===================
OPERATING AGREEMENT
OF
XXXXXXXXXXX.XXX LLC
a New Jersey Limited Liability Company
June 14, 1998
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TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.1 Adjusted Member Account Deficit....................................1
Section 1.2 Advisory Board.....................................................1
Section 1.3 Affiliate..........................................................1
Section 1.4 Aggregate Distributions............................................2
Section 1.5 Agreement..........................................................2
Section 1.6 Available Cash.....................................................2
Section 1.7 Bankruptcy Code....................................................2
Section 1.8 Capital Contribution...............................................2
Section 1.9 Certificate........................................................2
Section 1.10 Code..............................................................2
Section 1.11 Company...........................................................2
Section 1.12 Company Minimum Gain..............................................2
Section 1.13 Company Property..................................................2
Section 1.14 Contributed Property..............................................2
Section 1.15 CYSP..............................................................3
Section 1.16 Distributable Property............................................3
Section 1.17 Distribution......................................................3
Section 1.18 Distribution Date.................................................3
Section 1.19 Effective Date....................................................3
Section 1.20 Gaap..............................................................3
Section 1.21 Initial Members...................................................3
Section 1.22 Managing Member...................................................3
Section 1.23 Majority..........................................................3
Section 1.24 Majority In Interest..............................................3
Section 1.25 Member............................................................3
Section 1.26 Member Account....................................................3
Section 1.27 Member Minimum Gain...............................................3
Section 1.28 Member Nonrecourse Debt...........................................3
Section 1.29 Member Nonrecourse Deductions.....................................3
Section 1.30 New Jersey Act....................................................4
Section 1.31 Nonrecourse Deductions............................................4
Section 1.32 Nonrecourse Liability.............................................4
Section 1.33 Notice............................................................4
Section 1.34 Person............................................................4
Section 1.35 Substitute Member.................................................4
Section 1.36 Super Majority....................................................4
Section 1.37 Super Majority In Interest........................................4
Section 1.38 Supply Agreement..................................................4
Section 1.39 Taxable Year......................................................4
Section 1.40 TOPS..............................................................5
Section 1.41 Trademark Value...................................................5
Section 1.42 Unit(s)...........................................................5
Section 1.43 Unit Distribution.................................................5
ARTICLE 2
ORGANIZATION AND TERM
Section 2.1 Formation..........................................................5
Section 2.2 Name...............................................................6
Section 2.3 Term...............................................................6
Section 2.4 Consent to Continue the Company....................................6
Section 2.5 Registered Agent and Office........................................7
Section 2.6 Principal Office...................................................7
Section 2.7 Other Instruments..................................................7
ARTICLE 3
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose............................................................7
Section 3.2 Powers of the Company..............................................7
ARTICLE 4
CAPITAL CONTRIBUTIONS AND UNITS
Section 4.1 Initial Members; Membership Lists; and Obligation to Update........8
Section 4.2 Capital Contributions..............................................9
Section 4.3 Units..............................................................9
Section 4.4 Withdrawals and Return of Capital; Interest........................9
Section 4.5 Return of Capital..................................................9
ARTICLE 5
MEMBERS AND MANAGEMENT
Section 5.1 Management by Members and Managing Member.........................10
Section 5.2 Officers..........................................................10
Section 5.3 Consent of Super Majority in Interest.............................10
Section 5.4 Compensation......................................................11
Section 5.5 Compensation......................................................12
Section 5.6 Meetings of the Advisory Board....................................12
Section 5.7 Proxies...........................................................12
Section 5.8 Quorum............................................................12
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Section 5.9 Voting............................................................12
Section 5.10 Action Without Meeting...........................................13
Section 5.11 Telephonic Meetings..............................................13
Section 5.12 Waiver of Notice.................................................13
Section 5.13 Transactions Between a Member and the Company....................13
Section 5.14 Limited Restrictions of Business Pursuits of Members.............13
Section 5.15 Duration of Member Status........................................14
Section 5.16 Additional Commercial Assistance.................................14
Section 5.17 Acquisition, Sale or Change of Control of a Member...............14
ARTICLE 6
MEMBER ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Maintenance of Member Accounts....................................15
Section 6.2 Allocations.......................................................16
Section 6.3 Special Allocation Provisions.....................................16
Section 6.4 Distributions.....................................................17
ARTICLE 7
FISCAL YEAR, BOOKS AND RECORDS
Section 7.1 Books of Account and Records......................................17
Section 7.2 Inspection........................................................18
Section 7.3 Fiscal Year.......................................................18
Section 7.4 Accounting........................................................18
Section 7.5 Financial Reports.................................................18
ARTICLE 8
TAX MATTERS
Section 8.1 Member for Tax Matters............................................19
Section 8.2 Tax Returns.......................................................19
Section 8.3 Deductions and Elections..........................................19
ARTICLE 9
MEMBERS' AND OFFICERS' LIABILITY AND INDEMNITY
Section 9.1 Members' and Officers' Liability..................................20
Section 9.2 Right to Indemnification..........................................20
Section 9.3 Exculpation.......................................................22
Section 9.4 Remedies..........................................................22
Section 9.5 Waiver............................................................23
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ARTICLE 10
ADDITIONAL MEMBERS AND UNITS
Section 10.1 Additional Units.................................................23
Section 10.2 Allocations......................................................23
ARTICLE 11
TRANSFERS
Section 11.1 Transfer Restrictions............................................23
Section 11.2 Non-Consensual Transfers.........................................24
Section 11.3 Termination of Membership........................................24
Section 11.4 Successors and Assigns...........................................25
Section 11.5 Withdrawal.......................................................25
ARTICLE 12
DISSOLUTION AND WIND-UP
Section 12.1 Winding Up.......................................................25
Section 12.2 Authority to Wind-Up.............................................25
Section 12.3 Settlement and Distribution......................................25
Section 12.4 Termination......................................................26
Section 12.5 Claims of the Members............................................26
ARTICLE 13
NOTICES .................................26
ARTICLE 14
MISCELLANEOUS
Section 14.1 Governing Law....................................................27
Section 14.2 Jurisdiction; Costs..............................................27
Section 14.3 Severability.....................................................27
Section 14.4 Headings.........................................................27
Section 14.5 Plurals and Pronouns.............................................28
Section 14.6 Time.............................................................28
Section 14.7 Entire Agreement.................................................28
Section 14.8 Amendment........................................................28
Section 14.9 Method of Execution..............................................28
Section 14.10 Title to Assets.................................................28
Section 14.11 Nature of Unit in the Company...................................28
Section 14.12 No Third Party Rights...........................................29
Section 14.13 Binding Agreement...............................................29
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Section 14.14 Effect of Waiver or Consent.....................................29
Section 14.15 Further Assurances..............................................29
Section 14.16 Section References..............................................29
EXHIBITS
Exhibit A Initial Members, Capital Contributions and Units
Exhibit B Services to be Provided by CYSP to the Company
Exhibit C Services to be Provided by TOPS to the Company
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OPERATING AGREEMENT OF XXXXXXXXXXX.XXX LLC
This Operating Agreement is made as of June 14, 1998, by the parties set
forth on the signature page as "Members" (the "Initial Members") pursuant to the
provisions of the New Jersey Limited Liability Company Act, New Jersey Revised
Statues 42:2B-1 et seq.
WHEREAS, the Initial Members desire to form a limited liability company
pursuant to the New Jersey Limited Liability Company Act; and
WHEREAS, the Initial Members desire to adopt this Operating Agreement and
to be caused to be filed with the Secretary of State of the State of New Jersey
a Certificate of Formation, pursuant to Section 42:2B-11 of the New Jersey
Limited Liability Company Act.
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 is hereby acknowledged, the Initial Members hereby agree as
follows:
ARTICLE 1
DEFINITIONS
For purposes of this Operating Agreement, unless the context clearly
indicates otherwise, the following terms shall have the following meanings
(additional terms, used only in specific Articles, may be defined elsewhere in
this Agreement):
Section 1.1 Adjusted Member Account Deficit: The deficit balance, if any,
in a Member's Member Account as of the end of the Taxable Year, increased by any
amount which the Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and
(2)(i)(5), and decreased by the items described in Treasury Regulation Sections
1.704-l(b)(2)(ii)(d)(4), (5), and (6).
Section 1.2 Advisory Board: A board which consists of an equal number of
directors appointed by each of the Initial Members whose function is to consider
and advise the Members as to all matters which require approval by a Super
Majority in Interest.
Section 1.3 Affiliate: When used with reference to a specified Person, (i)
any Person directly or indirectly controlling, controlled by (as manager or
otherwise) or under common control with the specified Person, (ii) any Person
owning or controlling 50% or more of the outstanding voting securities of the
specified Person, (iii) any officer, director or partner of the specified
Person, (iv) if such other Person is an officer, director or partner, any
company for which such Person acts in any such capacity and (v) any Person
related by blood or marriage to such Person. For the purposes of this
definition, the beneficial ownership of
between 10% and 50% of the equity interest in any Person shall create a
rebuttable presumption of control.
Section 1.4 Aggregate Distributions: The aggregate of all Distributions
made by the Company from the Effective Date.
Section 1.5 Agreement: This Operating Agreement.
Section 1.6 Available Cash: Net amount of cash as determined by the
Members remaining after (a) payment of all of the Company's costs and expenses
and (b) funding any reserves established by the Members.
Section 1.7 Bankruptcy Code: United States Bankruptcy Code, Title 11 of
the United States Code, ' 101 et seq., as amended from time to time.
Section 1.8 Capital Contribution: The total amount of cash or property
(including the Carrying Value of any Contributed Property) contributed to the
Company by each Member pursuant to the terms of this Agreement. Any reference in
this Agreement to the Capital Contribution of a Member shall include the Capital
Contribution made by any predecessor holder of a Member.
Section 1.9 Certificate: The Certificate of Formation for the Company to
be filed with the Secretary of State, pursuant to Section 42:2B-11 of the New
Jersey Act.
Section 1.10 Code: The Internal Revenue Code of 1986, Title 26 of the
United States Code, 1 et seq., as amended from time to time.
Section 1.11 Company: Xxxxxxxxxxx.Xxx LLC, a limited liability company
formed pursuant to this Agreement under the laws of the State of New Jersey, and
any successor limited liability company.
Section 1.12 Company Minimum Gain: An amount determined in accordance with
Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d)(1).
Section 1.13 Company Property: Any property owned by the Company.
Section 1.14 Contributed Property: All assets, other than cash, including
but not limited to, notes, properties, interests in properties, interests in
general and limited partnerships, interests in tenancies-in-common, interest in
notes, and participation interests, transferred to the Company by a Member.
Except as otherwise agreed by a Super Majority in Interest, all contributions
shall be in cash.
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Section 1.15 CYSP: Cybershop Holding Corp., a New Jersey corporation.
Section 1.16 Distributable Property: As defined in section 6.4(c) herein.
Section 1.17 Distribution: A transfer of cash or Company Property to a
Member on account of each Unit held by such Member.
Section 1.18 Distribution Date: Any date upon which a Distribution, if
any, will be made to the Members on account of the Units held by each Member.
Section 1.19 Effective Date: The date at time at which the Certificate is
filed with the office of the Secretary of State.
Section 1.20 GAAP: Generally accepted accounting principles, consistently
applied.
Section 1.21 Initial Members: Those persons or entities, identified in
Exhibit 1, who have executed this Agreement.
Section 1.22 Managing Member: The entity which shall be designated under
the Agreement or otherwise by a Super Majority in Interest to manage the
Company's business.
Section 1.23 Majority: A number in excess of 50%.
Section 1.24 Majority in Interest: A number of Units in excess of 50% of
the Units of Members who vote or who are entitled to vote, as the case may be.
Section 1.25 Member: Any person who is an Initial Member or who is
admitted as a Member in accordance with Articles 10 or 11.
Section 1.26 Member Account: has the meaning set forth in Section 6.1(a).
Section 1.27 Member Minimum Gain: An amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Treasury Regulation Section 1.704-2(i)(3).
Section 1.28 Member Nonrecourse Debt: has the meaning set forth in
Treasury Regulation Section 1.704-2(b)(4).
Section 1.29 Member Nonrecourse Deductions: has the meaning set forth in
Treasury Regulation Section 1.704-2(i). The amount of Member Nonrecourse
Deductions
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with respect to a Member Nonrecourse Debt for a Taxable Year equals the excess,
if any, of the net increases, if any, in the amount of Member Minimum Gain
attributable to such Member Nonrecourse Debt during that Taxable Year over the
aggregate amount of distributions during that Taxable Year to the Member that
bears the economic risk of loss for such Member Nonrecourse Debt to the extent
such distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulation Section
1.704-2(i).
Section 1.30 New Jersey Act: New Jersey Limited Liability Company Act, New
Jersey Revised Statutes, ss. 42:2B-1 et seq., as amended from time to time.
Section 1.31 Nonrecourse Deductions: has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a
Taxable Year equals the excess, if any, of the net increase, if any, in the
amount of Company Minimum Gain during that Taxable Year over the aggregate
amount of any distributions during that Taxable Year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Company Minimum Gain,
determined according to the provisions of Treasury Regulation Section
1.704-2(b).
Section 1.32 Nonrecourse Liability: has the meaning set forth in Treasury
Regulation Section 1.752-l(a)(2).
Section 1.33 Notice: Any notice, payment, demand or communication required
or permitted to be given pursuant to this Agreement.
Section 1.34 Person: Any individual, partnership, limited liability
company, corporation, cooperative, trust or other entity.
Section 1.35 Substitute Member: An Assignee of all or a portion of a
Member's Units, who has become a Member pursuant to Article 11.
Section 1.36 Super Majority: A number in excess of 75%.
Section 1.37 Super Majority in Interest: A number of Units in excess of
75% of the units of Members who vote or who are entitled to vote, as the case
may be.
Section 1.38 Supply Agreement: The agreement between the Company and TOPS
described in Section 5.4(b) herein.
Section 1.39 Taxable Year: The taxable year of the Company for federal
income tax purposes.
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Section 1.40 TOPS: TOPS Appliance City, Inc.
Section 1.41 Trademark Value: The value assigned to the Company trademark
pursuant to Section 12.1 herein
Section 1.42 Unit(s): An interest, or interests, in the Company held by a
Member, as defined in Section 4.3.
Section 1.43 Unit Distribution: The amount of cash a Member will receive
on account of each Unit held by the Member on a Distribution Date.
ARTICLE 2
ORGANIZATION AND TERM
Section 2.1 Formation.
(a) The Members hereby form the Company, effective as of the
Effective Date, under and pursuant to the provisions of the New Jersey Act and
upon the terms and conditions set forth in this Agreement. Xxxxx & Xxxxxxx LLP
or any partner thereof is hereby authorized and directed to file the Certificate
with the Secretary of State of the State of New Jersey. The rights and
liabilities of all Members shall be as provided under the New Jersey Act, the
Certificate and this Agreement. To the extent permitted by applicable law, the
provisions of this Agreement shall override the provisions of the New Jersey Act
in the event of any inconsistency or contradiction between them. The fact that
the Certificate is on file in the office of the Secretary of State shall
constitute notice that the Company is a limited liability company, pursuant to
Section 42:2B-18 of the New Jersey Act. As of the Effective Date, each of the
Initial Members shall be admitted as, and shall be, Members of the Company.
(b) In order to maintain the Company as a limited liability company
under the laws of the State of New Jersey, the Company shall from time to time
take appropriate action, including the preparation and filing of such amendments
to the Certificate and such other assumed name certificates, documents,
instruments and publications as may be required by or desirable under law,
including, without limitation, action to reflect:
(i) any change in the Company name;
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(ii) any correction of false or erroneous statements in the
Certificate or the desire of the Members to make a change in any
statement therein in order that it shall accurately represent the
agreement among the Members; or
(iii) any change in the time for dissolution of the Company as
stated in the Certificate and in this Agreement.
Section 2.2 Name. The Company's name shall be: "Xxxxxxxxxxx.Xxx LLC" The
Company shall cause appropriate trade name and like statements to be filed and
published under the name set forth in this Section 2.2, or such other name as
the Company may have or use in any state or jurisdiction from time to time.
Section 2.3 Term. The term of the Company shall commence on the Effective
Date and shall continue in full force and effect until the earliest of the
following:
(a) the sale or disposition of all or substantially all of the
Company Property;
(b) the dissolution of the Company by the unanimous written
agreement of the Members;
(c) the tenth anniversary of the Effective Date;
(d) the expulsion, bankruptcy, or dissolution of a Member; provided,
however that if there are at least two remaining Members, the Members may
consent to the continuation of the business of the Company after the
occurrence of such an event, pursuant to Section 42:2B-48 of the New
Jersey Act and Section 2.4 of this Agreement;
(e) the entry of a decree of judicial dissolution under Section
42:2B-49 of the New Jersey Act;
(f) the happening of any event which makes it unlawful for the
Company business to be continued; or
(g) the occurrence of any event, other than those referred to in
paragraph (d), which causes dissolution of a limited liability company
under the New Jersey Act.
Section 2.4 Consent to Continue the Company. The Members may vote to
continue the business of the Company within 90 days after the occurrence of an
event of dissolution as set forth in Section 2.3(d), pursuant to and in
accordance with Section 42:2b-48 of the New Jersey Act. The agreement of the
holders of a Majority in Interest of the remaining Members
6
entitled to vote (whether or not voting) shall constitute the consent of the
Members to the continuation of the Company.
Section 2.5 Registered Agent and Office. The Company's registered agent
and office in New Jersey shall be Cybershop Holding Corp., 000 Xxxxxx Xxxxxx,
Xxxxxx Xxxx, XX 00000. At any time, the Company may designate another registered
agent and/or office.
Section 2.6 Principal Office. The Principal Office of the Company shall be
000 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000-0000 (the "Principal Office").
The Company may change the location of its Principal Office at any time.
Section 2.7 Other Instruments. Each Member shall execute and deliver to
the Company within five days after receipt of a written request therefor such
other and further documents and instruments, statements of interest and
holdings, designations, powers of attorney and other instruments and take such
other action as the Company deems necessary, useful or appropriate to comply
with any laws, rules or regulations as may be necessary to enable the Company to
fulfill its responsibilities under this Agreement.
ARTICLE 3
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose. The purpose of the Company is to own, operate and
manage a high volume electronics, computers and appliances merchandise business
through the use of web-based electronic commerce and any other lawful business
permitted by the New Jersey Act and to engage in any and all activities related
or incidental thereto.
Section 3.2 Powers of the Company. In order to carry out its purpose, and
not in limitation thereof, and as part of its business, subject to the
limitations set forth elsewhere in this Agreement, the Company is authorized to
do any and all acts and things necessary, appropriate, proper, advisable,
incidental to or convenient for the furtherance and accomplishment of its
purpose, including without limitation, to:
(a) conduct its business, carry on its operation and have and
exercise all of the powers granted by the New Jersey Act in any state,
territory, district or possession of the United States, or in any foreign
country which may be necessary or convenient to effect any or all of the
purposes for which it is organized;
(b) incur debt and guarantee indebtedness of others for Company
purposes and mortgage or pledge any or all of any Company Property to
secure or provide for the repayment of such loans; to obtain replacements
of any mortgage or mortgages in
7
whole or in part; and prepay, refinance, recast, modify, extend or
consolidate any mortgage affecting Company Property;
(c) purchase, take, receive, lease, otherwise acquire, own, hold,
improve, use and otherwise deal in and with real or personal property, or
interests therein, wherever situated;
(d) form and maintain wholly-owned subsidiaries;
(e) sell, convey, assign, encumber, mortgage, pledge, lease,
exchange, transfer, abandon and otherwise dispose of all or any part of
the Company Property or membership interests;
(f) xxx and be sued, complain and defend, and participate in legal,
administrative or other proceedings, in its name;
(g) appoint employees and agents of the Company, and define their
duties and fix their compensation by contract or other means;
(h) make and alter agreements not inconsistent with the Certificate
or with the laws of the State of New Jersey, for the performance of its
business or the administration and regulation of its affairs;
(i) indemnify a Member, or a former Member, and make any other
indemnification to the fullest extent permitted by this Agreement, the New
Jersey Act or other applicable law;
(j) cease its activities and surrender its Certificate; and
(k) have and exercise all powers necessary or convenient to effect
any or all of the purposes for which the Company is formed.
ARTICLE 4
CAPITAL CONTRIBUTIONS AND UNITS
Section 4.1 Initial Members; Membership Lists; and Obligation to Update.
The names and addresses of the Initial Members are as reflected on Exhibit A.
The Company shall maintain a list of all Members, their last known business,
residence or mailing address and the number of Units held by each Member.
8
Section 4.2 Capital Contributions.
(a) The initial Capital Contribution, and the form of payment, of
each Member shall be as set forth on Exhibit A under the caption "Capital
Contribution", and each Member shall pay the amount set forth opposite its name
within two business days after formation of the Company. Additional Capital
Contributions shall be required as set forth in Exhibit A or as otherwise
authorized by a Super Majority in Interest.
(b) The obligation to make Capital Contributions shall be a personal
obligation of each Member and shall be enforceable by the Company and its
Members. The failure of a Member to make Capital Contributions shall constitute
a material breach of this Agreement. If a Member fails to make a Capital
Contribution, all amounts distributable by the Company to the Member in any
capacity shall be suspended, and the Member's right to receive distributions
from the Company shall not be restored until the Member shall have paid in full
to the Company the delinquent Capital Contribution, plus interest at 2
percentage points over the Prime Rate from the date such Capital Contribution
should have been paid to the date it is paid by the Member, plus any damages to
the Company attributable to the failure to timely pay the Capital Contribution.
(c) No Member shall be required to lend any funds to the Company or
to pay any contributions, assessments or payments to the Company except as
otherwise set forth in this Agreement; provided, however, that a Member may be
required to repay Distributions made to it as provided in Article 11 of this
Agreement or Section 42:2B-42 of the New Jersey Act.
Section 4.3 Units. A Member's interest in the Company shall be represented
by the "Unit" or "Units" held by such Member. Each Unit shall equal $100.00 of a
Member's Capital Contributions, and each Member shall hold the number of Units
which equals each Member's Capital Contributions divided by $100.00; the
residual amount of a Member's Capital Contribution which is not left after such
division based on the Initial Contribution will entitle the Member to an
additional Unit. The number of Units held by each Initial Member based on the
Initial Contribution is set forth on Exhibit A.
Section 4.4 Withdrawals and Return of Capital; Interest. No Member shall
have the right to receive a return of, or to withdraw, its Capital Contribution
or to receive any interest on any portion of its Capital Contribution except as
otherwise provided in this Agreement.
Section 4.5 Return of Capital. No Member shall be entitled to the return
of all or any part of its Capital Contribution, except in accordance with this
Agreement.
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ARTICLE 5
MEMBERS AND MANAGEMENT
Section 5.1 Management by Members and Managing Member. The management of
the Company's business shall be vested in the Managing Member, who shall manage
the Company's business subject to the limitations set forth in this Agreement.
The Members have authorized CYSP to act as the Managing Member except for such
matters which require the consent of a Super Majority in Interest as provided in
Section 5.3 hereof. The Managing Member may directly, or through the officers
(if any) of the Company to whom the Managing Member has delegated authority,:
(i) manage the affairs and business of the Company; (ii) exercise the authority
and powers granted to the Company; and (iii) otherwise act in all other matters
on behalf of the Company. No contract, obligation or liability of any kind or
type can be entered into on behalf of the Company by any Member other than the
Managing Member or an officer of the Company acting with the consent of the
Managing Member. The Managing Member, at times acting through the Company's
officers, shall take all actions which shall be necessary or appropriate to
accomplish the Company's purposes in accordance with the terms of this
Agreement.
Section 5.2 Officers. The Members, by a Super Majority in Interest, may
elect officers including a President, Treasurer and Secretary and such other
offices as the Members may from time to time create. The officers shall exercise
such powers and perform such duties as are prescribed by the Managing Member.
Any number of offices may be held by the same person, as a Majority in Interest
may determine, except that no person may simultaneously hold the offices of
President and Secretary. The officers shall hold office for the term for which
they were appointed and until their successors are elected and qualified;
provided, however, that any officer may be removed with or without cause by the
Managing Member.
Section 5.3 Consent of Super Majority in Interest. The Consent of a Super
Majority in Interest of the Members of the Advisory Board shall be required with
respect to any matters outside of the ordinary course of business of the Company
or not included in the then current business plan of the Company which was
adopted by a Super Majority in Interest of the Members of the Advisory Board,
including, without limitation, the following:
(a) Amend or change the provisions of the Company's Certificate of
Formation;
(b) Declare the bankruptcy of or dissolve, voluntarily liquidate or
voluntarily wind-up the Company or any subsidiary thereof;
10
(c) Enter into or be subject to any transactions between the Company
or any subsidiary thereof and any owner or beneficial holder of an interest in
the Company or any officer, manager or member of the Company
(d) Declare or pay any dividends, distributions or other payments to
the owners or beneficial holders of the Company;
(e) Redeem or repurchase any interest in the Company;
(f) Borrow in the aggregate in excess of $10,000;
(g) Effect any merger, stock sale, corporate reorganization,
business combination, joint venture or similar transaction or arrangement that,
in any case, fundamentally changes the Company or any subsidiary thereof or the
sale of the Company of all or substantially all of its assets or business;
(h) Appoint a new Managing Member or appoint a chief executive
officer, chief operating officer and/or chief financial officer of the Company;
(i) Enter into any agreement or obligation not contemplated in an
approved business plan which involves an aggregate commitment of the Company in
excess of $10,000.
(j) Encumber any of the assets of the Company;
(k) Sell any assets of the Company other than in the ordinary course
of the Company's business; or
(l) Admit any Additional Members or issue any Additional Units.
Section 5.4 Compensation.
(a) Except as provided in Section 5.4(b) or elsewhere in this
Agreement, no Member shall be entitled to compensation for any services such
Member may render to or for the Company or be entitled to reimbursement of any
general overhead expenses incurred by the Member unless the Members shall decide
otherwise. Each Member, shall be entitled to reimbursement from the Company for
all direct out-of-pocket expenses incurred on behalf of the Company, except that
Members shall not charge the Company any rent for the use of a portion of the
Members' facilities.
(b) The Company is authorized to enter into a supply agreement with
TOPS to provide products required by the Company.
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Section 5.5 Services to be Provided by Members without Compensation.
(a) CYSP shall provide general and administrative and electronic
commerce functions required by the Company, such as financial and clerical
services, implementation and control of the website commercial operations of the
Company, customer interface and supervision and control of the Company's
employees, all as more specifically set forth in Exhibit B hereto.
(b) TOPS shall provide advice and assistance to the Company in
connection with inventory supplies, product acquisition, warehousing and
delivery, all as more specifically set forth in Exhibit C hereto.
(c) Neither TOPS nor CYSP shall receive any fees for the services
provided under this Section 5.5. Both TOPS and CYSP shall be reimbursed for
direct expenses incurred on behalf of the Company, provided that each such
direct expense would not otherwise have been incurred if the Company was not
established and engaged in business.
Section 5.6 Meetings of the Advisory Board. The Advisory Board shall hold
meetings on a quarterly basis and meetings may be called at any other time by
any Member or any director of the Advisory Board. Meetings of the Members may be
called by any Member. A call shall state the location of the meeting and the
nature of the business to be transacted. Notice of any such meetings shall be
given to all Members not less than 24 hours prior to the date of such meeting
pursuant to Section 13.1.
Section 5.7 Proxies. Each Member may authorize any person or persons to
act for it by proxy on all matters on which a Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Member or its attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
option of the Member executing it.
Section 5.8 Quorum. The presence, in person or by proxy, of the holders of
a Super Majority in Interest shall constitute a quorum for the transaction of
business by the Members; provided, however, that if less than a Super Majority
in Interest are present at such meeting, the Members present may adjourn the
meeting at any time without further notice.
Section 5.9 Voting. Unless otherwise specified in this Agreement or under
the New Jersey Act, each Member shall be entitled to one vote for each Unit held
by such Member. Except as otherwise provided in this Agreement, or under the New
Jersey Act any decision to be made or action to be taken (or declined to be
taken) by the Members shall require, and shall only be authorized upon, the
affirmative vote of Members holding a Majority in Interest of the Members who
vote.
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Section 5.10 Action Without Meeting. Unless specifically prohibited by the
New Jersey Act, any action required to be taken at a meeting of the Members or
any other action which may be taken at a meeting of the Members, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by Members having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
the Members were present and voting. Prompt notice of the taking of the action
without a meeting by less than unanimous consent shall be given in writing to
those Members who have not consented in writing.
Section 5.11 Telephonic Meetings. The Members may participate in and act
at any meeting of Members through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such meeting shall constitute
attendance and presence in person at the meeting of the person or persons so
participating.
Section 5.12 Waiver of Notice. When any Notice is required to be given to
any Member of the Company hereunder, a waiver thereof in writing signed by the
Person entitled to such notice, whether before, at, or after the time stated
therein, shall be equivalent to the giving of such notice.
Section 5.13 Transactions Between a Member and the Company. Except as
otherwise provided by applicable law and this Agreement, any Member may, but
shall not be obligated to, lend money to the Company, act as surety for the
Company and transact other business with the Company and has the same rights and
obligations when transacting business with the Company as a person or entity who
is not a Member.
Section 5.14 Limited Restrictions of Business Pursuits of Members. Except
as set forth in this Section 5.14, this Agreement shall not preclude or limit in
any other respect the right of any Member to engage in or invest in any business
activity of any nature or description. The Members will conduct a high volume
electronics, computers, and appliances merchandise business based on web-based
electronics commerce through the Company. Neither of the Members or their
affiliates will engage in the business of the Company separately or with other
third parties except that CYSP may continue to sell products which are also sold
by TOPS or the Company both with respect to CYSP's current operations and with
respect to a bridal registry operation to be established by CYSP subject to the
following limitations: (i) CYSP will not offer for sale at any time with respect
to its current operations more than 100 SKUs, in the aggregate, of products
which are then being sold by TOPS in its retail stores and/or by the Company;
(ii) CYSP will not offer for sale at any time in its bridal registry to be
established more than 100 SKUs in the aggregate of products which are then being
sold by TOPS in its retail stores and/or by the Company; (iii) CYSP will not
offer any products for sale at a price lower than the price then being charged
by TOPS and/or the
13
Company; and (iv) TOPS will have the right, unless CYSP can obtain a lower price
from a third party, to supply such products to CYSP at the lower of the most
favorable price offered by TOPS to any of its customers or a xxxx-up over its
invoice cost of no more than 5%.
Section 5.15 Duration of Member Status. Except as otherwise set forth in
Article 11, each Member shall remain a Member until the earliest of the death,
bankruptcy, withdrawal or dissolution of such Member; provided, however, that no
Member may withdraw without either the consent of the holders of a Majority in
Interest of all Members.
Section 5.16 Additional Commercial Assistance. In order to further develop
the business of the Company the Members shall provide additional commercial
assistance to the Company designed to increase consumer visibility and
acceptance of the Company. Such assistance shall include, without limitation,
use of the Company's URL on delivery trucks, inclusion of the Company's inserts
in the Members' mailings, references to the Company in the Members'
advertisements, in-store demonstrations and promotions. The Members shall also
gather and record E-Mail addresses of their present and potential future
customers.
Section 5.17 Acquisition, Sale or Change of Control of a Member. Nothing
contained in this Agreement shall limit the right of a Member to engage in any
transaction which results in such Member acquiring or being acquired or
controlled by an entity (including, without limitation, by stock sale, merger,
asset sale or other like transaction) including, without limitation, an entity
which engages in whole or part in any business which is competitive with the
business of the Company. In the event that such transaction is to be effected,
the Company and all other Members shall promptly be notified thereof. The Member
involved in such transaction agrees that its obligations under this Agreement,
and in the case of TOPS, the Supply Agreement, shall continue in full force and
effect, unless this Agreement is terminated as set forth below. In addition,
good faith negotiations shall be conducted between the Members with a view
toward a possible combination of the competitive business with that of the
Company. In the event that such negotiations fail or in the event that either
Member otherwise wishes to terminate this Agreement (and, in the case of TOPS,
the Supply Agreeement), the Members agree that they will negotiate the terms for
the sale of the Units owned by the Member engaged in such transaction to the
other Member based on the fair value of the Units determined at such time by
negotiations or by an appropriate appraisal method, if required.
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ARTICLE 6
MEMBER ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Maintenance of Member Accounts.
(a) A member account (a "Member Account") shall be established in
the Company's books for each Member and transferee in accordance with the rules
of Treasury Regulation Section 1.701(b)(2)(iv). Each Member Account shall be:
(i) increased by:
A. such Member's cash Capital Contributions;
B. the fair market value of the Contributed Property
contributed by such Member to the Company (net of liabilities
securing such Contributed Property that the Company is considered to
assume or take subject to); and
C. the amounts of the gross income and gain of the
Company allocated to such Member;
and shall be
(ii) decreased by:
A. the amounts of the Company's losses and deductions
allocated to such Member;
B. the amount of money distributed to such Member by the
Company; and
C. the fair market value of property distributed to such
Member by the Company (net of liabilities securing such property
that such Member is considered to assume or take subject to).
(b) Generally, a Substitute Member or Assignee of a Unit will
succeed to the Member Account relating to the Units transferred. However, if the
transfer causes a termination of the Company under Code Section 708, the Company
Properties shall be deemed to have been distributed in liquidation of the
Company to the Members (including the Substitute Member or transferee of a Unit)
and deemed recontributed by such Members and transferees in reconstitution of
the Company. In such event, the Carrying Values of the
15
Company Properties shall be adjusted immediately prior to such deemed
distribution (and such Carrying Values shall constitute the agreed values of
such properties upon this deemed contribution of the recontributed property).
The Member Accounts of such reconstituted Company shall be maintained in
accordance with the principles of Section 6.1.
(c) The foregoing provisions and other provisions of this Agreement
relating to maintenance of Member Accounts are intended to comply with Treasury
Regulation Sections 1.704-1(b) and -2(b), and shall be interpreted and applied
in a manner consistent with such regulations. In the event the Managing Member
shall determine that it is prudent to modify the manner in which the Member
Accounts, or any debits or credits thereto, are computed in order to comply with
such regulations, the Managing Member, without the approval of the Members, may
amend this Agreement to reflect such modification; provided that it is not
likely to have a material effect on the amounts distributed to the Members
pursuant to Article 12 upon dissolution of the Company.
Section 6.2 Allocations.
(a) All items of gross income and gain for any period shall be
allocated in proportion to the number of their Units.
(b) Except as provided in Section 10.2(c), all items of loss and
deductions for any period shall be allocated to the Members in proportion to the
number of their Units.
Section 6.3 Special Allocation Provisions
(a) The Members intend that Capital Accounts be maintained in
accordance with the tax regulations under Section 704 of the Code, including,
without limitation, the provisions relating to minimum gain chargeback in
Section 1.704-2(f), the Partner Minimum Gain Chargeback provisions in Section
1.704-2(j)(4), the qualified income offset provisions of Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), and the mandatory allocations under Section 704(c) of
the Code. Capital Accounts of all Members shall be adjusted upon the
circumstances and in the manner described in Section 1.704-1(b)(2)(iv)(f) and
(g) of the Tax Regulations. Nonrecourse Deductions for any Taxable Year shall be
specifically allocated among the Members in proportion to their Company
Percentages. The Managing Member, if it deems appropriate, may make, in good
faith and in its sole discretion, appropriate amendments to this Agreement to
more readily effectuate all of the foregoing.
(b) The allocations set forth in (a), above (the "Regulatory
Allocations").
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Section 6.4 Distributions.
(a) Distributions shall be made as and when decided by a Super
Majority in Interest of the Members; provided, however, that to the extent of
Available Cash a Distribution shall be made each year in an amount sufficient
for the Members to satisfy their respective income tax liabilities arising by
the allocations in Section 6.2, assuming each Member is subject to tax at the
highest marginal federal tax bracket for corporations and at the highest such
marginal rate applicable to New Jersey resident corporations. As of any
Distribution Date, each Member's Unit Distribution shall be calculated by
dividing the amount of the aggregate Distribution by the aggregate number of
Units held by such Member.
(b) A Member shall have no right to demand and receive any
Distribution from the Company in any form other than cash.
(c) A Member may not receive a Distribution to the extent that,
after giving effect to the Distribution, all liabilities of the Company, other
than liability to Members on account of their Capital Contributions, would
exceed the fair value of the Company's assets.
(d) The Company shall withhold taxes with respect to any
Distribution to the extent required by law, and any amount so withheld shall be
treated as a distribution to such Member for purposes of this Section 6.4.
(e) Any distribution of cash, cash equivalents, or marketable
securities ("Distributable Property") prior to the end of the Taxable Year in
which such Distributable Property came into possession of the Company shall be
treated as a non-interest-bearing loan (a "draw") from the Company to each
Member receiving such draw and shall be deemed repaid by reducing the amount of
each subsequent distribution to the Member receiving such draw pursuant to this
Section 6. 4(e) by the lesser of (i) the entire amount otherwise distributable
to the Member receiving such draw, and (ii) the entire amount of any unrepaid
draws pursuant to this Section 6.4(e).
ARTICLE 7
FISCAL YEAR, BOOKS AND RECORDS
Section 7.1 Books of Account and Records. At all times during the term of
the Company, the Company shall keep or cause to be kept at the Company's
principal office the following items:
(a) a copy of this Agreement;
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(b) a current list of the full name and last known business,
residence, or mailing address of each Member and the number of Units held
by each Member;
(c) a copy of the Certificate and all amendments thereto, together
with executed copies of any powers of attorney pursuant to which any
amendment has been executed;
(d) copies of the Company's federal, state, and local income tax
returns and reports, if any, for the three most recent years;
(e) the Company's financial books and records, including all
employment and human resources records; and
(f) minutes of meetings of Members and any written consents obtained
from Members regarding action taken by Members without a meeting.
Section 7.2 Inspection. All documents required to be maintained at the
Company's principal office under Section 7.1, as well as true and full
information regarding the state of the Company's business, financial condition
and other information regarding the affairs of the Company as is just and
reasonable, shall be made available upon reasonable demand for any purpose
reasonably related to the Member's interest as a Member, during ordinary
business hours for inspection and copying at the reasonable request and expense
of any Member. In addition, any Member of the Company shall have the right to
have a formal accounting of Company affairs at such Member's sole cost and
expense whenever circumstances render it just and reasonable.
Section 7.3 Fiscal Year. The fiscal year of the Company shall begin on
January 1 and end on December 31 in each year except that the first year of the
Company shall be that period (even if less than twelve months) beginning on the
date of filing the Certificate and ending on the next following December 31 and
the final year of the Company shall be that period beginning on the first day of
such year and ending on the date of cancellation of the Certificate.
Section 7.4 Accounting. The Company's accountants employed at any one time
shall be the final authority with regard to any accounting questions that may
arise during the course of the business of the Company. The fees of the
accountants will be a normal Company business expense.
Section 7.5 Financial Reports. On or before the 90th day following the end
of each fiscal year of the Company, the Company shall cause to be prepared in
accordance with GAAP by an independent accounting firm chosen by the Advisory
Board, an audited balance sheet of the Company as at December 31 of the
preceding fiscal year, together with all related
18
financial statements for the calender year then ended. The Company shall cause
such financial statements to be delivered to each Member along with all
information with respect to the Company necessary for the Members' federal and
state income tax returns, including a Form K-1 or its equivalent.
ARTICLE 8
TAX MATTERS
Section 8.1 Member for Tax Matters. Xxxx Xxxxxx shall be the person
designated pursuant to Section 6231(a)(7) of the Code for purposes of federal
and state income tax matters.
Section 8.2 Tax Returns. The Company shall cause the preparation and
timely filing of all tax returns required to be filed by the Company pursuant to
the Code and all other tax returns deemed necessary and required in each
jurisdiction in which the Company does business.
Section 8.3 Deductions and Elections. Wherever reasonably possible, the
Company shall treat as expense items all amounts incurred for services, rent,
taxes, leases, interest and other fees and charges inuring or relating to
Company Property which may, in accordance with applicable law, regulations
and/or decisions, be considered as expenses. Any such items that must be
capitalized shall be amortized over the shortest period of time allowable. The
Company shall, to the extent permitted by applicable law and regulations, elect
to claim those tax positions as the Member for tax matters, in its discretion,
determines to be most favorable to the Members. No Member shall take any action
or refuse to take any action which would cause the Company to forfeit the
benefits of any tax election previously made or agreed to be made. Each Member
shall promptly supply the Company with any information necessary to give effect
to such tax elections.
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ARTICLE 9
MEMBERS' AND OFFICERS' LIABILITY AND INDEMNITY
Section 9.1 Members' and Officers' Liability.
(a) To the fullest extent permitted by the New Jersey Act and all
other applicable law, no Member or officer shall be personally liable or
obligated under a judgment, decree or order of a court, or in any other manner,
for the debts, liabilities, or obligations of the Company, whether arising in
contract, tort or otherwise.
(b) If a Member has received the return of any part of its Capital
Contribution in violation of this Agreement or the New Jersey Act, such Member
shall be liable to the Company for a period of three years thereafter for the
amount of the Capital Contribution wrongfully returned.
(c) If a Member has received the return in whole or in part of its
Capital Contribution without violation of this Agreement or the New Jersey Act,
such Member shall be liable to the Company for a period of three years
thereafter for the amount of the returned Capital Contribution, but only to the
extent necessary to discharge the liabilities of the Company to those creditors
who extended credit to the Company during the period the Capital Contribution
was held by the Company.
(d) Any liability of a Member to the Company under this Article 11
can be waived or compromised pursuant to action of the Members. A Member who is
subject to an obligation to repay any Capital Contribution to the Company as
required by the Certificate or this Agreement shall make such repayment on
demand by the Company. No Member shall be liable to the Company, its creditors
or any other Member with respect to any amounts paid to such Member as profit
sharing, loan repayment, interest, salary, wage, rental, royalty, fee or payment
for value given and which is not paid to such Member as a return of such
Member's Capital Contribution.
Section 9.2 Right to Indemnification.
(a) Subject to the limitations and conditions provided in this
Section 9.2 and in the New Jersey Act, each Person (an "Indemnified Person") who
was or is made a party or is threatened to be made a party to or is otherwise
involved in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative (a
"Proceeding"), or any appeal in such a Proceeding, or any inquiry or
investigation that could lead to such a Proceeding, by reason of the fact that
he, she or it was or is (a) a Member (b) the legal representative of or a
manager, director, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of a Member (a
20
"Legal Representative"), or (c) an officer or agent or the Company, shall be
indemnified by the Company against judgments, penalties (including excise and
similar taxes and punitive damages), fines, settlements and reasonable costs and
expenses (including, without limitation, attorneys' fees) actually incurred by
such Indemnified Person in connection with such Proceeding if (i) such
Indemnified Person acted in good faith and in a manner he, she or it reasonably
believed to be in, or not opposed to, the best interest of the Company and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his, her or its conduct was unlawful and (ii) the Indemnitee's conduct did not
constitute gross negligence or willful or wanton misconduct. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Indemnified Person did not act in good faith and in a
manner which he, she or it reasonably believed to be in, or not opposed to, the
best interests of the Company or, with respect to any criminal action or
proceeding, that the Indemnified Person had reasonable cause to believe that
his, her or its conduct was unlawful.
(b) Notwithstanding Section 9.2(a), the Company's obligation to
indemnify any Indemnified Person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action or suit by or in
the right of the Company to procure a judgment in its favor by reason of the
fact that such Person is or was a Member, or a Legal Representative of a Member
of the Company, shall be limited to such Indemnified Person's expenses
(including attorneys' fees) actually and reasonably incurred by such Person in
connection with the defense or settlement of such action or suit, and such
indemnification shall be required only if such Person acted in good faith and in
a manner he, she or it reasonably believed to be in, or not opposed to, the best
interests of the Company, and no indemnification shall be made in respect of any
claim, issue or matter as to which such Person shall have been adjudged to be
liable for negligence or misconduct in the performance of his, her or its duty
to the Company unless, and only to the extent that, the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the case,
such Person is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper.
(c) Indemnification under this Section 9.2 shall continue as to a
Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity hereunder. The rights granted pursuant to this Section 9.2
shall be deemed contract rights, and no amendment, modification or repeal of
this Section 9.2 shall have the effect of limiting or denying any such rights
with respect to actions taken or Proceedings arising prior to any such
amendment, modification or repeal.
(d) The right to indemnification conferred by Section 9.2(a) and (b)
shall include the right to be paid or reimbursed by the Company for the
reasonable expenses incurred in advance of the final disposition of the
Proceeding and without any determination as to the Person's ultimate entitlement
to indemnification; provided, however, that the
21
payment of such expenses incurred in advance of the final disposition of a
Proceeding shall be made only upon delivery to the Company of a written
affirmation by such Person of his, her or its good faith belief that he, she or
it has met the standard of conduct necessary for indemnification under this
Section 9.2 and a written undertaking, by or on behalf of such Person, to repay
all amounts so advanced if it shall ultimately be determined that such Person is
not entitled to be indemnified under this Section 9.2 or otherwise.
(e) The right to indemnification and the advancement and payment of
expenses conferred by this Section 9.2 shall not be exclusive of any other right
which a Person may have or hereafter acquire under any law (common or
statutory), provision of the Articles, agreements, vote of Members or otherwise.
(f) The Company may purchase and maintain insurance, at its expense,
to protect itself and any Person who is or was serving as a Member, officer,
employee or agent of the Company or is or was serving as a manager, director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of a Member against any expense, liability or loss, whether or not
the Company would have the power to indemnify such Person against such expense,
liability or loss under this Section 9.3.
(g) If Section 9.2(a) or (b) or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Indemnified Person
as to costs, charges and expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article II that shall not have been
invalidated and to the fullest extent permitted by applicable law.
Section 9.3 Exculpation. To the fullest extent permitted by the New Jersey
Act or other applicable law, no Person who shall be authorized to and shall
perform or exercise any of the powers or duties set forth in Section 6 or
otherwise with respect to the management of the Company, shall have any personal
liability to the Company or any other Member for monetary damages for breach of
any fiduciary or other duty owed to any person.
Section 9.4 Remedies. The remedies of the Members and others hereunder are
cumulative and shall not exclude any other remedies to which a Member may be
lawfully entitled. The Members acknowledge that all legal remedies for any
breach of this Agreement may be inadequate, and therefore they consent to any
appropriate equitable remedy; provided, however, that any failure of a Member to
abide by the terms of this Agreement, including without limitation any vote or
consent that should bind a Member, or any other failure to adhere to the terms
of this Agreement which cost the Company legal and court costs to enforce same
shall render the breaching Member liable to the Company for any such fees and
costs.
22
Section 9.5 Waiver. The failure of the Company any Member to insist upon
strict performance of a covenant or condition hereunder shall not be waiver of
its right to demand strict compliance therewith in the future.
ARTICLE 10
ADDITIONAL MEMBERS AND UNITS
Section 10.1 Additional Units. With the prior written consent of a Super
Majority in Interest of the Members, the Company may issue Additional Units by
sale or other issuance to existing Members or other persons or entities
("Additional Members"). Any such sale or other issuance of Units shall be made
in accordance with the Certificate and this Agreement. As a condition to such
issuance, Additional Members acquiring such Units shall execute a copy of or
rider to this Agreement and all other documents and instruments as the Company
may require and shall become Members upon the date the last of such agreements
are executed. The legal fees and costs associated with the preparation and
filing of an amendment to the Certificate to effectuate such admission, if
necessary, and all other documents necessary to continue the Company's right to
do business in the jurisdictions in which it is then doing business, shall be
borne by the Company.
Section 10.2 Allocations. Additional Units shall not be entitled to any
retroactive allocation of the Company's gross income, gains, losses, deductions,
credits or other matters of any kind; provided that Additional Units shall be
entitled to their respective share of the Company's gross income, gains, losses,
deductions, credits and other matters of any kind arising under contracts
entered into before the effective date of the issuance of any Additional Units
to the extent that such gross income, gains, losses, deductions, credits and
other matters of any kind arise after such effective date. The Company's books
may be closed at the time Additional Units are issued (as though the Company's
tax year had ended) or the Company may credit to the Additional Units pro rata
allocations of the Company's gross income, gains, losses, deductions, credits
and other matters of any kind for that portion of the Company's fiscal year
after the effective date of the issuance of the Additional Units.
ARTICLE 11
TRANSFERS
Section 11.1 Transfer Restrictions. Except as provided elsewhere in this
Article 11, no Member shall, directly or indirectly, sell, transfer, assign,
endorse, mortgage, pledge, hypothecate, grant an option to any person to
acquire, grant a security interest in, or otherwise
23
dispose of or encumber its Units or interest in the Company or any economic
benefit therein without the prior, written consent of the holders of a Super
Majority in Interest of the Members, which consent may be given or withheld in
the sole and absolute discretion of each such party. Upon the receipt of all
required consent, pursuant to Section 42:2B-46 of the New Jersey Act, a person
acquiring one or more Units shall be admitted to the Company as a Substitute
Member. A Member shall cease to be a Member (and have the power to exercise any
rights of being a Member) when the Member has transferred all such Member's
Units to one or more transferees whether or not such transferees are or become
admitted as Substitute Members. No consent shall be required with respect to a
transfer to a parent or wholly-owned subsidiary of a Member.
Section 11.2 Non-Consensual Transfers.
(a) Any purported transfer of Units or any economic interest therein
not in compliance with Section 11.1 shall be null and void, regardless of any
notice provided to the Company, and shall not create any obligation or liability
of the Company to the purported transferee, and any person purportedly acquiring
any Units or any economic interest therein purportedly transferred without the
prior, written consent required by Section 11.1 shall not be entitled to
admission to the Company as a Substituted Member.
(b) In the case of an attempted transfer of any Units or any
economic benefit therein that has not received the consents required by Section
11.1, the parties engaging or attempting to engage in such transfer shall
indemnify and hold harmless the Company and the other Members from all cost,
liability, and damage that any of such indemnified persons may incur (including,
without limitation, incremental tax liability and lawyers' fees and expenses) as
a result of such transfer or attempted transfer and the enforcement of this
indemnity.
Section 11.3 Termination of Membership.
(a) If a Member is a corporation, trust or other entity and is
dissolved or terminated, the powers of that Member may be exercised by its legal
representative or successor.
(b) In the event of dissolution of a Member, followed by agreement
to continue the Company as provided in Section 2.4, any successor to the Units
of the affected Member as a result thereof shall be deemed to be the transferee
of the entire interest of the affected Member and may be admitted as a
Substitute Member upon satisfaction of the consent requirements of Section 11.1.
(c) The provisions of Article 2 and this Section 11.3 shall not
cause or require the dissolution of the Company should any of the events
described in such Article or
24
Section occur to a person or entity who is not a Member but only possesses
economic benefits associated with any Units.
Section 11.4 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrator, successors and
assigns of the parties hereto.
Section 11.5 Withdrawal. A Member does not have the right to withdraw from
the Company as a Member and shall not do so.
ARTICLE 12
DISSOLUTION AND WIND-UP
Section 12.1 Winding Up. Upon the occurrence of an event described in
Section 2.3 and the lack of an agreement to continue the Company as set forth in
Section 2.4 or if at least two Members do not remain following any such event,
the Company shall commence to wind up its affairs. At such time, if any Member
is interested in purchasing the trademark of the Company, the Members will agree
upon and assign to the Company trademark a value (the "Trademark Value"), or in
the absence of such an agreement, the Trademark Value will be determined by an
appraiser mutually appointed by the Members and at the expense of the Company.
The Trademark Value will be charged against the value to be received pursuant to
Section 12.3 by the Member to whom it will be assigned.
Section 12.2 Authority to Wind-Up. All winding-up activities shall be
managed by the agent appointed by the holders for this express purpose, to the
exclusion of the Members. Pursuant to Section 18-803 of the New Jersey Act, upon
dissolution of the Company and until the filing of a Certificate of Cancellation
as provided in Section 42:2B-14 of the New Jersey Act, the Person winding up the
Company's affairs may, in the name of and on behalf of the Company, prosecute
and defend suits, settle and close the Company's business, dispose of and convey
the Company Property, discharge the Company's liabilities and distribute to the
Members any remaining Company Property, all without affecting the liability of
the Members.
Section 12.3 Settlement and Distribution. In settling accounts after
dissolution, the assets of the Company shall be distributed as follows:
(a) to creditors, including Members who are creditors to the extent
otherwise permitted by law, in satisfaction of liabilities of the Company
other than liabilities for distribution to Members under Section 42:2B-36
or 42:2B-39 of the New Jersey Act;
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(b) except as provided in this Agreement, to Members and former
Members in satisfaction of liabilities for distributions under Sections
42:2B-36 or 42:2B-39 of the New Jersey Act; and
(c) to the establishment of reserves for contingencies or unforeseen
liabilities and obligations of the Company, which reserves may be paid
over to a bank or other party chosen by the Members, to be held in escrow
for payment of such continent or unforeseen liabilities;
(d) except as provided in this Agreement, to Members in proportion
to and to the extent of the Members' Member Accounts and thereafter in the
proportion in which the Members share in Distributions under Article 6.
At the expiration of such time period as the Members shall deem advisable, the
remaining balance of any reserve established in accordance with clause (c) shall
be distributed in the manner set forth in clause (d).
Section 12.4 Termination. Upon completion of the distribution of the
Company Property as provided in this Article 12, the Company shall be
terminated, and the Manager or other agent appointed as set forth in Section
12.2 in charge of winding-up the Company's business shall cause the filing of
the Certificate of Cancellation pursuant to Section 42:2B-14 of the New Jersey
Act and shall take all such other actions as may be necessary to terminate the
Company.
Section 12.5 Claims of the Members. The Members shall look solely to the
Company Property for the return of their Capital Contributions, and if the
assets of the Company remaining after payment or discharge of the debts or
liabilities of the Company are insufficient to return such Capital Contribution,
the Members shall have no recourse against the Company or any other Member or
Manager or former Member or Manager or any other employee or agent of the
Company or any Manager.
ARTICLE 13
NOTICES
All Notices shall be in writing and shall be deemed to have been given
when delivered personally to the party to be notified or when deposited in the
United States mail, certified, with return receipt requested, or deposited with
a nationally-recognized overnight delivery service, postage and charges prepaid,
addressed as follows:
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(a) if to the Company, addressed to the Company's Principal Office,
with a copy to each of Xxxxx & Xxxxxxx LLP, 0000 Xxxxxxxx, Xxx Xxxx, XX
00000; Attn: Xxxxxx X. Xxxxxxx, Esq. and Greenbaum, Smith, Ravin, Xxxxx &
Xxxxxx, 00 Xxxx Xxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx 00000; Attn: Xxxxxx
Xxxxxx, Esq.; and
(b) if to a Member, addressed to such Member's address for purposes
of Notice which is contained in the Company's records. Any Member may
change its address or representative to be notified by written Notice to
the Company.
ARTICLE 14
MISCELLANEOUS
Section 14.1 Governing Law. This Agreement shall be deemed to be made
under and shall be construed in accordance with the laws of the State of New
Jersey, excluding any conflict of laws rules. It is the intent of the Members
upon execution hereof that this Agreement shall be deemed to have been prepared
by all of the parties to the end that no Member shall be entitled to the benefit
of any favorable interpretation or construction of any term or provision hereof
under any rule or law.
Section 14.2 Jurisdiction; Costs. All actions or proceedings in any way,
manner or respect, arising out of or from or related to this Agreement shall be
litigated only in courts having situs within the State of New Jersey. Each
Member hereby consents and submits to the jurisdiction of any local, state or
federal court located within said county and state and hereby waives any rights
he, she or it may have to transfer or change the venue of any such litigation.
The prevailing party in any litigation in connection with this Agreement shall
be entitled to recover from the other party all costs and expenses, including
without limitation reasonable fees and expenses of attorneys and paralegals,
incurred by such party in connection with any such litigation.
Section 14.3 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement shall not be
affected and the application of such affected provisions shall be enforced to
the greatest extent permitted by law.
Section 14.4 Headings. All Article, Section or subsection titles or
captions and the Table of Contents contained in this Agreement are for
convenience only and shall not be deemed part of the context of this Agreement.
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Section 14.5 Plurals and Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons may require.
Section 14.6 Time. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall not be included, but the time shall begin to run on
the next succeeding day. The last day of the period so computed shall be
included, unless it is a Saturday, Sunday or legal holiday, in which event the
period shall run until the end of the next day which is not a Saturday, Sunday
or legal holiday.
Section 14.7 Entire Agreement. This Agreement constitutes the complete and
entire agreement among the Members. This Agreement merges any prior agreements,
verbal or collateral, express or implied. Any such prior agreements, not
expressly set forth herein, shall have no any legal effect.
Section 14.8 Amendment. This Agreement may be amended (including a
termination or extension) by a written instrument executed by the holders of a
Majority in Interest of the Members. Notwithstanding the foregoing (a) an
amendment or modification reducing a Member's voting rights or share of
distributions (other than to reflect changes otherwise provided by this
Agreement) is effective only with that Member's consent; (b) an amendment or
modification reducing the required vote or other measure for any consent or vote
in this Agreement is effective only with the consent or vote of Members having
the vote or other measure theretofore required; and (c) an amendment that would
modify the limited liability of a Member is effective only with that Member's as
applicable, consent.
Section 14.9 Method of Execution. The Agreement may be executed in
counterparts (including telecopied signature pages followed by original copies),
no one of which need be executed by all Members, each of which, however, shall
be deemed an original for all purposes, and all of which shall constitute but
one and the same Agreement.
Section 14.10 Title to Assets. Title to the Property and all other assets
acquired by the Company shall be held in the name of the Company. No Member
shall individually have any ownership interest or rights in and specific Company
Property or any other assets of the Company. No Member shall have any right to
seek or obtain a partition of the Property or other assets of the Company, nor
shall any Member have the right to any specific assets of the Company upon the
liquidation of or any distribution from the Company.
Section 14.11 Nature of Unit in the Company. A Member's Unit shall be
personal property for all purposes.
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Section 14.12 No Third Party Rights. None of the provisions contained in
this Agreement shall be for the benefit of or enforceable by any third parties,
including creditors of the Company.
Section 14.13 Binding Agreement. Subject to the restrictions on the
disposition of Units and other interests in the Company herein contained, the
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns.
Section 14.14 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of his her or its obligations hereunder or with respect to the Company is
not a consent or waiver to or of any other breach or default in the performance
by that Person of the same or any other obligations of that Person. Failure on
the part of a Person to complain of any act or to declare any Person in default
hereunder, irrespective of how long that failure continues, does not constitute
a waiver by that Person of his, her or its rights with respect to that default.
Section 14.15 Further Assurances. 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 the transactions contemplated herein.
Section 14.16 Section References. References to specific sections of the
New Jersey Act are to the New Jersey Act as in effect on the date hereof and
shall be deemed to be references to corresponding provisions of the New Jersey
Act as it may be amended from time to time.
This Agreement is executed as of the date first written above.
CYBERSHOP HOLDING CORP.
By:______________________________________
Name:
Title:
TOPS APPLIANCE CITY, INC.
By:______________________________________
Name:
Title:
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EXHIBIT A
INITIAL MEMBERS, CAPITAL CONTRIBUTIONS AND UNITS
================================================================================
Capital Units
Name and Address of Member Contributions Issued
================================================================================
Cybershop Holding Corp.
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000 76,500 765
================================================================================
TOPS Appliance City, Inc.
00 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000 73,500 735
================================================================================
EXHIBIT B
SERVICES TO BE PROVIDED BY CYSP TO THE COMPANY
1. Implementation and control of the website commercial operations of the
Company; website design and maintenance including navigation strategy, sign-up
strategy and design of template and processes for real time updates and ease of
use including input of product pages containing all necessary customer
information.
2. Web based infrastructure and marketing development, including use of
Interworld license and use of marketing arrangements currently in effect with
CYSP.
3. Customer interface/service including training of CYSP's
representatives, use of CYSP's representatives for overflow, use of CYSP's
systems and modification of systems for special needs of the Company.
4. Management information services needed by the Company in conducting its
business, including weekly and quarterly reports. Training of the Company's
personnel in the preparation of required supporting information and reports.
5. Financial information and clerical and reporting services required to
establish and maintain a financial reporting systems of the Company.
6. Preparation of the CYSP's facilities for use in the business of the
Company including adequate space for the Company's personnel and assistance in
the purchase/lease of dedicated computer equipment, web services, fax machines
and the like. To the extent that CYSP has such equipment available for use by
the Company consistent with the conduct of the business of the CYSP such
equipment shall be made available without charge other than direct charges of
third parties.
7. Provide commercial assistance to the Company designed to increase
consumer visibility and acceptance of the Company. Such assistance shall
include, without limitation, inclusion of the Company's inserts in CYSP's
electronic mailings and websites and references to the Company in CYSP's
advertisements and promotions.
8. Gather and record E-Mail addresses of their present and potential
future customers.
EXHIBIT C
SERVICES TO BE PROVIDED BY TOPS TO THE COMPANY
1. Establish distribution delivery systems for local, regional, national
and international customers.
2. Provide advice and assistance with respect to inventory supplies,
acquisition, warehousing and shipment.
3. Create inventory management systems for the Company which coordinates
warehousing capabilities, inventory restocking and alternative procedures for
inventory access.
4. Advise the Company on participation in coop advertising, store
promotions, inserts and other marketing materials.
5. Establish procedures with respect to delivery scheduling and returns.
6. Provide assistance with respect to establishing extended warranty
offerings.
7. Take necessary procedures at the TOPS warehouse and distribution
facilities to handle the projected requirements of the Company for distribution
and fulfillment.
8. Provide assistance and interface with manufacturers, suppliers, and
distributors with respect to expanding and developing the inventory and product
mix of the Company.
9. Provide commercial assistance to the Company designed to increase
consumer visibility and acceptance of the Company. Such assistance shall
include, without limitation, use of the Company's URL on delivery trucks,
inclusion of the Company's inserts in the TOPS mailings, references to the
Company in the TOPS advertisements, in-store demonstrations and promotions.
10. Gather and record E-Mail addresses of their present and potential
future customers.
