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EXHIBIT 10.1
OPERATING AGREEMENT OF CELEBRATION HYMNAL, LLC
EXCLUDING CONFIDENTIAL PORTIONS
(1) Indicates information which has been redacted pursuant to a request for
confidential treatment.
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TABLE OF CONTENTS
ARTICLE 1............................................................................................ 1
FORMATION............................................................................................ 1
Section 1.1 Formation...................................................................... 1
Section 1.2 Name........................................................................... 1
Section 1.3 Definitions.................................................................... 1
ARTICLE 2............................................................................................ 3
PURPOSE AND POWERS................................................................................... 3
Section 2.1 Purpose........................................................................ 3
Section 2.2 Powers......................................................................... 3
ARTICLE 3............................................................................................ 4
CAPITAL.............................................................................................. 4
Section 3.1 Initial Capital Contributions.................................................. 4
Section 3.2 Capital Accounts............................................................... 4
Section 3.3 Capital Account Deficits....................................................... 5
Section 3.4 Additional Capital Contributions by the Members................................ 5
Section 3.5 Interest on and Return of Capital.............................................. 5
Section 3.6 Statements of Membership Interests............................................. 5
ARTICLE 4............................................................................................ 6
PROFITS, LOSSES, CASH FLOW........................................................................... 6
Section 4.1 Allocation of Profits and Losses............................................... 6
Section 4.2 Determination of Profits or Losses............................................. 6
Section 4.3 Application of Cash Receipts................................................... 6
Section 4.4 Distribution of Cash Flow...................................................... 6
Section 4.5 Consent to Distributions....................................................... 7
Section 4.6 Special Tax Allocations........................................................ 7
ARTICLE 5............................................................................................ 8
MEMBERS.............................................................................................. 8
Section 5.1 Admission of New Members....................................................... 8
Section 5.2 Individual Member Authority.................................................... 8
Section 5.3 Meetings....................................................................... 9
Section 5.4 Quorum Requirements for Meetings............................................... 9
Section 5.5 Action of Members.............................................................. 9
Section 5.6 Action on Written Consent...................................................... 9
Section 5.7 Meetings by Telephone.......................................................... 9
Section 5.8 Proxies........................................................................ 10
ARTICLE 6............................................................................................ 10
MANAGEMENT........................................................................................... 10
Section 6.1 Management of Company.......................................................... 10
Section 6.2 Election, Withdrawal, and Removal of Managers.................................. 10
Section 6.3 Action of Managers............................................................. 11
Section 6.4 Duties of Chief Manager........................................................ 11
Section 6.5 Duties of Secretary............................................................ 11
Section 6.6 Duties of Additional Managers.................................................. 11
Section 6.7 Compensation of Managers....................................................... 11
Section 6.8 Contracts with Related Parties................................................. 12
Section 6.9 Borrowing...................................................................... 14
ARTICLE 7............................................................................................ 15
INDEMNIFICATION...................................................................................... 15
Section 7.1 Right to Indemnification....................................................... 15
Section 7.2 Contracts and Funding.......................................................... 15
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Section 7.3 Indemnification Not Exclusive Right............................................ 15
Section 7.4 Advancement of Expenses........................................................ 15
ARTICLE 8............................................................................................ 16
FISCAL MATTERS....................................................................................... 16
Section 8.1 Books and Records.............................................................. 16
Section 8.2 Fiscal Year.................................................................... 16
Section 8.3 Tax Status; Elections.......................................................... 16
Section 8.4 Reports to Members............................................................. 16
Section 8.5 Bank Accounts.................................................................. 17
Section 8.6 Tax Matters Member............................................................. 17
ARTICLE 9............................................................................................ 18
TRANSFER RESTRICTIONS; RIGHT OF FIRST REFUSAL........................................................ 18
Section 9.1 Withdrawal..................................................................... 18
Section 9.2 Bankruptcy..................................................................... 18
Section 9.3 Determination of Purchase Price; Method of Payment............................. 19
Section 9.4 Voluntary Disposition.......................................................... 19
Section 9.5 Tax Consequences............................................................... 21
Section 9.6 Transferee Assumes Company Obligations......................................... 21
ARTICLE 10........................................................................................... 21
DISSOLUTION; TERMINATION; CONTINUATION OF COMPANY.................................................... 21
Section 10.1 Term.......................................................................... 21
Section 10.2 Events Causing Dissolution and Winding Up..................................... 21
Section 10.3 Continuation of the Company................................................... 22
Section 10.4 Winding Up Affairs on Dissolution............................................. 22
Section 10.5 Distribution Upon Dissolution................................................. 23
ARTICLE 11........................................................................................... 23
GENERAL PROVISIONS................................................................................... 23
Section 11.1 Notices....................................................................... 23
Section 11.2 Entire Agreement.............................................................. 24
Section 11.3 Governing Law; Forum; Service of Process; Venue............................... 24
Section 11.4 Attorneys' Fees............................................................... 24
Section 11.5 Severability.................................................................. 24
Section 11.6 Binding Effect................................................................ 24
Section 11.7 Gender, Number................................................................ 25
Section 11.8 Captions and Headings......................................................... 25
Section 11.9 Amendment..................................................................... 25
Section 11.10 Counterparts................................................................. 25
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OPERATING AGREEMENT
OF
CELEBRATION HYMNAL, LLC
THIS OPERATING AGREEMENT (the "Agreement"), made and entered into as of
October 14, 1997, and is by and among the Members (as hereinafter defined).
RECITALS:
The Members desire to form a limited liability company under and
pursuant to the provisions of the Tennessee Limited Liability Company Act, as
from time to time amended, to conduct business as a limited liability company,
and to set forth their mutual rights and obligations.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings contained herein and other good and valuable consideration, the
receipt, adequacy, and sufficiency of which are hereby acknowledged, the Members
hereby agree as follows:
ARTICLE 1
FORMATION
SECTION 1.1 FORMATION.
The Members hereby form a limited liability company under and pursuant
to the Act, subject to the terms and conditions set forth in this Agreement.
SECTION 1.2 NAME.
The name of the Company shall be Celebration Hymnal, LLC. The Company
may adopt and conduct its business under such assumed or trade names as the
Members may from time to time determine. The Company shall file any assumed or
fictitious name certificates as may be required to conduct business in any
state.
SECTION 1.3 DEFINITIONS.
As used herein the following terms shall have the indicated meanings:
"ACT" means the Tennessee Limited Liability Company Act in effect on
the date hereof and as from time to time amended.
"AGREEMENT" means this Operating Agreement and as from time to time
amended.
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"ARTICLES OF ORGANIZATION" mean those certain Articles of Organization
of the Company filed with the Secretary of State of Tennessee pursuant
to which the Company was formed.
"THE HYMNAL" means all material created for The Celebration Hymnal
including but not limited to derivative products, publications and
other intellectual property and all other video device forms and
configurations whether now known or hereafter invented and in all
optical media, including, without limitation, all interactive and
multimedia platforms, such as CD-ROM, CDI or 3-D.
"CAPITAL ACCOUNT" means the account defined in Section 3.2 herein.
"CHIEF MANAGER" means the initial Chief Manager of the Company, who
shall be Xxx Xxxxx, a Manager appointed by Word, from the effective
date of this Agreement through calendar year 1998, or any subsequent
Chief Manager as may be elected by the Managers as set forth in Section
6.2.1 of this Agreement.
"CODE" means the Internal Revenue Code of 1986 in effect on the date
hereof and as from time to time amended.
"COMPANY" means Celebration Hymnal, LLC, the limited liability company
formed by the parties to this Agreement.
"FINANCIAL INTEREST" means each Member's rights to share in Net
Profits, Net Losses and distributions of the Company and to receive
interim and liquidation distributions of the Company, as set forth in
Exhibit A.
"GOVERNANCE INTEREST" means each Member's electoral rights to appoint,
control and direct Managers in accordance with Section 6 hereof.
"MANAGERS" means, collectively, and "MANAGER" means, individually,
those persons who may be elected from time to time by the Members to
manage the affairs of the Company pursuant to the provisions of this
Agreement.
"MEMBERS" means, collectively, and "MEMBER" means, individually, the
persons listed on Exhibit A hereto, together with any additional
Members hereafter admitted pursuant to the provisions of this
Agreement.
"MEMBERSHIP INTEREST" OR "INTEREST" means each Member's interest in the
Company, consisting of: (i) the Financial Interest, (ii) the Governance
Interest, and (iii) rights to transfer or assign either the Financial
Interest, the Governance Interest, or both. In the event a Member has
assigned some or all of its Financial Interest, in such case
"Membership Interest" means: (i) such Member's Governance Interest,
(ii) such Member's right to transfer or assign its Governance Interest,
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(iii) any remaining Financial Interest of such Member, and (iv) such
Member's right to transfer or assign any remaining Financial Interest
of such Member.
"NET LOSSES" means the excess of all expenses of the Company over all
income of the Company (including the amount of any losses/gains
recognized by the Company on the sale or other disposition of Company
property) during a calendar year, all as determined in accordance with
the method of accounting utilized by the Company for federal income tax
purposes.
"NET PROFITS" means the excess of all income of the Company over all
expenses of the Company (including the amount of any gains/losses
recognized by the Company on the sale or other disposition of Company
property) during a calendar year, all as determined in accordance with
the method of accounting utilized by the Company for federal income tax
purposes.
"PRODUCT" shall mean each physical, individual configuration of the
Hymnal.
"SECRETARY" means the initial Secretary of the Company, who shall be
Xxxxxx X. Xxxx, a Manager appointed by Integrity, from the effective
date of this Agreement through calendar year 1998, or any subsequent
Secretary as may be elected by the Managers as set forth in Section
6.2.1 of this Agreement.
"TRANSFER" means any transfer, alienation, sale, assignment, pledge or
granting of a security interest, lien or similar encumbrance or other
disposition of all or any part of an existing Membership Interest in
the Company, whether voluntarily or involuntarily, whether for or
without consideration, and includes a transfer by operation of law,
transfer incident to bankruptcy, foreclosure, judicial sale or
otherwise.
ARTICLE 2
PURPOSE AND POWERS
SECTION 2.1 PURPOSE.
The purpose and business of the Company shall be to undertake any
lawful business activity.
SECTION 2.2 POWERS.
In furtherance of the foregoing purposes, the Company shall have the
full power and authority to conduct its business as provided by the Act and
applicable law.
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ARTICLE 3
CAPITAL
SECTION 3.1 INITIAL CAPITAL CONTRIBUTIONS.
The Members have made, as of the date hereof, the initial contributions
to the capital of the Company in the amounts set forth on Exhibit A hereto. Each
Member hereby accepts, confirms and ratifies the contribution of each other
Member, and the corresponding issuance of such other Member's Financial
Interests, as set forth on Exhibit A, and Governance Interests, as set forth in
Section 6 hereof.
Further, it is the intent of the Members that the relationship of their
respective contributions to the capital of the Company reflects the relationship
of their respective Financial Interests. To the extent that the initial
contributions of the Members set forth on the Exhibit A do not reflect such a
relationship, the Members shall reconcile such difference as follows:
1. Integrity shall cease to make contributions. Any costs incurred by
Integrity on behalf of the Company after the commencement date shall be
allocated as the Company's costs, and said costs shall be reimbursed by
Company to Integrity, in accordance with the terms of Section 4.3
hereof.
2. Word shall make additional contributions as outlined below until
Word's total contributions equal the initial contributions made by
Integrity. At such time as Word's total contributions equal the initial
contributions of Integrity, then any costs incurred by Word on behalf
of the Company after that time shall be allocated as the Company's
costs, and said costs shall be reimbursed by Company to Word, in
accordance with the terms of Section 4.3 hereof.
Word shall make additional contributions as follows: Word shall pay all
of the Company's costs to manufacture and market the Products until such
payments made by Word plus the amount of Word's initial capital contributions
set forth on the Exhibit A total Integrity's initial capital contribution set
forth on the Exhibit A.
SECTION 3.2 CAPITAL ACCOUNTS.
Separate capital accounts (a "Capital Account") shall be maintained for
each Member in accordance with the regulations promulgated under Section 704(b)
of the Code and shall consist of the sum of the contributions of each Member to
the capital of the Company, plus its share of the Net Profits of the Company,
less its share of the Net Losses of the Company, and less any distributions to
or withdrawals made by or attributed to it from the Company.
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SECTION 3.3 CAPITAL ACCOUNT DEFICITS.
No Member shall make withdrawals from the Company that result in a
balance in that Member's Capital Account of less than one thousand dollars
($1,000.00) unless the Managers vote unanimously to approve the Member
withdrawal. Any deficit in a Members Capital Account shall be promptly restored
by the Member unless otherwise approved by the Managers.
Notwithstanding anything herein to the contrary, this Agreement shall
not be construed as creating a deficit restoration obligation. In the event of a
sale or exchange of some or all of a Member's Interest in the Company in
accordance with this Agreement, the Capital Account of the transferring Member
shall become the Capital Account of the assignee or transferee, to the extent it
relates to the portion of the Interest transferred.
SECTION 3.4 ADDITIONAL CAPITAL CONTRIBUTIONS BY THE MEMBERS.
Except as provided in Section 3.1 above or as otherwise agreed, the
Members shall have no obligations to contribute capital to the Company.
SECTION 3.5 INTEREST ON AND RETURN OF CAPITAL.
No Member shall be entitled to any interest on its contributions to the
capital of the Company and no Member shall have the right to demand or receive
the return of all or any part of its contribution to the capital of the Company,
it being understood and agreed that the return of each Member's contribution to
the capital of the Company shall be made solely from the assets of the Company
and that the Members shall not be individually liable or responsible for the
return of all or any part of such contributions. No Member shall have the right
to any property other than cash in return for its contributions to the capital
of the Company but, by subsequent agreement of the Members, such right may be
established.
SECTION 3.6 STATEMENTS OF MEMBERSHIP INTERESTS.
Within fourteen (14) days after the written request of any Member, the
Company shall provide to such Member a written statement of the particular
Membership Interest owned by such Member as of the time the Company makes such
written statement. Such statement of Membership Interest shall not be deemed to
be a certificated security, a negotiable instrument, a bond or stock, and shall
not be a vehicle by which any transfer of any Member's Membership Interest may
be effected.
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ARTICLE 4
PROFITS, LOSSES, CASH FLOW
SECTION 4.1 ALLOCATION OF PROFITS AND LOSSES.
The Net Profits, Net Losses, and other tax attributes of the Company
shall be allocated among the Members in accordance with their respective
Financial Interests in the Company, as of the date of such allocation. Net
Profits or Net Losses allocable to any Member whose Financial Interests have
been Transferred, in whole or in part, during any fiscal year, shall be
allocated among the Members who are the holders of such Financial Interests
during such fiscal year in proportion to their respective interests in such
Financial Interests and their respective holding periods, without separate
determination of the results of the company's operations during such periods.
SECTION 4.2 DETERMINATION OF PROFITS OR LOSSES.
Profits or losses of the Company shall be determined by use of the
accrual method of accounting in accordance with standards generally accepted for
such methods consistently applied. Any gains or losses from the sale of Company
assets shall be included.
SECTION 4.3 APPLICATION OF CASH RECEIPTS.
Cash receipts of the Company shall be applied: First to pay any
federal, state or local taxes of any kind owed by and due from the Company; then
to pay operating expenses, debt service requirements, and other obligations of
the Company currently due; then to make capital expenditures or improvements or
reduce indebtedness of the Company in such manner as the Members shall
determine; then to fund a reasonable working capital reserve as may be
established from time to time by the Members; and then to the Members, as
provided herein. Unless unanimously agreed to by the Managers, any reduction of
indebtedness of the Company to Members shall be made pro rata to each of the
Members to whom the Company is indebted based upon the ratio of the Company's
indebtedness to that Member to the aggregate indebtedness of the Company to all
Members.
SECTION 4.4 DISTRIBUTION OF CASH FLOW.
Cash generated from Company operations, after application of the cash
receipts as set out above, may be distributed to the Members from time to time
in such amounts as the Members shall determine. All distributions shall be made
in accordance with the Financial Interests of the Members as of the date of such
distribution.
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SECTION 4.5 CONSENT TO DISTRIBUTIONS.
Each Member hereby consents to the distributions provided for herein
and agrees to execute from time to time any amendments to this Agreement
necessary or appropriate to reflect any withdrawal of or reduction in such
Member's Capital Account (as defined in Section 3.2 hereof) resulting from the
distributions provided for herein.
SECTION 4.6 SPECIAL TAX ALLOCATIONS.
The following special allocations of income and gain shall be made for federal
income tax purposes prior to any other allocations pursuant to Section 4. 1:
4.6.1 Notwithstanding any other provisions of this Article 4, if
there is a net decrease during a Company's taxable year in the minimum gain
attributable to a nonrecourse debt, then any Member with a share of the minimum
gain attributable to such debt at the beginning of such year shall be allocated
items of Company income and gain for such year (and, if necessary, for
subsequent years) equal to such Member's share of the net decrease in the
minimum gain attributable to such nonrecourse debt. The allocations under this
Section shall be interpreted in a manner to conform with Treasury Regulation
1.704-2.
4.6.2 Notwithstanding any other provisions of this Article 4, if a
Member's Capital Account, increased for this purpose by any Member's share of
minimum gain, is reduced below zero due to: (i) an unexpected allocation of loss
or deduction pursuant to Code Sections 706(d), 704(e)(2) or Treasury Regulation
1.751-1(b)(2)(ii) or (ii) distributions to such Member (to the extent they
exceed reasonably expected offsetting increases in such Member's Capital
Account), then such Member shall be allocated, as quickly as possible, 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) equal to an
amount required to eliminate such deficit. Such allocation shall be interpreted
to conform with Treasury Regulation 1.704-1(b)(2)(ii)(d), as currently in
effect.
4.6.3 Gain or loss from the sale or exchange or other taxable
disposition of all or any part of the property of the Company shall be allocated
among the Members in the following manner and order of priority:
(i) Any part of such gain attributed to property
contributed to the Company by a Member shall, to the extent of the difference
between the adjusted basis to the Company of such contributed property at the
time of contribution and the amount credited to such Member's Capital Account in
respect of such contribution, be allocated to only the contributing Member;
(ii) Gain that results from depreciation deductions
previously taken by the Company shall be allocated among the Members in the same
proportions as such depreciation was originally allocated to them;
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(iii) Any remaining gain shall be allocated among the
Members in accordance with their Financial Interests; and
(iv) In the event that all or any part of any gain realized
from the sale or other disposition of any part of the property of the Company
constitutes ordinary income to the Company pursuant to Section 1245 and/or
Section 1250 of the Code, such part of the gain shall be allocable to the
Members, prior to the allocation of any gain realized from such sale that
constitutes capital gain to the Company pursuant to Section 1222 and/or Section
1231 of the Code, in the same proportions and to the same extent as the amount
of such gain that constitutes ordinary income bears to the total amount of such
gain to be allocated pursuant to subparagraphs (i)-(iii) above.
4.6.4 If any Member is determined to have received all or any part
of such Member's interest in the profits and losses of the Company (as
distinguished from such Member's interest in the capital of the Company) as
compensation for its services or as consideration for the sale of property, and
as a result of such determination, such Member is required to realize
compensation income or capital gain for federal and/or state income tax purposes
with respect to such interest in the Company, any corresponding federal and
state income tax benefit inuring to the Company as a result of such
determination whether in the form of a deduction for compensation paid, an
allowance for depreciation or amortization of any asset of the Company, or a
reduction in the gain required to be recognized by the Company upon a sale of
any of its assets, or otherwise, shall be allocated for federal and state income
tax purposes solely to the Member or Members required to recognize such
compensation income or capital gain in the same proportion as the amount of such
income or capital gain required to be recognized by each such Member bears to
the total amount of such income or capital gain required to be recognized by all
of the Members.
ARTICLE 5
MEMBERS
SECTION 5.1 ADMISSION OF NEW MEMBERS.
Additional parties may become Members of the LLC upon the unanimous
vote of the Members.
SECTION 5.2 INDIVIDUAL MEMBER AUTHORITY.
Each Member has the power under the Act to bind the Company as an agent
in the normal course of business. Notwithstanding such power, any Member, other
than the Managers acting within the scope of their authority granted in this
Agreement, shall indemnify the Company for any costs or damages incurred by the
Company as a result of any action by such Member purporting to act for or to
undertake any obligation, debt, duty or responsibility on behalf of any other
Member or the Company; excluding from
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such indemnity: (i) any action or undertaking that is expressly authorized by
this Agreement or by approval of all non-indemnifying Members; and (ii) any
action or undertaking of a Member, by and through one of its appointed Managers,
in the ordinary course of Company's business, involving expenditures of less
than ten thousand dollars ($10,000.00).
SECTION 5.3 MEETINGS.
Meetings of all Members may be called by the Managers or by Members
holding ten percent (10%) of the Governance Interests by delivering written
notice to all Members at least fourteen (14) days prior to the proposed date of
such meeting. Such notice shall state the purpose(s) of the meeting. The
business transacted at any meeting shall be limited to the purposes stated in
the notice of the meeting. Any such meetings shall be held at the principal
place of business of the Company, or such other place, as may be designated in
the notice. Members may waive the requirement of notice by attendance at a
meeting.
SECTION 5.4 QUORUM REQUIREMENTS FOR MEETINGS.
The Members holding a majority of the Governance Interests entitled to
vote at any meeting shall constitute a quorum for the transaction of business.
Once a Governance Interest is represented at any meeting, it is deemed to be
present for the remainder of that meeting and for any adjournment thereof. A
meeting may be adjourned despite the absence of a quorum, and notice of an
adjourned meeting is not necessary if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken.
SECTION 5.5 ACTION OF MEMBERS.
Except as otherwise required by this Agreement or by law, the Members
shall take action by the affirmative vote of the Members holding a majority of
the Governance Interests present and entitled to vote on that item of business
in a meeting in which a quorum is present.
SECTION 5.6 ACTION ON WRITTEN CONSENT.
Any action required or permitted to be taken at a meeting of the
Members may be taken without a meeting so long as a written waiver of acting at
a meeting is signed by Members holding a majority of the Governance Interests,
and a written consent is signed by Members who own Membership Interests equal to
that which would be required to take the same action at a meeting of the Members
at which all Members are present.
SECTION 5.7 MEETINGS BY TELEPHONE.
Any or all Members may participate in meetings by, or conduct the
meeting through the use of, any means of communication by which all Members
participating may
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simultaneously hear each other during the meeting. A Member participating in a
meeting by this means is deemed to be present in person at the meeting.
SECTION 5.8 PROXIES.
At all meetings of Members, a Member may vote in person or by proxy
executed in writing by the Member or by a duly authorized attorney-in-fact. Such
proxy shall be filed with the Managers of the Company before or at the time of
the meeting. No proxy shall be valid after eleven months from the date of its
execution.
ARTICLE 6
MANAGEMENT
SECTION 6.1 MANAGEMENT OF COMPANY.
The overall management of the business and affairs of the Company shall
be exercised by or under the direction of the Members. Except where expressly
provided herein to the contrary, all decisions with respect to the management of
the Company shall be made by the Managers, subject to the direction and control
of the Members.
SECTION 6.2 ELECTION, WITHDRAWAL, AND REMOVAL OF MANAGERS.
6.2.1 The Members will each appoint the following number of
Managers:
INTEGRITY 4 Managers, each with one vote; and
WORD 3 Managers, each with one vote.
Unless otherwise unanimously agreed by the Members, effective January
1, 2001, the number of Managers which will be appointed by the Members shall be
as follows:
INTEGRITY 3 Managers, each with one vote; and
WORD 3 Managers, each with one vote.
Each Member may remove or replace any Manager it has appointed. Each
Manager will have one equal vote. Any Manager may at any time, and upon thirty
(30) days' prior written notice to the Members, resign as a Manager.
6.2.2 Of the Managers so appointed, the Company shall at all times
have a Chief Manager and a Secretary, who shall not be the same person and shall
not be Managers appointed by the same Member. The Managers shall unanimously
elect the Chief Manager and the Secretary. The Chief Manager and Secretary Term
of Office shall be one (1) calendar year. In the event a Chief Manager cannot be
unanimously elected for the next
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calendar year, the Secretary serving at the year ending shall automatically
assume the office of Chief Manager for the next calendar year. In the event a
Secretary cannot be unanimously elected for the next calendar year, the Chief
Manager serving at the year ending shall automatically assume the office of
Secretary for the next calendar year.
SECTION 6.3 ACTION OF MANAGERS.
Except as expressly provided in this Agreement, any vote, determination
or action by the Managers required or allowed under the terms of this Agreement
shall be undertaken only upon the affirmative vote of a majority of the Managers
present at the meeting in person or by proxy.
SECTION 6.4 DUTIES OF CHIEF MANAGER.
The Chief Manager shall: (i) see that all orders and resolutions of the
Members are carried into effect; (ii) pursuant to any resolution of the Members,
sign and deliver in the name of the Company any deeds, mortgages, bonds,
contracts or other instruments pertaining to the business of the Company, except
in cases in which the authority to sign and deliver is required by law to be
exercised by another person or is expressly delegated by this Agreement or by
the Members; (iii) perform other duties prescribed by the Members; and (iv)
deliver any notices and accept any documents otherwise to be handled by the
Secretary, if the office of Secretary is vacant.
SECTION 6.5 DUTIES OF SECRETARY.
The Secretary shall: (i) keep accurate membership records for the
Company; (ii) maintain records of and, whenever necessary, certify all
proceedings of the Members, Managers, or committees of the Company; (iii)
receive notices required to be sent to the Secretary and keep a record of such
notices in the records of the Company; and (iv) perform other duties prescribed
herein or by the Members or by the Chief Manager.
SECTION 6.6 DUTIES OF ADDITIONAL MANAGERS.
All other Managers appointed by the Members pursuant to Section 6.2
hereof, shall perform duties as prescribed by the Members.
SECTION 6.7 COMPENSATION OF MANAGERS.
With the unanimous approval of the Members, Managers may be paid by the
Company for their services to the Company. The compensation amount shall
likewise require the unanimous approval of the Members. The Company shall not
cover the Managers' expense to attend meetings unless unanimously approved by
the Members.
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SECTION 6.8 CONTRACTS WITH RELATED PARTIES.
Except as expressly provided in this Agreement, the Company shall not
enter into any contract, agreement, lease or other arrangement for the
furnishing to or by the Company of goods, services or space with any party or
entity that is related to or affiliated with any Member or Manager, or that is
directly or indirectly owned or controlled by any Member or Manager or by a
party or entity related to or affiliated with any Member or Manager, unless such
contract, agreement, lease or other arrangement (a) has been approved by the
Members or Managers who do not have an interest in the Contract, and (b)
contains terms and conditions that are competitive with those offered by
unrelated third parties and are fair to the Company.
6.8.1 OBLIGATIONS OF THE MEMBERS. In addition to the capital
contributions set forth above, the parties shall perform the following duties
with respect to the Company.
6.8.1.1 INTEGRITY'S DUTIES. Integrity shall secure all permissions and
consents necessary for the creation of the Hymnal, including without limitation
all contracts and/or licenses with authors, editors, arrangers, owners of
copyrighted material, and other parties engaged to contribute to the creation of
the Hymnal prior to its manufacture, sale, and distribution (collectively "third
party contributors"). Such contracts, permissions, consents, and related
documents will be in the name of the Company, provided, however, that if such
instruments have been executed prior to the execution hereof, Integrity shall
assign such instruments to the Company. On behalf of the Company and using
Company funds, Integrity shall pay all sums and/or royalties due to such third
party contributors.
In addition to the above, the general accounting obligations for the
Company will be managed by Integrity and the results communicated to Word on a
regular monthly basis. Word shall also have the opportunity to review the
Company-related books and records, upon reasonable request during normal
business hours.
6.8.1.2 WORD'S DUTIES. Word shall develop, with Integrity's advice, the
initial and ongoing marketing plan(s) and budget(s) for the Products; execute
such plans, the funding for which will be reimbursed by the Company; and
supervise the manufacture and management of the Product. The cost of
manufacturing the Product shall be borne by the Company (or reimbursed by the
Company, as applicable).
6.8.1.3 OBLIGATIONS NOT FUNDED BY COMPANY. Unless approved by the
majority of the Managers in writing, the parties agree that the Company will not
bear the operational, overhead, or personnel costs of the parties even though
such costs may be incurred by a party as it fulfills its duties and obligations
described herein, in any agreement between a party and the Company, and/or in
the Company governing documents.
6.8.2 SERVICES PROVIDED TO THE COMPANY. Each of the parties hereto
shall offer specialized services to the Company pursuant to the terms of the
non-exclusive contracts
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described herein. Such services (sometimes collectively referred to as the
"specialized services") are as described below. For purposes of this Agreement,
"trade sales" are sales made to third parties for resale; and "direct sales" are
sales made directly to the user of the Hymnal. The Company shall not enter into
any contractual relationships regarding the provision of trade sales or direct
sales services without the majority approval of the Members. The non-exclusive
contracts described in Sections 6.8.2.1 and 6.8.2.2 are the only non-exclusive
licenses which the Company shall grant during the term of such non-exclusive
contracts; provided, however, that the Company may enter into other
non-exclusive contracts if at least two-thirds of the Managers approve the terms
thereof.
6.8.2.1 INTEGRITY'S SERVICES. Integrity shall sell the Hymnal through
its "direct sales" force in the U.S. and Canada. For such direct sales services,
Integrity shall receive a fee equal to [**]2% of Integrity's net receipts from
such sales. The Company will grant Integrity a non-exclusive contract to provide
Integrity's direct sales services to the Company subject to Word's rights
pursuant to the terms hereof. The Company and Integrity will enter into a
written agreement for the direct sales services (referred to herein as the
"Integrity Sales Agreement"). The Integrity Sales Agreement will contain a fixed
contract term and options for subsequent renewal periods.
6.8.2.2 WORD'S SERVICES. Word shall sell the Hymnal through:
(a) Word's "trade sales" force in the U.S.; and
(b) Word's "direct sales" force in the U.S. and Canada.
The Company will enter into a contract with Word to provide to the
Company Word's trade sales services on an exclusive basis and Word's direct
sales services on a non-exclusive basis; provided, however, that Word's right as
a provider of direct sales services to the Company is subject to Integrity's
rights pursuant to the terms hereof. The Company and Word will enter into a
written agreement for the direct sales and trade sales services (referred to
herein as the "Word Sales Agreement"). The Word Sales Agreement will contain a
fixed contract term and options for subsequent renewal periods.
For its trade sales services in the United States, Word will receive a
fee equal to [**](1)% of Word's net receipts from such sales. For its direct
sales services in the U.S. and Canada, Word will receive a fee equal to [**](1)%
of Word's net receipts from such sales.
In addition to the sales services described above, Word shall provide
distribution and fulfillment services (collectively the "distribution services")
for sales of the Hymnal, whether such sales are made by Word or Integrity. The
Company and Word will enter into a written agreement for such distribution
services (referred to herein as the "Word Distribution Agreement"). For any such
distribution services, Word will receive (or will be paid by Integrity for
Integrity's direct sales, as applicable) [**](1)% of Word's net receipts from
such sales.
-------------
(1) Indicates information which has been redacted pursuant to a request for
confidential treatment.
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6.8.2.3 ACCOUNTING FOR SPECIALIZED SERVICES. On a monthly basis during
the term hereof, Integrity and Word will provide a written accounting to the
Company, as applicable for the revenues received from the specialized services
they have provided pursuant to the terms of the Integrity Sales Agreement, the
Word Sales Agreement, and the Word Distribution Agreement, respectively, and any
related agreements referenced hereunder. Such accounting shall be consistent
with the royalty statements generated by each party hereto. Payments due the
Company for income generated on its behalf will be sent to the Custodian of
Company Accounts, c/o Integrity Incorporated, 0000 Xxxx Xxxx, Xxxxxx, Xxxxxxx
00000-0000.
The monthly payments remitted to the Company shall be in an amount
equal to each party's net sales revenue ("net revenue") derived from the
specialized services which such party provides to the Company. The net revenue
payments due the Company shall be calculated as follows (using the fee
percentages cited in Sections 6.8.2.1 and 6.8.2.2 as applicable):
(a) Integrity's net revenue will be equal to Integrity's gross revenue
less (i) Integrity's sales fee, as set forth in Section 6.8.2.1 herein,
attributable to its specialized services pursuant to the terms hereof
and (ii) any distribution fee payable by Integrity to Word on behalf of
the Company, according to the terms of the Word Distribution Agreement.
(b) Word's net revenue will be equal to Word's gross revenue less (i)
Word's sales fee, as set forth in Section 6.8.2.2 herein, attributable
to its specialized services provided pursuant to the terms hereof and
(ii) Word's distribution fee, according to the terms of the Word
Distribution Agreement.
For the purposes of such calculations, "gross revenue" shall mean total revenue
derived from the special services provided hereunder less actual returns,
discounts, and other credits.
SECTION 6.9 BORROWING.
The Company may borrow for Company purposes from any source upon such
terms and conditions as the Members may determine. Notwithstanding the
foregoing, but excepting trade accounts created in the ordinary course of
business, the Company shall not incur any indebtedness secured by assets of the
Company or any unsecured indebtedness in excess of $5,000.00 in any single
instance or $15,000.00 in the aggregate in any twelve-month period without the
Members' unanimous prior approval. The Chief Manager and Secretary will deliver
on behalf of the Company any and all promissory notes, security agreements,
deeds of trust, and other documents and instruments required by the lender in
connection therewith.
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ARTICLE 7
INDEMNIFICATION
SECTION 7.1 RIGHT TO INDEMNIFICATION.
The Company, to the fullest extent permitted by applicable law then in
effect, shall indemnify any person (an "Indemnitee") who was or is involved in
any manner (including, without limitation, as a party or a witness), or is
threatened to be made so involved, in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal (including,
without limitation, any action, suit or proceeding by or in the right of the
Company to procure a judgment in its favor) (a "Proceeding") by reason of the
fact that the Indemnitee is or was a Member, Manager, employee or agent of the
Company, or is or was serving at the request of the Company as a governor,
manager, director, officer or employee or agent of another corporation, limited
liability company, partnership, joint venture, trust or other enterprise,
against all expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in connection with
any such Proceedings. This indemnification shall be a contract right and shall
include the right to receive payment in advance of any expenses incurred by an
Indemnitee in connection with a Proceeding, consistent with the provisions of
applicable law as then in effect.
SECTION 7.2 CONTRACTS AND FUNDING.
The Company may enter into contracts with any Member, Manager,
employee, or agent of the Company in furtherance of the provisions of this
Article, and may create a trust fund, grant a security interest, or use other
means (including, without limitation, a letter of credit) to ensure the payment
of such amounts as may be necessary to effect indemnification as provided in
this Article.
SECTION 7.3 INDEMNIFICATION NOT EXCLUSIVE RIGHT.
The right of indemnification provided in this Article and in the Act
shall not be exclusive of any other rights to which a person seeking
indemnification may otherwise be entitled, under any statute, resolution,
agreement, vote of disinterested Members or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office. The provisions of this Article shall inure to the benefit of the heirs
and legal representatives of any person entitled to indemnity under this Article
and shall be applicable to Proceedings commenced or continuing after the
adoption of this Article, whether arising from acts or omissions occurring
before or after such adoption.
SECTION 7.4 ADVANCEMENT OF EXPENSES.
All reasonable expenses incurred by or on behalf of an Indemnitee in
connection with any proceeding shall be advanced to the Indemnitee by the
Company within twenty
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(20) days after the receipt by the Company of a statement from the Indemnitee
requesting such advance from time to time, whether prior to or after final
disposition of a proceeding. The statement shall reasonably evidence the
expenses incurred by the Indemnitee and shall include or be accompanied by an
undertaking by or on behalf of the Indemnitee to repay the amounts advanced if
it should ultimately be determined that the Indemnitee is not entitled to be
indemnified against such expenses.
ARTICLE 8
FISCAL MATTERS
SECTION 8.1 BOOKS AND RECORDS.
Full and accurate books and records of the Company (including without
limitation all information and records required by the Act) shall be maintained
at its principal place of business, or at another place or places within the
United States determined by its Members, showing all receipts and expenditures,
assets and liabilities, profits and losses, and all other records necessary for
recording the Company's business and affairs. All Members shall have access to
the books and records of the Company, during regular business hours, at the
Company's principal place of business, upon provision of notice in writing by
any Member to the Company at least five (5) business days before the date on
which any Member desires to inspect said books and records.
SECTION 8.2 FISCAL YEAR.
The fiscal year of the Company shall begin on January 1 of each year
and shall end on December 31 of the same year.
SECTION 8.3 TAX STATUS; ELECTIONS.
Notwithstanding any provision hereof to the contrary, solely for
purposes of the United States federal income tax laws, each of the Members
hereby recognizes that the Company will be subject to all provisions of
Subchapter K of Chapter 1 of Subtitle A of the Code; provided, however, that the
filing of U.S. Partnership Returns of Income shall not be construed to extend
the purposes of the Company or expand the obligations or liabilities of the
Members. At the Members' unanimous request, the Company shall file an election
under Section 754 of the Code.
SECTION 8.4 REPORTS TO MEMBERS.
Each of the following reports shall be prepared at the Company's
expense, and shall be delivered to each Member
8.4.1 Within seventy-five (75) days after the end of each fiscal
year, all information necessary for the preparation of the Members' federal,
state and local income tax returns; and
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8.4.2 Within seventy-five (75) days after the end of each fiscal
year, an annual report of the activities of the Company, including a balance
sheet, income statement and a statement of cash flow, and such annual report
shall contain a complete statement of all compensation and fees paid or accrued
by the Company to the Managers.
8.4.3 Within sixty (60) days prior to each Annual Meeting of the
Members, the Members will provide a report to the Secretary regarding the
corporate good standing of each Member. Any Member reported not in good standing
shall correct that situation prior to the Members' Annual Meeting. Confirmation
of such Members' good standing shall be reported at the Members' Annual Meeting.
SECTION 8.5 BANK ACCOUNTS.
All funds of the Company shall be deposited in its name at a financial
institution or institutions approved by the Managers, in such checking and
savings accounts or time deposits or certificates of deposit as shall be
designated from time to time by the Managers. Checks or other drafts to satisfy
expenses approved pursuant to the terms hereof shall be endorsed by the Chief
Manager and the Secretary or their intercompany designees up to ten thousand
dollars ($10,000.00). Any checks, drafts, or other withdrawals exceeding such
amount must first be approved in writing by the Managers, in accordance with
Section 6.3 hereof.
SECTION 8.6 TAX MATTERS MEMBER.
Unless another person is so designated by the Members, Integrity
Incorporated shall be the Tax Matters Member ("TMM"). The TMM shall be
responsible for all administrative and judicial proceedings for the assessment
and collection of tax deficiencies or the refund of tax overpayments arising out
of a Member's distributive share of items of income, deduction, credit and/or of
any other Company item (as that term is defined in the Code or in regulations
issued by the Internal Revenue Service) allocated to the Members affecting any
Member's tax liability. The TMM shall promptly give notice to all Members of any
administrative or judicial proceeding pending before the Internal Revenue
Service involving any Company item and the progress of any such proceeding. Such
notice shall be in compliance with such regulations as are issued by the
Internal Revenue Service. The TMM shall have all the powers provided to a tax
matters partner in Sections 6221 through 6233 of Code, including the specific
power to extend the statute of limitations with respect to any matter which is
attributable to any Company item or affecting any item pending before the
Internal Revenue Service and to select the forum to litigate any tax issue or
liability arising from Company items. The TMM may resign his or her position by
giving thirty (30) days' written notice to all Members, whereupon the Members
shall designate a new TMM. The TMM shall be entitled to reimbursement for any
and all reasonable expenses incurred with respect to any administrative and/or
judicial proceedings affecting the Company.
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ARTICLE 9
TRANSFER RESTRICTIONS; RIGHT OF FIRST REFUSAL
No Transfer of a Membership Interest in the Company shall be made
except in compliance with the conditions set out below, and any attempted
Transfer made without complying with the following conditions shall be void ab
initio and shall not be recognized by the Company or by any Member:
SECTION 9.1 WITHDRAWAL.
9.1.1 In the event that there are two (2) Members of the Company,
and one (1) Member wishes to retire or withdraw or, subject to Section 9.1.2
hereof, withdraws from the Company, such withdrawing Member shall consent to the
admission of another Member to the Company as at least a one percent (1%) Member
immediately prior to the effective date of such resignation or withdrawal. The
effective date of a Member's retirement or withdrawal from the Company must be
on or after the effective date that the new Member holding at least one percent
(1%) Membership Interest obtains such an interest in the Company, and the new
Member shall acquire the exiting Member's Membership Interest and shall assume
the exiting Member's rights and responsibilities according to Section 9.6.
9.1.2 In the event a Member ceases to be actively involved in the
management and business of the Company for whatever reason, such Member shall,
within fifteen (15) days after the effective date of such departure, offer to
sell to the Company all of its interest in the Company at a price to be agreed
upon by the Member and the Company. If the Member and the Company fail to agree
upon a price within thirty (30) days following the date such offer is due, the
price of the Interest shall be determined in accordance with Section 9.3 hereof.
Upon the determination of a Purchase Price, the Company shall have thirty (30)
days within which to accept the Member's offer, either in whole or in part.
Should the Company fail to give the withdrawing Member notice of its decision to
purchase some or all of its Interest, or not to purchase any of his or her
Interest, within such thirty-day period, the Company shall be deemed to have
elected not to purchase any of the Members Interest. In the event all of the
selling Members Interest is not purchased as provided above, such Member shall
continue to hold such Interest and shall dispose of it solely upon the terms
described in this Agreement.
9.1.3 The withdrawal of a Member shall not cause the dissolution of
the Company, except as provided in Section 10.3.
SECTION 9.2 BANKRUPTCY.
In the event a Member is the subject of an entry of an order of relief
under the United States Bankruptcy Code, 11 U.S.C. xx.xx. 101 et seq., as
amended, or any successor statute thereto, and any part of the Membership
Interest of that Member, as a consequence
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of the entry of such order of relief becomes the property of a person not a
party to this Agreement, the Governance Interest of such Interest shall
thereupon be suspended ipso facto, and the Interest held by said non-party shall
be subject to the provisions of Section 9.1, above, as though said non-party
shall have been a retiring party to this Agreement. Upon the acquisition of such
Interest by the Company from such non-party, the former Member shall, for a
period of ninety (90) days, have the right to purchase the Interest so acquired
by the Company at the cost paid by the Company for such Interest. Should such
former Member fail to exercise such option within ninety (90) days, such Member
shall then, for an additional period of two hundred seventy (270) days, have the
right to acquire such Interest from the Company at a price equal to its then
fair market value. After one (1) year from the date on which such Interest is
acquired by the Company, said former Member's right to acquire such Interest
shall terminate.
SECTION 9.3 DETERMINATION OF PURCHASE PRICE; METHOD OF PAYMENT.
The purchase price of the Interest owned by any Member purchased
pursuant to the provisions of this Section shall be fixed in the following
manner:
9.3.1 APPRAISAL. The fair market value of the Company shall be
established as follows: Three appraisals shall be obtained from experts in the
appropriate industry mutually agreeable to the parties. In the event the
appraisals vary in amount, the parties hereby agree that the highest and lowest
shall be averaged and the resulting amount shall become the agreed upon fair
market value of the Company. Such fair market value shall be known as the
"Appraised Value" of the Company. The expenses for the appraisers shall be paid
one-half (1/2) by the Company and one-half (1/2) by the Member whose Interest is
being sold hereunder.
9.3.2 DETERMINATION OF VALUE PER MEMBERSHIP INTEREST. The value of a
Members Interest in the Company shall be determined by multiplying the appraised
value by the Members Financial Interest in the Company.
SECTION 9.4 VOLUNTARY DISPOSITION.
9.4.1 TRANSFER TO MEMBER. A Member may Transfer all or any part of
its Membership Interest to another Member on such terms and conditions as the
transferring and transferee Member determine.
9.4.2 OTHER TRANSFERS OF FINANCIAL INTEREST FOR VALUE. Except as
provided above, a Member may not Transfer its Financial Interest for a valuable
consideration unless the Member desiring to make such Transfer (the
"Transferring Person") first gives the other Members the option to buy such
Financial Interest in the Company as follows:
9.4.2.1 The Transferring Person shall deliver written notice to the
other Members, which notice shall state the name of the prospective purchaser
and the price and terms offered by such prospective purchaser.
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9.4.2.2 The other Members shall have an option to purchase such
Financial Interest (the "Offered Interest") of the Transferring Person at the
price and on the same terms set forth in such written notice exercisable within
thirty (30) days following the receipt of such notice by giving notice of such
election to the Transferring Person and the other Members.
(a) TRANSFERRING MEMBER'S OFFER TO SELL FINANCIAL INTEREST. The
offering price for a transferring Members Financial Interest shall be
based on the Appraised Value described in Section 9.3. If no other
Member accepts the offered Financial Interest at that price within
thirty (30) days of receipt of such offer, then the transferring Member
may offer its Financial Interest to a third party within a reasonable
period of time thereafter.
If the transferring Member offers to sell its Financial Interest at a
price which is less than the Appraised Value, then the transferring
Member must first make such offer of its Financial Interest at such
price to the other Members(s). If no other Member(s) accept(s) the
offer at such lower price within thirty (30) days of receipt of such
offer, then the transferring Member may sell its Financial Interest to
a third party at such lower price within a reasonable period of time
thereafter.
(b) THIRD PARTY'S OFFER TO PURCHASE FINANCIAL INTEREST. If a third
party offers to purchase all or a part of any Member's Financial
Interest, and if such Member desires to accept such offer, then the
Member must first notify the other Member(s) of the third party offer
and, in such notice, give the other Member(s) thirty (30) days during
which to accept the offer to purchase said Financial Interest at the
lower of the price offered by the third party or the Appraised Value.
If the other Member(s) do(es) not accept such offer to purchase said
Financial Interest during the thirty (30) day period, then the Member
owning such Financial Interest may accept the third party's offer as
originally made.
9.4.2.3 Each Member shall have an option to purchase a percentage of
the Offered Interest equal to the proportion of such Member's Financial Interest
to the Financial Interest of all Members other than the Transferring Person. If
all the remaining Members do not exercise their option to purchase the Offered
Interest, those Member(s) desiring to purchase a portion of the Offered Interest
may, for a period of thirty (30) days following receipt of the Appraised Value,
elect to purchase the balance of the Offered Interest in proportion to their
Financial Interests by giving notice of such election to the Transferring Person
and the other Members. Upon the expiration of such thirty (30) additional day
period, if the remaining Members fail to offer to purchase all of the Offered
Interest, the Transferring Person is permitted to sell such Offered Interest to
the third party.
9.4.2.4 In the event that said option is not exercised within said
thirty (30) day period, the same shall expire and be of no force and effect, and
the Transferring Person may then consummate the proposed transfer of Offered
Interest to such person. In no
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event, however, shall the Offered Interest be sold to another party for less
than the price, or on terms and conditions materially different than those
stated in the written notice provided pursuant to Section 9.4.2.1; or if the
proposed sale is not consummated within thirty (30) days after the close of such
thirty (30) day period, the Transferring Person must again comply with this
Section 9.4.2 before any Transfer of Financial Interest.
9.4.3 OTHER TRANSFERS OF MEMBERSHIP INTEREST FOR VALUE. Except as
provided above, a Member may Transfer all or any part of its Membership Interest
only with the consent of the other Member.
SECTION 9.5 TAX CONSEQUENCES.
Notwithstanding the foregoing, in no event shall any Member Transfer
all or any part of its interest in the Company, nor shall any Member be admitted
to the Company, nor shall any Member withdraw from the Company, if such action
would result in a sale or exchange of fifty percent (50%) or more of the total
interest in the capital and profits of the Company within a twelve-month period
such that the Company would be considered as terminated under Section 708 of the
Code (or any successor statute thereto), or so as to prevent the Company from
continuing the use of accelerated methods of depreciation theretofore used by
the Company in connection with depreciable property of the Company, without the
prior approval of all of the Members.
SECTION 9.6 TRANSFEREE ASSUMES COMPANY OBLIGATIONS.
In the event that any Member Transfers its Governance or Financial
Interest in the Company to any person or entity other than one or more of the
other Members or the Company in compliance with this Article, no such Transfer
shall become effective until the proposed transferee agrees in writing to assume
and be bound by all the obligations and restrictions to which the Transferor is
subject under the terms of this Agreement and any further agreement with respect
to the business of the Company.
ARTICLE 10
DISSOLUTION; TERMINATION; CONTINUATION OF COMPANY
SECTION 10.1 TERM.
The term of the Company shall commence on the date of this Agreement
and shall continue until December 31, 2072, unless earlier terminated in
accordance with the provisions hereof or as provided by law.
SECTION 10.2 EVENTS CAUSING DISSOLUTION AND WINDING UP.
The Company shall be dissolved and its affairs wound up, upon the
occurrence of any of the following events:
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10.2.1 Upon the expiration of the term of the Company set out
herein;
10.2.2 Upon the sale of all or substantially all of the assets of
the Company and the distribution of all of the net proceeds
therefrom;
10.2.3 In the event of the dissolution or bankruptcy of any Member
provided that the Members may vote to continue the Company
as provided in Section 10.3;
10.2.4 At any time with the written consent of all of the Members;
or
10.2.5 As may be otherwise provided by law.
The Company shall be terminated when the winding up of Company affairs has been
completed following dissolution.
SECTION 10.3 CONTINUATION OF THE COMPANY.
Upon the dissolution or bankruptcy of a Member (referred to in this
Section as the "non-existing Member"), the remaining Members shall have the
right to continue the business of the Company upon the consent of the Members
holding a majority in interest, as defined in the Act, provided that such
consent is obtained no later than ninety (90) days after the occurrence of the
dissolution or bankruptcy. If at any time due to the withdrawal, expulsion,
dissolution, or bankruptcy of any of the Members, fewer than two (2) Members
remain, the Company shall thereafter dissolve and conduct only such activities
as are necessary to wind up its affairs.
If the Company dissolves because there are fewer than two (2) Members,
then the surviving Member shall have the first right to purchase any or all of
the Company's assets. In the event that the parties cannot reach an agreement on
the purchase price of the Company's assets which would be purchased, three
appraisals shall be obtained from experts in the appropriate industry mutually
agreeable to the parties. In the event the appraisals vary in amount, the
parties hereby agree that the highest and lowest shall be averaged and the
resulting amount shall become the agreed upon purchase price for the then
remaining assets of the Company which would be purchased.
SECTION 10.4 WINDING UP AFFAIRS ON DISSOLUTION.
Upon dissolution of the Company, the Managers or the other persons
required or permitted by law to carry out the winding up of the affairs of the
Company shall:
10.4.1 Promptly notify all Members of such dissolution;
10.4.2 Wind up the affairs of the Company;
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10.4.3 Prepare and file all instruments or documents required by
law to be filed to reflect the dissolution of the Company;
and
10.4.4 After paying or providing for the payment of all liabilities
and obligations of the Company, distribute the assets of the
Company as provided by the terms of this Agreement.
SECTION 10.5 DISTRIBUTION UPON DISSOLUTION.
Upon dissolution of the Company and the sale of its assets, the
proceeds of such sale or the assets of the Company shall be allocated as set
forth below:
10.5.1 First, to pay all outstanding liabilities and expenses of
the Company;
10.5.2 Next, to establish such reserves for unknown or contingent
liabilities, including without limitation reserves for
environmental matters, as the Managers may determine;
10.5.3 Next, to each Member an amount equal to its capital account
balance as of the date of dissolution (after giving effect
to the allocation of all Net Profits or Net Losses realized
upon dissolution) or a pro rata portion thereof if the total
assets to be distributed is less than the total capital
account balance of the Company; and
10.5.4 Lastly, any remaining balance shall be distributed to the
Members in proportion to their Financial Interests.
ARTICLE 11
GENERAL PROVISIONS
SECTION 11.1 NOTICES.
All written notices, offers, requests, demands, and other
communications pursuant to this Agreement shall be given by personal delivery,
by prepaid first class registered or certified mail properly addressed with
appropriate postage paid thereon, by recognized overnight courier service, and
shall be deemed to be duly given and received on the date of delivery if
delivered personally, on the second day after the deposit in the United States
Mail if mailed on the day after proper delivery to an overnight delivery
service. Notices shall be sent to the Company at the principal office of the
Company, to a Member at the address set forth on Exhibit A, or to such address
as any party may specify in writing to the other parties. Notice of any meeting
must contain a statement of the purpose of the meeting.
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SECTION 11.2 ENTIRE AGREEMENT.
This Agreement, including any exhibits, schedules, lists and other
documents and writings referred to herein or delivered pursuant hereto, all of
which form a part hereof, contains the entire understanding of the parties with
respect to its subject matter. It merges and supersedes all prior and/or
contemporaneous agreements and understandings between the parties, written or
oral, with respect to its subject matter and there are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter hereof other than those expressly set forth
herein.
SECTION 11.3 GOVERNING LAW; FORUM; SERVICE OF PROCESS; VENUE.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee. This Agreement and its subject matter have
substantial contacts with Tennessee, and all actions, suits or other proceedings
with respect to this Agreement shall be brought only in a court of competent
jurisdiction sitting in Xxxx County, Tennessee, or in the Federal District Court
having jurisdiction over that County. In any such action, suit or proceeding,
such court shall have personal jurisdiction of all of the parties hereto, and
service of process upon them under any applicable statutes, laws, and rules
shall be deemed valid and good.
SECTION 11.4 ATTORNEYS' FEES.
If legal action is commenced to enforce any provision of this
Agreement, the prevailing party in such action shall be entitled to recover its
attorneys' fees and expenses through all appellate levels in addition to any
other relief that may be granted.
SECTION 11.5 SEVERABILITY.
In the event that any provision of this Agreement, or the application
thereof to any person or circumstance, is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement in that jurisdiction or the application of
that provision to any other person or circumstance or in any other jurisdiction,
and this Agreement shall then be construed in that jurisdiction as if such
invalid, illegal or unenforceable provision had not been contained in this
Agreement, but only to the extent of such invalidity, illegality or
unenforceability.
SECTION 11.6 BINDING EFFECT.
Except as herein otherwise provided to the contrary, this Agreement
shall be binding upon, and inure to the benefit of, the Members and their
respective successors, transferees and assigns.
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SECTION 11.7 GENDER, NUMBER.
Whenever the context of this Agreement so requires, references of the
masculine gender shall include the feminine gender and corporate or other such
entities, the singular number shall include the plural and vice versa, and
reference to one or more parties hereto shall include all assignees of that
party.
SECTION 11.8 CAPTIONS AND HEADINGS.
The section and paragraph captions and headings contained in this
Agreement are for included reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 11.9 AMENDMENT.
This Agreement and the Articles of Organization may only be amended,
modified or supplemented upon the unanimous vote of the Members. If the
amendment establishes, amends or deletes a super majority quorum or super
majority voting requirement, a vote consistent with the super majority
requirement is required to effect the amendment.
SECTION 11.10 COUNTERPARTS.
This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed to be an original document and all of which, taken
together, shall be deemed to constitute but a single original document.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by themselves or their duly authorized representatives as of the day
and year first set out above.
WORD ENTERTAINMENT, A DIVISION OF INTEGRITY INCORPORATED
IDEA ENTERTAINMENT, INC.
By: /s/ Xxxxxx Xxxxx By: /s/ P. Xxxxxxx Xxxxxxx
------------------------------- ------------------------------------
Its: President Its: President
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29
EXHIBIT A
MEMBERS AND CAPITAL CONTRIBUTIONS
(Final reconciliation of capital contributions will be confirmed by an amendment
to this Exhibit A on or before April 15, 1998)
CURRENT MEMBERS
MEMBER NAMES ORIGINAL CAPITAL FINANCIAL
AND ADDRESSES CONTRIBUTION INTEREST
------------- ------------ --------
WORD:
Word Entertainment, a division of 50%
Idea Entertainment, Inc.
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
INTEGRITY:
Integrity Incorporated 50%
0000 Xxxx Xxxxx
Xxxxxx, XX 00000-0000
