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ReporterTV.com LLC Agreement 03-28-2000

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

REPORTERTV.COM, LLC

 

 

A DELAWARE LIMITED LIABILITY COMPANY

 

 

 

 

 

 

THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES

LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,

TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER

APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF

COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT

REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS

FURTHER SUBJECT TO OTHER RESTRICTIONS, THE TERMS AND CONDITIONS OF WHICH ARE SET

FORTH IN THIS AGREEMENT.

 

 

 

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TABLE OF CONTENTS

 

 

 

PAGE

----

ARTICLE I DEFINITIONS..............................................................................2

1.1 "Act".........................................................................................2

1.2 "Additional Capital"..........................................................................2

1.3 "Adjusted Capital Account"....................................................................2

1.4 "Adjusted Capital Contribution"...............................................................2

1.5 "Affiliate"...................................................................................2

1.6 "Agreed Overrun"..............................................................................2

1.7 "Agreement"...................................................................................2

1.8 "Affected Interest"...........................................................................2

1.9 "Bankruptcy"..................................................................................2

1.10 "Bona Fide Offer".............................................................................3

1.11 "Budget" .....................................................................................3

1.12 "Capital Account".............................................................................3

1.13 "Capital Contribution"........................................................................3

1.14 "Certificate of Formation"....................................................................3

1.15 "Closing".....................................................................................3

1.16 "Code" .....................................................................................3

1.17 "Company".....................................................................................3

1.18 "Company Minimum Gain"........................................................................3

1.19 "Confidential Information"....................................................................4

1.20 "Contribution Cap"............................................................................4

1.21 "Contribution Loan"...........................................................................4

1.22 "Cumulative Default Amount"...................................................................4

1.23 "Distributable Cash"..........................................................................4

1.24 "Distribution"................................................................................4

1.25 "Economic Interest"...........................................................................5

1.26 "Economic Interest Holder"....................................................................5

1.27 "Economic Risk of Loss".......................................................................5

1.28 "Eligible Members"............................................................................5

1.29 "Fair Market Value"...........................................................................5

1.30 "Fiscal Year".................................................................................5

1.31 "Former Member"...............................................................................5

1.32 "Former Member's Interest"....................................................................5

1.33 "Initial Call Notice".........................................................................5

1.34 "Interest Holder".............................................................................5

1.35 "Joint Designee"..............................................................................5

1.36 "Majority in Interest"........................................................................5

1.37 "Managers"....................................................................................5

1.38 "MediaChase"..................................................................................5

1.39 "Member" .....................................................................................5

1.40 "Member Minimum Gain".........................................................................6

1.41 "Member Nonrecourse Debt".....................................................................6

1.42 "Member Nonrecourse Deductions"...............................................................6

 

 

 

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1.43 "Membership Interest".........................................................................6

1.44 "Membership Termination Event"................................................................6

1.45 "Net Profits" and "Net Losses"................................................................6

1.46 "Noncompete Date".............................................................................6

1.47 "Nonrecourse Deductions"......................................................................7

1.48 "Nonrecourse Liability".......................................................................7

1.49 "Notice" .....................................................................................7

1.50 "Offered Interest"............................................................................7

1.51 "Onlinefilmsales".............................................................................7

1.52 "Person" .....................................................................................7

1.53 "Preferred Return"............................................................................7

1.54 "Preferred Return Account"....................................................................7

1.55 "Prime" ......................................................................................7

1.56 "Securities Act"..............................................................................7

1.57 "Subsequent Call Notice"......................................................................7

1.58 "Tax Credits".................................................................................7

1.59 "Tax Matters Partner".........................................................................7

1.60 "Transfer"....................................................................................7

1.61 "Treasury Regulations"........................................................................8

1.62 "United States Bankruptcy Code"...............................................................8

1.63 "Unpaid Preferred Return".....................................................................8

1.64 "Voting Interest".............................................................................8

 

ARTICLE II ORGANIZATIONAL MATTERS....................................................................9

2.1 Name..........................................................................................9

2.2 Term..........................................................................................9

2.3 Office and Agent..............................................................................9

2.4 Purpose of Company............................................................................9

2.5 Intent .......................................................................................9

2.6 Members ......................................................................................9

2.7 Formation Expenses............................................................................9

 

ARTICLE III CAPITAL CONTRIBUTIONS....................................................................10

3.1 Initial Capital Contributions................................................................10

3.2 Additional Capital Contributions.............................................................10

(a) Additional Contributions by Onlinefilmsales..............................................10

(b) Additional Capital.......................................................................10

(c) Call Procedures; Payment of Call.........................................................10

(d) Contribution of Default Capital..........................................................10

(e) Effects of Contribution of Default Capital...............................................11

(f) Financing of the Company.................................................................13

3.3 Capital Accounts.............................................................................13

3.4 No Withdrawals of Capital....................................................................13

3.5 Loans; No Compensation.......................................................................14

 

ARTICLE IV MEMBERS..................................................................................14

4.1 Admission of Additional Members..............................................................14

 

 

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4.2 Withdrawals or Resignations..................................................................14

4.3 Members Are Not Agents.......................................................................14

4.4 Meetings of Members; Written Consent.........................................................14

 

ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY....................................................15

5.1 Management of the Company by the Managers....................................................15

(a) Exclusive Management by the Managers.....................................................15

(b) Powers of the Managers...................................................................15

(c) Agency Authority of the Managers; Delegation by the Managers.............................16

(d) Discretion of the Managers...............................................................16

(e) Performance of Duties; Liability of Managers.............................................17

(f) Devotion of Time.........................................................................17

(g) Decisions of the Managers................................................................17

(h) Meetings of Managers.....................................................................17

5.2 Election of Managers.........................................................................18

(a) Number and Term..........................................................................18

(b) Vacancies................................................................................18

5.3 Limitations on Power of the Managers.........................................................18

5.4 Members Have No Managerial Authority.........................................................19

5.5 Transactions between the Company and the Managers, the Members or their Affiliates...........19

(a) Contracts with Affiliates................................................................19

(b) Contracts with Managers or Affiliates of the Managers....................................19

(c) Treatment of Affiliate Loans and Fees....................................................20

5.6 Officers ....................................................................................20

(a) Appointment of Officers..................................................................20

(b) Signing Authority of Officers............................................................20

(c) Acts of Officers as Conclusive Evidence of Authority.....................................20

5.7 Competing Activities.........................................................................20

(a) Pre-Formation Activities.................................................................20

(b) Post-Formation Activities................................................................21

(c) Specific Enforcement.....................................................................21

(d) Payments to Managers and Others..........................................................22

(e) Expenses.................................................................................22

 

ARTICLE VI ALLOCATIONS OF NET PROFITS, NET LOSSES AND DISTRIBUTIONS.................................22

6.1 Minimum Gain Chargeback......................................................................22

6.2 Member Minimum Gain Chargeback...............................................................22

6.3 Qualified Income Offset......................................................................22

6.4 Nonrecourse Deductions.......................................................................23

6.5 Member Nonrecourse Deductions................................................................23

6.6 Allocation of Net Profits....................................................................23

6.7 Allocation of Net Losses.....................................................................23

6.8 Distributions by the Company.................................................................23

 

 

 

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6.9 Allocation of Net Profits and Losses and Distributions in Respect of a Transferred Interest..24

6.10 Tax Allocation Matters.......................................................................24

(a) Contributed or Revalued Property.........................................................24

(b) Recapture Items..........................................................................24

6.11 Order of Application.........................................................................24

6.12 Allocation of Liabilities....................................................................25

6.13 Form of Distribution.........................................................................25

 

ARTICLE VII TRANSFER OF INTERESTS....................................................................25

7.1 Transfer of Interests........................................................................25

7.2 [intentionally omitted]......................................................................25

7.3 Right of First Refusal.......................................................................25

7.4 [intentionally omitted]......................................................................26

7.5 [intentionally omitted]......................................................................26

7.6 [intentionally omitted]......................................................................26

7.7 Repurchase Restrictions Imposed by Law.......................................................26

7.8 Further Restrictions on Transfer of Interests................................................27

7.9 Substitution of Members......................................................................27

7.10 Enforcement..................................................................................27

7.11 Effect of Transfers in Violation of Agreement................................................27

 

ARTICLE VIII CONSEQUENCES OF MEMBERSHIP TERMINATION EVENTS............................................28

8.1 Dissolution of Company.......................................................................28

8.2 Admission or Conversion......................................................................28

8.3 Terms of Transfer............................................................................28

(a) Transferee Bound by Agreement............................................................28

(b) Notice of Repurchase Event...............................................................28

(c) Option to Purchase.......................................................................29

(d) Purchase Price...........................................................................29

(e) Payment of Purchase Price................................................................30

(f) Consummation of Sale.....................................................................31

 

ARTICLE IX ACCOUNTING, RECORDS, REPORTING BY MEMBERS...........................................31

9.1 Books and Records............................................................................31

9.2 Reports; Annual Statements...................................................................32

(a) Governmental Reports.....................................................................32

(b) Financial Reports........................................................................32

(c) Tax Reports..............................................................................32

9.3 Bank Accounts; Invested Funds................................................................32

9.4 Tax Matters for the Company Handled by Tax Matters Partner...................................32

9.5 Accounting Matters...........................................................................33

9.6 Confidentiality..............................................................................33

 

ARTICLE X DISSOLUTION AND WINDING UP...............................................................33

10.1 Dissolution..................................................................................33

 

 

 

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10.2 Date of Dissolution..........................................................................33

10.3 Winding Up...................................................................................34

10.4 Liquidating Distributions to Economic Interest Holders.......................................34

10.5 Distributions in Kind........................................................................34

10.6 Provision for Debts and Liabilities..........................................................34

10.7 No Liability.................................................................................35

10.8 Limitations on Payments Made in Dissolution..................................................35

10.9 Certificate of Cancellation..................................................................35

10.10 Compensation for Services....................................................................35

 

ARTICLE XI LIMITATION OF LIABILITY; STANDARD OF CARE; INDEMNIFICATION...............................35

11.1 Limitation of Liability......................................................................35

11.2 Standard of Care.............................................................................35

11.3 Indemnification..............................................................................36

11.4 Contract Right; Expenses.....................................................................36

11.5 Indemnification of Employees and Agents......................................................36

11.6 Nonexclusive Right...........................................................................36

11.7 Severability.................................................................................37

11.8 Insurance....................................................................................37

 

ARTICLE XII REPRESENTATIONS OF THE MEMBERS...........................................................37

12.1 Preexisting Relationship or Experience.......................................................37

12.2 Access to Information........................................................................37

12.3 Economic Risk................................................................................37

12.4 Investment Intent............................................................................37

12.5 Consultation with Attorney...................................................................38

12.6 Purpose of Entity............................................................................38

12.7 Residency....................................................................................38

12.8 No Advertising...............................................................................38

12.9 Membership Interest is Restricted Security...................................................38

12.10 No Registration of Membership Interest.......................................................38

12.11 Organization.................................................................................38

12.12 Authority....................................................................................38

12.13 Enforceability...............................................................................38

12.14 No Violation.................................................................................38

 

ARTICLE XIII MISCELLANEOUS............................................................................39

13.1 Legal Counsel................................................................................39

13.2 Amendments...................................................................................39

13.3 Offset Privilege.............................................................................39

13.4 Arbitration..................................................................................39

(a) General..................................................................................39

(b) Governing Law............................................................................40

(c) Costs of Arbitration.....................................................................40

13.5 Remedies Cumulative..........................................................................40

13.6 Notices .....................................................................................40

 

 

 

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13.7 Attorneys' Fees..............................................................................40

13.8 Governing Law; Jurisdiction..................................................................40

13.9 Complete Agreement...........................................................................41

13.10 No Third-Party Rights........................................................................41

13.11 Binding Effect...............................................................................41

13.12 Section Headings.............................................................................41

13.13 Interpretation...............................................................................41

13.14 Severability.................................................................................41

13.15 Multiple Counterparts........................................................................41

 

 

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LIMITED LIABILITY COMPANY AGREEMENT

OF

REPORTERTV.COM, LLC

A DELAWARE LIMITED LIABILITY COMPANY

 

This Limited Liability Company Agreement is made as of March 28, 2000,

by and between Onlinefilmsales.com, LLC, a Delaware limited liability company

("Onlinefilmsales"), and MediaChase Ltd., a Delaware corporation ("MediaChase"),

with reference to the following facts:

 

A. ReporterTV.com, LLC (the "Company") was formed on March 8, 2000, as

a limited liability company under the laws of the State of Delaware by the

filing of a Certificate of Formation for the Company with the Delaware Secretary

of State.

 

B. Concurrently herewith, MediaChase will contribute to the capital of

the Company, all of its right, title and interest in and to any assets of

MediaChase used solely in connection with the operation of the business entitled

"ReporterTV.com" (collectively, the "ReporterTV Assets") in consideration of the

issuance by the Company to MediaChase of a one hundred percent (100%) Membership

Interest in the Company.

 

C. Immediately thereafter, MediaChase will contribute to

Onlinefilmsales, a fifty percent (50%) Membership Interest in the Company, in

consideration of (i) the issuance by Onlinefilmsales to MediaChase of an

interest in Onlinefilmsales (as more fully described in that certain Limited

Liability Company Agreement of Onlinefilmsales.com, LLC, of even date herewith),

(ii) the agreement by Onlinefilmsales herein to make additional contributions to

the capital of the Company upon the satisfaction of certain conditions stated

herein, and (iii) the contribution to Company by Onlinefilmsales (as

successor-in-interest to InternetStudios.com, Inc.) of it rights under that

certain Secured Promissory Note, dated November 12, 1999, by MediaChase payable

to the order of Onlinefilmsales (as successor-in-interest to

InternetStudios.com, Inc.), in the original principal amount of $2,025,000

as amended by those certain Allonges to Secured Promissory Note, each by

MediaChase, dated November 18, 1999, December 16, 1999, February 1, 2000 and

March 27, 2000 (the "MediaChase Note") and the prompt release of MediaChase

of any obligations thereunder.

 

D. The parties now desire to adopt a limited liability company

agreement to govern their respective rights and obligations as Members of the

Company.

 

NOW, THEREFORE, in consideration of the mutual covenants contained

herein and for other good and valuable consideration, the receipt of which is

acknowledged, the parties agree that the following shall be the Limited

Liability Company Agreement of the Company.

 

 

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ARTICLE I

 

DEFINITIONS

 

When used in this Agreement, the following terms have the following

meanings:

 

1.1 "ACT" means the Limited Liability Company Act of the State of

Delaware.

 

1.2 "ADDITIONAL CAPITAL" has the meaning specified in Section 3.2(b).

 

1.3 "ADJUSTED CAPITAL ACCOUNT" of an Economic Interest Holder means the

Capital Account of that Economic Interest Holder increased by the Economic

Interest Holder's share of Company Minimum Gain and Member Minimum Gain.

 

1.4 "ADJUSTED CAPITAL CONTRIBUTION" of an Economic Interest Holder

means the excess of (a) that Economic Interest Holder's Capital Contributions to

the Company, over (b) Distributions to that Economic Interest Holder that are a

return of Capital Contributions under Section 6.8(b) or 3.2(e)(iii).

 

1.5 "AFFILIATE" of a Member or Manager means (a) a Person directly or

indirectly (through one or more intermediaries) controlling, controlled by or

under common control with that Member or Manager; (b) a Person owning or

controlling ten percent (10%) or more of the outstanding voting securities or

beneficial interests of that Member or Manager; or (c) an officer, director,

partner or member, or a member of the immediate family of an officer, director,

partner or member, of that Member or Manager. For these purposes "control" means

the possession, direct or indirect, of the power to direct or cause the

direction of the management and policies of a Person, whether through the

ownership of voting securities, by contract or otherwise.

 

1.6 "AGREED OVERRUN" shall have the meaning specified in Section

3.2(e)(ii)(B).

 

1.7 "AGREEMENT" means this Limited Liability Company Agreement of

ReporterTV.com, LLC.

 

1.8 "AFFECTED INTEREST" has the meaning specified in Section 8.3.

 

1.9 "BANKRUPTCY" of a Member means the institution of any proceedings

under any federal or state law for the relief of debtors, including the filing

by or against that Member of a voluntary or involuntary case under the United

States Bankruptcy Code, which proceedings, if involuntary, are not dismissed

within sixty (60) days after their filing; an assignment of the property of that

Member for the benefit of creditors; the appointment of a receiver, trustee or

conservator of any substantial portion of the assets of that Member, which

appointment, if obtained ex parte, is not dismissed within sixty (60) days

thereafter; the seizure by a sheriff, receiver, trustee or conservator of any

substantial portion of the assets of that Member; the failure by that Member

generally to pay its debts as they become due within the meaning of Section

303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy

Court; or that Member's admission in writing of its inability to pay its debts

as they become due.

 

 

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1.10 "BONA FIDE OFFER" means an offer in writing to an Interest Holder

offering to purchase all or any part of that Interest Holder's Membership

Interest or Economic Interest and setting forth all of the material terms and

conditions of the proposed purchase from an offeror who is ready, willing and

able to consummate the purchase and who is not an Affiliate of that Interest

Holder.

 

1.11 "BUDGET" means a weekly expenditure of $50,000 to cover the

customary and usual operating expenses of the Company, which amount may be

increased or decreased from time to time by the mutual agreement of the parties

hereto.

 

1.12 "CAPITAL ACCOUNT" of an Economic Interest Holder means the capital

account of that Economic Interest Holder determined from the inception of the

Company strictly in accordance with the rules set forth in Section

1.704-1(b)(2)(iv) of the Treasury Regulations. If any Membership Interest and/or

Economic 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 Membership Interest and/or Economic

Interest so Transferred. In the event that assets of the Company other than cash

are distributed to an Economic Interest Holder in kind, Capital Accounts shall

be adjusted for the hypothetical "book" gain or loss that would have been

realized by the Company if the distributed assets had been sold for their fair

market values in a cash sale (in order to reflect unrealized gain or loss). In

the event of the liquidation of the Company, Capital Accounts shall be adjusted

for the hypothetical "book" gain or loss that would have been realized by the

Company if all Company assets had been sold for their fair market values in a

cash sale (in order to reflect unrealized gain or loss), whether as an initial

Capital Contribution, an additional Capital Contribution, or Additional Capital.

 

1.13 "CAPITAL CONTRIBUTION" of a Member, at any particular time, means

the amount of money or property, or a promissory note or other binding

obligation to contribute money or property, which that Member has theretofore

contributed to the capital of the Company, whether as an initial Capital

Contribution, an additional Capital Contribution or Additional Capital and shall

specifically include all amounts actually paid in legal fees (including

paralegal costs) to tax counsel in connection with the organization and

structuring of the Company, Onlinefilmsales, and StudioBuzz, LLC, a Delaware

limited liability company.

 

1.14 "CERTIFICATE OF FORMATION" means the Certificate of Formation of

the Company as filed under the Act with the Delaware Secretary of State, as the

same may be amended from time to time.

 

1.15 "CLOSING" has the meaning specified in Section 8.3.

 

1.16 "CODE" means the Internal Revenue Code of 1986, as amended.

 

1.17 "COMPANY" means ReporterTV.com, LLC, a Delaware limited liability

company.

 

1.18 "COMPANY MINIMUM GAIN" with respect to any taxable year of the

Company means the "partnership minimum gain" of the Company computed strictly in

accordance with the principles of Section 1.704-2(d) of the Treasury

Regulations.

 

 

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1.19 "CONFIDENTIAL INFORMATION" means all information or material not

generally known by non-Company personnel which (i) gives the Company some

competitive business advantage or the opportunity of obtaining such advantage or

the disclosure of which could be detrimental to the interests of the Company,

(ii) which is owned by the Company or in which the Company has an interest and

(iii) which is (A) marked "Confidential Information," "Proprietary Information,"

or other similar marking, (B) known to be considered confidential and

proprietary by the Company, or (C) from all the relevant circumstances should

reasonably be assumed to be confidential and proprietary to the Company.

Confidential Information includes, but is not limited to, the following types of

information and other information of a similar nature (whether or not reduced to

writing): trade secrets, inventions, drawings, graphics, file data,

documentation, diagrams, specifications, know how, processes, formulas, models,

flow charts, software in various stages of development, source codes, object

codes, research and development procedures, research or development and test

results, marketing techniques and materials, marketing and development plans,

price lists, pricing policies, business plans, information relating to customers

and/or suppliers' identities, characteristics and agreements, financial

information and projections, and employee files. Confidential Information also

includes any information described above which the Company obtains from another

party and which the Company treats as proprietary or designates as Confidential

Information, whether or not owned or developed by the Company. NOTWITHSTANDING

THE ABOVE, HOWEVER, NO INFORMATION CONSTITUTES CONFIDENTIAL INFORMATION IF IT IS

GENERIC INFORMATION OR GENERAL KNOWLEDGE WHICH IS OTHERWISE PUBLICLY KNOWN AND

IN THE PUBLIC DOMAIN. Also, Confidential Information shall not include any

information or material owned by MediaChase and used by MediaChase in the

ordinary course of its business, unless used on an exclusive basis in the

business of the Company.

 

1.20 "CONTRIBUTION CAP" has the meaning specified in Section 3.2(a).

 

1.21 "CONTRIBUTION LOAN" has the meaning specified in Section

3.2(e)(ii)(C).

 

1.22 "CUMULATIVE DEFAULT AMOUNT" has the meaning specified in Section

3.2(e)(iv).

 

1.23 "DISTRIBUTABLE CASH" at any time means that portion of the cash

then on hand or in bank accounts of the Company which the Managers deem

available for Distribution to the Economic Interest Holders, taking into account

(a) the amount of cash required for the payment of all current expenses,

liabilities and obligations of the Company (whether for expense items, capital

expenditures, improvements, retirement of indebtedness or otherwise) and

specifically including repayments of principal or interest on Contribution

Loans, and (b) the amount of cash which the Managers deem necessary to establish

reserves for the payment of future capital expenditures, improvements,

retirements of indebtedness, operations and contingencies, known or unknown,

liquidated or unliquidated, including, but not limited to, liabilities which may

be incurred in litigation and liabilities undertaken pursuant to the

indemnification provisions of this Agreement.

 

1.24 "DISTRIBUTION" means the transfer of money or property by the

Company to one or more Economic Interest Holders without separate consideration.

 

 

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1.25 "ECONOMIC INTEREST" means a share, expressed as a percentage, of

one or more of the Company's Net Profits, Net Losses, Tax Credits, Distributable

Cash or other Distributions, but does not include any other rights of a Member,

including, without limitation, the right to vote or participate in the

management of the Company or the right to information concerning the business

and affairs of the Company. The Economic Interest of each Economic Interest

Holder shall initially be the percentage set forth opposite the name of that

Economic Interest Holder in Exhibit A and may be adjusted from time to time

thereafter pursuant to the provisions of this Agreement, including, without

limitation, the provisions of Sections 3.2, 4.1, 4.2 and 8.1.

 

1.26 "ECONOMIC INTEREST HOLDER" means the holder of an Economic

Interest, including either a Member, to the extent of the Economic Interest

constituting a part of its Membership Interest, or a Person who is not a member

but holds merely a bare Economic Interest.

 

1.27 "ECONOMIC RISK OF LOSS" means the economic risk of loss within the

meaning of Section 1.752-2 of the Treasury Regulations.

 

1.28 "ELIGIBLE MEMBERS" has the meaning specified in Section 7.3.

 

1.29 "FAIR MARKET VALUE" means, with respect to an asset, the price at

which that asset would be sold for cash payable at closing between a willing

buyer and a willing seller, each having reasonable knowledge of all relevant

facts concerning the asset and neither acting under any compulsion to buy or

sell.

 

1.30 "FISCAL YEAR" means the Company's fiscal year, which shall be the

calendar year.

 

1.31 "FORMER MEMBER" has the meaning specified in Section 8.2.

 

1.32 "FORMER MEMBER'S INTEREST" has the meaning specified in Section

8.2(a).

 

1.33 "INITIAL CALL NOTICE" has the meaning specified in Section 3.2(c).

 

1.34 "INTEREST HOLDER" means either a Member or a Person who holds

merely a bare Economic Interest.

 

1.35 "JOINT DESIGNEE" has the meaning specified in Section 5.2(a).

 

1.36 "MAJORITY IN INTEREST" means Voting Interests which, taken

together, exceed fifty percent (50%) of the aggregate of all Voting Interests

held by all Members entitled to vote or grant consent with respect to the matter

in question.

 

1.37 "MANAGERS" means the one or more managers of the Company selected

by the Members pursuant to Section 5.2(a) and shall be deemed to refer to the

sole Manager at all times when there exists only one Manager.

 

1.38 "MEDIACHASE" means MediaChase Ltd., a Delaware corporation.

 

1.39 "MEMBER" means each Person who (a) is an initial signatory to this

Agreement, has been admitted to the Company as a Member in accordance with this

Agreement or is a

 

 

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transferee of a Member who has become a Member in accordance

with Article VII, and (b) has not suffered a Membership Termination Event.

 

1.40 "MEMBER MINIMUM GAIN" has the meaning given to the term "partner

nonrecourse debt minimum gain" in Section 1.704-2(d) of the Treasury

Regulations.

 

1.41 "MEMBER NONRECOURSE DEBT" means any "partner nonrecourse

liability" or "partner nonrecourse debt" under Section 1.704-2(b)(4) of the

Treasury Regulations. Subject to the foregoing, it means any Company liability

to the extent the liability is nonrecourse for purposes of Section 1.1001-2 of

the Treasury Regulations and a Member (or related Person within the meaning of

Section 1.752-4(b) of the Treasury Regulations) bears the Economic Risk of Loss

under Section 1.752-2 of the Treasury Regulations because, for example, the

Member or related Person is the creditor or a guarantor.

 

1.42 "MEMBER NONRECOURSE DEDUCTIONS" means the Company deductions,

losses and Code Section 705(a)(2)(B) expenditures, as the case may be (as

computed for "book" purposes), that are treated as deductions, losses and

expenditures attributable to Member Nonrecourse Debt under Section 1.704-2(i)(2)

of the Treasury Regulations.

 

1.43 "MEMBERSHIP INTEREST" means a Member's total interest as a Member

of the Company, including that Member's Economic Interest, its options or

similar rights hereunder to acquire Membership Interests or Economic Interests,

its right to inspect the books and records of the Company and its right, to the

extent specifically provided in this Agreement or in the Act and not otherwise

restricted herein, to participate in the business, affairs and management of the

Company and to vote or grant consent with respect to matters coming before the

Company.

 

1.44 "MEMBERSHIP TERMINATION EVENT" with respect to any Member means

one or more of the following: the withdrawal, resignation, expulsion,

dissolution or occurrence of any other event which terminates the continued

membership of that Member in the Company, other than a Transfer of a Member's

Membership Interest which is made in accordance with the provisions of Article

VII.

 

1.45 "NET PROFITS" and "NET LOSSES" means, for each fiscal period, the

net income and net loss, respectively, of the Company determined strictly in

accordance with federal income tax principles (including rules governing

depreciation and amortization), except that in computing net income or net loss,

the "book" value of an asset will be substituted for its adjusted tax basis if

the two differ; and the following items shall be excluded from the computation:

 

(a) any gain, income, deductions or losses specially allocated

under Sections 6.1, 6.2, or 6.3;

 

(b) any Nonrecourse Deductions; and

 

(c) any Member Nonrecourse Deductions.

 

1.46 "NONCOMPETE DATE" has the meaning specified in Section 5.7(b).

 

 

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1.47 "NONRECOURSE DEDUCTIONS" in any fiscal period means the amount of

Company deductions that are characterized as "nonrecourse deductions" under

Section 1.704-2(b) of the Treasury Regulations.

 

1.48 "NONRECOURSE LIABILITY" means a liability treated as a

"nonrecourse liability" under Sections 1.704-2(b)(3) and 1.752-1(a)(2) of the

Treasury Regulations.

 

1.49 "NOTICE" has the meaning specified in Section 8.3.

 

1.50 "OFFERED INTEREST" has the meaning specified in Section 7.3.

 

1.51 "ONLINEFILMSALES" means Onlinefilmsales.com, LLC, a Delaware

limited liability company.

 

1.52 "PERSON" means any entity, corporation, company, association,

joint venture, joint stock company, partnership, trust, limited liability

company, limited liability partnership, real estate investment trust,

organization, individual (including personal representatives, executors and

heirs of a deceased individual), nation, state, government (including agencies,

departments, bureaus, boards, divisions and instrumentalities thereof), trustee,

receiver or liquidator.

 

1.53 "PREFERRED RETURN" shall mean with respect to any Member, a

cumulative preferential rate of return in an amount equal to Prime plus two

percentage points (2%) per annum, on its Adjusted Capital Contributions.

 

1.54 "PREFERRED RETURN ACCOUNT" shall mean with respect to any Member,

the excess of (i) that Member's Preferred Return, over (ii) all allocations to

that Member pursuant to Section 6.6(c) below.

 

1.55 "PRIME" shall mean at any time that percentage interest rate per

annum then most recently announced by Wells Fargo, N.A., or its successor, in

Los Angeles, California, as its prime or "reference" rate. The Prime Rate is not

necessarily the lowest rate charged to customers. Any change in rate for

purposes of this Agreement shall become effective on the same date on which such

announced rate becomes effective.

 

1.56 "SECURITIES ACT" means the Securities Act of 1933.

 

1.57 "SUBSEQUENT CALL NOTICE" has the meaning specified in Section

3.2(c).

 

1.58 "TAX CREDITS" means all credits against income or franchise taxes

and credits allowable to Economic Interest Holders under state, federal or other

tax statutes.

 

1.59 "TAX MATTERS PARTNER" means Onlinefilmsales, or any successor in

interest to Onlinefilmsales' entire Membership Interest, except as otherwise

provided in Section 9.4

 

1.60 "TRANSFER" means, with respect to a Membership Interest, an

Economic Interest or any interest therein, the sale, assignment, transfer,

disposition, pledge, hypothecation or encumbrance, whether direct or indirect,

voluntary, involuntary or by operation of law, and whether or not for value, of

(a) that Membership Interest, Economic Interest or interest therein or

 

 

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(b) a controlling interest in any Person which directly or indirectly through

one or more intermediaries holds that Membership Interest, Economic Interest

or interest therein. Transfer includes any transfer as a result of or in

connection with any property settlement or judgment incident to a divorce,

dissolution of marriage or separation, and any transfer by decree of

distribution or other court order in proceedings arising from the death of

the spouse of any Member or Economic Interest Holder.

 

1.61 "TREASURY REGULATIONS" means the regulations of the United States

Treasury Department pertaining to the income tax.

 

1.62 "UNITED STATES BANKRUPTCY CODE" means the United States Bankruptcy

Code at Title 11, United States Code.

 

1.63 "UNPAID PREFERRED RETURN" shall mean the excess of (i) the total

cumulative Preferred Return as of any given date over (ii) the sum of all prior

Distributions in payment of the Preferred Return pursuant to Section 6.8(a).

 

1.64 "VOTING INTEREST" means a Member's percentage right to vote on

matters coming before the Members for action. The Voting Interest of each Member

shall initially be the percentage set forth opposite the name of that Member in

Exhibit A and may be adjusted from time to time thereafter pursuant to the

provisions of this Agreement, including, without limitation, the provisions of

Sections 3.2, 4.1, 4.2 and 8.1. The combined Voting Interest of all Members

shall at all times equal one hundred percent (100%).

 

References in this Agreement to "Articles," "Sections," "Exhibits" and

"Schedules" shall be to the Articles, Sections, Exhibits and Schedules of this

Agreement, unless otherwise specifically provided; all Exhibits and Schedules to

this Agreement are incorporated herein by reference; any of the terms defined in

this Agreement may, unless the context otherwise requires, be used in the

singular or the plural and in any gender depending on the reference; the words

"herein", "hereof" and "hereunder" and words of similar import, when used in

this Agreement, shall refer to this Agreement as a whole and not to any

particular provision of this Agreement; and except as otherwise specified in

this Agreement, all references in this Agreement (a) to any Person shall be

deemed to include such Person's permitted heirs, personal representatives,

successors and assigns; and (b) to any agreement, any document or any other

written instrument shall be a reference to such agreement, document or

instrument together with all exhibits, schedules, attachments and appendices

thereto, and in each case as amended, restated, supplemented or otherwise

modified from time to time in accordance with the terms thereof; and (c) to any

law, statute or regulation shall be deemed references to such law, statute or

regulation as the same may be supplemented, amended, consolidated, superseded or

modified from time to time.

 

 

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ARTICLE II

ORGANIZATIONAL MATTERS

 

2.1 NAME. The name of the Company shall be "ReporterTV.com, LLC." The

business of the Company may be conducted under that name or, upon compliance

with applicable law, under any other name that the Managers deem appropriate or

advisable.

 

2.2 TERM. The term of the Company's existence commenced upon the filing

of its Certificate of Formation with the Delaware Secretary of State on March 8,

2000, and shall continue until such time as it is terminated pursuant to Article

X.

 

2.3 OFFICE AND AGENT. The principal office of the Company shall be at

8286 Santa Monica Boulevard, West Hollywood, California, 90046, or at such other

place as the Managers may determine from time to time. The Company may also have

such other offices within the State of California, or elsewhere, as the Managers

may from time to time determine. The name and business address of the agent for

service of process for the Company in the State of Delaware is Corporation

Service Company, 1013 Centre Road, Wilmington, Delaware, 19805, or such other

Person as the Managers may appoint from time to time.

 

2.4 PURPOSE OF COMPANY. The Company may engage in any lawful activity

for which a limited liability company may be organized under the Act; however,

its primary purpose shall be to engage in the following business: the creation

and production of an interactive entertainment news magazine in a television

format broadcast via the Internet.

 

2.5 INTENT. It is the intent of the Members that the Company shall

always be operated in a manner consistent with its treatment as a "partnership"

for Federal and state income tax purposes. It also is the intent of the Members

that the Company not be operated or treated as a "partnership" for purposes of

Section 303 of the United States Bankruptcy Code. No Member or Manager shall

take any action inconsistent with that express intent.

 

2.6 MEMBERS. The names, addresses, Capital Contributions, Voting

Interests and Economic Interests of the Members as of the date of this Agreement

are set forth in Exhibit A.

 

2.7 FORMATION EXPENSES. Each Member shall be responsible for and shall

pay all fees and expenses incurred by it in connection with the formation of the

Company, including, without limitation, all legal and accounting fees and

expenses incurred by it in connection with the negotiation, preparation,

execution and delivery of this Agreement and all related agreements and

instruments. The Company shall pay all filing fees, minimum franchise or other

similar taxes and other governmental charges incident to its formation and

qualification to do business.

 

 

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ARTICLE III

 

CAPITAL CONTRIBUTIONS

 

3.1 INITIAL CAPITAL CONTRIBUTIONS. Each Member initially has

contributed to the Company the monies and/or properties which are specified in

Exhibit A as that Member's initial Capital Contribution.

 

3.2 ADDITIONAL CAPITAL CONTRIBUTIONS.

 

(a) ADDITIONAL CONTRIBUTIONS BY ONLINEFILMSALES. Onlinefilmsales

has contributed additional Capital Contributions to the Company in the amounts

set forth on Exhibit A hereto as additional Capital Contributions, and in no

event shall the sum of Onlinefilmsales initial Capital Contribution and its

additional Capital Contributions be required to exceed $1,650,000 ("Contribution

Cap").

 

(b) ADDITIONAL CAPITAL. In the event that further funds are

required, as determined by the Managers in their absolute discretion, to pay the

obligations of the Company in excess of the funds available from (i)

Onlinefilmsales' initial Capital Contributions, (ii) the additional Capital

Contributions contributed by Onlinefilmsales pursuant to Section 3.2(a) above,

(iii) any prior contributions of Additional Capital, and (iv) the revenues of

the Company, the Managers may call on the Members to contribute such additional

funds ("Additional Capital") if above the Contribution Cap in accordance with

the procedures set forth in Section 3.2(c) below.

 

(c) CALL PROCEDURES; PAYMENT OF CALL. A call for Additional

Capital above the Contribution Cap shall be made by notice to MediaChase in

substantially the form of Exhibit B (an "Initial Call Notice"). An Initial Call

Notice shall specify the amount to be contributed as Additional Capital, the

date by which the contribution is due and payable and shall be executed by all

of the Managers. The Managers shall use best efforts to attempt to cause an

Initial Call Notice to be given at least five (5) business days prior to the

date such call is due and payable. If MediaChase has not caused to be

contributed to the Company the full amount of such call for Additional Capital

on the date such call is due and payable, a notice (a "Subsequent Call Notice")

shall be sent to Onlinefilmsales setting forth, in addition to the foregoing

information, the balance of the Additional Capital call due but unpaid by

MediaChase (the "Default Capital"). To satisfy any call for Additional Capital,

a Member shall cause to be contributed to the Company immediately available

funds in the amount of such call on or before the date specified as the due date

in the Initial Call Notice or in the Subsequent Call Notice. Contributions of

Additional Capital shall be credited to the respective Capital Accounts and

Capital Contributions of the Members when made.

 

(d) CONTRIBUTION OF DEFAULT CAPITAL. In the event that a call

is issued pursuant to Section 3.2(c) above for Additional Capital, and

MediaChase does not contribute funds equal to the full amount of such call by

the date on which the contribution is due and payable, then upon receipt of a

Subsequent Call Notice, Onlinefilmsales may (but shall have no obligation to),

in addition to any other right or remedy available under this Agreement, at law

or in equity, contribute in cash up to the amount of the Default Capital.

 

 

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(e) EFFECTS OF CONTRIBUTION OF DEFAULT CAPITAL.

 

(i) For any contribution of Default Capital made by

Onlinefilmsales that when aggregated with all of its other Capital Contributions

is in excess of the Contribution Cap but is not for the Budget or not an Agreed

Overrun, Onlinefilmsales will have its Capital Account and Capital Contributions

increased by the amount of its contribution, but the Economic Interest and

Voting Interest percentages of Onlinefilmsales and MediaChase will remain

unchanged.

 

(ii) (A) As to any contribution of Default Capital made by

Onlinefilmsales that when aggregated with all of its other Capital

Contributions is in excess of the Contribution Cap and that is for the Budget

or is an Agreed Overrun, the Economic Interest and Voting Interest

percentages of MediaChase shall be reduced by subtracting the following from

such percentages, and the Economic Interest and Voting Interest percentages

of Onlinefilmsales shall be increased by adding the following to such

percentages: a fraction (rounded to the nearest hundredth), the numerator of

which is the amount of the Default Capital contributed by Onlinefilmsales,

and the denominator of which is $15,000. By way of example only, if prior to

the contribution of any Default Capital, MediaChase's Economic Interest and

Voting Interest are each 50%, then upon the contribution by Onlinefilmsales

of Default Capital in the amount of $30,000, MediaChase's Economic Interest

and Voting Interest will be reduced to 48%, and Onlinefilmsales' Economic

Interest and Voting Interest will be increased to 52%. In no event shall the

Economic Interest and Voting Interest of MediaChase be reduced below

twenty-five percent (25%). The Members acknowledge and agree that as a result

of the contribution by Onlinefilmsales to the Company of the MediaChase Note

(principal plus accrued interest of $56,124.11) on the date hereof and the

actual payment by Onlinefilmsales to tax counsel in a manner described in

Section 1.13 hereof of $41,982.50, the total Capital Contributions made by

Onlinefilmsales to the Company equals $2,123,106.16, of which $375,000 shall

be deemed Default Capital contributed for the Budget and as a result, the

Economic and Voting Interest percentages of MediaChase have been reduced to

25% and the Economic and Voting Interest percentages of Onlinefilmsales have

been increased to 75%.

 

(B) For purposes of this Agreement, an "Agreed Overrun"

means any expenditure in excess of the Budget as may be mutually agreed in

advance and in writing by Onlinefilmsales and MediaChase (which agreement shall

not be unreasonably withheld or delayed), but in no event shall any expenditures

incurred and occasioned by the following be an Agreed Overrun: (i) compliance

with any government regulation, request or order, or (ii) circumstances beyond

the control of MediaChase, including, but not limited to, an Act of God, war,

insurrection, fire, flood, earthquake, accident, strike or other labor

disturbance or interruption of or delay in transportation.

 

(C) In the event that MediaChase's Economic Interest and

Voting Interest have been reduced to twenty-five percent (25%), and Additional

Capital is thereafter required by the Managers, Onlinefilmsales shall have the

exclusive right (but not the obligation) to advance directly to the Company as a

nonrecourse loan the amount of the requested Additional Capital ("Contribution

Loan"). The Contribution Loan shall bear interest from the date it is advanced

until the date it is paid in full at Prime plus two percentage points (2.0%) per

annum. Principal and accrued interest on the Contribution Loan shall be repaid

in full by the Company. The

 

 

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Company will execute a note to reflect any Contribution Loan in form and

substance reasonably satisfactory to Onlinefilmsales.

 

(iii) Within ten (10) business days following the

conclusion of each calendar month in the year 2000, commencing

in April, 2000, the Managers shall determine the amount of Distributable Cash in

existence as of the close of business on the last business day of such month (in

each case, the "Month-End Distributable Cash"). In the event the Month-End

Distributable Cash exceeds $0, the Managers shall immediately cause the Company

to distribute all of such Month-End Distributable Cash to the Economic Interest

Holders pursuant to Section 6.8, unless distribution of any part of such

Month-End Distributable Cash (in each case, the "Withheld Portion") would not be

in the best interests of the Company in the good faith business judgment of the

Managers because of a reserve necessary for anticipated short-term liabilities

or unless all of the Members otherwise agree in writing, in which case the

Withheld Portion will be not be distributed to the Economic Holders under this

Section 3.2(e)(iii). Within three (3) business days of making the foregoing

determination of Month-End Distributable Cash, the Managers shall provide

written notice to MediaChase of the amount of such Month-End Distributable Cash

together with a description of the planned distribution thereof in accordance

with this Section 3.2(e)(iii) (the "Month-End Distributable Cash Report"). The

provisions of this Section 3.2(e)(iii) shall terminate upon termination of the

dilution provisions of Section 3.2(e)(ii) pursuant to Section 3.2(e)(vi).

 

(iv) Notwithstanding the dilution provisions of Section

3.2(e)(ii) above, MediaChase shall have the one-time right (the "Buyback Right")

at any time on or before January 31, 2001 to reclaim all or part of its diluted

Economic Interest and Voting Interest (the date of the exercise of such right to

be referred to as the "Buyback Date"); provided, however, that a Buyback Date

must be as of the last business day of a month prior to January 1, 2001 (each a

"Month-End Day"). MediaChase may elect to exercise the Buyback Right with

respect to any Month-End Day by giving written notice to the Company of such

election no later than the last business day of the month immediately following

the month in which the Month-End Day occurs (the "Election Notice"). The

Election Notice shall be accompanied by a contribution of cash equal to all or

less than the following amount (though no less than 25% of the following, with

the full amount of the following referred to as the "Full Buyback Amount"): the

cumulative amount of Default Capital that (A) resulted from the Budget or that

was an Agreed Overrun and (B) that has occurred as of the Buyback Date (the

"Cumulative Default Amount"), less the aggregate amount of all Distributable

Cash that has actually been distributed to Onlinefilmsales as a return of

capital pursuant to Section 6.8(b) from the date of this Agreement through the

close of business on the Buyback Date. Upon receipt by the Company of all or a

portion of the Full Buyback Amount (the actual amount contributed by MediaChase

to be referred to herein as the "MediaChase Contributed Amount"),

Onlinefilmsales will receive an immediate special distribution (notwithstanding

the normal distribution rules of Section 6.8) in cash equal to the amount of the

MediaChase Contributed Amount, which shall be applied first to Onlinefilmsales'

Unpaid Preferred Return accrued as of the date of such contribution and then to

its Adjusted Capital Contributions. Upon the contribution to the Company of the

MediaChase Contributed Amount, the Economic Interest and Voting Interest

percentages of MediaChase shall be increased by adding the following to such

percentages, and the Economic Interest and Voting Interest percentages of

Onlinefilmsales shall be decreased by adding the following to such percentages:

the product (rounded to the nearest hundredth) of 25 and a fraction (rounded to

the

 

 

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nearest hundredth), the numerator of which is the MediaChase Contributed

Amount and the denominator of which is the Full Buyback Amount. By way of

example only, if on the Buyback Date: MediaChase's Economic Interest and Voting

Interest have been reduced to 25%, and Onlinefilmsales's Economic Interest and

Voting Interest have been increased to 75%, the Cumulative Default Amount is

$600,000, the Capital Contributions of Onlinefilmsales are $2,250,000 (before

adjustment for any distributions) and of MediaChase are $0, MediaChase

contributes $150,000 in cash, and there has been $200,000 of other Distributable

Cash distributed to Onlinefilmsales under Section 6.8(b), then MediaChase's

Economic Interest and Voting Interest will be increased to 34.38%,

Onlinefilmsales' Economic Interest and Voting Interest will be decreased to

65.62% (($150,000/$600,000 - $200,000) x 25). In no event shall a reversal of

dilution result in MediaChase having any greater Economic Interest and Voting

Interest than it had as of the date hereof, or 50%.

 

(v) The Company shall give written notice to MediaChase at

least thirty (30) days prior to the consummation of a merger, consolidation or

other business combination involving the Company, where the Company is not the

surviving party, or an acquisition of more than 50% of the assets of the Company

or the issuance, sale, disposition (including by way of merger, consolidation,

share exchange or similar transaction) of securities representing 50% or more of

the voting control of the Company (the date of consummation of such transaction

to be referred to as the "Closing Date"). Such notice shall set forth the Full

Buyback Amount with respect to the Closing Date. Notwithstanding anything to the

contrary set forth in this Agreement, the Closing Date shall be deemed to be a

Month-End Day for all purposes of Section 3.2(e)(iv); provided, however, that in

order to exercise its Buyback Right with respect to the Closing Date, MediaChase

shall give written notice to the Company of its election to do so no later than

5:00 p.m. (Los Angeles time) on the business day immediately preceding the

Closing Date.

 

(vi) Notwithstanding anything else in this Agreement, from

and after the date on which Onlinefilmsales has been distributed Distributable

Cash pursuant to Section 6.8 and Section 3.2(e)(iii) an amount that has resulted

in both its Unpaid Preferred Return and its Adjusted Capital Contributions as of

such date being reduced to zero, the dilution provisions of Section 3.2(e)(ii)

above shall cease to be operative to effect further dilution from and after such

date.

 

(f) FINANCING OF THE COMPANY. The Managers shall not be required to

seek third-party financing prior to issuing calls for Additional Capital.

 

3.3 CAPITAL ACCOUNTS. The Company shall establish and maintain an

individual Capital Account for each Economic Interest Holder.

 

3.4 NO WITHDRAWALS OF CAPITAL. No Economic Interest Holder shall have

the right to withdraw or reduce its Capital Contributions in the Company except

as a result of the dissolution of the Company or as otherwise provided in

Section 4.2 or the Act, and no Economic Interest Holder shall have the right to

demand or receive property other than cash in return for its Capital

Contributions.

 

 

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3.5 LOANS; NO COMPENSATION. No Member or Economic Interest Holder shall

be required to lend any funds to the Company, and no Member or Economic Interest

Holder shall have any personal liability for the repayment of any Capital

Contribution of any other Member or Economic Interest Holder. No Member or

Economic Interest Holder shall receive any interest, salary or drawing with

respect to its Capital Contributions or its Capital Account or for services

rendered on behalf of the Company or otherwise in its capacity as a Member or

Economic Interest Holder, except as otherwise specifically provided in this

Agreement.

 

ARTICLE IV

MEMBERS

 

4.1 ADMISSION OF ADDITIONAL MEMBERS. Subject to compliance with

applicable law, additional Members may be admitted to the Company from time to

time upon the unanimous written approval of all Members.

 

4.2 WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or resign from

the Company except with the prior written consent of the Managers and all other

Members within the Prohibited Transfer Period (as defined in Section 7.1), which

consent may be given or withheld, conditioned or delayed in the Managers' and

the other Members' sole discretion. After the Prohibited Transfer Period, any

Member may withdraw or resign after thirty (30) day's written notice. If the

withdrawing or resigning Member is the last and only remaining Member, the

withdrawal or resignation shall be effective only after the expiration of the

period for Member consent to continue the business of the Company or dissolve,

as provided in Section 8.1. Any withdrawal or resignation (whether prior to or

after the Prohibited Transfer Period) of a Member shall constitute a Membership

Termination Event (other than a Transfer made in accordance with the provisions

of Article VII), and upon the occurrence thereof, that Member's Membership

Interest may, at the election of the Managers, either be converted to a bare

Economic Interest or purchased as provided in Section 8.2(c). If a Member

withdraws in violation of this Agreement, the Member shall forfeit his, her or

its Voting Interest and Economic Interest without further compensation. In

addition, the Member will be liable to the Company and the other Members and/or

Economic Interest Holders for all damages suffered by the Company and the other

Members and/or Economic Interest Holders as a result of such withdrawal.

 

4.3 MEMBERS ARE NOT AGENTS. The management of the Company is vested

exclusively in the Managers. No Member may be an agent of the Company, nor may

any Member, in its capacity as a Member, bind or execute any agreement,

instrument or document on behalf of the Company without the prior written

consent of the Managers.

 

4.4 MEETINGS OF MEMBERS; WRITTEN CONSENT. The Members do not

contemplate holding meetings; however, meetings of the Members may be held if

called by the Managers in their sole and absolute discretion, at such times and

places within or without the State of California as the Managers fix from time

to time. No annual or regular meetings of Members are required, but if such

meetings are held, they shall be noticed, held and conducted pursuant to the

Act. Members may participate in any meeting through the use of conference

telephones or similar communications equipment as long as all Members

participating can hear one another. A

 

 

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Member so participating is deemed to be present in person at the meeting. Any

action which may be taken by the Members at a meeting may also be taken

without a meeting, if a consent in writing setting forth the action so taken

is signed by Members having not less than the minimum votes that would be

necessary to authorize that action at a meeting of the Members duly called

and noticed.

 

ARTICLE V

MANAGEMENT AND CONTROL OF THE COMPANY

 

5.1 MANAGEMENT OF THE COMPANY BY THE MANAGERS.

 

(a) EXCLUSIVE MANAGEMENT BY THE MANAGERS. The business, property

and affairs of the Company shall be managed exclusively by the Managers. Except

for matters as to which the approval of the Members is expressly required by the

Act, Section 5.3, or otherwise in this Agreement, the Managers shall have full,

complete and exclusive authority, power and discretion to manage and control the

business, property and affairs of the Company, to make all decisions regarding

those matters and to perform any and all other actions customary or incident to

the management of the Company's business, property and affairs.

 

(b) POWERS OF THE MANAGERS. Without limiting the generality of

the foregoing, the Managers, acting in concert but without the need to obtain

any approval from the Members, except only as required in Section 5.3 or

otherwise in this Agreement or the Act, shall have the exclusive power and

authority to cause the Company:

 

(i) to do any act in the conduct of its business and to

exercise all powers granted to a limited liability company under the Act,

whether in the state of California or in any other state, territory, district or

possession of the United States or any foreign country, that may be necessary,

convenient, desirable or incidental to the accomplishment of the business

purposes of the Company;

 

(ii) to own, hold, operate, maintain, finance, refinance,

improve, lease, sell, convey, mortgage, transfer, demolish or dispose of any

asset as may be necessary, convenient, desirable or incidental to the

accomplishment of the business purposes of the Company;

 

(iii) to enter into, perform and carry out any contracts,

leases, instruments, commitments, agreements or other documents of any kind,

including, without limitation, contracts with any Member or Manager, any

Affiliate thereof or any agent of the Company, necessary, convenient, desirable

or incidental to the accomplishment of the business purposes of the Company;

 

(iv) to sue and be sued, complain and defend and participate

in administrative or other proceedings, in its own name;

 

(v) to appoint officers, employees and agents of the

Company, define their duties and fix their compensation, if any, and to select

attorneys, accountants, consultants and other advisors of the Company;

 

 

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(vi) to indemnify any Person in accordance with the Act and

to obtain any and all types of insurance;

 

(vii) to borrow money from any Person, and issue evidences of

indebtedness and to secure the same by mortgages, deeds of trust, security

agreements, pledges, collateral assignments or other liens on the assets of the

Company;

 

(viii) to negotiate, enter into, renegotiate, extend, renew,

terminate, modify, amend, waive, execute, acknowledge or take any other action

with respect to any loan agreement, commitment, deed of trust, mortgage,

security agreement or other loan document in respect of any assets of the

Company;

 

(ix) to pay, collect, compromise, litigate, arbitrate or

otherwise adjust or settle any and all other claims or demands of or against the

Company or to hold such proceeds against the payment of contingent liabilities;

 

(x) to make, execute, acknowledge, endorse and file any and

all agreements, documents, instruments, checks, drafts or other evidences of

indebtedness necessary, convenient, desirable or incidental to the

accomplishment of the business purposes of the Company;

 

(xi) to cease the Company's activities and dissolve and wind

up its affairs upon its duly authorized dissolution; and

 

(xii) to cause any special purpose subsidiary limited

liability company wholly owned by the Company to do any of the foregoing.

 

(c) AGENCY AUTHORITY OF THE MANAGERS; DELEGATION BY THE MANAGERS.

Any one Manager shall be authorized to endorse all checks, drafts and other

evidences of indebtedness made payable to the order of the Company and, once

approved as required under Section 5.1(g) or as specifically required elsewhere

in this Agreement, to execute all agreements, contracts, commitments, checks,

instruments and other documents on behalf of the Company. The Managers may also

delegate any or all of their authority, rights and/or obligations, whether

arising hereunder, under the Act or otherwise, to any one or more officers,

agents or other duly authorized representatives of the Company.

 

(d) DISCRETION OF THE MANAGERS. In making any and all decisions

relating to the conduct of the Company's business or otherwise delegated to them

by any provision of this Agreement, the Managers shall be free to exercise their

sole, absolute and unfettered discretion so long as such decision was made by

the Managers in good faith for a purpose reasonably believed by them to be in,

or not opposed to, the best interests of the Company. The Managers shall not, in

respect of any such decision, be liable to the Company, the Members or any of

their respective Affiliates or constituent owners for any resulting actual or

alleged losses, damages, costs or expenses suffered by them so long as such

decision was made by the Managers in good faith for a purpose reasonably

believed by them to be in, or not opposed to, the best interests of the Company.

 

 

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(e) PERFORMANCE OF DUTIES; LIABILITY OF MANAGERS. The Managers

shall perform their managerial duties in good faith and in a manner they believe

to be in, or not opposed to, the best interests of the Company. In performing

their duties, the Managers shall be entitled to rely on information, opinions,

reports or statements, including financial statements and other financial data,

of any attorney, independent accountant or other Person as to matters which the

Managers believe to be within such Person's professional or expert competence

unless the Managers have actual knowledge concerning the matter in question that

would cause such reliance to be unwarranted.

 

(f) DEVOTION OF TIME. The Managers shall not be obligated to devote

all of their time or business efforts to the affairs of the Company; however,

they shall devote such time, effort and skill as they deem appropriate for the

management and operation of the Company's affairs.

 

(g) DECISIONS OF THE MANAGERS. Except to the extent that this

Agreement expressly requires the unanimous approval of all of the Managers, any

decision or action taken by a majority in number of the Managers (whether

verbally or in writing, whether in person or by proxy and whether or not at a

formal meeting called pursuant to Section 5.1(h)) shall constitute the act or

decision of the Managers.

 

(h) MEETINGS OF MANAGERS. Meetings of the Managers may be called by

any Manager or by the Chairperson, President, any Senior Vice-President or

Vice-President or the Secretary of the Company, if any. All meetings shall be

held upon four (4) days' notice by mail or forty-eight (48) hours' notice

delivered personally or by telephone, telegraph or facsimile. A notice need not

specify the purpose of any meeting. Notice of a meeting need not be given to any

Manager who signs a waiver of notice, a consent to holding the meeting or an

approval of the minutes thereof, whether before or after the meeting, or who

attends the meeting without protesting the lack of notice prior to the

commencement of the meeting. All such waivers, consents and approvals shall be

filed with the Company records or made a part of the minutes of the meeting. A

majority of the authorized number of Managers shall constitute a quorum of the

Managers for the transaction of business, and except to the extent that this

Agreement expressly requires the approval of all of the Managers, every act or

decision done or made by a majority in number of the Managers present at a

meeting duly held at which a quorum is present shall be the act of the Managers.

A meeting at which a quorum is initially present may continue to transact

business notwithstanding the withdrawal of Managers if any action taken is

approved by at least a majority of the required quorum for the meeting. Managers

may participate in any meeting of the Managers by means of conference telephones

or similar communications equipment so long as all Managers participating can

hear one another. A Manager so participating is deemed to be present at the

meeting.

 

The provisions of this Section 5.1(h) govern meetings of the Managers

if the Managers elect, in their discretion, to hold meetings. However, nothing

in this Section 5.1(h) or in this Agreement is intended to require that meetings

of the Managers be held, it being the intent of the Members that meetings of the

Managers are not required.

 

 

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5.2 ELECTION OF MANAGERS.

 

(a) NUMBER AND TERM. Until such time as Onlinefilmsales' Unpaid

Preferred Return and Adjusted Capital Contributions are reduced to zero, the

Company shall have one (1) Manager, who shall be designated by Onlinefilmsales.

The initial Manager shall be Onlinefilmsales. After Onlinefilmsales' Unpaid

Preferred Return and Adjusted Capital Contributions are reduced to zero, the

Company shall have three (3) Managers, one of whom shall be designated by

Onlinefilmsales, one of whom shall be designated by MediaChase, and one of whom

shall be designated by Onlinefilmsales and MediaChase by mutual agreement (the

"Joint Designee"); provided, however, that in the event Onlinefilmsales and

MediaChase are unable in good faith to agree upon the Joint Designee,

Onlinefilmsales shall designate the Joint Designee. A Member shall have the

right to change the identity of the Manager(s) appointed by it at any time and

for any reason, by written notice to the other Member, and each Manager so

appointed shall serve in that capacity until he or she resigns or is removed by

the Member which appointed him or her, in its absolute discretion; provided,

however, that if the Joint Designee is designated by both Onlinefilmsales and

MediaChase, such Joint Designee may only be removed by the mutual agreement of

Onlinefilmsales and MediaChase. The failure of any Member to appoint one or both

Managers which that Member is entitled to appoint shall not limit the right of

the Managers to carry on the business of the Company.

 

(b) VACANCIES. Any vacancy occurring for any reason in the number

of Managers may be filled by designation of the Member(s) who previously

designated the Manager whose position has become vacant.

 

5.3 LIMITATIONS ON POWER OF THE MANAGERS. This Section 5.3 shall have

no force or effect until Onlinefilmsales' Unpaid Preferred Return and Adjusted

Capital Contributions are reduced to zero, and until such date, the Managers

shall have no restrictions on their powers under this Section 5.3. From and

after the date on which Onlinefilmsales' Unpaid Preferred Return and Adjusted

Capital Contributions are reduced to zero, the limitations on the Managers'

power in this Section 5.3 shall apply:

 

(a) the sale, exchange or other disposition of all, or

substantially all, of the Company's assets occurring as part of a single

transaction or plan, or in a series of transactions, shall require not only the

approval of the Managers, but also the affirmative vote or written consent of

Members holding at least seventy-five percent (75%) of all Voting Interests;

 

(b) the merger of the Company with another limited liability

company or a corporation, general partnership or limited partnership shall

require not only the approval of the Managers, but also the affirmative vote or

written consent of Members holding at least seventy-five percent (75%) of all

Voting Interests; provided, however, that in no event shall a Member be required

to become a general partner in a merger with a general or limited partnership

without that Member's express written consent or unless the agreement of merger

provides each Member with the dissenter's rights described in the Act;

 

(c) any decision to admit a Person as a Member of the Company shall

require not only the approval of the Managers, but also the affirmative vote or

written consent of all of the Members;

 

 

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(d) any decision to compromise the obligation of a Member to a make

a Capital Contribution or to return money or property paid or distributed in

violation of the Act shall require not only the approval of the Managers, but

also the affirmative vote or written consent of Members holding at least

seventy-five percent (75%) of the Voting Interests of all non-interested

Members;

 

(e) any act which would make it impossible to carry on the ordinary

business of the Company shall require not only approval of the Managers, but

also the affirmative vote or written consent of Members holding at least

seventy-five percent (75%) of all Voting Interests;

 

(f) any decision to place the Company into Bankruptcy shall require

not only the approval of the Managers, but also the affirmative vote or written

consent of Members holding at least seventy-five percent (75%) of all Voting

Interests; and

 

(g) any amendment to the Certificate of Formation or this Agreement

shall require not only the approval of the Managers, but also the affirmative

vote or written consent of Members holding at least seventy-five percent (75%)

of all Voting Interests, provided, however, that there shall be no change in the

purpose of the Company and provided further that no amendment will be binding on

a Member that diminishes its rights or increases its obligations unless approved

by such Member.

 

5.4 MEMBERS HAVE NO MANAGERIAL AUTHORITY. The Members shall have no

power to participate in the management of the Company except as expressly

authorized by this Agreement and except as expressly required by any

non-waivable provision of the Act. Without the written authorization of the

Managers to do so, no Member shall have any power or authority to bind or act on

behalf of the Company in any way, to pledge its assets or to render it liable

for any purpose.

 

5.5 TRANSACTIONS BETWEEN THE COMPANY AND THE MANAGERS, THE MEMBERS OR

THEIR AFFILIATES.

 

(a) CONTRACTS WITH AFFILIATES. Notwithstanding that it may

constitute a conflict of interest, the Members that are not also Managers may,

and may cause their Affiliates to, engage in any transaction (including, without

limitation, the purchase, sale, lease or exchange of any property, the lending

of money, the rendering of any service or the establishment of any salary, other

compensation or other terms of employment) with the Company so long as that

transaction is not expressly prohibited by this Agreement and so long as the

transaction is approved by the Managers and the transaction is fair to the

Company and is on commercially reasonable terms.

 

(b) CONTRACTS WITH MANAGERS OR AFFILIATES OF THE MANAGERS. The

Members acknowledge and intend that the Managers may provide, or cause the

Company to engage one or more of its Affiliates to provide, any or all goods

and/or services required by the Company in the conduct of its business and may

engage in any transaction (including, without limitation, the purchase, sale,

lease or exchange of any property, the lending of money, the rendering of any

service or the establishment of any salary, other compensation or other terms of

employment) with the Company, and that, except only as expressly limited below,

the terms and conditions of

 

 

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any such engagement shall be determined exclusively by the Managers in their

sole and absolute discretion; provided, however, that notwithstanding

anything to the contrary set forth in this Agreement, all disinterested

Members must approve the terms and conditions of an agreement with the

Manager or the terms and conditions of any agreement with one or more of the

Managers' Affiliates prior to the Company entering into such agreement, which

approval shall not be unreasonably withheld.

 

(c) TREATMENT OF AFFILIATE LOANS AND FEES. To the fullest extent

permitted by law, all principal, interest, costs and expenses owing by the

Company to the Members, the Managers and/or Affiliates thereof in repayment of

loans and all fees, commissions and/or reimbursable amounts payable by the

Company to the Members, the Managers and/or Affiliates thereof shall be treated

in the same manner as liabilities payable to unaffiliated creditors of the

Company and shall be paid and taken into account, as such, before any

Distributions of Distributable Cash are made to the Economic Interest Holders.

 

5.6 OFFICERS.

 

(a) APPOINTMENT OF OFFICERS. The Managers may, at their discretion,

appoint officers of the Company at any time. The officers of the Company may

include a Chairperson, a President or Chief Executive Officer, one or more

Senior Vice Presidents, one or more Vice Presidents, a Secretary, Assistant

Secretaries, a Chief Financial Officer, a Treasurer and one or more Assistant

Treasurers and a Comptroller. The officers shall serve at the pleasure of the

Managers, subject to all rights, if any, of an officer under any contract of

employment. Any individual may hold any number of offices. Officers of the

Managers may serve as officers of the Company if appointed by the Managers. The

officers shall exercise such powers and perform such duties as are typically

exercised by similarly titled officers in a corporation and as shall be

determined from time to time by the Managers. If any such officer is entitled to

a salary for his or her services, however, all of that salary shall be paid by

the Company.

 

(b) SIGNING AUTHORITY OF OFFICERS. The officers, if any, shall have

such authority to sign checks, instruments and other documents on behalf of the

Company as may be delegated to them by the Managers in writing.

 

(c) ACTS OF OFFICERS AS CONCLUSIVE EVIDENCE OF AUTHORITY. Any note,

mortgage, deed of trust, evidence of indebtedness, contract, certificate,

statement, conveyance or other instrument or obligation in writing, and any

assignment or endorsement thereof, executed or entered into between the Company

and any other Person, when signed by the Chairperson, the President or Chief

Executive Officer, any Senior Vice-President and any Secretary, any Assistant

Secretary, any Treasurer, or any Assistant Treasurer of the Company, is not

invalidated as to the Company by any lack of authority of the signing officers

in the absence of actual knowledge on the part of the other Person that the

signing officer(s) had no authority to execute the same.

 

5.7 COMPETING ACTIVITIES.

 

(a) PRE-FORMATION ACTIVITIES. Each Member, Economic Interest Holder

and Manager and each of its respective Affiliates may continue to engage or

invest in any activity or project, including, without limitation, those that

might be in direct or indirect competition with

 

 

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the Company, if such Member, Manager, Economic Interest Holder and/or

Affiliate was engaged or had an investment in such activity or project prior

to the date hereof (other than, in the case of MediaChase, any activities or

projects relating to the operation of the business of ReporterTV.com, which

shall be conducted exclusively pursuant to the terms of this Agreement)

("Pre-Formation Activity"). For purposes of this Agreement, "competition" or

"competitive" shall mean an online entertainment news program containing

business news for the film and television industry. Neither the Company nor

any other Member, Economic Interest Holder or Manager shall have any right in

or to such Pre-Formation Activity or to the income or proceeds derived

therefrom.

 

(b) POST-FORMATION ACTIVITIES. Except as provided in Section

5.7(a), no Member, Economic Interest Holder, Manager or Affiliate thereof shall,

at any time prior to the Noncompete Date (as hereinafter defined), directly or

indirectly engage in, or have any interest in, or manage, operate or advise in

any manner, or provide or arrange any financing for, any activity or project

(whether as director, officer, shareholder, owner, employee, agent,

representative, security holder, member, consultant or otherwise) which activity

or project is an online entertainment news program containing business news for

the film and television industry; provided, however, that this limitation (i)

shall not apply to the acquisition of a stock interest in a corporation that

competes with the Company's business, provided (x) such stock is publicly traded

and the stock so acquired (together with all other stock in the corporation

beneficially owned by such Person and/or his or her spouse and any other member

of his or her family) is not more than one percent (1%) of the outstanding

shares of such corporation or (y) such corporation is not primarily engaged in

the production of an online entertainment news program containing business news

for the film and television industry and (ii) shall not prohibit consulting or

work with companies that own activities or projects that are competitive with

the Company's business so long as the consulting or work is not directly related

to the competing activity or project. For purposes of this Section 5.7(b), the

"Noncompete Date" shall be the earlier of (i) the date which is one (1) year

after a Member's Membership Interest or Economic Interest Holder's Economic

Interest is terminated, or a non-Member Manager ceases to act in such capacity

on behalf of the Company (as the case may be), or (ii) the date on which the

Company or its successors in interest cease to engage in the Company's business.

Except as prohibited in this Section 5.7, the Members, Economic Interest Holders

and Managers and their respective Affiliates, may engage or invest in, and

devote their time to, any other business venture or activity of any nature and

description (independently or with others).

 

(c) SPECIFIC ENFORCEMENT. The parties hereby acknowledge and agree

that any breach or threatened breach of this Section 5.7 or Section 9.6 will

cause irreparable injury to the Company and the other Members and Economic

Interest Holders and that money damages will not constitute an adequate remedy.

Accordingly, if any Member, Economic Interest Holder, Manager or Affiliate

thereof breaches or threatens to breach this Section 5.7 or Section 9.6, the

Company and the other Members and Economic Interest Holders shall, in addition

to all other rights and remedies available to them at law or in equity, be

entitled to obtain equitable relief in the form of specific performance,

temporary restraining order, temporary or permanent injunction or any other

equitable remedy which may then be available from any court having equity

jurisdiction, all without the need to post a bond or other security or to prove

any amount of actual damage or that money damages will not provide an adequate

remedy. The provisions of this Section 5.7 and Section 9.6 are intended for the

sole protection and benefit of the parties

 

 

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hereto and their respective successors and assigns, and no other person or

entity shall be the direct or indirect beneficiary of or have any direct or

indirect cause of action or claim in connection of this Section 5.7 or

Section 9.6.

 

(d) PAYMENTS TO MANAGERS AND OTHERS. The Company is authorized to

pay any Person remuneration or reimbursement for goods and services provided to

the Company. Without limiting the generality of the foregoing, the Company shall

pay the Members, the Economic Interest Holders and their Affiliates for services

rendered or goods provided by them to the Company to the extent that those

Members, Economic Interest Holders or Affiliates are not required to render such

services or goods themselves without charge to the Company, and to the extent

that the fees paid to those Members, Economic Interest Holders or Affiliates do

not exceed the fees that would be payable to independent responsible third

parties that are willing to perform those services or provide those goods.

 

(e) EXPENSES. The Company shall reimburse the Managers and their

Affiliates for all reasonable out-of-pocket costs and expenses incurred by them

in connection with the business and affairs of the Company, as well as

organizational expenses (including, without limitation, legal and accounting

fees and costs) incurred by them to form the Company and prepare the Certificate

of Formation (other than expenses incurred in connection with the preparation

and negotiation of this Agreement), subject to the Managers receiving advance

approval from all non-Manager Members in the case of expenses (or a series of

related expenses) in excess of $1,000, or such other amount which is agreed to

by all the Members, in any month which do not constitute an Agreed Overrun. The

Managers may allocate to the Company, on any basis selected by them in good

faith which is consistent with good accounting practice, a portion of any and

all expenses, including general, special and administrative expenses, incurred

by them or their Affiliates for the benefit of the Company, subject to the

Managers receiving advance approval from all non-Manager Members in the case of

an allocation to the Company (or a series of related allocations) in excess of

$1,000, or such other amount which is agreed to by all the Members, in any month

which do not constitute an Agreed Overrun.

 

ARTICLE VI

ALLOCATIONS OF NET PROFITS, NET LOSSES AND DISTRIBUTIONS

 

6.1 MINIMUM GAIN CHARGEBACK. In the event that there is a net decrease

in the Company Minimum Gain during any taxable year, the minimum gain chargeback

described in Sections 1.704-2(f) and (g) of the Treasury Regulations shall

apply.

 

6.2 MEMBER MINIMUM GAIN CHARGEBACK. If during any taxable year there is

a net decrease in Member Minimum Gain, the partner minimum gain chargeback

described in Section 1.704-2(i)(5) of the Treasury Regulations shall apply.

 

6.3 QUALIFIED INCOME OFFSET. Any Economic Interest Holder who

unexpectedly receives an adjustment, allocation or Distribution described in

subparagraphs (4), (5) or (6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury

Regulations, which adjustment, allocation or distribution creates or increases a

deficit balance in that Economic Interest Holder's Capital Account, shall be

allocated items of "book" income and gain in accordance with the provisions

 

 

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of the "qualified income offset" as described in Section 1.704-1(b)(2)(ii)(d)

of the Treasury Regulations.

 

6.4 NONRECOURSE DEDUCTIONS. Nonrecourse Deductions shall be allocated

to the Economic Interest Holders in proportion to their Economic Interests.

 

6.5 MEMBER NONRECOURSE DEDUCTIONS. Member Nonrecourse Deductions shall

be allocated to the Economic Interest Holders as required in Section

1.704-2(i)(1) of the Treasury Regulations in accordance with the manner in which

the Economic Interest Holders bear the burden of an Economic Risk of Loss

corresponding to the Member Nonrecourse Deductions.

 

6.6 ALLOCATION OF NET PROFITS. The Net Profits for each fiscal period

of the Company shall be allocated to the Economic Interest Holders in accordance

with the following order of priority:

 

(a) first, to those Economic Interest Holders with negative

Adjusted Capital Accounts, among them in proportion to the ratio of the negative

balances in their Adjusted Capital Accounts, until no Economic Interest Holder

has a negative Adjusted Capital Account;

 

(b) second, to those Economic Interest Holders whose Adjusted

Capital Contributions are in excess of their Adjusted Capital Accounts, among

them in accordance with the ratio of these excesses, until all of these excesses

have been eliminated;

 

(c) third, to each Member in proportion to each Member's Preferred

Return Account, until the Preferred Return Account of each is reduced to zero;

and

 

(d) finally, to the Economic Interest Holders in proportion to

their Economic Interests.

 

6.7 ALLOCATION OF NET LOSSES. Net Losses for each fiscal period of the

Company shall be allocated to the Economic Interest Holders in accordance with

the following order of priority:

 

(a) first, to those Economic Interest Holders with positive

Adjusted Capital Accounts, in proportion to the ratio of the positive balances

in their Adjusted Capital Accounts, until no Economic Interest Holder has a

positive Adjusted Capital Account; and

 

(b) finally, to the Economic Interest Holders in proportion to

their Economic Interests.

 

6.8 DISTRIBUTIONS BY THE COMPANY. Subject to applicable law and any

limitations contained elsewhere in this Agreement, the Managers may elect from

time to time to cause the Company to distribute Distributable Cash to the

Economic Interest Holders, which Distributions shall be in the following order

of priority:

 

(a) first, to each Member in proportion to each Member's Unpaid

Preferred Return, until the Unpaid Preferred Return of each has been reduced to

zero;

 

 

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(b) second, to each Member in proportion to each Member's Adjusted

Capital Contributions, until the Adjusted Capital Contributions of each are

reduced to zero; and

 

(c) finally, to the Economic Interest Holders in proportion to

their Economic Interests.

 

6.9 ALLOCATION OF NET PROFITS AND LOSSES AND DISTRIBUTIONS IN RESPECT

OF A TRANSFERRED INTEREST. If any Economic Interest is Transferred or is

increased or decreased by reason of the admission of a new Economic Interest

Holder or otherwise during any Fiscal Year, each item of income, gain, loss,

deduction or credit of the Company for that Fiscal Year shall be allocated based

on the "interim closing of the books" method.

 

6.10 TAX ALLOCATION MATTERS.

 

(a) CONTRIBUTED OR REVALUED PROPERTY. Each Economic Interest

Holder's allocable share of the taxable income or loss of the Company,

depreciation, depletion, amortization and gain or loss with respect to any

contributed property, or with respect to revalued property where the Company's

property is revalued pursuant to Paragraph (b)(2)(iv)(f) of Section 1.704-1 of

the Treasury Regulations, shall be determined in the manner (and as to

revaluations, in the same manner as) provided in Section 704(c) of the Code. The

allocation shall take into account, to the full extent required or permitted by

the Code, the difference between the adjusted basis of the property to the

Economic Interest Holder contributing it and the fair market value of the

property determined by the Managers at the time of its contribution or

revaluation, as the case may be. The Company shall apply Section 704(c)(1)(A) by

using the "traditional method" as set forth in Section 1.704-3(b) of the

Treasury Regulations.

 

(b) RECAPTURE ITEMS. In the event that the Company has taxable

income that is characterized as ordinary income under the recapture provisions

of the Code, each Economic Interest Holder's distributive share of taxable gain

or loss from the sale of Company assets (to the extent possible) shall include a

proportionate share of this recapture income equal to that Economic Interest

Holder's share of prior cumulative depreciation deductions with respect to the

assets which gave rise to the recapture income.

 

6.11 ORDER OF APPLICATION. To the extent that any allocation,

Distribution or adjustment specified in any of the preceding Sections of this

Article VI affects the results of any other allocation, Distribution or

adjustment required herein, the allocations, Distributions and adjustments

specified in the following Sections shall be made in the priority listed:

 

(a) Section 6.8.

 

(b) Section 6.1.

 

(c) Section 6.2.

 

(d) Section 6.3.

 

(e) Section 6.4.

 

 

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(f) Section 6.5.

 

(g) Section 6.7.

 

(h) Section 6.6.

 

(i) Section 10.4.

 

These provisions shall be applied as if all Distributions and

allocations were made at the end of the Company's Fiscal Year. Where any

provision depends on the Capital Account of any Economic Interest Holder, that

Capital Account shall be determined after the operation of all preceding

provisions for the Fiscal Year.

 

6.12 ALLOCATION OF LIABILITIES. Each Economic Interest Holder's

interest in "partnership" profits for purposes of determining that Member's

share of "excess nonrecourse liabilities" of the Company as used in Section

1.752-3(a)(3) of the Treasury Regulations, shall be equal to that Economic

Interest Holder's Economic Interest.

 

6.13 FORM OF DISTRIBUTION. No Economic Interest Holder, regardless of

the nature of its Capital Contribution, has the right to demand and receive any

Distribution from the Company in any form other than money. No Economic Interest

Holder may be compelled to accept from the Company a Distribution of any asset

in kind in lieu of a proportionate Distribution of money being made to other

Economic Interest Holder(s), and except upon a dissolution and the winding up of

the Company, no Economic Interest Holder may be compelled to accept a

Distribution of any asset in kind.

 

ARTICLE VII

TRANSFER OF INTERESTS

 

7.1 TRANSFER OF INTERESTS. Notwithstanding anything to the contrary set

forth elsewhere herein, no Member may, except as permitted in Section 7.3,

Transfer all or any part of its Membership Interest or its Economic Interest,

for any reason, within the one (1) year period (the "Prohibited Transfer

Period") commencing upon the date hereof. Any attempted Transfer during such

Prohibited Transfer Period shall be null and void ab initio, and the transferee

shall not become either a Member or an Economic Interest Holder. After the

Prohibited Transfer Period, any Member may Transfer all or any part of its

Membership Interest or Economic Interest provided it has complied with Section

7.3. After the consummation of any permitted Transfer of all or any part of a

Membership Interest or an Economic Interest, the Membership Interest or Economic

Interest so Transferred shall continue to be subject to the terms and provisions

of this Agreement, and any further Transfers shall be required to comply with

the terms and provisions of this Agreement.

 

7.2 [intentionally omitted]

 

7.3 RIGHT OF FIRST REFUSAL. At any time after the Prohibited Transfer

Period, if any Member decides to Transfer all or any part of its Membership

Interest or Economic Interest (the "Offered Interest") pursuant to a Bona Fide

Offer, that Member shall give written notice to the

 

 

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Company and to all other Members (the "Eligible Members"), setting forth in

full the terms of such Bona Fide Offer and the identity of the offeror(s).

The Company shall then have the right and option, for a period ending thirty

(30) calendar days following its receipt of the written notice, to elect to

purchase all or any part of the Offered Interest at the purchase price and

upon the terms specified in the Bona Fide Offer, and the Eligible Members

(pro rata in accordance with the ratio of their Economic Interests) shall

then have the right and option, for a period of twenty (20) days thereafter,

to elect to purchase all or any part of the Offered Interest not elected to

be purchased by the Company at the purchase price and upon the terms

specified in the Bona Fide Offer. If all Eligible Members do not elect to

purchase the entire balance of the Offered Interest, then the Eligible

Members electing to purchase shall have the right and option, for a period of

ten (10) days thereafter and pro rata in accordance with the ratio of their

Economic Interests, to elect to purchase the balance of the Offered Interest

available for purchase.

 

Notwithstanding the foregoing, however, if the Company and/or the

Eligible Members do not elect to purchase all of the Offered Interest subject to

the right of first refusal pursuant to this Section 7.3, the Member desiring to

Transfer may Transfer all of the Offered Interest to the original proposed

transferee upon the terms set forth in the written notice provided to the

Company, whereupon the original proposed transferee shall take and hold the

Offered Interest subject to this Agreement and to all of the obligations and

restrictions upon the Member from whom such Offered Interest was acquired and

shall observe and comply with this Agreement and with all such obligations and

restrictions. Any such Transfer of the Offered Interest to the original proposed

transferee must be effected within ninety (90) calendar days after the date of

the termination of the right of first refusal options provided above. If no such

Transfer is effected within such ninety (90) calendar day period, then any

subsequent proposed Transfer of all or any part of the Membership Interest or

Economic Interest of the Member desiring to Transfer shall once again be subject

to the provisions of this Section 7.3.

 

For these purposes, if any consideration offered for the Offered

Interest in the Bona Fide Offer consists of rights, interests or property other

than money or an obligation to pay money, the Managers shall, in good faith,

determine the Fair Market Value of that consideration in monetary terms as of

the date the Bona Fide Offer was received by the Member desiring to Transfer.

The Fair Market Value of that consideration in monetary terms, as so determined,

shall be included in the purchase price payable by the Company and/or the

purchasing Members hereunder, but, in order to exercise their rights of first

refusal granted above, neither the Company nor the purchasing Members need

transfer to the Member desiring to Transfer the actual rights, interests or

property offered in the Bona Fide Offer nor afford the Member desiring to

Transfer the same tax treatment which would have been available to it under the

Bona Fide Offer.

 

7.4 [intentionally omitted]

 

7.5 [intentionally omitted]

 

7.6 [intentionally omitted]

 

7.7 REPURCHASE RESTRICTIONS IMPOSED BY LAW. Notwithstanding anything to

the contrary stated herein, the Company's right to exercise any option provided

in this Article VII shall be subject to the restrictions governing prohibited

Company Distributions set forth in the

 

 

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Act and such other pertinent federal and state laws, rules, regulations or

other governmental restrictions as may now or hereafter be in effect.

 

7.8 FURTHER RESTRICTIONS ON TRANSFER OF INTERESTS. In addition to any

other restrictions found in this Agreement, no Interest Holder may Transfer its

Membership Interest, its Economic Interest or any part thereof (a) without

compliance with the Securities Act, the California Corporate Securities Law of

1968 and any other applicable securities laws, and (b) if the Transfer could

result in the Company not being classified as a partnership for federal or state

income tax purposes, in each case as determined by the Managers. Any attempted

or purported Transfer in violation of this Section 7.8 shall be null and void ab

initio, and the transferee shall not become either a Member or an Economic

Interest Holder.

 

7.9 SUBSTITUTION OF MEMBERS. Notwithstanding anything in this Agreement

to the contrary, no transferee of the whole or any part of a Membership Interest

shall become a substituted Member in the place of its transferor unless all of

the following conditions are satisfied:

 

(a) the Transferring Interest Holder and the transferee execute and

acknowledge such other instrument or instruments as the Managers may deem

necessary or desirable to effectuate the admission, including the written

acceptance and adoption by the transferee of all of the terms and conditions of

this Agreement as the same may have been amended; and

 

(b) The transferee pays to the Company a transfer fee which is

sufficient, in the reasonable discretion of the Managers, to cover all expenses

incurred by the Company in connection with the Transfer and substitution.

 

7.10 ENFORCEMENT. The Transfer restrictions contained in this Agreement

are of the essence of the ownership of a Membership Interest or an Economic

Interest. Upon application to any court of competent jurisdiction, the Company

shall be entitled to a decree against any Person violating or about to violate

such restrictions, requiring their specific performance, including those

requiring a Member or an Economic Interest Holder to sell all or part of its

Membership Interest or Economic Interest to the Company and/or the other

Members, or prohibiting a Transfer of all or part of a Membership Interest or an

Economic Interest.

 

7.11 EFFECT OF TRANSFERS IN VIOLATION OF AGREEMENT. If, for any reason,

a court refuses to enforce the provisions of Section 7.1 to the effect that a

Transfer in violation of this Article VII is null and void, then, upon any such

Transfer of a Membership Interest or part thereof in violation of this Article

VII, the transferee shall have no right to vote or participate in the management

of the business, property and affairs of the Company or to exercise any rights

of a Member. The transferee shall only be entitled to become an Economic

Interest Holder to the extent of the Membership Interest attempted or purported

to be Transferred to it in violation of this Agreement and thereafter shall only

receive the share of the Company's Net Profits, Net Losses, Tax Credits,

Distributable Cash, and other Distributions to which the Transferring Interest

Holder would otherwise have been entitled.

 

 

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ARTICLE VIII

CONSEQUENCES OF MEMBERSHIP TERMINATION EVENTS

 

8.1 DISSOLUTION OF COMPANY. The occurrence of a Membership Termination

Event as to any Member other than the last and only remaining Member shall not

dissolve the Company. Upon the occurrence of a Membership Termination Event as

to the last and only remaining Member, the Company shall dissolve unless the

Managers and the successor-in-interest of the last and only remaining Member

consent in writing within ninety (90) days of such Membership Termination Event

to the continuation of the Company and to the admission of such personal

representative or other successor-in-interest, or its designee or nominee, as a

Member.

 

8.2 ADMISSION OR CONVERSION. Upon the occurrence of a Membership

Termination Event with respect to a Member under circumstances where the Company

does not dissolve, the Managers shall determine which one of the following shall

occur and give written notice thereof to the remaining Members and to the Member

who suffered the Membership Termination Event (the "Former Member"):

 

(a) the Former Member's successor-in-interest shall be admitted as

a Member of the Company in the place and stead of the Former Member to the

extent of the Former Member's Membership Interest (the "Former Member's

Interest"); provided, however, that the Managers may not elect this alternative

without the affirmative vote or written consent of Members constituting a

Majority in Interest of all remaining Members holding at least seventy-five

percent (75%) of the Voting Interests of all remaining Members;

 

(b) the Former Member's Interest shall be converted to a bare

Economic Interest, and the Former Member's successor-in-interest shall become

the owner of that Economic Interest; or

 

(c) the Company, and/or one or more of the remaining Members and/or

any other Person(s) designated by the Managers shall purchase, and the Former

Member or the Former Member's successor-in-interest shall sell, the Former

Member's Interest upon the terms and conditions specified in Section 8.3.

 

8.3 TERMS OF TRANSFER.

 

(a) TRANSFEREE BOUND BY AGREEMENT. If all or any part of Member's

Membership Interest or Economic Interest has been Transferred to a transferee,

that transferee shall take and hold such Interest subject to this Agreement and

to all of the obligations and restrictions upon the Member and shall observe and

comply with this Agreement and with all such obligations and restrictions.

 

(b) NOTICE OF REPURCHASE EVENT. Upon the occurrence of a Membership

Termination Event, the Member affected (the "Transferring Interest Holder")

shall promptly give notice (the "Notice") to the Company and to all Eligible

Members, stating when the Membership Termination Event occurred, the reason

therefor, if applicable, the percentage of the Membership Interest or Economic

Interest so affected, and the name, address and capacity of the transferee, if

 

 

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a Transfer has occurred. If no such Notice is given within ten (10) days of

the occurrence of the Membership Termination Event, any Eligible Member may

institute the purchase proceedings by giving a Notice to the Company, the

other Eligible Members and the Transferring Interest Holder. For purposes of

the remainder of this Section 8.3, the term "Affected Interest" shall mean

the Membership Interest or Economic Interest which the Transferring Interest

Holder is required to sell to the Company and the Eligible Members pursuant

to Section 8.2(c) above.

 

(c) OPTION TO PURCHASE. Upon receipt of any Notice, the Company

shall have the right and option, for a period ending thirty (30) calendar days

following the determination of the purchase price of the Affected Interest, to

elect to purchase all (but not less than all) of the Affected Interest at the

price and upon the terms provided below in this Section 8.3, and the Eligible

Members, pro rata in accordance with the ratio of their Economic Interests,

shall then have the right and option, for a period of twenty (20) days

thereafter, to elect to purchase all or any part of the Affected Interest not

elected to be purchased by the Company upon the same terms and conditions as

exist in favor of the Company. If all Eligible Members do not elect to purchase

the entire balance of the Affected Interest, then the Eligible Members electing

to purchase shall have the right and option, for a period of ten (10) days

thereafter and pro rata in accordance with the ratio of their Economic

Interests, to purchase the balance of the Affected Interest available for

purchase. If the Company and the Eligible Members do not elect to purchase all

of the Affected Interest, the Transferring Interest Holder shall retain all of

the Affected Interest subject to all of the terms of this Agreement.

 

(d) PURCHASE PRICE.

 

(i) BY AGREEMENT. Upon the Company's receipt of the Notice,

the Transferring Interest Holder and the Company (acting through the Managers)

shall promptly attempt to agree upon a purchase price for the Affected Interest.

 

(ii) BY APPRAISAL IF NO AGREEMENT. If the Company and the

Transferring Interest Holder are unable to agree upon a purchase price within

thirty (30) calendar days following the Company's receipt of the Notice, they

shall appoint an appraiser as mutually agreed by the parties to value the Fair

Market Value of the Affected Interest as of the date the Membership Termination

Event occurred. The determination of the purchase price in the by the appraiser

shall be conclusive for all purposes and upon all parties.

 

The expenses of appraisal shall be borne equally by the Company and the

Transferring Interest Holder. The portion of the compensation and fees allocated

to the Company shall be apportioned, as among the Company and any Members

electing to purchase the Affected Interest, on a pro rata basis to the amount of

the Affected Interest purchased by the Company and each such Member,

respectively.

 

(iii) QUALIFICATIONS OF APPRAISER. The appraiser selected by

the parties shall be reasonably experienced in valuing interests in businesses

similar to the business then conducted by the Company.

 

 

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(e) PAYMENT OF PURCHASE PRICE.

 

(i) PAYMENT. Except as provided below, the purchase price

for the Affected Interest shall be payable at the option of the Company and each

purchasing Member, severally, either entirely in cash, or partly in cash and

partly by delivery of a promissory note (in which latter case, at least

twenty-five percent (25%) of the purchase price for the Affected Interest shall

be payable in cash at closing with the remainder payable by delivery of a

promissory note). Each promissory note hereunder ("Note") shall be in the form

of a secured promissory note, payable as provided in clause (ii) below.

 

(ii) PROMISSORY NOTES. Each Note shall be payable in four (4)

equal quarterly principal installments over one year, with fixed interest at

Prime. Interest shall be paid quarterly in addition to principal. Each Note

shall provide that the maker of the Note shall have the right to prepay all or

any part of the principal balance on the Note without penalty or premium and

that any sums paid in any period in excess of the regular installment for that

period shall be applied against installments thereafter falling due, in the

inverse order of their maturity or against all of the remaining installments

equally, at the option of the holder of the Note. Each Note shall also provide

that in case of default in the payment of any installment when due, the entire

principal balance then remaining unpaid shall become immediately due and payable

at the option of the holder, and shall provide for the payment by the maker of

reasonable attorneys' fees to the holder in the event suit is commenced because

of any default. Each Note executed by a Member shall be secured by a security

interest in that part of the Affected Interest purchased by that Member. Each

Note executed by the Company shall be secured by a security interest in all of

the property of the Company. So long as no default occurs in the making of

payments on any Note, the Company and/or the purchasing Members shall have the

right to receive all distributions of Distributable Cash and other Distributions

and all allocations of Net Profits, Net Losses and Tax Credits attributable

thereto. However, upon default by the Company or a purchasing Member in the

payment of its Note, and if that default continues for a period of thirty (30)

days after notice thereof to the Company and/or the purchasing Member, the

Transferring Interest Holder shall thereupon have, in addition to any other

rights or remedies it may have by reason of the default, the right to receive

the distributions of Distributable Cash and other Distributions attributable

thereto (but not the allocations of Net Profits, Net Losses and Tax Credits

attributable thereto, which shall continue to vest until foreclosure in the

legal owners of the Membership Interests or Economic Interest(s) so serving as

security). Any Distributions so received shall be applied to, and shall reduce,

the amount of principal and interest owing on the Note.

 

(iii) SUBORDINATION OF NOTES. Each Note issued by the Company

shall be subordinated in right of payment to the payment of all Senior Debt (as

defined below) upon such terms and conditions as the holders of the Senior Debt

may determine, and each such Note shall contain subordination provisions which

are approved as to form and substance by all holders of the Senior Debt. For

these purposes "Senior Debt" means financing provided by one or more

institutional or private lenders to fund the Company's business operations. The

parties acknowledge that the Company's ability to make payments under

outstanding Notes may be limited from time to time by any such subordination

provisions, by provisions of applicable law and by provisions of the Articles.

If, as a result of these limitations, the Company is at any particular time able

to make payments under some but not all of its outstanding Notes, it shall

 

 

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allocate the payments which it is able to make among the Notes on a strict

"first issued, first paid" basis. Each Note issued by the Company shall provide

that no payments of principal or interest may be made thereon at any time that

the Company is in arrears in the payment of principal or interest on any Note

previously issued by the Company.

 

(f) CONSUMMATION OF SALE. Unless the parties involved mutually

agree otherwise, delivery to the Company and/or the purchasing Members of the

Affected Interest to be sold hereunder and payment of the purchase price

therefor shall take place at a closing (the "Closing") to be held at the

principal office of the Company within thirty (30) calendar days following the

termination of the last applicable option period. At the Closing, the

Transferring Interest Holder shall deliver to the Company and/or the purchasing

Members a bill of sale and assignment effecting the transfer of the Affected

Interest to be sold, in form and substance satisfactory to the Company and/or

the purchasing Members, and shall deliver, in addition, any other documents

reasonably requested by the Company and/or the purchasing Members to effectuate

the purposes of this Agreement.

 

ARTICLE IX

ACCOUNTING, RECORDS, REPORTING BY MEMBERS

 

9.1 BOOKS AND RECORDS. The books and records of the Company shall be

kept, and the financial position and the results of its operations recorded, in

accordance with the method selected by the Managers. The books and records of

the Company shall reflect all the Company transactions and shall be appropriate

and adequate for the Company's business. The Company shall maintain all of the

following at its principal office:

 

(a) a current list of the full name and last known business or

residence address of each Member and Economic Interest Holder set forth in

alphabetical order, together with the Capital Contributions, Capital Account,

Voting Interest and Economic Interest of each Member and Economic Interest

Holder;

 

(b) a current list of the full name and business or residence

address of each Manager;

 

(c) copies of the Certificate of Formation and all amendments

thereto, together with executed copies of any powers of attorney pursuant to

which the Certificate of Formation or any amendments thereto have been executed;

 

(d) copies of the Company's federal, state and local income tax or

information returns and reports, if any, for the six most recent taxable years;

 

(e) copies of this Agreement and any and all amendments thereto,

together with executed copies of any powers of attorney pursuant to which this

Agreement or any amendments thereto have been executed;

 

(f) copies of the financial statements of the Company, if any, for

the six most recent Fiscal Years;

 

 

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(g) the Company's books and records pertaining to the internal

affairs of the Company for at least the current and past four Fiscal Years; and

 

(h) copies of all written consents approving actions taken by the

Members without a meeting pursuant to Section 4.4.

 

9.2 REPORTS; ANNUAL STATEMENTS.

 

(a) GOVERNMENTAL REPORTS. The Managers shall cause to be filed all

documents and reports required to be filed with any governmental agency in

accordance with the Act.

 

(b) FINANCIAL REPORTS. The Managers shall cause to be sent to each

Member of the Company (a) not later than one hundred twenty (120) days after the

close of each Fiscal Year of the Company, the Company's unaudited financial

statements for that Fiscal Year, including a balance sheet as of the end of that

Fiscal Year and an income statement and statement of changes in financial

position for that Fiscal Year, accompanied by the report thereon of the

independent accountants engaged by the Company, and (b) within thirty (30) days

after the end of each of the first three (3) fiscal quarters of each Fiscal Year

of the Company, the Company's unaudited financial statements for such fiscal

quarter, including a balance sheet as of the end of that fiscal quarter and an

income statement and statement of changes in financial position for such fiscal

quarter.

 

(c) TAX REPORTS. The Managers shall cause to be prepared at least

annually, at Company expense, information necessary for the preparation of the

Members' and Economic Interest Holders' federal and state income tax returns.

The Managers shall send or cause to be sent to each Member and Economic Interest

Holder within ninety (90) days after the end of each taxable year such

information as is necessary to complete federal and state income tax or

information returns.

 

9.3 BANK ACCOUNTS; INVESTED FUNDS. All funds of the Company shall

be deposited in such account or accounts of the Company as may be determined by

the Managers and shall not be commingled with the funds of any other Person. All

withdrawals therefrom shall be made upon checks signed by such persons and in

such manner as the Managers may determine. Temporary surplus funds of the

Company may be invested in commercial paper, time deposits, short-term

government obligations or other investments determined by the Managers.

 

9.4 TAX MATTERS FOR THE COMPANY HANDLED BY TAX MATTERS PARTNER. The

Managers shall from time to time cause the Company to make such tax elections as

they deem to be in the best interests of the Company and the Members. The Tax

Matters Partner shall represent the Company (at the Company's expense) in

connection with all administrative and/or judicial proceedings by the Internal

Revenue Service or any government authority involving any return of the Company,

and may expend the Company's funds for professional services and costs

associated therewith. Without limiting the powers which the Tax Matters Partner

may exercise, the Tax Matters Partner shall have the authority to do any of the

following: (a) enter into a settlement agreement with the Internal Revenue

Service which binds the Members, (b) file a petition as contemplated in Section

6226(a) or 6228 of the Code, (c) intervene in any action as

 

 

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contemplated in Section 6226(b)(5) of the Code, (d) file any request

contemplated in Section 6227(b) of the Code, or (e) enter into an agreement

extending the period of limitations as contemplated in Section 6229(b)(1)(B)

of the Code.

 

9.5 ACCOUNTING MATTERS. All decisions as to accounting matters shall

be made by the Managers.

 

9.6 CONFIDENTIALITY. All books, records, financial statements, tax

returns, budgets, business plans and projections of the Company, all other

Confidential Information and all of the terms and provisions of this Agreement

shall be held in confidence by the Managers, the Members and the Economic

Interest Holders and their respective Affiliates, subject to any obligation to

comply with (a) any applicable law, (b) any rule or regulation of any legal

authority or securities exchange, or (c) any subpoena or other legal process to

make information available to the Persons entitled thereto. Such confidentiality

shall be maintained to the same degree as each Manager, Member or Economic

Interest Holder maintains its own confidential information and shall be

maintained until such time, if any, as any such confidential information either

is, or becomes, published or a matter of public knowledge. Without limiting the

generality of the foregoing, no Member, Economic Interest Holder or Manager

shall, at any time (both during the period such Person is a Member, Economic

Interest Holder or Manager and thereafter), cause, suffer or permit the

Confidential Information to be used for the gain or benefit of any party outside

of the Company or for such Person's personal gain or benefit outside the scope

of such Person's relationship with the Company.

 

ARTICLE X

DISSOLUTION AND WINDING UP

 

10.1 DISSOLUTION. The Company shall be dissolved, its assets disposed

of and its affairs wound up upon the first to occur of the following:

 

(a) the vote of the Managers and Members holding at least

seventy-five percent (75%) of all Voting Interests;

 

(b) the occurrence of a Membership Termination Event as to the last

and only remaining Member, if the Managers and that Member's

successor-in-interest fail to consent to the continuation of the Company in

accordance with Section 8.1 within ninety (90) days after the occurrence of that

event;

 

(c) the sale of all or substantially all of the assets of the

Company; or

 

(d) the occurrence of an event which makes it unlawful for the

business of the Company to be continued.

 

10.2 DATE OF DISSOLUTION. Dissolution of the Company shall be effective

on the day on which the event occurs giving rise to the dissolution, but the

Company shall not terminate until the assets of the Company have been liquidated

and distributed as provided herein. Notwithstanding the dissolution of the

Company, prior to the termination of the Company the

 

 

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business of the Company and the rights and obligations of the Members and

Economic Interest Holders, as such, shall continue to be governed by this

Agreement.

 

10.3 WINDING UP. Upon the occurrence of any event specified in Section

10.1, the Company shall continue solely for the purpose of winding up its

affairs in an orderly manner, liquidating its assets and satisfying the claims

of its creditors. The Managers shall be responsible for overseeing the winding

up and liquidation of the Company and shall cause the Company to (a) sell or

otherwise liquidate all of the Company's assets as promptly as practicable,

except to the extent the Managers determine to distribute any assets to the

Economic Interest Holders in kind, (b) allocate any Net Profits or Net Losses

resulting from such sales to the Economic Interest Holders' Capital Accounts in

accordance with this Agreement, (c) discharge or make reasonable provision for

all liabilities of the Company, including all liabilities to the Managers, the

Members and the Economic Interest Holders to the extent permitted by law (other

than liabilities for unpaid distributions to Economic Interest Holders and

former Economic Interest Holders under the Act), and all costs relating to the

dissolution, winding up, and liquidation and distribution of assets, (d)

establish such reserves as may be reasonably necessary to provide for contingent

liabilities of the Company (for purposes of determining the Capital Accounts of

the Economic Interest Holders, the amounts of such reserves shall be deemed to

be an expense of the Company), (e) discharge or make reasonable provision for

any remaining liabilities of the Company to the Economic Interest Holders, other

than on account of their interests in Company capital or profits, and to the

Managers, and (f) distribute the remaining assets to the Economic Interest

Holders in the manner specified in Section 10.4.

 

10.4 LIQUIDATING DISTRIBUTIONS TO ECONOMIC INTEREST HOLDERS. The

remaining assets of the Company shall promptly be distributed to the Economic

Interest Holders in accordance with Section 6.8, after taking into account

income and loss allocations for the Company's taxable year during which the

liquidation occurs.

 

10.5 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one or

more Economic Interest Holders shall first be valued at its Fair Market Value to

determine the Net Profit or Net Loss that would have resulted if that asset had

been sold for that value, the Net Profit or Net Loss shall then be allocated

pursuant to Article VI, and the Economic Interest Holders' Capital Accounts

shall be adjusted to reflect those allocations. The amount distributed and

charged to the Capital Account of each Economic Interest Holder receiving an

interest in the distributed asset shall be the Fair Market Value of the interest

(net of any liability secured by the asset that the Member assumes or takes

subject to). The Fair Market Value of that asset shall be determined by the

Managers.

 

10.6 PROVISION FOR DEBTS AND LIABILITIES. The payment of a debt or

liability, whether the whereabouts of the creditor is known or unknown, has been

adequately provided for if the payment has been provided for by either of the

following means:

 

(a) payment has been assumed or guaranteed in good faith by one or

more financially responsible Persons or by the United States government or any

agency thereof, and the provision, including the financial responsibility of the

Person, was determined in good faith and with reasonable care by the Managers to

be adequate at the time of any distribution of the assets pursuant to this

Section; or

 

 

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(b) the amount of the debt or liability has been deposited as

provided in Title 12, Section 1197 of the Delaware Code.

 

This Section 10.6 shall not prescribe the exclusive means of

making adequate provision for debts and liabilities.

 

10.7 NO LIABILITY. Notwithstanding anything to the contrary in this

Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g)

of the Treasury Regulations, if any Economic Interest Holder has a negative

deficit Capital Account balance (after giving effect to all contributions,

distributions, allocations and other Capital Account adjustments for all taxable

years, including the year during which such liquidation occurs), neither that

Economic Interest Holder nor the Managers shall have any obligation to make any

contribution to the capital of the Company, and the negative balance of that

Economic Interest Holder's Capital Account shall not be considered a debt owned

by that Economic Interest Holder or the Managers to the Company or to any other

person for any purpose whatsoever.

 

10.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise

specifically provided in this Agreement, each Economic Interest Holder shall be

entitled to look only to the assets of the Company for the return of that

Economic Interest Holder's positive Capital Account balance and shall have no

recourse for its Capital Contributions and/or share of Net Profits (upon

dissolution or otherwise) against the Managers or any other Economic Interest

Holder.

 

10.9 CERTIFICATE OF CANCELLATION. Upon completion of the winding up of

the Company's affairs, the Managers shall file a Certificate of Cancellation

with the Delaware Secretary of State.

 

10.10 COMPENSATION FOR SERVICES. The Managers shall be entitled to

reasonable compensation from the Company for their services in winding up the

affairs of the Company.

 

ARTICLE XI

LIMITATION OF LIABILITY; STANDARD OF CARE; INDEMNIFICATION

 

11.1 LIMITATION OF LIABILITY. The debts, obligations and liabilities of

the Company, whether arising in contract, tort or otherwise, shall be solely the

debts, obligations and liabilities of the Company, and no Member, Economic

Interest Holder, Manager or officer of the Company shall be obligated personally

for any such debt, obligation or liability of the Company solely by reason of

being a Member, Economic Interest Holder, Manager and/or officer.

 

11.2 STANDARD OF CARE. Neither the Managers nor any Member or officer

of the Company shall have any personal liability whatsoever to the Company or to

any Member, Economic Interest Holder or Affiliate of the Company or to any

Affiliate or constituent owner of any Member or Economic Interest Holder on

account of such Person's status as the Manager or as a Member or officer of the

Company or by reason of such Person's acts or omissions in connection with the

conduct of the business of the Company so long as such Person acts in good faith

for a purpose which the Person reasonably believes to be in, or not opposed to,

the best interests of the Company; provided, however, that nothing contained

herein shall protect any

 

 

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such Person against any liability to which such Person would otherwise be

subject by reason of (a) any act or omission of such Person that involves

actual fraud or willful misconduct or (b) any transaction from which such

Person derives any improper personal benefit.

 

11.3 INDEMNIFICATION. The Company shall indemnify and hold harmless any

Person made, or threatened to be made, a party to an action or proceeding,

whether civil, criminal or investigative (a "proceeding"), including an action

by or in the right of the Company, by reason of the fact that such Person was or