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EXHIBIT 10.29.1
EXECUTION COPY 6/25/96
LIMITED LIABILITY COMPANY AGREEMENT
OF XXXXXXX CELLULAR LLC (a Delaware limited liability company)
This Limited Liability Company Agreement (the "Agreement") is entered
into as of July 3, 1996, by and between Xxxxxxx Entertainment, Inc., with its
principal place of business at Xxx Xxxx Xxxx Xxxxx, Xxxxx Xxxxx, Xxx Xxxx 00000
("Xxxxxxx"), and Paragon Cellular Services, Inc., with its principal place of
business at 00000 X.X. Xxxxxxx 00X, Xxxxxxxxxx, XX 00000 ("Paragon") (Xxxxxxx
and Paragon are hereinafter referred to individually as a "Member" and
collectively as "Members"), both of which do hereby form XXXXXXX CELLULAR LLC, a
limited liability company (the "Company"), pursuant to the Delaware Limited
Liability Company Act, upon the following terms and conditions:
Section 1. DEFINITIONS.
As used herein, the following terms have the following meanings:
1.1 "Act" means the Delaware Limited Liability Company Act, as amended
from time to time.
1.2 "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by, or under common control with
such Person, (ii) any officer, director, shareholder, member, or partner of such
Person, (iii) any Person who is an officer, director, shareholder, member,
partner, trustee, or employee of any Person described in clauses (i) and (ii) of
this sentence, or (iv) any child, grandchild (whether through marriage,
adoption, or otherwise), parent, brother, sister, or spouse of a Person. For
purposes of this definition, the term "controls," "is controlled by," or "is
under common control with" shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
1.3 "Bankruptcy" means, with respect to any Person, a "Voluntary
Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary Bankruptcy" means, with
respect to any Person, the inability of such Person generally to pay its debts
as such debts become due, or an admission in writing by such Person of its
inability to pay its debts generally or a general assignment by such Person for
the benefit of creditors; the filing of any petition or answer by such Person
seeking to adjudicate it bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of such Person or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking,
consenting to, or acquiescing in the entry of an order for the relief or the
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appointment of a receiver, trustee, custodian, or other similar official for
such Person or for any substantial part of its property; or corporate action
taken by such Person to authorize any of the actions set forth above. An
"Involuntary Bankruptcy" means, with respect to any Person, without the consent
or acquiescence of such Person, the entering of an order for relief or approving
a petition for relief or reorganization or any other petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or other similar relief under any present or future bankruptcy,
insolvency or similar statute, law, or regulation, or the filing of any such
petition against such Person which petition shall not be dismissed within ninety
(90) days, or, without the consent or acquiescence of such Person, the entering
of an order appointing a trustee, custodian, receiver, or liquidator of such
Person or of all or any substantial part of the property of such Person which
order shall not be dismissed within sixty (60) days.
1.4 "Capital Account" means a capital account to be established for
each Member (or transferee of a Member who is not admitted to the Company as a
Member) and maintained in accordance with the rules in Code Reg.
1.704-1(b)(2)(iv). Upon a distribution in kind of Company property, the Capital
Account of each Member will be debited or credited with the Member's allocable
share of gain or loss that would have been recognized by the Company had the
property been sold for an amount equal to the fair market value immediately
prior to the distribution.
Each Member's Capital Account shall be determined and
maintained in accordance with the Treasury Regulations adopted under Section
704(b) of the Code. Any questions concerning a Member's Capital Account shall be
resolved by applying principles consistent with this Agreement and the Treasury
Regulations adopted under Section 704 of the Code in order to ensure that all
allocations to the Members will have substantial economic effect or will
otherwise be respected for federal income tax purposes.
In the event any Member transfers a Percentage Interest in the
Company in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor Member to the extent such
Capital Account relates to such transferred Percentage Interest. In determining
the amount of any liability for purposes of this Section 1.4, there shall be
taken into account Code Section 752(c) and any other applicable provisions of
the Code and regulations promulgated therein.
1.5 "Capital Contribution" means, as to each Member, the Initial
Capital Contribution together with all additional capital contributed to the
Company by such Member pursuant to Section 4 hereof.
1.6 "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
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1.7 "Code Regulations", "Code Regs." or "Regulations" means the Income
Tax Regulations, including Temporary Regulations, promulgated under the Code, as
such regulations may be amended form time to time (including corresponding
provisions in succeeding regulations).
1.8 "Company" means XXXXXXX CELLULAR LLC, a Delaware limited liability
company.
1.9 "Depreciation" means, for each fiscal year or other fiscal period
of the Company, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset of the Company for such
year or other period, except as provided in this Section 1.10. If the adjusted
basis of the Company's assets for federal income tax purposes differs from its
Gross Asset Value at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such fiscal year or other period bears to such beginning
adjusted tax basis. If, however, the federal income tax depreciation,
amortization or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Members.
1.10 "Gross Asset Value" means, with respect to any asset of the
Company, the asset's adjusted basis for federal income tax purposes.
1.11 "Initial Capital Contribution" means, as to any Member, the amount
of cash or property set forth opposite such Member's name on the attached
Schedule A under the heading "Initial Capital Contribution."
1.12 "Majority Vote" means the affirmative vote of Members holding a
majority of Percentage Interests in the Company.
1.13 "Member" means any Person (i) who becomes a Member pursuant to the
terms of this Agreement, and (ii) who holds Percentage Interests. "Members"
means all such Persons.
1.14 "Method of Accounting" means the method of accounting selected
from time to time by the Members.
1.15 "Net Available Cash" means for each fiscal year or other period an
amount equal to the total cash revenues and receipts of the Company from any
source (including financings and refinancings) for such period and other funds
of the Company which, in the determination of the Management Committee are not
needed for the conduct of the Company's
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business, less the sum of (i) cash payments made by the Company during such
period in connection with the conduct of the Company's business (including
payments of principal and interest on the Xxxxxxx Loans and any Third Party
Loans, but excluding distributions to Members) and (ii) the amount of any
increase during such period in, or amounts established during such period for,
reasonable reserves for anticipated costs, expenses, liabilities and obligations
of the Company, working capital needs of the Company or other appropriate
Company purposes, as determined by the Management Committee.
1.16 "Person" means any individual, partnership, limited liability
company, corporation, trust or other entity.
1.17 "Profit and Loss" means, for each fiscal year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with the Code.
1.18 "Substituted Member" means any Person admitted to the Company in
accordance with the provisions of Section 6 of this Agreement.
1.19 "Third Party Loans" means secured or unsecured financings arranged
by the Company and obtained from unaffiliated third parties; each such financing
to bear interest at the rate offered by the third party lender and to be
repayable over such period and upon such terms and conditions as shall have been
agreed upon between the third party lender and the Company.
1.20 "Transfer" means, with respect to a Percentage Interest, a sale,
assignment, gift, or other disposition, or the pledge, grant of a security
interest or lien in, or other encumbrance, whether voluntary or by operation of
law, of such Percentage Interest.
1.21 "Percentage Interest" or "Interest" means a fractional membership
interest in the Company.
Section 2. PURPOSES AND POWERS OF THE COMPANY
2.1 Purposes. The Company has been formed to engage in the business
described in the business plan on Schedule B annexed hereto.
2.2 Certificate of Formation. Upon the execution hereof, the Members
authorize the Managers to file a Certificate of Formation for the Company in the
form annexed hereto as
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Schedule C pursuant to Section 18-201 of the Act, which may be executed by any
of the Managers.
Section 3. MEMBERS; MANAGERS; MANAGEMENT OF COMPANY
3.1 Members' Voting Rights.
(a) Except as otherwise expressly provided in this
Agreement, all decisions of the Members shall be made with the consent of the
holders of a Majority in Percentage Interests.
(b) The following matters shall require approval by
the Members holding a Majority of Percentage Interests:
(i) dissolution of the Company;
(ii) the sale, exchange or other disposition
of assets constituting a material part of the assets of the Company outside of
the ordinary course of business;
(iii) the lease, mortgage, pledge or other
hypothecation of assets constituting a material part of the assets of the
Company;
(iv) the merger or consolidation of the
Company with another entity;
(v) the incurring of indebtedness by the
Company in excess of $50,000.00;
(vi) the issuance of any additional Interests
in the Company;
(vii) such other matters as are reserved to
the Members pursuant to any provisions of this Agreement or the Act.
3.2 Management Committee.
(a) The management of the Company's business shall be
vested in the Management Committee which shall consist of not less than five
Managers of whom two (2) shall be elected by Xxxxxxx (the "Xxxxxxx Managers" or
a "Xxxxxxx Manager"), two (2) by
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Paragon (the "Paragon Managers" or a "Paragon Manager") and one (1) by Xxxxxxx
for as long as the Xxxxxxx Loan and/or Additional Xxxxxxx Loan is due and
outstanding and thereafter by unanimous consent of the Members (the "Fifth
Manager"). Each Member agrees to vote his Percentage Interest to elect as a
Manager the nominee or nominees of the other Member which the other Member is
entitled to nominate as a Manager. Subject to Section 3.1, the powers granted to
the Management Committee shall include, without limitation, the express powers:
(i) to conduct, manage and control the
affairs and business of the Company, and to make such rules and regulations
therefor consistent with law, the Certificate of Formation and this Agreement;
(ii) to change the principal office of the
Company from one location to another within or outside of Florida; to fix and
locate from time to time one or more subsidiary offices of the Company within or
outside of the State of Florida; and to designate any place within or outside of
the State of Florida for the holding of any Members' meeting or meetings;
(iii) subject to Section 3.1(b)(v), to borrow
money and incur indebtedness for the purposes of the Company, to cause to be
executed and delivered therefor, in the Company's name, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecations or other evidence
of debt and securities;
(iv) to execute and file in the appropriate
office(s) any certificates or other documents required by law to effectuate the
purposes of this agreement, including, without limitation those required to
comply with the Act; and
(v) to execute all instruments, documents or
other papers which may be required to be executed by the Company in furtherance
of any of the powers described above, may be executed by any one of the
Managers, except that all withdrawals of Company funds, whether by check or
otherwise, shall be governed by Section 3.5 of this Agreement.
(b) Each Manager shall have one vote. Any action
requiring a decision of the Management Committee shall be determined by a
majority vote of the Managers then sitting on the Management Committee.
(c) In the event that the outstanding amount of
principal and interest due and unpaid on the Xxxxxxx Loan or Additional Loan is
less than $100,000.00 and more than $0.00, and Xxxxxxx determines that
additional capital or loans in excess of $100,000.00 are required for the
operation of the Company's business, and requests that such capital or loans be
provided by the Members, then Paragon shall have the right, exercisable within
ten (10) days
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after receipt of Xxxxxxx'x notice of such additional capital or loans, to
provide such amount on the terms proposed by Xxxxxxx, and if Paragon provides
such amount on such terms within such period, then Xxxxxxx shall request that
one of the three Managers appointed by Xxxxxxx resign and the Fifth Manager
shall be appointed by Paragon.
(d) Xxxxxxx X. Xxxxxxxx, Xxx Xxxxxxxxx, Xxxxxxx
Xxxxxx Xxxxx, Xxxxxxx X. Xxxxx, Xx. and Xxxxxx Xxxxxxxx are hereby appointed as
the Initial Managers of the Company. The Initial Managers shall serve until the
first organizational meeting of the Company. Thereafter, each Manager shall be
elected annually by the Members in accordance with Section 3.2(a). Failure by
the Members to name the Fifth Manager or to fill a vacancy created by the
removal or resignation of the Fifth Manager shall not affect the validity of any
action taken by the Management Committee in accordance with the other provisions
of this Agreement.
(e) The Management Committee may from time to time
authorize one or more of its Managers, agents or attorneys acting alone or in
concert, to take such actions as may be necessary or advisable to implement the
policies, decisions and duties of the Management Committee including, without
limitation, the execution and delivery of documents and instruments as
contemplated in Section 3.2(a)(iii) and 3.2(a)(v).
(f) The Managers shall not be required to manage the
Company as their sole and exclusive function and each may have other business
interests and/or engage in any other activity in addition to those related to
the Company. Neither the Company nor any Member or Manager shall have any right
pursuant to this Agreement to share or participate in such other business
interests or activities or to the income or proceeds derived therefrom. No
Manager shall incur liability to the Company or any Member solely as a result of
engaging in any other business interests or activities.
(g) The Members may appoint one or more officers of
the Company, including a President, one or more Vice Presidents, Treasurer,
Secretary and such other officers and agents as the Members may deem advisable.
All such officers must also be Managers and such officers shall have such
authority and perform such duties as may be prescribed by the Management
Committee.
3.3 Books of Account and Company Records. The books of the Company
shall be maintained, as provided by law, at the principal place of business of
the Company and shall include but not limited to: (1) a current and past list,
setting forth, in alphabetical order, the full name and last known mailing
address of each Member and Manager, if any; (2) a copy of the Certification of
Formation and any amendments thereto, together with executed copies of any
powers of attorney to which any Articles of Amendment have been executed; (3)
copies of the
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Company's federal, state and local income tax returns and financial statements
for the three (3) most recent years; (4) copies of this Agreement and any other
operating agreements, and all amendments of any of the foregoing; and (5) a
statement setting forth the Capital Contribution and the agreed value of any
other property or services contributed by each Member. Each Member shall cause
to be entered in the Company's books a full and accurate account any transaction
made by that Member on behalf of the Company. Each of the Members shall have the
right at all reasonable times to review all books of account and physical books
and records of the Company. At the completion of each fiscal year, the books of
account and physical records of the Company shall be audited by a certified
public accounting firm selected by the Management Committee.
3.4 Banking. The Company shall establish one or more general business
bank accounts with such bank or banks as may be determined by the Management
Committee from time to time. All Company receipts (including, without
limitation, the capital of the Company and all other monies and instruments for
the payment of monies to the Company) shall be deposited into said account or
accounts of the Company, and all expenses of the Company shall be paid from said
account or accounts.
3.5 Authorization of Disbursement of Company Funds. Disbursement of the
Company funds, in payment of business expenses or otherwise, shall be by
appropriate check, on an account of the company and shall be drawn upon those
signatures of the Managers or Members as hereinafter set forth. All drafts,
checks or withdrawal of monies from the company accounts shall require the
signature of at least two (2) Managers which will be the Xxxxxxx Managers for as
long as the Xxxxxxx Loan and/or Additional Xxxxxxx Loan remain due and
outstanding and thereafter, one of which will be a Xxxxxxx Manager and the other
a Paragon Manager.
3.6 Database. The Company anticipates that it will develop a customer
data base in the course of the sale and marketing of its products and services,
which shall be the property of the Company and be leased, sold and otherwise
dealt with by the Company. Each Member shall have the right while a Member of
the Company to use the customer data base created by the Company to market and
promote other products and services offered by such Member, but no Member may
sell or lease the Company's customer data base other than on behalf of the
Company. The foregoing restrictions shall not apply to any customer names or
other customer information provided by a Member to the Company, which names and
information shall remain the property of the Member to be sold, leased and
otherwise dealt with in that Member's sole discretion and without any duty to
account to the other Member.
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3.7 General Restrictions. No Member or Manager shall have the right,
power or authority to do any of the following acts without the prior approval of
the holders of a majority in Percentage Interests:
(a) expend or use any Company money or property
except upon the account of and for the benefit of the Company or except as
otherwise expressly provided in this Agreement;
(b) pledge any of the Company's credit or property
for other than Company purposes;
(c) assign the Company's property in trust for
creditors or on the assignee's promise to pay the debts of the Company except as
otherwise provided in this Agreement;
(d) confess a judgment against the Company in an
amount greater than $10,000.00; (e) enter into any leases for real or personal
property;
(f) enter into any financing or loan arrangements,
including any letters of credit; or
(g) enter into any agreement with any telephone or
telecommunications company or any service bureau.
3.8 Meetings.
(a) An annual meeting of all Members shall be held
annually at such time and place as may be designated by the Management
Committee.
(b) Written notice of the annual meeting setting
forth the place, date and hour of the meeting shall be given to each Member and
shall be given personally or by first class mail, not less than ten (10) nor
more than fifty (50) days before the date of the meeting.
(c) Any Member may call a special meeting of the
Members for any purpose on giving ten (10) days prior written notice of the
meeting (shorter notice may be agreed upon all of the Members in writing). The
notice shall provide information as to time, place and agenda of the meeting.
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(d) Any Member may waive his or her right to receive
any notice required under this Agreement by delivery to the Company of a written
waiver of the right to receive such notice.
3.9 Quorum. Members holding not less than a majority of all Percentage
Interests, represented in person or by proxy, shall constitute a quorum at any
meeting of Members. In the absence of a quorum at any meeting of Members, a
majority of the Percentage Interests so represented may adjourn the meeting from
time to time for a period not to exceed sixty (60) days without further notice.
However, if the adjournment is for more than sixty (60) days, or if after the
adjournment a new date if fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each Member of record entitled to vote at
such meeting. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. The Members present at a meeting may continue
to transact business until adjournment, notwithstanding the withdrawal during
the meeting of Percentage Interests who absence results in less than a quorum
being present.
3.10 Proxies.
(a) A Member may vote in person or by proxy executed
in writing by the Member or by a duly authorized attorney-in-fact.
(b) Every proxy must be signed by the Member or his
or her attorney-in- fact. No proxy shall be valid after the expiration of eleven
(11) months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Member executing it.
3.11 Salaries and Compensation to Members. Except as approved from time
to time by the Management Committee, the Company shall have no duty or
obligation to compensate the Members, their employees, agents or assigns, for
services rendered on behalf of the Company, nor shall a Member be entitled to
salary or other compensation.
3.12 Company Property. All property originally brought into or
transferred to the Company as Capital Contributions of the Members or
subsequently acquired by purchase or otherwise by or on behalf of the Company,
shall be owned by and held in the name of the Company or in such fictitious
business names as are approved by the Management Committee. The trade name
and/or goodwill, if any, of the Company shall be the sole property of the
Company and no Member or Person, shall have the right, title or interest in and
to the trade name or goodwill of the Company.
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3.13 Bankruptcy of the Company. Upon an affirmative vote of Members
holding a Majority in Percentage Interests, the Management Committee shall have
the right to cause a petition to be filed on the Company's behalf and exercise
any and all rights of the Company pursuant to the Federal Bankruptcy Code or any
successor thereto.
3.14 Limitation of Liability. The debts, obligations and liabilities of
the Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and no Member or Manager of
the Company shall be obligated personally for any such debt, obligation or
liability of the Company solely by reason of being a Member or acting as a
Manager of the Company.
Section 4. CAPITAL CONTRIBUTIONS AND LOANS
4.1 Xxxxxxx Loans.
(a) Xxxxxxx will provide a loan to the Company in the
amount of Two Hundred Fifty Thousand Dollars ($250,000.00) to provide for the
initial financing of the Company (the "Initial Xxxxxxx Loan"). The Initial
Xxxxxxx Loan shall bear interest at the rate of seven (7%) percent per annum
payable monthly and shall be repayable as follows:
(i) Mandatory prepayments of principal and
interest shall be made in equal quarterly installments in an amount equal to
twenty (20%) percent of the Company's retained earnings if retained earnings as
determined by the Company for the preceding financial quarter are at least
$250,000 or seventy-five (75%) of the Company's retained earnings if retained
earnings as determined by the Company for the preceding financial quarter are
greater than $500,000.
(ii) Notwithstanding the above, minimum
principal payments of the greater of $10,000.00 or five (5%) percent of the
Company's retained earnings determined on a semi-annual basis shall be made
semi-annually commencing January 1, 1997.
(b) In the event that Xxxxxxx determined in its sole
and absolute discretion, that additional funds are required by the Company
following the making of the Initial Xxxxxxx Loan, Xxxxxxx at its option, in its
sole and absolute discretion, may elect to make an additional $250,000.00 loan
to the Company (the "Additional Xxxxxxx Loan"). The terms of repayment and
interest on the Additional Xxxxxxx Loan shall be the same as the Initial Xxxxxxx
Loan. If Xxxxxxx determines that additional funds are needed by the Company but
Xxxxxxx determines that
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it does not wish to provide such additional funds, Xxxxxxx at its option and in
its sole discretion may offer to sell its Interest in the Company to Paragon at
an amount equal to the outstanding balance of principal and interest owing to
Xxxxxxx on the Xxxxxxx Loan, and, in the event that Paragon accepts such offer
(which acceptance to be effective must be accepted within ten (10) business days
after the making of such offer) Xxxxxxx shall not be bound by the restrictive
covenants set forth in Section 7 of this Agreement. The closing of the purchase
by Paragon of Xxxxxxx'x Interest shall occur within ten (10) business days after
Paragon's acceptance of Xxxxxxx'x offer, time being of the essence in connection
therewith.
4.2 Initial Capital Contributions. Each Member has initially
contributed to the capital of the Company the sum adjacent to the respective
Member's name as set forth in the attached Schedule A, which amount has been
advanced to or for the benefit of the Company.
4.3 Additional Loans or Capital Contributions.
(a) Xxxxxxx may, from time to time, propose a budget
that may require additional funds up to $1,000,000.00 for the operation of the
Company. If all of the Members agree in writing on the proposed budget by
Xxxxxxx, and the terms upon which such funds shall be provided (e.g. capital
contribution or loan and if a loan, the terms of such loans), then the
Management Committee shall deliver a Cash Call Notice to each Member, in which
event each Member shall, within ten (10) days after delivery of the Cash Call
Notice, loan or contribute, as the case may be as determined by the Members,
such Member's proportionate share (determined in accordance with its respective
Percentage Interest) of the total amount required. Nothing herein shall require
Xxxxxxx to propose such budget, and nothing herein shall limit the discretion of
Paragon to approve or disapprove any budget proposed by Xxxxxxx, or the
discretion of Paragon or Xxxxxxx, after a proposed budget has been presented, to
agree or decline to provide the funds described in any proposed budget, all of
which shall be in the sole and absolute discretion of the parties and such
approval or agreement, as the case may be, may be withheld or granted for any
reason or no reason.
(b) In the event that a Member shall fail or refuse
to provide its proportionate share of additional funds as set forth in the Cash
Call Notice (said Member hereinafter a "Cash Deficient Member"), then the
Percentage Interest of all of the Members who have provided their proportionate
share of additional funds shall thereupon be recalculated so that (1) the
Percentage Interest in the Company of each Cash Deficient Member shall be
reduced by subtracting therefrom the product (rounded to six decimal places) of
One and One Half (1 1/2) multiplied by the result obtained from (A) multiplying
such Cash Deficient Member's then Percentage Interest by (B) a fraction, the
numerator of which shall be the amount of the Deficiency and the denominator of
which shall be the sum of all Capital Contributions made and required to be made
plus the amount of additional funding required to be provided to the Company by
the Cash Deficient Member pursuant to the Cash Call Notice, and (2) the
Percentage Interest of the Member(s) who provided all or a portion of the
additional funds to the Company immediately prior to the making of such
additional funding shall be increased by adding thereto an aggregate amount
equal to the amount so subtracted from the Percentage
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Interest of each Cash Deficient Member. In such an event, the Management
Committee shall cause to be recorded in the books of the Company an amendment to
this Agreement reflecting the adjusted Percentage Interests of the Members. An
example of the operation of the formula set forth in this Paragraph 4.3(b)
appears in Schedule D annexed hereto.
(c) In the event all of the Members do not agree in
the manner provided for in Paragraph 4.3(a) on the budget proposed by Xxxxxxx,
then Xxxxxxx shall have the option to loan to the Company the additional funds
required by the Company (the amount of this loan shall be referred to as a
"Preferred Xxxxxxx Loan"). The Preferred Xxxxxxx Loan shall bear interest at the
rate of seven (7%) percent per annum, payable monthly, and shall be repayable on
the same terms as the Initial Xxxxxxx Loan. Notwithstanding anything to the
contrary contained herein, until the sum of the amount received by Xxxxxxx in
repayment of the Preferred Xxxxxxx Loan and distributions of Net Available Cash
equals two hundred percent (200%) of the sum of the principal amount of the
Preferred Xxxxxxx Loan, no payments whatsoever shall be made to any other
Member, including any payments due a Member by reason of dissolution of the
Company, other than payments under Paragraph 5.2(d) of this Agreement.
4.4 Interest. No Member shall be entitled to interest on its Capital
Contributions.
4.5 Withdrawal of Capital. No Member shall withdraw any portion of
the capital of the Company without the express consent of all of the Members.
4.6 Capital Account. An individual Capital Account shall be
established and maintained for each Member.
Section 5. PERCENTAGE INTERESTS; CASH DISTRIBUTIONS; ALLOCATIONS
OF PROFIT AND LOSS
5.1 Percentage Interests. The Members shall have the respective
Percentage Interests in the Company as are detailed on the attached Schedule A.
5.2 Distribution of Net Available Cash.
(a) Except as provided in Section 5.2(b) and (c), Net
Available Cash shall be distributed to the Members pro rata in accordance with
their respective Percentage Interests in the Company.
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(b) Prior to any distribution under Sections 5.2(a)
and 5.2(c) herein, there shall be paid first to Xxxxxxx the regular payments due
Xxxxxxx under the Initial Xxxxxxx Loan, and then the regular payments due under
any Additional Xxxxxxx Loan, and then regular payments due under any Preferred
Loan.
(c) Net Available Cash distributed in liquidation or
dissolution of the Company shall be distributed to the Members, pro rata in
accordance with each Member's positive Capital Account balance, to the extent
thereof, after allocation of all Profits and Losses and other appropriate
Capital Account adjustments.
(d) Notwithstanding the provisions of Paragraph 5.2(b)
above, the Company shall be required to distribute annually to each Member an
amount equal to forty (40%) percent of the amount of the Company's profits
allocated to the Member for tax purposes (the foregoing percentage has been
determined based upon present federal, state and local tax rates, and such
percentage will be adjusted if and when such rates change). Such distribution
shall be made not later than ten (10) days prior to the last day for filing of a
Member's tax returns for the preceding year, it being agreed that the Management
Committee shall use its best efforts to estimate the amount of profits allocated
to each Member, it being understood that the final amount may not be determined
until the final date for filing the Company's tax returns, giving effect to
automatic extensions of the time to file a return then available.
(e) If any Member shall fail to withdraw the whole or
any part of his share of the Net Available Cash when the same becomes available
to it as aforesaid, it shall not be entitled to receive any interest upon its
share of the Net Available Cash left in the Company and such Net Available Cash
shall not be treated as an increase in its Percentage Interest in the Company.
5.3 Allocation of Profits and Losses.
(a) Losses of the Company for each fiscal year shall be
allocated to the Members, pro rata in accordance with their respective
Percentage Interests.
(b) Profits of the Company for each fiscal year shall be
allocated to the Members, pro rata in accordance with their respective
Percentage Interests.
5.4 Taxable Year and Accounting Method. Except as otherwise required by
the Code or the Regulations, the Company's taxable year shall be the fiscal year
ending November 30. The Company shall use the accrual method of accounting for
federal income tax purposes.
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5.5 Tax Elections. The Management Committee shall have the authority to
make any election or other determination on behalf of the Company provided for
under the Code or any provision of state or local tax law.
5.6 Tax Matters Partner. The Members hereby designate Xxxxxxx to be the
"tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code.
Any Manager who is designated "tax matters partner" shall take any action as may
be necessary to cause each other Member to become a "notice partner" within the
meaning of Section 6223 of the Code.
Section 6 TRANSFER OF INTERESTS; ADDITIONAL MEMBERS
6.1 Transfer of Interests. Except as otherwise set forth in this
Section 6, a Member may not Transfer all or any part of his Interest in the
Company without the prior written consent of the other Members and no Person
taking or acquiring, by whatever means, any Percentage Interest in the Company
shall be admitted as a Substitute Member without the consent of all of the
Members. The other Members, in their sole discretion, may withhold their consent
to any Transfer for which such consent is required with or without reasonable
cause.
6.2 Come Along/Take Along Provision.
(a) If either Member secures a Selling Commitment to
transfer all or any portion of its Interest to a Person which is not an
Affiliate thereof ("Purchaser"), such Member (the "Offeror") must immediately
thereafter give written notice (the "Selling Notice") to the other Member (the
"Receiver") that the Offeror desires to sell such Interest in the Company in
accordance with the terms and conditions of the Selling Commitment and this
Section 6.2. The term "Selling Commitment" means a letter of intent from
Purchaser to purchase the Offeror's Interest, and if required, the Receiver's
Interest for a purchase price (as proportionately adjusted to reflect the
acquisition of either the Offeror's or both Members' Interests and expressed as
the purchase price for each one (1%) percent of Interests, the "Interests
Purchase Price") subject only to (i) customary "due diligence" items and a "due
diligence" period not to exceed forty-five (45) days and (ii) a closing on the
Selling Commitment to occur not more than ninety (90) days following execution
of the Selling Commitment; provided, however, the Selling Commitment shall not
be deemed delivered unless and until Purchaser delivers to the Company's
counsel, to be held in escrow, by wire transfer of immediately available funds,
an amount equal to five (5%) percent (the "Interests Downpayment") of the
Interests Purchase Price assuming both Members agree to sell in accordance with
the Selling Commitment. Upon receipt of the Selling Notice
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the Receiver shall be estopped from electing to transfer its Interest until the
Selling Commitment obligations of both Members have been released and relieved
as hereinafter provided.
(b) The Selling Commitment shall be specifically
subject to the provisions of this Section 6.2.
(c) On or before the date which is thirty (30) days
after delivery of the Selling Notice (the "Decision Date"), the Receiver shall
send a notice (the "Election Notice") to the Offeror electing either (i) to sell
its interests in the Company in accordance with the Selling Commitment or (ii)
to purchase the interests in the Company of the Offeror in accordance with the
Selling Commitment but at a price (the "FMV Purchase Price") determined in
accordance with the following formula: Interests Purchase Price multiplied by
the Percentage Interest of the Offeror multiplied by ninety-five (95%) percent.
Such transfer of the Offeror's interests in the Company shall occur at a closing
on the date set for closing in the Selling Commitment.
(d) In the event the Receiver (i) elects to sell its
interest in the Company in accordance with the Selling Commitment or (ii) fails
to deliver the Election Notice on or before the Decision Date, then the
Interests Downpayment shall be held in escrow in accordance with the terms of
the Selling Commitment and the Receiver shall be deemed to have elected to sell
its Interest in accordance therewith.
(e) In the event the Receiver elects to purchase the
Offeror's Interest at the FMV Purchase Price, then an amount (the "FMV Escrow")
equal to one (1%) percent of the FMV Purchase Price shall be deposited by the
Receiver and held in escrow by the Offeror's attorneys in accordance with the
terms of the Selling Commitment. The Offeror shall be obligated to sell its
interests to the Receiver in accordance with the terms of the Selling Commitment
at a purchase price equal to the FMV Purchase Price and the closing of the sale
and purchase shall occur not later than sixty (60) days following the Receiver's
election to purchase the Offeror's Interest.
(f) In the event the Offeror defaults in its
obligation to sell its Interest to the Receiver, (i) the Offeror shall be deemed
a Defaulting Member hereunder and (ii) the Receiver may exercise any and all
remedies available at law or in equity, including without limitation, (1)
obtaining an injunction to prevent the transfer of the Offeror's Interest to
Purchaser in accordance with the Selling Commitment and (2) seeking specific
performance of the Offeror's obligations hereunder, provided that the FMV
Purchase Price shall, following such default, be deemed to be an amount equal to
eighty percent (80%)] of the FMV Purchase Price as defined in Section 6.2(c)
above.
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(g) The remedies set forth in Section 6.2(f) hereof shall
also be available to the Offeror if, when obligated to do so, the Receiver does
not purchase the Offeror's interests as set forth herein; provided, however, the
FMV Purchase Price shall be further adjusted to account for the different
Interests of the Members, if any. Further, if Receiver does not convey its
interests to the Purchaser when, as and if obligated to do so under the
provisions of this Section 6.2, the Offeror is hereby granted a power of
attorney, which power of attorney shall be deemed irrevocable and coupled with
an interest, to execute and deliver, as attorney-in-fact for Receiver, and in
its name, place and stead, an assignment of all of the Receiver's interests in
the Company to Purchaser, and Offeror shall have the right to seek, receive and
retain (i) all remedies available to it at law or in equity as a result of
Receiver's failure to transfer its interest in the Partnership to the Purchaser
including, without limitation, specific performance and consequential damages or
(ii) to receive and retain twenty (20%) of the actual proceeds received from the
sale of the Receiver's interests in the Company to the Purchaser.
6.3 Legend. A legend shall be placed on each certificate or other
document, if any, evidencing a Percentage Interest stating the following:
The Percentage Interest represented by this Certificate
has not been registered under the Securities Act of 1933,
as amended, or the securities laws of any state. This
Percentage Interest has been acquired for investment and
may not be sold, transferred, pledged or hypothecated in
the absence of any effective registration statement for
such Percentage Interest under the Securities Act of 1933,
as amended, and any applicable state securities laws or an
opinion of counsel acceptable to counsel for the Company
that registration is not required under such laws. In
addition, the sale, transfer, pledge or hypothecation of
this Percentage Interest is substantially restricted by
that certain Agreement by and among the Company and its
Members, dated ________________, 1996, a copy of which is
on file with the Company at its principal place of
business and may be obtained by any Member upon prior
written request to the Company without charge.
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Section 7 RESTRICTIVE COVENANTS.
7.1 Confidentiality. Each Member acknowledges that during the term of
this
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Agreement it will have access to confidential information, including,
without limitation, (i) pricing information and information concerning the
Company's marketing techniques and methods, (ii) the terms of the Company's
existing contracts with suppliers, service bureaus or vendors, (iii) information
pertaining to the Company's customers and their requirements, (iv) information
concerning the management and assembly of the Company's data base, and (v) any
other of the Company's trade secrets (all of the foregoing is referred to as
"Confidential Information") which is not in the public domain and which has been
or will be acquired, developed or assembled by the Company at its expense. Each
Member agrees, for so long as the Company continues to engage in the active
conduct of business, including the business described in Schedule B of this
Agreement or any other business which the Company hereafter conducts, that it
shall not reveal, divulge or make known Confidential Information (other than in
the conduct of the Company's business) to any person, firm, corporation or other
business organization, and shall not directly or indirectly use for its own
benefit, or for the benefit of anyone else, any Confidential Information.
7.2 Non-Competition. Each Member agrees, for so long as the Member owns
a Percentage Interest in the Company and for a period of two (2) years
thereafter, not to (i) directly or indirectly, endeavor to entice away from the
employ of the Company or the other Member or otherwise interfere with the
relationship of the Company or the other Member with any individual, partner,
firm, corporation or other business organization which is employed by the
Company or by the Member or is otherwise performing services for the Company or
the Members, or (ii) acquire a direct or indirect interest in, or act as an
owner, manager, partner, shareholder, joint venturer, or consultant to any other
person or entity which competes with the business of the Company.
7.3 Blue-Pencilling. In the event that any provision of this Section 7
shall be deemed unenforceable, invalid, or overbroad in whole or in part for any
reason, then any tribunal, forum or court with jurisdiction over these matters
is hereby requested and instructed to reform such provision to provide for the
maximum competitive restraints upon a Member's activities (in time, product, and
geographic area) which may then be legal and valid, and consent to such
reformation is hereby granted.
7.4 Injunctive Relief. Each Member agrees that any violation of this
Section 7 by a Member is likely to cause irreparable injury to the Company for
which any remedy at law would be inadequate, and the Company and the other
Member shall be entitled to preliminary, permanent, and other injunctive relief
against any breach by a Member of the provisions of this Section 7. In the event
of a violation of any of the provisions of this Section 7, the period of
restriction referred to therein shall be extended to a period of time equal to
that period beginning on the date when such violation commenced and ending when
the activities constituting that violation shall be finally terminated.
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Section 8 DISSOLUTION.
8.1 Causes of Dissolution. Each Member expressly waives any right which
he might otherwise have to dissolve the Company except as set forth in this
Section 8. The Company shall be dissolved upon the first to occur of the
following:
(a) The bankruptcy or dissolution of a Member;
(b) The approval by the Members of the dissolution of
the Company;
(c) The election of either Member to dissolve the
Company, in the event that the Company, at any
such time, has ceased doing any business;
(d) The occurrence of any other circumstance which,
under the Act, would require that the Company
be dissolved;
(e) The Members, in their sole discretion, determine
that a rule, ordinance, regulation, statute or
government pronouncement has or may be enacted
that would make any aspect of this Agreement or
the activities conducted by the Company unlawful
or eliminate or substantially reduce, either
directly or indirectly, the benefits that would
accrue to the Members with respect to continuing
the Company's business operations; or
(f) November 30, 2046.
8.2 Reconstitution.
(a) If the Company is dissolved as a result of an
event described in Section 8.1(a), the Company may be reconstituted and its
business continued if, within ninety (90) days after the date of dissolution,
the reconstitution is approved by the Members. If the Company is reconstituted
and its business continued, any departing Member is entitled to receive any
distribution to which it is entitled up to the date which caused the dissolution
and it shall receive, within a reasonable time after such reconstitution, the
fair value of its Interest as of the date of the dissolution.
(b) The fair value of the departing Member's Interest
under Section 8.2(a) shall be determined by an appraisal firm nominated by the
remaining Members. Such
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determination shall be delivered to the departing Member. If the departing
Member shall object thereto, the department Member shall notify the Company in
writing of such objection within ten (10) days following actual receipt of such
determination. In such event the departing Member shall select an appraisal firm
to make such determination and it shall deliver its determination to the Company
within ninety (90) days following the date of its objection to the remaining
Members' determination. If the remaining Members shall object to the departing
Member's appraiser's determination, the remaining Members shall notify the
departing Member in writing of such objection with ten (10) days following
actual receipt of the departing Member's determination. If the remaining Members
and departing Members are then unable to agree on a determination, then an
appraiser shall be selected by the two firms originally selected whose
determination will then be binding on the remaining Members and the departing
Member. The cost of the third appraiser shall be borne one-half by the remaining
Members and one-half by the departing Members, unless the determination by the
third appraiser differs by more than five percent (5%) from the original two
determinations, in which case the party to whom the determination is less
favorable shall pay the entire costs of such third appraiser.
8.3 Liquidation.
(a) Upon the occurrence of any event requiring
dissolution as set forth in Section 8.1, if the business of the Company is not
continued by the remaining Members pursuant to Section 8.2, the Company shall
immediately execute and deliver to the Secretary of State a statement of its
intent to dissolve. Upon filing the statement of intent to dissolve, the Company
shall cease to carry on its business and shall wind up its affairs and
liquidate.
(b) In the course of the dissolution and winding up
the affairs of the Company, the Management Committee shall cause to be prepared
a full and accurate inventory of all of the Company's assets and shall determine
its liabilities and income, both gross and net for the purpose of dividing the
Profits or Losses and the Net Available Cash of the Company, as applicable.
Every effort shall me made to sell the assets of the Company for cash so that
the distribution may be made to the Members in cash. If the company's assets or
any part of them cannot be reduced to specie within a reasonable time or without
reasonable loss, the Members holding a majority of Interest may make such
arrangements for the disposition and liquidation of such assets or any part of
them, and for the proportionate distribution of said assets or any part of them,
or of the resultant proceeds, as will be most propitious, fair and reasonable
under the facts and circumstances then present. If the Company's assets include
notes secured by mortgages or deeds of trust on properties which the Company has
sold, said notes and mortgages or deeds of trust may be distributed in kind to
the Members if the Members may legally accept the same, and shall be valued at
one hundred percent (100%) of the unpaid principal balance of said notes, plus
accrued interest at the time of such distribution. Unless all of the members
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otherwise agree in writing, each Member shall receive a proportionate share of
each of those assets which are to be distributed in kind.
8.4 Distribution of Assets. The proceeds from the liquidation or sale
of the Company's assets shall be applied as follows:
(a) To creditors of the Company, other than Members,
in the order determined by the Management
Committee, but, in any event, in accordance
with law; and
(b) To the Members in accordance with Section 5.2.
Section 9 INDEMNIFICATION
9.1 Indemnification of Members and Managers. The Company shall
indemnify and hold harmless any Member or Manager from and against any and all
claims and demands for which they are not liable pursuant to Section 3.14 above.
Section 10 MISCELLANEOUS
10.1 Notices. All notices given pursuant to this Agreement shall be in
writing and shall be deemed effective when personally delivered or when placed
in the United States mail, registered or certified with return receipt
requested, or when sent by prepaid telegram or facsimile followed by
confirmatory letter. For purposes of notice, the addresses of the Members shall
be as stated under their names on the attached Schedule "A"; provided, however,
that each Member shall have the right to change its address with notice
hereunder to any other location by the giving of thirty (30) days notice to the
Company in the manner set forth above.
10.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive federal laws of the United States and the
laws of the State of Delaware.
10.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Members, and their respective heirs, legal
representatives, successors and
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permitted assigns; provided, however, that nothing contained herein shall negate
or diminish the restrictions set forth in Section 7.
10.4 Construction. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. The failure by any party to specifically
enforce any term or provision hereof or any rights of such party hereunder shall
not be construed as the waiver by that party of its rights hereunder. The waiver
by any party of a breach or violation of any provision of this Agreement shall
not operate as, or be construed to be, a waiver of any subsequent breach of the
same or other provision hereof.
10.5 Entire Agreement. This Agreement contains the entire agreement
among the Company and the Members relating to the subject matter hereof, and all
prior agreements relative hereto which are not contained herein are terminated.
10.6 Amendments. This Agreement may be amended or modified by the
written approval of all of the Members.
10.7 Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, but the extent of such invalidity or
unenforceability does not destroy the basis of the bargain among the Members as
expressed herein, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
10.8 Gender and Number. Whenever required by the context, as used in
this Agreement, the singular number shall include the plural and the neuter
shall include the masculine or feminine gender, and vice versa.
10.9 Schedules. Each Schedule to this Agreement is incorporated herein
for all purposes.
10.10 Additional Documents. Each Member agrees to perform all further
acts and execute, acknowledge and deliver any documents that may be reasonably
necessary, appropriate or desirable to carry out the provisions of this
Agreement.
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10.11 Section Headings. The section headings appearing in this
Agreement are for convenience of reference only and are not intended, to any
extent or for any purpose, to limit or define the text of any section.
10.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original but all of which shall constitute but one
document.
IN WITNESS WHEREOF, the Company and Members have executed this
Agreement as of the date first above written.
COMPANY:
XXXXXXX CELLULAR LLC
By:
----------------------------------------
, Member
MEMBERS:
XXXXXXX ENTERTAINMENT, INC.
By:
----------------------------------------
Its President
PARAGON CELLULAR SERVICES, INC.
By:
---------------------------------------
Its President
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SCHEDULE A
INITIAL PERCENTAGE
MEMBER AND ADDRESS: CAPITAL CONTRIBUTION: INTEREST
------------------- --------------------- --------
Xxxxxxx Entertainment, Inc. $18,750.00 cash 50%
Xxx Xxxx Xxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Paragon Cellular Services, Inc. $18,750.00 cash 50%
00000 X.X. Xxxxxxx 00X
Xxxxxxxxxx, XX 00000
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SCHEDULE B
BUSINESS OF THE COMPANY
The purpose of the Company shall be to sell, lease and market, at retail or
wholesale, cellular telephones and cellular telephone service, including access
and airtime required in respect thereof.
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SCHEDULE C
CERTIFICATE OF FORMATION
CERTIFICATE OF FORMATION OF
XXXXXXX CELLULAR LLC
1. The name of the limited liability company is XXXXXXX CELLULAR LLC.
2. The address of its registered office in the State of Delaware is
__________________________. The name of its registered agent at such address is
__________________________.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation of XXXXXXX CELLULAR LLC this ______ day of ____________.
-------------------------------------
Authorized Person
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SCHEDULE D
EXAMPLE OF OPERATION OF FORMULA FOR DILUTION UNDER
PARAGRAPH 4.3(B)
Assume that the Members agree that the Members should loan or
contribute an aggregate of $1,000,000 to the Company, thereby requiring
that each Member provide $500,000.00 to the Company on the terms agreed
upon by the Members. Assume further that Xxxxxxx provides $500,000.00
but Paragon provides only $200,000.00. Assume that each Member has
theretofore made capital contributions of $18,750.00. In this example,
Paragon is "deficient" by $300,000.00, because Paragon was required to
provide $500,000.00 but only provided $200,000.00. Paragon's Percentage
Interest would then be adjusted as follows:
50% - [ 1.5 x Amount of Deficiency ]
----------------------------------------------
Total Capital + Cash Call
of All Members Made on Deficient
Member
.50 - [ 1.5 x [.50 x 300 ]
---------------
37.5 + 500 =
.50 - [1.5 x [.50 x .5581395 ] =
.50 - [1.5 x .279070 ] =
.50 - .418605 =
.081395 or 8.1395%
In this example, Paragon's 50% Percentage Interest is reduced to
8.1395%, and Xxxxxxx'x Percentage Interest would be increased to
91.8605%.
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