Exhibit 3.2(a)
AMENDED AND RESTATED
REGULATIONS
OF
ASHTON WOODS USA L.L.C.
A NEVADA LIMITED LIABILITY COMPANY
Dated as of September 1, 2005
AMENDED AND RESTATED REGULATIONS
OF
ASHTON WOODS USA L.L.C.
A NEVADA LIMITED LIABILITY COMPANY
ARTICLE I. DEFINITIONS................................................... 1
1.01 Definitions................................................... 1
1.02 Construction.................................................. 4
ARTICLE II. ORGANIZATION................................................. 4
2.01 Formation..................................................... 4
2.02 Name.......................................................... 4
2.03 Registered Office; Registered Agent; Principal Office in the
United States; Other Offices.................................. 4
2.04 Purposes...................................................... 4
2.05 Foreign Qualification......................................... 4
2.06 Term.......................................................... 4
2.07 Mergers and Exchanges......................................... 5
2.08 No State-Law Partnership...................................... 5
ARTICLE III. MEMBERSHIP; DISPOSITIONS OF INTERESTS....................... 5
3.01 Initial Members............................................... 5
3.02 Representations and Warranties................................ 5
3.03 Restrictions on the Disposition of an Interest................ 5
3.04 Additional Members............................................ 7
3.05 Interests in a Member......................................... 8
3.06 Information................................................... 8
3.07 Liability to Third Parties.................................... 8
3.08 Withdrawal.................................................... 8
3.09 Lack of Authority............................................. 9
ARTICLE IV. CAPITAL CONTRIBUTIONS........................................ 9
4.01 Contributions................................................. 9
4.02 Failure to Contribute......................................... 9
4.03 Return of Contributions....................................... 11
4.04 Advances by Members........................................... 11
4.05 Capital Accounts.............................................. 11
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE V. ALLOCATIONS AND DISTRIBUTIONS................................. 12
5.01 Allocations................................................... 12
5.02 Distributions................................................. 12
ARTICLE VI. BOARD OF DIRECTORS........................................... 13
6.01 Management.................................................... 13
6.02 Number; Election; Voting...................................... 13
6.03 Vacancies; Removal............................................ 13
6.04 Actions by Board of Directors; Committees; Delegation of
Authority and Duties.......................................... 14
6.05 Vacancies; Removal; Resignation............................... 14
6.06 Meetings...................................................... 14
6.07 Action by Written Consent or Telephone Conference............. 15
6.08 Compensation.................................................. 15
6.09 Conflicts of Interest......................................... 15
ARTICLE VII. OFFICERS.................................................... 16
7.01 General Provisions............................................ 16
7.02 President..................................................... 16
7.03 Treasurer..................................................... 16
7.04 Secretary..................................................... 16
7.05 Assistant Officers............................................ 16
7.06 Vice Presidents............................................... 17
ARTICLE VIII. MEETINGS OF MEMBERS........................................ 17
8.01 Meetings...................................................... 17
8.02 Voting List................................................... 18
8.03 Proxies....................................................... 18
8.04 Conduct of Meetings........................................... 18
8.05 Action by Written Consent or Telephone Conference............. 19
ARTICLE IX. INDEMNIFICATION.............................................. 20
9.01 Right to Indemnification...................................... 20
9.02 Advance Payment............................................... 20
9.03 Indemnification of Officers, Employees, and Agents............ 20
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TABLE OF CONTENTS
(CONTINUED)
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9.04 Appearance as a Witness....................................... 21
9.05 Nonexclusivity of Rights...................................... 21
9.06 Insurance..................................................... 21
9.07 Savings Clause................................................ 21
ARTICLE X. TAXES......................................................... 21
10.01 Tax Returns................................................... 21
10.02 Tax Elections................................................. 21
10.03 Tax Matters Partner........................................... 22
ARTICLE XI. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS................... 22
11.01 Maintenance of Books.......................................... 22
11.02 Reports....................................................... 23
11.03 Accounts...................................................... 23
ARTICLE XII. BANKRUPTCY OF A MEMBER...................................... 23
ARTICLE XIII. DISSOLUTION, LIQUIDATION, AND TERMINATION.................. 24
13.01 Dissolution................................................... 24
13.02 Liquidation and Termination................................... 24
13.03 Deficit Capital Accounts...................................... 26
13.04 Articles of Dissolution....................................... 26
ARTICLE XIV. GENERAL PROVISIONS.......................................... 26
14.01 Offset........................................................ 26
14.02 Notices....................................................... 26
14.03 Entire Agreement; Supersedure................................. 27
14.04 Effect of Waiver or Consent................................... 27
14.05 Amendment or Modification..................................... 27
14.06 Binding Effect................................................ 27
14.07 Governing Law; Severability................................... 27
14.08 Further Assurances............................................ 27
14.09 Waiver of Certain Rights...................................... 28
14.10 Indemnification............................................... 28
14.11 Notice to Members of Provisions of this Agreement............. 28
14.12 Counterparts.................................................. 28
14.13 Arbitration................................................... 28
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AMENDED AND RESTATED REGULATIONS
OF
ASHTON WOODS USA L.L.C.
A NEVADA LIMITED LIABILITY COMPANY
These AMENDED AND RESTATED REGULATIONS OF ASHTON WOODS USA L.L.C. (these
"Regulations"), dated as of September 1, 2005, are (a) executed and agreed to,
for good and valuable consideration, by the Members and Special Members (as
defined below) and (b) replace and supersede any previous regulations of the
Company (as defined below), including but not limited to the Regulations of
Ashton Woods USA L.L.C., dated as of February 6, 1997, as amended by the First
Amendment to Regulations of Ashton Woods USA L.L.C., dated as of May 31, 1999,
and the Second Amendment to Regulations of Ashton Woods USA L.L.C., dated as of
May 31, 1999.
ARTICLE I.
DEFINITIONS
1.01 DEFINITIONS. As used in these Regulations, the following terms have
the following meanings:
"Act" means the Nevada Limited Liability Company Act, Nevada Revised
Statutes ("NRS") Chapter 86, and any successor statute, as amended from time to
time.
"Amount Due to Withdrawing Member" has the meaning given that term in
Section 3.08.
"Articles" has the meaning given that term in Section 2.01.
"Bankrupt Member" means (except to the extent a Required Interest consents
otherwise) any Member or Special Member (a) that (i) makes a general assignment
for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii)
becomes the subject of an order for relief or is declared insolvent in any
federal or state bankruptcy or insolvency proceedings; (iv) files a petition or
answer seeking for the Member or the Special Member a reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any law; (v) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the Member or
the Special Member in a proceeding of the type described in subclauses (i)
through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in
the appointment of a trustee, receiver, or liquidator of the Member or the
Special Member or of all or any substantial part of the Member's or Special
Member's properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any law has been commenced and 120 days have expired without
dismissal thereof or with respect to which, without the Member's or the Special
Member's consent or acquiescence, a trustee, receiver, or liquidator of the
Member or the Special Member or of all or any substantial part of the Member's
or the Special Member's properties has been appointed and 90 days have expired
without the appointment's having been vacated or stayed, or 90 days have expired
after the date of expiration of a stay, if the appointment has not previously
been vacated.
"Board of Directors" has the meaning given that term in Section 6.01.
"Business Day" means any day other than a Saturday, a Sunday, or a holiday
on which national banking associations in the State of Nevada are closed.
"Capital Contribution" means any contribution by a Member or a Special
Member to the capital of the Company.
"Code" means the Internal Revenue Code of 1986 and any successor statute,
as amended from time to time
"Company" means Ashton Woods USA L.L.C., a Nevada limited liability
company.
"Default Interest Rate" means a rate per annum equal to the lesser of (a)
four percent (4%) plus a varying rate per annum that is equal to the interest
rate published as the prime rate by The Bank of Nova Scotia from time to time,
with adjustments in that varying rate to be made on the same date as any change
in that rate, and (b) the maximum rate permitted by applicable law.
"Designated Entities" means Isleworth West Limited Partnership, a Florida
limited partnership; Ashton Woods Florida L.L.C., a Nevada limited liability
company; Butler Coves Limited Partnership, a Florida limited partnership; Ashton
Woods Orlando Limited Partnership, a Florida limited partnership; Ashton Woods
Orlando II Limited Partnership, a Nevada limited partnership; Ashton Woods
Lakeside L.L.C., a Florida limited liability company; and Ashton Woods Butler
L.L.C., a Nevada limited liability company.
"Delinquent Member" has the meaning given that term in Section 4.02(a).
"Director" shall mean any member of the Board of Directors, but does not
include any Person who has ceased to be a member of the Board of Directors.
"Dispose," "Disposing," or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or other
disposition or encumbrance (including, without limitation, by operation of law),
or the acts thereof.
"Excess Contributions" means, as to any Member whose Unrefunded
Contribution Ratio exceeds its Sharing Ratio, the amount by which such Member's
unreturned Capital Contributions exceed the unreturned Capital Contributions by
all of the Members multiplied by such Member's Sharing Ratio.
"General Interest Rate" means a rate per annum equal to the lesser of (a) a
varying rate per annum that is equal to the interest rate published as the prime
rate by The Bank of Nova Scotia from time to time, with adjustments in that
varying rate to be made on the same date as any change in that rate, and (b) the
maximum rate permitted by applicable law.
"Lending Member" has the meaning given that term in Section 4.02(a)(ii).
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"Member" means any Person executing these Regulations as of the date of
these Regulations as a member or hereafter admitted to the Company as a member
as provided in these Regulations, but does not include any Person who has ceased
to be a member in the Company.
"Membership Interest" means the share of the economic interests in the
Company, including, without limitation, profits, losses, distributions of
assets, rights to distributions (liquidating or other), allocations and
information, and rights to consent or approve.
"Permitted Transferee" has the meaning given that term in Section 3.03(b).
"Person" has the meaning given that term in the Act.
"Proceeding" has the meaning given that term in Section 9.01.
"Regulations" has the meaning given that term in the introductory paragraph
"Required Interest" means one or more Members having among them more than
80% of the Sharing Ratios of all Members.
"Sharing Ratio" with respect to any Member means the percentage set forth
in the column "Sharing Ratios" on Exhibit A, subject to change as herein
provided. However, in determining any capital contribution, allocation or
distribution with respect to the Designated Entities, "Sharing Ratio" shall mean
the percentage set forth in the column "Designated Entity Sharing Ratio" on
Exhibit A.
"Special Member" means any Person executing these Regulations as of the
date of these Regulations as a special member or hereafter admitted to the
Company as a special member as provided in these Regulations, but does not
include any Person who has ceased to be a special member in the Company.
"Special Membership Interest" means the interest of a Special Member in the
Company, which shall be limited to the special allocations of the profits and
cash distributions from the Pinery Joint Venture, a Colorado joint venture, in
the proportions set forth next to each Special Member's name on Exhibit B and
which, except are otherwise expressly provided herein, shall not confer any
rights to participate in the management or operation of the Company.
"Unreturned Contribution Ratio" means the ratio (expressed as a percentage)
of a Member's unreturned Capital Contributions to the unreturned Capital
Contributions of all of the Members.
"Withdraw Date" has the meaning given that term in Section 3.08.
"Withdrawing Member" has the meaning given that term in Section 3.08.
Other terms defined herein have the meanings so given them.
1.02 CONSTRUCTION. Whenever the context requires, the gender of all words
used in these Regulations includes the masculine, feminine, and neuter. All
references to Articles and Sections
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refer to articles and sections of these Regulations, and all references to
Exhibits are to Exhibits attached hereto, each of which is made a part hereof
for all purposes.
ARTICLE II.
ORGANIZATION
2.01 FORMATION. The Company has been organized as a Nevada limited
liability company by the filing of Articles of Organization (the "Articles")
under and pursuant to the Act and the issuance of a certificate of organization
for the Company by the Secretary of State of Nevada.
2.02 NAME. The name of the Company is "Ashton Woods USA L.L.C." and all
Company business must be conducted in that name or such other names that comply
with applicable law as the Managers may select from time to time.
2.03 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE UNITED
STATES; OTHER OFFICES. The registered office of the Company required by the Act
to be maintained in the State of Nevada shall be the office of the initial
registered agent named in the Articles or such other office (which need not be a
place of business of the Company) as the Board of Directors may designate from
time to time in the manner provided by law. The registered agent of the Company
in the State of Nevada shall be the initial registered agent named in the
Articles or such other Person or Persons as the Board of Directors may designate
from time to time in the manner provided by law. The principal office of the
Company in the United States shall be at such place as the Board of Directors
may designate from time to time, which need not be in the State of Nevada. The
Company shall maintain records at the office of the registered agent as required
by the Act and shall keep the street address of the registered office of the
Company in the State of Nevada. The Company may have such other offices as the
Board of Directors may designate from time to time.
2.04 PURPOSES. The purposes of the Company are those set forth in the
Articles.
2.05 FOREIGN QUALIFICATION. Prior to the Company's conducting business in
any jurisdiction other than Nevada, the Board of Directors shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Board of Directors, with all requirements
necessary to qualify the Company as a foreign limited liability company in that
jurisdiction. At the request of the Board of Directors, each Member shall
execute, acknowledge, swear to, and deliver all certificates and other
instruments conforming with these Regulations that are necessary or appropriate
to qualify, continue, and terminate the Company as a foreign limited liability
company in all such jurisdictions in which the Company may conduct business.
2.06 TERM. The Company commenced on the date the Secretary of State of
Nevada issued a certificate of organization for the Company and shall continue
in existence for the period fixed in the Articles for the duration of the
Company, or such earlier time as these Regulations may specify.
2.07 MERGERS AND EXCHANGES. The Company may be a party to (a) a merger or
(b) an exchange or acquisition.
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2.08 NO STATE-LAW PARTNERSHIP. The Members and Special Members intend that
the Company not be a partnership (including, without limitation, a limited
partnership) or joint venture, and that no Member, Special Member or Director be
a partner or joint venturer of any other Member, Special Member or Director, for
any purposes other than federal and state tax purposes, and these Regulations
may not be construed to suggest otherwise.
ARTICLE III.
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.1 INITIAL MEMBERS. The initial members of the Company are the Persons
executing these Regulations as of the date of these Regulations as Members or
Special Members.
3.2 REPRESENTATIONS AND WARRANTIES. Each Member or Special Member, as
applicable, hereby represents and warrants to the Company and each other Member
and Special Member that (a) if that Member or Special Member is a corporation,
it is duly organized, validly existing and in good standing under the law of the
state of its incorporation and is duly qualified and in good standing as a
foreign corporation in the jurisdiction of its principal place of business (if
not incorporated therein); (b) if that Member or Special Member is a limited
liability company, it is duly organized, validly existing, and (if applicable)
in good standing under the law of the state of its organization and is duly
qualified and (if applicable) in good standing as a foreign limited liability
company in the jurisdiction of its principal place of business (if not organized
therein); (c) if that Member or Special Member is a partnership, trust, or other
entity, it is duly formed, validly existing, and (if applicable) in good
standing under the law of the state of its formation, and if required by law is
duly qualified to do business and (if applicable) in good standing in the
jurisdiction of its principal place of business (if not formed therein), and the
representations and warranties in clause (a), (b) or (c), as applicable, are
true and correct with respect to each partner (other than limited partners),
trustee, or other member thereof; (d) that Member or Special Member has full
corporate, limited liability company, partnership, trust, or other applicable
power and authority to execute and agree to these Regulations and to perform its
obligations hereunder and all necessary actions by the board of directors,
shareholders, managers, members, partners, trustees, beneficiaries, or other
Persons necessary for the due authorization, execution, delivery, and
performance of these Regulations by that Member or Special Member have been duly
taken; (e) that Member or Special Member has duly executed and delivered these
Regulations; and (f) that Member's or Special Member's authorization, execution,
delivery, and performance of these Regulations do not conflict with any other
agreement or arrangement to which that Member or Special Member is a party or by
which it is bound.
3.3 RESTRICTIONS ON THE DISPOSITION OF AN INTEREST. (a) Except as
specifically provided in this Section 3.03, a Disposition of an interest in the
Company may not be effected without the consent the Members constituting a
Required Interest. Any attempted Disposition by a Person of an interest or
right, or any part thereof, in or in respect of the Company other than in
accordance with this Section 3.03 shall be, and is hereby declared, null and
void ab initio.
(b) Notwithstanding the provisions of Section 3.03(a), the interest of
any Member or Special Member in the Company may be transferred without the
consent of the Members constituting a Required Interest if (i) the transfer
occurs by reason of or incident to the death, dissolution, divorce, liquidation,
merger or termination of the transferor Member or Special Member,
5
and (ii) the transferee is a Permitted Transferee. A "Permitted Transferee" is
any member of such Member's or Special Member's immediate family, or a trust,
corporation, limited liability company, or partnership controlled by such
Member, Special Member or members of such Member's or Special Member's immediate
family, or another Person controlling, controlled by, or under common control
with such Member or Special Member.
(c) Subject to the provisions of Section 3.03(d),(e), and (f),(i) a
Person to whom an interest in the Company is transferred has the right to be
admitted to the Company as a (x) Member with the Sharing Ratio or (y) Special
Member with the profit allocation and cash distribution percentage so
transferred to such Person, if (A) the Member or Special Member making such
transfer grants the transferee the right to be so admitted, and (B) such
transfer is consented to in accordance with Section 3.03(a); (ii) a Permitted
Transferee under the circumstances described in Section 3.03(b) has the right to
be admitted to the Company as a (x) Member with the Sharing Ratio or (y) Special
Member with the profit allocation and cash distribution percentage so
transferred to the Permitted Transferee; and (iii) the Company or (with the
permission of the Company, which may be withheld in its sole discretion) a
Lending Member may grant the purchaser of a Delinquent Member's interest in the
Company at a foreclosure of the security interest therein granted pursuant to
Section 4.02(b) the right to be admitted to the Company as a Member with such
Sharing Ratio (no greater than the Sharing Ratio of the Member effecting such
Disposition prior thereto) as they may agree.
(d) The Company may not recognize for any purpose any purported
Disposition of all or part of a Membership Interest or Special Membership
Interest unless and until the other applicable provisions of this Section 3.03
have been satisfied and the Directors have received, on behalf of the Company, a
document (i) executed by both the Member or Special Member effecting the
Disposition (or if the transfer is on account of the death, incapacity, or
liquidation of the transferor, its representative) and the Person to which the
Membership Interest, Special Membership Interest or part thereof is Disposed,
(ii) including the notice address of any Person to be admitted to the Company as
a Member or Special Member and its agreement to be bound by these Regulations
with respect to the Membership Interest, Special Membership Interest or part
thereof being obtained, (iii) setting forth (x) the Sharing Ratios after the
Disposition of the Member effecting the Disposition or (y) the profit allocation
and cash distribution percentage of the Special Member effecting the Disposition
and the Person to which the Membership Interest, Special Membership Interest or
part thereof is Disposed (which together must total either (a) the Sharing Ratio
of the Member effecting the Disposition before the Disposition, or (b) the
profit allocation and cash distribution percentage of the Special Member
effecting the Disposition before the Disposition, as applicable), and (iv)
containing a representation and warranty that the Disposition was made in
accordance with all applicable laws and regulations (including securities laws)
and, if the Person to which the Membership Interest, Special Membership Interest
or part thereof is Disposed is to be admitted to the Company, its representation
and warranty that the representations and warranties in Section 3.02 are true
and correct with respect to that Person. Each Disposition and, if applicable,
admission complying with the provisions of this Section 3.03(d) is effective as
of the first day of the calendar month immediately succeeding the month in which
the Board of Directors receive the notification of Disposition and the other
requirements of this Section 3.03 have been met.
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(e) For the right of a Member or a Special Member to Dispose of a
Membership Interest, a Special Membership Interest or any part thereof or of any
Person to be admitted to the Company in connection therewith to exist or be
exercised, (i) either (A) the Membership Interest, Special Membership Interest
or part thereof subject to the Disposition or admission must be registered under
the Securities Act of 1933, as amended, and any applicable state securities laws
or (B) the Company must receive a favorable opinion of the Company's legal
counsel or of other legal counsel acceptable to the Board of Directors to the
effect that the Disposition or admission is exempt from registration under those
laws and (ii) the Company must receive a favorable opinion of the Company's
legal counsel or of other legal counsel acceptable to the Board of Directors to
the effect that the Disposition or admission, when added to the total of all
other sales, assignments, or other Dispositions within the preceding 12 months,
would not result in the Company being considered to have terminated within the
meaning of the Code. The Board of Directors, however, may waive the requirements
of this Section 3.03(e).
(f) The Member or Special Member effecting a Disposition and any
Person admitted to the Company in connection therewith shall pay, or reimburse
the Company for, all costs incurred by the Company in connection with the
Disposition or admission (including, without limitation, the legal fees incurred
in connection with the legal opinions referred to in Section 3.03(e) on or
before the tenth day after the receipt by that Person of the Company's invoice
for the amount due. If payment is not made by the date due, the Person owing
that amount shall pay interest on the unpaid amount from the date due until paid
at a rate per annum equal to the Default Interest Rate.
3.04 ADDITIONAL MEMBERS. Additional Persons may be admitted to the Company
as Members or Special Members and Membership Interests or Special Membership
Interests may be created and issued to those Persons and to existing Members or
Special Members at the direction of the Members constituting a Required
Interest, on such terms and conditions as such Members may determine at the time
of admission. The terms of admission or issuance must specify (i) the Sharing
Ratios in the case of Membership Interests or (ii) the profit allocation and
cash distribution percentages in the case of Special Membership Interests
applicable thereto and may provide for the creation of different classes or
groups of Members and Special Members and having different rights, powers, and
duties. The Members constituting a Required Interest shall reflect the creation
of any new class or group in an amendment to these Regulations indicating the
different rights, powers, and duties, and such an amendment need be executed
only by the Members constituting a Required Interest. Any such admission also
must comply with the provisions of Section 3.03(d)(i) and (ii) and is effective
only after the new Member or Special Member has executed and delivered to the
Board of Directors a document including the new Member's or Special Member's
notice address, its agreement to be bound by these Regulations, and its
representation and warranty that the representation and warranties in Section
3.02 are true and correct with respect to the new Member or Special Member. The
provisions of this Section 3.04 shall not apply to Dispositions of Membership
Interests or Special Membership Interests.
3.05 INTERESTS IN A MEMBER. A Member or Special Member that is not a
natural person may not cause or permit an interest, direct or indirect, in
itself to be Disposed of such that, after the Disposition, (a) the Company would
be considered to have terminated within the meaning of section 708 of the Code
or (b) without the consent of the Board of Directors and a Required Interest,
that
7
Member or Special Member shall cease to be controlled by substantially the same
Persons who control it as of the date of its admission to the Company. On any
breach of the provisions of clause (b) of the immediately preceding sentence,
the Company shall have the option to buy, and on exercise of that option the
breaching Member shall sell, the breaching Member's Membership Interest or
Special Member's Special Membership Interest, all in accordance with Section
12.01 as if the breaching Member or Special Member were a Bankrupt Member.
3.06 INFORMATION. (a) In addition to the other rights specifically set
forth in these Regulations, each Member is entitled to all information to which
that Member or Special Member is entitled to have access pursuant to the Act
under the circumstances and subject to the conditions therein stated. The
Members and Special Members agree, however, that the Board of Directors from
time to time may determine, due to contractual obligations, business concerns,
or other considerations, that certain information regarding the business,
affairs, properties, and financial condition of the Company should be kept
confidential and not provided to some or all other Members and Special Members,
and that it is not just or reasonable for those Members, Special Members or
assignees or representatives thereof to examine or copy that information.
(b) The Members and Special Members acknowledge that, from time to
time, they may receive information from or regarding the Company in the nature
of trade secrets or that otherwise is confidential, the release of which may be
damaging to the Company or Persons with which it does business. Each Member and
Special Member shall hold in strict confidence any information it receives
regarding the Company that is identified as being confidential (and if that
information is provided in writing, that is so marked) and may not disclose it
to any Person other than another Member, Special Member or a Director, except
for disclosures (i) compelled by law (but the Member or Special Member must
notify the Board of Directors promptly of any request for that information,
before disclosing it if practicable), (ii) to advisers or representatives of the
Member, Special Member or Persons to which that Member's Membership Interest or
Special Member's Membership Interest may be Disposed as permitted by these
Regulations, but only if the recipients have agreed to be bound by the
provisions of this Section 3.06(b), or (iii) of information that Member or
Special Member also has received from a source independent of the Company that
the Member or Special Member reasonably believes obtained that information
without breach of any obligation of confidentiality. The Members and Special
Members acknowledge that breach of the provisions of this Section 3.06(b) may
cause irreparable injury to the Company for which monetary damages are
inadequate, difficult to compute, or both. Accordingly, the Members and Special
Members agree that the provisions of this Section 3.06(b) may be enforced by
specific performance.
3.07 LIABILITY TO THIRD PARTIES. No Member, Special Member or Director
shall be liable for the debts, obligations or liabilities of the Company,
including under a judgment, decree or order of a court.
3.08 WITHDRAWAL. Special Members do not have the right or power to withdraw
from the Company as a Special Member. Any Member (the "Withdrawing Member") may
withdraw from the Company by giving written notice thereof to the Company. The
date the Company receives such written notice shall be referred to as the
"Withdraw Date." Upon the receipt of any such notice, the Company shall use its
reasonable efforts to distribute to the Withdrawing Member an amount equal to
the value of the Withdrawing Member's Membership Interest, as reflected on the
books of the
8
Company as of the Withdraw Date, taking into account all of the debts and
assets of the Company as of the Withdraw Date (the "Amount Due to the
Withdrawing Member"). In no event shall the Company have any obligation to
borrow funds to pay the Amount Due to the Withdrawing Member. As assets owned by
the Company are sold or converted into cash in the normal course of the
Company's business, the Company shall pay the Withdrawing Member all or a
portion of the Amount Due to the Withdrawing Member, and the Amount Due to the
Withdrawing Member shall not fluctuate after the Withdraw Date if the value of
the assets of the Company increase or decrease after the Withdraw Date. The
Withdrawing Member, after delivery of such Written Notice to the Company, shall
not be entitled to participate in any of the decisions, management or operations
of the Company. Upon receipt of the Amount Due to the Withdrawing Member, the
Withdrawing Member shall execute such documents as may be necessary to reflect
that the Withdrawing Member no longer has an interest in the Company or a right
to participate in the profits of the Company.
3.09 LACK OF AUTHORITY. No Member or Special Member has the authority or
power to act for or on behalf of the Company, to do any act that would be
binding on the Company, or to incur any expenditures on behalf of the Company.
ARTICLE IV.
CAPITAL CONTRIBUTIONS
4.01 CONTRIBUTIONS. Without creating any rights in favor of any third
party, each Member shall contribute to the Company, in cash, that Member's
Sharing Ratio of all monies that the Members constituting a Required Interest
determine should be contributed to the Company on or before the date determined
by the Members; provided, however, that a Member is not obligated to contribute
a total amount that exceeds that Member's Sharing Ratio of the required amount;
provided, further, that once a Member pays in full a Capital Contribution
required pursuant to this Section 4.01, such Member shall be deemed to have
fully satisfied such Member's required Capital Contribution and shall have no
further obligation with respect thereto to the Company or any third party,
including in any case where such Member has received a distribution or
distributions from the Company under Section 5.02 hereof.
4.02 FAILURE TO CONTRIBUTE. (a) If a Member does not contribute by the time
required all or any portion of a Capital Contribution that Member is required to
make as provided in these Regulations, the Company may exercise, on notice to
that Member (the "Delinquent Member"), one or more of the following remedies:
(i) taking such action (including, without limitation, court
proceedings) as the Board of Directors may deem appropriate to obtain
payment by the Delinquent Member of the portion of the Delinquent Member's
Capital Contribution that is in default, together with interest thereon at
the Default Interest Rate from the date that the Capital Contribution was
due until the date that it is made, all at the cost and expense of the
Delinquent Member;
(ii) permitting the other Members in proportion to their Sharing
Ratios or in such other percentages as they may agree (the "Lending Member"
whether one or more), to advance the portion of the Delinquent Member's
Capital Contribution that is in default, with the following results:
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(A) the sum advanced constitutes a loan from the Lending
Member to the Delinquent Member and a Capital Contribution of that sum
to the Company by the Delinquent Member pursuant to the applicable
provisions of these Regulations,
(B) the principal balance of the loan and all accrued unpaid
interest thereon is due and payable in whole on the tenth day after
written demand therefor by the Lending Member to the Delinquent
Member,
(C) the amount lent bears interest at the Default Interest
Rate from the day that the advance is deemed made until the date that
the loan, together with all interest accrued on it, is repaid to the
Lending Member,
(D) all distributions from the Company that otherwise would
be made to the Delinquent Member (whether before or after dissolution
of the Company) instead shall be paid to the Lending Member until the
loan and all interest accrued on it have been paid in full to the
lending Member (with payments being applied first to accrued and
unpaid interest and then to principal),
(E) the payment of the loan and interest accrued on it is
secured by a security interest in the Delinquent Member's Membership
Interest, as more fully set forth in Section 4.02(b), and
(F) the Lending Member has the right, in addition to the
other rights and remedies granted to it pursuant to these Regulations
or available to it at law or in equity, to take any action (including,
without limitation, court proceedings) that the Lending Member may
deem appropriate to obtain payment by the Delinquent Member of the
loan and all accrued and unpaid interest on it, at the cost and
expense of the Delinquent Member;
(iii) exercising the rights of a secured party under the Uniform
Commercial Code of the State of Nevada, as more fully set forth in Section
4.02(b): or
(iv) exercising any other rights and remedies available at law or
in equity.
(b) Each Member grants to the Company, and to each Lending Member with
respect to any loans made by the Lending Member to that Member as a Delinquent
Member pursuant to Section 4.02(a)(ii), as security, equally and ratably, for
the payment of all Capital Contributions that Member has agreed to make and the
payment of all loans and interest accrued on them made by Lending Members to
that Member as a Delinquent Member pursuant to Section 4.02(a)(ii), a security
interest in and a general lien on its Membership Interest and the proceeds
thereof, all under the Uniform Commercial Code of the State of Nevada. On any
default in the payment of a Capital Contribution or in the payment of such a
loan or interest accrued on it, the Company or the Lending Member, as
applicable, is entitled to all the rights and remedies of a secured party under
the Uniform Commercial Code of the State of Nevada with respect to the security
interest granted in this Section 4.02(b). Each Member shall execute and deliver
to the Company and the other Members all financing statements and other
instruments that the Managers or the Lending Member, as applicable, may
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request to effectuate and carry out the preceding provisions of this Section
4.02(b). At the option of the Managers or a Lending Member, these Regulations or
a carbon, photographic, or other copy hereof may serve as a financing statement.
4.03 RETURN OF CONTRIBUTIONS. Other than as expressly provided in these
Regulations, neither a Member nor a Special Member is entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member or Special
Member. Neither a Member nor a Special Member is required to contribute or to
lend any cash or property to the Company to enable the Company to return any
Member's or Special Member's Capital Contributions.
4.04 ADVANCES BY MEMBERS. If the Company does not have sufficient cash to
pay its obligations, any Member(s) that may agree to do so with the Board of
Directors' consent may advance all or part of the needed funds to or on behalf
of the Company. An advance described in this Section 4.05 constitutes a loan
from the Member to the Company, bears interest at the General Interest Rate from
the date of the advance until the date of payment, and is not a Capital
Contribution.
4.05 CAPITAL ACCOUNTS. A capital account shall be established and
maintained for each Member and Special Member. Each Member's or Special Member's
capital account (a) shall be increased by (i) the amount of money contributed by
that Member or Special Member to the Company, (ii) the fair market value of
property contributed by that Member or Special Member to the Company (net of
liabilities secured by the contributed property that the Company is considered
to assume or take subject to under section 752 of the Code), and (iii)
allocations to that Member or Special Member of Company income and gain (or
items thereof), including income and gain exempt from tax and income and gain
described in Treas. Reg. Section 1.704-l(b)(2)(iv)(g), but excluding income and
gain described in Treas. Reg. Section 1.704-1(b)(4)(i), and (b) shall be
decreased by (i) the amount of money distributed to that Member or Special
Member by the Company, (ii) the fair market value of property distributed to
that Member or Special Member by the Company (net of liabilities secured by the
distributed property that the Member or the or Special Member is considered to
assume or take subject to under section 752 of the Code), (iii) allocations to
that Member or Special Member of expenditures of the Company described in
section 705(a)(2)(B) of the Code, and (iv) allocations of Company loss and
deduction (or items thereof), including loss and deduction described in Treas.
Reg. Section 1.704-1(b)(2)(iv)(g), but excluding items described in clause
(b)(iii) above and loss or deduction described in Treas. Reg. Section
1.704-l(b)(4)(i) or Section 1.704-1 (b)(4)(iii). The Members' and the Special
Members' capital accounts also shall be maintained and adjusted as permitted by
the provisions of Treas. Reg. Section 1.704-l(b)(2)(iv)(f) and as required by
the other provisions of Treas. Reg. Sections 1.704- l(b)(2)(iv) and
1.704-1(b)(4), including adjustments to reflect the allocations to the Members
and the Special Members of depreciation, depletion, amortization, and gain or
loss as computed for book purposes rather than the allocation of the
corresponding items as computed for tax purposes, as required by Treas. Reg.
Section 1.704-l(b)(2)(iv)(g). A Member or Special Member that has more than one
Membership Interest or Special Membership Interest shall have a single capital
account that reflects all its Membership Interests or Special Membership
Interests, regardless of the class of Membership Interests or Special Membership
Interests owned by that Member or Special Member and regardless of the time or
manner in which those Membership Interests or Special Membership
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Interests were acquired. On the transfer of all or part of a Membership Interest
or a Special Membership Interest, the capital account of the transferor that is
attributable to the transferred Membership Interest, Special Membership Interest
or part thereof shall carry over to the transferee Member or Special Member in
accordance with the provisions of Treas. Reg. Section 1.704-1(b)(2)(iv)(l).
ARTICLE V.
ALLOCATIONS AND DISTRIBUTIONS
5.01 ALLOCATIONS. (a) Except as may be required by section 701(c) of the
Code and Treas. Reg. Section 1.701-l(b)(2)(iv)(f)(4), all items of income, gain,
loss, deduction, and credit of the Company shall be allocated among the Members
in accordance with their Sharing Ratios and among the Special Members in
accordance with their allocation of profits. Notwithstanding the previous
sentence, in the event that one or more Members has an Unreturned Contribution
Ratio that is greater than its Sharing Ratio, prior to any allocation of profits
being made to the Members pursuant to the previous sentence, such Member or
Members shall receive an allocation of profits equal to an annual rate of
interest equal to three quarters of one percent (3/4%) above the "prime" rate of
interest quoted by the Wall Street Journal from time to time on such Excess
Contributions during the existence of any such Excess Contributions.
(b) All items of income, gain, loss, deduction, and credit allocable
to any Membership Interest or Special Membership Interest that may have been
transferred shall be allocated between the transferor and the transferee based
on the portion of the calendar year during which each was recognized as owning
that Membership Interest or Special Membership Interest, without regard to the
results of Company operations during any particular portion of that calendar
year and without regard to whether cash distributions were made to the
transferor or the transferee during that calendar year; provided, however, that
this allocation must be made in accordance with a method permissible under
section 706 of the Code and the regulations thereunder.
5.02 DISTRIBUTIONS. All receipts and revenues of the Company from any
source shall be applied and distributed in the following order of priority with
no distribution being made in any category set forth below unless and until the
preceding category has been satisfied in full either by payment or by setting
aside of a reserve for payment of same.
(a) in payment of all debts, obligations, liabilities, costs and
expenses incurred in connection with or on account of the Company;
(b) in payment of Amounts Due to the Withdrawing Member pursuant to
Section 3.08;
(c) in repayment of any loans and accrued interest thereon made by a
Lending Member pursuant to Section 4.03(a)(ii);
(d) in repayment of Contributions by the Member in accordance with
their Sharing Ratios, subject to the provisions of Section 4.03 or Contributions
by a Special Member in accordance with their profit allocation percentages.
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(e) after having satisfied (a), (b), (c) and (d) above, receipts and
revenues of the Company shall represent the profits of the Company and shall be
distributed to the Members pro rata and pari passu in accordance with their
Sharing Ratios and any receipts and revenues of the Company allocable to the
Pinery Joint Venture shall be distributed to the Special Members pro rata and
pari passu in accordance with their profit allocation percentages.
However, no distribution of profits shall be made until after completion of any
development and/or construction activities undertaken by the Company, without
the agreement of the Members constituting a Required Interest. Furthermore,
notwithstanding the foregoing provisions of this Section 5.02, any Member with
Excess Contributions may request, in writing, that the Company distribute to
such Member an amount equal to such Member's Excess Contributions, and the
Company shall distribute such amount to the Member within one hundred twenty
(120) days after the receipt of such request.
ARTICLE VI.
BOARD OF DIRECTORS
6.01 MANAGEMENT. All Company powers shall be exercised by or under the
authority of, and the business and affairs of the Company managed under the
direction of, its board of directors ("Board of Directors"), subject to any
limitation set forth in these Regulations. The Directors shall be the "managers"
of the Company as that term is used in the Act.
6.02 NUMBER; ELECTION; VOTING. The Board of Directors shall from time to
time fix the number of members of the Board of Directors by resolution which
shall consist initially of three members. Except with respect to Directors
elected to fill a vacancy, Directors shall be elected by the Members
constituting a Required Interest and shall serve for a term of one (1) year and
until their successors are elected. All resolutions adopted and all business
transacted by the Board of Directors shall require the affirmative vote of a
majority of the Directors present at the meeting. The Board of Directors may
elect from its membership a chairman to preside at meetings of the Board of
Directors.
6.03 VACANCIES; REMOVAL. If a vacancy occurs on the Board of Directors,
including a vacancy resulting from an increase in the number of Directors:
(a) the Required Interest may fill the vacancy;
(b) The Board of Directors may fill the vacancy; or
(c) If the Directors remaining in office constitute fewer than a
quorum of the board, they may fill the vacancy by the affirmative vote of a
majority of all the Directors remaining in office.
6.04 ACTIONS BY BOARD OF DIRECTORS; COMMITTEES; DELEGATION OF AUTHORITY AND
DUTIES. (a) In managing the business and affairs of the Company and exercising
its powers, the Board of Directors shall act (i) collectively through meetings
and written consents pursuant to Sections 6.06 and 6.07; and (ii) through
committees pursuant to Section 6.04(b).
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(b) The Board of Directors may, from time to time, designate one or
more committees, each of which shall be comprised of one or more Directors. Any
such committee, to the extent provided in such resolution or in the Articles or
these Regulations, shall have and may exercise all of the authority of the Board
of Directors, subject to the limitations set forth in the Act. At every meeting
of any such committee, the presence of a majority of all the members thereof
shall constitute a quorum, and the affirmative vote of a majority of the members
present shall be necessary for the adoption of any resolution. The Board of
Directors may dissolve any committee at any time, unless otherwise provided in
the Articles or these Regulations.
6.05 VACANCIES; REMOVAL; RESIGNATION. Any Director position to be filled by
reason of an increase in the number of Directors may be filled by election at an
annual or special meeting of Members called for that purpose. Any vacancy
occurring in the Board of Directors other than by reason of an increase in the
number of Directors may be filled (a) by election at an annual or special
meeting of the Members called for that purpose or (b) pursuant to Section 6.03.
A Director elected to fill a vacancy occurring other than by reason of an
increase in the number of Directors shall be elected for the unexpired term of
his predecessor in office. At any meeting of Members at which a quorum of
Members is present called expressly for that purpose, or pursuant to a written
consent adopted pursuant to these Regulations, any Director may be removed, with
or without cause, by a Required Interest. Any Director may resign at any time.
Such resignation shall be made in writing and shall take effect at the time
specified therein, or if no time be specified, at the time of its receipt by the
remaining Directors. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly so provided in the resignation.
6.06 MEETINGS. (a) Unless otherwise required by law or provided in the
Articles or these Regulations, a majority of the total number of Directors fixed
by, or in the manner provided in, the Articles or these Regulations shall
constitute a quorum for the transaction of business of the Directors, and the
act of a majority of the Directors present at a meeting at which a quorum is
present shall he the act of the Directors. A Director who is present at a
meeting of the Board of Directors at which action on any Company matter is taken
shall be presumed to have assented to the action unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the Person acting as secretary of the meeting before
the adjournment thereof or shall deliver such dissent to the Company immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
(b) Meetings of the Board of Directors may be held at such place or
places as shall be determined from time to time by resolution of the Board of
Directors. At all meetings of the Board of Directors, business shall be
transacted in such order as shall from time to time be determined by resolution
of the Board of Directors. Attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
(c) In connection with any annual meeting of Members at which
Directors were elected, the Directors may, if a quorum is present, hold its
first meeting for the transaction of business immediately after and at the same
place as such annual meeting of the Members. Notice of such meeting at such time
and place shall not be required.
14
(d) Regular meetings of the Board of Directors shall be held at such
times and places as shall be designated from time to time by resolution of the
Directors. Notice of such regular meetings shall not be required.
(e) Special meetings of the Board of Directors may be called by any
Director on at least 24 hours notice to each other Director. Such notice need
not state the purpose or purposes of, nor the business to be transacted at, such
meeting, except as may otherwise be required by law or provided for by the
Articles or these Regulations,
6.07 ACTION BY WRITTEN CONSENT OR TELEPHONE CONFERENCE. Any action
permitted or required by the Act, the Articles or these Regulations to be taken
at a meeting of the Board of Directors or any committee designated by the Board
of Directors may be taken without a meeting if a consent in writing, setting
forth the action to be taken, is signed by all the Directors or members of such
committee, as the case may be. Such consent shall have the same force and effect
as a unanimous vote at a meeting and may be stated as such in any document or
instrument filed with the Secretary of State of Nevada, and the execution of
such consent shall constitute attendance or presence in person at a meeting of
the Board of Directors or any such committee, as the case may be. Subject to the
requirements of the Act, the Articles or these Regulations for notice of
meetings, unless otherwise restricted by the Articles, Directors, or members of
any committee designated by the Board of Directors, may participate in and hold
a meeting of the Board of Directors or any committee of Board of Directors, as
the case may be, by means of a conference telephone or similar communications
equipment by means of which all Persons participating in the meeting can hear
each other, and participation in such meeting shall constitute attendance and
presence in person at such meeting, except where a Person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
6.08 COMPENSATION. The Directors shall receive such compensation, if any,
for their services as may be designated from time to time by the Board of
Directors. In addition, the Managers shall be entitled to be reimbursed for
out-of-pocket costs and expenses incurred in the course of their service
hereunder, including the portion of their overhead reasonably allocable to
Company activities.
6.09 CONFLICTS OF INTEREST. Subject to the other express provisions of
these Regulations, each Director, Member, Special Member and officer of the
Company at any time and from time to time may engage in and possess interests in
other business ventures of any and every type and description, independently or
with others, including ones in competition with the Company, with no obligation
to offer to the Company or any other Member, Special Member, Director or officer
the right to participate therein. The Company may transact business with any
Director, Member, Special Member, officer or affiliate thereof, provided the
terms of those transactions are no less favorable than those the Company could
obtain from unrelated third parties.
ARTICLE VII.
OFFICERS
7.01 GENERAL PROVISIONS. The officers of the Company shall consist of a
President, a Treasurer and a Secretary who shall be elected by the Board of
Directors, and such other officers as may be elected by the Board of Directors
or appointed as provided in these Regulations. The officers
15
shall perform such duties as shall be delegated by the Board of Directors. Any
two or more offices may be held by the same person. Unless otherwise provided in
the resolutions electing or appointing them, each officer shall serve until the
earlier of his resignation, removal from office, death, or election of his
successor.
7.02 PRESIDENT. Unless another person is elected as the Chief Executive
Officer, the President shall also be the Chief Executive Officer of the Company
and shall hold such title. The President shall have general and active
management of the operations of the Company. He or she shall be responsible for
the administration of the Company, including general supervision of the policies
of the Company and general and active management of the financial affairs of the
Company, and shall execute bonds, mortgages or other contracts in the name and
on behalf of the Company, and shall have such duties as may be delegated by the
Board of Directors. The President may vote, endorse for transfer, or take any
other action necessary with respect to interests and securities issued by any
other entity and owned by this Company, and may make, execute, and deliver any
proxy, waiver, or consent with respect thereto.
7.03 TREASURER. Unless another person is elected as the Chief Financial
Officer, the Treasurer shall also be the Chief Financial Officer of the Company
and shall hold such title. The Treasurer shall be charged with the management of
the financial affairs of the Company, shall have the power to recommend action
concerning the Company's affairs to the President, and shall perform such other
duties and have such other powers as may from time to time be delegated to him
or her by the President or the Board of Directors.
7.04 SECRETARY. The Secretary shall keep minutes of all meetings of the
Members and Directors, shall have charge of the minute books, shall be
responsible for authenticating records of the Company, and shall perform such
other duties and have other powers as may from time to time be delegated to him
or her by the President or the Board of Directors.
7.05 ASSISTANT OFFICERS. Assistants to the Secretary and Treasurer may be
appointed by the President or by the Board of Directors and shall have such
duties as shall be delegated to them by the President or the Board of Directors.
7.06 VICE PRESIDENTS. The Company may have one or more Vice President,
elected by the Board of Directors, who shall perform such duties as may be
delegated by the President or the Board of Directors.
ARTICLE VIII.
MEETINGS OF MEMBERS
8.01 MEETINGS. (a) A quorum shall be present at a meeting of Members if the
holders of a Required Interest are represented at the meeting in person or by
proxy. With respect to any matter, other than a matter for which the affirmative
vote of the holders of a specified portion of the Sharing Ratios of all Members
entitled to vote is required by the Act, the affirmative vote of a Required
Interest at a meeting of Members at which a quorum is present shall be the act
of the Members.
16
(b) All meetings of the Members shall be held at the principal place
of business of the Company or at such other place within or without the State of
Nevada as shall be specified or fixed in the notices or waivers of notice
thereof; provided that any or all Members may participate in any such meeting by
means of conference telephone or similar communications equipment pursuant to
Section 8.05.
(c) Notwithstanding the other provisions of the Articles or these
Regulations, the chairman of the meeting or the holders of a Required Interest
shall have the power to adjourn such meeting from time to time, without any
notice other than announcement at the meeting of the time and place of the
holding of the adjourned meeting. If such meeting is adjourned by the Members,
such time and place shall be determined by a vote of the holders of a Required
Interest. Upon the resumption of such adjourned meeting, any business may be
transacted that might have been transacted at the meeting as originally called.
(d) An annual meeting of the Members, for the election of the
Directors and for the transaction of such other business as may properly come
before the meeting, shall be held at such place, within or without the State of
Nevada, on such date and at such time as the Board of Directors shall fix and
set forth in the notice of the meeting, which date shall be within 13 months
subsequent to the date of organization of the Company or the last annual meeting
of Members, whichever most recently occurred.
(e) Special meetings of the Members for any proper purpose or purposes
may be called at any time by the Board of Directors or the holders of at least
ten percent of the Sharing Ratios of all Members. If not otherwise stated in or
fixed in accordance with the remaining provisions hereof, the record date for
determining Members entitled to call a special meeting is the date any Member
first signs the notice of that meeting. Only business within the purpose or
purposes described in the notice (or waiver thereof) required by these
Regulations may be conducted at a special meeting of the Members.
(f) Written or printed notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than 60
days before the date of the meeting, either personally or by mail, by or at the
direction of the Board of Directors or Person calling the meeting, to each
Member entitled to vote at such meeting. If mailed, any such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the Member at his address provided for on Exhibit A, with postage thereon
prepaid.
(g) The date on which notice of a meeting of Members is mailed or the
date on which the resolution of the Board of Directors declaring a distribution
is adopted, as the case may be, shall be the record date for the determination
of the Members entitled to notice of or to vote at such meeting, including any
adjournment thereof, or the Members entitled to receive such distribution.
(h) The right of Members to cumulative voting in the election of
Directors is expressly prohibited.
17
8.02 VOTING LIST. An officer shall make, at least ten days before each
meeting of Members, a complete list of the Members entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the Sharing Ratios held by each, which list, for a period of ten
days prior to such meeting, shall be kept on file at the registered office or
principal place of business of the Company and shall be subject to inspection by
any Member at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Member during the whole time of the meeting. The
original membership records shall be prima-facie evidence as to who are the
Members entitled to examine such list or transfer records or to vote at any
meeting of Members. Failure to comply with the requirements of this Section
shall not affect the validity of any action taken at the meeting.
8.03 PROXIES. A Member may vote either in person or by proxy executed in
writing by the Member. A telegram, telex, cablegram or similar transmission by
the Member, or a photographic, photostatic, facsimile or similar reproduction of
a writing executed by the Member shall be treated as an execution in writing for
purposes of this Section. Proxies for use at any meeting of Members or in
connection with the taking of any action by written consent shall be filed with
the Board of Directors, before or at the time of the meeting or execution of the
written consent, as the case may be. All proxies shall be received and taken
charge of and all ballots shall be received and canvassed by the Board of
Directors, who shall decide all questions touching upon the qualification of
voters, the validity of the proxies, and the acceptance or rejection of votes,
unless an inspector or inspectors shall have been appointed by the chairman of
the meeting, in which event such inspector or inspectors shall decide all such
questions. No proxy shall be valid after 11 months from the date of its
execution unless otherwise provided in the proxy. A proxy shall be revocable
unless the proxy form conspicuously states that the proxy is irrevocable and the
proxy is coupled with an interest. Should a proxy designate two or more Persons
to act as proxies, unless that instrument shall provide to the contrary, a
majority of such Persons present at any meeting at which their powers thereunder
are to be exercised shall have and may exercise all the powers of voting or
giving consents thereby conferred, or if only one be present, then such powers
may be exercised by that one; or, if an even number attend and a majority do not
agree on any particular issue, the Company shall not be required to recognize
such proxy with respect to such issue if such proxy does not specify how the
Sharing Ratios that are the subject of such proxy are to be voted with respect
to such issue.
8.04 CONDUCT OF MEETINGS. All meetings of the Members shall be presided
over by the chairman of the meeting, who shall be a Director designated by the
Board of Directors. The chairman of any meeting of Members shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seem to him in order.
8.05 ACTION BY WRITTEN CONSENT OR TELEPHONE CONFERENCE, (a) Any action
required or permitted to be taken at any annual or special meeting of Members
may be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holder or holders of not less than the minimum Sharing Ratios that
would be necessary to take such action at a meeting at which the holders of all
Sharing Ratios entitled to vote on the action were present and voted. Every
written consent shall bear the date of signature of each Member who signs the
consent. No written consent shall be effective to take the action that is the
18
subject to the consent unless, within 60 days after the date of the earliest
dated consent delivered to the Company in the manner required by this Section, a
consent or consents signed by the holder or holders of not less than the minimum
Sharing Ratios that would be necessary to take the action that is the subject of
the consent are delivered to the Company by delivery to its registered office,
its principal place of business. Delivery shall be by hand or certified or
registered mail, return receipt requested. Delivery to the Company's principal
place of business shall be addressed to the Board of Directors. A telegram,
telex, cablegram or similar transmission by a Member, or a photographic,
photostatic, facsimile or similar reproduction of a writing signed by a Member,
shall be regarded as signed by the Member for purposes of this Section. Prompt
notice of the taking of any action by Members without a meeting by less than
unanimous written consent shall be given to those Members who did not consent in
writing to the action.
(b) The record date for determining Members entitled to consent to
action in writing without a meeting shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Company by delivery to its registered office or its principal
place of business. Delivery shall be by hand or by certified or registered mail,
return receipt requested. Delivery to the Company's principal place of business
shall be addressed to the Board of Directors.
(c) If any action by Members is taken by written consent, any articles
or documents filed with the Secretary of State of Nevada as a result of the
taking of the action shall state, in lieu of any statement required by the Act
concerning any vote of Members, that written consent has been given in
accordance with the provisions of the Act and that any written notice required
by the Act has been given.
(d) Members may participate in and hold a meeting by means of
conference telephone or similar communications equipment by means of which all
Persons participating in the meeting can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a Person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
ARTICLE IX.
INDEMNIFICATION
9.01 RIGHT TO INDEMNIFICATION. Subject to the limitations and conditions as
provided in this Article IX, each Person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (hereinafter a "Proceeding"), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a Person of whom he or she
is the legal representative, is or was a Director of the Company or while a
Director of the Company is or was serving at the request of the Company as a
Director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise shall be indemnified by the Company to the
fullest extent permitted by the Act and the laws of the State of Nevada, as the
same exist or may
19
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than said law permitted the Company to provide prior to such amendment)
against judgments, penalties (including excise and similar taxes and punitive
damages), fines, settlements and reasonable expenses (including, without
limitation, attorneys' fees) actually incurred by such Person in connection with
such Proceeding, and indemnification under this Article IX shall continue as to
a Person who has ceased to serve in the capacity which initially entitled such
Person to indemnify hereunder. The rights granted pursuant to this Article IX
shall be deemed contract rights, and no amendment, modification or repeal of
this Article IX shall have the effect of limiting or denying any such rights
with respect to actions taken or Proceedings arising prior to any such
amendment, modification or repeal. It is expressly acknowledged that the
indemnification provided in this Article IX could involve indemnification for
negligence or under theories of strict liability.
9.02 ADVANCE PAYMENT. The right to indemnification conferred in this
Article IX shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a Person of the type entitled to be indemnified
under Section 9.01 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such Person in advance of the final disposition of a Proceeding, shall be
made only upon delivery to the Company of a written affirmation by such Director
of his or her good faith belief that he has met the standard of conduct for
indemnification under this Article IX and a written undertaking, by or on behalf
of such Person, to repay all amounts so advanced if it shall ultimately be
determined that such indemnified Person is not entitled to be indemnified under
this Article IX or otherwise.
9.03 INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS. The Company, by
adoption of a resolution of the Board of Directors, may indemnity and advance
expenses to an officer, employee or agent of the Company to the same extent and
subject to the same conditions under which it may indemnify and advance expenses
to Directors under this Article IX; and, the Company may indemnify and advance
expenses to Persons who are not or were not Directors, officers, employees or
agents of the Company but who are or were serving at the request of the Company
as a director, officer, partner, venturer, proprietor, trustee, employee, agent
or similar functionary of another foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in such a capacity or arising out of his status as such a Person
to the same extent that it may indemnity and advance expenses to Directors under
this Article IX.
9.04 APPEARANCE AS A WITNESS. Notwithstanding any other provision of this
Article IX, the Company may pay or reimburse expenses incurred by a Director in
connection with his appearance as a witness or other participation in a
Proceeding at a time when he is not a named defendant or respondent in the
Proceeding.
9.05 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement and payment of expenses conferred in this Article IX shall not be
exclusive of any other right which a Director or other Person indemnified
pursuant to Section 9.03 may have or hereafter acquire under
20
any law (common or statutory), provision of the Articles or these Regulations,
agreement, vote of Members or disinterested Directors or otherwise.
9.06 INSURANCE. The Company may purchase and maintain insurance, at its
expense, to protect itself and any Person who is or was serving as a Director,
officer, employee or agent of the Company or is or was serving at the request of
the Company as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any expense, liability
or loss, whether or not the Company would have the power to indemnify such
Person against such expense, liability or loss under this Article IX.
9.07 SAVINGS CLAUSE. If this Article IX or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Director or any
other Person indemnified pursuant to this Article IX as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by any
applicable portion of this Article IX that shall not have been invalidated and
to the fullest extent permitted by applicable law.
ARTICLE X.
TAXES
10.01 TAX RETURNS. The Directors shall cause to be prepared and filed all
necessary federal and state income tax returns for the Company, including making
the elections described in Section 10.02. Each Member shall furnish to the
Directors all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed.
10.02 TAX ELECTIONS. The Company shall make the following elections on the
appropriate tax returns:
(a) to adopt the year ending on May 31 as the Company's fiscal year;
(b) to adopt a method of accounting as the Board of Directors may
determine from time to time;
(c) if a distribution of Company property as described in section 734
of the Code occurs or if a transfer of a Membership Interest or a Special
Membership Interest as described in section 743 of the Code occurs, on written
request of any Member or Special Member, to elect, pursuant to section 754 of
the Code, to adjust the basis of Company properties;
(d) to elect to amortize the organizational expenses of the Company
and the startup expenditures of the Company under Section 195 of the Code
ratably over a period of 60 months as permitted by section 709(b) of the Code;
and
21
(e) any other election the Board of Directors may deem appropriate and
in the best interests of the Members and the Special Members.
Neither the Company nor any Director, Member or Special Member may make an
election for the Company to be excluded from the application of the provisions
of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions
of applicable state law, and no provision of these Regulations (including,
without limitation, Section 2.06) shall be construed to sanction or approve such
an election.
10.03 "TAX MATTERS PARTNER." The Board of Directors shall designate one
Director that is affiliated with a Member to be the "tax matters partner" of the
Company pursuant to section 623l(a)(7) of the Code; or, if there is no Director
that is affiliated with a Member, the "tax matters partner" shall be a Member
that is designated as such by a Required Interest. Any Member who is designated
"tax matters partner" shall take such action as may be necessary to cause each
other Member to become a "notice partner" within the meaning of section 6223 of
the Code. Any Member who is designated "tax matters partner" shall inform each
other Member and the Special Members of all significant matters that may come to
its attention in its capacity as "tax matters partner" by giving notice thereof
on or before the fifth Business Day after becoming aware thereof and, within
that time, shall forward to each other Member and the Special Members copies of
all significant written communications it may receive in that capacity. Any
Member who is designated "tax matters partner" may not take any action
contemplated by sections 6222 through 6232 of the Code without the consent of a
Required Interest, but this sentence does not authorize such Member (or any
other Member or Special Member) to take any action left to the determination of
an individual Member or Special Member under sections 6222 through 6232 of the
Code.
ARTICLE XI.
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
11.01 MAINTENANCE OF BOOKS. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members, its Board of
Directors and each committee of the Board of Directors. The books of account for
the Company shall be maintained on an accrual basis in accordance with the terms
of these Regulations, except that the capital accounts of the Members and the
Special Members shall be maintained in accordance with Section 4.05. The
accounting year of the Company shall be a period beginning on June 1 and ending
on May 31 of the following year or such other period determined by the Board of
Directors.
11.02 REPORTS. On or before the 120th day following the end of each fiscal
year during the term of the Company, the Board of Directors shall cause each
Member and Special Member to be furnished with a balance sheet, an income
statement, and a statement of changes in Members' and Special Members' capital
of the Company for, or as of the end of, that year certified by a recognized
firm of certified public accountants. These financial statements must be
prepared in accordance with generally accepted accounting principles generally
employed for accrual-basis records consistently applied (except as therein
noted) and must be accompanied by a report of the certified public accountants
certifying the statements and stating that (a) their examination was made in
accordance with generally accepted auditing standards and, in their opinion, the
financial statements fairly present the financial position, financial results of
operations, and changes in Members' and Special Members'
22
capital in accordance with accounting principles generally employed for
accrual-basis records consistently applied (except as therein noted) and (b) in
making the examination and reporting on the financial statements described
above, nothing came to their attention that caused them to believe that (i) the
income and revenues were not paid or credited in accordance with the financial
and accounting provisions of these Regulations, (ii) the costs and expenses were
not charged in accordance with the financial and accounting provisions of these
Regulations, or (iii) the Board of Directors, any Member or any Special Member
failed to comply in any material respect with the financial and accounting
provisions of these Regulations, or if they do conclude that the Board of
Directors, Member or a Special Member so failed, specifying the nature and
period of existence of the failure. The Board of Directors also may cause to be
prepared or delivered such other reports as they may deem appropriate. The
Company shall bear the costs of all these reports.
11.03 ACCOUNTS. The Board of Directors shall establish and maintain one or
more separate bank and investment accounts and arrangements for Company funds in
the Company name with financial institutions and firms that the Board of
Directors determine. The Board of Directors may not commingle the Company's
funds with the funds of any Member; however, Company funds may be invested in a
manner the same as or similar to the Board of Directors' investment of their own
funds or investments by their affiliates.
ARTICLE XII.
BANKRUPTCY OF A MEMBER
BANKRUPT MEMBERS. Subject to Section 12.01(c), if any Member or Special
Member becomes a Bankrupt Member, the Company shall have the option, exercisable
by notice from the Board of Directors to the Bankrupt Member (or its
representative) at any time prior to the 180th day after receipt of notice of
the occurrence of the event causing it to become a Bankrupt Member, to buy, and
on the exercise of this option the Bankrupt Member or its representative shall
sell, its Membership Interest. The purchase price shall be an amount equal to
the fair market value thereof determined by agreement of the Bankrupt Member (or
its representative) and the Board of Directors; however, if those Persons do not
agree on the fair market value on or before the 30th day following the exercise
of the option, either such Person, by notice to the other, may require the
determination of fair market value to be made by an independent appraiser
specified in that notice. If the Person receiving that notice objects on or
before the tenth day following receipt to the independent appraiser designated
in that notice, and those Persons otherwise fail to agree on an independent
appraiser, either such Person may petition the Judge with jurisdiction over the
Bankrupt Member under the federal statutes codified as Title 11 of the United
States Code to designate an independent appraiser. The determination of the
independent appraiser, however designated, is final and binding on all parties.
The Bankrupt Member and the Company each shall pay one-half of the costs of the
appraisal. The purchaser shall pay the fair market value as so determined in
four equal cash installments, the first due on closing and the remainder
(together with accumulated interest on the amount unpaid at the General Interest
Rate) due on each of the first three anniversaries thereof. The payment to be
made to the Bankrupt Member or its representative pursuant to this Section 11.01
is in complete liquidation and satisfaction of all the rights and interest of
the Bankrupt Member and its representative (and of all Persons claiming by,
through, or under the Bankrupt Member and its representative) in and in respect
of the Company, including, without limitation, any Membership Interest or
Special Membership
23
Interest, any rights in specific Company property, and any rights against the
Company and (insofar as the affairs of the Company are concerned) against the
Members and the Special Members, and constitutes a compromise to which all
Members and Special Members have agreed pursuant to the Act.
ARTICLE XIII.
DISSOLUTION, LIQUIDATION, AND TERMINATION
13.01 DISSOLUTION. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the written consent of a Required Interest;
(b) the expiration of the period fixed for the duration of the Company
set forth in the Articles;
(c) any Member or Special Member shall become a Bankrupt Member (with
or without the consent of a Required Interest); provided, however, that if the
event described in this Section 12.01(c) shall occur and there shall be at least
one other Member remaining, the Company shall not be dissolved, and the business
of the Company shall be continued, if all Members so agree; and
(d) entry of a decree of judicial dissolution of the Company under
article 6.02 of the Act.
Except as provided in Section 13.01(c), the death, retirement, resignation,
expulsion, bankruptcy or dissolution of a Member or Special Member, or the
occurrence of any other event that terminates the continued membership of a
Member or Special Member in the Company, shall not cause a dissolution of the
Company.
13.02 LIQUIDATION AND TERMINATION. On dissolution of the Company, the
Board of Directors shall act as liquidator or may appoint one or more Members as
liquidator. The liquidator shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
costs of liquidation shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties
with all of the power and authority of the Board of Directors. The steps to be
accomplished by the liquidator are as follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the liquidator shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;
(b) the liquidator shall cause the notice described in article
6.05(A)(2) of the Act to be mailed to each known creditor of and claimant
against the Company in the manner described in such article 6.05(A)(2) of the
Act;
24
(c) the liquidator shall pay, satisfy or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including, without
limitation, all expenses incurred in liquidation and any advances described in
Section 4.04) or otherwise make adequate provision for payment and discharge
thereof (including, without limitation, the establishment of a cash escrow fund
for contingent liabilities in such amount and for such term as the liquidator
may reasonably determine); and
(d) all remaining assets of the Company shall be distributed to the
Members and the Special Members as follows:
(i) the liquidator may sell any or all Company property,
including to Members and Special Members, and any resulting gain or loss
from each sale shall be computed and allocated to the capital accounts of
the Members and the Special Members;
(ii) with respect to all Company property that has not been sold,
the fair market value of that property shall be determined and the capital
accounts of the Members and the Special Members shall be adjusted to
reflect the manner in which the unrealized income, gain, loss, and
deduction inherent in property that has not been reflected in the capital
accounts previously would be allocated among the Members and the Special
Members if there were a taxable disposition of that property for the fair
market value of that property on the date of distribution; and
(iii) Company property shall be distributed among the Members and
the Special Members in accordance with the positive capital account
balances of the Members and the Special Members, as determined after taking
into account all capital account adjustments for the taxable year of the
Company during which the liquidation of the partnership occurs (other than
those made by reason of this clause (iii)); and those distributions shall
be made by the end of the taxable year of the Company during which the
liquidation of the Company Occurs (or, if later, 90 days after the date of
the liquidation).
All distributions in kind to the Members and the Special Members shall be made
subject to the liability of each distributee for costs, expenses, and
liabilities theretofore incurred or for which the Company has committed prior to
the date of termination and those costs, expenses, and liabilities shall be
allocated to the distributee pursuant to this Section 13.02. The distribution of
cash and/or property to a Member or a Special Member in accordance with the
provisions of this Section 13.02 constitutes a complete return to the Member or
the Special Member of its Capital Contributions and a complete distribution to
the Member of its Membership Interest or the Special Member of its Special
Membership Interest, as the case may be, and all the Company's property and
constitutes a compromise to which all Members and Special Members have consented
within the meaning of the Act. To the extent that a Member or a Special Member
returns funds to the Company, it has no claim against any other Member or
Special Member for those funds.
13.03 DEFICIT CAPITAL ACCOUNTS. Notwithstanding anything to the contrary
contained in these Regulations, and notwithstanding any custom or rule of law to
the contrary, to the extent that the deficit, if any, in the capital account of
any Member or Special Member results from or is attributable to deductions and
losses of the Company (including non-cash items such as depreciation), or
25
distributions of money pursuant to these Regulations to all Members in
proportion to their respective Sharing Ratios and Special Members in proportion
to their respective profit distribution percentages, as the case may be, upon
dissolution of the Company such deficit shall not be an asset of the Company and
such Member or Special Member shall not be obligated to contribute such amount
to the Company to bring the balance of such Member's or Special Member's capital
account to zero.
13.04 ARTICLES OF DISSOLUTION. On completion of the distribution of Company
assets as provided herein, the Company is terminated, and the Board of Directors
(or such other Person or Persons as the Act may require or permit) shall file
Articles of Dissolution with the Secretary of State of Nevada, cancel any other
filings made pursuant to Section 2.05, and take such other actions as may be
necessary to terminate the Company.
ARTICLE XIV.
GENERAL PROVISIONS
14.01 OFFSET. Whenever the Company is to pay any sum to any Member or
Special Member, any amounts that the Member or Special Member owes the Company
may be deducted from that sum before payment.
14.02 NOTICES. Except as expressly set forth to the contrary in these
Regulations, all notices, requests, or consents provided for or permitted to be
given under these Regulations must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under these Regulations is
effective on receipt by the Person to receive it. All notices, requests, and
consents to be sent to a Member or Special Member must be sent to or made at the
addresses given for that Member or Special Member on Exhibit A or in the
instrument described in Section 3.03(d) or 3.04, or such other address as that
Member or Special Member may specify by notice to the other Members and Special
Member. Any notice, request, or consent to the Company or the Board of Directors
must be given to the Board of Directors at the following address: 3751 Victoria
Park Ave., Toronto, Ontario MlW 3Z4 Canada. Whenever any notice is required to
be given by law, the Articles or these Regulations, a written waiver thereof,
signed by the Person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
14.03 ENTIRE AGREEMENT; SUPERSEDURE. These Regulations constitute the
entire agreement of the Members, Special Members and their affiliates relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
14.04 EFFECT OF WAIVER OR CONSENT. A waiver or consent, express or implied,
to or of any breach or default by any Person in the performance by that Person
of its obligations with respect to the Company is not a consent or waiver to or
of any other breach or default in the performance by that Person of the same or
any other obligations of that Person with respect to the Company. Failure on the
part of a Person to complain of any act of any Person or to declare any Person
in default with respect to the Company, irrespective of how long that failure
continues, does not constitute a waiver by that
26
Person of its rights with respect to that default until the applicable
statute-of-limitations period has run.
14.05 AMENDMENT OR MODIFICATION. These Regulations may be amended or
modified from time to time only by a written instrument adopted by the Board of
Directors and executed and agreed to by a Required Interest; provided, however,
that (a) an amendment or modification changing a Member's Sharing Ratio or a
Special Member's profit allocation or cash distribution percentage (other than
to reflect changes otherwise provided by these Regulations) is effective only
with that Member's consent, (b) an amendment or modification reducing a Special
Member's profit allocation or cash distribution percentage (other than to
reflect changes otherwise provided by these Regulations) is effective only with
that Special Member's consent (c) an amendment or modification reducing the
required Sharing Ratio or other measure for any consent or vote in these
Regulations is effective only with the consent or vote of Members having the
Sharing Ratio or other measure theretofore required, and (c) amendments of the
type described in Section 3.04 may be adopted as therein provided.
14.06 BINDING EFFECT. Subject to the restrictions on Dispositions set forth
in these Regulations, these Regulations are binding on and inure to the benefit
of the Members and their respective heirs, legal representatives, successors,
and assigns.
14.07 GOVERNING LAW; SEVERABILITY. THESE REGULATIONS ARE GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH LAW OF THE STATE OF NEVADA, EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THESE REGULATIONS TO THE LAW OF ANOTHER JURISDICTION. In the
event of a direct conflict between the provisions of these Regulations and (a)
any provision of the Articles, or (b) any mandatory provision of the Act, the
application provision of the Articles or the Act shall control. If any provision
of these Regulations or the application thereof to any Person or circumstance is
held invalid or unenforceable to any extent, the remainder of these Regulations
and the application of that provision to other Persons or circumstances is not
affected thereby and that provision shall be enforced to the greatest extent
permitted by law.
14.08 FURTHER ASSURANCES. In connection with these Regulations and the
transactions contemplated hereby, each Member and Special Member shall execute
and deliver any additional documents and instruments and perform any additional
acts that may be necessary or appropriate to effectuate and perform the
provisions of these Regulations and those transactions.
14.09 WAIVER OF CERTAIN RIGHTS. Each Member and Special Member irrevocably
waives any right it may have to maintain any action for dissolution of the
Company or for partition of the property of the Company.
14.10 INDEMNIFICATION. To the fullest extent permitted by law, each Member
and Special Member shall indemnify the Company, each Director and each other
Member and Special Member and hold them harmless from and against all losses,
costs, liabilities, damages, and expenses (including, without limitation, costs
of suit and attorney's fees) they may incur on account of any breach by that
Member or Special Member of these Regulations.
27
14.11 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By executing these
Regulations, each Member and Special Member acknowledges that it has actual
notice of (a) all of the provisions of this Agreement, including, without
limitation, the restrictions on the transfer of Membership Interests and Special
Membership Interests set forth in Article III, and (b) all of the provisions of
the Articles, including, without limitation, the fact that the Articles provide
that no Member or Special Member shall have the preemptive right to acquire any
Membership Interests or Special Membership Interests or securities of any class
that may at any time be issued, sold or offered for sale by the Company. Each
Member and Special Member hereby agrees that these Regulations constitute
adequate notice of all such provisions.
14.12 COUNTERPARTS. These Regulations may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
14.13 ARBITRATION. If, at any time or from time to time during the
continuance of the Company or after the dissolution or other termination
thereof, any dispute, difference or question shall arise between or among any of
the parties hereto, or their successors, assigns or nominees, touching or
concerning the Company of the property, assets, rights or transactions thereof,
or the dissolution or other termination thereof, or the property of the Company
or the construction, meaning or effect of these Regulations, or any provision
hereof, or the rights of obligations of the Members or the Special Members, or
their successors, assigns or nominees, under these Regulations or otherwise,
with respect thereto, then every such dispute, difference or question shall be
submitted to and settled by arbitration and the decision of the arbitrator
appointed as hereinafter provided to deal with such matter shall be accepted by
all the Members and the Special Members to such dispute, difference or question.
The arbitration shall be conducted by a single arbitrator agreed upon by the
Members and Special Members to the matter. The decision of the arbitrator shall
be final and binding upon all the Members and Special Members to such dispute,
difference or question and their nominees, and there shall be no appeal
therefrom. Arbitration shall be administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules. The arbitration
will be conducted in Atlanta, Georgia. The arbitrator shall apply Nevada
substantive law and Nevada evidentiary law to the proceeding. The arbitrator
shall have the power to grant all legal and equitable remedies and award
compensatory damages provided by Nevada law. Punitive or exemplary damages shall
not be awarded for any breach or alleged breach of this Agreement. The
arbitrator shall be bound by the terms of this Agreement. The arbitrator shall
not be empowered or authorized to add to, subtract from, delete or in any other
way modify the terms of this Agreement. The arbitrator shall prepare in writing
and provide to the parties an award including factual findings and the reasons
on which the decision is based.
28
IN WITNESS WHEREOF, following the adoption of these Regulations by the
Board of Directors, the Members have executed these Regulations as of the date
first set forth above.
MEMBERS:
ELLY NEVADA, INC.,
a Nevada corporation
By: /s/ Elly Reisman
------------------------------------
Elly Reisman, President
NORMAN NEVADA, INC.,
a Nevada corporation
BY: /s/ Norman Reisman
------------------------------------
Norman Reisman, President
LARRY NEVADA, INC.,
a Nevada corporation
BY: /s/ Larry Robbins
------------------------------------
Larry Robbins, President
LITTLE SHOTS NEVADA L.L.C.,
a Nevada limited liability company
By: /s/ Bruce Freeman
------------------------------------
Bruce Freeman, Managing Member
By: /s/ Seymour Joffe
------------------------------------
Seymour Joffe, Managing Member
By: /s/ Harry Rosenbaum
------------------------------------
Harry Rosenbaum, Managing Member
29
SPECIAL MEMBERS:
ELLY COLORADO, INC.,
a Colorado corporation
BY: /s/ Elly Reisman
------------------------------------
Elly Reisman, President
NORMAN COLORADO, INC.,
a Colorado corporation
BY: /s/ Norman Reisman
------------------------------------
Norman Reisman, President
LARRY COLORADO, INC.,
a Colorado corporation
By: /s/ Larry Robbins
------------------------------------
Larry Robbins, President
LITTLE SHOTS NEVADA L.L.C.,
a Nevada limited liability company
By: /s/ Bruce Freeman
------------------------------------
Bruce Freeman, Managing Member
By: /s/ Seymour Joffe
------------------------------------
Seymour Joffe, Managing Member
By: /s/ Harry Rosenbaum
------------------------------------
Harry Rosenbaum, Managing Member
30