Exhibit 99(h)
EFG KIRKWOOD LLC
OPERATING AGREEMENT
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This Operating Agreement of EFG Kirkwood LLC (the "Company") is made as of
May 1, 1999 (this "Agreement"), by and between the persons identified as the
Managers and Members on Schedule A attached hereto (such persons and their
respective successors in office or in interest being hereinafter referred to
individually as a "Manager" or "Member" or collectively as the "Managers" or
"Members").
WHEREAS, the Company was formed as a limited liability company under the
Delaware Limited Liability Company Act (as amended from time to time, the "Act")
on December 2, 1998;*
WHEREAS, the Company intends to purchase interests in Kirkwood Associates,
Inc., a California corporation ("KAI") as follows: 6.5% Convertible Note of KAI
in the principal amount of $1,000,000 (the "Convertible Note"); and shares of
common stock of KAI representing approximately 15% of the outstanding common
shares of KAI (the "Purchased Stock"); and
WHEREAS, the Managers and the Members wish to set out fully their
respective rights, obligations and duties regarding the Company and its assets
and liabilities and the acquisition of the Purchased Stock and the Convertible
Note.
NOW, THEREFORE, in consideration of the mutual covenants expressed herein,
the parties hereby agree as follows (capitalized terms used and not otherwise
defined herein have the respective meanings specified in Article X):
1. ARTICLE I Organization and Powers
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ARTICLE I
Organization and Powers
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1.1 Organization. The Company has been formed by the filing of its
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Certificate of Formation with the Delaware Secretary of State pursuant to the
Act on December 2, 1998.* The Certificate of Formation may be restated by the
Managers as provided in the Act or amended by the Managers to change the address
of the office of the Company in Delaware and the name and address of its
resident agent in Delaware or to make corrections required by the Act. Other
additions to or amendments of the Certificate of Formation shall be authorized
by the Members as provided in Section 11.4. The Certificate of Formation, as
amended from time to time, is referred to herein as the "Certificate." The
Managers shall deliver a copy of the Certificate and any amendment thereto to
any Member who so requests.
1.2 Purposes and Powers. The Company shall have authority to acquire,
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own, vote, sell and otherwise deal with the KAI Securities (as defined in
Article XII) and to engage in any other lawful business, trade, purpose or
activity permitted by the Act, and shall possess and may exercise all of the
powers and privileges granted by the Act and any powers incidental thereto, so
far as such powers and privileges are necessary or convenient to the conduct,
promotion or attainment of the business, purposes or activities of the Company,
including without limitation the following powers:
(a) to acquire, hold, dispose of and otherwise deal with the KAI
Securities;
(b) to sell, transfer, convert or otherwise dispose of the KAI
Securities and to pay all legal and other costs associated therewith and to
vote, provide proxies and make all investment decisions with respect to the KAI
Securities.;
(c) to designate individuals, including Affiliates, to serve on
the Board of Directors of KAI;
(d) upon distribution of the Company to distribute the KAI
Securities in kind to the Members;
(e) to conduct its business and operations in any state, territory
or possession of the United States or in any foreign country or jurisdiction;
(f) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(g) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(h) to make contracts, including contracts of insurance, incur
liabilities and give guaranties, whether or not such guaranties are in
furtherance of the business and purposes of the Company, including without
limitation guaranties of obligations of other persons who are interested in the
Company or in whom the Company has an interest;
(i) to institute, prosecute and defend any legal action or
arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle or refer to arbitration any claim by or against the Company or any of its
assets;
(j) to be a partner in one or more partnerships or a member in one
or more limited liability companies; and
(k) to enter into any kind of activity and to perform and carry
out contracts of any kind necessary to, or in connection with, or coincidental
to the accomplishment of the purposes of the limited liability company, so long
as said activities and contracts may be lawfully carried on or performed by the
Company under the laws of the State.
1.3 Principal Place of Business. The principal office and place of
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business of the Company shall initially be One Canterbury Green, 8th Floor, 201
Broad Street, Stamford, Connecticut 06901. After giving notice to the Members,
the Managers may change the principal office or place of business of the Company
at any time and may cause the Company to establish other offices or places of
business.
1.4 Fiscal Year. The fiscal year of the Company shall end on December
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31 in each year.
1.5 Qualification in Other Jurisdictions. The Managers shall cause the
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Company to be qualified or registered under applicable laws of any jurisdiction
in which the Company transacts business and shall be authorized to execute,
deliver and file any certificates and documents necessary to effect such
qualification or registration, including without limitation the appointment of
agents for service of process in such jurisdictions.
1. ARTICLE II Members
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ARTICLE II
Members
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2.1 Members. The initial Members of the Company are the Class A
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Members and the Class B Members and their addresses are listed on Schedule A and
such Schedule shall be amended from time to time by the Managers to reflect the
withdrawal of Members or the admission of new or additional Members pursuant to
this Agreement. Schedule A shall set forth the percentage interest which each
Class A Member and Class B Member holds in the profits and losses and Cash Flow
of the Company allocated to such Class (the "Membership Interests"). The
Members shall constitute a single class or group of Members of the Company for
all purposes of the Act, except as otherwise explicitly provided herein as to
the Class A Members and Class B Members. The Managers shall notify the Members
of changes in Schedule A, which shall constitute the record list of the Members
for all purposes of this Agreement.
2.2 Admission of New Members. Additional persons may be admitted to
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the Company as Members and may participate in the profits, losses,
distributions, allocations and capital contributions of the Company upon such
terms as are established by the Managers, which may include the establishment of
classes or groups of one or more Members having different relative rights,
powers and duties, or the right to vote as a separate class or group on
specified matters, by amendment of this Agreement under Section 11.4. Existing
Members shall have no preemptive or similar right to subscribe to the purchase
of new membership interests in the Company.
2.3 Meetings of Members.
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(a) Meetings of Members may be called for any proper purpose at any time by
the Managers or the holders of a majority of the Membership Interests. The
Managers or the Members calling the meeting shall determine the date, time and
place of each meeting of Members, and written notice thereof shall be given by
the Managers to each Member not less than seven days or more than 60 days prior
to the date of the meeting. Notice shall be sent to Members of record on the
date when the meeting is called. The business of each meeting of Members shall
be limited to the purposes described in the notice. A written waiver of notice,
executed before or after a meeting by a Member or its authorized attorney
and delivered to the Managers, shall be deemed equivalent to notice of the
meeting.
(b) Persons holding a majority of the Membership Interests of each Class
shall constitute a quorum for the transaction of any business at a meeting of
Members. Members may attend a meeting in person or by proxy. Members may also
participate in a meeting by means of conference telephone or similar
communications equipment that permits all Members present to hear each other.
If less than a quorum of the Members is present, the meeting may be adjourned by
the chairman to a later date, time and place, and the meeting may be held
as adjourned without further notice. When an adjourned meeting is reconvened,
any business may be transacted that might have been transacted at the original
meeting.
(c) A chairman selected by the Managers shall preside at all meetings of the
Members unless the Members elect from the Membership a chairman of the
meeting. The chairman shall determine the order of business and the procedures
to be followed at each meeting of Members.
2.4 Action Without a Meeting. There is no requirement that the Members
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hold a meeting in order to take action on any matter. Any action required or
permitted to be taken by the Members may be taken without a meeting if one or
more written consents to such action shall be signed by Members who hold the
Membership Interests or other interest in the Company required to approve the
action being taken. Such written consents shall be delivered to the Managers at
the principal office of the Company and unless otherwise specified shall be
effective on the date when the first consent is so delivered. The Managers
shall give prompt notice to all Members who did not consent to any action taken
by written consent of Members without a meeting.
2.5 Voting Rights. Unless otherwise required by the Act or this
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Agreement, all actions, approvals and consents to be taken or given by the
Members under the Act, this Agreement or otherwise shall require the affirmative
vote or written consent of Members holding a majority of the Class A Membership
Interests and Class B Membership Interests.
2.6 Limitation of Liability of Members. Except as otherwise provided
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in the Act, no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member, whether arising
in contract, tort or otherwise, solely by reason of being a Member of the
Company. Except as otherwise provided in the Act, by law or expressly in this
Agreement, no Member shall have any fiduciary or other duty to another Member
with respect to the business and affairs of the Company, and no Member shall be
liable to the Company or any other Member for acting in good faith reliance upon
the provisions of this Agreement. No Member shall have any responsibility to
restore any negative balance in its Capital Account (as defined in Section 6.1)
or to contribute to or in respect of the liabilities or obligations of the
Company or return distributions made by the Company except as required by the
Act or other applicable law; provided, however, that Members are responsible for
their failure to make required Contributions under Section 6.2. The failure of
the Company to observe any formalities or requirements relating to the exercise
of its powers or the management of its business or affairs under this Agreement
or the Act shall not be grounds for making its Members or Managers responsible
for the liabilities of the Company.
2.7 Authority. Unless specifically authorized by the Managers, no
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Member that is not a Manager shall be an agent of the Company or have any right,
power or authority to act for or to bind the Company or to undertake or assume
any obligation or responsibility of the Company or of any other Member.
2.8 No Right to Withdraw. No Member shall have any right to resign or
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withdraw from the Company without the consent of the other Members or to receive
any distribution or the repayment of its capital contribution except as provided
in Sections 7.1 and 7.2 and Article IX upon dissolution and liquidation of the
Company. No Member shall have any right to have the fair value of its
Membership Interest in the Company appraised and paid out upon the resignation
or withdrawal of such Member or any other circumstances.
2.9 Rights to Information. Members shall have the right to receive
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from the Managers upon request a copy of the Certificate and of this Agreement,
as amended from time to time, and such other information regarding the Company
as is required by the Act, subject to reasonable conditions and standards
established by the Managers, as permitted by the Act, which may include without
limitation withholding or restricting the use of confidential information.
1. ARTICLE III - Management
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ARTICLE III
Management
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3.1 Managers. AFG ASIT Corporation, a Massachusetts corporation, shall
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be the initial Manager of the Company. The names and addresses of the Managers
shall be listed on Schedule A which shall be amended from time to time by the
Managers to reflect the resignation or removal of Managers or the appointment of
new or additional Managers pursuant to this Agreement.
3.2 Performance of Duties. Each Manager shall devote such time to the
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business and affairs of the Company as is reasonably necessary for the
performance of such Manager's duties, but shall not be required to devote full
time to the performance of such duties and may delegate its responsibilities as
provided in Section 3.3. A Manager need not be a Member.
3.3 Powers and Duties of the Managers. The business and affairs of the
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Company shall be managed under the direction of the Managers, who shall have and
may exercise on behalf of the Company all of its rights, powers, duties and
responsibilities under Section 1.2 or as provided by law, including without
limitation the right and authority:
(a) acquire, vote, make all decisions with respect to and, otherwise, deal
with the KAI Securities on behalf of the Company to manage the business and
affairs of the Company and for this purpose to employ, retain or appoint any
officers, employees, consultants, agents, brokers, professionals or other
persons in any capacity for such compensation and on such terms as the Managers
deem necessary or desirable and to delegate to such persons such of their duties
and responsibilities as the Managers shall determine;
(b) to enter into, execute, deliver, acknowledge, make, modify, supplement
or amend any documents or instruments in the name of the Company;
(c) to borrow money or otherwise obtain credit and other financial
accommodations on behalf of the Company on a secured or unsecured basis as
provided in Section 1.2(c), and to perform or cause to be performed all of the
Company's obligations in respect of its indebtedness and any mortgage, lien or
security interest securing such indebtedness; and
(d) to make elections and prepare and file returns regarding any federal,
state or local tax obligations of the Company.
Unless otherwise provided in this Agreement, any action taken by a Manager, and
the signature of a Manager on any agreement, contract, instrument or other
document on behalf of the Company, shall be sufficient to bind the Company and
shall conclusively evidence the authority of that Manager and the Company with
respect thereto.
3.4 Tax Matters Partner. The Member so designated by the Managers from
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time to time shall serve as the "Tax Matters Partner" of the Company for
purposes of Section 6231(a)(7) of the Internal Revenue Code of 1986 as amended
(the "Code"), with power to manage and represent the Company in any
administrative proceeding of the Internal Revenue Service. The initial Tax
Matters Partner of the Company shall be Semele Group, Inc.
3.5 Reliance by Third Parties. Any person dealing with the Company,
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the Managers or any Member may rely upon a certificate signed by any Manager as
to (i) the identity of any Manager or Member; (ii) any factual matters relevant
to the affairs of the Company; (iii) the persons who are authorized to execute
and deliver any document on behalf of the Company; or (iv) any action taken or
omitted by the Company, the Managers or any Member.
3.6 Resignation and Removal. Any Manager may resign upon at least 60
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days' notice to the Members and the other Managers (unless notice is waived by
them). Any Manager may be removed at any time with or without cause by the
Members.
3.7 Meetings and Action of Managers. Unless otherwise determined by
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the Members or Managers, all action to be taken by the Managers shall be taken
by majority vote or written consent of a majority of the Managers then in
office. There is no requirement that the Managers hold a meeting in order to
take action on any matter. Meetings of the Managers may be called by any
Manager. If action is to be taken at a meeting of the Managers, notice of the
time, date and place of the meeting shall be given to each Manager by an officer
or the Manager calling the meeting by personal delivery, telephone or fax sent
to the business or home address of each Manager at least 24 hours in advance of
the meeting, or by written notice mailed to each Manager at either such address
at least 72 hours in advance of the meeting; however, no notice need be given to
a Manager who waives notice before or after the meeting, or who attends the
meeting without protesting at or before its commencement the inadequacy of
notice to him or her. Managers may also attend a meeting in person or by proxy,
and they may also participate in a meeting by means of conference telephone or
similar communications equipment that permits all Managers present to hear each
other. A chairman selected by the Managers shall preside at all meetings of the
Managers. The chairman shall determine the order of business and the procedures
to be followed at each meeting of the Managers.
3.8 Compensation. Each Manager shall receive such compensation for his
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services and benefits as may be approved from time to time by the Managers. In
addition, the Managers shall be entitled to reimbursement for out-of-pocket
expenses incurred by them in connection with the performance of their duties for
the Company.
3.9 Limitation of Liability of Manager. No Manager shall be obligated
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personally for any debt, obligation or liability of the Company or of any
Member, whether arising in contract, tort or otherwise, solely by reason of
being or acting as Manager of the Company. No Manager shall be personally
liable to the Company or to its Members for breach of any fiduciary or other
duty that does not involve (i) a breach of the duty of loyalty to the Company or
its Members, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or (iii) a transaction
from which the Manager derived an improper personal benefit.
1. ARTICLE IV - Indemnification
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ARTICLE IV
Indemnification
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4.1 Definitions. For purposes of this Article IV:
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"Manager" includes (i) a person serving as a Manager of the Company or in a
similar executive capacity appointed by the Managers and exercising rights and
duties delegated by the Managers, (ii) a person serving at the request of the
Company as a director, Manager, officer, employee or other agent of another
organization, and (iii) any person who formerly served in any of the foregoing
capacities;
"expenses" means all expenses, including attorneys' fees and disbursements,
actually and reasonably incurred in defense of a proceeding or in seeking
indemnification under this Article, and except for proceedings by or in the
right of the Company or alleging that a Manager received an improper personal
benefit, any judgments, awards, fines, penalties and reasonable amounts paid in
settlement of a proceeding; and
"proceeding" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, and any
claim which could be the subject of a proceeding.
4.2 Right to Indemnification. Except as limited by law and subject to
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the provisions of this Article, the Company shall indemnify each of its Managers
against all expenses incurred by them in connection with any proceeding in which
a Manager is involved as a result of serving in such capacity, except that no
indemnification shall be provided for a Manager regarding any matter as to which
it shall be finally determined that such Manager did not act in good faith and
in the reasonable belief that its action was in the best interests of the
Company. Subject to the foregoing limitations, such indemnification may be
provided by the Company with respect to a proceeding in which it is claimed that
a Manager received an improper personal benefit by reason of its position,
regardless of whether the claim arises out of the Manager's service in such
capacity, except for matters as to which it is finally determined that an
improper personal benefit was received by the Manager.
4.3 Award of Indemnification. The determination of whether the Company
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is authorized to indemnify a Manager hereunder and any award of indemnification
shall be made in each instance (a) by a majority of the Managers who are not
parties to the proceeding in question, (b) by independent legal counsel
appointed by the Managers or the Members or (c) by the holders of a majority of
the Membership Interests of the Members who are not parties to the proceeding in
question. The Company shall be obliged to pay indemnification applied for by a
Manager unless there is an adverse determination (as provided above) within
forty-five (45) days after the application. If indemnification is denied, the
applicant may seek an independent determination of its right to indemnification
by a court, and in such event, the Company shall have the burden of proving that
the applicant was ineligible for indemnification under this Article.
Notwithstanding the foregoing, in the case of a proceeding by or in the right of
the Company in which a Manager is adjudged liable to the Company,
indemnification hereunder shall be provided to such Manager only upon a
determination by a court having jurisdiction that in view of all the
circumstances of the case, such Manager is fairly and reasonably entitled to
indemnification for such expenses as the court shall deem proper.
4.4 Successful Defense. Notwithstanding any contrary provisions of
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this Article, if a Manager has been wholly successful on the merits in the
defense of any proceeding in which it was involved by reason of its position as
Manager or as a result of serving in such capacity (including termination of
investigative or other proceedings without a finding of fault on the part of the
Manager), the Manager shall be indemnified by the Company against all expenses
incurred by the Manager in connection therewith.
4.5 Advance Payments. Except as limited by law, expenses incurred by a
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Manager in defending any proceeding, including a proceeding by or in the right
of the Company, shall be paid by the Company to the Manager in advance of final
disposition of the proceeding upon receipt of its written undertaking to repay
such amount if the Manager is determined pursuant to this Article or adjudicated
to be ineligible for indemnification, which undertaking shall be an unlimited
general obligation but need not be secured and may be accepted without regard to
the financial ability of the Manager to make repayment; provided, however, that
no such advance payment of expenses shall be made if it is determined pursuant
to Section 4.3 of this Article on the basis of the circumstances known at the
time (without further investigation) that the Manager is ineligible for
indemnification.
4.6 Insurance. The Company shall have power to purchase and maintain
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insurance on behalf of any Manager, officer, agent or employee against any
liability or cost incurred by such person in any such capacity or arising out of
its status as such, whether or not the Company would have power to indemnify
against such liability or cost.
4.7 Heirs and Personal Representatives. The indemnification provided
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by this Article shall inure to the benefit of the heirs and personal
representatives of each Manager.
4.8 Non-Exclusivity. The provisions of this Article shall not be
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construed to limit the power of the Company to indemnify its Managers, Members,
officers, employees or agents to the full extent permitted by law or to enter
into specific agreements, commitments or arrangements for indemnification
permitted by law. The absence of any express provision for indemnification
herein shall not limit any right of indemnification existing independently of
this Article.
4.9 Amendment. The provisions of this Article may be amended or
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repealed in accordance with Section 11.4; however, no amendment or repeal of
such provisions that adversely affects the rights of a Manager under this
Article with respect to its acts or omissions at any time prior to such
amendment or repeal shall apply to such Manager without its consent.
1. ARTICLE V - Conflicts of Interest
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ARTICLE V
Conflicts of Interest
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5.1 Transactions with Interested Persons. Unless entered into in bad
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faith, no contract or transaction between the Company and one or more of its
Managers or Members, or between the Company and any other corporation,
partnership, association or other organization in which one or more of its
Managers or Members have a financial interest or are directors, partners,
Managers or officers, shall be voidable solely for this reason or solely because
such Manager or Member was present or participated in the authorization of such
contract or transaction if:
(a) the material facts as to the relationship or interest of such Manager or
Member and as to the contract or transaction were disclosed or known to the
other Managers (if any) or Members and the contract or transaction was
authorized by the disinterested Managers (if any) or Members; or
(b) the contract or transaction was fair to the Company as of the time it
was authorized, approved or ratified by the disinterested Managers (if any) or
Members;
and no Manager or Member interested in such contract or transaction, because of
such interest, shall be considered to be in breach of this Agreement or liable
to the Company, any Manager or Member, or any other person or organization for
any loss or expense incurred by reason of such contract or transaction or shall
be accountable for any gain or profit realized from such contract or
transaction.
2. ARTICLE VI - Capital Accounts and Contributions
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ARTICLE VI
Capital Accounts and Contributions
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6.1 Capital Accounts.
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(a) There shall be established on the books of the Company a separate
capital account (a "Capital Account") for each Member.
(b) The Capital Account of each Member (regardless of the time or manner in
which such Member's interest was acquired) shall be maintained in accordance
with the rules of Section 704(b) of the Internal Revenue Code of 1986, as
amended, from time to time (the "Code"), and Treasury Regulation Section
1.704-1(b)(2)(iv). Adjustments shall be made to the Capital Accounts for
distributions and allocations as required by the rules of Section 704(b) of the
Code and the Treasury Regulations thereunder.
(c) If there is a transfer of all or a part of an interest in the Company by
a Member, the Capital Account of the transferor that is attributable to the
transferred interest shall carry over to the transferee of such Member.
(d) Subject to Section 7.2, notwithstanding any other provision contained
herein to the contrary, no Member shall be required to restore any negative
balance in its Capital Account.
6.2 Contributions. Each Member shall make the contributions to the
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capital of the Company (herein "Contributions") specified on Schedule A. All
Contributions shall be paid in cash unless otherwise specified on Schedule A or
agreed to by the Members. Except as set forth on Schedule A, no Member or
Manager shall be entitled or required to make any contribution to the capital of
the Company; however, the Company may borrow from its Members as well as from
banks or other lending institutions to finance its working capital or the
acquisition of assets upon such terms and conditions as shall be approved by the
Managers, and any such borrowing from Members shall not be considered
Contributions or reflected in their Capital Accounts. The value of all non-cash
Contributions made by Members shall be set forth on Schedule A. No Member shall
be entitled to any interest or compensation with respect to its Contribution or
any services rendered on behalf of the Company except as specifically provided
in this Agreement or approved by the Managers. No Member shall have any
liability for the repayment of the Contribution of any other Member and each
Member shall look only to the assets of the Company for return of its
Contribution.
1. ARTICLE VII - Profits, Losses and Distributions
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ARTICLE VII
Profits, Losses and Distributions
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7.1 Profits and Losses; Cash Flow.
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(a) Subject to Section 7.3, profits and losses shall be allocated
to the Members as follows:
(1) As to Profits:
First, profits shall be allocated to the Members to the extent that
cumulative losses allocated to the Members pursuant to Section 7.1(a)(2) for all
prior fiscal years exceed the aggregate amount of profits previously allocated
to Members pursuant to this Section 7.1(a)(1), with such profits to be allocated
ratably among the Members according to the excess losses allocated to each
Member; and
Second, an amount of profits shall be allocated to each of the Members
until the positive balance in the Capital Account of each Member equals, as
nearly as possible, the amount of cash which would be distributed to such Member
if the aggregate amount in the Capital Accounts of all Members were cash
available to be distributed in accordance with clauses First through Third of
Section 7.1(b).
(2) As to Losses:
First, losses shall be allocated to the Members to the extent that
cumulative profits allocated to the Members pursuant to Section 7.1(a)(1) for
all prior fiscal years exceed the amount of losses previously allocated to
Members pursuant to this Section 7.1(a)(2), with such losses to be allocated
ratably among the Members according to the excess profits allocated to each
Member;
Second, an amount of losses equal to the aggregate positive balances
(if any) in the Capital Accounts of all Members having positive Capital Account
balances shall be allocated to such Members in proportion to their positive
Capital Account balances until all such Capital Accounts shall have a zero
balance; and
Third, the balance, if any, of such losses shall be allocated to the
Members who bear the economic risk for such losses, or otherwise in accordance
with Membership Interests.
(b) Except to the extent governed by Section 7.2, Cash Flow of the
Company for each fiscal year (or portion thereof) shall be distributed among the
Partners as follows:
1. First, 100% to the Class A Members until Class A Payout;
2. Second, 100% of all Cash Flow to the Class B Members until Class B
Payout; and
3. Third, thereafter all Cash Flow will be distributed 15% to the Class
A Members and 85% to the Class B Members.
(c) The terms "profits" and "losses" used in this Agreement shall mean
income and losses, and each item of income, gain, loss, deduction or credit
entering into the computation thereof, as determined in accordance with
Regulation Section 1.704-1(b)(2)(iv).
7.2 Termination Distributions.
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(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership, the remaining
assets of the Partnership shall be distributed to the Partners in accordance
with the positive balances in their Capital Accounts after taking into account
all Capital Account adjustments for the Partnership taxable year.
(b) With respect to assets distributed in kind to the Partners in
liquidation or otherwise, (i) any unrealized appreciation or unrealized
depreciation in the values of such assets shall be deemed to be profits and
losses realized by the Partnership immediately prior to the liquidation or other
distribution event; and (ii) such profits and losses shall be allocated to the
Partners in accordance with Section 7.1(a), and any property so distributed
shall be treated as a distribution of an amount in cash equal to the excess of
such fair market value over the outstanding principal balance of and accrued
interest on any debt by which the property is encumbered. For the purposes of
this Section 7.2(b), "unrealized appreciation" or "unrealized depreciation"
shall mean the difference between the fair market value of such assets, taking
into account the fair market value of the associated financing (but subject to
Section 7701(g) of the Code) and the Partnership's adjusted basis for such
assets as determined under Section 1.704-1(b). This Section 7.2(b) is merely
intended to provide a rule for allocating unrealized gains and losses upon
liquidation or other distribution event, and nothing contained in this Section
7.2(b) or elsewhere herein is intended to treat or cause such distributions to
be treated as sales for value.
7.3 Special Provisions.
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(a) Section 704 of the Code and the Regulations issued thereunder,
including but not limited to the provisions of such regulations addressing
qualified income offset provisions, minimum gain chargeback requirements and
allocations of deductions attributable to nonrecourse debt and partner
nonrecourse debt, are hereby incorporated by reference.
(b) Except as otherwise provided in this Agreement, all profits,
losses and Cash Flow shared by Class A Member and Class B Member shall be shared
by each Class A Member and Class B Member in the ratio of his Capital
Contribution to the Class Contribution of all Members of such Class.
1.
ARTICLE VIII - Transfers of Interests
----------------------
ARTICLE VIII
Transfers of Interests
----------------------
8.1 Transfer of a Member's Membership Interest.
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(a) Except as set forth in the first sentence of Section 8.2, no Member may
sell, assign, give, pledge, hypothecate, encumber or otherwise transfer,
including, without limitation, any assignment or transfer by operation of law or
by order of court, such Member's Membership Interest in the Company,
without first complying with the provisions of Section 8.1(b). Any attempted
sale, transfer, assignment, pledge or other disposition in contravention of the
provisions of this section shall be void and ineffectual and shall not bind, or
be recognized, by the Company.
(b) Before any Membership Interest or any part thereof may be sold,
assigned, gifted, pledged, hypothecated, encumbered or otherwise transferred,
including transfer by operation of law or by order of court, the Member holding
such Membership Interest proposing such sale or transfer (the "Transferor")
shall first give written notice thereof to other Members at least sixty (60)
days prior to the proposed date of transfer (the "Transfer Date") stating the
proposed transferee, the Membership Interest proposed to be transferred, the
purchase price, if any, and the terms of the proposed transaction. The Members
receiving such notice (the "Purchasing Members") shall thereupon have the
option, but not the obligation, to acquire all, but not less than all, of the
Membership Interest proposed to be sold or transferred by the Transferor for the
Purchase Price determined pursuant to Section 8.1(d) (the "Purchase
Price"). Within thirty (30) days after the giving of such notice by the
Transferor, each Purchasing Member shall give written notice ("Purchase Notice")
to the Transferor stating whether or not the Purchasing Member elects to
exercise the option to purchase and a date and time (the "Closing Date") for the
consummation of the purchase not less than sixty (60) or more than ninety (90)
days after the giving of the Purchase Notice. If two (2) or more Purchasing
Members desire to purchase the Membership Interest proposed to be sold or
transferred, then, in the absence of an agreement between or among them, each
such Purchasing Member shall purchase the Membership Interest proposed to be
sold or transferred in the proportion that its Membership Interest bears to the
total Membership Interests of all the Purchasing Members who desire to so
purchase. Failure by a Purchasing Member to deliver a Purchase Notice within
the time period allowed shall be deemed an election by such Purchasing Member
not to exercise such option. If the Purchase Price is determined by appraisal
as set forth in Section 8.1(d)(ii), a Purchasing Member may rescind its election
to purchase by written notice to the Transferor given within ten (10) days after
being notified of the determination of the appraisers.
(c) If the Purchasing Members waive in writing their option to purchase or
fail to exercise their right to purchase within the time period allowed, the
Transferor may transfer such Membership Interest at any time during the 60-day
period after the termination of such time period, but only upon the terms and to
the transferee stated in its notice delivered pursuant to subsection (b).
After such Membership Interest is so transferred, or if the transfer is not
consummated within such period, the Membership Interest shall again become
subject to the terms of this Agreement.
(d) The Purchase Price shall be determined as follows:
(i) In the case of a proposed sale or transfer under paragraph (b) to a
third party in a bona fide transaction for fair value payable in cash or the
equivalent currently or in future installments, the Purchase Price for such
Membership Interest shall be the value offered by such third party payable upon
the same terms.
(ii) In all other cases, including without limitation a proposed transfer or
other disposition not constituting a sale described in subsection (i), the
Purchase Price shall be the fair market value of the Membership Interest being
purchased as of the last day of the month immediately prior to the month during
which the Transferor gave its notice. "Fair market value" as of any date shall
mean the cash price obtainable in an arm's-length sale between an informed and
willing buyer (under no compulsion to purchase) and an informed and willing
seller (under no compulsion to sell) of the Membership Interest, based upon the
going concern value of the Company, taking into account any minority or
non-control discount. If the parties are unable to agree upon the fair market
value, such fair market value shall be determined by appraisal as follows:
Either party may require appraisal by giving written notice to the other party
and appointing an independent appraiser. The other party shall deliver a
written notice appointing an independent appraiser within fifteen (15) days
after receipt of the notice from the other. The two appraisers so appointed, or
if only one appraiser is appointed, that appraiser, shall promptly seek to
determine the fair market value. If the two appraisers cannot agree within
thirty (30) days of their appointment, a third independent appraiser shall be
chosen within ten (10) days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by the office of the
American Arbitration Association nearest to the principal office of the Company,
or any organization successor thereto, and shall be a disinterested person
qualified in the valuation of business enterprises engaged in the same or
similar lines of business as the Company. The three appraisers shall make the
determination in accordance with the rules of the American Arbitration
Association or any such successor then in effect, and such determination shall
be binding and conclusive on the parties. Each party shall pay the costs of its
own appraiser and shall share equally in the costs, if any, of a third appraiser
and any other costs of arbitration, excluding their own costs.
8.2 Death, Incompetence, Dissolution of a Member. If a Member dies,
-----------------------------------------------
such Member's executor, administrator, or trustee, or, if he or she is
adjudicated incompetent, such Member's guardian, or, if it is a corporation,
trust, limited liability company or partnership and is dissolved, the
liquidator, shall automatically become an assignee (the "Assignee") of the
Membership Interest of the deceased, incompetent, or dissolved Member. The
Assignee may receive distributions and shall have all the rights of a Member for
the purpose of settling or managing such deceased or incompetent Member's
estate, but shall not be a Member and shall not have the power to vote such
Member's Membership Interest. The Assignee shall also have such power as the
decedent, incompetent or dissolved entity possessed to: (1) assign all or any
part of the Member's Membership Interest subject to Section 8.1; and (2) to
satisfy conditions precedent to the assignment of the Membership Interest set
forth in Section 8.1.
8.3 Admission of Member; Effect of Transfer.
--------------------------------------------
(a) In no event may any person obtaining a Membership Interest in the
Company by assignment, transfer, pledge or other means from an existing Member
be admitted as a successor Member without the affirmative vote or written
consent of Members of the Membership Interests exclusive in each case of the
Member whose Membership Interest is being transferred.
(b) If the transferee is admitted as a Member or is already a Member, the
Member transferring its Membership Interest shall be relieved of liability with
respect to the transferred Membership Interest arising or accruing under this
Agreement on or after the effective date of the transfer, unless the transferor
affirmatively assumes such liability; provided, however, that the transferor
shall not be relieved of any liability for prior distributions and unpaid
contributions unless the transferee affirmatively assumes such liabilities.
(c) Any person who acquires in any manner a Membership Interest or any part
thereof in the Company, whether or not such person has accepted and assumed in
writing the terms and provisions of this Agreement or been admitted as a Member,
shall be deemed by the acquisition of such Membership Interest to have
agreed to be subject to and bound by all of the provisions of this Agreement
with respect to such Membership Interest, including without limitation, the
provisions hereof with respect to any subsequent transfer of such Membership
Interest.
2. ARTICLE IX - Dissolution, Liquidation and Termination
----------------------------------------
ARTICLE IX
Dissolution, Liquidation and Termination
----------------------------------------
9.1 Dissolution. The Company shall dissolve and its affairs shall be
-----------
wound up upon the first to occur of the following:
(a) the written consent of the Members;
(b) the entry of a decree of judicial dissolution under Section 18-802 of
the Act; or
(c) The consolidation or merger of the Company in which it is not the
resulting or surviving entity.
9.2 Liquidation. Upon dissolution of the Company, the Managers shall
-----------
act as its liquidating trustees or the Managers may appoint one or more Managers
or Members as liquidating trustee. The liquidating trustees shall proceed
diligently to liquidate the Company and wind up its affairs and shall dispose of
the assets of the Company as provided in Section 7.2 hereof. Until final
distribution, the liquidating trustees may continue to operate the business and
properties of the Company with all of the power and authority of the Managers.
As promptly as possible after dissolution and again after final liquidation, the
liquidating trustees shall cause an accounting by the accounting firm then
serving the Company of the Company's assets, liabilities, operations and
liquidating distributions to be given to the Members.
9.3 Certificate of Cancellation. Upon completion of the distribution
-----------------------------
of Company assets as provided herein, the Company shall be terminated, and the
Managers (or such other person or persons as the Act may require or permit)
shall file a Certificate of Cancellation with the Secretary of State of Delaware
under the Act, cancel any other filings made pursuant to Sections 1.1 and 1.5
and take such other actions as may be necessary to terminate the existence of
the Company.
ARTICLE X
Certain Definitions
-------------------
The following defined terms have the meaning specified below:
"Adjusted Class A Investment" means the paid-in Capital Contribution of
each Class A Member reduced from time to time by the amount of Cash Flow
distributed to such Member pursuant to Clause First of Section 7.1(b) in excess
of the Cumulative Class A Annual Distribution.
"Adjusted Class B Investment" means the paid-in Capital Contribution of
each Class B Member reduced from time to time by the amount of Cash Flow
distributed to such Member pursuant to Clause Second of Section 7.1(b) in excess
of the Cumulative Class B Annual Distribution.
"Cash Flow" means all cash receipts of the Company with respect to the KAI
Securities or other miscellaneous sources, less all amounts expended to pay for
the costs, liabilities and expenses of the Company.
"Class A Members" means the Class A Members designated as such in Schedule
A, together with their successors and assigns in such capacity.
"Class A Payout" means the first time where the aggregate amount of Cash
Flow actually made to the Class A Members equals their paid-in Capital
Contribution, plus the Cumulative Class A Annual Distribution.
"Class B Members" means the Class B Member of Members designated as such in
Schedule A, together with their successors and assigns in such capacity.
"Class B Payout" means the first time that the Class B Members have
received cash from the Trust in an aggregate amount of their paid-in Capital
Contribution, plus the Cumulative Class B Annual Distribution.
"Cumulative Class A Annual Distribution" means an aggregate annual
distribution of Cash Flow to the Class A Member of 12% per annum, compounded
annually, on Adjusted Class A Investment.
"Cumulative Class B Annual Distribution" means an aggregate annual
distribution of Cash Flow to the Class B Member of 11% per annum, compounded
annually on the Adjusted Class B Investment.
"KAI Securities" means, as the context shall permit or require, all or any
portion of the Purchased Stock and the Convertible Note, any and all shares of
preferred or common stock of KAI into which such Purchased Stock and the
Convertible Note may be converted, and any and all other securities of KAI or
any other issuer or other property, assets or money into which such shares may
be converted or which may be received by the Company with respect thereto,
whether as a result of any reorganization, recapitalization, reclassification,
merger, stock dividend, distribution or otherwise.
1. ARTICLE X - General Provisions
------------------
ARTICLE XI
General Provisions
------------------
11.1 Offset. Whenever the Company is obligated to make a distribution
------
or payment to any Member, any amounts that Member owes the Company may be
deducted from said distribution or payment by the Managers.
11.2 Notices. Except as expressly set forth to the contrary in this
-------
Agreement, all notices, requests, or consents required or permitted to be given
under this Agreement must be in writing and shall be deemed to have been
properly given if sent by registered or certified mail, postage prepaid, by
commercial overnight courier, by facsimile or if delivered in hand to Members at
their addresses on Schedule A, or such other address as a Member may specify by
notice to the Managers and to the Company or the Managers at the address of the
principal office of the Company specified in Section 1.3. Whenever any notice
is required to be given by law, the Certificate or this Agreement, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
11.3 Entire Agreement; Binding Effect. This Agreement constitutes the
---------------------------------
entire agreement of the Members and the Managers relating to the Company and
supersedes all prior oral or written agreements or understandings with respect
to the Company. This Agreement is binding on and inures to the benefit of the
parties and their respective successors, permitted assigns and legal
representatives.
11.4 Amendment or Modification. Except as specifically provided
---------------------------
herein, this Agreement may be amended or modified from time to time only by a
written instrument signed by Members holding a majority of the Membership
Interests.
11.5 Governing Law; Severability. This Agreement is governed by and
-----------------------------
shall be construed in accordance with the law of the State of Delaware,
exclusive of its conflict-of-laws principles. In the event of a conflict
between the provisions of this Agreement and any provision of the Certificate or
the Act, the applicable provision of this Agreement shall control, to the extent
permitted by law. If any provision of this Agreement or the application thereof
to any person or circumstance is held invalid or unenforceable to any extent,
the remainder of this Agreement and the application of that provision shall be
enforced to the fullest extent permitted by law.
11.6 Further Assurances. In connection with this Agreement and the
-------------------
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Managers.
11.7 Waiver of Certain Rights. Each Member irrevocably waives any
---------------------------
right it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company. The failure of any Member to insist
upon strict performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall not
be a waiver of such Member's right to demand strict compliance herewith in the
future. No consent or waiver, express or implied, to or of any breach or
default in the performance of any obligation hereunder shall constitute a
consent or waiver to or of any other breach or default in the performance of the
same or any other obligation hereunder.
11.8 Third-Party Beneficiaries. The provisions of this Agreement are
--------------------------
not intended to be for the benefit of any creditor or other person to whom any
debts or obligations are owed by, or who may have any claim against, the Company
or any of its Members or Managers, except for Members or Managers in their
capacities as such. Notwithstanding any contrary provision of this Agreement,
no such creditor or person shall obtain any rights under this Agreement or
shall, by reason of this Agreement, be permitted to make any claim against the
Company or any Member or Manager.
11.9 Interpretation. For the purposes of this Agreement, terms not
--------------
defined in this Agreement shall be defined as provided in the Act; and all
nouns, pronouns and verbs used in this Agreement shall be construed as
masculine, feminine, neuter, singular, or plural, whichever shall be applicable.
Titles or captions of Articles and Sections contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
11.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts with the same effect as if all parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date set forth above.
MANAGER:
- -------
AFG ASIT Corporation
By:___________________________________
__________________, Authorized Officer
CLASS A MEMBERS:
- -----------------
AFG Investment Trust A
By: AFG ASIT Corporation,
Managing Trustee
By: ___________________________________
________________, Authorized Officer
AFG Investment Trust B
By: AFG ASIT Corporation,
Managing Trustee
By: ___________________________________
________________, Authorized Officer
AFG Investment Trust C
By: AFG ASIT Corporation,
Managing Trustee
By: ___________________________________
________________, Authorized Officer
AFG Investment Trust D
By: AFG ASIT Corporation,
Managing Trustee
By: ___________________________________
________________, Authorized Officer
CLASS B MEMBER:
- ----------------
Semele Group, Inc.
By: ______________________________________
_________________, Authorized Officer
EFG KIRKWOOD LLC
Schedule A
----------
MANAGERS
Name and Address
of Manager
- -----------
AFG ASIT Corporation
88 Broad Street
Boston, MA 02110
Name and Address
of Members Class A
Contribution Membership Interest
- -------------- -------------- --------------------
AFG Investment Trust A $ 600,000 10%
88 Broad Street
Boston, Massachusetts 02110
AFG Investment Trust B $ 1,200,000 20%
88 Broad Street
Boston, Massachusetts 02110
AFG Investment Trust C $ 2,400,000 40%
88 Broad Street
Boston, Massachusetts 02110
AFG Investment Trust D $ 1,800,000 30%
88 Broad Street
Boston, Massachusetts 02110 _________ _____
$ 6,000,000 100%
Class B Member: Class B
- --------------------------- Membership Interest
--------------------
Semele Group, Inc.* $ 750,000 100%
============== ====================