EXHIBIT 99.05
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_______________________________________________________________________________
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ZECAL TECHNOLOGY, LLC
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LIMITED LIABILITY COMPANY AGREEMENT
Dated as of May ___, 2000
THE COMPANY INTERESTS REPRESENTED BY THIS 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.
THE COMPANY INTERESTS REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER SPECIFIED IN THAT
CERTAIN MEMBERS AGREEMENT, DATED AS OF MAY __, 2000, AS AMENDED OR MODIFIED FROM
TIME TO TIME, AMONG THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH INTERESTS UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO ANY TRANSFER. A COPY OF SUCH
CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST AND WITHOUT CHARGE.
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS..................................................... 1
ARTICLE II ORGANIZATIONAL MATTERS.......................................... 7
2.1 Formation of Company........................................... 7
2.2 Limited Liability Company Agreement............................ 7
2.3 Name........................................................... 7
2.4 Purpose........................................................ 7
2.5 Principal Office; Registered Office............................ 7
2.6 Term........................................................... 8
2.7 No State-Law Partnership....................................... 8
ARTICLE III CAPITAL ACCOUNTS............................................... 8
3.1 Holders........................................................ 8
3.2 Capital Accounts............................................... 8
3.3 Negative Capital Accounts...................................... 9
3.4 No Withdrawal.................................................. 9
3.5 Loans From Holders............................................. 10
3.6 Preferred Company Interests.................................... 10
3.7 Common Company Interests....................................... 14
ARTICLE IV DISTRIBUTIONS AND ALLOCATIONS................................... 15
4.1 Distributions.................................................. 15
4.2 Allocations.................................................... 17
4.3 Special Allocations............................................ 18
4.4 Tax Allocations................................................ 19
4.5 Curative Allocations........................................... 19
4.6 Indemnification and Reimbursement for Payments on Behalf of a
Holder......................................................... 20
ARTICLE V MANAGEMENT....................................................... 20
5.1 Authority of Board............................................. 20
5.2 Actions of the Board........................................... 21
5.3 Composition.................................................... 21
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5.4 Proxies....................................................... 21
5.5 Meetings, etc................................................. 22
5.6 Delegation of Authority....................................... 23
5.7 Purchase of Company Interests................................. 24
5.8 Limitation of Liability....................................... 24
ARTICLE VI RIGHTS AND OBLIGATIONS OF HOLDERS.............................. 25
6.1 Limitation of Liability....................................... 25
6.2 Lack of Authority............................................. 25
6.3 No Right of Partition......................................... 25
6.4 Indemnification............................................... 25
6.5 Members Right to Act.......................................... 26
6.6 Conflicts of Interest......................................... 27
ARTICLE VII BOOKS, RECORDS, ACCOUNTING AND REPORTS........................ 28
7.1 Records and Accounting........................................ 28
7.2 Fiscal Year................................................... 28
7.3 Reports....................................................... 28
7.4 Transmission of Communications................................ 29
ARTICLE VIII TAX MATTERS.................................................. 29
8.1 Preparation of Tax Returns.................................... 29
8.2 Tax Elections................................................. 29
8.3 Tax Controversies............................................. 29
ARTICLE IX TRANSFER OF COMPANY INTERESTS.................................. 30
9.1 Transfer In General........................................... 30
9.2 Assignee's Rights............................................. 30
9.3 Assignor's Rights and Obligations............................. 30
ARTICLE X ADMISSION OF MEMBERS............................................ 31
10.1 Substituted Members........................................... 31
10.2 Additional Members............................................ 31
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ARTICLE XI WITHDRAWAL AND RESIGNATION OF HOLDERS.......................... 32
11.1 Withdrawal and Resignation of Holders......................... 32
ARTICLE XII DISSOLUTION AND LIQUIDATION................................... 32
12.1 Dissolution................................................... 32
12.2 Liquidation and Termination................................... 32
12.3 Deferment; Distribution in Kind............................... 33
12.4 Cancellation of Certificate................................... 34
12.5 Reasonable Time for Winding Up................................ 34
12.6 Return of Capital............................................. 34
12.7 Liquidity Event or IPO........................................ 34
ARTICLE XIII VALUATION.................................................... 34
13.1 Determination................................................. 34
13.2 Determination of Fair Market Value............................ 34
ARTICLE XIV GENERAL PROVISIONS............................................ 35
14.1 Power of Attorney............................................. 35
14.2 Amendments.................................................... 36
14.3 Title to Company Assets....................................... 36
14.4 Addresses and Notices......................................... 37
14.5 Binding Effect................................................ 37
14.6 Creditors..................................................... 37
14.7 Waiver........................................................ 37
14.8 Counterparts.................................................. 37
14.9 Applicable Law................................................ 37
14.10 Severability.................................................. 38
14.11 Further Action................................................ 38
14.12 Expenses...................................................... 38
14.13 Delivery by ▇▇▇▇▇▇▇▇▇......................................... 38
14.14 Offset........................................................ 38
14.15 Entire Agreement.............................................. 39
14.16 Remedies...................................................... 39
14.17 Descriptive Headings; Interpretation.......................... 39
14.18 Notice to Holder of Provisions................................ 39
14.19 Consent to Jurisdiction....................................... 39
14.20 Survival...................................................... 40
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ZECAL TECHNOLOGY, LLC
LIMITED LIABILITY COMPANY AGREEMENT
This LIMITED LIABILITY COMPANY AGREEMENT, dated as of May ___, 2000,
is entered into by and among the Members.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
The following definitions shall be applied to the terms used in this
Agreement for all purposes, unless otherwise clearly indicated to the contrary.
"Additional Member" means a Person admitted to the Company as a Member
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pursuant to Section 10.2.
"Adjusted Capital Account Deficit" means with respect to any Capital
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Account as of the end of any Taxable Year, the amount by which the balance in
such Capital Account is less than zero. For this purpose, such Person's Capital
Account balance shall be
(i) reduced for any items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6), and
(ii) increased for any amount such Person is obligated to contribute
or is treated as being obligated to contribute to the Company
pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c)
(relating to partner liabilities to a partnership) or 1.704-
2(g)(1) and 1.704-2(i) (relating to minimum gain).
"Adjusted EBITDA" is defined in the Members Agreement.
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"Admission Date" is defined in Section 9.3.
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"Affiliate" of any Person means any Person that directly or indirectly
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controls, is controlled by, or is under common control with the Person in
question.
"Agreement" means this Limited Liability Company Agreement of Zecal
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Technology, LLC.
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"Asset Purchase Agreement" means that certain Asset Purchase
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Agreement, dated as of the date hereof, by and among the Company, HTI and Zecal,
as the same may be amended or modified from time to time.
"Assignee" means a Person to whom a Company Interest has been
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transferred in accordance with the terms of the Members Agreement, but who has
not become a Member pursuant to Article X.
"Base Rate" means, on any date, a variable rate per annum equal to the
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rate of interest most recently published by The Wall Street Journal as the
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"prime rate" at large U.S. money center banks.
"Board" means the Board of Managers.
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"Book Value" means, with respect to any Company property, the
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Company's adjusted basis for federal income tax purposes, adjusted from time to
time to reflect the adjustments required or permitted by Treasury Regulation
Section 1.704-1(b)(2)(iv)(d)-(g).
"Capital Account" means the capital account maintained for a Member
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pursuant to Section 3.2.
"Capital Contribution" means any cash, cash equivalents, promissory
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obligations or the Fair Market Value of other property which a Holder
contributes to the Company pursuant to Section 3.1 or 5.1.
"Certificate" means the Company's Certificate of Formation as filed
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with the Secretary of State of Delaware.
"Chairman" is defined in Section 5.3(b).
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"Change in Control" is defined in Section 3.6(b)(ii).
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"Code" means the United States Internal Revenue Code of 1986, as
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amended through the date hereof. Such term shall, at the Board's sole
discretion, be deemed to include any future amendments to the Code and any
corresponding provisions of succeeding Code provisions (whether or not such
amendments and corresponding provisions are mandatory or discretionary).
"Commitment" means, with respect to each Holder, the aggregate amount
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of Capital Contributions made or agreed to be made by such Holder as specified
in Schedule I attached hereto as the same may be modified from time to time
under the terms of this Agreement; provided that notwithstanding any other
provision in this Agreement to the contrary, no Holder shall be under any
obligation to make any additional Capital Contributions other than as originally
set forth in Schedule I, unless such Holder shall otherwise agree in writing.
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"Common Company Interests" means a fractional part of the Company
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Interests of the Holders and having the rights and obligations specified with
respect to Common Company Interests in this Agreement.
"Common Holder" means a holder of Common Company Interests.
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"Company" means Zecal Technology, LLC, a Delaware limited liability
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company, established in accordance with this Agreement, as such limited
liability company may be from time to time constituted, and including its
successors.
"Company Interest" means the interest of a Holder in Profits, Losses
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and Distributions, expressed as a percentage the interest of a Holder bears to
the total interests of all Holders; the initial percentage interest of Zecal is
50% and the initial percentage interest of LZ is 50%.
"Delaware Act" means the Delaware Limited Liability Company Act, 6
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Del.L. (S) 18-101, et seq., as it may be amended from time to time, and any
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successor to the Delaware Act.
"Distribution" means each distribution made by the Company to a
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Holder, whether in cash, property or securities of the Company and whether by
liquidating distribution or otherwise; provided that none of the following shall
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be a Distribution: (a) any redemption or repurchase by the Company or any
Investor of any interests, (b) any recapitalization or exchange of interests of
the Company, (c) any distribution made by the Company pursuant to Section 4.1(b)
hereof (i.e., tax distributions) or (d) any fees or expenses that are required
to be and are paid to any Investor.
"Equity Interests" means (i) interests in the Company (including other
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classes or groups thereof having such relative rights, powers and duties as may
from time to time be established by the Board, including rights, powers and/or
duties senior to existing classes and groups of Company Interests and other
equity interests in the Company), (ii) obligations, evidences of indebtedness or
other securities or interests convertible or exchangeable into Company Interests
or other equity interests in the Company and (iii) warrants, options or other
rights to purchase or otherwise acquire Company Interests or other equity
interests in the Company.
"Event of Withdrawal" means the death, retirement, resignation,
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expulsion, bankruptcy or dissolution of a Member or the occurrence of any other
event that terminates the continued membership of a Member in the Company.
"Fair Market Value" means, with respect to any asset or equity
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interest, its fair market value determined according to Article XIII.
"Fiscal Period" means any interim accounting period within a Taxable
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Year established by the Board and which is permitted or required by Code Section
706.
"Fiscal Year" means the Company's annual accounting period established
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pursuant to Section 7.2.
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"Fundamental Change" is defined in Section 3.6(b)(ii).
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"GAAP" means United States generally accepted accounting principles,
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as promulgated by all relevant United States accounting authorities.
"Guaranty" means the guaranty issued by the Company pursuant to the
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Asset Purchase Agreement and the Letter Agreement, which guaranty is secured by
that certain security agreement, dated as of the date hereof, between ▇▇▇▇▇
Fargo Business Credit, Inc. and the Company; and for purposes of this Agreement,
all references to the "Guaranty" shall include the aforementioned security
agreement.
"Governmental Entity" means the United States of America or any other
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nation, any state or other political subdivision thereof, or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of government.
"Holder" means any owner of any Company Interest as reflected in the
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Company's books and records.
"Holder Group" is defined in Section 6.6(a).
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"HTI" means Heartland Technology, Inc., a Delaware corporation.
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"Indebtedness for Borrowed Money" shall have the meaning assigned
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thereto in the Asset Purchase Agreement.
"Indemnified Person" is defined in Section 6.4(a).
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"Invested Capital" means, as of any date, the aggregate amount of all
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Capital Contributions made by any particular Holder, less the amount of all
deemed distributions to such Holder pursuant to Section 4.1(d) or 4.1(e) hereof
or Section 2.2 of the Asset Purchase Agreement.
"Investors" means LZ, Zecal, their Affiliates and successors and their
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Permitted Transferees (as defined in the Members Agreement).
"IPO" means the initial sale pursuant to a registration statement
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filed under the Securities Act of any equity interests of the Company, whether
by the Company or any holder of equity interests of the Company.
"Junior Interests" means any Company Interests, except for the
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Preferred Company Interests.
"Letter Agreement" means that certain Letter Agreement, dated as of
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the date hereof, between ▇▇▇▇▇ Fargo Business Credit, Inc. and the Company.
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"Liens" means any mortgage, pledge, security interest, encumbrance,
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lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any Subsidiary or any Affiliate,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Company or any Subsidiaries under a
lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the ordinary course of business).
"Liquidation Value" of any Preferred Company Interest as of any
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particular date shall be equal to the purchase price paid to the Company
therefor (as the same may be finally determined from time to time).
"Liquidity Event" means (a) any sale of all or substantially all (as
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defined in the Model Business Corporation Act) of the assets of the Company and
its Subsidiaries on a consolidated basis in one transaction or series of related
transactions, (b) any sale of all or substantially all of the Company Interests
in one transaction or series of related transactions (but excluding any sales to
Affiliates and any sales of Company Interests in a Public Sale) or (c) a merger
or consolidation or other transaction which accomplishes one of the foregoing.
"Losses" means items of Company loss and deduction determined
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according to Section 3.2.
"LZ" means LZ Partners, LLC.
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"Member" means each of the members named on Schedule I attached hereto
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and any Person admitted to the Company as a Substituted Member or Additional
Member; but only so long as such Person is shown on the Company's books and
records as the owner of one or more Company Interests.
"Members Agreement" means that certain Members Agreement, dated as of
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the date hereof, by and among the Company and its Members, as the same may be
amended from time to time.
"Minimum Gain" means the partnership minimum gain determined pursuant
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to Treasury Regulation Section 1.704-2(d).
"Organic Change" shall have the meaning set forth in Section 3.6(e).
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"Person" means an individual or a corporation, partnership, limited
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liability company, trust, unincorporated organization, association or other
entity.
"Preference Amount" shall have the meaning set forth in Section
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3.6(b)(i) hereof.
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"Preferred Company Interest" means a fractional part of the Company
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Interests of the Holders and having the rights and obligations specified with
respect to the Preferred Company Interests in this Agreement.
"Preferred Holder" means a holder of Preferred Company Interest.
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"Profits" means items of Company income and gain determined according
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to Section 3.2.
"Public Offering" means any offering by the Company of its Equity
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Interests to the public pursuant to an effective registration statement under
the Securities Act.
"Public Sale" means any sale of equity interests of the Company (other
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than rights to acquire equity interests of the Company) to the public pursuant
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
"Representative" is defined in Section 5.3(a).
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"Securities Act" means the Securities Act of 1933, as amended, and
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applicable rules and regulations thereunder, and any successor to such statute,
rules or regulations. Any reference herein to a specific section, rule or
regulation of the Securities Act shall be deemed to include any corresponding
provisions of future law.
"Subsidiary" means, with respect to any Person, any corporation,
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limited liability company, partnership, association or business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association or other business entity (other than
a corporation), a majority of partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity (other than a corporation) if such Person or Persons shall
be allocated a majority of limited liability company, partnership, association
or other business entity gains or losses or shall be or control any managing
director or general partner of such limited liability company, partnership,
association or other business entity. For purposes hereof, references to a
"Subsidiary" of the Company shall be given effect only at such times that the
Company has one or more Subsidiaries, and, unless otherwise indicated, the term
"Subsidiary" refers to a Subsidiary of the Company.
"Substituted Member" means a Person that is admitted as a Member to
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the Company pursuant to Section 10.1.
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"Tax Matters Partner" has the meaning given to such term in Section
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6231 of the Code.
"Taxable Year" means the Company's accounting period for federal
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income tax purposes determined pursuant to Section 7.2.
"Treasury Regulations" means the income tax regulations promulgated
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under the Code and effective as of the date hereof. Such term shall, at the
Board's sole discretion, be deemed to include any future amendments to such
regulations and any corresponding provisions of succeeding regulations (whether
or not such amendments and corresponding provisions are mandatory or
discretionary).
"Zecal" means Zecal Corp., a Delaware corporation.
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ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation of Company. The Company was formed on February 3, 2000
pursuant to the provisions of the Delaware Act.
2.2 Limited Liability Company Agreement. The Members hereby execute
this Agreement for the purpose of establishing the affairs of the Company and
the conduct of its business in accordance with the provisions of the Delaware
Act. The Members hereby agree that during the term of the Company set forth in
Section 2.6, the rights and obligations of the Holders with respect to the
Company will be determined in accordance with the terms and conditions of this
Agreement; provided that where the Delaware Act provides that such rights and
obligations specified in the Delaware Act shall apply "unless otherwise provided
in a limited liability company agreement" or words of similar effect, such
rights and obligations specified in the Delaware Act are considered set forth in
this Agreement; provided further, that notwithstanding the foregoing, Section
18-210 of the Delaware Act shall not apply or be incorporated into this
Agreement.
2.3 Name. The name of the Company shall be Zecal Technology, LLC.
The Board in its sole discretion may change the name of the Company at any time
and from time to time. Notification of any such change shall be given to all
Holders. The Company's business may be conducted under its name and/or any
other name or names deemed advisable by the Board.
2.4 Purpose. The purpose and business of the Company shall be any
business which may lawfully be conducted by a limited liability company formed
pursuant to the Delaware Act.
2.5 Principal Office; Registered Office. The principal office of the
Company shall be at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, or such other
place as the Board may from time to time designate. The Company may maintain
offices at such other place or places as the Board deems advisable. Notification
of any such change shall be given to all Holders. The registered
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office of the Company required by the Delaware Act to be maintained in the State
of Delaware shall be the office of the initial registered agent named in the
Certificate or such other office (which need not be a place of business of the
Company) as the Board may designate from time to time in the manner provided by
law. The registered agent of the Company in the State of Delaware shall be the
initial registered agent named in the Certificate or such other Person or
Persons as the Board may designate from time to time in the manner provided by
law.
2.6 Term. The term of the Company commenced upon the filing of the
Certificate in accordance with the Delaware Act and shall continue in existence
until termination and dissolution thereof in accordance with the provisions of
Article XII.
2.7 No State-Law Partnership. The Holders intend that the Company
not be a partnership (including, without limitation, a limited partnership) or
joint venture, and that no Holder be a partner or joint venturer of any other
Holder by virtue of this Agreement, for any purposes other than as set forth in
the last sentence of this Section 2.7, and neither this Agreement nor any other
document entered into by the Company or any Holder relating to the subject
matter hereof shall be construed to suggest otherwise. The Holders intend that
the Company shall be treated as a partnership for federal and, if applicable,
state or local income tax purposes, and that each Holder and the Company shall
file all tax returns and shall otherwise take all tax and financial reporting
positions in a manner consistent with such treatment.
ARTICLE III
CAPITAL ACCOUNTS
3.1 Holders.
(a) Each Holder named on Schedule I attached hereto has made Capital
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Contributions to the Company as set forth on Schedule I in exchange for the
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Company Interest specified thereon.
(b) Each Holder who is issued Company Interests by the Company
pursuant to the authority of the Board pursuant to Section 5.1 shall make the
Capital Contributions to the Company determined by the Board pursuant to the
authority of the Board pursuant to Section 5.1 in exchange for such Company
Interests.
3.2 Capital Accounts.
(a) The Company shall maintain a separate Capital Account for each
Holder according to the rules of Treasury Regulation Section 1.704-1(b)(2)(iv).
For this purpose, the Company shall, upon the occurrence of the events specified
in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), increase or decrease the
Capital Accounts in accordance with the rules of such regulation and Treasury
Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Company
property.
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(b) For purposes of computing the amount of any item of Company
income, gain, loss or deduction to be allocated pursuant to Article IV and to be
reflected in the Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including any
method of depreciation, cost recovery or amortization used for this purpose);
provided that:
(i) The computation of all items of income, gain, loss and
deduction shall include those items described in Code
Section 705(a)(l)(B) or Code Section 705(a)(2)(B) and
Treasury Regulation Section 1.704-1(b)(2)(iv)(i), without
regard to the fact that such items are not includable in
gross income or are not deductible for federal income tax
purposes.
(ii) If the Book Value of any Company property is adjusted
pursuant to Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), the amount of such adjustment shall be
taken into account as gain or loss from the disposition of
such property.
(iii) Items of income, gain, loss or deduction attributable to
the disposition of Company property having a Book Value
that differs from its adjusted basis for tax purposes shall
be computed by reference to the Book Value of such
property.
(iv) Items of depreciation, amortization and other cost recovery
deductions with respect to Company property having a Book
Value that differs from its adjusted basis for tax purposes
shall be computed by reference to the property's Book Value
in accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(g).
(v) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Sections 732(d), 734(b)
or 743(b) is required, pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment
to the 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).
3.3 Negative Capital Accounts. No Holder shall be required to pay to
any other Holder or the Company any deficit or negative balance which may exist
from time to time in such Holder's Capital Account (including upon and after
dissolution of the Company).
3.4 No Withdrawal. No Person shall be entitled to withdraw any part
of such Person's Capital Contribution or Capital Account or to receive any
Distribution from the Company, except as expressly provided herein or in the
Members Agreement.
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3.5 Loans From Holders. Loans by Holders to the Company shall not be
considered Capital Contributions. If any Holder shall advance funds to the
Company in excess of the amounts required hereunder to be contributed by such
Holder to the capital of the Company, the making of such advances shall not
result in any increase in the amount of the Capital Account of such Holder. The
amount of any such advances shall be a debt of the Company to such Holder and
shall be payable or collectible in accordance with the terms and conditions upon
which such advances are made.
3.6 Preferred Company Interests. The Preferred Company Interests
shall have the following rights, preferences and privileges, subject to the
following restrictions, limitations and qualifications.
(a) Participating Distributions. In the event that the Company
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declares or pays any Distributions upon the Common Company Interests (whether
payable in cash, securities or other property), the Company shall also declare
and pay to the Preferred Holders at the same time that it declares and pays such
Distributions to the Common Holders, the Distributions which would have been
declared and paid with respect to the Common Company Interests issuable upon
conversion of the Preferred Company Interests had all of the outstanding
Preferred Company Interests been converted immediately prior to the record date
for such Distribution, or if no record date is fixed, the date as of which the
Holders entitled to such Distributions are to be determined.
(b) Liquidation.
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(i) Upon any liquidation, dissolution or winding up of the
Company (whether voluntary or involuntary), each Preferred
Holder shall be entitled to be paid, before any Distribution
or payment is made upon any Junior Interests, an amount (the
"Preference Amount") in cash equal to the greater of either
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(i) the aggregate Liquidation Value of all Preferred Company
Interests held by such Holder (plus all declared and unpaid
participating Distributions thereon pursuant to Section
3.6(a)) or (ii) such Holder's pro rata share (based upon the
aggregate amount of Preferred Company Interests outstanding)
of all liquidation proceeds payable to the Common Holders
assuming all outstanding Preferred Company Interests had
been converted into Common Company Interests immediately
prior to any such liquidation, dissolution or winding up,
and the Preferred Holders shall not be entitled to any
further payment. If upon any such liquidation, dissolution
or winding up of the Company, the Company's assets to be
distributed among the Preferred Holders are insufficient to
permit payment to such Holders of the aggregate amount which
they are entitled to be paid under this Section 3.6(b), then
the entire assets available to be distributed to the
Preferred Holders shall be distributed pro rata among such
Holders based upon the aggregate Preference Amount of the
Preferred Company Interests held by each such Holder. Not
less than 60 days prior to the payment date stated
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therein, the Company shall mail written notice of any such
liquidation, dissolution or winding up to each Preferred
Holder, setting forth in reasonable detail the amount of
proceeds to be paid with respect to each Preferred Company
Interest and each Common Company Interest in connection
with such liquidation, dissolution or winding up.
(ii) Upon the election of any Preferred Holder delivered to the
Company within 45 days after receipt of the Company's
notice to the Preferred Holders under this Section 3.6, any
consolidation or merger of the Company with or into another
entity or entities (whether or not the Company is the
surviving entity) or any sale or transfer by the Company of
all or substantially all of its assets (determined either
for the Company alone or with its Subsidiaries on a
consolidated basis) (any of the foregoing, a "Fundamental
-----------
Change") or any sale, transfer or issuance or series of
------
sales, transfers and/or issuances of the Company's Equity
Interests by the Company or the holders thereof as a result
of which the holders of the Company's outstanding Equity
Interests possessing the voting power (under ordinary
circumstances) to elect a majority of the Board immediately
prior to such sale or issuance cease to own the Company's
outstanding Equity Interests possessing the voting power
(under ordinary circumstances) to elect a majority of the
Board (any of the foregoing, a "Change in Control"), shall
-----------------
be deemed to be a liquidation, dissolution and winding up
of the Corporation for purposes of this Section 3.6(b), and
the Preferred Holders shall be entitled to receive payment
from the Company of the amounts payable with respect to the
Preferred Company Interests upon a liquidation, dissolution
or winding up of the Company under this Section 3.6(b) upon
the consummation of any such transaction. Each Preferred
Holder shall have the right to elect the benefits of either
this Section 3.6(b) or Section 3.6(e) hereof in connection
with any such merger, consolidation or sale of assets.
(c) Priority of Preferred Company Interests. So long as any
---------------------------------------
Preferred Company Interests remain outstanding, without the prior written
consent of the holders of not less than a majority of the Preferred Company
Interest then outstanding, the Company shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Junior Interests, nor shall the Company directly or indirectly pay, declare or
make any Distribution upon any Junior Interests.
(d) Conversion.
----------
(i) Conversion Procedure.
--------------------
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(A) At any time and from time to time, any Preferred Holder may
convert all or any portion of the Preferred Company
Interests held by such holder into Common Company Interests
representing an equivalent percentage of the aggregate
Company Interest then represented by such Preferred Company
Interests to be converted.
(B) Except as otherwise provided herein, each conversion of
Preferred Company Interests shall be deemed to have been
effected as of the close of business on the date on which
the holder or holders of such Company Interest delivers
notice of such conversion to the principal office of the
Company. At the time any such conversion has been effected,
the rights of the Preferred Holder as a holder of Preferred
Company Interests shall cease and the Person or Persons in
whose name or names any Common Company Interests are to be
reflected in the Company's books and records upon such
conversion shall be deemed to have become the holder or
holders of record of the Common Company Interests
represented thereby.
(C) Notwithstanding any other provision hereof, if a conversion
of Preferred Company Interests is to be made in connection
with a Public Offering, a Change in Control, a Fundamental
Change or other transaction affecting the Company, the
conversion of any Preferred Company Interests may, at the
election of the holder thereof, be conditioned upon the
consummation of such transaction, in which case such
conversion shall not be deemed to be effective until such
transaction has been consummated.
(D) As soon as possible after a conversion has been effected
(but in any event within five business days in the case of
subparagraph (I) below), the Company shall deliver to the
converting holder:
(I) a written confirmation signed by the president and
secretary of the Company confirming the issuance of the
Common Company Interests issuable by reason of such
conversion in such name or names and such amounts as
the converting holder has specified; and
(II) the amount of all Distributions declared pursuant to
Section 3.6(a) remaining unpaid with respect to the
Preferred Company Interests to be converted.
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(E) The issuance of Common Company Interests upon
conversion of Preferred Company Interests shall be made
without charge to the Preferred Holders for any
issuance tax in respect thereof or other cost incurred
by the Company in connection with such conversion and
the related recording of the Common Company Interests.
Upon conversion of each Preferred Company Interest, the
Company shall take all such actions as are necessary in
order to insure that the Common Company Interests
issuable with respect to such conversion shall be
validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances
with respect to the issuance thereof.
(F) The Company shall not close its books against the
transfer of Preferred Company Interests or of Common
Company Interests issued or issuable upon conversion of
Preferred Company Interests in any manner which
interferes with the timely conversion of Preferred
Company Interests. The Company shall assist and
cooperate with any Holder required to make any
governmental filings or obtain any governmental
approval prior to or in connection with any conversion
of Preferred Company Interests hereunder (including,
without limitation, making any filings required to be
made by the Company).
(G) The Company shall take all such actions as may be
necessary to assure that all Common Company Interests
may be issued without violation of any applicable law
or governmental regulation.
(e) Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction,
in each case which is effected in such a manner that the holders of Common
Company Interests are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Company Interests, is referred to herein as an "Organic Change." Prior
--------------
to the consummation of any Organic Change, the Company shall make appropriate
provisions (in form and substance satisfactory to the holders of not less than a
majority of the Preferred Company Interests then outstanding) to insure that
each of the Preferred Holders shall thereafter have the right to acquire and
receive, in lieu of or in addition to (as the case may be) the Common Company
Interests immediately theretofore acquirable and receivable upon the conversion
of such holder's Preferred Company Interests, such shares of stock, securities
or assets as such holder would have received in connection with such Organic
Change if such holder had converted its Preferred Company Interests immediately
prior to such Organic Change. In each such case, the Company shall also make
appropriate provisions (in form and substance satisfactory to the holders of not
less than a majority of the Preferred Company
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Interests then outstanding) to insure that the provisions of this Section 3.6
shall thereafter be applicable to the Preferred Company Interests. The Company
shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the Company) resulting
from any such consolidation or merger or the entity purchasing such assets
assumes by written instrument (in form and substance satisfactory to the holders
of not less than a majority of the Preferred Company Interests then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
(f) Notices. The Company shall give written notice to all Preferred
-------
Holders at least 20 days prior to the date on which the Company closes its books
or takes a record (a) with respect to any Distribution upon Common Company
Interests, (b) with respect to any pro rata subscription offer to holders of
Common Company Interests or (c) for determining rights to vote with respect to
any Organic Change, dissolution or liquidation. The Company shall also give
written notice to the Preferred Holders at least 20 days prior to the date on
which any Organic Change shall take place.
(g) Mandatory Conversion. The Company may at any time require the
--------------------
conversion of all of the outstanding Preferred Company Interests if the Company
is at such time effecting a firm commitment underwritten Public Offering of its
Common Company Interests in which the aggregate market capitalization of the
Company, based upon the price paid by the public for such interests, is at least
$150 million. Any such mandatory conversion shall only be effected at the time
of and subject to the closing of the sale of such interests pursuant to such
Public Offering and upon written notice of such mandatory conversion delivered
to all Preferred Holders at least seven days prior to such closing.
(h) Amendment and Waiver. No amendment, modification or waiver shall
--------------------
be binding or effective with respect to any provision of this Section 3.6 hereof
without the prior written consent of the holders of not less than a majority of
the Preferred Company Interests outstanding at the time such action is taken;
provided that no change in the terms hereof may be accomplished by merger or
consolidation of the Company with another corporation or entity unless the
Company has obtained the prior written consent of the holders of the applicable
percentage of the Preferred Company Interests then outstanding.
3.7 Common Company Interests.
(a) Distributions. Subject to the terms and conditions of the
-------------
Preferred Company Interests, as and when Distributions are declared or paid with
respect to Common Company Interests, whether in cash, property or securities of
the Company, the holders of Common Company Interests shall be entitled to
receive such Distributions pro rata based on the percentage of Company Interests
then held by each such holder.
(b) Liquidation. Subject to the terms and conditions of the
-----------
Preferred Company Interests, the Common Holders shall be entitled to
participate, pro rata based on the percentage of
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Company Interests then held by each such holder, in all Distributions to the
Common Holders in any liquidation, dissolution or winding up of the Company.
ARTICLE IV
DISTRIBUTIONS AND ALLOCATIONS
4.1 Distributions.
(a) Distributions in General. The Board may in its sole discretion
------------------------
make Distributions at any time and from time to time. Except as otherwise set
forth in this Section 4.1, each Distribution shall be made in the order and
priority specified in Sections 3.6 and 3.7 of this Agreement.
(b) Tax Distributions. The Company shall, subject to (i) any
-----------------
restrictions contained in the financing agreements to which the Company or any
its Subsidiaries is a party and (ii) having available cash (after setting aside
appropriate reserves), distribute to each Holder (pro rata according to their
respective Company Interests as of the end of such Taxable Year) within 75 days
after the close of each Taxable Year (or at such earlier times and in such
amounts as determined in good faith by the Board to be appropriate to enable the
Holders to pay estimated income tax liabilities) an amount equal to 46% (or, at
the Board's sole discretion, such greater or lesser percentage as the Board may
determine in good faith from time to time, to represent the sum of the maximum
marginal federal, state and local income tax rates applicable to the members of
LZ or to Zecal, whichever rate is higher) of the amount determined by dividing:
(i) Profits for such Fiscal Year allocated to the Designated Holder (as defined
below) pursuant to Sections 4.2 and 4.3, reduced by the Losses for such Fiscal
Year allocated to the Designated Holder pursuant to Sections 4.2 and 4.3, by
(ii) the Designated Holder's percentage of the aggregate Company Interest as of
the close of such Taxable Year. "Designated Holder" means whichever Holder is
-----------------
allocated the greatest amount of (i) Profits for such Fiscal Year allocated
pursuant to Sections 4.2 and 4.3, less (ii) the Losses for such Fiscal Year
allocated pursuant to Sections 4.2 and 4.3.
(c) Payment of Distributions. Each Distribution pursuant to Section
------------------------
4.1(a) and each distribution pursuant to Section 4.1(b) shall be made to the
Persons shown on the Company's books and records as Holders as of the date of
such distribution; provided that any transferor and transferee of Company
Interests may mutually agree as to which of them should receive payment of any
distribution under Section 4.1(b).
(d) Distributions Regarding the Guaranty.
------------------------------------
(i) Pursuant to the terms and conditions of the Asset Purchase
Agreement and the Letter Agreement, the Company has issued the Guaranty. HTI
agrees, on behalf of itself and each of its Affiliates (excluding, for the
avoidance of doubt, the Company), that (A) they shall be the primary obligor
with respect to the Indebtedness for Borrowed Money guaranteed by the Guaranty,
and neither the Company nor LZ shall have any obligation or liability with
respect to such Indebtedness for Borrowed Money, except as set forth in the
Guaranty and (B) they shall service the
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Indebtedness for Borrowed Money guaranteed by the Guaranty in accordance with
the current scheduled maturities of such indebtedness (or, at their election,
such indebtedness may be repaid in advance of any such scheduled maturities).
(ii) In the event that the Company pays any amount in connection
with the Guaranty, then either (A) Zecal shall immediately (and in no event
later than five business days after ▇▇▇▇▇ receives written notice from the
Company that the Company has made any payment in connection with the Guaranty)
make a cash contribution to the Company (which contribution shall have no effect
on Zecal's Invested Capital or Capital Account, and shall not be deemed to be a
Capital Contribution), by wire transfer of immediately available funds, in an
amount equal to the amount paid by the Company in connection with the Guaranty
(the "Debt Service Amount") or (B) if the Debt Service Amount is not so paid by
-------------------
Zecal, Zecal's Invested Capital shall immediately be reduced (by way of a deemed
capital Distribution to Zecal) by an amount equal to the Debt Service Amount
(and, without duplication, Zecal's Capital Account shall also be reduced by such
amount). If ▇▇▇▇▇'s Invested Capital is reduced pursuant to clause (B) of the
preceding sentence, each Holder's resultant ownership percentage in the Company
(i.e., each Holder's relevant percentage of Company Interests) shall be adjusted
and recalculated based upon each Holder's percentage of the Company's aggregate
Invested Capital immediately following any such Distribution.
(e) Ratchet Distributions.
---------------------
(i) The Company's projected aggregate cumulative net sales for
the years ended December 31, 2000 and December 31, 2001 are $45.3 million (the
"Target"), as set forth in the Customer List (as defined in Section 4.1(e)(ii)).
If the Company's actual net sales (as determined pursuant to the audited
financial statements required to be delivered pursuant to Section 8 of the
Members Agreement and the provisions of this Section 4.1(e)) for the years ended
December 31, 2000 and December 31, 2001 ("Actual Net Sales") are less than 90%
----------------
of the Target, then Zecal's Invested Capital shall immediately be reduced (by
way of a deemed capital Distribution to Zecal) by the percentage determined by
multiplying (i) 0.75, by (ii) the percentage shortfall in Actual Net Sales as
compared to the Target (e.g., if Actual Net Sales were $40 million, such
shortfall would result in a 9.1% reduction in Zecal's Invested Capital) (and,
without duplication, Zecal's Capital Account shall also be reduced by such
amount). If ▇▇▇▇▇'s Invested Capital is reduced pursuant to the preceding
sentence, each Holder's resultant ownership percentage in the Company (i.e.,
each Holder's relevant percentage of Company Interests) shall be adjusted and
recalculated based upon each Holder's percentage of the Company's aggregate
Invested Capital immediately following any such Distribution. Notwithstanding
anything to the contrary in this Section 4.1(e)(i), if (x) the Company's Actual
Net Sales are not less than 85% of the Target and (y) the Company's actual
Adjusted EBITDA is not less than 85% of the Adjusted EBITDA targets set forth on
the Customer List (calculated in the aggregate for the years ended December 31,
2000 and December 31, 2001), then Zecal's Invested Capital shall not be reduced
pursuant to the terms of this Section 4.1(e)(i).
(ii) For purposes of calculating Actual Net Sales and Adjusted
EBITDA under this Section 4.1(e): (w) all sales of Z-Strate shall be included,
(x) all outside assembly sales shall be excluded, (y) net sales of inside
assembly to any customer not identified on a list delivered at the closing of
the transactions contemplated by the Asset Purchase Agreement by signature of an
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officer of Zecal and countersigned by a LZ Director (as defined in the Members
Agreement) (the "Customer List") will be included in the calculation of Actual
-------------
Net Sales and Adjusted EBITDA only to the extent that such inside assembly sales
comprise not more than 23.3% of the total sales to any such customer and (z) net
sales of inside assembly to any customer listed on the Customer List which are
in excess of the dollar amounts of such inside assembly sales currently
specified thereon with respect to such customer will be included in the
calculation of Actual Net Sales and Adjusted EBITDA only to the extent that such
excess inside assembly sales comprise not more than 23.3% of the total excess
sales to such customer (i.e., sales which are in excess of the amounts currently
specified on the Customer List with respect to such customer); provided that for
the purposes of this Section 4.1(e), determinations of the percentage of inside
assembly sales to total sales shall in no case include outside assembly sales
(i.e., shall include only inside assembly sales and Z-Strate sales).
(f) Special Distributions With Respect to Disposals of Equipment.
------------------------------------------------------------
(i) If the Company sells, for cash, any of the equipment listed
on a list delivered at the Closing of the transactions contemplated by the Asset
Purchase Agreement by signature of an officer of Zecal and countersigned by a LZ
Director, the Company shall, subject to any restrictions contained in the
financing agreements to which the Company or any of its Subsidiaries is a party,
(i) first, apply the net proceeds (i.e., after deducting costs of sale) from any
such disposition of such equipment to repayment of the obligations under the
Guaranty and (ii) second, distribute to Zecal the remaining net proceeds (i.e.,
after deducting costs of sale) from any such disposition of such equipment;
provided that no distribution pursuant to this Section 4.1(f) shall affect the
percentage of Company Interests held by any Holder; provided further that if
restrictions under financing agreements preclude distribution of any remaining
net proceeds to Zecal, then in the event of a Call Notice (as defined in the
Members Agreement), the amount of such net proceeds not distributed to Zecal
shall be deemed additional financing funded by Zecal upon the closing of the
financing described in such Call Notice.
(ii) Notwithstanding anything to the contrary contained herein,
the provisions of this Section 4.1(f) shall not apply in connection with a
Liquidity Event.
(iii) The provisions of this Section 4.1(f) shall terminate upon
the first to occur of (A) the consummation of a Liquidity Event and (B) the
consummation of an IPO.
4.2 Allocations.
(a) Except as otherwise provided in Section 4.3, Profits and Losses
for any Fiscal Year shall be allocated among the Holders in such a manner that,
as of the end of such Fiscal Year, the sum of (i) the Capital Account of each
Holder, (ii) such Holder's share of Minimum Gain (as determined according to
Treasury Regulation Section 1.704-2(g)) and (iii) such Holder's partner
nonrecourse debt minimum gain (as defined in Treasury Regulation Section 1.704-
2(i)(3)) shall be equal to the respective net amounts, positive or negative,
which would be distributed to them or for which they would be liable to the
Company under this Agreement, determined as if the Company were to (i) liquidate
the assets of the Company for an amount equal to their Book Value and (ii)
distribute the proceeds of liquidation pursuant to Section 12.2.
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(b) For purposes of this Section 4.2, if Profits exceed Losses for a
Fiscal Year, (i) Losses shall first be allocated to Holders whose Capital
Accounts are reduced as a result of the allocations under Section 4.2(a), in an
amount equal to the amount by which such Capital Accounts have been reduced and
(ii) Profits and any remaining Losses shall be allocated to Holders whose
Capital Accounts are increased as a result of the allocations under Section
4.2(a), in the proportion that the amount of the increase in such Holder's
Capital Accounts as a result of the allocations under Section 4.2(a) bears to
the aggregate amount of the increase in all such Holders' Capital Accounts as a
result of the allocations under Section 4.2(a).
(c) For purposes of this Section 4.2, if Losses exceed Profits for a
Fiscal Year, (i) Profits shall first be allocated to Holders whose Capital
Accounts are increased as a result of the allocations under Section 4.2(a), in
an amount equal to the amount by which such Capital Accounts have been increased
and (b) Losses and any remaining Profits shall be allocated to Holders whose
Capital Accounts are reduced as a result of the allocations under Section
4.2(a), in the proportion that the amount of the reduction in such Holder's
Capital Accounts as a result of the allocations under Section 4.2(a) bears to
the aggregate amount of the reduction in all such Holders' Capital Accounts as a
result of the allocations under Section 4.2(a).
4.3 Special Allocations.
(a) Losses attributable to partner nonrecourse debt (as defined in
Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the manner
required by Treasury Regulation Section 1.704-2(i). If there is a net decrease
during a Taxable Year in partner nonrecourse debt minimum gain (as defined in
Treasury Regulation Section 1.704-2(i)(3)), Profits for such Taxable Year (and,
if necessary, for subsequent Taxable Years) shall be allocated to the Holders in
the amounts and of such character as determined according to Treasury Regulation
Section 1.704-2(i)(4).
(b) Nonrecourse deductions (as determined according to Treasury
Regulation Section 1.704-2(b)(1)) for any Taxable Year shall be allocated to
each Holder, ratably among such Holders based upon the aggregate percentage of
Company Interest outstanding held by each such Holder immediately prior to such
allocation. Except as otherwise provided in Section 4.3(a), if there is a net
decrease in the Minimum Gain during any Taxable Year, each Holder shall be
allocated Profits for such Taxable Year (and, if necessary, for subsequent
Taxable Years) in the amounts and of such character as determined according to
Treasury Regulation Section 1.704-2(f). This Section 4.3(b) is intended to be a
minimum gain chargeback provision that complies with the requirements of
Treasury Regulation Section 1.704-2(f), and shall be interpreted in a manner
consistent therewith.
(c) If any Holder that unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as of the
end of any Taxable Year, computed after the application of Sections 4.3(a) and
4.3(b) but before the application of any other provision of this Article IV,
then Profits for such Taxable Year shall be allocated to such Holder in
proportion to, and to the extent of, such Adjusted Capital Account Deficit. This
Section 4.3(c) is intended to be a qualified income offset provision as
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted in a manner consistent therewith.
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(d) Profits and Losses described in Section 3.2(b)(v) shall be
allocated in a manner consistent with the manner that the adjustments to the
Capital Accounts are required to be made pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(j), (k) and (m).
(e) If, and to the extent that, any Holder is deemed to recognize any
item of income, gain, loss, deduction or credit as a result of any transaction
between such Holder and the Company pursuant to Code Sections 1272-1274, 7872,
483, 482 or any similar provision now or hereafter in effect, and the Board
determines that any corresponding Profit or Loss of the Company should be
allocated to the Holder who recognized such item in order to reflect the
Holder's economic interests in the Company, then the Board may so allocate such
Profit or Loss.
4.4 Tax Allocations.
(a) The income, gains, losses, deductions and credits of the Company
will be allocated, for federal, state and local income tax purposes, among the
Holders in accordance with the allocation of such income, gains, losses,
deductions and credits among the Holders for computing their Capital Accounts;
except that if any such allocation is not permitted by the Code or other
applicable law, the Company's subsequent income, gains, losses, deductions and
credits will be allocated among the Holders so as to reflect as nearly as
possible the allocation set forth herein in computing their Capital Accounts.
(b) Items of Company taxable income, gain, loss and deduction with
respect to any property contributed to the capital of the Company shall be
allocated among the Holders in accordance with Code Section 704(c) 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 at the time of
contribution under the remedial allocation method described in Treas. Reg.
(S)1.704-3(d).
(c) If the Book Value of any Company asset is adjusted pursuant to
Section 3.2(b), subsequent allocations of items of taxable 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
Book Value in the same manner as under Code Section 704(c).
(d) Allocations of tax credits, tax credit recapture, and any items
related thereto shall be allocated to the Holders according to their interests
in such items as determined by the Board taking into account the principles of
Treasury Regulation Section 1.704-1(b)(4)(ii).
(e) Allocations pursuant to this Section 4.4 are solely for purposes
of federal, state and local taxes and shall not affect, or in any way be taken
into account in computing, any Holder's Capital Account or share of Profits,
Losses, Distributions or other Company items pursuant to any provision of this
Agreement.
4.5 Curative Allocations. The allocations set forth in Section 4.3 (the
"Regulatory Allocations") are intended to comply with certain requirements of
----------------------
Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations. The Regulatory
Allocations may not be consistent with the manner in which the Holders intend to
allocate Profit and Loss of the Company or make Company
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distributions. Accordingly, notwithstanding the other provisions of this Article
IV, but subject to the Regulatory Allocations, income, gain, deduction, and loss
shall be reallocated among the Holders so as to eliminate the effect of the
Regulatory Allocations and thereby cause the respective Capital Accounts of the
Holders to be in the amounts (or as close thereto as possible) they would have
been if Profit and Loss (and such other items of income, gain, deduction and
loss) had been allocated without reference to the Regulatory Allocations. In
general, the Holders anticipate that this will be accomplished by specially
allocating other Profit and Loss (and such other items of income, gain,
deduction and loss) among the Holders so that the net amount of the Regulatory
Allocations and such special allocations to each such Holder is zero. In
addition, if in any Fiscal Year or Fiscal Period there is a decrease in
partnership minimum gain, or in partner nonrecourse debt minimum gain, and
application of the minimum gain chargeback requirements set forth in Section
4.3(a) or Section 4.3(b) would cause a distortion in the economic arrangement
among the Holders, the Holders may, if they do not expect that the Company will
have sufficient other income to correct such distortion, request the Internal
Revenue Service to waive either or both of such minimum gain chargeback
requirements. If such request is granted, this Agreement shall be applied in
such instance as if it did not contain such minimum gain chargeback requirement.
4.6 Indemnification and Reimbursement for Payments on Behalf of a Holder.
Except as otherwise provided in Section 14.12, if the Company is obligated to
pay any amount to a Governmental Entity (or otherwise makes a payment to a
Governmental Entity) that is specifically attributable to a Holder or a Holder's
status as such (including federal withholding taxes, state personal property
taxes, and state unincorporated business taxes), then such Person shall
indemnify the Company in full for the entire amount paid (including interest,
penalties and related expenses). The Board may offset Distributions to which a
Person is otherwise entitled under this Agreement against such Person's
obligation to indemnify the Company under this Section 4.6. A Holder's
obligation to make contributions to the Company under this Section 4.6 shall
survive the termination, dissolution, liquidation and winding up of the Company,
and for purposes of this Section 4.6, the Company shall be treated as continuing
in existence. The Company may pursue and enforce all rights and remedies it may
have against each Holder under this Section 4.6, including instituting a lawsuit
to collect such contribution with interest calculated at a rate equal to the
Base Rate plus three percentage points per annum (but not in excess of the
highest rate per annum permitted by law).
ARTICLE V
MANAGEMENT
5.1 Authority of Board. Except for situations in which the approval of the
Members is specifically required by this Agreement, but subject to any
applicable provisions of the Members Agreement and subject to the provisions of
Section 5.5(b) with respect to any matter upon which the Board or any committee
thereof is deadlocked, (i) the Board shall conduct, direct and exercise full
control over all activities of the Company and (ii) all management powers over
the business and affairs of the Company shall be exclusively vested in the
Board. Without limiting the generality of the foregoing, subject to the Members
Agreement and subject to the provisions of Section 5.5(b) with respect to any
matter upon which the Board or any committee thereof is deadlocked, (x) the
Board shall have sole and complete discretion in determining whether to issue
Equity Interests, the
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amount or percentage of Equity Interests to be issued at any particular time,
the Capital Contribution or purchase price for any Equity Interests issued, and
all other terms and conditions governing the issuance of Equity Interests and
(y) the Board may in its sole and complete discretion enter into, approve, and
consummate any merger, consolidation, sale of all or any part of its assets,
Liquidity Event or other extraordinary transaction, and execute and deliver on
behalf of the Company or the Holders any agreement, document and instrument in
connection therewith (including amendments, if any, to this Agreement or
adoptions of new constituent documents) without the approval or consent of any
Holder. No Representative shall have the authority to bind the Company, unless
such authority has been granted to such Representative by the Board (or the
holders of not less than a majority of the Company Interest, pursuant to Section
5.5(b)).
5.2 Actions of the Board. The Board may act (i) through meetings and
written consents pursuant to Section 5.5 and (ii) through any Person or Persons
to whom authority and duties have been delegated pursuant Section 5.6.
5.3 Composition.
(a) The Board shall be composed of such persons appointed in
accordance with the terms and conditions of the Members Agreement and applicable
law. Each member of the Board so appointed is referred to herein as a
"Representative," it being agreed and understood that the Company's chief
--------------
executive officer, in his or her capacity as a non-voting member of the Board
pursuant to Section 1(a)(i)(C) of the Members Agreement, shall not be a
"Representative" for purposes of this Agreement.
(b) A "Chairman" of the Board shall be elected by the Board for one
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or more one-year terms, but such "Chairman" of the Board may be removed by the
Board at any time (with or without cause) and replaced with another "Chairman"
of the Board. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall be the initial Chairman. The "Chairman" shall
have only those powers as set out in those certain bylaws of the Company of even
date herewith or as affirmatively granted in writing by not less than a majority
of the Board.
(c) Notwithstanding any provision in this Section 5.3, in the event
of any conflict between the terms and conditions of this Section 5.3 and the
terms and conditions of the Members Agreement, the terms and conditions of the
Members Agreement shall control the resolution of any such conflict.
5.4 Proxies. A Representative may vote at a meeting of the Board or any
committee thereof either in person or by proxy executed in writing by such
Representative. A telegram, telex, cablegram or similar transmission by the
Representative, or a photographic, photostatic, facsimile or similar
reproduction of a writing executed by the Representative shall (if stated
thereon) be treated as a proxy executed in writing for purposes of this Section
5.4. Proxies for use at any meeting of the Board or any committee thereof or in
connection with the taking of any action by written consent shall be filed with
the Board, before or at the time of the meeting or execution of the written
consent as the case may be. All proxies shall be received and taken charge of
and all ballots shall be received and canvassed by the majority of the Board who
shall decide all questions concerning the
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qualification of voters, the validity of the proxies and the acceptance or
rejection of votes. No proxy shall be valid after eleven months from the date of
its execution unless otherwise provided in the proxy. A proxy shall be revocable
unless the proxy form conspicuously states that the proxy is irrevocable and
that the proxy is coupled with an interest. Should a proxy designate two or more
Persons to act as proxies, unless that instrument shall provide to the contrary,
a majority of such Persons present at any meeting at which their powers
thereunder are to be exercised shall have and may exercise all the powers of
voting or giving consents thereby conferred, or if only one be present, then
such powers may be exercised by that one; or, if an even number attend and a
majority do not agree on any particular issue, the Company shall not be required
to recognize such proxy with respect to such issue if such proxy does not
specify how the votes that are the subject of such proxy are to be voted with
respect to such issue.
5.5 Meetings, etc.
(a) Meetings of the Board and any committee thereof shall be held at
the principal office of the Company or at such other place as may be determined
by the Board or such committee. Regular meetings of the Board shall be held on
such dates and at such times as shall be determined by the Board; provided that
for the balance of the year ended December 31, 2000, such Board meetings shall
be held at least every two months commencing after the date of this Agreement.
Special meetings of the Board or any committee may be called by any one
Representative (or, in the case of a special meeting of any committee of the
Board, by any member thereof) on at least five days' prior written notice to the
other Representatives, which notice shall state the purpose or purposes for
which such meeting is being called. The actions taken by the Board or any
committee at any meeting (as opposed to by written consent), however called and
noticed, shall be as valid as though taken at a meeting duly held after regular
call and notice if (but not until), either before, at or after the meeting, the
Representative as to whom it was improperly held signs a written waiver of
notice or a consent to the holding of such meeting or an approval of the minutes
thereof. The actions by the Board or any committee thereof may be taken by vote
of the Board or any committee at a meeting of the Representatives thereof or by
written consent (without a meeting, without notice and without a vote) so long
as such consent is signed by at least the minimum number of Representatives that
would be necessary to authorize or take such action at a meeting of the Board or
such committee in which all members thereof were present. Prompt notice of the
action so taken without a meeting shall be given to those Representatives who
have not consented in writing. A meeting of the Board or any committee may be
held by conference telephone or similar communications equipment by means of
which all individuals participating in the meeting can be heard.
(b) Each Representative shall have one vote on all matters submitted
to the Board or any committee thereof (whether the consideration of such matter
is taken at a meeting, by written consent or otherwise), excluding, for the
avoidance of doubt, the Company's chief executive officer, in his or her
capacity as a non-voting member of the Board pursuant to Section 1(a)(i)(C) of
the Members Agreement. The affirmative vote (whether by proxy or otherwise) of
members of the Board holding a majority of the votes of all members of the Board
shall be the act of the Board, it being agreed and understood that in the event
of a Board deadlock on any matter before the Board or any committee thereof, the
affirmative vote of the holders of not less than a majority of the
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Company Interest shall be the act of the Company; provided that if such deadlock
occurs following the delivery of a Put Notice (as defined in the Members
Agreement) but prior to the consummation of the Put (as defined in the Members
Agreement), so long as Zecal has provided LZ unconditional financing commitments
or other evidence satisfactory to LZ in its reasonable discretion of Zecal's
ability to consummate the Put, the affirmative vote of the Company Interests
held by ▇▇▇▇▇ shall be the act of the Company, it being understood and agreed
that if ▇▇▇▇▇ fails to consummate the Put, the terms and conditions of this
proviso shall be of no further force and effect. Notwithstanding any provision
contained herein or in the Members Agreement to the contrary, only the LZ
Directors (as defined in the Members Agreement) (or the board members appointed
by LZ, in the event the Voting Agreement contained in Section 1 of the Members
Agreement is terminated pursuant to its terms), as a separate group as permitted
by Section 18-404(b) of the Delaware Act, shall be entitled to consider and vote
upon (i) the Company's exercise of any of its rights or remedies (including,
without limitation, any exercise of any right to indemnification) or the
performance of any of its obligations pursuant to the Asset Purchase Agreement
or (ii) any prepayment or repayment of the Guaranty in advance of the scheduled
maturity or required payment of such guaranty obligations, but, in the case of
this clause (ii), only after (A) the occurrence of any Insolvency Event (as
defined in the Members Agreement), (B) any demand for payment of the Guaranty by
▇▇▇▇▇ Fargo (as defined in the Members Agreement) or any exercise by ▇▇▇▇▇ Fargo
or attempt by ▇▇▇▇▇ Fargo to exercise any of its rights or remedies under the
Guaranty or (C) if necessary or desirable for the Company to obtain other
financing which the LZ Directors reasonably believe to be in the best interests
of the Company. Except as otherwise provided by the Board when establishing any
committee, the affirmative vote (whether by proxy or otherwise) of members of
such committee holding a majority of the votes of all members of such committee
shall be the act of such committee, it being agreed and understood that in the
event of a committee deadlock on any matter before any such Board committee, the
affirmative vote of the holders of not less than a majority of the Company
Interest shall be the act of the Company.
(c) The Company shall pay the reasonable out-of-pocket expenses
incurred by each Representative in connection with attending the meetings of the
Board and any committee thereof (unless such expenses shall have been paid or
are required to be paid by any other Person). Except as otherwise provided in
the immediately preceding sentence or elsewhere in this Agreement, the
Representatives shall not be compensated for their services as members of the
Board.
5.6 Delegation of Authority. The Board may, from time to time, delegate
to one or more Persons (including any Representative or officer 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, managing director,
chairman, chief executive officer, president, principal, vice president,
secretary, assistant secretary, treasurer, or assistant treasurer) and delegate
certain authority and duties to such persons, including, without limitation,
pursuant to those certain bylaws of the Company of even date herewith, as the
same may be amended, restated or otherwise modified from time to time. Any
number of titles may be held by the same Representative or other individual. The
salaries or other compensation, if any, of the officers and agents of the
Company shall be fixed from time to time by the Board. Any delegation pursuant
to this Section 5.6 may be revoked at any time by the Board in its sole
discretion. Notwithstanding any provision in this Section 5.6, in the event of
any conflict
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between the terms and conditions of this Agreement and the terms and conditions
of the Company's bylaws, the terms and conditions of this Agreement shall
control the resolution of any such conflict.
5.7 Purchase of Company Interests. The Board may cause the Company to
purchase or otherwise acquire Company Interests, or may purchase or otherwise
acquire Company Interests on behalf of the Company. As long as such Company
Interests are owned by or on behalf of the Company such Company Interests will
not be considered outstanding for any purpose.
5.8 Limitation of Liability.
(a) Except as otherwise provided herein or in an agreement entered
into by such Person and the Company, no Representative or any of such
Representative's Affiliates shall be liable to the Company or to any Holder for
any act or omission performed or omitted by such Representative in its capacity
as a member of the Board pursuant to authority granted to such Person by this
Agreement; provided that except as otherwise provided herein, such limitation of
liability shall not apply to the extent the act or omission was attributable to
such Person's gross negligence, willful misconduct or knowing violation of law
or for any present or future breaches of any representations, warranties or
covenants by such Person or its Affiliates contained herein or in the other
agreements with the Company. 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 shall 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 shall 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 shall in no
event subject the Board or any Representative thereof to liability to the
Company or any Holder.
(b) Whenever this Agreement or any other agreement contemplated
herein provides that the Board shall act in a manner which is, or provide terms
which are, "fair and reasonable" to the Company or any Holder, the Board shall
determine such appropriate action or provide such terms considering, in each
case, the relative interests of each party to such agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable United States generally
accepted accounting practices or principles.
(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 "sole discretion" or "discretion," with "complete discretion" or
under a grant of similar authority or latitude, the Board shall be entitled to
consider such interests and factors as it desires, provided that the Board shall
act in good faith.
(d) Whenever in this Agreement 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
-24-
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 shall not constitute a breach of this Agreement or any
other agreement contemplated herein or impose liability upon the Board, any
Representative thereof or any of such Representative's Affiliates.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF HOLDERS
6.1 Limitation of Liability. Except as provided in this Agreement or
in the Delaware Act, the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Company and no Holder or Representative shall
be obligated personally for any such debts, obligation or liability solely by
reason of being a Holder or acting as a Representative of the Company. Except
as otherwise provided in this Agreement, a Holder's liability (in its capacity
as such) for Company liabilities and Losses shall be limited to the Company's
assets; provided that a Holder shall be required to return to the Company any
distribution made to it in clear and manifest accounting or similar error. The
immediately preceding sentence shall constitute a compromise to which all
Holders have consented within the meaning of the Delaware Act. Notwithstanding
anything contained herein to the contrary, the failure of the Company to observe
any formalities or requirements relating to the exercise of its powers or
management of its business and affairs under this Agreement or the Delaware Act
shall not be grounds for imposing personal liability on the Holders for
liabilities of the Company.
6.2 Lack of Authority. Except as otherwise provided in Section 5.5(b)
hereof, no Holder in its capacity as such (other than through its Representative
or as a Representative) has the authority or power to act for or on behalf of
the Company, to do any act that would be binding on the Company or to make any
expenditures on behalf of the Company. Except as otherwise provided in Section
5.5(b) hereof, the Holders hereby consent to the exercise by the Board and the
Representatives of the powers conferred on them by law and this Agreement.
6.3 No Right of Partition. No Holder shall have the right to seek or
obtain partition by court decree or operation of law of any Company property, or
the right to own or use particular or individual assets of the Company.
6.4 Indemnification.
(a) Subject to Section 4.6, the Company hereby agrees to indemnify
and hold harmless any Person (each an "Indemnified Person") to the fullest
------------------
extent permitted under the Delaware Act, as the same now exists or may hereafter
be amended, substituted or replaced (but, in the case of any such amendment,
substitution or replacement only to the extent that such amendment, substitution
or replacement permits the Company to provide broader indemnification rights
than the Company is providing immediately prior to such amendment), against all
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
excise taxes or penalties) reasonably incurred or suffered by such Person (or
one or more of such Person's Affiliates) by reason of the fact that such
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Person is or was a Holder or is or was serving as a Representative, officer,
director, principal, member, employee or agent of the Company or is or was
serving at the request of the Company as a Representative, officer, director,
principal, member, employee or agent of another corporation, partnership, joint
venture, limited liability company, trust or other enterprise; provided that
(unless the Board otherwise consents) no Indemnified Person shall be indemnified
for any expenses, liabilities and losses suffered that are attributable to such
Indemnified Person's or its Affiliates' gross negligence, willful misconduct or
knowing violation of law or for any present or future breaches of any
representations, warranties or covenants by such Indemnified Person or its
Affiliates contained herein or in the other agreements with the Company.
Expenses, including attorneys' fees, incurred by any such Indemnified Person in
defending a proceeding shall be paid by the Company in advance of the final
disposition of such proceeding, including any appeal therefrom, upon receipt of
an undertaking by or on behalf of such Indemnified Person to repay such amount
if it shall ultimately be determined that such Indemnified Person is not
entitled to be indemnified by the Company.
(b) The right to indemnification and the advancement of expenses
conferred in this Section 6.4 shall not be exclusive of any other right which
any Person may have or hereafter acquire under any statute, agreement, by-law,
vote of Representatives or otherwise.
(c) The Company may maintain insurance, at its expense, to protect
any Indemnified Person against any expense, liability or loss described in
Section 6.4(a) above whether or not the Company would have the power to
indemnify such Indemnified Person against such expense, liability or loss under
the provisions of this Section 6.4.
(d) Notwithstanding anything contained herein to the contrary
(including in this Section 6.4), any indemnity by the Company relating to the
matters covered in this Section 6.4 shall be provided out of and to the extent
of Company assets only and no Holder (unless such Holder otherwise agrees in
writing or is found in a final decision by a court of competent jurisdiction to
have personal liability on account thereof) shall have personal liability on
account thereof or shall be required to make additional Capital Contributions to
help satisfy such indemnity of the Company.
(e) If this Section 6.4 or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify and hold harmless each Indemnified Person pursuant to
this Section 6.4 to the fullest extent permitted by any applicable portion of
this Section 6.4 that shall not have been invalidated and to the fullest extent
permitted by applicable law.
6.5 Members Right to Act. For situations which the approval of the
Members (rather than the approval of the Board on behalf of the Members) is
required, the Members shall act through meetings and written consents as
described in paragraphs (a) and (b) below:
(a) Except as otherwise provided by this Agreement, acts by the
Members holding not less than a majority of the Company Interest shall be the
act of the Members. Any Member entitled to vote at a meeting of Members or to
express consent or dissent to Company action in writing without a meeting may
authorize another person or persons to act for it by proxy. A telegram, telex,
cablegram or similar transmission by the Member, or a photographic, photostatic,
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facsimile or similar reproduction of a writing executed by the Member shall (if
stated thereon) be treated as a proxy executed in writing for purposes of this
Section 6.5(a). No proxy shall be voted or acted upon after eleven months from
the date thereof, unless the proxy provides for a longer period. A proxy shall
be revocable unless the proxy form conspicuously states that the proxy is
irrevocable and that the proxy is coupled with an interest. Should a proxy
designate two or more Persons to act as proxies, unless that instrument shall
provide to the contrary, a majority of such Persons present at any meeting at
which their powers thereunder are to be exercised shall have and may exercise
all the powers of voting or giving consents thereby conferred, or, if only one
be present, then such powers may be exercised by that one; or, if an even number
attend and a majority do not agree on any particular issue, the Company shall
not be required to recognize such proxy with respect to such issue if such proxy
does not specify how the votes that are the subject of such proxy are to be
voted with respect to such issue.
(b) The actions by the Members permitted hereunder may be taken at a
meeting called by Members holding at least 20% of the Company Interest on at
least five days' prior written notice to the other Members entitled to vote,
which notice shall state the purpose or purposes for which such meeting is being
called. The actions taken by the Members entitled to vote or consent at any
meeting (as opposed to by written consent), however called and noticed, shall be
as valid as though taken at a meeting duly held after regular call and notice if
(but not until), either before, at or after the meeting, the Members entitled to
vote or consent as to whom it was improperly held signs a written waiver of
notice or a consent to the holding of such meeting or an approval of the minutes
thereof. The actions by the Members entitled to vote or consent may be taken by
vote of the Members entitled to vote or consent at a meeting or by written
consent (without a meeting, without notice and without a vote) so long as such
consent is signed by the Members having not less than the minimum amount of
Company Interest that would be necessary to authorize or take such action at a
meeting at which all Members entitled to vote thereon were present and voted.
Prompt notice of the action so taken without a meeting shall be given to those
Members entitled to vote or consent who have not consented in writing. Any
action taken pursuant to such written consent of the Members shall have the same
force and effect as if taken by the Members at a meeting thereof.
(c) Except as specifically provided in this Agreement to the
contrary, Preferred Holders shall be entitled to notice of all meetings of the
Members in accordance with this Agreement and the Company's bylaws, and the
Preferred Holders shall be entitled to vote on all matters submitted to the
Members for a vote together with the Common Holders, all voting together as a
single group, with each such Member entitled to a number of votes (or fractions
thereof) equal to such Member's percentage interest of all of the Company
Interests.
6.6 Conflicts of Interest.
(a) A Holder, its Affiliates and each of their respective
stockholders, Representatives, directors, officers, controlling persons,
partners and employees (collectively, the "Holder Group") may have business
------------
interests and engage in business activities in addition to those relating to the
Company and its Subsidiaries, except as any such Person may have otherwise
agreed with the Company in writing. Neither the Company nor any of the other
Holders shall have any rights by virtue of this Agreement in any business
ventures of any such Person, except for any
-27-
business interests or activities which any such Person has agreed in writing
with the Company to not pursue or consummate (whether directly or indirectly),
in which case all of such Person's direct and indirect interest in such business
interests or activities shall, at the election of the Board, become an asset of
the Company and the Company shall be entitled to all rights in such business
interests or activities and to all income or profits derived therefrom.
(b) No member of a Holder Group shall be obligated to present any
particular investment or business opportunity to the Company even if the
opportunity is of a character which, if presented to the Company, could be
undertaken by the Company or any of its Subsidiaries, except as otherwise agreed
by any such Person with the Company in writing. Each member of a Holder Group
shall have the right to undertake any such opportunity for itself for its own
account or on behalf of another or to recommend any such opportunity to other
Persons, except as otherwise agreed by any such Person with the Company in
writing, in which case all of such Person's direct and indirect interest in such
business interests or activities shall, at the election of the Board, become an
asset of the Company and the Company shall be entitled to all rights in such
business interests or activities and to all income or profits derived therefrom.
ARTICLE VII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
7.1 Records and Accounting. The Company shall keep, or cause to be kept,
appropriate books and records with respect to the Company's business, including
all books and records necessary to provide any information, lists and copies of
documents required to be provided pursuant to Section 7.3 or pursuant to
applicable laws. All matters concerning (i) the determination of the relative
amount of allocations and distributions among the Holders pursuant to Articles
III and IV and (ii) accounting procedures and determinations, and other
determinations not specifically and expressly provided for by the terms of this
Agreement, shall be determined by the Board, whose determination shall be final
and conclusive as to all of the Holders absent manifest clerical error.
7.2 Fiscal Year. The Fiscal Year of the Company shall end on December
31 of each year or such other annual accounting period as may be established by
the Board.
7.3 Reports.
(a) The Company shall deliver or cause to be delivered to each
Holder, within 90 days after the end of each Fiscal Year, an annual report
containing the following:
(i) consolidated statements of income and cash flows of the
Company and its Subsidiaries for such Fiscal Year, and a
consolidated balance sheet of the Company and its
Subsidiaries as of the end of such Fiscal Year, all
prepared in accordance with generally accepted accounting
principles, consistently applied, and audited by an
independent accounting firm of recognized national standing
and a copy of such
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firm's annual management letter regarding internal controls
and other matters to the Board;
(ii) a statement of changes in the Holder's equity and the
Holder's Capital Account balance for such Fiscal Year; and
(iii) a general description of the Company's activities during
such Fiscal Year.
(b) The Company shall, to the extent required by the Delaware Act,
deliver or cause to be delivered to each Holder with reasonable promptness, such
other information and financial data concerning the Company and its Subsidiaries
as any Holder shall from time to time reasonably request; provided that
furnishing such information shall not be financially burdensome on the Board,
the Company or its Subsidiaries or unreasonably time consuming for the Board or
the employees of the Company or its Subsidiaries.
(c) The Company shall use reasonable efforts to deliver or cause to
be delivered, within 75 days after the end of each Fiscal Year, to each Person
who was a Holder at any time during such Fiscal Year all information necessary
for the preparation of such Person's United States federal and state income tax
returns.
7.4 Transmission of Communications. Each Person that owns or controls
Company Interests on behalf of, or for the benefit of, another Person or Persons
shall be responsible for conveying any report, notice or other communication
received from the Board to such other Person or Persons.
ARTICLE VIII
TAX MATTERS
8.1 Preparation of Tax Returns. The Company shall arrange for the
preparation and timely filing of all returns required to be filed by the
Company.
8.2 Tax Elections. The Taxable Year shall be the Fiscal Year set
forth in Section 7.2, unless the Board shall determine otherwise in its sole
discretion and in compliance with applicable laws. The Board shall, in its sole
discretion, determine whether to make or revoke any available election pursuant
to the Code. Each Holder will upon request supply any information necessary to
give proper effect to such election.
8.3 Tax Controversies. LZ is hereby designated the Tax Matters Partner
and is authorized and required to represent the Company (at the Company's
expense) 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 reasonably incurred in
connection therewith. Each Holder agrees to cooperate with the Company and to do
or refrain from doing any or all things reasonably requested by the Company with
respect to the conduct
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of such proceedings. The Tax Matters Partners shall keep all Holders fully
informed of the progress of any examinations, audits or other proceedings, and
all Holders shall have the right to participate at their expense in any such
examinations, audits or other proceedings. Notwithstanding the foregoing, the
Tax Matters Partners shall not settle or otherwise compromise any issue in any
such examination, audit or other proceeding without first obtaining approval of
the Board. In addition, the Tax Matters Partner shall not structure any such
settlement or compromise in a manner which inappropriately benefits any Holder
or Holders to the detriment of any other Holder or Holders.
ARTICLE IX
TRANSFER OF COMPANY INTERESTS
9.1 Transfer In General. THE TRANSFER OF ANY INTEREST IN THE COMPANY
IS SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED IN THE MEMBERS AGREEMENT,
WHICH RESTRICTIONS ARE INCORPORATED HEREIN BY REFERENCE. IN ADDITION, NO HOLDER
MAY TRANSFER ALL OR ANY PORTION OF SUCH ▇▇▇▇▇▇'S INTEREST IN THE COMPANY WITHOUT
THE PRIOR WRITTEN CONSENT OF THE BOARD IF SUCH TRANSFER WOULD (A) CAUSE THE
COMPANY TO HAVE MORE THAN 100 PARTNERS WITHIN THE MEANING OF TREASURY REGULATION
SECTION 1.7704-1(H) OR (B) CAUSE THE COMPANY TO HAVE MORE THAN 100 BENEFICIAL
OWNERS OF ITS SECURITIES FOR PURPOSES OF THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED.
9.2 Assignee's Rights.
(a) A permitted transfer of a Company Interest shall be effective as
of the date of assignment and compliance with the conditions to such transfer
and such transfer shall be shown on the books and records of the Company.
Profits, Losses and other Company items shall be allocated between the
transferor and the Assignee according to Code Section 706. Distributions made
before the effective date of such transfer shall be paid to the transferor, and
distributions made after such date shall be paid to the Assignee.
(b) Unless and until an Assignee becomes a Member pursuant to Article
X, the Assignee shall not be entitled to any of the rights granted to a Member
hereunder or under applicable law, other than the rights granted specifically to
Assignees pursuant to this Agreement; provided that without relieving the
transferring Holder from any such limitations or obligations as more fully
described in Section 9.3, such Assignee shall be bound by any limitations and
obligations of a Holder contained herein that a Member would be bound on account
of the Assignee's Company Interest (including the obligation to make Capital
Contributions on account of such Company Interest).
9.3 Assignor's Rights and Obligations. Any Member who shall transfer
any Company Interest or other interest in the Company shall cease to be a Holder
with respect to such Company Interest or other interest and shall no longer have
any rights or privileges, or, except as set forth in this Section 9.3, duties,
liabilities or obligations, of a Holder with respect to such Company Interest or
other interest (it being understood, however, that the applicable provisions of
Sections 5.8 and 6.4
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shall continue to inure to such Person's benefit), except that unless and until
the Assignee is admitted as a substituted Member in accordance with the
provisions of Article X (the "Admission Date"), (i) such assigning Holder shall
retain all of the duties, liabilities and obligations of a Holder with respect
to such Company Interest or other interest, including, without limitation, the
obligation (together with its Assignee pursuant to Section 9.2(b)) to make and
return Capital Contributions on account of such Company Interest or other
interest pursuant to the terms of this Agreement and (ii) the Board may, in its
sole discretion, reinstate all or any portion of the rights and privileges of
such Holder with respect to such Company Interest or other interest for any
period of time prior to the Admission Date. Nothing contained herein shall
relieve any Holder who Transfers any Company Interest or other interest in the
Company from any liability of such Holder to the Company with respect to such
Company Interest or other interest that may exist on the Admission Date or that
is otherwise specified in the Delaware Act and incorporated into this Agreement
or for any liability to the Company or any other Person for any materially false
statement made by such Holder (in its capacity as such) in the Members Agreement
or for any present or future breaches of any representations, warranties or
covenants by such Holder (in its capacity as such) contained herein or in the
other agreements with the Company.
ARTICLE X
ADMISSION OF MEMBERS
10.1 Substituted Members. Subject to the provisions of Section 9.1
hereof, in connection with the permitted transfer of a Company Interest of a
Holder, the transferee shall become a Substituted Member on the effective date
of such transfer, which effective date shall not be earlier than the date of
compliance with the conditions to such transfer (without any Board or Member
consent unless one of the conditions to such transfer is that Board or Member
consent is required for the admission of such transferee, in which case such
consent must first be obtained), and such admission shall be shown on the books
and records of the Company.
10.2 Additional Members. Subject to the provisions of Section 9.1 hereof,
a Person may be admitted to the Company as an Additional Member only upon
furnishing to the Board (a) a letter of acceptance, in form satisfactory to the
Board, of all the terms and conditions of this Agreement, including the power of
attorney granted in Section 14.1 and (b) such other documents or instruments as
may be necessary or appropriate to effect such Person's admission as a Member
(including entering into the Members Agreement and such other documents as the
Board may deem appropriate in its sole discretion). Such admission shall become
effective on the date on which the Board determines in its sole discretion that
such conditions have been satisfied, each of the conditions contained in the
Members Agreement to the issuance of Company Interests to such Member have been
satisfied, and when any such admission is shown on the books and records of the
Company.
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ARTICLE XI
▇▇▇▇▇▇▇▇▇▇ AND RESIGNATION OF HOLDERS
11.1 Withdrawal and Resignation of Holders. No Holder shall have the
power or right to withdraw or otherwise resign from the Company prior to the
dissolution and winding up of the Company pursuant to Article XII without the
prior written consent of the Board, except as otherwise expressly permitted by
this Agreement. Any Holder, however, that withdraws or otherwise resigns from
the Company without the prior written consent of the Board upon or following the
dissolution and winding up of the Company pursuant to Article XII but prior to
such Holder receiving the full amount of distributions from the Company to which
such Holder is entitled pursuant to Article XII shall be liable to the Company
for all damages (including all lost profits and special, indirect and
consequential damages) directly or indirectly caused by the withdrawal or
resignation of such ▇▇▇▇▇▇, and such Holder shall be entitled to receive the
fair value of his equity interest in the Company as of the date of its
resignation (or, if less, the amount that such Holder would have received on
account of such equity interest had such Holder not resigned or otherwise
withdrew from the Company), as conclusively determined by the Board, on the
sixth month anniversary date (or such earlier date determined by the Board)
following the completion of the distribution of Company assets as provided in
Article XII to all other Holders. Upon a transfer of all of a Holder's Company
Interest in a transfer permitted by the Members Agreement and this Agreement,
subject to the provisions of Section 9.3, such Holder shall cease to be a
Holder.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 Dissolution. The Company shall not be dissolved by the admission
of Additional Members or Substituted Members. The Company shall dissolve, and
its affairs shall be wound up, upon:
(a) the vote of the Board holding at least a majority of the votes
of all members of the Board; or
(b) the entry of a decree of judicial dissolution or administrative
dissolution of the Company under the Delaware Act.
Except as otherwise set forth in this Article XII, the Company is
intended to have perpetual existence. An Event of Withdrawal shall not cause a
dissolution of the Company and the Company shall continue in existence subject
to the terms and conditions of this Agreement.
12.2 Liquidation and Termination. On dissolution of the Company, the
Board shall act as liquidator or may appoint one or more Representatives or
Members as liquidator. The liquidators shall proceed diligently to wind up the
affairs of the Company and make final distributions as provided herein and in
the Delaware Act. The costs of liquidation shall be borne as a Company
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expense. Until final distribution, the liquidators shall continue to operate the
Company properties with all of the power and authority of the Board. The steps
to be accomplished by the liquidators are as follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the liquidators shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;
(b) the liquidators shall cause the notice described in the Delaware
Act to be mailed to each known creditor of and claimant against the Company in
the manner described thereunder;
(c) the liquidators shall pay, satisfy or discharge from Company
funds all of the debts, liabilities and obligations of the Company (including,
without limitation, all expenses incurred in liquidation) or otherwise make
adequate provision for payment and discharge thereof (including, without
limitation, the establishment of a cash fund for contingent liabilities in such
amount and for such term as the liquidators may reasonably determine); and
(d) all remaining assets of the Company shall be distributed to the
Holders in accordance with Section 4.1(a) by the end of the taxable year of the
Company during which the liquidation of the Company occurs (or, if later, by 90
days after the date of the liquidation).
The distribution of cash and/or property to a Holder in accordance with the
provisions of this Section 12.2 and Section 12.3 constitutes a complete return
to the Holder of its Capital Contributions and a complete distribution to the
Holder of its interest in the Company and all the Company's property and
constitutes a compromise to which all Holders have consented within the meaning
of the Delaware Act. To the extent that a Holder returns funds to the Company,
it has no claim against any other Holder for those funds. In connection with
any liquidation of the Company, any Holder may in its sole discretion offer to
purchase all or any portion of the assets of the Company, including, without
limitation, any intellectual property rights.
12.3 Deferment; Distribution in Kind. Notwithstanding the provisions
of Section 12.2, but subject to the order of priorities set forth therein, if
upon dissolution of the Company the liquidators determine that an immediate sale
of part or all of the Company's assets would be impractical or would cause undue
loss (or would otherwise not be beneficial) to the Holders, the liquidators may,
in their sole discretion, defer for a reasonable time the liquidation of any
assets except those necessary to satisfy Company liabilities (other than loans
to the Company by Holders) and reserves. Subject to the order of priorities set
forth in Section 12.2, the liquidators may, in their sole discretion, distribute
to the Holders, in lieu of cash, either (i) all or any portion of such remaining
Company assets in-kind in accordance with the provisions of Section 12.2(d),
(ii) as tenants in common and in accordance with the provisions of Section
12.2(d), undivided interests in all or any portion of such Company assets or
(iii) a combination of the foregoing. Any such distributions in kind shall be
subject to (x) such conditions relating to the disposition and management of
such assets as the liquidators deem reasonable and equitable and (y) the terms
and
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conditions of any agreements governing the such assets (or the operation
thereof or the holders thereof) at such time. Any Company assets distributed in
kind will first be written up or down to their Fair Market Value, thus creating
Profit or Loss (if any), which shall be allocated in accordance with Sections
4.2 and 4.3. The liquidators shall determine the Fair Market Value of any
property distributed in accordance with the valuation procedures set forth in
Article XIII.
12.4 Cancellation of Certificate. On completion of the distribution of
Company assets as provided herein, the Company is terminated (and the Company
shall not be terminated prior to such time), and the Board (or such other Person
or Persons as the Delaware Act may require or permit) shall file a certificate
of cancellation with the Secretary of State of Delaware, cancel any other
filings made pursuant to this Agreement that are or should be canceled 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 12.4.
12.5 Reasonable Time for Winding Up. 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 Sections 12.2 and 12.3 in order to
minimize any losses otherwise attendant upon such winding up.
12.6 Return of Capital. The liquidators shall not be personally liable
for the return of Capital Contributions or any portion thereof to the Holders
(it being understood that any such return shall be made solely from Company
assets).
12.7 Liquidity Event or IPO. In the event that the Board approves a
Liquidity Event or IPO, the Company and each of its Holders will cooperate to
structure such Liquidity Event or IPO to maximize the after-tax return of the
Holders, but only to the extent that such structure is not materially
detrimental to the Company or any other Holder.
ARTICLE XIII
VALUATION
13.1 Determination. The Fair Market Value of the assets of the Company or
of a Company Interest in the Company will be determined by the Board (or, if
pursuant to Section 12.3, the liquidators) in its good faith judgment in such
manner as it deems reasonable and using all factors, information and data deemed
to be pertinent.
13.2 Determination of Fair Market Value. "Fair Market Value" of (i) a
-----------------
specific Company asset will mean the amount which the Company would receive in
an all-cash sale of such asset in an arms-length transaction with an
unaffiliated third party consummated on the day immediately preceding the date
on which the event occurred which necessitated the determination of the Fair
Market Value (and after giving effect to any transfer taxes payable in
connection with such sale); and (ii) the Company will mean the amount which the
Company would receive in an all-cash sale of all of its assets and businesses as
a going concern in an arms-length transaction with an unaffiliated third party
consummated on the day immediately preceding the date on which the event
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occurred which necessitated the determination of the Fair Market Value (assuming
that such sale was accomplished pursuant to a Liquidity Event of the type
referred to in Section 12.7 above and all of the proceeds from such sale were
paid directly to the Company other than an amount of such proceeds necessary to
pay transfer taxes payable in connection with such sale, which amount will not
be deemed received by the Company). After a determination of the Fair Market
Value of the Company is made as provided above, the Fair Market Value of a
Company Interest will be determined by making a calculation reflecting the cash
distributions which would be made to the Holders in accordance with this
Agreement if the Company were deemed to have received such Fair Market Value in
cash and then distributed the same to the Holders in accordance with the terms
of this Agreement pursuant to Section 12.2 and assuming that all of the
convertible debt and other convertible securities, if any, were repaid or
converted (whichever yields more cash to the holders of such convertible
securities). Except as otherwise provided herein or in any agreement, document
or instrument contemplated hereby, any amount to be paid under this Agreement by
reference to the Fair Market Value shall be paid in full in cash, and any
Company Interest being transferred in exchange therefor will be transferred free
and clear of all Liens.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Power of Attorney.
(a) Each Holder hereby constitutes and appoints each member of the
Board and the liquidators, with full power of substitution, as his true and
lawful agent and attorney-in-fact, with full power and authority in his or its
name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (A) this Agreement, all
certificates and other instruments and all amendments
thereof which the Board deems appropriate or necessary to
form, qualify, or continue the qualification of, the Company
as a limited liability company in the State of Delaware and
in all other jurisdictions in which the Company may conduct
business or own property; (B) all instruments which the
Board deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this
Agreement in accordance with its terms; (C) all conveyances
and other instruments or documents which the Board deems
appropriate or necessary to reflect the dissolution and
liquidation of the Company pursuant to the terms of this
Agreement, including a certificate of cancellation; and (D)
all instruments relating to the admission, withdrawal or
substitution of any Holder pursuant to Article X or XI; and
(ii) sign, execute, swear to and acknowledge all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or
-35-
necessary, in the reasonable judgment of the Board, to
evidence, confirm or ratify any vote, consent, approval,
agreement or other action which is made or given by the
Members hereunder or is consistent with the terms of this
Agreement and/or appropriate or necessary (and not
inconsistent with the terms of this Agreement), in the
reasonable judgment of the Board, to effectuate the terms of
this Agreement.
(b) The foregoing power of attorney is irrevocable and coupled with
an interest, and shall survive the death, disability, incapacity, dissolution,
bankruptcy, insolvency or termination of any Holder and the transfer of all or
any portion of his or its Company Interest and shall extend to such ▇▇▇▇▇▇'s
heirs, successors, assigns and personal representatives.
14.2 Amendments. (a) The Representatives holding a majority of the
votes of all Representatives (pursuant to its powers of attorney from the
Holders as provided in Section 14.1), without the consent of any Holder, may
amend any provision of this Agreement and execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection
therewith, to reflect:
(i) a change in the name of the Company or the location of the
principal place of business of the Company;
(ii) admission, substitution, removal or withdrawal of Members or
Assignees in accordance with this Agreement;
(iii) a change that does not adversely affect any Holder in any
material respect in its capacity as an owner of Company
Interests and is necessary or desirable to satisfy any
requirements, conditions or guidelines contained in any opinion,
directive, order, ruling or regulation of any United States
federal or state agency or judicial authority or contained in
any United States federal or state statute; or
(iv) a change that does not adversely affect any Holder in any
material respect in its capacity as an owner of Company
Interests and cures any ambiguity.
(b) In all other cases this Agreement may be amended or modified
upon the written consent of the holders of not less than a majority of the
Company Interest. Notwithstanding the foregoing, no amendment or modification to
any of the terms and conditions of this Agreement which terms and conditions
expressly require the approval or action of certain Persons (e.g., the Board or
the holders of a specified percentage of the Preferred Company Interests) may be
made without obtaining the consent of the requisite number or specified
percentage of such Persons who are entitled to approve or take action on such
matter.
14.3 Title to Company Assets. Company assets shall be deemed to be
owned by the Company as an entity, and no Holder, individually or collectively,
shall have any ownership interest
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in such Company assets or any portion thereof. Legal title to any or all Company
assets may be held in the name of the Company, the Board or one or more
nominees, as the Board may determine. The Board hereby declares and warrants
that any Company assets for which legal title is held in its name or the name of
any nominee shall be held in trust by the Board or such nominee for the use and
benefit of the Company in accordance with the provisions of this Agreement. All
Company assets shall be recorded as the property of the Company on its books and
records, irrespective of the name in which legal title to such Company assets is
held.
14.4 Addresses and Notices. All notices, demands, or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given or made when (a)
delivered personally to the recipient, (b) telecopied to the recipient (with
hard copy sent to the recipient by reputable overnight courier service (charges
prepaid) that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on
a business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices, demands, and other communications shall be sent
to the address for such recipient set forth in the Company's books and records,
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party. Any
notice to the Board or the Company shall be deemed given if sent to the Board at
the principal office of the Company as designated in this Agreement. The Company
shall promptly forward any such notice to the members of the Board.
14.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
14.6 Creditors. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Company or any of its
Affiliates, and no creditor who 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, Distributions, capital or property other than as a secured creditor.
14.7 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
14.8 Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which together shall
constitute one and the same agreement binding on all the parties hereto.
14.9 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
any choice of law or conflict of law rules or provisions (whether of the State
of Delaware or any other
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jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
14.10 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
14.11 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking such actions
as may be necessary or appropriate to achieve the purposes of this Agreement.
14.12 Expenses. The Company shall pay, and hold the Investors and each
of their respective Affiliates harmless against liability for the payment of (i)
subject to Section 14.7 of the Asset Purchase Agreement, their out-of-pocket
fees and expenses incurred in connection with this Agreement and the
transactions related hereto and contemplated hereby (including legal expenses
relating to this Agreement and the documents related hereto); (ii) the
reasonable fees and expenses incurred in connection with an investment or
acquisition by the Company or any of its Subsidiaries; (iii) the fees and
expenses incurred with respect to any amendments or waivers (whether or not the
same become effective) under or in respect of any of this Agreement or the
agreements referred to herein or contemplated hereby or thereby (including in
connection with any proposed merger, sale or recapitalization of the Company or
any of its Subsidiaries); (iv) stamp and other taxes which may be payable in
respect of the execution and delivery of this Agreement or the issuance,
delivery or acquisition of any Company Interests; and (v) the reasonable fees
and expenses incurred by each such Person in any filing with any Governmental
Entity with respect to its investment in the Company which mentions such Person
(other than any tax returns).
14.13 Delivery by ▇▇▇▇▇▇▇▇▇. 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 machine, 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 shall re-execute original forms
thereof and deliver them to all other parties. No party hereto or to any such
agreement or instrument shall raise the use of a facsimile machine to deliver a
signature or the fact that any signature or agreement or instrument was
transmitted or communicated through the use of a facsimile machine as a defense
to the formation of a contract and each such party forever waives any such
defense.
14.14 Offset. Whenever the Company is to pay any sum to any Holder or
any Affiliate or related person thereof, any amounts that such Holder or such
Affiliate or related person owes to the
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Company which are not the subject of a good faith dispute may be deducted from
that sum before payment.
14.15 Entire Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
14.16 Remedies. Each Holder shall have all rights and remedies set
forth in this Agreement and all rights and remedies which such Person has been
granted at any time under any other agreement or contract and all of the rights
which such Person has under any law. Any Person having any rights under any
provision of this Agreement or any other agreements contemplated hereby shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
14.17 Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. Whenever required by the context, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. The use of the word "including" in
this Agreement shall be by way of example rather than by limitation. Reference
to any agreement, document or instrument means such agreement, document or
instrument as amended or otherwise modified from time to time in accordance with
the terms thereof, and if applicable hereof. Without limiting the generality of
the immediately preceding sentence, no amendment or other modification to any
agreement, document or instrument that requires the consent of any Person
pursuant to the terms of this Agreement or any other agreement will be given
effect hereunder unless such Person has consented in writing to such amendment
or modification. Wherever required by the context, references to a Fiscal Year
shall refer to a portion thereof. The use of the words "or," "either" and "any"
shall not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. Wherever a conflict exists between
this Agreement and any other agreement, this Agreement shall control but solely
to the extent of such conflict; provided that if a conflict exists between this
Agreement and the Members Agreement, the Members Agreement shall control but
solely to the extent of such conflict.
14.18 Notice to Holder of Provisions. By executing this Agreement, each
Holder acknowledges that it has actual notice of (a) all of the provisions
hereof (including the restrictions on the transfer set forth herein) and (b) all
of the provisions of the Certificate.
14.19 Consent to Jurisdiction. Each Holder irrevocably submits to the
nonexclusive jurisdiction of the United States District Court for the State of
Delaware and the state courts of the
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State of Delaware for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each
Holder further agrees that service of any process, summons, notice or document
by United States certified or registered mail to such ▇▇▇▇▇▇'s respective
address set forth in the Company's books and records or such other address or to
the attention of such other person as the recipient party has specified by prior
written notice to the sending party shall be effective service of process in any
action, suit or proceeding in Delaware with respect to any matters to which it
has submitted to jurisdiction as set forth above in the immediately preceding
sentence. Each Holder irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in the United States District
Court for the State of Delaware or the state courts of the State of Delaware and
hereby irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in such court
has been brought in an inconvenient forum.
14.20 Survival. Sections 4.6, 5.8, 6.1 and 6.4 shall survive and continue
in full force in accordance with their respective terms notwithstanding any
termination of this Agreement or the dissolution of the Company.
* * * * *
IN WITNESS WHEREOF, the undersigned have executed or caused to be
executed on their behalf this Limited Liability Company Agreement as of the date
first written above.
LZ PARTNERS, LLC
By:___________________________________
Its:__________________________________
ZECAL CORP.
By:___________________________________
Its:__________________________________
SCHEDULE I
----------
Capital Percent of
Contributions Total Type of
Pursuant to Company Company
Holder Section 3.1(a) Interest Interest
------ -------------- -------- --------
LZ $4,000,000.00 50% Preferred
Zecal $4,000,000.00* 50% Common
------------- ---
$8,000,000.00 100%
============= ===
*Pursuant to the resolution of the Company's board of managers dated as of the
date hereof, the Board approved the purchase of the assets and liabilities of
Zecal specified in the Asset Purchase Agreement, in exchange for the Common
Company Interests issued to Zecal per this Schedule I.