EXHIBIT 3.2
OPERATING AGREEMENT
FOR
IMPERIAL CREDIT FRANCHISE MORTGAGE LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
This Operating Agreement, is made as of June 30, 1995, by and between the
parties listed on the signature pages hereof, with reference to the following
facts:
A. On June 30, 1995, Articles of Organization for IMPERIAL CREDIT
FRANCHISE MORTGAGE LLC (the "Company"), a limited liability company organized
under the laws of the State of California, were filed with the California
Secretary of State.
B. The parties desire to adopt and approve an operating agreement for the
Company.
NOW, THEREFORE, the parties by this Agreement set forth the operating
agreement for the Company under the laws of the State of California upon the
terms and subject to the conditions of this Agreement.
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article I shall have the meanings set forth elsewhere in this Agreement):
1.1 "Act" shall mean the ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Limited Liability Company Act,
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codified in the California Corporations Code, Section 17000 et seq., as the same
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may be amended from time to time.
1.2 "Affiliate" of a Member or Manager shall mean any Person, directly or
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indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with a Member or Manager, as applicable. The term
"control," as used in the immediately preceding sentence, shall mean with
respect to a corporation or limited liability company the right to exercise,
directly or indirectly, more than fifty percent (50%) of the voting rights
attributable to the controlled corporation or limited liability company, and,
with respect to any individual, partnership, trust, other entity or association,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled entity.
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1.3 "Agreement" shall mean this Operating Agreement, as originally
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executed and as amended from time to time.
1.4 "Assignment and Assumption" shall mean that Assignment and Assumption
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of Asset Rights by and between the Company and FMAC dated as of June 30, 1995
relating to the Transferred Interests.
1.5 "Articles" shall mean the Articles of Organization for the Company
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originally filed with the California Secretary of State and as amended from time
to time.
1.6 "Assignee" shall mean the owner of an Economic Interest who has not
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been admitted as a substitute Member in accordance with Article VII.
1.7 "Bankruptcy" shall mean: (a)the filing of an application by a Member
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for, or his or her consent to, the appointment of a trustee, receiver, or
custodian of his or her other assets; (b) the entry of an order for relief with
respect to a Member in proceedings under the United States Bankruptcy Code, as
amended or superseded from time to time; (c) the making by a Member of a general
assignment for the benefit of creditors; (d) the entry of an order, judgment, or
decree by any court of competent jurisdiction appointing a trustee, receiver, or
custodian of the assets of a Member unless the proceedings and the person
appointed are dismissed within ninety (90) days; or (e) the failure by a Member
generally to pay his or her debts as the debts become due within the meaning of
Section 303(h)(1) of the United States Bankruptcy Code, as determined by the
Bankruptcy Court, or the admission in writing of his or her inability to pay his
or her debts as they become due.
1.8 "Capital Account" shall mean with respect to any Member the capital
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account which the Company establishes and maintains for such Member pursuant to
Section 3.3.
1.9 "Capital Contribution" shall mean the total amount of cash and fair
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market value of property contributed to the Company by Members.
1.10 "Closing Date" shall have the meaning ascribed to it in Section
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8.9.2.
1.11 "Code" shall mean the Internal Revenue Code of 1986, as amended from
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time to time, the provisions of succeeding law, and to the extent applicable,
the Regulations.
1.12 "Company" shall mean Imperial Credit Franchise Mortgage LLC, a
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California limited liability company.
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1.13 "Company Minimum Gain" shall have the meaning ascribed to the term
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"Partnership Minimum Gain" in the Regulations Section 1.704-2(d).
1.14 "Corporations Code" shall mean the California Corporations Code, as
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amended from time to time, and the provisions of succeeding law.
1.15 "Dissolution Event" shall mean with respect to any Member one or more
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of the following: the death, insanity, withdrawal, resignation, retirement,
expulsion, Bankruptcy or dissolution of any Member.
1.16 "Distributable Cash" shall mean the amount of cash to be distributed
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to the Members as provided in this Agreement.
1.17 "Economic Interest" shall mean the right to receive distributions of
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the Company's assets and allocations of income, gain, loss, deduction, credit
and similar items from the Company pursuant to this Agreement and the Act, but
shall not include any other rights of a Member, including, without limitation,
the right to vote or participate in the management of the Company, or except as
provided in Section 17106 of the Corporations Code, any right to information
concerning the business and affairs of the Company.
1.18 "Enforceability Exceptions" means bankruptcy, insolvency,
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reorganization, moratorium or other similar laws now or hereafter in effect
affecting generally the enforcement of creditors' rights.
1.19 "Employment Agreement" shall mean that Employment Agreement dated as
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of June 30, 1995 by and between Knyal and the Company.
1.20 "Fiscal Year" shall mean the Company's fiscal year, which shall be
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the calendar year.
1.21 "FMAC" means Franchise Mortgage Acceptance Corporation, a California
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corporation.
1.22 "Former Member" shall have the meaning ascribed to it in Section 8.1.
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1.23 "Former Member's Interest" shall have the meaning ascribed to it in
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Section 8.1.
1.24 "GAAP Income" shall mean the income of the Company determined in
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accordance with generally accepted accounting principles; provided, however,
that, in any event and whether or not recognized in accordance with such
principles, the present value of any equity, debt, or other interests retained
by the Company in any loans, leases or
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other financial accommodations which are securitized, sold or otherwise disposed
of by the Company shall be included in the income of the Company in the year in
which any such securitization, sale or disposition occurs.
1.25 "ICII" shall mean Imperial Credit Industries, Inc., a California
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corporation.
1.26 "Knyal" shall mean ▇▇▇▇▇ ▇▇▇▇▇, an individual.
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1.27 "Law" means any federal, state, local or foreign law (including
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common law), statute, code, ordinance, rule, or regulation, including but not
limited to the Truth-in-Lending Act.
1.28 "Legal Proceeding" means any judicial, administrative or arbitral
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action, suit, proceeding (public or private), claim, investigation or
governmental proceeding.
1.29 "Lien" means any lien, pledge, mortgage, deed of trust, security
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interest, claim, lease, charge, option, right of first refusal, easement or
other real estate declaration, covenant, condition, restriction or servitude,
transfer restriction under any shareholder or similar agreement or encumbrance.
1.30 "Majority Interest" shall mean those Members who hold a majority of
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the Percentage Interests which all Members hold.
1.31 "Manager" shall mean each of the persons listed on Exhibit A to this
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Agreement or any other persons that succeed any of them as a Manager of the
Company.
1.32 "Member" shall mean each Person who (a) is an initial signatory to
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this Agreement, has been admitted to the Company as a Member in accordance with
the Articles or this Agreement or is an Assignee who has become a Member in
accordance with Article VII, and (b) has not become the subject of a Dissolution
Event or ceased to be a Member in accordance with Article VIII or for any other
reasons.
1.33 "Member Nonrecourse Debt" shall have the meaning ascribed to the term
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"Partner Nonrecourse Debt" in Regulations Section 1.704-2(b)(4).
1.34 "Member Nonrecourse Deductions" shall mean items of Company loss,
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deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to
Member Nonrecourse Debt.
1.35 "Membership Interest" shall mean a Member's entire interest in the
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Company including the Member's Economic Interest, the right to vote on or
participate in the management, and the right to receive information concerning
the business and affairs, of the Company.
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1.36 "Net Profits" and "Net Losses" shall mean the income, gain, loss and
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deductions of the Company in the aggregate or separately stated, as appropriate,
determined in accordance with the method of accounting at the close of each
Fiscal Year on the Company's information tax return filed for federal income tax
purposes.
1.37 "Nonrecourse Liability" shall have the meaning set forth in
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Regulations Section 1.752-1(a)(2).
1.38 "Order" means any order, injunction, judgment, decree, ruling, writ,
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assessment or arbitration award.
1.39 "Percentage Interest" shall mean the percentage of a Member set forth
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opposite the name of such Member under the column "Member's Percentage Interest"
in Exhibit A hereto, as such percentage may be adjusted from time to time
pursuant to the terms of this Agreement.
1.40 "Permit" means any written approval, authorization, consent
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franchise, license, permit or certificate by any Governmental Body.
1.41 "Person" shall mean an individual, partnership, limited partnership,
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limited liability company, corporation, trust, estate, association or any other
entity.
1.42 "Regulations" shall, unless the context clearly indicates otherwise,
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mean the regulations in force as final or temporary that have been issued by the
U.S. Department of Treasury pursuant to its authority under the Code, and any
successor regulations.
1.43 "Remaining Members" shall have the meaning ascribed to it in Section
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8.1.
1.44 "Sale Option" shall have the meaning ascribed to it in Section 8.9.2.
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1.45 "Transferred Interests" shall mean all of FMAC's rights, duties and
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obligations in, to and under (i) that certain Servicing Agreement dated as of
September 1, 1991, by and among FMAC, as Servicer, Franchisee Loan Receivables
Trust 1991-A, as Association, as Bond Trustee, and all other agreements,
instruments and arrangements entered into by FMAC in connection therewith (the
"Servicing Contract"), (ii) all transferable rights in any software, including
any licenses or warranties, necessary to the performance of the servicing
obligations under the Servicing Contract that FMAC owns and or has any rights
with respect to, and (iii) the name "Franchise Mortgage Acceptance Corporation"
and all goodwill attributable thereto and associated therewith.
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ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. The Members have formed a California limited liability
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company under the laws of the State of California by filing the Articles with
the California Secretary of State and entering into this Agreement. The rights
and liabilities of the Members shall be determined pursuant to the Act and this
Agreement. To the extent that the rights or obligations of any Member are
different by reason of any provision of this Agreement than they would be in the
absence of such provision, this Agreement shall, to the extent permitted by the
Act, control.
2.2 Name. The name of the Company shall be "Imperial Credit Franchise
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Mortgage LLC", which name shall be changed to Franchise Mortgage Acceptance
Company LLC as, if and when such name is available for use by the Company. The
business of the Company may be conducted under that name or any other name that
the Managers deem appropriate or advisable.
2.3 Term. The term of this Agreement commenced on the filing of the
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Articles and shall continue until June 30, 2045, unless extended or sooner
terminated as hereinafter provided.
2.4 Office and Agent. The Company shall continuously maintain an office
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and registered agent in the State of California. The principal office of the
Company shall be ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such
location as the Managers may determine. The registered agent shall be as stated
in the Articles or as otherwise determined by the Managers.
2.5 Purpose and Business of the Company. The purpose of the Company is to
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engage in any lawful activity for which a limited liability company may be
organized under the Act. Notwithstanding the foregoing, without the consent of
all of the Members, the Company shall not engage in any business other than, the
following:
2.5.1 The business of originating loans, leases and other financial
accommodations and providing equity and making investments, directly or
indirectly, and selling insurance to or in franchisees or other groups of
businesses having a common trade name, sponsoring organization or other common
theme similar to a franchise;
2.5.2 The servicing and monitoring of any such loans, leases, other
financial accommodations, equity arrangements and investments; and
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2.5.3 Such other activities directly related to and in furtherance of
the foregoing business as may be necessary, advisable, or appropriate, in the
reasonable opinion of the Managers.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions. Each Member shall contribute such
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amount as is set forth in Exhibit A as his or her initial Capital Contribution,
which Exhibit A shall be revised to reflect any additional contributions made in
accordance with Section 3.2.
3.2 Additional Capital Contributions. No Member shall be required to make
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any additional Capital Contributions.
3.3 Capital Accounts. The Company shall establish and maintain an
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individual Capital Account for each Member in accordance with Regulations
Section 1.704-1(b)(2)(iv). If a Member transfers all or a part of his or her
Membership Interest in accordance with this Agreement, such Member's Capital
Account attributable to the transferred Membership Interest shall carry over to
the new owner of such Membership Interest pursuant to Regulations Section 1.704-
1(b)(2)(iv)(1).
3.4 No Interest. No Member shall be entitled to receive any interest on
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his or her Capital Contributions.
3.5 Issuance of Additional Membership Interests.
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3.5.1 The Company shall not issue additional Membership Interests
without the consent of all of the Members, except that a Majority Interest may
approve the issuance of additional Membership Interests in: (i) any public
offering of Membership Interests pursuant to a Registration Statement filed
under the Securities Act of 1933, as amended; or (ii) any other offering of
Membership Interests provided that no Member nor its Affiliates shall directly
or indirectly purchase any Membership Interests in any such offering and there
shall be no understanding or agreement in effect as a result of which a Member
or any of its Affiliates shall be entitled to purchase any such additional
Membership Interests which are purchased by other Persons.
3.5.2 Any additional Members shall obtain Membership Interests and
will participate in the Net Profits, Net Losses and distributions of the Company
on such terms as are determined by the Managers and approved by all of the
Members or a Majority Interest in those cases where a Majority Interest is
entitled to approve the issuance of additional Membership Interests as provided
in Section 3.5.1. Any additional Members
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shall be required to agree to be bound by the terms of this Agreement, and the
issuance of Membership Interests to such Members shall not be effective unless
and until the purchaser agrees in writing to be so bound.
ARTICLE IV
MEMBERS
4.1 Admission of Additional Members. Except as otherwise set forth
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herein, the Managers may not admit to the Company additional Members. Assignees
may only be admitted as substitute Members in accordance with Article VII.
4.2 Withdrawals or Resignations.
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4.2.1 Any Member may withdraw or resign as a Member at any time upon
one hundred twenty (120) days prior written notice to the Company, without
prejudice to the rights, if any, of the Company or the other Members under any
contract to which the withdrawing Member is a party. In the event of such
withdrawal, such Member's Membership Interest shall terminate pursuant to
Section 4.3 other than as set forth herein.
4.2.2 Notwithstanding the foregoing, if Knyal's employment with the
Company is terminated pursuant to Sections 2.2(b), (e), (f) or (g) of the
Employment Agreement or as a result of the Company giving a notice pursuant to
Section 2.1 of the Employment Agreement not to renew the Employment Agreement,
then Knyal (or his legal representatives) shall, for a period of twenty-four
(24) months from the last day of Knyal's employment, have the right to require
the Company to purchase Knyal's Membership Interest which shall be purchased by
the Company as provided in Article VIII. Such right shall be exercised by
written notice given within such 24 month period by Knyal (or his legal
representatives) to the Company of his intention to exercise the "put" set forth
in this Section 4.2.2.
4.2.3 Notwithstanding the foregoing, if Knyal's employment with the
Company is terminated pursuant to Sections 2.2(a), (b), (d), (e) or (f) of the
Employment Agreement or as a result of Knyal's giving a notice pursuant to
Section 2.1 of the Employment Agreement not to renew the Employment Agreement,
then the Company (and/or its designee) shall, for a period of twenty-four (24)
months from the last day of Knyal's employment, have the right to require Knyal
(or his legal representatives) to sell the Company (and/or its designee) Knyal's
Membership Interest which shall be sold by Knyal (or his legal representatives)
as provided in Article VIII. Such right shall be exercised by written notice
given within such 24 month period by the Company (and/or its designee) to Knyal
(or his legal representatives) of its intention to exercise the "call" set forth
in this Section 4.2.3.
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4.3 Termination of Membership Interest. Upon (a) the transfer of a
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Member's Membership Interest in violation of Article VII, (b) the occurrence of
a Dissolution Event as to such Member which does not result in the dissolution
of the Company under Article X, or (c) the withdrawal or resignation of a Member
in accordance with Section 4.3, the Membership Interest of a Member shall be
terminated by the Managers and thereafter that Member shall be an Assignee only
unless such Membership Interest shall be purchased by the Company and/or
remaining Members as provided in Article VIII. Each Member acknowledges and
agrees that such termination or purchase of a Membership Interest upon the
occurrence of any of the foregoing events is not unreasonable under the
circumstances existing as of the date hereof. Notwithstanding the foregoing,
upon termination of Knyal's employment with the Company under the Employment
Agreement, then Knyal shall be deemed to have withdrawn as of the date that his
Membership Interest is purchased or sold, as the case may be, in accordance with
Article VIII.
4.4 Transactions With The Company. Subject to any limitations set forth
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in this Agreement and with the prior approval of the Managers, a Member may lend
money to and transact other business with the Company, so long as such
transaction is not expressly prohibited by this Agreement and so long as the
terms and conditions of such transaction, on an overall basis, are fair and
reasonable to the Company and are at least as favorable to the Company as those
that are generally available from Persons capable of similarly performing them
and in similar transactions between parties operating at arm's length. Subject
to other applicable law, such Member has the same rights and obligations with
respect thereto as a Person who is not a Member.
4.5 Remuneration To Members. Except as otherwise specifically provided in
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this Agreement and the Employment Agreement, no Member is entitled to
remuneration for acting in the Company business.
4.6 Voting Rights. Except as expressly provided in this Agreement or the
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Articles, Members shall have no voting, approval or consent rights. Members
shall have the right to approve or disapprove matters as specifically stated in
this Agreement, including the following:
4.6.1 Unanimous Approval. The following matters (in addition to
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those otherwise expressly set forth herein) shall require the unanimous vote,
approval or consent of all Members who are not the subject of a Dissolution
Event or an assignor of a Membership Interest:
(i) Except as otherwise set forth herein, the transfer of a
Membership Interest and admission of the Assignee as a Member of the Company in
accordance with Article VII;
(ii) Any amendment of the Articles; and
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(iii) A decision to compromise the obligation of a Member to
return money or property paid or distributed in violation of the Act.
4.6.2 Approval by Members Holding a Majority Interest. Except as set
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forth in Section 5.3.2 or in any other provision of this Agreement, in all other
matters in which a vote, approval or consent of the Members is required, a vote,
consent or approval of a Majority Interest (or, in instances in which there are
defaulting or remaining members, non-defaulting or remaining Members who hold a
majority of the Percentage Interests held by all non-defaulting or remaining
Members) shall be sufficient to authorize or approve such act.
4.6.3 Other Voting Rights. Besides the rights granted in Section
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4.6.1, Members may vote, consent or approve to the extent and on the terms
provided in this Agreement in the following Sections:
(i) Section 3.2 on additional Capital Contributions;
(ii) Section 3.5 on admission of new Members;
(iii) Section 5.2 on election and removal of a Manager;
(iv) Section 5.3.2 on a change in the purpose or business of
the Company;
(v) Section 5.3.2 on reorganization of the Company;
(vi) Section 5.3.2 on other limitations on the Managers'
authority;
(vii) Section 5.6 on transactions with the Managers and
Affiliates of the Managers;
(viii) Section 10.1 on dissolving the Company; and
(ix) Section 11.1 on indemnification by the Company.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Managers.
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5.1.1 Exclusive Management by Managers. Subject to the provisions of
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this Agreement relating to actions required to be approved by the Members, the
business,
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property and affairs of the Company shall be managed and all powers of the
Company shall be exercised by or under the direction of the Managers.
5.1.2 Meetings of Managers. Meetings of the Managers may be called
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by any Manager. All meetings shall be held upon four (4) days notice by mail or
forty-eight (48) hours notice (or upon such shorter notice period if necessary
under the circumstances) delivered personally or by telephone, telegraph or
facsimile. A notice need not specify the purpose of any meeting. Notice of a
meeting need not be given to any Manager who signs a waiver of notice or a
consent to holding the meeting (which waiver or consent need not specify the
purpose of the meeting) or an approval of the minutes thereof, whether before or
after the meeting, or who attends the meeting without protesting, prior to its
commencement, the lack of notice to such Manager. All such waivers, consents
and approvals shall be filed with the Company records or made a part of the
minutes of the meeting. A majority of the Managers present, whether or not a
quorum is present, may adjourn any meeting to another time and place. If the
meeting is adjourned for more than twenty-four (24) hours, notice of any
adjournment shall be given prior to the time of the adjourned meeting to the
Managers who are not present at the time of the adjournment. Meetings of the
Managers may be held at any place within or without the State of California
which has been designated in the notice of the meeting or at such place as may
be approved by the Managers. Managers may participate in a meeting through use
of conference telephone or similar communications equipment, so long as all
Managers participating in such meeting can hear one another. Participation in a
meeting in such manner constitutes a presence in person at such meeting. A
majority of the authorized number of Managers constitutes a quorum of the
Managers for the transaction of business. Except to the extent that this
Agreement expressly requires the approval of all Managers, every act or decision
done or made by a majority of the Managers present at a meeting duly held at
which a quorum is present is the act of the Managers. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of Managers, if any action taken is approved by at least a
majority of the required quorum for such meeting.
Any action required or permitted to be taken by the Managers may be
taken by the Managers without a meeting, if all of the Managers individually or
collectively consent in writing to such action. Such action by written consent
shall have the same force and effect as a unanimous vote of such Managers.
The provisions of this Section 5.1.2 govern meetings of the Managers
if the Managers elect, in their discretion, to hold meetings. However, nothing
in this Section 5.1.2 or in this Agreement is intended to require that meetings
of Managers be held, it being the intent of the Members that meetings of
Managers are not required.
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5.2 Election of Managers.
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5.2.1 Number, Term, and Qualifications. During the term of this
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Agreement, the authorized number of Managers shall consist of not less than
seven (7) nor more than nine (9); three (3) of the Managers shall be selected by
Knyal and the remaining Managers shall be selected by ICII; provided, however,
that in the event that either of Knyal or ICII ceases to be a Member, his/its
rights to the election of Managers under this Section 5.2.1 shall terminate.
The number of Managers of the Company shall be fixed from time to time by the
affirmative vote or written consent of a Majority Interest; the number of
Managers will initially be seven (7). In no instance shall there be less than
one Manager and provided further that if the number of Managers is reduced from
more than one to one the Articles shall be amended to so state, and if the
number of Managers is increased to more than one, the articles shall be amended
to delete the statement that the Company has only one Manager. Unless he or she
resigns or is removed, each Manager shall hold office for a term of five years.
A Manager need not be a Member, an individual, a resident of the State of
California, or a citizen of the United States.
5.2.2 Resignation. Any Manager may resign at any time by giving
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written notice to the Members and remaining Managers without prejudice to the
rights, if any, of the Company under any contract to which the Manager is a
party. The resignation of any Manager shall take effect upon receipt of that
notice or at such later time as shall be specified in the notice. Unless
otherwise specified in the notice, the acceptance of the resignation shall not
be necessary to make it effective. The resignation of a Manager who is also a
Member shall not affect the Manager's rights as a Member and shall not
constitute a withdrawal of a Member.
5.2.3 Removal. Any Manager may be removed at any time, with cause,
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by the affirmative vote of a Majority Interest at a meeting called expressly for
that purpose. Any removal shall be without prejudice to the rights, if any, of
the Manager under any employment contract and, if the Manager is also a Member,
shall not affect the Manager's rights as a Member or constitute a withdrawal of
a Member. For purpose of this Section, "cause" shall mean fraud, embezzlement by
the Manager concerning the Company or a breach of such Manager's obligations,
willful misconduct or gross negligence, which breach, willful misconduct or
gross negligence relates to the Manager's activities concerning the Company and
have not been cured within 30 days after written notice given by a majority of
the Managers specifying such breach, willful misconduct or gross negligence.
5.2.4 Vacancies. Any vacancy occurring for any reason in the number
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of Managers may be filled by the affirmative vote or written consent of the
Member entitled to select such Manager in accordance with Section 5.2.1, or if a
Member is not accorded the right to fill such vacancy in accordance with Section
5.2.1, then by a Majority Interest.
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5.3 Powers of Managers.
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5.3.1 Powers of Managers. Without limiting the generality of Section
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5.1, but subject to Section 5.3.2 and to the express limitations set forth
elsewhere in this Agreement, the Managers shall have all necessary powers to
manage and carry out the purposes, business, property, and affairs of the
Company, including, without limitation, the power to exercise on behalf and in
the name of the Company all of the powers described in Corporations Code Section
17003.
5.3.2 Limitations on Power of Managers. Notwithstanding any other
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provisions of this Agreement, no debt or liability of more than $10,000 may be
contracted on behalf of the Company except by the written consent of all
Managers. Additionally, the Managers shall not have authority hereunder to
cause the Company to engage in the following transactions without first
obtaining the affirmative vote or written consent of all of the Members:
(i) The sale, exchange or other disposition of all, or
substantially all, of the Company's assets occurring as part of a single
transaction or plan, or in multiple transactions over a twelve (12) month
period, except in the orderly liquidation and winding up of the business of the
Company upon its duly authorized dissolution;
(ii) The merger of the Company with another limited liability
company or limited partnership;
(iii) The merger of the Company with a corporation or a
general partnership or other Person;
(iv) The establishment of different classes of Members;
(v) An alteration of the primary purpose or business of the
Company as set forth in Section 2.5;
(vi) The lending of money by the Company to any Manager,
Member, Affiliate or officer;
(vii) Any act which would make it impossible to carry on the
ordinary business of the Company;
(viii) The confession of a judgment against the Company;
(ix) To file a bankruptcy petition on behalf of the Company;
and
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(x) Any other transaction described in this agreement as
requiring the vote, consent, or approval of the Members in which case the vote
required will be as specified in the provision of this Agreement requiring such
vote, approval or consent.
5.4 Performance of Duties; Liability of Managers. Except as may otherwise
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be provided in the Employment Agreement, a Manager shall not be liable to the
Company or to any Member for any loss or damage sustained by the Company or any
Member, unless the loss or damage shall have been the result of fraud, deceit,
gross negligence, reckless or intentional misconduct, or a knowing violation of
law by the Manager.
5.5 Devotion of Time. Except as may otherwise be provided in the
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Employment Agreement, the Managers are not obligated to devote all of their time
or business efforts to the affairs of the Company. The Managers shall devote
whatever time, effort, and skill as they deem appropriate for the operation of
the Company.
5.6 Transactions between the Company and the Managers. Notwithstanding
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that it may constitute a conflict of interest, the Managers may, and may cause
their Affiliates to, engage in any transaction (including, without limitation,
the purchase, sale, lease, or exchange of any property or the rendering of any
service, or the establishment of any salary, other compensation, or other terms
of employment) with the Company so long as such transaction is not expressly
prohibited by this Agreement and so long as the terms and conditions of such
transaction, on an overall basis, are fair and reasonable to the Company and are
at least as favorable to the Company as those that are generally available from
Persons capable of similarly performing them and in similar transactions between
parties operating at arm's length.
5.7 Liability of Manager Limited to Manager's Assets. Under no
------------------------------------------------
circumstances will any director, officer, shareholder, member, manager, partner,
employee, agent or Affiliate of any Manager have any personal responsibility for
any liability or obligation of the Manager (whether on a theory of alter ego,
piercing the corporate veil, or otherwise), and any recourse permitted under
this Agreement or otherwise of the Members, any former Member or the Company
against a Manager will be limited to the assets of the Manager as they may exist
from time to time.
5.8 Payments to Managers. Except as specified in this Agreement, no
--------------------
Manager or Affiliate of a Manager is entitled to remuneration for services
rendered or goods provided to the Company.
5.9 Officers. The Managers may appoint officers at any time. The
--------
officers shall serve at the pleasure of the Managers, subject to all rights, if
any, of an officer under any contract of employment. Any individual may hold
any number of offices. The officers shall exercise such powers and perform such
duties as specified in this Agreement and as shall be determined from time to
time by the Managers.
14
5.10 Limited Liability. No person who is a Manager or officer or both a
-----------------
Manager and officer of the Company shall be personally liable under any judgment
of a court, or in any other manner, for any debt, obligation, or liability of
the Company, whether that liability or obligation arises in contract, tort, or
otherwise, solely by reason of being a Manager or officer or both a Manager and
officer of the Company.
5.11 Membership Interests of Managers. Except as otherwise provided in
--------------------------------
this Agreement, Membership Interests held by the Managers as Members shall
entitle each Manager to all the rights of a Member, including without limitation
the economic, voting, information and inspection rights of a Member.
ARTICLE VI
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS
6.1 Allocations of Net Profit and Net Loss.
--------------------------------------
6.1.1 Net Loss. Net Loss shall be allocated to the Members in
--------
proportion to their Percentage Interests.
Notwithstanding the previous sentence, loss allocations to a Member shall
be made only to the extent that such loss allocations will not create a deficit
Capital Account balance for that Member in excess of an amount, if any, equal to
such Member's share of Company Minimum Gain. Any loss not allocated to a Member
because of the foregoing provision shall be allocated to the other Members (to
the extent the other Members are not limited in respect of the allocation of
losses under this Section 6.l.1). Any loss reallocated under this Section 6.1.1
shall be taken into account in computing subsequent allocations of income and
losses pursuant to this Article VI, so that the net amount of any item so
allocated and the income and losses allocated to each Member pursuant to this
Article VI, to the extent possible, shall be equal to the net amount that would
have been allocated to each such Member pursuant to this Article VI if no
reallocation of losses had occurred under this Section 6.1.1.
6.1.2 Net Profit. Net Profit shall be allocated to the Members in
----------
proportion to their Percentage Interests.
6.2 Special Allocations. Notwithstanding Section 6.1:
-------------------
6.2.1 Minimum Gain Chargeback. If there is a net decrease in Company
-----------------------
Minimum Gain during any Fiscal Year, each Member shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary, in
subsequent fiscal years) in an amount equal to the portion of such Member's
share of the net decrease in
15
Company Minimum Gain that is allocable to the disposition of Company property
subject to a Nonrecourse Liability, which share of such net decrease shall be
determined in accordance with Regulations Section 1.704-2(g)(2). Allocations
pursuant to this Section 6.2.1 shall be made in proportion to the amounts
required to be allocated to each Member under this Section 6.2.1. The items to
be so allocated shall be determined in accordance with Regulations Section
1.704-2(f). This Section 6.2.1 is intended to comply with the minimum gain
chargeback requirement contained in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.
6.2.2 Chargeback of Minimum Gain Attributable to Member Nonrecourse
-------------------------------------------------------------
Debt. If there is a net decrease in Company Minimum Gain attributable to a
----
Member Nonrecourse Debt, during any Fiscal Year, each member who has a share of
the Company Minimum Gain attributable to such Member Nonrecourse Debt (which
share shall be determined in accordance with Regulations Section 1.704-2(i)(5))
shall be specially allocated items of Company income and gain for such Fiscal
Year (and, if necessary, in subsequent Fiscal Years) in an amount equal to that
portion of such Member's share of the net decrease in Company Minimum Gain
attributable to such Member Nonrecourse Debt that is allocable to the
disposition of Company property subject to such Member Nonrecourse Debt (which
share of such net decrease shall be determined in accordance with Regulations
Section 1.704-2(i)(5)). Allocations pursuant to this Section 6.2.2 shall be made
in proportion to the amounts required to be allocated to each Member under this
Section 6.2.2. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 6.2.2 is intended to comply
with the minimum gain chargeback requirement contained in Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
6.2.3 Nonrecourse Deductions. Any nonrecourse deductions (as defined
----------------------
in Regulations Section 1.704-2(b)(1)) for any Fiscal Year or other period shall
be specially allocated to the Members in proportion to their Percentage
Interests.
6.2.4 Member Nonrecourse Deductions. Those items of Company loss,
-----------------------------
deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to
Member Nonrecourse Debt for any Fiscal Year or other period shall be specially
allocated to the Member who bears the economic risk of loss with respect to the
Member Nonrecourse Debt to which such items are attributable in accordance with
Regulations Section 1.704-2(i).
6.2.5 Qualified Income Offset. If a Member unexpectedly receives any
-----------------------
adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), or any other event creates a deficit
balance in such Member's Capital Account in excess of such Member's share of
Company Minimum Gain, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate such
excess deficit balance as quickly as possible. Any
16
special allocations of items of income and gain pursuant to this Section 6.2.5
shall be taken into account in computing subsequent allocations of income and
gain pursuant to this Article VI so that the net amount of any item so allocated
and the income, gain, and losses allocated to each Member pursuant to this
Article VI to the extent possible, shall be equal to the net amount that would
have been allocated to each such Member pursuant to the provisions of this
Section 6.2.5 if such unexpected adjustments, allocations, or distributions had
not occurred.
6.3 Code Section 704(c) Allocations. Notwithstanding any other provision
-------------------------------
in this Article VI, in accordance with Code Section 704(c) and the Regulations
promulgated thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its fair market value on the date of contribution. Allocations
pursuant to this Section 6.3 are solely for purposes of federal, state and local
taxes. As such, they shall not affect or in any way be taken into account in
computing a Member's Capital Account or share of profits, losses, or other items
of distributions pursuant to any provision of this Agreement.
6.4 Allocation of Net Profits and Losses and Distributions in Respect of a
----------------------------------------------------------------------
Transferred Interest. If any Economic Interest is transferred, or is increased
--------------------
or decreased by reason of the admission of a new Member or otherwise, during any
Fiscal Year of the Company, Net Profit or Net Loss for such Fiscal Year shall be
assigned pro rata to each day in the particular period of such Fiscal Year to
which such item is attributable (i.e., the day on or during which it is accrued
or otherwise incurred) and the amount of each such item so assigned to any such
day shall be allocated to the Member or Assignee based upon his or her
respective Economic Interest at the close of such day.
However, for the purpose of accounting convenience and simplicity, the
Company shall treat a transfer of, or an increase or decrease in, an Economic
Interest which occurs at any time during a semi-monthly period (commencing with
the semi-monthly period including the date hereof as having been consummated on
the last day of such semi-monthly period, regardless of when during such semi-
monthly period such transfer, increase, of decrease actually occurs (i.e., sales
and dispositions made during the first fifteen (15) days of any month will be
deemed to have been made on the 15th day of the month).
Notwithstanding any provision above to the contrary, gain or loss of
the Company realized in connection with a sale or other disposition of any of
the assets of the Company shall be allocated solely to the parties owning
Economic Interests as of the date such sale or other disposition occurs.
17
6.5 Distributions of Distributable Cash by the Company. Subject to
--------------------------------------------------
applicable law and any limitations contained elsewhere in this Agreement, the
Managers may elect from time to time to distribute Distributable Cash to the
Members, which distributions shall be in the following order of priority:
6.5.1 To the Members in proportion to their unreturned Capital
Contributions until each Member has recovered his or her Capital Contributions;
and
6.5.2 To the Members in proportion to their Percentage Interests.
Notwithstanding the foregoing, the Company shall make the following mandatory
distributions on or before 90 days after the end of each fiscal year: Each
Member shall be distributed on an annual basis additional Distributable Cash
equal to such Members' tax liability on allocated Net Profits and the Members as
a whole, shall be distributed with respect to each fiscal year an amount equal
to the GAAP Net Income for such fiscal year up to a maximum of One Million Two
Hundred Thousand Dollars ($1,200,000). For the first year of this Agreement
(subject to the limitations of Section 6.7 herein) the minimum aggregate
distribution shall be no less than Four Hundred Fifty Thousand Dollars
($450,000) and such distributions during said first year shall be made at least
bi-weekly. All such distributions shall be made only to the Persons who,
according to the books and records of the Company, are the holders of record of
the Economic Interests in respect of which such distributions are made on the
actual date of distribution. Subject to Section 6.7, neither the Company nor any
Manager shall incur any liability for making distributions in accordance with
this Section 6.5.
6.6 Form of Distribution. A Member, regardless of the nature of the
--------------------
Member's Capital Contribution, has no right to demand and receive any
distribution from the Company in any form other than money. Except as provided
in Section 10.4, no Member may be compelled to accept from the Company a
distribution of any asset in kind in lieu of a proportionate distribution of
money being made to other Members and no Member may be compelled to accept a
distribution of any asset in kind.
6.7 Restriction on Distributions. No distribution shall be made if, after
----------------------------
giving effect to the distribution: (i) Such distribution would be in violation
of any applicable law; (ii) the amount of such distribution would be in excess
of the maximum amount of annual distribution authorized pursuant to Section 6.5
herein; (iii) the Company would not be able to pay its debts as they become due
in the usual course of business; or (iv) the Company's total assets would be
less than the sum of its total liabilities plus, unless this Agreement provides
otherwise, the amount that would be needed, if the Company were to be dissolved
at the time of the distribution, to satisfy the preferential rights of other
Members, if any, upon dissolution that are superior to the rights of the Member
receiving the distribution.
18
ARTICLE VII
TRANSFER AND ASSIGNMENT OF INTERESTS
7.1 Transfer and Assignment of Interests. Except as otherwise expressly
------------------------------------
set forth in this Agreement, no Member shall be entitled to transfer, assign,
convey, or sell all or any part of his/her/its Membership Interest
(collectively, "transfer") except with the prior written consent of all Members.
After the consummation of any transfer of any part of a Membership Interest, the
Membership Interest so transferred shall continue to be subject to the terms and
provisions of this Agreement and any further transfers shall be required to
comply with all the terms and provisions of this Agreement.
7.2 Further Restrictions on Transfer of Interests. In addition to other
---------------------------------------------
restrictions found in this Agreement, no Member shall transfer, assign, convey,
sell, encumber or in any way alienate all or any part of his or her Membership
Interest: (i) without compliance with all federal and state securities law, and
(ii) if the Membership Interest to be transferred, when added to the total of
all other Membership Interests transferred in the preceding twelve (12)
consecutive months prior thereto, would cause the tax termination of the Company
under Code Section 708(b)(1)(B).
7.3 Substitution of Members. An Assignee of a Membership Interest shall
-----------------------
have the right to become a substitute Member only if (i) the requirements of
Sections 7.1 and 7.2 relating to unanimous consent of Members, securities and
tax requirements hereof are met, (ii) the Assignee executes an instrument
satisfactory to the Managers accepting and adopting the terms and provisions of
this Agreement, and (iii) the Assignee pays any reasonable expenses in
connection with his or her admission as a new Member. The admission of an
Assignee as a substitute Member shall not result in the release of the Member
who assigned the Membership Interest from any liability that such Member may
have to the Company.
7.4 No Effect to Transfers in Violation of Agreement. Upon any transfer
------------------------------------------------
of a Membership Interest in violation of this Article VII, the transferee shall
have no right to vote or participate in the management of the business, property
and affairs of the Company or to exercise any rights of a Member. Such
transferee shall only be entitled to become an Assignee and thereafter shall
only receive the share of one or more of the Company's Net Profits, Net Losses
and distributions of the Company's assets to which. the transferor of such
Economic Interest would otherwise be entitled. Notwithstanding the immediately
preceding sentences, if, in the determination of the Managers, a transfer in
violation of this Article VII would cause the tax termination of the Company
under Code Section 708(b)(1)(B), the transfer shall be null and void.
7.5 Right of First Negotiation. If any Member desires to transfer all or
--------------------------
any part of his/her/its Membership Interest, such Member shall notify the
Company and the other
19
Members in writing of such desire and, for a period of thirty (30) days
thereafter, the Members and the Company shall negotiate with respect to the
purchase of such Member's Membership Interest. During such period, the Member
desiring to transfer such Membership Interest may not solicit a transferee for
such Membership Interest.
7.6 Right of First Refusal. If the period described in Section 7.6 expires
----------------------
without an agreement being reached as to the purchase of the Membership Interest
referred to therein, the Member desiring to transfer his/her/its Membership
Interest may solicit transferees. In such event, each time a Member proposes to
transfer all or any part of his or her Membership Interest (or as required by
operation of law or other involuntary transfer to do so), such Member shall
first offer such Membership Interest to the Company and the non-transferring
Members in accordance with the following provisions:
7.6.1 Such Member shall deliver a written notice ("Option Notice") to
the Company and the other Members stating (i) such Member's bona fide intention
to transfer such Membership Interest, (ii) the Membership Interest to be
transferred, and (iii) the purchase price and terms of payment for which the
Member proposes to transfer such Membership Interest.
7.6.2 Within thirty (30) days after receipt of the Option Notice, the
Company shall have the right, but not the obligation, to elect to purchase all
or any part of the Membership Interest upon the price and terms of Payment
designated in the Option Notice. If the Option Notice provides for the payment
of non-cash consideration, the Company may elect to pay the consideration in
cash equal to the good faith estimate of the present fair market value of the
non-cash consideration offered as determined by the Managers. If the Company
exercises such right within such thirty (30) day period, the Managers shall give
written notice of that fact to the transferring and non-transferring Members.
7.6.3 If the Company fails to elect to purchase the entire Membership
Interest proposed to be transferred within the thirty (30) day period described
in Section 7.6.2, the non-transferring Members shall have the right, but not the
obligation, to elect to Purchase any remaining share of such Membership Interest
upon the price and terms of payment designated in the Option Notice. If the
Option Notice provides for the payment of non-cash consideration, such
purchasing Members each may elect to pay the consideration in cash equal to the
good faith estimate of the present fair market value of the non-cash
consideration offered as determined by the Managers. Within sixty (60) days
after receipt of the Option Notice, each non-transferring Member shall notify
the Managers in writing of his or her desire to purchase a portion of the
Membership Interest proposed to be so transferred. The failure of any Member to
submit a notice within the applicable period shall constitute an election on the
part of that Member not to purchase any of the Membership Interest which may be
so transferred. Each Member so electing to purchase shall be entitled to
purchase a portion of such Membership Interest in the
20
same proportion that the Percentage Interest Of such Member bears to the
aggregate of the Percentage Interests of all of the Members electing to so
purchase the Membership Interest being transferred. In the event any Member
elects to purchase none or less than all of his or her pro rata share of such
Membership Interest, then the other Members can elect to purchase more than
their pro rata share.
7.6.4 If the Company and the other Members elect to purchase or
obtain any or all of the Membership Interest designated in the Option Notice,
then the closing of such purchase shall occur within ninety (90) days after
receipt of such notice and the transferring Member, the Company and/or the other
Members shall execute such documents and instruments and make such deliveries as
may be reasonably required to consummate such purchase.
7.6.5 If the Company and the other Members elect not to purchase or
obtain, or default in their obligation to purchase or obtain, all of the
Membership Interest designated in the Option Notice, then the transferring
Member may transfer the portion of the Membership Interest described in the
Option Notice not so purchased, providing such transfer (i) is completed within
thirty (30) days after the expiration of the Company's and the other Members'
right to purchase such Membership Interest, (ii) is made on terms no less
favorable to the transferring Member than as designated in the Option Notice,
and (iii) complies with Sections 7.1, 7.2 and 7.3 relating to consent of
Members, securities and tax requirements; it being acknowledged by the Members
that compliance with Sections 7.5 and 7.6.1-.4 does not modify any of the
transfer restrictions in Article VII or otherwise entitle a Member to transfer
his or her Membership Interest other than in the manner prescribed by Article
VII. If such Membership Interest is not so transferred, the transferring Member
must give notice in accordance with this Section prior to any other or
subsequent transfer of such Membership Interest.
7.7 Right of Co-Sale.
----------------
7.7.1 In the event that any Member proposes to sell, pledge or
assign, transfer, or otherwise dispose of all or any portion of his/her/its
Membership Interest and the provisions of Section 7.6 hereof have been complied
with each Member will have a right of co-sale (the "Right of Co-sale") to sell
such Member's "Pro Rata Share" of such Membership Interest that such Member
proposes to transfer on the same terms as such as described in this Agreement.
7.7.2 A Member's Pro Rata Share shall be that proportion which the
Percentage Interest (the "Co-sale Interest") held by such Member bears to the
aggregate of the Percentage Interests of all Members.
7.7.3 At least 30 days before the proposed date of a sale or transfer
of Membership Interest, each Member desiring to transfer such Membership
Interest will
21
give a written notice (the "Co-sale Notice") simultaneously to the Company and
to each of the Members. The Co-sale Notice shall describe in detail the proposed
transfer, including the number of Membership Interest(s) proposed to be
transferred, the proposed transfer price or consideration to be paid (which, for
consideration the value of which is not readily ascertainable, shall be the fair
market value of the Membership Interest to be transferred as most recently
determined in good faith by the Managers), the address of the Members proposing
to such transfer Membership Interest, and the name and address of the proposed
transferee. Each Member shall have the right to sell to the proposed transferee
(or, upon the unwillingness of any prospective transferee to purchase directly
from such Member, to the selling Member) its Pro Rata Share of the Co-sale
Interests (determined as of the date the Notice is delivered to the Company)
subject to the Co-sale Notice on the terms set forth in the Co-sale Notice.
7.7.4 A Member shall exercise his Right of Co-sale by delivering a
notice of exercise to the Member proposing to transfer such Membership Interest
(with a copy to the Company) within 20 days after the date such notice has been
delivered from the Member to the Company and each of the Members. The selling
Member shall inform each Member of the decision of each other Member promptly
upon learning it.
7.7.5 The selling Member shall assign to each Member who exercises
its Right of Co-sale as much of his interest in the agreement of sale with the
prospective transferee or transferees as such Member shall be entitled to and
shall accept. To the extent that any prospective transferee or transferees
prohibits such assignment or otherwise refuses to purchase a Membership Interest
from a Member, the selling Member shall not sell to such prospective transferee
or transferees any Membership Interests unless and until, simultaneously with
such sale, the selling Member shall purchase such Membership Interests from such
Member for the same consideration and on the same terms and conditions as the
proposed transfer described in the Co-sale Notice.
7.7.6 If none of the Members elect to exercise the Right of Co-sale
with respect to the Membership Interest subject to the Co-sale Notice, each
Member may, not later than 30 days following delivery of the Members of the Co-
sale Notice, conclude a transfer of not less than all of the Membership Interest
covered by the Co-sale Notice on terms and conditions not more favorable to the
Member than those described in the Co-sale Notice. Any proposed transfer of an
additional Membership Interest or on terms and conditions more favorable to the
Member than those described in the Co-sale Notice, as well as any subsequent
proposed transfer of any of the Membership Interest by such Member shall again
be subject to the Right of Co-Sale and shall require compliance by the Member
with the procedures described in this Section 7.7.
7.8 Other Permitted Transfer. The Economic Interest of any Member may be
------------------------
transferred subject to compliance with Section 7.2, and without the prior
written consent of the Members as required by Section 7.1, upon consent of the
Managers, which shall
22
not be unreasonably withheld, by the Member (i) by inter vivos gift or by
testamentary transfer to any spouse, parent, sibling, in-law, child or
grandchild of the Member, or to a trust for the benefit of the Member or such
spouse, parent, sibling, in-law, child or grandchild of the Member, or (ii) to
any Affiliate of the Member; it being agreed that, in executing this Agreement,
each Member has consented to such transfers.
ARTICLE VIII
CONSEQUENCES OF DISSOLUTION EVENTS AND
TERMINATION OF MEMBERSHIP INTEREST
8.1 Dissolution Event. Upon the occurrence of a Dissolution Event, the
-----------------
Company shall dissolve unless the remaining Members ("Remaining Members")
holding a majority of the Percentage Interests which all Remaining Members hold,
consent within ninety (90) days of the Dissolution Event to the continuation of
the business of the Company. If the Remaining Members consent to the
continuation of the business of the Company, the Company and/or the Remaining
Members shall have the right to purchase, and if such right is exercised the
Member whose actions or conduct resulted in the Dissolution Event ("Former
Member") or such Former Member's legal representative shall sell, the Former
Member's Membership Interest ("Former Member's Interest") as provided in this
Article VIII. Notwithstanding the foregoing, upon termination of Knyal's
employment with the Company under the Employment Agreement, the provisions of
Section 4.2.2 and/or 4.2.3 shall be applicable, depending on the nature of such
termination.
8.2 Withdrawal. Notwithstanding Section 8.1, upon the withdrawal by a
----------
Member in accordance with Section 4.4, such Member shall be treated as a Former
Member, and, unless the Company is to dissolve, the Company and/or the Remaining
Members shall have the right to purchase, and if such right is exercised, the
Former Member shall sell, the Former Member's Interest as provided in this
Article VIII. Notwithstanding the foregoing, in the event of the termination of
Knyal's employment with the Company under the Employment Agreement, the
provisions of Section 4.2.2 and/or 4.2.3 shall be applicable, depending on the
nature of such termination, and Knyal (or his legal representatives) shall
continue as a Member until his Membership Interest is purchased pursuant to this
Article VIII.
8.3 Purchase Price. The purchase price for the Former Member's interest
--------------
shall be the Capital Account balance of the Former Member; provided, however,
that if the Former Member, such Former Member's legal representative or the
Company, deems the Capital Account balance to vary from the fair market value of
the Former Member's Interest by more than ten percent (10%), such party shall be
entitled to require an appraisal by providing notice of the request for
appraisal within thirty (30) days after the
23
determination of the Remaining Members to continue the business of the Company.
In such event, the value of the Former Member's Interest shall be determined by
three (3) independent appraisers, one (1) selected by the Former Member or such
Former Member's legal representative, one selected by the Company, and one (1)
selected by the two (2) appraisers so named. The fair market value of the Former
Member's Interest shall be the average of the two (2) appraisals closest in
amount to each other. In the event the fair market value is determined to vary
from the Capital Account balance by less than ten percent (10%), the party
requesting such appraisal shall pay all expenses of all the appraisals incurred
by the party offering to enter into the transaction at the Capital Account
valuation. In all other events, the party requesting the appraisal shall pay
one-half of such expense and the other party shall pay one-half of such expense.
Notwithstanding the foregoing, if the Dissolution Event results from a breach of
this Agreement by the Former Member, the purchase price shall be reduced by an
amount equal to the damages suffered by the Company or the Remaining Members as
a result of such breach. Notwithstanding the foregoing, if the purchase of
Knyal's Membership Interest is pursuant to Sections 4.2.2 or 4.2.3 herein; the
value of Knyal's Membership Interest shall be determined by three (3)
independent appraisers (at the Company's cost and expense), one (1) selected by
Knyal or by Knyal's legal representative, one (1) selected by the Company, and
one (1) selected by the two (2) appraisers so named, and the value of Knyal's
Former Member's Interest shall be the average of the two (2) appraisals closest
in amount to each other. Each of the appraisers selected pursuant to this
Section 8.3 shall be skilled in valuing businesses such as the Company and shall
be independent with respect to the Company, the Members and their Affiliates.
Any appraisal procedure required pursuant to this Section 8.3 shall be conducted
as follows: each of the Persons entitled to select an appraiser pursuant to this
Section 8.3 shall select his or its appraiser within fifteen (15) days after the
occurrence of the event or notice (such as a notice given pursuant to Section
4.2.2 or 4.2.3) that gives rise to the appraisal requirement; the two (2)
appraisers so selected shall select a third appraiser within 15 days after their
selection; and the three (3) appraisers shall render their appraisals in writing
to the Persons interested in such determination within thirty (30) days after
the third appraiser is selected.
8.4 Notice of Intent to Purchase. Within thirty (30) days after the
----------------------------
Managers have notified the Remaining Members as to the purchase price of the
Former Member's Interest determined in accordance with Section 8.3, each
Remaining Member shall notify the Managers in writing of his/her/its desire to
purchase a portion of the Former Member's Interest. The failure of any
Remaining Member to submit a notice within the applicable period shall
constitute an election on the part of the Member not to purchase any of the
Former Member's Interest. Each Remaining Member so electing to purchase shall
be entitled to purchase a portion of the Former Member's Interest in the same
proportion that the Percentage Interest of the Remaining Member bears to the
aggregate of the Percentage Interests of all of the Remaining Members electing
to purchase the Former Member's Interest. Notwithstanding the foregoing, in the
event of a purchase by
24
Knyal's Membership interest pursuant to Section 4.2 or 4.3, the Company shall
be obligated to purchase Knyal's Membership Interest.
8.5 Election to Purchase Less Than All of the Former Member's Interest.
------------------------------------------------------------------
If any Remaining Member elects to purchase none or less than all of his or her
pro rata share of the Former Member's Interest, then the Remaining Members may
elect to purchase more than their pro rata share. If the Remaining Members fail
to purchase the entire Interest of the Former Member, the Company may purchase
any remaining share of the Former Member's Interest. Notwithstanding the
foregoing, in the event of a purchase of Knyal's Membership Interest pursuant to
Section 4.2 or 4.3, the Company shall be obligated to purchase Knyal's
Membership Interest.
8.6 Payment of Purchase Price. The Company or the Remaining Members shall
-------------------------
at the closing pay in cash the total purchase price for the Former Member's
Interest.
8.7 Closing of Purchase of Former Member's Interest. The closing for the
-----------------------------------------------
sale of a Former Member's Interest pursuant to this Article VIII shall be held
at 10:00 a.m. at the principal office of Company no later than sixty (60) days
after the determination of the purchase price, except that if the closing date
falls on a Saturday, Sunday, or California legal holiday, then the closing shall
be held on the next succeeding business day. At the closing, the Former Member
or such Former Member's legal representative shall deliver to the Company or the
Remaining Members an instrument of transfer (containing warranties of title and
no encumbrances) conveying the Former Member's Interest. The Former Member or
such Former Member's legal representative, the Company and the Remaining Members
shall do all things and execute and deliver all papers as may be necessary fully
to consummate such sale and purchase in accordance with the terms and provisions
of this Agreement.
8.8 Purchase Terms Varied by Agreement. Nothing contained herein is
----------------------------------
intended to prohibit Members from agreeing upon other terms and conditions for
the purchase by the Company or any Member of the Membership Interest of any
Member in the Company desiring to retire, withdraw or resign, in whole or in
part, as a Member.
8.9 Restrictions on Mandatory Repurchase. With respect to any repurchase
------------------------------------
of Knyal's Former Member's Interest under this Article VIII, the following shall
also apply:
8.9.1 No mandatory repurchase of Knyal's Former Member's Interest
pursuant to Article VIII may be made by the Company if, after giving effect to
the repurchase:
(i) such repurchase would be in violation of any applicable
law;
25
(ii) the Company would not be able to pay its debts as they
become due in the ordinary course of business; or
(iii) the Company's total assets would be less that the sum
of its total liabilities plus, the amount that would be needed, if the
Company were to be dissolved at the time of the repurchase, to satisfy
the preferential rights of other Members, if any, upon dissolution
that and superior to the rights of Knyal.
8.9.2 The obligation of the Company to ultimately repurchase Knyal's
Former Member's Interest under Article VIII when not otherwise prohibited by
this Section 8.9 shall not be affected by any prohibition on repurchase under
this Section 8.9.
8.9.3 If the Company does not purchase Knyal's Former Member's
Interest for the reasons set forth in Section 8.9.1 or if the Company defaults
in effecting such purchase (or if the Company fails to make any mandatory
distribution set forth in Section 6.5 herein within ten (10) business days of
the date such distribution is to be paid (the "Final Due Date"), then
notwithstanding any provisions to the contrary contained in this Agreement,
Knyal or his legal representatives) shall continue as a Member with all the
rights provided for in this Agreement and, in addition, Knyal (or his legal
representatives) shall have the option (the "Sale Option") to cause the assets
and business of the Company to be sold at any time within the period of eighteen
(18) months immediately succeeding the date (the "Closing Date") on which the
closing of the purchase of Knyal's Former Member's Interest was required to be
held or the Final Due Date, as the case may be. The Sale Option may be
exercised by written notice to the Company given at any time within such 18
month period. If the Sale Option is exercised, then Knyal (or his legal
representatives) shall be entitled to offer the Company for sale on such terms
and conditions as he shall select. If Knyal (or his legal representatives)
elects to accept any such offer for the sale of the Company, then the Company
will accept such offer and the Company will be sold in accordance with the terms
of such offer and on the terms and conditions acceptable to Knyal (or his legal
representatives). The Company, all of the other Members and the Managers shall
cooperate in good faith and shall take such actions and execute such documents
as may be reasonably required to effect such sale. If such sale is effected,
then Knyal (or his legal representatives) shall receive for his Membership
Interest an amount equal to the greater of (x) the purchase price which was to
be paid on the Closing Date together with interest thereon at a fluctuating rate
equal to 2% above the prime or rate of Citibank N.A. in effect from time to time
from the Closing Date until such price is paid or (y) the amount which would
have been paid to Knyal (or his legal representatives) with respect to such
Membership Interest in accordance with Section 10.4 of this Agreement upon the
sale of substantially all of the assets of the Company and the dissolution and
winding-up of the Company. Any such amounts to be paid to Knyal (or his legal
representatives) shall have priority over and shall be paid before any amounts
to be paid to any other Members. Notwithstanding
26
anything contained herein, the obligations of the Company to purchase Knyal's
Membership Interest shall continue and shall be effected as soon as the Company
is able to purchase such Membership Interest without violating the provisions of
Section 8.9.1.
ARTICLE IX
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 Books and Records. The books and records of the Company shall be
-----------------
kept, and the financial position and the results of its operations recorded, in
accordance with the accounting methods followed for federal income tax purposes.
The books and records of the Company shall reflect all the Company transactions
and shall be appropriate and adequate for the Company's business. Any Member
shall have the right to inspect the Company's books and records at any time.
The Company shall maintain at its principal office in California all of the
following:
9.1.1 A current list of the full name and last known business or
residence address of each Member and Assignee set forth in alphabetical order,
together with the Capital Contributions, Capital Account and Percentage Interest
of each Member and Assignee;
9.1.2 A current list of the full name and business or residence
address of each Manager;
9.1.3 A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed;
9.1.4 Copies of the Company's federal, state, and local income tax or
information returns and reports, if any, for the six (6) most recent taxable
years;
9.1.5 A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
9.1.6 Copies of the financial statements of the Company, if any, for
the six (6) most recent Fiscal Years; and
9.1.7 The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four (4) Fiscal Years.
27
9.2 Annual Statements.
-----------------
9.2.1 The Managers shall cause to be prepared at least annually, at
Company expense, information necessary for the preparation of the Members' and
Assignees' federal and state income tax returns. The Managers shall send or
cause to be sent to each Member or Assignee within ninety (90) days after the
end of each taxable year such information as is necessary to complete federal
and state income tax or information returns, and, if the Company has thirty-five
(35) or fewer Members, a copy of the Company's federal, state, and local income
tax or information returns for that year.
9.2.2 The Managers shall cause to be filed at least annually with the
California Secretary of State the statement required under California
Corporations Code (S) 17060.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 Dissolution. The Company shall be dissolved, its assets shall be
-----------
disposed of, and its affairs wound up on the first to occur of the following:
10.1.1 The happening of any event of dissolution specified in the
Articles;
10.1.2 The entry of a decree of judicial dissolution pursuant to
Corporations Code Section 17351;
10.1.3 The vote of all of the Members;
10.1.4 The occurrence of a Dissolution Event and the failure of the
Remaining Members to consent in accordance with Section 8.1 to continue the
business of the Company within ninety (90) days after the occurrence of such
event or the failure of the Company or the Remaining Members to purchase the
Former Member's Interest as provided in Section 8.2; or
10.1.5 The sale of all or substantially all of the assets of
Company.
10.2 Certificate of Dissolution. As soon as possible following the
--------------------------
occurrence of any of the events specified in Section 10.1, the Managers who have
not wrongfully dissolved the Company or, if none, the Members, shall execute a
Certificate of Dissolution in such form as shall be prescribed by the California
Secretary of State and file the Certificate as required by the Act.
28
10.3 Winding Up. Upon the occurrence of any event specified in Section
----------
10.1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Persons winding up the affairs of the Company shall give
written notice of the commencement of winding up by mail to all known creditors
and claimants whose addresses appear on the records of the Company.
10.4 Order of Payment Upon Dissolution. After determining that all the
---------------------------------
known debts and liabilities of the Company, including, without limitation, debts
and liabilities to Members who are creditors of the Company, have been paid or
adequately provided for, the remaining assets shall be distributed to the
Members in the following order of priority: (i) first, to the Members in
satisfaction for distributions under Sections 17201, 17202 or 17255 of the
Corporations Code; (ii) second, to the members for the return of their Capital
Contributions in proportion to the unreturned balances thereof; and (iii)
thereafter, to the Members in the proportions in which they share in
distributions.
10.5 Limitations on Payments Made in Dissolution. Except as otherwise
-------------------------------------------
specifically provided in this Agreement, each Member shall only be entitled to
look solely at the assets of the Company for the return of his or her positive
Capital Account balance and shall have no recourse for his or her Capital
Contribution and/or share of Net Profits (upon dissolution or otherwise) against
the Managers or any other Member.
10.6 Certificate of Cancellation. The Managers or Members who filed the
---------------------------
Certificate of Dissolution shall cause to be filed in the office of, and on a
form prescribed by, the California Secretary of State, a Certificate of
Cancellation of the Articles upon the completion of the winding up of the
affairs of the Company.
ARTICLE XI
CONVERSION TO C CORPORATION
11.1 Notwithstanding anything to the foregoing set forth herein, parties
listed on the signature pages hereof hereby agree that the Company shall
automatically convert to a "C" Corporation on the effective date of the
Company's initial public offering of shares of its capital stock pursuant to a
Registration Statement filed pursuant to the Securities Act of 1933, as amended,
and that no further consent of the Members or Managers shall be required for
such conversion. The Members' Membership Interests shall automatically convert
into shares of Common Stock at the same pro rata proportion that the Percentage
Interest of each member bears to the aggregate of the Percentage Interests of
all of the Members. Each of the Members and Managers agree to take all actions
necessary to effectuate such conversion.
29
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification of Agents. The Company shall defend and indemnify any
-------------------------
Member or Manager and may indemnify any other Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he or she is or was a Member,
Manager, officer, employee or other agent of the Company or that, being or
having been such a Member, Manager, officer, employee or agent, he or she is or
was serving at the request of the Company as a manager, director, officer,
employee or other agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise, to the fullest extent
permitted by applicable law in effect on the date hereof and to such greater
extent as applicable law may hereafter from time to time permit. The Managers
shall be authorized, on behalf of the Company, to enter into indemnity
agreements from time to time with any Person entitled to be indemnified by the
Company hereunder, upon such terms and conditions as the Managers deem
appropriate in their business judgment.
ARTICLE XIII
INVESTMENT REPRESENTATIONS
13.1 Member Representations. Each Member hereby represents and warrants
----------------------
to, and agrees with, the Managers, the other Members, and the Company as
follows:
13.1.1 Preexisting Relationship or Experience. (i) He/she/it has a
--------------------------------------
preexisting personal or business relationship with the Company or one or more of
its officers or control persons or (ii) by reason of his/her/its business or
financial experience, or by reason of the business or financial experience of
his/her/its financial advisor who is unaffiliated with and who is not
compensated, directly or indirectly, by the Company or any affiliate or selling
agent of the Company, he/she/it is capable of evaluating the risks and merits of
an investment in the Membership Interest and of protecting his/her/its own
interests in connection with this investment.
13.1.2 No Advertising. He/she/it has not seen, received, been
--------------
presented with, or been solicited by any leaflet, public promotional meeting,
newspaper or magazine article or advertisement, radio or television
advertisement or any other form of advertising or general solicitation with
respect to the sale of the Membership Interest.
13.1.3 Investment Intent. He/she/it is acquiring the Membership
-----------------
Interest for investment purposes for his/her/its own account only and not with a
view to or for sale in connection with any distribution of all or any part of
the Membership Interest. No
30
other person will have any direct or indirect beneficial interest in or right to
the Membership Interest.
13.2 Knyal Representations. Knyal hereby represents and warrants to ICII
---------------------
and the Company as follows:
13.2.1 Authority Relative to This Agreement. Knyal's owns 100% of
------------------------------------
the outstanding capital stock of FMAC. FMAC has the full right, power and
authority to execute and deliver the Assignment and Assumption and to perform
the transactions contemplated thereunder. The Assignment and Assumption has
been duly executed and delivered by FMAC and are the legal, valid and binding
obligation of FMAC, enforceable in accordance with its terms, subject to the
Enforceability Exceptions. Neither FMAC or Knyal is subject to or obligated
under any contract provision or any license, agreement, indenture, instrument,
franchise or Permit, or subject to any judgment, Law, order or decree, which
would be breached or violated by or in conflict with the execution and carrying
out of the Assignment and Assumption and the transactions contemplated
thereunder. The execution, delivery and performance of the Assignment and
Assumption and the consummation of the transactions contemplated thereunder will
not result in the creation of any Lien upon the Transferred Interests.
13.2.2 Consents. No consent of any Person, nor consent of any
--------
Governmental Body, is required to be obtained on the part of either FMAC or
Knyal to permit the transactions contemplated pursuant to the Assignment and
Assumption.
13.2.3 Tax Matters. FMAC has fully and timely, properly and
-----------
accurately paid any and all such taxes due with respect to the Transferred
Interests and there are no pending assessments, asserted deficiencies or claims
for additional taxes with respect thereto that have not been paid.
13.2.4 Title to Transferred Interests.
------------------------------
(a) FMAC owns and has good and valid title to the Transferred
Interests, free and clear of all Liens;
(b) Upon consummation of the transactions contemplated under the
Assignment and Assumption, the Company will have acquired good and valid title
in and to, the Transferred Interests, free and clear of all Liens, provided,
however, that no representation is made as to the ownership, title or rights to
any software; and
(c) The Company shall be entitled to all of the benefits of the
Transferred Interests without the necessity of any consent, authorization or
agreement from or with any Person.
31
13.2.5 Litigation.
----------
(a) There is no Legal Proceeding pending or, to the knowledge
of the Knyal, threatened:
(i) against either FMAC or Knyal in connection with the
Transferred Interests;
(ii) that seeks to enjoin or obtain damages in respect of
the consummation of the transactions contemplated by the Assignment and
Assumption; or
(iii) that questions the validity of the Assignment and
Assumption or any action taken or to be taken by either FMAC or Knyal in
connection with the consummation of the transactions contemplated thereby;
and
(b) Neither FMAC or Knyal is in default under or in breach or
violation of, nor, to Knyal's knowledge, is there any valid basis for any claim
of default by either FMAC or Knyal under, or breach or violation by either FMAC
or Knyal of, any contract, commitment or restriction to which FMAC or Knyal is a
party or to which it or any of its properties including, but not limited to, the
Transferred Interests, is subject or bound, where such defaults, breaches, or
violations would, in the aggregate, have an adverse effect on the Transferred
Interests. To Knyal's knowledge, no other party is in default under or in breach
or violation of, nor is there any valid basis for any claim of default by any
other party under or any breach or violation by any other party of, any material
contract, commitment, or restriction to which either FMAC or Knyal is bound or
by which any of its properties, including but not limited to the Transferred
Interests, is subject or bound, where such defaults, breaches, or violations
would, in the aggregate, have an adverse effect on the Transferred Interests.
13.2.6 Compliance with Law.
-------------------
(a) The Transferred Interests are in compliance with all
applicable material Laws and Orders of Governmental Bodies. Neither FMAC or
Knyal has received, nor knows of the issuance of, any notice of any violation or
alleged violation of any applicable Laws and Orders of Governmental Bodies, with
respect to the Transferred Interests; and
(b) To Knyal's knowledge, neither FMAC or Knyal is under
investigation with respect to any violation of any Law, order or judgment
entered by any court, arbitrator or Governmental Body, applicable to the
Transferred Interests.
13.2.7 Disclosure. No statements by Knyal or FMAC contained in the
----------
Assignment and Assumption and the Schedules and Exhibits attached hereto, or any
32
written statement or certificate furnished or to be furnished pursuant hereto or
in connection with the transactions contemplated hereby and thereby (when read
together) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
ARTICLE XIV
MISCELLANEOUS
14.1 Operations; Senior Loan Committee. ICII and Knyal agree to use their
---------------------------------
best efforts to cause the business of the Company to be conducted in accordance
with sound business practice, and in a lawful manner, and to endeavor to
preserve for the Company the goodwill of its customers, employees and others
having business relations with it. The Managers shall establish a Senior Loan
Committee, to which all loan financings shall be submitted for approval. The
Committee shall have three (3) members, two of which shall be selected by ICII
and the remaining member selected by Knyal. All loan financings must receive
the unanimous approval of the Committee. ICII and Knyal also contemplate that a
separate loan committee, whose members consist solely of Managers and/or
Officers of the Company, will be established; the duty of such committee will be
to preapprove certain loans for consideration by the Senior Loan Committee. The
composition of any such separate loan committee will be agreed to by ICII and
Knyal. The parties acknowledge that Knyal has previously been involved in
businesses substantially similar to the business of the Company.
14.2 Complete Agreement. This Agreement and the Articles constitute the
------------------
complete and exclusive statement of agreement among the Members and Managers
with respect to the subject matter herein and therein and replace and supersede
all prior written and oral agreements or statements by and among the Members and
Managers or any of them. To the extent that any provision of the Articles
conflict with any provision of this Agreement, the Articles shall control.
14.3 Binding Effect. Subject to the provisions of this Agreement relating
--------------
to transferability, this Agreement will be binding upon and inure to the benefit
of the Members, and their respective successors and assigns.
14.4 Interpretation. In the event any claim is made by any Member relating
--------------
to any conflict, omission or ambiguity in this Agreement, no presumption or
burden of proof
33
or persuasion shall be implied by virtue of the fact that this Agreement was
prepared by or at the request of a particular Member or his or her counsel.
14.5 Jurisdiction. Each Member hereby consents to the exclusive
------------
jurisdiction of the state and federal courts sitting in California in any,action
on a claim arising out of, under or in. connection with this Agreement or the
transactions contemplated by this Agreement, provided such claim is not required
to be arbitrated pursuant to Section 14.6. Each Member further agrees that
personal jurisdiction over him or her may be effected by service of process by
registered or certified mail addressed as provided in Section 14.8 of this
Agreement, and that when so made shall be as if served upon him or her
personally within the State of California.
14.6 Arbitration. Except as otherwise provided in this Agreement, any
-----------
controversy between the parties arising out of this Agreement shall be submitted
to the American Arbitration Association for arbitration in Los Angeles,
California. The costs of the arbitration, including any American Arbitration
Association administration fee, the arbitrator's fee, and costs for the use of
facilities during the hearings, shall be borne equally by the parties to the
arbitration. Attorneys' fees may be awarded to the prevailing party at the
discretion of the arbitrator. The provisions of Sections 1282.6, 1283, and
1283.05 of the California Code of Civil Procedure apply to the arbitration. The
arbitrator shall not have any power to alter, amend, modify or change any of the
terms of this Agreement nor to grant any remedy which is either prohibited by
the terms of this Agreement, or not available in a court of law.
14.7 Severability. If any provision of this Agreement or the application
------------
of such provision to any person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid shall not be affected
thereby.
14.8 Notices. Any notice to be given or to be served upon the Company or
-------
any party hereto in connection with this Agreement must be in writing (which may
include facsimile) and will be deemed to have been given and received when
delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member or Manager at the address specified in Exhibit
A hereto. Any party may, at any time by giving five (5) days' prior written
notice to the other parties, designate any other address in substitution of the
foregoing address to which such notice will be given.
14.9 Amendments. All amendments to this Agreement will be in writing and
----------
signed by all of the Members.
14.10 Multiple Counterparts. This Agreement may be executed in two or
---------------------
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
34
14.11 Attorney Fees. In the event that any dispute between the Company
-------------
and the Members or among the Members should result in litigation or arbitration,
the prevailing party in such dispute shall be entitled to recover from the other
party all reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including without limitation, reasonable attorneys' fees and
expenses, all of which shall be deemed to have accrued upon the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment. Any judgment or order entered in such action shall contain a specific
provision providing for the recovery of attorney fees and costs incurred in
enforcing such judgment and an award of prejudgment interest from the date of
the breach at the maximum rate of interest allowed by law. For the purposes of
this Section: (a) attorney fees shall include, without limitation, fees incurred
in the following: (1) postjudgment motions; (2) contempt proceedings; (3)
garnishment, levy, and debtor and third party examinations; (4) discovery; and
(5) bankruptcy litigation and (b) prevailing party shall mean the party who is
determined in the proceeding to have prevailed or who prevails by,dismissal,
default or otherwise.
14.12 Captions. The Section and Article captions contained in this
--------
Agreement are inserted only as a matter of convenience and reference and in no
way define, limit or describe the scope of this Agreement or the intent of any
provisions hereof.
All of the Members of Imperial Credit Franchise Mortgage LLC, a California
limited liability company, have executed this Agreement, effective as of the
date written above.
MEMBERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Imperial Credit Industries, Inc.,
a California corporation
By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
H. ▇▇▇▇▇ ▇▇▇▇▇▇▇,
Its Chairman of the Board
35
EXHIBIT A
---------
CAPITAL CONTRIBUTION OF MEMBERS AND ADDRESSES OF MEMBERS
AND MANAGERS AS OF
JUNE 30, 1995
Member's Capital Member's
Member's Name Member's Address Contribution Percentage Interest
------------------- ------------------- ---------------------------- --------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. Transferred Interests 33.33%
Los Angeles, CA. (defined under Section 1.45
90049 herein and valued at
$ 645,000)
Imperial Credit ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ $1,290,000 66.66%
Industries, Inc. ▇▇▇▇▇ ▇▇▇ ---------- ------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
---------- -------
Total $1,935,000 100.00%
========== =======
Manager's Name Manager's Address
---------------- ------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ Capital L.L.C.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Allen, Matkins, Lack
▇▇▇▇▇▇ & Mallocy
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
H. ▇▇▇▇▇ ▇▇▇▇▇▇▇ c/o Imperial Credit Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ c/o Southern Pacific Thrift and Loan Association
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ c/o Imperial Credit Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ c/o Imperial Credit Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ACKNOWLEDGMENT AND AGREEMENT
The undersigned is a member of Imperial Credit Franchise Mortgage LLC, a
California limited liability company (the "Company"). Unless otherwise defined
herein, all terms used herein shall have the meanings ascribed to them in the
Operating Agreement of the Company dated as of June 30, 1995.
The undersigned acknowledges, confirms and agrees that he holds his
Membership Interest in the Company as a nominee for Franchise Mortgage
Acceptance Corporation, a California Corporation ("FMAC"), and that FMAC is the
beneficial owner of the entire Membership Interest in the Company held in the
name of Knyal as of the date hereof.
Dated: June 30, 1995 /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
ACKNOWLEDGMENT
STATE OF NEW YORK :
: SS:
COUNTY OF NEW YORK :
I CERTIFY that on June 30, 1995, ▇▇▇▇▇ ▇. ▇▇▇▇▇ personally came before me and
stated to my satisfaction that he signed the above Acknowledgment and Agreement
as his own act.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Notary Public, State of New York
No. ▇▇-▇▇▇▇▇▇▇
Qualified in Queens County
Commission Expires May 31, 1997