AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF GLOBAL PUBLIC SAFETY, LLC (A Delaware Limited Liability Company)
Exhibit 10.6
AMENDED
AND RESTATED
OF
GLOBAL
PUBLIC SAFETY, LLC
(A
Delaware Limited Liability Company)
THE INTERESTS AND UNITS REPRESENTED BY THIS AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
OTHER APPLICABLE SECURITIES LAWS. SUCH INTERESTS MAY NOT BE SOLD,
ASSIGNED, PLEDGED, OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT
EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS, OR EXEMPTION
THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS
ON TRANSFERABILITY SET FORTH HEREIN.
AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT
OF
GLOBAL PUBLIC SAFETY, LLC
TABLE
OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS
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1
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1.01
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Definitions.
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1
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1.02
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Terms Defined Elsewhere.
|
5
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1.03
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Successor Statutes and Agencies; Global Terms
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6
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ARTICLE II ORGANIZATIONAL MATTERS
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7
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2.01
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Formation and Organization.
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7
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2.02
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7
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|
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2.03
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Name.
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7
|
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2.04
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Offices and Registered Agent.
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8
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2.05
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Purpose.
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8
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2.01
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Term.
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8
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2.02
|
Income Tax Classification of Company.
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8
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2.03
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Nature of Units and Interests.
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8
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2.04
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Class B Units.
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9
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ARTICLE III MEMBERS, UNITS AND CAPITAL CONTRIBUTIONS
|
10
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|
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3.01
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Members, Units and Capital Contributions.
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10
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3.02
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Capital Accounts.
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11
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3.03
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Withdrawal or Reduction of Contributions to Capital.
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12
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3.04
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Right to Participate in Additional Issuances.
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12
|
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ARTICLE IV ALLOCATIONS AND DISTRIBUTIONS
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13
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|
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4.01
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Allocation of Income and Loss..
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13
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4.02
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Distributions.
|
15
|
|
4.03
|
Allocations for Tax Purposes; Effect of Change of
Units.
|
17
|
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4.04
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Partnership Tax Items and Modifications to
Allocations.
|
17
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4.05
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Tax Withholding.
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20
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4.06
|
Books of Account; Member Inspection Rights.
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20
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ARTICLE V MANAGEMENT
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22
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|
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5.01
|
Duties and Authority of Board of Representatives.
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22
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5.02
|
Election, Term and Removal of Representatives.
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22
|
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5.03
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Meetings of the Board.
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23
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5.04
|
Officers.
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25
|
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ARTICLE VI ACTIONS OF THE MEMBERS
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29
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|
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6.01
|
Meetings and Actions of Members.
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29
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ARTICLE VII LIMITATION OF LIABILITY AND INDEMNIFICATION
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29
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|
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7.01
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Limitation of Liability.
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29
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7.02
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Reimbursements; Indemnification.
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29
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7.03
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Other Rights.
|
30
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ARTICLE VIII TRANSFERABILITY OF UNITS
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30
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|
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8.01
|
Transferability of Units.
|
30
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i
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8.02
|
Drag-Along Rights.
|
31
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8.03
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Repurchase Option for Class B Units..
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32
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ARTICLE IX DISSOLUTION AND TERMINATION
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32
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|
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9.01
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Dissolution Events.
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32
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9.02
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Certificate of Cancellation.
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33
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9.03
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Liquidation Priorities.
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34
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9.04
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Winding Up.
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34
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9.05
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Resignation.
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35
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9.06
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No Deficit Restoration Obligation.
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35
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9.07
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Return of Capital Contributions Nonrecourse to Other
Members.
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35
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ARTICLE X MISCELLANEOUS
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35
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10.01
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Amendment.
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35
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10.02
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Severability.
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36
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10.03
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Delaware Law.
|
36
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10.04
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Integrated Agreement.
|
36
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10.05
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Creditors.
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36
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10.06
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Gender.
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36
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10.07
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Waiver.
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36
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10.08
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Binding Agreement.
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37
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10.09
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Captions.
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37
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10.1
|
Counterparts; Delivery.
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37
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10.11
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Notice.
|
37
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10.12
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Member Representations and Agreements.
|
38
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10.13
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Headings; Interpretation ..
|
38
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10.14
|
Legal Counsel.
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39
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EXHIBIT A – Unit Ownership Ledger
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EXHIBIT B – Representatives
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EXHIBIT C – Nonrecourse Debt and Other Allocations
|
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ii
AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT
OF
GLOBAL PUBLIC SAFETY, LLC
This
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF GLOBAL
PUBLIC SAFETY, LLC is hereby adopted and entered into by and among
GLOBAL PUBLIC SAFETY, LLC, a Delaware limited liability company
(the “Company”),
LB&B ASSOCIATES, INC., a North Carolina corporation (the
“Majority
Member”) and BREKFORD CORP., a Delaware corporation
(the “Minority
Member”), effective as of February 28,
2017.
PRELIMINARY STATEMENTS
WHEREAS, the
Company was formed as a Delaware limited liability company on
January 27, 2017, upon the filing of the Certificate of Formation
with the Secretary of State of the State of Delaware pursuant to
the Act;
WHEREAS, at the
time of its formation, the Minority Member was the sole Member of
the Company;
WHEREAS, the
Minority Member, as the sole Member of the Company, entered into
that certain Limited Liability Company Agreement of the Company,
dated as of February 5, 2017 (the “Original
Agreement”);
WHEREAS, effective
as of the date hereof, the Majority Member has purchased an
Interest from the Minority Member, and the Company has admitted the
Majority Member as a Member of the Company;
WHEREAS, the
parties desire to enter into this Agreement to amend and restate
the Original Agreement in its entirety.
NOW,
THEREFORE, in consideration for the mutual covenants, promises and
agreements contained herein, the parties agree as
follows:
ARTICLE
I
Unless
otherwise expressly provided herein, the following terms with
initial capital letters shall have the meanings set forth below
whenever used in this Agreement:
“Act” means the Delaware
Limited Liability Company Act, as amended from time to
time.
“Affiliate” means any
Person that, directly or indirectly, Controls any other Person or
that is Controlled by or is under common Control with such other
Person.
1
“Agreement” means this
Amended and Restated Limited Liability Company Agreement of the
Company and all schedules and exhibits hereto, as from time to time
hereafter amended in accordance with its terms.
“BBA Provisions” means the
provisions in the Code for coordinated audit proceedings enacted by
section 1101 of the Bipartisan Budget Act of 2015, Public Law
114-74, as they may be thereafter amended and in effect from time
to time.
“Capital Contribution”
means any contribution to the capital of the Company in cash or
property by a Member, whenever made.
“Capital Transaction”
means any transaction not in the ordinary course of business that
results in the Company’s receipt of cash or other
consideration other than Capital Contributions made to the Company,
and includes, without limitation, any transactions resulting in
proceeds of sales or exchanges or other dispositions of more than a
de minimis amount of
property not in the ordinary course of business, debt financings or
refinancings, condemnations, involuntary conversions, and receipts
of insurance proceeds for the destruction of assets used in the
trade or business of the Company.
“Certificate of Formation”
means the Certificate of Formation of the Company filed with the
Secretary of State, as amended or restated from time to
time.
“Class” means and refers
to a particular class of Units, as more fully described in
Section 2.08 and
the other provisions of this Agreement. As of the date of this
Agreement, the Company has two authorized Classes of Units: Class A
Units and Class B Units.
“Class A Member” means any
Member holding any Class A Units.
“Class A Unit” means any
Unit that has the respective rights, benefits and obligations
specified with respect to the Class A Units in this
Agreement.
“Class B Member” means any
Member holding any Class B Units.
“Class B Unit” means any
Unit that has the respective rights, benefits and obligations
specified with respect to the Class B Units in this
Agreement.
“Code” means the Internal
Revenue Code of 1986, as the same may be amended from time to
time.
“Control” (including, with
correlative meanings, the terms “Controlled by” and
“under common
Control with”), as used with respect to any Person,
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
such Person, whether through ownership of voting securities, by
contract or otherwise.
2
“CUP Agreement” means that
certain Contribution and Unit Purchase Agreement dated on or about
the date of this Agreement by, between and among the Minority
Member, the Majority Member and the Company.
“Distributable Cash”
means, with respect to the Company for a period of time, all funds
of the Company from all sources other than Capital Contributions,
whether derived from revenues or otherwise, on hand or in bank or
other financial accounts of the Company, after payment or provision
for payment has been made for (i) all expenses of the Company as of
such time, (ii) all outstanding and unpaid current and anticipated
obligations and liabilities of the Company as of such time, (iii)
repairs and maintenance of the Company’s property, and (iv)
desired working capital levels and reserves, all as the Board deems
necessary or appropriate for Company operations or for the benefit
of the Members as a group.
“Entity” means any foreign
or domestic corporation, partnership, limited liability company,
trust, unincorporated organization, joint venture, association or
other entity, governmental body, or regulatory
authority.
“Income” and
“Loss”
means, for each fiscal 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) will be
included in taxable income or loss), with the adjustments set forth
below.
(i) Any income of the
Company that is exempt from federal income tax and not otherwise
taken into account in computing Income and Loss pursuant to this
definition shall be added to such income or loss.
(ii) There
shall be subtracted from such income or loss any expenditures of
the Company not deductible in computing its taxable income or not
properly chargeable to capital account (and that are not otherwise
taken into account in computing Income and Loss pursuant to this
definition), any expenditures contemplated by section 709 of the
Code (except for amounts with respect to which an election is
properly made under section 709(b) of the Code), and any
expenditures resulting in a deduction for a loss incurred in
connection with the sale or exchange of Company property that is
disallowed to the Company under sections 267(a)(1) or 707(b) of the
Code.
(iii) Gain
or loss resulting from any disposition of Company property with
respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the book value of the
disposed of property, notwithstanding that the adjusted tax basis
of such property differs from its book value.
(iv) 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 as computed on
the Company’s books and records for accounting
purposes.
3
(v) Upon any actual or
deemed distribution to a Member of any Company property (other than
cash or cash equivalents) with respect to any Units, there shall be
included and taken into account any unrealized gain or unrealized
loss attributable to such distributed property, as if such
unrealized gain or unrealized loss had been recognized in a sale of
such property immediately prior to such distribution for an amount
equal to the fair market value of such property.
(vi) In
the event that the values of the Company assets are adjusted in
accordance with Regulations section 1.704 1(b)(2)(iv)(f), the
aggregate adjustments shall be included and taken into account in
computing Income or Loss pursuant to the terms of this Agreement,
as if the Company recognized gain or loss on a sale of such assets
at such time equal to the amount of such aggregated
adjustments.
(vii) Notwithstanding
any other provision of this definition, any items that are
specially allocated pursuant to Exhibit C of this Agreement
shall not be taken into account in computing Income or
Loss.
After
taking into account the foregoing adjustments to taxable income, if
the result is an excess of income and gains over expenditures,
losses and deductions, the Company shall be treated as having
“Net
Income”, and if the result is an excess of
expenditures, losses and deductions over income and gains, the
Company shall be treated as having “Net Loss”. In addition,
the amounts of the items of Company income, gain, loss, or
deduction available to be specially allocated pursuant to
Exhibit C of this
Agreement shall be determined by applying rules analogous to those
set forth above in clauses (i) through (vi)).
“Interest” means all of a
Member’s legal and equitable rights as an owner in the
Company, including, without limitation, the rights and benefits to
which such Member is entitled.
“IRS” means the United
States Internal Revenue Service.
“Majority in Interest”
means, with respect to all or any referenced group of Members, a
combination of any of such Members that, in the aggregate, own more
than fifty percent (50%) of the total outstanding Units owned by
all or such referenced group of Members. If not otherwise specified
or restricted, a “Majority in Interest of the
Members” means and refers to Members holding of a
majority of the Company's total outstanding Class A Unit owned by
Members at any particular time.
“Member” means the
Majority Member and the Minority Member and any other Person
admitted as a member of the Company in accordance with this
Agreement or the Act, during the time period in which each such
Person is a member of the Company as provided in this Agreement,
but does not include any Person has ceased to be a Member of the
Company. “Members” refers to such
Persons as a group.
“Minority Member” has the
meaning set forth in the preamble.
Person” means an
individual, a custodian for any individual under any
jurisdiction’s Uniform Transfers to Minors Act or similar
statute, a trust or a trustee on behalf of a trust, an estate, or
any Entity.
“Regulations” means the
temporary and final regulations promulgated by the United States
Department of the Treasury pursuant to and in respect of provisions
of the Code, as such regulations may be amended from time to
time.
“Securities Act” means the
federal Securities Act of 1933, as amended, and the rules and
regulations thereunder.
“Unit” means a fractional part of an Interest in the
Company representing the relative interest, rights and obligations
such Member has with respect to certain economic rights, voting,
and other items pertaining to the Company as set forth in this
Agreement. Whole, as well as fractional, Units may be issued by the
Company and/or owned by Members. Each Member’s numbers
of and Class of Units are set forth in Exhibit B attached hereto, as
such Exhibit B may
be amended from time to time to reflect Transfers or additional
issuances of Units in accordance with the terms of this
Agreement.
“Unreturned Capital
Contribution” means with
respect to each holder of Units the excess, if any, from time to
time of the aggregate Capital Contributions made (or deemed to be
made) to the Company with respect to the holder’s Units over
the sum of the aggregate amount of distributions made with respect
to such Units pursuant to Section 4.02(a)(i).
Each of
the following capitalized terms, when used in this Agreement, has
the meaning provided for such term in the Section of this Agreement
set forth beside such term below:
4
|
Term
|
Section
|
|
Additional
Interests
|
3.05(b)
|
|
Adjusted
Capital Account
|
Exhibit
C
|
|
Aggregate
Consideration
|
8.03(b)
|
|
Authorized
Person
|
2.01
|
|
Board
|
5.01(a)
|
|
Capital
Account
|
3.03
|
|
Closing
|
10.03
|
|
Company
|
Introductory
Paragraph
|
|
Company
Minimum Gain
|
Exhibit
C
|
|
Company
Tax Rep
|
4.04(c)
|
|
Dissolution
Event
|
9.01(a)
|
|
Distribution
Threshold
|
2.09(c)
|
|
Existing
Owners
|
3.05(c)
|
|
Firm
|
11.14
|
|
IPO
|
3.05(b)
|
|
Later
Year
|
4.04(c)
|
|
Majority
Member
|
Introductory
Paragraph
|
|
Member
Nonrecourse Debt
|
Exhibit
C
|
|
Member
Nonrecourse Debt Minimum Gain
|
Exhibit
C
|
|
Member
Nonrecourse Deductions
|
Exhibit
C
|
|
Minority
Member Representative
|
5.02(a)
|
|
Nonrecourse
Deductions
|
Exhibit
C
|
|
Nonrecourse
Liability
|
Exhibit
C
|
|
Partnership
Representative
|
4.04(c)
|
|
Public
Safety
|
8.01
|
|
Put
Notice
|
10.01
|
|
Representative
|
5.01(a)
|
|
Redemption
Price
|
10.02
|
|
Safe
Harbor Election
|
4.08
|
|
Tax
Distributions
|
4.02(b)
|
|
Tax
Matters Member
|
4.04(c)
|
|
Transfer
|
8.01
|
|
Transfer
Notice
|
8.02(a)
|
|
Transferor
|
8.02(a)
|
|
Ultimate
Rules
|
4.08
|
|
Unitholder
|
4.04(c)
|
|
Units
Sale
|
8.03(a)
|
. Any
reference contained in this Agreement to specific statutory or
regulatory provisions or to specific governmental agencies or
Entities includes any successor statute or regulation, or agency or
Entity, as the case may be. Unless otherwise specified, the
references to “Section” and “Article” in
this Agreement are to the Sections and Articles of this Agreement.
When used in this Agreement, words such as “herein”,
“hereinafter”, “hereof”,
“hereto”, and “hereunder” refer to this
Agreement as a whole, unless the context clearly requires
otherwise. The use of the words “include” or
“including” in this Agreement is by way of example
rather than by limitation.
5
ARTICLE
II
The
Company was formed as a limited liability company pursuant to the
Act on January 27, 2017, upon the filing of the Certificate of
Formation with the Secretary of State of the State of Delaware.
This Agreement hereby confirms that the Minority Member became the
initial Member of the Company as of the effectiveness of the filing
of the Certificate of Formation. The Majority Member is hereby
admitted as an additional Member of the Company as of the date of
this Agreement. The Majority Member and the Minority Member, being
all of the Members of the Company as of the date hereof, hereby set
forth and adopt this Amended and Restated Limited Liability Company
Agreement of the Company in its entirely under the
Act.
This
Agreement is hereby adopted as the "limited liability company
agreement" of the Company within the meaning of the Act, for the
purpose of governing and regulating the affairs of the Company and
the conduct of its business in accordance with the provisions of
the Act. The rights and obligations of the Members of the Company
and the administration and termination of the Company shall be
governed by this Agreement, the Certificate of Formation, and the
Act. It is hereby acknowledged and affirmed that, during the term
of the Company set forth in Section 2.06, (i) the rights and
obligations of the Members with respect to the Company and any
subject matter covered in this Agreement will be determined in
accordance with the terms and conditions of this Agreement to the
greatest extent permitted under applicable law; (ii) where the
Act provides that such rights and obligations specified in the Act
shall apply "unless otherwise provided in a limited liability
company agreement", the "limited liability company agreement may
provide" for such rights and obligations, or words of similar
effect, such rights and obligations shall be as set forth in this
Agreement, none of those statutory default provisions shall apply
or have any effect whatsoever; and (iii) therefore, by way of
illustration and not in limitation of the foregoing, appraisal
rights permitted under section 18-210 of the Act shall not apply or
be incorporated into this Agreement, and no Member or assignee of a
limited liability company interest in the Company shall have any of
the appraisal rights described therein except to the extent
expressly provided herein. The Company shall have no oral limited
liability company agreements, and this Agreement may only be
amended in accordance with Section 11.01.
The
name of the Company is “Global Public Safety, LLC”, and
its operations shall be conducted under such name; provided, however, that the operations of
the Company may be conducted under any other name deemed necessary
or desirable by the Board or as may be necessary to comply with the
requirements of any jurisdiction in which the Company may conduct
operations.
6
The
principal office of the Company is to be located at such place as
may be determined by the Board. In addition, the Company may
maintain such other offices as the Board may deem advisable at any
other place or places. The initial registered office of the Company
under the Act is at Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the initial registered agent of the
Company under the Act for service of process at such address is The
Corporation Trust Company. The Board may change the registered
agent and registered office of the Company to such other agent or
office as may be permitted under the Act, upon satisfaction of the
requirements for making such a change as are set forth under the
Act.
(a) The principal purpose and business of the Company is
to do all things and engage in all activities and business
permitted under applicable Delaware law as may be approved by the
Board.
(b) The Company shall
have any and all powers that are necessary or desirable to carry
out the purposes and business of the Company, to the extent the
same may be legally exercised by limited liability companies under
the Act. The Company shall carry out the foregoing activities
pursuant to the provisions set forth in the Certificate of
Formation and this Agreement.
The
term of the Company commenced on January 27, 2017, the effective
date of the filing of the Certificate of Formation of the Company
pursuant to the Act. The Company shall continue in existence in
perpetuity, unless the Company’s Certificate of Formation is
amended to provide for a definite period of duration, in which case
the Company shall continue in existence until the close of business
on the last day of such period, or unless the Company is sooner
dissolved and its affairs wound up in accordance with the
provisions of this Agreement or the Act.
At such
time or times as the Company may be treated for purposes of federal
income taxation as having more than one owner, the Company shall be
classified as a partnership for purposes of federal income taxation
in accordance with Regulations section 301.7701-3, unless and until
a Majority in Interest of the Members gives written consent to the
Company’s making an affirmative election with the IRS to be
classified for federal income tax purposes as an association
taxable as a corporation.
7
The
Interests and Units in the Company shall be personal property for
all purposes. Legal title to all Company assets shall be held in
the name of the Company. No Member and no successor,
representative, or assignee of any Member shall have any right,
title, or interest in or to any Company property or the right to
partition any real property owned by the Company. Interests or
Units may, but need not necessarily, be evidenced by a certificate
of ownership interest issued by the Company, in such form as the
Board may determine. As of the date of this Agreement, the
authorized capital structure of the Company shall consist of two
(2) Classes of Units: Class A Units and Class B Units. The
Company’s Classes of Units shall have the relative rights,
privileges, preferences, restrictions, and limitations as provided
in this Agreement.
(a) The
Board is hereby authorized to cause the Company to issue Class B
Units to employees, officers, directors, and other service
providers of or to the Company, under such terms and conditions and
for such, or no, amounts of Capital Contribution per Unit, as the
Board may determine. The Board is authorized to issue any number of
Class B Units under this Section as long as the total outstanding
Class B Units at any time does not exceed 111 Class B Units,
provided
that, without the
prior written consent of all of the Class A Members, the total
outstanding Class B Units shall never exceed 10% of the outstanding
equity of the Company.
(b) The
Company and each Member agree to treat each Class B Unit granted to
a Class B Member as a separate “profits interest”
within the meaning of IRS Revenue Procedure 93-27, 1993-2 C.B. 343
(“Rev. Proc.
93-27”). In accordance
with IRS Revenue Procedure 2001-43, 2001-2 CB 191
(“Rev. Proc.
2001-43”), the Company
will treat each Class B Member as the owner of its Class B Units
from the date such Class B Units are granted, and shall file its
IRS Form 1065, and issue appropriate Schedules K-1 (Form 1065), to
such Class B Member, allocating to such Class B Member his, her, or
its distributive share of all items of income, gain, loss,
deduction and credit associated with such Class B Units (including
any unvested Class B Units as if they were vested Units). Each
holder of Class B Units agrees to take into account such
distributive share in computing such holder’s United States
federal income tax liability for the entire period during which he,
she, or it holds such Class B Units. The Company and each Member
agree not to claim a deduction (as wages, compensation or
otherwise) for the fair market value of any Class B Unit issued to
a Class B Member, either at the time of the grant of such Unit or
when such Unit vests pursuant to any restrictions placed on the
Unit in connection with its issuance. The undertakings contained in
this Section 2.09 shall be construed in accordance with section 4
of Rev. Proc. 2001-43. Accordingly, upon the issuance of Class B
Units to a Class B Member, (i) the gross book value of all
noncash assets of the Company shall be adjusted to equal their
respective gross fair market values, as determined by the Board,
pursuant to Regulations section 1.704-1(b)(2)(iv)(f), and (ii)
pursuant to paragraph (vi) of the definition in Section 1.01 of
“Income” and “Loss” and this Section 2.09,
such aggregate adjustments to the gross book value of all noncash
assets shall be treated as if the Company recognized gain or loss
equal to the amount of such aggregate adjustments, and then such
amounts of deemed gain or loss shall be simultaneously allocated to
the Capital Accounts of all Persons who are holders of Units
immediately prior to such issuance by adjusting the Capital
Accounts to reflect their respective shares of such deemed gain or
loss as if it arose from a Capital Transaction.
8
(c) Each
Class B Unit shall be issued subject to a Distribution Threshold. A
“Distribution
Threshold” means, unless otherwise determined by the
Board, an amount equal to the amount that would be distributed to
all holders of Units under Section 4.02(a)(ii) if, immediately
before the time the Class B Unit is issued, the Company were to
(i) sell all of its assets at their fair market values in a
Capital Transaction, (ii) settle all of its liabilities to the
extent of the Company’s available assets (but limited, in the
case of nonrecourse liabilities as to which the creditors’
rights to repayment are limited solely to one or more assets of the
Company, to the value of such assets), and (iii) distribute
any remaining cash and other proceeds to the holders of Units in
accordance with the distribution provisions of Section 4.02(a) for
proceeds arising from Capital Transactions; provided, however, that the Distribution
Threshold for any Class B Unit shall not be less than zero dollars.
The Board shall have the discretion to set any Class B Unit’s
Distribution Threshold at an amount that is greater than the amount
determined in the immediately preceding sentence. There are no
outstanding Class B Units issued as of the date of this Agreement,
and the Board shall determine the Distribution Threshold for each
Class B Unit issued after the date of this Agreement.
(d) The
intent of this Section 2.09 is to ensure that all Class B Units
qualify as “profits interests” under Rev. Proc. 93-27
and Rev. Proc. 2001-43 when issued, and this Section 2.09 and the
other provisions of this Agreement shall be interpreted and applied
consistently therewith. Each Class B Member who receives any
unvested Class B Unit (whether issued on or after the date hereof)
agrees to timely and properly make an election under section 83(b)
of the Code with respect to each such unvested Class B Unit
received. The provisions of this Section 2.09 shall apply
regardless of whether or not the Class B Member files an election
pursuant to section 83(b) of the Code with respect to such Class B
Units. Any Class B Unit that is repurchased by the Company, whether
pursuant to the terms of any agreement with the Company or
otherwise, shall no longer be deemed to be outstanding for any
purpose under this Agreement.
ARTICLE
III
(a) Before the
effectiveness of this Agreement, the Initial Member made a Capital
Contribution to the Company of a business division consisting of
the “Contributed Assets” and the
“Business”, as each such term is defined the CUP
Agreement. On the date of this Agreement, the Majority Member has
purchased from the Minority Member 80.1% of the Interests in the
Company (the “Member
Purchase”). Under applicable federal income laws,
rules and regulations, upon the Member Purchase the Majority Member
is treated as making a capital contribution to the Company of 80.1%
of the assets then owned by the Company in exchange for an equity
ownership interest in the Company, and the Minority Member is
treated as making a capital contribution to the Company of 19.9% of
the assets then owned by the Company in exchange for an equity
ownership interest in the Company, all under Code section 721.
Accordingly, the parties acknowledge and agree that as of the date
of this Agreement, (i) the Majority Member and the Minority
Member will each be deemed for purposes of this Agreement and
maintaining Capital Accounts to have made a Capital Contribution to
the Company equal to the amount listed beside its name under the
heading “Deemed Initial Capital Contribution” on
Exhibit B attached
hereto, and (ii) in exchange for such deemed Capital
Contributions, the Majority Member and the Minority Member will
each have and own the number of Class A Units listed besides its
name on Exhibit B
attached hereto. The name, address, and number of Units of each
Class of each Member are as listed on Exhibit B attached hereto,
which Exhibit may be amended by the Board without obtaining the
consent or approval of the Members upon the effectiveness of any
subsequent Transfer or issuance of any Interest that is in
accordance with this Agreement, and a copy of any such amended
Exhibit B shall be
delivered to each Member promptly following any such
amendment.
9
(b) Unless a Member
otherwise agrees in writing, a Member has no obligation to make any
Capital Contribution to the Company beyond the Capital
Contributions described in this Section 3.01 and except for (i) any
additional Capital Contribution that might be required with respect
to a tax audit of the Company as provided in Section 4.04(c) below
or (ii) any additional Capital Contribution deemed by the Board, in
its discretion, to be required, provided, however, that, with respect to
clause (ii), (x) each such required Capital Contribution must be
pro rata with respect to
the Class A Members and (y) the amount of all such Capital
Contributions the Board may require will not exceed $500,000 in the
aggregate. A Member shall not be entitled to interest on any
Capital Contributions, or to a return of any Capital Contributions,
except as specifically provided in this Agreement.
(c) Upon approval of
the terms thereof by the Board, any Member may make a loan to the
Company upon commercially reasonable terms. Loans by a Member to
the Company shall not be considered Capital
Contributions.
The
Company shall maintain a separate capital account (each a
“Capital
Account”) for each Member pursuant to the principles
of this Section 3.02 and Regulations section 1.704-1(b)(2)(iv). As
of the date of this Agreement, the initial Capital Account of each
of the Majority Member and the Minority Member shall be the amount
set forth as its “Deemed Initial Capital Contribution”
on Exhibit B
attached hereto. Thereafter, in the maintenance of Capital Accounts
for the Members, the following provisions will apply:
(a) Each Member’s
Capital Account shall be increased by the amount of any cash and
the agreed fair market value of any other property contributed by
such Member as an additional Capital Contribution, such
Member’s distributive share of Income and Net Income, any
items in the nature of income or gain that are specially allocated
to such Member pursuant to Exhibit C to this Agreement,
and the amount of any Company liabilities that are assumed by such
Member or that are secured by any Company property distributed to
such Member.
(b) Each Member’s
Capital Account shall be decreased by the amount of cash and the
fair market value of any other Company property distributed to such
Member pursuant to any provision of this Agreement, such
Member’s distributive share of Loss and Net Loss, any items
in the nature of deduction or loss that are specially allocated to
such Member pursuant to Exhibit C to this Agreement,
and the amount of any liabilities of such Member that are assumed
by the Company or that are secured by any property contributed by
such Member to the Company.
(c) Upon the Transfer
of all or any portion of any Member’s Units in accordance
with the terms of this Agreement, the transferee shall succeed to
the Capital Account of the transferor to the extent that it relates
to the transferred ▇▇▇▇▇.
▇▇
(▇) The provisions of
this Section 3.02 and other portions of this Agreement relating to
allocations and the proper maintenance of Capital Accounts are
designed and intended to comply with the requirements of
Regulations section 1.704-1(b). The Members intend that such
provisions be interpreted and applied in a manner consistent with
such Regulations. The Board is authorized to modify the manner in
which the Capital Accounts are maintained if the Board reasonably
determines, after consultation with the Company’s tax
advisors, that such modification (i) is required or prudent to
comply with the Regulations and (ii) is not likely to have a
material adverse effect on the amounts distributable to any Member
of the Company.
(a) No Member has the
right to withdraw all or any part of his, her, or its Capital
Contributions or to receive any return on any portion of his, her,
or its Capital Contributions, except as may be otherwise
specifically provided in this Agreement. Under circumstances
involving a return of any Capital Contributions, no Member has the
right to receive property other than cash; provided, however, that no Member has the
right to refuse an in kind distribution of property.
(b) Except as may be
otherwise set forth in Article IV, no Member will have priority
over any other Member, either as to the return of Capital
Contributions or as to Net Income, Net Loss, or distributions;
provided,
however, that this
subsection does not apply to loans (as distinguished from Capital
Contributions) that a Member has made to the Company.
(a) In addition to the
Interests and Capital Contributions specifically set forth in this
Agreement, the Company may issue additional Interests or Units to
one or more other Persons in exchange for additional Capital
Contributions to the Company, provided, however, that the Company will
not issue any additional Class A Units without the prior written
consent of both the Majority Member and Minority Member. Such
additional Interests or Units may be issued in exchange for such
amount of Capital Contributions, and under such other terms and
conditions, as may be determined and approved by the
Board.
11
(b) Except as otherwise
provided below, the Company will not sell or issue any additional
Interests (or Units thereof) in the Company or any rights to
acquire such additional Interests or Units thereof (collectively,
“Additional
Interests”) without first complying with this Section
3.04(b). The Company hereby grants to each Member the preemptive
right to purchase, pro rata
in accordance with such Member's total number of Units (regardless
of Class), all or any part of any such Additional Interests that
the Company may from time to time propose to sell or issue. In the
event the Company proposes to issue or sell Additional Interests,
it shall give each Member written notice of its intention,
describing such Additional Interests and the price and terms upon
which the Company proposes to issue or sell such Additional
Interests. Each Member will have no less than ten (10) days from
the date of receipt of any such notice to agree to purchase up to
its pro rata share of such
Additional Interests upon the terms specified in the notice by
giving written notice to the Company, at such address as is set
forth in the notice, stating the percentage of such Additional
Interests that the Member agrees to purchase. Thereafter, the
Company will have sixty (60) days to sell such Additional
Interests that are not elected to be purchased by the Members at
the same price and upon the same terms and conditions specified in
the Company’s notice described above. In the event the
Company has not sold such Additional Interests within such sixty
(60)-day period, the Company will not thereafter issue or sell any
Additional Interests without first offering such Additional
Interests in the manner provided above. Anything to the contrary
herein notwithstanding, the provisions of this Section 3.04(b)
shall not be applicable to (i) equity securities of the
Company offered pursuant to a registration statement under the
Securities Exchange Act of 1934, as amended, in connection with an
initial public offering of the Company’s (or any successor
Entity’s) equity interests or securities (an
“IPO”), (ii)
additional Interests or Units issued in connection with any Unit
split, reverse Unit split, Unit distribution, recapitalization,
reclassification, combination or similar reorganization or other
transaction affecting the Units, by the Company not involving new
financing, (iii) Units issued in connection with additional Capital
Contributions by any Member(s), (iv) ) additional Interests or
Units issued in connection with any acquisition of assets or equity
interests of any Person approved by the Board or (vi) Class B
Units issued to employees, officers, directors, and other service
providers of or to the Company as approved by the Board. The
preemptive rights set forth in this Section 3.04(b) shall terminate
upon an IPO.
(c) Upon
issuance of any Additional Interests for an amount of Capital
Contributions per Unit that is greater that the Capital Account
balance per Unit for the Members holding any then-outstanding
Units, (i) the value of all
noncash assets of the Company shall be adjusted to equal their
respective gross fair market values, as determined by the Board in
its good-faith reasonable discretion, pursuant to Regulations
section 1.704-1(b)(2)(iv)(f), and (ii) the Capital Accounts of
all Persons that are Members immediately prior to such issuance
(“Existing
Owners”) shall, after
reflecting and taking into consideration such Existing
Owners’ share of the Company’s unallocated Income and
Loss to date for the year, be adjusted simultaneously in accordance
with Regulations section 1.704-1(b)(2)(iv)(f) and (g) to reflect
the aggregate adjustments to the value of all noncash assets as if
the Company recognized gain or loss equal to the amount of such
aggregate adjustments and so as to cause the Existing Owners to
have Capital Account balances per Unit in parity with the Capital
Contributions per Unit being paid for the newly issued
Units.
ARTICLE
IV
4.01 Allocation of Income and Loss.
After first giving effect to any required special allocations
provided in Exhibit
C attached hereto, for purposes of maintaining Capital
Accounts and in determining the rights of the Members among
themselves, Net Income or Net Loss, if any, as determined for book
purposes within the meaning of Regulations section 1.704-1(b), for
all years or other periods, will be allocated to the Members and
other holders of Units in accordance with the provisions set forth
below. Notwithstanding the foregoing, upon the issuance by the
Company of any Class B Units after the effective date of this
Agreement or otherwise if and as provided in Section 3.05(c), the
special allocations of Net Income and Net Loss arising pursuant to Regulations section
1.704-1(b)(2)(iv)(f) as described in Sections 2.09(b) or
3.05(c) and interim allocations
of Net Income and Net Loss from all other activities of the Company to date in
that fiscal year of the Company (and not previously allocated to
and among the Capital Accounts of the holders of Units in any
previous interim allocation) shall be made under this Section at
such time among the Persons that hold Units in the Company
immediately prior to such issuance of such Class B Units or other
applicable Units.
12
(a) Net Income, if any,
for a year or other period will be allocated in the following order
and priority.
(i) First, if Net Loss
has been previously allocated pursuant to Section 4.01(b)(iii), Net
Income shall be allocated to the holders of Units in proportion to
and to the extent of their respective amounts of the excess, if
any, of (A) the aggregate amount of such Net Loss previously
allocated with respect to their Units pursuant to Section
4.01(b)(iii), over (B) the aggregate amount of Net Income
previously allocated, for the current and all previous periods,
with respect to their Units pursuant to this paragraph
(i).
(ii) Next,
if Net Loss has been previously allocated to any holders of Units
pursuant to Section 4.01(b)(ii), Net Income shall be allocated to
the holders of such Units in proportion to and to the extent of
their respective amounts of the excess, if any, of (A) the
aggregate amount of such Net Loss previously allocated with respect
to their Units pursuant to Section 4.01(b)(ii), over (B) the
aggregate amount of Net Income previously allocated, for the
current and all previous periods, with respect to their Units
pursuant to this paragraph (ii).
(iii) Finally,
any remaining Net Income shall be allocated to and among all of the holders of Units
pro rata
in proportion to their
respective number of Units,
regardless of Class; provided, however, that in the case of
each Class B Unit issued with a Distribution Threshold greater than
zero, no Net Income will be allocated to such Class B Unit until
the total allocations of Net Income under this Section 4.01(a)(iii)
after the issuance of the Class B Unit equal that Unit's
Distribution Threshold, and thereafter such Class B Unit is to be
allocated its pro rata share of all additional Net Income under
this paragraph.
(b) Net Loss, if any,
for a year or other period will be allocated in the following order
and priority.
(i) First, if Net
Income has been previously allocated pursuant to Section
4.01(a)(iii), Net Loss shall be allocated to the holders of Units
in proportion to and to the extent of their respective amounts of
the excess, if any, of (A) the aggregate amount of such Net
Income previously allocated with respect to their Units pursuant to
Section 4.01(a)(iii), over (B) the aggregate amount of Net
Loss previously allocated, for the current and all previous
periods, with respect to their Units pursuant to this paragraph
(i).
(ii) Next,
Net Loss shall be allocated to and among the holders of Units in
proportion to and to the extent of the amount of the excess, if
any, of (A) the aggregate Capital Contributions (taking into
account the deemed Capital Contribution amounts as provided in
Section 3.01 pursuant to the CUP Agreement) with respect to their
Units as of the time of the allocation, over (B) the aggregate
amount of Net Loss previously allocated to such Units under this
Section 4.01(b)(ii).
13
(iii) Finally,
any remaining Net Loss shall be allocated to and among the holders
of Units pro rata in accordance with their respective numbers of
Units, regardless of Class.
(c) All allocations of
Net Income and Net Loss made under this Section 4.01 shall be made
as of the last day of each year of the Company or other period for
which allocations are being made, but shall be made after adjusting
Capital Account balances to reflect all distributions or Capital
Contributions made on or before the last day of the period at
issue. In addition, for purposes of determining the amount of Net
Loss to be allocated under Section 4.01(b)(ii), to the extent any
prior allocations of Net Loss under that paragraph have been
subsequently offset with allocations of Net Income pursuant to
Section 4.01(a)(ii), such prior allocations of Net Loss shall be
disregarded for purposes of computing subsequent allocations of Net
Loss under Section 4.01(b)(ii).
Subject
to any nondiscretionary restrictions or limitations regarding
distributions imposed on the Company by the Act or under any loan
agreements, other financing documents, or other contracts or
agreements to which the Company or its property may be subject or
hereunder, the Board may, in its sole discretion, cause the Company
to distribute to the Members Distributable Cash or other property
in such aggregate amounts as the Board may determine, at any time
and from time to time, and any such distributions shall be made to
and among the Members as set forth in the remaining provisions of
this Section. Notwithstanding the foregoing, unless otherwise
agreed to in writing by both the Minority Member and the Majority
Member, the Board beginning with fiscal year 2017 shall cause the
Company to distribute no less than sixty-percent (60%) and no more
than eighty-percent (80%) of the Distributable Cash of the Company
during each fiscal year (the “Distribution Limitation”), which
distributions shall be made within sixty (60) days following
January 1 of each year.
(a) Regular Distributions. Except
for distributions in connection with the dissolution and
liquidation of the Company (to which the provisions of Section 9.03
shall apply), such distributions shall, after reducing the
distributable cash or other property for any required Tax
Distributions to be made pursuant to Section 4.02(b), be made to
and among the Members in the following order and
priority:
(i) First, distributions shall be made to the holders
of Units in proportion to and to the extent of their Units’
respective amounts of Unreturned Capital Contributions until the
Unreturned Capital Contributions of each such holder of Units has
been reduced to zero.
14
(ii) Second,
any remaining amounts shall be distributed to and among all of the
holders of Units pro rata in accordance with their respective
numbers of Units, regardless of Class; provided,
however,
that for each Class B Unit issued with a Distribution
Threshold greater than zero, no distributions will be made to such
Class B Unit until the total distributions under this Section
4.02(a)(ii) after the issuance of the Class B Unit equal that
Unit’s Distribution Threshold, and thereafter such Class B
Unit is to receive its pro rata share of all additional
distributions under this paragraph.
Notwithstanding
anything in this Agreement to the contrary, distributions to
holders of Class B Units pursuant to this Section 4.02(a) may be
modified by the Board to the extent necessary, in the reasonable
discretion of the Board after consultation with the Company’s
tax advisors, in order to cause such distributions and permit such
Class B Units to comply with the requirements of Section
2.09.
(b) Tax Distributions.
(i) If the total
distributions of cash and/or other property (based on the fair
market value of such other property) that otherwise would be
distributable to any Member with respect to a year (either during
such year or within ninety (90) days thereafter and identified as
being with respect to the immediately preceding year) under this
Agreement, but without regard to this Section 4.02(b), are less
than an amount equal to the aggregate state and federal income tax
liability such Member would have incurred as a result of the
allocation to such Member of the Company’s net taxable income
for such year allocated under Section 4.01(a), then the Board shall
use its best efforts to cause the Company to make, by the date that
is ninety (90) days after the end of such year, distributions in
cash (to the extent available) under this Section 4.02(b) (such
distributions being referred to as the “Tax
Distributions”) to all such Members in the amount of,
and in proportion to, their amounts of such underage. For purposes
of this Section 4.02(b), each Member’s aggregate income tax
liability with respect to such Company taxable income shall be
calculated: (i) as if such Member were (A) a natural
human being resident in the State of Maryland, (B) taxable at
the maximum combined effective rate provided for under applicable
federal and Maryland state income tax laws (as determined from time
to time by the Board in its reasonable judgment after consulting
with tax advisors to the Company) with respect to such taxable
income, taking into account the character of the items of income;
and (ii) as if allocations from the Company were, for such
year, the sole source of income and loss for such Member. If the
total distributions that otherwise would be distributed with
respect to a year to each Member under this Agreement, without
regard to this Section 4.02(b), are sufficient to satisfy the
minimum amounts of distributions required to be paid to each Member
under this Section 4.02(b), then no Tax Distributions will be paid
for such year, and distributions for such year will be payable
pursuant to the other provisions of this Agreement. Furthermore, no
Tax Distributions are to be paid in connection with the dissolution
and liquidation of the Company.
(i) Tax Distributions
may be made during a year to enable the Members to satisfy
estimated tax liabilities with respect to income and gains realized
by the Company (and not otherwise covered by distributions) during
such year, and such Tax Distributions shall be treated during such
year as advances (and not distributions). If such advances or
portions thereof are required to be returned at the end of a year
(after review of such Member’s share of the Company’s
taxable income for which Tax Distributions are distributable), such
portions shall be returned promptly to the Company without
interest. Any portion of such advance not required to be returned
at the end of the year shall be deemed a Tax Distribution at that
time. Any tax “withholding” or similar payments made by
the Company pursuant to Section 4.05 on behalf of a Member with
respect to a Member’s share of Company income or
distributions with respect to a year shall be treated by the
Company as distributions creditable against the Tax Distributions
requirement for such year under this Section 4.02(b), if the Member
does not reimburse the Company for such “withholding”
or similar payments.
15
(ii) All
Tax Distributions made by the Company to or on behalf of a Member
shall, for purposes of determining future distributions to be made
to such Member under Section 4.02(a)(iii), be treated as a
prepayment of distributions otherwise to have been made to such
Member under Section 4.02(a)(iii), by reducing the amount of the
next succeeding distribution or distributions otherwise
distributable to such Member under Section 4.02(a)(iii) by the
amount of Tax Distributions for which no prior reduction under
Section 4.02(a)(iii) has been made.
(c) Right of Set-Off. The Board
will have the right to cause the Company to apply all or any
portion of any amount of a distribution otherwise distributable to
a Member against any advances or other sums then due and owing to
the Company from or on behalf of such Member pursuant to this
Agreement, including, without limitation, advances under
Section 4.05 that are not repaid. The portion of any such
distribution so applied as a set-off against amounts due and owing
shall, even though not physically distributed to the Member, be
treated as a distribution with respect to the Member’s Units
for purposes of this Agreement, including, but not limited to, the
determination of the Member’s Capital Account balance and the
amount of future allocations and distributions to which the Member
is entitled. In addition, to the extent the amount applied is being
set off for payment of an unpaid Capital Contribution, the amount
shall be treated as a Capital Contribution by the Member as of the
date of the distribution so applied.
Except
as otherwise provided herein, each item of income, gain, loss, or
expense of the Company shall be allocated to the Members in the
same manner as allocations are made of Net Income, Net Loss and other items of
income, gain, loss, or expense pursuant to Section 4.01 and
Exhibit C. If
(i) there is a Transfer of, or issuance of any additional,
Units in the Company other than as of the end of a calendar year,
and (ii) after such Transfer or additional issuance the
Company is treated as a partnership for federal income tax
purposes, then all items to be
allocated, credited, charged or distributed for such year
shall be prorated in accordance with section 706 of the Code, using
any convention permitted by law and selected by the Board;
provided,
however, that if
the Company utilizes the cash method of accounting, certain
“allowable cash basis items” as defined in Code section
706(d)(2) shall be allocated as therein specified. Selection of the
specific allowable method will be made by the Board, unless a
transferor Member and a transferee themselves specify, with respect
to the transferred Units, a method that is permitted under the
Code. A Representative will have no liability to any Member in
connection with the determination of each Member’s share of
prorated allocations of income or losses if such allocations were
made in good faith in accordance with the terms of this Agreement
or in reliance on the advice of the Company’s accountants or
tax counsel.
At all
times during which the Company is treated as a partnership for
federal income tax purposes, the following provisions shall
apply.
16
(a) The Board, in its
sole discretion, may cause the Company to elect pursuant to section
754 of the Code and the Regulations to adjust the basis of the
Company assets as provided by sections 743 or 734 of the Code and
the Regulations thereunder. The Company shall make such other
elections for federal income tax purposes as may be determined by
the Board, acting in its sole and absolute discretion.
(b) The Board shall
prepare and execute any amendments to this Agreement, which
amendments need not be approved by the Members as otherwise
required under Section 11.01 to become effective, as are necessary
for the Company to comply with the provisions of Regulations
sections 1.704-1(b), 1.704-1(c), and 1.704-3 upon the happening of:
(i) a liquidation of the Company within the meaning of
Regulations section 1.704-1(b)(2)(ii)(g), other than a constructive
termination of the Company pursuant to Code section 708(b)(1)(B);
(ii) the contribution or distribution of any property, other
than a de minimis amount,
to or by the Company in exchange for Units or another form of
Interest in the Company; or (iii) the issuance of Units or
other form of Interest to a new or existing Member after the date
of this Agreement as consideration for the provision of services to
or on behalf of the Company by a Person acting in a Member capacity
or in anticipation of being a Member; provided, however, that adjustments
pursuant to clauses (ii) or (iii) are to be made only if the Board
reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the
Members. Under any other circumstance, the Board shall prepare and
execute any amendments to this Agreement, which amendments need not
be approved by the Members, as are necessary for the Company to
comply with the provisions of Regulations sections 1.704-1(b),
1.704-1(c) and 1.704-3, but only if the Board determines that such
amendment (I) is required or prudent to comply with the
Regulations and (II) is not likely to have a material effect
on the amounts distributable to any Member of the
Company.
(c)
(i) With respect to
each taxable year of the Company beginning on or before December
31, 2017, a “Tax Matters
Member” shall be selected to serve as the
Company’s “tax matters partner” within the
meaning of Code section 6231(a)(7) if the Company is subject to the
rules for coordinated audit proceedings under subchapter C of
chapter 63 of the Code (after taking into account Code section
6231(a)(1)(B)). The Tax Matters Member shall be selected by the
Board and shall be a Member that is permitted to serve as the
Company’s “tax matter partner” under Code section
6231(a)(7) and the Regulations promulgated thereunder. With respect
to each taxable year of the Company beginning after December 31,
2017, the Board is hereby authorized to designate a Member or any
other Person with a substantial presence in the United States as
the Company’s “partnership representative” within
the meaning of Code section 6223(a) of the BBA Provisions (the
“Partnership
Representative”). The Tax Matters Member or
Partnership Representative (in either case, the “Company Tax
Rep”) shall be selected, and may be changed from time
to time, by the Board.
17
(ii) The
Company Tax Rep is authorized and required to represent the Company
in connection with all examinations of the Company’s affairs
by tax authorities, including resulting administrative and judicial
proceedings, and to expend Company funds for professional services
and costs associated therewith. Each Member and other holder of
Units agrees to, and shall, (A) cooperate with the Board and
the Company Tax Rep in the determination of the liability of the
Company and each Member or other holder of Units pursuant to this
Section 4.04(c), including providing such information and
documentation as is reasonably requested by the Board or Company
Tax Rep in connection with any audit, examination or similar
proceeding of or with respect to the Company conducted by any tax
authority, including resulting administrative and judicial
proceedings, and (B) do or refrain from doing any or all
things reasonably required by the Board or Company Tax Rep to
conduct such proceedings. Any reasonable direct, out-of-pocket
expense incurred by the Company Tax Rep in carrying out his, her,
or its obligations hereunder shall be allocated to and charged to
the Company as an expense of the Company for which the Company Tax
Rep shall be reimbursed. In connection with any of the actions set
forth in this Section 4.04(c), the Company Tax Rep shall have the
authority to determine the proper tax and accounting treatment of
such action in his, her or its reasonable discretion and in
reliance upon the applicable provisions of the Code and the
Regulations promulgated thereunder.
(iii) With
respect to each taxable year of the Company beginning after
December 31, 2017 (a “Later Year”),
the Company Tax Rep is hereby authorized to cause the Company to
make the election described in Code section 6226 of the BBA
Provisions, and/or to file one or more requests for administrative
adjustments under Code section 6227 of the BBA Provisions. If for
any Later Year there is an adjustment in the amount of any item of
income, gain, loss, deduction or credit of the Company, or the
distributive share thereof of any current or former Member or other
holder of Units (each, a “Unitholder”),
under Code section 6225(a) of the BBA Provisions, each Unitholder
to which all or any portion of such adjustment is properly
allocable, as determined by the Company Tax Rep in good faith and
after consultation with the Company’s professional tax
advisors, shall take any such actions as the Company Tax Rep may
reasonably request for purposes of modifying the imputed
underpayment with respect to such adjustment in accordance with
Code section 6225(c) of the BBA Provisions and any Regulations
issued thereunder, including (A) filing U.S. federal income
tax returns for the taxable year of such Unitholder that includes
the end of such taxable year of the Company and any other affected
taxable years of such Unitholder, (B) taking into account on
such returns such adjustments, or the portions thereof, that are
properly allocable to such Unitholder, as determined by the Company
Tax Rep, and (C) including with such returns any tax
due.
18
(iv) If,
as a result of any adjustments in the amounts of any items of
income, gain, loss, deduction or credit with respect to any Later
Year, the Company pays any imputed underpayment (as determined
under Code section 6225(b) of the BBA Provisions), penalties,
additions to tax or interest, the Board shall be entitled to
(A) treat such payments as distributions by the Company to the
Unitholders in such proportions as the Board, with the advice of
the Company’s professional tax advisors, determines to be
equitable, taking into account the Unitholders’ respective
shares of such adjustments, and (B) reduce any distribution
otherwise required or permitted to be made under this Agreement to
any Unitholder by any such deemed distribution to such Unitholder.
If the Company is obligated to pay any imputed underpayment (as
determined under Code section 6225(b) of the BBA Provisions) or any
penalties, additions to tax or interest relating thereto and such
payment is determined by the Board to be attributable to a
Unitholder or all or any portion of a Unitholder’s current or
former interest in the Company, such Unitholder, whether or not
still an owner of Units, shall indemnify, reimburse, hold harmless
and otherwise pay the Company in full for the entire amount paid
(including, any interest, penalties and expenses associated with
such payment, but excluding any amounts that have been deducted
from distributions otherwise payable to such Unitholder or with
respect to such Unitholder’s current or former interest in
the Company as provided in the immediately preceding
sentence). Any amounts paid by a Unitholder pursuant to this
Section 4.04(c)(iv) shall be treated as a capital contribution to
the Company for United States federal income tax purposes, and the
amounts paid by the Company with respect to such Unitholder for
which the Unitholder is reimbursing the Company shall be treated as
a distribution to such Unitholder in return of capital
contributions; provided, however, that such payments
shall not affect the Capital Accounts or Unreturned Capital
Contribution amounts of, any other Capital Contributions to be made
by, or the distributions and allocations otherwise to be made to
the applicable Unitholders under this Agreement without regard to
this paragraph.
(v) The obligations of
each Unitholder, whether current or former, under this Section
4.04(c) shall survive the Transfer or other termination of such
Unitholder’s Interest in the Company and shall survive the
dissolution of the Company.
(d) In accordance with
section 704(c) of the Code and the Regulations thereunder, income,
gain, loss, and deduction with respect to any property contributed
to the capital of the Company shall, solely for income tax
purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its fair market value
(as agreed by the Company and the contributing Member) at the time
of contribution; provided, however, that with respect to
any variations that may exist with respect to the assets
contributed (or deemed as being contributed for tax purposes) to
the Company by the Minority Member as its initial Capital
Contribution, such variations shall be taken into account using the
“traditional method” as described in Regulations
section 1.704-3(d). If any Company asset has been revalued on the
books of the Company and the Capital Accounts of the Members
adjusted under section 1.704-1(b)(2)(iv)(f) of the Regulations,
subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes
and its adjusted book value in the same manner as, but not
necessarily under the same convention(s) or method(s) specifically
used by the Company for its allocations actually made or to be made
by the Company, under section 704(c) of the Code and the
Regulations thereunder.
(e) The
Board shall cause the Company to file a federal income tax return
and all other tax returns required to be filed by the Company for
each fiscal year or part thereof for which such returns are
required. In connection with all such returns, the Board shall
provide to each Person who at any time during the fiscal year was
recognized under this Agreement as a Member with an annual
statement or statements (including a copy of Schedule K-1 to IRS
Form 1065 or any successor Form) indicating such Person’s
share of the Company’s income, loss, gain, expense and other
items relevant for federal income tax purposes and any appropriate
state or local income tax purposes.
19
The
Board is hereby authorized to cause the Company to pay, on behalf
of or with respect to any Member, any amounts to a federal,
foreign, state or local taxing authority as may be necessary for
the Company to comply with tax withholding provisions of the Code
or other income tax or revenue laws of any applicable taxing
authority, whether because the Member is considered a nonresident
for any state or local income tax purposes or not to be a
“United States person” for federal income tax purposes
or for any other reason. Any such amount paid by the Company shall
be treated as a distribution by the Company to such Member, and
shall be offset against any distributions otherwise due to the
Member. In addition, if the amount of any such tax withholding or
payment exceeds the amount of unpaid distributions otherwise owing
to such Member with respect to the year or other period for which
such tax payment was made, the Company shall, in the sole
discretion of the Board, either (i) treat such excess amount
as an offset against any future distributions to be made to such
Member, or (ii) require the Member on whose behalf such
payments were made to reimburse the Company for such excess
amount.
(a) The Board shall
maintain, or otherwise cause the Company to maintain, books,
records and accounts of all operations and expenditures of the
Company, and shall determine all items
of income, expense, Net Income, and Net Loss in accordance with the
method of accounting selected by the Board, consistently applied.
All of the records and books of account of the Company, in whatever
form maintained, shall at all times be maintained at the principal
office of the Company or another location designated by the Board
and shall be open to the inspection and examination of the Members
or their representatives during reasonable business hours. Such
right of inspection and examination may be exercised through any
agent or employee of a Member designated by it or by an attorney or
independent certified public accountant designated by such Member.
Such Member shall bear all expenses incurred in any examination
made on behalf of such Member.
(b) All expenses in
connection with the keeping of the books and records of the Company
and the preparation of financial statements required to implement
the provisions of this Agreement or otherwise needed for the
conduct of the Company’s business shall be borne by the
Company as an ordinary expense of its business.
20
4.07 Incentive
Interest Safe Harbor Election. In
furtherance and not derogation of the authority granted to the
Board under Article V, subject to the terms hereof, the Board is
hereby authorized to cause the Company to make the safe harbor
election for valuing Interests issued in connection with the
performance of services by any employee (or other service provider)
as contemplated in IRS Notice
2005-43 (the “Safe Harbor
Election”), as the same
may be permitted pursuant to or in accordance with the finally
promulgated successor rules to Proposed Regulations section
1.83-3(1) and IRS Notice 2005-43, whether promulgated in the form
of one or more final Regulations, revenue rulings, revenue
procedures, notices, and/or other IRS guidance (collectively, the
“Ultimate
Rules”). Such Safe Harbor
Election shall be made if, and at such time as, the Board may
determine in its sole discretion. In connection with any Safe
Harbor Election, the provisions below in this Section also shall
apply.
(a)
Binding
Election. Any such Safe Harbor
Election shall be binding on the Company and on all of its holders
of Interests with respect to all transfers of Interests made while
a Safe Harbor Election is in effect. A Safe Harbor Election, once
made, may be revoked at any time by the Company, upon determination
by the Board in its sole discretion, as permitted by the Ultimate
Rules or any other applicable rule.
(b)
Agreement to
Comply. Each holder of Units or
any other Interest, by signing this Agreement or by accepting a
transfer of any Units or any other Interest in the Company, hereby
agrees to comply with all requirements of the Safe Harbor Election
with respect to any Interest to which the Safe Harbor Election
applies while the Safe Harbor Election remains
effective.
(c)
Filings.
The Board shall file or cause the Company to file all returns,
reports and other documentation as may be required to perfect and
maintain the Safe Harbor Election with respect to transfers of such
Interests.
(d)
Board’s Authority
to Amend. The Board is hereby
authorized and empowered, without further vote or action of the
Members, to amend this Agreement as necessary to comply with the
Ultimate Rules or any other rule or rules, including the allocation
provisions of the Agreement, that may be required in order to
provide for a Safe Harbor Election and the ability to maintain or
revoke the Safe Harbor Election, and the Board shall have the
authority to execute any such amendment by and on behalf of each
Member or other holder of Units.
(e)
Agreement to
Cooperate. Each holder of Units
or any other Interests agrees to (i) cooperate with the
Company and the Board to perfect and maintain any Safe Harbor
Election, (ii) timely execute and deliver any documentation
with respect thereto reasonably requested by the Board, and
(iii) take no position in any filings or other communications
with the IRS or any other taxing authority that is contrary to any
Safe Harbor Election in effect for the Company.
(f) Binding
on Transferees and Assignees.
No transfer, assignment, or other disposition of any Units or other
Interest by a holder of any Interest shall be effective unless
prior to such transfer, assignment, or disposition the transferee,
assignee, or intended recipient of such Units or other Interest
shall have agreed in writing to be bound by the provisions of this
Section 4.07, in a form satisfactory to the
Board.
21
ARTICLE
V
5.01 Duties and Authority of Board of
Representatives. All limited liability company powers of the
Company shall be exercised by or under the authority of, and the
business and affairs of the Company shall be managed under the
direction of, its Board of Representatives (the “Board”) or by
such executive or other committees as the Board may establish
pursuant to this Agreement, except only for those acts and things
as to which approval by the Members is expressly required by the
Certificate of Formation, this Agreement, the Act, or other
applicable law. The business and affairs of the Company shall be
managed by its Board and by any officers as may be authorized by
the Board, and not by any of the Members in their roles as members.
Except as otherwise expressly provided in this Agreement,
(i) the Board shall conduct, direct, and exercise full control
over all activities, policies and affairs of the Company, and
(ii) all management powers over the business and affairs of
the Company shall be exclusively vested in the Board, subject to
the Board’s authority to delegate powers and duties to the
officers and others as set forth herein. Each member of the Board
is sometimes referred to herein as a “Representative”.
If the Company at any time is required under the Act or any other
applicable laws to have or designate one or more Persons as being a
“manager”, the Board is hereby authorized to designate
such Person or Persons as it may determine as a
“manager” and give any such manager such rights,
powers, and duties as the Board may determine. Except for any
managers who may be designated by the Board as described in the
immediately preceding sentence, the Representatives and any Company
officers apportioned by the Board shall be the Company's
“company officials” as such term is defined in the
Act.
(a) The number of
Representatives constituting the Board of Representatives shall
initially be fixed at three (3). The number of Representative
constituting the Board may be hereafter increased or decreased from
time to time upon the written determination of Members constituting
a Majority in Interest of the Members. Representatives may, but
need not, be residents of the State of Delaware or officers or
Members of the Company. One of the Representatives shall be elected
by the vote or approval of the Minority Member (the
“Minority
Member Representative") and all of the other Representatives
shall be elected by the vote or approval of the Majority Member
(each a “Majority Member
Representative”). The initial Minority Member is
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and the initial Majority Member Representatives are
▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇. The name, address, and consent of
each initial Representative and any additional or successor
Representative to serve in such capacity shall be evidenced in the
form of Exhibit B
attached hereto and made a part hereof. Notwithstanding anything to
the contrary herein, if the Board of Representatives is increased,
such increase shall be sufficiently large such that the Minority
Member may appoint the number of directors required to maintain 1/3
of the seats on the Board of Representatives and the Minority
Member shall be entitled to appoint such number of Representatives
as equals 1/3 of the total number of Representatives.
(b) Each Representative
shall hold office until the earliest to occur of the death,
resignation, removal by the Member entitled to elect such
Representative (as provided in Section 5.02(d) below), or
expiration of the stated term in office, if any, of such
Representative.
22
(c) Any Representative
may resign at any time by giving written notice to the Board. The
resignation of any Representative shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such
notice; unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. The
resignation of a Representative who is also a Member or officer
shall not affect the resigning Representative’s rights as a
Member or officer under this Agreement.
(d) A Representative
may be removed at any time and from time to time, with or without
cause, only with the written consent of the Member entitled to
elect such Representative pursuant to Section 5.02(a).
(e) Any vacancy
occurring in a position on the Board, for any other reason, shall
be filled as follows: (i) if the vacancy is of a Minority
Member Representative, by the vote or approval of the Minority
Member, and (ii) if the vacancy is of a Majority Member
Representative, by the vote or approval of the Majority
Member.
(f) There may be a
Chairman of the Board elected by the Representatives from their
number at any meeting of the Board. The Chairman shall preside at
all meetings of the Board and perform such other duties as may be
directed by the Board. He or she shall have the power to call any
regular and any special meetings of the Board.
(g) A Representative
shall not receive any compensation for serving in the capacity as a
Representative; provided, however, that the Company may,
upon determination of the Board, agree to reimburse the
Representatives for reasonable out-of-pocket expenses incurred by
in attending regular and special meetings of the Board. Nothing
herein contained, however, shall be construed to preclude any
Representative from serving the Company in any other capacity and
receiving compensation therefor.
(a) Regular meetings of
the Board shall be held annually, at times and at locations
determined by the Board. Additionally, meetings of the Board may be
called by or at the request of the Chairman of the Board, if any,
by the President of the Company, or by any Representative. Such
meetings may be held either within or without the State of
Delaware, as fixed by the Person or Persons calling the
meeting.
(b) Special meetings of
the Board may be held if the Person or Persons calling a special
meeting, provides, at least ten (10) days before the meeting,
notice thereof by any usual means of communication, including
without limitation by electronic mail or other electronic means.
Such notice need not specify the purpose for which the meeting is
called.
23
(c) Any Representative
may waive notice of any meeting. The waiver must be in writing,
signed by the Representative entitled to the notice and delivered
to the Company for inclusion in the minutes or filing with the
Company’s records. A Representative's attendance at or
participation in a meeting will constitute a waiver of notice of
such meeting, unless the Representative at the beginning of the
meeting (or promptly on arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
(d) Except as otherwise
expressly set forth in this Agreement, the affirmative vote
(whether by proxy or otherwise) of a majority of the members of the
Board (and not just a majority of the members present at a meeting
thereof) shall be the act of the Board. Except in circumstances
where this Agreement provides for a higher level of approval,
whenever the term “the approval of the Board” or any
like or similar term is used in the Agreement, such term shall mean
the approval of the majority of the number of Representatives fixed
pursuant to this Agreement and not merely a majority of the
Representatives in attendance at a meeting.
(e) A Representative
who is present at a meeting of the Board when Company action is
taken is deemed to have assented to the action taken unless
(i) he or she objects at the beginning of the meeting (or
promptly upon his or her arrival) to holding it or transacting
business at the meeting, (ii) his or her dissent or abstention
from the action taken is entered in the minutes of the meeting, or
(iii) he or she files written notice of his or her dissent or
abstention with the presiding officer of the meeting before its
adjournment or with the Company immediately after the adjournment.
Such right to dissent shall not apply to a Representative who voted
in favor of such action.
(f) Action required or
permitted to be taken at a meeting of the Board may be taken
without a meeting if evidenced by a written consent, signed and
executed by a majority of the number of Representatives fixed
pursuant to this Agreement (as such number may be increased or
decreased pursuant to Section 5.02(a)), except to the extent a
higher percentage of the Representatives must give their
affirmative vote for such action by the Company to be effective
under this Agreement. The written consents shall be signed by each
Representative before or after such action, shall describe the
action taken, and shall be included in the minutes or filed with
the Company’s records. Such action will become effective when
the last Representative necessary for approval of the action signs
the consent, unless the consent specifies a different date. A
Representative's consent hereunder may be in electronic form and
may be delivered to the Company by electronic mail or other
electronic means. Any reasonable manifestation of a
Representative’s assent shall be considered such
Representative’s “signature” for this
purpose.
(g) Any one or more
Representatives may participate in a meeting of the Board by means
of a conference telephone or similar communications device that
allows all persons participating in the meeting to simultaneously
communicate with all other Persons participating in the meeting,
and such participation in a meeting shall be deemed presence in
person at such meeting.
24
(a) Officers of the Company.
Subject to Section 5.0(b), the Board may, from time to time,
delegate to one or more Persons (including any officer, employee or
other agent of the Company and including through the creation and
establishment of one or more committees) such authority and duties
as the Board may deem advisable. In addition, the Board may assign
titles (including, but not limited to, chairman of the board, chief
executive officer, chief operating officer, chief financial
officer, president, vice president, secretary, assistant secretary,
treasurer, assistant treasurer, controller, or assistant
controller) and delegate certain authority and duties to such
Persons. Any number of titles may be held by the same Person, but
no officer may act in more than one capacity where action of two or
more officers is required. Absent a specific delegation of
authority pursuant to this Section 5.04(a), an officer appointed by
the Board shall have such authority and duties as set forth for his
or her title in this Section 5.04. Any delegation pursuant to this
Section 5.04(a) may be revoked at any time by the Board in its sole
discretion.
(b) Appointment and Term. Each
officer of the Company shall hold office until his or her death,
resignation, retirement, removal by the Board, disqualification, or
successor shall have been appointed and qualified.
(c) Removal. Any officer or agent
elected or appointed by the Board may be removed by the Board at
any time with or without cause, but such removal shall be without
prejudice to the contract rights, if any, of the officer or agent
so removed.
(d) Resignation. An officer may
resign at any time by communicating his or her resignation to the
Company, orally or in writing. A resignation is effective when
communicated unless it specifies in writing a later effective date.
If a resignation is made effective at a later date that is accepted
by the Company, the Board may fill the pending vacancy before the
effective date if the Board provides that the successor does not
take office until the effective date. An officer’s
resignation does not affect the Company’s contract rights, if
any, with the officer.
(e) Compensation of Officers. The
compensation of all officers of the Company shall be fixed by the
Board, and no officer shall serve the Company in any other capacity
and receive compensation therefor unless such additional
compensation shall be authorized by the Board.
(f) Officers. The Board may
designate any or all of the following officers of the Company and
may delegate to such officers day to day management
responsibilities and authority, but such delegation will be subject
to the powers reserved to the Board and to the Members under this
Agreement.
(i) President. The President shall
have the powers and duties of supervision and management usually
vested in the office of the chief executive officer and shall have
and perform such other duties as may from time to time be assigned
by the Board.
(ii) Chief
Financial Officer. The Chief Financial Officer shall perform
such duties as from time to time may be assigned to him or her by
the President or the Board. Unless otherwise designated by the
Board, the Chief Financial Officer shall also have the
responsibilities of the Treasurer.
(iii) Vice
Presidents. Vice Presidents, when appointed by the Board,
shall have the powers and perform the duties as the Board and the
President may from time to time assign. In the absence of and at
the request of the President, the Vice President(s) shall perform
the duties of the President and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the
President.
25
(iv) Secretary.
The Secretary shall (i) attend all meetings of the Members and
the Board or Board committees and, if requested, shall keep true
and accurate records of such meetings; (ii) see that all
notices are duly given in accordance with the provisions of this
Agreement or as required by the Act; (iii) be custodian of the
Company’s records and of any seal of the Company and see that
any seal of the Company is affixed to all documents the execution
of which on behalf of the Company under its seal is duly
authorized; (iv) keep a register of the address of each Member
as may be furnished to the Secretary by such Member; (v) sign
with the President, or a Vice President, any certificates for
Interest or Units in the Company, the issuance of which shall have
been authorized by resolution of the Board; (vi) maintain and
have general charge of any Interest or Unit transfer books of the
Company; (vii) attest the signature or certify the incumbency
or signature of any officer of the Company; and (viii) in
general perform all duties incident to the office of Secretary and
such other duties as from time to time may be assigned to him or
her by the President or by the Board. The Secretary shall give
notice of all meetings of the Members or the Board.
(v) Assistant Secretaries. In the
absence of the Secretary or in the event of his or her death or
inability or refusal to act, the Assistant Secretaries (if any) in
the order of their length of service as Assistant Secretary, unless
otherwise determined by the Board, shall perform the duties of the
Secretary, and when so acting shall have all the powers of and be
subject to all the restrictions upon the Secretary. An Assistant
Secretary shall perform such other duties as may be assigned by the
Secretary, by the President, or by the Board.
(vi) Treasurer.
The Treasurer shall manage and oversee all funds and securities of
the Company, including cash, short-term investments and money
market funds, maintain appropriate accounting records as required
by law, and in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may
be assigned to him or her by the President, by the Board, or by or
under this Article.
(vii) Assistant
Treasurers. In the absence of the Treasurer or in the event
of his or her death or inability or refusal to act, the Assistant
Treasurers (if any) in the order of their length of service as
such, unless otherwise determined by the Board, shall perform the
duties of the Treasurer, and when so acting shall have all the
powers of and be subject to all the restrictions upon the
Treasurer. An Assistant Treasurer shall perform such other duties
as may be assigned by the Secretary, by the President, or by the
Board.
(viii) Other
Officers. Such other officers may be appointed by the Board
with such duties and responsibilities to the Company as may be
assigned by the Board.
26
5.06
Delegation of Authority. In
addition to the authority and duties delegated to the officers
pursuant to Section 5.05, the Board may, from time to time,
delegate to one or more Persons (including any Representative,
officer, employee or other agent of the Company and including
through the creation and establishment of one or more committees)
such authority and duties as the Board may deem advisable. In
addition, the Board may assign titles (including, without
limitation, manager, chairman, chief executive officer, chief
operating officer, president, principal, vice president, secretary,
assistant secretary, treasurer, or assistant treasurer) and
delegate certain authority and duties to such Persons. Any number
of titles may be held by the same Representative or other Person.
Any delegation pursuant to this Section 5.06 may be revoked at any
time by the Board in its sole discretion.
5.07
Contracts, Loans, Checks and
Deposits.
(a) Execution
of Contracts and Instruments. Any instrument regarding a
matter approved by the Board, as appropriate, in accordance with
this Article V may be executed and delivered on behalf of the
Company by any Representative, officer or agent to whom such
signatory authority has been delegated by the Board, including any
deed, deed of trust, note or other evidence of indebtedness, lease
agreement, security agreement, financing statement, contract of
sale, or other instrument purporting to convey or encumber, in
whole or in part, any or all of the assets of the Company, at any
time held in its name, or any receipt or compromise or settlement
agreement with respect to the accounts receivable and claims of the
Company; no other signature shall be required for any such
instrument to be valid, binding, and enforceable against the
Company in accordance with its terms. The Board may authorize any
officer or officers, or agent or agents, to enter into any contract
or execute and deliver any instrument in the name of and on behalf
of the Company, and such authority may be general or confined to
specific instances. Any resolution of the Board authorizing the
execution of documents by the proper officers of the Company or by
the officers generally will be deemed to authorize such execution
by the Chairman of the Board, the President, any Vice President, or
the Treasurer, or any other officer if such execution is generally
within the scope of the duties of his or her office. No
Representative, however, will have the authority to bind the
Company, unless such authority has been granted to such
Representative by the Board. The Board may by resolution authorize
such execution by means of one or more facsimile
signatures.
(b) Loans.
No loans may be contracted on behalf of the Company and no evidence
of indebtedness may be issued in the Company’s name unless
authorized by a resolution or other approval of the Board or
Members, in accordance with this Agreement. Such authority may be
general or confined to specific instances.
(c) Checks
and Drafts. All checks, drafts or other orders for the
payment of money issued in the name of the Company shall be signed
by such officer or officers, or agent or agents, of the Company and
in such manner as from time to time may be determined by resolution
of the Board.
(d) Deposits.
All funds of the Company not otherwise employed shall be deposited
from time to time to the credit of the Company in such depositories
as the Board may select or authorize.
5.08 Limitation
on Liability.
27
(a) Except
as otherwise provided herein or in an agreement entered into by
such Person and the Company, no Representative will be liable to
the Company or to any Member for any act or omission performed or
omitted by such Person in his or her capacity as a member of the
Board pursuant to authority granted to such Person by this
Agreement; provided, however, that, except as
otherwise provided herein or in an agreement entered into by such
Person and the Company, such limitation of liability will not apply
to the extent the act or omission was attributable to such
Person’s gross negligence, willful misconduct or knowing
violation of law. The Board may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon
it hereunder either directly or by or through its agents, and no
Representative or any of such Representative’s Affiliates
will be responsible for any misconduct or negligence on the part of
any such agent appointed by the Board (so long as such agent was
selected in good faith and with reasonable care). The Board will be
entitled to rely upon the advice of legal counsel, independent
public accountants and other experts, including financial advisors,
and any act of or failure to act by the Board in good-faith
reliance on such advice will in no event subject the Board or any
Representative thereof to liability to the Company or any
Member.
(b) Whenever
in this Agreement or any other agreement contemplated herein, the
Board is permitted or required to take any action or to make a
decision in its “sole discretion” or
“discretion,” with “complete discretion” or
under a grant of similar authority or latitude, the Board and each
Representative shall be entitled to consider such interests and
factors as it desires.
(c) Whenever
in this Agreement or any other agreement contemplated herein the
Board is permitted or required to take any action or to make a
decision in its “good faith” or under another express
standard, the Board shall act under such express standard and, to
the extent permitted by applicable law, shall not be subject to any
other or different standards imposed by this Agreement or any other
agreement contemplated herein, and, notwithstanding anything
contained herein to the contrary, so long as the Board acts in good
faith, the resolution, action, or terms so made, taken, or provided
by the Board will not constitute a breach of this Agreement or any
other agreement contemplated herein or impose liability upon the
Board, any Representative, or any of such Representative’s
Affiliates.
5.09 Resignation
of Brekford.. Brekford Corp., by entering into this
Agreement as a Member of the Company, hereby resigns as Manager of
the Company effective as of the date of this
Agreement.
ARTICLE
VI
There
are no required meetings of the Members, whether annually or
otherwise. Any actions taken by the Members, shall be in accordance
with the affirmative vote or written consent of the Members holding
the requisite percentage of Units necessary to take such action.
Unless action by Members holding a different percentage of Units or
action by any single Member is specifically required in this
Agreement or in the Act, all actions taken by the Members shall be
in accordance with the decision of Members constituting a
Majority in Interest of the
Members. A Member’s consent hereunder may be provided in
electronic form and may be delivered by electronic mail or other
electronic means. Any reasonable manifestation of a Member’s
assent shall be considered such Member’s “written
consent” for this purpose.
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ARTICLE
VII
OF
REPRESENTATIVES, OFFICERS AND MEMBERS
No
Member, Representative or officer shall be liable for the debts,
obligations, and liabilities of the Company beyond, in the case of
the Member, the Capital Contributions the Member has made or agreed
to make herein or in writing as required under Section 3.01. Except
as otherwise expressly provided herein, a Member shall not be
required to contribute to the capital of, or to loan any funds to,
the Company. However, a Member will be required to return to the
Company any distribution made to it in clear and manifest
accounting or similar error. The immediately preceding sentence
constitutes a compromise to which all Members have consented within
the meaning of the Act. The failure by the Company or any of its
Members, Representatives or officers to observe any formalities or
requirements relating to the exercise of the powers and management
of the Company’s business and affairs under this Agreement or
the Act shall not be grounds for imposing personal liability on any
Member, Representative or officer. If the Act is amended to
authorize action further eliminating or limiting the liability of
the Board, Members or officers, then the liability of the Board,
Members or officers of the Company will be eliminated or limited to
the fullest extent permitted by the Act as so amended. Any repeal or modification of this
Section shall not adversely affect the right or protection of a
Representative, Member or officer existing at the time of such
repeal or modification.
The
Company shall indemnify the Representatives, Members and officers
to the fullest extent permitted or required by the Act, as amended
from time to time; provided, however, that no Member or
other holder of Units is to be reimbursed or indemnified by the
Company for any federal, state or
local income, estate, gift or other taxes imposed on the
Member, or other holder, or the ultimate owners thereof by reason
of (i) such Member’s, or other holder’s, having,
selling or otherwise transferring any Units or
(ii) allocation of income or gain
from the Company or the Company’s being treated as a
flow-through entity, and not a separate taxable entity, for
purposes of income tax laws. The Company may advance expenses to be
incurred by a Representative, Member or officer upon application
therefor and the receipt by the Company of an agreement by the
Representative, Member or officer to repay the Company for such
advances, if the Representative, Member or officer receiving such
advances is found by a court of competent jurisdiction, upon entry
of a final judgment, to have violated any of the exceptions to
limitation of liability or indemnification contained in
Section 7.01, in this Section 7.02 or in the Act, which shall be
deemed to preclude indemnification. The Company may also indemnify
its employees and other representatives or agents up to the fullest
extent permitted under the Act or other applicable law. Any
promissory note executed by or in connection with a request for
indemnification shall be deemed paid and satisfied in full if it is
ultimately determined that such Person is entitled to be
indemnified by the Company against such expenses. Notwithstanding
the foregoing, except as otherwise specifically approved by the
Board, the indemnity provided in this Section will be operative
only (i) in the context of third-party suits or claims, and
not in connection with demands, claims, suits, actions or
proceedings either (A) initiated by any Member, other holder
of Units or any Affiliate thereof against another Member, other
holder of Units or any Affiliate, or (B) between the Company
and a Member, Representative or officer, and (ii) with respect
to courses of action or inaction of the party seeking
indemnification that did not constitute gross
negligence, fraud, willful misconduct, malfeasance, breach of such party’s
fiduciary duty, or
material breach of any representation, warranty, covenant or
agreement set forth in this Agreement.
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The
indemnification provided by this Agreement shall: (i) be
deemed exclusive of any other rights to which a Person seeking
indemnification may be entitled under any statute, agreement, vote
of Members or disinterested Representatives, or otherwise, both as
to action in official capacities and as to action in another
capacity while holding such office; (ii) continue as to a
Person who ceases to be a Representative, Member or officer;
(iii) inure to the benefit of the estate, heirs, executors,
administrators, or other successors of an indemnitee; and
(iv) not be deemed to create any rights for the benefit of any
other Person.
7.04
Fiduciary Duties and
Obligations. Except as may otherwise be set forth herein, a
Representative shall not have any duties, including fiduciary
duties, to the Company, the Members or any other Persons solely by
reason of being a Representative, except to the extent that such
duties are prohibited from being waived by the Act. To the maximum
extent permitted by law, the Members, acting in their capacity as
such, shall have no fiduciary duties to the Company, its Members or
other Persons.
ARTICLE
VIII
The
term “Transfer” when
used in this Agreement with respect to a Unit includes a direct or
indirect sale (including a change of control), assignment, gift,
exchange, or other disposition. Except as otherwise provided in the
Act or other applicable law, no Member or other holder of Units
shall, subject to Article
X, at any time Transfer all or any portion of its Units
except with the prior written consent of the Board, provided, that, the Minority Member may
Transfer all (but not less than all) of its Units to Public Safety
Vehicle Upfitting, LLC, a Delaware limited liability company and
wholly-owned subsidiary of the Minority Member (“Public
Safety”) so long as (i) Public Safety is a
wholly-owned subsidiary of the Minority Member on the date of such
Transfer, (ii) Public Safety complies with the other provisions of
this Section 8.01 prior to being admitted as Member and (iii) the
Brekford Corp. agrees to remain liable for Public Safety’s
pro rata portion of
additional Capital Contributions required hereunder following the
transfer. Any attempted Transfer of Units that does not comply with
the provisions of this Section 8.01 shall be void ab initio and shall not be recognized
by the Company for any purpose. Unless and until admitted as a
substituted Member in accordance with this Section 8.01, the
transferee shall not have the rights, powers or privileges of a
Member with respect to the Transferred Units, and the transferee
shall be entitled only to receive the distributions and allocations
of Income, gains, expenses and Losses to which the transferor would
be entitled but for the transfer of the Units, subject to all terms
and conditions of this Agreement. A transferee of Units may be
admitted as a Member of the Company upon the satisfaction of the
following conditions: (a) the transferee has executed and delivered
all documents reasonably deemed appropriate by the Board to reflect
the transferee’s admission to the Company and agreement to be
bound by this Agreement; and (b) if requested by the Board, payment
has been made to the Company of all reasonable costs and expenses
of admitting such transferee as a substituted Member.
30
(a) From and after the
time (if any) when the Board, upon the determination of a Majority
in Interest of the
Members, has informed each of the Members that a Majority in
Interest of the Members
desires to effectuate a sale or exchange of all of the
Company’s Units (a “Units Sale”),
the Company and each Member shall, subject to Section 8.03(c),
(i) cooperate in good faith to effectuate such Units Sale, and
(ii) consent to and raise no objections against, and take all
necessary or desirable actions in connection with, the consummation
of such Units Sale, including those reasonably requested by the
Board. The drag-along rights set forth in this Section 8.03 will
apply to a Units Sale only if (i) such sale is to be made only
pursuant to a definitive purchase and sale agreement or similar
agreement setting forth all of the material terms and conditions
relative to such Units Sale, (ii) the Board delivers a copy of
such agreement to all of the Members and other recognized holders
of Units in accordance with Section 11.11 at least ten (10) days
before the closing or other consummation of such Units Sale, and
(iii) such Units Sale is an arm’s-length transaction
with a primary buyer that is not an Affiliate of any Representative
or any Member owning a Majority in Interest of the Units, except that the
conditions and restrictions in this clause (iii) shall not be
applicable to any Units Sale whose terms are approved by a Majority
in Interest of the
Members that are not Affiliates of such Representative or such
Member owning a Majority in Interest of the Units. Without limiting the
generality of the foregoing, subject to the terms set forth in this
Section 8.02, each Member or other holder of Units hereby waives
any dissenter’s rights, appraisal rights, or similar rights
in connection with such Units Sale, and each Member or other holder
of Units agrees to sell or exchange any or all of his, her or its
Units on the terms and conditions approved by a Majority in
Interest of the Members
(including the making of all required customary representations,
warranties, covenants, indemnities and agreements). Further, each
Member agrees to and shall, in connection with such Units Sale,
sell, assign, Transfer and convey his, her, or its Units free and
clear of any and all liens and encumbrances.
(b) In connection with
any Units Sale pursuant to this Section 8.02, each Member shall
receive the same form of consideration and the same portion of the
aggregate consideration as such Member would have received if the
aggregate consideration paid by the buyer in connection with such
Units Sale (the “Aggregate
Consideration”) had been paid directly to the Company
and then distributed by the Company pursuant to Section 9.03
determined as of the consummation of the Units Sale (after giving
effect to any transfer taxes payable in connection with such Units
Sale, the amount of which will be paid directly by the Person(s)
owing such taxes). Each Member or other holder of Units will take
all necessary or desirable actions in connection with the receipt
of the Aggregate Consideration from such Units Sale as is requested
by the Majority in Interest of the Members to effectuate the
foregoing (including the making of all required customary
representations, warranties, covenants and
indemnities).
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(c) The Company shall
pay the costs of any sale of Units pursuant to a Units Sale to the
extent such costs are incurred for the benefit of all Members and
are not otherwise paid by the acquiring party, including, in any
event, the reasonable fees and disbursements of one counsel
selected by the Board to represent the Members and the Company. To
the extent the Company does not have sufficient available cash to
pay all such costs and the acquiring party does not pay such costs,
the Board may cause such excess costs to be funded by withholding a
proportionate amount of the consideration to be received by each
Member or other holder of Units from the Units Sale, with each
Member’s or other holder’s share of such withholding to
be determined as if such costs were an expense of the Company in
connection with a distribution pursuant to Section 9.03. Costs
incurred by any Member or other holder of Units on his, her, or its
own behalf will not be considered costs of a Units Sale under this
Section 8.02(c).
(d) Notwithstanding any
other provision of this Section 8.02, neither the Board
nor a Majority in Interest of the Members may exercise the
provisions of Sections 8.02(a)-(c) until after the
fifth anniversary of the date hereof.
8.03 Repurchase Option for
Class B Units. Notwithstanding any other provision herein to the
contrary, the Class B Units of the Company may be issued pursuant
to restricted equity award agreements, or similar agreements
between the Company and the recipient of the Class B Units, that
provide for limitations on the transferability of such Units and
give the Company the right to repurchase such Class B Units in the
event of the termination of the purchaser’s employment or
other service-provider relationship with the Company for any
reason, whether with or without cause, and including by reason of
death or disability. Transfer limitations and terms of any such
repurchase option and the vesting schedule for the Class B Units
issued thereunder may be as set forth in the individual restricted
equity award agreements, as approved by the Board, as long as such
terms do not provide for payment by the Company for any Class B
Unit of any amounts in excess of the fair market value of the Class
B Unit or the amount to which the Class B Unit would be entitled
upon a dissolution of the Company and liquidation of its assets at
the time in accordance with Section 9.03.
ARTICLE
IX
(a) The Company shall
be dissolved upon the first to occur of the following events (a
“Dissolution
Event”):
32
(i) if the
Company’s Certificate of Formation are subsequently amended
to provide for a definite period of duration for the
Company’s existence, the close of business on the last day of
such period;
(ii) the
written consent of the Board, the Majority Member and the Minority
Member to dissolve the Company;
(iii) the
sale or other disposition of all or substantially all of the
Company’s assets in consideration for which the Company
receives no property other than cash and cash equivalents, except
upon a determination at such time by the Board for the Company not
to dissolve;
(iv) the
happening of any event upon which a Member ceases (as defined in
the Act) to be a member of the Company, if the Company no longer
has any other Members; provided, however, that the Company shall
not be dissolved upon the cessation of membership of its last
Member if, within ninety (90) days of the event of cessation of
membership of its last Member, the assignee or the fiduciary of
such Member agrees in writing that the business of the Company may
be continued until the admission of the assignee or fiduciary of
the estate or its designee to the Company as a Member, effective as
of the occurrence of the event that causes the cessation of
membership of the last Member; or
(v) the entry of a
decree of judicial dissolution under the Act.
Notwithstanding
any provision of the Act, the Company shall not dissolve prior to
the occurrence of a Dissolution Event as set forth above. None of
the termination events set forth in section 18-801 of the Act shall
cause the dissolution of the Company. This Section 9.01 is
expressly intended to override and replace the provisions of
Section 18-801(a)(3) of the Act, to the greatest extent permitted
by law.
(b) Upon the
dissolution of the Company, the business and affairs of the Company
shall terminate and be wound up, and the assets of the Company
shall be liquidated under this Article IX. Dissolution of the
Company shall be effective as of the day on which the event occurs
giving rise to the dissolution, but the Company shall not terminate
until there has been a complete winding up and liquidation of the
Company’s business and affairs, and the assets of the Company
have been distributed as provided in Section 9.03. Upon dissolution
of the Company, the Board may cause any part or all of the assets
of the Company to be sold in such manner as the Board shall
determine in an effort to obtain the best prices for such assets;
provided,
however, that the
Board may, in its discretion, distribute assets of the Company in
kind to the Members to the extent practicable.
33
Upon
completion of the distribution of Company assets as provided in
this Article IX, the Company is terminated (and shall not be
terminated prior to such time), and the Board (or such other Person
or Persons as the Act may require or permit) shall file a
Certificate of Cancellation with the Secretary of State, cancel any
other filings made pursuant to Article II hereof and take such
other actions as may be necessary to terminate the Company. The
Company shall be deemed to continue in existence for all purposes
of this Agreement until it is terminated pursuant to this Section
9.02.
In
settling accounts after dissolution of the Company, the assets of
the Company shall be paid in the following order and
priority:
(a) first, to the
creditors of the Company, in the order of priority as provided by
law, excluding to Members with respect to their Units or Capital
Contributions, but including Members on account of any loans made
to, or other debts owed to them by, the Company;
(b) next, to the
Members and any other Persons recognized under this Agreement as an
owner of Units in accordance with the positive balances in their
Capital Accounts, after giving effect to all Capital Contributions,
prior distributions, and allocations of income, gain, loss, or
deduction for all periods (including allocations in connection with
the Company's dissolution and liquidation); provided, however, that if such Capital
Account balances (after making all adjustments required under the
immediately preceding clause) exceed the amount available to be
distributed under this Section 9.03(b), distributions under this
Section 9.03(b) shall be made among the holders of Units in the
following priority: (I) first, to the extent of the amount of
Unreturned Capital Contributions with respect to any Unit,
distributions shall be made to the holders of such Units, to the
extent of, and in proportion to, their Units’ amounts of
Unreturned Capital Contributions; and (II) then, any remaining
amounts shall be distributed to and among all holders of Units in
proportion to their remaining Capital Account balances, after
giving effect to all of the distributions under the foregoing
clauses of this proviso; and
(c) the balance, if
any, to the Members and other Persons recognized under this
Agreement as an owner of Units, in proportion to their numbers of
Units, regardless of Class.
Distributions
upon liquidation of the Company (or any Member’s Interest in
the Company) and related adjustments shall be made by the end of
the taxable year of the liquidation (or, if later, within ninety
(90) days after the date of such liquidation) or at such other time
as may be permitted by the Regulations. Notwithstanding anything to this Agreement to the
contrary, distributions to holders of Class B Units pursuant to
Section 9.03(b) above may be modified by the Board to the extent
necessary, in the reasonable discretion of the Board after
consultation with the Company’s tax advisors, in order to
cause such distributions and permit the Class B Units to
comply with the requirements
of Section 2.09.
34
A
reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Company and the liquidation of its
assets pursuant to Section 9.03 in order to minimize any losses
otherwise attendant upon such winding up and liquidation. The
Company shall set aside adequate reserves to discharge all costs,
expenses, and liabilities theretofore incurred or for which the
Company has committed prior to the date of termination so that all
distributions in kind to Members and other holders of Units will be
free and clear of such costs, expenses, and liabilities. The
distribution of cash and/or property to a Member or other holder of
Units in accordance with the provisions of Section 9.03 constitutes
a complete return to the Members and other holders of Units of
their Capital Contributions and a complete distribution to the
Members and other holders of Units of and with respect to their
Interests. To the extent that a Member or other holder of Units
returns funds to the Company, it has no claim against any other
Member or other holder of Units for those funds.
A
Member or other holder of Units shall not have the right or power
to effect a voluntary resignation from the Company or withdraw any
amount out of his, her or its Capital Account prior to the
dissolution and winding up of the Company pursuant to this Article
IX, except as otherwise expressly permitted by this Agreement. Any
such unpermitted attempted resignation shall be null and void, and,
notwithstanding any provision in the Act, the Company shall not be
required to make any payment or distribution in connection with the
attempted resignation. This Section 9.05 expressly overrides any
rights to distributions or other payments to which a Member or any
assignee thereof might otherwise be entitled under the default
provisions of section 18-604 of the Act or any other provisions of
the Act. Any Member or other holder of Units that attempts to
resign in contravention of this Section 9.05 shall indemnify,
defend, and hold harmless the Company and all other Members (other
than a Member who is, at the time of such resignation, in default
under this Agreement) from and against any losses, expenses,
judgments, fines, settlements, or damages suffered or incurred by
the Company or any such other Member arising out of, or resulting
from, such attempted resignation.
Notwithstanding
anything to the contrary in this Agreement, upon a liquidation
within the meaning of Regulations section 1.704-1(b)(2)(ii)(g), if
any Member has a deficit Capital Account balance (after giving
effect to all contributions, distributions, allocations, and other
Capital Account adjustments for all fiscal years, including the
fiscal year in which the liquidation occurs), such Member shall not
have any obligation to make any Capital Contribution to the
Company, and the negative balance of such Member’s Capital
Account shall not be considered a debt owed by such Member to the
Company or to any other Person for any purpose
whatsoever.
Except
as provided by law or as expressly provided in this Agreement, upon
dissolution each Member or other holder of Units may look solely to
the assets of the Company for the return of any Capital
Contribution with respect to his, her, or its Units. If the
Company’s property remaining after the payment or discharge
of the debts and liabilities of the Company is insufficient to
return the Capital Contributions to one or more Members or other
holders of Units, such Members or other holders of Units shall not
have any recourse against any other Member or Representative except
as otherwise provided in Section 7.01.
35
ARTICLE
X
PUT
RIGHT
10.01 Put
Right. On or after the seventh anniversary of the date of
this Agreement, the Minority Member will have the right to cause
the Company to redeem its entire Interest on the terms and
conditions set forth in this Article X; provided, however, that the Company shall
not be required to undertake any such redemption in the event that
the Board reasonably determines in good faith that the Company
would have insufficient available cash and liquidity for the
ongoing operations of the Company’s business following such
redemption. The Minority Member shall exercise this put right by
delivering to the Company written notice (a “Put Notice”)
of its desire to cause the Company to redeem its entire Interest
pursuant to this Article X.
10.02 Purchase
Price; Payment Terms. If the Company is required to redeem
the Minority Member’s Interest pursuant to Sections 10.01,
the purchase price (the “Redemption
Price”) shall be equal to the fair market value of the
Interest as reasonably agreed upon by the Minority Member, the
Majority Member and the Company. If
the fair market value cannot be agreed upon between the Minority
Member, the Majority Member and the Company, then the fair market
value shall be determined by a single appraisal made by an
appraiser agreed upon by the Members, which appraisal shall be
final. If the Members cannot agree on a single appraiser within
thirty (30) days after the delivery of the Put Notice, the fair
market value for the Interest shall be determined by three
appraisers: one appraiser selected by the Majority Member, one
selected by the Minority Member and one selected promptly
thereafter by the two appraisers. If any party fails to select its
appraiser within the applicable thirty (30) day period, the
appraiser(s) selected by the other party shall determine the
purchase price. The average value determined by the appraiser(s)
will be final and the costs of appraisal shall be borne one-half by
the Minority Member and one-half by the Company. At the
closing of the redemption, the Redemption Price will be payable in
immediately available funds; provided, however, the Company may, at
its option, fund twenty (20%) of the Redemption Price in
immediately available funds at the closing of the redemption and
pay the remainder of the Redemption Price by delivery of a
promissory note in an original principal amount equal to the unpaid
portion of the Redemption Price, which promissory note shall bear
interest at an interest rate equal to four percent (3%) per annum,
be payable in sixteen (16) equal quarterly installments of
principal and interest and provide no penalty for any
prepayments.
10.03
Closing of Purchase. Except as
provided above, the closing of any purchase of the Minority
Member’s Interest by the Company pursuant to this Article X
(the “Closing”)
shall take place on or before the ninetieth (90th) day following the
receipt of the Put Notice, as applicable. At the Closing,
(a) the Company shall deliver to the Minority Member
(i) cash or other immediately available federal funds in the
amount of the cash portion of the Redemption Price then due under
this Article X, and (ii) the promissory note, if any, for the
balance of the Redemption Price; and (b) the Minority Member
shall deliver to the Company any and all documents that reasonably
may be required by the Company and remaining Members in connection
with the transfer of the Minority Member’s Interest. In the
event that the Minority Member fails to cooperate with the
requirements of this Section or in any manner relating to the
execution of reasonable documentation related to the Closing, then
in such event, the Board shall be entitled to document such changes
on the books and records of the Company and to amend this Agreement
and Exhibit B in
accordance with the terms of such Closing, so long as the purchase
price required under this Agreement has been tendered in cash or in
a combination of cash and a promissory note as permitted under this
Agreement.
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ARTICLE
XI
Except
as otherwise specifically provided in this Agreement or as required
by applicable law (in which case the Board may amend this Agreement
to the extent necessary to comply with such law), this Agreement
may be amended in whole or in part only upon the written consent of
all of the Class A Members; provided, however, that (i) any
modifications or amendments that materially increase any
Member’s obligations under this Agreement beyond the
obligations the Member would have without such amendment, or that
are not applicable proportionately to all Members, or that have a
material and disproportionate adverse effect on any Member, will
not be effective against any adversely affected Member without such
Member’s written consent; (ii) any provision requiring
the consent of a specified Member, level or group of Members may
not be amended to a lesser voting or consent requirement without
the consent of the specified Member, level or group of the Members
and (iii) any amendment that adversely affects the rights of a
Member materially and disproportionately to other Members will
require the written consent of such Member.
Each
provision of this Agreement is intended to be severable. If any
term or provision of this Agreement or the application thereof to
any Person or circumstance is held to be invalid or unenforceable
to any extent, the remainder of this Agreement and the application
of such provisions to other Persons or circumstances shall not be
affected thereby, and the intent of this Agreement shall be
enforced to the greatest extent permitted by law.
The
substantive laws of the State of Delaware govern the validity of
this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties, without
giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
This
Agreement supersedes any and all prior agreements or dealings
between the parties hereto and their agents, employees, or officers
with respect to the subject matter hereof (except as contained in
any other agreements contemplated herein). This Agreement
constitutes the entire understanding and agreement among the
parties hereto with respect to the subject matter hereof, and there
are no agreements, understandings, restrictions, representations,
or warranties among the parties other than those set forth or
provided for herein.
37
None of
the provisions of this Agreement are for the benefit of or may be
enforceable by any creditors of the Company or of any of its
Affiliates, and no creditor that makes a loan to the Company or any
of its Affiliates may have or acquire (except pursuant to the terms
of a separate agreement executed by the Company in favor of such
creditor) at any time, as a result of making the loan, any direct
or indirect interest in Company profits, losses, gains,
distributions, capital, or property other than as a secured
creditor or unsecured creditor, as the case may be.
Unless
the context clearly indicates otherwise, the masculine, feminine,
and neuter genders will be deemed to be interchangeable, and the
singular includes the plural and vice versa.
No
consent or waiver, express or implied, by the Company, any
Representative, or any Member to or for any breach or default by
the Company, any Representative, or any other Member in the
performance by the Company, any Representative, or such other
Member of his, her, or its obligations under this Agreement may be
deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by the Company, any
Representative, or such other Member of the same or any other
obligations of the Company, the Representative, or such other
Member under this Agreement. Failure on the part of the Company,
any Representative, or any Member to complain of any act or failure
to act of the Company, any Representative, or any of the other
Member or to declare the Company, any Representative, or any of the
other Members in default, regardless of how long such failure
continues, will not constitute a waiver by the Company, a
Representative, or such Member of his, her, or its rights
hereunder.
Subject
to the restrictions on transferability set forth in this Agreement,
this Agreement inures to the benefit of and is binding upon the
Company, the Members and their successors, and
assigns.
Captions
are included solely for convenience of reference; if there is any
conflict between captions and the text of this Agreement, the text
shall control.
This
Agreement may be executed in any number of counterparts with the
same effect as if all parties hereto had signed the same document.
All counterparts are to be construed together and shall constitute
one Agreement. This Agreement and any signed agreement or
instrument entered into in connection with this Agreement or
contemplated hereby, and any amendments hereto or thereto, to the
extent signed and delivered by means of a facsimile or electronic
transmission, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have
the same binding legal effect as if it were the original signed
version thereof delivered in person. At the request of any party
hereto or to any such agreement or instrument, each other party
hereto or thereto agrees to, and must, re-execute original forms
thereof and deliver them to all other parties. No party hereto or
to any such agreement or instrument may raise the use of facsimile
or electronic transmission to deliver a signature or the fact that
any signature or agreement or instrument was transmitted or
communicated through the use of facsimile or electronic
transmission as a defense to the formation of a contract, and each
such party forever waives any such defense.
38
(a) All notices,
demands, requests, or consents provided for or permitted to be
given pursuant to this Agreement must be in writing, and electronic
communications shall be considered to be in writing for this
purpose.
(b) All notices,
demands, requests, and consents to be sent pursuant to this
Agreement to the Company, a Representative or a Member will be
deemed to have been properly given or served if addressed to such
Person at the Person’s address as it appears on the Company
records and (i) personally delivered, (ii) deposited for
next day delivery by Federal Express or other similar overnight
courier service, (iii) deposited in the United States mail,
prepaid, and registered or certified with return receipt requested,
(iv) transmitted via telecopier or other similar device to the
attention of such Person with receipt acknowledged, or (v)
transmitted via electronic mail or other electronic means to the
attention of such Person.
(c) All notices,
demands, and requests so given will be deemed to be received:
(i) when actually received, if personally delivered, deposited
for next day delivery with an overnight courier, telecopied, or
transmitted via electronic mail or other electronic means, or
(ii) as indicated upon the return receipt if deposited in the
United States mail.
(d) Each Representative
and Member has the right from time to time, and at any time during
the term of this Agreement, to change his, her, or its address for
notice by delivering to the other parties written notice of such
change in the manner prescribed in Section 10.11(b).
(e) All distributions
to any Member are to be made at the address to which notices are
sent unless otherwise specified in writing by any such
Member.
Notwithstanding
anything contained in this Agreement to the contrary, each Member
hereby represents and warrants to the Company, the Board, and to
each other that: (a) the Units of such Member are acquired for
investment purposes only, for the Member’s own account, and
not with a view to or in connection with any distribution, reoffer,
resale, or other disposition not in compliance with the Securities
Act and applicable state securities laws; (b) such Member (i)
is an “accredited investor” within the meaning of Rule
501 of Regulation D promulgated under the Securities Act, and/or
(ii) either alone or together with the Member’s
representatives, possesses such expertise, knowledge, and
sophistication in financial and business matters generally, and in
the type of transactions in which the Company proposes to engage in
particular, that the Member is capable of evaluating the merits and
economic risks of acquiring and holding the Units and is able to
bear all such economic risks now and in the future; (c) such
Member has had access to all of the information with respect to the
Units acquired by the Member under this Agreement that the Member
deems necessary to make a complete evaluation thereof and has had
the opportunity to question the other Members and the Company
concerning such Units; (d) such Member’s decision to
acquire the Units for investment has been based solely upon the
evaluation made by the Member; (e) such Member is aware that
the Member must bear the economic risk of an investment in the
Company for an indefinite period of time because Units in the
Company have not been registered under the Securities Act or under
the securities laws of the various states and, therefore, cannot be
sold unless such Units are subsequently registered under the
Securities Act and any applicable state securities laws or an
exemption from registration is available; (f) such Member is
aware that only the Company may take action to register Units and
that the Company is under no such obligation and does not propose
to attempt to do so; (g) such Member is aware that this
Agreement provides restrictions on the ability of a Member to sell,
Transfer, assign, mortgage, hypothecate, or otherwise encumber the
Member’s Units; (h) such Member agrees that the Member
will truthfully and completely answer all questions and make all
covenants that the Company or the Board may, contemporaneously or
hereafter, ask or demand for the purpose of establishing compliance
with the Securities Act and applicable state securities laws; and
(i) if that Member is an Entity, it is duly organized, validly
existing, and in good standing under the laws of its state of
organization, and it has full organizational power and authority to
execute and agree to this Agreement and to perform its obligations
hereunder.
11.13 Headings; Interpretation . The
Article and Section headings or titles shall not define, limit,
extend or interpret the scope of this Agreement or any particular
Article or Section. When the context in which words are used in
this Agreement indicates that such is the intent, words in the
singular number include the plural and vice versa. The masculine
gender shall include the feminine and neuter. Any reference to a
specific statutory provision or regulation in this Agreement is a
reference to such provision or regulation as amended from time to
time and, unless otherwise specifically excluded, any successor
provision(s) or regulation(s) to the referenced provision or
regulation.
This
Agreement was prepared by Wyrick, Robbins, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
(the “Firm”), which
is counsel for the Majority Member. Each Member acknowledges that
the Firm was counsel solely to the Majority Member, and not to any
other Member, and that each other Member had the opportunity to
consult his, her, or its own counsel prior to signing this
Agreement. Each Member acknowledges and agrees that the Firm
representing the Majority Member does not represent and will not be
deemed under the applicable codes of professional responsibility to
have represented or to be representing any or all of the Member,
other than the Majority Member, in any respect.
THE NEXT PAGE IS THE SIGNATURE PAGE.
39
SIGNATURE PAGE
TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
GLOBAL PUBLIC SAFETY, LLC
IN
WITNESS WHEREOF, the undersigned have executed or caused to be
executed on their behalf this Amended and Restated Limited
Liability Company Agreement of Global Public Safety, LLC as of the
date first above written; do hereby agree that any of the initial
Representatives identified in Section 5.02 above is hereby
authorized to execute and deliver this Agreement on behalf of the
Company; and do hereby assume and agree to be bound by and to
perform all of the terms and provisions set forth in this
Agreement.
|
|
COMPANY:
GLOBAL
PUBLIC SAFETY, LLC
By:
/s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Title: President
MEMBERS:
LB&B ASSOCIATES
INC.
By:
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Name:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title:
Executive Senior Vice
President
By:
/s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Title: President and COO |
[Signature
Page to Limited Liability Company of Agreement of Global Public
Safety, LLC]
EXHIBIT A
TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
GLOBAL PUBLIC SAFETY, LLC
Unit Ownership Ledger
As of
February 28, 2017
|
Member’s Name and Address
|
Number and Class of Units
|
Deemed Initial Capital Contribution
|
|
LB&B
Associates Inc.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇
Facsimile
No: [_____]
E-mail:
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
801
Class A Units
|
$6,048,394.45
|
|
▇▇▇▇
▇▇▇▇▇▇ ▇▇.
▇▇▇▇.
▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile
No: (443) 557 - 0201
E-mail:
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
|
199
Class A Units
|
$1,502,659.79
|
|
TOTALS
|
1,000
|
$7,552,054.24
|
A-1
EXHIBIT B
TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
GLOBAL PUBLIC SAFETY, LLC
Representatives
By
attaching his or her signature hereto, the undersigned does hereby
consent and agree to serve as a Representative of Global Public
Safety, LLC pursuant to the Amended and Restated Limited Liability
Company Agreement of Global Public Safety, LLC, as such Amended and
Restated Limited Liability Company Agreement may be hereafter
amended, until such time as the undersigned's death (if a human
being), dissolution and liquidation (if an Entity), removal,
resignation, or successor(s) have been duly elected and qualified
to serve.
This
consent shall be effective as of the ____ day of ___________
2017.
|
|
Name:
_________________
Address:
_________________
_________________
_________________
|
B-1
EXHIBIT C
TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
GLOBAL PUBLIC SAFETY, LLC
Nonrecourse Debt and Other Allocations
The
provisions of this Exhibit
C shall apply to the Company and its Members at all times
during which the Company is treated as a partnership for federal
tax purposes.
Section
C.1
Definitions. The
following defined terms used in this Exhibit C have the meanings
specified below.
(a) “Adjusted Capital Account”
means, with respect to any Member, the balance in such
Member’s Capital Account (as of the end of any period for
which allocations of the Company’s Income or Loss are made),
increased by (i) the amount of (A) any deficit balance
that the Member is obligated to restore upon liquidation of the
Company pursuant to Regulations section 1.704-1(b)(2)(ii)(b)(3) or
is treated as obligated to restore pursuant to Regulations section
1.704-1(b)(2)(ii)(c), and (B) the Member’s share of
Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, and
decreased by (ii) the items described in Regulations section
1.704-1(b)(2)(ii)(d)(4), (5), and (6). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions
of Regulations section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(b) “Company Minimum Gain” has
the meaning set forth for “partnership minimum gain” in
sections 1.704-2(b)(2) and 1.704-2(d) of the
Regulations.
(c) “Member” is to be
interpreted and applied so as to mean and include each Person that
is treated and respected under the Agreement as being a holder of
Units, regardless of whether such holder has been admitted as a
member of the Company.
(d) “Member Nonrecourse Debt”
has the meaning set forth for “partner nonrecourse
debt” in section 1.704-2(b)(4) of the
Regulations.
(e) “Member Nonrecourse Debt Minimum
Gain” means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with section
1.704-2(i)(3) of the Regulations.
(f) “Member Nonrecourse
Deductions” has the meaning set forth for
“partner nonrecourse deductions” in sections
1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
(g) “Nonrecourse Deductions”
has the meaning set forth in section 1.704-2(b)(1) of the
Regulations.
C-1
(h) “Nonrecourse Liability”
means a liability of the Company for which no Member bears the
economic risk of loss within the meaning of section 1.752-2 of the
Regulations.
Unless
otherwise defined, other terms with initial capital letters used in
this Exhibit C have
the same meaning as ascribed to them in the main text of the
Amended and Restated Limited Liability Company Agreement of the
Company, as such agreement may be further amended or restated from
time to time in accordance with the provisions thereof (the
“Agreement”). This
Exhibit C shall be
treated for all purposes as being fully a part of, and incorporated
within, the Agreement, as if the provisions of this Exhibit C were set forth in the
main text of the Agreement.
Section
C.2
Special
Allocations. The following special allocations shall be made
in the following order:
(a) Minimum Gain Chargeback. Except
as otherwise provided in section 1.704-2(f) of the Regulations,
notwithstanding any other provision of this Exhibit C or of Article IV of
this Agreement, if there is a net decrease in Company Minimum Gain
during any fiscal year or other applicable period, each Member
shall be specially allocated items of Company income and gain for
such fiscal year or other applicable period (and, if necessary,
subsequent fiscal years or other applicable periods) in an amount
equal to such Member’s share of the net decrease in Company
Minimum Gain, determined in accordance with Regulations section
1.704-2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with sections
1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
C.2(a) is intended to comply with the minimum gain chargeback
requirement in section 1.704-2(f) of the Regulations and shall be
interpreted consistently therewith.
(b) Member Minimum Gain Chargeback.
Except as otherwise provided in section 1.704-2(i)(4) of the
Regulations, notwithstanding any other provision of this
Exhibit C or of
Article IV of this Agreement, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse
Debt during any fiscal year or other applicable period, each Member
who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in
accordance with section 1.704-2(i)(5) of the Regulations, shall be
specially allocated items of Company income and gain for such
fiscal year or other applicable period (and, if necessary,
subsequent fiscal years or other applicable periods) in an amount
equal to such Member’s share of the net decrease in Member
Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall
be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section
C.2(b) is intended to comply with the minimum gain chargeback
requirement in section 1.704-2(i)(4) of the Regulations and shall
be interpreted consistently therewith.
C-2
(c) Qualified Income Offset. If any
Member unexpectedly receives any adjustments, allocations, or
distributions described in sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the
Regulations, items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, any deficit
Adjusted Capital Account of such Member as quickly as possible;
provided,
however, that an
allocation pursuant to this Section C.2(c) shall be made only if
and to the extent that such Member would have an Adjusted Capital
Account deficit after all other allocations provided for in this
Section C.2 have been tentatively made as if this Section C.2(c)
were not in the Agreement. This Section C.2(c) is intended to
constitute a “qualified income offset” within the
meaning of section 1.704-1(b)(2)(ii)(d) of the Regulations and
shall be interpreted consistently therewith.
(d) Gross Income Allocation. If any
Member has a deficit Capital Account at the end of any fiscal year
(or other applicable period) that is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to
any provision of this Agreement, and (ii) the amount such
Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations sections 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specially allocated items
of Company income and gain in the amount of such excess as quickly
as possible; provided, however, that an allocation
pursuant to this Section C.2(d) shall be made only if and to the
extent that such Member would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this
Exhibit C or in
Article IV of this Agreement have been made as if Section C.2(c)
hereof and this Section C.2(d) were not in the
Agreement.
(e) Nonrecourse Deductions.
Nonrecourse Deductions for any fiscal year or other applicable
period shall be specially allocated (i) to and among the
holders of Units in proportion
to the respective total Capital Contribution amounts with respect
to their Units, or (ii) in such other manner as the Company
Tax Rep determines is required under Code section 704 and the
Regulations thereunder. For purposes
of determining the proportionate shares of the “excess
nonrecourse liabilities” of the Company within the meaning of
Regulations section 1.752-3(a)(3), such excess nonrecourse
liabilities shall be allocated (i) to and among the
holders of Units in proportion
to the respective total Capital Contribution amounts with respect
to their Units, or (ii) in such other manner as the Company
Tax Rep determines is permitted or required under section
1.752-3 of the Regulations upon
consultation with the Company’s tax advisors.
(f) Member Nonrecourse Deductions.
Any Member Nonrecourse Deductions for any fiscal year or other
applicable period shall be specially allocated to the Member that
bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations section
1.704-2(i)(1).
C-3
(g) Section 754 Adjustments. To the
extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Code section 734(b) or Code section 743(b) is required,
pursuant to Regulations sections 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Member in
complete liquidation of such Member’s Units in the Company,
the amount of such adjustment to Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such
gain or loss shall be specially allocated: (i) if Regulations
section 1.704-1(b)(2)(iv)(m)(2) applies, to the Members in
accordance with how they would share the allocated item of gain or
loss if it were included in computing the Net Income or Net Loss in
the Company for the period in which the adjustment occurs; or
(ii) if Regulations section 1.704-1(b)(2)(iv)(m)(4) applies,
to the Member to which such distribution was made.
(h) Forfeiture Allocations.
Notwithstanding anything to the contrary in this Agreement, upon a
forfeiture by any holder of any Units that are substantially
nonvested and with respect to which any items of Company income,
gain, deduction, loss, or credit have been allocated for any period
before or including the date of disposition, then gross items of
income, gain, loss or deduction shall be specially allocated to
such holder if and to the extent required by final Regulations
provisions promulgated after the effective date of this Agreement
to ensure that allocations made with respect to all such nonvested
Units are respected under Code section 704 and Regulations
promulgated thereunder. The terms “forfeiture” and
“substantially nonvested” for this purpose shall have
the meaning given to such terms under Code section 83 or any final
Regulations issued pursuant to Code section 704. This paragraph is
intended to authorize and provide for “forfeiture
allocations” as may be required in accordance with final
Regulations to be promulgated under Code section 704 after the
effective date of this Agreement; provided, however, that this Section
C.2(h) shall apply only with respect to any Units to which the
forfeiture allocations provisions of any such final Regulations may
be applicable.
(i) Special Allocation of Items Resulting
from Company Audits. The Company Tax Rep may make special
allocations of income, gain, loss, or deduction in order to correct
for distortions arising from a Company tax audit under the BBA
Provisions. Allocations made under this Section C.2(i) shall
preserve, to the greatest extent permitted by law, the after-tax
economic arrangement of the Members as set forth in Article IV and
Section 9.03 of the Agreement.
Section
C.3
Curative
Allocations. The allocations set forth in Section C.2 hereof
(the “Regulatory
Allocations”) are intended to comply with certain
requirements of the Regulations. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special
allocations of other items of Company income, gain, loss, or
deduction pursuant to this Section C.3. Therefore, notwithstanding
any other provision of this Exhibit C (other than the
Regulatory Allocations), such offsetting special allocations of
Company income, gain, loss, or deduction shall be made in whatever
manner the Board determines appropriate (based on the advice of the
Company’s tax advisors) so that, after such offsetting
allocations are made, each Member’s Capital Account balance
is, to the extent possible, equal to the Capital Account balance
such Member would have had if the Regulatory Allocations were not
part of the Agreement and all Company items were allocated pursuant
to other Sections of the Agreement. In exercising its discretion
under this Section, the Board shall take into account future
Regulatory Allocations that, although not yet made, are likely to
be made and offset other prior Regulatory Allocations.
▇-▇
▇▇▇▇▇▇▇
▇.▇
Compliance with
Regulations. It is the intent of the Members that, to the
greatest extent possible, the allocations of all items of income,
gain, loss, deduction, and credit under this Agreement
(i) have “substantial economic effect” within the
meaning of, or otherwise be in accordance with, Code section 704(b)
and the Regulations promulgated thereunder, and/or (ii) be
consistent with the Members’ interests in the Company.
Accordingly, to the extent adjustment to the allocations under this
Agreement is necessary in order to be in compliance with the
provisions of Code section 704(b) and the Regulations thereunder,
such necessary adjustments in the allocations shall be made, but
only to the smallest extent necessary. Furthermore, if there has
been any adjustment in the allocations to the Members on account of
the preceding sentence, subsequent allocations of income, gain,
loss, deduction, or credit shall, to the extent possible, be
allocated to the Members in the order and in a manner designed to
result in each Member’s having a Capital Account balance
equal to what such balance would have been had the allocation(s)
pursuant to the preceding sentence not occurred, and in a manner
that is likely to minimize any economic distortions that otherwise
might result.
C-5