EXHIBIT 10.1
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") made this
17th day of March, 2005, is entered into by and between TRIMEDIA ENTERTAINMENT
GROUP, INC., a Delaware corporation with an address of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("TRIMEDIA") and INTERNATIONAL EQUITIES GROUP,
INC., a Florida corporation with an address of ▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("IEG") (each a "MEMBER" and collectively, the "MEMBERS").
The Members hereby form a limited liability company pursuant to and in
accordance with the Delaware Limited Liability Company Act, as amended from time
to time (the "Act "), and hereby agree as follows:
1. NAME. The name of the limited liability company is Battle Rap, LLC (the
"Company").
2. TERM. The term of the Company shall continue until the Company is
dissolved. The Company shall be dissolved and its affairs wound up, upon
the first to occur of the following events:
(a) the sale of all or substantially all of the Company's assets;
(b) the unanimous vote of the Members; or
(c) judicial dissolution of the Company as provided for in the Act.
3. PURPOSE. The purpose of the Company shall be to undertake one or more
development projects in the entertainment industry, including without
limitation development of the Battle Rap video brand for entertainment
content, including online interactive gaming, merchandise, film and
music productions and television programming and other business
opportunities. The foregoing enumerated objectives and purposes shall
not be limited or restricted by reference to, or inference from, the
terms of any other portion of this Agreement, and shall be regarded as
independent. They are intended to be and shall be construed as powers as
well as purposes and objects of the Company and shall be in addition to
and not in limitation of the general powers of limited liability
companies under the laws of the State.
4. MEMBERS. The names and the business, residence, or mailing addresses of
the Member are as set forth in the heading of this Operating Agreement.
5. POWERS. The business and affairs of the Company shall be managed by the
Members. The Members shall have the power to do any and all acts
necessary or convenient to or for the furtherance of the purposes
described herein, including all powers, statutory or otherwise,
possessed by members under the Act. Except as expressly provided herein,
any action by the Members shall require the consent of Members holding
than 50% greater/ aggregate Percentage Interest.
6. CAPITAL CONTRIBUTIONS. Each of the initial Members shall contribute
capital to the Company as follows: TRIMEDIA's Capital Contribution shall
be in the form of 2,000,000 shares of TRIMEDIA's common stock, which
shall be immediately distributed to IEG or its designees, and IEG's
Capital Contribution shall be through the assignment of all intellectual
property rights to the "Battle Rap" concept, including without
limitation the existing "Battle Rap" video gaming project, and $300,000
in cash or credit for expenses paid on behalf of the Company.
7. PERCENTAGE OWNERSHIP. The percentage ownership interest ("Percentage
Interest") in the Company of each Member shall be as follows:
IEG 90%
TRIMEDIA 10%
---
TOTAL 100%
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8. ALLOCATION OF PROFITS AND LOSSES. The Company's profits and losses shall
be allocated among the Members according to their respective Percentage
Interests.
9. DISTRIBUTIONS. Distributions of Available Cash Flow shall be made to the
Members at the times and in the aggregate amounts determined by the
Members, but in any event no less often than quarterly. Distributions
shall be made to the Members according to their respective Percentage
Interests. "AVAILABLE CASH FLOW" shall mean the Company's cash receipts
from operations in a particular period, and excluding without limitation
receipts from (i) capital contributions, or (ii) a financing or
refinancing of Company assets or other loans to the Company, less cash
expenditures paid or payable with respect to such period and less any
reserves established in the discretion of the Managers.
10. TRIMEDIA OPTION. During the first sixty (60) days following the date
hereof, TRIMEDIA shall have the option, at any time and from time to
time, to purchase up to an additional 39.9% Percentage Interest for an
aggregate Capital Contribution of $300,000. The additional Percentage
Interest purchased by TRIMEDIA upon exercise of the option shall be
equal to 39.9% times a fraction, the numerator of which is the Capital
Contribution made by TRIMEDIA upon such exercise and the denominator of
which is $300,000. By way of example, if TRIMEDIA elects to make a
Capital Contribution of $200,000, it will receive a 26.6% increase in
its Percentage Interest (39.9% times $200,000/$300,000), from 10% to
36.6%. The option shall be exercisable by written notice of exercise
from TRIMEDIA to the Company, accompanied by payment of the applicable
Capital Contribution. Upon exercise of the option in whole or in part,
this Limited Liability Company Agreement shall be amended to (i) to
reflect the additional Percentage Interest owned by TRIMEDIA, and (ii)
to otherwise read in full in the form attached hereto as Exhibit A. In
connection with any such exercise, IEG hereby appoints TRIMEDIA as its
attorney in fact to effect the amendments set forth in the preceding
sentence.
11. LIABILITY OF MEMBERS. The Members shall not have any liability for the
obligations or liabilities of the Company except to the extent provided
in the Act.
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12. GOVERNING LAW. This Agreement shall be governed by, and construed under,
the laws of the State of Delaware, without regard to the law of conflict
of laws, all rights and remedies being governed by said laws.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Operating Agreement as of the 17th day of March,
2005.
TRIMEDIA ENTERTAINMENT GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
INTERNATIONAL EQUITIES GROUP, INC.
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
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Exhibit A
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AMENDED AND RESTATED
OPERATING AGREEMENT
OF
BATTLE RAP, LLC
THIS OPERATING AGREEMENT (this "AGREEMENT") of Battle Rap, LLC (the
"COMPANY") is entered into and shall be effective as of the 17th day of March,
2005 (the "EFFECTIVE DATE"), as amended through ______________, 2005, by and
between TRIMEDIA ENTERTAINMENT GROUP, INC. ("TRIMEDIA") and INTERNATIONAL
EQUITIES GROUP, INC. ("IEG") (each a "MEMBER" and collectively, the "MEMBERS"),
on the following terms and conditions.
RECITALS
WHEREAS, the Company was formed by the filing of a Certificate of
Organization with the Department of State of the State of Delaware on January
25, 2005;
WHEREAS, the Members desire to set forth in this Agreement the terms of
their understandings and agreement concerning the management and operation of
the Company.
NOW, THEREFORE, incorporating the entire background herein by reference,
the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Capitalized terms used in this Agreement and not
defined elsewhere herein shall have the following meanings:
"ACT" means the Delaware Limited Liability Company Act, as amended from
time to time.
"ADDITIONAL MEMBER" means a Member other than TRIMEDIA and IEG or a
Substituted Member.
"AFFILIATE" means, as to any Person, any other Person controlled by,
under the control of, or under common control with, such Person, or any Person
who is an officer, director, manager, general partner or trustee of, or serves
in a similar capacity with respect to, the specified Person or of which the
specified Person is an officer, director, manager, general partner or trustee or
serves in a similar capacity.
"AGREEMENT" means this Operating Agreement of Battle Rap, LLC, as
amended from time to time.
"AVAILABLE CASH FLOW" shall mean the Company's cash receipts from
operations in a particular period, and excluding without limitation receipts
from (i) capital contributions, or (ii) a financing or refinancing of Company
assets or other loans to the Company, less cash expenditures paid or payable
with respect to such period and less any reserves established in the discretion
of the Managers.
"BANKRUPT" means, with respect to any Person, a Person that makes an
assignment for the benefit of creditors; files a voluntary petition in
bankruptcy; is adjudicated a bankrupt or insolvent or has entered against it an
order for relief in any bankruptcy or insolvency Proceedings which remains in
force for more than 90 days; 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; seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of such Person or of all or any
substantial part of its properties; does not have dismissed within 120 days
after its commencement, any Proceeding against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation; or, if within 90 days
after the appointment without its consent of a trustee, receiver or liquidator
of such Person or of all or any substantial part of its properties, the
appointment is not vacated or stayed or if, within 90 days after the expiration
of any such stay, the appointment is not vacated.
"BOARD OF MANAGERS" means the group of Persons appointed pursuant to
Section 4.4 hereof and in whom the management and control of the Company and its
business and affairs is vested, subject to and in accordance with the terms of
this Agreement.
"CAPITAL ACCOUNT" means the account to be established and maintained by
the Company for each Member in accordance with Section 6.1.
"CAPITAL CONTRIBUTION" means, with respect to any Member, the amount of
cash, or the value (as reasonably determined by the Managers) of property, which
a Member has contributed to the Company.
"CERTIFICATE" has the meaning set forth in Section 2.1.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMPANY MINIMUM GAIN" shall have the same meaning as "PARTNERSHIP
MINIMUM GAIN" has under Regulations Section 1.704-2(b)(2).
"DEPARTMENT OF STATE" means the Department of State of the State of
Delaware.
"DISTRIBUTION" means a transfer of cash or other Company assets
described in either Article7 or Article13 that is made to a Member or former
Member.
"EFFECTIVE DATE" has the meaning set forth in the preamble of this
Agreement.
"FAIR MARKET VALUE" shall mean, as to any asset, the value that a
willing buyer would pay a willing seller, based on all of the relevant facts and
circumstances, including, in the case of Units, factors such as discounts for
nonmarketability, minority interests, liquidation preferences, and restrictions
on transferability, which determination of Fair Market Value shall be binding on
all parties absent manifest error. Fair Market Value shall be determined by the
Company's accountants; provided that the Fair Market Value of Units shall be
determined by an independent appraiser experienced in the valuation of privately
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held companies selected by the Company and reasonably satisfactory to the Member
whose Units are being valued.
"FISCAL YEAR" shall have the meaning set forth in Section 9.1.
"FORMER MEMBER" has the meaning set forth in Section 10.4.
"GROSS ASSET VALUE" shall mean, with respect to any asset, such asset's
adjusted basis for federal income tax purposes, except as adjusted by the
Managers as provided herein.
"MAJORITY" or "MAJORITY IN INTEREST" means, with respect to the Managers
or Members as a whole, those Managers or Members entitled to cast a majority of
votes entitled to vote on the matter in question.
"MANAGERS" means those Persons appointed by the respective Members to
the Board of Managers.
"MEMBER" means each of TRIMEDIA and IEG and any Additional Members or
Substituted Members admitted to the Company pursuant to Article 3 or Article10
of this Agreement. Reference to a "Member" shall refer to any one of the Members
without distinction unless otherwise indicated.
"MEMBER NONRECOURSE DEBT" shall have the same meaning as "PARTNER
NONRECOURSE DEBT" has under Regulations Section 1.704-1(a)(2).
"MEMBER NONRECOURSE DEBT MINIMUM GAIN" shall have the same meaning as
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has under Regulations
Section 1.704-2(i)(2).
"MEMBER NONRECOURSE DEDUCTIONS" shall have the same meaning as "PARTNER
NONRECOURSE DEDUCTIONS" has under Regulations Section 1.704-2(i)(1).
"MEMBERSHIP INTERESTS" mean the ownership interest of a Member in the
Company from time to time, including the right of such Member to any and all
Distributions (liquidating and otherwise) and allocations of Net Profit(s) and
Net Loss(es) to which such Member may be entitled, as provided in this Agreement
and in the Act, together with the management and participation rights devolving
on such Member by virtue of its status as a "member" under the Act and as
specifically set forth in this Agreement, and the obligations of such Member to
comply with all the terms and provisions of this Agreement and of the Act.
Membership Interests may be segmented into and/or expressed as a percentage of
various rights and/or obligations, as provided herein.
"NET PROFIT(S)" and "NET LOSS(ES)" shall mean, for each fiscal period,
an amount equal to the Company's taxable income or loss for such period,
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable income or
loss) with the following adjustments:
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(i) Such taxable income or loss shall be increased by the
amount of all income during such period that is exempt from U.S. federal income
tax and not otherwise taken into account in computing Net Profit or Net Loss
pursuant to this paragraph;
(ii) Such taxable income or loss shall be decreased by the
amount of all expenditures made by the Company during such period which are
described in Section 705(a)(2)(B) or treated as so described pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Profit or Net Loss pursuant to this paragraph;
(iii) In the event that the Gross Asset Value of any Company
asset is adjusted pursuant to Section 6.2 of this Agreement, the amount of such
adjustments shall be treated as an item of gain or loss from the disposition of
such asset and shall be taken into account for purposes of computing Net Profit
or Net Loss;
(iv) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value; and
(v) Any items that are specially allocated pursuant to the
provisions of Section 8.3 shall not be taken into account in computing Net
Profit or Net Loss.
"NOTICE" shall mean notification in writing as set forth in Section
16.1.
"OFFERED UNITS" has the meaning set forth in Section 10.3.
"OFFERING MEMBER" has the meaning set forth in Section 10.3.
"PERCENTAGE INTEREST" means, with respect to any Member, the percentage
Membership Interest held by such Member, expressed as the ratio of the number of
Units held by such Member to the number of all Units outstanding at any given
time.
"PERSON" means an individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, trust or
unincorporated organization, joint stock company or other similar organization,
government or any political subdivision thereof, or any other legal entity.
"PRIME RATE" shall mean the Prime Rate from time to time published in
the Wall Street Journal.
"PROCEEDING" means any judicial or administrative trial, hearing or
other activity, civil, criminal or investigative, and appeals or reviews of any
of the foregoing, the result of which may be that a court, arbitrator or
governmental agency may enter a judgment, order, decree or other determination
which, if not appealed and reversed, would be binding upon the Company, a Member
or other Person subject to the jurisdiction of such court, arbitrator or
governmental agency.
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"REGULATIONS" shall mean the regulations promulgated under the Code, as
such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REGULATORY ALLOCATIONS" has the meaning set forth in Section 8.3(f).
"REMAINING MEMBERS" has the meaning set forth in Section 10.3.
"REORGANIZATION" has the meaning set forth in Section 5.4.
"SECRETARY OF STATE" shall mean the Secretary of State of the State of
Delaware.
"STATE" shall mean the State of Delaware.
"SUBSTITUTED MEMBER" has the meaning set forth in Section 10.6.
"TAX DISTRIBUTIONS" has the meaning set forth in Section 7.1.
"TAX PAYMENT LOAN" has the meaning set forth in Section 7.5.
"TAXABLE YEAR" means the taxable year of the Company as determined
pursuant to Section 706 of the Code.
"TERM" has the meaning set forth in Section 2.4.
"TERMINATION DATE" has the meaning set forth in Section 2.4.
"TRANSFER" means any sale, assignment, transfer, exchange, mortgage,
pledge, grant, hypothecation, or other transfer, absolute or as security or
encumbrance (including dispositions by operation of law).
"TRIGGERING EVENT" has the meaning set forth in Section 10.4.
"UNITS" shall mean the Units into which the Membership Interests of the
Company are divided from time to time, which Units shall be issued to the
Members in exchange for Capital Contributions as determined by the Managers in
accordance with Article 3 below.
"UNRETURNED CAPITAL CONTRIBUTION" with respect to any Member means all
cash paid toward such Member's Capital Contribution, reduced by distributions
made to such Member pursuant to Section 7.3.
"WITHHOLDING TAX ACT" has the meaning set forth in Section 7.5.
ARTICLE 2
THE COMPANY
2.1 Formation of the Company. The Company was formed by filing the
Certificate of Organization (the "CERTIFICATE") on the 25th day of January, 2005
with the Department of State.
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2.2 Company Name and Office.
(a) The name of the Company shall be "BATTLE RAP, LLC."
(b) The Company shall maintain a registered office in the
State, and the name and address of the Company's registered agent in the State
shall be as specified in the Certificate. Such office and such agent may be
changed from time to time by the Managers.
(c) The principal office of the Company shall be located at
such address within or without the State as is selected by the Managers. The
Company may maintain such additional offices as may be designated from time to
time by the Managers for the purpose of carrying out the business of the
Company.
2.3 Objective and Policy of the Company.
(a) The Company's primary business shall be to undertake one
or more development projects in the entertainment industry, including without
limitation development of the Battle Rap video brand for entertainment content,
including online interactive gaming, merchandise, film and music productions and
television programming and other business opportunities. The foregoing
enumerated objectives and purposes shall not be limited or restricted by
reference to, or inference from, the terms of any other portion of this
Agreement, and shall be regarded as independent. They are intended to be and
shall be construed as powers as well as purposes and objects of the Company and
shall be in addition to and not in limitation of the general powers of limited
liability companies under the laws of the State.
(b) The Company shall have all the powers permitted by law
that are necessary or desirable in carrying out the purposes and business of the
Company.
2.4 Term of the Company. The term of the Company (the "TERM") shall
commence on the Effective Date and shall continue until the Termination Date or
any earlier dissolution as provided for in Article13 hereof. Upon any
dissolution of the Company, the winding up of its affairs shall be conducted in
accordance with the provisions of Article13 hereof.
2.5 Foreign Qualification. Prior to the Company's conducting
business in any jurisdiction other than the State, the Managers shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Managers, with all requirements necessary
to qualify the Company as a foreign limited liability company in that
jurisdiction.
ARTICLE 3
ADMISSION, WITHDRAWAL AND
REDEMPTION OF MEMBERS; CAPITAL CONTRIBUTIONS
3.1 Admission of Members.
(a) As of the Effective Date, TRIMEDIA and IEG shall be
deemed admitted to the Company as Members. The Members' respective Capital
Contributions, the number of Units respectively issued to each Member with
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respect to his or its Capital Contributions, and his or its respective status as
a Member, shall be reflected on the books and records of the Company.
(b) Any Additional Member, or any Substituted Member
admitted pursuant to Article10 hereof, shall be admitted to the Company as of
the date on which such Member executes and delivers to the Company such
documentation as the Managers deem appropriate.
(c) The Company shall not issue any certificates in evidence
of its Units, but shall reflect each Member's Units on its books and records.
All Units so reflected shall be fully paid and non-assessable (except as
provided herein) upon their issuance by the Company as reflected on its books
and records. The Company may issue fractional Units.
3.2 Capital Contributions.
(a) Each of the initial Members has contribute capital to
the Company as set forth opposite his or its name on Schedule A hereto, and
shall receive the number of Units set forth opposite his or its name on Schedule
A hereto.
(b) On or prior to the date of admission of any Additional
Member, and prior to the issuance of any additional Units to an existing Member,
each such Member shall agree to and shall make a Capital Contribution in the
amount, if any, and at the time or times determined by the Managers and set
forth opposite such Member's name on Schedule A.
(c) Except as otherwise provided in this Agreement, a Member
is not entitled to the return of any part of his or its Capital Contribution or
to be paid interest in respect of any Capital Account or Capital Contribution.
An unrepaid Capital Contribution is not a liability of the Company or of any
Member. A Member is not required to contribute or to lend any cash or property
to the Company to enable the Company to return any Member's Capital
Contribution.
3.3 Loans. In the event that at any time the Managers determine that
additional funds are required by the Company, the Managers, acting for and on
behalf of, and in the name of, the Company, shall have the right, but not the
obligation, to cause the Company to borrow such additional funds from commercial
banks, savings and loan associations and/or other lending institutions or other
Persons (including Members).
3.4 Additional Members. Additional Persons may be admitted to the
Company as Members and Units may be created and issued to those Persons on such
terms and conditions as the Managers may determine at the time of issuance
without regard to the rights and privileges of the existing Members. The
Managers from time to time may sell additional Units, accept additional Capital
Contributions or subscriptions therefor and admit Additional Members to the
Company without the consent of the existing Members upon a determination by the
Managers that such additional Capital Contributions are reasonably required for
the Company's operations. The new Membership Interests may have preferences as
to distributions and/or allocations which differ from, and may be senior to, the
existing Membership Interests, and may have a the Capital Contribution required
per Unit that is more or less than that of the initial Members, all as
reasonably determined by the Managers to be in the best interests of the
Company. Upon acceptance of any additional Capital Contributions or the
admission of any addition Members, Schedule A to this Agreement shall be amended
appropriately.
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3.5 Liability of Members.
(a) The liability of each Member to the Company is limited
to such Member's Capital Contributions as specified in Schedule A hereof, as it
may be amended from time to time by agreement of the Managers and such Member.
Such Capital Contributions constitute the only funds that the Members are
required to furnish to the Company, whether by way of contribution of capital,
loan or otherwise. The Members shall have no personal liability for the
obligations of the Company.
(b) Except as may otherwise be required by the Act, no
Member shall be liable for a return of the assets of the Company delivered to
such Member.
(c) To the full extent allowed by applicable law, the
failure of the Company to observe any formalities or requirements relating to
the exercise of its powers or management of its business or affairs under this
Agreement or the Act shall not be grounds for imposing personal liability on the
Members for liabilities of the Company.
3.6 Withdrawal. No Member may withdraw as a Member voluntarily, nor
shall any Member have the right to have its Units redeemed by the Company except
as otherwise provided in this Agreement, prior to the expiration of the Term.
ARTICLE 4
MANAGEMENT AND OPERATIONS OF THE COMPANY
4.1 Management Generally. The business and affairs of the Company
shall be managed under the direction of a board of managers having one member at
all times (the "BOARD OF MANAGERS"); provided that if TRIMEDIA has a Percentage
Interest of 33%, the Board of Managers thereafter shall have three members at
all times. No Manager in his or her individual capacity as such shall have the
authority or capacity to bind the Company or conduct its business unless
specifically authorized to do so by the Managers acting as a body. The Managers
shall act on behalf of the Company only as a body, either by an affirmative
Majority Vote cast at a meeting duly called and at which a quorum is present, or
alternately, by Majority written consent. Similarly, no Member in its capacity
as such shall have the authority or capacity to bind the Company or conduct its
business, but shall have only such voting and other management and participation
rights as are specifically set forth herein.
4.2 Management Powers of the Managers.
(a) Without in any way limiting the generality of the
foregoing, but subject to the express provisions of this Agreement and the
provisions of the Act, the Managers shall have on behalf of the Company all
rights and powers that may be possessed by a manager under the Act, to manage
and administer the Company in accordance with the terms of this Agreement and to
perform all acts which they may, in their discretion, deem necessary or
desirable (which powers are hereby delegated to the extent provided herein to
the officers of the Company). The Managers' right and authority shall include,
but not be limited to, the right and authority to enter into and to execute,
acknowledge and deliver binding contracts and documents in the name of and on
behalf of the Company and to delegate power and authority to take designated
action(s) to any Member, group of Members, or employees.
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(b) Notwithstanding any provision hereof to the contrary,
the annual operating budget of the Company and any new Company projects shall
require unanimous approval of the Managers.
4.3 Legal and Regulatory Compliance by the Company. The Managers
shall take all reasonable actions that may be necessary or appropriate for the
continuation of the Company's valid existence as a limited liability company
under the laws of the State and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Members or to
enable the Company to conduct the business in which it is engaged.
4.4 Election, Tenure, and Removal of Managers.
(a) The Members hereby unanimously elect ▇▇▇▇▇▇ ▇▇▇▇▇▇ as
the initial Manager of the Company, to exercise the powers of a Manager under
this Agreement until he resigns as a Manager, is removed pursuant to the terms
hereof or his successor is selected by the Members.
(b) Any Manager may resign at any time. Such resignation
shall be made in writing and shall take effect at the time specified therein.
(c) In any election of Managers, each Member shall be
entitled to cast that number of votes equal to the number of Managers on the
Board of Managers times the number of Units held by such Member, which votes may
be cast for a single candidate or divided among two or more candidates, at the
Member's discretion. The candidates with the greatest aggregate number of votes
shall be elected to the Board of Managers.
(d) Any Manager may be removed by the Members; provided that
no Manager may be removed if the number of votes cast against such removal would
have been sufficient to elect a Manager at a meeting of Members called for the
purpose of electing a new Board of Managers.
4.5 Actions of the Managers; Meetings.
(a) Unless otherwise required by law or provided in the
Certificate or this Agreement, the act of a Majority of the Managers shall be
the act of the Managers.
(b) Meetings of the Managers may be held at such place or
places as shall be determined from time to time by resolution of the Managers.
At all meetings of the Managers, business shall be transacted in such order as
shall from time to time be determined by resolution of the Managers. A Majority
of the Managers shall constitute a quorum for any meeting.
(c) Special meetings of the Managers may be called by any
Manager on at least 24 hours notice to each other Manager. Such notice need not
state the purpose or purposes of, or the business to be transacted at, such
meeting, except as may otherwise be required by law or provided for by the
Certificate or this Agreement.
(d) The Managers may act by written consent of a Majority of
the Members in lieu of a meeting.
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4.6 Delegation of Authority and Management Power to the Officers;
Retained Authority and Status Under the Act.
(a) The Managers shall be responsible for the general
policies of the Company and the management of its business and affairs, but they
shall not be required to conduct the day-to-day business of the Company
personally, nor will any individual Manager, acting alone in such capacity, have
agency authority to bind the Company unless specifically authorized by the
Managers acting as a body. Concurrently with the Effective Date, the initial
Members and Managers hereby exercise their power and authority to delegate their
rights and powers to manage the Company and control its day-to-day business and
affairs to the Officers named on Schedule B hereto and their duly elected
successors then serving from time to time, each of whom when properly authorized
pursuant to the terms hereof or the Act shall be an agent for the Company with
the powers typically possessed by an officer of a corporation having the same
title or as specified in any enabling resolution of the Managers. The Officers
shall have such powers and duties to conduct the day-to-day business and affairs
of the Company in furtherance of its purposes, policies and objectives, subject
only to the terms of this Agreement and to the rights of approval reserved
herein to the Managers or the Members, as the case may be.
(b) A person may hold more than one office in the Company.
Officers may but need not be Members or Managers. Each Officer shall hold office
at the pleasure of the Managers or until his or her failure to qualify for such
position pursuant to the terms hereof, death, resignation, or removal with or
without cause by a Majority Vote of the Managers.
(c) Pursuant to the Act, the delegation effected hereby
shall not cause the Members or Managers to cease to be "members" or "managers,"
as the case may be, within the meaning of the Act. All specific references to
the duties and powers of the Company or the Managers as stated herein shall,
unless the Act or the context of this Agreement expressly requires otherwise, be
deemed to refer to the duties and powers of the Officers exercising their
delegated powers, and the Officers shall fulfill and exercise such powers in
furtherance of the Company's purposes, policies and objectives, subject only to
the express approvals required hereby or by applicable law.
4.7 Managers' and Officer's Standard of Care.
(a) The Managers and Officers shall carry out their duties
and exercise their powers hereunder in good faith and in a manner reasonably
believed by them to be in or not inconsistent with the best interests of the
Company. No Manager or Officer shall be liable to the Company or any Member for
honest mistakes of judgment or negligence in managing the affairs of the Company
or with respect to any other matter or for the negligence (whether of omission
or commission), dishonesty or bad faith of any employee or agent of the Company,
provided that such employee or agent was selected, engaged, retained and
supervised by the Managers or Officer in question with reasonable care. In
discharging its duties, each Manager and Officer shall be fully protected in
relying in good faith upon the records required to be maintained under this
Agreement and upon such information, opinions, reports or statements by any of
its other Managers, of Officers, or other agents, or by any other Person, as to
matters the Managers reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
10
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.
4.8 Liability and Indemnification of the Managers, Officers and Tax
Matters Partner.
(a) No Person acting in his capacity as a Manager or an
Officer of the Company, or the Tax Matters Partner, shall be personally liable
to the Company or its Members for money damages unless the Manager or Officer
has breached or failed to perform his or her duties under this Agreement and
such breach or failure constitutes self-dealing, willful misconduct or
recklessness. No amendment of this Agreement or repeal of any of its provisions
shall limit or eliminate the benefits provided to the Managers, Officers and Tax
Matters Partner under this Section with respect to any act or omission which
occurred prior to such amendment or repeal.
(b) The Company shall, to the fullest extent permitted by
applicable law, indemnify and hold harmless the Officers of the Company, the
Managers, the Authorized Person, the Tax Matters Partner, and each director,
manager, officer and employee thereof or Person who is deemed to control either
the Company or a Manager (hereinafter collectively referred to as "INDEMNITEES")
from and against any losses, claims, damages, liabilities or actions, joint or
several, to which such Indemnitees may be subject by virtue of any act performed
by such Indemnitee, or omitted to be performed by any such Indemnitee, in
connection with the business of the Company or its formation, including amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
shall reimburse each such Indemnitee for any legal or other expenses reasonably
incurred by such Person in connection with investigating, defending or preparing
to defend any such loss, claim, damage, liability or action, except with respect
to any matter as to which such Indemnitee shall not have acted in good faith in
the reasonable belief that his or her action was in the best interest of the
Company or, in the case of any criminal proceeding, as to which he or she shall
have had reasonable cause to believe that the conduct was unlawful; provided,
however, that the Company shall not be liable to any Indemnitee to the extent
that in the final judgment of a court of competent jurisdiction such loss,
claim, damage, liability or action is found to arise from such Indemnitee's
willful misconduct or recklessness. Notwithstanding the foregoing, with respect
to any action, suit or other Proceeding voluntarily prosecuted by any Indemnitee
as plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such Indemnitee was authorized by Majority
Vote of the Managers.
(c) Notwithstanding the foregoing, no indemnification shall
be made hereunder unless there has been a determination (1) by a final decision
on the merits by a court or other body of competent jurisdiction before whom the
issue of entitlement to indemnification hereunder was brought that such
Indemnitee is entitled to indemnification hereunder or, (2) in the absence of
such a decision, by (i) a Majority Vote of those Managers who are neither
Interested Persons of the Company nor parties to the Proceeding ("DISINTERESTED
NON-PARTY MANAGERS") that the Indemnitee is entitled to indemnification
hereunder, or (ii) if such vote is not obtainable because of the lack of
Disinterested Non-Party Managers, or even if obtainable, if such majority so
directs, independent legal counsel, in a written opinion, concludes that the
11
Indemnitee should be entitled to indemnification hereunder. All determinations
to make advance payments in connection with the expense of defending any
Proceeding shall be authorized and made in accordance with Subsection (d) of
this Section.
(d) Subject to any limitations provided by the Act and this
Agreement, the Company shall have the power and authority to advance expenses to
any Indemnitee, and shall advance such expenses to the fullest extent permitted
by law, and may indemnify other Persons providing services to the Company or any
of its Affiliates to the full extent provided by law as if the Company were a
corporation organized under the Pennsylvania Business Corporation Law, provided
in either event that such advance or indemnification has been approved by a
majority of the Managers.
ARTICLE 5
RIGHTS AND OBLIGATIONS OF THE MEMBERS
5.1 Management Rights of the Members. Except as expressly provided
in this Agreement or the Act, the Members shall take no part in the management
of the business of the Company or transact any business for the Company and
shall have no power to sign for or bind the Company.
5.2 Meetings.
(a) Meetings of the Members for any proper purpose or
purposes may be called at any time by the Managers or the Members. If not
otherwise stated in or fixed in accordance with the remaining provisions hereof,
the record date for determining Members entitled to call a special meeting is
the date any Member first signs the notice of such meeting. Only business within
the purpose or purposes described in the notice (or waiver thereof) required by
this Agreement may be conducted at a special meeting of the Members.
(b) Unless otherwise specifically provided herein, a
Majority Vote by the Members at a meeting of the Members shall be the act of the
Members.
(c) All meetings of the Members shall be held at the
principal place of business of the Company or at such other place within or
without the State as shall be specified or fixed in the notices or waivers of
notice thereof; provided that any or all Members may participate in any such
meeting by any means permitted under Section 5.3.
(d) The chairman of the meeting or the Members shall have
the power to adjourn such meeting from time to time, without any notice other
than announcement at the meeting of the time and place of the holding of the
adjourned meeting. If such meeting is adjourned by the Members, such time and
place shall be determined by agreement of the Members. Upon the resumption of
such adjourned meeting, any business may be transacted that might have been
transacted at the meeting as originally called.
5.3 Action by Written Consent or Telephone Conference.
(a) Any action required or permitted to be taken at any
meeting of Members may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing, setting forth the action so
12
taken, shall be signed by the holder or holders of not less than the minimum
Units that would be necessary to take such action at a meeting at which the
holders of all Units entitled to vote on the action were present and voted.
(b) Members may participate in and hold a meeting by means
of conference telephone, video conferencing or similar communications equipment
by means of which all Persons participating in the meeting can hear each other,
and participation in such meeting shall constitute attendance and presence in
Person at such meeting, except where a Person participates in the meeting for
the express purpose of objection to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
5.4 Corporate Conversion. In the event the Managers determine that
it is in the best interests of the Company's business for the Company to be
reorganized as a corporation (a "REORGANIZATION"), each of the Members agrees to
execute such documents, vote their respective Units or take such other actions
as are required or determined to be desirable by the Managers to accomplish such
Reorganization.
5.5 Members' Representations and Warranties. Each Member hereby
represents and warrants to the Company and each other Member that:
(a) it is duly organized, validly existing, and in good
standing under the law of the state of its incorporation and is duly qualified
and in good standing as a foreign corporation in the jurisdiction of its
principal place of business (if not incorporated therein);
(b) it has full corporate power and authority to execute and
agree to this Agreement and to perform its obligations hereunder and all
necessary actions by the board of directors, shareholders or other Persons
necessary for the due authorization, execution, delivery, and performance of
this Agreement and its obligations hereunder by that Member have been duly
taken;
(c) it has duly executed and delivered this Agreement; and
(d) its authorization, execution, delivery, and performance
of its obligations hereunder does not and will not violate the terms of or
require the consent or approval of any other Person under the terms of any other
agreement or arrangement to which it is a party or by which it is bound.
ARTICLE 6
CAPITAL ACCOUNTS
6.1 Capital Accounts.
(a) General. There shall be established on the books of the
Company a capital account ("CAPITAL ACCOUNT") for each Member that shall consist
of such Member's initial Capital Contribution to the Company made pursuant to
this Agreement, (i) increased by (1) any additional Capital Contributions made
by such Member, and (2) any additions to the Capital Account of such Member
pursuant to allocations of Net Profits under Section 8.1 hereof; (ii) decreased
by (1) any distributions made to such Member, and (2) any subtractions from the
13
Capital Account of such Member pursuant to allocations of Net Losses under
Section 8.2 hereof; and (iii) otherwise adjusted in accordance with the tax
accounting principles set forth in Treasury Regulations Section
1.704-1(b)(2)(iv) (including, but not limited to, those principles
concerning revaluations of Company property and book-ups pursuant to Section 6.2
hereof).
(b) Accounting for Distributions in Kind. For purposes of
maintaining Capital Accounts, when Company property is distributed in kind, (i)
the Company shall treat such property as if it had been sold for its Fair Market
Value on the date of distribution, (ii) any difference between the Fair Market
Value of such property and the cost of such property shall constitute Net Profit
or Net Loss attributable to such distribution and shall be allocated to the
Capital Accounts of the Members pursuant to Article8 and (iii) all property
distributed in kind by the Company to a Member shall reduce that Member's
Capital Account by the Fair Market Value of such property on the date of
distribution (net of any liabilities secured by such distributed property that
such Member is considered to assume or take subject to pursuant to Section 752
of the Code).
(c) Compliance with Treasury Regulations. The foregoing
provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Section 704(b) of
the Code and Treasury Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such regulations. In the event that the
Managers shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto, are computed in order to
comply with such regulations, the Managers may make such modification.
6.2 Book-Ups. The Managers may adjust the Gross Asset Values of all
the Company's assets to equal their respective gross fair market value as
determined by the Managers as of the following times:
(a) (i) the acquisition of an additional interest 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 property as consideration
for all or any part of an interest owned by the Member; (iii) at such times as
the Managers shall determine in order to carry out the purposes for which the
Company is established, and (iv) the liquidation of the Company within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided, however,
that adjustments pursuant to clauses (i), (ii) and (iii) above shall be made
only if the Managers determine that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members in the
Company;
(b) the distribution of any Company asset to any Member,
which distribution shall be treated as made for an amount equal to the gross
fair market value of such asset on the date of distribution; and
(c) the Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted bases of
such assets pursuant to Code Section 734(b) or Code 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) and
Section 754 of the Code; provided, however, that Gross Asset Values shall
14
not be adjusted pursuant to this Subsection (c) to the extent the Managers
determine that an adjustment pursuant to Subsection (a) above is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Subsection (c).
ARTICLE 7
DISTRIBUTIONS
7.1 Tax Distributions. Subject to this Section 7.1, the Managers may
in their sole discretion cause the Company to distribute to each Member in cash,
with respect to any fiscal year, either during such year or prior to the
deadline to filing the Company's tax returns for such year, as such deadline may
be extended, an amount equal to the aggregate state and federal income tax
liability such Member would have incurred as a result of such Member's ownership
of an interest in the Company, calculated (i) as if such Member were taxable at
the maximum marginal income tax rates provided for with respect to natural
persons under applicable federal and state income tax laws as determined from
time to time by the Managers after consulting with accountants to the Company
and (ii) as if allocations from the Company were, for such year, the sole source
of income and loss for such Member (such distributions being referred to herein
as "TAX DISTRIBUTIONS"). Tax Distributions made to any Member with respect to
any fiscal year shall be reduced by the amount of any other cash distributions
made by the Company to such Member during such fiscal year or within 90 days
thereafter, provided, however, that for purposes of this clause, any Tax
Distribution made within 90 days after the beginning of any fiscal year with
respect to a prior year shall not be accounted for as a Tax Distribution for the
fiscal year in which it was made. Any Tax Distribution shall be applied against
and reduce the amount a Member otherwise would be entitled to receive pursuant
to Section 7.3 hereof.
7.2 Timing of Distributions. The Managers may cause the Company to
make other distributions, in cash or in kind, in their sole discretion, subject
to the other provisions of this Article 7. Except as otherwise provided in
Section 7.1 of this Agreement with respect to Tax Distributions, all
Distributions shall be made to the Members in proportion to their respective
Percentage Interests.
7.3 Distributions on Dissolution. In the event of the dissolution
and liquidation of the Company pursuant to Article13, the net cash proceeds
and/or other assets of the Company available for distribution after the payment
of all expenses and previously outstanding indebtedness (or set aside for the
establishment by the Managers of reserves) shall be distributed among the
Members in the amounts and with the priorities set forth in Section 8.3 of this
Agreement. If any of the assets are to be distributed in kind, the Fair Market
Value of such assets shall be determined as of the time of such distribution (or
at such other day reasonably close to the day of such distribution as the
Managers shall determine). There shall be allocated among the Members, in
accordance with Article 8 of this Agreement, the amount of Net Profits or Net
Losses, if any, that would have been realized by the Company if such assets had
been sold by the Company for prices equal to their respective Fair Market
Values.
7.4 Taxes Withheld. Unless treated as a Tax Payment Loan (as
hereinafter defined), any amount paid by the Company for or with respect to any
Member on account of any withholding tax or other tax payable with respect to
the income, profits or distributions of the Company pursuant to the Code, the
Treasury Regulations, or any state or local statute, regulation or ordinance
15
requiring such payment (a "WITHHOLDING TAX ACT") shall be treated as a
distribution to such Member for all purposes of this Agreement, consistent with
the character or source of the income, profits or cash which gave rise to the
payment or withholding obligation. To the extent that the amount required to be
remitted by the Company under the Withholding Tax Act exceeds the amount then
otherwise distributable to such Member, the excess shall constitute a loan from
the Company to such Member (a "TAX PAYMENT LOAN") which shall be payable upon
demand and shall bear interest, from the date that the Company makes the payment
to the relevant taxing authority, at the Prime Rate, plus two percentage points,
compounded monthly. So long as any Tax Payment Loan or the interest thereon
remains unpaid, the Company shall make future distributions due to such Member
under this Agreement by applying the amount of any such distribution first to
the payment of any unpaid interest on all Tax Payment Loans of such Members and
then to the repayment of the principal of all Tax Payment Loans of such Member.
The Managers shall have the authority to take all actions necessary to
enable the Company to comply with the provisions of any Withholding Tax Act
applicable to the Company and to carry out the provisions of this Section.
Nothing in this Section shall create any obligation on the Managers to advance
funds to the Company or to borrow funds from third parties in order to make any
payments on account of any liability of the Company under the Withholding Tax
Act.
ARTICLE 8
ALLOCATION OF NET PROFITS OR NET LOSSES
8.1 Allocation of Net Profits. After giving effect to the Regulatory
Allocations set forth in Section 9.3 of this Agreement, Net Profits for any
fiscal year or other period of the Company will be credited to the Capital
Accounts of the Members in the following order of priority:
(a) First, to the Members, in accordance with their
respective Percentage Interests, in an amount sufficient to reverse the
cumulative amount of any Net Losses allocated to the Members in the current and
all prior fiscal years, first pursuant to the proviso after Section 8.2(b) of
this Agreement, and second pursuant to Section 9.2(b) of this Agreement,
allocated to each Member in the order and in proportion to the allocation of
such Net Losses to such Member; and
(b) Thereafter, one hundred percent (100%) to the Members in
accordance with their Percentages Interests.
8.2 Allocation of Net Losses. After giving effect to the Regulatory
Allocations set forth in Section 9.3 of this Agreement, Net Losses for any
fiscal year or other period will be charged to the Capital Accounts of the
Members in the following order of priority:
(a) First, to the Members in accordance with their
respective Percentage Interests to reverse the cumulative amount of Net Profits
allocated under Section 9.1(b) of this Agreement in the current and all prior
fiscal years; and
16
(b) Second, one hundred percent (100%) to the Members in
accordance with their respective Percentage Interests;
provided, however, that Net Losses that otherwise would be allocated to the
Members in accordance with their respective Percentage Interests will not be
allocated to any Member if such Net Losses would result in or increase an
Adjusted Capital Account Deficit with respect to such Member and any Net Losses
that cannot be allocated to any Member as a result of this proviso shall be
allocated first to the Capital Accounts of the other Members in proportion to
the positive balances in their respective Capital Accounts until all such
Capital Accounts are reduced to zero, and then to the Members in accordance with
their respective Percentage Interests.
8.3 Regulatory Allocations. The following special allocations shall
be made in the following order:
(a) Company Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(f) of the Regulations, in the event there is a net
decrease in Company Minimum Gain during a Company taxable year, each Member
shall be allocated items of income and gain for such year (and, if necessary,
for subsequent years) equal to that Member's share of the net decrease in
Company Minimum Gain.
(i) The determination of a Member's share of the net
decrease in Company Minimum Gain shall be determined in accordance with
Regulations Section 1.704-2(g).
(ii) The items to be specially allocated to the
Members in accordance with this Section 8.3(a) shall be determined in accordance
with Regulations Section 1.704-2(f)(6).
(iii) This Section 8.3(a) is intended to comply with
the Minimum Gain chargeback requirement set forth in Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(i)(4) of the Regulations, in the event there is a
net decrease in Member Minimum Gain during a Company taxable year, each Member
who has a share of that Member Minimum Gain as of the beginning of the year, to
the extent required by Regulations Section 1.704-2(i)(4) shall be specially
allocated items of Company income and gain for such year (and, if necessary,
subsequent years) equal to that Member's share of the net decrease in Member
Minimum Gain.
(i) Allocations pursuant to this Subsection 8.3(b)
shall be made in accordance with Regulations Section 1.704-2(i)(4). This
Subsection 8.3(b) is intended to comply with the requirement set forth in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(c) Qualified Income Offset Allocation. In the event any
Member unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
which would cause such Member to have an Adjusted Capital Account Deficit, items
17
of Company income and gain shall be specially allocated to such Member in an
amount and manner sufficient to eliminate such Adjusted Capital Account Deficit
as quickly as possible. This Section 8.3(c) is intended to constitute a
"qualified income offset" in satisfaction of the alternate test for economic
effect set forth in Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(d) Allocation of Nonrecourse Deductions. Nonrecourse
Deductions (within the meaning of Section 1.704-2(b)(1) of the Regulations)
shall be allocated to the Members in accordance and on the same basis as the
allocations of Net Profits and Net Losses, as the case may be.
(e) Allocation of Member Nonrecourse Deductions. Member
Nonrecourse Deductions (within the meaning of Section 1.704-2(i) of the
Regulations) shall be specially allocated to the Member who bears the economic
risk of loss with respect to the Member Nonrecourse Debt (within the meaning of
Section 1.704-2(b)(4) of the Regulations) to which such Member Nonrecourse
Deductions are attributable in accordance with Section 1.704-2(i)(1) of the
Regulations.
(f) Regulatory Allocations. The allocations set forth in
Section 8.3 of this Agreement (the "REGULATORY ALLOCATIONS") are intended to
comply with certain requirements of Treasury Regulations Section 1.704.
Notwithstanding any other provisions of this Article 8 (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
in allocating subsequent Net Profits, Net Losses and items of income, gain, loss
and deduction among the Members so that, to the extent possible, the net amount
of such allocations of subsequent Net Profits, Net Losses and other items and
the Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each such Member pursuant to the provisions of this
Article 8 if the Regulatory Allocations had not occurred. For purposes of
applying the foregoing sentence, allocations pursuant to this Section 8.3(f)
shall be made only to the extent the Managers reasonably determine that such
allocations will otherwise be inconsistent with the economic agreement among the
Members.
8.4 Section 704(c) Tax Allocations. In the event that the Capital
Account of any Member is credited with or adjusted to reflect the Fair Market
Value of a Company property or properties, the Members' distributive shares of
depreciation, depletion, amortization, and gain or loss, as computed for tax
purposes, with respect to such property, shall be determined pursuant to Section
704(c) of the Code and the Regulations thereunder, so as to take account of the
variation between the adjusted tax basis and book value of such property. Any
deductions, income, gain or loss specially allocated pursuant to this Section
8.4 shall not be taken into account for purposes of determining Net Profits or
Net Losses or for purposes of adjusting a Member's Capital Account.
8.5 Assignment During Fiscal Year. If a Member's interest in the
Company is transferred at any time other than at the end of a fiscal year of the
Company, each item of income, gain, loss, deduction and credit attributable to
such interest for the fiscal year in which the transfer occurs shall be divided
and allocated between the transferor and the transferee based on a closing of
the books by the Company which shall occur on the closing date of the transfer.
18
ARTICLE 9
ACCOUNTING; TAX MATTERS
9.1 Fiscal Year. The fiscal year of the Company ("FISCAL YEAR")
shall begin on January 1 and shall end on December 31 of each year.
9.2 Books of Account. At all times during the existence and
continuance of the Company, the Managers shall cause to be kept accurate,
complete, and proper books, records, and accounts pertaining to the Company's
affairs, including: (a) a list of all Members, Capital Contributions, Units
outstanding, Percentage Interests, and Capital Accounts; (b) copies of the
Company's Federal and state tax returns and financial statements; (c) the
Company's books and records; and (d) such other records as are required by law
to be kept. Such books and records shall be kept on the accrual basis of
accounting.
9.3 Financial Reports. Within ninety (90) days after the end of each
fiscal year of the Company, the Managers shall cause to be prepared and
furnished to each Member (i) the balance sheet of the Company dated as of the
end of the fiscal year then ended; (ii) a related statement of cash flow and
income or loss for the Company for the same year; and (iii) such other
information as is required by the Act. These financial statements must be
prepared in accordance with generally accepted accounting principles (except as
therein noted). The Managers may from time to time in his or her discretion
provide to Members interim balance sheets, income statements and other reports
and information concerning the Company's operations.
9.4 Preparation and Filing of Income Tax Returns and Other Writings.
The Managers shall cause the preparation and timely filing of all Company tax
returns, shall on behalf of the Company make such tax elections, determinations,
and allocations as appear to be appropriate, and shall timely make all other
filings required by any governmental authority having jurisdiction to require
such filing, the cost of which shall be borne by the Company. The Managers shall
also cause to be delivered to the Members, prior to the deadline for filing the
Company's federal income tax return for each tax year of the Company (including
extensions), a Form K-1 prepared by the Company's accountants. This form shall
show the allocation of Taxable Income or Tax Loss of the Company including all
separately stated items, to each Member.
9.5 "Tax Matters Partner." A Manager appointed by the Managers shall
be the Tax Matters Partner of the Company pursuant to Section 6231(a)(7) of the
Code.
ARTICLE 10
TRANSFER OF MEMBERSHIP INTERESTS; SUBSTITUTED MEMBERS
10.1 Non-Complying Transfers Prohibited. No Member may Transfer,
exchange, gift, devise, pledge, hypothecate, encumber or otherwise alienate or
dispose of any Units now owned by such Member or owned by such Member during the
term of this Agreement, or any right or interest therein, whether voluntarily or
involuntarily, by operation of law or otherwise, except in accordance with this
Agreement. Any such purported Transfer in violation of any provision of this
Agreement and all actions by the purported transferor and transferee in
connection therewith shall be of no force or effect and the Company shall not be
required to recognize such purported Transfer for any purpose, including without
19
limitation for purposes of distribution and voting rights. If any Transfer of
Units is made or attempted contrary to the provisions of this Agreement or if
any Units are not offered as required by this Agreement, the Company shall have
the right to purchase such Units from the owner thereof or such owner's
transferee at any time before or after the purported Transfer, as hereinafter
provided. In addition to any other legal or equitable remedies the Company may
have, the Company may enforce this right by actions for specific performance, to
the extent permitted by law.
10.2 Permitted Transfers.
(a) Transfers to Permitted Transferees. The restrictions on
Transfer contained in this Article 10 shall not apply to transfers to an entity
that is 100% owned and controlled by the transferee (collectively, "PERMITTED
TRANSFEREES"); provided, however, that in any such event the Units so
Transferred in the hands of each such Permitted Transferee shall remain subject
to this Agreement, and each such Permitted Transferee shall so acknowledge in
writing as a condition precedent to the effectiveness of such Transfer; and
provided further, that if any Permitted Transferee does not have material assets
other than the transferred Units, the Transferring Partner must agree to
restrictions on the Transfer of equity interests in the Permitted Transferee
equivalent to the provisions of this Article 10.
(b) Reasonable Assurances. The Company must receive
assurances reasonably satisfactory to it from the transferring Member and that
any permitted Transfer (i) may be effected without registration of the Interest
under the Securities Act of 1933, as amended, (ii) does not violate any state
securities laws; (iii) does not result in an acceleration or default under any
loan to the Company or other contractual obligation; (iv) will not have any
adverse tax result for the Company; and (v) will not cause the Company to be
subject to any additional regulatory requirements (including, without
limitation, registration requirements under the Investment Company Act of 1940,
as amended). If reasonably requested by the Managers, items (i) - (v) shall be
supported by an opinion of legal counsel reasonably acceptable to the Managers.
The cost of such opinion and any other such assurances shall be borne by the
transferring Member.
10.3 Right of First Refusal. In the event that a Member (an "OFFERING
MEMBER") shall desire to make any Transfer of all or any portion of its Units to
another Person, pursuant to the terms of a bona fide offer to purchase such
Units, the Offering Member must first notify the Company and each other Member
(the "REMAINING MEMBERS") of such intent and offer such Units (the "OFFERED
UNITS") for sale to the Company and to the Remaining Members for a period of 30
days on the same terms and conditions as the proposed sale. If the Managers have
approved the transfer and if the Offered Units are not purchased by the Company
or the Remaining Members, the Offering Member shall be entitled for a 60-day
period to transfer his Units to the proposed transferee on the terms and
conditions contained in the offer.
10.4 Mandatory Redemption.
(a) Upon the occurrence of any of the following (a
"TRIGGERING EVENT"):
(i) the dissolution of a non-individual Member;
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(ii) a Member becoming Bankrupt;
(iii) entry of an order of a court of competent
jurisdiction ordering the Transfer of any of the Units of any Member to any
third party; or
(iv) any attempt by a Member to effect a Transfer
other than in accordance with the terms hereof;
then all of the Units owned by such Member (the "FORMER MEMBER") shall be
subject to redemption by the Company, at its option by written notice to the
Former Member within thirty (30 days following receipt by the Company of notice
of the Triggering Event, for their Fair Market Value as of the date of the
Triggering Event.
(b) The Fair Market Value shall be determined on the date of
the Triggering Event.
(c) Closing shall occur within ninety (90) days after
delivery of written notice from the Company to the Former Member (or its
representative) that the Company is exercising its redemption right, at which
time the Company shall pay in immediately collectible funds an "initial payment"
equal to ten percent (10%) of the redemption price with the balance to be
evidenced by delivery of its promissory note providing for payments in sixty
(60) equal monthly installments of principal, each together with floating
interest at the applicable federal rate as required under the Code to avoid the
imputation of interest, such rate as in effect during the month and year of the
date of the Triggering Event; provided, however, that each monthly payment shall
not exceed ten percent (10%) of its Available Cash Flow for the most recent
month for which information is available. To the extent the Note is not paid in
such period, the Note shall automatically extend for such further term as shall
be necessary to pay the principal balance of and all accrued interest on the
Note. The redemption purchase price, together with interest thereon, shall be
paid in equal monthly installments over a period of five years.
10.5 Transfers Not in Compliance with this Article Void. Any
attempted Transfer of Units, or any part thereof, or any document purporting to
admit a transferee as a Member that is not in compliance with Article 3 and this
Article 10, shall be, and is declared to be, null and void ab initio.
10.6 Admission of Substituted Members. If a transferee of Units (a
"SUBSTITUTED MEMBER") is admitted pursuant to the terms of Articles 3 and 10
hereof, the Substituted Member shall have all the rights and powers and is
subject to all the restrictions and liabilities of the Member originally having
the Units.
ARTICLE 11
EXCLUSIVE EFFORTS AND NONCOMPETITION
11.1 Best Efforts and Non-Competition.
(a) The parties agree to devote their best efforts to
further the purpose and affairs of the Company. Each Member hereby covenants
that it will devote such of its time and resources, including without limitation
the business skill, time and efforts of its personnel, to the business of the
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Company as may be reasonably required, and that it shall not enter into any
agreement, arrangement, understanding or obligation that would materially
interfere with its ability to do so.
(b) No Member shall directly or indirectly (i) induce or
attempt to influence any employee or consultant of the Company or its Affiliates
to terminate such employee's or consultant's employment with or engagement by
the Company or its Affiliates or (ii) directly or indirectly, engage in any
business activity, on its own behalf or as a member, partner, shareholder,
director, principal, agent, officer, employee, consultant, or otherwise of any
Person, which directly or indirectly competes with any business that the Company
is then conducting (or which the Company has definite plans to conduct).
However, nothing contained in this Subsection shall prevent a Member from
holding for investment not more than two percent (2%) of any class of equity
securities of a company whose securities are traded on a national securities
exchange or quoted on a national interdealer quotation system.
(c) Each Member acknowledges that the restrictions contained
in the foregoing Subsections (a) and (b) do not impose an undue hardship and, in
view of the nature of the business in which the Company is engaged, are
reasonable and necessary in order to protect the legitimate interests of the
Company, and that any violation thereof would result in irreparable injuries to
the Company, and each Member therefore acknowledges that, in the event of his or
its violation of any of these restrictions, the Company shall be entitled to
obtain from any court of competent jurisdiction preliminary and permanent
injunctive relief as well as damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled.
ARTICLE 12
NONDISCLOSURE OF INFORMATION
12.1 Confidentiality. All disclosures of trade secrets, know-how,
financial information, or other confidential information made by the Company to
any Member or made by any Member under or in connection with this Agreement, as
well as the terms of this Agreement, shall be received and maintained in
confidence by the recipient and each Member shall treat all such trade secrets,
know-how, financial information or other confidential information as
confidential except:
(a) as to the persons directly responsible for the
performance of the obligations of the parties under this Agreement and for the
effective operation of the Company;
(b) as to the professional advisers of the Members and the
Company;
(c) as to such disclosures to customers of the Company as
are necessary for the effective carrying on of business by the Company;
(d) as to such information as is required by law to be
disclosed by the Members or the Company; and
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(e) as to such information as is or may fall within the
public domain otherwise than in violation of the provisions of this Section
12.1.
12.2 Duty of Care. Each Member will take such steps as lie within its
power to assure that all officers and employees of the Company, or of any
Affiliates of the Company or such Member, to whom confidential information is
disclosed, take all proper precautions to prevent the unauthorized disclosure
and use of the confidential information referenced in Section 12.1.
ARTICLE 13
POWER OF ATTORNEY
13.1 Authority to Execute Documents. During the Term of the Company
and (to the extent any Manager remains) during any additional period authorized
in accordance with this Agreement to dissolve, liquidate and wind up the affairs
of the Company, each of the Members irrevocably designates and appoints the
Managers, and any successor of the Managers, and any duly appointed agent of the
Managers, with full power of substitution, to be the Member's true and lawful
attorney-in-fact with the power from time to time in the name, place, and stead
of the Member to do any act necessary to qualify the Company to do business
under the laws of any jurisdiction in which it is necessary to file any
instrument in writing in connection with such qualification, and to make,
execute, swear to and acknowledge, amend, file, record, deliver, and publish in
conformance with the provisions of this Agreement (i) the Certificate; (ii) a
counterpart of this Agreement or of any amendment hereto for the purpose of
filing or recording such counterpart in any jurisdiction in which the Company
may own property or transact business; (iii) all certificates and other
instruments necessary to qualify or continue the Company as a limited liability
company in the State or in any jurisdiction where the Company may own property
or be doing business; (iv) any fictitious or assumed name certificate required
or permitted to be filed by or on behalf of the Company; (v) any other
instrument that is now or may hereafter be required by law to be filed for or on
behalf of the Company; (vi) any other instruments or documents that the Managers
deem necessary to conduct the operations of the Company; provided that such
instrument or document is not inconsistent with the terms of this Agreement in
effect at that time; (vii) any document or instrument required to approve or
effect a Reorganization described in Section 5.4; (viii) any amendment to this
Agreement pursuant to Section 14.1 hereof; and (ix) a certificate or other
instrument evidencing the dissolution or termination of the Company when such
shall be appropriate in each jurisdiction in which the Company shall own
property or do business.
13.2 Survival of Power. The existence of this Power of Attorney shall
not preclude execution of any such instrument by a Member individually on any
such matter. This limited Power of Attorney shall not be revoked and shall
survive the Transfer by a Member of all or part of its Units in the Company and,
being coupled with an interest, shall survive the death, incapacity, or
dissolution of the Member to the extent that it may legally contract for such
survival. Any person dealing with the Company may conclusively presume and rely
upon the fact that any such instrument executed by such agent and
attorney-in-fact is authorized, regular, and binding without further inquiry.
This Power of Attorney may be exercised for each Member by a signature of the
Managers or their designee(s) or by listing the names of all the Members and
executing any instrument with the signatures of the Managers or their
designee(s) acting as attorney-in-fact for all of them.
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ARTICLE 14
AMENDMENT
14.1 Amendment. Any provision of this Agreement may be amended by
written agreement of the Members, provided that no amendment of this Agreement
shall, without the consent of the affected Member (i) increase the liability of
such Member beyond the liability of such Member expressly set forth in this
Agreement or as applicable, its Subscription Agreement, or otherwise modify or
affect the limited liability of such Member; (ii) change the maximum Capital
Contribution required of such Member (other than as provided in this Agreement
or its Subscription Agreement); or (iii) change the method of allocations or
Distributions made under the provisions of Articles 7, 8 and 15 hereto to any
Member (except as allowed by this Agreement).
ARTICLE 15
DISSOLUTION AND WINDING UP
15.1 Dissolution. The Company shall be dissolved and its affairs
wound up, upon the first to occur of the following events:
(a) the sale of all or substantially all of the Company's
assets;
(b) the Majority Vote of the Members;
(c) the removal or resignation of a sole Manager, unless a
new Manager is elected by the Members within ninety (90) days thereafter; or
(d) judicial dissolution of the Company as provided for in
the Act.
15.2 Effect of Dissolution. Upon dissolution, the Company shall cease
carrying on (as distinguished from the winding up of) the Company business, but
the Company is not terminated and will continue until the winding up of the
affairs of the Company is completed and the certificate of dissolution has been
issued by the Secretary of State.
15.3 Distributions Upon Dissolution. Upon dissolution of the Company,
the Managers or their designee shall act as liquidating trustee(s) regarding the
disposition of the assets for cash and the winding up of its affairs, to pay and
discharge all liabilities and obligations of the Company, and to distribute all
cash remaining and any assets which cannot be disposed of to the Members in
accordance with the priorities set forth in Section 7.3 hereof.
15.4 Certificate of Dissolution. The winding up of the Company shall
be completed when all debts, liabilities, and obligations of the Company have
been paid and discharged or reasonably adequate provision therefor has been
made, and all of the remaining assets of the Company have been distributed to
the Members in accordance with the terms hereof. Upon the completion of winding
up of the Company, a certificate of dissolution shall be delivered by the
President or, in his absence, any Manager, or, in their absence, any Member, to
the Secretary of State for filing. The certificate of dissolution shall set
forth the information required by the Act.
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ARTICLE 16
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
16.1 Notices. All notices, reports and other communications given
pursuant to this Agreement shall be in writing and shall either be mailed by
first class mail, postage prepaid, certified or registered with return receipt
requested, delivered in person or by nationally recognized overnight courier, or
sent by telecopier or prepaid telegram followed by confirmatory letter, to
address of the recipient on the records of the Company.
16.2 Governing Law. THIS AGREEMENT IS MADE PURSUANT TO AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE EXCLUSIVE OF ITS
LAWS REGARDING THE CONFLICT OF LAWS, EXCEPT TO THE EXTENT SUCH STATE'S LAW MAY
BE PREEMPTED BY APPLICABLE FEDERAL LAWS.
16.3 Entire Agreement; Rules of Construction. This Agreement contains
the entire agreement among the Members relating to the subject matter hereof and
there are no other or further agreements outstanding not specifically mentioned
herein; provided, however, that this Agreement may be amended and supplemented
in writing from time to time as provided in Section 14.1 hereof.
16.4 Severability. The provisions of this Agreement are severable.
16.5 Gender and Number. Whenever required by the context, as used in
this Agreement, the singular number shall include the plural, the neuter shall
include the masculine or the feminine gender, and the masculine gender shall
include the neuter or the feminine gender.
16.6 Captions. The Article and Section headings appearing in this
Agreement are for convenience of reference only and are not intended, to any
extent and for any purpose, to limit or define the text of any Article or
Section hereof.
16.7 Counterparts and Execution. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original Agreement for
all purposes, and all of which when taken together shall constitute one
Agreement among each of the parties hereto on the dates respectively indicated
in the signatures of the parties.
16.8 Waiver of Right to Partition. Each of the parties hereto
irrevocably waives during the term of the Company any right that he may have to
maintain any action for partition with respect to a Company asset.
16.9 Assigns. Each and all of the covenants, terms, provisions, and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective heirs, executors, administrators and assigns.
16.10 Rights of Creditors and Third Parties under this Agreement. This
Agreement is entered into among the Company and the Members for the exclusive
benefit of the Company, its Members, and their successors and assignees. The
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other Person. Except and only to the extent provided by
25
applicable statute, no such creditor or third party shall have any rights under
the Agreement, any Subscription Agreement or any agreement between the Company
and any Member with respect to any Capital Contribution or otherwise.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as the
Members as of the day and year first written above.
TRIMEDIA ENTERTAINMENT GROUP, INC.
By:
-------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
INTERNATIONAL EQUITIES GROUP, INC.
By:
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
27
SCHEDULE A
MEMBERS AND CAPITAL CONTRIBUTIONS
CAPITAL
MEMBERS CONTRIBUTION UNITS
---------------------------------- ------------ -----
TRIMEDIA ENTERTAINMENT GROUP, INC. --
ITNERNATIONAL EQUITIES GROUP, INC. --
SCHEDULE B
INITIAL OFFICERS
▇▇▇▇▇▇ ▇▇▇▇▇▇ - Chairman and Chief Executive Officer