SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
ARIS INDUSTRIES, INC.
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
040401101
(CUSIP Number)
Robert W. Forman
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 26, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13d-1(b)(3) or (4), check
the following box |__|.
Check the following box if a fee is being paid with the statement |X|.
<PAGE>
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
THE SIMON GROUP, LLC
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 45,045,045
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 45,045,045
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
-0-
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
45,045,045
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63.4%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
CO
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
ARNOLD H. SIMON
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
00
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 45,045,045 (1)
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 45,045,045 (1)
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
-0-
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
45,045,045 (1)
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63.4%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
IN
________________________________________________________________________________
(1) Represents shares owned by The Simon Group, LLC.
<PAGE>
STATEMENT FOR SCHEDULE 13D
Item 1. Security and Issuer.
The class of equity securities to which this Statement relates is the
common stock (the "Common Stock") of Aris Industries, Inc. (the "Issuer"), whose
principal executive office is located at 475 Fifth Avenue, New York, NY.
Item 2. Identity and Background.
(a) This statement is filed by The Simon Group, LLC, a New York
limited liability company ("SGL") and Arnold H. Simon ("Simon"; and with SGL the
"Reporting Persons").
(b) The principal business address of each Reporting Person is 1385
Broadway, New York, NY 10018.
(c) SGL was formed to own the Shares. Simon is currently Chairman and
Chief Executive Officer of the Issuer and the sole managing member of SGL.
(d) Neither SGL nor any of its controlling persons has, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) Neither SGL nor any of its controlling persons has, during the
last five years, been party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The aggregate purchase price of the shares of the Issuer's Common Stock
owned by SGL was $20,000,000, which were acquired with SGL's capital, all of
which was contributed by Simon.
<PAGE>
Item 4. Purpose of Transaction.
SGL acquired 45,045,045 common stock and common stock equivalents directly
from the Company with a view toward making a profit. By virtue of the Agreements
by which the Reporting Persons acquired the Shares they are in a position to
designate, and have designated, a majority of the Issuer's board of directors.
Item 5. Interest in Securities of the Issuer.
(a) The aggregate percentage of shares of Common Stock reported owned
by the Reporting Persons is based upon approximately 71,000,000 shares of common
stock and common stock equivalents outstanding as of March 1, 1999.
As of the close of business on March 1, 1999:
SGL directly owns 24,107,145 shares of Common Stock and 2,093,790 shares of
Series A Preferred Stock, which are convertible into 20,937,900 shares of of
Common Stock. In the aggregate, SGL owns 45,045,045 common stock and common
stock equivalents, representing approximately 63.4% of the shares outstanding.
(b) By virtue of his position with SGL, Mr. Simon has the sole power
to vote and dispose of the shares reported in this Schedule 13D.
(c) Except for the acquisition by the Reporting Persons of the Shares
from the Company, neither Reporting Person has engaged in any transactions in
the Issuer's Common Stock within the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
The Reporting Persons are parties to the Securities Purchase Agreement,
Shareholders Agreement and Equity Registration Rights Agreement, each dated as
of February 26, 1999. In addition, pursuant to the Operating Agreement for SGL,
Simon is entitled to 20% of the profits made by SGL upon the sale or other
disposition of the Issuer's common stock owned by it.
<PAGE>
Item 7. Material to be Filed as Exhibits.
i. Securities Purchase Agreement, dated as of February 26,
1999, between Aris Industries, Inc., Apollo Aris Partners,
L.P., AIF-II, L.P., The Simon Group, LLC and Arnold Simon.
(1)
ii. Shareholders Agreement, dated as of February 26, 1999,
between Aris Industries, Inc., Apollo Aris Partners, L.P.,
AIF-II, L.P., The Simon Group, LLC and Charles S. Ramat. (1)
iii. Equity Registration Rights Agreement, dated as of
February 26, 1999, between Aris Industries, Inc., Apollo
Aris Partners, L.P., AIF-II, L.P., The Simon Group, LLC and
Charles S. Ramat. (1)
iv. Operating Agreement of The Simon Group, LLC dated
February 24, 1999.
- ----------
(1) Incorporated by reference from the Issuer's Form 8-K filed with the
Commission on or about March 2, 1999.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: March 8, 1999 THE SIMON GROUP, LLC
By: /s/ Arnold H. Simon
---------------------------
Arnold H. Simon,
Managing Member
/s/ Arnold H. Simon
---------------------------
ARNOLD H. SIMON
EXHIBIT 4
<PAGE>
This Limited Liability Company Operating Agreement of THE SIMON GROUP, LLC,
a New York limited liability company organized pursuant to the New York Limited
Liability Company Law (the "Company"), is made as of February 24, 1999, by and
among the Company and the Persons executing this Agreement and listed on Exhibit
A. Terms used herein and not otherwise defined have the meanings ascribed to
them in Section 1.1.
WHEREAS, the Articles of Organization of the Company were filed with the
Secretary of State of the State of New York on December 24, 1998;
WHEREAS, each Member has contributed to the Company the amount set forth
opposite such Members name on Exhibit A hereto;
NOW THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions. Unless the context otherwise requires, the terms
defined in this Section 1.1 shall, for the purposes of this Agreement, have the
meanings herein specified.
"Act" means the New York Limited Liability Company Law, as amended from
time to time.
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of a
Fiscal Year, after giving effect to the following adjustments:
1. Such Capital Account shall be increased by any amounts which the
Member is obligated to restore to the Company pursuant to any provision of
this Agreement or is deemed to be obligated to restore to the Company
pursuant to the penultimate sentence of Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5).
2. Such Capital Account shall be decreased by the items described in
Treasury Regulations Sections 1.704(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit and the
application of such term in the manner provided in this Agreement is intended to
comply with the provisions of Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common
<PAGE>
control with, the specified Person. As used in this definition, 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 ownership of voting securities, by contract or otherwise.
"Agreement" means this Limited Liability Company Agreement of the Company,
as amended, modified, supplemented or restated from time to time in accordance
with this Agreement and the Act.
"Articles of Organization" means the Articles of Organization of the
Company and any and all amendments thereof filed on behalf of the Company with
the Secretary of State of the State of New York pursuant to the Act.
"Capital Account" means, with respect to any Member, the account maintained
for such Member in accordance with the provisions of Section 4.4.
"Capital Contribution" means, with respect to any Member, the aggregate
amount of money, services and the initial Gross Asset Value of any property
other than money or services contributed to the Company pursuant to Section 4.1
with respect to such Member's Interest.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding Federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
section but also to all corresponding provisions of any Federal tax statute
enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Company" has the meaning ascribed to it in the forepart of this Agreement.
"Company Minimum Gain" has the meaning set forth in Treasury Regulation
Section 1.704-2(d).
"Covered Person" means any Member, any Affiliate of a Member, or any
officers, directors, shareholders, partners, employees, representatives or
agents of a Member or their respective Affiliates, or any employee or agent of
the Company or its Affiliates.
"Fiscal Year" means (i) the period commencing upon the formation of the
Company and ending on December 31, 1999 (ii) any subsequent 12-month period
commencing on January 1 and ending December 31, or (iii) any portion of the
period described in clause (ii) of this sentence for which the Company is
required to allocate Profits, Losses and other items of Company income, gain,
loss or deduction pursuant to Article VIII.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable period.
"Gross Asset Value" means, with respect to any asset, such asset's adjusted
basis for Federal income tax purposes, except as follows:
(1) the initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset, as
agreed to by the
<PAGE>
contributing Member and the Managing Member, or in the case of any asset
contributed by the Managing Member, as determined by the Managing Member;
(2) the Gross Asset Value of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the
Managing Member, as of the following times: (A) the distribution by the
Company to a Member of more than a de minimis amount of Company assets as
consideration for such Member's Interest; (B) the sale of any of the
Company's assets; and (C) the liquidation of the Company within the meaning
of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); provided, however,
that adjustments pursuant to clause (A) above shall be made only if the
Managing Member reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the Members in
the Company; and
(3) the Gross Asset Value of any Company asset distributed to any
Member shall be the gross fair market value of such asset on the date of
distribution, as determined by the Managing Member.
"Interest" means a Member's share of the Profits and Losses of the Company
and a Member's rights to receive distributions of the Company's assets in
accordance with the provisions of the Act and this Agreement.
"Liquidation Distribution" for any Member means the distribution which such
Member is entitled to receive upon any voluntary or involuntary dissolution,
winding up or termination of the Company.
"Losses" is defined below under "Profits" and "Losses."
"Managing Member" has the meaning set forth in Section 6.1.
"Member" means the persons listed on Exhibit A and any other Person who has
been admitted to the Company as a member of the Company pursuant to the terms of
this Agreement. A Member shall be either a Class A Member or a Class B Member as
designated on said Exhibit A.
"Member Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i).
"Net Cash Flow" means, for each Fiscal Period of the Company, the gross
cash receipts of the Company from all sources, but excluding any amounts, such
as gross receipts taxes, that are held by the Company as a collection agent or
in trust for others or that are otherwise not unconditionally available to the
Company, less all amounts paid by or for the account of the Company during the
same Fiscal Period (including payments of principal and interest on any Company
indebtedness and expenses reimbursed to the Members under Section 5.2), and less
any amounts determined by the Managing Member to be necessary to provide a
reasonable reserve for working- capital needs or any other contingencies of the
Company. Net Cash Flow shall be determined in accordance with GAAP. Net Cash
Flow shall not be reduced by depreciation, amortization, cost recovery
deductions, depletion, similar allowances or other non-cash items, but shall be
increased by any reduction of reserves previously established.
<PAGE>
"Percentage Interest" means the percentage that each Member's Interest
bears to the Interests of all Members as a group.
"Person" means any individual, corporation, association, partnership
(general, limited, or limited liability), joint venture, trust, estate, limited
liability company, or other legal entity or organization.
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to the
Company's taxable income or loss for such Fiscal Year, determined in accordance
with Section 703(a) of the Code (but including in taxable income or loss, for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code), with the following
adjustments:
(i) any income of the Company exempt from Federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in Section 705(a)(2)(B)
of the Code (or treated as expenditures described in Section 705(a)(2)(B)
of the Code pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i))
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be subtracted from such taxable income or
loss;
(iii) if the Gross Asset Value of any Company asset is adjusted in
accordance with paragraph (2) or (3) of the definition of Gross Asset Value
above, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Profits
or Losses; and
(iv) gain or loss resulting from any disposition of any asset of the
Company with respect to which gain or loss is recognized for Federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
asset disposed of, notwithstanding that the adjusted tax basis of such
asset differs from its Gross Asset Value.
"Substitute Member" shall mean a transferee who has been admitted to all of
the rights of membership pursuant to section 5.4 of the Agreement.
"Tax Matters Member" shall be the Managing Member.
"Transfer" shall mean any sale, assignment, transfer, gift, exchange,
bequest or other disposition of an Interest, in any manner, voluntary or
involuntary, by operation of law or otherwise.
"Treasury Regulations" means the income tax regulations, including the
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
(b) Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, words of any gender include each other gender;
words using the
<PAGE>
singular or plural number also include the plural or singular number,
respectively; the terms "hereof," "herein," "hereby" and derivative or similar
words refer to this entire Agreement; the terms "Article" and "Section" refer to
the specified Article or Section of this Agreement; and the terms "include,"
"includes," "including" and derivative or similar words shall be deemed to
include the phrase "without limitation." Whenever this Agreement refers to a
number of days, such number shall refer to calendar days. All accounting terms
used herein and not expressly defined otherwise shall have the meanings given
them under GAAP.
Section 1.2 Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
ARTICLE I INFORMATION AND TERM
Section 2.1 Formation. (a) The Company was organized on December 24, 1998
under and pursuant to the provisions of the Act. The Members agree that the
rights, duties and liabilities of the Members shall be as provided in the Act,
except as otherwise provided herein.
(b) Upon the execution of this Agreement, the Persons listed on Exhibit A
shall be Members of the Company.
(c) The name and mailing address of each Member, the amount contributed to
the capital of the Company, their classification as a Class A Member or a Class
B Member and their Percentage Interest in the Profits and Losses of the Company
are set forth on Exhibit A. The Managing Member shall be required to update
Exhibit A from time to time as necessary to accurately reflect the information
therein. Any amendment or revision to Exhibit A made in accordance with this
Agreement shall not be deemed an amendment to this Agreement. Any reference in
this Agreement to Exhibit A shall be deemed to be a reference to Exhibit A as
amended and in effect from time to time.
(d) The Managing Member, as an authorized person within the meaning of the
Act, shall execute, deliver and file any and all amendments the Articles of
Organization and restatements thereof.
Section 2.2 Name. The name of the Company is THE SIMON GROUP LLC. The
business of the Company may be conducted upon compliance with all applicable
laws under any other name designated by the Managing Member.
Section 2.3 Term. The term of the Company shall commence on the date of the
filing of the Articles of Organization with the Secretary of State of the State
of New York and shall continue until December 31, 2009, unless dissolved before
such date in accordance with the provisions of this Agreement.
ARTICLE III PURPOSE AND POWERS OF THE COMPANY
<PAGE>
Section 3.1 Purpose. The Company is formed for the object and purpose of,
and the nature of the business to be conducted and promoted by the Company is,
acquiring, holding and disposing of an equity interest in Aris Industries, Inc.,
a New York corporation, and any successor thereto by reincorporation, merger or
other form of business combination. The Company exists only for the purpose
specified in this Article III, and may not conduct any other business without
the unanimous consent of the Members.
Section 3.2 Powers of the Company. (a) Subject to Section 3.3, the Company
shall have the power and authority to take any and all actions necessary,
appropriate, proper, advisable, convenient or incidental to or for the
furtherance of the purpose set forth in Section 3.1.
(b) The Company may merge with, or consolidate into, another company or
other business entity upon the approval of the Managing Member in his sole
discretion.
Section 3.3 Limitations on Company Powers. The Company shall not do
business in any jurisdiction that would jeopardize the limitation on liability
afforded to the Members under the Act or this Agreement.
ARTICLE IV CAPITAL CONTRIBUTIONS, SECURITIES AND CAPITAL ACCOUNTS
Section 4.1 Capital Contributions. (a) Each Member has contributed or is
deemed to have contributed the amount set forth on Exhibit A to the capital of
the Company. The agreed value of the Capital Contributions made or deemed to
have been made by each Member shall be as set forth on Exhibit A.
(b) No Member shall be required to make any additional capital contribution
to the Company. However, a Member may make additional capital contributions to
the Company with the written consent of the Managing Member.
Section 4.2 Member's Interest. Each Member has the Percentage Interest set
forth in Exhibit A. A Member's Interest shall for all purposes be personal
property. A Member has no interest in specific Company property.
Section 4.3 Status of Capital Contributions. (a) Except as otherwise
provided in this Agreement, the amount of a Member's Capital Contributions may
be returned to it, in whole or in part, at any time, but only with the consent
of the Managing Member. Any such returns of Capital Contributions shall be made
to all Members in proportion to their Percentage Interests; provided, however,
that no return of a Member's Capital Contributions shall be made if such
distribution would violate applicable state law. Under circumstances requiring a
return of any Capital Contribution, no Member shall have the right to demand or
receive property other
<PAGE>
than cash, except as may be specifically provided in this Agreement. A Member
shall not be entitled to withdraw any part of its Capital Account or to receive
any distribution from the Company except as specifically provided in this
Agreement.
(b) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its Capital Account or for services rendered on
behalf of the Company or otherwise in its capacity as a Member (including as a
Managing Member), except as otherwise specifically provided in this Agreement.
(c) Except as otherwise provided herein and by applicable state law, the
Members shall be liable only to make their Capital Contributions pursuant to
Section 4.1, and no Member shall be otherwise required to lend or otherwise
provide any funds to the Company. No Member shall have any personal liability
for the repayment of any Capital Contribution of any other Member.
Section 4.4 Capital Accounts. (a) An individual Capital Account shall be
established and maintained for each Member.
(b) The Capital Account of each Member shall be maintained in accordance
with the following provisions:
(i) each Member's Capital Account shall be credited with such Member's
Capital Contributions, such Member's distributive share of Profits and the
amount of any Company liabilities that are assumed by such Member or that
are secured by any Company assets distributed to such Member;
(ii) each Member's Capital Account shall be debited for the amount of
cash and the Gross Asset Value of any Company assets distributed to such
Member pursuant to any provision of this Agreement, such Member's
distributive share of Losses and the amount of any liabilities of such
Member that are assumed by the Company or that are secured by any property
contributed by such Member to the Company; and
(iii) Section 752 of the Code and all other applicable Code provisions
and Treasury Regulations shall be taken into account in determining the
amount of any liability for purposes of this clause (b).
ARTICLE V MEMBERS
Section 5.1 Powers of Members. The Members shall have the power to exercise
any and all rights or powers granted to the Members pursuant to the express
terms of this Agreement. Except as otherwise specifically provided by this
Agreement or required by the Act, no Member, other than the Managing Member,
shall have the power to act for or on behalf of, or to bind, the Company.
<PAGE>
Section 5.2 Reimbursements. The Company shall reimburse the Managing Member
for all ordinary and necessary out-of-pocket expenses incurred by such Member on
behalf of the Company. Such reimbursement shall be treated as an expense of the
Company that shall be deducted in computing the Net Cash Flow and shall not be
deemed to constitute a distributive share of Profits or a distribution or return
of capital to any Member.
Section 5.3 Partition. Each Member waives any and all rights that it may
have to maintain an action for partition of the Company's property.
Section 5.4 Transfer and Resignation. (a) Except as otherwise specifically
provided in this Agreement, and subject in any event to Section 5.4(b), no
Member shall have the right to Transfer any Interest to a non-Member without the
consent of the Managing Member, which may be withheld for any reason or no
reason, in his sole discretion. Upon the Transfer of all of a Member's Interest,
the transferor shall cease to be a Member.
(b) The Interest of a Member may not be transferred in whole or in part,
and a transferee shall not have a right to become a Substitute Member unless the
following terms and conditions shall have been satisfied:
(i) The Managing Member shall have consented in writing to such
transfer and substitution, which consent may be given or withheld in his
sole discretion;
(ii) The transferee shall have assumed the obligations, if any, of the
transferor to the Company; and
(iii) The transferor and the transferee shall have complied with such
other requirements as the Managing Member may reasonably impose, including
the conditions that the transferee:
(A) adopt and approve in writing all the terms and provisions of
the Agreement then in effect; and
(B) pay such fees as may be reasonable to pay the costs of the
Company in effecting such substitution.
(d) The Interests of the Members have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any
applicable state securities laws. A Member may not transfer all or any part of
such Member's Interest except upon compliance with the applicable federal and
state securities laws. The Members shall have no obligation to register any
Member's Interest under the Securities Act or under any applicable sate
securities laws, or to make any exemption therefrom available to any Member.
(e) The restrictions set forth in Section 5.4(a) shall not apply to the
Transfer of an Interest from a deceased Member to his personal representative or
estate, except that such transferee will be deemed to have signed this Agreement
and to be bound by its terms.
<PAGE>
(f) A Member may not resign or withdraw from the Company prior to the
dissolution and winding up of the Company. A resigning or withdrawing Member
shall not be entitled to receive any distribution and shall not otherwise be
entitled to receive the fair value of its Interest, except as otherwise
expressly provided for in this Agreement. Notwithstanding anything contained
herein to the contrary, absent the written consent of the Managing Member, which
may be withheld in his sole and absolute discretion, an assignee or transferee
of a Member's interest shall not be entitled to any of the assignor's or
transferor's rights hereunder, other than the right to allocations and
distributions.
(g) Any Transfer of an Interest or admission of a Member in accordance with
this Agreement shall be effective as of the last day of the calendar month in
which all of the conditions thereto were satisfied. No Transfer of an Interest
shall be effective unless and until the Company has received notice of the name
and address of the transferee and the date of such Transfer, and shall then be
effective only to the extent set forth in this Agreement.
(h) No new Member or Substitute Member shall be entitled to any retroactive
allocation of Profits or Losses or other allocable items incurred by the
Company. The Managing Member may, in his discretion, at the time a new Member or
Substitute Member obtains an Interest, close the Company books (as though the
Fiscal Year had ended) or make pro rata allocations of such items to a new
Member or Substitute Member for that portion of the Fiscal Year in which it
holds an Interest, in accordance with Code Section 706(d) and the Treasury
Regulations promulgated thereunder.
(i) Any Transfer or attempted Transfer of an Interest in violation of the
terms of this Agreement shall be null and void and have no effect. Each
Transferor hereby indemnifies the Company and the remaining Members against any
and all loss, liabilities, damages and expenses, including, without limitation,
tax liabilities or loss of tax benefits, arising directly or indirectly out of
any Transfer or purported Transfer in violation of this Agreement.
ARTICLE VI MANAGEMENT
Section 6.1 Management of the Company. (a) Arnold Simon shall be the
managing member of the Company (including any successor managing member
designated pursuant to Section 6.5 below, the "Managing Member") and, in such
capacity, shall manage the Company in accordance with this Agreement. The
Managing Member is an agent of the Company's business, and the actions of the
Managing Member taken in such capacity and in accordance with this Agreement
shall bind the Company.
(b) The Managing Member shall have full, exclusive and complete discretion
to manage and control the business and affairs of the Company, to make all
decisions affecting the business and affairs of the Company and to take all such
actions as he deems necessary or appropriate to accomplish the purpose of the
Company as set forth herein. The Managing
<PAGE>
Member shall be the sole Person with the power to bind the Company, except and
to the extent that such power is expressly delegated to any other Person by the
Managing Member, and such delegation shall not cause the Managing Member to
cease to be a Member or the managing member of the Company. The Company shall
not have a "manager" within the meaning of the Act.
(c) The Managing Member may appoint individuals with such title as it may
elect, including the titles of President, Vice President, Treasurer and
Secretary, to act on behalf of the Company with such power and authority as the
Managing Member may delegate in writing to any such Person.
Section 6.2 Powers of the Managing Member. The Managing Member shall have
the right, power and authority, in the management of the business and affairs of
the Company, to do or cause to be done any acts, at the expense of the Company,
he deems necessary or appropriate to effectuate the business, purposes and
objectives of the Company.
The expression of any power or authority of the Managing Member in this
Agreement shall not in any way limit or exclude any other power or authority
which is not specifically or expressly set forth in this Agreement.
Section 6.3 No Management by Other Members. Except as otherwise expressly
provided herein, no Member other than the Managing Member shall take part in the
day-to-day management, or the operation or control of the business and affairs
of the Company. Except and only to the extent expressly delegated by the
Managing Member, no Member or other Person other than the Managing Member shall
be an agent of the Company or have any right, power or authority to transact any
business in the name of the Company or to act for, or on behalf of, or to bind
the Company.
Section 6.4 Reliance by Third Parties. Any Person dealing with the Company
or the Managing Member may rely upon a certificate signed by the Managing Member
as to:
(a) the identity of the Managing Member or any other Member hereof;
(b) the existence or non-existence of any fact or facts which
constitute a condition precedent to acts by the Managing Member or in any
other matter germane to the affairs of the Company;
(c) the Persons who are authorized to execute and deliver any
instrument or document of or on behalf of the Company; or
(d) any act or failure to act by the Company or as to any other matter
whatsoever involving the Company or any Member.
Section 6.5 Designation of Successor Managing Member. The Managing Member
(and any successor Managing Member designated pursuant to this Section 6.5)
shall have the right during his lifetime to designate a successor
<PAGE>
managing member who shall become the Managing Member upon the retirement,
withdrawal, bankruptcy, death or adjudicated incompetency of the Managing Member
(or any such successor Managing Member). In the event that, at any time, there
is no Managing Member or successor Managing Member due to the failure of any
Managing Member or successor Managing Member to designate a successor Managing
Member, a new Managing Member shall be designated by Members holding a majority
of the Members' Percentage Interests.
ARTICLE VII
AMENDMENTS AND MEETINGS
Section 7.1 Amendments. Any amendment to this Agreement shall be adopted
and be effective as an amendment hereto if approved by the Managing Member;
provided, however, that no amendment shall be made, and any such purported
amendment shall be void and ineffective, to the extent the result thereof would
be to cause the Company to be treated as anything other than a partnership for
purposes of United States income taxation.
Section 7.2 Meetings of the Members. (a) Meetings of the Members may be
called at any time by the Managing Member. Notice of any meeting shall be given
to all Members not less than two days nor more than 30 days prior to the date of
such meeting. Each Member may authorize any Person to act for it by proxy on all
matters in which a Member is entitled to participate, including waiving notice
of any meeting, or voting or participating at a meeting. Every proxy must be
signed by the Member or its attorney-in-fact.
(b) Each meeting of Members shall be conducted by the Managing Member or by
such other Person that the Managing Member may designate. The Managing Member,
in his sole discretion, shall establish all other provisions relating to
meetings of Members, including notice of the time, place or purpose of any
meeting at which any matter is to be voted on by any Members, waiver of any such
notice, action by consent without a meeting, the establishment of a record date,
quorum requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE VIII
ALLOCATIONS
Section 8.1 Profits and Losses. Subject to the allocation rules of
Section 8.2,
(a) Profits for any Fiscal Year shall be allocated as follows:
(i) First, to the Class A Members in an amount equal to twenty (20%)
percent of (A) the adjusted Gross Asset Value of any of the Company's
assets which have been sold or which have been, or are intended to be,
distributed to Members in kind, over (B) the adjusted basis of such assets
for Federal income tax purposes.
(ii) Second (in the order indicated),
<PAGE>
(1) to the Class A Members, if any, who received any
allocation of Losses under clause (b)(iii) below, in proportion
to (and to the extent of) the excess, if any, of (A) the
cumulative Losses allocated to such Members pursuant to clause
(b)(iii) for all prior Fiscal Years, over (B) the cumulative
Profits allocated to such Members pursuant to this clause
(a)(ii)(1) for all prior Fiscal Years;
(2) to the Class B Members, if any, who received any
allocation of Losses under clause (b)(ii) below, in proportion to
(and to the extent of) the excess, if any, of (A) the cumulative
Losses allocated to such Class B Members pursuant to clause
(b)(ii) for all prior Fiscal Years, over (B) the cumulative
Profits allocated to such Class B Members pursuant to this clause
(a)(ii)(2) for all prior Fiscal Years; and
(3) to the Class A Members, if any, who received any
allocation of Losses under clause (b)(i) below, in proportion to
(and to the extent of) the excess, if any, of (A) the cumulative
Losses allocated to such Class A Members pursuant to clause
(b)(i) below for all prior Fiscal Years, over (B) the cumulative
Profits allocated to such Class A Members pursuant to this clause
(a)(ii)(3) for all prior Fiscal Years.
(iii) Any remaining Profits shall be allocated to the Members in
proportion to their Percentage Interest as set forth on Exhibit A.
(b) Losses for any Fiscal Period shall be allocated as follows:
(i) First, to the Class A Members in the proportion to their positive
Capital Account balances until the Capital Account balances of such
Members are reduced to zero;
(ii) Second, to the Class B Members in proportion to the aggregate
Capital Account balances of such Class B Members.
(iii) Any remaining Losses shall be allocated to the Members in
proportion to their Percentage Interest set forth on Exhibit A.
(c) The Managing Member shall make such changes to the allocations in
Sections 8.1(a) and (b) in the year of the Company's liquidation as it deems
reasonably necessary so that amounts distributed to the Class A Members in such
year in accordance with Section 13.5 shall equal their Liquidation
Distributions; provided, however, that no allocation pursuant to this Section
8.1(c) may result in the any Member being required to make any capital
contribution to the Company.
Section 8.2 Allocation Rules. (a) For purposes of determining the Profits,
Losses or any other items allocable to any period, Profits, Losses and any such
other items shall be
<PAGE>
determined on a daily, monthly or other basis, as determined by the Managing
Member using any method that is permissible under Section 706 of the Code and
the Treasury Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all items of Company
income, gain, loss, deduction and any other allocations not otherwise provided
for shall be divided among the Members in the same proportions as they share
Profits and Losses for the Fiscal Year in question.
(c) The Members are aware of the income tax consequences of the allocations
made by this Article VIII and hereby agree to be bound by the provisions of this
Article VIII in reporting their shares of Company income and loss for income tax
purposes.
(d) Except as otherwise provided in Treasury Regulation Section 1.704-2(f),
if there is a net decrease in Company Minimum Gain during any fiscal year, each
Member shall be specially allocated items of income and gain for such year (and,
if necessary, for subsequent years) in an amount equal to such Member's share of
the net decrease in Company Minimum Gain, to the extent required and in the
manner provided by Section 1.704-2(g) of the Treasury Regulations. The items to
be so allocated shall be determined in accordance with Treasury Regulation
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 8.3(d) is intended to
comply with the minimum gain chargeback provision of Treasury Regulation Section
1.704-2(f) and shall be interpreted consistently therewith. Similar Rules shall
be applied with respect to Member Nonrecourse Debt Minimum Gain.
(e) Except as provided in Section 8.3(d), in the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which
create or increase an Adjusted Capital Account Deficit, items of income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the Adjusted
Capital Account Deficit created by such adjustments, allocations, or
distributions as quickly as possible; provided that an allocation pursuant to
this Section 8.3(e) shall be made if and only to the extent that such Member
allocations provided for in this Article VIII have been tentatively made as if
this Section 8.2(e) were not in this Agreement. This Section 8.2(e) is intended
to constitute a "qualified income offset" within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d).
(f) For purposes of this Section 8.2, a Member's Capital Account balance
shall be increased by such Member's share of Company Minimum Gain and Member
Nonrecourse Debt Minimum Gain.
(g) The Company's excess non-recourse liabilities (within the meaning of
Treasury Regulation Section 1.752-3(a)(3)) shall be allocated solely to the
Members in proportion to their Percentage Interests as set forth on Exhibit A.
<PAGE>
Section 8.3 Tax Allocations; Section 704(c) of the Code. (a) In accordance
with Section 704(c) of the Code and the Treasury Regulations thereunder, income,
gain, loss and deduction with respect to any property contributed to the capital
of the Company shall, solely for income tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of
such property to the Company for Federal income tax purposes and its initial
Gross Asset Value.
(b) If the Gross Asset Value of any Company asset is adjusted pursuant to
paragraph (2) of the definition of "Gross Asset Value" contained in Section 1.1,
subsequent allocations of income, gain, loss and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for Federal income tax purposes and its Gross Asset Value in the same
manner as under Section 704(c) of the Code and the Treasury Regulations
thereunder.
(c) Any elections or other decisions relating to allocations under this
Section 8.3, including the selection of any allocation method permitted under
Treasury Regulation Section 1.704-3, shall be made by the Managing Member in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 8.3 are solely for purposes of Federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Profits, Losses, other
items or distributions pursuant to any provision of this Agreement.
ARTICLE IX DISTRIBUTIONS
Section 9.1 Distribution Rules. (a) The Company shall pay to each Member an
amount, to the extent the Company has sufficient Net Cash Flow as determined by
the Managing Member, equal to the Profits allocated to them pursuant to Article
VIII, which amounts shall be distributed to the Members in proportion to their
respective shares of Profits allocated to each of them for such period (and
prior periods) under Section 8.1(a), to the extent that such amounts have not
been distributed previously under this Section 9.1 (whether in connection with
the current or a prior Fiscal Year). Such distributions shall be made within 90
days of the end of each Fiscal Year to those persons recognized on the books of
the Company as Members on the last day of such Fiscal Year.
(b) All amounts withheld pursuant to the Code and Tax Regulations or
any provision of any state or local tax law with respect to any payment,
distribution, or allocation to the Company or the Members shall be treated as
amounts distributed to the Members pursuant to this Section 9.1 for all purposes
under this Agreement. The Managing Member is authorized to withhold from
distributions, or with respect to allocations, to the Members and to pay over to
any Federal, state, or local government any amounts required to be so withheld
pursuant to the Code and Tax Regulations or any provision of any other Federal,
state, or local law, and shall allocate any
<PAGE>
such amounts to the Members with respect to which such amount was withheld.
Section 9.2 Limitations on Distribution. Notwithstanding any provision to
the contrary contained in this Agreement, the Company shall not make a
distribution to any Member with respect to such Member's Interest if such
distribution would violate the Act or other applicable law.
Section 9.3 Distributions in Kind. Notwithstanding any provision of this
Agreement to the contrary, any distribution made to Members may, in the sole
discretion of the Managing Member, be made in whole or in part in cash or in
other assets of the Company in kind.
ARTICLE X BOOKS AND RECORDS
Section 11.1 Books, Records and Financial Statements. (a) At all times
during the continuance of the Company, the Company shall maintain, at its
principal place of business, separate books of account for the Company that
shall show a true and accurate record of all costs and expenses incurred, all
charges made, all credits made and received and all income derived in connection
with the operation of the Company business in accordance with GAAP, and, to the
extent inconsistent therewith, in accordance with this Agreement. Such books of
account, together with a copy of this Agreement and of the Articles of
Organization, shall at all times be maintained at the principal place of
business of the Company and shall be open to inspection and examination at
reasonable times by each Member and its duly authorized representative for any
purpose reasonably related to such Member's interest as a member of the Company.
(b) The Managing Member shall prepare and maintain, or cause to be prepared
and maintained, the books of account of the Company. The Managing Member shall
furnish each Member with a statement indicating such Member's share of each item
of Company income, gain, loss, deduction or credit for such Fiscal Year for
income tax purposes.
Section 11.2 Accounting Method. For both financial and tax reporting
purposes and for purposes of determining Profits and Losses, the books and
records of the Company shall be kept on such of accounting applied in a
consistent manner as the Managing Member shall determine, and shall reflect all
Company transactions and be appropriate for the Company's business.
SECTION XI TAX MATTERS
Section 11.1 Tax Matters Member. (a) The Managing Member is hereby
<PAGE>
designated as "Tax Matters Member" of the Company for purposes of Section
6231(a)(7) of the Code and shall have the power to manage and control, on behalf
of the Company, any administrative proceeding at the Company level with the
Internal Revenue Service relating to the determination of an item of Company
income, gain, loss, deduction or credit for Federal income tax purposes.
(b) The Tax Matters Member shall, within 10 days of the receipt of any
notice from the Internal Revenue Service in any administrative proceeding at the
Company level relating to the determination of any Company item of income, gain,
loss, deduction or credit, mail a copy of such notice to each Member.
Section 11.2 Right to Make Section 754 Election. The Tax Matters Member
may, in his sole discretion, make or revoke, on behalf of the Company, an
election in accordance with Section 754 of the Code, so as to adjust the basis
of Company property in the case of a distribution of property within the meaning
of Section 734 of the Code, and in the case of a transfer of a Company interest
within the meaning of Section 743 of the Code. Each Member shall, upon request
of the Tax Matters Member, supply the information necessary to give effect to
such an election.
Section 11.3 Taxation as Partnership. The Company shall be treated as a
partnership for Federal income tax purposes.
ARTICLE XII LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 12.1 Liability. (a) Except as otherwise provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Covered
Person.
(b) Except as otherwise expressly required by law, a Member, including
the Managing Member, in its capacity as Member or Managing Member, shall have no
liability in excess of the amount of its Capital Contributions, its share of any
assets and undistributed profits of the Company, its obligation to make other
payments expressly provided for in this Agreement, and the amount of any
distributions wrongfully distributed to it.
Section 12.2 Exculpation. (a) No Covered Person shall be liable to the
Company or to any other Covered Person for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by this
Agreement, except that a Covered Person shall be liable for any
<PAGE>
such loss, damage or claim incurred by reason of such Covered Person's gross
negligence or willful misconduct.
(b) A Covered Person shall be fully protected in relying in good faith
upon the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Covered
Person reasonably believes are within the such other Person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the Company, including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which distributions to
Members might properly be paid.
Section 12.3 Duties and Liabilities of Covered Persons. (a) To the extent
that, at law or in equity, a Covered Person has duties (including fiduciary
duties) and liabilities relating thereto to the Company or to any other Covered
Person, a Covered Person acting under this Agreement shall not be liable to the
Company or to any other Covered Person for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of a Covered Person otherwise
existing at law or in equity, are agreed by the parties hereto to replace such
other duties and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, whenever a conflict of
interest exists of arises between Covered Persons, whenever this Agreement or
any other agreement contemplated herein or therein provides that a Covered
Person shall act in a manner that is, or provides terms that are, fair and
reasonable to the Company or any Member, the Covered Person shall resolve such
conflict of interest, taking such action or providing such terms, considering in
each case the relative interest of each party (including its own interest) to
such conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry practices, and
any applicable generally accepted accounting practices or principles. In the
absence of bad faith by the Covered Person, the resolution, action or term so
made, taken or provided by the Covered Person shall not constitute a breach of
this Agreement or any other agreement contemplated herein or of any duty or
obligation of the Covered Person at law or in equity or otherwise.
(c) Whenever in this Agreement a Covered Person is permitted or
required to make a decision in its "discretion" or under a grant of similar
authority or latitude, the Covered Person shall be entitled to consider only
such interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the Company or any other Person, or in its "good faith" or
under another express standard, the Covered Person shall act under such express
standard and shall not be subject to any other or different standard imposed by
this Agreement or other applicable law.
Section 12.4 Indemnification. To the fullest extent permitted by applicable
law,
<PAGE>
a Covered Person shall be entitled to indemnification from the Company for any
loss, damage or claim incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the Company and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by this Agreement, except that no
Covered Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Covered Person by reason of his gross
negligence or willful misconduct with respect to such acts or omissions;
provided, however, that any indemnity under this Section 12.4 shall be provided
out of and to the extent of Company assets only, and no Covered Person shall
have any personal liability on account thereof.
Section 12.5 Expenses. To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Covered Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be advanced
by the Company prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Company of an undertaking by or on behalf
of the Covered Person to repay such amount if it shall be determined that the
Covered Person is not entitled to be indemnified as authorized in Section 12.4.
Section 12.6 Insurance. The Company may purchase and maintain insurance, to
the extent and in such amounts as the Managing Member shall, in his sole
discretion, deem reasonable, on behalf of Covered Persons and such other Persons
as the Managing Member shall determine, against any liability that may be
asserted against or expenses that may be incurred by any such Persons in
connection with the activities of the Company or such indemnities, regardless of
whether the Company would have the power to indemnify such Persons against such
liability under the provisions of this Agreement. The Managing Member and the
Company may enter into indemnity contracts with Covered Persons and adopt
written procedures pursuant to which arrangements are made for the advancement
of expenses and the funding of obligations under Section 12.5 and containing
such other procedures regarding indemnification as are appropriate.
Section 12.7 Outside Businesses. Any Member or Affiliate thereof may engage
in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company, and the Company and the Members shall have no rights by virtue
of this Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the business of the Company, shall not be deemed wrongful or improper. No Member
or Affiliate thereof shall be obligated to present any particular investment
opportunity to the Company even if such opportunity is of a character that, if
presented to the Company, could be taken by the Company, and any Member or
Affiliate thereof shall have the right to take for its own account (individually
or as a partner, shareholder, fiduciary or otherwise) or to recommend to others
any such particular investment opportunity.
ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION
<PAGE>
Section 13.1 Dissolution. (a) The Company shall be dissolved and its
affairs shall be wound up upon the occurrence of any of the following events:
(i) The expiration of the term of the Company, as provided in Section
2.3;
(ii) the retirement, withdrawal, bankruptcy, death or adjudicated
incompetency any Member or the occurrence of any other event under the Act
that terminates the continued membership of any Member in the Company
unless at the time of such event there are at least two remaining Members
and the Company is continued with the consent of Class A Members holding at
least a majority of the Class A Members' Percentage Interests within 180
days after such event;
(iii) the entry of a decree of judicial dissolution under the Act; or
(iv) the written determination of the Managing Member.
If an election to continue the business of the Company is made by the Members
under clause (ii) above, then the Company shall continue as a limited liability
company pursuant to the Act under this Agreement until the end of the term for
which it is formed or until a subsequent event causing dissolution under the
Act, in which event an election shall again occur as to whether to continue the
business of the Company.
Section 13.2 Notice of Dissolution. Upon the dissolution of the Company,
the Managing Member shall promptly notify the Members of such dissolution.
Section 13.3 Liquidation. If the Members do not elect to continue the
business under Section 13.1, the Managing Member, as liquidating trustee, shall
immediately commence to wind up the Company's affairs; provided, however, that a
reasonable time shall be allowed for the orderly liquidation of the assets of
the Company and the satisfaction of liabilities to creditors so as to enable the
Members to minimize the normal losses attendant upon a liquidation.
Section 13.4 Termination. The Company shall terminate when all of the
assets of the Company have been distributed in the manner provided for in this
Article XIII, and the Articles of Organization shall have been cancelled in the
manner required by the Act.
Section 13.5 Distribution in Liquidation. Upon the winding up of the
Company, the assets of the Company shall be distributed in the following order
of priority:
(i) to creditors of the Company, to the extent otherwise
permitted by law, in satisfaction of the liabilities of the Company
(whether by payment or the making of reasonable provision for payment
thereof);
<PAGE>
(ii) to the Members in accordance with their positive Capital
Account balances, determined after giving effect to all allocations
and distributions for the current Fiscal Year and all prior Fiscal
Years. It is the intention of the parties that such Capital Account
balances will be in such amounts as will permit liquidating
distributions to be made in accordance with Section 9.1. The Managing
Member is authorized and instructed to reallocate items of income,
gain, loss and deduction for the current Fiscal Year (and, to the
extent necessary, prior Fiscal Years) to cause such Capital Account
balances to be in such amounts.
Section 13.6 Claims of the Members. Members and former Members shall look
solely to the Company's assets for the return of their Capital Contributions,
and if the assets of the Company remaining after payment of or due provisions
for all debts, liabilities and obligations of the Company are insufficient to
return such Capital Contributions, the Members and former Members shall have no
recourse against the Company or any other Member.
ARTICLE XIV MISCELLANEOUS
Section 14.1 Notices. All notices provided for in this Agreement shall be
in writing, duly signed by the party giving such notice, and shall be delivered,
transmitted or mailed by registered or certified mail, as follows.
(a) If given to the Company, in care of the Managing Member at the
Company's mailing address set forth below:
1385 Broadway
New York, New York 10018
With a copy to:
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Attn: Robert W. Forman, Esq.
(b) If given to any Member at the address set forth on the books and
records of the Company.
All such notices shall be deemed to have been given when received.
Section 14.2 Failure to Pursue Remedies. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provisions of this Agreement shall not prevent a subsequent act, which would
have originally constituted a violation from having the effect of an original
violation.
Section 14.3 Cumulative Remedies. The rights and remedies provided by this
<PAGE>
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
Section 14.4 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and assigns.
Section 14.5 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
Section 14.6 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document. All counterparts shall be construed together and shall constitute one
instrument.
Section 14.7 Integration. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter and supersedes all
prior agreements and understandings pertaining thereto.
Section 14.8 Governing Law. This Agreement and the rights of the parties
hereunder shall be interpreted in accordance with the laws of the State of New
York, and all rights and remedies shall be governed by such laws without regard
to principles of conflicts of laws. Each of the parties hereto consents to the
exclusive jurisdiction and venue of the Courts of the State of New York located
in the County of New York and the United States District Court for the Southern
District of New York with respect to any matter relating to this Agreement and
performance of the parties' respective obligations hereunder, and each party
hereto consents to the personal jurisdiction of such courts and shall subject
itself to such personal jurisdiction. Any action, suit or proceeding relating to
such matters shall be commenced, pursued, defended and resolved only in such
courts and any appropriate appellate court having jurisdiction to hear an appeal
from any judgment entered in such courts. The parties further agree to waive
trial by jury.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above stated.
MEMBERS:
Arnold Simon
David Fidlon
<PAGE>
EXHIBIT A
Class A
-------
Name and Address
of Member Capital Contribution Percentage Interest
---------------- -------------------- -------------------
Arnold Simon
1385 Broadway
New York, New York 10018
Class B
-------
David Fidlon
1385 Broadway
New York, New York 10018
