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EXHIBIT 10.51
ENSTAR FINANCE COMPANY, LLC
LIMITED LIABILITY COMPANY AGREEMENT
Dated as of June 6, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS............................. 1
ARTICLE II
FORMATION AND PURPOSE........................ 5
2.01 Formation........................................................... 5
2.02 Name................................................................ 5
2.03 Principal Office.................................................... 5
2.04 Term................................................................ 5
2.05 Purposes of Company................................................. 5
2.06 Certificate......................................................... 6
2.07 Addresses of the Members............................................ 6
2.08 Foreign Qualification............................................... 6
ARTICLE III
MEMBERS CAPITAL........................... 6
3.01 Initial Capital Contributions....................................... 6
3.02 Additional Capital Contributions.................................... 6
3.03 No Third Party Rights............................................... 7
ARTICLE IV
USE OF PROCEEDS........................... 7
ARTICLE V
STATUS OF MEMBERS.......................... 7
5.01 Limited Liability................................................... 7
5.02 Return of Distributions of Capital.................................. 7
ARTICLE VI
COMPENSATION TO THE MEMBERS...................... 8
ARTICLE VII
COMPANY EXPENSES.......................... 8
7.01 Reimbursement....................................................... 8
7.02 Operating Expenses.................................................. 8
ARTICLE VIII
DISTRIBUTIONS; ALLOCATION OF INCOME AND LOSS............. 8
8.01 Distributions of Cash Available for Distribution.................... 8
8.02 [Intentionally Deleted]............................................. 9
8.03 Withholding......................................................... 9
8.04 Allocations of Net Income and Net Losses............................ 10
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8.05 Special Allocations................................................. 10
(a) Company Minimum Gain Chargeback............................. 10
(b) Member Minimum Gain Chargeback.............................. 10
(c) Qualified Income Offset..................................... 10
(d) Gross Income Allocation..................................... 11
(e) Nonrecourse Deductions...................................... 11
(f) Member Nonrecourse Deductions............................... 11
8.06 Curative Allocations................................................ 11
8.07 Tax Allocations; Code Section 704(c)................................ 12
8.08 Consent............................................................. 12
ARTICLE IX
ASSIGNMENT OF COMPANY INTERESTS.................... 12
9.01 No Assignment....................................................... 12
9.02 Exceptions.......................................................... 13
9.03 Assignee............................................................ 13
9.04 Other Consents and Requirements..................................... 13
9.05 Assignment Not In Compliance........................................ 13
9.06 Tax Elections....................................................... 14
ARTICLE X
ADMISSION OF ASSIGNEE AS MEMBER.................... 14
10.01 Requirements........................................................ 14
ARTICLE XI
BOOKS, RECORDS, ACCOUNTING AND REPORTS................ 14
11.01 Books and Records................................................... 14
11.02 Delivery to Members and Inspection.................................. 15
11.03 Annual Statements................................................... 15
11.04 Filings............................................................. 15
ARTICLE XII
DESIGNATION RIGHTS, AUTHORITIES, POWERS,
RESPONSIBILITIES AND DUTIES OF THE MANAGER..................... 16
12.01 Designation of Manager.............................................. 16
12.02 Authority of Manager................................................ 16
(a) Permitted Acts.............................................. 16
(b) Limitations and Restrictions................................ 16
12.03 No Personal Liability............................................... 17
12.04 Tax Matters Member.................................................. 17
12.05 Officers............................................................ 18
ARTICLE XIII
RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS........... 20
13.01 Request for Vote.................................................... 20
13.02 Procedures.......................................................... 20
13.03 Action By Consent................................................... 21
13.04 Limitations......................................................... 21
13.05 Amendments to Agreement............................................. 21
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ARTICLE XIV
OTHER BUSINESSES AND INVESTMENT OPPORTUNITIES............... 21
ARTICLE XV
DISSOLUTION OF COMPANY........................ 21
15.01 Termination of Membership........................................... 21
15.02 Events of Dissolution or Liquidation................................ 22
15.03 Liquidation......................................................... 22
15.04 Distribution in Kind................................................ 23
15.05 No Action for Dissolution........................................... 23
15.06 No Further Claim.................................................... 23
ARTICLE XVI
REPRESENTATIONS BY THE MEMBERS.................... 24
16.01 Investment Intent................................................... 24
16.02 Securities Regulation............................................... 24
16.03 Knowledge and Experience............................................ 24
16.04 Economic Risk....................................................... 24
16.05 Binding Agreement................................................... 24
16.06 Tax Position........................................................ 24
16.07 Information......................................................... 25
ARTICLE XVII
MISCELLANEOUS............................ 25
17.01 Additional Documents................................................ 25
17.02 Severability........................................................ 25
17.03 Inspection.......................................................... 25
17.04 General............................................................. 25
17.05 Notices, Etc........................................................ 25
17.06 Execution of Certificate and Other Papers........................... 25
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ENSTAR FINANCE COMPANY, LLC
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement (the "Agreement") is made and
entered into as of June 6, 1997, by and among Falcon Holding Group, L.P., a
Delaware limited partnership ("FHGLP") and Enstar Communications Corporation, a
Georgia corporation ("ECC").
WHEREAS, the parties wish to form a limited liability company (the
"Company") under Delaware law for the purpose of organizing a centralized
finance company to raise funds through agreements with banks and other financial
institutions and to in turn lend funds to various cable television partnerships
of which ECC is the general partner ("Enstar Affiliates").
WHEREAS, the parties desire to enter into this Agreement to provide for
the formation of the Company, the management of the business and affairs of the
Company, the allocation of profits and losses, cash flow and other proceeds of
the Company among the Members, the respective rights, obligations and interests
of the Members to each other and to the Company, and certain other matters.
NOW, THEREFORE, the Members agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings (all terms used in this Agreement which are not defined in
this Article I shall have the meanings set forth elsewhere in this Agreement):
"Act" shall mean the Delaware Limited Liability Company Act.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant fiscal year, after giving effect to the following
adjustments:
(a) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the next to the last sentence of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) after taking into account
any changes during such year in Company Minimum Gain and Member Minimum Gain;
and
(b) Debit to such Capital Account the items described in
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section
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1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
"Affiliate" shall mean, with respect to any Member: (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities of such Member; (b) any Person 10% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by such Member; (c) any partnership or
limited liability company of which such Member or any other Person described in
clause (a) or clause (b) of this definition is a general or managing partner, or
a manager, as the case may be; and (d) any officer, director or partner in such
Member.
"Agreed Value" means the fair market value of property as determined by
the Manager using such reasonable methods of valuation as it deems appropriate.
"Approved by the Members" shall mean approved by the affirmative vote
(conducted in accordance with Sections 13.01 and 13.02) or written consent
(obtained in accordance with Section 13.03) of Members holding at least sixty
percent (60%) of the Company Interests.
"Assignee" shall mean a person who has acquired a beneficial interest in
a Company Interest in accordance with the provisions of Article IX hereof, but
who is not a Member.
"Book Depreciation" means the depreciation, cost recovery or
amortization of assets allowable to the Company with respect to an asset for any
period, except that if the Book Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such period, Book
Depreciation shall be an amount which bears the same ratio to such beginning
Book Value as federal income tax depreciation, amortization, or other cost
recovery deduction for such period bears to such beginning adjusted basis.
"Book Gain or Book Loss" means the gain or loss that would be recognized
by the Company for federal income tax purposes as a result of sales or exchanges
of its assets if its tax basis in such assets were equal to the Book Value of
such assets.
"Book Value" means (a) as to property contributed to the Company, its
Agreed Value, and (b) as to all other Company property, its adjusted basis for
federal income tax purposes as reflected on the books of the Company. The Book
Value of all Company assets shall be adjusted to equal their respective Agreed
Values, as determined by the Manager, as of the following times: (a) 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; (b) the
distribution by the Company to a Member of more than a de minimis amount of
Company property, unless all Members receive simultaneous distributions of
undivided interests in the distributed property in proportion to their
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respective Company Interest; and (c) the termination of the Company for federal
income tax purposes pursuant to Code Section 708(b)(1)(B). The Book Value of all
assets shall be adjusted by the Book Depreciation taken into account with
respect to such asset.
"Capital Account" means an individual capital account maintained for
each Member in accordance with Regulation Section 1.704-1(b) adopted pursuant to
Section 704(b) of the Code. Unless otherwise provided in such Regulations, such
capital account shall be credited with (a) Capital Contributions to the Company
by a Member; (b) the Net Income of the Company allocable to a Member; and (c)
any items in the nature of income or gain that are specially allocated pursuant
to Sections 8.05 and 8.06 hereof; and which account shall be debited with (x)
any Distribution to a Member; (y) the Net Loss of the Company allocable to a
Member; and (z) any items in the nature of loss or deduction that are specially
allocated pursuant to Sections 8.05 or 8.06 hereof. In the event the Book Value
of Company Interests are adjusted, the Capital Accounts of all Members shall be
adjusted to reflect such adjustment as if the Company recognized gain or loss
equal to the amount of such aggregate adjustment. The amounts debited or
credited to Capital Accounts shall be adjusted with respect to any liabilities
that are secured by such contributed or distributed property or that are assumed
by the Company or the Members, in the event the Manager shall determine such
adjustments are necessary or appropriate pursuant to Regulation Section
1.704-1(b)(2)(iv).
"Capital Contributions" shall mean the amount of cash or Book Value of
property a Member contributes to the capital of the Company.
"Cash Available for Distribution" means for any period (i) the sum of
the gross receipts for such period, (ii) less the sum of all expenses for such
period (excluding all depreciation or amortization expenses), (iii) less any
principal repayments on indebtedness of the Company (including any capitalized
lease obligations), and (iv) less any increases in amounts reserved for Company
working capital as determined by the Manager.
"Certificate" shall mean the certificate of formation of the Company
which is required to be filed pursuant to the Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the corresponding provisions of any future Federal tax law
and, to the extent applicable, the Regulations.
"Company Interest", as of any date, shall mean, with respect to any
Member, the ownership interest of such Member in the Company as of such date,
including all of its rights and obligations under the Act and this Agreement.
The initial Company Interest of each of the Members is set forth on Schedule I.
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"Company Minimum Gain" has the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Distributions" means all cash and the Book Value of other property
distributed to the Members arising from their Company Interests.
"Fiscal Year" shall mean the fiscal year of the Company which shall be
the calendar year.
"Manager" shall mean ECC and any other person that succeeds it pursuant
to Section 12.01.
"Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as Nonrecourse Debt, determined in
accordance with Section 1.704-2(c)(i) of the Regulations.
"Member Nonrecourse Debt" has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Deductions" has the meaning set forth in Section
1.704-(2)(i)(2) of the Regulations.
"Members" shall mean the Members and any other Person that acquires a
Company Interest and is admitted to the Company as a Member.
"Net Income" or "Net Loss" shall mean, with respect to any fiscal
period, the gross income, gains and losses of the Company for such period, less
all deductible costs, expenses and depreciation and amortization allowances of
the Company for such period, as determined for federal income tax purposes, with
the following adjustments: (a) any income of the Company that is exempt from
federal income tax and is not otherwise taken into account in computing Net
Income or Net Loss pursuant to this definition shall be added to such taxable
income or loss; (b) any expenditures of the Company not deductible in computing
taxable income or loss, not properly chargeable to capital account and not
otherwise taken into account in computing Net Income or Net Loss pursuant to
this definition shall be subtracted from such taxable income or loss; (c) if the
Book Value of any asset differs from its adjusted basis for federal income tax
purposes at the beginning of such period, the depreciation and amortization
allowances to be deducted from gross income with respect to such asset shall be
Book Depreciation; (d) Book Gain or Book Loss shall be used instead of taxable
gain or loss; and (e) any items that were specially allocated pursuant to
Sections 8.05 or 8.06 hereof shall not be taken into account in computing Net
Income or Net Loss. If such amount shall be greater than zero, it shall be known
as a "Net Income" and if such amount shall be less than zero, it shall be known
as "Net Loss".
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"Nonrecourse Debt" has the meaning given to the term "nonrecourse
liability" by Regulations Section 1.704-2(b)(3).
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(c).
"Person" shall mean an individual, partnership, joint venture,
association, corporation, trust, estate, limited liability company, limited
liability partnership or any other legal entity.
"Regulations" shall mean the regulations, including temporary
regulations promulgated under the Code, as such regulations may be amended from
time to time (including the corresponding provisions of any future regulations).
ARTICLE II
FORMATION AND PURPOSE
2.01 Formation. The Company shall be formed as a limited liability
company pursuant to the Act by the filing of the Certificate required by the Act
with the Secretary of State of Delaware. The rights and liabilities of the
Members shall be determined pursuant to the Act and this Agreement. To the
extent that the rights or obligations of any Member are different by reason of
any provision of this Agreement than they would be in the absence of such
provision, this Agreement shall, to the extent permitted by the Act, control.
2.02 Name. The name of the Company is ENSTAR FINANCE COMPANY, LLC.
2.03 Principal Office. The registered office required to be
maintained by the Company in the state of Delaware pursuant to the Act shall
initially be located at c/o Paracorp Incorporated, ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. The resident agent shall initially be Paracorp
Incorporated whose address is ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇. The principal executive office of the Company shall initially be at
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other
place as determined by the Manager. The Company may have such additional offices
at such other places as determined by the Manager.
2.04 Term. The term of the Company will commence on the date of
filing of the Certificate with the Secretary of State of Delaware, and shall
continue until January 1, 2035, unless sooner terminated as hereinafter
provided.
2.05 Purposes of Company. The purposes of the Company are:
(a) to maintain, develop and operate a captive lending organization
whereby the Company borrows funds from banks and other financial institutions
and lends such funds to Enstar
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Affiliates (the "Business"), and to sell or otherwise dispose of the Business
and to do all things necessary, appropriate, incidental or advisable in
connection with such business;
(b) to borrow or raise money, and from time to time to
issue, accept, endorse and execute promissory notes, loan agreements, options,
stock purchase agreements, contracts, documents, checks, drafts, bills of
exchange, warrants, bonds, debentures and other negotiable or nonnegotiable
instruments and evidences of indebtedness, and to secure the payment of any
thereof and of the interest thereon by mortgage upon or pledge, conveyance or
assignment in trust of, the whole or any part of the property of the Company
whether at the time owned or thereafter acquired and to guarantee the
obligations of others and to sell, pledge or otherwise dispose of such bonds or
other obligations of the Company for its purposes; and
(c) to maintain an office or offices in such place or places
as the Manager shall determine and in connection therewith to rent or acquire
office space, engage personnel and do such other acts and things as may be
necessary or advisable in connection with the maintenance of such office, and on
behalf of and in the name of the Company to pay and incur reasonable expenses
and obligations for legal, accounting, investment advisory, consultative and
custodial services, and other reasonable expenses including, without limitation,
taxes, travel, insurance, rent, supplies, interest, salaries and wages of
employees, and all other reasonable costs and expenses incident to the operation
of the Company.
2.06 Certificate. The Manager shall cause the Certificate to be filed
with the Secretary of State of Delaware and shall cause the Certificate to be
filed or recorded in any other public office where filing or recording is
required.
2.07 Addresses of the Members. The respective address of the Members
are set forth on Schedule I.
2.08 Foreign Qualification. The Manager shall take all necessary
actions to cause the Company to be authorized to conduct business legally in
California and all other appropriate jurisdictions.
ARTICLE III
MEMBERS CAPITAL
3.01 Initial Capital Contributions. Each Member shall contribute such
amount as is set forth on Schedule I as its initial Capital Contribution, which
Schedule I shall be revised to reflect any additional contributions contributed
in accordance with Section 3.02.
3.02 Additional Capital Contributions. The Members shall only be
required to contribute additional capital to the Company in such amounts and at
such times as Approved by the Members. Any
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such additional contributions by the Members shall be in proportion to their
respective Company Interests. Upon a vote to require additional capital
contributions, the Manager shall give written notice to each Member. Each Member
shall have fourteen (14) days from the date such notice is given to contribute
his or her share of the additional capital to the Company. Each Member shall
receive a credit to his or her Capital Account in the amount of any additional
capital which he or she contributes to the Company.
3.03 No Third Party Rights. The right of the Manager to require
additional Capital Contributions under the terms of this Agreement shall not be
construed as conferring any rights or benefits to or upon any party not a Member
herein, including but not limited to any creditor of the Company.
ARTICLE IV
USE OF PROCEEDS
The Company shall use the proceeds of the Capital Contributions of the
Members as follows:
(a) to develop and maintain the Business;
(b) to pay Company expenses related to the organization of the
Company;
(c) to pay initial expenses with respect to loans from banks and
financial institutions to the Company; and
(d) for Company working capital.
ARTICLE V
STATUS OF MEMBERS
5.01 Limited Liability. Except as otherwise agreed to by a Member
with any financial institution, no Member shall be bound by or personally liable
for, the expenses, liabilities or obligations of the Company.
5.02 Return of Distributions of Capital. A Member may, under certain
circumstances, be required by law to return to the Company for the benefit of
the Company's creditors, amounts previously distributed. No Member shall be
obligated to pay those distributions to or for the account of the Company or any
creditor of the Company. However, if any court of competent jurisdiction holds
that, notwithstanding the provisions of this Agreement, any Member is obligated
to return or pay over any part of those distributions, it shall be the
obligation of such Member. Any
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payment returned to the Company or made directly by a Member to a creditor of
the Company shall be deemed a Capital Contribution by such Member.
ARTICLE VI
COMPENSATION TO THE MEMBERS
The Members shall not receive any compensation directly or indirectly
in connection with the formation, operation, and dissolution of the Company
except as expressly specified in this Agreement.
ARTICLE VII
COMPANY EXPENSES
7.01 Reimbursement. The Company shall reimburse the Members for all
out-of-pocket costs and expenses reasonably incurred by them in connection with
the formation, organization and funding of the Company, including any legal fees
and expenses.
7.02 Operating Expenses. The Company shall pay the operating expenses
of the Company which may include, but are not limited to: (i) all reasonable
salaries, compensation and fringe benefits of personnel employed by the Company
and involved in the business of the Company; (ii) all costs of funds borrowed by
the Company and all taxes and other assessments on the Company's assets and
other taxes applicable to the Company; (iii) reasonable legal, audit and
accounting fees; (iv) the cost of insurance as required in connection with the
business of the Company; (v) reasonable expenses of revising, amending, or
modifying this Agreement or terminating the Company; (vi) reasonable expenses in
connection with distributions made by the Company, and communications, necessary
in maintaining relations with Members and outside parties, (vii) reasonable
expenses in connection with preparing and mailing reports required to be
furnished to Members for investor, tax reporting or other purposes, or other
reports to Members; (viii) reasonable costs incurred in connection with any
litigation in which the Company is involved, as well as in the examination,
investigation or other proceedings conducted by any regulatory agency with
jurisdiction over the Company, including legal and accounting fees incurred in
connection therewith; and (ix) reasonable expenses of professionals employed by
the Company in connection with any of the foregoing, including attorneys,
accountants and appraisers.
ARTICLE VIII
DISTRIBUTIONS; ALLOCATION OF INCOME AND LOSS
8.01 Distributions of Cash Available for Distribution. At such times
and in such amounts as the Manager shall determine, in his sole and absolute
discretion, and subject to any restrictions
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imposed by any loan or credit agreements of the Company, the Company shall
distribute Cash From Operations to the Members in accordance with their
respective Company Interests.
8.02 [Intentionally Deleted]
8.03 Withholding.
(a) The Company shall seek to qualify for and obtain
exemptions from any provision of the Code or any provision of state, local, or
foreign tax law that would otherwise require the Company to withhold amounts
from payments or distributions to the Members. If the Company does not obtain
any such exemption, the Company is authorized to withhold from any payment or
distribution to any Member any amounts that are required to be withheld pursuant
to the Code or any provision of any state, local, or foreign tax law that is
binding on the Company.
(b) Any amount withheld with respect to any payment or
distribution to any Member shall be credited against the amount of the payment
or distribution to which the Member would otherwise be entitled. If the Code or
any provision of any state, local, or foreign tax law that is binding on the
Company requires that the Company remit to any taxing authority any withholding
tax with respect to, or for the account of, any Member in its capacity as a
Member, the Company shall, to the extent that Company funds are available
therefor, remit the full required amount of such withholding tax to the taxing
authority and shall notify such Member in writing of its obligation to pay to
the Company such withholding tax to the extent it exceeds the amount of any
payment or distribution to which such Member would otherwise then be entitled.
Each Member shall pay to the Company, within five (5) business days after its
receipt of written notice from the Company that withholding is required with
respect to such Member, any amounts required to be remitted by the Company to
any taxing authority with respect to such Member that are in excess of the
amount of any payment or distribution to which such Member would otherwise be
entitled. If the Company is required to remit any withholding tax with respect
to, or for the account of, any Member prior to the Company's receipt of any
payment required to be made by such Member pursuant to the preceding sentence,
the amount of the payment required to be made by such Member shall be treated as
a loan (the "Withholding Advance") from the Company to the Member, which shall
accrue interest until paid at a rate of ten percent (10%) per year.
(c) Any Withholding Advance made to a Member and any
interest accrued thereon shall be credited against, and shall be offset by, the
amount of any later payment or distribution to which the Member would otherwise
be entitled (without duplication of the credit provided in the first sentence of
Section 8.03(b), with any credit for accrued and unpaid interest as of the date
such payment or distribution would otherwise have been made being applied before
any credit for the amount of the Withholding
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Advance. Any Withholding Advance made to a Member and any interest accrued
thereon, to the extent it has not previously been paid by the Member in cash or
fully credited against payments or distributions to which the Member would
otherwise be entitled, shall be paid by the Member to the Company upon the
earliest of (i) the dissolution of the Company, (ii) the date on which the
Member ceases to be a Member of the Company, or (iii) demand for payment by the
Company.
8.04 Allocations of Net Income and Net Losses. Net Income and Net
Losses of the Company for each Fiscal Year shall be allocated to the Members in
accordance with each Member's respective Company Interest.
8.05 Special Allocations. The following special allocations shall be
made in the following order:
(a) Company Minimum Gain Chargeback. Notwithstanding any
other provision of this Article VIII, if there is a net decrease in Company
Minimum Gain during any Fiscal Year, each Member shall be specially allocated
items of Company income and gain for such year (and, if necessary, subsequent
years) in proportion to, and to the extent of, an amount equal to such Member's
share of the net decrease in Company Minimum Gain, determined in accordance with
Section 1.704-(2)(g)(2) of the Regulations. The items to be so allocated shall
be determined in accordance with Section 1.704-2(f) of the Regulations. This
Section 8.05(a) is intended to comply with the minimum gain chargeback
requirement of the Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any
other provision of this Article VIII except Section 8.05(a), if there is a net
decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during
any Fiscal Year, each Member with a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years) in
proportion to, and to the extent of, an amount equal to such Member's share of
the net decrease in Member Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations.
The items to be so allocated shall be determined in accordance with Section
1.704-2(i)(5) of the Regulations. This Section 8.05(b) is intended to comply
with the Member minimum gain chargeback requirement of the Regulations and shall
be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations, items of
Company income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the
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Regulations, the Adjusted Capital Account Deficit of such Member as quickly as
possible, provided that an allocation pursuant to this Section 8.05(c) shall be
made only if and to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Article VIII
have been tentatively made as if this Section 8.05(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year which is in excess of the
sum of (i) the amount such Member is obligated to restore pursuant to any
provision of this Agreement, and (ii) the amount such Member is deemed to be
obligated to restore pursuant to Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specially allocated items of Company
income and gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 8.05(d) shall be made only if any to
the extent that such Member would have a deficit Capital Account in excess of
such sum after all other allocations provided for in this Article VIII have been
made as if this Section 8.05(d) and Section 8.05(c) hereof were not in the
Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year or other period shall be specially allocated to the Members in
accordance with each Member's respective Company Interest.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be allocated to the Member
who bears the economic risk of loss with respect to the Member Nonrecourse Debt
to which such Member Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
8.06 Curative Allocations. The "Regulatory Allocations" consist of
the allocations to a Member (or its predecessor) under Sections 8.05(a),
8.05(b), 8.05(c), 8.05(d), 8.05(e) and 8.05(f) hereof. Notwithstanding any other
provisions of this Article VIII (other than the Regulatory Allocations), the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of 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 if the Regulatory Allocations had not occurred.
For purposes of applying the foregoing sentence (i) no allocations pursuant to
this Section 8.06 with respect to allocations pursuant to Sections 8.05(a) and
8.05(e) shall be made prior to the Fiscal Year during which there is a net
decrease in Company Minimum Gain, and then only to the extent necessary to avoid
any potential economic distortions caused by such net decrease in Company
Minimum Gain, (ii) no allocations pursuant to this Section 8.06 shall be made
with respect to allocations pursuant to Sections 8.05(b) and 8.05(f) relating to
a particular Member Nonrecourse
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Debt prior to the Fiscal Year during which there is a net decrease in Member
Minimum Gain attributable to such Member Nonrecourse Debt, and then only to the
extent necessary to avoid any potential economic distortions used by such net
decrease in Member Minimum Gain, (iii) allocations pursuant to this Section 8.06
shall be deferred with respect to allocations pursuant to Section 8.05(e) hereof
to the extent the Manager reasonably determines that such allocations are likely
to be offset by subsequent allocations pursuant to Section 8.05(a) hereof, and
(iv) allocations pursuant to this Section 8.06 shall be deferred with respect to
allocations pursuant to 8.05(f) hereof relating to a particular Member
Nonrecourse Debt to the extent the Manager reasonably determines that such
allocations are likely to be offset by subsequent allocations pursuant to
Section 8.05(b) hereof. The Manager shall have reasonable discretion, with
respect to each Fiscal Year, to (i) apply the provisions of this Section 8.06 in
whatever order is likely to minimize the economic distortions that might
otherwise result from the Regulatory Allocations, and (ii) divide all
allocations pursuant to this Section 8.06 among the Members in a manner that is
likely to minimize such economic distortions.
8.07 Tax Allocations; Code Section 704(c). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its Book Value. Any elections or other decisions
relating to such allocations shall be made by the Manager in any manner
reasonably reflects the intent of this Agreement. Allocations pursuant to this
Section 8.07 are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any person's
Capital Account or share of Net Income, Net Loss, other items, or Distributions
pursuant to any provision of this Agreement.
8.08 Consent. The provisions of this Agreement for Distributions and
allocations of Net Income and Net Loss are consented to by each Member (and any
successor thereto) as an express condition to becoming a Member herein.
ARTICLE IX
ASSIGNMENT OF COMPANY INTERESTS
9.01 No Assignment. Except as provided in Section 9.02, a Member may
not assign (whether by sale, exchange, gift contribution, distribution or other
transfer, including a pledge or other assignment for security purposes) all or
any part of its Company Interest unless such assignment is first approved by the
Manager in his sole and absolute discretion.
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9.02 Exceptions. The provisions of Section 9.01 providing for
approval by the Manager shall not apply upon a transfer by a Member (i) to
another Member; (ii) to the partners of a Member; or (iii) to a corporation all
of the shares of which are directly or indirectly owned by such Member;
provided, however, such transferee shall immediately execute all documents
reasonably required by the other Member (A) to cause the Company Interests so
acquired by the transferee to become immediately subject to all of the terms and
conditions of this Agreement, and (B) in the case of a corporate transferee, to
cause the shareholders to agree not to transfer the shares of such corporation
without obtaining the other Member's consent.
9.03 Assignee. Provided the provisions of this Article IX have been
complied with an Assignee shall be entitled to receive Distributions and
allocations of Net Income and Net Losses, from the Company attributable to the
assigned Company Interests from and after the effective date of the assignment,
but an Assignee shall have no other rights of a Member herein, such as rights to
any information, an accounting, inspection of books or records or voting as a
Member on matters set forth herein or by law, until such Assignee is admitted as
a Member pursuant to the provisions of Article X; except that an Assignee shall
have the right solely to receive a copy of the annual financial statements
required herein to be provided the Members. The Company shall be entitled to
treat the assignor as the absolute owner of the Company Interests in all
respects, and shall incur no liability for Distributions, allocations of Net
Income or Net Losses, or transmittal of reports and notices required to be given
to Members which are made in good faith to the assignor until the effective date
of the assignment, or, in the case of the transmittal of reports (other than the
financial statements referred to above) or notices, until the Assignee is so
admitted as a substitute Member. The effective date of an assignment shall be
the first day of the calendar month following the month in which the Manager has
received an executed instrument of assignment in compliance with this Article IX
or the first day of a later month if specified in the executed instrument of
assignment. The Assignee shall be deemed an Assignee on the effective date, and
shall be only entitled to Distributions, Net Income or Net Losses attributable
to the period after the effective date of assignment. Each Assignee will inherit
the balance of the Capital Account, as of the effective date of Assignment, of
the Assignor with respect to the Company Interests transferred.
9.04 Other Consents and Requirements. Any assignment, sale, transfer,
exchange or other disposition of any Company Interests in the Company must be in
compliance with any requirements imposed by any state securities administrator
having jurisdiction over the assignment, sale, transfer, exchange or other
disposition of the Company Interests and the United States Securities and
Exchange Commission.
9.05 Assignment Not In Compliance. Any assignment, sale, exchange or
other transfer in contravention of any of the
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provisions of this Article IX shall be void and of no effect, and shall not bind
nor be recognized by the Company.
9.06 Tax Elections. The Manager will, at the request of an Assignee,
make an election under Code Section 754 to adjust the basis of the Company's
assets, to reflect the purchase price paid by an Assignee; provided, however,
all reasonable costs and expenses incurred in connection with implementing such
election (including, without limitation the reasonable expenses of attorneys and
accountants) with respect to any transfer shall be borne by the Assignee.
ARTICLE X
ADMISSION OF ASSIGNEE AS MEMBER
10.01 Requirements. An Assignee may not become a Member unless all of
the following conditions are first satisfied:
(a) A duly executed and acknowledged written instrument of
assignment is filed with the Company, specifying the Company Interests being
assigned and setting forth the intention of the assignor that the Assignee
succeed to assignor's interest as a substitute Member;
(b) The assignor and Assignee shall execute and acknowledge
any other instruments that the Manager deems necessary or desirable for
substitution, including the written acceptance and adoption by the Assignee of
the provisions of this Agreement;
(c) The admission of the Assignee is Approved by the
Members, the granting or denial of which may be withheld by the Members in their
sole and absolute discretion;
(d) Payment of a transfer fee to the Company, sufficient to
cover all reasonable expenses connected with the substitution; and
(e) Compliance with Article IX of this Company Agreement.
ARTICLE XI
BOOKS, RECORDS, ACCOUNTING AND REPORTS
11.01 Books and Records. The Company shall maintain at its principal
office all of the following:
(a) A current list of the full name and last known business
or residence address of each Member set forth in alphabetical order together
with the Capital Contributions and Company Interest owned by each Member.
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(b) A copy of the Certificate, this Agreement and any and
all amendments to either thereof, together with executed copies of any powers of
attorney pursuant to which any certificate or amendment has been executed;
(c) Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the six most recent taxable
years;
(d) The financial statements of the Company for the six most
recent fiscal years;
(e) The Company books and records for at least the current
and past three fiscal years.
11.02 Delivery to Members and Inspection.
(a) Upon the request of a Member, the Manager shall promptly
deliver to the requesting Member, at the expense of the Company, a copy of the
information required to be maintained by Section 11.01 except for 11.01(e).
(b) Each Member, or his duly authorized representative, has
the right, upon reasonable request, to each of the following:
(1) Inspect and copy during normal business hours
any of the Company records; and
(2) Obtain from the Company, promptly after becoming
available, a copy of the Company's federal, state and local income tax or
information returns for each year.
(c) The Company shall send to each Member within eighty-five
(85) days after the end of each Fiscal Year the information necessary for the
Member to complete its federal and state income tax or information returns.
11.03 Annual Statements. The Company shall cause to be prepared for
the Members at least annually, at Company expense financial statements of the
Company prepared on the basis of the accrual method of accounting in accordance
with generally accepted accounting principles. The financial statements will
include a balance sheet, statements of income or loss, cash flows and Members'
equity.
11.04 Filings. The Manager, at Company expense, shall cause the income
tax returns for the Company to be prepared and timely filed with the appropriate
authorities. The Manager, at Company expense, shall also cause to be prepared
and timely filed, with appropriate federal and state regulatory and
administrative bodies, all reports required to be filed by the Company with
those entities under then current applicable laws, rules and regulations. The
reports shall be prepared on the accounting or
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reporting basis required by the regulatory bodies. Upon written request, any
Member shall be provided with a copy of any of the reports without expense to
the requesting Member.
ARTICLE XII
DESIGNATION RIGHTS, AUTHORITIES, POWERS,
RESPONSIBILITIES AND DUTIES OF THE MANAGER
12.01 Designation of Manager. The initial Manager shall be ECC. A
Manager and any successor Manager may be removed and a person designated as
successor Manager at any time by resolution Approved by the Members.
12.02 Authority of Manager.
(a) Permitted Acts. Except as provided otherwise in this
Agreement, the Manager shall have the exclusive authority to manage the
operations and affairs of the Company, shall have the fiduciary responsibility
with respect to the Company which a director and a chief executive officer of a
Delaware corporation would have with respect to a corporation, and shall have
all authority, rights, and powers conferred by law and those required or
appropriate for the management of the Company business including without
limitation (i) entering into loan, credit or other agreements to borrow funds in
connection with the Company's business and in connection therewith to encumber,
pledge, grant security interests or otherwise hypothecate assets of the Company;
and (ii) enter into loan or credit agreements with Enstar Affiliates whereby the
Company loans funds to such Enstar Affiliates on terms and conditions approved
by the Manager.
(b) Limitations and Restrictions. The Manager shall not have
the authority to do the following without it being Approved by the Members:
(1) Alter the primary purpose of the Company as set
forth in Section 2.05;
(2) Except for a sale of the Company's business
which is Approved by the Members, do any other act in contravention of this
Agreement or which would make it impossible to carry on the ordinary business of
the Company;
(3) Confess a judgment against the Company in
connection with any threatened or pending legal action;
(4) Possess any Company property or assign the
rights of the Company in specific Company property for other than a Company
purpose;
(5) Employ or permit to employ the funds or assets
of the Company in any manner except for the exclusive benefit of the Company
without the unanimous vote of the Members;
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(6) Commingle Company funds with those of any other
Person;
(7) Admit additional Members to the Company; or
(8) Sell all or substantially all of the assets of
the Company.
12.03 No Personal Liability. The Manager shall have no personal
liability for the repayment of the Capital Contributions of any Member.
12.04 Tax Matters Member.
(a) The Manager is hereby designated as Tax Matters Member
of the Company as provided in Regulations pursuant to Code Section 6231. Each
Member, by the execution of this Agreement, consents to such designation of the
Tax Matters Member and agrees to execute, certify, acknowledge, deliver, swear
to, file and record at the appropriate public offices such documents as may be
necessary or appropriate to evidence such consent.
(b) (i) To the extent and in the manner provided by
applicable law and Regulations, the Tax Matters Member shall furnish the name,
address, profits interest and taxpayer identification number of each Member,
including any successor to an Interest, to the Secretary of the Treasury or his
delegate (the "Secretary").
(ii) The Tax Matters Member shall keep each Member
informed of the administrative and judicial proceedings for the adjustment at
the Company level of any item required to be taken into account by a Member for
income tax purposes (such administrative proceeding referred to hereinafter as a
"tax audit" and such judicial proceeding referred to hereinafter as "judicial
review").
(iii) The Tax Matters Member shall not enter into any
agreement with the Internal Revenue Service which would result in any material
change either in income as previously reported or in the allocation of Net
Profits or Net Losses unless the Member provides the other Members with at least
thirty (30) days written notice of such proposed agreement.
(c) The Tax Matters Member is hereby authorized, but not
required:
(i) to enter into any settlement with the Internal
Revenue Service or the Secretary of the Treasury (the "Secretary") with respect
to any tax audit or judicial review, in which agreement the Tax Matters Member
may expressly state that such agreement shall bind the other Members except that
such settlement agreement shall not bind any Member who (within the
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time prescribed pursuant to the Code and Regulations thereunder) files a
statement with the Secretary providing that the Tax Matters Member shall not
have the authority to enter into a settlement agreement on the behalf of such
Member;
(ii) in the event that a notice of a final
administrative adjustment at the Company level of any item required to be taken
into account by a Member for tax purposes (a "final adjustment") is mailed to
the Tax Matters Member, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court, the
District Court of the United States for the district in which the Company's
principal place of business is located or elsewhere as allowed by law, or the
United States Claims Court;
(iii) to intervene in any action brought by any other
Member for judicial review of a final adjustment;
(iv) to file a request for an administrative
adjustment with the Secretary at any time and, if any part of such request is
not allowed by the Secretary, to file a petition for judicial review with
respect to such request;
(v) to enter into an agreement with the Internal
Revenue Service to extend the period for assessing any tax which is attributable
to any item required to be taken into account by a Member for tax purposes, or
an item affected by such item; and
(vi) to take any other action on behalf of the
Members (with respect to the Company) or the Company in connection with any
administrative or judicial tax proceeding to the extent permitted by applicable
law or Regulations.
(d) The Company shall indemnify and reimburse the Tax
Matters Member for all expenses (including legal and accounting fees) incurred
in connection with any administrative or judicial proceeding with respect to the
tax liability of the Members. The payment of all such expenses shall be made
before any distributions are made to the Members. The taking of any action and
the incurring of any expense by the Tax Matters Member in connection with any
such proceeding, except to the extent required by law, is a matter in the sole
discretion of the Tax Matters Member and the provisions on limitations of
liability of the Members and indemnification set forth in Article XVIII hereof
shall be fully applicable to the Tax Matters Member in its capacity as such.
12.05 Officers.
(a) The Manager may appoint officers at anytime. The
officers of the Company, if deemed necessary by the Manager, may include a
president, one or more vice presidents, secretary and one or more assistant
secretaries, and chief financial officer (and one or more assistant treasurers).
Any individual may hold any number of offices. The officers shall exercise such
powers
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and perform such duties as specified in this Agreement and as shall be
determined from time to time by the Manager.
(b) Subject to the rights, if any, of an officer under a
contract of employment, any officer may be removed, either with or without
cause, by the Manager at any time. Any officer may resign at any time by giving
written notice to the Company. Any resignation shall take effect at the date of
the receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Company under any contract to which the
officer is a party. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in this Agreement for regular appointments to that office.
(c) The president shall be the chief executive officer of
the Company, and shall, subject to the control of the Manager, have general and
active management of the business of the Company and shall see that all orders
and resolutions of the Manager are carried into effect. The president shall have
the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by a Manager or this Agreement. The president shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the Company,
except where required or permitted by law to be otherwise signed and executed,
and except where the signing and execution thereof shall be expressly delegated
by the Manager to some other officer or agent of the Company.
(d) The vice-president, or if there shall be more than one,
the vice-presidents in the order determined by the Manager, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the Manager may from time to time prescribe.
(e) The secretary shall attend all meetings of the Members,
and shall record all the proceedings of the meeting in a book to be kept for
that purpose and shall perform like duties for the standing committees when
required. The secretary shall give or cause to be given, notice of all meetings
of the Members and shall perform such other duties as may be prescribed by the
Manager. The secretary shall have custody of the seal, if any, of the Company
and the secretary shall have authority to affix the same to any instrument
requiring it, and when so affixed, it may be attested by his or her signature.
The secretary shall keep, or cause to be kept at the principal executive office
or at the office of the Company's transfer agent or registrar, as determined by
the Manager, all documents described in Section 11.01 and such other documents
as may be required under the Act. The secretary
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shall perform such other duties and have such other authority as may be
prescribed elsewhere in this Agreement or from time to time by the Manager. The
secretary shall perform such other duties and have such other authority as may
be prescribed elsewhere in this Agreement or from time to time by the Manager.
The secretary shall have the general duties, powers and responsibilities of a
secretary of a corporation.
(f) The chief financial officer shall keep and maintain, or
cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the Company, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
Capital Accounts and Company Interests. The chief financial officer shall have
the custody of the funds and securities of the Company, and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Company, and shall deposit all moneys and other valuable effects in the name and
to the credit of the Company in such depositories as may be designated by the
Manager. The chief financial officer shall disburse the funds of the Company as
may be ordered by the Manager. The chief financial officer shall perform such
other duties and shall have such other responsibility and authority as may be
prescribed elsewhere in this Agreement from time to time by the Manager. The
chief financial officer shall have the general duties, powers and
responsibilities of a chief financial officer of a corporation, and shall be the
chief financial and accounting officer of the Company.
ARTICLE XIII
RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS
13.01 Request for Vote. Any Member holding in the aggregate Company
Interests which equal or exceed five percent (5%) may call a meeting of the
Members for a vote, or may call for a vote without a meeting. In either event,
such Member shall establish a date for the meeting on which votes shall be
counted and shall mail by first class mail a notice to all Members of the time
and place of the Company meeting, if called, and the general nature of the
business to be transacted, or if no such meeting has been called, of the matter
or matters to be voted and the date which the votes will be counted.
13.02 Procedures. Each Member shall be entitled to cast one vote for
each full one percent (1%) interest of such Member's Company Interest: (i) at a
meeting, in person, by written proxy or by a signed notice directing the manner
in which he desires that his vote be cast, which notice must be received by the
Company prior to such meeting, or (ii) without a meeting, by a signed notice
directing the manner in which he desires that his vote be cast, which notice
must be received by the Company prior to the date on which the votes of Members
are to be counted. Only the votes of Members of record on the notice date,
whether at a meeting or otherwise, shall be counted.
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13.03 Action By Consent. Notwithstanding anything to the contrary
contained in this Article XIII, any action or approval required or permitted by
this Agreement to be taken or given at any meeting of Members (whether by vote
or consent), may be taken or given without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken or
approval so given, shall be signed by Members owning Company Interests having
not less than the minimum number of votes that would be necessary to authorize
or take such action or give such approval at a meeting at which all Members
entitled to vote thereon were present and voted. Prompt notice of the taking of
any action or the giving of any approval without a meeting by less than
unanimous written consent shall be given to those Members who have not consented
in writing.
13.04 Limitations. No Member shall have the right of power to: (i)
withdraw or reduce his Capital Contribution except as a result of the
dissolution of the Company or as otherwise provided by law or in this Agreement,
(ii) bring an action for partition against the Company or any Company assets,
(iii) cause the termination and dissolution of the Company, except as set forth
in this Agreement, or (iv) demand or receive property other than cash in return
for his Capital Contribution. Except as otherwise set forth in this Agreement,
no Member shall have priority over any other Members either as to the return of
his Capital Contribution or as to Net Income, Net Loss or distributions. Other
than upon the termination and dissolution of the Company as provided by this
Agreement, there has been no time agreed upon when the Capital Contribution of
each Member will be returned.
13.05 Amendments to Agreement. This Agreement may only be modified or
amended if Approved by the Members, provided, however, no amendment shall
materially reduce or increase, as the case may be, a Member's right to
allocations of Net Profit or Net Loss or to Distributions without such Member's
consent.
ARTICLE XIV
OTHER BUSINESSES AND INVESTMENT OPPORTUNITIES
Any Member and any Affiliate may engage in or possess an interest in any
other business or venture, independently or with others, and neither the
Company, any other Member nor any Affiliate shall have any right or interest in
and to such venture or business.
ARTICLE XV
DISSOLUTION OF COMPANY
15.01 Termination of Membership. No Member shall resign from the
Company, or take any voluntary action to commence bankruptcy proceedings or
dissolve itself. If any Member ceases to be a Member for any reason, including
death, bankruptcy or
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dissolution, the business of the Company may be continued only by resolution
approved by the remaining Members who hold a majority of the Company Interests
then held by the remaining Members within ninety (90) days following such event.
In such event, the successor-in-interest to the Member who ceased to be a Member
shall be treated as an Assignee of such Member for all purposes of this
Agreement.
15.02 Events of Dissolution or Liquidation. The Company shall be
dissolved upon the happening of any of the following events:
(a) The failure of the Members to continue the Company in
accordance with the provisions of Section 15.01 hereof after the termination of
a Member's membership.
(b) The expiration of the term of the Company as set forth
in Section 2.04 hereof;
(c) The sale, exchange, or other disposition or transfer of
all or substantially all of the assets of the Company;
(d) Upon the unanimous consent of the Members; or
(e) Subject to any provision of this Agreement that limits
or prevents dissolution, the happening of any event that, under the Act caused
the dissolution of a limited liability company.
15.03 Liquidation. Upon dissolution of the Company for any reason, the
Company shall immediately commence to windup its affairs. A reasonable period of
time shall be allowed for the orderly termination of the Company business,
discharge of its liabilities and distribution or liquidation of the remaining
assets so as to enable the Company to minimize the normal losses attendant to
the liquidation process. A full accounting of the assets and liabilities of the
Company shall be taken and a statement thereof shall be furnished to each Member
within thirty (30) days after the dissolution. Such accounting and statements
shall be prepared under the direction of the Manager or, by a liquidating
trustee selected by unanimous consent of the Members. The Company property and
assets and/or the proceeds from the liquidation thereof shall be applied in the
following order of priority:
(a) First, payment of the debts and liabilities of the
Company, in the order of priority provided by law (including any loans by the
Members to the Company) and payment of the expenses of liquidation;
(b) Second, setting up of such reserves as the Members or
liquidating trustee may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company or any obligation or
liability not then due and payable; provided, however, that any such reserve
shall be paid over by the Manager or liquidating trustee to an escrow agent, to
be held by
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such escrow agent for the purpose of disbursing such reserves in payment of such
liabilities, and, at the expiration of such escrow period as the Manager or
liquidating trustee shall deem advisable but not to exceed one calendar year, to
distribute the balance thereafter remaining in the manner hereinafter provided;
and
(c) Third, to the Members in accordance with their
respective positive Capital Accounts. The distributions pursuant to this
paragraph (c) shall, to the extent possible, be made by the end of the Fiscal
Year in which the dissolution occurs, of if later, within ninety (90) days after
the date of such dissolution, or such other time period which may be permitted
under Regulations Section 1.704-1(b)(2)(ii)(b).
15.04 Distribution in Kind. If Approved by the Members, any noncash
asset may be distributed in kind to one or more Members. Any such asset,
however, shall first be valued at its fair market value to determine the gain or
loss used in determining Net Income or Net Losses that would have resulted if
such asset were sold for such value, such gain or loss shall then be allocated
pursuant to Article VIII hereof, and the Members' Capital Accounts shall be
adjusted to reflect such gain or loss. The amount distributed and charged to the
Capital Account of each Member receiving an interest in such distributed asset
shall be the fair market value of such interest (net of any liability secured by
such asset that such Member assumes or takes subject to). The fair market value
of such asset shall be determined by the Manager, or liquidating trustee, as the
case may be, or by an independent appraiser (any such appraiser must be
nationally recognized as an expert in valuing the type of asset involved)
selected by the Manager, or the liquidating trustee, as the case may be.
15.05 No Action for Dissolution. The Members acknowledge that
irreparable damage would be done to the goodwill and reputation of the Company
if any Member should bring an action in court to dissolve the Company. This
Agreement has been drawn carefully to provide fair treatment of all parties and
equitable payment in liquidation of the interests of all Members. Accordingly,
each Member hereby waives and renounces its right to initiate legal action to
seek dissolution, or to seek the appointment of a receiver or trustee to
liquidate the Company.
15.06 No Further Claim. Upon dissolution, each Member shall look
solely to the assets of the Company for the return of its investment, and if the
Company property remaining after payment or discharge of the debts and
liabilities of the Company, including debts and liabilities owed to one or more
of the Members, is insufficient to return the aggregate capital contributions of
each Member such Members shall have no recourse against any other Member.
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ARTICLE XVI
REPRESENTATIONS BY THE MEMBERS
Each Member hereby represents and warrants to, and agrees with, the
other Members and the Company as follows:
16.01 Investment Intent. It is acquiring its Company Interest with the
intent of holding the same for investment for its own account and without the
intent or a view to participating directly or indirectly in, or for resale in
connection with, any distribution of such Company Interest within the meaning of
the Securities and Exchange Act of 1933, as amended (the "Federal Act"), or any
applicable state securities laws, and it does not intend to divide its
participation with others, nor to resell, assign or otherwise dispose of all or
any part of its Company Interest.
16.02 Securities Regulation.
(a) It acknowledges and agrees that the Company Interest is
being issued and sold in reliance on the exemption from registration contained
in Section 4(2) of the Federal Act and exemptions contained in applicable state
securities laws, and that it cannot and will not be sold or transferred except
in a transaction which is exempt under the Federal Act and those state acts or
pursuant to an effective registration statement under those acts or in a
transaction which is otherwise in compliance with the Federal Act and those
state acts.
(b) It understands that it has no contract right for the
registration under the Federal Act of the Company Interest for public sale and
that, unless such Interest is registered or an exemption from registration is
available, such Interest may be required to be held indefinitely.
16.03 Knowledge and Experience. It has such knowledge and experience
in financial, tax and business matters as to enable it to evaluate the merits
and risks of its investment in the Company and to make an informed investment
decision with respect thereto.
16.04 Economic Risk. It is able to bear the economic risk of an
investment in its Interest.
16.05 Binding Agreement. This Agreement is and will remain its valid
and binding agreement, enforceable in accordance with its terms (subject, as to
the enforcement of remedies, to any applicable bankruptcy, insolvency or other
laws affecting the enforcement of creditor's rights).
16.06 Tax Position. Unless it provides prior written notice to the
Company it will not take a position on its federal income tax return, on any
claim for refund, or in any
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administrative or legal proceedings, that is inconsistent with any information
return filed by the Company or with the provisions of this Agreement.
16.07 Information. It has received all documents, books and records
pertaining to an investment in the Company requested by it.
ARTICLE XVII
MISCELLANEOUS
17.01 Additional Documents. At any time and from time to time after
the date of this Agreement, upon the request of the Manager, the other Members
shall do and perform, or cause to be done and performed, all such additional
acts and deeds, and shall execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, all such additional instruments and
documents, as may be required to best effectuate the purposes and intent of this
Agreement.
17.02 Severability. If any term or provision of this Agreement is held
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the legality, validity or enforceability of
the remainder of this Agreement.
17.03 Inspection. Any Member shall have the right at reasonable times
to inspect the books and records of the Company.
17.04 General. This Agreement: (i) shall be binding on the executors,
administrators, estates, heirs and legal successors of the Members; (ii) be
governed by and construed in accordance with the laws of the State of Delaware;
(iii) may be executed in more than one counterpart as of the day and year first
above written; and (iv) contains the entire agreement among the Members. The
waiver of any of the provisions, terms or conditions contained in this Agreement
shall not be considered as a waiver of any of the other provisions, terms or
conditions hereof.
17.05 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery, confirmation of telex or telecopy, or upon the fifth day
following mailing by registered mail, postage prepaid, addressed (a) if to any
Member at such addresses as set forth on the records of the Company, or at such
other address as any Member shall have furnished to the Company in writing, (b)
if to the Company, at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
17.06 Execution of Certificate and Other Papers. The Members agree to
execute such instruments, documents and papers as they deem necessary or
appropriate to carry out the intent of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Limited Liability
Company Agreement as of the day and year first set forth above.
FALCON HOLDING GROUP, L.P.,
a Delaware limited partnership
By: FALCON HOLDING GROUP, INC.,
a California corporation,
its general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: Chief Financial Officer
------------------------------
ENSTAR COMMUNICATIONS CORPORATION,
a Georgia corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: Chief Financial Officer
------------------------------
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SCHEDULE I
Capital Company
Member Contribution Interest
------ ------------ --------
Falcon Holding Group, L.P. $ 250,000 20.0%
Enstar Communications Corporation 1,000,000 [in accounts 80.0%
receivable]
$1,250,000 100.00%
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