LIMITED LIABILITY COMPANY AGREEMENT OF
_____________________________________, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement")
of _____________________, LLC, a Delaware limited liability
company (the "Company") is made as of ____________, 2000 by and
between ACE HARDWARE CORPORATION, a Delaware corporation ("Ace")
and ______________________________, a __________ ("______") (Ace
and ________ are referred to collectively as "Members" and
individually as "Member").
RECITALS
WHEREAS, the Members have formed the Company for the purpose
of acquiring a minimum of _______________ (__) Ace Hardwarer
affiliated stores in _____________.
WHEREAS, the Members hereby desire to set forth the rights
and obligations of the Members and the Manager (as hereinafter
defined) and operate this limited liability company in accordance
with the terms of, and subject to the condition set forth in,
this Agreement.
COVENANTS
In consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
Section 1.1 Definitions. When used in this Agreement the
following terms shall have the meanings set forth below:
"Act" means the Delaware Limited Liability Company Act, as
amended and as in effect from time to time.
"Advisory Committee" shall have the meaning ascribed to it
in Section 8.3.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or
under common control with, such Person; for purposes of this
definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or otherwise.
"Agreement" means this Limited Liability Company Agreement,
as from time to time amended in accordance with the terms herein.
"Assignee" means a person to whom an interest in the Company
has been transferred in accordance with the provisions of this
Agreement but who has not been admitted as a substitute or
additional Member.
"Available Cash" means, with respect to any fiscal year, the
sum of (i) all cash receipts of the Company during such fiscal
year (excluding for this purpose Capital Contributions), and (ii)
all reductions made by the Manager during such fiscal year in
reserves established as hereinafter provided, less the sum of (i)
all cash operating expenditures and all cash debt service
payments (including payments of principal, interest and
penalties, if any), (ii) current portion of any trade payable
owed to any Member and (iii) all additions to reserves during
such fiscal year deemed reasonably appropriate by the Manager,
including reserves for capital expenditures, working capital and
contingent liabilities.
"Bankruptcy" has the meaning given it in Section 18-101 of
the Act.
"Budget" means the annual operational and capital
expenditures budget prepared by the Manager and approved by the
Members in accordance with Section 8.2.
"Capital Account" of a Member means the Capital Account
established for such Member under Section 4.4.
"Capital Contribution" means, with respect to any Member or
Assignee, the amount of cash and the net fair market value of any
property other than cash contributed by the Member or Assignee
(or its predecessor in interest) to the Company.
"Cause" means with respect to the Manager or any Member
employed by the Company or any Affiliate thereof: (i) any
misappropriation of funds or property of the Company by the
Manager, Member or any action that results or is intended to
result directly or indirectly in gain for or personal enrichment
of the Manager, Member or other person at the expense of the
Company (ii) any conviction of a felony or any crime involving
moral turpitude; including, fraud or embezzlement or dishonesty
committed by the Manager, Member or other Person; (iii) any
misconduct on the part of the Member or any Affiliate that
impairs the Member's ability to effectively perform his duties
and discharge his responsibilities hereunder (including, but not
limited to, sexual harassment of employees, recurring
insubordination, chronic unexcused absences, improper treatment
of subordinates or intoxication while performing his duties
hereunder); (iv) the Manager is grossly negligent in the
supervision of its employees who engage in any activity described
in clause (i), (ii) or (iii); (v) any material breach of any
provision contained in this Agreement by the Member; provided,
however, such grossly negligent supervision or material breach
shall not constitute "Cause" unless the Company has given the
Member written notice of such grossly negligent supervision or
material breach and such grossly negligent supervision or
material breach remains uncured for a period of five (5) business
days.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the limited liability company formed
pursuant to this Agreement and the limited liability company
continuing the business of this Company in the event of
dissolution as herein provided.
"Company Minimum Gain" has the meaning of "partnership
minimum gain" as set forth in Sections 1.704-2(b)(2) and 1.704-
2(d) of the Treasury Regulations.
"Covered Capacities" has the meaning ascribed to it in
Section 8.6.
"Current Ratio" means current assets divided by current
liabilities in accordance with GAAP.
"Depreciation" means, for each fiscal year or other period,
an amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such
year or other period, except that if the Gross Asset Value of an
asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for
such year or other period bears to such beginning adjusted tax
basis.
"Dissolution" of the Manager which is not a natural person
means that such Manager has terminated its existence, wound up
its affairs and dissolved in accordance with applicable laws.
"Distribution" means, with respect to any Member, the amount
of cash and the net fair market value of any property other than
cash distributed by the Company to the Member.
"EBIT" means the Company's net income on a consolidated
basis plus: (a) income taxes paid or accrued during the
applicable period; and (b) interest expenses paid or accrued in
determining net income for such period.
"EBITDA" means the Company's net income on a consolidated
basis plus: (a) income taxes paid or accrued during the
applicable period, (b) interest expenses paid or accrued; and (c)
amortization and depreciation deducted in determining net income
for such period.
"Equity" means the sum of all Capital Contributions, plus
retained earnings, less any losses of the Company.
"Fair Market Value " means, the fair market value of the
Units of the Company as of any date as determined in good faith
by the Manager with the Required Approval of the Advisory
Committee. If the Manager and the Advisory Committee are unable
to agree on the Fair Market Value of the Units, the "Fair Market
Value" of such Units shall be the value of such Units as of such
date as determined by an independent appraiser having the MAI
designation and not less than ten (10) years' experience
appraising retail stores similar to the Stores who is employed by
a nationally recognized appraisal or accounting firm (the
"Minimum Qualifications") selected by the Manager (the cost of
which shall be borne by the Company); provided, however, that if
any member of the Advisory Committee does not agree with the Fair
Market Value as so determined with respect to the Units, the
Advisory Committee may obtain a second appraisal for each such
property from an independent appraiser having at least the
Minimum Qualifications (the cost of which shall be paid by the
Company) and if such second appraisal indicates a valuation
within ten percent (10%) of the value indicated by the first
appraisal, the "Fair Market Value" of such Units shall mean the
average of the valuations indicated by the two appraisals;
provided further, that if such appraisals indicate valuations
that differ by 10% or more then the Manager and the Advisory
Committee shall jointly designate a third appraiser having at
least the Minimum Qualifications (the cost of which shall be
borne by the Company) who shall provide a third appraisal for
such Units and the "Fair Market Value" for such Units shall be
the average valuation based on the two closest of the three
appraisals. The "Fair Market Value" of a Unit of the Company
shall be the aggregate Fair Market Value of all Units as
determined above, divided by the total outstanding Units of the
Company.
"Fixed Charge Coverage Ratio" means EBIT divided by Interest
Expense.
"Gross Asset Value" means, with respect to any asset, the
adjusted basis for Federal income tax purposes of such asset,
except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross
fair market value of such asset, as determined by the
contributing Member and the Company, set forth on Schedule A
and approved by the Members in accordance with Section 8.2;
(ii) The Gross Asset Value of all Company assets shall
be adjusted to equal their respective gross fair market
values, as determined by the Manager, as of the following
times: (a) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (b) the distribution
by the Company to a Member of more than a de minimis amount
of property as consideration for an interest in the Company;
and (c) the liquidation of the Company within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations;
provided, however, that adjustments pursuant to clauses (a)
and (b) above shall be made only if the Manager reasonably
determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of
the Members;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market
value of such asset on the date of distribution; and
(iv) The Gross Asset Value of Company assets shall be
increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Section 734(b) or
Section 743(b) of the Code, but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Treasury Regulations and Section 5.4(b); provided, however,
that Gross Asset Value shall not be adjusted pursuant to
this Subsection (iv) to the extent the Manager determines
that an adjustment pursuant to Subsection (ii) hereof is
necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to
this clause Subsection.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to clauses (i), (ii) or (iv), above, such Gross
Asset Value shall thereafter be adjusted in the same manner as
would the asset's basis for federal income tax purposes except
that in lieu of regular depreciation, the Company shall take
deductions for Depreciation.
"Interest Expense" means the interest expense of the Company
on a consolidated basis determined for the applicable period in
accordance with GAAP.
"Major Decisions" shall have the meaning ascribed to it in
Section 8.2.
"Majority Interest" means, with respect to any group of
Members as of any particular time, Members in such group whose
Units at such time exceed one-half of the outstanding Units of
all Members in such group at such time. If no distinction is
made with respect to the group of Units in the context so used,
the term Majority Interest shall mean as of any particular time,
Members whose Units at such time exceed one-half of the
outstanding Units of all Members owning Units at such time.
"Manager" means, as of any particular time,
_________________________, a ____________ or such other Person
who is at such time the Manager of the Company, whose authority
is defined in Section 8.1.
"Membership Agreement" means any membership agreement
between Ace and the Company, as amended, including any agreement
contributed and assigned to, and assumed by the Company, and
"Membership Agreements" means all such agreements from time to
time in effect.
"Membership Interest" means a Member's entire right, title
and interest in the Units in the Company owned by such Member and
may include a Member's right to share in the Profits and Losses,
the right to receive distributions of Company assets and the
right to participate in the management of the business and
affairs of the Company, to the extent permitted by this
Agreement, including the right to vote on, consent to, or
otherwise participate in any decision or action of or by the
Members granted pursuant to this Agreement and the Act.
"Member Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
"Member Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(2) of the Treasury Regulations.
"Offer" shall have the meaning ascribed to it in Section
4.7.
"Offer Note" shall have the meaning ascribed to it in
Section 4.7.
"Operating Cash Flow" means, for any period, the Company's
net income or loss, determined in accordance with general
accepted accounting principles (after deduction for each of (i)
federal and state income taxes, (ii) any non-cash income, and
(iii) all such capital expenditures made during such period and
not financed) plus or minus each of the following items, (x)
depreciation, (y) amortization and other non-cash charges, (z)
interest expense paid or accrued.
"Other Business Entity" has the meaning given it in Section
18-209 of the Act.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust, joint venture,
unincorporated organization, other entity or group.
"Profits" or "Losses" means, for each fiscal year or other
period, an amount equal to the Company's taxable income or loss
for such year or period, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain,
loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income
or loss), with the following adjustments:
(i) any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition
shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Treasury Regulations and not otherwise taken into account in
computing Profits or Losses pursuant to this definition
shall be subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any
Company asset is adjusted pursuant to (ii) or (iii) of the
definition of "Gross Asset Value," the amount of such
adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing
Profits or Losses;
(iv) gain or loss resulting from any disposition of any
property of the Company with respect to which gain or loss
is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value;
and
(v) in lieu of the depreciation, amortization and
other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken
into account Depreciation for such fiscal year or other
period, computed in accordance with the definition of
"Depreciation."
"Purchasing Members" shall have the meaning ascribed to it
in Section 4.6.
"Required Approval" means, unless otherwise specified in
this Agreement, a majority of the votes entitled to be cast
by all members of the Advisory Committee.
"Regulatory Allocations" shall have the meaning ascribed to
it in Section 5.2.
"Stores" means the stores developed, opened and operated as
Ace Hardwarer affiliated stores, which have executed Membership
Agreements.
"Tax Distributions" has the meaning ascribed to it in
Section 6.2(a).
"Tax Matters Partner" has the meaning ascribed to it in
Section 8.7.
"Total Debt" means current liabilities plus long term
liabilities less accounts payable determined for the applicable
period in accordance with GAAP.
"Transfer" has the meaning ascribed to it in Section 7.5.
"Treasury Regulations" means the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as
such regulations may be amended from time to time.
"Triggering Event" shall have the meaning ascribed to it in
Section 4.6.
"Units" refers to the interest of a Member in the Profits,
Losses, income, deductions and credits of the Company and
Distributions by the Company. The number of Units held by each
person admitted to the Company as a Member and by each Assignee
shall be as set forth on Schedule A hereto.
ARTICLE II
Section 2.1 Formation of Company. Pursuant to this
Agreement and the Certificate of Formation, the Members do hereby
form a limited liability company pursuant to the Act and the
provisions of this Agreement and, for that purpose, have caused
the Certificate of Formation to be prepared, executed and filed
with the Secretary of State of Delaware on _______________,2000.
Except as herein otherwise expressly stated, the rights and
liabilities of the Members shall be as provided in the Act.
Section 2.2 Company Name. The business of the Company
shall be conducted under the name "__________ Ace Hardware, LLC"
or under such other name as the Members may from time to time
determine.
Section 2.3 Purposes of Company.
(a) The Company's purpose is to acquire, develop, own and
operate Stores under a Membership Agreement with Ace and its
successors and assigns under the trade name of "_________ Ace
Hardware" or such other trade name as the Manager may from time
to time determine. The Company has all the powers now or
hereafter conferred by the laws of the State of Delaware on
limited liability companies formed under the Act and, subject to
the limitations of this Agreement, may do any and all lawful acts
or things that are necessary, appropriate, incidental or
convenient for the furtherance and accomplishment of the purpose
and business of the Company. In addition, the Members hereby
authorize and direct the Manager to take all such actions and to
prepare, execute, deliver and file all such agreements,
instruments, documents and certificates (including the execution
of all agreements with Ace and ________) in the name and on
behalf of the Company and to incur and pay all such fees and
expenses as it shall deem necessary, proper or advisable in order
to carry out and effectuate fully the purpose of the Company set
forth in this Section 2.3.
Section 2.4 Company Property. Title to Company property
shall be held in the name of the Company or its nominee.
Section 2.5 Registered Office; Principal Place of
Business. The name of the Company's registered agent for service
of process is The Corporation Trust Company, and the address of
the Company's registered office in the State of Delaware is 0000
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. The principal place
of business of the Company shall be at
_______________________________________. The Manager may change
the Company's registered agent or the location of the Company's
registered office or principal place of business as the Manager
may from time to time determine.
Section 2.6 Qualifications in Other Jurisdictions. The
Manager shall cause the Company to be qualified, formed or
registered under assumed or fictitious names statutes or similar
laws in any jurisdiction in which the Company transacts business.
The Manager, as an authorized person, within the meaning of the
Act, may execute, deliver and file any certificates and any
amendments and/or restatements thereof necessary for the Company
to do business in a jurisdiction in which the Company may wish to
conduct such business. The Manager shall prepare, execute and
cause to be filed such original or amended certificates
evidencing the formation and operation of the Company whenever
the same may be required under the laws of ___________ and
______________ and any other state where the Company may do
business.
ARTICLE III
Section 3.1 Term of Company. The term of the Company
commenced upon the filing of the Certificate in the office of the
Secretary of State of the State of Delaware, and shall continue
in perpetuity or until terminated pursuant to the terms of this
Agreement.
ARTICLE IV
Section 4.1 Capital Contributions of the Members.
(a) In connection with the execution of this Agreement, the
Members are making Capital Contributions equal to the amount as
set forth opposite each of their names on Schedule A attached
hereto. The form in which the Capital Contributions shall be
contributed is set forth in Schedule B attached hereto. Following
such contribution and the issuance of such Units, each Member
will have made such contributions, and been issued the number of
Units set forth opposite such Member's name on Schedule A
attached hereto.
(b) The Members acknowledge that, for federal income tax
purposes, any disparity between the fair market value and the
adjusted basis of the assets being contributed by the Members
shall be subject to the provisions of Section 704(c) of the Code,
as provided in Section 5.4 hereof.
Section 4.2 Withdrawal and Return of Capital. No Member
shall have the right to withdraw or to demand a return of any of
its Capital Contribution, and except upon dissolution and winding
up of the Company in accordance with the terms of Section 9.3.
Subject to the limitations contained in the Act, any return of
such Capital Contribution shall be made solely from the assets of
the Company (including the Capital Contributions of the Members)
and only in accordance with the terms hereof, and no Member shall
have personal or other liability for the return of any other
Member's Capital Contribution. Under circumstances requiring a
return of any Capital Contribution, no Member shall have the
right to receive property other than cash except as may be
specifically provided herein, and to the extent any monies which
any Member is entitled to receive pursuant to Article 6 hereof or
any other provision of this Agreement would constitute a return
of capital, each of the Members consents to the withdrawal of
such capital.
Section 4.3 Interest on Capital. No interest shall
accrue or be paid on any Capital Contribution made to the
Company.
Section 4.4 Capital Accounts. The Company shall create
upon its books and records a capital account ("Capital Account")
for each Member, which shall be maintained in accordance with the
following provisions:
(i) To each Member's Capital Account there shall be
credited such Member's Capital Contributions, such Member's
distributive share of Profits and any items in the nature of
income or gain which are specially allocated pursuant to
Section 5.2, 5.3, or 5.4, the amount of any Company
liabilities which are assumed by such Member or which are
secured by any property distributed to such Member, and the
Member's share of any increase in Gross Asset Value pursuant
to its definition.
(ii) To each Member's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
property distributed to such Member pursuant to any
provision of this Agreement, such Member's distributive
share of Losses and any items in the nature of deductions or
losses which are specially allocated pursuant to Section
5.2, 5.3 or 5.4, and the amount of any liabilities of such
Member which are assumed by the Company or which are secured
by any property contributed by such Member to the Company,
and the Member's share of any decrease in Gross Asset Value
pursuant to its definition.
(iii) In the event all or a portion of an interest
in the Company is transferred in accordance with the terms
of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates
to the transferred interest.
(iv) In determining the amount of any liability for
purposes of clauses (i) and (ii), above, there shall be
taken into account Section 752(c) of the Code and any other
applicable provisions of the Code and Treasury Regulations.
Section 4.5 Company's Purchase Right.
(a) The termination of employment by the Company or any
Affiliate thereof of any natural Person who is a Member shall
entitle, but not obligate, the Company to repurchase such
Member's Units at the time of such termination and any Units held
by such Person's spouse, children or trusts for their benefit
under the terms of this Section, regardless of the reason for
termination. The removal of the Manager for Cause shall entitle,
but not obligate, the Company to repurchase such Manager's Units
and any Units held by such Manager's shareholders or employees
under the terms of this Section. For the purposes of this
Section 4.5, "removal of the Manager for Cause" shall not include
removal of the Manager pursuant to Section 8.9(i) through (v).
If terminated for any reason other than Cause, the purchase price
for the Units shall be the Fair Market Value thereof at the time
of termination. If terminated or removed for Cause, the purchase
price for the Units shall be the book value thereof at the time
of termination or removal.
(b) The Company may exercise its purchase right at any time
within ninety (90) days after the date of termination of
employment or removal by written notice to the terminated Member
or removed Manager. Such notice shall set forth the number of
Units being purchased and the purchase price for each and shall
be accompanied by tender of the aggregate purchase price. The
terminated Member or removed Manager will have ten (10) days from
the giving of the purchase notice by the Company within which to
dispute, by written notice to the Company, the purchase price to
be paid for his Units. If the terminated Member or removed
Manager either accepts the amount tendered or fails to send a
notice of dispute within such ten (10) day period, the purchase
price shall conclusively be deemed to have been agreed upon. If
the terminated Member or removed Manager disputes the amount of
the purchase price for his Units, such price shall be determined
by binding arbitration in the manner set forth below, regardless
of when such dispute arises. Upon the resolution of such
dispute, by arbitration, agreement or otherwise, the Company
shall pay the purchase price so determined for the terminated
Member's or removed Manager's Units, in cash if the purchase
price is less than or equal to the amount of Capital Contribution
previously contributed to the Company by such Member. If the
purchase price is greater than the amount of Capital Contribution
previously contributed to the Company by such Member, that amount
shall be paid in cash and the remainder, together with interest
on the unpaid balance at the applicable federal rate, determined
in accordance with Section 1274 of the Code, in thirty-six (36)
equal monthly installments of principal and interest, or during
such shorter period as the Manager may elect. Such obligation
shall be evidenced by the Company's unsecured promissory note in
a form reasonably satisfactory to the seller. Notwithstanding
the foregoing, the terms of the payment of the purchase price are
subject to the approval of the Company's lender, if any, which
the Company agrees to use reasonable efforts to obtain. In all
events, the purchase and sale transaction for the Units shall be
deemed to have been consummated on the date of the giving of the
Company's purchase notice. Effective on that date, the
terminated Member or removed Manager shall cease to be a Member
of the Company, and all of such Person's interest in Profits,
Losses, income, gains or distributions of Available Cash shall
cease and terminate.
(c) The terminated Member's or removed Manager's acceptance
of the purchase price for its Units shall constitute a complete
release of the Company, the Manager, the Members, and their
Affiliates of all claims or rights arising out of, or on account
of, the Member's employment or ownership of Units. All notices
required by this Section shall be given and deemed delivered in
the manner set forth in Section 11.1 of this Agreement.
(d) The provisions of this Section 4.5 shall supersede
those in Section 7.5 with respect to transfers of Units to which
this Section applies and shall be subject to any contractual
arrangements entered into by the Company, a Member or any of
their Affiliates with any individual employee or the Manager.
(e) Any dispute or controversy which arises out of or
relates to the Company's purchase right described in this Section
4.5 shall be settled and determined by binding arbitration in
Chicago, Illinois in accordance with the commercial rules of the
American Arbitration Association then in effect, and judgment
upon the award rendered by the arbitrator(s) may be entered in,
and specifically enforced by, any court of competent
jurisdiction. The expenses of the arbitration shall be borne
equally by the parties to the arbitration, provided that each
party shall pay for and bear the cost of his or her own experts,
evidence and legal counsel, unless ruled otherwise by the
arbitrator(s).
(f) The Company shall have the right to set-off any and all
amounts owing to the Company from such terminated Member or
removed Manager against the purchase price determined pursuant to
this Section 4.5.
Section 4.6 Member's Right to Purchase Other Member's
Units.
(a) Any of the Members (the "Purchasing Member") shall have
the right, at any time to purchase all but not less than all of
such Unit held by any of the other Member ("Selling Member")
(hereafter the "Offer"). The Purchasing Member shall give five
(5) business day notice ("Section 4.7 Offer Notice") to such
Selling Member of his intent to purchase such Selling Member's
Units and the price per Unit to be paid. Such Selling Member
shall have ten (10) business days to elect to: (i) sell at the
price contained in the Section 4.7 Offer Notice; or (ii) elect to
purchase the Purchasing Member's Units at the price contained in
the Section 4.7 Offer Notice. If the Selling Member accepts the
offer to sell its Units, the offer price for the Selling Member's
Units shall be paid by the Purchasing Member in cash with 30 days
of receipt by the Selling Member of the Section 4.7 Offer Notice.
Effective on the date of payment of the offer price of such
Units, the Selling Member shall cease to be a Member of the
Company with respect to such purchased Units, and all of its
interest in the Profits, Losses, income, gains or Distributions
with respect to such Units shall cease and terminate. If the
Selling Member chooses to purchase the Purchasing Member's Units,
the offer price for the Purchasing Member's shall be paid by the
Selling Member, in cash, within 30 days of receipt by the
Purchasing Member of the Selling Member's intent to purchase such
Member's Units. Effective on the date of payment of the offer
price of such Member's Units, such Member shall cease to be a
Member of the Company with respect to such purchased Units, and
all of its interest in the Profits, Losses, income, gains or
Distributions with respect to such Units shall cease and
terminate.
(b) Upon the purchase of Ace's Units, _________ and Ace
shall execute and cause the Company to execute a redemption
agreement, substantially in the form attached hereto as Schedule
C. Effective on the date of payment of the Redemption Price, Ace
shall cease to be a Member of the Company with respect to such
purchased Units, and all of its interest in the Profits, Losses,
income, gains or Distributions with respect to such Units shall
cease and terminate.
Section 4.7 Additional Capital.
(a) Except for the issuance of Units pursuant to this
Agreement, if the Company proposes to issue any Units or rights
to acquire such Units, the Company will first offer to sell to
each Member holding Units a portion of such Units equal to the
quotient determined by dividing (1) the number of Units held
(directly or indirectly) by such Member by (2) the total number
of Units outstanding. Each Member will be entitled to purchase
such Units at the offered price and on the terms as determined by
the Manager as such Units are to be offered to any other Persons.
(b) In order to exercise its purchase rights hereunder, a
Member must, within fifteen (15) days after receipt of written
notice from the Company describing in reasonable detail the Units
being offered, the purchase price thereof, the payment terms and
such Member's percentage allotment, deliver a written notice to
the Company describing its election hereunder. If all of the
Units are not fully subscribed by such Members, the remaining
Units will be reoffered by the Company to the Members purchasing
their full allotment upon the terms set forth in this paragraph,
except that such Members must exercise their purchase rights
within five (5) days after receipt of such reoffer.
(c) Upon the expiration of the offering periods described
above, the Company will be entitled to sell such Units which
Members have not elected to purchase at any time or from time to
time during the 120 days following such expiration on terms and
conditions no more favorable to the purchasers thereof than those
offered to such Members. Any Units offered or sold by the
Company after such 120-day period must be reoffered to the
Members pursuant to the terms of this paragraph.
(d) The Members hereby consent to the admission of any
Person acquiring Units pursuant to this Section 4.8 and who did
not previously own Units of the Company and who executes this
Agreement.
(e) If Ace is required, pursuant to its guarantee of
certain leases, to make payment under such guarantee, such amount
of payment shall be deemed an additional Capital Contribution by
Ace. The Company shall be obligated to issue additional Units at
the lesser of (i) $100 per Unit or (ii) their respective Fair
Market Value, as determined in accordance with its definition.
ARTICLE V
Section 5.1 Allocation of Profits and Losses. After
giving effect to the Special Allocations in Section 5.2 hereof,
Profits and Losses of the Company for any fiscal year shall be
allocated as follows:
(a) Profits for any fiscal year shall be allocated in the
following order of priority:
(i) First, to all Members, in proportion to the
deficit balances (if any) in their Capital Accounts, in an
amount necessary to eliminate any deficits in the Members'
Capital Accounts and restore such Capital Accounts to zero;
(ii) Thereafter, to the Members holding Units in
proportion to their Units.
(b) Losses for any fiscal year shall be allocated in the
following order of priority:
(i) First, to the Members in proportion to their Units
until the Capital Account balances of such Members have been
reduced to zero;
(ii) Thereafter, to the Members in proportion to their
Units.
Section 5.2 Special Allocations. Notwithstanding
Sections 5.1, the following special allocations shall be made in
the following order:
(a) Profits and Losses and items thereof will be allocated
as though this Agreement contained (and there is hereby
incorporated herein by reference): (i) a minimum gain chargeback
provision that complies with the requirements of Section 1.704-
2(f) of the Treasury Regulations; (ii) a nonrecourse debt minimum
gain chargeback provision that complies with the requirements of
Section 1.704-2(i)(4) of the Treasury Regulations; and (iii) a
qualified income offset provision that complies with the
requirements of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations.
(b) Any Member Nonrecourse Deductions for any fiscal year
or other period will be specially allocated to the Member who
bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(1)
and (2).
(c) To the extent an adjustment to the adjusted tax basis
of any Company asset pursuant to Section 734(b) or section 743(b)
of the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m)
of the Treasury Regulations, to be taken into account in
determining Capital Accounts, the amount of such adjustment to
the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Members and Assignees in a manner
consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such Section of the
Regulations.
(d) The allocations set forth in this Section 5.2 (the
"Regulatory Allocations") are intended to comply with certain
provisions of Sections 1.704-1 and 1.704-2 of the Treasury
Regulations. Notwithstanding any other provisions of this
Agreement, the Regulatory Allocations shall be taken into account
in allocating Profits and Losses and other items of income and
deduction among the Members and Assignees so that, to the extent
possible, the net amount of such allocations of Profits and
Losses, other items of income, gain, loss and deduction, and the
Regulatory Allocations to each Member or Assignee shall be equal
to the net amount that would have been allocated to each Member
or Assignee if the Regulatory Allocations had not occurred.
Section 5.3 Allocation of Tax Credits. All tax credits
allowed in connection with any depreciable property shall be
allocated in the same manner as deductions for Depreciation of
such property, and all tax credits allowed in connection with
other expenditures shall be allocated in the same manner as
deductions arising out of such other expenditures.
Section 5.4 Section 704(c) Allocations.
(a) In accordance with Section 704(c) of the Code and the
Treasury Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital
of the Company shall be allocated among the Members so as to take
account of any variation between the adjusted basis of such
property to the Company for federal income tax purposes and its
initial fair market value.
(b) In the event the Gross Asset Value of any asset is
adjusted pursuant to the definition of "Gross Asset Value,"
subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes
and the value at which such asset is reflected in the Capital
Accounts of the Members, to the extent such variation was not
previously taken into account pursuant to Section 5.4(a), in the
same manner as under Section 704(c) of the Code and the Treasury
Regulations thereunder.
(c) Allocations pursuant to Sections 5.4(a) and (b) shall
be determined by the Manager using any permissible method under
Section 704(c) of the Code and the Treasury Regulations
thereunder.
(d) Allocations pursuant to Sections 5.4(a) and (b) are
solely for purposes of federal, state, and local income taxes and
notwithstanding any other provision of this Agreement, such
allocations shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Profits,
Losses, other items, or Distributions pursuant to any provision
of this Agreement.
Section 5.5 Certain Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any
such other items shall be determined on a daily, monthly or other
basis, as determined by the Manager in its sole discretion using
any permissible method under Section 706 of the Code and the
Treasury Regulations thereunder. Notwithstanding the foregoing,
the Member purchasing Units pursuant to Section 4.7 shall have
the right to require the Company to close its books as of the day
prior to the date of such transfer of such Units for purposes of
allocating Profits and Losses to the periods before and after the
date of such issuance.
(b) Except as otherwise provided in this Agreement, all
items of Company income, gain, loss, deduction, and credit, for
any fiscal year or other period, and any other allocations not
otherwise provided for shall be divided among the Members in the
same proportions as they share Profits or Losses, as the case may
be, for such year or other period.
Section 5.6 Recapture Responsibility. In making the
allocation of Profit among the Members, the ordinary income
portion, if any, of such Profit caused by the recapture of cost
recovery or any other deductions shall be allocated among those
Members who were previously allocated the cost recovery or any
other deductions in proportion to the amount of such deductions
previously allocated to them. It is intended that the Members,
as between themselves, shall be allocated the proportionate
recapture income as a result of any cost recovery or other
deductions which were previously allocated to them, in proportion
to the amount of such deductions which have been allocated to
them, notwithstanding that a Member's share of profits, losses or
liabilities may increase or decrease from time to time. Nothing
in this Section 5.6, however, shall cause the Members to be
allocated more or less gain or profit than would otherwise be
allocated to them pursuant to this Article 5.
ARTICLE VI
Section 6.1 Distributions.
(a) Except as otherwise provided in Section 6.2, which
shall be paid when due, Distributions of Available Cash shall be
made at such time or times and in such amounts as may be
determined by the Manager.
(b) Except as provided in Section 6.3 and Section 9.3
regarding distributions in liquidation of the Company,
Distributions of Available Cash shall be made to the Members in
proportion to their Units.
Section 6.2 Distributions for Tax Purposes.
(a) The Manager shall cause the Company to make
Distributions out of Available Cash within 75 days after the end
of any fiscal year of the Company, beginning with the fiscal year
ending in December____, to each of the Members, in an amount
equal to (i) the excess of (A) the total amount of taxable income
allocated to such Members for such fiscal year, over (B) the
amount, if any, by which the sum of all items of deduction and
loss allocated to such Members from the Company for all prior
fiscal years exceeds the sum of all items of taxable income
allocated to such Members for all prior fiscal years, multiplied
by (ii) a tax rate reasonably selected by the Manager (the "Tax
Distributions"); provided, however, that subsequent Distributions
to the Members made during such fiscal year and subsequent fiscal
years shall be adjusted as necessary to ensure that, over the
period of time since the date of this Agreement, the aggregate
cash distributed to a Member shall be equal to the amount to
which such Member would have been entitled had there been no Tax
Distributions. In the event that in any fiscal year Available
Cash is insufficient to permit the payment in full of the Tax
Distributions computed as set forth above, then in any fiscal
year in which Available Cash exceeds required Tax Distributions,
the Tax Distributions payable under this Section 6.2(a) shall be
increased (but not in excess of Available Cash) until such
deficiency has been recouped.
(b) The Manager may cause the Company to make periodic
Distributions to the Members during each fiscal year based on its
reasonable estimate of the amount that will be required to be
distributed pursuant to Section 6.2(a) for such fiscal year in
order to provide funds to the Members for the payment of
quarterly estimated taxes by them. In the event any such
periodic Distributions are made for any fiscal year, the amount
of the Distribution made after the end of the fiscal year shall
be appropriately adjusted so that the total amount distributed to
each Member (taking into account periodic Distributions made
pursuant to this Section 6.2(b)) is equal to the amount such
Member would have been entitled to receive pursuant to Section
6.2(a) had no such periodic Distributions been made.
Section 6.3 Payment and Withholding of Certain Taxes.
Notwithstanding anything to the contrary herein, to the extent
that the Company is required, pursuant to any applicable law, (i)
to pay tax (including estimated tax) on a Member's allocable
share of Company items of income or gain, whether or not
distributed, or (ii) to withhold and pay over to the tax
authorities any portion of a Distribution otherwise distributable
to a Member, the Company may pay over such tax or such withheld
amount to the tax authorities, and such amount shall be treated
as a Distribution to such Member at the time it is paid to the
tax authorities. For purposes of this Section 6.3, the Company
may assume that any Member who fails to provide to the Company
satisfactory evidence of his tax status for United States federal
income tax purposes is a foreign person.
Section 6.4 Right of Offset. Notwithstanding anything to
the contrary contained in the foregoing provisions of this
Article 6 or any other provisions of this Agreement, the Members
acknowledge and agree that the Company shall have the right to
setoff any and all amounts owing to the Company by a Member or
its Affiliates, including any amounts arising under any claims
for indemnification and all costs and expenses (including
attorneys' fees) incurred by the Company, in connection with any
such claims, against any distributions otherwise payable to such
Member under this Agreement; provided, however, that there shall
be no right of offset with respect to any Tax Distribution made
under Section 6.2.
ARTICLE VII
Section 7.1 Powers of Members. The Members shall have
the power to exercise any and all rights or powers granted to the
Members pursuant to the express terms of this Agreement. The
Members shall also have the power to authorize the Manager, by
vote of the Majority Interest of the Members, to possess and
exercise any right or power not already vested in the Manager
pursuant to Section 8.1. Except in the capacity as Manager, as
specifically provided in Article 8, no Member, acting alone,
shall have the authority to act for, in the name of, or as a
representative of the Company, or to deal with the Company's
assets in any way, or to undertake or assume any obligation,
debt, duty or responsibility on behalf of any other Member or the
Company. Any violation of this Section 7.1 shall be deemed to
constitute wilful misconduct.
Section 7.2 Partition. Each Member waives, until
termination of the Company, any and all rights that it may have
to maintain an action for partition of the Company's property.
Section 7.3 Resignation of Members. No Member shall have
the right to resign or withdraw from the Company as a Member
(except that this restriction shall not prevent any Member from
transferring its interest in the Company to the extent permitted
in Section 7.5).
Section 7.4 Conduct of Other Business Activities by the
Members. The Members may generally engage in any business or
profession or possess an interest in other businesses or
professions of every nature and description, independently or
with others, including but not limited to, all phases of the
hardware business. Neither the Company nor the Members shall,
under the terms of this Agreement or by virtue of the existence
of the Company or the relation created among the Members, have
any rights in or to any independent venture of any other Member
or its Affiliates, or the income or profits thereof, whether or
not any such venture is, or may be deemed to be, competitive with
the Company.
Section 7.5 Assignment by Members and Assignees.
(a) Except as otherwise provided in Section 4.6 or 4.7, and
subject to Section 7.6, a Member or Assignee may not assign,
pledge, mortgage, hypothecate, sell, or otherwise dispose or
encumber (hereinafter referred to as a "Transfer") all or any
part of his Units in the Company to any Assignee (and no such
Transfer, whether voluntary or involuntary, whether by operation
of law or otherwise and whether or not for value, shall be
effective) unless:
(i) such Transfer shall be made by means of an
assignment in such form as shall be reasonably satisfactory
to the Manager;
(ii) the Company shall have received advice of counsel
satisfactory to the Manager to the effect: (a) that the
proposed Transfer is permissible under the Securities Act of
1933, as amended, the rules and regulations of the
Securities and Exchange Commission thereunder and all
applicable state securities laws; (b) that the proposed
Transfer will not adversely affect the classification of the
Company as a partnership for federal income tax purposes;
and (c) that the proposed Transfer will not result in a
termination of the Company as a partnership under Section
708(b) of the Code;
(iii) the assignor and Assignee, and, if deemed
necessary by the Manager, all other Members, shall have
executed all such certificates and other documents and
performed all such acts as the Manager reasonably deems
necessary or appropriate to effect a valid transfer of the
Units being transferred, and to preserve the rights, status
and existence of the Company.
(b) The Company shall, after the effective date of any
Transfer pursuant to the provisions of this Section 7.5, pay all
Distributions on account of the Units so transferred to the
Assignee; provided, however, that if instructed to do so in
writing by the assignor and the Assignee, the Manager shall cause
the Company to pay to the assignor a portion of the Tax
Distribution provided for in Section 6.2 that would otherwise
have been payable to the Assignee for the year in which the
Transfer occurs, equal to the amount that would have been payable
under Section 6.2 with respect to the Units transferred if the
period beginning on the first day of the fiscal year in which the
Transfer occurred and ending on the effective date of the
Transfer had been a separate fiscal year of the Company. Any
such Distribution paid to the assignor shall be treated as if
paid to the Assignee for purposes of determining the Capital
Account balance of the Assignee.
(c) Any Member who Transfers all of its Units in the
Company shall, upon the effective date of such Transfer, cease to
be a Member for all purposes, except that no assignment of all or
any portion of its Units in the Company shall relieve the
assignor of its obligations under this Agreement, whether arising
prior to or subsequent to such Transfer.
(d) An Assignee who has not become a substitute or
additional Member in the manner provided in this Agreement shall
have no rights whatsoever in respect of the Company except the
right to receive the distributions, profits and losses to which
the Assignee Member would be entitled, and such other rights
specifically accorded him by the terms of this Agreement. The
provisions of this Agreement shall be binding on all Assignees.
(e) No Assignee of a Member shall have the right to become a
substitute or additional Member unless the conditions set forth
in Section 7.5(a)(i) through (iii) have been satisfied and the
Assignee shall have paid to the Company the costs and expenses
(including attorneys' fees and filing costs) incurred in
effecting the substitution or addition.
(f) Notwithstanding anything to the contrary herein, (and except
with respect to any public offering of equity that may be
undertaken by the Company), (i) the Manager shall not cause or
permit Units to become traded on an established securities market
and (ii) the Manager shall withhold its consent to any Transfer
that, to the Manager's knowledge after reasonable inquiry, would
otherwise be accomplished by a trade on a secondary market (or
the substantial equivalent thereof). For purposes of this
subsection the terms "traded on an established securities market"
and "secondary market (or the substantial equivalent thereof)"
shall have the meanings set forth in Sections 469(k)(2) and 7704
of the Code and any regulations promulgated thereunder that are
in effect at the time of the proposed Transfer.
(g) Any Member (the "Transferring Member") may Transfer its
Units, or any portion thereof, to any Permitted Transferee (as
hereafter defined) who agrees in a writing in form and substance
satisfactory to the Company delivered to the Company to be bound
by the terms of this Agreement (including, but not limited to,
the restrictions on Transfers specified in this Section) for all
purposes in the same manner as such Permitted Transferee's
Transferring Member and to assume the obligations of such
Transferring Member hereunder with respect to the Units. For
purposes of this Agreement, "Permitted Transferees" means: (i)
with respect to a Member who is a natural person, the spouse or
lineal descendants (but not minor children) of such Member, any
trust created solely for the benefit of such Member, the spouse
or lineal descendants of such Member or such Member's estate, any
individual retirement account or other tax-deferred account
solely for the benefit of such Member, the spouse or lineal
descendants of such Member or such Member's estate, any
corporation or partnership in which such Member, the spouse or
lineal descendants of such Member are the direct and beneficial
owners of all of the equity interests (provided such Member,
spouse and lineal descendants agree in writing to remain the
direct and beneficial owners of all such equity interests), or
the personal representative of such Member upon such Member's
death for purposes of administration of such Member's estate or
upon such Member's Incapacity for purposes of the protection and
management of the assets of such Member; and (ii) with respect to
a Member who is not a natural person, its Affiliates. The
Members do hereby consent to the Transfer of Ace's Units to a
wholly-owned subsidiary and the Members hereby consent to the
substitution of such Assignee as Member of the Company.
Section 7.6 Transfers and Other Dispositions - Right of
First Refusal
(a) In the event either of the Members, or their successor
in interest, desire to Transfer its Units, or any portion
thereof, the Members, or their successor in interest, shall give
written notice (the "Section 7.6 Offer Notice") to the other
Member, indicating its desire to sell its Units, or such portion
thereof, and offering to sell its Units, or such portion thereof,
to the other Member, at the price and on the other terms
stipulated in the Section 7.6 Offer Notice.
(b) At any time within ten (10) days after the Section 7.6
Offer Notice is given to the Member (the "Offer Date"), the other
Member may accept the Offer (in whole but not in part) to
purchase such Units at the price and upon the terms stipulated in
the Section 7.6 Offer Notice by giving written notice to that
effect to the other Member, or their successor in interest, prior
to the expiration of the aforementioned ten (10) day period. Any
such acquisition of the offered Units by such Member shall close
on a date mutually agreed upon by the Members, or their successor
in interest, within forty (40) days after the Offer Date and
otherwise in accordance with the terms set forth in the Section
7.6 Offer Notice.
(c) If the Member does not agree to the purchase of the
offered Units of the other Member, or their successor in
interest, referred to in the Section 7.6 Offer Notice within the
period prescribed herein, the Member, or their successor in
interest, may sell all of the offered Units described in the
Offer within 180 days after the Offer Date and otherwise in
accordance with the terms set forth in the Section 7.6 Offer
Notice to one or more purchasers (who need not be Members of the
Company at the time of such offer and sale) who agree in writing
in form and substance satisfactory to the Manager to be bound by
the terms of this Agreement as an Assignee of the Member;
provided, however, the Assignee and assignor agree to comply with
the conditions of Section 7.5(a)(i) through (iii). Any proposed
sale (i) in a transaction which closes more than 180 days after
the Offer Date or (ii) on terms that differ from those in the
Section 7.6 Offer Notice cannot be consummated without again
complying with the provisions of this Section 7.6.
Section 7.7 Limitation of Liability. For each Member,
liability shall be limited as set forth in this Agreement, the
Act, and other applicable law. A Member will not be personally
liable for any debts or losses of the Company beyond its
respective Capital Contribution; provided, however, that any
Member who receives a distribution or the return in whole or in
part of its Capital Contribution is liable to the Company only to
the extent provided by the Act.
ARTICLE VIII
Section 8.1 Management of the Company.
(a) Subject to the limitations set forth in Section 8.2,
the business and affairs of the Company shall be managed by the
Manager and the Manager shall have full authority to act for and
with the Company in all matters in connection with or relating to
the Company's business. On behalf of the Company and in
furtherance of the business of the Company, the Manager shall
have the authority to perform all acts which the Company is
authorized to perform, without the consent of the Members, except
as specifically provided herein, including the authority to:
(i) purchase or otherwise acquire, outright or by
lease, at such time or times, for such prices and on such
terms as it deems desirable, real or personal property,
tangible or intangible, of all types for use in the
Company's business, which property may be owned at the time
of such purchase by the Manager or their Affiliates;
(ii) execute and deliver such documents, instruments or
agreements as the Manager may deem necessary or desirable
for the acquisition, operation and disposition of the
Company's business and the investment, management and
maintenance of its assets, or for other Company purposes,
and amendments, revisions and substitutions to any of the
foregoing, including without limitation, the Membership
Agreements;
(iii) enter into leases, licenses, sublicenses,
franchises or other agreements with respect to all or any
portion of the Company's property, whether or not such
leases, licenses or agreements (including renewal or option
terms) shall extend beyond the date of termination of the
Company, upon such terms as it deems proper;
(iv) compromise, submit to arbitration, xxx on, or
defend all claims in favor of or against the Company;
(v) do all acts it deems necessary or appropriate for
the protection and preservation of the Company's assets,
including insuring the business and assets of the Company in
such amounts and against such risks as the Manager deems
advisable;
(vi) finance any assets or activities of the Company or
refinance, increase, modify, consolidate, prepay or extend
any debts, mortgages or other security obligations of the
Company; borrow money (including borrowings from the Manager
or any other Member or their Affiliates, there being no
obligation, however, for the Manager or any of its
Affiliates to make any such loan) on a secured or unsecured
basis and grant or pledge Company assets as security for any
such loan and confess a judgment against the Company in
connection therewith;
(vii) hold the Company assets in the Company name
or the name of one or more nominees;
(viii) open one or more bank accounts in the name of
the Company or in any other name in which the Company's
funds are to be held, make deposits therein, draw funds
therefrom and deal in or with the Company's funds in such
manner as it may deem appropriate; and
(ix) make distributions of Company funds or assets to
the Members as provided for by this Agreement.
(b) Subject to Section 8.2, the Manager may, on behalf of
the Company, employ, engage, retain or deal with any persons,
corporations or other entities (including its Affiliates) to act
in such capacities as the Manager may determine; provided,
however, if such services are provided by Members' Affiliates,
such fees must be no higher than those customarily charged by non-
Affiliates service providers.
(c) With respect to third parties, the signature of the
Manager on any agreement, contract, mortgage, deed of trust,
promissory note, instrument or other document shall be sufficient
to bind the Company in respect thereof and shall conclusively
evidence the authority of the Manager with respect thereto, and
no Person need look to any other evidence or require joinder or
consent of any other Person.
(d) In the event that the Manager proposes a merger or
consolidation of the Company with or into any Other Business
Entity or a sale of substantially all of the assets of the
Company, such merger, consolidation or sale shall require the
approval of a Majority Interest of the Units owned by Members.
(e) Any approval, consent, vote or other action of the
Members required or contemplated by this Agreement may be taken
without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the approval,
consent, vote or other action so taken is signed by Members
holding the requisite number of Units and delivered to the
Manager. Any failure to give notice of any such approval,
consent, vote or other action to the Members not executing a
consent shall not effect the validity of the approval, consent,
vote or other actions.
Section 8.2 Major Decisions.
(a) Notwithstanding anything to the contrary contained in
Section 8.1, the Manager shall not take any action with respect
to any of the matters enumerated below ("Major Decisions")
without the Required Approval of the Advisory Committee:
(i) issue new Units in the Company unless such Units
are offered to all Member in accordance with Section 4.7;
(ii) exchange the Units for equity interests in another
Other Business, whether such exchange is a taxable or non-
taxable transaction;
(iii) enter into any material modification,
amendment or restructuring of any Membership Agreement;
(iv) enter into any transaction with, contract with, or
otherwise compensate any Member or an Affiliate which is in
excess of $10,000, per calendar year, or enter into any
material modification, amendment or restructuring of any
transaction or contract with any Member or Affiliate;
(v) incur any additional indebtedness for borrowed
funds in excess of the lesser of (A) $300,000 or (B) which
would cause the Company to have a debt-to-equity ratio
greater than 2 to 1, except for trade payables incurred in
the ordinary course of business;
(vi) create any option plan for employees or other
persons;
(vii) dissolve the Company and wind up and
liquidate the business and assets;
(viii) guarantee any obligations of a third party;
(ix) amend the purpose of the Company;
(x) entering, directly or indirectly, into, or
approving the terms of, any transaction with any Member or
any affiliate of any Member including any employment of such
Member or its shareholder or employees, other than as
specifically provided in this Agreement including any
contributions of property;
(xi) purchasing stock or securities of, extending
credit to or making investments in, becoming liable as
surety for, or guarantee or endorsing any obligations of,
any person, except investments in direct obligations of the
United States and commercial bank deposit;
(xii) creating or permitting to exist any
subsidiaries of the Company;
(xiii) making any material modification to any
supply or vendor contract to which the Company is a party;
(xiv) determining the Fair Market Value of the
Units;
(xv) acquiring, and making all decisions relating to,
any interests of the Company in any corporation,
partnership, limited liability company, joint venture, or
other entity, including, without limitation, decisions
relating to: (A) the execution of subscription,
shareholders', partnership, operating, limited liability
company or joint venture agreements, voting agreements, or
the like having such terms as the Manager, in its sole
discretion, shall determine or consent to; (B) the
operation, financing or acquisition or sale of properties of
such entity; and (C) the sale of the Company's interest in
the entity; or
(xvi) agree to do any of the foregoing.
(b) The Required Approval of the Advisory Committee (which
approval shall include the approval of the Ace Members as defined
below) shall be obtained before the Manager and the Company
engage in: (i) implementation any operating and capital budgets
for any fiscal year of the Company; (ii) the development of any
Stores or permanently closing any Stores of the Company; (iii)
the approval of any expenditure in excess of $50,000.00 other
than the purchase of inventory in the ordinary course of
business; (iv) enter into any sale, exchange or contribution of
all or substantially all of the assets of the Company; (v)
recapitalizing the Company's organizational structure, or causing
the Company to consolidate or merge with any other entity,
acquire any business, acquire stock of any corporation, or enter
into any partnership or joint venture; (vi) file for Bankruptcy;
(v) the amendment of this Section 8.2(b); (vi) entering into any
agreement contemplated in Section 8.2(a)(xv); (vii) enter into
leases, licenses, sublicenses, franchises or other agreements
with respect to all or any portion of the Company's property, the
term of which is greater than one (1) year, or under which the
aggregate payments to be made exceed $350,000; or (viii)
compromise, submit to arbitration, xxx on or defend claims in
favor of or against the Company where the amount in controversy
exceeds $50,000.
(c) The Manager shall give the Advisory Committee written
notice of any Major Decision which it requests to be made and
shall, at the expense of the Company, furnish to the Advisory
Committee such documents and information as may be reasonably
necessary in order to enable the Advisory Committee to make the
Major Decisions set forth above.
(d) Notwithstanding 8.2(b)(ii), prior to the Manager
causing the Company to close or sell any Stores of the Company,
the Manager shall first give notice to Ace of the Company's
desire to sell or close such Store. Such notice shall include
the price and other terms of the sale of such Store. Ace shall
have ten (10) business days to elect to purchase such Store at
the purchase price contained in the notice. Ace shall have
fifteen (15) business days after receipt of the Manager's intent
to sell or close such Store to deliver the purchase price to the
Company and execute all documents, as determined by the Manager,
evidencing the transfer of such Store.
Section 8.3 Advisory Committee.
(a) There shall be an Advisory Committee of the Company
(the "Advisory Committee") which shall consist of up to five
members selected in accordance with the provisions of Section
8.3(b). The Advisory Committee shall perform all of the actions
set forth in this Agreement, including, but not limited to, the
following:
(i) review and approve or disapprove any Major
Decisions proposed by the Manager, as more fully described above;
and
(ii) review the determination of Fair Market Value.
The Manager will meet with the Advisory Committee annually
to review the performance of the Company.
(b) The initial Advisory Committee shall consist of five
members, two members selected by __________, and two members
selected by Ace. The fifth member will be selected by the
Members and shall be individuals who are not employed by the
Members or any of their Affiliates. All members of the initial
Advisory Committee shall serve until (i) the death; (ii) or
adjudicated incompetency of such member or is removed pursuant to
this Agreement. The fifth member to the Advisory Committee shall
serve for a period of two (2) years, such first term to initiate
after selection by _________ and Ace. Thereafter, such fifth
member shall be elected by the Members. A member of the Advisory
Committee may designate an alternate to act for him or her at any
meeting or for any period of time. An alternate so designated
shall, when acting for an Advisory Committee member, be deemed a
member of the Advisory Committee for purposes of this Agreement.
(c) An Advisory Committee member may resign from the
Advisory Committee for any reason. Such resignation shall be
effective, at the discretion of the resigning member, upon
receipt by the Company of a letter of resignation or any time up
to thirty days following the receipt of such letter. If such
member of the Advisory Committee is an employee of the Company
whose employment is terminated for Cause, such member shall be
removed effective upon the termination of his employment.
Otherwise, Ace may remove any of the Advisory Committee members
selected by Ace pursuant to subsection (b) and ______ may remove
any of the Advisory Committee members selected by ______pursuant
to subsection (b). The fifth Advisory Committee member may be
removed upon the consent of both Ace and ______.
(d) If an Advisory Committee member has resigned or has
been removed in accordance with this Agreement, such successor
shall be elected by the Member(s) who originally selected such
Advisory Committee member pursuant to subsection (b).
(e) The Advisory Committee shall not act unless there are
members present and voting on such action which represent a
majority of the votes entitled to be cast. Each member of the
Advisory Committee shall be entitled to cast one vote with
respect to any matter on which the Advisory Committee acts or
approves or proposes to act or approve. Any member of the
Advisory Committee may abstain from acting upon any matter.
Meetings of the Advisory Committee may be held in person at a
location set by the Manager or telephonically. Any action of the
Advisory Committee may be taken by unanimous written consent.
Members of the Advisory Committee shall be entitled to
reimbursement from the Company for their reasonable travel and
other out-of-pocket expenses in connection with the performance
of their duties as members of the Advisory Committee, but shall
not be entitled to any fees, remuneration, or other
reimbursements from the Company or any of the Members.
Notwithstanding, the fifth member shall be compensated for each
meeting at a rate determined by the Manager and approved by the
initial Advisory Committee.
(f) (i) The Members hereby acknowledge that each Advisory
Committee member or any Member whose representative is
an Advisory Committee member, (A) is not an agent of
the Members and (B) may give or withhold its approval
in its sole discretion and may consider only such
interests or factors as such member desires and may
consider such member's own interests and not the
interests of the other Members when voting on matters
before the Advisory Committee and shall have no duty or
obligation to give any consideration to any interests
of or factors affecting the Company, the Manager, the
other Members when voting on matters before the
Advisory Committee. The provisions of this Agreement,
to the extent that they restrict the duties and
liabilities of any member of the Advisory Committee or
any Member whose representative is a member of the
Advisory Committee otherwise existing at law or in
equity, are agreed by the Members to replace such other
duties and liabilities of such Person.
(ii) No Advisory Committee member or any Member whose
representative is an Advisory Committee member shall
have any liability to the Company or to any Member for
any loss suffered by the Company or any Member which
arises out of any decision made in good faith by such
member. Each Advisory Committee member (including any
former member) and any Member whose representative is
an Advisory Committee member or former member shall be
indemnified by the Company for all costs (including
reasonable attorneys' fees), judgments, fines and
amounts paid in settlement, damages, losses or expenses
incurred by such Person in defending any claim brought
against such Person based upon an alleged breach of
duties of such Person or such Person's representative
as a member of the Advisory Committee or based upon any
other reason arising out of such Person's or such
Person's representative's activities as an Advisory
Committee member; provided that if it is determined in
any final judicial proceeding that such member did not
act in good faith with respect to the matter on which
such claim is based, the Company shall have no
indemnity obligation to such member or Member on
account of such claim and such member or Members shall
promptly reimburse the Company for any payment
previously made to such Person under this Section by
the Company.
(iii) To the fullest extent permitted by law,
expenses (including legal fees) incurred by an Advisory
Committee member or any Member whose representative is
an Advisory Committee member in defending any claim,
demand, action, suit or proceeding shall, from time to
time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or
proceeding upon receipt by the Company of an
undertaking by or on behalf of such Person to repay
such amount if it shall be determined that such Person
is not entitled to be indemnified as authorized in this
Section 8.3(e).
Section 8.4 Certain Obligations of Manager. (a) The
Manager shall:
(i) arrange for Company records and books of
account to be maintained in which shall be entered
fully and accurately all transactions and other matters
relative to the Company business;
(ii) make available to any Member, at such
Member's request, during normal business hours and at
the principal place of business of the Company, all
books and records of the Company required to be
maintained by this Section 8.4, and such other
financial information as shall be reasonably requested
by any Member; provided, that the Manager shall not be
required to disclose to any Member information
regarding the Company if such information is acquired
by the Company or the Manager under circumstances where
the disclosure thereof to a Member may be in violation
of any fiduciary duty of the Company or the Manager or
in violation of a confidentiality agreement to which
the Company or the Manager is subject;
(iii) use its best efforts to provide, or
cause to be provided, to all Members at least the
following reports, within the time period specified
below:
(A) within twenty (20) days after the end of
each fiscal accounting month end, based on a 4/4/5
accounting cycle, a statement of operations for
such fiscal accounting month and a balance sheet
as of the end of such calendar month;
(B) within twenty (20) days after the end of
each fiscal year, a statement of operations for
such calendar year, a balance sheet or any other
statement required under generally accepted
accounting principals, as of the end of such
calendar year, which shall be prepared in
accordance with generally accepted accounting
principles and audited by a firm of independent
certified public accountants;
(C) within twenty (20) days after the end of
each fiscal year, a declaration that the Company
is in full compliance with its affirmative or
negative covenants contained in any third party
financing documents and is in full compliance with
the covenants contained in Section 8.9;
(D) within twenty (20) days after the end of
each fiscal year, the information necessary for
Members to prepare so much of their federal and
all applicable state income tax returns as relates
to the Company; and
(E) as soon as practicable after the end of
each quarter (as determined for federal estimated
tax purposes), such information relating to the
Company as is reasonably necessary for each Member
(or its constituent Members or shareholders) to
determine its (or their) quarterly federal and
state estimated tax liability;
(iv) cause the Company to timely file all required
Company federal, state, tax and information returns;
and
(v) subject to (b), cause the Company to be duly
qualified in each jurisdiction in which it proposes to
commence business if such qualification is necessary to
avoid subjecting Members to additional liability.
(b) The Company shall hire the independent accountant
chosen by the Manager and approved by the Advisory Committee.
The Manager shall provide Ace, for its review, a copy of all tax
returns to be filed by the Company no later than seventy five
(75) days after the close of the Company's tax year. Ace shall
have the right to approve or disapprove any and all elections
made with respect to each return, such approval or disapproval
shall not be unreasonably withheld by Ace.
Section 8.5 Liability of Manager; Omissions. The doing
of any act or the failure to do any act by the Manager, the
effect of which may cause or result in loss or damage to the
Company, shall not subject the Manager to any liability to the
Members if the Manager acted in good faith and in a manner the
Manager reasonably believed to be in or not opposed to the best
interests of the Company.
Section 8.6 Indemnification.
(a) To the fullest extent permitted under the Act, the
Company shall indemnify any Person who was or is a party, or is
threatened to be made a party, to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that he is or was
a Manager or Member of the Company, or a director, management
committee or advisory member or officer (or Person serving in any
capacity equivalent to any of the foregoing) of the Company or of
the Manager, or is or was serving at the request of the Company
as a director, management or advisory committee member or officer
(or in any capacity equivalent to any of the foregoing) of
another corporation, company, joint venture, trust or other
enterprise (all of the foregoing being herein collectively
referred to as "Covered Capacities"), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or pleas
of nolo contendere or its equivalent, shall not of itself create
a presumption that the person did not act in good faith or did
not act in a manner which he reasonably believed to be in and not
opposed to the best interests of the Company, and with respect to
any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) To the fullest extent permitted under the Act, the
Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Company to
procure a judgment in its favor by reason of the fact that he is
or was serving in any of the Covered Capacities, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Company and except that
no indemnification shall be made in respect to any claim, issue
or matter as to which such action or suit alleges misconduct in
the performance of his duty to the Company unless, and then only
to the extent that, the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability, and in view of all the circumstances
of the case, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
(c) Anything in Sections 8.6(a) or (b) to the contrary
notwithstanding, to the extent that any person referred to
therein has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to therein or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
(d) Any indemnification under Sections 8.6(a) or (b)
(unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the
indemnitee has met the applicable standard of conduct set forth
in Sections 8.6(a) or (b). Such determination shall be made by
the Manager.
(e) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Company in advance
of the final disposition of such action, suit or proceeding, as
authorized by the Manager in the specific case upon receipt of
any undertaking by or on behalf of the indemnitee to repay such
amount unless it shall ultimately be determined that be is
entitled to be indemnified by the Company.
(f) The indemnification provided by this Section 8.6 shall
not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any statute,
agreement, or otherwise, and shall continue as to a person who
has ceased to serve in a Covered Capacity and shall inure to the
benefit of his successors in interest, including, but not limited
to, his trustees, heirs, executors, and administrators.
(g) The Company shall have the power to purchase and
maintain insurance on behalf of any person who is or was serving
in any of the Covered Capacities and incurred by him in any such
capacity or arising out of his status as such, whether or not the
Company would have the power to indemnity him against such
liability under the provisions of this Section.
(h) Each Person who is or was an employee or agent of the
Company or an employee or agent of a Manager, or who is or was
serving at the request of the Company as an employee or agent of
another corporation, company, joint venture, trust or other
enterprise may be indemnified (or covered by insurance), in the
manner and to the extent provided in this Section 8.5 for persons
acting in Covered Capacities, at the discretion of the Manager.
(i) The Company shall have the right to assume the defense
of any action, suit or proceeding in connection with which any
Person is entitled to indemnification under this Section 8.5 and
to select counsel for such purpose. No Person entitled to
indemnification hereunder shall consent to entry of any judgment
or enter into any settlement in connection with any such action,
suit or proceeding without the consent of the Company, and the
Company shall not, without the consent of each such Person that
is entitled to indemnification, consent to entry of any judgment
or enter into any settlement in connection with such action, suit
or proceeding which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Person of
a release from all liability in respect to such claim or
litigation.
(j) Indemnification under this Section 8.6 shall not be
available to any Person in the case of any action, suit or
proceeding brought against the Company by or on behalf of such
Person.
Section 8.7 Tax Matters Partner.
(a) Ace is hereby appointed the "Tax Matters Partner" of
the Company for all purposes pursuant to the Code and the
Treasury Regulations. As Tax Matters Partner, Ace will (i)
furnish to each Member or Assignee affected by an audit of the
Company income tax returns a copy of each notice or other
communication received from the Internal Revenue Service or
applicable state authority, (ii) keep each such Member and
Assignee informed of any administrative or judicial proceeding
for the adjustment at the Company level of any "Company items,"
and (iii) allow each such Member and Assignee an opportunity to
participate in all such administrative and judicial proceedings.
(b) The Manager shall have the authority conferred on a Tax
Matters Partner by the Code and the Treasury Regulations.
(c) The Company is not obligated to pay any fees or other
compensation to the Tax Matters Partner in its capacity as such.
However, the Company will reimburse the Tax Matters Partner for
any and all out-of-pocket costs and expenses (including
reasonable attorneys' and other professional fees), including an
allocated portion of actual costs of Ace's employees and
personnel to perform services to the Company, incurred by it in
its capacity as Tax Matters Partner. Each Member who elects to
participate in Company, administrative tax proceedings will be
responsible for its own expenses incurred in connection with such
participation. In addition, the cost of any adjustments to a
Member and the cost of any resulting audits or adjustments of a
Member's tax return will be borne solely by the affected Member.
(d) The Company will indemnify, defend and hold the Tax
Matters Partner harmless from and against any loss, liability,
damage, cost or expense (including reasonable attorneys' and
other professional fees) sustained or incurred as a result of any
act or decision concerning Company tax matters and within the
scope of such Member's responsibilities as Tax Matters Partner,
so long as such act or decision was not made fraudulently or in
bad faith and did not constitute willful or wanton misconduct or
gross negligence.
Section 8.8 Resignation. Any Manager of the Company may
resign at any time by giving written notice to the Members of the
Company. The resignation of any Manager shall take effect upon
receipt of notice thereof or at such later date specified in such
notice. Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
The resignation of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute
a withdrawal of a Member.
Section 8.9 Removal. Ace may remove the Manager, at any
time, provided that any of the following occur: (i)the Company's
Current Ratio is less than 1.5 to 1.0; (ii) the Company's Fixed
Charge Coverage Ratio is less than 2.0 to 1.0; (iii) the
Company's Total Debt to EBITDA ratio is more than 3.0 to 1.0;
(iv) the Company's net income before taxes, for any fiscal
quarter, is less than 80% of the projected net income before
taxes, as set forth in the approved operating budget; (v) the
Company defaults under the Membership Agreements or any material
lease or contract entered into by the Company which default
continues beyond any applicable cure period or (vi) the Manager
or Members engage in an activity of Cause; provided, however, for
the purpose of (i) through (iv) or such other financial covenants
as established or modified in the annual operating budgets and
approved by the Members, Ace's right to remove the Manager shall
be effective only if the conditions remain uncured for two (2)
successive quarters. Other than a removal for Cause, the removal
of a Manager who is also a Member shall not affect the Manager's
rights as a Member and shall not constitute a withdrawal of a
Member.
Section 8.10 Vacancies. Any vacancy occurring for any
reason in the office of Manager of the Company may be filled by
the unanimous vote of Members.
ARTICLE IX
Section 9.1 Dissolution of Company. The Company shall be
dissolved upon the happening of either of the following events:
(a) the vote of the Members holding not less than the
Majority Interest of the Members to dissolve the Company;
(b) the entry of a decree of judicial dissolution under 18-
802 of the Act.
A Member shall not take any voluntary action which directly
causes a Dissolution of the Company.
Section 9.2 Final Accounting. Upon dissolution and
termination of the Company, an accounting shall be made of the
accounts of each Member and of the Company's assets, liabilities
and operations, from the date of the last previous accounting to
the date of such termination at the Company's expense.
Section 9.3 Liquidation; Distribution. In the event of
the dissolution of the Company, the Manager (or in the event the
dissolution is caused by the Dissolution or Bankruptcy of the
Manager, a person selected by the Advisory Committee) shall act
in an orderly manner as liquidating trustee and, in an orderly
manner, shall wind up the affairs of the Company and, after
paying all debts and liabilities of the Company, including all
costs of dissolution, shall distribute the remaining assets in
the following order of priority:
(i) first, to the establishment of any reserves which
the liquidating trustee may deem reasonably
necessary for any contingent or unforeseen
liabilities or obligations of the Company arising
out of or in connection with the Company, which
reserves may, at the option of the liquidating
trustee, be paid over by the liquidating trustee
to an escrow agent, to be held by it for the
purpose of disbursing such reserves in payment of
any of the aforementioned contingencies, and, at
the expiration of such period as the liquidating
trustee shall deem advisable, for distributing the
balance thereunder remaining in the manner
hereinafter provided;
(ii) thereafter, to the holders Units in accordance
with their positive Capital Account balances,
after taking into account all Capital Account
adjustments for the taxable year during which the
liquidation occurs, in compliance with Treasury
Regulation Section 1.704-1(b)(2)(ii)(b)(2).
Section 9.4 Termination. A reasonable time shall be
allowed for the orderly liquidation of the assets of the Company
and the discharge of liabilities to creditors so as to enable the
Manager or liquidating trustee to minimize the normal losses
attendant upon a liquidation. Each of the Members shall be
furnished with a statement prepared by the Company's then
certified public accountant, which shall set forth the assets and
liabilities of the Company as at the date of complete
liquidation. Upon compliance with the distribution plan set
forth in Section 9.3 (including any payment over to any escrowee
if there are sufficient funds therefor), the Members shall cease
to be such, and the Manager or the Liquidating trustee shall
execute, acknowledge, and cause to be filed a certificate of
cancellation of the Company. Upon completion of the dissolution,
winding up, liquidation and distribution of the liquidation
proceeds the Company shall terminate.
ARTICLE X
Section 10.1 Notices. Except as otherwise provided
herein, all notices and other written communications required or
permitted to be given under this Agreement shall be in writing
and shall be sent by Federal Express or other reliable courier,
transmitted by facsimile, personally delivered or mailed by
certified or registered mail, return receipt requested. Any
notices to be given to the Members shall be given or delivered to
the addresses set forth on Schedule A hereto or such other
address of which a Member may notify the Manager and the other
Members in writing. Any notices to be given to the Company shall
be sent or delivered to the office of the Company as specified
herein or at such other address as the Manager may specify in a
notice to all of the Members. Notices sent for next day delivery
by Federal Express or other reliable courier shall be deemed
given the next business day after sending, notices transmitted by
facsimile or personally delivered shall be deemed given when so
transmitted or delivered, respectively, and notices sent by
certified or registered mail shall be deemed given on the third
business day after sending.
Section 10.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the Act.
Section 10.3 Amendments.
(a) Subject to the provisions of this Section 10.3, this
Agreement may be amended only in writing with the written consent
of Members owning at least seventy-five percent (75%) of the then
outstanding Units.
(b) Amendments to this Agreement which are of a clerical or
inconsequential nature or which may be required to comply with
the Act or the terms of this Agreement, and which do not
adversely affect the Members in any material respect or which are
required or contemplated by this Agreement, including, without
limitation, amendments necessary to reflect the admission,
substitution or withdrawal of a Member that is otherwise
permitted by this Agreement or the change in the name of the
registered agent, the address of the registered office or the
address of the office at which Company records are kept, may be
made by the Manager, after notice to the Members, and the Members
agree to execute an amendment reflecting such change.
(c) No amendment shall increase the liability of any
Member, decrease the Capital Account of any Member, decrease the
number of Units of any Member or affect the right of any Member
to receive Distributions and Profits, except in each case with
the written consent of the Member adversely affected thereby.
(d) No amendment shall alter the rights of Members as a
class so as to affect them adversely without the written consent
of Members owning at least seventy-five percent (75%) of the then
outstanding Units; provided, however, that any such amendment
shall also require the written consent of each Member that is
adversely affected thereby if the amendment would effect any
change described in Section 10.3(c), unless (A) the amendment is
required by changes in law (including without limitation changes
in any statute, ordinance or regulation or in judicial or
administrative law) or (B) the amendment is of a type permitted
by Section 10.3(b).
Section 10.4 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the Members, the
Assignees and their respective legal representatives, heirs,
successors and assigns.
Section 10.5 Counterparts. This Agreement may be executed
in multiple counterparts, each of which shall be an original, but
all of which shall constitute one instrument.
Section 10.6 Fiscal Year; Method of Accounting. The
fiscal year of the Company shall be the fiscal year based on a
4/4/5 accounting cycle. The Company shall use the same method of
accounting for tax and financial reporting purposes.
Section 10.7 Modifications to be in Writings. This
Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof and no
amendment, modification or alteration of the terms hereof shall
be binding unless the same be in writing and adopted in
accordance with the provisions of Section 10.3.
Section 10.8 Action for Partition or Distribution in Kind.
Each of the parties hereto irrevocably waives any right which it
may have to partition Company property or maintain an action for
distribution of Company property in kind.
Section 10.9 Captions. The captions herein are inserted
for convenience of reference only and shall not affect the
construction of this Agreement.
Section 10.10 Pronouns and Plurals. Whenever the context
may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the
plural and vice versa.
Section 10.11 Validity and Severability. If any provision
herein shall be held invalid or unenforceable, such decision
shall not affect the validity or enforceability of any other
provisions hereof, all of which other provisions shall, in such
case, remain in full force and effect.
Section 10.12 Statutory References. Each reference in this
Agreement to a particular statute or regulation, or a provision
thereof, shall, at any particular time, be deemed to be a
reference to such statute or regulation, or provision thereof, or
to any similar or superseding statute or regulation, or provision
thereof, as at such time in effect.
Section 10.13 Additional Documents. Each Member shall
execute such additional documents and take such actions as are
reasonably requested by the Company in order to complete or
confirm the transactions contemplated by this Agreement.
Section 10.14 Time. Time is of the essence with respect to
this Agreement.
Section 10.15 Third Party Beneficiaries. The provisions of
this Agreement are intended solely for the benefit of the Members
and shall create no rights or obligations enforceable by any
third party, including third party creditors of the Company,
except as explicitly provided herein or by applicable law.
Section 10.16 Specific Performance. Each Member
acknowledges that the other Members may be irreparably damaged if
any of the provisions of this Agreement are not performed in
accordance with their specific terms, and that monetary damages
may not provide an adequate remedy. Accordingly, each Member
agrees that in addition to any other remedy at law or in equity,
each Member may be entitled to seek injunctive relief to prevent
breaches of this Agreement or to enforce the terms and provisions
of this Agreement.
Section 10.17 Entire Agreement. This Agreement and other
document to be furnished pursuant to the provisions hereof embody
the entire agreement and understanding of the Members as to the
subject matter hereof. There are no restrictions, promises,
representations, warranties, covenants or undertakings other than
those expressly set forth or referred to herein. This Agreement
and such documents supersede all prior agreements and
understandings among the Members with respect to the subject
matter hereof.
IN WITNESS WHEREOF, the undersigned have executed this
Limited Liability Company Agreement of ______________, LLC as of
the date first above written.
MEMBERS:
ACE HARDWARE CORPORATION
By:___________________________
Its: ______________________
________________________________
By:___________________________
Its: ______________________
SIGNATURE PAGE TO THE LIMITED LIABILITY
COMPANY AGREEMENT OF ________________________, LLC
SCHEDULE A
Member Capital Account Number of
Balance Units
ACE HARDWARE CORPORATION $
0000 Xxxxxxxxxx Xxxxx, Xxx
Xxxxx, XX 00000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Treasurer
with a copy to the General
Counsel
$
TOTAL $
EXHIBIT A
REDEMPTION AGREEMENT
This Redemption Agreement (the "Agreement") is made and
entered into as of the ___ day of _____________, ______ by and
between _______________________________, a
_______________________ corporation ("_________________") and ACE
HARDWARE CORPORATION, a Delaware corporation (the "Holder").
Recitals
A. ______________ and the Holder are members of
______________ Ace Hardware, LLC, a Delaware limited liability
company (the "Company") pursuant to a certain Limited Liability
Company Agreement of ______________ Ace Hardware, LLC dated as of
________________, 1998 (the "Company Agreement"), pursuant to
which ______________ is the owner of __________ units of the
Company and the Holder is the owner of _________ units of the
Company (the "Redemption Units").
B. Pursuant to the Company Agreement, ______________
desires to redeem all of the Redemption Units from the Holder and
the Holder desires to sell the Redemption Units to
______________, on the terms and conditions hereinafter set
forth.
Covenants
In consideration of the mutual representations, warranties
and covenants and subject to the conditions herein contained, the
parties hereto agree as follows:
1.0 Definitions
All capitalized terms used but not elsewhere defined in
this Agreement shall have the respective meanings ascribed to
such terms in the Company Agreement.
2.0 Redemption
2.1 The Holder hereby sells, transfers, assigns and
conveys to ______________ and ______________ hereby purchases and
accepts from the Holder, on the terms and subject to the
conditions set forth in this Agreement, the Redemption Units,
free and clear of all liens, claims, charges, security interests,
restrictions on transfer (other than restrictions under federal
and state securities laws), options, warrants, voting trusts and
any other encumbrances of any kind whatsoever ("Encumbrances").
2.2 As consideration for the Redemption Units being
acquired by ______________, ______________ agrees, on the terms
and subject to the conditions set forth in this Agreement, to pay
to the Holder the Redemption Price.
2.3 The Redemption Units transferred to ______________
are hereby canceled and all of the Holder's rights thereto are
hereby extinguished.
3.0 Representations and Warranties of the Holders
In order to induce ______________ to enter into this
Agreement and to redeem the Redemption Units, the Holder
represents and warrants to ______________ as follows:
3.1 The Holder has the power to execute, deliver, and
perform its obligations under the terms of this Agreement, and
has taken all necessary action to authorize the execution and
delivery and performance of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Holder and is a valid and legally binding
obligation of the Holder, enforceable in accordance with its
terms.
3.2 Neither the execution, delivery and performance of
this Agreement by the Holder nor the consummation by it of the
transactions contemplated hereby, will (a) to the best of its
knowledge, violate any applicable law or regulation, or any
order, writ, injunction, or decree of the United States or any
court, arbitrator, or governmental or regulatory official, body,
subdivision, instrumentality, agency or authority, whether
federal, state or local ("Governmental Body"), or (b) conflict or
be inconsistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default
under, any agreement to which the Holder is a party or by which
it is bound, or result in the creation of any Encumbrance upon
any of the property or assets of the Holder or result in the
acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under, the
terms of any license, permit, mortgage, deed of trust, lease,
agreement or other instrument to which the Holder is a party or
by which it is bound. No permit, consent, approval, or
authorization of, or declaration to or filing with, any
Governmental Body or any other person is necessary for the
execution and delivery by the Holder of this Agreement or for the
consummation by the Holder of the transactions contemplated
hereby.
3.3 There are no actions, suits, investigations or
proceedings pending or threatened (in the case of "threatened,"
to the best of its knowledge) against or affecting the Holder or
it's assets by or before any Governmental Body or any other
tribunal that could have a material adverse effect on the
consummation of the transactions contemplated hereby.
3.4 The Holder does not have any obligation to pay any
fees or commissions to any investment banker, broker, finder or
agent with respect to the transactions contemplated by this
Agreement.
4.0 Representations and Warranties of ______________
In order to induce the Holder to enter into this
Agreement and to sell the Redemption Units, each of
______________ represent and warrant as follows:
4.1 Each of ______________ have the power to execute,
deliver and perform their obligations under the terms of this
Agreement, and have taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by each Partner and is a valid and legally
binding obligation of each Partner, enforceable in accordance
with its terms.
4.2 Neither the execution and delivery of this
Agreement by ______________ nor the consummation by them of the
transactions contemplated hereby, will violate any applicable law
or regulation, or any order, writ, injunction, or decree of any
Governmental Body, or will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions
or provisions of, or constitute a default under, any agreement to
which either Partner is a party or by which he is bound, or
result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice
under, the terms of any license, permit, mortgage, deed of trust,
lease, agreement or other instrument to which either Partner is a
party or by which he is bound. No permit, consent, approval or
authorization of, or declaration to or filing with, any
Governmental Body or any other person is required in connection
with the execution and delivery of this Agreement by
______________ and the consummation by them of the transactions
contemplated hereby.
4.3 There are no actions, suits, investigations or
proceedings pending or threatened against or affecting
______________ or its assets by or before any Governmental Body
or any other tribunal that could have a material adverse effect
on the consummation of the transactions contemplated hereby.
4.4 ______________ has no obligation to pay any fees
or commissions to any investment banker, broker, finder or agent
with respect to the transactions contemplated by this Agreement.
5.0 Restrictive Covenant
5.1 As an inducement for the Holder to enter into this Agreement
and as additional consideration for the consideration to be paid
to the Holder under this Agreement, ______________, a member of
the Company, agrees that for a period of seven (7) years
following the date of this Agreement, it (i) will not terminate
any Membership Agreement between the Company (or its successors-
in-interest) and the Holder, unless a material breach of such
agreement by Ace gives rise to a right to terminate such
agreement, or, if required by Ace, cause the Company to execute a
new Membership Agreement with the Holder and (ii) will continue
to operate the Stores as Ace Hardwarer affiliated stores.
5.2 It is the desire and intent of the parties that
the provisions of Section 5.1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly,
if any particular portion of Section 5.1 shall be adjudicated to
be invalid or unenforceable, Section 5.1 shall be deemed amended
to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, and such deletion shall apply only with respect to
the operation of Section 5.1 in the particular jurisdiction in
which such adjudication was made.
5.3 If ______________ breach the covenants set forth
in Section 5.1 herein, in addition to its right to damages and
any other rights it may have, the Holder will be entitled to
obtain injunctive or other equitable relief to restrain any
breach or threatened breach or otherwise to specifically enforce
the provisions of Section 5.1 of this Agreement, it being agreed
that money damages alone would be inadequate to compensate the
Holder and would be an inadequate remedy for such breach. The
rights and remedies of the parties to this Agreement are
cumulative and not alternative.
6.0 Indemnification
6.1 The Holder agrees to indemnify, defend and hold
harmless ______________ and their manager, employees, members,
partners and agents, (collectively, the "______________
Indemnified Persons"), from and against all losses, claims,
damages, liabilities, expenses (including legal fees and
expenses), judgments, fines, settlements and other amounts
incurred or suffered by ______________ or ______________
Indemnified Persons and arising out of the inaccuracy of any of
the representations and warranties made by the Holder in this
Agreement or any breach by the Holder of this Agreement.
______________ agree that neither they nor ______________
Indemnified Persons shall seek against the Holder or the Holder
Indemnified Persons, nor shall the Holder or the Holder
Indemnified Persons be liable for, any consequential, punitive,
special or exemplary damages for any breach of this Agreement or
the agreements and transactions contemplated hereby.
6.2 ________________ agrees to indemnify, defend and
hold harmless the Holder and its managers, employees, members,
agents, and partners, (collectively, the "Holder Indemnified
Persons"), from and against all losses, claims, damages,
liabilities, expenses (including legal fees and expenses),
judgments, fines, settlements and other amounts incurred or
suffered by the Holder or the Holder Indemnified Persons and
arising out of the inaccuracy of any of the representations and
warranties made by ______________ in this Agreement or any breach
by ______________ of this Agreement. The Holder agrees that it
shall seek not against ______________ or ______________
Indemnified Persons, nor shall ______________ or ______________
Indemnified Persons be liable for, any consequential, punitive,
special or exemplary damages for any breach of this Agreement or
the agreements and transactions contemplated hereby.
6.3 Any party entitled to indemnification hereunder
will give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification and, unless
in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel
for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of such
counsel a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to
such claim.
7.0 Miscellaneous
7.1 The representations, warranties, covenants and
indemnification agreements contained herein are continuing in
nature and shall survive the execution and delivery of this
Agreement, regardless of any investigation made by or on behalf
of any party to this Agreement.
7.2 The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by
them in writing.
7.3 This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns.
7.4 Any reference herein to this Agreement shall be
deemed to include the schedules and exhibits attached hereto.
7.5 The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of
this Agreement.
7.6 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
7.7 All notices provided for in this Agreement shall
be in writing, duly signed by the party giving such notice, and
shall be sent by Federal Express or other reliable overnight
courier, sent by fax or mailed by registered or certified mail,
return receipt requested, as follows:
If to ______________, addressed to:
_______________________________
_______________________________
_______________________________
Attention: ______________________
If to the Holder, addressed to:
Ace Hardware Corporation
0000 Xxxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxx 00000
Attn: General Counsel
With a copy to its Treasurer
Each notice shall be deemed to have been given upon the earlier
of the receipt of such notice by the intended recipient thereof,
two (2) days after it is sent by Federal Express or other
reliable overnight courier or sent by confirmed fax, or five (5)
days after it is mailed by registered or certified mail, return
receipt requested.
7.8 This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed therein.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the day and year first above written.
______________:
________________________________________
By:_____________________________________
Its:____________________________________
HOLDER:
ACE HARDWARE CORPORATION
By:_____________________________________
Its:____________________________________
