SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
GUESS?, INC.
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
401617 10 5
(CUSIP Number)
Maurice Marciano
Guess?, Inc.
1444 South Alameda Street
(213) 765-3100
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 11, 2004
(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 that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[_].
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act.
1 OF 11 PAGES
CUSIP NO. 401617 10 5 Schedule 13D Page 2 of 11 Pages
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Marciano Financial Holdings II, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ] (b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
Item 2(d) [__]
Item 2(e) [__]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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7 SOLE VOTING POWER
22,100,000
NUMBER OF -------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 22,100,000
PERSON -------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
22,100,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
50.2%
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14 TYPE OF REPORTING PERSON
OO
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CUSIP NO. 401617 10 5 Schedule 13D Page 3 of 11 Pages
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement on Schedule 13D relates
is the common stock, par value $.01 per share (the "Common Stock"), of Guess?,
Inc., a Delaware corporation (the "Issuer"). The principal executive offices of
the Issuer are located at 1444 South Alameda Street, Los Angeles, California
90021.
ITEM 2. IDENTITY AND BACKGROUND
This statement on Schedule 13D is being filed on behalf of Marciano Holdings II,
LLC (the "Reporting Person"). The members functioning as the equivalent of
general partners with respect to the Reporting Person are Maurice Marciano as
sole trustee of the Maurice Marciano Trust (2000 Restatement) (the "Maurice
Marciano Trust"), and Paul Marciano as sole trustee of the Paul Marciano Trust
dated February 20, 1986 (the "Paul Marciano Trust"). The address and principal
business office of the Reporting Person is 9465 Wilshire Boulevard, Suite 400,
Beverly Hills, California 90212. The address and principal business office of
Maurice Marciano and Paul Marciano is located at 1444 South Alameda Street, Los
Angeles, California 90021.
None of the Reporting Person, Maurice Marciano or Paul Marciano has, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceedings 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.
The Reporting Person is organized under the laws of the State of California.
Maurice Marciano is a citizen of the Republic of France. Paul Marciano is a
citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Reporting Person acquired the shares of Common Stock as a contribution of
capital from its members, Maurice Marciano as sole trustee of the Maurice
Marciano Trust and Paul Marciano as sole trustee of the Paul Marciano Trust.
ITEM 4. PURPOSE OF TRANSACTION
The shares of Common Stock were contributed to the Reporting Person for estate
planning purposes. The Operating Agreement of the Reporting Person, a copy of
which is attached as Exhibit 1 hereto, provides that (a) Maurice Marciano as
sole trustee of the Maurice Marciano Trust has the sole power and authority to
exercise voting and investment power with respect to the shares of Common Stock
contributed to the Reporting Person by Maurice Marciano as sole trustee of the
Maurice Marciano Trust, and (b) Paul Marciano as sole trustee of the Paul
Marciano Trust has the sole power and authority to exercise voting and
investment power with respect to the shares of Common Stock contributed to the
Reporting Person by the Paul Marciano Trust. Except as otherwise described in
this statement on Schedule 13D, none of the Reporting Person, Maurice Marciano
or Paul Marciano has any plans or proposals that relate to or would result in
any of the following actions or events:
a. the acquisition or disposition of any securities of the Issuer;
b. an extraordinary corporate transaction involving the Issuer or its
subsidiaries;
c. the transfer of a material amount of assets of the Issuer or its
subsidiaries;
d. any change in the present board of directors or management of the Issuer;
e. any material change in the capitalization or dividend policy of the Issuer;
f. any other material change in the Issuer's business or corporate structure;
g. changes in the Issuer's organizational documents or other actions which might
impede the acquisition of control of the Issuer;
CUSIP NO. 401617 10 5 Schedule 13D Page 4 of 11 Pages
h. a class of the Issuer's securities being delisted or no longer quoted;
i. a class of the Issuer's securities becoming eligible for termination of
registration under the Securities Exchange Act of 1934; or
j. any similar action.
Notwithstanding the foregoing, the Reporting Person, Maurice Marciano or Paul
Marciano may determine to change his or its investment intent with respect to
the Issuer at any time in the future. Maurice Marciano and Paul Marciano intend
to vote the shares of Common Stock as each deems appropriate from time to time.
In determining from time to time whether to sell shares of the Common Stock (and
in what amounts) or to retain such shares, Maurice Marciano and Paul Marciano
will take into consideration such factors as each deems relevant, including the
business and prospects of the Issuer, anticipated future developments concerning
the Issuer, existing and anticipated market conditions from time to time,
general economic conditions, regulatory matters, and other opportunities
available. Each of the Reporting Person, Maurice Marciano and Paul Marciano
reserves the right to acquire additional securities of the Issuer in the open
market, in privately negotiated transactions (which may be with the Issuer or
with third parties) or otherwise, to dispose of all or any portion of the
securities of the Issuer over which it holds dispositive power or to change its
intention with respect to any or all of the matters referred to in this Item 4.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The Reporting Person is the record and beneficial owner of 22,100,000 shares of
Common Stock. One-half of the shares were contributed to the Reporting Person by
Maurice Marciano as sole trustee of the Maurice Marciano Trust, and one-half of
the shares were contributed to the Reporting Person by Paul Marciano as sole
trustee of the Paul Marciano Trust.
The Operating Agreement of the Reporting Person, a copy of which is attached as
Exhibit 1 hereto, provides that (a) Maurice Marciano as sole trustee of the
Maurice Marciano Trust has the sole power and authority to exercise voting and
investment power with respect to the shares of Common Stock contributed to the
Reporting Person by Maurice Marciano as sole trustee of the Maurice Marciano
Trust, and Paul Marciano as sole trustee of the Paul Marciano Trust has the sole
power and authority to exercise voting and investment power with respect to the
shares of Common Stock contributed to the Reporting Person by the Paul Marciano
Trust, and (b) all dividends and other distributions (whether in cash or in
kind), stock splits, and all proceeds from the sale, pledge or other
transactions in respect of, the shares of Common Stock contributed to the
Reporting Person by Maurice Marciano as sole trustee of the Maurice Marciano
Trust shall be distributed in respect of the membership interests issued to
Maurice Marciano as sole trustee of the Maurice Marciano Trust, and all
dividends and other distributions (whether in cash or in kind), stock splits,
and all proceeds from the sale, pledge or other transactions in respect of, the
shares of Common Stock contributed to the Reporting Person by Paul Marciano as
sole trustee of the Paul Marciano Trust shall be distributed in respect of the
membership interests issued to Paul Marciano as sole trustee of the Paul
Marciano Trust.
On October 14, 2004, Maurice Marciano as sole trustee of the Maurice Marciano
Trust granted an economic interest in his membership interest in the Reporting
Person equal to a 15% interest in the Reporting Person to The Maurice Marciano
2004 Two-Year Annuity Trust. Maurice Marciano is the sole trustee and sole
current beneficiary of The Maurice Marciano 2004 Two-Year Annuity Trust.
On October 14, 2004, Paul Marciano as sole trustee of the Paul Marciano Trust
granted an economic interest in his membership interest in the Reporting Person
equal to a 10% interest in the Reporting Person to The Paul Marciano 2004
Two-Year Annuity Trust. Paul Marciano is the sole trustee and sole current
beneficiary of The Paul Marciano 2004 Two-Year Annuity Trust.
The 22,100,000 shares of Common Stock beneficially owned by the Reporting Person
represent 50.2% of the outstanding shares of the Common Stock. Percentage
ownership of the Common Stock is based on 44,058,701 shares of Common Stock,
which represents the number of outstanding shares of Common Stock as of July 27,
2004, as reported in the Quarterly Report on Form 10-Q of the Issuer for the
quarter ended June 26, 2004.
CUSIP NO. 401617 10 5 Schedule 13D Page 5 of 11 Pages
In addition to the shares of Common Stock owned by the Reporting Person, Maurice
Marciano beneficially owns 4,983,214 shares of Common Stock as follows:
4,616,009 shares held indirectly as sole trustee of the Maurice Marciano Trust;
100,870 shares held indirectly as sole advisor of the Maurice Marciano 2001
Children's Trust; 256,300 shares held indirectly as president of the Maurice
Marciano Family Foundation; 10,000 shares held by his wife; and 35 shares held
as sole trustee of the Maurice Marciano Gift Trust FBO Caroline Marciano. The
16,033,214 shares of Common Stock beneficially owned by Maurice Marciano
represent 36.4% of the outstanding shares of the Common Stock.
Of the shares of Common Stock beneficially owned by him, Maurice Marciano has
(i) sole voting power with respect to 100,870 shares held indirectly as sole
advisor of the Maurice Marciano 2001 Children's Trust, 15,666,009 shares held
indirectly as sole trustee of the Maurice Marciano Trust, 256,300 shares held
indirectly as president of the Maurice Marciano Family Foundation, and 35 shares
held as sole trustee of the Maurice Marciano Gift Trust FBO Caroline Marciano;
and (ii) shared voting power with respect to 10,000 shares held by his wife.
In addition to the shares of Common Stock owned by the Reporting Person, Paul
Marciano beneficially owns 1,882,768 shares of Common Stock as follows:
1,741,898 shares held indirectly as sole trustee of the Paul Marciano Trust, and
140,870 shares held indirectly as co-trustee of the Maurice Marciano 2001
Children's Trust (formerly the Maurice Marciano 1996 Grantor Retained Annuity
Trust). The 12,932,768 shares of Common Stock beneficially owned by Paul
Marciano represent 29.4% of the outstanding shares of the Common Stock.
Of the shares of Common Stock beneficially owned by him, Paul Marciano has (i)
sole voting power with respect to 12,791,898 shares held indirectly as sole
trustee of the Paul Marciano Trust; and (ii) shared voting power with respect to
140,870 shares held indirectly as co-trustee of the Maurice Marciano 2001
Children's Trust (formerly the Maurice Marciano 1996 Grantor Retained Annuity
Trust).
In the last 60 days, Maurice Marciano as sole trustee of the Maurice Marciano
Trust has engaged in the following sales of the Common Stock, which sales have
been effected through a broker in accordance with Rule 144 of the Securities and
Exchange Commission:
AMOUNT OF
DATE OF SALE SECURITIES SOLD PRICE PER SHARE
------------ --------------- ---------------
8/25/2004 12,500 $16.00
8/26/2004 400 $16.00
9/8/2004 100 $16.44
9/8/2004 100 $16.45
9/8/2004 600 $16.47
9/8/2004 100 $16.49
9/8/2004 600 $16.50
9/8/2004 10,100 $16.52
9/8/2004 100 $16.54
9/8/2004 600 $16.55
9/8/2004 200 $16.57
9/9/2004 1,600 $16.00
9/9/2004 100 $16.01
9/9/2004 1,000 $16.02
9/9/2004 600 $16.03
9/9/2004 2,100 $16.04
9/9/2004 500 $16.05
9/9/2004 200 $16.06
9/9/2004 1,500 $16.08
9/9/2004 500 $16.09
9/9/2004 800 $16.10
9/9/2004 700 $16.12
9/9/2004 500 $16.14
9/9/2004 200 $16.20
9/9/2004 100 $16.21
9/9/2004 200 $16.23
9/9/2004 200 $16.30
9/9/2004 300 $16.36
9/9/2004 400 $16.38
9/9/2004 600 $16.43
9/9/2004 300 $16.48
9/9/2004 100 $16.49
9/14/2004 12,400 $16.40
9/14/2004 100 $16.43
9/15/2004 200 $16.21
CUSIP NO. 401617 10 5 Schedule 13D Page 6 of 11 Pages
AMOUNT OF
DATE OF SALE SECURITIES SOLD PRICE PER SHARE
------------ --------------- ---------------
9/15/2004 200 $16.24
9/15/2004 300 $16.25
9/15/2004 400 $16.26
9/15/2004 1,800 $16.27
9/15/2004 200 $16.28
9/15/2004 100 $16.29
9/15/2004 200 $16.30
9/15/2004 400 $16.31
9/15/2004 100 $16.32
9/15/2004 200 $16.33
9/15/2004 600 $16.35
9/15/2004 200 $16.37
9/15/2004 1,500 $16.38
9/15/2004 6,100 $16.40
9/23/2004 100 $16.91
9/23/2004 3,200 $16.92
9/23/2004 1,600 $16.93
9/23/2004 6,300 $16.94
9/23/2004 900 $16.95
9/23/2004 100 $16.96
9/23/2004 100 $16.98
9/23/2004 100 $17.11
9/23/2004 100 $17.15
9/24/2004 6,200 $17.80
9/24/2004 100 $17.85
9/24/2004 3,000 $17.90
9/24/2004 200 $17.97
9/24/2004 3,000 $18.03
9/29/2004 300 $17.35
9/29/2004 2,200 $17.37
9/29/2004 400 $17.38
9/29/2004 7,000 $17.40
9/29/2004 1,400 $17.43
9/29/2004 400 $17.55
9/29/2004 700 $17.61
9/29/2004 100 $17.77
9/30/2004 2,200 $17.33
9/30/2004 1,800 $17.45
9/30/2004 1,300 $17.49
9/30/2004 6,600 $17.50
9/30/2004 100 $17.53
9/30/2004 500 $17.54
10/5/2004 200 $17.00
10/5/2004 900 $17.02
10/5/2004 2,400 $17.03
10/5/2004 1,400 $17.04
10/5/2004 700 $17.05
10/5/2004 500 $17.06
10/5/2004 1,000 $17.08
10/5/2004 1,600 $17.10
10/5/2004 1,200 $17.13
10/5/2004 100 $17.15
10/5/2004 500 $17.29
10/5/2004 2,000 $17.30
10/6/2004 4,000 $16.75
10/6/2004 3,000 $16.76
10/6/2004 600 $16.77
10/6/2004 1,100 $16.79
10/6/2004 3,100 $16.80
10/6/2004 700 $16.84
10/13/2004 600 $16.30
10/13/2004 300 $16.31
10/13/2004 700 $16.33
10/13/2004 300 $16.34
10/13/2004 100 $16.40
10/13/2004 200 $16.44
10/13/2004 2,300 $16.45
10/13/2004 900 $16.46
10/13/2004 600 $16.47
10/13/2004 100 $16.50
10/13/2004 800 $16.52
10/13/2004 1,000 $16.53
CUSIP NO. 401617 10 5 Schedule 13D Page 7 of 11 Pages
AMOUNT OF
DATE OF SALE SECURITIES SOLD PRICE PER SHARE
------------ --------------- ---------------
10/13/2004 300 $16.54
10/13/2004 1,200 $16.55
10/13/2004 900 $16.56
10/13/2004 300 $16.57
10/13/2004 100 $16.58
10/13/2004 300 $16.82
10/13/2004 300 $16.90
10/13/2004 200 $16.96
10/13/2004 100 $17.04
10/13/2004 200 $17.20
10/13/2004 300 $17.25
10/13/2004 100 $17.26
10/13/2004 300 $17.30
10/14/2004 10,600 $16.50
10/14/2004 500 $16.51
10/14/2004 200 $16.54
10/14/2004 100 $16.59
10/14/2004 400 $16.66
10/14/2004 700 $16.75
In the last 60 days, Paul Marciano as sole trustee of the Paul Marciano Trust
has engaged in the following sales of the Common Stock, which sales have been
effected through a broker in accordance with Rule 144 of the Securities and
Exchange Commission:
AMOUNT OF
DATE OF SALE SECURITIES SOLD PRICE PER SHARE
------------ --------------- ---------------
8/26/2004 400 $16.00
9/7/2004 3,800 $16.02
9/7/2004 300 $16.00
9/7/2004 4,000 $16.05
9/7/2004 100 $16.09
9/7/2004 100 $16.08
9/7/2004 1,200 $16.11
9/7/2004 2,100 $16.10
9/7/2004 400 $16.12
9/7/2004 500 $16.15
9/8/2004 200 $16.44
9/8/2004 300 $16.57
9/8/2004 9,800 $16.52
9/8/2004 700 $16.55
9/8/2004 500 $16.50
9/8/2004 100 $16.49
9/8/2004 700 $16.47
9/8/2004 100 $16.45
9/8/2004 100 $16.53
9/15/2004 6,200 $16.40
9/15/2004 100 $16.42
9/15/2004 200 $16.21
9/15/2004 100 $16.24
9/15/2004 200 $16.25
9/15/2004 300 $16.26
9/15/2004 1,800 $16.27
9/15/2004 200 $16.28
9/15/2004 300 $16.30
9/15/2004 400 $16.31
9/15/2004 200 $16.32
9/15/2004 100 $16.34
9/15/2004 700 $16.35
9/15/2004 100 $16.37
9/15/2004 1,600 $16.38
9/16/2004 8,200 $17.00
9/16/2004 800 $16.87
9/16/2004 200 $16.82
9/16/2004 200 $16.85
9/16/2004 700 $16.99
9/16/2004 1,200 $16.95
9/16/2004 1,200 $16.94
9/20/2004 200 $17.20
9/20/2004 3,400 $17.02
CUSIP NO. 401617 10 5 Schedule 13D Page 8 of 11 Pages
AMOUNT OF
DATE OF SALE SECURITIES SOLD PRICE PER SHARE
------------ --------------- ---------------
9/20/2004 1,800 $17.05
9/20/2004 600 $17.00
9/20/2004 4,000 $17.04
9/20/2004 1,000 $17.03
9/20/2004 1,200 $16.96
9/20/2004 100 $16.95
9/20/2004 200 $16.94
9/21/2004 7,800 $17.00
9/21/2004 200 $17.01
9/21/2004 400 $17.05
9/21/2004 500 $17.02
9/21/2004 300 $17.10
9/21/2004 1,100 $17.15
9/21/2004 100 $17.14
9/21/2004 100 $16.96
9/21/2004 2,000 $16.90
9/27/2004 200 $17.50
9/27/2004 300 $17.57
9/27/2004 1,800 $17.25
9/27/2004 300 $17.07
9/27/2004 7,800 $17.15
9/27/2004 1,100 $17.10
9/27/2004 400 $17.11
9/27/2004 100 $17.13
9/27/2004 200 $17.14
9/27/2004 300 $17.16
9/28/2004 200 $17.23
9/28/2004 100 $17.22
9/28/2004 2,300 $17.20
9/28/2004 2,400 $16.88
9/28/2004 1,700 $16.89
9/28/2004 100 $17.00
9/28/2004 200 $17.07
9/28/2004 100 $17.09
9/28/2004 1,700 $16.93
9/28/2004 100 $16.94
9/28/2004 100 $16.96
9/28/2004 200 $16.91
9/28/2004 1,300 $16.90
9/28/2004 100 $17.11
9/28/2004 200 $17.15
9/28/2004 600 $17.10
9/28/2004 300 $17.18
9/28/2004 800 $17.17
10/7/2004 600 $17.06
10/7/2004 200 $17.09
10/7/2004 5,600 $17.05
10/7/2004 600 $17.00
10/7/2004 1,000 $17.07
10/7/2004 3,100 $17.14
10/7/2004 500 $16.99
10/7/2004 300 $16.93
10/7/2004 600 $16.90
10/8/2004 2,500 $17.45
10/8/2004 600 $17.51
10/8/2004 4,700 $17.50
10/8/2004 3,900 $17.25
10/8/2004 500 $17.26
10/8/2004 300 $17.34
10/12/2004 9,000 $17.45
10/12/2004 100 $17.51
10/12/2004 2,800 $17.50
10/12/2004 600 $17.53
10/13/2004 1,100 $16.53
10/13/2004 1,000 $16.52
10/13/2004 100 $16.50
10/13/2004 400 $16.90
10/13/2004 300 $16.82
10/13/2004 100 $16.60
10/13/2004 100 $16.59
10/13/2004 200 $16.58
10/13/2004 300 $16.57
CUSIP NO. 401617 10 5 Schedule 13D Page 9 of 11 Pages
AMOUNT OF
DATE OF SALE SECURITIES SOLD PRICE PER SHARE
------------ --------------- ---------------
10/13/2004 100 $16.44
10/13/2004 800 $16.96
10/13/2004 500 $17.04
10/13/2004 100 $17.05
10/13/2004 300 $17.20
10/13/2004 100 $17.21
10/13/2004 100 $17.22
10/13/2004 300 $17.25
10/13/2004 100 $17.26
10/13/2004 100 $17.28
10/13/2004 300 $17.30
10/13/2004 400 $16.34
10/13/2004 700 $16.33
10/13/2004 300 $16.31
10/13/2004 500 $16.30
10/13/2004 700 $16.47
10/13/2004 1,000 $16.45
10/13/2004 900 $16.56
10/13/2004 1,300 $16.55
10/13/2004 300 $16.54
10/18/2004 400 $16.89
10/18/2004 700 $16.88
10/18/2004 1,300 $16.86
10/18/2004 800 $16.87
10/18/2004 500 $16.85
10/18/2004 300 $16.84
10/18/2004 200 $16.80
10/18/2004 300 $17.00
10/18/2004 2,300 $16.90
10/18/2004 2,400 $16.91
10/18/2004 600 $16.92
10/18/2004 1,100 $16.95
10/18/2004 1,100 $16.94
10/18/2004 400 $16.93
10/18/2004 100 $16.96
10/19/2004 900 $17.42
10/19/2004 100 $17.40
10/19/2004 1,800 $17.44
10/19/2004 900 $17.43
10/19/2004 1,200 $17.45
10/19/2004 1,200 $17.46
10/19/2004 600 $17.54
10/19/2004 200 $17.53
10/19/2004 300 $17.52
10/19/2004 300 $17.55
10/19/2004 200 $17.37
10/19/2004 200 $17.38
10/19/2004 4,600 $17.39
Except for the transactions reported in this statement on Schedule 13D, on
statements under Section 16 of the Exchange Act or otherwise, none of the
Reporting Person, Maurice Marciano or Paul Marciano has engaged in any other
transactions in the Common Stock of the Issuer within the past 60 days.
Except as disclosed herein, no other person has the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the sale of,
the shares of Common Stock described herein.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The following summary description is qualified in its entirety by reference to
the full text of the agreement, which is incorporated herein by reference and
filed as Exhibit 1.
See Item 5 for a description of the terms of the Operating Agreement of the
Reporting Person.
Other than the foregoing, there are no contracts, arrangements, understandings
or relationships between the Reporting Person and any person with respect to any
securities of the Issuer.
CUSIP NO. 401617 10 5 Schedule 13D Page 10 of 11 Pages
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 Amendment No. 3 and Restatement of Operating Agreement for
Marciano Financial Holdings II, LLC, dated October 11, 2004.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: October 21, 2004
Marciano Financial Holdings II, LLC
/S/ MAURICE MARCIANO
-----------------------------------
BY: MAURICE MARCIANO, MANAGER
ATTENTION. INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001).
CUSIP NO. 401617 10 5 Schedule 13D Page 11 of 11 Pages
EXHIBIT INDEX
Exhibit No. Description
----------- --------------------------------------------------------------
Exhibit 1 Amendment No. 3 and Restatement of Operating Agreement for
Marciano Financial Holdings II, LLC, dated October 11, 2004.
EXHIBIT 1
AMENDMENT NO. 3 AND RESTATEMENT OF OPERATING AGREEMENT
FOR
MARCIANO FINANCIAL HOLDINGS II, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100,
25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES
TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
TABLE OF CONTENTS
PAGE
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ARTICLE 1.
DEFINITIONS....................................................................1
1.1 "Act".................................................................1
1.2 "Adjusted Capital Account Deficit"....................................1
1.3 "Affiliate"...........................................................2
1.4 "Agreement"...........................................................2
1.5 "Articles"............................................................2
1.6 "Assignee"............................................................2
1.7 "Bankruptcy"..........................................................2
1.8 "Capital Account".....................................................2
1.9 "Capital Contributions"...............................................2
1.10 "Code"................................................................3
1.11 "Company".............................................................3
1.12 "Company Minimum Gain"................................................3
1.13 "Distributable Cash"..................................................3
1.14 "Distribution"........................................................3
1.15 "Economic Interest"...................................................3
1.16 "Economic Interest Owner".............................................3
1.17 "Fiscal Year".........................................................3
1.18 "Gross Asset Value"...................................................3
1.19 "Liquidation".........................................................4
1.20 "Majority Interest"...................................................4
1.21 "Manager".............................................................4
1.22 "Member"..............................................................4
1.23 "Member Loans"........................................................4
1.24 "Member Nonrecourse Debt".............................................4
1.25 "Member Nonrecourse Debt Minimum Gain"................................4
1.26 "Member Nonrecourse Deductions".......................................4
1.27 "Membership Interest".................................................4
1.28 "Nonrecourse Debt"....................................................4
1.29 "Nonrecourse Deductions"..............................................4
1.30 "Nonrecourse Liability"...............................................5
1.31 "Percentage Interest".................................................5
1.32 "Person"..............................................................5
1.33 "Profits" and "Losses"................................................5
1.34 "Regulations".........................................................5
i
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(continued)
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ARTICLE 2.
ORGANIZATIONAL MATTERS.........................................................6
2.1 Formation.............................................................6
2.2 Name..................................................................6
2.3 Term..................................................................6
2.4 Office and Agent......................................................6
2.5 Purpose of Company....................................................6
ARTICLE 3.
CAPITAL CONTRIBUTIONS..........................................................6
3.1 Initial Capital Contributions.........................................6
3.2 Additional Capital Contributions......................................6
3.3 Capital Accounts......................................................7
3.4 Treatment of Capital Contributions....................................7
3.5 No Obligation to Fund Capital Account Deficit.........................8
3.6 Member Loans..........................................................8
ARTICLE 4.
MEMBERS........................................................................8
4.1 Limited Liability.....................................................8
4.2 Admission of Additional Members.......................................8
4.3 Withdrawals or Resignations...........................................8
4.4 Transactions with the Company.........................................9
4.5 Remuneration to Members...............................................9
4.6 Meetings of Members...................................................9
ARTICLE 5.
MANAGEMENT AND CONTROL OF THE COMPANY..........................................9
5.1 Management of the Company by Manager..................................9
5.2 Appointment of Manager...............................................10
5.3 Performance of Duties: Liability of Manager..........................10
5.4 Devotion of Time.....................................................11
5.5 Transactions between the Company and the Manager.....................11
5.6 Payments to Manager..................................................11
5.7 Expenses.............................................................11
5.8 Acts of Manager as Conclusive Evidence of Authority..................11
5.9 Limited Liability....................................................12
ii
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(continued)
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ARTICLE 6.
ALLOCATIONS OF PROFIT AND LOSS
AND DISTRIBUTIONS.............................................................12
6.1 Time of Allocations and Distributions................................12
6.2 Allocations of Profits and Losses....................................12
6.3 Nonrecourse Deductions; Minimum Gain Chargeback......................13
6.4 Member Nonrecourse Deductions........................................13
6.5 Qualified Income Offset..............................................13
6.6 Treatment of Special Allocations.....................................14
6.7 Tax Credits..........................................................14
6.8 Depreciation Recapture...............................................14
6.9 Differing Tax Basis; Tax Allocation..................................14
6.10 Sharing Between Transferor and Transferee............................14
6.11 Excess Nonrecourse Liability Safe Harbor.............................15
6.12 .....................................................................15
6.13 In-Kind Distributions................................................15
6.14 Restriction on Distributions.........................................15
6.15 Return of Distributions..............................................16
6.16 Distributions of Tax Cash............................................16
ARTICLE 7.
TRANSFER AND ASSIGNMENT OF INTERESTS..........................................17
7.1 Transfer and Assignment of Interests.................................17
7.2 Further Restrictions on Transfer of Interests........................17
7.3 Right of First Refusal...............................................17
7.4 Transferee Entitled to Economic Interest Only........................18
7.5 Permitted Transfer...................................................18
7.6 Determination of Purchase Price......................................18
7.7 Substitution of Members..............................................19
7.8 Effective Date of Permitted Transfers................................20
7.9 Rights of Legal Representatives......................................20
7.10 No Effect to Transfers in Violation of Agreement.....................20
7.11 Option to Purchase Non-Economic Interest.............................20
ARTICLE 8.
ACCOUNTING, RECORDS, REPORTING BY MEMBERS.....................................21
8.1 Books and Records....................................................21
8.2 Delivery to Members and Inspection...................................21
8.3 Annual Statements....................................................22
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(continued)
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8.4 Financial and Other Information......................................22
8.5 Filings..............................................................22
8.6 Bank Accounts........................................................23
8.7 Accounting Decisions and Reliance on Others..........................23
8.8 Accounting to Members. .............................................23
8.9 Tax Matters for the Company Handled by Manager.......................23
8.10 Tax Status and Returns...............................................23
8.11 Discretionary Section 754 Election...................................23
ARTICLE 9.
DISSOLUTION AND WINDING UP....................................................24
9.1 Dissolution..........................................................24
9.2 Events Not Causing Dissolution.......................................24
9.3 Winding Up...........................................................24
9.4 Distributions in Kind................................................24
9.5 Order of Payment and Distribution Upon Dissolution...................25
9.6 Limitations on Payments Made in Dissolution..........................25
9.7 Certificate of Cancellation..........................................25
9.8 No Action for Dissolution............................................25
ARTICLE 10.
INDEMNIFICATION AND INSURANCE.................................................26
10.1 Indemnification of Agents............................................26
10.2 Insurance............................................................26
ARTICLE 11.
PROVISIONS RELATING TO GUESS?, INC. STOCK.....................................26
11.1 Control Over Shares..................................................26
11.2 Allocations of Profit and Loss and Distributions.....................27
11.3 Effect of Transfer by Gift...........................................27
ARTICLE 12.
MISCELLANEOUS.................................................................27
12.1 Counsel to the Company...............................................27
12.2 Confidentiality and Press Releases...................................28
12.3 Complete Agreement...................................................28
12.4 Binding Effect.......................................................28
12.5 Parties in Interest..................................................28
12.6 Pronouns; Statutory References.......................................28
12.7 Headings ..........................................................28
12.8 Interpretation.......................................................28
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(continued)
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12.9 References to this Agreement.........................................29
12.10 Disputed Matters; Arbitration........................................29
12.11 Exhibits.............................................................29
12.12 Severability.........................................................29
12.13 Additional Documents and Acts........................................29
12.14 Notices..............................................................29
12.15 Amendments...........................................................29
12.16 Reliance on Authority of Person Signing Agreement....................30
12.17 No Interest in Company Property; Waiver of Action for Partition......30
12.18 Multiple Counterparts................................................30
12.19 Attorney Fees........................................................30
12.20 Time is of the Essence...............................................30
12.22 Remedies Cumulative..................................................31
EXHIBIT A.....................................................................32
v
AMENDMENT NO. 3 AND RESTATEMENT OF OPERATING AGREEMENT
FOR
MARCIANO FINANCIAL HOLDINGS II, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
THIS AMENDMENT NO. 3 AND RESTATEMENT OF OPERATING AGREEMENT is made as
of October 11, 2004, by and among the parties listed on the signature pages
hereof, with reference to the following facts:
A. The parties formed Marciano Financial Holdings II, LLC (the
"Company"), a limited liability company under the laws of the State of
California, by an Operating Agreement dated November 15, 1999 (the "Original
Agreement").
B. The parties desire to adopt and approve a restatement of the
operating agreement for the Company and, effective as of the date hereof, the
Original Agreement is superseded and of no further force or effect.
NOW, THEREFORE, the parties (hereinafter sometimes collectively referred to as
the "Members," or individually as a "Member") by this Agreement set forth the
operating agreement for the Company under the laws of the State of California
upon the terms and subject to the conditions of this Agreement.
ARTICLE 1.
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings set forth below (all terms used in this Agreement that are not defined
in this Article 1 shall have the meanings set forth elsewhere in this
Agreement):
1.1 "ACT" means the California Limited Liability Company Act,
California Corporations Code Section 17000 ET SEQ., as the same may be amended
from time to time.
1.2 "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 the relevant Fiscal Year, after giving effect to the following
adjustments:
1.2(a) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to this Agreement or is deemed to be
obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(C) after
taking into account any changes during such year in Company Minimum Gain and in
Minimum Gain attributable to any Company Nonrecourse Debt under Regulations
Section 1.704-2(d)(2) and (3); and
1
1.2(b) Debit to such Capital Account the items described in
Sections 1.704- 1(b)(2)(ii)(d)(4), (5), and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
1.3 "AFFILIATE" means any individual, partnership, corporation, trust
or other entity or association, directly or indirectly controlled by, or under
common control with, a Member. The term "control," as used in the immediately
preceding sentence, means, with respect to a corporation or limited liability
company the right to exercise, directly or indirectly, more than fifty percent
(50%) of the voting rights attributable to the controlled corporation or limited
liability company, and, with respect to any individual, partnership, trust,
other entity or association, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of the
controlled entity.
1.4 "AGREEMENT" means this Operating Agreement, as originally
executed and as amended from time to time.
1.5 "ARTICLES" means Articles of Organization for the Company
originally filed with the California Secretary of State and as amended from time
to time.
1.6 "ASSIGNEE" means a Person who has acquired an Economic Interest
in the Company but who has not been admitted as a Substituted Member.
1.7 "BANKRUPTCY" means: (a) the filing of an application by a Member
for, or his or her consent to, the appointment of a trustee, receiver, or
custodian of his or her other assets; (b) the entry of an order for relief with
respect to a Member in proceedings under the United States Bankruptcy Code, as
amended or superseded from time to time; (c) the making by a Member of a general
assignment for the benefit of creditors; (d) the entry of an order, judgment, or
decree by any court of competent jurisdiction appointing a trustee, receiver, or
custodian of the assets of a Member unless the proceedings and the Person
appointed are dismissed within ninety (90) days; or (e) the failure by a Member
generally to pay his or her debts as the debts become due within the meaning of
Section 303(h)(1) of the United States Bankruptcy Code, as determined by the
Bankruptcy Court, or the admission in writing of his or her inability to pay his
or her debts as they become due.
1.8 "CAPITAL ACCOUNT" means with respect to any Member the capital
account which the Company establishes and maintains for such Member pursuant to
Section 3.3.
1.9 "CAPITAL CONTRIBUTIONS" means the total value of cash and fair
market value of property (including promissory notes) contributed and/or
services rendered or to be rendered to the Company by Members.
2
1.10 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, the provisions of succeeding law and, to the extent applicable,
the Regulations.
1.11 "COMPANY" means Marciano Financial Holdings II, LLC, a
California limited liability company.
1.12 "COMPANY MINIMUM GAIN" shall have the meaning ascribed to the
term "Partnership Minimum Gain" in Regulations Section 1.704-2(d)(1).
1.13 "DISTRIBUTABLE CASH" means the amount of cash which the Manager
deems available for distribution to the Members, taking into account all Company
debts, liabilities, and obligations then due and amounts which the Manager deems
necessary to place into reserves for customary and usual claims with respect to
the Company's business.
1.14 "DISTRIBUTION" means any money or other property transferred
without consideration to Members with respect to their interests in the Company,
but shall not include any payments to the Manager pursuant to Section 5.6.
1.15 "ECONOMIC INTEREST" means a Member's or Economic Interest
Owner's share of one or more of the Company's taxable income, taxable losses,
and distributions of the Company's assets pursuant to this Agreement and the
Act, but shall not include any other rights of a Member, including, without
limitation, the right to vote or participate in the management, or any right to
information concerning the business or affairs of Company.
1.16 "ECONOMIC INTEREST OWNER" means the owner of an Economic
Interest who is not a Member.
1.17 "FISCAL YEAR" means the Company's fiscal year, which shall be
the calendar year.
1.18 "GROSS ASSET VALUE" means, with respect to any asset of the
Company, the asset's adjusted basis for federal income tax purposes; provided,
however, that (i) the Gross Asset Value of any asset contributed by a Member to
the Company or distributed to a Member by the Company shall be the gross fair
market value of such asset (without taking into account Section 7701(g) of the
Code), as reasonably determined by the contributing or distributee Member, as
the case may be, and the Manager; (ii) the Gross Asset Values of all Company
assets shall be adjusted to equal their respective gross fair market values
(without taking into account Section 7701(g) of the Code), upon the termination
of the Company for federal income tax purposes pursuant to Section 708(b)(1)(B)
of the Code; and (iii) the Gross Asset Values of all Company assets may be
adjusted in the sole and absolute discretion of the Manager to equal their
respective gross fair market values (taking into account Section 7701(g) of the
Code), as reasonably determined by the Manager, as of (A) the date of the
acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis contribution to the capital of the
Company or (B) upon the distribution by the Company to a retiring or continuing
Member of more than a de minimis amount of Company property including money in
reduction of such Member's interest in the Company.
3
1.19 "LIQUIDATION" means in respect to the Company the earlier of the
date upon which the Company is terminated under Section 708(b)(1) of the Code or
the date upon which the Company ceases to be a going concern (even though it may
exist for purposes of winding up its affairs, paying its debts and distributing
any remaining balance to its Members), and in respect to a Member where the
Company is not in Liquidation, means the date upon which occurs the termination
of the Member's entire Economic Interest in the Company by means of a
Distribution or the making of the last of a series of Distributions (in one or
more years) to such Member by the Company.
1.20 "MAJORITY INTEREST" means one or more Percentage Interests of
one or more Members which taken together exceed fifty percent (50%) of the
aggregate of all Percentage Interests in both profits and capital.
1.21 "MANAGER" means, Maurice Marciano, or any successor Manager(s)
elected pursuant to Section 5.2. Each Manager, and any successor Manager, shall
serve until his, her or its successor has been elected and qualified. A Manager
may also be a Member, however, it is not necessary that a Manager be a Member.
1.22 "MEMBER" means each Person who has been admitted to the Company
as a Member in accordance with the Articles or this Agreement, or an Assignee
who has become a Member in accordance with Article 7 and has not resigned,
withdrawn, been expelled or, if other than an individual, dissolved.
1.23 "MEMBER LOANS" is defined in Section 3.6.
1.24 "MEMBER NONRECOURSE DEBT" shall have the meaning ascribed to the
term "partner nonrecourse debt" in Regulations Section 1.704-2(b)(4).
1.25 "MEMBER NONRECOURSE DEBT MINIMUM GAIN" means an amount with
respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that
would result if such Member Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulations Section 1.704-2(i)(2).
1.26 "MEMBER NONRECOURSE DEDUCTIONS" shall have the meaning ascribed
to the term "partner nonrecourse deductions" in Regulations Section 1.704-2(i).
1.27 "MEMBERSHIP INTEREST" means a Member's entire interest in the
Company, including the Member's Economic Interest, any right to vote on or
participate in the management of, and the right to receive information
concerning the business and affairs of, the Company.
1.28 "NONRECOURSE DEBT" shall have the meaning set forth in
Regulations Section 1.704- 2(b)(3).
1.29 "NONRECOURSE DEDUCTIONS" shall have the meaning, and the amount
thereof shall be, as set forth in Regulations Section 1.704-2(c).
4
1.30 "NONRECOURSE LIABILITY" shall have the meaning set forth in
Regulations Section 1.704-2(b)(3).
1.31 "PERCENTAGE INTEREST" means the percentage interest of a Member
in the Company as set forth opposite the name of such Member under the column
"Member's Percentage Interest" in Exhibit "A" hereto, as such percentage may be
adjusted from time to time pursuant to the terms of this Agreement.
1.32 "PERSON" means an individual, general partnership, limited
partnership, limited liability company, corporation, trust, estate, real estate
investment trust association or any other entity.
1.33 "PROFITS" and "LOSSES" means, for each Fiscal Year or other
period, an amount equal to the Company's taxable income or loss, as the case may
be, for such year or period, determined in accordance with Section 703(a) of the
Code (for this purpose, all items of income, gain, loss and deduction required
to be stated separately pursuant to Section 703(a)(1) of the Code shall be
included in taxable income or loss); provided, however, for purposes of
computing such taxable income or loss: (i) any deductions for depreciation, cost
recovery or amortization attributable to any assets of the Company shall be
determined by reference to their Gross Asset Value, except that if the Gross
Asset Value of an asset differs from its adjusted tax basis for federal income
tax purposes at any time during such year or other period, the deductions for
depreciation, cost recovery or amortization attributable to such asset from and
after the date during such year or period in which such difference first occurs
shall bear the same ratio to the Gross Asset Value as of such date as the
federal income tax depreciation, amortization or other cost recovery deduction
for such year or other period from and after such date bears to the adjusted tax
basis as of such date; (ii) any gain or loss attributable to the taxable
disposition of any property shall be determined by the Company as if the
adjusted tax basis of such property as of such date of disposition was such
Gross Asset Value reduced by all amortization, depreciation and cost recovery
deductions (determined in accordance with clause (i) above) which are
attributable to said property; (iii) the computation of all items of income,
gain, loss and deduction shall be made without regard to any basis adjustment
under Section 743 of the Code, which may be made by the Company; (iv) any
receipts of the Company that are exempt from federal income tax and are not
otherwise included in taxable income or loss shall be added to such taxable
income or loss; and (v) 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 Regulations Section 1.704-1(b) shall be
subtracted from such taxable income or loss.
1.34 "REGULATIONS" means, unless the context clearly indicates
otherwise, the regulations currently in force as final or temporary that have
been issued by the U.S. Department of Treasury pursuant to its authority under
the Code, and the corresponding provisions of any successor regulations.
5
ARTICLE 2.
ORGANIZATIONAL MATTERS
2.1 FORMATION. Pursuant to the Act, the Members formed a California
limited liability company under the laws of the State of California by filing
the Articles with the California Secretary of State on November 12, 1999. The
rights and liabilities of the Members shall be determined pursuant to the Act
and this Agreement. To the extent that the rights or obligations of any Member
are different by reason of any provision of this Agreement than they would be in
the absence of such provision, this Agreement shall, to the extent permitted by
the Act, control. Effective as of the date hereof, the Original Agreement is
superceded and of no further force or effect.
2.2 NAME. The name of the Company shall continue to be "Marciano
Financial Holdings II, LLC." The business of the Company may be conducted under
that name or, upon compliance with applicable laws, any other name that the
Manager deems appropriate or advisable. The Manager shall file or cause to be
filed any fictitious name certificates and similar filings, and any amendments
thereto, that the Manager considers appropriate or advisable.
2.3 TERM. The term of this Agreement shall be thirty (30) years from
the date on which the Articles of Organization were filed with the California
Secretary of State, unless extended or sooner terminated as hereinafter
provided.
2.4 OFFICE AND AGENT. The Company shall continuously maintain an
office and registered agent in the State of California as required by the Act.
The principal office of the Company shall be as the Manager may determine. The
Company also may have such offices, anywhere within and without the State of
California, as the Manager from time to time may determine, or the business of
the Company may require. The registered agent shall be as stated in the Articles
or as otherwise determined by the Manager.
2.5 PURPOSE OF COMPANY. The purpose of the Company is to engage in
any lawful activity for which a limited liability company may be organized under
the Act. In addition, the Company is intended to provide liability protection to
the members, to provide for centralized management of various assets owned by
the Members, to provide a business succession plan for the eventual retirement
of Paul Marciano and Maurice Marciano, and to provide for the harmonious
co-ownership of such assets by their respective descendants following their
deaths. Notwithstanding the foregoing, the Company shall not conduct any
banking, insurance or trust company business.
ARTICLE 3.
CAPITAL CONTRIBUTIONS
3.1 INITIAL CAPITAL CONTRIBUTIONS. The Members previously made
Initial Capital Contributions as set forth in the Original Agreement.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. The Members shall not be
required to contribute additional capital to the Company.
6
3.3 CAPITAL ACCOUNTS. The Company shall maintain on its books a
Capital Account for each Member. For this purpose, "Capital Account" means with
respect to each Member the amount of money contributed by such Member to the
capital of the Company, increased by the Gross Asset Value of any property
contributed by such Member to the capital of the Company (net of Liabilities
securing such contributed property that the Company is considered to assume or
take subject to under Section 752 of the Code), and the amount of any Profits
allocated to such Member, and decreased by the amount of money distributed to
such Member by the Company (exclusive of a guaranteed payment within the meaning
of Section 707(c) of the Code paid to such Member), the Gross Asset Value of any
property distributed to such Member by the Company (net of Liabilities securing
such distributed property that such Member is considered to assume or take
subject to under Section 752 of the Code), and the amount of any Losses charged
to such Member. To the extent an adjustment to the tax basis of any Company
asset is made pursuant to Code Sections 734(b) or 743(b), and such adjustment is
required by Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account
in determining Capital Accounts, the Capital Accounts of the Members shall be
adjusted to reflect an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis), which is specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations. In the event the Gross Asset Values of Company assets are otherwise
adjusted pursuant to the terms of this Agreement, the Capital Accounts of the
Members shall be adjusted simultaneously to reflect the aggregate net adjustment
as if the Company recognized gain or loss equal to the amount of such aggregate
net adjustment and such gain or loss was allocated to the Members pursuant to
the appropriate provisions of this Agreement. The foregoing Capital Account
definition and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. The transferee of all or a portion of an Economic Interest
shall succeed to that portion of the transferor's Capital Account which is
allocable to the portion of the Economic Interest transferred. A Member who has
more than one Economic Interest in the Company shall have a single Capital
Account that reflects all such Economic Interests, regardless of the class of
Economic Interests owned by such Member and of the time or manner in which the
Economic Interests were acquired.
3.4 TREATMENT OF CAPITAL CONTRIBUTIONS. Except as otherwise
specifically set forth in this Agreement, no Member shall:
3.4(a) receive any interest on its Capital Contributions or on
the balance in its Capital Account;
3.4(b) have the right to withdraw or reduce its Capital
Contributions or to receive any Distributions from the Company except for the
Distributions to be made in accordance with this Agreement;
3.4(c) have the right to demand or receive property other than
cash in return for its Capital Contributions or as Distributions;
7
3.4(d) be compelled to accept a Distribution of any asset in
kind from the Company in lieu of a proportionate Distribution of cash being made
to other Members; or
3.4(e) have priority over any other Member with respect to a
return of Capital Contributions or the allocations of Profits, Losses or
Distributions of Distributable Cash, except as set forth in this Agreement.
3.5 NO OBLIGATION TO FUND CAPITAL ACCOUNT DEFICIT. Notwithstanding
anything to the contrary in this Agreement, if, after the Liquidation,
allocations and Distributions described in Section 9.5, a Member has a deficit
balance in his, her or its Capital Account, such Member shall not be required to
fund any such deficit balance in his, her or its Capital Account.
3.6 MEMBER LOANS. Any Member or an Affiliate may make a loan to the
Company requested by the Manager to the extent required to pay the Company's
operating expenses, including debt service. Any such loan shall bear interest at
the Prime or Reference Rate of Wells Fargo Bank or its successor from time to
time plus two percent (2%), compounded monthly, and be payable as provided in
Sections 6.12 and 9.5 hereof.
ARTICLE 4.
MEMBERS
4.1 LIMITED LIABILITY. Except as required under the Act or as
expressly set forth in this Agreement, no Member shall be personally liable for
any debt, obligation, or liability of the Company, whether that liability or
obligation arises in contract, tort, or otherwise.
4.2 ADMISSION OF ADDITIONAL MEMBERS. The Manager may admit to the
Company additional Members, from time to time, subject to the following:
4.2(a) The Manager and a Majority Interest of all Members must
consent to the admission of any new Member.
4.2(b) The additional Member shall make a Capital Contribution
in such amount and on such terms as the Manager determines to be appropriate
based on the needs of the Company, the net value of the Company's assets, the
Company's financial condition and the benefits anticipated to be realized by the
additional Member; provided, however, that the Economic Interests of all
existing Members must be affected similarly (on a relative basis) unless the
prior written consent of the adversely affected Member(s) is obtained; and
4.2(c) No additional Member shall be admitted if the effect of
such admission would be to terminate the Company within the meaning of Code
Section 708(b).
4.3 WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or resign
from the Company without the prior written consent of the Manager. No
withdrawing or resigning Member
8
shall be entitled to receive the fair value of his, her or its Membership
Interest on withdrawal or resignation.
4.4 TRANSACTIONS WITH THE COMPANY. Subject to any limitations set
forth in this Agreement and with the prior written approval of the Manager, or
all of the Managers if there is more than one Manager, after full disclosure of
the Member's involvement, a Member may lend money to and transact other business
with the Company. Subject to other applicable law, such Member shall have the
same rights and obligations with respect thereto as a Person who is not a
Member.
4.5 REMUNERATION TO MEMBERS. Except as specifically authorized in
this Agreement, no Member is entitled to remuneration for acting in the Company
business, subject to the entitlement of the Members winding up the affairs of
the Company to reasonable compensation pursuant to Section 9.3.
4.6 MEETINGS OF MEMBERS. Meetings of Members may be held in
accordance with the Act.
ARTICLE 5.
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 MANAGEMENT OF THE COMPANY BY MANAGER.
5.1(a) EXCLUSIVE MANAGEMENT BY MANAGER. Subject to the
provisions of 11.1, the business, property and affairs of the Company shall be
managed exclusively by the Manager. Except for situations in which the approval
of the Members is expressly required by the Articles or this Agreement, the
Manager shall have full, complete and exclusive authority, power, and discretion
to manage and control the business, property and affairs of the Company, to make
all decisions regarding those matters and to perform, or cause to be performed,
any and all other acts or activities customary or incident to the management of
the Company's business, property and affairs.
5.1(b) ACTION BY MANAGER. Subject to the provisions of Section
11.1, all actions taken and decisions made with respect to the management of the
property and affairs of the Company shall, except as expressly provided
otherwise herein, be made by the Manager. If at any time a partnership,
corporation, limited liability company, trust or other entity or association is
serving as a Manager of the Company, all actions to be taken by that Manager
shall be taken by that Manager's partners, officers or directors, members or
managers, or fiduciaries in accordance with the instrument governing the
administration of such entity and appropriate governing law. At any time that
more than one (1) Manager is serving hereunder, the Managers shall act by
majority vote.
5.1(c) AGENCY AUTHORITY OF MANAGER. The Manager is authorized
to endorse checks, drafts, and other evidences of indebtedness made payable to
the order of the Company, and to sign contracts and obligations on behalf of the
Company.
9
5.2 APPOINTMENT OF MANAGER.
5.2(a) NUMBER AND QUALIFICATIONS. The Company shall have one
(1) Manager which initially shall be Maurice Marciano. The management rights of
a Manager shall be personal to the Manager and shall not pass to, or be
assignable to, the Manager's estate, heirs, successors or assigns. Unless
otherwise filled in accordance with Section 5.2(d) below, at such time as
Maurice Marciano ceases to serve as the Manager of the Company, Paul Marciano
shall serve as the Manager of the Company.
5.2(b) RESIGNATION. A Manager may resign at any time by giving
written notice to the Members without prejudice to the rights, if any, of the
Company under any contract to which the Manager is a party. The resignation of a
Manager shall take effect upon receipt of that notice or at such later time as
shall be specified in the notice; and, unless otherwise specified in the notice,
the acceptance of the resignation shall not be necessary to make it effective.
The resignation of a Manager who is also a Member shall not affect the Manager's
rights as a Member and shall not constitute a withdrawal of a Member.
5.2(c) REMOVAL. The Members shall not have the right to remove
a Manager.
5.2(d) VACANCIES. Any vacancy occurring for any reason in the
position of the Manager may be filled by the affirmative vote of Members holding
a Majority Interest of the Membership Interests.
5.2(e) MEMBERS HAVE NO MANAGERIAL AUTHORITY. Subject to the
provisions of Section 26., the Members shall have no power to participate in the
management of the Company except as expressly authorized by this Agreement or
the Articles and except as expressly required by the Act. No Member, acting
solely in such capacity, is an agent of the Company. Unless expressly and duly
authorized in writing to do so by the Manager, no Member shall have any power or
authority to bind or act on behalf of the Company in any way, to pledge its
credit, to execute any instrument on its behalf, or to render it liable for any
purpose.
5.3 PERFORMANCE OF DUTIES: LIABILITY OF MANAGER. The Manager shall
perform his, her or its managerial duties in good faith, in a manner he, she or
it reasonably believes to be in the best interests of the Company and its
Members, and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances. In
performing his, her or its duties, the Manager shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, of the following Persons or groups unless they have
knowledge concerning the matter in question that would cause such reliance to be
unwarranted and provided that the Manager acts in good faith and after
reasonable inquiry when the need therefor is indicated by the circumstances:
5.3(a) one or more officers, employees or other agents of the
Company whom the Manager reasonably believes to be reliable and competent in the
matters presented; or
10
5.3(b) any attorney, independent accountant, or other Person
as to matters which the Manager reasonably believes to be within such Person's
professional or expert competence.
A Manager who so performs the duties of Manager shall not have any liability by
reason of being or having been a Manager of the Company. A Manager shall not be
liable to the Company or to any Member for any loss or damage sustained by the
Company or any Member, unless the loss or damage shall have been the result of
fraud, deceit, gross negligence, reckless or intentional misconduct, or a
knowing violation of law by the Manager. Under no circumstances shall any
director, officer, shareholder, member, manager, partner, employee, agent or
Affiliate of any Manager have any personal responsibility for any liability or
obligation of the Manager (whether on a theory of alter ego, piercing the
corporate veil or otherwise), and any recourse permitted under this Agreement or
otherwise of the Members, any former Member, or the Company against a Manager
shall be limited to the assets of the Manager as they may exist from time to
time.
5.4 DEVOTION OF TIME. The Manager is not obligated to devote all of
his, her or its time or business efforts to the affairs of the Company. The
Manager shall devote whatever time, effort and skill he, she or it deems
appropriate for the operation of the Company.
5.5 TRANSACTIONS BETWEEN THE COMPANY AND THE MANAGER. Notwithstanding
that it may constitute a conflict of interest, the Manager may, and may cause
his, her or its Affiliates to, engage in any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service, or the establishment of any salary, other
compensation, or other terms of employment) with the Company so long as such
transaction is not expressly prohibited by this Agreement and so long as the
terms and conditions of such transaction, on an overall basis, are fair and
reasonable to the Company and are at least as favorable to the Company as those
that are generally available from Persons capable of similarly performing them
and in similar transactions between parties operating at arm's length.
5.6 PAYMENTS TO MANAGER. The Manager, and/or any Affiliate of the
Manager, shall be entitled to reasonable remuneration from time to time for
services rendered or goods provided to the Company.
5.7 EXPENSES. The Company shall reimburse the Manager and its
Affiliates for the actual cost of goods and materials used for or by the
Company. The Company shall also pay or reimburse the Manager or its Affiliates
for overhead expenses including, without limitation, rent and general office
expenses, to the extent related to the conduct of the Company's business.
5.8 ACTS OF MANAGER AS CONCLUSIVE EVIDENCE OF AUTHORITY. Any note,
mortgage, evidence of indebtedness, contract, certificate, statement, conveyance
or other instrument in writing, and any assignment or endorsement thereof,
executed or entered into between the Company and any other Person, when signed
by the Manager(s) in accordance with Section 5.1(c) is not invalidated as to the
Company by any lack of authority of the signing Manager in the absence of actual
knowledge on the part of the other Person that the signing Manager had no
authority to execute the same.
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5.9 LIMITED LIABILITY. No Person who is a Manager of the Company
shall be personally liable under any judgment of a court, or in any other
manner, for any debt, obligation, or liability of the Company, whether that
liability or obligation arises in contract, tort, or otherwise, solely by reason
of being a Manager of the Company.
ARTICLE 6.
ALLOCATIONS OF PROFIT AND LOSS
AND DISTRIBUTIONS
Subject to the provisions of Section 11.2, all allocations of profit
and loss and all distributions shall be determined in accordance with the
provisions of this Article 6.
6.1 TIME OF ALLOCATIONS AND DISTRIBUTIONS. Distributions of
Distributable Cash and the determination of Profit and Loss allocations shall be
made as soon as practicable after the end of each Fiscal Year of the Company.
The Manager may, in his, her or its sole discretion, make distributions of
Distributable Cash at intervals during a Fiscal Year, and prior to the final
determination of Profit and Loss allocations and distributions to be made for
that Fiscal Year. However, any distributions prior to the end of a Fiscal Year
shall be deemed only an advance against the Distributions to be made at the end
of that Fiscal Year and shall be subject to a final determination of the actual
amount to be distributed for that Fiscal Year.
6.2 ALLOCATIONS OF PROFITS AND LOSSES. In each Fiscal Year of the
Company, Profits and Losses shall be allocated to the Members as follows:
6.2(a) Losses shall be allocated (i) first, in proportion and
up to positive Capital Account balances until they are reduced to zero; (ii)
second, in proportion and up to the amounts which will bring negative Capital
Account balances into the ratio of Percentage Interests; and (iii) thereafter,
in proportion to Percentage Interests.
6.2(b) Profits shall be allocated, (i) first, to offset Losses
previously allocated under Section 6.2(a), in reverse order thereof; and (ii)
thereafter, in proportion to Percentage Interests.
6.2(c) Losses allocated pursuant to Section 6.2(a) hereof
shall not exceed the maximum amount of Losses that can be so allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end of any
Fiscal Year. In the event some, but not all, of the Members would have Adjusted
Capital Account Deficits as a consequence of an allocation of Losses pursuant to
Section 6.2(a), the limitation set forth in this Section 6.2(c) shall be applied
on a Member-by-Member basis so as to allocate the maximum permissible Loss to
each Member under Regulations Section 1.704-1(b)(2)(ii)(d). In the event Losses
are allocated to any Member(s) under this Section 6.2(c), Profits shall first be
allocated to those Members in proportion and up to the amount of such Losses,
before any other allocation of Profits under this Section 6.2.
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6.3 NONRECOURSE DEDUCTIONS; MINIMUM GAIN CHARGEBACK.
6.3(a) Nonrecourse Deductions of the Company (other than
Member Nonrecourse Deductions) shall be aggregated with all other items of
Company income, gain, loss and deduction in determining Profits and Losses of
the Company.
6.3(b) Except as provided in Regulations Section 1.704-2(f)(2)
and (3), if there is a net decrease in Company Minimum Gain for a Company
taxable year, each Member shall be allocated items of Company income and gain
for that year equal to that Member's share of the net decrease in Company
Minimum Gain, as determined under Regulations Section 1.704-2(g)(2). Any Company
Minimum Gain required to be charged back pursuant to the preceding sentence
shall consist first of gain recognized from the disposition of Company property
subject to one or more Nonrecourse Liabilities of the Company (other than any
Member Nonrecourse Debt), and then if necessary of a pro rata portion of the
Company's other items of income and gain for that year. If the amount of Company
Minimum Gain required to be recognized pursuant to the first sentence of this
Section 6.3(b) exceeds the Company's income and gains for that year, such excess
shall carry over and be recognized under this Section 6.3(b) in each succeeding
year until such excess is eliminated.
6.4 MEMBER NONRECOURSE DEDUCTIONS.
6.4(a) Member Nonrecourse Deductions for any Fiscal Year
shall, notwithstanding any other provision of this Article 6, be allocated to
the Member or Members who bear the economic risk of loss for the Member
Nonrecourse Debt to which the Member Nonrecourse Deductions are attributable
under Regulations Section 1.704-2(c). Economic risk of loss shall be determined
under the rules of Regulations Section 1.752-2. If more than one Member bears
the economic risk of loss for a Member Nonrecourse Debt, any Member Nonrecourse
Deduction attributable thereto shall be allocated to the Members in accordance
with the ratios in which they share such risk of loss.
6.4(b) Except as provided in Regulations Section
1.704-2(i)(4), if there is a net decrease in the minimum gain attributable to a
Member Nonrecourse Debt of the Company during a taxable year, then each Member
with a share of minimum gain attributable to Member Nonrecourse Debt at the
beginning of such taxable year shall be allocated income and gain for the
taxable year (and, if necessary, subsequent years) in proportion to, and to the
extent of the portion of the Member's share of the net decrease in minimum gain
attributable to such Member Nonrecourse Debt. Any minimum gain required to be
charged back pursuant to the preceding sentence shall consist first of gains
recognized from the disposition of Company property subject to Member
Nonrecourse Debt, and then if necessary of a pro rata portion of the Company's
other items of income and gain for that year.
6.5 QUALIFIED INCOME OFFSET. Notwithstanding Section 6.2, after the
application of Sections 6.3 and 6.4, and in the event any Members unexpectedly
receive any adjustments, allocations, or distributions described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of Company Profits shall be
specially allocated to such Members in an amount and manner sufficient to
eliminate the deficit balances in their Capital Accounts (excluding from such
deficit
13
balance amounts Members are obligated to restore under this Agreement) created
by such adjustments, allocations, or distributions as quickly as possible and in
a manner which complies with Regulations Section 1.704-1(b)(2)(ii)(d).
6.6 TREATMENT OF SPECIAL ALLOCATIONS. Any special allocations of
items of Company income and gain pursuant to Sections 6.3, 6.4 and 6.5 are
intended to comply with the requirements of Regulations Section 1.704-2 and
shall be construed and applied consistent therewith. Such special allocations
shall be taken into account in computing subsequent allocations of Net Profits
and Net Losses pursuant to this Article 6, so that the net amount of any items
so allocated and the Profits, Losses and all other items allocated to each
Member pursuant to this Article 6 shall, to the extent possible, be equal to the
net amount that would have been allocated to each such Member pursuant to the
provisions of this Article 6 if Sections 6.3, 6.4 and 6.5 had not applied.
6.7 TAX CREDITS. All tax credits shall, subject to the applicable
provisions of the Code and Regulations Section 1.704-1(b), be allocated to the
Members in accordance with their respective Percentage Interests in the Company
as of the time the tax credit arises. Each Member's allocable share of any tax
credit recapture shall bear the same ratio to the total credit recapture as such
Member's share of the original tax credit subject to recapture.
6.8 DEPRECIATION RECAPTURE. To the extent possible, each Member's
allocable share of Company Profits which is characterized as ordinary income
pursuant to Sections 1245 or 1250 of the Code, with respect to the disposition
of an item of Company property, shall bear the same ratio to the total Profits
of the Company so characterized as such Member's share of the past depreciation
and/or cost recovery deductions taken with respect to the item of property bears
to all the Member's past depreciation and/or cost recovery deductions with
respect to that property.
6.9 DIFFERING TAX BASIS; TAX ALLOCATION. The Members shall cause
depreciation and/or cost recovery deductions and gain or loss with respect to
each item of property to be allocated among the Members for federal income tax
purposes in accordance with the principles of Section 704(c) of the Code and
Regulations promulgated thereunder, so as to take into account the variation, if
any, between the adjusted tax basis of such property and its Gross Asset Value.
Any elections or other decisions relating to such allocations shall be made by
the Manager in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to this Section 6.9 are solely for purposes
of federal and state income 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 provisions of this
Agreement.
6.10 SHARING BETWEEN TRANSFEROR AND TRANSFEREE.
6.10(a) Upon the transfer of all or any part of the Interest
of a Member, Profits and Losses shall be allocated between the transferor and
transferee on the basis of the computation method which in the reasonable
discretion of the Manager is in the best interests of theCompany, provided such
method is in conformity with the methods prescribed by Section 706 of the Code
and Regulations Section 1.706-1(c)(2)(ii). Distributions of Distributable Cash
shall be made to the
14
holder of record of an Economic Interest on the date of distribution. Any
transferee of an Economic Interest shall succeed to the Capital Account of the
transferor Member to the extent it relates to the transferred Economic Interest;
provided, however, that if such transfer causes a termination of the Company
pursuant to Section 708(b)(1)(B) of the Code, the Capital Accounts of all
Members, including the transferee, shall be redetermined as of the date of such
termination in accordance with Regulations Section 1.704-1(b).
6.10(b) Subject to the provisions of the Regulations Section
1.704-1(b), adjustments to the adjusted tax basis of Company property under
Sections 743 and 732(d) of the Code shall not be reflected in the Capital
Account of the transferee Member or on the books of the Company, and subsequent
Capital Account adjustments for distributions, depreciation, amortization, and
gain or loss with respect to such property shall disregard the effect of such
basis adjustment.
6.11 EXCESS NONRECOURSE LIABILITY SAFE HARBOR. Pursuant to
Regulations Section 1.752- 3(a)(3), solely for purposes of determining each
Member's proportionate share of the "excess nonrecourse liabilities" of the
Company (as defined in Regulations Section 1.752-3(a)(3)), the Members'
respective interests in Company Profits shall be their respective Percentage
Interests.
6.12 DISTRIBUTION OF DISTRIBUTABLE CASH. Except as provided in
Section 9.5, in each Fiscal Year of the Company, Distributions of Distributable
Cash shall be made to each of the Members as follows: (i) first, to repay any
Member Loans, including accrued interest thereon in proportion and up to the
outstanding balance of such Member Loans; and (ii) thereafter, in accordance
with their Percentage Interests.
6.13 IN-KIND DISTRIBUTIONS. Assets of the Company (other than cash)
shall not be distributed in kind to the Members without the prior approval of
all Members. If any assets of the Company are distributed to the Members in kind
for purposes of this Agreement, such assets shall be valued on the basis of the
Gross Asset Values thereof (without taking into account Section 7701(g) of the
Code) on the date of distribution. Any Member entitled to any interest in such
assets shall receive such interest as a tenant-in-common with the other
Member(s) so entitled with an undivided interest in such assets in the amount
agreed to by such Members. Upon such Distribution, the Capital Accounts of the
Members shall be adjusted to reflect the amount of gain or loss that would have
been allocated to the Members pursuant to the appropriate provisions of this
Agreement had the Company sold the assets being distributed for their Gross
Asset Values (taking into account Section 7701(g) of the Code) immediately prior
to their distribution.
6.14 RESTRICTION ON DISTRIBUTIONS.
6.14(a) No Distribution shall be made if, after giving effect
to the Distribution:
(i) The Company would not be able to pay its debts as
they become due in the usual course of business; or
15
(ii) The Company's total assets would be less than
the sum of its total liabilities plus, unless this Agreement provides otherwise,
the amount that would be needed, if the Company were to be dissolved at the time
of the Distribution, to satisfy the preferential rights of other Members, if
any, upon dissolution that are superior to the rights of the Member receiving
the Distribution.
6.14(b) The Manager may base a determination that a
Distribution is not prohibited hereunder on any of the following:
(i) Financial statements prepared on the basis of
accounting practices and principles that are reasonable in the circumstances;
(ii) A fair valuation; or
(iii) Any other method that is reasonable in the
circumstances.
The effect of a Distribution is measured as of the date the Distribution is
authorized if the payment occurs within 120 days after the date of
authorization, or the date payment is made if it occurs more than 120 days of
the date of authorization.
6.14(c) A Manager who makes a Distribution in violation of
this Agreement or the Act is personally liable to the Company for the amount of
the Distribution that exceeds what could have been distributed without violating
this Agreement or the Act if it is established that such Manager did not act in
compliance with Section 6.14(a) or Section 9.6. Any Manager who is so liable
shall be entitled to compel contribution from (i) each other Manager who also is
so liable and (ii) each Member for the amount the Member received with knowledge
of facts indicating that the distribution was made in violation of the Agreement
or the Act.
6.15 RETURN OF DISTRIBUTIONS. Except for Distributions made in
violation of the Act or this Agreement, no Member or Economic Interest Owner
shall be obligated to return any Distribution to the Company or pay the amount
of any Distribution for the account of the Company or to any creditor of the
Company. The amount of any Distribution returned to the Company by a Member or
Economic Interest Owner or paid by a Member or Economic Interest Owner for the
account of the Company or to a creditor of the Company shall be added to the
account or accounts from which it was subtracted when it was distributed to the
Member or Economic Interest Owner.
6.16 DISTRIBUTIONS OF TAX CASH. If, on April 1 of each calendar year
during the term of the Company, there is Distributable Cash available, such
Distributable Cash shall be distributed to the Members, in percentages equal to
their respective Percentage Interests and in amounts to be computed by
multiplying (a) the amount of net positive Company income, if any, which is
reflected or is reasonably expected to be reflected on the Company's federal
return of income for the immediately preceding tax year by (b) a percentage
equal to the highest marginal tax rate percentage imposed on ordinary income
wage earnings which are earned during the same tax year by married taxpayers
filing joint tax returns, and then subtracting from the resulting product the
cumulative
16
amount of regular distributions of cash made to all Members during such
preceding tax year pursuant to the terms of this Agreement. Distributions to be
made pursuant to the provisions of this Section 6.16 shall take precedence and
priority over Distributions provided for in the previous Sections of this
Article 6.
ARTICLE 7.
TRANSFER AND ASSIGNMENT OF INTERESTS
7.1 TRANSFER AND ASSIGNMENT OF INTERESTS. Subject to Sections 7.3 and
7.4, a Member may sell, assign, transfer, encumber or otherwise dispose of a
Membership Interest without the consent of the Manager or the other Members.
Transfers in violation of this Article 7 shall only be effective to the extent
set forth in Section 7.10. After the consummation of any transfer of any part of
a Membership Interest, the Membership Interest so transferred shall continue to
be subject to the terms and provisions of this Agreement, and any further
transfers shall be required to comply with all the terms and provisions of this
Agreement.
7.2 FURTHER RESTRICTIONS ON TRANSFER OF INTERESTS. In addition to
other restrictions found in this Agreement, no Member shall transfer, assign,
convey, sell, encumber or in any way alienate all or any part of his, her or its
Membership Interest: (i) without registration under applicable federal and state
securities laws, or if requested by the Manager, unless such Member delivers an
opinion of counsel satisfactory to the Manager that registration under such laws
is not required; and (ii) if the Membership Interest to be transferred,
assigned, sold or exchanged, when added to the total of all other Membership
Interests sold or exchanged in the preceding twelve (12) consecutive months
prior thereto, would cause the termination of the Company under the Code, as
determined by the Manager.
7.3 RIGHT OF FIRST REFUSAL. The existing Members shall have a right
of first refusal to acquire the interest (the "Offered Interest") of any Member
attempting to sell or otherwise transfer the Offered Interest (the "Transferring
Member") on the following terms and conditions, except if such transfer is a
"Permitted Transfer," as defined in Section 7.5.
7.3(a) If any Transferring Member receives a bona fide offer
from a third party (the "Offeror") to purchase the Offered Interest, the
Transferring Member shall first give written notice to the other Members (the
"Offerees") so that the Offerees have the first right to purchase the Offered
Interest. The notice shall contain the price and a complete designation of the
terms on which the Offeror has offered to purchase the Offered Interest.
7.3(b) If the proposed transfer by the Transferring Member is
a gift, bequest or part- gift part-sale, the Transferring Member shall first
give written notice to the Offerees so that the Offerees have the first right to
purchase the Offered Interest, and such notice shall constitute an offer to sell
the Offered Interest at its fair market value, as determined under Section 7.6.
7.3(c) Within thirty (30) days of receipt of the notice given
by the Transferring Member, or within fifteen (15) days after determination of
the fair market value of the Offered
17
Interest under Section 7.6 if the fair market value of the Offered Interest is
to be determined under Section 7.6 (the "Offer Period"), the Offerees shall in
writing either accept the offer to purchase the Offered Interest on the terms
provided in the notice or reject the offer. If more than one Offeree elects to
purchase the Offered Interest, each subscribing Offeree shall have the right to
purchase a pro rata portion of the Offered Interest in such proportion as each
subscribing Offeree's interest in the Company bears to the combined Membership
Interests of all subscribing Members. Failure by the Offerees to agree to
purchase the entire Offered Interest, in writing, within the Offer Period shall
be deemed a rejection by the Offerees.
7.3(d) If the offer to sell to the Offerees is rejected,
either by written notice of the Offerees or by failure to accept the offer in
writing within the Offer Period, the Transferring Member may transfer the
Offered Interest on the terms described in the notice within ninety (90) days
after the rejection by the Offerees (by written notice or failure to accept
within the Offer Period, as the case may be). If the terms of the sale or
transfer change or if the Transferring Member desires to sell or transfer the
Offered Interest more than ninety (90) days after rejection by the Offerees, the
sale or transfer shall again be subject to this Article 7.
7.4 TRANSFEREE ENTITLED TO ECONOMIC INTEREST ONLY. The transferee of
the interest of a Member shall only be entitled to receive the assigning
Member's share of allocable income and loss and distributions to the extent of
the interest assigned, and no other rights of the assigning Member hereunder,
unless such Assignee (a) is admitted to the Company as a substitute Member with
the consent of the Manager and a Majority Interest of all Members and (b)
executes an agreement in form acceptable to the Manager accepting admission to
the Company and agreeing to be bound by all of the terms and conditions of this
Agreement.
7.5 PERMITTED TRANSFER. A "Permitted Transfer" is a transfer of an
interest by a Member to a Family Member; to a trust for the benefit of a Member
or one or more of a Member's Family Members; or, in the case of a Member which
is a partnership, corporation or trust, to one or more of such Member's
partners, shareholders, current beneficiaries, Family Members of such current
beneficiaries or trusts for the benefit of such current beneficiaries or Family
Members of such current beneficiaries, respectively (any of whom is an "Indirect
Individual Transferee"). References to a "Family Member" are to the issue of an
individual Member's grandparents and, if the Member is not an individual, to the
issue of the grandparents of its Indirect Individual Transferees.
7.6 DETERMINATION OF PURCHASE PRICE. For purposes of determining the
purchase price under Section 7.3 of an Offered Interest that is to be
transferred by gift, bequest or part-gift part-sale, fair market value shall be
determined as follows:
7.6(a) The Offerees and the Transferring Member or the
Transferring Member's successor shall attempt to agree on the fair market value
of the Offered Interest within fifteen (15) days after the Transferring Member's
delivery of the notice of intent to transfer the Offered Interest.
18
7.6(b) If the Offerees and the Transferring Member or the
Transferring Member's successor cannot agree on the fair market value within
such fifteen (15)-day period, the (i) Offerees holding more than 50% of the
total interest in both capital and Profits of the Company and (ii) the
Transferring Member or his or her successor shall each appoint an appraiser
within thirty (30) days after the Transferring Member's delivery of the notice
of intent to transfer the Offered Interest. The appraisers shall attempt to
agree on the fair market value of the Offered Interest and, if they agree, their
determination shall be binding on the Offerees and the Transferring Member or
the Transferring Member's successor. If the appraisers cannot agree on the fair
market value of the Offered Interest within fifty (50) days after delivery of
such notice, the appraisers appointed by the Offerees and the Transferring
Member or the Transferring Member's successor shall appoint a third appraiser
within sixty (60) days after the delivery of such notice. If the appraisers
cannot agree on the appointment of the third appraiser, a third appraiser shall
be appointed as promptly as possible by the American Society of Appraisers or,
if the American Society of Appraisers will not act, by the presiding judge of
the Superior Court of the State of California for the County of Los Angeles.
Within twenty (20) days after the appointment of the third appraiser, each
previously appointed appraiser shall submit to the third appraiser a written
determination of the fair market value of the Offered Interest. The third
appraiser shall select the value of one appraiser (but not an average or any
other value), which value shall be binding on the Offerees and the Transferring
Member or the Transferring Member's successor.
7.6(c) Each appraiser appointed hereunder shall be qualified,
knowledgeable and experienced in the appraisal of assets similar to the Offered
Interest and of the type owned by the Company (as specified in Section 7.6(e)
and shall not be an Affiliate of, or a direct or indirect employee or agent of,
any Member, except in connection with the appraisals provided for under this
Section 7.6).
7.6(d) The Transferring Member or the Transferring Member's
successor shall pay the fees and expenses of the appraiser appointed by such
party, each Offeree shall pay its proportional share of the fees and expenses of
the appraiser appointed by the Offerees, and the fees and expenses of the third
appraiser shall be shared equally by the Transferring Member or the Transferring
Member's successor and the Offerees (each of whom shall pay its proportional
share thereof). If any appraiser is appointed by a Member after the expiration
of the time period set by this Section 7.6 for such appointment, or if one of
the appraisers appointed by a Member fails to act in accordance with this
Agreement, that appraiser and his or her determination of fair market value
shall be disregarded for purposes of the determination of the fair market value
of the Offered Interest.
7.6(e) For purposes of this Section 7.6, fair market value
means the price at which the Offered Interest would change hands between a
willing buyer and willing seller, neither being under any compulsion to buy or
to sell and both having reasonable knowledge of relevant facts, taking into
consideration any relevant adjustments relating to lack of marketability and
lack of control.
7.7 SUBSTITUTION OF MEMBERS. A transferee of a Membership Interest
shall have the right to become a substitute Member only if (i) the requirements
of Section 7.2 relating to securities and
19
tax requirements hereof are met, (ii) such Person executes an instrument
satisfactory to the Manager accepting and adopting the terms and provisions of
this Agreement, and (iii) such Person pays any reasonable expenses in connection
with his, her or its admission as a new Member. The admission of a substitute
Member shall not result in the release of the Member who assigned the Membership
Interest from any liability that such Member may have to the Company.
7.8 EFFECTIVE DATE OF PERMITTED TRANSFERS. Any Permitted Transfer of
all or any portion of a Membership Interest shall be effective on the first day
of the month following the date upon which the requirements of Sections 7.1, 7.2
and/or 7.7 have been met. The Manager shall provide the Members with written
notice of such transfer as promptly as possible after the requirements of
Sections 7.1, 7.2 and/or 7.7 have been met. Any transferee of a Membership
Interest shall take subject to the restrictions on transfer imposed by this
Agreement.
7.9 RIGHTS OF LEGAL REPRESENTATIVES. If a Member who is an individual
dies or is adjudged by a court of competent jurisdiction to be incompetent to
manage the Member's person or property, the Member's executor, administrator,
guardian, conservator, or other legal representative may exercise all of the
Member's rights, with the exception of the Member's rights as a Manager, for the
purpose of settling the Member's estate or administering the Member's property,
including any power the Member has under the Articles or this Agreement to give
an Assignee the right to become a Member. If a Member is a corporation, trust,
or other entity and is dissolved or terminated, the powers of that Member may be
exercised by his, her or its legal representative or successor.
7.10 NO EFFECT TO TRANSFERS IN VIOLATION OF AGREEMENT. Upon any
transfer of a Membership Interest in violation of this Article 7, the transferee
shall have no right to vote or participate in the management of the business,
property or affairs of the Company or to exercise any rights of a Member. Such
transferee shall only be entitled to become an Economic Interest Owner and
thereafter shall only receive the share of the Company's taxable income, taxable
loss and Distributions of the Company's assets to which the transferor of such
Economic Interest would otherwise be entitled. Notwithstanding the immediately
preceding sentences, if, in the determination of the Manager, a transfer in
violation of this Article 7 would cause the termination of the Company under
Section 708(b) of the Code, in the sole discretion of the Manager, the transfer
shall be null and void and the purported transferee shall become neither a
Member nor an Economic Interest Owner.
7.11 OPTION TO PURCHASE NON-ECONOMIC INTEREST. Upon and
contemporaneously with any transfer, assignment, conveyance or sale (whether
arising out of an attempted charge upon that Member's Economic Interest by
judicial process, a foreclosure by creditor of the Member or otherwise) of all
or any portion of a Member's Economic Interest which does not at the same time
transfer the balance of the rights associated with the Membership Interest
transferred by the Member (including, without limitation, the rights of the
Member to vote or participate in the management of the business, property and
affairs of the Company), the Company shall purchase from the Member, and the
Member shall sell to Company for a purchase price of one dollar ($1) for each
Percentage Interest transferred, all remaining rights and interests retained by
the Member that immediately before the transfer, assignment, conveyance or sale
were associated with the transferred Economic Interest. Such purchase and sale
shall not, however, result in the release of the Member from any
20
liability to the Company as a Member. Each Member acknowledges and agrees that
the right of the Company to purchase such remaining rights and interests from a
Member who transfers a Membership Interest in violation of this Article 7 is not
unreasonable under the circumstances existing as of the date hereof.
ARTICLE 8.
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
8.1 BOOKS AND RECORDS. The books and records of the Company shall be
kept, and the financial position and the results of its operations recorded, in
accordance with the accounting methods followed for federal income tax purposes.
The books and records of the Company shall reflect all the Company transactions
and shall be appropriate and adequate for the Company's business. The Company
shall maintain at its principal office all of the following:
8.1(a) A current list of the full name and last known business
or residence address of each Member and Economic Interest Owner set forth in
alphabetical order, together with the Capital Contributions, Capital Account and
Percentage Interest of each Member and Economic Interest Owner;
8.1(b) A current list of the full name and business or
residence address of each Manager;
8.1(c) A copy of the Articles and any and all amendments
thereto together with executed copies of any powers of attorney pursuant to
which the Articles or any amendments thereto have been executed;
8.1(d) Copies of the Company's federal, state, and local
income tax or information returns and reports, if any, for the six (6) most
recent taxable years;
8.1(e) A copy of this Agreement and any and all amendments
thereto together with executed copies of any powers of attorney pursuant to
which this Agreement or any amendments thereto have been executed;
8.1(f) Copies of the financial statements of the Company, if
any, for the six (6) most recent Fiscal Years; and
8.1(g) The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past four (4)
Fiscal Years.
8.2 DELIVERY TO MEMBERS AND INSPECTION.
8.2(a) Upon the request of any Member or Economic Interest
Owner for purposes reasonably related to the interest of that Person as a Member
or Economic Interest Owner, the Manager shall promptly deliver to the requesting
Member or Economic Interest Owner, at the
21
expense of the Company, a copy of the information required to be maintained by
Sections 8.1(a), (b) and (d).
8.2(b) Each Member, Manager and Economic Interest Owner shall
have the right, upon reasonable request for purposes reasonably related to the
interest of the Person as Member, Manager or Economic Interest Owner, to:
(i) inspect and copy during normal business hours any
of the Company records described in Sections 8.1(a) through 8.1(g); and
(ii) obtain from the Manager, promptly after their
becoming available, a copy of the Company's federal, state, and local income tax
or information returns for each Fiscal Year.
8.2(c) Any request, inspection or copying by a Member or
Economic Interest Owner under this Section 8.2 may be made by that Person or
that Person's agent or attorney.
8.3 ANNUAL STATEMENTS.
8.3(a) The Manager shall cause to be prepared at least
annually, at Company expense, information necessary for the preparation of the
Members' federal and state income tax returns. The Manager shall send or cause
to be sent to each Member or Economic Interest Owner as soon as practicable
after the end of each Fiscal Year such information as is necessary to complete
federal and state income tax or information returns, and, a copy of the
Company's federal, state, and local income tax or information returns for that
year.
8.3(b) The Manager shall cause to be filed timely with the
California Secretary of State all reports required by the Act, and with the
appropriate authorities of any other State or jurisdiction all reports required
by the laws of such State or jurisdiction in which the Company is qualified to
transact business.
8.4 FINANCIAL AND OTHER INFORMATION. The Manager shall provide such
financial and other information relating to the Company or any other Person in
which the Company owns, directly or indirectly, an equity interest, as a Member
may reasonably request. The Manager shall distribute, promptly after the
preparation or receipt thereof by the Manager, any financial or other
information relating to any Person in which the Company owns, directly or
indirectly, an equity interest, including any filings by such Person under the
Securities Exchange Act of 1934, as amended, that is received by the Company
with respect to any equity interest of the Company in such Person.
8.5 FILINGS. The Manager, at Company expense, shall cause the income
tax returns for the Company to be prepared and timely filed with the appropriate
authorities. The Manager, at Company expense, shall also cause to be prepared
and timely filed, with appropriate federal and state regulatory and
administrative bodies, amendments to, or restatements of, the Articles and all
reports required to be filed by the Company with those entities under the Act or
other then current applicable
22
laws, rules, and regulations. If a Manager required by the Act to execute or
file any document fails, after demand, to do so within a reasonable period of
time or refuses to do so, any other Manager or Member may prepare, execute and
file that document with the California Secretary of State.
8.6 BANK ACCOUNTS. The Manager shall maintain the funds of the
Company in one or more separate bank accounts in the name of the Company, and
shall not permit the funds of the Company to be commingled in any fashion with
the funds of any other Person.
8.7 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Manager. The Manager may rely upon the advice of their accountants
as to whether such decisions are in accordance with accounting methods followed
for federal income tax purposes.
8.8 ACCOUNTING TO MEMBERS. Any accounting rendered to any Member
shall be deemed final and conclusive nine (9) months after delivery unless the
Member specifically objects in writing to some specific aspect of the report and
delivers such written objection to the Manager. Such objection shall be deemed
waived unless such Member commences an arbitration within ninety (90) days of
the delivery of the written objection.
8.9 TAX MATTERS FOR THE COMPANY HANDLED BY MANAGER. The Manager shall
from time to time cause the Company to make such tax elections as he, she or it
deems to be in the best interests of the Company and the Members. The Manager
shall be designated as "Tax Matters Partner" (as defined in Code Section 6231),
to represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including resulting
judicial and administrative proceedings, and to expend the Company funds for
professional services and costs associated therewith. In his, her or its
capacity as "Tax Matters Partner," the Manager shall oversee the Company tax
affairs in the overall best interests of the Company.
8.10 TAX STATUS AND RETURNS.
8.10(a) ACCOUNTANTS. The Company's accountant shall be
selected by the Manager.
8.10(b) STATUS AS COMPANY FOR TAX PURPOSES. Any provision
hereof to the contrary notwithstanding, solely for United States federal income
tax purposes, each of the Members hereby confirms that the Company will be
subject to all provisions of Subchapter K of Chapter 1 of Subtitle A of the
Code; provided, however, the filing of U.S. Partnership Returns of Income shall
not be construed to extend the purposes of the Company or expand the obligations
or liabilities of the Members.
8.11 DISCRETIONARY SECTION 754 ELECTION. Upon a transfer by a Member
of an interest in the Company, which transfer is permitted by the terms hereof,
or upon the death of a Member or the distribution of any Company property to one
or more Members, the Manager, upon the request of one or more of the transferees
or distributees, may, in the Manager's sole discretion cause the Company's
accountants to file an election on behalf of the Company, pursuant to Section
754 of the
23
Code, to cause the basis of the Company's property to be adjusted for federal
income tax purposes in the manner prescribed in Sections 734 or 743 of the Code,
as the case may be. The cost of preparing said election, and any additional
accounting expenses of the Company occasioned by said election, shall be borne
by said transferees or distributees.
ARTICLE 9.
DISSOLUTION AND WINDING UP
9.1 DISSOLUTION. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
9.1(a) Upon the happening of any event of dissolution
specified in the Articles;
9.1(b) Upon the entry of a decree of judicial dissolution
pursuant to the Act;
9.1(c) Upon the vote of a Majority Interest of the Members; or
9.1(d) The sale of all or substantially all of the assets of
the Company.
9.2 EVENTS NOT CAUSING DISSOLUTION. The death, insanity, Bankruptcy,
dissolution or termination of a Member shall not cause a dissolution of the
Company.
9.3 WINDING UP. Upon the occurrence of any event specified in Section
9.1, the Company shall continue solely for the purpose of winding up its affairs
in an orderly manner, liquidating its assets, and satisfying the claims of its
creditors. The Manager, if he has not wrongfully dissolved the Company, or if he
has, then the Members, shall be responsible for overseeing the winding up and
liquidation of Company, shall take full account of the liabilities and assets of
the Company, shall either cause its assets to be sold or distributed, and if
sold (as promptly as is consistent with obtaining the fair market value thereof)
shall cause the proceeds therefrom, to the extent sufficient therefor, to be
applied and distributed as provided in Section 9.5. The Persons winding up the
affairs of the Company shall give written notice of the commencement of winding
up by mail to all known creditors and claimants whose addresses appear on the
records of the Company. The Manager or Members winding up the affairs of the
Company shall be entitled to reasonable compensation for such services.
9.4 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one or
more Members shall first be valued at its fair market value to determine the
taxable income or taxable loss that would have resulted if such asset were sold
for such value, such taxable income or taxable loss shall then be allocated
pursuant to Article 6, and the Members' Capital Accounts shall be adjusted to
reflect such allocations. The amount distributed and charged to the Capital
Account of each Member receiving an interest in such distributed asset shall be
the fair market value of such interest (net of any liability secured by such
asset that such Member assumes or takes subject to). The fair market value of
such asset shall be determined by the Manager or by the Members or if any Member
objects,
24
by an independent appraiser (any such appraiser must be recognized as an expert
in valuing the type of asset involved) selected by the Manager or liquidating
trustee and approved by the Members.
9.5 ORDER OF PAYMENT AND DISTRIBUTION UPON DISSOLUTION. Upon a
dissolution of the Company, the Members shall take or cause to be taken a full
account of the Company's assets and liabilities as of the date of such
dissolution and shall proceed with reasonable promptness to liquidate the
Company's assets and to terminate its business. Subject to Section 27, the cash
proceeds from the liquidation, as and when available therefor, shall be applied
in the following order of priority:
9.5(a) to the payment of all taxes, debts and other
obligations and liabilities of the Company and the necessary expenses of
liquidation; PROVIDED, HOWEVER, that all debts, obligations and other
liabilities of the Company as to which personal liability exists with respect to
any Member shall be satisfied, or a reserve shall be established therefor, prior
to the satisfaction of any debt, obligation or other liability of the Company as
to which no such personal liability exists; and PROVIDED, FURTHER, that where a
contingent debt, obligation or liability exists, a reserve, in such amount as
the Manager deems reasonable and appropriate, shall be established to satisfy
such contingent debt, obligation or liability, which reserve shall be
distributed as provided in this subsection (a) only upon the termination of such
contingency; and
9.5(b) the balance, if any, shall be distributed, first, to
repay any Member Loans, in proportion and up to the outstanding balance of such
Member Loans; and second, to the Members in proportion to and to the extent of
their respective positive Capital Account balances after allocating all income
and loss of the Company for all periods.
9.6 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise
specifically provided in this Agreement, each Member shall only be entitled to
look solely to the assets of Company for the return of his, her or its positive
Capital Account balance and shall have no recourse for his, her or its Capital
Contribution and/or share of taxable income (upon dissolution or otherwise)
against the Manager or any other Member except as provided in Article 10.
9.7 CERTIFICATE OF CANCELLATION. The Manager or Members who filed the
Certificate of Dissolution shall cause to be filed in the office of, and on a
form prescribed by, the California Secretary of State, a Certificate of
cancellation pursuant to the Act upon the completion of the winding up of the
affairs of the Company.
9.8 NO ACTION FOR DISSOLUTION. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
dissolution of the Company. The Members acknowledge that irreparable damage
would be done to the goodwill and reputation of the Company if any Member should
bring an action in court to dissolve the Company under circumstances where
dissolution is not required by Section 9.1. This Agreement has been drawn
carefully to provide fair treatment of all parties and equitable payment in
liquidation of the Economic Interests. Accordingly, except where the Manager has
failed to liquidate the Company as required by this Article 9, each Member
hereby waives and renounces his, her or its right to initiate legal action to
seek the appointment of a receiver or trustee to liquidate the Company or to
seek a decree
25
of judicial dissolution of the Company on the ground that (a) it is not
reasonably practicable to carry on the business of the Company in conformity
with the Articles or this Agreement, or (b) dissolution is reasonably necessary
for the protection of the rights or interests of the complaining Member. Damages
for breach of this Section 9.8 shall be in monetary damages only (and not
specific performance) and the damages may be offset against distributions by the
Company to which such Member would otherwise be entitled.
ARTICLE 10.
INDEMNIFICATION AND INSURANCE
10.1 INDEMNIFICATION OF AGENTS. The Company shall indemnify any
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that such Person is or was a Member, Manager, officer, employee or other
agent of the Company or that, being or having been such a Member, Manager,
officer, employee or agent, such Person is or was serving at the request of the
Company as a manager, director, officer, employee or other agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise (all such Persons being referred to hereinafter as an "agent"),
to the fullest extent permitted by applicable law in effect on the date hereof
and to such greater extent as applicable law may hereafter from time to time
permit.
10.2 INSURANCE. The Company shall have the power to purchase and
maintain insurance on behalf of any Person who is or was an agent of the Company
against any liability asserted against such Person and incurred by such Person
in any such capacity, or arising out of such Person's status as an agent,
whether or not the Company would have the power to indemnify such Person against
such liability under the provisions of Section 10.1 or under applicable law.
ARTICLE 11.
PROVISIONS RELATING TO GUESS?, INC. STOCK
Notwithstanding any other provision herein to the contrary, in order
to comply with certain provisions of the Securities Act of 1933 (the "Securities
Act"), the Securities Exchange Act of 1934 (the "Exchange Act") and the rules of
the Securities and Exchange Commission issued under the Securities Act and the
Exchange Act, the following provisions shall be applicable with respect to all
shares of the common stock of Guess?, Inc. (the "Shares") contributed to the
Company by the Members.
11.1 CONTROL OVER SHARES. Each Member shall have sole and absolute
management and control over the Shares contributed to the Company by such
Member, including, without limitation, the authority to determine how to vote
such securities and whether the Company should hold, sell, transfer, pledge,
encumber or take any other action with respect to such securities and when to
make distributions in respect of the securities pursuant to Section 11.2. Upon
the death or incapacity of the Member, the other Member shall, acting in a
fiduciary capacity for the benefit of the deceased or incapacitated Member,
including any beneficiary to whom the deceased Member may have left his
Membership Interest, have sole and absolute control over the Shares contributed
to the Company
26
by such deceased or incapacitated Member, including, without limitation, the
authority to determine how to vote such securities and whether the Company
should hold, sell, transfer, pledge, encumber or take any other action with
respect to such securities. The other Member shall obtain no direct or indirect
economic interest in the Shares or the proceeds from such shares by reason of
this Section.
11.2 ALLOCATIONS OF PROFIT AND LOSS AND DISTRIBUTIONS. All items of
income, gain, loss and deduction in respect of the Shares contributed by a
Member to the Company shall be allocated exclusively with respect to the
membership interests currently held by such member, including without limitation
allocations of profit and loss. All dividends and other distributions (whether
in cash or in kind), stock splits, and all proceeds from the sale, pledge or
other transaction in respect of the Shares contributed by a Member to the
Company shall be distributed exclusively in respect of the membership interests
currently held by such Member.
11.3 EFFECT OF TRANSFER BY GIFT. Notwithstanding the foregoing, if
any part of a Member's interest is transferred by gift (in the case of a gift to
a trust, such gift shall not be deemed to occur until such transferor ceases to
be a current beneficiary of such trust) in a Permitted Transfer, in accordance
with the provisions of Section 7.5, the provisions of this Article 11 shall no
longer apply to the Shares allocable to such transferred interest.
ARTICLE 12.
MISCELLANEOUS
12.1 COUNSEL TO THE COMPANY. COUNSEL DRAFTING THIS AGREEMENT MAY ALSO
BE COUNSEL TO ANY MANAGER, MEMBER, OR ANY AFFILIATE OF A MANAGER OR MEMBER. EACH
MEMBER AND MANAGER SPECIFICALLY ACKNOWLEDGES THAT GREENBERG GLUSKER FIELDS
CLAMAN MACHTINGER & KINSELLA LLP HAS REPRESENTED EACH OF THE MEMBERS AND
MANAGERS ON AN ONGOING AND CONTINUOUS BASIS, AND HAS ACTED AS SCRIVENER IN
DRAFTING THIS AGREEMENT IN ACCORDANCE WITH THE JOINT DIRECTION OF THE MEMBERS
AND MANAGER. BECAUSE THERE ARE ACTUAL AND POTENTIAL CONFLICTS OF INTEREST AMONG
THE MEMBERS AND MANAGER OF THE COMPANY, EACH MEMBER AND MANAGER ACKNOWLEDGES
THAT HE, SHE OR IT IS AWARE THAT HE, SHE OR IT SHOULD HAVE SEPARATE
REPRESENTATION TO AVOID THE POSSIBILITY THAT GREENBERG GLUSKER FIELDS CLAMAN
MACHTINGER & KINSELLA LLP MAY BE INFLUENCED IN ITS DRAFTING OF THIS AGREEMENT BY
ITS REPRESENTATION OF THE MEMBERS AND MANAGER. IT IS POSSIBLE THAT IF EACH
MEMBER AND MANAGER HAD SEPARATE COUNSEL, SUCH COUNSEL MIGHT ATTEMPT TO STRUCTURE
THIS AGREEMENT IN A FASHION DIFFERENT THAN THE STRUCTURE CONTEMPLATED AS SET
FORTH HEREIN. BY HIS, HER OR ITS EXECUTION HEREOF, EACH MEMBER AND MANAGER
CONFIRMS THAT HE, SHE OR IT HAS EITHER CONSULTED WITH SEPARATE COUNSEL, OR HAS
DETERMINED NOT TO OBTAIN SUCH SEPARATE REPRESENTATION, AND AGREES TO WAIVE ANY
CONFLICT IN THE DRAFTING OF THE AGREEMENT WHICH MAY HAVE BEEN CREATED BY
GREENBERG GLUSKER FIELDS CLAMAN MACHTINGER & KINSELLA LLP BOTH REPRESENTING THE
27
MEMBERS AND MANAGERS INDIVIDUALLY AND ACTING AS THE SCRIVENER OF THIS
AGREEMENT.
12.2 CONFIDENTIALITY AND PRESS RELEASES. The Members and their
respective Affiliates hereby agree that it is in the best interest of the
Company, the Members and their respective Affiliates that this Agreement, the
business of the Company and all information regarding the business of the
Company be kept confidential. Each of such parties agree that such parties will
not take any action nor conduct themselves in any fashion, including giving
press releases or granting interviews, that would disclose to third parties
unrelated to the Company or the business conducted by the Company any aspect of
the Company or the business of the Company without the unanimous prior written
consent of all Members. To the extent that such prior consent is given, it may
be conditioned upon approval of the text of any press release or the scope of
any intended interview.
12.3 COMPLETE AGREEMENT. This Agreement and the Articles constitute
the complete and exclusive statement of agreement among the Members and Manager
with respect to the subject matter herein and therein and replace and supersede
all prior written and oral agreements or statements by and among the Members and
Manager, or any of them. No representation, statement, condition or warranty not
contained in this Agreement or the Articles shall be binding on the Members or
Manager or have any force or effect whatsoever. To the extent that any provision
of the Articles conflicts with any provision of this Agreement, the Articles
shall control.
12.4 BINDING EFFECT. Subject to the provisions of this Agreement
relating to transferability, this Agreement shall be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.
12.5 PARTIES IN INTEREST. Except as expressly provided in the Act,
nothing in this Agreement shall confer any rights or remedies under or by reason
of this Agreement on any Persons other than the Members and Manager and their
respective successors and assigns, nor shall anything in this Agreement relieve
or discharge the obligation or liability of any third Person to any party to
this Agreement, nor shall any provision give any third person any right of
subrogation or action over or against any party to this Agreement.
12.6 PRONOUNS; STATUTORY REFERENCES. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, singular
or plural, as the context in which they are used may require. Any reference to
the Code, the Regulations, the Act or other statutes or laws shall include all
amendments, modifications or replacements of the specific sections and
provisions concerned.
12.7 HEADINGS. All headings herein are inserted only for convenience
and ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
12.8 INTERPRETATION. In the event any claim is made by any Member
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be
28
implied by virtue of the fact that this Agreement was prepared by or at the
request of a particular Member or his, her or its counsel.
12.9 REFERENCES TO THIS AGREEMENT. Numbered or lettered articles,
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.
12.10 DISPUTED MATTERS; ARBITRATION. Except as otherwise provided in
this Agreement, any controversy or dispute arising out of this Agreement, the
interpretation of any of the provisions hereof, or the action or inaction of any
Member or Manager hereunder shall be submitted to arbitration in Los Angeles
County, California before a retired California Superior Court or Court of Appeal
judge selected by the American Arbitration Association under the commercial
arbitration rules then obtaining of said Association. Any award or decision
obtained from any such arbitration proceeding shall be final and binding on the
parties, and judgment upon any award thus obtained may be entered in any court
having jurisdiction thereof. No action at law or in equity based upon any claim
arising out of or related to this Agreement shall be instituted in any court by
any Member or Manager except (a) an action to compel arbitration pursuant to
this Section 12.10 or (b) an action to enforce an award obtained in an
arbitration proceeding in accordance with this Section 12.10.
12.11 EXHIBITS. All Exhibits attached to this Agreement. are
incorporated and shall be treated as if set forth herein.
12.12 SEVERABILITY. If any provision of this Agreement or the
application of such provision to any Person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
Persons or circumstances other than those to which it is held invalid shall not
be affected thereby.
12.13 ADDITIONAL DOCUMENTS AND ACTS. Each Member agrees to execute
and deliver such additional documents and instruments and to perform such
additional acts as may be necessary or appropriate to effectuate, carry out and
perform all of the terms, provisions, and conditions of this Agreement and the
transactions contemplated hereby.
12.14 NOTICES. Any notice to be given or to be served upon the
Company or any party hereto in connection with this Agreement must be in writing
(which may include facsimile) and will be deemed to have been given and received
when delivered to the address specified by the party to receive the notice. Such
notices shall be given to a Member or Manager at the address specified in
Exhibit "A" hereto. Any party may, at any time by giving five (5) days prior
written notice to the other parties, designate any other Address in substitution
of the foregoing address to which such notice shall be given.
12.15 AMENDMENTS. All amendments to this Agreement shall be in
writing and signed by all of the Members.
29
12.16 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT. If a Member
is not a natural Person, neither the Company nor any Member shall (a) be
required to determine the authority of the individual signing this Agreement to
make any commitment or undertaking on behalf of such entity or to determine any
fact or circumstance bearing upon the existence of the authority of such
individual or (b) be responsible for the application or distribution of proceeds
paid or credited to individuals signing this Agreement on behalf of such entity.
12.17 NO INTEREST IN COMPANY PROPERTY; WAIVER OF ACTION FOR
PARTITION. Subject to Section 11.1, no Member or Economic Interest Owner shall
have any interest in specific property of the Company. Without limiting the
foregoing, each Member and Economic Interest Owner irrevocably waives during the
term of the Company any right that he, she or it may have to maintain any action
for partition with respect to the property of the Company.
12.18 MULTIPLE COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. Delivery of effective signature
pages by facsimile transmission shall constitute effective and binding execution
and delivery of this Agreement.
12.19 ATTORNEY FEES. In the event that any dispute between the
Company and the Members or among the Members should result in litigation or
arbitration, the prevailing party(ies) in such dispute shall be entitled to
recover from the other party(ies) all reasonable fees, costs and expenses of
enforcing any right of the prevailing party(ies), including without limitation,
reasonable attorneys' fees and expenses.
12.20 TIME IS OF THE ESSENCE. All dates and times in this Agreement
are of the essence.
30
12.21 GOVERNING LAW. This Agreement and all the rights and
obligations of the Members shall be governed and construed in accordance with
the laws of the State of California.
12.22 REMEDIES CUMULATIVE. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any Person may be
lawfully entitled.
IN WITNESS WHEREOF, the Manager and all of the Members of Marciano
Financial Holdings, LLC, a California limited liability company, have executed
this Agreement, effective as of the date written above.
MANAGER /s / MAURICE MARCIANO
-------------------------------------
Maurice Marciano
MEMBERS
The Paul Marciano Trust, U/T/D
February 20, 1986
/s/ PAUL MARCIANO, TRUSTEE
-------------------------------------
Paul Marciano, Trustee
The Maurice Marciano Trust, U/T/D
February 24, 1986
/s/ MAURICE MARCIANO, TRUSTEE
-------------------------------------
Maurice Marciano, Trustee
31
EXHIBIT A
---------
MEMBERS AND PERCENTAGE MEMBERSHIP INTEREST
MEMBER'S NAME AND ADDRESS MEMBER'S PERCENTAGE INTEREST
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MEMBERS
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The Paul Marciano Trust, U/T/D February 20, 1986 50%
Paul Marciano, Trustee
Southwest Pacific Investments
144 South Beverly Drive
Beverly Hills, CA 90212
The Maurice Marciano Trust, U/T/D February 20, 1986, 50%
Maurice Marciano, Trustee
Southwest Pacific Investments
144 South Beverly Drive
Beverly Hills, CA 90212
32