SEAWAY VALLEY FUND, LLC,
a Delaware limited liability company
THIS SECOND AMENDED LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the
"Agreement") is made on July 1, 2007 to amend the original August 14, 2002 (and
amended July 1, 2003) LIMITED LIABILITY OPERATING AGREEMENT by and among Seaway
Valley Capital Corporation, a Delaware corporation, as the manager (the
"Manager") and those persons executing this Agreement as members, whether in
counterpart or by separate instrument or otherwise, (collectively referred to as
the "Members" and singularly as a "Member"). The Manager and Members hereby form
a limited liability company (the "Company") under the Delaware Limited Liability
Company Act, as amended from time to time (the "Act").
W I T N E S S E T H:
WHEREAS, the Manager authorized the formation of the Company for the purposes
described in Article 2.5 below; and
WHEREAS, the Members and the Manager desire to enter into this Agreement to
define their respective rights and liabilities and to state their agreement
regarding owning and dealing with the assets of the Company.
AGREEMENT:
NOW, THEREFORE, to state the entire agreement of the Members and the Manager
with respect to their respective rights and obligations as Members and as
Manager and with respect to the Company and its affairs, and in consideration of
these premises, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
In this Agreement, the following terms, unless the context otherwise requires,
have the meanings indicated:
"Accountant" means the certified public accountant or firm of certified public
accountants, if any, selected by the Manager, to perform certain accounting
functions on behalf of the Company.
"Accredited Investor" means any Person who qualifies as an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended.
"Act" means the Delaware Revised Uniform Limited Liability Company Act, as
amended and as hereafter amended, or any successor law.
"Advisers Act" means the Investment Advisers Act of 1940, as amended and as
hereafter amended, or any successor law.
"Advisory Board" has the meaning set forth in Article 4.2.
"Affiliate" means, with respect to any person, (i) any Person directly or
indirectly controlling, controlled by, or under common control with such Person,
or (ii) a Person directly or indirectly owning, controlling, or having
beneficial interest in more than fifty percent (50%) of the outstanding voting
securities or interests of a Person identified in clause (i). As used in this
definition of Affiliate, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities of
Company interest, by contract, or otherwise.
"Agreement" means this Limited Liability Company Operating Agreement, as amended
from time to time.
"Annual Financial Statement" has the meaning set forth in Article 7.1
"Approval of the Members" or "Approved by the Members" means the affirmative
approval of Members then entitled to vote, who hold more than 50% of the issued
and outstanding Membership Units, including, without limitation, Members who are
Affiliates of the Manager.
"Approval of the Nonaffiliated Members" or "Approval by the Nonaffiliated
Members" means the affirmative approval of Members then entitled to vote, who
hold more than 50% of the issued and outstanding Membership Units, excluding the
Members who are Affiliates of the Manager at the time of determination or, if
such approval is made in connection with a dissolution or liquidation of the
Company, the last remaining Manager.
"Bankruptcy" means, for any Member, that Member's taking or acquiescing in the
taking of an action seeking relief under, or advantage of, an applicable debtor
relief, liquidation, receivership, conservatorship, bankruptcy, moratorium,
rearrangement, insolvency, reorganization, or similar law affecting the rights
or remedies of creditors generally, as in effect from time to time (the term
"acquiescing" including, without limitation, the failure to file, within twenty
(20) days after its entry, a petition, answer, or motion to vacate or to
discharge an order, judgment, or decree providing for any such relief).
"Capital Account" or "Member's Capital Account" means with respect to each
Member the capital account established and maintained on behalf of such Member
as described in, Article 3.3.
"Capital Contribution" means, with respect to any Member on any date, the amount
of money, and the reasonable value of Securities, property and services that
have been contributed to the Company by that Member on or by that date in
exchange for Membership Units.
"Cause" means (a) a determination by a vote of Members holding a majority of
outstanding Membership Units that the Manager has acted with gross negligence or
willful malfeasance in the performance of its obligations under this Agreement
or (b) a conviction of the Manager in a court of competent jurisdiction of any
criminal act involving fraud.
"Covered Person" has the meaning set forth in Article 4.8.
"Certificate" means the Certificate of Formation referred to in Article 2.1.
"Closing Date" means the first date as of which one or more Members are admitted
to the Company.
"Code" means the Internal Revenue Code of 1986, as amended and as hereafter
amended, or any successor law.
"Company" means the limited liability company formed pursuant to this Agreement
(i.e. the Seaway Valley Fund, LLC) and the business organization continuing the
business of the Company in the event of dissolution as herein provided.
"Fiscal Period" means each period which starts on the day immediately following
the last day of the preceding Fiscal Period, and which ends on the first to
occur of the following dates:
(a) the last day of any calendar month;
(b) any date as of which any withdrawal or distribution of capital is made
by or to any Members or as of which this Agreement provides for any
amount to be debited against the Capital Account of any Member, other
than a withdrawal or distribution by or to, or an allocation to the
Capital Accounts of, all Members which does not result in any change
of any Member's Company Percentage; or
(c) the date which immediately precedes any date as of which a
contribution to capital is accepted by the Company from any new or
existing Member or as of which this Agreement provides for any amount
to be credited to the Capital Account of any Member, other than an
allocation to the Capital Accounts of all Members which does not
result in any change of any Member's Membership Percentage.
"Fiscal Year" means each period commencing on January 1st of each year and
ending on December 31st of each year (or on the date of a final distribution
pursuant to Article 6.1(a)(iii)), unless the Manager shall elect another fiscal
year for the Company which is a permissible tax year under the Code.
"Interest" means the rights and obligations of a Member under this Agreement and
the Act attributable to each Membership Unit.
"Investment" means the purchase by the Company in any Security.
"Investment Committee" has the meaning set forth in Article 4.2.
"Loss Carryforward Account" means a memorandum account to be recorded in the
books and records of the Company with respect to each Member, which shall have
an initial balance of zero and which shall be adjusted as follows:
(a) As of the first day following the close of each Performance Period for
such Member, the balance of the Loss Carryforward Account shall be
increased by the amount, if any, of such Member's Negative Performance
Change for such Performance Period and shall be reduced (but not below
zero) by the amount, if any, of such Member's Positive Performance
Change for such Performance Period.
(b) As of the close of any Performance Period during which the Capital
Account of any Member is reduced as the result of any withdrawal or
distribution of capital, any positive balance of the Loss Carryforward
Account shall be reduced (but not below zero) by an amount determined
by multiplying (i) such positive balance by (ii) a fraction, of which
(A) the numerator is equal to the amount of such withdrawal or
distribution, and (B) the denominator is equal to the balance of such
Member's Capital Account immediately before giving effect to such
withdrawal or distribution, and by multiplying the resulting amount by
(iii) a fraction, of which (A) the numerator is equal to the number of
days from the date on which such withdrawal or distribution is
effective through the close of the Performance Period in which such
withdrawal or distribution was made and (B) the denominator is equal
to the total number of days in such Performance Period. Solely for the
purposes of the foregoing adjustment, any withdrawal or distribution
which is effective on the last day of the immediately preceding
Performance Period shall be treated as a withdrawal or distribution
effective on the first day of the current Performance Period. In the
case of any adjustment which is based on a withdrawal or distribution
effective (or deemed effective) as of any date other than the
commencement of such Performance Period, a further adjustment shall be
made to the Loss Carryforward Account as of the first day of the
subsequent Performance Period by reducing any positive balance therein
(but not below zero) by an amount determined by multiplying the amount
referred to in clause (i) by the fraction referred to in clause (ii)
and by multiplying the resulting amount by the difference between one
(1) and the fraction referred to in clause (iii).
No transferee of any interest in the Company (other than a successor to an
interest as a result of an involuntary transfer by operation of law) shall
succeed to any Loss Carryforward Account balance or portion thereof attributable
to the transferor without the express prior consent of the Manager.
"Manager" means, initially, Seaway Valley Capital Corporation, a corporation
organized in Delaware and currently operating in New York, and any successor to
the Manager.
"Manager Unit" means the rights and obligations of the Manager under this
Agreement.
"Managed Account" means any assets or investment of the Manager, or any assets
managed by the Manager for the account of any third party, which are invested or
available for investment in investment or trading activities whether or not of
the specific type being conducted by the Company.
"Management Fee" means, with respect to each Member, an amount equal to one-half
of one percent (0.5%) of the value of the Capital Account of such Member
calculated and payable in advance as of the first business day of each quarter
(after taking into account the allocation of net profit or net loss and
withdrawals or distributions or other allocations to such Member's Capital
Account effective as of the end of the preceding quarter and capital
contributions as of the beginning of the current quarter). In the case of a
Member who is admitted (or if a previously admitted Member contributes
additional capital) to the Company on a day which is not the first day of a
calendar quarter (that is, not the first day of January, April, July or October)
or who withdraws from the Company prior to the last day of a calendar quarter,
the Management Fee for such quarter shall be prorated to reflect the number of
days during which such Member was a Member. Manager may waive the Management Fee
for any Member for any period.
"Member" means any Person who signs this Agreement as a Member and any Person
who has become an additional or substituted member of the Company pursuant to
this Agreement; provided such Person has not ceased to be a member pursuant to
this Agreement. "Members" means all such Persons.
"Membership Percentage" means a percentage established for each Member on the
Company's books as of the first day of each Fiscal Period. The Membership
Percentage of a Member for a Fiscal Period shall be determined by dividing the
amount of the Member's Capital Account as of the beginning of the Fiscal Period
(after adjustment for any contributions to the capital of the Company which are
effective on such date) by the sum of the Capital Accounts of all of the Members
as of the beginning of the Fiscal Period (after adjustment for any contributions
to the capital of the Company which are effective on such date). The sum of the
Membership Percentages of all Members for each Fiscal Period shall equal one
hundred percent (100%).
"Membership Unit" means, with respect to each Member, the Interest held by that
Member and representing a Capital Contribution of $1.00 per Unit.
"Net Assets" means the total value, as determined by the Manager in accordance
with Article 7.2, of all Securities and other assets of the Company (including
net unrealized appreciation or depreciation of Securities and accrued interest
and dividends receivable net of withholding taxes), less an amount equal to all
accrued debts, liabilities and obligations of the Company (including any
reserves for contingencies accrued pursuant to Article 3.6). Except as otherwise
expressly provided herein, Net Assets as of the first day of any Fiscal Period
shall be determined on the basis of the valuation of assets conducted as of the
close of the immediately preceding Fiscal Period but after giving effect to (i)
any of the amounts set forth in (a) or (b) below payable by the Company which
are effective as of the close of such immediately preceding Fiscal Period and
(ii) any capital contributions made by any Member subsequent to the last day of
such immediately preceding Fiscal Period, and before giving effect to any
Management Fees accruing as of the first day of the current Fiscal Period; and
Net Assets as of the last day of any Fiscal Period shall be determined before
giving effect to any of the following amounts payable by the Company which are
effective as of the date on which such determination is made:
(a) any withdrawals or distributions payable to any Member which are
effective as of the date on which such determination is made; and
(b) withholding taxes and other items payable, and any increases or
decreases in any reserves or other amounts recorded pursuant to
Article 3.6, during the Fiscal Period ending as of the date on which
such determination is made, to the extent the Manager determines that,
pursuant to any provisions of this Agreement, such items are not to be
charged ratably to the Capital Accounts of all Members on the basis of
their respective Member Percentages as of the commencement of the
Fiscal Period.
"Net Loss" means the excess of the Net Assets on the first day of a Fiscal
Period over the Net Assets on the last day of the same Fiscal Period.
"Net Profit" means the excess of the Net Assets on the last day of a Fiscal
Period over the Net Assets on the first day of the same Fiscal Period.
"Offering Memorandum" means the Confidential Offering Memorandum of this
Company, as amended from time to time, relating to the offering of Membership
Units in the Company.
"Person" means any corporation, partnership, limited liability company,
co-tenancy, joint venture, trust, individual, or any other legal entity, whether
or not a party to this Agreement.
"Performance Allocation" means with respect to any Member twenty percent (20%)
of the amount, determined as of the close of each Performance Period with
respect to each Member, by which such Member's Positive Performance Change for
such Performance Period, if any, exceeds any positive balance in such Member's
Loss Carryforward Account as of the close of such Performance Period after all
adjustments thereto effective as of such date. If a Performance Period shall end
on a date other than at the end of a Fiscal Year solely due to a partial
withdrawal by a Member on such date, then the Performance Period shall be deemed
to have ended only with respect to the portion of such Member's Capital Account
withdrawn on such date and the Performance Allocation otherwise due shall be
prorated by multiplying the Performance Allocation by the fraction referred to
in clause (ii) of the definition of Loss Carryforward Account.
"Performance Change" means, with respect to each Member for each Performance
Period, any amount by which:
(a) the sum of (i) the balance of such Member's Capital Account as of the
close of the Performance Period (after giving effect to all
allocations to be made to such Member's Capital Account as of such
date other than any Performance Allocation to be debited against such
Member's Capital Account), plus (ii) any debits to such Member's
Capital Account during the Performance Period to reflect any actual or
deemed distributions or withdrawals with respect to such Member's
interest, plus (iii) any debits to such Member's Capital Account
during the Performance Period to reflect any items allocable to such
Member's Capital Account pursuant to Article 3.5 hereof other than
Management Fees;
exceeds:
(b) the sum of (i) the balance of, such Member's Capital Account as of the
commencement of the Performance Period, plus (ii) any credits to such
Member's Capital Account during the Performance Period to reflect any
contributions by such Member to the capital of the Company.
If the amount specified in clause (a) exceeds the amount specified in clause
(b), such difference shall be a 'Positive Performance Change", and if the amount
specified in clause (b) exceeds the amount specified in clause (a), such
difference shall be a "Negative Performance Change."
"Performance Period" means, with respect to each Member, the initial period
commencing as of the date of admission of such Member to the Company, and
thereafter each period commencing as of the day following the last day of the
preceding Performance Period with respect to such Member, and ending at the
close of business on the first to occur of the following:
(a) the last day of a Fiscal Year;
(b) the day as of which such Member withdraws all or part of his interest
in the Company; and
(c) the day as of which the Company admits as a substituted Member a
person to whom the entire interest of such Member in the Company has
been Transferred.
"Record Date" means (i) in the event of any sale of Securities, the date of such
sale or (ii) in the event of any other event requiring a determination of the
Fair Market Value of Securities, the date set by the Manager which is not fewer
than ten nor more than fifteen Business Days prior to such determination.
"Regulations" means the Income Tax Regulations, including temporary regulations,
promulgated under the Code, as those regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
"Securities" means publicly traded or privately placed securities of any kind
(including, without limitations "securities" as that term is defined in Article
2(l) of the Securities Act of 1933, as amended); any contracts for future or
forward delivery of any security, commodity or currency; any contracts based on
any securities or currency index or group of securities or currencies; any
evidences of indebtedness (including participations in or assignments of bank
loans or trade credit claims); any options to acquire any of the above; and any
derivative instrument of any kind.
"Security" means the singular of Securities.
"Schedule of Members" means a schedule to be maintained by the Manager in
accordance with this Agreement showing the name, address, date of admission,
classification as Member, amount of initial capital contribution and of any
additional capital contribution, subsequent capital contribution, amount of any
withdrawal and amount of any transfer with respect to each Member.
"Transfer" means any sale, exchange, transfer, assignment, pledge or granting of
another form of security interest or other disposition by a Member of all or a
part of an interest in the Membership Unit to another party, whether voluntary
or involuntary.
"Withdrawal Event" has the meaning set forth in Article 5.5.
All defined terms used in this Agreement that are not defined in this Article 1
have the meanings given to them elsewhere in this Agreement.
ARTICLE II
ORGANIZATION
2.1. Formation of Limited Liability Company
The Members hereto hereby form the Company under and pursuant to the Act. The
Manager has executed, acknowledged and filed a Certificate with the Secretary of
State of the State of Delaware in accordance with the Act. In addition, the
Manager shall execute, acknowledge and file any amendments to the Certificate as
may be required by the Act and any other instruments, documents and certificates
which, in the opinion of the Company's legal counsel, may from time to time be
required by the laws of the United States of America, the State of Delaware or
any other jurisdiction in which the Company shall determine to do business, or
any political subdivision or agency thereof, or which such legal counsel may
deem necessary or appropriate to effectuate, implement and continue the valid
and subsisting existence and business of the Company. Any required amendment to
the Certificate shall be filed by the Manager promptly following the event
requiring said amendment. All amendments may be signed either personally or by
an attorney-in-fact.
2.2. Name of Company
The name of the Company shall be Seaway Valley Fund, LLC or such other name as
the Manager may hereafter adopt upon (i) causing an amendment to the Certificate
to be filed with the Secretary of State of the State of Delaware; and (ii)
sending notice thereof to the Members. The Company shall have the exclusive
ownership and right to use the Company name so long as the Company continues,
despite the withdrawal, expulsion, resignation or removal of any Member, but
upon the Company's termination, the Company shall assign the name and the
goodwill attached thereto to the Manager.
2.3. Registered Office and Agent
The Company shall have its registered office at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxxx, XX 00000 or at such other place as the Manager may designate
from time to time, and its initial registered agent in Delaware is American
Incorporators Ltd.
2.4. Term of Company
(a) The term of the Company commenced on the date on which the Certificate
was filed with the Secretary of State of the State of Delaware, and
shall continue until the earliest of the following dates:
(i) any date on which the Manager shall elect to dissolve the
Company; or
(ii) the date on which (A) the Manager is declared bankrupt by a court
with appropriate jurisdiction, (B) the Manager files a petition
commencing a voluntary case under any bankruptcy law, (C) the
Manager makes an assignment for the benefit of creditors, (D) a
receiver for the property or affairs of the Manager is appointed,
(E) the entire Manager Unit of the Manager is withdrawn from the
Manager, or (F) the Manager is dissolved and a winding up thereof
commenced.
(b) Except as otherwise provided in Article 2.4(a) or in the Act, the
death, mental illness, dissolution, termination, liquidation,
bankruptcy, reorganization, merger, sale of substantially all of the
stock or assets of or other change in the ownership or nature of a
Member, the admission to the Company of a new Manager or Member, the
admission to the Manager of a new member, the withdrawal of a Member
from the Company, or the transfer by a Member of his interest in the
Company to a third party shall not cause the Company to dissolve.
(c) The parties agree that irreparable damage would be done to the
goodwill and reputation of the Members if any Member should bring an
action in court to dissolve the Company. Care has been taken in this
Agreement to provide for fair and just payment in liquidation of the
Interests of all Members. Accordingly, each Member hereby waives and
renounces its right to such a court decree of dissolution or to seek
the appointment by the court of a liquidator for the Company except as
provided herein.
2.5. Objects of Company
The objects of the Company shall be to purchase, sell (including short sales),
invest and trade in Securities, to engage in financial transactions relating
thereto, and to engage in any other lawful activity.
2.6. Actions by Company
The Company may execute, deliver and perform all contracts, agreements and other
undertakings and engage in all activities and transactions as may in the opinion
of the Manager be necessary or advisable to carry out the foregoing objects.
ARTICLE III
CAPITALIZATION
Acceptance of Subscription Agreements shall be at the sole discretion of
the Manager.
3.1. Contributions to Capital
(a) The Manager will contribute $1,000 in cash to the Company in exchange
for the Manager Unit. Except as provided in the Act, the Manager shall
not be required or obligated to make any additional contributions to
the Company.
(b) The minimum initial contribution of each Member to the capital of the
Company shall be $25,000 (twenty-five thousand Membership Units) or
such lower amount as the Manager, in its discretion, may permit.
Initial contributions to the capital of the Company may be accepted on
the first day of any calendar month (or on such other day as may be
approved in advance by the Manager, which approval may be withheld by
the Manager in its sole discretion). The amount of the initial
contribution of each Member shall be recorded by the Manager upon
acceptance as a contribution to the capital of the Company.
(c) The Members may make additional contributions to the capital of the
Company at such times and in such amounts as the Manager, in its
discretion, may permit. No Member shall be obligated to make any
additional contribution to the capital of the Company. Additional
contributions to the capital of the Company which are permitted by the
Manager may be accepted on the first day of each calendar month (or on
such other day as may be approved in advance by the Manager, which
approval may be withheld by the Manager in its sole discretion).
(d) Except as otherwise permitted by the Manager, (i) initial and any
additional contributions to the capital of the Company by any Member
shall be payable in cash or in such Securities which the Manager, in
its absolute discretion, may agree to accept on behalf of the Company,
and (ii) initial and any additional contributions shall be payable in
one installment and shall be paid prior to the date of the proposed
acceptance of the contribution (or within five business days
thereafter with the Manager's approval, which may be withheld by the
Manager in its sole discretion). The Company shall be entitled to
deduct from the amount of any contribution to be credited to the
Capital Account of any Member introduced by a placement agent or other
financial intermediary a subscription charge of up to two percent (2%)
of the subscription amount, which may be paid to such placement agent
or intermediary. Each Member allowed to contribute Securities to the
capital of the Company shall, prior to the date of any such
contribution, furnish to the Company evidence as to his dates of
acquisition of such Securities, his unencumbered ownership thereof,
his adjusted basis thereof for income tax purposes and his holding
period of such Securities.
3.2. Rights of Members in Capital
(a) No Member shall be entitled to interest on the Member's contributions
to the capital of the Company.
(b) No Member shall have the right to distributions or the return of any
contribution to the capital of the Company except (i) upon withdrawal
of such Member pursuant to Article 5.5 or (ii) upon the dissolution of
the Company pursuant to Article 6.1. The entitlement to any such
distribution or return at such time shall be limited to the value of
the Capital Account of the Member. The Manager shall not be liable for
the distribution or return of any such amounts.
3.3. Capital Accounts or Members Capital Accounts
(a) The Company shall maintain a separate Capital Account for each Member.
(b) Each Member's Capital Account shall have an initial balance equal to
the amount of cash and the value of any Securities' constituting such
Member's initial contribution to the capital of the Company (net of
any sales charges.)
(c) Each Member's Capital Account shall be increased by the sum of (i) the
amount of cash and the value of any Securities constituting additional
contributions by such Member to the capital of the Company permitted
pursuant to Article 3.1, plus (ii) the portion of any Net Profit
allocated to such Member's Capital Account pursuant to Article 3.4,
plus (iii) any Performance Allocation credited to such Member's
Capital Account pursuant to Article 3.7, plus (iv) a ratable portion
of any amounts deducted from any withdrawal payment pursuant to
Article 5.5(e), plus (v) any decreases in any reserves recorded by the
Company pursuant to Article 3.6(a), and any receipts determined to be
applicable to a prior Fiscal Period pursuant to Article 3.6(b), to the
extent the Manager determines that, pursuant to any provision of this
Agreement, such item is to be credited to such Member's Capital
Account on a basis which is not in accordance with the current
respective Membership Percentages of all Members.
(d) Each Member's Capital Account shall be reduced by the sum of (i) the
amount of any cash and the net value of any property withdrawn by or
distributed to such Member pursuant to Article 5.5 or 6.1, including
any amount deducted from any such withdrawal or distribution pursuant
to Article 5.5(c), plus (ii) the portion of any Net Loss allocated to
such Member's Capital Account pursuant to Article 3.4, plus (iii) the
Management Fees and any withholding taxes or other expense items
charged to such Member's Capital Account pursuant to Article 3.5, plus
(iv) any Performance Allocation charged to such Member's Capital
Account pursuant to Article 3.7, plus (v) any increases in any
reserves recorded by the Company pursuant to Article 3.6(a), and any
payments determined to be applicable to a prior Fiscal Period pursuant
to Article 3.6(b) and any charges made to a former Member pursuant to
Article 3.6(c) which the Company fails to collect from such former
Member, to the extent the Manager determines that, pursuant to any
provision of this Agreement, such item is to be charged to such
Member's Capital Account on a basis which is not in accordance with
the current respective Membership Percentages of all Members.
3.4. Allocation of Net Profit and Net Loss
(a) Subject to Articles 3.4(b) and 3.8, as of the, last day of each Fiscal
Period, any Net Profit or Net Loss for the Fiscal Period shall be
allocated among and credited to or debited against the Capital
Accounts of the Members in proportion to their respective Membership
Percentages for the Fiscal Period.
(b) Notwithstanding Article 3.4(a), the Company may establish one or more
separate brokerage accounts in its name in which it shall hold all
newly issued securities which it may acquire. To the extent required
by applicable rules of NASD Regulation, Inc., including without
limitation the Free-Riding and Withholding Interpretation or any
successor rule or interpretation, gains or losses attributable to
securities held in such account shall not be allocated to any Member
who shall be prohibited from receiving such allocation, and such gain
or loss shall instead be allocated to all other Members' pro rata in
proportion to their respective Membership Percentages.
3.5. Allocation of Management Fees, Withholding Taxes and Certain Other
Expenditures
(a) As of the first day of each Fiscal Period, and as of any other date on
which a Member is admitted as a Member or makes an additional capital
contribution, each Member's Management Fee for such quarter shall be
debited against the Capital Account of such Member. If the Member is
admitted on a day that does not represent the first day of a calendar
quarter (that is, not the first day of January, April, July or
October), the Management fee will be pro rated for that quarter and
calculated for and applied to the remaining months of that particular
quarter, after which, the regular quarterly Management Fee will be
debited against the Member Capital Account.
(b) If the Company incurs a withholding tax or other tax obligation with
respect to the share of Company income allocable to any Member, then
the Manager shall cause the amount of such obligation to be debited
against the Capital Account of such Member as of the close of the
Fiscal Period during which the Company pays such obligation. The
Manager shall not be obligated to apply for or obtain a reduction of
or exemption from withholding tax on behalf of any Member that may be
eligible for such reduction or exemption.
(c) Except as otherwise provided for in this Agreement, any expenditures
payable by the Company, to the extent determined by the Manager to
have been paid or withheld on behalf of, or by reason of particular
circumstances applicable to, one or more but fewer than all of the
Members, shall be charged to only those Members on whose behalf such
payments are made or whose particular circumstances gave rise to such
payments. Such charges shall be debited from the Capital Accounts of
such Members as of the close of the Fiscal Period during which any
such items were accrued by the Company.
3.6. Reserves; Adjustments for Certain Future Events
(a) Appropriate reserves may be created, accrued and charged against the
Assets and proportionately against the Capital Accounts of the Members
for contingent liabilities, if any, as of the date any such contingent
liability becomes known to the Manager, such reserves to be in the
amounts which the Manager in its sole discretion deems necessary or
appropriate. The Manager may increase or reduce any such reserve from
time to time by such amounts as the Manager in its sole discretion
deems necessary or appropriate. The amount of any such reserve, or any
increase or decrease therein, shall be proportionately charged or
credited, as appropriate, to the Capital Accounts of those parties who
are Members at the time when such reserve is created, increased or
decreased, as the case may be; provided that if any such reserve, or
any increase or decrease therein, exceeds the lesser of $50,000 or one
percent (1%) of the aggregate Capital Accounts of all such Members,
the amount of such reserve, increase or decrease may instead be
charged or credited to those parties who were Members at the time, as
determined by the Manager in its sole discretion, of the act or
omission giving rise to the contingent liability for which the reserve
was established in proportion to their Capital Accounts at that time.
(b) If at any time an amount is paid or received (other than in
conjunction with investments or as capital contributions, withdrawals
or distributions) by the Company and such amount exceeds the lesser of
$50,000 or one percent (1%) of the aggregate Capital Accounts of all
Members at the time of payment or receipt and such amount was not
accrued or reserved for but would nevertheless, in accordance with the
Company's accounting practices, be treated as applicable to one or
more prior Fiscal Periods, then such amount may, at the discretion of
the Manager, be proportionately charged or credited, as appropriate,
to those parties who were Members during such prior Fiscal Period or
Periods.
(c) If any amount is charged or credited pursuant to paragraph (a) or (b)
of this Article 3.6 to a party who is no longer a Member, such amount
shall be paid by or to such party, as the case may be, in cash, with
interest from the date on which the Manager determines that such
charge or credit is required at a floating rate determined by the
Manager by reference to the interbank rate prevailing at that time. In
the case of a charge, the former Member shall be obligated to pay the
amount of the charge, plus interest as provided above, to the Company
on demand; provided that (i) in no event shall a former Member be
obligated to make a payment exceeding the amount of its Capital
Account at the time to which the charge relates, and (ii) no such
demand shall be made more than four years after such former Member
ceased to be a Member. To the extent the Company fails to collect, in
full, any amount charged to such former Member pursuant to paragraph
(a) or (b) of this Article 3.6, whether due to the expiration of the
applicable limitation period or for any other reason whatsoever, the
deficiency shall be charged proportionately to the Capital Accounts of
the other persons who were Members at the time to which the charge
relates and, failing collection from them, to the Capital Accounts of
the current Members.
3.7. Performance Allocation
The Performance Allocation shall be debited against the Capital Account of each
Member as of the last day of each Performance Period with respect to such Member
(provided, however, that subject to compliance with the Advisers Act, such
Performance Allocation may be reduced by the Manager in its discretion with
respect to any Member) and the amount so debited shall simultaneously be
credited to the Capital Account of the Manager, or, subject to compliance with
the Advisers Act, to the Capital Accounts of such Members as have been
designated in writing by the Manager within ninety (90) days after the close of
such Performance Period.
3.8. Allocation to Avoid Capital Account Deficits
To the extent that any debits pursuant to Articles 3.4 through 3.7 hereof would
reduce the balance of the Capital Account of any Member below zero, that portion
of any such debits shall instead be allocated to the Capital Account of the
Manager. Any credits in any subsequent Fiscal Period which would otherwise be
allocable pursuant to Articles 3.4 through 3.7 hereof to the Capital Account of
any Member previously affected by the application of this Article 3.8 shall
instead be allocated to the Capital Account of the Manager in such amounts as
are necessary to offset all previous debits attributable to such Member pursuant
to this Article 3.8 not previously recovered.
3.9. Allocations for Income Tax Purposes
In each Fiscal Year, items of income, deduction, gain, loss or credit that are
recognized for income tax purposes shall be allocated among the Members, in such
manner as to reflect equitably amounts credited to or debited against each
Member's Capital Account, whether in such Fiscal Year or in prior Fiscal Years
(which shall include appropriate allocations to withdrawing or retiring
Members). To this end, the Company shall establish and maintain records which
shall show the extent to winch the Capital Account of each Member shall, as of
the last day of each Fiscal Year, be comprised of amounts which have not been
reflected in the taxable income of such Member. The Manager may, in its sole
discretion, elect to use an "aggregate" allocation method permitted under
Article 704(b)-(c) of the Code and the regulations thereunder. In the event a
Member withdraws the entire balance of such Member's Capital Account, the
Manager may in its sole discretion make a special allocation to the Member for
federal income tax purposes of the capital gains recognized by the Company in
such a manner as, will reduce the amount if any, by which the balance of such
Member's Capital Account exceeds its federal income tax basis in its interest in
the Company before such allocation. Otherwise, to the extent deemed by the
Manager to be feasible and equitable, taxable income and gains in each Fiscal
Year shall be allocated among the Members who have enjoyed the related credits,
and items of deduction, loss and credit in each Fiscal Year shall be allocated
among the Members who have bore the burden of the related debits. Taxable gain
or loss realized from the sale of Securities which were contributed in kind by a
Member (other than gain which was recognized by such contributing Member upon
such contribution pursuant to Article 721(b) of the Code) shall be allocated to
the contributing Member to the extent required under Article 704(c) of the Code
and the regulations promulgated thereunder.
ARTICLE IV
MANAGEMENT
4.1. Rights, Duties and Powers of the Manager
(a) Subject to the terms and conditions of this Agreement, the Manager
shall have complete and exclusive responsibility for managing and
administering the affairs of the Company, and shall have the power and
authority to do all things necessary or proper to carry out its duties
hereunder.
(b) Without limiting the generality of the Manager's duties and
obligations hereunder, the Manager shall have full power and
authority:
(i) to solicit investments in the Company and to file all such
documents and take all such other actions as may be necessary or
appropriate to qualify Membership Units in the Company for offer
and sale in any jurisdiction;
(ii) to receive from Members contributions to the capital of the
Company;
(iii) to conduct meetings of the Members;
(iv) to open, maintain and close bank accounts and custodial accounts
for the Company and draw checks and other orders for the payment
of money;
(v) to disburse payments to Members in connection with withdrawals
from the Company
(vi) to disburse payments as provided for in this Agreement;
(vii) to pay all expenses relating to the organization of the Company
(including attorneys' fees);
(viii) to engage such attorneys, accountants and other professional
advisers and consultants as the Manager may deem necessary or
advisable for the affairs of the Company;
(ix) to furnish Members with the reports described in Article 7.1;
(x) to furnish Members with copies of all amendments to this
Agreement;
(xi) to issue to any Member, in such form and on such terms as the
Manager may consider appropriate, an instrument certifying that
such Member is the owner of an Interest in the Company;
(xii) to prepare and file, on behalf of the Company, any required tax
returns and all other documents relating to the Company and to
make any elections (required or otherwise) in connection
therewith;
(xiii) to commence or defend litigation that pertains to the Company
or any of its assets;
(xiv) to provide office space, office and executive staff and office
supplies and equipment for the Company's principal office;
(xv) to cause the Company, if and to the extent the Manager deems such
insurance advisable, to purchase or bear the cost of (A) any
insurance covering the potential liabilities of the Company, the
Manager and their members, officers, employees and agents, (B)
fidelity or other insurance relating to the performance by the
Manager of its duties to the Company, and (C) key-man life
insurance on the lives of the key employees of the Manager
provided that the Company is the beneficiary of such insurance;
(xvi) in the normal course of the Company's business and for any
Company purpose, including without limitation payment of the
Company's operating expenses and of Management Fees, to cause the
Company to borrow money and make, issue, accept, endorse and
execute promissory notes, drafts, bills of exchange, guarantees
and other instruments and evidences of indebtedness, and secure
the payment thereof by mortgage, pledge or assignment of or
security interests in all or any part of the securities and other
property then owned or thereafter acquired by the Company;
(xvii) generally to provide all other executive and administrative
undertakings for and on behalf of the Company; and
(xviii) subject to the other terms and provisions of this Agreement,
to execute, deliver and perform such contracts, agreements and
other undertakings, and to engage in all activities and
transactions, as it may deem necessary or advisable for, or as
may be incidental to, the conduct of the business contemplated by
this Article 4.1, including, without in any manner limiting the
generality of the foregoing, contracts, agreements, undertakings
and transactions with any Member or with any other person firm or
corporation having any business, financial or other relationship
with any Member or Members.
(c) The Manager shall be the tax matters Member for purposes of Article
6231(a)(7) of the Code. Each Member agrees not to treat, on his
personal U.S. federal income tax return or in any claim for a refund,
any item of income, gain, loss, deduction or credit in a manner
inconsistent with the treatment of such item by the Company. The
Manager shall have the exclusive authority and discretion to make any
elections required or permitted to be made by the Company under any
provisions of the Code or any other revenue laws.
(d) The Manager may delegate to any person or persons any of the powers
and authority vested in it hereunder, and may engage such person or
persons to provide administrative and accounting services to the
Company, on such terms and conditions as it may consider appropriate.
4.2. Investment Management
(a) The Manager shall have complete and exclusive responsibility for all
investment and investment management decisions to be undertaken on
behalf of the Company. Without limiting the foregoing, the Manager
shall have full power and authority:
(i) to deposit funds in the Company's name in an account or accounts
maintained in an insured, commercial financial institution, as
determined by the Manager, and which will not be commingled with
the funds of any other Person (checks may be drawn on the account
or accounts of the Company only for the purposes of the Company
and shall be signed by the Manager or by its duly authorized
representatives);
(ii) to purchase, sell, exchange, trade and otherwise deal in and with
Securities and other property of the Company;
(iii) to make all decisions relating to the manner, method and timing
of investment and trading transactions, to select brokers,
dealers or other financial intermediaries (including any firms
with which the Manager or any of its principals is affiliated or
associated) for the execution, clearance and settlement of any
transactions on such terms as the Manager considers appropriate,
and to grant limited discretionary authorization to such persons
with respect to price, time and other terms of investment and
trading transactions;
(iv) to trade on margin, to borrow from banks or other financial
institutions, and to pledge Company assets as collateral
therefore; and
(v) to arrange for the custody of Securities and other assets
acquired or held on behalf of the Company, to direct custodians
to deliver funds or securities for the purpose of effecting
transactions, and to instruct custodians to exercise or abstain
from exercising any right or privilege attaching to assets.
(b) In the course of selecting brokers, dealers, and other intermediaries
for the execution, clearance and settlement of transactions for the
Company, the Manager may agree to such commissions, fees and other
charges on behalf of the Company as it shall deem reasonable in the
circumstances taking into account all such factors as it deems
relevant (including the quality of research and other services made
available to it even if such services are not for the exclusive
benefit of the Company and the cost of such services does not
represent the lowest cost available) and shall be under no obligation
to combine or arrange orders so as to obtain reduced charges.
(c) The Manager may establish an investment advisory committee (the
"Investment Committee") to provide assistance to the Manager in
determining the proposed Investments by the Company. In addition, the
Manager may establish an advisory board (the "Advisory Board") which
will provide strategic planning and other advisory services. The
Manager shall have the right to select, remove and replace, with or
without cause, all members of the Investment Committee and Advisory
Board, provided that, when establishing such Committee and Board, or
when adding a member thereto, the Manager shall invite a Member to
serve as such a member to the end that, if the invited Member accepts
such invitation, there is at least one Member on each of the
Investment Committee and the Advisory Board. The Investment Committee
and Advisory Board shall be advisory only, and the Manager shall
retain ultimate decision making authority concerning all such
Investments.
4.3. Expenses
(a) The Manager, not the Company, shall pay all of the Manager's own
operating and overhead costs. Such costs shall not include any costs
of insurance referred to in subparagraph 4.1(b)(xv) above.
(b) The Company shall pay or reimburse the Manager for all other costs and
expenses arising in connection with its operations, including, without
limitation, the following expenses:
(i) all legal and other organizational expenses incurred in the
formation of the Company.
(ii) all costs and expenses directly related to investment
transactions and positions for the Company's account, including
brokerage commissions, custody charges, interest and commitment
fees on loans and debit balances;
(iii) any withholding or transfer taxes imposed on the Company or any
of its Members as a result of its or their earnings, investments
or withdrawals (which amounts shall be assessed, where applicable
to particular Members, directly against the Capital Accounts of
such Members);
(iv) any governmental fees imposed on the capital of the Company or
incurred in connection with compliance with applicable regulatory
requirements;
(v) any legal fees and costs (including settlement costs) arising in
connection with any litigation or regulatory investigation
instituted against the Company or the Manager in connection with
the affairs of the Company except that the Company shall not be
obligated for fees and costs of any litigation or regulatory
investigation which results in a final determination of bad faith
or dishonesty by the Manager;
(vi) government charges and professional fees and expenses incurred in
connection with the preparation of this Agreement, other contract
documents and a disclosure document to be furnished by the
Manager to prospective investors in Membership Units in the
Company;
(vii) cost of the audits of the, Company 's annual financial
statements and the preparation of its tax returns;
(viii) fees and expenses of the Company's counsel in connection with
advice directly relating to the Company's legal affairs;
(ix) the costs of any other outside appraisers, accountants, attorneys
or other experts or consultants engaged by the Manager in
connection with the operations of the Company as well as other
expenses directly related to the Company's investment program;
and
(x) other ordinary operating and out-of-pocket expenses of the
Company.
The Manager shall be entitled to reimbursement from the Company for any of the
above expenses that it pays on behalf of the Company.
4.4. Rights of Members
Except as otherwise provided in this Agreement the Members shall have no right
to participate in the management or control of the Company's business. Members
shall have no right or authority to act for the Company or to vote on matters
other than the matters set forth in this Agreement or as required by applicable
law and not subject to a different requirement under this Agreement. Except as
otherwise provided by law, the liability of each Member is limited to the amount
of his capital contributions (plus any accretions in value thereto prior to
withdrawal).
4.5. Activities of the Manager and Members
(a) The Manager shall not be required to devote full time to the
affairs of the Company, but shall devote such time as may be
reasonably required therefor.
(b) Each Member agrees that any other Member (and any Member,
director, officer, shareholder, affiliate or employee of any
Member) may engage in or possess an interest in other business
ventures or commercial dealings of every kind and description,
independently or with others, including, but not limited to,
management of other accounts, investment in, or financing,
acquisition and disposition of, Securities, investment and
management counseling, brokerage services, serving as director,
officer, adviser or agent of any other company, member of any
membership entity, or trustee of any trust, or entering into any
other commercial arrangements, whether or not any such,
activities may conflict with any interest of the parties with
respect to the Company. The Members expressly agree that neither
the Manager nor the Members shall have any rights in or to such
activities, or any profits derived therefrom. Without in any way
limiting the foregoing, each Member hereby acknowledges that: (i)
neither the Manager, any Members, nor their respective members,
directors, officers, shareholders, affiliates or employees shall
have any obligation or responsibility to disclose or refer any of
the investment or other opportunities obtained through activities
contemplated by this paragraph (b) of Article 4.5 to the Manager
or the Members, but may refer the same to any other party or keep
such opportunities for their own benefit; and (ii) the Manager,
the Members and their respective members, directors, officers,
shareholders, affiliates and employees are hereby authorized to
engage in activities contemplated by this paragraph (b) of
Article 4.5 with, or to purchase, sell or otherwise deal or
invest in Securities issued by, companies in which the Company
might from time to time invest or be able to invest or otherwise
have any interest in, without the consent or approval of the
Company or any other Member.
(c) The parties hereto hereby waive, and covenant not to xxx on the
basis of, any law (statutory, common law or otherwise) respecting
the rights and obligations of the Members inter se which is or
may be inconsistent with this Article 4.5.
4.6. Duty of Care; Indemnification
(a) The Manager (and its Investment Committee or Advisory Board, if
established) shall not be liable to the Company or to any of its
Members for any loss or damage occasioned by any acts or
omissions in the performance of its services as Manager, unless
such loss or damage is due to the gross negligence, recklessness
or willful misconduct of the Manager, or as otherwise required by
law.
(b) The Manager (which shall include for this purpose each of its
members and employees, and each of their respective directors,
officers and employees, agents and each person who controls any
of them, and their executors, heirs, assigns, successors and
other legal representatives) shall be indemnified to the fullest
extent permitted by law by the Company (but not the Members
individually) against any cost, expense (including attorneys'
fees), judgment or liability reasonably incurred by or imposed
upon it in connection with any action, suit or proceeding
(including any proceeding before any administrative or
legislative body or agency) to which it may be made a party or
otherwise be involved or with which it shall be threatened by
reason of being or having been the Manager; provided, however,
that the Manager shall not be so indemnified to the extent such
cost, expense, judgment or liability shall have been finally
determined in a decision on the merits in any such action, suit
or proceeding to have been incurred or suffered by the Manager by
reason of its gross negligence, recklessness or willful
misconduct. The right to indemnification granted by this Article
4.6 shall be in addition to any rights to which the Manager may
otherwise be entitled and shall inure to the benefit of the
successors or assigns of the Manager. The Company shall pay the
expenses incurred by the Manager in defending a, civil or
criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding, upon receipt of
an undertaking by the Manager to repay such payment if there
shall be an adjudication or determination that it is not entitled
to indemnification as provided herein. The Manager may not
satisfy any right of indemnity or reimbursement granted in this
Article 4.6 or to which it may be otherwise entitled except out
of the assets of the Company, and no Member shall be personally
liable with respect to any such claim for indemnity or
reimbursement. The Manager may obtain appropriate insurance on
behalf of the Company to secure the Company's obligations
hereunder.
4.7 Conflicts of Interest
Principals of the Manager are engaged in financial activities other than on
behalf of the Company. Therefore, conflicts of interest may arise in connection
with the allocation of the Manager's time between the Company and other business
affairs of the Manager. The Manager and its Affiliates are engaged in private
equity, financial advisory, fund management, and other activities that may be
viewed as in competition with the Company. Except as specifically provided in
this Agreement, the Manager and any Manager Affiliate may engage in transactions
or cause or advise others to engage in transactions which may differ from or be
identical to the transactions engaged in for the Company's account.
No Member shall, by reason of being a Member in the Company, have any right to
participate in any manner in any profits or income earned or derived by or
accruing to the Manager or any Manager Affiliate from the conduct of business
other than the business of the Company or from any transaction in Securities
effected by the Manager or any Manager Affiliate for any account other than that
of the Company. Further, no Member will have any right to participate in any
other venture capital or other fund organized or managed by the Manager or its
Affiliates, whether presently existing or formed in the future.
4.8 Exculpation
To the extent permitted by applicable law, none of the Manager (including any
member of an Investment Committee or Advisory Board), any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Manager, or any director, officer, employee, member,
shareholder or member of the Manager, or such other Person (each a "Manager
Affiliate"), its agents, or any of their respective assigns (individually, a
"Covered Person" and, collectively, the "Covered Persons") shall be liable to
the Company or any Member for any action taken or omitted to be taken with
respect to the management or conduct of the business or affairs of the Company,
so long as such action or omission does not constitute gross negligence, fraud,
willful misconduct, willful violations of any state or federal securities laws
or willful violation of any law by such Covered Person. The Manager shall not be
liable to the Company or any other Member for any action taken or omitted to be
taken by any other Member, nor shall the Manager (to the extent permitted by
applicable law and in the absence of gross negligence, fraud, willful
misconduct, willful violations of any state or federal securities laws or
willful violation of any law by the Manager) be liable to the Company or any
other Member for any action or omission of any Manager Affiliate or agent of the
Company or the Manager. Any Covered Person may consult with legal counsel,
accountants or other professional advisors in respect of the affairs of the
Company and, so long as such Covered Person shall have used reasonable care in
selecting such counsel, accountants or other advisors, shall be fully protected
and justified in taking or omitting to take any action in reliance upon the
advice or opinion of such counsel, accountants and other advisors.
ARTICLE V
ADMISSIONS, TRANSFERS AND WITHDRAWALS
5.1. Admission of Members
The Manager may at the beginning of each calendar month (or on such other day or
days as the Manager may in its sole discretion determine) and without advance
notice to or consent from the Members admit any person who shall agree to be
bound by all of the terms of this Agreement as a Member, unless the investment
by such Member in the Company would have any of the effects described in clauses
(i) through (vi) of Article 5.3(b) herein. The Manager shall have the absolute
discretion to reject subscriptions for Membership Units in the Company.
Effective upon such admission, the Schedule of Members shall be revised to
reflect the name and the required contribution to the capital of the Company of
such additional Member.
5.2. Admission of Additional Manager
The Manager may admit one or more additional managers, who may be natural
persons, partnerships, membership entities or corporations, to the Company only
if such action is approved by the affirmative vote of Members whose Membership
Percentages represent more than fifty percent (50%) of the aggregate Membership
Percentages of all Members, except that the Manager may without the consent of
the Members admit an administrative manager which shall perform all of the
obligations set forth in Article 4.1(b) at the expense of the Company. No
additional manager shall be added if adding such additional manager would have
any of the effects described in clauses (i) through (vi) of Article 5.3(b)
herein.
5.3. Transfer of Interests of Members
(a) No Transfer of any Member's Interest in the Company, whether voluntary
or involuntary, shall be valid or effective, and no transferee shall
become a substituted Member, unless the prior written consent of the
Manager has been obtained, which consent may be withheld for any
reason or for no reason. Transfers of a Member's Interest in the
Company may be consented to by the Manager only if the entire Interest
of such Member in the Company will be transferred to a single
transferee, except that the Manager may consent to transfers of a
portion of the Interest of a Member in the Company occurring upon the
death of such Member or to members of the immediate family of such
Member. In the event of any Transfer, all of the conditions of the
remainder of this Article 5.3 must also be satisfied. Manager has the
right of first refusal to purchase for its account Member Interests if
being transferred for any returned value (i.e. if the Interest is
sold.)
(b) No Transfer of any Member's Interest in the Company, whether voluntary
or involuntary, shall be valid or effective unless the Manager
determines, after consultation with legal counsel acting for the
Company, that such Transfer will not:
(i) require registration of any interest in the Company under
any securities laws of the United States of America, any
state thereof or any other jurisdiction;
(ii) subject the Company or the Manager to registration under any
securities or commodities laws of the United States of
America, any state thereof or any other jurisdiction;
(iii) result in a termination of the Company for U.S. federal
income tax purposes under Article 708(b)(1)(B) of the Code;
(iv) result in the Company being deemed to be a "publicly traded
Membership" for purposes of Article 7704 of the Code, or
having more than 500 owners (including for this purpose any
indirect owners of an S corporation, grantor trust,
Membership or other entity that has elected to be treated as
a Membership for U.S. federal income tax purposes if
substantially all of the assets of such entity are invested
in the Company);
(v) result in assets of the Company being considered "Plan
Assets" for purposes of ERISA; or
(vi) violate or be inconsistent with any representation or
warranty made by the transferring Member at the time the
Member subscribed to purchase an interest in the
Company.
The transferring Member, or his legal representative, shall give the Manager
written notice before making any voluntary Transfer and within thirty (30) days
after any involuntary Transfer and shall provide sufficient information to allow
legal counsel acting for the Company to make the determination that the proposed
Transfer will not result in any of the consequences referred to in clauses (i)
through (vi) above. If a Transfer occurs by reason of the death of a Member or
assignee, the notice may be given by the duly authorized representative of the
estate of the Member or assignee. The notice must be supported by proof of legal
authority and valid assignment acceptable to the Manager.
(c) In the event any Transfer permitted by this Article 5.3 shall result
in multiple ownership of any Member's Interest in the Company, the
Manager may require one or more trustees or nominees to be designated
to represent a portion of or the entire Interest transferred for the
purpose of receiving all notices which may be given and all payments
which may be made under this Agreement, and for the purpose of
exercising the rights which the transferor as a Member had pursuant to
the provisions of this Agreement.
(d) A transferee shall be entitled to the allocations and distributions
attributable to the Interest in the Company transferred to such
transferee and to transfer such Interest in accordance with the terms
of this Agreement; provided, however, that such transferee shall not
be entitled to the other rights of a Member as a result of such
transfer until he becomes a substituted Member. No transferee, except.
with the consent of the Manager (which consent may be withheld at its
sole and absolute discretion), may become a substituted Member. If the
Manager withholds consent, a transferee will not have any of the
rights of a Member, except that the transferee will be entitled to
receive that share of capital or profits and to have the right of
withdrawal to which his transferor would have been entitled and will
remain subject to the other terms of this Agreement. A transferring
Member will remain liable to the Company as provided under applicable
law regardless of whether his transferee becomes a substituted Member.
Notwithstanding the above, the Company and the Manager shall incur no
liability for allocations and distributions made in good faith to the
transferring Member until a written instrument of transfer has been
received by the Company and recorded on its books and the effective
date of the Transfer has passed.
(e) Each Member agrees with all other Members that he will not make any
Transfer of his Interest in the Company which will violate this
Article 5.3. In the event of any attempted Transfer of any Member's
Interest in the Company in violation of the provisions of this Article
5.3, without limiting any other rights of the Company, the Manager
shall have the right to require the withdrawal of such Member's
Interest from the Company as provided by Article 5.5(g).
(f) Any other provision of this Agreement to the contrary notwithstanding,
any successor to any Member's Interest in the Company shall be bound
by the provisions hereof. Prior to recognizing any Transfer in
accordance with this Article 5.3, the Manager may (i) require the
transferring Member to execute and acknowledge an instrument of
transfer in form and substance satisfactory to the Manager and to
reimburse the Company for all expenses reasonably incurred in
connection with the Transfer, and (ii) require the transferee to make
certain representations and warranties to the Company and Members and
to accept, adopt and approve in writing all of the terms and
provisions of this Agreement. A transferee shall become a substituted
Member effective upon the satisfaction of all of the conditions for
such Transfer contained in this Article 5.3.
(g) In the event of a Transfer or in the event of a distribution of assets
of the Company to any Member, the Company, in the sole and absolute
discretion of the Manager, may, but shall not be required to, file an
election under Article 754 of the Code and in accordance with the
applicable U.S. Treasury regulations, to cause the basis of the
Company's assets to be adjusted for federal income tax purposes as
provided by Articles 734 or 743 of the Code,
5.4. Transfer of Interest of Manager
(a) The Manager may not transfer its Unit in the Company other than (i)
pursuant to a transaction not deemed to involve an assignment of its
investment management obligations within the meaning of the Advisers
Act, or (ii) with the approval of Members whose Membership Percentages
represent more than fifty percent (50%) of the aggregate Percentages
of all Members. By executing this Agreement, each Member shall be
deemed to have consented to any such transfer permitted by clause (i)
of the preceding sentence.
(b) The Manager shall promptly notify the Members if Xxxxxx Xxxxxxxxxx
shall for any reason cease to be active in the business of the
Manager.
5.5. Withdrawal of Interests of Members
(a) The Interest of a Member in the Company may not be withdrawn from the
Company prior to its dissolution except as provided in this Article
5.5.
(b) If the 100% of the Company's holdings are liquid investments (defined
as cash or publicly-traded Securities):
(1) After the fifth anniversary of a Member's initial capital
contribution in the Company, a Member may voluntarily withdraw
all or part of his Interest in the Company as of the last day of
each calendar quarter by giving irrevocable written notice to the
Manager at the principal office of the Company at least
forty-five (45) days prior to the proposed withdrawal date
indicating the withdrawal date and amount to be withdrawn from
such Member's Capital Account in such notice. The Manager may, in
its sole discretion, waive the foregoing notice requirement or
fifth anniversary requirement. Except with the consent of the
Manager, a withdrawal of less than a Member's entire Interest in
the Company may be made only in integral multiples of $5,000, and
any withdrawal which leaves a remaining balance of less than
$50,000 in a Member's Capital Account may be deemed a complete
withdrawal.
(2) Notwithstanding Article 5.5(b)(1), if investors request aggregate
withdrawals of more than ten percent (10%) of the aggregate
assets of the Company, effective as of the end of any calendar
quarter, then the Company may limit the withdrawals by each
Member (on a pro rata basis with each other Member) so that not
more than 10% of the aggregate assets of the Company are
withdrawn in such calendar quarter. Any amount which a Member is
not permitted to withdraw as of the end of any calendar quarter
shall be carried forward and withdrawn as of the end of the next
following calendar quarter, subject to the same ten percent (10%)
limitation referred to in the preceding sentence, provided that
the limitations in this Article 5.5(b)(2) shall not delay the
withdrawal of any amount subject to a withdrawal notice for more
than twelve (12) months after the date on which such original
notice would have been effective in the absence of this Article
5.5(2).
(3) The Manager may voluntarily withdraw part of its Interest in the
Company as of the last day of each calendar month pursuant to
this Article 5.5 without giving notice to the Members.
(4) Except as provided in Article 5.5(b)(6), payment of the amount of
such withdrawal shall be made in cash within thirty (30) days
after the effective date of withdrawal, without interest;
provided, however, that any Member withdrawing at least ninety
percent (90%) of such Member's Capital Account shall be paid at
least ninety percent (90%) of the amount of such withdrawal
within thirty (30) days after the effective date of withdrawal
and shall be paid any remaining balance promptly following
completion of the audit of the Company's financial statements for
the Fiscal Year which includes the effective date of withdrawal
(with interest on any unpaid balance from the 30th day after the
withdrawal date to the date or dates of payment at the broker's
call rate available to the Company from time to time during such
period). The Manager may deduct from any withdrawal payments or
otherwise charge to the withdrawing Member a charge of up to two
percent (2%) of the amount withdrawn, to reflect actual or
estimated costs to the Company and existing Members of
liquidating portfolio positions of the Company in order to fund
such withdrawal, and such amount shall be determined by the
Manager in its sole discretion. The Manager may assess an
additional charge in connection with any withdrawal, representing
a ratable portion of the Company's organization expenses which
have not yet been fully amortized. The amount of such charges
retained by the Company in connection with any withdrawal, net of
any actual costs and expenses of processing the withdrawal, shall
be allocated among and credited to the Capital Accounts of all
Members on the commencement of the Fiscal Period immediately
following the effective date of the withdrawal in accordance with
their respective Membership Percentages at such time.
(5) Upon receipt by the Manager of a Member's notice of intention to
withdraw assets from the Company, the Manager shall have the
discretion to manage the Company's assets in a manner which would
provide for cash being available to satisfy such Member's request
for withdrawal, but the Manager shall be under no obligation to
effect sales of Company assets if the Manager, in its discretion,
determines that such transactions might be detrimental to the
Interest of the other Members or that such transactions are not
reasonably practicable. In the event that on the date of
withdrawal the withdrawal cannot be fully funded with cash, the
Manager may transfer certain Securities to the Member, the fair
market value of which along with any cash distributed would
satisfy the Member's request for withdrawal. The right of any
Member to Withdraw or of any Member to have distributed an amount
from his Capital Account pursuant to the provisions of this
Article 5.5 is subject to the provision by the Manager for all
Company liabilities and for reserves for contingencies provided
for in Article 3.6 herein.
(6) The right of any Member to withdraw capital from the Company, or
to receive a distribution from the Company, pursuant to this
Article 5.5 may be suspended or restricted:
(i) when any such withdrawal would result in a violation by the
Company or the Manager of the securities or commodity laws
of the United States or any other relevant jurisdiction or
the rules of any self-regulatory organization applicable to
the Company or the Manager;
(ii) when any securities exchange or organized inter-dealer
market on which a significant portion of the Company's
Securities is regularly traded or quoted is closed
(otherwise than for holidays) or trading thereon has been
restricted or suspended;
(iii) whenever the Manager determines that disposal of any assets
of the Company or other transactions involving the sale,
transfer or delivery of funds, Securities or other assets in
the ordinary course of the Company's business is not
reasonably practicable without being detrimental to the
Interests of the withdrawing or remaining Members;
(iv) if, for any reason, it is not reasonably practicable to make
an accurate and timely determination of the net value of the
Company's assets; or
(v) if any event has occurred which may result in the
termination of the Company.
The Manager will promptly notify each Member who has submitted a withdrawal
request and to whom payment in full of the amount being withdrawn has not yet
been remitted of any suspension of withdrawal or distribution rights pursuant to
this Article 5.5(b)(6). The Manager may allow any such Members to rescind their
withdrawal request to the extent of any portion thereof for which withdrawal
proceeds have not yet been remitted. The Manager may in its discretion complete
any withdrawals or distributions as of a date after the cause of any such
suspension has ceased to exist to be specified by the Manager as the effective
date of withdrawal for all purposes of this Article 5.5.
(7) A withdrawing Member shall not share in the income, gains and
losses of the Company or have any other rights as a Member after
the effective date of the withdrawal except as provided in
Article 3.6. The Schedule of Members shall be amended to reflect
such withdrawal.
(c) If the Company's holdings are 100% illiquid investments or are
partially liquid and partially illiquid investments:
(1) A Member may voluntarily withdraw all or part of his Interest in
the Company after the eighth anniversary of the Member's initial
capital contribution in the Company, subject to the following
provisions of this Section 5(c)
(2) The withdrawing Member's rights and obligations shall be
determined by the terms of subsections 5(b)(1) through and
including 5(b)(6) above, except as those terms are modified by
any terms in this section 5(c).
(3) Payment to the withdrawing Member for the value of the illiquid
investments shall be by transfer to such Member of such
investments in kind, in a type and in an amount determined by the
Manager to represent on a book value basis the value necessary to
pay such Member, when combined with the cash payment to such
Member, the withdrawal amount to which such Member is entitled.
ARTICLE VI
LIQUIDATION
6.1. General.
(a) Selection of Liquidator. If the Company is dissolved and is not
reconstituted, then the Manager (or if a Manager has been removed
for Cause, a Liquidator chosen by those parties specified in this
Article; or if a Manager has retired, resigned or withdrawn, or
is in Bankruptcy, any remaining Manager; or if there are no such
other Managers or if all remaining Managers have retired,
resigned or withdrawn, then a liquidator or liquidating committee
selected by Approval of the Nonaffiliated Members) shall begin to
wind up the affairs of the Company and to liquidate and sell its
assets, all pursuant to the Act. The party or parties actually
conducting the liquidation in accordance with the foregoing
sentence, whether a Manager, a Member as liquidator, or a
liquidating committee, is herein referred to as the "Liquidator."
(b) Duties and Qualifications. The Liquidator (if other than a
Manager) shall have sufficient business expertise and competence
to conduct the winding up and termination of the Company and, in
the course thereof, to cause the Company to perform any existing
or future contractual obligations of the Company. The Liquidator,
subject to the Approval of the Members, shall determine the time,
manner and terms of any sale or sales of property of the Company
in liquidation, having due regard to the activity and condition
of the relevant market and general financial and economic
conditions.
(c) Compensation. The Liquidator (if other than a Manager) is
entitled to receive reasonable compensation for its services, as
agreed upon by the Liquidator and Approved by the Members.
(d) Resignation; Removal; Succession. The Liquidator may resign at
any time by giving fifteen (15) days' prior written notice and
may be removed at any time, with or without cause, by written
notice of removal Approved by the Nonaffiliated Members. On the
death, dissolution, removal or resignation of the Liquidator, a
successor and substitute Liquidator (who shall have and succeed
to all the rights, powers and duties of the original Liquidator)
will, within thirty (30) days thereafter, be appointed by
Approval of the Nonaffiliated Members, evidenced by written
appointment and acceptance. The right to appoint a successor
substitute Liquidator in the manner provided herein shall be
recurring and continuing for so long as the functions and
services of the "Liquidator" are authorized to continue under
this Agreement, and every reference herein to the "Liquidator"
refers also to any successor or substitute Liquidator appointed
in the manner herein provided. The Liquidator has and may
exercise, without further authorization or consent of any of the
parties hereto or their legal representatives or successors in
interest, all of the powers conferred by this Agreement upon the
Manager to the extent necessary or desirable in the good faith
judgment of the Liquidator to perform its duties and functions.
The Liquidator is not liable as a Manager hereunder to the
Members or to third party creditors.
6.2. Court Appointment of Liquidator.
If, within thirty (30) days after the date of dissolution, a Liquidator or
successor Liquidator has not been appointed in the manner provided therein, then
any Member or the Manager may make application to the then senior United States
Federal District Judge (in his or her judicial capacity) for the State of
Delaware in which the Company has its registered office, for appointment of the
Liquidator or successor Liquidator, and that judge shall be fully authorized and
empowered to appoint and designate the Liquidator or successor Liquidator, who
shall have the powers, duties, rights and authorities of the Liquidator herein
provided.
6.3. Distribution of Assets.
In winding up and terminating the business and affairs of the Company, its
assets (other than cash) shall be sold at the discretion of the Liquidator, its
liabilities and obligations to creditors and all expenses incurred in its
liquidation shall be paid, and all resulting items of income, gain, loss or
deduction of the Company shall be credited or charged to the Capital Accounts of
the Members in accordance with Article III. Any Member may be a purchaser of
assets of the Company at one or more liquidation sales.
The net proceeds from those sales (after deducting all selling costs and
expenses in connection therewith), shall be distributed among the Members with a
positive Capital Account, in proportion to those positive Capital Accounts. If
there is a discrepancy between the amount distributable to a Member under this
provision and the positive balance in such Member's Capital Account, then items
of Net Income and Net Loss for the fiscal year of the liquidation shall be
allocated among the Members in a manner such that the Capital Account of each
Member, immediately after giving effect to such allocation, is, as nearly as
possible, equal (proportionately) to the amount distributable to such Member
under this Agreement. If any assets of the Company are distributed to the
Members in kind, any unrealized gain or loss with respect to such assets shall
be allocated to the Members' respective Capital Accounts as though the assets in
question had been sold on the date of distribution and, after giving effect to
any such adjustment, such assets shall be distributed in the manner described in
this Article and Article 4.5. The Liquidator shall be instructed to use all
reasonable efforts to effect complete liquidation of the Company within one year
after the date on which the Company is dissolved. Each holder of a Membership
Unit shall look solely to the assets of the Company for all distributions and
shall have no recourse therefor (on dissolution or otherwise) against the
Company, the Members, the Manager or the Liquidator. On the completion of the
liquidation of the Company and the distribution of all funds of the Company, the
Company shall terminate and the Manager (or the Liquidator, as the case may be)
may execute and record all documents required to effectuate the dissolution and
termination of the Company.
6.3. Distributions in Kind.
If the Company shall be wound up (whether the liquidation is voluntary, under
supervision or by the court), the Liquidator may divide among the Members the
whole or any part of the assets of the Company, and whether or not the assets
shall consist of property of a single kind, and may for such purposes set such
value as he deems fair upon any one or more class or classes of property, and
may determine how such division shall be carried out as among the Members. The
Liquidator may, with the like authority, vest any part of the assets in trustees
upon such trusts for the benefit of Members as the Liquidator with the like
authority, as it shall determine appropriate, and the liquidation of the Company
may be closed and the Company dissolved, but so that no Member shall be
compelled to accept any Membership Units in respect of which there is liability.
6.4. Creation of Reserves.
After making payment or provision for payment of all fixed and determinable
debts and liabilities of the Company and all expenses of liquidation, the
Liquidator may set up, for a period not to exceed one year after the date of
dissolution, the cash reserves that the Liquidator deems reasonably necessary
for any contingent or unforeseen liabilities or obligations of the Company.
6.5. Final Accounting.
Within a reasonable time after completing the liquidation, the Liquidator shall
supply to each of the Members a statement which shall set forth the assets and
the liabilities of the Company as of the date of complete liquidation, the Pro
Rata portion of each Member of distributions, and the amount retained as
reserves by the Liquidator.
ARTICLE VII
ACCOUNTING AND VALUATIONS;
BOOKS AND RECORDS
7.1. Accounting and Reports
(a) The Company may adopt for tax accounting purposes any accounting
method which the Manager shall decide in its sole discretion is
in the best interests of the Company and which is permissible for
U.S. federal income tax purposes.
(b) As soon as practicable after the end of each Fiscal Year, the
Manager shall cause an examination of the financial statements of
the Company as of the end of each such Fiscal Year to be made on
a review or equivalent basis by a firm of certified public
accountants selected by the Manager; and as soon as is
practicable thereafter, a copy of a set of financial statements
prepared in accordance with generally accepted accounting
principles, including the report of such certified public
accountants, shall be furnished to each Member.
(c) As soon as practicable after the end of each taxable year, the
Manager shall furnish to each Member such information as may be
required to enable each Member properly to report for federal and
state income tax purposes his distributive share of each Company
item of income, gain, loss, deduction or credit for such year.
(d) To the extent required by the Advisers Act the Manager will
notify in writing each Member of any change in the membership of
the Manager within a reasonable time after the change.
7.2. Valuation of Company Assets and Interests
(a) The Manager shall value or have valued the liquid Securities and
other liquid assets of the Company as of the close of business on
the last day of each Fiscal Period and the illiquid Securities
and other illiquid assets of the Company and the close of
business on the last day of each fiscal year. In addition, the
Manager shall value Securities which are being (i) contributed in
kind as of their date of contribution pursuant to Article 3.1(d),
or (ii) distributed in kind as of their date of distribution in
accordance with Article 5.5(b)(5), 5.5(c)(3), or 6.1(b). In
determining the value of the assets of the Company, no value
shall be placed on the goodwill or name of the Company, or the
office records, files, statistical data or any similar intangible
assets of the Company not normally reflected in the Company's
accounting records, but there shall be taken into consideration
any related items of income earned but not received, expenses
incurred but not yet paid, liabilities fixed or contingent,
prepaid expenses to the extent not otherwise reflected in the
books of account, and the value of options or commitments to
purchase or sell Securities pursuant to agreements entered into
on or prior to such valuation date. Valuation of Securities made
pursuant to this Article 7.2 shall be based on all relevant
factors and is expected to comply generally with the following
guidelines:
(i) The market value of each Security listed or traded on any
recognized foreign or U.S. securities exchange shall be the
last reported sale price at the relevant valuation date on
the composite tape or on the principal exchange on which
such Security is traded. If no such sale of such Security
was reported on that date, the market value shall be the
average of the last reported bid and asked price. The market
value of any security quoted in the United States NASDAQ
National Market List or comparable foreign over-the-counter
quotation system shall be determined in like manner by
reference to the last reported sale price, or, if none is
available, to the average of the last reported bid and asked
quotation, as reported by NASDAQ or the comparable foreign
over-the-counter quotation system.
(ii) The market value of each Security which is not listed on a
recognized foreign or U.S. securities exchange or quoted in
the NASDAQ National Market List or comparable foreign
over-the-counter quotation system shall be as determined by
the Manager. The good faith determination by the Manager
shall be final and binding on all Members.
(iii) Dividends declared but not yet received and rights, in
respect of Securities which are quoted ex-dividend or
ex-rights, shall be recorded at the fair value thereof, as
determined by the Manager, which may (but need not) be the
value so determined on the day such Securities are first
quoted ex-dividend or ex-rights.
(iv) Listed options, or over-the-counter options for which
representative brokers' quotations are available, shall be
valued in the same manner as above listed. Premiums for the
sale of such options written by the Company shall be
included in the assets of the Company, and the market value
of such options shall be included as a liability.
(v) The value of unrealized gain or loss on open futures
contracts shall be recorded as the difference between the
contract price on the trade date and the closing price
reported as of the valuation date on the primary exchange on
which such contracts are traded.
(b) The fair value of any assets not referred to in paragraph (a) (or
the valuation of any assets referred to therein in the event that
the Manager shall determine that there is no active market or
that another method of valuation is advisable in the
circumstances) shall be determined by or pursuant to the
direction of the Manager.
(c) Except as otherwise determined by or at the direction of the
Manager: (i) investment and trading transactions shall be
accounted for on the trade date; and (ii) for purposes of
determining gain or loss on investment, cost of investments sold
shall be determined on the first-in, first-out basis. Accounts
shall be maintained in U.S. dollars, and except as otherwise
determined by or at the direction of the Manager: (A) assets and
liabilities denominated in currencies other than U.S. dollars
shall be translated at the rates of exchange in effect at the
close of the Fiscal Period (and exchange adjustments shall be
recorded in the results of operations); and (B) investment and
trading transactions and income and expenses shall be translated
at the rates of exchange in effect at the time of each
transaction.
(d) The value of each Security and other asset of the Company and the
net worth of the Company as a whole determined pursuant to this
Article 7.2 shall be conclusive and binding on all of the Members
and all parties claiming through or under them absent bad faith
or manifest error on the part of the Manager, and may not in any
event be disputed after the completion of the next audit of the
financial statements of the Company.
7.3. Determinations by Manager
(a) All matters concerning the determination and allocation among the
Members of the amounts to be determined and allocated pursuant to
Articles 3.4 through 3.8 hereof, and the items of income, gain,
deduction, loss and credit to be determined and allocated
pursuant to Article 3.9 hereof, including any taxes thereon and
accounting procedures applicable thereto, shall be determined by
the Manager unless specifically and expressly otherwise provided
for by the provisions of this Agreement, and such determinations
and allocations shall be final and binding on all the Members.
(b) The Manager may make such adjustments to the computation of Net
Profit or Net Loss, the Performance Change with respect to any
Member, or any component items comprising any of the foregoing as
it considers appropriate to reflect fairly and accurately the
financial results of the Company and the intended allocation
thereof among the Members.
7.4. Books and Records
The Manager shall keep books and records pertaining to the Company's affairs
showing all of its assets and liabilities, receipts and disbursements, realized
income, gains and losses, Members' Capital Accounts and all transactions entered
into by the Company. Such books and records of the Company shall be kept at its
principal office, and all Members and their representatives shall at all
reasonable times have free access thereto for the purpose of inspecting or
copying the same.
7.5. Confidentiality
(a) Each Member agrees to keep confidential, and not to make any use
of (other than for purposes reasonably related to its interest in
the Company or for purposes of filing such Member's tax returns)
or disclose to any person, any information or matter relating to
the Company and its affairs and any information or matter related
to any investment of the Company (other than disclosure to such
Member's directors, employees, agents, advisors, or
representatives responsible for matters relating to the Company
or to any other person approved in writing by the Manager (each
such person being hereinafter referred to as an "Authorized
Representative")); provided that (i) such Member and its
Authorized Representatives may make such disclosure to the extent
that (x) the information to be disclosed is publicly known at the
time of proposed disclosure by such Member or Authorized
Representative, (y) the information otherwise is or becomes
legally known to such Member other than through disclosure by the
Company or the Manager, or (z) such disclosure is required by law
or in response to any governmental agency request or in
connection with an examination by any regulatory authorities
(provided that such agency, regulatory authorities or association
is aware of the confidential nature of the information disclosed)
and (ii) such Member and its Authorized Representatives may make
such disclosure to such Member's beneficial owners to the extent
required under the terms of its arrangements with such beneficial
owners. Prior to making any disclosure required by law, each
Member must use its best efforts to notify the Manager of such
disclosure. Prior to any disclosure to any Authorized
Representative or beneficial owner, each Member must advise such
Authorized Representative or beneficial owner of the obligations
set forth in this Article 7.5(a).
(b) The Manager has the right to keep confidential from the Members,
for such period of time as the Manager in its sole discretion
deems reasonable, any information which the Manager in its sole
discretion reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the Manager
in its sole discretion believes is not in the best interests of
the Company or could damage the Company or its business or which
the Company is required by law or agreement with a third party to
keep confidential.
(c) The Manager may, in its sole discretion, disclose to any of the
Company's prospective investors such information relating, to the
Company or the Company's investments as the Manager believes in
good faith will benefit the Company and. facilitate an investment
in the Company by such prospective investors.
7.6. Legend.
Each Member hereby agrees that the following legend may be placed on any
counterpart of this Agreement, the Certificate, or any other document or
instrument evidencing ownership of a Membership Unit:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT REGISTRATION,
THESE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED AT ANY TIME
WHATSOEVER, EXCEPT ON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE MANAGER OF THE COMPANY THAT REGISTRATION IS NOT
REQUIRED FOR THE TRANSFER OR THE SUBMISSION TO THE MANAGER OF THE
COMPANY OF OTHER EVIDENCE SATISFACTORY TO THE MANAGER TO THE EFFECT
THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF
1933, AS AMENDED, ANY APPLICABLE STATE SECURITIES LAWS OR ANY RULES OR
REGULATIONS PROMULGATED THEREUNDER. ADDITIONALLY, ANY SALE OR OTHER
TRANSFER OF THESE SECURITIES IS SUBJECT TO CERTAIN RESTRICTIONS THAT
ARE SET FORTH IN THE LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF
THE COMPANY.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices
Any notice provided or permitted to be given under this Agreement must be in
writing, and may be served by depositing same in the United States mail,
addressed to the Member to be notified, postage prepaid, and registered or
certified, with a return receipt requested. Notices by facsimile shall be deemed
to have been received on the date reflected on any confirmation of the
transmission thereof. Notice served in any other manner shall be deemed to have
been given if and when actually received by the addressee. For purposes of
notices, the addresses and facsimile numbers of the Members are set forth on
Exhibit A hereof. Each notice given by registered mail shall be deemed delivered
and effective on the date of delivery as shown on the return receipt, and each
notice delivered in any other manner shall be deemed to be effective as of the
time of actual delivery thereof. Failure of or delay in delivery of any copy of
a notice shall not impair the effectiveness of any notice given to any Member as
specified in this Agreement. Each Member may change his address and facsimile
number for notice by the giving of notice thereof in the manner provided above.
8.2 Interpretation
The construction and validity of this Agreement and the rights and obligations
of the respective parties hereunder shall be governed by and interpreted and
enforced in accordance with Delaware law.
8.3 Terms
Common nouns and pronouns shall be deemed to refer to the masculine, feminine,
neuter, singular, and plural, as the identity of the person or persons, firm or
corporation may in the context require. Any reference to the Code or other
statutes or laws shall include all amendments, modifications, or replacements of
the specific Articles and provisions concerned.
8.4 References
Unless otherwise expressly stated, references to numbered or lettered articles,
Articles and subArticles herein contained are to articles, Articles and
subArticles of this Agreement. The terms "herein," "hereof," "hereunder,"
"hereby," "this Agreement" and other similar references shall be construed to
mean and include this Limited Liability Company Operating Agreement and all
amendments thereof and supplements thereto unless the context shall clearly
indicate or require otherwise.
8.5 Severability
If any provision of this Agreement or the application to any Person or
circumstances shall be invalid or unenforceable to any extent, the remainder of
this Agreement and the application of such provisions to other Persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
8.6 No Third-Party Beneficiary
This Agreement is made solely and specifically between and for the benefit of
the parties hereto and their respective successors and assigns, subject to the
expressed provisions hereof relating to successors and assigns, and no other
Person whatsoever has any rights, interest, or claims hereunder or is or will be
entitled to any benefits under or on account of this Agreement as a third-party
beneficiary or otherwise unless specifically provided in this Agreement.
8.7 Absolute and Sole Discretion
Except as otherwise provided in this Agreement, all actions which any Member may
take and all determinations which any Member may make pursuant to this Agreement
may be taken and made at the sole and absolute discretion of that Member.
8.8 Binding Effect
Subject to the provisions of this Agreement relating to transferability, this
Agreement shall be binding on and inure to the benefit of the parties signatory
hereto, and their respective distributees, successors and assigns.
8.9 Complete Agreement
This Agreement constitutes the complete and exclusive statement of the agreement
between and among the Members and replaces and supersedes all prior agreements,
except for any agreement executed contemporaneously herewith by and among the
Members, or any of them, contemporaneously herewith, except letters from the
Manager to Members confirming that no other Members have been or will be
admitted to the Company on terms more favorable (through guarantees, side
agreements or otherwise) than the terms specified in this Agreement applicable
to all Members. This Agreement supersedes all written and oral statements, and
no representation, statement, condition, or warranty not contained in this
Agreement shall be binding on the Members or have any force or effect
whatsoever. No Member has rendered any services to or on behalf of any other
Member or the Company, and no Member shall have any rights with respect to any
services that might be alleged to have been rendered.
8.10 Additional Documents and Acts
In connection with this Agreement, as well as all transactions contemplated by
this Agreement, each Member shall, on the request of the Manager, execute and
deliver such additional documents and instruments and perform such additional
acts as may be necessary or appropriate to effectuate, carry out, and perform
all of the terms, provisions and conditions of this Agreement and all such
transactions.
8.11 Counterparts
This Agreement may be executed in a number of counterparts, each of which shall
be deemed an original and all of which shall constitute one and the same
Agreement.
8.12 Reliance on Authority
If a Member is a Person other than a natural person, the Company and the Manager
(i) are not required to determine the authority of the Person signing this
Agreement to make any commitment or undertaking on behalf of such entity or to
determine any fact or circumstance bearing upon the existence of the authority
of such Person; (ii) are not required to see to the application or distribution
of proceeds paid or credited to Persons signing this Agreement on behalf of that
entity; (iii) are entitled to rely on the authority of the Person signing this
Agreement with respect to the giving of consent on behalf of such entity in
connection with any matter for which consent is permitted or required under this
Agreement; and (iv) are entitled to rely on the authority of any Manager,
manager, joint venturer, or successor trustee, or president or vice president
(as the case may be), of any such Person the same as if the Person were the
Person originally signing this Agreement on behalf of that entity.
8.13 Amendment
The terms and provisions of this Agreement may be modified or amended at any
time and from time-to-time by the Approval of the Members; provided, that (i)
without the Approval of the Members or Approval of the Nonaffiliated Members,
the Manager may amend this Agreement to make a change that is necessary or
desirable to correct any ambiguity, to correct or supplement any provision in
this Agreement that would be inconsistent with any other provision in this
Agreement and to make such other provision with respect to matters or questions
arising under this Agreement that will not be inconsistent with the provisions
of this Agreement, so long as the change does not materially adversely affect
the Members; and (ii) the consent of each Member must be obtained for any
amendment which would (A) increase the capital commitment of such Member, (B)
alter the provisions of Article 4 of this Agreement in anyway that would have an
adverse effect on such Member different from the effect on all Members, (C)
adversely affect his or its limited liability as a Member, or (D) alter the
provisions of Article 6 hereof.
8.14 Title to Property
The Members desire and intend that legal title to all property of the Company be
held and conveyed in the name of the Company. To the extent that any property of
the Company is held in the name of a Manager, the property shall be deemed held
by that Manager as agent and nominee for and on behalf of the Company. Property
acquired by or standing in the name of any Member shall be conclusively presumed
not to be Company property, unless an instrument in writing, signed by the
Member, specifies to the contrary.
8.15 Other Business
Each Member may be engaged in a business or businesses other than that of the
Company without being accountable or liable to the Company for the breach of any
fiduciary obligation.
8.16 Representations
Notwithstanding anything herein to the contrary, each Member hereby represents
and warrants to the Company, each Manager, and to each officer, director,
shareholder, controlling person and agent of each Manager that (i) the Interest
in the Company of such Member is acquired for investment purposes only for its
own account and not with a view to or in connection with any distribution,
re-offer, resale or other disposition not in compliance with the Securities Act
of 1933, as amended and the rules and regulations thereunder (the "1933 Act")
and applicable state securities laws; (ii) such Member is an accredited
investor; (iii) such Member, alone or together with its representatives,
possesses such expertise, knowledge and sophistication in financial and business
matters generally, and in the type of transactions in which the Company proposes
to engage in particular, that it is capable of evaluating the merits and
economic risks of acquiring and holding its Membership Unit in the Company; (iv)
such Member has had access to all of the information with respect to its
Interest in the Company that it deems necessary to make a complete evaluation
thereof, and has had the opportunity to question the Manager concerning such
interest; (v) such Member's decision to acquire its Interest in the Company for
investment has been based solely upon the evaluation made by it; (vi) such
Member is aware that it must bear the economic risk of its investment in the
Company for an indefinite period of time because Interests in the Company have
not been registered under the 1933 Act or under the securities laws of various
states, and therefore, cannot be sold unless such Interests are subsequently
registered under the 1933 Act and any applicable state securities laws or an
exemption from registration is available; (vii) such Member is aware that only
the Company can take action to register such Interest in the Company and the
Company is under no such obligation and does not propose to attempt to do so;
and (viii) such Member is aware that the Agreement provides restrictions on the
ability of the Member to sell, transfer, assign, mortgage, hypothecate, or
otherwise encumber its Interest in the Company.
8.17 Power of Attorney
Each Member hereby constitutes and appoints the Manager, with full power of
substitution, its true and lawful attorney-in-fact, and empowers and authorizes
such attorney, in the name, place and stead of such Member, to make, execute,
sign, swear to, acknowledge and file in all necessary or appropriate places all
documents relating to the Company and its activities, including, but not limited
to: (i) this Agreement and any amendments thereto approved as provided herein;
(ii) the Certificate and any amendments thereto, under the laws of the State of
Delaware or in any other state or jurisdiction in which such filing is deemed
advisable by the Manager; (iii) any applications, forms, certificates, reports
or other documents which may be requested or required by any foreign, federal,
state or local governmental agency, securities exchange, securities association,
self-regulatory organization, or similar institution and which are deemed
necessary or advisable by the Manager; (iv) any other instrument which may be
required to be filed or recorded in any state or county or by any governmental
agency (foreign or domestic), or which the Manager deems advisable to file or
record, including without limitation, certificates of assumed name; (v) any
documents which may be required to effect the continuation of the Company
pursuant to the terms hereof, the admission of new Members, the admission of
substitute Members, the withdrawal of a Manager or the dissolution and
termination of the Company, provided such continuation, admission or dissolution
and termination are in accordance with the terms of the Agreement; (vi) any
elections contained in the Code or state law governing taxation of limited
liability companies; and (vii) any other documents or items relating to the
performance of ministerial duties or functions necessary for the conduct of the
business of the Company. Each Member hereby ratifies, confirms and adopts as its
own, all actions that may be taken by such attorney-in-fact pursuant to this
Article 8.17. This power of attorney is coupled with an interest, is irrevocable
and shall continue notwithstanding the subsequent incapacity or death of the
Member. Each Member and/or his assignee, transferee or successor-in-interest
shall execute and deliver to the Manager an executed and appropriately notarized
power of attorney in such form consistent with the provisions of this Article
8.17 as the Manager may request.
IN WITNESS WHEREOF, this Agreement is effective as of the day and year
first above written.
MANAGER:
SEAWAY VALLEY CAPITAL CORPORATION
a Delaware corporation
By: Xxxxxx X. Xxxxxxxxxx
Its: President & CEO
MEMBERS:
WISEBUYS STORES, INC.
a Delaware corporation
By: Xxxxxx X. Xxxxxxxxxx
Its: Treasurer and CFO
EXHIBIT A
Company
Name: Seaway Valley Fund, LLC
Principal Office: 00-00 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Contact Information: 000-000-0000 (phone)
000-000-0000 (fax)
Contact: Xxxxxx X. Xxxxxxxxxx
Registered Agent: American Incorporators Ltd.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Manager
Name: Seaway Valley Capital Corporation
Principal Office: 00-00 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Contact Information: 000-000-0000 (phone)
000-000-0000 (fax)
Contact: Xxxxxx X. Xxxxxxxxxx
Legal
Name: Xxxxxxx & Xxxxxxx LLP
Principal Office: Financial Plaza
Post Office Box 4878
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000-0000