LIMITED LIABILITY COMPANY AGREEMENT OF MERIT CAPITAL ADVANCE, LLC
Execution
Version
OF
MERIT
CAPITAL ADVANCE,
LLC
TABLE
OF
CONTENTS
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Page
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ARTICLE
I FORMATION OF THE COMPANY
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1
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Section
1.1 Formation
of the Company
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1
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Section
1.2 Name
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1
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Section
1.3 Business
of the Company
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1
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Section
1.4 Location
of Principal Place of Business, Registered Office
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2
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Section
1.5 Filings,
Registered Agent
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2
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Section
1.6 Term
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3
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Section
1.7 Title
to Company Property
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3
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Section
1.8 Payments
of Individual Obligations
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3
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Section
1.9 Limited
Initial Capacity of Class A Noteholder
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3
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ARTICLE
II DEFINITIONS
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3
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Section
2.1 Definitions
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3
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Section
2.2 Rules
of Construction
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3
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ARTICILE
III INTERESTS, MEMBERS, CAPITAL CONTRIBUTIONS, ADDITIONAL
AGREEMENTS
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3
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Section
3.1 Interests
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3
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Section
3.2 Class
A Noteholder, Class A Members and Class B Members
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4
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Section
3.3 Capital
Contributions, Additional Units and Additional Members
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4
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Section
3.4 Additional
Agreements Among Members
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7
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Section
3.5 Representations
and Warranties
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8
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Section
3.6 Permitted
Reorganization
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8
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ARTICLE
IV ALLOCATION OF NET INCOME AND NET LOSSES
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8
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Section
4.1 Allocation
of Net Income and Net Losses
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8
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Section
4.2 Special
Allocations
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8
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Section
4.3 Curative
Allocations
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10
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Section
4.4 Other
Allocation Rules
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10
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Section
4.5 Tax
Allocations, Code § 704(c)
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11
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Section
4.6 Calculation
of Depreciation, Etc.
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12
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ARTICLE
V DISTRIBUTIONS, WITHDRAWALS
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12
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Section
5.1 Distributions
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12
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Section
5.2 Tax
Distributions
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12
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Section
5.3 Amounts
Withheld
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12
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Section
5.4 Making
of Payments
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13
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Section
5.5 Limitation
on Distributions
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13
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ARTICLE
VI MANAGEMENT
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13
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Section
6.1 Management
of the Company
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13
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Section
6.2 Right
to Rely on the Managing Member
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15
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Section
6.3 Restrictions
on Authority of the Managing Member
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16
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i
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Section
6.4 Board
of Directors; Approvals
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16
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Section
6.5 Conduct
of Business by the Company; Other Management Matters
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21
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Section
6.6 Compensation
and Expenses
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24
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Section
6.7 Execution
of other Transaction Documents
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24
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Section
6.8 Compliance
with the LLC Agreement
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24
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Section
6.9 Annual
Budget
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24
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Section
6.10 Initial
Class A Member’s Right of First Refusal
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25
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ARTICLE
VII ROLE OF NON-MANAGING MEMBERS
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25
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Section
7.1 Rights
of Powers
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25
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Section
7.2 Voting
Rights
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25
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Section
7.3 Procedure
for Consent
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25
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Section
7.4 Special
Rights of the Class A Noteholder and Class A Member
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25
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ARTICLE
VIII ACCOUNTING BOOKS AND RECORDS
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26
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Section
8.1 Accounting;
Books and Records
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26
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Section
8.2 Reports
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27
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Section
8.3 Tax
Matters
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29
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ARTICLE
IX AMENDMENTS; MEETINGS
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30
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Section
9.1 Amendments
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30
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Section
9.2 Meetings
of the Members
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30
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Section
9.3 Manner
of Consent
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31
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ARTICLE
X TRANSFERS OF INTERSTS
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31
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Section
10.1 Restriction
on Dispositions of Interests
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31
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Section
10.2 Prohibited
Dispositions
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32
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Section
10.3 Representation
on Transfer
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32
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ARTICLE
XI PURCHASE AND SALE RIGHTS
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32
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Section
11.1 Purchase
Option
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32
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ARTICLE
XII DISSOLUTION AND WINDING UP
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34
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Section
12.1 Liquidating
Events
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34
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Section
12.2 Winding
Up
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34
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Section
12.3 No
Restoration of Deficit Capital Accounts; Compliance With Timing
Requirements of Regulations
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35
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Section
12.4 Deemed
Distributions and Recontribution
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35
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Section
12.5 Rights
of Members
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35
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Section
12.6 Notice
of Dissolution
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36
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Section
12.7 Character
of Liquidating Distributions
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36
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Section
12.8 The
Liquidator
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36
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Section
12.9 Form
of Liquidating Distributions
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36
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Section
12.10 Liquidation
Notice
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36
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Section
12.11 Allocations
During Period of Liquidation
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37
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ii
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ARTICLE
XIII MISCELLANEOUS
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37
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Section
13.1 Amendments
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37
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Section
13.2 Notices
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37
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Section
13.3 No
Waiver, Cumulative Remedies
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38
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Section
13.4 Waiver
of Jury Trial
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38
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Section
13.5 Counterparts
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38
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Section
13.6 Survival
of Representations, Warranties and Indemnities: Entire
Agreement
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38
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Section
13.7 Severability
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38
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Section
13.8 Construction
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39
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Section
13.9 Determination
of Capital Accounts
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39
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Section
13.10 Governing
Law
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39
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Section
13.11 Waiver
of Action for Partition
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39
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Section
13.12 Consent
of Jurisdiction
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39
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Section
13.13 Third
Party Beneficiaries
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39
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ANNEX
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Annex
A:
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Definitions
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SCHEDULES
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Schedule
3.2
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Members,
Capital Commitments and Capital Accounts
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Schedule
6.4(a)
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Initial
Board of Directors
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EXHIBITS
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Exhibit
A:
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Form
of Membership Interest
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Exhibit
B:
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Form
of LEAF Services Agreement
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Exhibit
C:
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Form
of Member Interest Transfer
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Exhibit
D:
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Form
of Merchant Advance Contract
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Exhibit
E:
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Form
of Participation Agreement
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Exhibit
F:
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Form
of Class A Note
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Exhibit
G:
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Underwriting
Manual
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iii
OF
MERIT
CAPITAL ADVANCE, LLC
LIMITED
LIABILITY COMPANY AGREEMENT (this "LLC
Agreement")
of
MERIT CAPITAL ADVANCE, LLC (the "Company"),
dated
as of March 15, 2007 is entered into by the undersigned members (each, a
"Member").
ARTICLE
I
FORMATION
OF THE COMPANY
Section
1.1 Formation
of the Company.
The
Company was formed as a limited liability company under the LLC Act by the
filing of its Certificate of Formation on November 14, 2006 (the "Formation
Date")
with
the Office of the Secretary of State of the State of Delaware.
Section
1.2 Name.
The
name of the Company is "Merit Capital Advance, LLC", and all business of the
Company shall be conducted in such name or, in the discretion of the Managing
Member, under any other name; provided,
however,
that
the Managing Member may change the name of the Company only upon executing
and
filing an amendment to the Certificate of Formation and delivering notice
thereof to all the Members and the Class A Noteholder.
Section
1.3 Business
of the Company.
The
purposes of the Company are limited to (i) issuing (x) the Class A Note, (y)
the
Class A Interests issuable upon Conversion of the Class A Note (as provided
therein), and (z) the Class B Interests, (ii) entering into Merchant Advance
Contracts with counterparties, (iii) owning, managing, protecting, conserving
and disposing of the Permitted Assets and (iv) engaging in such other activities
related to the foregoing as are approved by the Required Directors. The Company,
and the Managing Member on behalf of the Company, may, subject to Article
VI,
enter
into and perform the Transaction Documents and all documents, agreements,
certificates and financing statements contemplated thereby, all without further
act, vote or approval of any Person. The authorization set forth in the
preceding sentence shall not be deemed a restriction on the power and authority
of the Managing Member to enter into other agreements or documents on behalf
of
the Company in accordance with the terms of this LLC Agreement and the other
Transaction Documents, and the Managing Member is hereby directed by the Members
to enter into the Transaction Documents to which the Company is to be a party
on
behalf of the Company and to cause the Company to perform its obligations
thereunder. The Company shall have the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or in furtherance
of
the purposes of the Company set forth in this Section 1.3
and
shall have, without
limitation, any and all powers that may be exercised on behalf of the Company
by
the Managing Member pursuant to Article
VI.
Section
1.4 Location
of Principal Place of Business; Registered Office.
The
principal place of business of the Company shall be at ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The registered office of the Company
in
the State of Delaware shall be located at ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or any successor office designated by the Managing
Member by filing an amendment to the Company's Certificate of
Formation.
Section
1.5 Filings;
Registered Agent.
(a) Filings.
▇▇▇▇ ▇.
▇▇▇▇▇▇ is hereby designated an "authorized person" within the meaning of the
LLC
Act and has executed and filed the Certificate of Formation of the Company
with
the Secretary of State of the State of Delaware. After such filing, ▇▇▇▇ ▇.
▇▇▇▇▇▇ ceased to be an authorized person, and the Managing Member is designated
as the Company's "authorized person" within the meaning of the LLC
Act.
The
Managing Member shall take any and all other actions necessary to perfect and
maintain the status of the Company as a limited liability company under the
laws
of the State of Delaware, including the preparation, execution and filing of
amendments to the Certificate of Formation and such other certificates,
documents and instruments as may be required by law. In addition, the Managing
Member may, with prior written notice to the Class A Noteholder or the Class
A
Members, as the case may be, register or qualify the Company as a limited
liability company in any jurisdiction in which registration or qualification
is
necessary or appropriate because of properties or activities of the Company
in
that jurisdiction.
(b) Delivery
of Certificates, etc. in Connection With Qualification of the
Company.
At the
request of the Managing Member, each Member shall execute, acknowledge, swear
to
and deliver all certificates and other instruments conforming with this LLC
Agreement that are necessary or appropriate to form, qualify, continue and,
in
connection with a liquidation of the Company in accordance with Article
XII,
terminate the Company as a limited liability company under the laws of the
State
of Delaware and to qualify, continue and terminate the Company as a foreign
limited liability company in all other jurisdictions in which the Company may
so
qualify, all to the extent contemplated and required by this LLC
Agreement.
(c) Registered
Agent.
The
registered agent for service of process on the Company in the State of Delaware
shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, or any successor as appointed by the Managing Member by filing an
amendment to the Company's Certificate of Formation.
(d) Dissolution.
Upon
the dissolution and completion of the winding up and liquidation of the Company,
the Liquidator, as an authorized person within the meaning of the LLC Act,
shall
promptly execute and cause to be filed statements of intent to dissolve and
certificates
of cancellation in accordance with the LLC Act and the laws of any other states
or jurisdictions in which the Liquidator deems such filing necessary or
advisable.
Section
1.6 Term.
The
term of the Company commenced on the Formation Date and shall continue until
the
Company's Certificate of Formation is cancelled following the
2
Section
1.7 Title
to Company Property.
All
Company Property shall be owned by the Company as an entity, and no Member
shall
have any ownership interest in such property in its individual name or right.
Each Member's interest in Company shall be personal property for all purposes.
The Company shall hold all of its property in the name of the Company and not
in
the name of any Member.
Section
1.8 Payments
of Individual Obligations.
The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
Section
1.9 Limited
Initial Capacity of Class A Noteholder.
The
Class A Noteholder is executing and delivering this Agreement solely as the
holder of the Class A Note, in order to be provided with the rights accorded
to
it hereunder as such and to evidence its agreement to become bound by this
Agreement as the Initial Class A Member upon Conversion of the Class A
Note.
ARTICLE
II
DEFINITIONS
Section
2.1 Definitions.
Unless
otherwise defined herein or the context otherwise requires, capitalized terms
used in this LLC Agreement (including the Schedules and Exhibits hereto) shall
have the meanings set forth in Section 1.01
of
Annex A
hereto,
and if not defined therein, in the Transaction Documents.
Section
2.2 Rules
of Construction.
This
LLC Agreement and the definitions referred to in Section 2.1
shall be
governed by, and construed in accordance with, the rules of construction set
forth in Section 1.02
of
Annex
A
hereto.
ARTICLE
III
INTERESTS;
MEMBERS; CAPITAL CONTRIBUTIONS;
ADDITIONAL
AGREEMENTS
Section
3.1 Interests.
There
shall be two classes of Interests: a Class A Member Interest and a Class B
Member Interest. Certificates in the form attached as Exhibit
A
hereto
(each, a "Certificate
of Interest")
shall
be issued to the Class A Members and the Class B Members to evidence
their respective Interests (and Units) herein. Each of the parties hereto hereby
acknowledges and agrees that the Interests (and Units) shall constitute
"securities" governed by Article 8 of the Uniform Commercial Code as in
effect in any applicable jurisdiction. A holder of a Class A Member Interest
(and Class A Units) that has been admitted to the Company as a member shall
have
all of the rights and obligations provided to a Class A Member under this
LLC Agreement, and a holder of a Class B Member Interest (and Class B
3
Section
3.2 Class
A Noteholder, Class A Members and Class B Members.
(a) Class
A Noteholder.
Upon
the Class A Noteholder's execution of a counterpart to this LLC Agreement and
payment to the Company by wire transfer of immediately available funds of an
amount equal to 100% of the initial principal amount of the Class A Note, and
without any further action being necessary, the Company shall duly execute
and
deliver the Class A Note to the Class A Noteholder. Upon Conversion of the
Class
A Note at the Class A Noteholder's election as provided therein, and without
any
further action being necessary, the Class A Noteholder shall be admitted to
the
Company as the Initial Class A Member. The name and address of the Class A
Noteholder shall be as set forth in Schedule 3.2
hereto.
The Managing Member is hereby authorized and directed to execute and deliver
the
Class A Note in the name of the Class A Noteholder, and upon such execution
and
delivery, the Class A Note shall be duly authorized and validly issued. The
Managing Member is hereby authorized and directed to execute and deliver
Certificate(s) of Interest in the name of the Initial Class A Member
representing its Class A Member Interest (and Class A Units) issuable upon
Conversion of the Class A Note, and upon such execution and delivery, such
Class
A Member Interest (and Class A Units) shall be duly authorized and validly
issued. It is understood and agreed that this Agreement and the Unitholders
Agreement shall bind the Class A Noteholder as the Initial Class A Member upon
Conversion of the Class A Note.
(b) Initial
Class B Member.
Upon
its
execution of a counterpart to this LLC Agreement, and without any further action
being necessary, the Initial Class B Member is hereby admitted to the Company
as
a Class B Member and shall be listed on Schedule
3.2
as such.
The name
and
address of the Initial Class B Member and the Capital Account balance of
the Initial Class B Member on and as of the Closing Date shall be as set
forth in Schedule 3.2
hereto.
The Managing Member is hereby authorized and directed to execute and deliver
a
Certificate of Interest in the name of the Initial Class B Member
representing its Class B Member Interest (and Class B Units), and upon such
execution and delivery, such Class B Member Interest (and Class B Units) shall
be duly authorized and validly issued.
Section
3.3 Capital
Contributions,
Additional Units and Additional Members.
(a) Initial
Capital Contributions of Members.
The
Initial Class B Member hereby agrees to make a Capital Contribution to the
Company on the Closing Date in an aggregate amount equal to, but not in excess
of, the amount set forth opposite the Class B Member's name in Schedule
3.2
hereto
(such Capital Contribution, and the deemed Capital Contributions of the Class
B
Member described in the following sentence, such Member's "Capital
Commitment").
In
consideration for the Initial Class B Member's Capital Commitment, the Initial
Class B Member shall receive the number of Class B Units set forth on Schedule
3.2 for the Class B Member. Upon Conversion of the Class A Note, the Class
A
Noteholder shall be deemed to have made a Capital Contribution to the Company
on
the date of Conversion in an amount equal
4
(b) Additional
Capital Contributions.
As and
when at any time the Required Directors determine that the Company requires
additional capital to carry out the business of the Company, the Managing Member
shall cause the Company to deliver to each Member a notice (a "Capital
Call Notice")
setting forth (i) the aggregate amount to be contributed by all of the Members
(a "Requested
Amount"),
(ii)
the general purposes to which such contributions are to be applied and (iii)
the
date by which Members wishing to participate in such capital call must elect
to
so participate, which may not be earlier than the fifth Business Day following
delivery of such Capital Call Notice (the "Election
Deadline").
Each
Member may elect to contribute an amount equal to (x) its Percentage Interest
multiplied
by
(y) such
Requested Amount (its "Pro
Rata Share")
by
providing the Company with written notice of such election by the Election
Deadline, which notice shall set forth the maximum amount, up to the Requested
Amount, that such Member is willing to contribute to the Company in accordance
with this Section 3.1(b)
(such
Member's "Maximum
Funding Amount"):
(i) If
all of
the Members elect to participate in such capital call, upon not less than seven
Business Days' notice from the Company, each Member shall make a Capital
Contribution to the Company in an amount equal to its Pro Rata Share by wire
transfer of immediately available funds to a Company account designated by
the
Company in such notice.
(ii) If
less
than all of the Members elect to participate in such capital
call:
(A) first,
upon
not less than seven Business Days' notice from the Company, each Member electing
to participate in such capital call shall make a Capital Contribution to the
Company in an amount equal to its Pro Rata Share by wire transfer of immediately
available funds to a Company account designated by the Company in such
notice;
(B) second,
to the
extent such Requested Amount exceeds the aggregate Capital Contributions to
be
made by the Members pursuant to the preceding clause
(A),
upon
not less than three Business Days' notice from the Company, such Members
electing to participate in such capital call shall make aggregate Capital
Contributions (in addition to those set forth in clause
(A)
above)
of such excess in proportion to their respective Maximum Funding Amounts by
wire
transfer of immediately available funds to a Company account designated by
the
Company in such notice; provided,
however,
that no
Member shall be required to contribute pursuant to this clause
(B),
when
taken together with amounts to be contributed pursuant to clause
(A),
an
amount in excess of its Maximum Funding Amount;
(C) third,
to the
extent such Requested Amount exceeds the aggregate Capital Contributions to
be
made by the Members pursuant to the preceding clauses
(A)
and
(B),
the
Board of Directors may cause the Company to admit one
5
(D) additional
Units of the Class held by each Member making Capital Contributions in
accordance with this Section 3.3(b) shall be issued to such Member, such that,
after giving effect to such issuance, the Percentage Interest of such Member
shall be an amount equal to (I) its Capital Contributions after giving effect
to
such capital call divided
by
(II) the
aggregate Capital Contributions of all Members after giving effect to such
capital call. Upon the issuance of additional Units, the Capital Accounts shall
be adjusted consistent with Regulation §§1.704-1(b)(2)(iv)(f) and (g) so that
the Capital Account balances of the Members are in proportion to their
respective Units immediately following such issuance.
(c) Additional
Units; Additional Members.
(i) Subject
to the prior approval in writing of the Required Directors, the Company may
issue additional Units of any Class at any time and from time to time to any
Person (including one or more Members) for any amount of consideration, if
any,
as determined by the Required Directors and, in the case of a Person who is
not
a Member, subject to paragraphs
(ii),
(iii)
and
(iv)
of this
Section
3.3(c),
admit
such Person as an additional Member (an "Additional
Member")
with
all of the rights and obligations of a Member under this Agreement; provided
that no such approval of the Required Directors shall be required in connection
with the Company's issuance of Class A Units to the Initial Class A Member
upon
Conversion of the Class A Note (and the Initial Class A Member shall not be
an
"Additional Member" for purposes of this Agreement). Any additional Units issued
by the Company to any Person shall reflect the Contribution Value of the Capital
Contributions made by such Person to the Company relative to the Value
of
the assets of Company at such time net of liabilities of the Company at such
time, as determined by the Required Directors. Upon the issuance of additional
Units, the Capital Accounts shall be adjusted consistent with Regulation
§§1.704-1(b)(2)(iv)(f) and (g) so that the Capital Account balances of the
Members are in proportion to their respective Units immediately following such
issuance.
(ii) Notwithstanding
the provisions of Section
3.3(c)(i),
no
Person may be admitted as an Additional Member if such admission would cause
the
Company to be treated as an association taxable as a corporation for Federal
income tax purposes, cause the Company to be treated as a "publicly traded
partnership" within the meaning of Code Section 7704, violate or cause the
Company to violate any applicable Federal, state or foreign law, rule or
regulation including, without limitation, the Securities Act of 1933, as
amended, or any other applicable Federal, state or foreign securities laws,
rules or regulations, cause the Company to be an investment company required
to
be registered under the Investment Company Act of 1940, as amended, or cause
some or all of the Company's assets to be "plan assets" or the trading and
investment activity of the Company to be subject to ERISA and/or Section 4975
of
the Code.
(iii) Each
Person desiring to become an Additional Member shall be admitted to the Company
upon the approval of the Required Directors and the delivery of a
6
counterpart signature page to this Agreement and the Unitholders Agreement
that
has been duly executed and delivered to the Company and any other documentation
required by the Required Directors.
(d) No
Other Capital Contributions.
Other
than the Capital Contributions provided for in this Section
3.3
and the
Capital Contributions of the Initial Class A Member deemed made as provided
in
Section
3.3(a)
upon
Conversion of the Class A Note, no Member shall be permitted to make Capital
Contributions to the Company without the prior written consent of all
Members.
Section
3.4 Additional
Agreements Among Members.
(a) Return
of Capital Contributions.
Except
as otherwise provided in Article
V,
Article XII
or in
the LLC Act, no Member shall be entitled to demand or receive a return of its
Capital Contributions or withdraw its capital from the Company without the
consent of all Members. Under circumstances requiring a return of any Capital
Contributions, no Member shall have the right to receive property other than
Cash.
(b) Return
on Capital.
No
Member shall receive any interest or draw with respect to its Capital
Contributions or its Capital Account, except as otherwise provided in this
LLC
Agreement.
(c) Obligations
of the Company.
Except
as required by the LLC Act, no Member (including the Managing Member) shall
be
personally liable for the debts, liabilities, contracts or any other Obligations
of the Company, solely by reason of being a Member (or Managing Member).
Except as otherwise provided by mandatory provisions of applicable state law
or
the provisions of this Article III,
a
Member shall not be required to lend any funds to the Company or to make any
Capital Contributions to the Company. No Member shall be liable for the payment,
repayment or return of any Capital Contributions of the other Members.
(d) Other
Investments.
Each
Member acknowledges that the other Members and their Affiliates are free to
engage or invest in an unlimited number of activities or businesses, any one
or
more of which may be related to the activities or businesses of the Company,
without having or incurring any obligation to offer any interest in such
activities or businesses to the Company or any Member, and neither this LLC
Agreement nor any activity undertaken pursuant to this LLC Agreement shall
prevent any Member or its Affiliates from engaging in such activities, or
require any Member to permit the Company or any Member or its Affiliates to
participate in any such activities, and as a material part of the consideration
for the execution of this LLC Agreement by each Member, each Member hereby
waives, relinquishes, and renounces any such right or claim of participation.
Each Member acknowledges that certain conflicts of interest may thus arise
and
hereby agrees that the specific rights with respect to the Members' and their
Affiliates' freedom of action provided in this Section 3.4(d),
together with the other provisions of this LLC Agreement, are sufficient to
protect their respective interests in relation to such possible conflicts and
are to be in lieu of all other possible limitations which might otherwise be
implied in fact, in law or in equity.
7
Section
3.5 Representations
and Warranties By
Each
Member.
Each
Member hereby represents and warrants to the Company and the other Members
that
(1) it is duly organized and validly existing under the laws of the jurisdiction
of its organization and has all requisite power and authority to execute,
deliver and perform this Agreement and the other Transaction Documents to which
it is a party and to consummate the transactions contemplated herein and
therein, (2) the execution, delivery and performance of this Agreement and
such
other Transaction Documents, and the consummation of such transactions have
been
duly authorized by it and this Agreement constitutes its legal, valid and
binding obligation, (3) its execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by it of
such
transactions do not require any filing or registration with, notification to,
or
authorization, permit, consent or approval of, or other action by or in respect
of, any Governmental Authority or any other Person, will not conflict with
the
provisions of its governing instruments or violate any provisions of applicable
law or regulation or any order of any court or regulatory body and will not
result in the breach of, or constitute a default, or require any consent, under
any agreement, instrument or document to which it or any of its Affiliates
is a
party or by which it, any of its Affiliates or any of their respective property
may be bound or affected (other than, in the case of the Initial Class B Member
and the Managing Member, the written approval of the Agent and the Required
Lenders under (and as defined in) the LEAF Warehousing Facility, which has
been
obtained and is in full force and effect) and (4) it is an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities
Act
and is not acquiring its Member Interests with a view to any distribution
thereof in a transaction that would violate the Securities Act or the securities
laws of any state of the United States and understands the restrictions on
transfer applicable to the Member Interests contained herein and in the
Certificate of Interest.
Section
3.6 Permitted
Reorganization.
The
Required Directors shall have the power and authority to direct the Managing
Member to cause the Company to reorganize into a corporation, whether by
conversion into a corporation, merger into a corporation, having all of the
Members contribute their Units to a corporation or otherwise (the "Permitted
Reorganization")
and
the Members agree to do all things reasonably requested by the Required
Directors to effect such Permitted Reorganization. Upon the consummation of
the
Permitted Reorganization, each Unit shall be converted into a number of shares
of common stock of the Successor Corporation as is determined by the Board
of
Directors.
ARTICLE
IV
ALLOCATION
OF NET INCOME AND NET LOSSES
Section
4.1 Allocation
of Net Income and Net Losses. Except
as
otherwise provided in this Article
IV,
the
Company's Net Income or Net Losses, as the case may be, and each item of income,
gain, loss and deduction entering into the computation thereof,
for each Allocation Period shall be allocated to the Members for Capital Account
purposes in proportion to the Members' Percentage Interests.
Section
4.2 Special
Allocations.
(a)
Minimum
Gain Chargeback/Member Minimum Gain Chargeback.
If
there is a net decrease in Company Minimum Gain for an
8
If
during
an Allocation Period there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt, then, in addition to the
amounts, if any, allocated pursuant to the preceding paragraph, any Member
with
a share of that Member Nonrecourse Debt Minimum Gain (determined in accordance
with Regulation § 1.704-2(i)(5)) shall, subject to the exceptions set forth
in Regulation § 1.704-2(i)(4), be allocated items of Company income and gain for
such Allocation Period (and, if necessary, subsequent Allocation Periods) equal
to that Member's share of the net decrease in the Member Nonrecourse Debt
Minimum Gain. Allocations of excepted items and other items pursuant to the
previous sentence shall be made in proportion to the respective amounts of
the
Members' shares of Member Nonrecourse Debt Minimum Gain under Regulations §
1.704-2(i)(5). The items to be so allocated shall be determined in accordance
with Regulation §§ 1.704-2(i)(4) and 1.704-2(j)(2). The foregoing is intended to
be the "chargeback of partner nonrecourse debt minimum gain" required by
Regulation § 1.704-2(i)(4) and shall be interpreted and applied in all respects
in accordance with that Regulation.
(b) Qualified
Income Offset.
If
during any Allocation Period a Member unexpectedly receives any adjustment,
allocation or distribution described in Regulation § 1.704-
1(b)(2)(ii)(d)(4),
(5)
or
(6),
which
causes or increases a deficit balance in such Member's Adjusted Capital Account,
there shall be allocated to such Member items of Company income and gain
(consisting of a pro
rata
portion
of each item of income, including gross income, and gain of the Company for
such
Allocation Period) in an amount and manner sufficient to eliminate such deficit
as quickly as possible; provided,
that an
allocation pursuant to this Section
4.2(b)
shall be
made only if and to the extent that the Member would have a deficit balance
in
its Adjusted Capital Account after all other allocations provided for in this
Article
IV
have
been tentatively made as if this Section
4.2(b)
were not
in this LLC Agreement. The foregoing isintended
to be a "qualified income offset" provision as described in Regulation
§ 1.704-1(b)(2)(ii)(d)
and
shall be interpreted and applied in all respects in accordance with that
Regulation.
(c) Gross
Income Allocation.
In the
event that any Member has a deficit balance in its Adjusted Capital Account
at
the end of any Allocation Period, such Member shall be allocated
9
(d) Member
Nonrecourse Deductions.
Notwithstanding anything to the contrary in this Article IV,
losses,
deductions, or expenditures subject to Code § 705(a)(2)(B) that are attributable
to a particular Member Nonrecourse Debt for any Allocation Period shall be
allocated to the Member that bears the economic risk of loss with respect to
the
Member Nonrecourse Debt to which the losses, deductions, or expenditures are
attributable in accordance with the rules of Regulation
§ 1.704-2(i).
(e) Section
754 Adjustments.
To the
extent Capital Accounts are required under Code §§ 734(b) and 743(b),
including by reason of Regulation § 1.704-1(b)(2)(iv)(m)(2)
or
(4),
to
reflect the adjustment to the adjusted tax basis of any Company asset as a
result of the distribution to a Class A Member in complete liquidation of its
Class A Member Interest, the amount of such adjustment shall be treated as
an
item of gain (if the adjustment is an increase in such basis) or loss (if the
adjustment is a decrease in such basis) that is allocated to the Members in
accordance with their interests pursuant to Regulation §
1.704-1(b)(2)(iv)(m)(2)
or to
the Member to whom such distribution was made pursuant to Regulation §
1.704-1(b)(2)(iv)(m)(4)
as
applicable.
Section
4.3 Curative
Allocations.
The
allocations set forth in Sections
4.2(a), 4.2(b),
4.2(c),
4.2(d)
and
4.2(e)
(the
"Regulatory
Allocations")
are
intended to comply with certain requirements of the Regulations. It is the
intent of the Members that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with allocations
of
other items of income, gain, loss or deduction of the Company pursuant to this
Section
4.3.
Therefore, notwithstanding any other provision of this Article
IV
(other
than the Regulatory Allocations), the Tax Matters Member, subject to (following
the Conversion of the Class A Note) the Majority Class A Members' consent (such
consent not to be unreasonably withheld) in the event that the Managing Member
is the Class B Member, shall make such offsetting allocations of income, gain,
loss or deduction of the Company in whatever manner it determines appropriate
so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of this LLC
Agreement and all items of the Company were allocated pursuant to this
Article
IV
without
regard to the Regulatory Allocations. In exercising its discretion under this
Section
4.3,
the Tax
Matters Member shall take into account future Regulatory Allocations under
Section
4.2(a)
that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections
4.2(d)
and
4.2(e).
Section
4.4 Other
Allocation Rules.
(a) Net
Income, Net Losses and any other items of income, gain, loss or deduction shall
be allocated to the Members pursuant to this Article
IV
as of
the last day of each Allocation Period; provided
that Net
Income, Net Losses and such other items shall also be allocated at such
10
other
times as the Gross Asset Values of Company Property are adjusted pursuant
to
clause (ii)
of the
definition of Gross Asset Value.
(b) The
Members hereby agree to be bound by the provisions of this Article
IV
in
reporting their shares of the Company income and loss for income tax purposes,
except to the extent otherwise required by law. Notwithstanding any requirements
of law as to allocations for income tax purposes, the Members agree, for
purposes of maintaining their Capital Accounts, to be bound by the allocations
contained in this Article
IV.
(c) To
the
extent permitted by Regulation § 1.704-2(h)(3), the Members shall endeavor to
treat distributions of Cash as having been made from the proceeds of a
nonrecourse liability (within the meaning of Regulation § 1.704-2(b)(3)) but
only to the extent that such distributions otherwise would cause or increase
a
deficit balance of any Member's Adjusted Capital Account.
(d) Any
fee
paid to any Member on the Closing Date shall be treated as a guaranteed payment
under Section 707(c) of the Code.
Section
4.5 Tax
Allocations; Code § 704(c).
In
accordance with Code § 704(c) and the applicable Regulations thereunder, income,
gain, loss, and deduction with respect to any property contributed to the
capital of the 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 initial
Gross Asset Value.
In
the
event the Gross Asset Value of any asset of the Company is adjusted pursuant
to
clause
(ii)
of the
definition of Gross Asset Value, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and
its
Gross Asset Value in the same manner as under Code § 704(c) and the applicable
Regulations thereunder.
Any
elections or other decisions relating to such allocations shall be made by
the
Tax Matters Member, subject to (following the Conversion of the Class A Note)
the Majority Class A Members' consent (such consent not to be unreasonably
withheld) in the event that the Managing Member is the Class B Member, in any
manner that reasonably reflects the purpose and intent of this LLC Agreement
and
is otherwise in the best interest of the Members, provided
that the
Company shall elect to apply any allocation method permitted by the Regulations
under Code § 704(c). Allocations pursuant to this Section
4.5
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 Member's Capital
Account or share of Net Income, Net Losses, other items, or distributions
pursuant to any provision of this LLC Agreement.
Except
as
otherwise provided in this LLC Agreement, for federal, state and local income
tax purposes, all items of income, gain, loss, deduction of the Company, and
any
other allocations not otherwise provided for shall be allocated for federal
income tax purposes to the Members in the same manner as its correlative item
of
"book" income, gain, loss or deduction is allocated pursuant to Sections
4.1,
4.2
and
4.3.
11
Section
4.6 Calculation
of Depreciation, Etc. Depreciation
shall be calculated under the maximum rate and the shortest life permissible
under the federal income tax law; provided
that if
federal income tax law changes in a way which increases the tax benefits
available to the Members attributable to the Company's assets (whether by the
introduction of an investment tax credit, energy tax credit or otherwise),
the
Tax Matters Member shall modify the allocations contained in this LLC Agreement
or, as necessary, other provisions contained in this LLC Agreement, so as to
cause, to the extent commercially reasonable, the Members to obtain the same
benefits they had prior to such change; provided,
further,
that no
such modification shall reduce the Cash otherwise Distributable to any Member
or
cause any Member any adverse federal income tax consequence as compared to
the
federal income tax law prior to such change.
ARTICLE
V
DISTRIBUTIONS;
WITHDRAWALS
Section
5.1 Distributions.
(a) Priority
of Payment.
Except
as otherwise provided in Sections
5.2
and
12.2,
Distributions to the Members shall be subject to approval of the Required
Directors. The Managing Member shall, on the date fixed for a Distribution
(the
"Distribution
Date"),
apply
such Distribution to the Members in proportion to their Percentage Interests.
For purposes of this Section
5.1(a),
any
transferee or successor to a Member shall be deemed to have made Capital
Contributions and received Distributions in respect of its Interest in the
amounts and times made by and received by the predecessors in interest to such
Member in respect of that Interest. Calculations of amounts to be distributed
on
each Distribution Date in accordance with the priority set forth above shall
be
the responsibility of the Managing Member.
(b) No
Other Distributions.
Except
as provided in this Section 5.1
and in
Sections
5.2 and
12.2,
no
other Distributions shall be permitted.
Section
5.2 Tax
Distributions.
Subject
to Section 5.5, for each Fiscal Year, the Company shall, during such Fiscal
Year
or within the first 90 days following such Fiscal Year or when such taxes become
payable, distribute to each Member a distribution in an amount equal to such
Member's Presumed Tax Liability for such Fiscal Year (a "Tax Distribution").
Any
amount distributed to a Member pursuant to Section 5.1 with respect to a Fiscal
Year shall reduce the amount distributable to such Member as a Tax Distribution
for such Fiscal Year. Any amount distributed pursuant to this Section 5.2 shall
be deemed to be an advance distribution of amounts otherwise distributable
to
the Members pursuant to Section 5.1 and shall reduce the amounts that would
subsequently otherwise be distributed to the Members pursuant to Section
5.1.
Section
5.3 Amounts
Withheld.
All
amounts withheld or required to be withheld pursuant to the Code or any
provision of any state, local or foreign Tax law, with respect to any payment,
distribution or allocation to the Company or the Members and treated by the
Code
(whether or not withheld pursuant to the Code) or any such Tax law as amounts
payable by or in respect of the Members or any Person owning an interest,
directly or indirectly,
12
Section
5.4 Making
of Payments.
Unless
otherwise expressly provided herein, all distributions or payments to the
Members pursuant to any provision of this LLC Agreement shall be made no later
than 3:00 p.m., New York City time, on the day of distribution or payment,
and,
at the time of any such distribution or payment, the Managing Member shall
provide to the Members a notice identifying the nature of the distribution
or
payment, the Section or Sections of this LLC Agreement pursuant to which it
is
being made and the amount being distributed or paid pursuant to each such
Section.
Section
5.5 Limitation
on Distributions.
Notwithstanding
any other provision of this LLC Agreement, the Company shall not be required
to
make a distribution to a Member if such distribution would violate the LLC
Act
or any other Applicable Law.
ARTICLE
VI
MANAGEMENT
Section
6.1 Management
of the Company.
(a) Except
for actions requiring the approval of the Company's Board of Directors pursuant
to Section
6.4
hereof
and as otherwise provided herein (including Section 7.4), the overall
management, control and administration of the business and affairs of the
Company shall be vested with the Managing Member, which shall be a "manager"
within the meaning of the LLC Act. The Managing Member shall have the authority
to exercise all powers necessary and convenient for the purposes of the Company
enumerated in Section 1.3,
on
behalf and in the name of the Company, subject to compliance with the
restrictions and other provisions of this LLC Agreement. At any time following
the Conversion of the Class A Note, the Majority Class A Members shall have
the right to remove the Initial Class B Member as Managing Member upon the
occurrence of any Board Reduction. Upon the delivery, at any time following
the
Conversion of the Class A Note, of written notice of such removal by the
Majority Class A Members to the Initial Class B Member after the
occurrence of any Board Reduction, the Member designated by the Majority
Class A Members shall, upon its written acceptance of such position and
without further act, become the Managing Member of the Company for all purposes
of this LLC Agreement and the Initial Class B Member shall no longer be the
Managing Member. The Initial Class B Member agrees to perform all actions
reasonably requested by the new Managing Member to effectuate such transfer
of
management. If, following the Conversion of the Class A Note, the Majority
Class
A Members remove the Managing Member and appoint a new Managing Member, to
the
fullest extent permitted by law, the new Managing Member shall not be
responsible for any of the past actions of the removed Managing Member and
shall
have no liability for the failure to take or perform any obligation of the
Managing Member hereunder to the extent such obligation is not capable of being
performed as a result of actions or omissions of the removed Managing
Member.
13
(b) The
Managing Member shall have the authority on behalf and in the name of the
Company to perform all acts necessary and desirable for the objects and purposes
of the Company, subject only to the restrictions expressly set forth in this
LLC
Agreement (including Sections 6.3,
6.4,
6.5
and
7.4)
and
subject to the rights of the Liquidator to liquidate the Company and take all
actions incidental thereto during the period of liquidation. Subject to such
restrictions, the authority of the Managing Member shall include the authority
to:
(i) engage
in
transactions and dealings on behalf of the Company, including transactions
and
dealings with any Member or any Affiliate of any Member;
(ii) call
meetings of the Members or any class thereof;
(iii) vote
any
equity interests, Financial Investments or other Permitted Assets held by the
Company;
(iv) purchase
or otherwise acquire the Permitted Assets and cause the Subsidiaries to purchase
or otherwise acquire the Permitted Assets;
(v) determine
and make Distributions, in Cash or otherwise, on the Interests in accordance
with the provisions of this LLC Agreement and the LLC Act;
(vi) appoint
(and dismiss from appointment) officers, attorneys and agents on behalf of
the
Company, and engage (and dismiss from engagement) any and all Persons providing
legal or financial services to the Company, or such other Persons as the
Managing Member deems necessary or desirable for the management and operation
of
the
Company (it being understood that the appointment (and dismissal from
appointment) of the Company Accountant shall be subject to the prior approval
of
the Required Directors as provided in Section 6.4(e)(xiii));
(vii) incur
and
pay all expenses and obligations incidental to the operation and management
of
the Company;
(viii) open
accounts;
(ix) subject
to Article XII,
effect
a dissolution of the Company after the occurrence of a Liquidating
Event;
(x) bring
and
defend (or settle) on behalf of the Company actions and proceedings at law
or
equity before any court or governmental, administrative or other regulatory
agency, body or commission or any arbitrator or otherwise;
(xi) prepare
or cause to be prepared reports, statements and other relevant information
for
distribution to the Members as may be required by this LLC Agreement or the
LLC
Act and any additional information determined to be appropriate by the Managing
Member from time to time;
14
(xii) execute,
deliver and perform the Company's obligations under and exercise the Company's
rights under, any of the Transaction Documents, including any certificates
and
other documents and instruments related thereto;
(xiii) prepare
and file all necessary returns and statements and cause the Company to pay
all
taxes, assessments and other impositions applicable to Company Property pursuant
to Section 8.3;
(xiv) borrow
under the Credit Agreement to (1) finance the Company's obligations under
Merchant Advance Contracts and (2) pay service fees owing by the Company under
the LEAF Services Agreement;
(xv)
enter
into agreements for the provision of other financing to the Company (subject
to
the rights of first refusal of the Class A Noteholder and its designated
Affiliates as set forth in the Class A Note and of Initial Class A Member and
its designated Affiliates as set forth in Section
6.10);
and
(xvi) execute
all other documents or instruments, perform all duties, exercise all powers,
and
do all things for and on behalf of the Company necessary or desirable for or
incidental to the foregoing.
If
the
Managing Member is the designee of the Majority Class A Members as provided
in Section 6.1(a),
the
Managing Member will be permitted to outsource one or more of its
responsibilities hereunder but shall select such outsource party with reasonable
care and the Company shall pay the reasonable fees and expenses of any such
outsource party.
(c) Except
as
otherwise provided herein (including Section
7.4
and
7.5),
no
Member (other than the Managing Member), as such, shall have any right to,
and
shall not, take part in the management or affairs of the Company, nor shall
any
Member (other than the Managing Member), as such, have the power to act for
or
bind the Company.
Section
6.2 Right
to Rely on the Managing Member.
(a) Any
Person dealing with Company may rely (without duty of further inquiry) upon
a
certificate signed by the Managing Member as to:
(i) the
identity of the Managing Member, the Class A Members or the Class B
Members;
(ii) the
existence or nonexistence of any fact or facts that constitute a condition
precedent to acts by the Managing Member or that are in any other manner germane
to the affairs of the Company;
(iii) the
Persons who are authorized to execute and deliver any instrument or document
of
the Company; and
(iv) any
act
or failure to act by the Company or any other matter whatsoever involving the
Company or any Member.
15
(b) To
the
extent that the Company is permitted or required to dispose of any Company
Property in accordance herewith, the signature of the Managing Member shall
be
sufficient to convey title to any such Company Property, and all of the Members
agree that a copy of this LLC Agreement may be shown to the appropriate parties
in order to confirm the same, and further agree that the signature of the
Managing Member shall be sufficient to execute any documents necessary to
effectuate this or any other provision of this LLC Agreement.
Section
6.3 Restrictions
on Authority of the Managing Member.
The
Managing Member shall not have the authority to:
(a) do
any
act in contravention of this LLC Agreement or any other Transaction
Document;
(b) do
any
act which would make it impossible to carry on the ordinary business of the
Company, except in connection with the dissolution, winding up and termination
of the Company as permitted by Article XII;
(c) possess
Company Property, or assign the Company's rights in specific Company Property,
for other than a Company purpose;
(d) admit
a
Person as a Member except as provided in this LLC Agreement;
(e) take
any
action expressly reserved for the Class A Noteholder or the Majority Class
A
Members, as the case may be, under Section
7.4
hereof;
or
(f) take
any
action that it has been advised by Deutsche Bank AG would cause Deutsche Bank
AG
to be in violation of the Bank Holding Company Act of 1956, as
amended.
Section
6.4 Board
of Directors; Approvals.
(a) The
Company shall have a board of directors (the "Board
of Directors")
initially composed of three directors appointed by the Initial Class B Member.
Prior to the Conversion of the Class A Note, the Class A Noteholder shall have
the right from time to time to select, appoint and remove (with or without
cause) two observers (each a "Board
Observer")
who
shall be entitled to attend and observe (but not vote at) meetings of the Board
of Directors as the representatives of the Class A Noteholder. On and after
the
Conversion of the Class A Note, the Board of Directors shall be composed of
four
directors, two of which shall be appointed by the Initial Class A Member and
shall act as representatives of the Class A Members on the Board of Directors,
and the other two of which shall be appointed by the Majority Class B Members
and shall act as representatives of the Class B Members on the Board of
Directors. Upon the occurrence of a Board Reduction Event (at any time following
the Conversion of the Class A Note), the Majority Class A Members may, by
delivering written notice of such election to the Class B Members, elect to
reduce the number of directors acting as representatives of the Class B Members
from two to one. Such reductions shall be effective upon receipt of such notice.
In addition to the foregoing, the Board of Directors shall at all times have
at
least one director that is an Independent Director; provided that the
Independent Director shall only be permitted to vote on the matters specified
in
Section
6.4(e)(xviii).
All
directors shall be natural persons. Each director is a "manager" within the
meaning of the LLC Act. The initial directors, the Initial Board Observers
and
the initial Independent Director are listed on Schedule
6.4(a)
hereto.
16
(b)
The
Majority Class A Members shall have the exclusive right from time to time to
select, appoint and remove (with or without cause) the director(s) acting as
the
representative(s) of the Class A Members on the Board of Directors. The Majority
Class B Members shall, except with respect to removals following a Board
Reduction Event, have the exclusive right from time to time to select, appoint
and remove (with or without cause) the director(s) acting as the
representative(s) of the Class B Members on the Board of Directors. Any vacancy
occurring on the Board of Directors due to the death, disability, removal or
resignation of a director shall be filled by the Member(s) who appointed the
director and as whose representative the deceased, disabled, removed or
departing director served, and in the case of the Independent Director, shall
be
filled by the Majority Class B Members with the consent (not to be unreasonably
withheld) of the Class A Noteholder or the Majority Class A Members, as the
case
may be; provided
that,
following a Board Reduction (after the Conversion of the Class A Note), any
such
vacancy of the Independent Director shall be filled by the Majority Class A
Members. In the event a Member fails or refuses to appoint representatives
to
the Board of Directors for any reason (and has actual notice of the death,
resignation or other refusal to serve of any person previously acting as a
member of the Board of Directors and representing such Member) so that for
a
period of fifteen days or more after such notice there is no representative
of
such Member acting as a member of the Board of Directors, then such Member
shall
be deemed to have consented to any actions taken by the Board of Directors
(other than any action requiring the vote of the Required Directors)
after the expiration of such fifteen day period and prior to the appointment
by
such Member of a director or directors to act as the representative of such
Member on the Board of Directors as provided herein, and the quorum and voting
requirements in Section
6.4(c)
below
shall be modified accordingly. The Board of Directors shall have the power
to
establish its own procedures for meeting and voting and to appoint one or more
committees, in each case subject to the requirements of this Section
6.4.
(c) Subject
to Section
6.4(e),
a
quorum for the conduct of business by the Board of Directors on behalf of the
Company shall be (i) prior to the Conversion of the Class A Note, (x) two
directors and (y) at least one Board Observer or (ii) on and after the
Conversion of the Class A Note, (x) one director appointed by the Majority
Class
A Members and (y) one director appointed by the Majority Class B Members, in
each case then acting and (in the case of each director) entitled to vote,
provided
that,
following a Board Reduction (at any time following the Conversion of the Class
A
Note), quorum shall be no less than half of the total number of directors then
appointed by the Members and acting and entitled to vote (it being understood
that the term "majority" for this purpose shall mean more than 50% of the entire
number of directors then acting and entitled to vote), and provided further
that,
(1) prior to the Conversion of the Class A Note and (2) for any matters
specified in Section
6.4(e)(xviii)
(whether prior to or after the Conversion of the Class A Note), the Independent
Director shall also be required in order for quorum to be constituted. For
quorum purposes, a director (or, prior to the Conversion of the Class A Note,
a
Board Observer) may be present in person or by conference telephone,
teleconference or any other means wherein each director (and, prior to the
Conversion of the Class A Note, each Board Observer) can hear each other
director (and, prior to the Conversion of the Class A Note, each Board
Observer). No action may be conducted at a meeting unless prior written or
telephonic notice (including agenda) has been given to each director (and,
prior
to the Conversion of the Class A Note, each Board Observer), in the case of
a
telephonic meeting, personally at least 48 hours prior to the time fixed for
such meeting, and in all other cases, at least 10 days prior to the time fixed
for such meeting, unless such notice has been waived in
17
(d) Subject
to the other applicable provisions of this Section
6.4,
the
Board of Directors may take action only by the vote of (i) prior to the
Conversion of the Class A Note, at least two directors or (ii) on and after
the
Conversion of the Class A Note, at least one director appointed by the Majority
Class A Members and at least one director appointed by the Majority Class B
Members, provided
that
following a Board Reduction (at any time following the Conversion
of the Class A Note), the Board of Directors may (subject to the other
applicable provisions of this Section
6.4)
take
action only by the vote of a majority of the entire number of directors then
appointed and acting at a meeting at which a quorum is present (it being
understood that the term "majority" for this purpose shall mean more than 50%
of
the entire number of directors then acting and entitled to vote), and
provided further
that,
for any matters specified in Section
6.4(e)(xviii),
the
vote of the Independent Director shall also be required. As provided in Section
18-404(d) of the LLC Act but subject to Section
6.4(e),
action
may be taken without a meeting if a consent in writing setting forth the action
so taken is executed by at least such number of directors as would be sufficient
to approve the action at a meeting.
(e) The
prior
written approval of the Required Directors (and, in the case of Sections
6.4(e)(ii),
6.4(e)(viii)
(to the
extent set forth therein) and 6.4(xvii),
the
Class A Noteholder) shall be required for the taking of any of the following
actions, and notwithstanding any power or authority granted to the Managing
Member under the LLC Act, the Certificate of Formation or this LLC Agreement
(including Sections 6.1 and 6.5),
the
Managing Member and the Company shall not have the authority to, and the
Managing Member agrees that it shall not take any of the following actions,
without first obtaining such approval
(in
addition to any other approvals that may be required under this LLC
Agreement):
(i) permit
the Company or any Subsidiary to take any act in contravention of this LLC
Agreement or any other Transaction Document;
(ii)
(x)
permit the Company to issue any limited liability company interests (including,
without limitation, any preferred or non-voting limited liability company
interests) in the Company, or permit the Company to issue any rights to acquire
any such limited liability company interests (it being understood that the
issuance of the Class A Units issuable upon Conversion of the Class A Note
shall
not require the consent of the
18
(iii) permit
the Company or any Subsidiary to acquire any assets other than Permitted
Assets;
(iv)
permit
the Company or any Subsidiary to incur or suffer to exist any Lien on any of
its
assets other than pursuant to the Security Agreement and other than Permitted
Liens (as defined in the Credit Agreement);
(v) permit
the Company or any Subsidiary to merge with any Person or Dispose of all or
substantially all of its assets;
(vi)
permit
the Company or any Subsidiary to Dispose of any Permitted Asset other than
(x)
in the case of the Company, any
pledge or other disposition under the Security Agreement or any Disposition
in
the ordinary course of the Company's business and (y) in the case of the
Servicer Subsidiary, any Disposition in the ordinary course of such Subsidiary's
business;
(vii)
permit
the Company or any Subsidiary to incur any Indebtedness, other than (x)
Indebtedness of the Company incurred pursuant to the Credit Agreement and (y)
Indebtedness of the Company under the Class A Note;
(viii)
permit
(A) any Distribution in respect of Interests or (B) any redemption of
Interests, other than, in each of clause (A)
or
(B),
as
permitted or contemplated by Article V
or
Article
XII
of this
LLC Agreement or by the Transaction Documents (provided
that the
prior written approval of the Class A Noteholder shall be required for any
redemption of Interests);
(ix)
permit
the Company to approve any Budget (including the amount of any working capital
and expense reserves), to be established each year; provided,
if a
new annual Budget is not approved, in order to allow the Company to continue
to
operate, the applicable Budget of the last approved year will be deemed to
be
approved until a new approved Budget can be put in place;
(x)
permit
the Company or any Subsidiary to (i) amend, modify or waive any provision of
the
LEAF Services Agreement, any Credit Card Processor Services Agreement or any
Relevant Provision of a Merchant Advance Contract, or (ii) enter into any
Merchant Advance Contract whose equivalent provisions differ from the Relevant
Provisions set forth in the form of Merchant Advance Contract attached as
Exhibit D;
(xi)
permit
any action by the Company or any Subsidiary in connection with the Company's
exercise of its rights under the LEAF Services Agreement, excluding any action
regarding a claim of fraud, theft or other misconduct or breach;
(xii)
permit
the Company or any Subsidiary to (i) terminate the LEAF Services Agreement,
or
(ii) enter into after the date hereof, terminate, or change (or consent or
fail
19
to
object to any change in) the settlement of funds procedures under, any Credit
Card Processor Services Agreement;
(xiii) permit
the Company or any Subsidiary to select
and
hire any material external service providers, including accountants and auditors
(but excluding counsel) for the Company, other than service providers retained
as of the Closing Date and identified to the Class A Noteholder;
(xiv)
permit
the Company or any Subsidiary to enter into any business combination,
partnership or joint venture with any Person, or to terminate any such
arrangement entered into;
(xv)
(i)
permit the Company to engage in any business activities other than those
conducted and proposed to be conducted on the date hereof, (ii) permit the
Servicer Subsidiary to engage in any business activities other than the
provision to the Company of services of the type contemplated in the LEAF
Services Agreement, (iii) permit the Company or any Subsidiary to enter into
Merchant Advance Contracts with counterparties in California (other than
Merchant Advance Contracts entered into by the Company with such counterparties
while the Company maintains a valid and effective California finance lender
license) or (iv) permit the Company or any Subsidiary to do business
in any State of the United States of America other than New York, California,
New Jersey, Pennsylvania, Florida, Texas and Nevada, or in any country other
than the United States of America or any political subdivision of such other
country;
(xvi)
permit
the Company or any Subsidiary to enter into any agreement or otherwise transact
with the Class B Member or any of its Affiliates (other than the Company
and its Subsidiaries, and other than as expressly contemplated by the
Transaction Documents);
(xvii)
permit
the Company or any Subsidiary to voluntarily liquidate or dissolve itself or
appoint a Liquidator;
(xviii) permit
the Company or any Subsidiary to take any action under the definition of
"Voluntary Bankruptcy"; provided
that any
action described in this clause
(xviii)
(whether
prior to or after a Board Reduction) shall require the affirmative vote of
each
director (including the Independent Director);
(xix) permit
the Company or any Subsidiary to change its Fiscal Year;
(xx) cause
the
Company or any Subsidiary to be treated as a corporation or other association
taxable as a corporation or as a publicly traded partnership for federal income
tax purposes or to take a position inconsistent with the Company or any
Subsidiary not being treated as a corporation or other association taxable
as a
corporation except as required by Applicable Law;
(xxi)
permit
the Company or any Subsidiary to confess a judgment against the Company or
any
Subsidiary or settling actions in proceedings in law or in equity in relation
to
the Company or any Subsidiary before any court or other Governmental
Authority;
20
(xxii)
permit
the Company or any Subsidiary (other than the Servicer Subsidiary) to have
any
employees;
(xxiii) permit
the Company to reduce the "Commitments" under the Credit Agreement;
(xxiv) permit
the Company or any Subsidiary to incur any voluntary expense, or to enter into
any agreement other than the Transaction Documents (and any agreement required
to be entered into pursuant to any Transaction Document), that in any such
case
is not covered in the Budget, if the aggregate of all such expenses, or of
all
obligations of the Company and its Subsidiaries pursuant to the relevant
agreement(s), as the case may be, (i) individually is in excess of $35,000
or
(ii) in the aggregate during any annual fiscal period of the Company is in
excess of $200,000, unless, in the case of any such voluntary expense, the
incurrence thereof is necessary to comply with Applicable Law, and it being
understood that the Managing Member shall provide the directors and (if
applicable) the Board Observers with at least three Business Days prior written
notice of the incurrence by the Company or any Subsidiary of any such expense,
or any such entry into by the Company or any Subsidiary of any such agreement,
in any such case not so covered (or not reasonably anticipated to be so covered)
in the Budget;
(xxv) permit
the Company or any Subsidiary to approve any new channel partner for marketing
the merchant advance business of the Company and its Subsidiaries (it being
understood that a Person which is a counterparty to a Merchant Advance Contract
with the Company shall not, as the sole consequence thereof, be deemed to be
channel partner of the Company for purposes of this Section
6.4(e)(xxv));
(xxvi) permit
the Company to exercise its right under the LEAF Services Agreement to acquire
the Servicer Subsidiary, or permit the Company or any Subsidiary to acquire
more
than five percent of any class of voting securities of, or 25 percent of the
equity of, any other Person; or
(xxvii)
permit the Company or any Subsidiary to hire any regulatory counsel,
provided
that
DBAH Capital LLC and its Affiliates shall have the right to require that any
advice provided by any regulatory counsel to the Company or any Subsidiary
be in
form and substance satisfactory to DBAH Capital LLC and its Affiliates and
in a
form expressly permitting DBAH Capital LLC and its Affiliates to rely thereon.
Section
6.5 Conduct
of Business by the Company; Other Management Matters.
(a) Covenants
of the Company.
Anything in this LLC Agreement to the contrary notwithstanding, the Managing
Member shall conduct the affairs of the Company and its Subsidiaries such
that:
(i) The
Company and its Subsidiaries shall
maintain books and records and bank accounts separate from those of any other
Person.
(ii) All
transactions between any Member (or any of their respective Affiliates, other
than the Company and its Subsidiaries), on the one hand, and any of
the
21
Company
or
any Subsidiary, on the other hand, shall be duly authorized and documented
and
recorded accurately in the appropriate books and records of such entities,
except where
normal industry practice does not normally require authorization or
documentation.
(iii) The
Company and its Subsidiaries shall: (x) maintain separate financial
statements, showing their assets and liabilities separate and apart from those
of any other Person and not have their assets listed on any financial statement
of any other Person, except that the Company's and its Subsidiaries' assets
may
be included in a consolidated financial statement of an Affiliate if required
by
GAAP so long as appropriate notation is made on such consolidated financial
statements to indicate the separateness of the Company and its Subsidiaries
from
such Affiliate and to indicate that the Company's and its Subsidiaries' assets
and credit are not available to satisfy the debts and other obligations of
such
Affiliate or any other Person and (y) otherwise maintain their own records
and books of account.
(iv) The
Company and its Subsidiaries shall not commingle or pool any of the funds and
other assets of the Company and its Subsidiaries with those of any Affiliate
of
the
Company, any Member or any Affiliate of any Member or any other Person, and
shall hold all of their assets in their own name.
(v) The
Company has done, or caused to be done, and shall do, or cause to be done,
all
things necessary to observe limited liability company formalities and other
organizational formalities and preserve its and its Subsidiaries' existence,
and
the Company shall abide by all statutory Delaware limited liability company
formalities.
(vi) Neither
the Company nor any of its Subsidiaries has, nor shall they, guarantee, become
obligated for, or hold itself or its credit out to be responsible for, or
available to satisfy, the debts or obligations of any other Person or control
the decisions or actions respecting the daily business or affairs of any other
Person (except as provided for in or permitted under the Transaction
Documents).
(vii) Neither
the Company nor any of its Subsidiaries shall acquire equity interests of any
Affiliate of the Company or of any of the Members or any of their Affiliates
(other than Permitted Assets and except as otherwise provided for in or
permitted under this LLC Agreement or the other Transaction Documents). Neither
the Company nor any of its Subsidiaries shall buy or hold any evidence of
indebtedness for borrowed money issued by, or make any loan or advance to,
any
other Person (other than such evidence of indebtedness for borrowed money,
loan
or advance constituting Permitted Assets and except as otherwise provided for
in
or permitted under this LLC Agreement or the other Transaction
Documents).
(viii) Neither
the Company nor any of its Subsidiaries has made any loans or advances to,
or
pledged its assets (other than as otherwise provided for in or permitted under
the Transaction Documents) for the benefit of, and shall not make any loans
or
advances (other than the Permitted Assets or as otherwise provided for in or
permitted under the Transaction Documents) to, or pledge its assets (other
than
as otherwise
22
provided
for in or permitted under the Transaction Documents) for the benefit of, any
Person, including, without limitation, any Affiliate of the Company, any Member,
or any Affiliate of any Member.
(xi) The
Company and its Subsidiaries shall maintain their assets in a manner such that
it is not difficult to segregate, identify or ascertain such
assets.
(x) Neither
the Company nor any of its Subsidiaries shall assume, guarantee or pay the
debts
or obligations of any other Person or otherwise pledge its assets for the
benefit of any other Person except as otherwise contemplated by the Transaction
Documents.
(xi) Neither
the Company nor any of its Subsidiaries shall enter into transactions with
any
of their Affiliates (other than the Company and its Subsidiaries) unless such
transactions are on terms and conditions at least as favorable to the Company
and its Subsidiaries as the terms and conditions that would be expected to
have
been obtained, under similar circumstances, from Persons who are not Affiliates
of the Company;
it being understood that the entering into of any Transaction Document and
the
performance thereof in accordance with its terms satisfies such
standard.
(xii) The
Company shall conduct its merchant advance business in accordance with the
Underwriting Manual.
(b) Board
Reduction Events and Liquidating Events.
Promptly upon becoming aware of any Board Reduction Event or Liquidating Event,
the Managing Member shall notify the Members of the occurrence of any such
Board
Reduction Event or Liquidating Event or any event that with notice or lapse
of
time or both would constitute such an event and the action that Company has
taken or proposes to take with respect thereto.
(c) Maintenance
of the Company's Existence, etc.
At the
Company's expense, the Managing Member shall take all actions that may be
necessary or appropriate (i) for the continuation of the Company's and each
of its Subsidiaries' valid existence as (in the case of the Company) a limited
liability company or (in the case of any Subsidiary) a corporation or a limited
liability company, in any such case, under the laws of its jurisdiction of
formation or organization, and its qualification to do business under the laws
of each other jurisdiction in which such existence or qualification is necessary
to protect the limited liability of the Members or to enable the Company and
its
Subsidiaries to conduct the business in which they are engaged or to perform
their respective obligations under any agreement to which they are a party,
(ii) for the accomplishment of the Company's and each of its Subsidiaries'
purposes, including the acquisition, management, maintenance, preservation,
and
operation of Permitted Assets in accordance with the provisions of this LLC
Agreement, the organizational documents of the Subsidiaries and applicable
laws
and regulations and (iii) to enforce the rights of the Company and each of
its Subsidiaries under each of the Transaction Documents. Without limitation
of
the foregoing, the Managing Member shall cause the Company and its Subsidiaries
to maintain all licenses, permits, registrations, authorizations, use
agreements, consents, orders or approvals of governmental or quasi-governmental
agencies and authorities (whether Federal, state, local,
23
(d) Fiduciary
Duty.
Without
limiting its rights under Section
3.4(d),
the
Managing Member shall be under a fiduciary duty to conduct the affairs of the
Company in the best interests of the Company, including the safekeeping and
use
of all Company Property and the use thereof for the exclusive benefit of the
Company and will not conduct the affairs of the Company so as to benefit any
other business now owned or hereafter acquired by the Managing Member or any
other Member if such conduct also produces a detriment to the Company.
(e) Notice
Regarding Qualification to Do Business.
The
Managing Member shall provide notice to the Class A Noteholder and the Members
of any state or jurisdiction in which Company is qualified to do business (other
than its jurisdiction of organization and any jurisdiction in which Company
is
qualified to do business on the Closing Date).
Section
6.6 Compensation
and Expenses.
No
Member or Affiliate of any Member, nor any director (other than the Independent
Director) or Board Observer, shall receive any salary, fee, or draw for services
rendered to or on behalf of the Company or otherwise in its capacity as a Member
or director, as the case may be, nor shall any Member or Affiliate of any Member
or any director (other than the Independent Director) or Board Observer be
reimbursed for any expenses (other than out-of-pocket travel and other expenses)
incurred by such Member, Affiliate, director or Board Observer, as the case
may
be, on behalf of the Company or otherwise in its capacity as a Member, director
or Board Observer, as the case may be; provided that if the Managing Member
is
the designee of the Majority Class A Members as provided in
Section 6.1(a), the designee shall be reimbursed for its out-of-pocket
costs and expenses incurred in connection with acting as Managing Member. For
the avoidance of doubt, this Section 6.6 shall not apply to the receipt by
the
Servicer (as defined in the LEAF Services Agreement) of the service fees
contemplated therein.
Section
6.7 Execution
of other Transaction Documents.
Simultaneously with the execution of this LLC Agreement, the Managing Member,
on
behalf of the Company, shall cause the Company to enter into the Transaction
Documents to which Company is a party.
Section
6.8 Compliance
with the LLC Agreement.
The
Managing Member shall exercise its rights hereunder as Managing Member to cause
the Company to comply with all of the obligations of the Company set forth
in
this LLC Agreement.
Section
6.9 Annual
Budget.
No
later than the Closing Date and thereafter, no later than 60 days after the
end
of each calendar year during the term hereof, the Managing Member shall submit
to the Board of Directors a preliminary budget for the Company for the next
succeeding calendar year. Such budget shall become final when approved by the
Required Directors. This Section 6.9 shall not apply to the Managing Member
if
the Managing Member is the designee of the Majority Class A Members as
provided in Section 6.1(a);
provided,
that if
the Managing Member is the designee of the Majority Class A Members and does
not
provide a budget in accordance with this Section
6.9,
it
shall provide the Members with information reasonably requested by a Member
as
to proposed amounts to be expended by the Company and
24
Section
6.10 Initial
Class A Member's Right of First Refusal.
The
Initial Class A Member (and/or any of its Affiliates designated thereby) shall
have a right of first refusal to provide (i) any debt or equity financing
required by the Company, as approved by the Board, at then-market terms and
(ii)
any advisory, structuring, underwriting or other services required in connection
with the Company's capital raising activities as approved by the Board
(including any third party debt financing, equity investment or initial public
offering) in exchange for market-rate compensation. For the avoidance of doubt,
the rights described in this Section
6.10
shall
not apply to additional capital contributions proposed to be made
to
the Company pursuant to Section
3.3(b)
or to
the issuance of Class A Units issuable upon Conversion of the Class A Note
(or
the Capital Contributions of the Initial Class A Member deemed made as provided
in Section
3.3(a)
upon
such Conversion).
ARTICLE
VII
ROLE
OF
NON-MANAGING MEMBERS
Section
7.1 Rights
or Powers.
Except
as otherwise provided herein (including Section
7.4),
no
Member (other than the Managing Member) shall have any right or power to take
part in the management or control of the Company or its business and affairs
or
to act for or bind the Company in any way. Notwithstanding the foregoing, the
Members shall have all the rights and powers specifically set forth in this
LLC
Agreement. Any Member, any Affiliate thereof or an employee, stockholder, agent,
member, manager, director or officer of a Member or any Affiliate thereof,
may
also be an employee or agent of the Company or the Manager. The existence of
these relationships and acting in such capacities will not result in such Member
being deemed to be participating in the control of the business of the Company
or otherwise by itself affect the limited liability of such Member.
Section
7.2 Voting
Rights.
Each
Member shall have the right to vote only on those matters expressly reserved
for
its vote (i) as provided in this LLC Agreement or (ii) as required by
mandatory provisions of the LLC Act.
Section
7.3 Procedure
for Consent.
In any
circumstances requiring the approval or consent of any Member specified in
this
LLC Agreement, such approval or consent may, except as expressly provided to
the
contrary in this LLC Agreement, be given or withheld in the sole and absolute
discretion of such Member. If the Managing Member receives the necessary
approval or consent of the Members to such action, the Managing Member shall
be
authorized and empowered to implement such action without further authorization
by the Members.
Section
7.4 Special
Rights of the Class A Noteholder and Class A Member.
Notwithstanding any other provision hereof, the Class A Noteholder or the
Majority Class A Member(s), as the case may be, shall have the exclusive
right and power to (a) control the
25
ARTICLE
VIII
ACCOUNTING;
BOOKS AND RECORDS
Section
8.1 Accounting;
Books and Records.
(a) Maintenance
of Books and Records.
The
Company shall maintain at its principal place of business or, upon notice to
the
Class A Noteholder and the Members, at such other place as the Managing Member
shall determine, separate books of account for Company, which shall include
a
record of all costs and expenses incurred, all charges made, all credits made
and received, and all income derived in connection with the conduct of the
Company and the operation of its business in accordance with this LLC
Agreement.
(b) Accounting
Methods.
(i) The
Company shall maintain appropriate books and records in a manner as necessary
to
comply with GAAP and with the Code and the Regulations, including maintaining
a
Capital Account and Adjusted Capital Account for each Member.
(ii) All
amounts payable under any agreement, other than this LLC Agreement, between
the
Company on the one hand and the Members or their Affiliates (excluding Company)
on the other hand, other than Distributions, shall be treated as occurring
between Company and a Person who is not a Member within the meaning of
Section 707(a)(1) of the Code and such amounts payable by the Company to
any Member or such Member's Affiliates shall be considered an expense or capital
cost, as the case may be, of the Company for income tax and financial reporting
purposes, and shall not be considered a Distribution to such Member, including
in maintaining such Member's Capital Account, and any such amounts payable
by
any Member or its Affiliates to the Company shall not, except as specifically
contemplated by Article III,
be
considered a contribution to the Company, including in maintaining such Member's
Capital Account.
26
(c) Access
to Books, Records, etc.
Each
Member or any agents or representatives of any Member (subject to reasonable
safety requirements), upon reasonable notice and with reasonable frequency
during normal business hours, may visit and inspect any of the properties of
the
Company and examine any information of the Company it may reasonably request
and
make copies of and abstracts from the financial and operating records and books
of account of the Company, and discuss the affairs, finances and accounts of
the
Company with the Managing Member, all at such reasonable times and as often
as
such Member or any agents or representatives of such Member may reasonably
request. The rights granted to each Member pursuant to this Section 8.1(c)
are
expressly subject to compliance by such Member with the reasonable
confidentiality procedures and guidelines of the Company, as such procedures
and
guidelines may be established from time to time.
Section
8.2 Reports.
(a) In
General.
The
Managing Member shall be responsible for the preparation of (or for causing
the
preparation of) financial reports of the Company and the coordination of
financial matters of the Company with the Company Accountants. Each report
delivered by the Company to the Members pursuant to this Section 8.2
shall be
accompanied by a representation of a Responsible Officer of the Managing Member
that such report presents fairly in all material respects the information
contained therein, subject, in the case of the reports to be delivered pursuant
to Section 8.2(c),
to
year-end audit adjustments.
(b) Annual
Financial Reports.
Within
90 days after the end of each Fiscal Year commencing with the Fiscal Year ending
September 30, 2007, the Managing Member shall cause to be prepared and to
be delivered to each Member, a consolidated balance sheet as of the last day
of
such Fiscal Year and a consolidated income statement and consolidated statement
of cash flows for Company for (x) in the case of the Fiscal Year ending
September 30, 2007, the period from the Formation Date to
September 30, 2007, and (y) in the case of any other Fiscal Year, such
Fiscal Year, and notes associated with each, in each case prepared in accordance
with GAAP and audited by the Company Accountants. The financial statements
described in this Section 8.2(b)
shall be
accompanied by a representation of a Responsible Officer of the Managing Member
stating that after reasonable inquiry, it has no actual knowledge of the
occurrence of any Board Reduction Event or Liquidating Event (or any event
which
with the giving of notice or passage of time would reasonably be expected to
become such an event) that is then continuing or, if it has any such actual
knowledge, specifying each then continuing event.
(c) Quarterly
Financial Reports.
Within
45 days after the close of each Fiscal Quarter during any Fiscal Year beginning
with the Fiscal Quarter ending March 31, 2007, the Managing Member shall cause
to be prepared and to be delivered to each Member its unaudited financial
statements consisting of a consolidated balance sheet as of the last day of
such
Fiscal Quarter and a consolidated income statement and a consolidated statement
of cash flows for Company for such Fiscal Quarter, in each case prepared in
accordance with GAAP except that such quarterly financial statements need not
include footnote disclosure and may be subject to ordinary year-end adjustment.
The financial statements described in this Section 8.2(c)
shall be
accompanied by a representation of a Responsible Officer of the Managing Member
stating that (x) the financial statements described in this Section 8.2(c)
present
fairly, in all material respects, the financial position of the Company at
the
end of the most recently completed Fiscal Quarter and
27
(d) Purchase
Option and Liquidation Date Reports.
The
Managing Member shall cause to be prepared and to be delivered to each Member
(x) on any Final Payment Date, a balance sheet as of the applicable
▇▇▇▇-to-Market Measurement Date setting forth the aggregate ▇▇▇▇-to-Market
Value
for each of the Permitted Assets (a "▇▇▇▇-to-Market
Balance Sheet")
together with a certificate by the Managing Member that such statements have
been prepared in accordance with this LLC Agreement, subject to adjustment
as a
result of the audit to be provided pursuant to the following clause (y)
and
(y) on the date on which final distributions are made to the Members
pursuant to Section 12.2
hereof
and not later than 75 days after the Purchase Date, certification by the Company
Accountants that such statements have been prepared in accordance with this
LLC
Agreement.
(e) Valuation
Reports.
The
Managing Member shall cause to be prepared contemporaneously with any adjustment
to the Gross Asset Values of the Company assets in accordance with clause (ii)
of the
definition of Gross Asset Value, reports required to determine the
▇▇▇▇-to-Market Value of such assets and (x) in the event any Permitted
Asset is acquired by contribution or distributed by the Company, with respect
to
such Permitted Asset only and (y) upon the occurrence of any adjustment to
the Gross Asset Value of all Permitted Assets, with respect to all Permitted
Assets, and the Managing Member shall furnish such reports to each Member
together with a certification by the Company Accountants that such reports
have
been prepared in accordance with this LLC Agreement.
(f) Certain
Other Information.
The
Managing Member shall provide to the Members a monthly report no later than
the
15th day of each calendar month, which report shall provide in reasonable detail
all material financial information with respect to the preceding month;
provided
that the
Managing Member designated by the Majority Class A Members pursuant to
Section
6.1
shall
not be required to comply with this sentence for a period of six (6) months
following such designation. In addition, the Managing Member shall provide
to
the Members: (i) concurrently with the sending thereof, copies of all written
information and reports which the Company (or any Person on its behalf) provides
under any of the Transaction Documents and promptly following receipt thereof,
copies of all written information and notices which the Company (or any Person
on its behalf) receives under any of the Transaction Documents (including,
without limitation, weekly cash flow forecasts received by the Company under
the
LEAF Services Agreement); (ii) as promptly as practicable, any material
correspondence or notices to or from any governmental authority, regulatory
or
self regulatory agencies, or other entities with jurisdiction over the Company
or any Subsidiary; (iii) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Company or any Affiliate thereof or any Member; (iv) as promptly
as practicable and in any event
within five Business Days after having knowledge of the occurrence of each
Default (as defined in the Credit Agreement), a statement of the Managing Member
setting forth details of such Default and the action which the Managing Member
has taken and proposes to take with
28
Section
8.3 Tax
Matters.
(a) Actions
by the Class B Member.
The
Managing Member is specifically authorized to act as the "Tax
Matters Member"
under
the Code and in any similar capacity under state or local law. The Tax Matters
Member is authorized to make any and all elections for federal, state, and
local
tax purposes including any election, if permitted by applicable law: (i) to
adjust the basis of Company Property pursuant to Code Sections 754, 734(b)
and 743(b), or comparable provisions of state or local law, in connection with
Dispositions of Interests and Company Distributions; (ii) with the consent
of the Members, to extend the statute of limitations for assessment of tax
deficiencies against the Members with respect to adjustments to the Company's
federal, state, or local tax returns; and (iii) to the extent provided in
Code Sections 6221 through 6231, to represent the Company and the Members
before taxing authorities or courts of competent jurisdiction in tax matters
affecting the Company or the Members in their capacities as Members, and to
file
or cause to be filed any tax returns and execute any tax returns, agreements
or
other documents relating to or affecting such tax matters, including agreements
or other documents that bind the Members with respect to such tax matters or
otherwise affect the rights of the Company and the Members, provided
that the
Tax Matters Member's authority to make an election under this Section
8.3(a)
is
subject to the consent of each Member for which such election could reasonably
be expected to have an adverse impact.
(b) Tax
Information and Filings.
The Tax
Matters Member shall deliver or cause to be delivered to each Member necessary
tax information for each Member's estimated quarterly tax filings within 45
days
of the end of the applicable quarter. The Tax Matters Member shall deliver
or
cause to be delivered to each Member: (i) on or prior to November 30 of
each Fiscal Year, the Tax Matters Member's good faith estimate of the amount
of
such Member's allocable share of the Company's taxable income or loss for the
preceding Fiscal Year and (ii) as soon as practicable after the end of each
Fiscal Year of the Company but not later than April 30th of the next succeeding
Fiscal Year, necessary tax information for each Member's annual tax filings.
The
Tax Matters Member shall file or cause to be filed tax or information returns
and all other filings for the Company prepared in accordance with the Code,
the
Regulations and applicable state and local tax laws. The Tax Matters Member
shall use reasonable efforts to provide the Members with details concerning
the
foregoing information upon the reasonable inquiry of a Member.
(c) Tax
Classification.
(i) The
Tax
Matters Member shall take such action as may be required under the Code and
Regulations to cause Company to be treated as a partnership for federal income
tax purposes.
(ii) To
the
extent Section
8.3(c)(i)
does not
govern the state and local tax classification of the Company, the Tax Matters
Member shall take such action as may be required under applicable state and/or
local law to cause Company to be treated as, and in a manner consistent with
a
partnership (or the functional equivalent thereof) for state
29
and
local
income and franchise tax purposes; provided,
that
the Tax Matters Member shall not take any action under this clause (c)(ii)
which
would be inconsistent with its obligations under Section 8.3(c)(i).
ARTICLE
IX
AMENDMENTS;
MEETINGS
Section
9.1 Amendments.
Amendments to this LLC Agreement may be proposed by any Member. Following such
proposal, the Managing Member shall submit to the Members a verbatim statement
of any proposed amendment once counsel for the Company shall have approved
of
the same in writing as to form, and the Managing Member shall include in any
such submission a recommendation as to the proposed amendment. The Managing
Member shall seek the written vote of the Members on the proposed amendment
or
shall call a meeting to vote thereon and to transact any other business that
it
may deem appropriate. Except as otherwise provided in Section 13.1, no amendment
shall be adopted and be effective as an amendment to this LLC Agreement unless
it receives the affirmative vote of all of the Members.
Section
9.2 Meetings
of the Members.
(a) Meetings
of the Members may be called by the Managing Member and shall be called upon
the
written request of any Member. The request shall state the nature of the
business to be transacted. Subject to other requirements specified herein
regarding notice periods, notice of any such meeting shall be given to all
Members not less than five Business Days nor more than 30 days prior to the
date
of such meeting, unless in any such case such notice has been waived in writing
by each Member who did not receive notice as required hereby. Members may vote
in person, by proxy or by telephone at such meeting. Whenever the vote or
consent of Members is permitted or required under this LLC Agreement, such
vote
or consent may be given at a meeting of Members or may be given in accordance
with the procedure prescribed in Section 9.3.
(b) For
the
purpose of determining the Members entitled to vote on, or to vote at, any
meeting of the Members or any adjournment thereof, the Managing Member or the
Member requesting such meeting may fix, in advance, a date as the record date
for any such determination. Such date shall not be more than thirty days nor
less than one Business Day before any such meeting.
(c) Each
Member may authorize any Person or Persons to act for it by proxy on all matters
in which the Member is entitled to participate, including waiving notice of
any
meeting, or voting or participating at a meeting. Every proxy must be signed
by
the Member or its attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Member executing it or as provided under the terms of
such proxy.
(d) Each
meeting of Members shall be conducted by the Managing Member or such other
Person as the Managing Member may appoint pursuant to such rules for the conduct
of the meeting as the Managing Member or such other Person deems
appropriate.
30
Section
9.3 Manner
of Consent.
In
the
event the consent of one or more Members is required for any action to be taken
by the Company, such consent may be given at a meeting, which may be attended
or
conducted by conference telephone call, or provided in a writing executed by
such Members.
ARTICLE
X
TRANSFERS
OF INTERESTS
Section
10.1 Restriction
on Dispositions of Interests.
(a) Dispositions
of Class A Member Interests.
Subject
to Section 10.1(c)
and to
the Unitholders Agreement and except as provided in Article XI,
no
Class A Member shall Dispose of its Class A Interest or resign from the
Company without the prior written consent of the Majority Class B Members
and (so long as the Initial Class A Member and its Affiliates are the Majority
Class A Members) the Majority Class A Members; provided
that no
consent of the Majority Class B Members shall be required if (x) a Board
Reduction Event shall have occurred or (y) with respect to a Disposition of
a
Class A Member Interest by the Initial Class A Member or any of its Affiliates
if, after giving effect to such Disposition, the Initial Class A Member and
its
Affiliates continue to own a majority of the Class A Member Interests; and
provided
further,
that a
Class A Member may Dispose of a Class A Member Interest to any Affiliate of
such Class A Member in a transfer that complies with Section 10.1(c).
(b) Dispositions
of Class B Member Interests.
(i)
Subject to Section 10.1(c)
and to
the Unitholders Agreement, no Class B Member shall Dispose of its Class B
Interest or resign from the Company without the prior written consent of the
Class A Noteholder or the Majority Class A Members, as the case may be;
provided,
that a
Class B Member may Dispose of a Class B Member Interest to any Affiliate of
such Class B Member in a transfer that complies with Section 10.1(c).
(c) Prohibited
Transfers.
No
Disposition of an Interest that is a Disqualified Transfer shall be permitted
by
this Section 10.1.
(d) Class
B Member Proxy.
If as a
result of any transfer permitted by this Section
10.1,
there
is more than one Class B Member, all Class B Members shall designate a single
Class B Member as their attorney-in-fact, in its name and stead, to give or
withhold all consents and approvals that each Class B Member shall be entitled
to give or withhold, and to exercise all voting
rights and other rights, and take all other actions, that such Class B Member
is
entitled to take pursuant to the provisions of this LLC Agreement until such
time as such designation and appointment is revoked in writing, and this
Section
10.1(d)
shall
be, to the extent required by Applicable Law to give it effect, construed as
a
proxy in favor of such designated Class B Member. The Class B Members or any
of
them shall provide a copy of any such designation or revocation to the Class
A
Members or the Class A Noteholder, as the case may be, promptly upon such
designation or revocation being effected.
(e) Miscellaneous.
Following any transfer by a Member of all of its Interest, such Member shall
cease to be a Member. Upon any transfer of any Interest in accordance with
this
31
Section
10.1,
the
transferee of such Interest will, without further action or consent by any
other
Member, be admitted as a Class A Member or Class B Member, as the case may
be, of the Company upon such transferee's execution and delivery to the Company
and each Member of (to the extent such transferee is not already a party
thereto) a counterpart to this Agreement and the Unitholders
Agreement.
Section
10.2 Prohibited
Dispositions.
To the
fullest extent permitted by law, any purported Disposition of an Interest that
is not made in accordance with Section
10.1
or the
Unitholders Agreement shall be null and void and of no effect whatever;
provided,
however,
that,
if the Company is required to recognize a Disposition of an Interest that is
not
made in accordance with Section
10.1
or the
Unitholders Agreement, the transferred Interest shall be strictly limited to
the
transferor's rights to allocations and distributions as provided by this LLC
Agreement with respect to the transferred Interest, which allocations and
distributions may be applied (without limiting any other legal or equitable
rights of the Company) to satisfy any debts or obligations, or liabilities
for
damages that the transferor or transferee of such Interest may have to the
Company.
To
the
fullest extent permitted by law, in the case of a Disposition or attempted
Disposition of an Interest that is not made in accordance with Section
10.1
or the
Unitholders Agreement, the parties engaging or attempting to engage in such
Disposition shall be liable to indemnify and hold harmless the Company and
the
other Members from all losses, costs, liability, and damages that any of such
indemnified Persons may incur (including incremental tax liability and
reasonable lawyers' fees and expenses) as a result of such Disposition or
attempted Disposition and efforts to enforce the indemnity granted
hereby.
Section
10.3 Representation
on Transfer.
Any
Person to whom an Interest is transferred in accordance with the terms of this
LLC Agreement shall be deemed to make the representations and warranties
provided for in Section
3.5
to the
Company and each other Member.
ARTICLE
XI
PURCHASE
AND SALE RIGHTS
Section
11.1 Purchase
Option.
(a) Following
(i) a material breach by a Member of a term of this LLC Agreement which is
not
promptly cured, (ii) deadlock between directors of the Company entitled to
vote
as to a matter requiring the approval of the Required Directors, (iii) a change
in Applicable Laws that makes participation by the Class A Noteholder or a
Member in this LLC Agreement illegal or subject to a material increase in
regulatory or tax costs for the Class A Noteholder or such Member, (iv)
Bankruptcy of the Class A Noteholder or a Member, (v) termination of the LEAF
Services Agreement, (vi) failure by the Lender to satisfy a funding obligation
under the Credit Agreement within five Business Days of any such obligation
becoming due thereunder, (vii) failure by LEAF Ventures, LLC to comply with
its
obligations under the Participation Agreement to purchase a 10% participation
interest in any Advance made by the Lender under the Credit Agreement within
five Business Days of the making of such Advance (except to the
32
(b) Any
Purchase Option Notice shall include the following:
(i) a
statement that all of the Other Members' Interest is to be purchased;
(ii) a
statement specifying the date on which the closing of the purchase and sale
of
the Other Members' Interest shall occur (the "Purchase
Date"),
which
Purchase Date shall not be less than 60 days nor more than 120 days from the
date of the occurrence of the first such Triggering Event; and
(iii) the
price
at which the Electing Member is offering to purchase the Other Members'
Interest, and the price at which the Electing Member would be willing to sell
its own Investment Interest to the Other Members (each thereof, a "Purchase
Price").
(c)
Upon the
receipt of a Purchase Option Notice, the Other Members may either (i)
elect
to sell, on the Purchase Date, the Other Members' Interest to the Electing
Member at the relevant Purchase Price or (ii) deliver an Irrevocable Election
to
the Electing Member evidencing the
Other
Members' election to purchase, at the relevant Purchase Price and on the
Purchase Date, all but not less than all (in proportion to the Percentage
Interests (in the case of the Class A Note, as though Converted)) of the
Investment Interest owned by the Electing Member.
(d) Purchase.
The
closing of the purchase and sale of the Investment Interest to be sold as
aforesaid (the "Purchased
Interest")
shall
occur on the Purchase Date and at such place as is mutually agreeable to the
Class A Noteholder (if applicable) and the Members, or upon the failure to
agree, at the principal place of business of the Company. On the Purchase Date,
the Class A Noteholder and/or Member(s) selling the Purchased Interest (the
"Selling
Members")
shall,
upon payment of the relevant Purchase Price, deliver to the Member(s) or Class
A
Noteholder, as the case may be (the "Purchasing
Member(s)")
or
their designee(s) purchasing the Purchased Interest all of their right, title
and interest in and to the Purchased Interest purchased, free and clear of
any
liens, claims, encumbrances, security interests or options by delivery of
endorsed Certificates of Interest and/or the Class A Note, as the case may
be,
and by (in the case of Interests) executing instruments of conveyance attached
hereto as Exhibit
C.
To the
fullest extent permitted by law, the transfer of the Purchased Interest shall
be
made "as-is, where is" without any representation or warranty other than the
absence of liens as aforesaid.
33
(e) Treatment
as Purchase Under Section 741.
The
Members agree to treat the Disposition of Interests pursuant to this
Section 11.1
as a
purchase and sale under Section 741 of the Code and not as a retirement
under Section 736 of the Code.
ARTICLE
XII
DISSOLUTION
AND WINDING UP
Section
12.1 Liquidating
Events.
The
Company shall dissolve and commence winding up and liquidating upon the first
to
occur of any of the following (collectively, "Liquidating
Events"):
(a) Liquidation
Notice.
The
date on which, pursuant to Section 12.10,
a
Liquidation Notice becomes effective to cause a Liquidating Event.
(b) Unanimous
Vote.
The
unanimous vote of the Members to dissolve, wind up, and liquidate
Company.
(c) Illegality,
etc.
The
happening of any event that makes it unlawful, impossible, or impractical to
carry on the business of the Company or the Delaware Court of Chancery has
entered a decree pursuant to Section 18-802 of the LLC Act.
(d) Last
Member.
At any
time there are no members of the Company unless the Company is continued without
dissolution in a manner permitted by the LLC Act.
(e) Triggering
Event.
If,
within ten days of the occurrence of a Triggering Event, (i) no Electing Member
shall have delivered a Purchase Option Notice to the Other Members pursuant
to Section
11.1(a),
and
(ii) at such time the Bankruptcy
of the Managing Member shall be continuing.
The
Members hereby agree that, notwithstanding any waivable provision of the LLC
Act, the Company shall not dissolve prior to the occurrence of a Liquidating
Event.
Section
12.2 Winding
Up. Upon
the
occurrence of a Liquidating Event, the Company shall continue solely for the
purposes of winding up its affairs in an orderly manner, liquidating its assets,
and satisfying the claims of its creditors and thereafter Members, and no Member
shall take any action with respect to the Company that is inconsistent with
the
winding up of the Company's business and affairs; provided
that all
covenants contained in this LLC Agreement and obligations provided for in this
LLC Agreement shall continue to be fully binding upon the Members until such
time as Company Property has been distributed pursuant to
34
(a) First,
to
creditors of the Company (including any Class A Member to the extent such Class
A Member is a creditor), in satisfaction of all of the Company's debts and
liabilities (whether by payment or making provision for payment thereof);
and
(b) Second,
the
balance to the Members in accordance with Article V.
Section
12.3 No
Restoration of Deficit Capital Accounts; Compliance With Timing Requirements
of
Regulations.
In the
event the Company is "liquidated" within the meaning of Regulation
§ 1.704-1(b)(2)(ii)(g),
(x) distributions shall be made pursuant to this Article XII
to the
Members who
have
positive balances in their Capital Accounts in proportion to and to the extent
of such positive balances in compliance with Regulation
§ 1.704-1(b)(2)(ii)(b)(2),
and
(y) if a Member's Capital Account has a deficit balance (after giving
effect to all contributions, distributions, and allocations for all taxable
years, including the taxable year during which such liquidation occurs), the
Member whose Capital Account has a negative balance shall have no obligation
to
contribute to the capital of the Company the amount necessary to restore such
deficit balance to zero, and such deficit shall not be considered a debt owed
to
the Company or to any other Person for any purpose whatsoever.
Section
12.4 Deemed
Distribution and Recontribution.
Notwithstanding any other provision of this Section
12,
in the
event the Company is liquidated within the meaning of Regulation
§1.704-1(b)(2)(ii)(g)
but
no
Liquidating Event has occurred, Company Property shall not be liquidated, the
Company's debts and other liabilities shall not be paid or discharged, and
the
Company's affairs shall not be wound up. Instead, solely for federal income
tax
purposes, the Company shall be deemed to have contributed all of Company
Property and liabilities to a new limited liability company in exchange for
an
interest in such new company and, and immediately thereafter, the Company will
be deemed to have been liquidated by distributing interests in the new company
to the Members.
Section
12.5 Rights
of
Members.
Each
Member shall look solely to Company Property for the return of its Capital
Contribution and, except as otherwise provided in
35
Section
12.6 Notice
of Dissolution.
The
Managing Member shall promptly provide written notice to each of the Members
of
the occurrence of a Liquidating Event known to it in accordance with
Section 6.5(b).
Section
12.7 Character
of Liquidating Distributions.
All
payments made in liquidation of the Interest of a retiring Member, other than
payments made under Section
12.2,
shall
be made in exchange for the interest of such Member in Company Property pursuant
to Code § 736(b)(1), including the interest of such Member in goodwill of
the Company.
Section
12.8 The
Liquidator.
(a) Definition.
The
"Liquidator"
shall
mean the Person appointed as Liquidator by the Company, subject to the approval
of the Required Directors.
The
Liquidator shall have the rights set forth in Section 18-803(b) of the LLC
Act and exclusively shall have the rights, power and authority of the Managing
Member necessary or appropriate
in its discretion to effect the dissolution, winding up and liquidation of
the
Company. The actions of the Liquidator shall for all purposes be the actions
of
the Company.
(b) Fees.
The
Company is authorized to pay a reasonable fee to the Liquidator for its services
performed pursuant to this Article XII
and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services.
(c) Resignation
of Liquidator.
At any
time any Liquidator may, in its discretion, resign as Liquidator and the
Managing Member shall appoint a replacement Liquidator, subject to the approval
of the Required Directors.
Section
12.9 Form
of Liquidating Distributions.
Except
as provided in this Section 12.9,
for
purposes of making distributions required by Section 12.2,
the
Liquidator may determine whether to distribute all or any portion of Company
Property in-kind or to sell all or any portion of Company Property and
distribute the proceeds therefrom, provided
that the
Liquidator shall not distribute Company Property other than Cash to any Member
without its consent, and the Liquidator shall be required to reduce Company
Property to Cash to the extent necessary to make distributions to the Members
pursuant to Section 12.2
in Cash.
In the case of a liquidation in kind, the amount distributed shall be deemed
to
equal to the ▇▇▇▇-to-Market Value of the property distributed on the date of
such distribution.
Section
12.10 Liquidation
Notice.
The
Class A Noteholder or any Class A Member (at the direction of the Majority
Class A Members) may, at any time on or after the occurrence of a Board
Reduction Event, deliver to the Managing Member and the Class B Members a
written notice (a "Liquidation
Notice")
stating that such Board Reduction Event constitutes a Liquidation Event;
provided,
however,
that:
(i) the delivery of such Liquidation Notice shall not become effective to
cause a Liquidating Event until the expiration of a period of 90 days from
the
date of delivery of such Liquidation Notice; (ii) the Class A Noteholder or
Majority Class A Members, as the case may be, may rescind such Liquidation
Notice by
36
Section
12.11 Allocations
During Period of Liquidation.
For the
avoidance of doubt, during the period commencing on the first day of the Fiscal
Year during which a Liquidation Event has occurred and ending on the date on
which all of the assets of the Company have been distributed to the Members
pursuant to Section 12.2 hereof, the Members shall continue to share in Net
Income, Net Losses, and other items of Company income, gain, loss or deduction
in the manner provided in Article IV hereof.
Section
12.12 Bankruptcy.
Notwithstanding any other provision of this Agreement, the Bankruptcy of a
Member shall not cause such Member to cease to be a member of the Company and
upon the occurrence of such an event, the Company shall continue without
dissolution.
ARTICLE
XIII
MISCELLANEOUS
Section
13.1 Amendments.
No
amendment or waiver of any provision of this LLC Agreement, and no consent
to
any departure by any party herefrom, shall in any event be effective unless
the
same shall be in writing and signed by the Majority Class A Members (at any
time
following Conversion of the Class A Note) and the Majority Class B Members;
provided
that (a)
no such amendment, waiver or consent having an effect on any Member materially
worse than the effect of such amendment, waiver or consent on the Majority
Members of any Class shall be effective without the consent of such Member
and
(b) no such amendment, waiver or consent shall (i) change the definition of
"Majority Class A Members", "Majority Class B Members" or "Majority Members"
without the consent of all of the Members of the applicable Class, (ii) change
this Section 13.1 without the consent of each Member, or (iii) increase or
accelerate the payment of any capital contribution obligation of, or decrease
the amount or delay the payment of any Distribution payable to, any Member,
or
limit any Member's right to participate in the election of directors
representing the Class of such Member, without, in any such case under this
clause (iii), the consent of such Member; and provided further
that no
such amendment, waiver or consent prior to the Conversion of the Class A Note
shall be effective unless consented to in writing by the Class A Noteholder.
No
such waiver of a provision or consent to a departure in any one instance shall
be construed as a further or continuing waiver of or consent to subsequent
occurrences, or a waiver of any other provision or consent to any other
departure.
Section
13.2 Notices.
Any
notice, payment, demand, or communication required or permitted to be given
by
any provision of this LLC Agreement shall be in writing or
37
Section
13.3 No
Waiver; Cumulative Remedies.
No
failure on the part of any Person to exercise, and no delay in exercising,
any
right under this LLC Agreement shall operate as a waiver thereof; nor shall
any
single or partial exercise of any right under this LLC Agreement preclude any
other or further exercise thereof or the exercise of any other right. The
remedies provided in this LLC Agreement are cumulative and not exclusive of
any
remedies provided by Applicable Law.
Section
13.4 Waiver
of Jury Trial.
EACH
PARTY TO THIS LLC AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS LLC AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section
13.5 Counterparts.
This
LLC Agreement may be executed in any number of counterparts and by different
parties thereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute
one
and the same agreement. To the fullest extent permitted by law, this LLC
Agreement may be delivered by facsimile transmission of the relevant signature
pages thereof.
Section
13.6 Survival
of Representations, Warranties and Indemnities: Entire Agreement.
All
representations, warranties and indemnities and undertakings to pay costs and
expenses contained in this LLC Agreement shall survive (a) the execution
and delivery of this LLC Agreement and the other Transaction Documents and
(b) performance by each party of its Obligations under this LLC Agreement
and each other Transaction Document to which it is a party.
Section
13.7 Severability.
Any
provision of this LLC Agreement that is prohibited by or unenforceable in any
relevant jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions thereof, and any such prohibition or unenforceability
in
any jurisdiction shall, to the fullest extent permitted by law, not invalidate
or render unenforceable such provision in any other jurisdiction.
38
Section
13.8 Construction.
The
parties intend that every covenant, term, and provision of each Transaction
Document shall be construed simply according to its fair meaning and not
strictly for or against any party thereto.
Section
13.9 Determination
of Capital Accounts.
In the
event any Class A Member or any Class B Member disputes in an
appropriate proceeding the determination of its Capital Account, an independent
determination of the Members' Capital Accounts shall be made without any special
weight being given to any prior determination made within the discretion of
the
Managing Member.
Section
13.10 Governing
Law.
THE LAW
OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES) SHALL
GOVERN THE VALIDITY OF THIS LLC AGREEMENT, THE CONSTRUCTION OF ITS TERMS, AND
THE INTERPRETATION OF THE RIGHTS AND DUTIES OF THE MEMBERS.
Section
13.11 Waiver
of Action for Partition.
Each of
the Members irrevocably waives any right that it may have to maintain any action
for partition with respect to any of Company Property.
Section
13.12 Consent
to Jurisdiction.
Each
Member (i) irrevocably submits to the jurisdiction of any Delaware State
court or federal court sitting in Wilmington, Delaware in any action arising
out
of this LLC Agreement, (ii) agrees that all claims in such action may be
decided in such court, (iii) waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum and (iv) to the
fullest extent permitted by law, consents to the service of process by mail.
A
final judgment in any such action shall be conclusive and may be enforced in
other jurisdictions. Nothing herein shall affect the right of any party to
serve
legal process in any manner permitted by law or affect its right to bring any
action in any other court.
Section
13.13 Third
Party Beneficiaries.
The
covenants contained herein are made for the benefit of the parties hereto and
permitted successors and assigns of such parties as specified herein, and
(except as expressly specified herein) shall not be construed as having been
intended to benefit any third party not a party to this Agreement.
39
IN
WITNESS WHEREOF, the undersigned have executed this LLC Agreement as of the
date
above first written.
CLASS
A NOTEHOLDER
(executing
and delivering this LLC Agreement not as a Member, but solely for the limited
initial purposes set forth in Section 1.9):
DBAH
CAPITAL LLC
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
INITIAL
CLASS B MEMBER:
LEAF
VENTURES, LLC
By: LEAF
Financial Corporation
Its
Managing Member
By:____________________________________
Name:
Title:
Schedule
3.2
|
Class
A Noteholder
|
Address
|
|
DBAH
Capital LLC
|
▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
Initial
Class B Member
|
Address
|
Capital
Commitment
|
Number
and Class
of
Units
|
|
LEAF
Ventures, LLC
|
c/o
LEAF Financial Corporation
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇
▇▇▇▇▇
|
$2,500,000
|
50
Class B Units
|
Schedule
6.4(a)
Initial
Board Observers and Board of Directors
Board
Observers Appointed by Class A Noteholder
Spring
▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
Directors
Appointed by Class B Member
Crit
▇▇▇▇▇▇
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
Independent
Director
Elvran
▇▇▇▇▇▇
ANNEX
A TO
MERIT
CAPITAL ADVANCE, LLC
DEFINITIONS
AND RULES OF CONSTRUCTION
SECTION
1.01 Definitions.
Capitalized terms used in this Annex A
and,
except as otherwise expressly provided in any Transaction Document with respect
to specific capitalized or other terms used in such Transaction Document,
capitalized terms used in the Transaction Documents and all appendices,
schedules and exhibits thereto, shall in each case have the respective meanings
given to them in this Section 1.01.
Not all
of the terms defined in this Annex A
are used
in any particular Transaction Document.
"Additional
Member"
is
defined in Section
3.3(c)(i).
"Adjusted
Capital Account"
means,
with respect to any Member, the balance, if any, in such Member's Capital
Account as of the end of the relevant Allocation Period, after giving effect
to
the following adjustments:
(i) credit
to
such Capital Account any amounts that such Member is obligated to contribute
or
deemed to be obligated to contribute pursuant to the penultimate sentences
of
Regulation §§ 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) debit
to
such Capital Account the items described in Regulation
§§ 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5)
and
1.704-1(b)(2)(ii)(d)(6).
The
foregoing definition of Adjusted Capital Account is intended to comply with
the
provisions of Regulation § 1.704-1(b)(2)(ii)(d)
and
shall be interpreted consistently therewith.
"Advance"
is
defined in the Credit Agreement.
"Affiliate"
means,
with respect to any Person, any other Person which, directly or indirectly,
controls, is controlled by or is under common control with such Person. For
purposes of any provision in the LLC Agreement limiting the ability of the
Company or any Member to enter into transactions with Affiliates, a Person
shall
be deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to
vote 10% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general
partners, or (b)
to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Allocation
Period"
means
the annual period beginning on January 1 of each year; provided,
that
(i) the Allocation Period for the first year of the Company shall commence
on the Closing Date and end on December 31, 2007 and (ii) in the year
in which the Company is liquidated, the final Allocation Period shall end on
the
date the Company is liquidated.
"Applicable
Law"
means
all applicable laws, statutes, treaties, rules, codes, ordinances, regulations,
permits, certificates, and orders, all binding interpretations thereof, and
the
related
requirements
and mandatory conditions of licenses and permits, of any governmental authority,
and judgments, decrees, injunctions, writs, orders, or like action of any court,
arbitrator or other administrative, judicial or quasi-judicial tribunal or
agency of competent jurisdiction.
"Applicable
Rate"
means,
for any Allocation Period, the highest effective marginal combined U.S. federal,
state and local income tax rate (taking into account any deductions and/or
credits relating to the payment of state and local taxes and the limitations
on
deductibility imposed by sections 55, 67 and 68 of the Code for purposes of
computing federal taxable income) applicable to individuals or corporations
under the Code and the laws of New York state and city on ordinary income or
capital gain, as the case may be. In the case of the Initial Class A Member
and
any Affiliate thereof which is a Class A Member, Applicable Rate shall also
take
into account any income tax imposed under section 11-503 of the New York City
Administrative Code.
"Bankruptcy"
means,
with respect to any Person, a Voluntary Bankruptcy or an Involuntary Bankruptcy.
A "Voluntary
Bankruptcy"
means,
with respect to any Person: (a) (i) the failure of such Person
generally to pay its debts as such debts become due or (ii) an admission in
writing by such Person of its inability to pay its debts generally or a general
assignment by such Person for the benefit of creditors; (b) the filing of
any petition by such Person seeking to adjudicate it a bankrupt or insolvent,
or
seeking for itself any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or its debts
under
any Applicable Law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking, consenting to, or acquiescing in the entry of
an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for such Person or for any substantial part of its property
or
the filing of an answer or other pleading admitting or failing to contest the
allegations of a petition filed against it in any proceeding of the foregoing
nature; or (c) action taken by such Person to authorize any of the actions
set forth above. An "Involuntary
Bankruptcy"
means,
with respect to any Person, without the consent or acquiescence of such Person,
the entering of an order for relief or approving a petition for relief or
reorganization or any other petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or other similar relief
under any present or future bankruptcy, insolvency or similar Applicable Law,
or
the filing of any such petition against such Person, that shall not be dismissed
or stayed within 60 days, or, without the consent or acquiescence of such
Person, the entering of an order appointing a trustee, custodian, receiver
or
liquidator of such Person or of all or any substantial part of the property
of
such Person that shall not be dismissed or stayed within 60 days. With respect
to the Members, this definition is intended to supersede the definition of
Bankruptcy and similar events set forth in Sections 18-101(1) and 18-304 of
the LLC Act.
"Board
Observer"
is
defined in Section
6.4(a).
"Board
of Directors"
is
defined in Section
6.4(a)
of the
LLC Agreement.
"Board
Reduction"
means
the removal of one of the two directors appointed by the Majority Class B
Members following a Board Reduction Event (at any time following the Conversion
of the Class A Note) as provided in Section
6.4
of the
LLC Agreement.
A-2
"Board
Reduction Event"
means
the occurrence and continuance of any of the following events and the failure
of
any such event to be cured prior to a Board Reduction:
(i)
the
failure of a Class B Member (including in its capacity as Managing Member)
to:
(1) make a material Capital Contribution when required under the LLC Agreement,
(2) pay any other material amount due from it hereunder or (3) make any material
Distribution required pursuant to Article
V
and, in
each case, such failure shall continue for more than five Business Days after
written notice of such failure from the Class A Noteholder or the Majority
Class
A Members;
(ii)
a
material breach by a Class B Member (including in its capacity as Managing
Member) or any Affiliate thereof of any covenant, obligation or agreement to
be
performed or observed by it under any of the Transaction Documents (other than
as specified in clause (i) of this definition) and such breach remains uncured
for more than 30 days after a Responsible Officer of the Class B Member has
received written notice or has actual knowledge of such breach; provided,
that if
such breach does not, in the reasonable judgment of the Class A Noteholder
or
Majority Class A Members, as the case may be, have a material adverse effect
on
the Company, such 30 day period shall be extended for an additional 60 days
so
long as the Class B Member is diligently working to fully cure such
breach;
(iii)
a
Bankruptcy of a Class B Member or any of its Affiliates that are party to any
Transaction Document;
(iv)
an
"Event of Default" arising other than primarily as a result of circumstances
beyond the Managing Member's reasonable control occurs under the Credit
Agreement; or
(v)
any
representation or warranty made by a Class B Member or any Affiliate thereof
in
a Transaction Document shall prove to have been incorrect in any material
respect when made (or deemed made) and such incorrectness remains uncured for
more than 30 days after a Responsible Officer of the Class B Member has received
written notice or has actual knowledge of such incorrectness; provided,
that if
such incorrectness does not, in the reasonable judgment of the Class A
Noteholder or the Majority Class A Members, as the case may be, have a material
adverse effect on the Company, such 30 day period shall be extended for an
additional 60 days so long as the Class B Member is diligently working to cure
such incorrectness.
"Budget"
means
the budget of the Company approved in accordance with Section
6.9
of the
LLC Agreement.
"Business
Day"
means
any day of the year except Saturday, Sunday and any day on which commercial
banking institutions are authorized or obligated by law, regulation or executive
order to close in New York, New York.
"Business
Entity"
means a
corporation (or, when used as an adjective, corporate), limited liability
company, partnership (whether general or limited), business trust, joint stock
company, unincorporated association, joint venture or other applicable business
entity.
A-3
"Capital
Account"
means,
with respect to any Member, the capital account in the Company maintained for
such Member in accordance with the following provisions:
(i) to
each
Member's Capital Account there shall be credited such Member's Capital
Contributions, such Member's distributive share of Net Income and any items
in
the nature of income or gain allocated to such Member pursuant to Article IV
of the
LLC Agreement (other than Section
4.5),
and
the amount of any Company liabilities of such Member assumed by such Member
or
which are secured by any Company Property Distributed to such
Member;
(ii) to
each
Member's Capital Account there shall be debited: (a) the amount of Cash and
the Gross Asset Value of any Company Property Distributed to such Member
pursuant to any provision of the LLC Agreement; (b) such Member's
distributive share of Net Losses and any items in the nature of expenses or
losses, allocated to such Member pursuant to Article IV
of the
LLC Agreement (other than Section
4.5);
and
(c) the amount of any liabilities of such Member assumed by the Company or
that
are secured by any property contributed by such Member to the Company;
and
(iii) in
the
event all or a portion of an Interest in the Company is Disposed of in
accordance with the terms of the LLC Agreement, the transferee shall succeed
to
the Capital Account of the transferor to the extent of the transferred
Interest.
The
foregoing provisions and the other provisions of this Agreement relating to
the
maintenance of Capital Accounts are intended to comply with Regulations
§ 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.
"Capital
Contributions"
means,
with respect to any Member, the amount of Cash and the initial Gross Asset
Value
of any property (other than Cash) contributed (or deemed to be contributed)
to
the Company by such Member (or its predecessors in interest) with respect to
the
Interest held by such Member.
"Cash"
means
cash, amounts credited to deposit accounts and other immediately available
funds
that are denominated in Dollars.
"Certificate
of Interest"
is
defined in Section 3.1
of the
LLC Agreement.
"Class"
in
relation to an Interest means that such Interest is a Class A Interest or Class
B Interest, as the case may be. An Interest of any Class shall be represented
by
a Unit of such Class.
"Class
A Member"
means
any Person that has been admitted to the Company as a member and that holds
any
Class A Units, in each such Person's capacity as a member of the Company, or
the
collective reference to all such Persons, as the context may require. For the
avoidance of doubt, the Class A Noteholder shall not be a Class A Member except
upon Conversion of the Class A Note, at which time the Class A Noteholder shall
become the Initial Class A Member.
A-4
"Class
A Member Interest"
or
"Class
A Interest"
means
an Interest in the Company designated as a Class A Interest under the LLC
Agreement.
"Class
A Note"
means a
convertible note in the form attached as Exhibit F to the LLC Agreement issued
on the Closing Date by the Company to the Class A Noteholder. On and after
Conversion or repayment in full of the Class A Note in accordance therewith,
the
Class A Note shall be deemed to no longer be outstanding for purposes of this
Agreement.
"Class
A Noteholder"
means
DBAH Capital LLC or its successors and assigns as holder(s) of the Class A
Note,
as the case may be. On and after Conversion or repayment in full of the Class
A
Note in accordance therewith, there shall no longer be a Class A Noteholder
for
purposes of this Agreement.
"Class
B Member"
means
any Person that has been admitted to the Company as a member and that holds
any
Class B Units, in each such Person's capacity as a member of the Company, or
the
collective reference to all such Persons, as the context may
require.
"Class
B Member Interest"
or
"Class
B Interest"
means
an Interest in the Company designated as a Class B Interest under the LLC
Agreement.
"Closing
Date"
means
March 15, 2007.
"Code"
means
the United States Internal Revenue Code of 1986, as amended from time to
time.
"Company"
means
Merit Capital Advance, LLC, the limited liability company formed pursuant to
the
LLC Agreement and the Certificate of Formation.
"Company
Accountants"
means
KPMG or any other replacement independent accounting firm of national reputation
selected by the Managing Member and approved by the Required
Directors.
"Company
Minimum Gain"
has the
same meaning as the term "partnership minimum gain" in Regulations §§
1.704-2(b)(2) and 1.704-2(d).
"Company
Property"
means
all property owned by the Company, including both tangible and intangible
property, which shall include, as the context requires, property of any
Subsidiary.
"Consolidated"
refers,
with respect to any Person, to the consolidation of accounts of such Person
and
its Subsidiaries in accordance with GAAP.
"Contingent
Liabilities"
means,
with respect to any Person, (a) any agreement, undertaking or arrangement by
which such Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person
(the amount of obligation
A-5
under
any
Contingent Liabilities shall be deemed to be the maximum outstanding amount
of
the debt, obligation or other liability guaranteed) and/or (b) liabilities
that
are contingent in nature which would be included as liabilities on the face
of
the balance sheet of such Person in accordance with GAAP.
"Contribution
Value"
means
the Value of a Company asset contributed by a Member to the Company (net of
liabilities secured by such contributed asset that the Company is treated as
assuming or taking subject to).
"Conversion"
means
the conversion of the Class A Note into Class A Units as provided therein,
and
"Converted"
and
"Convertible"
shall
have like meanings.
"Credit
Agreement"
means
the $33,000,000 revolving credit agreement dated as of March 15, 2007 between
the Company, as borrower, and the Lender, as the same may be amended, amended
and restated, waived, supplemented or modified from time to time.
"Credit
Card Processor Services Agreement"
means
an agreement (howsoever titled), in form and substance satisfactory to the
Required Directors, entered into by the Company with a credit card processor
acceptable to the Required Directors, providing, among other things, for the
payment of the Percentage of Future Credit Card Receivables by such processor
to
the Company until the Company has received the Specified Amount (as each such
term is defined in each applicable Merchant Advance Contract).
"Depreciation"
means,
for each Allocation Period, an amount equal to the depreciation, amortization,
or other cost recovery deduction allowable with respect to an asset for such
Allocation Period, except that if the Gross Asset Value of an asset differs
from
its adjusted basis for federal income tax purposes at the beginning of such
Allocation Period, Depreciation shall be an amount which bears the same ratio
to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Allocation Period bears
to such beginning adjusted tax basis; provided,
however,
that if
the adjusted basis for federal income tax purposes of an asset at the beginning
of such Allocation Period is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Tax Matters Member, subject to (following the Conversion of
the
Class A Note) the Majority Class A Members' consent (such consent not to be
unreasonably withheld) in the event that the Managing Member is the Class B
Member.
"Disposition"
means,
with respect to any property, any sale, assignment, gift, exchange, lease,
conversion, transfer, pledge or other disposition or divestiture of such
property, or of any property interest therein, including, without limitation,
any transfer by way of a capital contribution. "Dispose"
and
"Disposed"
shall
have correlative meanings.
"Disqualified
Transfer"
means
any Disposition of a Member Interest (i) to any Person that is not a United
States person within the meaning of Section 7701(a)(30) of the Code,
(ii) to any Person that is a tax-exempt entity within the meaning of
Section 168(h) of the Code, (iii) in any manner that would cause a
termination of the Company under Section 708(b)(1)(B) of the Code, (iv) to
any natural person or (v) to any Person that is not an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
A-6
"Distribution"
means,
as applicable, any distribution or dividend or return of capital or any other
distribution, payment, remittance or delivery of property or Cash in respect
of,
or the redemption, retirement, purchase or other acquisition, directly or
indirectly, of, any Interest now or hereafter outstanding or the setting aside
of any funds for any of the foregoing purposes, including any distribution
under
Sections 5.1,
5.2
or
5.3
or
Article XII
of the
LLC Agreement. "Distribute",
"Distributed"
and
"Distributive"
shall
have correlative meanings.
"Dollars"
and the
sign "$"
each
mean the lawful currency of the United States.
"Fee
Letter"
means
the Fee Letter dated as of the Closing Date between the Company, LEAF Financial
Corporation and DBAH Capital LLC.
"Final
Payment Date"
means
with respect to (i) the liquidation of the Company pursuant to Article XII
of the
LLC Agreement, the date on which all Company Property is distributed pursuant
to
Section 12.2
of the
LLC Agreement and, (ii) a Member's or Members' election to purchase
Interests pursuant to Section 11.1
of the
LLC Agreement, the Purchase Date.
"Financial
Investments"
means:
(a) Cash;
(b) direct
general obligations of, or obligations fully and unconditionally guaranteed
as
to the timely payment of principal and interest by, the United States or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, but excluding any of such securities whose terms
do not provide for payment of a fixed dollar amount upon maturity or call for
redemption;
(c) certificates
of deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
six months from the date of acquisition, and overnight bank deposits and other
short-term deposit instruments, in each case with any domestic commercial bank
having capital and surplus in excess of $500,000,000 and having a rating of
at
least "A2" (or the equivalent thereof) by ▇▇▇▇▇'▇ and at least "A" (or the
equivalent thereof) by S&P;
(d) repurchase
obligations with a term of not more than seven days for underlying securities
of
the types described in clause (b)
or
(c)
above
entered into with any financial institution meeting the qualifications specified
in clause (c)
above;
(e) commercial
paper (having original maturities of not more than 180 days) of any Person
rated
"P-2" (or the equivalent thereof) or better by ▇▇▇▇▇'▇ or "A-2" (or the
equivalent thereof) or better by S&P; and
(f) money
market mutual or similar funds having assets in excess of $100,000,000, at
least
95% of the assets of which are comprised of assets specified in clauses (a)
through
(e)
above.
"Fiscal
Quarter"
means
(i) the period commencing on the Closing Date and ending on March 31, 2007
and (ii) any subsequent three-month period commencing on each of
January 1,
A-7
April 1,
July 1 or October 1 and ending on the next of March 31,
June 30, September 30 and December 31, respectively; provided
that the
last Fiscal Quarter shall end on the first date on which all Company Property
is
distributed pursuant to Section 12.2
of the
LLC Agreement and the Certificate of Formation has been canceled pursuant to
the
LLC Act.
"Fiscal
Year"
means
(i) the period commencing on the Closing Date and ending on September 30,
2007 and (ii) any subsequent period commencing on October 1 and ending
on the earlier to occur of (a) the following September 30, or (b) the
first date on which all Company Property is distributed pursuant to Section 12.2
of the
LLC Agreement and the Certificate of Formation has been canceled pursuant to
the
LLC Act.
"Formation
Date"
is
defined in Section
1.1
of the
LLC Agreement.
"GAAP"
means
United States generally accepted accounting principles as in effect from time
to
time. Any financial statements or other information required by the Transaction
Documents to be prepared in accordance with GAAP shall mean in accordance with
GAAP as consistently applied for the period or periods covered by such financial
statements or other information.
"Governmental
Approval"
means,
with respect to any Person, any consent, license, approval, registration,
permit, sanction or other authorization of any nature which is required to
be
granted by any Governmental Authority under Applicable Law (a) for the
formation of such Person, (b) for the enforceability of any Transaction
Document against such Person and such Person's making of any payments
contemplated thereunder, and (c) for all such other matters as may be
necessary in connection with the performance of such Person's material
obligations under any Transaction Document.
"Governmental
Authority"
means
any federal, national, state, provincial, municipal, local, territorial or
other
governmental department, commission, board, bureau, agency, regulatory
authority, instrumentality or judicial or administrative body, whether domestic
or foreign, having jurisdiction over the matter or matters in
question.
"Gross
Asset Value"
means,
with respect to any asset, the asset's adjusted basis for federal income tax
purposes, except as follows:
(i) the
initial Gross Asset Value of any asset other than a Financial Investment
contributed by a Member to the Company shall be the fair market value of the
asset on the date of contribution and the initial Gross Asset Value of any
Financial Investment shall be equal to its face value, less unamortized discount
and plus unamortized premium, if any;
(ii) the
Gross
Asset Values of all the Company assets shall be adjusted to equal their
respective ▇▇▇▇-to-Market Values as determined by the Managing Member and,
in
the event that the Managing Member is the Class B Member, subject to (following
the Conversion of the Class A Note) the Majority Class A Members' consent (such
consent not to be unreasonably withheld) (a) upon the issuance of any additional
Interest to any person, (b) as specified in Section 12.2
of the
LLC Agreement, (c) upon the liquidation of the Company within the meaning
of Regulation § 1.704-1(b)(2)(ii)(g), and
A-8
(d)
in
connection with the grant of an Interest that is not de minimis as consideration
for the provision of services to or for the benefit of the Company by an
existing Member acting in a member capacity, provided that an adjustment under
clause (a), (b), or (d) of this paragraph shall be made only if the Managing
Member, subject to, in the event that (following the Conversion of the Class
A
Note) the Managing Member is the Class B Member, the Majority Class A Members'
consent (such consent not to be unreasonably withheld), reasonably has
determined that such adjustment is necessary to reflect the relative economic
interests of the Members;
(iii) the
Gross
Asset Value of any Company Property distributed to any Member shall be adjusted
to equal the ▇▇▇▇-to-Market Value of such asset on the date of such
distribution;
(iv) the
Gross
Asset Values of the assets of the Company shall be increased (or decreased)
to
reflect any adjustments to the adjusted basis of such assets pursuant to Code
§ 734(b) or Code § 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant
to
Regulation § 1.704-1(b)(2)(iv)(m) and clause (v)
of the
definition of "Net
Income"
and
"Net
Losses"
or
Section 4.2(e)
of the
LLC Agreement; provided,
however,
that
Gross Asset Values shall not be adjusted pursuant to this clause (iv)
to the
extent that an adjustment pursuant to clause (ii)
is
required in connection with a transaction that would otherwise result in an
adjustment pursuant to this clause (iv);
and
(v) if
the
Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (i), (ii), or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset
for
purposes of computing Net Income and Net Losses.
"Gross
Income"
means
all items of gross income and gain (before reduction for cost of goods sold
or
similar items of cost) that are realized by the Company.
"Indebtedness"
of any
Person means, without duplication:
(a) all
obligations of such person for borrowed money and all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments;
(b) all
obligations, contingent or otherwise, relative to the face amount of all letters
of credit, whether or not drawn, and banker's acceptances issued for the account
of such Person;
(c) all
obligations of such Person as lessee under leases which have been or should
be,
in accordance with GAAP, recorded as capital leases;
(d) all
other
items which, in accordance with GAAP, would be included as liabilities on the
liability side of the balance sheet of such Person as of the date at which
Indebtedness is to be determined other than accounts payable, deferred revenue
and accrued operating expenses incurred in the ordinary course of business
in
each case to the extent not otherwise constituting Indebtedness under the other
terms of this definition;
A-9
(e) net
liabilities of such Person under all Swap Agreements;
(f) whether
or not so included as liabilities in accordance with GAAP, all obligations
of
such Person to pay the deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by a lien on property
owned or being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;
and
(g) all
Contingent Liabilities of such Person in respect of any of the
foregoing.
"Independent
Director"
means a
director that is a natural person and is not and has not been for at least
five
years from the date of his or her or appointment (i) a direct or indirect legal
or beneficial owner of the Company or any Member or any of their respective
Affiliates (other than indirectly as a holder of shares in a publicly traded
mutual fund), (ii) a relative, supplier, employee, officer, director (other
than
as an independent director), manager (other than as an independent manager),
contractor or material creditor of the Company or any Member or any of their
respective Affiliates or (iii) a Person who controls (whether directly,
indirectly or otherwise) any Member or its Affiliates or any creditor, employee,
officer, director, manager or material supplier or contractor of any Member
or
its Affiliates.
"Initial
Class A Member"
means
the Class A Noteholder, following Conversion of the Class A Note into Class
A
Units.
"Initial
Class B Member"
means
LEAF Ventures, LLC.
"Interest"
means
any limited liability company interest in the Company, including any and all
benefits to which the holder of such an interest may be entitled as provided
in
the LLC Agreement, together with all obligations of such Person to comply with
the terms and provisions of the LLC Agreement. The Company has two classes
or
groups of Interests and Members: Class A and Class B (and two corresponding
classes or groups of Units: Class A and Class B). Notwithstanding anything
to
the contrary herein, a Member's Interest shall not exist separate from such
Member's Units, and the Class A Note shall not constitute an
"Interest".
"Investment"
means
any investment in any Person, whether by means of share purchase, capital
contribution, loan, time deposit or otherwise.
"Investment
Interest"
means
an Interest or the Class A Note, as the context shall require.
"Involuntary
Bankruptcy"
is
defined in the definition of "Bankruptcy".
"Irrevocable
Election"
means,
with respect to a Member's or the Class A Noteholder's proposed purchase of
Investment Interests in accordance with Section
11.1,
the
delivery by such Member or the Class A Noteholder, as the case may be, to the
Company of a written notice pursuant to which such Member or the Class A
Noteholder, as the case may be, unconditionally covenants and agrees that such
purchase shall be consummated on or prior to the Purchase Date, and at the
applicable Purchase Price, specified in the relevant Purchase Option
Notice.
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"LEAF"
means
LEAF Financial Corporation, a Delaware corporation.
"LEAF
Services Agreement"
means
the services agreement dated as of March 15, 2007 between the Company, LEAF
Ventures, LLC and LEAF, substantially in the form of Exhibit B to the LLC
Agreement.
"LEAF
Warehousing Facility"
means
the Credit Agreement dated July 31, 2006 by and among LEAF and LEAF Funding,
Inc., as Borrowers, the financial institutions party thereto, as Lenders, and
National City Bank, as Agent.
"Lender"
is
defined in the Credit Agreement.
"Lien"
means
any mortgage, pledge, hypothecation, assignment for security, encumbrance,
lien
(statutory or other), security interest or other security device or arrangement
of any kind or nature whatsoever (including any conditional sale or other title
retention agreement and any lease having substantially the same effect as any
of
the foregoing).
"Liquidating
Events"
is
defined in Section 12.1
of the
LLC Agreement.
"Liquidation
Notice"
is
defined in Section 12.10
of the
LLC Agreement.
"Liquidator"
is
defined in Section 12.8
of the
LLC Agreement.
"LLC
Act"
means
the Delaware Limited Liability Company Act, as set forth in Del. Code ▇▇▇.
Tit.
6, §§ 18-101, et seq.
and any
successor statute, as the same may be amended from time to time.
"LLC
Agreement"
means
the Limited Liability Company Agreement of Merit Capital Advance, LLC, dated
as
of March 15, 2007, and includes this Annex A
and all
other annexes and schedules attached thereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"Majority
Class A Members"
means
the Class A Member or Class A Members holding more than 50% of all outstanding
Class A Units; provided
that any
Class A Member that is an Affiliate of the Class B Member shall be disregarded
for purposes of the foregoing calculation (unless the Class B Member and its
Affiliates own all of the Class A Member Interests).
"Majority
Class B Members"
means
the Class B Member or Class B Members holding more than 50% of all outstanding
Class B Units; provided
that any
Class B Member that is an Affiliate of the Class A Member shall be disregarded
for purposes of the foregoing calculation (unless the Class B Member and its
Affiliates own all of the Class A Member Interests).
"Managing
Member"
means
initially the Class B Member of the Company and any replacement Member
appointed in accordance with the terms of the LLC Agreement, in such Person's
capacity as managing member of the Company.
"▇▇▇▇-to-Market
Balance Sheet"
is
defined in Section 8.2(d)
of the
LLC Agreement.
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"▇▇▇▇-to-Market
Measurement Date"
means
(a) with respect to the retirement of any Interest in the Company or the
issuance of any additional Interests in the Company to any Person (except for
any permitted transferees in accordance with Sections 10.1(a)
or
(b)
of the
LLC Agreement), the last day of the Fiscal Quarter preceding the Fiscal Quarter
during which the retirement or issuance, as the case may be, occurs;
(b) with respect to the liquidation of the Company pursuant to Section 12.2
of the
LLC Agreement, the last day of the Fiscal Quarter immediately preceding the
Fiscal Quarter during which the earlier of (i) the Liquidating Event giving
rise to such liquidation occurred or (ii) if applicable, the Board
Reduction Event giving rise to such Liquidating Event occurred; or (c) with
respect to the exercise of the Purchase Option, the last day of the Fiscal
Quarter immediately preceding the Fiscal Quarter during which the earlier of
(i) the date on which the Purchase Option Notice was delivered or
(ii) if the Purchase Option Notice was delivered after a Board Reduction
Event, the Board Reduction Event occurred.
"▇▇▇▇-to-Market
Value"
means
(a) prior to a ▇▇▇▇-to-Market Measurement Date, the sum of the initial
Gross Asset Values of the assets held by the Company, and (b) on or after a
▇▇▇▇-to-Market Measurement Date, the sum of the ▇▇▇▇-to-Market Values of each
asset owned by the Company net of all applicable liabilities not taken into
account in the calculation of Asset Values.
"Member
Nonrecourse Debt"
has the
same meaning as the term "partner nonrecourse debt" in Regulations
§ 1.704-2(b)(4).
"Member
Nonrecourse Debt Minimum Gain"
means
an amount, with respect to each Member Nonrecourse Debt equal to Company Minimum
Gain that would result if such Member Nonrecourse Debt were treated as a
nonrecourse liability with the meaning of Regulation § 1.704-2(b)(3),
determined in accordance with Regulation § 1.704-2(i)(3).
"Members"
means
each Class A Member and each Class B Member, collectively.
"Member"
means
any one of the Members.
"Merchant
Advance Contract"
means a
contract substantially in the form of Exhibit D to the LLC
Agreement.
"Moody's"
means
▇▇▇▇▇'▇ Investors Service, Inc. or any successor by merger, consolidation or
otherwise to its business.
"Net
Income"
and
"Net
Losses"
means,
for each Allocation Period, an amount equal to the Company's taxable income
or
loss for such Allocation Period, determined in accordance with Code
§ 703(a) (for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code § 703(a)(1) shall be
included in taxable income or loss), with the following
adjustments:
(i) any
income of the Company that is exempt from federal income tax and not otherwise
taken into account in computing Net Income or Net Losses pursuant to this
definition of "Net
Income"
and
"Net
Losses"
shall
be added to such taxable income or loss;
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(ii) any
expenditures of the Company described in Code § 705(a)(2)(B) or treated as
Code § 705(a)(2)(B) expenditures pursuant to Regulation
§ 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Net Income or Net Losses pursuant to this definition of "Net
Income"
and
"Net
Losses"
shall
be subtracted from such taxable income or loss;
(iii) in
the
event the Gross Asset Value of any asset of the Company is adjusted pursuant
to
clause (ii)
or
(iii)
of the
definition of Gross Asset Value, the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes
of
computing Net Income or Net Losses;
(iv) gain
or
loss resulting from any disposition of Company Property with respect to which
gain or loss is recognized for federal income tax purposes shall be computed
by
reference to the Gross Asset Value of Company Property disposed of,
notwithstanding that the adjusted tax basis of such Company Property differs
from its Gross Asset Value;
(v)
in lieu
of depreciation, amortization and other cost recovery deductions taken into
account in computing Net Income and Net Losses, there shall be taken into
account Depreciation for such Allocation Period, computed in accordance with
the
definition of Depreciation; and
(vi) any
items
that are allocated pursuant to Section 4.2
or
4.3
of the
LLC Agreement shall not be taken into account in computing Net Income or Net
Losses.
The
amounts of the items of income, gain, loss or deduction of the Company available
to be allocated pursuant to Sections 4.2
and
4.3
of the
LLC Agreement shall be determined by applying rules analogous to those set
forth
in clauses (i)
through
(v)
above.
"Net
Income Tax Distribution Amount"
means,
for any Allocation Period, the product of (i) the Applicable Rate and (ii)
a
Member's allocable share of Net Income for such Allocation Period.
"Nonrecourse
Deductions"
has the
meaning set forth in Regulations §§ 1.704-2(b)(1) and
1.704-2(c).
"Nonrecourse
Liability"
has the
meaning set forth in Regulations § 1.704-2(b)(3).
"Obligation"
means,
with respect to any Person, any obligation of such Person of any kind,
including, without limitation, any liability of such Person on any claim,
whether or not the right of any creditor to payment in respect of such claim
is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether or
not
such claim is discharged, stayed or otherwise affected by any
proceeding.
"Participation
Agreement"
means a
Participation Agreement substantially in the form of Exhibit E to the LLC
Agreement entered into on the date hereof between the Lender and the Initial
Class B Member, pursuant to which the Initial Class B Member shall have agreed
to
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purchase
from the Lender certain participations in Advances made to the Company from
time
to time by the Lender under the Credit Agreement.
"Percentage
Interest"
with
respect to each Member, means a fraction, expressed as a percentage, the
numerator of which is the number of Units held by such Member, and the
denominator of which is the aggregate number of Units held by all Members (and
"Percentage
Interest"
with
respect to each Member's Interest or Units of a particular Class shall have
a
correlative meaning).
"Permitted
Assets"
means
(a) in
relation to the Company: (i) Financial Investments; (ii) Merchant Advance
Contracts, including future receivables thereunder; (iii) intellectual property
rights; (iv) furniture, fixtures and equipment; (v) equity interests in
Subsidiaries and other Persons (to the extent permitted in the LLC Agreement);
and (vi) other assets approved in writing by the Required Directors;
and
(b) in
relation to the Servicer Subsidiary: (i) furniture, fixtures and equipment;
and
(ii) other assets approved in writing by the Required Directors.
"Permitted
Reorganization"
has the
meaning set forth in Section
3.6.
"Person"
means
any individual, trust, estate, association, Business Entity or other entity,
or
a government or any political subdivision or agency thereof.
"Presumed
Tax Liability"
means,
with respect to each Member for any Fiscal Year, an amount equal to the product
of (a) the amount of taxable income allocated by the Company to such Member
for
such Fiscal Year (taking any carryforwards of net operating losses and capital
losses not previously taken into account, computed as if each Member's sole
income in all Fiscal Years was income allocated to such Member by the Company)
and (b) the Presumed Tax Rate.
"Presumed
Tax Rate"
for any
Fiscal Year means the higher of the highest effective combined Federal, state
and local income tax rate applicable during such Fiscal Year to a corporation
or
a natural person doing business solely in or residing in, New York City, New
York, taxable at the highest marginal Federal income tax rate and the highest
marginal New York State and New York City income tax rates (after giving effect
to the Federal income tax deduction for such state and local income taxes,
the
state tax deduction for local income taxes, taking into account the effects
of
Code Sections 67 and 68 and the character of any income or gain, e.g. as
long-term capital gains).
"Purchase
Date"
is
defined in Section 11.1(b)(ii)
of the
LLC Agreement.
"Purchase
Option"
is
defined in Section 11.1(a)
of the
LLC Agreement.
"Purchase
Option Notice"
is
defined in Section 11.1(a)
of the
LLC Agreement.
"Purchase Price"
is
defined in Section 11.1(b)(iii)
of the
LLC Agreement.
A-14
"Regulations"
means
regulations promulgated under the Code (including temporary regulations), as
such regulations are amended, modified or supplemented from time to
time.
"Regulatory
Allocations"
is
defined in Section
4.3
of the
LLC Agreement.
"Relevant
Member"
means
(a) in the case of Section
11.1(a)(i)
of the
LLC Agreement, any Member other than the Member which shall have breached the
relevant term of this LLC Agreement, (b) in the case of Section
11.1(a)(ii)
of the
LLC Agreement, any Member represented by director(s) entitled to vote on the
relevant matter, (c) in the case of Section
11.1(a)(iii)
of the
LLC Agreement, any Member or the Class A Noteholder, as the case may be (an
"Investor")
which
is subject to such illegality or material increase in costs, (d) in the case
of
Section
11.1(a)(iv)
of the
LLC Agreement, any Investor other than the Investor which is the subject of
such
Bankruptcy, (e) in the case of Section
11.1(a)(v)
of the
LLC Agreement, (i) in the event the LEAF Services Agreement shall have been
terminated as a result of the occurrence of a Bankruptcy Event (as defined
therein) with respect to any Party (as so defined) pursuant to Section 2.2(a)
thereof, the Class A Noteholder or any Class A Member, (ii) in the event the
LEAF Services Agreement shall have been terminated at the election of the
Company pursuant to Section 2.2(b)(ii) thereof, any Investor, (iii) in the
event
the LEAF Services Agreement shall have been terminated at the election of the
Servicer (as defined therein) or LEAF, in either case, pursuant to Section
2.2(b)(ii) thereof, the Class A Noteholder or any Class A Member, (iv) in the
event the LEAF Services Agreement shall have been terminated for Cause (as
defined therein) pursuant to Section 2.2(b)(iii) thereof, the Class A Noteholder
or any Class A Member, (f) in the case of Section
11.1(a)(vi)
of the
LLC Agreement, any Class B Member, (g) in the case of Section
11.1(a)(vii)
of the
LLC Agreement, the Class A Noteholder or any Class A Member, (h) in the case
of
Section
11.1(a)(viii)
of the
LLC Agreement, any Investor, (i) in the case of Section
11.1(a)(ix)
of the
LLC Agreement, any Investor and (j) in the case of Section
11.1(a)(x)
of the
LLC Agreement, any Class B Member.
"Relevant
Provision"
means,
in relation to a Merchant Advance Contract, the following provisions (with
terms
not otherwise defined having the respective meanings set forth therein): (a)
provisions specifying that the transactions contemplated in the Merchant Advance
Contract constitute a purchase and sale of Future Credit Card Receivables,
rather than a loan, (b) provisions relating to governing law, (c) the covenants
of the counterparty to such Contract (the "Counterparty")
set
forth on the face page thereof under the heading "Certain Covenants", (d) the
Owners' guarantee of the obligations of the Counterparty, (e) the Counterparty's
acknowledgement that it shall have no right to repurchase Future Credit Card
Receivables and (f) the Company's obligation, in the event the transactions
contemplated in such Contract are held to be a loan rather than a purchase,
to
repay to the Counterparty the excess of amounts received by the Company over
any
applicable usurious rate of interest.
"Required
Directors"
means
(i) prior to a Board Reduction, all directors of the Company and (ii) on and
after a Board Reduction (at any time following the Conversion of the Class
A
Note), a majority of the Board of Directors, in any such case, excluding the
Independent Director, except with respect to Section
6.4(e)(xviii).
"Responsible
Officer"
means,
(i) with respect to the Class B Member, any senior officer of the Class B
Member and (ii) with respect to the Company, the Managing
Member.
A-15
"S&P"
means
Standard & Poor's Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies,
Inc., or any successor by merger, consolidation or otherwise to its
business.
"SEC"
means
the Securities and Exchange Commission.
"Securities
Act"
means
the Securities Act of 1933 or any successor law, and regulations and rules
issued pursuant to the Securities Act or any successor law.
"Security
Agreement"
is
defined in the Credit Agreement.
"Servicer
Subsidiary"
means
the Servicer under (and as defined in) the LEAF Services Agreement, if acquired
by the Company in accordance with Section 2.4 of such Agreement.
"Subsidiary"
means,
as to any Person, any corporation, partnership, joint venture, limited liability
company, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to elect
a
majority of the board of directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency),
(b) the right or power to direct, in the case of any entity of which such
Person or any of its Subsidiaries is a general partner, or both the beneficial
ownership of and the right or power to direct, in any other case, such limited
liability company, partnership or joint venture, or (c) the beneficial
interest in such trust or estate, is at the time directly or indirectly owned
or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries; provided,
however,
that no
such corporation, partnership, joint venture or other entity shall constitute
a
Subsidiary of any other Person unless such entity would appear as a consolidated
Subsidiary of such Person on a Consolidated balance sheet of such Person
prepared in accordance with GAAP. Unless the context otherwise clearly requires,
any reference to a "Subsidiary" is a reference to a Subsidiary of the
Company.
"Successor
Corporation"
means
the corporation resulting from the Permitted Reorganization of the
Company.
"Swap
Agreement"
means
any swap, forward, future or derivative transaction or option or similar
agreement involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial
or
pricing indices or measures of economic, financial or pricing risk or value
or
any similar transaction or any combination of these transactions; provided
that no
phantom stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants
of
the Company shall be a Swap Agreement.
"Tax"
or
"Taxes"
means
any and all taxes (including net income, gross income, franchise, value added,
ad valorem, gross receipts, leasing, excise, fuel, excess profits, sales, use,
property (personal or real, tangible or intangible) and stamp taxes), levies,
imposts, duties, charges, assessments, or withholdings of any nature whatsoever,
general or special, ordinary or extraordinary, now existing or hereafter created
or adopted, together with any and all interest, penalties, fines, additions
to
tax and interest thereon; provided,
that
the terms "Tax" and "Taxes" shall not include any governmental charge for which
a direct product or service is received.
A-16
"Tax
Distribution"
has the
meaning set forth in Section
5.2.
"Tax
Matters Member"
is
defined in Section 8.3(a)
of the
LLC Agreement.
"Transaction
Documents"
means
the LLC Agreement, the Class A Note, the Credit Agreement, the Security
Agreement, each Account Control Agreement referred to in the Credit Agreement,
the Fee Letter, each Merchant Advance Contract, each Credit Card Processor
Services Agreement, the LEAF Services Agreement and any certificates and other
documents and instruments related thereto.
"Triggering
Event"
is
defined in Section
11.1(a)
of the
LLC Agreement.
"Underwriting
Manual"
means
the Underwriting Manual attached as Exhibit G to the LLC Agreement, as such
Underwriting Manual may be modified from time to time by written agreement
of
the Class A Noteholder or the Majority Class A Members, as the case may be,
and
the Majority Class B Members.
"United
States"
or
"U.S."
means
the United States of America and the territories, possessions and territorial
waters of the United States of America.
"Units"
means
the Units representing Interests in the Company.
"Unitholders
Agreement"
means
the Unitholders Agreement, dated as of the date hereof, by and among the Company
and the Members, as amended, modified or supplemented from time to
time.
"Value"
of the
assets of the Company as of any date, means the fair market value of such assets
as of such date, as determined by the Required Directors in good faith. Any
determination of the Value or of the fair market value of an asset of the
Company made in good faith by the Required Directors shall be binding on the
Members for all purposes of this Agreement.
"Voluntary
Bankruptcy"
is
defined in the definition of "Bankruptcy".
SECTION
1.02 Rules of Construction.
This
Annex A
and,
except as otherwise expressly provided in any Transaction Document with respect
to specific rules of construction for such Transaction Document, all Transaction
Documents and all appendices, schedules and exhibits to the Transaction
Documents shall be governed by, and construed in accordance with, the following
rules of construction:
(a) Computation
of Time Periods.
In the
computation of periods of time from a specified date to a later specified date,
the word or phrase "from"
and
"commencing
on"
mean
"from and including" and the words or phrase "to"
and
"until"
and
"ending
on"
mean
"to but excluding".
(b) Accounting
Terms.
All
accounting terms shall be construed in accordance with GAAP applied
consistently, except with respect to Capital Accounts and items
A-17
entering
into the computation of Capital Accounts, and except to the extent otherwise
specified in the provisions of Section 1.01
or
1.02
hereof.
(c) No
Presumption Against Any Party.
Neither
any Transaction Document nor any uncertainty or ambiguity therein shall be
construed against any particular party, whether under any rule of construction
or otherwise. On the contrary, each Transaction Document has been reviewed
by
each of the parties thereto and their respective counsel and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties
thereto.
(d) Use
of
Certain Terms.
Unless
the context of any Transaction Document requires otherwise, the plural includes
the singular, the singular includes the plural, and "including"
has the
inclusive meaning of "including without limitation." The words "hereof,"
"herein,"
"hereby,"
"hereunder,"
and
other similar terms of any Transaction Document refer to such Transaction
Document (including this Annex A
to the
extent incorporated or referred to therein (whether or not actually attached
thereto) and all other annexes, schedules and exhibits attached thereto) as
a
whole and not exclusively to any particular provision of such Transaction
Document. All pronouns and any variations thereof shall be deemed to refer
to
the masculine, feminine, or neuter, singular or plural, as the identity of
the
Person or Persons may require.
(e) Headings
and References.
Article, Section and other headings are for reference only, and are not intended
to describe, interpret, define or limit the scope, extent or intent of any
Transaction Document or any provision thereof. References in any Transaction
Document to Articles, Sections, Annexes, Schedules and Exhibits refer to
Articles, Sections, Annexes, Schedules, and Exhibits of or to such Transaction
Document, and references in Sections of such Transaction Document to any clause
refer to such clause of such Section. Whether or not specified in any
Transaction Document or in this Annex A,
references in such Transaction Document or in this Annex A
to such
Transaction Document, any other Transaction Document or any other agreement
include, unless otherwise provided in such Transaction Document or in this
Annex A,
this
Annex A,
such
Transaction Document, the other Transaction Documents and such other agreements,
as the case may be, as the same may be amended, restated, supplemented or
otherwise modified from time to time pursuant to the provisions thereof and
of
any other Transaction Documents applicable thereto. Whether or not specified
in
any Transaction Document or in this Annex A,
a
reference to any Applicable Law or law (as the case may be) as at any time
shall
mean that Applicable Law or law (as the case may be) as it may have been
amended, restated, supplemented or otherwise modified from time to time, and
any
successor Applicable Law or law (as the case may be). A reference to a Person
includes the successors and assigns of such Person, but such reference shall
not
increase, decrease or otherwise modify in any way the provisions in this
Annex A
or any
Transaction Document governing the assignment of rights and obligations under,
or the binding effect, of any provision of this Annex A
or any
Transaction Document.
A-18
Exhibit
A
FORM
OF
MEMBERSHIP INTEREST
|
NUMBER
[__]
|
ORGANIZED
UNDER THE LAWS
OF
THE
STATE OF DELAWARE
|
CLASS
[__]
|
|
|
MERIT
CAPITAL ADVANCE, LLC
|
|||
This
Certifies that [_____________] is
the owner of ___ Class [A/B] limited liability company interest units of Merit
Capital Advance, LLC, a Delaware limited liability company (the "Company"),
with
such rights and privileges as are set forth in the Limited Liability Company
Agreement of the Company dated as of March
15,
2007, as amended from time to time (the "LLC Agreement").
THE
LIMITED LIABILITY COMPANY INTEREST UNIT REPRESENTED BY THIS CERTIFICATE (THE
"MEMBERSHIP INTEREST") HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933,
AS AMENDED (THE "SECURITIES ACT"), THE SECURITIES LAWS OF ANY STATE (THE "STATE
ACTS") OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND IS BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH LAWS. THE MEMBERSHIP INTEREST HAS NOT BEEN APPROVED
OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, BY ANY STATE SECURITIES
COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION.
ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NEITHER
THE MEMBERSHIP INTEREST NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) TO THE EXTENT
PERMITTED UNDER THE LLC AGREEMENT OR THE UNITHOLDERS AGREEMENT REFERRED TO
THEREIN, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER
THE
SECURITIES ACT OR FOR WHICH
SUCH
REGISTRATION IS OTHERWISE NOT REQUIRED AND (C) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A TRANSACTION
WHICH
IS EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS OR FOR WHICH SUCH REGISTRATION
OTHERWISE IS NOT REQUIRED.
THE
MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TRANSFER
RESTRICTIONS CONTAINED IN THE LLC AGREEMENT AND THE UNITHOLDERS AGREEMENT
REFERRED TO THEREIN. A COPY OF THE LLC AGREEMENT AND UNITHOLDERS AGREEMENT
WILL
BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST WITHOUT
CHARGE.
THERE
IS
NO PUBLIC MARKET FOR THE MEMBERSHIP INTEREST AND NONE IS EXPECTED TO DEVELOP.
THEREFORE, RECIPIENTS OF THIS MEMBERSHIP INTEREST OR ANY OTHER LIMITED
LIABILITY COMPANY
INTEREST
WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
THE
MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE CONSTITUTES "SECURITIES"
GOVERNED BY ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION.
In
Witness Whereof, the
said Company has caused this Certificate to be signed by its Managing Member
this_________ day of _________, 20__.
MERIT
CAPITAL ADVANCE,
LLC
By:
[__________],
as
Managing Member
By:_____________________________,
Name:________________________
Title:
_________________________
Exhibit
B
Form
of
LEAF Services Agreement
Exhibit
C
Form
of
Member Interest Transfer
This
MEMBERSHIP INTEREST ASSIGNMENT AGREEMENT
(this
"Agreement")
is
made and entered into as of ___________, 20__, by and among [________], a Class
[A/B] Member and a [__________] ("Assignor")
and
[designated assignee], a [___________] ("Assignee").
W I T N E S S E T H :
WHEREAS,
Assignor is the owner of [ ] Class [A/B] Units representing Class [A/B] Member
Interests (the "Assignor
Class [A/B] Member Interest")
in
Merit
Capital Advance, LLC, a Delaware limited liability company (the "Company");
WHEREAS,
pursuant to Section 11.1 of the Limited Liability Company Agreement of the
Company, dated as of March 15,
2007
(the "LLC
Agreement";
terms
used in this Agreement but not defined herein shall have the meanings given
to
such terms in the LLC Agreement), the Assignee has the right, following the
occurrence of any Triggering Event and subject to certain other conditions
set
forth in Section 11.1 of the LLC Agreement, to elect to purchase the Assignor
Class [A/B] Member Interest;
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements set forth herein, and
for
the good and valuable consideration specified in the LLC Agreement, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree
as
follows:
1. Assignment
and Delegation.
Assignor does hereby irrevocably from and after the Effective Time (as defined
below) (a) sell, transfer, assign and deliver to Assignee all of Assignor's
right, title and interest in and to the Assignor Class [A/B] Member Interests
(Assignor's assigned interest, an "Assigned
Interest")
and
(b) transfer, delegate and deliver to Assignee all of Assignor's obligations
and
liabilities in respect of the Assignor Class [A/B] Member Interests (Assignor's
delegated obligations, the "Delegated
Obligations").
THE
ASSIGNED INTEREST IS SOLD AND TRANSFERRED IN "AS IS, WHERE IS" CONDITION AT
THE
EFFECTIVE TIME AND ASSIGNOR MAKES NO WARRANTIES, GUARANTEES, OR REPRESENTATIONS
OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE. Nothing in
the
foregoing is intended to limit or otherwise affect in any manner Assignor's
representations and warranties set forth in Section 5 of this
Agreement.
Notwithstanding
the foregoing, Assignor shall retain any and all rights of Assignor in and
to
each and every indemnity or other similar payment under the LLC Agreement,
in
each case, with respect to claims arising, or events, acts or omissions
occurring, or circumstances existing, prior to the Effective
Time.
2. Acceptance
and Assumption.
Assignee hereby from and after the Effective Time (i) accepts the assignment
of
Assignor's Assigned Interest and (ii) assumes Assignor's respective Delegated
Obligations.
3. Effectiveness.
This
Agreement shall be effective upon the execution and delivery hereof and the
payment of the purchase price payable to Assignor pursuant to Section 11.1
of
the LLC Agreement (the "Effective
Time").
4. Release.
As of
the Effective Time, Assignee,
on its own behalf and on behalf of its members, affiliates, subsidiaries,
managers, officers and external advisers (collectively, the "Releasing
Parties")
grants
to Assignor and its equity holders, affiliates, subsidiaries, managers, officers
and external advisers (collectively, the "Released
Parties")
a
release as broad as permitted by law with respect to any liability, claim,
or
contingency or any other responsibility that may arise in relation with or
derived from the operations of the Company carried out on or after the date
hereof; provided,
that
the foregoing release shall not operate to release obligations of any Released
Parties under this Agreement. Subject to the foregoing, each Releasing Party
waives any right, action or claim of any kind against any Released Parties
in
relation with or derived from the operations of the Company carried out on
or
after the date hereof.
5. Representations
of Assignor.
Assignor hereby represents and warrants to Assignee that, as of the date
hereof:
|
(a)
|
Assignor
is the owner of its Assigned Interest; and
|
|
(b)
|
Assignor
has not previously encumbered, sold or assigned the Assigned Interest
(except with respect to encumbrances and other transfer restrictions
imposed by the LLC Agreement, the Unitholders Agreement and/or applicable
laws (including, without limitation, applicable securities
laws)).
|
6. Representations
of Assignee.
By
executing this Agreement, the Assignee hereby makes to the Company and each
other Member, as of the date hereof, each of the Assignee's representations
and
warranties as a Member in Section 3.5 of the LLC Agreement.
7. Further
Assurance.
Each of
the parties to this Agreement agrees that at any time and from time to time,
it
shall promptly and duly execute and deliver any and all such further instruments
and documents and take such further action as may reasonably be necessary in
order to give full effect to this Agreement and of the rights and powers herein
granted. Without limitation, upon execution and delivery of this Agreement,
the
Assignee shall execute and deliver to the Company and each other Member a
counterpart to the Unitholders Agreement.
8. Amendment.
This
Agreement may be changed, modified or terminated only by an instrument in
writing signed by each of the parties hereto.
9. Governing
Law.
This
Agreement shall be governed by and construed under the law of the State of
Delaware, without regard to the conflict of law principles thereof.
10. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
11. Entire
Agreement.
This
Agreement constitutes the sole understanding of the parties with respect to
the
subject matter hereto.
[Signature
pages following.]
NY3:#7400967v15
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date indicated above.
ASSIGNOR:
[ASSIGNING
MEMBER]
By:_________________________________
Name:
Title:
ASSIGNEE:
[NAME
OF
ASSIGNEE]
By:_________________________________
Name:
Title:
By
its
execution of this Agreement, Merit Capital Advance, LLC hereby acknowledges
that
the Assignor shall be released from all of its obligations under the LLC
Agreement accruing from and after the Effective Time
MERIT
CAPITAL ADVANCE, LLC
By:
[__________],
as
Managing Member
By:_________________________________
Name:
Title:
Exhibit
D
Form
of
Merchant Advance Contract
Exhibit
E
Form
of
Participation Agreement
Exhibit
F
Form
of
Class A Note
Exhibit
G
Underwriting
Manual