Document:

Unassociated Document

Exhibit 10.4

 

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into as of June 4, 2013, by and among Starstream Entertainment, LLC, a Delaware limited liability company (the “Grantor”), and OmniView Capital, LLC, in its capacity as collateral agent (in such capacity, the “Collateral Agent”) for the Holders (as defined below).

WITNESSETH:

WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of June 4, 2013, by and among the Grantor and each party listed as a “Buyer” on the Schedule of Buyers attached thereto as Schedule I (the “Purchase Agreement”), the Grantor shall sell, and the Buyers shall purchase, the “Notes” (as defined in the Purchase Agreement);

WHEREAS, it is a condition precedent to the Buyers purchasing the Notes that the Grantor has granted a security interest in and to the Collateral (as defined in this Agreement) to the Collateral Agent for the benefit of the Holders to secure all of the Grantor’s obligations under the Purchase Agreement, the Notes issued pursuant thereto and the other “Subscription Documents” (as defined in the Purchase Agreement, and as the same may be amended, restated, replaced or otherwise modified from time to time in accordance with the terms thereof, the “Subscription Documents”), on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, for and in consideration of the Purchase Agreement and the Notes, the other premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties covenant and agree as follows:

1.           Definitions. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement.  In addition to the words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, unless the context otherwise clearly requires:

“Accounts” shall have the meaning given to that term in the Code and shall include without limitation all rights of the Grantor, whenever acquired, to payment for goods sold or leased or for services rendered, whether or not earned by performance.

“Chattel Paper” shall have the meaning given to that term in the Code and shall include without limitation all writings owned by the Grantor, whenever acquired, which evidence both a monetary obligation and a security interest in or a lease of specific goods.

“Code” shall mean the Uniform Commercial Code as in effect on the date of this Agreement and as amended from time to time, of the state or states having jurisdiction with respect to all or any portion of the Collateral from time to time.

“Collateral” shall mean (i) all tangible and intangible assets of the Grantor, including, without limitation, collectively the Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Instruments, Intellectual Property, Inventory and Investment Property of the Grantor, and (ii) Proceeds of each of them.

 

  

 

  

 

“Deposit Accounts” shall have the meaning given to that term in the Code and shall include a demand, time, savings, passbook or similar account maintained with a bank, savings bank, savings and loan association, credit union, trust company or other organization that is engaged in the business of banking.

“Documents” shall have the meaning given to that term in the Code and shall include without limitation all warehouse receipts (as defined by the Code) and other documents of title (as defined by the Code) owned by the Grantor, whenever acquired.

“Equipment” shall have the meaning given to that term in the Code and shall include without limitation all goods owned by the Grantor, whenever acquired and wherever located, used or brought for use primarily in the business or for the benefit of the Grantor, and not included in Inventory of the Grantor, together with all attachments, accessories and parts used or intended to be used with any of those goods or Fixtures, whether now or in the future installed therein or thereon or affixed thereto, as well as all substitutes and replacements thereof in whole or in part.

“Event of Default” shall mean (i) any of the Events of Default described in the Notes or the Subscription Documents, or (ii) any default by a Grantor in the performance of its obligations under this Agreement.

“Fixtures” shall have the meaning given to that term in the Code, and shall include without limitation leasehold improvements.

“General Intangibles” shall have the meaning given to that term in the Code and shall include, without limitation, all leases under which the Grantor, now or in the future leases and or obtains a right to occupy or use real or personal property, or both, all of the other contract rights of the Grantor, whenever acquired, and customer lists, choses in action, claims (including claims for indemnification), books, records, patents, copyrights, trademarks, blueprints, drawings, designs and plans, trade secrets, methods, processes, contracts, licenses, license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies, and computer information, software, records and data, and oil, gas, or other minerals before extraction now owned or acquired after the date of this Agreement by the Grantor.

“Holder” means each Buyer and any person to whom a Buyer assigns all or any portion of a Note in accordance with the terms thereof.

“Instruments” shall have the meaning given to that term in the Code and shall include, without limitation, all negotiable instruments (as defined in the Code), all certificated securities (as defined in the Code) and all other writings which evidence a right to the payment of money now or after the date of this Agreement owned by the Grantor.

 

  

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“Inventory” shall have the meaning given to that term in the Code and shall include without limitation all goods owned by the Grantor, whenever acquired and wherever located, held for sale or lease or furnished or to be furnished under contracts of service, and all raw materials, work in process and materials owned by the Grantor, and used or consumed in the Grantor’s business, whenever acquired and wherever located.

“Investment Property,” “Securities Intermediary” and “Commodities Intermediary” each shall have the meaning set forth in the Code.

“Permitted Liens” shall mean all (i) all liens on the assets of a Grantor which have been disclosed to the Buyers by the Grantor on a Schedule II attached hereto or pursuant to the other Note Documents, and (ii) all purchase money security interests hereinafter incurred by a Grantor in the ordinary course of business.

“Proceeds” shall have the meaning given to that term in the Code and shall include without limitation whatever is received when Collateral or Proceeds are sold, exchanged, collected or otherwise disposed of, whether cash or non-cash, and includes without limitation proceeds of insurance payable by reason of loss of or damage to Collateral.

Capitalized terms not otherwise defined in this Agreement or the Purchase Agreement shall have the meanings attributed to such terms in the Code.

	
  

	
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Security Interest.

(a)           As security for the full and timely payment of the Notes in accordance with the terms of the Purchase Agreement and the performance of the obligations of the Company under the Purchase Agreement, the Notes and the other Subscription Documents, the Grantor agrees that the Holders shall have, and the Grantor hereby grants and conveys to and creates in favor of the Holders, a security interest under the Code in and to its Collateral, whether now owned or existing or hereafter acquired or arising and regardless of where located. The security interest granted to the Holders in this Agreement shall be the second priority security interest, prior and superior to the rights of all third parties existing on or arising after the date of this Agreement, except for the Credit Facility, subject to the Permitted Liens. The lien covering the Collateral will be subordinate only to the liens granted or to be granted by Grantor to lenders in the same Collateral to secure the Permitted Liens.

(b)           All of the Equipment, Inventory and Goods owned by the Grantor is located in the states as specified on Schedule I attached hereto (except to the extent any such Equipment, Inventory or Goods is in transit or located at such Grantor’s job site in the ordinary course of business).  Except as disclosed on Schedule I, none of the Collateral is in the possession of any bailee, warehousemen, processor or consignee.  Schedule I discloses such Grantor name as of the date hereof as it appears in official filings in the state of its incorporation, the organizational identification number issued by Grantor’s state of incorporation, formation or organization (or a statement that no such number has been issued), and the chief place of business, chief executive officer and the office where Grantor keeps its books and records.  The Grantor has only one state of incorporation.  The Grantor does not do business and have not done business during the past five (5) years under any trade name or fictitious business name except as disclosed on Schedule I attached hereto.

 

  

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3.             Provisions Applicable to the Collateral. The parties agree that the following provisions shall be applicable to the Collateral:

(a)           The Grantor covenants and agrees that at all times during the term of this Agreement it shall keep accurate and complete books and records concerning the Collateral that is now owned by the Grantor.

(b)           The Holders or their representatives shall have the right, upon reasonable prior written notice to a Grantor and during the regular business hours of the Grantor, to examine and inspect the Collateral and to review the books and records of the Grantor concerning the Collateral that is now owned or acquired after the date of this Agreement by the Grantor and to copy the same and make excerpts therefrom; provided, however, that from and after the occurrence of an Event of Default, the rights of inspection and entry shall be subject to the requirements of the Code.

(c)           The Grantor shall at all times during the term of this Agreement keep the Equipment, Inventory and Fixtures that are now owned by the Grantor in the states set forth on Schedule I or, upon written notice to the Collateral Agent, at such other locations for which the Holders have filed financing statements, and in no other states without 20 days’ prior written notice to the Holders, except that the Grantor shall have the right until one or more Events of Default shall occur to sell, move or otherwise dispose of Inventory and other Collateral in the ordinary course of business.

(d)           The Grantor shall not move the location of its principal executive offices without prior written notification to the Collateral Agent.

(e)           Without the prior written consent of the Holders, the Grantor shall not sell, lease or otherwise dispose of any Equipment or Fixtures, except in the ordinary course of their business.

(f)           Promptly upon request of the Holders or the Collateral Agent from time to time, the Grantor shall furnish the Holders or the Collateral Agent with such information and documents regarding the Collateral and the Grantor’s financial condition, business, assets or liabilities, at such times and in such form and detail as the Holders may reasonably request.

(g)           During the term of this Agreement, the Grantor shall deliver to the Holders or the Collateral Agent, upon their reasonable, written request from time to time, without limitation,

(i)            all invoices and customer statements rendered to account debtors, documents, contracts, chattel paper, instruments and other writings pertaining to the Grantor’s contracts or the performance of the Grantor’s contracts,

  

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(ii)           evidence of the Grantor’s accounts and statements showing the aging, identification, reconciliation and collection thereof, and

(iii)          reports as to the Grantor’s inventory and sales, shipment, damage or loss thereof, all of the foregoing to be certified by authorized officers or other employees of the Grantor, and Grantor shall take all necessary action during the term of this Agreement to facilitate perfection of any and all security interests in favor of the Holders by the Collateral Agent.

(h)           Notwithstanding the security interest in the Collateral granted to and created in favor of the Holders under this Agreement, the Grantor shall have the right until one or more Events of Default shall occur, at its own cost and expense, to collect the Accounts and the Chattel Paper and to enforce their contract rights.

(i)            After the occurrence of an Event of Default, the Collateral Agent shall have the right, in its sole discretion, to give notice of the Holders’ security interest to account debtors obligated to the Grantor and to take over and direct collection of the Accounts and the Chattel Paper, to notify such account debtors to make payment directly to the Holders and to enforce payment of the Accounts and the Chattel Paper and to enforce the Grantor’s contract rights. It is understood and agreed by the Grantor that the Collateral Agent shall have no liability whatsoever under this subsection (i) except for their own gross negligence or willful misconduct.

(j)            At all times during the term of this Agreement, the Grantor shall promptly deliver to the Collateral Agent, upon its written request, all existing leases, and all other leases entered into by the Grantor from time to time, covering any Equipment or Inventory which is leased to third parties.

(k)           The Grantor shall not change its name, entity status, federal taxpayer identification number, or provincial organizational or registration number, or the state under which it is organized without the prior written consent of the Holders, which consent shall not be unreasonably withheld.

(l)            The Grantor shall not close any of its Deposit Accounts or open any new or additional Deposit Accounts without first giving the Holders at least fifteen (15) days’ prior written notice thereof; however, Holders grant Collateral Agent the power to waive a portion of the notice period if such waiver does not harm Holders’ security position.

(m)          The Grantor shall cooperate with the Holders and the Collateral Agent, at the Grantor’s reasonable expense, in perfecting Holders’ security interest in any of the Collateral.

(n)           The Collateral Agent may file any necessary financing statements and other documents the Collateral Agent deems reasonably necessary in order to perfect Holders’ security interest without either Grantor’s signature.  The Grantor grants to the Collateral Agent a power of attorney for the sole purpose of executing any documents on behalf of the Grantor which the Collateral Agent deems reasonably necessary to perfect Holders’ security interest.  Such power, coupled with an interest, is irrevocable.

 

  

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4.            Actions with Respect to Accounts. The Grantor irrevocably makes, constitutes and appoints the Collateral Agent its true and lawful attorney-in-fact with power to sign its name and to take any of the following actions after the occurrence and prior to the cure of an Event of Default, at any time without notice to either Grantor and at the Grantor’s reasonable expense:

(a)           Verify the validity and amount of, or any other matter relating to, the Collateral by mail, telephone, telegraph or otherwise;

(b)           Notify all account debtors that the Accounts have been assigned to the Holders and that the Holders have a security interest in the Accounts;

(c)           Direct all account debtors to make payment of all Accounts directly to the Holders;

(d)           Take control in any reasonable manner of any cash or non-cash items of payment or proceeds of Accounts;

(e)           Receive, open and respond to all mail addressed to the Grantor;

(f)           Take control in any manner of any rejected, returned, stopped in transit or repossessed goods relating to Accounts;

(g)           Enforce payment of and collect any Accounts, by legal proceedings or otherwise, and for such purpose the Holders may:

(1)           Demand payment of any Accounts or direct any account debtors to make payment of Accounts directly to the Holders;

(2)           Receive and collect all monies due or to become due to the Grantor pursuant to the Accounts;

(3)           Exercise all of the Grantor’s rights and remedies with respect to the collection of Accounts;

(4)           Settle, adjust, compromise, extend, renew, discharge or release Accounts in a commercially reasonable manner;

(5)           Sell or assign Accounts on such reasonable terms, for such reasonable amounts and at such reasonable times as the Holders reasonably deem advisable;

(6)           Prepare, file and sign the Grantor’s name or names on any Proof of Claim or similar documents in any proceeding filed under federal or state bankruptcy, insolvency, reorganization or other similar law as to any account debtor;

 

  

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(7)           Prepare, file and sign the Grantor’s name or names on any notice of lien, claim of mechanic’s lien, assignment or satisfaction of lien or mechanic’s lien or similar document in connection with the Collateral;

(8)           Endorse the name of the Grantor upon any chattel papers, documents, instruments, invoices, freight bills, bills of lading or similar documents or agreements relating to Accounts or goods pertaining to Accounts or upon any checks or other media of payment or evidence of a security interest that may come into the Holders’ possession;

(9)           Sign the name or names of the Grantor to verifications of Accounts and notices of Accounts sent by account debtors to the Grantor; or

(10)         Take all other actions that the Holders reasonably deem to be necessary or desirable to protect the Grantor’s interest in the Accounts.

(h)           Negotiate and endorse any Document in favor of the Holders or their designees, covering Inventory which constitutes Collateral, and related documents for the purpose of carrying out the provisions of this Agreement and taking any action and executing in the name(s) of Grantor any instrument which the Holders may reasonably deem necessary or advisable to accomplish the purpose hereof. Without limiting the generality of the foregoing, the Collateral Agent shall have the right and power to receive, endorse and collect checks and other orders for the payment of money made payable to the Grantor representing any payment or reimbursement made under, pursuant to or with respect to, the Collateral or any part thereof and to give full discharge to the same. The Grantor does hereby ratify and approve all acts of said attorney and agrees that said attorney shall not be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact or law, except for said attorney’s own gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable until the Notes are paid in full (at which time this power shall terminate in full) and the Grantor shall have performed all of its obligations under this Agreement. The Grantor further agrees to use its reasonable efforts to assist the Collateral Agent in the collection and enforcement of the Accounts and will not hinder, delay or impede the Holders in any manner in its collection and enforcement of the Accounts.

5.              Preservation and Protection of Security Interest. The Grantor represents and warrants that it has, and covenants and agrees that at all times during the term of this Agreement, it will have, good and marketable title to the Collateral now owned by it free and clear of all mortgages, pledges, liens, security interests, charges or other encumbrances, except for the Permitted Liens and those junior in right of payment and enforcement to that of the Holders or in favor of the Holders, and shall defend the Collateral against the claims and demands of all persons, firms and entities whomsoever. Assuming Holders have taken all required action to perfect a security interest in the Collateral as provided by the Code, the Grantor represents and warrants that as of the date of this Agreement the Holders have, and that all times in the future the Holders will have, a second priority perfected security interest in the Collateral, prior and superior to the rights of all third parties in the Collateral existing on the date of this Agreement or arising after the date of this Agreement, except for the Credit Facility, and subordinate only to the liens granted or to be granted by Grantor to lenders in the same Collateral to secure the Permitted Liens. Except as permitted by this Agreement, the Grantor covenants and agrees that it shall not, without the prior written consent of the Holders (i) borrow against the Collateral or any portion of the Collateral from any other person, firm or entity, except for borrowings which are subordinate to the rights of the Holders, (ii) grant or create or permit to attach or exist any mortgage, pledge, lien, charge or other encumbrance, or security interest on, of or in any of the Collateral or any portion of the Collateral except those in favor of the Holders or the Permitted Liens, (iii) permit any levy or attachment to be made against the Collateral or any portion of the Collateral, except those subject to the Permitted Liens, or (iv) permit any financing statements to be on file with respect to any of the Collateral, except financing statements in favor of the Holders or those with respect to the Permitted Liens. The Grantor shall faithfully preserve and protect the Holders’ security interest in the Collateral and shall, at its own reasonable cost and expense, cause, or assist the Holders to cause that security interest to be perfected and continue perfected so long as the Notes or any portion of the Notes are outstanding, unpaid or executory. For purposes of the perfection of the Holders’ security interest in the Collateral in accordance with the requirements of this Agreement, the Grantor shall from time to time at the request of the Holders file or record, or cause to be filed or recorded, such instruments, documents and notices, including assignments, financing statements and continuation statements, as the Holders may reasonably deem necessary or advisable from time to time in order to perfect and continue perfected such security interest. The Grantor shall do all such other acts and things and shall execute and deliver all such other instruments and documents, including further security agreements, pledges, endorsements, assignments and notices, as the Holders in their discretion may reasonably deem necessary or advisable from time to time in order to perfect and preserve the priority of such security interest as a second lien security interest in the Collateral prior to the rights of all third persons, firms and entities, subordinate only to the liens granted by Grantor to lenders in the same Collateral to secure the Permitted Liens and except as may be otherwise provided in this Agreement. The Grantor agrees that a carbon, photographic or other reproduction of this Agreement or a financing statement is sufficient as a financing statement and may be filed instead of the original.

 

  

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6.             Insurance. Risk of loss of, damage to or destruction of the Equipment, Inventory and Fixtures is on the Grantor. The Grantor shall insure the Equipment, Inventory and Fixtures against such risks and casualties and in such amounts and with such insurance companies as is ordinarily carried by corporations or other entities engaged in the same or similar businesses and similarly situated or as otherwise reasonably required by the Holders in their sole discretion. In the event of loss of, damage to or destruction of the Equipment, Inventory or Fixtures during the term of this Agreement, the Grantor shall promptly notify the Collateral Agent of such loss, damage or destruction. At the reasonable request of the Holders, the Grantor’s policies of insurance shall contain loss payable clauses in favor of the Grantor and the Holders as their respective interests may appear and shall contain provision for notification of the Holders thirty (30) days prior to the termination of such policy. At the request of the Holders, copies of all such policies, or certificates evidencing the same, shall be deposited with the Holders. If any Grantor fails to effect and keep in full force and effect such insurance or fail to pay the premiums when due, the Holders may (but shall not be obligated to) do so for the account of such Grantor and add the cost thereof to the Notes.  The Holders are irrevocably appointed attorney-in-fact of the Grantor to endorse any draft or check which may be payable to the Grantor in order to collect the proceeds of such insurance. Unless an Event of Default has occurred and is continuing, the Holders will turn over to the Grantor the proceeds of any such insurance collected by it on the condition that the Grantor apply such proceeds either (i) to the repair of damaged Equipment, Inventory or Fixtures, or (ii) to the replacement of destroyed Equipment, Inventory or Fixtures with Equipment, Inventory or Fixtures of the same or similar type and function and of at least equivalent value (in the sole judgment of the Holders), provided such replacement Equipment, Fixtures or Inventory is made subject to the security interest created by this Agreement and constitutes a second lien security interest in the Equipment, Inventory and Fixtures subordinate only to the liens granted by Grantor to lenders in the same Collateral to secure  the Permitted Liens and other security interests permitted under this Agreement, and is perfected by the filing of financing statements in the appropriate public offices and the taking of such other action as may be necessary or desirable in order to perfect and continue perfected such security interest. Any balance of insurance proceeds remaining in the possession of the Holders after payment in full of the Notes shall be paid over to the applicable Grantor or its order.

  

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7.             Maintenance and Repair. The Grantor shall maintain the Equipment, Inventory and Fixtures, and every portion thereof, in good condition, repair and working order, reasonable wear and tear alone excepted, and shall pay and discharge all taxes, levies and other impositions assessed or levied thereon as well as the cost of repairs to or maintenance of the same. If any Grantor fails to do so, the Holders may (but shall not be obligated to) pay the cost of such repairs or maintenance and such taxes, levies or impositions for the account of such Grantor and add the amount of such payments to the principal of the Notes.

8.              Preservation of Rights against Third Parties; Preservation of Collateral in Holders’ Possession. Until such time as the Holders exercise their right to effect direct collection of the Accounts and the Chattel Paper and to effect the enforcement of the Grantor’s contract rights, the Grantor assumes full responsibility for taking any and all commercially reasonable steps to preserve rights in respect of the Accounts and the Chattel Paper and their contracts against prior parties. The Holders shall be deemed to have exercised reasonable care in the custody and preservation of such of the Collateral as may come into its possession from time to time if the Holders take such action for that purpose as the relevant Grantor shall request in writing, provided that such requested action shall not, in the judgment of the Holders, impair the Holders’ security interest in the Collateral or its right in, or the value of, the Collateral, and provided further that the Holders receive such written request in sufficient time to permit the Holders to take the requested action.

	
  

	
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Events of Default and Remedies.

(a)           If any one or more of the Events of Default shall occur or shall exist, the Collateral Agent may then or at any time thereafter, so long as such default shall continue, foreclose the lien or security interest in the Collateral in any way permitted by law, or upon fifteen (15) days’ prior written notice to the relevant Grantor, sell any or all Collateral at private sale at any time or place in one or more sales, at such price or prices and upon such terms, either for cash or on credit, as the Collateral Agent, in its sole discretion, may elect, or sell any or all Collateral at public auction, either for cash or on credit, as the Collateral Agent, in its sole discretion, may elect, and at any such sale, the Collateral Agent may bid for and become the purchaser of any or all such Collateral. Pending any such action the Collateral Agent may liquidate the Collateral.

 

  

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(b)           If any one or more of the Events of Default shall occur or shall exist, the Collateral Agents may then, or at any time thereafter, so long as such default shall continue, grant extensions to, or adjust claims of, or make compromises or settlements with, debtors, guarantors or any other parties with respect to Collateral or any securities, guarantees or insurance applying thereon, without notice to or the consent of any Grantor, without affecting the Grantor’s liability under this Agreement or the Notes. The Grantor waives notice of acceptance, of nonpayment, protest or notice of protest of any Accounts or Chattel Paper, any of its contract rights or Collateral and any other notices to which the Grantor may be entitled.

(c)           If any one or more of the Events of Default shall occur or shall exist and be continuing, then in any such event, the Collateral Agent shall have such additional rights and remedies in respect of the Collateral or any portion thereof as are provided by the Code and such other rights and remedies in respect thereof which it may have at law or in equity or under this Agreement, including without limitation the right to enter any premises where Equipment, Inventory and/or Fixtures are located and take possession and control thereof without demand or notice and without prior judicial hearing or legal proceedings, which the Grantor expressly waives.

(d)           The Collateral Agent shall apply the Proceeds of any sale or liquidation of the Collateral, and, subject to Section 5, any Proceeds received by the Collateral Agent from insurance, first to the payment of the reasonable costs and expenses incurred by the Collateral Agent in connection with such sale or collection, including without limitation reasonable attorneys’ fees and legal expenses; second to the payment of the Notes, pro rata, whether on account of principal or interest or otherwise as the Collateral Agent, in its sole discretion, may elect, and then to pay the balance, if any, to the relevant Grantor or as otherwise required by law. If such Proceeds are insufficient to pay the amounts required by law, the Grantors shall be liable for any deficiency.

(e)           Upon the occurrence of any Event of Default, the Grantor shall promptly upon written demand by the Collateral Agent assemble the Equipment, Inventory and Fixtures and make them available to the Holders at a place or places to be designated by the Collateral Agent The rights of the Collateral Agent under this paragraph to have the Equipment, Inventory and Fixtures assembled and made available to it is of the essence of this Agreement and the Collateral Agent may, at its election, enforce such right by an action in equity for injunctive relief or specific performance, without the requirement of a bond.

10.           Defeasance. Notwithstanding anything to the contrary contained in this Agreement upon payment and performance in full of the Notes, this Agreement shall terminate and be of no further force and effect and the Holders shall thereupon terminate their security interest in the Collateral. Until such time, however, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns, provided that, without the prior written consent of the Holders, no Grantor may assign this Agreement or any of its rights under this Agreement or delegate any of its duties or obligations under this Agreement and any such attempted assignment or delegation shall be null and void. This Agreement is not intended and shall not be construed to obligate the Holders to take any action whatsoever with respect to the Collateral or to incur expenses or perform or discharge any obligation, duty or disability of any Grantor.

 

  

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The Collateral Agent.

(a)            Delegation of Duties.  The Collateral Agent may execute any of its duties under this Agreement or any other Transaction Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Collateral Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects with reasonable care.

(b)           Liability of Collateral Agent.  None of the Collateral Agent Related Persons (as defined below) shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Transaction Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Holders for any recital, statement, representation or warranty made by any other party, or any officer thereof, contained in this Agreement or in any other Transaction Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement or any other Transaction Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Transaction Document, or for any failure of any other party to this Agreement or any other Transaction Document to perform its obligations hereunder or thereunder.  No Collateral Agent Related Person shall be under any obligation to any Holder to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the Company or any of the Company’s Subsidiaries or Affiliates.  “Collateral Agent Related Persons” means the Collateral Agent and any successor agent arising hereunder, together with their respective affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such persons and affiliates.

(c)           Reliance by Collateral Agent.  The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon advice and statements of legal counsel (including counsel to the Company or any Grantor), independent accountants and other experts selected by the Collateral Agent. The Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of the Majority Holders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Holders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Transaction Document in accordance with a request or consent of the Majority Holders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Holders. “Majority Holders” means at any time a Holder or Holders then holding in excess of 50% of the then aggregate unpaid principal amount of the Notes.

 

  

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(d)           Notice of Default.  The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any default or Event of Default, except with respect to defaults in the delivery of any documents or certificates required to be delivered to the Collateral Agent hereunder for the benefit of the Holders, unless the Collateral Agent shall have received written notice from a Holder or the Company or any Grantor referring to this Agreement, describing such default or Event of Default and stating that such notice is a “notice of default”.  The Collateral Agent will notify the Holders of its receipt of any such notice.  The Collateral Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Holders in accordance with this Agreement; provided, however, that unless and until the Collateral Agent has received any such request, the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such default or Event of Default as it shall deem advisable or in the best interest of the Holders.

(e)           Indemnification of Collateral Agent.  Whether or not the transactions contemplated hereby and by the other Subscription Documents are consummated, the Holders shall indemnify upon demand the Collateral Agent Related Persons (to the extent not reimbursed by or on behalf of the Company or any Guarantor and without limiting the obligation of the Company or the Grantor to do so), pro rata, from and against any and all Indemnified Liabilities (as defined below); provided, however, that no Holder shall be liable for the payment to the Collateral Agent Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct.  Without limitation of the foregoing, each Holder shall reimburse the Collateral Agent upon demand for its ratable share of any costs or out of pocket expenses (including fees and disbursements of legal counsel) incurred by the Collateral Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Transaction Document, or any document contemplated by or referred to herein, to the extent that the Collateral Agent is not reimbursed for such expenses by or on behalf of the Company.  Notwithstanding the foregoing, no Holder shall be required to pay, in total under this paragraph (e) and any similar provision in any other Transaction Document, any amount in excess of the total gross purchase price of the Notes purchased by such Holder.  The undertaking in this paragraph shall survive the payment of all obligations hereunder and the resignation or replacement of the Collateral Agent.  “Indemnified Liabilities” means all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including fees and disbursements of legal counsel) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Notes and the termination, resignation or replacement of the Collateral Agent) be imposed on, incurred by or asserted against any Collateral Agent Related Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby and thereby, or any action taken or omitted by any such Collateral Agent Related Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any bankruptcy or insolvency proceeding or appellate proceeding) related to or arising out of this Agreement or the Notes or the other Subscription Documents or the use of the proceeds thereof, whether or not any Collateral Agent Related Person is a party thereto.

 

  

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(f)            Collateral Agent in Individual Capacity.  Any Collateral Agent Related Person may engage in transactions with, make loans to, acquire equity interests in and generally engage in any kind of business with the Company or any Grantor and their affiliates, including purchasing and holding Notes, as though the Collateral Agent were not the Collateral Agent hereunder and without notice to or consent of the Holders.  The Holders acknowledge that, pursuant to such activities, any Collateral Agent Related Person may receive information regarding the Company or any Grantor and their affiliates (including information that may be subject to confidentiality obligations in favor of the Company or any Grantor and their affiliates) and acknowledge that the Collateral Agent shall be under no obligation to provide such information to them.  With respect to any Notes it holds, a Collateral Agent Related Person shall have the same rights and powers under this Agreement as any other Holder and may exercise the same as though the Collateral Agent were not the Collateral Agent, and the terms “Holder” and “Holders” include any such Collateral Agent Related Person in its individual capacity.

(g)           Successor Collateral Agent.  The Collateral Agent may, and at the request of the Majority Holders shall, resign as Collateral Agent upon 30 days’ notice to the Holders.  If the Collateral Agent resigns under this Agreement, the Majority Holders shall appoint from among the Holders a successor agent for the Holders, which successor agent shall be approved by the Company, such approval not to be unreasonably withheld.  If no successor agent is appointed prior to the effective date of the resignation of the Collateral Agent, the Collateral Agent may appoint, after consulting with the Holders and the Company, a successor agent from among the Holders.  Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent and the term “Collateral Agent” shall mean such successor agent and the retiring Collateral Agent’s appointment, powers and duties as Collateral Agent shall be terminated. After any retiring Collateral Agent’s resignation hereunder as Collateral Agent, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement.  If no successor agent has accepted appointment as Collateral Agent by the date which is 30 days following a retiring Collateral Agent’s notice of resignation, the retiring Collateral Agent’s resignation shall nevertheless thereupon become effective and the Holders shall perform all of the duties of the Collateral Agent hereunder until such time, if any, as the Majority Holders appoint a successor agent as provided for above.

	
  

	
12.

	
Miscellaneous.

(a)           The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall for any reason be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or any other provision of this Agreement in any jurisdiction.

 

  

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(b)           No failure or delay on the part of the Holders in exercising any right, remedy, power or privilege under this Agreement and the Notes shall operate as a waiver thereof or of any other right, remedy, power or privilege of the Holders under this Agreement, the Notes or any of the other Subscription Documents; nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other right, remedy, power or privilege or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Holders under this Agreement, the Notes and the other Subscription Documents are cumulative and not exclusive of any rights or remedies which they may otherwise have.

(c)           Unless otherwise provided herein, all demands, notices, consents, service of process, requests and other communications hereunder shall be in writing and shall be delivered in person or by overnight courier service, or mailed by certified mail, return receipt requested, addressed:

If to Grantor:

At the address for the Company set forth in the Purchase Agreement

If to Collateral Agent:

 

OmniView Capital, LLC

Attn: Abraxas J Discala

30 E. 21st St., #7B

New York, NY 10010

Phone: 203-803-1995

Any such notice shall be effective when delivered, if delivered by hand delivery, overnight courier service, or U.S. Mail return receipt requested.

 

(d)           The section headings contained in this Agreement are for reference purposes only and shall not control or affect its construction or interpretation in any respect.

(e)           Unless the context otherwise requires, all terms used in this Agreement which are defined by the Code shall have the meanings stated in the Code.

(f)           The Code shall govern the settlement, perfection and the effect of attachment and perfection of the Holders’ security interest in the Collateral, and the rights, duties and obligations of the Holders and the Grantor with respect to the Collateral. This Agreement shall be deemed to be a contract under the laws of the State of New York and the execution and delivery of this Agreement and, to the extent not inconsistent with the preceding sentence, the terms and provisions of this Agreement shall be governed by and construed in accordance with the laws of that State.  EACH GRANTOR HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

  

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(g)           This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.  In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.  Any party delivering an executed counterpart of this Agreement by facsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

  

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IN WITNESS WHEREOF, and intending to be legally bound, the parties have executed and delivered this Security Agreement as of the day and year set forth at the beginning of this Security Agreement.

 

	GRANTOR:	
STARSTREAM ENTERTAINMENT, LLC

	 
	 	 	 	 
	 	By:  	 	 
	 	 	
Name: Charles Bonan

	 
	 	 	
Title: Managing Member

	 

 

ACCEPTED BY:

OMNIVIEW CAPITAL, LLC

as Collateral Agent

	
By:

	 	 
	 	
Name: Abraxas J Discala

	 
	 	 
Title:   Chief Executive Officer

	 

 

[SIGNATURE PAGE TO STARSTREAM SECURITY AGREEMENT]

 

  

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Schedule I

	
1.

	
State(s)/Jurisdictions in which Collateral is located:

Delaware, California

	
2.

	
Grantor Information:

 

	
Grantor

	  
	
Starstream Entertainment, LLC

a Delaware limited liability company

File No.: 5254943

 

Executive Offices Address:

 

100 Sky Park Drive

Monterey, California 93940

Chief Executive Officer: Charles Bonan

E-mail: cbonan@sbcglobal.net

 

Foreign Corporation Qualification Numbers:

 

None

 

	  

 

  

  

  

 

Schedule II

Permitted Liens

	
  

	
1.

	
Credit Facility.f8k100813ex10v_geliagroup.htm

Exhibit 10.5

 

OPERATING AGREEMENT

OF

STARTSTREAM ENTERTAINMENT, LLC

 

a Delaware limited liability company

 

This OPERATING AGREEMENT (this "Agreement") of Starstream Entertainment, LLC (the "Company") is entered into, as of January 10, 2013 by and among Charles Bonan ("Ronan"), Kim Leadford ("Lcadford") and Dan MeCarney ((MeCarney") and collectively referred to herein as the "Members" or individually a "Member"). Bonan and Leaford shall collectively he the "Managing Members" or individually a "Managing Member" of the Company.

 

RECITALS

 

WHEREAS, the parties to this Agreement shall be the sole Members of the Company;

 

WHEREAS, the Members desire to adopt the provisions herein as the Operating Agreement of Starstream Entertainment, LLC;

 

THEREFORE, in consideration of the recitals and the mutual rights and obligations contained herein, the Members hereby agree as follows:

 

ARTICLE 1

ORGANIZATION

 

 

	 	1.1	Name. The name of the Company is Starstream Entertainment, LLC,
	 	 	 
	 	1.2	Formation, The Company has been organized as a Delaware Limited Liability Company by the filing of Articles wider the Act and the issuance of a Certificate of Formation by the Secretary of State of Delaware.
	 	 	 
	 	1.3	 
Purposes. The Company is formed to engage in any lawful activity for which limited liability companies may be formed under the Act including, without limitation, to produce, promote, support and/or develop motion pictures and engaging in any and all activities necessary or incidental to the foregoing.

	 	 	 
	 	1.4 	 
Registered Office. The Company shall maintain a registered office at Delaware Corporate Services Inc., 901 Market St. Suite 705, Wilmington, County of New Castle, Delaware 19801.

	 	 	 
	 	1.5 	 
California Office. The Company further maintains a California office to conduct further Company business at 100 Skypark Dr.. Monterey, CA 93940.

 

  

 

  

 

	 	1.6 	 
Other Offices. The Company may have, in addition to its registered office, offices and places of business at such places, both within and outside the State of Delaware and California, as the Members may from time to time determine or the business of the Company may require.

	 	 	 
	 	1.7	Registered Agent. The name and address of the registered agent of the Company for service of process on the Company shall be Delaware Corporate Services Inc., 901 Market St. Suite 705, Wilmington, County of New Castle, Delaware 19801.
	 	 	 
	 	1.8	Powers of the Company. The Company shall have the power and authority to take any and all actions necessary, appropriate, advisable, convenient or incidental to or for the furtherance of the purposes set forth herein.
	 	 	 
	 	1.9	 
Qualification Outside of Delaware. Prior to the Company's conducting business in any jurisdiction other than Delaware, the Members shall cause the Company to comply with all the requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. The Managing Members shall execute, acknowledge and deliver all certificates and other documents necessary or appropriate to qualify, continue and terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business from time to time.

	 	 	 
	 	1.10 	 
Term. The Company commenced on the date set forth in the certificate of organization issued for the Company by the Secretary of State of Delaware, and shall continue in existence for the period fixed in its Articles for the duration of the Company, or such earlier times as this Agreement may specify.

	 	 	 
	 	1.11 	 
No State Law Partnership. The Members intend that the Company shall not be a partnership (including, without limitation, a limited partnership) and that no Member shall be a partner of any other Member for any purposes other than federal and state tax purposes, and the provisions of this Agreement may not be construed to suggest otherwise.

	 	 	 
	 	1.12 	 
Liability to Third Parties. The Members or its designated Officers shall not be liable for the debts, liabilities, contracts or other obligations of the Company, including under a judgment or order of a court.

        

ARTICLE 2

MEMBERSHIP INTEREST

 

	 	2.1 	 
Membership Interest. The Members membership interest and equity ownership shall be in the form and percentages as set forth in Schedule A.

	 	 	 
	 	2.2 	Allocation of Profits and Losses. The Company's profits and losses shall be allocated to the Member and the Member's capital account. if any.

 

  

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	 	2.3 	Transfer. If the Member's interest is transferred during a fiscal year of the Company, the taxable year of the Company shall not close, instead, all profits and losses shall be prorated for the entire taxable year. Gains or losses from capital transactions shall be allocated to the Member of record on the date of such transaction.
	 	 	 
	 	2.4 	Distributions. The Company shall not make a distribution to a Member on account of its interest in the Company if such distribution would violates the Act or other applicable law.
	 	 	 
	 	2.5 	
Limited Liability. Except as otherwise provided by the Act and by equitable principles, the debts, obligations and liabilities of the Company shall be solely the debts, obligations and liabilities of the Company, and neither the Member nor any Officer shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or Officer of the Company, respectively.

 

ARTICLE 3

MANAGEMENT

 

	 	3.1 	Powers of Members. Pursuant to this section the Managing Members are solely hereby designated with all powers to bind, contract, encumber or otherwise engage and allocate Company's money toward and to effect the purpose of the Company as described herein. The Managing Members shall have the sole power on behalf of and in the name of the Company as to any and all voting rights and to carry out any and all of the purposes described herein and to perform all acts which it may, in its sole discretion, deem necessary, appropriate, advisable, convenient or incidental in furtherance of such purposes.
	 	 	 
	 	3.2	Officers. The Members may, from time to time as it deems advisable, select natural persons and designate them as officers of the Company (the -Officer/s") and assign titles (including, without limitation. President, Vice President, Secretary and Treasurer) to any such person. Unless the Managing Member provides otherwise, such person shall have the authorities and duties for the assigned office as are described in the Act and that are customary for such office. Any delegation pursuant to this Section may be revoked at any time by a vote of the Managing Members. Whenever applicable law or the provisions of this Agreement permits or requires the approval, consent or other action of the Managing Member with respect to the management of the Company, the appropriate officer appointed pursuant to this Section may take such action in lieu of the Member.

 

  

3

  

 

ARTICLE 4

LIABILITY AND INDIMNIFICATION OF MANAGERS AND OFFICERS

 

The Managing Members and Officers shall not be liable, responsible, or accountable in damages or otherwise to the Company or to the Member for any action taken or failure to act on behalf of the Company, unless (i) such action or omission was performed or omitted in bad faith or constituted gross negligence, willful misconduct, breach of fiduciary duty; (ii) such action resulted in receipt by the Managing Member and/or Officer of a financial benefit to which itiheishe was not entitled; or (iii) such action constitutes a violation of criminal law. The Company shall indemnify and hold harmless the Managing Member and Officers, and their agents, from and against any and all liabilities, losses, expenses, damages or injuries suffered or sustained by reason of any acts, omissions or alleged acts or omissions in their capacity as Managing Members and Officers hereunder arising out of his activities on behalf of the Company or in furtherance of the interests of the Company, including, but not limited to, any judgment, award, settlement, penalties, fines, reasonable attorneys' fees and other costs and expenses (which may be advanced by the Company) incurred in connection with the defense of any actual or threatened action, proceeding or claim, provided that such Managing Members and Officers acted in good faith and in a manner reasonably believed to be in the best interests of the Company or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

 

ARTICLE 5 

MEETINGS

 

Meetings of the Members may be called at any time by a vote of the Managing Members at a meeting of the Members or by any Member; any such meeting should be held at such place and time as may be designated by the Member or Members calling the meeting. Notice of the place and time of the meeting of the Members shall be delivered to each Member by telephone or sent to him by email. At all meetings of the Members, a majority of the Managing Members present at any meeting, constitutes a quorum for the transaction of business, and the action of a majority in number of votes of the Managing Members present at any meeting at which a quorum is present is the action of the Managing Members, unless the concurrence of a smaller or greater proportion is required for such action by the Articles of Organization or another provision of this Agreement.

 

All Members present at any meeting of the Members shall be deemed to have waived notice of that meeting.

 

Any action of the Company may be validly authorized by consents in writing to such action signed by Managing Members having the proportion of the total voting power that would be required to authorize or constitute such action at a formal meeting of the Members.

 

  

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ARTICLE 6

VOTING RIGHTS OF MEMBERS

 

The Managing Member shall be entitled to cast one vote for each percentage of ownership interest in the company on all matters properly brought before the Members, and all decisions of the Members shall be made by a majority of the votes cast in the manner set forth immediately above, except as otherwise provided fbr in this Article 6 or in the Articles of Organization of the Company Furthermore, a majority of votes cast by the Managing Members in the manner set forth in the preceding sentence shall be required to approve the following matters:

 

	
A.

	
Dissolution and winding up the affairs of the Company.

 

	
B.

	
Merger or consolidation of the Company.

 

	
C.

	
Additional Members and/or additional Capital Contributions including any additional loans.

 

	
D.

	
Addition of any Officer and/or replacement of any Officer.

 

	
E.

	
Entering into any motion picture film projects, film funs, mergers or acquisitions or in anyway encumbering the Company

 

Any amendment to this Agreement shall require the vote of the Managing Members.

 

No contract or transaction between the Company and one or more of its Members or a person in which such Member has a financial interest shall be void or voidable solely because the interested Member was present at or participated in the meeting which authorized the contract or transaction, or solely because his or their votes were counted for such purpose, if the material facts as to his interest and to the contract or transaction were disclosed or known to the Members, and the contract or transaction was approved by a majority vote without counting the vote of the interested Member, or if the contract or transaction was fair to the Company as of the time it was authorized, approved or ratified by the Members. Interested Members may be counted in determining the presence of a quorum at a meeting that authorized the contract or transaction.

 

ARTICLE 7

WITHDRAWAL

 

7.1    Bankruptcy or insolvency of the Members, the application for or appointment of a receiver of the Members, the general assignment of the Members for the benefit of creditors, the attempt by the Member to take advantage of any other bankruptcy or insolvency laws or the seizure of the Members' interest in the Company under a writ of execution, if the seizure is not released within thirty (30) days, shall cause the Members to be considered as having withdrawn, effective immediately, from this Company; however, the Company shall not hereby be terminated or dissolved, but such happening shall automatically provide each of the other Members (the "Non-withdrawing Members") with an option to purchase a pro rata share of the interest in the Company belonging to the Members involved in such proceedings (the "Withdrawing Member"), at the Fair Market Value as determined hereinafter. Each of such options may he exercised in accordance with the procedures established below:

 

  

5

  

 

A.           Within sixty (60) days following the date of any such event, one or more of the Non-withdrawing Members (the "Notice Member") may give written notice to the other Non-withdrawing Members of his desire to consider exercise of such option or options. Thereupon the Notice Member shall give written notice to the Withdrawing Member and all legally interested third parties, of the necessity for a determination of Fair Market Value pursuant to this Article.

 

B.            Upon receipt by the Notice Member of the written determination of Fair Market Value, he shall send a copy to each of the Non- withdrawing Members, and shall advise them of the ratable amounts in the offered interest of the Withdrawing Member to which they would be entitled if their options were exercised.

 

C.            Each of the Non-withdrawing. Members may exercise the option only by giving written notice to the Notice Member within fifteen (15) days thereafter, and each Member who exercises his option to purchase shall set forth in his notice of acceptance the amount of the interest of the Withdrawing Member to be purchased by him, which amount may not be in excess of the amount specified by the Notice Member as available.

 

D.            If the total amount included in the options exercised shall be less than the interest to be sold, the Notice Member shall notify the Non- withdrawing Members immediately of the difference, and they shall have fifteen (15) days in which to make voluntary arrangements among themselves to purchase the difference and to notify the Notice Member in writing of such arrangement.

 

E.            The Notice Member shall promptly notify the Withdrawing Member and all interested third parties of the options exercised, and the closing for the options exercised shall be held within thirty (30) days following the effective date of exercise.

 

F.            It shall not be necessary that the total of the options exercised include the entire interest of the Withdrawing Member.

 

G.            For all purposes of this Agreement, FAIR MARKET VALUE shall be determined by valuing the immovable and other property of the Company in the following manner: The Fair Market Value of all property of the Company other than immovable property shall be determined by the accountants of the Company by using the value thereof as shown on the books and records of the Company using generally accepted accounting practices. The immovable property of the Company shall be valued as provided for hereinafter. The Notice Member contemporaneously with notice, offer or option, shall name an MAI appraiser, and upon written notice of such appointment to the remaining Members, said appraiser shall be the sole determiner of the Fair Market Value of the immovable property in question unless within ten (10) days following such notice of appointment of appraiser, any or all of the other Members give written notice naming their selection of another MAI appraiser to represent them, in which case the two appraisers shall proceed forthwith to determine Fair Market Value of such immovable property. If, within thirty (30) days following appointment of the second appraiser, the two appraisers are not able to agree, they shall appoint a third appraiser of their choosing and the third appraiser shall within twenty (20) days make a determination of the Fair Market Value of such immovable property and the determination by the third appraiser shall be conclusive and binding on all Members. A report of the appraiser shall be sent to the Notice Member. There shall be subtracted from the Fair Market Value of the immovable and movable property of the Company all encumbrances affecting same, and the remaining value is the Fair Market Value of the total interest of all Members in the Company. The Fair Market Value of the interest in the Company of the Member in question shall be his proportional part of the Fair Market Value of the interests in the Company of all the Members therein.

 

  

6

  

 

7.2           No Member shall sell all or any portion of his interest in the Company to any

 

third party unless he first offers to sell such interest to the Managing Members in accordance with the procedures contained herein below:

 

A.           The selling Member ("Seller") shall deposit with the Non-selling Members his written offer to sell to the Non-selling Members setting forth the price and all other terms and conditions of the offer. Each of the Non-selling Members shall have an option to purchase a pro rata share of the interest of the Seller, such pro rata share to be based upon the percentages of ownership of the Non-selling Members ("Ratable Amount").

 

B.            Each option may be exercised only by giving written notice to the Seller within thirty (30) days after the date of the mailing or delivery of a copy of the signed written offer to each Non-selling Member as set forth above. Each Non-selling Member who exercises his option to purchase shall set forth in his notice of acceptance the amount of the interest of the Seller to be purchased by him which amount may not be in excess of his Ratable Amount.

 

C.            If the total amount included in the options accepted shall be less than the entire interest offered by the Seller, the Seller shall notify the Non-selling Members immediately or the difference. Thereafter the Non-selling Members shall have fifteen (15) days in which to make voluntary arrangements among themselves to purchase such difference, and to notify the Seller in writing of such arrangements.

 

D.           Thereafter the Non-selling Members shall promptly notify the Seller whether his offer has been accepted or rejected.

 

E.            Failure of the Non-selling Members to exercise options sufficient to purchase the entire interest offered by the Seller shall constitute a rejection of all options and of the offer by the Seller, and such interest may then be sold to any third party at the same price and upon the same terms and conditions as were provided in the offer from the Seller to the Non-selling Members. Such sale to a third party must be closed within ninety (90) days after the date of the notice of rejection given by the Notice Member, and if not so closed within said time, no transfer shall be made by the Seller, without the Seller repeating anew the procedure set forth above.

 

  

7

  

 

F.           If the Non-selling Members exercise the options provided in this Article so as to acquire the entire interest offered, the closing shall be held within thirty (30) days after the date on which the notice of acceptance of the offer is given by the Non-selling Members.

 

7.3           Notwithstanding anything to the contrary set forth elsewhere in this Agreement, each Member shall be free to sell, donate or transfer in any manner whatsoever, all or a portion of his undivided interest in the Company without the necessity of offering such interest to ail or any of the other Members in the following cases:

 

A.           Where the transfer by the Member is to any one or more of the following relatives of the Member or a trust established for such relative; namely, a spouse, a direct ascendant or descendant, or the spouse of a direct descendant; and

 

B.           Where, as a result of the death of a Member, his interest is transferred to his succession, his heirs or legatees.

 

7.4           Unless expressly provided to the contrary, any person acquiring an interest in the Company by any method whatsoever, irrespective of whether such person is a third party, or a Member to this Agreement, or a beneficiary of a trust which is a Member, or a relative of a Member as defined in Paragraph 7.3 of this Article or an heir. legatee or a succession representative of a deceased Member, shall, by the acquisition of such interest, be subject to all terms and conditions of this Agreement as completely as though the acquirer had been an original Member hereto. Nevertheless, each of such persons shall signify his acceptance of the terms and conditions of this Agreement by giving written notice of such to the remaining Members in a form acceptable to said Members.

 

ARTICLE 8 

TAXES

 

8.1           Fiscal Year. The fiscal year of the Company shall begin on Januaryand shall he on a calendar year basis.

 

8.2           Tax Returns. The Officer shall cause to be prepared and filed all necessary federal and state tax returns and make all elections necessary or appropriate, and may retain a certified public accountant for that purpose.

 

8.3           Partnership Taxation- Neither the Company, nor any Member, may make an election for the Company to be excluded from the application of the provisions of Subchapter K (Partners & Partnership) of Chapter 1 (Normal Taxes &. Surtaxes) of Subtitle A (Income Taxes) of the Internal Revenue Code or any similar provisions of applicable state law. The Members agree that for federal arid state tax purposes the Company shall be qualified and shall operate as a partnership; however, for all other state law purposes the Company shall not be a partnership, but shall constitute a limited liability company

 

  

8

  

 

ARTICLE 9

GOVERNING LAW AND ASSURANCES

 

9.1           Indemnification. The Company shall indemnify the Members or any Officers (any such person is hereinafter referred to in this Section 9 as an "Indemnified Person") against expenses (including, but not limited to, attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by such Indemnified Person ("liabilities"), to the fullest extent now or hereafter permitted by law in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (as used in this Section 9, "Proceeding" or, in the plural, "Proceedings"), brought or threatened to be brought against such Indemnified Person by reason of the fact that he or she is or was serving in any such capacity.

 

9.2           Advances. Expenses (including, but not limited to. attorneys' fees) incurred by any Indemnified Person in defending a Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding as authorized by the Member in the specific case upon receipt of an undertaking, by or on behalf of such Indemnified Person, to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Company as authorized by law.

 

9.3           Applicability; Survival. The provisions of Sections 9.1 and 9.2 shall be applicable to all Proceedings commenced after the date of this Agreement and arising out of acts or omissions which occur after the date hereof and shall continue as to a person who has ceased to be an Indemnified Person, and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

9.4            Non-Exclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under this Agreement, wider contract or otherwise,

 

9.3            Governing Law. This Agreement shall be governed by, and construed under, the laws of the State of Delaware without regard to the rules of conflict of laws thereof.

 

9.6           Severabilityof Provisions, Each provision of this Agreement shall be considered severable, and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions or this Agreement that are valid, enforceable and legal.

 

  

9

  

 

 

9.7           Sole Benefit of Members. The provisions of this Agreement are intended solely to benefit the Members and, to the fullest extent permitted by applicable law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor shall he a third-party beneficiary of this Agreement), and the Member shall have no duty or obligation to any creditor of the Company to make any contributions or payments to the Company.

 

	 	
MEMBERS:

	 
	 	 	 
	
 

	
/s/ Charles Bonan

	 
	 	
CHARLES BONAN

	 
	 	 	 
	 	/s/ Kim Leadford	 
	 	KIM LEADFORD	 
	 	 	 
	 	/s/ Daniel Maccarney	 
	 	DANIEL MCCARNEY	 
	 	 	 

 

  

10

  

 

SCHEDULE A

MEMBERSHIP INTEREST

 

	MEMBER:	MEMBERHIP INTEREST:
	 	 
	CHARLES BONN	70%
	 	 
	
KIM LEADFORD

	20%
	 	 
	DANIEL MCCARNEY	10%

 

 

11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00222-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00222-of-00352.parquet"}]]