Exhibit 10.2
OPERATING AGREEMENT
OF
PARK AVE. ASSOC. LLC
THIS OPERATING AGREEMENT (this "Agreement") OF PARK AVE. ASSOC. LLC
(the "Company"), a Delaware limited liability company with a principal place of
business at 000 X. Xxxx Xx., Xxxxxxxxxx, XX 00000, is entered into as of
October 31, 2005, by and among the Company and the Members listed on Schedule A
hereto.
W I T N E S S E T H:
WHEREAS, the Members are making or committing to make contributions to
the Company to enable the Company to acquire and develop real property located
in New Jersey and New York, as more fully described on Schedule B hereto (the
"Real Property") and for the continuing purpose more fully described in this
Agreement; and
WHEREAS, the Members desire to provide for the orderly management of
the Company as provided in this Agreement; and
WHEREAS, the parties desire to provide for the issuance and transfer
of Interests in the Company as provided in this Agreement.
NOW, THEREFORE, the parties agree as follows:
Definitions. In this Agreement, the following terms shall have the
meanings set forth below:
Affiliate means, when used with reference to a specified Person, any Person
that directly or indirectly controls or is controlled by or is under common
control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of the power to
direct or cause of the direction of management or policies (whether through the
ownership of securities or partnership or other ownership interests, by
contract or otherwise). With respect to any Person who is an individual,
"Affiliate" shall also include, without limitation, any member of such
individual's Family Group.
Agreement has the meaning ascribed to it in the introductory paragraph hereof.
Board means the Board of Managers of the Company.
Capital Account as of any date means the aggregate Capital Contributions to the
Company by a Member, adjusted as of such date pursuant to this Agreement.
Capital Commitment means an unfunded Capital Contribution a Member is obligated
to make pursuant to this Agreement as set forth in Schedule A hereto.
Capital Contribution means any contribution by a Member to the capital of the
Company in cash.
Capital Investment means the amount of financing provided by the Company in any
particular Project.
Certificate means the Company's Certificate of Formation, as amended or
restated from time to time.
Code means the Internal Revenue Code of 1986, as amended, or any superseding
federal revenue statute.
Company has the meaning ascribed to it in the introductory paragraph hereof.
Disposition has the meaning ascribed to it in introductory paragraph of Article
10.
Distribution means any cash and other property paid to a Member by the Company
from the operations of the Company.
Interests means with respect to the Company the percentage interests of the
Members set forth on Schedule A attached hereto, adjusted, if at all, pursuant
to Section 6.2.2.
Family Group means, with respect to any Person who is an individual, (i) such
Person's spouse, former spouse, ancestors and descendants (whether natural or
adopted), parents and their descendants and any spouse of the foregoing persons
(collectively, "relatives"), (ii) the trustee, fiduciary or personal
representative of such Person and any trust solely for the benefit of such
Person and/or such Person's relatives or (iii) any limited partnership, limited
liability company or corporation the governing instruments of which provide
that such Person shall have the exclusive, nontransferable power to direct the
management and policies of such entity and of which the sole owners of
partnership interests, membership interests or any other equity interests are,
and will remain, limited to such Person and such Person's relatives.
LLC Law means the Delaware Limited Liability Company Act.
Majority Vote and Majority Vote of Members have the meanings ascribed to them
in Section 3.1.3.
Management Agreement means that certain Management Agreement of even date
herewith by and between the Company and the Management Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time.
Management Company means Park Avenue Associates Management, Inc., a Delaware
corporation.
Manager has the meaning ascribed to it in Section 4.2.
Member means each Person who or which executes a counterpart of this Agreement
as a Member, a Subscription Agreement or Securities Purchase Agreement by which
such Person agrees to become a Member and each Person who or which may
hereafter become a party to this Agreement.
Net Cash means available cash after payment of all operating expenses of the
Company (including, without limitation, building operating expenses, mortgage
expenses, and sale/brokerage expenses regarding the sale of condominium units)
after providing for such reasonable reserve as the Board shall decide.
Net Losses means the losses of the Company, if any, determined in accordance
with generally accepted accounting principles employed under the cash method of
accounting.
Net Profits or Net Income means the income of the Company, if any, determined
in accordance with generally accepted accounting principles employed under the
cash method of accounting.
Newco has the meaning ascribed to it in Section 6.3.
Person means any individual, corporation, partnership, limited liability
company, trust, joint venture, governmental entity or other unincorporated
entity, association or group.
Preferred Return means, for any particular Project, an amount equal to nine
percent (9%) per annum accruing on the Company's Capital Investment in the
Project.
Price Per Point has the meaning ascribed to it in Section 6.2.2.
Project means a small business use and or active lifestyle real estate project
constructed and developed by the Company and shall include the Real Property.
Real Property has the meaning ascribed to such term in the first Whereas clause
hereof.
Public Offering means an underwritten public offering of the common stock of
Newco registered under the Securities Act.
Securities Act means the Securities Act of 1933, as amended.
Tax Matters Partner has the meaning ascribed to it in Section 9.1.
Unrecovered Capital means the aggregate amount of cash contributed to the
capital of the Company by a Member, whether as an initial Capital Contribution
or as an additional Capital Contribution, less only the aggregate amount of
cash and the fair market value of all property distributed to that Member
pursuant to Section 7.1.3.
WQN Member means WQN, Inc., a Delaware corporation.
1. Organization and Capitalization.
1.1 Organization. The Company was organized as a limited liability
company, upon filing its Certificate with the Delaware Secretary of State on
August 19, 2005 pursuant to the provisions of the LLC Law.
1.2 Conformity with LLC Law. This Agreement is the operating
agreement concerning the Company provided for in the LLC Law and the
Certificate. This Agreement is to be interpreted to conform with the LLC Law,
but where inconsistent with or different than the provisions of the LLC Law,
this Agreement shall control except to the extent prohibited or ineffective
under the LLC Law. To the extent any provision of this Agreement is prohibited
or ineffective under the LLC Law, this Agreement shall be considered amended in
order to make this Agreement effective under the LLC Law. In the event that the
LLC Law is subsequently amended or interpreted in such a way as to make valid
any provision of this Agreement that was formerly invalid, then such provision
shall be considered to be valid from the effective date of such interpretation
or amendment.
1.3 Capitalization. The initial Capital Commitments to the Company
shall be as set forth in Schedule A. Capital Commitments must be in full as and
to the extent provided herein. Any Capital Commitment that is not paid in full
pursuant to a signed and enforceable Subscription or Securities Purchase
Agreement, shall be subject to the provisions of Section 5.2.
2. Business.
2.1 Nature of Business. While the Company may engage in any lawful
business permitted by the LLC Law or the laws of any jurisdiction in which the
Company may do business and while the Company shall have the authority to do
all things necessary or convenient to accomplish its purpose and operate its
business as described in this Article 2, the Company exists for the principal
purpose of owning, developing, operating, managing, maintaining, administering,
leasing, mortgaging, pledging, selling and/or disposing of the Projects, which
it acquires by way of purchase or otherwise, as well as to do all other acts
which may be necessary or appropriate in connection with such objectives, and
may not conduct any other business without a Majority Vote of the Members. The
authority granted to Board to bind the Company (as provided in Article 4) shall
be limited to actions necessary, convenient or related to this business.
2.2 Place of Business. The principal office of the Company shall
be located at the address indicated in the first paragraph of this Agreement or
such other address as may be designated by the Board. The Delaware Secretary of
State is designated as agent for the service of process and the address to
which the Secretary of State shall mail a copy of any process shall be the
principal office of the Company, the office of counsel to the Company or such
other address as may be designated by the Board. The Board may, from time to
time, change the address of the principal office or, through appropriate
filings with the Delaware Secretary of State, the address for mailing of
process.
3. Members.
3.1 Meetings and Voting.
3.1.1 Annual and Special Meetings. Regular meetings of
Members shall be held at least annually and special meetings may be held at any
time and from time to time as may be necessary or appropriate. Special meetings
shall be held at the request of the Board or any Member or group of Members
owning at least a 35% Interest.
3.1.2 Notice/Waiver. Meetings of Members shall be held on at
least ten (10) days written notice. Any notice shall set forth the time and
place of the meeting and shall state the name of the party(ies) authorizing the
calling of the meeting. The notice need not state the purpose of the meeting.
Notice may be waived, in writing, before, at or after any meeting. Attendance
at any meeting without protesting the lack of notice thereof, prior to the end
of such meeting, shall be deemed a waiver of notice. Notice may be given by any
reasonable means, and mailing by regular mail to the last known address of a
Member shall be deemed reasonable.
3.1.3 Voting. Each Member entitled to vote on a matter shall
be entitled to a vote pro rata to his, her or its Interest in the Company. Each
Member shall be entitled to vote on any matter submitted to a vote of Members
except as restricted by the LLC Law or restricted by the Certificate or this
Agreement in accordance with the LLC Law. A Member shall not be entitled to
vote on any matter concerning a transfer of his, her or its Interest or the
reconstitution of the Company where his, her or its action has caused the
dissolution of the Company. As used in this Agreement, an action requiring a
"Majority Vote" or a "Majority Vote of Members" refers to an action that must
receive the affirmative vote of Interests representing at least a majority of
the Interests held by Members entitled to vote.
3.1.4 Written Consent. Any action otherwise requiring a vote
of Members may, instead, be approved by written consent without a meeting or at
a meeting, but without a vote, if such written consent shall be signed by
Members who hold Interests entitled to vote on such action having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all of the Members entitled to vote therein were
present and voted. Any such written consent shall be delivered to the office of
the Company by hand or by certified mail, return receipt requested. Prompt
notice of the taking of an action by less than unanimous written consent shall
be given to those Members who have not consented in writing but who would have
been entitled to vote thereon had such action been taken at a meeting.
3.1.5 Proxies. Any Member may participate in any vote of
Members or written consent of Members in person or by proxy.
3.2 Conflicts of Interest. Any Member shall be entitled to enter
into transactions that may be considered to be competitive with, or a business
opportunity that may be beneficial to, the Company. It is expressly understood
that some of the Members may enter into transactions that are similar to the
transactions into which the Company may enter. Notwithstanding the foregoing,
each Member shall account to the Company and hold as trustee for it any
property, profit or benefit derived by such Member without the consent of the
other Members in the conduct of, or winding up of, the Company's business,
including information developed exclusively for the Company and opportunities
expressly offered to the Company.
3.3 Indemnification of Members. The Company shall indemnify and
hold harmless, and advance expenses to, any Member or former Member, or any
testator or intestate of such Member or former Member, as well as any
Affiliate, partner, officer, director, shareholder, employee, agent, trustee or
representative of such Member or former Member, from and against any and all
claims and demands arising out of or relating to the Company and/or such
Member's status and service as a Member, provided, however, that no
indemnification may be made to or on behalf of any Member if a judgment or
other final adjudication adverse to such Member establishes (a) that his, her
or its acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated
or (b) that he, she or it personally gained in fact a financial profit or other
advantage to which he, she or it was not legally entitled. To the extent
required by law, any expenses advanced to a Member pursuant to the prior
sentence shall be repaid to the Company in the event a final adjudication
establishes that such Member was not entitled to indemnification pursuant to
either clause (a) or (b) of the prior sentence. The Company may, as determined
by Board, maintain liability insurance for its Members. No change to this
section 3.3 may be given retroactive effect to take away any right to
indemnification with respect to actions taken prior to such change.
4. Management.
4.1 General Provisions Regarding Management. Except as expressly
provided otherwise in the Agreement, management of the Company shall be vested
in the Board. The Board shall be responsible for making certain that all
transactions concerning the Projects are properly conducted, including, that
mortgage documents are properly prepared and filed, all required permits are
obtained and all filings and related fees are paid in a timely fashion. The
Board is hereby authorized to make the "day-to-day" business decisions of the
Company, to pay all ongoing business related bills, to enter into contracts in
the ordinary course of business in order to accomplish the purpose of the
Company, and conduct such ordinary aspects of the Company business without
seeking authorization of the Members; provided, however, that, subject to the
Board's oversight or approval, the Management Company may provide day-to-day
management of the Projects. No Member has the authority or power as a Member to
act for or on behalf of the Company, to do any act that would be binding on the
Company or to incur any expenditures on behalf of the Company.
4.2 Appointment, Terms and Actions of Managers. The Board shall
consist of five (5) members (each a "Manager") as follows: (i) three (3)
Managers shall be appointed and removed solely by the WQN Member, (ii) one (1)
Manager shall be appointed and removed solely by Xxxx Xxxxxx so long as he
remains a Member, and (iii) one (1) Manager shall be appointed and removed
solely by a Majority Vote of the Members other than the WQN Member. Each
Manager shall be a "manager" (as that term is defined in the LLC Law) of the
Company, but, notwithstanding the foregoing, no Manager shall have any rights
or powers beyond the rights and powers granted to such member in this
Agreement. Managers need not be residents of the State of Delaware. Each
Manager shall serve until his or her death, resignation or removal. A Manager
may resign at any time upon giving written notice of resignation to the Member
or Members who appointed such Manager. A Manager may be removed at any time
(with or without cause) by the same vote of Members that is required to appoint
the Manager. If a Manager ceases to serve as a Manager at any time for any
reason, the resulting vacancy shall be filled by the Member or Members entitled
to appoint such Manager. Except as otherwise provided in this Agreement, all
actions by the Board of Managers on behalf of the Company shall require the
approval of a majority of the Managers.
4.3 Meetings of Managers and Members; Written Consents. Meetings
of the Board shall be held at least quarterly, and may be called at any time by
any Manager with notice to the Managers at least three (3) business days prior
to such meeting (or such shorter notice as may be approved by the Board). Any
Manager may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all individuals
participating in the meeting can hear and speak to each other at the same time
or in sequence, and participation in a meeting pursuant to this provision shall
constitute presence at the meeting. Any action required or permitted to be
taken at a meeting may be taken without a meeting if a consent, in writing,
setting forth the action so taken shall be signed by the Managers required to
approve such action.
4.4 Officers. The Board of Managers may appoint officers of the
Company which may include, but shall not be limited to the following: (a)
Chairman of the Board; (b) Chief Executive Officer; (c) President; (d) Vice
President; (e) Secretary; and (f) Treasurer or Chief Financial Officer. Except
as provided in the Management Agreement, the Board may delegate day-to-day
management responsibilities to any such officers, and such officers shall have
the authority to contract for, negotiate on behalf of and otherwise represent
the interests of the Company as authorized by the Board in any job description
created by the Board. Each officer shall have the same fiduciary duties that
such officer would have if the Company were a Delaware corporation and such
officer were a corresponding officer of that corporation. All officers shall
hold office at the pleasure of the Board and until their successors shall have
been duly elected and qualified, unless sooner removed. Any officer may be
removed at any time by the Board. If the office of any officer becomes vacant
for any reason, the vacancy may be filled by the Board. Each officer shall
perform such duties commonly incident to the position of a comparable officer
of a Delaware corporation and shall also perform such other duties and have
such other powers as the Board shall designate from time to time.
4.5 Compensation of Managers. Except as otherwise provided by the
Management Agreement, Managers, as such, shall not receive any stated salary
for their services, but shall receive such reasonable compensation for their
services as may be from time to time agreed upon by the Board. In addition, a
fixed sum and reimbursement for out-of-pocket expenses of attendance, if any,
may be allowed for attendance at each regular or special meeting of the Board;
provided, that nothing contained in this Agreement shall be construed to
preclude any Manager from serving the Company or any of its subsidiaries in any
other capacity and receiving compensation for such service (including as an
officer, director or employee of the Management Company).
4.6 Committees. The Board may, by resolution, designate from among
the Managers one or more committees (including, but not limited to, an Audit
Committee and a Compensation Committee), each of which shall be comprised of
one or more Managers, and may designate one or more of the Managers as
alternate members of any committee, who may, subject to any limitations imposed
by the Board, replace absent or disqualified Managers at any meeting of that
committee. Any such committee, to the extent provided in such resolution, shall
have and may exercise all of the authority of the Board, subject to the
limitations set forth in the LLC Law or in the establishment of the committee.
Any members thereof may be removed by the Board. Unless the resolution
designating a particular committee or this Agreement expressly so provides, a
committee of the Board shall not have the authority to authorize or make a
distribution to the Members or to authorize the issuance of Interests.
4.7 Fiduciary Duties. The Managers, in the performance of their
duties as such, shall owe to the Members duties of loyalty and due care of the
type owed by the directors of a corporation to the stockholders of such
corporation under the laws of the State of Delaware. Notwithstanding anything
contained herein to the contrary, no Manager shall have any duty or obligation
to bring any "corporate opportunity" to the Company. The officers, if any, in
the performance of their duties as such, shall owe to the Members duties of
loyalty and due care of the type owed by the officers of a corporation to the
stockholders of such corporation under the laws of the State of Delaware.
4.8 Performance of Duties; Liability of Directors and Officers. In
performing his or her duties, each of the Managers and the officers (if any)
shall be entitled to rely in good faith on the provisions of this Agreement and
on information, opinions, reports, or statements (including financial
statements and information, opinions, reports or statements as to the value or
amount of the assets, liabilities, Net Profits, Net Income, Net Losses or Net
Cash of the Company or any facts pertinent to the existence and amount of
assets from which distributions to Members might properly be paid), of the
following other Persons or groups: (A) one or more officers or employees of the
Company; (B) any attorney, independent accountant, or other Person employed or
engaged by the Company (including the Management Company); or (C) any other
Person who has been selected with reasonable care by or on behalf of the
Company, in each case as to matters which such relying Person reasonably
believes to be within such other Person's professional or expert competence.
The preceding sentence shall in no way limit any Person's right to rely on
information to the extent provided in Section 18-406 of the LLC Law. No
individual who is a Manager or an officer of the Company, or any combination of
the foregoing, shall be personally liable under any judgment of a court, or in
any other manner, for any debt, obligation, or liability of the Company,
whether that liability or obligation arises in contract, tort, or otherwise,
solely by reason of being a Manager or an officer of the Company or any
combination of the foregoing.
4.9 Indemnification. Notwithstanding Section 4.7, the Managers and
officers (if any) shall not be liable, responsible or accountable for damages
or otherwise to the Company, or to the Members, and, to the fullest extent
allowed by law, each Manager and each officer shall be indemnified and held
harmless by the Company, including advancement of reasonable attorneys' fees
and other expenses from and against all claims, liabilities, and expenses
arising out of any management of Company affairs; provided that (A) such
Manager's or officer's course of conduct was pursued in good faith and believed
by him to be in the best interests of the Company and was reasonably believed
by him to be within the scope of authority conferred on such Manager or officer
pursuant to this Agreement and (B) such course of conduct did not constitute
gross negligence or willful misconduct on the part of such Manager or officer
and otherwise was in accordance with the terms of this Agreement. The rights of
indemnification provided in this Section 4.9 are intended to provide
indemnification of the Managers and the officers to the fullest extent
permitted by the Delaware law regarding a corporation's indemnification of its
directors and officers and will be in addition to any rights to which the
Directors or officers may otherwise be entitled by contract or as a matter of
law (including the LLC Law) and shall extend to his or her heirs, personal
representatives and assigns. The absence of any express provision for
indemnification herein shall not limit any right of indemnification existing
independently of this Section 4.9. Each Manager's and each officer's right to
indemnification pursuant to this Section 4.9 may be conditioned upon the
delivery by such Manager or such officer of a written undertaking to repay such
amount if such individual is determined pursuant to this Section 4.9 or
adjudicated to be ineligible for indemnification, which undertaking shall be an
unlimited general obligation.
4.10 Banking. The Company shall maintain such bank and other
financial accounts as the Board may determine. The Board and such Persons as
the Board shall appoint shall be authorized to sign checks on behalf of the
Company in such manner as determined by the Board.
5. Contributions and Capital Accounts.
5.1 Capital Contributions. Each Member has to make the Capital
Commitments to the Company as set forth on Schedule A. No Member shall have the
right to the return of his, her, or it's Capital Contribution during the period
of time during which the construction of the Projects set forth in Schedule B
are still in progress. Upon the closing of the books on the last of the three
Projects set forth in Schedule B, any of the Members, at that time, may notify
the Company in writing requesting a Distribution of the amount deposited into
the member's Capital Account. Notwithstanding any of the foregoing to the
contrary, the WQN Member may request a Distribution of all or any portion of
the amount deposited in its Capital Account at any time on or after the date
hereof, regardless of status of any particular Project. Within thirty (30) days
thereof, the Company must issue a check in the amount of the Distribution
requested and send it to the requesting Member.
5.2 Funding of Capital Commitments; No Additional Contributions.
The Members are not intended to have personal liability for the obligations of
the Company above their actual Capital Contributions and no contributions,
other than Capital Commitments (to the extent required) pursuant to the terms
hereof shall be required. If the Board determines that additional funding is
required for any particular Project, the Company shall provide written notice
to the Members of the amount and due date of the contribution. such notice
shall be given at least fifteen (15) days before the date on which a Capital
Contribution is due, except that such notice may be waived by any Member. The
Members shall fund such Capital Contributions in cash pro rata based on their
Interests; provided that the amount requested from any shall not exceed the
than the remaining unfunded amount of such Member's Capital Commitment. Upon
any such funding, the Company shall revise Schedule A hereto to increase the
amount of each Member's Capital Contribution and to decrease the amount of its
Capital Commitment by the amount so funded. No Member shall be obligated to
restore any deficit in his, her or its Capital Account.
5.2.1 In the event that any Member fails to make a Capital
Contribution required under this Agreement within thirty (30) days after the
date such Capital Contribution is due, then the Company may elect:
(a) to charge such Member interest at an annual rate
equal to fifteen percent (15%) on the amount due from the date such amount
became due until the earlier of (i) the date on which such Capital Contribution
is received by the Company from such Member, (ii) the day of any notice given
to such Member pursuant to subsection 5.2.4, and (iii) the date on which such
Capital Contribution is received by the Partnership under subsection 5.2.5;
and/or
(b) to declare by notice to such Member that (i) such
Member's Capital Commitment shall be deemed to be reduced to an amount equal to
the amount of Capital Contributions timely made by such Member pursuant to this
Agreement, and (ii) upon such notice (A) such Member shall have no right to
make any Capital Contribution thereafter (including any Capital Contribution
pursuant to Section 6.2, the Capital Contribution as to which the default
occurred and other Capital Contribution otherwise required to be made
thereafter pursuant to the terms of this Agreement, and (B) this Agreement
shall be amended to reflect such reduced Capital Commitment.
5.2.2 Any Distributions to which such Member is entitled
shall be reduced by the amount of any interest charged pursuant to 5.2.1(a),
and such interest shall be deemed to be income of the Partnership.
5.2.3 In the event that any Member fails to make a Capital
Contribution required under this Agreement within thirty (30) days after notice
by the Company to such Member that it has failed to make its Capital
Contribution on the date such Capital Contribution was due, the Company may
elect to: (i) declare, by notice of forfeiture (a "Forfeiture Notice" to such
Member that fifty percent (50%) of the Interest of such Member in the Company
(including amounts in its Capital Account as well as any interest in future Net
Profits, Net Losses or Distributions of the Company) is forfeited, effective as
of the date of such Member's failure to make such required Capital
Contribution; and/or (ii) declare by notice of default (a "Default Notice") to
such Member that such Member is in default.
(a) As of the date of any Forfeiture Notice is given
to a Member, (i) such Member shall ceased to be a Member with respect to such
forfeited Interest; provided, however, that such Member shall cease to have any
liability for the payment of the forfeited percentage of any Capital
Contributions due at such time or in the future and (ii) the forfeited
percentage of such Member's Capital Account shall be held by the Company and
reallocated among the Capital Accounts of the other Members in proportion with
their aggregate Capital Contributions.
(b) If the Company elects to declare by Default Notice
that such Member is in Default (such Member, an "Optionor"), then the other
Members which are not in default (the "Optionees") shall have the right and
option to acquire 100% of the Capital Account the ("Optioned Interest") of the
Optionor on the following terms:
(1) The Company shall give the Optionees notice
promptly after declaration of any such default. Such notice shall advise each
Optionee of the portion of the Optioned Interest available to it and the price
therefor. The portion available to each Optionee shall be that portion of the
Optioned Interest that bears the same ratio to the Optioned Interest as each
Optionees Capital Contributions to the Company bears to the aggregate Capital
Contributions to the Company, exclusive of the Capital Contributions of the
Optionor. The aggregate price for the Optioned Interest shall be the assumption
of the unpaid Capital Commitment obligation (both that portion then due and
amounts due in the future) of the Optionor (the "Option Price"). The Option
Price for each Optionee shall be pro rated according the portion of the
Optioned Interest purchased by such Optionee so that the percentage of the
unpaid Capital Commitment assumed by each Optionee is the same percentage of
the Optioned Interest purchased by such Optionee the option granted hereunder
shall be exercisable by each Optionee in whole or in part at any time within
thirty (30) days of the date of the notice from the Company by delivery to the
Company of (x) a notice of exercise of option, and (y) the Capital Contribution
due in accordance with subsection 5.2.3(b)(4). The Company shall forward the
above notices of exercise of option received to the Optionor.
(2) Should any Optionee not exercise its option
within the period provided in subsection 5.2.3(b)(1), the Company, within
fifteen (15) days of the end of such period, shall notify the other Optionees
who have previously exercised their options in full, which Optionees shall have
the right and option to purchase all or any portion of the Optioned Interest
(the "Remaining Portion") within fifteen (15) days of the date of the notice
specified in this subsection on the same terms as provided subsection
5.2.3(b)(1). The provisions of this subsection 5.2.3(b)(2) shall be repeated
until the earlier to occur of (x) such time as the Remaining Portion is reduced
to zero and (y) such time no Optionees elect to purchase any Remaining Portion.
(3) The amount of the Remaining Portion not
acquired by the Optionees pursuant to subsection 5.2.3(b)(2) may, if the Board
deems it in the best interest of the Company, be sold to any other Persons on
terms not more favorable to such Person that the Optionee's option (and the
Company may admit any such Person as a Member hereunder). Any consideration
received by the Company for such amount of the Optionor's Interest in excess of
the Option Price therefor shall be retained by the Company and allocated among
the Member's Capital Accounts in proportion to their respective Capital
Contributions.
(4) Upon the exercise of any option hereunder,
such Optionee shall be deemed to have assumed the portion of the Optionor's
unpaid Capital Commitment that constitutes the Option Price for the portion of
the Optioned Interest purchased by such Optionee, and such Option shall be
obligated (x) to contribute to the Company the portion of the Capital
Contribution then due from the Optionor equal to the percentage of the Optioned
Interest purchased by such Optionee, and (y) to pay the same percentage of any
further Capital Contributions which would have otherwise been due from such
Optionor.
(5) Upon the purchase of any portion of any
Optioned Interest by an Optionee, the Optionor shall have no further rights or
obligations under this Agreement with respect to such portion.
(6) Upon the purchaser of any portion of the
Optioned Interest, for purposes of computing a purchaser's (including an
Optionee's) aggregate Capital Contributions, such Person shall be deemed to
have aggregate Capital Contributions (or the aggregate Capital Contributions of
any Optionee shall be increased by an amount) equal to the percentage of the
defaulting Member's aggregate Capital Contribution which the purchased portion
of the Optioned Interest represents of the defaulting Member's entire Interest,
and the aggregate Capital Contributions of such defaulting Member shall be
reduced by a corresponding amount.
5.2.4 No part of any Distribution shall be paid to any
Member from which there is then due and owing to the Company, at the time of
such Distribution, any amount required to be paid to the Company by such
Member. At the election of the Board, the Company may either (a) apply all or
part of any such withheld Distribution in satisfaction of the amount then due
to the Company from such Member, or (b) withhold such Distribution until all
amounts due to the company (by application of withheld distributions or
otherwise), the Company shall Distribute any unapplied balance of any such
withheld Distribution to such Member. No interest shall be payable on the
amount of any Distribution withheld by the Company pursuant to this subsection
5.2.4.
5.2.5 The Company, with the approval of the Board, may
bring an action in any court of competent jurisdiction to collect any Capital
Contributions required under this Agreement with or without notice to the
Member failing to make such Capital Contributions and whether or not the
Company exercises any of the foregoing remedies.
5.2.6 The remedies available to the Company under this
Section 5.2 are non-cumulative and non-exclusive. Except as otherwise provided
herein, the Company may elect to exercise any number of remedies set forth
herein. The company shall not be precluded from exercising any remedy contained
herein by virtue of the Company's election to exercise or not exercise any
other remedy herein.
5.3 Capital Accounts.
5.3.1 Definition. The Company shall establish and
maintain a Capital Account for each Member reflecting the Capital Contributions
made by such Member, the Net Profits and Net Losses allocated to such Member
and the Distributions made to such Member.
5.3.2 Tax Allocations. Except as provided in section
5.4, for tax purposes, any items of income, gain, loss, deduction and credit
(as determined in accordance with the provisions of the Code) that are required
to be allocated to take into account the variation between fair market value of
an asset and its adjusted tax basis (e.g., allocations under Section 704(c) of
the Code for contributed or revalued property) shall be allocated among the
Members in accordance with the requirements of the Code and the Regulations
thereunder.
5.3.3 Allocations of Net Profit and Net Loss. Net
Profits and Net Losses shall be allocated to the Members as follows:
(a) Allocation and Distribution of Net Profits.
(1) Net Profits shall be allocated to the
Members, subject to tax allocations as set forth in paragraph 5.3.2 and the
provisions of Section 5.2, and Net Profits from each Project shall be
Distributed to the Members on a quarterly basis from the Company's Net Cash
from the applicable Project as follows:
(A) First, to the Members on a pro rata
basis based on their Interests, until the aggregate amount of Net Profits
Distributed to the Members is equal to the Company's Capital Investment in the
Project plus the Preferred Return;
(B) Second, to the Management Company
pursuant to the Management Agreement until the aggregate amount of Net Profits
Distributed to the Management Company is equal to the Preferred Return; and
(C) Third, to the Members and the Management
Company such that the Members on a pro rata basis based on their Interests,
receive 80% of the Net Profits and the Management Company receives 20% of the
Net Profits.
For purposes hereof, Net Profits will be determined on a "job-by-job" basis and
shall not be Distributed until after the books have closed on each of the
Projects undertaken by the Company. "Closing of the books" shall mean that the
Company has finished construction; that all costs and expenses associated
therewith have been paid in full; that all loans and/or mortgages associated
with the Project have been repaid or been satisfied in some other manner,
including loans and/or advances made by Members; and that all sales of the
property or units of the property have been substantially sold, meaning that
title has passed and the Company has received the full proceeds of sale. It
shall be in the sole discretion of the Board to determine whether a Project on
which there are units (i.e. condominium units; apartment units; cooperative
units or such or divisible shares of a Project) have been "substantially sold".
(2) On an annual basis, the Company's accountants
shall determine for Federal and State tax purposes, the annual income/loss to
be reported by the Company. Taxes that may be due and owing shall be paid from
the Company's bank accounts. Upon the closing of the books for each
construction project, the Board, with the assistance of the accountants for the
Company, shall allocate the taxes paid by the Company to that particular
Project, for the purpose of determining Net Profits and Net Losses on the
Project.
(3) Upon the dissolution and liquidation of the
Company, the Net Profits shall be Distributed to the Members in accordance with
subsection 5.3.3(a)(1).
(4) The Company shall notify the Members within
thirty (30) days after the sale, disposition, liquidation or transfer of a
Project to a third party. From and after the date of such notice, any Member
shall have the right, by written demand to the Company, to require the Company
to make an immediate Distribution of any and all remaining Net Profits of such
Project to the Members in accordance with subsection 5.3.3(a)(1).
(b) Allocation of Net Losses. Net Losses shall be
allocated to the Members as follows:
(1) First, to the Members with Unrecovered
Capital, in accordance with the amounts of Unrecovered Capital held by such
Members, until the sum of the cumulative Net Losses allocated pursuant to this
subsection for the current and all previous years is equal to the Members
Unrecovered Capital.
(2) Second, to the Members, an amount of Net
Losses until the sum of the cumulative Net Losses allocated pursuant to this
subsection for the current and all previous years is equal to the cumulative
Net Profits allocated to the Members pursuant to subsection 5.3.3(a). Net
Losses allocated under this subsection shall be allocated to the Members in
proportion to, and to the extent of, the Net Profits allocated to them under
subsection 5.3.3(a).
(3) Third, to the Members, in accordance with
their respective Interests as shown on Schedule A and adjusted, if at all,
pursuant to section 6.2.2.
(c) No Deficit Capital Account Balance.
Notwithstanding subsections 5.3.3(b), allocations of Net Losses to a Member
shall be made only to the extent that such allocation of Net Losses will not
create a deficit Capital Account balance for that Member in excess of an
amount, if any, equal to such Member's share of Company Minimum Gain that would
be realized on a foreclosure of the Company's property. Any Net Losses not
allocated to a Member because of the foregoing provision shall be allocated to
the other Members (to the extent the other Members are not limited in respect
of the allocation of losses under this subsection 5.3.3(c).
5.4 Special Allocations.
5.4.1 Terminology. Terms used in this section 5.4 and
not defined in this Agreement have the meanings ascribed to them (from time to
time) in the Code and the Regulations thereunder (with the substitution of
Company for Partnership and Member for Partner). Without limiting the
generality of the foregoing, the definitions of the following terms can be
presently found as follows:
Term Location of Definition
---- ----------------------
Company Minimum Gain Regulation ss. 1.704-2(d)
Member Nonrecourse Debt Regulation ss. 1.704-2(b)(4)
Member Nonrecourse Deductions Regulation ss. 1.704-2(i)(4).
5.4.2 Nonrecourse Liabilities. Nonrecourse Liabilities of the
Company shall be allocated among the Members in accordance with Regulation
ss.1.752-3(a). For such purposes, each Member's interest in Company profits
shall be his, her or its respective Interest.
5.4.3 Member Nonrecourse Deductions. Member Nonrecourse
Deductions for any fiscal year or other period shall be specifically allowed to
the Member who bears the risk of loss with respect to the Member Nonrecourse
Debt to which such Member Nonrecourse Deductions are attributable in accordance
with Regulation ss.1.704-2(i).
5.4.4 Company Minimum Gain Chargebacks. Notwithstanding any
provision of this Agreement to the contrary, if there is a net decrease in
Company Minimum Gain during any taxable year of the Company, then, except as
otherwise provided by Regulation ss.ss.1.704-2(f)(2) through (5), items of
Company income and gain for such taxable year (and subsequent years, if
necessary), in the order provided in Regulation ss.1.704-2(j)(2)(i), shall be
allocated among all Members whose share of Company Minimum Gain decreased
during that year in proportion and to the extent of such Member's share of the
net decrease in Company Minimum Gain during such year. The allocation described
in this subsection 5.4.4 is intended to be a "Minimum Gain Chargeback" within
the meaning of Regulation ss.1-704-2, and shall be interpreted consistently
therewith.
5.4.5 Member Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any provision of this Agreement (other than subsection 5.4.4)
to the contrary, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain during any taxable year of the Company then, except as otherwise provided
by Regulation ss.1.704-2(i), items of Company income and gain for such taxable
year (and subsequent years, if necessary), in the order provided in Regulation
ss.1.704-2(j)(2)(i), shall be allocated among all Members whose share of Member
Nonrecourse Debt Minimum Gain decreased during such year in proportion to and
to the extent of such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain during such year. The allocation described in this subsection
5.4.5 is intended to be a "Member Nonrecourse Debt Minimum Gain Chargeback"
within the meaning of Regulation ss.1-704-2(i), and shall be interpreted
consistently therewith.
5.4.6 Qualified Income Offset. Notwithstanding any provision
of this Agreement (other than subsections 5.4.4. and 5.4.5) to the contrary, if
any Member unexpectedly receives any adjustments, allocations or distributions
described in Regulation ss.1.704-1(b)(2)(ii)(d)(4), (5) or (6), then items of
Company income and gain shall be specifically allocated to each such Member in
an amount and manner sufficient to eliminate, to the extent required by the
Regulations, the Capital Account deficit of such Member as quickly as possible.
The allocation described in this subsection 5.4.6 is intended to be a
"Qualified Income Offset" within the meaning of Regulation
ss.1.704-1(b)(2)(ii)(d), and shall be interpreted consistently therewith.
5.4.7 Elections. All elections permitted to be made for the
Company pursuant to the Code and the Regulations thereunder (e.g., an election
pursuant to Section 754 of the Code) shall be made in the sole discretion of
the Tax Matters Partner. If the Tax Matters Partner decides to make such
election, all necessary Members shall join in such election, and each Member
shall take all steps reasonably necessary or desirable to give effect to such
election.
5.4.8 Other Special Allocations. In addition to those special
allocations specifically described in this Section 5.4, the Company shall make
such other special allocations as may be required from time to time by the Code
and the Regulations thereunder.
5.5 No Interest. No Member shall be entitled to earn interest
on the balance of such Member's Capital Account, but may earn interest on
actual loans and advances made to the Company as such.
6. Percentage Interests.
6.1 Initial Contributions. The initial Interests of the Members
are as shown on Schedule A. The Interests may be adjusted only as provided in
section 6.2.2.
6.2 Adjustments for Additional Contributions.
6.2.1 Additional Capital Contributions; Preemptive Rights.
Should the Company require capital contributions in excess of the initial
Capital Contributions and Capital Commitments or otherwise desire or purpose to
sell additional Interests (other than pursuant to an existing Capital
Commitment or pursuant to Section 5.2) to any Person (the "Prospective
Purchaser"), it shall provide written notice (a "New Insurance Notice") to the
Members of the amount of capital to be raised and the Price Per Point requested
by the Company or offered to be paid by the Prospective Purchaser (the
"Requested Amount"). The then present Members shall have the first option to
make such contribution or acquire such Interests pro rata to their then
Interests. After the expiration of such initial option, if any Member has
elected not to contribute such Member's full pro rata share of the Requested
Amount, the Company shall provide written notification of the remaining
Requested Amount (the "Remainder Notice") to the fully-contributing Members and
such Members shall have the next option to contribute up to the remainder of
the Requested Amount, each Member contributing towards such remainder pro rata
to the Interests of such contributing Members or in such other percentages as
such contributing Members may agree among themselves. If the combined
contributions of all Members do not equal the Requested Amount, then the
Company may (1) seek (i) new Members (subject to the approval of the Board)
and/or (ii) other sources of financing for the remainder of the Requested
Amount or (2) sell the remaining Requested Amount to the Prospective Purchaser,
as applicable, in either case, only during the sixty-day period following the
earlier to occur of (x) the notification by the Members that they will not
acquire 100% of Requested Amount (including any waiver by the Members of their
rights hereunder) or (y) the expiration of the second of the foregoing option
periods and only at a Price Per Point and upon other terms and conditions no
more favorable than those set forth in the New Issuance Notice. Any amount of
the remaining Requested Amount not sold during such 60-day period or proposed
to be sold at a lower Price Per Point or on other terms more favorable than
those set forth in the New Issuance Notice shall again be subject to the rights
of the Members set forth this Section 6.2.1. The two options of Members
described in this subsection 6.2.1 shall each be open for a successive thirty
(30) day period, the first of which will commence with the giving of the New
Issuance Notice, and the second of which will commence upon the giving of the
Remainder Notice. A Member may only accept an option by tendering a
contribution within ten (10) days of written notice to the Company of it
election to exercise his, her or its rights hereunder during the applicable
option period.
6.2.2 Percentage Interest Adjustments.
(a) To the extent that any Member contributes a
portion of a Requested Amount in excess of his, her or its pro rata portion of
such Requested Amount (determined in relation to the Interests of all Members,
his, her or its "Excess Contribution"), such Member's Interest shall be
increased (such increase to be offset by a pro rata decrease of the Interest of
each Member who contributed less than his, her or its pro rata share of the
Requested Amount) in accordance with the following formula:
Increase in MI = Excess Contribution/Price Per Point where:
MI refers to the Member's Interest.
Price Per Point refers to the highest cost per 1% Interest of the
following:
(1) the price per 1% Interest last paid by a Member other than by
virtue of an Excess Contribution, including either a price paid to the Company
by a new Member or the price paid to a former Member on a Disposition of an
Interest; and
(2) the price per 1% Interest received by the Company in a bona fide
offer from a Prospective Purchaser as set forth in the New Insurance Notice;
and
(3) the Price Per Point, if any, determined by the Board and set forth
in the New Insurance Notice.
In the event that the contributions of all Members do not equal the Requested
Amount and the Company obtains any or all of the Requested Amount from a new
Member (including the Prospective Purchaser), all Members acknowledge that
their Interests shall be adjusted in accordance with this Section 6.2.2.
(b) Interests shall be adjusted to reflect the
Disposition thereof in accordance with the terms hereof.
(c) Interests shall be adjusted to reflect the effect
of forfeiture or purchase of Interests pursuant to Section 5.2.
6.3 Recapitalization; Conversion. Except as otherwise provided in
this Agreement, the provisions of this Agreement shall apply to any and all
securities of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets, or otherwise) which may be issued in
respect of, in exchange for, or in substitution of, any Interests by reason of
any reorganization, any recapitalization, reclassification, merger,
consolidation, partial or complete liquidation, sale of assets, spin-off,
dividend, split, distribution to Members or combination of Interests or any
other change in the Company's capital structure, in order to preserve fairly
and equitably as far as practicable, the original rights and obligations of the
parties hereto under this Agreement. Without limiting the generality of the
foregoing, at any time, the Board shall have the power and authority to, and
shall, effect (a) the conversion of the Company's business form from a limited
liability company to a Delaware corporation, (b) the merger of the Company with
or into a new or previously established but dormant Delaware corporation having
no assets or liabilities, debts or other obligations of any kind whatsoever
other than those associated with its formation and initial capitalization or
(c) the contribution of the assets and liabilities of the Company to a Delaware
corporation in exchange for one or more classes of common stock in such
corporation, followed by a liquidation of the Company and a distribution of the
such corporation's common stock to the Members (such a conversion, merger or
liquidation is referred to as a "Conversion" and such Delaware corporation is
referred to as "Newco"). In connection with a Conversion, the Interests held by
each Member shall be converted into or exchanged for a number of shares of
Newco's common stock determined by (i) calculating the fair market value of the
Company as determined in good faith by the Board (provided that if the
Conversion is being completed in connection with a Public Offering, then, the
fair market value will be based upon the actual offering price of Newco's
common stock and the number of shares of common stock to be outstanding after
the Public Offering) and (ii) by determining the amount each Member would
receive with respect to such Interests if (A) all of the Company's assets were
sold for such fair market value and (B) the proceeds were distributed in
accordance with subsection 5.3.3. The Board shall use reasonable efforts to
undertake any Conversion in such manner as would provide for no gain or loss to
the Members solely as a result of the Conversion.
7. Distributions.
7.1 Priority. The Net Cash of the Company shall be Distributed in
a timely manner, and such amounts when Distributed shall be distributed in the
following order of priority and subject to the provisions regarding the payment
of Net Profits under subsection 5.3.3(b), the provisions of subsection 5.2 and
tax distributions under subsection 7.2:
7.1.1 To Members who have made interest bearing loans to the
Company in respect of accrued interest. To the extent that the total
Distribution with respect to such interest is less than the aggregate amount of
such interest, such Distribution shall be pro rated in accordance with the
interest accrued as to each Member.
7.1.2 To Members who have made loans to the Company in
repayment of such loans. To the extent that the total Distribution with respect
to such loans is less than the aggregate principal of such loans, such
Distribution shall be pro rated in accordance with the principal due to each
Member.
7.1.3 To Members, any Distributions unrelated to the payment
of Net Profits including sale proceeds, refinancing proceeds and cash flow on a
pro rata basis with respect to each of the other Member's Interests.
7.2 Tax Distributions. To the extent that Distributions pursuant
to subsection 7.1.3 for the current tax year have been insufficient, and
provided that the Company has adequate Net Cash available, the Company may, in
the discretion of the Managing Member, before April 15, June 15, September 15
and January 15 of each year (or such other dates by which installment tax
contributions may be due), make a Distribution in cash in the amount necessary
to allow the Members to pay the estimated or actual taxes due on each such date
attributable to the income of the Company to be allocated to the Members.
8. Records of the Company.
8.1 Maintenance. The Company shall maintain a record book at such
place, within or without the State of Delaware, as the Members shall determine
which shall contain copies of all minutes of meetings or written consents of
the Members, as well as evidence of the proper calling of any meeting of
Members or evidence of the waiver of such notice (attendance at a meeting
without protesting the lack of notice being deemed a waiver of notice), and a
list of all Members and the Interest of each Member.
8.2 Inspection. Any Member may review and copy any of such records
during regular business hours at the place where such records are maintained
upon two business day's prior written notice.
8.3 Reporting. The Company shall have annual financial statements
prepared and distributed to each Member as soon as practicable but in any event
within 90 days after the end of each fiscal year. The Company shall have such
informational income tax returns as are required by the Code or the laws of any
state prepared and distributed to each Member in a timely fashion, including a
Schedule K-1 within 90 days after the end of each calendar year. If determined
by the Board, the financial statements shall be prepared by an accountant or
accounting firm selected by the Board and shall be in such form and shall be
subject to such review or compilation by such accountant or firm as the Board
may determine from time to time in its discretion.
9. Taxes.
9.1 Tax Matters Partner. A Member who from time to time is
selected by the Board and shall initially be Xxxx Xxxxxx will act as tax
matters partner (the "Tax Matters Partner") of the Company pursuant to Section
6231(a)(7) of the Code. Any Member designated as Tax Matters Partner shall take
such action as may be necessary to cause each Member to become a "Notice
Partner" within the meaning of Section 6223 of the Code. Any Member who is
designated a Tax Matters Partner may not take any action contemplated by
Sections 6221 through 6233 of the Code without the consent of the Members.
9.2 Elections. The Tax Matters Partner may make any tax elections
for the Company allowed under the Code or the tax laws of any state or other
jurisdiction having Taxing Jurisdiction over the Company. The term "Taxing
Jurisdiction" shall mean any state, local or foreign government that collects
tax, interest or penalties, however designated, on any Member's share of the
income or gain attributable to the Company.
10. Transfer of Membership. No Member may sell, transfer, convey,
pledge, hypothecate or otherwise encumber (each a "Disposition") any Interests,
except in accordance with this Article 10.
10.1 Right of First Refusal.
10.1.1 In the event a Member other than the WQN Member (the
"Selling Member") desires to accept a bona fide third-party offer for the
transfer of any or all of such Selling Member's Interest (the ``Target
Interests"), the Selling Member shall promptly deliver to the WQN Member
written notice of the intended Disposition ("Disposition Notice") and the basic
terms and conditions thereof, including the portion of such Selling Member's
Interest proposed to be sold or transferred, the consideration to be paid and
the identity of the proposed purchaser or transferee.
10.1.2 The WQN Member shall, for a period of thirty (30) days
following receipt of the Disposition Notice, have the right to purchase all or
any portion of the Target Interests upon the same terms and conditions
specified in the Disposition Notice, subject to the following conditions: Such
right shall be exercisable by written notice (the "Exercise Notice") delivered
to the Selling Member prior to the expiration of the thirty (30) day exercise
period. If such right is exercised with respect to all the Target Interests
specified in the Disposition Notice, then the WQN Member shall effect the
repurchase of such Target Interests, including payment of the purchase price,
not more than five (5) business days after the delivery of the Exercise Notice,
except as provided below.
10.1.3 Should the purchase price specified in the Disposition
Notice be payable in property other than cash or evidences of indebtedness, the
WQN Member shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If the Selling Member and the
WQN Member cannot agree on such cash value within ten (10) days after the WQN
Member's receipt of the Disposition Notice, the valuation shall be made by an
appraiser of recognized standing selected by the Selling Member and the WQN
Member or, if they cannot agree on an appraiser within twenty (20) days after
the WQN Member's receipt of the Disposition Notice, each shall select an
appraiser of recognized standing and the two appraisers shall designate a third
appraiser of recognized standing, whose appraisal shall be determinative of
such value. The cost of such appraisal shall be shared equally by the Selling
Member and the WQN Member. The closing shall then be held on the later of (i)
the fifth business day following the delivery of the Exercise Notice, or (ii)
the fifth business day after such cash valuation shall have been made.
10.1.4 Subject to the WQN Member's co-sale rights described
in Section 10.2 below, in the event the Exercise Notice with respect to any
portion of the Target Interests is not given to the Selling Member within
thirty (30) days following the date of the WQN Member's receipt of the
Disposition Notice, the Selling Member shall have a period of sixty (60) days
thereafter in which to sell the portion of the Target Interests that WQN Member
has not elected to purchase upon terms and conditions (including the purchase
price) no more favorable to the third-party transferee than those specified in
the Disposition Notice. The third-party transferee shall acquire the Target
Interests subject to this Article 10. In the event the Selling Member does not
consummate the sale or disposition of the Target Interests within the sixty
(60) day period or proposes to sell such Target Interests at lower price or
upon terms and conditions more favorable than those set forth in the
Disposition Notice, such disposition of the Target Shares by the Selling Member
shall be subject to the terms of this Article 10.
10.2 Co-Sale Rights.
10.2.1 If (a) any such proposed Disposition of Target
Interests is being made by a Selling Member and (b) the rights of first refusal
of the WQN Member have been waived or have lapsed with respect to such proposed
Disposition, the WQN Member shall have the right, exercisable upon written
notice to the Selling Member within thirty (30) days after receipt of the
Selling Member's Disposition Notice, to sell a proportionate share of the WQN
Member's Interest in such sale of the Target Interests on the same terms and
conditions as those set forth in the Disposition Notice. To the extent the WQN
Member exercises such right of participation, the amount of the Target
Interests that the Selling Member may sell in the transaction shall be
correspondingly reduced. The right of participation of the WQN Member shall be
subject to the terms and conditions set forth in this Section 10.2.
10.2.2 The Selling Member shall deliver the Interests of the
WQN Member along with the Target Interests to be sold to the purchase offeror,
and upon the consummation of the sale of thereof, and the Selling Member shall
promptly thereafter remit to the WQN Member that portion of the sale proceeds
to which the WQN Member is entitled by reason of its participation in such
sale.
10.2.3. In the event the Selling Member should sell any
Interests in contravention of the co-sale rights of the WQN Member under this
Section 10.2 (a "Prohibited Transfer"), the WQN Member shall have the option to
sell to the Selling Member a portion of its Interest equal to the amount that
the WQN Member would have been entitled to sell had such Prohibited Transfer
been effected in accordance with this Section 10.2, at the same purchase price
per Interest paid to the Selling Member by the by the third-party purchaser or
purchasers of the Selling Member's Interests. Upon the exercise of such option,
the Selling Member pay the aggregate purchase price provided in foregoing
sentence, by certified check or bank draft made payable to the order of the WQN
Member, and shall reimburse the WQN Member for any additional expenses,
including reasonable legal fees and expenses, incurred in effecting such
purchase and resale.
10.3 Permitted Transfers. The restrictions on Dispositions
provided in this Article 10 shall not apply to (1) any Disposition by a Member
to an Affiliate or (2) any Disposition by the WQN Member; provided, in each
case, (x) that the Disposition is made in compliance with all applicable
federal and state securities laws and (y) the transferee agrees to become a
party to and to be bound by the terms of this Agreement pursuant to a written
instrument reasonably acceptable to the Company. In addition, the restrictions
in this Article 10 shall not apply to any Disposition contemplated by Section
5.2.
11. Dissolution and Winding Up.
11.1 Dissolution Events. The Company shall be dissolved and,
except as otherwise provided in this Article 11, its affairs shall be wound up
upon the first to occur of the following events:
11.1.1 Expiration of Term. Upon the expiration of the term
set forth in the Certificate, if any, including any extension thereof.
11.1.2 Consent. Upon the unanimous consent of the Members
given in writing or by vote at a meeting.
11.1.3 Death, etc. Upon the bankruptcy, death, dissolution,
expulsion, adjudicated incapacity or withdrawal of a Member (except a
withdrawal upon the Disposition of all of such Member's Interests in accordance
with the terms hereof) or occurrence of any other event that terminates the
continued Membership of a Member (any such event being a "Termination Event")
unless the remaining Members by Majority Vote consent to the continuation of
the business of the Company in accordance with this Article 11.
11.1.4 Judicial Dissolution. The entry of a decree of
judicial dissolution under the LLC Law.
11.2 Winding Up. Upon the winding up of the Company, the assets of
the Company shall be distributed as follows:
11.2.1 Creditors. To creditors, including Members who are
creditors, to the extent permitted by law, in satisfaction of liabilities of
the Company other than for Distributions to Members under the LLC Law.
11.2.2 Members. To Members and former Members in satisfaction
of liabilities for distributions under the LLC Law, unless otherwise provided
in the LLC Law or the Certificate.
11.2.3 Distributions. Unless otherwise provided in the LLC
Law or the Certificate or this Agreement, to Members (1) first, in payment of
their aggregate Capital Accounts and (2) second, in respect of their Interests
in the Company, in proportion to their Interests.
To the extent funds are available to pay some, but not all, amounts
due within any one of the foregoing distribution categories, the funds
available shall be allocated pro rata to the payment of all amounts due for
such category.
11.3 Election to Continue. In accordance with subsection 11.1.3,
the remaining Members may only consent to the continuation of the Company by
Majority Vote at a meeting held or by Majority Vote indicated in a written
consent given within 180 days after the Terminating Event. In the event of such
continuation, the Interest of the Member who has suffered a Terminating Event
(the "Terminated Member") must be addressed in one of the following manners:
11.3.1 Consent to Transfer. By the Company (with the approval
of the Board) consenting to the Disposition of the Interests of the Terminated
Member which shall be deemed given upon a Disposition to an Affiliate of such
Terminated Member.
11.3.2 Agreed Value. By the Company and the Terminated Member
(or such Member's legal Successor (as defined in section 12.3)) agreeing upon
an amount to be paid by the Company for the Membership of the Terminated Member
as well as the method of payment of such amount, which shall provide for
payment in installments over not less than 10 years, unless a shorter period is
unanimously approved by the Members. Alternatively, the Company may Distribute
to the Terminated Member or his, her or its Successor, in satisfaction of such
Member's Interest, a one time in-kind Distribution equal to such Member's
Interest in the assets of the Company, including, without limitation, the Real
Property or any other Project, as to which the Terminated Member or his, her or
its Successor will receive an interest as tenant-in-common with the Company.
11.3.3 Assignment. In the absence of (1) an approved
Disposition pursuant to subsection 11.3.1, (2) a Disposition permitted by
Article 10, or (3)(i) an agreement as to value and payment or (ii) an in-kind
distribution pursuant to subsection 11.3.2 and to the extent not prohibited by
the LLC Law, by treating the Terminated Member's Interest as assigned (in
accordance with Section 603(a) of the LLC Law) to such Member's legal
Successor.
11.4 Certificate of Cancellation. Upon the completion of winding
up of the Company pursuant to section 11.2, a Certificate of Cancellation shall
be filed with the Delaware Secretary of State.
12. Miscellaneous.
12.1 Notices. Any notice given pursuant to this Agreement shall be
in writing and shall be delivered by hand, or by certified or registered mail,
postage prepaid, or by telex or telecopy, or by Federal Express, DHL or other
similar courier, addressed to the party to whom intended at the address set
forth on Schedule A, or such other address as such party may designate by
appropriate notice, and such notice shall be deemed given when personally
delivered, mailed, sent or deposited with a courier, as the case may be.
Notwithstanding anything in the preceding sentence to the contrary, notices of
meetings of Members may be given as provided in subsection 3.1.2. Each party
recognizes that it is his, her or its individual responsibility to provide the
other parties with current address information, and that he, she or it may be
treated as having received and having knowledge of any notice properly given
pursuant to this Agreement, whether or not actually received.
12.2 Entire Agreement. This Agreement represents the entire
agreement between the parties regarding the subject matter hereof and, except
as set forth in this Agreement, supersedes in all respects any and all prior
oral or written agreements or understandings between them pertaining to the
subject matter of this Agreement. There are no representations or warranties
among the parties with respect to the subject matter of this Agreement, except
as set forth in this Agreement. This Agreement cannot be amended, modified or
terminated, nor may any of its provisions be waived, except as approved in
writing by a Majority Vote of Members; provided, however, that (i) Schedule A
hereto may be amended by the Company in accordance with the terms hereof
without any approval of the Members; (ii) any amendment, modification or wavier
which adversely affects the rights or obligations of a specified Member (e.g.
rights granted to the WQN Member or Xxxx Xxxxxx) shall receive the written
approval of such Member; or (iii) any amendment, modification or waiver
adversely affects the rights or obligations of a particular Member or group of
Members in a manner disproportionate to the Members constituting the Majority
Vote shall require the written approval of the adversely affected Member(s).
12.3 Successors; Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the respective parties, their successors,
assigns, heirs, legatees, executors, administrators and legal representatives
("Successors") and any Successor shall be deemed a party to this Agreement upon
such Successor's receipt of any interest in this Agreement.
12.4 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal substantive laws of the
State of Delaware.
12.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. This Agreement
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to each of the other parties.
12.6 Captions. Headings contained in this Agreement have been
asserted for reference purposes only and shall not be considered part of this
Agreement in construing this Agreement.
12.7 Equitable Relief. The parties agree that there will not be an
adequate remedy at law for the breach of this Agreement and the covenants
contained in this Agreement and agree that this Agreement may be enforced by
injunction, specific performance or other equitable relief.
12.8 Terminology.
12.8.1 Gender; Number. Unless the context clearly indicates
otherwise, terms used in this Agreement in the masculine, feminine or neuter
include the others, terms used in the singular include the plural and terms
used in the plural include the singular.
12.8.2 Successors Included. Reference in this Agreement to
any party includes such party's Successors.
[Signature page follows]
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth beside our names to be effective as of the date first set forth
above.
MEMBERS:
_________________________________ Dated: October 31, 2005
Xxxx Xxxxxx
_________________________________ Dated: October 31, 2005
Xxxxx Xxxxxxx
_________________________________ Dated: October 31, 2005
Xxxxxx Xxxxx
_________________________________ Dated: October 31, 2005
Xxxxx Xxxxxxxxx
_________________________________ Dated: October 31, 2005
Xxxxxx Xxxxx
_________________________________ Dated: October 31, 2005
Ray Drewers, Member
Cross-Country Capital Partners L.P.
By:_________________________________ Dated: October 31, 2005
Name: ______________________________
Title: _____________________________
WQN, Inc.
By:_________________________________ Dated: October 31, 2005
Name: ______________________________
Title: _____________________________
