EXHIBIT 10.9
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E-SYNC NETWORKS, LLC
OPERATING AGREEMENT
by and among
E-SYNC NETWORKS, LLC
CRC, INC.
and
E-SYNC NETWORKS, INC.
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TABLE OF CONTENTS
ARTICLE I GENERAL PROVISIONS.......................................................1
Section 1.1 Certain Definitions......................................................1
Section 1.2 The Company; Formation...................................................7
Section 1.3 Company Name; Place of Business; Registered Office and Agent.............8
Section 1.4 Term.....................................................................9
Section 1.5 Business of the Company; Powers..........................................9
Section 1.6 Taxed as Partnership.....................................................9
Section 1.7 Fiscal Year..............................................................9
Section 1.8 Membership Interests Certificated; Nature of Members' Interests..........9
Section 1.9 Business Transactions of Members with the Company........................9
Section 1.10 Capacity of the Members.................................................10
ARTICLE II MEMBERS.................................................................10
Section 2.1 Members as of Effective Date............................................10
Section 2.2 Admission of New Members................................................10
Section 2.3 Manner of Acting........................................................10
Section 2.4 Meetings of the Members.................................................10
Section 2.5 Record Date.............................................................11
Section 2.6 Relationship of the Members.............................................12
ARTICLE III MANAGEMENT OF THE COMPANY...............................................12
Section 3.1 Power and Authority of Members..........................................12
Section 3.2 Power and Authority of the General Manager..............................13
ARTICLE IV APPROVAL OF CERTAIN MATTERS.............................................14
Section 4.1 Approval of Certain Matters.............................................14
Section 4.2 Procedure in Event of Deadlock..........................................15
ARTICLE V EXCULPATION AND INDEMNIFICATION.........................................15
Section 5.1 Duties of the General Manager...........................................15
Section 5.2 Exculpation.............................................................16
Section 5.3 Reliance on Reports and Information by Members or General Manager.......16
Section 5.4 Indemnification by the Company..........................................16
Section 5.5 Proceedings Initiated by Indemnified Representatives....................18
Section 5.6 Advancing Expenses......................................................18
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Section 5.7 Payment of Indemnification..............................................18
Section 5.8 Contribution............................................................18
Section 5.9 Mandatory Indemnification of Members and General Manager................18
Section 5.10 Contract Rights; Amendment or Repeal....................................18
Section 5.11 Scope of Article........................................................18
Section 5.12 Reliance on Provisions..................................................19
Section 5.13 Indemnification Insurance...............................................19
ARTICLE VI CAPITAL ACCOUNTS........................................................19
Section 6.1 Capital Contributions...................................................19
Section 6.2 Liability for Contribution..............................................19
Section 6.3 Capital Accounts........................................................20
Section 6.4 No Interest on or Return of Capital.....................................20
Section 6.5 Membership Interest.....................................................20
Section 6.6 Allocations of Profits and Losses Generally.............................20
Section 6.7 Allocations Under Regulations...........................................20
Section 6.8 Other Allocations.......................................................21
ARTICLE VII DISTRIBUTIONS...........................................................21
Section 7.1 Distributions...........................................................21
Section 7.2 Limitations on Distributions............................................24
Section 7.3 Amounts of Tax Paid or Withheld.........................................25
Section 7.4 Distribution in Kind....................................................25
ARTICLE VIII TRANSFER OF MEMBERSHIP INTERESTS........................................25
Section 8.1 Restriction on Transfers................................................25
Section 8.2 Transfers of Membership Interests to Affiliates.........................25
Section 8.3 Buy-Sell Procedure......................................................25
Section 8.4 Right of First Refusal..................................................26
Section 8.5 Rights of Inclusion (Tag Along Rights)..................................27
Section 8.6 Drag-Along Obligation...................................................28
Section 8.7 Redemption of ESNI's Membership Interests...............................29
Section 8.8 Adjustments in Membership Interests.....................................31
Section 8.9 Consent of ESNI Stockholders............................................32
Section 8.10 Invalid Transfers Void..................................................32
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Section 8.11 Change in Ownership.....................................................32
Section 8.12 Effect of Transfer; Exclusions..........................................33
ARTICLE IX DISSOLUTION; TERMINATION; REORGANIZATION................................33
Section 9.1 Dissolution.............................................................33
Section 9.2 Events of Bankruptcy of Member..........................................34
Section 9.3 Withdrawal of Members...................................................34
Section 9.4 Winding Up..............................................................34
Section 9.5 Liquidation and Distribution of Assets..................................35
Section 9.6 Reorganization..........................................................35
ARTICLE X ADDITIONAL UNDERTAKINGS.................................................36
Section 10.1 Confidentiality.........................................................36
Section 10.2 Return of Confidential Information......................................37
Section 10.3 No License..............................................................37
Section 10.4 No Hire.................................................................37
Section 10.5 Non-Competition.........................................................37
Section 10.6 Business Opportunities..................................................37
Section 10.7 Allocation of Expenses..................................................39
ARTICLE XI BOOKS; REPORTS TO MEMBERS; TAX ELECTIONS................................40
Section 11.1 Books and Records.......................................................40
Section 11.2 Reporting...............................................................41
Section 11.3 Tax Matters Member......................................................41
Section 11.4 Tax Audits/Special Assessments..........................................42
Section 11.5 Tax Elections...........................................................42
Section 11.6 Taxes and Charges; Governmental Rules...................................42
ARTICLE XII MISCELLANEOUS...........................................................43
Section 12.1 Binding Effect..........................................................43
Section 12.2 Entire Agreement........................................................43
Section 12.3 Amendments..............................................................43
Section 12.4 Governing Law; Consent to Jurisdiction..................................43
Section 12.5 Notices to Members......................................................43
Section 12.6 Bank Accounts...........................................................44
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Section 12.7 Headings...............................................................44
Section 12.8 Waivers................................................................44
Section 12.9 No Third Party Beneficiaries...........................................44
Section 12.10 Interpretation.........................................................44
Section 12.11 Further Assurances.....................................................44
Section 12.12 Arbitration............................................................45
Section 12.13 Illegality and Severability............................................45
Section 12.14 Injunctive Relief......................................................45
Section 12.15 Authority/No Conflicts.................................................45
Section 12.16 Publicity..............................................................46
Section 12.17 Expenses...............................................................46
Section 12.18 Counterparts...........................................................46
SCHEDULE A Members; Membership Interests; Agreed Values of Company
Assets; Capital Accounts
SCHEDULE B ESNI Board Members
EXHIBIT A CRC Contribution Agreement
EXHIBIT B ESNI Contribution Agreement
EXHIBIT C Management Services Agreement
EXHIBIT D Membership Interest Certificate
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E-SYNC NETWORKS, LLC
OPERATING AGREEMENT
This OPERATING AGREEMENT is made and entered into as of February 13,
2002 (the "Effective Date") by and among E-SYNC NETWORKS, LLC, a Delaware
limited liability company (the "Company"), CRC, INC., a New York corporation
("CRC"), and E-SYNC NETWORKS, INC., a Delaware corporation ("ESNI"). Certain
other capitalized terms used in this Operating Agreement have the meanings given
to them in Section 1.1.
BACKGROUND
A. CRC is in the technology management services business.
B. ESNI is a provider of e-business infrastructure products and
services.
C. Prior to the consummation of the transactions contemplated under
the ESNI Contribution Agreement, the Company is a wholly-owned subsidiary of
CRC.
D. CRC and ESNI desire that the Company exploit commercially the CRC
Contributed Assets, the ESNI Contributed Assets and the synergies between the
respective businesses of CRC and ESNI.
E. This Operating Agreement is being entered into in connection with
(i) the ESNI Contribution Agreement, pursuant to which ESNI will contribute the
ESNI Contributed Assets to the Company in exchange for 51% of the Membership
Interests and (ii) the CRC Contribution Agreement pursuant to which CRC will
contribute the CRC Contributed Assets to the Company in exchange for 49% of the
Membership Interests.
F. ESNI has agreed to change its corporate name from "E-Sync
Networks, Inc." and to transfer all of its rights, title and interests to the
"E-Sync Networks" name to the Company.
ARTICLE I
GENERAL PROVISIONS
Section 1.1. (a) CERTAIN DEFINITIONS. As used in this Operating
Agreement, the following terms have the respective meanings assigned to them
below:
"Act" means the Delaware Limited Liability Company Act, Title 6,
Sections 18-101 et seq., and any successor statute, as the same may be amended
from time to time.
"Additional Agreements" means each of the following agreements of even
date herewith and the agreements and documents executed and delivered pursuant
thereto:
(a) ESNI Contribution Agreement;
(b) CRC Contribution Agreement;
(c) Management Services Agreement;
(d) First Installment Note;
(e) Extended Installment Note(s), if applicable (together with the
First Installment Note, the "Promissory Notes");
(f) Security Agreement;
(g) Warrant;
(h) Registration Rights Agreement; and
(i) the agreements and instruments evidencing the Credit Facility;
Except as may be expressly set forth in this Operating Agreement to the
contrary, any breach by a Member's Affiliate of an Additional Agreement or other
agreement between the Company and such Affiliate shall be attributed to the
applicable Member and shall be construed as a breach by such Member for all
purposes hereunder. Without limiting the foregoing, it is expressly acknowledged
that a breach by the General Manager of the Management Services Agreement shall
constitute a breach by CRC and, subject to Section 12.12 and provided that the
General Manager is an Affiliate of CRC, the other Members may enforce any claim
they have against the General Manager arising under the Management Services
Agreement against CRC.
"Adjusted Capital Account" means, for any Member, its Capital Account
balance maintained and adjusted as required by Treasury Regulations Section
1.704-1(b)(2)(iv).
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with, such
Person; and for purposes of the foregoing, "control" means (i) the ownership of
more than 50% of the voting securities or other voting interests of another
Person, or (ii) the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting shares, by contract or otherwise.
"Agreed Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Agreed Value of any asset contributed by a
Member to the Company shall be the gross Fair Market Value of such
asset;
(b) The Agreed Values of all Company assets shall be adjusted
to equal their respective gross Fair Market Values (taking IRC Section
7701(g) into account) as of the following times: (i) the acquisition of
an additional interest in the Company by any new or existing Member in
exchange for more than a de minimis capital contribution; (ii) the
distribution by the Company to a Member of more than a de minimis amount
of Company property as consideration for an interest in the Company;
(iii) the liquidation of the Company within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(g); (iv) the dissolution of the
Company in accordance with Article IX; and (v) at such other times as
the Tax Matters Member shall reasonably determine necessary or advisable
in order to comply with Treasury Regulations Sections 1.704-1(b) and
1.704-2; provided that the adjustments described in clauses (i) and (ii)
of this paragraph shall be made only if the Tax Matters Member
reasonably determines that such adjustment is necessary or appropriate
to reflect the relative economic interests of the Members in the
Company.
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(c) The Agreed Value of any Company asset distributed to any
Member shall be the gross Fair Market Value (taking IRC Section 7701(g)
into account) of such asset on the date of distribution; and
(d) The Agreed Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to IRC Section 732(d), IRC Section 734(b) or IRC Section
743(b), but only to the extent that such adjustments are taken into
account in determining capital accounts pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m); provided that Agreed Values shall not be
adjusted pursuant to this clause (d) to the extent that an adjustment
pursuant to clause (b) of this definition is made in connection with a
transaction that would otherwise result in an adjustment pursuant to
this clause (d).
The Agreed Values of the Company's assets immediately following the contribution
of the ESNI Contributed Assets pursuant to the ESNI Contribution Agreement and
the contribution of the CRC Contributed Assets pursuant to the CRC Contribution
Agreement are specified on Schedule A to this Operating Agreement. If the Agreed
Value of an asset has been determined or adjusted pursuant to this definition of
Agreed Value, such Agreed Value shall thereafter be adjusted by the Depreciation
with respect to such asset taken into account in computing Profits and Losses.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means, with respect to a Member, such Member's capital
account established and maintained in accordance with the provisions of Section
6.3.
"Capital Contribution" means the amount in cash and the value of
property or services contributed or undertaken to be contributed by each Member
to the capital of the Company, whenever made. A loan by a Member of the Company
shall not be considered a Capital Contribution.
"Company" means E-Sync Networks, LLC, a Delaware limited liability
company.
"Contract" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract or commitment, whether
written or oral.
"CRC Contributed Assets" has the same meaning as that used in the CRC
Contribution Agreement.
"CRC Contribution Agreement" means that certain Contribution Agreement
dated the date hereof among CRC and the Company in the form of Exhibit A,
pursuant to which CRC shall contribute to the Company the CRC Contributed
Assets.
"Credit Facility" has the same meaning as that used in the ESNI
Contribution Agreement.
"Depreciation" means, for any relevant period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other relevant period, except that if the
Agreed Value of an asset differs from its adjusted basis
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for federal income tax purposes at the beginning of such year, Depreciation
shall be an amount which bears the same ratio to such beginning Agreed Value as
the federal income tax depreciation, amortization or other cost recovery
deduction for such year bears to such beginning adjusted tax basis (except as
otherwise required under Treasury Regulations Section 1.704-3(d)); provided that
if the federal income tax depreciation, amortization or other cost recovery
deduction for such year is zero, Depreciation shall be determined with reference
to such beginning Agreed Value using any reasonable method selected by the Tax
Matters Member.
"Entity" means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, business trust, joint stock
company, joint venture or other organization, entity or business.
"ESNI Contributed Assets" has the same meaning as that used in the ESNI
Contribution Agreement.
"ESNI Contribution Agreement" means that certain Contribution Agreement
dated as of August 6, 2001 by and among the Company, ESNI and CRC, attached
hereto as Exhibit B, pursuant to which ESNI shall contribute to the Company the
ESNI Contributed Assets.
"Extended Installment Note" has the same meaning as that used in the
ESNI Contribution Agreement.
"Fair Market Value" means, with respect to any asset, as of the date of
determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such asset in an arms-length negotiated transaction
with an unaffiliated third party without time constraints, as conclusively
determined by the General Manager in good faith and subject to its duties set
forth in Section 5.1, except with respect to matters governed by Section 8.3,
which shall be determined in accordance with the provisions set forth therein.
"First Installment Note" has the same meaning as that used in the ESNI
Contribution Agreement.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"General Manager" means CRC Management Services, Inc., a New York
corporation and an Affiliate of CRC.
"IRC" means the Internal Revenue Code of 1986, as amended.
"Management Services Agreement" means that certain Management Services
Agreement dated the date hereof between CRC and the Company, in the form of
Exhibit C.
"Material Adverse Effect" shall mean, with respect to any party hereto,
any action, event or occurrence which has or could have a material adverse
effect on the business, assets, operations, prospects, financial condition or
results of operations of such party or its respective subsidiaries taken as a
whole.
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"Members" means CRC, ESNI and such other Persons who are admitted to the
Company in the future in accordance with the terms of this Operating Agreement
and shall have agreed to be bound hereby; and "Member" means any one of the
Members.
"Membership Interest" means, with respect to each Member, the entire
ownership interests and rights of such Member (expressed as a percentage) in the
Company. The sum of the Membership Interests for all Members shall equal one
hundred percent (100%).
"Operating Agreement" means this Operating Agreement, as it may be
amended or restated from time to time.
"Person" means any natural person or Entity.
"Profits" and "Losses" mean, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with IRC Section 703(a). For the purpose of this definition, all
items of income, gain, loss or deduction required to be stated separately
pursuant to IRC Section 703(a)(1) shall be included in taxable income or loss
with the following adjustments:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition shall be added to such taxable income
or loss;
(b) Any expenditures of the Company described in IRC Section
705(a)(2)(B) or treated as IRC Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be subtracted from such taxable income or loss;
(c) If the Agreed Value of any Company asset is adjusted
pursuant to clause (b) or clause (c) of the definition of Agreed Value
above, the amount of such adjustment shall be taken into account as gain
or loss from the disposition of such asset for purposes of computing
Profits or Losses;
(d) Gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Agreed Value
of the property disposed of, notwithstanding that the adjusted tax basis
of such property differs from its Agreed Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year or other relevant period;
(f) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to IRC Section 734(b) is required, pursuant
to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken
into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's interest in the
Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such
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basis) from the disposition of such asset and shall be taken into
account for purposes of computing Profits or Losses; and
(g) Notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to Section 6.8 shall
not be taken into account in computing Profits or Losses.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated the date hereof between CRC and ESNI.
"Security Act" means the Securities Act of 1933, as amended from time to
time, and including the rules and regulations of the Securities and Exchange
Commission thereunder.
"Security Agreement" means that certain Amended and Restated Pledge and
Security Agreement dated August 6, 2001 by and between CRC and ESNI.
"Subsidiary" means any Entity in which a Person beneficially owns or
controls 50% or more of the outstanding voting power of such Entity.
"Tax Rate" means 40%.
"Treasury Regulations" include proposed, temporary and final regulations
promulgated under the IRC in effect as of the date of this Operating Agreement
and the corresponding sections of any regulations subsequently issued that amend
or supersede such regulations.
"Warrant" means that certain warrant dated the date hereof issued by
ESNI to CRC.
(b) The following terms, when used in this Operating Agreement, shall
have the meanings defined for such terms in the Section set forth below:
TERM SECTION
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"Appraisal Notice" 8.3(a)
"Appraiser" 8.3(a)
"Approved Banker" 8.7(b)
"Approved Sale" 8.6(a)
"Benefactor" 6.2(a)
"CRC" introductory paragraph
"Certificate" 1.2
"Change in Control" 8.8(a)
"Change in Ownership" 8.11(a)
"Confidential Information" 10.1(a)
"Control Entity" 8.11(a)
"Disclosing Party" 10.1(b)
"Distribution Period" 7.1(c)
"Effective Date" introductory paragraph
"ESNI" introductory paragraph
"Exercising Member" 8.3(a)
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"Expense Allocation Report" 10.6(e)(i)
"First Offer Exercise Period" 8.4(b)
"Fiscal Year" 1.7
"Interest Purchase Option" 8.8(a)
"Liquidating Trustee" 9.4(a)
"Mandatory Distribution" 7.1(c)
"Mandatory Redemption" 8.7(a)
"Mandatory Redemption Date" 8.7(c)
"Mandatory Redemption Price" 8.7(a)
"Member Notice" 8.4(b)
"Member Option" 8.4(b)
"Notice of Election" 8.3(b)
"Offer Notice" 8.4(a)
"Offered Membership Interest" 8.4(a)
"Offering Member" 8.4(a)
"Option Exercise Notice" 8.8(a)
"Outstanding Balance" 8.7(d)
"Preferred Distribution" 7.1(b)
"Receiving Party" 10.1(b)
"Recipient" 8.3(a)
"Redemption Request" 8.7(a)
"Relevant Event" 8.8(a)
"Remaining Members" 8.4(a)
"Reorganized Company" 9.6
"Rollup" 9.6
"Sale Notice" 8.3(a)
"Section 704(c) Assets" 6.8(a)
"Tag-Along Interests" 8.5(b)
"Tag-Along Notice" 8.5(b)
"Tag-Along Transfer" 8.5(b)
"Tax Distributions" 7.1(a)
"Tax Matters Member" 11.3(a)
"Third Party" 8.4(a)
"Third Party Offer" 8.5(a)
"Unaffiliated Entity" 8.11(a)
"Wholly-Owned Subsidiary Transferee" 8.2
(c) Unless the context of this Operating Agreement otherwise
requires, (i) words of any gender include each other gender; (ii) words using
the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Operating Agreement; and (iv) the terms
"Article", "Section" or "subsection" refer to the specified Article, Section or
subsection of this Operating Agreement.
Section 1.2 THE COMPANY; FORMATION. The Company is a limited liability
company governed by the Members and managed by the General Manager. The Company
was formed on August 1, 2001 by the execution and filing of a Certificate of
Formation (as the same may be
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amended from time to time, the "Certificate") with the Secretary of State of the
State of Delaware. From the date hereof, the Membership Interests of the Members
in the Company, and the rights and obligations of the Members with respect
thereto and the Company, are subject to all of the provisions of this Operating
Agreement and to the provisions of the Act. Where any rights or obligations of a
Member are different by reason of any provision of this Operating Agreement than
they would be without such provision, this Operating Agreement shall control to
the extent permitted by the Act. Promptly following the execution hereof, and
from time to time thereafter, the Members shall execute and file or cause to be
executed and filed (i) all certificates and statements contemplated by the Act
that are approved by the General Manager and are not inconsistent with the
provisions of this Operating Agreement and (ii) all other necessary certificates
and documents, and shall make all other such filings and recordings, and shall
do all other acts as may be reasonably necessary or appropriate from time to
time to give effect to this Operating Agreement.
Section 1.3 COMPANY NAME; PLACE OF BUSINESS; REGISTERED OFFICE AND
AGENT.
(a) The Company shall do business under the name "E-SYNC NETWORKS,
LLC" or such other name as the General Manager may determine from time to time.
ESNI represents and warrants that it has taken all necessary action to change,
and has changed, it name from E-Sync Networks, Inc. to a name reasonably
satisfactory to all the Members. The name "E-Sync Networks" shall be the
exclusive property of the Company, and no Member shall have any right to use,
and each Member agrees not to use, such name other than on behalf of the
Company, except as may be permitted from time to time by the General Manager.
The General Manager shall promptly notify the Members of any change of name of
the Company. The General Manager shall from time to time execute and file or
cause to be executed and filed all necessary assumed or fictitious business name
statements as may be required by law for the operation of the Company in all
jurisdictions where the Company does business. Notwithstanding the foregoing,
ESNI may continue to use the name "E-Sync Networks" solely to the extent
necessary to reference its historical use of such name; provided, however, that
in no event shall ESNI continue to use such name for commercial purposes.
(b) The Company's principal place of business will be at 1290 Avenue
of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, or such location as the
General Manager may from time to time designate. The Company may also have
offices at such other places within or outside of the State of Delaware as the
General Manager may from time to time determine. Prior to conducting business in
any jurisdiction other than the State of Delaware, the General Manager shall use
reasonable efforts to cause the Company to comply with all requirements
necessary to qualify the Company as a foreign limited liability company in such
jurisdiction. At the request of the General Manager, each Member shall execute,
acknowledge, swear to and deliver all certificates and other instruments
conforming with this Operating Agreement that are necessary or appropriate from
time to time to qualify, continue or terminate the Company as a foreign limited
liability company in each such jurisdiction in which the Company may conduct
business from time to time.
(c) The registered agent for service of process on the Company in the
State of Delaware shall be the initial registered agent named in the Certificate
and the registered office of the Company required by the Act to be maintained in
the State of Delaware shall be the offices
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of the registered agent. The registered agent and the registered office of the
Company may be changed from time to time by action of the General Manager by
filing notice of such change with the Secretary of State of the State of
Delaware. The General Manager will promptly notify the Members of any such
change.
Section 1.4 TERM. The term of the Company shall commence on the date on
which the Certificate was filed with the Secretary of State of the State of
Delaware and shall continue in perpetuity until dissolved pursuant to the
provisions of this Operating Agreement or applicable law.
Section 1.5 BUSINESS OF THE COMPANY; POWERS.
(a) The purpose of the Company is to exploit commercially the assets
to be contributed to it, to engage in any business that is necessary,
appropriate or incidental to the foregoing, and to engage in any additional
activity for which limited liability companies may be formed under the Act and
which is approved in accordance with the provisions of Section 4.1. The Company
shall possess and may exercise all the powers and privileges now or hereafter
granted by the Act, by any other law or by this Operating Agreement, together
with any powers incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, protection, benefit, promotion or
attainment of the business, purposes or activities of the Company.
(b) Subject to the provisions of this Operating Agreement, the
Company may, with the approval of the General Manager, enter into and perform
any and all Contracts without any further act, vote or approval of the Members,
and the General Manager may authorize any Person to enter into and perform any
Contract on behalf of the Company.
Section 1.6 TAXED AS PARTNERSHIP. The Members intend that the Company
shall be treated as a partnership solely for federal, state and local tax
purposes. Each Member and the Company shall file all tax returns and shall
otherwise take all tax and financial reporting positions in a manner consistent
with such treatment.
Section 1.7 FISCAL YEAR. The "Fiscal Year" of the Company shall be the
period commencing on January 1 in any year and ending on December 31 in such
year, except that the first Fiscal Year of the Company shall commence on the
date of formation of the Company and end on the first December 31 to occur
following such formation.
Section 1.8 MEMBERSHIP INTERESTS CERTIFICATED; NATURE OF MEMBERS'
INTERESTS. The Membership Interests of the Members in the Company shall be
certificated. The form of the Membership Interest certificates is attached
hereto as Exhibit D. The interests of the Members in the Company will be
personal property for all purposes. All property owned by the Company, whether
real or personal, tangible or intangible, will be owned by the Company as an
entity, and no Member, individually, will have any ownership of such property.
Section 1.9 BUSINESS TRANSACTIONS OF MEMBERS WITH THE COMPANY. Subject
to Section 4.1(c), a Member may lend money to, borrow money from, act as a
surety, guarantor or endorser for, guarantee or assume one or more obligations
of, provide collateral for, and transact
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any and all other business with the Company and, subject to other applicable
law, has the same rights and obligations with respect to any such matter as a
Person who is not a Member.
Section 1.10 CAPACITY OF THE MEMBERS. No Member shall have any authority
to act for, or to assume any obligation or responsibility on behalf of, any
other Member or the Company, except as expressly provided in this Operating
Agreement or as authorized by the General Manager.
ARTICLE II
MEMBERS
Section 2.1 MEMBERS AS OF EFFECTIVE DATE. As of the Effective Date of
this Operating Agreement, the Members are set forth on Schedule A and each such
Member shall have the Membership Interests set forth opposite its name on
Schedule A.
Section 2.2 ADMISSION OF NEW MEMBERS. From and after the Effective Date,
a Person acquiring an interest in the Company is admitted as a Member upon the
satisfaction of all requirements set forth in this Operating Agreement.
Section 2.3 MANNER OF ACTING. Except as otherwise required by the Act or
this Operating Agreement, including, without limitation, Sections 3.2 and 4.1,
whenever any Company action is to be taken by vote of the Members of the
Company, it shall be authorized upon receiving the affirmative unanimous vote of
all Members entitled to vote. Each Member of the Company shall be entitled to a
percentage of the total votes equal to that Member's then current Membership
Interest.
Section 2.4 MEETINGS OF THE MEMBERS.
(a) Timing; Notice. Meetings of the Members, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by any Member by
giving written notice thereof to each Member of record entitled to vote at the
meeting (with a copy to counsel of such Member) at least ten (10) but not more
than sixty (60) Business Days prior to the day named for the meeting. Each
notice of meeting shall specify the place, day and hour of the meeting;
provided, however, that in no event shall any meeting of the Members be held on
a Friday or any religious holiday. If no place is designated, the place of
meeting shall be the principal office of the Company. The business to be
transacted at, and the purpose of, a meeting need not be specified in the notice
of the meeting. Notice shall be given in accordance with Section 12.5. Any
required notice of a meeting to any Member may be waived by such Member in
writing at any time, whether before or after the holding of such meeting.
Attendance by a Member at a meeting shall constitute a waiver of any required
notice of such meeting by such Member, except when such Member attends such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business on the ground that the meeting is not
properly called or convened.
(b) Quorum. A meeting of Members of the Company duly called shall not
be organized for the transaction of business unless a quorum is present. The
presence of each Member of record, represented in person or by proxy, shall
constitute a quorum at any meeting of Members; provided that if notice of a
meeting is provided to the Members, and such notice
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describes the business to be considered, the actions to be taken and the matters
to be voted on at the meeting in reasonable detail, and insufficient Members
attend the meeting to constitute a quorum, the meeting may be adjourned by those
Members attending such meeting for a period not to exceed twenty (20) days. Such
meeting may be reconvened by providing notice of the reconvened meeting to the
Members no less than ten (10) days prior to the date of the meeting specifying
that the business to be considered, the actions to be taken and the matters to
be voted upon are those set forth in the notice of the original adjourned
meeting. If, at the reconvened meeting, a quorum of Members is not present, a
majority of the Members present and voting will constitute a quorum for purposes
of the reconvened meeting; provided that such Members may only consider the
business, take the actions or vote upon the matters set forth in the notice of
the original meeting. At an adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal during the meeting of Members whose absence would cause less than a
quorum.
Notwithstanding the foregoing or any other provision in this
Operating Agreement, no Member shall have any power or authority to do or
perform any act with respect to any of the matters set forth in Section 4.1
unless such matter has been approved in accordance with the provisions of
Section 4.1.
(c) Attendance by Telephone, Etc. Members may, unless prohibited by
applicable law, rule or regulation, participate in a meeting of the Members by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting, except where
a Member participates in the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business on the ground
that the meeting is not properly called or convened.
(d) Action by Written Consent. Unless prohibited by applicable law,
rules and regulations, any action required or permitted to be taken at a meeting
of the Members may be taken without a meeting if a written consent setting forth
the action so taken is signed by the number of Members that would be necessary
to authorize the action at a meeting of the Members duly called and held, and is
filed with the minutes of the Company; provided that prior to any such written
consent becoming effective, such written consent has been provided to all
Members entitled to vote, and the Members shall have five (5) days to review
such consent prior to such written consent becoming effective (unless otherwise
agreed to by all Members). Any consent shall have the same force and effect as a
vote of the Members at a meeting duly called and held at which a quorum was
present. Prompt notice of the taking of Company action without a meeting by less
than unanimous written consent shall be given to those Members who have not
consented in writing.
Section 2.5 RECORD DATE. For the purpose of determining Members entitled
to notice of, or to vote at, any meeting of Members or any adjournment of the
meeting, or Members entitled to receive payment of any distribution, or to make
a determination of Members for any other purpose, the date on which notice of
the meeting is sent or the date on which the resolution declaring the
distribution or relating to such other purpose is adopted, as the case may be,
shall
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be the record date for such determination. Only Members of record on the date
fixed shall be so entitled, notwithstanding any permitted transfer of a Member's
Membership Interest after any record date fixed as provided in this Section.
When a determination of Members entitled to vote at any meeting of Members has
been made as provided in this Section 2.5, the determination shall apply to any
adjournment of the meeting.
Section 2.6 RELATIONSHIP OF THE MEMBERS.
(a) The relationship of the Members shall be limited solely to the
purpose and scope of the Company as expressed in this Operating Agreement and
the Additional Agreements. This Operating Agreement shall not constitute the
appointment of any party to this Operating Agreement as the legal representative
or agent of any other party to this Operating Agreement. No party to this
Operating Agreement, by reason of such status, shall have any right or authority
to assume, create or incur any liability or any obligation of any kind, express
or implied, against or in the name of or on behalf of any other party to this
Operating Agreement. Except as may be specifically provided in this Operating
Agreement or any Additional Agreement, neither the Company nor any party to this
Operating Agreement shall assume or be responsible for any liability or
obligation of any nature of, or any liability or obligation that arises from any
act or omission to act of, any other party to this Operating Agreement however
or whenever arising.
(b) Subject to Section 10.6, nothing contained in this Operating
Agreement (other than references to the binding nature of the Additional
Agreements) shall be deemed to restrict or limit in any way the carrying on,
directly or indirectly, of separate businesses or activities by any Member or
its Affiliates, now or in the future, independently or with others, even if such
businesses or activities are competitive with the Company (it being understood
that the Additional Agreements may so restrict or limit such businesses or
activities), and neither the Company nor the other Members shall, by virtue of
this Operating Agreement, have any interest or rights in or to such other
businesses or activities or any income, profits, liabilities or obligations with
respect thereto or derived therefrom. Subject to Section 10.6, no Member or any
of its Affiliates or any of their respective officers, directors, employees or
former employees shall have any obligation, or be liable, to the Company or any
other Member pursuant to this Operating Agreement, any Additional Agreement or
otherwise (i) for, or arising out of, the conduct described in this Section
2.6(b), (ii) solely by reason of such conduct, for breach of any fiduciary or
similar duty to the Company or any Member or (iii) for exercising or failing to
exercise its rights as a Member; except in each case for a breach of Sections
5.1, 10.1 or any other express provisions of this Operating Agreement or any
Additional Agreement.
ARTICLE III
MANAGEMENT OF THE COMPANY
Section 3.1 POWER AND AUTHORITY OF MEMBERS. Except for situations in
which the approval of the Members is expressly required by this Operating
Agreement or by non-waivable provisions of the Act, the Members shall govern the
Company only through the General Manager, to whom all discretion to manage the
Company is delegated, and the Members, in their capacity as such, shall have no
authority or right to act on behalf of or bind the Company in connection with
any matter. No Member shall take any action in the name of or on behalf of the
Company, including, without limitation, assuming any obligation or
responsibility on behalf of
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the Company, unless such action, and the taking thereof by such Member, shall
have been expressly authorized by the General Manager or shall be expressly and
specifically authorized by this Operating Agreement or by non-waivable
provisions of the Act.
Section 3.2 POWER AND AUTHORITY OF THE GENERAL MANAGER.
(a) Scope of Power. The business and affairs of the Company shall be
managed by or under the direction of the General Manager, except as may
otherwise be provided in this Operating Agreement or by non-waivable provisions
of the Act. The General Manager shall have the power on behalf and in the name
of the Company to carry out any and all objects and purposes of the Company
contemplated by this Operating Agreement and to perform all acts which it may
deem necessary, advisable or appropriate in connection therewith. The Members
agree that all determinations, decisions and actions made or taken by the
General Manager (or its designee(s)) shall be conclusive and absolutely binding
upon the Company, the Members (but only in their capacity as such) and their
respective successors, assigns and personal representatives.
(b) Authority. Except as otherwise expressly provided herein or as
otherwise determined by the General Manager:
(i) no Member other than the General Manager shall take part
in the day-to-day management or the operations or control of the
business and affairs of the Company; and
(ii) no Member or Person other than the General Manager shall
be an agent of the Company or have any right, power or authority to
transact any business in the name of the Company or to act for or on
behalf of or to bind the Company.
(c) Consultation With Members. The General Manager shall make a
reasonable and good faith effort to initiate discussion with, and obtain
consultation from, each of the Members regarding any matter which could have a
Material Adverse Effect or which could otherwise materially modify the
operations of the Company from its normal and ordinary course of business. Such
discussion and consultation shall not, in any way, restrict the ability of the
General Manager to perform the duties of General Manager within the scope of the
General Manager's power and authority delineated under this Article III. The
General Manager shall act in a commercially reasonable manner in exercising its
powers, taking actions in the Company's behalf and performing its activities and
responsibilities pursuant to this Operating Agreement and the Management
Services Agreement.
(d) Delegation of Authority. In carrying out this Section 3.2, the
General Manager shall have the power and authority to delegate authority to
qualified Persons. Any such delegation may be rescinded at any time by the
General Manager.
(e) Management Services Agreement. The General Manager is to be
compensated for its management of the Company in accordance with the terms of
the Management Services Agreement.
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ARTICLE IV
APPROVAL OF CERTAIN MATTERS
Section 4.1 APPROVAL OF CERTAIN MATTERS. Notwithstanding any provision
of this Operating Agreement or the Act to the contrary, and to the extent not
agreed and set forth in an Additional Agreement, where the General Manager or a
Member proposes for the Company to undertake any of the following matters, the
General Manager shall have no power or authority to do or perform any act with
respect to any of the following matters without first obtaining the unanimous
approval of all the Members at a meeting or by written consent given in
accordance with the provisions of this Operating Agreement. The relevant matters
are as follows:
(a) Bankruptcy. The voluntary dissolution or liquidation of the
Company, the making by the Company of a voluntary assignment for the benefit of
creditors, the filing of a petition in bankruptcy by the Company, the Company
petitioning or applying to any tribunal for any receiver or trustee, the Company
commencing any proceeding relating to itself under any bankruptcy,
reorganization, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction, the Company indicating its consent to, approval of or
acquiescence in any such proceeding and failing to use its best efforts to have
discharged the appointment of any receiver of or trustee for the Company or any
substantial part of their respective properties.
(b) Preservation of Existence. Any action contrary to the
preservation and maintenance of the Company's existence, rights, franchises and
privileges as a limited liability company under the laws of the State of
Delaware.
(c) Dealings with Affiliates. Except pursuant to this Operating
Agreement or any Additional Agreement, the Company's entrance into, amendment
of, waiver of rights under, termination of, or permitting or causing the
termination of, any material business transaction, including, without
limitation, any loans or extensions of credit or royalty agreements, with any
Member or any Affiliate of any Member, except in the ordinary course of business
and on terms not less favorable to the Company than it would reasonably expect
to obtain in a similar business transaction between unrelated parties. The
foregoing shall not be deemed to limit in any manner the right of any Member or
any of its Affiliates from performing or exercising its rights under this
Operating Agreement or any Additional Agreement; it being understood, however,
that the termination of the General Manager under circumstances that would
entitle the General Manager to receive a termination fee pursuant to the
Management Services Agreement shall require the unanimous approval of all
Members.
(d) Issuance of Membership Interests. The authorization or issuance
of any Membership Interests in, or the admission of any Members to, the Company
(other than with respect to CRC, ESNI, or their respective permitted transferees
in accordance with Section 8.2).
(e) Repurchase of Membership Interests. The redemption or repurchase
by the Company of any Membership Interests in the Company, other than pursuant
to the provisions of this Operating Agreement.
(f) Modification of Operating Agreement. Any amendment, modification
or waiver of any provision (other than ministerial, non-substantive amendments,
modifications or waivers)
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of this Operating Agreement or any Additional Agreement or other agreement
between the Company and any Member or its Affiliates.
(g) Additional Capital Contributions. Any capital contributions to
the Company by any Member other than such Member's initial capital contribution,
whether required or permitted.
(h) Removal of Liquidating Trustee. The removal of the Liquidating
Trustee as described in Section 9.4.
(i) Appointment of New General Manager. The appointment of a new
General Manager that is not an Affiliate of CRC.
Section 4.2 PROCEDURE IN EVENT OF DEADLOCK. In the event of deadlock of
the Members in connection with the matters set forth in Section 4.1 above, or
any other matters under this Operating Agreement, an Additional Agreement or an
applicable provision of the Act requiring the unanimous approval of the Members,
the Members shall promptly meet and negotiate in good faith to determine a
mutually acceptable resolution, as evidenced by a unanimous vote of the Members
approving any such resolution. Each Member shall be represented in such
negotiations by one or more senior executive officers with authority to bind
such Member, subject only to the approval of such Member's Board of Directors,
General Manager or similar governing body. In the event that no resolution is
agreed within thirty (30) days of the occurrence of the deadlock,
(a) the disagreement shall first be submitted for mediation to a
Person mutually agreeable to all the Members, the expenses for such mediation,
excluding legal expenses which are to be borne by the Member incurring such
expenses, to be borne equally by the Members; and
(b) if the disagreement is not settled by mediation, it shall be
submitted in New York, New York to arbitration pursuant to Section 12.12
hereunder.
Without in any way limiting the foregoing, the procedures set forth in
this Section 4.2 as to meditation and arbitration would be followed in the event
that a Member other than CRC wishes the Company to terminate the Management
Services Agreement, or seek legal recourse against CRC under the CRC
Contribution Agreement or this Operating Agreement, and any other Member or
Members do not consent to such action (i.e., the matter would go to mediation
and arbitration as aforesaid, and if the Member initiating the complaint won,
the Member would then be authorized to act on behalf of the Company in
implementing such termination and/or claim).
ARTICLE V
EXCULPATION AND INDEMNIFICATION
Section 5.1 DUTIES OF THE GENERAL MANAGER. The duties of the General
Manager shall be as set forth in the Management Services Agreement which is
attached hereto as Exhibit C. The General Manager shall owe such duty of loyalty
and due care to the Company as is required of a director of a Delaware
corporation under applicable Delaware law, shall discharge
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its duties in good faith with the care an ordinary prudent person in like
position would exercise under similar circumstances and in a manner it
reasonably believes to be in the best interests of the Company, and shall enjoy
each and every protection afforded to the directors of a Delaware corporation
under applicable Delaware law, including, without limitation, those afforded by
the business judgment rule and the presumptions afforded thereby and the
limitation on personal liability to the maximum extent permitted by Section 102
of the Delaware General Corporation Law as if the provisions thereof were set
forth in this Operating Agreement (and for all such purposes, the General
Manager shall be treated as not "interested" for Delaware corporation law
purposes).
Section 5.2 EXCULPATION. The Members and General Manager of the Company
shall not be liable to the Company or to any Member for any losses, claims,
damages or liabilities arising from, related to, or in connection with, this
Operating Agreement or the business or affairs of the Company, except for any
losses, claims, damages or liabilities as are determined by final judgment of a
court of competent jurisdiction to have resulted from such Members' or General
Manager's gross negligence, reckless conduct, intentional misconduct, knowing
violation of law, or breach of the provisions of Section 5.1. The provisions of
this Operating Agreement, to the extent that they restrict the duties and
liabilities of any Member or the General Manager otherwise existing at law or in
equity, are agreed by the Members to replace such other duties and liabilities
of the Members or General Manager.
Section 5.3 RELIANCE ON REPORTS AND INFORMATION BY MEMBERS OR GENERAL
MANAGER. A Member or the General Manager of the Company shall be fully protected
in relying in good faith upon the records of the Company and upon such
information, opinions, reports or statements presented to the Company by a
Member, the General Manager, or officers, employees or committees of the
Company, or by any other Person, as to matters the Member or the General Manager
reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits or losses of the Company or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
Section 5.4 INDEMNIFICATION BY THE COMPANY.
(a) The Company shall indemnify an indemnified representative
(defined herein) against any liability (defined herein) incurred in connection
with any proceeding (defined herein) in which the indemnified representative may
be involved as a party or otherwise, as and when incurred, by reason of the fact
that such Person is or was serving in an indemnified capacity (as defined
herein), including, without limitation, liabilities resulting from any actual or
alleged breach or neglect of duty, error, misstatement or misleading statement,
negligence, gross negligence or act giving rise to liability, except:
(i) where such indemnification is expressly prohibited by
applicable law;
(ii) where the conduct of the indemnified representative has
been finally determined:
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(A) to constitute gross negligence, reckless conduct,
intentional misconduct or a knowing violation of law, sufficient
in the circumstances to bar indemnification against liabilities
arising from the conduct;
(B) to constitute a breach of Section 5.1; or
(C) to be based upon or attributable to the receipt by
the indemnified representative from the Company of a personal
benefit to which the indemnified representative is not legally
entitled; or
(iii) to the extent such indemnification has been finally
determined in a final adjudication to be otherwise unlawful; or
(iv) where such indemnification relates to any proceeding
solely between or among the Members and solely in their capacity as
Members.
(b) If an indemnified representative is entitled to indemnification
in respect of a portion, but not all, of any liabilities to which such Person
may be subject, the Company shall indemnify such indemnified representative to
the maximum extent for such portion of the liabilities.
(c) The termination of a proceeding by judgment, order, settlement or
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the indemnified representative is not entitled
to indemnification.
(d) Definitions. For purposes of this Article V:
(i) "indemnified capacity" means any and all past, present and
future service by an indemnified representative in one or more
capacities as a Member, General Manager, officer or authorized agent of
the Company;
(ii) "indemnified representative" means any and all Members,
the General Manager, all employees, agents, representatives and
authorized agents of the Company, all employees, agents, representatives
and authorized agents of the General Manager and any other Person
designated as an indemnified representative by the mutual consent of CRC
and ESNI, given in accordance with the provisions of this Operating
Agreement;
(iii) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with
respect to an employee benefit plan, or cost or expense of any nature
(including, without limitation, attorneys' fees and disbursements); and
(iv) "proceeding" means any threatened, pending or completed
action, suit, appeal or other proceeding of any nature, whether civil,
criminal, administrative or investigative, whether formal or informal,
and whether brought by or in the right of the Company, a class of its
Members or security holders or otherwise.
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Section 5.5 PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article V, the Company shall not
indemnify under this Article V an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counterclaims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the Person seeking indemnification unless such initiation of or
participation in the proceeding is authorized, either before or after its
commencement, by the consent of the General Manager. This Section does not apply
to reimbursement of expenses incurred in successfully prosecuting or defending
the rights of an indemnified representative granted by or pursuant to this
Article V.
Section 5.6 ADVANCING EXPENSES. The Company shall pay the expenses
(including attorneys' fees and disbursements) incurred in good faith by an
indemnified representative in advance of the final disposition of a proceeding
described in Section 5.4 or the initiation of or participation in which is
authorized pursuant to Section 5.5 upon receipt of an undertaking by or on
behalf of the indemnified representative to repay the amount if it is ultimately
determined that such Person is not entitled to be indemnified by the Company
pursuant to this Article V. The financial ability of an indemnified
representative to repay an advance shall not be a prerequisite to the making of
such advance.
Section 5.7 PAYMENT OF INDEMNIFICATION. An indemnified representative
shall be entitled to payment with respect to indemnification within twenty (20)
days after a written request for such payment has been delivered to the General
Manager.
Section 5.8 CONTRIBUTION. If the indemnification provided for in this
Article V or otherwise is unavailable for any reason in respect of any liability
or portion thereof, the Company shall contribute to the liabilities to which the
indemnified representative may be subject in such proportion as is appropriate
to reflect the intent of this Article V.
Section 5.9 MANDATORY INDEMNIFICATION OF MEMBERS AND GENERAL MANAGER. To
the extent that an indemnified representative of the Company has been successful
on the merits or otherwise in defense of any proceeding or in defense of any
claim, issue or matter therein, such Person shall be indemnified against
expenses (including attorneys' fees and disbursements) actually and reasonably
incurred by such Person in connection therewith. This Section 5.9 shall not be
interpreted in any way that limits the applicability or scope of Section 5.6.
Section 5.10 CONTRACT RIGHTS; AMENDMENT OR REPEAL. All rights under this
Article V shall be deemed a contract between the Company and the indemnified
representative pursuant to which the Company and each indemnified representative
intend to be legally bound. Any repeal, amendment or modification hereof shall
be prospective only and shall not affect any rights or obligations then
existing.
Section 5.11 SCOPE OF ARTICLE. The rights granted by this Article V
shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement or vote of disinterested Members, both as to action in an
indemnified capacity and as to action in any other capacity. The
indemnification, contribution and advancement of expenses provided by or granted
pursuant to this Article V shall continue as to a Person who has ceased to be an
indemnified representative
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in respect of matters arising prior to such time, and shall inure to the benefit
of the heirs, executors, administrators, personal representatives, successors
and permitted assigns of such a Person.
Section 5.12 RELIANCE ON PROVISIONS. Each Person who shall act as an
indemnified representative of the Company shall be deemed to be doing so in
reliance upon the rights of indemnification, contribution and advancement of
expenses provided by this Article V.
Section 5.13 INDEMNIFICATION INSURANCE. To the extent available on
commercially reasonable terms, the Company shall obtain indemnification
insurance of a character and nature that provides coverage reasonably
satisfactory to CRC. Additionally, upon request of ESNI, the Company shall
obtain supplemental insurance of a character and nature that provides coverage
reasonably satisfactory to ESNI. All expenses incurred by the Company upon
fulfilling ESNI's request shall be borne by ESNI and shall be paid by ESNI
within ten (10) days of receiving an invoice thereof.
ARTICLE VI
CAPITAL ACCOUNTS
Section 6.1 CAPITAL CONTRIBUTIONS.
(a) The CRC Contributed Assets are deemed to be the initial Capital
Contribution of CRC and the ESNI Contributed Assets is deemed to be the initial
Capital Contribution of ESNI.
(b) The Capital Contributions shall be deemed made upon the
consummation of the transactions contemplated by the ESNI Contribution Agreement
and the CRC Contribution Agreement.
(c) No Member shall be obligated or permitted to make any additional
capital contributions to the Company, except as may be approved in accordance
with the provisions of Section 4.1.
Section 6.2 LIABILITY FOR CONTRIBUTION.
(a) A Member of the Company is obligated to the Company to perform
any promise to contribute cash or property or to perform services made by, on
behalf of, or for the benefit of such Member, even if the Member (or the Person
promising on behalf of or for the benefit of the Member (a "Benefactor")) is
unable to perform because of death, disability or any other reason. If a Member
or a Benefactor does not make the required contribution of property or services,
the Member is obligated at the option of the Company to contribute cash equal to
that portion of the Agreed Value (as stated in the records of the Company) of
the contribution that has not been made. The foregoing option shall be in
addition to, and not in lieu of, any other rights, including the right to
specific performance, that the Company may have against such Member or
Benefactor under applicable law.
(b) The obligation of a Member or a Benefactor to make a contribution
or return money or other property paid or distributed in violation of the Act
may be compromised only by consent of all the Members or Benefactors.
Notwithstanding the compromise, a creditor of the
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Company who extends credit, after entering into this Operating Agreement or an
amendment hereof which, in either case, reflects the obligation, and before the
amendment hereof to reflect the compromise, may enforce the original obligation
to the extent that, in extending credit, the creditor reasonably relied on the
obligation of a Member or a Benefactor to make a contribution or return. A
conditional obligation of a Member or a Benefactor to make a contribution or
return money or other property to the Company may not be enforced unless the
conditions of the obligation have been satisfied or waived as to or by such
Member or Benefactor. Conditional obligations include contributions payable upon
a discretionary call of the Company prior to the time the call occurs.
(c) Nothing in this Section 6.2 is meant to imply that a Member or
Benefactor is required to make, or to require a Member or Benefactor to make,
any contribution of cash, property or services to the Company unless and until
such time as said Member or Benefactor specifically agrees in writing to do the
same.
Section 6.3 CAPITAL ACCOUNTS. A separate Capital Account will be
maintained for each Member. Notwithstanding any other provision hereof, the
Company shall determine and adjust the Capital Accounts in accordance with the
rules of Treasury Regulations Section 1.704-1(b)(2)(iv). Upon the consummation
of the transactions contemplated by the Additional Agreements, the initial
Capital Accounts of the Members shall be as set forth on Schedule A. Except as
otherwise required in the Act, no Member shall have any liability to restore all
or any portion of a deficit balance in the Member's Capital Account.
Section 6.4 NO INTEREST ON OR RETURN OF CAPITAL. No Member shall be
entitled to interest on any Capital Contribution or Capital Account. No Member
shall have the right to demand or receive the return of all or any part of any
Capital Contribution or Capital Account except as may be expressly provided
herein, and no Member shall be personally liable for the return of the Capital
Contributions of any other Member.
Section 6.5 MEMBERSHIP INTEREST. The Membership Interests of the Members
are as set forth on Schedule A. Membership Interests will be varied only as
specifically agreed by the parties pursuant to this Operating Agreement and will
not be affected by allocations of Profits and Losses or other changes in
Members' Capital Accounts. The Membership Interests shall be updated by the
General Manager to reflect any adjustment of Membership Interests, set forth on
a revised Schedule A and filed with the records of the Company.
Section 6.6 ALLOCATIONS OF PROFITS AND LOSSES GENERALLY. After the
allocations in Section 6.7, at the end of each Fiscal Year (or shorter period if
necessary or longer period if agreed by all of the Members), Profits and Losses
shall be allocated to the Members in proportion to their respective Membership
Interests.
Section 6.7 ALLOCATIONS UNDER REGULATIONS.
(a) Company Nonrecourse Deductions. Loss attributable (under Treasury
Regulations Section 1.704-2(c)) to "partnership nonrecourse liabilities" (within
the meaning of Treasury Regulations Section 1.704-2(b)(1)) shall be allocated
among the Members in the same proportion as their respective Membership
Interests.
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(b) Member Nonrecourse Deductions. Loss attributable (under Treasury
Regulations Section 1.704-2(i)(2)) to "partner nonrecourse debt" (within the
meaning of Treasury Regulations Section 1.704-2(b)(4)) shall be allocated, in
accordance with Treasury Regulations Section 1.704-2(i)(1), to the Member who
bears the economic risk of loss with respect to the debt to which the Loss is
attributable.
(c) Minimum Gain Chargeback. Each Member will be allocated Profits at
such times and in such amounts as necessary to satisfy the minimum gain
chargeback requirements of Treasury Regulations Sections 1.704-2(f) and
1.704-2(i)(4).
(d) Qualified Income Offset. Losses and items of income and gain
shall be specially allocated when and to the extent required to satisfy the
"qualified income offset" requirement within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(d).
Section 6.8 OTHER ALLOCATIONS.
(a) Allocations when Agreed Value Differs from Tax Basis. When the
Agreed Value of a Company asset is different from its adjusted tax basis for
income tax purposes, then, solely for federal, state and local income tax
purposes and not for purposes of computing Capital Accounts, income, gain, loss,
deduction and credit with respect to such assets ("Section 704(c) Assets") shall
be allocated among the Members to take this difference into account in
accordance with the principles of IRC Section 704(c), as set forth herein and in
the Treasury Regulations thereunder and under IRC Section 704(b). The
calculation and allocations eliminating the differences between Agreed Value and
adjusted tax basis of the Section 704(c) Assets shall be made on an
asset-by-asset basis using remedial allocations under Treasury Regulations
Section 1.704-3(d).
(b) Change in Member's Interest.
(i) If during any Fiscal Year of the Company there is a change
in any Member's Membership Interest, then for purposes of complying with
IRC Section 706(d), the determination of Company items allocable to any
period shall be made by using the closing of the books method.
(ii) The Members agree to be bound by the provisions of this
Section 6.8(b) in reporting their shares of Company income, gain, loss,
and deduction for tax purposes.
ARTICLE VII
DISTRIBUTIONS
Section 7.1 DISTRIBUTIONS.
(a) Tax Distributions. The Company shall distribute to the Members in
accordance with the Members' Membership Interests as promptly as practicable
(and in any event within forty-five (45) days) after the end of each fiscal
quarter an amount equal to the product of the Tax Rate and the amount of Profits
for such fiscal quarter ("Tax Distributions").
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(b) Preferred Distributions. Subject to the provisions of the Act, on
January 1, 2006, the Company shall make a distribution to CRC in the aggregate
amount of $640,000 (the "Preferred Distribution"). To the extent the Company is
not able to make such distribution pursuant to the Act, the Company shall make
such distribution as soon as permissible under the Act.
(c) Mandatory Distributions.
(i) From and after the second anniversary of the date hereof,
as soon as practicable following the end of each annual calendar period (a
"Distribution Period") (including December 31, 2004), the Managing Member shall
calculate the amount of Distributable Funds, if any, for such period. The amount
of Distributable Funds, if any, for such period shall be distributed to the
Members (a "Mandatory Distribution") within 20 days following the completion of
the Company's annual audit and at such other times as determined by the Managing
Member in accordance with the percentages of the Member's respective Percentage
Interests, less, with respect to each Member, each such Member's distributed or
to be distributed Tax Distributions for such period, if any.
As used herein, "Distributable Funds" with respect to any
Distribution Period shall mean an amount equal to twenty-five percent (25%) of
the Cash Flow of the Company for such period, as reduced by commercially
reasonable amounts for anticipated future: (i) working capital needs, (ii)
development fees and other expenses (including "hard" and "soft" costs), (iii)
capital expenditures, (iv) operating expenses and (v) other purposes (to the
extent not included in calculating "Cash Flow" pursuant to the definition
thereof herein contained) reserved during such period and as increased by
amounts released from Company reserves (other than for payment of costs or other
obligations) during the relevant Distribution Period, in each case consistent
with the Company's past accounting practice, as shall be determined from time to
time by the Managing Member.
As used herein "Cash Flow" shall mean, for any Distribution
Period, gross cash receipts of the Company (excluding receipts from loans or
Member contributions) less (i) all costs and expenses incurred by the Company in
the course of carrying on the business of the Company which required a cash
expenditure during the relevant Distribution Period (including, without
limitation, license fees, insurance premiums, utility charges, advertising and
marketing expenses, salaries, wages and fringe benefits, property taxes and
assessments, technology development and leasing fees and other amounts and
accounting, legal and other administrative costs and costs incurred by the
Company), (ii) all payments of principal of, interest on and any other amounts
due with respect to or required to be paid or reserved by the terms of any debt,
leases or other commitments or obligations of the Company during such period,
(iii) any sum expended by the Company for capital expenditures during such
period, (iv) any expenses of the Company prepaid during such period, (v) all Tax
Distributions made or to be made with respect to such period and (vi) any sums
expended by the Company during such period which are otherwise capitalized.
(ii) The provisions of Section 7.1(c)(i) notwithstanding, the
Company shall not make any Mandatory Distributions unless all of the following
conditions are satisfied at the time of such distribution:
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1. Payment of the Mandatory Distribution will not
breach any covenant under any debt or financing agreement of the
Company; provided, however, that if such covenant restricts such
payment only absent a creditor's consent, the Company shall use
reasonable efforts (without incurring any costs, expenses or
fees) to obtain such consent.
2. If the Company were to borrow the amount of the
Mandatory Distribution, such borrowing, alone or together with
the Company's other borrowings, would not result in a breach of
any covenant under any debt or financing agreement of the
Company.
3. The Company's revenues recognized during the
relevant Distribution Period (excluding revenues from the sale or
resale of packaged software of hardware products) shall equal or
exceed $30 million.
4. The Company's pre-tax income during the relevant
Distribution Period shall equal or exceed 7.5% of the Company's
recognized revenues during such period.
5. The Company's recognized revenues during the
relevant Distribution Period equal or exceed 120% of the
Company's recognized revenues during the calendar year
immediately prior to the relevant Distribution Period.
6. The payment of the Mandatory Distribution will not
increase the Company's D/E Ratio above 2:1. "DE Ratio" means,
with respect to the Company, the ratio of (i) all debt and other
liabilities of the Company reflected on the face of the Company's
balance sheet as of the end of the relevant Distribution Period,
other than accounts payable to (ii) the total Members' equity in
the Company reflected on the face of such balance sheet, less the
value of the intangible assets reflected on the face of such
balance sheet.
7. The Company's retained earnings as reflected on the
face of the Company's balance sheet as of the end of the relevant
Distribution Period equals or exceeds the Company's tangible net
worth on the Closing Date, and the payment of the Mandatory
Distribution will not reduce such retained earnings below such
tangible net worth.
8. With respect to any Mandatory Distribution to be
made after December 31, 2005, the Preferred Distribution shall
have been fully paid to CRC.
(d) Additional Distributions. The Company may distribute Profits of
the Company to the Members in accordance with the Members' Membership Interests,
at such times and in such amounts as approved by the Members and the General
Manager in accordance with the provisions of Section 4.1.
(e) Minimum Annual Distributions. Subject to the other provisions of
this Operating Agreement and the Act, the aggregate amount of distributions
distributed by the Company to each Member in any fiscal year pursuant to this
Section 7.1 shall equal at least $65,000.
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(f) Payment of ESNI Distributions. Notwithstanding paragraphs (a),
(c), (d) and (e) above, all distributions to ESNI shall be made pursuant to, and
in accordance with, the following:
(i) In the event that ESNI has been finally adjudged to be
required to indemnify CRC pursuant to, and in accordance with, Article
VIII of the ESNI Contribution Agreement, all distributions otherwise
payable to ESNI hereunder shall be withheld and paid directly to CRC to
the extent necessary to discharge fully and completely ESNI's indemnity
obligations to CRC thereunder.
(ii) Sixty percent (60%) of all distributions otherwise payable
to ESNI hereunder (after giving effect to clause (i) above) shall be
withheld and paid directly to CRC to the extent necessary to repay
ESNI's outstanding obligations to CRC under the Promissory Notes.
(iii) Any distributions otherwise payable to ESNI hereunder
(after giving effect to clauses (i) and (ii) above) shall be paid
directly to ESNI.
In the event that any distribution otherwise payable to ESNI is paid to
CRC pursuant to clauses (i) or (ii) above, the Company shall provide written
notice to ESNI, setting forth (A) the full amount of such distribution to ESNI
without giving effect to any amount withheld and paid to CRC pursuant to this
Section 7.1(f) and (B) the amount of such distribution delivered to CRC.
Notwithstanding such payment to CRC pursuant to this Section 7.1(f), the full
amount of any such distribution shall be deemed to be a distribution to ESNI for
all other purposes under this Operating Agreement.
Section 7.2 LIMITATIONS ON DISTRIBUTIONS.
(a) The Company shall not make a distribution to a Member to the
extent that at the time of the distribution, after giving effect to the
distribution, all liabilities of the Company, other than liabilities to Members
on account of their interests in the Company and liabilities for which the
recourse of creditors is limited to specified property of the Company, exceed
the Fair Market Value of the assets of the Company, except that the Fair Market
Value of property that is subject to a liability for which the recourse of
creditors is limited shall be included in the assets of the Company only to the
extent that the Fair Market Value of that property exceeds that liability.
(b) A Member who receives a distribution in violation of subsection
(a), and who knew at the time of the distribution that the distribution violated
subsection (a), shall be liable to the Company for the amount of the
distribution. A Member who receives a distribution in violation of subsection
(a) and who did not know at the time of the distribution that the distribution
violated subsection (a) shall not be liable for the amount of the distribution.
Subject to subsection (c), this subsection shall not affect any obligation or
liability of a Member under other applicable law for the amount of a
distribution.
(c) A Member who receives a distribution from the Company shall have
no liability under this Section, the Act or other applicable law for the amount
of the distribution after the expiration of three (3) years from the date of the
distribution unless an action to recover the distribution from such Member is
commenced prior to the expiration of the said three (3)-year period and an
adjudication of liability against such Member is made in the action.
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Section 7.3 AMOUNTS OF TAX PAID OR WITHHELD. All amounts paid or
withheld pursuant to the IRC or any provision of any state or local tax law with
respect to any Member shall be treated as amounts distributed to the Member
pursuant to this Article VII for all purposes under this Operating Agreement.
Section 7.4 DISTRIBUTION IN KIND. The Company shall not distribute any
assets in kind.
ARTICLE VIII
TRANSFER OF MEMBERSHIP INTERESTS
Section 8.1 RESTRICTION ON TRANSFERS. Except as contemplated under the
Security Agreement, no Member shall have the right, directly or indirectly, to
sell, assign, transfer, pledge, hypothecate, mortgage or dispose of, by gift or
otherwise, or in any way encumber, voluntarily, involuntarily or by operation of
law (any such transaction being referred to as a "transfer" under this Article
VIII), any of the Membership Interest (including, without limitation, any of the
economic interest associated therewith) in the Company held by such Member,
except (a) in accordance with the provisions of this Article VIII and (b) upon
the written consent of the other Members, which consent may be determined in
their sole discretion.
Section 8.2 TRANSFERS OF MEMBERSHIP INTERESTS TO AFFILIATES. Any Member
shall have the right, without the consent of the other Members, to transfer
ownership of all (but not part) of its Membership Interest to its own direct or
indirect wholly-owned subsidiary (a "Wholly-Owned Subsidiary Transferee"). In
the event of any such transfer, the Wholly-Owned Subsidiary Transferee shall be
entitled to the rights and privileges set forth in this Operating Agreement and
shall be bound and obligated by the provisions hereof and thereof and shall, by
a binding written instrument which shall be enforceable by the Company and the
other Members, assume all obligations and liabilities hereunder of the
transferring Member.
Section 8.3 BUY-SELL PROCEDURE.
(a) Each of CRC and ESNI (the "Exercising Member") shall have the
right, at any time after the fourth anniversary of the Effective Date,
exercisable by written notice (the "Sale Notice") to the other (the
"Recipient"), to offer to sell all of its Membership Interest at a purchase
price payable in cash at the closing and on such other reasonable terms and
conditions as may be specified in the Sale Notice. In the event the Exercising
Member fails to name a price in its Sale Notice and fails to remedy such
omission within thirty (30) days following receipt of written notice thereof
from the Recipient or expressly states that a price is omitted in accordance
with this Section, the Company shall engage an independent third Person
reasonably known and respected in the field to determine the fair market value
of the Company (the "Appraiser"). The Appraiser shall notify each of the
Exercising Member and the Recipient in writing of such fair market value
determination within thirty (30) days after its engagement ("Appraisal Notice").
(b) The Recipient shall elect, by written notice to the Exercising
Member ("Notice of Election") within sixty (60) days of receipt of the later of
the Sale Notice or the Appraisal Notice, as the case may be, either (i) to
purchase all of such offered Membership Interest at the purchase price and on
the terms and conditions specified in the Sale Notice or Appraisal Notice,
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as the case may be or (ii) to sell all of its own Membership Interest to the
Exercising Member at a purchase price which bears the same proportional
relationship to its Membership Interest as the purchase price set forth in the
Sale Notice or Appraisal Notice, as the case may be, bears to the Exercising
Member's Membership Interest; provided, however, that if ESNI is the Recipient,
in no event shall ESNI be required to sell its Membership Interest for a
purchase price less than the then outstanding principal amount under the
Promissory Notes.
(c) If the Recipient elects to proceed pursuant to Section 8.3(b)(i),
the Members shall, within thirty (30) days after receipt of the Notice of
Election, execute such documents and instruments reasonably required to cause
the purchase and sale of the Exercising Member's Membership Interest at the
purchase price and the terms and conditions specified in the Sale Notice or
Appraisal Notice, as the case may be, and the closing of such sale shall take
place as soon as practicable, but in any event within thirty (30) days
thereafter. At the closing, the Exercising Member shall transfer its Membership
Interest to the Recipient free and clear of any and all encumbrances.
(d) If the Recipient elects to proceed pursuant Section 8.3(b)(ii),
the Members shall, within thirty (30) days after receipt of the Notice of
Election, execute such documents and instruments reasonably required to cause
the purchase and sale of the Recipient's Membership Interest at a purchase price
which bears the same proportional relationship to its Membership Interest as the
purchase price set forth in the Sale Notice or Appraisal Notice, as the case may
be, bears to the Exercising Member's Membership Interest, and on such terms and
conditions that are equivalent to the terms and conditions specified in the Sale
Notice or Appraisal Notice, as the case may be. The closing of such sale shall
take place as soon as practicable, but in any event within thirty (30) days
thereafter. At the closing, the Recipient shall transfer its Membership Interest
to the Exercising Member free and clear of any and all encumbrances.
Section 8.4 RIGHT OF FIRST REFUSAL.
(a) If any Member wishes to transfer all of its Membership Interest
(such person or entity wishing to transfer its Membership Interest, the
"Offering Member") to any person other than pursuant to Sections 8.2 or 8.3
above (hereafter referred to as a "Third Party") and receives a bona fide offer
from such Third Party, such Offering Member shall deliver a written notice (an
"Offer Notice") to the other Members (the "Remaining Members"). The Offer Notice
will describe in reasonable detail the offer from the Third Party, including the
percentage of the Membership Interest being offered (the "Offered Membership
Interest"), the purchase price and all other material terms and conditions of
the proposed transfer. As used in this Section 8.4(a), the term "bona fide
offer" means an offer not contingent on the Third Party obtaining necessary
financing or subject to any other material contingency, is made with express
recognition by the Third Party of the rights set forth in Section 8.5 below, and
is received from a Third Party which the Offering Member reasonably believes has
the financial resources to purchase the Offered Membership Interests and, if
required, such additional Membership Interests in accordance with Section 8.5
below.
(b) Upon receipt of an Offer Notice from an Offering Member, the
Remaining Members shall have the option (the "Member Option") to purchase at the
price and on the terms and conditions specified in the Offer Notice, all or any
part of such Remaining Member's
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Proportionate Share (as defined below) of the Offered Membership Interest by
notifying the Offering Member and the other Remaining Members in writing (the
"Member Notice") within ten (10) Business Days after the date of receipt of the
Offer Notice (the "First Offer Exercise Period") whether and to what extent such
Remaining Member intends to exercise the Member Option. If any Remaining Member
fails to exercise its Member Option as to all of its Proportionate Share of the
Offered Membership Interest, then any of the other Remaining Members shall have
the right to purchase all or part of the Offered Membership Interest that such
Remaining Member has elected not to purchase by amending its respective Member
Notice within five (5) Business Days after the date that it receives notice that
any other Remaining Member has so declined to exercise its Member Option in
full. Failure to deliver the Member Notice within the applicable periods shall
constitute a waiver of the applicable Remaining Member's purchase right as to
the Offered Membership Interest. For purposes of this Section 8.4,
"Proportionate Share" shall mean the product obtained by multiplying (i) the
Offered Membership Interest by (ii) a fraction, the numerator of which is the
percentage of the Membership Interests held by the applicable Remaining Member
and the denominator of which is the aggregate percentage of all the Membership
Interests held by the other Remaining Members who did elect to purchase a
portion of the Offered Membership Interest.
(c) If the Remaining Members elect to purchase all of the Offered
Membership Interest in accordance with this Section 8.4, the Offering Member
shall have the obligation to sell such Offered Membership Interest to the
Remaining Members electing to so purchase. Otherwise, subject to Section 8.5,
the Offering Member may sell to the Third Party the Offered Membership Interest
within 120 days after the expiration of the First Offer Exercise Period,
provided the purchase price for such Offered Membership Interest is no less than
the purchase price contained in the Offer Notice and the other terms offered to
such Third Party are no more favorable to such Third Party than those contained
in the Offer Notice. If such sale to such Third Party is not consummated within
the time period specified herein, the Offered Membership Interest shall again be
subject to the restrictions contained in this Operating Agreement.
(d) The closing for any purchase of the Offered Membership Interest
by the Remaining Members shall be held at the offices of the Company no later
than the 90th day after the date of the Offer Notice or at such other time and
place as the parties shall agree. At the closing, each applicable Remaining
Member shall pay for its applicable share of the Offered Membership Interest in
accordance with the terms of the Offer Notice.
(e) Neither the Company nor any transfer agent shall give any effect
in the Company's records to any transfer that does not fully comply with the
provisions of this Article VIII.
Section 8.5 RIGHTS OF INCLUSION (TAG ALONG RIGHTS).
(a) In addition to the terms and provisions set forth in Section 8.4
above, an Offering Member shall not transfer or otherwise dispose of any of its
Membership Interests to a Third Party unless the terms and conditions of such
sale or other disposition include a written offer by the Third Party to purchase
or otherwise acquire from the Remaining Members the Membership Interests of such
Remaining Members (determined in accordance with Section 8.5(b) below) on the
same terms and conditions as those made to the Offering Member (the "Third Party
Offer").
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(b) An Offering Member shall give notice of any intended transfer to
a Third Party its Membership Interests (a "Tag-Along Transfer") to the Remaining
Members. Such notice (the "Tag-Along Notice") shall set forth the material terms
and conditions of such proposed Tag-Along Transfer, including the name of the
Third Party, the amount of Membership Interests proposed to be transferred by
the Offering Member (the "Tag-Along Interests"), the purchase price per
percentage of Membership Interest proposed to be paid therefor, the payment
terms and type of Tag-Along Transfer to be effectuated, and any other material
terms and conditions of such proposed Tag-Along Transfer. Within twenty (20)
Business Days following the delivery of the Tag-Along Notice by the Offering
Member, each Remaining Member shall have the right, but not the obligation, to
participate in such Tag-Along Transfer by transferring up to a fraction of such
Remaining Member's Membership Interests which is equal to the fraction, the
numerator of which is the Tag-Along Interests and the denominator of which is
the total Membership Interests held by the Offering Member immediately prior to
the Tag-Along Transfer. Any participation in a Tag-Along Transfer by a Remaining
Member shall be on the same terms and conditions as the proposed Tag-Along
Transfer by the Offering Member. Notwithstanding the foregoing, in the event
that ESNI delivers to CRC a written legal opinion of counsel, such counsel being
located in ESNI's jurisdiction of incorporation and having a nationally
recognized expertise in such jurisdiction's corporation law, stating that it
cannot opine that ESNI's sale of its Membership Interests pursuant to this
Section 8.5 does not require the prior approval of ESNI stockholders, ESNI
shall, within ten (10) Business Days following the delivery of the Tag-Along
Notice by the Offering Member, send written notice to the Offering Member of its
desire to participate in the Tag-Along Transfer subject to stockholder approval
and shall have 60 days (and an additional 15 days if ESNI receives comments from
the Securities and Exchange Commission with respect to such stockholder
approval) following delivery of the Tag-Along Notice by the Offering Member to
obtain such stockholder approval.
(c) At the closing of any proposed Tag-Along Transfer in respect of
which a Tag-Along Notice has been delivered, the Offering Member, together with
all Tag-Along Offerees electing to transfer Membership Interests in accordance
with this Section 8.5, shall deliver to the Third Party certificates or other
instruments evidencing the Membership Interests to be transferred pursuant
hereto and all other documents to be delivered in connection with the transfer
and shall receive in exchange therefor the consideration to be paid or delivered
by the Third Party in respect of such Membership Interests as described in the
Tag-Along Notice.
Section 8.6 DRAG-ALONG OBLIGATION.
(a) Subject to Section 8.4, so long as CRC owns at least 10% of the
Membership Interests, if CRC approves a sale, transfer, or other disposition
(including by merger, consolidation or other business combination) to a Person
that is not an Affiliate of CRC, of (i) all of the Membership Interests or (ii)
all or substantially all of the assets of the Company and its subsidiaries
determined on a consolidated basis (each an "Approved Sale"), each Member shall
consent to and raise no objection to the Approved Sale or the process pursuant
to which the Approved Sale was arranged, waive any dissenter's rights and other
similar rights, and (1) if the Approved Sale is structured as a sale of
Membership Interests, shall agree to sell all Membership Interests owned by such
Member on the terms and conditions approved by CRC, (2) if the Approved Sale is
structured as a merger or consolidation, each Member shall vote in favor
thereof, and (3) if the Approved Sale is structured as a sale of all or
substantially all of the assets
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of the Company and a subsequent dissolution and liquidation of the Company, each
Member Party shall vote in favor thereof and will vote in favor of the
subsequent dissolution and liquidation of the Company; provided, however, that
in no event shall ESNI be required to consent to any Approved Sale if the Fair
Market Value of the aggregate consideration to be received by ESNI from such
Approved Sale is less than the then outstanding principal amount under the
Promissory Notes. Each Member will take all necessary and desirable actions as
directed by CRC in connection with the consummation of any Approved Sale,
including, without limitation, executing the applicable purchase agreement and
granting identical indemnification rights. Notwithstanding the foregoing, no
Member shall be required to agree to (1) make representations and warranties in
connection with such Approved Sale, except representations and warranties with
respect to such Member and such Member's Membership Interest, and (2) indemnify
the buyer or any other Person in connection with such Approved Sale or make a
payment in connection with a purchase price adjustment for an amount in excess
of the lesser of (I) its pro rata share of such indemnification or purchase
price adjustment obligation, other than indemnification obligations with respect
to representations and warranties regarding such Member or (II) the proceeds
such Member receives in such Approved Sale.
(b) The obligations of each Member with respect to an Approved Sale
are subject to the satisfaction of the following condition: upon the
consummation of the Approved Sale, each Member will receive the same form and
amount of consideration as each other Member (proportional to each Member's
Membership Interest) or if any Members are given an option as to the form and
amount of consideration to be received, all Members shall be given the same
option. In addition, the obligations of ESNI with respect to an Approved Sale is
subject to the receipt by ESNI of an amount of consideration equal to at least
the then outstanding principal amount under the Promissory Notes.
(c) All Members shall bear their pro rata share of any reasonable
costs related to the Approved Sale, to the extent such costs are not otherwise
paid by the Company or the acquiring party (provided that no Member shall be
obligated to bear any costs in excess of the proceeds payable to such Member in
such Approved Sale). Costs incurred by Members on their own behalf will not be
considered costs of the transaction hereunder.
Section 8.7 REDEMPTION OF ESNI'S MEMBERSHIP INTERESTS.
(a) Upon the written request (the "Redemption Request") of ESNI to
the Company, delivered on the maturity date of the Promissory Notes, that all of
ESNI's Membership Interests be redeemed (a "Mandatory Redemption"), subject to
obtaining any necessary lender consent without cost or expense (other than costs
or expenses that ESNI is willing to bear), the Company shall redeem from ESNI
its Membership Interests by payment in cash of an amount equal to the Mandatory
Redemption Price. Subject to the foregoing, the Company agrees to use
commercially reasonable efforts to obtain, or cooperate with ESNI to obtain,
such necessary lender consents. In addition, CRC agrees that during such time
that the Company and ESNI are attempting to obtain the necessary lender consent,
such time period not to exceed thirty (30) days from the date of the Redemption
Request, CRC will not foreclose or take any other action to enforce its rights
under the Promissory Notes. During such thirty-day period, interest, including
any applicable default interest, shall continue to accrue pursuant to the
Promissory Notes. As used herein:
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"Mandatory Redemption Price" equals 50% of the Appraised Value.
"Appraised Value" means the amount that a willing buyer would pay to a
willing seller for ESNI's Membership Interests, as determined by the Approved
Banker in accordance with the provisions of this Section 8.7.
"Banker" means an individual affiliated with a nationally or regionally
recognized investment banking, accounting or financial consulting firm, in his
or her capacity as a member or senior employee of such firm, such firm to be
unaffiliated with CRC or the Company, with recognized expertise in the field of
appraising non-public entities in the businesses that the Company is engaged.
(b) Within 10 Business Days of the Company's receipt of the
Redemption Request, the Company shall provide ESNI with a list of three (3)
Bankers. Within 10 Business Days of ESNI's receipt of such list, ESNI shall
select a Banker (the "Approved Banker") from such list to determine the
Appraised Value and shall inform the Company in writing of such selection. If
ESNI fails to timely select a Banker, the Company may select a Banker from such
list and such Banker selected by the Company shall for all purposes be the
Approved Banker.
(c) At the time of its appointment, the Approved Banker shall be
instructed to deliver to the Company and ESNI within thirty (30) days of its
appointment, such firm's determination of the Appraised Value as of the date of
the Company's receipt of the Redemption Request, together with an explanation,
in reasonable detail, of the assumptions, factual bases and methodology used to
make its determination. In making its determination of the Appraised Value, the
Approved Banker shall consider all relevant factors, including, without
limitation: (i) the liquidity of ESNI's Membership Interests; (ii) the
percentage of the total Membership Interests represented by ESNI's Membership
Interests; (iii) the general voting and management rights represented by ESNI's
Membership Interests; (iv) the effect of the Management Services Agreement; (v)
the history of and likelihood of continuing and/or future cash distributions by
the Company with respect to ESNI's Membership Interests; (vi) industry and
competitive factors in the businesses that the Company is engaged at the time of
the Redemption Request; and (vii) general economic and business factors. The
Company or ESNI, as the case may be, shall provide the other with a copy of the
appointment and letter of instruction simultaneously with its delivery to the
Approved Banker. The fees and expenses of the Approved Banker shall be borne by
ESNI.
(d) Notwithstanding the foregoing, if the Mandatory Redemption Price
as finally determined is greater than the outstanding aggregate balance under
the Promissory Notes (including accrued and unpaid interest thereunder, the
"Outstanding Balance"), then the Mandatory Redemption Price shall equal the
Outstanding Balance. It is further acknowledged that if there is no Outstanding
Balance, this Section 8.7 in its entirety shall be of no force and effect.
(e) The Company shall redeem ESNI's Membership Interests no later
than thirty (30) days after the final determination of the Mandatory Purchase
Price. Such date shall be the "Mandatory Redemption Date" as described herein.
Payment of the Mandatory Redemption Price by the Company to ESNI shall be made
pursuant to, and in accordance with, the following:
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(i) In the event that ESNI is required to indemnify CRC
pursuant to, and in accordance with, Article VIII of the ESNI
Contribution Agreement, all distributions otherwise payable to ESNI
hereunder shall be withheld and paid directly to CRC to the extent
necessary to discharge fully and completely ESNI's indemnity obligations
to CRC thereunder.
(ii) After giving effect to clause (i) above, the remaining
Mandatory Redemption Price shall be withheld and paid directly to CRC to
repay ESNI's outstanding obligations to CRC under the Promissory Notes.
Section 8.8 ADJUSTMENTS IN MEMBERSHIP INTERESTS. (a) CRC shall have an
option to purchase (the "Interest Purchase Option") Membership Interests of ESNI
representing up to an aggregate of 17% of all Membership Interests as follows:
(i) Membership Interests of ESNI representing up to, and
including, 2% of the Membership Interests at a price of $150,000 for
each 1% Membership Interest purchased;
(ii) Membership Interests of ESNI representing up to an
additional 5% of the Membership Interests at a price of $200,000 for
each 1% Membership Interest purchased; and
(iii) Membership Interests of ESNI representing up to an
additional 10% of the Membership Interests at a price of $250,000 for
each 1% Membership Interest purchased;
provided that, if (1) there is a Change of Control of ESNI (as defined below),
(2) ESNI, or an authorized appointee, initiates a bankruptcy proceeding on
ESNI's own behalf, or (3) ESNI defaults on, or fails to perform, any of its
material obligations under any of the Additional Agreements or this Operating
Agreement (each such event, a "Relevant Event"), then the exercise prices
described in clause (i), (ii) or (iii) of this Section 8.8(a) shall be reduced
by $50,000 for each 1% Membership Interest purchased by CRC under this Section
8.8(a). For purposes of this Operating Agreement, a "Change in Control" shall be
deemed to have occurred if the majority of the Board of Directors of ESNI shall
not be composed of (i) individuals who compose ESNI's Board as of the date
hereof, (ii) individuals listed on Schedule B hereto and/or (iii) individuals
approved in writing by CRC at the time of their election or appointment (which
approval shall not be unreasonably withheld).
So long as no Relevant Event takes place, CRC shall not exercise this
Interest Purchase Option for eighteen (18) months from the Effective Date and
shall give ESNI at least sixty (60) days' notice of its intention to exercise
such option ("Option Exercise Notice"), in whole or in part. The Interest
Purchase Option shall be exercisable by CRC for five (5) years from the
Effective Date or, if later, until two (2) years after ESNI fully and completely
fulfills its obligations and discharges its debt under the Promissory Notes.
(b) If CRC elects to proceed pursuant to this Section 8.8, the
Members shall, within thirty (30) days after ESNI's receipt of the Option
Exercise Notice, execute such documents and instruments reasonably required to
cause the purchase and sale of ESNI's Membership Interests at the purchase price
and the terms and conditions specified in this Section, as the case may be,
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and the closing of such sale shall take place as soon as practicable, but in any
event within thirty (30) days thereafter. At the closing, ESNI shall transfer
its Membership Interests to CRC free and clear of any and all encumbrances
(other than liens in favor of CRC).
(c) In the event that the Management Services Agreement is terminated
for any reason other than for Cause (as defined in the Management Services
Agreement) by any Person other than CRC or its affiliates, and provided that at
the time of such termination of the Management Services Agreement CRC has not
exercised its Interest Purchase Option under this Section 8.8, ESNI shall
transfer to CRC 1% of its Membership Interest, executing such documents and
instruments reasonably required to effectuate such transfer, within thirty (30)
days of such termination. ESNI shall transfer the 1% Membership Interest to CRC
free and clear of any and all encumbrances.
Section 8.9 CONSENT OF ESNI STOCKHOLDERS. In the event that ESNI
delivers to CRC a written legal opinion of counsel, such counsel being located
in ESNI's jurisdiction of incorporation and having a nationally recognized
expertise in such jurisdiction's corporation law, stating that it cannot opine
that ESNI's compliance with Sections 8.3 and 8.6 of this Operating Agreement
does not require the prior approval of ESNI stockholders, ESNI shall not be
required to take any actions required under Sections 8.3 and 8.6 prior to
obtaining such stockholder approval and shall use its best efforts to obtain
such stockholder approval as promptly as practicable.
Section 8.10 INVALID TRANSFERS VOID. Notwithstanding anything contained
herein to the contrary, no transfer of a Membership Interest may be made if such
transfer (i) would violate the registration requirements of then applicable
federal or state securities laws or rules and regulations of the Securities and
Exchange Commission, state securities commissions, or rules and regulations of
any other government agencies with jurisdiction over such transfer or (ii) would
affect the Company's existence or qualification under the Act. In the event a
transfer of a Membership Interest is otherwise permitted hereunder,
notwithstanding any provision hereof, no Member shall transfer all or any
portion of such Member's Membership Interest unless and until such Member, upon
the request of the Company, delivers to the Company an opinion of counsel,
addressed to the Company, reasonably satisfactory to the Company, to the effect
that (a) such Membership Interest has been registered under the Securities Act
and any applicable state securities laws, or that the proposed transfer of such
Membership Interest is exempt from any registration requirements imposed by such
laws and (b) that such transfer will not result in the Company being taxed as a
corporation or as an association taxable as a corporation. Such opinion shall
not be deemed delivered until the Company confirms to such Member that such
opinion is acceptable, which confirmation will not be unreasonably withheld. Any
purported transfer of any Membership Interest or any part thereof not in
compliance with this Article VIII shall be void and of no force or effect and
the transferring Member shall be liable to the other Members and the Company for
all liabilities, obligations, damages, losses, costs and expenses (including
reasonable attorneys' fees and disbursements) arising as a result of such
noncomplying transfer.
Section 8.11 CHANGE IN OWNERSHIP.
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(a) For purposes of this Operating Agreement, a "Change in Ownership"
of a Member shall be deemed to have occurred when (i) any Person that does not
beneficially own or control, directly or indirectly, 50% or more of the
outstanding voting power of such Member or is not a direct or indirect
wholly-owned subsidiary of a Person beneficially owning or controlling, directly
or indirectly, 50% or more of the outstanding voting power of such Member (an
"Unaffiliated Entity"), shall acquire (whether by merger, consolidation, sale,
assignment, lease, transfer or otherwise, in one transaction or series of
related transactions), or otherwise beneficially own or control 50% or more of
the outstanding voting power of such Member or any Unaffiliated Entity which,
directly or indirectly, through the ownership of one or more majority-owned
successive subsidiary Entities, owns more than 50% of the outstanding voting
power of or controls such Member (a "Control Entity") or (ii) an Unaffiliated
Entity, or group or persons acting in concert therewith, shall acquire the power
to direct or cause the direction of the management and policies of such Member
or a Control Entity thereof; provided that the foregoing shall not be deemed to
extend to any grant or transfer of outstanding voting power in such Member
pursuant to a plan of internal reorganization undertaken solely for
administrative or tax purposes.
(b) Any Change in Ownership of a Member shall be deemed for all
purposes hereof to be a proposed transfer of the Membership Interest of such
Member to the Unaffiliated Entity and shall be subject to all of the terms,
conditions and restrictions set forth in this Article VIII.
Section 8.12 EFFECT OF TRANSFER; EXCLUSIONS.
(a) In addition to satisfaction of Section 8.1 above, no assignee or
transferee of all or part of a Membership Interest in the Company shall have the
right to become admitted as a Member, unless and until:
(i) The assignee or transferee has executed an instrument
reasonably satisfactory to the General Manager accepting and adopting
the provisions of this Operating Agreement; and
(ii) The assignee or transferee has paid all reasonable
expenses of the Company requested to be paid by the General Manager in
connection with the admission of such assignee or transferee as a
Member.
(b) A Person who is a permitted assignee or transferee of a
Membership Interest in the Company transferred in compliance with the provisions
of this Article VIII shall be admitted to the Company as a Member and shall
receive a Membership Interest in the Company without making a contribution or
being obligated to make a contribution to the Company and shall thereupon be
bound by the provisions of this Operating Agreement.
ARTICLE IX
DISSOLUTION; TERMINATION; REORGANIZATION
Section 9.1 DISSOLUTION. The Company shall be dissolved only upon the
occurrence of any of the following events:
(a) By the written consent of all Members; and
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(b) Upon the occurrence of any of the events set forth in Section
18-801 of the Act, except as may be provided to the contrary in this Operating
Agreement as permitted by the Act.
Section 9.2 EVENTS OF BANKRUPTCY OF MEMBER. Without limiting the
generality of Section 9.1, the occurrence of any of the events set forth in this
Section with respect to any Member shall not result in the dissolution of the
Company. Such Member shall cease to be a Member of the Company, but shall,
however, retain its interest in allocations and distributions, upon the
happening of any of the following bankruptcy events:
(a) A Member takes any of the following actions:
(i) Makes an assignment for the benefit of creditors;
(ii) Files a voluntary petition in bankruptcy;
(iii) Is adjudged a bankrupt or insolvent, or has entered
against it an order for relief, in any bankruptcy or insolvency
proceeding;
(iv) Files a petition or answer seeking for it any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
(v) Files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature; or
(vi) Seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator for itself or for all or any substantial
part of its properties; or
(b) One hundred twenty (120) days after the commencement of any
proceeding against the Member seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation, if the proceeding has not been dismissed, or if within ninety
(90) days after the appointment without the consent or acquiescence of the
Member, of a trustee, receiver or liquidator of the Member or of all or any
substantial part of the properties of the Member, the appointment is not vacated
or stayed, or within ninety (90) days after the expiration of any such stay, the
appointment is not vacated.
Section 9.3 WITHDRAWAL OF MEMBERS. No Member shall have the right to
withdraw from the Company except following a transfer of its Membership Interest
in accordance with Section 8.1. However, if despite such prohibition a Member
gives the Company notice (which must be in writing) of its desire to wrongfully
withdraw from the Company, upon the Company's receipt of such written notice
from such Member, such Member shall cease to be a Member of the Company, and
such withdrawal shall be deemed wrongful. The withdrawal of a Member (wrongful
or otherwise) shall not result in the dissolution of the Company.
Section 9.4 WINDING UP.
(a) Upon the dissolution of the Company, the General Manager shall
engage an independent third Person reasonably known and respected in the field
to wind up the affairs of
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the Company (the "Liquidating Trustee"). All actions taken by the Liquidating
Trustee in respect of such winding up shall be taken in accordance with this
Section 9.4 and with Section 9.5. The Liquidating Trustee shall be entitled to
receive such compensation for its services as may be approved by the General
Manager. The Liquidating Trustee may resign only upon at least fifteen (15)
days' notice to the General Manager. The Liquidating Trustee may be removed by
the General Manager in accordance with Section 4.1(h) upon fifteen (15) days'
notice. Within fifteen (15) days of the effective date of such resignation or
removal, the General Manager shall engage a replacement who shall succeed to all
the rights, powers and obligations of its predecessor.
(b) The Liquidating Trustee may, in the name of, and for and on
behalf of, the Company, prosecute and defend suits, whether civil, criminal or
administrative, gradually settle and close the business of the Company, dispose
of and convey the property of the Company, discharge or make reasonable
provision for the liabilities and obligations of the Company, including all
contingent, conditional or unmatured liabilities and obligations, and distribute
to the Members any remaining assets of the Company, all in accordance with
Section 9.5 and without affecting the liability of the Members and the General
Manager and without imposing liability on the Liquidating Trustee.
(c) The Liquidating Trustee shall exercise all powers conferred upon
the Tax Matters Member to the extent necessary in its good faith judgment to
effect the liquidation, and the Tax Matters Member shall not interfere with or
duplicate the exercise of such powers.
Section 9.5 LIQUIDATION AND DISTRIBUTION OF ASSETS.
(a) In the event of a dissolution of the Company, the Liquidating
Trustee shall use all commercially reasonable efforts to effect a sale of the
Company as a going concern. In the event that no buyer can be found to purchase
the Company as a going concern, the Liquidating Trustee shall offer for sale the
separate assets of the Company. All sales, whether of the Company as a going
concern or of separate assets, shall be at the best price reasonably available.
(b) Any proceeds from a sale of the Company or its assets shall be
distributed as follows:
(i) First, to creditors, including the Members and the General
Manager who are creditors, to the extent otherwise permitted by law, in
satisfaction of liabilities of the Company (whether by payment or the
making of reasonable provision for payment thereof) other than
liabilities for which reasonable provision for payment has been made;
and
(ii) Then, to the Members in proportion to their positive
Adjusted Capital Accounts.
Section 9.6 REORGANIZATION. The General Manager may, in connection with
an initial public offering of the Company, cause the Company to convert (a
"Rollup") from the limited liability company form to the corporate form (such
successor corporate form, whether effected by contribution of Membership
Interests, contribution of assets, merger, reorganization or otherwise, the
"Reorganized Company"). Each Member shall consent to and raise no objections
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against, and shall take all actions reasonably necessary and desirable (to the
extent permissible in his, her or its capacity as such person) to effect such an
approved Rollup. It is the intention of the Members that any Rollup shall be
effected in a manner that (a) does not modify the economic terms of this
Operating Agreement and (b) avoids or minimizes to the maximum extent possible
(i) any limitations for purposes of Rule 144 under the Securities Act on the
tacking by a Member of the holding periods of Membership Interests surrendered
in such exchange to the holding periods of the new securities respectively
issued, and (ii) the recognition of taxable income by the Company or the Members
as a result of such exchange.
ARTICLE X
ADDITIONAL UNDERTAKINGS
Section 10.1 CONFIDENTIALITY.
(a) Maintenance of Confidentiality. Each of the Members shall, during
the term of this Operating Agreement and at all times thereafter, maintain in
confidence all confidential and proprietary information and data of the Company
and that the other Members or its Affiliates disclosed to it (the "Confidential
Information"). Each of the Members further agrees that it shall not use the
Confidential Information during the term of this Operating Agreement or at any
time thereafter for any purpose other than the performance of its obligations or
the exercise of its rights under this Operating Agreement. The Company and each
Member shall take all reasonable measures necessary to prevent any unauthorized
disclosure of the Confidential Information by any of their Affiliates and their
respective officers, directors, employees, agents or consultants.
(b) Permitted Disclosures. Nothing herein shall prevent the Company,
any Member, or any employee, agent or consultant of the Company or any Member
(in such capacity, the "Receiving Party") from using, disclosing or authorizing
the disclosure of any information it receives in the course of the business of
the Company from the Company or another Member (in such capacity, the
"Disclosing Party") which:
(i) Becomes publicly available without default hereunder by
the Receiving Party;
(ii) Is lawfully acquired by the Receiving Party from a source
not known to the Receiving Party to be under any obligation to the
Disclosing Party regarding disclosure of such information;
(iii) Is in the possession of the Receiving Party in written or
other recorded form at the time of its disclosure hereunder;
(iv) Is non-confidentially disclosed to any third party by or
with the permission of the Disclosing Party; or
(v) The Receiving Party believes in good faith to be required
by law or by the terms of any listing agreement with a securities
exchange; provided that the Receiving Party consults with the other
Members prior to making such disclosure.
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Section 10.2 RETURN OF CONFIDENTIAL INFORMATION. Upon expiration or
termination of this Operating Agreement, the Receiving Party shall return to the
Disclosing Party all requested Confidential Information of the Disclosing Party,
including all copies thereof, in the possession or under the control of it, its
Affiliates or any of their respective personnel, or, at the Disclosing Party's
option, destroy or purge all such Confidential Information from its and its
Affiliates' systems and files and deliver to the Disclosing Party a written
confirmation that such destruction and purging have been carried out.
Section 10.3 NO LICENSE. The furnishing of Confidential Information of
the Disclosing Party to the Receiving Party shall not constitute any grant of
license to the Receiving Party except (i) for the purposes of performing under
this Operating Agreement, (ii) as otherwise expressly provided in this Operating
Agreement or (iii) as hereafter expressly agreed in writing by the Disclosing
Party.
Section 10.4 NO HIRE. During the term of this Operating Agreement, each
Member agrees, and for one (1) year after the withdrawal of a Member or transfer
of a Member's Membership Interest in accordance with this Operating Agreement or
otherwise, such withdrawing or transferring Member agrees, that it shall not,
and shall make its best efforts to cause its Affiliates to not, directly or
indirectly, (i) solicit, induce, recruit or encourage any of the Company's
employees or consultants to terminate their relationship with the Company in
favor of a relationship with such Member or Affiliate, as the case may be, or
any other Person or (ii) hire or retain the services of any such employees or
consultants; provided that this obligation shall not apply to consultants who
regularly provide services concurrently to multiple clients in the normal course
of their business, to the extent that the hiring or retention of such
consultants is not likely to materially impair the ability of such consultants
to provide services to the Company. In addition, the Company and each Member
agrees that, for one (1) year after the proper withdrawal of a Member or
transfer of a Member's Membership Interest in accordance with this Operating
Agreement, it shall comply with the foregoing restrictions applied with respect
to the employees and consultants of such withdrawing or transferring Member.
Section 10.5 NON-COMPETITION. The Company and the other Members
acknowledge that CRC and its Affiliates engage in the same or similar activities
or lines of business as the Company and have an interest in the same area of
business opportunities. The Company and the other Members agree that CRC and its
Affiliates shall have the right to (a) subject to Section 10.6 below, engage in
the same or similar business activities or lines of business as the Company, (b)
do business with any client or customer of the Company and (c) Section 10.4
notwithstanding, employ or otherwise engage any officer or employee of the
Company if (i) prior to employment by the Company such person was an officer,
director or employee of CRC or an Affiliate thereof, or (ii) such employment or
engagement by CRC or its Affiliate would not harm the Company in any significant
manner, and neither CRC nor any Affiliate thereof, nor any officer, director,
employee, agent or other representative of CRC or such Affiliate, shall be
liable to the Company or any Member by reason of any such activities of CRC or
its Affiliates or of such Person's participation therein.
Section 10.6 BUSINESS OPPORTUNITIES. In the event that (a) CRC or any of
its Affiliates, or (b) any officer, director or employee of the Company who is
also an officer, director or employee of CRC or any Affiliate thereof, acquires
knowledge of a potential
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transaction or matter which may be a business opportunity for both the Company
and CRC or any of its Affiliates, such business opportunity shall belong only to
CRC and not to the Company, and any such officer, director or employee of the
Company shall treat such business opportunity as belonging only to CRC and not
to the Company, subject to the following sentence. In the case of clause (b) of
the preceding sentence, the General Manager shall determine in good faith
whether, based on the circumstances under which such individual acquired his or
her knowledge, such business opportunity instead was offered to such individual
solely in his or her capacity as an officer, director or employee of the Company
("Company Capacity").
For purposes of the foregoing determination, there shall be a
presumption that such business opportunity was offered to such person in his
capacity as an officer, director or employee of CRC or any Affiliate thereof. In
the event the General Manager determines that it was so offered to such person
in his Company Capacity, such business opportunity shall belong only to the
Company and not to CRC and such officer, director or employee shall treat such
business opportunity as belonging only to the Company and not to CRC. With
respect to any business opportunity belonging to CRC pursuant to this Section
10.6, CRC shall decide how to allocate and pursue such business opportunity
based on its sole determination of what is in the best interests of CRC. The
General Manager's good faith determination of the allocation of business
opportunities pursuant to this Section shall be conclusive and binding for all
purposes.
The foregoing notwithstanding, and in order to minimize the
circumstances subject to the preceding paragraph, the Members and the Company
agree as follows:
(a) Each of the following business activities shall be deemed the
exclusive business opportunities of the Company ("Company Opportunities"):
(i) Messaging and/or directory services, architecture and
design;
(ii) Hosting; and
(iii) Any new CRC Opportunities to be performed in Connecticut
or Westchester County, New York.
All Company Opportunities, whether originated by Company representatives
or CRC representatives, shall belong to the Company, subject to subsection (c)
below.
(b) Each of the following business activities shall be deemed
the exclusive business opportunities of CRC ("CRC Opportunities"):
(i) Support Services;
(ii) Programming;
(iii) Life cycle services/help desk services; and
(iv) Software development.
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All CRC Opportunities, whether originated by Company representatives or
CRC representatives, shall belong to CRC.
(c) In the event that the General Manager makes a good faith
determination that the Company does not have the financial resources to execute
on any new Company Opportunity, CRC shall be entitled to pursue such opportunity
pursuant to this Article X, and such opportunity shall be deemed a CRC
Opportunity.
(d) Company Opportunities originated by CRC shall be billed and
collected by CRC. Subject to the provisions hereof, CRC shall promptly forward
the appropriate funds to the Company following receipt thereof.
Section 10.7 ALLOCATION OF EXPENSES. Shared expenses and overhead of CRC
and the Company shall be allocated between the Company and CRC based on relative
revenues, as adjusted, such allocation being subject to reasonable adjustments
by the General Manager if the General Manager determines in its good faith
judgment that such allocation is not reasonable under the circumstances. Project
based expenses overhead will be allocated in the General Manager's reasonable
good faith judgment based on which entity is servicing such project. Further:
(i) the General Manager shall provide to the Members quarterly
reports of how such expenses and overhead are allocated (the "Expense
Allocation Report");
(ii) upon receiving a Quarterly Expense Allocation Report from
the General Manager, each Member shall have thirty (30) days to object
to such Expense Allocation Report;
(iii) any objections to a Expense Allocation Report must be made
based on the entire Expense Allocation Report and not on a line item
basis;
(iv) the General Manager shall have fifteen (15) days from
receipt of an objection to respond to the objecting Member;
(v) upon receipt of the General Manager's response to an
objection, there shall be a ten (10) day period for the parties to
resolve any further disputes related to the objection, after which any
remaining disputes shall be handled pursuant to and in accordance with
the dispute resolution provisions of Sections 4.2(a) and (b) and Section
12.12 of this Operating Agreement, subject to subsection (vii) below;
(vi) in the event that an objection to an Expense Allocation
Report is submitted to an arbitrator pursuant to Section 12.12 of this
Operating Agreement, such Expense Allocation Report shall be adjusted by
the General Manager to conform to the arbitrator's findings and
judgment;
(vii) in the event that the arbitrator's findings (x) uphold the
General Manager's original Expense Allocation Report, (y) show any
discrepancy in favor of ESNI from the original Expense Allocation Report
or (z) show a discrepancy in favor of CRC of less than or equal to 5%
from the original Expense Allocation Report, ESNI shall,
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notwithstanding the provisions of Section 12.12 of this Operating
Agreement, pay all expenses related to the arbitration, and CRC shall
pay a penalty to ESNI equal to the amount of any discrepancy between the
original Expense Allocation Report and the arbitrator's findings;
(viii) in the event that there is a discrepancy of more than 5%
in favor of CRC between the arbitrator's findings and the original
Expense Allocation Report, CRC shall, (x) notwithstanding the provisions
of Section 12.12 of this Operating Agreement, pay all expenses related
to the arbitration and (y) if the discrepancy shall be deemed the result
of CRC's willful or intentional misconduct, pay a penalty to ESNI equal
to such discrepancy.
ARTICLE XI
BOOKS; REPORTS TO MEMBERS; TAX ELECTIONS
Section 11.1 BOOKS AND RECORDS.
(a) As part of its general administrative duties for the Company, the
General Manager shall maintain or cause to be maintained proper and complete
books and records in which shall be entered fully and accurately all
transactions and other matters relating to the Company's business in the detail
and completeness customary and usual for businesses of the type engaged in by
the Company. The Company's financial statements shall be kept on the accrual
basis and in accordance with GAAP. The Company's financial statements shall be
audited annually by independent certified public accountants selected by the
General Manager. The fact that such independent certified public accountants may
audit the financial statements of one or more of the Members or their Affiliates
shall not disqualify such accountants from auditing the Company's financial
statements.
(b) At a minimum, the Company shall keep such books and records as
may be required by the Act and such other books and records as are customary and
usual for businesses of the type engaged in by the Company.
(c) Each Member or its duly authorized representatives shall have the
right, during normal business hours, to inspect and copy the Company's books and
records at the requesting Member's expense.
(d) The Members shall have the right to cause the Company to take all
actions necessary to afford, at the requesting party's expense, such party's
independent certified public accountants access to the Company's books, records,
General Manager, employees and agents to the full extent reasonably determined
by such party's independent certified public accountants to be necessary in
order to perform their audit or review of such party's financial statements. In
addition, the internal auditors of each such party shall have full right of
access to the Company's books, records, General Manager, employees and agents to
the full extent reasonably determined by such party's internal auditors to be
necessary in order to perform their audit or review of such party's financial
statements; provided that in exercising such right, such internal auditors to
the extent reasonably practicable shall coordinate their visits with those by
internal auditors of other parties requesting access under this subsection.
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Section 11.2 REPORTING.
(a) Monthly. The General Manager will deliver to the Members
operating and financial reports for each month (other than quarter and year end)
within 30 days following the end of that month, including balance sheet,
operating statement, income statement, and detailed fee invoicing, including
backup supporting expense changes.
(b) Quarterly. The General Manager will deliver to the Members
operating and financial reports for each quarter within 30 days following the
end of that quarter, including balance sheet, operating statement, income
statement, and detailed fee invoicing, including backup supporting expense
changes.
(c) Annual. The General Manager will deliver to the Members (1)
unaudited financial statements, prepared in accordance with GAAP, not later than
45 days following the end of each Fiscal Year and (2) audited financial
statements, prepared in accordance with GAAP, not later than 75 days following
the end of each Fiscal Year.
(d) Management Review. As part of its general management services,
the General Manager shall review annually the Company's audited financial
statements and operations with the Members in connection with the delivery to
the Members of such financial statements or at such time and at such place as
the Members and General Manager may mutually agree. Additionally, a Member may
request additional interim presentations by the General Manager, at that
Member's expense, subject to the availability of the General Manager or its
appointees.
(e) Tax Information. As part of its general management services, the
General Manager shall, within ninety (90) days after the end of each Fiscal
Year, supply to each Member all information necessary and appropriate to be
included in each Member's income tax returns for that year.
(f) Objection to Information from General Manager. Except as
otherwise expressly provided in this Agreement, each Member shall have sixty
(60) days following receipt of any report, financial statements or information
from the General Manager provided in accordance with this Agreement to object to
any such report, financial statements or information. The General Manager shall
have thirty (30) days from receipt of an objection to respond to the objecting
Member. Upon receipt of the General Manager's response to an objection, there
shall be a fifteen (15) day period for the parties to resolve any further
disputes related to the objection, after which any remaining disputes shall be
handled pursuant to and in accordance with the dispute resolution provisions of
Sections 4.2(a) and (b) and Section 12.12 of this Operating Agreement.
Section 11.3 TAX MATTERS MEMBER.
(a) Subject to Section 9.4(c), CRC is hereby appointed and shall
serve as the tax matters Member of the Company (the "Tax Matters Member") within
the meaning of IRC Section 6231(a)(7) for so long as it is not the subject of a
bankruptcy event as defined in Section 9.2 and otherwise is entitled to act as
the Tax Matters Member. The Tax Matters Member may file a designation of itself
as such with the Internal Revenue Service. The Tax Matters Member shall (i)
furnish to each Member affected by an audit of the Company income tax returns a
copy
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of each notice or other communication received from the IRS or applicable state
authority, (ii) keep such Member informed of any administrative or judicial
proceeding, as required by IRC Section 6223(g), and (iii) allow such Member an
opportunity to participate in all such administrative and judicial proceedings.
The Tax Matters Member shall take such action as may be reasonably necessary to
constitute the other Member a "notice partner" within the meaning of IRC Section
6231(a)(8); provided that the other Member provides the Tax Matters Member with
the information that is necessary to take such action.
(b) The Company shall not be obligated to pay any fees or other
compensation to the Tax Matters Member in its capacity as such. However, the
Company shall reimburse the expenses (including reasonable attorneys' and other
professional fees and disbursements) incurred by the Tax Matters Member in such
capacity. Each Member who elects to participate in Company administrative tax
proceedings shall be responsible for its own expenses incurred in connection
with such participation. In addition, the cost of any adjustments to a Member
and the cost of any resulting audits or adjustments of a Member's tax return
shall be borne solely by the affected Member.
(c) The Company shall indemnify and hold harmless the Tax Matters
Member from and against any loss, liability, damage, cost or expense (including
reasonable attorneys' fees and disbursements) sustained or incurred as a result
of any act or decision concerning Company tax matters and within the scope of
such Member's responsibilities as Tax Matters Member, so long as such act or
decision was not the result of gross negligence, fraud, bad faith or willful
misconduct by the Tax Matters Member. The Tax Matters Member shall be entitled
to rely on the advice of legal counsel as to the nature and scope of its
responsibilities and authority as Tax Matters Member, and any act or omission of
the Tax Matters Member pursuant to such advice shall in no event subject the Tax
Matters Member to liability to the Company or any Member.
Section 11.4 TAX AUDITS/SPECIAL ASSESSMENTS. If a tax return of the
Company or an individual Member with respect to an item or items of Company
income, loss, deduction, etc., potentially affecting any tax liability of the
Members generally is subject to an audit by the Internal Revenue Service (or
other similar governmental agency), the General Manager may, in the exercise of
their business judgment, determine that it is necessary to contest proposed
adjustments to such return or items.
Section 11.5 TAX ELECTIONS. The Company will elect to amortize
organizational costs. The Company may file an election under IRC Section 754, in
accordance with applicable Treasury Regulations, to cause the basis of the
Company's property to be adjusted for federal income tax purposes as provided by
IRC Section 734 and IRC Section 743. The determination whether to make and file
any such election shall be made by the General Manager in its sole discretion.
Section 11.6 TAXES AND CHARGES; GOVERNMENTAL RULES. Each Member shall
(a) promptly pay all applicable taxes and other governmental charge imposed on
or against such Member, except to the extent (i) the failure to promptly pay
such taxes or other governmental charges will not have a material adverse effect
on the Company or its assets or (ii) any such taxes or other governmental
charges are being contested in good faith by appropriate proceedings, and
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(b) comply with all applicable governmental rules, except to the extent that
such noncompliance will not have a material adverse effect on the Company.
ARTICLE XII
MISCELLANEOUS
Section 12.1 BINDING EFFECT. This Operating Agreement shall be binding
upon any Person who executes this Operating Agreement or any permitted
transferee or permitted assignee of an interest in the Company.
Section 12.2 ENTIRE AGREEMENT. This Operating Agreement and the
Additional Agreements, when executed and delivered, contain the entire agreement
of the parties hereto with respect to the subject matter hereof and supersede
all prior understandings and agreements of the parties with respect thereto.
Section 12.3 AMENDMENTS. This Operating Agreement may not be amended
except by the written agreement of all of the Members.
Section 12.4 GOVERNING LAW; CONSENT TO JURISDICTION. This Operating
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Delaware without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware. Each of the parties hereto hereby irrevocably
submits to the jurisdiction of any state or federal court sitting in the City,
County and State of New York in respect of any enforcement proceeding arising
out of or relating to this Operating Agreement, which courts shall have
exclusive jurisdiction over and with respect to any such enforcement proceeding,
and irrevocably accepts for itself and in respect of its property, generally and
unconditionally, jurisdiction of the aforesaid courts. Each of the parties
hereto hereby irrevocably waives, to the fullest extent such party may
effectively do so under applicable law, trial by jury and any objection that
such party may now or hereafter have to the laying of venue of any such
enforcement proceeding brought in any such court and any claim that any such
enforcement proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of any party hereto to
serve process in any manner permitted by law or to commence enforcement
proceedings or otherwise proceed against the other party in any other
jurisdiction.
Section 12.5 NOTICES TO MEMBERS. Except as otherwise provided in this
Operating Agreement, any notice, demand or communication to a Member required or
permitted to be given by any provision of this Operating Agreement shall be
deemed to have been sufficiently given or served for all purposes if delivered
personally, sent by facsimile transmission or electronic mail (with confirmation
of receipt), overnight express courier or registered or certified mail,
postage/charges-prepaid, return receipt requested, and addressed to the Member
(with a copy to counsel of the Member) as set forth on Schedule A. All such
notices, demands and other communications will (i) if delivered personally to
the address as provided in this Section 12.5, be deemed given upon delivery,
(ii) if delivered by facsimile or electronic mail transmission to the facsimile
number or electronic mail address, as the case may be, as provided in this
Section 12.5, be deemed given upon receipt, (iii) if delivered by overnight or
express courier to the address as
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provided in this Section 12.5, be deemed given on the earlier of the second
Business Day following the date sent by such overnight or express courier or
upon receipt and (iv) if delivered by mail in the manner described above to the
address as provided in this Section 12.5, be deemed given on the earlier of the
sixth Business Day following mailing or upon receipt, in each case regardless of
whether such notice, demand or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
12.5. Any party from time to time may change its address or other information
for the purpose of notices to that party by giving notice in accordance with
this Section 12.5 specifying such change to the other party hereto at least ten
(10) Business Days prior to the effective date of such notice.
Section 12.6 BANK ACCOUNTS. The Company shall maintain appropriate
accounts at one or more financial institutions for all funds of the Company.
Such accounts shall be used solely for the business of the Company. Withdrawal
from such accounts shall be made only upon the signature of the General Manager
and those persons authorized by the General Manager.
Section 12.7 HEADINGS. The titles of the Articles and the headings of
the Sections of this Operating Agreement are for convenience of reference only
and are not to be considered in construing the terms and provisions of this
Operating Agreement.
Section 12.8 WAIVERS. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Operating Agreement shall not prevent a subsequent act, that
would have originally constituted a violation, from having the effect of an
original violation.
Section 12.9 NO THIRD PARTY BENEFICIARIES. None of the provisions of
this Operating Agreement shall be for the benefit of or enforceable by any
Person other than the parties to this Operating Agreement and their respective
permitted successors and permitted transferees and assigns and the Persons
entitled to the benefits of Article V of this Operating Agreement.
Section 12.10 INTERPRETATION. It is the intention of the Members that,
during the term of this Operating Agreement, the rights and obligations of the
Members and their successors-in-interest shall be governed by the terms of this
Operating Agreement, and that the right of any Member or successor-in-interest
to assign, transfer, sell or otherwise dispose of any interest in the Company
shall be subject to limitations and restrictions of this Operating Agreement.
This Operating Agreement shall be construed without regard to any presumption or
other rule requiring construction hereof against the party causing this
Operating Agreement to be drafted.
Section 12.11 FURTHER ASSURANCES. ESNI shall, and shall cause its
Affiliates to, use all commercially reasonable efforts to obtain the consents
and perform such other acts as are required by Article VI of the ESNI
Contribution Agreement as promptly as reasonably practicable. Upon the
satisfaction of the conditions set forth in Article VI of the ESNI Contribution
Agreement, each of CRC and ESNI shall, and shall cause their respective
Affiliates to, promptly execute and deliver the Additional Agreements as
required by Article VI of the ESNI Contribution Agreement. Each Member shall
execute all such certificates and other documents and shall do all such other
acts as the General Manager deem reasonably appropriate to comply with the
requirements of law for the formation of the Company and to comply with
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any laws, rules, regulations and third-party requests relating to the
acquisition, operation or holding of the property of the Company.
Section 12.12 ARBITRATION. Subject to Section 4.2, the parties hereto
agree that any and all disputes, claims or controversies arising out of or
relating to this Operating Agreement that are not resolved by their mutual
agreement shall be submitted to final and binding arbitration before JAMS, or
its successor, pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1,
et seq. Either party may commence the arbitration process called for in this
Operating Agreement by filing a written demand for arbitration with JAMS, with a
copy to the other party. The arbitration will be conducted in accordance with
the provisions of JAMS' Comprehensive Arbitration Rules and Procedures in effect
at the time of filing of the demand for arbitration. The parties will cooperate
with JAMS and with one another in selecting an arbitrator from JAMS' panel of
neutrals, and in scheduling the arbitration proceedings. The parties covenant
that they will participate in the arbitration in good faith, and that they will
share equally in its costs. The provisions of this paragraph may be enforced by
any court of competent jurisdiction, and the party seeking enforcement shall be
entitled to an award of all costs, fees and expenses, including attorneys fees,
to be paid by the party against whom enforcement is ordered.
Section 12.13 ILLEGALITY AND SEVERABILITY. If application of any one or
more of the provisions of this Operating Agreement shall be unlawful under
applicable law and regulations, then the parties will attempt in good faith to
make such alternative arrangements as may be legally permissible and which carry
out as nearly as practicable the terms of this Operating Agreement. Should any
portion of this Operating Agreement be deemed unenforceable by a court of
competent jurisdiction, the remaining portion hereof shall remain unaffected and
be interpreted as if such unenforceable portions were initially deleted.
Section 12.14 INJUNCTIVE RELIEF. Each Member acknowledges that in the
event of any breach of this Operating Agreement, including, without limitation,
of Article X, the non-breaching Member(s) shall suffer irreparable injury not
compensable by money damages and for which such non-breaching Member(s) shall
not have an adequate remedy available at law. The non-breaching Member(s) shall
be entitled to obtain, without the posting of any bond or other security, such
injunctive or other equitable relief as may be reasonably necessary to prevent
or curtail any such breach, threatened or actual. The foregoing shall be in
addition to and without prejudice to such other rights as the non-breaching
Member(s) may have under this Operating Agreement or applicable law.
Section 12.15 AUTHORITY/NO CONFLICTS. Each Member represents and
warrants as follows:
(a) It, and to its best knowledge, each of its Control Entities, is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation or organization;
(b) It has full power and authority and legal right to execute and
deliver this Operating Agreement and, when executed and delivered, any
Additional Agreement to which it may be a party;
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(c) Its execution, delivery and performance of this Operating
Agreement has been, and, when executed and delivered, all Additional Agreements
to which it may be a party will have been, duly authorized by all necessary
action;
(d) This Operating Agreement and, when executed and delivered, each
Additional Agreement to which it may be a party has been duly executed and
delivered by it, as the case may be;
(e) This Operating Agreement and, when executed and delivered, each
Additional Agreement to which it may be a party constitutes its, as the case may
be, legal, valid and binding obligation, enforceable in accordance with its
terms, except that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by the availability of the remedy of specific
performance; and
(f) None of the execution, delivery or performance by it of this
Operating Agreement and, when executed and delivered, any Additional Agreement
to which it may be a party (i) will violate or conflict with its organizational
documents, (ii) will result in any breach of or default under any other Contract
to which it may be a party or (iii) is prohibited or, except as expressly
disclosed in this Operating Agreement or any Additional Agreement to which it
may be a party, requires it to obtain any consent, approval or authorization or
make any registration or filing with any governmental authority or other Person.
Section 12.16 PUBLICITY. Without the prior written consent of the other
Members, no Member shall, and each will cause its representatives not to, make
any release to the press or other public disclosure, or make any statement to
any other Person other than their respective representatives, with respect to
either the fact that discussions or negotiations are taking place concerning the
collaboration between the parties hereto or the existence or contents of this
Operating Agreement, except for such public disclosure as may be necessary for
the disclosing Person not to be in violation of or in default under any
applicable law, regulation, government order or securities exchange rules, in
which event the disclosing Person shall use its commercially reasonable efforts
to provide to the other Members in advance of such disclosure a copy of such
disclosure to be made so that the other Members may comment upon such
disclosure.
Section 12.17 EXPENSES. Each Member shall pay its own expenses incident
to the negotiation and preparation of this Operating Agreement and the
Additional Agreements and the consummation of the transactions provided for
herein and therein (including, without limitation, the fees of any accountant,
broker or financial advisor retained by such Member).
Section 12.18 COUNTERPARTS. This Operating Agreement may be executed in
counterparts (and by facsimile), each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
caused their authorized representatives to execute this Operating Agreement as
of the date first above written.
E-SYNC NETWORKS, LLC
By: CRC Management Services, Inc.
Its: General Manager
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
CRC, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
E-SYNC NETWORKS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Operating Officer
Signature Page to Operating Agreement
SCHEDULE A
MEMBERS; MEMBERSHIP INTERESTS; AGREED VALUES OF COMPANY
ASSETS; CAPITAL ACCOUNTS
MEMBER NAME MEMBERSHIP
AND NOTICE ADDRESS MEMBER'S COUNSEL INTEREST
------------------ ---------------- ----------
CRC, INC. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP 49%
1290 Avenue of the Americas, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Attn: Chief Executive Officer Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ e-Mail: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
e-Mail: ▇▇@▇▇▇▇▇▇.▇▇▇ and
▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
E-SYNC NETWORKS, INC. ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP 51%
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ One Landmark Square, Suite 1400
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Attn: President and Chief Operating Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Officer Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇ e-Mail: ▇▇▇▇▇▇@▇▇▇.▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
e-Mail:
AGREED VALUES OF COMPANY ASSETS
Total: $3,523,087
CAPITAL ACCOUNTS OF THE MEMBERS
CRC: $1,726,313
ESNI: $1,796,774