EFTA00805813.pdf

OPERATING AGREEMENT OF NAUTILUSX, LLC EFTA00805813  TABLE OF CONTENTS Preamble and Recitals Article I Definitions Article II Organization and Preliminary Provisions 9 Article III Membership 11 Article IV Capital Contributions 16 Article V Allocations and Elections 19 Article VI Distributions 21 Article VII Taxes 22 Article VIII Management 24 Article IX Transfer of Interests; Dissociation 27 Article X Dissolution 32 Article XI General Provisions 34 SCHEDULES Schedule 1 Members/Capital Contributions/Membership Interests EXHIBITS Exhibit A Joinder Agreement EFTA00805814  OPERATING AGREEMENT OF NAUTILUSX, LLC This OPERATING AGREEMENT (the "Agreement") is entered into and shall be effective on the day of , 2015, by and among NautilusX, LLC, a limited liability company organized under the laws of the State of New York with a principal place of business located at (the "Company"), and the undersigned Members (as defined below). The Company and the Members are sometimes referred to herein individually as a "Party" and collectively as the "Parties". RECITALS: WHEREAS, in exchange for the Capital Contributions set forth on Schedule I, the Company issued Units and Membership Interests to the undersigned Members such that each such Member holds the respective Units and Membership Interests set forth on Schedule I as of the date hereof; and WHEREAS, in connection with the foregoing, the Members and the Company now desire to adopt this Agreement as the Company's operating agreement in order to, among other things, set forth the respective rights, powers, preferences, limitations and responsibilities of the Parties, establish agreement among the Parties as to the internal affairs of the Company, and govern the conduct of the Company's business. NOW, THEREFORE, the Parties, intending to be legally bound, agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Act" means the New York Revised Uniform Limited Liability Company Act, and any successor statute, as it may be amended from time to time. "Additional Capital Contributions" has the meaning set forth in Section 4.2(a) of this Agreement. -I- EFTA00805815  "Affiliate" means, in relation to any entity, any other entity which: (i) directly or indirectly Controls, or is Controlled by, or is under common Control with, such entity, (ii) directly or indirectly beneficially owns or holds fifty percent (50%) or more of any class of voting stock, membership interests or other equity interests of such entity (iii) has fifty percent (50%) or more of any class of voting stock, membership interests, or other equity interests that is directly or indirectly beneficially owned or held by such entity, or (iv) either holds a general partnership interest in such entity or such entity holds a general partnership interest in the other entity. "Agreement" has the meaning set forth in the preamble hereto. "Capital Account" means, for each Member, the sum of (i) such Member's Capital Contributions, plus (ii) the Net Profits and other items of Company income and gain allocated to such Member pursuant to Article V plus (iii) any liabilities of the Company that are assumed by such Member (without duplication of the calculation of Gross Asset Value or other liabilities pursuant to subclause (vi) below), minus (iv) the aggregate amount of Distributions of cash made to such Member, minus (v) the Net Losses and other items of Company expense, loss and deduction allocated to such Member pursuant to Article V, minus (vi) the Gross Asset Value of the allocable share of Company assets distributed to such Member in-kind (as determined by the Manager in its reasonable good faith judgment and net of liabilities assumed by such Member and to which such property is subject), minus (vii) any liabilities of such Member assumed by the Company (without duplication of the calculation of Gross Asset Value or other liabilities pursuant to the definition of "Capital Contribution" below), and, plus or minus (viii) other adjustments in accordance with Treas. Reg. Section 1.704-1. All such Capital Contributions, allocations and Distributions shall be credited or charged, as the case may be, to the appropriate Capital Accounts of the respective Members to whom they apply at the time the Capital Contributions, allocations or Distributions are made. "Capital Contribution" means a contribution (including any initial Capital Contribution) by a Member to the capital of the Company in cash, property (determined based on the initial Gross Asset Value of the property) or services rendered, or by a promissory note or other obligation to contribute cash or property or to render services, net of any liabilities of such Member that the Company is considered to assume or take under Section 752 of the Code. The current Capital Contribution balance of each Member is set forth on Schedule 1 hereto. Any Additional Capital Contributions of the Members shall be set forth and recorded by the Manager in the books and records of the Company, including by amending Schedule 1 hereto from time to time to reflect any such Additional Capital Contributions. "Cash Flow" means, for any given Fiscal Year or other period, the amount, if any, by which (i) the sum, without duplication, of (A) the actual gross cash receipts of the Company during such period from whatever source derived (other than from a Liquidation Event) and (B) the amount of the reduction of any previously established Reserves described in clause (ii)(B) herein below that is larger than the amount of -2 - EFTA00805816 expenses paid from such Reserve, is greater than (ii) the sum, without duplication, of (A) all operating expenses (including, without limitation, taxes, insurance, and debt service) actually paid during such period and (B) such Reserves, if any, as the Manager determines are required for working capital, operating expenses and other capital expenditures of the Company; provided, however, that Cash Flow shall not be debited by expenses paid via Reserves set aside in prior years. "Certificate" means the Certificate of Formation of the Company filed with the Secretary of State of the State of New York, as the same may be amended from time to time. "Code" means the Internal Revenue Code of 1986, as amended, or any superseding federal tax statute. "Company" has the meaning set forth in the preamble of this Agreement. "Company Guarantor" has the meaning set forth in Section 3.12 of this Agreement. "Company Indebtedness" means any commercial loan or other indebtedness of the Company duly authorized and/or incurred in accordance with this Agreement. "Contributing Members" has the meaning set forth in Section 4.2(b) of this Agreement. "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 ownership of voting securities, voting and governance rights, through contract, or otherwise. "Controlling" and "Controlled by" shall have the respective correlative meanings thereto. "Covered Persons" has the meaning set forth in Section 3.15 of this Agreement. "Cram-Down Contribution" has the meaning set forth in Section 4.2(c) of this Agreement. "Default Amount" has the meaning set forth in Section 4.2(b) of this Agreement. "Default Loan" has the meaning set forth in Section 4.2(b) of this Agreement. "Default Rate" has the meaning set forth in Section 4.2(b) of this Agreement. "Dispute" has the meaning set forth in Section 11.9 of this Agreement. "Dissociating Member" means a Member who is the subject of an Event of Dissociation. -3- EFTA00805817  "Distribution" means any cash or property paid to a Member, in his or her capacity as a Member, by the Company from the operations or liquidation of the Company; provided, however, that none of the following shall be deemed or considered a Distribution: (i) any redemption or repurchase by the Company or any Member of any Units; (ii) any recapitalization or exchange of securities of the Company; (iii) any subdivision (by a split of Units or otherwise) or any combination (by a reverse split of Units or otherwise) of any outstanding Units; or (iv) any fees or remuneration paid to any Member in such Member's capacity as a manager, officer, employee, consultant, agent or other service provider for the Company or any of the Company's Affiliates (including any Guaranteed Payment). "Economic Interest" means a Member's share of the Net Profits and Net Losses of, and the right to receive Distributions from, the Company, in each case as provided by this Agreement. "Event of Dissociation" means, with respect to the subject Member, the occurrence of any one of the following: (i) in the case of a Member who is an individual, the death of such Member, the adjudication of the incompetency of such Member, or the total mental incapacitation of such Member for a continuous period of twelve (12) months or a total of twelve (12) months in any twenty-four (24) month period; (ii) in the case of a Member who is not an individual, the dissolution or winding-up (or its equivalent), or the termination or revocation of the charter or similar constituent document(s) of such Member; (iii) the filing or commencement under any provision of federal or state statute of voluntary or involuntary proceedings by or against a Member concerning bankruptcy, insolvency, reorganization, moratorium or similar relief; provided, however, that in the case of involuntary proceedings, an Event of Dissociation shall not be deemed to have occurred until ninety (90) days after such filing without the withdrawal or termination of the proceedings in the Member's favor; (iv) a Member's Membership Interest or any portion thereof becoming subject to sale, attachment or other enforcement proceedings in connection with (A) a judgment obtained against such Member or its Affiliates or (B) any other form of action or proceeding being concluded that would result in the sale or Transfer, either voluntarily or involuntarily, of the Membership Interest or a portion thereof; and (v) (A) a breach by a Member of the terms and conditions of Section 3.13, or (B) a Member's material breach of this Agreement after such -4- EFTA00805818  breaching Member has been given thirty (30) days' notice to cure by the Company and such Member fails to so cure within such time period, or, if such breach cannot reasonably be cured within such thirty (30) day period, such Member both fails to cure within such period and fails to diligently pursue such cure until accomplished; provided, that, at the election of a Majority, any breach of this Agreement contemplated by this clause (v) may be deemed to not constitute an "Event of Dissociation". "Fair Value" means the book value of the Company as of the close of business on the last day of the month in which the Event of Dissociation or Cram Down Contribution occurs, which shall be determined within sixty (60) days of the applicable Event of Dissociation or Cram Down Contribution. The book value of the Company shall be determined by the Company's regular certified public accountant and shall be made in accordance with GAAP, and on an accrual basis, but adjusted or determined in accordance with the following: (i) no allowance of any kind shall be made for goodwill, trade name or any similar intangible asset; (ii) all accounts payable shall be taken at the face amount, less discounts deductible therefrom, and all accounts receivable shall be taken at the face amount thereof, less discounts to customers and a reasonable reserve for bad debts; (iii) all machinery, fixtures and equipment shall be taken at the valuation appearing on the books of the Company; (iv) all unpaid and accrued taxes shall be deducted as liabilities. "Family Member" means any Person who, at the time of a Permitted Transfer, is the transferring Member's spouse or natural or adoptive lineal ancestor or descendent, or a trust for the exclusive benefit of such Member and/or such spouse and/or one or more of such ancestors and descendants. "Fiscal Year" for all bookkeeping, financial, accounting and tax matters and records of the Company, means the calendar year. "GAAP" means United States generally accepted accounting principles in effect from time to time. "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except (i) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset as determined by the Manager in his good faith and judgment, and (ii) the Gross Asset Value of any Company asset distributed to a Member shall be the gross fair market -5- EFTA00805819 value of such asset on the date of distribution as determined by the Manager in his good faith and judgment. "Guaranteed Payment" means any priority Distribution that qualifies as a guaranteed payment under Section 707(c) of the Code made to a Member in consideration of such Member's services to the Company or the use of such Member's capital. "Indemnified Party" has the meaning set forth in Section 11.14(a) of this Agreement . "Legal Representative" means any Person who succeeds to such Member's estate as a result of such Member's death, legal incompetence, or for any other reason, or who otherwise represents the interests of a Member. "Liquidation Event" means: (i) the sale, lease, exclusive license or other similar disposition of all or substantially all of the assets of the Company, in one transaction or a series of transactions; (ii) the sale or other Transfer of the Units or merger, consolidation, share exchange, business combination or recapitalization, in one transaction or a series of transactions, that results in the Member(s) that own a majority of the Company's outstanding Units as of any given date owning less than a majority of the Company's outstanding Units or of the outstanding equity interests in the surviving or acquiring entity, as applicable; or (iii) any other transaction or series of transactions having a substantially similar effect to those described in clauses (i) or (ii) hereof. "Liquidator" has the meaning set forth in Section 10.2(a) of this Agreement. "Majority" means, with respect to Members, Membership Interests and Units, and unless otherwise indicated, Members holding, in the aggregate, more than fifty (50%) percent of the Membership Units then owned by all Members. "Manager" has the meaning set forth in Section 8.1 of this Agreement. "Member" means each Person listed from time to time on Schedule 1 of this Agreement, and any transferee of a Member who is admitted to the Company as a Member in accordance with Section 3.2 and Article IX of this Agreement. "Membership Addendum Agreement" has the meaning set forth in Section 3.16 of this Agreement. "Membership Interest" means a Member's aggregate rights in the Company, including, without limitation, a Member's Economic Interest and right to vote its Membership Interest, in each case to the extent provided for herein. The current Membership Interest of each Member is set forth on Schedule I, which may be amended from time to time by the Manager to reflect current Membership Interests. -6- EFTA00805820  "Minimum Gain" means the aggregate of the amount of income, if any, with respect to each nonrecourse liability of the Company, that would be realized by the Company if it disposed of (in a taxable transaction) property subject to liability in full satisfaction thereof, determined pursuant to Treasury Regulations § 1.704-2(d). "Net Asset Management Fees" means the Company's total fee revenue derived from asset management in the prior calendar year less the cost of asset management fees charged to the Company in the prior calendar year. "Net Losses" means the losses of the Company, if any, determined in accordance with Section 703(a) of the Code under the method of accounting adopted by the Company, and as reported separately or in the aggregate, as appropriate, on the Company's income tax return filed for federal income tax purposes. "Net Profits" means the income of the Company, if any, determined in accordance with Section 703(a) of the Code under the method of accounting adopted by the Company, and as reported separately or in the aggregate, as appropriate, on the Company's income tax return filed for federal income tax purposes. "Non-Contributing Member" has the meaning set forth in Section 4.2(b) of this Agreement. "Offer Period" has the meaning set forth in Section 9.4 of this Agreement. "Offered Units" has the meaning set forth in Section 9.4 of this Agreement. "Offering Member" has the meaning set forth in Section 9.4 of this Agreement. "Offering Notice" has the meaning set forth in Section 9.4 of this Agreement. "Party" or "Parties" has the meaning set forth in the preamble of this Agreement. "Payment Method" means payment of the Purchase Price, as defined below, as follows: (i) The payment of cash or its equivalent in an amount equal to ten (10%) percent of the Purchase Price (the "Down Payment"), within thirty (30) days of the determination of such Purchase Price; and (ii) The delivery of an unsecured promissory note (the "Note") of the Company, within thirty (30) days of the later of the determination of Fair Value and the Purchase Price, in the principal amount of the Purchase Price less the Down Payment, and payable in twenty (20) equal consecutive quarterly installments of principal and accrued interest (each, an "Installment"), -7- EFTA00805821  commencing on the first day of the first calendar quarter after delivery of the Note. Notwithstanding the foregoing, the amount of principal and accrued interest paid in each Installment shall be limited to the product of (x) Cash Flow for the calendar quarter immediately preceding such quarterly installment, multiplied by (y) the Dissociating Member's Membership Interest percentage at the time of the relevant Event of Dissociation (the "Cash Flow Percentage") and any such deficit in the payment of an Installment shall be made up in subsequent quarters from Cash Flow Percentages that exceed the standard Installment amount, if any, and any deficit remaining thereafter shall extend the term of the Note. (iii) The Note shall contain the following terms: (A) interest shall accrue on all unpaid principal at one percent (1%) above the Wall Street Journal prime rate at the time of the relevant Event of Dissociation• provided, however, that in no event shall the interest rate exceed five percent (5%) per annum; (B) the Note may be prepaid in whole or in part by the maker at any time without penalty or premium; and (C) the Note shall become due and payable in full immediately upon the occurrence of a Liquidation Event. "Permitted Transfer" means (i) any Transfer by a Member to any other Person with the prior written consent of the majority of the Members. "Person" means any individual, corporation, governmental authority, limited liability company, partnership, joint venture, trust, unincorporated association, or other entity or any agency or instrumentality of any entity. "Proportionate Share" has the meaning set forth in Section 3.12 of this Agreement. "Purchase Price" means the product of a Dissociating Member's Membership Interest multiplied by the Fair Value of the Company. "Regulatory Allocations" has the meaning set forth in Section 5.7 of this Agreement. "Remaining Members" means all of the Members at the time of a Transfer, or proposed Transfer, and/or an Event of Dissociation, other than the Member who is the subject of the applicable Transfer and/or Event of Dissociation. -8- EFTA00805822  "Reserve" means a segregated amount of funds set aside by the Company in a given period for future operating expenses and/or capital expenditures. "ROFO Party" has the meaning set forth in Section 9.4 of this Agreement. "Tax Distribution" has the meaning set forth in Section 6.1 of this Agreement. "Third Party" has the meaning set forth in Section 9.8(4 of this Agreement. "Transfer" means, as a noun, any voluntary or involuntary sale, assignment, gift, pledge, hypothecation, encumbrance, exchange or other disposition of or transfer to another of any Membership Interest, Economic Interest or other portion of a Membership Interest, and, as a verb, to voluntarily or involuntarily sell, assign, gift, pledge, hypothecate, encumber, exchange or otherwise dispose of or transfer the same to another. 'Treasury Regulations" means all temporary and final regulations promulgated under the Code that from time to time are in effect. "Unit" shall mean a unit representing a fractional part of a Member's Membership Interest, with a single percentage point corresponding to a single Unit. Each Member's Units are set forth on Schedule I and shall be expressed on Member certificates in accordance with Section 3.4 of this Agreement. ARTICLE II ORGANIZATION AND PRELIMINARY PROVISIONS 2.1 Effective Date. This Agreement shall be effective on the date first set forth above. 2.2 Name. The name of the Company is NautilusX, LLC. All business of the Company shall be conducted in either such name or any properly registered assumed name selected by a Majority, and the Company shall hold all of its property in the name of the Company and/or its assumed name and not in the name or names of any Member or the Manager. 2.3 Principal Place of Business. The principal place of business of the Company within the State of New York shall be New York . The Company may establish any other places of business as a Majority may from time to time deem advisable. 2.4 Term. The term of the Company commenced on the date the Certificate was filed with the Secretary of State of the State of New York, and the Company shall continue in existence indefinitely unless otherwise dissolved in accordance with Article X hereof. -9- EFTA00805823  2.5 Purposes and Powers. The Company has been formed as a publishing firm. The Company shall have all lawful powers necessary or useful to accomplish such purpose and may engage in any lawful act or activity under the Act consistent with the purpose of the Company. Notwithstanding the foregoing, the Company shall have the authority to engage in any other lawful purpose or purposes permitted by the Act or the laws of any jurisdiction in which the Company may do business to the extent approved by a Majority. In addition, the Company shall have the power to establish and maintain, and shall establish and maintain, appropriate bank and other accounts for all purposes related to the Company, including, but not limited to, the collection of any distributions, dividends, accounts receivable and all other items of revenue and income accruing to the Company. Subject to the rights of the Members pursuant to Section 3.7, the Manager shall have sole access to such accounts and all funds that may, from time to time, exist in such accounts shall be considered property of the Company. 2.6 Company Status as a Separate Entity. The Company shall be an entity separate and independent from the Members and the Manager. The Members and the Manager shall take every reasonable measure to ensure the following: (a) To the extent reasonably practicable, the Company shall be specifically identified in all writings containing its name, including, without limitation, Company invoices, correspondence and checks; (b) The Company's financial accounts shall be completely separate from those of the Members and the Manager; (c) There shall be no co-mingling of funds of the Company, the Members and/or the Manager, which shall include a prohibition on (i) the Members or the Manager using any Company funds for their personal purposes, and (ii) the Company using personal funds of the Members or the Manager for its business purposes; (d) Neither the Members nor the Manager shall represent or imply to any Person that the Members or the Manager are personally liable for any obligation of the Company; and (e) The failure of the Members and/or the Manager to take all or any particular measures enumerated under this Section 2.6 shall not be construed or deemed to imply that the Company is not, in fact, an entity wholly separate and independent from the Members and the Manager. 2.7 Method of Accounting. In computing its taxable income, the Company shall use the cash basis method. 2.8 Registered Agent for Service of Process. The registered agent for the Company shall initially be Colby Attorney Services Co., Inc., having a registered address of III Washington Avenue, Suite 703, Albany, New York 12210. The registered agent for the -10- EFTA00805824 Company may be changed and designated by the Manager, from time to time, in his sole discretion. ARTICLE III MEMBERSHIP 3.1 Current Members. The members of the Company are the Members whose names and addresses are as set forth on Schedule 1 to this Agreement as of the date hereof. 3.2 Admission of Additional Members. An additional Person or Persons may be admitted as a Member, after the date of this Agreement, only by both (a) acquiring Units in the Company pursuant to and in compliance with Article IX or pursuant to a Company issuance of new Units in the Company following the date hereof, and (b) obtaining approval of admission as a Member via affirmative vote of the Majority. In addition, such Person or Persons, as a condition of such admission, must agree in writing to be bound by this Agreement and any amendments hereto by executing a Joinder Agreement in substantially the form of Exhibit A attached hereto. 3.3 Classes of Members; Voting Rights. The Company shall establish and maintain one class of Members: Each Member shall be entitled to vote on all matters with respect to which Members are entitled to vote under this Agreement, based on the total Units owned by such Member. 3.4 Certificates. Membership Interests of the Members shall be evidenced by certificates issued by the Company. Membership Interests shall be expressed in Units on such certificates. The following legend shall be placed upon any membership certificate, or any other document or instrument evidencing ownership of Membership Interests: THE INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS AS TO ITS SALE, TRANSFER, HYPOTHECATION, ASSIGNMENT OR OTHER DISPOSITION AS SET FORTH IN THE OPERATING AGREEMENT OF NAUTILUSX, LLC AND ANY PURPORTED TRANSFER OR DISPOSITION OF SUCH INTEREST IN VIOLATION OF SUCH RESTRICTIONS SHALL BE VOID. THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE UNITS MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION THEREFROM, AND THE COMPANY RECEIVES AN EFTA00805825  OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS LEGAL COUNSEL THAT SUCH SALE, PLEDGE, ASSIGNMENT OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 33 Limitation of Liability. No Member shall be liable or personally obligated to any third party for any debts, obligations or liabilities of the Company, whether arising in tort, contract or otherwise, solely by reason of being a Member. The Members shall only be liable for their conduct other than as Members as provided by law. 3.6 Meetings. All Members may participate in meetings by means of conference telephone or other similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. (a) Annual Meeting. An annual meeting of the Members may be held each year at the option of and at a time and in a place determined by a Majority. (b) Special Meetings. A meeting of the Members for any purpose or purposes may be called at any time upon the written request of the Manager or a Majority. Such notice shall state the purpose for which such meeting is to be called. (c) Notice of Meeting. Written notice stating the place, day and hour of a meeting, and indicating that it is being issued by or at the direction of the Person or Persons calling the meeting and stating the purpose or purposes for which the meeting is called, shall be delivered no fewer than ten (10) nor more than thirty (30) days before the date of the meeting. (d) Record Date. For the purpose of determining the Members entitled to notice of or to vote at a meeting or any adjournment of such meeting, the Members entitled to receive payment of any Distribution and any other determination of Members for any other purpose, the date on which notice of a meeting is mailed or the date on which the resolution declaring Distribution is adopted, as the case may be, shall be the record date for making such a determination. When a determination of Members entitled to vote at any meeting of Members has been made pursuant to this Section 3.6(d), the determination shall apply to any adjournment of the meeting. (e) Ouorum. Members holding not less than a majority of all Units entitled to vote at a meeting, represented in person or by proxy, shall constitute a quorum at any meeting of Members. In the absence of a quorum at any meeting of Members, a majority of the Units so represented may adjourn the meeting from time to time for a period not to exceed sixty (60) days without a requirement of further notice. However, if the adjournment is for more than sixty (60) days, or if after the adjournment a record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at such meeting. At an adjourned meeting at which a quorum shall be present or represented, any business may be - 12 - EFTA00805826 transacted that might have been transacted at the meeting as originally noticed. The Members present at a meeting may continue to transact business until adjournment, notwithstanding the withdrawal during the meeting of Members whose absence results in less than a quorum being present. (0 Manner of Acting. If a quorum is present at any meeting, the vote or written consent of Members holding not less than a majority of the Units entitled to vote at such meeting shall be the act of the Members, unless the vote of a greater or lesser proportion or number is otherwise required by the Act, the Certificate or this Agreement. (g) Action by Members Without a Meeting. Whenever the Members of the Company are required, or permitted, to take any action by vote, such action may be taken without a meeting, without prior notice and without a vote, if a written consent or consents in writing, setting forth the action so taken, shall be signed by Members entitled to vote therein having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the Members entitled to vote therein were present and voted. Such written consent and/or consents shall be delivered to the office of the Company at its principal place of business with attention to the Manager. Prompt notice of the taking of the action without a meeting by less than unanimous written consent of all Members (including the Class B Members) shall be given to each Member who has not consented in writing. (h) Waiver of Notice. Notice of a meeting need not be given to any Member who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any Member at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by such Member. (i) Proxies. A Member may vote in person or by proxy executed in writing by such Member or a duly authorized attorney-in-fact. Every proxy must be signed by the Member or such attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at any time by the Member executing it, and the authority of the holder of a proxy to act shall be revoked by the incompetence or death of the Member who executed the proxy. 0) Voting Agreement. An agreement between two or more Members, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the Membership Interests held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. 3.7 Information. Each Member may inspect, during ordinary business hours and at the principal place of business of the Company, the addresses and capital contributions of all Members, the Certificate, this Agreement, the minutes of any meeting of the Members, records reflecting material Company actions by the Manager and any tax returns of the Company for the immediately preceding three (3) Fiscal Years. Members may also inspect any other information regarding the affairs of the Company as is just and reasonable, or as is required to be disclosed to - 13 - EFTA00805827 them by law. In the event a vote or the consent of Units is required under this Agreement, such vote shall be taken and tallied by the Manager, and the results thereof, without the disclosure of names or other identifying information, shall be certified by the Manager and furnished to all Members. 3.8 Sale of All Assets; Annual Budgets. (a) The Members shall have the exclusive right, by the vote or written consent of a Majority, to approve the sale, lease, exchange, or other disposition of all or substantially all of the assets of the Company, or its merger or consolidation with another entity. (b) The Members shall also have the exclusive right, by the vote or written consent of a Majority, to request and then approve, adopt, disapprove, reject, modify or revise any annual budget of the Company, as such annual budget has been presented to the Members by the Manager. Any such annual budget of the Company so approved or adopted (or revised or modified and thereafter approved or adopted) by the Members shall be deemed the annual budget of the Company binding upon the Company for such given year. 3.9 Priority and Return of Capital. No Member shall have priority over any other Member, whether for the return of a Capital Contribution or for Net Profits, Net Losses, or a Distribution• provided, that this Section 3.9 shall not apply to loans or other indebtedness (as distinguished from a Capital Contribution) made by a Member to the Company. 3.10 Liability of a Member to the Company. A Member who or which rightfully receives the return of any portion of a Capital Contribution is liable to the Company only to the extent provided in this Agreement or now or hereafter provided by the Act. A Member who or which receives a Distribution made by the Company in violation of this Agreement or made when the Company's liabilities exceed its assets (after giving effect to such Distribution) shall be liable to the Company for the amount by which such Distribution exceeds the excess of the Company's liabilities over its assets. 3.11 Financial Adjustments. No Members admitted after the date of this Agreement shall be entitled to any retroactive allocation of losses, income or expense deductions incurred by the Company. The Members may, in their discretion, at the time an additional Member is admitted, close the books and records of the Company (as though the Fiscal Year had ended) or make pro rata allocations of loss, income and expense deductions to such additional Member for that portion of the Fiscal Year in which such additional Member was admitted in accordance with the Code. 3.12 Cross-Indemnity. To the fullest extent permitted by law, each Member shall indemnify and hold harmless any Company Guarantor (as defined below) against and with respect to the applicable indemnifying Member's Proportionate Share of any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses, and any amounts expended in settlement of any claims to which such Company Guarantor may become subject by reason of (a) having entered into a guarantee (whether of - 14- EFTA00805828 payment or performance) for the benefit of the Company and (b) said guarantee having been enforced against the Company Guarantor as a consequence of actions or omissions of the Company; provided, that the indemnifying Member shall have no obligation to reimburse, indemnify or hold harmless the Company Guarantor if the indemnifying Member is already responsible for or otherwise making payment with regard to its Proportionate Share of losses, claims, damages, judgment and fines resulting from such Company action or omission. "Company Guarantor" means any Member or member, shareholder, or Affiliate of a Member which has entered into a guarantee (whether of payment or performance) for the benefit of the Company. "Proportionate Share" means that number, expressed as a percentage, that is the quotient of each applicable Member's Membership Interest, divided by the aggregate Membership Interests held by all Members. 3.13 Guarantees. With respect to any commercial loan taken by the Company, at the request of the Company and upon the approval of a Majority, each Member agrees to use reasonable best efforts to personally guarantee such loan, where such guarantees are reasonably required by the lender as a condition to the making of such commercial loan. 3.14 Spousal Consent. In order to protect the interests of the Members under this Agreement, as soon as practicable following the execution of this Agreement, each Member who is an individual and married shall deliver to the Company the written consent of such Member's spouse, substantially in the form attached hereto as Exhibit B. This requirement shall apply to the marriage of a Member subsequent to the effective date hereof, in which case such spousal consent shall be executed and furnished to the Company as soon after such marriage as is practicable. 3.15 Fiduciary Duties. This Agreement is not intended to, and does not, create or impose any fiduciary duty on the Manager, any Member or any Affiliate, director, officer, agent or employee of a Member or the Company (collectively, the "Covered Persons"), other than an implied duty of good faith. The Members and the Company hereby waive any and all other fiduciary duties that, absent such waiver, may be implied by law, and in doing so, acknowledge and agree that the duties and obligation of each Covered Person to each other and to the Company are only as expressly set forth in this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Members and the Company to replace such other duties and liabilities of such Covered Person. The Members and the Company further agree that such duties and liabilities imposed by this Agreement are manifestly reasonable replacements of such fiduciary duties. - 15 - EFTA00805829  ARTICLE IV CAPITAL CONTRIBUTIONS 4.1 Current Capital Contributions. As of the date of the full execution of this Agreement, the Members have contributed the amount of cash, property and/or services identified in Schedule 1 to this Agreement. The current Capital Contribution made by each Member is the sole and entire consideration for the current Membership Interests in the Company. 4.2 Capital Calls. (a) In addition to the initial Capital Contributions of the Members, the Members shall make additional Capital Contributions, in proportion to their respective Membership Interests, as determined by a vote of a Majority and as from time to time reasonably necessary to pay any operating, capital or other expenses relating to the business of the Company (such additional Capital Contributions, the "Additional Capital Contributions"). Upon request of Members representing at least a Majority, the Company shall deliver to the Members a written notice of the Company's need for the Additional Capital Contributions, which notice shall specify in reasonable detail (i) the purpose for such Additional Capital Contributions, (ii) the aggregate amount of such Additional Capital Contributions, (iii) each Member's share of such aggregate amount of Additional Capital Contributions based upon each such Member's Membership Interest, and (iv) the date (which date shall not be less than ten (10) Business Days from the date that such notice is given) on which such Additional Capital Contributions shall be required to be made by the Members. (b) If any Member shall fail to timely make, or notifies the other Members that it shall not or cannot make, all or any portion of any Additional Capital Contribution which such Member is obligated to make under Section 4.2(0, then such Member shall be deemed to be a "Non-Contributing Member". The non-defaulting Members (the "Contributing Members") shall be entitled, but not obligated, to loan to the Non-Contributing Member, by contributing to the Company on his or its behalf, all or any part of the amount (the "Default Amount") that the Non-Contributing Member failed to contribute to the Company (each such loan, a "Default Loan"); provided, that such Contributing Members shall have contributed to the Company their own pro rata share of the applicable Additional Capital Contribution; provided, further, that if more than one Contributing Member elects to provide the Default Loan such that the aggregate proffered Default Loan is greater than the amount the Non-Contributing Member failed to contribute, the amount of the Default Loan shall be apportioned based on the proportion each Contributing Member's proffered Default Loan bears to the entire proffered Default Loans of all Contributing Members. Each Default Loan shall bear interest (compounded monthly on the first day of each calendar month) on the unpaid principal amount thereof from time to time from the date advanced until repaid, at the lesser of (i) the prime rate for commercial loans plus five percent (5%) per annum or (ii) the maximum rate permitted at law (the "Default Rate"). Each Default Loan shall be recourse solely to the Non-Contributing Member's Membership Interest. Default Loans shall be repaid out of the distributions that would otherwise be made to the Non- Contributing Member under Article VI or Article X, as more fully provided for in Section 4.2(d). -16- EFTA00805830 So long as a Default Loan is outstanding, the Non-Contributing Member shall have the right to repay the Default Loan (and interest then due and owing) in whole or in part. Upon the repayment in full of all Default Loans (but not upon their conversion as provided in Section 4.2(c)) made in respect of a Non-Contributing Member (and so long as the Non-Contributing Member is not otherwise a Non-Contributing Member), such Non-Contributing Member shall cease to be a Non-Contributing Member. (c) At any time after the date twelve (12) months after a Default Loan is made, at the option of the Contributing Members holding a majority of the Default Loan, (i) such Default Loan shall be converted into an Additional Capital Contribution of the Contributing Members in an amount equal to the principal and unpaid interest on such Default Loan as applicable to each Contributing Member pursuant to this Section 4.2(c), (ii) the Non- Contributing Member shall be deemed to have received a distribution, pursuant to Article VI, of an amount equal to the principal and unpaid interest on such Default Loan, (iii) the applicable amount of such distribution shall be deemed paid to each Contributing Member in repayment of the Default Loan, (iv) such amount shall be deemed contributed by each Contributing Member as an Additional Capital Contribution (a "Cram-Down Contribution"), and (v) the Contributing Members' Capital Accounts shall be increased by, and the Non-Contributing Member's Capital Account shall be decreased by, an amount equal to the pri