Community Pioneers, LLC Operating Agreement
EXHIBIT
3.2
Community
Pioneers, LLC
1.
Preliminary
Provisions
1.1
The
name
of the company is Community Pioneers, LLC, a Pennsylvania limited liability
company (“Company”, the “Company” or this “Company”). The Company shall have a
perpetual existence.
1.2
This
Operating Agreement is effective March 1, 2006, and shall continue until
terminated (this “Operating Agreement”).
1.3
The
Company may also do business under a different name by complying with the
fictitious name and other statutes.
1.4
The
Company shall be permitted to engage in any and all lawful business
activities.
1.5
The
principal office of the Company shall be in East Xxxx Township, Lancaster
County, Pennsylvania, and may change or have offices at other places as the
Managers may from time to time designate.
1.6
Holders
of membership units of interest of the Company (“Membership Units of Interest”)
are referred to in this Operating Agreement as a “Member” or
“Members.”
1.7
Any
person desiring to become a Member, except Xxxx X. Xxxxxxxx and Xxxxx Xxxxxx,
shall execute and deliver to the Company a Subscription Agreement substantially
in the form that is attached as an exhibit to the prospectus of the Company
as
may be amended from time to time, and such other documents as the Company
may
request, which other documents shall be in the form and substance satisfactory
to the Company, pursuant to which, among other things, such person shall,
subject to acceptance of his, her or its subscription by the Company, agree
to
be bound by all terms and provisions of this Operating Agreement.
1.8
No
person, except Xxxx X. Xxxxxxxx and Xxxxx Xxxxxx, shall be admitted to the
Company unless and until the Company raises $1 million from its initial public
offering. Upon the determination by the Managers that the Company has raised
$1
million, the Managers shall set the initial closing date. Following the initial
closing date, daily closings may be held. As promptly as is practicable
following the admission of each subscriber as Member, the Company shall send
notice to such Member in confirmation of the status as a Member. Subscribers
who
are accepted an Members shall be admitted no later than the last day of the
calendar month following the date their subscription was accepted.
1.9
Subscriptions
for Common Units or Preferred Units received after the initial closing date
(See
Section 1.8) shall promptly be accepted or rejected by the Company after
their
receipt by the Company (but in any event no later than 30 days thereafter)
and a
confirmation of receipt of the same sent to the subscriber. The Company retains
the unconditional right to refuse to admit any subscriber as a
Member.
1.10
Each
subscriber who is admitted to the Company as a Member shall, for all purposes
of
this Operating Agreement, become and be treated as a Member as of the first
day
immediately following the closing date as of which subscriber is admitted
to the
Company.
1.11
The
Company will make an election in accordance with Section 301.7701-3 of the
Treasury Regulations to be treated as an association taxable as a corporation
for federal income tax purposes if it does not receive a letter ruling from
the
Internal Revenue Service, reasonably acceptable to the Company, to the effect
that the Company will not be a “publicly traded partnership” within the meaning
of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”),
within a reasonable period of time after the closing of the initial offering
of
the Company’s Preferred Units. Such election shall not be revoked unless
required by law.
2.
Capitalization
2.1
This
Company is authorized to issue two classes of Membership Units of Interest
to be
designated, respectively, “Common Units” and “Preferred Units.” Unlimited
numbers of either class and in one or more series may be offered or redeemed
upon approval of the Board of Managers in accordance with this Operating
Agreement.
2.2
The
Common Units will be issued in one series and will be the only voting class
of
Membership Units of Interest subject to Section 8942(b) of the Pennsylvania
Limited Liability Company Law of 1994 (the “LLC Law”).
2.3
Subject
to the next to last sentence of this Section 2.3, holders of any of the Common
Units shall have the right to request that the Company purchase back the
Common
Units at a price equal to twenty dollars ($20) per Common Unit (the “Returned
Units”); provided, however, that the Company, in the sole discretion of the
Board of Managers, may defer the purchase of any of such Common Units, until
such time as the Company has available cash (as determined by the Board of
Managers in its sole discretion, subject to the priority in the application
of
available cash as set forth in Section 2.10), and the Company is not prohibited
from making such purchase by its agreements restricting such purchases or
the
limitations of Section 2.19. The Company shall maintain a register (the
“Repurchase Register”) reflecting the date of the repurchase request, amount of
any Common Units for which repurchase by the Company has been requested,
and the
date on which repurchase was effected. No distributions, repurchases or other
payments shall be made (or funds set aside for such payments) on account
of the
Common Units (including any Returned Units) so long as any Preferred Units
are
outstanding. Further, interest will not accrue on any Returned Units or Common
Units listed in the Repurchase Register while outstanding as a result of
a
repurchase request under this Section 2.3.
2.4
In
the
case of a liquidation, dissolution or winding up of the Company, the Common
Units shall rank junior to the Preferred Units, but shall be eligible to
receive
on a pro rata basis all the assets and income of the Company after all debts
of
the Company and the claims of the Preferred Units are satisfied.
2.5
The
Preferred Units will initially be issued in four series, of which one such
series will be designated the “Series A Preferred Units,” which series will
initially consist of 350,000 units, one such series will be designated the
“Series B Preferred Units,” which series will initially consist of 75,000 units,
one such series will be designated the “Series C Preferred Units,” which series
will initially consist of 50,000 units, and one such series will be designated
the “Series D Preferred Units,” which series shall consist of 25,000 units. At
its sole discretion, the Board of Managers may increase the amount of each
of
Series A Preferred Units, Series B Preferred Units, Series C Preferred Units
and
Series D Preferred Units that the Company may issue in accordance with
resolutions of the Board of Managers. Further, the Board of Managers may,
at its
sole discretion, create additional series of Preferred Units which may be
senior
to or pari
passu with
any
existing series or class of Preferred Units, with whichever number of authorized
Preferred Units that the Company may issue in accordance with resolutions
of
Board of Managers. Notwithstanding the foregoing, the Board of Managers shall
not issue any class or series of Preferred Units senior in right of payment
to
any then-outstanding class or series of Preferred Units without the prior
written consent of the holders of a majority of the outstanding Preferred
Units
of each such class or series of Preferred Units.
26
Subject
to Section 8942(b) of the LLC Law, the Preferred Units will not have voting
rights.
2.7
In
the
case of a liquidation, dissolution or winding up of the Company, the Preferred
Units shall have preferential rights in distributions, dividends or payments
to
Members over the holders of the Common Units, and all cash or assets available
for distribution to the holders of Units shall be distributed in accordance
with
the priorities set forth in Section 2.10, but the Members holding the Preferred
Units to the extent that each holds only Preferred Units shall not be entitled
to any other distribution, dividend or payment in the case of a liquidation,
dissolution or winding up except as provided in the first three paragraphs
of
Section 2.10. In the event that the Company liquidates, dissolves or winds
up,
all Members holding Preferred Units irrespective of series that have not
previously exercised their rights under Section 2.11 shall be deemed to have
exercised their right to request that the Company purchase back the Preferred
Units that each holds under Section 2.11 on the date of liquidation, dissolution
or winding up.
2
2.8
The
Preferred Units will have rights to preference payments as set forth in this
Operating Agreement. To the extent that the Board of Managers creates a new
series of Preferred Units, the Board of Managers shall set forth the amount
of
preference payments that such series of Preferred Units shall be entitled
to
receive in the resolutions establishing such series of Preferred
Units.
2.9
The
right
to receive preference payments on and the repurchase of the Preferred Units
is
subject to the availability of cash flow as determined at the sole discretion
of
the Board of Managers, the payment priorities as set forth in Section 2.10
below, compliance with any agreements to which the Company may be a party
restricting such payments and the limitations set forth in Section 2.19 below.
In the event that the Company fails to honor preference payments when due
or
repurchase requests of the Preferred Units under Section 2.11 when made,
interest will not accrue on such preference payments or Preferred
Units.
2.10
From
time
to time, the Board of Managers will determine in its sole discretion the
Company's cash available for distribution. Cash available for distribution
will
be distributed as follows:
first,
to
the payment of all accrued and unpaid preference payments on Preferred Units
for
which repurchase by the Company has been requested by the holders in accordance
with Section 2.11 but not effected by the Company ("Tendered Units"), in
the
order in which repurchase was requested by the holder as reflected in the
Repurchase Register (as defined below) (and if the cash available for
distribution is insufficient to pay such amounts on all Tendered Units for
which
repurchase was requested on the same date, ratably among such Units on a
per
Unit basis);
second,
to the payment of all accrued and unpaid preference payments in respect of
all
outstanding Units other than Tendered Units, ratably among such Units on
a per
Unit basis (without regard to series);
third,
to
the payment of the repurchase amount in respect of all Tendered Units, in
the
order in which repurchase was requested by the holder as reflected in the
Repurchase Register (and if the cash available for distribution is insufficient
to pay such amounts on all Units for which repurchase was requested on the
same
date, ratably among such Units on a per Unit basis);
fourth,
at the election of the Company, in accordance with this Operating Agreement,
to
the redemption or repurchase of Preferred Units other than Tendered
Units;
fifth,
subject to the priority of the Preferred Units and the related limitations
in
distributions on the Common Units set forth in this Operating Agreement,
to the
payment of the repurchase price on any outstanding Returned Units, in the
order
in which repurchase was requested by the holder as reflected in the Repurchase
Register (and if the cash available for distribution is insufficient to pay
such
amounts on all Units for which repurchase was requested on the same date,
ratably among such Units on a per Unit basis); and
sixth,
subject to the priority of the Preferred Units and the related limitations
in
distributions on the Common Units set forth in this Operating Agreement,
to the
Common Units, ratably on a per Unit basis.
2.11
Subject
to the terms of each series of the Preferred Units, any holder of any of
the
Preferred Units shall have the right to request that the Company purchase
back a
portion or all of the Preferred Units held by any such holder at a price
equal
to the amount invested to acquire such Preferred Units plus any accrued and
unpaid preference payments on such Preferred Units; provided, however, that
the
Company, in the sole discretion of the Board of Managers, may defer the purchase
of any of such Preferred Units, until such time as the Company has available
cash (as determined by the Board of Managers in its sole discretion, subject
to
the priority in the application of available cash as set forth in Section
2.10),
and the Company is not prohibited from making such purchase by its agreements
restricting such purchases or the limitations of Section 2.19. The Company
shall
maintain the Repurchase Register reflecting the date of the repurchase request,
amount and series of any Preferred Units for which repurchase by the Company
has
been requested, and the date on which repurchase was effected. Tendered Units
shall be deemed to be outstanding for all purposes (including, without
limitation, the right to accrue and receive preference payments while the
Tendered Units are listed in the Repurchase Register while outstanding) until
repurchase is completed in accordance with this Operating
Agreement.
3
2.12
The
Company may redeem any or all of the Preferred Units at any time at a redemption
price per Preferred Unit equal to the amount invested with the Company to
acquire such Preferred Unit at issuance, plus all accrued and unpaid preference
payments on such Preferred Units, provided that each Unit must be redeemed
in
whole and not in part. The Company will send a notice at least thirty (30)
days
before any redemption by the Company specifying the date for redemption.
In the
event the Company elects to redeem less than all of the Preferred Units then
outstanding, the Company shall select, in such manner as in its sole discretion
it deems appropriate, the Units to be redeemed, and specify the same in the
notice of redemption. However, Members may choose to convert any or all of
their
Preferred Units and accrued but unpaid preference payments in accordance
with
Section 2.13 by written notice of such election delivered to the Company
prior
to the date that the Company set forth as the redemption date. The Company
shall
not redeem any Preferred Unit if on the redemption date any Tendered Units
are
outstanding.
2.13
Subject
to Section 2.20 and Section 2.21, Members holding Preferred Units shall have
the
right at any time to convert (i) a portion or all of their Preferred Units
to
Common Units on a one for one basis (1:1 ratio) and/or (ii) a portion or
all of
the accrued but unpaid preference payments into Common Units on the basis
of one
Common Unit for each twenty dollars ($20) of accrued but unpaid preference
payments. Conversion shall be effected by written notice of conversion to
the
Company specifying the number of Preferred Units and/or amount of preference
payments converted, and such conversion shall be effective as of the date
of
receipt of such notice. In cases where a Member chooses to convert, the Company
shall issue a fractional Common Unit to Members where the accrued but unpaid
preference payments do not add up to a multiple of twenty (20) limited to
that
portion that does not add to a multiple of twenty (20). Once any Preferred
Unit
is converted into a Common Unit, the Member shall not be eligible to receive
any
cash payment or additional units representing preference payments on account
of
such converted Preferred Unit (other than any preference payments accrued
through the date of conversion).
2.14
Subject
to Section 2.20 and Section 2.21, Members holding Preferred Units shall have
the
right at any time to convert a portion or all of the accrued but unpaid
preference payments into Preferred Units on the basis of one Preferred Unit
for
each twenty dollars ($20) of accrued but unpaid preference payments. Conversion
shall be effected by written notice of conversion to the Company specifying
the
amount of preference payments converted, and such conversion shall be effective
as of the date of receipt of such notice. In cases where a Member chooses
to
convert, the Company shall issue a fractional Preferred Unit to Members where
the accrued but unpaid preference payments do not add up to a multiple of
twenty
(20) limited to that portion that does not add to a multiple of twenty
(20).
2.15
A
Series
A Preferred Unit shall expire at the time the Company redeems such Series
A
Preferred Unit in accordance with Section 2.12 of this Operating Agreement,
or
purchases back such Series A Preferred Unit at the Member’s request in
accordance with Section 2.11 of this Operating Agreement which request can
be
made at any time, or the Member exercises its right to convert such Series
A
Preferred Unit under Section 2.13 of this Operating Agreement. Preference
payments shall accrue on each Series A Preferred Unit from the date of issuance
at the rate of six percent (6%) of the amount of the investment by the Member
in
such Series A Preferred Unit at issuance, per annum, and shall be payable,
subject to Section 2.9, on each June 1 and December 1 until such Series A
Preferred Unit is cancelled and ceases to be outstanding as a result of its
being repurchased (or deemed repurchased) or redeemed by the Company or
converted into Common Units in accordance with this Operating
Agreement.
2.16
A
Series
B Preferred Unit shall expire at the time the Company redeems such Series
B
Preferred Unit in accordance with Section 2.12 of this Operating Agreement,
purchases back such Series B Preferred Unit at the Member’s request in
accordance with Section 2.11 of this Operating Agreement, which request can
be
made any time after the sixth month anniversary of the date of the purchase
of
such Series B Preferred Unit (the request can be presented up to fifteen
(15)
days prior to such anniversary), or the Member exercises its right to convert
such Series B Preferred Unit under Section 2.13 of this Operating Agreement.
Preference payments shall accrue on each Series B Preferred Unit from the
date
of issuance at the rate of seven percent (7%) of the amount of the investment
by
a Member in such Series B Preferred Unit at issuance, per annum, and shall
be
payable, subject to Section 2.9, on each June 1 and December 1 until such
Series
A Preferred Unit is cancelled and ceases to be outstanding as a result of
its
being repurchased or redeemed (or deemed repurchased) by the Company or
converted into Common Units in accordance with this Operating
Agreement.
4
2.17
A
Series
C Preferred Unit shall expire at the time the Company redeems such Series
C
Preferred Unit in accordance with Section 2.12 of this Operating Agreement,
or
purchases back such Series C Preferred Unit at the Member’s request in
accordance with Section 2.11 of this Operating Agreement, which request can
be
made any time after the third year anniversary of the date of the purchase
of
such Series C Preferred Unit (the request can be presented up to fifteen
(15)
days prior to such anniversary), or the Member exercises its right to convert
such Series C Preferred Unit under Section 2.13 of this Operating Agreement.
Preference payments shall accrue on each Series B Preferred Unit from the
date
of issuance at the rate of eight percent (8%) of the amount of investment
by a
Member in such Series C Preferred Unit at issuance, per annum, and shall
be
payable, subject to Section 2.9, on each June 1 until such Series A Preferred
Unit is cancelled and ceases to be outstanding as a result of its being
repurchased (or deemed repurchased) or redeemed by the Company or converted
into
Common Units in accordance with this Operating Agreement.
2.18
A
Series
D Preferred Unit shall expire at the time the Company redeems such Series
D
Preferred Unit in accordance with Section 2.12 of this Operating Agreement,
or
purchases back such Series D Preferred Unit at the Member’s request in
accordance with Section 2.11 of this Operating Agreement, which request can
be
made any time after the fifth anniversary of the date of the purchase of
such
Series D Preferred Unit (the request can be presented up to fifteen (15)
days
prior to such anniversary), or the Member exercises its right to convert
such
Series D Preferred Unit under Section 2.13 of this Operating Agreement.
Preference payments shall accrue on each Series D Preferred Unit from the
date
of issuance at the rate of nine percent (9%) of the amount of investment
by a
Member in such Series D Preferred Unit at issuance, per annum, and shall
be
payable, subject to Section 2.9, on each June 1 until such Series A Preferred
Unit is cancelled and ceases to be outstanding as a result of its being
repurchased (or deemed repurchased) by the Company or converted into Common
Units in accordance with this Operating Agreement.
2.19
Notwithstanding
anything to the contrary contained in this Operating Agreement, the Company
shall not make a repurchase payment or distribution, pay dividends or make
a
preference payment to any Member on account of its Membership Units of Interest
to the extent such distribution would violate applicable law, including without
limitation Section 8974 of the LLC Law.
2.20
If
the
Company (i) makes a distribution or pays a dividend on its Common Units by
issuing Common Units, (ii) subdivides its outstanding Common Units into a
greater number of Common Units, (iii) combines its outstanding Common Units
into
a smaller number of Common Units, (iv) makes a distribution on its Common
Units
in another class of units of its limited liability company interests other
than
Preferred Units; or (v) issues by reclassification of its Common Units any
units
of its limited liability company interests, then , the conversion ratio (y)
in
Section 2.13 in effect immediately prior to such action shall be proportionately
adjusted so that a Member or Members may receive the aggregate number of
Common
Units which such Member or Members would have owned immediately following
a
conversion referred to in Section 2.13 had the right of conversion had been
exercised immediately prior to such action and (z) in Section 2.14 in effect
immediately prior to such action shall be proportionately adjusted so that
a
Member or Members may receive the aggregate number of Preferred Units which
such
Member or Members would have owned immediately following a conversion referred
to in Section 2.14 had the right of conversion had been exercised immediately
prior to such action. The adjustment shall become effective immediately after
the record date in the case of a dividend or distribution and immediately
after
the effective date in the case of a subdivision, combination or
reclassification.
2.21
If
the
Company (i) consolidates or merges with or into any person, or (ii) permits
any
other person to consolidate with or merge into the Company and the Company
shall
be the continuing or surviving person but, in connection therewith, Common
Units
or other securities shall be changed into or exchanged for securities of
any
other person, or (iii) transfers or leases all or substantially all its assets
to any person in such a way that a Member or Members owning Common Units
shall
be entitled to receive stock, securities, cash or other property with respect
to
or in exchange for Common Units or (iv) effects a capital reorganization
or
reclassification of the Common Units or other securities (other than a
transaction for which adjustment is made pursuant to Section 2.20), then
concurrently with the consummation of any such event: (1) the Preferred Units
shall automatically become convertible for the kind and amount of securities,
cash or other assets which the Member or Members would have owned immediately
after the consolidation, merger, transfer or lease if the Member or Members
had
converted the Preferred Units immediately before the effective date of the
transaction; (2) the accrued but unpaid preference payments shall automatically
become convertible for the kind and amount of securities, cash or other assets
which the Member or Members would have owned immediately after the
consolidation, merger, transfer or lease if the Member or Members had converted
the accrued but unpaid preference payments immediately before the effective
date
of the transaction; and (3) the Company shall cause the surviving, successor
or
purchasing entity, as the case may be (if not the Company) to enter into
an
agreement so providing and further providing for adjustments which shall
be as
nearly equivalent as may be practical to the adjustments provided for in
this
Section 2.21. The successor entity shall mail to each Member a notice describing
the agreement. If the issuer of securities deliverable upon conversion of
Preferred Units or preference payments, as it may apply, under such agreement
is
an affiliate of the formed, surviving, transferee or lessee entity, that
issuer
shall join in the agreement. If Section 2.21 applies, Section 2.20 does not
apply.
5
3.
Members’
Meetings
3.1
All
meetings of the Members entitled to vote shall be held at the principal office
of the Company or at another place as the Managers may determine.
3.2
The
annual meeting of the Members entitled to vote shall be held in the forth
or
fifth month of each fiscal year.
3.3
Special
meetings of the Members entitled to vote may be called by any Manager, the
President of the Company, or by one or more Members entitled to vote holding
not
less than ten percent (10%) of the Membership Unit of Interest entitled to
vote.
3.4
Notice
of
annual and special meetings of the Members entitled to vote shall be given
pursuant to the laws of the State of Pennsylvania or other laws, as they
exist
now or as they may be amended in the future. In the absence of such laws
then
notice by any means shall be given at least ten (10) days in
advance.
3.5
Actions
taken at any meeting of the Members entitled to vote, no matter how called,
or
noticed, and wherever held, are as valid as if taken at a regularly noticed
and
called meeting, if a quorum is present, in person or by proxy, and if each
of
the absent Members entitled to vote signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes. All
such
waivers, consents and approvals must be filed with the Company’s records or made
a part of the minutes. If a Member entitled to vote attends a meeting and
fails
to object at the beginning to the holding of the meeting because it was not
lawfully called, then such an appearance is a waiver of notice to that Member.
Such attendance is not a waiver of the right to object at the meeting to
the
consideration of matters required by any applicable law or this Operating
Agreement to be included in the notice but not so included.
3.6
A
quorum
exists when a majority of the Membership Units of Interest entitled to vote
is
represented in person or by proxy. A quorum is not needed to adjourn a meeting
so long as a majority of the Membership Units of Interest entitled to vote
present, in person or by proxy, votes in favor of adjournment.
3.7
The
Managers need not be elected by ballot unless a Member entitled to vote so
demands at the meeting and before the commencement of voting.
3.8
Only
holders of Membership Units of Interest entitled to vote at the close of
business on the record date are entitled to notice and to vote, except as
provided by the Certificate of Organization, by consent agreement, or by
any
other applicable law.
6
3.9
Every
Member entitled to vote may authorize another to act by proxy with respect
to
the voting of such Membership Units of Interest entitled to vote by filing
a
written proxy signed by such Member with the Secretary of the Company. A
proxy
shall be valid for no more than eleven (11) months from the date of its
execution, unless otherwise provided on the face of the proxy. All proxies
shall
be subject to the laws of the State of Pennsylvania or any other applicable
laws.
4.
Managers
4.1
Subject
to the provisions and limitations of the laws of the State of Pennsylvania
or
any other applicable laws, and the Certificate of Organization, or by any
agreement of the outstanding Membership Units of Interest pertaining to the
business of this Company, business and affairs of the Company shall be managed
and all Company powers exercised by or under the Managers.
4.2
The
number of Managers shall be at least one (1) after issuance of Membership
Units
of Interest entitled to vote.
4.3
Managers
shall be elected at the annual meeting by the Members entitled to vote and
should serve until the next annual meeting and until their successors stand
qualified to assume office. If the Members fail to elect a Manager then the
existing Manager should serve until such time his successor is elected or
optionally appoint someone to act as Manager in his or her stead. Membership
Units of Interest entitled to vote are subject to the voting rights provisions
in this Operating Agreement. Tie votes in elections cannot be broken except
by
negotiation. If there is no Manager serving then the highest-ranking officer
shall act as Manager. If no officer will act as Manager then all the Member(s)
entitled to vote will automatically become the Managers.
4.4
(1)
Vacancies of the Managers may be filled upon a vote of the majority of the
Managers then in office, whether a quorum or not, or by a sole remaining
Manager, except for a vacancy caused by the removal of a Manager, or as
otherwise provided in the Certificate of Organization or this Operating
Agreement. (2) Vacancies caused by the removal of the Manager(s) may only
be
filled by approval of the Members entitled to vote. Any vacancy not filled
by
the Managers that it is authorized to fill may be filled by the Members entitled
to vote.
4.5
Meetings
of the Managers may be called by the President, the Secretary, or any one
Manager. Regular annual meetings of the Managers shall be held without notice
and immediately following and in the same location as the annual meeting
of
Members entitled to vote.
4.6
Meetings
of the Managers shall be held at the Company’s principal office, or at any place
designated by the Managers and contained in the notice.
4.7
Notice
of
any special meeting of the Managers shall be given by first-class mail, postage
prepaid, to all the Managers four (4) days in advance of such meeting or
by
telephone or in person two (2) days in advance of the meeting.
4.8
A
Manager
who signs a waiver of notice, or a consent to the holding of a meeting, or
an
approval of the minutes of that meeting, or who attends the meeting without
protest, thereby waives his right to notice of the meeting. All such waivers,
consents, or approvals shall be made a part of the Company record, filed
and
included in the minutes of the meeting.
4.9
A
quorum
shall consist of a majority of the authorized number of Managers. Every act
or
decision done or made by a majority of the Managers present at a meeting
of the
Managers is the act of the Managers, except as provided by sections in this
Operating Agreement. Any meeting where a quorum is present may transact business
if the vote for approval of an action constitutes a majority of the required
quorum for that meeting.
4.10
Action
required to be taken at a meeting of the Managers may be taken instead by
unanimous written consent of the Managers. Such consents shall be filed with
the
minutes of Manager’s proceedings.
7
4.11
All
policies, rules, and decisions must be law abiding and based on simple decency
and respect. A no alcohol, no drug policy must be established.
4.12
The
Managers shall not exercise their powers in a manner which causes the Company
to
be deemed an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.
5.
Officers
5.1
The
Company shall have officers including a President, Secretary, Treasurer,
and
other officers as the Managers from time to time, deem necessary. An officer
may
hold more than one office in the Company. The Managers in its determination
may
leave any office vacant. All officers serve at the pleasure of the Managers,
which shall fix their compensation and fix their terms of employment to not
more
than one year.
5.2
The
President shall be the chief executive officer of the Company and shall act
in
such a manner, and be responsible for such duties, appropriate to that officer.
However, the President shall always be under the supervisory power of the
Managers. The President shall be the presiding officer for the Members entitled
to vote and Manager meetings unless someone else is appointed.
5.3
The
Secretary shall be responsible for assuming the duties of the President upon
the
latter’s inability to serve.
5.4
The
Secretary shall issue all notices demanded by the law or this Operating
Agreement and shall keep the minutes of all the Members entitled to vote
and
Manager proceedings. The Secretary shall also have such other duties as the
President or Managers may determine.
5.5
The
Treasurer shall be responsible for all funds received by the Company and
shall
be the custodian of the Company securities and maintain the capital accounts
of
the Company’s Members. The Treasurer shall also maintain accurate books and
records of account of the assets and liabilities of the Company. The Treasurer
shall also have such other duties as the President or the Managers may
determine.
6.
Company
Records and Reports
6.1
The
Company shall maintain accurate books and records of assets and liabilities,
and
shall keep minutes of all proceedings involving Members entitled to vote,
Manager and Manager committees, and shall keep at its principal executive
office
a record of the Members and the number and class of Membership Units of Interest
held by each. All books, records, and minutes must be kept in written form,
with
the exception of those books and records that are capable of being kept in
a
form convertible into written form.
6.2
Subject
to applicable laws the record of Members entitled to vote, the books and
records
of assets and liabilities, and the minutes of meetings and proceedings, shall
be
open for inspection by any Member, whether entitled to vote or not, upon
written
request. Each and every Manager shall have the unqualified right to, at
reasonable times, inspect and copy all Company documents of any kind, and
to
inspect all Company properties and holdings.
7.
Indemnification
of Company Agents
7.1
Subject
to paragraph 7.2, each and every agent of the Company shall be indemnified
against legal expenses, judgments, fines, settlements and other amounts,
reasonably incurred by such person after having made or threatened to be
made a
party to a legal action.
7.2
The
Company shall not indemnify any agent in any case where the act giving rise
to
the claim of indemnification is determined by a court to constitute willful
misconduct or recklessness.
8
7.3
Payment
of indemnification amounts may be made in advance if expenses are reasonably
likely to be incurred by a Company agent in defense of such action, provided,
however, that the Company receives an undertaking by or on behalf of such
agent
to repay such indemnification amounts if a court determines that such agent
is
not entitled to be indemnified by the Company.
8.
Execution
of Instruments
The
Managers may by resolution determine the officers and agents to execute any
Company instrument or document, or to sign the Company name, within the law,
and
such execution and signing shall be binding on the Company.
9.
Issuance
and Transfer of Membership Units of Interest and Voting
Rights
9.1
Subject
to applicable laws, every Company Member shall be issued a numbered dated
certificate certifying the number and class of Membership Units of Interest
owned and contain any statement required by the Company or by the provisions
of
any applicable law. Every certificate shall be signed by or signed by facsimile
signature of the President or the Treasurer or the Secretary of the Company,
and
the Company seal may or may not be affixed thereto.
9.2
Subject
to applicable laws, a transfer of Common Units or Preferred Units may only
be
made with the consent of the Managers, which consent generally shall be limited
to transfers between family members, as defined in Section 267(c)(4) of the
Code. The Managers shall not approve any transfer if such transfer would
result
in (i) the Company being treated as a publicly traded partnership under Section
7704 of the Code, (ii) the Company failing to satisfy at least one of the
safe
harbors set forth in the Treasury Regulations promulgated under Section 7704
of
the Code, (iii) violate the terms or stated assumptions of any private letter
ruling obtained by the Company from the Internal Revenue Service, or (iv)
such
transfer being effectuated through an “established securities market” or “a
secondary market (or the substantial equivalent thereof)” within the meaning of
Section 7704 of the Code. A transfer shall only be effective with the Managers’
consent, and upon the signature of the owner and the delivery of the
certificate, but to be effective, such transfer must be entered in the Company
records, complete with the names of the parties, the certificate registration,
the number and class of Units involved and the date of transfer, and the
old
certificate must be surrendered and canceled.
9.3
The
Company has the duty to record the transfer of Membership Units of Interest,
to
cancel surrendered certificates, and to issue new certificates to new
owners.
9.4
Each
Membership Unit of Interest entitled to vote shall count as one vote. Fractional
Units of Interest are allowed. Tie votes may not be broken except by
negotiation.
10.
Disassociation
10.1
The
disassociation of any Member or Members will not have the effect of dissolving
the Company.
11.
Non-dissolution
11.1 Section
8971(a)(4) of the LLC Law will not apply to the Company.
12.
Nonliability
and Attendance Fees
12.1
Fees
for
attendance at meetings of the Managers may be paid to Managers.
12.2 No
Member, Manager, officer, nor employee of this Company shall be personally
liable for expenses, organizational costs, debts, obligations, or liabilities
of
the Company, or for claims made against the Company.
13.
Tax
Provisions
13.1
The
Company shall maintain a separate capital account for each of the Members
in
accordance with the provisions of Treasury Regulation Sections 1.704-1(b)(2)(iv)
and 1.704-2. The Managers shall have the authority to determine such capital
accounts, consistent with such Treasury Regulations, including, without
limitation, to determine whether and to what extent such capital accounts
shall
be adjusted to reflect a revaluation of the Company’s property in accordance
with the provisions of Treasury Regulations Sections 1.704-1(b)(2)(iv)(f)
and
(g).
9
13.2
After
giving effect to the special allocations set forth in Section 13.3, the
Company’s profits and losses, and each corresponding tax item of income, gain,
deduction and loss shall be allocated among the Members for each fiscal year
or
other period in a manner that the Managers determine will, as closely as
possible, give economic effect (within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(ii)) to the provisions of Section 2 of this Operating
Agreement.
13.3
The
Managers shall make such allocations of items of income, gain, deduction
and
loss to the Members as are required to satisfy the requirements of Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(3) (relating to a “qualified income
offset”), 1.704-2(f) and 1.704-2(i)(4) (relating to “minimum gain chargebacks”),
1.704-2(e) (relating to allocations of “nonrecourse deductions”) and
1.704-2(i)(1) (relating to allocations of “partner nonrecourse deductions”).
13.4
In
accordance with Code Section 704(c), gross income, gain, loss and deduction
with
respect to any property contributed to the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the Company’s adjusted tax basis in such property and its fair market
value at the time of contribution. In the event of a revaluation of the
Company’s property in accordance with Treasury Regulations Sections
1.704-1(b)(2)(iv)(f) and (g), subsequent allocations of income, gain, deduction
and loss with respect to such property shall take into account any variation
between the adjusted tax basis of such property and its fair market value
in the
same manner as under Code 704(c) and the Treasury Regulations thereunder.
Any
elections or other decisions with respect to such allocations, including
the
choice of permissible method under Treasury Regulation 1.704-3, shall be
made by
the Managers.
13.5
The
Managers shall appoint an individual who is both a Manager and a Member to
serve
as the Company’s “tax matters partner” within the meaning of Section 6231(a)(7)
of the Code. Xxxx X. Xxxxxxxx will be the Company’s initial tax matters partner.
The provisions of Section 7 of this Operating Agreement shall apply to the
tax
matters partner with respect to all actions taken in such capacity.
13.6
The
Managers shall cause the preparation and timely filing of all tax returns
required to be filed by the Company pursuant to the Code and all other tax
returns required in each jurisdiction in which the Company does business.
The
Managers shall cause the Company to prepare and deliver to each Member all
information with respect to the Company necessary for the Members’ federal and
state income tax returns, including a Form K-1 or its equivalent.
13.7
The
provisions of this Section 13 (other than the first sentence of Section 13.6)
shall cease to apply from and after the effective date of any election by
the
Company pursuant to Section 1.11 hereof to be treated as an association taxable
as a corporation.
14.
Amendment
of Operating Agreement
14.1
This
Operating Agreement may be amended or repealed by the Members entitled to
vote,
and new Operating Agreements adopted, subject to the provisions of applicable
laws, or the Certificate of Organization, and any such change cannot be adopted
if any Member, whether voting or nonvoting, is against its adoption. All
Members, whether voting or nonvoting, must have ample opportunity to be
heard.
If
any
provision of this Operating Agreement is determined by a court or arbitrator
to
be invalid, unenforceable or otherwise ineffective, that provision shall
be
severed from the rest of this Operating Agreement, and the remaining provisions
shall remain in effect and enforceable.
10
In
witness whereof, each of the initial members of this Company signs and adopts
this agreement as the Operating Agreement of this Company.
XXXX
X.
XXXXXXXX
/s/
Xxxx
X. Xxxxxxxx
XXXXX
XXXXXX
/s/
Xxxxx
Xxxxxx
11
