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EXHIBIT 10.14
AMENDMENT NO. 1
TO
OPERATING AGREEMENT
OF
PRIVILEGEONE NETWORKS, L.L.C.
This Amendment No. 1 to Operating Agreement of PrivilegeOne Networks,
L.L.C. dated as of February 9 , 2001 among Calton, Inc., a New Jersey
corporation, Taytrowe Van Fechtmann World Companies, LLC, a Delaware limited
liability company ("TVF") and 3D Think, Inc., a Delaware corporation ("3D").
WHEREAS, the parties hereto have entered into or succeeded to the
interest of a member under that certain Operating Agreement of PrivilegeOne
Networks, L.L.C. dated as of February 2, 2000;
WHEREAS, PrivilegeOne Networks, L.L.C. (the "Company") requires
additional capital to pursue its business plan and conduct its operations;
WHEREAS, in connection with the contribution of additional capital by
Calton, Inc. it is necessary to amend certain provisions of the Operating
Agreement and to increase Calton, Inc.'s percentage interest in the Company;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and premises contained herein, hereby agree as follows:
1. DEFINED TERMS. Capitalized terms not otherwise defined herein shall
have the meanings ascribed in the Operating Agreement.
2. CAPITAL CONTRIBUTION. Contemporaneous with the execution of this
Amendment No. 1 to Operating Agreement, Calton shall make an additional
equity contribution to the Company of $50,000.
3. ADDITIONAL LOAN. Contemporaneously with the execution of this Amendment
No. 1 to Operating Agreement, the Company shall execute and deliver to
Calton, Inc. the Second Promissory Note.
4. CLAWBACK OPTION. Contemporaneously with the execution of this Amendment
No. 1 to Operating Agreement, Calton, Inc. shall execute and deliver to
each of TVF and 3D the Clawback Option.
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5. AMENDMENT OF PROMISSORY NOTE. The parties hereby agree that
contemporaneously with the execution of this Agreement, the Company and
the parties hereto shall amend the Promissory Note pursuant to an
Amendment No. 1 to Promissory Note in the form annexed hereto as Annex
III.
6. AMENDMENTS TO OPERATING AGREEMENT.
(a) The following definitions are hereby added to Section 1.1 of
the Operating Agreement:
"Claw Back Option" means the option granted to TVF and 3D
pursuant to the Claw Back Option Agreement annexed hereto as
Annex I.
"Second Promissory Note" means the promissory note of even
date herewith issued to Calton, Inc. by the Company in the
form annexed hereto as Annex II.
(b) Section 3.1 of the Operating Agreement is hereby amended to
read in its entirety as follows:
"3.1 CAPITAL CONTRIBUTIONS. The Members hereby acknowledge
that the Corporation made a contribution of its business and
assets, which had an agreed value of $92,337.46 as of February
2, 2000, to the Company. In addition, Calton, Inc. made a
$50,000 equity contribution to the Company as of February 6 ,
2001. The Capital Contributions to which each Member has
succeeded and/or made and the Percentages applicable to each
Member are set forth on Exhibit A hereto."
(c) Section 5.1.2 is hereby amended to read in its entirety as
follows:
"5.1.2 ELECTION AND REMOVAL OF REPRESENTATIVES.
Representatives shall be elected by Members by a plurality
vote (based upon Percentages voted by Members) at the annual
meeting of Members to be held each year pursuant to Section
5.2.1; provided, however, that notwithstanding any change in
the Percentages which may occur after the date hereof (i)
until the later of (x) the payment in full of the Promissory
Note and the Second Promissory Note and (z) December 31, 2004
(the "Control Termination Date"), Calton, Inc. shall have the
right to nominate for election a majority of the
Representatives, (ii) after the Control Termination Date,
Calton, Inc. shall have the right to nominate a number of
Representatives in proportion to its Percentage and (iii) all
of the Members hereby agree to vote in favor of the election
of the Calton, Inc. nominees as Representatives. Calton, Inc.
agrees that the other Members of the Company (the "Non-Calton
Members") shall collectively have the right to nominate the
remaining Representatives in each election of Representatives
and agrees that it shall vote in favor of the election of such
nominees. Representatives who are nominees of Calton, Inc. may
only be removed by Calton, Inc. Representatives who are
nominees of the Non-Calton Members may be removed only a vote
of the Non-Calton Members holding a majority of the
Percentages held by the Non-Calton Members. Any vacancy in the
Board of Directors may be filled by the Member(s) who
nominated the Representative whose absence has caused the
vacancy."
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(d) Section 5.1.10 is hereby amended to read in its entirety as
follows:
"5.1.10 POWERS OF MEMBERS. Without limiting the generality of
Section 5.1.1 until such time as (i) the Promissory Note and
the Second Promissory Note have been repaid in full and (ii)
the Clawback Option has been exercised in full, the unanimous
approval of the Members shall be required before any of the
following acts involving the Company:
(a) any determination to call for any additional Capital
Contribution, or any authorization, issuance or
creation of, or increase of any Membership Rights or
other interests in the Company;
(b) transferring all or substantially all of the assets
of the Company;
(c) any merger, consolidation or other business
combination with respect to the Company or the
liquidation or dissolution of the Company or the
adoption of any plan with respect to any such
liquidation or dissolution;
(d) the Company making an assignment for the benefit of
creditors, filing a voluntary petition in bankruptcy,
filing a petition or answer seeking for itself any
reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, or
seeking, consenting to or acquiescing in the
appointment by a court of a trustee, receiver or
liquidator of the Company or all or any substantial
part of its assets;
(e) submitting any application for the entry of a decree
of judicial dissolution of the Company under the Act;
(f) amendment of this Agreement;
After such time as the Promissory Note and the Second
Promissory Note is paid in full and the Clawback Option is
exercised, the unanimous approval of the Members shall be
required before any of the acts specified in paragraphs (a)
through (f) above and any of the following acts involving the
Company may be taken:
(1) exercising any purchase option pursuant to Section
6.1.4.3.;
(2) borrowing any principal amount in excess of U.S.
$10,000, incurring any contingent liability
whatsoever in excess of U.S. $10,000, lending or
guarantying any third party indebtedness, it being
understood that such limitation shall not be a
limitation on the amount or type of trade payables
that may be incurred in the ordinary course of
business consistent in all respects with past
practices by the Company;
(3) approving of the Company's annual operating budget,
and any material deviations therefrom, including
setting or amending the compensation level of any
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officer or other similarly compensated person to the
extent that any such compensation level is not in
accordance with the Executive Incentive Pay Schedule
developed by the Company and annexed hereto as
Exhibit C;
(4) incurring any lien on any assets of the Company,
other than purchase money liens on items the purchase
of which is not otherwise subject to approval
hereunder;
(5) executing or otherwise entering into, or amending,
modifying or the terminating any contract with an
officer, employee or Representative of the Company or
a Member, an Affiliate of a Member or a person
related by blood or marriage to an officer, employee
or Representative of the Company or a Member
involving aggregate consideration (including assumed
actual and contingent liabilities) or fair market
value or actual or contingent liability in excess of
U.S. $10,000;
(6) approving of Member loans to or from the Company;
(7) amending the Company's certificate of formation;
(8) the adoption or modification of financial accounting
methods or principles (except those required by
changes in accounting industry standards or approved
as consistent with GAAP as applied by such accounting
firm), or any decision not to audit the financial
statements of the Company; or
(9) any material change in the business of the Company."
Neither the execution of this Amendment nor anything contained
herein shall constitute a waiver by any individual or Member
of rights they may have pursuant to contracts with the Company
that pre-date and exist as of the date of this Amendment.
(e) Section 6.1.1.4 is hereby amended to read in its entirety as
follows:
"6.1.1.4 the Transfer will not result in the Company or
Calton, Inc. being subject to the Investment Company Act of
1940, as amended."
(f) Exhibit A to the Operating Agreement is hereby amended to read
in its entirety as set forth in Annex III hereto.
Nothing contained herein shall be deemed to require the
approval of Calton, Inc. as a Member to repay and/or terminate
the Promissory Note or the Second Promissory Note.
7. WEB DEVELOPMENT WORK. Website development and hosting work will be
offered by the Company to eCalton.com, Inc. as the preferred vendor
based upon competitive bids for all work having a cost in excess of
$5,000.
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8. INFORMATION SYSTEMS. Each of the Members hereby acknowledges and agrees
that notwithstanding anything to the contrary set forth above, until
such time as the Promissory Note and the Second Promissory Note are
paid in full and the Clawback Option is exercised, the Company shall
make no expenditures for items related to computers, software, computer
systems or information technology which have a cost in excess of $1,500
without the prior written approval of Calton, Inc.
9. CALTON, INC. APPROVAL RIGHTS. Each of the Members hereby acknowledges
and agrees that notwithstanding anything to the contrary set forth
above, until such time as the Promissory Note and Second Promissory
Note are paid in full and the Clawback Option is exercised, the Company
shall make no expenditure or contractual commitment in an amount in
excess of $2,500 without the prior written approval of Calton, Inc.
10. COUNTERPARTS. This Amendment No. 1 to Operating Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which, when taken together, shall constitute one
and the same document. The signature of any party to any counterpart
shall be deemed a signature to and may be appended to, any other
counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
1 to Operating Agreement as of the date first above written.
Calton, Inc.
By:
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Name:
Title:
Taytrowe Van Fechtmann World
Companies, LLC
By:
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Name:
Title:
3d Think, Inc.
By:
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Name:
Title:
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ANNEX III
EXHIBIT A
PRIVILEGEONE NETWORKS, L.L.C.
OPERATING AGREEMENT
LIST OF MEMBERS, CAPITAL AND PERCENTAGES
Name and Address Capital Contribution Percentage
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Taytrowe Van Fechtmann World Companies, LLC $34,179.66 18.35%
20 Fry Pond Road
West Greenwich, RI 02817
(Taxpayer I.D. No.:***)
Calton, Inc. $85,103.00 69.25%
125 Half Mile Road, Suite 206
Red Bank, NJ 07701-6749
(Taxpayer I.D. No.: 22-243361)
3D THINK, INC. $23,094.37 12.40%
20 Fry Pond Road
West Greenwich, RI 02817
(Taxpayer I.D. No.:05-0511869)