Exhibit 99.2 Operating Agreement
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3D OPEN MOTION, LLC
OPERATING AGREEMENT
OPERATING AGREEMENT ("Agreement") relating to 3D OPEN MOTION, LLC, a
Delaware limited liability company having its initial principal place of
business The Mill, 00 Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxxxxxx, XX 00000 (the
"Company") made and entered into as of June 5, 1998, by and among Xxxxxx X.
Gain, an individual residing at 00 Xxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx ("Gain" or
"Xxxxxx X. Gain"), as the sole initial Manager of the Company, and Gain and the
Gain Family Trust (the "Trust") as the Series A Preferred Shareholders, Spacetec
IMC Corporation, a Massachusetts corporation ("Spacetec") located at the Boott
Xxxxx, 100 Foot of Xxxx Street, Lowell, Massachusetts as the Series B Preferred
Shareholder, and the Persons identified as Common Shareholders on the Share
Ledger attached hereto as the Common Shareholders.
RECITALS
1. WHEREAS, the Company has been formed as a limited liability company under
the laws of the State of Delaware by the filing on _______________ of the
Certificate of Formation pursuant to the Delaware Limited Liability Company Act;
2. WHEREAS, Spacetec has been involved in conceiving, designing, researching,
developing and prototyping an advanced level of 3D enabling software designed to
be a platform and graphics independent Application Programmer's Interface
("API") and related specific Software Development Kits ("SDKs") that will allow
faster and easier creation, storage, retrieval, editing and invoking of 3D
motion and 3D interactive motion control capabilities, all as set forth Exhibit
I of the Asset Transfer Agreement between the SIMC and the Company dated as of
the date hereof (the "OpenMotion Technology").
3. WHEREAS, Spacetec has not as yet brought the OpenMotion Technology to
commercial viability.
4. WHEREAS, Spacetec has decided to focus its development energies and efforts
on developing and growing its core 3D controller and related software business
and therefore has decided to divest itself of its OpenMotion Technology.
5. WHEREAS,Gain is willing and desirous of establishing the Company for the
purposes of acquiring the OpenMotion Technology and other intellectual property
and assets from Spacetec, including equipment, furniture and software tools used
in the OpenMotion Technology research and development effort in order to
continue the development and eventual commercialization of such technology.
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6. WHEREAS, Gain is willing to employ or engage at the Company certain current
key staff and consultants of the OpenMotion research and development staff from
Spacetec.
7. WHEREAS, Spacetec is also willing and agrees to contribute outright the
OpenMotion Technology and certain other assets currently used in the development
of the OpenMotion Technology to the Company for a minority equity interest in
the Company.
8. WHEREAS, pursuant to a Business Cooperation Agreement between Spacetec and
the Company dated as of the date hereof (the "Business Cooperation Agreement")
the companies have set forth the terms of their business relationship.
9. WHEREAS, pursuant to a Voting Trust Agreement between the Company, Gain and
certain individuals dated as of the date hereof (the "Voting Trust Agreement"),
Gain, as Voting Trustee, holds all of the Class C Shares of the Company.
AGREEMENT
Now therefore, in consideration of the foregoing the parties hereby agree
further as follows:
The Shareholders are entering into this Agreement in order more fully to
set out their respective rights, obligations and duties with respect to the
Company.
1. DEFINITIONS
1.1 DEFINITIONS. The following terms have the following meanings:
"Company" means 3D OPEN MOTION, LLC.
"Company's Initial Business Purpose" means, among other things, the
development, commercialization and marketing of the OpenMotion Technology.
"OpenMotion Technology" refers to the software technology described in
Paragraph 2 of the Recitals to this Agreement.
The "Initial Directors" shall be Xxxxxx X. Gain and Xxxxxx Xxxxxxxxx.
The "Initial President" shall be Xxxxxx X. Gain.
The "Initial Treasurer" shall be Xxxxxx X. Gain.
The "Initial Secretary" shall be Xxxxxx X. Gain.
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"Spacetec Shares" means shares of common stock, $.01 par value per share,
of Spacetec IMC Corporation
1.2 ADDITIONAL DEFINITIONS. The following terms have the following
meanings:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to time.
"Agreement" means this Operating Agreement as it may be amended,
supplemented, or restated from time to time.
"Bankruptcy" shall have the meaning assigned to such term by the Act.
"Board" means the Directors acting pursuant to Section 3.3.
"Capital Account" means, with respect to a Shareholder, such Shareholder's
capital account in the Company maintained in accordance with Section 6.8 of this
Agreement.
"Capital Contribution" means, with respect to a Shareholder, the agreed
fair market value of any property, and/or the amount of any cash contributed or
to be contributed by the Shareholder to the capital of the Company, as set forth
opposite each Shareholder's name on the Share Ledger (as defined below).
"Capitalization Description" means the capitalization description set
forth as Schedule B to this Agreement, as it may be amended from time to time
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by the terms of this Agreement.
"Certificate" means the Certificate of Formation of the Company filed in
accordance with the Act.
"Change in Control" of the Company means (i) the sale, transfer or other
disposition of all or substantially all of the assets of the Company to a Third
Party Entity, (ii) a merger or consolidation of the Company with a Third Party
Entity, or (iii) a transfer of more than fifty percent (50%) of the outstanding
voting equity of the Company to a Third Party Entity, provided no financing
transaction involving issuance of additional newly authorized securities of the
Company to a Third Party Entity shall constitute a Change in Control.
"Common Shareholder" means each of the Shareholders identified in the Share
Ledger as holding Series C Common Shares, in each such Shareholder's capacity as
such.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, unless otherwise indicated.
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"Director" refers to any one of those Persons elected and serving from time
to time as a Director under the provisions of Section 3.3 of this Agreement.
"Interest" means the entire ownership interest of a Shareholder in the
Company at any particular time, including the right of the Shareholder to any
and all benefits to which the Shareholder may be entitled as provided in this
Agreement, together with the obligation of the Shareholder to comply with all
the terms and provisions of this Agreement.
"Majority Board Action" means the affirmative vote of a majority of the
members of the Board present at a meeting at which there is a quorum of the
Board, or a written consent executed by a majority of the members of the Board.
In the case of a tie, the President shall have a casting vote (i.e. shall break
the tie).
"Majority Series B Action" means the affirmative vote of holders of a
majority of the Series B Preferred Shares present at a meeting at which there is
a quorum of the Voting Shares, or a written consent executed by holders of a
majority of the Series B Preferred Shares.
"Majority Shareholder Action" means the affirmative vote of holders of a
majority of the Voting Shares present at a meeting at which there is a quorum of
the Voting Shares, or a written consent executed by holders of a majority of the
Voting Shares.
"Manager" refers to each of those Persons elected and serving, from time to
time, as a Manager of the Company under the provisions of Section 3 of this
Agreement, in each such Person's capacity as a manager of the Company under the
Act.
"Net Distributable Cash" means, with respect to any fiscal period, the sum
of all cash receipts of the Company from any and all sources, less the sum of
the following expenditures paid out of such cash receipts:
(i) payments of rent, insurance, real estate taxes, legal
expenses, license fees, royalties, commissions, management expenses,
utilities, repairs and maintenance, accounting and bookkeeping
services, equipment, supplies, salaries, travel fees, consulting fees,
advertising and promotion, and any and all other items which are
customarily considered to be "operating expenses";
(ii) payments of interest, principal and other charges with
respect to any and all loans or other indebtedness of the Company;
(iii) all expenses of borrowings by the Company including, without
limitation, all commitment fees, finder's fees, engagement fees,
broker's commissions and attorneys' fees;
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(iv) any amounts used for any purpose in order to satisfy
conditions to or established in connection with such borrowings;
(v) payments made to acquire or in connection with the
acquisition, improvement, alteration or disposition of property of the
Company;
(vi) payments made in connection with the organization of the
Company;
(vii) any and all funds disbursed or to be disbursed (including
amounts deducted for adjustments) in connection with or as an expense
of the sale of property of the Company, including without limitation
all brokers' fees and attorneys' fees;
(viii) compensation payable to any Shareholder or Manager, or
affiliate of either, as provided in Section 3 of this Agreement (to
the extent not otherwise described in paragraphs (i) through (vii) of
this definition).
(ix) any and all other cash expenditures of the Company, except
distributions to Shareholders provided for in Section 5 of this
Agreement;
(x) distributions to Shareholders that are required under Section
5.2(a) of this Agreement ("Tax Distributions"); and less
(xi) amounts set aside as additions to reasonable reserves
established by the President for working capital, contingent
liabilities or for any of the expenditures described in Subsections
(i) through (ix) above, or as otherwise deemed by the President as
reasonably necessary to meet the current and anticipated future
liabilities, obligations and operating and capital expenditures of the
Company.
"Net Loss" means, with respect to any fiscal year of the Company, except as
provided in the sentence next following, the net loss of the Company, if any,
for such year as determined in accordance with the Company's accounting methods.
With respect to the Company's fiscal year or years ending or beginning with or
in the Company's 1998 taxable year, "Net Loss" as hereinabove determined shall
be reduced (or eliminated and a Net Profit created) by the aggregate amount of
expenses allocated to the Series A Preferred Shareholders under Section
5.1(a)(i) or Section 5.1(b)(i) of this Agreement.
"Net Profit" means, with respect to any fiscal year of the Company, except
as provided in the sentence next following, the net income of the Company, if
any, for such year as determined in accordance with the Company's accounting
methods. With respect to the Company's fiscal year or years ending or beginning
with or in the Company's 1998
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taxable year, "Net Profit" as hereinabove determined shall be increased by the
aggregate amount of expenses allocated to the Series A Preferred Shareholders
under Section 5.1(a)(i) or Section 5.01(b)(i) of this Agreement.
"Person" means any individual, partnership, corporation, limited liability
company, joint venture, trust, business trust, cooperative, association, or
other entity, and, where the context so permits, the legal representatives,
successors in interest and assigns of such Person.
"Percentage Interest" means, with respect to a Shareholder, the percentage
assigned to the Interest of that Shareholder, relative to that assigned to the
Interests of all other Shareholders, as determined in the manner set forth in
Section 4.5 of this Agreement.
"Preferred Return" means, at any point in time, for any Shareholder's
Shares of a particular Preferred Series of Shares, that amount which, when
considered together with all amounts previously distributed (or deemed
distributed) to such Shareholder pursuant to Section 5.2, will result in such
Shareholder having received a cumulative percentage return, compounded annually,
on such Shareholder's Capital Contribution, as set forth with respect to such
Series in the Capitalization Description.
"Preferred Shareholder" means each Series A Preferred Shareholder and each
Series B Preferred Shareholder.
"President" refers to the President appointed pursuant to Section 3.4, and
any Person who becomes a substitute or replacement President as permitted by
this Agreement.
"Series" has the meaning ascribed to such term in Section 4.5 of this
Agreement.
"Series A Preferred Shareholder" means each of the Shareholders identified
in the Share Ledger as holding Series A Preferred Shares, in each such
Shareholder's capacity as such.
"Series B Preferred Shareholder" means each of the Shareholders identified
in the Share Ledger as holding Series B Preferred Shares, in each such
Shareholder's capacity as such.
"Series A Preferred Shares" means Shares having the preferences and other
attributes set forth in the Capitalization Description as pertaining to Series A
Preferred Shares.
"Series B Preferred Shares" means Shares having the preferences and other
attributes set forth in the Capitalization Description as pertaining to Series B
Preferred Shares.
"Series C Common Shares" means Shares having the attributes set forth in
the
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Capitalization Description as pertaining to Series C Common Shares.
"Shareholder" refers to each of the Persons named as a Shareholder in this
Agreement, including the Share Ledger, and any Person who becomes an additional
or substitute Shareholder as permitted by this Agreement and reflected in the
Share Ledger, in each such Person's capacity as a member of the Company under
the Act.
"Share Certificate" means a certificate evidencing ownership of Shares
issued pursuant to Section 4.5.
"Share Ledger" means the share ledger set forth as a part of Schedule A
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attached to this Agreement, as it may be amended from time to time by the terms
of this Agreement.
"Shares" means units of Interest in the Company as described in Section 4.5
of this Agreement, including any Series A Preferred Shares, any Series B
Preferred Shares, and any Series C Common Shares.
"Supermajority Shareholder Action" means the affirmative vote of holders of
at least 66-2/3% of the Voting Shares present at a meeting at which there is a
quorum of the Voting Shares, or a written consent executed by holders of at
least 66-2/3% of the Voting Shares.
A "Third Party Entity" with respect to a transaction means another Person
except (i) any Person that directly or indirectly controls, is controlled by, or
is under common control with the Company or (ii) any Person which, following the
transaction in question, a majority of the voting equity of which is owned
directly or indirectly by the Voting Shareholders of the Company prior to the
transaction.
"Voting Shareholder" means each of the Shareholders identified in the Share
Ledger as holding Voting Shares.
"Voting Share" means any Series A Preferred Share, any Series C Common
Share, and any other Share identified in the Capitalization Description as
having the attribute, "voting."
"Unanimous Shareholder Action" means the affirmative vote of all holders of
Voting Shares at a meeting at which there is a quorum of the Voting Shares, or a
written consent executed by all holders of Voting Shares.
2. ORGANIZATION; BUSINESS; POWERS
2.1 ORGANIZATION. The name of the Company shall be 3D OPEN MOTION, LLC. The
Company shall from time to time file or cause to be filed such certificates and
documents as shall be appropriate to comply with the applicable requirements for
the
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existence and operation of the Company as a limited liability company under
the laws of any jurisdiction in which the Company shall conduct business, and
any one or more of the Managers shall have the authority to file or cause to be
filed any such certificate or document. The Company shall have such place or
places of business, within or without the Commonwealth of Massachusetts or State
of Delaware, as the President may from time to time determine. The President may
appoint agents for service of process in all jurisdictions in which the Company
conducts or is qualified to conduct business. The President may from time to
time change the name of the Company, its registered office, or any other matter
described in the Certificate; provided, however, that any required consent of
the Shareholders is obtained if such consent is expressly required by any
provision of this Agreement or by applicable law as a condition to any such
change. The President shall promptly file a certificate of amendment reflecting
any such change to its Certificate.
2.2 BUSINESS. The purposes of the Company shall be to engage in, to the
extent permitted by law, any lawful business, purpose or activity, including,
without limitation, the Company's Initial Business Purpose. In addition, the
Company may do such other acts and things as are permitted to be done by a
limited liability company in or under the laws of the State of Delaware. The
Company may directly carry on any of its business or activities or may do so as
a joint venturer or partner with any other Person or Persons.
2.3 POWERS. The Company is hereby authorized to possess and exercise all
the powers and privileges granted to a limited liability company under the Act
or by any other law, and, without limitation on such powers and privileges, the
Company is expressly authorized to:
(a) Enter into, execute, modify, amend, supplement, acknowledge,
deliver, perform and carry out contracts of any kind, including contracts
with any Shareholder or with any Manager.
(b) Acquire, hold, rent, lease and otherwise operate, construct,
improve, maintain, finance, sell, transfer, convey, exchange, assign,
mortgage, pledge, or otherwise deal with or dispose of any real or personal
property or interests therein.
(c) Borrow money, guarantee the obligations of others and issue
evidences of indebtedness, and extend, repay, and renegotiate the terms of
any such indebtedness, and secure the same by mortgage, assignment, pledge,
or grant of other security interest on any of the Company's properties.
(d) Lend, invest and reinvest its funds.
(e) Bring and defend actions at law or in equity.
(f) Purchase, cancel or otherwise retire or dispose of the
Interest of any Shareholder, subject to all other provisions of this
Agreement.
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(g) Possess and exercise all lawful powers necessary or
convenient to effect, or in connection with, any or all of the purposes of
the Company, and all lawful powers incidental thereto, and to engage in any
activity necessary or convenient or in connection with the conduct of the
Company's business or the accomplishment of its purposes.
(h) Take any other action not prohibited under the Act or other
applicable law.
3. MANAGEMENT; RIGHTS AND OBLIGATIONS OF SHAREHOLDERS AND MANAGERS
3.1 MANAGEMENT OF THE COMPANY. All decisions respecting any matters
affecting or arising out of the conduct of the business of the Company, or any
matters set forth in this Agreement or relating to the purposes of the Company,
shall, except as otherwise expressly provided in this Agreement or otherwise
required by law, be made exclusively by the Managers, as hereinafter provided.
The Company shall have two classes of Managers, referred to, respectively, as
the Directors and the Officers. The composition, and the respective rights,
authority, powers, and duties of each such class of Manager shall be as
hereinafter set forth. The Directors shall authorize the maintenance of a
company record book to include the Agreement and any amendments thereto and the
minutes of meetings (or consents in lieu of meetings) of Shareholders and
Managers and other important documents of the Company.
3.2 SHAREHOLDERS. The Shareholders shall have no voting or management
rights except as expressly provided in this Agreement or as otherwise required
by law.
3.3 DIRECTORS. The overall supervision and direction of the business and
affairs of the Company shall be vested in the Directors.
(a) Number and Election. The number of Directors shall initially
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be two. The number of Directors may be changed at any time by
Majority Shareholder Action holding a majority of the Voting Shares, but
shall not be less than one. The Directors shall be elected by Majority
Shareholder Action; provided, that from and after the date of this
Agreement until such time as the Shareholders by Majority Shareholder
Action elect Directors, the initial Directors shall be the Initial
Directors. Directors shall serve until their successors are elected and
qualified, subject to their earlier resignation or removal.
(b) Removal. Directors may be removed at any time by Majority
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Shareholder Action; provided that the President may only be removed as a
Director
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by Unanimous Shareholder Action and the initial President may only
be removed as President by Unanimous Shareholder Action.
(c) Vacancies. Any vacancy, however occurring, among the Directors may
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be filled by Majority Shareholder Action or, in the absence of such action,
by Majority Board Action.
3.4 OFFICERS. The Officers shall consist of a President, a Treasurer, a
Secretary and such other Officers, with such authority, powers, rights, duties
and responsibilities, as specified by Majority Board Action. The Board shall
specify by Majority Board Action a natural person to hold each such office,
except that the initial President shall be the Initial President specified
above, the initial Treasurer shall be the Initial Treasurer specified above and
the initial Secretary shall be the Initial Secretary specified above. The same
person may hold more than one of such positions. Unless prohibited by a
resolution of the Directors, an Officer may, without the approval of the
Directors, delegate some or all of the duties and powers of such Officer's
position as an Officer to one or more other natural persons. Officers shall
serve until their resignation, death or removal. Each Officer serves at the
pleasure of the Board, may resign at any time, and may be removed by Majority
Board Action for any reason, or for no reason, as the Board determines (provided
such right to resign and to remove shall not relieve the Company or the Officer,
as the case may be, of any financial liability in any contract between the
Company and such Officer).
(a) President. The President shall be a Director of the Company.
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President shall have the right, power and full authority to manage,
conduct, control and operate the Company's business and affairs, and
generally to exercise the rights and powers specified in this Agreement,
except to the extent expressly reserved to the Directors or to the
Shareholders. Without limitation on the foregoing, the President shall
have the power and full authority:
(i) To lease, license, sell, mortgage, pledge, or otherwise
transfer for consideration or encumber all or any portion of the
Company's assets; to consolidate or merge with any business entity, to
acquire any interest in any business entity, whether in the form of
stock, assets or otherwise; provided, however, any admission of new
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Shareholders of the Company in connection with any such transaction
shall be subject to the provisions of Section 7; and provided,
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further, that the President shall not effect a Change in Control of
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the Company without Supermajority Shareholder Action.
(ii) To borrow money or otherwise to obtain credit or other
financial accommodations from, and to cause to be paid on or before
the due date thereof amounts due and payable by the Company to, any
Person, including without limitation the President, any other Manager,
any Shareholder, or any Person related to or affiliated with the
President, any other Manager or any Shareholder;
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(iii) To employ such agents, employees, accountants, attorneys,
brokers, consultants, subcontractors, and other Persons, whether or
not related to or affiliated with the President, any other Manager or
any Shareholder, and to pay such fees, expenses, salaries, wages, and
other compensation to such Persons, and otherwise to agree to such
terms with such Persons, as the President shall determine to be
necessary or desirable;
(iv) To pay, extend, review, modify, contest, adjust, submit to
arbitration, prosecute, defend or compromise upon such terms as the
President may determine, any obligation, suit, liability, cause of
action or claim, including, without limitation, taxes, charges and
assessments, either in favor of or against the Company;
(v) To purchase or contract to purchase, or to lease, license
or hire any property, real or person, tangible or intangible, and to
enter into, carry out and enforce any agreements regarding the use of,
or affecting or benefiting any such property;
(vi) To enter into, execute, amend, supplement, acknowledge and
deliver any and all contracts, agreements, assignments, licenses,
deeds, leases, loan agreements, guarantees, notes and other evidences
of indebtedness, mortgages and other security instruments and
agreements, and any and all other instruments, documents and
agreements, as the President may determine to be necessary,
appropriate or desirable to carry out the purposes of the Company;
(vii) To cause to be obtained and continued in force all
policies of insurance required by any mortgage, lease or other
agreement to which the Company is a party, and such other additional
insurance, including, without limitation, key-man life insurance, as
the President may determine to be necessary, appropriate or desirable
to carry out the purposes of the Company;
(viii) To perform or cause to be performed all of the Company's
obligations under any agreement to which the Company is a party;
(ix) To cause to be paid all amounts determined by the
President to be due and payable by the Company to any Person;
(x) To the extent that funds of the Company are, in the
President's judgment, not immediately required for the conduct of the
Company's business, to invest temporarily the excess funds in such
interim investments
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as the President may select, including, without limitation,
obligations of federal, state and local governments or their agencies,
mutual funds, commercial paper, money-market funds, and bank
certificates of deposit;
(xi) To prosecute, protect and defend or cause to be protected
and defended all patents, patent rights, copyrights, trade names,
trademarks and service marks, and all applications with respect
thereto which may be held by the Company and to take all reasonable
and necessary actions to protect the secrecy of and the proprietary
rights with respect to any secret know-how, secret processes, trade
secrets or other proprietary information, and to prosecute and defend
all rights of the Company in connection therewith; and
(ix) To make donations to the public welfare or for religious,
charitable, scientific, literary or educational purposes.
(b) Treasurer. Unless provided otherwise by a resolution adopted by
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the Directors, the Treasurer shall (i) keep accurate financial records for
the Company; (ii) deposit all monies, drafts and checks in the name of and
to the credit of the Company in such banks and depositories as the
Directors shall designate from time to time; (iii) endorse for deposit all
notes, checks and drafts received by the Company, making proper vouchers
therefor; (iv) disburse Company funds and issue checks and drafts in the
name of the Company, (v) render to the President and the Directors,
whenever requested, an account of all of such Officer's transactions as
Treasurer and of the financial condition of the Company; and (vi) perform
such other duties as may be prescribed by the Directors or the President
from time to time.
(c) Secretary. Unless provided otherwise by Majority Board Action,
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the Secretary shall (i) attend all meetings of the Board and all meetings
of the Shareholders, and shall record all the proceedings of the meetings
in the Company Record Book referred to in Section 3.1; (ii) give, or cause
to be given, notice of all meetings of the Shareholders; (iii) have custody
of the seal of the Company, if any, and have authority to affix the same to
any instrument requiring it, and when so affixed, it may be attested by
his, her or its signature (it being understood that the Board may by
Majority Board Action give general authority to any other Officer to affix
the seal of Company and to attest the affixing by his or her signature);
and (iv) perform such other duties as may be prescribed by the Directors or
the President from time to time.
(d) Authority of President, Treasurer and/or Secretary to Bind the
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Company. Any action taken by the President as President of the Company, by
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the Treasurer as Treasurer of the Company or by the Secretary as Secretary
of the Company within the scope of such Officer's duties and
responsibilities described herein, shall bind the
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Company and shall be deemed to be the action of the Company. The signature
of the President, Treasurer and/or Secretary on any agreement, contract,
instrument or other document shall be sufficient to bind the Company in
respect thereof and shall conclusively evidence the authority of the
President, the Treasurer, the Secretary and the Company with respect
thereto, and no third party need look to any other evidence or require
xxxxxx or consent of any other party. Only the President, the Treasurer,
the Secretary and the Company's agents authorized by the President shall
have the authority to bind the Company.
(e) Compensation of Officers. The compensation of the Officers shall
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be fixed from time to time by the Directors; provided, however, that the
Company and Gain hereby agree that Gain shall not be paid compensation of
any kind by the Company for a period of one year from the date of this
Agreement; provided, further, however, that Gain shall be reimbursed for
all reasonable out-of-pocket business expenses incurred in connection with
his duties as President of the Company.
3.5 GENERAL MEETING AND VOTING REQUIREMENTS.
(a) Meetings.
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(i) Directors. Meetings of the Directors may be held at such
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places and at such times as the Directors may from time to time determine
(or as may be specified by the President or two or more Directors);
provided, that any Director who is absent when such determination is made
shall be given notice of the determination in the manner described herein.
(ii) Shareholders. A meeting of Shareholders may be called by
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the President for any purpose or purposes of addressing any matters on
which Shareholders may vote. The meeting of Shareholders shall be held at
such places and at such times as shall be stated in the notice of the
meeting.
(b) Notice of Meetings. Notice of meetings of the Directors shall
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be given to each Director by the President, or in case of his death,
absence, incapacity or refusal, by one of the Directors calling the
meeting. Notice of meetings of Directors shall be given to each Director
in person or telephonically or by fax or telegram sent to his business or
home address at least forty-eight hours in advance of the meeting, or by
written notice mailed to his business or home address at least five days in
advance of the meeting.
Notice of meetings of the Shareholders shall be given to each Voting
Shareholder by the President or the Secretary. Notice of meetings of
Shareholders shall be given to each Voting Shareholder in person or
telephonically or by mail, fax or telegram sent to his business or home
address at least seven days in advance of the meeting.
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Notice of a meeting need not be given to any Director or Shareholder
if a written waiver of notice, executed by the person before or after the
meeting, is filed with the records of the meeting, or to any person who
attends the meeting. A notice or waiver of notice of a meeting need not
specify the purposes of the meeting.
(c) Quorum. At any meeting of the Directors, a majority of the
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Directors shall constitute a quorum. At any meeting of the Shareholders,
presence in person or by proxy of holders of a majority of the aggregate
number of Voting Shares held by all Shareholders shall constitute a quorum.
(d) Action at Meeting. At any meeting of the Directors at which a
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quorum is present, a majority of the Directors present may take any action
on behalf of the Directors. At any meeting of the Shareholders at which a
quorum is present, holders of a majority of the aggregate number of Voting
Shares held by those Shareholders present at the meeting may take any
action on behalf of the Shareholders.
(e) Action by Consent. Any action required or permitted to be
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taken at any meeting of the Directors may be taken without a meeting, if a
majority of the Directors consent to the action in writing and the written
consents are filed with the records of the meetings of Directors. Any
action required or permitted to be taken at any meeting of the Shareholders
may be taken without a meeting, if holders of a majority of the outstanding
Voting Shares consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such a consent
shall be treated for all purposes as a vote at a meeting.
(f) Telephonic Meetings. Any or all of the Directors may
-------------------
participate in any meeting of the Directors by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time. Any
Director so participating shall be treated as having been present in person
at such meeting.
(g) Board and Shareholder Proxies. At all meetings of the Board, a
-----------------------------
Board Member may act by proxy executed in writing by the Board Member or by
his duly authorized attorney-in fact. At all meetings of Shareholders, a
Shareholder may vote by proxy executed in writing by the Shareholder or by
his duly authorized attorney-in fact. Any such proxy or authorization of
an attorney in-fact shall be in writing and shall be supplied to the Board
before or at the time of the meeting. No proxy shall be valid after three
months from date of execution, unless otherwise provided in the proxy.
June 17, 1998
14
3.6 CONTRACTS WITH RELATED OR AFFILIATED PERSONS.
(a) The Company may enter into agreements, leases, contracts or other
arrangements for the furnishing to or by the Company of goods, services, or
property rights with any Officer, Director, Shareholder, or any Person
related to or affiliated with any of them, and may pay compensation
thereunder for such goods, services or rights which is reasonably
comparable to that which would be payable to unrelated and unaffiliated
Persons under similar circumstances. If the determination of such amounts
is made by the President, Treasurer, or Secretary in good faith it shall be
conclusive absent manifest error.
(b) Without limitation on any of its powers set forth in Section 2.3
of this Agreement, the Company is hereby expressly authorized to enter into
and to perform a Share Contribution Agreement dated concurrently herewith
(the "Share Contribution Agreement") with Xxxxxx X. Gain and The Gain
Family Trust (collectively, the "Transferors") pursuant to which the
Transferors will transfer and assign to the Company the number of Spacetec
Shares set forth in the Share Contribution Agreement as their respective
Capital Contributions, in exchange for the number of Series A Preferred
Shares set forth after each of their names in the Share Ledger.
3.7 MANAGER'S STANDARD OF CARE. A Manager's duty of care in the discharge
of the Manager's duties to or on behalf of the Company and the Shareholders
shall be limited to refraining from engaging in grossly negligent or reckless
conduct, intentional misconduct, or a knowing violation of law. A Manager shall
be fully protected in relying in good faith upon the Company's records and upon
such information, opinions, reports or statements by any of the Company's
Shareholders, Managers, employees or agents, or by any other Person as to
matters such Manager reasonably believes are within such other Person's
professional or expert competence and who has been selected in good faith and
with reasonable care by such Manager, or who has been selected by the Directors,
including without limitation information, opinions, reports or statements as to
the value and amount of the assets, liabilities, profits or losses of the
Company.
3.8 LIMITATION OF LIABILITY OF MANAGER; INDEMNIFICATION. No Manager shall
be obligated personally for any debt, obligation or liability of the Company or
of any Shareholder, whether arising in contract, tort or otherwise, solely by
reason of being or acting as a Manager of the Company. No Manager shall be
personally liable to the Company or to its Shareholders for acting in good faith
reliance upon the provisions of this Agreement, or for breach of any fiduciary
or other duty that does not involve (i) a breach of the duty of loyalty to the
Company or its Shareholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; or (iii) a
transaction from
June 17, 1998
15
which the Manager derived an improper personal benefit. Any Manager shall be
entitled to indemnity from the Company for any liability incurred, and for any
act performed within the scope of authority conferred on the Manager by this
Agreement, by reason of his being or related to his status as a Director or an
Officer, unless resulting from such Manager's gross negligence, reckless
conduct, intentional misconduct or wrongdoing or knowing violation of law. Such
indemnification shall include all reasonable expenses incurred and paid,
including reasonable legal and other professional fees and expenses.
3.9 OTHER BUSINESS INTERESTS. Subject to the provisions of the Business
Cooperation Agreement, any Manager or Shareholder may have other business
interests and may engage in other activities in addition to those relating to
the Company, whether or not in competition with the business of the Company.
Neither the Company nor any Shareholder shall, by virtue of this Agreement, have
any right to or interest in any such other business interests or activities.
Gain shall use concerted efforts to manage the Company.
3.10 CONFIDENTIALITY. Each Shareholder (other than Spacetec) agrees not
to use Confidential Information (as hereinafter defined) of the Company for its
own use or for any purpose except to evaluate and make decisions with respect to
its equity investment in the Company. Each Shareholder(other than Spacetec)
agrees not to disclose such Confidential Information to any third parties or to
any of its employees except employees or third parties who are required to have
the Confidential Information to evaluate such Shareholder's investment;
provided, however, that a Shareholder may report summary financial information
concerning the Company in accordance with requirements of applicable law. For
purposes of this Section, "Confidential Information" means any information,
technical data, or know-how, including, but not limited to, the Company's
research, products, software, services, development, inventions, processes,
designs, drawings, engineering, marketing, or finances, disclosed by the Company
either directly or indirectly in writing, orally or by drawings or inspection of
parts or equipment and which the Company has marked "confidential,"
"proprietary" or "secret" or has otherwise identified as being such.
Confidential Information does not include information, technical data or know-
how which (i) the Shareholder acquired from sources independent of the Company
on a non-confidential basis or developed independent of any information obtained
directly or indirectly from the Company, other than the technology and know how
transferred to the Company in the Asset Transfer Agreement, as demonstrated by
the Shareholder from its files and records immediately prior to the time of
disclosure; or (ii) before or after it has been disclosed to the Shareholder, it
is part of the public knowledge or literature, not as a result of any action or
inaction of the Shareholder; or (iii) is approved for release by written
authorization of Company.
4. CAPITAL CONTRIBUTIONS; LIABILITIES OF SHAREHOLDERS
4.1 CAPITAL CONTRIBUTIONS. Each Shareholders has made or shall make the
Capital Contribution to the Company of cash or property specified opposite the
Shareholder's name
June 17, 1998
16
in the Share Ledger. Except as set forth on the Share Ledger, no Shareholder or
Manager shall be required to make any contribution to the capital of the
Company.
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS. No Shareholder shall be obligated
or required to make any contribution to the Company in addition to the
Shareholder's Capital Contribution referred to in Section 4.1 of this Agreement.
4.3 LIABILITY OF SHAREHOLDERS. The liability of each Shareholder to the
Company shall be limited to the Capital Contribution the Shareholder has agreed
to make, as provided in Section 4.1 of this Agreement. No Shareholder shall have
any liability to restore any negative balance in the Shareholder's Capital
Account or to contribute to, or in respect of, the liabilities or the
obligations of the Company, or to restore any amounts distributed from the
Company, except as may be required under the Act or other applicable law. In no
event shall any Shareholder be personally liable for any liabilities or
obligations of the Company.
4.4 NO WITHDRAWAL OF OR INTEREST ON CAPITAL. No Shareholder shall have
the right to resign and receive any distribution from the Company as a result of
such resignation, and no Shareholder shall have the right to receive the return
of all or any part of the Shareholder's Capital Contribution or capital account,
or any other distribution, except as expressly provided in this Agreement. No
Shareholder shall have any right to demand and receive property of the Company
in exchange for all or any portion of the Shareholder's Capital Contribution or
capital account, except as expressly provided in this Agreement. No interest
shall accrue or be paid on any Capital Contribution or capital account.
4.5 SHARES; SHARE CERTIFICATES. Ownership of Interests in the Company
shall be divided into and represented by Shares. There shall be the following
three classes of Interest in the Company: Series A Preferred Shares, Series B
Preferred Shares, and Series C Common Shares (each, a "Series" of Shares). The
number and Series of Shares owned by each Shareholder shall be as set forth in
the Share Ledger. The Percentage Interest of a Shareholder shall be determined
as of any date by dividing the number of Shares owned by the Shareholder on that
date by the total number of Shares owned by all of the Shareholders on that
date. The President may issue to Shareholders Share Certificates, in such form
as the President directs, certifying the number of Shares owned by the
Shareholder, and retain copies of such certificates in the Record Book, and may
direct a new Share Certificate(s) to be issued in place of any theretofore
issued and alleged to have been lost, stolen or destroyed, upon receipt of an
affidavit of that fact in such form as the President may require. Upon surrender
of a Share Certificate duly endorsed or accompanied by proper evidence of
authority to transfer, the President may, if the transfer of ownership is in
compliance with the provisions of Section 7 and all other terms of this
Agreement, cause the issuance of a new Share Certificate to the Person entitled
thereto, and cancel the old Share Certificate.
June 17, 1998
17
5. ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATION OF NET PROFITS AND LOSSES. Except as otherwise hereinafter
provided, the Net Profit or the Net Loss, as the case may be, as of the end of
any fiscal year of the Company shall be allocated among the Shareholders as
follows:
(a) Profits. For any fiscal year in which the Company has a Net
--------
Profit, such Net Profit shall be allocated among the Shareholders as
follows:
(i) With respect to the Company's fiscal year or years
ending or beginning with or in the Company's 1998 taxable year, there
shall first be allocated to Gain and The Gain Family Trust, as Series
A Preferred Shareholders, and in proportion to the number of Series A
Preferred Shares held by each such Shareholder, all expenses of the
Company not in excess of Seven Hundred Thousand Dollars ($700,000).
(ii) There shall next be allocated to each Shareholder with
a deficit in its capital account an amount of the Net Profit
sufficient to bring its capital account to zero. If the Net Profit
shall be insufficient to bring to zero the capital accounts of all
Shareholders with deficits in their capital accounts, then the Net
Profit shall be allocated to those Shareholders with deficits in their
capital accounts in proportion to their respective deficit capital
account balances.
(iii) Any remaining Net Profit shall next be allocated to
each of the Shareholders in the same proportions as, and to the extent
of the amount of any distributions under Section 5.2(c) of Net
Distributable Cash made to such Shareholder during the fiscal year,
plus any Net Distributable Cash held on the last day of the fiscal
year for distribution under Section 5.2(c) to such Shareholder in the
next succeeding fiscal year.
(iii) The balance, if any, of the Net Profit shall be
allocated among the Shareholders in proportion to their respective
Percentage Interests.
(b) Net Loss. For any fiscal year in which the Company has a Net
---------
Loss, disregarding any allocation under Subparagraph (i) of this Section
5.1(b), such Net Loss shall be allocated among the Shareholders as follows:
(i) With respect to the Company's fiscal year or years
ending or beginning with or in the Company's 1998 taxable year, there
shall first be allocated to Gain and The Gain Family Trust, as Series
A Preferred Shareholders, and in proportion to the number of Series A
Preferred Shares held by each such Shareholder, all expenses of the
Company not in excess of Seven Hundred Thousand Dollars ($700,000).
June 17, 1998
18
(ii) There shall next be allocated to each Shareholder with
a positive capital account an amount of the Net Loss sufficient to
reduce the Shareholder's capital account to zero. If the Net Loss
shall be insufficient to reduce to zero the capital accounts of all
Shareholders with positive capital accounts, the Net Loss shall be
allocated to those Shareholders with positive capital accounts in
proportion to their respective positive capital account balances.
(iii) The balance, if any, of the Net Loss shall be
allocated among the Shareholders in proportion to their respective
Percentage Interests.
(iv) Loss Allocation Limitation; Qualified Income Offset.
----------------------------------------------------
(A) Notwithstanding the foregoing provisions of this
Section 5.1, the amount of Net Loss or expenses for any
fiscal year that would otherwise be allocated to a
Shareholder shall not cause or increase a deficit balance in
such Shareholder's capital account in excess of the amount
of exposure of such Shareholder, if any, with respect to
debt or other obligations or liabilities of the Company,
plus such Shareholder's share of "partnership minimum gain",
as such term is defined in Regulation Section 1.704-2(b)(2)
under Code Section 704, as of the last day of such fiscal
year. To the extent the Net Loss for the fiscal year can not
be allocated to any Shareholder owing to the restriction in
the foregoing sentence, that amount of Net Loss shall be
allocated among the Shareholders in proportion to their
respective Percentage Interests.
(B) Notwithstanding the foregoing provisions of this
Section 5.1, if, as of the end of any taxable year of the
Company, any Shareholder who is not obligated to restore the
entire deficit balance in his capital account to the Company
(in accordance with paragraphs (b)(2)(ii)(b)(3) and
(b)(2)(ii)(c) of Regulation Section 1.704-1 under Code
Section 704) unexpectedly receives an adjustment, allocation
or distribution described in (4), (5) or (6) of Regulation
Section 1.704-l(b)(2)(ii)(d) under Code Section 704 which
causes or increases a deficit balance in such Shareholder's
capital account (as adjusted in accordance with the sentence
next following), then such Shareholder shall be allocated
items of income and gain (consisting of a pro rata portion
of each item of Company income, including gross income, and
gain for such year) in an amount and manner sufficient to
eliminate such deficit balance as quickly as possible. For
purposes (only) of determining the existence or the amount
of a deficit balance in any Shareholder's capital account
within the meaning of the
June 17, 1998
19
preceding sentence, such Shareholder's capital account shall
be reduced by the adjustments, allocations and distributions
described in (4), (5) and (6) of Regulation Section 1.704-
l(b)(2)(ii)(d) under Code Section 704.
(C) Minimum Gain Chargeback Notwithstanding the
-----------------------
foregoing provisions of this Section 5, if there is a net
decrease in "partnership minimum gain," as defined in
Paragraph (b)(2) of Regulation Section 1.704-2 under Code
Section 704 and as computed in the manner required under
said Regulation Section 1.704-2, during any taxable year of
the Company, then each Shareholder shall be allocated,
before any other allocation is made under this Section 5 for
such taxable year, items of income and gain for such year
(and, if necessary, subsequent years) equal in amount to
such Shareholder's share of any net decrease in partnership
minimum gain as determined under Regulation Section 1.704-
2(g)(2) under Code Section 704, except to the extent, if at
all, that (i) such Shareholder's share of any such net
decrease is caused by a guarantee, refinancing, or other
change in the debt instrument causing it to become partially
or wholly recourse debt or "partner recourse debt" as
defined in Paragraph (b)(2) of said Regulation Section
1.704-2, and the Shareholder bears the economic risk of loss
(within the meaning of Regulation Section 1.752-2 under Code
Section 752) for such converted or refinanced debt; or (ii)
the Shareholder contributes capital to the Company that is
used to repay the nonrecourse liability or is used to
increase the basis of property of the Company that is
subject to such liability, and the Shareholder's share of
the net decrease in partnership minimum gain results from
such repayment or such basis increase. The allocations
provided for in this Subparagraph (C) shall be made in
accordance with the requirements of Paragraph (j) of said
Regulation Section 1.704-2.
(D) Partner Nonrecourse Debt Notwithstanding the
------------------------
foregoing provisions of this Section 5, (a) any "partner
nonrecourse deductions," as defined in Paragraph (i) of
Regulation Section 1.704-2 under Code Section 704,
attributable to a "partner nonrecourse liability," as
defined in Paragraph (b)(4) of said Regulation Section
1.704-2, and as computed in the manner required under said
Regulation Section 1.704-2, shall be allocated to the
Shareholder, or to and among the Shareholders, that bear the
economic risk of loss for such liability and in the
proportions required by Paragraph (i)(1) of said Regulation
Section 1.704-2; and (b) if, during any taxable year
June 17, 1998
20
of the Company, there is a net decrease in "partner
nonrecourse debt minimum gain," as defined in Paragraph
(i)(2) of Regulation Section 1.704-2 under Code Section 704
and as computed in the manner required under said Regulation
Section 1.704-2, any Shareholder with a share, as determined
under Paragraph (i)(5) of said Regulation Section 1.704-2,
of that partner nonrecourse debt minimum gain, as of the
beginning of the year, shall be allocated items of income
and gain for the year (and, if necessary, for succeeding
years) equal in amount to such Shareholder's share of such
net decrease as determined in a manner consistent with the
requirements of Paragraph (g)(2) of said Regulation Section
1.704-2, to the extent (if at all) that such allocation is
required under Paragraph (i)(4) of said Regulation Section
1.704-2. The allocations provided for in this Subparagraph
(D) shall be made in accordance with the requirements of
Paragraphs (j)(1)(i), (j)(1)(iii), (j)(2)(ii) and
(j)(2)(iii) of said Regulation 1.704-2, as appropriate.
5.2 CASH DISTRIBUTIONS.
(a) The President shall cause distribution to be made to Gain
and The Gain Family Trust, as Series A Preferred Shareholders, on or before
April 1, 1999, of an amount of cash which the Company's accountants
determine is the amount necessary to offset the federal and state income
tax liability of such Series A Preferred Shareholders resulting from or
attributable to the transfer and assignment to the Company of Spacetec
Shares as such Shareholders' Capital Contributions; provided such
distribution shall in no event be less than $100,000 nor exceed $200,000.
Any such distribution shall be allocated to and divided between such Series
A Preferred Shareholders in proportion to the number of Series A Preferred
Shares held by each.
(b) After the distribution specified in Section 5.2(a) is made
or funds are set aside for such distribution, the President shall cause
distributions to be made, on or before April 1 of each calendar year, of an
amount of cash which the President shall, with the advice of the Company's
accountants, determine is a reasonable amount to be distributed to assist
the Shareholders in paying federal and state income taxes on any income of
the Company for the Company's fiscal year ending in or with the immediately
preceding calendar year. Any such cash distribution ("Tax Distribution")
shall be allocated to and divided among the Shareholders in proportion to
their respective distributive shares of the Company's taxable income.
(c) The President shall also cause distributions to be made of Net
Distributable Cash at such times, and in such amounts, as the Directors, in
their sole discretion, from time to time determine. Distributions of Net
Distributable Cash hereunder shall be allocated to and divided among the
Shareholders as follows:
June 17, 1998
21
(i) First, until each of the Series A Preferred Shareholders
and Series B Preferred Shareholders has received, in the aggregate,
from the current distribution under this Subparagraph (i) and from all
prior distributions of Net Distributable Cash under this Subparagraph
(i), an amount equal to such Preferred Shareholder's Preferred Return
determined as of the date of any such distribution (any difference
between such Preferred Return and such aggregate cash distributions
being hereinafter referred to as the Preferred Shareholder's
"Preferred Return Deficit"), such distribution shall be allocated to
and divided among those Preferred Shareholders having Preferred Return
Deficits. Cash distributed to Preferred Shareholders under this
Section 5.2(c)(i)shall be shared among them in the proportions that
the amount of each such Preferred Shareholder's Preferred Return
Deficit bears to the aggregate amount of Preferred Return Deficits of
all such Preferred Shareholders.
(ii) Second, until each of the Series A Preferred Shareholders
and Series B Preferred Shareholders has received, in the aggregate,
from the current distribution under this Subparagraph (ii) and from
all prior distributions of Net Distributable Cash under this
Subparagraph (ii), an amount equal to such Preferred Shareholder's
Capital Contribution, (any difference between such Capital
Contribution and such aggregate cash distributions being hereinafter
referred to as the Preferred Shareholder's "Contribution Deficit"),
such distribution shall be allocated to and divided among those
Preferred Shareholders having Contribution Deficits. Cash distributed
to Preferred Shareholders under this Section 5.2(c)(i) shall be shared
among them in the proportions that the amount of each such Preferred
Shareholder's Contribution Deficit bears to the aggregate amount of
Contribution Deficits of all such Preferred Shareholders.
(iii) Thereafter, any such distribution shall be allocated to and
divided among the Shareholders in proportion to their respective
Percentage Interests.
5.3 DISTRIBUTIONS UPON DISSOLUTION. Upon dissolution of the Company,
distributions shall be made as provided in Section 8.3 of this Agreement.
6. BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
6.1 BOOKS AND RECORDS. The books and records of the Company shall be
maintained by the President and made available, in addition to the records and
documents required to be kept under the Act, at the office of the Company. All
such books, records and documents
June 17, 1998
22
shall be available at such office for inspection by any Shareholder or the
Shareholder's authorized representative, at any reasonable time during ordinary
business hours for any purpose reasonably related to the Shareholder's interest
in the Company. Those records and documents required to be kept under the Act
shall be available at such office for inspection and copying by any Shareholder
or the Shareholder's authorized representative, at the reasonable request of and
at the expense of the Shareholder, during ordinary business hours.
6.2 ACCOUNTING AND FISCAL YEAR. The books of the Company shall be kept in
accordance with such accounting methods as the President shall determine is
appropriate. The Company's books shall be closed and balanced at the end of each
fiscal year of the Company and at such other times as the President may
determine is appropriate. The fiscal year of the Company shall end on December
31 of each year.
6.3 REPORTS. The President shall deliver to each person who was a
Shareholder at any time during the fiscal year then ended the following:
(a) as soon as practicable but in no event later than the date
prescribed by applicable law, such information as shall be necessary for
the preparation by the Shareholder of a federal income tax return, and
state income or other tax returns with regard to each jurisdiction in which
the Company does or is qualified to do business;
(b) within one hundred twenty (120) days after the end of each
fiscal year of the Company, a statement of assets, liabilities and
Shareholders' capital, a statement of income and expenses, a statement of
sources and uses of funds, and a statement of changes in Shareholders'
capital prepared in accordance with generally accepted accounting
principles and certified by a firm of independent accountants of recognized
national standing selected by the Board of Directors.
(c) within thirty (30) days after the end of each quarter in each
fiscal year, a statement of assets, liabilities and Shareholders' capital,
a statement of income and expenses, a statement of sources and uses of
funds, and a statement of changes in Shareholders' capital prepared in
accordance with generally accepted accounting principles.
(d) as soon as practicable but in no event later than prescribed
by applicable law, such information as shall be necessary for the
preparation by each Shareholder of a federal income tax return, and state
income or other tax returns with regard to each jurisdiction in which the
Company does or is qualified to do business.
June 17, 1998
23
6.4 INTERIM CLOSING OF THE BOOKS. There shall be an interim closing of
the Company's books of account at any time a tax year of the Company ends under
any provision of the Code, and at such other times as the President may
determine is required by good accounting practice or may be appropriate under
the circumstances.
6.5 TAX ALLOCATIONS. The parties intend that the Company will be taxable
as a partnership for United States federal income tax purposes. Except as
otherwise provided below, for federal income tax purposes each Shareholder's
distributive share of income, gain, loss, deduction, credit, recapture or tax
preference (or item thereof) for any fiscal year of the Company shall be
allocated in the same proportion that the item or items of the Company's Net
Profit or Net Loss, depreciation or cost recovery deductions, for such year to
which it corresponds, under applicable federal income tax accounting rules, is
allocated under Section 5.1 of this Agreement (and, if applicable, Section 7.4
of this Agreement). Notwithstanding the foregoing, income, gain, loss and
deduction with respect to property contributed to the Company by a Shareholder
shall be shared among the Shareholders so as to take account of the variation
between the basis of the property to the Company and its fair market value at
the time of contribution, as required by Section 704(c) of the Code and Treasury
Regulations thereunder.
6.6 TAX DEPRECIATION AND ELECTIONS. With respect to all depreciable
assets of the Company, the President shall have sole discretion to elect from
time to time to use such depreciation methods for federal tax purposes as the
President may determine is appropriate. The President shall have sole discretion
to make an election under Section 754 of the Code and to make such other tax
elections as the President may from time to time deem necessary or appropriate.
6.7 TAX MATTERS PARTNER. The President is hereby designated as the "tax
matters partner," as provided in Treasury Regulations under Section 6231 of the
Code as in effect on the date of this Agreement.
6.8 SHAREHOLDERS' CAPITAL ACCOUNTS. The Company shall maintain a separate
capital account for each Shareholder. Each Shareholder's initial capital account
balance shall equal his initial contribution to the capital of the Company, as
reflected on the Share Ledger. Each Shareholder's capital account shall
thereafter be increased by (i) by the amount of money, if any, contributed by
the Shareholder to the Company, (ii) the fair market value of property
contributed by the Shareholder 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), and (iii) allocations to the
Shareholder of Company income and gain (or items thereof), including income and
gain exempt from tax and income and gain described in Regulation Section 1.704-
1(b)(2)(iv)(g) under Section 704 of the Code, but excluding income and gain
described in Regulation Section 1.704-1(b)(4)(i) under Section 704 of the Code;
and is decreased by (aa) the amount of money distributed to the Shareholder by
the Company, (bb) the fair market value of property distributed to the
Shareholder by the
June 17, 1998
24
Company (net of liabilities secured by such distributed property that such
Shareholder is considered to assume or take subject to under Section 752 of the
Code), (cc) allocations to the Shareholder of expenditures of the Company
described in Section 705(a)(2)(B) of the Code, and (dd) allocations of Company
loss and deduction (or item thereof), including loss and deduction described in
Regulation Section 1.704-1(b)(2)(iv)(g) under Section 704 of the Code, but
excluding items described in (cc) above and loss or deduction described in
Regulation Section 1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii) under Section 704 of
the Code. In addition, each Shareholder's capital account shall, in the
discretion of the Treasurer, be increased or decreased to reflect a revaluation
of property of the Company (including intangible assets such as goodwill) on the
Company's books in connection with a contribution of money or other property
(other than a de minimis amount) to the Company by a new or existing Shareholder
as consideration for Shares, or in connection with the granting of Shares by the
Company to a new or existing Shareholder in consideration for the performance of
services for the Company (including the vesting of any such Shares which are
subject to vesting), or in connection with the liquidation of the Company or a
distribution of money or other property (other than a de minimis amount) by the
Company to a retiring or continuing Shareholder as consideration for Shares;
provided, that any such adjustment shall be consistent with the requirements of
Regulation Section 1.704-1(b)(2)(iv) under Section 704 of the Code. Any such
adjustments shall be based on the fair market value of the Company's property
(taking into account Section 7701(g) of the Code) on the date of adjustment, and
shall reflect the manner in which the unrealized income, gain, loss, or
deduction inherent in such property (not previously reflected in the
Shareholders' capital accounts) would be allocated among the Shareholders if
there were a taxable disposition of such property for such fair market value on
that date. In the event of any such adjustment, the Shareholders' distributive
shares of depreciation, depletion, amortization, and gain or loss, as computed
for federal income tax purposes, with respect to such property, shall be
determined so as to take account of the variation between the adjusted tax basis
and book value of such property in the same manner as under Section 704(c) of
the Code. Other appropriate adjustments to each Shareholder's capital account
shall also be made from time to time, in accordance with the rules set forth in
Regulation Section 1.704-l(b)(2)(iv) under Section 704 of the Code or the
requirements of any other applicable proposed, final or temporary regulations
thereunder. It is the intent of the Shareholders that the capital accounts shall
be determined and maintained in accordance with said Code Section and said
regulations, and this Section 6.8 shall be construed in a manner consistent
therewith. A Shareholder who has more than one Interest in the Company shall
have a single capital account that reflects all such Interests. No Shareholder
shall be entitled to interest on his capital account.
7. TRANSFERS OF SHAREHOLDERS' INTERESTS; ADDITIONAL SHAREHOLDERS
7.1 RESTRICTIONS ON TRANSFER. No Shareholder may assign all or any part
of the Share except with the President's written approval, which approval shall
not be unreasonably
June 17, 1998
25
withheld. Any attempt to assign without such approval shall be void and
ineffectual and shall not bind the Company. Further:
(a) No assignment of any Share may be made other than on the first
day of a month; and
(b) The President may require that an assignment of a Share may be
made only if the assignor or assignee provides an opinion of counsel
reasonably acceptable to the President that the assignment would not
require the filing of a registration statement under the Securities Act of
1933, would otherwise not be in violation of any applicable federal or
state securities laws (including any investment suitability standards) or
would not result in the Company's being treated for federal tax purposes as
anything other than a partnership; and
(c) No assignment of any Share may be made without Supermajority
Shareholder Action if the assignment, alone or when combined with other
transactions, would result in the deemed termination of the Company under
Section 708 of the Code; and
(d) Without limiting the discretion of the President, the following
shall be deemed reasonable reasons for the President to withhold approval
of an assignment:
(i) the prospective assignee is a competitor or affiliate
of a competitor of the Company; or
(ii) the prospective assignee's financial condition,
citizenship, residency or other factors could result in the
unavailability of exemptions to the Company under the U.S. federal
securities laws or result in adverse U.S. federal or state tax
consequences or complications, including loss of prospective tax
benefits; or
(iii) the prospective assignee has been convicted of,
indicted for (or its procedural equivalent), or entered a guilty plea
or plea of no contest with respect to, a felony, the equivalent
thereof, or any other crime with respect to which imprisonment is a
possible punishment, or the prospective assignee has otherwise
committed any wrongful action which could have a detrimental effect on
the Company's reputation or business; or
(iv) the prospective assignor is an employee or consultant
of the Company.
June 17, 1998
26
7.2 ASSIGNEES AND SUBSTITUTED SHAREHOLDERS.
(a) Where the President has approved of an assignment of a Share,
the Company nevertheless need not recognize such assignment for any purpose
unless there shall have been filed with the Company (i) a duly executed
counterpart of the instrument making such assignment, signed by both the
assignor and the assignee and unless such instrument evidences the written
agreement by the assignee to be bound by all of the terms and provisions of
this Agreement and represents that such assignment was made in accordance
with all applicable laws and regulations (including without limitation
investor suitability) and (ii) an opinion of counsel set forth in 7.1.
(b) If a Shareholder assigns all of the Shareholder's Shares, the
Shareholder shall cease to be a Shareholder upon the admission of the
assignee as a substituted Shareholder in accordance with the provisions of
this Section 7.2.
(c) Any assignee of a Share of a Shareholder shall become a
Shareholder when the President has approved such assignment in accordance
with 7.1, the books and records of the Company reflect that the assignee
has been admitted as a Shareholder, the assignee has satisfied all
conditions to such admission specified in this Agreement, and (unless
waived by the President) has paid all reasonable legal fees and filing
costs of the Company in connection with his admission as a Shareholder.
(d) In the event an assignee of all or any part of the Shares of
a Shareholder is admitted as a Shareholder in accordance with the
provisions of this Section 7.2, the Share Ledger shall be amended to
reflect (i) such admission, and, if applicable, (ii) the withdrawal of the
assignor as a Shareholder as provided in Section 7.2(a) of this Agreement,
and (iii) the resulting new Percentage Interests of the Shareholders.
7.3 ADMISSION OF SHAREHOLDERS.
(a) Admission of Additional Shareholders. A Person may at any
------------------------------------
time be admitted as a Shareholder with the approval of the President, and
the number and Series of Shares to be to be issued to such Shareholder,
Capital Contribution required of any such Shareholder as a condition of
admission, any other conditions required to be satisfied prior to the
admission of such Person as a Shareholder, shall be as determined by the
President. Upon the admission of any additional Shareholder as provided
herein, the Share Ledger shall be amended in all appropriate respects to
reflect such admission.
(b) Authority to Issue Compensatory Shares and Options. The
--------------------------------------------------
Directors by Majority Board Action may award Shares, or grant options to
purchase Shares, as compensation to any Shareholder or other Person for
services rendered or to be rendered to the Company, or for any other
purpose as the Directors determine.
June 17, 1998
27
The terms and conditions of any such award or grant shall be determined by
the Directors in their sole discretion. For example, the Directors may
award Shares subject to vesting at no or nominal cost to employees or
consultants of the Company, whether or not any such Person is a Shareholder
at the time of such award. Any Majority Board Action awarding Shares or
granting options as compensation under the authority of this Subsection (b)
shall state that such award or grant is compensatory and that it is being
made under the authority of Subsection 7.3(b) of the Company's Operating
Agreement.
7.4 ALLOCATIONS SUBSEQUENT TO TRANSFER. In the event of the admission or
withdrawal of a Shareholder, or in the event all or any part of the Shares of a
Shareholder is validly transferred as provided in this Section 7, the
distributions and the Net Profit or Net Loss (and each item thereof or
corresponding thereto) shall be further allocated based upon the ownership of
the respective Shares prior to and following the effective date of such
admission or withdrawal in a manner determined by the President to be consistent
with the requirements of Section 706 of the Code and any final, proposed or
temporary Treasury Regulations thereunder.
7.5 LIMITATION ON ISSUANCES OF SHARES. Only the series of Shares set
forth in the Capitalization Description may be issued and the total number of
shares of a Series so issued shall not exceed the number of Shares of such
series set forth in the Capitalization Description, it being understood that the
Capitalization Description and this Agreement may be amended by Majority
Shareholder Action, subject to the limitations in Section 10.10.
7.6 PREEMPTIVE RIGHT. At the time of any future issuance and sale of
membership interests in the Company pursuant to any future offerings to raise
capital for the Company (the "New Securities"), the Company shall offer to each
Preferred Shareholder by written notice the right, for a period of thirty (30)
days, to purchase for cash at an amount equal to the price or other
consideration for which the New Securities are to be issued, a number of the New
Securities so that, after giving effect to such issuanc e, such Preferred
Shareholder will continue to maintain his same Percentage Interest in the
Company as of the date of such notice (the "Preemptive Right"); provided,
--------
however, that the Preemptive Right of the Preferred Shareholders shall not apply
-------
to the New Securities which are (A) Series C Common Shares issued to employees
or consultants of the Company in connection with services they provide to the
Company; (B) issued to pursuant to an acquisition, merger, consolidation or
similar business combination transaction and (C) issued pursuant to a public
offering. The Company's written notice to the Preferred Shareholders shall
describe the New Securities proposed to be issued by the Company and specify the
number, price and payment terms. Each Preferred Shareholder may accept the
Company's offer as to the full number of New Securities offered to it or any
lesser number, by written notice thereof given by it to the Company prior to the
expiration of the aforesaid thirty (30) day period, in which event the Company
shall promptly sell and such Preferred Shareholder shall buy, upon the terms
specified, the number of securities
June 17, 1998
28
agreed to be purchased by such Preferred Shareholder. The Company shall be free
to offer and sell to any third party or parties the number of New Securities not
purchased by any Preferred Shareholder, at a price and on payment terms no less
favorable to the Company than those specified in such notice of offer to the
Preferred Shareholders.
8. DISSOLUTION AND TERMINATION
8.1 TERM; EVENTS CAUSING DISSOLUTION. The term of this Agreement shall
commence as of the date the Certificate of Formation is filed in the office of
the Secretary of State of the State of Delaware and shall continue perpetually
until dissolved in accordance with this Section. The existence of the Company as
a separate legal entity shall continue until the cancellation of the Certificate
of Formation. The Company shall be dissolved and its affairs wound up upon:
(a) the election to dissolve the Company, which shall require
Board Majority Action and Supermajority Shareholder Action;
(b) the withdrawal, removal, incompetence, death, insanity,
retirement, resignation, expulsion, or Bankruptcy of any Shareholder who is
also a Manager, unless a majority in interest, as determined under Internal
Revenue Service Rev. Proc. 94-46, of the remaining Shareholders, within
ninety (90) days after such event, elect to continue the Company and the
business of the Company; or
(c) the occurrence of an event specified under the laws of the
State of Delaware as one effecting dissolution, except that where, under
the terms of this Agreement, the Company is not to terminate, then the
Company shall be immediately reconstituted and reformed on all the
applicable terms, conditions, and provisions of this Agreement.
8.2 PROCEDURES ON DISSOLUTION. Dissolution of the Company shall be
effective on the day on which the event occurs giving rise to the dissolution,
but the Company shall not terminate until the assets of the Company shall have
been liquidated and distributed as provided in Section 8.3 of this Agreement and
the Company's Certificate shall have been canceled. Notwithstanding the
dissolution of the Company, the business and the affairs of the Company shall be
conducted so as to maintain the continuous operation of the Company under the
provisions of this Agreement. Upon dissolution of the Company, the President or,
if none, a liquidator elected by the written consent of Shareholders having a
majority of the Percentage Interests, shall liquidate the assets of the Company,
apply and distribute the proceeds thereof as provided in Section 8.3 of this
Agreement, and cause the cancellation of the Certificate.
8.3 LIQUIDATION. Upon the dissolution of the Company, its affairs shall
be wound up and it shall be liquidated and the proceeds of such liquidation and
the Company's other assets shall be distributed as follows:
June 17, 1998
29
(a) All of the Company's ascertained debts and liabilities to
creditors shall be promptly paid and discharged in the order provided by
applicable law.
(b) A reserve shall be set aside in an amount reasonably required
to provide for contingent or other liabilities.
(c) The Company's Net Profit or Net Loss, and depreciation or
cost recovery deductions shall be computed and shall be allocated to the
Shareholders in accordance with Section 5 of this Agreement, and the
Shareholders' capital accounts shall be adjusted in accordance with Section
6.8 of this Agreement.
(d) Distribution shall be made to the Shareholders in accordance
with the provisions of Section 5.2 of this Agreement of any Net
Distributable Cash, and the Shareholders' capital accounts shall be
adjusted in accordance with Section 6.8 of this Agreement.
(e) The remainder of the Company's assets shall be distributed,
in liquidation of the Shares of all the Shareholders, to those Shareholders
with positive capital account balances, after taking into account all
capital account adjustments provided for in Section 6.8 of this Agreement
(other than those made as a result of any such liquidating distributions)
in the ratios of such positive capital account balances, as so adjusted.
Each Shareholder shall receive his share of such remaining assets in cash
and/or in kind, and the portion of such share that is received in cash may
vary from Shareholder to Shareholder, all as the President may in his sole
discretion determine. Notwithstanding the foregoing, if any assets of the
Company are to be distributed in kind, such assets shall be distributed on
the basis of the fair market value thereof and any Shareholder entitled to
any interest in such assets shall receive such interest therein as a
tenant-in-common with all other Shareholders so entitled. If any asset is
to be distributed in kind, the Shareholders' capital accounts shall be
adjusted as provided for in Section 6.8 of this Agreement (consistent with
the requirements of Regulation Section 1.704-1(b)(2)(iv) under Section 704
of the Code) before any such distribution is made to reflect the increases
or decreases to said capital accounts which would have occurred if such
asset to be distributed in kind had been sold for its fair market value by
the Company immediately prior to such distribution. All such liquidating
distributions shall be made by the end of the taxable year of the Company
in which there is a liquidation of the Company for purposes of Paragraphs
(b)(2)(ii)(b) and (b)(2)(ii)(g) of Regulation Section 1.704-1 under Code
Section 704 or, if later, within 90 days after the date of such
liquidation. Notwithstanding the foregoing, the President may, in his
discretion, withhold from such distribution any or all installment
obligations owed to the Company, so long as such withheld amounts are so
distributed as soon as practicable and in the ratios of such positive
capital account balances, as so adjusted.
June 17, 1998
30
(f) As soon as practicable, the remaining balance, if any, of
the reserve established in accordance with Section 8.3(b) of this Agreement
shall be distributed in the manner set forth in Section 8.3(e) of this
Agreement.
(g) Distribution of cash or property to the Shareholders in
accordance with the provisions of Subsections (e) and (f) of this Agreement
shall constitute a complete return to the Shareholders of their respective
Shares in the Company assets. Each Shareholder shall look solely to the
assets of the Company for the return of its investment in the Company, and
it shall have no recourse against the President or any other Manager or any
Shareholder if the net assets of the Company remaining for distribution as
hereinabove provided are insufficient to return its investment.
(h) Notwithstanding any other provision of this Agreement, in the
event there is a liquidation of the Company for purposes of Paragraphs
(b)(2)(ii)(b) and (b)(2)(ii)(g) of Regulation Section 1.704-1 under Code
Section 704 (regardless of whether or not there is a dissolution of the
Company as hereinabove provided), liquidating distributions, within the
meaning of said Paragraph (b)(2)(ii)(b), shall in all cases be made in
accordance with the positive capital account balances of the Shareholders,
taking into account all capital account adjustments for the taxable year of
the Company during which such liquidation occurs (other than adjustments
made pursuant to this Section 8.3(h)), by the end of such taxable year or,
if later, within 90 days after the date of such liquidation. Such
distributions shall otherwise be made in the manner and in accordance with
the provisions of Section 8.3(e) of this Agreement. Neither the occurrence
of such a liquidation nor the making of such liquidating distributions
shall, however, be treated as the occurrence of any event described in
Section 8.1 of this Agreement, or shall otherwise result in dissolution of
the Company. If such liquidation occurs at a time when there is not also
such a dissolution by reason of the independent occurrence of an event
described in said Section 8.1, then (i) the Company shall not be dissolved,
(ii) the Shareholders shall, immediately upon receiving such liquidating
distributions, contribute all cash and properties so received to the
Company, (iii) the capital accounts of the Shareholders shall be adjusted
as provided in Section 6.8 of this Agreement and (iv) the business and
affairs of the Company shall be continued without interruption. Prior to
distribution of any property pursuant to this Section 8.3(h), the
Shareholders' capital accounts shall be adjusted as provided for in Section
6.8 of this Agreement (consistent with the requirements of Regulation
Section 1.704-1(b)(2)(iv) under Code Section 704) to reflect the increases
or decreases to said capital accounts which would have occurred if such
property had been sold for its fair market value by the Company immediately
prior to such distribution.
June 17, 1998
31
9. CONVERSION
June 17, 1998
32
9.1 CONVERSION TO CORPORATION STATUS. Upon Majority Board Action and
Majority Shareholder Action (with all Shareholders voting together as a single
class, and no class or series of Shares shall be entitled to any separate class
vote), the Company shall convert from a limited liability company to a
corporation (a "Change in Status") pursuant to the following procedure and in
accordance with the following terms and conditions: The Change in Status shall
be accomplished pursuant to an incorporation agreement, under which each
Shareholder shall agree to contribute all of the Shareholder's Shares
(representing all of the Shareholder's Interest in the Company) to a corporation
("Newco") organized in the State of Delaware, in exchange for stock of Newco (as
more fully described below and in accordance with the incorporation agreement),
in a transaction intended to qualify under Section 351 of the Code. The
incorporation agreement shall be in such form, and shall contain such terms and
conditions consistent with the intent of this Section 9.1, as the Board of
Directors shall approve. Each Shareholder hereby agrees promptly to execute such
incorporation agreement. As a result of the Change in Status, the Interest in
the Company of each Shareholder (represented by the Shareholder's Shares
contributed to Newco) shall be exchanged for stock of Newco having a value
equivalent to the value of such Interest, as shall be determined by the Board of
Directors in its reasonable discretion. Each class of Interest existing
immediately prior to the Change in Status (each represented by a corresponding
Series of Shares), shall be exchanged for a class or series of stock of Newco
which gives economic effect to the terms and conditions of each class of
Interest for which the stock is exchanged, in order to preserve the preferences,
privileges, qualifications, limitations and special rights of each class of
Interest in the Company. By way of illustration, the Interest of a Series A
Preferred Shareholder shall be exchanged for a class or series of preferred
stock of Newco which contains a liquidation preference, anti-dilution
protection, voting rights, board of director designation rights, redemption
rights and conversion features in form and substance similar to the terms of the
Series A Preferred Shareholder's Interest, and the Interest of a Series B
Preferred Shareholder shall be exchanged for a class or series of preferred
stock of Newco which contains a liquidation preference, anti-dilution
protection, no voting rights, redemption rights and conversion features in form
and substance similar to the terms of the Series B Preferred Shareholder's
Interest. Notwithstanding the foregoing, the liquidation preferences of any
class or classes or series of Newco preferred stock may differ from the
liquidation rights of the Series of Shares for which such stock is exchanged, to
the extent the Board of Directors determines such difference is necessary or
advisable to assure that the value of the stock received by each Shareholder
shall equal the value of the Shareholder's Interest exchanged therefor. No
Shareholder shall have contractual or other right of appraisal in connection
with a Change in Status. Notwithstanding the prior approval of the Board of
Directors or the Shareholders, the transaction effecting a Change in Status may
be terminated or amended pursuant to a provision for such termination or
amendment contained in the incorporation agreement. Once the Company has
effected a Change in Status, Newco shall assume and convert into stock options
(to the extent permissible) any options to acquire Interests held by any Person
immediately prior to the Change in Status.
June 17, 1998
33
9.2 ASSISTANCE IN CONVERSION. Each Shareholder shall take such action,
and give such consent, in connection with the actions specified in Section 9.1,
as may be necessary, appropriate or convenient to effect the conversion
specified therein.
10. MISCELLANEOUS
10.1 NOTICES. All notices, requests, demands, consents and other
communications hereunder shall be in writing and (except in the situations
specified in Section 3.3(d)) shall be deemed to have been duly given if
delivered or if mailed by certified or registered mail, postage prepaid, tothe
President and Chief Financial Officer of the appropriate party at the address
shown in the Share Ledger, as amended from time to time, or to such other Person
or at such other address as such party shall have specified to the other party
upon seven (7) days' notice in the manner herein provided.
10.2 SUCCESSORS AND ASSIGNS. This Agreement shall, subject to the
restrictions on transferability set forth herein, and except to the extent
otherwise expressly set forth herein, be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and permitted assigns.
10.3 NO WAIVER. The failure of the Company or any Shareholder to insist
upon strict performance of any provision hereunder, irrespective of the length
of time for which such failure continues, shall not be deemed a waiver of the
Company's or such Shareholder's right to demand strict performance at any time
in the future. No consent or waiver, express or implied, to or of any breach or
default in the performance of any obligation or provision hereunder shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
10.4 ENTIRE AGREEMENT. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter of this
Agreement.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together for all purposes shall constitute one
instrument, binding on all the Shareholders notwithstanding that all
Shareholders have not signed the same counterpart.
10.6 APPLICABLE LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware. All disputes and
litigation regarding this Agreement and matters connected with its performance
shall be subject to the non-exclusive jurisdiction of the state and federal
courts in Suffolk County, Massachusetts.
June 17, 1998
34
10.7 HEADINGS; SECTION REFERENCES. The headings contained in this
Agreement are for reference only and shall not in any way affect the meaning or
interpretation of this Agreement. References to Sections without decimals (such
as "Section 2") shall include all sections numbered with decimals in such
Section (i.e. Section 2.1, 2.2, etc.).
10.8 CONSTRUCTION. Whenever appropriate in this Agreement, words used in
the singular may be read in the plural, words used in the plural may be read in
the singular, words imparting the neuter shall include the masculine and
feminine genders and words imparting the masculine gender shall include the
feminine and neuter.
10.9 SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions or in all
cases, because of the conflicting of any provision with any constitution or
statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question
invalid, inoperative or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy; but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein and such provision
reformed so that it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction or in such case.
10.10 AMENDMENT. This Agreement may be amended by Majority Shareholder
Action, and any such amendment shall be binding on all parties; provided that in
addition, the President and/or Treasurer of the Company may amend the Share
Ledger, without the approval or consent of any other Director or Shareholder, to
reflect changes in the Capital Contribution, Percentage Interest or address of
any Shareholder or the assignment of any Share, or the admission or removal of
any additional Shareholders, provided such changes, assignments, admissions
and/or removals were performed in accordance with the terms of this Agreement.
Notwithstanding the foregoing, (i) any elimination of a requirement of
Supermajority Member Action shall require a Supermajority Member Action and (ii)
any amendment of Sections 4, 5, 6 and 8 which materially and adversely affects
the Series B Preferred Shares in a manner which is more adverse than such
amendment would be to the Series A Preferred Shares with respect to economic
terms (but not terms such as voting or management rights) shall also require
Series B Majority Action; provided that, for the purpose of avoiding doubt it is
agreed none of the following shall require Series B Majority Action: (1) any
amendment to create or increase any series of membership interest with any
preference or priority over the Series B Preferred Shares as to the right to
receive distribution ("Senior Shares") so long as such Senior Shares also have
an equivalent preference or priority over, and dilute proportionately with, the
Series A Preferred Shares; and (2) any amendment to create or increase any
series of membership interest which are not Senior
June 17, 1998
35
Shares with respect to which the Series B Preferred Shares and are not Senior
Shares with respect to the Series A Preferred Shares ("Junior Shares").
June 17, 1998
36
EXECUTED UNDER SEAL as of the 5th day of June, 1998.
/s/ Xxxxxx X. Gain
-------------------
Xxxxxx X. Gain
THE GAIN FAMILY TRUST
/s/ Xxxxxx X. Gain
-------------------
Xxxxxx X. Gain
SPACETEC IMC CORPORATION
By: /s/ C. Xxxxxxx Xxxxxx
-----------------------
Name: C. Xxxxxxx Xxxxxx
Title: President & Chief Operating Officer
3D OPEN MOTION, LLC VOTING TRUST
/s/ Xxxxxx X. Gain
-------------------
Xxxxxx X. Gain, as Voting Trustee
June 17, 1998
37
SCHEDULE A
----------
SHARE LEDGER
NUMBER AND
CERT. DATE SHAREHOLDER NAME CAPITAL SERIES OF
NO. AND ADDRESS CONTRIBUTION SHARES % INTEREST
-------------------------------------------------------------------------------------------------
1 Xxxxxx Gain $340,000 27,200 Class A 27.2%
00 Xxxxx Xxxx Xxxxxx
Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
2 The Gain Family Trust $360,000 28,800 Class A 28.8%
00 Xxxxx Xxxx Xxxxxx
Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
3 Spacetec IMC Corporation $100,000 20,000 Class B 20.0%
The Boott Xxxxx Shares
000 Xxxx xx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
----------------------------------------------------------------------------------------------------
4 Xxxxxx Gain, as Voting Trustee
3D OPEN MOTION, LLC VOTING TRUST $9,500 24,000 Class C 24.0%
The Mill Shares
00 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxxxxxx, XX 00000
----------------------------------------------------------------------------------------------------
June 17, 1998
38
SCHEDULE B
----------
CAPITALIZATION DESCRIPTION
Preferred
Preferred or Return on Number of Shares
Series of Shares Voting or Non-voting Common Capital Authorized
---------------------------------------------------------------------------------------------
Series A Voting Preferred 8% 200,000
----------------------------------------------------------------------------------------------
Series B Non-voting Preferred 8% 30,000
----------------------------------------------------------------------------------------------
Series C Voting Common None 400,000
---------------------------------------------------------------------------------------------
June 17, 1998
39
