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EXHBIT 2.2
MEMBERS AGREEMENT
OF
EBS BUILDING, L.L.C.
A LIMITED LIABILITY COMPANY
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DATED AS OF
SEPTEMBER 26, 1997
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TABLE OF CONTENTS
PAGE
I. FORMATION OF THE COMPANY .......................................... 1
1.1. Name and Formation ......................................... 1
1.2. Membership Units ........................................... 1
1.3. Offices .................................................... 3
1.4. Term of the Company ........................................ 3
1.5. Purpose .................................................... 4
1.6. Defined Terms .............................................. 4
II. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS ........................... 4
2.1. Initial Capital Contributions .............................. 4
2.2. Admission of Additional Members ............................ 4
2.3. Additional Capital Contribution ............................ 4
2.4. No Withdrawal .............................................. 4
2.5. Capital Accounts, Allocations and Related Matters .......... 4
2.6. Partnership Classification for Tax Purposes ................ 5
III. MANAGEMENT AND OPERATIONS ......................................... 5
3.1. Appointment of Manager ..................................... 5
3.2. Specific Authority and Responsibilities of the Manager ..... 6
3.3. Additional Powers of the Manager ........................... 6
3.4. Funding of Company; Operating Accounts ..................... 7
3.5. Limitations on Power and Authority of the Manager .......... 7
3.6. Reports to Members ......................................... 8
3.7. Compensation ............................................... 8
3.8. Resignation or Removal of the Manager ...................... 9
3.9. Indemnity .................................................. 9
3.10. Additional Indemnity Matters .............................. 10
3.11. Actions of Members ........................................ 11
3.12. Company Liabilities ....................................... 11
3.13. Power of Attorney ......................................... 11
3.14. Other Activities of the Manager ........................... 11
IV. DISTRIBUTIONS ..................................................... 12
4.1. Distributions of Income .................................... 12
4.2. Distribution of Sale Transaction Proceeds .................. 12
4.3. Applications of Proceeds ................................... 12
4.4. Reserve of Proceeds ........................................ 12
4.5. Information Concerning Distributions ....................... 13
V. TRANSFER OF MEMBERSHIP UNITS ...................................... 14
5.1. Transfers of Membership Units .............................. 14
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5.2. Transfer Procedures and Approval ............................ 14
5.3. After-Acquired Membership Units ............................. 15
5.4. Specific Performance ........................................ 15
5.5. Records of the Company; Void Transfers ...................... 15
5.6. Withdrawal .................................................. 15
VI. DISSOLUTION AND LIQUIDATION ........................................ 15
6.1. Dissolution ................................................. 15
6.2. Certificate of Cancellation ................................. 16
6.3. Procedures .................................................. 16
6.4. Termination of this Agreement ............................... 17
VII. FISCAL AND ADMINISTRATIVE MATTERS .................................. 17
7.1. Fiscal Year ................................................. 17
7.2. Deposits .................................................... 17
7.3. Checks, Drafts, Etc. ........................................ 17
7.4. Books and Records ........................................... 17
7.5. Administrative Matters ...................................... 18
7.6. Compliance with Securities Laws ............................. 18
VIII. MISCELLANEOUS ...................................................... 18
8.1. Notices ..................................................... 18
8.2. Extension Not a Waiver ...................................... 19
8.3. Entire Agreement; Amendments; No Third Party Beneficiary .... 19
8.4. Governing Law ............................................... 19
8.5. Venue ....................................................... 20
8.6. Headings .................................................... 20
8.7. Severability ................................................ 20
8.8. Certain Defined Terms ....................................... 20
8.9. Successors .................................................. 22
8.10. No Suits by Members ........................................ 22
8.11. Involvement of the Company in Certain Proceedings .......... 22
8.12. Waiver of Partition and Certain Other Rights ............... 22
8.13. Member Meetings; Member Approvals ......................... 22
8.14. No Voting Rights ........................................... 23
CERTIFICATE OF FORMATION .................................................. 24
APPENDIX A ................................................................ 1
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MEMBERS AGREEMENT
This Members Agreement ("Agreement"), entered into as of September 26,
1997, is made by and among Edison Brothers Stores, Inc., a Delaware corporation
("Edison"), and those Persons who are from time to time named as additional
members (the "General Members") on the books and records of EBS Building,
L.L.C., a Delaware limited liability company (the "Company").
WHEREAS, Edison has caused the Company to be formed in connection with the
reorganization of Edison and its subsidiaries pursuant to a Joint Plan of
Reorganization (as the same may be amended from time to time, the "Plan of
Reorganization") filed in the United States Bankruptcy Court for the District of
Delaware in Case No. 95-1354 (PJW); and
WHEREAS, the Plan of Reorganization provides for, among other things, (i)
the sale, transfer, conveyance, assignment and delivery by Edison, on the
Effective Date, of the fee simple title to the Corporate Headquarters Building
(or, in certain circumstances, the right to receive disposition proceeds
relating thereto) to the Company in exchange for the issuance to Edison of all
of the Class B Membership Units and (ii) the distribution by Edison of the Class
A Membership Units to the holders of Allowed General Unsecured Claims;
NOW, THEREFORE, Edison, as the sole initial Member, and each of the General
Members (upon becoming such) agree as follows:
I. FORMATION OF THE COMPANY
1.1. Name and Formation. The name of the Company is EBS Building, L.L.C.
The Company is a limited liability company organized under the Delaware Limited
Liability Company Act (Delaware Code Annotated, Title 6, Section Section 18-101
through 18-1109) (the "Delaware Act"). The Company is a separate legal entity.
The Company and all ownership interests in the Company will be governed by this
Agreement and, except as modified by this Agreement, by the Delaware Act.
1.2. Membership Units. (a) The owners of the Company will be known as
Members. The ownership interest of a Member will be designated as a "Membership
Unit." The Company will have the following classes of Membership Units: (i)
"Class B Membership Units," which shall initially represent all of the
Membership Units and which shall be held by Edison pending the surrender thereof
by Edison for cancellation from time to time in exchange for an equivalent
number of Class A Membership Units to be distributed by Edison pursuant to the
Plan of Reorganization, and (ii) "Class A Membership Units", which shall be
distributed by Edison from time to time to holders of Allowed General Unsecured
Claims pursuant to the Plan of Reorganization. Membership Units will be issued
only as specifically provided for in this Agreement and there shall be
outstanding a total of 10,000,000 Membership Units throughout the term of the
Company's existence. Membership Units will constitute personal property and no
Member will have a claim to or interest in specific property of the Company.
Each of the
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Class A Membership Units and Class B Membership Units will have the relative
preferences, rights, limitations or restrictions as set forth in this Agreement.
(b) Each Class B Membership Unit will be represented solely by an entry
in the books for registration and transfer of Membership Units provided for in
Section 1.2(d). Each Class A Membership Unit, including without limitation any
Class A Membership Unit that may be issued upon transfer of a Class A Membership
Unit, will be evidenced by, and subject to the terms of, a Membership Unit
certificate (a "Membership Certificate") in substantially the form of Exhibit A,
with such changes, marks of identification or designation, and such legends,
summaries, or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto.
(c) The Membership Certificates will be executed on behalf of the
Company by the manual or facsimile signature of the Manager.
(d) The Manager will keep or cause to be kept, at the principal office
of the Company or its agent designated for such purpose, books for registration
and transfer of the Membership Certificates issued hereunder. Such books will
show, in addition to the Class B Membership Units held by Edison, the names and
addresses of the respective holders of the Membership Certificates, the number
of Class A Membership Units evidenced by each of the Membership Certificates,
and the date of each of the Membership Certificates. The Company and its agent
will be entitled to treat the registered holder of any Class A Membership
Certificate as the sole owner of the Membership Units represented by such
Membership Certificate for all purposes and will not be bound to recognize any
equitable or other claim or interest in such Class A Membership Units on the
part of any other Person. The Manager will be entitled to establish such record
dates as it deems appropriate from time to time for purposes of determining the
Members entitled to receive distributions or notices or to exercise voting
rights and for such other purposes as the Manager deems expedient.
(e) In connection with each distribution of Class A Membership Units
required to be made pursuant to the Plan of Reorganization, Edison shall
instruct the Company or its agent designated for such purpose that Edison
desires to surrender for cancellation a specified number of Class B Membership
Units in exchange for the issuance and delivery to Edison of a like number of
Class A Membership Units, to be evidenced by Membership Certificates in such
denominations and registered in the names of such holders of Allowed General
Unsecured Claims (or the designees thereof) as may be specified in such
instruction, to be distributed by Edison pursuant to the Plan of Reorganization.
All Class A Membership Units transferred by Edison to holders of disputed claims
pursuant to the Plan of Reorganization on any Subsequent Distribution Date shall
be deemed for purposes of this Members Agreement to have been issued in exchange
for Class B Membership Units and distributed at the end of the last day of the
preceding fiscal quarter. All General Members agree to file all federal, state,
and local tax returns in a manner that is consistent with the preceding
sentence.
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(f) Any Membership Certificate may be transferred, split up, combined,
or exchanged for another Membership Certificate or Membership Certificates. Any
Member desiring to transfer, split up, combine, or exchange any such Membership
Certificate will make such request in writing delivered to the Manager, and will
surrender the Membership Certificate or Membership Certificates to be
transferred, split up, combined, or exchanged, with a form of assignment duly
executed by the Member thereof, at the principal office of the Company or its
agent designated for such purpose. Thereupon or as promptly as practicable
thereafter, the Company or its agent will prepare, execute, and deliver the
Membership Certificate or Membership Certificates, as the case may be, as so
requested. Neither the Company nor its agent will be required to issue or
deliver any Membership Certificates in connection with any transfer, split up,
combination, or exchange of Membership Certificates unless and until the Member
requesting the issuance or delivery thereof has paid to the Manager the amount
of any tax or governmental charge that may be payable in connection with such
transfer, split up, combination, or exchange or has established to the
satisfaction of the Manager that any tax or governmental charge has been paid.
(g) Upon receipt by the Company and the Manager of evidence reasonably
satisfactory to them of the loss, theft, destruction, or mutilation of a
Membership Certificate, and, in case of loss, theft, or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Manager of all reasonable expenses incidental thereto, and upon
surrender to the Manager and cancellation of the Membership Certificate if
mutilated, the Manager will prepare, execute, and deliver a new Membership
Certificate of like tenor to the Member in lieu of the Membership Certificate so
lost, stolen, destroyed, or mutilated.
(h) All Membership Certificates surrendered for the purpose of
transfer, split-up, combination or exchange will be delivered to the Company or
its agent designated for such purpose for cancellation and will be canceled by
the Company or such agent, and no Membership Certificates will be issued in lieu
thereof except as expressly provided in this Agreement.
1.3. Offices. The initial registered agent of the Company is The
Corporation Trust Company, and the address of the initial registered office of
the Company is 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx. The principal office of
the Company will be maintained at the principal office of the Manager.
1.4. Term of the Company. The Company's existence will commence on the date
hereof (the "Commencement Date") and will continue until the third anniversary
of the Effective Date unless sooner terminated in accordance with Article VI;
provided, however, that in the event that (a) the liquidation and distribution
of all Company Assets in accordance with this Agreement shall not have then been
completed or (b) all Disputed General Unsecured Claims shall not have been
resolved, the existence of the Company may be extended by the Manager, with the
approval of the Bankruptcy Court for good cause shown, for one or more
successive periods of two years each. In no event will the Company continue
after the liquidation and distribution of all Company Assets in accordance with
this Agreement shall have been completed and all Disputed General Unsecured
Claims have been resolved.
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1.5. Purpose. The Company is organized for the exclusive purposes of
acquiring, owning, managing, maintaining, repairing, leasing, selling,
hypothecating, mortgaging or otherwise dealing with the Corporate Headquarters
Building and for receiving, administering and distributing any disposition
proceeds relating thereto. Except as otherwise provided in the Delaware Act or
by other applicable law, the Company will have the power to do all things
necessary or convenient to effect any or all of its purposes.
1.6. Defined Terms. In addition to the terms defined elsewhere herein,
terms used herein which are defined in the Plan of Reorganization will have the
meanings ascribed thereto in the Plan of Reorganization when used in this
Agreement with initial capital letters.
II. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
2.1. Initial Capital Contributions. As of the Commencement Date, Edison
will make an initial contribution to the capital of the Company in the amount of
$100. On the Effective Date, Edison will make an additional contribution to the
capital of the Company of all of its right, title and interest in and to the
Corporate Headquarters Building (or, in certain circumstances, the right to
receive disposition proceeds relating thereto) and the applicable portion of the
LLC Funding Amount. In consideration for such initial contribution or the
obligation of the Debtors or the Reorganized Debtors to make such additional
contributions, 10,000,000 Class B Membership Units will be issued to Edison on
the Commencement Date.
2.2. Admission of Additional Members. From and after the Effective Date,
Class A Membership Units will be issued and delivered to Edison for distribution
to holders of Allowed General Unsecured Claims in accordance with Section
1.2(e). Upon such issuance and delivery the Persons in whose names such Class A
Membership Units are registered will be admitted to the Company as General
Members. Similarly, each Person to whom record ownership of a Class A Membership
Unit is subsequently transferred in accordance with Section 5.2 will be admitted
to the Company as a General Member upon the registration of such transfer.
2.3. Additional Capital Contribution. Except as provided for in Section
2.1, no Member will have any obligation to, nor will any Member be entitled to,
make any additional contributions to the capital of the Company.
2.4. No Withdrawal. No Member will be entitled to withdraw any portion of
its contribution or Capital Account, or to receive any distribution from the
Company, except as otherwise provided in this Agreement.
2.5. Capital Accounts, Allocations and Related Matters.
2.5.1. Capital Accounts. A Capital Account will be maintained for each
Member in the manner set forth in Article II of Appendix A, which is attached
hereto and is a part of this Agreement.
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2.5.2 Allocations of Book Income and Loss. Except to the extent
modified by the provisions of Article III of Appendix A, the Company's Book
income and Book loss for any fiscal year will be allocated to the Members as
follows:
first, all items of income consisting of interest or other
earnings on Reserved Proceeds shall be allocated to the holders of
the Class B Membership Units in proportion to their respective Class
B Sharing Percentages; and
second, all remaining items of Book income and loss shall be
allocated to the Members in proportion to their respective Overall
Sharing Percentages.
2.5.3. Advances from Members. Advances by Members to the Company
will not be deemed a capital contribution to, or be reflected on the balance of,
any Capital Account. The amount of any such advance will be a debt due from the
Company to such Member and, except as otherwise expressly provided in this
Agreement or as agreed between such Member and the Manager at the time such
funds are advanced, will be repaid as soon as practicable to such Member.
2.5.4. No Interest. No interest will be paid by the Company on (a)
any capital contribution, (b) on the balance of any Capital Account, or (c)
unless otherwise agreed to by the Manager, on any advance to the Company from
any Member.
2.6. Partnership Classification for Tax Purposes. Each Member recognizes
and intends that for federal income tax purposes the Company will be classified
as a partnership, and the Members will not make any election or take any action
that would cause the relationship of the Members under this Agreement to be
excluded from the application of all or any part of Subchapter K of Chapter 1 of
Subtitle A of the Code or from any successor provisions to Subchapter K under
the Code or from any similar provisions of applicable state laws.
III. MANAGEMENT AND OPERATIONS
3.1. Appointment of Manager. (a) The Company Assets will be administered,
and the business and affairs of the Company will be managed, by the Person
specified in the Confirmation Order as having been designated as such by the
Creditors' Committee (together with any successor Manager appointed pursuant to
Section 3.9, the "Manager"), who will have the specific authority and
responsibilities granted to him/her hereunder.
(b) The Manager will not be liable or accountable, in damages or
otherwise, to the Company or to any Member for anything it may do or refrain
from doing, except in the case of its willful breach of a material provision of
this Agreement or gross negligence in connection with the performance of its
duties hereunder.
(c) The Manager may rely, and will be fully protected personally in
acting upon, any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order or other instrument or document that it
has no reason to believe to be other than genuine and to have been signed or
presented other than by the proper party or parties or, in the case
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of facsimile transmissions, to have been sent other than by the proper party or
parties, in each case without obligation to satisfy itself that the same was
given in good faith and without responsibility for errors in delivery,
transmission or receipt. In the absence of its gross negligence or willful
breach of this Agreement, the Manager may rely as to the truth of statements and
the correctness of the facts and opinions expressed therein and will be fully
protected personally in acting thereon. The Manager may consult with legal
counsel and will be fully protected in respect of any action taken or suffered
by it in accordance with the written opinion of legal counsel.
3.2 Specific Authority and Responsibilities of the Manager.
3.2.1. Management and Sale of Corporate Headquarters Building. For
so long as title to the Corporate Headquarters Building is held by the Company,
the Manager will be empowered to cause the Company, in the Manager's sole
discretion (to be exercised with due regard for the best interests of the
Company and the Members), (i) to perform all obligations of lessor/owner under
the provisions of any lease covering all or any portion of the Corporate
Headquarters Building, (ii) subject to the terms of any such lease, to manage,
maintain, repair sell or mortgage the Corporate Headquarters Building or any
interest therein, and (iii) contract with one or more Persons in relation to any
of the foregoing matters (including without limitation contracting with one or
more Persons to perform management, maintenance or other services with respect
to the Corporate Headquarters Building); provided, however, that such rights may
not be exercised in any manner inconsistent with Section 3.5 or any other
provision of this Agreement.
3.2.2. Retention of Attorneys, Accountants and Other Professionals.
(a) The Manager may retain such independent experts and advisors (including, but
not limited to, law firms, tax advisors, consultants, or other professionals) as
the Manager may select to aid in the performance of its duties and
responsibilities hereunder and to perform such other functions as may be
appropriate in furtherance of the intent and purpose of this Agreement.
(b) The Manager may commit the Company to provide such professional
persons or entities reasonable compensation and reimbursement from the Company
Assets for services rendered and expenses incurred. The Manager will make all
reasonable and customary arrangements for payment or reimbursement of such
compensation and expenses and will pay the same from the Operating Account in
accordance with the provisions of Section 3.4.
3.3 Additional Powers of the Manager. (a) Except as otherwise provided in
Section 3.5 or any other provision of this Agreement, the Plan of Reorganization
or the Confirmation Order, and subject to the retained jurisdiction of the
Bankruptcy Court as provided for in the Plan of Reorganization, but without
prior or further authorization, the Manager may control and exercise authority
over the Company Assets, over the acquisition, management and disposition
thereof and over the management and conduct of the Company to the extent
necessary to enable the Manager to fulfill the intent and purposes of this
Agreement. No person dealing with the Company will be obligated to inquire into
the authority of the Manager in connection with the acquisition, management or
disposition of the Company Assets.
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(b) In connection with the administration of the Company Assets and
the management of the Company's business and affairs, the Manager, except as
otherwise expressly limited in this Agreement, the Plan of Reorganization or the
Confirmation Order, will have, in addition to any powers conferred upon the
Manager by any other provision of this Agreement, the power to take any and all
actions as, in the Manager's sole discretion, are necessary or advisable to
effectuate the purposes of the Company, including, without limitation, the power
and authority (i) to distribute the Company Assets to Members in accordance with
the terms of this Agreement, (ii) to sell, convey, transfer, assign, liquidate
or abandon the Company Assets, or any part thereof or any interest therein, upon
such terms and for such consideration as the Manager, in its sole discretion,
may deem desirable, (iii) to endorse the payment of notes or other obligations
of any Person or to make contracts with respect thereto, (iv) to borrow such
sums of money, at any time and from time to time, for such periods of time, upon
such terms and conditions, from such Persons, for such purposes as may be deemed
advisable, and (v) to appoint, engage, supervise and compensate such officers,
employees and agents of the Company and such other Persons, as may be deemed
necessary or desirable.
(c) All decisions and actions taken by the Manager under the
authority of Section 3.2 or this Section 3.3 will be binding upon all of the
Members and the Company.
3.4 Funding of Company; Operating Accounts.
3.4.1. Operating Accounts. The Company will maintain in the
Operating Account all funds received (including loan proceeds received pursuant
to Section 3.3(b)(iv)) in respect of the Company Assets, subject to expenditures
in accordance with Section 3.2.2 and distributions made in accordance with
Article IV.
3.4.2. Investment of Company Funds. All funds received by the
Company may be temporarily invested by the Manager in United States treasury
bills and notes with maturities of 12 months or less, institutional money market
funds, and demand or time deposits and certificates of deposit with commercial
banks organized under the laws of the United States, or any State thereof,
having primary capital of not less than $500,000,000.
3.5 Limitations on Power and Authority of the Manager.
3.5.1. Actions Requiring Unanimous Consent of the Members. Without
the consent of all of the Members, the Manager will not have the authority to do
any of the following:
(a) Take any action in contravention of this Agreement;
(b) Take any action which would make it impossible to carry on the
activities of the Company; or
(c) Possess property of the Company or assign the Company's rights
in specific property for other than Company purposes.
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3.5.2. Actions Requiring Consent of Designation Members or Requisite
Holders. The Manager, without the approval of either the Designation Members or
the holders of a majority of the Class A Membership Units (the "Requisite
Holders"), will not:
(a) adopt any annual budget;
(b) except with respect to the Corporate Headquarters Building
Lease, enter into a lease agreement that provides for the leasing of more
than 20,000 square feet in the Corporate Headquarters Building;
(c) make or commit to make an expenditure in an aggregate amount
exceeding $1,000,000 for additions to the Company's property, plant or
equipment; or
(d) enter into an agreement providing for the sale of the Corporate
Headquarters Building;
provided, however, that with respect to those items set forth in clauses (a),
(b) and (c), the Manager shall be permitted to take such action if (x) the
Manager provides the Requisite Holders with 30 days prior written notice of its
intention to take such action and (y) within 30 days following such notice the
Manager has not received a notice from the Requisite Holders disapproving such
action (it being understood that the failure of the Requisite Holders to deliver
such a disapproval notice to the Manager within such 30 day period shall be
deemed acceptance by the Requisite Holders of such proposed action).
3.6. Reports to Members. The Manager will cause the Company to furnish to
the Members, promptly after the filing thereof with the Securities and Exchange
Commission (the "SEC"), each Annual Report on Form 10-K filed by the Company
with the SEC (or, if the Company is not required to file an Annual Report on
Form 10-K in respect of a particular fiscal year, to furnish to the Members,
within a comparable time frame following the end of such fiscal year, an annual
report containing information substantially identical to that which would have
been included in an Annual Report on Form 10-K in respect of such fiscal year
prepared in accordance with the rules and regulations of the SEC).
3.7. Compensation. The Manager will be compensated for services to the
Company as described in the Confirmation Order or as otherwise determined by the
Creditors' Committee. In addition, the Company will reimburse the Manager for
the reasonable expenses incurred by him in connection with the performance of
his duties hereunder.
3.8. Resignation or Removal of the Manager.
3.8.1 Resignation. The Manager may resign as manager by executing an
instrument in writing and delivering it to the Members; provided, however, that
such Manager will continue to serve as a Manager after his resignation until the
time when appointment of a successor Manager becomes effective in accordance
with Section 3.8.3.
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3.8.2. Removal. The Designation Members or the Requisite Holders may
at any time remove the Manager, with or without cause, in their sole discretion;
provided, however, that the Manager will continue to serve as Manager after his
removal until the time when appointment of a successor Manager will become
effective in accordance with Section 3.8.3.
3.8.3. Appointment of Successor Manager. In the event of the death,
resignation, incompetency or removal of the Manager, the Designation Members
will have the right to appoint a successor Manager; provided, however, that no
Person who is an affiliate of Edison may be so appointed. Such appointment will
specify the date on which such appointment will be effective; provided, however,
that if a successor Manager is not appointed within 90 days of the death,
resignation, incompetency or removal of the Manager, the Manager or the
Manager's representative may petition the Bankruptcy Court for the appointment
of a successor Manager. Every successor Manager appointed hereunder will
execute, acknowledge and deliver to the departing Manager an instrument
accepting such appointment, and thereupon such successor Manager, without any
further act, deed or conveyance, will become vested with all the rights, powers
and duties of the departing Manager.
3.8.4. Effect of Resignation or Removal. The death, resignation,
incompetency or removal of the Manager will not operate to revoke any existing
agency created under the terms of this Agreement or invalidate any action
theretofore taken by such Manager. In the event of the resignation or removal of
the Manager, such Manager will promptly (a) execute and deliver such documents,
instruments and other writings as may be reasonably requested by the successor
Manager to effect the termination of such Manager's capacity under this
Agreement, (b) deliver to the successor Manager all documents, instruments,
records and other writings related to the Company as may be in the possession of
such Manager (provided that such Manager may retain one copy of such documents
for archival purposes), and (c) otherwise assist and cooperate in effecting the
assumption of its obligations and functions by such successor Manager.
3.9. Indemnity.
3.9.1. Indemnity of Managers and Members. To the fullest extent
permitted by the Delaware Act, the Company, to the extent of its assets legally
available for that purpose, will indemnify and hold harmless the Manager, the
Tax Matters Partner, the Members or any member, partner, shareholder, director,
officer, agent, affiliate and professional or other advisor of any of them
(collectively, the "Indemnified Persons") from and against any and all loss,
cost, damage, expense (including without limitation fees and expenses of
attorneys and other advisors and any court costs incurred by any Indemnified
Person) or liability by reason of anything any Indemnified Person does or
refrains from doing for, or in connection with the business or affairs of, the
Company, except to the extent that it is finally judicially determined by a
court of competent jurisdiction that the loss, cost, damage, expense or
liability resulted primarily from the Indemnified Person's gross negligence or
willful breach of a material provision of this Agreement which in either event
causes actual material damage to the Company. The Company may pay in advance or
reimburse reasonable expenses (including advancing reasonable costs of defense)
incurred by the Indemnified Person who is or is threatened to be named or made a
defendant or a respondent in a proceeding concerning the business and affairs of
the Company.
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3.9.2. Future Laws. To the extent future enactments or judicial
decisions permit an expansion of the rights of indemnification afforded to the
Manager and the Members by the Company, then it is the Members' express
intention and agreement that this Section 3.9 immediately and automatically be
deemed to be amended so as to permit and authorize the indemnification of the
Indemnified Persons by the Company to the maximum extent permitted by law. The
Manager is authorized and empowered to execute, on behalf of all Members, such
amendments to this Agreement as may be appropriate to give further effect to
this Section 3.9.
3.9.3 Insurance. To the extent commercially reasonable, the Manager
will cause the Company to purchase and maintain insurance, to the extent and in
such amounts as the Manager, in its sole discretion, deems reasonable, on behalf
of persons to be covered and such other Persons as the Manager determines,
against any liability that may be asserted against or expenses that may be
incurred by any such Person in connection with the activities of the Company or
such indemnities, regardless of whether the Company would have the power to
indemnify such Person against such liability under the provisions of this
Agreement. The Manager and the Company may enter into indemnity contracts with
Persons to be covered and adopt written procedures pursuant to which
arrangements are made for the advancement of expenses and the funding of
obligations and containing such other procedures regarding indemnification as
are appropriate.
3.10. Additional Indemnity Matters.
3.10.1. Waiver of Indemnity Rights. Any Indemnified Person may waive
the benefits of indemnification under Section 3.9, but only by an instrument in
writing executed by such Indemnified Person.
3.10.2. Certain Related Rights. The rights to indemnification under
Section 3.11 are not exclusive of other rights which any Indemnified Person may
otherwise have at law or in equity, including without limitation common law
rights to indemnification or contribution. Nothing in section 3.9 or this
Section 3.10 will affect the rights or obligations of any Person (or the
limitations on those rights or obligations) under any other agreement or
instrument to which that Person is a party.
3.11. Actions of Members. Except as otherwise expressly provided for in
this Agreement, the Members may not act for or bind the Company or participate
in the general management, conduct or control of the Company's business or
affairs. Nothing contained in this Section 3.11 will prohibit any Member or any
partner, shareholder, member, officer, director, employee, agent or other
representative of any Member from serving as an officer or agent of the Company.
3.12. Company Liabilities. All liabilities of the Company, including
without limitation indemnity obligations under Section 3.11, will be liabilities
of the Company as an entity, and will be paid or satisfied from Company Assets.
No liability of the Company will be payable in whole or in part by Edison or any
Member in its capacity as a Member, the Manager in its capacity as Manager or by
any member, partner, shareholder, director, officer, agent, affiliate or advisor
of any Member, the Manager or their affiliates.
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3.13. Power of Attorney. (a) General. Each of the Members appoints the
Manager as its attorney-in-fact, with full power of substitution and
resubstitution, for the sole purpose of executing and delivering in the Member's
name any or all of the following:
(i) The Certificate of Formation of the Company and any amendments to
the Certificate of Formation that the Manager deems appropriate as long as
such amendment would not materially adversely affect the Members' interest
in the Company;
(ii) All certificates and other instruments that may be appropriate
to effect the dissolution and termination of the Company under Article VI;
and
(iii) All reports, forms and schedules that the Manager determines
appropriate to file with any governmental body in connection with any
Company activity.
(b) Irrevocable Grant. The power of attorney granted under this
Section 3.13 is coupled with an interest and is irrevocable and will survive the
death, dissolution, legal incompetency, bankruptcy and withdrawal from the
Company of any Member or the transfer of its interest in the Company.
3.14 Other Activities of the Manager. The Manager will be free to own or
otherwise participate directly or indirectly in the ownership or operation of
any property or any activity of any Person, or any professional activity,
whether or not the property or activity competes with or is enhanced by any
property or activity of the Company.
IV. DISTRIBUTIONS
4.1. Distributions of Income. Subject to the provisions of Sections 4.3 and
4.4, the Manager will distribute the net profits of the Company (together with
any interest earned thereon or other proceeds thereof) to the General Members in
proportion to their respective Class A Sharing Percentages. Such distributions
will be made from time to time as the Manager may determine, but no less
frequently than annually, after the Manager has established such reserves for
anticipated Company needs as it deems reasonable (taking into account, at the
time of such distribution and looking forward a period of 12 months, existing
and potential liabilities and obligations of the Company and projected further
revenues and expenses; provided, however, that any funds so reserved which are
not expended after such 12 month period will be distributed).
4.2. Distribution of Sale Transaction Proceeds. Subject to the provisions
of Sections 4.3 and 4.4, the Manager will distribute any Sale Transaction
Proceeds (together with any interest earned thereon or other proceeds thereof),
promptly following the Company's receipt thereof, to the General Members in
proportion to their respective Class A Sharing Percentages.
4.3. Applications of Proceeds. Prior to making any distribution pursuant to
Section 4.1 or Section 4.2, the Manager will apply amounts otherwise available
for such distribution as follows: (a) first, to the payment of any associated
taxes and unpaid administrative expenses, (b) second, to the payment of all
unpaid fees and expenses incurred in
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employing the professional advisors to the Company and the compensation and fees
of the Manager, (c) third, to the payment of Tax Distributions required to be
distributed pursuant to Section 4.6, and (d) fourth, to the repayment in full of
any outstanding loans.
4.4. Reserve of Proceeds. At any time at which any Class B Membership Units
remain outstanding, prior to making any distribution pursuant to Section 4.1 or
Section 4.2, and after giving effect to the application of amounts pursuant to
Section 4.3, the Manager will withhold from amounts otherwise available for
distribution an amount equal to the product of (a) the percentage of the
aggregate Membership Units represented by the Class B Membership Units and (b)
the amount of such proceeds otherwise available for distribution. All such
amounts that are so withheld shall constitute "Reserved Proceeds," shall be held
by the Manager in a separate account (the "Reserved Proceeds Account") for the
benefit of the Persons to whom Class A Membership Units shall thereafter be
transferred pursuant to the Plan of Reorganization, and shall be invested in
instruments of the kind specified in Section 3.5.2. All amounts deposited in the
Reserved Proceeds Account, together with all interest thereon, shall be
distributed in accordance with the following sentence. Each Class A Membership
Unit issued pursuant to Section 1.2(e) for distribution pursuant to the Plan of
Reorganization at a time at which funds are held in the Reserved Proceeds
Account shall be accompanied by a payment (by means of a check made payable to
the Person in whose name such Class A Membership Unit is to be registered) in an
amount determined by multiplying the aggregate amount of funds held in the
Reserved Proceeds Account immediately prior to such issuance by a fraction, the
numerator of which shall be one and the denominator of which shall be the
aggregate number of Class B Membership Units outstanding immediately prior to
such issuance; provided, however, that no payment that would require the
issuance of a check in an amount less than $1.00 shall be made pursuant to this
Section 4.4.
4.5. Information Concerning Distributions. On the occasion of any
distribution to the Members pursuant to this Article IV, the Manager will inform
the Members of the aggregate amount of such distribution.
4.6. Tax Distributions. (a) Subject to the terms, conditions, and
limitations set forth in this Section 4.6, the Company shall have the obligation
to make distributions (the "Tax Distributions") to Edison with respect to
taxable income allocated to Edison.
(b) Following the close of each fiscal quarter or fiscal year, the
Company shall promptly notify Edison in writing of the amount of taxable income
or loss expected to be allocable to Edison for federal and state income tax
purposes for such fiscal quarter or fiscal year.
(c) Within 60 days following the close of each fiscal quarter or
fiscal year in which the Company recognizes taxable income for federal or state
income tax purposes, the Company shall make a Tax Distribution to Edison.
(d) The amount of the Tax Distribution that the Company shall be
obligated to make to Edison shall be subject to all of the following provisions:
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(i) The Tax Distribution for each of the first three fiscal quarters
in each fiscal year shall equal the product of (x) the amount of net
taxable income expected to be allocable to Edison for that fiscal quarter,
multiplied by (y) the Effective Tax Rate.
(ii) The Tax Distribution for the fourth fiscal quarter in each
fiscal year shall equal
the product of (x) the amount of net taxable income allocated to
Edison for that fiscal year, multiplied by (y) the Effective Tax
Rate
minus
the aggregate amount of Tax Distributions made during the first
three fiscal quarters of that fiscal year.
(iii) In the event that the calculation described in the previous
subsection produces a negative amount (i.e., where Tax Distributions for
the first three fiscal quarters exceed the total amount of Tax
Distributions that should be made for the fiscal year as a whole), Edison
shall promptly return to the Company an amount equal to the absolute value
of the negative amount thus determined, which amount the Company shall
maintain in a segregated reserve account to be applied against any
subsequent Tax Distributions deficiencies.
(iv) Tax Distributions shall not exceed the amount of cash available
to the Company after the application of proceeds pursuant to Section
4.3(a) and (b). In the event that the amount of cash available is less
than the required Tax Distributions, any such deficiencies will be carried
over and paid in full in the next succeeding fiscal quarter in which
sufficient cash is available to make such Tax Distributions.
(v) The Tax Distribution with respect to the last fiscal quarter in
which Edison owns Class B Membership Units (giving effect to the timing
convention set forth in the penultimate sentence in Section 1.2(e)) shall
be determined using the interim closing of the books method under Section
706 of the Code and Treasury regulations promulgated thereunder, so long
as such quarter is one of the first three fiscal quarters in the fiscal
year.
For purposes of this Section 4.6(d), taxable income shall be determined under
Section 703 of the Code without regard to Section 703(a)(1) thereof.
(e) For all relevant federal, state, and local tax purposes, the
Company and Edison shall treat each Tax Distribution as having been made
pursuant to section 731 of the Code on account of the Class B Membership Units
held by Edison at the end of the immediately preceding fiscal quarter.
(f) The "Effective Tax Rate" shall mean a rate computed by combining
the highest marginal tax rate imposed on corporations for federal income tax
purposes and the
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highest marginal tax rate imposed on corporations for purposes of the state
income tax of the State of Missouri, treating the payment of state income tax as
a deduction for federal income tax purposes.
V. TRANSFER OF MEMBERSHIP UNITS
5.1. Transfers of Membership Units. (a) A General Member (a "Selling
Member") may Transfer all or a portion of its Class A Membership Unit upon
compliance with the provisions of this Article V. In addition, the Company
agrees to recognize on its books any Transfer of a Class A Membership Unit which
occurs by operation of law as a result of the merger or consolidation of a
General Member into another Person or the liquidation and dissolution of a
General Member.
(b) Notwithstanding anything to the contrary in this Agreement, Edison
will not Transfer any Class B Membership Unit to any Person except by operation
of law to a Person who shall have succeeded to Edison's obligations to
distribute all previously undistributed Class A Membership Units (including any
related Reserved Proceeds) pursuant to the Plan of Reorganization.
5.2. Transfer Procedures and Approval. Prior to effecting a Transfer of its
Membership Unit, a Selling Member will deliver to the Company a notice setting
forth (a) the intended date of Transfer (the "Transfer Date"), which Transfer
Date will be not less than ten (10) nor more than thirty (30) days following the
date of such notice and (b) the name of the proposed transferee. Prior to the
Transfer Date, if requested by the Manager, such Selling Member will provide to
the Manager (i) such evidence as the Manager may reasonably require (including,
if required by the Manager, an opinion of counsel reasonably satisfactory to the
Manager), to the effect that such Transfer will not result in the Company
ceasing to be classified as a partnership for federal income tax purposes, and
(ii) such assurances as the Manager may reasonably require with respect to the
reimbursement of any expenses that may be incurred by the Company in connection
with such Transfer. Following compliance with the foregoing, the Selling
Shareholder may proceed to effect such Transfer on the Transfer Date or a date
not later than thirty (30) days following such Transfer Date.
5.3. After-Acquired Membership Units. All of the provisions of this
Agreement will apply to and include all the Membership Units issued by the
Company to any Member or acquired by any Person on and after the date hereof.
Any Person who at any time becomes the holder of record of a Membership Unit
will, upon becoming such, be admitted to the Company as a Member and will be
bound by the provisions of this Agreement with the same force and effect as
though such Person were a signatory hereto.
5.4. Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any Member Transfers, or attempts to Transfer, any
equity interest in the Company in violation of this Agreement and that the
Company shall be entitled to specific performance in addition to recovering
attorney's fees from the breaching party and any other remedy at law or equity.
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5.5. Records of the Company; Void Transfers. The Manager will Transfer
Membership Units on the Company's books only in accordance with the terms and
conditions of this Agreement. Any purported Transfer by a Selling Member which
is disapproved by the Company or which Transfer does not comply with the
provisions of Section 5.2 will be null and void, and the transferee under any
such purported Transfer will acquire no title or ownership thereby but will hold
such Membership Units for the benefit of the other Members.
5.6. Withdrawal. No Member may resign from the Company or effect a partial
or complete withdrawal from the Company.
VI. DISSOLUTION AND LIQUIDATION
6.1. Dissolution. The Company will be dissolved upon the occurrence of any
of the following events:
(a) When the period fixed for the existence of the Company (including
any extensions thereof effected in accordance with the terms hereof) expires;
(b) Upon the entry of a final judgment, order, or decree of a court of
competent jurisdiction adjudicating the Company to be bankrupt and the
expiration without appeal of the period, if any, allowed by applicable law in
which to appeal; or
(c) By the unanimous written agreement of all of the Members.
The death, expulsion, bankruptcy or dissolution of any Member, or the occurrence
of any other event which terminates the continued membership of a Member will
not result in the Company's dissolution unless such dissolution is otherwise
required pursuant to the provisions of this Section 6.1.
6.2. Certificate of Cancellation. In accordance with the Delaware Act, as
soon as possible following the occurrence of any of the events specified in
Section 6.1 effecting the dissolution of the Company, the Manager will cause to
be executed and filed a certificate of cancellation to dissolve the Company in
such form as is prescribed by the Secretary of State of Delaware.
6.3. Procedures.
6.3.1. Liquidation of Assets. In the event of the dissolution of the
Company, the Manager or the Person required by law to wind up the Company's
affairs (the Manager or other Person being referred to herein as the
"Liquidating Agent") will commence to wind up the affairs of the Company and
liquidate its assets as promptly as is consistent with obtaining the fair value
thereof. In connection with any such winding up and liquidation, a financial
statement of the Company as of the date of dissolution will be prepared and
furnished to all the Members by the Liquidating Agent. The Members will continue
to share profits and losses during the period of liquidation in accordance with
Section 2.5.2 of this Agreement.
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6.3.2. Authority of Liquidating Agent. In connection with the
dissolution and winding up of the Company, the Liquidating Agent will have all
of the rights and powers with respect to the assets and liabilities of the
Company that a manager would have pursuant to this Agreement or any other
applicable law.
6.3.3. Distribution of Assets. Following the payment of, or provision
for, all debts and liabilities of the Company and all expenses of liquidation,
and subject to the right of the Liquidating Agent to set up such cash reserves
as the Liquidating Agent may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company, the proceeds of the
liquidation and any other funds (or other remaining Company Assets) of the
Company will be distributed to the General Members in accordance with their
respective Capital Account balances.
6.3.4. No Recourse to Assets of Members. Each Member will look solely
to the Company Assets for all distributions with respect to such Member's
Capital Account balances, and will have no recourse therefor (upon dissolution
of the Company or otherwise) against Edison or any other Member.
6.4. Termination of this Agreement. Upon the completion of the liquidation
and distribution of all Company Assets and the resolution of all Disputed
General Unsecured Claims and filing of the Certificate of cancellation as
contemplated by Section 6.2, this Agreement will terminate automatically without
any further action on the part of the Members.
VII. FISCAL AND ADMINISTRATIVE MATTERS
7.1. Fiscal Year. The fiscal year of the Company will begin on the first
day of January and end on the last day of December of each year.
7.2. Deposits Consistent with the provisions of Section 3.5.2, all funds of
the Company will be deposited from time to time to the credit of the Company in
such banks, trust companies or other depositories as the Manager may select.
7.3. Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, and all notes or other evidences of indebtedness issued in the
name of the Company will be signed by the Manager or any other Person selected
by the Manager.
7.4. Books and Records. The Manager will maintain books and records
relating to the assets and income of the Company and the payment of expenses of,
and liabilities or claims against or assumed by, the Company in such detail and
for such period of time as may be necessary to enable it to make full and proper
accounting in respect thereof and to comply with applicable provisions of law.
Nothing in this Agreement is intended to require the Manager to file any
accounting or seek approval of any court with respect to the administration of
the Company, or as a condition for managing any payment or distribution out of
the Company Assets. The Manager will keep or cause to be kept accurate and
complete minutes and records of the Members and books and records of account of
the Company, which will be kept at the
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principal place of business of the Company or at such other places, within or
without the State of Delaware, as the Manager will from time to time determine.
7.4.1. Right of Inspection. Edison and any Member of the Company
will have the right to examine, at any reasonable time or times for any purpose,
the minutes and records of the Members and the books and records of account of
the Company, and to make copies thereof. Such inspection may be made by any
agent or duly appointed attorney of Edison or the Member making such request, as
applicable. Notwithstanding the foregoing, if the Manager determines that the
disclosure of certain confidential and proprietary information of the Company to
a Member would cause irreparable harm to the Company or the Members, the
Manager, in the exercise of its good faith judgment, may refuse to disclose such
confidential and proprietary information to such requesting Member.
7.4.2. Financial Records. Subject to the provisions of Appendix A,
all books and records of account of the Company will be maintained and reported
based upon generally accepted accounting principles.
7.5. Administrative Matters.
7.5.1. "Tax Matters Partner". The Manager will designate one of the
Members of the Company, with the consent of such Member, to be the "Tax Matters
Partner" (as defined in Code Section 6231). The Tax Matters Partner is
authorized and required to represent the Company (at the Company's expense) in
connection with all examinations of the Company's affairs by tax authorities,
including administrative and judicial proceedings, and to expend Company funds
for professional services and costs associated therewith. The Manager will, to
the extent requested by the Tax Matters Partner, coordinate and assist the Tax
Matters Partner in the performance of such functions.
7.5.2. Cooperation. Each Member agrees to cooperate with the Tax
Matters Partner and to do or refrain from doing any or all things reasonably
requested by the Tax Matters Partner with respect to the conduct of such
proceedings and the preparation of all returns pursuant to Section 7.5.3.
7.5.3. Filings. The Tax Matters Partner will arrange for the
preparation and timely filing of all returns required to be filed by the Company
and the distribution of Form K-1 or other similar forms to all Members.
7.5.4. Authorization. The actions of the Tax Matters Partner will be
deemed to be authorized by the unanimous consent of the Members with respect to
the matters set forth in Section 7.5.1.
7.5.5. Reporting to Members. The Tax Matters Partner will keep the
other Member informed of all material matters that may come to its attention in
its capacity as Tax Matters Partner.
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7.6. Compliance with Securities laws. The Manager will file with the
Securities and Exchange Commission and other applicable federal and state
governmental agencies such reports and other documents, if any, and take any
other actions as may be necessary to comply with federal or state securities
laws.
VIII. MISCELLANEOUS
8.1. Notices. (a) All notices, requests or other communications
required or permitted to be made in accordance with this Agreement will be in
writing and will be delivered personally or by first class mail, telecopier or
overnight courier:
(i) if to the Manager, at it principal office;
(ii) if to Edison, at:
Edison Brothers Stores, Inc.
000 Xxxxx Xxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
Confirmation No.: (000) 000-0000;
(iii) if to the Members, then to such entities at their respective
addresses set forth in the register of the Company.
(b) All such notices will be deemed to have been duly delivered: at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail (postage prepaid), if mailed; when receipt is
confirmed, if telecopied; and on the day delivered, if sent by an air courier
guaranteeing overnight delivery.
(c) Any Member may change the address at which it is to receive
notices under this Agreement by furnishing written notice in accordance with the
provisions of this Section 8.1 to the Manager.
(d) Whenever any notice is required to be given by law or this
Agreement, a waiver thereof in writing, signed by the Person entitled to such
notice, whether before or after the time of the event for which notice is to be
given, will be deemed equivalent to such notice.
8.2. Extension Not a Waiver. No delay or omission in the exercise of
any power, remedy or right herein provided or otherwise available to any party
hereto will impair or affect the right of such party thereafter to exercise the
same. Any extension of time or other indulgence granted to any party hereunder
will not otherwise alter or affect any power, remedy or right of any other party
hereto, or the obligations of the party to whom such extension or indulgence is
granted.
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8.3. Entire Agreement; Amendments; No Third Party Beneficiary. This
Agreement sets forth the entire agreement between the parties relating to the
subject matter hereof and all prior agreements relative thereto that are not
contained herein or therein are terminated. Amendments, variations,
modifications or changes herein may be made effective and binding upon the
parties hereto by, and only by, a written agreement duly executed by each of the
Members and any alleged amendment, variation, modification or change herein
which is not so documented will not be effective as to any party hereto. This
Agreement is for the sole benefit of Edison, the General Members and the Manager
and their permitted assigns and nothing herein expressed or implied will give or
be construed to give to any Person, other than Edison, the General Members and
the Manager and such permitted assigns any legal or equitable rights hereunder.
8.4. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED
UNDER AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES.
8.5. Venue. Except with respect to the matters specified in this
Agreement for which the Bankruptcy Court will have retained jurisdiction, any
action or other legal proceeding brought under this Agreement will be subject to
the jurisdiction of the State of Delaware or the courts of the United States
located in the State of Delaware. Each of the Members consents to the
jurisdiction of Delaware for actions or legal proceedings brought by any other
Member or the Company arising out of or relating to this Agreement and waives
any objection which it may have to the laying of the venue of such suit, action
or proceeding in any of such courts.
8.6. Headings. Sections, subheadings and other headings used in this
Agreement are for convenience only and will not affect the construction of this
Agreement.
8.7. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable any such provision in
any other jurisdiction.
8.8. Certain Defined Terms. As used in this Agreement, in addition
to the terms defined in the Plan of Reorganization or elsewhere herein
(including Appendix A), the following terms have the meanings specified below:
"Class A Membership Unit" has the meaning assigned to it in Section
1.2.
"Class A Sharing Percentage" means, for each Member, a percentage
computed by dividing (x) the number of Class A Membership Units owned of record
by such Member by (y) the number of Class A Membership Units owned of record by
all Members.
"Class B Membership Unit" has the meaning assigned to it in Section
1.2.
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"Class B Sharing Percentage" means, for each Member, a percentage
computed by dividing (x) the number of Class B Membership Units owned of record
by such Member by (y) the number of Class B Membership Units owned of record by
all Members.
"Company Assets" means (a) the Corporate Headquarters Building, (b)
all rental income and other revenues derived from the leasing and managing of
the Corporate Headquarters Building, (c) all other assets acquired by the
Company pursuant to the terms of the Plan of Reorganization or this Agreement
(including funds, if any, contributed to the Company and the proceeds of any
loans to the company), (d) any investments purchased with Company Assets, and
(e) proceeds of each of the foregoing (including, without limitation, any
interest or other earnings thereon), excluding assets distributed, expended or
otherwise disposed of by the Company.
"Delaware Act" has the meaning assigned to it in Section 1.1.
"Designation Members" mean the three Members who, as of the date
that any action is to be taken hereunder by the Designation Members, hold at
least 5% of the total Class A Membership Units and constitute the holders of
record of the three largest amounts of Class A Membership Units (based on such
Members' Class A Sharing Percentages); provided, however, that (i) any Person
and its affiliates will be treated as a single Person for such purpose; (ii) no
Person who is an affiliate of Edison may be a Designation Member, and (iii) any
person who notifies the Company that such Person does not wish to be a
Designation Member shall be disregarded in determining the Persons entitled to
be a Designation Member.
"Effective Tax Rate" has the meaning assigned to it in Section
4.6(f).
"Indemnified Persons" has the meaning assigned to it in Section
3.9.1.
"Liquidating Agent" has the meaning assigned to it in Section 6.3.1.
"Manager" has the meaning assigned to it in Section 3.1.
"Member" has the meaning assigned to it in the introductory
paragraph.
"Membership Unit" has the meaning assigned to it in Section 1.2.
"Operating Account" means the separate account maintained by the
Manager for the payment of Company expenses and from which distributions to
Members will be made in accordance with Article IV and the Plan of
Reorganization.
"Overall Sharing Percentage" means, for each Member, a percentage
computed by dividing (x) the number of Membership Units owned of record by such
Member by (y) the number of Membership Units owned of record by all Members.
"Person" means an individual or entity.
"Requisite Holders" has the meaning assigned to it in Section 3.5.2.
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"Reserved Proceeds" has the meaning assigned to it in Section 4.4.
"Sale Transaction Proceeds" means cash proceeds received by the
Company in connection with any sale or disposition of the Corporate Headquarters
Building, net of all legal, title and recording tax expenses, commissions, and
other fees, expenses and taxes incurred by the Company in connection with such
transaction.
"Tax Distribution" has the meaning assigned to it in Section 4.6(a).
"Tax Matters Partner" has the meaning assigned to it in Section
7.5.1.
"Transfer" means any sale, assignment, pledge, hypothecation,
encumbrance, disposition, transfer, gift or attempt to create or grant a
security interest in a Membership Unit (including any economic interest therein)
or other property or contract right or any interest therein or portion thereof,
whether voluntary or involuntary, by operation of law or otherwise, and will
include any sale or other disposition in any one transaction or series of
transactions (whether or not related) of any majority equity interest in any
legal entity that owns a Membership Unit or other property or contractual right
that would be the subject of any provision of this Agreement.
8.9. Successors. This Agreement will bind and inure to the benefit
of the parties hereto and their respective successors.
8.10. No Suits by Members. No Member will have any right by virtue
of any provision of this Agreement to institute any action or proceeding in law
or in equity against Edison or any party other than the Company upon or under or
with respect to the Company Assets.
8.11. Involvement of the Company in Certain Proceedings. If any
Member becomes involved in legal proceedings unrelated to the business of the
Company in which Edison or the Company is called upon to provide information,
the Member will indemnify and hold harmless Edison, the Company and the Manager
against all costs and expenses, including without limitation fees and expenses
of attorneys and other advisors, incurred by Edison, the Company or the Manager
in preparing or producing the required information or in resisting any request
for production or obtaining a protective order limiting the availability of the
information actually provided by Edison, the Company or the Manager.
8.12. Waiver of Partition and Certain Other Rights. Each of the
Members irrevocably waives any right or power that such Member might have:
(a) To cause the Company or any of the Company Assets to be
partitioned;
(b) To cause the appointment of a receiver for all or any portion of
the Company Assets;
(c) To compel any sale of all or any portion of the Company Assets;
and
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(d) To file a complaint, or to institute proceeding at law or in
equity, to cause the dissolution or liquidation of the Company.
8.13. Member Meetings; Member Approvals. (a) Meetings of the
Members may be called and held at the Company's expense for any purpose by the
Designation Members, in which event the Designation Members will designate any
place, within or without the State of Delaware, as the place for such meeting.
Written or printed notice stating the place, day and hour of the meeting and the
purpose or purposes for which such meeting is called, will be delivered by the
Company to each Member not less than ten (10) days nor more than fifty (50) days
before the meeting. If all of the Members meet at any time and place, either
within or without the State of Delaware, and consent to the holding of a meeting
at such time and place, such meeting shall be valid without call or notice, and
at such meeting any Company action may be taken.
(b) At each meeting of the Members, the holders of record of a
majority of the Class A Membership Units, present in person or by proxy, shall
constitute a quorum for the transaction of Company business. In the absence of a
quorum any Member present at such meeting in person or by proxy shall have the
power to adjourn such meeting until a quorum shall be constituted. Unless
otherwise provided by law or this Agreement, the affirmative vote of the holders
of record of a majority of the Class A Membership Units represented at a meeting
at which a quorum is present shall constitute an act of the Members. At any
meeting of the Members, a Member may vote by proxy executed in writing by such
Member or by his duly authorized representative. Such proxy shall be filed with
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
such proxy. Members may participate in any meeting through telephonic or similar
communications equipment by means of which all persons participating in the
meeting can hear one another, and such participation shall constitute presence
in person at such meeting.
(c) Any action required to, or which may, be taken by the Members,
including without limitation the approval or disapproval of any action set forth
in Section 3.5.2, may be taken without a meeting if consent thereto in writing,
setting forth the action so taken, shall be signed by the holders of record of a
majority of the Class A Membership Units. A written consent may be in one or
more instruments, each of which may be signed by one or more Members. No notice
need be given of action proposed to be taken by written action, or an approval
given by written action, unless specifically required by the Delaware Act.
8.14. No Voting Rights. Notwithstanding anything to the contrary
contained herein, there shall be no voting rights attached to ownership of Class
B Membership Units on any matter for which approval of the Members is required
or requested.
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CERTIFICATE OF FORMATION
OF
EBS BUILDING, L.L.C.
The undersigned, an authorized natural person, for the purpose of forming a
limited liability company under the provisions and subject to the requirements
of the State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code
and the acts amendatory thereof and supplemental thereto, and known, identified,
and referred to as the "Delaware Limited Liability Company Act"), hereby
certifies that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is EBS Building, L.L.C.
SECOND: The address of the registered office and the name and the address
of the registered agent for service of process of the limited liability company
required to be maintained by Section 18-104 of the Delaware Limited Liability
Company Act are The Corporation Trust Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx.
Executed on _______________________, 1997.
______________________________________
___________________, Authorized Person
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EBS BUILDING, L.L.C.
APPENDIX A
TAX MATTERS
This Appendix is attached to and is a part of the Members Agreement
(the "Agreement") of EBS Building, L.L.C. (the "Company"). The parties to the
Agreement intend that the Company be classified as a partnership for federal
income tax purposes pursuant to section 7701(a)(2) of the Code and the
regulations thereunder. The provisions of this Appendix are intended to comply
with the requirements of Treas. Reg. Section 1.704-1(b)(2)(iv) and Treas. Reg.
Section 1.704-2 with respect to maintenance of capital accounts and allocations,
and shall be interpreted and applied accordingly.
ARTICLE I
DEFINITIONS
1.01. Definitions. For purposes of this Appendix, the capitalized
terms listed below shall have the meanings indicated. Capitalized terms not
listed below and not otherwise defined in this Appendix shall have the meanings
specified in the Agreement.
"Account Reduction Item" means (i) any adjustment described in
Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4); (ii) any allocation described in
Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(5), other than a Nonrecourse Deduction
or a Member Nonrecourse Deduction; or (iii) any distribution described in Treas.
Reg. Section 1.704-1(b)(2)(ii)(d)(6), other than a Nonrecourse Distribution or a
Member Nonrecourse Distribution.
"Adjusted Capital Account Balance" means, as of the end of any
taxable year, a Member's Capital Account balance as of the end of such taxable
year (taking into account all contributions made by such Member and
distributions made to such Member during such taxable year and any special
allocations required by Sections 3.02, 3.03, 3.04(a), (b), and (d), and 3.06),
increased by the sum of (i) such Member's share of Company Minimum Gain and (ii)
such Member's share of Member Nonrecourse Debt Minimum Gain, both determined
after taking into account any such special allocations.
"Adjusted Fair Market Value" of an item of Company property means
the greater of (i) the fair market value of such property or (ii) the amount of
any Nonrecourse indebtedness to which such property is subject within the
meaning of section 7701(g) of the Code.
"Book" means the method of accounting prescribed for compliance with
the capital account maintenance rules set forth in Treas. Reg. Section
1.704-1(b)(2)(iv) as reflected in Articles II and III of this Appendix, as
distinguished from any accounting method which the Company may adopt for other
purposes such as financial reporting.
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"Book Value" means, with respect to any item of Company property,
the book value of such property within the meaning of Treas. Reg. Section
1.704-1(b)(2)(iv)(g)(3); provided, however, that if the Company adopts the
remedial allocation method described in Treas. Reg. Section 1.704-3(d) with
respect to any item of Company property, the Book Value of such property shall
be its book basis determined in accordance with Treas. Reg. Section
1.704-3(d)(2).
"Capital Account" means the capital account of a Member maintained
in accordance with Article II of this Appendix.
"Code" means the Internal Revenue Code of 1986, as amended.
References to specific sections of the Code shall be deemed to include
references to corresponding provisions of succeeding internal revenue law.
"Company Minimum Gain" means partnership minimum gain determined
pursuant to Treas. Reg. Section 1.704-2(d) and Section 5.02.
"Deemed Liquidation" means a liquidation of the Company that is
deemed to occur pursuant to Treas. Reg. Section 1.708-1(b)(1)(iv) in the event
of a termination of the Company pursuant to section 708(b)(1)(B) of the Code.
"Excess Deficit Balance" means the amount, if any, by which the
balance in a Member's Capital Account as of the end of the relevant taxable year
is more negative than the amount, if any, of such negative balance that such
Member is treated as obligated to restore to the Company pursuant to Treas. Reg.
Section 1.704-1(b)(2)(ii)(c), Treas. Reg. Section 1.704-1(b)(2)(ii)(h), Treas.
Reg. Section 1.704-2(g)(1), or Treas. Reg. Section 1.704-2(i)(5). Solely for
purposes of computing a Member's Excess Deficit Balance, such Member's Capital
Account shall be reduced by the amount of any Account Reduction Items that are
reasonably expected as of the end of such taxable year.
"Excess Nonrecourse Liabilities" means excess nonrecourse
liabilities within the meaning of Treas. Reg. Section 1.752-3(a)(3).
"Exculpatory Liability" means a liability that is recourse to the
Company as an entity, and for which no Member or Related Person bears the
economic risk of loss under Treas. Reg. Section 1.752-2.
"Foreign Person" means a foreign person or entity within the meaning
of Section 168(h)(2)(A)(3) of the Code.
"Member Nonrecourse Debt" means any liability of the Company to the
extent that (i) the liability is nonrecourse for purposes of Treas. Reg. Section
1.1001-2 and (ii) a Member or a Related Person bears the economic risk of loss
under Treas. Reg. Section 1.752-2.
"Member Noncourse Debt Minimum Gain" means minimum gain attributable
to Member Nonrecourse Debt pursuant to Treas. Reg. Section 1.704-2(i)(3).
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"Member Nonrecourse Deduction" means any item of Book loss or
deduction that is a partner nonrecourse deduction within the meaning of Treas.
Reg. Section 1.704-2(i)(1) and (2).
"Member Nonrecourse Distribution" means a distribution to a Member
that is allocable to a net increase in such Member's share of Member Nonrecourse
Debt Minimum Gain pursuant to Treas. Reg. Section 1.704-2(i)(6).
"Nonrecourse Deduction" means, subject to Section 5.02, a
nonrecourse deduction determined pursuant to Treas. Reg. Section 1.704-2(b)(1)
and Treas. Reg. Section 1.704-2(c).
"Noncourse Distribution" means a distribution to a Member that is
allocable to a net increase in Company Minimum Gain pursuant to Treas. Reg.
Section 1.704-2(h)(1).
"Pass-through Entity" means an entity that is treated as a
partnership for federal income tax purposes.
"Regulatory Allocation" means (i) any allocation made pursuant to
Section 3.04(a) to the extent that such allocation is attributable to a prior
distribution that is treated as a Nonrecourse Distribution (after taking into
account Section 5.03(a)); (ii) any allocation made pursuant to Section 3.04(b)
to the extent that such allocation is attributable to a prior distribution that
is treated as a Member Nonrecourse Distribution (after taking into account
Section 5.03(b)); (iii) any reallocation made pursuant to Section 3.04(d) or
(e); or (iv) any allocation or reallocation made pursuant to Section 3.05.
"Related Person" means, with respect to a Member, a person that is
related to such Member pursuant to Treas. Reg. Section 1.752-4(b).
"Revaluation Event" means (i) a liquidation of the Company (within
the meaning of Treas. Reg. Section 1.704-1(b)(2)(ii)(g)); or (ii) a contribution
of more than a de minimis amount of money or other property to the Company by a
new or existing Member or a distribution of more than a de minimis amount of
money or other property to a retiring or continuing Member where such
contribution or distribution alters the Overall Sharing Percentage of any
Member.
"Section 705(a)(2)(B) Expenditures" means non-deductible
expenditures of the Company that are described in section 705(a)(2)(B) of the
Code, and organization and syndication expenditures and disallowed losses to the
extent that such expenditures or losses are treated as expenditures described in
section 705(a)(2)(B) of the Code pursuant to Treas. Reg. Section
1.704-1(b)(2)(iv)(i).
"Section 751 Property" means unrealized receivables and
substantially appreciated inventory items within the meaning of Treas. Reg.
Section 1.751-1(a)(1).
"Tax Basis" means, with respect to any item of Company property, the
adjusted basis of such property as determined in accordance with the Code.
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30
"Tax-exempt Entity" means (i) the United States, any state or
political subdivision thereof, any possession of the United States, or any
agency or instrumentality of any of the oregoing; or (ii) any organization
(other than a cooperative described in section 521 of the Code) that is exempt
from federal income tax.
"Treasury Regulation" or "Treas. Reg." means the temporary or final
regulation(s) promulgated pursuant to the Code by the U.S. Department of the
Treasury, as amended, and any successor regulation(s).
ARTICLE II
CAPITAL ACCOUNTS
2.01. Maintenance. (a) A single Capital Account shall be maintained
for each Member in accordance with this Article II.
(b) Each Member's Capital Account shall from time to time be
increased by:
(i) the amount of money contributed by such Member to the
Company (including the amount of any Company liabilities which the Member
assumes (within the meaning of Treas. Reg. Section 1.704-1(b)(2)(iv)(c)),
but excluding liabilities assumed in connection with the distribution of
Company property and excluding increases in such Members' share of Company
liabilities pursuant to section 752 of the Code);
(ii) the fair market value of property contributed by such
Member to the Company (net of any liabilities secured by such property
that the Company is considered to assume or take subject to pursuant to
Section 752 of the Code);
(iii) allocations to such Member of Company Book income and gain
(or the amount of any item or items of income or gain included therein);
(iv) upon the revaluation of Company property pursuant to
Section 2.02(a), the Book gain (if any) that would have been allocated to
such Member if such Company property had been sold at its Adjusted Fair
Market Value as of the date of such revaluation; and
(v) upon the distribution of Company property to a Member, if
Company property is not revalued pursuant to Section 2.02(a), the Book
gain (if any) that would have been allocated to such Member if such
Company property had been sold at its Adjusted Fair Market Value
immediately prior to the distribution.
(c) Each Member's Capital Account shall from time to time be reduced
by:
(i) the amount of money distributed to such Member by the
Company (including the amount of such Member's individual liabilities for
which the Company becomes personally and primarily liable but excluding
liabilities assumed in connection
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31
with the contribution of property to the Company and excluding
decreases in such Member's share of Company liabilities pursuant to
section 752 of the Code);
(ii) the fair market value of property distributed to such
Member by the Company (net of any liabilities secured by such property
that such Member is considered to assume or take subject to pursuant to
section 752 of the Code);
(iii) allocations to such Member of Company Book loss and
deduction (or items thereof);
(iv) upon the revaluation of Company property pursuant to
Section 2.02(a), the Book loss (if any) that would have been allocated to
such Member if such Company property had been sold at its Adjusted Fair
Market Value as of the date of such revaluation; and
(v) upon the distribution of Company property to a Member, if
Company property is not revalued pursuant to Section 2.02(a), the Book
loss (if any) that would have been allocated to such Member if such
Company property had been sold at its Adjusted Fair Market Value
immediately prior to the distribution.
(d) The Company shall make such other adjustments to the Capital
Accounts of the Members as are necessary to comply with the provisions of Treas.
Reg. Section 1.704-1(b)(2)(iv).
2.02. Revaluation of Company Property. (a) Upon the occurrence of a
Revaluation Event, the Manager may revalue all Company property (whether
tangible or intangible) for Book purposes to reflect the Adjusted Fair Market
Value of Company property immediately prior to the Revaluation Event. In the
event that Company property is so revalued, the Capital Accounts of the Members
shall be adjusted in accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(f).
(b) Upon the distribution of Company property to a Member, if
Company property is not revalued pursuant to Section 2.02(a), the property to be
distributed shall be revalued for Book purposes to reflect the Adjusted Fair
Market Value of such property immediately prior to such distribution, and the
Capital Accounts of all Members shall be adjusted in accordance with Treas. Reg.
Section 1.704-1(b)(2)(iv)(e).
2.03. Restoration of Negative Balances. No Member with a deficit
balance in its Capital Account shall have any obligation to the Company, to any
other Member or to any third party to restore or repay said deficit balance.
2.04. Transfers of Interests. (a) Upon the transfer of a Member's
entire interest in the Company, the Capital Account of such Member shall carry
over to the transferee.
(b) Upon the transfer of a portion of a Member's interest in the
Company, the portion of such Member's Capital Account attributable to the
transferred portion shall carry over
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32
to the transferee. In the event that the document effecting such transfer
specifies the portion of such Member's Capital Account to be transferred, such
portion shall be deemed to be the portion attributable to the transferred
portion of such Member's interest for purposes of this Section 2.04(b).
ARTICLE III
ALLOCATION OF BOOK INCOME AND LOSS
3.01. Book Income and Loss. (a) The Book income or loss of the
Company for purposes of determining allocations to the Capital Accounts of the
Members shall be determined in the same manner as the determination of the
Company's taxable income, except that (i) items that are required by section
703(a)(1) of the Code to be separately stated shall be included; (ii) items of
income that are exempt from inclusion in gross income for federal income tax
purposes shall be treated as Book income, and related deductions that are
disallowed under section 265 of the Code shall be treated as Book deductions;
(iii) Section 705(a)(2)(B) Expenditures shall be treated as deductions; (iv)
items of gain, loss, depreciation, amortization, or depletion that would be
computed for federal income tax purposes by reference to the Tax Basis of an
item of Company property shall be determined by reference to the Book Value of
such item of property; and (v) the effects of upward and downward revaluations
of Company property pursuant to Section 2.02 shall be treated as gain or loss
respectively from the sale of such property.
(b) In the event that the Book Value of any item of Company property
differs from its Tax Basis, the amount of Book depreciation, depletion, or
amortization for a period with respect to such property shall be computed so as
to bear the same relationship to the Book Value of such property as the
depreciation, depletion, or amortization computed for tax purposes with respect
to such property for such period bears to the Tax Basis of such property. If the
Tax Basis of such property is zero, the Book depreciation, depletion, or
amortization with respect to such property shall be computed by using a method
consistent with the method that would be used for tax purposes if the Tax Basis
of such property were greater than zero.
(c) Allocations to the Capital Accounts of the Members shall be
based on the Book income or loss of the Company as determined pursuant to this
Section 3.01. Such allocations shall be made as provided in the Agreement except
to the extent modified by the provisions of this Article III.
3.02. Allocation of Nonrecourse Deductions. Notwithstanding any
other provisions of the Agreement, Nonrecourse Deductions shall be allocated
among the Members in proportion to their respective Overall Sharing Percentages.
3.03. Allocation of Member Nonrecourse Deductions. Notwithstanding
any other provisions of the Agreement, any item of Member Nonrecourse Deduction
with respect to a Member Nonrecourse Debt shall be allocated to the Member or
Members who bear the economic risk loss for such Member Nonrecourse Debt in
accordance with Treas. Reg. Section 1.704-2(i).
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3.04. Chargebacks of Income and Gain. Notwithstanding any other
provisions of the Agreement:
(a) Company Minimum Gain. In the event that there is a net decrease
in Company Minimum Gain for a taxable year of the Company, then before any other
allocations are made for such taxable year, each Member shall be allocated items
of Book income and gain for such year (and, if necessary, for subsequent years)
to the extent required by Treas. Reg. Section 1.704-2(f).
(b) Member Nonrecourse Debt Minimum Gain. In the event that there is
a net decrease in Member Nonrecourse Debt Minimum Gain for a taxable year of the
Company, then after taking into account allocations pursuant to paragraph (a)
immediately preceding, but before any other allocations are made for such
taxable year, each Member with a share of Member Nonrecourse Debt Minimum Gain
at the beginning of such year shall be allocated items of Book income and gain
for such year (and, if necessary, for subsequent years) to the extent required
by Treas. Reg. Section 1.704-2(i)(4).
(c) Application for Waiver. In the event that the Manager
determines, in its reasonable discretion, that the application of the provisions
of Section 3.04(a) or Section 3.04(b) would cause a distortion in the economic
arrangement among the Members, the Manager may, on behalf of the Company,
request a waiver of the application of either or both of such provisions
pursuant to Treas. Reg. Section 1.704-2(f)(4) or Treas. Reg. Section
1.704-2(i)(4).
(d) Qualified Income Offset. In the event that any Member
unexpectedly receives any Account Reduction Item that results in an Excess
Deficit Balance at the end of any taxable year after taking into account all
other allocations and adjustments under this Agreement other than allocations
under Section 3.04(e), then items of Book income and gain for such year (and, if
necessary, for subsequent years) will be reallocated to each such Member in the
amount and in the proportions needed to eliminate such Excess Deficit Balance as
quickly as possible.
(e) Gross Income Allocation. If, at the end of any taxable year, the
Capital Accounts of any Members have Excess Deficit Balances after taking into
account all other allocations and adjustments under this Agreement, then items
of Book income and gain for such year will be reallocated to such Members in the
amount and in the proportions needed to eliminate such Excess Deficit Balances
as quickly as possible.
3.05. Reallocation to Avoid Excess Deficit Balances. Notwithstanding
any other provisions of the Agreement, no Book loss or deduction shall be
allocated to any Member to the extent that such allocation would cause or
increase an Excess Deficit Balance in the Capital Account of such Member. Such
Book loss or deduction shall be reallocated away from such Member and to the
other Members in accordance with the Agreement, but only to the extent that such
reallocation would not cause or increase Excess Deficit Balances in the Capital
Accounts of such other Members.
3.06. Corrective Allocation. Subject to the provisions of Sections
3.02, 3.03, 3.04, and 3.05, but notwithstanding any other provision of the
Agreement, in the event that any
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34
Regulatory Allocation is made pursuant to this Appendix for any taxable year,
then remaining Book items for such year (and, if necessary, Book items for
subsequent years) shall be allocated or reallocated in such amounts and
proportions as are appropriate to restore the Adjusted Capital Account Balances
of the Members to the position in which such Adjusted Capital Account Balances
would have been if such Regulatory Allocation had not been made.
3.07. Other Allocations. (a) If during any taxable year of the
Company there is a change in any Member's Class A Sharing Percentage or Class B
Sharing Percentage, allocations of Book income or loss for such taxable year
shall take into account the varying interests of the Members in the Company in a
manner consistent with the requirements of Section 706 of the Code.
(b) If and to the extent that any distribution of Section 751
Property to a Member in exchange for property other than Section 751 Property is
treated as a sale or exchange of such Section 751 Property by the Company
pursuant to Treas. Reg. Section 1.751-1(b)(2), any Book gain or loss
attributable to such deemed sale or exchange shall be allocated only to Members
other than the distributee Member.
(c) If and to the extent that any distribution of property other
than Section 751 Property to a Member in exchange for Section 751 Property is
treated as a sale or exchange of such other property by the Company pursuant to
Treas. Reg. Section 1.751-1(b)(3), any Book gain or loss attributable to such
deemed sale or exchange shall be allocated only to Members other than the
distributee Member.
ARTICLE IV
ALLOCATION OF TAX ITEMS
4.01. In General. Except as otherwise provided in this Article IV,
all items of income, gain, loss, and deduction shall be allocated among the
Members for federal income tax purposes in the same manner as the corresponding
allocation for Book purposes.
4.02. Section 704(c) Allocations. In the event that the Book Value
of an item of Company property differs from its Tax Basis, allocations of
depreciation, depletion, amortization, gain, and loss with respect to such
property will be made for federal income tax purposes in a manner that takes
account of the variation between the Tax Basis and Book Value of such property
in accordance with section 704(c)(1)(A) of the Code and Treas. Reg. Section
1.704-1(b)(4)(i). The Manager may select any reasonable method or methods for
making such allocations, including, without limitation, any method described in
Treas. Reg. Section 1.704-3(b), (c), or (d).
4.03. Tax Credits. Tax credits shall be allocated among the Members
in accordance with Treas. Reg. Section 1.704-1(b)(4)(ii).
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35
ARTICLE V
OTHER TAX MATTERS
5.01. Excess Nonrecourse Liabilities. For the purpose of determining
the Members' shares of the Company's Excess Nonrecourse Liabilities pursuant to
Treas. Reg. Section Section 1.752-3(a)(3) and 1.707-5(a)(2)(ii), and solely for
such purpose, the Members' interests in profits are hereby specified to be their
respective Overall Sharing Percentages.
5.02. Exculpatory Liabilities. The Manager may (a) treat deductions
attributable to Exculpatory Liabilities as deductions that are not Nonrecourse
Deductions, and (b) disregard Exculpatory Liabilities in the determination of
Company Minimum Gain.
5.03. Treatment of Certain Distributions. (a) In the event that (i)
the Company makes a distribution that would (but for this Subsection (a)) be
treated as a Nonrecourse Distribution; and (ii) such distribution does not cause
or increase a deficit balance in the Capital Account of the Member receiving
such distribution as of the end of the Company's taxable year in which such
distribution occurs; then the Manager may treat such distribution as not
constituting a Nonrecourse Distribution to the extent permitted by Treas. Reg.
Section 1.704-2(h)(3).
(b) In the event that (i) the Company makes a distribution that
would (but for this Subsection (b)) be treated as a Member Nonrecourse
Distribution; and (ii) such distribution does not cause or increase a deficit
balance in the Capital Account of the Member receiving such distribution as of
the end of the Company's taxable year in which such distribution occurs; then
the Manager may treat such distribution as not constituting a Member Nonrecourse
Distribution to the extent permitted by Treas. Reg. Section 1.704-2(i)(6).
5.04. Reduction of Basis. In the event that a Member's interest in
the Company may be treated in whole or in part as depreciable property for
purposes of reducing such Member's basis in such interest pursuant to section
1017(b)(3)(C) of the Code, the Manager may, upon the request of such Member,
make a corresponding reduction in the basis of the Company's depreciable
property with respect to such Member. Such request shall be submitted to the
Company in writing, and shall include such information as may be reasonably
required in order to effect such reduction in basis.
5.05. Withholding. (a) The Company shall withhold any amounts
required to be withheld pursuant to any applicable provisions of the Code,
including without limitation sections 1441 through 1446 of the Code, or pursuant
to any applicable provisions of state or local law.
(b) Any amounts withheld with respect to a Member's distributive
share of Company income (whether or not distributed) shall be treated by the
Company and by such Member for all purposes as amounts distributed to such
Member. Any amounts withheld with respect to any payment to a Member shall be
treated by the Company and by such Member for all purposes as amounts paid to
such Member. Amounts so treated as distributed or paid to any Member shall
reduce the amount otherwise distributable or payable to such Member.
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(c) In the event that the Company withholds with respect to a
Member's distributive share of Company income for a taxable year, and such
distributive share exceeds the amount distributed to such Member in such taxable
year, then subsequent distributions to such Member shall be deemed to be made
first from income with respect to which the Company has already withheld.
5.06. Pass-through Entities as Members. Any Member that is a
Pass-through Entity shall promptly notify the Company in writing upon any of the
following occurrences:
(a) any event, such as a sale or exchange of an interest in such
Member, that will result in an adjustment to the basis of the assets of such
Member under section 743(b) of the Code pursuant to an election under section
754 of the Code;
(b) any event, such as a distribution of cash or other property by
such Member, that will result in an adjustment to the basis of such Member's
assets under section 734(b) of the Code pursuant to an election under section
754 of the Code; or
(c) any event that will result in the termination of such Member as
a partnership pursuant to section 708(b)(1)(B) of the Code.
5.07. Tax-exempt or Foreign Ownership of Members. In the event that
any interest in a Member that is a Pass-through Entity is owned directly or
indirectly by any Tax-exempt Entity or Foreign Person, such Member shall
promptly notify the Company in writing of such Tax-exempt Entity's or Foreign
Person's proportionate share of such Member's items of income and gain
(determined as a percentage pursuant to section 168(h)(6)(C) of the Code) and of
any change in such proportionate share.
5.08. Entity Classification. Neither the Company nor any Member
shall file or cause to be filed any election, the effect of which would be to
cause the Company to be classified as other than a partnership for federal
income tax purposes, without the prior written consent of all Members.
[End of Appendix A]
10
