of such amendment or interpretation).
13.14 Counterparts. This Agreement may be executed in a number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all of the Members and Managers, notwithstanding that all
Members and Managers have not signed the same counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
WITNESS the execution hereof under seal as of the day first above written.
MEMBERS: MANAGERS:
XXXXX X. XXXXXX LIVING TRUST
By: /s/ Xxxxx X. Xxxxxx /s/ Xxxxx Xxxxxx
----------------------------------- -----------------------------------
Xxxxx X. Xxxxxx, as Trustee and Xxxxx Xxxxxx
individually
/s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx
JEWEL FAMILY LIMITED PARTNERSHIP
By: /s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx, as General Partner
and individually
ZOOM TELEPHONICS, INC.
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx
Executive Vice President
/s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx
Counterpart Signature Page For Members
The undersigned hereby agrees to become a party to that certain Operating
Agreement dated as of March ___, 2002 (the "Agreement") of Zoom Group LLC, a
Massachusetts limited liability company (the "Company"). From and after the
undersigned's execution and delivery and the Company's acceptance of this
Counterpart Signature Page, the undersigned shall be a party to the Agreement as
a "Member" and the Units owned by the undersigned as set forth below shall be
deemed to be "Units" for all purposes of the Agreement.
-------------------------------------------
Printed Name of Member
-------------------------------------------
Signature of Member
Name: ___________________________________
Title: ____________________________________
Type and Number of Units: ___________________
Capital Contribution: ________________________
Date: _____________________________________
Agreed and accepted:
ZOOM GROUP LLC
By:
---------------------------------------
Date:
-------------------------------------
Counterpart Signature Page For Managers
The undersigned hereby agrees to become a party to that certain Operating
Agreement dated as of March ___, 2002 (the "Agreement") of Zoom Group LLC, a
Massachusetts limited liability company (the "Company"). From and after the
undersigned's execution and delivery of this Counterpart Signature Page, the
undersigned shall be a party to the Agreement as a "Manager" and shall be
entitled to the rights, and subject to and bound by the obligations set forth
therein.
------------------------------------------
Printed Name of Manager
------------------------------------------
Signature of Manager
Date:
-------------------------------------
ZOOM GROUP LLC
SCHEDULE A
MEMBERS
As of _________, 2002
----------------------------------------------------------------------------------------
Capital Percentage Capital
Name Address Units Contribution Interest Account
Balance
----------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 0000 X. Xxxxxxx Xx.
Living Trust Arlington, VA 20 $540,000.00 20% $540,000.00
22207
Xxxxx Xxxxxx 0000 Xxxxxx Xx.
Xxxxxxxxx, XX 20 $540,000.00 20% $540,000.00
02446
Jewel Family Limited 0 Xxxxxxxx Xx.
Xxxxxxxxxxx Xxxxxxxxx, XX 20 $490,000.00 20% $490,000.00
02482
Zoom Telephonics, 000 Xxxxx Xx.
Xxx. Xxxxxx, XX 00000 20 $540,000.00 20% $540,000.00
Xxxxx Xxxxxxx 00 Xxxxxxxx Xx.
Xxxxxx, XX 00000 20 $540,000.00 20% $540,000.00
----------------------------------------------------------------------------------------
