OPERATING AGREEMENT
OF
FORCEONE, LLC
TABLE OF CONTENTS
I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II FORMATION OF COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Principal Place of Business. . . . . . . . . . . . . . . . . . . 7
2.4 Registered Office and Registered Agent. . . . . . . . . . . . . . 7
III BUSINESS OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IV NAMES AND ADDRESSES OF MEMBERS. . . . . . . . . . . . . . . . . . . . . 7
V RIGHTS AND DUTIES OF MANAGERS . . . . . . . . . . . . . . . . . . . . . 7
5.1 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Number, Tenure and Qualifications. . . . . . . . . . . . . . . . 8
5.3 Meetings of Managers . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.5 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.6 Certain Powers of Manager. . . . . . . . . . . . . . . . . . . . .10
5.7 Restrictions on Authority of the Manager(s). . . . . . . . . . .11
5.8 Liability for Certain Acts.. . . . . . . . . . . . . . . . . . . .12
5.9 Managers and Members Have No Exclusive Duty to Company. . . . . .12
5.10 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . .13
5.11 Indemnification of the Managers, Employees and Other Agents. . . .13
5.12 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.13 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.14 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.15 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.16 Right to Rely on the Managers. . . . . . . . . . . . . . . . . .14
5.17 Reimbursement to Manager. . . . . . . . . . . . . . . . . . . . .14
5.18 Execution of Documents. . . . . . . . . . . . . . . . . . . . . .14
5.19 Transactions with Company and Otherwise. . . . . . . . . . . . .14
5.20 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
VI RIGHTS AND OBLIGATIONS OF MEMBERS . . . . . . . . . . . . . . . . . . .17
6.1 Limitation of Liability. . . . . . . . . . . . . . . . . . . . .17
6.2 Company Debt Liability. . . . . . . . . . . . . . . . . . . . . .17
6.3 List of Members. . . . . . . . . . . . . . . . . . . . . . . . .17
6.4 Approval of Sale of All Assets. . . . . . . . . . . . . . . . . .17
6.5 Company Books. . . . . . . . . . . . . . . . . . . . . . . . . .17
6.6 Priority and Return of Capital. . . . . . . . . . . . . . . . . .17
6.7 Liability of a Member to the Company. . . . . . . . . . . . . . .17
6.8 Right to Partition. . . . . . . . . . . . . . . . . . . . . . . .17
VII MEETINGS OF MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . .17
7.1 Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . . . .17
7.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . .18
7.3 Place of Meetings. . . . . . . . . . . . . . . . . . . . . . . .18
7.4 Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . . .18
7.5 Meeting of all Members. . . . . . . . . . . . . . . . . . . . . .18
7.6 Record Ownership. . . . . . . . . . . . . . . . . . . . . . . . .18
7.7 Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . .19
7.8 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
7.9 Manner of Acting. . . . . . . . . . . . . . . . . . . . . . . . .19
7.10 Method of Voting. . . . . . . . . . . . . . . . . . . . . . . . .19
7.11 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
7.12 Action by Members Without a Meeting. . . . . . . . . . . . . . .19
7.13 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . .20
VIII CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS . . . . . . . . . . .20
8.1 Members' Capital Contributions. . . . . . . . . . . . . . . . . .20
8.2 Additional Contributions.. . . . . . . . . . . . . . . . . . . . .20
8.3 Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
8.4 Capita1 Accounts.. . . . . . . . . . . . . . . . . . . . . . . . .21
8.5 Withdrawal or Reduction of Members' Contributions to Capital.. . .22
IX ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
9.1 Allocations of Profits and Losses from Operations. . . . . . . . .23
9.2 Special Allocations to Capital Accounts and Certain Other Income Tax
Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
9.3 Distribution of Net Cash Flow. . . . . . . . . . . . . . . . . .26
9.4 Limitation Upon Distributions. . . . . . . . . . . . . . . . . .27
9.5 Accounting Principles. . . . . . . . . . . . . . . . . . . . . .27
9.6 Interest On and Return of Capital Contributions. . . . . . . . .27
9.7 Salaries and Drawings. . . . . . . . . . . . . . . . . . . . . .27
9.8 Accounting Period. . . . . . . . . . . . . . . . . . . . . . . .27
9.9 Records, Audits and Reports. . . . . . . . . . . . . . . . . . .27
9.10 Returns and Other Elections. . . . . . . . . . . . . . . . . . . .28
9.11 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . .28
X TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
10.1 Limitation on Transfer. . . . . . . . . . . . . . . . . . . . . .28
10.2 Transfer of Record Ownership. . . . . . . . . . . . . . . . . . .28
10.3 Approval by Majority Interest. . . . . . . . . . . . . . . . . .28
10.4 Rights of Assignee. . . . . . . . . . . . . . . . . . . . . . . .29
10.5 Transfer in Contravention of Operating Agreement. . . . . . . . .29
10.6 No Rights to Become Substituted Member. . . . . . . . . . . . . .29
10.7 Transfer to Family Member. . . . . . . . . . . . . . . . . . . .29
10.8 Amendment of Operating Agreement. . . . . . . . . . . . . . . . .29
10.9 Disposition by Member Not a Natural Person. . . . . . . . . . . .29
10.10 Creditors of a Member . . . . . . . . . . . . . . . . . . . .29
XI ADDITIONAL MEMBERS AND PREFERRED MEMBERS. . . . . . . . . . . . . . . .30
11.1 Admission of Additional Members. . . . . . . . . . . . . . . . .30
11.2 Admission of Preferred Members. . . . . . . . . . . . . . . . . .30
XII DISSOLUTION AND TERMINATION . . . . . . . . . . . . . . . . . . . . . .31
12.1 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
12.2 Effect of Filing of Dissolving Statement. . . . . . . . . . . . .32
12.3 Winding Up, Liquidation and Distribution of Assets.. . . . . . . .32
12.4 Articles of Dissolution. . . . . . . . . . . . . . . . . . . . .33
12.5 Certificate of Dissolution. . . . . . . . . . . . . . . . . . . .33
12.6 Return of Contribution Nonrecourse to Other Members. . . . . . .33
XIII EXPULSION OF A MEMBER . . . . . . . . . . . . . . . . . . . . . . . . .33
13.1 Causes of Expulsion. . . . . . . . . . . . . . . . . . . . . . . .34
13.2 Notice of Expulsion. . . . . . . . . . . . . . . . . . . . . . .34
13.3 Purchase of Expelled Member's Membership Interest. . . . . . . . .34
XIV MEMBER OFFER TO ACQUIRE MEMBER'S INTERESTS. . . . . . . . . . . . . . .34
XV BANKRUPTCY OR INSOLVENCY OF MEMBER OR ENCUMBRANCING
OF MEMBER INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . .35
XVI PURCHASE UPON DISABILITY OF AN EMPLOYEE MEMBER. . . . . . . . . . . . .36
XVII OPTION TO PURCHASE INTEREST ON DEATH. . . . . . . . . . . . . . . . . .37
XVIII TERMINATION OF EMPLOYMENT OF EMPLOYED MEMBER . . . . . . . . . . .40
XIX DETERMINATION OF PURCHASE PRICE . . . . . . . . . . . . . . . . . . . .41
XX RETIREMENT OR RESIGNATION OF A MEMBER . . . . . . . . . . . . . . . . .42
20.1 Right to Retire or Resign. . . . . . . . . . . . . . . . . . . .42
20.2 Consequences of Retirement or Resignation. . . . . . . . . . . . .42
XXI MEMBER'S COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .42
21.1 Member's Personal Debts. . . . . . . . . . . . . . . . . . . . . .42
21.2 Alienation of Membership Interest. . . . . . . . . . . . . . . . .42
21.3 Work Product. . . . . . . . . . . . . . . . . . . . . . . . . . .42
21.4 Competition. . . . . . . . . . . . . . . . . . . . . . . . . . .43
21.5 Non-Interference with Employees. . . . . . . . . . . . . . . . . .43
21.6 Clients and Customers. . . . . . . . . . . . . . . . . . . . . . .44
21.7 Covenant to Retain Confidences . . . . . . . . . . . . . . . . . .44
XXII ACCOUNTING, REPORTS AND VALUATIONS. . . . . . . . . . . . . . . . . . .45
22.1 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
22.2 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
22.3 Tax Elections. . . . . . . . . . . . . . . . . . . . . . . . . . .45
22.4 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . .46
22.5 Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
XXIII AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
23.1 Routine Amendments . . . . . . . . . . . . . . . . . . . . . . . .46
23.2 Consent Required . . . . . . . . . . . . . . . . . . . . . . . . .47
23.3 Certain Proscribed Amendments. . . . . . . . . . . . . . . . . . .47
XXIV INVESTMENT INTENT AND INDEMNIFICATION . . . . . . . . . . . . . . . . .47
24.1 Investment Intent of Members . . . . . . . . . . . . . . . . . . .47
24.2 Indemnification of the Managers. . . . . . . . . . . . . . . . . .48
24.3 Internal Revenue Service Compliance. . . . . . . . . . . . . . . .48
XXV MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .48
25.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
25.2 Application of Delaware Law. . . . . . . . . . . . . . . . . . . .49
25.3 Waiver of Action for Partition. . . . . . . . . . . . . . . . . .49
25.4 Employment of Agents. . . . . . . . . . . . . . . . . . . . . . .49
25.5 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . .49
25.6 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .49
25.7 Inurement. . . . . . . . . . . . . . . . . . . . . . . . . . . .49
25.8 No Limit on Personal Activities. . . . . . . . . . . . . . . . .49
25.9 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . .49
25.10 Execution of Additional Instruments. . . . . . . . . . . . .50
25.11 Construction. . . . . . . . . . . . . . . . . . . . . . . .50
25.12 Headings and Pronouns. . . . . . . . . . . . . . . . . . . .50
25.13 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . .50
25.14 Rights and Remedies Cumulative. . . . . . . . . . . . . . .50
25.15 Severability. . . . . . . . . . . . . . . . . . . . . . . .50
25.16 Heirs, Successors and Assigns. . . . . . . . . . . . . . . .50
25.17 Creditors. . . . . . . . . . . . . . . . . . . . . . . . . .50
25.18 Counterparts. . . . . . . . . . . . . . . . . . . . . . . .50
25.19 Rule Against Perpetuities. . . . . . . . . . . . . . . . . .50
25.20 Investment Representations. . . . . . . . . . . . . . . . .51
25.21 Representations and Warranties. . . . . . . . . . . . . . . .52
CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
EXHIBIT B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
OPERATING AGREEMENT
THIS OPERATING AGREEMENT is made and entered into this ___ day of
_____________, 2000, by and between the Members whose signatures appear on the
signature page hereof.
ARTICLE I
DEFINITIONS
The following terms used in this Operating Agreement shall have the
following meanings (unless otherwise expressly provided herein);
1.1 "Articles of Organization" means the Articles of Organization of
ForceOne, LLC, as filed with the Secretary of State of Delaware under the name
"Guardian Armor, LLC" as the same may be amended from time to time.
1.2 "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by, or under common control
with such Person, (ii) any Person owning or controlling ten percent (10%) or
more of the outstanding voting interests of such Person, (iii) any officer,
director, or general partner of such Person, or (iv) any Person who is an
officer, director, general partner, trustee, or holder of ten percent (10%) or
more of the voting interests of any Person described in clauses (i) through
(iii) of this sentence. For purposes of this definition, the term "Controls",
"is controlled by," or "is under common control with" shall mean the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person or entity, whether through the
ownership of voting securities, by contract, or otherwise.
1.3 "Capital Account" as of any given date means the Capital
Contribution to the Company by a Member as Adjusted up to the date in question
pursuant to Article VIII.
1.4 "Capital Contribution" means any contribution to the capital of the
Company by a Member whenever made. A Capital Contribution may be in the form
of in cash, property, services, a promissory note, or other obligation to
contribute cash, property or to perform services. "Initial Capital
Contribution" shall mean the initial contribution to the capital of the
Company pursuant to this Operating Agreement.
1.5 "Capital Interest" means the proportion that a Member's positive
Capital Account bears to the aggregate positive Capital Accounts of all
Members whose Capital Accounts have positive balances as may be adjusted from
time to time.
1.6 "Code" means the Internal Revenue Code of 1986 or corresponding
provisions of subsequent superseding federal revenue laws.
1.7 "Company" means ForceOne, LLC.
1.8 "Deficit Capital Account" means with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
taxable year, after giving effect to the following adjustments:
(a) credit to such Capital Account any amount which such Member is
obligated to restore under Section 1.704-1 (b) (2) (ii) (c) of the Treasury
Regulations, as well as any addition thereto pursuant to the next to last
sentence of Sections1.704-2 (g) (1) and (i) (5) of the Treasury Regulations,
after taking into account thereunder any changes during such year in
partnership minimum gain (as determined in accordance with Section 1.704-2 (d)
of the Treasury Regulations) and in the minimum gain attributable to any
partner nonrecourse debt (as determined under Section 1.704-2 (i) (3) of the
Treasury Regulations); and
(b) debit to such Capital Account the items described in Sections
1.704-1 (b) (ii) (d) (4), (5) and (6) of the Treasury Regulations.
This definition of Deficit Capital Account is intended to comply with the
provision of Treasury Regulations Section 1.704-1 (b) (2) (ii) (d) and 1.704-
2, and will be interpreted consistently with those provisions.
1.9 "Delaware Act" means the Delaware Limited Liability Corporation Act.
1.10 "Depreciation" means, for each fiscal year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such fiscal year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such fiscal year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or the cost recovery deduction for such fiscal
year bears to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at the
beginning of such fiscal year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Manager(s).
1.11 "Dissociating Member" means a Member who is undergoing a
Dissociation.
1.12 "Dissociation" means the death, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member or occurrence of any other event which
terminates the continued membership of a Member in the Company.
1.13 "Distributable Cash" means all cash, revenues and funds received by
the Company, less the sum of the following to the extent paid or set aside by
the Company: (i) all principal and interest payments on indebtedness of the
Company and all other sums paid to lenders; (ii) all cash expenditures
incurred incident to the normal operation of the Company's business; (iii)
such Reserves as the Managers deem reasonably necessary to the proper
operation of the Company's business.
1.14 "Economic Interest" shall mean a Member's or Economic Interest
Owner's share of one or more of the Company's Net Profits, Net Losses and
distributions of the Company's assets pursuant to this Operating Agreement and
the Delaware Act, but shall not include any right to participate in the
management or affairs of the Company, including, the right to vote on, consent
to or otherwise participate in any decision of the Members or Managers.
1.15 "Economic Interest Owner" shall mean the owner of an Economic
Interest who is not a Member.
1.16 "Entity" shall mean any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association or any foreign trust or foreign business
organization.
1.17 The "Fair Market Value" of an asset which is a security shall be
determined as follows:
(a) If the security is freely tradable (that is, if it can be
transferred publicly without registration under the Securities Act of 1933):
(i) If the security is listed on a national securities
exchange or admitted to unlisted trading privileges on
such an exchange or quoted on the automated quotation
system operated by The Nasdaq Stock Market, Inc.
("NASDAQ"), the fair market value shall be the last
reported sale price of that security on such exchange or
system on the last business day prior to the Valuation
Date, or if no such sale is made on such day, the average
of the highest closing bid and asked price for such day on
such exchange or system;
(ii) If the security is not so listed or quoted or admitted to
unlisted trading privileges, the fair market value shall
be the average of the average highest bid and lowest asked
prices quoted on the Electronic Bulletin Board operated by
NASDAQ (or if not quoted on such system, then as quoted by
the National Quotation Bureau, Inc.) for the ten business
days ending on the last business day prior to the
Valuation Date.
(b) If the security is not freely tradable, or if it is not listed
or quoted as described in (A) or (B) above, the fair market value shall be
determined by a disinterested party selected by the Managers.
1.18 "Fiscal Year" shall mean the period terminating on December 31 of
each year during the term hereof or on such earlier date in any year in which
the Company shall be dissolved as provided herein.
1.19 "Gifting Member" shall mean any Member, Preferred Member, or
Economic Interest Owner who gifts, bequeaths or otherwise transfers for no
consideration (by operation of law or otherwise, except with respect to
bankruptcy) all or any part of its Membership Interest, Preferred Membership
Interest, or Economic Interest.
1.20 "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member or a Preferred Member to the Company shall be the gross fair market
value of such asset, as determined by the contributing Member or contributing
Preferred Member and the Managers, provided that the initial Gross Asset
Values of the assets contributed to the Company pursuant to Section 8.1 hereof
shall be as set forth in Exhibit 8.1, and provided further that, if the
contributing Member or contributing Preferred Member is a Manager, the
determination of the fair market value of any other contributed asset shall
require the consent of the other Members owning a Majority Interest
(determined without regard to the Capital Account of such contributing
Member);
(b) The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Managers as of the following times; (a) the acquisition of an additional
interest by any new or existing Member or Preferred Member in exchange for
more than a de minimis contribution of property (including money); (b) the
distribution by the Company to a Member or Preferred Member of more than a de
minimis amount of property as consideration for a Membership Interest,
Preferred Membership Interest, or Economic Interest; and (c) the liquidation
of the Company within the meaning of Regulations Section 1.704-1 (b) (2) (ii)
(g): provided, however, that adjustments pursuant to clauses (a) and (b)
above shall be made only if the Managers reasonably determine(s) that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members and Preferred Members in the Company;
(c) The Gross Asset Value of any Company asset distributed to any
Member or Preferred Member shall be adjusted to equal the gross fair market
value of such asset on the date of distribution as determined by the
distributee and the Manager(s), provided that, if the distributee is a
Manager, the determination of the fair market value of the distributed asset
shall require the consent of the other Members owning a Majority Interest
(determined without regard to the Capital Account of the distributee Member);
and
(d) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734 (b) or Code Section 743 (b) but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulation Section 1.704-1 (b) (2) (iv) (m) and
Section 8.3 and subparagraph (iv) under the definition of Net Profits and Net
Losses; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this definition to the extent the Manager(s) determine(s) that an
adjustment pursuant to subparagraph (ii) of this definition is necessary or
appropriate in connection with transaction that would otherwise result in an
adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (i), (ii) or (iv) of this definition, then such Gross
Asset Value shall thereafter by adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Net Profits and
Net Losses.
1.21 "Majority Interest" shall mean Members holding a majority of the
Capital Interests.
1.22 "Majority Vote" means the affirmative vote or consent of a Majority
Interest.
1.23 "Majority in Interest of the Remaining Members" means Members (other
than the Dissociating Member) holding a majority of the Capital Interests
(determined, however, by disregarding the Capital Interest of the Dissociating
Member) and a majority of the profits allocated (determined, however, by
disregarding the profits allocable to the Dissociating Member) based on any
reasonable estimate of profits from the date of the dissociation of the
Dissociating Member to the projected termination of the Company, taking into
account present and future allocations of profits under this operating
agreement as in effect at that time.
1.24 "Manager" shall mean one or more managers. Specifically, "Manager"
shall mean the Initial Manager(s), or any other persons that succeed them in
that capacity. References to the Manager in the singular or as him, her, it,
itself, or other like references shall also, where the context requires, be
deemed to include the plural or the masculine or feminine reference, as the
case may be.
1.25 "Member" shall mean each of the parties who executes a counterpart
of this Operating Agreement as a Member and each of the parties who may
hereafter become Members. To the extent a Manager has purchased Membership
Interests in the Company, he will have all the rights of a Member with
respect to such Membership Interests, and the term "Member" as used herein
shall include a Manager to the extent he has purchased such Membership
Interests in the Company. If a Person is a Member immediately prior to the
purchase or other acquisition by such Person of an Economic Interest, such
Person shall have all the rights of a Member with respect to such purchased or
otherwise acquired Membership Interest or Economic Interest, as the case may
be. Unless the context states otherwise, "Member" includes a Preferred
Member.
1.26 "Membership Interest" shall mean a Member's entire interest in the
Company including such Member's Economic Interest and such other rights and
privileges that the Member may enjoy by being a Member, including without
limitation the right to participate in the management of the business and
affairs of the Company, including the right to vote on, consent to, or
otherwise participate in, any decision or action of or by the Members granted
pursuant to this Operating Agreement or the Delaware Act.
1.27 "Net Profits" and "Net Losses" shall mean for each taxable year of
the Company an amount equal to the Company's net taxable income or loss for
such year as determined for federal income tax purposes (including separately
stated items) in accordance with the accounting method and rules used by the
Company and in accordance with Section 703 of the Code with the following
adjustments:
(a) Any items of income, gain, loss and deduction allocated to
Members pursuant to Section 9.2 shall not be taken into account in computing
Net Profits or Net Losses of this Operating Agreement;
(b) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Net Profits and Net
Losses (pursuant to this definition) shall be added to such taxable income or
loss;
(c) Any expenditure of the Company described in Section 705 (a) (2)
(B) of the Code and not otherwise taken into account in computing Net Profits
and Net Losses (pursuant to this definition) shall be subtracted from such
taxable income or loss; and
(d) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to clause (ii) or (iv) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Net Profits
and Net Losses;
(e) Gain or loss resulting from any disposition of any Company
asset with respect to which gain or loss is recognized for federal income tax
purposes shall be computed with reference to the Gross Asset Value of the
asset disposed of, notwithstanding that the adjusted tax basis of such asset
differs from its Gross Asset Value;
(f) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such fiscal year; and
(g) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Section 734 (b) of the Code is required pursuant to
Section 1.704-1 (b) (2) (iv) (m) (4) of the Treasury Regulations to be taken
into account in determining Capital Accounts as a result of a distribution
other that in liquidation of a Membership Interest, Preferred Membership
Interest, or Economic Interest, the amount of such adjustment shall be treated
as an item of gain (if the adjustment decreases the basis of the asset) from
the disposition of the asset and shall be taken into account for purposes of
computing Net Profits or Net Losses.
1.28 "Operating Agreement" shall mean this Operating Agreement as
originally executed and as amended from time to time.
1.29 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such "Person" where the context so permits.
1.30 "Preferred Distribution" shall mean a distribution to a Preferred
Member in accordance with the provisions of Article XI.
1.31 "Preferred Interest" shall mean an interest in the Company issued in
accordance with Article XI.
1.32 "Preferred Member" shall mean a person owning a Preferred Interest.
1.33 "Reserves" shall mean, with respect to any fiscal period, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the Managers for working capital
and to pay taxes, insurance, debt service or other costs or expenses incident
to the ownership or operation of the Company's business.
1.34 "Selling Member" shall mean any Member, Preferred Member, or
Economic Interest Owner which sells, assigns, or otherwise transfers for
consideration all or any portion of its Membership Interest, Preferred
Membership Interest, or Economic Interest.
1.35 "Transferring Member" shall collectively mean a Selling Member and
Gifting Member.
1.36 "Treasury Regulations" shall include proposed, temporary and final
regulations promulgated under the Code in effect as of the date of filing the
Articles of Organization and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
ARTICLE II
FORMATION OF COMPANY
2.1 Formation. On June 13, 2000, the Company was organized as a
Delaware Limited Liability Company under the name "Guardian Armor, LLC" by
delivering articles of organization to the Delaware Secretary of State in
accordance with and pursuant to the Delaware Act.
2.2 Name. The name of the Company is ForceOne, LLC or any trade or
assumed name permitted by applicable Delaware statutes and adopted by the
Manager.
2.3 Principal Place of Business. The principal place of business of the
Company shall be 00 Xxxxxxx Xxxxxx, Xxxxx 00, Xxxxxxxx, Xxxxxxx 00000. The
Company may locate its places of business and registered office at any other
place or places as the Managers may from time to time deem advisable by notice
to all Members and by appropriate modification of the Articles of
Organization.
2.4 Registered Office and Registered Agent. The Company's initial
registered office shall be at the office of its registered agent at 00 Xxxxxxx
Xxxxxx, Xxxxx 00, Xxxxxxxx, Xxxxxxx 00000, and the name of its initial
registered agent at such address shall be J. Xxxxxx Xxxxxx. The registered
office and registered agent may be changed from time to time by filing the
address of the new registered office and/or the name of the new registered
agent with the Delaware Secretary of State pursuant to the Delaware Act.
ARTICLE III
BUSINESS OF COMPANY
The business of the Company shall be to conduct any lawful business
whatsoever that may be conducted by limited liability companies pursuant to
the Delaware Act.
ARTICLE IV
NAMES AND ADDRESSES OF MEMBERS
The names, addresses, and percentage interests of the Members who have
executed this Agreement are as set forth on Exhibit "A" attached hereto. The
Managers shall, in timely fashion, amend this Agreement to reflect the
admission of others persons as Members or Preferred Members, if applicable.
ARTICLE V
RIGHTS AND DUTIES OF MANAGERS
5.1 Management. The business and affairs of the Company shall be
managed by its Managers. The Managers shall direct, manage and control the
business of the Company to the best of their ability. Except for situations
in which the approval of the Members is expressly required by this Operating
Agreement or by non-waivable provisions of applicable law, the Managers shall
have full and complete authority, power and discretion to manage and control
the business, affairs and properties of the Company, to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business. At anytime
when there is more than one Manager, any one Manager may take any action
permitted to be taken by the Managers, unless the approval or more than one of
the Managers is expressly required pursuant to this Operating Agreement or the
Act.
5.2 Number, Tenure and Qualifications.
(a) The initial Manager of the Company shall be J. Xxxxxx Xxxxxx
(the "Initial Manager"). The number of Managers of the Company shall be not
less than one (1) or more than ten (10) and shall be increased or decreased
from time to time by a majority vote of the Managers or the affirmative vote
of the Members holding at least a majority of all Capital Interests in the
Company's capital, but in no instance shall there be less than one Manager. A
Manager shall have attained the age of 18 years of age. A Manager need not be
a Member of the Company.
(b) The Managers shall be elected at the annual meeting of
Members by a Majority Vote except as otherwise prescribed by statute.
(c) The term of office of the Managers shall be until the next
annual meeting of the Members or until their successors have been duly
elected, and have qualified.
(d) The Managers shall have supervisory control and management of
the affairs and business of the Company. In the transaction of business, the
act of the Managers, except as otherwise provided by law or the Articles of
Organization, shall be the act of the Company. The Managers may adopt such
rules and regulations for the management of the Company as they may deem
proper, not inconsistent with law or this Agreement.
(e) The Managers may be removed either with or without cause by a
Majority Vote.
(f) All third parties dealing with the Company may conclusively
rely on the validity of all documents executed on behalf of the Company by one
or more of the Manager of the Company.
(g) The Managers shall select one of their number to serve as the
Tax Matters Member of the Company for purposes of executing the duties
described in Section 6221 through 6232 of the Internal Revenue code of 1986,
as amended, and the Regulations thereunder, and such person shall use his
reasonable efforts to properly execute those duties.
5.3 Meetings of Managers
5.3.1 Regular Meetings. Regular meetings of the Managers may be
held without the requirement of any notice. The Managers may provide, by
resolution, the time and place, either within or without the State of
Delaware, for the holding of regular meetings without other notice than such
resolution.
5.3.2 Special Meetings. Special meetings of the Managers may be
called by or at the request of any Manager. The persons calling the special
meetings of the Managers may fix any place, either within or without the State
of Delaware, as the place for holding any special meeting of the Managers
called by them.
5.3.3 Notice. Written notice of any special meeting of Managers
shall be given (a) by mail to each Manager at his or her business address at
least three days prior to the meeting; or (b) by personal delivery, telegram,
or telecopy at least twenty-four (24) hours prior to the meeting to the
business address of each Manager or, in the event such notice is given on a
Saturday, Sunday, or holiday, to the residence address of each Manager.
If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. If notice
is delivered by telecopy, such notice shall be deemed to be delivered when a
confirmation of receipt of the telecopy is printed by the sending telecopier.
Any Manager may waive notice of any meeting. The attendance of a
Manager at any meeting shall constitute a waiver of notice of such meeting,
except where a Manager attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Managers need be specified in the notice or
waiver of notice of such meeting.
When any notice is required to be given to a Manager, a waiver
thereof in writing signed by such Manager, whether before, at, or after the
time stated therein, shall constitute the giving of such notice.
5.3.4 Quorum. A majority of the Managers constitutes a quorum
for the transaction of business at any meeting of the Managers, but if less
than such majority is present at a meeting, a majority of the Managers present
may adjourn the meeting from time to time without further notice.
5.3.5 Manner of Acting. The act of the majority of the Managers
present at a meeting, at which a quorum is present shall be the act of the
Managers.
5.3.6 Informal Action by Managers. Any action required or
permitted to be taken at a meeting of the Managers or of any committee
designated by said Managers may be taken without a meeting, if the action is
evidenced by one or more written consents describing the action taken, signed
by each Manager or committee member, and delivered to the person having
custody of the Company records for inclusion in the minutes or for filing with
the records. Action taken under this Section is effective when all Managers
or committee members have signed the consent, unless the consent specifies a
different effective date. Such consent has the same force and effect as an
unanimous vote of the Managers or committee members and may be stated as such
in any document.
5.3.7 Participation by Electronic Means. Any Manager or any
committee designated by the Managers may participate in a meeting of the
Managers or committee by means of telephone conference or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute
presence in person at the meeting.
5.3.8 Presumption of Assent. A Manager of the Company who is
present at a meeting of the Managers or committee thereof at which action on
any matter is taken shall be presumed to have assented to the action taken
unless such Manager objects at the beginning of such meeting to the holding of
the meeting or to the transacting of business at the meeting, unless his/her
dissent is entered in the minutes of the meeting, or unless he/she shall file
his/her written dissent to such action with the presiding officer of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Company immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Manager who voted in favor
of such action.
5.4 Committees. The Managers may, by resolution, adopted by all of the
Managers, designate two or more Managers to constitute a committee, any of
which shall have such authority in the management of the Company as the
Managers shall designate.
5.5 Compensation. By resolution of the Managers and irrespective of any
personal interest of any of the Managers, each Manager may be paid his or her
expenses, if any, for attendance at each meeting of the Managers, and may be
paid a stated salary as Manager or a fixed sum for attendance at each meeting
of the Managers or both. No such payment shall preclude any Manager from
serving the Company in any other capacity and receiving compensation therefor.
5.6 Certain Powers of Manager.
(a) Without limiting the generality of Section 5.1, the Managers
shall have power and authority, on behalf of the Company:
(i) To acquire property from any Person as the Managers may
determine. The fact that a Manager or a Member is directly or indirectly
affiliated or connected with any such Person shall not prohibit the Managers
from dealing with that Person;
(ii) To borrow money for the Company from banks, other lending
institutions, the Managers, Members, or Affiliates of the Managers or Members
on such terms as the Manager deem appropriate, and in connection therewith, to
hypothecate, encumber and grant security interests in the assets of the
Company to secure repayment of the borrowed sums. No debt shall be contracted
or liability incurred by or on behalf of the Company except by the Managers,
or to the employees of the Company expressly authorized to contract such debt
or incur such liability by the Managers;
(iii) To purchase liability and other insurance to protect
the Company's property and business;
(iv) To hold and own any Company real and/or personal
properties in the name of the Company;
(v) To invest any Company funds temporarily (by way of example
but not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments;
(vi) Upon the affirmative vote of the Members holding at least
two-thirds of all Capital Interests, to sell or otherwise dispose of all or
substantially all of the assets of the Company as part of a single transaction
or plan so long as such disposition is not in violation of or a cause of a
default under any other agreement to which the Company may be bound, provided,
however, that the affirmative vote of the Members shall not be required with
respect to any sale or disposition of the Company's assets in the ordinary
course of the Company' S business;
(vii) To execute. on behalf of the Company all instruments
and documents, including, without limitation, checks; drafts; notes and other
negotiable instruments; mortgages or deeds of trust; security agreements;
financing statements; documents providing for the acquisition, mortgage or
disposition of the Company's property; assignments; bills of sale; leases;
partnership agreements, operating agreements of other limited liability
companies; and any other instruments or documents necessary, in the opinion of
the Managers, to the business of the Company;
(viii) To employ accountants, legal counsel, managing agents
or other experts to perform services for the Company and to compensate them
from Company funds;
(ix) To approve the issuance of Preferred Membership Interests
pursuant to Article XI of this Agreement.
(x) To enter into any and all other agreements on behalf of
the Company, with any other Person for any purpose, in such forms as the
Managers may approve; and
(xi) To do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's business.
(b) Unless authorized to do so by this Operating Agreement or by a
Manager or Managers of the Company, no attorney-in-fact, employee or other
agent of the Company shall have any power or authority to bind the Company in
any way, to pledge its credit or to render it liable pecuniarily for any
purpose. No Member shall have any power or authority to bind the Company
unless the Member has been authorized by the Managers to act as an agent of
the Company in accordance with the previous sentence. Any Member who takes
any action or binds the Company in violation of this Section 5.6 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
harmless with respect to such loss or expense.
5.7 Restrictions on Authority of the Manager(s). Each Manager shall not
have the authority to, and covenants and agrees that it shall not, do any of
the following acts without the consent of the two-thirds of the Capital
Interests of the Members:
(a) Knowingly do any act in contravention of this Operating
Agreement;
(b) Knowingly do any act which would make it impossible to carry on
the ordinary business of the Company, except as otherwise provided in this
operating Agreement;
(c) Confess a judgment against the Company in an amount in excess
of $10,000.
(d) Possess property, or assign rights in specific property, for
other than a Company purpose;
(e) Knowingly perform any act that would cause the Company to
conduct business in a state which has neither enacted legislation which
permits limited liability companies to organize in such state nor permits the
Company to register to do business in such state as a foreign limited
liability company;
(f) Cause the Company to voluntarily take any action that would
cause a bankruptcy of the Company;
(g) Cause the Company to admit any additional Members other than
pursuant to Article XI hereof,
(h) Sell or otherwise dispose of all or substantially all of the
Company's assets other than in the ordinary course of the Company's business,
except for a liquidating sale in connection with the dissolution of the
Company.
5.8 Liability for Certain Acts. Each Manager shall perform his duties
as Manager in good faith, in a manner he reasonably believes to be in the best
interests of the Company, and with such care as an ordinarily prudent person
in a like position would use under similar circumstances. The Manager shall
not be liable for any error of judgment or for any loss suffered by the
Company or any Member therein in connection with its management of the
Company, except a loss resulting from willful misfeasance, bad faith, or gross
negligence on his part in the performance of, or from reckless disregard by
him of his obligations and duties under this Agreement. In performing the
duties of a Manager, a Manager shall be entitled to rely on information,
opinions, reports, or statements, including financial statements and other
financial data, in which case prepared or presented by:
(a) one or more Officers or employees of the Company who the Manger
believes to be reliable and competent in the matters presented; or
(b) counsel, independent accountants, or other persons as to matter
which the Manager believes to be within such person's professional or expert
competence.
The Manager shall not be liable to any Member for any mistake or from the
negligence, fraud, or willful misconduct of any employee or agent of the
Company, provided that such employee or agent was selected, engaged, or
retained by the Manager with reasonable care. The Manager does not, in any
way, guarantee the return of the Members' Capital Contributions or a profit
for the Members from the operations of the Company.
5.9 Managers and Members Have No Exclusive Duty to Company. No Manager
or Member shall be required to manage the Company as a sole and exclusive
function and any Manager and/or Member may have other business interests and
may engage in other activities in addition to those relating to the Company.
Neither the Company nor any Manager or Member shall have any right, by virtue
of this Operating Agreement, to share or participate in such other investments
or activities of any Manager and/or Member or to the income or proceeds
derived therefrom. Neither any Manager nor any Member shall incur any
liability to the Company or to any of the Members as a result of engaging in
any other business or venture.
5.10 Bank Accounts. The Managers may from time to time open bank
accounts in the name of the Company, and the Managers shall be the sole
signatory thereon, unless the Managers determine otherwise.
5.11 Indemnification of the Managers, Employees and Other Agents. The
Company shall indemnify and save harmless the Manager from any personal loss
or damage incurred by him by reason of any act performed by him for or on
behalf of the Company and in furtherance of its interests, and make advances
for expenses to the maximum extent permitted under the Delaware Act, in
accordance with the provisions of the Act or any amendment to the Act. The
Manager may consult with legal counsel selected by the Company, and any action
taken or omitted to be taken by him in good faith in reliance and in
accordance with the opinion or advice of such counsel shall be full protection
and justification to him with respect to the action taken or omitted to be
taken on behalf of the Company. The Company shall indemnify its employees and
other agents who are not Managers to the fullest extent permitted by law,
provided that such indemnification in any given situation is approved by a
Majority Vote
5.12 Resignation. Any Manager of the Company may resign at any time by
giving written notice to the Members of the Company. The resignation of any
Manager shall take effect upon receipt of notice thereof or at such later time
as shall be specified in such notice; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it
effective. The resignation of a Manager who is also a Member shall not affect
the Manager's rights as a Member and shall not constitute a Dissociation of a
Member.
5.13 Removal. At a meeting called expressly for that purpose, all or any
lesser number of Managers may be removed at any time, with or without cause,
by a Majority Vote; provided, however, that a Manager who is also a Member may
only be removed for cause, by a Majority Vote. The removal of a Manager who
is also a Member shall not affect the Manager's rights as a Member and shall
not constitute a Dissociation of a Member.
5.14 Vacancies. Any vacancy occurring for any reason in the number of
Managers of the Company may be filled by the affirmative vote of a majority of
the remaining Managers then in office, provided that if there are no remaining
Managers, the vacancy(ies) shall be filled a Majority Vote. Any Manager's
position to be filled by reason of an increase in the number of Managers shall
be filled by the affirmative vote of a majority of the Managers then in office
or by an election at an annual meeting or at a special meeting of Members
called for that purpose or by the Members' unanimous written consent. A
Manager elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office and shall hold office until the expiration of such
term and until his successor shall be elected and shall qualify or until his
earlier death, resignation or removal. A Manager chosen to fill a position
resulting from an increase in the number of Managers shall hold office until
the next annual meeting of Members and until his successor shall be elected
and shall qualify, or until his earlier death, resignation or removal.
5.15 Compensation. The compensation of the Managers shall be fixed from
time to time by a Majority Vote, and no Manager shall be prevented from
receiving such compensation by reason of the fact that he is also a Member of
the Company.
5.16 Right to Rely on the Managers. Any Person dealing with the Company
may rely (without duty of further inquiry) upon a certificate signed by any
Manager as to:
(a) The identity of any Manager or any Member;
(b) The existence or nonexistence of any fact or facts which
constitute a condition precedent to acts by any Manager or which are in any
other manner germane to the affairs of the Company;
(c) The Persons who are authorized to execute and deliver any
instrument or document of the Company; or
(d) Any act or failure to act by the Company or any other matter
whatsoever involving the Company or any Member.
5.17 Reimbursement to Manager. The Company shall reimburse the Manager
for all ordinary, necessary, and direct expenses incurred by the Manager on
behalf of the Company in carrying out the Company's business activities.
5.18 Execution of Documents. Any document or instrument of any and every
nature, including without limitation, any agreement, contract, deed,
promissory note, mortgage or deed of trust, security agreement, financing
statement, pledge, assignment, xxxx of sale and certificate, which is intended
to bind the Company or convey or encumber title to its real or personal
property shall be valid and binding for all purposes only if executed by the
Manager.
5.19 Transactions with Company and Otherwise. Any of the Managers, or
any agent, servant, or employee of any of the Managers, may engage in and
possess any interest in other businesses or ventures of every nature and
description, independently or with other persons, whether or not directly or
indirectly in competition with the business or purpose of the Company, and
neither the Company nor any of the Members shall have any rights, by virtue of
this Agreement or otherwise, in and to such independent ventures or the income
or profits derived therefrom, or any rights, duties, or obligations in respect
thereof. A Manager may lend money to, act as surety for, and transact other
business with the Company and shall have the same rights and obligations with
respect thereto as a person who is not a Manager of the Company, except that
nothing contained in this Section shall be construed to relieve a Manager from
any of his or her duties to the Company.
5.20 Officers.
(a) Officers. The Officers of the Company shall be a President,
Secretary, and Chief Financial Officer. The Company may also have, at the
discretion of the Managers, one or more Vice-Presidents, a Treasurer, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
Officers as may be appointed in accordance with paragraph (c) below. Any
number of offices may be held by the same person.
(b) Election of Officers. The Officers of the Company shall be
chosen by the Managers, and each shall serve at the pleasure of the Managers,
subject to the rights, if any, of any Officer under any contract of
employment. Officers of the Company may, but need not be, Managers.
(c) Subordinate Officers, etc. The Managers may appoint, and may
empower the President to appoint, such other Officers as the business of the
Company may require, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in this Agreement or as the
Managers may determine.
(d) Removal and Resignation of Officers.
(i) Subject to the rights, if any, of an Officer under any
contract of employment, any Officer may be removed, either with or without
cause, by the Managers, at any regular or special meeting thereof, or by an
Officer upon whom such power of removal may be conferred by the Mangers.
(ii) Any Officer may resign at any time by giving written
notice to the Managers. Any such resignation shall take effect upon the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Any such resignation is without prejudice to
the rights, if any, of the Company under any contract to which the Officer is
a party.
(e) Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause shall be
filled in the manner prescribed in this Agreement for regular appointments to
such office.
(f) President. The President shall be the general manager of the
Company and shall, subject to the control of the Managers, have general
supervision, direction and control of the business and the Officers of the
Company. He shall have the general powers and duties of management usually
vested in the office of President of a corporation, and shall have such other
powers and duties as may be from time to time assigned to him by the Managers
or prescribed by this Agreement
(g) Vice President(s). In the absence or disability of the
President, the Vice President(s) may, in order of their rank as fixed by the
Managers, or, if not ranked, a Vice President designated by the Managers,
shall perform all the duties of the President and when so, acting shall have
all the powers of, and be subject to all the restrictions upon, the President.
The Vice Presidents(s) shall have such other powers and perform such other
duties as from time to time may be prescribed for them respectively by the
President, the Managers, or this Agreement.
(h) Secretary.
(i) The Secretary shall keep or cause to be kept at the
Principal office, or such other place as the Managers may designate, a book of
minutes of all meetings and actions of Managers. Manager Committees, and
Members, with the time and place of holding, whether regular or special, and,
if special, how authorized, the notice thereof given, the names of those
present, the number of Membership Interests present or' represented at
Members' Meetings, and the proceedings thereof.
(ii) The Secretary shall keep or cause to be kept at the
principal office or at the office of the Company's transfer agent or
registrar, or a duplicate share register, the names of all Members and their
addresses, the number of Membership Interests held by each, the number and
date of certificates issued for the same, if any, and the number and date of
cancellation of every certificate surrendered for cancellation.
(iii) The Secretary shall give notice, or cause notice to
be given, of all Members' meetings, Managers' meetings, and Manager Committee
meetings for which notice is required. If the Secretary or other person
authorized by the Secretary to give notice fails to act, notice of any
meeting may be given by any other Officer of the Company. The Secretary shall
maintain records of the mailing or other delivery of notices and documents to
Members or Managers, as prescribed by this Agreement or by the Managers.
(iv) The Secretary shall keep the seal of the Company, if any,
in safe custody. The Secretary shall have such other powers and perform such
other duties as prescribed by this Agreement or by the Managers.
(i) Chief Financial Officer.
(i) The Chief Financial Officer shall keep and maintain, or
cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the Company, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
income, revenues, deductions, expenses, capital, and Capital Accounts. The
books of account shall be open at all reasonable times to inspection by any
Manager or Member upon demand.
(ii) The Chief Financial Officer shall cause to be deposited
all moneys and other valuables in the name and to the account of the Company
with such depositories as may be designated by the Managers. The Chief
Financial Officer shall cause the funds of the Company to be disbursed as he
or she may be properly directed from time to time and shall render to the
President and Managers an account of all of his transactions as Chief
Financial Officer and of the financial condition of the Company whenever
requested.
(iii) The Chief Financial Officer shall have such other
powers and perform such other duties as prescribed by this Agreement or by the
Managers.
(j) Subordinate Officers. The Managers may, appoint, and may
empower the President or Chief Financial Officer to appoint, subordinate
officers as required by the Company's business, whose duties shall be as
provided in this Agreement or as determined from time to time by the
Managers, the President, or the Chief Financial Officer.
(k) Compensation. Salaries of Officers employed by the Company
shall be determined by the Managers or established under employment agreements
approved by the Managers. No Officer shall be prevented from receiving this
salary because he or she is also a Manager and/or Member of the Company.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
6.1 Limitation of Liability. Each Member's liability shall be limited
as set forth in this Operating Agreement, the Delaware Act and other
applicable law.
6.2 Company Debt Liability. A Member will not be personally liable for
any debts or losses of the Company beyond his respective Capital Contributions
and any obligation of the Member under Section 8.1 or 8.2 to make Capital
contributions, except as provided in Section 6.7 herein or as otherwise
required by law.
6.3 List of Members. Upon written request of any Member, the Manager
shall provide a list showing the names, addresses and Membership Interests and
Economic Interests of all Members and Economic Interest Owners.
6.4 Approval of Sale of All Assets. The Members shall have the right,
by the affirmative vote of Members holding at least two-thirds of all Capital
Interests, to approve the sale, exchange or other disposition of all, or
substantially all, of the Company's assets (other than in the ordinary course
of the company's business) which is to occur as part of a single transaction
or plan.
6.5 Company Books. In accordance with Section 9.9 herein, the Managers
shall have exclusive control and supervision of books and other relevant
Company documents. Upon reasonable request, each Member and Economic Interest
Owner shall have the right, during ordinary business hours, to inspect and
copy such Company documents at the requesting Member's and Economic Interest
Owner's expense.
6.6 Priority and Return of Capital. Except as may be expressly provided
in Article IX, no Member or Economic Interest Owner shall have priority over
any other Member or Economic Interest Owner, either as to the return of
capital contributions or as to Net Profits, Net Losses or distributions;
provided that this Section shall not apply to loans (as distinguished from
Capital Contributions) which a Member has made to the Company.
6.7 Liability of a Member to the Company. A Member who receives any
distribution is liable to the Company only to the extent now or hereafter
provided by the Delaware Act.
6.8 Right to Partition. It is specifically agreed and understood that
no Member shall have any right to seek the partition of any property or
property interest owned or hereafter acquired by the Company, nor shall any
Member have any right to specific assets of the Company upon the liquidation
or dissolution as the case may be and the signing of this Agreement shall
constitute a waiver of all rights to partition that the parties hereto would
otherwise have.
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Annual Meeting. The annual meeting of the Members shall be held at
such time as shall be determined by resolution of the Managers, for the
purpose of the transaction of such business as may come before the meeting.
7.2 Special Meetings.
(a) Special meetings of Members, other than those regulated by
statute, may be called at any time by the Managers or must be called upon
written request of the holders of ten percent of the outstanding Membership
Interests entitled to vote at such special meeting. Written notice of such
special meeting stating the place within or without the State of Delaware, the
date and hour of the meeting, the purpose or purposes for which it is called,
and the name of the person by whom or at whose direction the meeting is called
shall be given no less than five (5) nor more than twenty (20) days before the
date set for the meeting. The notice shall be given to each Member of record
in the same manner as notice of the annual meeting. No business other than
that specified in the notice of meeting shall be transacted at any such
special meeting.
(b) In the event the Managers determine that an emergency exists
and that a special meeting of the Members must be called at a time earlier
than five (5) days following notice, the Managers shall give, or cause to be
given notice of the time, place and general purpose of such special meeting to
the Members by telephone, telegram, telecopier, facsimile or other method of
transmission reasonably calculated to provide notice to such Members.
7.3 Place of Meetings. The Managers may designate any place, either
within or outside the State of Delaware, as the place of meeting for any
meeting of the Members. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal executive office
of the Company.
7.4 Notice of Meetings. Except as provided in Section 7.5, written
notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than ten
nor more than fifty days before the date of the meeting, either personally or
by mail, by or at the direction of the Managers or person calling the meeting,
to each Member entitled to vote at such meeting. If mailed, such notice shall
be deemed to be delivered two calendar days after being deposited in the
United States mail, addressed to the Member at its address as it appears on
the books of the Company, with postage thereon prepaid.
7.5 Meeting of all Members. If all of the Members shall meet at any
time and place, either within or outside of the State of Delaware, and consent
to the holding of a meeting at such time and place, such meeting shall be
valid without call or notice, and at such meeting lawful action may be taken.
7.6 Record Ownership. Only Members of record on the books of the
Company shall be entitled to be treated by the Company as holders in fact of
the Membership Interest standing in their respective names, and the Company
shall not be bound to recognize any equitable or other claim to, or interest
in, any percentage of Membership Interest on the part of any other person,
firm or corporation, whether or not it shall have express notice thereof,
except as expressly provided by the laws of the State of Delaware pertaining
to limited liability companies. If a Member of the Company has attempted to
dispose of his/her or its interest in the Company, but did not obtain the
approval of the transfer or assignment in accordance with the provisions of
Article X hereof, the transferee or assignee of such Member's interest shall
have no right to participate in the management of the business and affairs of
the Company and such transferee or assignee shall not be a Member of record on
the books of the Company for any purposes under this Article.
7.7 Record Date. For the purpose of determining Members entitled to
notice of or to vote at any meeting of members or any adjournment thereof, or
Members or Preferred Members entitled to receive payment of any distribution,
or in order to make a determination of Members for any other purpose, the date
on which notice of the meeting is mailed or the date on which the resolution
declaring such distribution is adopted. as the case may be, shall be the
record date for such determination of Members. When a determination of
Members entitled to vote at any meeting of Members has been made as provided
in this Section, such determination shall apply to any adjournment thereof.
7.8 Quorum. Members holding at least two-thirds of all Capital
Interests, represented in person or by proxy, shall constitute a quorum at any
meeting of Members. In the absence of a quorum at any such meeting, a
majority of the Capital Interests so represented may adjourn the meeting from
time to time for a period not to exceed 60 days without further notice.
However, if the adjournment is for more than 60 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each Member of record entitled to vote
at the meeting. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The Members present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the Dissociation during such meeting of that number of Capital
Interests whose absence would cause less than a quorum.
7.9 Manner of Acting. If a quorum is present, a Majority Vote shall be
the act of the Members, unless the vote of a greater or lesser proportion or
number is otherwise required by the Delaware Act or by this Operating
Agreement. Unless otherwise expressly provided herein or required under
applicable law, Members who have an interest (economic or otherwise) in the
outcome of any particular matter upon which the Members vote or consent may
vote or consent upon any such matter and their Capital Interest, vote or
consent, as the case may be, shall be counted in the determination of whether
the requisite matter was approved by the Members.
7.10 Method of Voting. A Member entitled to vote at a meeting may vote
at such meeting in person, by proxy or by telephone or as hereinafter
provided. Members who participate in meetings and in decisions of the Company
by telephone communication shall confirm his action and his vote by written
approval of the minutes of such meeting or Member's action. Each Member shall
be entitled to cast one (1) vote for each one (1) percent interest of the
Company owned by such Member. Fractional percentage interests shall be
permitted to cast a fractional vote equal to such fractional interest.
7.11 Proxies. At all meetings of Members a Member may vote in person or
by proxy executed in writing by the Member or by a duly authorized attorney-
in-fact. Such proxy shall be filed with the Managers of the Company before or
at the time of the meeting. No proxy shall be valid after eleven months from
the date of its execution, unless otherwise provided in the proxy.
7.12 Action by Members Without a Meeting. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if the
action is evidenced by one or more written consents describing the action
taken, signed by each Member entitled to vote and delivered to the Managers of
the Company for inclusion in the minutes or for filing with the company
records. Action taken under this Section is effective when Members
representing a Majority Vote have signed the consent. The record date for
determining Members entitled to take action without a meeting shall be the
date the first Member signs a written consent.
7.13 Waiver of Notice. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
ARTICLE VIII
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
8.1 Members' Capital Contributions. Each Member shall contribute such
amount as is set forth in Exhibit A hereto as its share of the Initial Capital
Contribution.
8.2 Additional Contributions.
(a) If the Manager determines at any time that there is a need for
additional funds to meet the expenses and obligations of the Company, the
Manager shall give written notice (the "Capital Call Notice") to each Member
of the amount of additional funds needed together with such information as may
be necessary to evidence the need for the funds and the proposed uses thereof
(the required amount of funds are referred to as the "Capital Contribution
Call"). Within twenty (20) days following any Capital Contribution Call, each
Member shall contribute to the capital of the Company their proportionate
share of the Capital Contribution Call.
(b) If any Member(s) fails to make any contribution to the
Company's capital at the time and in the form and amount required, such
defaulting Member shall be given a grace period of sixty (60) days to cure his
or her default by paying the amount due in cash or in property plus interest
on the cash capital contribution at one and one-half percent (1-1/2%) per
month. Any Member who fails to pay the due contribution plus interest thereon
within the above sixty (60) day grace period shall become a Defaulting Member.
In such event:
(i) The Membership Interest of the Defaulting Member shall be
reduced and the Membership Interest of the Contributing Members shall be
increased by a number of Interests equal to the amount of Capital Contribution
made, or not made, as the case may be, divided by the book value of the
Company on the date of the Capital Contribution Call.
(ii) The Manager shall promptly give written notice of such
failure to make a required contribution, specifying the amount not paid, to
all Members who have made their required contributions. Any and all of the
remaining Members shall be entitled to elect, by giving written notice of
election to the Company, within ten (10) days after the Company gives written
notice of the default, to subscribe for some, or all, of the amount not paid
by the Defaulting Member. If more than the total amount defaulted upon is so
subscribed, the available amounts shall be prorated in proportion to said
subscriptions. Any member who makes a contribution to the Company pursuant to
this Section 8.2(b)(ii) shall treat his or her additional contribution as
additional capital, such funds shall be allocated to his or her capital
account and, after such contribution is made, the Membership Interest in the
Company of each Member shall be increased by a number of Interests equal to
the contribution made divided by the then current book value of each
Membership Interest.
(c) Upon each Capital Contribution Call, the Capital Interest of
each Contributing Member shall be increased to the extent of all additional
capital contributions made by such Member.
8.3 Borrowing.
(a) In lieu of imposing upon the Members one or more additional
capital assessments in order to fund operating expenses or to finance new
investments, the Company shall be authorized to borrow monies from one or more
of the Managers, Members or third parties, as determined by duly authorized
action of the Managers.
(b) Any loan agreement between the Company, on the one hand, and
any Manager or Member, on the other, shall be only in writing and shall be
upon terms and conditions no less favorable to the Company than terms
otherwise available to the Company from commercial lenders or other third
parties. Without in any way limiting the generality of the foregoing, the
Company shall be authorized to pay interest upon the outstanding principal
balance of any loan from a Manager or Member at a commercially competitive
rate. Such indebtedness shall be evidenced by a written promissory note duly
executed and delivered by the Company by the Managers and shall be repayable
on a date certain (the "Maturity Date") which in no event shall be sooner than
six (6) months from the date made unless otherwise agreed by the Members.
(c) In the event the Company has any outstanding loan from a
Manager or Member, the Company shall not make any payment of any division or
distribution of capital or profits to any Members without the express written
consent of the Manager or Member holding the promissory note.
(d) In the event that the obligation of the Company to repay any
loan made to any third party is personally guaranteed by any Manager or Member
(the "Guaranteeing Party") such guarantee shall be in writing and shall be
subject to the approval of a majority of the Members. If as a result of such
written guarantee the Guaranteeing Party is required to make any payment to a
creditor or otherwise perform any obligation of the Company under the
Guaranteed Loan Agreement, the Guaranteeing Party shall be entitled to
contribution from each Member, pro rata, of any sums so advanced by the
Guaranteeing Party on behalf of the Company. For purposes of this
subparagraph, each Member's pro rata share shall be equal to the Member's pro
rata membership interest in the Company on the date of such contribution. In
the event any Guaranteeing Party is entitled to contribution pursuant to this
section, it shall serve written notice upon the Members and each Member shall
pay its pro rata share within thirty (30) days of such written demand. Any
Member who fails to pay its pro rata share pursuant to these contribution
provisions shall be deemed to have defaulted in its obligation to make an
additional capital assessment pursuant to the provisions of Section 8.2 of
this Operating Agreement to the extent of such unpaid amount.
8.4 Capita1 Accounts.
(a) A separate Capital Account will be maintained for each Member.
Each Member's Capital Account will be increased by (1) the amount of money
contributed by such Member to the Company; (2) the fair market value of
property contributed by such Member to the Company (net of liabilities secured
by such contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code); (3) allocations to such Member of
Net Profits; (4) any items in the nature of income and gain which are
specially allocated to the Member pursuant to paragraphs (a), (b), (c), (d),
(e), (i) and/or (j) of Sections 9.2 or 11.2; (5) the amount of any Company
liabilities that are assumed by such Member or that are secured by any
Property distributed to such Member; and (6) allocations to such Member of
income described in Section 705 (a) (1) (B) of the Code. Each Member's
Capital Account will be decreased by (1) the amount of money distributed to
such Member by the Company; (2) the fair market value of property distributed
to such Member by the Company (net of liabilities secured by such distributed
property that such Member is considered to assume or take subject to under
Section 752 of the Code); (3) allocations to such Member of expenditures
described in Section 705(a)(2)(B) of the Code; (4) any items in the nature of
deduction and loss that are specially allocated to the Member pursuant to
paragraphs (a), (b), (c), (d), (e), (f), (i) and/or (j) of Section 9.2 or
Section 11.2; and (5) allocations to the Capital Account of such Member of Net
Losses.
(b) In the event of a permitted sale or exchange of a Membership
Interest or an Economic Interest in the Company, the Capital Account of the
transferor shall become the Capital Account of the transferee to the extent it
relates to the transferred Membership Interest or Economic Interest in
accordance with Section 1.704-1(b) (2) (iv) of the Treasury Regulations.
(c) The manner in which Capital Accounts are to be maintained
pursuant to this Section 8.4 is intended to comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations promulgated
thereunder. If the Managers, after conferring with the Company's accountants,
determine that the manner in which Capital Accounts are to be maintained
pursuant to the preceding provisions of this Section 8.4 should be modified in
order to comply with Section 704(b) of the code and the Treasury Regulations
thereunder, then notwithstanding anything to the contrary contained in the
preceding provisions of this Section 8.4, the method in which Capital Accounts
are maintained shall be so modified; provided, however, that any change in the
manner of maintaining Capital Accounts shall not materially alter the economic
agreement between or among the Members.
(d) Upon liquidation of the Company (or any Member's Membership
Interest or Economic Interest Owner's Economic Interest), liquidating
distributions will be made in accordance with the positive Capital Account
balances of the Members and Economic Interest Owners, as determined after
taking into account all Capital Account adjustments for the Company's taxable
year during which the liquidation occurs. Liquidation proceeds will be paid
in accordance with section 12.3 (b) . The Company may offset damages for
breach of this Operating Agreement by a Member or Economic Interest Owner
whose interest is liquidated (either upon the Dissociation of the Member or
the liquidation of the Company) against the amount otherwise distributable to
such Member.
(e) Except as otherwise required in the Delaware Act (and subject
to Section 8.1 and 8.2), no Member or Economic Interest Owner shall have any
liability to restore all or any portion of a deficit balance in such Member's
or Economic Interest Owner's Capital Account.
8.5 Withdrawal or Reduction of Members' Contributions to Capital.
(a) A Member shall not receive out of the Company's property any
part of its Capital Contribution until all liabilities of the Company, except
liabilities to Members on account of their Capital Contributions, have been
paid or there remains property of the Company sufficient to pay them.
(b) A Member, irrespective of the nature of its Capital
Contribution, has only the right to demand and receive cash in return for its
capital Contribution.
ARTICLE IX
ALLOCATIONS, INCOME TAX, DISTRIBUTIONS,
ELECTIONS AND REPORTS
9.1 Allocations of Profits and Losses from Operations.
(a) All profits and distributions shall be allocated or paid to the
Members and Economic Interest Owners in the percentage proportions of each
Membership Interest or Economic Interest, as the case may be. All losses shall
be borne by the Members in the percentage proportion of the Capital Interest
of each.
(b) "Profits" and "Losses" means, for each fiscal year or other
period, an amount equal to the Company's taxable income or loss for such year
or period, determined in accordance with Code Section 703 (a) (for this
purpose, all items of income, gains, loss or deduction required to be stated
separately pursuant to Code Section 703 (a) (1) shall be included as income or
loss), with the following adjustments:
(i) Any income of the Company that is exempt from Federal
income tax and not otherwise taken into account in computing Profits or Losses
shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705 (a) (2) (B) or treated as Code Section 705 (a) (2) (B) expenditures
pursuant to Treasury Regulation Section 1. 704-1 (b) (2) (iv) (i), and not
otherwise taken into account in computing Profits and Losses shall be
subtracted from such taxable income or loss;
(iii) Gain or loss resulting from any disposition of any
Company Property with respect to which gain or loss is recognized for Federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(iv) Notwithstanding any other provision of this Paragraph, any
items which are specially allocated pursuant to Sections 9.2 or 11.2 hereof
shall not be taken into account in computing Profits and Losses.
9.2 Special Allocations to Capital Accounts and Certain Other Income Tax
Allocations. Notwithstanding Section 9.1 hereof:
(a) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in sections 1.704-1(b) (2) (ii) (d)
(4), (5), or (6) of the Treasury Regulations, which create or increase a
Deficit Capital Account of such Member, then items of Company income and gain
(consisting of a pro rata portion of each item of company income, including
gross income, and gain for such year and, if necessary, for subsequent years)
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the Deficit
Capital Account so created as quickly as possible. It is the intent that this
Section 9.02(a) be interpreted to comply with the alternate test for economic
effect set forth in Section 1.704-1(b) (2) (ii) (d) of the Treasury
Regulations.
(b) In the event any Member would have a Deficit Capital Account at
the end of any Company taxable year which is in excess of the sum of any
amount that such Member is obligated to restore to the Company under Section
1.704-1(b) (2) (ii) (c) of the Treasury Regulations and such Member's share of
minimum gain as defined in Section 1.704-2(g) (1) of the Treasury Regulations
(which is also treated as an obligation to restore in accordance with Section
1.704-1(b) (2) (ii) (d) of the Treasury Regulations), the Capital Account of
such Member shall be specially credited with items of Membership income
(including gross income) and gain in the amount of such excess as quickly as
possible.
(c) Notwithstanding any other provision of this Section 9.2, if
there is a net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company, then, the
Capital Accounts of each Member shall be allocated items of income (including
gross income) and gain for such year (and if necessary for subsequent years)
equal to that Member's share of the net decrease in Company minimum gain.
This Section 9.2(c) is intended to comply with the minimum gain chargeback
requirement of Section 1.704-2 of the Treasury Regulations and shall be
interpreted consistently therewith. If in any taxable year that the Company
has a net decrease in the Company's minimum gain, the minimum gain chargeback
requirement would cause a distortion in the economic arrangement among the
Members and it is not expected that the Company will have sufficient other
income to correct that distortion, the Managers may in their discretion (and
shall, if requested to do so by a Member) seek to have the Internal Revenue
Service waive the minimum gain chargeback requirement in accordance with
Treasury Regulation Section 1.704-2 (f) (4).
(d) Items of Company loss, deduction and expenditures described in
Section 705 (a) (2) (3) which are attributable to any nonrecourse debt of the
Company and are characterized as partner (Member) nonrecourse deductions under
Section 1.704-2(i) of the Treasury Regulations shall be allocated to the
Members' capital Accounts in accordance with said Section l.704-2(i) of the
Treasury Regulations.
(e) Beginning in the first taxable year in which there are
allocations of "nonrecourse deductions" (as described in Section 1.704-2(b) of
the Treasury Regulations) such deductions shall be allocated to the Members in
the same manner as Net Profit or Net Loss is allocated for such period.
(f) In accordance with Section 704(c) (1) (A) of the Code and
Section 1.704-1(b) (2) (i) (iv) of the Treasury Regulations, if a Member
contributes property with a fair market value that differs from its adjusted
basis at the time of contribution, income, gain, loss and deductions with
respect to the property shall, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the
Company and its fair market value at the time of contribution.
(g) Pursuant to Section 704(c) (1) (B) of the Code, if any
contributed property is distributed by the Company other than to the
contributing Member within five years of being contributed, then, except as
provided in Section 704(c) (2) of the Code, the contributing Member shall,
solely for federal income tax purposes (and not for Capital Account purposes),
be treated as recognizing gain or loss from the sale of such property in an
amount equal to the gain or loss that would have been allocated to such Member
under Section 704(c) (1) (A) of the Code if the property had been sold at its
fair market value at the time of the distribution.
(h) In the case of any distribution by the Company to a Member or
Economic Interest Owner, such Member or Economic Interest Owner shall, solely
for federal income tax purposes (and not for Capital Account purposes), be
treated as recognizing gain in an amount equal to the lesser of:
(i) the excess (if any) of (A) the fair market value of the
property (other than money) received in the distribution over (B) the adjusted
basis of such Member's Membership Interest or Economic Interest Owner's
Economic Interest in the Company immediately before the distribution reduced
(but not below zero) by the amount of money received in the distribution, or
(ii) the Net Precontribution Gain (as defined in Section 737(b)
of the Code) of the Member or Economic Interest Owner. The Net
Precontribution Gain means the net gain (if any) which would have been
recognized by the distributee Member or Economic Interest Owner under section
704(c) (l) (B) of the Code of all property which (1) had been contributed to
the Company within five years of the distribution, and (2) is held by the
Company immediately before the distribution, had been distributed by the
company to another Member or Economic Interest Owner. If any portion of the
property distributed consists of property which had been contributed by the
distributee Member or Economic Interest Owner to the Company, then such
property shall not be taken into account under this Section 9.2(h) and shall
not be taken into account in determining the amount of the Net precontribution
Gain. If the property distributed consists of an interest in an Entity, the
preceding sentence shall not apply to the extent that the value of such
interest is attributable to the property contributed to such Entity after such
interest had been contributed to the Company.
(iii) All recapture of income tax deductions resulting from
sale or disposition of Company property shall be allocated to the Member or
Members to whom the deduction that gave rise to such recapture was allocated
hereunder to the extent that such Member is allocated any gain from the sale
or other disposition of such property.
(j) Any credit or charge to the Capital Accounts of the Members
pursuant to Sections 9.2 (a) (b), (c), (d), and/or (a) hereof shall be taken
into account in computing subsequent allocations of profits and losses
pursuant to Section 9.1, 50 that the net amount of any items charged or
credited to Capital Accounts pursuant to sections 9.1 and 9.2 (a), (b), (c),
(d), and/or (e) and shall to the extent possible, be equal to the net amount
that would have been allocated to the Capital Account of each Member pursuant
to the provisions of this Article IX if the special allocations required by
Sections 9.2 (a)1 (b), (c), (d), and/or (a) hereof had not occurred.
(k) Other Allocation Rules.
(i) In the event additional Members are admitted to the
Company on different dates during any fiscal year, the Profits (or Losses)
allocated to the Members for each such fiscal year shall be allocated among
the Members in proportion to the number of interests each holds from time to
time during such fiscal year(s) in accordance with Code Section 706, using any
convention permitted by law and selected by the Managers. In such event,
subsequent allocations of Losses (or Profits) pursuant to Subparagraph (b) or
Subparagraph (a) hereof shall be allocated (A) first, so as to offset the
Profits (or Losses) allocated for such fiscal year or years, and (B) the
balance, if any, to the Members in proportion to the interests held by each.
(ii) For purposes of determining the Profits, Losses or any
other items allocable to any period, Profits, Losses and any such other items
shall be determined on a quarterly basis, as determined by the Managers, using
any permissible method under Code Section 706 and the Treasury Regulations
thereunder.
(iii) Except as otherwise provided in this Agreement, all
items of Company income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Members in the same
proportions as they share Profits or Losses, as the case may be, for the year.
(iv) The Members are aware of the income tax consequence of the
allocations made by this Article IX and hereby agree to be bound by the
provisions in reporting their shares of Company income and loss for income tax
purposes.
9.3 Distribution of Net Cash Flow.
(a) Net Cash Flow of the Company shall be paid to the Members and
Economic Interest Owners on a pro-rata basis in the percentage proportion of
their respective Capital Interests, as adjusted in accordance with the
provisions of this Agreement.
(b) The "Net Cash Flow" of the Company shall mean, for purposes of
this Agreement, all revenues generated by the Company from Company properties
or Company activities (excluding, however, capital contributions to the
Company) less all cash expenditures for the debts and expenses of the Company,
principal payments on any indebtedness of the Company, capital expenditures
and reasonable reserves otherwise required for the Company business. Except
as herein provided, the Company shall retain only such amounts of cash as may
be reasonably required to carry on its activities and satisfy its obligations
and expenses as described herein, such amount to be determined by the Managers
from time to time.
Expenses of the Company shall include, without limitation,
contingency reserves, insurance and bonding charges, and the expenses of the
Company's business, including, without limitation, employee salaries,
management fees, costs of inventory, fees to governmental entities, real and
personal property taxes, assessments, legal and accounting expenses,
maintenance expense, interest and principal expense, commissions, loan fees
and loan closing costs, advertisement, and any other expenses required to be
incurred or paid by the Company to effect the purpose hereof which are
reasonable in amount and are properly chargeable against the income derived
from the Company's business in accordance with generally accepted accounting
principles applied on a consistent basis.
(c) Unless the loan documents provide otherwise, the full amount of
any loan made by a Member to the Company will be deemed to be a current
operating expense and must be repaid in full before the Company will have Net
Cash Flow for payment or distribution to Members and Economic Interest Owners.
(d) Net Cash Flow shall be distributed at such time or times as the
Managers shall determine in their sole discretion; provided, however, that the
Managers must distribute funds from the Company's Net Cash Flow or from its
Reserves, no less often than annually, to the Members in proportion to their
Capital Interests, in an amount equal to the product of (a) the Company's
taxable income for such Fiscal year as determined for federal income tax
purposes and (b) the highest combined federal, state, and local income tax
rates for an individual resident of the State of Delaware (regardless of the
actual tax rates of the Members).
9.4 Limitation Upon Distributions. No distribution or return of capital
contributions may be made and paid if, after the distribution or return of a
capital contribution, either (a) the Company would be insolvent; or (b) the
net assets of the Company would be less than zero. The Manager may base a
determination that a distribution or return of a capital contribution may be
made under this section in good faith reliance upon a balance sheet and profit
and loss statement of the Company represented to be correct by the person
having charge of its books of account or certified by an independent public or
certified public accountant or firm of accountants to fairly reflect the
financial condition of the Company.
9.5 Accounting Principles. The profits and losses of the Company shall
be determined in accordance with accounting principles applied on a consistent
basis using the cash method of accounting. It is intended that the Company
will elect those accounting methods which provide the Company with the
greatest tax benefits.
9.6 Interest On and Return of Capital Contributions. No Member shall
receive any interest on his contribution to the capital of the Company unless
decided to the contrary by the unanimous vote of the Members, provided that
any Member may loan money to the Company on terms approved by the Managers and
interest paid on such loan shall not be deemed interest upon a contribution to
capital.
9.7 Salaries and Drawings. No Member shall receive any compensation,
salary, or draw for services rendered on behalf of the Company in his capacity
as Member. Any Member may, however, be engaged by the Company to perform
services for the Company and be compensated for such services in accordance
with his or her agreement with the Company.
9.8 Accounting Period. The Company's accounting period shall be
the calendar year.
9.9 Records, Audits and Reports. At the expense of the Company, the
Manager shall maintain records and accounts of all operations and expenditures
of the Company. At a minimum the Company shall keep at its principal place of
business the following records:
(a) A current list of the full name and last known business,
residence, or mailing address of each Member, Economic Interest Owner and
Manager, both past and present;
(b) A copy of the Articles of Organization of the Company and all
amendments thereto, together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;
(c) Copies of the Company's federal, state, and local income tax
returns and reports, if any, for the four most recent years;
(d) Copies of the Company's currently effective written Operating
Agreement, copies of any writings permitted or required with respect to a
Member's obligation to contribute cash, property or services, and copies of
any financial statements of the Company for the three most recent years;
(e) Minutes of every annual, special meeting and court-ordered
meeting;
(f) Any written consents obtained from Members for actions taken by
Members without a meeting.
9.10 Returns and Other Elections. The Manager 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 deemed necessary and
required in each jurisdiction in which the Company does business. Copies of
such returns, or pertinent information therefrom, shall be furnished to the
Members within a reasonable time after the end of the Company's fiscal year.
All elections permitted to be made by the Company under federal or state laws
shall be made by the Manager in his sole discretion, provided that the Manager
shall make any tax election determined by a Majority Vote.
9.11 Tax Matters Partner. The Managers shall elect one of their number
or a non-Manager Member to be designated the "Tax Matters Partner" (as defined
in Code Section 6231), and that person is authorized and required to represent
the Company (at the Company's expense) in connection with all examinations of
the Company's affairs by tax authorities, including, without limitation,
administrative and judicial proceedings, and to expend Company funds for
professional services and costs associated therewith. The Members agree to
cooperate with each other and to do, or refrain from doing, any and all things
reasonably required to conduct such proceedings.
ARTICLE X
TRANSFERABILITY
10.1 Limitation on Transfer. A Membership Interest in the Company may
only be transferred or assigned in conformity with the requirements of this
Agreement unless Members holding a Majority Interest approve of the proposed
transfer or assignment. Each Member agrees with all other Members that he,
she or it will not make any disposition of any Membership Interest in
violation of this Agreement. No transfer of an interest which is in violation
of this Agreement shall be valid or effective, and the Company shall not
recognize the same for purposes of making distributions with respect to such
interest, or any part thereof.
10.2 Transfer of Record Ownership. No Member shall sell or assign a
beneficial interest in any Membership Interest without transferring record
ownership of such interest.
10.3 Approval by Majority Interest. In order to obtain the consent of
the Majority Interest to a transfer or assignment, a Member should provide to
the Members the following information:
(a) The facts pertaining to any proposed transaction and all
documents to be used in connection with such transaction;
(b) Information sufficient to show that the proposed offer, sale,
or transfer would not violate the registration provisions of any federal or
state securities laws, including, if required by the Members, an opinion of
counsel to that effect;
10.4 Rights of Assignee. No assignee shall have the right to become a
substituted Member in place of his assignor unless all of the following
conditions are first satisfied: (i) a duly executed and acknowledged written
instrument of assignment shall have been filed with the Company, which
instrument shall specify the Membership Interest being assigned and shall set
forth the intention of the assignor that the assignee succeed to the
assignor's interest as substituted Member in his place; (ii) the assignor and
assignee shall have executed and acknowledged such other instruments as the
Managers may deem necessary or desirable to perfect such substitution,
including the written acceptance and adoption by the assignee of the
provisions of this Agreement and his execution, acknowledgment, and delivery
to the Manager of a special power of attorney, the form and content of which
are satisfactory to the Manager; and (iii) a fee shall have been paid to the
Company which is sufficient to cover all reasonable expenses connected with
such substitution.
10.5 Transfer in Contravention of Operating Agreement. The terms of the
proposed transaction must not be in contravention of any of the provisions of
this Agreement.
10.6 No Rights to Become Substituted Member. In the event of a transfer
or assignment of a Membership Interest under circumstances where the
transferee or assignee does not become a substituted Member in accordance with
the terms of this Agreement, the assignee shall have no right to participate
in the management of the business and affairs of the Company or to become a
Member. The transferee or assignee shall only be entitled to receive the
share of profits or other compensation by way of income and the return of
contributions to which the assignment Member would otherwise be entitled.
10.7 Transfer to Family Member. For the purposes of this Article, the
restriction on transfer or assignment of a Membership Interest shall not apply
to transfers or assignments to a Member's immediate family, including his or
her spouse, parents, siblings, and children, or a trust, corporation, or other
entity controlled by the transferring Member.
10.8 Amendment of Operating Agreement. If the transfer or assignment is
approved as described in this Article X, the Manager shall cause this
Agreement to be amended to reflect the addition or substitution of Members.
10.9 Disposition by Member Not a Natural Person. A Member that is not a
natural person may not cause or permit an ownership interest, direct or
indirect, in itself to be disposed of such that, after the disposition: (i)
the Company would be considered to have terminated within the meaning of
Section 708 of the Code; or (ii) that Member ceases to be controlled by the
same Persons who control it as of the date of the Member's admission to the
Company. Any breach of this section will cause the disposition of the
ownership interest to be deemed a transfer of such interest under this Article
X.
10.10 Creditors of a Member. In the event of the attachment or
involuntary assignment by way of a charging order of any Membership Interest,
the creditor, assignee, representative, trustee or successor-in-interest
thereof, as the case may be, shall be deemed solely to be an assignee of the
Economic Interest of the Membership Interest and, as a result, shall be
entitled solely to the right to receive a distribution, if any, to which the
Membership Interest would otherwise be entitled pursuant to the provisions of
this Agreement. The Managers shall be under no obligation to declare or pay
any distribution of Net Cash Flow and no creditor, assignee, representative,
trustee or successor-in-interest to any Membership Interest by way of
attachment or involuntary assignment as the result of any charging order shall
have the right to compel through legal process or otherwise the distribution
of any Net Cash Flow of the Company. Upon any such involuntary assignment,
the assignee shall not be entitled to exercise any rights of the Member, and
the Member shall continue to be and shall continue to have the right to
exercise all powers and authority of the Member under this Agreement. Such
assignee shall nevertheless be liable for the obligations of the Member to
make or return contributions as provided in this Agreement or in the Delaware
Act and shall be liable to report, and pay, the taxes, pursuant to the Code,
in the same manner and in the same amounts that would be required if the
assignee were a substituted Member.
ARTICLE XI
ADDITIONAL MEMBERS AND PREFERRED MEMBERS
11.1 Admission of Additional Members. From the date of the formation of
the Company, any Person acceptable to the Managers may become a Member in
this Company either by the issuance by the Company of Membership Interests for
such consideration as the Managers shall determine, or as a transferee of a
Member's (or Preferred Member's) Membership Interest or any portion thereof,
subject to the terms and conditions of this Operating Agreement. No new
Member shall be entitled to any retroactive allocation of losses, income or
expense deductions incurred by the Company. The Managers may, at their option,
at the time a Member is admitted, close the Company books (as though the
Company's tax year had ended) or make pro rata allocations of loss, income and
expense deductions to a new Member for that portion of the Company's tax year
in which a Member was admitted in accordance with the provisions of Section
706(d) of the Code and the Treasury Regulations promulgated thereunder.
11.2 Admission of Preferred Members. The Managers may admit any person
as a Preferred Member by issuing such person a Preferred Interest. The
description of such Preferred Interest, including without limitation, the
allocations to such Preferred Member Capital Interest, any preferences in
distributions, allocations of income and expenses, profits and losses, voting
powers, restrictions, limitations as to distributions, qualifications, and
terms and conditions of transfer of such Preferred Interest, shall be as set
forth in a resolution adopted by the Managers and in amendments to this
Agreement. The Managers may establish a series of such Preferred Interest and
issue Preferred Interests of such series.
The Managers are expressly authorized, prior to issuance, by adopting
resolutions providing for the issuance of Preferred Interests, to set or
change any one or more respects the designation of a series, or the
preferences, rights, voting powers, restrictions, limitations as to
distributions, qualifications, or terms and conditions of transfer of such
Preferred Interest or series of Preferred Interests. The authority of the
Managers with respect to each Preferred Interest or series of Preferred
Interests shall include, but not be limited to, setting or changing the
following:
(a) the distinctive serial designation of such Preferred Interests
and the amount of such Preferred Interest constituting such series;
(b) the annual distribution rate on Preferred Interests of such
series, whether distributions shall be cumulative and, if so, from which date
or dates;
(c) whether the Preferred Interests of such series shall be
redeemable and, if so, the terms and conditions of such redemption, including
the date or dates upon and after which such Preferred Interests shall be
redeemable, and the amount per Preferred Interests payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates;
(d) the obligation, if any, of the Corporation to redeem or
repurchase Preferred Interests of such series pursuant to a sinking fund;
(e) whether Preferred Interests of such series shall be convertible
into, or exchangeable for, Membership Interests, and, if so, the terms and
conditions of such conversion or exchange, including the price or prices or
the rate or rates of conversion or exchange and the terms of adjustment, if
any;
(f) whether the Preferred Interests of such series shall have
voting rights, in addition to the voting rights provided by law, and, if so,
the terms of such voting rights;
(g) the rights of the Preferred Interests of such series in the
event of voluntary or involuntary liquidation, dissolution or winding-up of
the Company; and
(h) the allocation of Capital Interests to such series of Preferred
Interests;
(i) the effect that income and losses from specific sources shall
have on such Preferred Members' Capital Accounts;
(j) allocations to such series of specific sources of income and
loss;
(k) the right to distributions from specific sources;
(l) any other relative rights, powers, preferences, qualifications,
limitations or restrictions thereof relating to such series.
The Preferred Interests of any one series shall be identical with each
other in all respects except as to the dates from and after which
distributions thereon shall cumulate, if cumulative.
ARTICLE XII
DISSOLUTION AND TERMINATION
12.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of
the following events:
(i) by the unanimous written agreement of all Members; or
(ii) upon the sale of all or substantially all of the Company's
assets.
(b) As soon as possible following the occurrence of any of the
events specified in this Section 12.1 effecting the dissolution of the
Company, the appropriate representative of the Company shall execute a
statement of intent to dissolve in such form as shall be prescribed by the
Delaware Secretary of State and file same with the Delaware Secretary of
State's office.
12.2 Effect of Filing of Dissolving Statement. Upon the filing by the
Delaware Secretary of State of a statement of intent to dissolve, the Company
shall cease to carry on its business, except insofar as may be necessary for
the winding up of its business, but its separate existence shall continue
until a certificate of dissolution has been issued by the Secretary of State
or until a decree dissolving the Company has been entered by a court of
competent jurisdiction.
12.3 Winding Up, Liquidation and Distribution of Assets. In the event of
dissolution of the Company, the Company shall be liquidated and assets
distributed in accordance with this Agreement.
(a) Upon dissolution, an accounting shall be made by the Company's
independent accountants of the accounts of the Company and of the Company's
assets, liabilities and operations1 from the date of the last previous
accounting until the date of dissolution. The Managers shall immediately
proceed to wind up the affairs of the Company.
(b) In the event of the dissolution and termination of the Company,
the Managers shall proceed to the dissolution and liquidation of the Company
under the provisions of the Act. The proceeds of such liquidation shall be
applied and distributed in the following order of priority:
(i) To the payment of the debts and liabilities of the Company
(other than any loans or advances that may have been made by the Members to
the Company) and the expenses of liquidation.
(ii) To the setting up of any reserves which the Managers may
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Members arising out of or in connection with the Company.
Such reserves shall be paid over by the Members to a commercial bank located
in the State of Delaware, as Escrowee, to be held for payment of any of the
aforementioned contingencies, and, at the expiration of such period as the
Managers shall deem advisable, to distribute the balance thereafter remaining
in the manner hereinafter provided.
(iii) To the repayment of any loans or advances that may
have been made by any of the Members to the Company, but if the amount
available for such repayment shall be insufficient, then pro rata on account
thereof or in accordance with the instruments securing said loans.
(iv) Any balance remaining shall be distributed among all
Members on a pro-rata basis and in accordance with their ending capital
account balance.
The Managers shall determine whether to sell any Company property in
connection with the termination of the Company or to distribute any portion
thereof in kind. Any property distributed in kind in the liquidation shall be
valued at its fair market value and treated for Company accounting (but not
tax) purposes as though such property were sold and the cash proceeds
distributed.
(c) A reasonable time shall be allowed for the orderly liquidation
of the assets of the Company and the discharge of liabilities to creditors so
as to enable the Members to minimize the normal losses attendant upon a
liquidation. Each of the Members shall be furnished with a statement prepared
by the Company's accountant, which shall set forth the assets and liabilities
of the Company at the date of complete liquidation. Upon the Member's
compliance with the distribution plan set forth in Paragraph 24 hereof
(including payment over to the Escrowee if there are sufficient funds
therefor), the Members shall execute, acknowledge, and cause to be executed
all documents necessary to dissolve and terminate the Company.
(d) Notwithstanding anything to the contrary in this Operating
Agreement, upon a liquidation within the meaning of Section 1.704-l(b) (2)
(ii) (g) of the Treasury Regulations, if any Member has a Deficit Capital
Account (after giving effect to all contributions, distributions, allocations
and other Capital Account adjustments for all taxable years, including the
year during which such liquidation occurs), such Member shall have no
obligation to make any capital contribution, and the negative balance of such
Member's capital Account shall not be considered a debt owed by such Member to
the Company or to any other Person for any purpose whatsoever.
(e) Upon completion of the winding up, liquidation and distribution
of the assets, the Company shall be deemed terminated.
(f) The Manager(s) shall comply with any applicable requirements of
applicable law pertaining to the winding up of the affairs of the Company and
the final distribution of its assets.
12.4 Articles of Dissolution. When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been
made therefor and all of the remaining property and assets have been
distributed to the Members, articles of dissolution shall be executed in
duplicate and verified by the person signing the articles, which articles
shall set forth the information required by the Delaware Act. Duplicate
originals of such articles of dissolution shall be delivered to the Delaware
Secretary of State.
12.5 Certificate of Dissolution. Upon the issuance of the certificate of
dissolution, the existence of the Company shall cease, except for the purpose
of suits, other proceedings and appropriate action as provided in the Delaware
Act. The Manager shall have authority to distribute any Company property
discovered after dissolution, convey real estate and take such other action as
may be necessary on behalf of an in the name of the Company.
12.6 Return of Contribution Nonrecourse to Other Members. Except as
provided by law or as expressly provided in this Operating Agreement, upon
dissolution, each Member shall look solely to the assets of the Company for
the return of its Capital Contribution. If the Company property remaining
after the payment or discharge of the debts and liabilities of the Company is
insufficient to return the cash contribution of one or more Members, such
Member or Members shall have no recourse against any other Member.
ARTICLE XIII
EXPULSION OF A MEMBER
13.1 Causes of Expulsion. A Member may be expelled from the Company by
the Managers upon the occurrence of any of the following events:
13.1.1 If a Member shall violate any provision of this Operating
Agreement or the Articles of Organization; or
13.1.2 If a Member's Membership Interest shall be subject to a
charging order or tax lien which is not dismissed or resolved to the
satisfaction of the Management of the Company within thirty (30) days after
assessment or attachment; or
13.1.3 A Member becomes subject to a voluntary or involuntary
petition in bankruptcy.
13.2 Notice of Expulsion. Upon the occurrence of an Event described in
Section 13.1, written notice of expulsion shall be given to the violating
Member either by serving the same by personal delivery or by mailing the same
by certified mail to his or her last known place of residence, as shown on the
books of the Company. Upon the receipt of personal notice, or the date of
post xxxx for certified mail, the violating Member shall be considered
expelled and shall have no further rights as a Member of the Company.
13.3 Purchase of Expelled Member's Membership Interest. Upon the
expulsion of a Member, the Company shall have the right, but not the
obligation, to purchase the expelled Member's Membership Interest by paying to
the expelled Member an amount equal to 75% of the expelled Member's Capital
Account on the date of such expulsion, plus his or her Income Account as of
the end of the prior fiscal year, decreased by his or her share of Company
losses, deductions and credits computed to the date of such expulsion, and
decreased by withdrawals such as would have been charges to his Income Account
as of the end of the prior fiscal year. The purchase price for such expelled
Member's Membership Interest shall be paid to the expelled Member in eight
equal quarterly payments, without interest, commencing 180 days from the date
of such expulsion.
ARTICLE XIV
MEMBER OFFER TO ACQUIRE MEMBER'S INTERESTS
14.1 Any Member desiring to acquire all but not less than all of the
interest in the Company held by any other Member (the "Acquiring Member" and
"Offeree Member," respectively) may, at any time, offer to purchase said
interest by submitting a written offer to purchase to one or more of the
Offeree Members setting forth the price, terms and conditions upon which the
Acquiring Member will purchase all, but not less than all, of the shares of
the Offeree Member (hereinafter the "Acquiring Member Offer"), a copy of which
shall be provided to all Members.
14.2 Each of the Offeree Members to whom the Acquiring Member Offer was
made shall have the right, exercisable upon written notice to the Acquiring
Member within thirty (30) days after receipt of the Acquiring Member Offer, to
purchase from the Acquiring Member, upon the same price, terms and conditions
as are set forth in the Acquiring Member Offer, and the Acquiring Member, by
submitting the Acquiring Member Offer, agrees to sell to the Offeree Member,
upon the same price, terms and conditions as are set forth in the Acquiring
Member Offer, all of the interests of the Company owned by the Acquiring
Member.
14.3 If the Offeree Member fails or refuses, for any reason, to exercise
their option to purchase and/or close upon the purchase of the Acquiring
Member's interest as provided in paragraph 14.2 above, the Acquiring Member
shall have the right, subject to the provisions of this Agreement, to acquire
the interest covered by the Acquiring Member Offer and the Offeree Member to
whom the Acquiring Member Offer was made shall be obligated to sell to the
Acquiring Member the interest covered by the Acquiring Member Offer upon the
price, terms and conditions contained therein.
14.4 Any interest purchased pursuant to any option exercised pursuant to
this Article XIV shall close no later than sixty (60) days from the date the
option is exercised, unless the closing term is included in the Acquiring
Member Offer, in which case the Acquiring Member Offer shall control.
ARTICLE XV
BANKRUPTCY OR INSOLVENCY OF MEMBER
OR ENCUMBRANCING OF MEMBER INTERESTS
15.1 Upon the bankruptcy, insolvency or failure to satisfy any civil
judgment within thirty (30) days of its entry of any Member or any Member's
spouse or the entry of an order by any Court directing the transfer or
assignment of such shares, or the encumbrancing by any Member of any and all
of his interest in the Company without the consent of the Managers, the
bankrupt, insolvent or encumbrancing Member shall sell, and the Company may
purchase all of the Interests of such Member within thirty (30) days of the
happening of either event. If the Company so elects, all of such shares shall
be sold and purchased at seventy-five percent (75%) of book value as prepared
and certified by a firm of accountants then serving the Company. The
determination of book value shall be made in accordance with generally
accepted accounting principles and the following shall be observed:
(a) No allowance of any kind shall be made for good will, trade
name or any similar intangible asset.
(b) All accounts payable shall be taken at face value, less
discounts deductible therefrom, and all accounts receivable shall be taken at
face value, less discounts and a reasonable reserve for bad debts.
(c) All machinery, fixtures and equipment shall be taken at the
valuation appearing on the books of the Company.
(d) Inventory of merchandise and supplies shall be computed at cost
or market value, whichever is lower.
(e) All unpaid, accrued taxes shall be deducted as liabilities.
The purchase price as hereinabove determined of any bankrupt or
encumbrancing Member shall be payable twenty (20%) percent down, the balance
amortized over five (5) years in equal monthly installments with interest at
prime.
ARTICLE XVI
PURCHASE UPON DISABILITY OF AN EMPLOYEE MEMBER
16.1 For the purposes of this Agreement, the term "Employee Member" shall
mean any Member who is employed by the Company as a full or part-time
employee, and the term "disabled" and "disability" shall mean an employee
Member's inability to perform his normal duties for the Company for more than
thirty (30) calendar days, or for such shorter period as may be stipulated and
agreed to by the disabled Member and his or her treating physician. If the
Company and the Member cannot agree as to the existence of a disability, the
determination shall be made by two physicians, one designated by the Company,
and one designated by the Member. If these two physicians cannot agree, they
shall appoint a third physician and the determination of the majority shall be
conclusive and binding on the Company and the Member. All costs so incurred
shall be borne equally by the Company and such Member.
16.2 The date of disability shall be the date upon which the disabled
Member and the Company agree or the date upon which the physicians determine,
whichever may apply.
16.3 In the event that an employee Member continues to be disabled for a
period of twelve (12) months after the date on which it is determined that
such Member became disabled, the Company and the remaining Members shall have
the option to purchase all or any portion of the disabled Member's Interest in
the Company on the terms and conditions set forth below:
(a) The Company shall collect the proceeds, if any, of any
disability buyout policies on the disabled Member maintained by the Company,
and shall pay such proceeds, or so much of them as may be necessary, to the
disabled Member in payment for all or that portion of the Interest in the
Company owned by the disabled Member which the Company desires to purchase.
In the event the purchase price, as determined in accordance with the
provisions of Section 16 hereof, exceeds the insurance proceeds, the balance
of the purchase price may be paid by the Company in accordance with Section
19.3 of this Agreement. If the policy proceeds exceed the purchase price to
be paid for the disabled Member's Interest, the Company shall retain the
balance of such proceeds.
(b) In the event the Company does not have in full force and effect
any disability buyout insurance policy or policies, the Company shall
nevertheless, upon the expiration of such twelve-month period from the date of
disability, have the option, for thirty (30) days, to purchase, and the
disabled Member shall sell all or that portion of the disabled Member's
Interest in the Company, as the Company may wish to acquire. In such event,
the purchase price shall be determined in accordance with the provisions of
Section 19.3 hereof and shall be payable in accordance with the provisions of
Section 19.3 of this Agreement. In the event the Company fails for any reason
to exercise the option granted herein, then the remaining Members shall have
the second right and option for a period of thirty (30) days following the
termination of the Company's option to purchase the Interest of the disabled
Member, at a price determined in accordance with the provisions of Section
15.1 and upon terms set forth in Section 19.3.
16.4 If the Company does not have sufficient unreserved and unrestricted
surplus to purchase all or the desired portion of the Interest, then the
Company and the remaining Members may, if they so elect, take all actions
necessary to recapitalize the Company to the extent necessary for the purchase
of the Interest. Any Interest not purchased by the Company by reason of its
insufficient surplus may be purchased by the remaining Members, pro-rata, at a
price determined in accordance with the provisions of Section 19.2 and upon
terms set forth in Section 19.3. In the event the Company and the remaining
Members fail to purchase the disabled Member's Interest in the Company
pursuant to this Section 16.4, the Interest in the Company owned by the
disabled Member shall nevertheless continue to be subject to the terms and
conditions of this Agreement.
16.5 If the disabled Member dies before he has been totally disabled for
a period of twelve months, then the Company may purchase his Interest in
accordance with the provisions of Article XVII hereof.
16.6 If the disabled Member should die before the full purchase price has
been paid, the Company shall apply the proceeds of any life insurance policies
on the disabled Member maintained by the Company, if any, to prepay the unpaid
principal balance and accrued interest owed by the Company. If the proceeds
of such life insurance policies exceed the amount required to prepay the
promissory note, such excess shall be the sole property of the Company. If
the proceeds are less than the amount required to prepay the obligation, then
the Company shall partially prepay the obligation to the extent of such
proceeds.
ARTICLE XVII
OPTION TO PURCHASE INTEREST ON DEATH
Should any Member die while this Agreement is in effect, the Company and
the Remaining Members shall have the option but not the obligation to purchase
all or any portion of the deceased Member's Interest of the Company on the
terms and conditions set forth below:
17.1 Life Insurance.
(a) Redemption Policy. The Company shall have the right to
purchase policies of life insurance on the lives of any or all of the Members
(the "Redemption Policies") and such policies shall be listed on Schedule A to
this Agreement and shall be subject to the terms and conditions of this
Agreement. If the Company elects to purchase life insurance or additional
life insurance after the initial purchase of life insurance, each Member
agrees to cooperate in the acquisition of such insurance by performing all
reasonable acts necessary, including undergoing a medical examination. The
Company shall pay the premiums on all Redemption Policies purchased and listed
on Schedule A of this Agreement. The Members may request written proof that
payment of premiums has been properly made. If a premium is not paid by the
Company within fifteen (15) days from its due date, the Members, or any of
them, shall have the right to pay such unpaid premium and shall be reimbursed
by the Company. If reimbursement is not made promptly, any such payment of
premium by a Member shall be considered a loan to the Company and shall bear
interest from the date of premium payment at the rate of eighteen percent
(18%) per annum or at the highest rate permitted by applicable law, whichever
is higher. Each Redemption Policy set forth on Schedule A shall designate the
Company as owner of said policy and shall name the Company as direct
beneficiary under the policy. At the closing of any purchase and sale of all
sales of the Selling Member pursuant to Section 2 of this Agreement, the
Company shall assign to the Selling Member any Redemption Policy covering the
Selling Member's life, in consideration for a sum, payable in cash or
certified funds, equal to the cash surrender value, if any, of such policy and
the assumption by the Selling Member of all liability for payment of future
premiums.
(b) Cross Purchase Policy. The Members shall have the right, but
not the obligation, to purchase policies of life insurance on the lives of any
or all of the other Members (the "Cross Purchase Policies") and any such
policies shall be listed on Schedule B of this Agreement and shall be subject
to the terms and conditions of this Agreement. If any Member elects to
purchase life insurance or additional life insurance after the initial
purchase of life insurance, each Member agrees to cooperate in the acquisition
of such insurance by performing all reasonable acts necessary, including
undergoing a medical examination. Each Member agrees to pay premiums due on
the Cross Purchase Policies purchased on the life of the other Members. The
Company may, at its discretion, reimburse such Member for such premium
payments, in which event such Member will, if required by the Internal Revenue
Code, recognize the amount of such reimbursement as additional income. Each
Member shall have the right to purchase additional insurance on the life of
the other Members; such additional policies shall also be listed on Schedule
B, along with any substitution or withdrawal of life insurance policies
subject to this Agreement. Each Cross Purchase Policy set forth on Schedule B
shall designate the purchasing Member as owner of such policy and shall name
such Member as direct beneficiary under the policy. At the closing of any
purchase and sale of all Interest of a Selling Member pursuant to Section 2 of
this Agreement, the Member owning such policy shall assign to the Selling
Member any Cross Purchase Policy covering the Selling Member's life, in
consideration for a sum payable in cash or certified funds equal to the cash
surrender value, if any, of such policy and the assumption by the Selling
Member of all liability for payment of future premiums.
(c) Proceeds Defined. For the purposes of this Agreement, the term
"proceeds" shall be the amount paid on a life insurance policy by reason of
death of an insured Member, including dividends, accidental death benefits and
less any policy loan.
(d) Insurance Companies. Any insurance company which has issued a
policy of life insurance listed on either Schedule A or Schedule B to this
Agreement is authorized to act in accordance with the terms of such policies,
regardless of any provisions of this Agreement. Payment made by any such
insurance company, pursuant to the policy terms, shall be a complete discharge
of its obligations.
17.2 Upon the death of any Member, the Company and/or the remaining
Members shall collect the proceeds of any insurance policies on the life of
the deceased Member maintained by the Company and/or the remaining Members, as
the case may be. The collection of such proceeds by the Company and/or the
remaining Members shall not constitute an election by either the Company or
the remaining Members to purchase all or any portion of the Interest of the
deceased Member.
17.3 Upon the death of any Member, the Company shall have the first right
and option for a period of thirty (30) days following the date of death to
purchase, and the Personal Representative of the deceased Member shall sell
upon receipt of written notice from the Company setting forth the Interest the
Company wishes to acquire, all or any portion of the Interest of a deceased
Member at a price determined in accordance with the provisions of Section 19.2
hereof. If the Company elects to purchase all or any portion of the Interest
of a deceased Member, the Company shall pay the proceeds of any Redemption
Policy, or so much of such proceeds as may be necessary, to the deceased
Member's Personal Representative in payment for all or any portion of the
Interest of the Company owned by the deceased Member at the time of his death,
and by any pledgee, donee or other holder of the deceased Member's Interest,
as the Company may wish to acquire. In the event the purchase price, as
determined in accordance with the provisions of Section 19.2, exceeds the
insurance proceeds, or if the Company is prevented by law from using all or
any portion of the proceeds, the amount required to purchase the Interest of
the deceased Member may be paid by the Company in accordance with Section19.3
of this Agreement. If the policy proceeds exceed the purchase price to be
paid for the deceased Member's Interest, the balance shall be paid to the
Company.
17.4 In the event the Company does not have in full force and effect any
life insurance policy on the life of the deceased Member, the Company shall
nevertheless have the option for thirty (30) days following the date of death
to purchase, and the Personal Representative of the deceased Member shall
sell, upon receipt of written notice from the Company setting forth the
Interest the Company wishes to acquire, all or that portion of the deceased
Member's Interest of the Company covered by the Company's written notice. In
such event, the purchase price shall be determined in accordance with the
provisions of Section 19.2 hereof and shall be payable in accordance with the
provisions of Section 19.3 of this Agreement.
17.5 In exercising its right and options set forth in Section 17.3 and
17.4, the Company shall close upon the purchase of the Interest of the
deceased Member within sixty (60) days of the date of death, or upon receipt
of the proceeds of any Redemption Policy, whichever occurs later.
17.6 In the event the Company fails for any reason to exercise the option
granted herein to purchase and does in fact purchase all of the Interest of
the Company owned by the deceased Member at the date of death, then the
Remaining Members shall have the second right and option for a period of
thirty (30) days to purchase by written notice to the Company and the Personal
Representative of the deceased Member all or any portion of the Interest of
the deceased Member remaining unpurchased by the Company, at a price
determined in accordance with the provisions of Section 19.2. Should there be
more than one Remaining Member, such second right and option may be exercised
by the Remaining Members pro rata. For the purposes of this Agreement, the
phrase "pro rata" shall mean a fraction, the numerator of which is the total
Interest beneficially owned by the Remaining Member, and the denominator of
which is the total outstanding Interests of the Company at the time of the
deceased Member's death. In any exercise by any Remaining Member of the right
and option granted herein, the Remaining Member may indicate in writing that
he desires to subscribe to more than his pro rata share of the Interest of the
deceased Member. If Interests of the deceased Member remain after all of the
Remaining Members have made their elections pursuant to such second right and
option, such excess subscription may be exercised by the Remaining Members,
pro rata, so electing upon the same terms and conditions applicable to the
purchase and sale of the other Interest covered by the first and second
option.
17.7 Any Remaining Member electing to purchase Interest of the deceased
Member shall pay to the Personal Representative of the deceased Member within
sixty (60) days after the date of death of the deceased Member or upon receipt
by the remaining Member of any Cross Purchase Policy proceeds, whichever is
later, an amount in cash determined in accordance with the provisions of
Section 19.2. If the proceeds exceed the purchase price, the amount of such
excess shall be the sole property of the Remaining Member. If the Remaining
Member is prevented by law from using all or any portion of the proceeds or in
the event at the date of death or there exists no Cross Purchase Policy
proceeds with which the Remaining Member can purchase the deceased Member's
Interest pursuant to Section 17.2 herein, then in such an event the Remaining
Members may purchase from the estate of the deceased Member the Interest of
the deceased Member which the Remaining Member has elected to purchase in
accordance with the provisions of Section 17.6 hereof pursuant to the payment
terms set forth in Section 17.7 herein.
17.8 To avoid the sanctions imposed by IRC Section 101(a)(2), if
applicable,when one Member dies, the deceased Member's legal and/or beneficial
ownership portion of the policies maintained on the life of the other Members
shall be transferred to the Company.
17.9 In the event the Company and the Remaining Members fail to purchase
the shares of Company Interests of the Company owned by the deceased Member
at the date of death, the Personal Representative of the deceased Member shall
be free to sell such Company Interests to any person or entity at any price at
any time or to hold and distribute such interests without restriction.
17.10 In the event of a death of a Member, the Member's executor,
administrator or other legal representative ("Successor") may exercise all of
the Member's rights for the purpose of settling his estate; provided, however,
that for purposes of approving a transfer of a Membership Interest, approving
a resolution to dissolve the Company in accordance with Article XII or
amending this Operating Agreement, the Successor shall not be considered a
Member and shall have no right to vote, approve or consent to such matters.
ARTICLE XVIII
TERMINATION OF EMPLOYMENT OF EMPLOYED MEMBER
18.1 In the event of the involuntary termination for cause by the Company
of any employed Member or the voluntary termination of employment by any
employed Member, the Company shall have the option for thirty (30) days to
purchase from the terminated Member all or any portion of the Company Interest
of the Company owned by the terminated Member, at a price determined in
accordance with the provisions of Section 15.1 and upon terms set forth in
Section 19.3 hereof. In the event the Company fails for any reason to
exercise the option granted herein, then the remaining Members shall have the
second right and option for a period of thirty (30) days to purchase the
Company Interest of the terminated Member, at a price determined in accordance
with the provisions of Section 15.1 and upon terms set forth in Section 19.3.
18.2 In the event the Company and the Members fail to exercise their
options to purchase the terminated Member's interest in the Company pursuant
to Section 18.1 above, the Company Interest owned by the terminated Member
shall nevertheless continue to be subject to the terms and conditions of this
Agreement.
18.3 In the event of the involuntary termination of employment, without
cause, of any employed Member, the Company shall, at the option of the
terminated Member, which option is exercisable for a period of thirty (30)
days following the date of termination, purchase all of the Interest of the
Company owned by the terminated Member, at a price determined in accordance
with the provisions of Section 19.2 and upon terms set forth in Section 19.3.
Any Company Interest not purchased by the Company for any reason shall be
purchased by the remaining Members, pro-rata, at a price determined in
accordance with the provisions of Section 19.2 and upon terms set forth in
Section 19.3.
18.4 For the purposes of this Article 18, termination "for cause" shall
mean any act or failure to act by Member which constitutes just cause for
termination of Member's employment with Company "Cause" includes, but is not
necessarily limited to: any dishonesty; gross neglect of duties; conflict of
interest; commission of a felony; professional negligence; misconduct; fraud;
misrepresentation; refusal or repeated failure to carry out reasonable
directions of the Board, or the C.E.O.; act or failure to act which
substantially impairs Company business, good will or reputation; or any
material breach of this Agreement.
ARTICLE XIX
DETERMINATION OF PURCHASE PRICE.
19.1 The purchase price for the Company Interest to be purchased and sold
pursuant to Articles XVI, XVII and Section 18.3 of this Agreement shall be an
amount equal to (i) the fair market value of the Company multiplied by (ii) a
fraction, the numerator of which is the number of Membership Interests to be
purchased and sold pursuant to Articles XVI, XVII and Section 18.3, as the
case may be, and the denominator of which is the total number of issued and
outstanding Company Interests on the date of such purchase and sale.
19.2 Upon the occurrence of an event described in Articles XVI, XVII and
Section 18.3, then the Members agree to negotiate in good faith for a period
of ten (10) business days in an effort to agree upon a fair market value of
the Company. In the event the Members cannot agree on the value of the
Company within such time, then within a consecutive ten (10) day period, the
selling Member(s) on the one hand, and the purchasing Member(s) or Company on
the other hand, shall each designate and retain, at their separate cost and
expense, a business appraiser holding a professional certification from the
American Society of Appraisers or a comparable professional certification
("Qualified Business Appraiser") for the purpose of determining the fair
market value of the Company. The determination of each Qualified Business
Appraiser shall be reduced to writing and such written determination shall be
delivered to the other party within twenty (20) business days of the date the
ten-day period of negotiation terminated. All Members agree that the value of
the company shall be the numerical average of the determinations of fair
market value by the two Qualified Business Appraisers. In the event either
party fails to provide the other with a determination of a Qualified Business
Appraiser within the period provided, then the other party's Qualified
Business Appraiser determination shall be deemed conclusive as to the value of
the Company.
19.3 The purchase price for the Company Interest to be purchased as
determined in accordance with the provisions of this Section 19 shall be paid
as follows:
(a) Twenty percent (20%) down, in cash at closing;
(b) Interest, payable annually, at the prime rate quoted in the
Wall Street Journal, plus one percentage point;
(c) Principal payable in ten equal semiannual installments, the
first due and payable one year from the date of closing;
(d) No prepayment penalty;
(e) Payment to be secured by a pledge back of the Interest.
ARTICLE XX
RETIREMENT OR RESIGNATION OF A MEMBER
20.1 Right to Retire or Resign. A Member shall have the right, at any
time, to retire or resign as a Member of the Company, by giving written notice
to the Company's place of business.
20.2 Consequences of Retirement or Resignation. Upon the retirement or
resignation of a Member, such Member shall cease to be a Member of the
Company. The Company shall thereupon have the right, but not the obligation,
upon thirty (30) days' written notice, to purchase from the Member who retires
or resigns his or her Membership Interest for the amount and upon the terms
set forth in Section 13.3 hereof.
ARTICLE XXI
MEMBER'S COVENANTS
21.1 Member's Personal Debts. In order to protect the property and
assets of the Company from any claim against any Member for personal debts
owed by such Member, each Member shall promptly pay all debts owed by him or
her and shall indemnify the Company from any claim that might be made to the
detriment of the Company by any personal creditor of such Member.
21.2 Alienation of Membership Interest. No Member shall sell, assign,
mortgage, or otherwise encumber his or her Membership Interest in the Company
or in its capital assets or property; or enter into any agreement of any kind
that will result in any person, firm, or other organization becoming
interested with him or her in the Company; or do any act detrimental to the
best interests of the Company.
21.3 Work Product. All trade secrets, know-how, confidential
information, copyrightable material, inventions, discoveries, and
improvements, whether patentable or unpatentable, made, devised, or discovered
by an employed Member, pursuant to or as a result of services rendered for the
Company, relating or pertaining in any way to the business of the Company
(hereafter "Member's Work Product"), shall constitute "work-for-hire," shall
be promptly disclosed in writing to an Officer of the Company and are to
redound to the benefit of the Company and become and remain its sole and
exclusive property. An employed Member hereby transfers and assigns to the
Company all of an employed Member's Work Product and agrees to execute any
assignments to the Company or its nominee of this entire right, title and
interest in and/or right to exploit any such trade secrets, copyrightable
material, inventions, discoveries, and improvements and to execute any other
instruments and documents requisite or desirable in applying for and obtaining
patents and/or copyrights, at the cost of the Company, with respect thereto in
the United States and in all foreign countries, that may be requested by the
Company. Without in any way limiting the generality of the foregoing, an
employed Member agrees that all copyrightable and/or patentable materials
generated or developed by it as an employed Member, including, but not limited
to, source codes and/or computer programs and documentation pertaining
thereto, shall be considered the property and copyrights of the Company, and
the Company shall have the right to register and hold in its own name all
copyrights and/or patents issuable from such materials. An employed Member
further agrees, whether or not engaged by the Company, to cooperate to the
extent and in the manner requested by the Company in the prosecution or
defense of any patent/copyright claims or any litigation or other proceeding
involving any inventions, trade secrets, processes, discoveries, or
improvements covered by this Agreement, but all expense thereof shall be paid
by the Company.
21.4 Competition.
21.4.1 Each Member covenants to and with the Company, its
successors and assigns, and with each other, that during the term of this
Agreement he will not directly or indirectly, either as principal, agent,
manager, employee, owner, partner (dominant or otherwise), stockholder,
director or other officer of a corporation, creditor, consultant or otherwise,
engage or become interested financially or otherwise, in any business, agency,
trade or occupation similar to or in competition with the Company or its
affiliates. Because of the nature of the business, the parties agree that it
is reasonable for the covenant to apply to the entire geographic area of the
United States. If the geographic area is determined by a court to be overly
broad in scope, it shall be modified only to the extent necessary to bring it
within the requirements of the law and interpreted to give the Company and the
individual Members the broadest protection allowed by law.
21.4.2 The provisions of Section 18.1 shall not be construed to
prohibit the ownership, for investment purposes only, of not more than two
percent (2%) of the outstanding securities of a competitive corporation which
are publicly held and traded.
21.4.3 In the event of a breach or threatened breach by any
Member of any provisions of this Section 21, the Company shall be entitled to
an injunction restraining the breaching Member from the commission of such
breach. Nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of money damages. The covenants
contained in this Section 21 shall be construed as independent of any other
provisions in this Agreement; and the existence of any claim or cause of
action of a Member against the Company, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the Company
of said covenants.
21.4.4 The Company shall have the right to assign the aforesaid
covenants; and Members agrees to remain bound by the terms of the covenants to
any and all subsequent purchasers and assignees of the assets and business of
the Company.
21.5 Non-Interference with Employees.
21.5.1 Each Member covenants with the Company that employees of
or consultants to the Company and employees of and consultants to firms,
Companies or entities affiliated with the Company will, of necessity, be
exposed to and will acquire certain knowledge, understandings, and know-how
concerning the Company's business operations which is confidential information
and proprietary to the Company.
21.5.2 In order to protect the Company's confidential information
and to promote and insure the continuity of the Company's contractual
relations with its employees and consultants, each Member covenants and agrees
that for so long as Member holds any position or affiliation with the Company,
including service to the Company as an officer, director, employee,
consultant, agent, contractor or Member, and for a period of twelve (12)
months from the date Member ceases to hold any such position or status with
the Company or otherwise becomes disaffiliated with the Company, he will not
directly or indirectly, or permit or encourage others to directly or
indirectly (i) interfere in any manner whatsoever with the Company's
contractual or other relations with any or all of its employees or
consultants, or (ii) induce or attempt to induce any employee or consultant to
the Company to cease performing services for or on behalf of the Company, or
(iii) solicit, offer to retain, or retain, or in any other manner engage or
employ the services of, or conduct any business activity in cooperation or
association with, any person or entity who or which at any time was retained
or engaged by the Company, or any firm, corporation or entity affiliated with
the Company, as an employee, consultant or agent.
21.5.3 In the event any court of competent jurisdiction
determines or holds that all or any portion of the covenants contained in this
Section 18 are unlawful, invalid, or unenforceable for any reasons, then the
parties hereto agree to modify the provisions of this Section 21 if and only
to the extent necessary to render the covenants herein contained enforceable
and otherwise in conformance with all legal requirements.
21.6 Clients and Customers.
21.6.1 Each Member covenants with the Company that the clients
and customers of the Company, both actual and contemplated, constitute actual
and prospective business relationships which are proprietary to the Company
and comprise, in part, the Company's confidential information and trade
secrets.
21.6.2 In order to protect the Company's proprietary rights and
to promote and ensure the continuity of the Company's contractual relations
with its customers and clients, each Member covenants and agrees that for so
long as Member holds any position or affiliation with the Company, including
service to the Company as an officer, director, employee, consultant, agent,
contractor or Member, and for a period of twelve (12) months from the date
Member ceases to hold any such position or status with the Company or
otherwise becomes disaffiliated with the Company, he will not directly or
indirectly, or permit or encourage others to directly or indirectly
(i) interfere in any manner whatsoever with the Company's contractual or
prospective relations with any clients or customers, or (ii) induce or attempt
to induce any client or customer of the Company to cease or reduce its
business with the Company, or (iii) solicit, offer to retain, or retain, or in
any other manner engage or enter into any business or other arrangement with
any of the Company's customers or clients to provide any services or products
to any of such customers or clients as they may from time to time exist or be
constituted, except and unless such arrangement for the provision of products
or services is not in any way competitive with the products or services
actually provided by the Company to its clients or customers or proposed to be
provided by the Company to its clients or customers.
21.6.3 In the event any court of competent jurisdiction
determines or holds that all or any portions of the covenants contained in
this Section 21 are unlawful, invalid or unenforceable for any reason, then
the parties hereto agree to modify the provisions of this Section 21if and
only to the extent necessary to render the covenants herein contained
enforceable and otherwise in conformance with all legal requirements.
21.7 Covenant to Retain Confidences. Each Member understands that all
information learned, known, made, devised or developed concerning the business
operation of the Company, its customer lists, marketing strategies, vendors,
pricing and the like used by the Company in connection with its business
constitutes the confidential information, proprietary information and trade
secrets of the Company. Each Member covenants and agrees that he will not
(except as required in the course of his position with the Company), during
the term hereof or thereafter, communicate or divulge to, or use for the
benefit of himself or any other person, firm, association, or Company, without
the consent of the Company, any information concerning the methods, trade
secrets, research, secret data, costs, clients, customers, pricing and the
like of the Company or its affiliates or assigns, or other confidential
matters possessed, owned, or used by the Company or its affiliates that may be
communicated to, acquired by, or learned of by the Member in the course of or
as a result of his affiliation with the Company. All records, files,
memoranda, reports, price lists, customer lists, drawings, plans, sketches,
documents, prototypes, testing data, equipment, electronically stored
information on disk, tape or any other medium or existing in computer memory
transmitted by any means, including, but not limited to, telephone or
electronic data transmission and the like, relating to the business of the
Company or its affiliates, which Member shall use or prepare or come into
contact with, shall remain the sole property of the Company, and shall at all
times remain in the possession of the Company. Upon the termination of the
employment by the Company of any employed Member, such employed Member agrees
to deliver to the Company the original and any and all copies of any such
records, files, reports, memorandum or other stored information and, at the
request of the Company, shall certify to the Company that such Member retains
no copies of any information belonging to the Company whether or not
containing or constituting trade secrets of the Company.
ARTICLE XXII
ACCOUNTING, REPORTS AND VALUATIONS
22.1 Accounting. As promptly as possible after the close of each fiscal
year of the Company, the Managers shall cause a set of financial statements to
be prepared and to be furnished to each Member, and shall include, as of the
end of such fiscal year:
(a) a statement of the assets and liabilities of the Company;
(b) a statement of operations setting forth the net loss or net
profit of the Company; and
(c) a statement of changes in the Company's net assets.
In addition, within seventy five (75) days of the close of each
fiscal year the Managers shall supply all other information necessary to
enable each Member to prepare his federal, state and local income tax returns,
and the Managers shall supply such other information concerning the operations
and investments of the Company as each Member may reasonably request.
22.2 Fiscal Year. The fiscal year of the Company shall be the calendar
year.
22.3 Tax Elections. The Company shall keep its books in accordance with
the following:
(a) The Company will use the cash basis method of accounting.
(b) The Company will make those elections available to the Company
which will accelerate deductions and defer income recognition to the extent
the Members determine that such elections are in the best interests of the
Company.
(c) In the event of the transfer of a Member's interest or in the
event of a distribution of Company property to any Member pursuant hereto, the
Member who is a party to such transfer or distribution may request that the
Managers file on behalf of the Company an election in accordance with
applicable regulations to cause the basis of the Company property to be
adjusted for federal income tax purposes as provided by Sections 734, 743 and
754 of the Code. The Members shall determine in their sole discretion as to
whether such election is filed.
(d) The Company shall elect to deduct expenses incurred in
organizing the Company as provided in Section 709 of the Code, as amended.
(e) No election shall be made by the Company or any Member to be
excluded from the application of any of the provisions of Subchapter K,
Chapter 1 of Subtitle A of the Code, or any similar provisions of state tax
laws.
22.4 Books and Records. The Managers shall maintain accurate books and
records for the Company in accordance with generally accepted accounting
principles consistently applied, showing all of its assets and liabilities,
receipts and disbursements, realized profits and losses, Members' capital
accounts and all transactions entered into by the Company. Each Member, and
the duly authorized representative of such Member, shall have the right and
power to inspect and copy, at the reasonable request and expense of such
Member, during normal and ordinary business hours, the books and records of
the Company. The Managers will provide to the Members all information
reasonably requested by them concerning the Company.
22.5 Banking. An account or accounts in the name of the Company shall be
maintained at such bank or banks as the Managers may select. All uninvested
funds of the Company shall be deposited in a bank account of the Company. All
funds so credited to the Company in any such account shall be subject to
withdrawal by checks made in the name of the Company and signed by the Manager
or such person or persons as the Managers may, from time to time, designate,
including, but not limited to, officers of a Member. All deposits and other
funds not needed in the operation of the business, or not yet invested, may be
invested in U.S. government securities, securities issued or guaranteed by
U.S. government agencies, securities issued or guaranteed by states or
municipalities, certificates of deposit, and time or demand deposits in
commercial banks, bankers' acceptances, savings and loan association deposits
or deposits in members of the federal home loan bank system.
ARTICLE XXIII
AMENDMENT
23.1 Routine Amendments. Amendments to this Agreement and to any
Certificate of Organization may be made by the Managers through the use of a
power of attorney granted by each Member in this Agreement if such amendments:
(a) In the opinion of the Managers, with advice of counsel, may be
necessary to preserve the limited liability of Members;
(b) In the opinion of the Managers, with advice of counsel, may be
necessary to preserve the status of the Company as a Company, and not an
association taxable as a corporation, for federal income tax purposes;
(c) May be required or contemplated by this Agreement in connection
with substitution or addition of Members;
(d) Are necessary or appropriate to cure any ambiguity or to
correct or supplement any provision hereof which may be inconsistent with any
other provision hereof; or
(e) Are necessary or appropriate to change the allocations of
income, gain, losses, deductions or credits in Article IX hereof, in responses
to changes in the Code, regulations or other developments in the law
applicable to allocations, if the Managers concludes in good faith that such
amendments are in the overall best interests of the Members; provided,
however, that the Managers shall be authorized to amend such provisions only
to the minimum extent which in good faith they judge to be necessary or
advisable, based upon advice of counsel or accountants, to make the Company's
allocations of these items effective for federal income tax purposes; and
provided further that the Managers shall be under no obligation to make any
such amendment.
23.2 Consent Required. Other amendments may be proposed by the Managers
by sending written notice thereof to each Member. No proposed amendment shall
become effective, however, except upon Members' Consent and the affirmative
vote of the Managers.
23.3 Certain Proscribed Amendments. This Agreement may not be amended
without the consent of all Members so as to (i) modify the limited liability
of a Member; (ii) alter the interest of a Member in Net Profits or Net Losses,
except as described in Section 23.1(e) above; (iii) reduce the percentage of
Members which is required to consent to any action hereunder; (iv) modify the
liability of the Managers; (v) permit the Managers to take any action
prohibited by the Act; (vi) cause the Company to be taxed for Federal income
tax purposes as an association taxable as a corporation; or (vii) remove any
requirement herein that the Managers concur with respect to any action taken
by the Company.
ARTICLE XXIV
INVESTMENT INTENT AND INDEMNIFICATION
24.1 Investment Intent of Members. Each Member, by execution of this
Agreement or the Subscription Agreement, warrants to every other Member and to
the Company that it is acquiring its interest for purposes of investment only,
for its own account and not with the view to resell or to distribute the same
or any part thereof, that no other person has any interest in such interest or
in the rights of such Member hereunder, other than as a stockholder in, or
partner of, such Member, that it has received or has been given access to all
information it deems relevant to evaluate the merits and risks of an
investment in the Company and that it has the ability to bear the economic
risk and lack of liquidity of an investment in the Company.
24.2 Indemnification of the Managers. The Managers shall be entitled to
indemnification as hereinafter provided in this section. Any person entitled
to indemnification shall be indemnified to the fullest extent permitted by law
by the Company against any cost, expense (including attorneys' fees), judgment
and/or liability reasonably incurred by or imposed upon such person in
connection with any action, suit or proceeding (including any proceeding
before any administrative or legislative body or agency) to which such person
may be made a party or otherwise involved or with which such person shall be
threatened by reason of being or having been a Managers (or officer or
director of a Managers); provided, however, that such person shall not be so
indemnified with respect to any matter as to which such person shall have
acted in bad faith or in a grossly negligent manner. Any indemnification
hereunder shall be made by the Managers only as authorized in the specific
case upon determination that indemnification of the person is proper in the
circumstances because such person has met the applicable standard of conduct
set forth above. In any event, a person shall not be entitled to
indemnification until thirty (30) days following the date the Company has
mailed to the Members written notice that it intends to indemnify such person,
which notice shall describe with reasonable specificity the facts giving rise
to the person's indemnification claim and (to the extent determinable) the
potential scope of liability. The right of indemnification granted by this
Section 24.2 shall be in addition to any rights to which the person seeking
indemnification may otherwise be entitled and shall inure to the benefit of
the successors, assigns, executors or administrators of such persons. The
Company shall pay the expenses incurred by any person indemnified hereunder in
defending a civil or criminal action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding upon receipt of an
agreement from such person to be indemnified to repay such payment if there
shall be an adjudication or determination that he is not entitled to
indemnification as provided herein. The Managers may not satisfy any right of
indemnity or reimbursement granted in this Section 24.2 or to which they may
be otherwise entitled except out of the assets of the Company, and no Member
shall be personally liable with respect to any such claim for indemnity or
reimbursement. Notwithstanding anything herein to the contrary, the Managers
shall not be entitled to any indemnification pursuant to this Section 24.2 if
payment would be in violation of Section 17(h) of the Investment Company Act
of 1940, if applicable, and the rules thereunder.
24.3 Internal Revenue Service Compliance. In compliance with Revenue
Procedure 74-17, a creditor who makes a non-recourse loan to the Company will
not have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Company other
than as a secured creditor.
ARTICLE XXV
MISCELLANEOUS PROVISIONS
25.1 Notices. Any notice, demand, or communication required or permitted
to be given by any provision of this Operating Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered
personally to the party or to an executive officer of the party to whom the
same is directed or, if sent by registered or certified mail, postage and
charges prepaid, addressed to the Member's and/or Company's address, as
appropriate1 which is set forth in this Operating Agreement. Except as
otherwise provided herein, any such notice shall be deemed to be given three
business days after the date on which the same was deposited in a regularly
maintained receptacle for the deposit of united States mail, addressed and
sent as aforesaid.
25.2 Application of Delaware Law. This Operating Agreement, and the
application of interpretation hereof, shall be governed exclusively by its
terms and by the laws of the State of Delaware, and specifically the Delaware
Act.
25.3 Waiver of Action for Partition. Each Member and Economic Interest
Owner irrevocably waives during the term of the Company any right that it may
have to maintain any action for partition with respect to the property of the
Company.
25.4 Employment of Agents. The Members hereby consent to the employment,
when and if required, of such brokers, sales agents, managing or other agents,
contractors, engineers, accountants, attorneys or other persons furnishing
services as the Managers may from time to time determine. The fact that a
Member or a Manager or a member of a Manager or Member's family is employed
by, or directly or indirectly interested in or connected with, any person,
firm or corporation employed by the Company to render or perform a service or
from which the Company may purchase any property, shall not prohibit the
Managers from employing such person, firm or Company or otherwise dealing with
him or it; and neither the Company nor any of the Members herein shall have
any rights in accordance with the laws of the State of Delaware to object to
such association or relationship.
25.5 Power of Attorney. Each Member, by the execution of this Agreement,
and each Member admitted to the Company pursuant to the provisions of this
Agreement, does irrevocably make, constitute and appoint the Managers, and
each of them, together with their successors as such, his true and lawful
attorney, with full power and authority, in his name, place and xxxxx, with
full power of substitution, to make, execute, sign, swear to, acknowledge,
deliver, file and record, with respect to the Company and on its behalf, any
and all agreements, certificates, amended articles of organization,
instruments, contracts, deeds and notes, other evidences of indebtedness,
deeds of trust, mortgages, security agreements, bills of sale, loan
applications and all other documents necessary to conduct the business of the
Company. The appointment hereby made and the powers hereby granted by each of
the Members are coupled with an interest and are and shall be irrevocable in
any manner and for any reason, including, without limitation, the death or
incapacity of such Member.
25.6 Indemnification. The Company shall indemnify its Managers,
employees and agents from and against any claim, demand, liability or
obligation, including, without limitation, any and all costs and expenses
associated with defending any civil action or other proceeding, as well as
their reasonable attorneys' fees, to the fullest extent allowed by the Act.
25.7 Inurement. This Agreement shall be binding upon, and inure to the
benefit of, all parties hereto, their personal and legal representatives,
guardians, successors, and assigns to the extent, but only to the extent that
assignment is provided for in accordance with, and permitted by, the
provisions of this Agreement.
25.8 No Limit on Personal Activities. Nothing herein contained shall be
construed to limit in any manner the Members, or their respective agents,
servants, and employees, in carrying out their own respective businesses or
activities.
25.9 Further Assurances. The Members and the Company agree that they and
each of them will take whatever action or actions as are deemed by counsel to
the Company to be reasonably necessary or desirable from time to time to
effectuate the provisions or intent of this Agreement, and to that end, the
Members and the Company agree that they will execute, acknowledge, seal, and
deliver any further instruments or documents which may be necessary to give
force and effect to this Agreement or any of the provisions hereof, or to
carry out the intent of this Agreement or any of the provisions hereof.
25.10 Execution of Additional Instruments. Each Member hereby agrees
to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply
with any laws, rules or regulations.
25.11 Construction. whenever the singular number is used in this
Operating Agreement and when required by the context, the same shall include
the plural and vice versa, and the masculine gender shall include the feminine
and neuter genders and vice versa.
25.12 Headings and Pronouns. The headings in this Operating
Agreement are inserted for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent or intent of this
Operating Agreement or any provision hereof. All pronouns and only variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular
or plural as the identity of the Person or Persons may require.
25.13 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Operating Agreement shall not prevent a subsequent act,
which would have originally constituted a violation, from having the effect of
an original violation.
25.14 Rights and Remedies Cumulative. The rights and remedies
provided by this Operating Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive the right to use any
or all other remedies. Said rights and remedies are given in addition to any
other rights the parties may have by law, statute, ordinance or otherwise.
25.15 Severability. If any provision of this Operating Agreement or
the application thereof to any person or circumstance shall be invalid,
illegal or unenforceable to any extent, the remainder of this Operating
Agreement and the application there of shall not be affected and shall be
enforceable to the fullest extent permitted by law.
25.16 Heirs, Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by
this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
25.17 Creditors. None of the provisions of this Operating Agreement
shall be for the benefit of or enforceable by any creditors of the Company.
25.18 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
25.19 Rule Against Perpetuities. The parties hereto intend that the
Rule Against perpetuities (and any similar rule of law) not be applicable to
any provisions of this Operating Agreement. However, notwithstanding anything
to the contrary in this Operating Agreement, if any provision in this
Operating Agreement would be invalid or unenforceable because of the Rule
Against Perpetuities or any similar rule of law but for this Section 25.19,
the parties hereto hereby agree that any future interest which is created
pursuant to said provision shall cease if it is not vested within twenty-one
years after the death of the survivor of the group composed of the individuals
listed in the original Exhibit A of this Agreement (all who are currently
Members) and their issue who are living on the date of this Operating
Agreement and their issue, if any, who are living on the effective date of
this Operating Agreement.
25.20 Investment Representations. The undersigned Members and
Economic Interest Owners, if any, understand (1) that the Membership Interests
and Economic Interests evidenced by this Operating Agreement have not been
registered under the securities Act of 1933, the Colorado Securities Act or
any other state securities laws (the "Securities Acts") because the Company is
issuing these membership Interests and Economic Interests in reliance upon the
exemptions from the registrations requirements of the Securities Acts
providing for issuance of securities not involving a public offering, (2) that
the Company has relied upon the fact that the Membership Interests and
Economic Interests are to be held by each Member for investment, and (3) that
exemption from registrations under the Securities Acts would not be available
if the Membership Interests and Economic Interests were acquired by a Member
with a view to distribution.
Accordingly, each Member and Economic Interest Owner hereby confirms to
the company that such Member and Economic Interest Owner is acquiring the
Membership Interests and Economic Interests for such own Member's and Economic
Interest Owner's account1 for investment and not with a view to the resale or
distribution thereof. Each Member and Economic Interest Owner agrees not to
transfer, sell or offer for sale any of portion of the membership Interests or
Economic Interests unless there is an effective registration or other
qualification relating thereto under the Securities Act of 1933 and under any
applicable state securities laws or unless the holder of Membership Interests
or Economic Interests delivers to the Company an opinion of counsel,
satisfactory to the Company, that such registration or other qualification
under such Act and applicable state securities laws is not required in
connection with such transfer, offer or sale. Each Member and Economic
Interest Owner understands that the Company is under no obligation to register
the Membership Interests or Economic Interests or to assist such Member or
Economic Interest Owner in complying with any exemption from registration
under the Acts if such Member or Economic Interest Owner should at a later
date, wish to dispose of the Membership Interest or Economic Interest.
Furthermore, each Member realizes that the Membership Interests and Economic
Interests are unlikely to qualify for disposition under Rule 144 of the
Securities and Exchange Commission unless such Member is not an "affiliate" of
the Company and the Membership Interest or Economic Interest has been
beneficially owned and fully paid for by such Member or Economic Interest
Owner for at least two years.
Prior to acquiring the Membership Interests and Economic Interests, each
Member and Economic Interest Owner has made an investigation of the Company
and its business and have had made available to each such Member and Economic
Interest Owner all information with respect thereto which such Member needed
to make an informed decision to acquire the Membership Interest or Economic
Interest. Each Member and Economic Interest Owner considers himself or itself
to be a person possessing experience and sophistication as an investor which
are adequate for the evaluation of the merits and risks of such Member's or
Economic Interest Owner's investment in the Membership Interest or Economic
Interest.
25.21 Representations and Warranties.
(a) In General. As of the date hereof, each of the Members hereby
makes each of the representations and warranties applicable to such Members as
set forth in Section hereof, and such warranties and representations shall
survive the execution of this Operating Agreement.
(b) Representations and Warranties. Each Member that is a Company
or other entity hereby represents and warrants that:
(i) Due Incorporation or Formation; Authorization of
Agreement. Such Member is a Company duly organized or a Company or limited
liability company duly formed, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or formation and has the
corporate, Company or limited liability company power and authority to own its
property and carry on its business as owned and carried on at the date hereof
and as contemplated hereby. Such Member is duly licensed or qualified to do
business and in good standing in each of the jurisdictions in which the
failure to be so licensed or qualified would have a material adverse effect on
its financial condition or its ability to perform its obligations hereunder.
Such Member has the corporate, Company or limited liability company power and
authority to execute and deliver this Operating Agreement and to perform its
obligations hereunder and the execution, delivery, and performance of this
Operating Agreement has been duly authorized by all necessary corporate,
Company or limited liability company action. This Operating Agreement
constitutes the legal, valid, and binding obligation of such Member.
(ii) No Conflict with Restrictions: No Default. Neither the
execution, delivery, and performance of this Operating Agreement nor the
consummation by such Member of the transactions contemplated hereby (1) will
conflict with, violate, or result in a breach of any of the terms, conditions,
or provisions of any law, regulation, order, writ, injunction, decree,
determination, or award of any court, any governmental department. board,
agency, or instrumentality. domestic or foreign, or any arbitrator, applicable
to such Member or any of its Affiliates, (2) will conflict with, violate,
result in a breach of, or constitute a default under any of the terms,
conditions, or provisions of the articles of incorporation, bylaws, Company
agreement or operating agreement of such member or any of its Affiliates or of
any material agreement or instrument to which such Member or any of its
Affiliates is a party or by which such member, or any of its Affiliates is or
may be bound or to which any of its material properties or assets is subject,
(3) will conflict with, violate, result in a breach of, constitute a default
under (whether with notice or lapse of time or both), accelerate or permit the
acceleration of the performance required by, give to others any material
interests or rights, or require any consent, authorization, or approval under
any indenture, mortgage, lease agreement, or instrument to which such Member
or any of its Affiliates is a party or by which such member or any of its
Affiliates is or may be bound, or (4) will result in the creation or
imposition of any lien upon any of the material properties or assets of such
Member or any of its Affiliates.
(iii) Government Authorizations. Any registration,
declaration, or filing with, or consent, approval, license, permit, or other
authorization or order by, any government or regulatory authority, domestic or
foreign, that is required in connection with the valid execution, delivery,
acceptance, and performance by such Member under this Operating Agreement or
the consummation by such Member of any transaction contemplated hereby has
been completed, made, or obtained on or before the effective date of this
Operating Agreement.
(iv) Litigation. There are no actions, suits, proceedings, or
investigations pending or, to the knowledge of such Member or any of its
Affiliates, threatened against or affecting such Member or any of its
Affiliates or any of their properties, assets, or businesses in any court or
before or by any governmental department, board, agency, or instrumentality,
domestic or foreign, or any arbitrator which could, if adversely determined
(or, in the case of an investigation could lead to any action, suit, or
proceeding, which if adversely determined could) reasonably be expected to
materially impair such Member's ability to perform its obligations under this
Operating Agreement or to have a material adverse effect on the consolidated
financial condition of such Member; and such Member or any of its Affiliates
has not received any currently effective notice of any default, and such
Member or any of its Affiliates is not in default, under any applicab1e order,
writ, injunction, decree, permit, determination, or award of any court, any
governmental department, board, agency, or instrumentality, domestic or
foreign, or any arbitrator which could reasonably be expected to materially
impair such Member's ability to perform its obligations under this Operating
Agreement or to have a material adverse effect on the consolidated financial
condition of such Member.
(v) Investment Company Act: Public Utility Holding Company
Act. Neither such Member nor any of its Affiliates is, nor will the Company
as a result of such Member holding an Interest be, an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of
1940. Neither such Member nor any of its Affiliates is, nor will the Company
as a result of such Member holding an Interest be, a "holding company," "an
affiliate of a holding company," or a "subsidiary of a holding company," as
defined in, or subject to regulation under, the Public Utility Holding Company
Act of 1935.
(vi) Confidentiality. Except as contemplated hereby or
required by a court of competent authority, each member shall keep
confidential and shall not disclose to others and shall use its reasonable
efforts to prevent its Affiliates and any of its, or its Affiliates', present
or former employees, agents, and representatives from disclosing to others
without the prior written consent of the Manager(s) any information which (1)
pertains to this Operating Agreement, any negotiations pertaining thereto, any
of the transactions contemplated hereby, or the business of the Company, or
(2) pertains to confidential or proprietary information of any Member or the
Company or which any Member has labeled in writing as confidential or
proprietary; provided that any Company may disclose to its Affiliates'
employees, agents, and representatives any information made available to such
Member. No Member shall use, and each Member shall use its best efforts to
prevent any Affiliate of such Member from using, any information which (1)
pertains to this Operating Agreement, any negotiations pertaining hereto, any
of the transactions contemplated hereby, or the business of the Company, or
(2) pertains to the confidential or proprietary information of any Member or
the Company or which any Member has labeled in writing as confidential or
proprietary, except in connection with the transactions contemplated hereby.
CERTIFICATE
The undersigned hereby agree, acknowledge and certify that the foregoing
Operating Agreement, consisting of 55 pages, excluding the Table of Contents
and attached Exhibit A, constitutes the Operating Agreement of ForceOne, LLC
adopted by the Members of the Company as of _____________, 2000.
FORCEONE, LLC
By:____________________________________
J. Xxxxxx Xxxxxx, Manager
MEMBERS:
GUARDIAN SECURITY AND SAFETY PRODUCTS, INC.
By:____________________________________
J. Xxxxxx Xxxxxx, President
EXHIBIT A
MEMBERS
Initial Members Initial Capital Initial
Contributions Member's
Interest Percentage
Guardian Security and Safety
Products, Inc. $ 100%
Xxxx Xxxxxx Xxx 0000
Xxxxxxxx, Xxxxxxx 00000
EXHIBIT B
MANAGERS
J. Xxxxxx Xxxxxx
