OPERATING AGREEMENT OF IDS PATENT HOLDING, LLC
EXHIBIT 10.15
OF
IDS
PATENT HOLDING, LLC
This
Operating Agreement (“Agreement”), effective this
2nd
day of April, 2008, is among IDS Patent Holding, LLC, a New York limited
liability company (the “Company”), and the Members of
the Company set forth on Schedule 2.3.
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SECTION
1
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DEFINITIONS
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Unless
defined elsewhere in this Agreement, capitalized terms used in this
Agreement will have the meanings ascribed to them in the attached Appendix
A.
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SECTION
2
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COMPANY
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2.1
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Organization. The
Company was organized as a New York limited liability company pursuant to
the Act on March 6, 2008.
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2.2
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Name of the
Company. The name of the Company heretofore formed
is IDS Patent Holding, LLC. The Company may do business under
that name and under any other name or names which the Managing Member
selects. If the Company does business under a name other than
that set forth in its Articles of Organization, then the Company shall
file a certificate with the Department of State of the State of New York
as required by the Act.
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2.3
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Company
Information. Schedule 2.3
sets forth the following Company information:
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(a)
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the
name of each Member;
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(b)
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the
number of Units owned by each Member;
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(c)
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each
Member’s contribution to the Company, together with the date and value of
the contribution;
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(d)
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the
value of each Member’s capital account;
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(e)
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the
address or other contact information of the Company and each
Member;
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(f)
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the
Tax Matters Member of the Company; and
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(g)
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the
name of each officer of the Company, if
any.
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2.4
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Amendment. The
Company will promptly amend and restate Schedule 2.3 to
account for any changes in the information set forth on Schedule 2.3
resulting from matters that occur in accordance with the Act, the Articles
of Organization, and this Agreement. Upon an amendment, the
Company will promptly deliver to each Member a copy of the amended and
restated Schedule
2.3.
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SECTION
3
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PURPOSES
AND POWERS
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3.1
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Purposes. The
Company has been organized to own all rights in and to certain United
States patent applications (the “Patent Applications”) filed by Member,
Intelligent Digital Systems, LLC (“IDS”), to process appeals therefore, to
pursue such patent rights, and to hold and commercially exploit any
patents granted thereon, by threatening, commencing, prosecuting and
settling litigation to enforce those patents, if granted, to recover
damages for infringement, if granted, and to pursue, negotiate and settle
claims for license fees for use of patented technologies, if granted, to
maintain such patents, and other acts related to the ownership, use and
sale of such patent rights, if granted, all to the extent deemed advisable
by the Managing Member. The Patent Applications are identified on attached
Exhibit
A.
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3.2
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Duties. The
Company shall utilize the knowledge, experience, expertise, and know how
of the Members, their advice and consultation, and their managerial,
operational and financial resources, so that the Company performs its
obligations and discharges its duties as stated herein.
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3.3
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Good
Faith. The Members acknowledge that the terms and
conditions of each and every specific role of the Members within the
Company may not have been fully set forth herein. The Members agree to act
cooperatively and in good faith to supplement their understanding as to
their specific roles within the Company so that the objectives and purpose
set forth herein are accomplished.
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3.4
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Costs. The
Managing Member shall have the right to cause the Company to incur such
costs as it determines are appropriate to pursue the purposes set forth in
Section 3.1 and the Members shall contribute to such costs as
provided in Section 6 below.
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3.5
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Limitation. The
Company will not conduct or promote any other business.
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3.6
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Powers.
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(a)
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Unless
the Articles of Organization provide otherwise, the duration of the
Company will be perpetual, subject to termination as set forth in Section
17;
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(b)
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Unless
the Articles of Organization provide otherwise, and subject to the Act,
the Company may have and exercise all powers and do every other act not
inconsistent with law, which is necessary, convenient or incidental to
promote and effect any and all of the purposes for which the Company is
organized.
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SECTION
4 OFFICE
AND AGENT
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4.1
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Registered
Office. The Company must continuously maintain in the
State of New York a registered office, which shall be such place as the
Managing Member shall designate and which may be, but need not be, the
same as any of its places of business.
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4.2
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Registered
Agent. The Company must continuously maintain in the
State of New York a registered agent, which registered agent shall be such
agent as the Managing Member shall designate and which must
be:
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(a)
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an
individual who resides in the State of New York and whose business office
is identical to the registered office, or
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(b)
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a
domestic limited liability company, a domestic corporation or a domestic
professional corporation whose business office is identical to the
registered office.
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SECTION
5
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MANAGEMENT
AND MANAGEMENT RIGHTS OF MEMBERS
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5.1
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Management.
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(a) Managing
Member. The Company is a Member-managed limited liability
company. The Company shall be managed by Member IDS, which is and shall be its
Managing Member. The Managing Member shall have full, exclusive, and
complete discretion, power and authority, subject in all cases to the other
provisions of this Agreement and the requirements of applicable law,
to manage, control, administer, and operate the business and affairs of the
Company for the purposes herein stated, and to make all decisions affecting such
business and affairs, including, without limitation, for Company purposes, the
power to:
(i)
enter into agreements and contracts and give receipts, releases, and
discharges;
(ii) purchase
liability and other insurance to protect the Company’s properties and
business;
(iii) execute
any and all other instruments and documents which may be necessary or in the
opinion of the Managing Member desirable to carry out the intent and purpose of
this Agreement;
(iv)
make any and all expenditures which the Managing Member, in its sole discretion,
deems necessary or appropriate in connection with the management of the affairs
of the Company and the carrying out of its obligations and responsibilities
under this Agreement, including, without limitation, all legal, accounting and
other related expenses incurred in connection with the organization and
operation of the Company, except that if the expenditures for any given calendar
year exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate, Member
VMS shall have the right to exert veto authority over all additional
expenditures for the remainder of said given calendar year. Upon the
expenditure in the aggregate of $100,000 by the Company in a given year, the
Managing Member must submit in writing all additional planned expenditures to
Member VMS at least 10 days prior to payment of the expense; and
(v) enter
into any kind of activity necessary to, in connection with, or incidental to,
the accomplishment of the purposes of the Company.
(b)
Limitation on
Authority of Members. No Member is an agent of the Company
solely by virtue of being a Member, and no Member has authority to act for the
Company solely by virtue of being a Member. This Section 5.1(b)
supersedes any authority granted to the Members pursuant to Section 401 of the
Act. Any Member who takes any action or binds the Company in
violation of this Section 5.1(b) shall be solely responsible for any loss and
expense incurred by the Company as a result of the unauthorized action and shall
indemnify and hold the Company and the other Member harmless with respect to the
loss or expense. Notwithstanding the foregoing, Member, Visual
Management Systems Inc. (“VMS”) shall not have a management right, but shall
have the right to approve any transaction between the Company and the Managing
Member or an affiliate thereof, including the payment of salary or distributions
of income, or compensation of any kind to the Managing Member or an affiliate
thereof, except for (i) distributions to the Members made pursuant to and in
accordance with Section 10 hereof and (ii) loans to the Company on commercially
reasonable terms, of less than $50,000.00 in the aggregate when summed with all
other loans from the Managing Member to the Company, in any given calendar
year.
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5.2
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Member
Proxy. A Member may appoint a proxy to vote or otherwise
act for the Member by signing an appointment instrument, either personally
or by the Member’s attorney-in-fact.
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5.3
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Member Duties and Standards of
Conduct.
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(a)
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Each
Member’s duty of loyalty to the Company and the other Member includes the
following:
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(1)
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to
account to the Company and hold for it any property, profit, or benefit
derived by the Member in the conduct and winding up of the Company’s
business or derived from a use by the Member of Company property,
including the appropriation of a Company opportunity;
and
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(2)
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except
as provided in Section 5.3(d)
and Section
5.3(e), to refrain from dealing with the Company in a manner
adverse to the Company and to refrain from representing a person with an
interest adverse to the Company, in the conduct or winding up of the
Company’s business; and
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(3)
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to
refrain from competing with the Company in the conduct of the business of
the Company before the dissolution of the Company.
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(b)
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Each
Member’s duty of care to the Company and the other Members in the conduct
and winding up of the business of the Company also includes refraining
from grossly negligent or reckless conduct, intentional misconduct, or a
violation of applicable regulation or law.
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(c)
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Each
Member will discharge the duties to the Company and the other Members
under the Act or under this Agreement and exercise any rights consistent
with the obligation of good faith and fair dealing.
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(d)
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A
Member does not violate a duty or obligation under the Act or under this
Agreement merely because the Member’s conduct furthers the Member’s own
interest.
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(e)
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A
Member may lend money to or transact other business with the Company,
provided that any loan or transaction between the Member and the Company
must be:
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(1)
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fair
to the Company;
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(2)
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authorized
by this Agreement; or
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(3)
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authorized
or ratified by the Managing Member after full disclosure of all material
facts.
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(f)
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Loans
and other transactions between the Company and a Member are binding on the
parties in the same manner as transactions between the Company and persons
who are not Members, subject to other applicable law.
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(g)
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Member
IDS is owned by Xxx Xxxxxx Xxxx, Esq. (“Xxxx”). Xxxx is, or may
in the future become, a member of the Board of Directors of Member
VMS. Xxxx is, or may in the future become, a compensated
consultant to Member VMS. The parties hereto acknowledge and
agree that Member IDS may act as Managing Member of the Company, without
limitation, notwithstanding these positions and any others, which Xxxx may
now, or hereafter, hold with Member VMS, or otherwise. In the
event Xxxx is or becomes a member of the Board of Directors of Member VMS,
Xxxx may vote as a member of such Board of Directors of Member VMS on any
and all matters affecting VMS, the Company, or both, without limitation
and Member VMS hereby waives any conflict of interest, actual or
perceived, in relation thereto, and in relation to the purpose of the
Company.
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5.4
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Limitation of Liability and
Indemnification.
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(a)
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The
Managing Member shall not be liable, responsible, or accountable, in
damages or otherwise, to any Member or to the Company for any act or
omission performed by it within the scope of the authority conferred by
this Agreement, except for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of applicable
regulation or law or any transaction from which the Member derives an
improper personal benefit.
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(b)
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The
Company will indemnify the Managing Member for any act or omission
performed by it within the scope of the authority conferred by this
Agreement, except for acts or omissions not in good faith or which involve
gross recklessness, intentional misconduct or a knowing violation of
applicable regulation or law or any transaction from which the Member
derives an improper personal benefit.
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5.5
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Liability of
Members. The debts, obligations, and liabilities of the
Company, whether arising in contract, tort, or otherwise, are solely the
debts, obligations, and liabilities of the Company. A Member is
not and shall not be personally liable for a debt, obligation, or
liability of the Company solely by reason of being or acting as a
Member.
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SECTION
6
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CONTRIBUTIONS
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6.1
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Contributions. The
Members each acknowledge and agree that the funding for the business
activities of the Company as set forth in Section 6.3(b) below shall be
borne by the Members, based upon each member’s pro rata ownership of
Units. The contributions of a Member to the Company may consist
of cash, property, services rendered, or a promissory note or other
obligation to contribute cash or to perform services, each as acceptable
to the Managing Member.
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6.2
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Liability for
Contributions.
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(a)
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A
promise by a Member to contribute to the Company is not enforceable unless
it is set out in writing and signed by the Member.
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(b)
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The
obligation of a Member to make a contribution may be compromised only by
consent of both Members.
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6.3
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Contributions. Contemporaneously
with the execution and delivery of this Agreement, each Member will
contribute to the Company the contribution of the Member set forth on
Schedule
2.3 (the “Initial Contribution”) as of the date of this
Agreement. From time to time after the date hereof, the
Managing Member may make requests for additional contributions by the
Members hereunder (each such request, a “Capital Call”), and each Member
hereby agrees that it shall within thirty (30) days contribute its share
of any Capital Call to the Company, based upon each Member’s pro rata
ownership of Units; provided, that under no
circumstances shall a Member be required to make any contribution in
response to a Capital Call hereunder unless:
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(a)
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The
amount of such contribution in respect of such Capital Call, together with
the amounts of all prior contributions made by such Member hereunder,
including the Initial Contribution and any additional contributions made
pursuant to prior Capital Calls hereunder, does not exceed $250,000 in the
aggregate; and
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(b)
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The
contributions in respect of any such Capital Call are to be used only for
the purposes of either (i) prosecution of the Patent Applications,
including (without limitation) the preparation and filing of any
applications, amendments, supplemental materials, appeals or similar
activities in connection with the pursuit of any and all patent rights
thereunder, (ii) commercially exploiting any patents granted on the Patent
Applications, if any, or (iii) preserving, maintaining or protecting any
patents granted on the Patent Applications, if any, including (without
limitation) by threatening, commencing, prosecuting and settling
litigation to enforce or prevent or seek damages in respect of the
infringement of those patents, if granted, or to pursue, negotiate and
settle claims for license fees for use of patented technologies, if
granted.
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6.4
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No Interest on
Contributions. A Member shall not be paid any interest
on any contribution.
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6.5
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Return of
Contributions. Except as otherwise provided in this
Agreement, a Member shall not have the right to receive any return of any
contribution. If a Member is entitled to receive a return of a
contribution, the Company may distribute cash, property or a combination
thereof to the Member in return of the contribution at the discretion of
the Managing Member, and pursuant to any relevant terms of this
Agreement.
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6.6
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Failure to Make
Contributions. If any Member shall fail to make timely
payment in full of any required additional capital contribution pursuant
to Section 6.3 (a “Funding Default”), the defaulting Member
shall have five (5) days in which to cure such Funding
Default. If, after such five (5) days, the defaulting Member
has not cured such Funding Default, the non-defaulting Member shall have
the following rights, as applicable, in each case exercisable by giving
written notice to the defaulting Member in accordance with Section
19.4:
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(a)
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in
the case of a Funding Default by a Member other than the Managing Member,
the Managing Member shall have the right to cause such defaulting Member
to sell all of the Units that such defaulting Member then owns to the
Managing Member for an amount equal to the Buy-out Amount (as defined
below). Within five (5) days following receipt by the
defaulting Member of a notice from the Managing Member pursuant to this
Section 6.6, the defaulting Member shall sell, transfer, assign, convey
and deliver to the Managing Member all of its right, title and interests
in the Units of such defaulting Member (the “Forced Sale Units”), free and
clear of all liens. Simultaneously with the sale, transfer,
assignment, conveyance and delivery by the defaulting Member of the Forced
Sale Units to the Managing Member, the Managing Member shall deliver or
cause to be delivered to the defaulting Member the Buy-out Amount.
Thereafter, the defaulting Member shall cease to be a Member for any and
all purposes under this Agreement. For purposes of this
Agreement, the term “Buy-out Amount” shall mean, the amount that
represents, at the election of such defaulting Member, either (i) the
defaulting Member’s then-current Capital Account balance, which amount
will be payable by the Managing Member in the form of a non-interest
bearing, subordinated promissory note, which note shall be due and payable
on the five (5) year anniversary of the date of its issuance, or (ii)
fifty percent (50%) of the defaulting Member’s then-current Capital
Account balance, which amount will be paid in cash. If such
defaulting Member fails to make an election by written notice to the
Managing Member with respect to its Buy-out Amount hereunder within five
(5) days following receipt by such defaulting Member of the notice from
the Managing Member pursuant to this Section 6.6(a), then such defaulting
Member shall be deemed to have elected payment in accordance with Section
6.6(a)(i) above.
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(b)
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in
the case of a Funding Default by the Managing Member, the non-defaulting
Member shall have the right to cause the Managing Member to purchase all
of the Units that such non-defaulting Member then owns for an amount equal
to such non-defaulting Member’s then-current Capital Account balance,
which amount will be payable by the Managing Member in
cash. Within five (5) days following receipt by the Managing
Member of a notice from the non-defaulting Member pursuant to this Section
6.6, the non-defaulting Member shall sell, transfer, assign, convey and
deliver to the Managing Member all of its right, title and interests in
the Units of such non-defaulting Member (the “Forced Purchase Units”),
free and clear of all liens. Simultaneously with the sale,
transfer, assignment, conveyance and delivery by the non-defaulting Member
of the Forced Purchase Units to the Managing Member, the Managing Member
shall deliver or cause to be delivered to the non-defaulting Member the
cash in an amount equal to such non-defaulting Member’s then-current
Capital Account balance. Thereafter, the non-defaulting Member
shall cease to be a Member for any and all purposes under this
Agreement.
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SECTION
7
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CAPITAL
ACCOUNTS
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7.1
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Capital
Accounts. The Company will maintain a separate Capital
Account for each Member.
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7.2
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Section 704(c)
Considerations. In cases where IRC § 704(c) and
Treas Reg § 1.704-3 apply to Company property, the Members’
Capital Accounts will be adjusted in accordance with
Treas Reg § 1.704-1(b)(2)(iv)(g) for allocations to them of
income, gain, loss, and deduction, including depreciation, depletion,
amortization, or other cost recovery as computed for book purposes, with
respect to the property.
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7.3
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Revaluations of
Property
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(a)
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(1)
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a
contribution of money or other property to the Company by a Member as
consideration for Units; or
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(2)
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a
distribution of Company property by the Company to a Member as
consideration for Units.
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(b)
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(c)
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Adjustments
to Capital Accounts under this Section 7.3
may be made only if:
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(1)
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the
adjustments are based on the fair market value of Company property taking
IRC § 7701(g) into account on the date of adjustment;
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(2)
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the
adjustments reflect the manner in which the unrealized income, gain, loss,
or deduction inherent in such property that has not been reflected in the
Capital Accounts previously would be allocated among the Members if there
were a taxable disposition of such property for such fair market value on
that date;
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9 -
OPERATING AGREEMENT
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(3)
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the
Members’ Capital Accounts are adjusted in accordance with
Treas Reg § 1.704-1(b)(2)(iv)(g) for allocations to them of
depreciation, depletion, amortization, and gain or loss, as computed for
book purposes, with respect to such property; and
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(4)
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the
Members’ distributive shares of depreciation, depletion, amortization, and
gain or loss, as computed for tax purposes, with respect to such property
will be determined so as to take account of the variation between the
adjusted tax basis and book value of such property in the same manner as
under IRC § 704(c) and
Treas Reg § 1.704-1(b)(4)(i).
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7.4
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Section 754
Elections. Upon adjustment to the adjusted tax basis of
Company property under IRC § 732, IRC § 734, or IRC § 743, the Capital
Accounts of the Members will be adjusted as provided in
Treas Reg § 1.704-1(b)(2)(iv)(m).
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7.5
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Negative Capital Account
Balances No Member will have the obligation to
contribute to the Company any amount in respect of such Member’s negative
Capital Account balance.
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SECTION
8
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ALLOCATION
OF PROFITS AND LOSSES
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8.1
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Allocation of Profits and
Losses After giving effect to the allocation provisions
set forth on Schedule 8.1,
Profits and Losses will be allocated to the Members based upon each
Members Unit ownership percentage, which shall be determined by dividing
the number of Units owned by such Member by the total number of Units
owned by all Members.
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8.2
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Distributions In
Kind The Profits or Losses attributable to any asset in
kind that is distributed to one or more Members:
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(a)
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will
be determined as if the asset had been sold at its fair market value
before the dissolution and winding up of the Company;
and
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(b)
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will
be allocated as provided in Section 8.1.
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SECTION
9
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ACCOUNTING,
TAXES, AND BANKING
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9.1
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Books of
Account The Company will keep complete and
accurate books of account and records in a manner sufficient to effect and
carry out this Agreement. The books of account and records will
be kept in accordance with sound accounting practices consistently
applied.
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9.2
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Taxable
Year. The Company will have a taxable year ending on
December 31.
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10 -
OPERATING AGREEMENT
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9.3
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Bank
Accounts. All Company funds will be deposited in one or
more bank accounts in the Company’s name. The Managing Member
will determine the banks, the types of accounts, and the individuals who
have authority with respect to the accounts and the funds
therein. Company funds will not be commingled with the funds of
any Member.
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9.4
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Tax
Returns. The Company will cause to be prepared all
federal, state, and local income tax returns for the
Company. Within ninety (90) days after the end of a taxable
year, the Company will deliver to each Member:
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(a)
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any
financial statements of the Company for the taxable year, which may be
unaudited;
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(b)
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a
statement showing the share of Company income, gain, loss, credit, and
deduction for income tax purposes allocated to each Member for the taxable
year; and
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(c)
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any
other information concerning the Company that the Member may require to
complete the Member’s federal, state, and local income tax
returns.
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9.5
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Reporting. Each
Member will report the Member’s share of Company income, gain, loss,
credit, and deduction for income tax purposes in a manner consistent with
this Agreement.
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9.6
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Tax Matters
Member. The Company will have a Tax Matters Member who
will have all of the powers and obligations of a “tax matters member”
under IRC § 6231(a)(7). The Tax Matters Member shall be the
Managing Member.
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9.7
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Tax
Elections. The Tax Matters Members will make all of the
Company’s tax elections permitted under the Internal Revenue Code,
including but not limited to elections under IRC §
754.
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SECTION
10
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DISTRIBUTIONS
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10.1
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Allocation of Interim
Distributions. Any distributions of cash or other assets
of the Company before the dissolution and winding up of the Company will
be allocated to the Members based on each Member’s pro rata ownership of
Units, except as set forth in Section
8.1.
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10.2
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Right to
Distributions. A Member is entitled to receive
distributions from the Company before the dissolution and winding up of
the Company to the extent and at the times the Managing Member determines,
based upon each Member’s pro rata ownership of
Units.
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11 -
OPERATING AGREEMENT
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SECTION
11
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WITHDRAWAL
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11.1
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Withdrawal. A
Member may voluntarily withdraw from the Company upon not less than twenty
(20) days prior written notice to the Company and the other
Member. If such a notice is provided, the Member receiving the
notice may waive any portion or all of the twenty (20) days, thereby
causing the Member providing the notice to withdraw on an earlier
date. A notice of withdrawal may not be amended or
revoked. Upon the effectiveness of the withdrawal of a Member
pursuant to this Section 11.1, all Units owned by such withdrawn Member
shall be immediately cancelled and will no longer be outstanding, and the
withdrawn Member shall no longer have any rights hereunder, including
(without limitation) any right to return of any of its contributions
hereunder.
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11.2
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No
Expulsion. A Member may not be expelled from the Company
but the following acts or omissions by a Member, including the Managing
Member, shall entitle the other Member to treat such act or omission as a
Funding Default hereunder subject in all respects to the terms of Section
6.6 hereof and/or to hold the Member responsible and liable for damages
and other remedies in an arbitration proceeding in accordance with Section 11.3,
for such acts or omissions:
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(a)
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the
Member has willfully or persistently committed a material breach of the
Articles of Organization or this Agreement or otherwise breached a duty
owed to the Company or another Member (including but not limited to
violation of the Transfer, Non-competition, or Non-disclosure Provisions
hereof).
|
||
|
11.3
|
Arbitration. Except
as set forth in Section 6.6 or 19.18, any disagreement, claim or dispute
between the Members, shall be resolved by binding
arbitration. The arbitration hereunder shall be before one
arbitrator in New York County, New York, selected in accordance with
procedures established by JAMS Endispute. Judgment on the award
may be entered in any court having jurisdiction. Each Member
shall be responsible for its own fees related to any
arbitration. The Members intend that the arbitration be an
expedited forum and, therefore, waive pre-arbitration discovery,
depositions, document production and the like, except if, in the opinion
of the arbitrator, same may be completed within ten (10)
days. Each Member may be present at all proceedings and may be
represented by counsel, who shall have the right to participate, make
argument and cross-examine witnesses. There shall be a full
record of the proceedings. The arbitrator shall render a
decision in writing with findings of fact and conclusions of
law.
|
||
|
SECTION
12
|
DISSOLUTION
|
|
12.1
|
Dissolution. The
Company will be dissolved and its affairs will be wound up upon the
earliest to occur of any of the following Dissolution
Events:
|
|||
|
(a)
|
upon
reaching the time for dissolution, if any, specified in the Articles of
Organization;
|
|||
12 -
OPERATING AGREEMENT
|
(b)
|
by
the consent of the Members;
|
|||
|
(c)
|
at
such time as the Company has no Members; or
|
|||
|
(d)
|
upon
entry of a decree of judicial dissolution under the
Act.
|
|||
|
12.2
|
Distribution. Upon
the winding up of the Company, the assets of the Company will be
distributed, and applied by the Company in the following
priority:
|
|||
|
(a)
|
to
the extent permitted by law, to creditors, including Members and former
Members who are creditors, in satisfaction of liabilities of the
Company;
|
|||
|
(b)
|
with
respect to non-cash assets of the Company, to the Managing Member;
and
|
|||
|
(c)
|
after
giving effect to the allocation and other provisions under Section 8.1,
all other assets of the Company to the Members based upon their respective
pro rata ownership of Units.
|
|||
|
12.3
|
Winding
Up. Upon dissolution, the Company will continue its
existence, but may not carry on any business, except that which is
appropriate to wind up and liquidate its business and affairs. The Member
who has not wrongfully dissolved the Company may wind up the Company’s
affairs, including:
|
|||
|
(1)
|
collecting
its assets;
|
|||
|
(2)
|
disposing
of its properties that will not be distributed in kind to the
Members;
|
|||
|
(3)
|
discharging
or making provision for discharging its liabilities;
|
|||
|
(4)
|
distributing
its remaining property among the Members in accordance with Section 12.2;
and
|
|||
|
(5)
|
doing
every other act necessary to wind up and liquidate its business and
affairs.
|
|||
|
SECTION
13
|
RECORDS
AND REPORTS
|
|
13.1
|
Company
Records.
|
|||
|
(a)
|
The
Company will keep at its principal office or registered office the
following:
|
|||
|
(1)
|
a
current list of the full name and last-known business, residence, or
mailing address of each Member;
|
|||
13 -
OPERATING AGREEMENT
|
(2)
|
a
copy of the Articles of Organization and all amendments to the Articles of
Organization, together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;
|
|||
|
(3)
|
copies
of the Company's federal, state, and local income tax returns and reports,
if any, for the three most recent years; and
|
|||
|
(4)
|
a
copy of this Agreement and all restated operating agreements, copies of
any writings permitted or required under the Act, and copies of any
financial statements of the Company for the three most recent
years.
|
|||
|
(b)
|
Any
of the foregoing Company records are subject to inspection and copying by
any Member at such Member’s reasonable request and at such Member’s
expense during ordinary business hours.
|
|||
|
13.2
|
Scope of Inspection
Right.
|
|||
|
(a)
|
A
Member’s agent or attorney has the same inspection and copying rights as
the Member.
|
|||
|
(b)
|
The
right to copy records includes, if reasonable, the right to receive copies
made by photographic, xerographic, or other
means.
|
|||
|
SECTION
14
|
OFFICERS
|
|
14.1
|
Officers.
|
||
|
(a)
|
The
Company may have any officers or assistant officers designated by the
Managing Member.
|
||
|
(b)
|
The
same individual may simultaneously hold more than one office in the
Company.
|
||
|
14.2
|
Duties. Each
officer has the authority and will perform the duties set forth in this
Agreement or, to the extent consistent with this Agreement, the duties
prescribed by the Managing Member or by direction of an officer authorized
by the Managing Member to prescribe the duties of other
officers.
|
||
|
14.3
|
Designation and
Removal. An officer:
|
||
|
(a)
|
must
be designated, appointed, elected, removed, or replaced by vote, approval,
or consent of the Managing Member; and
|
||
|
(b)
|
holds
office until a successor has been appointed and qualified, unless the
officer sooner resigns or is
removed.
|
||
14 -
OPERATING AGREEMENT
|
14.4
|
President. The Managing
Member may designate a President. If designated, the President
will supervise, direct, manage and administer the business and affairs of
the Company as directed by the Managing Member.
|
||
|
14.5
|
Treasurer. The
Managing Member may designate a Treasurer. If designated, the
Treasurer will:
|
||
|
(a)
|
have
general charge of and be responsible for all funds of the
Company;
|
||
|
(b)
|
receive
and give receipts for monies due and payable to the Company from any
source and deposit the monies in the name of the Company in banks, trust
companies, or other depositories selected by the Managing Member or an
authorized officer; and
|
||
|
(c)
|
perform
all duties commonly incident to the office of Treasurer and other duties
prescribed by the Managing Member or an authorized
officer.
|
||
|
14.6
|
Secretary. The
Managing Member may designate a Secretary. If designated, the
Secretary will.
|
||
|
(a)
|
prepare
minutes of the Members’ and Managing Member’s meetings and authenticate
records of the Company;
|
||
|
(b)
|
ensure
that all notices by the Company under the Act, the Articles of
Organization, or this Agreement are given;
|
||
|
(c)
|
keep
and maintain the records of the Company specified in Section 13.1(a); and
|
||
|
(d)
|
perform
all duties commonly incident to the office of Secretary and other duties
prescribed by the Managing Member or an authorized
officer.
|
||
|
SECTION
15
|
REPRESENTATIONS,
WARRANTIES, AND COVENANTS OF
MEMBERS
|
|
Each
Member represents, warrants, and covenants to the other Member as
follows:
|
|||
|
15.1
|
Status. Member is duly
organized and validly existing under the laws of the state specified under
the Member’s name on Schedule 2.1.
|
||
|
15.2
|
Authority. Member
has full power and authority to sign and deliver this Agreement and to
perform all of Member’s obligations under this
Agreement.
|
||
|
15.3
|
Binding
Obligation. This Agreement is the legal, valid, and
binding obligation of Member, enforceable against Member in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, or other similar laws of general application or by general
principles of equity.
|
||
15 -
OPERATING AGREEMENT
|
15.4
|
No
Conflicts. The signing and delivery of this Agreement by
Member and the performance by Member of all of Member’s obligations under
this Agreement will not:
|
||
|
(a)
|
conflict
with Member’s articles of incorporation, bylaws, articles of organization,
operating agreement, certificate of limited partnership, partnership
agreement, trust agreement, or other similar organizational documents, if
any;
|
||
|
(b)
|
breach
any agreement to which Member is a party, or give any person the right to
accelerate any obligation of Member;
|
||
|
(c)
|
violate
any law, judgment, or order to which Member is subject;
or
|
||
|
(d)
|
require
the consent, authorization, or approval of any person, including but not
limited to any governmental body.
|
||
|
15.5
|
Speculative
Investment. Member understands that:
|
||
|
(a)
|
Acquiring
or purchasing the Units is a speculative investment and involves a high
degree of risk of loss of Member’s investment; and.
|
||
|
(b)
|
Member
may be unable to liquidate Member’s investment in the Units because the
Units are subject to substantial transfer restrictions in that Units may
only be sold or transferred to the other Member, and because no public
market exists for the Units.
|
||
|
15.6
|
Sophistication.
|
||
|
(a)
|
Member
has the knowledge and experience in technological, financial and business
matters necessary to make Member capable of evaluating the merits and
risks of an investment in the Units.
|
||
|
(b)
|
Member
has had the opportunity to ask questions and receive answers concerning
the Company and the terms and conditions of the purchase of the Units, and
to obtain any additional information deemed necessary by Member to
evaluate the merits and risks of an investment in the
Units. Member has obtained all of the information desired in
connection with the purchase of the
Units.
|
||
16 -
OPERATING AGREEMENT
|
15.7
|
Investment
Intent.
|
||
|
(a)
|
Member
is acquiring the Units solely for Member’s own account, for investment,
and not with a view to or for resale in connection with any distribution
of the Units.
|
||
|
(b)
|
Member
has no oral or written agreement or plan to sell or transfer or otherwise
dispose of the Units.
|
||
|
(c)
|
Member
understands that Member must bear the economic risk of owning the Units
for an indefinite period of time.
|
||
|
15.8
|
No
Registration. Member understands that the Units have not
been registered under the Securities Act of 1933, as amended (the
“Securities Act”), or any state securities laws and that the Company is
not obligated to register the Units.
|
||
|
15.9
|
Release and
Indemnification. Member understands that the Company is
relying on Member’s representations, warranties, and covenants in this
Agreement to issue the Units pursuant to one or more exemptions from the
registration and qualification requirements of the Securities Act and
applicable state securities laws. Member releases and will
defend and indemnify the Company and the other Member and authorized
representative of the Company and other Member, from and against any and
all claims, actions, proceedings, damages, liabilities, and expenses of
every kind, whether known or unknown, including but not limited to
reasonable attorney’s fees, resulting from or arising out of a breach by
Member of any representation, warranty, or covenant in this Section
15.
|
||
SECTION
16 ADDITIONAL
PROVISIONS
|
The
following provisions are incorporated by reference into this
Agreement:
|
|||
|
(a)
|
Definitions;
|
||
|
(b)
|
the
Transfer Provisions attached as Appendix
B;
|
||
|
(c)
|
the
Non-competition Provisions attached as Appendix C;
and
|
||
|
(d)
|
the
Non-disclosure Provisions attached as Appendix
D.
|
||
|
SECTION
17
|
TERMINATION
|
|
17.1
|
Agreement. This
Agreement will terminate (which will not relieve the Members from,
thereafter, complying with the Non-competition Provisions, Non-disclosure
Provisions, Dissolution matters and remedies of the Members) upon the
earliest to occur of the following:
|
||
17 -
OPERATING AGREEMENT
|
(a)
|
upon
the written agreement of the Members; or
|
||
|
(b)
|
upon
the merger of the Company with another business entity, if the Company is
not the surviving business entity; or
|
||
|
(c)
|
upon
the conversion of the Company into another business entity;
or
|
||
|
(d)
|
as
set forth in Section 11.2;
or
|
||
|
(e)
|
the
Bankruptcy of the Company.
|
|
SECTION
18
|
EQUITABLE
RELIEF
|
|
The
parties acknowledge that the remedies available at law for any breach of
this Agreement will, by their nature, be
inadequate. Accordingly, each party may obtain injunctive
relief or other equitable relief to restrain a breach or threatened breach
of this Agreement or to specifically enforce this Agreement, without
proving that any monetary damages have been
sustained.
|
|
SECTION
19
|
GENERAL
|
|
19.1
|
No
Assignment. Except as specifically set forth herein, a
Member may neither assign nor delegate any of the Member’s rights or
obligations under this Agreement to any person or entity, and any
attempted or purported assignment in violation of this provision shall be
void and of no effect. An assignment includes but is not
limited to a transfer or encumbrance or series of transfers or
encumbrances of fifty (50%) percent or more of the Units or other
ownership interests of a Member, regardless of whether the transfer or
encumbrance occurs voluntarily or involuntarily, by operation of law, or
because of any act or occurrence.
|
|||
|
19.2
|
Binding
Effect. This Agreement will be binding on the Members
and their respective representatives and successors.
|
|||
|
19.3
|
Amendment. This
Agreement may be amended only by a written agreement signed by the
Members, except that the Company may amend Schedule 2.3 in
accordance with Section 2.4
without the consent of the other parties.
|
|||
|
19.4
|
Notices. All
notices or other communications required or permitted by this
Agreement:
|
|||
|
(a)
|
must
be in writing;
|
|||
18 -
OPERATING AGREEMENT
|
(b)
|
must
be delivered to the Members at the addresses or facsimile numbers set
forth on Schedule 2.3,
or any other address or contact information that a Member may designate by
notice to the other Members; and
|
|||
|
(c)
|
are
considered delivered:
|
|||
|
(1)
|
upon
actual receipt if delivered personally or by facsimile, e-mail, or an
overnight delivery service; and
|
|||
|
(2)
|
at
the end of the third business day after the date of deposit in the United
States mail, postage pre-paid, certified, return receipt
requested.
|
|||
|
19.5
|
Waiver. No
waiver will be binding on a Member unless it is in writing and signed by
the Member making the waiver. A Member’s waiver of a breach of
a provision of this Agreement will not be a waiver of any other provision
or a waiver of a subsequent breach of the same
provision.
|
|||
|
19.6
|
Severability. If
a provision of this Agreement is determined to be unenforceable in any
respect, the enforceability of the provision in any other respect and of
the remaining provisions of this Agreement will not be
impaired.
|
|||
|
19.7
|
Further
Assurances. The Members will sign other documents and
take other actions reasonably necessary to further effect and evidence
this Agreement.
|
|||
|
19.8
|
No Third-Party
Beneficiaries. The Members do not intend to, and do not,
confer any right or remedy on any third party.
|
|||
|
19.9
|
Termination. The
termination of this Agreement, regardless of how it occurs, will not
relieve a party of obligations that have accrued before the
termination.
|
|||
|
19.10
|
Survival. All
provisions of this Agreement that would reasonably be expected to survive
the termination of this Agreement will do so.
|
|||
|
19.11
|
Attachments. Any
exhibits, schedules, and other attachments referenced in this Agreement
are part of this Agreement.
|
|||
|
19.12
|
Remedies. The
Members will have all remedies available to them at law or in
equity. All available remedies are cumulative and may be
exercised singularly or concurrently.
|
|||
|
19.13
|
Governing
Law. This Agreement and all rights, benefits and
privileges hereunder are governed by the laws of the State of New York
without giving effect to any conflict-of-law principle of any
jurisdiction.
|
|||
19 -
OPERATING AGREEMENT
|
19.14
|
Venue. Any
action or proceeding arising out of this Agreement will be litigated in
courts located in New York or Nassau County, New York. Each
party consents and submits to the jurisdiction of any local, state, or
federal court located in New York or Nassau County, New
York.
|
|||
|
19.15
|
Attorney’s
Fees. Each Member shall be responsible for its own
attorney’s and other fees related to any arbitration or
litigation.
|
|||
|
19.16
|
Entire
Agreement. This Agreement contains the entire
understanding of the Members regarding the subject matter of this
Agreement and supersedes all prior and contemporaneous negotiations and
agreements, whether written or oral, between the parties with respect to
the subject matter of this Agreement.
|
|||
|
19.17
|
Signatures. This
Agreement may be signed in counterparts. A fax transmission of
a signature page will be considered an original signature
page. At the request of a Member, the other Member will confirm
a fax-transmitted signature page by delivering an original signature page
to the requesting Member.
|
|||
|
19.18
|
Member VMS Contract
Default. In the event that Member VMS fails to perform
any obligation or otherwise breaches any agreement under the terms of
either (a) that certain Unsecured Convertible Promissory Note issued by
Member VMS to Member IDS, dated as of the date hereof (the “Note”), (b)
that certain Consulting Agreement between Member VMS and Xxx Xxxx, dated
as of the date hereof (the “Consulting Agreement), or (c) that certain
Exclusive Patent and Trade Secret License Agreement, by and between Member
VMS and the Company, dated as of the date hereof (the “License Agreement,”
and together with the Note and the Consulting Agreement, the “IDS
Agreements”), and in the case of (a) above, such failure constitutes an
“event of default” (as such term is defined in the Note) under such Note,
then in any such case, Member VMS shall be deemed to have committed a
Funding Default under Section 6.6 of this Agreement and, thereafter,
Member IDS shall be entitled to all remedies available to it under this
Agreement for such Funding Default.
|
|||
[Signature
pages to follow]
20 -
OPERATING AGREEMENT
|
Company:
IDS
Patent Holding, LLC, by
Intelligent
Digital Systems, LLC, its Managing Member, by
___________________________________
Xxx
Xxxxxx Xxxx, Esq., Managing Member
|
|
Members:
|
|
Intelligent
Digital Systems, LLC, by
___________________________________
Xxx
Xxxxxx Xxxx, Esq., Managing Member
|
|
Visual
Management Systems, Inc., by
______________________________
Xxxxx
Xxxxxxxx, President
|
21 -
OPERATING AGREEMENT
APPENDIX
A
Definitions
“Act” means the New York
Limited Liability Company Act, as amended from time to time.
“Articles of Organization”
means the document described in the Act for the purpose of forming the Company,
including articles of organization as they may be amended or restated, articles
of conversion, and articles of merger.
“Bankruptcy” means, with
respect to a person:
|
(a)
|
assignment
by the person for the benefit of creditors;
|
||
|
(b)
|
commencement
of a voluntary bankruptcy case by the person;
|
||
|
(c)
|
adjudication
of the person as bankrupt or insolvent;
|
||
|
(d)
|
filing
by the person of a petition or answer seeking for the person any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law, or
rule;
|
||
|
(e)
|
filing
by the person of an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the person in
any proceeding of this nature;
|
||
|
(f)
|
seeking,
consenting to, or acquiescing in the appointment of a trustee, receiver,
or liquidator of the person or of all or any substantial part of the
person’s properties;
|
||
|
(g)
|
commencement
of an involuntary bankruptcy case against the person that has not been
dismissed on or before the 120th
day after the commencement of the case; or
|
||
|
(h)
|
appointment,
without the person’s consent, of a trustee, receiver, or liquidator either
of the person or of all or any substantial part of the person’s properties
that is not:
|
||
|
(1)
|
vacated
or stayed on or before the 90th
day after appointment; or
|
||
|
(2)
|
vacated
on or before the 90th
day after expiration of a stay.
|
||
“Capital Account” means a
capital account to be maintained in accordance with
Treas Reg § 1.704-1(b)(2)(iv).
“Member” means a person with an
ownership interest in the Company and all of the rights and obligations of a
Member specified in the Act, the Articles of Organization, and this Agreement,
including the Member’s share of Profits and Losses, the right to receive
distributions of the Company’s assets, and any right to vote or participate in
management.
“Profit” and “Loss” means for each taxable
year of the Company or other period for which profits and losses must be
computed the Company’s taxable income or loss determined in accordance with IRC
§ 703(a), with the following adjustments:
|
(i)
|
all
items of income, gain, loss, deduction, or credit required to be stated
separately under IRC § 703(a)(1) will be included;
|
|
|
(j)
|
any
tax-exempt income of the Company not otherwise taken into account in this
definition will be included;
|
|
|
(k)
|
any
expenditures of the Company under IRC § 705(a)(2)(B) or treated as such
under Treas Reg § 1.704-1(b)(2)(iv)(i) not otherwise taken
into account in this definition will be excluded;
|
|
|
(l)
|
gain
or loss resulting from any taxable disposition of property will be
computed by reference to the adjusted book value of the property disposed
of, notwithstanding the fact that the adjusted book value of the property
differs from the adjusted basis of the property for federal income tax
purposes;
|
|
|
(m)
|
in
lieu of the depreciation, amortization, or cost recovery deductions
allowable in computing taxable income or loss, there will be taken into
account the depreciation or amortization computed for book purposes;
and
|
|
|
(n)
|
any
items which are allocated under Schedule
8.1
will not be taken into account.
|
“Transfer” means any transfer,
including but not limited to any sale, exchange, gift, encumbrance, foreclosure
of an encumbrance, or attachment.
“Units” means units that
evidence an ownership interest in the Company.
APPENDIX
B
Transfer
Provisions
SECTION
20 DEFINITIONS
Unless
defined elsewhere in this Agreement, capitalized terms used in these Transfer
Provisions will have the meanings ascribed to them in Appendix
A.
SECTION
21 RESTRICTION
ON TRANSFER
|
21.1
|
Restriction. No
Transfer of Units may be made unless the Transfer is expressly permitted
by this Agreement.
|
|
|
21.2
|
Securities
Laws. No offer or Transfer of Units may be made unless
pursuant to an effective registration statement filed under the Securities
Act and applicable state securities laws, or unless the Company receives
an opinion of counsel, in form and from counsel satisfactory to the
Company, that the offer or Transfer is exempt from the registration
requirements of the Securities Act and applicable state securities
laws.
|
|
|
21.3
|
Prohibited
Transfers. Any Transfer of Units that is not expressly
permitted by this Agreement will be null and void and have no force or
effect.
|
|
|
21.4
|
Indemnification. Each
Member will defend and indemnify the Company and the other Member from any
and all claims, actions, proceedings, damages, liabilities, and expenses
of every kind, whether known or unknown, including but not limited to
reasonable attorney’s fees, resulting from or arising out of any attempted
or purported Transfer of Units by the Member that is not expressly
permitted by this Agreement.
|
SECTION
22 PERMITTED
TRANSFERS
A Member
may Transfer Units only with the prior written consent of all other Members.
APPENDIX
C
Non-competition
Provisions
SECTION
23 DEFINITIONS
|
For
purposes of these Non-competition Provisions, the following terms have the
following meanings:
|
|||
|
“Restricted Period” means
with respect to a Member the period beginning on the date of this
Agreement and ending after the earlier to occur of the
following:
|
|||
|
(a)
|
the
Member ceases being a party to this Agreement; and
|
||
|
(b)
|
this
Agreement terminates.
|
||
|
“Restrictions” means the
restrictions set forth in Section
20, Section
21, and Section
22 of these
Non-competition Provisions.
|
|||
SECTION
24 NON-COMPETITION
|
During
a Member’s Restricted Period, the Member will not advise, invest in, own,
manage, operate, control, be employed by, provide services to, lend the
Member’s name to, or otherwise assist any person or entity that competes
with the Company.
|
SECTION
25 NON-SOLICITATION
|
25.1
|
Employees. During
a Member’s Restricted Period, except as expressly contemplated in this
Agreement or as expressly authorized by all Members, the Member will
not:
|
||
|
(a)
|
solicit
any employee of the Company or the other Member to become an employee or
independent contractor of the Member or any other person;
or
|
||
|
(b)
|
suggest
to an employee of the Company or the other Member that the employee should
reduce or terminate the employee’s relationship with the Company or other
Member.
|
||
|
25.2
|
Business
Relations. During a Member’s Restricted Period, the
Member will not suggest to a business relation of the Company or the other
Member that the business relation should reduce or terminate the business
relation’s business or relationship with the Company or other
Member.
|
||
SECTION
26 NO
HIRE
|
During
a Member’s Restricted Period, except as expressly contemplated by this
Agreement or as expressly authorized by all Members, the Member will not,
for the Member, or on behalf of any person or entity, hire as an employee
or engage as an independent contractor any person who was an employee of
the Company or the other Member at any time during the Member’s Restricted
Period.
|
SECTION
27 RESTRICTIONS
|
27.1
|
Reasonableness. Each
Member acknowledges and agrees that each Restriction is reasonable in
scope and that the Restrictions afford a fair protection to the interests
of the Company and the other Member.
|
|
|
27.2
|
Enforceability. The
parties intend that each Restriction be enforceable to the fullest extent
permitted by law. If a Restriction is determined to be
unenforceable to any extent, the Restriction will automatically be amended
to the extent necessary to make it enforceable.
|
|
|
27.3
|
Breach. If a
Member breaches a Restriction, the Member’s Restricted Period for all
Restrictions will be extended by the duration of the
breach.
|
APPENDIX
D
Non-disclosure
Provisions
SECTION
28 DEFINITIONS
|
For
purposes of these Non-disclosure Provisions, the following terms have the
following meanings:
|
|||
|
“Confidential
Information” means all information related to the Company or its
business that is disclosed to a Member, including but not limited to
business models, financial and technical information, trade secrets,
know-how, ideas, designs, drawings, specifications, techniques, programs,
systems, processes, and computer software.
|
|||
|
“Representatives” means
directors, officers, managers, employees, subcontractors, agents,
consultants, advisors, and other authorized
representatives.
|
|||
|
“Restricted Period” means
with respect to a Member the period beginning on the date of this
Agreement and ending after the earlier to occur of the
following:
|
|||
|
(a)
|
the
Member ceases being a party to this Agreement; and
|
||
|
(b)
|
this
Agreement terminates.
|
||
SECTION
29 OBLIGATIONS
OF MEMBERS
|
29.1
|
Use Restrictions and
Nondisclosure Obligations. During a Member’s Restricted
Period:
|
||
|
(a)
|
the
Member will not use Confidential Information for any purpose without the
Company’s specific prior written authorization, except the Member may use
Confidential Information to promote and effect the purposes of the
Company;
|
||
|
(b)
|
the
Member will not disclose Confidential Information to any person without
the Company’s specific prior written authorization, except the Member may
disclose Confidential Information on a need-to-know basis, to
Representatives of the Member who are informed by the Member of the
confidential nature of the Confidential Information and the obligations of
the Member under these Non-disclosure Provisions and each Member will
cause the Member’s Representatives to comply with the provisions of this
Section
24.
|
||
|
29.2
|
Notification and Assistance
Obligations. During a Member’s Restricted Period, the
Member will:
|
||
|
(a)
|
promptly
notify the Company of any unauthorized use or disclosure of Confidential
Information, or any other breach of these Non-disclosure Provisions;
and
|
||
|
(b)
|
assist
the Company in every reasonable way to retrieve any Confidential
Information that was used or disclosed by the Member or the Member’s
Representatives without the Company’s specific prior written authorization
and to mitigate the harm caused by the unauthorized use or
disclosure.
|
||
|
29.3
|
|||
|
(a)
|
is
generally available to the public other than as a result of a disclosure
by the Member or a Representative of the Member;
|
||
|
(b)
|
was
received by the Member from another person without any limitations on use
or disclosure, but only if the Member had no reason to believe that the
other person was prohibited from using or disclosing the information by a
contractual or fiduciary obligation; or
|
||
|
(c)
|
was
independently developed by the Member without using Confidential
Information.
|
||
|
29.4
|
Return of Confidential
Information. Upon the Company’s request, each Member
will promptly return to the Company all materials furnished by the Company
containing Confidential Information, together with all copies and
summaries of Confidential Information in the possession or under the
control of the Member.
|
||
SECTION
30 NO
TRANSFER
|
These
Non-disclosure Provisions do not transfer any ownership rights to any
Confidential Information.
|
SECTION
31 NO
REPRESENTATIONS OR WARRANTIES
|
No
party makes any representations or warranties, either express or implied,
with respect to the accuracy or completeness of Confidential
Information.
|
SCHEDULE
2.3
Company
Information as of April 2, 2008.
|
|
(a)
|
Name
of each Member:
|
Intelligent
Digital Systems, LLC
Visual
Management Systems, Inc.
|
|
(b)
|
Number
of Units owned by each Member:
|
|
Member
|
Units
|
|
Intelligent
Digital Systems, LLC
|
50
Units
|
|
Visual
Management Systems, Inc.
|
50
Units
|
|
|
(c)
|
Each
Member’s contribution to the Company, together with the date and value of
the contribution:
|
|
Member
|
Contributions
|
Date of
Contribution
|
Value
|
|
Intelligent
Digital Systems, LLC
|
U.S.
Patent Applications,
Serial
Numbers 10/145,058
and
10/279,279
|
4/2/08
|
$5,000*
|
|
Visual
Management Systems, Inc.
|
Cash
|
4/2/08
|
$5,000
|
|
|
(d)
|
Value
of each Member’s capital account:
|
|
Member
|
Value
of Capital Account
|
|
Intelligent
Digital Systems, LLC
|
$5,000
|
|
Visual
Management Systems, Inc.
|
$5,000
|
|
|
(e)
|
Address
or other notice information of the Company and each Member (for purposes
of all notices hereunder):
|
IDS
Patent Holding, LLC
Facsimile:
(000) 000-0000
Intelligent
Digital Systems, LLC
Facsimile:
(000) 000-0000
Visual
Management Systems, Inc.
0000
Xxxxxxxxxx Xxx Xxxxx Xxxxx X
Xxxx
Xxxxx, Xxx Xxxxxx 00000
|
|
(f)
|
Tax
Matters Member of the Company:
|
Intelligent
Digital Systems, LLC
|
|
(g)
|
Name
of each officer of the Company:
|
Xxx Xxxx
- President
Allocation
of Profits and Losses
SECTION
1 CONTRIBUTED
PROPERTY
|
To
the extent permitted or required by IRC § 704(c) and the
regulations thereunder, income, gain, loss, and deduction with respect to
property contributed to the Company will be allocated among the Members so
as to take account of the variation between the basis of the property to
the Company and its fair market value at the time of
contribution. Allocations made under this Section
1 are solely for tax purposes and will not affect any Member’s
Capital Account, share of Profits and Losses, or the right to receive
distributions of the Company’s
assets.
|
|
SECTION
2
|
SECTION
754 ELECTIONS
|
|
If
the Capital Accounts of the Members are adjusted under Treas
Reg § 1.704-1(b)(2)(iv)(m) because of an adjustment to the
adjusted tax basis of Company property under IRC § 732, IRC § 734, or IRC
§ 743:
|
|||
|
(a)
|
the
amount of the adjustment to the Capital Accounts will be treated as an
item of gain if the basis of the property increases;
|
||
|
(b)
|
the
amount of the adjustment to the Capital Accounts will be treated as an
item of loss if the basis of the property decreases;
and
|
||
|
(c)
|
the
gain or loss will be allocated to the Members in a manner consistent with
the manner in which their Capital Accounts are adjusted under Treas
Reg § 1.704-1(b)(2)(iv)(m).
|
||
|
SECTION
3
|
GUARANTEED
PAYMENTS
|
|
To
the extent that any compensation paid to a Member by the Company is
determined by the Internal Revenue Service not to be a guaranteed payment
under IRC § 707(c) or not to be a transaction between the Member and
the Company under IRC § 707(a), the Member will be allocated income
in an amount equal to the compensation payment and the Member’s Capital
Account will be adjusted to treat the compensation payment as a
distribution.
|
|
SECTION
4
|
RECAPTURE
|
|
In
making any allocation among the Members of income or gain from a sale or
other disposition of a Company asset, the ordinary income portion, if any,
of the income or gain resulting from the recapture of cost recovery or
other deductions will be allocated among those Members who were previously
allocated, or whose predecessors-in-interest were previously allocated,
the cost recovery deductions or other deductions resulting in the
recapture items, in proportion to the amount of the cost recovery
deductions previously allocated to
them.
|
|
SECTION
5
|
WITHHOLDING
|
|
All
amounts required to be withheld under IRC § 1446 or any other
provision of applicable federal, state, or local tax law will be treated
as amounts actually distributed to the affected
Members.
|
|
SECTION
6
|
OTHER
ALLOCATIONS
|
|
If
this Agreement does not provide for the allocation of any items of Company
income, gain, loss, credit, or deduction among the Members the items will
be allocated among the Members in the same proportions as they share
profits.
|
