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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
barnesandnoble.com llc
Effective as of ____________,1999
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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
barnesandnoble.com llc
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(the "Agreement") of barnesandnoble.com llc, a Delaware limited liability
company (the "Company"), is made and entered into, effective as of
_____________, 1999, by and among Barnes & Noble, Inc., a corporation organized
and existing under the laws of Delaware, with its principal place of business at
122 Fifth Avenue, New York, New York 10011 ("BN"), B&N.com Holding Corp., a
corporation organized and existing under the laws of Delaware, with its
principal place of business at 122 Fifth Avenue, New York, New York 10011 ("BN
Holding"), barnesandnoble.com inc., a corporation organized and existing under
the laws of Delaware, with its principal place of business at 76 Ninth Avenue,
New York, New York 10011 (the "Public Corp."), Bertelsmann AG, an
Aktiengesellschaft organized and existing under the laws of Germany, with its
principal place of business at Carl-Bertelsmann-Strasse 270, 33311 Gutersloh,
Germany ("BAG") and BOL.US Online, Inc., a corporation organized and existing
under the laws of Delaware, with its principal place of business at 1540
Broadway, New York, New York 10036 ("USO").
WHEREAS, the Company was formed as a limited liability company pursuant
to the Delaware Limited Liability Company Law (6 Del. C. Section 18-101, et
seq., as it may be amended from time to time, or any successor statute (the
"LLCL")) by the filing of a Certificate of Formation with the Office of the
Secretary of State of the State of Delaware on October 27, 1998;
WHEREAS, the parties entered into an Amended and Restated Limited
Liability Company Agreement (the "Amended Agreement"), dated as of October 31,
1998, to provide for the admission of USO as a Member and to establish the
respective rights and obligations of BN Holding and USO with respect to the
Company; and
WHEREAS, the parties hereto desire to amend and restate the Amended
Agreement to reflect the addition of the Public Corp. as a Member and the sole
Manager of the LLC pursuant to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the conditions and provisions
contained herein, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1 DEFINITIONS. The following terms shall, for the purposes of
this Agreement and the Schedules and Exhibits hereto, have the following
meanings (terms defined in the singular or the plural include the plural or the
singular, as the case may be):
"Affiliate" of any Person shall mean any other Person that, directly or
indirectly, controls, is under common control with or is controlled by that
Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise. In the case of BOL, the term "Affiliates" shall
include all Persons in which BOL directly or indirectly owns an equity interest
to the extent such Person operates under the name BOL (or a derivative thereof)
provided that no Restricted Transferee owns any equity interest therein.
"Bankruptcy" of a Member shall mean (a) the filing by a Member of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any other federal, foreign or
state insolvency law, or a Member's filing of an answer consenting to or
acquiescing in any such petition; (b) the making by a Member of any assignment
for the benefit of its creditors or the admission by a Member in writing of its
inability to pay its debts as they mature; or (c) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the United States
Code (or corresponding provisions of future laws), seeking an application for
the appointment of a receiver for the assets of a Member, or an involuntary
petition seeking liquidation, reorganization, arrangement or readjustment of its
debts under any other federal, foreign or state insolvency law, provided that
the same shall not have been vacated, set aside or stayed within such 60-day
period.
"BN College" shall mean Barnes & Noble College Bookstores, Inc., a New
York corporation, and any successor thereto.
"BN Directors" shall mean, collectively, the Class B Directors as
defined in the Certificate of Incorporation.
"BOL" shall mean BOL.Global, Inc., a corporation organized under the
laws of Delaware.
"Book Clubs" shall mean the business commonly known as "book clubs,"
"negative option mail-order" and "positive option mail-order" and similar
operations, which offer access to a customary and limited number of titles, to
which access is made available to the consumers by any means including through
Websites. For the avoidance of doubt, reference to such clubs or mail order or
similar operations shall include the business of acquiring customers by
direct-toconsumer methods and of selling and distributing such products by
direct marketing to customers who selected such products which were offered at
regular intervals or as special offers irrespective of the manner by which
customers are solicited or acquired.
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"By-laws" shall mean the By-laws of the Public Corp.
"Business" shall mean sale, through one or more Websites, of books to
consumers (regardless of the form in which such books are delivered and
regardless of whether the form of delivery is now known or hereafter devised),
as well as videos, magazines, software or music. For the sake of clarity, all
other activities which do not directly involve consumers, as well as the
following, are excluded from the definition of "Business":
1. the retail sale of books through traditional
retail stores;
2. sale of college textbooks through Websites;
3. Book Clubs regardless of the medium or means (whether
now known or hereafter devised, including through
Websites) through which access to such Book Clubs is
made available to consumers;
4. mail-order operations; and
5. wholesale distribution of books.
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which federally chartered banks in the United States are open for business.
"Certificate of Formation" shall mean the Certificate of Formation of
the Company filed on October 27, 1998 with the Secretary of State of the State
of Delaware pursuant to the LLCL.
"Certificate of Incorporation" shall mean the Amended and Restated
Certificate of Incorporation of the Public Corp. as filed on ___________, 1999
with the Secretary of State of the State of Delaware pursuant to the Delaware
General Corporation Law.
"Class A Common Stock" shall mean Class A Common Stock of the Public
Corp.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
corresponding provisions of succeeding law.
"Company" shall have the meaning given to that term in the first
paragraph of this Agreement.
"Distributable Cash" shall mean the excess of the Company's positive
cash flow on a consolidated basis (excluding any consolidation with any
stockholder of the Public Corp.) over the Company's consolidated working capital
needs as determined in U.S. dollars in accordance with GAAP. The Company's
positive cash flow on a consolidated basis shall mean the excess of consolidated
cash receipts (excluding the proceeds of any borrowing by the Company or any
subsidiary thereof) over consolidated cash disbursements for any given period.
The Company's working capital needs shall be determined in good faith by the
Manager and shall include, but not
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be limited to, reasonable reserves for current and future operating expenses,
debt service, business expansion and acquisitions, contingencies and
emergencies.
"Depreciation" shall mean for any fiscal year or portion thereof of the
Company, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such period for
federal income tax purposes, except that (1) with respect to any asset whose
Gross Asset Value differs from its adjusted tax basis for federal income tax
purposes and which difference is being eliminated by the remedial allocation
method of Treasury Regulation Section 1.704-3(d), Depreciation shall be the
amount of book basis recovered under the rules of such Section, and (2) with
respect to any asset whose Gross Asset Value differs from its adjusted basis for
federal income tax purposes at the beginning of such period, Depreciation shall
be an amount that bears the same relationship to such beginning Gross Asset
Value as the depreciation, amortization or cost recovery deduction in such
period for federal income tax purposes bears to such beginning adjusted tax
basis; provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such period is zero, Depreciation shall
be determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Manager.
"Encumbrance" shall mean any mortgage, pledge, security interest, lien,
restriction on use or transfer, other than those imposed by law, voting
agreement, adverse claim or encumbrance or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or any
agreement to give, any financing statement under the Uniform Commercial Code or
similar law of any jurisdiction.
"English Language Books" shall mean books published in the English
language.
"Fiscal Year" of the Company shall mean the twelve (12) month period
ending on December 31st.
"Foreign Language Books" shall mean books published in a language other
than English.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time, consistently applied, with respect to the jurisdiction to
which it refers.
"Governmental Body" shall mean any domestic or foreign national, state
or municipal or other local government or multi-national body (including, but
not limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder and any corporation, partnership or other entity
directly or indirectly owned by or subject to the control of any of the
foregoing.
"Gross Asset Value" shall mean, with respect to any Company asset, such
asset's adjusted basis for federal income tax purposes, except as follows:
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(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market
value of such asset, as determined by the Manager in accordance with
Section 3.1(d) of the By-laws;
(ii) The Gross Asset Value of the Company assets
shall be adjusted to equal their respective gross fair market values
(taking Code Section 7701(g) into account, as determined by the
Manager, as of the following times: (x) the acquisition of an
additional interest in the Company by any new or existing Member in
exchange for more than a de minimis Capital Contribution; (y) the
distribution by the Company to a Member of more than a de minimis
amount of Company property as consideration for an interest in the
Company; and (z) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (x) and (y) above shall be made only if
the Manager reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the
Members in the Company;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be adjusted to equal the gross fair
market value (taking Code Section 7701(g) into account) of such asset
on the date of distribution as determined by the Manager; and
(iv) The Gross Asset Values of Company assets shall
be increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this paragraph (iv) to the extent the
Manager determines that an adjustment pursuant to paragraph (ii) above
is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraphs (i), (ii) or (iv) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Net Profits and Net Losses.
"Incentive Plan" shall mean the 1999 Incentive Plan of the Public
Corp. or any other incentive plan adopted by the Public Corp. in accordance with
the approval procedures set forth in the Certificate of Incorporation or
By-laws.
"Manager" shall mean the Public Corp. or any successor thereto.
"Member" shall mean, at any time, BN Holding, USO and the Public Corp.
if, at such time, they own Membership Units in the Company and any Person who at
such time owns Membership Units in the Company.
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"Member-Funded Debt" shall mean any non-recourse debt of the Company
which is loaned or guaranteed by any Member and/or is treated as "partner
non-recourse debt" under Section 1.704-2(b)(4) of the Treasury Regulations.
"Membership Unit" shall mean the unit representing a Member's interest
in the Company, including such Member's (i) ownership interest in the Company,
(ii) right to share in any Net Profits, Net Losses and any distributions of the
Company, and (iii) right, if any, to participate in the management of the
Company or any other decision of the Members pursuant to this Agreement.
"Minimum Gain" shall mean an amount equal to the excess of the
principal amount of debt, for which no Member is liable ("non-recourse debt"),
secured by any property of the Company over the adjusted basis of such Property
which represents the minimum taxable gain which would be recognized by the
Company if the non-recourse debt were foreclosed upon and the property were
transferred to the creditor in satisfaction thereof, and which is referred to as
"minimum gain" in Section 1.704-2(b)(2) of the Treasury Regulations. A Member's
share of Minimum Gain shall be determined pursuant to the above-cited Treasury
Regulations.
"Name License Agreements" shall mean each of the agreements between the
Company and BOL and between the Company and BN College relating to the right to
use the trade names, trademarks and domain names associated with BOL and "Barnes
and Noble," respectively.
"Net Profits" and "Net Losses" shall mean the net income or net loss of
the Company (including capital gains and losses) as determined in accordance
with the accounting methods followed by the Company for federal income tax
purposes including income exempt from tax and described in Code Section
705(a)(1)(B) and treating as deductions items of expenditure described in, or
under Treasury Regulations deemed described in, Code Section 705(a)(2)(B). For
purposes of computing Net Profits and Net Losses, gain or loss resulting from
the disposition of property, which gain or loss is recognized for federal income
tax purposes, shall be computed by reference to the Gross Asset Value of such
property rather than its adjusted tax basis. In lieu of the depreciation,
amortization and other cost recovery deductions taken into account in computing
taxable income or loss for federal income tax purposes, there shall be taken
into account Depreciation. In addition: (i) In the event the Gross Asset Value
of any Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the
definition of Gross Asset Value, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the Gross Asset Value of the
asset) or an item of loss (if the adjustment decreases the Gross Asset Value of
the asset) from the disposition of such asset and shall be taken into account
for purposes of computing Net Profit or Net Losses; and (ii) Notwithstanding any
other provision of this definition, any items which are specially allocated
pursuant to sections 5.4(f), (g), (h), (i), (j), and (k) hereof shall not be
taken into account for purposes of computing Net Profits or Net Losses. The
amounts of the items of Company income, gain, loss or deduction available to be
specially allocated pursuant to sections 5.4(f), (g), (h), (i), (j), and (k)
hereof shall be determined by applying rules analogous to those set forth in
this definition of "Net Profits" and "Net Losses."
"Percentage Interest" shall mean a Member's aggregate economic
percentage interest in the Company as determined by dividing the number of
Membership Units owned by such
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Member by the number of Membership Units then owned by all Members. The
Percentage Interests of the Members as of the effective date of this Agreement
are set forth on Schedule I.
"Permitted Encumbrances" shall mean as of a particular date (i)
Encumbrances reflected in the financial statements of the Company (including
purchase money liens which are not overdue as of a particular date or which are
being contested in good faith), (ii) Encumbrances arising out of contracts
entered into in the ordinary course of the Business, (iii) mechanics',
materialmen's or similar inchoate liens relating to liabilities not yet due and
payable and (iv) liens for current taxes not yet delinquent, to the extent the
validity thereof is being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing foreclosure or enforcement of
such liens and where adequate reserves are established and maintained in
accordance with GAAP.
"Person" shall mean an individual, sole proprietorship, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, mutual company, joint stock company, estate, union, employee
organization, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, or a Governmental Body.
"Prime Rate" for any period shall mean the interest rate for such
period as announced by Citibank N.A. (or its successors) at its principal office
in New York City as its base rate for loans.
"Restricted Member" shall mean USO and BN Holding.
"Restricted Transferee" shall mean amazon.com, inc., Borders Group,
Inc., America Online, Inc. ("AOL"), Microsoft, Inc. or Yahoo, Inc. or any of
their respective Affiliates.
"Services Agreements" shall mean the Amended and Restated Services
Agreement, dated as of October 31, 1998, by and between the Company and BN, and
the Amended and Restated Services Agreement, dated as of October 31, 1998, by
and between the Company and Marboro Books Corp., a New York corporation and a
wholly owned subsidiary of BN.
"Software Licenses" shall mean the Technology Sharing and License
Agreement between the Company and BOL, dated as of October 31, 1998, relating to
the exploitation of software owned by the Company, the Technology Sharing and
License Agreement between the Company and BOL, dated as of October 31, 1998,
relating to the exploitation of software owned by BOL, and the Amended and
Restated Database and Software License Agreement between BN and the Company,
dated as of October 31, 1998, relating to the exploitation of software owned by
BN.
"Supply Agreement" shall mean the Supply Agreement, dated as of October
31, 1998, between BN and the Company, as amended.
"Tax Year" shall mean the twelve (12) month period ending on October
31st.
"Transfer" shall mean, whether directly or indirectly by merger,
operation of law or otherwise, any sale, assignment, conveyance, transfer,
donation or any other means to dispose of,
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or pledge, hypothecate or otherwise encumber in any manner whatsoever, or permit
or suffer any Encumbrance of any interest in the Company (whether profits,
management or Percentage Interest).
"Treasury Regulations" means the regulations promulgated by the U.S.
Department of the Treasury under the Code.
"USO Directors" shall mean, collectively, the Class C Directors as
defined in the Certificate of Incorporation.
"Website" shall mean any interactive site or area, including any
interactive site or area located on the World Wide Web portion of the Internet
or on any commercial service or network (including services such as AOL), which
is accessed via the use of any protocols, standards or platforms (including
Internet or Internet derivative protocols, standards and platforms) for remote
access by narrowband or broadband telecommunications, including POTS, ISDN,
cable, fiber optics and hybrid CD-ROM, regardless of whether access to such site
or area is secured through cable, telephone, satellite or otherwise and
regardless of whether the same is received or operated in conjunction with a
personal computer or television, together with any successor into which any of
the foregoing may evolve.
Section 1.2 USAGE GENERALLY; INTERPRETATION. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. All references herein to Articles, Sections and Schedules shall be deemed
to be references to Articles, Sections and Schedules of this Agreement unless
the context otherwise requires. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. Unless otherwise expressly provided herein, any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. Except to the extent a
provision of this Agreement expressly incorporates federal income tax rules by
reference to sections of the Code or Treasury Regulations or is expressly
prohibited or ineffective under the LLCL, this Agreement shall govern, even when
inconsistent with, or different from, the provisions of the LLCL or any other
law or rule. To the extent any provision of this Agreement is prohibited or
ineffective under the LLCL, this Agreement shall be deemed to be amended to the
least extent necessary in order to make this Agreement effective under the LLCL.
In the event the LLCL is subsequently amended or interpreted in such a way to
make any provision of this Agreement that was formerly invalid valid, such
provision shall be considered to be valid from the effective date of such
interpretation or amendment.
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ARTICLE II. ORGANIZATIONAL AND OTHER MATTERS; MEMBERSHIP
Section 2.1 FORMATION; ADMISSION. The Company was formed as a limited
liability company under the provisions of the LLCL by the filing on October 27,
1998 of the Certificate of Formation with the Secretary of State of the State of
Delaware. Each of the Persons listed on Schedule I, by virtue of the execution
of this Agreement, are Members of the Company. The rights and liabilities of the
Members shall be as provided in the LLCL, except as is otherwise expressly
provided herein. This Agreement hereby amends and restates the Amended Agreement
in its entirety.
Section 2.2 NAME. The name of the Company shall be, and the business of
the Company shall be conducted under the name of, barnesandnoble.com llc.
Section 2.3 BUSINESS PURPOSE/OPERATION.
(a) The purpose of the Company is to engage in the Business
and/or such other businesses as determined by the Manager in accordance with
Sections 3.1 and 4.1 of the By-laws.
(b) The Company shall operate one or more Websites for the
purpose of selling English Language Books.
(c) The Websites operated by BOL and its Affiliates shall
allow access to customers of the Company who wish to order Foreign Language
Books, and the Websites operated by the Company shall promote (in a manner
approved by the Manager) the availability of Foreign Language Books which shall
be accessed through "hot links", pointers and key word indexes which transport
the customers to one or more Websites operated by BOL or its Affiliates. BOL and
its Affiliates shall be the exclusive Website to which customers of the Company
shall be allowed access with respect to the Business through any form of links,
pointers or key words for purposes of ordering Foreign Language Books (to the
extent that BOL is capable of servicing such orders), except as may be limited
by reason of applicable laws or agreements relating to sale and distribution of
books in the country to which shipment will be made. If BOL or any of its
Affiliates is unable to provide a certain Foreign Language Book, the Company may
provide access to third-party Websites ("Alternative Site") which offers books
in such language provided that the Company shall discontinue access to such
Alternative Site, and resume BOL's exclusive Website promotion and access for
such Foreign Language Book, at such time as BOL offers books in such foreign
language. In the event that BOL expands to offer music, videos, magazines or
software in languages other than English in the future, the Company may offer
access to such Websites operated by BOL or its Affiliates in the same manner as
available with respect to books. Nothing herein shall obligate BMG Music, a New
York partnership, of which Bertelsmann Music Group, Inc. and Ariola Eurodisc,
Inc. are the partners or any other Person owned directly or indirectly by BAG
which is engaged in the music business (collectively, "BMG") to conduct business
with BOL, the Company or in any manner whatsoever affect the conduct of business
by BMG through a Website.
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(d) The Websites operated by the Company shall allow access to
customers of BOL and its Affiliates who wish to order English Language Books,
and the Websites operated by BOL and its Affiliates shall promote (in a manner
approved by the Manager and the applicable boards of directors of BOL and its
Affiliates) the availability of English Language Books which shall be accessed
through "hot links", pointers and key word indexes which transport the customers
to one or more Websites operated by the Company. The Company shall be the
exclusive Website to which customers of BOL and its Affiliates shall be allowed
access with respect to the Business through any form of links, pointers or key
words for purposes of ordering English Language Books, except as may be limited
by reason of applicable laws or agreements relating to sale and distribution of
books in the country to which shipment will be made. In the event that the
Company expands to offer music, videos, magazines or software in the English
language in the future, BOL may offer access to such Websites operated by the
Company in the same manner as available with respect to books. Nothing herein
shall obligate BMG to conduct business with BOL, the Company or in any manner
whatsoever affect the conduct of business by BMG through a Website.
(e) Notwithstanding the foregoing, the parties hereto will
work together, in good faith, so that each BOL Website (other than BOL.UK,
BOL.Australia and BOL.New Zealand) shall offer its customers access to English
Language Books through two equal sized buttons, one of which shall access
BOL.UK, BOL.Australia and BOL.New Zealand, respectively, and one of which shall
access the Company. In the case of BOL.UK, BOL.Australia and BOL.New Zealand,
there will be a button for barnesandnoble.com of equal size as other BOL
entities.
(f) Orders for English Language Books placed by customers of
BOL or its Affiliates who enter Websites operated by BOL or its Affiliates will
be filled by the Company.
(g) Orders for Foreign Language Books placed by customers of
the Company who enter Websites operated by the Company will be filled by BOL or
its Affiliates.
(h) BN or its Affiliates will provide services for the benefit
of the Company pursuant to the Services Agreements and the Supply Agreement.
(i) In order to minimize confusion and maximize name
recognition, the Company shall agree with BOL on cobranding of trademarks and
trade names which will be used by the Company, BOL and its Affiliates, including
identifying an affiliation or a relationship between the Company and BOL on the
first screen and/or home page and for purposes of "bridging screens", assuring
seamless order processing and avoiding confusion to the public.
(j) Any party may engage in any activity relating to
development and exploitation of content, regardless of the medium which is used
(i.e. traditional media or Websites), except that actual sale of books on
Websites will be permitted only as set forth in this Section 2.3 and Sections
7.5, 7.6 and 7.7.
(k) Nothing herein shall affect the right of any party, or of
BN, BAG or any of their respective Affiliates, to engage in any other business,
including sale in any manner
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whatsoever (including through Websites) of music, videos, software, magazines or
any other product other than books through Websites, except as provided in
Section 2.3(a) relating to Book Clubs.
(l) Notwithstanding anything to the contrary contained herein
or in any of the agreements referred to in this Agreement, BN shall not
commingle any of its (or any of its Affiliates') funds with the funds which it
(or any of its Affiliates) collects on behalf of the Company.
(m) With respect to all existing agreements to which BN (or
any of its Affiliates) is the contracting party for the sole benefit of the
Company, and which are renewed or extended during the term of this Agreement,
the Company shall use its good faith efforts to substitute itself in place of BN
(or its applicable Affiliate) as a party to, and the sole obligor under, such
agreements.
(n) BN Holding, USO and the Public Corp. are fully aware of,
have been advised and agree that each of BN Holding, USO and their respective
Affiliates are engaged in, and may, in the future, conduct activities, which are
directly or indirectly competitive with the Company without any benefit to the
Company or its Members, except to the extent explicitly set forth in this
Agreement. Each party hereby consents to such activity and agrees that such
conduct or competition will not, in and of itself, constitute any breach of
corporate or partnership opportunity, breach of fiduciary responsibility,
conflict of interest, or otherwise, or impose any obligation on BN Holding or
USO or their Affiliates.
(o) The parties acknowledge that BAG and BN or their
Affiliates may, as a result of receipt of or exposure to confidential
information, increase or enhance the knowledge and experience retained in the
unaided memories of each of their directors, officers, employees or contractors.
Notwithstanding anything to the contrary in this Agreement, BAG and BN and their
respective Affiliates and their respective directors, employees, agents or
contractors may use and disclose such residual information (as defined below) in
their respective businesses or for any purpose whatsoever, including the design,
development, manufacture, marketing, sale, licensing, distribution and
maintenance of the products and services of such Member and its Affiliates;
provided that: (i) such Member and its Affiliates (and their respective
directors, employees, agents or contractors) have not (x) intentionally
memorized the confidential information so as to reduce it to an intangible form
for the purpose of creating residual information or using same, or (y) avoided
their obligation to maintain the confidentiality of confidential information by
having a person commit such information to memory so as to reduce it to an
intangible form; and (ii) such right shall not represent a license under any
patents, copyrights or maskwork rights. Notwithstanding anything to the contrary
in this Agreement or any other agreement between the parties which is referenced
herein or in any information or documents disclosed hereunder, the receipt by a
Member or its Affiliate of confidential information shall not create any
obligation in any way limiting or restricting the assignment and/or reassignment
of such Member's (or its Affiliate's) employees within such Member and its
Affiliates. The term "residual information" shall mean the ideas, concepts,
know-how, methods, techniques, and other information in nontangible form which
may be retained in unaided memory by those directors, officers, employees or
contractors who have had access to confidential information.
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Section 2.4 OFFICES. The Company's principal office shall be located
at 76 Ninth Avenue, 11th Floor, New York, New York 10011. The Company may have
other offices at such other places within or without the State of New York as
the Manager from time to time may select.
Section 2.5 TERM. The Company commenced on the date of the filing of
the Certificate of Formation, and the term of the Company shall continue until
the close of business on January 31, 2075, subject to extension under Section
9.1(a), or until the earlier dissolution of the Company in accordance with the
provisions of ARTICLE IX or as otherwise provided by law.
Section 2.6 MEMBERS. The Members of the Company as of the date of
this Agreement are BN Holding, USO and the Public Corp. Subject to the prior
written consent of all Members, a new Person may be admitted from time to time
as a Member; provided, however, that each such new Member shall execute an
appropriate supplement to this Agreement pursuant to which the new Member agrees
to be bound by the terms and conditions of this Agreement, as it may be amended
from time to time. Admission of a new Member shall not be cause for the
dissolution of the Company.
Section 2.7 PLACE OF MEMBERS' MEETINGS. Meetings of the Members
(each, a "Members' Meeting") shall be held at the principal office of the
Company, or at such other place as the Members shall mutually agree.
Section 2.8 MEETINGS. A Members' Meeting may be called by any Member
for any matter which is appropriate for consideration thereat. Members' Meetings
shall be held from time to time, but no fewer than once in each calendar year.
Meetings shall be chaired by the Chairman of the Company, and the Secretary of
the Meeting shall be appointed by the Chairman.
Section 2.9 TELEPHONIC MEETINGS. Members' Meetings may be held
through the use of conference telephone or similar communications equipment so
long as all Persons participating in such Members' Meetings can hear one another
at the time of such Members' Meeting. Participation in a Members' Meeting via
conference telephone or similar communications equipment in accordance with the
preceding sentence constitutes presence in person at the Members' Meeting.
Section 2.10 NOTICE OF MEETINGS. Written notice of each Members'
Meeting shall state the place, date and hour of such Members' Meeting, and the
general nature of the business to be transacted. Notice shall be given in the
manner prescribed in Section 11.2 not fewer than ten (10) days nor more than
sixty (60) days before the date thereof.
Section 2.11 WAIVERS. Notice of a Members' Meeting need not be given
to any Member who signs a waiver of notice, in person or by proxy, whether
before or after the Members' Meeting. The attendance of any Member at a Members'
Meeting, in person or by proxy, without protesting prior to the conclusion of
such Members' Meeting the lack of notice of such Members' Meeting, shall
constitute a waiver of notice by such Member, provided that such Member has been
given an adequate opportunity at the meeting to protest such lack of notice.
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Section 2.12 QUORUM. Members holding a majority of the Membership
Units shall constitute a quorum at a Members' Meeting for the transaction of any
business; provided, however, that in order to constitute a quorum, each of such
Members must be represented in person or by proxy. Holders of a majority of such
Membership Units present may adjourn the Members' Meeting, whether or not a
quorum is present. An adjournment may include notice of the date, hour and place
that the Members shall reconvene. Notice of the adjournment (with the new date,
time and place) shall be given to all Members who were absent at the time of the
adjournment and, unless such date, hour and place are announced at the Members'
Meeting, to the other Members.
Section 2.13 PROXIES. Every Member entitled to vote at a Members'
Meeting may authorize another Person or Persons to act for it by proxy. Every
proxy must be signed by the Member or his 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 in writing at
the pleasure of the Member executing it.
Section 2.14 VOTING POWER. Each Membership Unit shall be entitled to
one (1) vote on all matters to be voted on by the Members.
Section 2.15 WRITTEN CONSENT. Any action required or permitted to be
taken at any Members' Meeting may be taken without a meeting if all Members
consent thereto in writing. Any such written consents shall be filed with the
minutes of the proceedings.
ARTICLE III. MANAGER; POWERS
Section 3.1 MANAGER
(a) The business, property and affairs of the Company shall be
managed under the direction of the Manager.
(b) Without limiting the foregoing provisions of this Section
3.1, the Manager shall have the general power to manage or cause the management
of the Company within the scope of the business purpose set forth in Section
2.3, including the following powers which may, subject to any limitations set
forth in this Agreement (including those set forth in Sections 4.3 and 4.4), be
delegated to the officers of the Company:
(i) to have developed and prepared a Business
Plan each year which will set forth the operating goals and plans for the
Company;
(ii) to execute and deliver or to authorize the
execution and delivery of contracts, deeds, leases, licenses, instruments of
transfer and other documents in the ordinary course of business on behalf of
the Company;
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(iii) to employ, retain, consult with and dismiss
such personnel as may be required for accomplishment of the business purpose set
forth in Section 2.3;
(iv) to establish and enforce limits of authority
and internal controls with respect to all personnel and functions;
(v) to engage attorneys, consultants and
accountants for the Company;
(vi) to develop or cause to be developed accounting
procedures for the maintenance of the Company's books of account;
(vii) to appoint auditors; and
(viii) to do all such other acts as shall be
specifically authorized in this Agreement or by the Members in writing from
time to time.
Section 3.2 COMPENSATION. The Manager shall not be entitled to
compensation for services rendered to the Company in its capacity as Manager.
ARTICLE IV. OFFICERS
Section 4.1 OFFICERS. The officers of the Company (the "Officers")
shall at all times be identical to the then officers of the Public Corp. Any
changes in the officers of the Public Corp., whether by election, resignation,
removal, death or otherwise, shall automatically and concurrently take effect
with respect to the Officers of the Company. No Officer may resign unless such
Officer concurrently resigns as an officer of the Public Corp. Any resignation
by an Officer shall constitute such Officer's concurrent resignation from the
Public Corp.
Section 4.2 MANAGEMENT POLICIES. The Chief Executive Officer and other
officers and employees of the Company shall develop and implement management
policies consistent with the general policies and programs established by the
Chairman of the Company and the Manager, as approved, in accordance with the
By-laws, by its Board of Directors and, where required by the By-laws, the
Special Committee (as defined in the By-laws).
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ARTICLE V. FINANCE AND CAPITAL
Section 5.1 CAPITAL CONTRIBUTIONS. The Members have made, on or prior
to the date hereof, capital contributions and have acquired the number of
Membership Units as specified opposite their respective names on Schedule I.
Section 5.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as set forth in
Section 10.5, no Member shall be required or permitted to make additional
capital contributions to the Company without the consent of all of the Members.
Section 5.3 MEMBERS' CAPITAL ACCOUNTS. No Member shall have any right
to withdraw any portion of its Capital Account, except as otherwise provided
herein. For purposes hereof, "Capital Account" shall mean the separate capital
account maintained for each Member in accordance with Treasury Regulations (as
hereinafter defined) Section 1.704-1(b), as of any particular date. Each
Member's initial Capital Account (as determined immediately after all of the
events described in Section 5.1 hereof) is set forth on Schedule I, which
initial Capital Accounts apply the principles of Treasury Regulation Section
1.704-1(b)(2)(iv)(d) and thereafter such Capital Accounts shall be adjusted as
follows:
(a) The Capital Account of each Member shall be increased by:
(i) The amount of any Net Profits (and any items of
income or gain), allocated on or after the date hereof to such Member;
(ii) The amount, if any, of any Company liabilities
assumed by such Member or taken subject to or in connection with the
distribution of property to such Member by the Company on or after the date
hereof;
(iii) The amount of any cash contributed by the Member
to the Company;and
(iv) The fair market value of property contributed to
the Company by such Member on or after the date hereof.
(b) The Capital Account of each Member shall be decreased by:
(i) The amount of cash distributed to such Member by
the Company on or after the date hereof;
(ii) The amount of any Net Losses (and any items of
deduction or loss) allocated to such Member on or after the date hereof;
(iii) The fair market value of any property distributed
to such Member by the Company on or after the date hereof; and
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(iv) The amount of any liabilities of such Member
assumed by the Company or taken subject to or in connection with the
contribution of property by such Member to the Company on or after the date
hereof.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations under Section 704(b) of the Code and, to the extent not
inconsistent with the provisions of this Agreement, shall be interpreted and
applied in a manner consistent with such Treasury Regulations.
Section 5.4 PROFITS/LOSSES.
(a) Allocation of Income and Loss.
(i) Net Profits shall be allocated among the Members
in proportion to their Percentage Interests.
(ii) Net Losses shall be allocated among the Members
in proportion to their Percentage Interests.
(iii) Whenever a proportionate part of the Net Profits
or Net Losses is allocated to a Member, every item of income, gain, loss,
deduction or credit entering into the computation of such Net Profits or Net
Losses or arising from the transactions with respect to which such Net Profits
or Net Losses were realized shall be credited or charged, as the case may be, to
such Member in the same proportion; provided, however, that "recapture income",
if any, shall be allocated to the Members who were allocated the corresponding
depreciation deductions.
(iv) If any Member Transfers all or any portion of its
Membership Units during any Fiscal Year, Net Profits and Net Losses attributable
to such transferred Membership Units for such Fiscal Year shall be apportioned
between the transferor and the transferee or computed as to such Members on the
basis of an interim closing of the books and records of the Company, provided in
all events that any apportionment described above shall be permissible under the
Code and applicable regulations thereunder.
(b) Tax credits, if any, shall be allocated among the Members
in proportion to their Percentage Interests.
(c) When the Gross Asset Value of a Company asset differs from
its basis for federal or other income tax purposes, solely for purposes of the
relevant tax and not for purposes of computing Capital Account balances, income,
gain, loss, deduction and credit with respect to such asset shall be allocated
among the Members under the remedial allocation method under Treasury Regulation
Section 1.704-3(d). The Members agree that, as of October 31, 1998, all such
differences related to goodwill, and the corresponding remedial allocations
shall be made ratably over a fifteen (15) year period.
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(d) Determinations by the Members. All matters concerning the
allocation of Net Profits and Net Losses (and items of income, gain, loss and
deduction) among the Members, tax elections (except as may otherwise be required
by the income tax laws) and accounting procedures not expressly and specifically
provided by the terms of this Agreement, shall be determined in good faith by
the Manager, and on a basis which is in conformity with the requirements imposed
under Code Section 704 and the Treasury Regulations thereunder as equitably
applied among the Members.
(e) Interest. Except for interest payable pursuant to Member
loans permitted to be made hereunder, no interest shall be paid by the Company
on capital contributions, balances in Member's Capital Accounts or any other
funds contributed to the Company or distributed or distributable by the Company
under this Agreement.
(f) Minimum Gain Chargeback. Notwithstanding any provision of
Section 5.4, if there is a net decrease in Minimum Gain during a taxable year of
the Company (including any Minimum Gain attributable to Member-Funded Debt),
each Member at the end of such year shall be allocated, before any other
allocations of Net Profits or Net Losses for such year, items of income and gain
for such year (and, if necessary, subsequent years) in the amount and in the
proportions described in Section 1.704-2(f) of the Treasury Regulations.
(g) Qualified Income Offset. Notwithstanding the allocations
provided for in Section 5.4(a), (b), (c), (d) or (e), no allocation of an item
of loss or deduction shall be made to a Member to the extent such allocation
would cause or increase a deficit Capital Account balance in such Member's
Capital Account as of the end of the taxable year to which such allocation
relates, after taking into account any adjustment, allocation or distribution
described in Section l.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury
Regulations and such losses or deductions shall be allocated to other Members in
accordance with the positive balances in such Members' capital accounts so as to
allocate the maximum permissible losses or deductions to each Member under
Treasury Regulation 1.704-1(b)(2)(ii)(d). If any such adjustment, allocation or
distribution unexpectedly occurs, the Members shall be allocated items of income
and gain in an amount and manner to eliminate any Capital Account deficit
attributable to such adjustment, allocation or distribution as quickly as
possible. For purposes of this Section 5.4(g), there shall be excluded from a
Member's deficit Capital Account balance at the end of a taxable year of the
Company: (x) such Member's share, determined in accordance with Section 704(b)
of the Code and Section 1.704-2(g) of the Treasury Regulations, of Minimum Gain
(provided that in the case of Minimum Gain attributable to Member-Funded Debt,
such Minimum Gain shall be allocated only to the Member or Members to which such
debt is attributable pursuant to Section 1.704-2(i) of the Treasury
Regulations); (y) the amount of any loans (other than Member-Funded Debt) for
which such Member is personally liable (whether as a result of a guarantee or
otherwise); and (z) the amount such Member is obligated to restore to the
Company under Section 1.704-l(b)(2)(ii) of the Treasury Regulations.
(h) Member-Funded Debt. Notwithstanding the allocations
provided for in Section 5.4(a), (b), (c), (d) or (e), if there is a net increase
in Minimum Gain during a taxable year of the Company that is attributable to
Member-Funded Debt then, first depreciation, to the extent
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the increase in such Minimum Gain is allocable to depreciable property, and then
a proportionate part of other deductions and expenditures described in Section
705(a)(2)(B) of the Code, shall be allocated to the lending or guaranteeing
Member, provided that, the total amount of deductions so allocated for any year
shall not exceed the increase in Minimum Gain attributable to such Member-Funded
Debt in such year.
(i) Regulatory Allocations. The allocations set forth in
Sections 5.4(f), (g), (h) and (k) (the "Regulatory Allocations") are intended to
comply with certain requirements of Section 1.704-1(b) of the Treasury
Regulations. The Regulatory Allocations shall be taken into account in
allocating other Net Profits and Net Losses and items of income, gain, loss and
deduction so that, to the extent possible, the net amount of such other
allocations and the Regulatory Allocations to each Member shall be equal to the
net amount that would have been allocated to such Member if the Regulatory
Allocations had not been made.
(j) Special Allocations. With respect to Company assets as of
October 31, 1998 that are subject to Section 5.4(c), if the remedial allocation
provisions of Section 5.4(c) or the provisions of Section 6.8(b) shall not apply
in the manner contemplated by BN Holding and USO, then notwithstanding Section
5.4(a), Net Profits and Net Losses or items of income, gain, deduction or loss
otherwise allocable to BN Holding and USO shall be allocated between BN Holding
and USO so that the tax consequences are as nearly as possible identical to
those tax consequences contemplated by BN Holding and USO.
(k) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining capital accounts,
the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be allocated to the Members in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
Section 5.5 BANKING; INVESTMENTS. All funds of the Company shall be
deposited in such bank account or accounts, or invested, and withdrawals from
any such bank account shall be made upon such signature or signatures, as shall
be established and designated by the Manager, subject to any approval by the
Special Committee required by the By-laws.
Section 5.6 DISTRIBUTIONS.
(a) Except as otherwise required by law or as provided in this
Agreement, no Member shall have any right to withdraw any portion of its Capital
Account without the consent of all the other Members.
(b) The Company shall distribute Distributable Cash to each
Member in proportion to such Member's Percentage Interest, at such times and in
such amounts as the Manager shall determine.
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(c) Notwithstanding the foregoing, if as a result of any Net
Profits allocated to the Public Corp., after giving effect to all cumulative Net
Losses allocated to the Public Corp. available to the Public Corp. to offset any
such Net Profits, the Public Corp. is obligated to pay any federal, state or
local income taxes, then the Company shall distribute Distributable Cash as
follows:
(i) The Manager shall determine the amount of funds
which the Public Corp. requires to pay such taxes with respect to the
most recently ended Tax Year of the Company, after giving effect to
the amount of cumulative Net Losses available to the Public Corp. for
such Tax Year (the "Tax Amount"); and
(ii) The Company shall distribute to each Member an
amount equal to: (x) the Percentage Interest of such Member multiplied
by a collective amount (the "Collective Amount") equal to (y) the Tax
Amount divided by (z) the Percentage Interest of the Public Corp.
(expressed as a decimal). In the event that the Collective Amount
distributable to all Members pursuant to the preceding sentence exceeds
the amount of Distributable Cash, the amount otherwise distributable to
each Member shall be multiplied by a fraction, the numerator of which
shall be the Distributable Cash and the denominator of which shall be
the Collective Amount. The distribution under this provision shall be
made within one hundred twenty (120) days after the date of each Tax
Year of the Company.
Section 5.7 RETURN OF CONTRIBUTION. Except as required by the LLCL, no
Member shall be personally liable for the return of any capital contribution, or
any portion thereof, or the return of any additions to the Capital Accounts of
the other Members, or any portion thereof, it being agreed that any return of
capital as may be made at any time, or from time to time, shall be made solely
from the assets of the Company, and only in accordance with the terms hereof.
ARTICLE VI. ACCOUNTING; TAX MATTERS
Section 6.1 BOOKS; FISCAL YEAR. The Company shall maintain complete and
accurate books of account of the Company's affairs at the Company's principal
place of business. Such books shall be kept in accordance with U.S. GAAP. The
Company's accounting period for tax purposes shall be the Fiscal Year. The
Company's accounting year for all other purposes shall be the Fiscal Year,
however, the Company shall also report its results for the twelve (12) month
period ended as of June 30 of each year to BAG in German GAAP.
Section 6.2 REPORTS. The Company shall close the books of account after
the close of each month in each Fiscal Year. The Company shall prepare and
distribute to each Member a monthly statement of such Member's distributive
share of income and expense for income tax reporting purposes, as well as a
report on sales, income, expenses and other reports as are normally prepared for
USO, BN Holding and the Public Corp. and in sufficient detail to permit each of
USO, BN Holding and the Public Corp. to report its respective share of income,
expense
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and such other GAAP items as each of USO, BN Holding and the Public Corp. may
reasonably request. Such information shall be made available to each Member no
later than fourteen (14) days after the end of each month (provided that the
Company shall have twenty-one (21) days until June 30, 1999 and eighteen (18)
days until December 31, 1999, respectively, after each month end) and no later
than August 15 of each Fiscal Year in respect of such Fiscal Year. After the end
of each Fiscal Year, the Company shall send to each Member a report indicating
such information with respect to the Member as is necessary for purposes of
reporting such amounts for federal, state and local income tax purposes.
Section 6.3 COMPANY INFORMATION. Upon reasonable request, the Company
shall supply to any Member information regarding the Company, its sales,
receipts, payments, all accounting information and records as well as all
activities of the Company. Each Member and its representatives shall have free
access during normal business hours to discuss the operations and business of
the Company with employees or agents of the Company, and to inspect, audit or
make copies of all books, records and other information relative to the
operations and business of the Company at their own expense; provided, however,
that each Member shall preserve the confidentiality of such information. The
Chairman or the Chief Executive Officer of the Company shall provide all
information requested by a Member.
Section 6.4 RECORDS. The Company shall keep or cause to be kept
appropriate books and records in accordance with the LLCL with respect to the
Company's business, which books and records shall at all times be kept at the
principal office of the Company. Without limiting the foregoing, the Company
shall keep at its principal office the following:
(a) a current list of the full name and the last known street
address of each Member;
(b) a copy of the Certificate of Formation and this Agreement
and all amendments thereto;
(c) copies of the Company's federal, state and local income
tax returns and reports, if any, for the three most recent Fiscal Years;
(d) copies of any financial statements, if any, of the Company
for the six most recent Fiscal Years; and
(e) such other documents with respect to the Company's
business as may reasonably be required from time to time by the Manager.
Section 6.5 TAX CHARACTERIZATION. It is intended that the Company be
characterized and treated as a partnership for, and solely for, U.S. federal,
state and local income tax purposes. For such purpose, (i) the Company shall be
subject to all the provisions of Subchapter K of Chapter 1 of Subtitle A of the
Code, and (ii) all references to a "Partner," to "Partners" and to the
"Partnership" in the provisions of the Code and Treasury Regulations cited
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in this Agreement shall be deemed to refer to a Member, Members and the Company,
respectively.
Section 6.6 TAX RETURNS. The Members shall provide each other with
copies of all correspondence or summaries of other communication with any taxing
authority regarding any aspect of items of Company income, gain, loss or
deduction and no Member shall enter into settlement negotiations with respect to
the tax treatment of any Company item of income, gain, loss or deduction without
first giving reasonable advance notice of such intended action to the other
Members.
Section 6.7 TAX MATTERS PARTNER. Pursuant to Code Section
6231(a)(7)(A), the Public Corp. shall be the "Tax Matters Partner" of the
Company for all purposes of the Code and any corresponding state or local
statute. Each Member consents to such designation and agrees to take such
further action as may be required, by regulation or otherwise, or as may be
requested by any Member, to effectuate such designation. The Tax Matters Partner
shall cooperate with the other Members and shall promptly provide the other
Members with copies of notices or other materials from, and inform the other
Members of discussions engaged in with, any taxing authority and shall provide
the other Members with notice of all scheduled administrative proceedings,
including meetings with agents, technical advice conferences and appellate
hearings, as soon as possible after receiving notice of the scheduling of such
proceedings. The Tax Matters Partner will schedule such proceedings only after
consulting the other Members with a view to accommodating the reasonable
convenience of both the Tax Matters Partner and the other Members. The Tax
Matters Partner shall not agree to extend the period of limitations for
assessments; file a petition or complaint in any court; file a request for an
administrative adjustment of partnership items after any return has been filed;
or enter into any settlement agreement with respect to Company items of income,
gain, loss or deduction except at the direction of the Members. The Tax Matters
Partner may request extensions to file any tax return or statement without the
written consent of, but shall so inform, the other Members. The provisions of
this Agreement regarding the Company's tax returns shall survive the termination
of the Company and the transfer of any Member's interest in the Company and
shall remain in effect for the period of time necessary to resolve any and all
matters regarding the taxation of the Company and items of Company income, gain,
loss and deduction.
Section 6.8 TAX ELECTIONS.
(a) The Manager shall determine whether to make any available
tax election.
(b) Effective for its taxable year ended October 31, 1999,
the Company shall file with its tax return a written statement (the "ss. 754
Election"), signed by the Manager, setting forth (i) the name and address of the
Company, (ii) a declaration that the Company elects under ss. 754 to apply the
provisions of ss. 734(b) and ss. 743(b) and (iii) such other information as may
be required under Treas. Reg. ss. 1.754-1. The Company shall allocate such
special basis adjustments under ss. 734(b) and ss. 743(b) pursuant to ss. 755.
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(c) The Company shall pay all costs incurred by the Company in
connection with such special basis adjustments arising from such permitted
ownership Transfers or distributions, including reasonable attorneys' and
accountants' fees. In addition, both the transferor and the transferees of a
permitted ownership interest Transfer (or the transferee of any Company
distribution) shall (within sixty (60) days of such permitted Transfer or
distribution), provide the Company with complete and accurate information
regarding such Transfer (or distribution) to enable the Company to make special
basis adjustments and other computations in connection therewith.
Section 6.9 WITHHOLDING. Each Member hereby authorizes the Company to
withhold from or pay on behalf of or with respect to such Member any amount of
federal, state, local or foreign taxes that the Manager determines that the
Company is required to withhold or pay with respect to any amount distributable
or allocable to such Member pursuant to this Agreement, including any taxes
required to be withheld by the Company pursuant to Sections 1441, 1442, 1445 or
1446 of the Code. Any amount paid on behalf of or with respect to a Member shall
constitute a loan by the Company to such Member, which loan shall be repaid by
such Member within fifteen (15) days after notice from the Manager that such
payment must be made unless (a) the Company withholds such payment from a
distribution which would otherwise be made to such Member or (b) the Manager
determines, in its sole discretion, that such payment may be satisfied out of
the available funds of the Company which would, but for such payment, be
distributed to such Member. Any amounts withheld pursuant to the foregoing
clauses (a) and (b) of this Section 6.9 shall be treated as having been
distributed to such Member.
ARTICLE VII. TRANSFERS/EXCLUSIVITY/NONCOMPETITION
Section 7.1 PROHIBITED TRANSFERS. Except as expressly permitted in this
Agreement, no Restricted Member or any of their respective Affiliates, including
any direct or indirect beneficial owner or ultimate parent of any such entity
(including BN and BAG), shall, directly or indirectly, Transfer any of the
right, title or interest in (i) any Membership Units or (ii) any of their
Affiliates which beneficially own, either directly or indirectly, any Membership
Units.
Section 7.2 PERMITTED TRANSFERS. Notwithstanding anything in this
Agreement to the contrary:
(a) Each Restricted Member may Transfer all (but not less than
all) of the Membership Units owned by it and its rights under this Agreement
under any of the following circumstances:
(i) Each Restricted Member may Transfer all (but not
less than all) of the Membership Units owned by it together with its rights
under this Agreement to any transferee which is an Affiliate of the transferring
Member provided that no Restricted Transferee owns an interest in such
transferee.
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(ii) Each Restricted Member (or any permitted
transferee under clause (a) above) may Transfer all (but not less than all) of
the Membership Units owned by it together with its rights under this Agreement
if such Transfer is part of the Transfer (i) by BAG and its Affiliates of all
(or substantially all) of the publishing business in the United States, operated
by BAG and its Affiliates, or (ii) by BN and its Affiliates, of all (or
substantially all) of its retail book store business.
(iii) In the event of any such Transfer, a transferee
(or subsequent transferee) shall be entitled to the rights and privileges set
forth in this Agreement and shall be bound and obligated by the provisions of
this Agreement. As a condition to such Transfer permitted pursuant to this
Section 7.2(a), each transferee shall, prior to such transfer, agree in writing
to be bound by all of the provisions of this Agreement and no such transferee
shall be permitted to make any Transfer which the original transferor was not
permitted to make. In connection with any Transfer pursuant to this Section
7.2(a), the transferee shall execute and deliver to the non-transferring Members
and the Company such documents as may reasonably be requested by the
non-transferring Members or the Company to evidence the same.
(b) Each Restricted Member may Transfer some or all of the
Membership Units owned by it to the other Restricted Member.
(c) Any Restricted Member may Transfer some or all of the
Membership Units owned by it to the Public Corp. in exchange for Class A Common
Stock in accordance with the Certificate of Incorporation.
Section 7.3 RIGHTS OF FIRST REFUSAL.
(a) Except with respect to Transfers permitted pursuant to
Sections 7.2, if, on or after October 31, 1999, a Restricted Member desires to
Transfer any of its Membership Units to any other Person (other than a
Restricted Transferee) in a bona fide transaction solely for cash consideration,
such Member (the "Offeror") shall be entitled to do so provided that such
Offeror first offers to sell such Membership Interest to the other Restricted
Member (the "Offeree") at the same price and the same terms and conditions as
the Offeror would receive from such other Person. If the Offeror shall Transfer
Membership Units which are equal to more than ten percent (10%) of the then
aggregate outstanding Membership Units, the member of the Special Committee
elected by the BN Managers (if BN Holding or its Affiliate is the Offeror) or by
the USO Managers (if USO or its Affiliate is the Offeror) shall be deemed to
have resigned effective immediately upon such Transfer. The Offeror shall submit
to the Company and the Offeree a written notice (the "Offer Notice") stating in
reasonable detail such price and such terms and conditions and identifying the
Person and all Persons who beneficially own more than five percent (5%) of such
Person, proposing to purchase the Membership Units. The Offeree shall have a
period of thirty (30) days after the receipt of the Offer Notice in which to
accept or reject such offer. If the Offeree elects to accept such offer, which
acceptance must be for all and not part of the Membership Units offered for
sale, it shall so indicate within such thirty (30) day period by notice to the
Offeror. The notice required to be given by the Offeree shall specify a date for
the closing of the purchase which, subject to the expiration or early
termination of any
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waiting period required by any Governmental Body and the receipt of any required
approvals of any Governmental Body, shall not be more than thirty (30) days
after the date of the giving of such notice.
(b) If the Offeree does not exercise its right to purchase all
of the Membership Units offered for sale pursuant to the provisions of this
Section 7.3, the Offeror of such Membership Units shall have the right to sell
all (but not less than all) of such offered Membership Units to the Person
identified in the Offer Notice, subject to the provisions of this Agreement on
the same terms and conditions including the Membership Unit price as specified
in the Offer Notice, free from the restrictions of Section 7.1 of this Agreement
(for purposes of such specific transaction, but not for purposes of any
subsequent transaction) in a bona fide transaction, for a period of ninety (90)
days from the date that the Offer expires hereunder, provided that any such
purchaser shall, prior to such transfer, agree in writing to be bound by all of
the provisions of this Agreement. At the end of such ninety (90) day period, the
Offeror shall notify the Company and the other Member in writing whether its
Membership Units have been sold in a bona fide transaction during such period.
To the extent not sold during such ninety (90) day period, all of such
Membership Units shall again become subject to all of the restrictions and
provisions hereof.
(c) The purchase price per unit for the Membership Units shall
be the price per unit offered to be paid by the prospective transferee described
in the Offer Notice, which price shall be paid in cash.
(d) The closing of the purchase shall take place at the office
of the Company or such other location as shall be mutually agreeable and the
purchase price shall be paid at the closing by wire transfer of immediately
available funds. At the closing, the Offeror shall deliver to the Offeree the
certificates evidencing the Membership Units to be conveyed, duly endorsed and
in negotiable form as well as the items listed in Section 7.4.
Section 7.4 CLOSING DELIVERIES. The Offeror at a closing under this
ARTICLE VII shall deliver to the Purchaser the following:
(a) A duly executed "Deed of Transfer of Membership Interest"
in the Company conveying to the Offeree the Membership Units being purchased by
the Offeree, free and clear of any Encumbrances, except those in this Agreement
which are expressly assumed.
(b) A statement from the Offeror that: (i) except as set forth
therein, the Offeror has no claim as against the Company for unpaid dividends,
compensation, bonuses, profit-sharing or rights or other claims of whatsoever
kind, nature or description and that all amounts due and payable by the Company
to the Offeror have been paid; and (ii) it shall guarantee the performance of
the Offeror's obligations under this Agreement.
Section 7.5 EXCLUSIVITY. The Members agree that the following
provisions shall be applicable during such time as BN and BAG (directly or
indirectly through its respective Affiliates) own Membership Units:
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(a) The Company shall be the exclusive vehicle for each of BN
and BAG (and their respective Affiliates) to engage in the Business with respect
to English Language Books in English-speaking countries, except that BAG (and
its Affiliates) may engage in the sale of English Language Books through BOL.UK,
BOL.Australia and BOL.New Zealand in accordance with the provisions set forth in
Section 2.3(e). "English-speaking countries" shall mean the U.S., Canada, the
U.K., Australia, New Zealand and South Africa.
(b) BN (and its Affiliates) shall not engage in the: (i) sale
of Foreign Language Books through Websites except through links to Websites
operated by BAG and its Affiliates; or (ii) establishment or operation of Book
Clubs through Websites.
(c) Notwithstanding any provision of this Agreement to the
contrary:
(i) Either BN or BAG (or its respective Affiliates)
may engage in any activity described in clauses (1), (2), (4) (provided that
Websites may only be used for e-mail purposes in connection with operations
described in clause (4)) or (5) of the definition of Business;
(ii) BAG (or its Affiliates) may engage in any
activity described in clause (3) of the definition of Business;
(iii) BAG (or its Affiliates) may engage in the sale to
consumers through Websites of English Language Books, which are published by
BAG, or its Affiliates, at such times as unrelated third party publishers (which
are regarded as major publishers by industry sources) are engaged in such sales
activity;
(iv) BN (or its Affiliates) may engage in the sale to
consumers through Websites of English Language Books which are published by BN
(or its Affiliates), at such times as unrelated third party publishers (which
are regarded as major publishers by industry sources) are engaged in such sales
activity;
(v) Either BAG or BN (or its respective Affiliates) may
engage in the distribution of videos, music, software or magazines independent
of the Company;
(vi) BAG (or its Affiliates) or BN (or its Affiliates)
may engage in the following activities relating to sale, distribution or
delivery of electronic or digitized material:
1) the actual act of transforming copyrighted
material into electronic or digitized form;
2) the services involved in providing
clearinghouse functions; and
3) the offering of such electronic or digitized
materials to wholesalers, retailers, distributors or consumers, whether through
Websites or otherwise,
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including (but with respect to BAG and its Affiliates only) through Book Clubs,
but only to the extent that the offering party is the publisher of such
material;
(vii) With respect to countries that are not
English-speaking countries, BAG (and its Affiliates) may sell English language
books without restriction; and
(viii) Each of the Members acknowledges and agrees that
good faith de minimus sales that would otherwise constitute a violation of this
Section 7.5 shall not be considered to be such a violation.
Section 7.6 EXCEPTIONS TO EXCLUSIVITY.
Notwithstanding anything in this Agreement to the contrary, the
following shall be exempt from the restrictions set forth in Section 7.5:
(a) Any Person in which either BAG, BN, or any of their
respective Affiliates owns:
(i) ten percent (10%) or less, in case the primary
activity of such Person is the Business. For purposes of the preceding sentence,
the primary activity of a Person shall be deemed to be the Business only if it
derives twenty-five percent (25%) or more of its net revenues from the conduct
of Business for the fiscal year of such Person preceding the acquisition;
(ii) twenty percent (20%) or less, in the case of any
Person the primary activity of which involves or is focused on sectors outside
of the Business and where the contribution from the Business, in net revenues,
is less than twenty-five percent (25%) (on a consolidated basis) but more than
ten percent (10%) (on a consolidated basis) for the fiscal year of such Person
preceding the acquisition;
(iii) any percentage of another Person, without
limitation, if the net revenues of such Person from the conduct of Business (on
a consolidated basis) is less than ten percent (10%) of its total net revenues
for the fiscal year of such Person preceding the acquisition; or
(iv) any acquisition of another Person where such
Person is directly engaged in the Business (directly or through one or more
units) to an extent greater than that permitted by the above provisions of this
Agreement provided that, within a period of twelve (12) months after the date of
the acquisition, the acquiring party either: (a) makes an orderly divestiture of
such portions of the acquired business which are conducted by the acquired
Person or its Affiliates to a third party; or (b) the acquiring party offers and
sells such identifiable unit which is engaged in the Business to the Company. In
case an offer is made to the Company under the preceding sentence, the purchase
price shall be determined by the offering party subject to acceptance, on behalf
of the Company, by Managers who are not appointed by the offering party.
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(v) For purposes of this Section, the ownership
interest of each of BN and BAG, respectively, shall be aggregated with the
ownership interest of any Person in which it directly or indirectly through a
chain of other Persons owns an interest of fifty percent (50%) or more.
Section 7.7 NONCOMPETITION AFTER SALE OF MEMBERSHIP UNITS.
The restrictions set forth in Section 7.5 , and the provisions of
Sections 2.3(c), (d), and (e), shall apply to a Restricted Member at all times
during which:
(a) such Member owns Membership Units; and
(b) for two (2) years after the date on which such Member
ceases to own at least ten percent (10%) of the total Membership Units
outstanding.
ARTICLE VIII. LIMITED LIABILITY; INDEMNIFICATION
Section 8.1 LIMITED LIABILITY. Except as otherwise provided under the
LLCL, 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 neither any Member nor the Manager shall be
obligated or liable for any such debt, obligation or liability of the Company.
Except as otherwise provided by the laws of the State of Delaware, the debts,
obligations and liabilities of any Member, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liability of such Member
and neither any Member, the Manager (in its capacity as such) nor the Company
shall be obligated or liable for any such debt, obligation or liability of such
Member.
Section 8.2 INDEMNIFICATION.
(a) The Company shall indemnify, defend and hold harmless any
Member, the Manager or other Person (and any of their respective officers,
directors, managers, employees and agents), who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he, she or it is or was a Member, the Manager, or an officer, director,
manager, employee or agent of the Company, the Manager or any Member, or is or
was serving at the request of the Company as a director, officer, manager,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, from and against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such Person in connection with such claim, action, suit
or proceeding if such Person acted in good faith and in a manner such Person
reasonably believed to be in, or not opposed to, the best interests of the
Company, and, with respect to any criminal sanction or proceeding, had no
reasonable cause to believe that his, her or its conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its
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equivalent, shall not, of itself, create a presumption that the Person did not
act in good faith and in a manner which he, she or it reasonably believed to be
in, or not opposed to, the best interests of the Company, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his, her
or its conduct was unlawful.
(b) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of any Member, the Manager, or any officer, director, manager,
employee or agent of the Company, the Manager or any Member to repay such amount
if it shall be ultimately determined by a court of competent jurisdiction from
which no further appeal may be taken or the time for appeal has lapsed that such
Person is not entitled to be indemnified by the Company pursuant to the terms
and conditions of this Section 8.2.
(c) The Company shall maintain insurance on behalf of any
Person who is or was a Member, the Manager, or an officer, director, employee or
agent of the Company, the Manager or any Member, or is or was serving at the
request of the Company as an officer, director, manager, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against and incurred by such Person in any such
capacity, or arising out of such Person's status as such, whether or not the
Company would have the power to indemnify such Person against such liability
under this Section 8.2.
(d) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 8.2 shall continue as to a Person who
has ceased to be a Member, the Manager, or any officer, director, manager,
employee or agent of the Company, the Manager or any Member, and shall inure to
the benefit of the heirs, executors, administrators and other legal successors
of such Person.
(e) The indemnification provided by this Section 8.2 shall not
be deemed exclusive of any other rights to indemnification to which those
seeking indemnification may be entitled under any agreement, determination of
Members or otherwise.
(f) Any indemnification hereunder shall be satisfied only out
of the assets of the Company (including insurance and any agreements pursuant to
which the Company and indemnified Persons are entitled to indemnification), and
the Members shall not, in such capacity, be subject to personal liability by
reason of these indemnification provisions.
(g) No Person shall be denied indemnification in whole or in
part under this Section 8.2 because such Person had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
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ARTICLE IX. DISSOLUTION; LIQUIDATION
Section 9.1 DISSOLUTION. The Company shall be dissolved and its affairs
wound up, upon the first to occur of any of the following events (each of which
shall constitute a "Dissolution Event"):
(a) The expiration of the term set forth in Section 2.5 hereof
unless the Company is continued with the consent of all Members;
(b) The written consent of all Members;
(c) The entry of a decree of judicial dissolution with respect
to the Company;
(d) Any event which makes it unlawful for the business of the
Company to be carried on by the Members;
(e) Any other event not inconsistent with any provision hereof
causing a dissolution of a limited liability company under the LLCL; or
(f) The Bankruptcy of any Member; provided, however, that upon
any such event, the Company shall be deemed dissolved, but such dissolution
shall not cause the termination of the Company, it being understood and agreed
that, upon any such dissolution, the remaining Members may elect to continue to
carry on the Company business pursuant to, and subject to, all of the terms and
provisions of this Agreement.
Section 9.2 WITHDRAWAL OF MEMBERS. No Member shall have the right to
voluntarily withdraw as a Member of the Company other than following the sale of
all Membership Units owned by such Member, which sale shall be in accordance
with ARTICLE VII. Prior to October 31, 2008, no Member shall seek a decree of
judicial dissolution with respect to the Company.
Section 9.3 DISTRIBUTION UPON DISSOLUTION.
(a) Upon dissolution, the Company shall not be terminated and
shall continue until the winding up of the affairs of the Company is completed
and a certificate of cancellation has been issued by the Secretary of State of
Delaware. Upon the winding up of the Company, the Manager, or any other Person
designated by the Manager (the "Liquidation Agent"), shall take full account of
the assets and liabilities of the Company and shall, unless the Members agree
otherwise, liquidate the assets of the Company as promptly as is consistent with
obtaining the fair value thereof. The proceeds of any liquidation shall be
applied and distributed in the following order:
(i) First, to the payment of debts and liabilities of
the Company (including payment of all indebtedness to Members and/or their
Affiliates) and the expenses of liquidation;
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(ii) Second, to the establishment of any reserve which
the Liquidation Agent shall deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company ("Contingencies"). Such
reserve may be paid over by the Liquidation Agent to any attorney-at-law, or
acceptable party, as escrow agent, to be held for disbursement in payment of any
Contingencies and, at the expiration of such period as shall be deemed advisable
by the Liquidation Agent for distribution of the balance in the manner
hereinafter provided in this Section 9.3; and
(iii) Any balance, in accordance with the Percentage
Interest of each Member.
(b) It is the intent of the Members that the allocations
provided in Section 5.4 hereof result in the distributions required pursuant to
Section 9.3 being in accordance with positive capital accounts as provided for
in the Treasury Regulations under Section 704(b) of the Code. However, if after
giving hypothetical effect to the allocations required by Section 5.4, the
capital accounts of the Members are in such ratios or balances that
distributions pursuant to Section 9.3 would not be in accordance with the
positive capital accounts of the Members as required by Treasury Regulations
under Section 704(b) of the Code, such failure shall not affect or alter the
distributions required by Section 9.3. Rather, the Members will have the
authority to make other allocations of Net Profits or Net Losses, or items of
income, gain, loss or deduction among the Members which, to the extent possible,
will result in the capital accounts of each Member having a balance prior to the
distribution equal to the amount of the distributions to be received by each
Member pursuant to Section 9.3.
Section 9.4 TIME FOR LIQUIDATION. A reasonable amount of time shall be
allowed for the orderly liquidation of the assets of the Company and the
discharge of liabilities to creditors so as to enable the Liquidation Agent to
minimize the losses attendant upon such liquidation.
Section 9.5 WINDING UP AND FILING ARTICLES OF CANCELLATION. Upon the
commencement of the winding up of the Company, articles of cancellation shall be
delivered by the Company to the Secretary of State of Delaware for filing. The
articles of cancellation shall set forth the information required by the LLCL.
The winding up of the Company shall be completed when all debts, liabilities,
and obligations of the Company have been paid and discharged or reasonably
adequate provision therefor has been made and all the remaining assets of the
Company have been distributed to the Members.
ARTICLE X. MEMBERSHIP UNITS; CERTIFICATES
Section 10.1 CERTIFICATES. Membership Units shall be represented by a
certificate or certificates, setting forth upon the face thereof that the
Company is a limited liability company formed under the laws of the State of
Delaware, the name of the Member to which it is issued and the number of
Membership Units which such certificate represents. Such certificates shall be
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entered in the books of the Company as they are issued, and shall be signed by
the Chairman or the Chief Executive Officer of the Company and may be sealed
with the Company's seal or a facsimile thereof. Upon any Transfer permitted
under this Agreement, the transferring Member shall surrender to the Company and
the Company shall issue to the transferring Member certificates representing the
remaining Membership Units held by such transferring Member after taking into
account such Transfer. All certificates representing Membership Units (unless
registered under the Securities Act of 1933, as amended (the "Securities Act")),
shall bear the following legend:
THE MEMBERSHIP UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY SECURITIES REGULATORY AUTHORITY OF ANY
STATE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, ENCUMBERED,
TRANSFERRED, GRANTED AN OPTION WITH RESPECT TO OR OTHERWISE
DISPOSED OF, (I) UNLESS AND UNTIL THEY HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OR SUCH SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE,
TRANSFER, OPTION GRANT OR OTHER DISPOSITION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND (II) EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF THE AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT OF THE COMPANY, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY.
Section 10.2 LOST OR DESTROYED CERTIFICATES. The Company may issue a
new certificate for Membership Units in place of any certificate or certificates
theretofore issued by it, alleged to have been lost or destroyed, upon the
making of an affidavit of that fact, and providing an indemnity in form and
substance reasonably satisfactory to the Manager, by the Person claiming the
certificate to be lost or destroyed.
Section 10.3 TRANSFER OF MEMBERSHIP UNITS. Except for Transfers duly
made in accordance with ARTICLE VII, no Transfer of Membership Units shall be
valid as against the Company except upon surrender to and cancellation of the
certificate therefor, accompanied by an assignment or transfer by the Member,
subject to any restrictions on Transfer contained in this Agreement.
Section 10.4 SPLITS AND RECLASSIFICATIONS. The Company shall not in any
manner subdivide (by any unit split, unit distribution, reclassification,
recapitalization or otherwise) or combine (by reverse unit split,
reclassification, recapitalization or otherwise) the outstanding Membership
Units unless an identical event is occurring with respect to the Class A Common
Stock, in which event the Membership Units shall be combined or subdivided
concurrently with and in the same manner as the Class A Common Stock.
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Section 10.5 INCENTIVE PLANS; REGISTERED AND PRIVATE OFFERINGS.
(a) At any time the Public Corp. issues a share of Class A
Common Stock pursuant to an Incentive Plan (whether pursuant to the exercise of
a stock option or the grant of a restricted share award or otherwise), the
following shall occur: (i) the Public Corp. shall be deemed to contribute to the
capital of the Company an amount of cash equal to the current per share market
price of a share of Class A Common Stock on the date such share is issued (or,
if earlier, the date the related option is exercised); (ii) the Company shall be
deemed to purchase from Public Corp. a share of Class A Common Stock for an
amount of cash equal to the amount of cash deemed contributed by the Public
Corp. to the Company in clause (i) above (and such share is deemed delivered to
its owner under the Incentive Plan); (iii) the net proceeds (including the
amount of any payments made on a loan with respect to a stock purchase award)
received by the Public Corp. with respect to such share, if any, shall be
concurrently transferred to the Company (and such net proceeds so transferred
shall not constitute a capital contribution); and (iv) the Company shall issue
to the Public Corp. one (1) Membership Unit registered in the name of the Public
Corp. The Company shall retain any net proceeds that are paid directly to the
Company.
(b) At any time the Public Corp. issues a share of Class A
Common Stock pursuant to a primary public offering registered under the
Securities Act of 1933, as amended, or in a private placement, the net proceeds
received by the Public Corp. with respect to such share, if any, shall be
concurrently transferred to the Company and the Company shall issue to the
Public Corp. one (1) Membership Unit registered in the name of the Public Corp.
Section 10.6 REGULATIONS. The Manager may make such additional rules
and regulations, not inconsistent with this Agreement, as it may deem expedient
with respect to the issue, transfer and recordation of certificates for the
Membership Units.
Section 10.7 REGISTERED MEMBERS. The Company shall be entitled to
recognize the exclusive right of a Person registered on its records as the owner
of the Membership Units to receive distributions and to vote as owner of
Membership Units and shall not be bound to recognize any equitable or other
claim to or interest in such Membership Units on the part of any other Person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the LLCL.
ARTICLE XI. MISCELLANEOUS
Section 11.1 SEVERABILITY. The terms, conditions, and provisions of
this Agree ment are fully severable, and the decision or judgment of any court
of competent jurisdiction rendering void or unenforceable any one or more of
such terms, conditions or provisions shall not render void or unenforceable any
of the other terms, conditions or provisions hereof and such void or
unenforceable term shall be replaced with a valid and enforceable term which
would to the greatest degree possible reflect the original intentions of the
parties hereunder.
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Section 11.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be given and delivered by messenger, transmitted
by telecopy or telegram (in either case followed by reputable overnight courier
sent the same day), by reputable overnight courier or mailed by certified mail,
postage prepaid, return receipt requested, to the parties at the following
addresses (or such other address as shall be specified by such party by like
notice), and shall be deemed given on the date on which so delivered by
messenger or reputable overnight courier, on the next business day following the
date on which so transmitted by telecopy, tele gram or on the third business day
following the date on which mailed by certified mail:
If to the Company or the Public Corp., to:
barnesandnoble.com llc
76 Ninth Avenue
11th Floor
New York, New York 10011
Attention: Chief Executive Officer
Fax: (212) 414-6652
If to BN, BN Holding or any BN Managers, to:
Barnes & Noble, Inc.
122 Fifth Avenue
New York, New York 10011
Attention: Mr. Leonard Riggio
Fax: (212) 675-0413
with a copy to:
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Michael Rosen, Esq.
Fax: (212) 541-1400
If to USO, to:
BOL.US Online, Inc.
1540 Broadway
New York, New York 10036
Attention: Robert J. Sorrentino
Fax: (212) 782-1010/1103
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If to BAG, to:
Bertelsmann AG
Carl-Bertelsmann-Strasse 270
33311 Gutersloh, Germany
Attention: Dr. Klaus Eierhoff
Fax: (011) 49 5241 809 555
with a copy for each of USO and BAG to:
Walter, Conston, Alexander & Green, P.C.
90 Park Avenue
New York, New York 10016
Attention: Aydin S. Caginalp, Esq.
Fax: (212) 210-9444
Section 11.3 CAPTIONS. The captions at the heading of each Article or
Section of this Agreement are for convenience of reference only, and are not to
be deemed a part of the Agreement itself.
Section 11.4 ENTIRE AGREEMENT. This Agreement, including the Schedules
hereto and the other agreements and documents referenced herein or contemplated
hereby, constitutes the entire agreement and understanding of the parties hereto
with respect to the matters herein set forth, and all prior negotiations and
understandings relating to the subject matter of this Agreement are merged
herein and are superseded and canceled by this Agreement.
Section 11.5 COUNTERPARTS. This Agreement may be executed and delivered
in one or more counterparts, each of which shall be deemed an original, and all
of which shall be deemed to constitute one and the same agreement.
Section 11.6 AMENDMENTS; WAIVER. Amendments to this Agreement may be
made from time to time, provided, however, that (a) no amendment, modification
or waiver of this Agreement or any provision hereof shall be valid or effective
unless in writing and signed by each and every Member, and (b) no amendment,
modification or waiver of Section 10.4 shall be valid or effective unless
approved by a majority of the holders of Class A Common Stock, voting separately
as a class. No consent to, or waiver, discharge or release (each, a "Waiver")
of, any provision of or breach under this Agreement shall be valid or effective
unless in writing and signed by the party giving such Waiver, and no specific
Waiver shall constitute a Waiver with respect to any other provision or breach,
whether or not of similar nature. Failure on the part of any party hereto to
insist in any instance upon strict, complete and timely performance by another
party hereto of any provision of or obligation under this Agreement shall not
constitute a Waiver by such party of any of its rights under this Agreement or
otherwise.
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Section 11.7 FURTHER ASSURANCES. Each party shall perform all other
acts and execute and deliver all other documents as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
Section 11.8 GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to its rules on conflicts of laws.
Section 11.9 THIRD PARTY BENEFICIARY. Except as provided in Section
11.6 with respect to certain approval rights of holders of Class A Common Stock,
nothing set forth in the Agreement shall be construed to confer any benefit to
any third party who is not a party to this Agreement.
Section 11.10 ASSIGNMENT. This Agreement is personal to the parties
hereto and neither party may (except as set forth in ARTICLE VII) assign or
Transfer the rights accruing hereunder nor may performance of any duties by
either party hereunder be delegated or assumed by any other Person or legal
entity without the prior written consent of the other parties hereto.
Section 11.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the respective successors and permitted assigns
of each party hereto; provided, that no party hereto may Transfer (or cause or
permit to be created or existing any lien on) or assign any of such party's
Membership Units (or any portion thereof or any beneficial interest therein) or
this Agreement or such party's rights, interests or obligations hereunder,
except in accordance with the terms of this Agreement.
Section 11.12 RELATIONSHIP. This Agreement does not constitute any
Member, Manager, or any employee or agent of the Company as the agent or legal
manager of any Member for any purpose whatsoever and no Member, Manager, or any
employee or agent of the Company is granted hereby any right or authority to
assume or to create any obligation or responsibility, express or implied, on
behalf of or in the name of any Member or to bind any Member in any manner or
thing whatsoever.
Section 11.13 CONSENT TO JURISDICTION. The exclusive jurisdiction and
venue for any disputes arising out of or in connection with this Agreement will
be any state or federal court located in New York County, New York, and each
party hereby consents to personal jurisdiction in such court and consents to
service of process by means of certified or registered mail, return receipt
requested.
Section 11.14 EQUITABLE REMEDIES. Each party acknowledges that no
adequate remedy of law would be available for a breach of ARTICLES VII and VIII
of this Agreement, and that a breach of any of such Sections or Articles of this
Agreement by one party would irreparably injure the other and accordingly agrees
that in the event of a breach of any of such Sections or Articles of this
Agreement, the respective rights and obligations of the parties hereunder shall
be enforceable by specific performance, injunction or other equitable remedy
(without bond or security being required), and each party waives the defense in
any action and/or
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proceeding brought to enforce this Agreement that there exists an adequate
remedy or that the other party is not irreparably injured. Nothing in this
Section 11.14 is intended to exclude the possibility of equitable remedies with
respect to breaches of other Sections or Articles of this Agreement.
Section 11.15 FEES AND EXPENSES. Except as specifically set forth
herein, each party shall be responsible for any legal and other fees and
expenses incurred by such party in connection with the negotiation and
preparation of this Agreement and the transactions contemplated hereby.
Section 11.16 OBLIGATIONS OF BN AND BAG. By their signatures below, BN
agrees to be liable for any failure by BN Holding to perform any of its
obligations under this Agreement and any other agreements executed in connection
herewith to which it is a party, and
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BAG agrees to be liable for any failure by USO to perform any of its obligations
under this Agreement and any other agreements executed in connection herewith to
which it is a party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
Bertelsmann AG
By:_______________________
Name:
Title:
BOL.US Online, Inc.
By:_______________________
Name:
Title:
Barnes & Noble, Inc.
By:________________________
Name:
Title:
B&N.com Holding Corp.
By:_______________________
Name:
Title:
barnesandnoble.com inc.
By:_______________________
Name:
Title:
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SCHEDULE I
MEMBERS; MEMBERSHIP UNITS; CAPITAL ACCOUNTS
Member Membership Units Capital Account
- ------ ---------------- ---------------
barnesandnoble.com inc. ___________ $
Membership Units
B&N.com Holding Corp. ____________ $
Membership Units
BOL.US Online, Inc. ___________ $
Membership Units
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