OPERATING AGREEMENT
OF
AIM/NEW TECH LLC
A Delaware Limited Liability Company
OPERATING AGREEMENT OF AIM/NEW TECH LLC dated as of August 27, 1998 (this
"Agreement") by, among and between AIM/NEW TECH LLC, a Delaware limited
liability company (the "Company"), NEW TECH ENTERTAINMENT, LLC, a Delaware
limited liability company ("New Tech") and AMERICAN INTERACTIVE MEDIA, INC., a
Delaware corporation ("AIM" or "Management", and together with New Tech
collectively referred to as the "Members" and each individually as a "Member").
W I T N E S S E T H:
WHEREAS, as of the date hereof the Members have organized the Company as a
Delaware limited liability company pursuant to the Limited Liability Company Act
of the State of Delaware, as amended, Title 6, xx.xx. 18-101 et seq. (the
"Act"); and
WHEREAS, the Members and the Company desire to enter into this Agreement in
order to state the terms and conditions of the ongoing operation and management
of the Company.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein and intending to be legally bound hereby, the Members and the
Company hereby agree as follows:
I. FORMATION
1.1 Formation; Name; Office. As of the date hereof, the Members have formed
the Company under and pursuant to the Act to be conducted under the name
"AIM/NEW TECH LLC". The business office of the Company shall be at 000 Xxxxxxxx,
Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000, or at such other place or places within the
New York metropolitan area as the Manager (as defined in Section 5.1 of this
Agreement) may from time to time designate or is otherwise agreed to by the
Members.
1.2 Purposes. The purposes for which the Company has been formed are:
(a) to develop, produce, distribute, license, lease, sell or otherwise deal
in and exploit, whether directly or indirectly, the entertainment productions
and information program ("Projects") set forth on Schedule A, as such Schedule
may be amended from time to time, for distribution on the Internet and to
exploit as appropriate any and all ancillary rights thereto, worldwide in
perpetuity, in any and all forms and media in or by any manner, method, device
(now known or hereafter devised) including but not limited to the Internet,
internet access appliances or services; over-the-air, network, direct-to-home,
subscription, pay-per-view, master antenna, multi-point closed circuit,
interactive or cable television; home video devices; other
computer-related media which may be embodied in or delivered through magnetic,
digital, optical or laser-based software, CD-ROM, interactive software; compact
discs, optical discs, audio and audio-visual cassettes and discs, electronic
video recordings, holograms, ROM Card, silicon chip, on-line transmission to
computers, and on-line transmission to computer connected television or monitors
in the home or office; motion pictures, films and tapes for exhibition in all
media and in all gauges, whether for theatrical exhibition or for sale, lease or
license;
(b) to negotiate, execute and enter into and perform any and all contracts
and agreements necessary or desirable for, or otherwise related to, the
operation or management of the Company or the development, production,
distribution, leasing, licensing, merchandising or other exploitation of the
Projects;
(c) to accomplish any lawful business whatsoever or which shall at any time
appear conducive, to or expedient for, the protection or benefit of the Company
and its assets;
(d) to engage in any lawful act or activity for which a limited liability
company may be formed under the Act; and
(e) to engage in all activities necessary, customary, convenient or
incident to any of the foregoing.
1.3 Duration. The term of existence of the Company commenced on August 27,
1998 and shall end on December 31, 2048, unless the Company is earlier dissolved
in accordance with either the terms of this Agreement or the Act (the "Term").
1.4 Resident Office and Resident Agent. The registered office and resident
agent of the Company shall be as designated in the Certificate of Formation of
the Company (the "Certificate") or any amendment thereof. The registered office
and/or the resident agent may be changed from time to time by the Manager, upon
prior written notice to New Tech, in accordance with the Act. If the resident
agent shall ever resign, then the Manager shall promptly appoint a successor,
resident, agent and shall file an appropriate amendment to the Certificate.
1.5 Minimum Number of Members. At no time shall there be fewer than two (2)
Members.
II. CAPITAL CONTRIBUTIONS, LIABILITY AND AUTHORITY
2.1 Initial Commitments and Contributions.
(a) The percentage interest ("Percentage Interest"), initial capital
contribution and address of each Member are set forth on Schedule B hereto.
(b) Simultaneously with the execution and delivery of this Agreement, New
Tech shall deliver such documentation, including operating agreements, or other
agreements, in a form reasonably acceptable to AIM, relating to each project
("Project Operating Agreements") as New Tech shall have obtained at that time
(collectively, the "Escrow Documents"), and AIM shall deliver the funds
referenced in Sections 2.1(e) and 5.7(g) to Xxxxxxx, Xxxxxxxxx LLP, as escrow
agent (the "Escrow Agent") pursuant to an escrow agreement in substantially the
form
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attached hereto as referenced in Sections 2.1(e) and all monthly installments as
they become due referenced in 5.7(g) to New Tech upon execution, delivery and
approval by AIM of a Project Operating Agreement for each of the five (5)
Projects referenced in 2.1(d), which Agreements shall be delivered to the Escrow
Agent within six (6) months of the execution and delivery of this Agreement. If
New Tech shall fail to deliver to the Escrow Agent a Project Operating Agreement
for each of such five (5) Projects, AIM may, at its option, terminate this
Agreement and shall have no further obligations or liabilities hereunder or, in
the alternative, AIM may elect to accept less than all the Project Operating
Agreements and reduce its payments therefor on a pro rata basis.
(c) Subject to Section 2.1(b), simultaneously with the execution and
delivery of this Agreement, New Tech shall, subject to Section 5.12 and the
Third Party Agreements, transfer, assign, to the extent currently assignable,
and otherwise contribute and convey to the Company any and all of its right,
title and interest in and to the projects and any story concepts, outlines,
music, text and graphics related to each Project and all ancillary rights
related thereto in the manner, form and method described in Section 1.2(a) and
all intellectual property, copyright, merchandising, licensing and promotional
rights derivative thereof (the "Rights"). New Tech, with the Manager's
cooperation when necessary, shall, subject to the Third Party Agreements (as
defined in Section 4.1), execute and deliver any and all necessary instruments,
assignments, or other documents required by Manager to vest all of New Tech's
right, title and interest in and to the Projects and related Rights in the
Company's name.
(d) Subject to Section 2.1(b), simultaneously with the execution and
delivery of this Agreement, New Tech shall obtain and deliver to the Company the
valid, effective signed assignments to the Company of the following five (5)
Projects:
Biz Buzz
Romance Land
Crimebeat
Stork Club
Cartoonland
(e) Subject to Section 2.1(b), simultaneously with the execution and
delivery of this Agreement (i) the Manager shall advance to the Company ONE
HUNDRED THOUSAND 00/100 DOLLARS ($100,000.00) in immediately available funds and
(ii) the Company shall pay New Tech such advanced amount as partial
reimbursement of costs incurred to date by New Tech in connection with the
development of the Projects; provided, however, that neither the Manager nor the
Company shall have any further obligations to reimburse New Tech for such costs
unless in accordance with a budget approved pursuant to this Agreement.
(f) No interest shall accrue on any capital contribution.
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2.2 Additional Contributions. No Member shall be obligated to make any
additional capital contribution to the Company.
2.3 Members' Liability. Except as otherwise provided in this Agreement, the
liability of the Members, as such, shall be limited to the amount of capital
contributions that the Members have made to the Company.
2.4 Uses of Capital Contributions. Any funds received by the Company
pursuant to this Article II shall be utilized by the Company for Company
purposes as determined by the Manager.
2.5 Withdrawal of Capital. Unless the prior written consent of the Members
shall have been obtained, no Member shall have the right to withdraw any part of
such Member's capital contributions prior to the liquidation and termination of
the Company pursuant to Article XI of this Agreement.
2.6 Source of Distributions. No Member, Manager or other Related Party (as
defined in Section 13.1 of this Agreement) shall be personally liable for the
return of the capital contributions of any other Member, or any portion thereof,
it being expressly understood that any such return shall be made solely from the
Company's assets.
III. TITLE TO THE PROPERTY OF THE COMPANY
3.1 Title to Property. Title to any and all property, real or personal,
tangible or intangible, owned by or leased to the Company shall be held in the
name of the Company.
3.2 Copyrights. Subject to any rights, obligations or provisions of any
Project Operating Agreement or Third Party Agreement, as described in Sections
4.1 and 4.2, Management and New Tech shall take all actions necessary to secure
and maintain copyrights in the name of the Company for each Project acquired,
produced and otherwise exploited by the Company. Upon liquidation and
termination of the Company, any and all copyrights existing in the name of the
Company shall be assigned, transferred and conveyed into the joint ownership of
New Tech and the Manager and all proceeds shall be shared one-half (1/2) to New
Tech and one-half (1/2) to the Manager, free and clear of any encumbrances or,
upon mutual consent of New Tech and the Manager, sold with profits from such
sale to be distributed equally between New Tech and the Manager in accordance
with Section 11.3. Notwithstanding the foregoing, any licenses granted by the
Company to third party users prior to the liquidation and termination of the
Company, shall remain in full force and effect pursuant to their terms.
3.3 Intellectual Property Rights. Subject to the reversion rights of New
Tech pursuant to Section 5.12, all of the program content developed in
connection with or arising out of the development and production of any Project
shall be (subject to the Third Party Agreements) the exclusive property of the
Company, including (a) the ultimate title of any program and any working titles,
(b) any other elements which are or could be the subject of trademarks,
tradenames, or copyrights; and (c) the script, story lines, episode themes,
characters, personas, set designs, costumes, and ideas for all of the foregoing
which are developed and/or made known to the Company by any means.
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IV. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Transfer of Rights and Assets. New Tech represents and warrants to the
Company and each Member that it owns and is transferring, assigning or otherwise
conveying all right, title and interest in and to the Projects and the Rights to
the Company free and clear of any claim, charge, lien, pledge, security
interest, transfer restriction, encumbrance, or other restriction or limitation
whatsoever created or caused by New Tech or of which New Tech has knowledge, but
subject to certain underlying rights agreements ("Third Party Agreements")
described in Section 4.2. New Tech further represents and warrants that it has
created the projects either alone or together with parties to the Third Party
Agreements.
4.2 Third Party Agreements. Development, production and distribution of
each project by the Company is subject to certain limited liability company
operating agreements, joint venture agreements restrictions, conditions and
terms of the Third Party Agreements. New Tech represents and warrants that the
Third Party Agreements set forth in Schedule D are valid, subsisting and in full
force and effect and that there are no defaults thereunder and covenants that it
shall use its best efforts to assist the Manager to effectuate commercially
reasonable amendments to the Third Party Agreements as the Manager shall deem
necessary and desirable.
4.3 Full Power and Authority. Each Member represents and warrants that it
has the full power and authority to execute, deliver and perform this Agreement.
V. MANAGEMENT OF THE COMPANY; POWERS AND DUTIES OF THE MANAGER; CONFLICTS OF
INTEREST; COMPENSATION OF MEMBERS; COSTS
5.1 Management of Business.
(a) The Company shall be managed by a manager (the "Manager") who shall be
designated by the Members in accordance with Section 5.1(b) of this Agreement.
(b) The Members hereby appoint Management as the Manager to serve for the
Term. The address of the Manager is set forth on Schedule E attached hereto.
(c) If at any time there is no Manager, any decision delegated herein to
the Manager shall be decided by unanimous consent of the Members.
5.2 General Powers of Manager. Subject to the terms and provisions of
Sections 5.7(f) and 7.4 of this Agreement, consistent with Approved Project
Budget(s) and an Approved Annual Budget and otherwise not inconsistent with the
provisions of this Agreement, any and all decisions concerning the day-to-day
business and affairs of the Company shall be made by the Manager.
5.3 Duties and Rights of the Manager and New Tech.
(a) The Manager has the power, on behalf of the Company, to do all things
necessary or convenient to carry out the business and affairs of the Company.
The Manager shall, with the advice and consent of New Tech, supervise the
operation, management, conduct
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and control of the development, production and distribution phases of each
Project and the overall day-to-day operation of, and matters relating to, the
Company or its properties.
(b) The Manager shall be responsible for the creation, development and
maintenance of Internet sites for the Projects, hiring and compensation of
personnel necessary to effectuate the foregoing and for the distribution of the
Projects on the Internet and all television media. Manager shall provide to New
Tech, to the extent reasonably practicable, to have meaningful creative
interface regarding the projects and consultations with respect to any works,
negotiations or transactions in progress, the development of all projects, and
the management and operation of the Company.
(c) The Manager and New Tech shall devote, on a non-exclusive basis, such
of their time and attention to the business and affairs of the Company and shall
provide their expertise and know-how in the development and production of
programming content for Internet broadcast use, including, but not limited to,
their business, professional and talent contacts (including individual artists
and performing groups) to the extent such contracts would prove useful to the
Company in the development, production and exploitation of the projects as shall
be reasonably necessary to effectuate the Company's business and purpose.
(d) New Tech shall provide consulting services for the creative design of
each Internet site and shall be responsible for seeking network television
and/or syndication of the Projects.
5.4 Conflicts of Interest. The fact that a Manager, a Member or any other
Related Party is directly or indirectly interested in or connected with any
person, firm or corporation employed by the Company or from whom the Company may
buy merchandise, services or other property shall not prohibit the Manager from
employing, or from dealing with, such Member, Manager or other Related Party on
behalf of the Company, if the compensation, price or fee therefor is comparable
and competitive with the compensation, price or fee therefor chargeable by an
unaffiliated person who is rendering comparable services or selling or leasing
comparable goods to entities conducting businesses similar to that conducted by
the Company.
5.5 Engaging in Other Activities. Notwithstanding any provision contained
in this Agreement to the contrary and the fact that the Company shall have the
exclusive right to exploit each Project listed on Schedule A, each Member may
engage in, acquire and possess, without accountability to the Company or other
Members, any calling, business, profession, investment or interest independently
or with others, including, but not limited to, the acquisition, ownership,
financing, leasing, operation, management or development of any interests in any
business or asset even if competitive with that of the Company.
5.6 Compensation of Members and the Manager. Unless expressly provided
herein to the contrary, no Member shall be entitled to any compensation for such
Member's services to the Company unless otherwise determined by the mutual
consent of the Members.
5.7 Budgets, Advances, Operating Costs and Expenses.
(a) The Manager shall submit a detailed production and distribution budget,
and updates and revisions thereto, for each Project and an annual operating
budget for the
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Company (upon approval, each an "Approved Project Budget" and an "Approved
Annual Budget," respectively) to New Tech for approval, which approval shall not
be unreasonably withheld.
(b) On or before December 31, 1998, New Tech shall use its best efforts to
obtain and deliver to the Company the valid, effective signed assignments to the
Company of the following four (4) Projects, or mutually agreed upon substitute
projects:
Sci-Fi Universe
Pop City
I Need Help
Platinum (Over 50)
Upon the delivery of each such assignment, the Manager shall advance to the
Company TWENTY-FIVE THOUSAND 00/100 DOLLARS ($25,000.00) in immediately
available funds. Upon receipt by the Company from the Manager of such advance,
the Company shall pay New Tech such advanced amount as partial reimbursement of
costs incurred by New Tech in connection with the development of the Projects;
provided, however, that neither the Manager nor the Company shall have further
obligations to reimburse New Tech for any additional reimbursement of such costs
unless in accordance with a budget approved pursuant to this Agreement. So long
as New Tech shall have used its best efforts to obtain and delivery such
assignments, New Tech's failure to obtain and deliver one or more of such
assignments shall not be deemed to be a breach of this Agreement; provided that
the Manager shall not be obligated to advance and the Company shall not be
obligated to pay the TWENTY-FIVE THOUSAND 00/100 DOLLARS ($25,000.00) to New
Tech for any assignment related to any Project which is not obtained and
delivered to the Company by New Tech.
(c) The Manager shall advance funds to the Company sufficient to cover all
costs and expenses of the operations of the Company, including but not limited
to, the supplying of the personnel, management, office space and production
materials and facilities reasonably required (either at the Manager's existing
facilities at 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, or other mutually agreeable
space) and related overhead costs, including but not limited to, office
supplies, telephone services, utilities, reception and secretarial services.
(d) The Manager shall also advance funds to cover expenses incurred by the
Company in connection with the creation, production, marketing and promotion of
the Projects and legal and accounting expenses.
(e) The advances provided by the Manager described in Sections 2.1(e),
5.7(b), 5.7(c), 5.7(d) and 5.7(g) shall be subject to recoupment by Manager on a
first priority basis as expenses of the Company prior to the allocation of Net
Profits among Members or otherwise. Any advances required to be supplied by
Manager pursuant to this Section 5.7 shall be provided on a timely, "as
required" basis.
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(f) Unless, and to the extent, provided for in an Approved Project Budget
or an Approved Annual Budget, neither the Manager nor New Tech without the prior
written consent of the other shall (i) incur any debt, obligation or other
liability on behalf of the Company, (ii) borrow any monies from or lend any
monies to the Company, (iii) accept or endorse any commercial paper, (iv) make
use of any of the Company's credit, property or assets, (v) assign, transfer, or
otherwise convey any rights or delegate any duties arising out of any contract,
agreement, commitment or understanding to which the Company is a party or has
agreed to be bound, or (vi) solely liable for any debt incurred or other
obligation assumed by such Member in excess of an Approved project Budget, an
approved Annual Project or in violation of any tem or provision of this
Agreement, without any right to contribution from another Member.
(g) Subject to Section 2.1(b), the Manager shall advance to the Company
funds necessary for the Company to pay New Tech a consulting fee of $240,000 per
year for non-exclusive consulting services to the Company for the initial two
(2) years of this Agreement. The consulting fee will be payable monthly in
advance in equal installments, with the first payment due upon the execution and
delivery of this Agreement. New Tech shall cause Xxxxxx Xxxx, Xxxx Xxxxxxxxxxxx
and/or Xxxxxx Xxxxxxxxxxxx and such other employees and agents of New Tech, as
it determines, to provide such consulting services.
5.8 Production Credits. Xxxx Xxxxxxxxxxxx, Xxxxxx Xxxxxxxxxxxx, Xxxxxx Xxxx
and other AIM personnel as shall be determined by AIM not to exceed three
persons shall each be accorded equal credits as "Executive Producer" or
"Executive Consultant" as each may elect; the Members shall each be accorded
equal credits as a `Production Company"; and the Company shall receive a
"Production" credit, on the site screen, video, print or tape production of each
Project.
5.9 Subsidiaries. The Company shall establish for each Project, a
wholly-owned entity, in either corporate or limited liability company form, as
the Manager and New Tech shall so agree. The Company shall grant an exclusive
license to such wholly-owned entity to use and exploit any and all copyrighted
material and any other Rights and Assets relating to that Project.
5.10 Right of First Refusal.
(a) The Management shall have, at any time, the right of first refusal to
acquire all rights to develop, produce, distribute, lease, license or otherwise
deal in and exploit any and all entertainment productions and information
programs and all ancillary rights thereto, created or obtained by New Tech for
use on the Internet (the "New Project"), as a new project of the Company.
Notwithstanding the immediately preceding sentence, the right of first refusal
shall not apply to those productions or programs listed on Schedule F which
previously have been presented to the Manager for inclusion on Schedule A and
which the Manager has rejected.
(b) Prior to discussing or negotiating with any third party with respect to
a New Project, New Tech shall first notify in writing and discuss and negotiate
exclusively and in good faith with the Manager with respect to the terms and
conditions upon which the Manager may acquire rights to the New Project,
including any ancillary rights thereto for a thirty (30) day
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period following receipt by the Manager of New Tech's notice (the "First Refusal
Negotiations Period").
If after the First Refusal Negotiations Period, no agreement is reached
between New Tech and the Manager with respect to the foregoing, then New Tech
shall have the right to enter into negotiations with any other third party with
respect to the New Project; provided, that New Tech shall not enter into any
agreement with any such third party without first delivering to the Manager a
written notice of all material terms and conditions of the offer if any to such
third party. Such notice shall constitute an exclusive, irrevocable offer (the
"Offer") to contract with the Manager on such terms and conditions as set forth
in the Offer; and the Manager shall have a period of ten (10) business days in
which to accept the Offer. If the Manager does not accept the Offer, New Tech
may then enter into an agreement with such third party during the sixty (60)
business day period (the "Contract Period") following expiration of such ten
(10) business days, upon the same terms and conditions as included in the Offer.
If New Tech has not contracted with a third party on or before conclusion of the
Contract Period, upon the same terms and conditions as included in the Offer,
then all rights granted to the Manager pursuant to this Section 5.10 shall
remain in effect with respect to such New Project. The failure of the manager to
accept or match any offer shall not cancel, terminate, or act as a waiver of,
any of the Manager's rights under this Section 5.10 with respect to future New
Projects.
(c) In the event that the Manager exercises its right of first refusal
described in this Section 5.10, such New Project shall be listed on Schedule A
and accordingly, shall be subject to all of the terms and conditions of this
Agreement.
5.11 Reimbursement of Expenses. The Company shall reimburse each of the
Members and the Manager for reasonable business expenses incurred in connection
with either party's activities conducted on behalf of the Company; provided,
however, that prior to reimbursing any Member for such reasonable business
expenses, the Manager may require such Member to submit receipts and any other
reasonably requested documentation to verify such expenses.
5.12 Reversion. In the event that the end of the initial six (6) months
from the date the Company receives (i) a valid, effective signed assignment for
such Project from New Tech pursuant to Sections 2.1(d) and 5.7(b) and (ii) a
valid, effective signed assignment (or similar acknowledgment, joint venture
agreement or definitive understanding which shall vest in the Company all rights
necessary to exploit such Project) from any third party having rights in such
Project, the Manager has failed, or thereafter fails, to use its good faith best
efforts as commercially reasonable, and to expend funds in accordance with the
Approved Project Budget, to develop and produce a Project towards an operating
Internet site or other commercial exploitation as contemplated herein, all
rights in and to such unproduced and inoperative Project shall immediately
revert to New Tech. New Tech shall then have the sole and absolute right to
develop, produce, distribute and exploit such Project and shall have no further
obligations to the Company or the Manager with respect to such Project, except
that the Manager shall be entitled to recover from the first gross revenues of
each such project all of the Manager's out of pocket expenses incurred in
connection with such Project and any agreements of New Tech with a third party
for such reverted Project shall provide for such priority recoupment.
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5.13 Authorized Representatives and Consents. The Manager and New Tech
shall each appoint the authorized representatives listed on Schedule E to whom
all necessary consents or approvals which may be required under this Agreement
shall be addressed and may be granted. Any consent required hereunder shall not
be withheld except if in good faith and for commercially reasonable and
non-arbitrary reasons.
5.14 Executive Personnel. In the event that both Xxxx Xxxxx and Xxxxxxx
Xxxxxxx are no longer associated with the Manager, the Manager agrees to provide
substitute executives with comparable abilities and experience.
VI. CONFIDENTIALITY
6.1 Confidentiality. Each of the Members shall use its best efforts to
safeguard the secrecy and confidentiality of all Confidential and Proprietary
Information (as defined below) of the Company and shall not disclose, directly
or indirectly, any of the foregoing to any third party nor use Confidential and
Proprietary Information for any purpose except for the benefit of the Company
except: (i) information which at the time of disclosure is part of the public
knowledge or literature and is readily accessible to such third party through no
act of a member; provided that any combination of features shall not be deemed
within this exception merely because individual features are part of the public
knowledge or literature and readily accessible to such third party, but only if
the combination itself and its principle of operation are part of the public
knowledge or literature and are readily accessible to such third party; (ii)
information required by law to be disclosed; or (iii) as otherwise may be
permitted by the terms of this Agreement.
6.2 Confidential and Proprietary Information. "Confidential and Proprietary
Information" shall mean all confidential and proprietary information of the
Company, including, without limitation, all technical and creative processes and
information relating to or concerning the Projects or the Company, all tangible
and intangible property owned by, or licensed to, or otherwise used by the
Company or its affiliates including, without limitation, ideas, concepts,
designs, music, graphics, text, methods, techniques, projects, programs,
computer software, databases, copyrights, trademarks, trade names, service
names, service marks, logos and proprietary rights relating thereto, marketing,
licensing and distribution strategies, plans or projections, royalty or
licensing arrangements, and all other business related information which ahs not
been publicly disclosed by the Company or its affiliates, whether such
information is in written, graphic, recorded, photographic or electronic data.
Any person who has or may have access to Confidential Information shall agree to
be bound by and comply with the confidentiality provisions of this Article VI.
VII. MEETINGS AND VOTING OF MEMBERS; ACTIONS REQUIRING MEMBERSHIP APPROVAL
7.1 Meetings of Members. Meetings of the Members may be called at any time
by the Manager or by any of the Members. Upon receipt of a written request
either in person or by certified mail that a meeting is to be held and stating
the purposes of the meeting, the Manager shall provide all of the Members,
within ten (10) days after receipt of said request, written notice (either in
person or by certified mail) of the meeting and the purposes of such meeting. No
meeting shall be held less than five (5) nor more than sixty (60) days after
notice thereof;
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provided, however, that any Member may, with respect to itself, waive the notice
requirements herein set forth.
7.2 Voting by Members. Whenever under this Agreement the consent or
approval of a Member is required, the Member or Manager requesting the same
shall solicit such consent or approval by a notice given in accordance with
Section 15.4 of this Agreement or at a meeting held by the Members.
7.3 Action by Written Consent Without a Meeting. Any action required or
permitted to be taken at an annual or special meeting of the Members may be
taken without a meeting, without prior notice, and without a vote, if consents
in writing, setting forth the action so taken, are assigned by the Members
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all Membership Interests
entitled to vote on the action were present and voted. Every written consent
shall bear the date and signature of each Member who signs the consent.
7.4 Actions Requiring Membership Approval. Except as expressly set forth in
this Agreement, no act shall be taken, sum expended, decision made, obligation
incurred or power exercised by the Manager on behalf of the Company except with
the unanimous consent of all of the Members including, without limitation, the
following matters:
(a) The admission of additional Members to the Company or the creation of a
new class of members or membership interest in the Company;
(b) The sale of all or substantially all of the assets and property of the
Company; and
(c) Any merger, consolidation or reorganization of the Company with another
entity.
VIII. ACCOUNTING PROVISIONS
8.1 Fiscal and Taxable Year. The fiscal and taxable year of the Company
shall be the calendar year.
8.2 Books and Accounts.
(a) Complete and accurate books and accounts shall be kept and maintained
for the Company at the Company's principal place of business or at such other
place as the Manager shall select. Such books and accounts shall be kept for
fiscal and tax purposes on the cash or accrual basis, as the Manager shall
determine, and shall include separate accounts for each Member. A list of the
names and addresses of the Members shall be maintained as part of the books and
records of the Company. Each Member or such member's duly authorized
representatives, at such Member's own expense and upon delivering advance
written notice to the Company, shall at all reasonable times have access to, and
may inspect and make copies of, such books and accounts and any other records of
the Company.
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(b) All funds received by the Company shall be deposited in the name of the
Company in such bank account or accounts as the Manager may designate from time
to time, and withdrawals therefrom shall be made upon the signature of the
Manager or upon such other signature or signatures on behalf of the Company as
the Manager may designate from time to time. In the discretion of the Manager,
all deposits and other funds not needed in the operation of the Company's
business may be deposited in interest-bearing bank accounts, in money market
funds, or invested in treasury bills, certificates of deposit, U.S. government
security-backed repurchase agreements or similar short-term money market
instruments, or funds investing in any of the foregoing or similar types of
short-term investments.
8.3 Financial Reports.
(a) The Manager shall endeavor to cause the Company to provide each Member
on or about April 1 of each year, with financial statements including a balance
sheet and the related statements of income and changes in Company capital and
changes in financial position for the prior year.
(b) The Manager shall cause to be prepared after the end of each taxable
year of the Company and filed, on or before their respective due dates (as the
same may be extended), all federal and state income tax returns of the Company
for such taxable year and shall take all action as may be necessary to permit
the Company's regular accountants to prepare and timely file such returns. Form
1065 (Schedule K-1) shall be sent to each Member after the end of each taxable
year reflecting the Member's pro rata share of income, loss, credit and
deductions for such taxable year.
8.4 Tax Elections. Management shall be the Company's Tax Matters Partner
within the meaning of Section 6231 of the Internal Revenue Code of 1986, as
amended (the "Code").
8.5 Expenses. To the extent practicable, all expenses of the Company shall
be billed directly to, and be paid by, the Company.
IX. ADMISSION OF SUBSTITUTE MEMBERS; TRANSFER BY A MEMBER; DISABILITY OF A
MEMBER; CONTINUATION OF THE COMPANY
9.1 Admission of Substitute Members. Upon the prior written consent (which
consent may be granted or withheld for any reason or no reason) of all of the
Members, the Manager shall admit to the Company as a substitute member any
person or entity who shall have acquired all or any portion of the Membership
Interest of one or more Members pursuant to a written assignment, provided that
the provisions of this Article IX shall have been complied with.
9.2 Transfer of a Member's Interest.
(a) A Member may not, without the prior written consent of all of the
Members, sell, transfer, assign or otherwise dispose of, or permit, voluntarily
or involuntarily, any security interest, pledge, mortgage, lien, charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind
(collectively an "Encumbrance") upon, all or any portion of such Member's
Interest in the Company. Any such purported sale, transfer, assignment or
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other disposition or Encumbrance of a Member's Interest (hereinafter
collectively referred to as a "Transfer") without such consent shall be void and
shall not bind the Company. If all of the Members have consented to the
Transfer, such Transfer may be made only if (i) the provisions of Section 9.3 of
this Agreement do not otherwise prohibit the Transfer, (ii) a duly executed and
acknowledged counterpart of the instrument effecting such Transfer in form and
substance satisfactory to the Members shall have been delivered to Members, and
the assignor shall have indicated such intention of substitution in the
instrument effecting such Transfer, (iii) the assignee shall have expressly
agreed to be bound by the provisions of this Agreement and to assume all of the
obligations imposed upon Members hereunder, (iv) the assignor and the assignee
shall have executed or delivered such other instruments as the Members may deem
necessary or desirable to effectuate such admission, including, but not limited
to, an opinion of counsel that the Transfer complies with the registration
provision of the Securities Act of 1933, as amended (the "Securities Act") and
any applicable securities or "Blue Sky" law of any state or other jurisdiction,
or an exemption therefrom, and (v) the assignor or assignee shall have paid all
reasonable expenses and legal fees relating to the Transfer and, if all of the
Members so permit, the assignee's admission as a Member, including, but not
limited to, the cost of any required counsel's opinion and of preparing, filing
and publishing any amendment to the Certificate necessary to effect such
admission.
(b) The consent of the Members shall not be required for a Transfer of all
or a part of a Member's economic interest in Company distributions, for no
consideration, to a third party or to a trustee for the benefit of the assignor,
provided that such Transfer is otherwise made in accordance with and subject to
the provisions of Section 9.2(a) of this Agreement and this Section 9.2(b).
However, such assignee shall not be admitted as a substitute Member without the
consent of all of the Members. Any transferee of a Member's Interest in the
Company who is not admitted to the Company as a substitute Member shall be
entitled to receive, to the extent assigned, the distributions to which the
assigning Member would be entitled, but shall have no right to participate in
the management and affairs of the Company, exercise any voting or other rights
of a Member or be entitled to become a Member.
9.3 Further Limitations on Transfers of Members' Interests. In no event may
a Transfer be made if the Transfer would result in (i) the termination of the
Company as a limited liability company for federal income tax purposes pursuant
to Section 708(b)(1)(B) of the Code, or (ii) the dissolution of the Company
pursuant to the Act; and, if so attempted, the Transfer shall be void and shall
not bind the Company. In making the determination whether a Transfer will result
in such a termination, the Members may require the assignee to furnish at such
assignee's expense an opinion of counsel passing on this issue. In no event may
a Transfer be made to (and no substitute Member shall be admitted to the Company
who is) a person below the age of twenty-one (21) years (or the local age of
majority, if higher) or a person who has been adjudged to be insane or
incompetent, and any purported Transfer to any such person shall be void and
shall not bind the Company. As a condition of recognizing a Transfer, the
Manager may require such proof of age and competency of the assignee as the
Members may deem necessary.
9.4 Disability of a Member. Upon the dissolution, retirement, withdrawal,
bankruptcy or termination of a Member or the making by a Member of an assignment
for the benefit of creditors or any other event which terminates the continued
membership of a Member in the Company (each of the foregoing being herein called
a "Disabling Event"), the Company
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shall be dissolved; unless within ninety (90) days after the occurrence of a
Disabling Event with respect to any Member, all of the surviving Members consent
to continue the business of the Company pursuant to Section 9.5 of this
Agreement and to the admission of one or more Members as necessary and the
appointment of one or more Managers as necessary.
9.5 Continuation of the Company. If the Company is continued following a
Disabling Event with respect to any Member or the Manager, any substitute Member
or Manager shall assume and shall be bound by the provisions of this Agreement.
For the purposes of this Agreement, unless the context otherwise requires: (i)
any substitute Member, upon compliance with the provisions of this Article IX
and such individual's or entity's admission as a Member, shall be included
within the meaning of the term "Member"; and (ii) any substitute Manager, upon
compliance with the provisions of this Article IX and such individual's or
entity's admission as the Manager, shall be included within the meaning of the
term "Manager."
9.6 Affiliates. No provision of this Agreement shall restrict in any way
the Transfer of any Membership Interest to another Member, or to an entity in
which the transferor owns or controls a minimum fifty percent (50%) interest.
X. DISTRIBUTION AND ALLOCATIONS
10.1 Definitions. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited (A) such
Member's Capital Contributions, and (B) the amount of any Company
liabilities assumed by such Member or which are secured by any property
distributed to such Member. The principal amount of a promissory note which
is not readily traded on an established securities market and which is
contributed to the Company by the maker of the note (or a Member related to
the maker of the note within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any
Member until the Company makes a taxable disposition of the note or until
(and to the extent) principal payments are made on the note, all in
accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2);
(ii) To each Member's Capital Account there shall be debited (A) the
amount of money and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, (B) such Member's
distributive share of Losses and (C) the amount of any liabilities of such
Member assumed by the Company or which are secured by any property
contributed by such Member to the Company;
(iii) In the event of a Transfer of Interests in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the Transfer of
Interests; and
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(iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii) above there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Manager shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Members) are computed in order to comply with
such Regulations, the Manager may make such modification, provided that it is
not likely to have a material effect on the amounts distributed to any Person
pursuant to Article XI hereof upon the dissolution of the Company. The Manager
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Members and the amount of
capital reflected on the Company's balance sheet, as computed for book purposes,
in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b).
(b) "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 Manager provided that the initial Gross Asset Values of
the assets contributed to the Company pursuant to Section 2.1 hereof shall
be as set forth in such section;
(ii) The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values (taking Code Section
7701(g) into account), as determined by the Manager 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 Company 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 that an adjustment
described in clauses (A) and (B) of this paragraph shall be made only if
the Manager reasonably determines that such adjustment is necessary to
reflect the relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of any item of Company assets distributed
to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Manager; 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
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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 Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the
definition of "Profits" and "Losses"; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph (iv) to the
extent that an adjustment pursuant to subparagraph (ii) is required 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
subparagraph (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.
(c) "Losses" has the meaning set forth in the definition of "Profits" and
"Losses."
(d) "Profits" and "Losses" mean, for each taxable year, an amount equal to
the Company's taxable income or loss for such taxable year, 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 or Losses
pursuant to this definition of "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 Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition of
"Profits" and "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 subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the Gross Asset Value of the asset) or an
item of loss (if the adjustment decreases the Gross Asset Value of the
asset) from the disposition of such asset and shall be taken into account
for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) If the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes, 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 in an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or
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other cost recovery deduction for such taxable year 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 taxable
year is zero, depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Manager;
(vi) To the extent an adjustment to the adjusted to adjusted tax basis
of any Company asset pursuant to Code Section 734(b) or Code Section 743(b)
is required, pursuant to Regulations Section 1.704-(b)(2)(iv)(m)(2) or (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
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) from the disposition of such asset and
shall be taken into account for purposes of computing Profits or Losses and
shall be specially allocated to the Member or Members to whom such
adjustment relates.
(e) "Regulation" means the income tax regulations promulgated from time to
time by the U.S. Department of the Treasury.
10.2 Distributions of Net Cash Flow. Except as otherwise required by this
Agreement or by law, Net Cash Flow (as defined) shall be distributed, at such
times as the Manager shall determine (but at least annually) to the Members in
accordance with their respective Percentage Interests.
(a) "Net Cash Flow" means the gross cash proceeds paid less any debts and
liabilities of the Company less the portion thereof used to pay or establish
reserves for all Company expenses, debt payments, capital improvements,
replacements, and contingencies, all as determined by the Manager, provided,
however, that such reserves shall not cause the amount of any distribution of
Net Cash Flow to be insufficient for each Member to pay its income tax
liability. "Net Cash Flow" shall not be reduced by depreciation, amortization,
cost recovery deductions, or similar allowances, but shall be increased by any
reductions of reserves previously established pursuant to the first sentence of
this definition.
10.3 Allocation of Profits and Losses.
(a) Subject to Section 5.7(e), Profits and Losses shall be allocated among
the Members in accordance with their respective Percentage Interests.
10.4 No Return of Distributions. No Member shall have any obligation to
refund to the Company any amount that shall have been distributed to such Member
pursuant to this Agreement, subject, however, to the rights of any third party
creditor under law.
10.5 Allocations between Assignor and Assignee Members. In the case of a
Transfer, the assignor and assignee shall each be entitled to receive
distributions of Net Cash Flow and allocations of Net Profits or Net Losses as
follows:
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(a) Unless the assignor and assignee agree to the contrary and shall so
provide in the instrument effecting the Transfer, distributions shall be made to
the person owning the Member's Membership Interest on the date of the
distribution; and
(b) Profits or Losses shall be allocated by the number of days of the
fiscal year each person held the Member's Interests.
10.6 Tax Credits. Any Company tax credits shall be allocated among the
Members in proportion to their respective Percentage Interests.
10.7 Deficit Capital Accounts. Except as otherwise provided herein or under
the Act, no Member shall be required at any time to make up any deficit in such
Member's Capital Account.
10.8 Tax Allocations: Code Section 704(c).
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 the definition of Gross Asset
Value) using such method as the Manager shall select.
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.
Any elections or other decisions relating to such allocation shall be made
by the Manager in any manner that reasonably reflects the purpose and intention
of this Agreement. Allocations pursuant to this Section 10.8 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 Member's Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any provision of this
Agreement.
XI. LIQUIDATION AND TERMINATION OF THE COMPANY
11.1 General. The Company may liquidate and terminate its operations upon
(i) unanimous consent of all the Members, or (ii) a material breach of this
Agreement by a Member, which breach is not cured within fifteen (15) business
days after written notice of such breach from the non-defaulting Member. The
right of termination of the non-defaulting Member is not intended to release the
defaulting Member from any obligations or liabilities which it may have to the
non-defaulting Member, whether pursuant to the provisions of this Agreement or
at law or in equity, whether or not the non-defaulting Member elects to
terminate. Upon the termination of the Company (unless the Company is continued
pursuant to Sections 9.4 and 9.5 of this Agreement), the Company shall be
liquidated in accordance with this Article XI and the Act. The liquidation shall
be conducted and supervised by the Manager, or if there shall be no
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Manager, by a person who shall be designated for such purpose by all of the
Members (the Manager or person for such purpose so designated being herein
referred to as the "Liquidating Agent"). The Liquidating Agent shall have all of
the rights and powers with respect to the assets and liabilities of the Company
in connection with the liquidation and termination of the Company that the
Manager would have with respect to the assets and liabilities of the Company
during the term of the Company. Without limiting the foregoing, the Liquidating
Agent is hereby expressly authorized and empowered to execute and deliver any
and all documents necessary or desirable to effectuate the liquidation and
termination of the Company and the transfer of any asset or liability of the
Company. The Liquidating Agent shall have the right from time to time, by
revocable powers of attorney, to delegate to one (1) or more persons any or all
of such rights and powers and such authority and power to execute and deliver
documents, and, in connection therewith, to fix the reasonable compensation of
each such person, which compensation shall be charged as an expense of
liquidation. The Liquidating Agent is also expressly authorized to distribute
the Company's property to the Members subject to liens.
11.2 Statements on Termination. Each Member shall be furnished with a
statement prepared by the Company's regular accountants setting forth the assets
and liabilities of the Company as of the date of complete liquidation, and each
Member's share thereof. Upon compliance with the distribution plan set forth in
Section 11.3 of this Agreement, the Members shall cease to be such, and the
Liquidating Agent shall execute, acknowledge and cause to be filed where
appropriate under law Certificate of Dissolution of the Company.
11.3 Priority on Liquidation. The Liquidating Agent shall, to the extent
feasible and subject to Section 3.2, liquidate the assets of the Company as
promptly as shall be practicable. To the extent the proceeds are sufficient
therefor, as the Liquidating Agent shall deem appropriate, the proceeds of such
liquidation shall be applied in the following order of priority:
(a) to pay the costs of all unpaid operating expenses;
(b) to pay the costs and expenses of the liquidation and termination;
(c) to pay the matured or fixed debts and liabilities of the Company;
(d) to establish any reserve that the Liquidating Agent may deem necessary
for any contingent, unmatured or unforeseen liability of the Company; and
(e) to distribute the balance, if any, to the Members in the proportion to
their respective Percentage Interests.
11.4 Distribution of Non-Liquid Assets. If the Liquidating Agent shall
determine that it is not practicable to liquidate all of the assets of the
Company subject to Section 3.2, then the Liquidating Agent shall cause the fair
market value of the assets not so liquidated to be determined by appraisal by an
independent appraiser. Such assets, as so appraised, shall be retained or
distributed by the Liquidating Agent as follows:
(a) The Liquidating Agent shall retain assets having a fair market value
equal to the amount, if any, by which the net proceeds of liquidated assets are
insufficient to satisfy the debts and liabilities of the Company (other than any
debt or liability for which neither the
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Company nor the Members are personally liable), to pay the costs and expenses of
the dissolution and liquidation, and to establish reserves, all subject to the
provisions of Section 11.3 of this Agreement. The foregoing shall not be
construed, however, to prohibit the Liquidating Agent from distributing,
pursuant to Section 11.4(b) of this Agreement, property subject to liens at the
value of the Company's equity therein.
(b) The remaining assets (including, without limitation, receivables, if
any) shall be distributed to the Members by way of undivided interests therein
in such proportions as shall be equal to the respective amounts to which each
Member is entitled pursuant to Section 11.3(e) of this Agreement. If, in the
judgement of the Liquidating Agent, it shall not be practicable to distribute to
each Member an undivided aliquot share of each asset, the Liquidating Agent may
allocate and distribute specific assets to one or more Members as
tenants-in-common as the Liquidating Agent shall determine to be fair and
equitable, taking into consideration, inter alia, the basis for tax purposes of
each asset distributed.
(c) Nothing contained in this Article XI or elsewhere in this Agreement is
intended to cause any in-kind distributions to be treated as sales for value.
11.5 Orderly Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to minimize the losses normally attendant upon a
liquidation.
11.6 Deficit upon Liquidation. Except as otherwise provided herein, upon
liquidation no Member or other Related Party shall be liable to the Company for
any deficit in any Member's Capital Account, nor shall such deficit be deemed an
asset of the Company. Nothing herein shall limit the liability of a Member under
the Act.
XII. LOANS AND ADVANCES BY MEMBERS
If any Member or Related Party of such Member shall loan or advance any
funds to the Company (other than the capital contributions provided for in
Article II of this Agreement), such loan or advance shall not be deemed a
contribution to the capital of the Company and shall not in any respect increase
such Member's interest in the Company. Such loan or advance shall constitute an
obligation and liability of the Company. Unless otherwise agreed in writing
between the Members and the Company, the Members and the other Related Parties
shall not have personal obligation or liability for the repayment of such loans
and the same shall be collectible only from Company assets. Any reference in
this Agreement to the payment of debts, obligations or liabilities of the
Company shall be deemed to include any such loans from a Member or Related Party
of such Member, and, to the extent that law and agreements to which the Company
is a party or is subject permit, and to the extent that the terms of such loans
may require, such loans from a Member or Related Party of such Member shall be
paid ahead of other general debts, obligations and liabilities of the Company.
XIII. INDEMNIFICATION OF THE MANAGER, MEMBERS, OFFICERS, TRUSTEES, EMPLOYEES AND
AFFILIATES
13.1 Claims. Except as otherwise provided in this Article XIII, the
Company, or its receiver or trustee, shall pay all judgments and claims asserted
by anyone (a "Claimant") against,
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and shall indemnify and hold harmless, the Manager and each Member, and each
member, manager, officer, director, shareholder, partner, trustee, employee,
agent, representative and other retained persons of the Manager and each Member,
and each member, manager, officer, director, shareholder, partner, trustee,
beneficiary, employee, agent, representative and other retained persons of any
of the foregoing or any direct or indirect affiliate of any of the foregoing
(collectively the "Related Parties" and individually a "Related Party") from and
against, any liability or damage to a Claimant, incurred by reason of any act
performed or omitted to be performed by any Related Party in connection with the
business of the Company, including, without limitation, reasonably attorneys'
fees and disbursements incurred by any Related Party in connection with the
defense of any action based on any such act or omission.
13.2 Procedure. Upon a Related Party's discovery of any claim by a third
party which, if sustained, would be subject to indemnification pursuant to
Section 13.1 of this Agreement, the Related Party shall give prompt notice to
the Company of such claim, provided, however, that the failure of the Related
Party to so promptly notify the Company of such claim shall not relieve the
Company of any indemnification obligation under this Agreement unless the
Company shall have been substantially prejudiced thereby. Unless the Related
Party shall, in its sole discretion, agree in writing to assume and control the
defense of any action for which indemnification may be sought, the Company shall
assume and control such defense, in which event the Related Party shall have the
right to retain its own counsel in each jurisdiction for which the Related Party
determines counsel is required, at the expense of the Company. If the Company
shall fail or refuse to undertake the defense within fifteen (15) days after
receiving notice that a claim has been made, the Related Party shall have the
right (but not the obligation) to assume the defense of such claim in such
manner as it deems appropriate until the Company shall, with the consent of the
Related Party, assume control of such defense, and the Company shall indemnify
the Related Party pursuant to Section 13.1 of this Agreement from and against
the costs and expenses of such defense. The party hereto handling the defense of
an action shall keep the other party hereto fully informed at all times of the
status of the claim. Neither the Company nor the Related Party, when handling
the defense of a claim for which indemnification may be sought by the Related
Party, shall settle such claim without the consent of the other party (which
consent shall not be unreasonably withheld or delayed) unless such settlement
shall (i) impose no additional liability or obligation upon such party (or its
members, managers, officers, directors, shareholders, partners, trustees,
beneficiaries, employees, agents and representatives or any direct or indirect
affiliate of any of the foregoing) whose consent would otherwise be required and
(ii) where the Company is handling the defense and settlement of the claim,
provide the Related Party with a general release with respect to the subject
claim.
13.3 Member's Claims. Except as otherwise provided in this Article XIII, in
any action by a Member against a Related Party, including a Company derivative
suit, the Company shall indemnify and hold harmless each Related Party from and
against any liability or damage incurred by any of them, including, without
limitation, reasonable attorneys' fees and disbursements incurred in defense of
such action.
13.4 Expenses. In any matter with respect to which a Related Party may be
entitled to indemnification from the Company pursuant to this Article XIII, the
Company shall, to the extent not prohibited by applicable law, advance to the
Related Party, pending the final disposition of such matter, all costs and
expenses which the Related Party may incur in such matter, including,
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without limitation, all attorneys' fees and disbursements, court costs and the
fees and disbursements of accountants, other experts and consultants.
13.5 Limitations on Indemnification. Notwithstanding Sections 13.1 or 13.3
of this Agreement, no Related Party shall be entitled to indemnification from
any liability imposed by fraud, bad faith, willful neglect or gross negligence.
Under no circumstances shall any Related Party be personally liable in respect
of any indemnification obligation set forth in this Article XIII.
13.6 Manager's Liability to Company and Members. The Manager, solely in its
capacity as such, shall not be liable to the Company or to the Members for any
act or omission or breach of duty unless a judgment or other final adjudication
adverse to the Manager establishes that the Manager's acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law or
that the Manager personally gained in fact a financial profit or other advantage
to which the Manager was not legally entitled.
13.7 Member's Liability. A Member shall be liable to the Company and the
other Members for breach of any representation, warranty or covenant made
pursuant to this Agreement and shall indemnify and hold harmless the Company and
the other Members from and against any liability or damage incurred by any of
them as a result of such breach or misrepresentation, including, without
limitation, reasonable attorneys' fees and disbursements incurred in defense of
such action (whether between any of the Members or otherwise).
XIV. POWER OF ATTORNEY
14.1 General. Each Member irrevocably constitutes and appoints the Manager
and the Liquidating Agent, or any one of them, with full power of substitution,
the true and lawful attorney of such Member to execute, acknowledge, swear to
and file any of the following:
(a) any certificate or other instrument (x) that may be required to be
filed by the Company under the laws of the United States, the State of Delaware
or any other state in which any of the Members reside or in which the Company
engages in business or (y) which the Manager deems advisable to file;
(b) any document that may be required to effectuate the liquidation or
termination of the Company; and
(c) any amendment to this Agreement, the Certificate or the foregoing
certificates, instruments or documents necessary to effect any change permitted
under Section 15.8 of this Agreement or to reflect any change in the ownership
of interests in the Company, or otherwise as expressly provided in this
Agreement.
It is expressly acknowledged by each Member that foregoing power of
attorney is coupled with an interest and shall survive the disability of such
Member or a Transfer by such Member, provided, however, that if such Member
shall make a Transfer of all of such Member's Membership Interest and the
assignee shall, in accordance with the provisions of Article IX of this
Agreement, become a successor Member, such power of attorney shall survive the
Transfer
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only for the purpose of executing, acknowledging, swearing to and filing any and
all instruments necessary to effectuate such substitution.
Each Member hereby agrees to execute concurrently herewith or upon five (5)
days' prior written notice, a special power of attorney containing the
substantive provisions of this Agreement in form satisfactory to the Manager.
14.2 Successor Members. A power of attorney similar to that contained in
Section 14.1 of this Agreement shall be one of the instruments that the
successor Member may be required to execute, acknowledge and swear to pursuant
to Section 9.2 of this Agreement.
14.3 Additional Power of Attorney. Upon the admission of a successor
Manager or upon the liquidation or termination of the Company, the Members, at
the request of the Manager or any of such successor Manager or the Liquidating
Agent, shall execute, acknowledge and swear to and deliver a new power of
attorney, similar to that described in Section 14.1 of this Agreement, in favor
of any such successors or the Liquidating Agent.
XV. MISCELLANEOUS PROVISIONS
15.1 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration before
three (3) arbitrators in the City, County and State of New York in accordance
with the then-current rules and procedures of the American Arbitration
Association. The decision rendered by such arbitrators(s) may be entered in any
court having jurisdiction thereof.
15.2 Investment Intent. Each Member represents that such Member has
acquired such Member's Membership Interest for such Member's own account, for
investment and not with a view to the distribution or resale thereof and
understands that (i) such Member's Membership Interest has not been registered
under the Securities Act or any applicable securities or "blue sky" law of any
state or other jurisdiction; and (ii) a Transfer may not be made unless the
transferring Member's Membership Interest is registered under such laws or any
exemption from such registration is available, and such Member complies with the
applicable provisions of this Agreement.
15.3 Oral Modification/Non-Waiver. This Agreement constitutes the entire
agreement and understanding among the parties hereto. No waiver or modification
of the provisions of this Agreement shall be valid unless it is in writing and
signed by the parties hereto. No waiver by any party of any right hereunder or
of any failure to perform or breach hereof by any other party shall constitute
or be deemed a waiver of any other right hereunder or of any other failure to
perform a breach hereof by the same or any other Member.
15.4 Notices. All notices, demands, consents and other communications
permitted or required to be given hereunder shall be in writing and shall be
deemed given when deposited in the Unites States mail, and sent either in
registered or certified form, return receipt requested, postage prepaid, or when
delivered to an overnight courier company, charges prepaid, addressed as
follows:
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(i) If to Company:
AIM/NEW TECH LLC
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn:
with a copy to:
Xxxxxxx Xxxxxxx, Esq.
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(ii) if to Manager:
AMERICAN INTERACTIVE MEDIA, INC.
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx
with a copy to:
Xxxxxxx Xxxxxxx, Esq.
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(iii) if to New Tech:
NEW TECH ENTERTAINMENT, LLC
000 X. Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxx
with a copy to:
Xxxxx Xxxxxxxxx, Esq.
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
15.5 Captions. The captions used herein are intended for convenience of
reference only, shall not constitute any part of this Agreement and shall not
modify or affect in any manner the meaning or interpretation of any of the
provisions of this Agreement.
-24-
15.6 Pronouns. All pronouns and any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
15.7 Execution. This Agreement may be executed in counterparts, and as so
executed shall constitute one agreement binding on the Company and the Members.
15.8 Amendments. This Agreement may be amended only by the unanimous
written consent of all of the Members.
15.9 Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and shall inure to the benefit of the respective legal
representatives and permitted successors and assigns of the parties hereto.
15.10 Separability. In case any one or more of the provisions contained in
this Agreement or any application thereof shall be deemed invalid, illegal or
unenforceable in any respect, such affected provisions shall be construed and
deemed rewritten so as to be enforceable to the maximum extent permitted by law,
thereby implementing to the maximum extent possible, the intent of the parties
hereto, and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
15.11 Further Assurances. The Members and the Manager will execute and
deliver such further instruments and documents and do such further acts and
things as may be required to carry out the intent and purposes of this
Agreement.
15.12 No Third Party Beneficiaries. Except as is otherwise specifically
provided for in this Agreement or as may otherwise be specifically agreed in
writing by all of the Members and the Manager, the provisions of this Agreement
are not intended to be for the benefit of any creditor or other person (other
than a Related Party or a Member or the Manager in such Member's or Manager's
capacity as a Member or Manager, respectively) to whom any debts, liabilities,
or obligations are owed by (or who otherwise has any claim against) the Company
or any of the Members, the Manager or any Related Party; and no such creditor or
other person shall obtain any benefit from such provisions or shall, by reason
of any such foregoing provision, make any claim in respect of any debt,
liability, or obligation against the Company, any of the Members, the Manager or
any Related Party.
-25-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
AIM/NEW TECH LLC
By: AMERICAN INTERACTIVE MEDIA, INC.,
its Manager
By: /s/ Xxxx Xxxxx
----------------------------------------
Name: Xxxx Xxxxx
Title:
MEMBERS:
NEW TECH ENTERTAINMENT, LLC
By: FIRST INTERNET INNOVATIONS, INC.,
a Managing Member
By: /s/ Xxxxxx Xxxx
----------------------------------------
Name: Xxxxxx Xxxx
Title: President
By: STARDUST ENTERTAINMENT, INC.,
a Managing Manager
By: /s/ Xxxx Xxxxxxxxxxxx
----------------------------------------
Name: Xxxx Xxxxxxxxxxxx
Title: President
By: /s/ Xxxxxx Xxxxxxxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxxxxxxx
Title: Vice President
AMERICAN INTERACTIVE MEDIA, INC.
By: /s/ Xxxx Xxxxx
--------------------------------------------
Name: Xxxx Xxxxx
Title: President
-26-
STATE OF ________________________ )
: ss.:
COUNTY OF _______________________ )
On the ___ day of August 1998, before me personally came Xxxxxx Xxxx, to me
known, who, being by me duly sworn did depose and say that he has an address at
000 X. Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000; that he is
President of FIRST INTERNET INNOVATIONS, INC., a Managing Member of NEW TECH
ENTERTAINMENT, LLC, a Delaware limited liability company, and that he executed
the foregoing instrument on behalf of said company.
------------------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ___ day of August, 1998, before me personally came Xxxx Xxxxx, to
me known, who, being by me duly sworn did depose and say that he has an address
at 000 Xxxxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000; that he is the President
of AMERICAN INTERACTIVE MEDIA, INC., a New York corporation; and that he
executed the foregoing instrument on behalf of said corporation.
------------------------------------
Notary Public
-27-
SCHEDULE A
Projects
Romance Land
Pop City
Sci-Fi Universe
Crimebeat
I Need Help
Stork Club
Cartoonland
Platinum
Biz Buzz
SCHEDULE B
Names, Addresses, Percentage
Interest and Initial Capital Contribution
of Each Member
Name and Address of Percentage of Initial Capital
Member Interests Contribution
------------------- ------------- ---------------
American Interactive Media, Inc. 50% $1,000.00
000 Xxxxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
New Tech Entertainment, LLC 50% $1,000.00
000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 ___ __________
100% $2,000.00
=== =========
SCHEDULE D
Third Party Agreements
1. I Need Help (Letter Agreement dated March 5, 1998. Re: Creation of a Joint
Venture between New Tech Entertainment, LLC and Montel Productions, Inc.);
2. Platinum/Stork Club (Letter Agreement dated January 2, 1996. Re: Creation
of a Joint Venture between Xxxxx Xxxxxxxxx Productions, Inc. and Rush
Associates, Inc., together with the Assignment to New Tech Productions,
Inc.);
3. Biz Buzz (Entertainment Career Opportunities LLC Operating Agreement dated
as of October 24, 1997);
4. Pop City (Letter Agreement dated June 13, 1996 between Xxxx Xxxxx
Productions, Inc. and New Tech Productions, Inc.);
5. Crimebeat (Joint Venture Agreement dated August 14, 1996 between
Xxxxxx-Xxxxxxxx Productions, Inc. and New Tech Production, Inc.);
6. Sci-Fi Universe (Letter Agreement dated August 14, 1996. Re: Creation of a
Joint Venture between New Tech Productions, Inc. and Melis Productions,
Inc.);
7. Cartoonland (Operating Agreement of Scheimer/New Tech Productions, LLC);
and
8. Romance Land (Joint Venture Agreement dated October 15, 1997 between Xxxx
Xxxxxx Productions, Inc. d/b/a Boardwalk Entertainment and New Tech
Productions, Inc.).
SCHEDULE E
Name and Address of the Authorized
Representatives of each Member
AIM
---
Xx. Xxxx Xxxxx
American Interactive Media, Inc.
000 Xxxxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Xx. Xxxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
New Tech
--------
Xx. Xxxxxx Xxxx
New Tech Entertainment, LLC
000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Xx. Xxxx Xxxxxxxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xx. Xxxxxx Xxxxxxxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
SCHEDULE F
Rejected Projects
Great Women
The Great America
One Times Square
Las Vegas World
