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Exhibit 10.49
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ALLIANCE EDISON LLC
a Delaware limited liability company
DATED AS OF
July __, 2000
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS............................................. 1
ARTICLE II. ORGANIZATION........................................... 12
ARTICLE III. CAPITAL CONTRIBUTIONS/PERCENTAGE INTERESTS............ 14
ARTICLE IV. CAPITAL ACCOUNTS....................................... 16
ARTICLE V. ALLOCATIONS; ACCOUNTING; DISTRIBUTIONS.................. 16
ARTICLE VI. MANAGEMENT............................................. 17
ARTICLE VII. BOOKS AND RECORDS..................................... 22
ARTICLE VIII. TAX YEAR............................................. 22
ARTICLE IX. REPORTS; MEETINGS...................................... 23
ARTICLE X. TRANSFERS BY MEMBERS................................... 24
ARTICLE XI. DISABLING EVENT........................................ 27
ARTICLE XII. DISSOLUTION.......................................... 28
ARTICLE XIII. APPRAISAL............................................ 29
ARTICLE XIV. REPRESENTATIONS AND WARRANTIES........................ 31
ARTICLE XV. DEFAULTS AND REMEDIES.................................. 38
ARTICLE XVI. INDEMNIFICATION....................................... 41
ARTICLE XVII. MISCELLANEOUS........................................ 42
Annexes
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Annex Capital Accounts; Allocations and Accounting
Exhibits
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Exhibit AA Premises
(i)
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Schedules
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Schedule 1 List and Copies of Licenses Required for the School
Schedule 2 AFM Litigation
Schedule 3 Environmental Reports
Schedule 4 Title Insurance Policy and Title Commitment for Title
Insurance
Schedule 5 Ground Lease Defaults
Schedule 6 Leases
Schedule 7 Operating Contracts
Schedule 8 Insurance Policies
Schedule 9 List of Tax Applications and Proceedings
Schedule 10 Permitted Exceptions
Schedule 11 Approved Plans
(ii)
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THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (this
"Agreement"), dated as of the ___ day of July, 2000, by and between Edison
Schools Inc., a Delaware corporation having an address at 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 ("Edison"), and Alliance Facilities Management, Inc., an
Ohio not-for-profit corporation having an address at Xxxxxxxxxx Xxxxx, XX 0xx
Xxxxx, Xxxxxx, Xxxx 00000-0000 ("AFM").
W I T N E S S E T H :
WHEREAS, Edison and AFM, as members, desire to form a limited
liability company under the laws of the State of Delaware for the purposes and
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements made herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1. Definitions. For the purposes of this Agreement:
"ACS" means Alliance Community Schools, Inc., an Ohio non-profit
corporation.
"Act" means the Limited Liability Company Law of the State of
Delaware.
"Additional Capital Contribution" shall mean any (i) cash capital
contribution made by any Member to the Company after the date of this Agreement
or (ii) any amount deemed to be a cash capital contribution pursuant to the
express provisions of this Agreement made by any Member to the Company after the
date of this Agreement, other than such Member's Initial Capital Contribution.
"Affiliate" means, with respect to any Person, any other Person
which directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" of a Person means the power, directly or indirectly,
(a) to vote or direct the vote of fifty percent (50%) or more of the outstanding
shares of voting securities of any Person, or (b) to direct or cause the
direction of the management and policies of such Person, whether by contract,
ownership or otherwise.
"AFM" shall have the meaning set forth on page one hereof.
"AFM Contribution" means all of AFM's right, title and interest as
tenant under the Ground Lease.
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"AFM Debt" means the indebtedness of AFM due and payable to Edison
in the amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) as
evidenced by the AFM Loan Documents.
"AFM Default" shall have the meaning set forth in Section 15.1(a)
hereof .
"AFM Indemnified Parties" shall have the meaning as set forth in
Section 16.2 hereof.
"AFM Loan Documents" means (a) that certain Promissory Note, dated
March 8, 2000 in the original principal amount of Five Hundred Thousand and
00/100 Dollars ($500,000.00) executed by AFM in favor of Edison, (b) that
certain Loan Agreement, dated as of March 8, 2000 by and between Edison and AFM
and (c) that certain Escrow Agreement, dated as of March 8, 2000 by and among
AFM, Edison, Xxxxxx-Xxxxxxxxx Construction, Inc., and Imperial Bank.
"Agency Agreement" means that certain Agency Agreement, dated as of
the date hereof by and among AFM, the Company and Xxxxxx-Xxxxxxxxx Construction,
Inc.
"Annex" means the Annex of U.S. tax provisions attached hereto
which sets forth the allocation and capital account provisions of the Company.
"Applicable Laws" means any and all laws, ordinances, rules,
regulations, orders, restrictions and other requirements of all Governmental
Authorities, foreseen or unforeseen, ordinary or extraordinary, whether now or
hereafter adopted, having or asserting jurisdiction over the Company, the
Members or the Premises.
"Approved Plans" means the plans set forth on Schedule 11
attached hereto.
"Assignment and Assumption of Contracts" means that certain
Assignment and Assumption of Contracts, dated as of the date hereof by and
between AFM and the Company.
"Available Cash" means, with respect to any relevant period, an
amount equal to the excess, if any, of all gross cash receipts (excluding
Capital Proceeds) of the Company during such period from all sources whatsoever,
over the sum of all expenditures of the Company (other than expenditures
deducted in computing Capital Proceeds), on a cash basis, during such period,
including, without limitation, the following:
(a) costs and expenses of operating, improving, maintaining,
leasing and managing the Premises and any other Company assets and
the costs and expenses of repairs and restoration;
(b) taxes and assessments chargeable, and payments in lieu of
taxes, if any, in respect of the Premises and any other Company
assets;
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(c) professional fees, brokerage fees and management and
leasing fees in respect of the Premises and any other Company
assets;
(d) interest and principal amortization on loans as well as
any additional amounts which may be payable or paid under or in
respect of such loans;
(e) all other costs, expenses or disbursements which are
properly attributable to the Company and the Premises and any other
Company assets, whether or not considered as capital improvements;
and
(f) a reserve in an amount reasonably determined by the
Managing Member to be necessary or appropriate for contingencies and
anticipated cash disbursements, including, without limitation,
capital requirements of the Company, major renovations and repairs,
real estate taxes and insurance and provision for the payment of all
outstanding and unpaid current obligations of the Company as of such
time.
"Bankruptcy" means each of the following occurrences:
(a) if any Member shall make a general assignment for the
benefit of its creditors, or shall file a voluntary petition in
bankruptcy, or shall be adjudicated a bankrupt or insolvent, or
shall file any petition or answer seeking, consenting to, or
acquiescing in reorganization, arrangement, adjustment, composition,
liquidation, dissolution or similar relief, under any present or
future statute, law or regulation, or shall file an answer admitting
or failing to deny the material allegations of a petition against it
for any such relief, or shall admit in writing its inability to pay
its debts as they mature; or
(b) if any proceeding against a Member seeking any of the
relief mentioned in subparagraph (a) hereof shall not have been
stayed or dismissed within ninety (90) days after the commencement
thereof; or
(c) if a trustee, receiver or liquidator in bankruptcy of any
Member or of any substantial part of its properties or assets or of
its estate or Interests shall be appointed with the consent or
acquiescence of such Member, or if any such appointment, if not so
consented to or acquiesced in, shall remain unvacated or unstayed
for a period of sixty (60) days provided, that the appointment of a
testamentary trustee, executor or conservator of the estate of an
individual Member shall not be deemed an appointment of a trustee,
receiver or liquidator in bankruptcy for purposes of this
subparagraph (c).
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"Building" means the buildings and improvements located at the
Premises from time to time during the term of the Company.
"Business Day" means a day other than (a) a Saturday or Sunday or
(b) a day in which commercial banks in New York, New York are authorized or
required by law to close.
"Buying Offeree" shall have the meaning set forth in Section
15.1(d)(ii) hereof.
"Buying Member" shall have the meaning set forth in Section
15.1(d)(iii) hereof.
"Buy-Sell Notice" shall have the meaning set forth in Section
15.1(d)(i) hereof.
"Buy-Sell Price" shall have the meaning set forth in Section
15.1(d)(i) hereof.
"Call Notice" means a notice given by the Managing Member pursuant
to the terms of Section 3.5(a) hereof, which notice shall specify the total
amount of additional capital required to purchase fee simple title to the
Premises and the additional capital required to be contributed by each Member.
"Capital Account" means an individual capital account maintained for
each Member in accordance with the terms of Article IV hereof and the Annex.
"Capital Proceeds" means the net cash proceeds actually received by
the Company resulting from any of the following (each such, a "Capital Event"):
(a) insurance proceeds or damage recoveries (other than from
business interruption and rental insurance) paid with respect to the
damage or destruction of the assets of the Company, less (i) the
amount of such proceeds required to repair or restore the damaged or
destroyed assets and (ii) the amount of such proceeds required to be
paid to the holder of any mortgage encumbering the Premises or any
portion thereof in payment of interest or in reduction of principal;
(b) financing or refinancing proceeds from any indebtedness
secured by any assets of the Company, less the amount of any
indebtedness repaid with such loan proceeds;
(c) any sale or any exchange, transfer, assignment or other
disposition of all or part of the assets of the Company, less any
indebtedness relating to or secured by such assets to the extent
paid out of the sales proceeds; and
(d) any expropriation (condemnation) awards actually received
by the Company in respect of a taking of all or part of the assets
of the Company, less (i) the costs of restoring the remaining
portion of the Premises to usable condition, if
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necessary following such taking and (ii) the amount of such awards
required to be paid to the holder of any mortgage encumbering the
Premises or any portion thereof in payment of interest or in
reduction of principal,
after reducing the amount of any such net cash proceeds described in any of
subclauses (a) through (d) above by amounts equal to (1) any costs incurred in
obtaining such net cash proceeds, and (2) amounts set aside upon the occurrence
of any of the events described in subclauses (a) through (d) above as a reserve
in an amount reasonably determined by the Managing Member to be necessary or
appropriate for contingencies and anticipated cash disbursements including,
without limitation, capital requirements of the Company, major renovations and
repairs, real estate taxes and insurance and provision for the payment of all
outstanding and unpaid current obligations of the Company as of such time.
"Closely Held Corporation" shall mean any corporation or trust, the
beneficial interests of which are held by less than thirty (30) holders.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time (or any corresponding provisions of any succeeding law).
"Company" means Alliance Edison LLC, a Delaware limited liability
company.
"Company's Accounting Firm" means Price Waterhouse Coopers or any
other national, reputable accounting firm unanimously selected by the Members.
"Complying Member" means any Member which is not a Non-Complying
Member.
"Construction Contract" means, collectively, (a) the construction
contract dated as of November 5, 1999 by and between AFM and Xxxxxx-Xxxxxxxxx
Construction, Inc. and (b) the construction contract dated as of January 12,
2000 by and between AFM and Xxxxxx-Xxxxxxxxx Construction, Inc.
"CPI" means the "All Urban Consumers Index" for the Cleveland-Akron,
Ohio area, All Items (1982-84=100) determined and published by the Bureau of
Labor Statistics of the United States Department of Labor.
"Dayton Academy Management Agreement" means that certain Amended and
Restated Management Agreement, dated as of May 23, 2000 by and between ACS and
Edison as amended by that certain modification agreement dated as of July 6,
2000.
"Dayton View Management Agreement" means that certain Management
Agreement, dated as of June 20, 2000 by and between ACS and Edison.
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"Dayton Zoning Certificate" means that certain Decision, Final
Order and Entry of the City of Dayton Board of Zoning Appeals dated January
28, 2000, BZA Case #003-2000.
"Defaulting Member" means any Member which is affected by a
Bankruptcy or which is otherwise in default of its obligations under this
Agreement.
"Defaulting Member's Appraiser" means an independent real estate
appraiser designated by the Defaulting Member.
"Defaulting Member's Determination" means the Defaulting Member's
determination of the Fair Market Value.
"Defaulting Member's Notice" means a written notice of whether the
Defaulting Member accepts or disputes the Non-defaulting Member's Determination.
"Disabling Event" means, with respect to a Member, such Member's (a)
in the case of a Member that is a natural Person, death, (b) Bankruptcy, (c) in
the case of a Member who is a natural Person, the entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his property,
(d) in the case of a Member who is acting as a Member by virtue of being a
trustee of a trust, termination of the trust (but not merely the substitution of
a new trustee), (e) in the case of a Member that is a partnership or limited
liability company, dissolution and commencement of winding up of the partnership
or limited liability company, or (f) in the case of a Member that is a
corporation, filing of a certificate of dissolution, or its equivalent, for the
corporation or the revocation of its charter and the expiration of ninety (90)
days after the date of notice to the corporation of revocation without a
reinstatement of its charter.
"Disabled Member" means a Member who has suffered a Disabling
Event.
"Disabled Member Successor" means, with respect to a Disabled
Member, such Disabled Member's successor(s) in trust, personal
representative(s), heirs at law, legatee(s), or estate.
"Disposing Member" shall have the meaning set forth in Section
15.1(d)(iii) hereof.
"Edison" shall have the meaning set forth on page one hereof.
"Edison Contribution" means an amount equal to Three Million Five
Hundred Thousand and 00/100 Dollars ($3,500,000.00), of which (a) Three Million
and 00/100 Dollars ($3,000,000.00) Edison has paid to the Company prior to the
date hereof and (b) the balance is contributed through the cancellation of the
AFM Debt by Edison on the date hereof.
"Edison Default" shall have the meaning set forth in Section
15.2(a) hereof.
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"Edison Fundraising Amount" shall have the meaning set forth in
the Fundraising Agreement.
"Edison Indemnified Parties" shall have the meaning set forth in
Section 16.1 hereof.
"Edison Payment Guaranty" means that certain Payment Guaranty, dated
as of the date hereof executed by Edison in favor of KeyBank National
Association, a national banking association.
"Environmental Law" means any Federal, state or local statute, law,
rule, regulation, ordinance, code, policy, rule of common law, judicial order,
administrative order, consent decree or judgment, relating to the indoor or
outdoor environment, health or safety, or relating to pollution or protection of
the environment (including surface and ground water), or the emission,
discharge, spillage, leakage, storage, release or threatened release of
Hazardous Materials into ambient air, surface water, ground water or land or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, abatement, removal, remediation or handling of
Hazardous Materials, and includes, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 USC Sections
9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1876 and Hazardous and Solid Waste Amendments of 1984, 42
USC Sections 6901 et seq., Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 USC Sections 1251 et sEq., Clean Air
Act of 1966, as amended 42 USC Sections 7401 et seq., Toxic SubstanceS
Control Act of 1976, 15 USC Sections 2601 et seq., Hazardous Materials
TransportaTion Authorization Act of 1994, 49 USC Sections 5101 et seq.,
Oil Pollution AcT of 1990, 33 USC Sections 2701 et seq., Emergency
Planning and Community Right-to-KNow Act of 1986, 42 USC Sections 11001 et
seq., National Environmental Policy Act of 1969, 42 USC Sections 4321 et
seq., Safe Drinking Water Act of 1974, as amended, 42 USC Sections 300(f)
et seq., Federal Insecticide, Fungicide and Rodenticide Act, 7 USC
Sections 136 et seq., and any similar or implementing law, and any rule,
regulation or other legally binding action of a governmental authority issued
thereunder.
"Environmental Reports" shall have the meaning set forth in
Section 14.1(i) hereof.
"Fair Market Value" shall mean the aggregate fair market value of
the assets (including any Additional Capital Contribution made by a
Non-defaulting Member) of the Company immediately prior to dilution, after
deducting therefrom the aggregate permitted liabilities of the Company
immediately prior to dilution.
"Fair Market Value Notice" means a written notice which shall set
forth the Non-defaulting Member's Determination.
"Final Capital Budget" shall have the meaning set forth in Section
6.3(a) hereof.
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"Final Operating Budget" shall have the meaning set forth in Section
6.3(a) hereof.
"First Offer Notice" shall have the meaning set forth in Section
10.1(c)(i) hereof.
"Fundraising Agreement" means that certain Fundraising Agreement,
dated as of the date hereof by and between AFM and Edison.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Governmental Authority" means any governmental or
quasi-governmental authority including, without limitation, any federal,
provincial, state, territorial, county, municipal or other governmental or
quasi-governmental agency, board, branch, bureau, commission, court, department
or other instrumentality or political unit or subdivision, whether domestic or
foreign.
"Ground Lease" means that certain Ground Lease Agreement, dated as
of November 23, 1999 by and between Ground Lessor and AFM, as amended by that
certain First Amendment to Ground Lease Agreement, dated as of the date hereof
by and between Ground Lessor and AFM.
"Ground Lease Assignment" means that certain Assignment and
Assumption of Ground Lease and Lessor Consent, dated as of the date hereof by
and between AFM, the Company and Ground Lessor.
"Ground Lessor" means Dayton Metropolitan Housing Authority, a body
corporate and politic organized and existing under the laws of the State of
Ohio.
"Hazardous Materials" means any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant, or
containment, as defined or regulated under any Environmental Law.
"Initial Capital Contribution" of a Member means such Member's
capital contribution (of cash or property) to the Company, as set forth in
Sections 3.1 and 3.2 hereof.
"Interest" or "Member Interest" means an interest of a Member in
the Company.
"Leases" shall have the meaning set forth in Section 14.1(k)
hereof.
"Lien" means any mortgage, lien (statutory or otherwise), charge,
pledge, hypothecation, conditional sales agreement, adverse claim, title
retention agreement or any other security interest, encumbrance or title defect
of any nature whatsoever.
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"Liquidating Member" means the Managing Member at the time of the
dissolution of the Company pursuant to the terms of Section 12.1 hereof.
"Major Contracts" means (a) the Construction Contract, (b) the
Sublease, (c) the Agency Agreement, (d) any contract, agreement, document or
instrument relating to any leasing, subleasing or construction activity at the
Premises and (e) all amendments, modifications, supplements and extensions of
any of the foregoing.
"Management Agreement" means, individually and collectively, the
Dayton Academy Management Agreement and the Dayton View Management Agreement.
"Managing Member" means AFM or any other Member who is appointed
Managing Member pursuant to the terms of this Agreement.
"Member(s)" means Edison and AFM, and any other person or entity
permitted to act as a Member from time to time pursuant to the provisions of
this Agreement.
"Mutual Determination" means the determination of the Fair Market
Value as mutually agreed upon by the Non-Defaulting Member's Appraiser and the
Defaulting Member's Appraiser.
"Non-Complying Amount" means, with respect to monies to be
contributed by a Member as additional capital pursuant to the terms of Section
3.5 hereof, an amount equal to the Additional Capital Contributions then
required to be made and not made by a Non-Complying Member, and contributed by a
Complying Member.
"Non-Complying Member" means any Member which fails to contribute
monies to the Company as additional capital pursuant to, and required by, the
terms of Section 3.5 hereof.
"Non-defaulting Member" means any Member which is not a Defaulting
Member.
"Non-defaulting Member's Appraiser" means an independent real estate
appraiser designated by the Non-defaulting Member.
"Non-defaulting Member's Determination" means the Non-defaulting
Member's determination of the Fair Market Value.
"Non-defaulting Member's Notice" means a written notice of whether
the Non-defaulting Member accepts or disputes the Defaulting Member's
Determination.
"Non-Selling Member" shall have the meaning set forth in Section
10.1(c)(i) hereof.
"Notifying Member" shall have the meaning set forth in Section
15.1(d)(i) hereof.
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"Operating Contracts" shall have the meaning set forth in Section
14.1(l) hereof.
"Organizational Documents" means (a) with respect to the Company,
this Agreement and the certificate of formation of the Company filed with the
Office of Secretary of State of the State of Delaware, (b) with respect to AFM,
its articles of organization filed with the Office of the Secretary of State of
the State of Ohio and its bylaws and (c) with respect to Edison, its certificate
of incorporation filed with the Office of the Secretary of State of the State of
Delaware and its bylaws.
"Percentage Interest" means the percentage used to determine
allocations and distributions to which each Member is entitled, as specified in
Section 3.4 hereof, as the same may be adjusted for each Member pursuant to the
terms hereof. The aggregate Percentage Interest of all the Members shall at all
times equal one hundred percent (100%).
"Permitted Exceptions" means the title matters set forth on Schedule
10 attached hereto.
"Permitted Transferee" shall mean any transferee of an Interest who
(a) is of good character and business reputation and (b) has liquid assets and a
total net worth satisfactory to the Non-Selling Members acting reasonably.
"Person" shall mean an individual, partnership (general or limited),
association, company, corporation, limited liability company, joint venture,
trust, estate, a governmental entity, agency, authority or political subdivision
or instrumentality thereof, or any other entity.
"Preliminary Capital Budget" shall have the meaning set forth in
Section 6.3(a) hereof.
"Preliminary Operating Budget" shall have the meaning set forth in
Section 6.3(a) hereof.
"Premises" means the real property having an address of 500 Xxxx
Xxxxxxxx Xxxxxx Street (also known as 0000 Xxxx Xxxxxxxxx Xxxxxx), Xxxxxx, Xxxx
as more particularly described on Exhibit AA attached hereto.
"Proposed Final Capital Budget" shall have the meaning set forth in
Section 6.3(a) hereof.
"Proposed Final Operating Budget" shall have the meaning set forth
in Section 6.3(a) hereof.
"Receiving Member" shall have the meaning set forth in Section
15.1(d)(i) hereof.
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"Regulations" shall mean the Income Tax Regulations (as the same may
be amended, succeeded or superseded from time to time) promulgated under the
Code.
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the environment.
"Selling Member" shall have the meaning set forth in Section
10.1(c) hereof.
"Selling Offeree" shall have the meaning set forth in Section
15.1(d)(ii) hereof.
"School" means the school to be operated at the Premises.
"Sublease" means that certain Sublease Agreement, dated as of March
10, 2000 by and between AFM, as sublessor, and ACS, as sublessee, as amended by
that certain Amended and Restated Sublease Agreement, dated as of the date
hereof by and between the Company, as sublessor, and ACS, as sublessee.
"Survey Letter Agreement" means that certain letter agreement, dated
as of the date hereof by and between AFM and Edison, pursuant to which AFM shall
plat the Premises into a platted City of Dayton lot.
"Takeover Notice" shall have the meaning set forth in Section
15.1(b) hereof.
"Tax Matters Member" shall have the meaning set forth in Section
6231(a)(7) of the Code and Section 6.8 hereof.
"Tenant" shall have the meaning set forth in Section 14.1(k)
hereof.
"Third Appraiser" means an independent real estate appraiser
selected by the Defaulting Member's Appraiser and the Non-defaulting Member's
Appraiser or as otherwise provided in Section 13.1(c) hereof.
"Threat of Release" means a substantial likelihood of a Release
which requires action to prevent or mitigate damage to the Environment which may
result from such Release.
"Transaction Documents" means this Agreement, the Management
Agreement, the Fundraising Agreement, the Ground Lease Assignment, the Agency
Agreement, the Assignment and Assumption of Contracts and the Survey Letter
Agreement.
"transfer" shall have the meaning set forth in Section 10.1(a)
hereof.
"transferor" shall have the meaning set forth in Section 10.1(a)
hereof.
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ARTICLE II. ORGANIZATION
Section 2.1. Formation. The parties hereto have formed the Company
pursuant to and in accordance with the terms and provisions of the Act. If not
already executed and filed, promptly after the execution of this Agreement, the
Members shall execute and duly file, in the appropriate offices, a certificate
of formation in such form as may be required by law and such other documents as
may be required under the laws of the State of Delaware or the laws of any other
jurisdiction in connection with the activities or business of the Company.
Copies of each such document as duly filed will be maintained at the principal
place of business of the Company.
Section 2.2. Name. The name of the Company shall be "Alliance Edison
LLC".
Section 2.3. Powers. The Company shall have all such powers as are
necessary or appropriate to carry out its purposes set forth in Section 2.6
hereof. No Member shall bind or have any authority to bind the Company or the
other Members except as specifically provided in this Agreement or in the Act.
Section 2.4. Title to Property; No Partition. A Member's Interest
shall be personal property for all purposes. All real and other property now or
hereafter owned by the Company shall be deemed owned by the Company as an entity
and no Member, individually, shall have any ownership of such property. Title to
all assets and properties, real and personal, now or hereafter owned by or
leased to the Company, shall be held in the name of the Company. No Member or
its successors, assigns or legal representatives shall seek, institute or
maintain any action or proceeding for the partition of any property owned by the
Company and such remedy shall not be available to, and is hereby waived by, the
Members.
Section 2.5. Name and Address of Each Member. The name and address
of each Member is:
Name Address
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Edison Schools Inc. 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Alliance Facilities Management, Inc. Xxxxxxxxxx Xxxxx
XX 0xx Xxxxx
Xxxxxx, Xxxx 00000-0000
Section 2.6. Purposes. The purposes of the Company are:
(a) To hold the leasehold interest under the Ground Lease and
to operate, manage, repair and maintain the Premises and all improvements
located thereon as a
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school and educational facility or for any other purpose permitted by Applicable
Law, and to own and otherwise deal with all legal and beneficial interests in
and to the Premises for the exclusive support and benefit of a system of
educational organizations as set forth in Sections 170(b)(1)(A)(ii) and
509(a)(1) of the Code;
(b) To mortgage or otherwise encumber, lease, sell, exchange
or otherwise dispose of all or any portion or portions of the leasehold interest
under the Ground Lease and the Premises and/or any interest in the Premises in
accordance with the provisions of this Agreement;
(c) To deal generally in and with all parts of the Premises
and any other Company assets;
(d) To borrow money, on a secured or unsecured basis, and to
secure any secured borrowings with all or any portion of the leasehold interest
in the Ground Lease and the Premises and other Company assets in accordance with
the provisions of this Agreement; and
(e) To do any and all other acts and things necessary,
incidental or desirable to carry on the Company's business in accordance with
the provisions of this Agreement so long as such acts are for the exclusive
support and benefit of a system of educational organizations as set forth in
Sections 170(b)(1)(A)(ii) and 509(a)(1) of the Code.
So long as any Member is a tax-exempt entity, it is intended
that all acts, activities and business carried on by the Company shall be
consistent with the tax exempt status of that entity under Section 501(c)(3) of
the Code and for the exclusive support and benefit of a system of educational
organizations as set forth in Sections 170(b)(1)(A)(ii) and 509(a)(1) of the
Code.
Section 2.7. Company Offices. The Company shall have its principal
place of business in the State of Ohio at which the Company records will be kept
c/o Alliance Facilities Management, Inc., Xxxxxxxxxx Xxxxx, XX 0xx Xxxxx,
Xxxxxx, Xxxx 00000-0000, or at such other address in the State of Ohio or in New
York, New York as may be designated from time to time pursuant to the terms and
provisions of Section 6.2(a)(xxix) hereof. The Managing Member shall notify each
Member of any change of such office at least ten (10) Business Days prior to
such change. The address of the office of the Company in the State of Delaware
required to be maintained pursuant to the Act is Corporation Service Company,
0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000, or such other address as may be
designated by the Managing Member with written notice to the other Members. The
name and address of the registered agent for service of process on the Company
in the State of Delaware is Corporation Service Company, 0000 Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, or such other agent and address as may be designated
from time to time by the Managing Member, with written notice thereof to the
other
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Members. In addition, the Company may maintain such other offices as the
Managing Member may deem advisable.
Section 2.8. Term of the Company. The term of the Company shall
commence as of the date hereof, and shall continue until May 31, 2050, unless
the term shall sooner terminate pursuant to the terms and provisions of this
Agreement.
Section 2.9. Relationship Among the Members. The relationship
created by this Agreement among the Members shall be limited to the performance
of this Agreement and shall not affect any other business or activity of any
Member or any of their respective Affiliates except as may otherwise be provided
herein. Except as specifically provided herein, nothing in this Agreement shall
be construed to authorize or require any Member or any of its Affiliates to act
as agent for any other Member or such other member's Affiliates, or to require
any Member or Affiliate to offer to other Members or the Company any business
opportunity that such Member or Affiliate may wish to pursue with Persons other
than Members, or to prohibit any Member or any of its Affiliates from entering
into business activities in competition with the Company or any other Member.
ARTICLE III. CAPITAL CONTRIBUTIONS/PERCENTAGE INTERESTS
Section 3.1. Members Initial Capital Contribution.
(a) In connection with its execution and delivery of this
Agreement, AFM has contributed the AFM Contribution to the capital of the
Company.
(b) In connection with its execution and delivery of this
Agreement, Edison has contributed the Edison Contribution to the capital of the
Company.
Section 3.2. AFM's Additional Capital Contribution. Provided that no
Edison Event of Default (as such term is defined in the Fundraising Agreement)
shall have occurred and be continuing beyond all applicable notice, grace and
cure periods set forth in the Fundraising Agreement, AFM shall make an
additional contribution to the capital of the Company (a) of cash in the amount
of Four Hundred Five Thousand and 00/100 Dollars ($405,00.00) on or prior to
March 1, 2001, time being of the essence, (b) of cash in the amount of Four
Hundred Five Thousand and 00/100 Dollars ($405,000.00) on or prior to March 1,
2002, time being of the essence, and (c) of cash in the amount of One Million
Five Hundred Ninety Five Thousand and 00/100 Dollars ($1,595,000.00) on or prior
to June 30, 2002, time being of the essence.
Section 3.3. Edison Guaranty. In the event Edison makes any payment
(other than a payment which is made as a result of Edison's failure to procure
the Edison Fundraising Amount pursuant to the Fundraising Agreement) pursuant to
any guaranty made by Edison of the obligations of the Company including, without
limitation, the Edison Payment Guaranty, such payment shall be deemed to be a
capital contribution by Edison and the Percentage Interests of
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each Member shall be adjusted as set forth in Section 3.5(c) hereof as of the
date Edison makes any such payment. Edison hereby agrees not to subrogate to the
rights of the lender if Edison makes a payment to such lender under the Edison
Payment Guaranty which is the result of Edison's failure to procure the Edison
Fundraising Amount pursuant to the Fundraising Agreement. In the event any
payment is made by Edison under the Edison Payment Guaranty which is the result
of Edison's failure to procure the Edison Fundraising Amount pursuant to the
Fundraising Agreement, such payment shall not be deemed a capital contribution
and the Percentage Interests of the Members shall not be adjusted as a result of
such payment.
Section 3.4. Percentage Interests. Subject to Sections 3.3 and
3.5(c) hereof, the initial Percentage Interest of each Member shall be as
follows:
MEMBERS PERCENTAGE INTEREST
------- -------------------
Edison 54.3%
AFM 45.7%
Total: 100.0%
=====
The initial Percentage Interest of each Member is based on the total Initial
Capital Contribution of Edison and AFM equal to $6,455,000.00, which amount is
comprised of (a) the amount of the Edison Contribution ($3,500,000.00) and (b)
the value of the AFM Contribution ($2,955,000.00).
For purposes of determining the amounts of Available Cash and Capital Proceeds
to be distributed to each Member pursuant to the terms hereof, a Member's
Percentage Interest shall be (a) with respect to distributions of Available
Cash, such Member's Percentage Interest as of the date such distribution is
made, and (b) with respect to distributions of Capital Proceeds, such Member's
Percentage Interest on the date on which the event giving rise to such Capital
Proceeds occurs.
Section 3.5. Additional Capital Contribution. (a) If the Company
shall be obligated to purchase fee simple title to the Premises pursuant to the
terms of Section 21 of the Ground Lease, then the Managing Member shall first
discuss with the other Members whether the funds needed to purchase fee simple
title to the Premises should be borrowed. If the Members do not unanimously
agree as to whether a borrowing should be used, or if the Company is unable to
borrow the necessary funds in a timely manner on terms unanimously approved by
the Members, the Managing Member shall send a Call Notice to the other Members.
Each Member shall thereupon be required to make an Additional Capital
Contribution equal to the product of its Percentage Interest and the amount of
additional capital required to purchase fee simple title to the Premises. Each
Member shall, within twenty (20) days after receipt of the
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Call Notice, make the Additional Capital Contribution required to be made
pursuant to such Call Notice by delivery of immediately available funds to the
Company.
(b) In the event that there is a Non-Complying Member, the Complying
Member(s) may elect by twenty (20) days written notice to the Non-Complying
Member to make an additional cash capital contribution in the Non-Complying
Amount in proportion to the respective Percentage Interests of those Complying
Member(s) so electing, and cause the Member Interest of the Non-Complying Member
to be automatically diluted in accordance with the provisions of Section 3.5(c)
hereof.
(c) In the event that the Complying Member(s) shall make the
election set forth in Section 3.5(b) hereof, the Member Interest of the
Non-Complying Member shall be automatically diluted as of the date immediately
following the date of contribution of the Non-Complying Amount by the Complying
Member(s) so that the Member Interest of such Non-Complying Member, after giving
effect to such dilution, shall be equal to the total amount of the capital
contributions made by such Member divided by the total amount of the capital
contributions made by all of the Members (including, without limitation, any
additional capital contributions made pursuant to the terms of Sections 3.3 and
3.5(b) hereof). By way of example, if (i) the Initial Capital Contribution of
Edison is equal to $3,500,000.00 for an initial Percentage Interest of 54.3%,
(ii) the Initial Capital Contribution of AFM is equal to $2,955,000.00 for an
initial Percentage Interest of 45.7%, (iii) the total Initial Capital
Contribution of Edison and AFM is equal to $6,455,000.00 and (iv) Edison makes
an additional contribution of $1,000,000.00 pursuant to the terms of Section
3.5(b) hereof, then, after taking into account such additional capital
contribution, the Percentage Interest of Edison shall be 60.4% and the
Percentage Interest of AFM shall be 39.6%.
ARTICLE IV. CAPITAL ACCOUNTS
Section 4.1. Capital Accounts. A Capital Account shall be maintained
for each Member. The Capital Account for each Member shall be maintained by the
Company in accordance with the terms and provisions set forth in the Annex
attached hereto and made a part hereof.
ARTICLE V. ALLOCATIONS; ACCOUNTING; DISTRIBUTIONS
Section 5.1. Allocations; Accounting. The Company's income, gains,
losses, deductions and credits shall be allocated among the Members in
accordance with the terms and provisions set forth in the Annex attached hereto
and made a part hereof. The accounting procedures and methods of the Company
shall be as set forth on such Annex.
Section 5.2. Application of Available Cash and Capital Proceeds. (a)
Available Cash shall be distributed by the Managing Member to the Members in
accordance with their respective Percentage Interests no less frequently than
once a calendar year; provided, however, no
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Member shall have the right to receive its distribution of Available Cash if at
the time of the distribution such Member is in default of its obligations under
this Agreement.
(b) Capital Proceeds attributable to a Capital Event occurring
pursuant to or in anticipation of the liquidation of the Company shall be
distributed in accordance with Section 12.2 hereof. Other Capital Proceeds, if
any, shall be distributed as soon as shall be reasonably practicable following
the receipt of such Capital Proceeds, and shall be distributed in the same
manner as Available Cash is distributed pursuant to Section 5.2(a) hereof.
ARTICLE VI. MANAGEMENT
Section 6.1. Overall Authority. (a) Subject to the terms and
provisions of Sections 6.1(b) and 6.2 hereof, the management of the Company
shall be vested in the Members in accordance with the Act; provided, however,
that notwithstanding the power and authority thereby provided the Members hereby
agree to exercise such management powers and responsibilities, make decisions
and delegate authority in accordance with the specific provisions of this
Agreement including, without limitation, the terms and provisions of Sections
6.1(b) and 6.2 hereof.
(b) (i) Subject to the terms and provisions of Section 6.2
hereof, the overall management and control of the business and affairs of the
Company, and the right and authority to make all decisions and elections on
behalf of the Company, shall be exercised solely by the Managing Member. The
Managing Member, except as otherwise provided in this Agreement, shall have the
sole right and authority, in its sole discretion, to exercise management powers
and authority to act for the Company, to carry out the purposes of the Company
described in Section 2.6 hereof and to bind the Company and any third party
dealing with the Company. The Managing Member shall exercise its responsibility
and duties to the Company subject to the need to preserve its tax-exempt status
(if the Managing Member is a tax-exempt entity) and shall meet the tax-exempt
requirements of any tax-exempt Member with respect to its Interest in the
Company with the highest level of fiduciary duty of care and loyalty to the
Company and shall take all actions in good faith consistent with such duties.
The Managing Member shall promptly provide the other Members with copies of all
notices, communications and correspondence with respect to (a) any litigation or
settlement of any litigation involving the Company, (b) any matter between the
Company and the IRS, (c) any matter or issue relating to the Premises and a
violation of, or the compliance with, any Environmental Law, (d) any material
issue or a default by the Company under any Major Contract and (e) any other
matter requested by any Member at the cost of such Member.
(ii) The Managing Member shall have the right, at any time in
which Edison is a Member and upon thirty (30) days' prior written notice to
Edison and any other Member, to delegate, in whole or in part, to Edison the
Managing Member's responsibilities (but not the Managing Member's authority) set
forth in Sections 6.3(a), 7.1 and 9.1 of this Agreement. Notwithstanding any
such delegation to Edison, the Managing Member shall
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promptly provide to Edison any and all books, records, statements,
correspondence, notices, documentation and information necessary for Edison to
comply with such responsibilities of the Managing Member. Edison's performance
of such responsibilities shall be at the cost and expense of the Company.
Section 6.2. Major Decisions. (a) The following decisions and acts
shall require the unanimous written approval of the Members:
(i) the authorization or issuance of any additional limited
liability company interests or any other type of equity security
including, without limitation, options, warrants or convertible
securities, relating to the Company;
(ii) any amendment or modification to any of the
Organizational Documents of the Company;
(iii) any sale, transfer, exchange or other disposition of all
or any substantial portion of the assets of the Company including, without
limitation, any sale, transfer or disposition of all or any portion of the
Company's interest in the Ground Lease;
(iv) except as approved as part of a Final Operating Budget or
Final Capital Budget, the approval of any indebtedness for borrowed money
incurred by the Company in excess of $5,000.00 in the aggregate at any
time and any extension, postponement, amendment or alteration of any such
indebtedness, and the execution of any documents relating to, evidencing,
governing or serving any such indebtedness;
(v) any mortgage, lien, pledge, hypothecation or encumbrance
of any property or asset of the Company including, without limitation, the
Company's interest in the Ground Lease and any amendment, modification or
extension of any of the foregoing, and the execution of any documents
relating thereto;
(vi) except as set forth in Sections 6.6 and 6.7 hereof, any
investment by the Company (including the making of any loan) or the
engagement by the Company in any activity not directly related to the
operation of the Premises;
(vii) the authorization or issuance of any notes or debt
securities containing equity features (including any notes or debt
securities convertible or exchangeable for equity securities) issued by
the Company or secured by the Company's interest in the Ground Lease;
(viii) the merger or consolidation with any Person by the
Company;
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(ix) the liquidation, dissolution, recapitalization or
reorganization of the Company;
(x) the approval of (A) each Final Capital Budget and each
Final Operating Budget, (B) any amendment to a line item in a Final
Operating Budget or a Final Capital Budget which, when aggregated with
prior amendments to such line item, exceeds $5,000.00 and (C) the making
of any expenditures not provided for in a Final Operating Budget or a
Final Capital Budget;
(xi) any sublease of all or any portion of the Company's
interest in the Ground Lease and any amendment, modification, extension or
termination thereof;
(xii) except as approved as part of a Final Operating Budget
or a Final Capital Budget in accordance with clause (x) above, the
approval of any construction or repair work at the Premises having a cost
to the Company (whether or not covered by insurance) in excess of
$5,000.00;
(xiii)except as approved as part of a Final Operating Budget
in accordance with clause (x) above, any decision to maintain cash
reserves in the Company in excess of $5,000.00;
(xiv) the election to cause the indemnification of any Person
by the Company except as may be otherwise provided in this Agreement;
(xv) the admission or approval of any Member of the Company
(except as provided in Article 10 hereof);
(xvi) all material tax elections or other material actions or
determinations relating to taxes by the Company;
(xvii)except as provided in Sections 3.2 and 3.3 hereof, the
making by the Company of any call for additional equity capital
contributions or loans by the Members to the Company;
(xviii) entering into the management or operation of any
business other than the operation of the Premises;
(xix) entering into, amending, extending or terminating any
property management agreement and/or leasing agreement with respect to the
Premises or the School;
(xx) the execution of any contract with an Affiliate of the
Managing Member;
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(xxi) the execution of any guarantee by the Company of any
obligation of any third party;
(xxii)the application for any change in zoning or any zoning
variance, the institution of any action to appeal any change in zoning or
the issuance of any variance in respect of the Premises;
(xxiii) the creation of any easement encumbering the Premises
or the School or any portion thereof;
(xxiv)any material change in depreciation or other accounting
method, principle or practice of the Company;
(xxv) the initiation of any litigation, arbitration or other
legal proceeding or the settlement of any litigation, arbitration,
condemnation or other legal proceeding involving the Company;
(xxvi)except as may be required by law or a contractual
obligation, the establishment of the types, amounts, coverage and limits
of insurance to be maintained by the Company;
(xxvii) changing the organizational status, including the
state of organization, of the Company;
(xxviii) the hiring of any employee or the termination of any
employee except as approved as part of a Final Operating Budget;
(xxix) any move of the principal office of the Company;
(xxx) approval of (A) any site plan and plans and
specifications for the School other than the Approved Plans and (B) any
material restatement of, or material amendment to or other material
modification of such site plan and/or plans and specifications; and/or
(xxxi) entering into, amending, extending or terminating any
Major Contract.
Section 6.3. Budgets. (a) The Managing Member shall (i) on or before
May 15 of each year prepare and submit to the other Members a preliminary budget
for capital expenditures for the succeeding fiscal year (the "Preliminary
Capital Budget"), (ii) on or before May 15 of each year prepare and submit to
the other Members a preliminary budget for the operating expenses for the
succeeding fiscal year (the "Preliminary Operating Budget"), (iii) on or before
June 10 of each year prepare and submit to the other Members for their written
approval a proposed final capital expenditures budget for the succeeding fiscal
year (the "Proposed Final Capital Budget"), and (iv) on or before June 10 of
each year prepare and submit to the other Members for their written
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approval a proposed final budget for operating expenses for the succeeding
fiscal year (the "Proposed Final Operating Budget"). During the first week of
June in each year the Managing Member shall meet with the representatives of the
other Members to discuss the Preliminary Capital Budget and the Preliminary
Operating Budget for the next fiscal year, and during the second and third weeks
of June in each year and at such other times as may be necessary, the Managing
Member shall (x) meet with the representatives of the other Members to discuss
the Proposed Final Capital Budget and the Proposed Final Operating Budget for
the next fiscal year and (y) provide any and all documentation and information
relating to the Proposed Final Capital Budget and the Proposed Final Operating
Budget reasonably requested by any Member. Upon the written approval by all of
the Members of the Proposed Final Capital Budget and the Proposed Final
Operating Budget for such fiscal year, the same shall be deemed to be the final
budgets for such fiscal year (respectively, a "Final Capital Budget" and a
"Final Operating Budget").
Notwithstanding the foregoing, in the event the Members fail to
timely approve a Proposed Final Operating Budget for any fiscal year, the
Managing Member shall, for such fiscal year until a Final Operating Budget is
approved by the Members for such fiscal year, implement and make the
expenditures provided in the Final Operating Budget for the prior fiscal year as
each item on such Final Operating Budget is adjusted by the CPI.
(b) The Managing Member shall implement each Final Capital
Budget and Final Operating Budget and shall be authorized to make the
expenditures and incur the obligations provided for in the Final Capital Budget
and the Final Operating Budget, subject to the terms of Section 6.2(a)(x)
hereof.
Section 6.4. Other Business. It is expressly understood that each
Member may engage in any other business, investment or profession, competitive
or otherwise, including the ownership of or investment in real estate and the
development, operation and management of real estate or a school, and neither
the Company nor any Member shall have any rights in and to said business,
professions or investments, or the income or profits derived therefrom. Without
limiting the generality of the foregoing, Edison shall have the right, without
the consent of any other Member (including the Managing Member), to (a) perform
its obligations and exercise any of its rights and remedies under the Management
Agreements and any documents or agreements relating to the performance of its
obligations under the Management Agreements and (b) amend, modify, extend, renew
or terminate the Management Agreements and any other documents or agreements
relating thereto. The performance by Edison of its obligations under the
Management Agreements shall have no effect on Edison's rights as a Member under
this Agreement.
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Section 6.5. Standard of Care. Each Member shall use due care and
reasonable diligence in the management of the Company business, but shall not be
liable, responsible, or accountable in damages or otherwise for any mistake of
judgment or other action taken or omitted to be taken by it in good faith or for
any loss sustained by the Company or by the Members by reason of any act
performed by or on behalf of the Company to the extent authorized hereunder,
unless such act constitutes fraud, willful misconduct, a breach of this
Agreement or violation of the Act.
Section 6.6. Bank Accounts. All funds of the Company shall be
deposited in such account or accounts, of a type, in form and in name and in a
bank or banks determined by the Managing Member. All checks or other orders
withdrawing funds from such account or accounts shall be signed in the Company
name by the Managing Member or by any other party designated in writing by the
Managing Member.
Section 6.7. Investment of Excess Funds. The Managing Member shall
invest excess funds not required in the Company's business, and not distributed
pursuant to the terms of this Agreement, in bank accounts, certificates of
deposit and short-term government obligations as determined by the Managing
Member, subject to the reasonable approval of the other Members.
Section 6.8. Tax Matters Member. AFM is hereby designated Tax
Matters Member for the Company. Tax Matters Member shall comply with the
requirements of Section 6221 through Section 6231 of the Code applicable to a
Tax Matters Member.
ARTICLE VII. BOOKS AND RECORDS
Section 7.1. Books and Records. The Tax Matters Member shall, at the
Company's cost and expense, maintain full and accurate books of the Company,
showing all receipts and expenditures, assets and liabilities, profits and loss,
and all other records necessary for recording the Company's business and
affairs, including those sufficient to record the allocations and distributions
provided in this Agreement. The Company shall maintain books and records in
accordance with GAAP and books and records for tax purposes in accordance with
accepted federal income tax accounting principles. The Company's books and
records shall be located at the Tax Matters Member's Office and shall be open to
the inspection, examination and copying by the Members in person or by their
duly authorized representatives (including, but not limited to, auditors) during
regular business hours. Any expense for any inspection, examination or copying
shall be borne by the Member causing such inspection, review or copying to be
conducted.
ARTICLE VIII. TAX YEAR
Section 8.1. Taxable Year. The taxable year and fiscal year of the
Company shall be from July 1 through June 30 of each year, except that in any
year in which the Company
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shall commence or terminate for Federal income tax purposes, the then current
taxable year shall either begin on the date of commencement or end on the date
of such termination, as the case may be.
ARTICLE IX. REPORTS; MEETINGS
Section 9.1. Reports. (a) Within thirty (30) days after the last day
of each month during the term of the Company the Managing Member shall prepare
and send to each Member (i) a report of any significant Company activities
conducted during such month, and (ii) a report showing the cash flow for the
Company for such month together with financial statements that are in form
satisfactory to the Members.
(b) As soon as reasonably practicable after the end of each taxable
year of the Company, but in any event not later than ninety (90) days
thereafter, the Managing Member shall cause (i) an audit to be made by the
independent accountants for the Company, covering the assets, liabilities and
net worth of the Company, and its cash flows during such taxable year, and all
matters customarily included in such audits and (ii) to be delivered to the
Members within five (5) days following the completion thereof, the following
financial statements with respect to the Company: a balance sheet and statement
of income and expense, changes in financial position, Members' capital position
and operating revenues and required payments as at the end of and for such
taxable year, together with the report of such accountant covering the results
of such audit and certifying such financial statements as having been prepared
in accordance with GAAP.
(c) Within either (i) fourteen (14) days after completion of the
audit referred to in Section 9.1(b) hereof or (ii) ten (10) days before or after
the filing date for the Company's Federal income tax return, as extended, the
Managing Member shall deliver or cause to be delivered to each Member the
appropriate Schedule K-1 (or any replacement thereof).
(d) The Managing Member shall, as promptly as practicable, take all
actions reasonably necessary and deliver all documents or other information to
the accountants of the Company so that such accountants shall prepare, at the
Company's cost and expense, all Federal, state and local income tax returns
which the Company is required to file, and any Federal, state and local
information returns which the Company is required to furnish to Members. The
Managing Member shall deliver copies of all such filings (and any documentation
and information relating thereto) to all of the Members. In addition, the
Managing Member shall supply each Member on or before the last day of February
in each year with such unaudited information as each such Member requires in
connection with the payment of estimated taxes.
Section 9.2. Meetings. Any Member shall have the right to call a
meeting of the Members (at a location in the State of Ohio determined by the
Managing Member) by giving to the other Members no less than twenty (20) days
prior written notice of the date and time of such meeting, which notice shall
establish the agenda for such meeting.
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ARTICLE X. TRANSFERS BY MEMBERS
Section 10.1. Transfers by Members. (a) No Member shall directly or
indirectly assign, sell, mortgage, pledge, hypothecate, or otherwise dispose of
or encumber (any of such actions being herein collectively referred to in this
Article X as a "transfer", and the Member taking any such action being referred
to in this Article X as a "transferor"), all or any part of its Interest or its
share of allocations under this Agreement (including any indirect transfer by
sale of stock, partnership interest, assets or merger), except as provided in
Sections 10.1(b), 10.1(c), 10.2, 15.1(c), 15.1(d) and 15.2(c) hereof, without
the prior written consent of all of the Members, which consent may be given or
withheld in the sole and absolute discretion of any of the Members.
(b) At any time during the term of this Agreement any Member
other than the original Managing Member may transfer all or any portion of its
respective Interest to an Affiliate of itself provided the transferor shall have
first provided the remaining Members with the following:
(i) An agreement with the Affiliate transferee wherein the
Affiliate transferee agrees to be bound by and comply with or cause
compliance with all of the terms and provisions of this Agreement; and
(ii) Conclusive evidence satisfactory in all respects to the
remaining Members that the transferor and the transferee are in fact
Affiliates.
(c) At any time during the term of this Agreement any Member
may transfer all or any portion of its respective Interest to a Permitted
Transferee provided the selling Member ("Selling Member") shall have first
complied with the following provisions:
(i) The Selling Member must give written notice (the "First
Offer Notice") to the non-selling Member (the "Non-Selling Member") which
contains all of the financial and other material terms and conditions
under which the Selling Member would be willing to sell its Interest
including, without limitation: (v) the sales price, which must be payable
in lawful money of the United States and method of payment, (w) the
required down payment, (x) the time and place of closing which must not be
less than one hundred twenty (120) days nor more than one hundred eighty
(180) days after the date of the receipt of the First Offer Notice by the
Non-Selling Member, (y) any indemnity to be given by the Selling Member,
and (z) the party responsible for paying transfer taxes (if any). The
Selling Member shall also provide the Non-Selling Member with reasonable
information, if known, as to the identity and financial condition of any
third party offeror which information shall include, without limitation,
evidence as to the character, reputation and credit worthiness of any
third party offeror. The Selling Member agrees to provide the Non-Selling
Member with such other information regarding the First Offer Notice as it
may reasonably request.
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(ii) Within thirty (30) days after receipt of the First Offer
Notice the Non-Selling Member shall have the right, exercisable by written
notice given to the Selling Member, to elect to purchase all, but not less
than all, of the Interests proposed to be transferred at the price and on
the terms of such offer, as set forth in the First Offer Notice, pro rata
in proportion to the Interests of the Non-Selling Members if there is more
than one Non-Selling Member. The failure or refusal of the Non-Selling
Members to make such election within such thirty (30) day period shall be
deemed to constitute a rejection of such offer. In the event any
Non-Selling Member elects to purchase the Interests proposed to be
transferred, such Non-Selling Member and the Selling Member shall close
the transfer of all but not less than all of the Interests in accordance
with the terms of the First Offer Notice within the time period set forth
in the First Offer Notice.
(iii) If the Non-Selling Members shall not have elected to
exercise any right to purchase as set forth in this Section 10.1(c),
whether pursuant to notice to such effect to the Selling Member or by
reason of the failure or refusal of the Non-Selling Member to make such
election to purchase within the thirty (30) day period set forth in
Section 10.1(c)(ii), then the Selling Member shall have the right to
transfer the Interests proposed to be transferred to a Permitted
Transferee at any time prior to the expiration of the one hundred eighty
(180) day period after the date of the First Offer Notice at a price and
otherwise on terms no less favorable to the Selling Member than those
contained in the First Offer Notice. In the event that any such
transaction is consummated within such one hundred eighty (180) day
period, the purchaser shall be admitted to the Company as a Member. In the
event that (x) the Selling Member fails to consummate any such transaction
within such one hundred eighty (180) day period and thereafter desires to
make a transfer of its Interest in accordance with this Section 10.1(c) or
(y) the Selling Member wants to sell all or part of its Interests on terms
materially different from that set forth in the First Office Notice, the
Selling Member shall be required to make another written offer to the
Non-Selling Member in accordance with the provisions of this Section
10.1(c) and the rights of the Non-Selling Member provided for herein shall
be reinstated.
(d) In the event that any Person shall acquire all or any part
of any Interest of a Member pursuant to this Section 10.1, the following
provisions shall apply:
(i) if such Person is an entity classified for U.S. tax
purposes as a partnership, the provisions of this Section 10.1 shall apply
to the transfer of any partnership interest therein in the same manner and
to the same extent as they apply to transfers of Members' Interests;
(ii) if such Person or if any partner in a partnership
referred to in clause (i) above is a Closely Held Corporation, the
provisions of this Section 10.1 shall
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apply to the transfer of any voting stock in such corporation in the same
manner and to the same extent as such provisions apply to transfers of
Members' Interests;
(iii) such Person shall be bound by the provisions of this
Agreement and shall assume in writing all of the obligations of the
transferor Member under this Agreement, the Fundraising Agreement, each
Management Agreement and the Agency Agreement; and
(iv) such Person shall execute such documents and instruments
as may be required by applicable law to evidence and confirm the
acquisition of any Interest of a Member by such Person.
(e) Each Member agrees that any purported transfer which is
not in compliance with this Section 10.1 or Article 15 hereof shall be null and
void. No Person to whom any Interest is transferred shall make any further
disposition except in accordance with the terms and conditions hereof. No Person
purporting to acquire any Member's Interest shall be a Member of the Company
unless such Person shall be admitted as a Member and no Person purporting to
acquire any Member's Interest shall have any right to participate in the
management of any Company affairs or business unless such Person shall be
admitted as a Member pursuant to this Article 10. All costs and expenses
incurred by the Company in connection with any transfer of an Interest,
including any filing or recording costs and the fees and disbursement of
counsel, shall be paid by the transferring Member.
Section 10.2. Management Agreement Buyout. Notwithstanding anything
in this Agreement to the contrary, in the event that either Management Agreement
is terminated by ACS, AFM shall purchase Edison's Interest in the Company for an
amount equal to $3,500,000.00. The closing of such purchase shall occur (a) in
the event of a termination of either Management Agreement by ACS for any reason
other than pursuant to the terms of Section 13.1 thereof, no later than the date
which is thirty (30) days after the termination of such Management Agreement
(time being of the essence) and (b) in the event of a termination of either
Management Agreement by ACS pursuant to the terms of Section 13.1 thereof, no
later than the date which is two (2) years after the termination of such
Management Agreement (time being of the essence). At such closing, AFM shall
deliver to Edison $3,500,000.00 by certified or bank check or by wire transfer
of immediately available federal funds to an account designated by Edison. All
stamp and transactional taxes (not including income or franchise taxes) payable
in connection with such purchase shall be paid by AFM.
Section 10.3. Bankruptcy. In the event of the Bankruptcy of any
Member, the remaining Members not affected by such Bankruptcy shall have the
option within ninety (90) days of the occurrence of the event constituting a
Bankruptcy hereunder to institute proceedings necessary or appropriate under
Applicable Law to purchase (on a pro rata basis) the Interest of the Member
affected by such Bankruptcy. Any purchase of the Interest of the Member affected
by such Bankruptcy in accordance with the immediately preceding sentence shall
be for an
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amount of cash equal to the aggregate Percentage Interest (at the time of
Bankruptcy) of the Member affected by such Bankruptcy, multiplied by the Fair
Market Value (determined in accordance with Article XIII hereof) of the Company
assets. The purchasing Members under this Section 10.3 may exercise said
purchase option by written notice to the selling Member given within thirty (30)
days following the determination of the Fair Market Value of the Company assets.
The date of purchase shall be designated by the purchasing Member in such notice
and shall be a date not less than ninety (90) days and not more than one hundred
eighty (180) days after such notice. Notwithstanding anything to the contrary
contained in this Agreement, from and after the date of the occurrence of any
event constituting a Bankruptcy of a Member pursuant to this Agreement, the
Member affected by such Bankruptcy shall have no further right, power or
authority to make any decision or election on behalf of the Company or to
participate in the overall management and control of the business and affairs of
the Company.
Section 10.4. Void Assignments. Notwithstanding anything to the
contrary in this Agreement, any assignment of a Member's Interest in the Company
(a) to a Person prohibited by law from holding such Interest or (b) in violation
of the provisions of this Agreement, shall be null and void and shall not bind
the Company.
Section 10.5. Obligations and Rights of Transferee. A Person
acquiring an interest in the Company shall have only such rights, and shall be
subject to all the obligations, as are set forth in this Agreement; and, without
limiting the generality of the foregoing, such Person shall not have any right
to partition of the Company's assets or to have the value of its interest
ascertained or receive the value of such interest, or, in lieu thereof, profits
attributable to any right in the Company, except as herein set forth.
Section 10.6. New Managing Member. In the event that the Managing
Member transfers all of its Interests to a transferee pursuant to this Article
X, then, notwithstanding anything to the contrary contained in this Agreement,
such transferee shall be the Managing Member subject to the same rights,
responsibilities and restrictions regarding management acts as set forth herein.
ARTICLE XI. DISABLING EVENT
Section 11.1. Disabling Event; No Right of Withdrawal. (a) Upon the
occurrence of a Disabling Event with respect to a Member, the Company shall not
dissolve but shall continue in accordance with the terms of this Agreement.
(a) A Disabled Member Successor shall have the rights of an assignee
of the Disabled Member's Interest, but shall not be admitted to the Company as a
Member.
Section 11.2. No Right of Withdrawal. (a) No Member shall have the
right to terminate this Agreement or dissolve the Company by such Member's
express will.
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(b) No Member shall have any right to retire, resign, or otherwise
withdraw from the Company and have the value of such Member's Interest
ascertained and receive an amount equal to the value of such Interest.
ARTICLE XII. DISSOLUTION.
Section 12.1. Dissolution Events. The Company shall dissolve upon,
but not before, the first to occur of:
(i) the expiration of the term of the Company; or
(ii) the total loss of the Building or the sale or transfer or
condemnation of all or substantially all of the Company assets; or
(iii) the unanimous written consent of the Members; or
(iv) if, in the event that there occurs the Bankruptcy or
dissolution of any Member, the business of the Company is not continued
pursuant to the written consent of a majority in interest of the remaining
Members (by Percentage Interests) within one hundred eighty (180) days
following the occurrence of such Bankruptcy or dissolution.
Upon dissolution, the Liquidating Member, on behalf of the Company,
shall immediately commence to wind up the affairs of the Company and shall
proceed with reasonable promptness to liquidate the business of the Company. To
the extent that the Company is not completely liquidated within twelve (12)
months from the date of election to dissolve, the remaining assets shall
forthwith be disposed of at a public sale.
The rights and obligations of the Members shall continue during the
period of the winding up of the affairs of the Company.
Section 12.2. Distribution of Assets Upon Dissolution.
(a) Upon the dissolution of the Company pursuant to Section 12.1
hereof, the Liquidating Member shall proceed diligently to wind up the affairs
of the Company and distribute its assets in accordance with the provisions of
Section 12.2(d) hereof.
(b) All saleable assets of the Company may be sold in connection
with any liquidation at public or private sale at such price and upon such terms
as the Liquidating Member may deem advisable. Any Member or any partnership,
corporation or other firm in which any Member is in any way interested may
purchase assets at such sale, provided that such purchase is on commercially
reasonable terms.
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(c) Profits and losses of the operations of the Company shall be
determined as of the end of the period of winding up in accordance with the
provisions of this Agreement. No Member shall have an obligation to make a
contribution or Additional Capital Contribution to restore any negative balance
in its Capital Account.
(d) Upon the dissolution of the Company, the assets of the Company
shall be distributed in the following order of priority:
(i) first, to the payment of any debts and liabilities of the
Company to third parties which shall then be due and payable;
(ii) next, to the establishment of a reserve which the
Liquidating Member deems necessary to provide for any contingent or
unforeseen liabilities or obligations of the Company. At the expiration of
such period of time as the Liquidating Member reasonably deems advisable,
the balance remaining in any such reserve after payment of such
liabilities and obligations as deemed reasonably necessary by the
Liquidating Member shall be distributed in the manner set forth in this
Section 12.2(d); and
(iii) the balance, if any, to the Members in accordance with
their respective Percentage Interests.
ARTICLE XIII. APPRAISAL
Section 13.1. Appraisal.
In the event that it becomes necessary to determine the Fair Market
Value, it shall be determined in accordance with the following procedure:
(a) The Non-defaulting Member shall give the Defaulting Member a
Fair Market Value Notice.
(b) The Defaulting Member shall give the Non-defaulting Member a
Defaulting Member's Notice within thirty (30) days after the Defaulting Member's
receipt of the Fair Market Value Notice. If the Defaulting Member in the
Defaulting Member's Notice accepts the Non-defaulting Member's Determination or
if the Defaulting Member fails or refuses to give the Defaulting Member's Notice
as aforesaid, the Defaulting Member shall be deemed to have accepted the
Non-defaulting Member's Determination for and as the Fair Market Value. If the
Defaulting Member in the Defaulting Member's Notice disputes the Non-defaulting
Member's Fair Market Value Notice, the Defaulting Member shall deliver to the
Non-defaulting Member, within thirty (30) days after the Defaulting Member's
receipt of the Fair Market Value Notice, the Defaulting Member's Determination
as determined by the Defaulting Member's Appraiser, together with a copy of the
appraisal prepared by the Defaulting Member's Appraiser.
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(c) The Non-defaulting Member shall give the Defaulting Member a
Non-defaulting Member's Notice within thirty (30) days after the Non-defaulting
Member's receipt of any Defaulting Member's Determination. If the Non-defaulting
Member in the Non-defaulting Member's Notice accepts the Defaulting Member's
Determination or if the Non-defaulting Member fails or refuses to give the
Non-defaulting Member's Notice as aforesaid, the Non-defaulting Member shall be
deemed to have accepted the Defaulting Member's Determination. If the
Non-defaulting Member in the Non-defaulting Member's Notice disputes the
Defaulting Member's Determination, either (i) if the respective estimates of the
Fair Market Value set forth in the Defaulting Member's Determination and the
Non-defaulting Member's Determination vary such that the amount set forth in the
greater of the two determinations is 105% or less of the amount set forth in the
lesser of the two determinations, or if the two determinations are equal, then,
the Fair Market Value shall be deemed to be the arithmetic average of the two
determinations, or (ii) if the respective estimates of the Fair Market Value set
forth in the Defaulting Member's Determination and the Non-defaulting Member's
Determination vary by more than 5%, the Non-defaulting Member shall appoint the
Non-defaulting Member's Appraiser. If there shall be a Mutual Determination
within thirty (30) days after the Defaulting Member's receipt of the
Non-defaulting Member's Notice in the case of a dispute, such Mutual
Determination shall be final and binding upon the parties. If the Non-defaulting
Member's Appraiser and the Defaulting Member's Appraiser shall be unable to
reach a Mutual Determination within said thirty (30) day period, then the
Defaulting Member's Appraiser and the Non-defaulting Member's Appraiser shall
jointly select the Third Appraiser whose fee shall be borne equally by the
Non-defaulting Member and the Defaulting Member. In the event that the
Non-defaulting Member's Appraiser and the Defaulting Member's Appraiser shall
fail to jointly agree on the designation of the Third Appraiser within five (5)
days after they are requested to do so by either party, then the parties agree
to allow the American Arbitration Association or any successor organization to
designate the Third Appraiser in accordance with the rules, regulations and
procedures then existing of the American Arbitration Association or any
successor organization.
(d) The Third Appraiser shall conduct such hearings and
investigations as he may deem appropriate and shall, within thirty (30) days
after the date of designation of the Third Appraiser, choose either the
Non-defaulting Member's or the Defaulting Member's Determination, and such
choice by the Third Appraiser shall be conclusive and binding upon the
Non-defaulting Member and the Defaulting Member. Each party shall pay its own
counsel fees and expenses, if any, in connection with any arbitration under this
Section 13.1, including the expenses and fees of any appraiser selected by it in
accordance with the provisions of this Section 13.1 and each party shall
otherwise share equally any and all costs incurred in connection with the
appraisal. Any appraiser appointed pursuant to this Section 13.1 shall be an
independent real estate appraiser with at least ten (10) years' experience in
valuation of properties which are similar in character to the Premises and
located in Dayton, Ohio.
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ARTICLE XIV. REPRESENTATIONS AND WARRANTIES
Section 14.1. Representations and Warranties of AFM. AFM hereby
represents and warrants to Edison that on and as of the date of this Agreement:
(a) Organization and Qualification of AFM; Authority. AFM is duly
organized, validly existing as a not-for-profit corporation and in good standing
under the laws of the State of Ohio, has full power and authority to own its
Interest in the Company in and exercise its rights as a Member of the Company
and to conduct the business proposed to be conducted by it, and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business proposed to be conducted by it makes such
qualification required or necessary for the conduct of the business proposed to
be conducted. Prior to the date hereof, AFM has delivered to Edison complete and
correct copies of its Organizational Documents, and none of such Organizational
Documents have been terminated, modified or amended and each Organizational
Document is in full force and effect.
(b) Licenses. AFM holds all licenses, franchises, permits, consents,
registrations, certificates, orders, qualifications, authorizations,
determinations, declarations, filings and other approvals (including, without
limitation, those relating to environmental matters, public and worker health
and safety, buildings, highways or zoning) (individually, a "License" and
collectively, "Licenses") required for the ownership of its Interest in the
Company and the conduct of its business as now being conducted, and is operating
in compliance therewith. AFM is in compliance with all laws, regulations, orders
and decrees applicable to it. No event has occurred which permits, or after
notice or lapse of time or both would permit, the revocation or termination of
any License. AFM has no knowledge of any fact that is likely to result in the
denial of an application or renewal, or the revocation, modification, nonrenewal
or suspension of any of the Licenses. Schedule 1 to this Agreement (i) sets
forth a true, correct and complete list of all Licenses required to be procured
for the development, construction and operation of the School at the Premises
and (ii) contains copies of all such Licenses issued as of the date hereof or
copies of receipts from the City of Dayton Building Department evidencing such
Licenses, and all such Licenses are current and in full force and effect.
(c) Corporate and Governmental Authorization; No Contravention. The
(i) execution, delivery and performance by AFM of the Transaction Documents to
which it is a party and (ii) making of the AFM Contribution pursuant to this
Agreement are within AFM's power, having been duly authorized by all necessary
corporate action on the part of AFM; do not require any License, authorization,
approval, qualification or formal exemption from, or other action by or in
respect of, or filing of a declaration or registration with, any Governmental
Authority; do not contravene or constitute a default under or violation of (w)
any provision of applicable law or regulation of any Governmental Authority, (x)
the Organizational Documents of AFM, (y) any agreement, contract, note,
mortgage, lease, license or instrument (or require the consent of any Person
under any agreement that has not been obtained) to which AFM is a party
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or by which it or any of its properties is bound, or (z) any judgment,
injunction, order, decree, or other instrument binding upon AFM.
(d) Consents. Each and every consent of any lender, shareholder,
beneficiary, tenant, creditor, investor, Governmental Authority or other Person
which is required of AFM in order for AFM (i) to enter into this Agreement or
any other Transaction Document or (ii) to consummate the transactions
contemplated under this Agreement or any other Transaction Document has been
obtained.
(e) Validity and Binding Effect. Each of the Transaction Documents
has been and will be duly executed and delivered by AFM and is a legal, valid
and binding agreement of AFM, enforceable against AFM in accordance with its
terms, except for (i) the effect upon the Transaction Documents of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally and (ii) limitations imposed by a
court of competent jurisdiction under general equitable principles upon the
specific enforceability of any of the remedies, covenants or other provisions of
the Transaction Documents and upon the availability of injunctive relief or
other equitable remedies.
(f) Litigation; Insolvency; Defaults. Except as set forth in
Schedule 2 to this Agreement, there is no action, suit, labor dispute,
proceeding (including arbitration), investigation or settlement pending or, to
the knowledge of AFM, threatened against the Premises or AFM, before or by any
court or arbitrator or any Governmental Authority. AFM is not in violation of,
or in default under (and there does not exist any event or condition which,
after notice or lapse of time or both, would constitute such a default under),
any term of AFM's Organizational Documents, or any term of any agreement,
instrument, judgment, decree, order, statute, injunction, governmental
regulation, rule or ordinance (including without limitation, those relating to
zoning, city planning or similar matters) applicable to the Premises or AFM. AFM
has not made a general assignment for the benefit of creditors, filed any
voluntary petition in bankruptcy or suffered the filing of any involuntary
petition in bankruptcy by any of its creditors, suffered the appointment of a
receiver to take possession of all, or substantially all, of its assets,
suffered the attachment or other judicial seizure of all, or substantially all,
of its assets, or made an offer of settlement, extension or composition to its
creditors generally.
(g) ERISA. The assets of AFM do not constitute, and have never
constituted, "plan assets" of any employee benefit plan or other entity that is
subject to ERISA.
(h) Broker's or Finder's Commissions. No broker, finder, placement
agent or similar person has been engaged by AFM in connection with AFM's Capital
Contribution or any other transaction contemplated by the Transaction Documents.
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(i) Environmental Regulation.
(i) True, correct and complete copies of the most recent
environmental reports (the "Environmental Reports") relating to the
Premises, which were prepared by, for or at the direction of AFM, have
previously been delivered or made available to Edison, and each such
Environmental Report is identified in Schedule 3 to this Agreement.
(ii) AFM has no knowledge that AFM has any liability under any
Environmental Law or common law cause of action relating to or arising
from environmental conditions at the Premises. The Premises complies with
all applicable Environmental Laws. Neither AFM nor any other Person has
entered into or been subject to any judgment, consent decree, compliance
order, or administrative order with respect to any environmental or health
and safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim
with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law with respect to the Premises.
(iii) Neither AFM nor any other Person has ever generated,
transported, used, stored, treated, disposed of, or managed any Hazardous
Waste at the Premises. AFM has no knowledge of any Release or Threat of
Release of a Hazardous Material at the Premises. There are no underground
storage tanks on the Premises. No Lien has been imposed by any
Governmental Authority on the Premises in connection with the presence of
any Hazardous Material.
(j) Properties and Assets. AFM is the owner of the lessee's interest
under the Ground Lease. The Premises and AFM's interest in the Ground Lease are
free and clear of all Liens, liabilities, claims, debts, exceptions, options,
security interests, assessments, charges, impositions, levies, taxes and all
other types of encumbrances, except for Permitted Exceptions. Schedule 4
identifies each title insurance policy and commitment for title insurance issued
to AFM. No default by AFM exists under any of the provisions of the Ground
Lease, and there are no conditions or circumstances which, with the giving of
notice or the passage of time or both, would constitute a default by AFM under
the Ground Lease. A true and complete copy of the Ground Lease has been
delivered to Edison. Except as set forth on Schedule 5 attached hereto:
(i) the Ground Lease is valid and enforceable in accordance
with its terms (subject to bankruptcy, insolvency and other laws of
general application relating to enforcement of the rights of creditors and
to the limitations imposed by general principles of equity) and is in full
force and effect. AFM has not sent a notice of default to the Ground
Lessor, AFM has not received a written notice of default from the Ground
Lessor, AFM has no knowledge of any default under the Ground Lease, and
there exists no condition or circumstance which, with the passage of time
or the giving of notice or both, would constitute a default under the
Ground Lease;
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(ii) AFM has assigned, pledged, mortgaged, encumbered or
hypothecated none of its rights or interests under the Ground Lease; and
(iii) All of the contingencies set forth in Sections 3.1 and
3.2 of the Ground Lease have been satisfied and fulfilled by AFM and
Ground Lessor, respectively.
(k) Purchase Options and Leases.
(i) Except as set forth in Section 21 of the Ground Lease, AFM
has not granted any Person a right or option or first refusal to purchase
or acquire the Premises or any portion of the Premises or any of its
rights or interests under the Ground Lease.
(ii) Attached as Schedule 6 to this Agreement is a list of any
and all (x) leases, supplemental agreements, subleases, licenses,
concessions and other agreements of use or occupancy affecting the
Premises that have been entered into by AFM (as lessor, lessee, licensor,
developer or grantor) on or prior to the date of this Agreement, including
all modifications or amendments to such agreements (collectively,
"Leases"; each person entitled to the possession, use or occupancy of the
Premises or a portion thereof, under any of the Leases is herein referred
to as a "Tenant") and (y) agreements of surety or guaranty with respect to
the performance of each such Tenant under its respective Lease, and all
modifications and amendments to such agreements of surety or guaranty.
(iii) AFM has delivered or made available to Edison true and
correct copies of all of the Leases.
(iv) No Tenant has any right or option to renew or extend the
term of its Lease or to expand into additional space except as set forth
in the Leases.
(v) Each Lease has been duly executed and delivered by, and is
a binding obligation of, the applicable Tenant, and each Lease is in full
force and effect. Each Lease constitutes the entire agreement between AFM
and Tenant pertaining to the premises demised thereunder, and there are no
amendments, modifications, supplements, arrangements, side letters or
understandings, oral or written, of any sort, modifying, amending,
altering, supplementing or changing the terms of any Lease.
(vi) All obligations of AFM under each Lease requiring
performance on or before the date of this Agreement have been performed,
and no event has occurred and no condition exists that, with the giving of
notice or lapse of time or both, would constitute a default by AFM or the
Tenant under any Lease.
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(vii) There are no offsets or defenses that any Tenant has
against the full enforcement of its Lease by AFM.
(viii) To the knowledge of AFM, no Tenant has assigned,
transferred or hypothecated its Lease or any interest therein or subleased
all or any portion of the premises demised under the Lease.
(ix) All obligations of AFM with respect to the payment of
leasing brokerage, finders fees, leasing commissions or other similar fees
or commissions which are due prior to the date of this Agreement have been
satisfied in full and no such fees or commissions are outstanding. In
addition to and not in limitation of any other rights hereunder, AFM
agrees that it will indemnify and hold harmless Edison and Edison's
shareholders, officers, directors, employees and agents from and against
any and all claims, demands or liabilities for broker's, finder's, leasing
agent's or other similar fees or commissions.
(x) AFM has assigned, pledged, mortgaged, encumbered or
hypothecated none of its rights under the Leases.
(l) Operating Contracts. Except as set forth on Schedule 7 (those
contracts set forth on Schedule 7 are collectively referred to as the "Operating
Contracts"), AFM has not entered into any and there are no other material
contracts or agreements which impose obligations upon AFM relating to the
Premises as of the date of this Agreement. AFM has delivered to Edison, true and
complete copies of each of the Operating Contracts. Each of the Operating
Contracts is in full force and effect and has not been amended, modified or
supplemented. To the knowledge of AFM, there is no existing default or state of
facts which, with the passage of time or the giving of notice or both, would
constitute a default by AFM or any other party to any Operating Contract, under
any of the Operating Contracts.
(m) Premises Compliance with Laws. The planned improvements on the
Premises including, without limitation, the School, to the extent designed, have
been designed in compliance with all Applicable Laws including, without
limitation, those relating to zoning, land use, building, and environmental
matters. AFM has timely complied with all of the obligations and requirements
set forth in the Dayton Zoning Certificate.
(n) Taxes/Tax-Exempt Status. AFM has filed or obtained extensions of
all federal, state, local and foreign income, excise, franchise, real estate,
sales and use and other tax returns required by law. No audits or investigations
are pending or, to the knowledge of AFM, threatened with respect to any tax
returns or taxes of AFM. AFM has received all certifications and approvals from
the IRS required for its tax-exempt status and has not engaged in any act or
conduct which violates or would reasonably be expected to violate its tax-exempt
status.
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(o) No Solicitation of Other Offers. Neither AFM nor any of its
representatives, has, directly or indirectly, solicited, encouraged, assisted,
initiated discussions or engaged in negotiations with, provided any information
to, or entered into any agreement or transaction with, any person relating to
the possible acquisition of the Premises or the leasehold interest under the
Ground Lease.
(p) Condemnation. There is no pending or, to the knowledge of AFM,
threatened condemnation, taking, expropriation, eminent domain or similar
proceeding affecting all or any portion of the Premises or AFM's leasehold
interest under the Ground Lease, and AFM has not received any written notice of
any such proceeding.
(q) Insurance. Schedule 8 attached hereto and made a part hereof sets
forth all of the insurance policies currently in effect with respect to the
Premises and the information contained on Schedule 8 is true, correct and
complete. All such insurance policies have the Company as the named insured.
(r) Violations. AFM has not received any written notice that there
exists any violation of (i) any restriction, condition or agreement contained in
any easement, restrictive covenant or any similar instrument or agreement
recorded against the Premises or any portion thereof or (ii) any applicable law
relating to the Premises or any portion thereof. To the best knowledge of AFM,
there is no such violation as described in (i) or (ii) above. To the best
knowledge of AFM, AFM is in compliance with all applicable laws, statutes,
ordinances and regulations, whether federal, state or local, relating to such
entities or their businesses, properties, assets or operations.
(s) Tax Assessments. Copies of current real estate tax bills with
respect to the Premises have been delivered to Edison. Except as set forth on
Schedule 9, no application or proceeding initiated by AFM or by any Governmental
Authority or third party from which AFM has received notice is pending with
respect to a reduction of or an increase in any such real estate taxes. AFM has
not received any written notice of or otherwise been made aware of (i) any
special tax or assessment to be levied or proposed to be levied against the
Premises or (ii) any change or proposed change in the tax assessment of the
Premises except as set forth on Schedule 9 to this Agreement.
Section 14.2. Representations and Warranties of Edison. Edison hereby
represents and warrants to AFM that on and as of the date of this Agreement:
(a) Edison is duly organized and validly existing as corporation in
good standing under the laws of the State of Delaware, has full power and
authority to enter into this Agreement, and is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction in which the
character of the business proposed to be owned and conducted by it makes such
qualification necessary for the conduct of the business proposed to be owned and
conducted. Edison has delivered to AFM complete and correct copies of the
Organizational
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Documents of Edison, and such Organizational Documents have not been terminated,
modified or amended and are in full force and effect.
(b) Corporate and Governmental Authorization; No Contravention(b). The
(i) execution, delivery and performance by Edison of the Transaction Documents
to which it is a party and (ii) the making of the Edison Contribution pursuant
to this Agreement are within Edison's power, having been duly authorized by all
necessary action on the part of Edison, do not require any License,
authorization, approval, qualification or formal exemption from, or other action
by or in respect of, or filing of a declaration or registration with, any
Governmental Authority; do not contravene or constitute a default under or
violation of (w) any provision of applicable law or regulation of any
Governmental Authority, (x) the Organizational Documents of Edison, (y) any
agreement (or require the consent of any Person under any agreement that has not
been obtained) to which Edison is a party or by which it or any of its
properties is bound, or (z) any judgment, injunction, order, decree or other
instrument binding upon Edison.
(c) Consents. No consent of any lender, partner, shareholder,
beneficiary, tenant, creditor, investor, Governmental Authority or other Person
is required in order for Edison (i) to enter into this Agreement or any other
Transaction Document to which it is a party and (ii) to consummate the
transactions contemplated under this Agreement or any other Transaction Document
to which it is a party.
(d) Validity and Binding Effect. Each of the Transaction Documents to
which Edison is a party has been duly executed and delivered by Edison, as
applicable, and is a legal, valid and binding agreement of Edison enforceable
against Edison in accordance with its terms, except for (i) the effect upon said
Transaction Documents of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the rights of creditors generally
and (ii) limitations imposed by a court of competent jurisdiction under general
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions of said Transaction Documents and upon the
availability of injunctive relief or other equitable remedies.
(e) Broker's or Finder's Commissions. No broker, trader, placement
agent or similar person has been engaged in connection with any transaction
contemplated by the Transaction Documents.
Section 14.3. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement or the Transaction
Documents or made in writing by or on behalf of a party hereto in connection
with the transactions contemplated by this Agreement or the Transaction
Documents shall survive for a period of six (6) months following the execution
and delivery of this Agreement; provided, however, that (a) the representations
and warranties contained in Sections 14.1(a), 14.1(c), 14.1(h), 14.2(a),
14.2(b), and 14.2(e) shall survive indefinitely, (b) the representations and
warranties contained in Sections 14.1(j), 14.1(k), shall survive six (6) months
beyond the term of the Ground Lease or the applicable Lease and (c)
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the representations and warranties set forth in Section 14.1(g) hereof shall
survive until the expiration of the applicable statute of limitations.
ARTICLE XV. DEFAULTS AND REMEDIES
Section 15.1. AFM Defaults. (a) Each of the following events or
occurrences shall be an "AFM Default":
(i) A breach of any material representation or warranty made
by AFM under this Agreement;
(ii) The failure of AFM to perform any of its obligations or
covenants under this Agreement including, without limitation, any of
its obligations as the Managing Member and (x) such obligation or
covenant is material in nature and/or (y) such failure, either by
itself or combined with any other failure of AFM to perform its
obligations or covenants hereunder, has a material adverse effect on
the Company, any Member's Interest or the operation of the School;
(iii) The failure of AFM to make any capital contribution
which may be required to be made by AFM pursuant to the terms of this
Agreement including, without limitation, the capital contribution set
forth in Section 3.2 hereof; or
(iv) An AFM Event of Default (as such term is defined in the
Fundraising Agreement) shall have occurred beyond all applicable
notice, grace and cure periods set forth in the Fundraising Agreement,
provided that no Edison Event of Default (as such term is defined in
the Fundraising Agreement) shall have occurred under the Fundraising
Agreement beyond all applicable notice, grace and cure periods set
forth thereunder.
(b) In the event of an AFM Default, Edison shall have the right to (i)
specifically enforce this Agreement against AFM, (ii) recover any actual (but
not consequential) damages resulting therefrom, (iii) exercise any rights and
remedies available to Edison hereunder, at law or in equity and (iv) in the
event of an AFM Default set forth in Section 15.(a)(ii) above, upon notice to
AFM (the "Takeover Notice"), remove AFM as the Managing Member in which event
Edison shall become the Managing Member of the Company and Edison shall have all
of the rights, power and authority of the Managing Member set forth in this
Agreement.
(c) Notwithstanding anything in this Section 15.1 or in any other
section of this Agreement to the contrary, and in lieu of any other rights and
remedies Edison may have hereunder, in the event of a default by AFM as set
forth in Section 15.1(a)(iv) above, Edison shall have the right, upon notice to
AFM, to buy AFM's Interest in the Company for One Dollar ($1.00). The closing of
such purchase of AFM's Interest in the Company shall occur thirty (30) days
after Edison's delivery of the aforesaid notice to AFM. At such closing, AFM
shall execute
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and deliver to Edison any and all agreements and documents reasonably requested
by Edison to consummate the transfer of AFM's Interest in the Company to Edison.
(d) (i) In the event the Company's Accounting Firm determines in
writing that Edison's delivery of the Takeover Notice and its removal of AFM as
the Managing Member will result in AFM losing its tax-exempt status, either
Member (the "Notifying Member") at any time may provide the other Member (the
"Receiving Member") with written notice (the "Buy-Sell Notice") that the
Notifying Member is either willing to sell all of the Interests in the Company
that it owns or buy all of the Interests in the Company that the Receiving
Member owns at a specified price per percentage interest (the "Buy-Sell Price")
which is set forth in the Buy-Sell Notice, which Buy-Sell Price shall be the
Fair Market Value of such Interests.
(ii) The Receiving Member shall, in a written notice given to the
Notifying Member within thirty (30) days after receipt of the Buy-Sell Notice
from the Notifying Member, specify whether it will be (x) a buyer of the
Interests in the Company owned by the Notifying Member or (y) a seller of the
Interests in the Company owned by the Receiving Member, in each case at the
Buy-Sell Price. If the Receiving Member fails to provide such notice, the
Notifying Member shall within thirty (30) days of the expiration of the first
mentioned thirty (30) day period in this Section 15.1(d)(ii) notify the
Receiving Member in writing whether the Notifying Member will sell its Interests
in the Company to the Receiving Member or buy the Interests in the Company owned
by the Receiving Member, in each case at the Buy-Sell Price. In the event that
there is more than one Receiving Member, each such Member (or its designee)
shall have the right to elect to purchase its pro rata portion of the Interests
in the Company of the Notifying Member; provided, however, that in the event
that any Member makes the election under clause (x) above (a "Buying Offeree")
and any other Member makes the election under clause (y) above (a "Selling
Offeree"), the Buying Offeree (or its designee) shall be obligated to purchase
all (but not less than all) of the Interests in the Company of the Notifying
Member and all (but not less than all) of the Interests in the Company of the
Selling Offeree.
(iii) The closing of any purchase and sale pursuant to this Section
15.1(d) shall be held on a Business Day selected by the Member who will be the
buyer (the "Buying Member") of the other Member's Interest in the Company (the
"Disposing Member"), which closing date will not be less than twenty-five (25)
days and not more than seventy-five (75) days following the date of the written
notice from the Receiving Member or the Notifying Member, as the case may be,
setting forth whether it will buy or sell its Interests in the Company. At such
closing, the Disposing Member shall deliver to the Buying Member any documents
with respect to such purchase and sale as the Buying Member may reasonably
request. All stamp and transactional taxes (excluding income or franchise taxes)
payable in connection with such purchase and sale shall be paid by the Disposing
Member. The price (i.e., the price set forth in the original notice from the
Notifying Member) to be paid by the Buying Member shall be payable at the
closing. At such closing the Buying Member shall deliver to the Disposing
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Member the purchase price by certified or bank check or by wire transfer of
immediately available federal funds to an account designated by the Disposing
Member.
(iv) Notwithstanding anything in this Section 15.1(d) to the
contrary, in each case where Edison would be a Buying Member it shall
have the right to designate an Affiliate to exercise its rights under
this Section 15.1(d).
Section 15.2. Edison Defaults. (a) Each of the following events or
occurrences shall be an "Edison Default":
(i) A breach of any material representation or warranty made
by Edison under this Agreement;
(ii) The failure of Edison to perform any of its obligations
or covenants under this Agreement and (x) such obligation or covenant
is material in nature and/or (y) such failure, either by itself or
combined with any other failure of Edison to perform its obligations or
covenants hereunder, has a material adverse effect on the Company, any
Member's Interest or the operation of the School;
(iii) The failure of Edison to make any capital contribution
which may be required to be made by Edison pursuant to the terms of
this Agreement including, without limitation, the capital contribution
set forth in Section 3.1 hereof; or
(iv) An Edison Event of Default (as such term is defined in
the Fundraising Agreement) shall have occurred beyond all applicable
notice, grace and cure periods set forth in the Fundraising Agreement,
provided that no AFM Event of Default (as such term is defined in the
Fundraising Agreement) shall have occurred under the Fundraising
Agreement beyond all applicable notice, grace and cure periods set
forth thereunder.
(b) In the event of an Edison Default, AFM shall have the right to (i)
specifically enforce this Agreement against Edison, (ii) recover any actual (but
not consequential) damages resulting therefrom, and (iii) exercise any rights
and remedies available to AFM hereunder, at law or in equity.
(c) Notwithstanding anything in this Section 15.2 or in any other
section of this Agreement to the contrary, and lieu of any other rights and
remedies AFM may have hereunder, in the event of a default by Edison as set
forth in Section 15.2(a)(iv) above, AFM shall have the right, upon notice to
Edison, to buy Edison's Interest in the Company for One Dollar ($1.00). The
closing of such purchase of Edison's Interest in the Company shall occur thirty
(30) days after AFM's delivery of the aforesaid notice to Edison. At such
closing, Edison shall execute and deliver to AFM any and all agreements and
documents reasonably requested by AMF to consummate the transfer of Edison's
Interest in the Company to AMF.
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ARTICLE XVI. INDEMNIFICATION
Section 16.1. AFM Indemnification. AFM shall indemnify and hold
harmless Edison, its Affiliates, and their respective shareholders, employees,
officers, directors, members, and agents (collectively, the "Edison Indemnified
Parties") from and against any and all losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys' fees) incurred or suffered
by any Edison Indemnified Party in connection with or arising out of (a) any
breach or inaccuracy of any representation made by AFM to Edison hereunder, (b)
third party claims against the Company or any of the Edison Indemnified Parties
in connection with or arising out of any acts or activities relating to the
Premises occurring prior to the date hereof and (c) any Hazardous Materials
found, used, applied, stored or placed on or about the Premises due to any act
or omission of AFM prior to the date hereof.
Section 16.2. Edison Indemnification. Edison shall indemnify and hold
harmless AFM, its Affiliates, and their respective shareholders, employees,
officers, directors, members, and agents (collectively, the "AFM Indemnified
Parties") from and against any and all losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys' fees) incurred or suffered
by any AFM Indemnified Party in connection with or arising out of any breach or
inaccuracy of any representation made by Edison under this Agreement.
Section 16.3. Notice. If any indemnified party is entitled to
indemnification hereunder, such indemnified party shall give prompt notice to
the indemnifying party of any claim or of the commencement of any proceeding
against the indemnified party brought by any third party with respect to which
such indemnified party seeks indemnification pursuant hereto; provided, however,
that the failure so to notify the indemnifying party shall not relieve the
indemnifying party from any obligation or liability. Each indemnifying party
shall have the right, exercisable by giving written notice to an indemnified
party promptly after the receipt of written notice from such indemnified party
of such claim or proceeding, to assume, at the expense of the indemnifying
party, the defense of any such claim or proceeding with counsel reasonably
satisfactory to such indemnified party. The indemnified party or parties will
not be subject to any liability for any settlement made without its or their
consent.
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ARTICLE XVII. MISCELLANEOUS
Section 17.1. Notices.
All notices, demands, consents, offers and other communications
required to be given pursuant to this Agreement by any Member to any other
Member shall be given to all Members and shall be in writing and shall be
considered as properly given or made if sent by delivery against receipt with a
messenger or courier service or by certified or registered mail, return receipt
requested, postage prepaid, or by prepaid telegram addressed to the respective
address of such party as follows:
if to Edison to:
Edison Schools Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
with a copy to:
Coudert Brothers
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to AFM to:
Alliance Facilities Management, Inc.
Xxxxxxxxxx Xxxxx, XX 0xx Xxxxx
Xxxxxx, Xxxx 00000-0000
Attention: President
with a copy to:
Coolidge, Wall, Womsley & Lombard Co., L.P.A.
00 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxx 00000
Attention: Xxx Xxxxxx, Esq.
All notices delivered against receipt or sent by telegram shall be deemed
effective upon receipt and all other notices shall be deemed effective on the
date of receipt indicated on the return receipt (or
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the date of attempted delivery if delivery is refused). Each Member may change
its address or additional addresses for notice by like notice stating its new
address to the Managing Member.
Section 17.2. Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the Members and their respective legal representatives,
successors and permitted assigns.
Section 17.3. Agreement in Counterparts. This Agreement may be executed
in any number of counterparts which together shall constitute one and the same
instrument.
Section 17.4. Rules of Construction. Each Section and subsection of
this Agreement shall be considered severable, and if for any reason any Section
or subsection herein is determined to be invalid and contrary to any existing or
future laws, such invalidity shall not impair the operation or effect the
portions of this Agreement that are valid.
Section 17.5. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
Section 17.6. Captions. Captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision hereof.
Section 17.7. Creditors. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any third party creditors of the
Company.
Section 17.8. Entire Agreement. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties in connection therewith. No covenant, representation or condition not
expressed in this Agreement shall affect or be effective to interpret, change or
restrict the express provisions of this Agreement. No waiver of any of the
provisions of this Agreement shall be valid unless in writing and signed by the
party to be charged and then only to the extent therein set forth.
Section 17.9. Pronouns. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
Section 17.10. Confidentiality. In no event shall any Member or any of
its advisors or representatives issue any press release, advertisement or other
publicity regarding this Agreement or the Company or the transactions
contemplated hereby, or disclose this Agreement or any document ancillary
thereto to any person not a Member, unless the other Member has consented
thereto and to the form and substance of any such statement, announcement or
release.
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Section 17.11. Compensation. No Member (including the Managing Member)
shall be entitled to receive any compensation for services rendered to the
Company.
Section 17.12. Amendments. This Agreement may not be altered, amended
or modified except by an instrument in writing signed by all the Members.
Section 17.13. Further Assurances. The Members shall execute and
deliver such further instruments and do such further acts and things as may be
reasonably required to (a) correct any errors in this Agreement or (b)
consummate more fully the transactions contemplated hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MEMBERS:
EDISON SCHOOLS INC.,
a Delaware corporation
By:_________________________________________
Name:
Title:
ALLIANCE FACILITIES MANAGEMENT, INC.,
an Ohio not-for-profit corporation
By:_________________________________________
Name:
Title:
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ANNEX
Alliance Edison LLC
Annex of U.S. Tax Provisions
A.1 Introduction.
This Annex sets forth principles under which items of income, gain,
loss, deduction and credit shall be allocated among the Members for U.S. federal
income tax purposes. This Annex also provides for the determination and
maintenance of Capital Accounts, generally in accordance with Treasury
Regulations promulgated under Section 704(b) of the Code (all as defined below),
for purposes of determining such allocations.
A.2 Definitions.
For purposes of this Annex, the following terms have the meanings set
forth below. If a capitalized term is used herein but not defined in this
Section A.2, it shall have the meaning ascribed thereto in the Limited Liability
Company Operating Agreement (the "Agreement"), unless the context shall
otherwise indicate.
"Adjusted Capital Account" means, with respect to a Member, such
Member's Capital Account after (i) crediting to such Capital Account any amount
which such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Treasury Regulation Sections 1.704-2(g)(1) and
1.704-2(i)(5); (ii) crediting to such Capital Account the amount, if any, such
Member is unconditionally obligated to contribute to the Company under the
Agreement or applicable law; and (iii) debiting to such Capital Account the
items described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), and
(6). This definition of Adjusted Capital Account is intended to comply with the
provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2, and
will be interpreted consistently with those provisions.
"Adjusted Capital Account Deficit" means, with respect to a Member, the
deficit balance, if any, in that Member's Adjusted Capital Account.
"Capital Account" shall have the meaning set forth in Section A.3.1
hereof.
"Depreciation" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for the year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of the year or other period, Depreciation
will be an amount which bears the same ratio to the beginning Gross Asset Value
as the federal income tax depreciation, amortization or other cost recovery
deduction for the year or other period bears to the
50
beginning adjusted tax basis, provided that if the federal income tax
depreciation, amortization, or other cost recovery deduction for the year or
other period is zero, Depreciation will be determined with reference to the
beginning Gross Asset Value using any reasonable method selected by the Tax
Matters Member.
"Gross Asset Value" means, with respect to any asset, the adjusted
basis of the asset for U.S. federal income tax purposes, adjusted as follows:
(a) The initial Gross Asset Value of any asset contributed (or
deemed contributed under Code Sections 704(b) and 752 and the Treasury
Regulations promulgated thereunder) by a Member to the Company will be
the gross fair market value of the asset on the date of the
contribution, as determined by agreement of the Members.
(b) The Gross Asset Values of all Company assets will be
adjusted to equal the respective fair market values of the assets, as
determined by agreement of the Members, as of (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 Company property as consideration for an interest in the
Company if the Members reasonably determine an adjustment is necessary
or appropriate to reflect the relative economic interests of the
Members in the Company, and (iii) the liquidation of the Company within
the meaning of the Treasury Regulations Section 1.704-1(b)(2)(ii)(g).
(c) The Gross Asset Value of any Company asset distributed to
any Member will be the gross fair market value of the asset, as
determined pursuant to agreement of the Members, on the date of
distribution.
(d) The Gross Asset Values of Company assets will be increased
or decreased to reflect any adjustment to the adjusted basis of the
assets under Code Section 734(b) or 743(b), but only to the extent that
the adjustment is taken into account in determining Capital Accounts
under Treasury Regulations Section 1.704-1(b)(2)(iv)(m), provided that
Gross Asset Values will not be adjusted under this paragraph (d) to the
extent that the Members determine that an adjustment under paragraph
(b) hereof is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment under this paragraph (d).
After the Gross Asset Value of any asset has been determined or adjusted under
paragraphs (a), (b) or (d) hereof, such Gross Asset Value will be adjusted by
the Depreciation taken into account with respect to the asset for purposes of
computing Net Income or Net Loss.
"Net Income" and "Net Loss" mean, for each fiscal year or other period,
an amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (and for this purpose, all
items of income, gain, loss, or deduction required to be
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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 Income
or Net Loss 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 Income or Net Loss, shall
be subtracted from such taxable income or loss;
(c) Gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for U.S.
federal income tax purposes shall be computed by reference to the Gross
Asset Value of the property disposed of (unreduced by any liabilities
attributable thereto), notwithstanding that the adjusted tax basis of
such property differs from its Gross Asset Value;
(d) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such fiscal
year or other period;
(e) Notwithstanding any other provisions of this definition,
any items which are specially allocated pursuant to Sections A.4.2 and
A.4.3 hereof shall not be taken into account in computing Net Income or
Net Loss;
(f) If the Gross Asset Value of any Company asset is adjusted
under paragraphs (b) or (c) of its definition, the adjustment will be
taken into account as gain or loss from disposition of the asset for
purposes of computing Net Income or Net Loss; and
(g) The amounts of the items of Company income, gain, loss or
deduction available to be specially allocated pursuant to Sections
A.4.2 and A.4.3 hereof shall be determined by applying rules analogous
to those set forth above.
"Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1) and shall be determined according to the
provisions of Treasury Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(3).
"Partially Adjusted Capital Account" means, with respect to any Member
and any Company fiscal year (or other period), the Capital Account of such
Member at the beginning of such fiscal
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year (or other period), adjusted for all capital contributions and distributions
during such year (or other period) and all special allocations pursuant to
Sections A.4.2 and A.4.3 with respect to such fiscal year (or other period), but
before giving effect to any allocations of Net Income or Net Loss for such
fiscal year (or other period) pursuant to Section A.4.1(a) or Section A.4.1(b)
hereof.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2) and shall be determined in accordance
with Treasury Regulations Sections 1.704-2(i)(3) and (i)(5).
"Partner Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(1) and shall be determined in accordance with
Treasury Regulations Section 1.704-2(i)(2).
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2) and shall be determined in accordance with
Treasury Regulations Section 1.704-2(d).
"Target Capital Account" means, with respect to any Member and any
Company fiscal year (or other period), an amount (which may be either a positive
or a deficit balance) equal to the hypothetical distribution such Member would
receive pursuant to the following sentence minus the Member's share of
Partnership Minimum Gain determined pursuant to Treasury Regulations Section
1.704-2(g), and minus the Member's share of Partner Nonrecourse Debt Minimum
Gain determined in accordance with Treasury Regulations Section 1.704-2(i)(5),
all computed immediately prior to the hypothetical sale described in the
following sentence. The hypothetical distribution to a Member is equal to the
amount that would be received by such Member if all Company assets were sold for
cash equal to their then Gross Asset Values, all Company liabilities were
satisfied to the extent required by their terms (limited, with respect to each
Company Nonrecourse Liability or Partner Nonrecourse Debt, to the then Gross
Asset Value of the assets securing each such liability), and the net assets of
the Company were distributed in full to the Members pursuant to Section
12(d)(iii) of the Agreement, all as of the last day of such year (or other
period).
"Treasury Regulations" means the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
A.3 Capital Accounts.
A.3.1 The Company shall determine and maintain Capital Accounts.
"Capital Account" shall mean an account of each Member determined and maintained
throughout the full term of the Company generally in accordance with Section 704
of the Code and the capital accounting rules of
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Treasury Regulations Section 1.704-1(b)(2)(iv). Without limiting the generality
of the foregoing, the following rules shall apply:
(a) The Capital Account of each Member shall be credited with (i) an
amount equal to such Member's capital contributions, including cash and the
initial Gross Asset Value of property contributed to the Company by such Member
(net of liabilities that the Company is considered to assume or to which it is
considered to take subject to under Code Section 752) and (ii) such Member's
share of the Company's Net Income (or items thereof, including gross income),
together with items of income or gain specially allocated to such Member
pursuant to Sections A.4.2 and A.4.3.
(b) The Capital Account of each Member shall be debited by (i) the
amount of cash and the then Gross Asset Value of any property distributed to
such Member in kind (net of liabilities assumed by such Member and liabilities
to which such distributed property is subject) and (ii) such Member's share of
the Company's Net Loss (or items thereof), together with items of loss or
deduction specially allocated to such Member pursuant to Sections A.4.2 and
A.4.3.
(c) In determining the amount of any liability for purposes of Sections
A.3.1(a)-(b), Code Section 752(c) and any other applicable provisions of the
Code and the Treasury Regulations will be taken into account.
(d) Upon the transfer by a Member of all or part of an interest in the
Company after the date hereof, the Capital Account of the transferor that is
attributable to the transferred interest shall carry over to the transferee and
the Capital Accounts of the Members shall be adjusted to the extent provided in
Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
(e) Adjustment to such Capital Accounts in respect of Company income,
gain, loss, deduction, and Code Section 705(a)(2)(B) expenditures (or items
thereof) shall be made with reference to the U.S. federal tax treatment of such
items (and, in the case of book items, with reference to the U.S. federal tax
treatment of the corresponding tax items) at the Company level, without regard
to any requisite or elective tax treatment of such items at the Member level.
(f) In the event the Members shall determine that it is prudent to
modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributions or distributed property or which
are assumed by the Company or its Members), are computed in order to comply with
such Treasury Regulations, the Members may make such modification, provided that
it is consistent with the manner that amounts are distributed to Members
pursuant to the Agreement during the existence of the Company and upon the
dissolution of the Company. The Members also shall make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Members and the amount of Company capital reflected on the Company's balance
sheet, as computed for book purposes, in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv)(g).
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(g) No Member shall be required to pay to the Company or to any other
Member or to any other Person any deficit or negative balance which may exist
from time to time in such Member's Capital Account.
A.4 Allocations of Net Income and Net Loss.
A.4.1 In General.
After giving effect to the special allocations set forth in Sections
A.4.2 and A.4.3, and taking into account any change in the Members' respective
percentage ownership interests in the Company pursuant to Section 3.4(b) of the
Agreement, Net Income and Net Loss shall be allocated among the Members in the
following manner:
(a) Net Income. Net Income for any fiscal year shall be allocated to
and among the Members so as to reduce, proportionately, the differences between
their respective Target Capital Accounts and Partially Adjusted Capital Accounts
for such fiscal year. No portion of the Net Income for any fiscal year shall be
allocated to a Member whose Partially Adjusted Capital Account is greater than
or equal to his Target Capital Account for such fiscal year.
(b) Net Loss. Net Loss for any fiscal year shall be allocated to and
among the Members so as to reduce, proportionately, the differences between
their respective Partially Adjusted Capital Accounts and Target Capital Accounts
for such fiscal year. No portion of the Net Loss for any fiscal year shall be
allocated to a Member whose Target Capital Account is greater than or equal to
his Partially Adjusted Capital Account for such fiscal year.
A.4.2 Special Allocations.
The following special allocations shall be made in the following order
and priority:
(a) Minimum Gain Chargeback. Notwithstanding anything to the contrary
in Section A.4, if there is a net decrease in Partnership Minimum Gain during
any fiscal year, then there shall be allocated to each Member items of income
and gain for that year (and, if necessary, subsequent fiscal years) in
proportion to, and to the extent of, an amount equal to such Member's share of
the net decrease in Partnership Minimum Gain (within the meaning of Treasury
Regulations Section 1.704-2(g)(2)), subject to the exceptions set forth in
Treasury Regulations Section 1.704-2(f)(2), (3) and (5). The items to be
allocated will be determined in accordance with Treasury Regulations Section
1.704-2(g). The foregoing is intended to be a "minimum gain chargeback"
provision as described in Treasury Regulations Section 1.704-2(f) and shall be
interpreted and applied in all respects in accordance with the Treasury
Regulations and will be subject to all exceptions provided therein.
(b) Partner Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding
anything to the contrary in Section A.4, if during a fiscal year there is a net
decrease in Partner Nonrecourse
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Debt Minimum Gain (as determined in accordance with Treasury Regulations Section
1.704-2(i)(3)), then, in addition to the amounts, if any, allocated pursuant to
Section A.4.2(a), any Member with a share of that Partner Nonrecourse Debt
Minimum Gain (determined in accordance with Treasury Regulations Section
1.704-2(i)(5)) as of the beginning of the fiscal year shall, subject to the
exceptions set forth in Treasury Regulations Section 1.704-2(i)(4), be allocated
items of income and gain for that fiscal year (and, if necessary, for subsequent
fiscal years) equal to that Member's share of the net decrease in the Partner
Nonrecourse Debt Minimum Gain. The foregoing is intended to be the "chargeback
of partner nonrecourse debt minimum gain" required by Treasury Regulations
Section 1.704-2(i)(4) and shall be interpreted and applied in all respects in
accordance with the Treasury Regulations.
(c) Nonrecourse Deductions. Nonrecourse Deductions for any Company
fiscal year or other period shall be allocated among the Members in accordance
with their Percentage Interests.
(d) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any Company fiscal year or other period shall be specially allocated to the
Member who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulations Section 1.704-2(i)(1).
(e) Qualified Income Offset. If any Member unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain
(consisting of a pro rata portion of each item of Company income, including
gross income, and gain for such year) shall be specially allocated to 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. An allocation pursuant to the foregoing sentence shall
be made only if and to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in Article A.4
have been tentatively made as if this Section A.4.2(e) were not in this Annex.
This allocation is intended to constitute a "qualified income offset" within the
meaning of Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(3) and shall be
construed in accordance with the requirements thereof. In the event any Member
has a deficit Capital Account at the end of any Company fiscal year that is in
excess of the amount, if any, that the Member is obligated to restore under the
Agreement, including any amount that such Member is deemed to be obligated to
restore under Treasury Regulations Section 1.704-2(g)(1) and Section
1.704-2(i)(5), each such Member shall be specially allocated items of Company
income and gain in the amount necessary to eliminate such excess as quickly as
possible.
(f) Basis Adjustments. 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 under Treasury Regulation Section 1.704-1(b)(2)(iv)(m) to be
taken into account in determining Capital Accounts, 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
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56
gain or loss shall be specially allocated to the Members in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such Section of the Treasury Regulations.
A.4.3 Curative Allocations.
(a) Subject to the other provisions of Section A.4.2, any allocations
made under Section A.4.2(e) shall be taken into account in allocating other
items of income, gain, loss and deduction among the Members so that, to the
extent possible, the net amount of such allocations of other items and the
allocations under Section A.4.2(e) to each Member shall be equal to the net
amount that would have been allocated to each such Member if the allocations
under Section A.4.2(e) had not occurred.
(b) Over the term of the Company, allocations under Section A.4.2(a)
are intended generally to offset allocations under Section A.4.2(c), and
allocations under Section A.4.2(b) are intended generally to offset allocations
under Section A.4.2(d). In the event that such offsets will not occur for any
reason, the Members shall have reasonable discretion to make such additional
allocations (including allocations of gross income) so that (i) the net effect
of all allocations under Section A.4.2(a), Section A.4.2(c) and this Section
A.4.3(b) generally will (as of the dissolution of the Company) be as though no
allocations under any of such sections (including this Section A.4.3(b)) were
made and (ii) the net effect of all allocations under Section A.4.2(b), Section
A.4.2(d) and this Section A.4.3(b) generally will (as of the dissolution of the
Company) be as though no allocations under any of such sections (including this
Section A.4.3(b)) were made. The Members will have discretion to accomplish this
result in any reasonable manner that is consistent with Code Section 704 and the
related Treasury Regulations, subject to the other provisions of Section A.4.2.
A.4.4 Other Allocation Rules.
(a) For purposes of determining a Member's proportionate share of the
"excess nonrecourse liabilities" of the Company within the meaning of Treasury
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits
shall be deemed to be in proportion to their respective Percentage Interests.
(b) For purposes of determining the Net Income, Net Loss or any other
item allocable to any period, Net Income, Net Loss and other items will be
determined on a daily, monthly or other basis, as determined by the Tax Matters
Member using any permissible method under Code Section 706 and the related
Treasury Regulations.
(c) Where allocations must be made for a period other than a fiscal
year, references in Section A.4 to fiscal year shall be interpreted to refer to
such other period.
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A.5 Tax Allocations.
(a) Income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company or revalued pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(f), shall, solely for U.S. tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its initial or reset Gross Asset Value in accordance with the principles of
Code Section 704(c) and the Treasury Regulations thereunder and Treasury
Regulations Section 1.704-1(b)(4)(i) using any reasonable method required or
permitted thereunder and agreed to by the Members.
(b) Subject to Section A.5(a), if any gain (as computed for tax
purposes) on the sale or other disposition of Company property shall constitute
recapture of depreciation under Section 291, 1245 or 1250 of the Code or any
similar provision, such gain shall (to the extent possible) be divided among the
Members in accordance with the principles of Treasury Regulations Section
1.1245-1(e)(2) (i.e., generally in proportion to the depreciation deductions
previously claimed by them giving rise to such recapture), provided that this
Section A.5(b) shall not affect the amount of gain otherwise allocable to a
Member.
(c) Allocations pursuant to this Article A.5 are solely for purposes of
U.S. federal, state, and local taxes and shall not affect any Member's Capital
Account or share of Net Income or Net Loss (or any amount distributable to any
Member under the Agreement).
A.6 Returns.
The Tax Matters Member shall cause the Company's accountants to prepare
and to file on or before the due date (or any extension thereof) U.S. federal
and state tax or information returns required to be filed by the Company.
A.7 Elections.
To the extent that the Company may be or is required to make elections
for federal, state or local income or other tax purposes, such elections shall
be made in accordance with the terms of Section 6.2(a)(xvi) of the Operating
Agreement. In the event of a Transfer or in the event of a distribution of
assets of the Company to any Member, the Company, upon the request of any
Member, shall file (at the requesting Member's expense) an election under
Section 754 of the Code and in accordance with the applicable U.S. Treasury
regulations, to cause the basis of the Company's assets to be adjusted for U.S.
Federal income tax purposes as provided by Sections 734 or 743 of the Code.
A.8 Consistency of Tax Treatment.
The Members agree to be bound by the provisions of this Annex in
reporting their shares of Company income and loss for U.S. income tax purposes.
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A.9 Partnership Classification.
The Members intend that the Company will be at all times classified as
a "partnership" for U.S. federal income tax purposes. The Members agree
reasonably to cooperate in assuring this result, and shall make (and hereby
consent to the making of) an election or filing with U.S. tax authorities if
necessary to insure such classification.
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EXHIBIT AA
Premises
60
SCHEDULE 1
List and Copies of Licenses Required for the School
61
SCHEDULE 2
AFM Litigation
1. Settlement Agreement and Dismissal of Appeal, dated as of February
29, 2000 by and between Orbit Movers & Erectors, Inc. and AFM.
62
SCHEDULE 3
Environmental Reports
1. That certain Environmental Site Assessment prepared by ERAtech Environmental
Inc., Project 00-3377, dated March 3, 2000.
2. That certain Soil Borings and Report prepared by Dayton Testing Laboratory,
Inc., Project 19354, dated November 26, 1999.
63
SCHEDULE 4
Title Insurance Policy and Title Commitment for Title Insurance
1. That certain Second Amended Commitment for Title Insurance No. 36 149 10
000189 issued by Chicago Title Insurance Company in favor of Alliance Edison LLC
and Edison Schools Inc. dated as of June 2, 2000.
64
SCHEDULE 5
Ground Lease Defaults
None.
65
SCHEDULE 6
Leases
1. Sublease (as defined in Article I) between AFM and ACS.
66
SCHEDULE 7
Operating Contracts
None.
67
SCHEDULE 8
Insurance Policies
68
SCHEDULE 9
List of Tax Applications and Proceedings
None.
69
SCHEDULE 10
Permitted Exceptions
1. Reservation on page 24 of the Deed from Public Housing Administration, to
Dayton Metropolitan Housing Authority, dated December 1, 1954, filed for record
December 1, 1954 at 12:40 p.m., and recorded in Deed Volume 1670, Page 18 of
Xxxxxxxxxx County, Ohio records relating to mining of all uranium, thorium, and
all other materials determined to be peculiarly essential to the production of
fissionable materials.
2. Right of Way and Easement from Dayton Metropolitan Housing Authority to The
Dayton Power and Light Company, dated January 18, 1965, filed for record
February 15, 1965 at 10:18 a.m., and recorded in Deed Volume 2238, Page 473 of
the Xxxxxxxxxx County, Ohio records.
3. Taxes and assessments, if any, for the 2000 tax year which are a lien against
the Premises but not yet due and payable.
70
SCHEDULE 11
Approved Plans
