Exhibit 10.3
OPERATING AGREEMENT
OF
PARK AVE. ASSOC. MANAGEMENT LLC
THIS OPERATING AGREEMENT (this "Agreement") OF PARK AVE. ASSOC.
MANAGEMENT LLC (the "Company"), a Delaware limited liability company with a
principal place of business at 000 X. Xxxx Xx. Xxxxxxxxxx, XX 00000 is entered
into as of October 31, 2005 by and among the Company and the Members listed on
Schedule "A".
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Members are making contributions to the Company to enable
the Company to provide real estate management services to Park Ave. Assoc. LLC
in its acquisition and development of real property located in New Jersey and
New York and other states, as more fully described on Schedule "B" (the "Real
Property") and for the continuing purpose more fully described in, but not
limited by, this Agreement, and
WHEREAS, the Members desire to provide for the orderly management of
the Company as provided in this Agreement; and
WHEREAS, the parties desire to provide for the issuance and transfer of
Interests as provided in this Agreement.
NOW, THEREFORE, the parties agree as follows:
Definitions. In this Agreement, the following terms shall have
the meanings set forth below:
Affiliate means, when used with reference to a specified Person, any Person that
directly or indirectly controls or is controlled by or is under common control
with the specified Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of the power to direct or cause
of the direction of management or policies (whether through the ownership of
securities or partnership or other ownership interests, by contract or
otherwise). With respect to any Person who is an individual, "Affiliate" shall
also include, without limitation, any member of such individual's Family Group.
Capital Account as of any date means the Capital Contribution to the Company by
a Member, adjusted as of such date pursuant to this Agreement.
Capital Contribution means any contribution by a Member to the capital of the
Company in cash.
Certificate means the company's Certificate of Formation, as amended or restated
from time to time.
Code shall mean the Internal Revenue Code of 1986, as amended, or any
superseding federal revenue statute.
Distribution means any cash and other property paid to a Member by the Company
from the operations of the Company.
Family Group means, with respect to any Person who is an individual, (i) such
Person's spouse, former spouse, ancestors and descendants (whether natural or
adopted), parents and their descendants and any spouse of the foregoing persons
(collectively, "relatives"), (ii) the trustee, fiduciary or personal
representative of such Person and any trust solely for the benefit of such
Person and/or such Person's relatives or (iii) any limited partnership, limited
liability company or corporation the governing instruments of which provide that
such Person shall have the exclusive, nontransferable power to direct the
management and policies of such entity and of which the sole owners of
partnership interests, membership interests or any other equity interests are,
and will remain, limited to such Person and such Person's relatives.
Interests means with respect to the Company the percentage interests of the
members set forth on Schedule A attached hereto, adjusted, if at all, pursuant
to section 6.2.2.
LLC Law means the Delaware Limited Liability Company Act.
Management Agreement means that certain Management Agreement of even date
herewith by and between the Company and PAA, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
Management Fee means the management fee payable by PAA to the Company pursuant
to the Management Agreement.
Member means each Person who or which executes a counterpart of this Agreement
as a Member, a Subscription Agreement by which such person agrees to become a
Member and each Person who or which may hereafter become a party to this
Agreement.
Net Losses shall mean the losses of the Company, if any, determined in
accordance with generally accepted accounting principles employed under the cash
method of accounting.
Net Profits or Net Income shall mean the income of the Company, if any,
determined in accordance with generally accepted accounting principles employed
under the cash method of accounting.
Newco has the meaning ascribed to it in Section 6.3.
PAA means Park Ave. Assoc. LLC, a Delaware limited liability company.
PAA Net Profits means the net profits of PAA distributed to the Company by PAA
pursuant to the terms of the Management Agreement and the Management Agreement.
PAA Operating Agreement means the Operating Agreement of PAA of even date
herewith, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
Person means any individual, corporation, partnership, limited liability
company, trust, joint venture, governmental entity or other unincorporated
entity, association or group.
Public Offering means an underwritten public offering of the common stock of
Newco registered under the Securities Act.
Securities Act means the Securities Act of 1933, as amended.
Unrecovered Capital shall mean the aggregate amount of cash contributed to the
capital of the Company by a Member, whether as an initial capital contribution
or as an additional capital contribution, less only the aggregate amount of cash
and the fair market value of all property distributed to that Member pursuant to
section 7.1.3(b).
WQN means WQN, Inc., a Delaware corporation.
1. Organization and Capitalization.
1.1 Organization. The Company was organized as a limited
liability company, upon filing its Certificate with the Delaware Secretary of
State on August 19, 2005 pursuant to the provisions of the LLC Law.
1.2 Conformity with LLC Law. This Agreement is the Operating
Agreement concerning the Company provided for in the LLC Law and the
Certificate. This Agreement is to be interpreted to conform with the LLC Law,
but where inconsistent with or different than the provisions of the LLC Law,
this Agreement shall control except to the extent prohibited or ineffective
under the LLC Law. To the extent any provision of this Agreement is prohibited
or ineffective under the LLC Law, this Agreement shall be considered amended in
order to make this Agreement effective under the LLC Law. In the event that the
LLC Law is subsequently amended or interpreted in such a way as to make valid
any provision of this Agreement that was formerly invalid, then such provision
shall be considered to be valid from the effective date of such interpretation
or amendment.
1.3 Capitalization. The initial Capital Contributions to the
Company shall be as set forth in Schedule "A".
2. Business.
2.1 Nature of Business. While the Company may engage in any
lawful business permitted by the LLC Law or the laws of any jurisdiction in
which the Company may do business and while the Company shall have the authority
to do all things necessary or convenient to accomplish its purpose and operate
its business as described in this Article 2, the Company exists for the
principal purpose of providing real estate management services to Park Ave.
Assoc. LLC as part of its owning, developing, operating, managing, maintaining,
administering, leasing, mortgaging, pledging, selling and/or disposing of the
Real Property, which it acquires by way of purchase or otherwise. The Company
may do all acts which may be necessary or appropriate in connection with such
management objectives, and may not conduct any other business without the
unanimous consent of the Members. The authority granted to a Member to bind the
Company (as provided in Article 4) shall be limited to actions necessary,
convenient or related to this business.
2.2 Place of Business. The principal office of the Company
shall be located at the address indicated in the first paragraph of this
Agreement or such other address as may be designated by the Members. The
Secretary of State of the State of Delaware is designated as agent for the
service of process and the address to which the Secretary of State shall mail a
copy of any process shall be the principal office of the Company, the office of
counsel to the Company or such other address as may be designated by the
Members. The Members may, from time to time, change the address of the principal
office or, through appropriate filings with the Secretary of State, the address
for mailing of process.
3. Members.
3.1 Meetings and Voting.
3.1.1 Annual and Special Meetings. Regular meetings
of Members shall be held at least annually and special meetings may be held at
any time and from time to time as may be necessary or appropriate. Special
meetings shall be held at the request of any Member.
3.1.2 Notice/Waiver. Meetings of Members shall be
held on at least ten (10) days written notice given by any Member. Any notice
shall set forth the time and place of the meeting and shall state the name of
the party(ies) authorizing the calling of the meeting. The notice need not state
the purpose of the meeting. Notice may be waived, in writing, before, at or
after any meeting. Attendance at any meeting without protesting the lack of
notice thereof, prior to the end of such meeting, shall be deemed a waiver of
notice. Notice may be given by any reasonable means, and mailing by regular mail
to the last known address of a Member shall be deemed reasonable.
3.1.3 Voting. Each Member entitled to vote on a
matter shall be entitled to a vote pro rata to his, her or its Interest in the
Company. Each Member shall be entitled to vote on any matter submitted to a vote
of Members except as restricted by the LLC Law or restricted by the Certificate
or this Agreement in accordance with the LLC Law. A Member shall not be entitled
to vote on any matter concerning a transfer of his, her or its Interest or the
reconstitution of the Company where his, her or its action has caused the
dissolution of the Company. As used in this Agreement, an action requiring a
"Majority Vote" or a "Majority Vote of Members" refers to an action that must
receive the affirmative vote of Interests representing at least a majority of
the Interests held by Members entitled to vote.
3.1.4 Written Consent. Any action otherwise
requiring a vote of Members may, instead, be approved by written consent without
a meeting or at a meeting, but without a vote, if such written consent shall be
signed by Members who hold Interests entitled to vote on such action having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all of the Members entitled to vote
therein were present and voted. Any such written consent shall be delivered to
the office of the Company or any Member having custody of the Company's records
by hand or by certified mail, return receipt requested. Prompt notice of the
taking of an action by less than unanimous written consent shall be given to
those Members who have not consented in writing but who would have been entitled
to vote thereon had such action been taken at a meeting.
3.1.5 Proxies. Any Member may participate in any
vote of Members or written consent of Members in person or by proxy.
3.2 Investment Purposes. Each Member represents that he, she
or it is acquiring his, her or its interest in the Company for his, her or its
own account as an investment and without an intent to distribute such interest.
The parties acknowledge that Memberships in the Company, to the extent
considered to be securities, have not been registered under the Securities Act
or any state securities laws, and may not be disposed of by any Member without
appropriate registration or the availability of an exemption from such
requirement.
3.3 Conflicts of Interest. Any Member shall be entitled to
enter into transactions that may be considered to be competitive with, or a
business opportunity that may be beneficial to, the Company. It is expressly
understood that some of the Members may enter into transactions that are similar
to the transactions into which the Company may enter. Notwithstanding the
foregoing, each Member shall account to the Company and hold as trustee for it
any property, profit or benefit derived by such Member without the consent of
the other Members in the conduct of, or winding up of, the Company's business,
including information developed exclusively for the Company and opportunities
expressly offered to the Company.
3.4 Indemnification of Members. The Company shall indemnify
and hold harmless, and advance expenses to, any Member or former Member, or any
testator or intestate of such Member or former Member, as well as any Affiliate,
partner, officer, director, shareholder, employee, agent, trustee or
representative of such Member or former Member, from and against any and all
claims and demands arising out of or relating to the Company and/or such
Member's status and service as a Member, provided, however, that no
indemnification may be made to or on behalf of any Member if a judgment or other
final adjudication adverse to such Member establishes (a) that his, her or its
acts were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated or (b) that
he, she or it personally gained in fact a financial profit or other advantage to
which he, she or it was not legally entitled. To the extent required by law, any
expenses advanced to a Member pursuant to the prior sentence shall be repaid to
the Company in the event a final adjudication establishes that such Member was
not entitled to indemnification pursuant to either clause (a) or (b) of the
prior sentence. The Company may, as determined by the unanimous vote of the
Members, maintain liability insurance for its Members. No change to this section
3.4 may be given retroactive effect to take away any right to indemnification
with respect to actions taken prior to such change.
4. Management.
4.1 Member Management. Management of the Company shall be
vested in Xxxx Xxxxxx the Managing Member. The Managing Member of the Company
shall be responsible for making certain that all transactions concerning the
Real Property are properly conducted, including, that mortgage documents are
properly prepared and filed, all required permits are obtained and all filings
and related fees are paid in a timely fashion. Notwithstanding such authority,
the Managing Member may manage the affairs of the Company in conjunction with
his other business interests and activities, which may be competitive with or in
direct competition with the business of the Company, and shall not be obligated
to devote all or any particular part of his time and effort to the Company and
its affairs. The Member Manager is hereby authorized to make the "day-to-day"
business decisions of the Company, to pay all ongoing business related bills, to
enter into contracts in the ordinary course of business in order to accomplish
the purpose of the Company, and conduct such ordinary aspects of the Company
business without seeking authorization of the Members.
4.2 Banking. The Company shall maintain such bank and other
financial accounts as the Managing Members may determine. The Managing Members
and such Persons as the Managing Members shall appoint shall be authorized to
sign checks on behalf of the Company in such manner as determined by the
Managing Members.
4.3 Standard of Care. In managing the Company, the Managing
Member shall perform his duties in accordance with his good faith business
judgment in the best interests of the Company. The standard of care to be used
shall be no greater than that required by the LLC Law or any successor provision
of law establishing a required standard of care. Unless a Managing Member has
knowledge or information concerning the matter in question that makes reliance
unwarranted, the Managing Member is entitled to rely on information, opinions,
reports or statements, including financial statements and other financial data,
if prepared or presented by:
4.3.1 One or more Members, agents or employees of
the Company.
4.3.2 Legal counsel, public accountants or other
persons as to matters the Managing Member believes, in good faith, are within
the person's professional or expert competence.
4.3.3 A committee of the Members of which the
Managing Member is not a member, if the materials presented are within such
committee's designated authority and the Managing Member believes, in good
faith, that the committee merits confidence.
4.4 Limitation of Liability. No Member shall have any
personal liability to the Company or the Members for damages for any breach of
duty by a Member in such capacity except to the extent that this elimination of
liability is prohibited pursuant to the LLC Law or any successor provision of
law concerning the elimination or limitation of such liability.
4.5 Compensation. No Member shall receive compensation for
his, her or its services as such; provided, however, that the Managing Member
may receive compensation for his services hereunder. Any Member shall, however,
be entitled to be reimbursed for actual out of pocket expenses reasonably
incurred on behalf of the Company, upon presentation of such documentation as
may be reasonably requested by the Members.
5. Contributions and Capital Accounts.
5.1 Initial Contributions. Each Member has made an initial
capital contribution to the Company as set forth on Schedule A.
5.2 No Additional Contributions. The Members are not intended
to have personal liability for the obligations of the Company above their actual
capital contributions and no Capital Contributions, other than the initial
Capital Contributions, shall be required. No Member shall be obligated to
restore any deficit in his, her or its Capital Account.
5.3 Capital Accounts.
5.3.1 Definition. The Company shall establish and
maintain a Capital Account for each Member reflecting the Capital Contributions
made by such Member, the Net Profits and Net Losses allocated to such Member and
the Distributions made to such Member.
5.3.2 Tax Allocations. Except as provided in section
5.4, for tax purposes, any items of income, gain, loss, deduction and credit (as
determined in accordance with the provisions of the Code that are required to be
allocated to take into account the variation between fair market value of an
asset and its adjusted tax basis (e.g., allocations under Section 704(c) of the
Code for contributed or revalued property) shall be allocated among the Members
in accordance with the requirements of the Code and the Regulations thereunder.
5.3.3 Allocations of Net Profit and Net Loss. Net
Profits and Net Losses shall be allocated to the Members as follows:
(a) Allocation of Net Profits. Net Profits shall be
allocated and distributed to the Members on not less than a quarterly basis,
subject to tax allocations as set forth in paragraph 5.3.2 and subject to the
following conditions:
(1) Definition: Profits consist of (x) PAA
Net Profits and (y) the Management Fee
(2) The Net Profits shall be distributed
Seventy percent (70%) to Xxxx Xxxxxx and Thirty percent
(30%) to WQN; provided, however, that any Net Profits attributable to the
Management Fee (i) shall be Distributed net of any necessary expenses, taxes and
other costs or liabilities of the Company and (ii) shall not be distributed to
WQN in any particular calendar year unless and until the aggregate Distributions
to Xxxx Xxxxxx during such year are $250,000.
(3) Third, on an annual basis, the
Company's accountants shall determine for Federal and State tax purposes, the
annual income/loss to be reported by the Company. Taxes that may be do and owing
shall be paid from the Company's bank accounts.
(4) Upon the dissolution and liquidation of
the Company, the balance, to the Members in accordance
with subsection 5.3.3(a).
(b) Allocation of Net Losses. Net Losses shall be
allocated to the Members as follows:
(1) First, to the Members with Unrecovered
Capital, in accordance with the amounts of Unrecovered Capital held by such
Members, until the sum of the cumulative Net Losses' allocated pursuant to this
subsection for the current and all previous years is equal to the Members
Unrecovered Capital.
(2) Second, to the Members, an amount of
Net Losses until the sum of the cumulative Net Losses allocated pursuant to this
subsection for the current and all previous years is equal to the cumulative Net
Profits allocated to the Members pursuant to subsection 5.3.3(a), Net Losses
allocated under this subsection shall be allocated to the Members in proportion
to, and to the extent of, the Net Profits allocated to them under subsection
5.3.3(a).
(3) Third, to the Members, in accordance
with their respective Interests as shown on Schedule A and adjusted, if at all,
pursuant to section 6.2.2.
(c) No Deficit Capital Account Balance.
Notwithstanding subsections 5.3.3(b), allocations of Net Losses to a Member
shall be made only to the extent that such allocation of Net Losses will not
create a deficit Capital Account balance for that Member in excess of an amount,
if any, equal to such Member's share of Company Minimum Gain that would be
realized on a foreclosure of the Company's property. Any Net Losses not
allocated to a Member because of the foregoing provision shall be allocated to
the other Members (to the extent the other Members are not limited in respect of
the allocation of losses under this subsection 5.3.3(c).
5.4 Special Allocations.
5.4.1 Terminology. Terms used in this section 5.4
and not defined in this Agreement have the meanings ascribed to them (from time
to time) in the Tax Code and the Regulations thereunder (with the substitution
of Company for Partnership and Member for Partner). Without limiting the
generality of the foregoing, the definitions of the following terms can be
presently found as follows:
Term Location of Definition
---- ----------------------
Company Minimum Gain Regulation s. 1.704-2(d)
Member Nonrecourse Debt Regulation s. 1.704-2(b)(4)
Member Nonrecourse Deductions Regulation s. 1.704-2(i)(4).
5.4.2 Nonrecourse Liabilities. Nonrecourse
Liabilities of the Company shall be allocated among the Members in accordance
with Regulation s. 1.752-3(a). For such purposes, each Member's interest in
Company profits shall be his, her or its respective Interest.
5.4.3 Member Nonrecourse Deductions. Member
Nonrecourse Deductions for any fiscal year or other period shall be specifically
allowed to the Member who bears the risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Regulation s. 1.704-2(i).
5.4.4 Company Minimum Gain Chargebacks.
Notwithstanding any provision of this Agreement to the contrary, if there is a
net decrease in Company Minimum Gain during any taxable year of the Company,
then, except as otherwise provided by Reg. ss. 1.704-2(f)(2) through (5),
items of Company income and gain for such taxable year (and subsequent years, if
necessary), in the order provided in Regulation s. 1.704-2(j)(2)(i), shall be
allocated among all Members whose share of Company Minimum Gain decreased during
that year in proportion and to the extent of such Member's share of the net
decrease in Company Minimum Gain during such year. The allocation described in
this subsection 5.4.4 is intended to be a "Minimum Gain Chargeback" within the
meaning of Regulation s. 1-704-2, and shall be interpreted consistently
therewith.
5.4.5 Member Nonrecourse Debt Minimum Gain
Chargeback. Notwithstanding any provision of this Agreement (other than
subsection 5.4.4) to the contrary, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain during any taxable year of the Company then,
except as otherwise provided by Regulation s. 1.704-2(i), items of Company
income and gain for such taxable year (and subsequent years, if necessary), in
the order provided in Regulation s. 1.704-2(j)(2)(i), shall be allocated among
all Members whose share of Member Nonrecourse Debt Minimum Gain decreased during
such year in proportion to and to the extent of such Member's share of the net
decrease in Member Nonrecourse Debt Minimum Gain during such year. The
allocation described in this subsection 5.4.5 is intended to be a "Member
Nonrecourse Debt Minimum Gain Chargeback" within the meaning of Regulation s.
1-704-2(i), and shall be interpreted consistently therewith.
5.4.6 Qualified Income Offset. Notwithstanding any
provision of this Agreement (other than subsections 5.4.4. and 5.4.5) to the
contrary, if any Member unexpectedly receives any adjustments, allocations or
distributions described in Regulation s. 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
then items of Company income and gain shall be specifically allocated to each
such Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the adjusted Capital Account deficit of such Member
as quickly as possible. The allocation described in this subsection 5.4.6 is
intended to be a "Qualified Income Offset" within the meaning of Regulation s.
1.704-1(b)(2)(ii)(d), and shall be interpreted consistently therewith.
5.4.7 Elections. All elections permitted to be made
for the Company pursuant to the Code and the Regulations thereunder (e.g., an
election pursuant to s. 754 of the Code) shall be made in the sole discretion
of the Tax Matters Partner. If the Tax Matters Partner decides to make such
election, all necessary Members shall join in such election, and each Member
shall take all steps reasonably necessary or desirable to give effect to such
election.
5.4.8 Other Special Allocations. In addition to
those special allocations specifically described in this section 5.4, the
Company shall make such other special allocations as may be required from time
to time by the Tax Code and the Regulations thereunder.
5.5 No Interest. No Member shall be entitled to earn interest
on the balance of such Member's Capital Account, but may earn interest on actual
loans and advances made to the Company as such.
6. Percentage Interests.
6.1 Initial Contributions. The initial percentage Interests
of the Members are as shown on Schedule "A". The Interests may be adjusted only
as provided in section 6.2.2.
6.2 Adjustments for Additional Contributions.
6.2.1 Additional Capital Contributions. Should the
Company require Capital Contributions in excess of the initial Capital
Contributions, the Members, by unanimous vote, may make a contribution request
by giving written notice (a "Contribution Request") to the Members of the amount
of capital sought (the "Requested Amount"). The then present Members shall have
the first option to make such contribution pro rata to their then Interests. If
any Member does not contribute his, her or its full pro rata share, then the
contributing Members shall have the next option to contribute up to the
remainder of the Requested Amount, each Member contributing towards such
remainder pro rata to the Interests of such contributing Members or in such
other percentages as such contributing Members may agree among themselves. If
the combined contributions of all Members do not equal the Requested Amount,
then the Company may (1) seek (i) new Members and/or (ii) other sources of
financing for the the remainder of the Requested Amount. The two options to
Members described in this subsection 6.2.1 shall each be open for a successive
thirty (30) day period, the first of which will commence with the giving of the
Contribution Request. A Member may only accept an option by tendering a
contribution during the applicable option period.
6.2.2 Percentage Interest Adjustments. To the extent
that any Member contributes a portion of a Requested Amount in excess of his,
her or its pro rata portion of such Requested Amount (determined in relation to
the Interests of all Members; his, her or its "Excess Contribution"), such
Member's Interest shall be increased (such increase to be offset by a pro rata
decrease of the Interest of each Member who contributed less than his, her or
its pro rata share of the Requested Amount) in accordance with the following
formula:
Increase in MI = Excess Contribution/Price Per Point where:
MI refers to the Member's Interest.
Price Per Point refers to the highest cost per 1% Interest of
the following:
(1) The price per 1% Interest last paid by
a Member other than by virtue of an Excess Contribution, including either a
price paid to the Company by a new Member or the price paid to a former Member
on a transfer of an Interest.
(2) The Price Per Point, if any, determined
by the Members, by unanimous vote, and set forth in the Contribution Request.
In the event that the contributions of all Members do not equal the
Requested Amount and the Company obtains any or all of the Requested Amount from
a new Member, the price per 1% Interest to such new Member may be more or less
than the Price Per Point and all Members acknowledge that their Interests may be
diluted by the admission of the new Member.
6.3 Recapitalization; Conversion. Except as otherwise
provided in this Agreement, the provisions of this Agreement shall apply to any
and all securities of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets, or otherwise) which may be
issued in respect of, in exchange for, or in substitution of, any Interests by
reason of any reorganization, any recapitalization, reclassification, merger,
consolidation, partial or complete liquidation, sale of assets, spin-off,
dividend, split, distribution to Members or combination of Interests or any
other change in the Company's capital structure, in order to preserve fairly and
equitably as far as practicable, the original rights and obligations of the
parties hereto under this Agreement. Without limiting the generality of the
foregoing, at any time, the Members, by unanimous vote, shall have the power and
authority to, and shall, effect (a) the conversion of the Company's business
form from a limited liability company to a Delaware corporation, (b) the merger
of the Company with or into a new or previously established but dormant Delaware
corporation having no assets or liabilities, debts or other obligations of any
kind whatsoever other than those associated with its formation and initial
capitalization or (c) the contribution of the assets and liabilities of the
Company to a Delaware corporation in exchange for one or more classes of common
stock in such corporation, followed by a liquidation of the Company and a
distribution of the such corporation's common stock to the Members (such a
conversion, merger or liquidation is referred to as a "Conversion" and such
Delaware corporation is referred to as "Newco"). In connection with a
Conversion, the Interests held by each Member shall be converted into or
exchanged for a number of shares of Newco's common stock determined by (i)
calculating the fair market value of the Company as determined in good faith by
the Members (provided that if the Conversion is being completed in connection
with a Public Offering, then, the fair market value will be based upon the
actual offering price of Newco's common stock and the number of shares of common
stock to be outstanding after the Public Offering) and (ii) by determining the
amount each Member would receive with respect to such Interests if (A) all of
the Company's assets were sold for such fair market value and (B) the proceeds
were distributed in accordance with subsection 5.3.3. The Managing Member shall
use reasonable efforts to undertake any Conversion in such manner as would
provide for no gain or loss to the Members solely as a result of the Conversion.
7. Distributions.
7.1 Priority. The net cash of the Company, after payment of
all operating expenses of the Company (including, without limitation, building
operating expenses, mortgage expenses, and sale/brokerage expenses regarding the
sale of condominium units) after providing for such reasonable reserve as the
Managing Member shall decide and the payment of any Distribution required
hereunder, shall be distributed in a timely manner, and such amounts when
Distributed shall be distributed in the following order or priority:
7.1.1 To Members who have made interest bearing
loans to the Company in respect of accrued interest. To the extent that the
total Distribution with respect to such interest is less than the aggregate
amount of such interest, such Distribution shall be pro rated in accordance with
the interest accrued as to each Member.
7.1.2 To Members who have made loans to the Company
in repayment of such loans. To the extent that the total Distribution with
respect to such loans is less than the aggregate principal of such loans, such
Distribution shall be pro rated in accordance with the principal due to each
Member.
7.2 Tax Distributions. To the extent that distributions
pursuant to subsection 7.1.3 for the current tax year have been insufficient,
and provided that the Company has adequate cash available (in excess of the
reasonable reserve determined pursuant to section 7.1), the Company may, in the
discretion of the Managing Member, before April 15, June 15, September 15 and
January 15 of each year (or such other dates by which installment tax
contributions may be due), make a Distribution in cash in the amount necessary
to allow the Members to pay the estimated or actual taxes due on each such date
attributable to the income of the Company to be allocated to the Members.
8. Records of the Company.
8.1 Maintenance. The Company shall maintain a record book at
such place, within or without the State of Delaware, as the Members shall
determine which shall contain copies of all minutes of meetings or written
consents of the Members, as well as evidence of the proper calling of any
meeting of Members or evidence of the waiver of such notice (attendance at a
meeting without protesting the lack of notice being deemed a waiver of notice),
and a list of all Members and the Interest of each Member.
8.2 Inspection. Any Member may review and copy any of such
records during regular business hours at the place where such records are
maintained upon two business days prior written notice.
8.3 Reporting. The Company shall have annual financial
statements prepared and distributed to each Member as soon as practicable but in
any event within 90 days after the end of each fiscal year. The Company shall
have such informational income tax returns as are required by the Code or the
laws of any state prepared and distributed to each Member in a timely fashion,
including a Schedule K-1 within 90 days after the end of each calendar year. If
determined by the Board, the financial statements shall be prepared by an
accountant or accounting firm selected by the Board and shall be in such form
and shall be subject to such review or compilation by such accountant or firm as
the Board may determine from time to time in its discretion.
9. Taxes.
9.1 Tax Matters Partner. The Members may from time to time by
unanimous consent designate one Member to act as tax matters partner (the "Tax
Matters Partner") of the Company pursuant to ss. 6231(a)(7) of the Code and who
shall initially be the Managing Member. The initial Tax Matters Partner shall be
Park Ave. Assoc., LLC. Any Member designated as Tax Matters Partner shall take
such action as may be necessary to cause each Member to become a Notice Partner
within the meaning of ss. 6223 of the Code. Any Member who is designated a Tax
Matters Partner may not take any action contemplated by xx.xx. 6221 through 6233
of the Code without the consent of the Members.
9.2 Elections. The Tax Matters Partner may make any tax
elections for the Company allowed under the Code or the tax laws of any state or
other jurisdiction having Taxing Jurisdiction over the Company. The term "Taxing
Jurisdiction" shall mean any state, local or foreign government that collects
tax, interest or penalties, however designated, on any Member's share of the
income or gain attributable to the Company.
10. Transfer of Membership. Interests may be sold, transferred or
otherwise conveyed, or pledged, hypothecated or otherwise encumbered, except (i)
to, an Affiliate, (ii) another Member or (iii) in accordance with subsection
11.3.1 (each a "Disposition").
11. Dissolution and Winding Up.
11.1 Dissolution Events. The Company shall be dissolved and,
except as otherwise provided in this Article 11, its affairs shall be wound up
upon the first to occur of the following events:
11.1.1 Expiration of Term. Upon the expiration of
the term set forth in the Certificate, if any, including any extension thereof.
11.1.2 Consent. Upon the unanimous consent of the
Members given in writing or by vote at a meeting.
11.1.3 Death, etc. Upon the bankruptcy, death,
dissolution, expulsion, adjudicated incapacity or withdrawal of a Member (except
a withdrawal upon the Disposition of all of such Member's interests in
accordance with the terms hereof) or occurrence of any other event that
terminates the continued Membership of a Member (any such event being a
"Termination Event") unless the remaining Members by Majority Vote consent to
the continuation of the business of the Company in accordance with this Article
11.
11.1.4 Judicial Dissolution. The entry of a decree
of judicial dissolution under the LLC Law.
11.1.5 One Member. At such time as there is only one
Member remaining as a Member of the Company, unless such Member consents to the
continuation of the Company.
11.2 Winding Up. Upon the winding up of the Company, the
assets of the Company shall be distributed as follows:
11.2.1 Creditors. To creditors, including Members
who are creditors, to the extent permitted by law, in satisfaction of
liabilities of the Company other than for distributions to Members under the LLC
Law.
11.2.2 Members. To Members and former Members in
satisfaction of liabilities for distributions under the LLC Law, unless
otherwise provided in the LLC Law or the Certificate.
11.2.3 Distributions. Unless otherwise provided in
the LLC Law or the Certificate, to Members (1) first, in payment of their
aggregate Capital Accounts and (2) second, in respect of their Interests in the
Company, in proportion to their Interests.
To the extent funds are available to pay some, but not all, amounts due
within any one of the foregoing distribution categories, the funds available
shall be allocated pro rata to the payment of all amounts due for such category.
11.3 Election to Continue. In accordance with subsection
11.1.3, the remaining Members may only consent to the continuation of the
Company by Majority Vote at a meeting held or by Majority Vote indicated in a
written consent given within 180 days after the Terminating Event. In the event
of such continuation, the Interest of the Member who has suffered a Terminating
Event (the "Terminated Member") must be addressed in one of the following
manners:
11.3.1 Consent to Transfer. By the remaining Members
consenting to the Disposition of the Membership of the Terminated Member by
Majority Vote.
11.3.2 Agreed Value. By the Company and the
Terminated Member (or such Member's legal Successor (as defined in section
12.3)) agreeing upon an amount to be paid by the Company for the Membership of
the Terminated Member as well as the method of payment of such amount, which
shall provide for payment in installments over not less than 10 years, unless a
shorter period is unanimously approved by the Members. Alternatively, the
Company may distribute to the Terminated Member or his, her or its Successor, in
satisfaction of such Member's Interest, a one time in-kind distribution equal to
such Member's Interest in the assets of the Company.
11.3.3 Assignment. In the absence of (1) a
Disposition permitted under Article 10 or (2)(i) an agreement as to value and
payment or (ii) an in-kind distribution pursuant to subsection 11.3.2 and to the
extent not prohibited by the LLC Law, by treating the Terminated Member's
Interest as assigned (in accordance with Section 603(a) of the LLC Law) to such
Member's legal Successor.
11.4 Certificate of Cancellation. Upon the completion of
winding up of the Company pursuant to section 11.2, a Certificate of
Cancellation shall be filed with the Secretary of State of the State of
Delaware.
12. Miscellaneous.
12.1 Notices. Any notice given pursuant to this Agreement
shall be in writing and shall be delivered by hand, or by certified or
registered mail, postage prepaid, or by telex or telecopy, or by Federal
Express, DHL or other similar courier, addressed to the party to whom intended
at the address set forth on Schedule A, or such other address as such party may
designate by appropriate notice, and such notice shall be deemed given when
personally delivered, mailed, sent or deposited with a courier, as the case may
be. Notwithstanding anything in the preceding sentence to the contrary, notices
of meetings of Members may be given as provided in subsection 3.1.2. Each party
recognizes that it is his, her or its individual responsibility to provide the
other parties with current address information, and that he, she or it may be
treated as having received and having knowledge of any notice properly given
pursuant to this Agreement, whether or not actually received.
12.2 Entire Agreement. This Agreement represents the entire
agreement between the parties regarding the subject matter hereof and, except as
set forth in this Agreement, supersedes in all respects any and all prior oral
or written agreements or understandings between them pertaining to the subject
matter of this Agreement. There are no representations or warranties among the
parties with respect to the subject matter of this Agreement, except as set
forth in this Agreement. This Agreement cannot be modified or terminated, nor
may any of its provisions be waived, except by a written instrument signed by
all of the Members.
12.3 Successors; Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the respective parties, their
successors, assigns, heirs, legatees, executors, administrators and legal
representatives ("Successors") and any Successor shall be deemed a party to this
Agreement upon such Successor's receipt of any interest in this Agreement.
12.4 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal substantive laws of the
State of Delaware.
12.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which together shall be deemed to be one and the same instrument. This Agreement
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to each of the other parties.
12.6 Captions. Headings contained in this Agreement have been
asserted for reference purposes only and shall not be considered part of this
Agreement in construing this Agreement.
12.7 Equitable Relief. The parties agree that there will not
be an adequate remedy at law for the breach of this Agreement and the covenants
contained in this Agreement and agree that this Agreement may be enforced by
injunction, specific performance or other equitable relief.
12.8 Terminology.
12.8.1 Gender; Number. Unless the context clearly
indicates otherwise, terms used in this Agreement in the masculine, feminine or
neuter include the others, terms used in the singular include the plural and
terms used in the plural include the singular.
12.8.2 Successors Included. Reference in this
Agreement to any party includes such party's Successors.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth beside our names to be effective as of the date first set forth
above.
MEMBERS:
_________________________________ Dated: October 31, 2005
Xxxx Xxxxxx, Managing Member
WQN, Inc.
By:_________________________________ Dated: October 31, 2005
Name: ______________________________
Title: _____________________________
