6.24 Sample Joint Venture Agreement: Limited Liability Company Form
LIMITED LIABILITY COMPANY AGREEMENT OF VENTURE COMPANY L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is entered into as
of ______________, 19____, by and among ________________________, a
_________________________ corporation ("Member A") and __________________, a
____________________ corporation ("Member B"). Member A and Member B and any other
persons or entities who shall in the future execute and deliver this Agreement pursuant to the
provisions hereof shall hereinafter collectively be referred to as the "Members."
Member A and Member B propose to form a joint venture to engage in the business of
[brief description of business]. Member A and Member B further propose that the joint venture take
the form of a limited liability company organized pursuant to the provisions of the Delaware
Limited Liability Company Act (the "Delaware LLC Act") under the name "Venture Company
L.L.C." (the "LLC").
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the Members hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, capitalized terms used herein shall have
the respective meanings assigned thereto in Addendum I, attached hereto and incorporated herein
by reference, for all purposes of this Agreement (such definitions to be equally applicable to both
the singular and the plural forms of the terms defined). Unless otherwise specified, all references
herein to Articles or Sections are to Articles or Sections of this Agreement.
ARTICLE II
FORMATION; NAME; PLACE OF BUSINESS
2.01 Formation of LLC; Certificate of Formation
The Members of the LLC hereby:
(a) authorize the formation of the LLC by the Members as a limited liability
company pursuant to the Delaware LLC Act, and further authorize the filing of the Certificate with
the Recording Office as required under the Delaware LLC Act;
(b) confirm and agree to their status as Members of the LLC;
(c) execute this Agreement for the purpose of confirming the existence of the LLC
and establishing the rights, duties and relationship of the Members; and
(d) (i) agree that if the laws of any jurisdiction in which the LLC transacts business
so require, the Board of Managers also shall file, with the appropriate office in that jurisdiction, any
documents necessary for the LLC to qualify to transact business under such laws; and (ii) agree to
execute, acknowledge, and cause to be filed, in the place or places and manner prescribed by law,
any amendments to the Certificate as may be required, either by the Delaware LLC Act, by the
laws of any jurisdiction in which the LLC transacts business or by this Agreement, to reflect
changes in the information contained therein or otherwise to comply with the requirements of law
for the continuation, preservation, and operation of the LLC as a limited liability company under
the Delaware LLC Act.
2.02 Name of LLC
The name under which the LLC shall conduct its business is "Venture Company L.L.C."
The business of the LLC may be conducted under any other name permitted by the Delaware LLC
Act that is selected by the Board of Managers, in its sole and absolute discretion. The Board of
Managers promptly shall execute, file, and record any assumed or fictitious name certificates
required by the laws of the State of Delaware or any state in which the LLC conducts business.
2.03 Place of Business
The location of the principal place of business of the LLC shall be as determined by the
Board of Managers. The Board of Managers may change the principal place of business of the LLC
to such other place or places within the United States as the Board of Managers may from time to
time determine, in its sole and absolute discretion, provided that the Board of Managers shall give
written notice of the change to the Members within thirty (30) days after the effective date of the
change and, if necessary, the Board of Managers shall amend the Certificate in accordance with the
applicable requirements of the Delaware LLC Act. The Board of Managers may, in its sole and
absolute discretion, establish and maintain such other offices and additional places of business of
the LLC, either within or without the State of Delaware, as it deems appropriate.
2.04 Registered Office and Registered Agent
The street address of the initial registered office of the LLC shall be
_____________________________ [city], Delaware [zip code], and the LLC's registered agent at
such address shall be [agent for service of process].
ARTICLE III
PURPOSES AND POWERS OF LLC
3.01 Purposes
The purposes of the LLC shall be:
(a) to engage in the business of [describe venturers' intended business];
(b) to acquire, hold, own, operate, manage, finance, encumber, sell, or otherwise
dispose of and otherwise use the LLC Assets; and
(c) to enter into any lawful transaction and engage in any lawful activities in
furtherance of the foregoing purposes and as may be necessary, incidental or convenient to carry
out the business of the LLC as contemplated by this Agreement.
3.02 Powers
The LLC shall have the power to do any and all acts and things necessary, appropriate,
advisable, or convenient for the furtherance and accomplishment of the purposes of the LLC,
including, without limitation, to engage in any kind of activity and to enter into and perform
obligations of any kind necessary to or in connection with, or incidental to, the accomplishment of
the purposes of the LLC, so long as said activities and obligations may be lawfully engaged in or
performed by a limited liability company under the Delaware LLC Act.
ARTICLE IV
TERM OF LLC
The LLC commenced on the date upon which the Certificate was duly filed with the
Recording Office and shall continue for thirty (30) years, unless dissolved and liquidated before the
Termination Date in accordance with the provisions of Article XI.
ARTICLE V
CAPITAL
5.01 Initial Capital Contributions of the Members
Concurrently with the execution of this Agreement, Member A shall contribute
[$____________] in cash to the LLC and Member B shall contribute [$____________] in cash
(each such contribution an "Initial Contribution"). The Initial Capital Contribution of each Member
shall be made by immediately available wire transfer payable to the order of the LLC or its
designated agent. The Members shall not be required to make any Capital Contributions to the LLC
other than as set forth in this Section 5.01 or in Section 5.02.
5.02 Additional Capital Contributions of the Members
Upon the agreement of all of the Members, a Member may make an additional Capital
Contribution (an "Additional Capital Contributions"). Any Additional Capital Contributions to the
LLC shall be made by the Members by immediately available wire transfer payable to the order of
the LLC or its designated agent. The Percentage Interests of the Members shall be adjusted to
reflect any Additional Capital Contribution at the time it is made.
5.03 Capital Accounts
A separate capital account (a "Capital Account") shall be established and maintained for
each Member. The Capital Account of each Member shall be (a) increased by the amount of any
contributions made to the LLC by the Member, (b) increased or decreased by items of Net Income
or Net Loss allocated to the Member pursuant to Article VI, and (c) decreased by any distributions
made to the LLC by the Member.
5.04 No Interest on Capital Contributions or Capital Accounts
No Member shall be entitled to receive any interest on its Capital Contributions or its
outstanding Capital Account balance.
5.05 Advances to LLC
No Member shall advance funds or make loans to the LLC in excess of the amounts
required hereunder to be contributed by it to the capital of the LLC without the express written
consent of the other Member. Any such approved advances or loans by a Member shall not result in
any increase in the amount of such Member's Capital Account or entitle it to any increase in its
Percentage Interest. The amounts of such advances or loans shall be a debt of the LLC to such
Member and shall be payable or collectible only out of the LLC Assets in accordance with terms
and conditions agreed upon by all Members.
5.06 Liability of Members and the Board of Managers
Except as otherwise provided in the Delaware LLC Act, the debts, obligations and liabilities
of the LLC, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the LLC, and none of the Members or the Managers shall be obligated personally for
any such debt, obligation or liability of the LLC solely by reason of being a Member or a Manager.
The failure of the LLC to observe any formalities or requirements relating to the exercise of its
powers or management of its business or affairs under the Delaware LLC Act or this Agreement
shall not be grounds for imposing personal liability on the Members or the Managers for liabilities
of the LLC.
5.07 Return of Capital
Except upon the dissolution of the LLC or as may be specifically provided in this
Agreement, no Member shall have the right to demand or to receive the return of all or any part of
its Capital Account or its Capital Contributions to the LLC.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS; TAXES
6.01 Allocation of Net Income or Net Loss
Except as otherwise provided in Section 6.04, the Net Income or Net Loss, other items of
income, gains, losses, deductions and credits, and the taxable income, gains, losses, deductions and
credits of the LLC, if any, for each Fiscal Year (or portion thereof) shall be allocated to the
Members in proportion to their Percentage Interests.
6.02 Allocation of Income and Loss With Respect to LLC Interests Transferred
If any LLC Interest is transferred during any Fiscal Year, the Net Income or Net Loss (and
other items referred to in Section 6.01) attributable to such LLC Interest for such Fiscal Year shall
be allocated between the transferor and the transferee by closing the books of the LLC as of the
date of the transfer.
6.03 Distributions
Distributions to the Members may be made at times and in amounts as are determined by
the Board of Managers. Distributions shall be made to the Members in proportion to their
Percentage Interests. Distributions may be made in cash or by distributing property in kind.
6.04 Taxes
(a) Reports. As soon as practicable after the end of each Fiscal Year, the LLC shall
prepare and mail to each Member a report containing all information necessary for the Member to
include its share of taxable income or loss (or items thereof) in its income tax return.
(b) Nonrecourse Loans.
(i) For Federal income tax purposes, any loss attributable to a nonrecourse
loan made to the LLC by a Member (i.e., any loss that would be economically borne by such
Member in his capacity as lender) shall be allocated to such Member in accordance with Treas.
Reg. ¤ 1.704-1(b)(4)(iv)(g). If any allocation of loss is made pursuant to the preceding sentence,
subsequent income and gain of the LLC shall first be allocated to such Member until the amount of
income and gain so allocated equals the amount of loss previously allocated to the Member
pursuant to the preceding sentence.
(ii) For federal income tax purposes, any loss attributable to a nonrecourse
loan made to the LLC other than by a Member shall be allocated pursuant to Treas. Reg. ¤1.7041(b)(4)(iv) according to the Member's interests in the Percentage Interests in the LLC.
(c) Contributions of Property. In accordance with Section 704(c) of the Code and the
Treasury Regulations thereunder, depreciation, amortization, gain and loss, as determined for tax
purposes, with respect to any contributed property the book value of which differs from its adjusted
basis for federal income tax purposes, shall, for tax purposes, be allocated between the Members so
as to take account of any variation between the adjusted basis of such property to the LLC for
federal income tax purposes and its book value.
(d) Purpose of Tax Allocations. Allocations pursuant to this Section 6.04 are solely
for purposes of federal, state and local taxes and shall not affect, or in any way be taken into
account in computing, the capital account of any Member or such Member's share of profit, loss,
other items, or distributions pursuant to any provision of this Agreement. The provisions of this
Section 6.04 relating to federal income tax treatment of an item shall apply for state and local
income tax purposes to the extent permitted under applicable law. Any elections or other decisions
relating to such allocations shall be made by the Board of Managers pursuant to Section 7.01(d) of
this Agreement.
(e) Tax Matters Partner. The "Tax Matters Partner" of the LLC shall be designated
from time to time by the Board of Managers. The Tax Matters Partner shall not extend the statute
of limitations on behalf of the LLC, submit any written material to any taxing authority, settle or
offer to settle any controversy, select the LLC's choice of litigation forum in a tax controversy, or
take any other action in its capacity as Tax Matters Partner without the consent of the Board of
Managers. The Tax Matters Partner shall keep the Board of Managers fully advised of the progress
of any audit and shall supply the Board of Managers with copies of any written communications
received from the Internal Revenue Service or other taxing authority relating to any audit within ten
(10) days of receipt thereof, and shall at least ten (10) business days prior to submitting any
materials to the Internal Revenue Service, or other taxing authority, provide such materials to the
Board of Managers. The Tax Matters Partner shall be reimbursed by the LLC for any reasonable
expenses incurred in its capacity as Tax Matters Partner.
(f) Modifications. If the Board of Managers determines that any of the provisions of
this Section 6.04 do not comply with the rules of Treas. Reg. ¤ 1.704-1(b)(3) for allocating income,
gain, loss, and deductions of the Venture in accordance with the Members' interests in the LLC, the
Board of Managers may make any modifications required to cause such provisions to comply with
such rules.
ARTICLE VII
MANAGEMENT
7.01 Management of the LLC by the Board of Managers
(a) Management by the Board of Managers. The Members hereby unanimously
agree that the responsibility for management of the business and affairs of the LLC shall be
delegated to a board of managers pursuant to Section 18-402 of the Delaware LLC Act (the "Board
of Managers"), subject to the limitations set forth in Section 7.04.
(b) Composition of Board Managers; Appointment and Removal
(i) The Board of Managers shall at all times be composed of four (4)
Managers (each, a "Manager").
(ii) Each Member shall appoint two individuals to serve as its initial
representatives on the Board of Managers. Each such individual shall serve until such time as he or
she resigns, retires, dies or is removed. Any Manager may be removed with or without cause by the
Member who appointed such Manager. Upon the resignation, retirement, death or removal of any
Manager, the Member who appointed such Manager shall designate the replacement Manager.
(c) Meetings and Actions
(i) The Board of Managers shall meet (w) at least once each Fiscal Quarter at
the principal offices of the LLC or at such other place as may be agreed upon from time to time by
the Board of Managers (unless such meeting shall be waived by all of the Managers); (x) at such
other times as may be determined by the Board of Managers; (y) upon the request of at least two
Managers or the President upon ten (10) days' notice to all Managers; or (z) in accordance with
Section 8.01, following a failure by the Board of Managers to adopt or reject a proposal for action
presented to it. Meetings may be held by telephone if at least one Manager appointed by each
Member so consents. The Board of Managers shall cause written minutes to be prepared of all
actions taken by the Board of Managers and shall cause a copy thereof to be delivered to each
Manager within fifteen (15) days thereof.
(ii) No action may be taken at a meeting of the Board of Managers unless a
quorum consisting of at least one Manager appointed by each member is present.
(iii) Each Manager shall be entitled to cast one vote with respect to any
decision made by the Board of Managers, except with respect to a determination to seek
indemnification pursuant to Section 7.05 hereof, in which event a Manager seeking indemnification
hereunder shall have no vote with respect to his indemnification. Any action to be taken by the
Board of Managers shall require at least three affirmative votes, except that any determination to
grant indemnification to a Manager pursuant to Section 7.05 hereof shall only require two (2)
affirmative votes. Approval or action by the Board of Managers shall constitute approval or action
by the LLC and shall be binding on the Members. A Manager may grant a proxy entitling the other
Manager appointed by the same Member to exercise his voting rights. Such proxy shall be in
writing and shall specify a termination date. The Managers appointed by the other Member shall be
entitled to inspect the proxy on demand.
(iv) Any action to be taken by the Board of Managers may be taken without
a meeting if consents in writing setting forth the action so taken are signed by at least three
Managers.
(d) Subcommittees. The Board of Managers may designate a subcommittee
consisting of at least one Manager appointed by each Member. Any subcommittee, to the extent
provided by the Board of Managers, shall have and may exercise all the power and authority of the
Board of Managers.
(e) Power and Authority of the Board of Managers. The Board of Managers (acting
on behalf of the LLC), by its own action, or by action of a subcommittee of the Board of Managers,
but not by delegation to officers or other employees of the Venture, shall have the right, power and
authority to take the following actions, and no such action will be taken without the approval of the
Board of Managers.
(i) making overall policy decisions with respect to the business and affairs of
the Venture;
(ii) reviewing and approving annual budgets and operating guidelines;
(iii) approving any contract, agreement and commitment with a value in
excess of $50,000 or a term longer than six (6) months (or a group of related contracts, agreements
and commitments with an aggregate value in excess of $50,000);
(iv) approving the choice of bank depositories, and approving arrangements
relating to signatories on bank accounts; (v) approving the choice of the LLC's attorneys,
independent accounts, and any other consultants, including but not limited to market consultants,
leasing agents, management agents, and advertising and public relations agents, where it is
contemplated that such consultants will provide services with a value in excess of $50,000, or for a
period longer than six (6) months;
(vi) approving all contracts that are proposed to be entered into between the
LLC and any Member or Affiliate of a Member, in accordance with the criteria set forth in Section
7.04;
(vii) approving any change of the LLC's fiscal year;
(viii) approving all distributions to the Members;
(ix) approving the conveyance, sale, transfer, assignment, pledge,
encumbrance, or disposal of, or the granting of a security interest in, any assets of the LLC;
(x) approving the entry of the LLC into any other partnership or joint
venture;
(xi) incurring indebtedness or loaning any sum or extending credit to any
Person in an amount in excess of $50,000, or for a period in excess of six (6) months;
(xii) guaranteeing any indebtedness of any other Person in any amount in
excess of $50,000 or for a period in excess of six (6) months, or guaranteeing any contractual
obligations of any other Person with a value in excess of $50,000 or for a period in excess of six (6)
months;
(xiii) entering into any real estate lease with a value in excess of $50,000 or a
term greater than six (6) months, or the acquisition by the LLC of any real estate with a value in
excess of $100,000;
(xiv) authorizing any Member to act for or to assume any obligation or
responsibility on behalf of the LLC;
(xv) employing, appointing and removing of any LLC employee who will be
involved in the day to day management of the business of the LLC, and who will receive
compensation in excess of $50,000 per year;
(xvi) changing any accounting principles used by the LLC, except to the
extent required by generally accepted accounting principles;
(xvii) approving any tax elections of the LLC;
(xviii) conducting litigation to which the LLC is a party;
(xix) approving the acquisition of any business or a business division from
any Person, whether by asset purchase, stock purchase, merger or other business combination; and
(xx) approving the transfer of any assets of the LLC, or any interest therein,
other than in the ordinary course of business, the fair market value of which may reasonably be
expected to exceed $250,000.
(f) Third Party Reliance. Third parties dealing with the LLC shall be entitled to rely
conclusively upon the power and authority of the Board of Managers and the officers of the LLC as
set forth herein.
(g) Fiduciary Relationship. No Manager shall be liable to the LLC or its Members
for monetary damages for breach of fiduciary duty as a Manager or otherwise liable, responsible or
accountable to the LLC or its Members for monetary damages or otherwise for any acts performed,
or for any failure to act; provided, however, that this provision shall not eliminate or limit the
liability of a Manager (i) for any breach of the Manager's duty of loyalty to the LLC or its
Members, (ii) for acts or omissions which involve intentional misconduct or a knowing violation of
law, or (iii) for any transaction from which the Manager received any improper personal benefit.
(h) Reimbursement. All expenses incurred with respect to the organization,
operation, and management of the LLC shall be borne by the LLC. The Managers shall be entitled
to reimbursement from the LLC for direct expenses allocable to the organization, operation, and
management of the LLC. None of the Managers, in their capacity as such. shall be entitled to any
fees for services rendered for or on behalf of the LLC.
(i) No Individual Authority. Except as otherwise expressly provided in this
Agreement, no Member, acting alone, shall have any obligation to act for, or undertake or assume
any obligation or responsibility on behalf of, the other Member or the LLC.
7.02 Officers
(a) President. The Board of Managers shall appoint a president of the LLC (the
"President"). Subject to the supervision and authority of the Board of Managers, the President (i)
shall be the chief executive officer of the LLC, (ii) shall have responsibility and authority for
management of the day-to-day operations of the LLC, and (iii) may execute agreements and
contracts on behalf of the LLC.
(b) Secretary. The Board of Managers shall appoint a secretary of the LLC (the
"Secretary"). The Secretary, at the direction of the Board of Managers, shall prepare and distribute
to each Manager an agenda in advance of each meeting and shall prepare and distribute promptly to
each Manager written minutes of all meetings of the Board of Managers. The Secretary shall also
be responsible for preparing and distributing to the Managers any notices received by the LLC or
otherwise called for by this Agreement to be given by the LLC.
(c) Other Officers. The Board of Managers may appoint other officers of the LLC
(including, but not limited to, one or more vice presidents, a treasurer and an assistant secretary)
upon terms and conditions the Board of Managers deems necessary and appropriate. Any officer
shall hold his or her respective office unless and until such officer is removed by the Board of
Managers.
7.03 Other Activities of Members or Affiliates; Restrictions on Competition
Any Member or any Affiliate thereof may have other business interests or may engage in
other business ventures of any nature or description whatsoever, whether currently existing or
hereafter created, and may compete, directly or indirectly, with the business of the LLC; provided,
however, that [limits on competition with joint venture] No Member or Affiliate thereof shall incur
any liability to the LLC as a result of its pursuit of such other permitted business interests, ventures
and competitive activity, and neither the LLC nor the other Members shall have any right to
participate in such other business ventures or to receive or share in any income or profits derived
therefrom.
7.04 Certain Transactions
The LLC is expressly permitted in the normal course of its business to enter into
transactions with any or all Members or with any Affiliate of any or all Members provided that the
price and other terms of such transactions are fair to the LLC and that the price and other terms of
such transactions are not less favorable to the LLC than those generally prevailing with respect to
comparable transactions between unrelated parties.
7.05 Indemnification of the Members, Managers, Officers and any Affiliate
(a) Right of Indemnification. In accordance with Section 18-108 of the Delaware
LLC Act, the LLC shall indemnify and hold harmless any Member, Manager, officer, and Affiliate
thereof (individually, in each case, an "Indemnitee") to the fullest extent permitted by law from and
against any and all losses, claims, demands, costs, damages, liabilities joint or several), expenses of
any nature (including attorneys' fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which the Indemnitee may be involved or threatened to
be involved, as a party or otherwise, arising out of or incidental to the business or activities of or
relating to the LLC, regardless of whether the Indemnitee continues to be a Member, a Manager, an
officer or any Affiliate thereof at the time any such liability or expense is paid or incurred;
provided, however, that this provision shall not eliminate or limit the liability of an Indemnitee (i)
for any breach of the Indemnitee's duty of loyalty to the LLC or its Members, (ii) for acts or
omissions which involve intentional misconduct or a knowing violation of law, or (iii) for any
transaction from which the Indemnitee received any improper personal benefit.
(b) Advances of Expenses. Expenses incurred by an Indemnitee in defending any
claim, demand, action, suit, or proceeding subject to this Section 7.05 shall, from time to time,
upon request by the Indemnitee, be advanced by the LLC prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the LLC of an undertaking by or on
behalf of the Indemnitee to repay such amount if it shall be determined in a judicial proceeding or a
binding arbitration that such Indemnitee is not entitled to be indemnified as authorized in this
Section 7.05.
(c) Other Rights. The indemnification provided by this Section 7.05 shall be in
addition to any other rights to which an Indemnitee may be entitled under any agreement, vote of
the Board of Managers as a matter of law or equity, or otherwise, both as to an action in the
Indemnitee's capacity as a Member, a Manager, an officer or any Affiliate thereof, and as to an
action in another capacity, and shall continue as to an Indemnitee who has ceased to serve in such
capacity and shall inure to the benefit of the heirs, successors, assigns, and administrators of the
Indemnitee.
(d) Insurance. The LLC may purchase and maintain insurance on behalf of the
Board of Managers and such other Persons as the Board of Managers shall determine against any
liability that may be asserted against or expense that may be incurred by such Persons in connection
with the offering of interests in the LLC or the business or activities of the LLC, regardless of
whether the LLC would have the power to indemnify such Persons against such liability under the
provisions of this Agreement.
(e) Effect of Interest in Transaction. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.05 or otherwise by reason of the fact that
the Indemnitee had an interest in the transaction with respect to which the indemnification applies
if the transaction was otherwise permitted or not expressly prohibited by the terms of this
Agreement.
(f) No Third Party Rights. The provisions of this Section 7.05 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to
create any rights for the benefit of any other Persons.
ARTICLE VIII
DEADLOCK
8.01 Deadlock
(a) Definition of Deadlock. "Deadlock" shall occur if the Board of Managers casts a
tie vote on a matter submitted to it at a meeting or in the form of a proposed written consent, and
during the sixty (60) day period following this tie vote, the Board of Managers is unable to break
the tie. (If the matter is presented in the form of a proposed written consent, the sixty (60) day
period shall commence on the date that the Manager who was last to receive the proposal received
it.) During this sixty (60) day period, the Board of Managers shall hold at least one additional
meeting at which it shall make a good faith effort to break the tie. The additional meeting shall be
held at the time and place agreed to by the Manager, or if the Managers are unable to agree, at a
time and place determined by the President, on at least five (5) days' written notice.
(b) Resolution of Deadlock. If a Deadlock occurs, the LLC shall submit the matter
that was the subject of the tie to the chief executive officers for each of the Members by providing
notice of the Deadlock to the Members. The chief executive officers shall then make a good faith
effort to resolve the dispute and break the tie. If they are unable to resolve the dispute within sixty
(60) days of receiving notice of the Deadlocks, then either Member may terminate the LLC in
accordance with the provisions of Section 11.01.
ARTICLE IX
BANK ACCOUNTS; BOOKS AND RECORDS; STATEMENTS; TAXES; FISCAL YEAR
9.01 Bank Accounts
All funds of the LLC shall be deposited in its name in such checking and savings accounts,
time deposits, certificates of deposit or other accounts at such banks as shall be designated by the
Board of Managers from time to time, and the Board of Managers shall arrange for the appropriate
conduct of such account or accounts.
9.02 Books and Records
The Board of Managers shall keep, or cause to be kept, accurate, full and complete books
and accounts showing assets, liabilities, income, operations, transactions and the financial condition
of the LLC. Such books and accounts shall be prepared on the accrual basis of accounting. Any
Member or its designee shall have access thereto at any reasonable time during regular business
hours and shall have the right to copy said records at its expense.
9.03 Financial Statements and Information
(a) Preparation in Accordance with Generally Accepted Accounting Principles. All
financial statements prepared pursuant to this Section 8.04 shall present fairly the financial position
and operating results of the LLC and shall be prepared in accordance with generally accepted
accounting principles on the accrual basis for each Fiscal Year of the LLC during the term of this
Agreement.
(b) Quarterly Report. Within thirty (30) days after the end of each quarterly period
(the "Fiscal Quarter") of each Fiscal Year, commencing with the first Fiscal Quarter after the date
of this Agreement, the Board of Managers shall prepare and submit or cause to be prepared and
submitted to the Members an unaudited statement of profit and loss for the LLC for such Fiscal
Quarter and an unaudited balance sheet of the LLC dated as of the end of such Fiscal Quarter, in
each case prepared in accordance with generally accepted accounting principles consistently
applied.
(c) Annual Reports. Within sixty (60) days after the end of each Fiscal Year during
the term of this Agreement, the Board of Managers shall prepare and submit or cause to be
prepared and submitted to the Members (i) an audited balance sheet, together with audited
statements of profit and loss, Members' equity and changes in financial position for the LLC during
such Fiscal Year; (ii) a report of the activities of the LLC during the Fiscal Year; (iii) a report
summarizing the fees and other remuneration paid by the LLC for such Fiscal Year to the Board of
Managers and any Affiliate thereof; and (iv) an audited statement showing any amounts distributed
to the Members in respect of such Fiscal Year.
(d) Other Reports. The Board of Managers shall provide to the Members such other
reports and information concerning the business and affairs of the LLC as may be required by the
Delaware LLC Act or by any other law or regulation of any regulatory body applicable to the LLC.
9.04 Accounting Decisions
All decisions as to accounting matters, except as specifically provided to the contrary
herein, shall be made by the Board of Managers.
9.05 Where Maintained
The books, accounts and records of the LLC at all times shall be maintained at the LLC's
principal office.
9.06 Fiscal Year
The fiscal year of the LLC for financial, accounting, Federal, state and local income tax
purposes shall initially be the fiscal year commencing on January 1 and ending on December 31
(the "Fiscal Year"). The Board of Managers shall have authority to change the beginning and
ending dates of the Fiscal Year if the Board of Managers, in its sole and absolute discretion, deems
such change to be necessary or appropriate to the business of the LLC, and shall give written notice
of any such change to the Members within thirty (30) days after the occurrence thereof.
ARTICLE X
TRANSFER AND CONVERSION OF LLC INTERESTS AND THE ADDITION,
SUBSTITUTION AND WITHDRAWAL OF MEMBERS
10.01 Transfer of LLC Interests
(a) Definition of Transfer. The term "transfer," when used in this Article X with
respect to an LLC Interest, shall include any sale, assignment, gift, pledge, hypothecation,
mortgage, exchange or other disposition, except that such term shall not include any pledge,
mortgage or hypothecation of or granting of a security interest in an LLC Interest in connection
with any financing obtained on behalf of the LLC.
(b) Void Transfers. No LLC Interest shall be transferred, in whole or in part, except
in accordance with the terms and conditions set forth in this Article X. Any transfer or purported
transfer of any LLC Interest not made in accordance with this Article X shall be void ab initio.
10.02 Restrictions on Transfers
(a) Consent Required. No Member may transfer all or any portion of its LLC
Interest or its Capital Account without the express written consent of the nontransferring Member.
(b) Substitution. Any transferee of an LLC Interest shall become a substituted
Member upon (i) the express written consent of the nontransferring Member in the exercise of their
sole and absolute discretion; (ii) the transferee agreeing to be bound by all the terms and conditions
of the Certificate and this Agreement as then in effect; and (iii) receipt of any necessary regulatory
approvals. Unless and until a transferee is admitted as a substituted Member, the transferee shall
have no right to exercise any of the powers, rights, and privileges of a Member hereunder. A
Member who has transferred its LLC Interest shall cease to be a Member upon transfer of the
Member's entire LLC Interest and thereafter shall have no further powers, rights, and privileges as a
Member hereunder except as provided in Section 7.05.
(c) Dealing with Members. The LLC, each Member, the Board of Managers, the
President and any other Person or Persons having business with the LLC need deal only with
Members who are admitted as Members or as substituted Members of the LLC, and they shall not
be required to deal with any other person by reason of transfer by a Member or by reason of the
death of a Member, except as otherwise provided in this Agreement. In the absence of the
substitution (as provided herein) of a Member for a transferring or a deceased Member, any
payment to a Member or to a Member's executors or administrators shall acquit the LLC and the
Board of Managers of all liability to any other persons who may be interested in such payment by
reason of an assignment by, or the death of, such Member.
(d) Transferred Economic Interest. Notwithstanding the foregoing, any Member may
transfer its economic interest in its LLC Interest to a transferee which, directly or indirectly,
controls, is controlled by, or under common control with, such Member; provided, however that
such transfer shall give the transferee only the right to receive distributions, income, gain and loss
allocable to such Member's LLC Interest to which such Member would otherwise be entitled.
10.03 No Right to Withdraw
No Member shall have any right to resign or otherwise withdraw from the LLC without the
express written consent of all the other Members.
ARTICLE XI
DISSOLUTION AND LIQUIDATION
11.01 Events Causing Dissolution
The LLC shall be dissolved and its affairs wound up upon the occurrence of any of the
following events:
(a) the consent in writing to dissolve and wind up the affairs of the LLC by all of the
Members;
(b) the sale or other disposition by the LLC of all or substantially all of the LLC
Assets and the collection of all amounts derived from any such sale or other disposition, including
all amounts payable to the LLC under any promissory notes or other evidences of indebtedness
taken by the LLC and the satisfaction of contingent liabilities of the LLC in connection with such
sale or other disposition (unless the Members shall elect to distribute such indebtedness to the
Members in liquidation);
(c) the "Bankruptcy" (as hereinafter defined), dissolution or liquidation of a
Member;
(d) the Termination Date; or
(e) the occurrence of any event that, under the Delaware LLC Act, would cause the
dissolution of the LLC or that would make it unlawful for the business of the LCC to be continued.
(f) Upon thirty (30) days' written notice by either Member, if a Deadlock occurs and
the chief executive officers of the Members are unable to resolve the Deadlock within sixty (60)
days of receiving notice of the Deadlock.
For the purposes of this Agreement, the term "Bankruptcy" shall mean, and a Member shall
be deemed "Bankrupt" upon, (i) the entry of a decree or order for relief of the Member by a court of
competent jurisdiction in any involuntary case involving the Member under any bankruptcy,
insolvency or other similar law now or hereafter in effect; (ii) the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar agent for the Member or for
any substantial part of the Member's assets or property; (iii) the ordering of the winding up or
liquidation of the Member's affairs; (iv) the filing with respect to the Member of a petition in any
such involuntary bankruptcy case, which petition remains undismissed for a period of ninety (90)
days or which is dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy Code
(or any corresponding provision of any future United States bankruptcy law); (v) the
commencement by the Member of a voluntary case under any bankruptcy, insolvency or other
similar law now or hereafter in effect; (vi) the consent by the Member to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar agent for the Member
or for any substantial part of the Member's assets or property; (vii) the making by the Member of
any general assignment for the benefit of creditors; or (viii) the failure by the Member generally to
pay its debts as such debts become due.
(g) Default. If a Member fails to perform any of its material obligations under this
agreement (an "Event of Default") then the other Member a "Nondefaulting Member"), shall have
the right to give the Defaulting Member notice (a "Notice of Default"). The Notice of Default shall
set forth the nature of the obligations which the Defaulting Member has failed to perform. If the
Defaulting Member fails to cure the Event of Default within thirty (30) days, and the Nondefaulting
Member has given Notice of Default in compliance with this section, the Nondefaulting Member
may (i) terminate the LLC (ii) cause the determination of Fair Market Value and purchase the
Defaulting Member's interest in the LLC at a price equal to eighty percent (80%) of the Fair Market
Value of such interest. The Members agree that damages resulting from an Event of Default may be
impossible to measure; therefore the Members further agree that the reduction in the purchase price
for the Defaulting Member's interest in the LLC as provided in the foregoing clause (ii) constitutes
the Member's best estimate of any such damages and is not a penalty. The rights of the
Nondefaulting Members to terminate or purchase the Defaulting Member's interest shall be
exercised, if at all, within sixty (60) days after (x) the determination of Fair Market Value in the
case of a purchase or (y) the expiration of the thirty (30) day cure period in the case of termination.
The fees of any and all Appraisers used to determine Fair Market Value under this Section 11.01(f)
shall be borne by the Defaulting Member. The rights granted in this Section 11.01(f) above shall
not be deemed the exclusive remedy of a Nondefaulting Member, but all other rights and remedies,
legal and equitable, shall be available to it.
11.02 Cancellation of Certificate
Upon the dissolution of the LLC, the Certificate shall be canceled in accordance with the
provisions of Section 18-203 of the Delaware LLC Act, and the Board of Managers (or any other
person or entity responsible for winding up the affairs of the LLC) shall promptly notify the
Members of such dissolution.
11.03 Distributions Upon Dissolution
(a) Upon the dissolution of the LLC, the Board of Managers (or any other person or
entity responsible for winding up the affairs of the LLC) shall proceed without any unnecessary
delay to sell or otherwise liquidate the LLC Assets and pay or make due provision for the payment
of all debts, liabilities and obligations of the LLC.
(b) The Board of Managers (or any other person or entity responsible for winding up
the affairs of the LLC) shall distribute the net liquidation proceeds and any other liquid assets of the
LLC after the payment of all debts, liabilities and obligations of the LLC (including, without
limitation, all amounts owing to a Member under this Agreement or under any agreement between
the LLC and a Member entered into by the Member other than in its capacity as a Member in the
LLC), the payment of expenses of liquidation of the LLC, and the establishment of a reasonable
reserve in an amount estimated by the Board of Managers to be sufficient to pay any amounts
reasonably anticipated to be required to be paid by the LLC, which shall be distributed to the
Members first, pro rata, in proportion to the positive balances, if any, in their respective Capital
Accounts until such Capital Accounts are reduced to zero sums, and, second, the remaining LLC
Assets, if any, shall be distributed to the Members, pro rata, in accordance with their respective
Percentage Interests.
11.04 Reasonable Time for Winding Up
A reasonable time shall be allowed for the orderly winding up of the business and affairs of
the LLC and the liquidation of its assets pursuant to Section 11.03 in order to minimize any losses
otherwise attendant upon such a winding up.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01 Compliance with Delaware LLC Act
Each Member agrees not to take any action or fail to take any action which, considered
alone or in the aggregate with other actions or events, would result in the termination of the LLC
under the Delaware LLC Act.
12.02 Additional Actions and Documents
Each of the Members hereby agrees to take or cause to be taken such further actions, to
execute, acknowledge, deliver and file or cause to be executed, acknowledged, delivered and filed
such further documents and instruments, and to use best efforts to obtain such consents, as may be
necessary or as may be reasonably requested to fully effectuate the purposes, terms and conditions
of this Agreement, whether before, at or after the closing of the transactions contemplated by this
Agreement.
12.03 Notices
All notices, demands, requests or other communications which may be or are required to be
given, served or sent by a Member pursuant to this Agreement shall be in writing and shall be hand
delivered (including delivery by courier), mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission,
addressed as follows:
(i)
If to Member A: [Address]
If to Member B: [Address]
Each Member may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent. Each notice,
demand, request or communication which shall be delivered, mailed or transmitted in the manner
described above shall be deemed sufficiently given, served, sent or received for all purposes at such
time as it is delivered to the addressee (with an affidavit of personal delivery, the return receipt, the
delivery receipt or (with respect to a telex) the answer back being deemed conclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon presentation.
12.04 Severability
The invalidity of any one or more provisions hereof or of any other agreement or instrument
given pursuant to or in connection with this Agreement shall not affect the remaining portions of
this Agreement or any such other agreement or instrument or any part thereof, all of which are
included subject to the condition that they are held valid in law; and in the event that one or more of
the provisions contained herein or therein should be invalid, or should operate to render this
Agreement or any such other agreement or instrument invalid, this Agreement and such other
agreements and instruments shall be construed as if such invalid provisions had not been inserted.
12.05 Survival
It is the express intention and agreement of the Members that all covenants, agreements,
statements, representations, warranties and indemnities made in this Agreement shall survive the
execution and delivery of this Agreement.
12.06 Waivers
Neither the waiver by a Member of a breach of or a default under any of the provisions of
this Agreement, nor the failure of a Member, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right, remedy or privilege hereunder, shall
thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a
waiver of any such provisions, rights, remedies or privileges hereunder.
12.07 Exercise of Rights
No failure or delay on the part of a Member or the LLC in exercising any right, power or
privilege hereunder and no course of dealing between the Members or between a Member and the
LLC shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein expressly provided are cumulative and not
exclusive of any other rights or remedies which a Member or the LLC would otherwise have at law
or in equity or otherwise.
12.08 Binding Effect
Subject to any provisions hereof restricting assignment, this Agreement shall be binding
upon and shall inure to the benefit of the Members and their respective heirs, devises, executors,
administrators, legal representatives, successors and assigns.
12.09 Limitation on Benefits of this Agreement
Subject to Section 7.05, it is the explicit intention of the Members that no person or entity
other than the Members and the LLC is or shall be entitled to bring any action to enforce any
provision of this Agreement against any Member or the LLC, and that the covenants, undertakings
and agreements set forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the Members (or their respective successors and assigns as permitted
hereunder) and the LLC.
12.10 Amendment Procedure
Except for adjustments to the Member's Percentage Interests as set forth in Section 5.02 this
Agreement may only be modified or amended by the unanimous written consent of the Members.
12.11 Entire Agreement
This Agreement (including the Schedules hereto) contains the entire agreement between the
Members with respect to the transactions contemplated herein, and supersedes all prior oral or
written agreements, commitments or understandings with respect to the matters provided for herein
and therein.
12.12 Pronouns
All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identity of the person or entity may require.
12.13 Headings
Article, Section and subsection headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose,
and shall not in any way define or affect the meaning, construction or scope of any of the
provisions hereof.
12.14 Governing Law
This Agreement, the rights and obligations of the parties hereto, and any claims or disputes
relating thereto, shall be governed by and construed in accordance with the laws of the State of
Delaware (but not including the choice of law rules thereof).
12.15 Execution in Counterparts
To facilitate execution, this Agreement may be executed in as many counterparts as may be
required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons
required to bind any party, appear on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts containing the respective
signatures of, or on behalf of, all of the parties hereto.
12.16 Announcements
Except as required by law or applicable stock exchange regulation, no party hereto shall
make any announcement, press release or other public statement relating in any manner to this
Agreement, the terms hereof or the relationship of the parties hereto without first obtaining the
consent of the other parties to the disclosure proposed to be made. The other parties hereto shall not
unreasonably withhold their consent to any request made by a party pursuant to this Section 12.16.
The Members shall use their best efforts to consult and coordinate with each other before making
any announcement, press release or other public statement as required by law or applicable stock
exchange regulation.
IN WITNESS WHEREOF, the undersigned have duly executed this Limited Liability Company
Agreement or have caused this Limited Liability Company Agreement to be duly executed on their
behalf as of the day and year first set forth above.
(Member A)
By:
Name:
Title:
(Member B)
By:
Name:
Title:
ADDENDUM I
DEFINITIONS
Additional Capital Contribution: As defined in Section 5.02.
Affiliate: Any Person directly or indirectly controlling, controlled by, or under common
control with the Person in question; if the Person in question is a corporation, any executive officer
or director of the Person in question or of any corporation directly or indirectly controlling the
Person in question. As used in this definition of "Affiliate", the term "control" means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by contract, or
otherwise.
Agreement: This Limited Liability Company Agreement, as it may be further amended or
supplemented from time to time.
Appraiser: An Independent appraiser or investment bank.
Bankruptcy: As defined in Section 11.01.
Board of Managers: As defined in Section 7.01.
Business Day: Monday through Friday of each week, except that a legal holiday recognized
as such by the Government of the United States shall not be regarded as a Business Day.
Capital Account: As defined in Section 5.03.
Capital Contribution: Any property (including cash) contributed to the LLC by or on behalf
of a Member.
Certificate: The Certificate of Formation, and any and all amendments thereto, filed on
behalf of the LLC with the Recording Office as required under the Delaware LLC Act.
Code: The Internal Revenue Code of 1986, as in effect and hereafter amended, and, unless
the context otherwise requires, applicable regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any corresponding
provision of future law.
Deadlock: As defined in Section 8.01.
Delaware LLC Act: The Delaware Limited Liability Company Act, as amended from time
to time.
Event of Default: As defined in Section 11.01(g).
Fair Market Value: With respect to any property or asset, the dollar value of the property or
asset determined (i) by mutual agreement of the Members, or (ii) if the Members cannot so agree
within twenty (20) days after one Member first proposes in writing to the other Member that Fair
Market Value be determined, by two independent Appraisers, one selected by each Member,
provided, that if a Member fails to appoint an Appraiser within, ten (10) days following the
expiration of such twenty (20) day period, Fair Market Value shall be determined by the Appraiser
selected by the other Member. If two Appraisers are selected, each Appraiser shall submit to the
Members their respective appraisals within thirty (30) days after their selection. If a discrepancy
between the dollar value of the appraisals exceeds 10% of the higher appraisal and the Members do
not agree on a settlement of the discrepancy within ten (10) days after receipt of the appraisals, then
a third Appraiser mutually selected by the Members (or if they cannot so select, then selected by
the first two Appraisers), shall be afforded access to the first two appraisals. The third Appraiser
shall select one of the appraisals of the first two Appraisers, which selection shall constitute a final
determination of Fair Market Value of the property or asset and shall be binding upon the
Venturers. If a discrepancy between the appraisals of the first two Appraisers is less than 10% of
the higher appraisal, then the average of the two appraisals shall constitute a final determination of
Fair Market Value of the property or asset and shall be binding upon the Venturers.
Fiscal Year: As defined in Section 9.07.
Initial Capital Contribution: As defined in Section 5.01.
LLC: As defined in the preamble.
LLC Assets: All assets and property, whether tangible or intangible and whether real,
personal, or mixed, at any time owned by or held for the benefit of the LLC, including, without
limitation, the assets of any television broadcast stations owned by the LLC.
LLC Interest: As to any Member, all of the interest of that Member in the LLC, including,
without limitation, such Member's (i) right to a distributive share of the income, gain, losses and
deductions of the LLC in accordance with this Agreement, and (ii) right to a distributive share of
LLC Assets.
Manager: Any member of the Board of Managers.
Member: Member A and Member B and any other Person who shall in the future execute
and deliver this Agreement pursuant to the provisions hereof.
Net Income and Net Loss. For a period as determined for federal income tax purposes, the
taxable income or loss, respectively, computed with the following adjustments:
(a) items of gain, loss and deduction relating to LLC Assets shall be computed based
on the Carrying Values of the LLC Assets rather than upon their Adjusted Bases, and in the case of
depreciation, amortization or other cost recovery deductions, computed using the same method and
useful life used by the LLC in computing such deductions for federal income tax purposes;
(b) tax-exempt income of the LLC shall be treated, for purposes of this definition
only, as gross income; and
(c) expenditures of the LLC described in Section 705(a)(2)(B) of the Code or treated
as such expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the regulations under the Code
shall be treated, for purposes of this definition only, as deductible expenses.
Notice of Default: As defined in Section 11.01(g).
Percentage Interest: A Member's percentage share of the total LLC Interests, which shall be
equal to the percentage that its Capital Contributions bears to the sum of all Capital Contributions.
Member A's Initial Percentage Interest is ______________ percent, and Member B's Percentage
Interest is ______________ percent.
Person: Any individual, corporation, association, partnership, limited liability company,
joint venture, trust, estate, or other entity or organization.
Recording Office: The office of the Secretary of State of the State of Delaware.
Tax Matters Partner: That person required by Section 6231(a)(7) of the Code.
