EXHIBIT 10.28.1
HBL, LLC
LIMITED LIABILITY COMPANY AGREEMENT
EFFECTIVE AS OF DECEMBER 31, 2001
TABLE OF CONTENTS
SECTION 1.........................................................................................................1
FORMATION OF THE LIMITED LIABILITY COMPANY........................................................................1
1.1 FORMATION; FILINGS....................................................................................1
1.2 NAME..................................................................................................2
1.3 TERM..................................................................................................2
1.4 REGISTERED AGENT AND OFFICE...........................................................................2
1.5 PRINCIPAL PLACE OF BUSINESS...........................................................................2
1.6 QUALIFICATION IN OTHER JURISDICTIONS..................................................................2
SECTION 2.........................................................................................................3
PURPOSE AND POWERS................................................................................................3
2.1 BUSINESS PURPOSES.....................................................................................3
2.2 POWERS OF THE COMPANY.................................................................................3
SECTION 3.........................................................................................................3
MEMBERS...........................................................................................................3
3.1 POWERS OF MEMBERS.....................................................................................3
3.2 NO PRIORITY, ETC......................................................................................4
3.3 MEETINGS OF MEMBERS...................................................................................4
3.4 ACTIONS OF MEMBERS WITHOUT A MEETING..................................................................5
3.5 TRADE SECRETS; CONFIDENTIALITY........................................................................5
SECTION 4.........................................................................................................6
MANAGEMENT........................................................................................................6
4.1 THE BOARD.............................................................................................6
4.2 OFFICERS..............................................................................................8
4.3 ACTIONS AND DETERMINATIONS OF THE COMPANY............................................................13
SECTION 5........................................................................................................13
OPERATING POLICIES...............................................................................................13
5.1 ANNUAL BUSINESS PLAN PROCESS.........................................................................13
5.2 INSURANCE............................................................................................14
5.3 FISCAL YEAR..........................................................................................14
5.4 INITIAL ACCOUNTANTS; CHANGE OF ACCOUNTANTS...........................................................14
SECTION 6........................................................................................................14
CAPITAL CONTRIBUTIONS, PERCENTAGE INTERESTS,
CAPITAL ACCOUNTS AND ADVANCES....................................................................................14
6.1 CAPITAL CONTRIBUTIONS................................................................................14
6.2 MEMBER'S PERCENTAGE INTEREST.........................................................................14
6.3 STATUS OF CAPITAL CONTRIBUTIONS......................................................................14
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6.5 NEGATIVE CAPITAL ACCOUNTS............................................................................16
6.6 LOANS FROM MEMBERS...................................................................................16
SECTION 7........................................................................................................16
ALLOCATIONS OF PROFITS AND LOSSES................................................................................16
7.1 ALLOCATIONS OF NET PROFIT AND NET LOSS...............................................................16
7.2 SPECIAL ALLOCATIONS..................................................................................17
7.3 TAX ALLOCATIONS......................................................................................19
7.4 TRANSFER OR CHANGE IN MEMBER INTERESTS...............................................................19
SECTION 8........................................................................................................20
DISTRIBUTIONS AND WITHHOLDING....................................................................................20
8.1 DISTRIBUTIONS........................................................................................20
8.2 LIMITATIONS ON DISTRIBUTION..........................................................................20
8.3 WITHHOLDING TAXES....................................................................................20
SECTION 9........................................................................................................20
TAX MATTERS......................................................................................................20
9.1 TAX MATTERS MEMBER...................................................................................20
9.2 RIGHT TO MAKE SECTION 754 ELECTION...................................................................22
9.3 TAXATION AS PARTNERSHIP..............................................................................22
SECTION 10.......................................................................................................22
BANKING; ACCOUNTING; BOOKS AND RECORDS...........................................................................22
10.1 BANKING..............................................................................................22
10.2 MAINTENANCE OF BOOKS AND RECORDS; ACCOUNTS AND ACCOUNTING METHOD; INSPECTION.........................22
SECTION 11.......................................................................................................23
REPORTS TO MEMBERS...............................................................................................23
11.1 REPORTS TO CURRENT MEMBERS...........................................................................23
11.2 TAX INFORMATION......................................................................................23
11.3 ADDITIONAL INFORMATION...............................................................................24
SECTION 12.......................................................................................................24
LIABILITY, EXCULPATION AND INDEMNIFICATION.......................................................................24
12.1 LIABILITY............................................................................................24
12.2 EXCULPATION..........................................................................................24
12.3 INDEMNIFICATION......................................................................................26
SECTION 13.......................................................................................................27
TRANSFER OF PERCENTAGE INTERESTS; WITHDRAWAL,
BANKRUPTCY, DISSOLUTION; CERTAIN ADMISSIONS OF MEMBERS..........................................................27
13.1 ADMISSION, SUBSTITUTION AND WITHDRAWAL OF MEMBERS; ASSIGNMENT........................................27
13.2 WITHDRAWAL...........................................................................................30
SECTION 14.......................................................................................................30
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DISSOLUTION AND TERMINATION OF THE COMPANY.......................................................................30
14.1 EVENTS CAUSING DISSOLUTION...........................................................................30
14.2 LIQUIDATION..........................................................................................31
14.3 DISTRIBUTIONS IN CASH OR IN KIND.....................................................................31
14.4 TIME AND MANNER FOR LIQUIDATION, ETC.................................................................31
14.5 TERMINATION..........................................................................................32
14.6 CLAIMS OF THE MEMBERS................................................................................32
SECTION 15.......................................................................................................32
DEFINITIONS......................................................................................................32
15.1 DEFINITIONS..........................................................................................32
SECTION 16.......................................................................................................38
AMENDMENTS; MERGER OR SALE.......................................................................................38
16.1 AMENDMENTS GENERALLY.................................................................................38
16.2 MERGER OR SALE.......................................................................................39
SECTION 17.......................................................................................................39
MISCELLANEOUS PROVISIONS.........................................................................................39
17.1 NOTICES..............................................................................................39
17.2 COUNTERPARTS.........................................................................................39
17.3 TABLE OF CONTENTS AND HEADINGS.......................................................................39
17.4 SUCCESSORS AND ASSIGNS; ASSIGNMENT...................................................................39
17.5 SEVERABILITY.........................................................................................40
17.6 NON-WAIVER...........................................................................................40
17.7 APPLICABLE LAW.......................................................................................40
17.8 WAIVER OF JURY TRIAL.................................................................................40
17.9 SURVIVAL OF CERTAIN PROVISIONS.......................................................................40
17.10 LIMITATION ON DAMAGES; LEGAL DISPUTES................................................................40
17.11 WAIVER OF PARTITION..................................................................................41
17.12 ENTIRE AGREEMENT.....................................................................................41
17.13 FURTHER ACTIONS......................................................................................41
17.14 NO PARTNERSHIP.......................................................................................41
17.15 APPLICABLE OF LAW AND DISPUTE RESOLUTION.............................................................41
Schedule A.................................................................................................44
Schedule B.................................................................................................45
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LIMITED LIABILITY COMPANY AGREEMENT
OF HBL, LLC
This Limited Liability Company Agreement of HBL, LLC (the "COMPANY") is made
effective as of December 31, 2001, by and between H.B.L. HOLDINGS, INC., a
Virginia corporation, ("HBL") and XXXXX X. XXXXXX, XX., an individual ("RSP")
(each of the foregoing parties to this Agreement shall be referred to herein
collectively as the "PARTIES"), and the Persons who become Members of the
Company in accordance with the provisions of this Agreement and whose names are
set forth as Members on SCHEDULE A hereto. Certain capitalized terms used herein
without definition have the meanings specified in SECTION 14.
WHEREAS, the parties hereto desire to form a limited liability company under the
Delaware Act; and
WHEREAS, the parties hereto desire to establish their respective rights and
obligations as Members of such limited liability company.
NOW, THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
SECTION 1
FORMATION OF THE LIMITED LIABILITY COMPANY
1.1 FORMATION; FILINGS.
(a) GENERALLY. The Parties agree to form a limited liability
company pursuant to the provisions of the Delaware Act and
upon the terms, subject to the conditions, and for the
purposes set forth in this Agreement. Each of the Members
shall execute or cause to be executed from time to time all
other instruments, certificates, notices and documents, and
shall do or cause to be done all such filing, recording,
publishing and other acts, in each case, as may be necessary
or appropriate from time to time to comply with all applicable
requirements for the formation and/or operation and, when
appropriate, termination of a limited liability company in the
State of Delaware and all other jurisdictions where the
Company shall desire to conduct its business.
(b) CAPITAL CONTRIBUTIONS. The name, mailing address, Capital
Contribution and Percentage Interest of each Member is listed
on SCHEDULE A attached hereto. The Company shall be required
to update SCHEDULE A from time to time as necessary to reflect
accurately any changes in the information contained therein.
Any
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reference in this Agreement to Schedule A shall be deemed to
be a reference to Schedule A as amended and in effect from
time to time.
1.2 NAME.
The name of the Company is "HBL, LLC" and its business shall be carried
on in this name with such variations and changes as the Board in its
sole judgment deems necessary or appropriate to comply with
requirements of the jurisdictions in which the Company's operations are
conducted.
1.3 TERM.
The term of the Company shall commence on the date of the filing of a
Certificate of Formation in the office of the Secretary of State of the
State of Delaware and shall continue until dissolved and liquidated in
accordance with the provisions of Section 13.
1.4 REGISTERED AGENT AND OFFICE.
The registered agent and office of the Company in Delaware shall be The
Corporation Trust Company, Corporation Trust Center, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx. The registered agent for service of
process on the Company in the State of Delaware shall be The
Corporation Trust Company. At any time, the Managers of the Company may
designate another registered agent and/or registered office.
1.5 PRINCIPAL PLACE OF BUSINESS.
The principal place of business of the Company shall be at 0000
Xxxxxxxx Xxxx, Xxxxxx, XX 00000.
1.6 QUALIFICATION IN OTHER JURISDICTIONS.
The Board shall take and/or authorize the taking of such action
necessary to cause the Company to be qualified, formed or registered
under assumed or fictitious name statutes or similar laws in any
jurisdiction in which the Company transacts business and in which such
qualification or registration is required by law or deemed advisable by
the Company. The President or any duly qualified officer of the
Company, as an authorized person within the meaning of the Delaware
Act, shall execute, deliver and file any certificates (and any
amendments and/or restatements thereof) necessary for the Company to
qualify to do business in any jurisdiction in which the Company may
wish to conduct business.
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SECTION 2
PURPOSE AND POWERS
2.1 BUSINESS PURPOSES.
The purpose of the Company is to (i) engage for profit in the Business,
(ii) engage for profit in any and all other activities reasonably
related to or incidental to the Business, and (iii) engage for profit
in any other business for which limited liability companies may be
formed under the Delaware Act, whether or not related or incidental to
the Business, as may be determined from time to time by the act of the
Directors constituting fifty and one-tenth percent (50.1%) or more of
the total vote of the Board.
2.2 POWERS OF THE COMPANY.
Subject to obtaining any requisite Board approval required by Sections
2.1 or 4.2(e), the Company shall have the power and authority to take
any and all actions necessary, appropriate, proper, advisable,
incidental or convenient to or for the furtherance of the purposes set
forth in Section 2.1, to the extent that the same may be lawfully
exercised by limited liability companies under the Delaware Act.
SECTION 3
MEMBERS
3.1 POWERS OF MEMBERS.
Except as otherwise expressly provided herein, the Members shall have
no power to transact any business in the Company's name nor have the
power to sign documents for or otherwise bind the Company. Subject to
the provisions of the Delaware Act, the Certificate and this Agreement,
the Members hereby delegate any and all such powers to the Board and
the officers to carry out the business affairs of the Company on the
Members' behalf. Any power not reserved to the Members or delegated to
the officers of the Company, if any, shall remain with the Board.
Notwithstanding the foregoing, the agreement of the Parties contained
in the Transaction Agreement takes precedence over, and shall not be
abridged in any way by, the terms of this Agreement and the Company
shall take such action as shall be necessary, upon receipt of notice of
a Party, to cause the Company to abide by the terms of the Transaction
Agreement and to cause the rights of such Party set forth in the
Transaction Agreement to be honored by the Company.
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3.2 NO PRIORITY, ETC.
Except as otherwise provided herein, no Member shall have priority
over any other Member either as to the return of the amount of its
Capital Contribution, if any, to the Company or as to any allocation of
Net Profit and Net Loss.
3.3 MEETINGS OF MEMBERS.
(a) ANNUAL MEETINGS. An annual meeting of the Members for the
election of Directors and the transaction of other proper
business shall be held once a year at a time designated by the
Company.
(b) SPECIAL MEETINGS. Special meetings of the Members, for any
purpose or purposes, may be called by the Company and shall be
called by the Company at the request of Members holding ten
percent (10%) or more of the aggregate Percentage Interests.
The business transacted at any special meeting of Members
shall be limited to the purposes stated in the notice.
(c) PLACE OF MEETING. All meetings of Members shall be held at
such place within or outside the State of Delaware as the
Company shall designate.
(d) NOTICE OF MEETINGS. Notice of all meetings of Members, stating
the time, place and purpose of the meeting, shall be given as
provided in Section 16.1 at least 10 days and not more than 60
days before the meeting. Any adjourned meeting may be
adjourned without further notice, provided that any adjourned
session or sessions are held within 60 days after the date set
for the original meeting. No notice need be given (i) to any
Member if a written waiver of notice, executed before or after
the meeting by such Member or his attorney thereunto duly
authorized, is filed with the records of the meeting, or (ii)
to any Member who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A
waiver of notice need not specify the purposes of the meeting.
(e) QUORUM AND VOTING. All Members must be present in order to
constitute a minimum quorum required for the transaction of
business at any meeting of Members. Any question brought
before any meeting shall be decided by Members who, at the
time in question and in the aggregate, hold, or hold proxies
with respect to, a majority of the aggregate Percentage
Interests, unless a different vote is specifically provided
for by this Agreement.
(f) PROXIES. Percentage Interests of Members may be voted in
person or by proxy. A proxy purporting to be executed by or on
behalf of a Member shall be deemed
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valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger.
(g) ELECTRONIC COMMUNICATIONS. Members may participate in any
meeting of Members by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person
at the meeting.
3.4 ACTIONS OF MEMBERS WITHOUT A MEETING.
Any action required to be taken at any annual or special meeting of
Members or otherwise, or any action which may be taken at any annual or
special meeting of such Members or otherwise, may be taken without a
meeting and without a vote, if (i) at least two days advance notice of
the intent to take action without a meeting is provided to each Member
and (ii) a consent in writing, setting forth the action so taken, shall
be signed by Members having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting.
The foregoing two day advance notice period shall be deemed waived with
respect to any Member that returns a signed consent to the Company.
Prompt notice of the taking of the action without a meeting by less
than unanimous written consent shall be given to each of those Members
who have not consented in writing.
3.5 TRADE SECRETS; CONFIDENTIALITY.
(a) Each Member, to the extent, if any, that it becomes aware of a
trade secret of the Company, agrees that it will not at any
time reveal, divulge or otherwise make known any such trade
secret of the Company to any Person other than a current
officer or employee of the Company, or such other person as
the Board may designate in writing or, with prior notice to
the Company, pursuant to court order or other legal process or
the order of any governmental agency or entity.
(b) Except as required by applicable law (including reporting
requirements under generally accepted accounting principles),
each Member shall keep secret all material confidential
matters of the Company which are not otherwise in the public
domain and will not intentionally disclose them to anyone
outside of the Company during the term of this Agreement.
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SECTION 4
MANAGEMENT
4.1 THE BOARD.
(a) GENERAL. The business and affairs of the Company shall be
managed by or under the direction of a committee of Managers
of the Company (the "BOARD") consisting initially of three (3)
natural persons designated as directors of the Company
("DIRECTORS") pursuant to the terms of this Agreement. Other
than rights and powers expressly reserved to Members by this
Agreement or the Delaware Act, the Board shall have full,
exclusive and complete discretion to manage and control the
business and affairs of the Company, to make all decisions
affecting the business and affairs of the Company and to take
all such actions as it deems necessary or appropriate to
accomplish the purposes of the Company as set forth herein.
Each Director is hereby designated a Manager. The Directors
shall be appointed or elected as provided in Section 4.1(b).
Each Director elected shall hold office until a successor is
elected and qualified or until such Director's earlier death,
resignation or removal. Directors need not be Members. No
appointment or election of a Director shall become effective,
however, until the Person named shall have accepted in writing
such appointment and agreed in writing to be bound by the
terms of this Agreement.
(b) INITIAL ELECTION AND APPOINTMENT OF DIRECTORS. The initial
Directors shall be Xxxxx X. Xxxxxx, Xx. (Chairman), Xxxxxx X.
Xxxxxxx, Xx., and Xxxxx Xxxxxxxx. A Majority in Interest of
the Members, shall have the power to remove, with or without
cause and fill any vacancy on the Board created by the death,
resignation or removal of any Director; provided, however,
that so long as RSP owns two percent (2%) or more of the
Company the Members agree to take such action as is necessary
to ensure that he is elected as a Director of the Company.
(c) INCREASE OR DECREASE IN SIZE OF BOARD. The size of the Board
may be increased or decreased from time to time only by A
Majority in Interest of the Members or by an amendment to this
Agreement.
(d) RESTRICTIONS ON THE BOARD. The Board shall not: (i) do any act
in contravention of any applicable law or regulation, or
provision of this Agreement; (ii) admit any Person as a Member
except as permitted in this Agreement and the Delaware Act;
and (iii) without the prior consent of each Member or except
as provided in this Agreement, require the Members to make
additional capital contributions.
(e) MEETINGS OF THE BOARD. The Board may hold meetings, both
regular and special, either within or outside the State of
Delaware. The first meeting of each newly
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elected Board shall be held immediately after the annual
meeting of Members and at the same place, and no notice of
such meeting shall be necessary to the newly elected Directors
in order legally to constitute the meeting, provided a quorum
shall be present. In the event such meeting is not held at
that time and place, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board, or as shall be
specified in a written waiver signed by all of the Directors.
Regular meetings of the Board may be held without notice at
such time and at such place as shall from time to time be
determined by the Board. Special meetings of the Board may be
called by any Member on two days' notice to each Director,
either personally, by telephone, by mail, by telegram or by
any other means of communication; special meetings shall be
called by any Member, the Chairman, or the Secretary in like
manner and on five days' notice on the written request of one
or more of the Directors. Notice of a meeting need not be
given to any Director if a written waiver of notice, executed
by such Director before or after the meeting, is filed with
the records of the meeting, or to any Director who attends the
meeting without protesting prior thereto or at its
commencement, the lack of notice. A waiver of notice need not
specify the purposes of the meeting.
(f) QUORUM. At all meetings of the Board no less than three
Directors shall constitute a quorum for the transaction of
business. If a quorum shall not be present at any meeting of
the Board, the Directors present at such meeting may adjourn
the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Any action required or permitted to be taken at any meeting of
the Board or of any committee thereof may be taken without a
meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be
signed, in the case of action by the Board, by Directors
having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting, and
in the case of action by a committee, by all members of such
committee. Prompt notice of the taking of the action without a
meeting by less than unanimous written consent shall be given
to each of those Directors who have not consented in writing.
(g) REQUIRED BOARD VOTE. The affirmative vote of a majority of the
Directors present at any meeting at which there are sufficient
Directors present to constitute a quorum ("MAJORITY BOARD
VOTE") shall be the act of the Board, unless another vote is
specifically provided by this Agreement.
(h) COMMITTEES OF DIRECTORS. The Board may, by resolution passed
by a Majority Board Vote, designate one or more additional
committees, each committee to consist of one or more of the
Directors. Any such committee, to the extent and only to the
extent expressly provided in the resolution of the Board,
shall have and may exercise all the powers and authority of
the Board in the management of the
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business and affairs of the Company. Each committee shall keep
regular minutes of its meetings and report the same to the
Board when required.
(i) ELECTRONIC COMMUNICATIONS. Members of the Board, or any
committee designated by the Board, may participate in a
meeting of the Board, or any committee, by means of conference
telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each
other, and such participation in a meeting shall constitute
presence in person at the meeting.
(j) COMPENSATION OF DIRECTORS. Directors shall not receive
remuneration for services as a Director; provided, that
Directors shall be entitled to reimbursement of reasonable
out-of-pocket expenses incurred in connection with attendance
at regular or special meetings of the Board or any committee
thereof.
(k) DIRECTORS NOT AGENTS. The Directors are not agents of the
Company for the purpose of the Company's business and shall
not have the power to sign documents for or otherwise bind the
Company.
4.2 OFFICERS.
(a) GENERAL. The designated officers of the Company shall be a
Chairman, Vice Chairman, a President who shall be the Chief
Executive Officer of the Company, a Secretary and a Treasurer
and may include one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and
such other officers as may be appointed in accordance with the
provisions of Section 4.2(k) (each, an "OFFICER," and
together, the "OFFICERS"). Officers may be, but need not be,
Managers.
(b) ELECTION, TERM OF OFFICE, QUALIFICATIONS. Executive Officers
shall be elected by a Majority Board Vote, and the other
Officers shall be elected by a Majority Board Vote at any
regular or special meeting of the Board, provided that until
such elections or appointments have been made, the Officers
shall be the natural persons designated on SCHEDULE B annexed
hereto. Except as provided in paragraphs (c) and (d) of this
Section 4.2, each Officer shall hold office until his or her
successor shall have been chosen and qualified. Any two
offices may be held by the same Person, but no Officer shall
execute, acknowledge or verify any instrument in more than one
capacity if such instrument be required by law or this
Agreement to be executed, acknowledged or verified by any two
or more Officers.
(c) RESIGNATIONS AND REMOVALS. Any Officer may resign his or her
office at any time by delivering a written resignation to the
President or any Director. Unless otherwise specified therein,
such resignation shall take effect upon delivery. Executive
Officers may be removed from office at any time, with or
without
8
cause, by a Majority Board Vote at any regular meeting or any
special meeting. All other officers may be removed from
offices at any time by the President. Except to the extent
expressly provided in a written agreement with the Company, no
Officer resigning and no Officer removed shall have any right
to any compensation for any period following his resignation
or removal or any right to damages on account of such removal.
(d) VACANCIES AND NEWLY CREATED OFFICES. If any vacancy shall
occur in any office, other than any Executive Officer, by
reason of death, resignation, removal, disqualification or
other cause, or if any new office shall be created, such
vacancies or newly created offices may be filled by the Board
at any regular or special meeting or, in the case of any
office created pursuant to Section 4.2(k), by any Officer upon
whom such power shall have been conferred by the Board. If any
vacancy shall occur in the office of any Executive Officer,
such vacancy shall be filled by appointment made by a Majority
Board Vote.
(e) AUTHORITY OF OFFICERS; CERTAIN ACTS REQUIRING OR MAJORITY
BOARD VOTE. Subject to the provisions of this Agreement and to
the directives and policies of the Board not in conflict with
this Agreement, the President and the other Officers of the
Company shall have the power, acting individually or jointly,
to represent and bind the Company in all matters, in
accordance with the scope of their respective duties subject
to the following restrictions:
The following actions or types of transactions shall not be
taken or consummated by the President or any other Officer,
employee or agent of the Company except pursuant to
resolutions, directions or guidelines adopted by a Majority
Board Vote, and such actions and types of transactions shall
not constitute action by the Company unless such Majority
Board Vote is obtained:
(1) The merger, consolidation, reorganization or other
business combination of any kind involving the
Company or sale of all or substantially all the
assets of the Company.
(2) Amendments to, or the execution or filing of any
document or agreement of any kind which would affect
the terms of, the Certificate or this Limited
Liability Company Agreement.
(3) The issuance or sale, or any agreement to issue or
sell, directly or indirectly, to any Person, by the
Company any interest of any kind in the Company, any
rights, options or warrants or other securities to
acquire any such interest, or any securities
convertible into or exchangeable or exercisable for
such interest; provided, however, that any such
issuance that could or would entitle such person to
the rights of a Member or that would cause (or
entitle) such person to receive an interest (other
than
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collateral security interests granted by the Company
to secure its obligations) of 5% or more in the
assets or profits of the Company shall also require
the approval of the Members of the Company in
accordance with section 12.1(b).
(4) Any sale or other transfer of assets of the Company
not in the ordinary course of business consistent
with past practices (other than as provided in the
approved annual Business Plan).
(5) The declaration or payment, directly or indirectly,
of any distribution, whether in cash, property or
securities or a combination thereof, with respect to
any Percentage Interest or Capital Contribution.
(6) The redemption, purchase, repurchase, retirement or
other acquisition for value of any of the interests
in, or securities of, the Company.
(7) The dissolution, liquidation, or voluntary bankruptcy
of the Company (other than any right of liquidation
expressly provided for under this Agreement).
(8) Approval of the annual Business Plan.
(9) Any investment in the equity or debt of another
corporation or in any partnership or other enterprise
(other than temporary investments of cash in money
market instruments).
(10) Acceptance of annual financial statements.
(11) Approval of policies relating to the investment or
allocation of surplus funds and creation of reserve
accounts.
(12) Any change in the Company's accountants or any change
in the Company's material accounting policies, except
as required by generally accepted accounting
principles.
(13) The making of any capital expenditure or acquisition
of assets by the Company (including by way of merger)
other than capital expenditures or acquisitions of
assets provided for in the then current approved
annual Business Plan (or any permitted deviations
from the capital budget which may be allowed by a
current approved Business Plan).
(14) Incurring, creating, assuming or guaranteeing any
indebtedness by the Company, absolute or contingent
of any nature whatsoever (other than
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indebtedness incurred in the ordinary course of
business consistent with past practice or as provided
for in a current approved Business Plan).
(15) The extension of any material credit, including the
lending of funds by the Company, to another Person,
other than in the normal course of business of the
Company.
(16) Election of Executive Officers; the establishment or
change in any Executive Officer's compensation or
benefits of any kind; the establishment or amendment
of any employee pension or other benefit programs of
any kind; or action taken under any employment
agreement.
(17) The institution, termination or settlement by the
Company of any litigation where the amount in
controversy exceeds $100,000.
(18) The formation of any Subsidiary.
(19) Any change in the Company's name, subject to the
terms of the Trademark Agreement.
(f) CHAIRMAN; VICE CHAIRMAN. The Chairman and Vice Chairman shall
each be elected by the Board and preside at all meetings of
the Board, but shall have no other duties or powers except as
may be determined by the Board from time to time.
(g) PRESIDENT. From time to time as appropriate, pursuant to
Section 4.2(b) the Board shall elect a president of the
Company who (subject to the terms of any applicable employment
agreement) shall serve as such until the earlier of his death
or resignation or his removal in accordance with the terms of
this Agreement (the "PRESIDENT"). The President shall be the
chief executive officer of the Company, shall preside at all
meetings of the Members, and shall have the responsibility for
managing the day-to-day business operations and affairs of the
Company and supervising its other Officers, subject to the
direction, supervision and control of the Board. In general,
the President shall have such other powers and (subject to the
terms of any applicable employment agreement) perform such
other duties as usually pertain to the office of the
President, and as from time to time may be assigned to him by
the Board, including, without limitation, the authority to
retain and terminate employees of the Company (other than
Officers). The powers and duties of the President shall at all
times be subject to the provisions of Section 4.2(e).
(h) VICE PRESIDENT. From time to time as appropriate, pursuant to
Section 4.2(b), the Board may elect one or more vice
presidents of the Company (each a "VICE PRESIDENT") who
(subject to the terms of any applicable employment agreement)
11
shall serve as such until the earlier of such persons death or
resignation or his removal in accordance with the terms of
this Agreement. A Vice President shall have such duties as may
be prescribed by the Board or the President, under whose
supervision the Vice President shall be.
(i) THE SECRETARY AND ASSISTANT SECRETARY. The Secretary shall
attend all meetings of the Board and all meetings of the
Members and record all the proceedings of the meetings and all
actions of the Members, the Board and the committees of the
Board in a book to be kept for that purpose and shall perform
like duties for the standing committees when required. The
Secretary shall give, or cause to be given, notice of all
meetings of the Members and special meetings of the Board, and
shall perform such other duties as may be prescribed by the
Board or the President, under whose supervision the Secretary
shall be. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the
Board (or if there be no such determination, then in order of
their election) shall, in the absence of the Secretary or in
the event of the Secretary's inability to act, perform the
duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the
Board may from time to time prescribe.
(j) THE TREASURER AND ASSISTANT TREASURER. The Treasurer shall
have the custody of the Company's funds and securities and
shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company and shall
deposit all moneys and other valuable effects in the name and
to the credit of the Company in such depositories as may be
designated by the Board. The Treasurer shall disburse the
funds of the Company as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to
the President, under whose supervision the Treasurer shall be,
and the Board, at its regular meetings, or when the Board so
requires, an account of all of the Treasurer's transactions
and of the financial condition of the Company. The Assistant
Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board (or if there
be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the
event of the Treasurer's inability to act, perform the duties
and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board may
from time to time prescribe.
(k) SUBORDINATE OFFICERS. The Board from time to time may appoint
such other subordinate Officers, or agents as it may deem
advisable, each of whom shall have such title, hold office for
such period, have such authority and perform such duties as
the Board may determine in its sole discretion subject always
to the direction and control of the President. The Board from
time to time may delegate to one or more Officers or agents
the power to appoint any such subordinate Officers or agents
and prescribe their respective rights, terms of office,
authorities and duties.
12
(l) OFFICERS AS AGENTS. The Officers, to the extent of their
powers set forth in this Agreement, are agents of the Company
for the purpose of the Company's business, and the actions of
the Officers taken in accordance with such powers shall bind
the Company.
4.3 ACTIONS AND DETERMINATIONS OF THE COMPANY.
Whenever this Agreement provides that a determination shall be made or
an action shall be taken by the Company, such determination or act may
be made or taken by the Board or, pursuant to this Agreement or with
the required authorization of the Board, by any committee of the Board
or any Officer acting under the supervision of the Board.
SECTION 5
OPERATING POLICIES
5.1 ANNUAL BUSINESS PLAN PROCESS.
The President shall prepare and submit, or cause to have prepared and
submitted, to the Board for its approval (i) a business plan (the
"INITIAL BUSINESS PLAN") on or before December 15, 2001, and (ii)
updated business plans at least sixty (60) days prior to the beginning
of each new Fiscal Year (each such business plan, a "BUSINESS PLAN")
covering the period of the new Fiscal Year (except for the Initial
Business Plan, which shall cover the current Fiscal Year) and each of
the two next succeeding years (such three year period, the "BUSINESS
PLAN PERIOD"). Each such Business Plan shall set forth, for each of the
years covered by the Business Plan Period, the Company's capital
expenditure and expense budgets, anticipated financing requirements, a
detailed financial plan and proforma financial statements, and shall
specify quantitative and qualitative goals for the Company and relate
the attainment of those goals to the Company's strategic objectives.
(a) Not more than thirty (30) days following its receipt of an
annual Business Plan, the Board shall identify any additional
information, clarification and/or modification required for
its approval, and the President shall provide such to the
Board as soon as practicable. Any approval granted by the
Board shall apply only to the first year of any Business Plan
Period and, in the event that the annual Business Plan for the
next fiscal year is not approved by the close of the then
current Fiscal Year, the then existing Business Plan shall
continue as the approved Business Plan for a period of not
more than 90 days following the close of the then current
Fiscal Year.
(b) The President shall prepare and present, or have prepared and
presented, at each regular meeting of the Board, or at any
special meeting called for this purpose, a
13
review of the Company's year-to-date progress in comparison to
the approved Business Plan.
5.2 INSURANCE.
The Company will maintain insurance at levels and of types consistent
with what would be deemed commercially reasonable for a company engaged
in business activities substantially similar to that of the Business.
5.3 FISCAL YEAR.
The fiscal year of the Company (the "FISCAL YEAR") shall end on the
31st day of December in each year. The Company shall have the same
fiscal year for income tax and for financial accounting purposes. To
the extent permissible under applicable law, the Fiscal Year may be
changed by a Majority Board Vote.
5.4 INITIAL ACCOUNTANTS; CHANGE OF ACCOUNTANTS.
The Company's independent public accountant as of the Closing shall be
Deloitte & Touche LLP. The Company's independent public accountant may
be changed at any time by a Majority Board Vote.
SECTION 6
CAPITAL CONTRIBUTIONS, PERCENTAGE INTERESTS,
CAPITAL ACCOUNTS AND ADVANCES
6.1 CAPITAL CONTRIBUTIONS.
The value of each Member's initial capital contribution to the Company
shall equal the amount set forth opposite the Member's name on SCHEDULE
A attached hereto. Schedule A hereto shall be amended by the Company
from time to time to reflect changes in the Percentage Interests set
forth therein resulting from issuances, redemptions, purchases and
sales of membership interests in the Company pursuant to the terms of
this Agreement.
6.2 MEMBER'S PERCENTAGE INTEREST.
A Member's Percentage Interest shall for all purposes be personal
property. A Member has no interest in specific Company property.
6.3 STATUS OF CAPITAL CONTRIBUTIONS.
(a) Except as otherwise expressly provided herein, no Member shall
have the right to withdraw capital from the Company or to
receive any distribution or return of such Member's Capital
Contributions.
14
(b) No Member shall receive any interest, salary or drawing with
respect to its Capital Contributions, if any, or its Capital
Account or for services rendered on behalf of the Company or
otherwise in its capacity as a Member, except as otherwise
specifically provided in this Agreement.
(c) The Members shall be liable only to make their initial Capital
Contributions pursuant to Section 6.1, and no Member shall be
required to lend any funds to the Company or to make any
additional Capital Contributions to the Company.
6.4 CAPITAL ACCOUNTS.
A separate capital account (each a "CAPITAL ACCOUNT") for each Member
shall be established on the books and records of the Company and such
Capital Accounts shall be maintained for each Member in accordance with
the following provisions:
(a) To each Member's Capital Account there shall be credited such
Member's Capital Contributions, such Member's distributive
share of Net Profit and items in the nature of income or gain
which are specially allocated to such Member pursuant to
Section 6.4(f) and Section 7.2 hereof, and the amount of any
Company liabilities assumed by such Member or which are
secured by any Company property distributed to such Member.
(b) To each Member's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Company
property distributed to such Member pursuant to any provision
of the Agreement (including amounts distributed to a Member
but required to be paid on such Member's behalf directly to a
creditor or another party pursuant to a separate agreement),
such Member's distributive share of Net Loss and any items in
the nature of expenses or losses which are specially allocated
pursuant to Section 6.4(f) and Section 7.2 hereof, and the
amount of any liabilities of such Member assumed by the
Company or which are secured by any property contributed by
such Member to the Company.
(c) In the event all or a portion of a Member's Percentage
Interest is transferred in accordance with the terms of the
Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred
Percentage Interest.
(d) In determining the amount of any liability for purposes of
Sections 6.4(a) and 6.4(b) hereof, there shall be taken into
account Code Section 752 and any other applicable provisions
of the Code and Treasury Regulations.
(e) Immediately prior to the occurrence of an event specified in
Treasury Regulation Section 1.704(b)-1(b)(2)(iv)(f)(5)(i) or
(ii), the Capital Accounts of the Members shall be adjusted
(consistent with the provisions hereof and Treasury
Regulations under Section 704 of the Code) upward or downward
to reflect any unrealized
15
gain or unrealized loss attributable to property of the
Company, as if such unrealized gain or unrealized loss had
been recognized upon an actual sale of each asset immediately
prior to such event and had been allocated first to equalize
the Capital Accounts of the Members in proportion to their
relative Percentage Interests, and then to all the Members in
accordance with their Percentage Interests. In determining
such unrealized gain or unrealized loss, the fair market value
of the property of the Company as of any date of determination
shall be reasonably determined by Majority Board Vote. This
Section 6.4(e) provision is intended to meet the requirements
of Treas. Reg. 1.704-1(b)(2)(iv)(f).
(f) This Section 6.4 and other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended
to comply with Treasury Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with
such Treasury Regulations. Notwithstanding that a particular
adjustment is not set forth in this Section 6.4, the Capital
Accounts of the Members shall be adjusted as required by, and
in accordance with, the capital account maintenance rules of
Treasury Regulations Section 1.704-1(b).
6.5 NEGATIVE CAPITAL ACCOUNTS.
No Member shall be required to make up an Adjusted Capital Account
Deficit nor pay to any Member the amount of any such deficit in any
such account.
6.6 LOANS FROM MEMBERS.
Loans by a Member to the Company shall not be considered Capital
Contributions. If any Member shall advance funds to the Company in
excess of the amounts required hereunder to be contributed by such
Member to the capital of the Company, the making of such advances shall
not result in any increase in the amount of the Capital Account of such
Member. The amounts of any such advances shall be a debt of the Company
to such Member and shall be payable or collectible only out of the
Company assets in accordance with the terms and conditions upon which
such advances are made. The repayment of loans from a Member to the
Company upon liquidation shall be subject to the order of priority set
forth in Section 14.2.
SECTION 7
ALLOCATIONS OF PROFITS AND LOSSES
7.1 ALLOCATIONS OF NET PROFIT AND NET LOSS.
(a) After giving effect to the special allocations set forth in
Section 6.4(e) and Section 7.2 hereof, Net Profit of the
Company for any Fiscal Year shall be allocated: one hundred
percent (100%) to the Members, in proportion to and to the
extent of (A)
16
the cumulative Net Losses allocated to each Member pursuant to
Section 7.1(c) for all prior Fiscal Years, over (B) the
cumulative Net Profits allocated to each Member pursuant to
this Section 7.1(a)(ii) for all prior Fiscal Years; and (iii)
the balance, if any, among the Members in proportion to their
Percentage Interests.
(b) After giving effect to the special allocations set forth in
Section 6.4(e) and Section 7.2 hereof, Net Losses of the
Company for any Fiscal Year shall be allocated among the
Members in proportion to their Percentage Interests.
(c) Notwithstanding the foregoing provisions of Section 7.1(b),
the Net Losses allocated pursuant to Section 7.1(b) shall not
exceed the maximum amount of Net Losses that can be so
allocated without causing any Member to have an Adjusted
Capital Account Deficit at the end of any Fiscal Year. In the
event some but not all of the Members would have Adjusted
Capital Account Deficits as a consequence of an allocation of
Net Losses pursuant to Section 7.1(b) hereof, the limitation
set forth in this Section 7.1(c) shall be applied on a Member
by Member basis so as to allocate the maximum permissible Net
Loss amounts to each Member under Treasury Regulations Section
1.704-1(b)(2)(ii)(d). All Net Loss amounts in excess of the
limitation set forth in this Section 7.1(c) shall be allocated
to the Members in accordance with their Percentage Interests.
7.2 SPECIAL ALLOCATIONS.
(a) Any allocation pursuant to Section 7.1 will be subject to the
following adjustments and special allocations which shall be
made in the following order of priority and prior to any
allocation under Section 7.1:
(i) MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of this Section 7.2, if there is a net
decrease in Company Minimum Gain or Member Minimum
Gain during any Fiscal Year, prior to any other
allocation pursuant hereto, items of Company income
and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) shall be specially allocated
between the Members in accordance with Treasury
Regulations Sections 1.704-2(f) and (i). The items to
be so allocated shall be determined in accordance
with Treasury Regulations Section 1.704-2(f)(6) and
1.704-2(j)(2)(i) through (iii).
(ii) QUALIFIED INCOME OFFSET. If any Member unexpectedly
receives any adjustments, allocations or
distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items
of Company income and gain shall be specially
allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by
the Treasury Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as
possible, provided that an allocation pursuant to
this Section 7.2(a)(ii) shall be made only if and to
the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations
17
provided for in this Section 7.2(a) have been
tentatively made as if this Section 7.2(a)(ii) were
not in the Agreement.
(iii) SPECIAL INCOME ALLOCATION. If any Member has an
Adjusted Capital Account Deficit in its Capital
Account at the end of any Fiscal Year or portion
thereof that is in excess of the sum of (I) the
amount such Member is obligated to restore pursuant
to any provision of this Agreement, and (II) the
amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations, each such Member
shall be specially allocated items of Company income
and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to
this Section 7.2(a)(iii) shall be made only if and to
the extent that such Member would have an Adjusted
Capital Account Deficit in excess of such sum after
all other allocations provided for in this Section
7.2(a) have been made as if this Section 7.2(a)(iii)
were not in the Agreement.
(iv) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions, if
any, for any Fiscal Year shall be allocated (as
nearly as possible) under Treasury Regulations
Section 1.704-2(e) among the Members in proportion to
their respective Percentage Interests.
(v) MEMBER NONRECOURSE DEDUCTIONS. In accordance with the
principles set forth in Treasury Regulations Section
1.704-2(i), any Member Nonrecourse Deductions for any
Fiscal Year shall be allocated to the Members in
accordance with the ratios in which they potentially
bear the economic risk of loss with respect to such
Member Nonrecourse Debt.
(vi) SECTION 754 ADJUSTMENTS. To the extent an adjustment
to the adjusted tax basis of any Company asset
pursuant to Section 734(b) or 743(b) of the Code is
required pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m) to be taken into account in
determining Capital Accounts as a result of a
distribution to a Member in complete liquidation of
its interest, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset),
or loss (if the adjustment decreases such basis), and
such item of gain or loss shall be specially
allocated in a manner consistent with the manner in
which the Capital Accounts of the Members are
required to be adjusted pursuant to such Section of
the Regulations.
(b) CURATIVE ALLOCATIONS. It is the intent of the parties
that, to the extent possible, all allocations
pursuant to Sections 7.2(a)(i) through 7.2(a)(vi)
(the "REGULATORY ALLOCATIONS") shall be offset either
with other Regulatory Allocations or with special
allocations of other items of
18
Company income, gain, loss or deduction pursuant to
this Section 7.2(b). Therefore, notwithstanding any
other provision of this Agreement (other than
Sections 7.2(a)(i) through 7.2(a)(vi)), the Board
shall make such offsetting special allocations of
Company income, gain, loss or deductions as are
appropriate so that after such offsetting allocations
are made, each Members Capital Account balance is, to
the extent possible, equal to the Capital Account
balance such Member would have had if Sections
7.2(a)(i) through 7.2(a)(vi) were not part of this
Agreement and all Company items were allocated
pursuant to Section 7.1 of this Agreement.
7.3 TAX ALLOCATIONS.
Items of income, gain, loss, deduction and credit of the Company shall,
for each Fiscal Year, be allocated, for U.S. federal, state and local
income tax purposes, among the Members in the same manner as the items
of income, gain, loss, deduction and credit were allocated to such
Members pursuant to Section 6.4(e), Section 7.1 and Section 7.2 hereof.
Notwithstanding the foregoing, in accordance with Code Section 704(c)
and the Treasury Regulations thereunder, items of income, gain, loss
and deduction with respect to any property contributed to the capital
of the Company shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted tax
basis of such property at the time of contribution to the Company for
federal income tax purposes and its Gross Asset Value at the time of
contribution using the "remedial allocation method" set forth in
Treasury Regulation 1.704-3(d). In the event the Gross Asset Value of
any Company asset is adjusted in accordance with the definition of
Gross Asset Value hereof, subsequent allocations of items of income,
gain, loss, and deductions with respect to such asset shall take
account of any variation between the adjusted tax basis of such asset
for federal income tax purposes and its adjusted Gross Asset Value in a
manner consistent with the principles of Code Section 704(c) and the
Treasury Regulations thereunder. Allocations pursuant to this Section
7.3 are solely for purposes of U.S. federal, state, and local income
taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Net Profit or Net
Loss, other items, or distributions pursuant to any provision of this
Agreement.
7.4 TRANSFER OR CHANGE IN MEMBER INTERESTS.
If the respective interests of the existing Members in the Company
change or if a Company interest is transferred to any other person or
entity, then, for the Fiscal Year of transfer, all income, gains,
losses, deductions, tax credits and other tax incidents resulting from
the operations of the Company shall be allocated, as between the
transferor and the transferee, by taking into account their varying
interests in accordance with Section 706 of the Code.
19
SECTION 8
DISTRIBUTIONS AND WITHHOLDING
8.1 DISTRIBUTIONS.
The Company shall not make any distributions to its Members except as
determined by the Board in accordance with Section 4.2(e) or except as
provided in Section 13. It is the current policy of the Company to
distribute on a monthly basis 90% of the earnings of the Company for
the month preceding distribution. Except as otherwise expressly
provided in Section 13, all Distributions shall be made to Members pro
rata in accordance with their respective Percentage Interests.
8.2 LIMITATIONS ON DISTRIBUTION.
Notwithstanding any provision to the contrary contained in this
Agreement, the Company shall not make a distribution to any Member on
account of its interest in the Company if such distribution would
violate Section 18-607 of the Delaware Act.
8.3 WITHHOLDING TAXES.
If the Company is required to withhold any portion of any amounts
distributed or allocated to a Member by applicable U.S. federal, state,
local or foreign tax laws, the Company may withhold such amounts and
make such payments to taxing authorities as are necessary to ensure
compliance with such tax laws. Any funds withheld by reason of this
Section 8.3 shall nonetheless be deemed distributed to the Member in
question for all purposes under this Agreement. If the Company did not
withhold from actual distributions any amounts it was required to
withhold, the Company may, at its option, (i) require the Member to
which the withholding was credited to reimburse the Company for such
withholding; or (ii) reduce any subsequent distributions to such Member
by the amount of such withholding. The obligation of a Member to
reimburse the Company for taxes that were required to be withheld shall
continue after such Member transfers or liquidates its interest in the
Company. Each Member agrees to furnish the Company with any
representations and forms as shall reasonably be requested by the
Company to assist in determining the extent of, and in fulfilling, any
withholding obligations it may have.
SECTION 9
TAX MATTERS
9.1 TAX MATTERS MEMBER.
(a) United Auto Group, Inc. ("UAG") is hereby designated as the
initial "Tax Matters Member" ("TMM") of the Company under
Section 6231 of the Code and the
20
Treasury Regulations thereunder. Each Member hereby consents
to such designation and agrees that upon the request of the
Company it will execute, certify, acknowledge, deliver, swear
to, file and record at the appropriate public offices such
documents as may be necessary or appropriate to evidence such
consent. Upon the resignation or bankruptcy of UAG, or upon
the failure of UAG to carry out the responsibilities of a TMM
in a timely fashion, a successor to serve in such capacity
shall be designated by vote of Members holding a majority of
the interests in the Company. The TMM may employ experienced
tax counsel to represent the Company in connection with any
audit or investigation of the Company by the Internal Revenue
Service ("IRS"), and in connection with --- all subsequent
administrative and judicial proceedings arising out of such
audit. The fees and expenses of such counsel shall be a
Company expense and shall be paid by the Company. Such counsel
shall be responsible for representing the Company; it shall be
the responsibility of the Members, at their own expense, to
employ tax counsel to represent their respective separate
interests. The TMM shall keep the Members informed of all
administrative and judicial proceedings as required by Code
Section 6223(g) and shall furnish to each Member a copy of
each notice or other communication received by the TMM from
the IRS except such notice or communication sent directly to
the Members by the IRS. All expenses incurred by the TMM in
serving in such capacity shall be Company expenses and shall
be paid by the Company.
(b) Notwithstanding the foregoing, prior to taking any of the
following actions the Company shall provide notice to the
Members and shall provide the Members with a reasonable period
of time in which to review and approve such action (which
approval shall not be unreasonably withheld):
(i) Any written correspondence or filings and any
settlements in connection with any income tax audit
of the Company or any other tax audit involving
material taxes of the Company, including
administrative settlement and judicial review.
(ii) Except as set forth in Section 9.1(a) and Section
9.2, the making of any tax election.
(iii) Any adjustment to the capital accounts of the Members
in connection with Section 6.4(e) and Section 6.4(f).
(iv) Approval of any income tax return of the Company and
any other tax return of the Company which reflects
the tax treatment of any item arising in connection
with actions described in Section 4.2(e)(i)(1),(4),
(5), (6) or (7) or 4.2(e)(ii) (2), (5) or (7).
21
(v) Any allocation made pursuant to Section 7.2, and any
decision to revise, alter or otherwise modify the
methods of allocation set forth in Section 7 hereof.
9.2 RIGHT TO MAKE SECTION 754 ELECTION.
The TMM may make an election under Section 754 of the Code to the
extent requested by any Member. Each Member shall, upon request of the
TMM, at such Member's cost, promptly supply the TMM information
reasonably necessary to give effect to such election.
9.3 TAXATION AS PARTNERSHIP.
The Company shall be treated as a partnership for United States federal
and state income tax purposes and the Members agree not to take any
action inconsistent with the Company's classification as a partnership
for United States federal and State income tax purposes. By executing
this Agreement, each of the Members hereby consents to, and the TMM
shall, take any action necessary, including, without limitation, the
execution of any forms and documents, for the Company to be treated as
a partnership for United States federal and state income tax purposes.
SECTION 10
BANKING; ACCOUNTING; BOOKS AND RECORDS
10.1 BANKING.
All funds of the Company may be deposited in such bank, brokerage or
money market accounts as shall be established by the Company.
Withdrawals from and checks drawn on any such account shall be made
upon the President's signature and/or such other signature or
signatures as the Board may designate.
10.2 MAINTENANCE OF BOOKS AND RECORDS; ACCOUNTS AND ACCOUNTING METHOD;
INSPECTION.
(a) the Company shall keep or cause to be kept at the address of
the Company (or at such other place as the Company shall
advise the Members in writing) full and accurate accounts of
the transactions of the Company in proper books and records of
account which shall set forth all information required by the
Delaware Act. Such books and records shall be maintained on
the basis of United States generally accepted accounting
principles, to the extent that such principles are not
inconsistent with the other provisions of this Agreement. Such
books and records shall be available, upon reasonable notice
to the Company, for inspection and copying at reasonable times
during business hours by a Member or its duly authorized
agents or representatives for any purpose reasonably related
to such
22
Member's interest as a member in the Company.
(b) Employees, agents and representatives of UAG shall have full
access to the plants and properties of the Company and its
Subsidiaries for the purpose of inspecting such plants and
properties and the operations thereon during normal business
hours, in a manner that does not unduly disrupt the business
or operations of the Company and upon the prior written notice
to the President of the Company of any such inspection.
SECTION 11
REPORTS TO MEMBERS
11.1 REPORTS TO CURRENT MEMBERS.
(a) The Company shall use its good faith efforts to prepare and
mail to each Member, within 75 days after the end of each
Fiscal Year and 30 days after the end of each quarter thereof
other than the last quarter of the Fiscal Year, a financial
report (upon request of UAG, audited in the case of a report
sent as of the end of a Fiscal Year and unaudited in the case
of a report sent as of the end of a quarter) setting forth as
of the end of such Fiscal Year or quarter (i) the assets and
liabilities of the Company as of the end of such Fiscal Year
or quarter, (ii) the income or loss of the Company for such
Fiscal Year or quarter and (iii) the changes in cash flow
during such Fiscal Year or quarter. The Company shall provide
timely and accurate tax information to enable the Members to
prepare extensions, estimates and final returns.
(b) The Company shall use its good faith efforts to prepare and
mail to each Member, within 100 days after the end of each
Fiscal Year a financial report setting forth as of the end of
such Fiscal Year such Member's closing Capital Account as of
the end of such Fiscal Year, together with a reconciliation of
the changes from the previous report.
11.2 TAX INFORMATION.
(a) No later than April 10, June 10, September 10 and December 10
of each Fiscal Year, the Company shall deliver to each Person
that was a Member at any time during the quarter in which or
immediately preceding which such date occurs a statement of
such Person's distributive share, if any, of items of income,
gain, loss, deduction and credit of the Company for such
quarter and such other information as may be reasonably
necessary for such Person to make its estimated tax payments.
23
(b) As soon as practicable after the end of the Fiscal Year, but
in no event later than 45 days after the end of the Fiscal
Year, the Company shall deliver to each Person that was a
Member at any time during such Fiscal Year a final statement
of such Person's reasonably determined distributive share, if
any, of items of income, gain, loss, deduction and credit of
the Company for such Fiscal Year and such other information as
may be reasonably necessary for such Person to complete its
tax returns (including copies of any tax returns that have
been filed by the Company).
(c) The Company shall provide each Member with a copy of any tax
return described in Section 9.1(b)(iv) hereof for such
Member's review at least twenty (20) business days before the
due date of such tax return.
11.3 ADDITIONAL INFORMATION.
Upon the request of any Member, the Company shall, at the request of a
Member, furnish such additional information about the Company and
distributions from the Company reasonably related to such Member's
interest in the Company. Without limiting the foregoing sentence, the
Company agrees to use its good faith efforts to make available to any
Member which accounts for its interest on the equity method (whether or
not the Company is publicly reporting), such financial information as
may be reasonably required by such Member, it being understood that
such information will be the type of financial information that the
Company would file with the Securities and Exchange Commission if the
Company were subject to the periodic reporting requirements of the
Exchange Act of 1934, as amended. the Company agrees to use its good
faith efforts to provide such information to any such Member at a date
which will allow such Member a reasonable period of time in which to
incorporate such information into any filings to be made by such
Member.
SECTION 12
LIABILITY, EXCULPATION AND INDEMNIFICATION
12.1 LIABILITY.
Except as otherwise provided by the Delaware Act, the debts,
obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Covered Person shall be obligated
personally for any such debt, obligation or liability of the Company
solely by reason of being a Covered Person.
12.2 EXCULPATION.
(a) GENERALLY. No Covered Person shall be liable to the Company or
any Member for any act or omission taken or suffered by such
Covered Person in good faith and in the reasonable belief that
such act or omission is in or is not contrary to the best
24
interests of the Company and is within the scope of authority
granted to such Covered Person by this Agreement, provided
that such act or omission is not in material violation of this
Agreement and does not constitute Disabling Conduct by the
Covered Person. No Member shall be liable to the Company or
any Member for any action taken by any other Member.
(b) RELIANCE GENERALLY. A Covered Person shall incur no liability
in acting upon any signature or writing reasonably believed by
it to be genuine, and may rely on a certificate signed by an
executive officer of any Person in order to ascertain any fact
with respect to such Person or within such Person's knowledge
and may rely on an opinion of counsel selected by such Covered
Person with respect to legal matters, except to the extent
that such liability resulted from the Covered Person having
engaged in Disabling Conduct. Each Covered Person may act
directly or through its agents or attorneys. Each Covered
Person may consult with counsel, appraisers, engineers,
accountants and other skilled Persons of its choosing, and
shall not be liable for anything done, suffered or omitted in
good faith in reasonable reliance upon the advice of any of
such Persons, except to the extent that such Covered Person
engaged in Disabling Conduct. No Covered Person shall be
liable to the Company or any Member for any error of judgment
made in good faith by a responsible officer or officers of the
Covered Person, except to the extent that such liability
resulted from the Covered Person having engaged in Disabling
Conduct. Except as otherwise provided in this Section 12.2, no
Covered Person shall be liable to the Company or any Member
for any mistake of fact or judgment by the Covered Person in
conducting the affairs of the Company or otherwise acting in
respect of and within the scope of this Agreement, except to
the extent that such liability resulted from the Covered
Person having engaged in Disabling Conduct. No Covered Person
shall be liable for the return to any Member of all or any
portion of any Member's Capital Account or Capital
Contributions, except to the extent that such liability
resulted from the Covered Person having engaged in Disabling
Conduct.
(c) RELIANCE ON THIS AGREEMENT. To the extent that, at law or in
equity, a Covered Person has duties (including fiduciary
duties) and liabilities relating thereto to the Company or to
the Members, any Covered Person acting under this Agreement or
otherwise shall not be liable to the Company or to any Member
for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of a Covered
Person otherwise existing at law or in equity, are agreed by
the Members to replace such other duties and liabilities of
such Covered Person.
(d) STANDARD OF CARE. Whenever in this Agreement a Person is
permitted or required to make a decision (i) in its "sole and
absolute discretion," "sole discretion," "discretion" or under
a grant of similar authority or latitude, the Person shall be
entitled to consider such interests and factors as it desires,
including its own
25
interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting any
other Member, the Company or any other Person, or (ii) in its
"good faith" or under another express standard, the Person
shall act under such express standard and shall not be subject
to any other or different standard imposed by this Agreement
or other applicable law.
12.3 INDEMNIFICATION.
(a) INDEMNIFICATION GENERALLY. The Company shall and hereby does,
to the fullest extent permitted by applicable law, indemnify,
hold harmless and release each Covered Person from and against
all claims, demands, liabilities, costs, expenses, damages,
losses, suits, proceedings and actions, whether judicial,
administrative, investigative or otherwise, of whatever
nature, known or unknown, liquidated or unliquidated
("CLAIMS"), that may accrue to or be incurred by any Covered
Person, or in which any Covered Person may become involved, as
a party or otherwise, or with which any Covered Person may be
threatened, relating to or arising out of the business and
affairs of, or activities undertaken in connection with, the
Company, or otherwise relating to or arising out of this
Agreement, including, but not limited to, amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties and counsel fees and expenses incurred in connection
with the preparation for or defense or disposition of any
investigation, action, suit, arbitration or other proceeding
(a "PROCEEDING"), whether civil or criminal (all of such
Claims and amounts covered by this Section 12.3. and all
expenses referred to in Section 12.3(c), are referred to as
"DAMAGES"), except to the extent that it shall have been
determined ultimately that such Damages arose from Disabling
Conduct of such Covered Person or that such Covered Person
committed a material breach of this Agreement. The termination
of any Proceeding by settlement shall not, of itself, create a
presumption that any Damages relating to such settlement arose
from a material violation of this Agreement by, or Disabling
Conduct of, any Covered Person.
(b) NO DIRECT MEMBER INDEMNITY. Members shall not be required
directly to indemnify any Covered Person.
(c) EXPENSES, ETC. Expenses incurred by a Covered Person in
defense or settlement of any Claim that may be subject to a
right of indemnification hereunder may be advanced by the
Company prior to the final disposition thereof upon receipt of
an agreement by or on behalf of the Covered Person to repay
such amount if it shall be determined ultimately that the
Covered Person is not entitled to be indemnified hereunder.
The right of any Covered Person to the indemnification
provided herein shall be cumulative with, and in addition to,
any and all rights to which such Covered Person may otherwise
be entitled by contract or as a matter of law or equity and
shall extend to such Covered Person's successors, assigns and
legal representatives.
26
(d) NOTICES OF CLAIMS, ETC. Promptly after receipt by a Covered
Person of notice of the commencement of any Proceeding, such
Covered Person shall, if a claim for indemnification in
respect thereof is to be made against the Company, give
written notice to the Company of the commencement of such
Proceeding, provided that the failure of any Covered Person to
give notice as provided herein shall not relieve the Company
of its obligations under this Section 12.3 except to the
extent that the Company is actually prejudiced by such failure
to give notice. In case any such Proceeding is brought against
a Covered Person (other than a derivative suit in right of the
Company), the Company will be entitled to participate in and
to assume the defense thereof to the extent that the Company
may wish, with counsel reasonably satisfactory to such Covered
Person. After notice from the Company to such Covered Person
of the Company's election to assume the defense thereof (and
corresponding expenses), the Company will not be liable for
expenses subsequently incurred by such Covered Person in
connection with the defense thereof. The Company will not
consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Covered Person of
a release from all liability in respect to such Claim.
(e) NO WAIVER. Nothing contained in this Section 12.3 shall
constitute a waiver by any Member of any right that it may
have against any party under United States federal or state
securities laws.
SECTION 13
TRANSFER OF PERCENTAGE INTERESTS; WITHDRAWAL,
BANKRUPTCY, DISSOLUTION; CERTAIN ADMISSIONS OF MEMBERS
13.1 ADMISSION, SUBSTITUTION AND WITHDRAWAL OF MEMBERS; ASSIGNMENT.
(a) GENERAL. Except as set forth in this Section 13, no Person may
be admitted to, and no Member may withdraw from, the Company
prior to the dissolution and winding up of the Company. No
Member shall sell, transfer, assign, convey, pledge, mortgage,
encumber, hypothecate or otherwise dispose of all or any part
of its interest in the Company (a "TRANSFER") without
complying with the provisions of this Section 13.1.
(b) ADMISSION OF NEW MEMBERS AND ISSUANCE OF INTERESTS IN EXCESS
OF 5%. Except for Transfers in accordance with Section 13.1(c)
below, no person shall be admitted as a new Member and the
Company shall not authorize the issuance of interest in the
Company of any kind that could or would entitle the recipient
27
thereof to the rights of a Member or that would cause (or
entitle) such person to receive an interest (other than
collateral security interests granted by the Company to secure
its obligations) of 5% or more in the assets or profits of the
Company unless the written approval of each of the Members of
the Company has been obtained.
(c) CONDITIONS TO TRANSFER. Any purported Transfer by a Member
pursuant to the terms of this Section 13 shall be subject to
the satisfaction of the following conditions:
(i) the transferring Member or transferee shall undertake
to pay all reasonable expenses incurred by the
Company in connection therewith;
(ii) the Company shall received from the transferring
Member a legal opinion, in form and substance
reasonably satisfactory to the nontransferring
Members, to the effect that the transfer will not
result (directly or indirectly) in (A) a termination
of the Company under any Section of the Code that
would require the non-transferring Members to
recognize gain under Section 731 of the Code, or (B)
treatment of the Company as an entity other than a
partnership for purposes of the Code; and
(iii) the Company shall receive from the Person to whom
such Transfer is to be made (A) such documents,
instruments and certificates as may be requested by
the Company, pursuant to which such transferee shall
agree to be bound by this Agreement, (B) such other
documents, opinions, instruments and certificates as
the Company shall reasonably request and (C) a
counterpart of this Agreement executed by or on
behalf of such Person.
(iv) if RSP desires to sell all or any portion of his
Percentage Interest other than to trusts established
for the principal benefit of RSP's immediate family
members ("Permitted Transferees") (provided that (a)
any transfers to Permitted Transferees shall remain
subject to the terms of this Agreement and (b) the
Permitted Transferees shall execute documents in form
and substance satisfactory to HBL acknowledging that
the Percentage Interest so transferred remain subject
to the terms of this Agreement) to a third party, he
shall first give notice ("ROFR Notice") to HBL of his
intention to sell. HBL shall have the right to
purchase all or any portion of the Percentage
Interest proposed to be sold as set forth in the ROFR
Notice at a purchase price equal to the lesser of (i)
the price at which the Percentage Interest is
proposed to be sold and set forth in the ROFR Notice
or (ii) the Fair Market Value as of the date of
notice. If HBL does not notify RSP of an intention to
exercise this right of first refusal within ten (10)
days from the date of receipt of the ROFR Notice, the
right of first refusal with respect to the Percentage
Interest described in the ROFR
28
Notice shall terminate and RSP shall be entitled to
consummate the proposed sale of his Percentage
Interest as described in the ROFR Notice; provided,
however, that such sale must be consummated within
twenty (20) Business Days after the expiration of the
right of first refusal. In the event HBL gives
written notice to RSP of its intention to exercise
this right of first refusal and to purchase all or
any portion of the Percentage Interest described to
be sold in the ROFR Notice on the terms and
conditions stated in the ROFR Notice, RSP shall have
the right to designate the time, date, and place of
closing provided that the date of closing shall be
within twenty (20) Business Days after receipt of the
ROFR Notice.
(d) COOPERATION BY THE COMPANY. The Company shall provide
reasonable assistance to any Member at such Member's request
seeking to sell its Percentage Interest in compliance with
this Agreement, provided that the Company shall not be
required to provide any confidential information to any
prospective purchaser who has not executed a confidentiality
agreement in form reasonably satisfactory to the Company. Any
costs to the Company of providing such assistance shall be
paid by the Member seeking to sell its Percentage Interest.
29
(e) PROHIBITED TRANSFERS. No attempted Transfer shall be
recognized by the Company unless effected in accordance with
and as permitted by this Agreement.
13.2 WITHDRAWAL.
No Member shall have the right to withdraw from the Company and no
Member shall take any action to accomplish its voluntary dissolution,
except as otherwise provided in this Agreement.
SECTION 14
DISSOLUTION AND TERMINATION OF THE COMPANY
14.1 EVENTS CAUSING DISSOLUTION.
(a) DISSOLUTION EVENTS. There will be a dissolution of the Company
and its affairs shall be wound up upon the first to occur of
any of the following events:
(i) the written consent of all Members;
(ii) the death, retirement, resignation, expulsion,
bankruptcy or dissolution (any of the foregoing, a
"WITHDRAWAL") of any Member (in such capacity, the
"WITHDRAWING MEMBER") unless, within ninety days
after the occurrence of such an event Members holding
a majority of the Percentage Interests of all of the
remaining Members agree in writing to continue the
business of the Company and to the appointment, if
necessary or desired, effective as of the date of
such event, of one or more new Members; or
(iii) the entry of a decree of judicial dissolution under
Section 18-802 of the Delaware Act.
(b) If the remaining Members decide to continue the Company
pursuant only to Section 14.1(a)(ii), the Company shall inform
the Withdrawing Member of such decision by written notice
delivered within ninety (90) days of the occurrence of the
Withdrawal. If the Members so elect to continue the Company,
the Withdrawing Member shall no longer be a Member of the
Company and the Company (and/or the other Members) shall make
payment in cash in liquidation of the Withdrawing Member's
interest in the Company. Any such payment shall be equal to
the Withdrawing Member's capital account minus any costs, fees
or expenses of the Company and the non-withdrawing members
related to the Withdrawal.
30
14.2 LIQUIDATION.
Upon dissolution of the Company, the Person or Persons approved as
provided in Section 14.4(b) to carry out the winding up of the Company
(in such capacity, the "LIQUIDATING TRUSTEE") and shall proceed,
subject to the provisions herein, to liquidate the Company and apply
the proceeds of such liquidation, or at the discretion of the Members
to distribute Company assets, in the following order of priority:
(a) First, to creditors (including creditors that are also
Members) in satisfaction of debts and liabilities of the
Company, whether by payment or the making of reasonable
provision for payment (including any loans or advances that
may have been made by any of the Members to the Company), and
the expenses of liquidation, whether by payment or the making
of reasonable provision for payments, any such reasonable
reserves (which may be funded by a liquidating trust) to be
established by the Liquidating Trustee, as the case may be, in
amounts deemed by it to be reasonably necessary for the
payment of the Company's expenses, liabilities and other
obligations (whether fixed or contingent); and
(b) Second, to the Members in proportion to, and to the extent of,
each Member's Capital Account, as such Capital Account has
been adjusted pursuant to Section 6.4, any remainder to be
distributed among the Members in accordance with their
respective Percentage Interests.
14.3 DISTRIBUTIONS IN CASH OR IN KIND.
(a) Upon the dissolution of the Company, the Liquidating Trustee
shall use its good faith efforts to liquidate all of the
Company assets in an orderly manner and apply the proceeds of
such liquidation as set forth in Section 14.2, or if in the
good faith business judgment of the Liquidating Trustee a
Company asset should not be liquidated, the Liquidating
Trustee shall allocate, on the basis of the Value of any
Company assets not sold or otherwise disposed of, any
unrealized gain or loss based on such Value to the Members'
Capital Accounts as though the assets in question had been
sold on the date of distribution and, after giving effect to
any such adjustment, distribute said assets in accordance with
Section 14.2, provided that the Liquidating Trustee will in
good faith attempt to liquidate sufficient Company assets to
satisfy in cash (or make reasonable provision for) the debts
and liabilities referred to in paragraph First of Section
14.2.
14.4 TIME AND MANNER FOR LIQUIDATION, ETC.
(a) A reasonable time period shall be allowed for the orderly
winding up and liquidation of the assets of the Company and
the discharge of liabilities to creditors so as to enable the
Liquidating Trustee to seek to minimize potential losses upon
such liquidation. The provisions of this Agreement shall
remain in full force
31
and effect during the period of winding up and until the
filing of a certificate of cancellation of the Company with
the Secretary of State of the State of Delaware.
(b) In the event of a liquidation of the Company, the Members
shall jointly approve the Person to act as Liquidating Trustee
and shall be entitled to direct the manner and timing under
which such Liquidating Trustee shall proceed to liquidate the
Company. All Members shall be promptly informed of any
directions given by another Member to the Liquidating Trustee
and of the progress of the liquidation.
14.5 TERMINATION.
Upon completion of the foregoing, the Liquidating Trustee shall
execute, acknowledge and cause to be filed a certificate of
cancellation of the Company with the Secretary of State of the State of
Delaware.
14.6 CLAIMS OF THE MEMBERS.
The Members and former Members shall look solely to the Company's
assets for the return of their Capital Contributions, and if the assets
of the Company remaining after payment of or due provision for all
debts, liabilities and obligations of the Company are insufficient to
return such Capital Contributions, the Members and former Members shall
have no recourse against any Member, any Manager or any Member's or
Manager's Affiliates.
SECTION 15
DEFINITIONS
15.1 DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
Section 15.1 shall, for the purposes of this Agreement, have the
meanings herein specified.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account
as of the end of the relevant Fiscal Year after giving effect to the
following adjustments: (a) credit to such Capital Account any amounts
that such Member is obligated to restore pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and (b) debit to such Capital Account the items
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5)
and (6). This definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Treasury Regulations and shall be interpreted consistently
therewith.
32
"AFFILIATE" of any entity or Person shall mean any other entity or
person controlling, controlled by, or under common control with, such
entity or Person. For purposes of this definition, "control" shall mean
the ownership, directly or indirectly, of a majority of the voting
securities or other equity of a Person.
"AGREEMENT" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"ASSOCIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the Securities Exchange Act of 1934, as amended.
"BUSINESS" means the business of operating new and used retail
automotive dealerships, including businesses ancillary or related
thereto.
"BUSINESS DAY" shall mean any day on which banks located in New York
City are not required or authorized by law to remain closed.
"CAPITAL ACCOUNT" shall mean, with respect to any Member, the account
maintained for such Member in accordance with the provisions of Section
6.4.
"CAPITAL CONTRIBUTION" shall mean, with respect to any Member, the
amount of money and the Gross Asset Value of property (other than
money) contributed by such Member to the Company pursuant to Article VI
hereof and as set forth on Schedule A.
"CERTIFICATE" shall mean the Company's Certificate of Formation and any
and all amendments thereto and restatements thereof filed on behalf of
the Company with the office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act.
"CLAIMS" shall have the meaning set forth in Section 12.3(a).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY MINIMUM GAIN" shall have the meaning of "partnership minimum
gain" set forth in Treasury Regulations Sections 1.704-2(b)(2) and
1.704-2(d).
"COVERED PERSON" shall mean a Member, a Manager, a Director, an
Officer, any Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with the Company, a Member or a Manager; any officers, directors,
shareholders, controlling Persons, partners, employees, representatives
or agents of a Member or a Manager, or their respective Affiliates; or
any officer, employee or agent of the Company or its Affiliates; or any
Person who was, at the time of the act or omission in question, such a
Person.
33
"DAMAGES" shall have the meaning set forth in Section 12.3(a).
"DELAWARE ACT" shall mean the Delaware Limited Liability Company Act, 6
Del. C. " 18-101, et seq., as amended from time to time.
"DEPRECIATION" shall mean, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year, Depreciation
shall be an amount which bears the same ratio to such beginning Gross
Asset Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such Fiscal Year bears to such
beginning adjusted tax basis; provided, however, that if the adjusted
basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable
method selected by the Member.
"DIRECTORS" shall have the meaning set forth in Section 4.1(a).
"DISABLING CONDUCT" shall mean conduct that constitutes fraud, a
willful violation of this Agreement or law, gross negligence or
reckless disregard of duty in the conduct of the duties of the Person
referred to which results in a material loss to the Company.
"EXECUTIVE OFFICER" shall mean the President of the Company and all
officers and employees of the Company who directly report to, or are
directly supervised by, the President.
"FAIR MARKET VALUE" means the fair market value of the Percentage
Interest for which fair market value is being determined as determined
by the affirmative vote of a majority of the Board of Directors of
United Auto Group, Inc.; provided, however, that if RSP disputes the
determination of Fair Market Value of the Board of Directors within 10
Business Days of such determination, then United Auto Group, Inc. and
RSP will select an independent accounting firm or other Person not
affiliated with either RSP and his Affiliates or United Auto Group,
Inc. and its Affiliates and the determination of such independent
accounting firm or other Person will be binding on both parties. The
costs of the independent accounting firm or other Person will be borne
one-half be United Auto Group, Inc. and one-half by RSP.
"FINANCIAL STATEMENTS" with respect to the Company shall mean the
financial statements of the Company that reflect the assets,
liabilities, retained capital, operations and cash flows of the
Company.
"FISCAL YEAR" shall have the meaning set forth in Section 5.4.
34
"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the
fair market value of such asset at the time it is
accepted by the Company, unreduced by any liability
secured by such asset, as determined by the Members.
(b) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective fair market
values, unreduced by any liabilities secured by such
assets, as determined by the Members as of the
following times: (i) the acquisition of an additional
interest in the Company by any new or existing Member
in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Company to
a Member of more than a de minimis amount of Property
as consideration for an interest in the Company; and
(iii) the liquidation of the Company within the
meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g).
(c) The Gross Asset Values of any Company asset
distributed to any Member shall be adjusted to equal
the fair market value of such asset, unreduced by any
liability secured by such asset, on the date of
distribution as determined by the Members.
(d) The Gross Asset Values of the Company assets shall be
increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b); but only to
the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and
paragraph (vi) of the definition of "Net Profits" and
"Net Losses".
If the Gross Asset Value of an asset has been
determined or adjusted pursuant to paragraphs (a),
(b) or (d) of this definition, such Gross Asset Value
shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for
purposes of computing Net Profits and Net Losses.
"LIQUIDATING TRUSTEE" shall have the meaning set forth in Section 14.2.
"MAJORITY IN INTEREST OF THE MEMBERS" shall mean the written consent,
or vote at a duly called meeting of Members, of Members holding a
majority of Percentage Interests held by all Members.
35
"MANAGER" shall mean a "manager" (within the meaning of the Delaware
Act) of the Company.
"MEMBER" shall mean any Person named as a member of the Company on
Schedule A hereto or admitted subsequently as an additional Member
pursuant to the provisions of this Agreement, in such Person's capacity
as a member of the Company, and "Members" shall mean two or more of
such Persons when acting in their capacities as members of the Company.
"MEMBER MINIMUM GAIN" shall mean a Member's share of Company Minimum
Gain as set forth in Treasury Regulations Section 1.704-2(g) and member
nonrecourse debt minimum gain as described in Treasury Regulations
Section 1.704-2(i).
"MEMBER NONRECOURSE DEBT" shall have the meaning of "partner
nonrecourse debt" as set forth in Treasury Regulations Section
1.704-2(b)(4).
"MEMBER NONRECOURSE DEDUCTIONS" shall have the meaning of "partner
nonrecourse deductions" set forth in Treasury Regulations Section
1.704-2(i).
"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1).
"NET PROFIT" or "NET LOSS" shall mean, for each Fiscal Year, an amount
equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(a) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this
definition shall be added to such taxable income or
loss;
(b) any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Net Profits
or Net Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(c) in the event the Gross Asset Value of any Company
asset is adjusted pursuant to paragraphs (b) or (c)
of the definition of "Gross Asset Value," the amount
of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for
purposes of computing Net Profits or Net Losses;
36
(d) gain or loss resulting from any disposition of
property with respect to which gain or loss is
recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of
property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its
Gross Asset Value;
(e) in lieu of depreciation, amortization, and other cost
recovery deductions taken into account in computing
such taxable income or loss there shall be taken into
account Depreciation with respect to each asset of
the Company for such Fiscal Year, computed in
accordance with the definition of "Depreciation"
above;
(f) to the extent an adjustment to the adjusted tax basis
of any Company asset pursuant to Code Section 734(b)
or Code Section 743(b) is required pursuant to
Treasury Regulations 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as
a result of a distribution other than in complete
liquidation of a Member's Interest, the amount of
such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be
taken into account for purposes of computing Net
Profits or Net Losses; and
(g) notwithstanding any other provision of this
definition, any items which are specially allocated
pursuant to Section 7.2(a) of this Agreement shall
not be taken into account in computing Net Profits or
Net Losses.
The amounts of the items of Company income, gain, loss, or
deduction available to be specially allocated pursuant to
Sections 7.2(a) hereof shall be determined by applying rules
analogous to those set forth in paragraphs (a) through (f)
above.
"OFFICER" shall have the meaning set forth in Section 4.2(a).
"PERCENTAGE INTEREST" shall mean a Member's limited liability company
interest in the Company which represents such Member's share of the
profits and, if applicable, losses of the Company and such Member's
rights to receive distributions of the Company's assets in accordance
with the provisions of this Agreement and the Delaware Act.
"PERIOD" shall mean, for the first period, the period commencing on the
date of this Agreement and ending on the next Adjustment Date. All
succeeding Periods shall commence on the day after an Adjustment Date
and end on the next Adjustment Date.
37
"PERSON" shall mean any individual, corporation, association,
partnership (general or limited), joint venture, trust, joint-stock
company, estate, limited liability company, unincorporated organization
or other legal entity or organization.
"PROCEEDING" shall have the meaning set forth in Section 12.3(a).
"SECRETARY" shall mean the person or persons duly appointed as
Secretary of the Company.
"SUBSIDIARY" of any Person shall mean a corporation or other entity a
majority of whose capital stock with voting power or the majority
ownership interest of which is at the time owned or controlled,
directly or indirectly, by such Person.
"TMM" shall have the meaning set forth in Section 9.1(a).
"TRANSFER" shall have the meaning set forth in Section 13.1(a).
"TREASURER" shall mean the person or persons duly appointed as
Treasurer of the Company.
"TREASURY REGULATIONS" shall mean the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as the same may be
amended hereafter from time to time (including corresponding provisions
of succeeding Income Tax Regulations).
"WITHHELD AMOUNT" shall have the meaning set forth in Section 7.4(c).
SECTION 16
AMENDMENTS; MERGER OR SALE
16.1 AMENDMENTS GENERALLY.
Except as otherwise specifically provided herein, the terms of this
Agreement shall not be amended except in a writing signed by all
Members, provided that, without the consent of any of the Members, the
Company:
(i) may enter into agreements with Persons who are transferees of
the interests in the Company of Members, pursuant to the terms
of this Agreement, providing in substance that such Persons
will be bound by this Agreement; and
(ii) may amend this Agreement as may be required to implement (A)
transfers of interests of Members or (B) any admission of new
Members.
38
16.2 MERGER OR SALE.
The Company may merge with, or consolidate into, a Delaware limited
liability company or another business entity (as defined in Section
18-209(a) of the Delaware Act) or may sell all or substantially all of
its assets only upon the approval of the Company and all Members of the
Company.
SECTION 17
MISCELLANEOUS PROVISIONS
17.1 NOTICES.
Each notice relating to this Agreement shall be in writing and shall be
delivered (a) in person, by registered or certified mail, private
courier or (b) by telecopy or other facsimile transmission, confirmed
by telephone to an executive officer of the recipient. In addition, all
notices to any Member shall be addressed to such Member at their
respective addresses set forth on Schedule A or at such other address
as the Member may have designated by notice in writing. Any Member may
designate a new address by notice to that effect given to the Company.
The Company may designate a new address by notice to that effect given
to each Member. Unless otherwise specifically provided in this
Agreement, a notice given in accordance with the foregoing clause (a)
shall be deemed to have been effectively given when mailed by
registered or certified mail, return receipt requested, to the proper
address, or when delivered in person. Any notice to the Company or to a
Member by telecopy or other facsimile transmission shall be deemed to
be given when sent and confirmed by telephone in accordance with the
foregoing clause (b).
17.2 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute a single agreement.
17.3 TABLE OF CONTENTS AND HEADINGS.
The table of contents and the headings and subheadings of the sections
of this Agreement are inserted for convenience and identification only
and are in no way intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any provision thereof.
17.4 SUCCESSORS AND ASSIGNS; ASSIGNMENT.
This Agreement shall inure to the benefit of the Members and the
Covered Persons, and shall be binding upon the parties, and their
respective successors and permitted assigns.
39
17.5 SEVERABILITY.
Every provision of this Agreement is intended to be severable. If any
term or provision of this Agreement is illegal or invalid for any
reason whatsoever, such term or provision will be enforced to the
maximum extent permitted by law and, in any event, such illegality or
invalidity shall not affect the validity of the remainder of the
Agreement.
17.6 NON-WAIVER.
No provision of this Agreement shall be deemed to have been waived
except if the giving of such waiver is contained in a written notice
given to the party claiming such waiver and no such waiver shall be
deemed to be a waiver of any other or further obligation or liability
of the party or parties in whose favor the waiver was given.
17.7 APPLICABLE LAW.
This agreement and the rights and obligations of the parties hereunder
shall be interpreted and enforced in accordance with and governed by
the laws of the state of Delaware, and all rights and remedies shall be
governed by such laws without regard to principles of conflict of laws.
17.8 WAIVER OF JURY TRIAL.
Each party to this Agreement waives to the fullest extent permitted by
applicable law any right it may have to a trial by jury in respect of
any action, suit or proceeding arising out of or relating to this
Agreement.
17.9 SURVIVAL OF CERTAIN PROVISIONS.
The obligations of each Member pursuant to Sections 6.5 and 12.3 shall
survive the termination or expiration of this Agreement and the
winding-up, liquidation and dissolution of the Company.
17.10 LIMITATION ON DAMAGES; LEGAL DISPUTES.
(a) In no event will any party to this Agreement be liable to any
other party for special, indirect, punitive or incidental
damages, lost profits, lost savings or any other consequential
damages, even if such party has been advised of the
possibility of such damages resulting from the breach by it of
any of its obligations hereunder or from the use of any
confidential or other information.
(b) Subject to the limitations of subsection (a), immediately
above, the rights and remedies of the parties under this
Agreement are cumulative and are not exclusive
40
of any rights or remedies which the parties would otherwise
have for equitable relief, including the remedies of specific
performance and injunction.
17.11 WAIVER OF PARTITION.
Except as may otherwise be provided by law in connection with the
winding-up, liquidation and dissolution of the Company, each Member
hereby irrevocably waives any and all rights that it may have to
maintain an action for partition of any of the Company's property.
17.12 ENTIRE AGREEMENT.
This Agreement and the Transaction Agreement and agreements executed in
connection therewith constitute the entire agreement among the Members
with respect to the subject matter hereof, and supersede any prior
agreement or understanding among them with respect to such subject
matter.
17.13 FURTHER ACTIONS.
Each Member shall execute and deliver such other certificates,
agreements and documents, and take such other actions, as may
reasonably be requested by the Company in connection with the formation
of the Company and the achievement of its purposes, including, without
limitation all such agreements, certificates, tax statements and other
documents as may be required to be filed in respect of the Company.
17.14 NO PARTNERSHIP.
Nothing contained in this Agreement shall be deemed or construed to
make any Member partners or joint venturers with each other, for any
purposes other than for federal and state tax purposes. The only
business association to be formed by the Members will be the Company,
which will be a limited liability company under Delaware law, to be
organized pursuant to this Agreement. The Company shall not be a
general partnership, a limited partnership or a joint venture, and no
Member shall be considered a partner or joint venturer of or with any
other Member for any purposes other than for federal and state tax
purposes.
17.15 APPLICABLE OF LAW AND DISPUTE RESOLUTION
This Agreement will be construed in accordance with, and governed by,
the laws of the State of Delaware, without regard to conflict of laws
principles thereof. If a dispute arises between the Parties arising out
of or relating to this Agreement, the following procedure shall be
implemented before either Party pursues other available remedies,
except that a
41
Party may seek injunctive relief from a court where appropriate in
order to maintain the status quo while this procedure is being
followed:
The Parties shall hold a meeting promptly, attended by persons with
decision making authority regarding the dispute, to attempt in good
faith to negotiate a resolution of the dispute; provided, however, that
no such meeting shall be deemed to vitiate or reduce the obligations
and liabilities of the Parties or be deemed a waiver by a Party hereto
of any remedies to which such party would otherwise be entitled.
1. If, within 30 days after such meeting, the Parties have not
succeeded in negotiating a resolution of the dispute, they
agree to submit the dispute to mediation in accordance with
the then-current Model Procedure for Mediation of Business
Disputes of the CPR Institute for Dispute Resolution ("CPR")
and to bear equally the costs of the mediation.
2. The Parties will jointly appoint a mutually acceptable
mediator, seeking assistance in such regard from the CPR if
they have been unable to agree upon such appointment within
twenty (20) days after the conclusion of the negotiation
period.
3. The Parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of
thirty (30) days. If the Parties are not successful in
resolving the dispute through the mediation, then the Parties
agree to submit the matter to binding arbitration in
accordance with the CPR Institute for Dispute Resolution's
Rules for Non Administered Arbitration of Business Disputes,
by a sole arbitrator. All applicable statutes of limitations
shall be tolled during the negotiation and mediation periods
provided for in this Agreement.
Mediation or arbitration shall take place in Detroit, Michigan,
unless otherwise agreed upon by the Parties in writing. The
substantive and procedural law of the State of Delaware shall
apply to the proceedings. Equitable remedies shall be available in
any arbitration. Punitive damages, exemplary damages and multiple
damages shall not be awarded and have been waived by the Parties.
This clause is subject to the Federal Arbitration Act, 9 U.S.C.A.
ss. 1 et seq. to the exclusion of any state law inconsistent
therewith, and judgment upon the award rendered by the Arbitrator,
if any, may be entered by any court having jurisdiction thereof.
42
IN WITNESS WHEREOF, the undersigned have duly executed this Limited Liability
Company Agreement of HBL, LLC effective as of the day and year first above
written.
H.B.L. HOLDINGS, INC.,
BY: /s/ Xxxxxx X. Xxxxxxx, Xx.
------------------------------------------
NAME: Xxxxxx X. Xxxxxxx, Xx.
TITLE: Asst. Secretary
/s/ Xxxxx X. Xxxxxx, Xx.
----------------------------------------------
XXXXX X. XXXXXX, XX.
43
SCHEDULE A
THE MEMBERS
------------------------------------------------------------------------------------------------------------------------
NAME INITIAL CAPITAL ACCOUNT PERCENTAGE INTEREST
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
H.B.L. Holdings, Inc. $ 65,036,988.00* 90.0%
00000 Xxxx Xxxxx Xxxxx
Xxxxx X-00
Xxxxxxx, XX 00000
------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx, Xx. $ 7,226,332.00 10.0%
000 Xxxxxxxx
Xxxxxxxxxx, XX 00000
------------------------------------------------------------------------------------------------------------------------
* Contributed through the contribution of assets.
44
SCHEDULE B
------------------------------------------------------------------------------------------------------
INITIAL DIRECTORS
------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx, Xx.
------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx, Xx.
------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
INITIAL OFFICERS
------------------------------------------------------------------------------------------------------
Chairman Xxxxx X. Xxxxxx, Xx.
------------------------------------------------------------------------------------------------------
Vice Chairman
------------------------------------------------------------------------------------------------------
President Xxxxxx X. Xxxxxxx
------------------------------------------------------------------------------------------------------
Senior Vice President Xxxxxx X. XxXxx
------------------------------------------------------------------------------------------------------
Vice President X. Xxxxxxxxx Ramonat
------------------------------------------------------------------------------------------------------
Vice President Xxxxxx X. Xxxxxxx
------------------------------------------------------------------------------------------------------
Secretary/Treasurer Xxxxxx X. Xxxxxxx
------------------------------------------------------------------------------------------------------
Assistant Treasurer Xxxxx X. Xxxxxxxx
------------------------------------------------------------------------------------------------------
Assistant Secretary Xxxxxx X. Xxxxxxx, Xx.
------------------------------------------------------------------------------------------------------
Assistant Secretary Xxxxxx X. Xxxxxx
-------------------------------------------------------------- ---------------------------------------
45
