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EXHIBIT 10.25
MEMBERS AGREEMENT
FOR
INCON PROCESSING, L.L.C.
BETWEEN
AC HUMKO CORP.
AND
INCON TECHNOLOGIES, INC.
JUNE 25, 1999
The notation [*] herein indicates information omitted pursuant to a
request for confidential treatment filed with the Commission. The confidential
information has been filed separately with the Commission.
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TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINED TERMS.......................................................................................1
1.1 Defined Terms..............................................................................1
1.2 Terminology................................................................................7
ARTICLE II
ORGANIZATION........................................................................................7
2.1 Formation..................................................................................7
2.2 Name.......................................................................................7
2.3 Registered Office; Registered Agent; Offices...............................................7
2.4 Purposes...................................................................................7
2.5 Foreign Qualification......................................................................7
2.6 Term.......................................................................................8
2.7 No State-Law Partnership...................................................................8
ARTICLE III
MEMBERS AND MEMBERSHIP..............................................................................8
3.1 Members; Membership Interests..............................................................8
3.2 Encumbrances of Membership Interests.......................................................8
3.3 Admission of New Members...................................................................8
3.4 Information................................................................................9
3.5 Liability to Third Parties.................................................................9
3.6 Expulsion..................................................................................9
3.7 Resignation................................................................................9
ARTICLE IV
CAPITAL AND OTHER CONTRIBUTIONS.....................................................................10
4.1 Initial Contributions......................................................................10
4.2 Subsequent Capital Contributions...........................................................11
4.3 Failure to Contribute......................................................................11
4.4 Security Agreement.........................................................................12
4.5 Special Cash Calls.........................................................................13
4.6 Return of Contributions....................................................................15
4.7 Special Humko Provisions...................................................................15
ARTICLE V
MANAGEMENT OF THE COMPANY...........................................................................16
5.1 Management by Members......................................................................16
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5.2 Management Committee.......................................................................16
5.3 CEO, COO, CFO and CTO......................................................................21
5.4 Conflicts of Interest......................................................................23
5.5 Indemnification for Breach of Agreement....................................................23
ARTICLE VI
ALLOCATIONS; DISTRIBUTIONS..........................................................................24
6.1 Allocations................................................................................24
6.2 Distributions..............................................................................24
6.3 Liquidating Distributions..................................................................25
ARTICLE VII
FINANCIAL MATTERS...................................................................................25
7.1 Maintenance of Books and Records...........................................................25
7.2 Fiscal Year; Reports.......................................................................25
7.3 Bank Accounts and Investments..............................................................26
7.4 Loans by Members to the Company............................................................27
7.5 Insurance..................................................................................27
7.6 Tax Returns................................................................................27
7.7 Tax Elections..............................................................................27
ARTICLE VIII
PLANNING AND BUDGETS................................................................................28
8.1 Annual Business Plan.......................................................................28
8.2 Annual Budgets.............................................................................28
8.3 Completion Date; Failure to Agree..........................................................29
8.4 Proposals for Nonbudgeted Capital Expenditures.............................................29
8.5 Initial Business Plan, Operating Budget and Capital Expenditure Budget.....................29
ARTICLE IX
AGREEMENTS REGARDING CERTAIN OPERATIONS.............................................................29
9.1 Utilization of Production Capacity.........................................................29
9.2 Restrictions Relating to Certain Products and Materials....................................30
ARTICLE X
LIABILITIES AND INDEMNIFICATION.....................................................................30
10.1 Indemnity of Members by the Company........................................................30
10.2 Claims by InCon's Employees................................................................31
10.3 General Indemnity Provisions-Humko.........................................................31
10.4 General Indemnity Provisions-InCon.........................................................31
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ARTICLE XI
DISPOSITIONS OF MEMBERSHIP INTERESTS................................................................32
11.1 Dispositions of Membership Interests.......................................................32
11.2 Change of Control of InCon.................................................................32
11.3 Preferential Right on Sales................................................................32
11.4 Buy-Sell Option............................................................................33
ARTICLE XII
DISSOLUTION OF THE COMPANY..........................................................................33
12.1 Dissolution................................................................................33
12.2 Deficit Capital Accounts...................................................................34
12.3 Winding-Up.................................................................................34
12.4 Effect of Dissolution on the Transition Services Agreement.................................35
12.5 Bankruptcy Remedies........................................................................35
12.6 No Consequential Damages...................................................................35
ARTICLE XIII
DEADLOCK RESOLUTION PROCEDURES......................................................................35
13.1 Notice of Deadlock Issue...................................................................35
13.2 Special Meeting of Members.................................................................35
13.3 Post-Meeting Time Period to Resolve Deadlock Issue.........................................35
13.4 Declaration of Deadlock Event..............................................................35
13.5 Failure to Declare Deadlock Event..........................................................36
13.6 Post-Declaration Time Period to Resolve Deadlock Event.....................................36
13.7 Election to Dissolve Company...............................................................36
13.8 Buy-Sell Option............................................................................36
ARTICLE XIV
BUY-SELL OPTION.....................................................................................36
14.1 Buy-Sell Notice............................................................................36
14.2 Actions by Receiving Member................................................................36
14.3 Closing....................................................................................37
14.4 Failure to Close...........................................................................37
ARTICLE XV
GENERAL PROVISIONS..................................................................................37
15.1 Notices....................................................................................37
15.2 Entire Agreement; Supersedure; Amendment; Written Consents and Agreements..................39
15.3 Effect of Waiver or Consent................................................................39
15.4 Amendments of Certificate and Regulations..................................................39
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15.5 Binding Effect.............................................................................39
15.6 Governing Law..............................................................................39
15.7 Severability...............................................................................39
15.8 Further Assurances.........................................................................39
15.9 Press Releases.............................................................................40
15.10 Trademarks.................................................................................40
15.11 Conflicts Between this Agreement and a Related Agreement...................................40
15.12 Counterparts...............................................................................40
EXHIBITS
Exhibit 2.1 -- Certificate of Formation
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MEMBERS AGREEMENT
This MEMBERS AGREEMENT (this "Agreement") is entered into as of June
25, 1999, by and between AC HUMKO CORP., a Delaware corporation ("Humko"),
having offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
and INCON TECHNOLOGIES, INC., a Delaware corporation ("InCon"), having offices
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, InCon and Humko (sometimes referred to herein as the
"Members") are the members of a newly-formed limited liability company named
INCON PROCESSING L.L.C. (the "Company"); and
WHEREAS, the Company will engage in toll processing of various
products, the sale of certain services in connection with the design,
engineering and/or construction of molecular separation (including molecular
distillation, dry fractionation, chromatographic separation and membrane
filtration) facilities and various activities related thereto, including
research and development, technical support and marketing and the operation of
certain facilities involving molecular separation procedures and other processes
and procedures currently engaged in by InCon, all as more fully described as the
"Scope of Business" defined in Article I; and
WHEREAS, Humko, InCon, Bionutrics, Inc., Nutrition Technology
Corporation, and InCon International, Inc. have entered into that certain Master
Formation Agreement dated of even date herewith (the "Master Formation
Agreement"), and this Agreement is being executed pursuant to the terms and
provisions of the Master Formation Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants hereinafter set forth, Humko and InCon hereby agree as
follows:
ARTICLE I
DEFINED TERMS
1.1 Defined Terms. For purposes of this Agreement, the following
capitalized terms shall have the meanings ascribed thereto in this Section 1.1.
"Act" has the meaning set forth in Section 2.1.
"Affiliate(s)" means an entity controlling, controlled by or under
common control with another entity, with majority ownership being deemed
necessary for control.
"Agreed Interest Rate" means the prime rate of interest established
from time to time by Citibank, N.A. or its successor.
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"Agreement" means this Members Agreement, together with its exhibits,
annexes, appendices and other documents referred to hereunder, as may from time
to time be supplemented or amended in accordance with the terms hereof. This
Agreement is an agreement referred to as a "limited liability company agreement"
under Section 18-101(7) of the Act.
"Alternate Representative" has the meaning set forth in Section 5.2(a).
"InCon" has the meaning set forth in the introductory paragraph of this
Agreement.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which federal banking institutions in the United States are required or
authorized by Law to suspend operations.
"Buy-Sell Notice" has the meaning set forth in Section 14.1.
"Capital Contributions" means the contributions set forth in Sections
4.1, 4.2 and 4.3, together with any other contributions made by the Members
pursuant to this Agreement.
"Cash Call Loan" has the meaning set forth in Section 4.5(b)(i).
"Certificate" has the meaning set forth in Section 2.1.
"Claims and Expenses" means any and all demands, claims, suits and
causes of action and any and all liability, costs, expenses, settlements, and
judgments incurred in connection therewith (including, without limitation, court
costs and attorney's fees, charges, disbursements and advances), whether arising
in equity, at common law, or by statute, or under the Law of contracts, torts
(including, without limitation, negligence and strict liability without regard
to fault), of every kind or character, arising in favor of or brought by any
Members' employees, agents, subcontractors, or representatives, or by any
Governmental Authority or any other third party, based upon, in connection with,
relating to or arising out of (i) any Member's actions or inactions under this
Agreement, (ii) violation of any Laws by any Member including, without
limitation, any Environmental Laws, (iii) caused by any misrepresentation,
breach of warranty or failure to fulfill any covenant or agreement of any Member
contained herein, (iv) any act or failure to act by any Member or any of its
Affiliates that occurred before the date hereof relating to or arising out of
the operation of any Member's business, or the ownership or use prior to the
date hereof of any of the assets of any Member prior to the date hereof, or (v)
any obligation or liability (whether absolute, accrued, contingent or otherwise)
relating to any Member's business which arose prior to the date hereof and which
is not expressly assumed by the Company (herein clauses (i) through (v) being
collectively called "Claims and Expenses").
"Code" means the Internal Revenue Code of 1986, as amended. References
to specific sections of the Code shall be deemed to include references to
corresponding provisions of succeeding internal revenue Law.
"Company" has the meaning set forth in the first recital of this
Agreement.
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"Competitive Activity" means any action taken in furtherance of an
agreement, resolution, or other evidence of intent to [*].
"Confidential Information" means all secret, confidential or non-public
information or know-how owned by the Company, whether solely or jointly with
others, including, but not limited to, (i) information, ideas, concepts,
improvements, discoveries, inventions, applications of products and services,
results of investigations, studies or experiments products, processes,
compositions, samples, formulas, computer programs, computer hardware designs,
computer firmware designs, and servicing, marketing or Manufacturing methods and
techniques, trade secrets, inventions, drawings (whether for engineering,
production, or development purposes), specifications (whether for products,
processes, equipment, or otherwise) and (ii) all of the foregoing matters that
were acquired by the Company from InCon or others pursuant to the Master
Formation Agreement or otherwise. As used herein, the term "Confidential
Information" shall not include any and all proprietary information relating to
compounds and compositions of matter having biological activity and/or utility
and products incorporating such compositions of matter, but such term shall
include (a) all proprietary information with respect to methods and/or
techniques involved in the processing of natural source materials except for
coconut oil and (b) all proprietary information relating to compounds and
compositions of matter that are biologically inactive and/or utility and
products incorporating such compositions of matter.
"Conversion" has the meaning set forth in Section 4.5(d).
"Cumulative Contributions" means, as to each Member, the value of all
contributions to the Company by the Members, and their respective Affiliates,
regardless of whether such contributions are reflected in their capital
accounts. The value of contributions other than cash shall be as agreed by the
Members for the purpose of any calculation involving Cumulative Contributions in
connection with any Conversion under Section 4.5(d). The value of the initial
contributions to the Company shall be deemed to be US $3,200,000 by each of
Humko and InCon, or US $6,400,000 in the aggregate.
"Deadlock Event" means an event declared by a Member pursuant to
Section 13.4(a), following a failure to resolve a Deadlock Issue within the time
permitted by Section 13.3.
"Deadlock Issue" means an issue of a profound nature involving the
conduct of the Company's business on which the Members are in disagreement,
including but not limited to any substantial aspect of (A) the business,
capital, research or financial plans of the Company, (B) the management of the
sales, research, Manufacturing, licensing or purchasing activities of the
Company, or (C) the development or implementation of the acquisition, joint
venture or business consolidation plans that directly affect and relate to the
Company, but does not include any issue relating to a breach or alleged breach
of this Agreement or any Related Agreement by a Member.
"Declining Member" has the meaning set forth in Section 4.5(b).
"Delinquent Member" has the meaning set forth in Section 4.3.
"Directly or indirectly" means taking an action or participating in an
activity, and shall be construed in the broadest possible sense and shall
include without limitation:
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(i) acting or participating as a proprietor, partner,
investor, joint venturer, shareholder, consultant, independent contractor, or
otherwise; and
(ii) acting or participating through directors,
officers, employees, subsidiaries, or agents.
"Dispose," "Disposing" or "Disposition" means with respect to any asset
(including a Membership Interest or any right forming a part thereof), a sale,
assignment, transfer, conveyance, foreclosure, gift, exchange, or other
disposition of such asset, whether such disposition be voluntary, involuntary or
by operation of Law.
[*]
"EBITDA" has the meaning set forth in the Master Formation Agreement.
"Facility" means the facility of InCon located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"First Member" has the meaning set forth in Section 11.3.
"Governmental Authority" means the United States, the state, county,
city, and political subdivisions in which the Facility is located or that
exercise jurisdiction over the Facility or InCon, and any agency, department,
commission, board, bureau, or instrumentality that exercises jurisdiction over
the Facility or InCon.
"Humko" has the meaning set forth in the introductory paragraph of this
Agreement.
"Indemnified Acts" has the meaning set forth in Section 5.3(d).
[*]
"Law" means any applicable constitutional provision, statute, act, code
(including the Code), law, regulation, rule, ordinance, order, injunction,
arbitral award, decree, ruling, proclamation, resolution, judgment, decision, or
declaration, of a Governmental Authority.
"Lending Member" has the meaning set forth in Section 4.3.
"Majority Interest" has the meaning set forth in Section 5.2(f).
"Management Committee" has the meaning set forth in Section 5.2.
"Manufacture" or "Manufacturing" shall mean the processes commonly
referred to as refining, hydrogenating, co-hydrogenating, interesterifying,
co-interesterifying, [fractionating] fractioning, and deodorizing, but shall not
include the process commonly referred to as blending and packaging.
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"Master Formation Agreement" has the meaning set for in the recitals of
this Agreement.
"Members" means InCon, Humko and each other person that is hereafter
admitted to the Company as a member in accordance with this Agreement.
"Membership Interest" has the meaning set forth in Section 3.1.
"Monthly Financial Statements" has the meaning set forth in Section
7.2(b).
"Net Available Cash" has the meaning set forth in Section 6.2(d).
"Officer(s)" has the meaning set forth in Section 5.2(k).
"Ordinary Course of Business" means the ordinary course of business of
the Company consistent with past custom and practice (including with respect to
quantity and frequency). For purposes of the calendar year 1999 only, the term
"Ordinary Course of Business" means the ordinary course of business of InCon
consistent with past custom and practice (including with respect to quantity and
frequency) as reflected in the February 1999 profit and loss statement and the
February 1999 balance sheet of InCon for the period covered thereby, copies of
each of which have been delivered to Humko.
"Outside Activities" has the meaning set forth in Section 5.4.
"Preferential Notice" has the meaning set forth in Section 11.3.
"Purchase Price" has the meaning set forth in Section 14.1.
"Purchaser" has the meaning set forth in Section 14.3(i).
"Receiving Member" has the meaning set forth in Section 14.1.
"Related Agreement(s)" has the meaning set forth in the Master
Formation Agreement.
"Representative" has the meaning set forth in Section 5.2(a).
"Response Notice" has the meaning set forth in Section 14.2.
"Scope of Business" means the toll processing of various products, the
sale of certain equipment and services in connection with the design,
engineering and/or construction of molecular separation (including molecular
distillation, dry fractionation, chromatographic separation and membrane
filtration) facilities and various activities related thereto, including
research and development, technical support and marketing, and the operation of
certain facilities involving molecular separation procedures and other processes
and procedures currently engaged in by InCon [*].
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"Second Member" has the meaning set forth in Section 11.3.
"Seller" has the meaning set forth in Section 14.3(i).
"Sharing Ratio(s)" has the meaning set forth in Section 3.1.
"Special Cash Call" has the meaning set forth in Section 4.5.
"Territory" means the continents of North America, Central America and
South America.
"Transition Services Agreement" means that certain Transition Services
Agreement of even date herewith by and between InCon and the Company.
"Transition Period" means the period commencing on the date hereof and
ending on the date that the Transition Services Agreement terminates.
"Triggering Member" has the meaning set forth in Section 14.1.
"Unanimous Interest" has the meaning set forth in Section 5.2(f).
"Voting Ratio(s)" has the meaning set forth in Section 3.1.
"Yearly Financial Statements" has the meaning set forth in Section
7.2(a).
1.2 Terminology. Unless the context requires otherwise: (a) the gender
(or lack of gender) of all words used in this Agreement includes the masculine,
feminine, and neuter; (b) the word "including" means "including, without
limitation,"; (c) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (d) references to Exhibits are to the Exhibits
attached to this Agreement, each of which is made a part hereof for all
purposes.
ARTICLE II
ORGANIZATION
2.1 Formation. The Company has been organized as a Delaware limited
liability company by the filing of a Certificate of Formation (the
"Certificate") in the form attached hereto as Exhibit 2.1 under and pursuant to
the Delaware Limited Liability Company Act (as amended from time to time, the
"Act").
2.2 Name. The name of the Company is "InCon Processing, L.L.C." and
all Company business must be conducted in that name or such other names that may
be selected by the Members and that comply with applicable Law.
2.3 Registered Office; Registered Agent; Offices. The registered
office and registered agent of the Company in the State of Delaware shall be as
specified in the Certificate or as designated by the Members from time to time
in the manner provided by applicable Law.
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2.4 Purposes. The purposes of the Company are to engage in operations
and activities within the Scope of Business, and to engage in any other business
or activity that now or hereafter may be determined by the Members to be
necessary, incidental, proper, advisable, or convenient to accomplish the
purposes of the Scope of Business (including obtaining financing therefor) and
that is not forbidden by the Law of the jurisdiction in which the Company
engages in that business.
2.5 Foreign Qualification. The Members shall cause the Company to
qualify as a foreign limited liability company (or otherwise qualify in the
method prescribed by the relevant jurisdiction) in all jurisdictions in which
the Company conducts business or is otherwise required by Law to register to do
business.
2.6 Term. The Company commenced on the effective date of the
Certificate and shall have a perpetual existence, unless and until it is
dissolved in accordance with Article XII.
2.7 No State-Law Partnership. The Members intend that the Company is
not and will not be a partnership (including a limited partnership) or joint
venture under state Law (even though the Company will be treated as a
partnership under U.S. federal income tax Law). Accordingly, pursuant to this
Agreement or otherwise in connection with the Company, no Member is or will be a
partner or joint venturer of any other Member for any purpose (other than
applicable tax Law), and this Agreement may not be construed to suggest
otherwise.
ARTICLE III
MEMBERS AND MEMBERSHIP
3.1 Members; Membership Interests. The initial Members of the Company
are InCon and Humko, each of which owns a limited liability company interest (as
that term is defined in the Act and herein referred to as a "Membership
Interest") in the Company. Each of Humko and InCon initially has a fifty percent
(50%) share of the profits and losses of the Company, and each is initially
entitled to receive fifty percent (50%) of any distributions of the Company's
assets (such percentages are herein referred to as "Sharing Ratios," as such
percentages may be changed from time to time by mutual agreement of the Members
or as may be required by the express terms of this Agreement). In addition, each
of Humko and InCon initially has a fifty percent (50%) vote with respect to
Company matters (such percentages are herein referred to as "Voting Ratios," as
such percentages may be changed from time to time by mutual agreement of the
Members or as may be required by the express terms of this Agreement). The
Voting Ratios shall be changed to correspond to the Sharing Ratios whenever the
Sharing Ratios are changed in accordance with the terms of this Agreement or as
may otherwise agreed by the Members.
3.2 Encumbrances of Membership Interests. Except as provided in
Section 4.4 of this Agreement, a Member may not pledge, mortgage, subject to a
security interest or lien, or otherwise encumber (voluntarily, involuntarily or
by operation of Law) all or any portion of its Membership Interest without the
prior written consent of the other Member.
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3.3 Admission of New Members.
(a) Each permitted transferee of a Membership Interest under
Article XI shall be admitted as a Member of the Company in the place of the
Member whose Membership Interest was transferred to such transferee.
(b) Additional Membership Interests may be created and issued
to existing Members or to other persons, and such other persons may be admitted
to the Company as Members, only with the unanimous written consent of the
existing Members, in which event the Members' Sharing Ratios and Voting Ratios
shall be adjusted as may be agreed by the Members.
3.4 Information. In addition to the other rights specifically set
forth in this Agreement, each Member has the right to have access to, or to
obtain copies of, all of the information described in Section 18-305(a) of the
Act, subject to the following:
(i) All requests to obtain such information shall be
submitted in writing to the Company and to the other Member.
(ii) If the requested information is in the
possession of the Company, the Company will make such information available to
the requesting Member during normal business hours at the location at which such
information is normally maintained.
(iii) If the requested information is not in the
possession of the Company, but rather in the possession of one of the Members,
then that Member will make such information available to the requesting Member
during normal business hours at the location at which such information is
normally maintained.
(iv) The requesting Member shall be responsible for
the expenses relating to copies of such information, but will not be obligated
to pay for the time of employees or contractors of the producing Member.
(v) All information that is provided to the
requesting Member pursuant to this Section 3.4 is subject to the confidentiality
provisions set forth in the Master Formation Agreement, unless expressly waived
by the producing Member.
3.5 Liability to Third Parties. No Member shall be liable for the
debts, obligations or liabilities of the Company solely by reason of being a
member or participating in the management of the Company as provided in Section
5.1.
3.6 Expulsion. A Member may not be expelled from the Company.
3.7 Resignation. A Member may not resign from the Company prior to the
dissolution and winding up of the Company. In the event that a Member attempts
to resign in violation of this Section 3.7, the non-resigning Member may, at its
sole option, (a) enforce the restriction set forth in this Section to the
maximum extent permitted under Law or in equity, or (b) may accept such
resignation subject to the following: (i) such resigning Member shall be
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liable to the Company and the other Member for all monetary damages (including
all consequential damages) suffered by the non-resigning Member and the Company
as a result of such resignation; and (ii) such resigning Member shall not be
entitled to receive the fair market value of its Membership Interest; and (iii)
such resigning Member shall not have any rights under Section 18-604 of the Act.
ARTICLE IV
CAPITAL AND OTHER CONTRIBUTIONS
4.1 Initial Contributions.
(a) Contemporaneously with the execution of this Agreement,
each Member shall:
(i) make the contributions to the capital of the
Company described in the Master Formation Agreement; and
(ii) execute and deliver, and cause its Affiliates to
execute and deliver, those Related Agreements to which it or such Affiliates are
intended to be parties.
(b) The Members agree that the value of the initial
contributions made by each Member is equal and that, for the purpose of any
calculation involving Cumulative Contributions in connection with a Conversion
under Section 4.5(d), the value of each Member's initial contributions shall be
deemed to be US $3,200,000.
(c) The initial Capital Contribution of Humko will be made in
cash in the amount of US $3,200,000.
(d) The initial Capital Contribution of InCon will be made (i)
by the assignment to the Company of certain assets owned by InCon and others,
the value of which has been agreed upon by InCon and Humko to be US $6,000,000,
and (ii) by the payment by InCon to the Company of US $200,000 cash. On the date
hereof, the Company has paid to InCon US $3,000,000 in payment for a one-half
(1/2) undivided interest in the non-cash assets conveyed by InCon to the
Company. The other one-half (1/2) undivided interest in the non-cash assets
conveyed by InCon to the Company shall constitute a Capital Contribution by
InCon to the Company equal to US $3,000,000. InCon has additionally paid to the
Company a sum of money to cover payment of certain accounts payable that have
been assigned by InCon to the Company (which shall constitute a reimbursement to
the Company and not a contribution), but that were required to be paid by the
Company from funds provided by InCon to the Company under the terms of the
Master Formation Agreement.
(e) After the distribution of US $3,000,000 to InCon on the
date hereof, the remaining US $400,000 of cash of the Company shall be used as
directed by the Management Committee; provided, however, that none of such funds
may be expended by the Company (except for normal operations not exceeding in
the aggregate $300,000) until [*].
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4.2 Subsequent Capital Contributions
(a) Except as otherwise provided in this Agreement, no
subsequent contributions by the Members shall be made without the prior written
consent of both Members. Except as provided in Section 4.2(b) and Section 4.5,
neither Member is required to make any contributions to the Company other than
pursuant to Section 4.1.
(b) Without creating any rights in favor of any third party,
to the extent that the Members mutually agree to make any Capital Contributions
to the Company, each Member shall be obligated to contribute such amounts to the
Company in accordance with such agreement.
(c) Except as set forth above and as elsewhere expressly
provided in this Agreement, (i) in no event shall the payment of any amount by
any Member to the Company or the other Member pursuant to a requirement of
indemnification under this Agreement or any of the Related Agreements be
considered a contribution of capital to the Company, and (ii) no Member shall be
required to make any additional contributions to the Company.
4.3 Failure to Contribute. If a Member (the "Delinquent Member") does
not pay to the Company all or any portion of a Capital Contribution that is
required to be paid pursuant to Sections 4.1 or 4.2, the Company, upon written
request by the other Member, shall exercise one or more of the following
remedies, as specified by the other Member, and shall provide notice thereof to
the Delinquent Member:
(i) charging interest on the unpaid portion of such
required payment at an annual rate equal to the lesser of (i) the Agreed
Interest Rate plus three percent (3%) or (ii) the maximum rate permitted by
applicable Law, from the date that such payment was due until the date that it
is made;
(ii) taking such action as the other Member may deem
appropriate to obtain payment by the Delinquent Member of the required payment,
including withholding any distributions otherwise payable to the Delinquent
Member;
(iii) permitting (but not requiring) the other Member
(the "Lending Member") to deliver to the Company all or any portion of the
Delinquent Member's unpaid required payment, with the following results:
(A) the sum delivered shall constitute a
loan from the Lending Member to the Delinquent Member pursuant to the applicable
provisions of this Agreement;
(B) the principal balance of such loan and
all accrued unpaid interest thereon shall be due and payable in whole by the
Lending Member to the Delinquent Member on or before one (1) year from the date
of such loan;
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(C) the unpaid principal balance of such
loan shall bear interest at an annual rate equal to the lesser of (i) the Agreed
Interest Rate plus three percent (3%), or (ii) the maximum rate permitted by
applicable Law, from the date that such loan is made until the date that the
principal balance, together with all interest accrued thereon, is repaid to the
Lending Member;
(D) all distributions from the Company that
otherwise would be made to the Delinquent Member (whether before or after
dissolution of the Company) instead shall be paid to the Lending Member, for
credit against: first, all costs incurred by the Lending Member in enforcing
payment of its loan by the Delinquent Member (including, without limitation,
attorneys' fees and court costs); second, the unpaid and accrued interest on
such loan; and third, the unpaid principal balance of such loan, until all such
costs, such principal balance and all such interest shall have been paid in full
to the Lending Member, but all such payments to the Lending Member shall be
treated for all other purposes of this Agreement as a distribution to the
Delinquent Member;
(E) the repayment of the principal balance
and interest accrued thereon shall be secured by a security interest in the
Delinquent Member's Membership Interest, as more fully set forth in Section 4.4;
and
(F) the Lending Member shall have the right
(in addition to the other rights and remedies granted to it pursuant to this
Agreement or available to it at Law or in equity) to take, after five Business
Days' advance written notice to the Delinquent Member, such action (including
court proceedings) as the Lending Member may deem appropriate to obtain payment
by the Delinquent Member of the principal balance of such loan and all interest
accrued thereon, at the cost and expense of the Delinquent Member;
(iv) exercising the rights of a secured party under
the Uniform Commercial Code of the State of Delaware, as more fully set forth in
Section 4.4; or
(v) exercising any other rights and remedies
available at Law or in equity.
4.4 Security Agreement. Each Member (as a Delinquent Member) hereby
grants to the other Member (as a Lending Member) a security interest in, and a
first lien on, its Membership Interest and the proceeds thereof, under the
Uniform Commercial Code of the State of Delaware to secure any and all loans
made by the Lending Member to the Delinquent Member pursuant to Section
4.3(iii), together with interest thereon as provided in Section 4.3(iii)(C). In
addition, InCon hereby grants to Humko a security interest in, and a first lien
on, its Membership Interest and the proceeds thereof, under the Uniform
Commercial Code of the State of Delaware to secure its obligations under the
terms and provisions of Section 4.7 of this Agreement and under Section 7.6 of
the Master Formation Agreement, and upon failure by, or refusal of, InCon to pay
any of the amounts required to be paid under the terms of Section 4.7 of this
Agreement or to perform any of its obligations under Section 7.6 of the Master
Formation Agreement, Humko is entitled to all the rights and remedies of a
secured party under the Uniform Commercial Code of the State of Delaware with
respect to the security interest granted in this Section 4.4. On any
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default by a Member in making a required payment to the Lending Member pursuant
to Section 4.3(iii)(B), the Lending Member is entitled to all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of
Delaware with respect to the security interest granted in this Section 4.4.
Contemporaneously with the execution and delivery of this Agreement and from
time- to-time thereafter, each Member shall execute and deliver to the other
Member (and hereby appoints the other Member as its attorney-in-fact for the
purpose of such execution and delivery) all financing statements and other
instruments as the Lending Member may reasonably request to effectuate and carry
out the preceding provisions of this Section 4.4.
4.5 Special Cash Calls. If the Company is unable to meet its
obligations as and when they come due and has exhausted all other sources of
funds reasonably available to it including, without limitation, additional
Member loans pursuant to Section 7.4 hereof, then either Member may make a
request (a "Special Cash Call") that both Members provide a specified amount of
additional funds to the Company in proportion to their respective Sharing Ratios
sufficient to meet the Company's immediate cash needs.
(a) If both Members agree to provide such additional funds
within 10 days of the date of a Special Cash Call, the Members shall make
additional Capital Contributions as provided in Section 4.2, or loans to the
Company as provided in Section 7.4, as they may agree. Any amounts contributed
or loaned pursuant to this Section 4.5(a) must be in proportion to the Members'
respective Sharing Ratios.
(b) If one Member (the "Declining Member") does not agree,
within 10 days of its receipt of a Special Cash Call, to provide its share of
funds requested pursuant to the Special Cash Call, then the other Member may, at
its option, advance to the Company the entire amount of both its share of the
Special Cash Call and the Declining Member's share of the Special Cash Call, on
the following basis:
(i) The sum advanced will constitute a loan (a "Cash
Call Loan") from the Lending Member to the Company.
(ii) The principal balance of a Cash Call Loan and
all accrued unpaid interest thereon will be due and payable in whole on or
before eighteen months from the date of such loan.
(iii) The amount of a Cash Call Loan will bear
interest at an annual rate equal to the lesser of (i) the Agreed Interest Rate
plus three percent (3%) or (ii) the maximum rate permitted by applicable Law,
such interest to be calculated from the date that a Cash Call Loan is made until
the date that such Cash Call Loan is repaid to the Lending Member.
(iv) The Company shall pay the interest on such Cash
Call Loan monthly, provided that it has funds available to do so.
(v) Notwithstanding the provisions of Article VI,
until such Cash Call Loan is repaid in full or converted into equity pursuant to
Section 4.5(d):
(A) No distributions shall be made to either
Member,
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(B) All Net Available Cash shall be paid to
the Lending Member to repay a Cash Call Loan (applied first to accrued and
unpaid interest, and second to principal),
(C) no payments shall be made by the Company
with respect to any other loan to the Company by either Member, and
(D) No further capital expenditures may be
made except for amounts required (i) by contract, (ii) to comply with
environmental, health or safety requirements, (iii) for routine maintenance,
(iv) for emergency repairs, (v) to preserve and protect partially completed
capital projects; or (vi) as otherwise approved by the Management Committee.
Notwithstanding the foregoing, while a Cash Call Loan is outstanding, the
Company shall pay all amounts due to Members and their Affiliates for goods or
services provided to the Company, to the extent that funds are available to make
such payments.
(c) At any time at which a Cash Call Loan is outstanding, the
Declining Member may pay to the Lending Member its share of the outstanding
balance of a Cash Call Loan (including any accrued and unpaid interest), in
exchange for a proportionate share of such Cash Call Loan.
(d) At any time after a Cash Call Loan is due and payable in
full, the Lending Member shall have the option, exercisable in its sole
discretion upon 180 days' prior written notice to the Declining Member, to
convert all or any portion of its Cash Call Loan (excluding any accrued and
unpaid interest thereon) to a Capital Contribution (the "Conversion"). If the
Declining Member does not pay its share of the outstanding balance of a Cash
Call Loan (including any accrued and unpaid interest) within 180 days after the
Lending Member's notice, the Conversion shall become effective, with the
following results:
(i) The Lending Member's Sharing Ratio shall be
adjusted to equal the percentage determined by a fraction, the numerator of
which is the sum of (A) the Lending Member's Cumulative Contributions
immediately preceding the Conversion plus (B) the outstanding principal and
accrued but unpaid interest of a Cash Call Loan converted hereunder, and the
denominator of which is the sum of (X) both Members' Cumulative Contributions
immediately preceding the Conversion plus (Y) the outstanding principal and
accrued but unpaid interest of a Cash Call Loan converted hereunder.
(ii) The Declining Member's Sharing Ratio shall be
adjusted to equal the percentage determined by a fraction, the numerator of
which is the Declining Member's Cumulative Contributions immediately preceding
the Conversion and the denominator of which is the sum of (X) both Members'
Cumulative Contributions immediately preceding the Conversion plus (Y) the
outstanding principal and accrued but unpaid interest of a Cash Call Loan
converted hereunder.
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4.6 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the Company to enable
the Company to return any Member's Capital Contributions. The foregoing
provisions of this Section 4.6 do not limit the Members from agreeing to
distribute capital of the Company or from receiving distributions of capital
upon the liquidation of the Company in accordance with Section 12.1. All of the
provisions of this Section are subject to the terms and provisions of Section
4.7.
4.7 Special Humko Provisions. Notwithstanding anything to the contrary
contained in this Agreement, if EBITDA is less than US $1,500,000 for the period
commencing one (1) calendar year after the date hereof and ending on the date
which is two (2) calendar years after the date hereof, InCon is obligated under
the terms and provisions of the Master Formation Agreement to pay to Humko two
hundred percent (200%) of the difference between US $1,500,000 and the actual
amount of EBITDA for such period, but in no event shall InCon be required to pay
Humko more than US $600,000 plus accrued and unpaid interest from the date due
until paid in accordance with the terms of the Master Formation Agreement. The
obligation to pay such amount to Humko shall be secured in the same manner as a
loan under the terms and provisions of Section 4.4, and Humko shall be deemed to
be a Lending Member and InCon a Delinquent Member under Sections 4.3 and 4.4 for
purposes of this Section 4.7 only, but such amount shall be payable upon demand
by Humko and shall not be subject to the term or interest rate applicable to a
loan under Section 4.3. In addition, if InCon fails to pay Humko such amount
when and if due in accordance with the provisions of the Master Formation
Agreement, then (i) all distributions to be made to InCon under the terms of
this Agreement shall be paid to Humko until the entire sum owed to Humko has
been paid in full, (ii) Humko shall be entitled to exercise any of the remedies
provided to the Lending Member under the terms and provisions of Section 4.5(b),
and (iii) the entire US $600,000 together with all accrued and unpaid interest
thereon or such portion thereof that InCon is obligated to pay to Humko but
fails to pay shall be deemed to be a Cash Call Loan for purposes of Conversion
only under Section 4.5(d) and shall be deemed to be due and payable upon failure
of InCon to pay all or any part of such amount when due under the Master
Formation Agreement. Without limiting the generality of the foregoing, (i) Humko
shall be entitled to the Conversion referred to in Section 4.5(d) immediately
upon failure of InCon to pay all or any portion of such amounts notwithstanding
anything to the contrary contained in Section 4.5(d), and (ii) all of the terms
and provisions of Section 4.5(b)(v) shall be applicable to the portion of the
foregoing amounts that remain unpaid in the same manner as if such amounts
constituted a Cash Call Loan.
ARTICLE V
MANAGEMENT OF THE COMPANY
5.1 Management by Members. The management of the Company is fully
vested in the Members, acting exclusively in their membership capacities. To
facilitate the orderly and efficient management of the Company, the Members
shall act (a) collectively as a "committee of the whole" pursuant to Section
5.2, and (b) through the delegation of certain responsibility and
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authority to the Chief Executive Officer pursuant to Section 5.3. The Company
will not have "managers," as that term is used in the Act, it being understood
that the Representatives, the Chief Executive Officer and the other Officers do
not constitute "managers."
5.2 Management Committee. The Members shall act collectively through
meetings as a "committee of the whole," which is hereby named the "Management
Committee". Decisions or actions taken by the Management Committee in accordance
with the provisions of this Agreement shall constitute decisions or actions by
the Company and shall be binding on each Member, Representative, Officer and
employee of the Company. The Management Committee shall conduct its affairs in
accordance with the following provisions and the other provisions of this
Agreement:
(a) Representatives.
(i) Designation. To facilitate the orderly and
efficient conduct of Management Committee meetings, each
Member shall notify the other Members, from time to time, of
the identity of (A) one of its Officers, employees or agents
who will represent it at such meetings (a "Representative"),
and (B) one of its Officers, employees or agents who will
represent it at any meeting that the Member's Representative
is unable to attend (an "Alternate Representative") (the term
"Representative" shall also refer to any Alternate
Representative that is actually performing the duties of the
applicable Representative.). The initial Representative of
Humko shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and the initial
Representative of InCon shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇. A Member may
designate a different Representative or Alternate
Representative for any meeting of the Management Committee by
notifying each of the other Members at least three Business
Days prior to the scheduled date for such meeting; provided,
however, that if giving such advance notice is not feasible,
then such new Representative or Alternate Representative shall
present written evidence of his or her authority at the
commencement of such meeting.
(ii) Authority. Each Representative shall have the
full authority to act on behalf of the Member that designated
such Representative; the action of a Representative at a
meeting (or through a written consent) of the Management
Committee shall bind the Member that designated such
Representative; and the other Members shall be entitled to
rely upon such action without further inquiry or investigation
as to the actual authority (or lack thereof) of such
Representative. In addition, the act of an Alternate
Representative shall be deemed the act of the Representative
for which such Alternate Representative is acting, without the
need to produce evidence of the absence or unavailability of
such Representative.
(iii) Disclaimer of Duties; Indemnification. EACH
REPRESENTATIVE SHALL REPRESENT, AND OWE DUTIES TO, ONLY THE
MEMBER THAT DESIGNATED SUCH REPRESENTATIVE (THE NATURE AND
EXTENT OF SUCH DUTIES BEING AN INTERNAL CORPORATE AFFAIR OF
SUCH MEMBER), AND NOT TO THE
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COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE, OR ANY OFFICER OR
EMPLOYEE OF THE COMPANY. THE PROVISIONS OF SECTION 5.2(f)(ii)
SHALL ALSO INURE TO THE BENEFIT OF EACH MEMBER'S
REPRESENTATIVE. THE COMPANY SHALL INDEMNIFY, PROTECT, DEFEND,
RELEASE AND HOLD HARMLESS EACH REPRESENTATIVE FROM AND AGAINST
ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON (INCLUDING
ANOTHER MEMBER), OTHER THAN THE MEMBER THAT DESIGNATED SUCH
REPRESENTATIVE, THAT ARISE OUT OF, RELATE TO OR ARE OTHERWISE
ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, SUCH REPRESENTATIVE'S
SERVICE ON THE MANAGEMENT COMMITTEE.
(iv) Attendance. Each Member shall use all reasonable
efforts to cause its Representative or Alternate
Representative to attend each meeting of the Management
Committee, unless its Representative is unable to do so
because of a "force majeure" event or other event beyond his
or her reasonable control, in which event such Member shall
use all reasonable efforts to cause its Representative or
Alternate Representative to participate in the meeting by
telephone pursuant to Section 5.2(h).
(b) Chairman and Secretary. One of the Representatives will be
designated as Chairman of the Management Committee, in accordance with
this Section 5.2(b), to preside over meetings of the Management
Committee. The Chairman shall be the Representative of Humko in
odd-numbered calendar years and of InCon in even-numbered calendar
years. The Representative of Humko designated as Chairman initially
shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇. The Management Committee shall also
designate a Secretary of the Management Committee, who need not be a
Representative.
(c) Procedures. The Secretary of the Management Committee
shall maintain written minutes of each of its meetings, which shall be
submitted for approval no later than the next regularly-scheduled
meeting. The Management Committee may adopt whatever rules and
procedures relating to its activities as it may deem appropriate,
provided that such rules and procedures shall not be inconsistent with
or violate the provisions of this Agreement.
(d) Time and Place of Meetings. The Management Committee shall
meet quarterly subject to more or less frequent meetings upon approval
of the Management Committee. Notice of, and an agenda for, all
Management Committee meetings shall be provided by the Chairman to all
Members at least ten days prior to the date of each meeting, together
with proposed minutes of the previous Management Committee meeting (if
such minutes have not been previously ratified). Special meetings of
the Management Committee may be called at such times, and in such
manner, as any Member deems necessary. Any Member calling for any such
special meeting shall notify the Chairman, who in turn shall notify all
Members of the date and agenda for such meeting at least ten days prior
to the date of such meeting. Such ten-day period may be shortened by
the Management Committee, acting through a Unanimous Interest. All
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meetings of the Management Committee shall be held at a location
designated by the Chairman. Attendance of a Member at a meeting of the
Management Committee shall constitute a waiver of notice of such
meeting, except where such Member attends the meeting for the express
purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
(e) Quorum. The presence of a Majority Interest shall
constitute a quorum for the transaction of business at any meeting of
the Management Committee.
(f) Voting.
(i) Voting by Voting Ratios; Voting Thresholds.
Except as provided otherwise in this Agreement, voting shall
be according to the Members' respective Voting Ratios. Set
forth below are definitions of the principal voting thresholds
that are required to approve certain actions:
(A) "Unanimous Interest" means all of the
Members; and
(B) "Majority Interest" means Members
holding among them at least a majority of the Voting
Ratios.
Except for matters that require the approval of a Unanimous
Interest, the vote of a Majority Interest shall constitute the
action of the Management Committee.
(ii) DISCLAIMER OF DUTIES. WITH RESPECT TO ANY VOTE,
CONSENT OR APPROVAL AT ANY MEETING OF THE MANAGEMENT COMMITTEE
OR OTHERWISE UNDER THIS AGREEMENT, EACH MEMBER MAY GRANT OR
WITHHOLD SUCH VOTE, CONSENT OR APPROVAL (A) IN ITS SOLE AND
ABSOLUTE DISCRETION, (B) WITH OR WITHOUT CAUSE, (C) SUBJECT TO
SUCH CONDITIONS AS IT SHALL DEEM APPROPRIATE, AND (D) WITHOUT
TAKING INTO ACCOUNT THE INTERESTS OF, AND WITHOUT INCURRING
LIABILITY TO, THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE,
OR ANY OFFICER OR EMPLOYEE OF THE COMPANY (COLLECTIVELY, "SOLE
DISCRETION"). THE PROVISIONS OF THIS SECTION 5.2(f)(ii) SHALL
APPLY NOTWITHSTANDING THE NEGLIGENCE, GROSS NEGLIGENCE,
WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR
RESPONSIBILITY OF A MEMBER OR ITS REPRESENTATIVE.
(g) Action by Written Consent. Any action required or
permitted to be taken at a meeting of the Management Committee may be
taken without a meeting, without prior notice, and without a vote if a
consent or consents in writing, setting forth the action so taken, is
signed by Members that could have taken the action at a meeting of the
Management Committee at which all Members entitled to vote on the
action were represented and voted.
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(h) Meetings by Telephone. Members may participate in and hold
such meeting by means of conference telephone, video conference or
similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such
a meeting shall constitute presence in person at such meeting, except
where a Member participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
(i) Matters Requiring Management Committee Approval.
Notwithstanding any other provision of this Agreement, no actions may
be taken by, or on behalf of, the Company (including by the Chief
Executive Officer or Chief Operating Officer) without first obtaining
the vote of a Majority Interest of the Management Committee. Included,
without limitation, in those actions that require the vote of a
Majority Interest of the Management Committee shall be each of the
following:
(i) causing or permitting the Company to Dispose of
or encumber (i) all or substantially all of its assets;
(ii) causing or permitting the Company to incur any
indebtedness for borrowed money, except a Cash Call Loan;
(iii) causing or permitting the Company to merge,
consolidate or convert into any other entity;
(iv) considering at a meeting of the Management
Committee a matter not on the agenda for that meeting;
(v) approving disclosures of Confidential
Information;
(vi) approving the annual Budget for the Company
(with it being understood that the last approved Budget shall
be used, and deemed approved, for any subsequent period until
the new Budget for that period is so approved), including the
parameters within which the Chief Executive Officer or Chief
Operating Officer is authorized to expend Company funds
without further Management Committee approval;
(vii) causing or permitting the Company to enter into
any contract or agreement (1) with a term in excess of one (1)
year, (2) involving payments by or to the Company in excess of
US $100,000 over the term of such contract or agreement
(taking into account any permitted renewals or extensions
thereof) or (3) which is not being entered into the Ordinary
Course of Business.
(viii) causing or permitting the Company to cancel,
amend or restate, or relinquish any material rights under, (i)
any Related Agreement or (ii) any other material contract or
agreement to which the Company is a party;
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(ix) causing or permitting the Company to enter into
or engage in any transaction, contract, agreement or
arrangement with a Member, Officer or employee of the Company,
an Affiliate of any of the foregoing, or a Person related by
blood or marriage to any of the foregoing;
(x) causing or permitting the Company to enter into
or engage in any transaction, contract, agreement or
arrangement that (i) is unrelated to the Company's purpose (as
set forth in Section 2.4), (ii) otherwise contravenes the
Certificate or this Agreement, (iii) would make it impossible
to carry on the Ordinary Course of Business of the Company, or
(iv) is not apparently for the carrying on of the business of
the Company in the usual way;
(xi) causing or permitting the Company (i) to fail to
comply with any provisions of applicable Law, (ii) to fail to
obtain, or comply with, all material permits and
authorizations from Governmental Authorities required for it
to conduct its business, or (iii) to agree to the
cancellation, amendment, restatement, or relinquish of any
material rights under, any such material permit or
authorization;
(xii) selecting a different name for the Company; and
(xiii) causing or permitting the Company to become
Bankrupt under the United States Bankruptcy Code (but this
provision shall not be construed to require any Member to
ensure the profitability or solvency of the Company).
(j) Subcommittees. The Management Committee may create such
subcommittees, delegate to such subcommittees such authority and
responsibility, and rescind any such delegations, as it may deem
appropriate.
(k) Officers. The Management Committee may designate one or
more persons to be Officers of the Company (the "Officers"). Any
Officers so designated shall have such titles and, subject to the other
provisions of this Agreement, have such authority and perform such
duties as the Management Committee may delegate to them and shall serve
at the pleasure of the Management Committee.
5.3 CEO, COO, CFO and CTO. The Members hereby delegate the authority
described in Section 5.3(b) to the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer in accordance with
this Section 5.3. The Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, Chief Technology Officer and such other Officers as may be
appointed by the Management Committee shall be Officers of the Company.
Decisions or actions taken by the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer in accordance with
the provisions of this Agreement shall constitute decisions or actions by the
Company and shall be binding on each Member, Representative, Officer and
employee of the Company. The Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer and Chief Technology Officer shall be
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designated, and shall exercise such delegated authority, in accordance with the
following provisions and the other provisions of this Agreement:
(a) Designation and Removal. The initial Chief Executive Officer is
▇▇▇▇ ▇. ▇▇▇▇▇▇, the Chief Operating Officer is ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and
the Chief Technology Officer is ▇.▇. ▇▇▇▇▇▇. Each Officer shall serve
in such capacity for one (1) year unless reappointed by the Management
Committee. Each of them, and any successor Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer or Chief Technology
Officer that is designated in accordance with this Section 5.3(a),
shall cease to be the Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer and Chief Technology Officer upon the earliest
to occur of the following events: (i) if the Member with whom such
Officer is employed shall Dispose of all of its Membership Interest;
(ii) if the Member with whom such Officer is employed shall be in
default of any of its obligations under this Agreement; (iii) the
Management Committee removes any such Officers, (iv) any such Officer
shall resign as Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer or Chief Technology Officer by giving notice thereof
to all Members (which resignation shall become effective 90 days after
delivery of such notice, unless an earlier or later effectiveness is
agreed to by such Officer and the Management Committee); (v) any such
Officer shall commit gross negligence or willful misconduct in the
management of the Company and, as a consequence, shall be removed as
Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer or Chief Technology Officer by the Management Committee, acting
by a vote of a Majority Interest at a meeting called for such purpose
(which removal shall become effective 90 days after the vote of the
Management Committee, unless an earlier or later effectiveness is
agreed to by the Management Committee); or (vi) the respective
employment agreement of any such Officer with the Company has been
terminated. Upon the occurrence of any of the events described in the
immediately-preceding sentence, the Management Committee, by vote of a
Majority Interest, shall designate another person (that consents to
serve as such) as a successor to any such Officer so removed.
Notwithstanding anything to the contrary contained in this Agreement,
Humko shall have the exclusive right (i) until five (5) calendar years
after the date hereof, to appoint the Chief Financial Officer of the
Company, (ii) to appoint the independent accounting firm used by the
Company in the event that the Members are unable to agree on the firm
to be used, provided that for the first fiscal year of the Company, the
Company shall use the independent accounting firm of Delloite & Touche,
and (iii) to select the accounting procedures to be used by the
Company.
(b) Duties and Authority.
(i) Except for decisions and actions that are to be
made by the Management Committee pursuant to Section
5.2(i) or another express provision of this
Agreement, the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and Chief
Technology Officer are hereby delegated duties and
authority that may be established, from time to time,
by the Management Committee. Without limiting the
generality of the foregoing, all such Officers shall
comply at all time with all Laws.
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(ii) Except for decisions and actions that are to be
made by the Management Committee pursuant to Section
5.2(i) or another express provision of this
Agreement, the Chief Operating Officer is hereby
delegated the duty and authority to manage the
day-to-day business of the Company, subject to any
policies that may be established, from time to time,
by the Management Committee.
(c) Compensation to Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer. The
Company shall not make any payments to the Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer and Chief Technology
Officer for any duties performed by them under the terms of this
Agreement. All such Officers shall be compensated for any duties
performed under this Agreement by the Member for whom they are employed
until such Officers have entered into employment contracts with the
Company.
(d) LIMITATIONS OF DUTIES; INDEMNIFICATION. THE CHIEF
EXECUTIVE OFFICER, CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND
CHIEF TECHNOLOGY OFFICER SHALL BE LIABLE TO THE COMPANY AND THE OTHER
MEMBERS FOR HIS OR HER GROSS NEGLIGENCE OR WILLFUL MISCONDUCT IN THE
MANAGEMENT OF THE COMPANY; BUT THE CHIEF EXECUTIVE OFFICER, CHIEF
OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND CHIEF TECHNOLOGY OFFICER
SHALL NOT BE LIABLE TO THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE,
OR ANY OFFICER OR EMPLOYEE OF THE COMPANY FOR ANY ACTS OR OMISSIONS
THAT DO NOT CONSTITUTE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT,
INCLUDING THE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR
RESPONSIBILITY (SHORT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE
CHIEF EXECUTIVE OFFICER, CHIEF OPERATING OFFICER, CHIEF FINANCIAL
OFFICER AND CHIEF TECHNOLOGY OFFICER (THE "INDEMNIFIED ACTS"); AND THE
COMPANY SHALL INDEMNIFY, PROTECT, DEFEND, RELEASE AND HOLD HARMLESS
FROM AND AGAINST ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON
(INCLUDING ANOTHER MEMBER) THAT ARISE OUT OF, RELATE TO OR ARE
OTHERWISE ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, THE INDEMNIFIED
ACTS.
(e ) Limitation of Members' Authority. Except for the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer and
Chief Operating Officer, each Member agrees that it will not exercise
its authority under the Act to bind or commit the Company to
agreements, transactions or other arrangements, or to hold itself out
as an agent of the Company.
5.4 Conflicts of Interest. A Member or an Affiliate of a Member may
engage in and possess interests in other business ventures of any and every type
and description, independently or with others, including ones in competition
with the Company, with no obligation to offer to
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the Company, any other Member or any Affiliate of another Member the right to
participate therein. The Company may transact business with any Member or
Affiliate thereof, provided the terms of those transactions are approved by the
Management Committee. Without limiting the generality of the foregoing, the
Members recognize and agree that they and their respective Affiliates currently
engage in certain activities and that these and other activities by Members and
their Affiliates may be made possible or more profitable by reason of the
Company's activities (herein referred to as "Outside Activities"). No Member or
Affiliate of a Member shall be restricted in its right to conduct, individually
or jointly with others, for its own account any Outside Activities, and no
Member or its Affiliates shall have any duty or obligation, express or implied,
to account to, or to share the results or profits of such Outside Activities
with, the Company, any other Member or any Affiliate of any other Member, by
reason of such Outside Activities. Nothing contained herein shall limit or
modify any of the terms or provisions of Section 5.2(i)(v) relating to
disclosures of Confidential Information by the Company, and nothing contained
herein shall permit any Member to disclose any Confidential Information without
the prior written consent of all Members.
5.5 Indemnification for Breach of Agreement. Each Member shall
indemnify, protect, defend, release and hold harmless each other Member, its
Representative, its Affiliates, and its and their respective owners, directors,
Officers, trustees, employees and agents from and against any Claims and
Expenses asserted by or on behalf of any party (including another Member) that
arise out of, relate to or are otherwise attributable to, directly or
indirectly, a breach by the indemnifying Member of this Agreement; provided,
however, that this Section 5.5 shall not apply to any Claims and Expenses or
other matter for which a Member (or its Representative) has no liability or
duty, or is indemnified or released, pursuant to Section 5.2(a)(iii),
5.2(f)(ii), 5.3(d) (in the case of the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer) or 5.4.
ARTICLE VI
ALLOCATIONS; DISTRIBUTIONS
6.1 Allocations. All items of income, gain, loss, deduction and credit
of the Company shall be allocated to the Members in accordance with the
following:
(a) Except as otherwise provided in this Section 6.1, for
accounting and federal income tax purposes, each item of income, gain, loss,
deduction and credit shall be allocated to the Members in accordance with their
Sharing Ratios.
(b) Under Code Section 704(c) and Treasury Regulation Section
1.704-(3), income, gain, loss and deduction with respect to any asset
contributed to the capital of the Company, solely for federal income tax
purposes, shall be allocated among the Members so as to take into account any
variation between the adjusted tax basis of the asset for federal income tax
purposes and its fair market value at the date of contribution. The allocations
required by this Section 6.1 shall be made by the Management Committee using the
remedial allocation method permitted by Treasury Regulation Section 1.704-3(d).
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6.2 Distributions.
(a) The Company shall make distributions in accordance with
the procedure set out in this Section 6.2. Except as otherwise provided in this
Section 6.2, all distributions shall be made in accordance with the respective
Sharing Ratios of the Members or as otherwise expressly provided in this
Agreement.
(b) All Net Available Cash, if any, attributable to each
calendar year (or portion thereof) and distributable other than in connection
with the liquidation of the Company shall be applied and distributed as follows:
First, to Humko in payment of all accrued and
outstanding amounts referred to in Section 4.7 (including principal
even though not yet due and payable) to the extent Humko has not
elected to make a Conversion under Section 4.7, and such distribution
shall be deemed to be made entirely against the account of InCon;
Second, to the Lending Members in payment of any Cash
Call Loans, even though not yet due and payable, in proportion to the
outstanding balances of such Cash Call Loans (amounts so paid to be
applied first to interest accrued and unpaid, and then to outstanding
principal); and
Third, to the Members in accordance with their
respective Sharing Ratios.
(c) Unless the Management Committee requires otherwise, the
Company shall make distributions of Net Available Cash under this Section 6.2 as
soon as practicable after the end of each fiscal year but not later than
forty-five (45) days after the end of each fiscal year (if and to the extent of
Net Available Cash and not otherwise).
(d) As used in this Section 6.2, "Net Available Cash" means
the amount, if any (determined by the Management Committee as of December 31 of
the then just-ended year), by which the Company's funds, whether held in bank
accounts or in approved investments pursuant to Section 7.3(b), exceed the
Company's cash needs for ongoing operations, including, without limitation, (A)
meeting the Company's contractual obligations under the Related Agreements and
to third parties, (B) mandatory expenditures for health, safety or environmental
matters, (C) the continuance of capital projects approved in previous budgets,
but excluding any capital projects that have not been so approved, and (D)
payment of debt service and taxes.
6.3 Liquidating Distributions. Distributions in liquidation of the
Company shall be made in accordance with Section 12.3.
ARTICLE VII
FINANCIAL MATTERS
7.1 Maintenance of Books and Records. While the Transition Services
Agreement, as defined in the Master Formation Agreement, is in effect, InCon
shall, on behalf of the
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Company and the Members, maintain or cause to be maintained at the principal
office of the Company complete and accurate books and records of the Company,
and supporting and other documentation of the transactions with respect to the
conduct of the Company's business. After the Transition Services Agreement has
been terminated, the books and records of the Company, and supporting and other
documentation of the transactions with respect to the conduct of the Company's
business shall be maintained by the party designated by the Management
Committee. The books and records shall be maintained with respect to accounting
matters in accordance with sound accounting practices applied on a consistent
basis. All such books and records of the Company shall be available at the
Company's principal office for examination and audit by any Member or the
Member's duly authorized representatives at any and all reasonable times during
normal business hours with reasonable advance notice. Such books and records of
the Company will be maintained for a minimum of seven (7) years from the date of
each of the respective books and records and otherwise in accordance with the
Company's document retention policies that are in effect from time to time and
designated by the Management Committee.
7.2 Fiscal Year; Reports.
(a) The fiscal year of the Company shall be the fiscal year of Humko,
as the same may be modified from time to time. Within sixty (60) days after the
end of each fiscal year, the Company shall cause to be sent to each Member a
complete accounting of the financial affairs of the Company for the fiscal year
then ended, together with a balance sheet, statement of income and change in
financial position (collectively referred to as the "Yearly Financial
Statements"), all prepared in accordance with generally accepted accounting
principles, consistently applied by the Company and consistent with the
provisions of this Agreement and the Related Agreements.
(b) Within ten (10) days after the end of each month, the Company shall
cause to be sent to each Member a complete accounting of the financial affairs
of the Company for the month then ended, together with a balance sheet,
statement of income and change in financial position, all prepared in accordance
with generally accepted accounting principles, consistently applied by the
Company and consistent with the provisions of this Agreement and the Related
Agreements (collectively referred to as the "Monthly Financial Statements").
(c) As soon as practicable after such Yearly Financial Statements are
prepared, the Company will have such Yearly Financial Statements audited by the
independent accounting firm selected in accordance with the terms of Section
5.3(a). The costs and expenses associated with such audit will be borne by the
Company.
(d) Either Member may conduct a separate audit or accounting review of
the Yearly or Monthly Financial Statements or any aspect of the Company's
business or operations, at its own expense.
(e) On a weekly basis commencing on the first Monday following the date
hereof and then each Monday thereafter, the Chief Operating Officer of the
Company shall deliver or cause to be delivered to the Chief Financial Officer of
Humko a written statement listing each disbursement of funds made by the Company
during the immediately preceding week including, without limitation, all checks
of the Company written during the week in question.
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7.3 Bank Accounts and Investments.
(a) The Company shall establish one or more separate bank
accounts and arrangements in its name with financial institutions and such
signature authorizations as the Members agree upon. The accounts shall be
administered by the Company, and all funds of the Company will be held in such
accounts or in approved investments under Section 7.3(b).
(b) All funds of the Company held as reserves for the future
payment of Company expenses or pending distribution shall be invested as the
Members may agree.
(c) Each check or other payment to be made by the Company
which exceeds US $10,000 must be preapproved by the Chief Financial Officer of
Humko before it may be sent to the appropriate party. In addition, to the extent
that any payments are to be made to any party by the Company and the aggregate
of those payments will exceed US $10,000, such payments must be preapproved by
the Chief Financial Officer of Humko before they may be sent to the appropriate
party.
7.4 Loans by Members to the Company. In addition to loans made under
the terms and provisions of Article IV, from time to time, with the prior
written consent of the other Member, a Member may make a loan to the Company on
such terms as may be approved in such prior written consent.
7.5 Insurance. The Company shall obtain and maintain, either directly
or as an insured under worldwide insurance policies maintained by the Members or
their Affiliates, such insurance policies as may be determined from time to time
by the Members.
7.6 Tax Returns. (a) Unless otherwise agreed to by the Management
Committee, the accounting firm for the Company selected in accordance with
Section 5.3(a) shall prepare and timely file (on behalf of the Company) all
federal, state and local tax returns required to be filed by the Company. Each
Member shall furnish to such accounting firm all pertinent information in its
possession relating to the Company's operations that is necessary to enable the
Company's tax returns to be timely prepared and filed. The Company shall bear
the costs of the preparation and filing if its returns.
(b) On or before November 1 of each year, the accounting firm
for the Company selected in accordance with Section 5.3(a) shall furnish to each
Member such federal, state and local income tax returns and such other
accounting, tax information and schedules as shall be necessary for the
preparation by each Member of its income tax return with respect to the
immediately-preceding year.
7.7 Tax Elections. The Company shall make the following elections on
the appropriate tax returns:
(a) to adopt as the Company's fiscal year the fiscal year of
Humko then in effect;
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(b) to adopt the accrual method of accounting;
(c) to elect, pursuant to Code Section 754, to adjust the
basis of the Company's properties;
(d) to elect to amortize the organizational expenses of the
Company ratably over a period of 60 months as permitted by Section 709(b) of the
Code; and
(e) any other election the Management Committee may deem
appropriate.
ARTICLE VIII
PLANNING AND BUDGETS
8.1 Annual Business Plan. By May of each year but subject to Section
8.5, the Company (through the Chief Executive Officer, the Chief Operating
Officer, Chief Financial Officer and the Chief Technology Officer) will prepare
and submit to each Member for review and approval a business plan of the Company
that will address the topics specified below, as well as such other topics as
may be reasonably requested by a Member. Such business plan will cover a
three-year period with specific budget focus on the first year, or such other
periods as the Members may otherwise establish by mutual agreement. Such
business plan will be developed pursuant to the schedule and requirements
established by the Management Committee from time to time. The topics to be
covered by such business plan shall include:
(i) proposed business objectives and strategies of
the Company;
(ii) proposed financial objectives of the Company;
(iii) proposed sales objectives of the Company;
(iv) proposed licensing objectives of the Company, if
any;
(v) proposed capital expenditures of the Company
(including any capital expenditures required to be paid by the Company pursuant
to any Related Agreement) and proposed methods for the financing thereof;
(vi) a summary of proposed operating budgets
(research and development, technical services, Manufacturing, toll processing,
sales, general and administrative, and including all expenses and payment
obligations of the Company pursuant to any Related Agreement) of the Company for
the ensuing year with a projection of costs for the next 3 years; and
(vii) any other matters required by the Management
Committee.
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8.2 Annual Budgets. As part of the preparation of each business plan,
the Company (through the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer and the Chief Technology Officer) will prepare an
operating budget showing monthly detail and a capital expenditure budget that
will provide additional detail on the aggregate items submitted in such business
plan for the next ensuing year. Such operating budget (as approved by the
Members) will be used to monitor the Company's actual financial performance for
the fiscal year. Each budget shall separately identify the source of funds to
meet the requirements of the proposed budget. Each budget will contain such
information and details as any Member may reasonably request.
8.3 Completion Date; Failure to Agree.
(a) The Members shall seek to agree on a final business plan,
capital expenditure plan and operating budget on or before sixty (60) days
immediately precedes the beginning of each fiscal year.
(b) If the Members do not agree on an operating budget for the
next fiscal year by July 1, then the prior year's operating budget will be used
until a new operating budget has been established by the Members.
(c) Notwithstanding any failure to agree on a new operating
budget or a new capital budget, each Member shall be obligated to contribute any
Capital Contributions that the Members agreed to make when they approved any
previously approved budgets.
8.4 Proposals for Nonbudgeted Capital Expenditures. In addition to the
capital expenditure budget prepared in accordance with this Article VIII, any
Member may from time to time propose a capital expenditure program for the
Company for any purpose, including without limitation to increase the production
capacity of the Company. Each such proposal shall identify the source of
funding, and the cost, time and benefits associated with the proposed capital
improvement. No such proposal shall be adopted without the vote of a Majority
Interest.
8.5 Initial Business Plan, Operating Budget and Capital Expenditure
Budget. As of the date hereof, no business plan, operating budget or capital
expenditure budget has been approved by the Management Committee. Within thirty
(30) days after the date hereof, the Officers of the Company shall present a
written business plan, operating budget and capital expenditure budget for
approval by the Management Committee. Until the Management Committee has
approved the initial operating budget and capital expenditure budget submitted
by the Officers of the Company, the Company shall only make expenditures in the
Ordinary Course of Business (subject to the restrictions contained in Section
4.1[e]), and in no event will any capital expenditures be made without the
approval of the Management Committee.
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ARTICLE IX
AGREEMENTS REGARDING CERTAIN OPERATIONS
9.1 Utilization of Production Capacity.
(a) The Company leases the Facility. Unless the Members agree
otherwise, it is the intent of the Members that all of the capacity of the
Facility will be used as much as commercially practicable before any new
production facilities or significant improvements at existing sites are
constructed, purchased or leased by the Company and before the Company makes any
commitments for additional capacity through a contract or otherwise with a third
party.
(b) The scheduling of the Company's production and the
operation of the Facility and the business of the Company will be coordinated by
InCon during the term of the Transition Services Agreement. Thereafter, such
scheduling shall be done pursuant to the directives of the party or parties
designated by the Management Committee.
9.2 Restrictions Relating to Certain Products and Materials. Until
April 8, 2001, the Company shall not (i) participate in any Competitive Activity
within the Territory, (ii) engage directly or indirectly in any Competitive
Activity within the Territory; or (iii) engage directly or indirectly in the
business of manufacturing, marketing, selling, or distributing [*] or any
combination of the foregoing, within the Territory.
ARTICLE X
LIABILITIES AND INDEMNIFICATION
10.1 Indemnity of Members by the Company.
(a) To the fullest extent permitted by applicable Law
(including as permitted by Section 18-108 of the Act), the Company shall
indemnify, defend and hold harmless each Member from and against any Claims and
Expenses incurred by such Member (i) as a result of its status as a Member or
owner of the Company, or (ii) by reason of any acts, omissions or alleged acts
or omissions arising out of or purportedly arising out of its activities as a
Member on behalf of the Company or activities of the Company; provided, however,
that in the case of (ii), the acts, omissions or alleged acts and omissions upon
which such Claims and Expenses are based were undertaken by such Member in good
faith and consistent with any applicable standard of care set forth in any
Related Agreement, were not outside of the scope of authority conferred upon
such Member by this Agreement or a Related Agreement, and were not performed or
omitted fraudulently or in bad faith or as a result of gross negligence or
willful misconduct by such Member. The foregoing indemnification specifically
includes all Claims and Expenses caused or alleged to be caused by the sole,
joint or concurrent negligence, contractual comparative negligence, or other
fault of such Member, but excludes any Claims and Expenses that (1) do not meet
the requirements of the proviso to the immediately preceding sentence, (2) are
referred to in Section 10.1(d) or (3) are related to any of the warranties,
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representations or obligations of InCon or any Affiliate of InCon under the
Master Formation Agreement, the Guaranty (as defined in the Master Formation
Agreement) or any of the Related Agreements. Accordingly, if Humko or the
Company asserts a claim or brings an action against InCon for any matter covered
under either the Master Formation Agreement or any of the Related Agreements or
both, as the case may be, then none of such matters shall be deemed to be
covered by this Section 10.1(a).
(b) Expenses that are incurred by a Member prior to the final
disposition of such Claim or Expense in connection with the investigation or
defense of a Claim or Expense (including civil or criminal action, suit,
proceeding or claim) to which it is entitled to indemnification, shall be paid
by the Company no less frequently than quarterly, provided (i) such Claim or
Expense relates to the performance of duties or services by the Member on behalf
of the Company or asserts liability against the Member as a result of its status
as a member or owner of the Company, and (ii) the Company receives an
undertaking by or on behalf of such Member to repay such amount unless it shall
ultimately be determined that such Member is entitled to be indemnified by the
Company as authorized by this Section, together with the undertaking of the
ultimate corporate parent of such Member of its obligations under such
undertaking.
(c) Any amounts payable to a Member pursuant to this Section
10.1 are recoverable only out of the assets of the Company and not from the
Members.
(d) Notwithstanding the provisions of this Section 10.1, no
Member shall be indemnified for any liability imposed by judgment, or a cost
associated therewith, including attorneys' fees, arising from or out of a
violation of any applicable Law, including any state or federal securities Laws
or rules, to the extent such indemnification is prohibited thereby.
(e) For purposes of this Section 10.1, the term "Member" shall
be deemed to include any Affiliate or Associate of such Member, and any owner,
Officer, director, employee or agent of such Member or its Affiliates and
Associates.
10.2 Claims by InCon's Employees. DURING THE TRANSITION PERIOD, THE
COMPANY SHALL INDEMNIFY, DEFEND AND HOLD INCON HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS AND EXPENSES INCURRED OR SUFFERED BY INCON BY OR ON BEHALF OF ANY
INDIVIDUAL EMPLOYED BY OR PROVIDING PERSONAL SERVICES TO THE COMPANY FOR ANY
MATTER ARISING FROM OR RELATED TO SUCH EMPLOYEE'S EMPLOYMENT WITH INCON WHILE
PROVIDING SERVICES TO THE COMPANY DURING THE TRANSITION PERIOD ONLY, INCLUDING
WITHOUT LIMITATION ANY PERSONAL INJURY, DEATH, DISABILITY, DISCRIMINATION OR
OTHER SIMILAR EMPLOYEE RELATIONS MATTER OR ANY MATTER RELATED TO PAYROLL OR
BENEFITS, AND INCLUDING SPECIFICALLY ANY CLAIM OR EXPENSE CAUSED OR ALLEGED TO
BE CAUSED BY THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, CONTRACTUAL COMPARATIVE
NEGLIGENCE OR OTHER FAULT OF INCON OTHER THAN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
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10.3 General Indemnity Provisions-Humko. With respect to the
indemnities provided in this Agreement, references to "Humko" as an indemnified
person includes Humko, and all of its Affiliates, and their respective owners,
directors, officers, agents, partners and employees.
10.4 General Indemnity Provisions-InCon. With respect to the
indemnities provided in this Agreement, references to "InCon" as an indemnified
person includes InCon, and all of its Affiliates, and their respective owners,
directors, officers, agents, partners and employees, subject to the terms and
provisions of Section 5.3(d) relating to gross negligence or willful misconduct
of Officers.
ARTICLE XI
DISPOSITIONS OF MEMBERSHIP INTERESTS
11.1 Dispositions of Membership Interests.
(a) Except as expressly permitted under this Article and
elsewhere in this Agreement including, without limitation, Section 4.5(d), a
Member may not Dispose of all or any portion of its Membership Interest in the
Company, except with the prior written consent of the other Member, which
consent may be granted or withheld in the Member's sole and absolute discretion,
with or without cause, and subject to such conditions as it shall deem
appropriate. Any attempted Disposition of all or any portion of a Membership
Interest, other than in strict accordance with this Article, shall be null and
void ab initio.
(b) For purposes of this Article XI only and subject to
Section 11.2, the terms "Disposition" or "Dispose" shall not include any sale,
assignment, transfer, conveyance or other disposition of any Membership Interest
to any Affiliates of a Member or any corporate reorganization involving only an
Affiliate or Affiliates of a Member.
11.2 Change of Control of InCon. For purposes of this Article XI, a
Disposition of shares or other ownership interest in InCon or the sole
shareholder of the capital stock of InCon, which results in a change of control
of InCon shall be deemed to constitute an assignment of InCon's Membership
Interest in the Company.
11.3 Preferential Right on Sales of Membership Interests. Subject to
the other provisions of this Article XI, either Member may Dispose of all of its
Membership Interest in accordance with this Section 11.3. Should either Member
at any time desire to Dispose of all (but no Member may Dispose of part of its
Membership Interest) of its Membership Interest, such Member (the "First
Member") shall promptly give notice thereof (the "Preferential Notice") to the
other Member (the "Second Member"). The Preferential Notice shall set forth all
relevant information in respect of the proposed Disposition, including without
limitation the name and address of the prospective transferee, the purchase
price, the terms of payment, and the proposed closing date. The Second Member
shall have the following rights (which shall be exercised by written notice to
the First Member given no later than thirty (30) days after the Second Member's
receipt of the Preferential Notice): (i) the preferential right to acquire, at
the same purchase price and upon the same terms and conditions as set forth in
the Preferential Notice, the Membership
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Interest of the First Member, or (ii) the right to consent to the proposed
Disposition to the party identified in the Preferential Notice upon the exact
terms and conditions set out in the Preferential Notice. If the optional right
described in the immediately preceding clause (i) is not exercised within such
thirty (30) day period, then the First Member may Dispose of its Membership
Interest to the prospective transferee named in the Preferential Notice for the
same purchase price and upon the same terms and conditions as therein set forth,
provided such transaction is consummated within sixty (60) days after the Second
Member's receipt of the Preferential Notice. Thereafter the First Member may not
consummate such transaction without again complying with the provisions of this
Section 11.3. As a condition to the validity of any sale of an interest in the
Company to a third party pursuant to this Section 11.3, prior to or concurrently
with the closing of such sale such third party shall execute such documents as
the Second Member may reasonably require pursuant to which the third party
becomes bound by all terms and provisions of this Agreement. Following any such
sale, the First Member shall be relieved of future liability hereunder, but
shall not be relieved of any liabilities arising prior to such sale. Any closing
of a sale of an interest from one Member to another pursuant to this Section
11.3 shall be held in accordance with the terms and provisions relative thereto
set forth in the Preferential Notice.
11.4 Buy-Sell Options. All the terms and provisions of this Article XI
are subject to the rights of the Members under Article XIV. Without limiting the
generality of the foregoing, any Member may exercise the rights set forth in
Article XIV notwithstanding the existence of a Preferential Notice.
ARTICLE XII
DISSOLUTION OF THE COMPANY
12.1 Dissolution. The affairs of the Company shall be wound-up (and
the Company dissolved and liquidated upon completion of such winding up) on the
first to occur of the following events:
(a) the unanimous consent of the Members;
(b) entry of a decree of judicial dissolution of the Company
under Section 18-802 of the Act;
(c) subject to Article XIV (and to the extent permitted by
applicable Law), the bankruptcy (as defined in Section 18-304 of the Act) or
dissolution of either Member (upon the occurrence of such a bankruptcy and prior
to the winding-up of the Company, the non-bankrupt Member shall have the right
to exercise the option described in Section 12.5);
(d) subject to Article XIV, at the written election of either
Member delivered to the other Member in accordance with the provisions of
Article XIII, following the Members' failure to resolve a Deadlock Event; or
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(e) subject to Article XIV, at the written election of a
non-defaulting Member if the other Member defaults in the performance of any
material obligation under this Agreement or the Master Formation Agreement and
such defaulting Member has not cured such default within 30 days, with respect
to defaults under this Agreement, and 30 days, with respect to defaults under
the Master Formation Agreement, of its receipt of a notice specifying such
default.
12.2 Deficit Capital Accounts. No Member shall be required to pay to
the Company, to any other Member or to any third party, any deficit balance that
may exist from time to time in such Member's capital account.
12.3 Winding-Up.
(a) On the occurrence of an event described in Section 12.1,
the Management Committee shall appoint a liquidator by vote of Majority
Interest. The liquidator shall proceed diligently to wind up the affairs of the
Company and make final distributions as provided herein and in the Act. The
costs of winding up shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties
with all of the power and authority of the Members. The steps to be accomplished
by the liquidator are as follows:
(i) as promptly as possible after dissolution and again after
final winding up, the liquidator shall cause a proper accounting to be
made by a recognized firm of certified public accountants of the
Company's assets, liabilities, and operations through the last calendar
day of the month in which the dissolution occurs or the final winding
up is completed, as applicable;
(ii) the liquidator shall discharge from Company funds all of
the indebtedness and other debts, liabilities and obligations of the
Company (including all expenses incurred in winding up and any loans
described in Sections 4.3 and 4.5) or otherwise make adequate
provision for payment and discharge thereof (including the
establishment of a cash escrow fund for contingent liabilities in such
amount and for such term as the liquidator may reasonably determine);
and
(iii) all remaining assets of the Company shall be distributed
to the Members in accordance with their Sharing Ratios.
(b) All assets of the Company shall be sold by the liquidator
and may be sold to Members, and the net proceeds derived from any such sale
shall be applied and distributed in the following order of priority:
(i) First, to the payment of any debts and liabilities of the
Company; and
(ii) Second, in the order and in the proportions set forth in
Section 6.2.
(c) The distribution of cash or property to a Member in
accordance with the provisions of this Section 12.3 constitutes a complete
return to the Member of its Capital
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Contributions and a complete distribution to the Member of its Membership
Interest and all the Company's property and constitutes a compromise to which
all Members have consented pursuant to Section 18-502(b) of the Act. To the
extent that a Member returns funds to the Company, it has no claim against any
other Member for those funds.
(d) On completion of such final distribution, the Members
shall file a Certificate of Cancellation with the Secretary of State of
Delaware, cancel any other filings made pursuant to Section 2.5, and take such
other actions as may be necessary to terminate the existence of the Company.
12.4 Effect of Dissolution on the Transition Services Agreement. Upon
the occurrence of any dissolution of the Company pursuant to Section 12.1, the
Transition Services Agreement shall be terminated.
12.5 Bankruptcy Remedies. Upon the bankruptcy (as defined in Section
18-304 of the Act) or dissolution of a Member, prior to the winding up of the
Company, the other Member shall have the sole and exclusive authority to manage
the Company and shall, further, have the right to elect to have the Company
continue its business, rather than be dissolved and liquidated.
12.6 No Consequential Damages. Except as expressly set forth in this
Agreement or the Related Agreements, no Member shall be responsible for any lost
profits or other consequential damages arising as a result of the breach of this
Agreement or any of the Related Agreements. In addition, no termination of the
Company shall relieve any Member from its indemnification obligations under this
Agreement or the Related Agreements.
ARTICLE XIII
DEADLOCK RESOLUTION PROCEDURES
13.1 Notice of Deadlock Issue. If the Members are in disagreement over
an issue that falls within the definition of Deadlock Issue, either Member may
initiate the procedures provided in this Article XIII by giving written notice
to the other Member and calling a special meeting in accordance with Section
13.2.
13.2 Special Meeting of Members. A special meeting of the Members to
consider the Deadlock Issue shall be convened not less than 30 days, nor more
than 60 days, after the notice described in Section 13.1.
13.3 Post-Meeting Time Period to Resolve Deadlock Issue. If the
Deadlock Issue remains unresolved after the date established by the notifying
Member in its notice delivered pursuant to Section 13.1, the Members shall
attempt to resolve the Deadlock Issue to their mutual satisfaction during the
120-day period immediately following such date.
13.4 Declaration of Deadlock Event.
(a) Under the circumstances described in Section 13.4(b), if a
Deadlock Issue is not resolved during the 120-day period described in Section
13.3 either Member may, within
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30 days after the expiration of such 120-day period, give written notice to the
other Member declaring a Deadlock Event with respect to the Deadlock Issue.
(b) A Deadlock Event under Section 13.4(a) may be declared a
Deadlock Event only if the notice required by Section 13.4(a) is properly given.
Otherwise, no Deadlock Event may be declared, and the Members shall be subject
to Section 13.5.
13.5 Failure to Declare Deadlock Event. If no Deadlock Event is, or
can be, declared under Section 13.4(a), the Deadlock Issue shall lapse, and
neither Member may thereafter give notice under Section 13.1 with respect to the
same issue until thirty (30) days has elapsed from the end of the 120-day period
specified in Section 13.3.
13.6 Post-Declaration Time Period to Resolve Deadlock Event. The
Members shall attempt to resolve the Deadlock Event to their mutual satisfaction
during the 30-day period immediately following the declaration of the Deadlock
Event.
13.7 Election to Dissolve Company. If the Deadlock Issue is not
resolved during the 30-day period described in Section 13.6, either Member may,
within 30 days immediately following that 30-day period give written notice to
the other Member exercising its right under Section 12.1(d) to dissolve the
Company.
13.8 Buy-Sell Option. All of the terms and provisions of this Article
XIII are subject to the rights of the Members under Article XIV. Without
limiting the generality of the foregoing, any Member may exercise the rights set
forth in Article XIV notwithstanding the existence of a Deadlock Issue or a
Deadlock Event.
ARTICLE XIV
BUY-SELL OPTION
14.1 Buy-Sell Notice. At any time, either Member (the "Triggering
Member") may send a notice (the "Buy-Sell Notice") to the other Member (the
"Receiving Member"). The Buy-Sell Notice shall constitute a binding offer by the
Triggering Member to take either of the following actions, pursuant to this
Article XIV: (a) sell all of its Membership Interest to the Receiving Member, or
(b) purchase all of the Membership Interest of the Receiving Member, in either
case for the cash price per Sharing Ratio percentage (the "Purchase Price") set
forth in the Buy-Sell Notice.
14.2 Actions by Receiving Member. No later than 60 days after the
giving of the Buy-Sell Notice to the Receiving Member, the Receiving Member
shall notify (the "Response Notice") the Triggering Member whether the Receiving
Member elects (a) to sell or (b) to purchase, in either case at the Purchase
Price. Failure to give the Response Notice within such 60-day period shall be
deemed to be an election to sell by the Receiving Member.
14.3 Closing. The closing of the sale and purchase in accordance with
this Article XIV shall occur at the principal place of business of the Company
on the 60th day after (a) the
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giving of the Response Notice or (b) after the date that the Receiving Member is
deemed to make an election to sell as set forth in Section 14.2 above, as the
case may be (or, if later, the fifth day after the receipt of all applicable
regulatory and governmental approvals to the purchase), unless the parties to
such closing agree upon a different place or date. At the closing, the following
shall occur:
(i) The Member purchasing the applicable Membership Interest
(the "Purchaser") shall pay to the Member selling such Membership
Interest (the "Seller") the Purchase Price.
(ii) The Seller shall transfer its Membership Interest to the
Purchaser by instrument of assignment, ▇▇▇▇ of sale and such other
instruments as shall be reasonably requested by the Purchaser, shall
warrant to the Purchaser that the Membership Interest sold is free and
clear of all legal and equitable claims of third parties and, if
requested to do so by the Purchaser, shall provide an opinion of
Seller's regular counsel stating that, in the opinion of such counsel,
the instruments and agreements delivered to the Purchaser by Seller
with respect to such sale are binding on the Seller.
14.4 Failure to Close. If the Purchaser shall fail to complete its
acquisition of the Seller's Membership Interest pursuant to Section 14.3 for
reasons other than the breach by the Seller of any of its obligations imposed on
it thereunder, the Seller may elect (a) to purchase the Purchaser's Membership
Interest for a price equal to 90% of the Purchase Price that the Purchaser would
have received if, instead of being the Purchaser, it had been the Seller there
under, with the closing of the purchase and sale of such Membership Interest
pursuant to this Section 14.4 to take place within 90 days after notice is given
by the Seller to the Purchaser of its election to apply this Section 14.4, which
notice must be given within 60 days of such failure by Purchaser, or (b) to
cancel the Buy-Sell Notice or the Response Notice, as the case may be.
ARTICLE XV
GENERAL PROVISIONS
15.1 Notices. Any and all notices to any of the parties hereto
provided for or permitted under this Agreement or by Law shall be given in
writing by personal delivery, telecopier, overnight delivery service, or by
certified or registered mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below, and shall be effective
upon actual receipt or, if given by certified or registered mail, as of three
(3) days after the date of mailing:
(a) If to InCon: InCon Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
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▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to Bionutrics: Bionutrics, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ Siegelbaum LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to Humko: AC HUMKO CORP.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
- and-
AC HUMKO CORP.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Counsel
With copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
2500 First City Tower
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Any party may change its address or add or change parties for receiving notice
by written notice given to the other names above in the manner required above.
15.2 Entire Agreement; Supersedure; Amendment; Written Consents and
Agreements. This Agreement and the Related Agreements constitute the entire
agreement of the Members relating to the Company and supersede all prior
contracts or agreements with respect to the Company, whether oral or written.
This Agreement and the Related Agreements may be amended only by a written
instrument signed by an authorized representative of each Member.
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No consent, agreement or approval of a Member that is contemplated under this
Agreement shall be valid unless in writing and signed by such Member.
15.3 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any person in the performance by that
person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that person of the
same or any other obligations of that person with respect to the Company.
15.4 Amendments of Certificate and Regulations. The Certificate and
this Agreement may be amended or restated only with the unanimous approval of
the Members.
15.5 Binding Effect. Subject to the restrictions on Dispositions set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the Members and their respective heirs, legal representatives, successors,
and assigns.
15.6 Governing Law. THIS AGREEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE.
15.7 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other persons or circumstances is not affected thereby and
that provision shall be enforced to the greatest extent permitted by applicable
Law.
15.8 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
15.9 Press Releases. During the term of this Agreement, each Member
shall consult with the Company and each other regarding the development and
distribution of all news releases and other public disclosure regarding any
aspect of the Company or its business, and no such press release shall be issued
without the approval of both Members.
15.10 Trademarks. Unless expressly permitted by a Member or otherwise
covered in the Master Formation Agreement, neither Member nor the Company may
use the trademark or designs of the other Member or Company, as the case may be.
No Member shall have any obligation to license any of its trademarks to the
Company or the other Member.
15.11 Conflicts Between this Agreement and a Related Agreement. In the
event of a conflict between a provision contained in this Agreement and a
provision contained in the Master Formation Agreement, the provision contained
in the Master Formation Agreement shall prevail. In the event of a conflict
between a provision contained in the Agreement and a provision contained in
another Related Agreement, the provision contained in this Agreement shall
prevail.
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15.12 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute the same instrument.
IN WITNESS WHEREOF, the parties below have executed this Agreement as
of the date first set forth above.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
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MEMBERS:
AC HUMKO CORP., a Delaware corporation
By
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President & CEO
"HUMKO"
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INCON TECHNOLOGIES, INC., a Delaware
corporation
By
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
"INCON"
[SIGNATURE PAGE 2 TO MEMBERS AGREEMENT]
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