OPERATING AGREEMENT
OF
DMTR, LLC
Operating Agreement (this "Agreement") entered into as of the 22nd day of
September, 2000 by and among Willowcreek Capital Partners, L.P., NTS Financial
Services Limited (BVI), Europa International, ▇▇▇▇▇ Brothers Limited
Partnerships, Phoenix Enterprises Family Fund LLC, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇ (collectively, the "Members").
EXPLANATORY STATEMENT
The parties have agreed to operate a limited liability company in
accordance with the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties, intending legally to be bound, agree
as follows:
Article I
Defined Terms
The following capitalized terms shall have the meaning specified in this
Article I. Other terms are defined in the text of this Agreement; and,
throughout this Agreement, those terms shall have the meanings respectively
ascribed to them.
"Adjusted Capital Account Deficit" means, with respect to any Interest
Holder, the deficit balance, if any, in the Interest Holder's Capital Account as
of the end of the relevant taxable year, after giving effect to the following
adjustments:
(i) the deficit shall be decreased by the amounts which the Interest Holder
is obligated to restore pursuant to Section 4.4.2 or is deemed obligated to
restore pursuant to Regulation Section 1.704-1(b)(2)(ii)(c); and
(ii) the deficit shall be increased by the items described in Regulation
Sections 1.704-1(b)(2)(ii)-(d)(4), (5), and (6).
"Adjusted Capital Balance" means, as of any day, an Interest Holder's total
Capital Contributions less all amounts actually distributed to the Interest
Holder pursuant to Sections 4.1 and 4.4 hereof. If any Interest is transferred
in accordance with the terms of this Agreement, the transferee shall succeed to
the Adjusted Capital Balance of the transferor to the extent the Adjusted
Capital Balance relates to the Interest transferred.
"Agreement" means this Operating Agreement, as amended from time to time.
"Capital Account" means the account to be maintained by the Company for
each Interest Holder in accordance with the following provisions:
(i) an Interest Holder's Capital Account shall be credited with the
Interest Holder's Capital Contributions, the amount of any Company liabilities
assumed by the Interest Holder (or which are secured by Company property
distributed to the Interest Holder), the Interest Holder's distributive share of
Profit and any item in the nature of income or gain specially allocated to the
Interest Holder pursuant to the provisions of Article IV (other than Section
4.3.3); and
(ii) an Interest Holder's Capital Account shall be debited with the amount
of money and the fair market value of any Company property distributed to the
Interest Holder, the amount of any liabilities of the Interest Holder assumed by
the Company (or which are secured by property contributed by the Interest Holder
to the Company), the Interest Holder's distributive share of Loss and any item
in the nature of expenses or losses specially allocated to the Interest Holder
pursuant to the provisions of Article IV (other than Section 4.3.3).
If any Interest is transferred pursuant to the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
the Capital Account is attributable to the transferred Interest. If the book
value of Company property is adjusted pursuant to Section 4.3.3, the Capital
Account of each Interest Holder shall be adjusted to reflect the aggregate
adjustment in the same manner as if the Company had recognized gain or loss
equal to the amount of such aggregate adjustment. It is intended that the
Capital Accounts of all Interest Holders shall be maintained in compliance with
the provisions of Regulation Section 1.704-1(b), and all provisions of this
Agreement relating to the maintenance of Capital Accounts shall be interpreted
and applied in a manner consistent with that Regulation.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed (or deemed contributed under Regulation
Section 1.704-1(b)(2)(iv)(d)) to the Company by a Member, net of liabilities
assumed or to which the assets are subject.
"Cash Flow" means all cash funds derived from operations of the Company
(including interest received on reserves), without reduction for any noncash
charges, but less cash funds used to pay current operating expenses and to pay
or establish reasonable reserves for future expenses, debt payments, capital
improvements, and replacements as determined by the Members. Cash Flow shall not
include Capital proceeds but shall be increased by the reduction of any reserve
previously established.
"Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law or any corresponding provision.
"Company" means the limited liability company formed in accordance with
this Agreement.
"Interest" means a Person's share of the Profits and Losses of, and the
right to receive distributions from, the Company.
"Interest Holder" means any Person who holds an Interest, whether as a
Member or an unadmitted assignee of a Member.
"Involuntary Withdrawal" means, with respect to any Member, the occurrence
of any of the following events:
(i) the Member makes an assignment for the benefit of creditors;
(ii) the Member files a voluntary petition of bankruptcy;
(iii) the Member is adjudged bankrupt or insolvent or there is entered
against the Member an order for relief in any bankruptcy or insolvency
proceeding;
(iv) the Member files a petition seeking for the Member any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any statute, law, or regulation;
(v) the Member seeks, consents to, or acquiesces in the appointment of a
trustee for, receiver for, or liquidation of the Member or of all or any
substantial part of the Member's properties;
(vi) the Member files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Member in any
proceeding described in Subsections (i) through (v);
(vii) any proceeding against the Member seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any statute, law, or regulation, continues for one hundred twenty
(120) days after the commencement thereof, or the appointment of a trustee,
receiver, or liquidator for the Member or all or any substantial part of the
Member's properties without the Member's agreement or acquiescence, which
appointment is not vacated or stayed for one hundred twenty (120) days or, if
the appointment is stayed, for one hundred twenty (120) days after the
expiration of the stay during which period the appointment is not vacated;
(viii) the Member's death, incapacity, or adjudication by a court of
competent jurisdiction as incompetent to manage the Member's person or property;
"Law" means the New York Limited Liability Company Law, as amended from
time to time.
"Member" means each Person who has signed this Agreement and any Person who
subsequently is admitted as a member of the Company.
"Membership Interest" means all of the rights of a Member in the Company,
including a Member's: (i) Interest; (ii) right to inspect the Company's books
and records; (iii) right to participate in the management of and vote on matters
coming before the Company; and (iv) unless this Agreement or the Articles of
Organization provide to the contrary, right to act as an agent of the Company.
"Minimum Gain" has the meaning set forth in Regulation Section 1.704-2(d).
Minimum Gain shall be computed separately for each Interest Holder in a manner
consistent with the Regulations under Code Section 704(b).
"Negative Capital Account" means a Capital Account with a balance of less
than zero.
"Percentage" means, as to a Member, the percentage set forth after the
Member's name on Exhibit A, as amended from time to time, and as to an Interest
Holder who is not a Member, the 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.
"Person" means and includes an individual, corporation, partnership,
association, limited liability company, trust, estate, or other entity.
"Positive Capital Account" means a Capital Account with a balance greater
than zero.
"Profit" and "Loss" means, for each taxable year of the Company (or other
period for which Profit or Loss must be computed), the Company's taxable income
or loss determined in accordance with Code Section 703(a), with the following
adjustments:
(i) all items of income, gain, loss, deduction, or credit required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
computing taxable income or loss; and
(ii) any tax-exempt income of the Company, not otherwise taken into account
in computing Profit or Loss, shall be included in computing taxable income or
loss; and
(iii) any expenditures of the Company described in Code Section
705(a)(2)(B) (or treated as such pursuant to Regulation Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit
or Loss, shall be subtracted from taxable income or loss; and
(iv) gain or loss resulting from any taxable disposition of Company
property shall be computed by reference to the adjusted book value of the
property disposed of, notwithstanding the fact that the adjusted book value
differs from the adjusted basis of the property for federal income tax purposes;
and
(v) in lieu of the depreciation, amortization, or cost recovery deductions
allowable in computing taxable income or loss, there shall be taken into account
the depreciation computed based upon the adjusted book value of the asset; and
(vi) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 4.3 hereof shall not be taken
into account in computing Profit or Loss.
"Regulation" means the income tax regulations, including any temporary
regulations, from time to time promulgated under the Code.
"Transfer" means - when used as a noun - any sale, hypothecation, pledge,
assignment, gift, bequest attachment, or other transfer, including transfers by
operation of Law, and - when used as a verb - means to sell, hypothecate,
pledge, assign, give, bequeath, or otherwise transfer.
"Voluntary Withdrawal" means a Member's disassociation with the Company by
means other than a Transfer or an Involuntary Withdrawal.
Article II
Formation and Name: Office; Purpose; Term
2.1. Organization.
2.1.1. The undersigned have organized a limited liability company pursuant
to the Law and the provisions of this Agreement and, for that purpose, have
caused Articles of Organization to be prepared, executed, and filed with the New
York Department of State on September 22, 2000.
2.2. Name of the Company. The name of the Company shall be DMTR, LLC. The
Company may do business under that name and under any other name or names upon
which the Members agree. If the Company does business under a name other than
that set forth in its Articles of Organization, then the Company shall file an
assumed-name certificate as required by General Business Law ss. 130.
2.3. Purpose. The purpose of the Company shall be to engage in any lawful
business and to do any and all things necessary, convenient, or incidental to
that purpose.
2.4. Term. The term of the Company shall begin upon the filing of Articles
of Organization with the New York Department of State and shall have a perpetual
existence unless its existence is sooner terminated pursuant to Article VII of
this Agreement.
2.5. Registered Agent. The name and address in New York of the Company's
registered agent upon whom and at which process against the Company can be
served is CT Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other
persons as may be designated by the Members.
2.6. Members. The name, present mailing address, taxpayer identification
number, agreed value of contribution and Percentage of each Member are set forth
on Exhibit A.
Article III
Members; Capital; Capital Accounts
3.1. Initial Capital Contributions. Upon the execution of this Agreement,
the Members shall contribute to the Company cash in the amounts respectively set
forth on Exhibit A as initial contributions.
3.2. No Additional Capital Contributions Required.
3.2.1. No Member shall be required to contribute any additional capital to
the Company, unless required by a vote of the Members holding three-quarters
(3/4) in interest, and in no event in an amount greater than $10,000. No Member
shall have any personal liability for any debt, obligation, or liability of the
Company.
3.3. No Interest on Capital Contributions. Interest Holders shall not be
paid interest on their Capital Contributions.
3.4. Return of Capital Contributions. Except as otherwise provided in this
Agreement, no Interest Holder shall have the right to receive any return of any
Capital Contribution.
3.5. Form of Return of Capital. If an Interest Holder is entitled to
receive a return of a Capital Contribution, the Company may distribute cash,
notes, property, or a combination thereof to the Interest Holder in return of
the Capital Contribution at the discretion of the Tax Matters Member.
3.6. Capital Accounts. A separate Capital Account shall be maintained for
each Interest Holder.
3.7. Loans. Any Member may, at any time, make or cause a loan to be made to
the Company in any amount and on those terms as approved by a majority in
interest of the other Members.
Article IV
Profit, Loss, and Distributions
4.1. Mandatory Distributions of Cash Flow. Cash Flow for each taxable year
of the Company shall be distributed to the Interest Holders in proportion to
their Percentages no later than ninety (90) days after the end of the taxable
year.
4.2. Allocation of Profit or Loss. After giving effect to the special
allocations set forth in Section 4.3, for any taxable year of the Company,
Profit or Loss shall be allocated to the Interest Holders in proportion to their
Percentages.
4.3. Regulatory Allocations.
4.3.1. Qualified Income Offset. No Interest Holder shall be allocated
Losses or deductions if the allocation causes the Interest Holder to have an
Adjusted Capital Account Deficit. If an Interest Holder receives (1) an
allocation of Loss or deduction (or item thereof) or (2) any distribution, which
causes the Interest Holder to have an Adjusted Capital Account Deficit at the
end of any taxable year, then all items of income and gain of the Company
(consisting of a pro rata portion of each item of Company income, including
gross income and gain) for that taxable year shall be allocated to that Interest
Holder, before any other allocation is made of Company items for that taxable
year, in the amount and in proportions required to eliminate the excess as
quickly as possible. This Section 4.3.1 is intended to comply with, and shall be
interpreted consistently with, the "qualified income offset" provisions of the
Regulations promulgated under Code Section 704(b).
4.3.2. Minimum Gain Chargeback. Except as set forth in Regulation Section
1.704-2(f)(2), (3), and (4), if, during any taxable year, there is a net
decrease in Minimum Gain, each Interest Holder, prior to any other allocation
pursuant to this Article IV, shall be specially allocated items of gross income
and gain for such taxable year (and, if necessary, subsequent taxable years) in
an amount equal to that Interest Holder's share of the net decrease of Minimum
Gain, computed in accordance with Regulation Section 1.704-2(g). Allocations of
gross income and gain pursuant to this Section 4.3.2 shall be made first from
gain recognized from the disposition of Company assets subject to nonrecourse
liabilities (within the meaning of the Regulations promulgated under Code
Section 752), to the extent of the Minimum Gain attributable to those assets,
and thereafter, from a pro rata portion of the Company's other items of income
and gain for the taxable year. It is the intent of the parties hereto that any
allocation pursuant to this Section 4.3.2 shall constitute a "minimum gain
chargeback" under Regulation Section 1.704-2(f).
4.3.3. Contributed Property and Book-Ups. In accordance with Code Section
704(c) and the Regulations thereunder, as well as Regulation Section
1.704-l(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any
property contributed (or deemed contributed) to the Company shall, solely for
tax purposes, be allocated among the Interest Holders so as to take account of
any variation between the adjusted basis of the property to the Company for
federal income tax purposes and its fair market value at the date of
contribution (or deemed contribution). If the adjusted book value of any Company
asset is adjusted as provided herein, subsequent allocations of income, gain,
loss, and deduction with respect to the asset shall take account of any
variation between the adjusted basis of the asset for federal income tax
purposes and its adjusted book value in the manner required under Code Section
704(c) and the Regulations thereunder.
4.4. Liquidation and Dissolution.
4.4.1. If the Company is liquidated, the assets of the Company shall be
distributed to the Interest Holders in accordance with the balances in their
respective Capital Accounts, after taking into account the allocations of Profit
or Loss pursuant to Section 4.2, if any, and distributions, if any, of cash or
property pursuant to Section 4.1.
4.4.2. No Interest Holder shall be obligated to restore a Negative Capital
Account.
4.5. General.
4.5.1. Except as otherwise provided in this Agreement, the timing and
amount of all distributions shall be determined by the Members.
4.5.2. If any assets of the Company are distributed in kind to the Interest
Holders, those assets shall be valued on the basis of their fair market value,
and any Interest Holder entitled to any interest in those assets shall receive
that interest as a tenant-in-common with all other Interest Holders so entitled.
Unless the Members otherwise agree, the fair market value of the assets shall be
determined by an independent appraiser who shall be selected by the Members. The
Profit or Loss for each unsold asset shall be determined as if the asset had
been sold at its fair market value, and the Profit or Loss shall be allocated as
provided in Section 4.2 and shall be properly credited or charged to the Capital
Accounts of the Interest Holders prior to the distribution of the assets in
liquidation pursuant to Section 4.4.
4.5.3. All Profit and 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, unless the Company's
taxable year is separated into segments, if there is a Transfer or an
Involuntary Withdrawal during the taxable year, the Profit and Loss shall be
allocated between the original Interest Holder and the successor on the basis of
the number of days each was an Interest Holder during the taxable year;
provided, however, the Company's taxable year shall be segregated into two or
more segments in order to account for Profit, Loss, or proceeds attributable to
any extraordinary non-recurring items of the Company.
4.5.4. The Members are hereby authorized, upon the advice of the Company's
tax counsel, to amend this Article IV 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.
Article V
Management: Rights, Powers, and Duties
5.1. Management. The Company shall be managed by the Members. Except as
otherwise provided in this Agreement, each Member shall have the right to act
for and bind the Company in the ordinary course of its business. Notwithstanding
the foregoing, the consent of all of the Members is required to bind the Company
for an amount in excess of five thousand dollars ($5,000.00).
5.2. Meetings of and Voting by Members.
5.2.1. No annual or regular meetings of the Members as such shall be
required.
5.2.2. A meeting of the Members may be called at any time by any Member.
Meetings of Members shall be held at the Company's principal place of business
or, upon the consent of the Members, at any other place designated by the Person
calling the meeting. Not fewer than ten (10) nor more than sixty (60) days
before each meeting, the Person calling the meeting shall give written notice of
the meeting to each Member entitled to vote at the meeting. The notice shall
state the place, date, hour, and purpose of the meeting. Notwithstanding the
foregoing provisions, each Member who is entitled to notice waives notice if
before or after the meeting the Member signs a waiver of the notice which is
filed with the records of Members' meetings, or is present at the meeting in
person or by proxy without objecting to the lack of notice. Unless this
Agreement provides otherwise, at a meeting of Members, the presence in person or
by proxy of Members holding not less than a majority (over 50 percent) of the
Percentages then held by Members constitutes a quorum. A Member may vote either
in person or by written proxy signed by the Member or by the Member's duly
authorized attorney in fact.
5.2.3. Except as otherwise provided in this Agreement, the affirmative vote
of Members holding a majority (over 50 percent) or more of the Percentages then
held by Members shall be required to approve any matter coming before the
Members.
5.2.4. In lieu of holding a meeting, the Members may vote or otherwise take
action by a written instrument indicating the consent of Members holding such
Percentages then held by Members as would be required for Members to take action
under this Agreement. If such consent is not unanimous, prompt notice shall be
given to those Members who have not consented in writing but who would have been
entitled to vote thereon had such action been taken at a meeting.
5.3. Personal Service. No Member shall be required to perform services for
the Company solely by virtue of being a Member. Unless approved by the Members,
no Member shall be entitled to compensation for services performed for the
Company. However, upon substantiation of the amount and purpose thereof, the
Members shall be entitled to reimbursement for expenses reasonably incurred in
connection with the activities of the Company.
5.4. Duties of Parties.
5.4.1. The Members shall devote such time to the business and affairs of
the Company as is necessary to carry out the Members' duties set forth in this
Agreement.
5.4.2. Except as otherwise expressly provided in Section 5.4.3, nothing in
this Agreement shall be deemed to restrict in any way the rights of any Member
to conduct any other business or activity whatsoever, and no Member shall be
accountable to the Company or to any other Member with respect to that business
or activity even if the business or activity competes with the Company's
business. The organization of the Company shall be without prejudice to the
Members' respective rights to maintain, expand, or diversify such other
interests and activities and to receive and enjoy profits or compensation
therefrom. Each Member waives any rights the Member might otherwise have to
share or participate in such other interests or activities of any other Member.
5.4.3. Each Member understands and acknowledges that the conduct of the
Company's business may involve business dealings and undertakings with Members.
In any of those cases, those dealings and undertakings shall be at arm's length
and on commercially reasonable terms.
5.5. Liability and Indemnification.
5.5.1. Except as otherwise provided by law, no Member shall be liable,
responsible, or accountable in any way for damages or otherwise to the Company
or to any of the Members for any act or failure to act pursuant to this
Agreement or otherwise unless there is a judicial determination that (i) such
person acted in bad faith, (ii) the conduct of such person constituted
intentional misconduct or a knowing violation of law, (iii) such person gained a
financial benefit to which he or she was not legally entitled, or (iv) such
person failed to perform his or her duties, specifically with respect to
distributions under section 508(a) of the Law, in good faith and with that
degree of care that an ordinarily prudent person in a like position would use
under similar circumstances.
5.5.2. The Company shall indemnify, defend, and hold harmless each of the
Members (severally, the "Indemnitee" and collectively, the "Indemnitees"), from
and against any claims, losses, liabilities, damages, fines, penalties, costs,
and expenses (including, without limitation, reasonable fees and disbursements
of counsel and other professionals) arising out of or in connection with any act
or failure to act by an Indemnitee pursuant to this Agreement, or the business
and affairs of the Company to the fullest extent permitted by law; provided,
however, that an Indemnitee shall not be entitled to indemnification hereunder
if there is a judicial determination that (a) such Indemnitee's actions or
omissions to act were made in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or (b) such Indemnitee personally gained a financial benefit to which the
Indemnitee was not legally entitled.
5.5.3. Each member (the "Indemnifying Member") shall indemnify, defend and
hold harmless each of the other Members, from and against any claim, losses,
liabilities, damages, fines, penalties, costs and expenses (including, without
limitation, reasonable fees and disbursements of counsel and other
professionals) arising out of or in connection with any act or failure to act
pursuant to this Agreement or otherwise if there is a judicial determination
that (i) the Indemnifying Member acted in bad faith or was negligent, (ii) the
conduct of the Indemnifying Member constituted intentional misconduct or a
knowing violation of law, (iii) the Indemnifying Member gained a financial
benefit to which he or she was not legally entitled or (iv) the Indemnifying
Member failed to perform his or her duties, specifically with respect to
distributions under section 508(a) of the Law, in good faith and with that
degree of care that an ordinarily prudent person in a like position would use
under similar circumstances.
5.6. Assignment of Developments.
5.6.1. If, at any time or times while a Member is bound by this Agreement,
such Member shall (either alone or with others) make, conceive, discover or
reduce to practice any Proprietary Information (as defined below) whatsoever or
any interest therein (whether or not patentable or registrable under copyright
or similar statutes or subject to analogous protection) (herein called
"Developments") that (i) relates to the business of the Company or any customer
of or supplier to the Company or any of the products or services being
developed, manufactured, sold or provided by the Company or which may be used in
relation therewith, (ii) results from tasks assigned such Member by the Company
or (iii) results from the use of premises or personal property (whether tangible
or intangible) owned, leased or contracted for by the Company, such Developments
and the benefits thereof shall immediately become the sole and absolute property
of the Company and its assigns, and such Member shall promptly disclose to the
Company (or any persons designated by it) each such Development and such Member
hereby assigns any rights he may have or acquire in the Developments and
benefits and/or rights resulting therefrom to the Company and its assigns
without further compensation and shall communicate, without cost or delay, and
without publishing the same, all available information relating thereto (with
all necessary plans and models) to the Company.
5.6.2. Upon disclosure of each Development to the Company, such Member
will, at any time thereafter, at the request and cost of the Company, sign,
execute, make and do all such deeds, documents, acts and things as the Company
and its duly authorized agents may reasonably require:
(i) to apply for, obtain and vest in the name of the Company alone (unless
the Company otherwise directs) letters patent, copyrights or other analogous
protection in any country throughout the world and when so obtained or vested to
renew and restore the same;
(ii) to defend any actions or opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications for
revocation of such letters patent, copyright or other analogous protection; and
(iii) to bring any action to enforce any rights in any Developments.
5.6.3. In the event the Company is unable, after reasonable effort, to
secure a Member's signature on any letters patent, copyright or other analogous
protection relating to a Development, whether because of such Member's physical
or mental incapacity or for any other reason whatsoever, such Member hereby
irrevocably designates and appoints the Company and its duly authorized officers
and agents as such Member's agent and attorney-in-fact, to act for and in such
Member's behalf and stead to execute and file any such application or
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of any such letters patent, copyright and other
analogous protection thereon with the same legal force and effect as if executed
by such Member.
5.6.4. As used herein, the term "Proprietary Information" shall mean,
collectively, trade secrets or proprietary or confidential information, or any
other information, respecting or constituting inventions, products, product
plans, designs, drawings, sketches, marketing and other plans, methods,
know-how, techniques, technology, systems, characters, processes, strategies,
software programs, works of authorship, customer lists, user lists, vendor
lists, content provider lists, supplier lists, pricing information, projects,
notes, memoranda, reports, lists, records, specifications, software programs,
data, documentation, budgets, plans, projections, forecasts, financial
information and proposal in whatever form, tangible or intangible, or other
materials of any nature relating to any matter within the scope of the business
of the Company or concerning any of the dealings or affairs of the Company.
Article VI
Transfer of Interests and Withdrawal of Members
6.1. Transfers. A Member (or transferee) at any time and from time to time
may Transfer all or any portion of such person's Interest, provided that such
Member (or transferee) has complied with the terms of Section 6.2 of this
Agreement (and any purported transfer without such compliance shall be null and
void). The Transfer of all or a portion of an Interest does not entitle the
transferee to become a Member or to exercise any rights of a Member. The
transferee shall be entitled to receive, to the extent transferred, only the
distributions and allocations of profits and losses to which the transferor
would be entitled; and the transferee shall not be admitted as a Member unless
approved by a vote of the Members holding not less than seventy-five percent
(75%) of the Percentages.
6.2. Rights of First Refusal.
(a) If at any time after the date hereof any Member or transferee (the
"Seller") shall receive a bona fide written offer to purchase any or all of his
Interest (the "Offered Interest"), and if the Seller desires to accept such
offer, the Seller shall, give prompt written notice (a "Notice of Offer") to the
Company (which shall in turn promptly give copies of the Notice of Offer to each
other Member (collectively, the "Other Members")), which Notice of Offer shall
contain (a) a true and complete copy of the offer; (b) the proposed purchase
price and all other material terms and conditions of the offer; and, if
appropriate, (c) the Seller's estimate of the fair market value of any non-cash
consideration offered by the proposed purchaser. The date on which the Notice of
Offer is received by the Company is referred to hereinafter as the "Notice
Date." A Notice of Offer shall be deemed to be an irrevocable offer to sell the
Interest on the terms set forth in such Notice of Offer and herein, and the
Company will have the irrevocable and exclusive option, as hereinafter provided,
to buy the Offered Interest on the terms set forth in such Notice of Offer and
herein.
i) Within thirty (30) days following the Notice Date, the Company shall
notify the Seller and the Other Members as to the portion of the Offered
Interest that the Company elects to purchase and, if applicable, whether it
agrees with the Seller's estimate of the fair market value of any non-cash
consideration specified in the Notice of Offer (a "Company Acceptance"). If the
Seller does not receive the Company Acceptance within such 30-day period, the
Company shall be deemed to have declined to purchase all or any part of the
Offered Interest. The Company Acceptance shall be deemed to be an irrevocable
commitment to purchase from the Seller the Offered Interest, as set forth in
such Company Acceptance.
ii) During the period beginning on the thirty-first day after the Notice
Date and ending on the sixtieth day after the Notice Date, each Other Member
shall notify the Company, the Other Members and the Seller as to the portion, if
any, of the Offered Interest available to the Other Members that such Other
Member elects to purchase and, if applicable, whether such Other Member agrees
with the Seller's estimate of the fair market value of any non-cash
consideration specified in the Notice of Offer (a "Member Acceptance"). If the
Seller does not receive a Member Acceptance from a Member within such period,
such Member shall be deemed to have declined to purchase any of the Offered
Interest. A Member Acceptance shall be deemed to be an irrevocable commitment to
purchase from the Seller the Offered Interest, as set forth in such Member
Acceptance.
If the Other Members shall have elected to purchase the Offered Interest
which, in the aggregate, exceeds the Offered Interest available for purchase by
the Other Members, the Offered Interest shall be allocated pro rata among the
Other Members in accordance with the Offered Interest requested to be purchased
by each such Other Member; provided, that no Member shall be required or
entitled to purchase a portion of the Offered Interest greater than the number
set forth in his Member Acceptance.
(b) Purchase Price. The purchase price for the Offered Interest sold to the
Company or any Member pursuant to Section 6.2(a) shall be the purchase price
contained in the Notice of Offer if the entire purchase price contained therein
is in cash. If all or a portion of the consideration for which the Seller
proposes to sell the Offered Interest shall be other than cash, and if the
Company and/or the Other Members that elect to purchase the Offered Interest
(together, the "Purchasers") shall all agree with such valuation, each of the
Purchasers shall have the right to purchase such Offered Interest as it shall be
entitled to purchase pursuant hereto for cash in an amount equal to the sum of
the cash portion of such consideration proposed to be received by the Seller for
such Offered Interest plus additional cash equal to such agreed upon value of
the non-cash consideration therefor. Each Purchaser also may elect to obtain and
deliver to the Seller property substantially identical to the non-cash
consideration for purposes of payment of the non-cash portion of the purchase
price for the Offered Interest proposed to be sold to such Purchaser. If any
Purchaser shall not agree with the Seller's estimate of the fair market value of
the non-cash consideration, or if such non-cash consideration consists of unique
or personal services to be rendered, the Seller shall negotiate with such
Purchaser in good faith for the purpose of attempting to agree upon the fair
market value of the non-cash consideration. If such an agreement is not reached
within 15 days after the expiration of the notice period specified in Section
6.2(b)(ii) hereof, each of the Seller and such Purchaser shall obtain from an
appraiser, of recognized standing in respect of property of the kind
constituting such non-cash consideration, an appraisal as to the fair market
value thereof and shall furnish a copy of such appraisal to the other party and
to each Purchaser within 20 days after the expiration of such 15-day period and
the parties shall use their best efforts to reconcile any difference between
their respective appraisals. If the parties shall be unable to reconcile such
differences, the appraisers shall appoint an additional appraiser who shall
reconcile such differences and render to all the parties its appraisal of the
fair market value of the non-cash consideration. The fair market value as so
determined shall be binding on the Seller and each of the Purchasers. The cost
of all such appraisals shall be borne by the party objecting to the Seller's
valuation, unless such valuation is determined to be substantially incorrect, in
which case the cost shall be borne by the Seller.
(c) Obligations to Close. Upon the exercise by the Purchasers of their
rights of first refusal, the Purchasers and the Seller shall be legally
obligated to consummate the purchase and sale contemplated thereby and shall use
their best efforts to secure any approvals required in connection therewith;
provided, however, that the Seller shall not be required to sell less than all
of the Offered Interest and shall not be so obligated unless the Purchasers who
exercise their rights of first refusal do so in the aggregate for the entire
Offered Interest. If the Purchasers do not exercise their rights of first
refusal hereunder with respect to the entire Offered Interest within the time
specified for such exercise, the Seller shall be free, during a period of ninety
(90) days following the expiration of the last time for such exercise, to sell
the Offered Interest, but only to the third party specified in the Notice of
Offer and at a price not less than the price set forth in such Notice of Offer
and upon the other terms and conditions set forth in such Notice of Offer and
subject to the condition that such third party, fully and without reservation,
accepts and agrees to comply with all of the terms, conditions and obligations
set forth in this Agreement and that the Offered Interest so purchased shall
continue to be subject to the terms and conditions of this Agreement. If the
Seller does not complete such sale within the 90-day period, the provisions of
this Section 6 shall again apply, and no sale of any Offered Interest shall be
made other than in accordance with the terms of this Agreement.
(d) Closing. The closing of purchases of the Offered Interest by the
Purchasers pursuant hereto shall take place on such date, within 30 days after
the termination of the later of (i) the 60-day period following the Notice Date
or (ii) the date of the final determination of the fair market value of any
non-cash consideration offered, if applicable, as the Purchasers of the majority
in interest of the Offered Interest shall determine, at 11:00 a.m., at the
principal offices of the Company, or at such other time or place as the parties
may agree. At such closing, the Seller shall sell to each Purchaser all of the
Seller's right, title and interest in and to the Offered Interest, free and
clear of all liens, claims, charges or encumbrances of any kind or nature,
provided that any subsequent transfer of such Offered Interest shall again be
subject to compliance with the requirements of this Section 6, and shall deliver
to each Purchaser a certificate or certificates evidencing the Offered Interest
sold to such Purchaser. Each Purchaser shall deliver to the Seller, in full
payment of the purchase price for the Offered Interest purchased thereby, the
non-cash consideration offered, if any, together with a certified or official
bank check payable to the order of the Seller in the amount of the cash portion
of the purchase price allocated to such Seller.
(e) No Assignment. The right of first refusal granted to the Company and
the Members hereunder may not be assigned directly or indirectly to any other
person or entity and any such purported assignment shall be null and void.
(f) Transfers to Comply with Laws. Each Member agrees that he will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any Interest (or solicit any offers to purchase or otherwise acquire
or take a pledge of any Interest), except in compliance with (i) the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
(ii) any applicable state securities laws and the rules and regulations
promulgated thereunder, and (iii) the rules of any self-regulatory organization
of which the Company from time to time may be a member.
6.3. Voluntary Withdrawal. A Member shall have the right to Voluntarily
Withdraw from the Company, upon ninety (90) days prior written notice to the
other Members and upon such terms as the Members may reasonably determine.
6.4. Involuntary Withdrawal. Immediately upon the occurrence of an
Involuntary Withdrawal, the successor of the Withdrawn Member shall thereupon
become an Interest Holder but shall not become a Member. If the Company is
continued as provided in Section 7.1.2, the successor Interest Holder shall have
all the rights of an Interest Holder (i.e., the right to receive the profits,
losses, and distributions that the Member would have received, at the time the
Member would otherwise have been entitled to receive them had the Member not
withdrawn), but shall not be entitled by reason of the withdrawal to receive in
liquidation of the Interest, the fair market value of the Member's Interest as
of the date the Member Involuntarily withdrew from the Company.
Article VII
Dissolution, Liquidation, and
Termination of the Company
7.1. Events of Dissolution. The Company shall be dissolved upon the
happening of any of the following events:
7.1.1. upon the unanimous written agreement of the Members; or
7.1.2. the occurrence of an Involuntary Withdrawal, unless all of the
remaining Members, within ninety (90) days after the occurrence of the
Involuntary Withdrawal, unanimously elect to continue the business of the
Company pursuant to the terms of this Agreement; or
7.1.3 the occurrence and continuation for sixty (60) days of a deadlock
among the Members such that it is not reasonably practicable to carry on the
business of the Company.
7.2. Procedure for Winding Up and Distribution. If the Company is
dissolved, the remaining 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 Interest Holders who are creditors, in satisfaction of
the liabilities of the Company, and then to the Interest Holders in accordance
with Section 4.4 of this Agreement.
7.3. Filing of Articles of Dissolution. If the Company is dissolved, the
Members shall promptly file Articles of Dissolution with the New York Department
of State. If there are no remaining Members, the Articles shall be filed by the
last Person to be a Member; if there are no remaining Members, or a Person who
last was a Member, the Articles of Dissolution shall be filed by the legal or
personal representatives of the Person who last was a Member.
Article VIII
Books, Records, Accounting, and Tax Elections
8.1. Bank Accounts. All funds of the Company shall be deposited in a bank
account or accounts opened in the Company's name. The Members shall determine
the institution or institutions at which the accounts will be opened and
maintained, the types of accounts, and the Persons who will have authority with
respect to the accounts and the funds therein.
8.2. Books and Records. The Members shall keep or cause to be kept complete
and accurate books and records of the Company as required under Section 1102 of
the Law as well as supporting documentation of transactions with respect to the
conduct of the Company's business. The books and records shall be maintained in
accordance with sound accounting practices and shall be available at the
Company's principal office for examination by any Member or the Member's duly
authorized representative at any and all reasonable times during normal business
hours.
8.3. Annual Accounting Period. The annual accounting period of the Company
shall be its taxable year. The Company's taxable year shall be selected by the
Members, subject to the requirements and limitations of the Code.
8.4. Reports. Within seventy-five (75) days after the end of each taxable
year of the Company, the Members shall cause to be sent to each Person who was a
Member at any time during the taxable year then ended a copy of audited
financial statements for the affairs of the Company's taxable year then ended
together with a report on the affairs of the Company. In addition, within
seventy five (75) days after the end of each taxable year of the Company, the
Members shall cause to be sent to each Person who was an Interest Holder at any
time during the taxable year then ended, that tax information concerning the
Company which is necessary for preparing the Interest Holder's income tax
returns for that year. At the request of the Members holding three-quarters
(3/4) in interest, and at the Company's expense, the Members shall cause an
audit of the Company's books and records to be prepared by independent
accountants for the period requested by the Members.
8.5. Tax Matters Member. The Members shall designate a Member to be the
Company's tax matters partner pursuant to Code Section 6231(a)(7) ("Tax Matters
Member"). The Tax Matters Member shall have all powers and responsibilities
provided in Code Section 6221, et seq. The Tax Matters Member shall keep all
Members informed of all notices from government taxing authorities which may
come to the attention of the Tax Matters Member. The Company shall pay and be
responsible for all reasonable third-party costs and expenses incurred by the
Tax Matters Member in performing those duties. A Member shall be responsible for
any costs incurred by the Member with respect to any tax audit or tax-related
administrative or judicial proceeding against any Member, even though it relates
to the Company. The Tax Matters Member shall not compromise any dispute with the
Internal Revenue Service without the approval of the Members.
Article IX
General Provisions
9.1. Assurances. Each Member shall execute all certificates and other
documents and shall do all such filing, recording, publishing, and other acts as
the Members deem 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.
9.2. 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 or sent
by certified mail, postage prepaid, return receipt requested or by facsimile
transmission, provided receipt of facsimile transmission is actually
acknowledged by the Member or Member's agent. A notice must be addressed to a
Member at the Member'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 that is sent by mail will be deemed given three (3) business days after
it is mailed. 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. A notice sent by
facsimile is deemed given when receipt is acknowledged.
9.3. 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, the Company as well as any party who may be injured (in addition to
any other remedies which may be available to the Company or 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.
9.4. Complete Agreement. This Agreement constitutes the complete and
exclusive statement of the agreement among the Members with respect to the
subject matter thereof. It supersedes any prior operating agreement or interim
operating agreement and any and all prior written and oral statements, including
but not limited to any prior representation, statement, condition, or warranty.
Except as expressly provided otherwise herein, this Agreement may not be amended
without the written consent of the Members holding three-quarters (3/4) or more
of the Percentages then held by Members.
9.5. Applicable Law. All questions concerning the construction, validity,
and interpretation of this Agreement and the performance of the obligations
imposed by this Agreement shall be governed by the internal law, not the law of
conflicts, of the State of New York.
9.6. Article and 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.
9.7. 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.
9.8. Exclusive Jurisdiction and Venue. Any suit involving any dispute or
matter arising under this Agreement or relating to the organization or operation
of the Company may be brought only in a United States District Court located in
the State of New York or any New York State Court having jurisdiction over the
subject matter of the dispute or matter. All Members hereby consent to the
exercise of personal jurisdiction by any such court with respect to any such
proceeding and waive any objection to venue or inconvenient forum.
9.9. 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.
9.10. 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.
9.11. 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.
IN WITNESS WHEREOF, the parties have executed, or caused this Agreement to
be executed, as of the date set forth above.
MEMBERS:
WILLOWCREEK CAPITAL PARTNERS, L.P.
By:
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NTS Financial Services Limited (BVI)
By:
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Name:
Title:
EUROPA INTERNATIONAL
By:
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Name:
Title:
▇▇▇▇▇ BROTHERS LIMITED PARTNERSHIP
By:
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Name:
Title:
PHOENIX ENTERPRISES FAMILY FUND LLC
By:
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Name:
Title:
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