Exhibit 10.3
LIMITED LIABILITY COMPANY AGREEMENT
LIMITED LIABILITY COMPANY AGREEMENT, dated as of November 20, 1997
(this "Agreement"), by and among ONSITE VENTURES, L.L.C., a Delaware limited
liability company (the "Company"), RSI-OSA HOLDINGS, INC., a Delaware
corporation, having an office located at 000 Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx
Xxxx 00000 ("RSI"), VERITECH VENTURES LLC, a New York limited liability company
having an office located at 0 Xxxxxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxx
Xxxx, XX 00000 ("Veritech", together with RSI, the "Institutional Members"),
XXXXXX XXXXX, an individual with an address at 000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxx
Xxxx 00000 ("Simon"), XXXXX XXXXXX, an individual with an address at 000 Xxxx
00xx Xxxxxx, #0X, Xxx Xxxx, Xxx Xxxx 00000 ("Xxxxxx"), and XXXXXX XXXXXXXXXX, an
individual with an address at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 ("Rabinowitz",
and together with Simon and Xxxxxxx, the "General Members"). The General Members
and the Institutional Members who execute and deliver this Agreement are
referred to herein, collectively, as the "Members" and, individually, as a
"Member". Unless otherwise expressly set forth herein, all capitalized terms
used herein shall have the meaning ascribed thereto in Section 23.
WHEREAS, on November 20, 1997 the Members formed the Company as a
Delaware limited liability company pursuant to the Limited Liability Company Act
of the State of Delaware, as amended, Title 6 ss.ss.18-101 et seq. (the "Act");
WHEREAS, prior to the Effective Date, JAH Realties, L.P., a New York
limited partnership ("JAH"), Xxxxxxxxxx, Xxxxx and Xxxxxx were members in
Veritech with a percentage membership interest in Veritech of 62.875%, 5.450%,
26.947%and 4.728%, respectively;
WHEREAS, on or prior to the Effective Date (as hereinafter defined),
Veritech and certain of its Affiliates have contributed to the Company all of
their respective right, title and interest in and to all of the assets
(collectively, the "Contributed Assets") (other than the regulatory approvals,
licenses and permits held by ONSITE ACCESS LLC, a New York limited liability
company ("OCC Access"), and ONSITE ACCESS LOCAL LLC, a New York limited
liability company ("OCC Local") which approvals, licenses and permits shall
continue to be held by OCC Access and OCC Local) which are used or useful in
connection with the Company's Business (as hereinafter defined) as heretofore
conducted by Veritech and such Affiliates pursuant to the terms and conditions
of that certain Capital Contribution Agreement (the "Capital Contribution
Agreement") including, without limitation, all of the membership interests in
OCC Access and OCC Local;
WHEREAS, the Members desire to provide for the stability and
continuity of the management of the affairs of the Company and to impose certain
rights and restrictions with respect to the transfer or other disposition of
their membership interests upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Formation.
(a) Formation; Name; Office. On November 20, 1997, the Members formed
the Company under and pursuant to the Act (and filed an amendment to the
Certificate of Formation on November 26, 1997) to be conducted under the name
"ONSITE VENTURES, L.L.C." The business office of the Company shall be 000 Xxxxx
Xxxxxx, Xxx Xxxx, XX 00000 or at such other place or places as the Board of
Managers (as defined below) may from time to time designate.
(b) Purposes. The purposes for which the Company has been formed are:
(i) To, through itself and its subsidiaries, construct and
develop advanced telecommunications distribution systems within
commercial and residential buildings and/or commercial and residential
complexes (each, a "Building") and provide to residential and
commercial customers (A) local, long distance, international, calling
card, 800/888 services, directory assistance, paging, wireless and
other related telephone services, (B) local loop provisioning and
selling of circuits either directly or through ventures or telephone
carrier reselling agreements, (C) dial-up, dedicated and satellite
Internet access, (D) Internet service provider services for website
hosting, E-mail, collocation, news groups, browser software and
Internet links such as ESPN/Sportzone, HotBot, MSNBC, Yahoo and
Weather Channel, (E) standard cable and television access, (F) LAN and
desktop installation, router, hub and CSU/DSU setup services and sales
of related equipment (collectively, "Equipment") and (G) customer
referrals to providers of hardware and installation services related
thereto;
(ii) To promote and develop the Plan of the Company set forth on
Exhibit I (the "Plan" and, together with the operations and activities
described in Section 1(b)(i), but excluding the primary business of
OCC Access and OCC Local, the "Business");
(iii) To negotiate, execute and enter into and perform any and
all contracts and agreements necessary or desirable for, or otherwise
related to, the Company's Business, including, without limitation, the
operation or management of the Company or the ownership, operation or
management of any asset or property owned by the Company;
(iv) To accomplish any lawful business whatsoever or which shall
at any time appear conducive to, or expedient for, the protection or
benefit of the Company or its assets or properties and in furtherance
of the Business;
(v) To engage in any lawful act or activity for which a limited
liability company may be formed under the Act in furtherance of the
Business; and
(vi) To engage in all activities necessary, customary, convenient
or incident to any of the foregoing.
(c) Term. The term of existence of the Company commenced on November
20, 1997 and shall end on December 31, 2047 unless the Company is earlier
dissolved in accordance with either the terms of this Agreement or the Act (the
"Term"). This Agreement shall be effective, except as otherwise provided herein,
until the earlier of the Term or the date of an IPO by the Company of at least
twenty (20%) percent of the aggregate membership interests in (or other equity
interest in or equity security of) the Company on a fully diluted basis after
giving effect to such IPO.
(d) Registered Office and Resident Agent. The registered office and
the resident agent of the Company shall be as designated in the Certificate of
Formation of the Company (the "Certificate") or any amendment thereof. The
registered office and the resident agent may be changed from time to time by the
Board of Managers in accordance with the Act. If the resident agent shall ever
resign, then the Board of Managers shall promptly appoint a successor resident
agent and shall file an appropriate amendment to the Certificate.
2. Capital Contributions.
(a) Initial Capital Contributions. Simultaneously with the execution
and delivery of this Agreement free and clear from any escrow conditions (the
"Effective Date") Veritech shall assign, transfer and contribute all of its
right, title and interest in, to and under the Contributed Assets (including,
without limitation, the then remaining proceeds of the Interim Loans) which the
parties hereto acknowledge and agree have a fair market value net of the
Veritech Excess, as of the Effective Date, of FOUR MILLION AND FIFTY THOUSAND
and 00/100 ($4,050,000.00) DOLLARS. The initial capital contribution of each of
Veritech, Xxxxxxxxxx, Xxxxx and Xxxxxx shall be their proportionate share (on a
fair market value basis) in the Contributed Assets which they are deemed to have
had immediately prior to the Effective Date through their respective ownership
of membership interests in Veritech prior to the Effective Date (which were
redeemed by Veritech in consideration for membership interests in the Company).
In addition to the foregoing, simultaneously with the execution and delivery of
this Agreement: (i) the Company shall assume all payment obligations for
borrowed money of Veritech with respect to the Interim Loans if such amount is
converted into a Committed Loan (as defined by the RSI Subordinated Note) on
such date; and (ii) RSI and the Company shall execute and deliver that certain
Convertible Subordinated Loan Agreement and Promissory Note in the form attached
hereto as Exhibit II (the "RSI Subordinated Note") dated as of the Effective
Date, pursuant to, and subject to the terms and provisions of, RSI shall have
the irrevocable obligation to loan the Company up to an aggregate amount of SIX
MILLION FIVE HUNDRED THOUSAND and 00/100 ($6,500,000.00) DOLLARS less the
aggregate amount of the Interim Loans (which shall be converted into and deemed
a part of such convertible subordinated loan (as evidenced by an endorsement on
the schedule to the RSI Subordinated Note)) from time to time upon demand of the
Company in amounts not less than five hundred thousand ($500,000) dollars for
expenditures to be made by the Company approved in accordance with the Section 9
(Governance), it being acknowledged and agreed that such conversion and the
entering into of the RSI Subordinated Note and other good and valuable
consideration shall be the initial capital contribution of RSI. The initial
capital contribution of each of RSI, Veritech, Xxxxxxxxxx, Xxxxx and Xxxxxx is
referred to herein as a "Initial Capital Contribution".
(b) Issuance of Membership Interests. In consideration of the
foregoing, the Company shall issue to each of RSI, Veritech, Simon, Xxxxxx and
Xxxxxxxxxx a Percentage Membership Interest (as defined below) in the Company as
described and provided for in this Section 2.
(c) Initial Percentage Membership Interests. (i) Effective as of the
date hereof, the Percentage Membership Interest of each Member in the Company
(their respective "Percentage Membership Interest"), as the same may be adjusted
from time to time pursuant to the terms and conditions of this Agreement,
including, without limitation, in order to reflect a Transfer (as defined below)
of all or part of a Member's membership interest is as follows:
Percentage Membership
Member Interests
------ ---------------------
RSI 1.0000%
Veritech 62.2470%
Simon 26.6770%
Xxxxxx 4.6800%
Xxxxxxxxxx 5.3960%
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TOTAL: 100.0000%
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(ii) Effective as of the date that the Conversion Right is exercised,
the Percentage Membership Interest of each Member in the Company, as the same
may be adjusted from time to time pursuant to the terms and conditions of this
Agreement and the RSI Subordinated Note, including, without limitation, the
purchase of Additional Interests and a Transfer of all or part of a Member's
membership interest is as follows:
Percentage Membership
Member Interests
------ ---------------------
RSI 58.6900%
Veritech 25.9740%
Simon 11.1317%
Xxxxxx 1.9529%
Xxxxxxxxxx 2.2514%
--------
TOTAL: 100.0000%
========
(d) Members' Liability. Except as otherwise provided in this
Agreement, the liability of a Member, solely as Member, for any obligations,
debts or liabilities incurred by the Company shall be limited to the aggregate
amount of the capital contributions that such Member has made or is obligated to
make to the Company.
(e) Uses of Capital Contributions and Proceeds from the RSI
Subordinated Note; Interest on Capital Contributions. Any funds received by the
Company pursuant to this Section 2 and any funds loaned to the Company by RSI
under the terms of the RSI Subordinated Note shall be utilized by the Company
for Company purposes in accordance with Section 9; provided, that such funds
shall also be used for the payment of the Veritech Excess. Except as otherwise
provided in this Agreement, no interest shall accrue on any capital
contribution.
(f) Withdrawal of Capital. Subject to Section 2(g), unless the prior
unanimous written consent of the Members shall have been obtained and except as
otherwise provided in this Agreement, no Member shall have the right to withdraw
any part of such Member's capital contributions prior to the liquidation and
termination of the Company pursuant to Section 19 of this Agreement.
(g) Veritech Excess. Notwithstanding Section 2(f), Veritech shall be
entitled on the Effective Date to receive from the Company cash in the sum of
$306,806, which sum represents the amount which the aggregate unreturned capital
contributions of JAH, Simon and Xxxxxx in Veritech immediately prior to the
Effective Date exceeds $550,000 (the "Veritech Excess"). Except for the Veritech
Excess, all cash investments made on or prior to the Effective Date by a member
in Veritech, whether in the form of a capital contribution, loan or otherwise,
including, without limitation, JAH, Simon, Xxxxxx and Xxxxxxxxxx shall be
included in the Contributed Assets and may not be withdrawn.
(h) Source of Distributions. No Member, manager or any of their
respective Affiliates shall be personally liable for the return of the capital
contributions of any other Member, or any portion thereof, it being expressly
understood that any such return shall be made solely from the Company's assets.
3. Title to the Property of the Company.
(a) Title to the Property of the Company. Title to any and all
property, real, personal or mixed, owned by, or leased to, the Company shall be
held in the name of the Company, or in the name of any nominee which the Board
of Managers may, in its sole and absolute discretion, designate, and no Members,
individually or collectively, shall have, or shall be deemed to have, any
ownership interest in or to any such property.
4. Representations and Warranties of the Members.
(a) Representations and Warranties of Each Member. Each Member (solely
with respect to such Member) represents and warrants to the Company and each
other Member as follows:
(i) Such Member has the full power and authority to execute,
deliver and perform this Agreement;
(ii) This Agreement has been duly and validly authorized,
executed and delivered by such Member and constitutes a valid and
binding obligation of such Member;
(iii) The execution, delivery and performance of this Agreement
by such Member does not violate or conflict with or constitute a
default under such Member's certificate of incorporation, by-laws,
certificate of limited partnership, certificate of formation, limited
liability company agreement, partnership agreement or similar charter
or organizational document or any material agreement to which it is a
party or by which it or its property is bound; and
(iv) Such Member has acquired its membership interest for
investment purposes only and not with a view to the distribution
thereof in violation of any applicable state or federal securities
law; it being acknowledged and agreed, however, that each Member shall
have the rights set forth herein with respect to a Syndication.
(b) Additional Representation and Warranty of Veritech. Veritech
represents and warrants to the Company and each other Member that the amount of
the Veritech Excess is not less than the amount specified in Section 2(g).
5. Sale or Transfer of Membership Interest.
(a) General Restrictions. Subject to the terms and provisions of
Section 5(b), during the term of this Agreement, without the prior written
consent of each other Member, no Member shall, directly or indirectly, sell,
pledge, hypothecate, give, devise, transfer, create a security interest in or
lien on, place in trust (voting or otherwise), assign or in any other way
encumber or dispose of (each, a "Transfer") any membership interest now or
hereafter at any time held by him or it, or any interest therein, or the
certificate or document representing any such membership interest, if any (each,
a "Transfer of Interest"). Without limiting the generality of the foregoing,
except with respect to the membership interest in Veritech held (or entitled to
be held) on the date hereof by any employee of, or member in, Veritech
(provided, that any such Transfer of Interest is limited among such employees,
such members and Veritech), a Transfer of Interest by a Member shall include the
direct or indirect Transfer of any equity securities of, or interest in, such
Member and with respect to any such Transfer, a Permitted Transfer shall pertain
to any Transfer by holder of such equity interests as if the transferor were a
Member and the interest being Transferred were membership interests. Any
Transfer of Interest effected or purported or attempted to be effected: (i) not
in accordance with the terms and conditions of this Agreement; (ii) to an
individual younger than 18 years of age or who has been adjudged incompetent or
insane; or (iii) to a person prohibited by law from holding any membership
interest, shall be void ab initio and shall not bind the Company or any Member.
(b) Permitted Transfers of Interest. Notwithstanding the provisions of
Section 5(a) hereof and subject to Section 5(b)(vii), a Member may, without the
consent of any other Member, effect a Transfer of Interest as follows (each, a
"Permitted Transfer"); provided, however that neither Veritech nor any General
Member may effect a Transfer of Interest to any Disqualified Transferee.
(i) Testamentary and Gift Transfers. Each Member that is an
individual may effect a Transfer of Interest by gift, will or the laws
of descent and distribution to any Family Group Member of such Member;
(ii) Affiliate Transfers. Each Member may effect a Transfer of
Interest to an Affiliate of such Member and, with respect to RSI, may
effect a Transfer of Interest to Reckson Services Industries Inc.
("Reckson");
(iii) Sale to the Company. Any Member may Transfer any membership
interest to the Company pursuant to this Agreement or otherwise;
(iv) Sales to Third Parties. Any Member may sell any membership
interest to another Member or any third party purchaser who is not an
Affiliate of such Member to the extent provided in, and in accordance
with, the provisions of this Agreement, including Sections 6, 7, 8,
10, 14, 15 and 16; provided, that (x) on or prior to the date that is
two (2) years after the Effective Date no Member shall sell any of its
membership interests pursuant to a Third Party Offer or to any other
Member (other than pursuant to a Buy/Sell Right, Participation Right,
Tag-Along Right or pursuant to Section 8 (Bring-Along Rights)); and
(y) on or prior to the date that is three (3) years after the
Effective Date no Member shall sell any of its membership interests
unless it together with its Affiliates concurrently sells, in the
aggregate, the same percentage of the membership interests in OnSite
Commerce and Content LLC, a Delaware limited liability company and an
Affiliate of the Company ("OCC") held by it and its Affiliates, to the
same third party purchaser or other Member;
(v) Pledges. (A) Each Member may grant a security interest
("Pledge") in any of its membership interests now or hereafter held by
it, and an Affiliate of a Member may Pledge any equity interest in
such member, to secure its indebtedness (or the indebtedness or the
guarantee of indebtedness of any of its Affiliates that is incurred
for general purposes) owing to a bank, financial institution, third
party lender or other Person (a "Pledgee") if the Pledgee is not a
Disqualified Transferee; provided, however, that in the event a
Pledgee or its successor succeeds to the interest of such Member, then
such Member and such Pledgee shall deliver a notice to the Company and
each other Member of such succession and at any time within three (3)
months after the earlier to occur of (x) delivery of such notice or
(y) actual knowledge of such succession: (1) Veritech, if the member
which granted such security interest is RSI, (2) RSI, if the member
which granted such security interest is Veritech, may elect to
exercise a Buy/Sell Right between such Members as if there were a
Deadlock with respect to a Significant Decision in accordance with the
terms and provisions of Section 10 but without the requirement of
providing a Warning Notice; or (3) the Company, if the Member which
granted such security interest is a General Member, may elect to
redeem all the membership interest of such Member at the Fair Market
Value of such membership interests;
(B) Notwithstanding the provisions of Section 5(b)(v)(A),
neither Veritech nor any General Member may on or prior to the date
that is two years after the Effective Date Pledge any of their
respective membership interests for: (1) any purpose other than the
acquisition (or the refinancing of the acquisition) of the membership
interests held by such Member; or (2) an aggregate amount which,
together with all prior Pledge transactions, is in excess of the
aggregate amount paid or payable to the Company or a Member for the
aggregate purchase price of such membership interests including,
without limitation, Additional Interests (or for the purpose of
refinancing such indebtedness);
(vi) Syndication. On and after the date that is two (2) years
after the Effective Date a Member may syndicate its membership
interests by a Transfer of the equity interests in such Member in any
transaction or series of related transactions (each, a "Syndication");
provided, that (A) neither Veritech nor any General Member shall
effect any Syndication which (together with all prior Syndications)
would result in the Syndication of 50% or more of such Member's
membership interest; (B) no direct or indirect subscriber, participant
or Transferee of any such interest shall be a Disqualified Transferee;
(C) such Member and each such subscriber, participant or Transferee
shall be subject to, and shall submit to, the jurisdiction of the
Delaware Court of Chancery, the New York state courts in New York
County and all federal courts; (D) with respect to a Syndication by
Veritech or a General Member, the Syndicate Representatives of such
Member shall be the exclusive representatives of such Member and the
membership interests, business and affairs of such Member; (E) no such
transaction shall relieve such Member from any of its obligations
under this Agreement; and (F) with respect to any Syndication by
Veritech, at the time of any such Syndication, the Family Group
Members of Veritech shall, collectively, own at least one-third of the
beneficial economic interests in JAH Realties, L.P., a New York
Limited Partnership, which presently owns 70% of the equity interests
in Veritech; and
(vii) Conditions to a Permitted Transfer. Notwithstanding the
provisions of this Section 5(b), no Transfer of Interest shall be a
Permitted Transfer unless, in each case, such Transfer of Interest (A)
complies with all applicable federal and state securities and "Blue
Sky" laws, (B) does not relieve such Member from any of its
obligations under this Agreement, (C) does not require the
registration of any membership interests or any other security under
the Securities Act of 1933, as amended, (the "1933 Act"), (D) does not
require the approval, license or permit of, or notification to, any
regulatory authority with jurisdiction over OCC Access or OCC Local
(unless all required approvals, licenses or permits have been obtained
and are in full force and effect, or all such notifications have been
made, in each case, to the satisfaction of the Company) and (D) prior
to the consummation of any Permitted Transfer (x) the Company and each
Member shall have received a notice from the Member proposing such
Transfer of Interest stating the provision herein which permits such
Transfer of Interest, the identity of such permitted assignee or
transferee (any such person, regardless of the method of Transfer,
being referred to herein as a "Transferee"), the expected closing date
for such Transfer of Interest the amount of membership interest or
equity interest proposed to be Transferred and, if such Transfer of
Interest is to be effected by a Member pursuant to clause (iv), the
purchase price or other consideration to be received in connection
with such Transfer of Interest, if any, (y) the Company shall have
received the opinion of its counsel that such Transfer of Interest
does not require registration under the 1933 Act (which, for avoidance
of doubt, does not include a notice to the Securities and Exchange
Commission) or any applicable state securities or "Blue Sky" laws
together with all documentation reasonably requested by the Company to
evidence that such Transfer of Interest is permitted hereunder and to
otherwise disclose the identity and financial condition of such
Transferee and (z) any Transferee not a party hereto shall execute an
appropriate document confirming that such Transferee takes such
membership interests subject to the terms and conditions of this
Agreement and assumes all of the obligations of the Member effecting
such Transfer of Interest hereunder and with respect to such
membership interests. The Company shall not give effect on its books
to any Transfer or purported Transfer of membership interests held or
owned by any Member to any Transferee unless each and all of the
conditions hereof affecting such Transfer shall have been complied
with.
(c) Indemnity by Member for an Invalid Transfer of Membership
Interests. In the event that any Member effects or purports to effect any
Transfer of Interest other than a Permitted Transfer, then such Member shall
indemnify and hold harmless the Company and each other Member from and against
any and all liabilities or damages to such party by reason of such act
including, without limitation, reasonable attorneys' fees and disbursements
incurred by any such indemnified party in connection with any such act as and
when such liabilities or damages are determined and such expenses are incurred.
6. Right of First Refusal.
(a) Right of the Institutional Members. If, at any time, either
Institutional Member has a bona fide written offer, including an offer which is
a result of solicitation by such Institutional Member, for a Contingent Transfer
other than a Transfer to another Member, for any or all of its membership
interests (collectively, the "Third Party Offered Interest") and such
Institutional Member (the "Selling Institutional Member") desires to accept such
offer, such Selling Institutional Member shall give a prompt notice regarding
such proposed Contingent Transfer (a "Notice of Offer") to the other
Institutional Member (the "FR Member") and each other Member which notice shall
contain: (i) a true and complete copy of such offer; (ii) the Percentage
Membership Interests proposed to be sold; (iii) the identity of such third party
purchaser and its controlling Affiliates; (iv) reasonable and sufficient
evidence that such third party purchaser has a financial net worth sufficient to
consummate the proposed Permitted Transfer (it being acknowledged and agreed
that if the FR Member does not dispute the reasonableness and sufficiency of
such information by delivering a notice to the Selling Institutional Member to
such effect within ten (10) business days after the delivery of the Notice of
Offer that such information shall be deemed to satisfy the requirements of this
clause (iv)); (v) the proposed Third Party Price; and (vi) the other material
terms and conditions of such offer including, without limitation, any promissory
notes included in such Third Party Price and the proposed date of closing.
(b) Acceptance Period. For a period of ten (10) business days after
receipt of the Notice of Offer (the "FR Acceptance Period"), the FR Member shall
have the right, but not the obligation (the "FR Right"), to purchase all, but
not less than all, of the Third Party Offered Interest from the Selling
Institutional Member in accordance with the provisions of this Section 6 at a
purchase price equal to the Third Party Price. The FR Member may exercise its FR
Right by providing a notice (the "FR Acceptance Notice") to such effect to the
Selling Institutional Member and each General Member on or prior to the
expiration of the FR Acceptance Period and specifying the proposed date for the
closing of the purchase and sale of the Third Party Offered Interest (the "FR
Closing Date") which date shall not be later than (x) sixty (60) days after the
date that the Notice of Offer is delivered, if the FR Member is RSI, or (y) one
hundred and eighty (180) days after the date that the Notice of Offer is
delivered, if the FR Member is Veritech.
(c) FR Deposit. Upon exercise of its FR Right, the FR Member shall
deliver a deposit (the "FR Deposit") to the Selling Institutional Member on or
prior to five (5) business days after the delivery of the FR Acceptance Notice,
which deposit shall be as set forth below:
(i) if Veritech is the FR Member, the FR Deposit shall equal the
greater of (x) 5% of the aggregate Third Party Price or (y) $300,000
(but not in excess of the aggregate Third Party Price). The FR Deposit
shall consist of (x) a certified check (the "Cash Deposit") payable to
the order of RSI in an amount equal to not less than the lesser of the
amount of the FR Deposit or $1,000,000 and (y) either (A) a first
priority security interest in, and pledge of, a percentage of
Veritech's membership interest such that the product of (1) the
aggregate Third Party Price divided by (2) the Percentage of
Membership Interest represented by the Third Party Offered Interest
multiplied by (3) Veritech's Percentage Membership Interest pledged to
the Selling Institutional Member is equal to 1.5 times the amount that
the FR Deposit exceeds the amount of the Cash Deposit, if any, or (B)
a second priority security interest in, and pledge of, all of the
membership interests of the FR Member, if the amount of the FR Deposit
is greater than the amount of the Cash Deposit actually paid.
(ii) if RSI is the FR Member, the FR Deposit shall equal 5% of
the aggregate Third Party Price for the Third Party Offered Interest
consisting of (x) a Cash Deposit payable to the order of Veritech in
an amount equal to not less than the lesser of the amount of the FR
Deposit or $3,000,000 and (y) either (A) a first priority security
interest in, and pledge of, a percentage of RSI's membership interest
such that the product of (1) the aggregate Third Party Price divided
by (2) the Percentage of Membership Interest represented by the Third
Party Offered Interest multiplied by (3) RSI's Percentage Membership
Interest pledged to the Selling Institutional Member is equal to 1.5
times the amount that the FR Deposit exceeds the amount of the Cash
Deposit, if any, or (B) a second priority security interest in, and
pledge of, all of the membership interests of the FR Member, if the
amount of the FR Deposit is greater than the amount of the Cash
Deposit actually paid.
(iii) if an FR Member is required to deliver to the Selling
Institutional Member a security interest in, and pledge of, any of its
membership interests, it will execute and deliver such documents
(including, without limitation, UCC Financing Statements) as are
reasonably required by the Selling Institutional Member to the Selling
Institutional Member at its address specified in Section 28. It is
acknowledged and agreed that any security interest in, and pledge of,
membership as collateral security provided in this Section shall be
limited for the purpose of providing collateral for the amount of the
FR Deposit which is in excess of the Cash Deposit, if any.
Accordingly, the Selling Institutional Member's right and interest in
the FR Member's membership interest shall be limited to the Deposit
Defaulted Interests of the FR Member.
(iv) it is acknowledged and agreed that, except as expressly
provided below, the FR Deposit is intended to be a non-refundable
deposit to secure the obligations of the FR Member. Accordingly, if
the FR Member fails to purchase the Third Party Offered Interest on
the FR Closing Date, other than as a result of an Excused Condition,
then: (A) the Selling Institutional Member shall retain the Cash
Deposit and the Deposit Defaulted Interests as liquidated damages for
the harm (which harm is acknowledged to not be readily measurable in
damages) caused by the failure of the FR Member to timely conclude
such purchase and, to the extent that a portion of the FR Deposit
constituted a pledge of membership interests, the Deposit Defaulted
Interests shall be transferred to the Selling Institutional Member and
any membership interests included in the FR Deposit other than the
Deposit Defaulted Interests shall be returned to the FR Member; and
(B) the FR Member shall promptly upon request vote all of its
membership interests in favor of a transaction for the sale of the
entire Company (whether by a merger, consolidation, recapitalization,
sale of assets or membership interests or otherwise) to be consummated
within 180 days after the FR Closing Date at an aggregate value of not
less than ninety-five (95%) percent of the Third Party Price divided
by the Percentage of Membership Interest represented by the Third
Party Offered Interest (e.g., the value of the Company using the
Third-Party Price) if the Selling Institutional Member votes its
membership interests (or causes the directors designated by the
Selling Institutional Member to vote) in favor of such transaction.
(d) Exercise of FR Right. Subject to Section 7, upon exercise of its
FR Right, the Selling Institutional Member shall be obligated to sell all, but
not less than all, of the Third Party Offered Interest to the FR Member, and the
FR Member shall be obligated to purchase all, but not less than all, of: (i) the
Third Party Offered Interest from the Selling Institutional Member; and (ii) the
Tag-Along Interest of each General Member, if any, simultaneously on the FR
Closing Date, in each case, at a price equal to the Third Party Price; provided,
that, at the sole discretion of the FR Member, the payment of the aggregate
Third Party Price may be on the terms and conditions stated in the Notice of
Offer including by the issuance of any promissory notes described therein ("FR
Notes"). Each Member shall use all commercially reasonable efforts to secure any
approvals required to be obtained by such Member for the consummation of the
purchase and sale of such membership interests.
(e) Failure to Exercise FR Right or Failure to Close after Exercise.
In addition to the rights granted to the Selling Institutional Member under
Section 6(c)(iv), if the FR Member: (i) does not exercise its FR Right hereunder
with respect to all, but not less than all, of the Third Party Offered Interest
within the FR Acceptance Period; (ii) does not deliver the FR Deposit to the
Selling Institutional Member in accordance with Section 6(c); or (iii) otherwise
fails to purchase such membership interest on or prior to the FR Closing Date
other than as a result of an Excused Condition, then:
(A) If an FR Acceptance Notice was not delivered, the Selling
Institutional Member shall be free (subject to any Tag-Along Rights of
the Members as provided for in Section 7) to sell the Third Party
Offered Interest at the price and upon the terms specified in the
Notice of Offer within sixty (60) days after the expiration of the FR
Acceptance Period and in compliance with the provisions of Section 5;
(B) If an FR Acceptance Notice was delivered but the FR Deposit
was not delivered to the Selling Institutional Member in accordance
with Section 6(c), the Selling Institutional Member shall be free
(subject to any Tag-Along rights of the Members as provided for in
Section 7) to sell the Third Party Offered Interest at a price not
less than ninety-five (95%) percent of the Third Party Price within
one hundred twenty (120) days after the five (5) business days
specified in Section 6(c) and in compliance with the provisions of
Section 5; and
(C) If an FR Acceptance Notice and the FR Deposit was delivered,
the Selling Institutional Member shall be free (subject to any
Tag-Along Rights of the Members as provided for in Section 7) to sell
the Third Party Offered Shares at a price not less than ninety-five
(95%) percent of the Third Party Price within one hundred eighty (180)
days after the earlier to occur of (x) the date a notice is delivered
by the FR Member to the Selling Institutional Member specifying that
the FR Member will not purchase the Third Party Offered Interest on
the FR Closing Date or (y) the proposed FR Closing Date and in
compliance with the provisions of Section 5.
If the Selling Institutional Member does not consummate the sale
of the Third Party Offered Interests within the applicable time period specified
above, then the provisions of this Section 6 shall again apply, and no sale of
membership interests shall be made otherwise than in accordance with the terms
of this Agreement.
(f) FR Right Closing. On the FR Closing Date at the offices of the
Company: (i) the FR Member shall pay the aggregate Third Party Price (less the
Cash Deposit actually received by the Selling Institutional Member) to the
Selling Institutional Member by wire transfer of immediately available funds
(or, if the Notice of Offer permits FR Notes, an amount equal to the sum of cash
and the principal amount of the FR Notes); and (ii) the Selling Institutional
Member shall deliver to the FR Member (x) an assignment of the Third Party
Offered Interest in a form and substance reasonably acceptable to the FR Member
and assign and transfer all, but not less than all, of the Third Party Offered
Interest free and clear of any Liens (but such membership interests shall
continue to be subject to the provisions of this Agreement) and (y) a release of
the non-cash portion of the FR Deposit and all documents delivered to it in
connection therewith. If any Tag-Along Member has exercised his or its Tag-Along
Right in accordance with Section 7, then on the FR Closing Date at the offices
of the Company simultaneously with the closing of the purchase of the Third
Party Offered Interest (x) the FR Member shall pay an amount of cash (or, if the
Notice of Offer permits FR Notes, an amount equal to the sum of cash and the
principal amount of the FR Notes), equal to the amount of the Tag-Along Interest
of each such Tag-Along Member valued at the Third Party Price of such Tag-Along
Interest and (y) each such Tag-Along Member shall deliver the to the FR Member
an assignment of the Tag-Along Interest of such Tag-Along Member in a form and
substance reasonably acceptable to the FR Member and assign and transfer all,
but not less than all, of the Tag-Along Interests of such Tag-Along Member free
and clear of any Liens (but such membership interests shall continue to be
subject to the provisions of this Agreement).
(g) Proposed Sale by a General Member
(i) General Member Offered Interest. If, at any time, a General
Member has a bona fide written offer, including an offer which is a result of
solicitation by such General Member, to effect a Contingent Transfer for any or
all of his or its membership interests (collectively, the "General Member
Offered Interest") and such General Member desires to accept such offer, such
General Member shall promptly give a Notice of Offer (which shall include the
items set forth in clauses (a)(i) through (vi), inclusive, of Section 6) to each
Institutional Member.
(ii) IM Acceptance Period. For a period of ten (10) business days
after receipt of the Notice of Offer (the "IM Acceptance Period"), each
Institutional Member shall have the right, but not the obligation (the "IM
Refusal Right"), to purchase all, but not less than all, of each Institutional
Member's pro rata share of each such General Member Offered Interest (each, an
"IM Share") in accordance with this Section 6. Each Institutional Member may
exercise its right to purchase all, but not less than all, of its IM Share of
the General Member Offered Interest by providing a notice to such effect (the
"IM Acceptance Notice") to such General Member and the other Institutional
Member on or prior to the expiration of the IM Acceptance Period, together with
a cash deposit (a "ROI Deposit") in an amount equal to five (5%) percent of the
aggregate purchase price for the IM Share of such General Member Offered
Interest (determined as set forth below) to be purchased by such Institutional
Member (such deposit to be retained by such General Member as liquidated damages
in the event that such Institutional Member fails to timely consummate the
purchase of such membership interests for any reason other than an Excused
Condition).
(iii) Exercise of the Purchase Right by each Institutional
Member. Upon exercise of the IM Refusal Right and delivery of the ROI Deposit by
an Institutional Member, each such General Member shall be obligated to sell
all, but not less than all, of the IM Share of the General Member Offered
Interest to such Institutional Member and such Institutional Member shall be
obligated to purchase all, but not less than all, of its IM Share of the General
Member Offered Interest on the date that is specified in the Notice of Offer,
but in any event, not earlier than sixty (60) days after the date that the IM
Acceptance Notice is delivered (the "IM Closing Date") at a purchase price equal
to the Third Party Price of such General Member Offered Interest. Each such
Member shall use all commercially reasonable efforts to secure any approvals
required to be obtained by such Member for the consummation of the purchase and
sale of such membership interests.
(iv) Exercise of the Purchase Right by one Institutional Member.
If one but not both Institutional Members exercises its IM Refusal Right and
delivers its ROI Deposit on or prior to the IM Acceptance Period, then such
General Member shall promptly deliver a notice to such effect to the exercising
Institutional Member and within five (5) business days after the date such
notice is delivered such exercising Institutional Member shall have the right,
but not the obligation, to purchase the IM Share of such General Member Offered
Interest of the non-exercising Institutional Member by providing a notice to
such effect to such General Member on or prior to the expiration of such five
(5) business day period together with the ROI Deposit applicable to such IM
Share. Upon delivery of such notice and ROI Deposit, such General Member shall
be obligated to sell all, but not less than all, of such General Member Offered
Interest to such exercising Institutional Member and such exercising
Institutional Member shall be obligated to purchase all, but not less than all,
of such General Member Offered Interest on the IM Closing Date at a purchase
price equal to the Third Party Price of the General Member Offered Interest.
Each General Member Transferring a General Member Interest and such exercising
Institutional Member shall use all commercially reasonable efforts to secure any
approvals required to be obtained by such Member for the consummation of the
purchase and sale of such membership interests.
(v) Failure to Exercise the IM Refusal Right in Full. If one or
both Institutional Members do not elect to purchase all, but not less than all,
of such General Member Offered Interest in accordance with this Section 6(g), or
if such Institutional Member(s) otherwise fail to purchase such membership
interest on or prior to the IM Closing Date other than as a result of a Excused
Condition, then
(A) if each Institutional Member did not exercise its IM Refusal
Right, then such General Member shall be free to sell such General
Member Offered Interest other than the IM Share of the General Member
Offered Interest of any exercising Institutional Member at the Third
Party Price of such membership interest and upon the terms specified
in the Notice of Offer within sixty (60) days after the expiration of
such ten (10) business day period and in compliance with the
provisions of Section 5; and
(B) if an IM Acceptance Notice was delivered and the ROI Deposit
was delivered to such General Member in accordance with this Section
6(g) and one or both Institutional Members failed to purchase its IM
Share of the General Member Offered Interest on the IM Closing Date
other than as a result of an Excused Condition, then such General
Member shall be free to sell such General Member Offered Interest
other than the IM Share of the General Member Offered Interest of
non-defaulting Institutional Member at a price equal to not less than
ninety-five (95%) percent of the Third Party Price of such membership
interest within one hundred and eighty (180) days after the expiration
of the IM Closing Date and in compliance with the provisions of
Section 5.
If such General Member proposing to Transfer a General Member Interest
does not consummate the sale within the applicable period specified above, then
the provisions of this Section 6 shall again apply, and no sale of membership
interests shall be made otherwise than in accordance with the terms of this
Agreement.
(vi) Closing of the General Member Sale. On the date specified
for the closing of the purchase and sale of a General Member Offered Interest
(or an IM Share) at the offices of the Company (x) the Institutional Member
purchasing such General Member Offered Interest (or an IM Share) shall pay to
the General Member Transferring such General Member Interest an aggregate amount
equal to the General Member Offered Interest (or such IM Share) valued at the
Third Party Price of such membership interests (less the amount of the ROI
Deposit actually paid to the General Member Transferring the General Member
Interest) for the General Member Offered Interest (or such IM Share) by wire
transfer of immediately available funds and (y) the General Member Transferring
such General Member Interest shall deliver to such Institutional Member an
assignment of such General Member Offered Interest (or such IM Share) in a form
and substance reasonably acceptable to such Institutional Member and assign and
transfer all, but not less than all, of such General Member Offered Interest (or
such IM Share) free and clear of any Liens (but such membership interests shall
continue to be subject to the provisions of this Agreement).
7. Tag-Along Rights.
(a) Qualifying Sale. If one or more Members proposes to effect a
Contingent Transfer of any or all of its membership interests then, each other
Member shall have such rights (the "Tag-Along Rights") as are set forth below:
(i) If the Member proposing to sell all or part of its membership
interest (the "Selling Member") is an Institutional Member, then each
Tag-Along Member may require, and the selling Institutional Member
shall cause, such third party purchaser or Institutional Member to
purchase from him or it all, but not less than all, of the Tag Along
Interest of such Tag-Along Member.
(ii) An Institutional Member with Tag-Along Rights with respect
to a Third Party Offer with respect to which it exercised its FR Right
(a "Specified Sale") and either: (A) failed to deliver the applicable
FR Deposit in accordance with Section 6(c); or (2) otherwise failed to
purchase all of such Third Party Offered Interest on the FR Closing
Date other than as a result of an Excused Condition, shall have a
Tag-Along Right with respect to the sale of such Third Party Offered
Interest (e.g. the membership interests applicable to the Specified
Sale) if (1) such Third Party Offered Interest are sold by the Selling
Member in accordance with Section 6(e)(B) or 6(e)(C) and (2) if the
Selling Member in connection with the Specified Sale did not receive
the applicable FR Deposit at the closing of the sale of such Third
Party Offered Interest the Selling Member is paid an amount equal to
the sum of (I) the Cash Deposit applicable to the Specified Sale and
(II) the amount of cash equal to the Deposit Defaulted Interests
applicable to the Specified Sale, if any, valued at the purchase price
of the Third Party Offered Interest sold by the Selling Member in
accordance with Section 6(e)(B) or 6(e)(C).
(iii) It is acknowledged and agreed that the Tag-Along Rights
provided by this Section 7 do not limit or restrict the Participation
Rights provided by Section 15.
(b) Notice of Transfer. A Selling Member shall deliver a notice to the
Company and each other Member of each proposed sale of all or part of a
membership interest (the "Notice of Transfer") at least fifteen (15) business
days prior to the closing of such purchase and sale. A Notice of Transfer shall
contain the information required to be included in a Notice of Offer and a
statement that the third party purchaser has been informed of the Tag-Along
Rights provided for in this Section 7 and has agreed in writing to purchase the
membership interest in accordance with the terms of this Agreement including,
without limitation, the Tag-Along Rights provided by this Section 7.
(c) Exercise of Tag-Along Rights. A Tag-Along Right may be exercised
by a Tag-Along Member by delivery of a notice to the Company and the Selling
Member to such effect (the "Tag-Along Notice") within ten (10) business days
after receipt of the Notice of Transfer. The Tag-Along Notice shall state the
Percentage Membership Interest of such Member to be sold to such third party
purchaser or the purchasing Institutional Member. Any membership interest
purchased from a Member pursuant to this Section 7 shall be at a price and upon
such other terms which are no less favorable to such Member than that contained
in the Notice of Transfer.
8. Bring-Along Rights.
(a) Sale by Institutional Members. If the Institutional Members
propose to sell all or a pro rata portion of their respective membership
interests to the same third party purchaser(s) or its Affiliates which, in each
case, are not an Affiliate of either Institutional Member (whether resulting
from the exercise of their respective Tag-Along Rights or otherwise), including
a proposed sale of the Company by the sale or exchange of all or substantially
all the Members' membership interests, a merger, consolidation, recapitalization
or otherwise, such third party purchaser and each Institutional Member shall
have the right, but not the obligation (the "Bring Along Right") upon five (5)
business days' prior notice, to require each other Member (other than an
Institutional Member) to participate in such sale in the same manner, at the
same purchase price on the same closing date and on the same other terms and
conditions as the Institutional Members, as follows:
(i) if the proposed sale of membership interest is a sale of the
entire Percentage Membership Interests held by the Institutional
Members, such third party purchaser or the Institutional Members may
require the General Members to sell all, but not less than all, of
their respective membership interest to such third party purchaser;
(ii) if the proposed sale of membership interest is a sale of
less than all of the membership interests owned by the Institutional
Members, such third party purchaser or the Institutional Members may
require the General Members to sell the same percentage, but not less
than the same percentage, of their respective membership interest as
the Institutional Members propose to sell to such third party
purchaser; and
(iii) on the closing date specified for the purchase and sale of
all or part of each General Member's membership interest (the "Bring
Along Interest") pursuant to the exercise by such third party
purchaser or an Institutional Member of its Bring-Along Right at the
offices of the Company (x) the party purchasing such membership
interest shall pay to each such General Member the aggregate purchase
price for his or its Bring Along Interest on the same terms and
conditions as regards the other Members by wire transfer of
immediately available funds and (y) each such General Member shall
deliver to such purchaser an assignment of such Bring Along Interest
in a form and substance reasonably acceptable to such purchaser and
assign and transfer all, but not less than all, of the Bring Along
Interest of such Member free and clear of any Liens (but such
membership interests shall continue to be subject to the provisions of
this Agreement).
(b) Sale by RSI After Default by Veritech. If RSI (but not any other
Member) proposes to sell all, but not less than all, of its Percentage
Membership Interest to a third-party purchaser which is not an Affiliate of RSI,
and, at any time prior to the date of such proposed sale, Veritech shall have
(x) exercised its FR Right or Buy/Sell Right and (y) failed to timely close on
its purchase of RSI's membership interest in contravention of its having
exercised such FR Right or Buy/Sell Right, as the case may be (other than as a
result of an Excused Condition) then upon five (5) business days prior notice by
RSI if RSI shall have entered into a fully executed agreement for the
consummation of such sale within 180 days after such failure by Veritech,
Veritech shall be required to sell to a third party purchaser on the same terms
and conditions (including the purchase price) as RSI, for all, but not less than
all, of Veritech's Percentage Membership Interest, and RSI shall have Bring
Along Rights as to each and any General Member in accordance with Section 8(a)
above.
(c) Sale of OCC. If the members in OCC have an obligation to transfer
all or substantially all of their respective membership interests in OCC to a
third party purchaser in a transaction approved by RSI (or its Affiliate), then:
(i) such third party purchaser or RSI may require each Member to
Transfer the same percentage, but not less than the same percentage,
of its membership interest in the Company as the members in OCC
propose to Transfer to such third party purchaser at a price and on
such other terms and conditions approved by the RSI Designees, it
being acknowledged and agreed that the amount to be received by each
Member shall equal such Member's Percentage Membership Interest on the
closing date of such Transfer multiplied by the aggregate price or
consideration paid to all Members for all of the membership interests
Transferred to such third party; and
(ii) on the closing date specified for the Transfer of all or
part of the membership interest in the Company of such Members
pursuant to the exercise by such third party purchaser or RSI of its
Bring-Along Right pursuant to this Section 8(c) at the offices of the
Company (x) the third party acquiring such membership interests shall
pay to each such Member the aggregate purchase price for the
membership interests (computed as set forth above) to be Transferred
in accordance with this Section 8(c) and (y) each Member shall deliver
to such third party an assignment of such membership interest in a
form and substance reasonably acceptable to such third party and
assign and transfer all, but not less than all, of such membership
interest free and clear of any Liens (but such membership interests
shall continue to be subject to the provisions of this Agreement).
9. Governance.
(a) Covenant by Each Member. Each Member hereby agrees to take, at any
time and from time to time, all action necessary (including, without limitation,
voting its membership interest (in person or by proxy), calling special meetings
of the Board of Managers and the Members and executing and delivering written
consents in lieu thereof) to effect the provisions of this Section 9.
(b) Board of Managers.
(i) Subject to the provisions of this Agreement (including,
without limitation, Section 9(b)(x)), the Board of Managers shall have
the exclusive power and authority including, without limitation, the
power and authority customarily afforded the board of directors or the
stockholders of a corporation incorporated in the State of Delaware to
manage the business and affairs of the Company. In this regard, except
as otherwise expressly provided herein (including, without limitation,
Section 9(b)(x)), the Board of Managers shall have all power and
authority to approve any transaction of the Company, manage, and
direct the management and the business and affairs of, the Company
including, without limitation, the power to terminate the employment,
contract or arrangement of any officer, employee or agent of the
Company (other than the Chairman and Vice Chairman). Any power not
delegated by the Board of Managers pursuant to this Agreement shall
remain with the Board of Managers. Approval of, or action taken by,
the Board of Managers in accordance with the terms of this Agreement
shall constitute approval of, or action by, the Company and shall be
binding on the Members.
(ii) During the Supermajority Effective Period, the requirements
for a quorum for the transaction of any business at any meeting of the
Board of Managers shall be a majority of the entire Board of Managers,
but including at least one (1) RSI Designee and one (1) Veritech
Designee, and, subject to the provision hereof, including Sections
9(c), 6(c)(iv) and 11(d), requirements for action of, or by, the Board
of Managers shall be a majority as aforesaid of the entire Board of
Managers.
(iii) During the Supermajority Effective Period, subject to
Section 9(b)(v), the Board of Managers of the Company and the Board of
Managers (or similar body) of any direct or indirect subsidiary of the
Company shall consist of the managers elected or appointed by RSI and
Veritech in accordance with the terms and provisions of this
Agreement. RSI and Veritech hereby agree that the Board of Managers
shall consist of three designees of RSI (the "RSI Designees") and two
designees of Veritech ("Veritech Designees") and that one of the
initial Veritech Designees shall be Xxx X. Xxxxxxx and one of the
initial RSI Designees shall be Xxxxx Xxxxxxx.
(iv) During the Supermajority Effective Period, from time to
time, the Board of Managers may be expanded or decreased only by the
mutual agreement of RSI and Veritech; provided, that any such
modification shall, unless otherwise agreed by RSI and Veritech, in
their respective sole and absolute discretion, provide for 3:2
proportionate representation of the RSI and Veritech constituencies,
respectively. The Board of Managers shall regularly examine the need
to add managers and advise the Members of its recommendations.
(v) During the Supermajority Effective Period, if a third party
investor in the Company requires a designee on the Board of the
Managers (a "Third Party Designee") and such investment is approved in
accordance with Section 9(c), if applicable, and Section 9(b)(iv),
then the Board of Managers shall be expanded so as to include such
Third Party Designee and provide for 3:2 proportionate representation
of the RSI and Veritech Member constituencies, respectively, and each
of RSI and Veritech agree to elect or appoint each such designee.
(vi) Each manager of the Board of Managers shall serve until the
completion of his term (which term shall be for three (3) years), or
until such earlier date as: (1) the removal of such manager with or
without cause, by written notice of the Member entitled to elect or
qualify such manager; or (2) his resignation, death or inability to
serve. Any manager of the Board of Managers may resign at any time
upon written notice to the Company. Upon the removal, resignation,
death or inability to serve of a manager of the Board of Managers, the
Member entitled to elect or appoint such manager may designate a
successor who shall serve for the remainder of the term of the manager
that he succeeds. Designation of a manager of the Board of Managers
shall be effective upon the Company's receipt of notice thereof. The
Chairman of the Board of Managers shall be Xxx X. Xxxxxxx and the
Vice-Chairman shall be Xxxxx Xxxxxxx. Each such person shall continue
in such officer capacity until the earlier date of: (1) the removal of
such person from the Board of Managers by the Member entitled to
designate such person; (2) his resignation, death or inability to
serve; or (3) the election or appointment of his successor after his
initial term of three (3) years provided that during the Supermajority
Effective Period Veritech shall continue to have the right to
designate the Chairman. The Chairman and Vice Chairman shall have no
greater vote than any other manager of the Board of Managers and shall
have an initial term of three (3) years.
(vii) Regular meetings of the Board of Managers shall be held at
least once each calendar quarter at the principal offices of the
Company unless otherwise agreed by the managers on such dates as may
be fixed from time to time by the managers. Special meetings of the
Board of Managers may be called by the Chairman. The Vice Chairman may
request that the Chairman call a special meeting of the Board of
Managers and, if such meeting is not called by the Chairman within
five (5) business days after such request, then the Vice Chairman may
call a special meeting of the Board of Managers. Special meetings of
the Board of Managers shall require at least forty-eight (48) hours'
prior written or telephonic notice to all Members of the Board of
Managers, unless such notice shall have been waived in writing by all
of the Managers of the Board of Managers, which notice shall identify
the purpose of the meeting or the business to be transacted. Each
manager of the Board of Managers may vote by delivering his proxy to
another manager of the Board of Managers. Managers of the Board of
Managers may participate in a meeting of the Board of Managers by
means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear one
another, and such participation shall constitute presence in person at
such meeting. The Board of Managers may act without a meeting if the
action taken is unanimously approved in writing by the managers;
provided, that a notice specifying the actions taken in such consent
is delivered to each manager within three (3) business days after the
execution and delivery of such consent. The Board of Managers shall
cause written minutes to be prepared of all actions taken by it, which
minutes shall be made available to each Member and manager.
(viii) RSI agrees that until thirty (30) months after the
Effective Date, it shall cause each RSI Designee to consent to and
approve each investment for wiring of Buildings; provided, that, in
each case, that the forecasted internal rate of return (the
"Projections") presented to management in connection with such
Building, taking into account penetration rates, revenue projections
and other applicable parameters is reasonably forecasted to be equal
to not less than a 15% (the "IRR Benchmark") for any such Building.
For purposes of determining the IRR Benchmark, total investment costs
("Total Investment Costs") shall mean the infrastructure costs of
bringing a Building on-line, including all vendor costs for labor and
material for wiring, hardware and software in such Building and cash
flow revenue ("Cash Flow Revenue") shall mean all revenues received
from the applicable Buildings, including internet, telephone and VPN
charges less the cost of sale expenses of these sales, including
tenant sales commissions, CLEC share charges and landlord share
charges, if any. If from and after 12 months after the Effective Date,
the parameters for Buildings on line for all of the 12 calendar months
prior to the date of determination (the "Stabilized Buildings") are
materially different from those set forth in the Projections for such
Buildings, then, with respect to consent and approvals sought for new
Buildings, the Board of Managers may apply to the Projection presented
for such new Building the actual penetration, revenue and other
applicable parameters resulting from the Stabilized Buildings at such
time and if in utilizing such parameters the Projections for such new
Building is forecasted at less than the IRR Benchmark, the RSI
Designees shall not be required to approve such projects but shall act
reasonably in their determination. The parameters utilized in the
Projections for Stabilized Buildings (adding additional Buildings as
they reach the stabilization timing threshold) for purposes of this
Section shall be updated on a monthly basis.
(ix) Except as set forth in any employment agreement or as
otherwise expressly set forth in this Agreement (including, without
limitation, Section 21), neither the Chairman, the Vice Chairman nor
any manager (unless he is a Third Party Designee) shall be entitled to
compensation or other remuneration for his service to the Company,
whether in such capacity or otherwise, other than reimbursement of
reasonable and customary expenses for the discharge of their
respective duties hereunder and participation in the Company Option
Plan; provided, that RSI and Veritech shall in good faith consider and
evaluate the compensation of managers (including the compensation of
the Chairman and Vice Chairman) in the event of a significant capital
event, including a recapitalization or sale of equity interests to a
third party, or the significant growth of the Company, so that the
managers receive compensation commensurate with that of directors,
managers or executives of similarly situated companies engaged
primarily in a business similar to that of the Company's Business.
(x) Subject to Section 9(c) and duly adopted resolutions of the
Board of Managers, and Section 9(b)(xii) as to senior management
employment agreements, the Chairman (or the executive officers as
directed by the Chairman) shall have the full authority to direct and
carry on the day-to-day business, activities and operations of the
Company, including, without limitation, the hiring and terminating of
employees and officers, opening and closing bank accounts, leasing
office space and other facilities, authorization, execution and
delivery of contracts in the name and stead of the Company, retention
of consultants, agents and accountants, development of policies and
procedures, business plans and business strategies; provided, that,
the Board of Managers and the Chairman shall cause the business and
commercial activities of the Company to be limited to the Business
unless otherwise modified in accordance with Section 9(c); provided,
further, that in the event expenditures by the Company are not made in
accordance with each of the requirements of the Plan, RSI shall upon
delivery of a notice to Company have the right, but not the
obligation, through the Vice-Chairman designated by RSI to cause the
Company to make expenditures (including providing its services and
Equipment) with respect to any Building selected by RSI, provided,
that the expenditures to be made and services and equipment to be
provided are in accordance with the Plan. Notwithstanding the
provisions of this paragraph to the contrary, the selection of
accountants and all financial reporting and tax matters pertaining to
the Company shall be subject to the approval of RSI, which approval
shall not be unreasonably withheld.
(xi) The Board of Managers shall adopt on behalf of the Company a
company option or phantom interest plan (the "Company Option Plan") in
form and substance as shall be mutually agreed by RSI and Veritech, it
being acknowledged and understood that such Company Option Plan shall,
at a minimum, contain the following provisions: (1) the Company Option
Plan shall represent 15% of the aggregate equity interests in the
Company (which as of the Effective Date is deemed to have a
capitalization equal to $10,800,000); (2) 20% of the interests (the
"RSI Share") in the Company Option Plan shall be allocated to
employees and directors of RSI who are managers or otherwise a part of
the executive management of the Company in some capacity, and awarded
to such individuals by the RSI Board of Directors; (3) 80% of the
interests (the "Management Share") in the Company Option Plan shall be
awarded to the existing management of the Company, including Xxx X.
Xxxxxxx and to employees; (4) if the actual net profits of the Company
and other performance factors contemplated by the Plan exceed the
results contemplated by the Plan, as determined in the reasonable
discretion of both RSI and Veritech, then the equity interests of the
Company Option Plan as a percentage of the aggregate equity interests
in the Company shall be increased in accordance with the provisions of
the Company Option Plan; (5) RSI and Veritech shall, in their
reasonable discretion, mutually determine the award of the Company
Option Plan interests to senior management of the Company, including
the performance benchmarks, option strike prices and other threshold
factors for senior management to be awarded such interests.
(xii) Employment Agreements, and any amendments or modifications
thereof, shall be executed and delivered with respect to the former
Veritech's senior management employees to be employed by the Company,
or such other individuals in replacement of such individuals as shall
be mutually agreed by RSI and Veritech, on such terms and conditions
as shall be mutually agreed by RSI and Veritech, it being acknowledged
and agreed that Veritech shall negotiate such agreements in good faith
but shall have no liability if any such agreement is not executed and
delivered on or prior to the Effective Date.
(xiii) Veritech agrees to provide to the Company sales,
management, marketing, technical, administrative and other services
which are reasonably requested from time to time by the Company. Such
services shall be provided by Veritech without any compensation in
addition to the rights and benefits of Veritech's membership interest;
provided, however, that the Company shall reimburse Veritech for all
reasonable and customary expenses, fees and other disbursements
incurred by Veritech as a result of providing such services promptly
upon request and presentment of appropriate documentation, such
expenses, fees and disbursement to include, without limitation,
personnel and employee salaries and related expenses (other than
indirect overhead expenses or charges).
(c) Significant Decisions. Notwithstanding any provisions contained in
this Agreement to the contrary, during the Supermajority Effective Period, no
act shall be taken, sum expended, decision made or obligation incurred by or on
behalf of the Company except with the affirmative consent (a "Supermajority
Vote") of at least one (1) RSI Designee and one (1) Veritech Designee with
respect to any of the following matters set forth in this Section 9(c) (each, a
"Significant Decision"), unless (x) Veritech shall have not accepted the RSI Put
Offer, or Veritech has accepted the RSI Put Offer, but did not consummate the
purchase of RSI's membership interest thereunder (other than as a result of an
Excused Condition) (y) Veritech shall have consummated a Syndication which
results in a breach of or default under the terms and provisions of Section 5(b)
or (z) the Syndicate Representative of the Veritech membership interests is not
the person specified in Section 5(b)(vi):
(i) The voluntary liquidation or dissolution (including the
filing of a Certificate of Dissolution with the Delaware Secretary of
State) of the Company or the winding-up the business of the Company;
provided, that a Supermajority Vote shall not be required for such
actions from and after the date that the Company has Employed the RSI
Funds, it being acknowledged that in such event Veritech may avoid
dissolving the Company by exercise of the Veritech Call Right in
accordance with Section 14.
(ii) Except as provided by the Intercompany Agreement dated the
date hereof by and between the Company and OCC and by the RSI
Subordinated Note, any transaction between the Company (on the one
hand) and RSI or Veritech or any of their respective Affiliates (on
the other hand) including, without limitation, the use of any
Affiliate for outsourcing of administrative matters, treasury
functions, construction (wiring services), wiring of a Building owned
or leased by RSI or any of its Affiliates, or architectural or other
professional or administrative functions, which requires the Company
to pay or distribute any cash amounts or incur any indebtedness other
than: (1) distributions made in accordance with Section 18, (2) such
other transactions in which RSI or Veritech or any such Affiliate is
acting solely in its capacity as a Member of the Company or exercising
its rights as a Member under the Act or this Agreement (including the
payment of the fees and disbursements of Nominated Investment Banks in
connection with the determination of the fair market value of the
Company or the membership interests of any Member), (3) the
transactions approved in accordance with Section 12 between the
Company and any Building owned, leased or managed by RSI or any of its
Affiliates or (4) any transaction or transactions which during any
fiscal year of the Company requires a payment, distribution or
incurrence by the Company or any such Affiliate of an aggregate amount
of not more than $20,000;
(iii) The issue and sale of any equity interests (including
phantom interests) in the Company or the grant of any securities,
options, warrants, rights or other equity or debt obligations which
are or may be converted or exchanged for any equity interests or
interests other than in accordance with Section 11, the Company Option
Plan or the conversion of the RSI Subordinated Note into a membership
interest in the Company, which (x) with respect to any transaction
exceeds in the aggregate 15% of the aggregate membership interests of
the Company on a fully diluted basis immediately prior to such
transaction or (y) with respect to all such transactions (other than
those transactions which have been previously approved in accordance
with this Section 9(c)(iii)) exceeds in the aggregate 25% of the
aggregate membership interests of the Company on a fully diluted basis
immediately prior to such transaction;
(iv) The offer and sale of any securities in the Company to any
investor who, in addition to the purchase price for such securities,
is reasonably likely to provide an opportunity for meaningful
synergies to the Company through a material service or client base;
(v) The expansion of the Board of Managers of the Company other
than pursuant to Sections 9(b)(iv)and (v);
(vi) A change in organizational or tax structure of the Company
or any other action which would have a material adverse tax
consequence to either RSI or Veritech in their capacity as a member in
the Company;
(vii) The hiring (but not terminating) of the (x) Chief Executive
Officer or Chief Operating Officer (whichever office has superior
authority and responsibilities) or (y) Chief Financial Officer of the
Company;
(viii) Commencing any business or line of business other than the
Business of the Company or conducting any business which is
inconsistent with the Plan or making any material changes to (x) the
nature of the Business or (y) the Certificate of Formation of the
Company;
(ix) Changing the name of the Company;
(x) The incurrence of any indebtedness of the Company or the
refinancing of any such indebtedness which, on a pro forma basis after
giving effect to any such proposed transaction, results in a
consolidated ratio of total debt to total equity that is less than 50%
or more than 75% at the time of any such incurrence;
(xi) The filing of a registration statement with the Securities
and Exchange Commission registering any membership interests, or
common stock exchanged therefor, or other equity securities of the
Company or any direct of its direct or indirect subsidiaries;
(xii) The recapitalization, exchange, conversion or redemption of
the equity of the Company other than in accordance with the terms and
provisions of this Agreement;
(xiii) The merger or consolidation of the Company or the sale of
all or substantially all of the assets of the Company (other than
pursuant to Section 6(c)(iv)); provided, however, that any such
transaction may be approved by the vote or consent of the RSI
Designees if at any time on or prior to the date of such proposed
transaction: (A) Veritech shall have (x) exercised its FR Right or
Buy/Sell Right and (y) failed to purchase the membership interest of
RSI with respect to such FR Right or Buy/Sell Right, other than as a
result of an Excused Condition; or (B) the Board of Managers of OCC
shall have adopted any such merger, consolidation or sale of OCC (or
its assets) to the same third party (or any of such third party's
Affiliates) and the managers of OCC designated by RSI (or any of its
Affiliates) voted in favor of, or consented to, any such transaction.
(xiv) Any transaction which results in the Members (as a group)
no longer controlling the management and affairs of the Company
whether by the ownership of equity securities, contract or otherwise;
(xv) The equity investment in, or the acquisition of any business
which will be managed and serviced by the Company in a manner
consistent with past practices; or
(xvi) The merger or incorporation of all or part of the
operations of the Company or any direct or indirect subsidiary of the
Company, including, without limitation, bookkeeping and accounting
operations, into the operations of RSI or any of its Affiliates.
(d) Leverage of the Company. It is acknowledged and agreed that prior
to the date that the Securities and Exchange Commission declares effective a
registration statement that registers any membership interest or other equity
securities in the Company under the 1933 Act, the parties hereto intend to the
extent commercially reasonable that the Company shall be leveraged with third
party non-recourse financing (except for recourse as to the Company itself), at
a ratio of assets to liabilities comparable to that of companies (or division's
or segments thereof) engaging primarily in a business similar to the Company's
Business, it being acknowledged and agreed that under no circumstances shall any
Member be liable for any such indebtedness and that the Board of Mangers shall
attempt to utilize purchase money financing when commercially practical and
advantageous. Accordingly, prior to an IPO by the Company, the Company shall use
its commercially reasonable efforts to obtain such financing (whether unsecured
or secured, by asset based financing, securitization, sale-leaseback
transactions or otherwise). Without limiting the generality of the foregoing,
the Board of Managers shall in good faith attempt to structure asset
acquisitions (e.g., Equipment) and investments of the Company so that between
50% and 75% of the net purchase price (including taxes, fees, installation and
other related fees and disbursements) of such assets or investments are financed
by the Company (whether on an unsecured or secured basis, by a third party
financing or purchase money financing, it being acknowledged that vendor
financing will be pursued when and to the extent feasible).
10. Deadlock Regarding Significant Decisions; Buy/Sell Option.
(a) Buy/Sell Right. Subject to Section 10(i), each Institutional
Member shall have the right (the "Buy/Sell Right") to cause (x) the sale of all
of such Institutional Member's membership interest or (y) the purchase of all of
the other Institutional Member's membership interest in the event of a Deadlock
(but other than an affiliate transaction in accordance with Section 9(c)(ii) or
a change in the name of the Company in accordance with Section 9(c)(ix))
regarding a Significant Decision upon the terms and conditions set forth in this
Section 10.
(b) Significant Decision Deadlock. If an Institutional Member (the
"Initiating Member") requests the approval of a Significant Decision by the
other Institutional Member (the "Deciding Member") and such Significant Decision
is not approved by the Supermajority Vote on or prior to five (5) business days
after such request (a "Deadlock") because the Deciding Member did not vote or
execute a written consent in favor of such Significant Decision, whether at a
meeting of the Board of Managers duly called in accordance with this Agreement
or by an action by written consent in lieu thereof, then on or prior to thirty
(30) days after the expiration of such five (5) business day period the
Initiating Member shall be entitled to deliver a notice (the "Warning Notice")
to the Deciding Member specifying in such notice the Significant Decision that
is the subject of such Deadlock and that the Initiating Member intends to
deliver to the Deciding Member a notice (the "Buy/Sell Notice") requiring the
Deciding Member to (x) purchase all, but not less than all, of the membership
interests of the Initiating Member or (y) sell to the Initiating Member all, but
not less than all, of the membership interests of the Deciding Member, in each
case, at a stated cash purchase price, equal to the value of the Company as
stated in the Buy/Sell Notice (the "Buy/Sell Value", i.e., the aggregate value
of the Company) multiplied by the Percentage Membership Interest to be
purchased, which purchase shall be paid on the Buy/Sell Closing Date; provided:
(i) that concurrently with the delivery of a Warning Notice, the
Initiating Member shall provide a notice (the "Sealed Price Notice") to an
investment bank listed on Schedule A attached hereto (each, a "Nominated
Investment Bank") specifying the Buy/Sell Value as determined by the Initiating
Member, in its sole discretion , it being acknowledged and agreed that the
Nominated Investment Bank shall be instructed to: (A) read the Sealed Price
Notice for the limited purpose of verifying that such notice has included a
Buy/Sell Value; (B) promptly provide a notice to each Institutional Member if
such notice does not include such Buy/Sell Value; (C) hold such Buy/Sell Value
and all other information included in the Sealed Price Notice in strict
confidence; and (D) not disclose such Buy/Sell Value to the Deciding Member
except pursuant to Section 10(d).
(ii) if a Deadlock is with respect to the Significant Decision
described in Section 9(c)(xiii) (merger, consolidation or asset sale) and such
Member or any of its Affiliates is a member in OCC and would be entitled to an
OCC Buy Sell Right under the OCC LLC Agreement with respect to any such
transaction, then, such Institutional Member shall not be permitted to deliver a
Warning Notice or a Buy/Sell Notice hereunder unless such Member (or such
Affiliate) simultaneously delivers a Warning Notice and Buy/Sell Notice pursuant
to the terms and provisions of the OCC LLC Agreement.
(c) Other Events Triggering a Buy/Sell Right.
(i) In the event Veritech effects a Transfer of Interest to a
Pledgee other than as permitted pursuant to the terms of Section 5(b)(v), RSI
shall have the right, but not the obligation, to deliver a Buy/Sell Notice to
Veritech and such Pledgee (without the requirement to deliver a Warning Notice
or a Sealed Price Notice) at any time prior to the date that is three (3) months
after the date RSI receives notice of such Transfer of Interest. For the
purposes of this Agreement, if RSI so delivers a Buy/Sell Notice to Veritech,
RSI shall be the Initiating Member and the Pledgee or Veritech (or both,
whichever person holds such membership interest) shall be the Deciding Member.
(ii) If an Institutional Member (or any of its Affiliates)
exercises an OCC Buy Sell Right, then simultaneously with the delivery of a
Warning Notice and Buy/Sell Notice under the OCC LLC Agreement such
Institutional Member shall deliver a Warning Notice and Buy/Sell Notice
hereunder. For the purposes of this Agreement, the Institutional Member which is
required to exercise its Buy/Sell Right pursuant to this Section 10(c)(ii) shall
be the Initiating Member and the other Institutional Member shall be the
Deciding Member.
(d) Delivery of the Buy/Sell Notice. Upon receipt of a Warning Notice,
the Deciding Member shall have three (3) business days to approve such
Significant Decision or otherwise amicably resolve such Deadlock. In the event
that the Deadlock which is the subject of the Warning Notice has been amicably
resolved within such three (3) business day period, then the Initiating Member
shall not have the right to deliver a Buy/Sell Notice with respect to such
Deadlock and shall instruct the Nominated Investment Bank which received the
Sealed Price Notice to return or destroy such notice. In the event that at the
close of business at the end of such three (3) business day period, the Deadlock
has not been resolved by a writing signed and delivered by both Institutional
Members, the Initiating Member shall deliver a Buy/Sell Notice to the Deciding
Member which notice shall specify a Buy/Sell Value (which shall be equal to the
Buy/Sell Value specified in the Sealed Price Notice) and, if a Buy/Sell Notice
is so delivered, instruct the Nominated Investment Bank which received the
Sealed Price Notice to deliver by telecopier and First Class U.S. Mail such
Sealed Price Notice to the Deciding Member. In the event the Deadlock is not
amicably resolved within such three (3) business day period and the Buy/Sell
Notice is not actually delivered for any reason it nonetheless shall be deemed
delivered by the prior delivery of the Sealed Price Notice to the Nominated
Investment Bank and the Nominated Investment Bank shall deliver the Sealed Price
Notice to the Deciding Member promptly upon the request of the Deciding Member
(with the date of such delivery of the Sealed Price Notice to the Deciding
Member being deemed the date of delivery of the Buy/Sell Notice to the Deciding
Member).
(e) Delivery and Deemed Delivery of Response Notice.
(i) Within ten (10) business days after the delivery of a
Buy/Sell Notice (including the deemed delivery to the Member by the
delivery to the Nominated Investment Bank), the Deciding Member shall
deliver a notice (the "Response Notice") to the Initiating Member
specifying either that:
(A) the Deciding Member has elected to sell all, but not less
than all, of its membership interest to the Initiating Member at an
all cash price equal to the Buy/Sell Value multiplied by the total
Percentage Membership Interest of the Deciding Member, in which case,
subject to the Tag-Along Rights of the General Members provided in
Section 7, the Deciding Member shall sell all, but not less than all,
of the Deciding Member's membership interest to the Initiating Member
at such price and the Initiating Member shall purchase all, but not
less than all, of the Deciding Member's membership interest, and all,
but not less than all, of the Tag-Along Interest of each such General
Member, if any, at a price equal to the Buy/Sell Value multiplied by
the total Percentage Membership Interest represented by the Tag-Along
Interest of such Tag-Along Member.
(B) the Deciding Member has elected to purchase all, but not less
than all, of the Initiating Member's membership interest, at an all
cash price equal to the Buy/Sell Value multiplied by the total
Percentage Membership Interest of the Initiating Member, in which
case, subject to the Tag-Along Rights of the General Members provided
in Section 7, the Initiating Member shall sell all, but not less than
all, of the Initiating Member's membership interest to the Deciding
Member at such price and the Deciding Member shall purchase all, but
not less than all of the Initiating Member's membership interest, and
all, but not less than all of the Tag-Along Interest of each such
General Member, if any, at a price equal to the Buy/Sell Value
multiplied by the total Percentage Membership Interest of the
Tag-Along Interest of such Member.
(ii) In the event that the Deciding Member has not delivered a
Response Notice within the ten (10) business day period provided above, or
has delivered a Response Notice exercising its right to purchase but has
not delivered the Buy/Sell Deposit within the five (5) business day period
provided above, then for purposes of this Agreement, the Deciding Member
shall be deemed to have made the election to sell all, but not less than
all, of its membership interest and thereafter, subject to the Tag-Along
Right of the General Members provided by Section 7, the Deciding Member
shall sell all of its membership interest to the Initiating Member at the
price determined by the Buy/Sell Value specified in the Buy/Sell Notice.
(iii) If the Buy/Sell Notice delivered hereunder is delivered
concurrently with the delivery of a Buy/Sell Notice under the terms and
provisions of the OCC LLC Agreement, the Deciding Member shall the make an
election (e.g., to purchase or sell) hereunder that is the same as in its
(or its Affiliate's) Response Notice delivered under the OCC LLC Agreement.
In the event the Response Notice delivered hereunder contains a different
election, then the election of the Deciding Member (or its Affiliate)
contained in the Response Notice that was delivered as the direct result of
a Deadlock of a Significant Decision (as opposed to the requirement to
concurrently deliver a Warning Notice and Buy/Sell Notice) shall be
controlling and deemed to be the election of the Deciding Member hereunder.
(f) Buy/Sell Deposit. Upon exercise of its Buy/Sell Right, the
purchasing Institutional Member shall be irrevocably obligated to pay and
deliver a deposit (the "Buy/Sell Deposit") to the selling Institutional Member
on or prior to five (5) business days after the delivery of the Response Notice,
which deposit shall be as set forth below:
(i) if Veritech is the purchasing Member, the Buy/Sell Deposit
shall equal the greater of (x) five (5%) percent of the aggregate
purchase price or (y) $300,000 (but not in excess of the aggregate
purchase price). The Buy/Sell Deposit shall consist of (x) a Cash
Deposit payable to the order of RSI in the amount equal to not less
than the lesser of the amount of the Buy/Sell Deposit or $1,000,000
and (y) either (A) a first priority security interest in, and pledge
of, a percentage of Veritech's membership interest such that the
aggregate Buy/Sell Value multiplied by the Veritech Percentage
Membership Interest pledged to the selling Institutional Member is
equal to 1.5 times the amount that the Buy/Sell Deposit exceeds the
amount of the Cash Deposit, if any, or (B) a second priority security
interest in, and a pledge of, all of the membership interests of the
purchasing Institutional Member, if the amount of the Buy/Sell Deposit
is greater than the amount of the Cash Deposit actually paid.
(ii) if RSI is the purchasing Member, the Buy/Sell Deposit shall
equal five (5%) percent of the purchase price consisting of (x) a Cash
Deposit payable to the order of Veritech in the amount equal to the
lesser of the Buy/Sell Deposit or $3,000,000 and (y) either (A) a
first priority security interest in, and pledge of, a percentage of
RSI's membership interest such that the aggregate Buy/Sell Value
multiplied by the RSI Percentage Membership Interest pledged to the
selling Institutional Member is equal to 1.5 times the amount that the
Buy/Sell Deposit exceeds the Cash Deposit, if any, or (B) a second
priority security interest in, and a pledge of, all of the membership
interests of the purchasing Institutional Member, if the amount of the
Buy/Sell Deposit is greater than the amount of the Cash Deposit
actually paid.
(iii) if a Member is required to deliver a security interest in,
and pledge of, any of its membership interests, it will execute and
deliver to the selling Institutional Member at its address specified
in Section 28 such documents (including, without limitation, UCC
Financing Statements) as are reasonably required by the selling
Institutional Member to evidence and perfect such security interest.
(iv) it is acknowledged and agreed that any such security
interest in, and pledge of, membership interests as collateral
security provided in this Section shall be for the limited purpose of
providing collateral for the amount of the Buy/Sell Deposit which is
in excess of the Cash Deposit, if any. Accordingly, the selling
Institutional Member's right and interest under this Section in the
purchasing Institutional Member's membership interests shall not
exceed the Deposit Defaulted Interest of the purchasing Institutional
Member.
(g) [Reserved]
(h) Closing of the Buy/Sell Right. Subject to the Tag-Along Right of
the General Members provided in Section 7, on the date (the "Buy/Sell Closing
Date") that is (x) sixty (60) days, if RSI is the purchasing Institutional
Member or (y) six (6) months, if Veritech is the purchasing Institutional
Member, in each case, after the date the Buy/Sell Notice is delivered, at the
offices of the Company: (i) the purchasing Institutional Member shall pay the
aggregate purchase price (less the amount of the cash portion of the Buy/Sell
Deposit actually received by the selling Institutional Member) to the selling
Institutional Member by wire transfer of immediately available funds; and (ii)
the selling Institutional Member shall deliver to the purchasing Institutional
Member (x) an assignment of the membership interest of the selling Institutional
Member in a form and substance reasonably acceptable to the purchasing
Institutional Member and assign and transfer all, but not less than all, of the
membership interest of the selling Institutional Member free and clear of any
Liens (but such membership interests shall continue to be subject to the
provisions of this Agreement) and (y) a release of the non-cash portion of the
Buy/Sell Deposit and all documents delivered to it in connection therewith. If a
General Member has exercised his or its Tag-Along Right in accordance with this
Agreement, then on the Buy/Sell Closing Date at the offices of the Company
simultaneously with the closing under the Buy/Sell Right (x) the purchasing
Institutional Member shall pay to each such General Member an amount of cash
equal to the purchase price of the Tag-Along Interest (that is, the Buy/Sell
Value multiplied by the Percentage Membership Interest represented by such
Tag-Along Interest) by wire transfer of immediately available funds and (y) each
such General Member shall deliver to the purchasing Institutional Member an
assignment of the Tag-Along Interest of such General Member in a form and
substance reasonably acceptable to the purchasing Institutional Member and
assign and transfer all, but not less than all, of the Tag-Along Interest of
such General Member free and clear of any Liens (but such membership interests
shall continue to be subject to the provisions of this Agreement).
(i) RSI Buy/Sell Option. Notwithstanding any provision of this Section
10 to the contrary, RSI shall not have the Buy/Sell Right until such time as the
Company has Employed the RSI Capital unless an OCC Buy/Sell Right is exercised
by RSI (or any of its Affiliates).
(j) Failure of Buyer to Close. (A) It is acknowledged and agreed that
the Buy/Sell Deposit is intended to be a non-refundable deposit to secure the
obligations of the purchasing Institutional Member. Accordingly, if the
Institutional Member which pursuant to the terms hereof has elected to purchase
or has become obligated to purchase the membership interests of the other
Institutional Member fails to close in accordance with Section 10(h) for any
reason other than an Excused Condition, the Buy/Sell Deposit shall be retained
by the selling Institutional Member as liquidated damages for the harm (which
harm is acknowledged to not be readily measurable in damages) caused by the
failure of the buying Institutional Member to timely conclude its purchase and,
to the extent that a portion of the Buy/Sell Deposit constituted a pledge of all
or a portion of a Member's Percentage Membership Interest, the Deposit Defaulted
Interests shall be transferred to the selling Institutional Member. If the
buying Institutional Member that so fails to close is Veritech, then: (i) RSI
may, at any time within thirty (30) days after the Buy/Sell Closing Date failed
to close, elect to buy Veritech's entire membership interest in the Company at a
price equal to the Buy/Sell Value multiplied by Veritech's then remaining total
Percentage Membership Interest with the closing thereon to occur in accordance
with Section 10(h) sixty (60) days after RSI delivers notice of its election to
buy Veritech's entire interest in the Company; or (ii) alternatively, RSI may,
at any time within thirty (30) days after the Buy/Sell Closing Date, elect to
sell the Company by the sale or exchange of the membership interests, a merger,
consolidation, recapitalization, asset sale or otherwise, at a value of not less
than ninety-five (95%) percent of the Buy/Sell Value, such sale to be on such
terms and conditions as are directed by the Board of Managers without a Super
Majority Vote requirement and without the vote of the Veritech Designees.
(B) If the Institutional Member which pursuant to the terms
hereof has elected to sell or has become obligated to sell its membership
interests to the other Institutional Member fails to close in accordance with
Section 9(h) for any reason other than an Excused Condition, the other
Institutional Member shall have the remedy set forth in Section 31.
(k) Assumption of Obligations. Any Institutional Member who purchases
the entire remaining membership interest of another Institutional Member
pursuant to this Section 10, shall assume all of the liabilities and obligations
of the selling Member with regard to the Company, including, without limitation,
any recourse obligations with respect to such Member to the Company (other than
an obligation to pay to the Company the purchase price of any membership
interests).
11. Additional Contributions.
(a) Capital Call. If, at any time and from time to time, the Board of
Managers determines that the Company requires funds in addition to the then
unborrowed Maximum Committed Amount (as defined by the RSI Subordinated Note)
and cash on hand for the Company to conduct its business and affairs (the
"Necessary Funds"), then prior to the Company issuing any equity interest in, or
equity security of, the Company to any person who is not a Member, a notice
shall be given to all Members (a "Capital Call Notice") stating the terms and
conditions of the offering of additional membership interest (the "Additional
Interests") to the Members, the amount of the Necessary Funds required and all
other relevant information regarding the intended use of such Necessary Funds.
(b) Capital Call Objectives. The Members acknowledge and agree that
each Member shall be provided the opportunity to contribute up to its pro rata
share of any Necessary Funds and that Members who do not contribute their
respective pro rata share in full shall have their equity interest in the
Company (as represented by their Percentage Membership Interest) diluted on a
fair market value basis in accordance with the provisions of this Section 11.
The following example illustrates the method by which fair market dilution of
equity interests shall be determined for purposes of this Agreement:
(i) Assume that a Member holds a Percentage Membership Interest
equal to ten (10%) percent; that the Fair Market Value of the Company
determined in accordance with this Agreement prior to the Capital Call
and the contribution of Necessary Funds is $4,000,000; that the
Capital Call is for an aggregate contribution of Necessary Funds of
$1,000,000; that such Member does not contribute any Necessary Funds;
and that each other Member has contributed such Member's portion of
the Necessary Funds on a pro rata basis.
(ii) The provisions of this Section 11 would result in a dilution
of such Member as follows:
(A) The amount of the Capital Call applicable to the Member
(10% * $1,000,000 or $100,000) divided by the Fair Market Value
of the Company after the Capital Call, assuming that the other
Members contribute the total amount of Necessary Funds
($4,000,000 fair market value plus the $1,000,000 contribution of
Necessary Funds or $5,000,000); which equals 100,000 / 5,000,000
or 0.02 or 2%.
(B) The equity interest (i.e. Percentage Membership
Interest) of such Member after the dilution caused by it not
contributing Necessary Funds is the Percentage Membership
Interest of such Member prior to the Capital Call less the amount
of such dilution, that is: 10% less 2%, which results in a
Percentage Membership Interest equal to 8% after the dilution of
such Member.
(c) Pre-Emptive Rights. Within thirty (30) days after the date that a
Capital Call Notice is delivered (the "Subscription Acceptance Period"), each
Member shall have the right, but not the obligation, to subscribe for the
purchase of Additional Interests (that is, contribute Necessary Funds) on a pro
rata basis based on such Member's Percentage Membership Interest in the Company
at such time. The Company shall offer Additional Interests to the Members in the
manner stated in the Capital Call Notice. Any Member who provides the Company
with a notice prior to the expiration of the Subscription Acceptance Period that
it shall purchase all of the Additional Interests offered to such Member (that
is, contribute all of the Necessary Funds which such Member has a right to
contribute) in accordance with the terms and conditions stated in such Capital
Call Notice is herein called a "Fully Subscribing Member" and each other Member
is herein referred to as a "Non-Fully Subscribing Member". Each Non-Fully
Subscribing Member who provides the Company with a notice prior to the
expiration of the Subscription Acceptance Period that it will purchase some, but
not all, of the Additional Interests offered to it (that is, contribute some but
not all of the Necessary Funds that it has a right to contribute) is herein
called a "Partly Subscribing Member", and together with the Fully Subscribing
Member, the "Subscribing Members".
(d) Notice of Subscription Deficit. Promptly after the expiration of
the Subscription Acceptance Period, the Company shall give a notice to each
Member setting forth: (i) the name of each Non-Fully Subscribing Member; (ii)
the Additional Interests which each Non-Fully Subscribing Member did not
subscribe to purchase in accordance with the applicable Capital Call Notice
(which shall be stated as a percentage of the Necessary Funds which such Member
had a right to contribute to the Company); and (iii) the aggregate amount of
Additional Interests which all of the Non-Fully Subscribing Members declined to
purchase pursuant to such Capital Call Notice, which shall be expressed as a
percentage of the aggregate Necessary Funds which all of the Members had a right
to contribute to the Company (such total amount as the same may be reduced by
any Additional Interests purchased by the Fully Subscribing Members in the
manner hereinafter set forth is herein called the "Additional Subscription
Interests"). Within thirty (30) days after the giving of such notice (the
"Subscription Deficit Contribution Period"), the Fully Subscribing Members shall
have the right, but not the obligation, to subscribe for the purchase of the
Additional Subscription Interests (increase the amount of Necessary Funds that
it has a right to contribute to the Company) on a pro rata basis based upon the
amount of Additional Interests subscribed to by such Fully Subscribing Member to
the aggregate amount of Additional Interests subscribed to by all Fully
Subscribing Members. Those Fully Subscribing Members electing to subscribe for
the purchase of Additional Subscription Interests shall provide a notice to the
Company to such effect on or prior to the expiration of the Subscription Deficit
Contribution Period. Notwithstanding any provision of this Section 11 to the
contrary, if the aggregate amount of the Necessary Funds will not be contributed
by the Members, the Company shall, in the reasonable discretion of the Board of
Managers by unanimous vote and within five (5) business days after the
expiration of the Subscription Deficit Contribution Period, have the right to
cancel the offering of Additional Interests. If the Company proceeds with the
offering of Additional Interests, then the Company shall provide a notice to
each Subscribing Member specifying the aggregate amount of Additional Interests
to be purchased and sold (that is, the aggregate amount of Necessary Funds to be
contributed) by all of the Subscribing Members (the "Purchased Additional
Interests"), the name of each Subscribing Member, the amount of Additional
Interests to be purchased and sold to (that is, the aggregate amount of
Necessary Funds to be contributed by) each such Subscribing Member (the "Member
Purchased Interests").
(e) Subscription Closing; Adjustment of Percentage of Membership
Interest. On the date (the "Subscription Due Date") specified in the Capital
Call Notice for the contribution of Necessary Funds by the Members, in
accordance with the procedures described in the Capital Call Notice and at the
offices of the Company: (i) the Company shall deliver to each Subscribing Member
a written statement specifying: (1) the name of each Member as of the
Subscription Due Date; (2) the Percentage Membership Interest of each Member
immediately prior to the Subscription Due Date; and (3) the Percentage
Membership Interest of each Member as of the Subscription Due Date which shall
be computed in accordance with Section 11(f) below; and (ii) each Subscribing
Member shall pay to the Company an amount equal to the aggregate Member
Purchased Interests of such Member by wire transfer of immediately available
funds; provided, however, that if RSI pays for such Additional Interests by
loaning the aggregate Member Purchased Interest amount to the Company under the
terms and provisions of the RSI Subordinated Note, then each other Member may
pay for its Additional Interests by loaning the aggregate Member Purchased
Interest Amount of such Member to the Company under terms and conditions which
are not more favorable to such Member than the terms and conditions of the RSI
Subordinated Note, such terms and conditions including, without limitation,
subordination of such indebtedness, interest rate and maturity.
(f) Computation of Adjusted Membership Interest. On the Subscription
Due Date, the Company shall make such entries in its books and records as may be
necessary to reflect that as of the Subscription Due Date, the Percentage
Membership Interest of each Member shall equal: (i) such Member's Percentage
Membership Interest in the Company immediately prior to the Subscription Due
Date (the "Base Percentage Interest") less (ii) an amount equal to a fraction
(A) the numerator of which is (x) such Member's Base Percentage Interest
multiplied by the aggregate amount of Purchased Additional Interests actually
contributed to the Company on the Subscription Due Date less (y) the Member
Purchased Interest of such Member actually contributed to the Company on the
Subscription Due Date and (B) the denominator of which is the Fair Market Value
of the Company as of the date of the Capital Call Notice plus the aggregate
amount of Purchased Additional Interests actually contributed to the Company on
the Subscription Due Date.
(g) Illustration of Adjustments to Membership Interest. Using the
above illustration,
(i) if the Member did not contribute any Necessary Funds, its
Percentage Membership Interest in the Company as of the Subscription
Due Date would equal eight (8%) percent of the aggregate Percentage
Membership Interests in the Company, computed as follows: 10% (its
Base Percentage Interest) - [(10% * 1,000,000) - 0 / 4,000,000 +
1,000,000)];
(ii) if the Member contributed one-half ($50,000) of the
Necessary Funds it had a right to contribute and all of the Necessary
Funds were contributed to the Company, its Percentage Membership
Interest would equal 9% of the aggregate Percentage Membership
interest in the Company, computed as follows
(A) 10% (its Base Percentage Interest) - [(10% * 1,000,000)
- 50,000 / 4,000,000 + 1,000,000] or
(B) 10% - (100,000 - 50,000 / 5,000,000) or
(C) 10% - 1%.
(iii) if the Member contributed all (100%) ($100,000) of the
Necessary Funds it had a right to contribute and all of the Necessary
Funds were contributed to the Company, its Percentage Membership
Interest would equal 10% (i.e., no dilution) of the aggregate
Percentage Membership Interests in the Company, computed as follows:
(A) 10% (its Base Percentage Interest) - [(10% *
$1,000,000) - $100,000 / $4,000,000 + $1,000,000] or
(B) 10% - ($100,000 - $100,000 / $5,000,000) or
(C) 10% - ($0 / $5,000,000) or
(D) 10%-0%.
(iv) if the Member ("A") contributed all (100%) ($100,000) of the
Necessary Funds it had a right to contribute, there are two (2) other
Members ("B") and ("C") each holding a 45% Percentage Membership
Interest in the Company, "B" did not contribute any Necessary Funds,
"C" contributed its full share of the Necessary Funds and the "A"
Member contributed all of the Necessary Funds which the "B" Member did
not contribute, the Percentage Membership Interest of the "A" Member
would equal 19% of the aggregate Percentage Membership Interests in
the Company, computed as follows:
(A) 10% (its Base Percentage Interest) - [(10% * 1,000,000)
- 100,000 (its contributions) + 450,000 ("B"'s
contribution) / 4,000,000 + 1,000,000] or
(B) 10% - (100,000 - 550,000 / 5,000,000) or
(C) 10% - (-450,000 / 5,000,000) or
(D) 10% - negative .09 (that is 9%) or
(E) 19% (which corresponds to the 9% dilution of "B").
12. Opportunities; Confidentiality; Noncompetition; RSI Buildings.
(a) Opportunities. Each Member on behalf of itself and its respective
Affiliates, hereby transfers to the Company all right, title and interest that
such Member or its Affiliates currently has or may have in all business
opportunities relating to the Company's Business on the date hereof. In
furtherance of the foregoing, subject to Section 12(d), each Member, on behalf
of itself and its respective Affiliates, covenants and agrees that such Member
and such Member's Affiliates shall conduct the Business of the Company solely
for the benefit of the Company.
(b) Confidentiality. Each Member shall retain in strict confidence,
and shall not use for any purpose whatsoever, or divulge, disseminate or
disclose to any third party (other than in furtherance of the business purposes
of the Company or as may be required by law) any proprietary or confidential
information relating to the Company's Business, including, without limitation,
information regarding financial information, development plans, distribution or
franchising methods and channels, pricing information, business methods,
management information systems and software, customer lists, supplier lists,
leads, solicitations and contacts, know-how, show-how, inventions, improvements,
specifications, trade secrets, agreements, research and development, business
plans and marketing plans of the Company, whether or not any of the foregoing
are copyrightable or patentable; provided, that a Member may in connection with
a Syndication provide financial and other information with respect to the
Company which is reasonably requested by any proposed Transferee in such
Syndication and reasonably required for the evaluation of such financial
investment if such person executes and delivers to the Company a confidentiality
agreement in form and substance reasonably acceptable to the Company.
(c) Non-Competition. Unless otherwise agreed by the Company and
subject to Section 12(d), each of the Members and Reckson, on behalf of itself
and its respective Affiliates, hereby severally warrants, covenants and agrees
with the Company and each other Member and Reckson that neither it nor its
Affiliates will, during the applicable Restrictive Covenant Period (as defined
below), directly or indirectly, without the prior written consent of the Company
and each Member and Reckson, engage in or be interested in any business which is
competitive with the Company's Business in the localities where the Company has
active operations pursuant to the Plan for the Company nor during such period
shall it or any of its Affiliates retain or hire (on behalf of itself or any
other person) any person who is or was an employee, consultant or agent of the
Company (other than any such person whose duties do not include activities that
are material to the management, administration or operations of the Company's
Business) unless that person was in the employ of, or a consultant or agent of,
the Member, Reckson or any of their respective Affiliates prior to being so for
the Company. For the purposes of this Agreement, a party shall be deemed to be
directly or indirectly interested in a business if such party is or shall be
engaged or affiliated directly or indirectly with such business as a
stockholder, director, officer, employee, salesman, sales representative, agent,
broker, partner, member, individual proprietor, lender, investor, consultant or
otherwise, unless such interest is limited solely to the passive investment
ownership of twenty percent (20%) or less of the equity interests or debt of any
company, as the case may be. For purposes of this Agreement, the "Restrictive
Covenant Period" shall mean the period that commences on the date hereof and
expires one (1) year after the date which is the earlier of the date: (i) that
such Member no longer holds, or has any beneficial interest in, any membership
interest; or (ii) of an IPO or (iii) in the case of Reckson, when RSI no longer
holds, or has any beneficial interest in, any membership interests.
(d) RSI Buildings; Exclusivity of the Company. During the RSI
Exclusivity Period:
(i) The Company shall, to the extent permitted by applicable law,
have the exclusive right (and RSI and Reckson shall have the
obligation to permit and retain the Company) to deliver or provide its
communication, wiring and other related services and Equipment with
respect to all Buildings owned or leased by RSI or Reckson or any of
their respective Affiliates; provided, that if the Company declines to
provide such communication, wiring and other services and Equipment to
any such Building or if the Company is not able to provide all of the
communication, wiring and other services and Equipment which RSI,
Reckson or such Affiliate requests to be provided to such Building,
then RSI, Reckson or such Affiliate may then acquire such requested
combination of communication, wiring and other services and Equipment
from vendors or suppliers other than the Company with respect to such
Building.
(ii) All contracts between the Company and RSI or Reckson or any
of their respective Affiliates with respect to communication, wiring
and other services and Equipment to any Building owned or leased RSI,
Reckson or such Affiliate shall at all times be on such terms and
conditions as are at least as favorable to those afforded by the
Company to other customers of the Company and, as to those afforded by
or any other similar company (a "Competitor") which offers all or
substantially all of the services offered by the Company on a regular
basis in the geographic area of such Building and is making (or
proposing to make) a similar financial investment in such Building.
(iii) For the purposes of this Agreement, the term "RSI
Exclusivity Period" shall mean the period of time commencing on the
Effective Date and expiring on the date that is one year after the
date that RSI or any of its Affiliates is not a Member in the Company.
(iv) The parties hereto agree that if the exclusivity arrangement
provided in this Section 12 is not permitted by applicable law, then
with respect to each Building of RSI, Reckson or any of their
respective Affiliates with respect to which the Company does not have
the exclusive rights provided in this Xxxxxxx 00, XXX, Reckson and
each such Affiliate shall grant the Company the right of first refusal
to provide any communication, wiring and other services and Equipment
proposed to be required for such Building on the same terms and
conditions offered by any third party.
(v) Notwithstanding any provision of this Agreement to the
contrary, this Section 12 shall not be applicable with respect to any
acquisition or investment by RSI, Reckson or any of their respective
Affiliates in any Building or any company or entity if such Building,
company or entity, as the case may be, has a commitment or obligation
(which is not on its terms cancellable or terminable without the
payment of money, property, services or damages) to a competitor of
the Company for communication, wiring and other related services and
Equipment.
(e) Survival. The provisions of this Section 12 shall survive the
termination of this Agreement.
13. Effect of the Xxxx Xxxxx Xxxxxx Act.
(a) Applicability. Each Member hereby acknowledges and agrees that the
Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") may be applicable to the
purchase and sale of membership interests as contemplated by this Agreement,
including the purchase by Veritech of all of RSI's membership interest in
accordance with the Buy/Sell Right and the exercise of the Veritech Call Right,
the Veritech Put Right or the RSI Put Offer. In addition, the HSR Act may be
applicable to the acquisition of the Contributed Assets and the acquisition of
membership interests upon the conversion of the RSI Subordinated Note.
(b) Covenant to File all Necessary Documents. Each Member hereby
covenants and agrees that if and when the HSR Act is applicable to a
transaction, it will use its commercially reasonable best efforts to: (i)
promptly and timely file the Notification and Report Form For Certain Mergers
and Acquisition as required under the HSR Act; (ii) request early termination of
the waiting period under the HSR Act; (iii) take all other actions necessary or
desirable to obtain a termination of the waiting period under the HSR Act; (iv)
provide a copy, subject to an appropriate agreement regarding confidentiality,
of all documents submitted in connection with the HSR Act; and (v) coordinate
and consult with each other party with respect to such filing. Each Member
hereby agrees that if such Member effects any transaction hereunder or
contemplated hereby which causes the HSR Act to be applicable, such Member shall
pay all reasonable fees and disbursements in connection with such filings.
(c) Amendment of Timing Periods. Wherever this Agreement provides that
a Member may purchase the membership interest of another Member or exercise the
Veritech Call Right Option, the Veritech Put Right or the RSI Put Offer and the
HSR Act is applicable to such, if this Agreement provides that the closing of
such transaction shall occur within a specified period of time, the expiration
of such period shall be stayed for the waiting period of the HSR Act, but in any
event not later than forty-five (45) days.
14. Veritech Call Right; Veritech Put Right. Subject to the limitations set
forth in this Section 14, RSI hereby grants Veritech the right and option, but
not the obligation (the "Veritech Call Right"), to require RSI to sell, assign
and transfer all, but not less than all, of its membership interest in the
Company to Veritech in the event (each, a "VC Event") that: (i) at any time
after the Company has Employed the RSI Funds, the Board of Managers approves and
adopts the dissolution or winding-up of the Company; or (ii) within sixty (60)
days after the date that is two (2) years after the Effective Date if an
aggregate amount of at least $6,500,000 has not been spent by the Company for
the wiring of Buildings and providing services relating thereto and general
administrative expenses in connection therewith, in each case, in accordance
with the Plan within the first two (2) years after the Effective Date; provided,
that notwithstanding any provision of this Section 14 to the contrary, Veritech
shall not have the Veritech Call Right if on or prior to the date that is two
years after the Effective Date Veritech did not propose transactions within the
scope of the Plan and in accordance with the financial budget set forth in the
Plan sufficient to expend an aggregate amount of not less than $6,500,000 within
the first two (2) years after the Effective Date. Additionally, subject to the
limitations set forth in this Section 14, RSI hereby grants Veritech the right
and option, but not the obligation (the "Veritech Put Right"), to require RSI to
purchase all, but not less than all, of Veritech's membership interest in the
Company, if at any time after the date that is two (2) years after the Effective
Date, RSI (as a member in the Company) does not consent to an IPO proposed by
Veritech; provided that Veritech may not propose more than one IPO during any
calendar year.
(a) Exercise Period. At any time during the period commencing on the
date of any VC Event and ending on the date that is sixty (60) days after such
date, Veritech may exercise the Veritech Call Right. At any time during the
period commencing on the date of the rejection of an IPO proposed by Veritech as
aforesaid and ending on the date that is sixty (60) days after such date
Veritech may exercise the Veritech Put Right.
(b) Manner of Exercise of the Rights. The Veritech Call Right and the
Veritech Put Right shall be exercised by Veritech delivering to RSI a notice to
such effect which notice shall specify the date for the closing of the purchase
and sale of the RSI membership interest or Veritech membership interest, as the
case may be, provided, Veritech shall have up to six (6) months after the notice
is given to close the acquisition of RSI's membership interest and RSI shall
have sixty (60) days after the notice is given to close the acquisition of
Veritech's membership interest.
(c) Purchase Price. The purchase price pursuant to the Veritech Call
Right or Veritech Put Right shall be the Fair Market Value of the membership
interest being purchased as determined in accordance with Section 23 of this
Agreement.
(d) Deposit.
(i) Upon exercise of the Veritech Call Right, Veritech shall pay
a deposit (the "Call Deposit") to RSI on or prior to five (5) business
days after the delivery of the notice specified in Section 14(b),
which deposit shall be as set forth below:
(A) The Call Deposit shall equal the greater of (x) five
(5%) percent of the aggregate Fair Market Value of the RSI
membership interest or (y) $300,000. The Call Deposit shall
consist of (x) a Cash Deposit payable to the order of RSI in the
amount equal to not less than the lesser of the amount of the
Call Deposit or $1,000,000 and (y) either (A) a first priority
security interest in, and pledge of, a percentage of Veritech's
membership interest such that the aggregate Fair Market Value of
the Percentage Membership Interest pledged is equal to 1.5 times
the amount that the Call Deposit exceeds the amount of the Cash
Deposit, if any, or (B) a second priority security interest in,
and pledge of, all of the membership interest of Veritech, if the
amount of the Call Deposit is greater than the amount of the Cash
Deposit actually paid.
(B) If Veritech is required to deliver to RSI a security
interest in, and pledge of, any of its membership interest, it
will execute and deliver such documents as are reasonably
required by RSI (including UCC Financing Statements) to evidence
and perfect such security interest to RSI at the address
specified in Section 28. It is acknowledged and agreed that any
security interest in, and pledge of, membership interests of
Veritech pursuant to this Section shall be limited for the
purpose of providing collateral for the amount that the Call
Deposit exceeds the Cash Deposit, if any. Accordingly, RSI's
rights and interest in and to Veritech's membership interest
shall not exceed the Deposit Defaulted Interest of Veritech.
(C) It is acknowledged and agreed that the Call Deposit is
intended to be a non-refundable deposit to secure the obligations
of Veritech. Accordingly, if Veritech fails to purchase the
membership interests of RSI pursuant to the Veritech Call Right
on the closing date specified in Section 14(b), other than as a
result of an Excused Condition, then: (1) RSI shall retain the
Call Deposit as liquidated damages for the harm (which harm is
acknowledged to not be readily measurable in damages) caused by
the failure of Veritech to timely conclude such purchase and, to
the extent that a portion of the Call Deposit constituted a
pledge of a percentage of Veritech's membership interest, the
Deposit Defaulted Interests pledged shall be Transferred to RSI;
(2) Veritech shall no longer have any Veritech Call Right or
Veritech Put Right for any purpose whatsoever and (3) RSI shall
release any security interest in the membership interests of
Veritech other than RSI's security interest in the Deposit
Defaulted Interests.
(ii) Upon exercise of the Veritech Put Right, RSI shall pay to
Veritech within ten (10) business days after the giving of the notice
by Veritech specified above, a non-refundable deposit (the "Put
Deposit"), which Deposit shall be as set forth below:
(A) The Put Deposit shall equal five (5%) percent of the
aggregate Fair Market Value of Veritech's membership interest.
The Put Deposit shall consist of (x) a Cash Deposit payable to
the order of Veritech in the amount equal to not less than the
lesser of the amount of the Put Deposit or $3,000,000 and (y)
either (A) a first priority security interest in, and pledge of,
a percentage of RSI's membership interest such that the aggregate
Fair Market Value of the Percentage Membership Interest pledged
is equal to 1.5 times the amount that the Put Deposit exceeds the
amount of the Cash Deposit, if any, or (B) a second priority
security interest in, and pledge of, all of the membership
interest of RSI, if the amount of the Put Deposit is greater than
the amount of the Cash Deposit actually paid.
(B) If RSI is required to deliver to Veritech a security
interest in, and pledge of, any of its membership interest, it
will execute and deliver such documents as are reasonably
required by Veritech (including UCC Financing Statements) to
evidence and perfect such security interest to Veritech at the
address specified in Section 28. It is acknowledged and agreed
that any security interest in, and pledge of, membership
interests of RSI pursuant to this Section shall be limited for
the purpose of providing collateral for the amount that the Put
Deposit exceeds the Cash Deposit, if any. Accordingly, Veritech's
rights and interest in and to RSI's membership interest shall not
exceed the Deposit Defaulted Interest of RSI.
(C) It is acknowledged and agreed that the Put Deposit is
intended to be a non-refundable deposit to secure the obligations
of RSI. Accordingly, if RSI fails to purchase the membership
interests of Veritech pursuant to the Veritech Put Right on the
closing date specified in Section 14(b), other than as a result
of an Excused Condition, then: (1) Veritech shall retain the Put
Deposit as liquidated damages for the harm (which harm is
acknowledged to not be readily measurable in damages) caused by
the failure of RSI to timely conclude such purchase and, to the
extent that a portion of the Put Deposit constituted a pledge of
a percentage of RSI's membership interest, the Deposit Defaulted
Interests pledged shall be Transferred to Veritech and Veritech
shall release any security interest in the membership interests
of RSI other than Veritech's security interest in the Deposit
Defaulted Interests.
(iii) it is acknowledged and agreed that each of the Call Deposit
and the Put Deposit is non-refundable unless the party selling its
membership interests under this Section 14 does not Transfer such
membership interests on the closing date specified in accordance with
Section 14(b) and Section 14(e) and Section 14(f), as the case may be.
(e) Closing of the Veritech Call Right. On the closing date specified
in accordance with Section 14(b) at the offices of the Company: (i) Veritech
shall pay the Fair Market Value of RSI's Percentage Membership Interest (less
the cash portion of the Call Deposit actually received by RSI) to RSI by wire
transfer of immediately available funds; and (ii) RSI shall deliver to Veritech
(x) an assignment of its entire membership interest in a form and substance
reasonably acceptable to Veritech and assign and transfer all, but not less than
all, of its membership interest free and clear of any liens or encumbrances
other than indebtedness of the Company (but such membership interests shall
continue to be subject to the provisions of this Agreement); and (y) a release
of the non-cash portion of the Call Deposit and all documents delivered to it in
connection therewith.
(f) Closing of the Veritech Put Right. On the closing date specified
in accordance with Section 14(b) at the offices of the Company: (i) RSI shall
pay the Fair Market Value of the entire Veritech membership interest (less the
cash portion of the Put Deposit actually received by Veritech) to Veritech by
wire transfer of immediately available funds; and (ii) Veritech shall deliver to
RSI (x) an assignment of its entire membership interest in a form and substance
reasonably acceptable to RSI and assign and transfer all, but not less than all,
of its membership interest free and clear of any Liens (but such membership
interests shall continue to be subject to the provisions of this Agreement); and
(y) a release of the non-cash portion of the Put Deposit and all documents
delivered to it in connection therewith. If a General Member has exercised its
Tag-Along Right in accordance with Section 7, then on the closing date specified
in accordance with Section 14(b), simultaneously with the closing of the
purchase of Veritech's membership interest under the Veritech Put Right (x) RSI
shall pay by wire transfer of immediately available funds, to each such General
Member an amount of cash equal to the aggregate amount of the Tag-Along Interest
of such General Member valued at the Fair Market Value of such membership
interests and (y) each such General Member shall deliver to RSI an assignment of
such Tag-Along Interests in a form and substance reasonably acceptable to RSI
and assign and transfer all, but not less than all, of the Tag-Along Interest of
such General Member free and clear of any Liens (but such membership interests
shall continue to be subject to the provisions of this Agreement).
15. Participation Right.
(a) General Member Participation Right. In the event that an
Institutional Member exercises its FR Right, Buy/Sell Right or Veritech Put
Right, each General Member shall have the right, but not the obligation, which
right is contingent upon the consummation of such other transaction (the
"Participation Right") to participate with the purchasing Institutional Member
in the purchase of such membership interest on a pro rata basis or to
participate on a pro rata basis with the Selling Institutional Members in the
sale of such membership interest (each General Member's right to participate
shall be based on the Percentage Membership Interest held by the purchasing
Institutional Member or Selling Institutional Member, as the case may be, and
such General Member) at the same Third Party Price, Buy/Sell Value or Fair
Market Value, as the case may be (in each case, appropriately adjusted for the
Percentage Membership Interest represented by such Tag-Along Interest), and on
the same other terms and conditions as the purchasing or selling Institutional
Member, as the case may be. A General Member may exercise his or its
Participation Right by notice to such effect to the purchasing Institutional
Member within five (5) business days after such General Member has received
notice of such Transfer. If a General Member has exercised its Participation
Right in accordance with this Section 15, then contingent upon the consummation
of such Transfer between the Institutional Members: (i) such General Member
shall be obligated to purchase, and the selling Institutional Member shall be
obligated to sell, the amount of Percentage Membership Interest such General
Member is purchasing under its Participation Right; and (ii) on the closing date
for the Transfer of membership interest between the Institutional Members at the
offices of the Company, simultaneously with the such closing (x) such General
Member shall pay an amount equal to the aggregate purchase price of the
Percentage Membership Interest such General Member is purchasing under its
Participation Right by wire transfer of immediately available funds to the
selling Institutional Member and (y) the selling Institutional Member shall
deliver to such General Member an assignment of the membership interest in form
and substance reasonably acceptable to such General Member and assign and
transfer all, but not less than all, of the Percentage Membership Interest
purchased by such General Member under its Participation Right free and clear of
any Liens (but such membership interests shall continue to be subject to the
provisions of this Agreement). To the extent that this Participation Right is
exercised, the membership interest to be purchased by the purchasing
Institutional Member (and all of such Member's obligations in connection
therewith) shall be reduced by the obligations of such General Member under the
Participation Right; provided, that if such General Member shall default in its
obligation to so purchase such Percentage Membership Interest, then the
purchasing Institutional Member shall have the obligation to purchase such
membership interest. If a General Member has exercised his Participation Right
in accordance with this Section 15 so as to sell, then contingent upon the
consummation of such Transfer between the Institutional Members: (i) such
General Member shall be obligated to sell, and the purchasing Institutional
Member shall be obligated to purchase, the amount of Percentage Membership
Interest such General Member is selling under its Participation Right; and (ii)
on the closing date of the Transfer of membership interest between the
Institutional Members at the office of the Company, simultaneously with such
closing (x) the purchasing Institutional Member shall pay an amount equal to the
aggregate purchase price of the Percentage Membership Interest such General
Member is selling under its Participation Right by wire transfer of immediately
available funds to such General Member and (y) such General Member shall deliver
to the purchasing Institutional Member an assignment of the membership interest
in form and substance reasonably acceptable to the purchasing Institutional
Member and assign and transfer all, but not less than all, of the Percentage
Membership Interest purchased by the purchasing Institutional Member free and
clear of any liens or encumbrances (but such membership interests shall continue
to be subject to the provisions of this Agreement).
(b) Participation Rights on Transfers to a General Member and to his
or its Affiliates. In the event that either Institutional Member intends to
Transfer any of its membership interests to a General Member or any Affiliate of
a General Member, such Institutional Member shall give the Company and the other
Institutional Member ten (10) days' prior written notice of such proposed
Transfer and such other Institutional Member (or an Affiliate of such Member)
may elect to purchase a pro rata portion of the membership interests that is the
subject of such proposed Transfer. The pro rata portion of shares which such
other Institutional Member shall be entitled to purchase shall be calculated
based on the relative proportions of membership interests in the Company held by
such Institutional Member and by such General Member. Such General Member and
the other Institutional Member, if it so elects to purchase shall have at least
sixty (60) days from receipt of the transferor's notice of intention to close on
such purchase. Such election shall be made in writing by such Institutional
Member within five (5) days of receipt of such notice by the Institutional
Member proposing to transfer its membership interests, the failure to deliver
such notice by the other Institutional Member being deemed an election not to so
purchase.
16. RSI Put Option.
(a) RSI Put Notice. RSI may offer to put that portion of its
membership interest (the "RSI Put Interests") which on the Effective Date is
equal to 18.6% of the aggregate Percentage Membership Interests in the Company
for a purchase price equal to TWO MILLION and 00/100 ($2,000,000) DOLLARS (the
"RSI Put Offer"). RSI may exercise its RSI Put Offer by notice (the "RSI Put
Notice") to such effect to Veritech at any time (but not more than once) during
the period between the 24th month and the 30th month after the Effective Date;
provided, that the Veritech Call Right has not previously been exercised (unless
such transaction does not close in accordance with Section 14). Veritech may
accept the RSI Put Offer by notice to such effect on or prior to ten (10)
business days after the date that the RSI Put Notice is delivered to Veritech.
If Veritech does not provide a notice accepting the RSI Put Notice within such
ten (10) business day period, then for the purposes of this Agreement, Veritech
shall be deemed to have rejected the RSI Put Offer.
(b) Acceptance of RSI Put Offer. If Veritech accepts the RSI Put
Offer, then Veritech shall be obligated to purchase, and RSI shall be obligated
to sell, all but not less than all of the RSI Put Interests on or prior to the
date that is nine (9) months after the date that Veritech delivers a notice to
RSI accepting the RSI Put Offer (the "RSI Put Closing Date") for a purchase
price equal to $2,000,000. Each Member shall use all commercially reasonable
efforts to secure any approvals required to be obtained by such Member for the
consummation of the purchase and sale of such membership interests.
(c) Deposit. On or prior to five (5) business days after acceptance of
the RSI Put Offer, Veritech shall pay and deliver a deposit (the "RSI Put
Deposit") to RSI equal to $250,000 in cash which shall be non-refundable in
accordance with Section 16(e).
(d) RSI Put Closing. On the RSI Put Closing Date at the offices of the
Company: (i) Veritech shall pay $1,750,000 to RSI (which is equal to the
$2,000,000 purchase price less the amount of the RSI Put Deposit) by wire
transfer of immediately available funds; and (ii) RSI shall deliver to Veritech
an assignment of its RSI Put Interests in a form and substance reasonably
acceptable to Veritech and assign and transfer all, but not less than all, of
its RSI Put Interests free and clear of any liens or encumbrances (but such
membership interests shall continue to be subject to the provisions of this
Agreement).
(e) Rejection of RSI Put; Failure to Close. Notwithstanding any
provision of Section 9(c) to the contrary, in the event that Veritech: (i)
rejects the RSI Put Offer; or (ii) accepts the RSI Put Offer but does not
purchase the RSI Put Interests on the RSI Put Closing Date, other than as a
result of an Excused Condition, then from and after the date that Veritech did
not accept the RSI Put Offer or if Veritech accepted the RSI Put Offer, the RSI
Put Closing Date, no Significant Decision shall require a Supermajority Vote for
approval or adoption by the Company. Additionally, if Veritech accepts the RSI
Put Offer but does not purchase the RSI Put Interests on the RSI Put Closing
Date, other than as a result of an Excused Condition, then RSI shall be entitled
to retain the RSI Put Deposit as liquidated monetary damages for the harm (which
harm is acknowledged to not be readily measurable in damages) caused by the
failure of Veritech to timely conclude such purchase.
17. Accounting Provisions.
(a) Fiscal and Taxable Year. The fiscal and taxable year of the
Company shall be the calendar year, unless the Board of Managers, in its sole
and absolute discretion, designates a different fiscal or taxable year.
(b) Books and Accounts.
(i) Complete and accurate books and accounts shall be kept and
maintained for the Company at the Company's principal place of
business. Such books and accounts shall be kept for fiscal and tax
purposes on the cash or accrual basis, as the Board of Managers shall
determine, and shall include separate accounts for each Member. A list
of the names and addresses of the Members and their respective
membership interest shall be maintained as part of the books and
records for the Company. Each Member or such Member's duly authorized
representative, at such Member's own expense and upon delivering
advance written notice to the Company, shall at all reasonable times
have access to, and may inspect and make copies of, such books and
accounts and any other records of the Company.
(ii) All funds received by the Company shall be deposited in the
name of the Company in the bank account or accounts of the Company,
and withdrawals therefrom shall be made upon the signature of the
individual or individuals designated from time to time by the Board of
Managers. In the sole and absolute discretion of the Board of
Managers, all deposits and other funds not needed in the operation of
the Company's business may be deposited in interest-bearing bank
accounts, in money market funds, or invested in treasury bills,
certificates of deposit, U.S. government security-backed repurchase
agreements or similar money market instruments, or funds investing in
any of the foregoing or similar types of investments.
(c) Financial Reports.
(i) If requested in advance and in writing by any Member prior to
the last day of any calendar year the Board of Managers shall endeavor
to cause the Company to provide each Member on or about April 1 of the
following year, with financial statements including a balance sheet
and the related statements of income and changes in Company capital
and changes in financial position for the prior year. Each Member
shall be entitled to receive any financial statements that are
produced by the Company in the ordinary course of business.
(ii) The Board of Managers shall endeavor to cause to be prepared
after the end of each taxable year of the Company and filed, on or
before their respective due dates (as the same may be extended), all
federal and state income tax returns of the Company for such taxable
year and shall take all action as may be necessary to permit the
Company's regular accountants to prepare and timely file such returns.
Form 1065 (Schedule K-1) shall be sent to each Member after the end of
each taxable year reflecting the Member's pro rata share of income,
loss, credit and deductions for such taxable year.
(d) Tax Elections. Any elections required or permitted to be made by
the Company under the Internal Revenue Code of 1986, as amended (the "Code"),
shall be made by the Board of Managers in such manner as the Board of Managers
shall determine, subject to Section 9(c). In the event of an audit of the
Company by the Internal Revenue Service (the "IRS"), Veritech shall act as the
"tax matters partner" pursuant to Section 6231(a)(7) of the Code, and such tax
matters partner shall comply with all of his obligations as such under the Code
and the regulations promulgated thereunder.
(e) Expenses. To the extent practicable, all expenses of the Company
shall be billed directly to, and be paid by, the Company.
18. Distributions and Allocations.
(a) Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(i) "Capital Account" means as to each Member the amount of such
Member's cash capital contributions once made and the Gross Asset
Value of any property contributed to the Company, plus such Member's
share of Net Profits and items of income and gain allocated to such
Member pursuant to this Agreement and the amount of any Company
liabilities assumed by such Member or which are secured by any
property distributed to such Member, less the amount of cash
distributions and the Gross Asset Value of distributions of property
to such Member (other than payments described in Sections 707(a) and
707(c) of the Code) and also less (1) such Member's share of Net
Losses, Nonrecourse Deductions and items of loss and deduction,
allocated to such Member pursuant to this Agreement, (2) the amount of
any liabilities of such Member assumed by the Company or which are
secured by any property contributed by such Member to the Company and
(3) such Member's share of Company expenditures which are neither
deductible nor properly chargeable to Capital Accounts under Section
705(a)(2)(B) of the Code or are treated as such expenditures under
Regulation Section 1.704-1(b)(2)(iv)(i), subject, however, to such
further or different adjustments as may be required pursuant to
Section 704 of the Code, or any successor provision, and any
regulation promulgated thereunder, so as to cause the allocations
prescribed hereunder to be respected for tax purposes. In the event
any property other than cash is contributed to or distributed by the
Company, the adjustments to Capital Accounts required by Regulation
Section 1.704-1(b)(2)(iv)(d), (e), (f) and (g) and Section
1.704-1(b)(4)(i) shall be made.
In the event membership interests are Transferred in accordance
with the terms of this Agreement, the Transferee shall succeed to the
Capital Account of the Transferor to the extent it relates to the
Transferred membership interests; and
In determining the amount of any liability for purposes of
determining a Member's Capital Account there shall be taken into
account Code Section 752(c) and any other applicable provisions of the
Code and Regulations.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations.
In the event the Board of Managers shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including, without limitation, debits or credits
relating to liabilities which are secured by contributed or
distributed property or which are assumed by the Company or any
Members, are computed in order to comply with such Regulations, the
Board of Managers may make such modification, provided that it is not
likely to have a material effect on the amounts distributed to any
Person pursuant to Section 18(c) hereof upon the dissolution of the
Company. The Board of Managers also shall (1) make any adjustments
that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of capital reflected on
the Company's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (2) make
any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
(ii) "Company Minimum Gain" shall have the meaning provided in
Regulation Section 1.704-2(b)(2).
(iii) "Depreciation" means, for each Allocation Year, an amount
equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such Allocation Year,
except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of
such Allocation Year, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for
such Allocation Year bears to such beginning adjusted tax basis;
provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such Allocation Year is zero,
Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the Board of
Managers.
(iv) "Gross Asset Value" means with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(1) 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 Board of Managers provided
that the initial Gross Asset Values of the assets contributed to
the Company pursuant to Section 2(a) hereof shall be as set forth
in such section;
(2) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values
(taking Code Section 7701(g) into account, as determined by the
Board of Managers as of the following times: (A) the acquisition
of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis capital
contribution; (B) the distribution by the Company to a Member of
more than a de minimis amount of Company property as
consideration for an interest in the Company; and (C) the
liquidation of the Company within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g), provided that an adjustment
described in clauses (A) and (B) of this paragraph shall be made
only if the Board of Managers reasonably determines that such
adjustment is necessary to reflect the relative economic
interests of the Members in the Company;
(3) The Gross Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross
fair market value (taking Code Section 7701(g) into account) of
such asset on the date of distribution as determined by the Board
of Managers; and
(4) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b) or
Code Section 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (6)
of the definition of "Net Profits" and "Net Losses" or Section
3.3(c) hereof; provided, however, that Gross Asset Values shall
not be adjusted pursuant to this subparagraph (4) to the extent
that an adjustment pursuant to subparagraph (2) is required in
connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (4). If the Gross Asset
Value of an asset has been determined or adjusted pursuant to
subparagraph (2) or (4), such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect
to such asset, for purposes of computing Profits and Losses.
(v) "Member Nonrecourse Debt" shall have the meaning
provided in Regulation Section 1.704-2(b)(4).
(vi) "Member Nonrecourse Debt Minimum Gain" means the
minimum gain attributable to "Member Nonrecourse Debt", as determined in
accordance with Regulation Section 1.704-2(i)(3).
(vii) "Net Cash Flow" means all cash receipts of the Company
(including, without limitation, capital contributions and investment
income), and the fair market value of any property received in connection
therewith, in any fiscal year from whatever source derived, less payment of
all of the Company's expenses, capital expenditures and investments and
such reserves as the Board of Managers shall decide in good faith to
establish for current and future expenses of operating the Company and its
subsidiaries or liabilities in connection therewith and the current and
future capital expenditures and investments of the Company and its
subsidiaries.
(viii) "Net Profits" and "Losses" mean for taxable year an
amount equal to the Company's taxable income or loss for such taxable year,
determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or
loss), with the following adjustments (without duplication):
(1) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this definition
of "Net Profits" and "Net Losses" shall be added to such taxable
income or loss;
(2) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this definition
of "Net Profits" and "Net Losses" shall be subtracted from such
taxable income or loss;
(3) In the event the Gross Asset Value of any Company
asset is adjusted pursuant to subparagraphs (2) or (3) of the
definition of Gross Asset Value, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases
the Gross Asset Value of the asset) or an item of loss (if the
adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for
purposes of computing Profits or Losses;
(4) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by reference to
the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(5) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account
Depreciation for such taxable year, computed in accordance with
the definition of Depreciation;
(6) To the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) is
required, pursuant to Regulations Section 1.704-(b)(2)(iv)(m)(4),
to be taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a Member's
interest in the Company, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis
of the asset) or loss (if the adjustment decreases such basis)
from the disposition of such asset and shall be taken into
account for purposes of computing Net Profits or Net Losses; and
(7) Notwithstanding any other provision of this
definition, any items which are specially allocated pursuant to
Section 17(h) hereof shall not be taken into account in computing
Net Profits or Net Losses.
The amounts of the items of Company income, gain, loss
or deduction available to be specially allocated pursuant to
Section 17(h) hereof shall be determined by applying rules
analogous to those set forth in subparagraphs (1) through (6)
above.
(ix) "Nonrecourse Deductions" shall have the meaning set forth in
Regulation Section 1.704-2(b)(1).
(x) "Regulation" means the income tax regulations promulgated
from time to time by the U.S. Department of the Treasury.
(xi) "Tax Distribution" with respect to any Member means an
amount of cash equal to the product of:
(1) the sum of (x) the highest marginal individual Federal income
tax rate (the "Individual Rate") and (y) the product of (1) 100% minus
the Individual Rate and (2) the highest marginal state and local tax
rate applicable to any individual Member; multiplied by
(2) the taxable income of the Company for Federal income tax
purposes for the applicable fiscal year which is allocated to such
Member in accordance with Section 18.
(b) Distributions of Net Cash Flow. Except as otherwise required by
this Agreement or by law, Net Cash Flow shall be distributed, at such times as
the Board of Managers shall determine (but at least quarterly), to the Members
pro rata in accordance with their then respective Percentage Membership
Interest; provided, that on or prior to March 31 of each year, the Company shall
distribute Net Cash Flow to the members, pro rata in accordance with their
Percentage Membership Interest as of December 31 of the immediately preceding
year, such that each Member shall receive cash in an amount not less than such
Member's Tax Distribution for such immediately preceding year.
(c) Allocation of Net Profits and Net Losses.
(i) Net Profits shall be allocated among the Members as follows:
(1) First, to the Members having negative Capital Account
balances (after adding to such Capital Account balance such Member's
share of Company Minimum Gain and such Member's share of Member
Nonrecourse Debt Minimum Gain), up to an amount necessary to increase
such negative Capital Account balances to zero; and
(2) The balance, if any, among the Members in accordance
with their respective Percentage Membership Interest.
(ii) Net Losses shall be allocated as follows:
(1) First, to the Members having positive Capital Account
balances, up to an amount necessary to reduce such positive Capital
Account balance to zero; and
(2) The balance, if any, among the Members in accordance
with their respective Percentage Membership Interest.
(d) No Return of Distributions. No Member shall have any obligation to
refund to the Company any amount that shall have been distributed to such Member
pursuant to this Agreement, subject, however, to the rights of any third party
creditor under law.
(e) Allocations between Assignor and Assignee Members. In the case of
a Transfer, the assignor and assignee shall each be entitled to receive
distributions of Net Cash Flow and allocations of Net Profits or Net Losses and
Nonrecourse Deductions as follows:
(i) Unless the assignor and assignee agree to the contrary and
shall so provide in the instrument effecting the Transfer,
distributions shall be made to the person owning the Member's
membership interest on the date of the distribution; and
(ii) Net Profits or Net Losses and Nonrecourse Deductions shall
be allocated by the number of days of the fiscal year each person held
the Member's membership interest.
(f) Tax Credits. Any Company tax credits shall be allocated among the
Members in proportion to their respective Percentage Membership Interest.
(g) Deficit Capital Accounts. Except as otherwise provided herein or
under the Act, no Member shall be required at any time to make up any deficit in
such Member's Capital Account.
(h) Further Allocation Rules. Anything herein to the contrary
notwithstanding:
(i) An item of Company tax loss or deduction shall not be
allocated to a Member to the extent that as of the end of any taxable
year a deficit balance in such Member's Capital Account would be
created or increased (after adding to such Capital Account balance
such Member's share of Company Minimum Gain and Member Nonrecourse
Debt Minimum Gain as provided in Regulation Sections 1.704-2(g)(1) and
1.704-2(i)(5), respectively) and subtracting the items referred to in
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). Any amount
that cannot be allocated to one Member by reason of this Section shall
be allocated to the Members whose Capital Accounts, as determined in
accordance with the foregoing rules, are positive. Additionally, if in
any taxable year any Member unexpectedly receives any adjustment,
allocation or distribution described in Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) such that had such unexpected
adjustment, allocation or distribution been known at the time of the
determinations made under this Section such Member would not have been
entitled to the allocation under this Agreement, such Member shall be
allocated items of income and gain in an amount and manner sufficient
to eliminate any deficit balance in such Member's Capital Account
(after adjustment as provided above) as quickly as possible. The
preceding sentence is intended to satisfy the qualified income offset
provisions of the Regulations referenced therein.
(ii) Company tax losses and Nonrecourse Deductions that are
attributable to Member Nonrecourse Debt shall be allocated to the
Member that bears the economic risk of loss for such debt. Such
allocations and any determinations required in order to make such
allocations shall be made in accordance with Regulation Section
1.704-2. Except as otherwise required by Regulation Section 1.704-2,
all other Nonrecourse Deductions shall be allocated among the Members
in accordance with their respective Percentage Membership Interest.
(iii) If there is a net decrease in Company Minimum Gain during
any Company taxable year, each Member shall be allocated before any
other allocation is made under Section 704(b) of the Code (for such
taxable year, and, if necessary, for subsequent years), items of
Company income and gain in proportion to, and to the extent of such
Member's share of the net decrease in Company Minimum Gain during such
year (as determined in accordance with Regulation Sections
1.702-2(g)(2) and 1.702-2(j)(2)). This clause (iii) shall not apply to
the extent no minimum gain chargeback is required pursuant to
Regulation Section 1.704-2(f).
(iv) Minimum Gain during any Company taxable year, each Member
with a share of such Member Nonrecourse Debt Minimum Gain at the
beginning of such taxable year shall be allocated, after any
allocation pursuant to Section (iii) of this subparagraph (h) but
before any other allocation is made under Section 704(b) of the Code
(for such taxable year and, if necessary, for subsequent years), items
of Company income and gain in proportion to, and to the extent of,
such Member's share of the net decrease in such Member Nonrecourse
Debt Minimum Gain (as determined in accordance with Regulation
Sections 1.702-2(i)(4) and 1.702-2(j)(2)). This clause (iv) shall not
apply to the extent no minimum gain chargeback is required pursuant to
Regulation Section 1.704-2(i)(4).
(v) Notwithstanding the allocations provided for in this
subparagraph (h), each of the Members agrees that the Board of
Managers is authorized to make such special allocations of items of
income, gain, loss or deduction as may be necessary to eliminate the
effects of any special allocations or adjustments to the Capital
Accounts of the Members pursuant to Section 704(b) of the Code and any
regulations promulgated thereunder ("Regulatory Allocations") which
are applied to the Company by the Board of Managers but which
Regulatory Allocations might cause distributions to the Members to
differ from those provided for in this Agreement without the authority
of the Board of Managers to make the special allocations of income,
gain, loss or deduction provided for hereby.
(vi) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset, pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of such Member's
interest in the Company, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member
to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(vii) Each item of income, gain, loss or deduction which is
specially allocated under this subparagraph (h), shall not be taken
into account for purposes of Net Profits and Net Losses allocated
under subparagraph (c) of this Agreement.
(i) Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any Property contributed to
the capital of the Company shall, solely for tax purposes, be allocated among
the Members so as to take account of any variation between the adjusted basis of
such Property to the Company for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with clause (1) of the definition of
Gross Asset Value in Section 18(a)(iv)) using the remedial method pursuant to
the Regulations under Section 704(c).
In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (2) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the Board of Managers in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this subparagraph (i)
are solely for purposes of federal, state, and local taxes and shall not affect,
or in any way be taken into account in computing, any Member's Capital Account
or share of Profits, Losses, other items, or distributions pursuant to any
provision of this Agreement.
19. Liquidation and Termination of the Company.
(a) General. Upon the termination of the Company, the Company shall be
liquidated in accordance with this Section 19 and the Act. The liquidation shall
be conducted and supervised by the Board of Managers, or if there shall be no
Board of Managers, by a person who shall be designated for such purpose by the
members holding a majority of the Percentage Membership Interests in the Company
(the Board of Managers or person for such purpose so designated being herein
referred to as the "Liquidating Agent"). The Liquidating Agent shall have all of
the rights and powers with respect to the assets and liabilities of the Company
in connection with the liquidation and termination of the Company that the Board
of Managers would have with respect to the assets and liabilities of the Company
during the term of this Agreement including, without limitation, and
notwithstanding any provision contained in this Agreement to the contrary, the
ability to liquidate and/or sell any or all of the Company's tangible assets or
intangible assets without the necessity to obtain any Member's consent. Without
limiting the foregoing, the Liquidating Agent is hereby expressly authorized and
empowered to execute and deliver any and all documents necessary or desirable to
effectuate the liquidation and termination of the Company and the transfer of
any asset or liability of the Company. The Liquidating Agent shall have the
right from time to time, by revocable powers of attorney, to delegate to one or
more persons any or all of such rights and powers and such authority and power
to execute and deliver documents, and, in connection therewith, to fix the
reasonable compensation of each such person, which compensation shall be charged
as an expense of liquidation. The Liquidating Agent is also expressly authorized
to sell the Company's assets and/or to distribute the Company's property to the
Members or other third parties subject to liens and the terms and provisions of
this Agreement.
(b) Statements on Termination. Each Member shall be furnished
with a statement prepared by the Company's regular accountants setting forth the
assets and liabilities of the Company as of the date of complete liquidation,
and each Member's share thereof. Upon compliance with the distribution plan set
forth in this Agreement, the Members shall cease to be such, and the Liquidating
Agent shall execute, acknowledge and cause to be filed where appropriate under
law a Certificate of Dissolution of the Company.
(c) Priority on Liquidation. The Liquidating Agent shall, to
the extent feasible, liquidate and sell the tangible assets and the intangible
assets of the Company as promptly as shall be practicable. To the extent the
proceeds are sufficient therefor, in the Liquidating Agent's opinion, the
proceeds of such liquidation shall be applied and distributed in the following
order of priority (the "Liquidation Distribution"):
(i) To pay the costs and expenses of the liquidation and
termination;
(ii) To pay the matured or fixed debts and liabilities of the
Company;
(iii) To establish any reserve that the Liquidating Agent may
deem necessary for any contingent, unmatured or unforeseen liability
of the Company;
(iv) The balance, if any, shall be distributed to the initial
Members of the Company up to an amount not in excess of the following
for each Member on the Effective Date: (1) RSI, $6,500,000, if RSI has
converted the RSI Subordinated Note on or prior to the date of the
termination of the Company; (2) Veritech, Simon and Xxxxxx, $550,000
pro rata in accordance with their Percentage Membership Interest on
the Effective Date; and (3) each General Member, the amount of the
initial capital contribution of such Member specified in Section 2(a),
pro rata in accordance with to such amounts.
(v) The balance, if any, shall be distributed to Veritech and the
General Members up to an amount not in excess of $3,500,000 pro rata
in accordance with their Percentage Membership Interest on the
Effective Date.
(vi) The balance, if any, shall be distributed to the Members of
the Company in the proportion to their then Percentage Membership
Interest.
(d) Distribution of Non-Liquid Assets. If the Liquidating Agent shall
determine that it is not practicable to liquidate all of the assets of the
Company, then the Liquidating Agent shall cause the fair market value of the
assets not so liquidated to be determined by appraisal by an independent
appraiser. Such assets, as so appraised, shall be retained or distributed by the
Liquidating Agent as follows:
(i) The Liquidating Agent shall retain assets having a fair
market value equal to the amount, if any, by which the net proceeds of
liquidated assets are insufficient to satisfy the debts and
liabilities of the Company (other than any debt or liability for which
neither the Company nor the Members are personally liable), to pay the
costs and expenses of the dissolution and liquidation, and to
establish reserves, all subject to the provisions of this Agreement.
The foregoing shall not be construed, however, to prohibit the
Liquidating Agent from distributing, pursuant to this Agreement,
property subject to liens at the value of the Company's equity
therein.
(ii) The remaining assets (including, without limitation,
receivables, if any) shall be distributed to the Members by way of
undivided interests therein in such proportions as shall be equal to
the respective amounts to which each Member is entitled pursuant to
this Agreement (including recognizing any priorities provided for in
this Agreement). If, in the judgment of the Liquidating Agent, it
shall not be practicable to distribute to each Member an undivided
aliquot share of each asset, the Liquidating Agent may allocate and
distribute specific assets to one or more Members as tenants-in-common
as the Liquidating Agent shall determine to be fair and equitable,
taking into consideration, inter alia, the basis for tax purposes of
each asset distributed. Notwithstanding any provision contained herein
to the contrary, if the Liquidating Agent shall for any reason be
unable to liquidate and/or sell the Company's intangible assets in the
course of any liquidation, then the parties hereto hereby instruct the
Liquidating Agent to, and the Liquidating Agent shall, subject to the
terms and provisions of this Section 19, distribute each of such
intangible assets to the Members as co-owners with an undivided
interest in the whole and unless otherwise agreed to by the parties
hereto to the contrary, each Member to whom an intangible asset shall
have been distributed shall have the full right to exploit the
intellectual property rights contained therein without being obligated
to account or pay to the other Member or Members for any royalties or
other revenues received therefrom.
(iii) Nothing contained in this Agreement is intended to cause
any in-kind distributions to be treated as sales for value.
(e) Orderly Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to minimize the losses normally attendant upon a
liquidation.
20. Loans and Advances.
(a) Loans and Advances. If any Member, manager or any of their
respective Affiliates shall loan or advance any funds to the Company, such loan
or advance shall not be deemed a contribution to the capital of the Company and
shall not in any respect increase such Member's Percentage Membership Interest
in the Company. Such loan or advance shall constitute an obligation and
liability of the Company. Unless otherwise agreed in writing between the
Members, the Board of Managers and the Company, the Members, the managers and
any of their respective Affiliates shall not have any personal obligation or
liability for the repayment of such loans and the same shall be collectible only
from Company assets. Any reference in this Agreement to the payment of debts,
obligations or liabilities of the Company shall be deemed to include any such
loans from a Member, a manager, and any of their respective Affiliates, to the
extent that law and agreements to which the Company is a party or is subject
permit, and to the extent that the terms of such loans may require, such loans
from a Member, the managers or any of their respective Affiliates, shall be paid
ahead of other general debts, obligations and liabilities of the Company.
21. Exculpation and Indemnification of Managers, Members and Affiliates.
(a) Exculpation. Notwithstanding any other provisions of this
Agreement, whether express or implied, or obligation or duty at law or in
equity, no Member or manager, nor any officer or employee of the Company or any
of its or their respective Affiliates (individually, a "Related Party" and
collectively, the "Related Parties") shall be liable to the Company or any other
person or entity for any act or omission taken or omitted by a Related Party
which is within the scope of authority granted to such Related Party by this
Agreement, provided that such act or omission does not constitute a breach of
any representation, warranty, covenant or agreement of this Agreement, fraud,
willful misconduct, bad faith or gross negligence.
(b) Indemnification.
(i) The Company shall indemnify any person or entity who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
initiated by or in the right of the Company in which action the
Company ultimately prevails) by reason of the fact that such party is
or was a Member, manager, officer, employee, or agent of the Company,
or is or was serving at the request of the Company as a manager,
director, officer, employee, trustee or agent of another limited
liability company or corporation, partnership, joint venture, trust or
other enterprise, from and against expenses (including attorneys' and
accountants' fees and disbursements), judgments, fines and amounts
paid in settlement, actually and reasonably incurred (collectively,
"Losses") by such party in connection with such action, suit or
proceeding if such party acted in good faith and in a manner such
party reasonably believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such party's conduct
was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person seeking indemnification did not act in
good faith and in a manner which such party reasonably believed to be
in or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that such party's conduct was unlawful.
(ii) To the extent that a Member, manager, officer, employee or
agent of the Company has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section
21(a), or in defense of any claim, issue or matter therein, such party
shall be indemnified against expenses (including attorneys' and
accountants' fees and disbursements) actually and reasonably incurred
by such party in connection therewith.
(iii) Any indemnification hereunder (unless ordered by a court)
shall be made by the Company only as authorized in the specific case
upon a determination by the Board of Managers that indemnification of
the Member, manager, officer, employee or agent is proper in the
circumstances because such party has met the applicable standard of
conduct set forth herein; provided, that no person or entity shall be
entitled to indemnification hereunder to the extent that the amount of
any Losses arises from a breach of any representation, warranty,
covenant or agreement of this Agreement, fraud, willful misconduct,
bad faith or gross negligence.
(iv) Expenses (including attorneys' and accountants fees and
disbursements) incurred by any Member, manager, officer, employee or
agent in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall, with the prior consent
of the Board of Managers which shall be made in good faith after
meaningful consultation with the Chairman, be paid by the Company in
advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such person or
entity to repay such amount if it shall ultimately be determined that
such party is not entitled to be indemnified by the Company as
authorized in this Section 21(b).
(v) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 21(b) shall not be deemed
exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any law, agreement,
or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office.
(vi) The Company may purchase and maintain insurance on behalf of
any person who is or was a Member, manager, officer, employee or agent
of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee or agent of another limited
liability company corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such party and
incurred by such party in any such capacity, or arising out of such
party's status as such.
(vii) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 21(b) shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a Member, manager, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of
each such person or entity.
22. Power of Attorney.
(a) General. Each Member irrevocably constitutes and appoints the
Board of Managers and the Liquidating Agent, or any one of them, with full power
of substitution, the true and lawful attorney of such Member to execute,
acknowledge, swear to and file any of the following:
(i) Any amendment to the Certificate pursuant to the Act;
provided, that if any provision of such amendment adversely affects
such Member's limited liability company interests in the Company such
amendment is approved by all the Members;
(ii) Any certificate or other instrument (i) that may be required
to be filed by the Company under the laws of the United States, the
State of Delaware or any other state in which any of the Members
reside or in which the Company engages in business or (ii) which the
Board of Managers deems advisable to file;
(iii) Any amendments to the certificates or other instruments
referred to in paragraphs (a) and (b) of this Section 22;
(iv) Any document that may be required to effectuate the
liquidation or termination of the Company; and
(v) Any amendment to this Agreement or the foregoing
certificates, instruments or documents necessary to effect any change
permitted under this Agreement or to reflect any change in the
ownership of membership interests in the Company as expressly provided
for in this Agreement.
It is expressly acknowledged by each Member that the
foregoing power of attorney is coupled with an interest and shall
survive the disability of such Member or a Transfer by such Member,
provided, however, that if such Member shall make a Transfer of all of
such Member's membership interest and the Transferee shall, in
accordance with the provisions of Article VIII of this Agreement,
become a successor Member, such power of attorney shall survive the
Transfer only for the purpose of executing, acknowledging, swearing to
and filing any and all instruments necessary to effectuate such
substitution.
Each Member hereby agrees to execute concurrently herewith
or upon five (5) business days' prior written notice, a special power
of attorney containing the substantive provisions of this Agreement in
form satisfactory to the Board of Managers.
(b) Successor Members. A power of attorney similar to that contained
in Section 22(a) of this Agreement shall be one of the instruments that the
Board of Managers may require a successor Member to execute, acknowledge and
swear to pursuant to this Agreement. No Transferee shall become a Member or
otherwise own all or part of a Member's Percentage Membership Interest or any
other interest in the Company unless, as a condition precedent thereto, such
purported Transferee becomes a signatory of this Agreement.
(c) Additional Power of Attorney. Upon the admission of a successor
Board of Managers or upon the liquidation or termination of the Company, the
Members, at the request of the Board of Managers or any of such successor Board
of Managers or the Liquidating Agent, shall execute, acknowledge and swear to
and deliver a new power of attorney, similar to that described in Section 22(a)
of this Agreement, in favor of any such successors or the Liquidating Agent.
23. Certain Defined Terms. For the purposes of this Agreement, the
following terms used herein shall be defined as follows:
(a) Affiliate. With respect to any Person means: (i) any person at the
time directly or indirectly controlling, controlled by or under direct or
indirect common control (whether by ownership of voting securities, contract or
otherwise) with such person; (ii) any executive officer, senior employee or
director (or a person with similar responsibilities) of such person; and (iii)
when used with respect to an individual, shall include the Family Group of such
individual. Notwithstanding the provisions of this Section 23(a), an Affiliate
of RSI shall include Reckson, Reckson Realty Associates Corp. and any Platform
Company.
(b) Contingent Transfer. A Transfer of Interest of membership
interests other than a Transfer (A) permitted by, and as described in, Sections
5(b)(i) (Testamentary and Gift Transfers), (ii) (Affiliate Transfers), (iii)
(Sale to the Company), (v) (Pledges), (vi) (Syndications), Section 10 (Buy/Sell)
or Section 16 (RSI Put) or (B) pursuant to the exercise of the Veritech Call.
(c) Deposit Defaulted Interests. Means that aggregate amount of
membership interests so that the value of such membership interests (valued at
the Third Party Price, Buy/Sell Price or Fair Market Value, as the case may be)
equals the amount of the FR Deposit, Buy/Sell Deposit, Call Deposit, Put Deposit
or RSI Put Deposit, as the case may be, less the amount of the Cash Deposit
actually paid by such Member.
(d) Disqualified Transferee. Means, unless waived by RSI, any Person
other than the Persons listed on Schedule B hereto that is: (i) a real estate
investment trust or similar investment vehicle, real estate investor or
developer which actively and directly (by itself or through one or more of its
Affiliates) competes with RSI or any of its Affiliates in the geographic
locations in which it or any such Affiliate is then actively engaged in the real
estate investment or management business; or (ii) actively and directly (by
itself or through one or more of its Affiliates) competes in the same business
or any line of business of the Company or any other Platform Company of RSI or
any of its Affiliates; provided, however, that notwithstanding the foregoing to
the contrary, in no event shall a Disqualified Transferee include any pension
fund or trust or any financial investor, including without limitation those set
forth on Schedule B hereto, whose primary activity is investment in entities or
businesses (including real estate businesses).
(e) Employed the RSI Funds. Means that the total disbursements by the
Company on or prior to the specified date plus the aggregate amount that the
Company is unconditionally contractually committed to disburse from its funds as
of such date is equal to $6,500,000 or more; provided, that the Company shall be
deemed to have Employed the RSI Funds: (i) if such disbursements and contractual
commitments would have equaled or exceeded $6,500,000 had the Company conducted
its Business in accordance with the Plan; or (ii) in any event, on and after the
date that is two years and sixty (60) days after the Effective Date; provided,
further, that, solely with respect to the Significant Decision specified in
Section 9(c)(vii), the Company shall be deemed to have Employed the RSI Funds if
the actual or deemed amount of such disbursements and contractual commitments
equals or exceeds, or would have equaled or exceeded, $5,500,000.
(f) Excused Condition. With respect to any Member which will purchase
membership interests of any other Member hereunder, means a breach or default on
the part of the selling Member or the failure of a condition precedent to the
specified purchase of the membership interests unless such failure is the result
of a breach, default or failure on the part of the purchasing Member.
(g) Fair Market Value. With respect to the valuation of the Company
for the purposes of this Agreement shall mean the fair market valuation of the
equity of the Company determined by valuing the Company as a going concern
without any discount for loss of liquidity determined by the mutual agreement of
RSI and Veritech or, if after ten (10) business days such parties do not agree
upon such determination, the average of such fair market valuations of the
Company (provided, that in connection with a Capital Call Notice the acquisition
or investment that is the subject of such notice shall be valued at the proposed
cost to the Company) as determined in good faith by two Nominated Investment
Banks selected by the Company in the order of appearance of such firms on
Schedule A; provided, that if the difference between such valuations is greater
than ten (10%) of the higher valuation, then the Company shall select the next
available Nominated Investment Bank (in the order of appearance of such firms on
such schedule) and the "Fair Market Value" shall equal the average of all three
such valuations. Whenever the Fair Market Value of the Company is to be
determined, the Company shall pay all fees and disbursement of such Nominated
Investment Banks and shall require that each Nominated Investment Bank to (x)
confirm in writing that it is independent with respect to, and not conducting
any business with, any Member or their respective Affiliates other than stock or
commodity or similar brokerage or broker/dealer activities for reasonable and
customary commissions or discounts and (y) report its valuation within thirty
(30) days after the date of such assignment. The "Fair Market Value" of any
membership interest held by any Member shall be the Fair Market Value of the
Company, as determined above, multiplied by the Percentage Membership Interest
represented by such membership interests on the date of such determination.
Accordingly, the Fair Market Value of such membership interests is without
regard to a premium or discount for a majority or minority interest. It is
acknowledged and agreed that the procedures described above are to determine the
specified valuation with administrative efficiency and expediency. Accordingly,
no party hereto shall have a right, and no Nominated Investment Bank shall be
required to or shall hold any hearing, presentation or other advocacy proceeding
with respect to the preparation of such valuation and the determination of such
value in accordance with the terms hereof shall be final and binding on the
parties hereto.
(h) Family Group Member. Means with respect to (i) (I) Veritech, Xxx
Xxxxxxx; (II) Xxxxxxxxxx: Xxxxx Xxxxxxxxxx; (III) Simon: Xxxxxx Xxxxx; (IV)
Xxxxxx: Xxxxx Xxxxxx or (V) RSI: Xxxxx Xxxxxxx or Xxxxxxxx Xxxxxxx; (ii) the
parents grandparents, brothers, sisters, spouse and descendants (whether natural
or adopted) of any person described in clause (i) above; (iii) any spouse or
descendant of any person described in clauses (i) and (ii) above; (iv) any trust
created solely for the benefit of any person described in clauses (i) through
(iii) above; (v) any executor or administrator for any of the persons described
in clauses (i) through (iv) above; (vi) any partnership solely of persons
described in clauses (i) through (v) above; and (vii) any corporate foundation
created by any of the persons described in clauses (i) through (v) above for
charitable purposes.
(i) Interim Loans. Means the loans and advances made by RSI or its
Affiliate to Veritech on or prior to the Effective Date.
(j) IPO. Means an initial public offering of the membership interests
in (or other equity interest in or equity security of) of the Company which is
registered with the Securities and Exchange Commission under the provisions of
the 1933 Act; provided, that not less than twenty percent (20%) such interest
(on a fully diluted basis after giving effect to the sale of such interests in
such IPO) shall be issued in such offering (or any substantially similar
transaction, including without limitation, the transfer of the Company's assets
to a subsidiary and the sale of such subsidiary's stock in an offering of the
type described in this subsection with respect to the Company).
(k) Liens. Means any lien, encumbrance, claim, charge or restriction
on or with respect to the membership interests other than a lien, encumbrance,
claim, charge or restriction imposed by this Agreement or which either (A) was
granted in order to secure any obligation of the Company or any guaranty of any
obligation of the Company at the request of the Company or (B) is fully,
absolutely and irrevocably released on the day of a Transfer of such membership
interests.
(l) OCC Buy Sell Right. Means a Buy/Sell Right (as defined by the OCC
LLC Agreement) of the membership interests in OCC pursuant to the terms and
provisions of the OCC LLC Agreement caused by, or resulting from, a Deadlock (as
defined by the OCC LLC Agreement) with respect to the merger or consolidation of
OCC or the sale of all or substantially all of the assets of OCC.
(m) OCC LLC Agreement. Means the Limited Liability Company Agreement
of OCC, as amended from time to time.
(n) Person. Any individual and any corporation, partnership, trust or
other entity.
(o) Platform Company. The Company and any other company or entity, or
any division thereof, in which RSI, Reckson, or any of their respective
Affiliates directly or indirectly invests and has rights to direct or
significantly influence the management and control thereof.
(p) Supermajority Effective Period. Means the period of time
concerning on the date hereof and ending on the date that: (i) Veritech's
Percentage Membership Interests is less than 12.9870% and (ii) at such time the
ratio of RSI's Percentage Membership Interests to Veritech's Percentage
Membership Interest is greater than 2.26:1.
(q) Syndicate Representative. Means: (i) any individual who is
ultimately at the direction of JAH Realties, L.P., in the case of a Syndication
by Veritech; (ii) Xx. Xxxxxx Xxxxxxxxxx, in the event of a Syndication by
Xxxxxxxxxx; (iii) Xx. Xxxxxx Xxxxx, in the event of a Syndication by Simon; and
(iv) Xx. Xxxxx Xxxxxx, in the event of a Syndication by Xxxxxx.
(r) Tag-Along Interest. Means a membership interest of the specified
Tag-Along Member equal to the same percentage of membership interest of the
selling Member which it proposes to Transfer in the specified Contingent
Transfer (for example, if a Selling Member has a fifty (50%) percent Percentage
Membership Interest in the Company and proposes to sell one-half of its
membership interest (i.e., a twenty-five (25%) percent Percentage Membership
Interest in the Company), the Tag-Along Interest would equal one-half of the
Tag-Along Member's membership interest; provided, that, in no event shall the
Tag-Along Interest exceed the aggregate Percentage Membership Interest proposed
to be sold by the selling Member.
(s) Tag-Along Member. Means a Member which is exercising the Tag-Along
Right provided in Section 7.
(t) Third Party Price. (i) Means a proposed or offered price in or
converted to cash equal to: (A) cash; (B) cash equivalents; and (C) stated
principal amount of any promissory notes, in each case, included in any such
proposal or offer; provided, however, that if there is no interest rate, or a
nominal interest rate, the stated principal amount shall be discounted in
accordance with generally accepted accounting principles; provided, further,
that any such note shall be included in the Third Party Price only if the
obligor (or guarantor) of such note has a minimum financial net worth of at
least $5,000,000 on a pro forma basis, assuming the Third Party Offered Interest
are purchased in accordance with the terms stated in the Notice of Offer. As
used herein, the Third Party Price for membership interests other than Third
Party Offered Interests shall be adjusted to equal a price per Percentage
Membership Interest represented by such membership interests. Accordingly, the
Third Party Price of Tag-Along Interests shall equal the Third Party Price as
defined by clause (i) above multiplied by a fraction, the numerator of which is
equal to the Percentage Membership Interest represented by such Tag-Along
Interests and the denominator of which is equal to the Percentage Membership
Interest represented by the Third Party Offered Interests. For example, if the
Third Party Offered Interest represents a Percentage Membership Interest of 33%,
the Third Party Offered Price as defined by clause (i) above is equal to
$1,000,000 and the Tag-Along Interest represents a Percentage Membership
Interest equal to 10%, then the Third Party Price of the Tag-Along Interest is
equal to $300,000, computed as follows: $1,000,000 / .33 * .10 or $3,000,000 *
.10 or $300,000.
(u) Glossary. A glossary of other defined terms is attached hereto as
Schedule C.
24. Amendment and Modification. No change or modification of this Agreement
shall be valid, binding or enforceable as against: (i) the Company unless the
same shall be in writing and signed by the Company; or (ii) any of the Members
unless the same shall be in writing and signed by such Member unless the rights
of such Member are not adversely affected by such amendment.
25. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, assigns, executors, administrators or successors, but neither
this Agreement nor any of the rights, benefits, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided, however, that the rights and
benefits of this Agreement shall be assigned to any purchaser or transferee of
membership interests if such transaction is a Permitted Transfer, except that
unless such purchaser or Transferee is an Affiliate of RSI, Veritech or a
General Member, the rights and benefits of the following Sections may shall not
be assigned or transferred to any Person other than a Pledgee which is not a
Disqualified Transferee without the prior written consent of each Institutional
Member: 6 (Right of First Refusal), 7 (Tag-Along Rights), 9 (Governance), 10
(Deadlock Regarding Significant Decisions; Buy/Sell Option), 11 (Additional
Contributions), 14 (Veritech Call Right; Veritech Put Right), 15 (Participation
Right), 16 (RSI Put Option) and 35 (Initial Investment in the Company by RSI).
This Agreement is not intended to confer upon any other person except the
parties hereto and their permitted successors and assigns any rights or remedies
hereunder. In the event that any membership interests are Transferred by RSI,
Veritech or a General Member to an Affiliate of such Member, such Transferee
shall be deemed to be included in each reference to RSI, Veritech or such
General Member, as the case may be; provided, that notices shall only be
required to be sent to, and shall only be sent by, RSI, Veritech, Xxxxxxxxxx,
Xxxxx or Xxxxxx, as the case may be, for as long as such party is a Member
hereunder.
26. Further Assurances. Each party hereto by the execution and delivery of
this Agreement hereby consents to the formation of the Company, the sale to, and
the acquisition by, the Company of the Contributed Assets by the Company from
Veritech pursuant to the terms and conditions of the Capital Contribution
Agreement, the conduct of the Business by the Company, obtaining and maintaining
in full force and effect all regulatory approvals, licenses, permits and
consents necessary or desirable to conduct the Business and hereby agrees that
he or it shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
27. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware governing agreements made
wholly within the State of Delaware.
28. Notices. All notices given pursuant to this Agreement shall be in
writing and shall be made by hand-delivery, first-class mail (registered or
certified, return receipt requested), telex, telecopier, or overnight air
courier guaranteeing next day delivery:
(a) if to the Company,
to the principal office of the Company:
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: The Chairman
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and
if Xxxxxxxxxx is a Member,
Pryor, Cashman, Xxxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and
if Xxxxxx is a Member,
Davidoff & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and
if Simon is a Member,
Frankfurt, Xxxxxx, Xxxxx & Selz, P.C.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) if to the Member, to him or it at his or its address as reflected
in the records of the Company or as the Member shall designate to the Company in
writing, such designation to be effective only upon receipt.
(c) Except as otherwise provided in this Agreement, each such notice
shall be deemed given at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next business day delivery.
29. Consent to Jurisdiction. All actions and proceedings arising out of, or
relating to, this Agreement shall be heard and determined in any state or
federal court sitting in Delaware (including without limitation the Court of
Chancery) or New York. The undersigned, by execution and delivery of this
Agreement, expressly and irrevocably consent and submit to the personal
jurisdiction of any of such courts in any such action or proceeding; (ii)
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to such party by
hand or by certified mail, delivered or addressed as set forth in Section 28 of
this Agreement; and (iii) waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis.
30. Entire Agreement; Non-Waiver. This Agreement supersedes and terminates
all prior agreements between any of the parties hereto with respect to the
subject matter contained herein, and this Agreement embodies the entire
understanding between the parties relating to such subject matter, and any and
all prior correspondence, conversations and memoranda are merged herein and
shall be without effect hereon. No promises, covenants or representations of any
kind, other than those expressly stated herein, have been made to induce any
party to enter into this Agreement. In the event a party hereto is in material
breach of any of the terms and provisions of this Agreement, then such party
shall not be entitled to the benefits of this Agreement including without
limitation the Supermajority Vote provided in Section 9. No delay on the part of
any party in exercising any right hereunder shall operate as a waiver thereof,
nor shall any waiver, express or implied, by any party of any right hereunder or
of any failure to perform or breach hereof by any other party constitute or be
deemed a waiver of any other right hereunder or of any other failure to perform
or breach hereof by the same or any other Member, whether of a similar or
dissimilar nature thereof.
31. Specific Performance and Injunctive Relief. The parties recognize and
acknowledge that their membership interests are closely held and that,
accordingly, in the event of a breach or default by one or more of the parties
hereto of the terms and conditions of this Agreement, the damages to the
remaining parties to this Agreement, or any one or more of them, may be
impossible to ascertain and such parties will not have an adequate remedy at
law. In the event of any such breach or default in the performance of the terms
and provisions of this Agreement, any party or parties thereof aggrieved thereby
shall be entitled to institute and prosecute proceedings in any court of
competent jurisdiction, either at law or in equity, to enforce the specific
performance of the terms and conditions of this Agreement, to enjoin further
violations of the provisions of this Agreement and/or to obtain damages. Such
remedies shall however be cumulative and not exclusive and shall be in addition
to any other remedies which any party may have under this Agreement or at law
(including the right to retain a Deposit as partial "liquidated damages"). Each
Member hereby waives any requirement for security or the posting of any bond or
other surety and proof of damages in connection with any temporary or permanent
award of injunctive, mandatory or other equitable relief and further agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
32. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees and all disbursements in addition to any other available remedy.
33. Severability. If any provision of this Agreement or the application
thereof to any party or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provisions to the other parties or circumstances shall not b e affected thereby
and shall be enforced to the greatest extent permitted by applicable law.
34. Miscellaneous.
(a) Notwithstanding any provision of this Agreement to the contrary, a
Transferee of a Permitted Transfer shall take the membership interests in such
sale or transaction subject to the terms and provisions of this Agreement
including, without limitation, the Tag-Along and Participation Rights of the
Members provided herein.
(b) Section headings are for convenience of reference only and shall
not be used to construe the meaning of any provision of this Agreement.
(c) This Agreement may be executed in any number of counterparts, each
of which shall be an original, and all of which shall together constitute one
agreement.
(d) Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires. The
words "herein", "hereof", "hereby" or "hereto" shall refer to this Agreement
unless otherwise expressly provided. Any reference herein to a Section or any
exhibit or schedule shall be a reference to a Section of, and an exhibit or
schedule to, this Agreement unless the context otherwise requires. Any reference
herein to a "business day" shall mean a day in which the New York branch of the
Federal Reserve Bank is open for business during its normal hours of operation.
(e) This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto who have executed and delivered this Agreement on or prior to
5:00 p.m. (New York City time), March 2, 1998 and their respective successors,
assigns and permitted Transferees (to the extent otherwise permitted by this
Agreement). In the event that any General Member does not so execute and deliver
this Agreement on or prior to such date and time, then Veritech shall have the
right and the obligation to purchase from the Company all, but not less than
all, of the membership interest which would have been allocated to each such
General Member on the same terms and conditions as such General Member (unless
otherwise agreed by the Company) and from and after such date, each reference to
the term "General Member" shall not include any party which did not so execute
and deliver this Agreement on or prior to such date and time unless any such
party otherwise acquires a membership interest in the Company in accordance with
the terms and provisions of this Agreement.
(f) In the event the terms and conditions of any Buy/Sell Notice or
Notice of Transfer are inconsistent with the terms and conditions of this
Agreement, the terms and conditions of this Agreement shall supersede the terms
and conditions of any such notice. The Buy/Sell Right shall be applicable to the
all, but not less than all, of the membership interests held by an Institutional
Member and all of its Affiliates.
35. Initial Investment in the Company of RSI.
(a) Intention of Parties. It is the intention of the parties hereto
that the initial investment in the Company of RSI shall be pursuant to the terms
and provisions of that certain RSI Subordinated Note which shall be executed and
delivered by the Company and RSI on or prior to the Effective Date and provides,
inter alia, that:
(i) RSI, in its sole discretion, may exercise a right (the
"Conversion Right") to convert all, but not less than all, of the
aggregate principal amount and the accrued and unpaid interest under
the RSI Subordinated Note on the date of such conversion (the
"Conversion Date") into the Percentage Membership Interest (the "RSI
Deemed Membership Interest") specified in Section 2(c)(ii) subject to
adjustment as provided in the RSI Subordinated Note with all rights
and benefits provided to RSI under this Agreement including, without
limitation, the governance rights provided in Section 9 and the right
to contribute Necessary Funds to the Company by the purchase of
Additional Interests (including Additional Subscription Interests) in
the Company offered to Members in the Company from time to time
pursuant to a Capital Call Notice as if the Conversion Right were
exercised on the date hereof;
(ii) That RSI may exercise its Conversion Right at any time on or
prior to the date that is two (2) years and thirty (30) days after the
Effective Date (the "Conversion Period") upon delivery of a notice to
such effect and an original of the RSI Subordinated Note (or a duly
executed affidavit that such note is lost or stolen).
(iii) That all amounts to be paid by RSI to the Company may, at
the option of RSI in its sole discretion, be paid by (A) a loan by RSI
to the Company under the terms and provisions of the RSI Subordinated
Note (increasing the principal balance thereof) or (B) a cash
contribution to the capital of the Company for a membership interest
(or increase of its Percentage Membership Interest) in the Company;
(iv) That if RSI does not exercise its Conversion Right on or
prior to the expiration of the Conversion Period, then (A) the
membership interests of RSI which it holds on the date hereof (i.e.,
the 1% Percentage Membership Interest specified in Section 2 (c)(i))
shall be redeemed by the Company and (B) the Company shall have the
right, but not the obligation, to redeem all other membership
interests held by RSI on such date, in each case, within thirty (30)
days after the expiration of the Conversion Period at a purchase price
equal to the Fair Market Value of such membership interests on the
date of such redemption, such amount to be paid by cash or by an
increase in the principal amount of outstanding indebtedness under the
RSI Subordinated Note;
(v) That during the Conversion Period the interest rate under the
RSI Subordinated Note shall equal twelve (12%) percent, per annum,
compounded annually paid semi-annually to the extent provided below
and, to the extent the accrued interest is not paid in full on the
expiration of the Conversion Period, such unpaid amount shall be
accrued and paid in full without additional interest on the maturity
date of the RSI Subordinated Note;
(vi) That after the Conversion Period the interest rate under the
RSI Subordinated Note shall equal seven (7%) percent, per annum,
compounded annually and paid semi-annually commencing on the first
semi-annual period after the expiration of the Conversion Period;
(vii) That the unpaid principal balance shall be due and payable
on the date that is twelve (12) years after the Effective Date;
(viii) That, subject to terms and conditions of the RSI
Subordinated Note, the Company may draw upon the aggregate principal
amount of six million five hundred thousand and 00/100 ($6,500,000.00)
dollars less the outstanding principal amount of the Interim Loans on
the date of the execution and delivery of the RSI Subordinated Note
(as evidenced by the endorsement of the schedule to the RSI
Subordinated Note) from time to time upon demand by the Company in
amounts not less than $500,000 or the maximum amount which the Company
may then borrow under the RSI Subordinated Note;
(ix) That if RSI exercises its Conversion Right, RSI shall
contribute to the capital of the Company the amount which $6,500,000
exceeds the amount which the Company has drawn upon (including,
without limitation, the outstanding principal amount of the Interim
Loans on the date of the execution and delivery of the RSI
Subordinated Note) pursuant to the terms and conditions of the RSI
Subordinated Note, if any;
(x) The indebtedness under the RSI Subordinated Note shall be
subordinate in right of payment as provided therein and RSI will
execute and deliver any subordination agreement reasonably requested
by the Company to confirm the subordinated status of the RSI
Subordinated Note;
(xi) That during the Conversion Period the Company is required to
pay accrued interest only to the extent that RSI would have received a
distribution of Net Cash Flow had it exercised the Conversion Right
and converted the RSI Subordinated Note into the RSI Deemed Membership
Interest;
(xii) That during the Conversion Period the Company shall
distribute to RSI an amount equal to the excess, if any, of (x) the
amount of distributions actually made to the members in the Company
during any fiscal period that RSI would have received had it exercised
the Conversion Right and converted the RSI Subordinated Note into the
RSI Deemed Membership Interest immediately prior to such distribution
less (y) the amount of accrued interest received by RSI during such
fiscal period; and
(xiii) That during the Conversion Period RSI shall have the
rights and benefits provided to it under this Agreement.
(b) General Interpretation of this Agreement. The parties hereto agree
that this Agreement shall be interpreted in a manner that fully effectuates the
intention of the parties described in Section 35(a).
(c) Consent to Admission of RSI as a Member in the Company. Each
Member on behalf of themselves and any of their respective assignees or
transferees) hereby agrees, and each such assignee and transferee as a condition
to being admitted as a member in the Company shall agree, to the admission of
RSI as a member in the Company upon the conversion of the RSI Subordinated Note
in accordance with the terms and provisions thereof or upon the purchase by RSI
of any Additional Interests by a cash contribution to the capital of the
Company.
(d) Release of Security Interest. Simultaneously with the execution
and delivery of the RSI Subordinated Note the security interest of RSI (or its
Affiliate) in Veritech's ownership of OSA and OSL shall be terminated and
released by RSI (or such Affiliate) and RSI (or such Affiliate) shall deliver to
Veritech duly executed and completed UCC Termination Statements on UCC Form-3
for filing by Veritech to record such termination and release.
(e) Interpretation of Specific Provisions of this Agreement. Each of
the parties hereto agrees that in furtherance of the intent expressed above in
this Section 35, during the Conversion Period or, if earlier, until the
Conversion Date the following provisions of this Agreement shall be interpreted
as provided below:
(i) Recitals.
(A) Each Member by the execution and delivery of this
Agreement hereby elects RSI as a manager of the Company with all
rights provided to RSI hereunder.
(B) Until the expiration of the Conversion Period RSI shall
continue to be a manager of the Company with all such rights and
benefits.
(C) That upon conversion of the RSI Subordinated Note, RSI's
membership interest in the Company shall be increased to the RSI
Deemed Membership Interest.
(D) The term "membership interest" shall include the RSI
Deemed Membership Interest and all of RSI's right, title and
interest in, to and under the RSI Subordinated Note. Further,
each other term defined herein (e.g., "Transfer", "Third Party
Offered Interests", "Bring Along Interest", "Contingent
Transfer", "Permitted Transfer", "Syndication", "Supermajority
Effective Period", "Restrictive Covenant Period" and "RSI
Exclusivity Period") shall be conformed to include such
reference.
(ii) Section 2(c) Initial Percentage Membership Interests. The
"Percentage Membership Interest" of RSI shall be computed by
aggregating the Percentage Membership Interest of RSI (including
Additional Interests actually purchased by RSI by a cash contribution
to the capital of the Company) and the Percentage Membership Interest
represented by the RSI Deemed Membership Interest as of the date of
such computation (including Additional Interests deemed to have been
purchased by RSI). Further, each other term defined herein (e.g.,
"Base Percentage Interest") shall be conformed to include such
reference.
(iii) Section 4 Representations and Warranties of the Members.
Each Member hereby authorizes the execution, delivery and performance
of the RSI Subordinated Note by the Company and RSI hereby represents
and warrants that the RSI Subordinated Note was duly authorized,
executed and delivered.
(iv) Section 9 Governance. RSI shall have all of the rights
provided in Section 9 including, without limitation, the right to
designate the RSI Designees to the Board of Managers and the
requirement that all Significant Decisions be approved by a
Supermajority Vote.
(v) Section 10 Deadlock Regarding Significant Decisions; Buy/Sell
Option. Without limiting the generality of the interpretation of
"membership interests" provided above, in the event that a Buy/Sell
Right is exercised, RSI shall be deemed to have exercised its
Conversion Right immediately prior to such exercise and, accordingly,
the Buy/Sell Deposit may include a pledge of the RSI Subordinated Note
or part thereof.
(vi) Section 11 Additional Contributions. RSI shall have the
right to purchase Additional Interests offered pursuant to the
provisions of Section 11 as if RSI had exercised its Conversion Right
immediately prior to such offering. RSI may, in its sole discretion,
pay for any Additional Interests by (A) a cash contribution to the
capital of the Company or (B) a loan to the Company of the aggregate
purchase price of such Additional Interests under the terms and
provisions of the RSI Subordinated Note. RSI shall have actually
purchased Additional Interests if it pays for such Additional
Interests by a cash contribution to the capital of the Company, and
shall for the purposes of this Agreement be deemed to have purchased
such Additional Interests if it loans money to the Company as provided
above. Any amount paid by RSI to the Company for such Additional
Interests (whether as a cash contribution or loan) shall be included
in the amount of "Purchased Additional Interests" and "Member
Purchased Interests".
(vii) Section 12 Opportunities; Confidentiality; Non-Competition;
RSI Buildings. If on or prior to the Conversion Date the Conversion
Right is not exercised by RSI, then: (A) the term "Restrictive
Covenant Period" with respect to RSI, Reckson and any of their
respective Affiliates shall mean the period that commences on the date
hereof and expires one (1) year after the Conversion Date or, if
earlier, the date of an IPO; and (B) the term "RSI Exclusivity Period"
shall mean the period of time commencing on the Effective Date and
expiring on the date that is one (1) year after the Conversion Date
or, if earlier, the date of an IPO.
(viii) Section 17(b) Books and Records. The capital account in
the Company of RSI shall exclude the membership interests in the
Company which RSI would acquire upon the exercise of the Conversion
Right.
(ix) Section 18 Distributions and Allocations. There shall be no
allocations of income or loss to RSI with respect to the RSI Deemed
Membership Interest unless RSI exercises its Conversion Right.
(x) Section 19(c) Priority on Liquidation. The term "Percentage
of Membership Interest" shall not include the Percentage Membership
Interest represented by the RSI Deemed Membership Interest.
(xi) Section 20 Loans and Advances. For the purposes of the first
sentence of Section 20(a), the Percentage Membership Interest of RSI
shall be increased by the RSI Deemed Membership Interest.
[The next page is the Signature Page]
IN WITNESS WHEREOF, this Agreement has been signed by each of the
parties hereto as of the date first written above.
ONSITE VENTURES, L.L.C.
By: ______________________________
Name: Xxx Xxxxxxx
Title: Manager
RSI-OSA HOLDINGS, INC.
By: _____________________________
Name: Xxxxx Xxxxxxx
Title: President
VERITECH VENTURES LLC
By: JAH Realties, L.P.,
its Managing Member
By: JLH Realty Management Service, Inc.,
its general partner
By: ________________________
Name: Xxx Xxxxxxx
Title: President
------------------------------
XXXXXX XXXXXXXXXX, Individually
------------------------------
XXXXXX XXXXX, Individually
------------------------------
XXXXX XXXXXX, Individually
[Signatures Continued on the Following Page]
ACCEPTED AND AGREED AS TO
SECTIONS 12 (c) and 12(d)
RECKSON SERVICES INDUSTRIES INC.
By: ______________________________
Name: Xxxxx Xxxxxxx
Title: President
SCHEDULE A
Nominated Investment Banks
1. Ladenburg Xxxxxxxx & Co. Inc.
2. Xxxxxx Xxxxxxx Group Inc.
3. Bear, Xxxxxxx & Co. Inc.
4. BancAmerica XXXXXXXXX XXXXXXXX
5. Xxxxxxx Sachs & Co.
6. BT Xxxx Xxxxx Incorporated
7. Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
8. Xxxxxxx Xxxxx Barney
9. Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated
10. Lazard Freres & Co. LLC
[End of List]
SCHEDULE B
Exceptions to Disqualified Transferees
A. Developers
Capelli
B. Financial Investors
Xxxxx Funds
Apollo Funds
NorthStar Funds
[End of List]
SCHEDULE C
Glossary of Defined Terms
Term Reference
---- ---------
1933 Act 5(b)
Act Recitals
Additional Interests 11(a)
Additional Subscription Interests 11(d)
Agreement Recitals
Base Percentage Interest 11(e)
Bring Along Right 8(a)
Bring Along Interest 8(a)
Building 1(b)
Business 1(b)
Buy/Sell Closing Date 10(h)
Buy/Sell Notice 10(b)
Buy/Sell Right 10(a)
Buy/Sell Value 10(b)
Buy/Sell Deposit 10(f)
Buy/Sale Value 10(b)
Call Deposit 14(d)
Capital Call Notice 11(a)
Capital Contribution Agreement Recitals
Cash Deposit 6(c)
Cash Flow Revenue 9(b)
Certificate 1(d)
Code 17(d)
Company Option Plan 9(b)
Company Recitals
Competitor 12(d)
Contributed Assets Recitals
Conversion Right 35(a)
Deadlock 10(b)
Deciding Member 10(b)
Effective Date 2(a)
Equipment 1(b)
FR Acceptance Notice 6(b)
FR Notes 6(d)
FR Closing Date 6(b)
FR Acceptance Period 6(b)
FR Deposit 6(c)
FR Right 6(b)
FR Member 6(a)
Fully Subscribing Member 11(c)
General Member Offered Interest 6(g)
Xxxxxx Recital
HSR Act 13(a)
IM Closing Date 6(g)
IM Acceptance Notice 6(g)
IM Share 6(g)
IM Refusal Right 6(g)
IM Acceptance Period 6(g)
Initial Veritech Capital Contribution 2(a)
Initial Xxxxxxxxxx Capital Contribution 2(a)
Initial Simon Capital Contribution 2(a)
Initial RSI Capital Contribution 2(a)
Initial Xxxxxx Capital Contribution 2(a)
Initiating Member 10(b)
Institutional Members Recitals
IRR Benchmark 9(b)
IRS 17(d)
JAH Recitals
Liquidating Agent 19(a)
Liquidation Distribution 19(c)
Losses 21(b)
Management Share 9(b)
Member Purchased Interests 11(d)
Members Recitals
MRVeritech Loan 2(a)
Necessary Funds 11(a)
Nominated Investment Bank 10(b)
Non-Fully Subscribing Member 11(c)
Notice of Offer 6(a)
Notice of Transfer 7(b)
OCC Local Recitals
OCC Access Recitals
OCC 5(b)
Participation Right 15(a)
Partly Subscribing Member 11(c)
Percentage Membership Interest 2(c)
Permitted Transfer 5(b)
Plan 1(b)
Pledge 5(b)
Pledgee 5(b)
Projections 9(b)
Purchased Additional Interests 11(d)
Put Deposit 14(d)
Xxxxxxxxxx Recitals
Reckson 5(b)
Related Party 21(a)
Response Notice 10(e)
Restrictive Covenant Period 12(c)
ROI Deposit 6(g)
RSI Put Interests 16(a)
RSI Put Deposit 16(c)
RSI Recitals
RSI Share 9(b)
RSI Subordinated Note 2(a)
RSI Put Closing Date 16(b)
RSI Exclusivity Period 12(d)
RSI Put Offer 16(a)
RSI Designees 9(b)
RSI Put Notice 16(a)
Sealed Price Notice 10(b)
Selling Institutional Member 6(a)
Selling Member 7(a)
Significant Decision 9(c)
Simon Recitals
Specified Sale 7(a)
Stabilized Buildings 9(b)
Subscribing Members 11(c)
Subscription Deficit Contribution Period 11(d)
Subscription Due Date 11(e)
Subscription Acceptance Period 11(c)
Supermajority Vote 9(c)
Syndication 5(b)
Tag-Along Rights 7(a)
Tag-Along Notice 7(c)
Term 1(c)
Third Party Designee 9(b)
Third Party Offered Interest 6(a)
Transfer 5(a)
Transfer of Interest 5(a)
Transferee 5(b)
VC Event 14
Veritech Put Right 14
Veritech Recitals
Veritech Call Right 14
Veritech Excess 2(g)
Veritech Designees 9(b)
Warning Notice 10(b)
RSI Deemed Membership Interest 35(a)
Conversion Date 35(a)
Conversion Period 35(a)
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the 20th day of February 1998, before me personally came Xxx
Xxxxxxx to me known, who being duly sworn, did depose and say that he is the
officer of ONSITE VENTURES, L.L.C., the limited liability company described in
and which executed the foregoing instrument; that he signed his name thereto by
order of the board of managers of such company.
Sworn to before me this
20th day of February, 1998
---------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the ____ day of February 1998, before me personally came Xxxxx
Xxxxxxx to me known, who being duly sworn, did depose and say that he is the
officer of RSI-OSA HOLDINGS, INC., the corporation described in and which
executed the foregoing instrument; that he signed his name thereto by order of
the board of directors of such corporation.
----------------------------------
Sworn to before me this
___ day of February, 1998
---------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the 20th day of February 1998, before me personally came Xxx
Xxxxxxx to me known, who being duly sworn, did depose and say that he is the
officer of JLH Realty Management Services, Inc., the general partner of JAH
Realties, L.P. which is the managing member of Veritech Ventures LLC, a limited
liability company, and that he executed the foregoing instrument in the name of
such corporation on behalf of such limited liability company and that he had
authority to sign the same, and he acknowledged that he executed the same as the
act and deed of the said corporation as the general partner of the said limited
partnership as the managing member of the said limited liability company.
Sworn to before me this
20th day of February, 1998
---------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF _____________ )
On the ___ day of February, 1998, before me personally came XXXXXX
XXXXXXXXXX to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
----------------------------------
Sworn to before me this
___ day of February, 1998
---------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the ___ day of February, 1998, before me personally came XXXXXX
XXXXX to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
----------------------------------
Sworn to before me this
___ day of February, 1998
---------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the ___ day of February, 1998, before me personally came XXXXX
XXXXXX to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
----------------------------------
Sworn to before me this
___ day of February, 1998
---------------------------
Notary Public
TABLE OF CONTENTS
Page
1. Formation..............................................................2
(a) Formation; Name; Office.......................................2
(b) Purposes......................................................2
(c) Term..........................................................3
(d) Registered Office and Resident Agent..........................3
2. Capital Contributions..................................................3
(a) Initial Capital Contributions.................................3
(b) Issuance of Membership Interests..............................4
(c) Initial Percentage Membership Interests.......................4
(d) Members' Liability............................................5
(e) Uses of Capital Contributions and Proceeds
from the RSI Subordinated Note;
Interest on Capital Contributions.............................5
(f) Withdrawal of Capital.........................................5
(g) Veritech Excess...............................................5
(h) Source of Distributions.......................................5
3. Title to the Property of the Company...................................6
(a) Title to the Property of the Company..........................6
4. Representations and Warranties of the Members..........................6
(a) Representations and Warranties of Each Member.................6
(b) Additional Representation and Warranty of Veritech............6
5. Sale or Transfer of Membership Interest................................6
(a) General Restrictions..........................................6
(b) Permitted Transfers of Interest...............................7
(i) Testamentary and Gift Transfers......................7
(ii) Affiliate Transfers..................................7
(iii) Sale to the Company..................................7
(iv) Sales to Third Parties...............................7
(v) Pledges..............................................8
(vi) Syndication..........................................8
(vii) Conditions to a Permitted Transfer...................9
(c) Indemnity by Member for an Invalid Transfer of
Membership Interests.........................................10
6. Right of First Refusal................................................10
(a) Right of the Institutional Members...........................10
(b) Acceptance Period............................................11
(c) FR Deposit...................................................11
(d) Exercise of FR Right.........................................12
(e) Failure to Exercise FR Right.................................13
(f) FR Right Closing.............................................14
(g) Proposed Sale by a General Member............................14
(i) General Member Offered Interest.....................14
(ii) IM Acceptance Period................................14
(iii) Exercise of the Purchase Right by each
Institutional Member................................15
(iv) Exercise of the Purchase Right by one
Institutional Member................................15
(v) Failure to Exercise the IM Refusal Right in Full....16
(vi) Closing of the General Member Sale..................16
7. Tag-Along Rights......................................................17
(a) Qualifying Sale..............................................17
(b) Notice of Transfer...........................................17
(c) Exercise of Tag-Along Rights.................................18
8. Bring-Along Rights....................................................18
(a) Sale by Institutional Members................................18
(b) Sale by RSI After Default by Veritech........................19
(c) Sale of OCC..................................................19
9. Governance............................................................20
(a) Covenant by Each Member......................................20
(b) Board of Managers............................................20
(c) Significant Decisions........................................25
(d) Leverage of the Company......................................28
10. Deadlock Regarding Significant Decisions; Buy/Sell Option.............28
(a) Buy/Sell Right...............................................28
(b) Significant Decision Deadlock................................29
(c) Other Events Triggering a Buy/Sell Right.....................29
(d) Delivery of the Buy/Sell Notice..............................30
(e) Delivery and Deemed Delivery of Response Notice..............30
(f) Buy/Sell Deposit.............................................32
(g) [Reserved]...................................................33
(h) Closing of the Buy/Sell Right................................33
(i) RSI Buy/Sell Option..........................................33
(j) Failure of Buyer to Close....................................34
(k) Assumption of Obligations....................................34
11. Additional Contributions..............................................35
(a) Capital Call.................................................35
(b) Capital Call Objectives......................................35
(c) Pre-Emptive Rights...........................................36
(d) Notice of Subscription Deficit...............................36
(e) Subscription Closing; Adjustment of Percentage of Membership
Interest.....................................................37
(f) Computation of Adjusted Membership Interest..................37
(g) Illustration of Adjustments to Membership Interest...........38
12. Opportunities; Confidentiality; Noncompetition; RSI Buildings.........39
(a) Opportunities................................................39
(b) Confidentiality..............................................39
(c) Non-Competition..............................................39
(d) RSI Buildings; Exclusivity of the Company....................40
13. Effect of the Xxxx Xxxxx Xxxxxx Act...................................41
(a) Applicability................................................41
(b) Covenant to File all Necessary Documents.....................42
(c) Amendment of Timing Periods..................................42
14. Veritech Call Right; Veritech Put Right...............................42
(a) Exercise Period..............................................43
(b) Manner of Exercise of the Rights.............................43
(c) Purchase Price...............................................43
(d) Deposit......................................................43
(e) Closing of the Veritech Call Right...........................45
(f) Closing of the Veritech Put Right............................46
15. Participation Right...................................................46
(a) General Member Participation Right...........................46
(b) Participation Rights on Transfers to a General Member
and to his or its Affiliates................................47
16. RSI Put Option........................................................48
(a) RSI Put Notice...............................................48
(b) Acceptance of RSI Put Offer..................................48
(c) Deposit......................................................48
(d) RSI Put Closing..............................................48
(e) Rejection of RSI Put; Failure to Close.......................49
17. Accounting Provisions.................................................49
(a) Fiscal and Taxable Year......................................49
(b) Books and Accounts...........................................49
(c) Financial Reports............................................50
(d) Tax Elections................................................50
(e) Expenses.....................................................50
18. Distributions and Allocations.........................................50
(a) Definitions..................................................50
(b) Distributions of Net Cash Flow...............................55
(c) Allocation of Net Profits and Net Losses.....................55
(d) No Return of Distributions...................................56
(e) Allocations between Assignor and Assignee Members............56
(f) Tax Credits..................................................56
(g) Deficit Capital Accounts.....................................56
(h) Further Allocation Rules.....................................57
19. Liquidation and Termination of the Company............................59
(a) General......................................................59
(b) Statements on Termination....................................60
(c) Priority on Liquidation......................................60
(d) Distribution of Non-Liquid Assets............................61
(i) The Liquidating Agent...............................61
(ii) The remaining assets................................61
(iii) Nothing contained in this Agreement.................62
(e) Orderly Liquidation..........................................62
20. Loans and Advances....................................................62
(a) Loans and Advances...........................................62
21. Exculpation and Indemnification of Managers, Members and Affiliates...62
(a) Exculpation..................................................62
(b) Indemnification..............................................62
22. Power of Attorney.....................................................64
(a) General......................................................64
(b) Successor Members............................................65
(c) Additional Power of Attorney.................................65
23. Certain Defined Terms.................................................65
(a) Affiliate....................................................65
(b) Contingent Transfer..........................................66
(c) Deposit Defaulted Interests..................................66
(d) Disqualified Transferee......................................66
(e) Employed the RSI Funds.......................................66
(g) Fair Market Value............................................67
(h) Family Group.................................................67
(i) Interim Loans................................................68
(j) IPO..........................................................68
(k) Liens........................................................68
(l) OCC Buy Sell Right...........................................68
(m) OCC LLC Agreement............................................68
(n) Person.......................................................68
(o) Platform Company.............................................68
(p) Supermajority Effective Period...............................68
(q) Syndicate Representative.....................................68
(t) Third Party Price............................................69
(u) Glossary.....................................................69
24. Amendment and Modification............................................69
25. Assignment............................................................70
26. Further Assurances....................................................70
27. Governing Law.........................................................70
28. Notices...............................................................70
29. Consent to Jurisdiction...............................................72
30. Entire Agreement; Non-Waiver..........................................72
31. Specific Performance and Injunctive Relief............................73
32. Attorneys' Fees.......................................................73
33. Severability..........................................................73
34. Miscellaneous.........................................................73
35. Initial Investment in the Company of RSI..............................74
(a) Intention of Parties.........................................74
(b) General Interpretation of this Agreement.....................76
(c) Consent to Admission of RSI as a Member in the Company.......76
(d) Release of Security Interest.................................77
(e) Interpretation of Specific Provisions of this Agreement......77
SCHEDULE A List of Nominated Investment Banks.
SCHEDULE B List of Persons or Entities which are not
Disqualified Transferees.
SCHEDULE C Glossary of Certain Defined Terms.
EXHIBIT I Copy of the Plan.
EXHIBIT II Form of The RSI Subordinated Note.
LIMITED LIABILITY COMPANY AGREEMENT
dated as of
November 20, 1997
by and among
ONSITE VENTURES, L.L.C.
RSI-OSA HOLDINGS, INC.
VERITECH VENTURES LLC
XXXXXX XXXXX, Individually
XXXXX XXXXXX, Individually
and
XXXXXX XXXXXXXXXX, Individually
