Limited Liability Company Agreement
of
Predict It China, LLC
Limited Liability Company Agreement of Predict It China, LLC (the "Company")
dated as of March 3, 2000, by China Interactive Media Group, LLC, a limited
liability company organized under the laws of the State of Delaware ( "CIMG"),
and Predict It Inc., a corporation organized under the laws of the State of
Delaware ("Predict-It") (each a "Member", and together the "Members"); and such
other persons who become Members by executing this Agreement (or a supplement
hereto) as amended from time to time.
Witnesseth:
Whereas, the Company is a limited liability company organized under the laws of
the State of Delaware; and
Whereas, the Members wish to set forth the terms pursuant to which the Company
will be managed and operated.
Now, therefore, in consideration of the mutual promises and agreements made
herein, the parties, intending to be legally bound hereby, agree as follows:
Article I
Definitions
When used in this Agreement, the following terms shall have the meanings set
forth below:
"1933 Act" shall have the meaning given such term in Section 4.01 hereof.
"Affiliate" of any specified Person shall mean any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall mean this Limited Liability Company Agreement of the
Company, as amended from time to time.
"Capital Account" shall mean the amount determined in accordance with
Section 3.04 with respect to any Member.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and all successors thereto.
"Competitor" of the Company shall mean any Person that competes, directly
or indirectly, with the Website operated by the Company using the Licensed
Technology (as defined in the License Agreement) in any geographic area
which is then covered by the License Agreement and any other Person that
renders financial support to any such Person.
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"Fiscal Year" shall mean the fiscal year of the Company, which shall end on
each December 31st.
"Interest" shall mean an Interest Holder's ownership interest in the
Company, including any and all rights and benefits to which the Interest
Holder may be entitled as provided in this Agreement, together with all
obligations of such Interest Holder to comply with the terms of this
Agreement.
"Interest Holder" shall mean any Person who holds an Interest, whether as a
Member or an unadmitted assignee of a Member.
"Initial Capital Contribution" shall have the meaning given such term in
Section 3.02 hereof.
"Initial Public Offering" shall mean the sale by the Company in an
underwritten public offering made pursuant to an effective registration
statement under the 1933 Act of its Interests or other equivalent common
equity securities.
"Involuntary Withdrawal" when used with respect to any Member shall mean
and include: (i) the death, retirement or bankruptcy of the Member; or (ii)
in the case of any Member who is not an individual, the liquidation or
dissolution of such Member, any merger or consolidation of such Member in a
transaction where the Member is not the surviving entity, any
reorganization of the Member, or any change in more than 50% of the equity
ownership of the Member.
"License Agreement" shall mean the License Agreement dated as of March 3,
2000 between Predict-It and the Company.
"Manager" shall have the meaning given such term in Section 6.03 hereof.
"Members" shall mean the persons or entities identified at the beginning of
this Agreement together with any persons or entities who may hereafter be
admitted as Members of the Company in accordance with the provisions hereof
and whose membership in the Company has not terminated in accordance with
this Agreement or applicable law.
"Net Profits" and "Net Losses" shall mean the net profits and net losses of
the Company as determined in accordance with United States generally
accepted accounting principles consistently applied.
"Operational Date of the Project" shall have the meaning given such term in
the License Agreement.
"Participation Percentage" when used with respect to any Member, the
percentage set forth opposite the Member's name on Schedule A hereto, as
adjusted from time to time in accordance with this Agreement, and as to an
Interest Holder who is not a Member, the Participation Percentage of the
Member whose Interest has been acquired by such Interest Holder, to the
extent the Interest Holder has succeeded to that Member's Interest. The sum
of the Members' Participation Percentages for each class of Membership
Interest on any date shall equal 100%.
"Permitted Transfer" when use with respect to the Transfer of an Interest
shall mean and include:
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(i) a Transfer of an Interest by an existing Member to any other
existing Member;
(ii) a Transfer of an Interest by a Member to members of the
immediate family of such Member, to the estate of such Member or
the descendents of such Member, or to a trust established by
such member for the benefit of such Member or for the benefit of
any other transferee described in this clause (ii);
(iii) a Transfer of an Interest by a Member to an Affiliate of such
Member; or
(iv) a Transfer of an Interest by any Member with the approval of the
Board of Directors;
provided in all cases of the foregoing, the transferee agrees in
writing satisfactory to the Manager to be bound by this Agreement, and
that the transferred Interests shall be continued to be bound by this
Agreement, to the same extent as the transferee and to the same extent
as such Interests are governed by this Agreement.
"Person" shall mean shall mean: any corporation, partnership, joint
venture, trust, unincorporated association or organization, business,
enterprise, or other entity; any individual; and any Government.
"Regulatory Allocations" shall have the meaning given such term in Section
5.03 hereof.
"Related Persons" when used with respect to any other Person shall mean and
include: members of the family of such Person (including without limitation
natural and adopted children, parents, grand-parents, siblings and children
of siblings); the estate of such Person upon such Person's death;
descendents of such Person; and trusts or similar entities created for the
benefit of such Person or any Related Person.
"Restricted Members" shall mean (i) any Competitor of the Company or (ii)
any Person the admission as a Member would, in the reasonable judgment of
Predict-It, be materially detrimental to the "Licensed Technology" (as
defined in the License Agreement) or the licensing thereof by Predict-It,
or to Predict-It, provided that, if the Company shall request that
Predict-It consent to the admission of any such Person, the giving of such
consent shall not be unreasonably withheld by Predict-It
"Right of First Refusal Purchaser", "Right of First Refusal Sale" and
"Right of First Refusal Seller" shall have the meanings given such terms in
Section 6.08(d) hereof.
"Subscription Agreement" shall have the meaning given such term in Section
11.04 hereof.
"Tag-along Participant", "Tag-along Sale" and "Tag-along Seller" shall have
the meanings given such terms in Section 6.08(c) hereof.
"Transfer", when used as a noun, shall mean any voluntary sale,
hypothecation, pledge, assignment, attachment or other transfer, and, when
used as a verb, shall mean voluntarily to sell, hypothecate, pledge, assign
or otherwise transfer.
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"Voluntary Withdrawal" shall mean a Member's dissociation from the Company
by means other than a Transfer approved pursuant to Section 7.01 or an
Involuntary Withdrawal subject to the provisions of Section 7.05.
"Website" shall have the meaning given such term in Section 2.02 hereof.
Article II
General
2.01. Offices. The principal office of the Company shall be at: ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The Company may operate at such
additional offices as it shall deem advisable.
2.02. Purpose. The Company is organized to, among other things, engage in
internet and related businesses in The People's Republic of China, has
all powers provided by law, and may use those powers to any lawful
purpose. Without limiting the generality of the foregoing, is
authorized to establish, maintain and operate a website in the Chinese
language (the "Website") using code and programming to be licensed to
the Company pursuant to the License Agreement.
2.03. Term. Except as provided in Section 8.01, the Company shall have a
perpetual existence.
2.04. Name. The name of the Company shall be "Predict It China, LLC" or
such other name as the Members shall agree.
2.05. Registered Agent and Office. The registered agent for service of
process and the registered office shall be that person and location
stated in the Certificate of Formation as on file with the Secretary of
State of the State of Delaware. In the event the registered agent
ceases to act as such for any reason, the Board shall promptly appoint
a substitute registered agent or file notice of a change in address, as
the case may be.
2.06. Additional Members. Subject to the provisions of Section 7.01 hereof
(including without limitation with respect to the admission of new
Members in connection with a Permitted Transfer), this Agreement may be
amended from time to time by a vote the Members so as to admit any
person as a new Member of such class as shall be designated in such
amendment; however, (i) the admission of new Members prior to the
Operational Date of the Project shall be prohibited if, immediately
following the admission of such new Members or as a consequence
thereof, the Participation Percentage of CIMG and its Affiliates would
not be greater than 50%, and (ii) the admission of new Members
subsequent to the Operational Date of the Project who are Restricted
Members shall be prohibited if, immediately following the admission of
such Restricted Members as new Members or as a consequence thereof, the
Participation Percentage of such Restricted Members would be greater
than 50%. A new Member may be admitted by execution of this Agreement
or by execution of a supplement hereto by which such new member agrees
to be a party to and to be bound by the this Agreement as amended from
time to time and to such other terms and conditions as the Members
shall deem appropriate. However, in the event that the Company, with
the approval of the Members, shall propose to issue additional
Interests, then each Member shall have the option (exercisable during
the 30-day period following notice from the Company that such
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Interests are proposed to be issued) to purchase a portion of the
Interests proposed to be issued in an amount determined by multiplying
the Interests proposed to be issued by the percentage Interests of such
Member immediately prior to the issuance of the new Interest.
Article III
Capitalization; Capital Accounts; Loans
3.01. Capitalization. Unless the Members shall determine otherwise, the total
capitalization of the Company shall initially consist exclusively of
100 Interests. The Interests shall be identical in all respects.
3.02. Capital Contributions. Each Member shall make a capital contribution to
the Company in an amount set forth on Schedule A hereto, as amended
from time to time ("Initial Capital Contribution"). Upon the admission
of an additional Member pursuant to Section 2.06 hereof, each new
Member shall contribute to the capital of the Company, as his Initial
Capital Contribution, an amount in cash or property determined by the
existing Members.
3.03. No Other Capital Contributions Required; No Liability. No Member shall
be required to contribute any capital to the Company in addition to his
or its Initial Capital Contribution. No Member, in such capacity, shall
have any personal liability for any obligation or liability of the
Company.
3.04. Members' Capital Accounts. The Capital Account maintained for each
Member, which shall be kept in accordance with Treasury Regulation
ss.1.704(b), shall be: (a) credited with (i) such Member's Initial
Capital Contribution pursuant to Section 3.02 hereof, (ii) the amount
of cash and fair market value of any property such Member subsequently
contributes to the Company and (iii) any Net Profit or gain allocated
to such Member pursuant to Article V hereof; and (b) reduced by (i) any
distribution to such Member and (ii) any Net Loss allocated to such
Member pursuant to Article V hereof.
3.05. No Interest on Capital Accounts. Members shall not be paid interest on
their Capital Accounts.
3.06. Return of Capital Contributions. Except as otherwise provided in this
Agreement, Members shall not have the right to receive a return of any
portion of their Capital Accounts.
3.07. Form of Return of Capital. If a Member is entitled to receive a return
of his or its Capital Account, the Members may cause the Company to
distribute cash, notes, property or a combination thereof to the Member
in the amounts required hereunder.
3.08. Loans. Any Member may at any time make or cause to be made to the
Company a loan or loans in any amount and on those terms upon which the
other Members and the lending Member agree.
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Article IV
Investment Representation; Representations and Warranties of Members
4.01. No Registration of Interests. Each Member understands that the
Interests have not been registered under the Securities Act of 1933, as
amended (the "1933 Act"). Each Member also understands that the
Interests are being offered and sold pursuant to an exemption from
registration contained in the 1933 Act based in part upon such Member's
representations contained in this Agreement.
4.02. Representations and Warranties of Members. Each Member represents and
warrants as follows: Member has substantial experience in evaluating
and investing in private placement transactions of securities in
companies similar to the Company so that such Member is capable of
evaluating the merits and risks of its investment in the Company and
has the capacity to protect his own interests. Such Member must bear
the economic risk of this investment indefinitely unless the Interests
are registered pursuant to the 1933 Act, or an exemption from
registration is available. Such Member understands that the Company has
no present intention of registering the Interests. Such Member also
understands that there is no assurance that any exemption from
registration under the 1933 Act will be available and that, even if
available, such exemption may not allow such Member to transfer all or
any portion of the Interests under the circumstances, in the amounts or
at the times Member might propose. Member is acquiring the Interests
for such Member's own account for investment only, and not with a view
towards their distribution. Such Member represents that by reason of
his business or financial experience, such Member has the capacity to
protect his own interests in connection with the transactions
contemplated in this Agreement. Such Member represents that it is an
accredited investor within the meaning of Regulation D under the 1933
Act. Such Member has had an opportunity to discuss the Company's
business, management and financial affairs with the Company and has had
the opportunity to review the Company's books, records, operations and
facilities. Such Member has also had the opportunity to ask questions
of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
Article V
Allocations of Net Profits and Net Losses; Distributions of Cash
5.01. Allocations of Net Profits and Net Losses. Net Profits and Net Losses
shall be determined and allocated to the Capital Accounts of the
Members as of the close of business on the last business day of each
Fiscal Year to and among the Members pro rata in accordance with their
Participation Percentages. Notwithstanding any other provision of this
Article V, Net Losses shall be allocated first to CIMG and to Members
who have acquired their Interests from CIMG (prior to any allocation to
Predict-It or any Members who have acquired their Interests from
Predict-It) until the aggregate amount of Net Losses equal to the
aggregate Capital Contributions of CIMG have been so allocated.
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5.02. Regulatory Allocations.
(a) Qualified Income Offset; Minimum Gain Chargeback. The Members
intend that the Company's allocations of Net Profit and Net Loss
comply with the Treasury Regulations issued pursuant to Section
704(b) of the Code; therefore, this Agreement hereby expressly
incorporates a "Qualified Income Offset" and "Minimum Gain
Chargeback", in each case as defined in the Treasury
Regulations.
(b) Gross Income Allocation. If, following the tentative allocation
of Net Profit or Net Loss pursuant to Section 5.01, any Member
would otherwise have a deficit balance in his Capital Account,
which is in excess of the amount (if any) such Member is
obligated to restore (whether under this Agreement or
otherwise), then items of income and gain (consisting of a pro
rata portion of each item of income or gain) shall be specially
allocated to such Member so as to eliminate such excess as
quickly as possible.
(c) Limitation on Net Loss Allocations. To the extent that any
allocation of Net Loss pursuant to Section 5.01 would cause or
increase a deficit balance in a Member's Capital Account
balances, such portion of such Net Loss shall be allocated among
the Members with positive Capital Account balances, pro rata in
accordance with their positive Capital Account balances. For
purposes of this Section 5.02(c), a Member's Capital Account
shall be reduced for the items described in Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Treasury
Regulations.
5.03. Restorative Allocations. The allocations set forth in Section 5.02 (the
"Regulatory Allocations") are intended to comply with certain
requirements of Section 1.704-1(b) of the Treasury Regulations. The
Regulatory Allocations may not be consistent with the intended Net
Profit and Net Loss allocations. Accordingly, notwithstanding the other
provisions of this Article V, but subject to the Regulatory
Allocations, the Company shall reallocate items of income, gain,
deduction and loss among the Members so as to eliminate the effect of
the Regulatory Allocations and thereby to cause the respective Capital
Accounts of the Members to be in the amounts (or as close thereto as
possible) they would have been if Net Profit and Net Loss (and such
other items of income, gain, deduction and loss) had been allocated
without reference to the Regulatory Allocations.
5.04. Allocations for Federal Income Tax Purposes.
(a) Except as otherwise provided herein, all items of income, gain,
loss, deduction and credit shall be allocated among the Members
in the same manner that each such item was allocated to the
Members' Capital Accounts.
(b) In accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, each items of income, gain, loss, and
deductions with respect to any contributed property 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 for federal income tax purposes and its value as the
time of contribution using the "traditional method".
(c) If there is a distribution of property that causes the
recognition of gain to the Member who contributed the property
or to the Member who received the distribution or to both such
Members, such gain shall be treated as having been
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recognized by such Member or Members in the amount and manner as
specified in Sections 704(c)(1)(B) and 737 of the Code, and
appropriate basis adjustments shall be made as provided therein.
5.05. Distributions. Subject to Articles VI and VIII hereof, there shall be
distributed to the Members cash available for distribution in such
amounts and at such times as may be determined by the Members from time
to time, but in any event prorata in accordance with their Interests.
The Company shall distribute to the Members an amount of Net Profits as
shall be sufficient to enable the Members to pay their federal and
state income tax liabilities attributable to their respective shares of
the taxable income of the Company.
Article VI
Management and Members
6.01. Members. Wherever this Agreement requires the vote, consent or approval
of the Members, the agreement of at least a majority in Interests of
the Members shall be required to consent to or approve the matter.
However, no amendment of the provisions of Sections 2.06, 6.05 or 6.08
hereof shall be effective unless approved by all of the Members.
6.02. Board of Directors. The Company shall be managed by and under the
supervision of a Board of Directors. The size of the Board of Directors
and the members of the Board of Directors shall be determined from time
to time by a vote of the Members. The vote of a majority of the members
of the Board of Directors shall be sufficient to approve any matter
submitted to the Board of Directors for its approval.
6.03. Delegation of General Management to the Officers of the Company.
Subject to Section 6.04 hereof, the Board of Directors may appoint any
officers and assign to them such titles and duties as the Board of
Directors shall see fit and delegate certain management and operation
of the Company's business to such officers of the Company. In that
connection, the Board of Directors hereby designates ▇▇▇▇▇ ▇▇▇▇ as the
initial "Manager" of the Company, to serve in such capacity and
position until removed (with or without cause) by the Board of
Directors.
6.04. Actions Requiring Approval of the Board of Directors. Notwithstanding
any other provision of this Agreement to the contrary, the Manager and
the other officers of the Company, except with the express written
approval of the Board of Directors pursuant to Section 6.03 hereof,
shall not have the power or authority to:
(a) sell, transfer, exchange or otherwise dispose of any of the
assets of the Company, except for sales in the ordinary course
of business or the sale, transfer or exchange of assets other
than in the ordinary course of business which do not exceed
$25,000 in the aggregate in any 12-month period;
(b) consolidate, merge, reorganize, liquidate, wind-up, or dissolve
the Company (or take any other similar action);
(c) issue, sell, acquire, repurchase, redeem or reclassify any
Interest, other equity interest (or option, warrant, conversion
or other similar right with respect to any equity interest) or
debt interest in or of the Company;
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(d) incur debt or enter into any agreement, facility, commitment,
guaranty, instrument or other undertaking providing for, or
relating to, the incurrence of any indebtedness by the Company
(other than trade indebtedness incurred in the ordinary course
of business not in excess of $5,000 and payable within thirty
(30) days), or otherwise encumber Company assets;
(e) enter into any transaction with any member of the Board of
Directors or any Member or an Affiliate of a member of the Board
of Directors or of the Company or the Members;
(f) approve a business plan and annual operating budget for the
Company (or any updates to each thereof);
(g) declare or make any distributions to Members;
(h) consummate, or enter into any binding agreement to consummate,
any acquisition of any property or asset in excess of $5,000;
introduce or launch a new product or service; or engage in or
enter into a new line of business or a transaction not in the
ordinary course of the Company's business;
(i) institute proceedings to have the Company be adjudicated as
bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against the Company, or
file a petition with respect to the Company or consent to a
petition with respect to the Company seeking reorganization or
relief under any applicable Federal or state laws relating to
bankruptcy or insolvency, or consent to the appointment of a
receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of the Company or a substantial part of
the Company's properties, or make any assignment for the benefit
of creditors, or except as required by law, admit in writing an
inability to pay its debts generally as they become due, or to
take any action in furtherance of any such action;
(j) delegate any of the management responsibilities of any officer;
(k) commit the Company to make any expenditures that affect the
market value of the Company, or any other expenditure in excess
of $5,000;
(l) purchase or redeem the Interest of any Member; or
(m) amend this Agreement.
6.05. Actions Requiring Approval of Members. Notwithstanding any other
provision of this Agreement to the contrary, the Company shall not,
without the approval of the Members:
(a) sell, transfer, exchange or otherwise dispose of substantially
all of the assets of the Company, excluding sales in the
ordinary course of business; or
(b) consolidate, merge, reorganize, liquidate, wind-up or dissolve
the Company (or take any other similar action);
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however, unless approved by all of the Members: (i) no such transaction
prior to the Operational Date of the Project shall be effected; (ii) no
such transaction shall be effected with any Affiliate of any Member;
and (iii) no such transaction subsequent to the Operational Date of the
Project shall be effected with any Restricted Member.
6.06. No Liability of the Board of Directors or any Member. No member of the
Board of Directors and no Member, in such capacity, shall be liable for
any obligation or liability of the Company.
6.07. Liability and Indemnification.
(a) A member of the Board of Directors or a Member shall not be
liable, responsible or accountable, in damages or otherwise, to
any other Member or to the Company for any act performed by the
member of the Board of Directors or the Member in such capacity,
with respect to Company matters, except for fraud, gross
negligence or an intentional breach of this Agreement.
(b) The Company shall indemnify each member of the Board of
Directors and each Member and the officers of the Company for
any act performed by the member of the Board of Directors, the
Member or such officers of the Company, in such capacity, with
respect to Company matters, except for fraud, gross negligence
or an intentional breach of this Agreement. The provisions of
this Section 6.07 shall continue to afford protection to each
indemnitee regardless of whether such indemnitee remains a
Member or officer, employee or agent of the Company.
6.08. Certain Covenants.
(a) So long as Predict-It shall be the holder of at least a 10%
Percentage Interest in the Company, and prior to the occurrence of
an Initial Public Offering, Predict-It shall be entitled to
appoint and elect one member of the Board of Directors of the
Company.
(b) In the event that, subsequent to the Operational Date of the
Project and prior to the occurrence of an Initial Public Offering
and other than in an Initial Public Offering, the Company shall
propose to raise additional capital by the sale of Interests in
the Company, whether to any then existing Member or to third
parties, each of CIMG and Predict-It shall be entitled to
subscribe for and to purchase, on the same terms and conditions as
proposed by the Company to the existing Member or such third
party, a portion of such new Interests as would be necessary to
maintain its then Percentage Interest in the Company relative to
the other Members. Such new Interests may take the form of a
separate class of Interest, which may have such terms (including
without limitation preferences) as shall be specified by the Board
of Directors at the time of the issuance thereof. All of the
members of the Board of Directors of the Company may participate
in the approval of such financing and the terms thereof
notwithstanding that any such director might be affiliated or
associated with, or have any financial or other interest or
relationship with or in, any Person who is proposing to acquire
the Interests and the vote of such director shall be counted in
such approval.
(c) Subject to the provisions of Article VII hereof, in the event that
CIMG or Predict-It (a "Tag-along Seller") shall propose, prior to
the occurrence of an Initial Public Offering and other than in an
Initial Public Offering, to sell any portion of its Interests to
any Person (other than to an Affiliate or Related Person of the
Tag-along Seller) (a "Tag-
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along Sale"), then the Tag-along Seller shall permit the other
(the "Tag-along Participant") to participate in the Tag-along Sale
on the same terms and conditions that the Tag-along Seller
proposes to sell such portion of its Interests. In the event that
the Tag-along Participant shall elect (within 10 days following
the receipt by the Tag-along Participant of notice of the proposed
Tag-along Sale, which notice shall contain information as to the
material terms of the proposed Tag-along Sale, including without
limitation the identity of the proposed purchaser and the price)
to participate in the Tag-along Sale, the Tag-along Participant
shall be permitted to sell in the Tag-along Sale a portion of its
Interest determined by multiplying the portion of the Interests of
the Tag-along Seller proposed to be sold by the Percentage
Interest of the Tag-along Participant as of immediately prior to
the closing of the Tag-along Sale. The Tag-along Participant shall
be required to execute the same transaction documents executed by
the Tag-along Seller in the Tag-along Sale and to make the same
representations and warranties and covenants (including without
limitation indemnification covenants) as the Tag-along Seller, and
the Tag-along Participant shall bear a prorata portion of the
expenses incurred by the Tag-along Seller in the Tag-along Sale.
(d) Subject to the provisions of Article VII hereof, in the event that
CIMG or Predict-It (a "Right of First Refusal Seller") shall
propose, prior to the occurrence of an Initial Public Offering and
other than in an Initial Public Offering, to sell any portion of
its Interests to any Person (other than to an Affiliate or Related
Person of the Right of First Refusal Seller) (a "Right of First
Refusal Sale"), then the Right of First Refusal Seller shall
permit the other (the "Right of First Refusal Purchaser") to
purchase the portion of the Interests of the Right of First
Refusal Seller proposed to be sold on the same terms and
conditions that the Right of First Refusal Seller proposes to sell
such portion of its Interests. In the event that the Right of
First Refusal Purchaser shall elect (within 10 days following the
receipt by the Right of First Refusal Purchaser of notice of the
proposed Right of First Refusal Sale, which notice shall contain
information as to the material terms of the proposed Right of
First Refusal Sale, including without limitation the identity of
the proposed purchaser and the price) to purchase all, but not
less than all, of the portion of the Interests of the Right of
First Refusal Seller proposed to be sold, the Right of First
Refusal Purchaser shall be permitted to purchase the portion of
the Interests of the Right of First Refusal Seller proposed to be
sold. The Right of First Refusal Purchaser shall pay any expenses
or breakup fee or similar fee or compensation that the Right of
First Refusal Seller might be required to pay the original
proposed purchaser as a consequence of the election of the Right
of First Refusal Purchaser under this Section 6.08(d). If after
the Right of First Refusal Purchaser shall fail to close on the
purchase of the portion of the Interests of the Right of First
Refusal Seller proposed to be sold within 15 days following such
election, then the Right of First Refusal Seller shall be
permitted to effect the sale of the portion of the Interests of
the Right of First Refusal Seller proposed to be sold to the
original proposed purchaser, provided that the sale on
substantially the same terms as disclosed in the notice of the
Right of First Refusal Sale previously given to the Right of First
Refusal Purchaser.
(e) Prior to the occurrence of an Initial Public Offering, CIMG and
Predict-It shall be entitled to receive from the Company the
unaudited financial statements of the Company as at the end of
each fiscal quarter (to be delivered within 60 days after the end
of the fiscal quarter) and audited financial statements of the
Company as at the end of each fiscal year (to be delivered within
120 days after the end of the fiscal year), together with such
other material financial information prepared by the Company in
the regular course of its business as CIMG or Predict-It shall
request.
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(f) CIMG shall be responsible for funding the operating expenses of
the Company until the Operational Date of the Project. However,
the foregoing obligation of CIMG shall terminate if all necessary
Governmental licenses and approvals are not obtained on or before
August 31, 2001. Operating expenses funded by CIMG, and other
amounts contributed by CIMG to the Company, shall increase the
Capital Account of CIMG and, in the event of the liquidation or
dissolution of the Company, shall be repaid to CIMG prior to any
distributions to Predict-It in respect of the Capital Account of
Predict-It.
(g) If demanded by CIMG or Predict-It at any time prior to the
occurrence of an Initial Public Offering, the outstanding
Interests in the Company shall be exchanged for newly issued
interests in CIMG on such terms as shall be fair from a financial
point of view as determined by a nationally recognized (in the
United States) investment banking firm selected by CIMG.
(h) In the event that the license granted to the Company pursuant to
the License Agreement shall be terminated for any reason, CIMG or
its assigns shall have the right to require Predict-It to sell to
CIMG 100% (but not less than 100%) of the Interests of Predict-It
and its Affiliates in the Company. The purchase price for the
Interests shall be the fair market value of the Interests as
determined by the Board of Directors of the Company. In the event
that CIMG or Predict-It and its Affiliates shall object to any
determination by the Board of Directors of fair market value of
such Interests, provided that such objection is delivered to the
Company and CIMG within 15 days following the receipt by
Predict-It of written notice of the determination of fair market
value, then an independent appraiser shall be selected by the
Company and requested to determine the fair market value of the
Interests, and the determination of such independent appraiser
shall be final and binding on CIMG and Predict-It and its
Affiliates; however: (i) if the objecting Person asserts that the
fair market value of the Interests is greater than the initial
determination of the fair market value of the Interests, but the
fair market value of the Interests is determined by the
independent appraiser to be no greater than 105% of the fair
market value of the Interests as initially determined by the Board
of Directors, then the Person who objected to the initial
determination by the Board of Directors of the fair market value
of the Interests shall pay the fees and expenses of the
independent appraiser; and (ii) if the objecting Person asserts
that the fair market value of the Interests is lesser than the
initial determination of the fair market value of the Interests,
but the fair market value of the Interests is determined by the
independent appraiser to be at least 95% of the fair market value
of the Interests as initially determined by the Board of
Directors, then the Person who objected to the initial
determination by the Board of Directors of the fair market value
of the Interests shall pay the fees and expenses of the
independent appraiser. The closing for the purchase of the
Interests shall occur within 30 days following the final
determination of the purchase price for the Interests.
Article VII
Transfer of Interests and Withdrawals of Members
7.01. Transfers. Except for Permitted Transfers (but subject to the options
of the other Members set forth in this Section 7.01 and subject to the
restrictions of Section 7.02 hereof), no Member shall Transfer all, or
any portion of, or any interest or rights in, the Interest owned by
such Member. The Transfer of any membership rights or Interests in
13
violation of the prohibition contained in this Section 7.01 shall be
deemed invalid, null and void, and of no force or effect. Any person to
whom an Interest is attempted to be transferred in violation of this
Section 7.01 shall not be entitled to (i) vote on matters coming before
the Members, (ii) participate in the management of the Company to the
extent permitted by this Agreement, (iii) act as an agent of the
Company, (iv) receive distributions from the Company, (v) have any
other rights in or with respect to the Company or (vi) have Net Profits
credited to such person's Capital Account after the Transfer (but shall
have any Net Loss of the Company after the Transfer charged against
such person's Capital Account). Upon the Involuntary Withdrawal of any
Member, the other Members shall be entitled to require the Member or
the estate or successor of such Member to sell the Interest of the
Member to the remaining Members (in proportion to their Participation
Percentages) for a price in cash equal to the fair market value of the
Interest of the Member subject to the Involuntary Withdrawal as
determined by an independent nationally recognized investment banking
firm selected by the remaining Members, which determination shall be
made without discount based on the minority position represented by
such Interest; and the determination of such investment banking firm
shall be final and binding on the Members and the estate or successor
of the Member subject to the Involuntary Withdrawal. However, at the
election of the remaining Members, the purchase price for the Interest
of the Member subject to the Involuntary Withdrawal may be paid in five
equal annual installments with interest thereon at the annual rate of
10%. The fees and expenses of the investment banking firm retained to
determine the fair market value of the Interest of the Member subject
to the Involuntary Withdrawal shall be paid by the Member subject to
the Involuntary Withdrawal (and if not paid, shall be withdrawn from
the first installment of the purchase price).
7.02. General Limitations of Transfer. Notwithstanding anything set forth
herein to the contrary, no Member shall transfer any of its Interest
(including without limitation in connection with any Permitted
Transfer) until such Member shall have notified the Company of such
pending transaction and, if requested by the Company, delivered an
opinion of legal counsel reasonably satisfactory to the Company to the
effect that the proposed transfer does not and will not violate the
Securities Act of 1933, as amended, and applicable securities laws of
any state.
7.03. Voluntary Withdrawal. Unless the Members shall so approve, no Member
shall have the right or power to effect a Voluntary Withdrawal from the
Company and any attempt to do so shall be treated as a Transfer under
Section 7.01 hereof.
7.04. Involuntary Withdrawal.
Immediately upon the occurrence of an Involuntary Withdrawal, the
Member shall cease to be a Member and no successor in interest, if any,
to the Member shall become a Member of the Company. However, in the
event that the other Members do not elect pursuant to Section 7.01
hereof to purchase the Interest of the Member subject to the
Involuntary Withdrawal, then the former Member or the estate of
successor in interest to the former Member shall become an Interest
Holder with all the economic rights under this Agreement of the former
Member as though the former Member were still a Member.
14
7.05. Sale of the Company, Etc.
In the event that the holders of more than fifty percent (50%) of the
Interests of the Members shall propose to effect a transaction for the
sale of all the Interests of all of the Members, or a merger or
consolidation of the Company, or a sale of substantially all of the
assets of Company, the remaining Members shall join in any such sale,
merger, consolidation or other transaction, and shall vote their
Interests in favor of such sale, merger, consolidation or other
transaction; provided that each Member receives the same consideration
for their Interests (in proportion to their respective Interests), and
provided that such sale or transaction is not with or to any Member.
All Members shall execute and deliver all such documents, certificates,
agreements, indemnifications, guarantees and instruments which the
holders of more than fifty percent (50%) of the Interests of the
Members shall be required to execute and deliver in connection with any
such transaction. However, the provisions of this Section 7.05 shall be
inapplicable to any such transaction prior to the Operational Date of
the Project or any such transaction to be effected with any Affiliate
of any Member, unless approved by all of the Members.
Article VIII
Dissolution and Termination of the Company
8.01. Events of Dissolution. The Company shall be dissolved only upon the
happening of any of the following events:
(a) upon the written agreement of more than fifty percent (50%) in
Interests of the Members; however, no dissolution of the Company
shall be effected prior to the Operational Date of the Project,
unless approved by all of the Members;
(b) upon a sale of all or substantially all of the assets of the
Company; or
(c) upon the entry of a decree of judicial dissolution of the
Company under Section 702 of the Code.
8.02. Procedure for Winding Up and Dissolution. If the Company is dissolved,
the Members shall wind up its affairs. On winding up of the Company,
the assets of the Company shall be distributed first to creditors of
the Company, including Members who are creditors, in satisfaction of
the liabilities of the Company, and then to the Members in accordance
with Section 8.03.
8.03. Dissolution.
(a) If the Company is dissolved, the assets of the Company shall be
distributed to the Members in accordance with their respective
positive Capital Accounts balances after taking into account the
allocations of Net Profit or Net Loss and other items of income,
gain, loss and deduction pursuant to Article V hereof and
distributions made pursuant to Section 5.05 hereof and this
Article VIII.
(b) Notwithstanding any other provision of this Agreement, no Member
shall be obligated to restore a negative Capital Account.
15
8.04. General.
(a) Except as otherwise specifically provided in this Agreement, the
timing and amount of all distributions shall be determined by
the Members.
(b) (i) If any assets of the Company are distributed in kind
to the Members, those assets shall be valued at their fair
market value, and any Member entitled to any interest in
those assets shall receive that interest as a
tenant-in-common with all other Members so entitled. The
fair market value of the assets shall be determined by the
Board of Directors, who may, but shall not be obligated
to, have an independent appraiser determine the fair
market value of any asset. The determination of fair
market value of any asset by an independent appraiser
selected by the Company shall be final and binding on the
Members. In the event that any Member shall object to a
determination of fair market value of any asset made
solely by the Board of Directors without a determination
by an independent appraiser, provided that such objection
is delivered to the Company within 15 days following the
receipt by the objecting Member of written notice of the
determination of fair market value, then an independent
appraiser shall be selected by the Company and requested
to determine the fair market value of the asset, and the
determination of such independent appraiser shall be final
and binding on the Members; however: (i) if the objecting
Member asserts that the fair market value of the asset is
greater than the initial determination of the fair market
value of the asset, but the fair market value of the asset
is determined by the independent appraiser to be no
greater than 105% of the fair market value of the asset as
initially determined by the Board of Directors, then the
Member who objected to the initial determination by the
Board of Directors of the fair market value of the asset
shall pay the fees and expenses of the independent
appraiser; and (ii) if the objecting Member asserts that
the fair market value of the asset is lesser than the
initial determination of the fair market value of the
asset, but the fair market value of the asset is
determined by the independent appraiser to be at least 95%
of the fair market value of the asset as initially
determined by the Board of Directors, then the Member who
objected to the initial determination by the Board of
Directors of the fair market value of the asset shall pay
the fees and expenses of the independent appraiser.
(ii) Net Profit or Net Loss for each unsold asset shall be
determined as if the asset had been sold at its fair
market value, and the Net Profit or Net Loss shall be
allocated as provided in Article V and shall be properly
credited or charged to the Capital Accounts of the Members
prior to the distribution of the assets in liquidation
pursuant to Section 8.03.
(c) All Net Profit and Net Loss shall be allocated, and all
distributions shall be made, to the persons shown on the records
of the Company to have been Interest Holders as of the last day
of the taxable year for which the allocation or distribution is
to be made. Notwithstanding the foregoing, the taxable year of
the Company shall close with respect to a Member or Interest
Holder whose entire Interest in the Company terminates, whether
by Transfer, Voluntary or Involuntary Withdrawal or otherwise,
and all Net Profits, Net Losses and other items of income, gain,
loss, deduction and credit shall be allocated on such basis.
16
(d) The Members are hereby authorized, upon the advice of the
Company's tax counsel, to amend this Article VIII to comply with
the Code and the regulations promulgated under Code Section
704(b); provided, however, that no amendment shall materially
affect distributions to an Interest Holder without the Interest
Holder's prior written consent.
8.05. Filing of Articles of Dissolution. If the Company is dissolved, the
Members shall promptly file Articles of Dissolution with the office of
the Secretary of State of the State of Delaware. If there are no
remaining Members, the Articles shall be filed by the last person to be
a Member.
8.06. Successor Company. The Members acknowledge that it may be desirable to
form another company that will succeed to the business and operations
of the Company (including without limitation in connection with any
proposed public offering), and the Members shall cooperate in effecting
the organization of such successor company and the transfer of the
business and operations of the Company to such successor company in a
manner that is the most tax efficient for the Company and the Members
and which provides for substantially the same rights and obligations of
the Members as under this Agreement except to the extent agreed by the
Members.
Article IX
Books, Records, Accounting and Reports
9.01. Books and Records. The Company's books and records, together with all
of the documents and papers pertaining to the business of the Company,
shall be kept at the principal office of the Company.
9.02. Financial Statements. As soon as practicable after the close of the
Company's Fiscal Year, the Company shall cause to be prepared at the
expense of the Company financial statements of the Company relating to
the prior Fiscal Year and shall transmit a copy of such financial
statements to each Interest Holder. The tax year of the Company shall
coincide with the Fiscal Year of the Company.
9.03. Tax Returns. The Company shall cause income tax returns for the Company
to be prepared and timely filed with the appropriate authorities. Each
Interest Holder of the Company shall cooperate with and assist in the
preparation of such tax returns.
9.04. Bank Accounts. All funds of the Company shall be deposited in the name
of the Company in such bank account or accounts as shall be deemed
appropriate by the Company. All withdrawals therefrom shall be made
upon checks signed on behalf of the Company by any person or persons
approved by the Company to sign such checks.
Article X
Tax Matters
10.01. Tax Matters Member. CIMG is hereby designated as the "Tax Matters
Partner" of the Company for purposes of Section 6231(a)(7) of the Code.
The Tax Matters Partner shall, within ten (10) days of the receipt of
any notice from the Internal Revenue Service in any
17
administrative proceeding at the Company level relating to the
determination of any Company item of income, gain, loss, deduction or
credit, mail or otherwise deliver a copy of such notice to each Member.
10.02. Taxation as Partnership. The Company and its Members shall not take any
action that would prevent the Company from being treated as a
partnership for U.S. federal income tax purposes.
Article XI
General Provisions
11.01. Assurances. Each Interest Holder shall execute all such certificates
and other documents and shall do all such filing, recording, publishing
and other acts as the Board of Directors or the Manager deems
appropriate to comply with the requirements of law for the formation
and operation of the Company and to comply with any laws, rules and
regulations relating to the acquisition, operation or holding of the
property of the Company.
11.02. Notifications. Any notice, demand, consent, election, offer, approval,
request or other communication (collectively, a "notice") required or
permitted under this Agreement must be in writing and either delivered
personally, sent by certified or registered mail, postage prepaid,
return receipt requested or sent by nationally recognized overnight
courier. A notice must be addressed to an Interest Holder at the
Interest Holder's last known address on the records of the Company. A
notice to the Company must be addressed to the Company's principal
office. A notice delivered personally will be deemed given when
delivered. A notice that is sent by mail will be deemed given three (3)
business days after it is mailed. A notice delivered by nationally
recognized overnight courier will be deemed given one (1) day after it
is sent. Any party may designate, by notice to all of the others,
substitute addresses or addressees for notices; and, thereafter,
notices are to be directed to those substitute addresses or addressees.
11.03. Specific Performance. The parties recognize that irreparable injury
will result from a breach of any provision of this Agreement and that
money damages will be inadequate to fully remedy the injury.
Accordingly, in the event of a breach or threatened breach of one or
more of the provisions of this Agreement, any party who may be injured
(in addition to any other remedies which may be available to that
party) shall be entitled to one or more preliminary or permanent orders
(i) restraining and enjoining any act which would constitute a breach
or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
11.04. Complete Agreement. This Agreement, together with the Subscription
Agreement dated as of March 3, 2000 among the Company, CIMG and
Predict-It (the "Subscription Agreement") and the License Agreement,
constitutes the complete and exclusive statement of the agreement among
the Interest Holders. It supersedes all prior written and oral
statements, including any prior representation, statement, condition or
warranty. In the event of any conflict between the terms and provisions
of this Agreement and the Subscription Agreement, the terms and
provisions of the Subscription Agreement shall govern. Except as
expressly provided otherwise herein, this Agreement may not be amended
without the written consent of the Members.
18
11.05. Section Titles. The headings herein are inserted as a matter of
convenience only, and do not define, limit or describe the scope of
this Agreement or the intent of the provisions hereof.
11.06. Binding Provisions. This Agreement is binding upon, and inures to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and
permitted assigns.
11.07. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware without giving effect to the conflicts of law
principles thereof. The parties hereby irrevocably consent to, and
waive any objection to the exercise of, personal jurisdiction by the
state and federal courts located in the State of Delaware with respect
to any action or proceeding arising out of this Agreement.
11.08. Attorneys' Fees. In the event that any party finds it necessary to
bring an action at law or other proceedings against the other party to
enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its
reasonable attorneys' fees as well as court costs.
11.09. Terms. Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of
the person may in the context require.
11.10. Separability of Provisions. Each provision of this Agreement shall be
considered separable; and if, for any reason, any provision or
provisions herein are determined to be invalid and contrary to any
existing or future law, such invalidity shall not impair the operation
of or affect those portions of this Agreement which are valid.
11.11. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts each of which shall be deemed an original, and all of
which, when taken together, constitute one and the same document. The
signature of any party to any counterpart shall be deemed a signature
to, and may be appended to, any other counterpart.
[The remainder of this page is intentionally left blank.]
19
In witness whereof, the parties have executed this Agreement as of the date
first written above.
Members
China Interactive Media Group LLC Predict It Inc.
By:_____________________________ By:____________________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Member President
Schedule A
Initial Capital Contributions and Participation Percentages of the Members
Initial Capital Participation Aggregate
Member Contribution Percentage Votes
-------------------------------------------------------------------------------
China Interactive Media Group $-0- 70% 70
Predict It Inc. $-0- 30% 30