LIMITED LIABILITY COMPANY AGREEMENT
OF
SOLIANCE NETWORKS, LLC
Dated as of August 25, 1999
THIS LIMITED LIABILITY COMPANY AGREEMENT of SOLIANCE NETWORKS, LLC a
Delaware limited liability company (the "Company"), is made and effective as of
August 25, 1999, among Sempra Energy Information Solutions, a California
corporation ("SEIS"), Modis, Inc., a Florida corporation ("Modis"), and
Xxxxxxx.xxx, a Delaware corporation, ("Cayenta") (SEIS, Modis and Cayenta are
collectively referred to herein as the "Members").
WHEREAS, the Members desire to form the Company under the Delaware
Act for the purposes and upon the terms and conditions set forth herein;
WHEREAS, the Members desire that the Company be their vehicle for
the provision of certain products and services supporting underlying business
processes to be marketed to organizations within the energy, water, and utility
industries on the terms and conditions set forth herein; and
WHEREAS, Modis, SEIS and Cayenta have agreed to provide certain
necessary services to the Company pursuant to the Management Service Agreements.
NOW, THEREFORE, in consideration of the agreements and obligations
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINED TERMS
SECTION 1.01 Definitions. Each of the following terms shall have the
meaning provided in the Section or Schedule set forth opposite such term:
Term Section
---- -------
Adjusted Capital Account Schedule 1.01
Adjusted Capital Account Deficit Schedule 1.01
Affiliate Schedule 1.01
Agreement Schedule 1.01
Appraiser 11.02
Asset Value Schedule 1.01
Auditors 9.01
Bankruptcy Schedule 1.01
Business Day Schedule 1.01
Capital Account Schedule 1.01
Capital Contribution Schedule 1.01
Cayenta Preamble
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Cayenta Dedicated Assets 4.02
Cayenta Initial Membership Units 5.02
Cayenta Representatives 6.03
Certificate Schedule 1.01
Chairman 6.03
Code Schedule 1.01
Company Preamble
Company Business Schedule 1.01
Company Minimum Gain Schedule 1.01
Conversion 16.01
Conversion Date 16.01
Corporation 16.01
Covered Person Schedule 1.01
Customer Contract Schedule 1.01
Debt Schedule 1.01
Dedicated Assets Schedule 1.01
Delaware Act Schedule 1.01
Delinquent Member 4.04
Depreciation Schedule 1.01
Existing Programs 14.01
Fair Market Value 11.02
Fiscal Year Schedule 1.01
Former Member 11.02
GAAP Schedule 1.01
Information 14.04
Interest Rate Schedule 1.01
License Agreement 4.02
Liens Schedule 1.01
Liquidating Trustee 11.03
Majority Vote Schedule 1.01
Management Services Agreement 4.02
Managing Members Schedule 1.01
Marketable Securities Schedule 1.01
Member Schedule 1.01
Member Nonrecourse Debt Schedule 1.01
Member Nonrecourse Debt Minimum Gain Schedule 1.01
Member Nonrecourse Deductions Schedule 1.01
Members Preamble
Members Committee 6.03
Membership Unit Schedule 1.01
Modis Preamble
Modis Dedicated Assets 4.02
Modis Initial Membership Units 5.02
Modis Representatives 6.03
Net Distributable Cash Schedule 1.01
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Non-Delinquent Members 4.04
Nonrecourse Deductions Schedule 1.01
Nonrecourse Liability Schedule 1.01
Officers 6.11
Person Schedule 1.01
President 6.11
Products Schedule 1.01
Property Schedule 1.01
Regulations Schedule 1.01
Regulatory Allocations 7.03
Related Agreements Schedule 1.01
Representatives 6.02
SEIS Preamble
SEIS Dedicated Assets 4.02
SEIS Initial Membership Unit 5.02
SEIS Representatives 6.03
Services Agreement Schedule 1.01
Subsidiary or Subsidiaries Schedule 1.01
Transfer Schedule 1.01
Transferee Schedule 1.01
Unanimous Vote Schedule 1.01
Unrecovered Capital 16.01
ARTICLE II
FORMATION AND TERM
SECTION 2.01 Formation.
(a) The parties hereto hereby form and confirm the formation of the
Company as a limited liability company under and pursuant to the provisions of
the Delaware Act and all other pertinent laws of the State of Delaware for the
purposes and upon the terms and conditions hereinafter set forth. The parties
hereto agree that the rights, duties and liabilities of the initial Members and
any additional Member admitted to the Company in accordance with the terms
hereof shall be as provided in the Delaware Act, except as otherwise provided
herein.
(b) The name and mailing address of each Member shall be listed on
Schedule 2.01 attached hereto. Each of SEIS, Modis and Cayenta is hereby
admitted as a Member of the Company. Additional Members shall be admitted as
Members of the Company in accordance with Article X. The Chief Executive
Officer, or a designee of the Chief Executive Officer, shall be required to
update Schedule 2.01 from time to time, as necessary to reflect accurately the
information herein as known by the Chief Executive Officer, but no such update
shall modify Schedule 2.01 in any manner inconsistent with this Agreement or the
Delaware Act. Any amendment or revision to Schedule 2.01 made in accordance with
this Agreement shall not be deemed an amendment to this Agreement for purposes
of Section 17.12. Any reference in this
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Agreement to Schedule 2.01 shall be deemed to be a reference to Schedule 2.01,
as amended and in effect from time to time.
(c) The President, or a designee of the Chief Executive Officer, is
hereby designated as an authorized person, within the meaning of the Delaware
Act, to execute, deliver and file, or to cause the execution, delivery and
filing of, any amendments or restatements of the Certificate and any other
certificates, notices, statements or other instruments (and any amendments or
restatements thereof) necessary or advisable for the formation of the Company or
the operation of the Company in all jurisdictions where the Company may elect to
do business, but no such amendment, restatement or other instrument may be
executed, delivered or filed unless adopted in a manner authorized by this
Agreement.
SECTION 2.02 Name. The name of the Company is Soliance Networks. The
business of the Company may not be conducted under any other name unless all the
parties hereto expressly agree in writing.
SECTION 2.03 Term. The term of the Company shall commence, and the
Certificate shall be filed in the office of the Secretary of State of the State
of Delaware, on the date hereof and shall continue for a term as set forth in
the Certificate of Formation, subject to the provisions set forth in Article XI
and applicable law. The existence of the Company as a separate legal entity
shall continue until cancellation of the Certificate in the manner required by
the Delaware Act or this Agreement.
SECTION 2.04 Principal Place of Business. The principal place of
business of the Company shall be SEIS's principal place of business, whether in
California or otherwise, or such other place as the Members Committee may
determine from time to time, and the Company shall have other regional offices
and operations as the Members Committee may determine from time to time.
SECTION 2.05 Title to Company Property. All property of the Company,
whether real, personal or mixed, tangible or intangible, shall be deemed to be
owned by the Company as an entity, and no Member, individually, shall have any
direct ownership interest in such property. At no time will the Company own or
include in Company Property, the SEIS Dedicated Assets, the Modis Dedicated
Assets or the Cayenta Dedicated Assets.
SECTION 2.06 Agent for Service of Process. The Company's registered
agent for service of process in the State of Delaware shall be as set forth in
the Certificate, as the same may be amended by the Members Committee from time
to time.
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ARTICLE III
PURPOSE AND POWER OF THE COMPANY
SECTION 3.01 Purpose. The purpose of the Company is to engage in (a)
the Company Business and (b) any and all lawful activities in accordance with
the Delaware Act which the Members Committee deems necessary or advisable in
connection with the Company Business.
SECTION 3.02 Powers of the Company. Subject to the limitations set
forth in this Agreement, the Company will possess and may exercise all of the
powers and privileges granted to it by the Delaware Act, by any other law or
this Agreement, together with all powers incidental thereto, so far as such
powers are necessary or convenient to the conduct, promotion or attainment of
the purpose of the Company set forth in Section 3.01.
SECTION 3.03 Maintenance of Separate Existence. The Company shall do
all things necessary to maintain its limited liability company existence
separate and apart from each Member and any Affiliate of any Member, including
holding regular meetings of the Members and maintaining its books and records on
a current basis separate from that of any Affiliate of the Company or any other
Person, and shall not commingle the Company's assets with those of any Affiliate
of the Company or any other Person. In furtherance, and not in limitation, of
the foregoing, the Company shall not:
(a) Authorize or permit any Person, other than the Chief Executive
Officer, to act on its own behalf with respect to matters (other than matters
customarily delegated to others under powers of attorney) for which a limited
liability company's members or managing member would customarily be responsible;
(b) Fail (i) to maintain, or cause to be maintained by an agent
under the Company's control, physical possession of all its books and records,
(ii) to maintain capitalization adequate for the conduct of its business, (iii)
to account for and manage all of its liabilities separately from those of any
other Person, including payment by it of administrative expenses and taxes,
other than income taxes, from its own assets, or (iv) to the extent practicable,
to identify or cause to be identified, on its books and records or otherwise,
separately all of its assets from those of any other Person;
(c) Except as contemplated by the preceding clause (b) or Section
4.03, commingle or permit the commingling of its funds with the funds of any
Member or any Affiliate of any Member or use its funds for other than the
Company Business; or
(d) Except as contemplated by Section 4.03, maintain or permit the
maintenance of joint bank accounts or other depository accounts to which any
Member would have independent access.
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ARTICLE IV
CAPITAL CONTRIBUTIONS, RELATED
AGREEMENTS, DEDICATION OF ASSETS,
CAPITAL ACCOUNTS AND ADVANCES
SECTION 4.01 Capital Contributions.
(a) SEIS. In exchange for the SEIS Initial Membership Units, SEIS
hereby agrees to make a Capital Contribution of $4,000,000 as provided in
Section 4.01(d) below.
(b) Modis. In exchange for the Modis Initial Membership Units, Modis
hereby agrees to make a Capital Contribution of $5,000,000 as provided in
Section 4.01(d) below.
(c) Cayenta. In exchange for the Cayenta Initial Membership Units,
Cayenta hereby agrees to make a Capital Contribution of $5,000,000 as provided
in Section 4.01(d) below.
(d) Initial Capital Contributions. SEIS, Modis and Cayenta shall
make their respective Initial Capital Contribution on or before October 1, 1999
after receiving appropriate wire instructions from the Company.
SECTION 4.02 Related Agreements: Dedication of Assets.
(a) SEIS. SEIS hereby agrees:
(i) to enter into (A) a Management Services Agreement with the
Company for Energy Commodity Products dated and effective as of the date hereof
in form and substance satisfactory to the Members ( "Management Services
Agreement") and (B) an intellectual property license agreement with the Company
effective as of the date hereof in form and substance satisfactory to the
Members ("License Agreement"), and
(ii) to make available to the Company on a non-exclusive
basis, to the extent requested by the Members Committee and approved by SEIS,
such other assets, facilities and services as the Members Committee may
reasonably request at any time (such assets, facilities and services being the
"SEIS Dedicated Assets"). The Company shall have no right to the earnings or
other financial results of any such dedicated assets.
(iii) to provide Company a restricted source code license in
perpetuity to the Sempra Energy Enterprise Frameworks (EFX) and its related
components. SEIS shall provide Modis and Cayenta a restricted source code
license in perpetuity to the EFX for use in their respective businesses outside
of the American gas, water and electric utility industries. In the event of a
dissolution and winding up of the Company by SEIS, Cayenta and Modis shall
receive an unrestricted source code license in perpetuity to the Sempra Energy
Enterprise Frameworks (EFX) and its related components subject to Section 14.01
herein.
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(b) Modis. Modis hereby agrees:
(i) to enter into (A) a Management Services Agreement with the
Company dated and effective as of the date hereof in form and substance
satisfactory to the Members, and (B) a License Agreement, and
(ii) to make available to the Company on a non-exclusive
basis, to the extent requested by the Members Committee pursuant to a Majority
Vote and approved by Modis, such other assets, facilities and services as the
Members Committee may reasonably request at any time (such assets, facilities
and services being the " Modis Dedicated Assets"). The Company shall have no
right to the earnings or other financial results of any such dedicated assets.
(c) Cayenta. Cayenta hereby agrees:
(i) to enter into (A) a License Agreement, and (B) a
Management Services Agreement, and
(ii) to make available to the Company on a non-exclusive
basis, to the extent requested by the Members Committee and approved by Cayenta,
such other assets, facilities and services as the Members Committee may
reasonably request at any time (such assets, facilities and services being the
"Cayenta Dedicated Assets"). The Company shall have no right to the earnings or
other financial results of any such dedicated assets.
(d) All parties shall have the right of first refusal to provide any
and all personnel for internal and external development activities, projects, or
maintenance requirements for all areas outlined in the Company's Service Level
Agreement.
(e) Compensation.
(i) The Company shall pay SEIS, Modis and Cayenta the amounts
due them in accordance with the Management Services Agreement or the License
Agreement to which such Member shall be a party. All licenses granted to the
Company under the License Agreements shall be royalty-free.
(ii) The Company shall pay SEIS, Modis and Cayenta an amount
for the use of the SEIS Dedicated Assets, the Modis Dedicated Assets or the
Cayenta Dedicated Assets, respectively.
(iii) The Members Committee shall adopt guidelines to
calculate costs under Related Agreements and for use of Dedicated Assets. Such
guidelines shall not include as a cost salaries and benefits of senior
executives of such Member. Within five Business Days of the last day of each
month, each Member shall notify the Company in writing of the compensation due
for services under its Related Agreement and for the use of its Dedicated
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Assets, during the preceding month. Should the Company not pay said sum, or any
part thereof, within 30 calendar days from the date of the monthly invoice (A)
interest at the Interest Rate shall be additionally due and owing on the unpaid
balance from the date past due and (B) the Member to which such sum is owed
shall, effective 30 days following the delivery of written notice to the
Company, have no further obligation pursuant to its Related Agreement to perform
thereunder or pursuant to Section 4.02 to make available to the Company any of
its Dedicated Assets until such unpaid balance plus all accrued interest shall
have been paid; provided, that no Member shall be relieved of any of its
obligations pursuant to a Related Agreement to perform such services or pursuant
to this Section 4.02 to make available its Dedicated Assets if, following the
delivery of written notice pursuant to this clause (B) but prior to 30 days
following such delivery, the Company shall deliver to the relevant Member
written notice setting forth in reasonable detail why the Company in good faith
believes no unpaid amount is owed pursuant to its Related Agreement or this
Section 4.02. Such Member will research the items in question and resolve any
differences with the Company. In the event any amount that was paid by the
Company was not properly owed, then within 30 days after the delivery of such
notice, the Company shall be reimbursed that amount with interest at the
Interest Rate from the date the original payment was received until the
adjustment was refunded. Upon the dissolution and winding up of the Company,
each Member will xxxx the Company for the actual costs it incurred since the
last billing under the terms and conditions mentioned above and the Company
shall pay promptly such Member.
(f) Audit Rights. The Company shall conduct an annual audit to
examine the costs, payments, and/or settlements charged to the Company pursuant
to Section 4.02(d) in respect of Related Agreements and Dedicated Assets. Such
audit shall take place in the first quarter of each year for the immediately
preceding year and be conducted by the Auditors who shall report the findings to
the Member's Committee no later than April 15 of each year. By unanimous vote
the Members may elect not to conduct such audit. In any event each Member
reserves the right to designate its own employee representative, or its
contracted representative, who shall have the right to audit and to examine any
cost, payment, settlement, or supporting documentation charged to the Company
pursuant to Section 4.02(d) in respect of any other Member's Related Agreement
or Dedicated Assets. Any such audit shall be undertaken at the expense of the
party requesting such audit at reasonable times and in conformance with
generally accepted auditing standards. The Company and each Member agree to
fully cooperate with any such audit. The right to audit shall extend during the
term of this Agreement and for a period of two years following the date of final
payment by the Company to such Member. Each Member and its respective Affiliates
shall retain all necessary records/documentation for two years, or such longer
period as may be required by order, law, regulation or rule, after the year to
which they pertain. Each Member and the Company will be notified in writing of
any exception taken as a result of an audit. If the auditing Member and the
audited Member agree that the Company has been overcharged with regard to the
audited Member's Related Agreement or Dedicated Assets, such Member shall refund
the agreed upon amount plus interest to the Company within 30 days (or,
alternatively, with prior written approval of the Company, deduct the dollar
amount from the next invoice submitted to the Company). In the event agreement
is not reached within 30 days of delivery of the notice referred to above, the
matter shall be referred to the Auditors who shall decide such matter within 60
days of such referral. The fees of the Auditors in
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connection with such matter shall be paid by the party against which the
Auditors decide. Interest will be computed at the Interest Rate from the date
the excess payment was made by the Company until the repayment or offset was
made.
SECTION 4.03 Additional Funding.
(a) In the event that the Members Committee determines pursuant to a
Majority Vote that additional capital or credit support is required by the
Company, it will be funded through any or a combination of the following
mechanisms at the option of the Members Committee:
(i) pursuant to a Majority Vote through revolving credit
facilities or other credit support from third parties (such as banks);
(ii) pursuant to a Majority Vote through credit support,
subject to availability, from SEIS and/or its Affiliates (by means of guaranty
or otherwise);
(iii) pursuant to a Unanimous Vote through additional capital
contributions made by all Members at the same ratio as the initial capital
contributions. Unless approved by Unanimous Vote the maximum additional capital
contribution, shall be $2 million for SEIS; $2.5 million for Modis and $2.5
million for Cayenta. Unless a Member fails to make its capital contribution
hereunder, in which case such Member shall be subject to the terms of Section
4.04 herein, such contributions shall increase the number of Membership Units of
each Member by the ratio of the additional capital contribution to the initial
capital contribution.
(iv) pursuant to a Unanimous Vote through Member loans by each
of SEIS, Modis and Cayenta and/or their Affiliates (a schedule of anticipated
Member loans including repayment terms will be developed by the Company after
six months of operation hereunder); it being understood that such Member loans
shall not exceed an aggregate of $8 million and $1 million, and $1 million
respectively, for the first six months after the date hereof; or
(v) pursuant to a vote of the majority of the Members
representing at least the majority of the outstanding Member Units through
additional cash capital contributions made by existing Members, who elect to
make such additional contributions, or new member(s).
(b) In the event that such funding is to be made in the form of
Member loans or credit support, the Company shall notify SEIS, Modis, and/or
Cayenta, as the case may be, of the Member loans to be made or credit support to
be provided, pursuant to this Section 4.03 by delivering a written notice to
SEIS, Modis and/or Cayenta, specifying the aggregate amount of Member loans to
be made by each of them. In each case, the obligation of SEIS, Modis and/or
Cayenta to make Member loans or provide credit support, as the case may be, as
determined by the Members Committee, shall be subject to and conditioned on the
Company meeting funding criteria. The Members expect that the funding criteria
will be established by the Members Committee prior to January, 2000 and reviewed
and revised by the Members Committee from
9
time to time based on the then current operations and business plans of the
Company. The amount of Member loans to be made by SEIS, Modis and/or Cayenta
shall be the product of (A) the aggregate amount of Member loans to be made and
(B) a fraction, the numerator of which shall be the aggregate number of
Membership Units owned by SEIS, Modis, or Cayenta, as the case may be, and the
denominator of which shall be the number of outstanding Membership Units owned
by the parties. The Member loans to be made by SEIS, Modis and Cayenta shall be
made in such amount as is specified in such notice in immediately available
funds by wire transfer or other similar means to a bank account designated by
the Company in such notice prior to the close of business on the fifth Business
Day following the date of delivery of such notice. Subject to paragraphs (c) and
(d) below, each Member loan shall be on such terms as to repayment and otherwise
as the Members by a Majority Vote shall agree.
(c) The Company shall, on demand, reimburse SEIS, Modis, Cayenta
and/or their Affiliates, as the case may be, for all costs and expenses directly
incurred by them in providing any Member loan, credit support or other extension
of credit to or for the benefit of the Company and reimburse them for all
amounts payable to third parties in connection with each such extension of
credit provided by them. The Company shall compensate SEIS, Modis, and Cayenta
for any Member loans made by them and for funds advanced under credit support
and the extensions of credit to or for the benefit of the Company by SEIS and/or
its Affiliates on a quarterly basis until repaid in full together with interest
thereon, by the payment of interest at the Interest Rate calculated from the
date each loan or advance is made until the date all outstanding principal and
interest thereon is paid in full. Member loans and funds advanced under credit
support or other extension of credit for the Company shall be repaid, in inverse
order of maturity, in equal quarterly installments over such period of time as
approximately two (2) years, provided, that, in addition to repayment of such
amounts in such equal quarterly installments, the Company shall make mandatory
prepayments out of Net Distributable Cash in respect of such Member loans and
funds advanced under credit support or other extension of credit for the Company
each quarter in an amount determined in accordance with Section 8.05(a)(iii)
hereof (after giving effect to any distributions called for by clauses (i) or
(ii) thereof), and upon withdrawal of such Member its Member loans and credit
supports and other extensions of credit for the Company shall be repayable on
the same terms as if such Member did not so withdraw. For purposes hereof, a
borrowing by SEIS, Modis, and/or Cayenta to fund a Member loan or credit support
or otherwise provide liquidity to or for the benefit of the Company, or the
extension to the Company of credit as an unmargined line shall, in every
instance, be treated as a Member loan.
(d) Notwithstanding any other provisions in this Agreement, the
obligations of the Members pursuant to this Section 4.03 shall not be, and shall
not be deemed to be, a guaranty, maintenance or support agreement or other
similar agreement, or under any circumstances utilized to satisfy the general or
other obligations and liabilities of the Company.
SECTION 4.04 Delinquent Members. If SEIS, Modis, or Cayenta
wrongfully fails to timely advance all or any portion of any capital
contributions or Member loans that it has agreed to make pursuant to the
provisions of this Article IV, within 15 days following notice by the Company to
such Member (the "Delinquent Member") of such failure, the Company may exercise
any one or more of the following rights or remedies:
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(a) Taking such action as the Managing Members other than the
Delinquent Member deem appropriate to obtain payment or provision by the
Delinquent Member of that portion of its agreed advance or credit support that
is in default, together with interest thereon at the Interest Rate from the date
that such advance or credit support was due until the date that such advance is
made, at the cost and expense of the Delinquent Member; and
(b) Permitting those Members that desire to do so (the
"Non-Delinquent Members") to advance that portion of the advance that is in
default, with the result that, the sum thus advanced shall be determined to be a
loan from the Non-Delinquent Members to the Delinquent Member pursuant to this
Article IV. The loan shall have the following terms: (A) the principal balance
of such loan and all accrued unpaid interest thereon shall be due and payable in
whole within thirty days after written demand therefor has been given to the
Delinquent Member by the Non-Delinquent Members; (B) the loan shall bear
interest at the Interest Rate, from the date that the loan was made until the
date that such loan, together with all interest accrued thereon, is repaid to
the Non-Delinquent Members; (C) all distributions from the Company that would
otherwise be made to the Delinquent Member are hereby assigned by the Delinquent
Member to the Non-Delinquent Members (whether before or after dissolution of the
Company) until the loan and all interest accrued thereon have been repaid in
full to the Non-Delinquent Members (with all such payments being applied first
to interest earned and unpaid and then to principal); and (D) the Non-Delinquent
Members shall have the right, in addition to the other rights and remedies
granted to them pursuant to this Agreement or available to them at law or in
equity, to take such action as the Non-Delinquent Members deem appropriate to
obtain payment by the Delinquent Member of the principal balance of such loan
and all accrued and unpaid interest thereon, at the cost and expense of the
Delinquent Member.
SECTION 4.05 Status of Capital Contributions.
(a) No Member 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,
except as otherwise specifically provided in this Agreement or in the Management
Services Agreements, or License Agreements. Except as otherwise expressly
provided herein, no Member will be permitted to borrow, make an early withdrawal
of, or demand or receive a return of any Capital Contributions. Under
circumstances requiring a return of any Capital Contributions, except as
otherwise expressly provided in this Agreement, no Member will have the right to
receive property other than cash.
(b) Except as otherwise provided herein, the Members shall be liable
only to make their Capital Contributions and Member loans and other credit
support pursuant to this Article IV, and no Member shall otherwise be required
to lend any funds to the Company or, after a Member's Capital Contributions have
been fully paid pursuant to this Article IV, to make any additional capital
contributions to the Company. No Member shall have any personal liability for
the repayment of any Capital Contribution of any other Member or Transferee. A
Member's obligation to contribute capital to the Company is conditional (within
the meaning of Section 18-502(b) of the Delaware Act), payable only to the
extent, and only in such amounts,
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required to be paid to the Company pursuant to this Agreement. Notwithstanding
any other provision in this Agreement, the obligations of the Members pursuant
to this Section 4.05 shall not be, and shall not be deemed to be, a guaranty,
maintenance or support agreement or other similar agreement, or under any
circumstances utilized to satisfy the general or other obligations and
liabilities of the Company.
SECTION 4.06 Capital Accounts.
(a) An individual Capital Account shall be established and
maintained for each Member.
(b) The Capital Account of each Member shall be maintained in
accordance with the substantial economic effect and special rule provisions of
Regulations Sections 1.704-1(b)(2) and 1.704-2 and the following provisions:
(i) to each Member's Capital Account there shall be credited
such Member's Capital Contributions, such Member's distributive share of Net
Profits, any items in the nature of income or gain that are specially allocated
to such Member pursuant to Article VII and the amount of any Company liabilities
that are assumed by such Member or that are secured by any Company assets
distributed to such Member;
(ii) to such Member's Capital Account there shall be debited
the amount of cash and the Asset Value of any Company assets distributed to such
Member pursuant to any provision of this Agreement, such Member's distributive
share of Net Losses, any items in the nature of deductions or losses that are
specially allocated to such Member pursuant to Article VII and the amount of any
liabilities of such Member that are assumed by the Company or that are secured
by any property contributed by such Member to the Company;
(iii) in the event all or some of a Member's interest in the
Company is assigned in accordance with Article X, the assignee shall succeed to
the Capital Account of the assignor to the extent it relates to the assigned
interest; and
(iv) no Member shall be required to pay to the Company or to
any other Member or Person any deficit in such Member's Capital Account upon
liquidation (as such term is defined in Regulations Section
1.704-1(b)(2)(ii)(g)) of its interest in the Company or upon dissolution of the
Company or otherwise.
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ARTICLE V
MEMBERSHIP UNITS
SECTION 5.01 Membership Units. All Membership Units shall have
identical rights in all respects as all other Membership Units except as
otherwise specified in this Agreement. Each Member hereby agrees that its
interest in the Company and in its Membership Units shall for all purposes be
personal property. A Member shall have no interest in specific Company property.
SECTION 5.02 Initial Membership Units. Effective as of the date
hereof, SEIS shall have an aggregate of 800 Membership Units (the "SEIS Initial
Membership Units"), Modis shall have an aggregate of 100 Membership Units (the "
Modis Initial Membership Units"), and Cayenta shall have an aggregate of 100
Membership Units (the "Cayenta Initial Membership Units").
SECTION 5.03 Additional Membership Units. In the event additional
Membership Units shall be issued to an initial Member, or to any other Person
and such Person shall be admitted as a Member in accordance with Article X, the
Chairman (as defined in Section 6.03(a) shall amend Schedule 2.01 accordingly.
The Capital Contribution to be made by such Person except as provided for in
4.03(iii) shall be in the form and amount determined by Unanimous Vote and the
amount of such Capital Contribution shall be credited to such Person's Capital
Account.
ARTICLE VI
MANAGING MEMBERS; MEMBERS COMMITTEE;
MANAGEMENT COMMITTEE; AND OFFICERS
SECTION 6.01 Management by the Managing Members. The Company shall
be managed by the Managing Members.
SECTION 6.02 Power of Managing Members.
(a) The Managing Members shall have the power to exercise any and
all rights or powers granted to the Members pursuant to the terms of this
Agreement. In addition to the foregoing, the Managing Members shall have the
power to exercise any and all other rights or powers of the Company and do all
lawful acts and things as are not directed or required to be exercised or done
by the Company under the Delaware Act or this Agreement.
(b) With respect to the internal management of the Company, without
limiting the authority of the Managing Members, in their capacities as such, to
act for and bind the Company, the Managing Members shall act through their
designees (collectively, the "Representatives") on the Members Committee, who
may be replaced at any time by the Managing Member that appointed such
Representative (with or without cause), subject to Section 6.03(a). Any vote or
consent to be taken by the Managing Members shall be taken with
13
the approval of not less than a Majority Vote of the Members Committee, except
as otherwise provided in the Delaware Act or this Agreement.
SECTION 6.03 Members Committee.
(a) The forum for meetings of the Managing Members shall be a
members committee (the "Members Committee"). Each Managing Member shall be
entitled to be represented at Members Committee meetings by its Representatives.
The total number of Representatives that shall be entitled to attend Members
Committee meetings shall be six, (i) of whom two shall be designated by SEIS
(the "SEIS Representatives"), (ii) two shall be designated by Modis (the " Modis
Representatives") and (iii) two shall be designated by Cayenta (the "Cayenta
Representatives"). In addition, the President of the Company shall be entitled
to participate but not vote in all Members Committee meetings unless the
President is also acting as a Representative of one of the Managing Members. The
Members Committee shall select a chairman (the "Chairman") from among the SEIS
Representatives, who shall preside over meetings of the Members Committee. The
SEIS Representatives shall be officers, directors or employees of SEIS or its
Affiliates, the Modis Representatives shall be officers, directors or employees
of Modis or its Affiliates, and the Cayenta Representatives shall be officers,
directors or employees of Cayenta or its Affiliates. The initial SEIS
Representatives, Modis Representatives and Cayenta Representatives are named on
Schedule 6.03. The number of Representatives in the Members Committee may be
amended by unanimous vote of the Members to accommodate new Members.
(b) In addition to the Members' Representatives, officers,
directors, employees or other representatives (including the accountants,
attorneys and/or financial advisors) of a Member and its Affiliates shall be
permitted to attend Members Committee meetings as observers, in accordance with
non-discriminatory rules to be adopted by the Members Committee.
(c) The Members Committee shall meet no less frequently than
semi-annually at such place and time as shall be determined by Majority Vote.
Special meetings of the Members Committee, to be held at the offices of the
Company as above provided (or such other place as shall be agreed by Majority
Vote), shall be called at the direction of the Chairman or a Managing Member
upon not less than five Business Days' notice given by the Chairman.
(d) With respect to quarterly meetings and special meetings, not
later than five Business Days before each such meeting the Chairman shall
deliver to each Managing Member, together with the notice of each such meeting,
an agenda specifying in reasonable detail the matters to be discussed at the
applicable Members Committee meeting. Any Managing Member that wishes to have
any additional matter discussed at any such meeting, shall give to the Chairman
and each other Managing Member not later than two Business Days prior to any
such meeting, notice of each matter it so wishes to discuss.
(e) At any meeting of the Members, every Member entitled to vote may
vote or attend in person or by proxy.
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(f) A quorum shall be at least one Representative of each Member.
Notwithstanding the above, if a Member has not attended two consecutive duly
noticed Member Meetings and does not attend the subsequent duly noticed
meeting(s), such Member will be deemed to be present so that a quorum will be
considered present. For any vote of the Members at such meeting the votes of the
absent Member shall be cast to concur with the majority vote of the Members who
are present.
(g) For each Membership Unit (or fraction thereof) of a Member, such
Member shall be entitled to one vote (or a corresponding fractional vote).
Member's votes may be cast by any one of its Representatives.
(h) Any one or more Members or Representatives or any committee
thereof may participate in a meeting of such Members, Members Committee or other
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at the
meeting.
SECTION 6.04 Approval Required.
(a) Except as expressly required by the Delaware Act or by this
Agreement, no vote, consent or authorization of the Members shall be required
for the taking of any action on behalf of or with respect to the Company. The
Members Committee shall have authority with respect to all aspects of the
operation of the Company. Except as otherwise provided in the Delaware Act or in
this Agreement, action required to be approved by vote of the Members or Members
Committee shall be authorized if approved by a Majority Vote. Except as
otherwise provided herein, in every instance where this Agreement requires the
consent or authorization of Members or of any particular group of Members, such
consent or authorization need not be in writing.
(b) Without limiting the generality of the foregoing, the Company
shall not take any of the following actions except pursuant to an Unanimous
Vote:
(i) the conduct by the Company of any business other than, or
the engagement by the Company in any transaction not substantially related to,
the Company Business; it being understood that the approval of the modification
or expansion of Company Business or any component thereof, shall not by itself
modify or expand the scope of Section 14.01;
(ii) the amendment or restatement of the Articles, except as
otherwise permitted pursuant to Section 17.12;
(iii) the admission of a Member and the approval of any
Transfer by a Member of a Membership Interest or Member loan, except as
otherwise permitted pursuant to Section 10.01(a);
15
(iv) the sale, transfer, lease, sublease, license or other
disposition by the Company to a third party of any material property or asset,
real, personal or mixed (including leasehold interests and intangible assets
other than in the ordinary course of the Company's Business); or xxxxx x Xxxx on
any assets of the Company, other than pursuant to Section 4.03(d);
(v) the authorization, issuance, sale, acquisition, repurchase
or redemption by the Company of any Membership Units or other equity interest
(or option, warrant, conversion or similar right with respect to any equity
interest) in or of the Company, including but not limited to, the establishment
of a Membership Unit option plan and the granting of options or other rights
thereunder;
(vi) the merger or consolidation with, or acquisition of an
interest in, any Person other than in the ordinary course of the Company
Business, or the acquisition of a substantial portion of the assets or business
of any Person or any division or line of business thereof other than in the
ordinary course of the Company Business, or any other acquisition of material
assets not in the ordinary course of the Company Business, or the entering into
of any joint venture, partnership or similar arrangement;
(vii) the assumption or guarantee of any Debt of any third
party, other than of Members with respect to obligations incurred in accordance
with a Related Agreement or a Member loan, credit support or other extension of
credit to or for the benefit of the Company as contemplated by Section 4.03;
(viii) the commitment to any capital expenditure in excess of
$5 million;
(ix) other than pursuant to the types of contracts described
in clause (c)(vi) below and as contemplated by Section 4.03, the entering into
by the Company of any agreement, contract or arrangement pursuant to which the
Company is obligated to pay or entitled to receive payments in excess of
$5,000,000 over the term of such contract;
(x) the entering into, or amendment of, any (1) agreement,
arrangement or transaction, including a Related Agreement, with any officer,
Affiliate or Member of the Company (or any relative, beneficiary, employee or
Affiliate of such person), (2) any arrangement that would obligate the Company
to pay any employee in excess of $350,000 per year, or (3) any arrangement that
would obligate the Company to pay any employee compensation based on the net
profits, revenues or gross sales of the Company or any other contingent basis;
(xi) the commencement or settlement of any litigation for an
amount in excess of $1 million in any such commencement or settlement or series
of relate commencements or settlements; or
(xii) any change in the number of, or method of designating,
Representatives on the Members Committee;
16
(xiii) the appointment of any President, chief executive
officer, or chief financial officer;
(xiv) (1) the dissolution, liquidation or winding up of the
Company, or
(2) the commencement of a voluntary proceeding
seeking reorganization or other similar relief;
(c) To avoid confusion, the Company shall be entitled to take any of
the following actions pursuant to a Majority Vote:
(i) any determination with respect to, or the sending of any
notice to SEIS, Modis, and Cayenta requesting, additional capital contributions,
credit support or Member loans pursuant to Section 4.03;
(ii) other than pursuant to the types of contracts described
in clause (vii) below, the incurrence, issuance, assumption or refinancing of
any Debt of the Company if the aggregate amount of such Debt and all other
outstanding Debt of the Company exceeds $5,000,000, other than Member loans,
credit supports or other extensions of credit to or for the benefit of the
Company as contemplated by Section 4.03;
(iii) the declaration, making or payment of any dividend or
distribution (whether in cash, securities or other property) to the Members or
otherwise;
(iv) the termination of any President, Chief Executive
Officer, Chief Financial Officer, Chief Operating Officer, General Manager,
President or Senior Vice President, or any person who performs similar
functions, or the selection or replacement of the independent auditors of the
Company; the appointment of any Chief Operating Officer, General Manager,
President or Senior Vice President, or any person who performs similar
functions;
(v) unless required by law or a change in GAAP, the making of
any material change in the accounting methods of the Company;
(vi) the initial public offering of securities by the Company
or the Conversion of the Company into a Corporation in connection therewith or
otherwise, including the authorization, issuance and sale by the Company of any
Membership Unit or other equity interest (or option, warrant, conversion or
similar right with respect to any equity interest) in or of the Company in
connection therewith.
(d) To avoid confusion, the President and/or Chief Financial Officer
of the Company are authorized to enter into contracts and commitments on behalf
of the Company up to a maximum $1 million and the Management Committee is
authorized to enter into such contracts and commitments up to a maximum of $5
million, without obtaining approval from the Members Committee.
17
SECTION 6.05 Management Committee.
(a) The Members Committee may, by resolution passed by a Majority
Vote, appoint a Management Committee of three members, to serve at the pleasure
of the Members Committee, to consist of one member designated by each Member,
including as one of such three members, the President of the Company. Each
designee of a Member shall also be one of its Representatives. The Chairman of
the Management Committee, who shall preside over meetings of the Executive
Committee, shall be the President. The initial members of the Management
Committee are named on Schedule 6.03. Any member of the Management Committee may
be removed or replaced by the Member that designated such member.
(b) In addition to the members of the Management Committee,
designees, officers, directors, employees or other representatives (including
the accountants, attorneys and/or financial advisors) of a Member and its
Affiliates shall be permitted to attend Management Committee meetings as
observers, in accordance with non-discriminatory rules to be adopted by the
Management Committee.
(c) The Management Committee shall, by a vote of a majority of its
members, fix its own times and places of meeting, and prescribe its own rules of
procedure, no change in which shall be made save by a majority vote of its
members; provided, that no such rule shall be inconsistent with any provision of
this Agreement.
(d) During the intervals between the meetings of the Members
Committee, except as otherwise provided by the Members Committee in the
resolutions establishing the Management Committee or otherwise, the Management
Committee shall possess and may exercise all the powers of the Members Committee
in the management and direction of the business and affairs of the Company which
are legally delegable to a committee of Members; provided, that the Management
Committee shall not have the power to take any of the actions that require a
Unanimous Vote or Majority Vote of the entire Members Committee pursuant to
Section 6.04. All action taken by the Management Committee shall be subject to
review, amendment and repeal by the Members Committee; provided, that no rights
of third parties shall be adversely affected by any such review, amendment or
repeal. A quorum shall be at least two-thirds (2/3) of all members of the
Management Committee.
SECTION 6.06 Action by Written Consent. Any action required or
permitted to be taken by the Managing Members, the Members Committee or the
Management Committee, either at a meeting or otherwise, may be taken without a
meeting if Managing Members or Representatives having not less than the same
voting power required to approve such action at a meeting of the Managing
Members, the Members Committee or the Management Committee, as the case may be,
consent in writing and the writing or writings are filed with the minutes of
proceedings of the Managing Members, the Members Committee or the Management
Committee, as the case may be. At least two Business Days prior to the
effectiveness of any such action, written consent will be given by the President
or Secretary of the Company to those Managing Members who have not consented in
writing.
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SECTION 6.07 Telephonic Meetings. Managing Members and
Representatives may participate in a meeting of the Managing Members, the
Members Committee or the Management Committee, as the case may be, by means of a
conference telephone or similar communications equipment through which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.
SECTION 6.08 Company Minutes. The decisions and resolutions of the
Members, the Members Committee and the Management Committee shall be reported in
minutes, which shall state the date, time and place of the meeting (or the date
of the written consent in lieu of meeting), the Members or Representatives, as
the case be, present at the meeting, the resolutions put to a vote (or the
subject of a written consent) and the results of such voting (or written
consent). The minutes shall be entered in a minute book kept at the principal
office of the Company and a copy of the minutes shall be provided to each
Managing Member. All action by the Management Committee shall be reported
promptly to the Members Committee.
SECTION 6.09 No Reimbursements. Except as set forth in this
Agreement or in any Related Agreement, or otherwise agreed upon by the Members
Committee, the Company shall not reimburse the Members for any expenses incurred
by the Members on behalf of the Company.
SECTION 6.10 Partition. Until termination of the Company, each
Member hereby specifically renounces, waives and forfeits all rights, whether
arising under contract or statute or by operation of law, to seek, bring or
maintain any action in any court of law or equity for partition of the Company,
or any interest which is considered to be Company assets, regardless of the
manner in which title to any such assets may be held.
SECTION 6.11 Officers.
(a) The Company shall have employees or agents who are denominated
as officers (including, but not limited to a President, one or more
Vice-Presidents, a Chief Financial Officer or a Treasurer, one or more Assistant
Treasurers, a Secretary, and one or more Assistant Secretaries), as the Members
Committee may designate from time to time (the "Officers"). The initial chief
executive officer of the Company shall be the President. The President shall be
a designee of SEIS.
(b) The Officers shall be responsible for implementing the decisions
of the Members Committee and Management Committee and for conducting the
ordinary and usual business and affairs of the Company, including, subject to
the policies and limitations established by, and the supervision of, the Members
Committee or Management Committee and subject to the terms of this Agreement,
including, without limitation, Section 6.04:
19
(i) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Company;
(ii) the acquisition or disposition of assets in the ordinary
course of the Company Business;
(iii) the use of the assets of the Company (including, without
limitation, the financing of the conduct of the operations of the Company, the
lending of funds to other Persons and the repayment of obligations of the
Company);
(iv) the maintenance of insurance for the benefit of the
Members and the Company; and
(v) the control of any matters affecting the rights and
obligations of the Company, including, without limitation, the bringing and
defending of actions at law or in equity and otherwise engaging in the conduct
of litigation and the incurring of legal expenses and settlement of claims and
litigation up to $250,000 in amount.
(c) The Officers shall be entitled to receive for their services to
the Company such compensation as may be determined by the Members Committee from
time to time, such compensation to be paid by the Company. The Officers shall at
all times be subject to the supervision and control of the Members Committee and
shall conform to policies and programs established by the Members Committee, and
the scope of the Officers' authority shall be limited to such policies and
programs. The acts of the Officers shall bind the Company when conducted within
the scope of the authority of such Officers. Except as otherwise authorized by
the Members Committee or the President, no other Person shall have authority to
bind or act for, or assume any obligations or responsibilities on behalf of, the
Company. The Officers shall keep the Members Committee informed as to all
matters of concern to the Company.
(d) Nothing in this Section 6.11 shall be construed so as to limit
the authority of the Managing Members, in their capacities as such, to act for
and bind the Company.
ARTICLE VII
ALLOCATIONS; TAX MATTERS
SECTION 7.01 Allocations.
(a) The Company's Net Profits and Net Losses, subject to the special
allocations pursuant to Sections 7.02 and 7.03, shall be allocated for each
fiscal year to the Members as follows:
20
(i) the Company's Net Profits shall be allocated to the
Members pro rata in accordance with the number of Membership Units owned by each
Member; and
(ii) the Company's Net Losses shall be allocated to the
Members, pro rata in accordance with the number of Membership Units owned by
each Member.
(b) Notwithstanding anything to the contrary in Section 7.01(a), in
the event of the winding up and dissolution of the Company pursuant to Section
11.04 hereof, Net Profit and Net Losses (and items of gross income, loss or
deduction, if necessary), including gain or loss realized by the Company upon
the sale (or deemed sale) of its property or assets, shall be allocated to the
extent possible, subject to the special allocations of Sections 7.02 and 7.03,
in a manner so as to cause the Capital Accounts of the Members to equal the
amounts due the respective Members in accordance with the provisions of Section
11.04.
SECTION 7.02 Special Allocations.
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Article VII, if there is a net decrease in Company Minimum Gain during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for the fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Company Minimum Gain,
determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 7.02(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Section 7, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each
Member who has a share of the Member Nonrecourse Debt, determined in accordance
with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated
items of Company income and gain for such Allocation Year (and, if necessary,
subsequent Allocation Years) in an amount equal to such Member's share of the
net decrease in Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amount required to be allocated to
each Member pursuant thereto. The items to be so allocated shall be determined
in accordance with Sections 1.704-2(i)(4) of the Regulations. This Section
7.02(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of
the Regulations, items of Company gross
21
income and gain shall be specially allocated to each such Member in an amount
and manner sufficient to eliminate, to the extent required by the Regulations,
the Adjusted Capital Account Deficit of such Member as quickly as possible;
provided, that an allocation pursuant to this Section 7.02(c) shall be made only
if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article VII have been
tentatively made as if this Section 7.02(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any fiscal year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated
items of Company gross income and gain in the amount of such excess as quickly
as possible; provided, that an allocation pursuant to this Section 7.02(d) shall
be made only if and to the extent that such Member would have a Adjusted Capital
Account Deficit in excess of such sum after all other allocations provided for
in this Article VII have been made as if Section 7.02(c) and this Section
7.02(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
year shall be allocated to the Members, pro rata, in accordance with the number
of Membership Units owned by such Member.
(f) Member Loan Deductions. All items of Company gross deduction and
loss attributable to a Member loan which constitutes partner nonrecourse debt
within the meaning of Regulations Section 1.704-2(b)(4) shall be allocated to
the Member or Members that bear the economic risk of loss for such loan in
accordance with Regulations Section 1.704-2(i)(1).
(g) Net Losses Limitation. The Net Losses and items of Company gross
deduction or loss allocated pursuant to Sections 7.01 and 7.02 shall not exceed
the maximum amount of Losses and items of deduction and loss that can be so
allocated without causing any Member to have an Adjusted Capital Account Deficit
at the end of any Fiscal Year. All Net Losses and items of Company gross
deduction or loss in excess of the limitations set forth in this Section 7.02
shall be allocated to the Members who do not have Adjusted Capital Account
Deficit in proportion to their Adjusted Capital Accounts.
SECTION 7.03 Curative Allocations. The allocations set forth in
Section 7.02 hereof (the "Regulatory Allocations") are intended to comply with
certain requirements of the Regulations. It is the intent of the Members that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 7.03.
Therefore, notwithstanding any other provision of this Article VII (other than
the Regulatory Allocations), the Members shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible,
22
equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all Company items were
allocated pursuant to this Article VII without regard to the Regulatory
Allocations. In exercising their discretion under this Section 7.03, the Members
shall take into account future Regulatory Allocations under Section 7.02 that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Section 7.02.
SECTION 7.04 Other Allocation Rules.
(a) Solely for purposes of determining the Members' proportionate
share of the "excess nonrecourse liabilities" of the Company within the meaning
of Regulations Section 1.752-3(a)(3), the Members' interests in Company profits
are in proportion to their ownership of Membership Units.
(b) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Members shall endeavor to treat distributions of cash as having
been made from the proceeds of a nonrecourse liability only to the extent that
such distributions would cause or increase an Adjusted Capital Account Deficit
for any Member.
(c) If the number of Membership Units owned by any Member changes
during the fiscal year, the Company's Net Profits and Net Losses for that fiscal
year shall be allocated evenly among each day of the fiscal year, and each
Members' share of Net Profits and Net Losses for such fiscal year shall be the
sum of its shares of the Net Profits and Net Losses for each day during the
fiscal year.
SECTION 7.05 Tax Allocation.
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for Federal income tax purposes
and its initial Asset Value (computed in accordance with the definition of Asset
Value).
(b) In the event the Asset Value of any Company asset is adjusted
pursuant to subparagraph (ii) of the definition of Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
Federal income tax purposes and its Asset Value in the same manner as under Code
Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to such allocations
shall be made by the tax matters Member in any manner that reasonably reflects
the purpose and intention of this Agreement. Allocations pursuant to this
Section 7.05 are solely for purposes of Federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Net Profit, Net Losses, other items, or
distributions pursuant to any provision of this Agreement.
23
(d) Except as otherwise provided in this Agreement, all items of
Company gain, loss, deduction, and any other allocations not otherwise provided
for shall be divided among the Members in the same proportion as they share Net
Profit or Net Losses, or amounts specially allocated pursuant to Section 7.02 or
7.03 hereof, as the case may be, for the fiscal year.
SECTION 7.06 Tax Decisions.
(a) The Company shall file as a partnership for Federal and state
income tax purposes. All elections required or permitted to be made by the
Company, and all other tax decisions and determinations relating to Federal,
state or local tax matters, shall be made by the tax matters Member, in
consultation with the Managing Members and the Company's attorneys and/or
accountants. Tax audits, controversies and litigations shall be conducted under
the direction of the tax matters Member. The tax matters Member shall submit to
the Members, for their review and comment, any settlement or compromise offer
with respect to any disputed item of income, gain, loss, deduction or credit of
the Company. SEIS shall be the initial tax matters Member within the meaning of
Section 6231(a)(7) of the Code. The tax matters Member shall furnish to the
Members a copy of all notices or other written communications received by the
tax matters Member from the Internal Revenue Service or any state of local
taxing authority. The tax matters Member shall cause all tax returns of the
Company to be timely filed. Copies of such returns shall be kept at the
Company's principal place of business or at such other place as the tax matters
Member shall determine and shall be available for inspection by the Members or
their duly authorized representatives during regular business hours. The tax
matters Member shall distribute to each of the Members, as soon a practicable
after the end of the fiscal year of the Company, information with respect to the
Company necessary for each Member to prepare its Federal, state and local tax
returns.
(b) The Managing Members may, by Majority Vote, amend the provisions
of this Agreement relating to the manner in which tax items are allocated to the
extent necessary to comply with Regulations Sections 1.704-1(b) and 1.704-2;
provided, however, that any such amendment may be made only if it is not likely
to have a material effect on the amounts distributable to any Member pursuant to
Article XI hereof upon the liquidation of the Company.
24
ARTICLE VIII
DISTRIBUTIONS
SECTION 8.01 Distributions.
The Members Committee, as determined in accordance with Article VI, may make
distributions to the Members, pro rata in accordance with their respective
Membership Units.
SECTION 8.02 Liquidation Distributions. Distributions made upon
liquidation of the Company shall be made as provided in Section 11.04.
SECTION 8.03 Distribution Rules.
(a) All amounts withheld pursuant to the Code or any provision of
any state or local tax law with respect to any payment, distribution or
allocation by the Company to the Members shall be treated as amounts distributed
to the Members pursuant to this Article VIII for all purposes of this Agreement.
The President is authorized and directed to withhold from distributions, or with
respect to allocations, to the Members and to pay over to any Federal, state or
local government any amounts required to be so withheld pursuant to the Code or
any provision of any other Federal, state or local law and shall allocate such
amounts to those Members with respect to which such amounts were withheld.
Promptly upon learning of any requirement under any provision of the Code or any
other applicable law requiring the Company to withhold any sum from a
distribution to a Member or to make any payment to any taxing authority in
respect of such Member, the Company shall give written notice to such Member of
such requirement and, if practicable and if requested by such Member, shall
cooperate with such Member in all lawful respects to minimize or to eliminate
any such withholding or payment.
(b) A Member shall not have the status of, and is not entitled to
the remedies available to, a creditor of the Company with regard to
distributions on its Membership Units that such Member becomes entitled to
receive pursuant to this Agreement and the Delaware Act.
(c) If any amounts owed by a Member to the Company pursuant to any
of the Related Agreements are then due and payable, the Company shall have the
right to withhold and offset all or part of such amounts from and against any
distributions otherwise payable to such Member.
SECTION 8.04 Limitations on Distributions. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not
make a distribution to any Member on account of its Membership Units, if (i)
such distribution would violate Section 18-607(a) of the Delaware Act or other
applicable law, (ii) such distribution would be made from funds other than Net
Distributable Cash, (iii) any costs or expenses directly incurred by SEIS,
Modis, Cayenta and/or their Affiliates in providing any Member loan, credit
support or other extension of credit to or for the benefit of the Company, or
any regular quarterly payment of principal theretofore due in respect of any
such Member loan, credit support or other extension of credit, or any mandatory
prepayment based on Net Distributable Cash contemplated by the proviso in
Section 4.03(c) above), or any interest thereon, shall in any such case be due
and
25
remain unpaid, provided that this clause (iii) shall not prohibit distributions
in accordance with Sections 8.05(a)(i) and (ii) prior to such mandatory
prepayments, or if such mandatory prepayment or other payments shall be made
from borrowed funds or otherwise on credit, or (iv) any amount then due and
payable by the Company to any Member pursuant to any of the Related Agreements
remains outstanding and unpaid.
SECTION 8.05 Distribution Priority. Distribution Priority
Distributions (including the payments contemplated by clause (a)(ii) below which
shall not be an equity transaction), other than distributions upon the
liquidation of the Company, and contractual or guaranteed payments, whether in
respect of Net Distributable Cash of the Company or otherwise, shall be made to
the Members as follows and in the following order of priority:
(a) The following distributions (including the payments contemplated
by clause (ii) below which shall not be an equity transaction) shall be made
each quarter, unless determined otherwise by an Unanimous Vote of the Members:
(i) After the end of each Fiscal Year, to the extent
permissible pursuant to financing agreements to which the Company is now or
hereafter may become a party, the Company shall distribute to each Member the
aggregate amount by which (A) United States federal and state income taxes that
would be payable by a Member in the highest tax bracket applicable from time to
time to a corporation (and taking into account the character of such income),
with respect to the taxable income and gains of the Company allocated to such
Member for the Fiscal Year of the Company ending in such year and for all prior
Fiscal Years, and after giving effect to all deductions and losses of the
Company allocated to such Member for such Fiscal Year and prior Fiscal Years, if
applicable (and in each case applying such highest applicable tax brackets
thereto), exceeds (B) all amounts previously distributed (or deemed distributed)
to such Member in respect of its Membership Interest pursuant to this Agreement.
Subject to the limitations set forth above, the Company will, where reasonably
practicable, make distributions on a quarterly basis to facilitate the payment
of quarterly estimated income taxes by the Members, subject to adjustment at or
following the end of such calendar year, as the Company may deem appropriate
(including the right of the Company to require prompt repayment of amounts
distributed under this sentence in excess of that ultimately determined to be
required to be distributed for such period).
(ii) Thereafter, distributions to the Members will be made in
respect of the outstanding balance of all debts and liabilities of the Company
to the Members to whom the same are owed, including Member loans and amounts
payable to withdrawing members pursuant to Section 10.06, in the ratio of the
aggregate outstanding amount owed to each such Member by the Company, until paid
in full.
(b) Thereafter, the following distributions shall be made if, as and
then only to the extent determined from time to time by a Majority Vote of the
Members in the sole and absolute discretion of such majority in interest:
26
(i) Distributions to the Members will be made in the ratio of
their respective Membership Units.
(c) Distributions in connection with the liquidation of the Company
shall be made as provided in Article XI hereof.
ARTICLE IX
BOOKS AND RECORDS; FINANCIAL STATEMENTS
SECTION 9.01 Books and Records; Financial Statements
(a) At all times during the continuance of the Company, the Company
shall maintain separate books of account for the Company that shall show a true
and accurate record of all costs and expenses incurred, all charges made, all
credits made and received and all income derived in connection with the
operation of the Company Business in accordance with GAAP consistently applied,
and, to the extent inconsistent therewith, in accordance with this Agreement.
Such books of account, together with a complete and correct copy of this
Agreement and of the Articles, shall at all times be maintained at the principal
place of business of the Company and shall be open to inspection and examination
at reasonable times by each Member and its duly authorized representatives for
any purpose reasonably related to such Member's interest in the Company. The
books of account and the records of the Company shall be examined by and
reported upon as of the end of each Fiscal Year by a firm of independent
certified public accountants that shall be selected by the Members Committee
from among the five largest U.S. accounting firms (the "Auditors"). Any Member
shall have the right to have a private audit of the Company books and records
conducted at reasonable times and after reasonable advance notice to the Company
for any purpose reasonably related to such Member's interest in the Company, but
any such private audit shall be at the expense of the Member desiring it, and it
shall not be paid for out of Company funds. Such private right to audit the
books and records of the Company shall also include the right to audit and make
recommendations regarding the internal control systems, policies and procedures
and compliance therewith of the Company.
(b) The President, Chief Financial Officer, Treasurer or Controller
shall prepare and maintain, or cause to be prepared and maintained, the books of
account of the Company and the following financial information, prepared, in the
case of (i)(A), (i)(B) and (i)(C) below in accordance with GAAP, and in the case
of (i)(A), on an accrual basis, together with an operating report in a form to
be determined by the Members Committee analyzing such information, shall be
transmitted by the President, Chief Financial Officer, Treasurer or Controller
to each Member at the times hereinafter set forth:
(i) Within 60 days after the close of each Fiscal Year, the
following financial statements, examined by and certified to by the Auditors:
27
(A) the balance sheet of the Company as of the close of
such Fiscal Year;
(B) a statement of Company Net Profits and Net Losses
for such Fiscal Year;
(C) a statement of the Company's cash flows for such
Fiscal Year; and
(D) a statement of such Member's Capital Account as of
the close of such Fiscal Year, and changes therein during such Fiscal Year.
(ii) Within 60 days after the close of each Fiscal Year, a
statement indicating such Member's share of each item of Company income, gain,
loss, deduction or credit for such Fiscal Year for income tax purposes.
(iii) As soon as available and in any event within 30 days
after the end of each three-month period, balance sheets of the Company as of
the end of such three-month period and statements of income and Company Net
Profits and Net Losses for the period commencing at the end of the previous
fiscal year and ending with the end of such three-month period, certified by the
President, Chief Financial Officer, Treasurer or Controller of the Company.
(iv) As soon as practicable and in any event within 20 days
following the end of each calendar month, a monthly operating summary of the
Company's activities in a form to be established by the Members' Committee.
(c) Each Member shall provide to the President, Chief Financial
Officer, Treasurer or Controller upon request tax basis information about
contributed assets and other tax information reasonably requested by the
President, Chief Financial Officer, Treasurer or Controller.
SECTION 9.02 Reporting Requirements. The President shall furnish or
cause to be furnished to each Member:
(a) as soon as possible and in any event within ten days after the
Company has received notice of the occurrence of any default or event of default
continuing on the date of such statement under any agreement relating to any
material obligation of the Company, a statement of the President setting forth
details of such default or event of default and the action which the President
has taken and proposes to take with respect thereto;
(b) promptly after the sending or filing thereof, copies of all
material reports that the Company sends to any of its creditors, and copies of
all income tax returns that the Company files with any federal or state taxing
authority;
28
(c) within 15 days of the filing by the tax matters Member of the
Company's federal tax return (Federal Form 1065), a copy of Schedule K-1 of
Federal Form 1065 reporting the Member's allocable share of Net Profits, Net
Losses and other items of income, gain, deductions or loss for such Fiscal Year;
and, from time to time, such additional information as the Member may reasonably
require for tax purposes;
(d) on a quarterly basis, a copy of the report from Modis, Cayenta
and SEIS pursuant to its Management Services Agreement, stating, among other
things, its current accomplishments, problems/issues, upcoming events, schedule
progress, budget versus actual revenues and expenses and such other information
regarding the condition or operations, financial or otherwise, of the Company as
any Member may from time to time reasonably request.
ARTICLE X
TRANSFERABILITY AND ADDITIONAL MEMBERS
SECTION 10.01 General Restrictions on Transfer
(a) No Transfer may be made by any Member of all or any part of its
Membership Units in the Company or Member loan except pursuant to the Unanimous
Vote of the Members Committee, except that a Member may transfer its Membership
Units or Member loan to an Affiliate without the consent of the other Members so
long as neither the Company nor any non-Transferring Member shall incur any
additional liability as a result of such Transfer and the Transferring Member
shall not be released from any liability or obligation under this Agreement or
any Related Agreement. Notwithstanding the foregoing, any Member or Affiliate of
a Member may pledge, hypothecate or xxxxx x Xxxx on any Member loan in
connection with such Member's financing thereof.
(b) Each time a Member proposes to transfer all or any part of its
Membership Units (or as required by operation of law or other involuntary
transfer to do so), such Member shall first offer such Membership Units to the
Company and the non-transferring Members in accordance with the following
provisions:
(i) Such Member shall deliver a written notice ("Option
Notice") to the Company and the other Members stating such Member's bona fide
intention to transfer such Membership Units, the Membership Units to be
transferred, the purchase price and terms of payment for which the Member
proposes to transfer such Membership Units and the name and address of the
proposed transferee.
(ii) Within thirty (30) days after receipt of the Option
Notice, the Company shall have the right, but not the obligation, to elect to
purchase all or any part of the Membership Units upon the price and terms of
payment designated in the Option Notice. If the Option Notice provides for the
payment of non-cash consideration, the Company may elect to pay the
consideration in cash equal to the good faith estimate of the present fair
market value of
29
the non-cash consideration offered as determined by the Management Committee. If
the Company exercises such right within such thirty (30) day period, the
Management Committee shall give written notice of the fact to the transferring
and non-transferring Members.
(iii) If the Company fails to elect to purchase the entire
Membership Units proposed to be transferred within the thirty (30) day period
described in Section 10.01(b)(ii), the non-transferring Members shall have the
right, but not the obligation, to elect to purchase any remaining share of such
Membership Units upon the price and terms of payment designated in the Option
Notice. If the Option Notice provides for the payment of non-cash consideration,
such purchasing Members each may elect to pay the consideration in cash equal to
the good faith estimate of the present fair market value of the non-cash
consideration offered as determined by the Management Committee. Within sixty
(60) days after receipt of the Option Notice, each non-transferring Member shall
notify the Management Committee in writing of its desire to purchase a portion
of the Membership Units proposed to be so transferred. The failure of any Member
to submit a notice within the applicable period shall constitute an election on
the part of that Member not to purchase any of the Membership Units which may be
so transferred. Each Member so electing to purchase shall be entitled to
purchase a portion of such Membership Units in the same proportion that the
Units of such Member bears to the aggregate of the Units of all of the Members
electing to so purchase the Membership Units being transferred. In the event any
Member elects to purchase none or less than all of its pro rata share of such
Membership Units, then the other Members can elect to purchase more than their
pro rata share.
(iv) If the Company and the other Members elect to purchase or
obtain any or all of the Membership Units designated in the Option Notice, then
the closing of such purchase shall occur within ninety (90) days after receipt
of such notice and the transferring Member, the Company and/or the other Members
shall execute such documents and instruments and make such deliveries as may be
reasonably required to consummate such purchase.
(v) If the Company and the other Members elect not to purchase
or obtain, or default in their obligation to purchase or obtain, all of the
Membership Units designated in the Option Notice, then the transferring Member
may transfer the portion of the Membership Units described in the Option Notice
not so purchased, to the proposed transferee, providing such transfer is
completed within thirty (30) days after the expiration of the company's and the
other Members' right to purchase such Membership Units, is made on terms no less
favorable to the transferring Member than as designated in the Option Notice. If
such Membership Units are not so transferred, the transferring Member must give
notice in accordance with this Section prior to any other or subsequent transfer
of such Membership Units.
(c) In the case of permitted Transferees, any Transferee of a
Membership Units (including an Affiliate of the transferor) shall be admitted as
a Member only after such Transferee agrees to assume all obligations of the
transferor hereunder and otherwise be bound by the provisions of this Agreement.
(d) Any Person that becomes a Member after the date hereof, accepts,
ratifies and agrees to be bound by all actions duly taken pursuant to the terms
and provisions of this
30
Agreement by the Company prior to the date such Person became a Member and,
without limiting the generality of the foregoing, specifically ratifies and
approves all agreements and other instruments as may have been executed and
delivered on behalf of the Company prior to such date and which are in force and
effect on such date.
(e) Each Transfer of all or a part of Membership Units (other than
any Transfer of all or part of Membership Units or any interest therein upon
foreclosure of a security interest created in such Membership Units) to a
permitted Transferee shall entitle such Transferee to share in such Net Profits
and Net Losses, to receive such distributions, and to receive such allocations
of income, gain, loss, deduction or credit or similar item to which the
transferor was entitled, but only to the extent of the transferred Membership
Units. Such Transfer shall also give a permitted Transferee the right to
participate in the management of the Company through voting or otherwise and any
other rights exercisable by a Member or, in the case of a Transfer by a Managing
Member, such Managing Member, subject to the compliance of such Transferee with
the provisions of paragraph (b) above and the admission of such Transferee as a
Member.
(f) Notwithstanding the above, a Managing Member may transfer up to
twenty per cent (20%) of its initial Membership Units to one or more of its
employees. Such Transfer shall entitle such Transferee to share in such Net
Profits and Net Losses, to receive such distributions, and to receive such
allocations of income, gain, loss, deduction or credit or similar item to which
the transferor was entitled, but only to the extent of the transferred
Membership Units. Such Transfer shall not give such employee Transferee the
right to participate in the management of the Company through voting or
otherwise nor any other rights exercisable by a Member.
SECTION 10.02 Recognition of Transfer by Company. No Transfer of
Membership Units, or any part thereof, that is in violation of this Article X
shall be valid or effective, and neither the Company nor the Members shall
recognize the same for the purpose of making distributions pursuant to Section
8.01 hereof with respect to such Membership Units or part thereof. Neither the
Company nor the non-transferring Members shall incur any liability as a result
of refusing to make any such distributions to the Transferee of any such invalid
Transfer.
SECTION 10.03 Indemnification. In the case of a Transfer or
attempted Transfer of an interest in the Company contrary to the provisions of
Section 10.01 hereof, the parties engaging or attempting to engage in such
Transfer shall indemnify and hold harmless the Company and each of the other
Members from all costs, liabilities or damages that any of such indemnified
Persons may incur (including, without limitation, incremental tax liability and
lawyers' fees and expenses) as a result of such Transfer or attempted Transfer
and efforts to enforce terms of this Agreement and the indemnity granted hereby.
SECTION 10.04 Effective Date of Transfer. Any valid Transfer of a
Membership Units in the Company, or part thereof, shall be effective as of the
close of business on the last day of the calendar month in which such Transfer
occurs. The Company shall, from the effective date of such Transfer, thereafter
pay all further distributions on account of the Membership Units (or part
thereof) so transferred, to the Transferee of such interest, or part
31
thereof. As between any Member and its Transferee, Net Profits and Net Losses
for the Fiscal Year of the Company in which such Transfer occurs shall be
apportioned for federal income tax purposes in accordance with any convention
permitted under Code Section 706(d) and selected by the transferring Member and
its Transferee.
SECTION 10.05 Additional Transfer Provisions. In the case of any
Transfer under this Article X:
(a) Except as otherwise provided in this Section 10.05, upon the
Transfer of the entire Membership Units of a Member, such Member shall have no
further obligations as a Member pursuant to this Agreement, except that (i) the
obligations of such Member pursuant to Section 14.01 shall survive for a period
of twelve (12) months after the Transfer in accordance with the terms thereof
and Section 14.04 shall survive indefinitely, (ii) the obligations of such
Member pursuant to Article XV and Sections 17.02 and 17.10 shall survive for a
period of 24 months after the effective date of such Transfer, unless a claim
for indemnification shall have been made under Section 15.02 prior to the
expiration of such 24-month period, in which case such Member's obligations
under Article XV shall survive until the final disposition of such claim
pursuant to a binding settlement, non-appealable decision of a court of law or
otherwise, and (iii) if such Member shall transfer its Membership Units to an
Affiliate, such Member shall not be released from any liability or obligation
under this Agreement, and for purposes of all provisions of this Agreement which
are based on or calculated with respect to such date of Transfer, including
without limitation, the provisions of Section 10.05(b), 10.06 and 14.01 (but
other than the second sentence of Section 10.04), the date of Transfer shall be
deemed the date such Membership Units shall become owned by a Person other than
the Member or an Affiliate. The contractual rights and obligations of such
Member to the Company (other than pursuant to this Agreement) shall remain
unaffected unless otherwise provided in paragraph (b) below.
(b) Upon the Transfer of a Member's Membership Units (other than to
an Affiliate), the following specific provisions shall apply (which provisions
illustrate and clarify the provisions of paragraph (a) above):
(i) such Member shall no longer have any obligation to make
Capital Contributions or provide credit support or make Member loans, pursuant
to Section 4.01 or 4.03, but any assets or cash contributed to the Company prior
to the date of such Transfer shall remain property of the Company;
(ii) such Member shall continue to provide to the Company the
Dedicated Assets provided by it, so long as requested by the Company (and shall
be entitled to continue to receive compensation therefor), in accordance with
Section 4.02, but not longer than one hundred eighty (180) days after the
Transfer,
(iii) any License Agreement between such Member and the
Company shall remain in effect in accordance with its terms;
32
(iv) any Management Services Agreement between such Member and
the Company shall remain in effect in accordance with its terms, so long as
requested by the Company, but not more than one hundred eighty (180) days after
the Transfer;
(v) such Member shall have no further obligation to make
certain Persons available to perform services in accordance with Section
12.01(a); and
(vi) Persons who become employees of the Company in accordance
with Section 12.01(b) shall remain employees of the Company.
(c) The Transferee or Transferees, as the case may be, shall be
required to pay any and all filing and recording fees, fees of counsel and
accountants and other costs and expenses reasonably incurred by the Company as a
result of such Transfer.
(d) No such Transfer of Membership Units shall be made except upon
terms which would not, in the opinion of counsel to the Company, result in a
violation of the Securities Act of 1933, as amended, or any "Blue Sky" laws or
other securities laws of any state of the United States applicable to the
Company or the Membership Interest to be transferred.
(e) Notwithstanding any other provision of this Article X, no
Transfer of Membership Units will occur (a) unless and until any and all
necessary regulatory approvals and third-party approvals have been obtained,
including, without limitation, expiration of any applicable waiting periods
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
(b) if such transfer would (x) cause the Company or any Member to become subject
to any statute, rule, regulation, order or injunction that would impose material
limitations or restrictions on its ability to conduct the Company Business.
SECTION 10.06 Withdrawal.
(a) Each Member shall have the right, upon thirty (30) days prior
written notice of its desire to withdraw given to all other Members, to withdraw
from the Company and resign as a Member at any time, commencing on the
expiration of thirty-six (36) full calendar months after the month in which this
Agreement is executed. Such notice shall become effective upon the expiration of
such thirty (30) day period, and shall specify a time and date (which shall not
be less than thirty (30) days following the determination of the Fair Market
Value) for the purchase of such Membership Units. No Member may otherwise
withdraw from the Company or resign as a Member except as a result of a Transfer
made in accordance with this Article X or upon dissolution in accordance with
Article XI. If any Member withdraws from the Company or resigns as a Member in
breach of this provision, such withdrawal or resignation shall be of no force or
effect. The withdrawal of a Member shall not dissolve the Company.
(b) Upon the withdrawal or resignation of any Member for any reason,
the following shall apply:
33
(i) all Customer Contracts shall remain the property of the
Company;
(ii) the provisions of Section 10.05 shall apply with respect
to such Member as if it affected a Transfer, including without limitation, the
provisions of Section 14.01 for a period of twelve (12) months after the date of
such withdrawal;
(iii) if the Company is continued in accordance with Section
11.02(d) after the expiration of the fiscal quarter after the quarter in which
the closing shall occur, the withdrawing Member shall be entitled to receive,
subject to the Delaware Act, the Fair Market Value of its Membership Units,
determined in accordance with Section 11.02, as of the date of withdrawal,
except that the cost of determining the Fair Market Value shall be borne 50% by
the Company and 50% by the withdrawing Member. The interest of any Member who
has given notice of its desire to withdraw shall thereafter not be included in
calculating the requisite number of Members or percentage of interests required
for action of the Company; and
(iv) all Member loans, credit supports and other extensions of
credit to or for the benefit of the Company by the withdrawing Member shall be
payable on the same terms as if such Member did not so withdraw, including
distributions in accordance with Section 8.05(a)(iii).
(c) The closing of such purchase of such Membership Units shall take
place at the offices of the Company in accordance with, and at the time
specified in, such notice of withdrawal. The purchase price for the Membership
Interest shall be paid out of the Net Distributable Cash of the Company (if any)
to the extent that such purchase price balance plus the purchase price balance
resulting from any other purchase by the Company of a Membership Interest does
not exceed 50% of such Net Distributable Cash. In the event the Company shall
have any such purchase price payment obligations to two or more Members, the
amount payable out of such Net Distributable Cash for any given period shall be
allocated pro rata among such Members. Subject to the foregoing, payments in
respect of the Membership Units of a withdrawn Member shall be made quarterly,
out of Net Distributable Cash (if any) on the same basis as, and pro rata with,
mandatory prepayments of the principal amount of Member loans pursuant to
Section 8.05(a)(iii). The remaining purchase price balance for any such purchase
and sale shall be due and payable on the fifth (5th) anniversary of the date of
withdrawal, and shall bear interest at a rate equal to the rate announced from
time to time by the principle lending bank to SEIS, as its prime rate, or in the
absence thereof at the prime rate published in The Wall Street Journal or an
analogous publication selected by SEIS.
(d) On the closing date, such withdrawing Member shall pay to the
Company any and all liabilities and monetary obligations of the withdrawing
Member to the Company or to any other Member, and the Company shall be entitled
to deduct from the purchase price payable hereunder the full amount of such
liabilities and obligations, as well as any income tax which the Company is
obligated (in the opinion of counsel chosen by the remaining Managing Members)
to deduct and withhold as a result of the subject purchase and sale. At the
closing, the withdrawing Member shall transfer, convey and deliver all right,
title and interest in and to such Membership Units being transferred by such
party, which shall constitute (and, at the closing, the withdrawing
34
Member shall certify the same in writing) good and unencumbered title to such
Membership Units, free and clear of all Liens. In addition, the withdrawing
Member shall deliver to the Company at such closing any opinions of counsel
(relating to transferability) and certificates that the Company may reasonably
request.
(e) In each case where the Company is required to purchase a
Membership Units pursuant to this Section 10.06, each Member (including the
withdrawing Member) shall, at the request of the Company, take such action as is
necessary and lawful to permit the Company's purchase, including, but not
limited to, the incurrence of indebtedness and, if applicable, the creation of
legally available surplus (whether by reduction of capital, revaluation of
assets or otherwise).
SECTION 10.07 Further Assurances. The Members shall cooperate and
use all reasonable efforts to take all actions necessary to complete a Transfer
in accordance with this Article X, including the making of filings, and
provision of information, necessary to comply with Sections 10.05(e).
ARTICLE XI
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 11.01 No Dissolution. The Company shall not be dissolved by
the admission of additional Members in accordance with the terms of this
Agreement.
SECTION 11.02 Events Causing Dissolution. The Company shall be
dissolved and its affairs shall be wound up upon the occurrence of any of the
following events:
(a) the expiration of the term of the Company as provided in Section
2.03;
(b) at any time after the expiration of twenty-four (24) months
after the effective date of this Agreement, the Majority Vote of the Members
Committee to dissolve, wind up and liquidate the Company;
(c) the sale of all or substantially all the assets of the Company;
(d) the Bankruptcy, insolvency, expulsion from the Company or
withdrawal pursuant to Section 10.06 of a Managing Member, unless within 90 days
after the occurrence of such an event, Members holding a majority of the
remaining Membership Units agree in writing to continue the Company Business and
to the appointment, if necessary or desired, effective as of the date of such
event, of one or more additional Members; or
(e) the entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act.
35
If the Company is continued pursuant to clause (d) above after the
Bankruptcy, insolvency, expulsion or withdrawal of a Managing Member (the
"Former Member"), the other Managing Members and the Company shall have the
right to purchase the Membership Interest of such Former Member at the Fair
Market Value of such Membership Units in accordance with the procedures set
forth below. The cost of determining the Fair Market Value shall be borne 50% by
the Company and 50% by the Former Member.
The "Fair Market Value" of the Company shall be determined by a
nationally recognized investment banking firm, accounting firm or valuation firm
selected by the other Managing Members from a list of three such firms provided
by a representative of the Former Member (the "Appraiser"). The Appraiser's
determination of the Fair Market Value shall be considered in the context of a
hypothetical purchase of the Company negotiated between a willing buyer and a
willing seller, neither of whom is under compulsion to act, without any control
premium or any discount for a minority interest, transfer restrictions,
illegality or other similar factors. The Appraiser shall also assume that the
Company will continue to have obligations to third parties but that the proceeds
of the sale shall be used to make payments representing a return of Capital
Contributions and the repayment of any Member loans by the Former Member
(including any interest thereon). In evaluating the Company, the Appraiser shall
give due consideration to the prospects and potential of the Company. Within 30
days of the date of selection, the Appraiser will determine the Fair Market
Value and allocate such value between the Membership Interests of the Former
Member and the other Members and within 30 days of the delivery of such
determination and allocation by the Appraiser, the other Managing Members shall
notify the representative of the Former Member whether such other Managing
Members will exercise their right to acquire the Membership Units of the Former
Member. Any acquisition pursuant to this Section 11.02 shall be completed within
90 days of the date of the selection of the Appraiser.
SECTION 11.03 Notice of Dissolution. Upon the dissolution of the
Company, the Person or Persons approved by the Members holding a majority of the
remaining Membership Units to carry out the winding up of the Company (the
"Liquidating Trustee") shall promptly notify the Members of such dissolution,
except that in the case of a dissolution pursuant to Section 11.02(d) the
Liquidating Trustee shall be the Managing Member (or Members) that is not a
Former Member.
SECTION 11.04 Liquidation.
(a) Upon dissolution of the Company, the Liquidating Trustee shall
immediately commence to wind up the Company's affairs; provided, that a
reasonable time shall be allowed for the orderly liquidation of the assets of
the Company and the satisfaction of liabilities to creditors so as to enable the
Members to minimize the normal losses attendant upon a liquidation. The Members
shall continue to share Net Profits and Net Losses and items of Company gross
income, gain, deduction and loss during liquidation in the same proportions, as
specified in Article VII hereof, as before liquidation. Each Member shall be
furnished with a statement audited by the Auditors that shall set forth the
assets and liabilities of the Company as of the date of dissolution. Each Member
(and its Affiliates) shall pay to the Company all amounts
36
then owing by it (and them) to the Company. The Liquidating Trustee shall take
the following action and make the following distributions out of the assets of
the Company, in the following manner and order of priority:
(i) first, pay or establish adequate reserves for all debts
and liabilities of the Company to persons other than Members and expenses of
liquidation in the order of priority provided by law;
(ii) then, establish any reserves which are reasonably deemed
necessary to provide for contingent liabilities or obligations of the Company;
provided, however, that, at the expiration of such period of time as the
Liquidating Trustee may reasonably deem advisable, the balance of any reserves
shall be paid or distributed as provided in clauses (iii) through (v) of this
Section 11.04 (in the order of priority thereof), it being agreed that such
reserves may, at the election of the Liquidating Trustee, be paid over to an
independent escrow agent to be held by it in escrow for the purpose of
disbursing such reserves in payment of any of the aforesaid contingencies;
(iii) then, pay out of the balance of such assets, if any, the
outstanding balance of all remaining debts and liabilities of the Company to the
Members including any Member who has withdrawn pursuant to Section 10.06 to whom
the same are owed, pro rata, including satisfaction of the liabilities of the
Company and borrowings by SEIS, Modis, and/or Cayenta to fund Member loans or
credit supports or otherwise provide liquidity to or for the benefit of the
Company, including the extension of credit as an unmargined line (whether by
payment or the making of reasonable provision for payment thereof), other than
liabilities for distributions on Membership Units;
(iv) then, after giving effect to all allocations provided in
Article VII hereof, including those required under clause (ii) of the definition
of "Asset Value" on Schedule 1.01, pay the Members who have Unrecovered Capital,
pro rata, to the extent of their respective amounts of Unrecovered Capital but
not in excess of their respective Capital Accounts, the balance, if any, of such
assets; and
(v) then pay the balance, if any, of such assets to the
Members in the following order and priority:
(A) to the Members, pro rata, in accordance with their
positive Capital Account balances;
(B) to the Members, pro rata, in accordance with the
number of Membership Units owned by each such Member.
To the extent that the Members determine that any or all of the
assets of the Company shall be sold, such assets shall be sold as promptly as
practicable, in a commercially reasonable manner. For purposes of making the
liquidating distributions required by this Section 11.04(a), the Liquidating
Trustee may determine, at the direction of the Members by Majority
37
Vote, whether to distribute all or any portion of the assets of the Company in
kind or to sell all or any portion of the assets of the Company and distribute
the proceeds therefrom. Each Member shall receive copies of all customer
information relating to customers of the Company. Subject to paragraph (c)
below, Customer Contracts will be divided among the Members such that each
Member receives its pro rata share (in accordance with the number of Membership
Units) of the aggregate value of Customer Contracts, unless all of the Members
otherwise agree in writing to distribute Customer Contracts to certain but not
all Members. The Capital Account of each Member shall be adjusted to take into
account the Net Profit and Net Losses resulting from the sale of the Company's
assets and all other transactions in connection with the winding up of the
Company.
Notwithstanding anything herein to the contrary, all Joint Work
Product (as such term is defined in the License Agreement) except all Company
Marks and Hybrid Marks (as those terms are defined in the License Agreement)
shall be distributed to the Members and such Joint Work Product shall thereafter
be jointly owned by the Members and each Member shall have the unrestricted
right to use, license, distribute, sell or otherwise fully exploit such rights
without accounting to the other Members, subject to any rights of third parties
with regard to such Joint Work Product. In the event that any Joint Work Product
is embodied in or is used in connection with a Member's Separate Work Product
(as such term is defined in the License Agreement), such Member shall grant to
each other Member a limited non-exclusive, royalty-bearing license, on
commercially reasonable terms, to use the Separate Work Product solely in
connection with obligations and services being provided pursuant to contracts
and agreements in effect on the date liquidation of the Company begins, and not
for general use of the Joint Work Product in the Member's business. The
Liquidating Trustee shall promptly cause copies of any physical embodiments of
all Joint Work Product (including source code) other than Company Marks and
Hybrid Marks to be delivered to each Member. All Company Marks and all Hybrid
Marks shall be deemed to be abandoned. The Members shall have no rights in the
Company Marks, Hybrid Marks or any component parts of any Hybrid Marks, or any
goodwill associated with any of the foregoing except that (x) the Members shall
be permitted to use such Company Marks and Hybrid Marks solely in connection
with obligations and services being provided pursuant to contracts and
agreements in effect on the date liquidation of the Company begins, and not for
general use in the Member's business and (y) SEIS shall own and have the sole
right to use the name "Soliance" and all variations thereof and derivations
therefrom. All rights in said component parts, and the goodwill associated
therewith, shall revert to the Member owning such component parts.
(b) Notwithstanding any provision to the contrary in this Section
11.04, upon dissolution of the Company as a result of Section 11.02(a) or (b),
the Liquidating Trustee shall, to the extent practicable and consistent with
Sections 11.04(a)(iv) and 11.04(a)(v), distribute in kind to each Member the
respective assets contributed or transferred by such Member to the Company. The
value of each such asset at dissolution shall be determined using the same
methodology that was used to determine the value of the assets to be contributed
to the Company.
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(c) To the extent that, pursuant to the provisions of paragraphs (a)
and (b) above, a Member does not, as provided in Section 11.04(a)(v), receive
property or assets equal to the value of such Member's Capital Account plus a
proportionate share of the remainder of property and assets available for
distribution after all Members' Capital Accounts have been eliminated pursuant
to the liquidation, an attempt will be made to re-allocate the Customer
Contracts such that each Member receives property and assets equal to the value
of such Member's aggregate Capital Account plus a proportionate share of the
remainder of property and assets available for distribution after all Members'
Capital Accounts have been eliminated pursuant to the liquidation. In the event
that the re-allocation of the Customer Contracts fails to provide each Member
with the full value of such Member's Capital Account plus a proportionate share
of the remainder of property and assets available for distribution after all
Members' Capital Accounts have been eliminated pursuant to the liquidation, each
Member which has received more than the full value of its Capital Account plus a
proportionate share of the remainder of property and assets available for
distribution after all Members' Capital Accounts have been eliminated pursuant
to the liquidation, shall pay to the other Member(s), within five Business Days
of the notice described in paragraph (d) below becoming final, a cash amount in
immediately available funds, equal to the difference in the amount such Member
was entitled to receive pursuant to Section 11.04(a)(v) and the amount such
Member actually received. Notwithstanding any other provisions of this
paragraph, in the event that should there be an insufficient amount of assets to
return to each Member the full value of its Capital Account, the Liquidating
Trustee will, in its discretion, divide the assets such that each Member
receives as near as possible the proportionate amount it was entitled to receive
pursuant to Section 11.04(a)(v).
(d) As soon as practicable, the Liquidating Trustee shall deliver a
notice to each Member setting forth the value assigned to each asset and the
Member to which such asset will be distributed, in connection with the
provisions of paragraphs (a), (b) and (c) above. Each Member shall have 15 days
to dispute such valuation and if no notice of dispute is delivered to the
Liquidating Trustee and the other Members, the notice of valuation shall become
final. If such notice of dispute is delivered, the matter shall be submitted to
a nationally recognized investment banking firm, accounting firm or valuation
firm selected by the Liquidating Trustee from a list of three such firms
provided by the disputing Member. The banking, accounting or valuation firm
shall make a decision within 60 days of referral, which decision shall be final
and binding, and the fees and expenses of such firm shall be borne by the
Company.
SECTION 11.05 Termination. The Company shall terminate when all of
the assets of the Company, after payment of or due provision for all debts,
liabilities and obligations of the Company, shall have been distributed to the
holders of Membership Units in the manner provided for in this Article XI, and
the Certificate shall have been canceled in the manner required by the Delaware
Act.
SECTION 11.06 Claims of the Members. The Members shall look solely
to the Company's assets for the return of their Capital Contributions, and if
the assets of the Company remaining after payment of or due provision for all
debts, liabilities and obligations of the Company (including any credit support
or other liquidity provided by SEIS or Member loans
39
made by SEIS and Cayenta and borrowings thereof to fund Member loans, credit
support or otherwise provide liquidity to or for the benefit of the Company) are
insufficient to return such Capital Contributions, the Members shall have no
recourse against the Company or any other Member or any other Person. No Member
with a negative balance in such Member's Capital Account shall have any
obligation to the Company or to the other Members or to any creditor or other
Person to restore such negative balance upon dissolution or termination of the
Company or otherwise.
ARTICLE XII
EMPLOYEES
SECTION 12.01 Employees.
(a) Commencing on the date hereof, each Member hereby agrees to make
certain Persons available to perform services and work for the Company as and
when requested by the Members Committee and approved by such Member. The
relevant Member shall xxxx the Company at their employees' normal billing rates.
Market-based consultant billing rates will be established for any salaried
employee providing services to the Company. Members are encouraged to enter into
fixed price, fixed time line contracts when appropriate, the details of which
are more fully discussed in the Services Agreements. Should the Company not pay
said sum, or any part thereof, within 30 calendar days from the date of the
monthly invoice (i) interest at the Interest Rate shall be additionally due and
owing on the unpaid balance, from the date past due and (ii) the Member to which
such sum is owed shall, effective 30 days following the delivery of written
notice to the Company, have no further obligation pursuant to this Section 12.01
to make available to the Company any Persons until such unpaid balance plus all
accrued interest shall have been paid; provided, that no Member shall be
relieved of any of its obligations pursuant to this Section 12.01 to make
available any Persons if, following the delivery of written notice pursuant to
this clause (ii) but prior to 30 days following such delivery, the Company shall
deliver to the relevant Member written notice setting forth in reasonable detail
why the Company in good faith believes no unpaid amount is owed pursuant to this
Section 12.01. The Company shall notify the relevant Member of any billing items
in question. Such Member will research the items in question and resolve any
differences with the Company. In the event any amount that was paid by the
Company was not properly owed, then within 30 days after the delivery of such
notice, the Company shall be reimbursed that amount with interest at the
Interest Rate from the date the original payment was received until the
adjustment was refunded. Upon the termination of this Agreement, each Member
will xxxx the Company for the actual costs incurred since the last billing under
the normal terms and conditions mentioned above. Each Member shall have the same
audit rights in respect of compensation due pursuant to this Section 12.01 as
they have pursuant to Section 4.02(e).
(b) In the event the Members Committee hires employees to work
directly for the Company, or determines to have certain employees of a Member
become employees of the Company rather than provide services on a dedicated
basis, it shall determine whether to establish welfare and benefit plans for the
Company and provide payroll services directly or
40
contract with one or more of the Members to provide such benefits and services.
In the event the Members Committee elects to contract with a Member for such
benefits and services, such contract shall be on the terms set forth in
paragraph (a) above, except as otherwise provided in any Management Services
Agreement between the Company and such Member.
(c) Each Member (and former Member) agrees that from and after the
date hereof, for the duration of the Company and for a period of two (2) years
after the dissolution of the Company or after the date the Member transferred
its Membership Units, it shall not solicit the employment of any employee of any
of the other Members unless such Member consents thereto in advance, provided
that a general advertisement in the public media shall not constitute a
violation of this section.
ARTICLE XIII
PRODUCTS
SECTION 13.01 Company Products. The Company provides information
products and services to the energy provider market (collectively referred to
herein as, the "Products"). For purposes of this Agreement, "Products" is
defined as the provision of Application Service Provider (ASP) and Web-hosting
services for the utility industry (any company engaged in the generation,
distribution, transmission and retail sale of electrical energy, gas and water
to retail sellers or transporters of energy commodity including municipalities,
utilities and other energy service providers (ESPs). Each Managing Member will
contribute its unique expertise to provide a complete solution for the customer.
SEIS will provide the industry knowledge and expertise, Cayenta will provide
application and technology interoperability expertise, and Modis will provide
application configuration expertise. In addition, SEIS will provide service
bureau operational support, application licenses, and the operations
infrastructure; this can include related sale, lease and rental of software,
hardware, and telecommunication services. When needed, all Managing Members will
provide expert information technology consulting services in support of
delivering a total solution to the customer.
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ARTICLE XIV
CERTAIN AGREEMENTS
SECTION 14.01 Scope of Business
(a) The Products will be marketed by and offered by the Members
through the Company. Members will provide Company all leads on new marketing and
sales opportunities for Products. If the Company elects, in writing, not to
proceed with the lead, the individual Member who initiates the lead may go
forward to unilaterally develop such lead. Any Member may deliver written notice
to the Company requesting whether a Product not then offered by the Company will
be offered by the Company and the Company shall have 90 days to respond to such
Member. In the event that within such 90-day time period the Members Committee
is unable to determine that such Product will be offered by the Company then the
Members hereby agree that such Product may be offered on a non-exclusive basis
by the notifying Member, or any other Member, or any of their Affiliates as well
as by the Company.
The Members agree that this Agreement will not prevent any
Member from marketing any products or services that do not constitute Products
at any time, or from marketing Products after the last day of the fifteenth (15)
calendar month commencing with the first month after the month in which such
Member has transferred its entire Membership Interest (other than to an
Affiliate) and ceased to be a Member of the Company or withdrawn from the
Company.
Subject to the foregoing, the Members agree that they will not enter into any
other new agreement to provide any of the Products with any other party.
(b) No Subsidiary or Affiliate of a Member shall have any obligation
to refrain from (i) engaging in the same or similar activities or lines of
business as the Company or developing or marketing any products or services that
compete, directly or indirectly, with those of the Company or (ii) investing or
owning any interest publicly or privately in, or developing a business
relationship with, any Person engaged in the same or similar activities or lines
of business as, or otherwise in competition with, the Company; and neither the
Company nor any Member (or any Subsidiary or Affiliate of such Member) shall
have any right by virtue of this Agreement in or to, or to be offered any
opportunity to participate or invest in, any venture engaged or to be engaged in
by any other Member (or any Subsidiary or Affiliate of such Member) or any right
of this Agreement in or to any income or profits derived therefrom.
SECTION 14.02 Compliance with U.S. Foreign Corrupt Practices Act.
(a) Each Member shall take all appropriate action to cause the
Company to adopt such internal policies as are necessary to assure that the
business of the Company and the conduct of its officers, employees and agents
are consistent with the following operating principles: No money or other thing
of value shall be offered, promised or given directly or indirectly to (i) any
governmental official, (ii) any political party or official thereof, (iii) any
candidate for political office, or (iv) any other person, while knowing or
having reason to know that all or a portion of such money or thing of value will
be offered, promised or given, directly
42
or indirectly, to any of those listed in items (i) through (iv) above for the
purpose of influencing any action, omission or decision by the recipient in
order to either obtain or retain business for the Company or to direct business
to another.
(b) Upon receiving information which provides reasonable certainty
that any such payment has been made, or action has been taken, each Member shall
(i) advise all other Members of the occurrence, and (ii) take all actions
reasonably necessary to mitigate, correct and report such occurrence, under law
or otherwise (such steps may include termination or severance of the
individual(s) involved).
All Members acknowledge they have a good working knowledge of the
requirements of the Foreign Corrupt Practices Act. The Members also agree to
adhere to the foregoing operating principle with respect to their own actions on
behalf or in the name of the Company.
SECTION 14.03 Regulatory Approvals. Each Member shall cooperate and
use its best efforts to promptly prepare and file all necessary documentation,
to effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of all governmental or
regulatory authorities necessary or advisable to (i) consummate the transactions
contemplated by this Agreement and (ii) allow the Company to engage in the
Company Business. Each Member shall have the right to review and approve in
advance all characterizations of the information relating to such Member which
appear in any filing made in connection with the transactions contemplated by
this Agreement. The Members agree that they will consult with each other with
respect to the obtaining of all such necessary permits, consents, approvals and
authorizations of governmental and regulatory authorities. The Members shall
jointly assist the Company in its efforts to obtain necessary approvals from any
governmental or regulatory authority.
SECTION 14.04 Confidentiality. Each Member and each of its
Affiliates shall keep confidential and not reveal, and shall cause its
Affiliates and Subsidiaries and the officers, directors, employees, agents and
representatives of such Member and its Affiliates and Subsidiaries, to keep
confidential and not to reveal, to any other Person (other than on a "need to
know" basis, to the Company or its officers and employees, to any Affiliate or
any officer, director, employee, agent or representative of such Member or its
Affiliates (each of whom shall be subject to confidentiality obligations), or to
any other Member or such Member's Affiliates), any documents and other
information concerning, relating to or in connection with the Company or another
Member or the business of the Company or such other Member, that come to the
knowledge of such Member or its Affiliates or their respective representatives
or agents by reason of the relationship of such Member or Affiliate with the
Company or such other Member, including but not limited to other leads brought
to the Company for consideration by a Member. Information does not include
knowledge that (a) is generally available to the public (other than as a result
of a disclosure by such Member or its Affiliates), (b) is available to such
Person on a non-confidential basis from a source that is not prohibited from
disclosing such information to such Person, (c) is independently developed by
such Person without assistance by the disclosure
43
of such information, or (d) such Person can demonstrate was known to it prior to
the disclosure thereof by the Company ("Information"). In the event that any
Member or any such agent, representative, Affiliate, employee, officer or
director becomes legally compelled to disclose any such Information, such party
shall provide the Managing Members with prompt written notice of such
requirement so that such Managing Members or the Company may seek a protective
order or other remedy or waive compliance with this Section 14.04; provided,
that in the event that such protective order or other remedy is not obtained, or
the Managing Members waive compliance with this Section 14.04, the disclosing
party shall furnish only that portion of such Information which is legally
required to be provided and shall exercise all reasonable efforts to obtain
assurances that confidential treatment will be accorded such information. The
Members further agree not to use any Information for any purpose other than in
connection with activities of the Company and shall cause each of their
respective employees who have access to Information to sign a confidentiality
agreement. The provisions of this Section 14.04 shall survive the termination or
dissolution of the Company with respect to any such documents and other
information concerning another Member or the business of such other Member, and
shall survive the Transfer of any Membership Units or the withdrawal of any
Member with respect to any such documents and other information concerning the
Company or another Member or the business of the Company or such other Member.
ARTICLE XV
LIABILITY AND INDEMNIFICATION
SECTION 15.01 Liability.
(a) Except as otherwise provided by the Delaware Act or this
Agreement, 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 Covered Person shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a Covered Person.
(b) Except as otherwise expressly required by law, a Member, in its
capacity as such, shall have no liability in respect of any distributions
wrongfully distributed to it unless such Member had actual knowledge at the time
of the distribution of facts indicating the impropriety of the distribution and
if immediately after giving effect to such distribution all liabilities of the
Company (other than liabilities to Members or assignees on account of their
Membership Units and liabilities as to which recourse is limited to specific
property of the Company) exceed the fair market value of the Company's assets;
provided, that a Member shall have no liability under this Section 15.01 in
respect of any distribution on or after the third anniversary of the
distribution unless an action to recover such distribution from such Member is
commenced prior to such third anniversary and an adjudication of liability
against such Member is made in such action.
(c) No Managing Member, nor any Affiliate of any Managing Member,
shall have any personal liability to the Company or any of the Members (i) for
damages for any breach
44
of duty as a manager of the Company or as a Managing Member or as an authorized
agent, as the case may be, when acting with the requisite consent or
authorization of the Managing Members (which may include such Member) or (ii)
for any act or omission performed or omitted by it pursuant to authority granted
by this Agreement, provided that the foregoing provision shall not eliminate or
limit the liability of any Managing Member if a judgment or other financial
adjudication adverse thereto establishes that acts or omissions thereto involved
intentional misconduct or a knowing violation of law. Each Member, acting in any
capacity hereunder, having the opportunity to grant or withhold its consent or
authorization shall be entitled to grant or withhold its consent or
authorization to any act hereunder in its sole and absolute discretion, and is
entitled to act in its own self-interest in all matters affecting the management
or affairs of the Company. Without limiting the foregoing, no Managing Member
nor any Affiliate of a Managing Member shall have personal liability to the
Company or any of the Members in connection with any decisions, whether for good
reason or no reason, that the Company requires or does not require additional
capital or credit support or as to the manner of providing any such additional
funding, and no consent or authorization as to a level of funding has been
expressed nor should be implied.
(d) No Member or Managing Member shall be personally liable for the
return or payment of all or any portion of the capital of or profits allocable
to or loans to the Company by any Member (or any successor, assignee or
transferee thereof), it being expressly agreed that any such return of capital
or payment of profits made pursuant to this Agreement, or any payment or
repayment in respect of any such loan, shall be made solely from the assets of
the Company (which shall not include any right of contribution from any Member
or Managing Member).
SECTION 15.02 Indemnification.
(a) To the fullest extent permitted by applicable law, a Covered
Person shall be entitled to indemnification from the Company for any loss,
damage or claim incurred by such Covered Person by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the
Company and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that no Covered
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Covered Person by reason of gross negligence, bad faith
or willful misconduct with respect to such acts or omissions; provided, that any
indemnity under this Section 15.02 shall be provided out of and to the extent of
Company assets only, and no other Covered Person shall have any personal
liability on account thereof.
(b) (i) In the event that any claim, demand, action, suit or
proceeding shall be instituted or asserted or any loss, damage or claim shall
arise in respect of which indemnity may be sought by a Covered Person pursuant
to Section 15.02(a), such Covered Person shall promptly notify the Company
thereof in writing. Failure to provide notice shall not affect the Company's
obligations hereunder except to the extent the Company is actually and
materially prejudiced thereby.
45
(ii) The Company shall have the right, exercisable subject to
the approval of the disinterested Members, to participate in and control the
defense of any such claim, demand, action, suit or proceeding and, in connection
therewith, to retain counsel reasonably satisfactory to each Covered Person, at
the Company's expense, to represent each Covered Person and any others the
Company may designate in such claim, demand, action, suit or proceeding. The
Company shall keep the Covered Person advised of the status of such claim,
demand, action, suit or proceeding and the defense thereof and shall consider in
good faith recommendations made by the Covered Person with respect thereto.
(iii) In any such claim, demand, action, suit or proceeding,
any Covered Person shall have the right to retain its own counsel at its own
expense; provided, that the fees and expenses of such Covered Person's counsel
shall be at the expense of the Company if (A) each other Member and such Covered
Person shall have mutually agreed to the retention of such counsel, (B) the
Company shall have failed, within a reasonable time after having been notified
of the existence of an indemnified claim, to assume the defense of such
indemnified claim or (C) the named parties to any such claim, demand, action,
suit or proceeding (including any impleaded parties) include both the Company
and such Covered Person and representation of both parties by the same counsel
would be inappropriate in the judgment of the Covered Person (as evidenced by an
opinion of counsel) due to actual or potential differing interests between them
and the Company shall have failed, within a reasonable time after having been
notified of the Covered Person's objection under this Section 15.02(b)(iii)(C)
to such joint representation, to retain counsel for such Covered Person
reasonably satisfactory to such Covered Person. It is understood that the
Company shall not, in respect of the legal expenses of any Covered Person, in
connection with any claim, demand, action, suit or proceeding or related claims,
demands, actions, suits or proceedings in the same jurisdiction, be liable for
the fees and expense of more than one separate firm (in addition to any local
counsel) for all such Covered Persons and that all such fees and expenses shall
be reimbursed as they are incurred; provided, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of a Covered Person (as evidenced by an opinion of
counsel) for the same counsel to represent such Covered Person and any other
Covered Person, then such Covered Person shall be entitled to retain its own
counsel, in each jurisdiction for which the Covered Person reasonably determines
counsel is required, at the expense of the Company.
(iv) The Company shall not be liable for any settlement of any
claim, demand, action, suit or proceeding effected without its written consent
(which consent shall not be unreasonably withheld or delayed), but if settled
with such consent or if there be a final judgment for the plaintiff, the Company
agrees to indemnify each Covered Person, to the extent provided in Section
15.02(a), from and against all losses, damages or claims by reason of such
settlement or judgment. The Company shall not effect any settlement of any
pending or threatened claim, demand, action, suit or proceeding in respect of
which any Covered Person is seeking indemnification hereunder without the prior
written consent of each such Covered Person (which consent shall not be
unreasonably withheld or delayed by any such Covered Person), unless such
settlement includes an unconditional release of each such Covered Person from
all liability and claims that are subject matter of such claim, demand, action,
suit or proceeding.
46
(v) As necessary or useful to the defending party in effecting
the foregoing procedures, the parties shall cooperate in the execution and
delivery of agreements, instruments and other documents and in the provision of
access to witnesses, documents and property (including access to perform
interviews, physical investigations or other activities).
SECTION 15.03 Expenses. To the fullest extent permitted by
applicable law, expenses (including legal fees) actually and reasonably incurred
by a Covered Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Company of an undertaking by or on behalf of the Covered Person to repay
such amount if it shall be determined that the Covered Person is not entitled to
be indemnified therefor as authorized in Section 15.02 hereof.
ARTICLE XVI
CONVERSION TO CORPORATION
SECTION 16.01 Conversion to Corporation.
(a) At such time and in such manner as the Members shall determine
to be appropriate, the Members Committee by Unanimous Vote shall be entitled to
cause the Company to be converted into and reconstituted as a corporation under
the laws of the State of Delaware (the "Corporation"), whether by conversion
pursuant to Delaware Act ss.18-214, merger, transfer and/or contribution of
assets and liabilities of the Company to the Corporation in exchange for shares
of capital stock of the Corporation (and distribution of such shares to the
Members in liquidation of the Company) or otherwise (a "Conversion", and the
actual date of such Conversion being referred to herein as the "Conversion
Date").
As of the Conversion Date, each Member shall, to the extent
hereinafter provided, be entitled to receive:
(i) a capital share ownership interest in the Corporation
substantially equivalent, as reasonably determined by the Managing Members, to
the Units comprising its Membership Interest as of the Conversion Date; and
(ii) each Member shall also be issued in respect of the sum of
such Member's Unrecovered Capital preferred stock of the Corporation with an
aggregate redemption price and liquidation preference equal in the aggregate to
such Unrecovered Capital, and otherwise with such rights, preferences and
privileges as in the reasonable judgment of the Managing Member(s) shall be
equitable in light of the rights, preferences and privileges to which Members
are entitled under this Agreement in respect of their respective Unrecovered
Capital.
(b) Each of the Members hereby agrees to cooperate fully with such
Conversion and enter into one or more stockholders' agreements which shall
reflect each of their
47
respective rights and obligations as stockholders of the Corporation, which
rights and obligations shall be substantially equivalent to the respective
rights and obligations of the Members under this Agreement, and with such
changes taking account of the differences between the Company and the
Corporation and the laws governing the same, as the Managing Member(s) shall
reasonably determine.
ARTICLE XVII
MISCELLANEOUS
SECTION 17.01 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopier or by registered or certified mail (postage prepaid, return receipt
requested), as follows:
(i) if given to the Company, in care of the Secretary at
000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, or such other address as the
Company may hereafter designate in writing; or
(ii) if given to any Member at the address set forth
opposite its name on Schedule 2.01 attached hereto, or at such other address as
such Member may hereafter designate by written notice to the Company.
SECTION 17.02 Public Announcements. The Members (and their
Affiliates) agree to consult with each other before issuing any press release or
making any public statement with respect to this Agreement and will not issue
any such press release or make any such public statement prior to such
consultation, and, except as may be required by applicable law, will not issue
any such press release or make any such public statement without the prior
consent of the other party.
SECTION 17.03 Cumulative Remedies. The rights and remedies provided
by this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
SECTION 17.04 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of all of the parties and, to the extent permitted by
this Agreement, their successors, executors, administrators, heirs, legal
representatives and assigns.
SECTION 17.05 Interpretation. Throughout this Agreement, nouns,
pronouns and verbs shall be construed as masculine, feminine, neuter, singular
or plural, whichever shall be applicable. Unless otherwise specified, all
references herein to "Articles", "Sections" and paragraphs shall refer to
corresponding provisions of this Agreement.
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SECTION 17.06 Severability. If any term or other provision of this
Agreement is held to be invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions is not affected in any manner
materially adverse to any party. Upon a determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby by consummated as
originally contemplated to the fullest extent possible.
SECTION 17.07 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in two or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 17.08 Integration. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining hereto.
SECTION 17.09 Governing Law; Dispute Resolution
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
(b) Dispute Resolution.
(i) The Members shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiation
between their respective executives who have authority to settle the
controversy. Any Member may give the other Members written notice of any dispute
not resolved in the normal course of business. Within five (5) Business Days
after the date that the notice is deemed to have been delivered, executives of
the disputing Members shall agree upon a mutually acceptable time and place to
meet and shall meet at that time and place, and thereafter as often as they
reasonably deem necessary, to exchange relevant information and to attempt to
resolve the dispute. The first of those meetings shall take place within ninety
(90) days after the date that the notice referred to above has been deemed to be
delivered. If a disputing Member intends to be accompanied at a negotiation
meeting by an attorney, that disputing Member shall give the other Members at
least three (3) business days notice of that intention, and the other Members
also may be accompanied by an attorney. If the matter has not been resolved
within ninety (90) calendar days of the disputing Member's notice or if, within
five (5) business days of delivery of that notice, the Members fail to agree on
a time and place for an initial meeting, any Member may initiate arbitration of
the dispute, controversy or claim as provided in Section 17.09. In addition, if
one Member has requested another Member to participate in a non-binding
procedure and the other Member has failed to participate, the requesting Member
may initiate arbitration pursuant to Section 17.09
49
prior to the expiration of the ninety (90) days. The ninety (90) day periods in
this Section 17.09 are referred to in this Article 17 as the "Notice Periods."
(ii) Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement, including the breach, termination or
validity hereof, which cannot be resolved by negotiation as provided in Section
17.09, shall be finally settled under the Rules of Conciliation and Arbitration
of the American Arbitration Association (the "Rules") by an arbitral tribunal
(the "Tribunal") comprising one arbitrator appointed by the disputing Member(s),
one arbitrator appointed by the non-disputing Member(s) and a third arbitrator
appointed by the two arbitrators appointed by the Members. The third arbitrator
shall act as the presiding arbitrator (the "Chairman"). A decision of the
majority of the arbitrators shall be binding.
(iii) The arbitration shall be held in San Diego, California.
(iv) Any arbitration proceeding hereunder must be instituted
within two (2) years after the dispute, controversy or claim arises. Failure to
institute an arbitration proceeding within the two-year period shall constitute
an absolute bar to the institution of any proceedings respecting the dispute,
controversy or claim and a waiver thereof. The arbitration proceeding shall be
conducted and concluded as soon as reasonably practicable, based on the schedule
established by the Tribunal, but in any event the Tribunal shall render its
decision within one hundred twenty (120) calendar days following the selection
of the Chairman. The Members desire that any dispute, controversy or claim be
resolved quickly and at the lowest possible cost, and the Tribunal shall act in
a manner consistent with these intentions, including limiting discovery to only
that which is absolutely necessary to enable the Tribunal to render a fair
decision that reflects the Members' intent as set forth in this Agreement.
(v) The Tribunal shall interpret this Agreement in accordance
with the laws stipulated in Section 17.09 and the rules of construction
stipulated in this Agreement. The procedural law of the forum shall be applied
with respect to matters not covered by the Rules. All statutes of limitation
that otherwise would be applicable shall apply to the arbitration proceeding
provided that such statutes of limitation shall be tolled to the extent
necessary to allow the Members and the Tribunal the full benefit of the Notice
Periods. Any attorney-client privilege and other protection against disclosure
of privileged or confidential information, including any protection afforded the
work product of any attorney, that otherwise could be claimed by any Member
shall be available to and may be claimed by that Member in any arbitration
proceeding. No Member waives any attorney-client privilege or any other
protection against disclosure of privileged or confidential information by
reason of anything contained in, or done pursuant to, the arbitration provisions
of this Agreement.
(vi) The decision of the Tribunal pursuant to this Article 17
shall be final and binding on the parties of this Agreement. The Members agree
to submit to the jurisdiction of any court having jurisdiction over the Member
or the property of the Member against whom enforcement is sought for purposes of
the enforcement of any award, order or judgment.
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(vii) Any award of damages pursuant to the arbitration shall
be included in a written decision signed by the arbitrator (or a majority of the
arbitrators) which shall state the reasons upon which the award was based,
including all the elements involved in the calculation of any award of damages.
The award of damages shall not include punitive, special, exemplary or
consequential damages, including loss of profits or lost business opportunity,
or any damages other than or in addition to actual damages, but may include
interest from the date of the award. Any monetary award shall be in the United
States dollars, free of any tax or other deduction, and shall include interest
from the date of claim for any breach or other violation of this Agreement to
the date paid in full at a floating rate of interest equal to the prime rate of
interest in effect from time to time at Citibank, N.A., New York, New York.
(viii) Notwithstanding any provision of this Agreement, either
Member shall have the right, at any time after commencement of any arbitration
proceeding hereunder and prior to the rendering of any award, order or judgment
thereunder, to apply to the Tribunal or to any court of competent jurisdiction
for injunctive or preliminary relief. No application for injunctive or
preliminary relief shall be construed to infringe this arbitration agreement or
affect the powers of the Tribunal.
(ix) The Members agree that during the pendency of any
mediation and/or arbitration, the Company shall continue its operations and each
of the Members will continue to provide its services under the existing
Management Services Agreement as if there were no dispute.
(c) The parties hereto agree that irreparable damage would occur in
the event any provision of this Agreement was not performed in accordance with
the terms hereof and that the parties hereto shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or in
equity.
SECTION 17.10 Expenses. Each of the Members will bear its own costs
and expenses, including brokers' or finders' fees, if any, incurred in
connection with the preparation and execution of this Agreement.
SECTION 17.11 Further Assurances. The Members will execute and
deliver such further instruments and do such further acts and things as may be
required to carry out the intent and purpose of this Agreement.
SECTION 17.12 Amendments and Waivers; Assignment.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, or in the case of a waiver, by the party or
parties against whom the waiver is to be effective; provided, that Schedule 2.01
to this Agreement shall be deemed amended from time to time to reflect the
admission of a new Member, the withdrawal or resignation of a Member and the
adjustment of the Membership Units resulting from any sale, Transfer or other
disposition of a Membership Unit, in each case that is made in accordance with
the provisions thereof; and
51
provided, further, that the Members Committee may, by Majority Vote, amend this
Agreement without the consent of any other Member (i) to reflect changes validly
made in the membership of the Company and corresponding changes in the terms and
provisions of this Agreement necessary to reflect or conform with any such
change in membership, (ii) to reflect changes permitted in accordance with this
Agreement in the Capital Accounts and/or Membership Units of the Members, (iii)
to clarify any ambiguities herein or to appropriately adjust any mechanics or
procedures set forth herein so long as the rights of the Members are not
prejudiced thereby, or (iv) if such amendment is of an inconsequential nature
(as reasonably determined by the Managing Members) and does not affect the
rights of the Members in any adverse respect. Anything in the foregoing
provisions of this Section 17.12 to the contrary notwithstanding, this Agreement
shall be amended from time to time (without any required consent of the Members)
in each and every manner deemed necessary or appropriate by the Managing Members
or the tax matters Member to comply with the then existing requirements of the
Code and the Regulations and the Rulings of the Treasury Department or Internal
Revenue Service affecting the Company. Any amendment of the definition of the
term "Company Business" or expansion of the scope or coverage thereof shall not
itself amend or expand the scope or coverage of the restrictions imposed
pursuant to Section 14.01.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder (other than a failure or delay beyond a period of time
specified herein) shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
(c) Except as provided in Article X hereof, this Agreement shall not
be assigned by the Members and no such assignment shall relieve the assigning
party of its obligations hereunder if such assignee does not perform such
obligations.
SECTION 17.13 No Third Party Beneficiaries. No person or entity
other than a party hereto shall have any rights or remedies under this
Agreement.
SECTION 17.14 Headings. The headings and subheadings in this
Agreement are included for convenience and identification only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof.
52
IN WITNESS WHEREOF, the parties hereto have entered into this
Limited Liability Company Agreement or have caused this Agreement to be duly
executed by their respective authorized officers, in each case as of the date
first written above.
Sempra Energy Information Solutions
By: __________________________________
Name: __________________________________
Title: _________________________________
Modis, Inc.
By: __________________________________
Name: __________________________________
Title: _________________________________
Xxxxxxx.xxx
By: __________________________________
Name: __________________________________
Title: _________________________________
53
SCHEDULE 1.01
Certain Definitions
"Adjusted Capital Account" means, with respect to each Member, the
balance in such Member's Capital Account as of the end of the relevant Fiscal
Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of each
of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in
Sections 1.704-(1)(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
"Adjusted Capital Account Deficit" means, with respect to each
Member, the deficit balance, if any, in such Member's Adjusted Capital Account
as of the end of the relevant Fiscal Year.
"Affiliate" means, with respect to a specified Person, any Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the specified Person, including,
without limitation, any partnership or joint venture in which the specified
Person (either alone or together with any other subsidiary) has, directly or
indirectly, an interest of 10% or more; provided that, with respect to each of
SEIS, Modis and Cayenta, an "Affiliate" means any non-regulated Person that
directly or indirectly is controlled by it. As used in this definition, the term
"control" means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, as trustee
or executor, by contract or credit arrangements or otherwise.
"Agreement" means this Limited Liability Company Agreement of
Soliance Networks, as amended, modified, supplemented or restated from time to
time.
"Asset Value" means, with respect to any asset or liability, such
asset's or liability's adjusted basis for federal income tax purposes, except as
follows:
(i) the initial Asset Value of any asset (other than money)
contributed by, or liability assumed from, a Member of the Company shall be the
value of such asset or liability as determined by Unanimous Vote of the Members;
and
(ii) the Asset Value of all assets and liabilities of the
Company shall be adjusted to equal their respective gross fair market values, as
determined by the Members Committee, in accordance with Regulations Section
1.704-1(b)(2)(iv)(f) at the following times:
54
(i) the acquisition of an additional interest in the Company by any new or
existing Member in exchange for more than a de minimis contribution to the
capital of the Company; (ii) the distribution by the Company to a Member of more
than a de minimis amount of Company assets other than money as consideration for
an interest in the Company; and (iii) the liquidation of the Company within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (i) and (ii) above shall be made only if
required by a Majority Vote of the Managing Members. Upon a revaluation of the
Company's assets pursuant to this clause (ii), each Member's Capital Account
shall be increased or decreased as if such assets were sold for their fair
market values and the gain or loss realized thereon were allocated among the
Members in accordance with Article VII hereof and Regulations Section
1.704-1(b)(2)(iv)(f).
If the Asset Value of an asset or liability has been determined or
adjusted pursuant to paragraph (i) or paragraph (ii) above, such Asset Value
shall thereafter be reduced by the Depreciation taken into account with respect
to such asset for purposes of computing Net Profits and Net Losses.
(iii) The Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g0 into account) of such asset on the date of
distribution as determined by the Members' Committee; and
(iv) The Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of
the definition of "Net Profits" and "Net Losses" or Section 7.02 hereof;
provided, however, that Asset Values shall not be adjusted pursuant to this
subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii)
is required in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (iv).
If the Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (ii) or (iv), such Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset, for
purposes of computing Net Profits and Net Losses.
"Bankruptcy" of a Member shall be deemed to occur for purposes of
this Agreement if:
(i) an involuntary petition under any bankruptcy or insolvency
law or under the reorganization provisions of any such law is filed with respect
to such Member or a receiver of or for the property of such Member is appointed
without acquiescence of such Member, which petition or appointment remains
undischarged or unstayed for an aggregate period of 90 days (whether or not
consecutive); or
55
(ii) a voluntary petition under any bankruptcy or insolvency
law or under the reorganization provisions of any such law is filed by such
Member, a voluntary assignment of such Member's property for the benefit of
creditors is made, or a receiver of or for the property of such Member is
appointed by, or acquiesced in, by such Member.
"Business Day" means any day, except a Saturday, Sunday or other day
on which commercial banking institutions in New York City are authorized or
directed by law or executive order to close.
"Capital Account" means, with respect to any Member, the account
maintained for such Member in accordance with the provisions of Section 4.06.
"Capital Contribution" means, with respect to any Member, the
aggregate amount of money contributed to the Company and the initial Asset Value
of any property (other than money) contributed to the Company pursuant to
Article IV with respect to the Membership Units held by such Member. In the case
of a Member that acquires an interest in the Company by virtue of an assignment
or transfer in accordance with the terms of this Agreement, "Capital
Contribution" means the Capital Contribution of such Member's predecessor to the
extent relating to the acquired interest.
"Certificate " means the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. The reference to a specific section (ss.) of the Code refers not only
to such specific section but also to any corresponding provision of any federal
tax statute enacted after the date of this Agreement, as such specific section
or corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Company Business" means any activity, business, project or
undertaking related to the production or distribution of Products as
contemplated in Article XIII in which the Members' Committee by Majority Vote
determines the Company should be engaged, and any other activity, business,
project or undertaking approved by the Unanimous Vote of the Members Committee;
provided, that any such additional activities, businesses, projects or
undertakings approved by such a Unanimous Vote shall not itself amend or expand
the scope or coverage of the restrictions imposed pursuant to Section 14.01.
"Company Minimum Gain" has the meaning given "partnership minimum
gain" in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Covered Person" means a Member, any Affiliate of a Member, any
officers, directors, Representatives, shareholders, employees or partners or
members of a Member, or its respective Affiliates or any officers of the
Company.
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"Customer Contract" means written agreements between the Company,
directly or through an agent approved by the Members Committee, on the one hand,
and the customer, on the other hand, on such terms and subject to such
conditions as shall be within underwriting and other guidelines to be determined
from time to time by the Members Committee.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments, (c)
all obligations of such Person as lessee under leases that have been or should
be, in accordance with GAAP, recorded as capital leases, (d) all obligations,
contingent or otherwise, of such Person in respect of acceptances, letters or
credit or similar extensions of credit, (e) all Debt of others referred to in
clauses (a) through (d) above or clause (f) below guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such Debt
or to advance or supply funds for the payment or purchase of such Debt, (ii) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such Debt or to assure the holder of such Debt against loss, (iii) to supply
funds to or in any other manner invest in the debtor (including any agreement to
pay for property or services irrespective of whether such property is received
or such services are rendered) or (iv) otherwise to assure a creditor against
loss, and (f) all Debt referred to in clauses (a) through (e) above secured by
(or which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even through
such Person has not assumed or become liable for the payment of such Debt.
Notwithstanding the foregoing, Capital Contributions made pursuant to Article IV
shall not be considered Debt of any Person.
"Dedicated Assets" means all or any of the SEIS Dedicated Assets,
the Modis Dedicated Assets and the Cayenta Dedicated Assets.
"Delaware Act" means the Limited Liability Company Act, Delaware
Code ss.ss.18-101, et seq., as amended from time to time.
"Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
Fiscal Year or other period; provided, that if the Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such Fiscal Year or other period, Depreciation shall be an amount that bears
the same ratio to such beginning Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction with respect to such
asset for such Fiscal Year or other period bears to such beginning adjusted tax
basis; and provided further that, if the federal income tax depreciation,
amortization or other cost recovery deduction for such Fiscal Year or other
period is zero, Depreciation shall be determined with reference to such
beginning Asset Value using any reasonable method selected by the Members.
57
"Fiscal Year" means (i) the period commencing upon the formation of
the Company and ending on December 31, 1999, (ii) any subsequent twelve month
period commencing on January 1 and ending on December 31, or (iii) any portion
of the period described in clause (ii) of this sentence for which the Company is
required to allocate Net Profits, Net Losses and other items of Company income,
gain, loss or deduction pursuant to Article VII hereof.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Interest Rate" means the London Interbank Offered Rate (LIBOR) plus
2%.
"Liens" means any liens, claims, encumbrances, security interests,
equities, charges and options of any nature whatsoever.
"Majority Vote" means, with respect to any matter to be voted on by
the Representatives designated by the Members, the written approval of, or the
affirmative vote by, in the aggregate, a majority of the number of Membership
Units.
"Managing Members" means each of SEIS, Modis and Cayenta and their
respective successors and permitted assigns.
"Marketable Securities" means shares of common stock that are listed
and traded on a national exchange or the Nasdaq National Market.
"Member" means any Person named as a member of the Company on
Schedule 2.01 hereto and any Person admitted as an additional Member pursuant to
the provisions of this Agreement, in each case, in such Person's capacity as a
member of the Company.
"Member Nonrecourse Debt" has the same meaning as the term "partner
nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect
to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.
"Member Nonrecourse Deductions" has the same meaning as the term
"partner nonrecourse deductions" in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Regulations.
"Membership Unit" means an equity interest in the Company
representing such fractional part of the interest of all unit holders pursuant
to this Agreement as is equal to the quotient of one divided by the total number
of Membership Units.
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"Net Distributable Cash" means, for any period for which the amount
thereof is being determined, the net income for the Company for such period,
after the deduction of all expenses incurred (including without limitation, the
amortization of the acquisition cost of Customer Contracts over such period and
at such rate as shall be determined by the Members Committee in accordance with
GAAP, all interest expenses incurred (including Member loans for liquidity or
margin), and reasonable reserves for Customer Contract attrition and
repudiation), and as further adjusted by subtracting the amount of any of the
following added, and by adding any of the following subtracted, in determining
such net income (i) the restoration of any reserve except to the extent that
provision for such reserve was made during such period, (ii) the write-up of any
assets, (iii) net gains arising from the collection of insurance proceeds, (iv)
any net income of any entity in which the Company has an ownership interest
except to the extent of the cash dividends or distributions actually received by
the Company from such entity, and (v) Depreciation (other than amortization of
Customer Contracts and other assets); minus
(i) if the Company is not a taxable entity for federal income
tax purposes, the amount of distributions made or to be made by the Company to
its Members with respect to the Company's taxable income for such period; or if
the Company is a taxable entity for federal income tax purposes, the amount of
tax payable in respect of the Company's taxable income for such period; minus
(ii) to the extent not previously deducted, all interest, fees
and other charges which are due or have accrued during such period under or in
respect of all indebtedness of the Company, and all principal payments due or
payable during such period under or in respect of indebtedness, including in
each case Member loans, credit supports and other extensions of liquidity in
accordance with Section 4.03; minus
(iii) an amount equal to the product of (x) the sum of the
aggregate cash outlay and uses of funds (including without limitation, operating
expenses, debt service (including all principal, interest, fees and charges) and
capital expenditures) of the Company accrued or paid in respect of the previous
fiscal quarter, times (y) the number of fiscal quarters of the Company included
within the period for which Net Distributable Cash is being determined; minus
(iv) the amount of capital expenditures actually made during
such period.
"Net Profits" and "Net Losses" mean, for each Fiscal Year, an amount
equal to the Company's taxable income or loss for such Fiscal Year, determined
in accordance with ss. 703(a) of the Code (but including in taxable income or
loss, for this purpose, all items of income, gain, loss or deduction required to
be stated separately pursuant to ss. 703(a)(1) of the Code), with the following
adjustments:
(i) any income of the Company exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this definition shall be added to such taxable income or loss;
59
(ii) any expenditures of the Company described in ss.
705(a)(2)(B) of the Code (or treated as expenditures described in ss.
705(a)(2)(B) of the Code pursuant to Regulation ss. 1.704-1(b)(2)(iv)(i)) and
not otherwise taken into account in computing Net Profits or Net Losses pursuant
to this definition shall be subtracted from such taxable income or loss;
(iii) in the event the Asset Value of any asset of the Company
is adjusted in accordance with paragraph (ii) or paragraph (iii) of the
definition of "Asset Value" above, the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Net Profits or Net Losses;
(iv) gain or loss resulting from any disposition of any asset
of the Company with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Asset Value of the
asset disposed of, notwithstanding that the adjusted tax basis of such asset
differs from its Asset Value;
(v) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's Interest in the Company, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the basis of
the asset ) or loss (if the adjustment decreases such basis) from the
disposition of such asset and shall be taken into account for purposes of
computing Net Profits or Net Losses; and
(vi) Notwithstanding any other provision of this definition,
any items which are specifically allocated pursuant to Section 7.02 or Section
7.03 hereof shall not be taken into account in computing Net Profits or Net
Losses.
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 7.02 and 7.03 shall be
determined by applying rules analogous to those set forth in subparagraphs (i)
through (vi) above. Net Profits and Net Losses shall be determined net of the
items of Company income, gain, loss or deduction specially allocated pursuant to
Sections 7.02 and 7.03.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Person" means any individual, corporation, partnership, limited
partnership, limited liability company, joint venture, trust, unincorporated or
governmental organization or any agency or political subdivision thereof.
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"Products" is defined as the provision of Application Service
Provider (ASP) and Web-hosting services for the utility industry (any company
engaged in the generation, distribution, transmission and retail sale of
electrical energy, gas and water to retail sellers or transporters of energy
commodity including municipalities, utilities and other energy service providers
(ESPs).
"Property" means all real and personal property acquired by the
Company, including cash, and any improvement thereto, and shall include both
tangible and intangible property, but shall not include the SEIS Dedicated
Assets, Modis Dedicated Assets and Cayenta Dedicated Assets.
"Rate Earned" shall mean the dollar value of interest earned on cash
invested based on the applicable short-term money market rate.
"Regulations" means the income tax regulations, including temporary
regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Related Agreements" means the Management Services Agreements, and
the License Agreements as any of the same may be amended and/or restated from
time to time.
"Subsidiary" or "Subsidiaries" of any Person means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which such person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"Transfer" means the voluntary or involuntary sale, assignment,
transfer, pledge, hypothecation or other disposition or conveyance of, or grant
of a Lien in respect of, legal or beneficial interest, directly or indirectly,
whether in one transaction or in a series of related transactions.
"Transferee" means any Person that is a transferee of a Member's
interest in the Company, or part thereof.
"Unanimous Vote" means, with respect to any matter to be voted on,
the written approval of, or the affirmative vote by, Representatives designated
by Members owning all of the Membership Units.
"Unrecovered Capital" shall mean, as to a particular Member at a
particular time, the amount, if any, by which (i) the aggregate Capital
Contributions of such Member pursuant to Sections 4.01 and 4.03(a)(iii) hereof
up to such time, exceeds (ii) all amounts theretofore distributed as a return of
Capital Contributions in respect of such Member's Membership Interest in the
Company pursuant to Sections 8.05(b)(i) and 11.04(b)(iv) hereof.
61
62
SCHEDULE 2.01
Members, Capital Contributions, Addresses
and Number of Membership Units
Member Capital Number of
Name and Address Contribution Membership Units
Sempra Energy
Information Solutions $4 million 800
000 Xxx Xxxxxx
Xxx Xxxxx, XX 00000-0000
Modis, Inc. $5 million 100
0 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Xxxxxxx.xxx $5 million 100
000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
1
SCHEDULE 6.03
Initial Representatives on Members Committee
Initial SEIS Initial Modis Initial Cayenta
Representatives Representatives Representatives
Xxx Xxxxxxxxx Xxx Xxxxx Xxxx Xxx
Xxxxx Xxxxx Xxxxx Xxxxxxxx Xxxx XxXxxxx
Initial Designees on Management Committee
Initial SEIS Initial Modis Initial Cayenta
Designees Designees Designees
Xxxx Xxxxx-Xxxxxxxx Xxxxx Xxxxxxxx Xxxx Xxxxxxx
2
TABLE OF CONTENTS
Page
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SCHEDULES
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SCHEDULE 1.01 Certain Definitions
SCHEDULE 2.01 Members, Capital Contributions, Addresses and Number of
Membership Units
SCHEDULE 6.03 Initial Representatives; Management Committee
i
