Exhibit 10al
LIMITED LIABILITY COMPANY AGREEMENT
OF
BELLATAIRE INTERNATIONAL LLC
A Delaware Limited Liability Company
Dated: As of November 30, 2005*
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* Certain portions of this agreement have been omitted pursuant to a request for
confidential treatment.
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS..................................................................................1
1.01 Definitions..................................................................................1
1.02 Construction................................................................................10
ARTICLE 2 ORGANIZATION................................................................................10
2.01 Formation...................................................................................10
2.02 Name........................................................................................11
2.03 Registered Office; Registered Agent; Principal Office in the United States; Other Offices...11
2.04 Business of the Company.....................................................................11
2.05 Foreign Qualification.......................................................................11
2.06 Term........................................................................................11
2.07 Title to Property...........................................................................11
2.08 Maintenance of Separate Existence...........................................................11
2.09 Compliance with Laws........................................................................12
ARTICLE 3 MEMBERSHIP; DISPOSITIONS OF INTERESTS.......................................................12
3.01 Members; Membership Interests...............................................................12
3.02 Representations, Warranties and Covenants...................................................13
3.03 Dispositions and Encumbrances of Membership Interests and Member Equity.....................14
3.04 Creation of Additional Membership Interest..................................................15
3.05 Withdrawal..................................................................................16
3.06 Disclaimer of Duties and Liabilities........................................................16
ARTICLE 4 CAPITAL CONTRIBUTIONS.......................................................................16
4.01 Capital Contributions.......................................................................16
4.02 Return of Contributions.....................................................................16
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4.04 Capital Accounts............................................................................17
4.05 Maintenance of Capital Accounts.............................................................17
4.06 Revaluations of Property....................................................................17
4.07 Adjustments to Gross Asset Values of Distributed Assets.....................................18
4.08 Certain Other Adjustments to Gross Asset Values of Property.................................18
4.09 Compliance with Applicable Treasury Regulations.............................................18
4.10 Transfers of Interests......................................................................18
ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS...............................................................18
5.01 Computation of Profit and Loss..............................................................18
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5.04 Special Limitation..........................................................................20
5.05 Special Allocations.........................................................................20
5.06 Curative Allocations........................................................................21
5.07 Other Allocation Rules......................................................................22
5.08 Allocation of Tax Items.....................................................................22
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5.10 Amounts Withheld............................................................................23
5.11 Liability for Distributions.................................................................23
5.12 Distributions in Kind.......................................................................23
ARTICLE 6 MANAGEMENT..................................................................................23
6.01 Board of Directors..........................................................................23
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6.03 Special Board Consents......................................................................25
6.04 Indemnification.............................................................................26
6.05 Arbitration.................................................................................26
ARTICLE 7 TAXES.......................................................................................27
7.01 Tax Returns.................................................................................27
7.02 Tax Elections...............................................................................27
7.03 Tax Matters Member..........................................................................27
ARTICLE 8 BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS..................................................27
8.01 Maintenance of Books........................................................................27
8.02 Reports.....................................................................................28
8.03 Access to Information.......................................................................29
8.04 Confidential Information....................................................................29
8.05 Bank Accounts...............................................................................30
ARTICLE 9 DISSOLUTION, WINDING-UP AND TERMINATION.....................................................31
9.01 Default.....................................................................................31
9.02 Dissolution.................................................................................31
9.03 Winding-Up and Termination..................................................................31
9.04 Deficit Capital Accounts....................................................................31
9.05 Certificate of Cancellation.................................................................31
ARTICLE 10 GENERAL PROVISIONS..........................................................................31
10.01 Offset......................................................................................31
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10.02 Expenses....................................................................................31
10.03 Notices.....................................................................................32
10.04 Counterparts................................................................................32
10.05 Entire Agreement; Superseding Effect........................................................32
10.06 Publicity...................................................................................32
10.07 Effect of Waiver or Consent.................................................................32
10.08 Amendment or Restatement....................................................................32
10.09 Binding Effect..............................................................................33
10.10 Governing Law; Severability.................................................................33
10.11 Further Assurances..........................................................................33
10.12 Creditors and Other Third Parties...........................................................33
10.13 Relationship of this Agreement and the Certificate of Formation.............................33
10.14 Relationship of this Agreement to the Default Rules.........................................33
10.15 Headings and Captions.......................................................................33
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LIMITED LIABILITY COMPANY AGREEMENT
OF
BELLATAIRE INTERNATIONAL LLC
A Delaware Limited Liability Company
This LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of
BELLATAIRE INTERNATIONAL LLC (the "Company"), dated and effective as of November
30, 2005 (the "Effective Date"), is adopted, executed and agreed to, for good
and valuable consideration, by DI Bahamas Inc., a Bahamas international business
corporation ("DI BA"), and LKI Bahamas Ltd., a Bahamas international business
corporation ("LKI BA").
RECITALS
WHEREAS, DI BA and LKI BA have decided to form the Company for the
purpose of conducting directly or indirectly through its Affiliates the business
of sourcing, processing, cutting and polishing and selling natural gem diamonds
with the intention of improving their color by a high pressure high temperature
process developed by the Members or their Affiliates, and currently sold under
the Bellataire'TM' brand name [*]; and
WHEREAS, the Members have agreed to make certain contributions to the
Company as set forth herein;
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.01 Definitions. As used in this Agreement, the following terms have
the respective meanings set forth below or set forth in the Sections referred to
below:
Act - the Delaware Limited Liability Company Act, as amended.
Additional Contribution - as defined in Section 4.01(b).
Adjusted Capital Account Deficit - with respect to the Capital Account
maintained for a Member at the close of any Fiscal Year, the deficit balance in
such Capital Account at such time (determined by (i) crediting to such Capital
Account the amount of such Member's Deficit Restoration Obligation at that time;
and (ii) charging to such Capital Account (x) any adjustments described in
Section 1.7041(b)(2)(ii)(d)(4) of the Treasury Regulations that, at such time,
are reasonably expected to be made to such Account, (y) any allocations
described in Section 1.704-1(b)(2)(ii)(d)(5) of the Treasury Regulations that,
at such time, are reasonably expected to be made to such Member, and (z) any
distributions described in Section
1.7041(b)(2)(ii)(d)(6) of the Treasury Regulations that, at such time, are
reasonably expected to be made to such Member.
Affiliate - with respect to any Person, (a) each entity that such
Person Controls; (b) each Person that Controls such Person; and (c) each entity
that is under common Control with such Person; provided, however, that DI BA (or
its Affiliates) shall not be considered an Affiliate of LKI BA (or its
Affiliates) nor LKI BA (or its Affiliates) an Affiliate of DI BA (or its
Affiliates) for the purposes of this Agreement. Affiliation shall have a
corresponding meaning.
Affiliate Agreements - as defined in Section 6.03(a).
Agreement - this Limited Liability Agreement of the Company, as
amended, modified, supplemented or restated from time to time in accordance with
the provisions of this Agreement.
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Assignee - any Person that acquires a Membership Interest or any
portion thereof through a Disposition; provided, however, that an Assignee shall
have no right to be admitted to the Company as a Member except in accordance
with Section 3.03(c).
Bellataire - Bellataire LLC, a Delaware limited liability company.
Bellataire Interests - the membership interests in Bellataire.
Beneficial Ownership - with respect to any security, the power to vote,
or direct the vote of, such security and the power to dispose, or direct the
disposition of, such security.
Board of Directors - as defined in Section 6.01.
Business Day - any day other than a Saturday, a Sunday, or a holiday on
which national banking associations are closed in New York, New York.
BVBA - Bellataire BVBA, a corporation organized under the laws of
Belgium.
Capital Account - the account to be maintained by the Company for each
Member in accordance with Section 4.04.
Capital Contribution - with respect to any Member, the amount of money
and the Fair Market Value of property contributed by that Member to the Company
(net of liabilities secured by such contributed property that the Company is
considered to assume or take subject to under Section 752 of the Code)
contributed to the Company by the Member. Any reference in this Agreement to the
Capital Contribution of a Member shall include a Capital Contribution of its
predecessors in interest.
CEO - as defined in Section 6.01(i).
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Certified Public Accountants - a firm of independent public accountants
selected from time to time by the Board of Directors, who initially shall be BDO
Xxxxxxx, LLP.
Claim - any and all judgments, claims, causes of action, demands,
lawsuits, suits, proceedings, Governmental investigations or audits, losses,
assessments, fines, penalties, administrative orders, obligations, costs,
expenses, liabilities and damages (whether actual, consequential or punitive),
including interest, penalties, reasonable attorney's fees, disbursements and
costs of investigations, deficiencies, levies, duties and imposts.
Code - the Internal Revenue Code of 1986, as amended.
Company - Bellataire International LLC.
Company Business - as defined in Section 2.04(a).
Company Minimum Gain - the aggregate amount of gain (of whatever
character), determined for each Nonrecourse Liability of the Company, that would
be realized by the Company if it disposed of the Company property subject to
such liability in a taxable transaction in full satisfaction thereof (and for no
other consideration) and by aggregating the amounts so computed, determined in
accordance with Regulation sections 1.704-2(b)(2), -2(d) and -2(k).
Complete Control - the possession, directly or indirectly, through one
or more intermediaries, of both of the following:
(a) (i) in the case of a corporation, all of the outstanding
voting securities thereof; (ii) in the case of a limited liability
company, partnership, limited partnership or venture, the right to all
of the distributions therefrom (including liquidating distributions);
(iii) in the case of a trust or estate, including a business trust, all
of the beneficial interest therein; and (iv) in the case of any other
entity, all of the economic or beneficial interest therein; and
(b) in the case of any entity, the power and authority to
completely control the management of the entity.
Confidential Information - all information and data (including all
copies thereof) related to the business or activities of the Company, including,
without limitation, all information and data that is furnished or submitted by
any of the Members or their Affiliates, whether oral, written, or electronic, on
a confidential basis to the other Members or their Affiliates in connection with
the Company, and any and all of the activities and studies relating to the
economics or performance of the Company performed pursuant to this Agreement,
and the resulting information and data obtained from those studies shall be
deemed to be confidential and shall be maintained by each Member and their
respective Affiliates in confidence, using the same degree of care to preserve
the confidentiality of such Confidential Information that the party to whom such
Confidential Information is disclosed would use to preserve the confidentiality
of its own information of a similar nature. Notwithstanding the foregoing, the
term "Confidential Information" shall not include any information that (a) is in
the public domain at the time of its disclosure or thereafter (other than as a
result of a disclosure directly or indirectly by a Member or its Affiliates in
contravention of this Agreement); [*]
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Control - the Beneficial Ownership, directly or indirectly, through one
or more intermediaries, of either of the following:
(a) (i) in the case of a corporation, in excess of 50% of the
outstanding voting securities thereof; (ii) in the case of a limited
liability company, partnership, or venture, the right to in excess of
50% of the distributions therefrom (including liquidating
distributions); provided, however, neither LKI BA nor DI BA shall be
deemed to be in Control of the Company, including, without limitation,
at any time a Member is deemed a Non-Delinquent Member; (iii) in the
case of a limited partnership, the right to in excess of 50% of the
distributions therefrom (including liquidating distributions) or the
general partnership interest; (iv) in the case of a trust or estate,
including a business trust, in excess of 50% of the beneficial interest
therein; and (v) in the case of any other entity, in excess of 50% of
the economic or beneficial interest therein; provided, however, that
for the purposes of Section 2.04(c), the applicable threshold, in each
of (i) through (v) hereof shall be deemed reduced from "in excess of
50%" to "5% or more"; or
(b) in the case of any entity, the power or authority, through
ownership of voting securities, by contract or otherwise, to direct or
cause the direction of the management and policies of the Company;
provided, however, neither LKI BA nor DI BA shall be deemed to be in
Control of the Company, including, without limitation, at any time a
Member is deemed a Non-Delinquent Member.
Debt - of any Person means without duplication, (a) all indebtedness of
such Person for borrowed money, (b) all indebtedness of such Person evidenced by
notes, bonds, debentures or other similar instruments, (c) all obligations of
such Person for the deferred purchase price of property or services that in
accordance with GAAP would be shown as a liability on the balance sheet of such
Person (other than accounts payable that are payable not more than one (1) year
after the date of incurrence), (d) all capitalized lease obligations of such
Person, (e) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities (other than any such
obligations that relate to the purchase of raw materials or other materials used
in the Company Business in the ordinary course), (f) all Debt of others referred
to in clauses (a) through (e) above guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell service (which
agreement, in the case of clauses (i) and (ii), is entered into primarily for
the purpose of enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss), or (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered), and (g) all Debt referred to in clauses (a) through (f) above secured
by (or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Debt.
Notwithstanding the foregoing, Capital Contributions made pursuant to Article IV
shall not be considered Debt of any Person.
Debt Instruments - as defined in Section 3.03(f).
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Default - the failure of (a) a Member to (i) pay its Initial
Contribution, as set forth in Section 4.01(a) hereof, within ten (10) Business
Days after the same is due; (ii) pay any Additional Contributions after having
agreed to make such contribution in accordance with the terms and conditions set
forth in Section 4.01(b) hereof, and such non-payment remains outstanding for
ten (10) Business Days; (iii) comply in any material respect with any of its
material agreements, covenants or obligations under this Agreement and, to the
extent curable, such failure shall have continued uncured for thirty (30) days
after written notice by the Company or another Member or (iv) comply in any
material respect with any of its material agreements, covenants or obligations
under the Affiliate Agreements and, to the extent curable, such failure shall
have continued uncured for thirty (30) days after written notice by the Company
or another Member; or (b) the failure of any representation or warranty made by
a Member in this Agreement to have been true and correct in all material
respects at the time it was made, and, to the extent curable, such failure shall
continue uncured for thirty (30) days after written notice by the Company or
another Member.
Default Rule - a rule provided by the Act that (i) structures, defines
or regulates the finances, governance, operations or other aspect of a limited
liability company formed under the Act, and (ii) applies except to the extent it
is negated or modified through the provisions of a limited liability company's
certificate of formation or operating agreement.
Defaulting Party - as defined in Section 9.01.
Deficit Restoration Obligation - with respect to any Member at the end
of any Fiscal Year, the amount such Member is obligated to restore under
applicable law or pursuant to any provision of this Agreement on account of a
deficit balance in such Member's Capital Account or is deemed obligated to
restore under Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury
Regulations (determined after taking into account any changes in the Minimum
Gain and the Member Minimum Gain during such Fiscal Year).
Delaware Certificate - as defined in Section 2.01.
Delinquent Member - as defined in Section 4.01(c).
Depreciation - for each Fiscal Year or part thereof, an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such Fiscal Year or
part thereof, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes, the depreciation, amortization
or other cost recovery deduction for such Fiscal Year or part thereof shall be
an amount which bears the same ratio to such Gross Asset Value as the federal
income tax depreciation, amortization or other cost recovery deduction for such
Fiscal Year or part thereof bears to such adjusted tax basis. If such asset has
a zero adjusted tax basis, the depreciation, amortization or other cost recovery
deduction for each Fiscal Year shall be determined under a method reasonably
selected by the Board of Directors. Notwithstanding the preceding, if the
remedial allocation method is used, Depreciation shall be computed as required
under Treasury Regulation Section 1.704-3(d)(2).
DI - Diamond Innovations, Inc., a Delaware corporation.
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DI BA - as defined in the Introductory paragraph.
Director - as defined in Section 6.01(a)(i).
Dispose, Disposing or Disposition - with respect to any asset
(including a Membership Interest or any portion thereof), a direct or indirect
sale, assignment, transfer, conveyance, gift, exchange or other disposition of
such asset, whether such disposition be voluntary, involuntary or by operation
of Law, including the following: (a) in the case of an asset owned by a natural
person, a transfer of such asset upon the death of its owner, whether by will,
intestate succession or otherwise; (b) in the case of an asset owned by an
entity, (i) a merger or consolidation of such entity (other than where such
entity is the survivor thereof), (ii) a conversion of such entity into another
type of entity, or (iii) a distribution of such asset, including in connection
with the dissolution, liquidation, winding-up or termination of such entity
(unless, in the case of dissolution, such entity's business is continued without
the commencement of liquidation or winding-up); and (c) a disposition in
connection with, or in lieu of, a foreclosure of an Encumbrance; but such terms
shall not include the creation of an Encumbrance.
Disposing Member - a Member making a Disposition.
Dissolution Event - as defined in Section 9.02(a).
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Effective Date - as defined in the introductory paragraph.
Encumber, Encumbering, or Encumbrance - the creation of a security
interest, lien, pledge, mortgage or other encumbrance, whether such encumbrance
be voluntary, involuntary or by operation of Law.
Excess Nonrecourse Liabilities - at any time, means the nonrecourse
liabilities of the Company not allocated under paragraphs (a)(1) and (a)(2) of
Section 1.752-3 of the Treasury Regulations.
Fair Market Value - of Membership Interests or other property, as the
case may be, means the cash price that an unaffiliated third party would pay to
acquire such Membership Interests or other property in an arm's-length
transaction as reasonably determined by the Board of Directors or by a valuation
expert as specified in this Agreement.
Financing Documents - any term or revolving credit facilities or other
debt instruments entered into from time to time by the Company.
Fiscal Year - the year on which the financial statements of the Company
shall be based, which shall be a fiscal year ending May 31.
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GAAP - at any time, (i) generally accepted accounting principles, as
set forth in opinions of the accounting principles board of the American
Institute of Certified Public Accountants and
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in the Financial Accounting Standards Board Statements that are then applicable;
and (ii) where not inconsistent with such opinions and statements, as set forth
in other American Institute of Certified Public Accountants publications and
guidelines or which otherwise arise by custom for a particular industry.
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Gross Asset Value - at any time (i) with respect to any asset whose
Gross Asset Value has not been adjusted pursuant to Section 4.06 or Section
4.08, the Initial Gross Asset Value of such asset, adjusted by the depreciation
(or cost recovery) or amortization taken into account with respect to such asset
for purposes of determining Profit and Loss; and (ii) with respect to any asset
whose Initial Gross Asset Value has been adjusted pursuant to Section 4.06 or
Section 4.08, the Gross Asset Value of such asset immediately following the last
such adjustment, adjusted by the depreciation (or cost recovery) or amortization
taken into account subsequent to such adjustment with respect to such asset for
purposes of determining Profit and Loss.
Governmental Authority (or Governmental) - a federal, state, local or
foreign governmental authority; a state, province, commonwealth, territory or
district thereof; a county or parish; a city, town, township, village or other
municipality; a district, xxxx or other subdivision of any of the foregoing; any
executive, legislative or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission,
committee, council or other administrative body of any of the foregoing; any
court or other judicial body; and any officer, official or other representative
of any of the foregoing.
Initial Contribution - as defined in Section 4.01(a).
Initial Gross Asset Value - (i) in the case of an asset that is
contributed to the Company, the gross fair market value of such asset on the
contribution date, as determined by the Board of Directors; and (ii) in the case
of any other asset, the basis of such asset at the time it as acquired by the
Company (as determined for federal income tax purposes).
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Issuance Item - any income, gain, loss or deduction realized as a
direct or indirect result of the issuance of Interests by the Company.
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Law - any applicable constitutional provision, statute, act, code
(including the Code), law, regulation, rule, ordinance, order, decree, ruling,
proclamation, resolution, judgment, decision, declaration, or interpretative or
advisory opinion or letter of a Governmental Authority having valid
jurisdiction.
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LKI - Xxxxxx Xxxxxx International Inc., a Delaware corporation.
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LKI BA - as defined in the Introductory paragraph.
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Loss -for any Fiscal Year, an amount equal to the loss incurred by the
Company determined in accordance with Section 5.01).
Mediators - [*]
Member - any Person executing this Agreement as of the date of this
Agreement as a member or hereafter admitted to the Company as a member as
provided in this Agreement, but such term does not include any Person who has
ceased to be a member in the Company.
Member Nonrecourse Debt - means any liability of the Company that is a
partner nonrecourse debt (as that term is defined by Section 1.704-2(b)(4) of
the Treasury Regulations).
Member Nonrecourse Deductions - for any Fiscal Year, the partner
nonrecourse deductions of the Company for such Fiscal Year (determined in
accordance with Section 1.704-2(i)(2) of the Treasury Regulations).
Membership Interest - with respect to any Member, (a) that Member's
status as a Member; (b) that Member's share of the income, gain, loss, deduction
and credits of, and the right to receive distributions from the Company; (c) all
other rights, benefits and privileges enjoyed by that Member (under the Act,
this Agreement or otherwise) in its capacity as a Member, including that
Member's rights to vote, consent and approve and otherwise to participate in the
management of the Company, including through the Board of Directors; and (d) all
obligations, duties and liabilities imposed on that Member (under the Act, this
Agreement or otherwise) in its capacity as a Member, including any obligations
to make Capital Contributions.
Minimum Gain - at the close of any Fiscal Year, the minimum gain of the
Company (determined in accordance with Section 1.704-2(i)(2) of the Treasury
Regulations).
Net Cash Flow - for any Fiscal Year, the sum of (x) the excess of (A)
the gross cash proceeds received by the Company in such Fiscal Year (including
the net cash proceeds from all sales and other dispositions and refinancings of
assets), over (B) the portion of such proceeds used in such Fiscal Year to pay
or establish reserves for expenses, debt payments, capital improvements,
replacements and contingencies, and (y) any reductions in such Fiscal Year of
previously established reserves.
Non-Delinquent Member - as defined in Section 4.01(c).
Non-Transferred Membership Interests - as defined in Section
3.03(f)(ii).
Nonrecourse Deductions - for any Fiscal Year, the nonrecourse
deductions of the Company for such Fiscal Year (determined in accordance with
Section 1.704-2(b)(1) of the Treasury Regulations).
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Nonrecourse Liability - any liability (or portion thereof) for which no
Member or a related person (as defined in Regulation section 1.752-4(b)) bears
the economic risk of loss for that liability under Regulation section 1.752-2.
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Officer - any Person designated as an officer of the Company as
provided in Section 6.01(i), but such term does not include any Person who has
ceased to be an officer of the Company.
Outside Activities - as defined in Section 2.04(b).
Patents - as defined in Section 1.1 of the Technology Transfer
Agreements.
Person - any natural person, partnership (whether general or limited),
trust, estate, association, corporation, custodian, nominee or any other
individual or entity in its own or any representative capacity, in each case,
whether domestic or foreign, and a limited liability company or foreign limited
liability company and includes a Governmental Authority and any other entity.
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Profits - for any Fiscal Year, the amount equal to the profit of the
Company for such Fiscal Year (determined in accordance with Section 5.01).
Prospective Seller - as defined in Section 3.03(f)(i).
Regulatory Allocations - collectively, the allocations set forth in
Sections 5.03 and Section 5.05 (other than the allocation set forth in Section
5.05(h)).
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Sole Discretion - a Member's sole and absolute discretion, with or
without cause, and subject to whatever limitations or qualifications the Member
may impose.
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Term - as defined in Section 2.06.
Treasury Regulations - the regulations (including temporary
regulations) promulgated by the United States Department of the Treasury
pursuant to and in respect of provisions of the Code. All references herein to
sections of the Treasury Regulations shall include any corresponding provision
or provisions of succeeding, similar or substitute, temporary or final Treasury
Regulations.
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Wholly-Owned Affiliate - with respect to any Person, (a) each entity
that such Person Completely Controls; (b) each Person that Completely Controls
such Person; and (c) each entity that is under common Complete Control with such
Person.
Other terms defined herein have the meanings so given them.
1.02 Construction. Unless the context requires otherwise: (a) the
gender (or lack of gender) of all words used in this Agreement includes the
masculine, feminine, and neuter; (b) references to Articles and Sections refer
to Articles and Sections of this Agreement; (c) references to Exhibits and
Schedules refer to the Exhibits and Schedules attached to this Agreement, each
of which is made a part hereof for all purposes and each of which shall be
revised from time to time as required by the terms of this Agreement; (d)
references to Laws refer to such Laws as they may be amended from time to time,
and references to particular provisions of a Law include any corresponding
provisions of any succeeding Law; (e) references to money refer to legal
currency of the United States of America; and (f) and use of the word
"including" shall be interpreted as "including without limitation". The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement, and, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring either party by virtue of the authorship of any of the provisions of
this Agreement.
ARTICLE 2
ORGANIZATION
2.01 Formation. The Company has been organized as a Delaware limited
liability company by the filing of a Certificate of Formation, dated as of
August 8, 2005 (the "Delaware Certificate"), with the Secretary of State of
Delaware pursuant to the Act.
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2.02 Name. The name of the Company is "Bellataire International LLC"
and all Company business must be conducted in that name or such other name that
complies with Law as the Board of Directors may select.
2.03 Registered Office; Registered Agent; Principal Office in the
United States; Other Offices. The registered office of the Company required by
the Act to be maintained in the State of Delaware shall be the office of the
initial registered agent named in the Delaware Certificate or such other office
(which need not be a place of business of the Company) as the Board of Directors
may designate in the manner provided by Law. The registered agent of the Company
in the State of Delaware shall be the initial registered agent named in the
Delaware Certificate or such other Person or Persons as the Board of Directors
may designate in the manner provided by Law. The principal office of the Company
in the United States shall be at such place as the Board of Directors may
designate, which need not be in the State of Delaware, and the Company shall
maintain records there or such other place as the Board of Directors shall
designate and shall keep the street address of such principal office at the
registered office of the Company in the State of Delaware. The Company may have
such other offices as the Board of Directors may designate.
2.04 Business of the Company.
(a) [*] The Company Business may be conducted directly by
Company or indirectly through its Affiliates. The Company shall possess and may
exercise all the powers and privileges granted by the Act or by any other law or
by this Agreement, together with any incidental powers and privileges necessary
or convenient to the conduct, promotion or attainment of the Company Business.
[*]
2.05 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than Delaware, the Board of Directors shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Board of Directors, with all requirements
necessary to qualify the Company as a foreign limited liability company in that
jurisdiction. At the request of the Board of Directors, each Member shall
execute, acknowledge, swear to and deliver all certificates and other
instruments conforming with this Agreement that are necessary or appropriate to
qualify, continue or terminate the Company as a foreign limited liability
company in all such jurisdictions in which the Company may conduct business.
2.06 Term. [*]
2.07 Title to Property. All property of the Company, whether real,
personal or mixed, tangible or intangible, shall be deemed to be owned by the
Company as an entity, and no Member, individually, shall have any direct
ownership interest in such property.
2.08 Maintenance of Separate Existence. The Company shall do all things
necessary to maintain its limited liability company existence separate and apart
from each Member and any Affiliate of any Member, including holding regular
meetings of the Members and maintaining its books and records on a current basis
separate from that of any Affiliate of the Company or any
11
other Person, and shall not commingle the Company's assets with those of any
Affiliate of the Company or any other Person. In furtherance, and not in
limitation, of the foregoing, the Company shall not:
(a) Authorize or permit any Person other than the CEO to act
on its own behalf with respect to matters (other than matters
customarily delegated to others under powers of attorney) for which a
limited liability company's members or managing member would
customarily be responsible;
(b) Fail (i) to maintain or cause to be maintained by an agent
under the Company's control physical possession of all its books and
records, (ii) to maintain capitalization adequate for the conduct of
its business, (iii) to account for and manage all of its liabilities
separately from those of any other Person, including payment by it of
administrative expenses and taxes, other than income taxes, from its
own assets, or (iv) to identify or cause to be identified separately
all of its assets from those of any other Person;
(c) Commingle, or permit the commingling of, its funds with
the funds of any Member or any Affiliate of any Member or use its funds
for other than the Company's uses; or
(d) Maintain, or permit the maintenance of, joint bank
accounts or other depository accounts to which any Member would have
independent access.
2.09 Compliance with Laws. Each Member shall in implementing
this Agreement and in its activities relating to any activity contemplated
hereunder fully comply, and shall cause its employees and agents fully to
comply, with all laws and regulations of the United States and any other
relevant jurisdiction, including, without limitation, the Xxxxxxxxx Process
Certification Scheme, the World Diamond Congress resolutions pertaining to the
industry system of self-regulation and warranties, the USA PATRIOT ACT, the
Foreign Corrupt Practices Act, and the Xxxxxxxx-Xxxxx Act, whether or not such
party has an obligation independent of this Agreement to observe such laws.
ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 Members; Membership Interests.
(a) Members. The Members are executing this Agreement as of
the date of this Agreement as Members, each of which is admitted to the Company
as a Member effective contemporaneously with the execution by such Person of
this Agreement.
(b) Membership Interests.
(i) [*] The aggregate number of Membership Interests
available for issuance shall be adjusted from time to time by the Board of
Directors to account for any new Members admitted in accordance with
Section 3.04.
12
(ii) Each Membership Interest shall be entitled to
one vote on any matter requiring the vote, agreement
or consent of the Members. All Membership Interests shall have identical rights
in all respects as all other Membership Interests except as otherwise specified
in this Agreement. Each Member hereby agrees that its interest in the Company
and in its Membership Interests shall for all purposes be personal property.
(iii) Membership certificates of the Company shall be
in such form as shall be approved by the Members
and shall be signed in the name of the Company by an officer of the Company.
Transfers of Membership Interests pursuant to Section 3.03 hereof shall be made
only upon the books of the Company by the holder of the Membership Interest in
person or by its duly authorized attorney, and on the surrender of the
certificate or certificates for the same number of Membership Interests,
properly endorsed.
(iv) No Member shall be liable for the Debts,
obligations or liabilities of the Company, unless such
liability is expressly agreed to in writing by such Member. Other than as set
forth in Article 4, a Member is not obligated to make any Initial Contributions
or Additional Contributions.
3.02 Representations, Warranties and Covenants.
(a) Each Member hereby represents, warrants and covenants to
the Company and the other Members that the following statements are true and
correct as of the date such Person becomes a party to this Agreement and shall
be true and correct at all times that such Person is a Member:
(i) that Member is duly incorporated, organized or
formed (as applicable), validly existing, and (if applicable) in good
standing under the Law of the jurisdiction of its incorporation,
organization or formation; if required by applicable Law, that Member
is duly qualified and in good standing in the jurisdiction of its
principal place of business, if different from its jurisdiction of
incorporation, organization or formation; and that Member has full
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and all necessary actions by the
board of directors, shareholders, managers, members, partners,
trustees, beneficiaries or other applicable Persons necessary for the
due authorization, execution, delivery and performance when due of this
Agreement by that Member have been duly taken or will be taken by the
date that performance is due;
(ii) that Member and each of the Affiliates of such
Member has duly executed and delivered this Agreement, the Affiliate
Agreements and the other documents contemplated herein, and they
constitute the legal, valid and binding obligation of that Member
enforceable against it in accordance with their terms; and
(iii) that the authorization, execution, delivery and
performance of this Agreement [*] by the Member [*] does not and will
not (x) conflict with, or result in a breach, default or violation of,
(A) the organizational documents of such Member, (B) any contract or
agreement to which that Member is a party or is otherwise subject, or
(C) any Law, order, judgment, decree, writ, injunction or arbitral
award to which that
13
Member is subject; or (y) require any consent, approval or
authorization from, filing or registration with, or notice to, any
Governmental Authority or other Person, unless such requirement has
already been satisfied or will be satisfied by the date when required
for performance hereunder.
[*]
3.03 Dispositions and Encumbrances of Membership Interests and Member
Equity.
(a) General Restriction; Legend. A Member may not Dispose of
or Encumber all or any portion of its Membership Interest except in strict
accordance with this Section 3.03. References in this Section 3.03 to
Dispositions or Encumbrances of a "Membership Interest" by any Person shall also
refer to Dispositions or Encumbrances of (i) a portion of a Membership Interest
and (ii) the equity interests in or assets of any Person as to which the
Membership Interest constitutes (either directly or indirectly) all or
substantially all of such Person's assets. Any attempted Disposition or
Encumbrance of a Membership Interest, other than in strict accordance with this
Section 3.03, shall be, and is hereby declared, null and void ab initio. The
Members agree that a breach of the provisions of this Section 3.03 may cause
irreparable injury to the Company and to the other Members for which monetary
damages (or other remedy at law) are inadequate in view of the complexities and
uncertainties in measuring the actual damages that would be sustained by reason
of the failure of a Member to comply with such provisions and the uniqueness of
the Company business and the relationship among the Members. Accordingly, the
Members agree that the provisions of this Section 3.03 may be enforced by
specific performance. The Company shall affix to each certificate evidencing
Membership Interests issued to Members a legend in substantially the following
form:
"THE MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR AN EXEMPTION
THEREFROM AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS.
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN A LIMITED LIABILITY
COMPANY AGREEMENT DATED AS OF NOVEMBER 30, 2005, AS IT MAY BE AMENDED
FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY. NO REGISTRATION OF TRANSFER OF THESE
MEMBERSHIP INTERESTS WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS
AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH."
[*]
14
(c) Admission of Assignee as a Member. An Assignee has the
right to be admitted to the Company as a Member, only if (i) the Disposing
Member making the Disposition has granted the Assignee the Disposing Member's
entire Membership Interest and (ii) such Disposition is effected in strict
compliance with this Section 3.03.
(d) Requirements Applicable to All Dispositions and
Admissions. In addition to the requirements set forth in this Section 3.03, any
Disposition of a Membership Interest and any admission of an Assignee as a
Member shall also be subject to the following requirements, and such Disposition
(and admission, if applicable) shall not be effective unless such requirements
are complied with:
(i) Disposition Documents. The following documents
must be delivered to the Board of Directors and
must be satisfactory, in form and substance, to the Board of Directors:
(A) Disposition Instrument. A copy of the
instrument pursuant to which the Disposition is
effected.
(B) Ratification of this Agreement. An
instrument, executed by the Disposing Member and its Assignee, containing the
following information and agreements, to the extent they are not contained in
the instrument described in Section 3.03(d)(i)(A): (i) the notice address of the
Assignee; (ii) if applicable, the controlling entities of the Assignee; (iii)
the Membership Interests after the Disposition of the Disposing Member and its
Assignee (which together must total the Membership Interests of the Disposing
Member before the Disposition); (iv) the Assignee's ratification of this
Agreement and agreement to be bound by it, and its confirmation that the
representations and warranties in Section 3.02 are true and correct with respect
to it; and (v) representations and warranties by the Disposing Member and its
Assignee that the Disposition and admission is being made in accordance with all
applicable Laws.
(C) Amended LLC Agreement. An amended
Agreement governing the rights and obligations of the Members, and making such
changes to this Agreement as are made necessary by the Disposition. Any and all
costs incurred in connection with such amendment of this Agreement (including
all attorneys' fees) shall be borne by the Member Disposing of its Membership
Interest.
(ii) No Release. No Disposition of a Membership
Interest shall effect a release of the Disposing Member from any liabilities to
the Company or the other Members arising from events occurring prior to the
Disposition.
[*]
3.04 Creation of Additional Membership Interest. Additional Membership
Interests may be created and issued to existing Members or to other Persons, and
such other Persons may be admitted to the Company as Members, with the unanimous
consent of the Members, on such terms and conditions as the Members may
unanimously determine at the time of admission. The terms of admission or
issuance must specify the Membership Interests applicable thereto and may
provide for the creation of different classes or groups of Members having
different rights,
15
powers and duties. The Board of Directors may reflect the creation of any new
class or group in an amendment to this Agreement indicating the different
rights, powers and duties. Any such admission is effective only after the new
Member has executed and delivered to the Members an instrument containing the
notice address of the new Member, the Assignee's ratification of this Agreement
and agreement to be bound by it, and its confirmation that the representations
and warranties in Section 3.02 are true and correct with respect to it. The
provisions of this Section 3.04 shall not apply to Dispositions of Membership
Interests or admissions of Assignees in connection therewith, such matters being
governed by Section 3.03.
3.05 Withdrawal. A Member may not withdraw or resign from the Company
unless unanimously agreed to in writing by all other Members.
3.06 Disclaimer of Duties and Liabilities.
(a) NO MEMBER SHALL OWE ANY DUTY (INCLUDING ANY FIDUCIARY
DUTY) TO THE OTHER MEMBERS OR TO THE COMPANY, OTHER THAN THE DUTIES THAT ARE
EXPRESSLY SET FORTH IN THIS AGREEMENT.
(b) NO MEMBER SHALL BE LIABLE (WHETHER IN CONTRACT, TORT OR
OTHERWISE) FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES;
PROVIDED, HOWEVER, THAT A MEMBER SHALL BE LIABLE FOR ANY CLAIMS BY OR ON BEHALF
OF ANY PERSON (INCLUDING ANOTHER MEMBER) ARISING FROM OR RELATED TO FRAUDULENT
ACTS OR WILLFUL MISCONDUCT OF THE MEMBER.
(c) THE OBLIGATIONS OF THE MEMBERS UNDER THIS AGREEMENT ARE
OBLIGATIONS OF THE MEMBERS ONLY, AND NO RECOURSE SHALL BE AVAILABLE AGAINST ANY
OFFICER, DIRECTOR OR AFFILIATE OF ANY MEMBER, EXCEPT AS PERMITTED UNDER
APPLICABLE LAW.
ARTICLE 4
CAPITAL CONTRIBUTIONS
4.01 Capital Contributions.
(a) Each Member, pursuant to each Member's [*] and in return
for Membership Interests as set forth on Exhibit A, shall contribute to the
Company on the date hereof an initial contribution as set forth in Exhibit B
(the "Initial Contribution"). [*] No Member shall receive any interest, salary
or drawing with respect to its Capital Contributions or its Capital Account or
for services rendered on behalf of the Company or otherwise in its capacity as a
Member, except as otherwise specifically provided in this Agreement. [*] Each
Member hereunder is solely responsible for making its own Capital Contributions.
[*]
4.02 Return of Contributions. Except as otherwise expressly provided
herein, no Member will be permitted to borrow, make an early withdrawal of, or
demand or receive a return
16
of any Capital Contributions. [*] Except as otherwise provided herein, the
Members shall be liable only to make their Capital Contributions pursuant to
this Article IV, and no Member shall be required to lend any funds to the
Company or, after a Member's Capital Contributions have been fully paid pursuant
to this Article IV, to make any additional capital contributions to the Company.
No Member shall have any personal liability for the repayment of any Capital
Contribution of any other Member or transferee.
[*]
4.04 Capital Accounts. A single Capital Account shall be established on
the books of the Company for each Member.
4.05 Maintenance of Capital Accounts. The Capital Account established
for any Person shall be maintained in accordance with the following rules.
(a) Basic Rules. The Capital Account established for any
Member shall be (i) credited with (A) such Member's Capital Contributions, (B)
such Member's allocable share of Profits and any items in the nature of income
or gain that are specially allocated to such Member pursuant to Section 5.05 or
Section 5.06, and (C) the amount of any Company liabilities assumed by such
Member or which are secured by any property distributed to such Member by the
Company; and (ii) charged with (A) the amount of money and the Adjusted Gross
Asset Value of any property distributed to such Member pursuant to any provision
of this Agreement, (B) such Member's allocable share of Losses and any items in
the nature of expense or loss that are specially allocated to such Member
pursuant to Section 5.04, 5.05 or Section 5.06, and (C) the amount of such
Member's liabilities assumed by the Company or that are secured by any property
contributed to the Company by such Member.
(b) Treatment of Liabilities. The amount of any liability
shall be determined for purposes of this Section 4.05 taking into account
Section 752(c) of the Code and any other applicable provisions of the Code and
the Treasury Regulations.
(c) Treatment of Certain Promissory Notes. If a promissory
note (other than a note that is readily tradable on an established securities
market) is contributed to the Company by the Person who is the maker of such
note, such Person's Capital Account shall be credited on account of the
contribution of such note only when there is a taxable disposition of such note
by the Company or when the maker makes principal payments on such note.
(d) Defaulted Capital Contributions. The Capital Account of
the Delinquent Member shall be debited the amount of interest paid or accrued
pursuant to Section 4.02.
4.06 Revaluations of Property. The Gross Asset Values of all Company
assets shall be adjusted to their respective gross fair market values (taking
Section 7701(g) of the Code into account) as of the following times: (i) the
acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis amount of money or other property;
(ii) the distribution by the Company to a Member of more than a de minimis
amount of money or other property as consideration for an interest in the
Company; (iii) the liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Treasury Regulations; and (iv) the issuance by the
Company of more than a de minimis interest therein as consideration
17
for the provision of services to or for the benefit of the Company by an
existing Member acting in a membership capacity, or by a new Member acting in a
membership capacity or in anticipation of becoming a Member, provided, however,
that adjustments made at the times described in clauses (i), (ii) and (iv) of
this Section 4.06 shall be made only if the Board of Directors reasonably
determine that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members. The determination of the Gross Asset
Values of all Company assets for purposes of this Section 4.06 shall be made by
the Board of Directors.
4.07 Adjustments to Gross Asset Values of Distributed Assets. The Gross
Asset Values of any asset distributed to a Member by the Company shall be
adjusted to the gross fair market value (taking Section 7701(g) of the Code into
account) of such asset on the distribution date, as determined by the Board of
Directors.
4.08 Certain Other Adjustments to Gross Asset Values of Property. The
Gross Asset Values of all Company assets shall be adjusted to reflect any
adjustments to the tax bases of such assets pursuant to Section 743(b) or
Section 734(b) of the Code, but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Treasury Regulations and Section 5.01(vii) or
Section 5.05(e) of this Agreement; provided, however, that such Gross Asset
Values shall not be adjusted pursuant to this Section 4.08 to the extent an
adjustment pursuant to Section 4.06 is required in connection with a transaction
that would otherwise result in an adjustment pursuant to this Section 4.08.
4.09 Compliance with Applicable Treasury Regulations. The provisions of
Sections 4.05, 4.06, 4.07 and 4.08 are intended to comply with Section
1.704-1(b) of the Treasury Regulations and shall be interpreted and applied in a
manner consistent with such provision. In the event that the Board of Directors
determine that it is prudent to modify the manner in which Capital Accounts, or
any credits or charges thereto are computed in order to comply with such
Section, they may make such modification, provided it is not likely to have a
material effect on the amounts distributable to any Member upon dissolution of
the Company. The Board of Directors shall (i) make any adjustments that are
necessary or appropriate to maintain equality between their Capital Accounts and
the amount of Company capital reflected on the Company's balance sheet, as
computed for book purposes, in accordance with Section 1.704-1(b)(2)(iv)(q) of
the Treasury Regulations; and (ii) make any other appropriate modifications in
the event unanticipated events might otherwise cause this Agreement not to
comply with Section 1.704-1(b) of the Treasury Regulations.
4.10 Transfers of Interests. If in any Fiscal Year a Member transfers
any or all of its Interest, then such Member's Capital Account (or the portion
thereof attributable to the transferred Interest) shall carry over to the
transferee.
ARTICLE 5
DISTRIBUTIONS AND ALLOCATIONS
5.01 Computation of Profit and Loss. The Profit (or Loss) for any
Fiscal Year shall be an amount equal to the taxable income (or loss) of the
Company for such Fiscal Year (computed in accordance with Section 703(a) of the
Code), with the following adjustments:
18
(i) any income that is exempt from federal income tax
and not otherwise taken into account in computing Profit (or Loss)
under this Section 5.01 shall be added to such taxable income (or
loss);
(ii) any expenditures described in Section
705(a)(2)(B) of the Code or treated pursuant to Section
1.704-1(b)(2)(iv)(i) of the Treasury Regulations as expenditures
described in such Section of the Code and not otherwise taken into
account in computing Profit (or Loss) under this Section 5.01 shall be
subtracted from such taxable income (or loss);
(iii) in the event the Gross Asset Value of any asset
is adjusted pursuant to Section 4.06 or Section 4.08, the amount of
such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profit (or Loss);
(iv) any gain or loss resulting from the disposition
during such Fiscal Year of any asset (in a taxable transaction) shall
be computed by reference to the Gross Asset Value of such asset;
(v) in lieu of the depreciation (or cost recovery) or
amortization with respect to any asset taken into account in computing
such taxable income (or loss), there shall be taken into account
depreciation (or cost recovery) or amortization in respect of such
asset determined by applying the method used by the Company for federal
income tax purposes with respect to such asset to the Gross Asset Value
of such asset (or if the tax basis of such asset is zero at the
beginning of such Fiscal Year, by applying any reasonable method
selected by the Board of Directors);
(vi) any items in the nature of income, gain, expense
or loss that are specially allocated pursuant to Sections 5.05 and 5.06
shall not be taken into account;
(vii) to the extent an adjustment to the tax basis of
any asset pursuant to Section 734(b) or Section 743(b) of the Code is
required pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury
Regulations to be taken into account in determining Capital Accounts a
result of a distribution other than in complete liquidation of a
Member's Interest, 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 the basis of the asset) from the
disposition of the asset and shall be taken into account in computing
Profit (or Loss); and
(viii) the amount of interest payable pursuant to
Section 4.02 shall not be taken into account in determining Profits and
Losses.
The amount of the items in the nature of income, gain, expense or loss available
to be specially allocated pursuant to Sections 5.05 and 5.06 shall be determined
by applying rules analogous to those set forth in this Section 5.01.
[*]
19
[*]
5.04 Special Limitation. Loss allocated to the Members for any Fiscal
Year pursuant to Section 5.03 shall not exceed the maximum amount of such Loss
that can be so allocated without causing any Member to have an Adjusted Capital
Account Deficit at the end of such Fiscal Year. In the event some but not all of
the Members would have such Adjusted Capital Account Deficits as a consequence
of an allocation of Loss for a Fiscal Year pursuant to Section 5.03, the
limitation set forth in the first sentence of this Section 5.04 shall be applied
so as to allocate the maximum permissible amount of such Loss to each Member
under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
5.05 Special Allocations. The following special allocations shall be
made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided by
Section 1.704-2(f) of the Treasury Regulations, if there is a net decrease in
the Minimum Gain during any Fiscal Year, there shall be allocated to each Member
(before any other allocation is made under this Section 5.05) items of income
and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in
proportion to, and to the extent of, an amount equal to such Member's share of
the net decrease in the Minimum Gain during such Fiscal Year (determined in
accordance with Section 1.704-2(g) of the Treasury Regulations). The items to be
allocated for any Fiscal Year under this Section 5.05(a) shall be determined in
accordance with Section 1.704-2(j)(2) of the Treasury Regulations. This Section
5.05(a) is intended to comply with the minimum gain charge-back requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise
provided by Section 1.704-2(i)(4) of the Treasury Regulations, if during any
Fiscal Year there is a net decrease in the Member Minimum Gain attributable to a
Member Nonrecourse Debt, there shall be allocated (before any allocation for
such Fiscal Year is made under this Section 5.05 (other than Section 5.05(a)) to
each Member with a share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt (as determined under Section 1.704-2(i)(5) of the Treasury
Regulations) items of income and gain for such Fiscal Year (and, if necessary,
for subsequent Fiscal Years) in proportion to, and to the extent of such
Member's share of the net decrease during such Fiscal Year in the Member Minimum
Gain attributable to such Member Nonrecourse Debt (determined under Section
1.704-2(i)(4) of the Treasury Regulations). The items to be allocated for any
Fiscal Year under this Section 5.05(b) shall be determined in accordance with
Section 1.704-2(j)(2) of the Treasury Regulations. This Section 5.05(b) is
intended to comply with the partner minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) Qualified Income Offset. If during any Fiscal Year any
Member unexpectedly receives any adjustment described in Section
1.704-1(b)(2)(ii)(d)(4) to the Capital Account maintained for him on the books
of the Company, any allocation described in Section 1.704-1(b)(2)(ii)(d)(4), or
any distribution described in Section 1.704-1(b)(2)(ii)(d)(6) of the Treasury
Regulations to such Member; there shall be allocated (before any allocation is
made under this Section 5.05 (other than Sections 5.05(a) or 5.05(b)) to such
Member items of income
20
and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section
5.05(c) shall be made only if and to the extent that such Member would have an
Adjusted Capital Account Deficit after all other allocations provided in this
Section 5.05 have been tentatively made as if this Section 5.05(c) were not in
this Agreement. Any allocation of income or gain for any Fiscal Year made under
this Section 5.05(c) shall consist of a pro rata portion of each item of income
of the Company (including gross income) and gain for such period (other than
income or gain for such period allocated under Section 5.05(a) or Section
5.05(b)).
(d) Gross Income Allocation. If there is a deficit balance in
the Capital Account of any Member at the end of any Fiscal Year which is in
excess of the amount of such Member's Deficit Restoration Obligation at that
time, each such Member shall be specially allocated items of income and gain in
the amount of such excess as quickly as possible, provided that an allocation to
a Member pursuant to this Section 5.05(d) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit in excess
of such Deficit Restoration Obligation after all other allocations provided for
in this Section 5.05 have been made as if Section 5.05(c) and this Section
5.05(d) were not in this Agreement.
(e) Section 754 Adjustments. To the extent an adjustment
pursuant to Section 734(b) or Section 743(b) of the Code to the tax basis of any
asset is required pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section
1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations 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 or as the result of the sale of a
Member's Interest, 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) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the company in
the event Section 1.704-1(b)(2)(iv)(m)(2) of the Treasury Regulations applies,
or to the distributee in the event Section 1.704-1(b) (2)(iv)(m)(4) of the
Treasury Regulations applies.
(f) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year shall be allocated as determined by the Board of Directors in a
manner that is consistent with the principles of Sections 1.704-1 and 1.704-2 of
the Treasury Regulations.
(g) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year shall be allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Section
1.704-2(i)(1) of the Treasury Regulations.
(h) Allocations of Issuance Items. Any Issuance Items shall be
allocated among the Members so that, to the extent possible, the net amount of
such Items, together with all other allocations under this Agreement to each
Member shall be equal to the net amount that would have been allocated to each
Member if such Items had not been realized.
5.06 Curative Allocations. All Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of items in
the nature of income, gain,
21
expense, or loss pursuant to this Section 5.06. The Board of Directors shall
make such offsetting special allocations in its discretion so that, after such
offsetting allocations are made, the balance of the Capital Account maintained
for each Member is, to the extent possible, equal to the balance such Member
would have had with respect to such Capital Account if the Regulatory
Allocations were not part of the Agreement and all items of the Company were
allocated pursuant to Section 5.02 and Section 5.03. In exercising their
discretion under this Section 5.06, the Board of Directors shall take into
account future Regulatory Allocations that, although not yet made, are likely to
offset other Regulatory Allocations previously made.
5.07 Other Allocation Rules.
(a) Allocations Where Members' Interests Vary. If during any
taxable year of the Company there is a change in any Member's interest in the
Company, then each Member's distributive share of each item of Company income,
gain, loss and deduction shall be determined for federal income tax purposes as
if the taxable year of the Company closed on the date of such change.
(b) Excess Nonrecourse Liabilities. Solely for purposes of
determining a Member's proportionate share of the "excess nonrecourse
liabilities" (within the meaning of Section 1.752-3(a) of the Treasury
Regulations). To the extent that any Nonrecourse Liability is an Excess
Nonrecourse Liability, the portion of such Excess Nonrecourse Liability equal to
the excess, if any, of (x) the amount of any taxable gain that would be taxable
to a Member under Section 704(c) of the Code (or in the same manner as Section
704(c) of the Code in connection with a revaluation of Company property) over
(y) the portion of the gain with respect to such property described in Section
1.752-3(a)(2) of the Treasury Regulations shall be allocated to such Member, and
the remaining amount of such Excess Nonrecourse Liability shall be allocated
among the Members in proportion to their Interests.
[*]
5.08 Allocation of Tax Items. For federal and state income tax
purposes, Company income gain, loss, deduction and credit (or items thereof) for
any Fiscal Year shall be allocated as follows:
(a) General Rule. Except as provided in Sections 5.08(b) and
5.08(c), all items of income, gain, loss, deduction and credit shall be
allocated in the same manner as the correlative items are allocated under
Sections 5.02, 5.03, 5.04(d), 5.06 and 5.07.
(b) Section 704(c) Considerations. Items of income, gain, loss
and deduction with respect to any asset contributed to the capital of the
Company shall, solely for income tax purposes, be allocated among the Members so
as to take account of any variation between the adjusted basis of such asset to
the Company for federal income tax purposes and the gross fair market value of
such asset at the time of contribution. In the event the Gross Asset Value of
any asset contributed to the capital of the Company is adjusted pursuant to
Section 4.06, 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 to the Company for federal income tax purposes and the book
value of such asset immediately following such revaluation in the same
22
manner as under Section 704(c) of the Code and the Treasury Regulations
thereunder. Any elections or other decisions relating to allocations made
pursuant to this Section 5.08(b) shall be made by the Board of Directors in any
manner that reasonably reflects the purposes and intentions of this Agreement.
(c) Recapture Income. For purposes of determining the
character (as ordinary income or capital gain) of any taxable income of the
Company, such portion of the taxable income of the Company which is treated as
ordinary income attributable to the recapture of depreciation (or cost recovery)
shall, to the extent possible, be allocated among the Members (or their
successors in interest) in the same proportions that the depreciation (or cost
recovery) deductions directly or indirectly giving rise to such income were
previously allocated. This Section 5.08(c) shall not alter the amount of
allocations to any Member but merely the character of income so allocated.
[*]
5.10 Amounts Withheld. All amounts withheld pursuant to the Code and
the Treasury Regulations or any provision of any state or local tax law or the
law of any foreign country or subdivision thereof with respect to any payment,
distribution, or allocation to the Company or the Members shall be treated as
amounts distributed to the Members pursuant to Section 5.09 for all purposes
under this Agreement. The Company is authorized to withhold from distributions,
or with respect to allocations, to the Members and to pay over to any federal,
state, or local government or foreign government or any subdivision thereof any
amounts required to be so withheld pursuant to the Code or any provisions of any
other federal, state, or local law or the law of any foreign country or
subdivision thereof and shall allocate such amounts to the Members with respect
to which such amount was withheld.
5.11 Liability for Distributions. A Member who receives an erroneous
distribution for the Company shall have no liability under the Act or any other
applicable law for the amount of the erroneous distribution after the expiration
of six (6) years from the date of the erroneous distribution unless an action to
recover the distribution from such member is commenced prior to the expiration
of such six- (6-) year period and an adjudication of liability against such
Member is made in such action.
5.12 Distributions in Kind. The Company shall have the right to compel
a Member to accept a distribution of any asset in kind, whether or not the
percentage of the asset distributed to him exceeds a percentage of that asset
which is equal to the percentage in which he shares in distributions from the
Company.
ARTICLE 6
MANAGEMENT
6.01 Board of Directors. The Members shall act collectively through
meetings of the "Board of Directors" with respect to the Company. The Board of
Directors shall conduct its affairs in accordance with the provisions of this
Agreement.
23
(a) Directors.
(i) Designation. [*]
(ii) Authority. Each Director shall have the full
authority to act on behalf of the Member that
designated such Director; the action of a Director at a meeting (or through a
written consent) of the Board of Directors shall bind the Member that designated
such Director; and the other Members shall be entitled to rely upon such action
without further inquiry or investigation as to the actual authority (or lack
thereof) of such Director.
(iii) Disclaimer of Duties; Indemnification. Each
Director shall represent, and owe fiduciary duties to, only the Member that
designated such Director (the nature and extent of such duties being an internal
corporate affair of such Member), and not to the Company, the other Member or
Directors, or any officer or employee of the Company. The provisions of Section
3.06 shall also apply to and inure to the benefit of each Member's Directors.
(iv) Compensation. Directors shall receive no
compensation for their service on the Board of Directors
of the Company; provided that the Company shall pay out of pocket costs of
attending meetings of the Board of Directors or otherwise incurred in connection
with performance of duties on the Board of Directors. The Company shall also
obtain directors and officers insurance in amounts as shall be determined by the
Board of Directors.
(b) Chairman and Secretary. One of the Directors will be
designated as Chairman of the Board of Directors to preside over meetings of the
Board of Directors. [*]
(c) Procedures. The Secretary of the Board of Directors shall
maintain written minutes of each of its meetings, which shall be submitted for
approval no later than the next regularly scheduled meeting. The Board of
Directors may adopt whatever rules and procedures relating to its activities as
it may deem appropriate, provided that such rules and procedures shall not be
inconsistent with or violate the provisions of this Agreement or the Act.
(d) Frequency, Time and Place of Meetings. The Board of
Directors shall meet quarterly, subject to more or less frequent meetings upon
approval of the Board of Directors. Notice of, and an agenda for, all Board of
Directors meetings shall be provided by the Chairman to the Members at least ten
(10) days prior to the date of each meeting, together with proposed minutes of
the previous Board of Directors meeting (if such minutes have not been
previously ratified). Special meetings of the Board of Directors may be called
at such times, and in such manner, as any Member deems necessary. Any Member
calling for any such special meeting shall notify the Chairman, who in turn
shall notify the Members of the date and agenda for such meeting at least ten
(10) days prior to the date of such meeting. The Board of Directors may shorten
such ten- (10-) day period. All meetings of the Board of Directors shall be held
at a location selected by the Board of Directors. Attendance of a Member at a
meeting of the Board of Directors shall constitute a waiver of notice of such
meeting, except where such Member attends the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
24
(e) Voting and Quorum. Except as otherwise set forth in
Section 6.03, no action may be taken at a meeting of the Board of Directors
unless all Directors entitled to vote are present in person, by proxy or by
telephone. Each Director shall be entitled to designate a proxy for one or more
meetings which proxy shall have the full authority of such designating Director
which proxy may be the other Director appointed by the same Member as the
Director that executed the proxy. Except as otherwise set forth in Section 6.03,
all action of the Board of Directors, except as otherwise specifically provided,
shall be passed by the affirmative vote of all Directors.
(f) Action by Written Consent. Any action required or
permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting, without prior notice, and without a vote if a consent or
consents in writing, setting forth the action so taken, is signed by each
Director that could have taken the action at a meeting of the Board of Directors
at which any Director entitled to vote on the action was represented and voted.
(g) Meetings by Telephone. Directors may participate in and
hold such meeting by means of conference telephone, video conference or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall constitute
presence in person at such meeting, except where a Member participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
(h) Subcommittees. The Board of Directors may create such
subcommittees, delegate to such subcommittees such authority and responsibility,
and rescind any such delegations, as it may deem appropriate.
(i) Deadlocks. If there is a deadlock at the level of the
Board of Directors, the Members agree to use their reasonable best efforts to
attempt to resolve the deadlock within ten (10) Business Days after receiving
notice from the Board of Directors of such deadlock. If the dispute or
controversy cannot be amicably resolved, it shall be brought to the attention of
the Mediators, who shall, as mediators in good faith, use their best efforts to
find an amicable solution. While any Board of Directors deadlock is pending, the
Company and its business shall continue to be operated without interruption in a
manner most likely to continue its operations in the ordinary course of
business.
(j) Officers. The Board of Directors may designate one or more
Persons to be Officers of the Company. Any Officers so designated shall have
such titles and, subject to the other provisions of this Agreement, have such
authority and perform such duties as the Board of Directors may specifically
delegate to them and shall serve at the pleasure of the Board of Directors.
[*]
[*]
6.03 Special Board Consents. Notwithstanding Sections 6.01 and 6.02,
the following actions require the consent of the Board of Directors as described
in this Section 6.03.
25
[*]
6.04 Indemnification.
(a) By Member. Each Member shall indemnify, protect, defend,
release and hold harmless the Company, any other Members and such Member's
Directors, Affiliates and respective directors, officers, employees and agents
from and against any Claims asserted by or on behalf of any Person (including
another Member) that arise out of, relate to or are otherwise attributable to,
directly or indirectly, a Default by the indemnifying Member or its Affiliates,
any Pre-Transfer Liability of the indemnifying Member or its Affiliates or the
gross negligence or willful misconduct of the indemnifying Member or its
Directors, Affiliates and respective directors, officers, employees and agents
in connection with this Agreement.
(b) By the Company. The Company shall indemnify, protect,
defend, release and hold harmless each Member, and such Member's Directors,
Affiliates and respective directors, officers, employees and agents from and
against any Claims asserted by or on behalf of any Person that arise out of,
relate to or are otherwise attributable to, directly or indirectly, any act or
omission of the Company, except for a Default by the indemnified Member or its
Affiliates, or [*], or the gross negligence or willful misconduct of the
indemnified Member or its Directors, Affiliates and respective directors,
officers, employees and agents in connection with this Agreement. [*]
(c) Procedures. Promptly upon receipt by an indemnified party
of notice of any claim or the commencement of any action for which indemnity may
be sought hereunder, the indemnified party shall notify the indemnifying party
in writing of the claim or the commencement of such action, attaching to such
notice a copy of the claim or judicial pleading received. The indemnifying party
shall be entitled to participate in the defense of any such claim or action that
may be brought against the indemnified party, and may elect, by notice to the
indemnified party within a reasonable time following notification by the
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party, and to settle and compromise any such
claim or action; provided, however, that if the indemnified party has elected to
be represented by separate counsel pursuant to the proviso to the following
sentence, such settlement or compromise shall be effected only with the consent
of the indemnified party, which consent shall not be unreasonably withheld,
delayed or conditioned. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the indemnified party shall have the
right to employ counsel to represent it if, in the indemnifying party's sole
reasonable judgment, it is advisable for the indemnified party to be represented
by separate counsel due to a conflict of interest and, in that event, the
reasonable fees and expenses of such separate counsel shall thereafter be paid
by the indemnifying party. The parties agree to render to each other such
assistance as may reasonably be requested in order to insure the proper and
adequate defense of any such claim or action.
6.05 Arbitration. The Members agree that in connection with any claim
under this Agreement as to whether a Member is in Default that the Members shall
use their best efforts to
26
settle any such claim by mutual agreement in accordance with the following
principles set forth in this Section 6.05. If the claim cannot be amicably
resolved, it shall be brought to the attention of the Mediators, who shall, as
mediators in good faith, use their best efforts to find an amicable solution.
[*]
ARTICLE 7
TAXES
7.01 Tax Returns. The Board of Directors shall prepare (or cause to be
prepared) and timely file (on behalf of the Company) all federal, state, local
and foreign tax returns required to be filed by the Company. Each Member shall
furnish to the Board of Directors all pertinent information in its possession
relating to the Company's operations that is necessary to enable the Company'
tax returns to be timely prepared and filed. The Company will provide to any
Member upon such Member's request estimates of taxable income of the Company
allocable to such Member. The Company shall bear the costs of the preparation
and filing of its returns, including the costs of any audit of its returns by
any Governmental Authority.
7.02 Tax Elections. The Company shall make such tax elections as the
Board of Directors may deem appropriate, including an election pursuant to Code
Section 754 to adjust the basis of the Company's properties. Neither the Company
nor any Member shall make an election for the Company to be excluded from the
application of the provisions of subchapter K of chapter 1 of subtitle A of the
Code or any similar provisions of applicable state law and no provision of this
Agreement (including Section 2.07) shall be construed to sanction or approve
such an election.
7.03 Tax Matters Member.
(a) [*] is hereby designated as "tax matters partner" of the
Company pursuant to Section 6231(a)(7) of the Code (the "Tax Matters Member").
The Tax Matters Member shall inform the other Members of all matters that may
come to its attention in its capacity as Tax Matters Member by giving notice
thereof on or before the fifth Business Day after becoming aware thereof and,
within that time, shall forward to the other Members copies of all written
communications it may receive in that capacity.
(b) The Tax Matters Member shall take no action without the
consent of [*], which consent shall not be unreasonably withheld. Any reasonable
cost or expense incurred by the Tax Matters Member in connection with its
duties, including the preparation for or pursuance of administrative or judicial
proceedings, shall be paid by the Company.
ARTICLE 8
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
8.01 Maintenance of Books. The Board of Directors shall keep or cause
to be kept at the principal office of the Company or at such other location
approved by the Board of Directors
27
complete and accurate books and records of the Company, supporting documentation
of the transactions with respect to the conduct of the Company's business and
minutes of the proceedings of its Members and the Board of Directors, and any
other books and records that are required to be maintained by applicable Law.
The Company's books and records shall be kept separate from the books and
records of any other Person, and otherwise in a manner determined by the Board
of Directors to be most beneficial for the Company. The books of account of the
Company shall be (i) maintained on the basis of a Fiscal Year that ends May 31,
(ii) maintained on an accrual basis in accordance with generally accepted
accounting principles, consistently applied, and (iii) audited by the Certified
Public Accountants at the end of each Fiscal Year.
8.02 Reports.
(a) With respect to each Fiscal Year, the Board of Directors
shall cause to be prepared and delivered to each Member:
(i) Within sixty (60) days after the end of such
Fiscal Year, a profit and loss statement and a statement of cash flows
for such year, a balance sheet and a statement of each Member's Capital
Account as of the end of such year, together with agreement of such
statements by the Certified Public Accountants, and within seventy-five
(75) days after the end of such Fiscal Year, audited financial
statements along with an audit opinion of the Certified Public
Accountants; and
(ii) Such federal, state and local income tax returns
and such other accounting, tax information and schedules as shall be
necessary for the preparation by each Member within three and a half
months following the end of each Fiscal Year of its income tax return
with respect to such year.
(b) By the day which is within ten (10) Business Days after
the end of each calendar month, the Board of Directors shall cause to be
prepared and delivered to each Member an estimated profit and loss statement, a
statement of cash flows and a balance sheet for such month (provided that the
Board of Directors may change the financial statements required by this Section
8.02(b) to a quarterly basis or make such other change therein as it may deem
appropriate).
(c) Within thirty (30) days after the end of each fiscal
quarter, the Board of Directors shall cause to be prepared and delivered to each
Member, with an appropriate certificate of the Person authorized to prepare the
same (provided that the Board of Directors may make such changes to the
financial statements required by this Section 8.02(c):
(i) A profit and loss statement and a statement of
cash flows for such quarter (including sufficient information to permit
the Members to calculate their tax accruals), for the portion of the
Fiscal Year then ended;
(ii) A balance sheet and a statement of each Member's
Capital Account as of the end of such quarter and the portion of the
Fiscal Year then ended;
(iii) A statement comparing the actual financial
status and results of the Company as of the end of or for such quarter
and the portion of the Fiscal Year then
28
ended with the budgeted or forecasted status and results as of the end
of or for such respective periods; and
(iv) A description and analysis of the Company's
performance during such period.
(d) The Board of Directors shall also cause to be prepared and
delivered to each Member such other reports, forecasts, studies, budgets and
other information as the Board of Directors may request from time to time.
8.03 Access to Information. Each Member shall be entitled to receive
any information that it may reasonably request concerning the Company; provided,
however, that this Section 8.03 shall not obligate the Company or the Board of
Directors to create any information that does not already exist at the time of
such request (other than to convert existing information from one medium to
another, such as providing a printout of information that is stored in a
computer database). Each Member shall also have the right, upon reasonable
notice, and at all reasonable times during usual business hours to inspect the
properties of the Company and to audit, examine and make copies of the books of
account and other records of the Company. Such right may be exercised through
any agent or employee of such Member designated in writing by it or by an
independent public accountant, engineer, attorney or other consultant so
designated. The Member making the request shall bear all costs and expenses
incurred in any inspection, examination or audit made on such Member's behalf.
Moreover, the Member making the request shall indemnify the Company and the
other Members for any and all Claims arising out of or related to any activities
of the requesting Member's agent, employee, independent public accountant,
engineer, attorney or other consultant while present at and traveling to and
from the facilities of the Company. Confidential Information obtained pursuant
to this Section 8.03 shall be subject to the provisions of Section 8.04.
8.04 Confidential Information.
(a) Except as permitted by Section 8.04(b), (i) each Member
shall keep confidential all Confidential Information and shall not disclose any
Confidential Information to any Person, including any of its Affiliates, and
(ii) each Member shall use the Confidential Information only in connection with
the business of the Company.
(b) Notwithstanding Section 8.04(a), but subject to the other
provisions of this Section 8.04, a Member may make the following disclosures and
uses of Confidential Information:
(i) disclosures to the other Members in connection
with the Company;
(ii) disclosures and uses that are approved by the
Board of Directors;
(iii) disclosures to a Wholly-Owned Affiliate of such
Member, if such Wholly-Owned Affiliate has agreed to abide by the terms
of this Section 8.04;
(iv) disclosures to a Person that is not a Member or
a Wholly-Owned Affiliate of a Member, (x) if such Person is an attorney
or accountant who has been
29
retained to provide services by the Member in connection with the
Company or such Member's Membership Interest and has agreed to abide by
the terms of this Section 8.04 and other third parties or (y) upon the
written consent of the Board of Directors, which consent shall not to
be unreasonably withheld;
(v) disclosures that a Member is legally compelled to
make by deposition, interrogatory, request for documents, subpoena,
civil investigative demand, order of a court of competent jurisdiction,
or similar process, or otherwise by Law or securities exchange
requirements; provided, however, that prior to any such disclosure,
such Member shall, to the extent legally permissible:
(A) provide the Board of Directors with
prompt notice of such requirements so that the other Members
may seek a protective order or other appropriate remedy or
waive compliance with the terms of Section 8.04(a);
(B) consult with the Board of Directors on
the advisability of taking steps to resist or narrow such
disclosure; and
(C) cooperate with the Board of Directors
and with the other Members in any attempt any of them may make
to obtain a protective order or other appropriate remedy or
assurance that confidential treatment will be afforded the
Confidential Information; and in the event such protective
order or other remedy is not obtained, or the other Members
waive compliance with the provisions hereof, such Member
agrees (I) to furnish only that portion of the Confidential
Information that the other Members are advised by counsel to
the disclosing Member is legally required and (II) to exercise
all reasonable efforts to obtain assurance that confidential
treatment will be accorded such Confidential Information.
(c) Each Member shall take such precautionary measures as may
be required to ensure (and such Member shall be responsible for) compliance with
this Section 8.04 by any of its Affiliates, and its and their directors,
officers, employees and agents, and other Persons to which it may disclose
Confidential Information in accordance with this Section 8.04.
(d) The Members agree that no adequate remedy at law exists
for a breach or threatened breach of any of the provisions of this Section 8.04,
the continuation of which unremedied breach will cause the Company and the other
Members to suffer irreparable harm. Accordingly, the Members agree that the
Company and the other Members shall be entitled, in addition to other remedies
that may be available to them, to immediate injunctive relief from any breach of
any of the provisions of this Section 8.04 and to specific performance of their
rights hereunder, as well as to any other remedies available at law or in
equity.
8.05 Bank Accounts. Funds of the Company shall be deposited in such
banks or other depositories as shall be designated from time to time by the
Board of Directors. All withdrawals from any such depository shall be made only
as authorized by the Board of Directors and shall be made only by check, wire
transfer, debit memorandum or other written instruction.
30
ARTICLE 9
DISSOLUTION, WINDING-UP AND TERMINATION
9.01 Default. [*]
9.02 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following events (each a "Dissolution
Event"): [*]
9.03 Winding-Up and Termination.
(a) On the occurrence of a Dissolution Event pursuant to
Sections 9.02(a), (b) or (c) above, the Board of Directors shall select one
Member to act as liquidator. On the occurrence of a Dissolution Event pursuant
to Section 9.02(d) above, the non-bankrupt or non-insolvent Member shall act as
liquidator. The liquidator shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
reasonable costs of winding up shall be borne as a Company expense. Following
the occurrence of a Dissolution Event, there shall be no new advances of equity
or debt capital by any Member without the unanimous consent of the Members.
Until final distribution, the liquidator shall continue to operate the Company
properties with all of the power and authority of the Members. [*]
9.04 Deficit Capital Accounts. Except with respect to any unpaid
balance of a Member's Initial Contribution or any Additional Contribution in
accordance with the provisions of Sections 4.01(a) and 4.01(b) hereof, no Member
will be required to pay to the Company, to the other Members or to any third
party any deficit balance that may exist from time to time in the Member's
Capital Account.
9.05 Certificate of Cancellation. On completion of the distribution of
the Company assets as provided herein, the Members (or such other Person or
Persons as the Act may require or permit) shall file a certificate of
cancellation with the Secretary of State of Delaware, cancel any other filings
made pursuant to Section 2.05, and take such other actions as may be necessary
to terminate the existence of the Company. Upon the filing of such certificate
of cancellation, the existence of the Company shall terminate, except as may be
otherwise provided by the Act or other applicable Law.
ARTICLE 10
GENERAL PROVISIONS
10.01 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes to the Company that are past due may be deducted from
that sum before payment.
10.02 Expenses. Except as otherwise specified in this Agreement, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
31
10.03 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests or consents provided for or permitted to be
given under this Agreement must be in writing and must be delivered to the
recipient in person, by courier or mail or by facsimile or other electronic
transmission. A notice, request or consent given under this Agreement is
effective on receipt by the Member to receive it. All notices, requests and
consents to be sent to a Member must be sent to or made at the addresses given
for that Member on Exhibit A attached hereto, or such other address as that
Member may specify by notice to the other Members. Any notice, request or
consent by the Company must be given to all of the Members. Whenever any notice
is required to be given by Law, the Delaware Certificate or this Agreement, a
written waiver thereof, signed by the Person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
10.04 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
10.05 Entire Agreement; Superseding Effect. This Agreement and the
Affiliate Agreements set forth on Exhibit D hereto, constitute the entire
agreement of the Members and their Affiliates relating to the Company and the
transactions contemplated hereby and supersede all provisions and concepts
contained in all prior contracts or agreements between the Members or any of
their Affiliates with respect to the Company and the transactions contemplated
hereby, whether oral or written.
10.06 Publicity. Each Member agrees that it shall not (and shall cause
its Affiliates not to), without the unanimous consent of the Board of Directors,
issue a press release or have any contact with or respond to the news media,
except as required by securities or similar Laws or securities exchange
requirements applicable to a Member and its Affiliates. Any press release by a
Member or its Affiliates shall be subject to review and approval by the Board of
Directors, except in circumstances in which time deadlines imposed by securities
or similar Laws or securities exchange requirements applicable to a Member and
its Affiliates make it impractical for such Member to comply with the foregoing
provisions.
10.07 Effect of Waiver or Consent. Except as otherwise provided in this
Agreement, a waiver or consent, express or implied, to or of any breach or
default by any Member in the performance by that Member of its obligations with
respect to the Company is not a consent or waiver to or of any other breach or
default in the performance by that Member of the same or any other obligations
of that Member with respect to the Company. Except as otherwise provided in this
Agreement, failure on the part of a Member to complain of any act of any Member
or to declare any Member in default with respect to the Company, irrespective of
how long that failure continues, does not constitute a waiver by that Member of
its rights with respect to that default until the applicable
statute-of-limitations period has expired.
10.08 Amendment or Restatement. This Agreement or the Delaware
Certificate may be amended or restated by a written instrument executed (or, in
the case of the Delaware Certificate, approved) by the Board of Directors.
32
10.09 Binding Effect. Subject to the restrictions on Dispositions set
forth in this Agreement, this Agreement is binding on and shall inure to the
benefit of the Members and their respective successors and permitted assigns.
10.10 Governing Law; Severability. This Agreement is governed by the
Law of the State of Delaware. In the event of a direct conflict between the
provisions of this Agreement and any mandatory, non-waivable provision of the
Act, such provision of the Act shall control. If any provision of the Act
provides that it may be varied or superseded in a limited liability company
agreement (or otherwise by agreement of the members or managers of a limited
liability company), such provision shall be deemed superseded and waived in its
entirety if this Agreement contains a provision addressing the same issue or
subject matter. If any provision of this Agreement or the application thereof to
any Member or circumstance is held invalid or unenforceable to any extent, (a)
the remainder of this Agreement and the application of that provision to other
Members or circumstances is not affected thereby, and (b) the Members shall
negotiate in good faith to replace that provision with a new provision that is
valid and enforceable and that puts the Members in substantially the same
economic, business and legal position as they would have been in if the original
provision had been valid and enforceable.
10.11 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions. In addition, each Member agrees to cooperate
with any other Member in making reasonably requested changes in the tax and
reporting provisions of this Agreement to accommodate the tax status of such
Member, provided that no such change shall have an adverse impact on the
interests of the cooperating Member under this Agreement and further provided
any costs incurred by the Company or cooperating Member in connection therewith
shall be borne by the requesting Member.
10.12 Creditors and Other Third Parties. None of the provisions of this
Agreement are made for the benefit of, or shall be enforceable by, any creditor
of the Company or any other Person who is not a Member.
10.13 Relationship of this Agreement and the Certificate of Formation.
If a provision of this Agreement differs from a provision of the Certificate of
Formation, then to the extent allowed by Law this Agreement will govern.
10.14 Relationship of this Agreement to the Default Rules. Regardless
of whether this Agreement specifically refers to particular Default Rules, (i)
if any provision of this Agreement conflicts with a Default Rule, such provision
shall control and the Default Rule shall be modified or negated accordingly; and
(ii) if it is necessary to construe a Default Rule as modified or negated in
order to effectuate any provision of this Agreement, such Rule shall be modified
or negated accordingly.
10.15 Headings and Captions. All headings and captions contained in
this Agreement and the table of contents hereto are inserted only as a matter of
convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
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IN WITNESS WHEREOF, the undersigned have executed this Limited
Liability Company Agreement as of the date first written above.
DI BAHAMAS INC.
By:________________________
Name:______________________
Title:_____________________
LKI BAHAMAS LTD.
By:________________________
Name:______________________
Title:_____________________
The below listed company hereby agrees to be subject to and bound by Sections
3.02(a), 3.02(c) and 3.03(e) of this Agreement.
XXXXXX XXXXXX INTERNATIONAL INC.
By: _________________________
Name: ________________________
Title: _______________________
The below listed company hereby agrees to be subject to and bound by Sections
3.02(a), 3.02(b) and 3.03(e) of this Agreement.
DIAMOND INNOVATIONS, INC.
By: _________________________
Name: ________________________
Title: _______________________
Schedule 6.01(a)(i)
Directors
[*]
EXHIBIT A
Members
---------------------------------------------------------- -------------------
Membership
Name and Address Interests
---------------------------------------------------------- -------------------
DI Bahamas Inc. [*] Membership
[*] Interests
---------------------------------------------------------- -------------------
LKI Bahamas Ltd. [*] Membership
[*] Interests
---------------------------------------------------------- -------------------
EXHIBIT B
Initial Capital Contributions
[*]
EXHIBIT C
Funding Agreement
-----------------
[*]
EXHIBIT D
List of Affiliate Agreements
----------------------------
[*]
EXHIBIT E
Performance Thresholds
----------------------
[*]
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as................................ 'TM'
