LIMITED LIABILITY COMPANY AGREEMENT OF LEAF VENTURES, LLC (a Delaware Limited Liability Company)
(Back
to Main Document)
OF
LEAF
VENTURES, LLC
(a
Delaware Limited Liability Company)
THIS
LIMITED LIABILITY COMPANY AGREEMENT
is made
as of March ____, 2007, by which LEAF Financial Corporation (the “Class
A Member”),
Crit
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (individually each a “Class
B Member”
and
collectively the “Class
B Members”),
establish and organize a limited liability company (the “Company”)
to be
managed by the Class A Member. The Class A Member and the Class B Member are
sometimes collectively referred to as the “Members”.
The
Members, intending to be legally bound, hereby set forth the terms of their
agreement as to the affairs of the Company and the conduct of its business,
as
follows:
DEFINITIONS
As
used
in this Agreement, the capitalized terms shall have the following
meanings:
“Act”
shall
mean the Delaware Limited Liability Company Act, as amended, and any successor
act.
“Affiliate”
means
(i) a Person defined as an affiliate in Section 101 of the United States
Bankruptcy Code, including all insiders (as defined in Section 101), or
(ii) any Person controlled by, controlling or under common control with a
Person.
“Agreement”
shall
mean this Limited Liability Company Agreement, as amended.
“Capital”
shall
mean the sum of all of the money and other property contributed to the Company
by the Members as provided herein.
“Capital
Account”
shall
mean the book capital account established and maintained for each
Member.
“Capital
Contributions”
shall
mean all contributions to the Capital of the Company made by the Members under
the terms of this Agreement.
“Capital
Contribution”
shall
mean each initial and any subsequent contribution to the Capital of the Company
by a Member.
“Capital
Transaction”
shall
mean any sale, transfer, financing, refinancing, exchange or other disposition
of all or substantially all of the assets of the Company, not in the ordinary
course of business.
“Capital
Transaction Proceeds”
shall
mean all cash receipts of the Company arising from a Capital Transaction
(including principal and interest received on a debt obligation received as
consideration, in whole or in part, on a sale of assets and the net proceeds
of
refinancing
of any indebtedness of the Company), less all expenses incurred and reserves
determined by the Class A Member to be necessary in connection with the Capital
Transaction; provided,
however,
that
neither distributions which are deemed returns of Capital for Federal income
tax
purposes nor the payment of Capital Contributions by the Members shall be
included within the meaning of the term Capital Transaction
Proceeds.
“Certificate”
shall
mean the Certificate of Formation of the Company as filed with the Delaware
Secretary of State, including any and all amendments thereto.
“Code”
shall
mean the Internal Revenue Code of 1986, as amended.
“Distributable
Cash”
shall
mean, for any Fiscal Year (as defined in Section 4 hereof) or portion thereof,
Gross Revenues minus the total annual cash expenditures of the Company
(excluding cash expenditures attributable to a Capital Transaction) and any
additions to cash reserves of the Company as determined by the Class A Member
for such period.
“Gross
Revenues”
shall
mean, for any Fiscal Year or portion thereof, the total cash gross receipts
from
operations of the Company from all sources (but excluding Capital Transaction
Proceeds), Capital Contributions and the proceeds of any loans made to the
Company) for such period.
“Interest”
or “Interest in the Company”
shall
mean the ownership interest of each Member in the Company as set forth in
Schedule A, as Schedule A may be amended from time to time.
“Merit
Capital Advance LLC Agreement”
shall
mean the limited liability company agreement of Merit Capital Advance, LLC,
a
Delaware limited liability company.
“Person”
shall
mean any individual, corporation, partnership, limited liability company, trust
or other entity.
“Regulations”
shall
mean the regulations promulgated from time to time by the U.S. Treasury
Department under the Code.
“Transfer”
shall
mean any and all types of transfers including, but not limited to, any sale,
conveyance, assignment, disposition, distribution, encumbrance, pledge,
mortgage, hypothecation or gift.
“Units”
shall
mean a representation of a Member’s respective Interest in the
Company.
Any
capitalized terms not defined above shall have the meanings ascribed to them
in
the relevant sections of this Agreement.
1. FORMATION
AND NAME
The
parties to this
Agreement agree to establish and organize a limited liability company pursuant
to the Act, upon the terms set forth in this Agreement. The
Members
2
are
hereby admitted to the Company as members in the Company. The name of the
Company shall be LEAF Ventures, LLC.
2. PRINCIPAL
AND REGISTERED OFFICE
The
principal office
of the Company shall be ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and the registered office of the Company shall be ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Class A Member may from time to
time
change such principal and registered office upon written notice to the other
Members. All Members agree to execute and deliver all necessary documents in
connection with the registration of the Company in all jurisdictions requiring
such registration.
3. PURPOSE
The
purpose of the
Company shall be to acquire membership interests in Merit Capital Advance,
LLC
and to engage in any lawful act or activity for which limited liability
companies may be organized under the Act and engage in any and all activities
necessary, convenient, desirable or incidental to the foregoing. The Company
shall have the authority to do all things necessary or advisable in order to
accomplish such purpose.
4. TERM;
FISCAL YEAR
The
existence of the Company shall commence on the date the Certificate is filed
and
deemed effective in the office of the Secretary of State of the State of
Delaware and shall continue until the Company is dissolved in accordance with
the provisions of this Agreement (the “Term”).
The
fiscal year of the Company (the “Fiscal
Year”)
shall
begin on October 1 and end on September 30 unless otherwise determined by the
Class A Member.
5. MEMBERS
AND THEIR INTERESTS
5.1. Members.
There
shall be two classes of Members, the Class A Member and the Class B Members.
Unless otherwise set forth in this Agreement, the Company shall be managed
by
the Class A Member in accordance with the provisions of Section 8. The Members
each shall individually have the number of Units and a corresponding Interest
in
the Company as set forth on Schedule A hereto. The Class A Member shall modify
Schedule A from time to time, upon the issuance of additional Units or a
transfer of Units to reflect the then current Members and their respective
Interests in the Company and such schedule shall be kept at the principal office
of the Company. The Company may issue partial or fractional Units.
5.2. Capital
Contributions.
5.2.1. Members.
Each
Member agrees to make on the date of this Agreement the Capital Contribution
in
the amount set forth opposite such Member’s name on the attached Schedule A in
exchange for the number of Units and Interest in the Company set forth opposite
such Member’s name on the attached Schedule A. The initial Capital Contribution
of the Class A Member is an amount that is equal to the required initial capital
contribution of the Company under the terms of the Merit Capital Advance LLC
Agreement.
3
5.2.2. Additional
Capital Contributions.
No
Class B Member shall be required to make any additional Capital Contributions
to
the Company. Any additional Capital Contributions shall be made by, and in
the
sole discretion of, the Class A Member. Notwithstanding the foregoing, the
Class
A Member shall make additional Capital Contributions to the Company in an amount
equal to any additional capital contributions required to be made by the Company
to Merit Capital Advance, LLC. Such additional Capital Contributions shall
be
made immediately prior to the time the Company is required to make such
additional capital contribution to Merit Capital Advance, LLC.
5.3. Vote
of Members.
Any
matter requiring the vote of the Members shall be determined by a vote in
accordance with their Interests as set forth on the attached Schedule
A.
5.4. Additional
Members.
Additional Members may be admitted to the Company or additional Units issued
with the prior written consent of the Members holding in the aggregate equal
to
or greater than fifty-one percent (51%) of the Member Interests in the Company.
In the event any additional Members are admitted to the Company, the Unit(s),
Interest(s) and vote in the Company of the most recently admitted Member(s)
shall be as specified at the time such new Member(s) shall be admitted, and
the
Interest in the Company of each of the Members of the Company shall be
proportionately reduced, as appropriate. The foregoing shall not apply to any
substituted Member who is the transferee of one or more Units and Interest
in
the Company from another Member. The existing Members shall not have any
pre-emptive rights to any additional Units issued hereunder.
5.5. Other
Activities of Members.
The
Members may engage in or possess an interest in other business ventures of
any
nature, whether or not similar to or competitive with the activities of the
Company, for their respective accounts and not for the account of the Company
or
the other Members.
5.6. Limitation
of Liability of Members.
No
Member shall have any liability or obligation for any debts, liabilities or
obligations of the Company, or of any agent or employee of the Company, beyond
the Member’s Capital Contribution.
5.7. Loans.
Loans
may be made to the Company by a Member only upon the consent of the Class A
Member. If a Member makes any loan to the Company, or advances money on its
behalf, the amount of any such loan or advance shall not be deemed an increase
in, or contribution to, the Capital Contribution of the Member. Interest shall
accrue on any such loan at an annual rate agreed to by the Company and the
Member making such loan (but not in excess of the maximum rate allowable under
applicable usury laws).
5.8. Certain
Units Subject to Forfeiture.
Notwithstanding any other provision of this Agreement, as provided below, ▇▇.
▇▇▇▇▇▇▇▇▇▇’▇ Units are subject to forfeiture if ▇▇. ▇▇▇▇▇▇▇▇▇▇ ceases to be
employed by Merit Capital Manager, LLC or any of its affiliates (“Employer”).
5.8.1. If
▇▇.
▇▇▇▇▇▇▇▇▇▇ is not employed by Employer prior to the first anniversary of the
date hereof, ▇▇. ▇▇▇▇▇▇▇▇▇▇ shall forfeit 100% of his Units.
4
5.8.2. If
▇▇.
▇▇▇▇▇▇▇▇▇▇ is employed by Employer on the first anniversary of the date hereof
but is not employed by Employer prior to the second anniversary of the date
hereof, ▇▇. ▇▇▇▇▇▇▇▇▇▇ shall forfeit 75% of his Units.
5.8.3. If
▇▇.
▇▇▇▇▇▇▇▇▇▇ is employed by Employer on the second anniversary of the date hereof
but is not employed by Employer prior to the third anniversary of the date
hereof, ▇▇. ▇▇▇▇▇▇▇▇▇▇ shall forfeit 50% of his Units.
5.8.4. If
▇▇.
▇▇▇▇▇▇▇▇▇▇ is employed by Employer on the third anniversary of the date hereof
but is not employed by Employer prior to the fourth anniversary of the date
hereof, ▇▇. ▇▇▇▇▇▇▇▇▇▇ shall forfeit 25% of his Units.
5.8.5. If
▇▇.
▇▇▇▇▇▇▇▇▇▇ is employed by Employer on the fourth anniversary of the date hereof,
his Units shall no longer be subject to forfeiture.
6. CAPITAL
ACCOUNTS AND ALLOCATIONS
6.1. Capital
Accounts.
A
single Capital Account shall be established, determined and maintained for
each
Member in accordance with the “alternate test for economic effect” set forth in
Regulation §1.704-l(b)(2), which provides, in part, that a Member’s Capital
Account shall be:
6.1.1. increased
by (i) the amount of money contributed by the Member to the Company,
(ii) the fair market value of any property contributed by the Member to the
Company (net of liabilities secured by such contributed property), and
(iii) allocations to the Member of Company income and gain (or items
thereof), including income and gain exempt from tax; and
6.1.2. decreased
by (i) the amount of money distributed to the Member by the Company, (ii) the
fair market value of any property distributed to the Member by the Company
(net
of liabilities secured by such distributed property), (iii) allocations to
the
Member of expenditures of the Company not deductible in computing its taxable
income and not properly capitalized for federal income tax purposes, and (iv)
allocations to the Member of Company loss and deduction (or items
thereof).
6.2. Transferred
Capital Accounts; Adjustments.
Upon
the Transfer of all or any part of a Member’s Unit(s) and Interest in the
Company, the Capital Account of the transferor Member that is attributable
to
the transferred interest shall carry over to the transferee Member, unless
such
Transfer causes a termination of the Company for federal income tax purposes,
in
which case the Capital Account that carries over to the transferee Member shall
be adjusted in accordance with Regulation §1.704-l(b)(2)(iv)(e).
6.3. Return
of Capital.
Each
Member is entitled to the return of his Capital Contribution only by way of
distributions made pursuant to Sections 7 and 12 hereof. No Member shall
have the right to demand or receive any property other than cash in return
for
that Member’s Capital Contribution or to bring an action of partition against
the Company or its property.
5
6.4. Profits
and Losses; Allocations.
The
income (including tax exempt income), gains, deductions, losses and credits
of
the Company shall be determined in conformity with standard federal tax
accounting principles consistently applied and shall be allocated among the
Members in the following order:
6.4.1. First,
to
each Member in proportion to the aggregate net losses heretofore allocated
to
all the Members to the extent that such net losses have not heretofore been
offset by allocations of net profits pursuant to this Section 6.4.1. to the
extent thereof;
6.4.2. Second,
to each Member in proportion to and up to the amount of Distributable Cash
distributed under Section 7.1;
6.4.2.1. Profits
in excess of Distributable Cash shall first be allocated among the Members
to
the extent that a Member was allocated less profit than Distributable Cash
in
prior years under Section 6.4.2.2. hereof; and
6.4.2.2. Profits
in excess of Distributable Cash shall next be allocated among the Members in
proportion to their respective Interests in the Company.
6.4.3. The
Company’s net profits from a Capital Transaction shall be allocated among the
Members, to the extent possible, to create positive balances in the Members’
respective Capital Accounts that will result in liquidating distributions
pursuant to Section 12.2 hereof being made in the manner described in Section
7.3 hereof.
6.4.4. The
Company’s net losses for any Fiscal Year shall be allocated among the Members in
the following order:
6.4.4.1. First,
to
each Member in proportion to the aggregate net profits heretofore allocated
to
all Members to the extent that such net profits have not heretofore been offset
by allocations of net losses pursuant to this Section 6.4.4.1. to the
extent thereof; and
6.4.4.2. Second,
to the Members in proportion to such Member’s respective Interest in the
Company; provided,
however,
that in
the event of a contribution to the Company of property to which Section 704
of
the Code applies, or a revaluation of Company property pursuant to the
Regulations, allocations of items of depreciation, amortization and gain or
loss, as computed for federal income tax purposes, shall be made in a manner
that takes into account the variations between the adjusted tax basis of such
property and its adjusted value in accordance with the “Traditional Method” set
forth in the Regulations.
6.5. Qualified
Income Offset; Minimum Gain Chargeback.
Notwithstanding the provisions of Section 6.4 hereof:
6.5.1. A
Member
shall not be allocated items of loss, deduction or nondeductible
noncapitalizable expenditure (“Loss
Items”)
to the
extent such an allocation would cause or increase a negative balance in such
Member’s Capital Account as of the close of
6
any
taxable year in excess of the sum of (i) the amount of such balance the Member
is obligated or deemed obligated to restore pursuant to the Regulations, and
(ii) to the extent not taken into account under clause (i), the amount of any
loan with respect to which the Member is treated as bearing the risk of loss
pursuant to the Regulations. Any Loss Items prohibited to be allocated to a
Member by reason of this Section 6.5.1. shall be allocated to or among the
other Members as provided in this Section 6 and the applicable
Regulations.
6.5.2. If
there
is a net decrease in Company minimum gain (as defined in the Regulations) or
in
minimum gain attributable to Member nonrecourse debt (as defined in the
Regulations) during a Company Fiscal Year, the Members shall be allocated items
of Company income and gain (“Income
Items”)
in
accordance with the Regulations. This Section 6.5.2. is intended to comply
with the minimum gain chargeback requirement of the Regulations, and shall
be
interpreted and applied consistently therewith.
6.5.3. If
a
Member unexpectedly receives an adjustment, allocation or distribution described
in the Regulations which results in a negative balance in such Member’s Capital
Account in excess of the sum described in Section 6.5.1. above, Income
Items (consisting of a pro-rata portion of each item of Company income,
including gross income, and gain) shall be allocated to such Member in an amount
and a manner sufficient to eliminate such excess deficit balance as quickly
as
possible. This Section 6.5.3. is intended to comply with the qualified
income offset requirement of the Regulations, and shall be interpreted and
applied consistently therewith.
6.5.4. If
(i) any Loss Items shall be specifically allocated pursuant to
Section 6.5.1. hereof, and the Member to whom such Loss Items has been
allocated does not have a related share of minimum gain (within the meaning
of
the Regulations) or minimum gain attributable to Member nonrecourse debt (within
the meaning of the Regulations), or (ii) any Income Items shall be
specially allocated pursuant to Section 6.5.2. or 6.5.3. hereof, then as
quickly as possible thereafter (but not in such a manner as to violate the
provisions of any part of this Section 6.5) Income Items and Loss Items
shall be allocated to such Member to reverse such special allocations. The
intention of this Section 6.5.4. is to cause the ultimate adjustment of all
Capital Accounts to such balances as they would have had if no special
allocations had been made pursuant to Sections 6.5.1., 6.5.2. or 6.5.3.
hereof during the Term but the limitation set forth in Section 6.5.1. above
had instead been applied immediately prior to the liquidation of the Company
taking into account all Income Items and Loss Items incurred at any time during
the Term.
7. CASH
DISTRIBUTIONS
7.1. Distributable
Cash.
Distributions of Distributable Cash to the Members shall be made within five
business days of the Company’s receipt of a distribution pursuant to Section
5.1(a) of the Merit Capital Advance LLC Agreement. Distributable Cash shall
be
distributed to the Members in accordance with their Interests in the Company;
provided, however, if the Class A Member reasonably determines that such
distribution constitutes a capital transaction of Merit Capital Advance, LLC,
then such distribution shall be deemed Capital Transaction Proceeds and
distributed pursuant to Section 7.3. All other distributions shall be made
at
the sole discretion of the Class A Member.
7
7.2. Tax
Distributions.
The
Company shall, at any time it receives a tax distribution pursuant to the Merit
Capital Advance LLC Agreement, distribute the pro rata amount of such
distribution to each Member. Any amount distributed pursuant to this Section
7.2
shall be deemed to be an advance distribution of amounts otherwise distributable
to the Members pursuant to Section 7.1 and shall reduce the amounts that would
subsequently otherwise be distributed to the Members pursuant to Section
7.1.
7.3. Capital
Transaction Proceeds.
Distributions of Capital Transaction Proceeds to the Members shall be made
in
the manner, and at such time, as solely determined by the Class A Member but
in
no event later than sixty (60) days following the Capital Transaction giving
rise to such proceeds. Capital Transaction Proceeds shall be distributed to
the
Members with positive Capital Account balances, pro rata, in proportion to
the
Members’ respective positive Capital Account balances until each Member’s
Capital Account balance is zero and any excess Capital Transaction Proceeds
shall be distributed, pro rata, in proportion to the Member’s respective
Interest in the Company.
8. MANAGEMENT
OF THE COMPANY
8.1. Management.
Except
as otherwise expressly stated elsewhere in this Agreement, the business and
affairs of the Company shall be managed solely by the Class A
Member.
8.2. Powers
of the Class A Member.
Subject
to this Agreement, the Class A Member shall have the exclusive right to manage
the business of the Company and is hereby authorized to take any action of
any
kind and to do anything and everything it deems necessary in accordance with
the
provisions of this Agreement. The Class A Member shall take all actions which
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 of
Delaware, and to qualify the Company to do business in such other jurisdictions
as required by law. All decisions concerning the management of the Company
shall
be made by the Class A Member. Except as otherwise provided in this Agreement
or
by nonwaivable provisions of the Act, the Class B Members shall not be entitled
to vote on any matters concerning the management of the Company, or have the
authority to bind the Company. The Class A Member 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
the
Members under the laws of the State of Delaware.
Unless
authorized in writing to do so by this Agreement or by the Class A Member,
no
attorney-in-fact, employee or other agent of the Company shall have any power
or
authority to bind the Company in any way, to pledge its credit or to render
it
liable pecuniarily for any purpose.
8.3. Meeting
of Members.
8.3.1. No
annual
meetings of the Members shall be held.
8.3.2. Special
meetings of the Members for any proper purpose or purposes may be called at
any
time by the Class A Member. Only business within the purpose or
8
purposes
described in the notice (or waiver thereof) provided by the Class A Member
to
the Members may be conducted at a special meeting of the Members.
8.3.3. Any
action 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 taken, shall be signed by the holder or holders
of a
majority of the Interests in the Company. Every written consent shall bear
the
date of signature of each Member who signs the consent.
8.4. Exculpation
and Indemnification.
8.4.1. The
Class
A Member shall not be held liable to the Company or to any Member for any loss
suffered by the Company unless such loss is caused by the Class A Member’s gross
negligence, willful misconduct or violation of law. The Class A Member shall
not
be liable for errors in judgment or for any acts or omissions that do not
constitute gross negligence, willful and wanton misconduct or violation of
law.
The Class A Member may consult with counsel and accountants in respect of
Company affairs and, provided the Class A Member acts in good faith reliance
upon the advice or opinion of such counsel or accountants, the Class A Member
shall not be liable for any loss suffered by the Company in reliance
thereon.
8.4.2. Subject
to the limitations and conditions as provided in this Section 8.4, each Person
who was or is made a party or is threatened to be made a party to or is involved
in any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative (hereinafter a “Proceeding”),
or
any appeal in such a Proceeding or any inquiry or investigation that could
lead
to such a Proceeding, by reason of the fact that he or she, or a Person of
whom
he or she is the legal representative, is or was a Class A Member of the Company
or a director, officer, employee or agent of the Class A Member, or while a
Class A Member of the Company or a director, officer, employee or agent of
the
Class A Member, is or was serving at the request of the Company as a Class
A
Member, director, partner, venturer, proprietor, trustee, employee, agent,
or
similar functionary of another foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise shall be indemnified by the Company to the
fullest extent permitted by the Act, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
such law permitted the Company to provide prior to such amendment) against
judgments, penalties (including excise and similar taxes and punitive damages),
fines, settlements and reasonable expenses (including, without limitation,
attorneys’ fees) actually incurred by such Person in connection with such
Proceeding, and indemnification under this Section 8.4 shall continue as to
a
Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity hereunder. The rights granted pursuant to this Section
8.4
shall be deemed contract rights, and no amendment, modification or repeal of
this Section 8.4 shall have the effect of limiting or denying any such rights
with respect to actions taken or Proceedings arising prior to any amendment,
modification or repeal. It is expressly acknowledged that the indemnification
provided in this Section 8.4 could involve indemnification for negligence or
under theories of strict liability.
9
8.4.3. The
right
to indemnification conferred in this Section 8.4 shall include the right to
be
paid or reimbursed by the Company the expenses incurred by a Person of the
type
entitled to be indemnified under Section 8.4.2. who was, is or is threatened
to
be made a named defendant or respondent in a Proceeding in advance of the final
disposition of the Proceeding and without any determination as to the Person’s
ultimate entitlement to indemnification. Upon request, the Company shall pay
such expenses incurred and to be incurred by any such Person in advance of
the
final disposition of a Proceeding, upon receipt of an undertaking by such Person
to repay all amounts so advanced if it shall ultimately be determined that
such
Person is not entitled to be indemnified under this Section 8.4 or
otherwise.
8.4.4. The
right
to indemnification and the advancement and payment of expenses conferred in
this
Section 8.4 shall not be exclusive of any other right which a Person may have
or
hereafter acquire under any law (common or statutory), provision of the
Certificate or this Agreement, vote of Members or disinterested Class A Member
or otherwise.
8.4.5. The
Company may purchase and maintain insurance, at its expense, to protect itself
and any Member (or director, officer, employee or agent of the Class A Member),
or agent of the Company or is or was serving at the request of the Company
as a
director, officer, partner, venturer, proprietor, trustee, employee, agent
or
similar functionary of another foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any amounts entitled to be indemnified
whether or not the Company would have the power to indemnify such Person against
such expense, liability or loss under this Section 8.4.
8.4.6. If
this
Section 8.4 or any portion hereof shall be invalidated on any ground by any
court of competent jurisdiction, then the Company shall nevertheless indemnify
and hold harmless the Class A Member or any other Person indemnified pursuant
to
this Section 8.4 as to any amounts entitled to be indemnified under Section
8.4.2. to the full extent permitted by any applicable portion of this Section
8.4 that shall not have been invalidated and to the fullest extent permitted
by
applicable law.
8.5. Reliance
by Third Parties.
Third
parties dealing with the Company shall be entitled to rely conclusively upon
the
power and authority of the Class A Member. Any corporation, trust, partnership,
or other business entity called upon to Transfer any property to or from the
name or account of the Company shall be entitled to rely on instructions or
assignments signed by the Class A Member without inquiry as to the authority
of
the Person signing or purporting to sign such instructions or assignments and
without inquiry as to the validity of the Transfer.
8.6. Class
A Member Has No Exclusive Duty to Company.
The
Class A Member shall devote to the Company such time and effort as may be
necessary for the proper performance of its duties hereunder. The Class A Member
shall not be required to manage the Company as its sole and exclusive function
and it may have other business interests and may engage in other activities
in
addition to those relating to the Company. Neither the Company nor any other
Member shall have any right, by virtue of this Agreement, to share or
participate in such other investments or activities of the Class A Member or
to
the income or proceeds derived
10
from
such
investments or activities. The Class A Member shall incur no liability to the
Company or any other Member as a result of engaging in any other business or
venture.
8.7. Tax
Matters Member.
The
Class A Member is designated as the tax matters member under § 6231(a)(7) of the
Code or under comparable provisions of state or local tax laws and shall have
the duties and authority of a tax matters member as specified in the Code and
the Regulations or under comparable provisions of state or local tax
laws.
8.8. Company
Expenses.
All
reasonable third party expenses incurred by the Class A Member (or any third
party hired by the Class A Member) for performing the services in performing
its
duties and obligations hereunder shall constitute operating expenses of the
Company. The Class A Member shall not be required to use its own funds in
carrying out any of its responsibilities under this Agreement. If the Class
A
Member uses its own funds to pay for any operating expenses of the Company,
the
Company shall reimburse the Class A Member within ten (10) days following
receipt of evidence of such expenditure made by the Class A Member out of its
own funds. The Members shall pay their own legal and other expenses in
connection with the negotiation and execution of this Agreement.
8.9. Tax
Elections.
The
Company shall be treated, and shall file its tax returns, as a partnership
for
federal, state and local income and other tax purposes. All elections permitted
to be made by the Company under the Code shall be made by the Class A Member.
Notwithstanding the foregoing, no election shall be made by the Company or
the
Class A Member for the Company to be excluded from the application of any of
the
provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state tax laws.
9. LIABILITY
AND RIGHTS OF MEMBERS
9.1. No
Participation in Management.
Except
as otherwise provided herein, the Members shall not participate in the
management or control of Company business, nor shall the Members transact any
business for the Company, nor shall the Members have the power to act for or
bind the Company, said powers being vested exclusively in the Class A
Member.
9.2. No
Personal Liability.
No
Member, employee or agent of the Company shall have any personal liability,
whether to the Company, to any of the Members or to the creditors of the
Company, for the debts, obligations or liabilities of the Company or any losses
beyond the amount committed by the Member to the capital of the Company. No
Member shall be personally liable for the return of any Capital Contribution
made to the Company by another Member.
9.3. Death
of a Member.
The
death of a Member shall not cause a dissolution of the Company. Upon the death
of a Member, the rights of such Member to share in the Company profits and
losses, to receive distributions of Company funds and to transfer his or her
Unit(s) and Interest in the Company shall descend to and vest in his or her
personal representatives
or successors-in-interest, subject to the terms and conditions of this
Agreement, and the Company shall continue as a limited liability
company.
11
10. BANKING;
BOOKS AND RECORDS
10.1. Banking.
All
funds of the Company shall be deposited and kept in its name in such Company
bank account or accounts as shall be designated by the Class A Member. All
withdrawals therefrom shall be made upon checks signed by the Class A Member
or
its designee(s).
10.2. Books
and Records.
Adequate accounting records of all Company business shall be kept and these
shall be open to inspection by any of the Members at all reasonable times.
The
Company shall maintain its accounting records and shall report for income tax
purposes on the cash or accrual method of accounting, as determined by the
Class
A Member.
10.3. Tax
Returns.
The
Class A Member shall cause all tax returns for the Company to be prepared and
timely filed with the appropriate authorities, and shall provide copies of
all
such returns to the Members.
11. TRANSFERABILITY
OF INTERESTS
11.1. Member’s
Unit(s) and Interest.
A
Member
may not Transfer all or part of its Unit(s) or Interest in the Company to a
Person (hereinafter sometimes referred to as an “Assignee”)
unless
such Transfer is made in accordance with the provisions of this Section 11.
Any
purported Transfer in violation of the provisions of this Section 11 shall
be
null and void and any non-transferring Member, in addition to any other remedies
available under this Agreement and at law, in equity and otherwise, may seek
to
enjoin such Transfer and the transferring Member, or its legal representatives,
agrees to submit to the jurisdiction of any court of the State of Delaware
and
to be bound by any order of such court enjoining such purported Transfer. An
Assignee who receives all or a portion of a Member’s Unit(s) and Interest in the
Company in a Transfer made in accordance with the provisions of this Section
11
shall be entitled to receive all distributions, allocations and economic
benefits attributable to the interest transferred to such Assignee, but such
Assignee shall in no event be admitted to the Company as a substitute Member
unless the additional requirements set forth in Section 11.5.3. below are
satisfied.
11.2. Permitted
Transfers.
A
Member shall be permitted to Transfer all or a portion of its economic interests
in the Company in each of the following circumstances:
11.2.1. If
such
Transfer is made with the consent of the Class A Member, which consent may
be
granted or withheld in the Class A Member’s sole discretion;
11.2.2. Such
Transfer is made to one or more members of the Member’s Immediate Family (as
defined below) or to a trust, partnership, corporation or limited liability
company established for the benefit of the Member or member of the Member’s
Immediate Family, provided that such transferring Member retains all of the
voting rights of the Unit(s) and Interest in the Company
transferred;
11.2.3. In
the
case of one or more Units and Interest in the Company held by a trust, such
Transfer is to the beneficiary or beneficiaries of such trust; or
12
11.2.4. Such
Transfer is made by the Class A Member to a Lender in connection with and as
security for a loan; or
11.2.5. Such
Transfer is made upon the death of the Member, by will or intestate
succession.
As
used
herein, “Immediate
Family”
means
with respect to a Person who is an individual, his or her spouse, his or her
descendants, and his or her parents. In the case of a Transfer permitted under
this Section 11.2, the Assignee of the transferred interest shall hold such
transferred interest subject to the terms of this Agreement, including the
restrictions on Transfers contained in this Section 11.
11.3. Involuntary
Transfers.
If any
Member becomes bankrupt or insolvent, or if all or any portion of a Member’s
Unit(s) and Interest
in the Company is Transferred or threatened to be Transferred involuntarily
or
by operation of law (other than a Transfer resulting from the death of such
Member), the Company and the other Members shall have the right, but not the
obligation, to purchase such Member’s Unit(s) and Interest
in the Company for its fair market value, based upon such Member’s right to
share in distributions from the Company. The fair market value shall be
determined by an independent appraisal performed by a certified public
accountant or other qualified appraiser selected by the Class A Member. Such
independent appraisal shall take all relevant facts and circumstances into
account, including, without limitation, minority discounts, lack of liquidity
and restrictions on Transfer. At least twenty-five percent (25%) of such
purchase price shall be paid in cash, with the remainder payable by means of
a
promissory note bearing interest at the rate of two (2) percentage points in
excess of the rate of interest published from time to time in the Wall
Street Journal
as the
prime rate of interest in effect on the date of such purchase, but in no event
shall the interest rate be greater than the maximum rate permitted by law,
and
payable in equal quarterly payments over a period not to exceed five (5)
years.
13
11.4. Additional
Requirements for Assignment.
11.4.1. Notwithstanding
any rule of law to the contrary, no Transfer, however accomplished, whether
voluntary or involuntary, of a Member’s Unit(s) and Interest in the Company,
although otherwise permitted under this Section 11, shall be recognized by
the
Company unless and until (i) the assigning Member has given written notice
thereof to the Class A Member; (ii) the Assignee agrees in writing to be bound
by all of the terms of this Agreement and to assume all obligations hereunder
with respect to the assigning Member’s Unit(s) and Interest in the Company, and
executes and delivers such other instrument in form and substance satisfactory
to the Class A Member as it may reasonably deem necessary and desirable; and
(iii) the Assignee pays or obligates himself to pay, as the Class A Member
may
determine, all reasonable expenses connected with such substitution, including
but not limited to the cost of preparing and filing any amendment of the
Certificate. If the Member is deceased or incompetent, certified copies of
any
court order or documents may be submitted in lieu of the document which the
assigning Member is required to submit under clause (i), above.
11.4.2. Unless
the Class A Member shall otherwise consent, no Transfer shall be permitted
if
such Transfer would result in termination or deemed termination of the Company
pursuant to section 708(b)(1)(B) of the Code.
11.4.3. If
a
Transfer of a Member’s Unit(s) and Interest in the Company satisfies the other
requirements of this Section 11, the Assignee shall be entitled to the
distributions and allocations to which the assigning Member would have been
entitled with respect to such interest, but such Assignee shall only become
a
substitute Member entitled to exercise the assigning Member’s other rights under
this Agreement if: (i) the Class A Member consents to such substitution (or,
in
the case of an Assignee of the Manger’s Unit(s) and Interest in the Company, the
Members holding in the aggregate equal to or greater than fifty-one percent
(51%) of the Member Interests in the Company consent to such substitution),
which consent may be withheld for any reason which the Class A Member or Members
deems appropriate or for no reason; and (ii) the assigning Member grants the
Assignee such right, provided,
however,
that
such grant shall be deemed to have been given in the event of a Transfer which
occurs by reason of the death, incompetency or bankruptcy of the assigning
Member.
11.4.4. Upon
the
admission of a substitute Member in accordance with this Section 11.5, Schedule
A to this Agreement shall be amended to reflect the current list of Members
and
their respective Unit(s) and Interests in the Company.
11.5. Securities
Law Representation.
The
Members and any assignee of an interest of any Member hereby represent, warrant
and acknowledge to the Company that:
11.5.1. the
Member or assignee is acquiring its Member Interest for its own account for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Acts, or other applicable securities law or regulations; and
11.5.2. the
Member’s or assignee’s Member Interest may only be disposed of pursuant to an
effective registration statement filed under the Securities Acts,
or
14
pursuant
to an exemption from the registration requirements of the Securities Acts;
the
Company has not filed such a registration statement nor has any obligations
to
do so, nor has agreed to do so, nor contemplates doing so in the future; and
in
the absence of such a registration statement or such an exemption, the Member
may have to hold its Member Interest indefinitely and may be unable to liquidate
it in case of a financial emergency.
11.6. Repurchase
Option.
11.6.1. In
the
event a Class B Member other than Crit ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇ is no longer
employed by the Class A Member or any of its Affiliates (the “Separation”),
such
Member’s Units will be subject to repurchase at the option of the Company
pursuant to the terms and conditions set forth in this Section 11.6 (the
“Repurchase
Option”).
11.6.2. The
purchase price for each Unit will be the fair market value of such Unit. The
fair market value shall be determined by the manner described in Section
11.3.
11.6.3. The
Company shall have a one time right to exercise such option by giving notice
to
such Member to purchase all, but not less than all, of such Member’s Units by
delivering written notice (the “Repurchase
Notice”)
to the
Member within sixty (60) days after the Separation.
11.6.4. The
closing of the purchase of the Units pursuant to the Repurchase Option shall
take place on the date designated by the Company in the Repurchase Notice,
which
date shall not be more than thirty (30) days nor less than five (5) days after
the delivery of such notice or after the receipt by the Company of a binding
determination of the Units’ fair market value, whichever is later. The Company
will pay for the Units to be purchased by it pursuant to the Repurchase Option
by a check or wire transfer of funds. At least twenty-five percent (25%) of
such
purchase price shall be paid in cash, with the remainder payable by means of
a
promissory note bearing interest at the rate of two (2) percentage points in
excess of the rate of interest published from time to time in the Wall
Street Journal
as the
prime rate of interest in effect on the date of such purchase, but in no event
shall the interest rate be greater than the maximum rate permitted by law,
and
payable in equal quarterly payments over a period not to exceed five (5)
years.
12. TERMINATION
AND LIQUIDATION
12.1. Termination.
The
existence of the Company shall terminate upon the occurrence of any of the
following:
12.1.1. Upon
the
written consent of the Members holding in the aggregate equal to or greater
than
fifty-one percent (51%) of the Interests in the Company; or
12.1.2. Upon
entry of a decree of judicial dissolution pursuant to the Act.
15
On
the
occurrence of an event described in Section 12.1, the Company shall be
liquidated, and the affairs of the Company shall be wound up in accordance
with
the provisions of Section 12.2.
12.2. Liquidation.
Upon
the dissolution of the Company its assets shall be sold and reduced to cash
and/or distributed in kind to the Members as provided in this Section 12.2.
After the payment of all expenses and charges and the establishment of any
reserve deemed by the Class A Member to be necessary or appropriate for the
payment of any contingent or unsettled claims, all available cash and any
remaining assets of the Company shall be distributed to the Members in
proportion to their respective Capital Accounts, to the extent the sums are
positive, and then in accordance with their respective Interests in the Company,
subject to the prior discharge of any liabilities of the Company, first to
outside creditors in order of legal priority and then to the Members (except
liabilities arising from their respective rights to participate in distributions
hereunder) and to the payment or setting aside of an amount sufficient to pay
the costs of dissolution and winding up.
For
purposes of making such liquidation distributions, the Capital Accounts of
the
Members shall be adjusted to reflect all Capital Account adjustments for the
Company’s taxable year during which such liquidation occurs (other than those
made pursuant to the preceding portions of this paragraph) and after adjustment
for all items of unrealized income, gain, loss or deduction inherent in any
property to be distributed to the Members that have not been previously
reflected in their Capital Accounts, determined as if there had been a taxable
disposition of the distributed property for its fair market value on the date
of
liquidation.
If
any
Member has a deficit balance in his Capital Account (after giving effect to
all
contributions, distributions, and allocations for all taxable years, including
the year during which such liquidation occurs), such Members shall have no
obligation to make any contribution to the capital of the Company with respect
to such deficit, and such deficit shall not be considered a debt owed to the
Company or to any other Person for any purpose whatsoever.
In
the
event the Company is “liquidated” within the meaning of Regulations Section
1.704-1(6)(2)(ii)(g), distributions shall be made pursuant to this Section
12 to
the Member’s who have positive Capital Accounts in compliance with Regulations
Section 1.704-1(b)2)(ii)(b)(2). Notwithstanding anything to the contrary, in
the
event the Company is liquidating within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), and liquidated under this Section 12, liquidating
distributions shall be made pursuant to this Section by the end of the taxable
year in which the Company is liquidated, or if later, within 90 days after
the
date of such liquidation. Distributions pursuant to the preceding sentence
may
be made to a trust for the purpose of an orderly liquidation of the Company
by
the trust in accordance with the Act. Notwithstanding any other provision of
this Section 12, in the event the Company is liquidated within the meaning
of
Regulations Section 1.704-1(b)(2)(ii)(g) but the Company is not liquidated
under
this Section 12, the property of the Company shall not be liquidated, the
Company’s liabilities shall not be paid or discharged, and the Company’s affairs
shall not be wound up. Instead, the Company shall be deemed to have liquidated
and reconstituted in the manner provided in the Regulations under Code Section
704.
16
13. MISCELLANEOUS
13.1. Amendments.
Subject
to the provisions of Section 13.13, amendments to this Agreement shall become
effective only upon the execution of a written instrument describing said
amendment and signed by the Members holding in the aggregate equal to or greater
than fifty-one percent (51%) of the Interests in the Company. Notwithstanding
the foregoing, the Class A Member (pursuant to the Class A Member’s power of
attorney from Member), without the consent of any Member, may amend any
provision of this Agreement, and execute, swear to, acknowledge, deliver, file,
and record whatever documents may be required in connection therewith, to
reflect:
13.1.1. a
change
in the name of the Company, in the registered office or registered agent of
the
Company, or in the location of the principal place of business of the
Company;
13.1.2. the
admission, substitution, or removal of a Member in accordance with this
Agreement;
13.1.3. a
change
that the Class A Member has determined is reasonable and necessary or
appropriate to qualify or register, or continue the qualification or
registration of, the Company as a limited liability company (or a partnership
in
which the Member has limited liability) under the laws of any state or which
change is necessary or advisable in the opinion of the Class A Member to ensure
that the Company will not be treated as an association taxable as a corporation
for federal income tax purposes;
13.1.4. a
change
that (i) the Class A Member has determined does not adversely affect the Members
in any material respect, or (ii) is necessary or desirable to satisfy any
requirements, conditions, or guidelines contained in any opinion, directive,
order, ruling, or regulation of any federal or state agency or judicial
authority or contained in any federal or state statute; or
13.1.5. an
amendment that is necessary, in the opinion of counsel to the Company, to
prevent the Company or the Class A Member or its directors, officers, employees,
agents, or representatives from in any manner being subjected to the “plan
asset” regulations adopted under the Employee Retirement Income Security Act of
1974, as amended.
Notice
to
Members of an amendment pursuant to this Section
13.1
shall
not be necessary.
13.2. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, without regard to the conflicts of law rules of such
jurisdiction.
13.3. Headings.
The
headings herein have been included for convenience of reference only and shall
not be considered in interpreting this Agreement.
13.4. Integration.
This
Agreement constitutes the sole agreement among the Members with respect to
the
subject matter hereof and shall supersede all oral agreements and prior writings
with
respect
to the subject matter hereof.
17
13.5. Successors
and Assigns.
This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective administrators, executors, legal representatives, heirs,
successors and permitted assigns.
13.6. Severability.
If any
provision of this Agreement is held to be invalid, the same shall not affect
the
remaining provisions of this Agreement, which shall continue in full force
and
effect.
13.7. Counterparts.
This
Agreement may be executed in counterparts, and by facsimile signature, each
of
which shall be deemed to be an original but all of which together shall
constitute one and the same Agreement.
13.8. Dissociation.
Each
Member does hereby waive any right to dissociate or the right to take any other
action which might otherwise be available to such Member for the purpose of
severing his relationship with the Company, or such Member’s Unit(s) and
Interest in the Company from the Unit(s) and Interests in the Company of the
other Members until the end of the Term, except as otherwise provided in Section
11 hereof.
13.9. Notices.
All
notices required to be given pursuant to this Agreement shall be given
personally or be sent by hand delivery, certified mail, return receipt
requested, overnight express delivery service, telegram, telex, or telecopy
to
the addresses specified on Schedule A or, for a Member who shall become a Member
after the execution hereof, on the joinder or other agreement executed by such
Member (or any superseding addresses specified by proper notice) with all
postage or other charges of conveyance prepaid and shall be effective upon
the
earlier of the actual receipt thereof or the second day (excluding weekends
and
Federal holidays) after the proper sending thereof.
13.10. Execution
of Documents.
The
Members agree that they shall execute the Certificate or any amendment thereto
or any other instrument necessary to carry our the terms of this Agreement
and
the actions contemplated hereby.
13.10.1. Authority.
Nothing
herein shall serve to limit or otherwise diminish the authority of the Class
A
Member to take any and all actions as are permitted in the
Agreement.
13.10.2. Prevailing
Party.
The
prevailing party in any arbitration and/or litigation shall be entitled to
be
reimbursed by the non-prevailing party for all attorney’s fees and
costs.
13.11. Power
of Attorney.
The
Members hereby make, constitute and appoint the Class A Member as their true
and
lawful attorney, to make, sign, execute, acknowledge and file with respect
to
the Company;
13.11.1. such
formation documents and such amended formation documents as may be required
by
law or pursuant to the provisions of this Agreement;
13.11.2. all
documents required to qualify the Company to do business in other
states;
18
13.11.3. documents
of transfer of Member Interests and all other instruments to effect said
transfers in the event the provisions of this Agreement have been complied
with;
and
13.11.4. all
documents required to reflect the dissolution and termination of the Company
after it has been dissolved or terminated in accordance herewith.
The
foregoing power of attorney is hereby declared to be irrevocable and is a power
coupled with an interest, and it shall survive and not be affected by the
subsequent death, incompetency, legal disability, withdrawal, dissolution,
bankruptcy, insolvency or termination of any Member or the transfer of all or
any portion of a Member Interest, and shall extend to each Member’s heirs, legal
representatives, successors and assigns.
[SIGNATURES
CONTAINED ON FOLLOWING PAGE]
19
IN
WITNESS WHEREOF, the Members have executed this Agreement as of the day and
year
first above written.
Class
A Member:
LEAF
Financial Corporation
By:
_______________________________
Name:
Title:
Class
B Members:
___________________________________
Crit
▇▇▇▇▇▇
___________________________________
▇▇▇▇▇
▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇
▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
=
1
LW:
264452.2LW:
264452.2
20
SCHEDULE
A TO
OF
LEAF
VENTURES, LLC
|
Name
of Members
|
Capital
Contribution
|
Units
|
Interests
in the Company
|
|||||||
|
LEAF
Financial Corporation
|
$
|
2,500,000
|
920
|
92.0
|
%
|
|||||
|
Crit
▇▇▇▇▇▇
|
0
|
20
|
2.0
|
%
|
||||||
|
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
|
0
|
20
|
1 |
2.0
|
%
|
|||||
|
▇▇▇▇▇
▇▇▇▇▇▇
|
0
|
15
|
1.5
|
%
|
||||||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
0
|
10
|
1.0
|
%
|
||||||
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
0
|
10
|
1.0
|
%
|
||||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
|
0
|
5
|
0.5
|
%
|
||||||
|
Totals
|
$
|
2,500,000
|
1,000
|
100
|
%
|
|||||
1 ▇▇.
▇▇▇▇▇▇▇▇▇▇’▇ Units are subject to the conditions set forth in Section
5.8.
Unless
otherwise noted in the books and records of the Company, Members’ addresses are
as follows:
Class
A
Member:
LEAF
Financial Corporation
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
Chief Executive Officer
Each
Class B Member:
c/o
LEAF
Financial Corporation
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇