Exhibit 10.5
===============================================================================
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXX XXXXXXX VENTURES LLC
===============================================================================
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXX XXXXXXX VENTURES LLC
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") of Xxxxxx Xxxxxxx Ventures LLC (the "Company") is made as of August
15, 2005, by and among the Persons whose names are set forth on Schedule A as
the members, as such Schedule may be amended pursuant to the terms hereof (each,
a "Member" and, collectively, the "Members").
In consideration of the covenants and conditions set forth in this
Agreement, the parties agree as follows:
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on August 11, 2005, a Certificate of Formation of the
Company was filed with the Secretary of State of the State of Delaware;
WHEREAS, MM executed a counterpart of that certain Limited Liability
Company Agreement of the Company, dated as of August 11, 2005 (such agreement,
the "Original Agreement"), and was admitted to the Company as a Member in
accordance with the terms thereof;
WHEREAS, concurrently with, and as a condition to, the execution and
delivery of this Agreement, the Company, on the one hand, and Xxxxxx Xxxxxxx
("GF") and Xxxxxx Xxxxxxx Productions, Inc. ("GFPI"), on the other hand, are
entering into an assignment agreement, in substantially the form attached hereto
as Exhibit A (the "Assignment Agreement"), and a services agreement, in
substantially the form attached hereto as Exhibit B (the "Services Agreement");
and
WHEREAS, the Members desire for their mutual benefit to enter into
this Agreement to amend, restate and supersede the Original Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
promises and obligations contained herein, and with the intent of being legally
bound, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following respective meanings:
1.1 Act: Limited Liability Company Act of the State of Delaware, as
amended from time to time.
1.2 Adjusted Capital Account Deficit: With respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Member
is obligated to contribute to the Company (pursuant to the terms of this
Agreement or otherwise) or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulation Section 1.704-2(g)(1) or Regulation Section
1.704-2(i)(5), as applicable; and
(ii) Debit to such Capital Account the items described in
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account Deficit" is
intended to comply with Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
1.3 Affiliate: With respect to a specified Person, any other Person
that directly or indirectly, through one or more intermediaries, has control of,
is controlled by, or is under common control with, such specified Person. For
purposes of this definition, the term "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management or policies of a Person whether through the ownership of voting
securities, by contract or otherwise.
1.4 Agreement: Has the meaning set forth in the preamble hereto.
1.5 Assignment Agreement: Has the meaning set forth in the recitals.
1.6 Assignor Royalty(ies): Has the meaning set forth in the
Assignment Agreement.
1.7 Available Cash: Cash available for Distribution to the Members
in respect of any fiscal year of the Company, after giving effect to all
expenses payable in respect of such year (including, without limitation, the
amount of the Assignor Royalty payable to GF and GFPI under the Assignment
Agreement and the total amount of compensation payable to GFPI under the
Services Agreement) and after making adequate provisions for all necessary
reserves.
1.8 Board: Has the meaning set forth in Section 3.1(a) hereof.
1.9 Bonus: Has the meaning ascribed to such term in the Services
Agreement.
1.10 Capital Accounts: The capital accounts of the Members,
maintained in accordance with Article 4 hereof.
1.11 Capital Contributions: With respect to any Member, the amount
of cash and the Gross Asset Value (net of liabilities secured by such property
that the Company is
2
considered to assume or take subject to the under Code Section 752) of any
property contributed to the capital of the Company by such Member, as set forth
on Schedule A, as such Schedule may be amended from time to time.
1.12 Capitalization: As of any date, the amount equal to the sum of
(x) the average, over the preceding five (5) trading days, of the result
obtained by multiplying (i) the number of shares of Common Stock issued and
outstanding as of such trading day by (ii) the higher of the daily closing sale
price or bid price on such trading day of the Common Stock (as reported on the
principal securities exchange or quotation system on which the Common Stock is
then listed or admitted for trading) and (y) the fair market value of all
outstanding equity securities of MM, if any, other than Common Stock, as
determined in good faith by the board of directors of MM.
1.13 Certificate of Formation: Has the meaning set forth in Section
2.1 hereof.
1.14 Code: The Internal Revenue Code of 1986, as amended from time
to time, and the corresponding provisions of succeeding law.
1.15 Common Stock. The common stock of MM, par value $0.01 per
share.
1.16 Company: Has the meaning set forth in the preamble hereto.
1.17 Company Minimum Gain: Has the meaning set forth in Regulation
Section 1.704-2(d).
1.18 Company Nonrecourse Deductions: Has the meaning set forth in
Regulation Section 1.704-2(b)(1) and 1.704-2(c).
1.19 Company Percentage: With respect to the Traditional Licensing
Business, the Company Percentage for the Members shall be as follows: fifty
percent (50%) in the case of MM, and fifty percent (50%), in the aggregate, in
the case of GF and GFPI, allocated, in the case of GF and GFPI, in proportion to
their respective Capital Contributions as reflected on Schedule A attached
hereto. With respect to the Non-Traditional Businesses, the Company Percentage
for the Members shall be as follows: eighty-five percent (85%) for MM, and
fifteen percent (15%), in the aggregate. for GF and GFPI, allocated, in the case
of GF and GFPI, in proportion to their respective Capital Contributions as
reflected on Schedule A attached hereto.
1.20 Confidential Information: Has the meaning set forth in Section
10.19(a) hereof.
1.21 Controlled Entity: An entity (x) of which the Company or MM is
the managing member, sole general partner or sole director, or (y) which
provides Xxxxxxx with the same management rights provided to Xxxxxxx pursuant to
Section 3 hereof.
1.22 Covered Person: Has the meaning set forth in Section 8.2
hereof.
1.23 Depreciation: With respect to each taxable year or other
period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that if the Gross Asset Value of an asset
3
differs from its adjusted basis for Federal income tax purposes at the beginning
of such year or other period, Depreciation shall be an amount that bears the
same ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization, or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis; provided, however, that
if the Federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, Depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
Board, and provided further that no depreciation shall be taken with respect to
the Xxxxxxx Assets.
1.24 Director Designee: Has the meaning ascribed to such term in the
Investor Rights Agreement.
1.25 Director Manager Replacement: The person designated by the
Director Managers to replace any of them as a Manager of the Company in the
event of the resignation, death or removal of any such Director Manager in
accordance with Section 3.2(c) hereof. Any such designation shall be in writing,
signed by the Director Managers in office at the time such designation is made
and delivered to the Board of Managers. The Director Managers may, in their sole
and absolute discretion, change such designation at any time or from time to
time during their terms of office, by a writing similarly signed and delivered.
1.26 Director Managers: Xxxxxxx Xxxxxxxx, an individual, and Xxxxx
Xxxxxxxxx, an individual, unless and until either such person has resigned, died
or been removed as a Manager of the Company in accordance with Section 3.2(c)
hereof; thereafter Director Managers shall mean the remaining Director Manager
and the Director Manager Replacement who has succeeded such former Director
Manager as a Director Manager.
1.27 Disability: With respect to a Manager or Designee, such
Manager's or Designee's inability to perform the functions of a manager
hereunder as a result of a physical or mental condition, disease or injury,
which inability has continued, or is substantially likely to continue, for a
period of more than thirty (30) days.
1.28 Disposition (Dispose): Any sale, assignment, exchange,
mortgage, pledge, grant, hypothecation, encumbrance, disposition or other
transfer, whether absolute or as security (including transfers by operation of
law and involuntary transfers).
1.29 Distributions: Any distributions of cash or other assets of the
Company. For purposes of Article 4 (relating to maintenance of Capital
Accounts), Article 5 ( to the extent relating to Distributions) and Article 9
(to the extent relating to Distributions Upon Liquidation) of this Agreement,
amounts payable in respect of the Assignor Royalty under the Assignment
Agreement (after giving effect to any adjustments under Section 4 thereof and
Section 5.1(c) hereof) shall be treated as Distributions of cash to GF and GFPI,
pro rata in accordance with their respective Company Percentages with respect to
the Traditional Licensing Business.
1.30 Excess Reduction Amount: Has the meaning set forth in Section
5.1(c) hereof.
1.31 Exchange Act: The U.S. Securities Exchange Act of 1934, as
amended.
4
1.32 Xxxxxxx: GF and GFPI.
1.33 Xxxxxxx Assets: Collectively, the Indicia Rights and the Marks
(as each such term is defined in the Assignment Agreement).
1.34 Xxxxxxx Designee: Has the meaning ascribed to such term in the
Investor Rights Agreement.
1.35 Xxxxxxx Manager Replacement: The person designated by the
Xxxxxxx Managers to replace any of them as a Manager of the Company in the event
of the resignation, death or removal of either such Xxxxxxx Manager in
accordance with Section 3.2(c) hereof. Any such designation shall be in writing,
signed by the Xxxxxxx Managers in office at the time such designation is made
and delivered to the Board of Managers. The Xxxxxxx Managers may, in their sole
and absolute discretion, change such designation at any time or from time to
time during their terms of office, by a writing similarly signed and delivered.
1.36 Xxxxxxx Managers: Xxxxxx Xxxxxxx, an individual, and Xxxxxx
Xxxxxxx, Xx., an individual, unless and until either such person has resigned,
died or been removed as a Manager of the Company in accordance with Section
3.2(c) hereof; thereafter Xxxxxxx Managers shall mean the remaining Xxxxxxx
Manager and the Xxxxxxx Manager Replacement who has succeeded such former
Xxxxxxx Manager as a Xxxxxxx Manager.
1.37 GF: Has the meaning set forth in the recitals.
1.38 GFPI: Has the meaning set forth in the recitals.
1.39 Gross Asset Value: With respect to any asset of the Company,
the asset's adjusted basis for Federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed to the Company by a
Member shall be its gross fair market value (taking into account Section 7701(g)
of the Code) immediately before such contribution, (ii) the Gross Asset Value of
all Company assets shall be adjusted to equal their respective gross fair market
values (taking into account Section 7701(g) of the Code), as reasonably
determined by the Board, (A) immediately before the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution, and (B) immediately before the distribution
by the Company to a Member of more than a de minimis amount of Company assets as
consideration for an interest in the Company, in either case if the Board
reasonably determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Members, and (C) immediately
before the liquidation of the Company within the meaning of Regulation Section
1.704-1(b)(2)(ii)(g), (iii) the Gross Asset Value of any asset distributed to a
Member shall be adjusted to equal the gross fair market value of such asset on
the date of distribution; and (iv) the Gross Asset Value of the Company's assets
shall be adjusted in connection with an adjustment under Sections 734(b) or
743(b) of the Code, but only as provided in Regulation Section
1.704-1(b)(2)(iv)(m); provided, however, that the Gross Asset Value shall not be
adjusted pursuant to this clause (iv) to the extent the Board determines that an
adjustment pursuant to clause (ii) is necessary or appropriate in connection
with a transaction that would otherwise require adjustment pursuant to this
clause (iv). If the Gross Asset Value of an asset has been determined or
adjusted pursuant to clause (i), (ii) or (iv),
5
such Gross Asset Value shall thereafter be further adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing Profits
and Losses.
1.40 Indemnification Obligation(s): Has the meaning set forth in
Section 8.3 hereof.
1.41 Indemnified Party(ies): Has the meaning set forth in Section
8.3 hereof.
1.42 Initial Capital Contribution: With respect to each Member, the
aggregate amount of Capital Contributions made to the Company by such Member as
of or prior to the date of this Agreement, as set forth opposite such Member's
under the column headed "Initial Capital Contribution" on Schedule A hereto.
1.43 Investor Rights Agreement. That certain investor rights
agreement, dated as of the date hereof, by and among MM and the Company, on the
one hand, and GF and GFPI, on the other hand.
1.44 Manager(s): Has the meaning set forth in Section 3.2(a) hereof.
1.45 Member(s): Has the meaning set forth in the preamble.
1.46 Member Minimum Gain: As determined in accordance with
Regulation Section 1.704-2(i)(3) and 1.704-2(i)(4).
1.47 Member Nonrecourse Debt: Has the meaning set forth in
Regulation Section 1.704-2(b)(4).
1.48 Member Nonrecourse Deductions: Has the meaning set forth in
Regulation Section 1.704-2(i)(2).
1.49 Membership Interest: The ownership interest of any Member in
the Company.
1.50 MM: MM Companies, Inc., a Member.
1.51 MM Manager Replacement: The individual who replaces a MM
Manager as a director of MM.
1.52 MM Managers: The individuals serving as directors of MM other
than the Director Designees and the Xxxxxxx Designees.
1.53 Net Active Business Income: Has the meaning set forth in the
Services Agreement.
1.54 Net Traditional License Payments: Has the meaning set forth in
the Assignment Agreement.
1.55 Nonrecourse Debt: Any "nonrecourse liability" as defined in
Regulation Section 1.752-1(a)(2).
6
1.56 Non-Traditional Businesses: Has the meaning ascribed to such
term in the Assignment Agreement.
1.57 Officer: Has the meaning set forth in Section 3.6(a) hereof.
1.58 Original Agreement: Has the meaning set forth in the recitals.
1.59 Permitted Indebtedness: Trade debt, inventory or receivables
financing, or other commercial indebtedness incurred by the Company, or
indebtedness owed to MM or any entity of which MM or the Company owns at least
eighty percent (80%) of the outstanding equity interests.
1.60 Person: An individual, trust, estate, partnership, joint
venture, association, company, corporation or other entity.
1.61 Profits and Losses: With respect to each taxable year or other
period, an amount equal to the Company's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Company that is exempt from Federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition of Profits and Losses shall be added to such taxable
income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of Profits and Losses
shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to Section 1.39 hereof, (x) any difference between such
Gross Asset Value and the prior Gross Asset Value of such asset (as previously
adjusted pursuant to Section 1.39 hereof) shall be treated as gain or loss, as
the case may be, from the Disposition of such asset for purposes of computing
Profits or Losses and (y) in lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such fiscal year or
other period, computed in accordance with the definition of Depreciation herein;
and
(iv) Gain or loss resulting from any Disposition of any Company
asset with respect to which gain or loss is recognized for Federal income tax
purposes shall be computed by reference to the Gross Asset Value of the asset
Disposed of, notwithstanding that the adjusted tax basis of such asset differs
from its Gross Asset Value.
(v) Any items of income, gain, loss, expense, deduction or
credit, which are specially allocated hereunder shall not be taken into account
in determining Profits and Losses.
7
1.62 Promissory Note: Means that certain demand promissory note,
dated as of the date hereof, in the principal amount of $3,500,000, given by MM
to the Company as partial consideration for its Membership Interest.
1.63 Reduction Amount: Has the meaning set forth in Section 5.1(c)
hereof.
1.64 Regulations: Means the Treasury Regulations, final and
temporary, promulgated under the Code.
1.65 Regulatory Allocations: Has the meaning set forth in Section
5.5 hereof.
1.66 Related Transferee: (a) With respect to any natural person,
such natural person's spouse, any lineal ancestor or descendant of such person
or spouse, the spouses of such lineal ancestors or descendants, trusts for the
benefit of any of the foregoing, a corporation all of the outstanding capital
stock of which is at all times solely owned by, a limited liability company all
of the members of which are at all times solely, or a partnership all of the
partners of which are at all times solely, such natural person and/or any
Related Transferee and, in the event of the death of such natural person, such
natural person's estate; and (b) with respect to any Person other than a natural
person, any Affiliate of such Person.
1.67 Replacements: The Director Manager Replacements and the Xxxxxxx
Manager Replacements. Notwithstanding anything in the Agreement to the contrary,
each such Manager Replacement shall be reasonably acceptable to the Board; if
any such Manager Replacement is not reasonably acceptable to the Board, the
Director Managers shall select another Director Manager Replacement, or the
Xxxxxxx Managers shall select another Xxxxxxx Manager Replacement, as the case
may be, who is reasonably acceptable to the Board (it being agreed that the
individuals named on Schedule A hereto shall be deemed reasonably acceptable to
the Board).
1.68 Securities Act: The U.S. Securities Act of 1933, as amended.
1.69 Services Agreement: Has the meaning set forth in the recitals.
1.70 Supermajority in Interest: Members who are record owners in the
aggregate of no less than two-thirds (66?%) of the Company Percentages with
respect to the Traditional Licensing Business.
1.71 Tax Distribution: If a Member so elects, the amount payable by
the Company to such Member in accordance with Section 5.1(c) hereof in respect
of any fiscal year, within ninety (90) days of the close of such year, equal to
forty percent (40%) of such electing Member's allocable share (as determined
under Section 5.2 hereof) of an amount equal to (x) the Profits for such year
that are attributable solely to the Non-Traditional Businesses (before taking
into account the second sentence of Section 5.1(c) hereof) less (y) the Losses
for all prior years that are attributable solely to the Non-Traditional
Businesses and that have not previously offset Profits in accordance with the
terms hereof.
1.72 Traditional Licensing Business: Has the meaning ascribed to
such term in the Assignment Agreement.
8
1.73 Transfer: Has the meaning set forth in Section 7.1 hereof.
1.74 Unreturned Capital Contribution: With respect to any Member,
such Member's Capital Contributions to the Company, reduced (but not below zero)
by any distributions to such Member pursuant to Section 9.3(a) hereof.
ARTICLE 2
GENERAL PROVISIONS
2.1 Formation. On August 11, 2005, an authorized person in
accordance with Section 18-201 of the Act, caused a certificate of formation
(the "Certificate of Formation") to be filed in the Office of the Secretary of
State of Delaware. The execution, delivery and filing of the Certificate of
Formation, and all actions taken in connection with the formation of the
Company, are hereby adopted, approved, ratified and confirmed by the Members.
The provisions of the Act shall govern the rights and obligations of, and the
relationships among, the Members except as modified by the provisions of this
Agreement. The Members shall cause the execution, delivery and filing of, any
necessary or advisable amendments or restatements to the Certificate of
Formation, and any other certificates, notices, statements or other instruments
(and any amendments or statements thereof) necessary or advisable for the
operation of the Company in all jurisdictions where the Company may elect to do
business.
2.2 Further Action. The Members hereby agree to take any and all
action as may be required, from time to time, under the laws of the State of
Delaware, to give effect to, and continue in good standing, the Company in each
jurisdiction where such qualification or registration is required or desirable
as determined by the Board.
2.3 Name of the Company. The name of the Company shall be "Xxxxxx
Xxxxxxx Ventures LLC". The business of the Company will be conducted under such
name or such other trade names or fictitious names as may be deemed advisable by
the Board. The Board in its sole and absolute discretion may change the name of
the Company at any time and from time to time. Notification of any such change
shall be given to all Members. The Board shall cause to be filed on behalf of
the Company such assumed or fictitious name certificate or certificates or other
similar documents as may from time to time be required by law for the formation
and continuation of the Company as a limited liability company under the laws of
Delaware applicable to limited liability companies and the laws of such other
states in which the Company is doing business regarding the qualification of
foreign limited liability companies.
2.4 Business of the Company. The business of the Company shall be to
do any or all of the following: (i) engage in any lawful act, activity or
business in which a limited liability company may legally engage in the State of
Delaware, and (ii) make, enter into, perform and carry out any arrangements,
contracts or agreements consistent with the foregoing and to do any and all
things necessary or incidental to any of the foregoing to carry out and further
the business of the Company as contemplated by this Agreement.
2.5 Place of Business; Registered Agent and Office. The Company's
principal place of business is x/x XX Xxxxxxxxx, Xxx., 000 X. Xxxxxx-Xxxxx
Blvd., 4th Floor, Xxxxxx-Xxxxx, Xxxxxxxxxxxx 00000, or such other place as the
Board may, from time to time,
9
determine upon written notice of the change to each Member. The initial address
of the Company's registered office in Delaware is 0000 Xxxxxxxxxxx Xxxx, Xxxxx
000, Xxxxxxxxxx, Xxxxxxxx 00000, and its initial registered agent at such
address for service of process is the Corporation Service Company.
2.6 Duration of the Company. The existence of the Company began on
August 11, 2005, and shall continue until terminated in accordance with the
provisions of Article 9 hereof.
2.7 Title to Company Property. All property owned by the Company,
whether real or personal, tangible or intangible, shall be owned by the Company
as an entity, and no Member, individually, shall have any ownership interest in
that property.
2.8 No State-Law Partnership. The Members intend that the Company
shall not be a partnership (including a limited partnership) or joint venture,
and that no Member or Members shall be a partner or joint venturer of any other
Member or Members, for any purposes other than federal and, if applicable, state
and local tax purposes, and this Agreement shall not be construed to the
contrary. The Members intend that the Company shall be treated as a partnership
for federal and, if applicable, state and local income tax purposes, and each
Member and the Company shall file all tax returns and shall otherwise take all
tax and financial reporting positions in a manner consistent with such treatment
and shall exercise commercially reasonable efforts to cause the Company to
remain classified as a partnership for federal and, if applicable, state and
local income tax purposes.
2.9 Dealing with Members. The fact that a Member, an Affiliate of a
Member, or any officer, director, employee, partner, member, consultant or agent
of a Member, is, directly or indirectly, interested in or connected with any
Person employed by the Company to render or perform a service, or from or to
whom the Company may buy or sell any property or have other business dealings,
shall not prohibit a Member from employing such Person or from dealing with such
Person on customary terms and at competitive rates of compensation, and neither
the Company nor any of the other Members shall have any rights in or to any
income or profits derived therefrom.
ARTICLE 3
MANAGEMENT
3.1 Management by, and Authority of, the Board of Managers.
(a) Except for decisions as to which Member consent is
otherwise expressly required hereby or required by non-waivable provisions of
applicable law, (x) the powers of the Company shall be exercised solely by or
under the authority of, and the business and affairs of the Company shall be
managed solely under the direction of, a board of Managers constituted as
provided in Section 3.2(a) hereof (the "Board") and (y) the Board may make all
decisions and take all actions for the Company not otherwise expressly provided
for in this Agreement, including, without limitation, the following:
(i) to maintain the assets of the Company in good order;
10
(ii) to negotiate, execute, deliver, perform and terminate on
behalf and in the name of the Company any and all contracts, deeds, assignments,
deeds of trust, leases, subleases, promissory notes and other evidences of
indebtedness, mortgages, bills of sale, financing statements, security
agreements, easements, stock powers, and any and all other instruments
necessary, appropriate or advisable to the business of the Company and the
financing thereof;
(iii) to borrow money, without limit as to amount, and to
secure the payment thereof by mortgage, pledge, or assignment of, or security
interest in, all or any part of the assets then owned or thereafter acquired by
the Company;
(iv) to open and maintain bank and investment accounts and
arrangements, to draw checks and other orders for the payment of money and to
designate individuals with authority to sign or give instructions with respect
to those accounts and arrangements;
(v) to collect sums due the Company;
(vi) to the extent that funds of the Company are available
therefor, to pay debts and obligations of the Company;
(vii) to acquire, utilize for Company purposes and Dispose of
any asset of the Company;
(viii) to select, remove and change the authority and
responsibility of lawyers, accountants and other advisers and consultants in
connection with the operation of the Company;
(ix) to purchase, at the expense of the Company, liability,
casualty and other insurance and bonds to protect the Company's properties and
assets and the Managers;
(x) to institute, defend and settle litigation on behalf of the
Company;
(xi) to execute any notifications, statements, reports, returns
or other filings that are necessary or desirable to be filed with any state or
Federal agency, commission or authority;
(xii) to determine distributions of cash and other property of
the Company as provided in Article 5 hereof; and
(xiii) to perform all other duties, have all other powers and
do all other things for and on behalf of the Company in all matters necessary,
desirable, convenient or incidental to the purpose of the Company.
(b) The Board may act (x) by resolutions adopted at a meeting
of the Board or by written consents pursuant to Section 3.3 hereof, and (y) by
delegating power and authority pursuant to Section 3.6 hereof.
11
(c) Each Member acknowledges and agrees that no Manager shall,
as a result of being a Manager (as such), be bound to devote all of his or her
business time to the affairs of the Company, and that such Manager and such
Manager's Affiliates do and will continue to engage for their own account and
for the accounts of others in other business ventures.
3.2 Composition of the Board of Managers.
(a) Number. The number of managers (each, a "Manager", and
collectively, the "Managers") of the Company shall be six (6), each of whom
shall serve as a member of the Board. Subject to Sections 3.2(b) and 3.2(c)
hereof, the Managers of the Company shall be the two (2) Xxxxxxx Managers, two
(2) Director Managers and two (2) MM Managers.
(b) Term. Xxxxxxx Managers and Director Managers shall serve
until their resignation, death or removal in accordance with Section 3.2(c)(i)
or (ii) hereof. MM Managers shall serve until their death, or their resignation
or removal from the Board of Directors of MM, in accordance with Section
3.2(c)(i) or (ii) hereof. Managers need not be Members and need not be residents
of the State of Delaware. A Xxxxxxx Manager or a Director Manager may resign as
such by delivering his or her written resignation to the Company at the
Company's principal office addressed to the Board. Such resignation shall be
effective upon receipt unless it is specified to be effective at some other time
or upon the happening of some other event.
(c) Removal and Resignation; Vacancies.
(i) Subject to clause (iii) below, any Director Manager or
Xxxxxxx Manager may be removed on account of such Manager's Disability by the
other Managers.
(ii) In the event of a vacancy on the Board on account of the
death, removal or resignation of a Xxxxxxx Manager, the Xxxxxxx Manager
Replacement, immediately and without further action on the part of any Member or
Manager of the Company, will fill such vacancy and become a Xxxxxxx Manager. In
the event of a vacancy on the Board on account of the death, removal or
resignation of a Director Manager, the Director Manager Replacement, immediately
and without further action on the part of any Member or Manager of the Company,
will fill such vacancy and become a Director Manager. In the event of a vacancy
on the Board on account of the death of, or the removal or resignation from the
Board of Directors of MM of, a MM Manager, the individual who replaces such MM
Manager as a director of MM, immediately and without further action on the part
of any Member or Manager of the Company, will fill such vacancy and become a MM
Manager.
(iii) If a successor Manager has filled the vacancy on the
Board resulting from the removal of a Manager on account of Disability, such
successor Manager shall be removed forthwith upon recovery of the removed
Manager from such Disability and the recovered Manager shall be re-appointed as
a Manager.
(d) Reimbursement. The Company shall reimburse the Managers for
all out-of-pocket expenses reasonably incurred by the Managers in their capacity
as such in the course of their service hereunder, including in connection with
attending regular and special
12
meetings of the Board. The Board's determination of which expenses may be
reimbursed to a Manager, and the amount of such expenses, shall be conclusive.
(e) Compensation of Managers. Managers shall receive no
compensation for serving in such capacity.
(f) Reliance by Third Parties. Any Person dealing with the
Company, other than a Member, may rely on the authority of the Board or any
Director Manager in taking any action in the name of the Company without inquiry
into the provisions of this Agreement or compliance herewith, regardless of
whether that action actually is taken in accordance with the provisions of this
Agreement. Every agreement, instrument or document executed by any Director
Manager (or any person authorized by the Board) in the name of the Company with
respect to any business or property of the Company shall be conclusive evidence
in favor of any Person relying thereon or claiming thereunder that (i) at the
time of the execution or delivery thereof, this Agreement was in full force and
effect, (ii) such agreement, instrument or document was duly executed according
to this Agreement and is binding upon the Company and (iii) such Director
Manager or person was duly authorized and empowered to execute and deliver such
agreement, instrument or document for and on behalf of the Company.
3.3 Board Meetings and Actions by Written Consent.
(a) Quorum; Voting. A majority of the Managers shall constitute a
quorum for the transaction of business at any meeting. Except as expressly set
forth herein, the action of the majority of the Managers present at a meeting at
which a quorum is present shall be the action of the Board of Managers.
(b) Place; Attendance. Meetings of the Board may be held at such
place or places as shall be determined from time to time by resolution of the
Board. At all meetings of the Board, business shall be transacted in such order
as shall from time to time be determined by resolution of the Board. Attendance
of a Manager at a meeting shall constitute a waiver of notice of such meeting,
except where a Manager attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
(c) Time, Place and Notice. Regular meetings of the Board shall be
held at such times and places as shall be designated from time to time by
resolution of the Board. Notice of such meetings shall not be required.
(d) Special Meetings. Special meetings of the Board may be called
by any Director Manager on at least 24 hours' notice to each other Manager. Such
notice need not state the purpose or purposes of, nor the business to be
transacted at, such meeting, except as may otherwise be required by law or
provided for in this Agreement.
(e) Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the Certificate of Formation or this Agreement
to be taken at a meeting of the Board may be taken without a meeting if a
consent in writing, setting forth the action to be taken, is signed by a
majority of the Managers. Such consent shall have the same force and effect as a
majority vote at a meeting and may be stated as such in any document or
13
instrument filed with the Secretary of State of Delaware or otherwise, and the
execution of such consent shall constitute attendance or presence in person at a
meeting of the Board. Subject to the requirements of the Act, the Certificate of
Formation or this Agreement for notice of meetings, unless otherwise restricted
by the Certificate of Formation, the Managers may participate in and hold a
meeting of the Board by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such meeting shall constitute
attendance and presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
3.4 Supermajority Voting.
(a) Notwithstanding Sections 3.3(a) and 3.3(e), without first
obtaining the affirmative vote or written consent of at least five (5) Managers,
the Company shall not:
(i) Effect any merger, consolidation, combination, or any other
comparable transaction of the Company with or into any other entity, or any
sale, transfer, encumbrance or other disposition of a significant (as such term
is defined in the context of "significant subsidiary" in Rule 1-01(w) of
Regulation S-X) portion of the assets of the Company;
(ii) Incur indebtedness (other than Permitted Indebtedness)
that, together with any other indebtedness of the Company (other than Permitted
Indebtedness), would cause the aggregate debt of the Company to exceed the
greatest of (x) $2,000,000, (y) 20% of the Capitalization of MM or (z) five
times the greater of the annual net income of MM or the annual net income of the
Company as reflected on the audited income statement of MM or the Company, as
the case may be, for its most recently concluded fiscal year;
(iii) Issue additional Membership Interests;
(iv) Make a demand under the Promissory Note; or
(v) Enter into, materially amend, or vote not to extend the
term of any employment agreement or comparable arrangements in respect of (a)
any executive officer (as defined in Rule 3b-7 promulgated under the Exchange
Act) of the Company, (b) the heads of sales and marketing of the Company, or (c)
any person who is a member of the immediate family (as such term is defined in
Item 404 of Regulation S-K under the Securities Act) of Xxxxxxx Xxxxxxxx, GF, or
any Manager or executive officer of the Company (provided that the terms of any
extension shall remain within the discretion of the Board).
(b) The Company shall not enter into or materially amend any
contract, agreement or other arrangement relating to the use of the Xxxxxxx
Assets with an entity other than a Controlled Entity, unless the subject matter
of such contract, agreement, arrangement or amendment has been approved by at
least five (5) members of the Board pursuant to either an affirmative vote or
written consent.
14
3.5 Xxxxxxx Manager Voting. No Xxxxxxx Manager shall be entitled to
vote on any matter in a way that is inconsistent or divergent with the vote of
the Xxxxxxx Designees (as such term is defined in the Investor Rights Agreement)
on the Board of Directors of MM with respect to the same or any substantially
related matter.
3.6 Delegation of Authority and Duties; Officers.
(a) Delegation; Designation and Appointment. The Board may, from
time to time, delegate to one or more Persons (including any Manager) such
authority and duties as the Board may deem advisable in addition to those powers
and duties set forth in Section 3.1 hereof. The Board also may assign titles to
any Manager or other individual and may delegate to such Manager or other
individual certain authority and duties. Any number of titles may be held by the
same Manager or other individual. Any delegation pursuant to this Section 3.6(a)
may be revoked at any time by the Board. Without limiting the generality of the
foregoing, the Board shall appoint a chief executive officer, president, one or
more vice presidents (whether executive vice presidents or otherwise) and such
other officers, if any, as it determines from time to time (each, an "Officer").
No Officer need be a resident of the State of Delaware, a Member, or a Manager.
Any Officers so designated shall have such authority and perform such duties as
the Board may, from time to time, delegate to them by resolution, pursuant to a
written employment agreement or otherwise. The Board may assign titles to
particular Officers. Each Officer shall hold office until his successor shall be
duly designated and shall qualify or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided. Any number of
offices may be held by the same individual. The salaries or other compensation,
if any, of the Officers and agents of the Company shall be fixed from time to
time by the Board. The Officers, as of the date hereof, are as set forth on
Schedule B hereto.
(b) Duties of Officers. The following Officers, to the extent such
Officers have been appointed by the Board, shall have the following duties and
such other duties as may be provided by the Board or in such Officer's written
employment agreement:
(i) Chief Executive Officer. The person who serves as the chief
executive officer of the Company shall, except as otherwise determined by the
Board, have direct charge of all business operations of the Company and, subject
to the control of the Managers, shall have general supervision over the entire
business of the Company. The chief executive officer of MM shall serve as the
chief executive officer of the Company.
(ii) President. Unless the Board otherwise specifies, the
president shall be the chief operating officer of the Company. The president
shall be vested with all the powers and required to perform all the duties of
the chief executive officer in his absence or disability and shall perform such
other duties as may be prescribed by the Board. The president of MM shall serve
as the president of the Company.
(iii) Vice President. Vice president(s) shall be vested with
all the powers and required to perform such duties as may be prescribed by the
Board, the chief executive officer or the president; provided, however, that if
the employment agreement of a particular vice president does not specify that
the president may prescribe duties to such vice president, the vice president
shall not be required to perform duties prescribed by the president (unless such
duties are also prescribed by either the Board or the chief executive officer).
15
3.7 Liability of Managers and Officers. The Managers and Officers
shall not be liable for the obligations or liabilities of the Company. The
failure of the Company to observe any formalities or requirements relating to
the exercise of its powers or management of its business or affairs under this
Agreement or the Act shall not be a ground for imposing personal liability on
any of the Managers or Officers for the obligations or liabilities of the
Company.
3.8 Fiduciary Relationship. To the extent permitted by applicable
law, no Member, Manager or Officer shall have any duty (including any fiduciary
duty) to the Company or its Members other than as provided in this Agreement,
including, without limitation, any fiduciary duty associated with self-dealing
or corporate opportunities, so long as such Member, Manager or Officer conducts
himself, herself, or itself in a manner consistent with this Agreement.
ARTICLE 4
CAPITAL CONTRIBUTIONS; MEMBERSHIP INTERESTS
4.1 Capital. The capital of the Company shall consist of amounts
contributed to the Company pursuant to this Article 4.
4.2 Capital Contributions. The Capital Contributions of each of the
Members are as set forth on Schedule A hereto.
4.3 Capital Accounts.
(a) A Capital Account shall be maintained for each Member in
accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited
such Member's Capital Contributions (net of any liabilities assumed or taken
subject to by the Company in connection therewith) and such Member's allocable
share of Profits and such items of income and gain as are specially allocated to
a Member in accordance with the terms of this Agreement.
(ii) To each Member's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Company property (net of any
liabilities assumed or taken subject to by such Member in connection therewith)
distributed to such Member pursuant to any provision of this Agreement and such
Member's allocable share of Losses and such items of expense, deduction and loss
as are specially allocated to a Member in accordance with the terms of this
Agreement.
(iii) In the event any Membership Interest is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
Membership Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulation
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event that the Board
16
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are computed in order to comply with
such Regulations, the Board may make such modification, provided that it is not
likely to have a material effect on the amounts distributable to any Member
pursuant to Section 5.1 or Section 9.3 hereof. The Board also shall make any
appropriate modifications in the event unanticipated events (for example, the
Company making an election under Code Section 754) might otherwise cause this
Agreement not to comply with Regulation Section 1.704-1(b).
(b) No interest shall be paid by the Company on any Capital
Contribution or on the balance of any Member's Capital Account. A Member shall
not be entitled to demand the return of, or to withdraw, any part of such
Member's Capital Contribution or any balance in such Member's Capital Account,
or to receive any Distribution, except as provided for in this Agreement. No
Member shall be liable for the return of the Capital Contributions of any other
Member and no Member shall have any obligation to restore the amount of any
deficit in such Member's Capital Account to the Company.
4.4 Withdrawal of Capital. No Member will be entitled to withdraw
all or any part of such Member's Capital Contribution or Capital Account from
the Company prior to the Company's dissolution or, if such withdrawal is
permitted, to demand a Distribution of property other than money; provided that
upon the occurrence of any of the events specified in Section 11(i)-(iv) of the
Assignment Agreement (i.e., bankruptcy dissolution), GF and GFPI shall receive a
distribution of the Xxxxxxx Assets in accordance with the Assignment Agreement
and in accordance with Section 9.3 hereof.
4.5 No Interest on Capital. No Member will be entitled to receive
interest on such Member's Capital Account or any Capital Contribution.
4.6 No Deficit Make-Up. No Member shall be obligated, including on a
liquidation of the Company within the meaning of Regulation Section
1.704-1(b)(2)(ii)(g), to restore any negative balance in such Member's Capital
Account.
ARTICLE 5
DISTRIBUTIONS; ALLOCATIONS OF INCOME AND LOSSES
5.1 Distributions.
(a) Except as otherwise provided in this Section 5.1, and Sections
4.4, 9.2 and 9.3 hereof, Distributions of cash or other property of the Company
shall be made to the Members, as and when determined in the sole and absolute
discretion of the Board, as follows:
(i) Distributions with respect to the Traditional Licensing
Business shall be made as follows:
(A) To GF and GFPI, in proportion to their respective
Capital Contributions, an aggregate amount equal to the
Assignor Royalty payable in respect of any fiscal year
under the Assignment Agreement (after taking into account
any
17
adjustments set forth in Section 4 of the Assignment
Agreement and Section 5.1(c) hereof), which amount shall be
paid pursuant to, and in the time and manner provided in,
the Assignment Agreement, but which shall be treated as a
Distribution hereunder; and
(B) To MM, an amount equal to the Net Traditional License
Payments (as such term is defined in the Assignment
Agreement), less the Assignor Royalty (after taking into
account any adjustments set forth in Section 4 of the
Assignment Agreement and Section 5.1(c) hereof), which the
Company is entitled to retain under the Assignment
Agreement.
(ii) Distributions with respect to the Non-Traditional
Businesses shall be made to the Members in proportion to their relative Company
Percentages with respect to the Non-Traditional Businesses.
To the extent the Company may be required by law to withhold or to
make tax payments on behalf of or with respect to a Member, the Company may
withhold such amounts and make such tax payments as so required. All such
payments made on behalf of a Member must, at the option of the Board, (x) be
promptly repaid to the Company by the Member on whose behalf such payments were
made or (y) be repaid by reducing the amount of the current or next succeeding
distribution or distributions (including, if necessary, liquidating
distributions) that would otherwise have been made to that Member, which
reduction amount shall for all purposes of this Agreement be treated as having
been distributed to such Member.
(b) [Intentionally Deleted]
(c) Notwithstanding anything to the contrary contained in this
Section 5.1, in the event that the Company shall engage in the conduct of
Non-Traditional Businesses, the Members shall have the right, to the extent that
there is sufficient Available Cash therefor, to receive a Tax Distribution. If
and to the extent that GF and/or GFPI, as the case may be, elect to receive such
Tax Distribution, but MM elects not to receive such Tax Distribution, then, in
addition to such other consequences as are set forth in this Agreement and the
Assignment Agreement, the following shall occur in accordance with Section 4 of
the Assignment Agreement: (i) first, the amount of the Assignor Royalty that
would otherwise be payable to the Assignor under the Assignment Agreement in
respect of a given fiscal year of the Company shall be reduced by the amount of
the Tax Distribution that GF and/or GFPI have elected to receive (the amount by
which the Assignor Royalty is reduced, the "Reduction Amount"); (ii) the
Reduction Amount shall be retained by the Company for working capital and other
purposes, until such time as the Board shall determine, in its sole and absolute
discretion, to distribute cash in an amount equal to the Reduction Amount in
accordance with Section 5.1(a)(ii) hereof; (iii) if and to the extent that the
Reduction Amount in respect of any fiscal year of the Company should exceed the
amount of the Assignor Royalty that would otherwise be payable to GF and GFPI
under the Assignment Agreement for such year, such excess (the "Excess Reduction
Amount") shall next be applied to reduce up to (but not in excess of) the amount
of the Bonus that would otherwise be payable to GFPI under the Services
Agreement for such year; and (iv) the Excess
18
Reduction Amount shall be retained by the Company for working capital and other
purposes, until such time as the Board shall determine, in its sole and absolute
discretion, to distribute cash in an amount equal to the Excess Reduction Amount
in accordance with Section 5.1(a)(ii) hereof. Tax Distributions shall be treated
as advances against Distributions to be made to the Members under Section
5.1(a)(ii) hereof.
5.2 Allocations of Profits. After making the allocations set forth
in Section 5.4 hereof, Profits for each fiscal year shall be allocated to the
Members in proportion to their relative Company Percentages with respect to the
Non-Traditional Businesses.
5.3 Allocation of Losses. After making the allocations set forth in
Section 5.4 hereof, Losses for each fiscal year shall be allocated to the
Members in proportion to their relative Company Percentages with respect to the
Non-Traditional Businesses.
5.4 Special Allocations. Except as otherwise provided, the following
special allocations shall be made:
(a) Gross Income Allocations. Notwithstanding anything to the
contrary set forth in Section 5.2 hereof or in the Assignment Agreement, gross
income of the Company in respect of any fiscal year shall be specially allocated
to the Members in the circumstances and in the amounts set forth below:
(i) Gross income shall be allocated to GF and GFPI, pro rata in
accordance with their respective Company Percentages with respect to the
Traditional Licensing Business, in an amount equal to the Assignor Royalty
payable in respect of any fiscal year under the Assignment Agreement (after
taking into account any adjustments set forth in Section 4 thereof and Section
5.1(c) hereof), it being intended that for federal, state and local income tax
purposes such Assignor Royalty shall be treated as a special allocation of gross
income to such Members rather than as a payment to such Members acting in a
capacity other than that of a Member under Section 707(a) of the Code;
(ii) Gross income shall be allocated to MM in an amount equal
to the Net Traditional License Payments (as such term is defined in the
Assignment Agreement), less the Assignor Royalty (prior to taking into account
any adjustments set forth in Section 4 of the Assignment Agreement and Section
5.1(c) hereof), which the Company is entitled to retain under the Assignment
Agreement; and
(iii) Gross income shall be allocated to MM in an amount equal
to the sum of any Reduction Amount and any Excess Reduction Amount retained by
the Company in accordance with Section 4 of the Assignment Agreement and Section
5.1(c) hereof.
(b) Qualified Income Offset. If a Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulation Sections
1.704-l(b)(2)(ii)(d)(4), (5), or (6), or otherwise has an Adjusted Capital
Account Deficit as of the end of a taxable year, items of Company income and
gain shall be specially allocated to the Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of the Member as quickly as possible, provided that an
allocation pursuant to this Section 5.4(b) shall be made only if and to the
extent that such Member would have an
19
Adjusted Capital Account Deficit after all other allocations provided for in
this Article 5 have been tentatively made as if this Section 5.4(b) were not in
the Agreement.
(c) Minimum Gain Chargeback. Notwithstanding the preceding
provisions of this Article 5, except as otherwise provided in Regulation Section
1.704-2(f), if there is a net decrease in the Company Minimum Gain during a
fiscal year, each Member with a share of Company Minimum Gain shall be allocated
items of Company income and gain for that year (and, if necessary, subsequent
years), in accordance with Regulation Sections 1.704-2(f) and 1.704-2(j)(2)(i),
in an amount equal to such Member's share of the net decrease in the Company
Minimum Gain. This Section 5.4(c) is intended to comply with the minimum gain
chargeback requirement in Regulation Section 1.704-2(f) and shall be interpreted
consistently therewith.
(d) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 5, except as otherwise provided in Regulation Section
1.704-2(i)(4), if there is a net decrease in the Member Minimum Gain during a
fiscal year, after the allocation required by Section 5.4(c), but prior to any
other allocation for the year, each Member with a share of the Member Minimum
Gain shall be allocated items of Company income and gain for that year (and, if
necessary, subsequent years), in accordance with Regulation Section
1.704-2(j)(2)(ii), in an amount equal to such Member's share of the net decrease
in the Member Minimum Gain. This Section 5.4(d) is intended to comply with the
partner minimum gain chargeback requirement in Regulation Section 1.704-2(i)(4)
and shall be interpreted consistently therewith.
(e) Company Nonrecourse Deductions. Company Nonrecourse Deductions
for each fiscal year shall be allocated among the Members in proportion to their
respective Company Percentages.
(f) Member Nonrecourse Deductions. Notwithstanding anything to the
contrary herein, Member Nonrecourse Deductions for each fiscal year shall be
allocated to the Member who bears the economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulation Section 1.704-2(i)(1).
5.5 Regulatory Allocations. The allocations set forth in Section 5.4
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of Regulation Section 1.704-l(b) and 1.704-2. The Regulatory
Allocations may not be consistent with the manner in which the Board intends to
divide Company Distributions. Accordingly, the Board, on advice of tax counsel
or independent accountant to the Company, is hereby authorized to allocate
Profits, Losses, and other items among the Members so as to prevent the
Regulatory Allocations from distorting the manner in which Company Distributions
will be made among the Members pursuant to Sections 5.1 and 9.3 hereof. In
general, the Members anticipate that this will be accomplished by specially
allocating other Profits, Losses, and items of income, gain, loss, and deduction
among the Members so that the net amount of the Regulatory Allocations and such
special allocations (after taking into account future Regulatory Allocations) to
each such Member is zero. However, the Board shall have discretion to accomplish
this result in any reasonable manner permitted under Regulation Section
1.704-1(b).
20
5.6 Other Allocations Rules. Except as otherwise provided in this
Agreement, all items of Company income, gain, loss, deduction and any other
allocations not otherwise provided for shall be allocated among the Members in
the same proportions as they share Profits or Losses, as the case may be, for
the year.
5.7 Tax Allocations: Code Section 704(c). Income, gain, loss and
deduction with respect to Company property shall be allocated among the Members
for federal income tax purposes in accordance with the principles of Section
704(c) of the Code and Regulation Section 1.704-3 promulgated thereunder so as
to take into account the variation, if any, between the adjusted tax basis of
such property and its Gross Asset Value. Any allocation required by Code Section
704(c) shall be made using the "traditional method" as described in Regulation
Section 1.704-3(b). Allocations pursuant to this Section 5.7 are solely for
purposes of federal, state and local income taxes and shall not affect, or in
any way be taken into account in computing, any Member's Capital Account or
share of Distributions.
5.8 Tax Elections. The Board may in its discretion elect in
accordance with Section 754 of the Code to adjust the basis of the assets of the
Company for Federal income tax purposes in the event of a distribution of
Company property as described in Section 743 of the Code or a transfer by any
Member of such Member's Membership Interest as described in Section 743 of the
Code; provided, however, that the Company shall make such election if requested
by the estate of GF. The Board may make such other tax elections as it
determines from time to time .
5.9 Transfers. If any Membership Interest is transferred pursuant to
and in compliance with Article 7 hereof, Profits and Losses and other items
allocable to the transferred Membership Interest shall be divided and allocated
between the transferor and the transferee by taking into account their varying
interest during the relevant period in accordance with Section 706(d) of the
Code using any conventions permitted by law and reasonably selected by the
Board.
ARTICLE 6
BOOKS AND RECORDS; REPORTS; ACCOUNTS
6.1 Books and Records. True and correct books of account with
respect to the operations of the Company shall be kept at the principal place of
business of the Company. The Board shall be responsible for keeping the books of
account. The Company shall also maintain at its principal place of business the
following records: (a) a current list of the full name and last known business
address of each Member set forth in alphabetical order, (b) a copy of the
Certificate of Formation and all certificates of amendment thereto, together
with executed copies of any powers of attorney pursuant to which any certificate
has been executed, (c) copies of the Company's Federal, state and local income
tax returns and reports, if any, for the three most recent years and (d) copies
of any then effective operating agreements and of any financial statements of
the Company for the three most recent years.
Any Member shall have the right to examine, or have such Member's
duly authorized representative examine, the books of account of the Company and
such other
21
information reasonably related to such Member's Membership Interest, and such
books shall be available at any reasonable time at the office at which those
books are maintained.
6.2 Accounting Basis and Fiscal Year. The Company's books shall be
kept on the accrual method of accounting. The fiscal year of the Company shall
be the calendar year, except as otherwise required by the Code.
6.3 Tax Returns. The Board, at the Company's expense, shall prepare
or cause to be prepared and shall file on or before the due date (or any
extension thereof) any Federal, state or local tax returns required to be filed
by the Company. Also within 60 days after the end of each fiscal year or as soon
thereafter as practicable, the Company shall furnish each Member with such
information as may be needed to enable each Member to file such Member's Federal
income tax return and any required state and local income tax return.
Notwithstanding anything in this Agreement to the contrary, GF shall be provided
with a copy of any federal, state or local income tax return at least fifteen
(15) days prior to the filing thereof, for his review and comment.
6.4 Tax Matters Member. Pursuant to Section 6231(a)(7)(A) of the
Code, MM is hereby designated as the Tax Matters Member of the Company for all
purposes of the Code and for the corresponding provision of any state or local
statute. Each of the Members hereby consents to such designation and agrees to
take any such further action as may be required by Regulations or otherwise to
effectuate such designation. The Tax Matters Member is authorized and required
to represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by any tax authorities, including
resulting judicial and administrative proceedings, and to expend Company funds
for professional services and costs associated therewith. The decisions of the
Tax Matters Member shall be final and binding as to all Members except to the
extent that any Member files a statement not to be bound by a settlement
pursuant to Code Section 6224(c)(3); provided, however, that the Tax Matters
Member shall periodically advise and consult with GF (or his duly authorized
representatives) as to such matters as the status and nature of the controversy
with such tax authorities and the appropriate approach for dealing with such
controversy, and provided, further, that the Tax Matters Member shall not
undertake to litigate or settle any tax controversy without first consulting
with GF (or his duly authorized representatives).
ARTICLE 7
TRANSFERS OF INTERESTS
7.1 Transfers of Membership Interests. No Member may sell, transfer,
assign or otherwise Dispose (as the case may be, a "Transfer") the whole or any
part of such Member's Membership Interest (including, but not limited to, the
right to receive any Distributions under this Agreement) without the written
consent of the Board; provided, however, that an exchange of Membership
Interests in accordance with the provisions of the Investor Rights Agreement
shall not constitute a Transfer of Membership Interests for purposes hereof. Any
Transfer of any Membership Interest in violation of this Article 7 shall be null
and void and of no effect for any purpose.
22
7.2 Certain Transfers by the Members. Notwithstanding anything to
the contrary contained in this Agreement, any Member may, without obtaining the
prior written consent of the Board, Transfer all or any portion of such Member's
Membership Interest to any of such Member's Related Transferees; provided that
such Related Transferee shall first execute and deliver to the transferring
Member and the Company a written consent to be bound by all of the provisions of
this Agreement as though such Related Transferee were the transferring Member.
In the event of any Transfer by a Member to such Member's Related Transferees of
all or any portion of such Member's Membership Interests (or in the event of any
subsequent Transfer by any such Related Transferee to another Related Transferee
of such Member), such Related Transferees shall receive, hold and vote said
Membership Interests subject to the terms of this Agreement and the rights and
obligations hereunder of the Member from whom such Membership Interests were
originally Transferred as though said Membership Interests were still owned by
such Member, and such Member (together with all of such Member's Related
Transferees) shall continue to be deemed a single Member for all purposes of
this Agreement. There shall be no further Transfer of such Membership Interests
by a Related Transferee except between and among such Related Transferee, the
Member to which such Related Transferee is "Related" and another Related
Transferee of such Member, or except as is otherwise expressly permitted by this
Agreement or to which the Company has given its prior written consent.
7.3 Substitute Members. The transferee of a Membership Interest
transferred pursuant to this Article 7 shall be admitted as a substitute member
of the Company with respect to such transferred Membership Interest at the time
such admission is reflected in the records of the Company and such transferee
shall have the right to be admitted as a substitute Member only if (a) the
Transfer is in accordance with this Article 7, (b) the transferring Member so
provides in an instrument of assignment, (c) the transferee agrees in writing to
be bound by the terms of this Agreement and (d) the transferee pays the
reasonable costs incurred by the Company in preparing and recording any
necessary amendments to this Agreement and the Certificate of Formation, unless
the Board consents to waiving such costs.
7.4 Pledges of Membership Interests. No Member shall pledge or
otherwise encumber such Member's Membership Interest, unless a Supermajority in
Interest shall consent in writing to such pledge or encumbrance, which consent
may be granted or withheld in each Member's sole and absolute discretion. Any
purported pledge of or other encumbrance on a Membership Interest which is not
in compliance with this Agreement shall be null and void and of no force or
effect whatsoever.
ARTICLE 8
LIABILITY; EXCULPATION; INDEMNIFICATION
8.1 Liability. Except as otherwise specifically provided herein, or
under the Act or any other applicable law, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Member or Manager shall be obligated personally or individually for any such
debt, obligation or liability of the Company solely by reason of being a Member
or a Manager; provided that a Member shall be required to return to the Company
any Distribution made to such Member in clear and manifest accounting or similar
error. The immediately preceding sentence shall constitute a compromise to which
all Members have consented within the meaning
23
of the Act. Notwithstanding anything contained herein to the contrary, the
failure of the Company to observe any formalities or requirements relating to
the exercise of its powers or management of its business and affairs under this
Agreement or the Act shall not be grounds for imposing personal or individual
liability on the Members for liabilities of the Company.
8.2 Exculpation. No Member, Manager, or officer, employee, or other
agent of the Company (including a Person having more than one such capacity)
(each, a "Covered Person") shall be liable to the Company or any Member for any
loss, liability, damage or claim incurred by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the
Company, except for any such act or omission that constituted gross negligence
or willful misconduct. Whenever any Covered Person acts in accordance with the
standard set forth in the immediately preceding sentence, such Person shall not
be subject to any other or different standard imposed by this Agreement or any
relevant provisions of law or in equity or otherwise. A Covered Person shall be
fully protected in relying in good faith upon the records of the Company and
upon such information, opinions, reports or statements presented to the Company
by any person or entity as to matters the Covered Person reasonably believes are
within such Person's or entity's professional or expert competence. The
provisions of this Agreement, to the extent they restrict the duties and
liabilities of a Covered Person otherwise existing at law or in equity in the
absence of this Agreement, are agreed by the Members to replace such other
duties and liabilities of such Covered Person.
8.3 Indemnification by Company. Any Person who was or is a Member or
a Manager or an officer, employee, or other agent of the Company, or was or is
serving at the request of the Company as a director, officer, employee, or other
agent of another limited liability company, corporation, partnership, joint
venture, trust, or other enterprise (each, an "Indemnified Party", and
collectively, the "Indemnified Parties") shall, in accordance with this Article
8, be indemnified and held harmless by the Company from and against any and all
losses, claims, damages, liabilities, expenses (including reasonable legal and
other professional fees and disbursements), judgments, fines, settlements, and
other amounts incurred (collectively, the "Indemnification Obligations") in
connection with any and all claims, demands, actions, suits or proceedings
(civil, criminal, administrative or investigative), actual or threatened, in
which such Indemnified Party may be involved, as a party or otherwise, by reason
of such Indemnified Party's service to, or on behalf of, or management of the
affairs of, the Company, or rendering of advice or consultation with respect
thereto, whether or not the Indemnified Party continues to be serving in the
above-described capacity at the time any such Indemnification Obligation is paid
or incurred. Notwithstanding the foregoing, no indemnification shall be provided
by the Company with respect to any Indemnification Obligation that resulted from
action or inaction of such Indemnified Party that, in each case, constituted
gross negligence or willful misconduct. The Company shall also indemnify and
hold harmless each Indemnified Party from and against any Indemnification
Obligation suffered or sustained by such Indemnified Party by reason of any
action or inaction of any employee, broker or other agent of such Indemnified
Party, whether or not the Indemnified Party continues to be serving in the
above-described capacity at the time any such Indemnification Obligation is paid
or incurred; provided that such employee, broker or agent was selected, engaged
or retained by such Indemnified Party with reasonable care. The termination of a
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not, of itself, create a presumption that
such Indemnification Obligation resulted from the gross negligence or willful
misconduct of such Indemnified Party.
24
Expenses (including reasonable legal and other professional fees and
disbursements) incurred in any proceeding will be paid by the Company, as
incurred, in advance of the final disposition of such proceeding upon receipt of
an undertaking by or on behalf of such Indemnified Party to repay such amount if
it shall ultimately be determined that such Indemnified Party is not entitled to
be indemnified by the Company as authorized hereunder.
8.4 Indemnification Not Exclusive. The indemnification provided by
Section 8.3 hereof shall not be deemed to be exclusive of any other rights to
which an Indemnified Party may be entitled under any agreement, or as a matter
of law, or otherwise, both as to action in such Indemnified Party's official
capacity and to action in another capacity, and shall continue as to any
Indemnified Party who has ceased to have an official capacity for acts or
omissions during such official capacity or otherwise when acting at the request
of the Company, or any Person granted authority thereby, and shall inure to the
benefit of the heirs, successors and administrators of such Indemnified Party.
8.5 Insurance on Behalf of Indemnified Party. The Company shall have
the power but not the obligation to purchase and maintain insurance on behalf of
each Indemnified Party, at the expense of the Company, against any liability
which may be asserted against or incurred by such Indemnified Party in any such
capacity, whether or not the Company would have the power to indemnify the
Indemnified Parties against such liability under the provisions of this
Agreement.
8.6 Indemnification Limited by Law. Notwithstanding any of the
foregoing to the contrary, the provisions of this Article 8 shall not be
construed so as to provide for any indemnification for any liability to the
extent (but only to the extent) that such indemnification would be in violation
of applicable law or that such liability may not be waived, modified or limited
under applicable law, but shall be construed as to effectuate the provisions of
this Article 8 to the fullest extent permitted by law.
ARTICLE 9
DISSOLUTION AND TERMINATION
9.1 Events of Dissolution. The Company shall be dissolved upon the
earliest to occur of either of the following events:
(a) the agreement of the Board and a Supermajority in Interest; or
(b) the entry of a decree of judicial dissolution under Section
18-802 of the Act.
Dissolution of the Company shall be effective on the day the event
occurs giving rise to the dissolution, but the Company shall not terminate until
the Certificate of Formation of the Company has been cancelled and the assets of
the Company have been distributed as provided herein.
9.2 Limited Return of Capital Contributions Upon Dissolution. Each
Member shall look solely to the assets of the Company for all Distributions with
respect to the
25
Company and such Member's Capital Contribution, and shall have no recourse
therefor (upon dissolution or otherwise) against any Member. Notwithstanding the
dissolution of the Company, the business of the Company and the affairs of the
Members, as such, shall continue to be governed by this Agreement until
termination of the Company, as provided in this Agreement. Upon dissolution of
the Company, a liquidator appointed by the Board shall liquidate the assets of
the Company, apply and distribute the proceeds thereof (or, if determined by the
Board, make Distributions in kind) as contemplated by this Agreement and cause
the cancellation of the Company's Certificate of Formation.
9.3 Distributions Upon Liquidation. (a) Upon dissolution of the
Company, the liquidator appointed pursuant to Section 9.2 hereof, as applicable,
shall liquidate the assets of the Company as promptly as is consistent with
obtaining the fair value thereof, and apply and distribute the proceeds thereof:
(i) First, to creditors, in the order of priority provided by
law;
(ii) Second, to the establishment of any reserves for
contingencies which the liquidator may consider necessary;
(iii) Third, to the Members in accordance with their respective
positive Capital Account balances.
(b) Notwithstanding the foregoing, in the event the liquidator
shall reasonably determine that an immediate sale of part or all of the Company
assets would cause undue loss to the Members, the liquidator, in order to avoid
such loss, may, after giving notice to all the Members, to the extent not then
prohibited by the limited liability company law of any jurisdiction in which the
Company is then formed or qualified and applicable in the circumstances, defer
liquidation of and withhold from distribution for a reasonable time any assets
of the Company except those necessary to satisfy the Company's debts and
obligations.
(c) After the proceeds of the liquidation of the assets of the
Company have been distributed (which shall occur as soon as practical), the
liquidator shall cause the Certificate of Formation of the Company to be
cancelled.
(d) If the Board determines that any assets should be distributed
in kind, such assets shall be distributed to the Members in the same amounts,
sequence and priority as if such Distribution were made in cash rather than in
kind; provided, however, that upon the occurrence of any of the events specified
in Section 11(i)-(iv) of the Assignment Agreement (i.e., bankruptcy
dissolution), GF and GFPI in accordance with the Assignment Agreement shall
receive a distribution of the Xxxxxxx Assets, pro rata in proportion to their
respective Company Percentages. Such assets as are distributed in kind shall be
valued at their fair market value, and the difference between such value and the
Gross Asset Value of such assets shall be treated as gain or loss, as the case
may be, from the disposition of such assets for purposes of computing Profits or
Losses.
9.4 Final Accounting. Upon the dissolution of the Company a proper
accounting shall be made by the Company's accountants from the date of the last
previous accounting to the date of dissolution.
26
ARTICLE 10
MISCELLANEOUS
10.1 Notices. Any notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
Member giving such notice, election or demand, shall be sent by personal
delivery, nationally recognized overnight courier service or telecopier and
addressed: (i) if to the Company, to x/x XX Xxxxxxxxx, Xxx., 000 X. Xxxxxx-Xxxxx
Blvd., 4th Floor, Xxxxxx-Xxxxx, Pennsylvania 18702, or to such other address as
may be supplied by written notice given in conformity with the terms of this
Section 10.1; and (ii) if to a Member, at the last address recorded for such
Member on the books and records of the Company. All notices shall be deemed to
have been delivered on the date of their delivery if personally delivered or if
transmitted by telecopier (provided receipt of such transmission is confirmed;
if not transmitted on a business day, such notice shall be deemed to have been
delivered on the first business day after such transmission) or on the first
business day after deposit with the courier service if delivered by courier.
10.2 Amendments. This Agreement may be amended only by a written
document approved by and duly executed by Supermajority in Interest, subject to
the condition that such amendment shall not increase the Capital Contribution of
any Member or adversely affect any Distribution or allocation to any Member
without such Member's written consent.
10.3 Company Property. The Company's property shall consist of all
its assets and funds. Title to the Company's property may be taken and held only
in the name of the Company or in such other name or names as shall be determined
by the Board; provided, however, that if title is held other than in the name of
the Company, the Person or Persons who hold title shall certify by instrument
duly executed and acknowledged, in form for recording or filing, that title is
held as nominee and/or trustee for the benefit of the Company pursuant to the
terms of this Agreement and an executed copy of such instrument shall be
delivered to each Member. All property now or hereafter owned by the Company
shall be deemed owned by the Company as an entity and no Member, individually,
shall have any ownership of such property.
10.4 Partition. No Member or any successor-in-interest to any Member
shall have the right while this Agreement remains in effect to have any Company
assets partitioned, and each Member, on behalf of itself, such Member's
successors, representatives, heirs and assigns, hereby waives any such right. It
is the intention of the Members that during the term of this Agreement the
rights of the Members and their successors-in-interest, as among themselves,
shall be governed by the terms of this Agreement, and that the rights of any
Member or successor-in-interest to assign, transfer, sell or otherwise Dispose
of any interest in the Company shall be subject to the limitations and
restrictions of this Agreement.
10.5 Reimbursements. The Company shall reimburse each Manager for
all ordinary and necessary out-of-pocket expenses reasonably incurred by such
Manager on behalf of the Company. Such reimbursement shall be treated as an
expense of the Company and shall not be deemed to constitute a distributive
share of profits or a distribution or return of capital to any Manager who is
also a Member.
27
10.6 No Waiver. The failure of any Member to insist upon strict
performance of a covenant under this Agreement or of any obligation under this
Agreement, irrespective of the length of time for which such failure continues,
shall not be a waiver of that Member's right to demand strict compliance in the
future. No consent or waiver, express or implied, to or of any breach or default
in the performance of any obligation under this Agreement shall constitute a
consent or waiver to or of any other breach or default in the performance of the
same or any other obligation under this Agreement. No waiver or consent shall be
effective unless in writing.
10.7 Entire Agreement. This Agreement constitutes the full and
complete agreement of the parties to this Agreement with respect to the subject
matter of this Agreement and all other agreements or understandings, whether
written or oral, are hereby superseded.
10.8 Captions. The titles or captions of Articles or Sections
contained in this Agreement are inserted only as a matter of convenience and for
reference, are not a part of this Agreement, and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision of this
Agreement.
10.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall for all purposes constitute one
agreement, binding on all the Members, notwithstanding that all Members have not
signed the same counterpart.
10.10 Severability. In case any of the provisions contained in this
Agreement or any application of any of those provisions shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained in this Agreement and other
applications of those provisions shall not in any way be affected or impaired
thereby.
10.11 Applicable Law. This Agreement and the rights and obligations
of the parties under this Agreement shall be governed by and interpreted,
construed and enforced in accordance with the law of the State of Delaware
(without regard to conflict of laws principles).
10.12 Rights of Creditors and Third Parties. This Agreement is
entered into among the Members for the exclusive benefit of the parties to this
Agreement. This Agreement is expressly not intended for the benefit of any
creditor of the Company or of any Member or any other Person other than the
parties to this Agreement. No such creditor or other Person shall have any
rights under this Agreement or any agreement between the Company and any Member
with respect to any Capital Contribution, any Member's Membership Interest in
the Company or otherwise. This Agreement shall be binding upon and shall inure
to the benefit of the parties to this Agreement and their respective heirs,
personal representatives, executors, successors and permitted assigns. No party
to this Agreement may assign, transfer or otherwise Dispose of this Agreement or
any interest in this Agreement or any right, remedy, duty or obligation under
this Agreement whether voluntarily, involuntarily, by operation of law or
otherwise, except to the extent specifically provided in Article 7 hereof with
respect to the Disposition of a Member's Membership Interest in the Company.
10.13 Consent to Jurisdiction and Service of Process. Each party
hereto irrevocably submits to the co-exclusive jurisdiction of the courts of the
State of New York located in New York County and the United States District
Court for the Southern District of
28
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods (other
than by telecopier) as are specified for the giving of notices under this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying of
venue in such court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
10.14 Rights and Remedies Cumulative. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all other
remedies. Such rights and remedies are given in addition to any other rights the
parties may have by law, statute, ordinance or otherwise.
10.15 Specific Performance. The parties acknowledge that they will
be irreparably damaged if the provisions of this Agreement are not specifically
enforced. Should any controversy arise concerning a breach of any provision of
this Agreement, an order or injunction may be issued restraining the breach
pending the determination of such controversy (without the requirement of
posting a bond or indemnity), and the resolution of the controversy shall be
enforceable in a court of equity by a decree of specific performance.
Notwithstanding Section 10.13 hereof, each party shall be permitted to enforce
specifically the terms and provisions hereof in any court of the United States
or any state thereof or any other court having jurisdiction, this being in
addition to any other remedy to which such party may be entitled at law or in
equity or otherwise.
10.16 Further Assurances. Each Member shall execute and deliver such
documents, instruments and agreements and take such further actions as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions contemplated hereby, and each of the parties hereto shall
cooperate with each other in connection with the foregoing.
10.17 Certain Interpretive Matters.
(a) Unless the context otherwise requires, (i) "or" is disjunctive
but not necessarily exclusive, (ii) words in the singular include the plural and
vice versa, and (iii) the use in this Agreement of a pronoun in reference to a
party hereto includes the masculine, feminine or neuter, as the context may
require and (iv) the word "including" shall mean "including without limitation."
(b) No provision of this Agreement will be interpreted in favor
of, or against, any of the parties hereto by reason of the extent to which any
such party or its counsel participated in the drafting thereof or by reason of
the extent to which any such provision is inconsistent with any prior draft
hereof and no rule of strict construction will be applied against any party
hereto.
10.18 Waiver of Jury Trial. THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
29
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING
WITHOUT LIMITATION, ANY COUNTERACTION OR COUNTERCLAIM, WHETHER IN CONTRACT,
STATUTE, TORT (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE) OR OTHERWISE.
10.19 Confidentiality.
(a) To the extent that, in connection with this Agreement or the
transactions contemplated hereby, any Member comes into possession of any
proprietary or confidential information of the Company ("Confidential
Information"), such Member agrees not to disclose such Confidential Information
to any third party without the prior consent of a Supermajority in Interest.
Each Member shall maintain the Confidential Information of the Company in
confidence using at least the same degree of care as it employs in maintaining
in confidence such Member's own proprietary and confidential information, but in
no event less than a reasonable degree of care.
(b) Confidential Information shall not include information that
(i) shall have otherwise become publicly available other than as a result of
disclosure by the Member in breach hereof, (ii) was disclosed to the Member on a
non-confidential basis from a source other than the Company, which the Member
believes is not prohibited from disclosing such information as a result of an
obligation in favor of the Company, (iii) is developed by the Member
independently of, or was known by the Member prior to, any disclosure of such
information made by the Company, (iv) is required to be disclosed by order of a
court of competent jurisdiction, administrative agency or governmental body, or
by any law, rule or regulation, or by subpoena, summons or any other
administrative or legal process, or by applicable regulatory standards, or (v)
is disclosed with the written consent of the Company.
[Remainder of Page Intentionally Left Blank]
30
IN WITNESS WHEREOF, this Agreement has been executed as of the 15th
day of August, 2005.
MM COMPANIES, INC.
By:
---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
XXXXXX XXXXXXX
-------------------------------------
Xxxxxx Xxxxxxx
XXXXXX XXXXXXX PRODUCTIONS, INC.
By:
---------------------------------
Name:
Title:
31
Schedule A
----------
Members
-------
Initial Capital
Name Address Contribution
---- ------- ------------
MM Companies, Inc. 000 X. Xxxxxx-Xxxxx Xxxx. $3,500,000 Promissory
4th Floor Note; $500,000 cash
Xxxxxx-Xxxxx, XX 00000
Xxxxxx Xxxxxxx [ADDRESS] 85% of the Xxxxxxx
Assets with a value
equal to $1,830,769.10
Xxxxxx Xxxxxxx c/o Xxxxxx Xxxxxxx 15% of the Xxxxxxx
Productions, Inc [ADDRESS] Assets with a value
equal to $323,076.90
Schedule B
----------
Officers
--------
Xxxxxxx Xxxxxxxx: Chief Executive Officer
Xxxxx Xxxxxxxxx: President
Xxxxxx Xxxxxxx, Xx.: Senior Executive Vice President
Xxxxxx Xxxxxxx III: Executive Vice President
Exhibit A
---------
Assignment Agreement
--------------------
Exhibit B
---------
Services Agreement
------------------
