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EXHIBIT 10.5
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT is dated as of the 30th day of November,
1998 (the "Effective Date"), but has been executed by the parties on the dates
written below the parties' signatures at the end of this Agreement, by and
between PARADIGM DIRECT, INC., a Delaware corporation, with offices located at 0
Xxxxxxxxx Xxxxx, Xxxx Xxx, Xxx Xxxxxx 00000 ("Paradigm"), XXXXXXX
COMMUNICATIONS, INC. formerly known as XXXXXXX ENTERTAINMENT, INC., a Delaware
corporation, with offices at One Blue Hill Plaza, Pearl River, New York
("Xxxxxxx") and PARADIGM CELLULAR, L.L.C., a Delaware limited liability company
(the "Company").
W I T N E S S E T H :
WHEREAS, Paradigm owns a forty-nine percent (49%) membership interest
and Xxxxxxx owns a fifty-one percent (51%) membership interest in the Company.
WHEREAS, Paradigm desires to acquire all of Xxxxxxx'x 51% membership
interest in the Company (to include, all of Xxxxxxx'x interest in the assets and
liabilities of the Company) (the "Interest"), and Xxxxxxx is willing to sell the
Interest pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF INTEREST
1.1 TRANSFER OF INTEREST. On the terms and subject to the conditions of
this Agreement, Xxxxxxx xxxxx, conveys, transfers and assigns and delivers to
Paradigm, and Paradigm hereby purchases and acquires from Xxxxxxx, all of
Xxxxxxx'x right, title and interest of Xxxxxxx, legal or equitable, in and to
the Interest, free and clear of all security interests, liens, pledges, charges,
escrow, options, rights, rights of first refusal, encumbrances, agreements,
arrangements, commitments or other claims of any kind or character
(collectively, "Claims").
ARTICLE II
PAYMENTS
2.1 AMOUNT. The price to be paid for the Interest (the "Purchase
Price") shall be two hundred thousand ($200,000) Dollars paid by wire transfer
concurrently with the Closing.
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2.2 In addition to the Purchase Price, Paradigm shall also pay to
Xxxxxxx the following by wire transfer concurrently with the Closing:
(a) $281,000 representing one-half the Company's total
undistributed net equity from inception to the Effective Date.
(b) $13,563.82 representing amounts due to Xxxxxxx pursuant to the
company's balance sheet dated as of the Effective Date and which is annexed
hereto as Exhibit 5.4.
ARTICLE III
CLOSING
3.1 CLOSING DATE. The Closing under this Agreement shall take place
concurrently with the execution and delivery of this Agreement.
3.2 XXXXXXX CLOSING DOCUMENTS. At the Closing, Xxxxxxx has executed and
delivered or caused to be executed and delivered to Paradigm the following:
(a) An assignment of the Interest, in the form attached hereto as
Exhibit 3.2(a);
(b) The resignation of Xxxxxxx Xxxxxxxx and Xxx Xxxxxxxxx as
managers of the Company and each and every officer or agent of Xxxxxxx who is an
authorized signatory of the Company in the form attached hereto as Exhibit
3.2(b);
(c) The mutual release (the "Release") between Paradigm and Xxxxxxx
in the form attached hereto as Exhibit 3.2(c);
(d) A letter of instruction from Xxxxxxx regarding the AT&T
Contract (as defined below) in the form attached hereto as Exhibit 3.3(d).
(e) Such other instruments of transfer, agreements, certificates
and other documents as Paradigm shall reasonably request.
3.3 PARADIGM CLOSING DOCUMENTS. At the Closing, Paradigm has executed
and delivered or caused to be delivered to Xxxxxxx the following:
(a) The Purchase Price;
(b) The Release; and
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(c) Such other instruments of transfer, accounts, certificates and
other documents as Paradigm shall reasonably request.
3.4 PROCEEDINGS. All proceedings taken and all documents executed and
delivered by the parties at the Closing shall be deemed to have been taken and
executed simultaneously, and no proceeding shall be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXXX
Xxxxxxx represents and warrants to Paradigm as follows:
4.1 ORGANIZATION AND GOOD STANDING. Xxxxxxx is a corporation duly
organized, validity existing and in good standing when the laws of the State of
Delaware, and has all requisite corporate power to own, operate and lease its
properties and carry on its business as the same is now being conducted.
4.2 CORPORATE AUTHORITY. Xxxxxxx has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and each agreement, document or instrument contemplated hereby. The execution,
delivery and performance by Xxxxxxx of this Agreement and each such agreement,
document or instrument, and the consummation of the transactions contemplated
hereby and thereby, have been authorized by all necessary action and (i) do not
require the consent, waiver, approval, license or authorization of any person,
entity, or public authority, (ii) do not violate, with or without the giving of
notice and/or the passage of time, any provision of law, and (iii) will not
conflict with or result in a breach or termination of any provision of, or
constitute a default or give rise to a right of termination or acceleration
under, any corporate charter, by-law, mortgage, deed of trust, indenture or
other agreement or instrument, or any order, judgment, decree, statute,
regulation or any other restriction of any kind or character, to which Xxxxxxx
is a party or by which any of its assets or properties may be bound, or result
in the creation of any lien, charge or encumbrance upon any of the assets of the
Company.
4.3 EFFECT OF AGREEMENT. This Agreement has been duly executed and
delivered by Xxxxxxx and constitutes, and each other agreement, document,
certificate or instrument contemplated by this Agreement when executed and
delivered shall constitute, a legal, valid and binding obligation of Xxxxxxx
enforceable against it in accordance with its terms.
4.4 BALANCE SHEET. To Xxxxxxx'x actual knowledge and subject to the
truth of representations and warranties made by Paradigm in sections 5.4 through
5.8 hereof, the balance sheet of the Company dated as of November 30, 1998
attached as Exhibit 5.4 fairly
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and accurately presents the assets and liabilities of the Company as of the date
thereof in all material respects, all in accordance with generally accepted
accounting principles.
4.5 UNDISCLOSED LIABILITIES. As at the Effective Date, and as at the
time of Closing, Xxxxxxx did not cause the Company to incur, and has no actual
knowledge that the Company has any liabilities or obligations of any kind,
whether accrued, absolute, contingent or otherwise, other than those reflected
in the balance sheet of the Company dated as of January 18, 1999, a copy of
which is attached hereto as Exhibit 5.5. Except for liabilities and obligations
incurred since the Effective Date in the ordinary course of business consistent
with past practices, to the actual knowledge of Xxxxxxx, there is no basis for
the assertion of any claim, liability, offset or defense against the Company or
under the Existing AT&T Contract (defined herein) in any amount not fully
disclosed in this Agreement or the Exhibits hereto.
4.6 BANK ACCOUNTS. To the actual knowledge of Xxxxxxx, the list of bank
accounts annexed as Exhibit 4.6 is true and correct, and Xxxxxxx has no actual
knowledge of or information pertaining to, and is not authorized to draw on or
have access to, any other account, deposit or safe deposit box in which the
Company has an interest, direct or indirect.
4.7 DISCLOSURE. Neither this Agreement, nor any exhibit annexed to this
Agreement contains any untrue statement of any material fact, or omits to state
a material fact (i) necessary to make the statements herein or therein not
misleading, or (ii) necessary to provide the Company and Paradigm with
materially accurate and substantially complete information with respect to the
matters covered thereby.
4.8 LITIGATION. To Xxxxxxx'x actual knowledge, without having made any
independent investigation (i) there are no claims, actions, suits, proceedings
(public or private) or governmental investigations threatened or pending against
or commenced by the Company at law or in equity, before or by any Federal,
state, municipal or other governmental or non-governmental department,
commission, board, bureau, agency, court or other instrumentality, or by any
private person or entity, (ii) there is no ground on which any threatened
action, suit or proceeding would have a material adverse effect on the financial
condition or results of operations of the Company and (iii) there are no
existing orders, judgments or decrees of any court or governmental agency
affecting any of the properties or assets of the Company which materially
adversely affect the Company's financial condition or its operations as
presently conducted.
4.9 CONTRACTS. Attached as Exhibit 4.9 is a list of all material
contracts to which the Company is a party or by which its assets are bound (the
"Contracts"), which list includes the Existing AT&T Contract (defined below), to
which the Company is not a party. To Xxxxxxx'x actual knowledge: (i) all of the
Contracts and the Existing AT&T Contract are in full force and effect in
accordance with their respective terms, (ii) there is no event of default or
state of facts which with the passage of time and/or giving of notice would
become an
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event of default under such Contracts, and (iii) there are no other material
contracts, agreements, obligations or undertakings of which the Company is a
party.
4.10 POWERS OF ATTORNEY. Xxxxxxx has not given any power of attorney
that is currently in effect, whether limited or general, to any person, firm,
company or otherwise, relating to the Company.
4.11 OWNERSHIP. Xxxxxxx owns the Interest unencumbered by any Claim.
4.12 LIMITATION OF LIABILITY. The liability of Xxxxxxx under this
Agreement arising out of any claims whatsoever, including but not limited to
claims for indemnification under Section 6.1, shall not exceed the Purchase
Price and the amounts paid to Xxxxxxx under Section 2.2 of this Agreement. In no
event shall Xxxxxxx be liable for consequential, special, or punitive damages
with respect to any claim arising under this Agreement, including under Section
6.2.
The foregoing representations and warranties shall survive the Closing
for a period two (2) years.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARADIGM
Paradigm hereby represents and warrants to Xxxxxxx as follows:
5.1 ORGANIZATION AND GOOD STANDING. Paradigm is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power to own, operate and lease its
properties and carry on its business as the same is now being conducted.
5.2 CORPORATE AUTHORITY. Paradigm has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
and each agreement, document or instrument required to be delivered hereby. The
execution, delivery and performance by the Paradigm of this Agreement and each
such agreement, document or instrument, and the consummation of the transactions
contemplated hereby and thereby, have been authorized by all necessary action
and, (i) do not require the consent, waiver, approval, license or authorization
of any person, entity, or public authority, (ii) do not violate, with or without
the giving of notice and/or the passage of time, any provision of law, and (iii)
will not conflict with or result in a breach or termination of any provision of,
or constitute a default or give rise to a right of termination or acceleration
under, any corporate charter, by-law, mortgage, deed of trust, indenture or
other agreement or instrument or any order, judgment, decree, statute,
regulation or any other restriction of any kind or character, to which Paradigm
or The Company is a party or by which any of their assets or properties may be
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bound, or result in the creation of any lien, charge or encumbrance upon any of
the properties or assets of Paradigm.
5.3 EFFECT OF AGREEMENT. This Agreement has been duly executed and
delivered by Paradigm and constitutes, and each other document contemplated by
this Agreement when executed and delivered in accordance with the provisions
hereof shall constitute, a legal, valid and binding obligation of Paradigm
enforceable against it in accordance with its terms.
5.4 BALANCE SHEET. To Paradigm's actual knowledge and subject to the
truth of representations and warranties made by Xxxxxxx in sections 4.4 through
4.8 hereof, the balance sheet of the Company dated as of November 30, 1998
attached as Exhibit 5.4 fairly and accurately presents the assets and
liabilities of the Company as of the date thereof in all material respects, all
in accordance with generally accepted accounting principles.
5.5 UNDISCLOSED LIABILITIES. As at the Effective Date, and at the time
of Closing, Paradigm did not cause the Company to incur, and has no actual
knowledge that the Company has any liabilities or obligations of any kind,
whether accrued, absolute, contingent or otherwise, other than those recorded on
the balance sheet of the Company dated as of January 18, 1999, a copy of which
is attached hereto as Exhibit 5.5. Except for liabilities and obligations
incurred since the Effective Date in the ordinary course of business consistent
with past practices, to the actual knowledge of Paradigm, there is no basis for
the assertion of any claim, liability, offset or defense against the Company or
under the Existing AT&T Contract (defined herein) in any amount not fully
disclosed in this Agreement or the Exhibits hereto.
5.6 BANK ACCOUNTS. To the actual knowledge of Paradigm, the list of
bank accounts annexed as Exhibit 4.6 is true and correct, and Paradigm has no
actual knowledge of or information pertaining to, and is not authorized to draw
on or have access to, any other account, deposit or safe deposit box in which
the Company has an interest, direct or indirect.
5.7 DISCLOSURE. Neither this Agreement nor any exhibit annexed to this
Agreement contains any untrue statement of any material fact, or omits to state
a material fact (i) necessary to make the statements herein or therein not
misleading, or (ii) necessary to provide Xxxxxxx with materially accurate and
substantially complete information with respect to the matters covered thereby.
5.8 LITIGATION. To Paradigm's actual knowledge, without having made any
independent investigation (i) there are no claims, actions, suits, proceedings
(public or private) or governmental investigations threatened or pending against
or commenced by the Company at law or in equity, before or by any Federal,
state, municipal or other governmental or non-governmental department,
commission, board, bureau, agency, court or other instrumentality, or by any
private person or entity, (ii) there is no ground on which any threatened
action, suit or proceeding would have a material adverse effect on the financial
condition or results of
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operations of the Company and (iii) there are no existing orders, judgments or
decrees of any court or governmental agency affecting any of the properties or
assets of the Company which materially adversely affect the Company's financial
condition or its operations as presently conducted.
5.9 CONTRACTS. Attached as Exhibit 4.9 is a list of all material
contracts to which the Company is a party or by which its assets are bound (the
"Contracts"), which list includes the Existing AT&T Contract (defined below), to
which the Company is not a party. To Paradigm's actual knowledge: (i) all of the
Contracts and the Existing AT&T Contract are in full force and effect in
accordance with their respective terms, (ii) there is no event of default or
state of facts which with the passage of time and/or giving of notice would
become an event of default under such Contracts, and (iii) there are no other
material contracts, agreements, obligations or undertakings of which the Company
is a party.
5.10 LIMITATION OF LIABILITY. In no event shall Paradigm be liable for
consequential, special, or punitive damages with respect to any claim arising
under this Agreement, including under Section 6.2.
The foregoing representations and warranties shall survive the Closing
for a period of two (2) years.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY XXXXXXX. Xxxxxxx shall indemnify and hold
Paradigm and the Company, and their respective officers, directors,
shareholders, members, managers, agents, employees, attorneys, and their
respective successors and assigns harmless from, and will reimburse them for,
any and all claims, liabilities, losses, damages and expenses (including without
limitation reasonable attorneys fees) incurred by any one or more of them after
the Effective Date to the extent that they arise from or relate to the
untruthfulness in any material respect of any representation or warranty made by
Xxxxxxx in this Agreement.
6.2 INDEMNIFICATION BY PARADIGM. Paradigm shall indemnify and hold
Xxxxxxx, and its officers, directors, shareholders, agents, employees,
attorneys, and their respective successors and assigns harmless from, and will
reimburse Xxxxxxx for, any and all claims, liabilities, losses, damages and
expenses (including without limitation reasonable attorneys fees) incurred by
any one or more of them after the Effective Date to the extent they arise from
or relate to the untruthfulness in any material respect of any representation or
warranty made by Paradigm in this Agreement.
6.3 INDEMNIFICATION PROCEDURES. Promptly after receipt by any party
entitled to indemnification under this Article VI (hereafter referred to as an
"Indemnified
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Party") of notice of any demand, claim or circumstance which, with the lapse of
time, would or might give rise to a Claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in any claim for which the Indemnified Party is
entitled to indemnification under Article VI (hereafter referred to as a
"Claim"), the Indemnified Party shall promptly give notice thereof (the "Claims
Notice") to the party obligated to provide indemnification pursuant to Section
6.1 or 6.2 of this Article VI (the "Indemnifying Party"). The Claims Notice
shall describe the Asserted Liability in reasonable detail, shall contain
supporting documentation (if applicable), and shall indicate the amount
(estimated, if necessary and to the extent feasible) of the Claims that have
been or may be suffered by the Indemnified Party. No indemnification obligation
shall be imposed upon an Indemnifying Party unless a proper Claims Notice is
given to that Indemnifying Party on or before the last day of the survival
period for the representation, warranty, or covenant, the alleged breach of
which forms the basis for the Claim. Failure of an Indemnified Party to give
prompt notice of an Claim shall not release, waive or otherwise affect an
Indemnifying Party's obligations with respect thereto except to the extent that
the Indemnifying Party suffers actual loss or prejudice as a result of such
failure.
(a) The Indemnifying Party may elect to compromise or defend, at
its own expense and by its own counsel, any Asserted Liability. If the
Indemnifying Party elects to compromise or defend such Asserted Liability, it
shall within thirty (30) days (or sooner, if the nature of the Asserted
Liability so requires) notify the Indemnifying Party of its intent to do so, and
the Indemnified Party shall cooperate with the Indemnifying Party and shall
provide the Indemnifying Party access to its records and personnel relating to
any such Asserted Liability, in each case, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability or
fails to notify the Indemnified Party of its election as herein provided, the
Indemnified Party may pay, compromise or defend such Asserted Liability at the
expense of the Indemnifying Party. Subject to the limitations contained in
Section 6.3(b) on the obligations of the Indemnifying Party in respect of
proposed settlements, the Indemnified Party shall have the right to employ its
own counsel with respect to any Asserted Liability, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (i) the
employment of such counsel at the expense of the Indemnifying Party shall have
been authorized in writing by the Indemnifying Party in connection with the
defense of such action, or (ii) such Indemnifying Party shall not have, as
provided above, promptly employed counsel reasonably satisfactory to the
Indemnified Party to take charge of the defense of such action. The Indemnified
Party, at its own cost, may employ separate counsel to assert, based on an
opinion of counsel, one or more legal defenses available to it which are
different from or additional to those available to such Indemnifying Party; the
Indemnifying Party shall not have the right to direct the defense of such action
on behalf of the Indemnified Party in respect of such different or additional
defenses. If the Indemnifying Party chooses to defend any claim, the Indemnified
Party shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense.
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(b) Notwithstanding the provisions of Section 6.3(a), neither
Indemnifying Party nor the Indemnified Party may settle or compromise any claim
for which indemnification has been sought and is available hereunder, over the
reasonable objection of the other; provided, however, that consent to settlement
or compromise shall not be unreasonably withheld or delayed. If, however, the
Indemnified Party refuses to consent to a bona fide offer of settlement which
the Indemnifying Party wishes to accept, the Indemnified Party may continue to
pursue such matter, free of any participation by the Indemnifying Party, at the
sole expense of the Indemnified Party. In such event, the obligation of the
Indemnifying Party to the Indemnified Party shall be equal to the lesser of (i)
the amount of the offer of settlement which the Indemnified Party refused to
accept plus the costs and expenses of the Indemnified Party prior to the date
the Indemnifying Party notified the Indemnified Party of the offer of
settlement, and (ii) the actual out-of-pocket amount the Indemnified Party is
obligated to pay as a result of the Indemnified Party's continuing to pursue
such matter.
6.4 INDEMNIFICATION BY THE COMPANY.
(a) The obligation of the Company to indemnify its members as set
forth in Section 5.10 of the Company's Operating Agreement dated as of June 30,
1998 shall survive the execution of this Agreement the and Closing for two
years, subject, however, to any defenses, offsets and counterclaims arising from
Xxxxxxx'x obligations under this Agreement.
(b) The Company shall indemnify, defend and hold Xxxxxxx harmless
with respect to any claims arising out of any action or failure to act by
Paradigm or the Company relating to the business of the Company (including but
not limited to, under the Existing AT&T Agreement) after the date of the Closing
except for claims arising out of (i) a breach of a warranty, representation or
covenant of Xxxxxxx contained in this Agreement or any action by Xxxxxxx which
would constitute a breach under the Existing AT&T Agreement or (ii) any
negligent or wilful misconduct of Xxxxxxx or its employees, agents, affiliates
or contractors.
ARTICLE VII
POST-CLOSING OBLIGATIONS
7.1 THE AT&T CONTRACT. One of the Contracts is the Dealer Agreement
between AT&T Wireless Services of Florida, Inc., d/b/a AT&T Wireless Services
("AT&T") and Xxxxxxx Entertainment, Inc. dated as of July 1, 1997 (the "Existing
AT&T Contract"). Xxxxxxx acknowledges that it has been advised by Paradigm that
AT&T and the Company intend to enter into a new contract on or around January
, 1999 (the "New AT&T Contract"). Xxxxxxx agrees that if it receives any
payment of any type whatsoever relating to the Existing AT&T Contract it will
within one (1) business day endorse the check payable to
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the order of Paradigm and forward the instrument to Paradigm. Xxxxxxx agrees
that it will take no action to interfere with the negotiations and execution of
the New AT&T Contract. Subject to the performance by the Company of Xxxxxxx'x
obligations to AT&T under the Existing AT&T Contract , Xxxxxxx will take all
commercially reasonable measures to assist Paradigm and the Company in
maintaining the Existing AT&T Contract in full force and effect until the
effective date of the New AT&T Contract and once the New AT&T Contract is ready
to become effective, Xxxxxxx will take all actions necessary to terminate the
Existing AT&T Contract immediately.
7.2 FURTHER ASSURANCES. If, at any time after the date hereof, either
party shall consider or be advised that any further assignments, conveyances,
certificates, filings, instruments or documents or any other things are
necessary or desirable to consummate any of the transactions contemplated by
this Agreement, the other party shall, upon request, promptly execute and
deliver all such proper instruments and do all things reasonably necessary and
proper to otherwise carry out the purposes of this Agreement.
7.3 TAX RETURNS. Paradigm shall prepare all necessary tax and
information returns required by any governmental entity. Paradigm shall forward
to Xxxxxxx all such returns prior to filing for Xxxxxxx'x approval, at least
thirty (30) days prior to the due date for the filing thereof as it may be
lawfully extended which shall not be unreasonably withheld or delayed.
7.4 RETURN OF CERTAIN INFORMATION TO XXXXXXX.
(a) Paradigm and the Company acknowledge that in the course of
conducting the Company's business Xxxxxxx has made a computer-generated database
available to the Company and Paradigm containing names and/or telephone numbers
regarding potential customers (collectively referred to as the "Xxxxxxx
Information") for the Company's products and services, all of which Xxxxxxx
Information Paradigm and the Company acknowledge is confidential and proprietary
information belonging to Xxxxxxx. The term "Xxxxxxx Information" does not
include the names and telephone numbers of any actual or potential customers
obtained by Paradigm from any other source without knowingly breaching any
obligation of confidentiality owing to Xxxxxxx by such other party, which or
whose name may also be included within the Xxxxxxx Information. Paradigm and the
Company agree that all of the Xxxxxxx Information which is in tangible form
shall be returned to Xxxxxxx not later than thirty days after the date of this
Agreement. Neither Paradigm nor the Company will use, publish or disclose any of
the Xxxxxxx Information or authorize any other person or entity to make use,
publish or disclose any of the Xxxxxxx Information for any purpose whatsoever;
provided, however, that to the extent that the current customers of the Company
are persons disclosed as part of the Xxxxxxx Information, the Company shall
continue to have the right to use the name and telephone number of the customer
in the conduct of the Company's business, but for no other purpose.
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(b) The Company and Paradigm each acknowledges and agrees that
Xxxxxxx will be irreparably damaged if the provisions of Section 7.4(a) are not
specifically enforced. Accordingly, Xxxxxxx shall be entitled to an injunction
restraining any breach of Section 7.4(a) by the Company or Paradigm (without
being required to prove irreparable injury), or any other appropriate decree of
specific performance. As a condition precedent for the application for any such
injunction or any other form of equitable or extraordinary relief, Xxxxxxx shall
first notify the Company and Paradigm in writing of any such alleged breach.
Such notice shall contain the names and addresses of the persons for whom such a
breach is alleged to have occurred. Paradigm and the Company shall have five
business days to respond to such notice of an alleged breach by providing to
Xxxxxxx written documentation demonstrating that Xxxxxxx and the Company have
not breached the provisions of Section 7.4(a). Xxxxxxx agrees to give Paradigm
and the Company two (2) days' advanced notice of any application for injunctive
or other extraordinary relief. The foregoing shall not constitute a waiver of
Paradigm's or the Company's right to an undertaking or bond in connection with
such injunction or decree as provided under applicable law.
ARTICLE VIII
MISCELLANEOUS
8.1 WAIVERS AND AMENDMENTS.
(a) This Agreement may be amended, modified or supplemented only by
a written instrument executed by the parties hereto. The provisions of this
Agreement may be waived only by an instrument in writing executed by the party
granting the waiver. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach.
(b) No failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operated as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
8.2 FEES AND EXPENSES. Xxxxxxx and Paradigm shall each be responsible
for all of their respective fees and expenses incurred in connection with this
transaction.
8.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given or made: if by hand, immediately upon
delivery; if by telex, telecopier, or similar electronic device, immediately
upon sending, provided it is sent on a business day, but if not, then
immediately upon the beginning of the first business day after
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being sent; if by Federal Express, Express Mail or any other overnight delivery
service, on the first business day after dispatch; and if mailed by certified
mail, return receipt requested, three (3) business days after delivery or the
return of the notice to render marked "unclaimed". All notices, requests and
demands are to be given or made to the parties at the following addresses (or to
such other address as either party may designate by notice in accordance with
the provisions of this paragraph):
IF TO XXXXXXX: XXXXXXX COMMUNICATIONS, INC.
---------------
ONE XXXX XXXX XXXXX
X.X. XXX 0000
XXXXX XXXXX, XXX XXXX 00000
ATTN: X. XXXXXXXX
TELEPHONE: (000)000-0000
TELECOPIER: (000) 000-0000
WITH A COPY TO: FEDER, KASZOVITZ, ISAACSON, WEBER, XXXXX & BASS LLP
--------------
000 XXXXXXXXX XXXXXX
XXX XXXX, XXX XXXX 00000-0000
ATTENTION: XXXXXXXX XXXX
TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000
IF TO PARADIGM: PARADIGM DIRECT, INC.
0 XXXXXXXXX XXXXX
XXXX XXX, X.X. 00000
ATTN: XXXXX XXXXX
TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000
WITH A COPY TO: XXXXXXXX BROG LEINWAND XXXXXX
XXXXXXXX & XXXXX P.C.
0000 XXXXXX XX XXX XXXXXXXX
XXX XXXX, XXX XXXX 00000
ATTENTION: XXXXX X. XXXXXXX, ESQ.
TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000
8.4 ENTIRE AGREEMENT. This Agreement and the exhibits hereto set forth
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersede any prior negotiations, agreements,
letters of intent, understandings or arrangements between the parties hereto
with respect to the subject matter hereof.
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8.5 BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors.
Nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto, or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
8.6 NON-ASSIGNABILITY. This Agreement and any rights pursuant hereto
shall not be assignable by any party hereto without the prior written consent of
the other party.
8.7 PARTIAL INVALIDITY. In the event any provision of this Agreement or
the application thereof to any person or circumstances shall be adjudged to be
invalid or unenforceable according to any applicable laws, the remaining
provisions of this Agreement and the application thereof to any person or
circumstances shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
8.8 GRAMMATICAL CONVENTIONS; DEFINITION OF "KNOWLEDGE". Unless some
meaning and intent is apparent from the context of the Agreement, the plurals
shall include the singular and vice versa, and masculine, feminine and neuter
words shall be used interchangeably. "Knowledge" of any matter means with
respect to an individual, the actual knowledge, but not constructive or imputed
knowledge, after due inquiry of such person's books and records, of such matter
of such person and, with respect to any person that is not an individual, such
actual knowledge of each individual that is a director or executive officer, in
the case of a corporation, or a manager, in the case of a limited liability
company, of such entity in each case after due investigation of the relevant
employees and books and records of such entity.
8.9 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
8.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
PARADIGM DIRECT, INC.
13
14
BY:
---------------------------------------
ITS:
---------------------------------------
DATE: JANUARY , 1999
---------------------------------------
XXXXXXX COMMUNICATIONS, INC.
BY:
---------------------------------------
ITS:
---------------------------------------
DATE: JANUARY , 1999
---------------------------------------
PARADIGM CELLULAR, LLC
BY:
---------------------------------------
ITS:
---------------------------------------
DATE: JANUARY , 1999
---------------------------------------
14
15
LIST OF EXHIBITS
3.2(a) Assignment of Membership Interest
3.2(b) Resignation
3.2(c) Release
3.2(d) Xxxxxxx letter re: AT&T Contract
4.6 List of Bank Accounts
4.9 List of Contracts
5.4 Balance Sheet as of Effective Date
5.5 Balance Sheet as of January 18, 1999
16
ASSIGNMENT OF MEMBERSHIP INTEREST
FOR VALUE RECEIVED, XXXXXXX COMMUNICATIONS, INC., a Delaware
corporation, formerly known as XXXXXXX ENTERTAINMENT, INC. ("Assignor"), has
assigned and by these presents does hereby assign to PARADIGM DIRECT, INC., a
Delaware corporation ("Assignee") all of the Assignor's rights, title and
interest in and to its 51% membership interest in PARADIGM CELLULAR, L.L.C., a
Delaware limited liability company, (the "Interest") free and clear of all
security interests, liens, pledges, charges, escrows, options, rights, rights of
first refusal, encumbrances, agreements, arrangements, commitments or claims of
any kind or character, to have and to hold the same onto the Assignee, its
successors and assigns from and after the date hereof.
IN WITNESS WHEREOF, the Assignor has executed this Assignment this 25th
day of January, 1999.
XXXXXXX COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------
17
RESIGNATION
We hereby resign as Managers of PARADIGM CELLULAR, L.L.C., a Delaware
limited liability company effective this _____ day of January, 1999
/s/ Xxxxxxx Xxxxxxxx
--------------------------
XXXXXXX XXXXXXXX
/s/ Xxx Xxxxxxxxx
--------------------------
XXX XXXXXXXXX
18
XXXXXXX COMMUNICATIONS, INC.
One Blue Hill Plaza, 5th Floor, X.X. Xxx 0000, Xxxxx Xxxxx, XX 00000
Phone (000) 000-0000 -Fax (000) 000-0000
Date: January 20, 1999
Xx. Xxxx Xxxxxxxxx
AT&T Wireless Services of
Florida, Inc.
000 X. Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Re: Dealer Agreement between AT&T Wireless Services of Florida, Inc., d/b/a
AT&T Wireless Services and Xxxxxxx Communications, Inc., formerly known
as Xxxxxxx Entertainment, Inc., effective as of July 1, 1997 (the
"Dealer Agreements")
Dear Xx. Xxxxxxxxx:
This is to advise you that Xxxxxxx Communications, Inc., formerly known
as Xxxxxxx Entertainment, Inc. has on this day sold to Paradigm Direct, Inc. its
membership interest in Paradigm Cellular, L.L.C. Accordingly, this letter is
intended to document our request to terminate the Dealer Agreement. Our Dealer
Code is 8C914. We would like the termination to take effect within 30 days
pursuant to the Agreement. Please call our controller, Xxxxx Xxxxx, at
000-000-0000 with any questions. Thank you.
Sincerely yours,
XXXXXXX COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxx
------------------------------
XXXXX XXXXX
Its: Controller
------------------------------
cc: AT&T Wireless Services of Florida
00000 Xxxxx X.X. Xxxxxxx Xxx
Xxxxx Xxxx Xxxxx, Xxxxxxx 00000
19
EXHIBIT 4.6
LIST OF BANK ACCOUNTS
1. CITIBANK, NA. ACCOUNT NUMBER 00000000, IN THE NAME OF PARADIGM
CELLULAR, LLC, XXX XXXX XXXX XXXXX, XXXXX 0000, XXXXX XXXXX, XXX XXXX
00000-0000.
20
EXHIBIT 4.9
LIST OF CONTRACTS
1. Agreement dated September 26, 1997 between Cellular Telephone Company
d/b/a AT&T Wireless Services and Paradigm Direct, Inc.
2. Dealer Agreement effective as of July 1, 1997 between AT&T Wireless
Services of Florida, Inc., d/b/a AT&T Wireless Services and Xxxxxxx
Entertainment, Inc.
21
EXHIBIT 5.4
PDI & XXXXXXX XX
BALANCE SHEET
AS OF NOVEMBER 30, 1998
Nov. 30, '98
ASSETS
Current Assets
Checking/Savings
Cash - Citibank Checking 592,298.69
Cash - In Transit, Clearing 297,055.00
------------
Total Checking/Savings 889,353.89
Other Current Assets
A/R Att - Cost Adjustment for P 185,607.61
Inventory - Florida (Old Deal) 3,750.00
A/R Wireless Sales
Philadelphia
A/R Phila Reserve -19,430.00
Philadelphia - Other 44,700.00
---------
Total Philadelphia 25,270.00
Florida (New Deal) 542,700.00
A/R FL Reserve (New Deal) -540,083.00
NY/NJ 316,500.00
----------
Total A/R Wireless Sales 344,387.00
------------
Total Other Current Assets 533,744.61
------------
Total Current Assets 1,423,098.30
Other Assets
Organization Costs 6,470.85
Accumulated Amortization -1,185.95
------------
Total Other Assets 5,284.90
------------
TOTAL ASSETS 1,428,383.20
============
LIABILITIES AND EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 363,669.70
------------
Total Accounts Payable 363,669.70
Other Current Liabilities
Accrued Direct Mail 700.00
A/P - ATT Phones Not Ret FL New 43,680.00
1
22
A/P - ATT Phones (New Deal) 1,032,183.40
A/P - ATT Phones (Credits) -764,313.30
Accrued - Customer Lists 1,500.00
Accrued Data Mgmt Exp 9,060.00
Accrued Professional Fees 4,200.00
Due to PDI 164,370.65
Due to Xxxxxxx 13,563.82
------------
Total Other Current Liabilities 504,944.57
------------
Total Current Liabilities 868,614.27
------------
Total Liabilities 868,614.27
------------
Equity
Retained Earnings -365,085.96
Net Income 924,854.89
------------
Total Equity 559,768.93
------------
TOTAL LIABILITIES AND EQUITY 1,428,383.20
============
2
23
EXHIBIT 5.5
PDI & XXXXXXX XX
BALANCE SHEET
AS OF NOVEMBER 30, 1998
Jan. 18, '99
ASSETS
Current Assets
Checking/Savings
Cash - Citibank Checking 426,403.11
Cash - In Transit, Clearing 297,055.00
------------
Total Checking/Savings 723,458.11
Other Current Assets
A/R Att - Cost Adjustment for P 185,607.61
Inventory - Florida (Old Deal) 3,750.00
A/R Wireless Sales
Philadelphia
A/R Phila Reserve -19,430.00
Philadelphia - Other 44,700.00
---------
Total Philadelphia 25,270.00
Florida (New Deal) 542,700.00
A/R FL Reserve (New Deal) -540,083.00
NY/NJ 208,500.00
----------
Total A/R Wireless Sales 236,387.00
------------
Total Other Current Assets 425,744.61
------------
Total Current Assets 1,149,202.72
Other Assets
Organization Costs 6,470.85
Accumulated Amortization -1,185.95
------------
Total Other Assets 5,284.90
------------
TOTAL ASSETS 1,154,487.62
============
LIABILITIES AND EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 89,774.12
------------
Total Accounts Payable 89,774.12
Other Current Liabilities
Accrued Direct Mail 700.00
A/P - ATT Phones Not Ret FL New 43,680.00
A/P - ATT Phones (New Deal) 1,032,183.40
1
24
A/P - ATT Phones (Credits) -764,313.30
Accrued - Customer Lists 1,500.00
Accrued Data Mgmt Exp 9,060.00
Accrued Professional Fees 4,200.00
Due to PDI 164,370.65
Due to Xxxxxxx 13,563.82
------------
Total Other Current Liabilities 504,944.57
------------
Total Current Liabilities 594,718.69
------------
Total Liabilities 594,718.69
Equity
Retained Earnings 559,768.93
------------
Total Equity 559,768.93
------------
TOTAL LIABILITIES AND EQUITY 1,164,487.62
============
2
25
MUTUAL RELEASE
This Mutual Release is entered into this __ day of January, 1999 by and
between PARADIGM DIRECT, INC., a Delaware corporation, with offices located at 0
Xxxxxxxxx Xxxxx, Xxxx Xxx, Xxx Xxxxxx ("PDI") and PARADIGM CELLULAR, L.L.C., a
Delaware limited liability company (the "Company") (together PDI and the Company
are referred to as "the Paradigm Entities") and XXXXXXX COMMUNICATIONS, INC., a
Delaware corporation, formerly known as, XXXXXXX ENTERTAINMENT, INC., with
offices at Xxx Xxxx Xxxx Xxxxx, Xxxxx Xxxxx, Xxx Xxxx ("Xxxxxxx").
W I T N E S S E T H:
WHEREAS, PDI owns a 49% interest and Xxxxxxx owns a 51% interest in
Paradigm Cellular, L.L.C., a Delaware limited liability company (the "Company");
WHEREAS, PDI and Xxxxxxx have entered into that certain Purchase and
Sale Agreement dated as of the 30th day of November, 1998 (the "Sale Agreement")
wherein Paradigm is purchasing from Xxxxxxx and Xxxxxxx is selling to PDI all of
rights, title and interest of Xxxxxxx'x membership interest in the Company;
WHEREAS, Section Section 3.2(c) of the Sale Agreement requires each
party to release the other in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree:
3. Release. The Paradigm Entities on the one part and Xxxxxxx on the
other part hereby release and discharge each other, and their respective
shareholders, directors, managers, members, officers, employees,
26
agents, attorneys, and their respective successors and assigns, from all
actions, causes of action, suits, debts, dues, accounts, bonds, covenants,
contracts, agreements, damages, judgments, claims, and demands whatsoever, in
law or in equity, which either party ever had, now has, or hereafter can, shall
or may have, for, upon, or by reason of any matter, causes or things whatsoever
from the beginning of the world to the date of this Mutual Release arising out
of the Operating Agreement dated as of June 30, 1998 regarding the Company
between Paradigm and Xxxxxxx. Nothing herein shall constitute a release of any
obligation of the Paradigm Entities or Xxxxxxx under the Sale Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day near first above written:
XXXXXXX COMMUNICATIONS, INC.
By: _________________________________
Its: _________________________________
PARADIGM DIRECT, INC.
By: _________________________________
Its: _________________________________
PARADIGM CELLULAR, L.L.C..
By: _________________________________
Its: _________________________________
1
27
EXECUTION COPY
OPERATING AGREEMENT
OF
PARADIGM CELLULAR, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
2
28
TABLE OF CONTENTS
PAGE
1. ORGANIZATION........................................................................ 1
1.1 Formation.................................................................... 1
1.2 Organization Filings......................................................... 1
1.3 Name......................................................................... 2
1.4 Principal and Registered Office.............................................. 2
1.5 Registered Agent and Agent for Service of Process............................ 2
1.6 Purpose...................................................................... 2
1.7 Term......................................................................... 2
1.8 Names and Addresses of Members............................................... 2
1.9 Additional Members........................................................... 2
2. DEFINITIONS AND INTERPRETATION...................................................... 2
2.1 Definitions.................................................................. 2
2.2 Terms Defined Elsewhere...................................................... 5
2.3 Table of Contents and Captions............................................... 7
2.4 Construction................................................................. 7
3. CAPITAL; CAPITAL ACCOUNTS........................................................... 7
3.1 Initial Capital Contributions................................................ 7
3.2 Member Loans................................................................. 7
3.3 No Withdrawal of Capital Contributions....................................... 7
3.4 Return of Capital Contributions.............................................. 8
3.5 Liability of Members, Managers and Their Affiliates.......................... 8
3.6 No Priority.................................................................. 8
3.7 No Interest.................................................................. 8
3.8 No Obligation to Restore Negative Balances in Capital Accounts............... 8
3.9 Capital Accounts............................................................. 8
3.10 Investment Capital........................................................... 10
4. PROFITS, LOSSES AND DISTRIBUTIONS................................................... 10
4.1 Profits and Losses........................................................... 10
4.2 Distributions of Available Cash.............................................. 14
4.3 Incorrect Distributions...................................................... 14
4.4 Distributions in Kind........................................................ 14
5. MANAGEMENT OF THE COMPANY........................................................... 15
5.1 Management Powers of the Managers............................................ 15
5.2 Managers..................................................................... 15
5.3 Power of Members............................................................. 17
5.4 Meetings of Members.......................................................... 17
5.5 Delegation of Authority by Managers.......................................... 18
i
29
5.6 Managers' Duty to Devote Time................................................ 19
5.7 Managers' Compensation....................................................... 19
5.8 Competition; Outside Interests............................................... 19
5.9 Conduct of Managers; Limited Liability of the Managers....................... 21
5.10 Indemnification.............................................................. 21
5.11 Business with Affiliates..................................................... 22
5.12 Obligations of the Members................................................... 22
6. RESTRICTIONS ON THE DISPOSITION OF AN INTEREST...................................... 22
6.1 Generally.................................................................... 22
6.2 Permitted Transfers.......................................................... 22
6.3 Right of First Refusal....................................................... 23
6.4 Transfer Upon Repurchase Events.............................................. 24
6.5 Mandatory Transfer........................................................... 26
6.6 General Conditions to Transfer............................................... 26
6.7 Withdrawal................................................................... 28
6.8 Collateral Assignment of Interests........................................... 28
7. BOOKS, RECORDS AND REPORTS.......................................................... 28
7.1 Company Documents............................................................ 28
7.2 Financial Books.............................................................. 29
7.3 Bank Accounts................................................................ 29
7.4 Reports...................................................................... 29
7.5 Tax Returns.................................................................. 29
7.6 Tax Matters Person........................................................... 30
7.7 Fiscal Year and Accounting Method............................................ 30
7.8 Tax Elections................................................................ 30
7.9 Title to Company Assets...................................................... 30
8. DISSOLUTION AND TERMINATION OF THE COMPANY.......................................... 30
8.1 Dissolution.................................................................. 30
8.2 Liquidation.................................................................. 31
8.3 Termination.................................................................. 31
9. APPLICABLE LAW...................................................................... 32
9.1 Applicable Law............................................................... 32
9.2 Dispute Resolution........................................................... 32
10. MISCELLANEOUS PROVISIONS............................................................ 32
10.1 No Third Party Beneficiary................................................... 32
10.2 Power of Attorney to each Manager............................................ 32
10.3 Notices...................................................................... 33
10.4 Severability................................................................. 34
10.5 Counterparts............................................................... 34
10.6 Entire Agreement; Amendments............................................... 34
10.7 Further Assurances......................................................... 34
10.8 Successors and Assigns..................................................... 34
ii
30
10.9 Waiver of Action for Partition............................................. 34
10.10 Insurance.................................................................. 34
10.11 Representations of the Members............................................. 34
Schedule 1.8 Members
Exhibit A Initial Operating Budget
iii
31
OPERATING AGREEMENT
OF
PARADIGM CELLULAR, L.L.C.
This Limited Liability Company Operating Agreement dated as of June 10,
1998 (the "Operating Agreement") by and among the persons whose names and
addresses appear on Schedule 1.8 annexed hereto (individually a "Member" and
collectively the "Members") has been executed for the purpose of forming a
limited liability company (the "Company") pursuant to the provisions of the
Delaware Limited Liability Company Act, 6 Del, C. Section 18-101 et seq. (the
"Act") and setting forth the rights and obligations of the Members and Managers
thereof and the manner in which the Company shall be operated, and the Members
do hereby agree as follows:
1. ORGANIZATION
1.1 Formation. The Company has been organized as a limited
liability Company under the Act on June 9, 1998. Except as otherwise expressly
provided for by this Operating Agreement, the rights and obligations of the
Members and Managers, the management of the affairs of the Company and the
conduct of its business shall be governed by the Act.
1.2 Organization Filings. (a) The Members hereby consent to the
filing of the Certificate of Formation with the Delaware Secretary of State on
June 9, 1998. The Managers shall file or cause to be filed such amendments to
the Certificate of Formation as may from time to time be authorized in
accordance with this Operating Agreement and the Act.
(b) The Managers are authorized to execute, file and publish,
or cause to be filed and published, with the proper authorities in each
jurisdiction (or subdivision thereof) where the Company conducts business, such
certificates or documents as may be required by such jurisdiction (or
subdivision thereof) in connection with the conduct of its business pursuant to
a fictitious name.
(c) The Members from time to time shall execute, acknowledge,
verify, file, record and publish, or cause to be executed, acknowledged,
verified, filed, recorded and published, all such applications, certificates and
other documents, and do or cause to be done all such other acts, as the Managers
may reasonably deem necessary or appropriate to comply with the requirements of
law for the formation, qualification and operation of the Company as a limited
liability company in all jurisdictions in which the Company shall desire to
conduct business.
1
32
1.3 Name. The name of the Company shall be Paradigm Cellular,
L.L.C. or such other name as the Managers shall from time to time determine upon
written notice to the Members.
1.4 Principal and Registered Office. The principal and registered
office of the Company shall be Xxx Xxxxxxxxx Xxxxx, Xxxx Xxx, Xxx Xxxxxx 00000
or such other place as may be designated by the Managers upon written notice to
the Members. The Managers may provide additional offices for the Company within
or outside of the State of New Jersey if the same are deemed advisable for the
conduct of the Company's business.
1.5 Registered Agent and Agent for Service of Process. The address
of the Company's registered office and the name and address of the registered
agent of the Company required to be maintained by Section 18-104 of the Act are
Corporation Service Company, 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
1.6 Purpose. The purposes of the Company shall be to engage in the
sale and marketing of Conventional Wireless Services (as defined herein).
1.7 Term. The term of the Company shall commence upon the filing of
the Certificate of Formation with the Secretary of State of the State of
Delaware.
1.8 Names and Addresses of Members. (a) The name, address,
telephone number, or employer identification number, Capital Contribution and
Percentage Interest of each of the Initial Members of the Company are set forth
in Schedule 1.8 annexed hereto.
(b) If necessary, Schedule 1.8 shall from time to time be
amended to reflect any changes to the information set forth thereon.
1.9 Additional Members. The Members, acting unanimously, shall have
the right to admit additional Members to the Company upon such terms and
conditions, at such time or times, and for such Capital Contributions as shall
be determined by the Managers. In addition, additional Members shall be admitted
to the Company in accordance with the provisions set forth in Section 6 hereof.
In connection with any such admission, the Managers shall amend Schedule 1.8
hereof to reflect the name, address, Capital Contribution and other data
required thereby of the additional Members and any agreed upon changes in the
Interests and Percentage Interests.
2. DEFINITIONS AND INTERPRETATION
2.1 Definitions. (a) In addition to terms otherwise defined herein,
the following terms shall have the following meanings:
2
33
(i) "Affiliate" or "affiliate" of a Person shall
mean: (A) any officer, partner, director, manager, trustee, member, general
partner, or controlling shareholder of such Person; (B) any Person controlling,
controlled by or under common control with such Person; and (C) any officer,
director, trustee, member, manager, controlling shareholder or partner of any
Person described in (B) above. For purposes of this definition, the term
"control" shall mean the power to direct the management and policies of such
Person, directly or indirectly, by or through stock ownership, agency or
otherwise, or pursuant to or in connection with an agreement, arrangement or
understanding (written or oral) with one or more other Persons by or through
stock ownership, agency or otherwise; and the terms "affiliated," "controlling"
and "controlled" shall have meanings correlative to the foregoing.
(ii) "AT&T Wireless Agreements" means the following
agreements: (A) Dealer Agreement dated as of July 1, 1997 between AT&T Wireless
Services of Florida, Inc. d/b/a AT&T Wireless Services and Xxxxxxx
Entertainment, Inc., and (B) Agreement dated __________, 1997 between Cellular
Telephone Company d/b/a AT&T Wireless Services, Paramus, New Jersey and
Paradigm.
(iii) "Available Cash" shall mean all Gross Receipts
actually received by the Company, less the sum of the following:
(A) All principal, interest and other
payments due and owing with respect to loans, mortgages and other indebtedness
of the Company;
(B) All cash expenditures then required to
be made in connection with the operation of the business of the Company; and
(C) Such cash reserves as are necessary for
the operation of the business of the Company which shall be determined in
accordance with the Operating Budgets (as defined herein) of the Company.
(iv) "Bankruptcy" of a Person or a "Bankruptcy
Action" of a Person shall mean (A) the filing by that Person of a voluntary
petition seeking liquidation, reorganization, arrangement or readjustment, in
any form, of its debts under Title 11 of the United States Code or any other
federal or state insolvency law, or a Person's filing an answer or otherwise
consenting to or acquiescing in any such petition, (B) the making by a Person of
any assignment for the benefit of its creditors with respect to substantially
all of the assets of such Person or (C) the expiration of 90 days after the
filing of an involuntary petition under Title 11 of the United States Code, an
application for the appointment of a receiver for substantially all of the
assets of a Person, or any involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts under any other federal
or state insolvency law, provided that the same shall not have been dismissed,
vacated, set aside, stayed or otherwise disposed of within such 90-day period. A
"Bankrupt" Person shall mean a Person who has entered into Bankruptcy within the
meaning of this Section.
3
34
(v) "Capital Contribution" shall mean, with respect
to any Member, the amount of capital actually contributed by such Member to the
Company in accordance with Article 3 hereof.
(vi) "Code" shall mean the Internal Revenue Code of
1986, as the same has been or may be amended from time to time.
(vii) "Conventional Wireless Services" shall mean the
marketing, promotion and sale of wireless cellular telephone services, both
digital and analog, which are paid for by the end user after the services are
provided to the end user, as such wireless cellular telephone services are being
offered as of the date hereof in the continental United States by companies such
as AT&T Wireless and its competitors. Without limitation to the foregoing, the
term "Conventional Wireless Services" does not include (A) Pre-Paid Wireless
Services (as defined in this Agreement), (B) voice-mail services separate from
the sale of wireless cellular telephone services, or (C) any form of telephone
services which are provided using the "Internet". The parties agree that the
wireless cellular telephone services being sold under the AT&T Wireless
Agreements constitute "Conventional Wireless Services" within the meaning of
this Agreement.
(viii) "Gross Receipts" with respect to any period
shall mean all gross cash receipts of the Company from any source whatsoever
received by the Company during such period less contractual allowances, returns,
allowances, credits and discounts, but excluding (A) Capital Contributions, (B)
the proceeds of Company borrowings including Member Loans and (C) any amounts
received by the Company which constitute segregated escrow or similar accounts
(until the same are released or forfeited to the Company).
(ix) "Initial Members" shall mean and include the
Members of the Company on the date hereof set forth on Schedule 1.8 annexed
hereto.
(x) "Interest" shall mean the ownership interest of a
Member in the Company as reflected on Schedule 1.8 annexed hereto as the same
may, from time to time, be required to be amended (which shall be considered
personal property for all purposes), consisting of (A) such Member's Percentage
Interest in profits, losses, allocations and distributions and (B) such Member's
right to vote or grant or withhold consents with respect to Company matters as
provided herein or in the Act.
(xi) "Managers" shall mean the Managers designated
in, or selected pursuant to, Article 5 hereof so long as they remain Managers.
Unless the context requires otherwise, reference to a "Manager" means any of the
Managers.
(xii) "Members" shall mean the Initial Members and
all other Persons admitted as additional or substituted Members pursuant to this
Operating Agreement, so long as they remain Members. Unless the context requires
otherwise, reference to a "Member" means any one of the Members.
4
35
(xiii) "Net Losses" shall mean, with respect to any
fiscal period of the Company, the net losses of the Company for such period for
federal income tax purposes including as appropriate each item of income, loss,
deduction or credit entering into such determination, as determined by the
regular accountants of the Company.
(xiv) "Net Profits" shall mean, with respect to any
fiscal period of the Company, the net profits of the Company for such period for
federal income tax purposes including, as appropriate, each item of income,
loss, deduction or credit entering into such determination, as determined by the
regular accountants of the Company.
(xv) "Operating Budgets" of the Company shall mean
the operating budgets for the Company which shall be prepared by the Managers
with respect to the business plan and operating budget for the Company for each
succeeding fiscal quarter. The initial Operating Budget for the Company is
annexed hereto as Exhibit A.
(xvi) "Paradigm" shall mean Paradigm Direct, Inc., an
Initial Member.
(xvii) "Percentage Interest" shall mean the
percentage set forth opposite such Member's name on Schedule 1.8 hereto, as such
percentage shall be adjusted from time to time in accordance with the provisions
hereof. The combined Percentage Interests of all Members shall at all times
equal 100%.
(xviii) "Person" shall means an individual,
corporation, limited liability company, limited partnership, general
partnership, joint venture, custodian, company trust, bank or other entity.
(xix) "Pre-Paid Wireless Services" shall mean the
provision of wireless cellular telephone services which are paid for prior to
the provision of such services.
(xx) "Xxxxxxx" shall mean Xxxxxxx Entertainment,
Inc., an Initial Member.
(xxi) "Regulations" shall mean the Treasury
Regulations promulgated under the Code as such regulations may be amended from
time to time (including the corresponding provisions of succeeding regulations).
2.2 Terms Defined Elsewhere. The following terms have been defined in
the locations set forth below:
5
36
Defined Term Location
------------ --------
Act Preamble
Bona Fide Offer Section 6.3(a)
Capital Account Section 3.8(a)
Closing Date Section 6.3(e)
Company Preamble
Damages Section 5.7
Declining Member Section 3.10
Disposing Member Section 6.4(b)
Effective Date Section 4.1(b)
Encumber Section 6.1
First Refusal Election Notice Section 6.3(a)
First Refusal Offer Section 6.3(a)
First Refusal Right Section 6.3(b)
First Repurchase Event Option Section 6.4(c)(ii)
First Repurchase Event Option Period Section 6.4(c)(ii)
Gross Asset Value Section 3.8(d)
Identifying Member Section 5.8(b)
Initial Capital Contributions Section 1.1(xvii)
Investment Capital Section 3.10
Loan Request Section 3.2(a)
Maker Section 6.3(c)
Member Nonrecourse Deductions Section 4.2(c)(iii)
Member Preamble
Member Loan Section 3.2(a)
Offered Interests Section 6.4(a)
Offeree Section 6.4(a)
Offering Member Section 6.3(a)
Operating Agreement Preamble
Option Termination Date Section 6.3(d)
Permitted Transferee Section 6.2(d)
Purchase Price Section 6.4(d)
Repurchase Event Option Notice Section 6.4(c)(i)
Repurchaser Event Election Notice Section 6.4(c)(ii)
Repurchase Event Options Section 6.4(c)(iii)
Second Repurchase Event Option Section 6.4(c)(iii)
Second Repurchase Event Options Period Section 6.4(c)(iii)
Selling Member Section 6.4(a)
Terms Section 5.8(b)
TMP Section 7.6
Transfer Section 6.i
Transferring Members Section 6.4(a)
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2.3 Table of Contents and Captions. The table of contents and captions
used in this Operating Agreement are inserted for convenience and identification
only and are in no way intended to define or limit the scope, extent or intent
of this Operating Agreement or any of the provisions hereof.
2.4 Construction. Whenever the singular number is used herein, the same
shall include the plural, and the masculine, feminine and neuter genders shall
include each other. Unless the context clearly requires otherwise, the words
"hereof," "herein" and "hereunder" and words of similar import shall refer to
this Operating Agreement as a whole and not to any particular provision hereof.
3. CAPITAL; CAPITAL ACCOUNTS
3.1 Initial Capital Contributions
(a) Initial Capital Contributions. Schedule 1.8 hereto sets
forth the amount of capital contributed to the Company by each of the Members as
of the date hereof (the "Initial Capital Contributions") and the amount of
capital which has been returned to each of the Members as of the date hereof,
(b) Percentage Interests. Each Initial Member initially shall
have the Percentage Interest set forth on Schedule 1.8 annexed hereto which
shall be adjusted, from time to time, in accordance with the terms of this
Operating Agreement.
(c) Additional Contributions. The Members shall be required to
contribute additional capital to the Company in accordance with the provisions
of Section 3.10 hereof.
3.2 Member Loans.
(a) Loan Request. The Managers may at any time and from time
to time request loans ("Loan Request") of additional funds from one or more
Members (a "Member Loan"). However, no Member shall be obligated to make any
such loan to the Company and any Member which elects not to make loans to the
Company in response to a Loan Request shall not be deemed to be in default of
this Agreement and the Capital Account and Percentage Interest of such Member
shall not be adjusted, and such Member shall not otherwise be penalized, as a
result thereof.
3.3 No Withdrawal of Capital Contributions. Except upon dissolution
and liquidation of the Company, no Member shall have the right to withdraw,
reduce or demand the return of its Capital Contributions, or any part thereof,
or any distribution thereon. Except as otherwise provided herein, no Member
shall have the right to receive assets other than cash in connection with a
distribution or return of capital.
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3.4 Return of Capital Contributions.
(a) No Fixed Time. Except upon dissolution and liquidation of
the Company and as set forth in Section 4.2 hereof, there is no agreement, nor
time set, for the return of any Capital Contribution to any Member. To the
extent funds are available therefor, the Managers may return such capital, after
reserving sufficient funds for payment of debts, working capital, contingencies
and replacements and, to the extent of available funds, the Managers shall
return such capital as set forth in Section 4.2 and at the dissolution and
termination of the Company, as hereinafter set forth.
(b) No Personal Liability of Managers. Except as otherwise
required by the Act, the Managers shall not be personally liable for the return
or repayment of any Capital Contribution.
3.5 Liability of Members, Managers and Their Affiliates. Except as
otherwise provided by applicable law, the debts, obligations and liabilities of
the Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company and no Member, Manager or
Person Affiliated with a Member or Manager shall be obligated personally for any
such debt, obligation or liability of the Company solely by reason of being a
Member, a Manager or being Affiliated with either of them.
3.6 No Priority. Except as expressly provided for in this Operating
Agreement, no Member shall have priority over another Member as to return of
Capital Contributions or allocations of income, gain, profits, losses, credits
or deductions or as to distributions.
3.7 No Interest. Except as expressly provided for by this Operating
Agreement, no interest shall be paid on all or any part of a Member's Capital
Contribution or Capital Account.
3.8 No Obligation to Restore Negative Balances in Capital Accounts.
No Member shall have an obligation, at any time during the term of the Company
or upon its liquidation, to pay to the Company or any other Member or third
party an amount equal to the negative balance in such Member's Capital Account.
3.9 Capital Accounts. (a) The Company shall maintain a separate
capital account ("Capital Account") for each Member and its legal
representatives, successors and permitted assigns.
(b) The Capital Account of each Member shall be maintained in
accordance with Section 1.704-1(b) of the Regulations as in effect on the date
of this Operating Agreement and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Managers shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto, are computed in order to comply with Regulation Section
1.704-1(b), the Managers acting unanimously may make such modifications.
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(c) The Capital Account of each Member shall consist of the
amount of cash and the fair market value of the property (as determined in good
faith by the Managers acting unanimously) contributed by such Member to the
Company (net of liabilities securing such contributed property assumed by the
Company or subject to which the Company takes the contributed property)
increased by allocations of Net Profits pursuant to Section 4.2 hereof, and of
tax-exempt income, if any, and decreased by allocations of Net Losses pursuant
to Section 4.2 hereof, by distributions and withdrawals of cash and property (to
the extent of the fair market value thereof, net of liabilities securing such
property assumed by the Member or subject to which the Member takes the
property) and by expenditures defined in Section 705(a)(2)(B) of the Code (or
which are treated as Section 705(a)(2)(B) expenditures under Regulation
1.704-1(b)(2)(iv)(i)).
(d) In the event the Gross Asset Value of a Company asset is
adjusted pursuant to Section 3.9(e) hereof, the Capital Accounts of all Members
shall be adjusted simultaneously to reflect the allocation of gain or loss that
would be recognized by the Company if it disposed of such asset in an amount
equal to the Gross Asset Value. For purposes of this Agreement, "Gross Asset
Value" means with respect to any asset, the asset's adjusted basis for federal
income tax purposes adjusted from time to time pursuant to section (e) below,
except that (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 Manager, and (ii) the Gross Asset Value shall be adjusted for
gain, loss, depreciation and amortization, all as calculated based on the Gross
Asset Value of such asset in accordance with Regulation Section
1.704-1(b)(2)(iv)(g).
(e) If the Managers make an election pursuant to Regulation
Section 1.704-1(b)(2)(f), the Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as determined by
the Managers as of the following times: (i) the acquisition of an additional
Member interest by any new or existing Member in exchange for a Capital
Contribution (other than a de minimis contribution); (ii) the distribution by
the Company to a Member of Company assets, unless all Members receive
simultaneous distributions of undivided interests in the distributed assets in
proportion to their respective interests; and (iii) the liquidation of the
Company within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g).
(f) For purposes of computing the amount of any item of Net
Profit or Net Loss to be reflected in Capital Accounts, the determination,
recognition and classification of each such item shall be the same as its
determination, recognition and classification for federal income tax purposes
except that:
(i) any deductions for depreciation, amortization or
similar expense attributable to property which has a Gross Asset Value different
from its adjusted basis for federal income tax purposes, shall be based on the
Gross Asset Value of such property as determined pursuant to Section 3.9(d).
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(ii) Net Profit or Net Loss resulting from any disposition
of Company property 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.
(g) In the event of a transfer of an Interest or any portion
thereof in accordance with the terms of this Operating Agreement, whether or not
the purchaser, assignee or successor-in-interest is then a Member, the Person so
acquiring such Interest or any portion thereof shall acquire the Capital Account
or portion thereof of the Member formerly owning such Interest, adjusted for
distributions of Available Cash made pursuant to Section 4.3 hereof and
allocations of Net Profits and Net Losses made pursuant to Section 4.2 hereof.
The cost of computing such adjustment shall be borne by the Member disposing of
such Interest.
3.10 Investment Capital. (a) To the extent that the Managers at any
time determine that additional capital is needed to fund the Company's business
("Investment Capital"), the Managers may make a request for such Investment
Capital to the Members, and the Members shall be obligated to make contributions
of Investment Capital as follows:
(i) First, Xxxxxxx shall be required to contribute that amount
of capital to the Company which, together with the existing Investment Capital
of the Company, equals $500,000; and
(ii) Xxxxxxx and Paradigm shall then each be required to
contribute 50% of any additional required Investment Capital.
(b) The Managers shall keep separate account records which shall
reflect Investment Capital contributed by and distributed to the Members.
4. PROFITS, LOSSES AND DISTRIBUTIONS
4.1 Profits and Losses
(a) Generally. (i) The Net Profits and Net Losses of the
Company shall be determined for each fiscal year in accordance with the
accounting method followed by the Company for federal income tax purposes.
Except as otherwise provided herein, whenever a proportionate part of the Net
Profits or Net Losses is credited or charged to a Member's Capital Account,
every item of income, gain, loss, deduction or credit entering into the
computation of such Net Profits or Net Losses shall be considered either
credited or charged, as the case may be, in the same proportion to such Member's
Capital Account, and every item of credit or tax preference related to such Net
Profits or Net Losses and applicable to the period during which such Net Profits
or Net Losses was realized shall be allocated to such Member in the same
proportion.
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(ii) Net Profits and Net Losses shall be allocated to the
Members as set forth below in accordance with their respective Interests in the
Company, as adjusted from time to time, and for this purpose, at the end of the
month (the "Effective Date") that includes the date on which there occurs the
admission of a new Member into the Company or a valid transfer of all or part of
a Member's Interest, the books of the Company shall be closed in accordance with
Section 706(d) of the Code, and consistent therewith: (X) items of income,
deduction, gain, loss and/or credit of the Company that are recognized prior to
the Effective Date shall be allocated among those Persons who were Members in
the Company prior to the Effective Date in accordance with their respective
Interests prior to the Effective Date; and (Y) items of income, deduction, gain,
loss and/or credit of the Company that are recognized after the Effective Date
shall be allocated among the persons or entities who were Members after the
Effective Date in accordance with their respective Interests after the Effective
Date.
(b) Allocation of Net Profits and Net Losses. (i) Subject to any
allocations required under Section 4. 1 (c), Net Profits shall be allocated to
the Members as follows:
(A) First, to the Members in the amounts and proportions
necessary to reverse, on a cumulative basis without duplication, all allocations
of Net Losses to the Members pursuant to subsection Section 4.1(b)(ii)(B) below;
(B) Second, to the Members in the amounts and proportions
necessary to reverse, on a cumulative basis and without duplication, all
allocations of Net Losses to the Members pursuant to Section 4.1(b)(ii)(A)
below;
(C) Thereafter, to the Members, pro rata in accordance with
their Percentage Interests.
(ii) Subject to any allocations required under Section
4.1(c), Net Losses shall be allocated to the Members as follows;
(A) First, to the Members, in proportion to the balance in
their respective Capital Accounts, until the Capital Accounts of all Members
have reached a zero balance; and
(B) Thereafter, to the Members, pro rata in accordance with
their Percentage Interests.
(c) Special Allocation Provisions.
(i) General Limitation. Notwithstanding anything to the
contrary contained in Section 4.1, no allocation shall be made to a Member which
would cause such Member to have a deficit balance in its Capital Account which
exceeds the sum of such Member's share of Company Minimum Gain (as defined in
Section 4.1 (c)(iv)(A) hereof) and such Member's share of Member Nonrecourse
Debt Minimum Gain (as defined in Section 4.1(c)(iv)(B) hereof). If the
limitation contained in the preceding
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sentence would apply to cause an item of loss or deduction to be unavailable for
allocation to all Members, then such item of loss or deduction shall be
allocated between or among the Members in accordance with the Members'
respective "interests in the Company" within the meaning of Section
1.704-1(b)(3) of the Regulations.
(ii) Qualified Income Offset. In the event any Member
unexpectedly receives an adjustment, allocation or distribution described in
clauses (4), (5) and (6) of Regulation Section 1.704-1(b)(2)(ii)(d) that results
in such Member having a negative balance in its Capital Account in excess of the
amount it is required to restore on a liquidation of the Company (or of the
Member's interest in the Company), then, after any allocations required by
Section 4.1(c)(iv) hereof, such Member shall be allocated income and gain in an
amount and manner sufficient to eliminate such excess as quickly as possible. To
the extent permitted by the Code and the Regulations, any special items of
income or gain allocated pursuant to this Section 4.1(c)(ii) shall be taken into
account in computing subsequent allocations of Net Profits and Net Losses
pursuant to this Section 4.1, so that the net amount of any items so allocated
and the subsequent Net Profits and Net Losses allocated to the Members pursuant
to this Section 4.1(c)(ii) shall to the extent possible, be equal to the net
amounts that would have been allocated to each such Member pursuant to the
provisions of this Section 4.1(c)(ii) if such unexpected adjustments,
allocations or distributions had not occurred.
(iii) Member Nonrecourse Deductions. Notwithstanding
anything to the contrary contained in Section 4.1 hereof, any and all items of
loss and deduction and any and all expenditures described in Section
705(a)(2)(B) of the Code (or treated as expenditures so described pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Regulations) (collectively, "Member
Nonrecourse Deductions") that are (in accordance with the principles set forth
in Section 1.704-2(i)(2) of the Regulations) attributable to Member Nonrecourse
Debt (as such term is defined in Section 1.704-2(b)(4) of the Regulations) shall
be allocated to the Member that bears the economic risk of loss pursuant to
Section 1.752-2(b)-(j) of the Regulations for such Member Nonrecourse Debt. If
more than one Member bears such economic risk of loss, such Member Nonrecourse
Deductions shall be allocated between or among such Members in accordance with
the ratios in which they share such economic risk of loss. If more than one
Member bears such economic risk of loss for different portions of a Member
Nonrecourse Debt, each such portion shall be treated as a separate Member
Nonrecourse Debt.
(iv) (A) Company Minimum Gain. Except to the extent provided
in Sections 1.704-2(e)(2), (3), (4) and (5) of the Regulations, if there is, for
any Fiscal Year of the Company, a net decrease in Company Minimum Gain (as such
term is defined in Sections 1.704-2(b)(2) and (d) of the Regulations), there
shall be allocated to each Member, before any other allocation pursuant to
Section 4.1 hereof is made under Section 704(b) of the Code of Company items for
such Fiscal Year, items of income and gain for such Year (and, if necessary, for
subsequent years) equal to such Member's share of the net decrease in Company
Minimum Gain. A Member's share of the net decrease in Company Minimum Gain is
the amount of such total net decrease multiplied by the Member's percentage
share of the Company's Minimum Gain at the end of the immediately preceding
taxable year, determined in accordance with Section 1.704-2(g)(1)
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of the Regulations. Items of income and gain to be allocated pursuant to the
foregoing provisions of this Section 4.1(c)(iv)(A) shall consist first of gains
recognized from the disposition of items of Company property subject to one or
more Nonrecourse Liabilities (as defined in Section 1.704-2(b)(3) of the
Regulations) of the Company, and then of a pro rata portion of the other items
of Company income and gain for that year.
(B) Member Nonrecourse Debt Minimum Gain. Except to the
extent provided in Section 1.704-2(i)(4) of the Regulations, if there is, for
any Fiscal Year of the Company, a net decrease in Member Nonrecourse Debt
Minimum Gain (as defined in Section 1.704-2(i)(2) of the Regulations), there
shall be allocated to each Member that has a share of Member Nonrecourse Debt
Minimum Gain at the beginning of such Fiscal Year before any other allocation
pursuant to Section 4.1 hereof (other than an allocation required pursuant to
Section 4.1(c)(iv)(A)) is made under Section 704(b) of the Code of Company items
for such fiscal year, items of income and gain for such year (and, if necessary,
for subsequent years) equal to such Member's share of the net decrease in the
Member Nonrecourse Debt Minimum Gain. The determination of a Member's share of
the net decrease in Member Nonrecourse Debt Minimum Gain shall be made in a
manner consistent with the principles contained in Section 1.704-2(g)(1) of the
Regulations. The determination of which items of income and gain to be allocated
pursuant to the foregoing provisions of this Section 4.1(c)(iv)(B) shall be made
in a manner that is consistent with the principles contained in Section
1.704-2(f)(6) of the Regulations.
(v) (A) Any item of Company income, gain, loss, deduction or
credit attributable to property contributed to the Company, solely for tax
purposes, shall be allocated among the Members in accordance with the principles
set forth in Section 704(c) of the Code and the Regulations promulgated
thereunder 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
Gross Asset Value.
(B) In the event the Gross Asset Value of any Company asset
is adjusted (pursuant to Section 3.9 hereof), subsequent allocations of income,
gain, loss, deduction and credit with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations promulgated thereunder as in effect at the time such
Gross Asset Value is adjusted.
(C) Any elections or other decisions relating to allocations
pursuant to this Section 4.1(v) shall be made by the Managers in any manner that
reasonably reflects the purpose and intention of this Agreement.
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(vi) Members' Interest In Company Profits For Purposes Of
Section 752. As permitted by Section 1.752-3(a)(3) of the Regulations, the
Members hereby specify that solely for purposes of determining their respective
interests in the Nonrecourse Liabilities of the Company for purposes of Section
752 of the Code, such interests shall be equal to their respective Percentages
Interests.
4.2 Distributions of Available Cash. (a) Distributions of
Available Cash shall be made once each fiscal quarter. Such distributions shall
be made to the Members in the following amounts and order of priority:
(i) First, to the Members in proportion to their respective
contributions of Investment Capital made pursuant to Section 3.10(a)(ii) hereof
as of such date until each Member has received an amount equal to the total of
such Member's Investment Capital contributed pursuant to Section 3.10(a)(ii)
hereof (reduced by the amount of all prior distributions made pursuant to this
Section 4.2(a)(i));
(ii) Second, to Xxxxxxx until Xxxxxxx has received an amount
equal to the total of Xxxxxxx'x contributions of Investment Capital made
pursuant to Section 3.10(a)(i) hereof (reduced by the amount of all prior
distributions made pursuant to this Section 4.2(a)(ii); and
(iii) Then, the balance to the Members in accordance with
their Percentage Interests.
4.3 Incorrect Distributions. To the extent distributions
pursuant to this Section 4 were incorrectly made, as determined by financial
statements of the Company, the recipients shall promptly repay all incorrect
payments and/or the Company shall have the right to set off any current or
future amounts owing to such recipients against any such incorrectly paid
amounts.
4.4 Distributions in Kind. In the event any proceeds available
for distribution consist of items other than cash (including, but not limited to
notes, mortgages and payments in kind), the Members shall be entitled to their
pro rata shares of each such asset, in accordance with the aggregate amounts of
proceeds due them, respectively. In determining the Capital Accounts of the
Members for purposes of Section 3.9, the amount by which the fair market value
of any property to be distributed in kind to the Members exceeds or is less than
the tax basis of such assets, to the extent not otherwise recognized by the
Company shall be taken into account as if such gain or loss were recognized by
the Company.
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5. MANAGEMENT OF THE COMPANY
5.1 Management Powers of the Managers. Except as expressly limited
or otherwise provided by the provisions of this Operating Agreement or by the
Act, the Managers shall have the full, exclusive and absolute right, power and
authority to manage and control each and every aspect of the business of the
Company and its property, assets and affairs.
5.2 Managers.
(a) Number. There shall be four Managers, two of which shall be
designated by Xxxxxxx (the "Xxxxxxx Designees") and two of which shall be
designated by Paradigm (the "Paradigm Designee"). The number of Managers may be
increased by the Members, acting unanimously. The initial Xxxxxxx Designees
shall be Xxxxxxx Xxxxxxxx and Xxx Xxxxxxxxx, and the initial Paradigm Designees
shall be Xxxx Xxxxx and Xxxxx Xxxx.
(b) Term. The Managers shall continue to serve in such capacity
until they resign, die, become incapacitated, or are removed.
(c) Replacement of Managers. At any time and upon written notice
to all of the other Managers, (i) the Xxxxxxx Designee may be replaced by
Xxxxxxx, and (ii) the Paradigm Designee may be replaced by Paradigm.
(d) Removal of Managers. Any of the Managers may be removed as a
manager at any time for Cause by the remaining Managers, acting unanimously;
provided that such Manager may be replaced as provided in Section 5.2(i).
"Cause" shall mean (i) gross negligence or wilful misconduct; (ii) such
Manager's continued and repeated failure or refusal to perform his duties
hereunder, or (iii) indictment of such Manager for any crime involving moral
turpitude.
(e) Vacancy. In the event of the vacancy of a Manager, the
Member which designated such Manager may designate a successor to such position.
(f) Voting for Managers. Each Member shall vote its Interest and
take any and all other action at any meeting of Members or otherwise as is
necessary to ensure that the Managers are elected in accordance with the
provisions of this Section 5.2.
(g) Actions of the Managers. Unless otherwise required by the
Act or specifically provided for in this Operating Agreement, all matters
requiring the vote, consent or approval of the Managers shall be determined by
the affirmative vote or written consent of the Managers, acting unanimously.
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(h) Meetings of Managers.
(i) Meetings. Meetings of the Managers may be called at any
time by two or more of the Managers. Notice of any meeting of the Managers shall
provide information as to time, place and agenda of the meeting.
(ii) Place of Meeting. The Managers may designate any place,
either within or without the State of Delaware, as the place for any meeting of
the Managers. If no designation is made the place of meeting shall be the
principal executive office of the Company.
(iii) Notice of Meetings. Except as provided in Section
5.2(b)(iv), written notice stating the place, day and hour of the meeting and
the purpose or purposes for which the meeting is called shall be delivered not
less than five days nor more than thirty days before the date of the meeting,
either personally or by mail, to each Manager. If mailed, such notice shall be
deemed to be delivered two calendar days after being deposited in the United
States mail, addressed to the Manager at his address as it appears on the books
of the Company, with postage thereon prepaid.
(iv) Meeting of all Managers. If all of the Managers shall
meet at any time and place and all consent to the holding of a meeting at such,
time and place, either in writing or by failing to object, such meeting shall be
valid without call or notice, and at such meeting any lawful action may be
taken.
(v) Quorum. All of the Managers shall constitute a quorum at
any meeting of Managers.
(vi) Action by Managers Without a Meeting. Action required
or permitted to be taken at a meeting of Managers may be taken without a meeting
by written consents signed by each Manager and delivered to the Company for
inclusion in the minutes or for filing with the Company records. Furthermore,
any or all Managers may participate in a meeting by telephone conference or any
other means of communication by which all Managers participating may
simultaneously hear each other during the meeting.
(i) Manager May Exercise Authority. If the Managers or Members
have approved or have been deemed to have approved of any action requiring their
respective approval in accordance with the provisions of this Operating
Agreement, each Manager (acting alone or together with one or more Managers)
shall be authorized to execute, deliver and file any document, or take any other
action necessary or desirable, to effectuate such approved action (unless such
approval of the Managers or Members specifically provides otherwise).
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5.3 Power of Members.
(a) General. Except as expressly provided in this Operating
Agreement or as otherwise required by the Act, the Members (as members) shall
have no voice or participation in the management of the Company's business, and
no power to bind the Company or to act on behalf of the Company in any manner
whatsoever.
(b) Member Vote. Unless otherwise provided in the Operating
Agreement or in the Act, any action or consent of the Members shall require the
affirmative vote of all of the Members.
(c) Consent to Managers' Powers. Subject to the provisions of
this Operating Agreement, the Members hereby expressly acknowledge and agree
that by the execution of this Operating Agreement they consent to all of the
rights, power and authority of the Managers under this Operating Agreement, to
the free and unrestricted exercise thereof and to the doing of any act that the
Managers have the right, power or authority to do under this Operating
Agreement.
5.4 Meetings of Members.
(a) Meetings. Meetings of the Members may be called at any time
by the Managers, and shall be called by the Managers upon the unanimous request
of the Members. Notice of any meeting of the Members shall provide information
as to time, place and agenda of the meeting.
(b) Place of Meeting. The Managers may designate any place,
either within or without the State of Delaware, as the place for any meeting of
the Members. If no designation is made the place of meeting shall be the
principal executive office of the Company.
(c) Notice of Meetings. Except as provided in Section 5.4(d),
written notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than five
days nor more than thirty days before the date of the meeting, either personally
or by mail, by or at the direction of the person calling the meeting, to each
Member entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered two calendar days after being deposited in the United States
mail, addressed to the Member at his address as it appears on the books of the
Company, with postage thereon prepaid.
(d) Meeting of all Members. If all of the Members shall meet at
any time and place and all consent to the holding of a meeting at such, time and
place, either in writing or by failing to object, such meeting shall be valid
without call or notice, and at such meeting any lawful action may be taken.
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(e) Quorum. Members holding two-thirds (2/3) of the Percentage
Interests held by the Members, represented in person or by proxy, shall
constitute a quorum at any meeting of Members.
(f) Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting by
written consents signed by each Member entitled to vote and delivered to the
Managers of the Company for inclusion in the minutes or for filing with the
Company records, and the action is approved by the consent of the Members
holding the Percentage Interest required if the action had been approved at a
meeting at which all Members were present. Furthermore, any or all Members may
participate in a regular or special meeting by telephone conference or any other
means of communication by which all Members participating may simultaneously
hear each other during the meeting.
5.5 Delegation of Authority by Managers. (a) General. The
Managers shall have the right to delegate any portion of their duties as they
may determine to other Persons, subject in each case to the provisions of this
Article 5; provided, however, that no such delegation of authority shall relieve
the Managers of their obligations hereunder.
(b) Officers. (i) The Managers may appoint one or more officers
of the Company who shall have the duties, rights and obligations as may be
determined by the Managers, from time to time, subject in each case, to the
provisions of this Article 5 and to the supervision and authority of the
Managers and the other terms and conditions of this Operating Agreement. Each
officer shall serve at the pleasure of the Managers and may be removed by the
Managers with or without cause at any time. Each officer shall serve until his
successor is duly appointed and qualified or his earlier death, incompetence,
resignation or removal.
(ii) President - Unless the Managers shall otherwise
determine, the President shall serve as the chief operating officer of the
Company and shall be responsible for the day to day operations of the Company
reporting to and under the supervision of the Managers and shall have such other
duties as may from time to time be designated by the Managers.
Vice President - The Vice Presidents, including any
Executive Vice President, shall perform such duties and have such powers as may
from time to time be assigned to them by the Managers. In the absence of the
President, the Executive Vice Presidents may perform the duties of the
President.
Secretary - The Secretary shall attend to the giving
of notice of each, meeting of Members, if any, and each meeting of Managers, and
shall act as secretary at each such meeting. He shall keep minutes of all
proceedings at such meetings as well as of all proceedings at all meetings of
such other committees of Managers as any such committee shall direct him to so
keep. The Secretary shall keep and account for all books, documents, papers and
records of the Company except those for which some other officer or agent is
properly accountable. In addition, the Secretary shall have such other duties as
may from time to time be designated by the Managers.
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Assistant Secretary - The Assistant Secretaries shall
general assist the Secretary in performing all of his duties and, in the absence
of the Secretary, may perform the functions of the Secretary. In addition, the
Assistant Secretaries shall have such other duties as may from time to time be
designated by the Managers.
Treasurer - The Treasurer shall have the care and
custody of all the funds of the Company and shall deposit such funds in such
banks or other depositories as the Managers or any officer thereunto duly
authorized by the Managers shall from time to time direct or approve. In
addition, the Treasurer shall have such other duties as may from time to time be
designated by the Managers.
(iii) The initial Officers shall be:
President - Xxxxx Xxxx
(c) Notwithstanding the authority of the officers contained
herein, the approval of a majority of the Managers shall be required for an
officer to take any action outside of the ordinary course of business of the
Company.
5.6 Managers' Duty to Devote Time. The Managers shall be
responsible for the conduct of the business of the Company as set forth in this
Operating Agreement and they shall devote such time to Company business as is
necessary, desirable and appropriate to manage and supervise Company business
and affairs in an efficient manner.
5.7 Managers' Compensation. The Managers shall serve without
compensation as such, but they shall be reimbursed for all reasonable expenses
which they may incur in connection with the business of the Company.
5.8 Competition, Outside Interests.
(a) (i) Subject to the provisions of Section 5.8(b), from the
date hereof until the termination of this Agreement and the dissolution of the
Company, no Member of the Company or any Affiliate of any Member of the Company
shall directly or indirectly, be engaged in the provision of Conventional
Wireless Services (except that ownership of less than 5% of the equity
securities of a public corporation shall not be considered engagement in the
provision of Conventional Wireless Services).
(ii) Simultaneously with the execution of this Agreement,
both of the Initial Members are assigning all of their respective right, title
and interest in and to the AT&T Wireless Agreements to the Company, and the
Company hereby assumes and agrees to be bound by all of the terms and provisions
of such agreements.
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(b) If any Member (the "Identifying Member") becomes aware of
any business opportunity with respect to the provision of Conventional Wireless
Services, such Member shall promptly notify the other Members and the Managers
in writing Of the material terms (the "Terms") of such opportunity (an
"Opportunity"). The Managers shall then consider the Terms of the Opportunity,
including the amount, if any, of additional capital contributions necessary for
the Company to pursue such opportunity and shall, within seven days after
receipt of such notice, determine whether the Company shall pursue such
Opportunity and whether to make a capital call with respect thereto. If the
Managers determine that the Company shall pursue such Opportunity and determine
to make a capital call in connection therewith, the Members shall make any such
additional capital contributions in accordance with the provisions of Section
3.10 hereof. If the Managers determine that the Company shall not pursue such
Opportunity, the Identifying Member shall be free to pursue such Opportunity
outside of the Company on substantially the same terms as the Terms; provided,
however, that if either of the Manager Designees of the Identifying Member
determines not to pursue such Opportunity, or if the Identifying Member does not
make the capital contributions required pursuant to Section 3.10 hereof, neither
the Identifying Member nor the Manager Designees of the Identifying Member shall
be permitted, directly or indirectly, to pursue such Opportunity, and provided
further that if the terms of such Opportunity shall materially vary from the
Terms, the Initiating Member shall again be required to present such revised
Terms to the other Members and the Managers for consideration as provided
herein.
(c) Subject to the other provisions of this Section 5.8, any
Member, Manager or Affiliate of any Member or Manager shall have the right to
engage in and/or possess an interest in any other business of every kind, nature
and description, independently or with other Persons. Neither the Company nor
any Member shall have or be entitled to any rights, solely by virtue of this
Operating Agreement, in and to such independent ventures or to the income and
profits derived therefrom, nor shall any such Member, Manager or such Affiliated
Person have any obligation whatsoever to offer, share or offer to share any
business opportunity of any kind to or with the Company or any other Member. The
Members hereby waive any and all rights and claims which they may otherwise have
against such other Members, Managers and their Affiliated Persons.
(d) Each Member acknowledges that during the term of this
Agreement it will have access to confidential information, including, without
limitation, (i) pricing information and information concerning the Company's
marketing techniques and methods, (ii) the terms of the Company's existing
contracts, (iii) information pertaining to the Company's customers and their
requirements, and (iv) any other of the Company's trade secrets (all of the
foregoing is referred to as "Confidential Information") which is not in the
public domain and which has been or will be acquired, developed or assembled by
the Company at its expense. Each Member agrees, for so long as the Company
continues to engage in the active conduct of business, that is shall not reveal,
divulge or make known Confidential Information (other than in the conduct of the
Company's business) to any person, firm, corporation or other business
organization, and shall not directly or indirectly use for its own benefits, or
for the benefit of anyone else, any Confidential Information, except as
permitted under any other provision of this Agreement.
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5.9 Conduct of Managers: Limited Liability of the Managers.
(a) Each Manager shall perform his or her duties as a Manager
in accordance with the provisions of the Act.
(b) Except in the case of bad faith, gross negligence or wilful
misconduct, the liability of the Managers shall be eliminated and limited to the
maximum extent permitted by the Act.
(c) All obligations or liabilities of the Managers under this
Operating Agreement shall (to the extent permitted by law) be several and not
joint or joint and several.
(d) The Managers shall have fiduciary responsibility for the
safekeeping and use of all funds, property and assets of the Company, whether or
not in their control, and shall not employ, or permit another to employ, such
funds, property or assets in any manner except as otherwise expressly set forth
herein or for the benefit of the Company.
5.10 Indemnification. (a) Except in the case of bad faith, gross
negligence or wilful misconduct, the Company, its receiver or its trustee (but
not the Members personally) shall indemnify and defend the Members, Managers and
their respective agents and Affiliates and any other Persons whom it shall have
the power to indemnify under the Act against and hold them harmless to the
maximum extent permitted by the Act from any and all losses, judgments, costs,
damages, liabilities, fines, claims and expenses (including, but not limited to,
reasonable attorneys' fees and court costs and other disbursements related
thereto, which shall be paid by the Company as incurred) and other matters
covered or referred to in the Act. The rights to indemnification and advancement
of expenses set forth above shall be contract rights, shall continue as to an
indemnitee who has ceased to be Affiliated with the Company, Member or a Manager
and shall inure to the benefit of the personal representative, successors and
assigns of an indemnitee. The indemnifications provided for herein shall not be
deemed exclusive of any other rights to which any Person may be entitled by
resolution, agreement or otherwise, as to any action in any capacity in which
such Person served at the request of the Company.
(b) The Company shall pay all expenses incurred by a Person
covered by the provisions of this Section 5. 10 in connection with the defense
of any matter which is the subject of this Section 5. 10 in advance of the final
disposition of the action or proceeding; provided, that such Person has agreed
in writing to repay such amount to the extent that such Person is ultimately
found not to be entitled to indemnification or, where indemnification is
granted, to the extent the expenses so advanced by the Company or allowed by the
court exceed the indemnification to which such Person is entitled.
(c) Subject to the other provisions contained herein, the
Company at its expense may maintain insurance to protect itself and any Members,
Managers, agents or Affiliate, against liability, loss or expense whether or not
the Company would have the power to indemnify such Person under the Act.
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5.11 Business with Affiliates. The Company may transact business
with any Member, Manager or any Affiliate thereof for goods or services
reasonably required in the conduct of the Company's business, provided that any
such transaction shall be effected only if the transaction is on terms
competitive with those which may be obtained from unaffiliated Persons.
5.12 Obligations of the Members. The Members shall have the
following obligations with respect to the business of the Company:
(a) Paradigm shall be responsible for (i) providing the Company
with resources in order to secure business for the Company, and (ii) providing
resources to manage the telemarketing operations of the Company.
(b) Xxxxxxx shall be responsible for (i) providing customer
lists, and (ii) providing resources to manage the mail and DRTV.
6. RESTRICTIONS ON THE DISPOSITION OF AN INTEREST.
6.1 Generally. Except as otherwise expressly provided for in this
Operating Agreement or as otherwise required under the Act, no Member may sell,
transfer, assign, or otherwise dispose of all or any part of its Interest in the
Company and may not withdraw from the Company (collectively, a "Transfer"), or
pledge, hypothecate or otherwise encumber (collectively, "Encumber"), all or any
part of its Interest in the Company, without in the case of each of the
foregoing, the prior written consent of a majority of the Managers. Any attempt
to Transfer or Encumber a right or Interest of a Member in violation of this
Operating Agreement shall be of no force or effect and shall not be recognized
by the Company.
6.2 Permitted Transfers. (a) Permitted Transfers. Notwithstanding
anything herein to the contrary, a Member may Transfer its Interest to a
Permitted Transferee (as defined below) at any time, without prior consent.
(b) A "Permitted Transferee" means:
(i) with respect to a Member which is a partnership,
corporation or limited liability company, such Member's partners, shareholders,
members, directors, executive officers or managers, as the case may be; or
(ii) with respect to any Member, to another Member.
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6.3 Right of First Refusal. (a) If a Member (the "Offering
Member") wishes to Transfer all or part of its Interest (other than to a
Permitted Transferee or in the case of a Repurchase Event, which shall not be
subject to the provisions of this Section 6.3) pursuant to a bona-fide, arms'
length offer (a "Bona-Fide Offer") from a non-affiliated third party (an
"Offeror") such Member shall, within ten days of receipt of the Bona Fide Offer,
provide the other Members and the Managers written notice of such intention (the
"First Refusal Offer"), which shall include the material terms of the Bona Fide
Offer, including, without limitation, the identity of the Offeror.
(b) The other Members shall then have the first right (the
"First Refusal Right") to purchase its pro rata portion of the offered Interest
(which pro rata portion shall be based on such Member's Percentage Interest
relative to the aggregate Percentage Interest of all Members electing to
exercise their First Refusal Right) upon the terms, including at the price,
contained in the Bona-Fide Offer, which right is exercisable by written notice
to the Offering Member, the other Members and the Managers of its intention to
do so (the "First Refusal Election Notice"), which notice shall be delivered
within fifteen days of delivery of the First Refusal Offer.
(c) A Member which desires to exercise its First Refusal Right
(a "Purchasing Member") shall be required to deposit into escrow 10% of the
purchase price payable by such Member for its pro rata portion of the offered
Interest (the "Escrowed Amount") simultaneously with or prior to its delivery of
the First Refusal Election Notice. The Escrowed Amount shall be deposited with
an unaffiliated third party and shall be held pursuant to the terms of an escrow
agreement to be entered into with respect thereto. If the Purchasing Member has
not purchased its pro rata portion of the offered Interest prior to the Option
Termination Date, and the Offering Member has not transferred the offered
Interest to the Offeror within sixty days thereafter, then the Escrowed Amount
shall be released to the Offering Member; provided, however, that if the
Purchasing Member is ready, willing and able to consummate the purchase of the
offered Interest on the Option Termination Date and the sale of such Interest
does not occur through no fault of the Purchasing Member, the Escrowed Amount
shall be released to the Purchasing Member on the Option Termination Date; and
provided further that, if the Escrowed Amount is released to the Offering Member
and the Offering Member subsequently transfers its Interest to the Offeror
within one year thereafter, the Offering Member shall return the Escrowed Amount
to the Purchasing Member, together with interest thereon at the prime rate then
in effect as announced by The Chase Manhattan Bank in New York, New York.
(d) If the Members have elected to purchase less than all of
the offered Interests, the Company shall then have the right to purchase the
remaining portion of the offered Interests upon the terms, including at the
price, contained in the Bona-Fide Offer, which right is exercisable by written
notice to the Offering Member, the other Members and the Managers of its
intention to do so, which notice shall be delivered within fifteen days of
delivery of the First Refusal Election Notice.
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(e) If the purchase and sale of the offered Interest has not
taken place within sixty days from the date of the First Refusal Election Notice
(the "Option Termination Date"), then the Offering Member shall have the right
to Transfer the offered Interest to the Offeree, provided, that (i) the
consummation of the sale occurs within thirty days from the Option Termination
Date, and (ii) the price shall be no less, and the terms and conditions shall be
no more favorable, than that contained in the Bona Fide Offer, and (iii) the
Managers have consented to such Transfer as provided herein.
6.4 Transfer Upon Repurchase Events.
(a) Offer to Sell. Upon the occurrence of a Repurchase Event
(as defined in Section 6.4(b)), the Member which is the subject of the
Repurchase Event and each of his Transferees (other than transferees who are
Members) (collectively, the "Selling Member") shall automatically be deemed to
irrevocably offer to sell their entire Interest (the "Offered Interests") to the
Company and the other Members, and the Company and the other Members shall have
the option to purchase all or a portion of the Selling Member's Interest, in the
manner and subject to the terms and conditions set forth in this Section 6.4.
(b) Repurchase Event. A "Repurchase Event" with respect to any
Member shall mean (i) the Bankruptcy of such Member; (ii) the conviction of a
crime which constitutes a felony under applicable law or the entering of a plea
of guilty or nolo contenders by such Member with respect thereto; or (iii) the
sale of substantially all of the assets of, or a controlling equity interest in,
such Member.
(c) Exercise of Options.
(i) Notice of Repurchase Event. Upon the Managers becoming
aware of the occurrence of a Repurchase Event, the Managers shall promptly
notify the Company and the other Members (the "Repurchase Event Option Notice")
and shall include in such notice a description of the Interests which are
subject to purchase options pursuant to this Section 6.4 and, if then
determined, the purchase price of the Offered Interests.
(ii) First Option of the Members. Upon the occurrence of a
Repurchase Event, the remaining Members shall have a non-assignable first option
(the "First Repurchase Event Option") to purchase all or any portion of their
pro rata portion of the Offered Interests. Such options shall be exercisable by
a Member by giving written notice of its election to exercise its option to the
Selling Member, the other Members and the Managers (a "Repurchase Event Election
Notice") within fifteen (15) days after the later of the receipt of the
Repurchase Event Option Notice or the determination of the Purchase Price of the
Offered Interests (the "First Repurchase Event Option Period"). The holders of
the First Repurchase Event Options shall have the right to exercise their
options with respect to all or a portion of their pro rata portion of the
Offered Interests (which pro rata portion shall be determined based on such
Member's Percentage Interest relative to the aggregate Percentage Interest of
all Members electing to exercise First Xxxxxxxxxx
00
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Event Options) or in such other proportion as such Members may unanimously agree
upon.
(iii) Option of the Company. If the Members have elected or
deemed to have elected to purchase less than all of the Offered Interests which
are the subject of the First Repurchase Event Option, the Company shall have a
non-assignable option to purchase all or any portion of the remaining Offered
Interests (the "Second Repurchase Event Option"; together with First Repurchase
Event Options the "Repurchase Event Options") by giving written notice thereof
to the Members and the Managers within five (5) days after the earlier of the
receipt of a Repurchase Event Election Notice from the Members or the expiration
of the First Repurchase Event Option Period ("Second Repurchase Event Options
Period"). The Company shall have the right to exercise its option with respect
to all or a portion of the Offered Interests.
(iv) Obligations to Purchase. If holders of Repurchase
Event Options elect to purchase all or any portion of the Offered Interests
subject to Repurchase Event Options, then such holders (to the extent that each
has so elected) shall be obligated to purchase and the Selling Member shall be
obligated to sell such Offered Interests or portion thereof within fifteen (15)
days of the later of the termination of the Second Repurchase Event Option
Period or receipt of the last Repurchase Event Election Notice to purchase the
Offered Interests.
(v) Retention of Offered Interests. If the entire Offered
Interests of the Selling Member are not purchased by holders of Repurchase Event
Options within the time period set forth in this Section 6.4, then the Selling
Member shall retain such portion of the Offered Interests which have not been so
purchased.
(d) Purchase Price. The purchase price to be paid for a
Member's Interest pursuant to this Section 6.4 (the "Purchase Price") shall be
the fair market value of the Interest as determined by the Managers in good
faith within thirty (30) days after the Managers are informed or become aware of
the occurrence of a Repurchase Event. If the Managers are unable for any reason
to make such determination, the Purchase Price shall be determined by three
independent appraisers, one of which shall be selected by the Xxxxxxx Designees,
one of which shall be selected by the Paradigm Designees, and the third of which
shall be selected by the two initially selected appraisers. The cost of such
appraisal shall be borne equally between the selling and purchasing Member.
(e) Other Closing Conditions. At the Closing of the Transfer of
the Offered Interest pursuant to this Section 6.4, the Selling Members shall
deliver to the Purchaser such instruments of Transfer as the purchaser shall
request so as to transfer record and beneficial ownership of such Interest to
the purchaser on the books and records of the Company. The Interest shall be
transferred to the purchaser free and clear of any and all liens, claims,
mortgages, security interest, pledges and other encumbrances of any nature
whatsoever ("Liens'). If the Selling Member's entire Interest is being
purchased, the Selling Members shall repay in full all amounts outstanding to
the Company or any of its Affiliates, whether or not such amounts are otherwise
then due and payable.
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6.5 Mandatory Transfer.
(a) Request for Purchase or Sale. At any time, a Member (the
"Initiating Member") may, by written notice to the other Members (a "Request
Notice"), request that such other Members purchase all (but not less than all)
of the Interests of the Initiating Member (the "Subject Interest") or sell to
the Initiating Member all (but not less than all) of such other Member's
Interests, at the purchase price per Percentage Interest and on the other terms
and conditions contained in the Request Notice (the "Purchase Price"). The other
Members (the "Non-Initiating Members") shall then have the obligation to either
(i) purchase their pro rata portion of the Subject Interest at the Purchase
Price of such Interest (a "Purchase"), or (ii) sell all of their Interests in
the Company to the Initiating Member at the Purchase Price of such Interest (a
"Sale").
(b) Exercise of Option. The Non-Initiating Members shall elect
whether they shall effect a Purchase of the Subject Interest or a Sale of their
Interests, which election shall be made by written notice (the "Election
Notice") to the Initiating Member and the Managers within thirty (30) days after
the receipt of the Request Notice.
(c) Purchase and Sale. The purchase and sale of Interests under
this Section 6.5 shall take place within thirty (30) days after the receipt by
the Members and the Managers of an Election Notice.
(d) Other Closing Conditions. At the closing of a Transfer of
an Interest to a Member under this Section 6.5, (i) the selling Member shall
deliver to the purchasing Member such instruments of Transfer as the purchaser
shall reasonably request so as to transfer record and beneficial ownership of
such Interest, and (ii) the Interest shall be Transferred free and clear of all
Liens, and (iii) the transferring Member shall repay in MI any and all amounts
owed to the Company, whether or not such amounts are otherwise due and payable.
6.6 General Conditions to Transfer.
(a) Capacity. Notwithstanding anything herein to the contrary,
no Transfer of any Interest or portion thereof shall be made (i) to a Person
who, in accordance with applicable law, lacks the capacity to own, or otherwise
is prohibited from owning, any such Interest in the Company by reason of
minority, incompetence or otherwise; or (ii) to a Person otherwise prohibited by
applicable law from entering into such transaction or holding such Interest; or
(iii) which violates any other provision of this Operating Agreement.
(b) Requirements. No Transfer of an Interest otherwise
permitted by this Agreement shall be effective unless:
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(i) such Transfer shall have been consented to in writing
by the Managers (other than the Manager who is the designee of the Transferring
Member or of the Member group of which the Transferring Member is a part);
(ii) the transferee shall accept in writing, by an
instrument in form and substance satisfactory to the Managers, all of the terms
and provisions of this Agreement, as the same may be amended from time to time,
and shall have expressly assumed all of the obligations of the transferring
Member;
(iii) the transferee shall pay all filing, publication and
recording fees, if any, and all reasonable expenses, including, without
limitation, reasonable counsel fees and expenses incurred by the Company in
connection with such transaction;
(iv) the transferee shall execute such other documents or
instruments as counsel to the Company may require (or as may be required by law)
in order to effect the admission of such Person as a Member;
(v) the transferee shall execute a statement that it is
acquiring the Interest for its own account for investment and not with a view to
the resale or distribution thereof and that he will only Transfer the acquired
Interest to a Person who so similarly represents and warrants and shall include
in such statement such other representations and warranties as the Managers as
counsel to the Company may reasonably require;
(vi) if required by the Managers, the Company receives an
opinion of responsible counsel (who may be counsel for the Company), in form and
substance satisfactory to the Managers, that such Transfer does not violate
federal or state securities laws or any representation or warranty of such
transferring Member given in connection with the acquisition of its Interest;
(vii) if required by the Managers, counsel to the Company
delivers to the Company an opinion that such Transfer (A) will not result in a
termination of the Company under Section 708 of the Code; (B) will not cause the
Company to lose its status as a partnership for United States federal income tax
purposes; and (C) will not cause the Company to become subject to the Investment
Company Act of 1940, as amended; and
(viii) such disposition, when added to the total of all
other dispositions within the period of twelve (12) consecutive months prior
thereto, would not, in the opinion of counsel for the Company, result in the
Company being considered to have been terminated within the meaning of the Code
or would not otherwise result in material adverse tax treatment or consequences,
unless, in the opinion of counsel for the Company, that termination will not
have a substantial adverse effect upon the remaining Members.
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(c) Fulfillment of all Conditions. No Transfer of an Interest,
where otherwise permitted by the terms of this Agreement, shall be binding on
the Company until all of the conditions to such Transfer have been fulfilled.
Upon the admission of a substitute Member, the Managers shall promptly cause any
necessary documents or instruments to be filed, recorded or published, wherever
required, showing the substitution of the transferee as a substitute Member in
place of the transferring Member.
(d) Distributions. A transferee of an Interest shall be
entitled to receive distributions of cash or other property from the Company
attributable to the Interest acquired by reason of such Transfer from and after
the effective date of the Transfer of such Interest to him; provided, however,
that anything herein to the contrary notwithstanding, the Company and the
Managers shall be entitled to treat the transferor of such Interest as the
absolute owner thereof in all respects, and shall incur no liability for
allocations of income, gain, losses, credits, deductions or distributions that
are made in good faith to such transferor until such time as all of the
conditions of such Transfer have been fulfilled, the written instrument of
Transfer has been received by the Company and the effective date of Transfer has
passed.
(e) Effective Date of Transfer. The effective date of a
permitted Transfer of an Interest shall be no earlier than the last day of the
calendar month following receipt of notice of assignment and such documentation
as the Managers determine is required.
(f) Effect of Transfer. The transferring Member shall cease to
be, and the transferee shall become, a substituted Member as to the Interest so
transferred as of the effective date, and thereafter the transferring Member
shall have no rights or obligations with respect to the Company insofar as the
Interest transferred is concerned.
6.7 Withdrawal. Except as expressly provided for in this Operating
Agreement, no Member shall have the right to withdraw from the Company except
upon such terms and conditions as may be specifically agreed upon between such
other Members and the withdrawing Member. The provisions of this Operating
Agreement with respect to distributions to Members upon withdrawal are exclusive
and no Member shall be entitled to claim any further or different distribution
upon withdrawal under the Act or otherwise.
6.8 Collateral Assignment of.Interests Each Member hereby agrees,
if necessary or desirable as determined by the vote of the Managers, in
connection with any borrowing by the Company, to pledge and collaterally assign
its Interest, upon terms and conditions as may be requested by any lender or
lenders to the Company.
7. BOOKS, RECORDS AND REPORTS.
7.1 Company Documents. The Managers shall maintain at the principal
office of the Company or at such other place as the Managers may determine the
following documents: (a) a current list of the full name and last known business
address of
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each Member; (b) a copy of the Articles of Organization of the Company, together
with executed copies of any powers of attorney pursuant to which such
certificate or any amendment thereto has been executed; (c) copies of the
Company's federal, state and local income tax returns and reports, if any, for
each fiscal year during which the Company has been in existence; (d) copies of
this Operating Agreement, as it may be further amended and/or restated, and as
then in effect, and (e) of any financial statements of the Company for each
fiscal year during which the Company has been in existence, Such documents are
subject to inspection and copying at the reasonable request, and at the expense,
of any Member during ordinary business hours and on reasonable prior written
notice.
7.2 Financial Books. The Managers shall keep or cause to be kept
complete and accurate financial books in accordance with generally accepted
accounting principles with respect to the Company's business.
7.3 Bank Accounts. The funds of the Company shall be deposited in
such amounts in such bank account or accounts as shall be designated by the
Managers and withdrawals therefrom shall be made upon the signature of such
Person or Persons as shall be designated in writing by the Managers. The funds
of the Company shall not be commingled with the funds of any other Person and,
if not immediately required for Company business, may be temporarily invested in
such manner as the Managers shall determine.
7.4 Reports. The Managers, at the expense of the Company, shall
cause to be prepared and distributed to each Person who was a Member during any
fiscal year of the Company:
(a) within sixty (60) days after the end of each fiscal year of
the Company, all information relating to the Company that is necessary for the
preparation of the Members' federal, state and local income tax returns;
(b) within one hundred eighty (180) days after the end of each
fiscal year of the Company, an annual financial statement of the Company
prepared on a federal income tax basis in accordance with generally accepted
accounting principles, compiled or reviewed by independent public accountants
selected by the Managers; and
(c) Any other information that may be reasonably requested by
any Members.
7.5 Tax Returns. The Managers, at the expense of the Company, shall
cause to be prepared all tax returns for the Company and shall further cause
such returns to be timely filed with the appropriate authorities. It is
contemplated that the Company will be classified as a "partnership" for federal,
state and local income tax purposes. The Company and its Members will take such
reasonable action as may be necessary or advisable, and as determined by the
Managers, including the amendment of this Operating Agreement to cause or ensure
that the Company shall be treated as a "partnership' for federal, state and
local income tax purposes.
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7.6 Tax Matters Person. In the event the Company is subject to
administrative or judicial proceedings for the assessment and collection of
deficiencies for federal taxes or for the refund of overpayments of federal
taxes arising out of a Company's distributive share of income, losses, gain,
credits and deductions, the Managers shall designate one of the Managers as the
tax matters person ("TMP") and such Manager shall have all the powers and duties
assigned to the TMP under Sections 6221-6232 of the Code and the Regulations
thereunder. The Members agree to perform all acts necessary under Section 6231
of the Code and the Regulations thereunder to designate such designated Person
as the TMP.
7.7 Fiscal Year and Accounting Method. The Company shall adopt a
fiscal year ending on the last day of such month of each year and a method of
accounting selected by the Managers with the advice of the accountants for the
Company; provided, however, that the Managers in their sole discretion may,
subject to any approval required by the Internal Revenue Service and the
applicable state taxing authorities, at any time without the approval of the
Members change the Company's method of accounting.
7.8 Tax Elections. The Managers shall have the authority to cause
the Company to make any election required or permitted to be made for income tax
purposes. Notwithstanding the foregoing, the Managers may cause the Company to
make, in accordance with Section 754 of the Code, a timely election to adjust
the basis of Company property as described in Sections 734 and 743 of the Code
in the sole discretion of the Managers.
7.9 Title to Company Assets. Title to, and all right and interest
in, the Company's assets, shall be acquired in the name of and held by the
Company, or, if acquired in any other name, be held for the benefit of the
Company.
8. DISSOLUTION AND TERMINATION OF THE COMPANY.
8.1 Dissolution. The Company shall be dissolved and terminated and
its affairs shall be wound up upon the earliest to occur of the following:
(a) withdrawal of a Member, unless within 90 days after the
occurrence of such an event all of the remaining Members elects to continue the
Company business, and all other requirements of the Act are complied with;
(b) the express written consent of all Members;
(c) the entry of a decree of judicial dissolution of the
Company; or
(d) ownership by any of the Members of 100% of the Interests of
the Company.
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8.2 Liquidation. (a) In the event of dissolution under Section 8.1,
and if there has been no election to continue the Company as provided therein,
unless agreed to by the Members, each of the then unsold assets of the Company
shall be sold for cash or distributed in kind, as the Managers shall determine.
(b) Following the sale of the Company's property, the assets of
the Company shall be paid and distributed as follows:
(i) first, all of the Company's debts and liabilities to
Persons other than Members shall be paid and discharged (excluding secured
creditors whose obligations will be assumed or otherwise transferred on the
liquidation of Company assets), and any reserve deemed necessary by the Managers
for the payment of such debts shall be set aside; thereafter
(ii) all of the Company's loans from Members shall be paid
and discharged; thereafter
(iii) all of the Company's other debts and liabilities to
Members shall be paid and discharged; and thereafter
(iv) to the Members in accordance with the positive balance
in their Capital Accounts (calculated after giving affect to the allocation of
Net Profits and Net Losses under Article IV and distributions of Available Cash
pursuant to Article IV hereof for the year in which dissolution occurs),
(c) Upon dissolution, the Members shall look solely to the
assets of the Company for the return of their Capital Contributions. The winding
up of the affairs of the Company and the distribution of its assets shall be
conducted exclusively by the Managers, who hereby are authorized to do any and
all acts and things authorized by law for these purposes. In the event of the
dissolution or Bankruptcy of the sole remaining Manager, and there is a failure
of the Members to appoint a new Manager, the winding up of the affairs of the
Company and the distribution of its assets shall be conducted by the remaining
Members.
8.3 Termination. Upon the completion of the distribution of Company
assets as provided in Section 8.2 and all affairs of the Company have been wound
up, the Company shall be terminated, and the Managers or other Person acting as
liquidator (or the Members, if necessary) shall cause the Articles of
Organization of the Company to be cancelled and shall take such other actions as
may be necessary to terminate the existence of the Company.
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9. APPLICABLE LAW.
9.1 Applicable Law. This Agreement and the rights and obligations of
the parties hereto shall be interpreted in accordance with the laws of the State
of New Jersey applicable to contracts entered into and to be performed therein
without giving effect to principles of conflict of laws.
9.2 Dispute Resolution. The parties agree to try in good faith to
settle any dispute, controversy or claim arising out of or relating to this
Operating Agreement or the breach thereof through negotiation and if such
dispute cannot be settled through negotiation within 60 days, by mediation in
the City, County and State of New York administered by the American Arbitration
Association under its Commercial Mediation Rules before resorting to
arbitration, litigation or some other dispute resolution procedure. If the
parties are unable to settle said dispute through negotiation or mediation, it
shall be settled by arbitration in the City, County and State of New York
administered by the American Arbitration Association under its Commercial
Arbitration Rules and the Supplementary Procedures for Large, Complex Disputes,
and judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
10. MISCELLANEOUS PROVISIONS.
10.1 No Third Party Beneficiary. None of the provisions of this
Operating Agreement shall be for the benefit of, or enforceable by, any Person
who is not a party to this Operating Agreement, or the successor or permitted
assigns of such a party.
10.2 Power of Attorney to each Manager. (a) Xxxxxxx hereby makes,
constitutes, and appoints each Xxxxxxx Designee, and Paradigm hereby makes,
constitutes and appoint each Paradigm Designee, its attorney-in-fact in its
name, place and stead, to make, execute, swear to and acknowledge, amend, file,
record and deliver the following documents and interests and any other documents
or instruments deemed by the Managers necessary or appropriate for the business
of the Company:
(i) any Certificate of Formation, or amendments or restatements
thereto, required or permitted to be filed on behalf of the Company, and any and
all certificates or other documents as may be necessary to qualify or continue
the Company as a limited liability company (or other entity wherein the Members
thereof have limited liability) in the states where the Company may be doing
business, and all instruments that effect a change or modification of the
Company in accordance with this Operating Agreement;
(ii) any amendments to this Operating Agreement or the
Schedules hereto in accordance with this Operating Agreement;
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(iii) any other instrument that is now or that may hereafter be
required or be advisable in the reasonable judgment of the Managers to be filed
for or on behalf of the Company; and
(iv) any document that may be reasonably required to effect the
admission of an additional or substituted Member, or the termination of a Member
(provided such admission or termination is in accordance with the terms of this
Operating Agreement), or to reflect any change in the amount of Capital
Contributions, Interests or Percentage Interests of Members in accordance with
the terms of this Operating Agreement.
In the case of any of the foregoing, each of the designated Managers will have
the power to execute such instruments on such Member's behalf, whether or not
such Member approves of such action,
(b) This power of attorney is a special power of attorney coupled
with an interest, and shall not be revoked and shall survive the assignment,
delivery or transfer by a Member of all or part of its Member Interest.
(c) Each Member hereby gives and grants to its said attorney full
power and authority to do and perform each and every act and thing whatsoever
requisite, necessary or appropriate to be done and performed in connection with
this power of attorney as fully to all intents and purposes as he, she or it
might or could do if personally present, hereby ratifying all that its said
attorney shall lawfully do or cause to be done by virtue of this power of
attorney.
(d) The existence of this power of attorney shall not preclude
execution of any such instrument by a Member individually on any matter. A
Person dealing with the Company may conclusively presume and rely on the fact
that any such instrument executed by such agent and attorney-in-fact is
authorized and binding without further inquiry.
(e) The appointment of the Paradigm Designees and the Xxxxxxx
Designees as attorneys-in-fact pursuant to this power of attorney automatically
shall terminate as to such Person at such time as he or it ceases to be a Member
or Manager and from such time shall be effective only as to the substitute
Member(s) or Managers designated or elected pursuant to this Operating
Agreement.
10.3 Notices. (a) All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
addressed to the Members at their addresses set forth on Schedule 1. 8, or to
such other addresses as may have been specified in a written notice duly given
to the others.
(b) Any notices addressed as aforesaid shall be delivered by hand or
overnight courier, by telecopier or by the United States mail by certified mail,
return receipt requested and shall be deemed given upon receipt.
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10.4 Severability. If any covenant, condition, term, or provision of
this Operating Agreement is illegal, or if the application thereof to any Person
or in any circumstance be judicially or administratively determined to be
invalid or unenforceable, the remainder of this Operating Agreement, or the
application of such covenant, condition, term, or provision to Persons or in
circumstances other than with respect to which it is held invalid or
unenforceable, shall not be affected thereby, and each covenant, condition,
term, and provision of this Operating Agreement shall be valid and enforceable
to the fullest extent permitted by law.
10.5 Counterparts. This Operating Agreement may be executed in one or
more counterparts, each of which, for all purposes, shall be deemed an original
and all of such counterparts, taken together, shall constitute one and the same
Operating Agreement. Counterparts of this Agreement may be delivered by
telecopier.
10.6 Entire Agreement; Amendments. This Operating Agreement and the
agreements referred to herein constitute the entire agreement of the parties
relating to the subject matter hereof, and together they supersede and replace
any prior agreement or understanding between some or all of the parties
pertaining thereto. Except as otherwise expressly provided for herein, this
Operating Agreement may not be amended, changed or modified, except by the prior
written consent of each Member.
10.7 Further Assurances. The Members will execute and deliver such
further instruments and do such further acts and things as may be reasonably
required to carry out the intent and purposes of this Operating Agreement,
including, without limitation, such amendments to this Operating Agreement as
the Managers may determine to be reasonably necessary or advisable to ensure
that the Company will be classified and treated as a partnership for federal,
state and local income tax purposes.
10.8 Successors and Assigns. Subject in all respects to the limitations
on transferability contained herein, this Operating Agreement shall be binding
upon, and shall inure to the benefit of, the heirs, administrators,
representatives, successors and permitted assigns of the respective parties
hereto.
10.9 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives, during the term of the Company and during the period of
liquidation following any dissolution, any right that it may have to maintain
any action for partition with respect to any of the assets of the Company.
10.10 Insurance. Each Member agrees that if requested by the Managers,
it shall cause the Company and each other Member to be named as an additional
insured on its liability and malpractice insurance policies, as the case may be.
10.11 Representations of the Members. Each Member hereby represents and
wan-ants to each other Member that:
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(a) Such Member has full authority to enter into this Agreement and
perform the transactions contemplated hereby.
(b) The consummation of the transactions contemplated hereby will
not result in violation of any instrument to which such Member is a party or by
which it is bound.
(c) This Agreement constitutes the valid and binding obligation of
such Member enforceable against it in accordance with its terms subject to
applicable Bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity (regardless if enforcement is sought in a proceeding in
equity or at law).
(d) Such Member has such knowledge and experience in financial and
business matters to enable it (i) to utilize. the information made available to
it in connection with its investment, (ii) to understand and evaluate the merits
and risks of its investment hereunder and (iii) to protect its own interests in
connection with its investment hereunder.
(e) Each Member and its representatives have made an investigation
of the Company and have been granted full access to all information regarding
the Company that it regards as relevant in making a decision to consummate this
transaction. In connection with such investigation of the Company, it and its
representatives: (i) have been given an opportunity to ask, and have, to the
extent considered necessary, asked questions of, and have received answers from
the Company concerning the business of the Company and (ii) have been given or
afforded access to all documents, records, books and additional information that
he has requested regarding such matters.
(f) Such Member is acquiring its Interest solely for its own
account for investment and not with a present intention to make any sale,
distribution or other transfer of its Interest in a manner that is in violation
of any applicable securities laws.
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IN WITNESS WHEREOF, the undersigned have duly executed this Operating
Agreement as of the date first above written.
PARADIGM DIRECT, INC.
By: /s/ Xxxxx Xxxx
------------------------------------------
Name: Xxxxx Xxxx 6/10/98
Title: President
XXXXXXX ENTERTAINMENT, INC.
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxxxx 6/10/98
Title: CEO
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