-1 -Initials _________ _________ ARTICLES AND REGULATIONS OF at_LIBERTY, L.L.C. (the “Company”) _____________________________________________________ Organized in the County of Los Angeles under the California Corporations Code Section 17000 et seq. _____________________________________________________ TABLE OF CONTENTS ORGANIZATION MATTERS.................................................................................................... 2 DEFINITIONS .............................................................................................................................. 2 CAPITAL CONTRIBUTIONS.................................................................................................... 5 ALLOCATIONS AND DISTRIBUTIONS ................................................................................ 5 ACCOUNTING AND FINANCIAL MATTERS....................................................................... 8 MANAGEMENT .......................................................................................................................... 9 RIGHTS AND OBLIGATIONS MEMBERS .......................................................................... 12 TRANSFER OF INTERESTS -SUBSTITUTED MEMBERS -WITHDRAWL................ 13 AGENTS ..................................................................................................................................... 15 DISSOLUTION, LIQUIDATION AND TERMINATION..................................................... 15 MISCELLANEOUS ................................................................................................................... 18 SIGNATURE PAGE……………………………………………………………………………22 EXHIBIT A MEMBERSHIP INTERESTS…………………………………………………..23 -2 -Initials _________ _________ ARTICLE I ORGANIZATION MATTERS Section 1.01. Formation. This Limited Liability Company (“Company”) will be considered consummated on the date of the signing of these Articles and Regulations by all parties listed on the signatory page. Subsequent to the date hereof, the Limited Liability Company will organize in the State of California by filing a Statement of Limited Liability Company Authority with the California Secretary of State under and pursuant to California Law. Section 1.02. Name. The name of the Limited Liability Company is “at_Liberty LLC” The Company’s business may be conducted under such name or any other name or names deemed advisable by the Managing Member(s). The Managing Member(s) will comply or cause the Company to comply with all applicable laws and other requirements relating to fictitious or assumed names. Section 1.03. Purpose and Business. The transaction of any and all lawful business for which Limited Liability Company’s may be organized under the California Corporations Code (CCC). Section 1.04. Principal Office. The principal business office and registered office of the Limited Liability Company shall be at 950 S. Flower street Suite 407 Los Angeles, Ca 90015 or such other place in the State of California designated from time to time by the Managing Member(s). The Company shall maintain records there as required by IRS regulations and the CCC. Section 1.05. Foreign Qualification. Prior to the Membership’s conducting business in any jurisdiction other than California, the Managing Member(s) shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Managing Member(s), with all requirements necessary to qualify the Company as a foreign corporation in that jurisdiction. At the request of the Managing Member(s), each Member shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with these Regulations that are necessary or appropriate to qualify, continue or terminate the Company as a foreign corporation in all jurisdictions in which the Company may conduct business. Section 1.06. Term. The Company shall commence on the date of the signing of these regulations and shall continue in existence for an infinite period, or such earlier time as these Regulations may specify or applicable law may require. ARTICLE II DEFINITIONS -3 -Initials _________ _________ Capitalized terms used in these Regulations and not otherwise defined herein shall have the following meanings: Advances. At any time, the total amount from time to time lent to the Company by all Members or any one Member, as the case may be, and not theretofore repaid by the Company. Payment is subordinated to the claims of creditors who are not Members (§ UPA 40(b)) Assignee. A Person to whom a Membership Interest has been transferred in a manner expressly permitted under Article VIII, and who thereby shall have an interest in the Company equivalent to that of a Member. As used herein, the phrase “Members or their Assignees” means Members or, if and to the extent that any Assignees shall have succeeded to the interest of any Members, then such Assignees in lieu of such predecessor Members. Board of Directors. The Board of Directors (the “Board”) (the “Managing Members”) shall be comprised of all owners of Class A Membership Interests as provided by section 6.00(c) and shall have the powers vested in it as outlined by these regulations. Capital Contribution. At any time the total amount contributed to the Company by all Members or any one Member, as the case may be, including each Member’s Initial Capital Contribution and any additional capital contributions and not theretofore returned by the Company. Cash Available for Distribution. With respect to any point in time, all Company cash, demand deposits and short-term marketable securities on hand, after payment or reservation for payment of all operating expenses of the Company (including debt service), and less such additional reserves as the Managing Member(s) shall deem reasonable to retain in order to provide for the operation of the Company’s business. CCC. The California Corporations Code, a codification of the Uniform Membership Act of 1994 as amended in 1996 and any successor statute, as amended and in effect from time to time. Code. The Internal Revenue Code of 1986 and any successor statute, as amended and in effect from time to time. Incoming Member. A person pending the status of Member with a corresponding Class A or Class B Membership Interest vested and becoming a “Member” only after accordance with these regulations including the definition of Member and the rules and regulations of section VI and VIII of these bylaws are reached. Initial Capital Contribution. See Section 3.01. Initial Return Amount. 50% of the Initial Capital Contribution. -4 -Initials _________ _________ Managing Member(s). Owners of at least one Class A Membership Interest who also have a position on the Board of Directors. Member. Each Person set forth on Exhibit A hereto who contributes the Initial Capital Contribution set forth for such Person on Exhibit A in compliance with the requirements of Section 3.01, unless such Person ceases to be a Member hereunder or sells, transfers or otherwise disposes of a portion of its interest in the Company and is replaced in whole or in part, as the case may be, by a Substituted Member, in each case in accordance with the Regulations, each additional Member who may be admitted to the Company as provided herein, and each Person that becomes a Substituted Member, if any, of the Company as provided herein, in each case in such Person’s capacity as a Member of the Company. Membership Interest. Pursuant to §17102 of the CCC, there shall be two classes of Membership Interests, Class A and Class B. Unless otherwise specified, the term Membership Interest shall apply to holders of both Class A and Class B Membership Interests. “Membership Interest” shall refer to each Member’s Unit interest in the Company, which shall be the aggregate of each respective Member’s Class A and Class B Membership Interests. When voting on matters for which all classes of Membership Interests may vote, a Member shall have one vote for each Unit of Membership Interest, with a .5 or higher fraction rounded up. Class A Membership Interest (CCC §17102). Each Member’s Class A Membership Interest is represented by such Member’s Class A Units, as set forth opposite such Member’s name in Exhibit A. When voting on matters for which only holders of Class A Membership Interests may vote, a Member shall have one vote for each Unit of Class A Membership Interest, with a .5 fraction rounded up. Class B Membership Interest (CCC §17102). Each Member’s Class B Membership Interest is represented by such Member’s Class B Units, as set forth opposite such Member’s name in Exhibit A. When voting on matters for which only holders of Class B Membership Interests may vote, a Member shall have one vote for each Unit of Class B Membership Interest, with a .5 fraction rounded up. Person. Any individual, general or limited Partnership, corporation, limited liability Membership, executor, administrator or estate, association, trustee or trust, or other entity. Regulations. These governing regulations of the Company. Substituted Member. A Person who is admitted as a Member, or to the Company in place of and with all the rights of a Member pursuant to Section 8.02, in such Person’s capacity as a Member of the Company. Tax Regulations. The income tax regulations promulgated by the Department of the Treasury, as amended and in effect from time to time. Income tax regulations include final, temporary and proposed regulations. -5 -Initials _________ _________ UPA. Uniform Membership Act as adopted and codified in the State of California.. Unit. An interest of a Member in the Company indicating an interest in the profits, losses and distributions of the Company as described herein. ARTICLE III CAPITAL CONTRIBUTIONS Section 3.01. Initial Capital Contributions of Members. Each Member has contributed or will contribute to the Company in cash one hundred percent (100%) of the initial capital contribution (“Initial Capital Contribution”) set forth opposite such Member’s name on Exhibit A attached hereto. Each Member (together with such Member’s Assignees, if any) shall have the Membership Interest in the Company determined on the basis of the number and Class of Units set forth opposite such Member’s name on Exhibit A, as the same may be adjusted as set forth herein or by any amendment to these regulations. Section 3.02. Return of Capital Contributions. No Member shall be entitled to have its Capital Contribution returned except in accordance with the express provisions of these Regulations. Section 3.03. Capital Accounts. Capital Accounts are balance sheet accounts for each Member that include the equity gained or lost from each Member’s respective capital contributions, proportion of business net income or loss, and decreased from Cash Distributions. A separate capital account will be established for each Member. Each Member’s capital account shall be determined and maintained in accordance with Tax Regulation § 1.704-1(b)(2)(iv) as interpreted by the Managing Member(s). A transferee of a Membership Interest will succeed to the capital account of the transferor relating to the interest transferred, and thereafter such transferee’s capital account balance will be determined without regard to any election under Section 754 of the Code. The Managing Member(s) shall have complete discretion to make those determinations, valuations, adjustments and allocations with respect to each Member’s capital account as the Members deem appropriate so that the allocations made pursuant to this Agreement will have substantial economic effect as such term is used in Tax Regulation § 1.704-1(b). See Article IV for more detail. ARTICLE IV ALLOCATIONS AND DISTRIBUTIONS Section 4.01. Allocations Among Members. (a) Taxable Loss shall be allocated in proportion (percentage basis) to the Member’s positive capital account balances. (b) Taxable Income shall be allocated as follows: -6 -Initials _________ _________ a. First, to the Members to the extent and in the proportion they were allocated Taxable Loss under Section 4.01(a). b. Second, Cash Available for Distribution will be split in the following proportion (a) with respect to holders of Class B Membership Interests 75% of Cash Available for Distribution and (b) with respect to holders of Class A Membership Interests the other 25% of the Cash Available for Distribution. For holders of Class B Membership Interests Cash Available for Distribution shall be distributed pro rata based on their respective Initial Capital Contribution as a percentage of the total Initial Capital Contributions of all holders of Class B Membership Interests until such cumulative aggregate distributions amount is reached equal to the Initial Return Amount. For Holders of Class A Membership Interests Cash Available for Distribution shall be distributed pro rata based on the then current Membership Interests. c. Third, to each Member in accordance with the then current Membership Interest of each such Member. Section 4.02. Quarterly Determinations. Subject to the provisions of Section 4.07, the allocations in this article shall be made each calendar quarter to the Members or their Assignees on the last day of such calendar quarter with respect to the Units owned by such Members or their Assignees on that day. Section 4.03 Qualified Allocations. (a) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulation § 1.704-1(b)(2)(iv)(m), to be taken into account, the adjusted Capital gain or loss shall be allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to Section 704(c) of the Code (using the traditional method of Regulation § 1.704-3(b)). Section 4.04. Advances, Repayment and Interest. Advances made by any Member will accumulate in a separate account as liabilities of the Company. Interest will accrue on these Advances based on a rate negotiated in good faith by the lending Member. Advances and the related accrued interest will be repaid as the Company produces net cash in excess of operating needs, unless otherwise provided in any instrument which evidences the Advance. To the extent the Members determine that less than all outstanding Advances to Members shall be repaid at any given time, any outstanding Advances to be repaid shall be repaid to the Members in proportion to the outstanding balances of the Advances made by each, unless otherwise provided in any instrument which evidences the Advance. Section 4.05. Distributions. (a) From time to time, the Company shall make such distributions of Cash Available for Distribution as and to the extent, in the Managing Member’s opinion, there is sufficient cash in the Company to make a distribution. Within 30 days after the last day of each calendar -7 -Initials _________ _________ quarter, the Managing Member(s) shall determine the amount of Cash Available for Distribution with respect to such quarter, and except for distributions made in liquidation of the Company pursuant to Section 10.03, shall distribute the Cash Available for Distribution, if any, to the Members as follows: (i) First, Cash Available for Distribution will be split in the following proportion (a) with respect to holders of Class B Membership Interests 75% of Cash Available for Distribution and (b) with respect to holders of Class A Membership Interests the other 25% of the Cash Available for Distribution. For holders of Class B Membership Interests Cash Available for Distribution shall be distributed pro rata based on their respective Initial Capital Contribution as a percentage of the total Initial Capital Contributions of all holders of Class B Membership Interests until such cumulative aggregate distributions amount is reached equal to the Initial Return Amount. For Holders of Class A Membership Interests Cash Available for Distribution shall be distributed pro rata based on the then current Membership Interests. (ii) Second, After the Initial Return Amount is met, any further distributions to Members of Available Cash will be made 75% to Class A members and 25% to Class B Members, pro rata based on the then current Membership Interests of each party. All distributions shall decrease the positive Capital Account balance of each respective Member by the cash amount distributed. Capital Account record keeping and treatment is discussed further in sections 3.03, 4.01, and 5.06. (b) Distributions to the Members of cash or property (in aggregate value) arising from a liquidation of the Company shall be made in accordance with the capital account balance proportions of the Members, decreasing the respective capital accounts pro rata dollar for dollar until such account balances equal zero (0), after which distributions of liquid or non-liquid assets will be in proportion to each Member’s Membership Interest as provided in Section 10.03(b) hereof. (c) The Company may not make a distribution to the extent that, immediately after giving effect to the distribution, all liabilities of the Company, other than liabilities to Members with respect to their interests and liabilities for which the recourse of creditors is limited to specific property of the Company, exceed the fair value of the Company assets, except that the fair value of property that is subject to liability for which recourse of creditors is limited shall be included in the Company assets only to the extent that the fair value of that property exceeds that liability. Section 4.06 Tax Withholding. The Company is authorized to withhold from distributions to a Member and to pay over to a federal, state or local government, any amounts required to be withheld pursuant to the Code or any provisions of any other federal, state or local law. Any amounts so withheld shall be treated as distributed to such Member pursuant to this Article IV for -8 -Initials _________ _________ all purposes of this Agreement, and shall be offset against any amounts otherwise distributable to such Member. Section 4.07. Transfer of Interest. A Member upon transferring his/her Membership Interest in whole or in part to an Assignee shall no longer have claim to any of the income, gain, loss, deduction or credit allocated and/or distributed to the transferred Membership Interest. Exception may be taken to this regulation only if there is the existence of an instrument or contract signed by the managing Member(s) or his/her duly authorized representative. Income, gain, loss, deduction or credit allocable to any Membership Interest transferred during any calendar quarter shall be allocated within 30 days of the close of such calendar quarter in proportion to the number of days during such calendar quarter for which each holder was recognized by the Company as the owner of the Membership Interest during such calendar quarter, without regard to the date, amount or receipt of any distributions which may have been made with respect to such Membership Interest. Section 4.08. Guaranteed Payments to Members. Unless otherwise decided by the Managing Member(s), no guaranteed payments or salaries will be made to the Members. Section 4.09. Return of Capital Contribution. It is the intent of the Company to invest such capital as is contributed by its members in securities that bear a periodic coupon payment. The manner in which the capital is invested is up to the sole discretion of the Board of Directors, with the following conditions: (a) That the Board must use reasonable effort and due diligence to ascertain that such investment or investments are of a level of risk low enough as to reasonably be expected to not depreciate in value. (b) That the Board must set a term of ten (10) years or less from the date of the first dollar invested as the term of its portfolio, and at the consummation of such term return to each Class B Membership owner his or her capital contribution, and do so in a timely manner not to exceed four months from the date of the last security held in the portfolio liquefied into cash. ARTICLE V ACCOUNTING AND FINANCIAL MATTERS Section 5.01. Fiscal Year. The fiscal year of the Company shall be the calendar year. Section 5.02 Method of Accounting. Unless otherwise provided herein, the Company’s books of account shall be maintained in accordance with federal income tax accounting principles utilizing the accrual method of accounting, with the adjustments required by Regulation § 1.704-1(b) to properly maintain capital accounts. Section 5.03. Tax Controversies. The Managing Member(s) is designated as the tax matters Member (as defined in the Code) and is authorized, empowered and required to represent -9 -Initials _________ _________ the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. Members and their Assignees agree to cooperate with the tax matters Member and to do or refrain from doing any or all things reasonably required by the tax matters Member to conduct such proceedings. The Managing Member(s) is authorized, empowered and required to make such filings with the Internal Revenue Service as may be required to designate the Managing Member(s) as the tax matters Member. Section 5.04. Preparation of Tax Returns. The Company shall file federal and state returns of income and all other tax returns required to be filed by the Company for each calendar year or part thereof. On or prior to March 15 of each year, the Company shall cause each Member or its Assignee to be furnished with information relating to the Company necessary for preparing such Member’s or Assignee’s income tax returns for the preceding year. A copy of the Company’s federal and state returns of income will be available to Members and Assignees upon written request. If a Member or its Assignee intends to report its share of any Company tax item in a manner inconsistent with the Company’s reporting of such item, such Member or its Assignee shall notify the Company in writing at least twenty (20) days prior to the filing of any statement with the Internal Revenue Service in which such inconsistent position is reported. Section 5.05. Books and Records. The Company shall keep and maintain such books and records and other information as may be required under the CCC and shall make such materials available to Members or their Assignees as provided in such Code. Section 5.06. Capital Account Records. Capital Accounts will be adjusted with applicable taxable and non-taxable gains and losses at the close of every quarter, at the discretion of the Managing Member(s). Capital Accounts will be constituted of two sub-accounts, Equity from Cash and Liquid Assets, and Equity from Non-Liquid Assets. Only Equity from Cash and Liquid Assets in cash form can be distributed by to the respective Members by the Managing Member(s) in a Cash Distribution. ARTICLE VI MANAGEMENT Section 6.00(a) Voting. Unless otherwise expressly noted in these Regulations, for a vote to take place the presence of at least a quorum (2/3 of the total units of the Company outstanding) of the class or classes of Membership Interests entitled to vote must be present, whether in person, over the telephone, the internet or in writing. For a vote to be accepted as successful at least a majority of the total Units outstanding in the Company of the applicable class or classes of Membership Interests entitled to vote, vote to the affirmative. Such votes need not take any particular formal form, but must be entered into the records of the company upon conclusion of such vote. -10 -Initials _________ _________ Section 6.00(b) No Quorum. Should no quorum be present such that no vote, decision or action may be taken for a period of 30 consecutive days, a majority of the class of the Company’s Membership Interests entitled to vote shall be sufficient to carry forward a vote, with a vote being successful if at least a majority of the total Units outstanding in the Company of the applicable class or classes of Membership Interests entitled to vote, vote to the affirmative. Section 6.00(c) Board of Directors. All holders of Class A Membership Interests shall hold one position on the Company’s Board of Directors (the “Board”). The Member’s residing on Company’s Board of Director’s shall be the Managing Members, with the powers designated in Section 6.01 Managing Member’s Authority. In order for the Managing Member’s to take any action or make any decision, the voting requirements set out under Section 6.00(a) Voting must be met. Notwithstanding the foregoing, a Class A Member may only be voted off the Board of Directors by a vote to the affirmative of 80% of the total amount of votes eligible to be cast from owners of Class A Membership Interests who reside on the Board. Section 6.00(d) Officers: Pursuant to §17154 of the Code, the Board of Directors may appoint as it deems necessary additional Officers, including, without limitation, a chairperson or a president, or both, a secretary, a chief financial officer, and any other officers with such titles, powers, and duties as shall be specified and determined by the Board. An officer may, but need not, be a member or manager of the limited liability company, and any number of offices may be held by the same person. Unless otherwise vested in another authority by the Board of Directors, the Board of Directors shall set all responsibilities and compensation for officers and employees. Chief Executive Officer – There shall be one Chief Executive Officer (CEO), who may or may not be a Member of the Company. The CEO shall be considered an employee of the Company (unless the CEO is a Member, under which circumstances the CEO, if he/she holds Class A Membership Interests may also be a Managing Member and a member of the Board of Directors) and shall serve a term to be determined by the Board of Directors. The CEO shall work under the supervision of the Board of Directors and shall be subject to any financial or other constraints put into place by the Board. Subject to any constraints put into place by the Board, the CEO shall have the final say on all day-to-day financial decisions as well as be responsible for supervising the other officers of the company in their day-to-day business. Control of Expenditures – A Company operating budget (the “Budget”) will be determined in the 30 days prior to the beginning of each fiscal year by consent of at least the majority of Votes qualified to be cast by the Board of Directors. The budget shall designate the spending controls imposed on each Officer position of the Company. Section 6.01. Managing Member’s Exclusive Authority: the Managing Member(s) shall manage all of the Company’s business and affairs. The Managing Member(s) is exclusively authorized and directed to manage and control the assets and business of the Company, subject to the voting restrictions set out in Section 6.00 as well as the restrictions in Section 6.02 hereof. Except as limited under Section 6.02, the Managing Member(s) is hereby granted the right, -11 -Initials _________ _________ power and authority to do on behalf of the Company all lawful things that, in the judgment of the Managing Member(s), are necessary, proper or desirable to carry out the business of the Company including, but not limited to, the right, power and authority: (a) to incur all expenditures; (b) to employ and dismiss from employment any and all officers, employees, agents, independent contractors, brokers, attorneys and accountants; (c) to acquire, hold, lease, sell or otherwise deal with all or any portion of any Company property for any Company purpose; (d) to arbitrate, settle or defend any claim by, against or involving the Company; (e) to borrow money on behalf of the Company and use as security therefore all or any part of any Company property; (f) to vote shares held by the Company (pro rata to each Member based on then current Membership Interests); (g) to procure and maintain insurance; admit a new Member holding Class B Membership interests only; (h) approve the sale, assignment and/or transfer of a Class B Membership Interest; (i) Buy out any or all Class B Membership Interests per section 8.03 (j) to do any and all of the foregoing at such price, or amount and upon such terms as the Managing Member(s) deems proper and (k) to execute, acknowledge, swear to and deliver any and all instruments to effectuate any and all of the foregoing. Any and all lawful acts heretofore taken by the Managing Member(s) on behalf of the Company that are permitted under this Section 6.01 are hereby ratified and confirmed by the Members as the acts and deeds of the Company. The Managing Member(s) may confer his/her status as Managing Member(s) on one of the other Members with the unanimous consent of all Members holding a 100% aggregate of the Class A Membership Interests. The Managing Member(s) is not released of his/her responsibilities until such consent is received. Section 6.02 Restrictions on the Managing Member(s). (a) Superseding any other provision in this Agreement to the contrary, the following acts require the unanimous consent (vote) of Member(s) holding a 100% aggregate Membership Interest from both Class A and B Membership Interests: (b) the dissolution, liquidation, and termination of the Company pursuant to Article X other than pursuant to the express provisions of Section 10.01; (c) any amendment to this Agreement, known as “The Regulations of at_Liberty a California Limited Liability Company.”; (d) causing the Company to incur any indebtedness or assume or guaranty any indebtedness of any other entity in excess of $200,000 other than normal trade accounts payable in the ordinary course of business; (e) consolidating or merging with or into any other entity or conveying or transferring or leasing its property and assets substantially as an entirety to any entity; (f) authorizing the Company to sell all or substantially all of its assets; (g) the authorization of distributions to the Members other than distributions expressly contemplated by this Agreement; and -12 -Initials _________ _________ Section 6.02(a) Procedures for admitting new Class A Membership Holders: Superseding any other provision in this Agreement to the contrary, the following act requires the unanimous consent (vote) of Member(s) holding a 100% of the aggregate Class A Membership Interests outstanding as well as satisfaction of the guidelines for admission of new members in Section 8.01, 8.02 and 8.03. (a) The admission of a new Member or a Substituted Member holding any Class A Membership Interests. Section 6.03 General Authority. Persons dealing with the Company are entitled to rely conclusively on the power and authority of the Managing Member(s) as set forth in this Agreement. In no event shall any person dealing with the Managing Member(s) with respect to any business or property of the Company be obligated to ascertain that the terms of this Agreement have been complied with, or be obligated to inquire into the necessity or expedience of any act or action of the Managing Member(s); and every contract, agreement, deed, mortgage, security agreement, promissory note or other instrument or document executed by the Managing Member(s) with respect to any business or property of the Company shall be conclusive evidence in favor of any and every person relying thereon or claiming thereunder that (a) at the time of the execution and/or delivery thereof, this Agreement was in full force and effect, (b) the instrument or document was duly executed in accordance with the terms and provisions of this Agreement and is binding upon the Company, and (c) the Managing Member(s) was duly authorized and empowered to execute and deliver any and every such instrument or document for and on behalf of the Company. ARTICLE VII RIGHTS AND OBLIGATIONS OF MEMBERS Section 7.01. No Participation in Management. Except as expressly provided in section IX and otherwise herein, no Member other than the Managing Member(s) shall take part in the management or control of the Company’s business nor shall any Member transact any business in the Company’s name or have the power to sign documents for or otherwise to bind the Company. Section 7.02 Rights of Member. Each Member shall have all of the rights, and be afforded the status, of a Member as set forth in the CCC. In particular, a Member shall have the right to: (a) inspect and copy during regular business hours at such Member’s expense, any of the Company’s books and records; (b) receive copies of this Agreement, the Articles of Organization, all amendments thereto, and the Company’s federal, state, and local information or income tax returns; -13 -Initials _________ _________ (c) have on demand true and full information of all things affecting the Company and a formal accounting of Company affairs; and (b) have dissolution and winding up by decree of court; (c) bring an action for an accounting in a court of law against the other Members. (d) No Member may be expelled from the Company. A Member shall have the right, on demand, to obtain from the Company without cost a list of the names, addresses and interests of all Members. A Member shall not disclose to third parties any information included in the Company’s books and records, except as required by law. Section 7.03. Actions Without a Meeting. Any action that may be taken at any meeting of Members may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the Members holding at least the minimum percentage of the aggregate votes entitled to be cast that would be necessary to take such action at a meeting at which all Members entitled to vote on the action were present and voted. Section 7.04. Confidentiality. Members and Assignees shall not, except as required by law, disclose to third parties (a) any information included in the Company’s books and records, (b) any trade secrets or (c) any information which the Company has treated in a confidential manner. ARTICLE VIII TRANSFER OF INTERESTS -SUBSTITUTED MEMBERS -WITHDRAWL Section 8.01. Transfer of Interests. Except for a testamentary transfer, no Member may sell, exchange, encumber, pledge, gift, distribute, assign or transfer, all or any part of its Membership Interest or any rights relating thereto, except (i) as set forth in section 6.01 or section 6.02(a) with written consent; or (ii) as otherwise specifically provided in this Article VIII. Any attempted disposition made in violation of these Regulations shall be null and void, and the party to which any prohibited disposition is made shall not be entitled to have such prohibited disposition recorded upon the books of the Company. Section 8.02. Rights of Transferees /Substituted Members /New Members. A transferee shall be a Substituted Member, and an Incoming Member may receive a Membership Interest after the provisions of section 8.01 and 6.02 are satisfied and (ii) such transferee executes an instrument reasonably satisfactory to the Company accepting the terms and provisions of these Regulations, obtains such consents and opinions of counsel as the Company -14 -Initials _________ _________ deems necessary in connection with such admission and pays any reasonable expenses in connection with such admission as a Substituted Member (including legal and accounting expenses). Such Substituted Member(s) and Incoming Member(s) who satisfy the provisions set forth above become liable for the existing debts and obligations of the Company only to the extent of his or her capital contributions and only to the extent allowed under these regulations and California Law (UPA § 17). The Substituted Member(s) and/or Incoming Member(s) are personally liable for debts and obligations incurred by the Company after becoming a Member to the extent allowed under these regulations and California Law. Section 8.03. Effective Date of Transfer. (a) Except as otherwise permitted in the discretion of the Company, each transfer shall become effective as of the first day of the calendar month following the calendar month during which the Managing Member(s) receives (i) a copy of the written consent of Member(s) to the transfer required by Section 8.01, and (ii) such consents and opinions of counsel as the Company deems necessary in connection with such transfer. (b) Except as otherwise permitted in the discretion of the Company, each transferee accepted as a Substituted Member shall become a Substituted Member effective as of the first day of the calendar month following the calendar month during which the Members approve of such transferee becoming a Substituted Member as provided in Section 8.02 and the Managing Member(s) receive all such certificates and documents of the character described in Section 8.02 that the Managing Member(s) may request. Section 8.04. Invalid Transfer. No transfer of a Membership Interest that is in violation of this Article shall be valid or effective, and the Company shall not recognize the same for the purposes of making payment of income, return of Capital Contribution or other distribution with respect to such Membership Interest, or part thereof. The Company may enforce the provisions of this Article either directly or indirectly or through its agents by entering an appropriate stoptrannsfe order on its books or otherwise refusing to register or transfer or permit the registration or transfer on its books of any proposed transfers not in accordance with this Article. Section 8.05. Distributions to the Transferee. The Company shall, after any transfer pursuant to the provisions of this Article, thereafter pay all further distributions or profits or other compensation by way of income, or return of capital, on account of the Membership Interest so transferred, to the transferee from such time as such Membership Interest is transferred to the name of the transferee on the Company’s books in accordance with the above provisions. In the absence of written notice to the Company of the transfer of any Membership Interest, the Members may, without any recourse against or liability to the Members or the Company, assume that no transfer has occurred. Section 8.06. Withdrawal. A Member may withdraw from the Company at any time. A Member must give the Managing Member(s) 30 days written notice of intent to withdraw from the Company. The 30th day is hereafter known as the “Date of Withdrawal.” If this action does not cause the Company to terminate as defined in section 10.01 then the following rules and -15 -Initials _________ _________ regulations apply. Upon the Date of Withdrawal such Member’s tax year in accordance with the Company shall end. All Capital Accounts, Basis, income, distributions, deductions, profit and loss shall be frozen. A Schedule K-1 will be provided to the withdrawing Member in accordance with IRS regulations. The Managing Member(s) is authorized to file and the Withdrawing Member agrees to sign a Certificate of Amendment with the Secretary of the State of California stating the parties withdrawal from the Company. The Withdrawing Member upon the Date of Withdrawal is indemnified against all future liabilities or actions of law against the Company; but is not indemnified or released from liabilities and obligations existing at or prior to the Date of Withdrawal. The Withdrawing Member’s capital contribution will not be returned. Section 8.07. Buy/Sell Provisions. Regarding Class B Membership Interests only, the Company as directed by the Managing Members, or the Class A Members as allowed by the Board of Directors, reserves the right to buy any or all outstanding Class B Membership Interests at any time from such Interest’s owner according to the following schedule. The price for the purchase of such Class B Membership Interests shall be set as an amount equal to a total percentage return specified in the table under the appropriate year on top of and including the original capital contribution. For each individual owner of Class B Membership Interests the return is variable based on the number of years since the date of the close of escrow on each Class B Membership Interest held by each owner. The Column titled “Buyout amount per dollar invested” shows in single dollar terms the price of the buyout for each year beyond the date of the close of escrow or of the date of capital contribution if an escrow was not used. Class B Membership Interest Buyout Schedule Year from Date of Escrow Close 1 2 3 4 5 6 7 8 9 10+ Annual Return Guaranteed 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% Total Return Guaranteed 8% 16% 24% 32% 40% 48% 56% 64% 72% 80% Buyout amount per dollar invested $ 1.08 $ 1.16 $ 1.24 $ 1.32 $ 1.40 $ 1.48 $ 1.56 $ 1.64 $ 1.72 $ 1.80 ARTICLE IX AGENTS Section 9.01. Delegation. The Managing Member(s) may delegate and authorize the powers and duties of the Managing Member(s) or any Member of the Company to any agent or employee of the Company, subject to the general supervision of the Managing Member(s) or such Member. ARTICLE X DISSOLUTION, LIQUIDATION AND TERMINATION -16 -Initials _________ _________ Section 10.01. Dissolution and Termination. The Company shall be dissolved upon the happening of any one of the following events: (i) The expiration of the fixed term of the Company; (ii) The conduct of the Company’s business becoming unlawful; (iii) the consent of Member(s) holding at least a majority of the aggregate votes entitled to be cast by the Member(s) to dissolve the Company; or (vi) Any other event which under the laws of the State of California causes the dissolution of a Limited Liability Company. Section 10.02. Continuation of Business Enterprises. If the Company is dissolved under Section 10.01(iv) and the Company has at least two (2) remaining members, the Company may be reconstituted and its business continued by the consent of Members holding at least a majority of the Units, which consent must be obtained within ninety (90) days after all Members have been notified in writing (by the Managing Member(s)) of such event of dissolution. If the requisite consent is not obtained within such time period, the Company shall be wound up and terminated pursuant to Section 10.03. Section 10.03. Winding-up and Termination. (a) Managing Member(s) as Liquidating Trustee/Appointment Rules: Unless otherwise provided herein, upon the dissolution of the Company no further business shall be conducted, except for such action as shall be necessary for the winding-up of the affairs of the Company and the distribution of its assets to the Members and Assignees pursuant to the provisions of this Section 10.03. The Managing Member(s) shall act as liquidating trustees, or may appoint in writing one or more other Persons to act as liquidating trustee or trustees, and such trustee or trustees shall have full authority to wind up the affairs of the Company and to make final distribution as provided herein; provided, however, that if the Company is dissolved by reason or in consequence of any act which constitutes a breach of duty by the Managing Member(s), the other Members shall, by a vote of the holders of a majority of the aggregate votes entitled to be cast by the Members, designate one or more other Persons to act as the liquidating trustee or trustees. (b) Payment of Debts and Obligations: The liquidating trustee or trustees shall pay all Company debts, obligations and liabilities, including all debts, obligations and liabilities to the Members and all costs of dissolution. No Member who has a negative balance in its capital account after all liabilities of the Company are paid shall for any reason be required to contribute cash or property to the Company to bring the balance in its capital account up to zero. (c) Liquid and Non-Liquid Asset Valuation and Distribution Methodology: Upon dissolution and liquidation of the Company, all liquid assets shall be distributed to the Members based on their respective Capital Account proportions, with the dollar amount of liquidating distribution given to each Member reducing each respective Member’s Capital Account balance. Once each Member’s Capital Account balance equals zero (0) distributions shall take place in -17 -Initials _________ _________ proportion to each Member’s Membership Interest. Also upon dissolution of the Company, all Company property and Non-Liquid assets shall be sold or distributed in kind as determined in the sole discretion of the liquidating trustee or trustees. The liquidating trustee or trustees shall ascertain the fair market value by appraisal or other reasonable means of all Company property and assets remaining unsold. Upon distribution to a Member(s) of such un-liquidated property or assets such Member’s capital account(s) shall be adjusted as if such property had been sold at such fair market value and the gains and losses realized thereby had been allocated to the Members in accordance with a liquidation distribution under Article IV (4.05(b)) hereof. Any property which is distributed in kind shall reduce the capital account of the distributee by the fair market value of such property as determined above. The liquidating distribution shall be made by the Company by the later of the end of the Company taxable year in which the liquidation occurs or ninety (90) days after the date of the liquidation. For purposes of the preceding sentence the date of liquidation shall be determined in accordance with Tax Regulation § 1.704-1(b)(ii)(g). (d) Member Indebtedness: Notwithstanding the foregoing, if any Member shall be indebted to the Company, then until payment in full of such indebtedness, regardless of the stated maturity or maturities thereof, the liquidating trustee or trustees shall retain such Member’s distributive share of Company property and apply such sums to the liquidation of such indebtedness and the cost of operation of such Company property during the period of such liquidation. (e) The liquidating trustee or trustees shall comply with this Agreement and all requirements of the CCC and other applicable law pertaining to or governing the winding-up of a limited liability Company. (f) The Members shall look solely to the assets of the Company for the return of their Capital Contributions, and if the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return a Member’s Capital Contribution, it shall have no recourse against the Company, the Members or any other Person for that purpose. Section 10.04. Statement. Within a reasonable time following the completion of the liquidation of the Company’s business, the liquidating trustee or trustees shall supply to each of the Members or Assignees a statement (which may be unaudited) which shall set forth the assets and the liabilities of the Company as of the date of complete liquidation, and each Member’s or Assignee’s pro rata portion of distributions pursuant to Section 10.03. Section 10.05. Termination. Upon the completion of the liquidation of the Company and the distribution of all Company funds, the Company shall terminate and the liquidating trustee or trustees, as the case may be shall (and are hereby given the authority to) execute and record all documents required to effectuate the dissolution and termination of the Company. Section 10.06. Indemnification. The liquidating trustee or trustees, and each officer, Member, assignee, agent, attorney, representative, contractor, adviser, appraiser, Member or -18 -Initials _________ _________ employee thereof (collectively, the “Indemnified Parties”) shall be indemnified and held harmless by the Company from and against all demands, liabilities, causes of action, costs and damages of any nature whatsoever arising out of or incidental to the taking of any action authorized under this Article X, WHETHER OR NOT ARISING OUT OF THE NEGLIGENCE OF THE INDEMNIFIED PARTY, provided, however, that the Indemnified Party shall not be entitled to indemnification hereunder where the claim or issue arose out of (a) a matter entirely unrelated to acting under the provisions hereof, (b) the gross negligence, bad faith or willful misconduct of the Indemnified Party or (c) the breach by the Indemnified Party of obligations under this Article X. The indemnification rights herein contained shall be cumulative of, and in addition to, any and all other rights, remedies and resources to which the Indemnified Party shall be entitled at law or in equity. ARTICLE XI MISCELLANEOUS Section 11.01. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Company shall be signed by the Managing Member(s) or such officers or employees of the Company as shall from time to time be authorized pursuant to these Regulations or by the Members or Managing Member(s). Section 11.02. Depositories. All funds of the Company shall be deposited from time to time to the credit of the Company in such banks or other depositories as the Managing Member(s) may from time to time designate, and upon such terms and conditions as shall be fixed by the Managing Member(s). The Managing Member(s) may from time to time authorize the opening and maintaining with any such depository as it may designate of general and special accounts, and may make such special rules and regulations with respect thereto as the Members may deem expedient. Section 11.03. Resignations. Any appointed officer or agent of the Company may resign at any time. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Section 11.04. Liability and Indemnification. (a) No Member nor any officer of the Company shall be liable, responsible or accountable to the Company in damages or otherwise for any act or omission of such Member or any such officer in connection with acts carried out on behalf of the Company SPECIFICALLY INCLUDING SUCH MEMBER’S OR ANY OF SUCH OFFICER’S SOLE, PARTIAL OR CONCURRENT NEGLIGENCE, provided each Member or any such officers shall be liable for any material breach of any obligation under these Regulations or for fraud, willful misconduct or gross negligence committed toward the Company. -19 -Initials _________ _________ (b) The Company shall and does hereby indemnify and hold harmless each Member and each officer of the Company from any loss, damage, claim or liability, including reasonable attorneys’ fees and expenses, that they may incur by reason of any act, or failure to act, performed on behalf of the Company in the furtherance of the Company’s interest to the fullest extent permitted by California Law; provided in no event shall the Company indemnify any Member or officer for any act or performance which is a material breach of any obligation under these Regulations or such Member’s or officer’s respective act of fraud, willful misconduct or gross negligence. It is the express intent of this Section to provide an indemnity to the Members and officers for their acts or omissions of negligence or comparative negligence or contributory negligence or similar liability SPECIFICALLY INCLUDING THE INDEMNIFIED PERSON’S SOLE, PARTIAL OR CONCURRENT NEGLIGENCE. (c) The Company may at its discretion purchase and maintain insurance on behalf of any person who is or was an officer, employee or Member of the Company, or who is or was serving at the request of the Company as an officer, Member, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, limited liability Company, Membership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by that person in such a capacity or arising out of his or her status as such a person, whether or not the Company would have the power to indemnify such person against such liability under this Section 11.04. (d) All Members are indemnified from paying more than his or her proportionate share of contract liabilities as determined by the Members Membership Interest. (e) The Company intends that the indemnification provided hereunder shall indemnify the officers and each Member to the fullest extent possible under California Law; and if any indemnification which would otherwise be granted by this Section shall be disallowed by any competent court or administrative body as illegal, then any officer or Member with respect to whom such adjudication was made, and any other officer or Member, shall be indemnified to the fullest extent permitted under California Law. Section 11.05. Amendments. Subject to the terms of Section 6.02 hereof, these Regulations shall not be amended without the consent of the Members holding at least a majority of the aggregate votes entitled to be cast by the Members. Section 11.06. Independent Activities. Each Member may, notwithstanding these Regulations, engage in whatever activities it chooses, whether the same are competitive with the Company or otherwise, without having or incurring any obligation to offer any interest in such activities to the Company. Section 11.07. Scope. These Regulations constitute the entire understanding of the Members with respect to the Company. Section 11.08. Governing Law. These Regulations are governed by and shall be construed and enforced in accordance with the laws of the State of California. -20 -Initials _________ _________ Section 11.09. Binding Effect. These Regulations shall be binding upon and shall inure to the benefit of the Members, their heirs, beneficiaries, executors, administrators, legal representatives, successors and assigns. Section 11.10. Headings. The headings in these Regulations are intended for convenience and identification only, are in no way intended to describe, interpret, define, or limit the scope, extent or intent of these Regulations or any provision hereof and shall be disregarded in the construction and enforcement of these Regulations. Section 11.11. Violation. The failure of any party to seek redress for a violation of or to insist upon the strict performance of any covenant or condition of these Regulations shall not prevent a subsequent act, that would have originally constituted a violation, from having the effect of an original violation. The rights and remedies provided by these Regulations are cumulative and the use of any one right or remedy by any party shall not preclude or waive that party's right to use any or all other remedies. Such rights and remedies are given in addition to any other rights or remedies the parties may have by law, statute, ordinance or otherwise. Section 11.12. Severability. Every provision of these Regulations is intended to be severable. If any term or provision is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder hereof. Section 11.13. Counterparts. These Regulations and any amendments hereto may be executed in any number of counterparts with the same effect as if all parties hereto had all signed the same document. All counterparts shall be construed together and shall constitute one agreement. Section 11.14. Waiver of Right to Partition. Each Person who now or hereafter is a party hereto or who has any right herein or hereunder irrevocably waives during the term of the Company any right to maintain any action for partition with respect to Company property. [Signature Page Follows] -21 -Initials _________ _________ CERTIFICATION Each of the undersigned Members of The Company Productions LLC hereby certifies that it is familiar with and has approved the foregoing Regulations of the Company and agrees to be bound by the terms thereof. ___________ Date ___________ Date -22 -Initials _________ _________ EXHIBIT A INITIAL CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS Name and Address of Member Initial Capital Account Number of Class A Units Number of Class B Units Address $ Address $