EXPLANATORY NOTE

 

This Amendment No. 1, or this Amendment, to the Regulation A Offering Statement on Form 1-A filed by MCI Income Fund V, LLC on January 4, 2021 (the “Original Filing”) is being filed solely to include Exhibits 1(a), 1(b), 2(b), 3(a), 3(b), 3(c), 3(d), 3(e), 6(a), 6(b), and 6(c). Accordingly, this Amendment consists only of the explanatory note, the signature page to the Form 1-A, the exhibit index, and Exhibits 1(a), 1(b), 2(b) 3(a), 3(b), 3(c), 3(d), 3(e), 6(a), 6(b), and 6(c). The Preliminary Offering Circular is unchanged and therefore has been omitted.

 

 

PART III - EXHIBITS

 

EXHIBIT INDEX

 

Exhibit Number		Exhibit Description
(1)(a)		Managing Broker-Dealer Agreement by and between International Asset Advisors. and MCI Income Fund V, LLC
(1)(b)		Soliciting Dealer greement
(2)(a)		Certificate of Formation of MCI Income Fund V, LLC*
(2)(b)		Limited Liability Company Agreement of MCI Income Fund V, LLC
(3)(a)		Form of Indenture
(3)(b)		Form of A-1 Bond
(3)(c)		Form of B-1 Bond
(3)(d)		Master Credit Facility
(3)(e)		Promissory Note
(4)		Subscription Agreement**
(6)(a)		Loan Policies and Procedures of MCI Income Fund V, LLC
(6)(b)		Amended and Restated Investment Opportunity Allocation Agreement by and between MCI Secured Income Fund, LLC, MCI Preferred Equity Fund, LLC, MCI Preferred Income Fund II, LLC, MCI Preferred Income Fund IV, LLC, and MCI Preferred Income Fund V, LLC
(6)(c)		Deed of Trust
(11)(a)		Consent of Lane Gorman Trubitt, LLC**
(11)(b)		Consent of Kaplan Voekler Cunningham & Frank, PLC***
(12)		Opinion of Kaplan Voekler Cunningham & Frank, PLC regarding legality of the Bonds**

 

   * Previously filed.

 ** To be filed by amendment.

*** Included with the legal opinion provided pursuant to item (12).

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, Texas on January 27 of 2021.

 

MCI INCOME FUND V, LLC,

a Delaware limited liability company

 

By:       Megatel Capital Investments, LLC,

             a Delaware limited liability company

Its:        Sole Member

 

 

Name:   Zach Ipour

Its:        Co-President (Principal Executive Officer)

 

Name:   Aaron Ipour

Its:        Co-President

       

Name:  Richard Wygle

Its:       Chief Financial Officer of the Sole Member of the Manager

            (Principal Financial Officer and Principal Accounting Officer)

 

Exhibit 1(A)

 

MCI INCOME FUND V, LLC

MANAGING BROKER DEALER AGREEMENT

 

As of [DATE] (the “Effective Date”), this MANAGING BROKER DEALER AGREEMENT (the “Agreement”) is made by and between MCI INCOME FUND V, LLC, a Delaware limited liability company (the “Company”), and INTERNATIONAL ASSETS ADVISORY, LLC, a Florida limited liability company (the “Managing Broker Dealer”), in connection with the offering and sale by the Company of preferred limited liability company interests in the Company (“Securities”) in the Company (“the “Offering”). The Securities will be offered during a period commencing and ending on such dates as set forth in the Offering Statement and Offering Circular (the “Offering Period”) for the Offering that shall be prepared by the Company, as either may be supplemented and amended (together with all exhibits or schedules thereto, the “Offering Document”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Offering Document.

 

1.            Appointment of the Managing Broker Dealer.

 

1.1           The Managing Broker Dealer’s acceptance of this appointment is specifically conditioned on its approval of the final Offering Documents and receipt of a favorable third party due diligence report from FactRight, or other similar recognized third party due diligence company.

 

1.2           On the basis of the representations, warranties, and covenants herein contained, but subject to the terms and conditions herein set forth, the Managing Broker Dealer is hereby appointed and agrees to sell the Securities on a “best efforts” basis and to solicit purchasers for the Offering at the price to be paid and otherwise upon the terms and conditions set forth in the Offering Documents. The Managing Broker Dealer shall solicit purchasers for the Offering through a Title IV, Regulation A+ Tier 2 Offering (“Reg A+”).

 

1.3           The Managing Broker Dealer is authorized to enlist other members of the Financial Industry Regulatory Authority, Inc. (“FINRA”) acceptable to the Company (a “Selling Group Member”, or collectively the “Selling Group Members”) to solicit Purchasers (as defined below) for the Securities. The Company may also enter into agreements for the sale of the Securities to certain Purchasers with non-FINRA registered investment advisors (“Registered Investments Advisors”), and the Managing Broker Dealer shall assist in the administration of such arrangements. All engagements of the Selling Group Members will be evidenced by a Soliciting Dealer Agreement in the form attached hereto as Exhibit A. All engagements with Registered Investment Advisors will be evidenced by a RIA Introduction Agreement in the form attached hereto as Exhibit B. Neither the Soliciting Dealer Agreement nor the RIA Introduction Agreement shall be modified, amended or supplemented without the prior consent of the Company and the Managing Broker Dealer.

 

1.4           It is understood that no sale of the Securities shall be regarded as effective unless and until accepted by the Company. The Company reserves the right in its sole discretion to accept or reject any purchase agreement for the Securities (the “Purchase Agreement”) in whole or in part for a period of thirty (30) days after receipt of the Purchase Agreement. Any proposed purchase of the Securities not accepted within thirty (30) days of receipt shall be deemed rejected.

 

 

 

1.5           Subject to the performance by the Company of all the obligations to be performed hereunder and to the completeness and accuracy of all the Company’s representations and warranties contained herein, the Managing Broker Dealer hereby accepts such agency and agrees on the terms and conditions herein set forth to use its best efforts during the Offering Period to find qualified purchasers (“Purchasers”) for the Securities.

 

2.            Representations and Warranties of the Company. The Company hereby represents and warrants to the Managing Broker Dealer that:

 

2.1           The Company is duly organized and validly exists as a limited liability company in good standing under the laws of the State of Delaware, has all requisite power and authority to enter into this Agreement, and has all requisite power and authority to conduct its business as described in the Offering Document.

 

2.2           No consent, approval, authorization, or other order of any governmental authority is required in connection with the execution or delivery by the Company of this Agreement or the issuance and sale by the Company of the Securities, except such as may be required under the Securities Act or applicable state securities laws.

 

2.3           No defaults exist in the due performance and observance of any material obligation, term, covenant, or condition of any agreement or instrument to which the Company is a party or by which it is bound.

 

2.4           This Agreement, when executed by the Company, will have been duly authorized and will be a valid and binding agreement of the Company, enforceable in accordance with its terms.

 

2.5           The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and the compliance with the terms of this Agreement by the Company will not conflict with or constitute a default or violation under any certificate of formation, operating agreement, contract, indenture, mortgage, deed of trust, lease, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company.

 

2.6           At the time of the issuance of the Securities, the Securities will have been duly authorized and validly issued, and upon payment therefor, will be fully paid and non-assessable and will conform to the description thereof contained in the Offering Document.

 

2.7           The Company is not required to register as an “investment company,” as such term is defined in the Investment Company Act of 1940, as amended.

 

 

 

2.8           Subject to the performance of the Company’s obligations hereunder, the holders of the Securities (the “Securities Holders”) will have the rights described in the Offering Document and associated transaction documents.

 

2.9           For the entirety of the Offering Period, the Offering Document will not include, through the date that the Offering shall terminate (as defined in the Offering Document, the “Offering Termination Date”), any untrue statement of a material fact nor will it omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

2.10           The Company represents and warrants to the Managing Broker Dealer and each of the Selling Group Members and Registered Investment Advisers, that neither none of the Company, any of its predecessors, any affiliated issuer, any director, officer, general partner, or managing member of the Company, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, any promoter connected with the issuer in any capacity at the time of filing, any offer after qualification, or such sale; any person employed by the Company that has been or will be paid (directly or indirectly) remuneration for solicitation of Purchasers in connection with such sale of Securities; any general partner or managing member of any such solicitor; or any director, executive officer or other officer participating in the offering of any such solicitor or general partner or managing member of such solicitor:

 

 

(i)           In connection with the purchase or sale of any security;

 

(ii)          Involving the making of any false filing with the Securities and Exchange Commission (“SEC”); or

 

(iii)         Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

 

 

 

(ii)          Involving the making of any false filing with the SEC; or

 

(iii)         Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

 

 

 

 

(i)           At the time of the filing of the offering statement, bars the person from:

 

(A)           Association with an entity regulated by such commission, authority, agency, or officer;

 

(B)           Engaging in the business of securities, insurance or banking; or

 

(C)           Engaging in savings association or credit union activities; or

 

(ii)           Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within (10) ten years before such filing of the offering statement;

 

 

(i)            Suspends or revokes such person's registration as a broker, dealer, municipal securities dealer or investment adviser;

 

(ii)           Places limitations on the activities, functions or operations of such person; or

 

(iii)          Bars such person from being associated with any entity or from participating in the offering of any penny stock;

 

 

(i)           Any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (the “Securities Act”) , section 10(b) of the Exchange Act and 17 CFR 240.10b-5, section 15(c)(1) of the Exchange Act and section 206(1) of the Advisers Act, or any other rule or regulation thereunder; or

 

(ii)           Section 5 of the Securities Act.

 

 

 

 

 

2.11         The representations and warranties made in this Section 2 are and shall be continuing representations and warranties throughout the term of the Offering. In the event that any of these representations or warranties becomes untrue, the Company will immediately notify the Managing Broker Dealer in writing of the fact which makes the representation or warranty untrue.

 

3.            Duties, Obligations and Covenants of the Company. The Company agrees that:

 

3.1           The Company will comply with all requirements imposed upon it by the rules and regulations of the SEC, and by all applicable state securities laws and regulations, to permit the continuance of offers and sales of the Securities, in accordance with the provisions hereof and in the Offering Document, and will amend or supplement the Offering Document in order to make the Offering Document comply with the requirements of federal and applicable state securities laws and regulations.

 

3.2           If, at any time, any event occurs as a result of which the Offering Document would include an untrue statement of a material fact or, in view of the circumstances under which it was made, omit to state any material fact necessary to make the statements therein not misleading, the Company will notify the Managing Broker Dealer thereof, effect the preparation of a supplement to or an amendment of the Offering Document which will correct such statement or omission, and deliver to the Managing Broker Dealer such numbers of copies of such amended or supplemental Offering Document as the Managing Broker Dealer may reasonably request.

 

3.3           The Company shall not make any written or oral representations or statements to Purchasers that contradict or are inconsistent with the statements made in the Offering Document, as amended or supplemented.

 

3.4           The Company will deliver to the Managing Broker Dealer such numbers of copies of the Offering Document and any amendment(s) or supplement(s) thereto, with all appendices thereto, and such numbers of copies of printed sales literature or other materials as the Managing Broker Dealer may reasonably request in connection with the Offering or for the purposes contemplated by federal and applicable state securities laws.

 

 

 

3.5           Authorized Sales Materials. All supplemental advertising and sales literature to be used in connection with the Offering, whether designated solely for “broker-dealer use only” or otherwise and regardless of how labeled or described, that is prepared by or on behalf of the Company (the “Authorized Sales Materials”), when taken together with the Offering Document, will not contain any untrue statement of material fact or omit to state a material fact required to be stated therein, in the light of the circumstances under which they were made, not misleading. Prior to its first use, the Company shall file all Authorized Sales Materials with, and will have received all required regulatory approval. The Dealer Manager will, if required or deemed advisable by the Managing Broker Dealer, submit to FINRA for review all materials deemed by the Managing Broker Dealer to be advertising, at the Company’s expense. The Company also will deliver to the Managing Broker Dealer such number of copies of any printed Authorized Sales Materials as the Managing Broker Dealer may reasonably request in connection with the Offering.

 

3.6           Subject to the Managing Broker Dealer’s actions and the actions of others in connection with the Offering, the Company will comply with all requirements imposed upon it by the Securities Act, Regulation A and all applicable state securities laws, rules and regulations. Upon request, the Company will furnish to the Managing Broker Dealer a copy of such papers filed by the Company with any state or federal regulatory pursuant to state or federal securities laws and regulations.

 

3.7           The Company will apply the net proceeds from the Offering received by it in the manner set forth in the Offering Document.

 

3.8           The Company will furnish the Securities Holders with all reports described in the Offering Document and applicable Company governing documents and will deliver to the Managing Broker Dealer, and make available, upon request, to each Selling Group Member and Registered Investment Advisor, one copy of each such report (excluding Subscriber tax reporting documents) prior to, or at the time that such reports are furnished to the Securities Holders, and any other such other information concerning the Company, as may reasonably be requested.

 

3.9           Any officer, director, employee, or affiliate of the Company who buys any Securities in connection with the Offering shall do so for investment purposes only and not with the intention of resale or distribution.

 

3.10         This Agreement, or any supplement or amendment hereto, may be filed by the Company with the SEC, if such filing should be required, and may be filed with and may be subject to the approval of applicable federal and applicable state securities regulatory agencies, if required.

 

3.11         The Company understands and acknowledges that the Managing Broker Dealer has expended and continues to expend significant time and expense in recruiting and training its employees, associated persons and registered personnel (each, for purposes of this section, a "Broker Dealer Covered Person"), and that the loss of a Broker Dealer Covered Person would cause significant and irreparable harm to the Managing Broker Dealer. The Company agrees and covenants not to directly or indirectly solicit, hire, recruit, or attempt to solicit, hire, or recruit any Broker Dealer Covered Person of the Managing Broker Dealer or induce the termination of employment of any Broker Dealer Covered Person for a period of twenty-four (24) months, beginning on the last day of the Broker Dealer Covered Person’s association with the Managing Broker Dealer, regardless of the reason for the termination, without first obtaining written consent by the Managing Broker Dealer.

 

 

 

4.             Representations and Warranties of the Managing Broker Dealer. The Managing Broker Dealer represents and warrants to the Company that:

 

4.1           The Managing Broker Dealer is duly organized and validly exists as a limited liability company in good standing under the laws of the State of Florida and has all requisite power and authority to enter into this Agreement.

 

4.2           This Agreement, when executed by the Managing Broker Dealer, will have been duly authorized and will be a valid and binding agreement of the Managing Broker Dealer, enforceable in accordance with its terms.

 

4.3           The consummation of the transactions contemplated herein and those contemplated by the Offering Document will not result in a breach or violation of any order, rule, or regulation directed to the Managing Broker Dealer by any court, any federal or state regulatory body, FINRA, or any administrative agency having jurisdiction over the Managing Broker Dealer or its affiliates.

 

4.4           The Managing Broker Dealer is, and during the term of this Agreement will be, duly registered as a broker dealer pursuant to the provisions of the Exchange Act, a member in good standing with FINRA, and duly registered as a broker dealer in any state where offers are made by the Managing Broker Dealer. The Managing Broker Dealer will comply with all applicable laws, regulations, and requirements of the Securities Act, the Exchange Act, applicable state securities law, the published rules and regulations thereunder, and FINRA rules.

 

4.5           The Managing Broker Dealer has established and implemented anti-money laundering compliance programs, in accordance with FINRA Rule 3310 and Section 352 of the Money Laundering Abatement Act and Section 326 of the Patriot Act of 2001, which are reasonably expected to detect and cause reporting of suspicious transactions in connection with the sale of Securities.

 

4.6           The Managing Broker Dealer represents and warrants to the Company that neither the Managing Broker Dealer nor its executive officers, managing member or officers involved in the Offering or any person who owns 20% or more of the Managing Broker Dealer:

 

 

 

 

 

(ii)           Involving the making of any false filing with the Securities and Exchange Commission (“SEC”); or

 

(iii)          Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

 

 

 

(ii)          Involving the making of any false filing with the SEC; or

 

(iii)         Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

 

 

(i)           At the time of the filing of the offering statement, bars the person from:

 

(A)           Association with an entity regulated by such commission, authority, agency, or officer;

 

(B)           Engaging in the business of securities, insurance or banking; or

 

(C)           Engaging in savings association or credit union activities; or

 

(ii)          Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within (10) ten years before such filing of the offering statement;

 

 

 

 

 

(ii)           Places limitations on the activities, functions or operations of such person; or

 

(iii)          Bars such person from being associated with any entity or from participating in the offering of any penny stock;

 

 

(i)           Any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (the “Securities Act”) , section 10(b) of the Exchange Act and 17 CFR 240.10b-5, section 15(c)(1) of the Exchange Act and section 206(1) of the Advisers Act, or any other rule or regulation thereunder; or

 

(ii)          Section 5 of the Securities Act.

 

 

 

 

4.7           The representations and warranties made in this Section 4 are and shall be continuing representations and warranties throughout the term of the Offering. In the event that any of these representations or warranties becomes untrue, the Managing Broker Dealer will immediately notify the Company in writing of the fact which makes the representation or warranty untrue.

 

5.           Duties and Obligations of the Managing Broker Dealer.

 

5.1           The Managing Broker Dealer will serve in a “best efforts” capacity in the offering, sale, and distribution of the Securities. The Managing Broker Dealer may offer the Securities as an agent, but all sales shall be made by the Company, acting through the Managing Broker Dealer as an agent, and not by the Managing Broker Dealer as a principal. The Managing Broker Dealer shall have no authority to appoint any person or other entity as an agent or sub-agent of the Managing Broker Dealer or the Company, except to appoint Selling Group Members acceptable to the Company in the Company’s sole discretion.

 

 

 

5.2           In the event the Managing Broker Dealer elects to become a Selling Group Member, the Managing Broker Dealer shall separately enter into a Soliciting Dealer Agreement and shall comply with all requirements of the Selling Group Members as set forth in the Soliciting Dealer Agreement.

 

5.3           The Managing Broker Dealer will immediately bring to the attention of the Company any circumstance or fact which causes the Managing Broker Dealer to believe the Offering Document, or any other literature distributed pursuant to the Offering, or any information supplied by prospective Purchasers in their subscription materials, may be inaccurate or misleading.

 

5.4           The Managing Broker Dealer will comply in all respects with the purchase procedures and plan of distribution set forth in the Offering Document.

 

5.5           It is understood that no sale shall be regarded as effective unless and until accepted by the Company. The Company reserves the right in its sole discretion to accept or reject any subscription for Securities in whole or in part for a period of 30 days after receipt of the subscription for Securities. Any subscription for Securities not accepted within 30 days of receipt shall be deemed rejected.

 

5.6           The Managing Broker Dealer shall not knowingly execute any transaction in which a Purchaser invests in the Securities in a discretionary account without prior written approval of the transaction by the Purchaser.

 

5.7           In the event the Managing Broker Dealer receives any customer funds for the Securities, the Managing Broker Dealer will transmit such customer funds, not later than noon of the next business day following receipt of such funds for the Securities, to the applicable escrow or bank account for the Offering.

 

5.8           All actions, direct or indirect, by the Managing Broker Dealer, its respective agents, members, employees, and affiliates, shall conform to (i) requirements applicable to broker dealers under federal and applicable state securities laws, rules, and regulations, and (ii) applicable rules of FINRA.

 

6.            Compensation.

 

6.1           As compensation for services rendered by the Managing Broker Dealer under this Agreement, the Managing Broker Dealer will be entitled to receive from the Company the following compensation, a portion or all of which may be re-allowed to Selling Group Members or other associated persons eligible to receive such compensation:

 

 

 

(a)           A selling commission (the “Selling Commission”) of [6]% of the purchase price of the Securities sold by the Managing Broker Dealer (the “Total Sales”), which it will re-allow to the Selling Group Members; provided, however, that this amount will be reduced to the extent a lower commission rate is negotiated with a Selling Group Member and the commission rate will be the lower agreed upon rate; and

 

(b)           A dealer manager fee (the “Dealer Manager Fee”) of up to [2.5]% of the Total Sales, (i) from which up to [1.0]% of the Total Sales may be re-allowed to the Selling Group Members (pursuant to a side-letter agreement), as a non-accountable marketing and due diligence allowance, and (ii) up to [1.5]% of the Total Sales may be re-allowed to certain wholesalers, some of which may be internal to the Company and its Affiliates; and

 

(c)           A servicing fee (the “Servicing Fee”), payable by either the Company or an affiliate of the Company, which will be [0.5]% of the Total Sales of a given month.

 

6.2           Notwithstanding the foregoing provision 6.1(a), the Company reserves the right to sell the Securities net of Selling Commissions to Purchasers who are introduced to the Managing Broker-Dealer by a Registered Investment Advisor and to Purchasers who meet the accreditation requirement and are affiliated or otherwise deemed family and friends of the Company and its affiliates.

 

6.3           For Purchasers who are introduced to the Managing Broker Dealer by a Registered Investment Advisor, the Managing Broker Dealer agrees to waive its right of receipt of [1.0]% of the Dealer Manager Fee (which would generally be reallowed to a Selling Group Member as a non-accountable marketing and due diligence allowance), and the Company, in its discretion, may reimburse the applicable Registered Investment Advisor for certain marketing and due diligence expenses pursuant to a side letter agreement.

 

6.4           Subject to Section 5.2, the Managing Broker Dealer may also sell the Securities as a Selling Group Member, thereby becoming entitled to selling commissions.

 

7.             Reserved.

 

8.             Offering. The Offering of the Securities shall be at the price and upon the terms and conditions set forth in the Offering Document. The Company reserves the right, in its sole discretion, to refuse to accept any or all Purchase Agreements tendered by the Managing Broker Dealer at any time during the Offering, and/or to terminate the Offering. Selling Commissions and fees earned prior to such termination remain payable to the applicable parties.

 

 

 

9.            Indemnification by the Company.

 

9.1          Subject to the conditions set forth below, the Company, with respect to the applicable Offering, agrees to indemnify and hold harmless the Managing Broker Dealer, the Selling Group Members, Registered Investment Advisors, and their respective owners, managers, members, partners, directors, officers, employees, agents, attorneys, and accountants (the “Selling Parties”), against any and all loss, liability, claim, damage and expense whatsoever (“Loss”) arising out of or based upon:

 

(a)           Any untrue statement or alleged untrue statement of a material fact contained in the Offering Document (as amended and supplemented from time to time) or in any application or other document filed in any jurisdiction in order to qualify the Securities under, or exempt the Offering of the Securities from, the registration or qualification requirements of the securities laws thereof;

 

(b)           The omission or alleged omission from the Offering Document (as amended and supplemented from time to time), or in any sales or other materials provided by the Company to the Managing Broker Dealer for use by the Selling Group Members, of a material fact required to be stated therein or necessary to make the statements therein not misleading;

 

(c)           The failure of the Company to comply with any of the applicable provisions of the Securities Act, the Exchange Act or any applicable federal or state securities laws, rules or regulations;

 

(d)           Any verbal or written representations in connection with the Offering made by the Company or its agents, employees, or affiliates in violation of the Securities Act, the Exchange Act, or any other applicable federal or state securities laws, rules and regulations; or

 

(e)           The breach by the Company of any term, condition, representation, warranty or covenant of this Agreement.

 

9.2          If any action is brought against any of the Selling Parties in respect of which indemnity may be sought hereunder, the Selling Party shall promptly notify the Company in writing of the institution of such action, and the Company shall assume the defense of such action; provided, however, that the failure to notify the Company shall not affect the provisions in this Section 9 except to the extent such failure to notify the Company has a material and adverse effect on the defense of such claims. The affected Selling Parties shall have the right to employ counsel in any such case. The reasonable fees and expenses of such counsel shall be at the Company’s expense, provided that the Company will not be obligated to pay for legal fees and expenses for more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions.

 

9.3          The Company agrees to promptly notify the Managing Broker Dealer of the commencement of any litigation or proceedings against the Company or any of its respective officers, directors, members, managers, agents, attorneys, or accountants in connection with the Offering.

 

 

 

9.4         The indemnity provided to the Managing Broker Dealer pursuant to this Section 9 shall not apply to the extent that any Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Managing Broker Dealer specifically for use in the preparation of the Offering Document (or any amendment or supplement thereto) or any sales literature.

 

9.5         The indemnity provided to the Selling Group Member and Registered Investment Advisors pursuant to this Section 9 shall not apply to the extent that any Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Selling Group Member or Registered Investment Advisor specifically for use in the preparation of the Offering Document (or any amendment or supplement thereto) or any sales literature.

 

10.          Indemnification by the Managing Broker Dealer.

 

10.1         Subject to the conditions set forth below, the Managing Broker Dealer agrees to indemnify and hold harmless the Company and its affiliates and their respective general partners, stockholders, partners, directors, officers, managers, employees, members and agents, each controlling person and each of their respective attorneys and accountants (“Company Parties”), against any and all Loss arising out of or based upon:

 

(a)           Any verbal or written representations in connection with the Offering made by the Managing Broker Dealer in violation of the Securities Act or any applicable federal or state securities laws, rules and regulations;

 

(b)           The Managing Broker Dealer’s failure to comply with any of the applicable provisions of the Securities Act, the Exchange Act, applicable requirements and rules of FINRA, or any applicable federal or state securities laws and regulations, other than any failure to comply which results from acts of the Company;

 

(c)           The breach by the Managing Broker Dealer of any term, condition, representation, warranty, or covenant of this Agreement;

 

10.2         If any action is brought against the Company Parties in respect of which indemnity may be sought hereunder, the Company Party shall promptly notify the Managing Broker Dealer in writing of the institution of such action, and the Managing Broker Dealer shall assume the defense of such action. The Company Parties shall have the right to employ counsel in any such case. The reasonable fees and expenses of such counsel shall be at the Managing Broker Dealer’s expense, provided that the Managing Broker Dealer will not be obligated to pay for legal fees and expenses for more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions.

 

 

 

10.3         The Managing Broker Dealer agrees to promptly notify the Company of the commencement of any litigation or proceedings against the Managing Broker Dealer or any of the Managing Broker Dealer’s officers, directors, partners, affiliates, or agents in connection with the Offering.

 

10.4         The indemnity provided to the Company pursuant to this Section 10 shall not apply to the extent that any Loss arises out of or is based upon any untrue statement or alleged untrue statement of material fact made by the Company or any agent of the Company or any omission or alleged omission of a material fact required to be disclosed by the Company or any agent of the Company.

 

11.           Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided pursuant to Sections 9 and 10 is for any reason held to be unavailable from the Company, the Managing Broker Dealer, the Selling Group Members, or Registered Investment Advisors, as the case may be, the parties shall contribute to the aggregate Loss, liabilities, claims, damages and expenses (including any amount paid in settlement of any action, suit, or proceeding or any claims asserted) in such amounts as a court of competent jurisdiction may determine (or in the case of settlement, in such amounts as may be agreed upon by the parties) in such proportion to reflect the relative fault of each party in connection with the events described in Sections 9 and 10 as the case may be, which resulted in such Loss, liabilities, claims damages or expenses, as well as any other equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Managing Broker Dealer, the Selling Group Members, and Registered Investment Advisors and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such omission or statement. The Selling Parties, the Company Parties and any person who controls the Managing Broker Dealer shall also have rights to contribution pursuant to this Section.

 

12.           Privacy Act.

 

12.1         To protect Customer Information (as defined below) and to comply as may be necessary with the requirements of the Gramm-Leach-Bliley Act, the relevant state and federal regulations pursuant thereto and state privacy laws, the parties wish to include the confidentiality and non-disclosure obligations set forth herein.

 

12.2         “Customer Information” means any information contained on a customer’s application or other form and all nonpublic personal information about a customer that a party receives from the other party. Customer Information shall include, but not be limited to, name, address, telephone number, social security number, health information, and personal financial information (which may include consumer account number).

 

12.3         The parties understand and acknowledge that they may be financial institutions subject to applicable federal and state customer and consumer privacy laws and regulations, including Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801, et seq.) and regulations promulgated thereunder (collectively, the “Privacy Laws”), and any Customer Information that one party receives from the other party is received with limitations on its use and disclosure. The parties agree that they are prohibited from using the Customer Information received from the other party other than (i) as required by law, regulation or rule, or (ii) to carry out the purposes for which one party discloses Customer Information to the other party pursuant to the Agreement, as permitted under the use in the ordinary course of business exception to the Privacy Laws.

 

 

 

12.4       The parties shall establish and maintain safeguards against the unauthorized access, destruction, loss, or alteration of Customer Information in their control which are no less rigorous than those maintained by a party for its own information of a similar nature. In the event of any improper disclosure of any Customer Information, the party responsible for the disclosure will immediately notify the other party.

 

13.         Representations and Agreements to Survive. Except as the context otherwise requires, all representations, warranties, and agreements contained in this Agreement shall be deemed to be representations, warranties, and agreements at and as of the Offering Termination Date, and such representations, warranties, and agreements by the Managing Broker Dealer or the Company, including the indemnity and contribution agreements contained in Sections 9, 10, and 11 shall remain operative and in full force and effect regardless of any investigation made by the Managing Broker Dealer, the Company, and/or any controlling person, and shall survive the sale of, and payment for, the Securities.

 

14.         Expenses of the Offering. The Company agrees to pay all expenses incident to the performance of its obligations hereunder, including all expenses incident to marketing the Offering and submitting filings with federal and state regulatory authorities and to the exemption of the Securities under federal and state securities laws, including fees and disbursements of the Company’s counsel, and all costs of reproduction and distribution of the Offering Document and any amendment or supplement thereto. The Company agrees to pay all costs and expenses incident to the Offering, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated.

 

15.         Confirmation. The Company agrees to confirm all orders for purchase of Securities that are accepted by the Company and provide such confirmation to the Managing Broker Dealer and the Selling Group Members.

 

16.         Termination. This Agreement is terminable by either party for any reason whatsoever or for no reason at any time upon 60 days’ prior written notice to the other party. Notwithstanding the foregoing, this Agreement is immediately terminable by the Managing Broker Dealer if it does not approve of the final Offering Document or does not receive a favorable third party due diligence report on or before [____TBD_____]. Such termination shall not affect the obligations set forth in Sections 9, 10, 11, 12, and 13.

 

17.         Governing Law; Venue. This Agreement shall be governed by, subject to and construed in accordance with, the laws of the State of Florida without regard to conflict of law provisions and any dispute between the parties concerning this Agreement shall come within the jurisdiction of the courts of Florida. The parties hereby consent to personal jurisdiction and exclusive venue in the state and federal courts located in Orange County, Florida for any action brought by either party arising out of or in connection with this Agreement.

 

 

 

18.           Severability. If any portion of this Agreement shall be held invalid or inoperative, then so far as is reasonable and possible (a) the remainder of this Agreement shall be considered valid and operative and (b) effect shall be given to the intent manifested by the portion held invalid or inoperative.

 

19.           Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, and together which shall constitute one and the same instrument.

 

20.           Modification or Amendment. This Agreement may not be modified or amended except by written agreement executed by the both the Company and the Managing Broker Dealer.

 

21.           Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered: (i) when delivered personally or by commercial messenger; (ii) one business day following deposit with a recognized overnight courier service, provided such deposit occurs prior to the deadline imposed by such service for overnight delivery; (iii) when transmitted, if sent by email electronic communication, provided confirmation of receipt is received by sender and such notice is sent by an additional method provided hereunder, in each case above provided such communication is addressed to the intended recipient thereof as set forth below:

 

If to the Company:

 

MCI Income Fund V, LLC

2101 Cedar Springs Road, Suite 700

Dallas, Texas 75201

Attention: Stacy Grace

Email Address: sgrace@munckwilson.com

 

If to the Managing Broker Dealer:

 

International Assets Advisory, LLC

390 N. Orange Avenue, Suite 750

Orlando, Florida 32801

Attention: Myra Nicholson

Email Address: mnicholson@iaac.com

 

22.           Parties. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto, the parties referred to in Sections 9, 10 and 11, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under, in respect of, or by virtue of, this Agreement or any provision herein contained.

 

 

 

23.           Delay. Neither the failure nor any delay on the part of any party to this Agreement to exercise any right, remedy, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall a waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power, or privilege with respect to any subsequent occurrence.

 

24.           Recovery of Costs. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding (and any additional proceeding for the enforcement of a judgment) in addition to any other relief to which it or they may be entitled.

 

25.           No Partnership. Nothing in this Agreement shall be construed or interpreted to constitute the Managing Broker Dealer as in association with or in partnership with the Company, and instead, this Agreement only shall constitute the Managing Broker Dealer as a broker-dealer authorized by the Company to place and to facilitate the placement by others of the Securities according to the terms set forth in the Offering Document or this Agreement.

 

26.           Entire Agreement. This Agreement contains the entire understanding between the parties hereto and supersedes any prior understandings or written or oral agreements between them respecting the subject matter hereof.

 

27.           Noncircumvention; Noninterference. Neither the Company, the Managing Broker Dealer, nor their affiliates shall (a) notify or solicit any persons who have been identified to the Company as clients of the Managing Broker Dealer or its affiliates with respect to any future transactions of the Company or (b) release the name and/or account information for any client of the Managing Broker Dealer or its affiliates to any other person (other than agents of or persons affiliated with the parties hereto) unless required by court order, an authorized government or self-regulatory agency, or by any other agreement among the parties to do so. The Company shall establish and maintain safeguards against the unauthorized access, destruction, loss, or alteration of any personal information of the clients of the Managing Broker Dealer or its affiliates. In the event of any improper disclosure of any client information, the party responsible for the disclosure will immediately notify the other party. The provisions of this section shall survive any termination of this Agreement for a period of five (5) years.

 

28.           Due Diligence. The Company will authorize a collection of information regarding the Offering (the “Due Diligence Information”), which collection the Company may amend and supplement from time to time, which may be delivered by the Managing Broker Dealer or the Company to the Selling Group Members (or their agents performing due diligence) in connection with their due diligence review of the Offering. In the event a Selling Group Member (or its agent performing due diligence) requests access to additional information or otherwise wishes to conduct additional due diligence regarding the Offering, the Company and the Managing Broker Dealer will reasonably cooperate with such Selling Group Member to accommodate such request. All Due Diligence Information received by the Managing Broker Dealer and/or the Selling Group Members in connection with their due diligence review of the Offering are confidential and shall be maintained as confidential and not disclosed by the Managing Broker Dealer or the Selling Group Members except to the extent such information is disclosed in the Offering Document.

 

 

 

If the foregoing correctly sets forth the understanding between the Managing Broker Dealer and the Company, please so indicate in the space provided below for that purpose.

 

AGREED AND ACCEPTED:

 

MCI INCOME FUND V, LLC

 

By:                                                                    

 

Name:                                                               

 

Title:                                                                  

 

 

INTERNATIONAL ASSETS ADVISORY, LLC

 

By:                                                                    

 

 

EXHIBIT A

SOLICITING DEALER AGREEMENT

 

 

 

 

 

 

 

 

EXHIBIT B

RIA INTRODUCTION AGREEMENT

 

 

 

 

SOLICITING DEALER AGREEMENT

FOR

MCI INCOME FUND V, LLC

 

 

___________________________________________

Print Name of Dealer

 

The undersigned, International Assets Advisory, LLC a Florida limited liability company (the “Managing Broker Dealer”), has entered into an agreement (the “Managing Broker Dealer Agreement”) with MCI Income Fund V, LLC, a Delaware limited liability company (the “Company”), in connection with the offering and sale by the Company of Securities in the Company (“the “Offering”) pursuant to which the Managing Broker Dealer has agreed to use its best efforts to form and manage, as the Managing Broker Dealer, a group of securities dealers (the “Dealers”) for the purpose of soliciting offers for the purchase of the Securities. A copy of the Managing Broker Dealer Agreement is attached as Exhibit A. The terms of the Offering are set forth in the Offering Statement and Offering Circular, as may be supplemented or amended from time to time (collectively the “Offering Documents”). The Securities will be offered during a period commencing on the effective date of the Offering Documents and continuing until the Offering Termination Date. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Offering Documents.

 

You are invited to become a Dealer and by your confirmation hereof you agree to act in such capacity and to participate in the distribution of the Offering to the public on a “best efforts basis”. By your acceptance of this Agreement, you will become one of the Dealers and will be entitled to and subject to the indemnification provided herein, wherein the Dealers severally agree to indemnify and hold harmless the Company and the Managing Broker Dealer for certain actions as well as the indemnification and contribution provisions contained in the Managing Broker Dealer Agreement.

 

1. Dealer Representations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Compensation. Subject to certain conditions, and in consideration of your services hereunder, the Managing Broker Dealer will pay you sales commissions and marketing allowances as follows: (i) 6.0% of the purchase price of the Securities (the “Total Sales”) sold by you; provided, however, that this amount may be reduced to the extent the Managing Broker Dealer negotiates a lower commission rate with you, in which event the commission rate will be the lower agreed upon rate (the above being referred to as the “Commissions”), and (ii) a non- accountable marketing and a due diligence allowance of up to 1.0% of the Total Sales (the “Allowance”). Payment of the Commissions and the Allowance shall be subject to the following conditions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If to the Managing Broker Dealer:

International Assets Advisory, LLC

390 N. Orange Avenue, Suite 750

Orlando, Florida 32801

Attention: Myra Nicholson

Email Address: mnicholson@iaac.com

 

If to the Company:

MCI Income Fund V, LLC

2101 Cedar Springs Road, Suite 700

Dallas, Texas 75201

Attention: Stacy Grace

Email Address: sgrace@munckwilson.com

 

 

If sent to you, it shall be delivered to your address set forth below. The notice shall be deemed to be received on the date of its actual receipt by the party entitled thereto.

 

 

 

 

 

 

 

 

The parties acknowledge that for the purposes of the FINRA rules the Investors who purchase Securities through the Dealer are “Customers” of the Dealer and not the Managing Broker Dealer. Nonetheless, to the extent that the Managing Broker Dealer deems it prudent, the Dealer shall cooperate with the Managing Broker Dealer’s auditing and monitoring of the Dealer’s AML Program and its OFAC Program by providing, upon request, information, records, data and exception reports, related to the Company’s bond holders introduced to, and serviced by, the Dealer (the “Customers”). Such documentation could include, among other things: (i) copies of Dealer’s AML Program and its OFAC Program; (ii) documents maintained pursuant to the Dealer’s AML Program and its OFAC Program related to the Customers; (iii) any suspicious activity reports filed related to the Customers; (iv) audits and any exception reports related to the Dealer’s AML activities; and (v) any other files maintained related to the Customers. In the event that such documents reflect, in the opinion of the Managing Broker Dealer, a potential violation of the Managing Broker Dealer’s obligations in respect of its AML or OFAC requirements, the Dealer will permit the Managing Broker Dealer to further inspect relevant books and records related to the Customers (with respect to the Offering) and/or the Dealer’s compliance with AML or OFAC requirements. Notwithstanding the foregoing, when so directed by his or her legal counsel, the Dealer shall not be required to provide to the Managing Broker Dealer any documentation that could potentially cause the Dealer to lose the benefit of an attorney-client privilege or other privilege which it may be entitled to assert relating to the discoverability of documents in any civil or criminal proceedings. The Dealer hereby represents that it is currently in compliance with all AML rules and all OFAC requirements, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the USA PATRIOT Act. The Dealer hereby agrees, upon request by the Managing Broker Dealer to (i) provide an annual certification to the Managing Broker Dealer that, as of the date of such certification (A) its AML Program and its OFAC Program are consistent with the AML Rules and OFAC requirements, (B) it has continued to implement its AML Program and its OFAC Program and (C) it is currently in compliance with all AML Rules and OFAC requirements, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the USA PATRIOT Act and (ii) perform and carry out, on behalf of both the Managing Broker Dealer and the Company, the Customer Identification Program requirements in accordance with Section 326 of the USA PATRIOT Act and applicable SEC and Treasury Department Rules thereunder.

 

 

 

 

With respect to Securities held through custodial accounts, the Dealer agrees and acknowledges that to the extent practicable and permitted by law, all confirmations, statements, communications and other information provided from the Company, the Managing Broker Dealer and/or their agents to Company investors may be provided solely to the custodian that is the registered owner of the Securities, rather than to the beneficial owners of the Securities. In such case it shall be the responsibility of the custodian to distribute the information to the beneficial owners of Securities.

 

The Dealer agrees and acknowledges that the Managing Broker Dealer may, as a preference but not as a requirement, use an electronic platform to process subscriptions, including but not limited to the Depository Trust Company (DTC) model. If an electronic platform is used, the Dealer agrees to cooperate with the processing of subscriptions through such an electronic platform if reasonably practical.

 

 

The representations and warranties made in this Section 24 are and shall be continuing representations and warranties throughout the term of the Offering. In the event that any of these representations or warranties becomes untrue, the Managing Broker Dealer will immediately notify the Dealer in writing of the fact which makes the representation or warranty untrue.

 

 

 

[THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]

 

 

If the foregoing correctly sets forth the understanding between the Managing Broker Dealer and the Dealer, please so indicate in the space provided below for that purpose.

 

AGREED AND ACCEPTED:

 

Firm:____________________________________________________________________________________________________

 

Firm CRD:_________________________________________

 

 

By:

__________________________________________________

Date:

__________________________________________________

 

Name: ____________________________________________

 

Title: _____________________________________________

 

Email: ____________________________________________

 

Address:

 

__________________________________________________

 

__________________________________________________

 

__________________________________________________

Phone:____________________________________________

 

 

AGREED AND ACCEPTED:

 

International Assets Advisory, LLC

 

 

By:__________________________________________________

      Matthew Lampman, COO

 

 

 

EXHIBIT A

MANAGING BROKER DEALER AGREEMENT

 

See attached.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT B

COVERED PERSON QUESTIONNAIRE

 

The undersigned gives these answers in this “Covered Person Questionnaire” in connection with the following-described offering of securities:

 

 

 

 

Reason for this Questionnaire: Rule 262 of Regulation A, promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Act”), provides an exemption from the registration requirements of certain private placement offerings. However, this exemption is not available where any person participating in the offering (“Covered Person”) is disqualified due to specified past misconduct.

 

In accordance with Rule 262 of Regulation A, MCI Income Fund V, LLC (“Issuer”) is required to confirm the disciplinary history of Covered Persons. In order to make this confirmation, Issuer will rely upon the information provided in this Questionnaire. Issuer may request updates of this verification on a periodic basis or otherwise as may be deemed appropriate. The SEC may require the disclosure of information provided in this Questionnaire to potential investors or other persons.

 

 “Covered Person” includes:

 

 

Please answer each of the following questions by indicating “Yes” or “No.” If you answer “Yes” to any of the questions, please describe the underlying events and circumstances, including dates and any ongoing or related activities.

 

 

 

Please provide all previous names of the Broker Dealer and its affiliates:

 

 

Business Address:   ____________________________________________________________________________________

 

Business Telephone:____________________________________________________________________________________

 

Contact Email Address: _________________________________________________________________________________

 

The above named Broker Dealer and its Covered Persons shall be referred to collectively and individually as “you”.

 

QUESTIONS

 

 

 

 

 

____________________________________________________________________________________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

____________________________________________________________________________________________________

 

 

 

 

 

 

____________________________________________________________________________________________________

 

 

 

 

 

 

 

 

____________________________________________________________________________________________________

 

 

 

 

 

____________________________________________________________________________________________________

 

 

 

 

 

____________________________________________________________________________________________________

 

 

 

 

 

____________________________________________________________________________________________________

 

 

 

CERTIFICATION

 

By signing below, you acknowledge and agree to the following:

 

 

 

 

 

 

The foregoing answers are correct and complete to the best of my knowledge and understanding after a reasonable investigation.

 

 

 

 

 

 

Exhibit 2(b)

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

MCI PREFERRED INCOME FUND V, LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) is effective as of April 1, 2019 (the “Effective Date”), between and among Megatel Capital Investment, LLC, a Delaware limited liability company (the “Manager”) and MCI Holdings, LLC, a Delaware limited liability company (the “Initial Member”), on the terms and conditions below. All capitalized terms not otherwise defined herein shall have the meaning set forth for such terms in Appendix I.

 

RECITALS

 

 By execution of this Agreement, pursuant to and in accordance with the Delaware Limited Liability Company Act, 6 Del. C. §18- 101, et seq., as amended from time to time (the “Act”), the Manager and the Initial Member hereby agree as follows:

 

SECTION I

THE COMPANY

1.1          Formation. The Company has been organized as a limited liability company under and pursuant to the provisions of the Act by the filing of the certificate of formation of the Company (as amended from time to time, the “Certificate”) with the office of the Secretary of State of Delaware, State of Delaware on April 1, 2019. The fact that the Certificate is on file in the office of the Secretary of State, State of Delaware, shall constitute notice that the Company is a limited liability company. The rights and liabilities of the holders of membership interests (the “Members”) shall be as provided under the Act, the Certificate, and this Agreement.

1.2           Name. The name of the Company is “MCI Preferred Income Fund V, LLC,” and all business of the Company shall be conducted in such name. The Manager of the Company may change the name of the Company upon notice to the Members.

1.3           Purpose. The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act and engaging in any and all activities necessary or incidental to the foregoing, which shall include, but not be limited to, funding or investing in a secured master credit facility (the “Master Credit Facility”) between Megatel Homes, L.L.C., a Texas limited liability company; Megatel Holdings, LLC, a Texas limited liability company; Megatel Homes III, LLC, a Texas limited liability company; including any wholly-owned subsidiaries of such entities and Affiliates that may now or hereafter be joined thereunder pursuant to a joinder agreement (collectively, and any of which may be referred to herein as, “Megatel”), and making loans to Megatel thereunder.

 

1.4           Powers. In furtherance of the foregoing, but not as a limitation thereon, the Company shall have the power and authority to take any and all actions necessary, appropriate, advisable, convenient or incidental to or for the furtherance of the purpose set forth in Section 1.3, including, but not limited to, the power to:

 

(a)           conduct its business, carry on its operations, and have and exercise the powers granted to a limited liability company by the Act in any state, territory, district, or possession of the United States, or in any foreign country that may be necessary, convenient, or incidental to the accomplishment of the purpose of the Company;

 

 

 

 

(b)           engage in a private offering of securities pursuant to a confidential private placement memorandum, including the sale and issuance of interests in the Company;

 

(c)           fund loans to or equity investments in Megatel, on such terms and conditions as the Manager determines, in its sole discretion, to be desirable;

 

(d)           enter into an escrow or depository agreement providing for the escrow and/or deposit of proceeds raised from an offering of securities;

 

(e)            enter into a managing broker-dealer agreement by and between the Company and a FINRA-registered broker-dealer in connection with an offering of securities;

 

(f)           acquire, operate, purchase, maintain, finance, improve, own, sell, convey, assign, mortgage, lease or demolish or otherwise dispose of any real or personal property which may be necessary, convenient or incidental to the accomplishment of the purposes of the Company;

 

(g)         act as a trustee, executor, nominee, bailee, director, officer, agent or in some other fiduciary capacity for any person or entity and to exercise all of the powers, duties, rights and responsibilities associated therewith;

 

(h)           take any and all actions necessary, convenient or appropriate as trustee, executor, nominee, bailee, director, officer, agent or other fiduciary, including the granting or approval of waivers, consents or amendments of rights or powers relating thereto and the execution of appropriate documents to evidence such waivers, consents or amendments;

 

(i)           purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use, and deal in and with, shares or other interests in or obligations of domestic or foreign corporations, associations, general or limited partnerships (including, without limitation, the power to be admitted as partner thereof and to exercise the rights and perform the duties created thereby), trusts, limited liability companies (including, without limitation, the power to be admitted as a member or appointed as guarantors thereof and to exercise the rights and perform the duties created thereby), and other entities or individuals, or direct or indirect obligations of the United States or any foreign country or of any government, state, territory, governmental district, or municipality or of any instrumentality of any of them;

 

(j)           sue and be sued, complain and defend and participate in administrative or other proceedings, in its name;

 

(k)           pay, collect, compromise, litigate, arbitrate, or otherwise adjust or settle any and all other claims or demands of or against the Company or to hold such proceeds against the payment of contingent liabilities;

 

(l)            indemnify any person or entity and to obtain any and all types of insurance;

 

(m)           lend money for any proper purpose, invest and reinvest its funds, and take and hold real and personal property for the payment of funds so loaned or invested;

 

(n)           invest any funds of the Company pending distribution or payment of the same pursuant to the provisions of this Agreement;

 

 

 

(o)         prepay in whole or in part, refinance, recast, increase, modify, or extend any indebtedness of the Company and, in connection therewith, execute any extensions, renewals, or modifications of any mortgage or security agreement securing such indebtedness;

 

(p)        enter into, perform, and carry out contracts of any kind, including, without limitation, contracts with Affiliates, necessary to, in connection with, convenient to, or incidental to the accomplishment of the purposes of the Company;

 

(q)           make, execute, acknowledge, and file any and all documents or instruments necessary, convenient, or incidental to the accomplishment of the purpose of the Company;

 

(r)           employ or otherwise engage employees, guarantors, contractors, advisors, attorneys, and consultants and pay reasonable compensation for such services;

 

(s)           enter into partnerships, limited liability companies, trusts, associations, corporations, or other ventures with other persons or entities in furtherance of the purposes of the Company; and

 

(t)           do such other things and engage in such other activities related to the foregoing as may be necessary, convenient, or incidental to the conduct of the business of the Company, and have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act;

 

(u)         Notwithstanding the foregoing, the Company shall not be permitted to borrow money or issue evidences of indebtedness; except that the Company reserves the right, in its sole and absolute discretion, to borrow money from, and/or issue evidences of indebtedness to, affiliates of the Company for the sole purpose of funding the Preferred Distributions, and provided that such incurrence of indebtedness be interest free and without other cost or expense beyond principal, for the life of the loan, and further provided that the repayment of such indebtedness shall be subordinate to the payment of the Preferred Distributions and the return of all unredeemed Invested Capital. The Company shall not be permitted to secure any Company indebtedness by mortgage, pledge, or other lien on the assets of the Company.

 

1.5         Registered Office; Registered Agent; Principal Place of Business.

 

(a)           The registered office of the Company required by the Act to be maintained in the State of Delaware is the initial registered office named in the Certificate or such other office (which need not be the place of business of the Company) as the Manager may designate from time to time in the manner provided by the Act.

 

(b)           The registered agent of the Company in the State of Delaware shall be the initial registered agent named in the Certificate or such other Person or Persons (a “Person” being an individual, partnership, limited liability company, corporation, trust, estate, association, nominee or other entity) as the Manager may designate in the manner provided by the Act.

 

(c)           The principal place of business of the Company is at 1800 Valley View Lane, Suite 400, Farmers Branch, Texas 75234. The Manager may change the principal place of business of the Company to any other place within or outside of the State of Delaware upon notice to the Members, and the Company shall maintain records there for inspection as required by the Act. The Company may have such other offices as the Manager may designate from time to time.

 

1.6           Term. The term of the Company commenced on the date the Certificate was filed in the office of the Secretary of State of Delaware in accordance with the Act and shall continue perpetually until it is dissolved and liquidated in accordance with Section XI of this Agreement.

 

 

 

1.7           Title to Property. All real and personal property acquired by the Company, including cash, and any improvements thereon, and both tangible and intangible property (“Property”) shall be owned by the Company as an entity, and at all times after the Effective Date, the Company shall hold title to all of its Property in the name of the Company and not in the name of any Member. No Member shall have any ownership interest in the Company’s Property in its individual name (notwithstanding each Member’s limited liability company interest in the Company, which shall be the personal property of each Member for all purposes).

1.8           Required Filings. The Manager shall execute, acknowledge, file, record, and/or publish such certificates and documents as may be required by this Agreement or by law in connection with the formation and operation of the Company.

 

SECTION II

INTERESTS, CAPITALIZATION AND FINANCING

2.1           Interests. The limited liability company interests in the Company shall consist of a class of common limited liability company interests (the “Common Interests” or the “Interests”). Each owner of one or more Common Interests shall be referred to herein as a “Common Member,” or the “Members,” and each, a “Member”. The Interests will not be evidenced by certificates unless otherwise determined by the Manager in its sole discretion. The aggregate number of Interests that the Company shall have authority to issue shall be One Hundred (100), of which One Hundred (100) shall be Common Interests. 

2.2           Initial Member Capital Contribution for Common Interests. The Initial Member shall contribute the sum of $100.00 in cash to the Company as of the Effective Date and shall receive 100 Common Interests therefor.

2.3           Admission of a Member. To the extent required by law, the Manager shall amend this Agreement and take such other action as the Manager deems necessary or appropriate promptly after receipt of the Members’ Capital Contributions to reflect the admission of those Persons as Members of the Company.

 

2.4          Liabilities of Members. Except as specifically provided in this Agreement or as required by law, neither the Manager nor any Member shall be required to make any additional Capital Contributions to the Company, and no Manager or Member shall be liable for the expenses, liabilities or any other obligations of the Company solely by reason of being a Manager or Member of the Company, nor shall the Manager or the Members be required to lend any funds to the Company or to repay to the Company, any Member, any creditor of the Company or any other Person, any portion of, or all of, any deficit balance in a Member’s Capital Account. For the avoidance of doubt, the Manager has no authority to bind the Members to any agreement that would preempt the foregoing limitation on liabilities, whether acting through a power of attorney as granted to the Manager in each Member’s Subscription Agreement, or otherwise.

 

2.5         Third Party Beneficiaries. The parties to this Agreement shall be entitled to all of the privileges, benefits, and rights contained herein; no other party shall be a third-party beneficiary or have any rights hereunder or be able to enforce any provision contained herein.

 

 

 

SECTION III

ALLOCATIONS

 

3.1           Profits and Losses.

 

(a)           Profits. After giving effect to the special allocations set forth in Sections 3.2 and 3.3, Profits for any Allocation Year shall be allocated to the Preferred Members to the extent of any Preferred Distributions received by such Preferred Member and then to the Common Members in proportion to their Membership Percentages.

 

(b)           Losses. After giving effect to the special allocations set forth in Sections 3.2 and 3.3 and subject to Sections 3.4 and 3.5, Losses for any Allocation Year shall be allocated to the Preferred Members to the extent of any Preferred Distributions received by such Preferred Member, and then to the Common Members in proportion to their Membership Percentages.

 

3.2           Special Allocations and Section 754 Adjustments.

(a)           Certain Special Allocations. Notwithstanding Section 3.1(a) and Section 3.1(b), special allocations of Profits, Losses, or specific items of income, gain, loss or deduction may be specially allocated for any Allocation Year as follows:

 

(iii)           Qualified Income Offset. The Company shall specially allocate items of income and gain when and to the extent required to satisfy the “qualified income offset” requirements within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d).

(b)         Nonrecourse Deductions. Nonrecourse Deductions for any Allocation Year (or other applicable period) shall be specially allocated pro rata among the Members, based upon their respective Membership Percentages except to the extent that the Code and Regulations require that such deductions be allocated in some other manner.

(c)        Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1).

 

 

 

(d)           Allocations Relating to Taxable Admission of Additional Members/Issuance of Interests. Any income, gain, loss, or deduction realized as a direct or indirect result of the admission of additional Members to the Company and/or the issuance of Interests (“Issuance Items”) shall be allocated among the Members so that, to the maximum extent possible, the net amount of such Issuance Items, together with all other allocations under this Agreement to each Member shall be equal to the net amount that would have been allocated to each such Member if the Issuance Items had not been realized.

(e)           Compliance with Code. It is the intent of the Members that allocations (including allocations on liquidation) of income, gain and loss (or items thereof) of the Company shall be made in a manner which complies with provisions of Section 704(b) of the Code and the Regulations thereunder and which reflects the Members’ interests in the Company as determined under Regulations Section 1.704-1(b)(3). In furtherance of the foregoing, the Manager is authorized and directed to allocate income, gain, loss or deduction in a manner which is inconsistent with this Section III to the extent necessary to comply with Section 704(b) of the Code and the Regulations thereunder; provided that such allocations shall be made, to the extent possible, to reflect the economics set forth in the distribution provisions of Sections 4 and 11.2.

(f)          Maintenance of Capital Accounts. The provisions of this Agreement relating to the maintenance of Aggregate 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; provided, however, that the Gross Asset Value of each asset shall be computed in accordance with the definition of “Gross Asset Value” in Appendix I. In the event the Manager shall determine that it is prudent to modify the manner in which the Aggregate Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed Property or which are assumed by the Company or any Members), are computed in order to comply with such Regulations, the Manager may make such modification, provided that it is not likely to have a material effect on the amounts distributed hereunder. The Manager shall also have the authority to make appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

3.3           Curative Allocations. The Manager shall have the right and obligation to adjust the allocations of Profits and Losses to reflect the intended economics of the Company. The allocations set forth in Sections 3.2(a), 3.2(b), 3.2(c) and 3.4 (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 3.3. Therefore, notwithstanding any other provision of this Section III (other than the Regulatory Allocations), the Manager in good faith shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Aggregate Capital Account balance is, to the extent and as quickly as possible, equal to the Aggregate Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Sections 3.1 and 3.2(b). To the extent possible, the offsetting special allocations made to a Member pursuant to the preceding sentence shall be made to the separate Capital Account balances of such Member in such proportions as will cause such separate Capital Account balances to be the same as if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 3.1.

 

3.4           Loss Limitation. Losses allocated pursuant to Section 3.1 shall not exceed the maximum amount of Losses that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Allocation 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 3.1 hereof, the limitation set forth in this Section 3.4 shall be applied on a Member-by-Member basis, and Losses not allocable to any Member as a result of such limitation shall be allocated to the other Members in accordance with the positive balances in such Member’s Aggregate Capital Accounts so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.

 

 

3.5           Other Allocation Rules.

 

(a)           For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Manager using any permissible method under Code Section 706 and the Regulations thereunder.

 

(b)           The Members are aware of the income tax consequences of the allocations made by this Section III and hereby agree to be bound by the provisions of this Section III in reporting their shares of Company income and loss for income tax purposes, except to the extent otherwise required by law.

 

(c)           Solely for purposes of determining a Member’s proportionate share of the “excess nonrecourse liabilities” of the Company within the meaning of Regulations Section 1.752-3(a)(3), the Member’s interests in Company Profits are in proportion to their respective Membership Percentages on the date with respect to which such determination is being made.

 

(d)           Tax credits and any other items other than Profits and Losses that are not otherwise expressly provided for herein shall be allocated to the Members in proportion to their respective Membership Percentages on the date with respect to which such determination is being made.

 

(e)           To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Members shall endeavor to treat distributions as having been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member.

 

SECTION IV

DISTRIBUTIONS

 

4.1           Distributions.

 

(a)           The Manager shall cause the Company to distribute, at least monthly, 100% of the Company’s Distributable Cash to the Common Members in proportion to the Common Capital Account of each Common Member (the “Common Distribution”). For the avoidance of doubt, no Common Distribution shall be paid or payable by the Company until such time as no Preferred Interests remain issued and outstanding, and the Preferred Distribution has thereby terminated in accordance with Section 4.1(a).

 

 

 

 

 

4.2           Withholding Obligations.

 

(a)           If the Company is required (as determined in good faith by the Manager) to make a payment with respect to any Member to discharge any legal obligation of the Company or the Manager to make payments to any governmental authority with respect to any federal, foreign, state or local tax liability of such Member arising as a result of such Member’s Interests in the Company (a “Tax Payment”), then, notwithstanding any other provision of this Agreement to the contrary, the amount of any such Tax Payment shall be deemed to be a loan by the Company to such Member, which loan shall bear interest at the Prime Rate and be payable upon demand or by offset to any Preferred Distribution which otherwise would be made to such Member.

 

(b)           If and to the extent the Company is required to make any Tax Payment with respect to any Member, or elects to make payment on any loan described in Section 4.2(a) by offset to a Preferred Distribution to a Member, either (i) such Member’s proportionate share of such Preferred Distribution shall be reduced by the amount of such Tax Payment, or (ii) such Member shall pay to the Company prior to such Preferred Distribution an amount of cash equal to such Tax Payment.

 

(c)           The Manager shall be entitled to hold back any Preferred Distribution to any Member to the extent the Manager believes in good faith that a Tax Payment will be required with respect to such Member in the future and the Manager believes that there will not be sufficient subsequent Preferred Distributions to make such Tax Payment.

 

SECTION V

MANAGEMENT

5.1           General. The business and affairs of the Company shall be managed solely by the Manager. Except as otherwise set forth in this Agreement, the Manager shall have full and complete authority, power and discretion to manage and control the business, affairs and all Property of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company’s business. No Member (with the exception of the Manager, in the event the Manager becomes a Member) shall have the authority or power to act for, or on behalf of, the Company, to do any act that would be binding on the Company, or to incur any expenditure on behalf of the Company. 

 

 

 

 

5.3           Compensation. For the services rendered by it in its capacity as a Manager under this Agreement, the Manager shall receive such compensation, if any, as set forth herein. Any compensation paid to a Member will be deemed for all purposes as a guaranteed payment under Section 707(c) of the Code.

 

5.4           Other Business.

(a)           The Manager is not obligated to devote all of its time or business efforts to the affairs of the Company but shall comply with the terms of the governing documents of the Company and any other entity or organization applicable thereto. The Manager shall devote to the Company whatever time, effort, and skill that the Manager deems appropriate to carry out the duties of the Manager set forth herein or for the operation of the Company.

(b)           Subject to Section 5.4(c), the Manager may engage or invest, independently or with others, directly or indirectly, in any business activity and may purchase, sell, hold, or otherwise deal with any securities or real estate opportunities for the account of any such other business, for its own accounts or for others. Neither the Company nor the Members shall have any rights in or to such independent ventures or activities or the income or profits therefrom by virtue of this Agreement.

(c)           For the duration of the Company, the Manager shall not form, sponsor, or act (other than through the Company), directly or indirectly, as general partner of any pooled investment entity that meets the Company’s investment criteria, unless such entity is formed solely for the purpose of holding the investments of the Person who controls the Manager or the investments of any members of such Person’s extended family.

(a)           The Manager shall have the right to appoint officers of the Company to assist with the day-to-day management of the business and affairs of the Company. Such officers may include a president, one or more vice presidents, a chief financial officer, a secretary and one or more assistant secretaries. The officers shall serve at the pleasure of the Manager, subject to all rights, if any, of any officer under any contract of employment. Any individual may hold any number of offices. The officers shall exercise such powers and perform such duties as shall be determined from time to time by the Manager.

(b)           The Manager may designate signatories to execute documents for and on behalf of the Company.

(a)           The Manager shall discharge its duties as such in good faith and shall act fairly in all dealings with other Persons in its capacity as a Manager, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner it reasonably believes to be in the best interests of the Company.

 

 

 

(b)           The Manager and its members, managers, affiliates, owners, officers, employees, attorneys, and agents, and each officer or employee of the Company (each, an “Indemnitee”) shall, to the fullest extent permitted or required by the Act, be exculpated from, and indemnified by, the Company against any liability, loss, damage, penalty, action, claim, judgment, settlement, cost, or expense of any kind or nature whatsoever (including all reasonable attorneys' fees, costs, and expenses of defense, appeal, and settlement of any proceedings instituted against such Indemnitee or the Company and all costs of investigation in connection therewith) that relates to or arises out of, or is alleged to relate to or arise out of, any action or inaction on the part of the Company or such Indemnitee acting on behalf of the Company; provided, an Indemnitee shall be entitled to indemnification hereunder only to the extent that such Indemnitee's conduct did not constitute gross fraud, willful misconduct, or gross negligence. The Company shall advance expenses incurred by such Indemnitee upon the receipt by the Company of the signed statement of such Indemnitee agreeing to reimburse the Company for such advance in the event it is ultimately determined that such Indemnitee is not entitled to be indemnified by the Company for such expenses. No Indemnitee shall be liable for the acts, receipts, neglects, defaults, or omissions of any other Indemnitee or agent of the Company.

(c)           Not Exclusive. The indemnification and advancement of expenses provided by or granted pursuant to this Section 5.6 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any agreement or by applicable law.

(d)           Beneficiaries. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 5.6 shall continue as to a Person who has ceased to be the Manager (and the members, managers, affiliates, owners, officers, employees, attorneys, and agents of such Person), an officer, or an employee, and shall inure to the benefit of the personal representatives, executors, or administrators of such a Person.

(e)           Limit on Liability of Members. The indemnification set forth in this Section 5.6 shall in no event cause the Members to incur any personal liability beyond their positive Capital Accounts, nor shall it result in any liability of the Members to any third party.

SECTION VI

ROLE OF MEMBERS: WITHDRAWAL, PARTITION AND OTHER ISSUES

6.1           Withdrawal/Resignation. Except as otherwise provided in Sections II, IV and XI hereof, no Member shall demand or receive a return on or of its Invested Capital (if any) or withdraw from the Company without the consent of the Manager. Under circumstances requiring a return of any Invested Capital, no Member has the right to receive Property other than cash except as may be specifically provided herein.

 

6.3           Member Liability. No Member shall be liable under a judgment, decree, or order of a court, or in any other manner for the Debts or any other obligations or liabilities of the Company. A Member shall be liable only to make its Capital Contributions. No Member shall be required to restore a deficit balance in its Aggregate Capital Account or to lend any funds to the Company or, after its Capital Contributions have been made, to make any additional contributions, assessments, or payments to the Company, notwithstanding anything to the contrary contained herein.

 

6.4           Partition. While the Company remains in existence or is continued, each Member agrees and waives its rights to have any Property partitioned, or to file a complaint or to institute any suit, action, or proceeding at law or in equity to have any such Property partitioned, and each Member, on behalf of itself, its successors, and assigns hereby waives any such right.

 

 

 

6.5           Other Instruments. Each Member hereby agrees to execute and deliver to the Company within five (5) Business Days after receipt of a written request therefor, such other and further documents and instruments, statements of interest and holdings, designations, powers of attorney and other instruments and to take such other action as the Manager reasonably deems necessary, useful or appropriate to comply with any laws, rules or regulations as may be necessary to enable the Company to fulfill its responsibilities under this Agreement.

 

SECTION VII

ACCOUNTING, BOOKS AND RECORDS

7.1           Books and Records.

 

(a)           The Company shall keep at its principal place of business each of the records required to be maintained by the Act, as well as any others agreed upon by the Manager or otherwise required for the Company to fulfill its financial and accounting obligations to the Members.

 

(b)           On written request stating the purpose, a Member may examine and copy in person, at any reasonable time, for any proper purpose reasonably related to such Member’s Interest, and at the Member’s expense, records required to be maintained under the Act and such other information regarding the business, affairs, and financial condition of the Company as is just and reasonable for the Member to examine and copy.

 

7.2           Tax Matters.

 

(a)           Tax Elections. The Company may designate a partnership representative for any taxable year pursuant to Code Section 6223 (the “Partnership Representative”). The Partnership Representative shall, without any further consent of the Members being required (except as specifically required herein), have the authority to decide whether to make any and all elections for federal, state, local, and foreign tax purposes, and to extend the statute of limitations for assessment of tax deficiencies against the Members with respect to adjustments to the Company’s federal, state, local, or foreign tax returns. To the extent provided in Code Sections 6221 through 6223 (as in effect before amendment of the Bipartisan Budget Act of 2015) and similar provisions of federal, state, local, or foreign law, the Partnership Representative shall represent the Company and the Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company or the Members in their capacities as Members, and to file any tax returns and execute any agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Members with respect to such tax matters or otherwise affect the rights of the Company and the Members. Arash Afzalipour is specifically authorized to act as the Partnership Representative under the Code and in any similar capacity under applicable state or local law.

 

(b)           Tax Information. Necessary tax information shall be delivered to each Member as soon as practicable after the end of each Fiscal Year of the Company.

 

7.3           Financial Statements and Other Reports. The Manager shall make available to each Member, upon request, and as soon as reasonably practicable:

 

(a)           after the end of each calendar quarter, a written update on the business and affairs and the financial status of the Company; and

 

 

 

(b)           after the end of each Fiscal Year of the Company, audited financial statements of the Company for such Fiscal Year prepared by the Company.

 

7.4           Tax Status. It is intended that the Company shall be treated as a partnership (or as a disregarded entity if there is only one Member) for federal and state income tax purposes. Notwithstanding the foregoing, no provision of this Agreement shall be deemed or construed to constitute the Company a partnership (including, without limitation, a limited partnership) or joint venture, or any Member a partner or joint venturer of or with any other Member, for any purposes other than federal and state tax purposes.

 

7.5           Fiscal Year. The fiscal year of the Company shall be the calendar year.

 

SECTION VIII

TRANSFERS

 

 

THE INTERESTS HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF BY A MEMBER WITHOUT THE PRIOR WRITTEN CONSENT OF THE MANAGER, COMPLIANCE WITH THE TERMS OF THIS AGREEMENT, AND COMPLIANCE WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, THE RULES AND REGULATIONS PROMULGATED UNDER EACH OF SUCH ACTS AND ANY APPLICABLE STATE “BLUE SKY” OR SECURITIES LAWS.

 

8.2           Prohibited Transfers. Except as specifically provided in Section 8.1, any purported Transfer of Interests shall be null and void and of no force or effect whatever; provided that, if the Company is required to recognize a Transfer that is not an Approved Transfer, the Interests Transferred shall be strictly limited to the Transferor’s rights to allocations and distributions as provided by this Agreement with respect to the Transferred Interests, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities for damages that the Transferor or Transferee of such Interests may have to the Company.

 

In the case of a Transfer or attempted Transfer of Interests that is not an Approved Transfer, the parties engaging or attempting to engage in such Transfer shall be liable to indemnify and hold harmless the Company and the other Members from all cost, liability, and damage that any of such indemnified Members and the Company may incur (including, without limitation, incremental tax liabilities, attorney fees and expenses and the costs of reversing an unapproved transfer) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby.

 

8.3           Rights of Unadmitted Assignees. A Person who acquires Interests but who is not admitted as a substituted Member pursuant to Section 8.4 shall be entitled only to allocations and distributions with respect to such Interests in accordance with this Agreement and shall have no right to any information or accounting of the affairs of the Company, shall not be entitled to inspect the books or records of the Company, and shall not have any of the rights of a Member under the Act or this Agreement.

 

 

 

8.4           Admission of Substituted Members. Subject to the other provisions of this Section VIII, a Transferee of Interests may be admitted to the Company as a substituted Member only upon satisfaction of the conditions set forth in this Section 8.4:

(a)           The Interests with respect to which the Transferee is being admitted were acquired by means of an Approved Transfer;

(b)           The Transferee of Interests (other than, with respect to clauses (i) and (ii) below, a Transferee that was a Member prior to the Transfer) shall, by written instrument in form and substance reasonably satisfactory to the Manager (and, in the case of clause (ii) below, the Transferor Member), (i) accept and adopt the terms and provisions of this Agreement and (ii) assume the obligations of the Transferor Member under this Agreement with respect to the Transferred Interests. The Transferor Member shall be released from all such assumed obligations except (x) those obligations or liabilities of the Transferor Member prior to Transfer arising out of a breach of this Agreement by Transferor Member, (y) in the case of a Transfer to any Person other than a Member or any of its controlled Affiliates, those obligations or liabilities of the Transferor Member based on events occurring, arising, or maturing prior to the date of Transfer, and (z) in the case of a Transfer to any of its controlled Affiliates, any Capital Contribution or other financing obligation of the Transferor Member under this Agreement;

(c)           The Transferee pays or reimburses the Company for all reasonable legal, filing, and publication costs that the Company incurs in connection with the admission of the Transferee as a Member with respect to the Transferred Interests; and

(d)           Except in the case of a Transfer involuntarily by operation of law, if required by the Manager, the Transferee shall deliver to the Company evidence of the authority of such Person to become a Member and to be bound by all of the terms and conditions of this Agreement, and the Transferee and Transferor shall each execute and deliver such other instruments as the Manager reasonably deems necessary or appropriate to effect, and as a condition to, such Transfer, including amendments to the Certificate or any other instrument filed with the State of Delaware or any other state or governmental authority.

8.5           Distributions and Allocations in Respect of Transferred Interests. If any Interests are Transferred during any Allocation Year in compliance with the provisions of this Section VIII, Profits, Losses, each item thereof, and all other items attributable to the Transferred Interests for such Allocation Year shall be divided and allocated between the Transferor and the Transferee by taking into account their varying holdings of Interests during the calendar year in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Manager. All distributions on or before the date of such Transfer shall be made to the Transferor, and all distributions thereafter shall be made to the Transferee. Solely for purposes of making such allocations and distributions, the Company shall recognize such Transfer not later than the end of the calendar month during which it is given notice of such Transfer, provided that, if the Company is given notice of a Transfer at least ten (10) Business Days prior to the Transfer, the Company shall recognize such Transfer as of the date of such Transfer, and provided further that if the Company does not receive a notice stating the date such Interests were Transferred and such other information as the Manager may reasonably require within thirty (30) Business Days after the end of the Allocation Year during which the Transfer occurs, then all such items shall be allocated, and all distributions shall be made, to the Person who, according to the books and records of the Company, was the owner of the Interests on the last day of such Allocation Year. Neither the Company nor any Member shall incur any liability for making allocations and distributions in accordance with the provisions of this Section 8.5, whether or not the Company has knowledge of any Transfer of ownership of any Interests.

 

 

 

SECTION IX

BENEFIT PLAN INVESTORS

 

10.1           Investment in Accordance with Law. Each Member that is, or is investing assets on behalf of, an “employee benefit plan,” as defined in, and subject to the fiduciary responsibility provisions of, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or a “plan,” as defined in and subject to Section 4975 of the Code (each such employee benefit plan and plan, a “Plan”), and each fiduciary thereof who has caused the Plan to become a Member (a “Plan Fiduciary”), represents and warrants that (a) the Plan Fiduciary has considered an investment in the Company for such Plan in light of the risks relating thereto; (b) the Plan Fiduciary has determined that, in view of such considerations, the investment in the Company for such Plan is consistent with the Plan Fiduciary’s responsibilities under ERISA; (c) the investment in the Company by the Plan does not violate and is not otherwise inconsistent with the terms of any legal document constituting the Plan or any trust agreement thereunder; (d) the Plan’s investment in the Company has been duly authorized and approved by all requisite Plan Fiduciary and Plan action; (e) none of the Manager, any member of the investment committee, any member of a board of advisors, any placement agent, any of their respective Affiliates or any of their respective agents or employees: (i) has investment discretion with respect to the investment of assets of the Plan used to purchase Interests; (ii) has authority or responsibility to, or regularly gives investment advice with respect to, the assets of the Plan used to purchase Interests for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to the Plan and that such advice will be based on the particular investment needs of the Plan; or (iii) is an employer maintaining or contributing to the Plan; and (f) the Plan Fiduciary (i) is authorized to make, and is responsible for, the decision for the Plan to invest in Interests, including the determination that such investment is consistent with the requirement imposed by Section 404 of ERISA that Plan investments be diversified so as to minimize the risks of large losses; (ii) is independent of the Manager, each placement agent, and each of their respective Affiliates, and (iii) is qualified to assess the merits and risks associated with making such investment decision to invest in Interests.

 

SECTION X

DISSOLUTION AND WINDING UP

 

11.1           Dissolution Events.

 

(a)           Except as otherwise provided in the Act, the Company shall dissolve and shall commence winding up and liquidation upon (i) the written election of the Manager to dissolve, wind up, and liquidate the Company; or (ii) the removal of the Manager for Cause pursuant to Section 5.7 hereof (each, a “Dissolution Event”).

 

(b)           The Bankruptcy, dissolution, retirement, death, or resignation of the Manager shall not cause the dissolution of the Company.

 

11.2           Winding Up. Upon the occurrence of a Dissolution Event, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members, and no Member shall take any action that is inconsistent with, or not necessary to, or appropriate for, the winding up of the Company’s business and affairs, provided that all covenants contained in this Agreement and obligations provided for in this Agreement shall continue to be fully binding upon the Members until such time as the Company’s assets have been distributed pursuant to this Section 11.2 and the Certificate has been canceled pursuant to the Act. The Liquidator shall be responsible for overseeing the winding up and dissolution of the Company, which winding up and dissolution shall, to the extent practical, be completed within twelve (12) months of the occurrence of the Dissolution Event. The Liquidator shall take full account of the Company’s Debts, other liabilities and assets and shall cause any assets or the proceeds from the sale thereof, to the extent sufficient therefor, to be applied and distributed, to the maximum extent permitted by law, in the following order:

 

 

 

 

(a)           First, to creditors (including Members who are creditors, to the extent otherwise permitted by law) in satisfaction of all of the Company’s Debts and other liabilities (whether by payment or the making of reasonable provision for payment thereof), other than liabilities for which reasonable provision for payment has been made and liabilities for distribution to Members under Section 18-601 or 18-604 of the Act;

 

(b)           Second, except as provided in this Agreement, and subject to Section 4.1 herein, to Members and former Members of the Company in satisfaction of liabilities for distribution under Section 18-601 or 18-604 of the Act; and

 

(c)           The balance, if any, to the Members in accordance with their respective positive (credit) balances in their Capital Accounts after all adjustments, and further subject to Section 4.1 herein.

 

11.3           Deficit Aggregate Capital Accounts. If any Member has a deficit balance in its Aggregate Capital Account (after giving effect to all contributions, distributions, and allocations for all Allocation Years, including the Allocation Year during which such liquidation occurs), such Member shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever. In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Section XI may be:

 

(a)           Distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company. The assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to Section 11.2; or

 

(b)           Withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld amounts shall be distributed to the Members as soon as practicable.

 

11.4           Rights of Members. Except as otherwise provided in this Agreement, each Member shall look solely to the Property of the Company for the return of its Invested Capital (if any) and has no right or power to demand or receive Property other than cash from the Company. If the assets of the Company remaining after payment or discharge of the Debts or liabilities of the Company are insufficient to return such Invested Capital (if any), the Members shall have no recourse against the Company or any other Member.

 

11.5           Notice of Dissolution/Termination.

 

(a)           In the event a Dissolution Event occurs, the Manager shall, within thirty (30) Business Days thereafter, provide written notice thereof to each of the Members and to all other parties with whom the Company regularly conducts business (as determined in the sole discretion of the Manager).

 

 

 

(b)           Upon completion of the distribution of the Company’s Property as provided in this Section XI, the Company shall be terminated, and the Liquidator shall cause the filing of the Certificate of Cancellation pursuant to Section 18-203 of the Act and shall take all such other actions as may be necessary to terminate the Company.

 

11.6       Allocations During Period of Liquidation. Except as otherwise provided in Section 11.2, during the period commencing on the first day of the year during which a Dissolution Event occurs and ending on the date on which all of the assets of the Company have been distributed to the Members pursuant to Section 11.2 (the “Liquidation Period”), the Members shall continue to share Profits, Losses, gain, loss and other items of Company income, gain, loss or deduction in the manner provided in Section IV.

 

11.7       The Liquidator. The “Liquidator” shall mean a Person appointed by the Manager (including, without limitation, the Collateral Agent in its capacity as Manager following the removal of the Manager for Cause, or the Person appointed thereby) to oversee the liquidation of the Company.

 

(a)           Fees. The Company is authorized to pay a reasonable fee to the Liquidator for its services performed pursuant to this Section XI and to reimburse the Liquidator for its reasonable costs and expenses incurred in performing those services.

 

(b)           Indemnification. The Company shall indemnify, save harmless, and pay all judgments and claims against such Liquidator or any officers, directors, agents or employees of the Liquidator relating to any liability or damage incurred by reason of any act performed or omitted to be performed by the Liquidator, or any officers, directors, agents or employees of the Liquidator in connection with the liquidation of the Company, including reasonable attorneys’ fees incurred by the Liquidator, officer, director, agent, or employee in connection with the defense of any action based on any such act or omission, which attorneys’ fees may be paid as incurred, except to the extent such liability or damage is caused by the gross fraud, intentional misconduct of, or a knowing violation of the laws by the Liquidator which was material to the cause of action.

 

11.8        Form of Liquidating Distributions. Notwithstanding anything to the contrary contained in this Agreement, for purposes of making distributions required by Section 11.2, the Liquidator may determine whether to distribute all or any portion of the Property in-kind or to sell all or any portion of the Property and distribute the proceeds therefrom; provided, however, that no such distribution in-kind shall be made to a Member who holds his Interests in a qualified retirement account, including without limitation an individual retirement account without the prior written consent of the custodian or trustee then acting for such Member. In the case of an in-kind distribution of the Property, the Capital Accounts of the Members shall be adjusted in accordance with Section 1.704-1(b)(2)(iv)(e)(1) of the Regulations to reflect the manner in which the unrealized income, gain, loss and deduction inherent in the Property (that has not previously been reflected in the Capital Accounts) would be allocated among the Members if there were a taxable disposition of the Property for its fair market value (taking into account Code Section 7701(g)) on the date of the distribution.

 

 

SECTION XI

MISCELLANEOUS

 

12.1           Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other shall be in writing and shall be deemed given to the party to whom addressed: (i) when delivered to such party by hand, (ii) one Business Day after being sent to such party by overnight courier, (iii) three (3) Business Days after being sent to such party by registered or certified mail (return receipt requested, postage prepaid), or (iv) when delivered via email to the Person to whom such notice is addressed, in each case at the following address: (A) if to the Company, to the address determined pursuant to Section 1.5(c); and (b) if to the Members, to the address the Company has on file for such Member.

 

 

 

 

12.2           Amendments.

 

(a)           Except as provided in Section 12.2(c) hereof, the Manager may amend this Agreement without the consent of the Members (i) to reflect changes validly made in the membership of the Company, in Capital Contributions, Capital Accounts, and Invested Capital, and take such actions as may be necessary or appropriate to avoid the assets of the Company being treated for any purpose of ERISA or Section 4975 of the Code as assets of any “employee benefit plan” as defined in and subject to ERISA or of any “Plan” as defined in and subject to Section 4975 of the Code (or any corresponding provisions of succeeding law) or to avoid the Company’s engaging in a prohibited transaction as defined in Section 406 of ERISA or Section 4975(c) of the Code; and (ii) otherwise as the Manager may determine, in the Manager’s sole discretion.

 

(b)           Notwithstanding Section 12.2(c) hereof, the Manager, without the necessity of obtaining the consent of any Member, shall amend this Agreement from time to time in each and every manner necessary to comply with the existing requirements of the Code, Regulations and rulings of the Internal Revenue Service (or any successor agency thereto) affecting the status of the Company as a “partnership” for federal income tax purposes; and no amendment of this Agreement shall be made that would adversely affect or jeopardize the status of the Company as a “partnership” for federal income tax purposes.

 

(c)           Except as provided in Section 12.2(b) hereof, and notwithstanding anything otherwise to the contrary contained in this Agreement:

 

(i)           No amendment to this Agreement shall be adopted without the consent of the Members constituting a majority of the Preferred Interests then outstanding for any action that would (A) modify or adversely affect the limited liability of any Preferred Member, (B) approve the issuance of any equity securities that are pari passu or senior to the Preferred Interests, (C) otherwise materially affect the amount or timing of distributions to which any Preferred Member would be entitled to receive pursuant to this Agreement (which in no event shall be interpreted to include occurrences of dilution as a result of the issuance of additional Interests of any class by the Manager pursuant to this Agreement), or (D) otherwise materially and adversely change or alter the rights of any Preferred Interests as stipulated herein (such as conversion, redemption or others); and

 

(ii)           No Member shall be required without his prior written consent to make any Capital Contribution in excess of the amount set forth in this Agreement.

 

All amendments made in accordance with this Section 12.2 shall be evidenced by a writing, executed by the Manager in its capacity as such and as attorney-in-fact for the Members, and a copy of such amendments shall be kept at the principal place of business of the Company.

 

12.3           Binding Effect. Except as otherwise provided in this Agreement, every covenant, term, and provision of this Agreement shall be binding upon and inure to the benefit of the Members and their respective successors, Transferees, and assigns.

 

12.4           Construction. Every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Member. References to Sections are references to Sections of this Agreement unless otherwise specified.

 

 

 

12.5           Time. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included, but the time shall begin to run on the next succeeding day. The last day of the period so computed shall be included, unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or legal holiday.

 

12.6           Headings. Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof.

12.7           Severability. Except as otherwise provided in the succeeding sentence, every provision of this Agreement is intended to be severable, and, if any term or provision of this Agreement is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement. The preceding sentence of this Section 12.7 shall be of no force or effect if the consequence of enforcing the remainder of this Agreement without such illegal or invalid term or provision would be to cause any Member to lose the material benefit of its economic bargain.

12.8           Incorporation by Reference. Every exhibit, appendix, schedule, and other addendum attached to this Agreement and referred to herein is incorporated in this Agreement by reference unless this Agreement expressly otherwise provides.

 

12.9           Variation of Terms. All terms and any variations thereof shall be deemed to refer to masculine, feminine, or neuter, singular or plural, as the identity of the Person or Persons may require.

 

12.10         Governing Law. The laws of the State of Delaware shall govern the validity of this Agreement, the construction of its terms, and the interpretation of the rights and duties arising hereunder.

 

12.11       Arbitration. Any dispute, controversy or claim arising out of or in connection with or relating to this Agreement or any breach or alleged breach hereof shall be submitted to, and determined and settled by, arbitration in Dallas County, Texas, pursuant to the rules of the American Arbitration Association, and judgment upon any such arbitration award rendered may be entered in any court having jurisdiction thereof.

 

12.12      Confidentiality.

 

(a)           Each Member agrees not to divulge, communicate, use to the detriment of the Company or for the benefit of any other Person, or misuse in any way, any confidential information or trade secrets of the Company or its Affiliates, or of any other Member or its Affiliates, including personnel information, secret processes, know-how, customer lists, formulas or other technical data, except as may be required by law (“Confidential Information”); provided, however, this prohibition shall not apply to any information which, through no improper action of such Member, is publicly available or generally known in the industry. Each Member acknowledges and agrees that any Confidential Information such Member has acquired was received in confidence and as a fiduciary of the Company.

(b)           It is agreed between the Members that the Company would be irreparably damaged by reason of any violation of the provisions of this Section 12.12, and that any remedy at law for a breach of such provisions would be inadequate. Therefore, the Company shall be entitled to seek and obtain injunctive or other equitable relief (including, but not limited to, a temporary restraining order, a temporary injunction, or a permanent injunction) against any Member, or such Member’s agents, assigns, or successors for a breach or threatened breach of such provisions and without the necessity of proving actual monetary loss or posting of any bond or other security. It is expressly understood among the parties of this Agreement that this injunctive or other equitable relief shall not be the Company’s exclusive remedy for any breach of this Section 12.12, and the Company shall be entitled to seek any other relief or remedy that it may have by contract, statute, law, or otherwise for any breach hereof, and it is agreed that the Company shall also be entitled to recover its attorneys’ fees and expenses in any successful action or suit against any Member relating to any such breach.

 

 

 

(c)           Notwithstanding anything in this Agreement to the contrary, to comply with Regulations Section 1.6011-4(b)(3), each Member (and any employee, representative, or other advisor of such Member) may disclose to any and all persons of any kind, the tax treatment and tax structure of the Company or any transactions contemplated by the Company, it being understood and agreed, for this purpose (i) the name of, or any other identifying information regarding (A) the Company or any existing or future Member (or any Affiliate thereof) of the Company, or (B) any investment or transaction entered into by the Company, and/or (ii) any performance information relating to the Company or its investments, the Manager or their Affiliates, does not constitute such tax treatment or tax structure information.

 

12.13     Counsel to the Company. The Members each acknowledge that this Agreement has been prepared by Kaplan Voekler Cunningham & Frank PLC and Hesse & Hesse, PC (both and each, “Counsel”), as counsel to the Company, with the consent of each Member. Each Member acknowledges that he has been advised by Counsel to the Company that a conflict may exist among his individual interests with respect to this Agreement, that he or she should seek the advice of independent counsel, and that he or she has had the opportunity to seek the advice of independent counsel. Each Member further acknowledges that Counsel has provided no advice or representations to him regarding the tax consequences of this Agreement to him, and that he has been advised to seek the advice and consultation of his own personal tax advisers with respect to such tax consequences and that counsel is not counsel to any Member or to any Affiliate of a Member, except with respect to the Manager.

 

 

 

12.15      Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, other than agreements specifically contemplated by this Agreement or which specifically refer to this Agreement.

 

12.16     Compliance with Anti-Money Laundering Requirements. Notwithstanding any other provision of this Agreement to the contrary, the Manager, in its own name and on behalf of the Company, shall be authorized without the consent of any Person, including any Member, to take such action as it determines in its discretion to be necessary or advisable to comply with any anti-money laundering or anti-terrorist laws, rules, regulations, directives, or special measures.

 

12.17     Counterpart Execution. This Agreement may be executed in any number of counterparts with the same effect as if all of the Members had signed the same document. All counterparts shall be construed together and shall constitute one agreement.

 

[Signature Page Follows]

 

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement as of the date first above set forth.

 

COMPANY:	MCI PREFERRED INCOME FUND V, LLC,
	a Delaware limited liability company
	By:         Megatel Capital Investment, LLC
	Its:         Manager
	By:       ________________________________
	Name:  Arash Afzalipour
	Its:        Co-President
	By:       ________________________________
	Name:  Armin Afzalipour
	Its:        Co-President
MANAGER:	MEGATEL CAPITAL INVESTMENT, LLC,
	a Delaware limited liability company
	By:           ________________________________
	Name:       Arash Afzalipour
	Its:            Co-President
	By:            ________________________________
	Name:       Armin Afzalipour
	Its:            Co-President
INITIAL MEMBER:	MCI HOLDINGS, LLC,
	a Delaware limited liability company
	By:            ________________________________
	Name:       Arash Afzalipour
	Its:            Co-President
	By:            ________________________________
	Name:       Armin Afzalipour
	Its:            Co-President

 

 

 

APPENDIX I

 

DEFINED TERMS

 

“Act” means the Delaware Limited Liability Company Act, 6 Del. C. §18-101 et seq., as amended from time to time (or any corresponding provisions of succeeding law).

 

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Aggregate Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments:

 

(i)           Credit to such Aggregate Capital Account any amounts which such Member is deemed to be obligated to restore pursuant to the penultimate sentences in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and

 

(ii)           Debit to such Aggregate Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(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.

 

“Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person or (ii) any officer, director, member, partner or trustee of such Person. For purposes of this definition, the terms “controlling,” “controlled by” or “under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person or entity, whether through the ownership of voting securities, by contract or otherwise, or the power to elect at least 50% of the directors, members, or Persons exercising similar authority with respect to such Person or entities.

 

“Aggregate Capital Account” means, with respect to any Member, the sum of (a) such Member’s Common Capital Account, and (b) such Member’s Preferred Capital Account. In the event that all of the Capital Accounts of a Member are negative, then all such Capital Accounts shall be added to produce a total deficit Aggregate Capital Account for such Member. A positive balance in any of the Capital Account(s) of a Member shall be offset with a negative balance in its other Capital Account(s) to produce either a positive or a negative Aggregate Capital Account, as the case may be. In the event any Interests are Transferred in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account(s) of the Transferor to the extent such Capital Account(s) relate to the Transferred Interests.

 

“Agreement” means this Limited Liability Company Agreement, the Appendices attached hereto, as the same shall be amended from time to time. This Limited Liability Company Agreement shall constitute a limited liability company agreement within the meaning of 18-101(7) of the Act. Words such as “herein,” “hereinafter,” “hereof,” “hereto” and “hereunder” refer to this Agreement as a whole, unless the context otherwise requires.

 

“Allocation Year” means (i) the period commencing on the Effective Date and ending on the first December 31, (ii) any subsequent twelve (12) month period commencing on January 1 and ending on December 31, or (iii) any portion of the period described in clauses (i) or (ii) for which the Company is required to allocate Net Income, Net Loss and other items of Company income, gain, loss, deduction or other items pursuant to Section III.

 

“Approved Transfer” has the meaning provided in Section 8.1.

 

 

 

“Bankruptcy” means, with respect to any Person, a “Voluntary Bankruptcy” or an “Involuntary Bankruptcy.” A “Voluntary Bankruptcy” means, with respect to any Person (i) the inability of such Person generally to pay its debts as such debts become due, or an admission in writing by such Person of its inability to pay its debts generally or a general assignment by such Person for the benefit of creditors, (ii) the filing of any petition or answer by such Person seeking to adjudicate itself as bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for such Person or for any substantial part of its property, or (iii) corporate action taken by such Person to authorize any of the actions set forth above.

“Business Day” means any day other than Saturday, Sunday or other day of the year on which banks are not required or authorized to close in Dallas, Texas.

 

“Capital Account” means the capital account required to be maintained under Section 704(b) of the Code and its Regulations to meet the alternative test for economic effect under such Regulations. The Manager shall have the right and obligation to cause such Capital Accounts to be maintained and adjusted as required to reflect the economics of the Company and in compliance with such Regulations.

 

“Capital Contribution” means, with respect to any Member, the amount of cash contributed to the Company with respect to any Interests.

 

“Certificate” means the certificate of formation filed with the Secretary of State of the State of Delaware pursuant to the Act to form the Company, as originally executed and amended, modified, supplemented or restated from time to time, as the context requires.

 

“Certificate of Cancellation” means a certificate filed in accordance with 6 Del. C. §18-203.

 

“Code” means the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal revenue laws.

 

“Common Capital Account” means, with respect to any Member, the Capital Account maintained for such Member’s Common Interests.

 

“Common Interests” has the meaning set forth in Section 2.1.

 

“Common Member” has the meaning set forth in Section 2.1.

 

“Company” means the limited liability company formed pursuant to this Agreement and the Certificate and the limited liability company continuing the business of this Company in the event of dissolution of the Company as herein provided.

 

“Company Minimum Gain” shall have the same meaning as the term “partnership minimum gain” set forth in Section 1.704-2(d) of the Regulations.

 

“Confidential Information” has the meaning provided in Section 12.12(a).

 

 

 

“Debt” means (i) any indebtedness for borrowed money, including loans, or the deferred purchase price of property as evidenced by a note, bonds, or other instruments, (ii) obligations as lessee under capital leases, (iii) obligations secured by any mortgage, pledge, security interest, encumbrance, lien, or charge of any kind existing on any asset owned or held by the Company whether or not the Company has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate swap agreement, (v) accounts payable, and (vi) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i), (ii), (iii), (iv), and (v) above; provided that, Debt shall not include obligations in respect of any accounts payable that are incurred in the ordinary course of the Company’s business and are not delinquent or are being contested in good faith by appropriate proceedings.

 

“Depreciation” means, for each Allocation Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Allocation Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Allocation Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Allocation Year bears to such beginning adjusted tax basis; provided, however, if the adjusted basis for federal income tax purposes of an asset at the beginning of such Allocation Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Manager.

 

“Dissolution Event” shall have the meaning set forth in Section 11.1.

 

“Distributable Cash” means cash that is available for distribution to the Members after Reserves and payment of expenses, as determined by the Manager in its discretion, pursuant to certain debt subordination requirements as provided in Section 1.4(u) herein, or as required to be distributed pursuant to Section 4.1.

 

“Early Redemption Fee” means a 12% fee deductible from a Preferred Member’s Preferred Capital Account upon an Early Redemption, calculated based on the Capital Contribution of the Preferred Member seeking early redemption, such fee being, in part, for the purpose of recouping non-reimbursable fees paid to third-parties who assisted in the placement of the deceased Preferred Member’s investment in the Offering as well as expense and cost of the Company to prematurely withdraw funds from its investments to accommodate an early redemption payment.

 

“Effective Date” has the meaning set forth in the preamble to this Agreement.

 

“ERISA” has the meaning set forth in Section 10.1.

 

“Extended Offering Termination Dates” has the meaning set forth in Section 2.4.

 

“Front-End Load” means the aggregate amount of the managing broker-dealer fees, servicing fees, Selling Commissions, and Organization and Offering Expenses—expected to total 12% of gross offering proceeds of the Offering, as more fully described in the Memorandum.

 

“Fiscal Year” has the meaning set forth in Section 7.5.

 

“Governmental Body” means any foreign, federal, state, local, or other governmental or regulatory agency, board, bureau, body, department or authority.

 

“Gross Asset Value” means with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except that the Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values (taking Code Section 7701(g) into account), as determined by the Manager, as of the following times: (A) the liquidation of the Company pursuant to a Dissolution Event, for purposes of Section 11.2(e); or (B) in the sole discretion of the Manager, as permitted pursuant to Regulations Section 1.704-1(b)(2)(iv)(f). If the Gross Asset Value of an asset has been determined or adjusted pursuant to the preceding sentence, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset, for purposes of computing Profits and Losses.

 

 

 

“Indemnitee” has the meaning set forth in Section 5.6(b).

 

“Initial Member” has the meaning set forth in the preamble to this Agreement.

 

“Initial Offering Termination Date” has the meaning set forth in Section 2.4.

 

“Interests” has the meaning set forth in Section 2.1.

 

“Invested Capital” means the number of Interests owned by a Member multiplied by $5,000.

 

“Involuntary Bankruptcy” means, with respect to any Person, without the consent or acquiescence of such Person, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or the filing of any such petition against such Person which petition shall not be dismissed within ninety (90) days, or without the consent or acquiescence of such Person, the entering of an order appointing a trustee, custodian, receiver or liquidator of such Person or of all or any substantial part of the property of such Person which order shall not be dismissed within ninety (90) days.

 

“Liquidation Period” has the meaning set forth in Section 11.6.

 

“Liquidator” has the meaning set forth in Section 11.7.

 

“Losses” has the meaning set forth in the definition of “Profits” and “Losses.”

 

“Megatel” includes Megatel Homes, L.L.C., a Texas limited liability company; Megatel Holdings, LLC, a Texas limited liability company; Megatel Homes III, LLC, a Texas limited liability company, including any wholly-owned subsidiaries of such entities, and affiliates that may now or hereafter be joined to the Master Credit Facility pursuant to a joinder agreement.

 

“Manager” shall have the meaning set forth in the preamble to this Agreement.

 

“Managing Broker-Dealer” shall mean International Assets Advisory, LLC, or any successor FINRA-registered broker-dealer acting in the same capacity.

 

“Member” shall mean any holder of either a Common Interest or a Preferred Interest who is admitted to the Company as a Member, and the Common Members and the Preferred Members shall be, collectively, referred to herein as “Members”.

 

“Member Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” in Section 1.704-2(b)(4) of the Regulations.

 

“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 Section 1.704-2(i)(3) of the Regulations.

 

 

 

“Member Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse deductions” in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.

 

“Membership Percentage” shall mean, with respect to each Member, the number of Interests in a share class held by such Member as of any determination date, divided by the total number of Interests held by all Members of the same class of Interests on such determination date, expressed as a percentage. The sum of the Membership Percentages of all Members in a particular class of Interests, as of any determination date, shall equal 100%. The initial Membership Percentage of the Common Interests of the Initial Member as of the Effective Date is as set forth on Appendix II hereto.

 

“Memorandum” shall mean the Company’s Confidential Private Placement Memorandum, as amended and/or supplemented from time to time, for the sale of up to $500,000,000 in Preferred Interests.

 

“Net Income” or “Net Loss” shall mean, respectively, for each Allocation Year of the Company, the taxable income and taxable loss (exclusive of Built-In Gain or Loss) of the Company as determined for federal income tax purposes in accordance with Section 703(a) of the Code—including all items of income, gain, loss, or deduction required to be separately stated pursuant to Section 703(a)(1) of the Code (other than any specific item of income, gain (exclusive of Built-In Gain), loss (exclusive of Built-In Loss), deduction, or credit subject to special allocation under this Agreement—with the following modifications:

 

(i)           The amount determined above shall be increased by any income exempt from federal income tax;

 

(ii)       The amount determined above shall be reduced by any expenditures described in Section 705(a)(2)(B) of the Code or expenditures treated as such pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i);

 

(iii)         Depreciation, amortization, and other cost recovery deductions shall be computed based on book value instead of on the amount determined in computing taxable income or loss. Any item of deduction, amortization, or cost recovery specially allocated to a Member and not included in Net Income or Net Loss shall be determined for Capital Account purposes in a similar manner; and

 

(iv)         For purposes of this Agreement, any book gain and book loss attributable to a revaluation of property attributable to unrealized gain or loss in such property shall be treated as Net Income and Net Loss.

 

“Nonrecourse Deductions” has the meaning set forth in Section 1.704-2(b)(1) of the Regulations.

 

“Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the Regulations.

 

“Offering” shall mean the Company’s private placement securities offering of up to $500,000,000 in Preferred Interests pursuant to the Memorandum.

 

“Offering Termination Date” has the meaning set forth in Section 2.4.

 

“Organization and Offering Expenses” has the meaning set forth in Section 9.1.

 

“Partnership Representative” has the meaning set forth in Section 7.2(a).

 

 

 

“Person” means any individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, association, nominee or other entity.

 

“Plan” has the meaning set forth in Section 10.1.

 

“Plan Assets Entity” has the meaning set forth in Section 10.2.

 

“Plan Fiduciary” has the meaning set forth in Section 10.1.

 

“Preferred Capital Account” means, with respect to any Member, the Capital Account maintained for such Member’s Preferred Interests.

 

“Preferred Distribution” has the meaning set forth in Section 4.1(a).

 

“Preferred Interest” has the meaning set forth in Section 2.1.

 

“Preferred Member” has the meaning set forth in Section 2.1.

 

“Prime Rate” shall mean the reference rate announced from time-to-time by the Wall Street Journal, and changes in the Prime Rate shall be deemed to occur at the end of each calendar month.

 

“Profits” and “Losses” mean, for each Allocation Year, an amount equal to the Company’s taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):

(i)           Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;

 

(ii)           Any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be subtracted from such taxable income or loss;

 

(iii)           In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the asset) or an item of loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

 

(iv)           Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value (as defined herein) of the Property disposed of, notwithstanding that the adjusted tax basis of such Property may differ from its Gross Asset Value;

 

(v)           In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Allocation Year, computed in accordance with the definition of Depreciation; and

 

 

 

(vi)           Notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 3.2 or Section 3.3 shall not be taken into account in computing Profits or Losses.

 

The amounts of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to Section 3.2 or Section 3.3 shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (v) above.

 

“Property” means all real and personal property acquired by the Company, including cash, and any improvements thereto, and shall include both tangible and intangible property.

 

“Recapture Fee” means a 10% fee deductible from a Preferred Member’s Preferred Capital Account upon a Redemption Upon Death payment, such fee being, in part, for the purpose of recouping non-reimbursable fees paid to third-parties who assisted in the placement of the deceased Preferred Member’s investment in the Offering; provided however, for Preferred Members who purchased Interests net of selling commissions, such as Interests purchased through a Registered Investment Advisor, the recapture fee shall be 3.0% of the Capital Contribution.

 

“Regulations” means the Income Tax Regulations, (whether final, temporary, or proposed) validly promulgated under the Code, as such Regulations are amended from time to time.

 

“Regulatory Allocations” has the meaning set forth in Section 3.3.

 

“Reserves” means the sum of funds or amounts set aside or otherwise allocated for working capital, to pay taxes and future, anticipated, potential or contingent obligations, and all of the other costs and expenses incident to the Company's operations or ownership of the Company assets, as determined by the Manager.

 

“Selling Group” means the broker-dealers who are members of the Financial Industry Regulatory Authority, Inc. and non-affiliated registered investment advisors that engage in the offer and sale of the Interests;

 

“Tax Basis Capital Account” shall mean, with respect to each Member as of any determination date, such Member’s Capital Account balance as of the most recent December 31 preceding such determination date, and adjusted for (a) Profits, Losses, and other items of income, gain, loss or deduction that are attributable to the Company’s ownership and operation of its Properties through the date of determination and (b) distributions, including Tax Distributions and distributions pursuant to Section 11.2(c), made to such Member through such date of determination, but excluding (i) any Profits, Losses, distributions and other items of income, gain, loss or deduction that are attributable to the sale of all remaining Company assets; and (ii) any “book up” adjustments to Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(f). The Tax Basis Capital Account of any Member as of any given date shall be determined in the reasonable discretion of the Manager.

 

“Transfer” means, as a noun, any voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of. The terms “Transferred,” whether used as a verb or adjective, “Transferor” and “Transferee” shall each have comparable meanings.

 

“Voluntary Bankruptcy” has the meaning set forth in the definition of “Bankruptcy.”

 

* * *

APPENDIX II

 

INITIAL MEMBER AND CAPITAL CONTRIBUTION

 

Members:	Capital Contribution	Preferred Interests	Common Interests	Membership Percentage of Class
Common Member:
MCI Holdings, LLC	$100	None	100	100.0%
Preferred Members:

 

 

 

 

 

 

MCI Income Fund V, LLC

 

a Delaware limited liability company

 

AND 

 

UMB Bank, N.A.

 

Trustee 

 

INDENTURE 

 

Dated as of __________, 2020

 

Debt Securities

 

 

 

 

 

 

TABLE OF CONTENTS(1)

 

ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION		1
	Section 1.01 Definitions of Terms	1
	Section 1.02 Rules of Construction.	6
	Section 1.03 Form of Documents Delivered to Trustee	6
ARTICLE II ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF SECURITIES		7
	Section 2.01 Form of Bonds and Trustee’s Certificate.	7
	Section 2.02 Denominations: Provisions for Payment, Maturity.	7
	Section 2.03 Execution and Authentication.	9
	Section 2.04 Registration of Transfer and Exchange.	10
	Section 2.05 [Intentionally Deleted]	10
	Section 2.06 Mutilated, Destroyed, Lost or Stolen Bonds.	10
	Section 2.07 Cancellation.	11
	Section 2.08 Benefits of Indenture.	11
	Section 2.09 Authenticating Agent.	11
	Section 2.10 Global Form of Bonds	12
	Section 2.11 Book-Entry Registration for Uncertificated Bonds	12
	Section 2.12 CUSIP Numbers	12
ARTICLE III REDEMPTION OF SECURITIES		12
	Section 3.01 Redemption.	13
	Section 3.02 Notice of Redemption.	13
	Section 3.03 Payment Upon Redemption.	13
	Section 3.04 Redemption Upon Death or Disability or Bankruptcy	14
ARTICLE IV COVENANTS		14
	Section 4.01 Payment of Principal, Premium and Interest.	14
	Section 4.02 Maintenance of Office or Agency.	15
	Section 4.03 Paying Agents.	15
	Section 4.04 Appointment to Fill Vacancy in Office of Trustee.	16
	Section 4.05 Compliance with Consolidation Provisions.	16
	Section 4.06 Debt Limit.	16
	Section 4.07 Bond Service Reserve.	16
	Section 4.08 Liens.	16
	Section 4.09 Payment of Taxes and Other Claims.	16
ARTICLE V BONDHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE		17
	Section 5.01 Company to Furnish Trustee Names and Addresses of Bondholders.	17
	Section 5.02 Preservation of Information; Communications with Bondholders.	17
	Section 5.03 Reports by the Company.	17

 

 

 

ARTICLE VI REMEDIES OF THE TRUSTEE AND BONDHOLDERS ON EVENT OF DEFAULT		18
	Section 6.01 Event of Default.	18
	Section 6.02 Collection of Indebtedness and Suits for Enforcement by Trustee.	19
	Section 6.03 Application of Moneys Collected.	20
	Section 6.04 Limitation on Suits.	20
	Section 6.05 Rights and Remedies Cumulative; Delay or Omission Not Waiver.	21
	Section 6.06 Control by Bondholders.	21
	Section 6.07 Undertaking to Pay Costs.	22
ARTICLE VII CONCERNING THE TRUSTEE		22
	Section 7.01 Certain Duties and Responsibilities of Trustee.	22
	Section 7.02 Notice of Defaults.	23
	Section 7.03 Certain Rights of Trustee.	23
	Section 7.04 Trustee Not Responsible for Recitals or Issuance or Bonds.	24
	Section 7.05 May Hold Bonds.	24
	Section 7.06 Moneys Held in Trust.	24
	Section 7.07 Compensation and Reimbursement.	24
	Section 7.08 Reliance on Manager’s Certificate.	25
	Section 7.09 Disqualification; Conflicting Interests.	25
	Section 7.10 Corporate Trustee Requires; Eligibility.	25
	Section 7.11 Resignation and Removal; Appointment of Successor.	25
	Section 7.12 Acceptance of Appointment By Successor.	26
	Section 7.13 Merger, Conversion, Consolidation or Succession to Business.	27
ARTICLE VIII CONCERNING THE BONDHOLDERS		27
	Section 8.01 Evidence of Action by Bondholders.	27
	Section 8.02 Proof of Execution by Bondholders.	27
	Section 8.03 Who May be Deemed Owners.	27
	Section 8.04 Certain Bonds Owned by Company Disregarded.	28
	Section 8.05 Actions Binding on Future Bondholders.	28
ARTICLE IX SUPPLEMENTAL INDENTURES		28
	Section 9.01 Supplemental Indentures without the Consent of Bondholders.	28
	Section 9.02 Supplemental Indentures with Consent of Bondholders.	29
	Section 9.03 Effect of Supplemental Indentures.	29
	Section 9.04 Bonds Affected by Supplemental Indentures.	30
	Section 9.05 Execution of Supplemental Indentures.	30
ARTICLE X SUCCESSOR ENTITY		30
	Section 10.01 Company May Consolidate, Etc.	30
	Section 10.02 Successor Entity Substituted.	30
	Section 10.03 Evidence of Consolidation, Etc. to Trustee.	31
ARTICLE XI SATISFACTION AND DISCHAREGE; DEFEASANCE		31
	Section 11.01 Satisfaction and Discharge.	31
	Section 11.02 Deposited Moneys to be Held in Trust.	31
	Section 11.03 Payment of Moneys Held by Paying Agents.	31
	Section 11.04 Repayment of Company.	32
	Section 11.05 Reinstatement.	32

 

 

 

 

ARTICLE XII IMMUNITY OF ORGANIZERS, MEMBERS, OFFICERS AND MANAGERS		32
	Section 12.01 No Recourse.	32
ARTICLE XIII MISCELLANEOUS PROVISIONS		32
	Section 13.01 Effect on Successors and Assigns.	32
	Section 13.02 Actions by Successor.	33
	Section 13.03 Surrender of Company Powers.	33
	Section 13.04 Notices.	33
	Section 13.05 Governing Law.	33
	Section 13.06 Treatment of Bonds as Debt.	33
	Section 13.07 Compliance Certificates and Opinions	33
	Section 13.08 Payments on Business Days	34
	Section 13.09 Counterparts.	34
	Section 13.10 Separability.	34
	Section 13.11 Electronic Storage	34
Form of Series A Bond		Exhibit A-1
Form of Series A R-Bond		Exhibit A-2
Form of Pledge and Security Agreement		Exhibit B

 

(1) This Table of Contents does not constitute part of the Indenture and shall not have any bearing on the interpretation of any of its terms or provisions.

 

 

 

INDENTURE

 

INDENTURE, dated as of _________, 2020, between MCI INCOME FUND V, LLC, a Delaware limited liability company (the “Company”), and UMB Bank, N.A., a national banking association, as trustee (the “Trustee”):

 

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of secured debt securities (hereinafter referred to as the “Bonds”) to be issued as registered Bonds without coupons, to be authenticated by the certificate of the Trustee;

 

WHEREAS, to provide the terms and conditions upon which the Bonds are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture; and

 

WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.

 

NOW, THEREFORE, in consideration of the premises and the purchase of the Bonds by the holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the holders of Bonds.

 

ARTICLE I 

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

 

 

Section 1.01    Definitions of Terms.

 

The terms defined in this Section (except as in this Indenture otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section and shall include the plural as well as the singular. All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939, as amended, or that are by reference in said Trust Indenture Act defined in the Securities Act of 1933, as amended (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of the execution of this instrument.

 

“Affiliate” as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

  

“Authenticating Agent” means an authenticating agent with respect to the Bonds appointed by the Trustee pursuant to Section 2.09.

 

“Bankruptcy” shall mean, for any Person, the (i) commencement of a voluntary bankruptcy case by that Person; (ii) consent to the entry of an order for relief against such Person in an involuntary bankruptcy case; (iii) consent to the appointment of a custodian of it or for all or substantially all of its property.

 

“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. 

 

 “Bonds” means any debt security authorized, authenticated and delivered under this Indenture, together with all classes, sub-classes, series and sub-series of any such securities. As of the date of this Indenture, the only Bonds available for issuance hereunder were Series A Bonds and Series B Bonds.

 

“Bondholder”, “holder of Bonds”, “registered holder”, or other similar term, means the Person or Persons in whose name or names a particular Bond shall be registered on the books of the Company kept for that purpose in accordance with the terms of this Indenture.

 

“Bond Register” has the meaning given in Section 2.04.

 

“Bond Registrar” has the meaning given in Section 2.04.

 

“Bond Service Obligation” means the amount payable by the Company in principal and interest on the Bonds each Interest Accrual Period.

 

“Business Day” means any day other than a day on which federal or state banking institutions in the City of New York, New York, are authorized or obligated by law, executive order or regulation to close.

 

“Cash and Cash Equivalents” shall have the meaning prescribed by GAAP

 

“Certificate” means a certificate signed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company. The Certificate need not comply with the provisions of Section 13.07.

 

“Change of Control Repurchase Event”, means (A) the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of the membership units entitling that person to exercise more than 50% of the total voting power of all the membership units entitled to vote in meetings of the Company (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and (B) following the closing of any transaction referred to in subsection (A), neither we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange, or the NYSE, the NYSE Amex Equities, or the NYSE Amex, or the Nasdaq Stock Market, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE Amex or the Nasdaq Stock Market.

 

“Closing” means each closing of sales of the Bonds.

 

“Collateral Documents” means (i) the Pledge and Security Agreement; and (ii) any other agreements, documents or instruments, including any financing statements and amendments or supplements thereto, creating, perfecting or evidencing any Liens securing any Bonds, and any other obligation under this Indenture or the Collateral Documents.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Company” means MCI INCOME FUND V, LLC, a limited liability company duly organized and existing under the laws of the State of Delaware, and, subject to the provisions of Article X, shall also include its successors and assigns.

 

 

“Company Assets” means, with respect to the Company, all assets and interests in assets of the Company, whether real, personal or mixed, whether directly owned or indirectly owned, including without limitation interests owned in Subsidiaries, whether now owned or existing or hereafter acquire or arising and wheresoever located.

 

“Corporate Trust Office” means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 928 Grand Blvd, 12th Floor, Kansas City, Missouri 64106, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).

 

 “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

 

“Default” means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

 

“Defaulted Interest” has the meaning given in Section 2.02.

 

"Depositary" means, with respect to the Bonds, DTC, Cede & Co. or Phoenix American Financial Services, Inc., as the case may be, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

 

“DTC” means The Depository Trust Company.

 

 “Event of Default” means any event specified in Section 6.01, continued for the period of time, if any, therein designated, after the applicable cure period.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.

 

“Governmental Obligations” means securities that are (i) direct obligations (other than obligations subject to variation in principal repayment) of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America that, in either case, are not callable or redeemable prior to maturity at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such Governmental Obligation or a specific payment of principal of or interest on any such Governmental Obligation held by such custodian for the account of the holder of such depositary receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Governmental Obligation or the specific payment of principal of or interest on the Governmental Obligation evidenced by such depositary receipt.

 

“Herein”, “hereof” and “hereunder”, and other words of similar import, refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

 

“Holder Redemption Event” has the meaning set forth in Section 3.04(a).

  

“Indebtedness” means, with respect to any Person and without duplication, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including capital lease obligations) or the expenditure for any services or representing any hedging obligations, including without limitation, any such balance that constitutes an accrued expense or an account or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and hedging obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, (a) the guarantee of items that would be included within this definition, and (b) liability for items that would arise by operation of a Person’s status as a general partner of a partnership.

 

 

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into in accordance with the terms hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively.

 

“Initial Interest Payment Date” means the Interest Payment Date corresponding to the first full fiscal quarter following the initial issuance of the Bonds.

 

“Interest Accrual Period” means, if interest has been paid, the applicable fiscal quarter immediately preceding an Interest Payment Date, or if interest has not been paid, from the date of issuance to the end of the first full fiscal quarter occurring thereafter.

 

“Interest Payment Date” means any January 25th, April 25th, July 25th, and October 25th, beginning with the Initial Interest Payment Date and continuing until the Bonds have been repaid in full or are otherwise no longer Outstanding.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code, or equivalent statutes, of any jurisdiction).

 

“Manager” means the Manager of the Company as may be designated from time to time in accordance with the Company’s operating agreement. As of the date hereof, the Manager is Megatel Capital Investments, LLC, a Delaware limited liability company.

 

“Manager’s Certificate” means a certificate signed by the Manager of the Company that is delivered to the Trustee in accordance with the terms hereof. Each such certificate shall include the statements provided for in Section 13.07, if and to the extent required by the provisions thereof.

 

“Maturity Date” means, with respect to any Security, the date on which the principal of such Security becomes due and payable as therein provided.

 

“Maturity Record Date” means, with respect to any Security, as of the close of business on the first Business Day that is at least 31 days prior to the Maturity Date or redemption date applicable to such Security.

 

“Notice of Maturity” means a notice from the Company to a Bondholder that the Bondholder’s Bonds will be maturing on the related Maturity Date.

 

“Opinion of Counsel” means an opinion in writing of legal counsel, who may be an employee of or counsel for the Company that is delivered to the Trustee in accordance with the terms hereof.

 

“Outstanding” means, subject to the provisions of Section 8.04, as of any particular time, all Bonds theretofore authenticated and delivered by the Trustee under this Indenture, except (a) Bonds theretofore canceled by the Trustee or any paying agent, or delivered to the Trustee or any paying agent for cancellation or that have previously been canceled; (b) Bonds or portions thereof for the payment or redemption of which moneys or Governmental Obligations in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been irrevocably set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that if such Bonds or portions of such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in Article III or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been authenticated and delivered pursuant to the terms of Section 2.06.

 

“Person” means any individual, corporation, limited liability company, partnership, joint-venture, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

 

“Pledge and Security Agreement” means that certain Pledge and Security Agreement by and between the Company and the Trustee (in its capacity as trustee under this Indenture), as the same may be amended, modified or supplemented from time to time in the future, which agreement is a Collateral Document with respect to the Bonds issued hereunder. The form of Pledge and Security Agreement is attached hereto as Exhibit B.

 

“Predecessor Bond” of any particular Bond means every previous Bond evidencing all or a portion of the same debt as that evidenced by such particular Bond; and, for the purposes of this definition, any Bond authenticated and delivered under Section 2.06 in lieu of a lost, destroyed or stolen Bond shall be deemed to evidence the same debt as the lost, destroyed or stolen Bond.

 

“Price to Public” means $1,000 per Bond.

 

“Record Date” means, for each fiscal quarter, the last day of such fiscal quarter.

 

“Repayment Election” means a written notice from a Bondholder to the Company stating that repayment of the Bondholder’s Bonds is required in connection with the maturity of such Bonds.

 

“Repurchase Date” shall have the meaning set forth in Section 3.04(b).

 

“Repurchase Penalty” means, (i) if the Repurchase Request is for disability or bankruptcy, there is no penalty; (ii) if the Repurchase Request is for Death, then 10% of the initial principal amount of such Bond or beneficial interest being repurchased; and (iii) if the Repurchase Request is for any other reason, then 12% of the initial principal amount of such Bond or beneficial interest being repurchased.

 

“Repurchase Price” means, with respect to any Bond to be repurchased, the principal amount of such Security plus the interest accrued but unpaid during the Interest Accrual Period up to but not including the Repurchase Date for such Bond, minus the Repurchase Penalty, if any.

  

“Repurchase Request” means a written notice from a Bondholder to the Company stating that such Bondholder is making an irrevocable request for the Company to repurchase such Bondholder’s Bonds pursuant to Section 3.04.

 

“Responsible Officer” when used with respect to the Trustee means the Chairman of the Board of Directors, the President, any Vice President, the Secretary, the Treasurer, any trust officer, any corporate trust officer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject.

 

“Series A Bonds” are a series of Bonds authorized for issuance under the Indenture, the form of which is attached to this Indenture as Exhibit A-1.

 

“Series B Bonds” are a series of Bonds authorized for issuance under the Indenture, the form of which is attached to this Indenture as Exhibit A-2.

 

“Subsidiary” means, with respect to any Person, (i) any corporation at least a majority of whose outstanding Voting Stock shall at the time be owned, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, (ii) any general partnership, limited liability company, joint venture or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner.

 

“Total Permanent Disability” means a determination by a physician approved by the Company that the Bondholder or the holder of a beneficial interest in a Bond, who is a natural person and who was gainfully employed on a full-time basis at the date they were issued such Bond, is unable to work on a full-time basis at all during the immediately succeeding 24-month period. For purposes of this definition, “working on a full-time basis” shall mean working at least 40 hours per week.

 

  

“Trustee” means UMB Bank, N.A., and, subject to the provisions of Article VII, shall also include its successors and assigns, and, if at any time there is more than one Person acting in such capacity hereunder, “Trustee” shall mean each such Person.

 

 “Voting Stock”, as applied to stock of any Person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

 

Section 1.02    Rules of Construction

 

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

 

(1)    the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

 

(2)    all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;

  

(3)    all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States of America, and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation;

 

(4)    the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

 

(5)    the word “or” is always used inclusively (for example, the phrase “A or B” means “A or B or both”, not “either A or B but not both”);

 

(6)    the masculine gender includes the feminine and the neuter; and

 

(7)    references to agreements and other instruments include subsequent amendments and supplements thereto.

 

Section 1.03    Form of Documents Delivered to Trustee.

 

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

 

Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion with respect to the matters upon which his certificate or opinion is based is erroneous. Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company, a governmental official or officers or any other Person or Persons, stating that the information with respect to such factual matters is in the possession of the Company unless such counsel knows, or in the exercise of reasonable care should know, that the certificate, opinion or representations with respect to such matters are erroneous.

 

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions, or other instruments under this Indenture or any Bond, they may, but need not, be consolidated and form one instrument.

 

 

 

ARTICLE II

ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND 

EXCHANGE OF SECURITIES

 

Section 2.01    Form of Bonds and Trustee’s Certificate.

 

The Bonds may be issued in book-entry form, uncertificated form, or certificated form. Except for Bonds held by a Depositary through a global note, Bonds will only be certificated at the Company’s discretion. In the event the Bonds are issued in certificated form, the Bonds and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A hereto. The Bonds may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Bonds may be listed, or to conform to usage. The terms and conditions contained in the Bonds shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Bond conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

 

The aggregate principal amount of Bonds that may be issued under this Indenture is unlimited. Bonds shall be issued from time to time upon receipt by the Trustee of a written order of the Company certifying that a Closing has occurred, stating the terms and conditions of the Bonds and principal amount of Bonds to be issued and that it has delivered to the Trustee the items required by Section 2.03. All Bonds issued under this Indenture shall rank pari passu. For Bonds issued, at the request of the Trustee, the Company shall deliver prior to issuance of such Bonds a Form W-9 for each registered holder of such Bonds and any other information required by law or as reasonable requested by the Paying Agent/Registrar to maintain the Bond Register and make the payments to the registered holders. The Paying Agent/Registrar may conclusively rely upon such information provided by the Company.

 

Section 2.02    Denominations, Provisions for Payment, Maturity.

 

(a) The Bonds shall be issuable as registered Bonds and in the denominations of One Thousand U.S. dollars ($1,000) or any integral multiple thereof. The Bonds shall bear interest from the date of issuance at the rate prescribed on the Bond, payable monthly in arrears on each Interest Payment Date. Interest payable shall be calculated using the Interest Accrual Period immediately preceding such Interest Payment Date. Each Bond shall be dated the date of its authentication by the Trustee. Interest on the Bonds shall be computed on the basis of a 365-day year. The interest installment on any Bond that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name said Bond (or one or more Predecessor Bonds) is registered at the close of business on the Record Date for such interest installment. In the event that any Bond is called for redemption and the redemption date is subsequent to a Record Date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Bond will be paid upon presentation and surrender of such Bond as provided in Section 3.03. Notwithstanding any other provisions of this Section 2.02, payment of principal and any interest on the Bonds shall be made by the Paying Agent to the registered owner of the Bonds or to a Depositary or its nominee, as the case may be, as the sole registered owner and holder of the Bonds for all purposes under this Indenture.

 

(b) Any interest on any Bond that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”), subject to the cure period in each Bond shall forthwith cease to be payable to the registered holder on the relevant Record Date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company, at its election, as provided in clause (1) or clause (2) below:

 

(1)    The Company may make payment of any Defaulted Interest on Bonds to the Persons in whose names such Bonds (or their respective Predecessor Bonds) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Bond and the date of the proposed payment, and at the same time the Company shall deposit with the paying agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Bondholder at his or her address as it appears in the Bond Register (as hereinafter defined), not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Bonds (or their respective Predecessor Bonds) are registered on such special record date.

 

 

 

(2)    The Company may make payment of any Defaulted Interest on any Bonds in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Bonds may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Bond delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Bond shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Bond.

 

(c)          All Bond redemptions by the Bondholders will be subject to an aggregate limit of 5.0% [of total Bonds outstanding] during each three-year term of the Bonds, and 1.0% [of total Bonds outstanding] per year.

 

(1)      The Bonds will be redeemable at the election of the Bondholder subject to certain limits below. To be redeemed, the Bondholder must provide written notice to the Bond Registrar between [June 15] and [June 30] of [2025]. If no notice is given, then the Bonds will be extended for an additional three-year term, upon the same terms. Bondholders will be able to provide written notice to the Bond Registrar between [June 15 and June 30] of [2028]. If no notice is given, then the Bonds will be extended for the final additional three-year term, upon the same terms. The Company will have 120 days from the date that any such redemption notice is provided to begin redeeming the Bondholder’s Bonds at a price per Bond equal to $880 plus any accrued but unpaid interest on the Bond. Bond redemptions validly received (not postmarked) will be redeemed pro-rata if more redemptions are received than can be accommodated.  If the Bonds are not renewed, the Company will pay the principal remaining on the Bonds in 10 equal payments over the 10 subsequent calendar quarters. If the Bonds have not covered the initial costs and expenses of the ofering, then the principal remaining on the Bonds will be paid back in 20 equal payments over the subsequent 20 calendar quarters.

 

(2)           Within 60 days of the death, total permanent disability, or bankruptcy of a Bondholder who is a natural person, the estate of such Bondholder, such Bondholder, or legal representative of such Bondholder may request that the Company repurchase, in whole but not in part and without penalty, the Bonds held by such Bondholder by delivering tothe Company a written notice requesting such Bonds be redeemed. Any such request shall specify the particular event giving rise to the right of the holder or beneficial holder to have his or her Bonds redeemed. If a Bond held jointly by natural persons who are legally married, then such request may be made by (i) the surviving Bondholder upon the death of the spouse, or (ii) the disabled or bankrupt Bondholder (or a legal representative) upon total permanent disability or bankruptcy of the spouse. In the event a Bond is held together by two or more natural persons that are not legally married, neither of these persons shall have the right to request that the Company repurchase such Bond unless each Bondholder has been affected by such an event.

 

Upon receipt of redemption request in the event of death, total permanent disability or bankruptcy of a Bondholder, the Company will designate a date for the redemption of such Bonds and notify the Trustee therefor, which date shall not be later than after 120 days we receive facts or certifications establishing to the reasonable satisfaction of the Company supporting the right to be redeemed. For redemption requests due to death, on the designated date, such Bonds will be redeemed at a price per Bond equal to $910 plus any accrued and unpaid interest, to but not including the date on which the Bonds are redeemed. For other requests, on the designated date, such Bonds will be redeemed at a price per Bond that is equal to all accrued and unpaid interest, to but not including the date on which the Bonds are redeemed, plus the then outstanding principal amount of such Bond.

 

 

 

(d) The Bonds may be redeemed at the Company’s option at no penalty within 18 months of maturity. The Company may extend, with written notice to the Bondholders and the Trustee, the maturity on the Bonds for two six-month periods in order to facilitate redemption of the Bonds in the Company’s sole discretion. If the Bonds are renewed for any additional three-year term, the Company may exercise its option to redeem the Bonds at any time during such renewal period. Any redemption will occur at a price equal to the then outstanding principal amount of the Bonds, plus any accrued but unpaid interest.

 

(e) If the Company pursues a liquidity event, with a focus on a merger with or into Megatel or its affiliates in connection with a potential initial public offering by Megatel or its affiliates, but which may involve another merger or other transaction in which the Bondholders may elect to receive shares of a publicly traded company and/or cash. Such merger event may begin prior to any Redemption date. If the Company elects to participate in the merger event, it shall provide written notice therefor to the Trustee and each Bondholder that each Bondholder may make an election as to whether to (i) retain his or her Bond, (ii redeem his or her Bond pursuant to other available redemption options discussed herein, or (iii) convert his or her Bond into the resulting public security.

 

(f)           The above Sections 2.02(c),2.02(d), and 2.02(e) shall govern redemption or maturity of Bonds at maturity notwithstanding anything contained to the contrary in Article III of this Indenture.

 

Section 2.03    Execution and Authentication.

 

If the Bonds are certificated, the Bonds shall be signed on behalf of the Company by an authorized signatory. Signatures may be in the form of a manual or facsimile signature. The Company may use the facsimile signature of any Person who shall have been an authorized signatory, notwithstanding the fact that at the time the Bonds shall be authenticated and delivered or disposed of such Person shall have ceased to be an authorized signatory of the Company. The Bonds may contain such notations, legends or endorsements required by law, stock exchange rule or usage. A Bond shall not be valid until authenticated manually by an authorized signatory of the Trustee, or by an Authenticating Agent. Such signature shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Bonds executed by the Company to the Trustee for authentication, together with a written order of the Company for the authentication and delivery of such Bonds, signed by an authorized signatory of the Company and the Trustee in accordance with such written order shall authenticate and deliver such Bonds.

 

Prior to the initial issuance of any Bonds, in accepting the additional responsibilities under this Indenture in relation to such Bonds and any Bonds to be issued thereafter, the Trustee shall receive (i) an Opinion of Counsel to the Issuer stating that (a) the Company is permitted by law to enter into this Indenture, (b) the form and terms of the Bonds have been established in conformity with the provisions of this Indenture, the Regulation A Offering Statement on Form 1-A filed with the SEC on __________, 2020 as amended, all SEC requirements, and other applicable laws and regulations, and (3) that all Bonds, when issued by the Company and if applicable, authenticated by the Trustee will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to any Bankruptcy Law or other insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (ii) a Manager’s Certificate stating that all conditions precedent provided for in this Indenture relating to the issuance of the Bonds have been complied with and that, to the best of the knowledge of the signers of such Manager’s Certificate, no Event of Default with respect to any of the Bonds shall have occurred and be continuing. Additionally, prior to the issuance of any Bonds after the initial issuance, the Company shall deliver to the Trustee a Manager’s Certificate stating that all conditions precedent provided for in this Indenture relating to the issuance of the Bonds have been complied with and that, to the best of the knowledge of the signers of such Manager’s Certificate, no Event of Default with respect to any of the Bonds shall have occurred and be continuing. The Trustee may conclusively rely upon the Opinion of Counsel and Manager’s Certificate in authenticating the Bonds (if applicable) and accepting the responsibility under this Indenture. The Trustee shall not be required to authenticate such Bonds if the issue of such Bonds pursuant to this Indenture will affect the Trustee’s own rights, duties or immunities under the Bonds and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee.

 

 

 

Section 2.04    Registration of Transfer and Exchange.

 

(a)    Bonds may be exchanged upon presentation thereof at the office or agency of the Bond Registrar (as defined herein), for other Bonds of authorized denominations, and for a like aggregate principal amount, upon payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, all as provided in this Section. In respect of any Bonds so surrendered for exchange, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in exchange therefor the Bond or Bonds that the Bondholder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding.

   

(b)    The Company shall keep, or cause to be kept, at its office or agency designated for such purpose by the Company, a register or registers (herein referred to as the “Bond Register”) in which, subject to such reasonable regulations as it may prescribe, the Bond Registrar shall register the Bonds and the transfers of Bonds as in this Article provided and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the purpose of registering Bonds and transfer of Bonds as herein provided shall be appointed as authorized by an authorized signatory of the Company (the “Bond Registrar”). The initial Bond Registrar is UMB Bank, N.A. Upon surrender for transfer of any certificated Bond at the office or agency of the Bond Registrar or upon receipt of the written request of the registered holder of any uncertificated Bonds together with all documentation required by law or a reasonably requested by the Bond Registrar, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in the name of the transferee or transferees a new Bond as the Bond presented for a like aggregate principal amount. All uncertificated and certificated Bonds presented or surrendered for exchange or registration of transfer (or with respect to uncertificated Bonds, requested to be transferred), as provided in this Section, shall be accompanied (if so required by the Company or the Bond Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Bond Registrar, duly executed by the registered holder or by such holder’s duly authorized attorney in writing.

 

For the avoidance of doubt, in purchasing any uncertificated Bonds, the bondholders of such uncertificated Bonds and the Company expressly acknowledge and agree that the transfer requirements with respect to certificated Bonds may be imposed for the transfer of any uncertificated Bonds and the transfer of any uncertificated Bonds shall be in accordance with any SEC regulations or other applicable laws, if any.

 

(c)    No service charge shall be made for any exchange or registration of transfer of Bonds, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, other than exchanges pursuant to Section 2.04, Section 3.03(b) and Section 9.04 not involving any transfer.

 

(d)           The transfer and exchange of beneficial interests in the Bonds represented by global notes will be effected through the respective Depositary, in accordance with the procedures of the Depository.

 

 (e)           At any time prior to cancellation of a Bond, if any beneficial interest in a Bond represented by a global note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Bond, the registered holder of the such Bond will provide written direction to the Trustee to reduce the principal amount represented by such Bond held by the Depository and an endorsement will be made on such Bond by the Trustee or by the respective Depositary to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Bond, the registered holder of such Bond will provide written direction to the Trustee to increase such other Bond and an endorsement will be made on such Bond by the Trustee or by the respective Depositary. The Trustee may conclusively rely upon any such written direction from the registered holders received in accordance with this Section.

 

Section 2.05    [Intentionally Deleted]

 

Section 2.06    Mutilated, Destroyed, Lost or Stolen Bonds.

 

In case any certificated Bond shall become mutilated or be destroyed, lost or stolen, the Company (subject to the next succeeding sentence) shall execute, and upon the Company’s request the Trustee (subject as aforesaid) shall authenticate and deliver, a new Bond bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Bond, or in lieu of and in substitution for the Bond so destroyed, lost or stolen. In every case the applicant for a substituted Bond shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of the applicant’s Bond and of the ownership thereof. The Trustee may authenticate any such substituted Bond and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Bond, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Bond that has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Bond, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Bond) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as they may require to save them harmless, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Bond and of the ownership thereof. Every replacement Bond issued pursuant to the provisions of this Section shall constitute an additional contractual obligation of the Company whether or not the mutilated, destroyed, lost or stolen Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Bonds duly issued hereunder. All Bonds shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude (to the extent lawful) any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

 

 

Section 2.07    Cancellation.

 

All certificated Bonds surrendered for the purpose of payment, redemption, exchange or registration of transfer shall, if surrendered to the Company or any paying agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be cancelled by it, and no Bonds shall be issued in lieu thereof except as expressly required or permitted by any of the provisions of this Indenture. The Trustee may dispose of canceled Bonds in accordance with its standard procedures and deliver a certificate of disposition to the Company. If the Company shall otherwise acquire any of the Bonds, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Bonds unless and until the same are delivered to the Trustee for cancellation.

 

Section 2.08    Benefits of Indenture.

 

Nothing in this Indenture or in the Bonds, express or implied, shall give or be construed to give to any Person, other than the parties hereto and the holders of the Bonds any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions and provisions being for the sole benefit of the parties hereto and of the holders of the Bonds.

 

Section 2.09    Authenticating Agent.

 

So long as any of the Bonds remain Outstanding there may be an Authenticating Agent for any or all Bonds which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Bonds issued upon exchange, transfer or partial redemption thereof, and Bonds so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation that has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and that is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by Federal or State authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time (and upon request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon resignation, termination, or cessation of eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor Authenticating Agent acceptable to the Company. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder as if originally named as an Authenticating Agent pursuant hereto.

 

 

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided that such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

 

Section 2.10    Global Form of Bonds

 

If the Company issues the Bonds in global form, the Company may issue a Bond only to a Depositary.  A Depositary may transfer a Bond only to its nominee or to a successor Depositary.  A Bond shall represent the amount of the securities specified therein.  A Bond may have variations that the Depositary requires or that the Company considers appropriate for such a security.

 

Prior to due presentment of the Bond(s) for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name such Bond(s) is registered as the owner of such Bonds for the purpose of receiving payment of principal of and interest on such Bond(s) and for all other purposes whatsoever, whether or not such Bond(s) be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

 

Beneficial owners of part or all of a Bond are subject to the rules of the Depositary as in effect from time to time.  The Company, the Trustee and any agent of the Company or Trustee shall not be responsible for any acts or omissions of a Depositary, for any Depositary records of beneficial ownership interests or for any transactions between the Depositary and beneficial owners.

 

Section 2.11    Book-Entry Registration for Uncertificated Bonds

 

Except for certificated Bonds or bonds held with a Depositary, the Bond Registrar shall maintain a book-entry registration and transfer system through the establishment and maintenance of the Bond Register for the benefit of Bondholders as the sole method of recording the ownership and transfer of ownership interests in such Bonds. The registered owners established by the Bond Registrar in connection with the purchase or transfer of the Bonds shall be deemed to be the Bondholders of the Bonds outstanding for all purposes under this Indenture. The Company (or its duly authorized Agent) shall promptly notify the Bond Registrar of the acceptance of a subscriber’s purchase of a Bond and, upon receipt of such notice, the Bond Registrar shall establish an account for such Bond by recording a credit to its book-entry registration and transfer system to the account of the related Bondholder for the principal amount of such Bond owned by such Bondholder and issue a confirmation to the Bondholder, with a copy being delivered to the Trustee, on behalf of the Company. The Bond Registrar shall make appropriate credit and debit entries within each account to record all of the applicable actions under this Indenture that relate to the ownership of the related Bonds and issue confirmations to the related Bondholders as set forth herein, with copies being delivered to the Trustee, on behalf of the Company. For example, the total amount of any principal or interest due and payable to the Bondholders of the accounts maintained by the Bond Registrar as provided in this Indenture shall be credited to such accounts by the Bond Registrar within the time frames provided in this Indenture, and the amount of any payments of principal and/or interest distributed to the Bondholders of the accounts as provided in this Indenture shall be debited to such accounts by the Bond Registrar. The Trustee may review the book-entry registration and transfer system as it deems necessary to ensure the Bond Registrar’s compliance with the terms of the Indenture.

 

Section 2.12    CUSIP Numbers

 

The Company may obtain and use one or more CUSIP numbers for the Bonds (if then generally in use) and may also obtain and use different CUSIP numbers for Bonds of the same class or series that have different issuance dates, Maturity Dates or interest rates. If CUSIP numbers are so obtained, the Trustee shall use CUSIP numbers in notices of redemption or purchase as a convenience to Bondholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Bonds or as contained in any notice of a redemption or purchase, and any such redemption or purchase shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers.

 

ARTICLE III

 

 

REDEMPTION OF SECURITIES

 

Section 3.01    Redemption

 

The Bonds may be redeemed, in whole or from time to time in part, subject to the conditions and at the redemption prices set forth in this Article III and on the Bonds, together with accrued and unpaid interest to the redemption date. If the Company elects to redeem Bonds pursuant to this Article III, it shall notify the Trustee in writing of the redemption date, the redemption price and the principal amount of Bonds to be redeemed. The Company shall give notice of redemption to the Trustee not less than ten (10) days and not more than sixty (60) days before the redemption date, together with such documentation and records as shall enable the Trustee to select the Bonds to be redeemed. If a Change of Control Repurchase Event occurs while any Bonds remain outstanding, the Company shall immediately provide written notice to the Trustee and Bondholders and shall make an offer to each Bondholder to repurchase all or any amount of each Bondholder’s Bonds at the redemption price set forth on the Bond.

 

Section 3.02    Notice of Redemption.

 

(a)    In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Bonds in accordance with the right reserved so to do, the Company shall, or shall cause the Trustee to, give notice of such redemption to holders of the Bonds to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than five (5) days and not more than sixty (60) days before the date fixed for redemption to such holders at their last addresses as they shall appear upon the Bond Register unless a shorter period is specified in the Bonds to be redeemed. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Bond designated for redemption in whole or in part, or any defect in the notice, shall not affect the validity of the proceedings for the redemption of any other Bonds. In the case of any redemption of Bonds prior to the expiration of any restriction on such redemption provided in the terms of such Bonds or elsewhere in this Indenture, the Company shall furnish the Trustee with a Manager’s Certificate evidencing compliance with any such restriction. Each such notice of redemption shall specify the date fixed for redemption and the redemption price at which Bonds are to be redeemed, and shall state that payment of the redemption price of such Bonds to be redeemed will be made at the office or agency of the Company in the City of Dallas, Texas, or such other location designated by the Company, upon presentation and surrender of such Bonds, that interest accrued to the date fixed for redemption will be paid as specified in said notice, that from and after said date interest will cease to accrue, and the CUSIP number of the Bonds and state that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in the notice or printed on the Bonds. If less than all the Bonds are to be redeemed, the notice to the holders of Bonds to be redeemed in whole or in part shall specify the particular Bonds to be so redeemed. In case any Bond is to be redeemed in part only, the notice that relates to such Bond shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the redemption date, upon surrender of such Bond, a new Bond or Bonds in principal amount equal to the unredeemed portion thereof will be issued.

 

(b)    If less than all the Bonds are to be redeemed, the Company shall give the Trustee at least fifteen (15) days’ notice (unless a shorter period is satisfactory to the Trustee) in advance of the date fixed for redemption as to the aggregate principal amount of Bonds to be redeemed, and thereupon the Trustee shall select in a manner that complies with the requirements, if any, of any applicable stock exchange or which the Bonds are listed and that the Trustee deems appropriate and fair in its discretion and that may provide for the selection of a portion or portions (equal to one thousand U.S. dollars ($1,000) or any integral multiple thereof) of the principal amount of such Bonds of a denomination larger than $1,000, the Bonds to be redeemed and shall thereafter promptly notify the Company in writing of the numbers of the Bonds to be redeemed, in whole or in part. The Company may, if and whenever it shall so elect, by delivery of instructions signed on its behalf by an authorized signatory of the Company, instruct the Trustee or any paying agent to call all or any part of the Bonds for redemption and to give notice of redemption in the manner set forth in this Section, such notice to be in the name of the Company or its own name as the Trustee or such paying agent as it may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such paying agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such paying agent, as the case may be, such Bond Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the Trustee or such paying agent to give any notice by mail that may be required under the provisions of this Section.

 

Section 3.03    Payment Upon Redemption

 

 

 

(a) If the giving of notice of redemption shall have been completed as above provided, the Bonds or portions of Bonds to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption and interest on such Bonds or portions of Bonds shall cease to accrue on and after the date fixed for redemption, unless the Company shall default in the payment of such redemption price and accrued interest with respect to any such Bond or portion thereof. On presentation and surrender of such Bonds on or after the date fixed for redemption at the place of payment specified in the notice, said Bonds shall be paid and redeemed at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption (but if the date fixed for redemption is an Interest Payment Date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable Record Date pursuant to Section 2.02).

 

(b)    Upon presentation of any Bond that is to be redeemed in part only, the Company shall execute and the Trustee shall authenticate and the office or agency where the Bond is presented shall deliver to the holder thereof, at the expense of the Company, a new Bond of authorized denominations in principal amount equal to the unredeemed portion of the Bond so presented.

 

Section 3.04    Redemption upon Death or Disability or Bankruptcy

 

(a) Subject to subsection (b) below, within 60 days of the death, Total Permanent Disability or Bankruptcy of a holder who is a natural person or a Person who beneficially holds Bonds represented by a global note (a “Holder Redemption Event”), the estate of such Person, such Person, or legal representative of such Person may require the Company to repurchase, in whole but not in part, without penalty, the Bonds held or beneficially held by such Person (including Bonds of such Person held or beneficially held in his or her individual retirement accounts), as the case may be, by delivering to the Company a Repurchase Request; provided, however, that in the case of a Repurchase Request by a Person who beneficially holds represented by a global note, such Repurchase Request shall be valid only if delivered through the Depositary, in its capacity as the registered holder of the global note with respect to which such beneficial holder holds his or her beneficial interest in a Bond.

 

Any Repurchase Request shall specify the particular Holder Redemption Event giving rise to the right of the holder or beneficial holder to have his or her Securities or beneficial interest in a global note repurchased by the Company. If a Bond or beneficial interest in a global note is held jointly by natural persons who are legally married, then a Repurchase Request may be made by (i) the surviving holder or beneficial holder upon the occurrence of a Holder Redemption Event arising by virtue of a death, or (ii) the disabled or bankrupt holder or beneficial holder (or a legal representative) upon the occurrence of a Holder Redemption Event arising by virtue of a Total Permanent Disability or Bankruptcy. In the event a Bond or beneficial interest in a global note is held together by two or more natural persons that are not legally married (regardless of whether held as joint tenants, co-tenants or otherwise), neither of these persons shall have the right to request that the Company repurchase such Bond or beneficial interest in a global note unless a Holder Redemption Event has occurred for all such co-holders or co-beneficial holders of such Bond. A holder or beneficial holder that is not an individual natural person does not have the right to request repurchase under this Section.

 

(b) Upon receipt of a Repurchase Request under subsection (a) above, the Company shall designate a date for the repurchase of such Security (the “Repurchase Date”) and notify the Trustee of such Repurchase Date, which date shall not be later than the 15th day of the month next following the month in which the Company receives facts or certifications establishing to the reasonable satisfaction of the Company the occurrence of a Holder Redemption Event. On the Repurchase Date, the Company shall pay the Repurchase Price to the Paying Agent for payment to the holder, or the estate of the holder, in accordance with the terms of the Bond being repurchased and the Paying Agent shall pay out such Repurchase Price upon the surrender of the Bond to the Trustee. No interest shall accrue on a Bond to be repurchased under this Section for any period of time on or after the Repurchase Date for such Bond, provided that the Company has timely tendered the Repurchase Price to the Paying Agent.

 

ARTICLE IV

COVENANTS

 

Section 4.01    Payment of Principal, Premium and Interest.

 

 

 

The Company will duly and punctually pay or cause to be paid the principal of (and premium, if any), interest and any other amounts due on the Bonds at the time and place and in the manner provided herein and established with respect to such Bonds, subject to any cure period set forth in the Bond.

 

Section 4.02    Maintenance of Office or Agency.

 

So long as the Bonds remain Outstanding, the Company agrees to cause to be maintained an office of the Bond Registrar, where (i) Bonds may be presented for payment, (ii) Bonds may be presented as herein above authorized for registration of transfer and exchange, and an office of the Company where notices and demands to or upon the Company in respect of the Bonds and this Indenture may be given or served, such designation to continue with respect to such office or agency until the Company shall, by written notice signed by an authorized signatory of the Company and delivered to the Trustee, designate some other office or agency in the City of Dallas, Texas for such purposes or any of them.

 

Section 4.03    Paying Agents.

 

(a)    The Company hereby appoints UMB Bank, N.A. as the initial paying agent. If the Company shall appoint one or more paying agents for the Bonds, other than the Trustee, the Company will cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree, subject to the provisions of this Section:

 

(1)    that it will hold all sums held by it as such agent for the payment of the principal of (and premium, if any) or interest on the Bonds (whether such sums have been paid to it by the Company or by any other obligor of such Bonds) in trust for the benefit of the Persons entitled thereto;

 

(2)    that it will give the Trustee notice of any failure by the Company (or by any other obligor of such Bonds) to make any payment of the principal of (and premium, if any) or interest on the Bonds when the same shall be due and payable;

 

(3)    that it will, at any time during the continuance of any failure referred to in the preceding paragraph (a)(2) above, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent; and

 

(4)    that it will perform all other duties of paying agent as set forth in this Indenture.

 

(b)    If the Company shall act as its own paying agent with respect to the Bonds, it will on or before each due date of the principal of (and premium, if any) or interest on Bonds, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of such action, or any failure (by it or any other obligor on such Bonds) to take such action. Whenever the Company shall have one or more paying agents, it will, prior to each due date of the principal of (and premium, if any) or interest, deposit with the paying agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such paying agent is the Trustee) the Company will promptly notify the Trustee of this action or failure so to act.

 

 (c)    Notwithstanding anything in this Section to the contrary,

 

(1)    the agreement to hold sums in trust as provided in this Section is subject to the provisions of Section 11.05, and

 

(2)    the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any paying agent to pay, to the Trustee all sums held in trust by the Company or such paying agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such paying agent; and, upon such payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money.

 

  

Section 4.04    Appointment to Fill Vacancy in Office of Trustee.

 

The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.11, a Trustee, so that there shall at all times be a Trustee hereunder.

 

Section 4.05    Compliance with Consolidation Provisions.

 

The Company will not, while any of the Bonds remain Outstanding, consolidate with or merge into any other Person, in either case where the Company is not the survivor of such transaction, or sell, convey, transfer or otherwise dispose of its property as an entirety or substantially as an entirety to any other Person unless the provisions of Article X hereof are complied with.

 

Section 4.06    Debt Limit.

 

The Company will not, directly or indirectly through Subsidiaries, incur [indebtedness], exclusive of (i) the principal owed on the Outstanding Bonds and (ii) any loans held as assets by the Company.

 

Section 4.07    Intentionally Deleted.